# Bentley Systems Inc: Form 10-Q for the period ended Mar 31, 2023

- Company: [Bentley Systems Inc](/companies/bsy.md) (CIK 1031308)
- Form: 10-Q
- Filed: 2023-05-09
- Accepted by EDGAR: May 9, 2023, 16:23 ET
- Period: 2023-03-31
- Accession: 0001628280-23-016837
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1031308/000162828023016837/bsy-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1031308/000162828023016837/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $314.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $67.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $247.2m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-01-01 to 2023-03-31 | $67.8m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | $65.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $9.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | $45.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.14 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.15 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 331,251,884 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $176.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $4.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-01-01 to 2023-03-31 | $14.5m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2023-03-31 | $93.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $431.7m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $3.19bn | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $719.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $2.57bn | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $1.67bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-03-31 | $6.3m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-03-31 | $614.2m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 34,454 characters.

*The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form 10‑Q and with our audited consolidated financial statements and notes thereto included in our 2022 Annual Report on Form 10‑K.*

All amounts presented in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, except share and per share amounts, are presented in thousands. Additionally, many of the amounts and percentages have been rounded for convenience of presentation. Minor differences in totals and percentage calculations may exist due to rounding.

### Overview

We are a leading global provider of software for infrastructure engineering, and enable infrastructure professionals and their organizations, by “going digital” through our software and cloud services offerings, to better design, build, and operate better infrastructure. Our users engineer, construct, and operate projects and assets across the following infrastructure sectors: public works/utilities, resources, industrial, and commercial/facilities.

Our enduring commitment is to develop and support the most comprehensive portfolio of integrated software offerings across professional disciplines, project and asset lifecycles, infrastructure sectors, and geographies. We deliver our solutions via on‑premises, cloud, and hybrid environments. Our software enables digital workflows across engineering disciplines, across distributed project teams, and from offices to the field.

We believe that our offerings, in particular our infrastructure digital twin solutions, empower the achievement of sustainable development goals by helping our users – infrastructure professionals – realize outcomes that are more sustainable and resilient.

### Results of Operations

| Revenues: | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Subscriptions | $277,845 | $241,233 |
| Perpetual licenses | 9,547 | 10,205 |
| Subscriptions and licenses | 287,392 | 251,438 |
| Services | 27,019 | 24,079 |
| Total revenues | 314,411 | 275,517 |
| Cost of revenues: |  |  |
| Cost of subscriptions and licenses | 40,931 | 33,727 |
| Cost of services | 26,253 | 22,058 |
| Total cost of revenues | 67,184 | 55,785 |
| Gross profit | 247,227 | 219,732 |
| Operating expense (income): |  |  |
| Research and development | 67,800 | 61,273 |
| Selling and marketing | 52,141 | 45,945 |
| General and administrative | 46,807 | 51,154 |
| Deferred compensation plan | 4,146 | (5,138) |
| Amortization of purchased intangibles | 10,548 | 9,906 |
| Total operating expenses | 181,442 | 163,140 |
| Income from operations | 65,785 | 56,592 |
| Interest expense, net | (11,092) | (6,748) |
| Other income, net | 289 | 10,347 |
| Income before income taxes | 54,982 | 60,191 |
| Provision for income taxes | (9,492) | (3,231) |
| Loss from investments accounted for using the equity method, net of tax | — | (572) |
| Net income | $45,490 | $56,388 |
| Per share information: |  |  |
| Net income per share, basic | $0.15 | $0.18 |
| Net income per share, diluted | $0.14 | $0.18 |
| Weighted average shares, basic | 310,758,802 | 307,969,672 |
| Weighted average shares, diluted | 331,251,884 | 331,330,256 |

31

### Comparison of the Three Months Ended March 31, 2023 and 2022

#### Revenues

|  | Three Months Ended March 31, 2023 | 2022 | Comparison Amount% |  | Constant Currency %(1) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Subscriptions | $277,845 | $241,233 | $36,612 | 15.2% | 18.0% |
| Perpetual licenses | 9,547 | 10,205 | (658) | (6.4%) | (3.1%) |
| Subscriptions and licenses | 287,392 | 251,438 | 35,954 | 14.3% | 17.1% |
| Services | 27,019 | 24,079 | 2,940 | 12.2% | 17.3% |
| Total revenues | $314,411 | $275,517 | $38,894 | 14.1% | 17.1% |

(1) Constant currency is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of constant currency.

The increase in total revenues for the three months ended March 31, 2023 was primarily driven by increases in subscriptions and services revenues, partially offset by a decrease in perpetual licenses revenues.

*Subscriptions*. For the three months ended March 31, 2023, the increase in subscriptions revenues was primarily driven by improvements in our business performance of approximately $32,300 ($39,000 on a constant currency basis) and the impact from our platform acquisition of approximately $4,300. Our business performance excludes the impact of our platform acquisitions and includes the impact from programmatic acquisitions, which generally are immaterial, individually and in the aggregate. The platform acquisition impact relates to our acquisition of PLS and is inclusive of PLS’ organic performance.

The improvements in business performance were primarily driven by expansion from accounts with revenues in the prior period (“existing accounts”), and growth of 3% attributable to new accounts, most notably smaller- and medium-sized accounts. Improvements in business performance for the three months ended March 31, 2023 were led by our geoprofessional applications, civil and structural engineering applications, and our Enterprise Systems for project delivery.

*Perpetual licenses*. For the three months ended March 31, 2023, the decrease in perpetual licenses revenues was primarily driven by a decline in business performance of approximately $700.

*Services.* For the three months ended March 31, 2023, the increase in services revenues was primarily driven by improvements in our business performance of approximately $2,900 ($4,200 on a constant currency basis).

The improvements in business performance were primarily driven by contributions from Cohesive digital integrator services of approximately $3,600 ($4,600 on a constant currency basis), partially offset by the ongoing transition of historically classified services revenues into subscriptions revenues for accounts converting to our E365 subscription offering with embedded Success Services.

#### Revenues by Geographic Region

Revenue to external customers is attributed to individual countries based upon the location of the customer. Revenues by geographic region are as follows:

|  | Three Months Ended March 31, 2023 | 2022 | Comparison Amount% |  | Constant Currency %(1) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Americas | $168,345 | $154,260 | $14,085 | 9.1% | 9.5% |
| EMEA | 92,832 | 77,480 | 15,352 | 19.8% | 26.3% |
| APAC | 53,234 | 43,777 | 9,457 | 21.6% | 27.8% |
| Total revenues | $314,411 | $275,517 | $38,894 | 14.1% | 17.1% |

(1) Constant currency is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of constant currency.

*Americas*. For the three months ended March 31, 2023, the increase in revenues from the Americas was primarily driven by improvements in our business performance of approximately $10,400 ($11,000 on a constant currency basis) and the impact from our platform acquisition of approximately $3,700.

The improvements in business performance were primarily due to expansion of our subscriptions revenues from existing accounts in the U.S.

*EMEA*. For the three months ended March 31, 2023, the increase in revenues from EMEA was primarily driven by improvements in our business performance of approximately $14,900 ($19,900 on a constant currency basis).

The improvements in business performance were primarily due to expansion of our subscriptions revenues from existing accounts in the U.K., and the Middle East and Africa, partially offset by reductions in Russia due to exiting our operations beginning in the second quarter of 2022.

*APAC.* For the three months ended March 31, 2023, the increase in revenues from APAC was primarily driven by improvements in our business performance of approximately $9,300 ($12,000 on a constant currency basis).

The improvements in business performance were primarily due to expansion of our subscriptions revenues from existing accounts in India, Australia, and Southeast Asia. While we have seen an increase in revenues in China for the three months ended March 31, 2023 compared to the same prior year period, future results in China remain uncertain as a result of continued geopolitical challenges the obstacles there to cloud‑deployed software, and the financial timing impact of the preference there for license sales, rather than subscriptions, of locally-developed solutions based on our platforms.

#### Cost of Revenues

|  | Three Months Ended March 31, 2023 | 2022 | Comparison Amount% |  | Constant Currency %(1) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Cost of subscriptions and licenses | $40,931 | $33,727 | $7,204 | 21.4% | 24.7% |
| Cost of services | 26,253 | 22,058 | 4,195 | 19.0% | 25.8% |
| Total cost of revenues | $67,184 | $55,785 | $11,399 | 20.4% | 25.1% |

(1) Constant currency is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of constant currency.

*Cost of subscriptions and licenses.* For the three months ended March 31, 2023, on a constant currency basis, cost of subscriptions and licenses increased primarily due to an increase in headcount‑related costs of approximately $4,500, mainly due to an increase in headcount and annual compensation costs, an increase in cloud‑related costs of approximately $2,100, and an increase in channel partner compensation of approximately $1,300.

*Cost of services.* For the three months ended March 31, 2023, on a constant currency basis, cost of services increased primarily due to an increase in headcount-related costs of approximately $5,400, mainly due to third-party personnel costs, and to a lesser extent, an increase in headcount and annual compensation costs.

#### Operating Expense (Income)

|  | Three Months Ended March 31, 2023 | 2022 | Comparison Amount% |  | Constant Currency %(1) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Research and development | $67,800 | $61,273 | $6,527 | 10.7% | 14.9% |
| Selling and marketing | 52,141 | 45,945 | 6,196 | 13.5% | 17.3% |
| General and administrative | 46,807 | 51,154 | (4,347) | (8.5%) | (6.7%) |
| Deferred compensation plan | 4,146 | (5,138) | 9,284 | NM | NM |
| Amortization of purchased intangibles | 10,548 | 9,906 | 642 | 6.5% | 8.5% |
| Total operating expenses | $181,442 | $163,140 | $18,302 | 11.2% | 14.6% |

Percentage changes that are considered not meaningful are denoted with NM.

(1) Constant currency is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of constant currency.

*Research and development.* For the three months ended March 31, 2023, on a constant currency basis, research and development expenses increased primarily due to an increase in headcount-related costs of approximately $8,600, mainly due to an increase in headcount and annual compensation costs.

*Selling and marketing.* For the three months ended March 31, 2023, on a constant currency basis, selling and marketing expenses increased primarily due to an increase in headcount-related costs of approximately $7,200, mainly due to an increase in headcount and annual compensation costs, and to a lesser extent, an increase in travel-related costs and stock‑based compensation expense.

*General and administrative*. For the three months ended March 31, 2023, on a constant currency basis, general and administrative expenses decreased primarily due to lower acquisition expenses of approximately $5,400 (acquisition expenses were $5,200 for the three months ended March 31, 2023 compared to $10,600 for the three months ended March 31, 2022), approximately $1,800 of other income recorded during the three months ended March 31, 2023 due to the continued wind down of our Russian entities since we exited operations beginning in the second quarter of 2022, and a decrease in facility-related costs of approximately $1,600. Partially offsetting these decreases were increases in headcount-related costs of approximately $7,000, mainly due to an increase in headcount and annual compensation costs, and to a lesser extent, an increase in stock‑based compensation expense.

*Deferred compensation plan*. For the three months ended March 31, 2023, deferred compensation plan expense was $4,146 as compared to deferred compensation plan income of $5,138 for the three months ended March 31, 2022. These amounts were attributable to the marked to market impact on deferred compensation plan liability balances period over period.

*Amortization of purchased intangibles.* For the three months ended March 31, 2023, on a constant currency basis, amortization of purchased intangibles increased primarily due to amortization from recently acquired purchased intangibles.

#### Interest Expense, Net

|  | Three Months Ended March 31, 2023 | 2022 | Comparison Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Interest expense | $(11,321) | $(6,830) | $(4,491) | 65.8% |
| Interest income | 229 | 82 | 147 | 179.3% |
| Interest expense, net | $(11,092) | $(6,748) | $(4,344) | 64.4% |

For the three months ended March 31, 2023, interest expense, net increased primarily due to a higher weighted average interest rate on borrowings under the revolving loan facility and on the term loan, partially offset by lower weighted average debt outstanding.

#### Other Income, Net

| (Loss) gain from: | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Change in fair value of interest rate swap | $(4,489) | $12,084 |
| Foreign exchange (1) | 1,454 | (3,071) |
| Sale of aircraft | — | 2,029 |
| Change in fair value of acquisition contingent consideration (See Note 17) | — | (500) |
| Receipts (payments) related to interest rate swap | 1,920 | (294) |
| Other income, net | 1,404 | 99 |
| Total other income, net | $289 | $10,347 |

(1) Foreign exchange gain (loss) is primarily attributable to foreign currency translation derived mainly from U.S. dollar denominated cash and cash equivalents, account receivables, customer deposits, and intercompany balances held by foreign subsidiaries. Intercompany finance transactions primarily denominated in U.S. dollars resulted in unrealized foreign exchange gains (losses) of $861 and $(764) for the three months ended March 31, 2023 and 2022, respectively.

#### Provision for Income Taxes

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Income before income taxes | $54,982 | $60,191 |
| Provision for income taxes | $9,492 | $3,231 |
| Effective tax rate | 17.3% | 5.4% |

For the three months ended March 31, 2023, the effective tax rate was higher primarily due to the decrease in discrete tax benefits recognized in the current year period. For the three months ended March 31, 2023 and 2022, we recorded discrete tax benefits of $7,073 and $12,728, respectively, primarily associated with windfall tax benefits from stock‑based compensation, net of the impact from officer compensation limitation provisions.

### Key Business Metrics

In addition to our results of operations discussed above, we believe the following presentation of key business metrics provides additional useful information to investors regarding our results of operations. To the extent material, we disclose below the additional purposes, if any, for which our management uses these key business metrics. Our key business metrics may vary significantly from period to period for reasons unrelated to our operating performance and may differ from similarly titled measures presented by other companies.

|  | March 31, 2023 | 2022 |
| --- | ---: | ---: |
| ARR | $1,070,955 | $962,550 |
| Last twelve-months recurring revenues | $1,014,113 | $885,882 |
| Twelve-months ended constant currency (1): |  |  |
| ARR growth rate | 13% | 27% |
| Account retention rate | 98% | 98% |
| Recurring revenues dollar-based net retention rate | 110% | 108% |

(1) Constant currency is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of constant currency.

### Recurring revenues

Recurring revenues are the basis for our other revenue-related key business metrics. We believe this measure is useful in evaluating our ability to consistently retain and grow our revenues within our existing accounts.

Recurring revenues are subscriptions revenues that recur monthly, quarterly, or annually with specific or automatic renewal clauses and professional services revenues in which the underlying contract is based on a fixed fee and contains automatic annual renewal provisions.

### ARR

ARR is a key business metric that we believe is useful in evaluating the scale and growth of our business as well as to assist in the evaluation of underlying trends in our business. Furthermore, we believe ARR, considered in connection with our last twelve‑month recurring revenues dollar‑based net retention rate, is a leading indicator of revenue growth.

ARR is defined as the sum of the annualized value of our portfolio of contracts that produce recurring revenues as of the last day of the reporting period, and the annualized value of the last three months of recognized revenues for our contractually recurring consumption‑based software subscriptions with consumption measurement durations of less than one year, calculated using the spot foreign exchange rates. We believe that the last three months of recognized revenues, on an annualized basis, for our recurring software subscriptions with consumption measurement period durations of less than one year is a reasonable estimate of the annual revenues, given our consistently high retention rate and stability of usage under such subscriptions.

ARR resulting from the annualization of recurring contracts with consumption measurement durations of less than one year, as a percentage of total ARR, was 44% and 39% as of March 31, 2023 and 2022, respectively. Within our consumption‑measured ARR, the continued transition to our E365 subscription offering has increased daily consumption‑measured ARR, representing 36% and 30% of total ARR as of March 31, 2023 and 2022, respectively.

Constant currency ARR growth rate is the growth rate of ARR measured on a constant currency basis. We believe that ARR growth is an important metric indicating the scale and growth of our business.

### Last twelve‑months recurring revenues

Last twelve‑month recurring revenues is a key business metric that we believe is useful in evaluating our ability to consistently retain and grow our recurring revenues. We believe that we will continue to experience favorable growth in recurring revenues primarily due to our strong account retention and recurring revenues dollar‑based net retention rates, as well as the addition of new accounts with recurring revenues.

Last twelve‑months recurring revenues is calculated as recurring revenues recognized over the preceding twelve‑month period.

The last twelve‑months recurring revenues for the periods ended March 31, 2023 compared to the last twelve‑months of the comparative twelve‑month period increased by $128,231. This increase was primarily due to growth in ARR, which is primarily the result of growing our recurring revenues within our existing accounts as expressed in our recurring revenues dollar‑based net retention rate, as well as additional recurring revenues resulting from new accounts and acquisitions, including the favorable impact from our platform acquisition of PLS and Seequent Holdings Limited. For the twelve months ended March 31, 2023 and 2022, 89% and 87%, respectively, of our revenues were recurring revenues.

### Account retention rate

Account retention rate is a key business metric that we believe is useful in evaluating the long‑term value of our account relationships and our ability to retain our account base. We believe that our consistent and high account retention rates illustrate our ability to retain and cultivate long‑term relationships with our accounts.

Account retention rate for any given twelve-month period is calculated using the average currency exchange rates for the prior period, as follows: the prior period recurring revenues from all accounts with recurring revenues in the current and prior period, divided by total recurring revenues from all accounts during the prior period.

### Recurring revenues dollar‑based net retention rate

Recurring revenues dollar‑based net retention rate is a key business metric that we believe is useful in evaluating our ability to consistently retain and grow our recurring revenues.

Recurring revenues dollar‑based net retention rate is calculated using the average exchange rates for the prior period, as follows: the recurring revenues for the current period, including any growth or reductions from existing accounts, but excluding recurring revenues from any new accounts added during the current period, divided by the total recurring revenues from all accounts during the prior period. A period is defined as any trailing twelve months. Related to our platform acquisitions, recurring revenues into new accounts will be captured as existing accounts starting with the second anniversary of the acquisition when such data conforms to the calculation methodology. This may cause variability in the comparison.

Given that recurring revenues represented 89% of our total revenues for the twelve months ended March 31, 2023, this metric helps explain our revenue performance, excluding the impact from acquisitions, as primarily growth into existing accounts.

### Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP discussed above, we believe the following presentation of financial measures not in accordance with GAAP provides useful information to investors regarding our results of operations. To the extent material, we disclose below the additional purposes, if any, for which our management uses these non‑GAAP financial measures and provide reconciliations between these non‑GAAP financial measures and their most directly comparable GAAP financial measures. Non‑GAAP financial information should be considered in addition to, not as a substitute for, or in isolation from, the financial information prepared in accordance with GAAP, including operating income, or other measures of performance. Our non‑GAAP financial measures may vary significantly from period to period for reasons unrelated to our operating performance and may differ from similarly titled measures presented by other companies.

### Adjusted OI w/SBC

Adjusted OI w/SBC is a non-GAAP financial measure and is used to measure the operational strength and performance of our business, as well as to assist in the evaluation of underlying trends in our business.

Adjusted OI w/SBC is our primary performance measure, which excludes certain expenses and charges, including the non-cash amortization expense resulting from the acquisition of intangible assets, as we believe these may not be indicative of the Company’s core business operating results. We intentionally include stock-based compensation expense in this measure as we believe it better captures the economic costs of our business.

Management uses this non-GAAP financial measure to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, to evaluate financial performance, and in our comparison of our financial results to those of other companies. It is also a significant performance measure in certain of our executive incentive compensation programs.

Adjusted OI w/SBC is defined as operating income adjusted for the following: amortization of purchased intangibles, expense (income) relating to deferred compensation plan liabilities, acquisition expenses, and realignment expenses (income), for the respective periods.

### Adjusted operating income

Adjusted operating income is a non-GAAP financial measure that we believe is useful to investors in making comparisons to other companies, although this measure may not be directly comparable to similar measures used by other companies.

Adjusted operating income is defined as operating income adjusted for the following: amortization of purchased intangibles, expense (income) relating to deferred compensation plan liabilities, acquisition expenses, realignment expenses (income), and stock‑based compensation expense, for the respective periods.

Reconciliation of operating income to Adjusted OI w/SBC and to Adjusted operating income:

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Operating income | $65,785 | $56,592 |
| Amortization of purchased intangibles (1) | 13,735 | 12,928 |
| Deferred compensation plan (2) | 4,146 | (5,138) |
| Acquisition expenses (3) | 8,777 | 13,997 |
| Realignment expenses (income) (4) | (1,979) | — |
| Adjusted OI w/SBC | 90,464 | 78,379 |
| Stock-based compensation expense (5) | 19,198 | 14,953 |
| Adjusted operating income | $109,662 | $93,332 |

Further explanation of certain of our adjustments in arriving at Adjusted OI w/SBC and Adjusted operating income are as follows:

(1) *Amortization of purchased intangibles*. Amortization of purchased intangibles varies in amount and frequency and is significantly impacted by the timing and size of our acquisitions. Management finds it useful to exclude these non‑cash charges from our operating expenses to assist in budgeting, planning, and forecasting future periods. The use of intangible assets contributed to our revenues earned during the periods presented and will also contribute to our revenues in future periods. Amortization of purchased intangible assets will recur in future periods.

(2) *Deferred compensation plan*. We exclude *Deferred compensation plan* expense (income) when we evaluate our continuing operational performance because it is not reflective of our ongoing business and results of operation. We believe it is useful for investors to understand the effects of this item on our total operating expenses. Deferred compensation plan liabilities are marked to market at the end of each reporting period, with changes in the liabilities recorded as an expense (income) to *Deferred compensation plan* in the consolidated statements of operations.

(3) *Acquisition expenses*. We incur expenses for professional services rendered in connection with business combinations, which are included in our U.S. GAAP presentation of general and administrative expense (See Note 4 to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q). Also included in our acquisition expenses are retention incentives paid to executives of the acquired companies. We exclude these acquisition expenses when we evaluate our continuing operational performance as we would not have otherwise incurred these expenses in the periods presented as part of our continuing operations. For the three months ended March 31, 2022, $9,773 of our acquisition expenses related to our platform acquisition of PLS.

(4) *Realignment expenses (income)*. We exclude these charges and subsequent adjustments to our estimates when we evaluate our continuing operational performance because they are not reflective of our ongoing business and results of operations. We believe it is useful for investors to understand the effects of these items on our total operating expenses. In the ordinary course of operating our business, we incur severance expenses that are not included in this adjustment. For the three months ended March 31, 2023, *Realignment income* primarily relates to the continued wind down of our Russian entities since we exited operations beginning in the second quarter of 2022.

(5) *Stock‑based compensation expense*. We exclude non-cash stock‑based compensation expenses from certain of our non‑GAAP measures because we believe this is useful to investors in making comparisons to other companies.

### Constant currency

Constant currency and constant currency growth rates are non-GAAP financial measures that present our results of operations excluding the estimated effects of foreign currency exchange rate fluctuations. We have operations outside the U.S. that are conducted in local currencies. As a result, the comparability of the financial results reported in U.S. dollars is affected by changes in foreign currency exchange rates. We use constant currency and constant currency growth rates to evaluate the underlying performance of the business, and we believe it is helpful for investors to present operating results on a comparable basis period over period to evaluate its underlying performance.

In reporting period‑over‑period results, we calculate the effects of foreign currency fluctuations and constant currency information by translating current period results using prior period average foreign currency exchange rates.

### Liquidity and Capital Resources

Our primary source of operating cash is from the sale of subscriptions, perpetual licenses, and services. Our primary use of cash is payment of our operating costs, which consist primarily of headcount‑related costs. In addition to operating expenses, we also use cash to service our debt obligations, to pay quarterly dividends, to repurchase our Class B Common Stock and convertible debt, and for capital expenditures in support of our operations. We also use cash to fund our acquisitions of software assets and businesses, and other investment activities, including our *iTwin Ventures* initiative which makes seed, early, and growth stage investments in technology companies with promising and emerging opportunities for infrastructure digital twin solutions potentially relevant to our business.

We believe that existing domestic and international cash and cash equivalent balances, together with cash generated from operations, and liquidity under the credit facility, will be sufficient to meet our domestic and international working capital and capital expenditure requirements through the next twelve months. However, our future capital requirements may be materially different than those currently planned in our budgeting and forecasting activities and depend on many factors, including our strategy of regularly acquiring and integrating specialized infrastructure engineering software businesses, our rate of revenue growth, the timing and extent of spending on research and development, the expansion of our sales and marketing activities, the timing of new product introductions, market acceptance of our products, competitive factors, our discretionary payments of dividends or repurchases of our Class B Common Stock and convertible debt, currency fluctuations, and overall economic conditions, globally. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders, while the incurrence of debt financing, including convertible debt, would result in debt service obligations. Such debt instruments also could introduce covenants that might restrict our operations. We cannot provide assurance that we could obtain additional financing on favorable terms or at all.

### Cash and cash equivalents

|  | March 31, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Cash and cash equivalents held domestically | $10,810 | $3,883 |
| Cash and cash equivalents held by foreign subsidiaries | 82,757 | 67,801 |
| Total cash and cash equivalents | $93,567 | $71,684 |

40

### Long-term debt

|  | March 31, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Current portion of long-term debt | $6,250 | $5,000 |
| Long-term debt | 1,668,781 | 1,775,696 |
| Total debt | $1,675,031 | $1,780,696 |

### Comparison of the Three Months Ended March 31, 2023 and 2022

Our cash flow activities for the three months ended March 31, 2023 and 2022 consist of the following:

| Net Cash Provided By (Used In): | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $176,223 | $101,731 |
| Investing activities | (20,761) | (700,575) |
| Financing activities | (134,241) | 399,931 |

#### Operating activities

Net cash provided by operating activities was $176,223 for the three months ended March 31, 2023. Compared to the same period in the prior year, net cash provided by operating activities was higher by $74,492 due to an increase in net cash flows from the change in operating assets and liabilities of $72,434 and a net increase in non‑cash adjustments of $12,956, partially offset by a decrease in net income of $10,898. The increase in cash flows from the change in operating assets and liabilities was primarily due to higher CSS deposits, the overall timing of tax payments, and an increase in deferred revenues period over period.

For the three months ended March 31, 2022, net cash provided by operating activities was $101,731 due to net income of $56,388 increased by $27,472 of non‑cash adjustments and $17,871 from changes in operating assets and liabilities.

#### Investing activities

Net cash used in investing activities was $20,761 for the three months ended March 31, 2023 primarily due to $10,299 in acquisition related payments, net of cash acquired, to complete one acquisition, and $6,178 for purchases of investments.

For the three months ended March 31, 2022, net cash used in investing activities was $700,575 primarily due to $695,968 in acquisition related payments, net of cash acquired, to complete one acquisition.

#### Financing activities

Net cash used in financing activities was $134,241 for the three months ended March 31, 2023 primarily due to the net paydown of the credit facility of $107,235, payments for shares acquired of $20,948, and payments of dividends of $14,522.

For the three months ended March 31, 2022, net cash provided by financing activities was $399,931 primarily due to an increase in net borrowings under the credit facility of $438,966, partially offset by net payments for shares acquired of $35,117.

## Market risk

As filed, 196 characters.

There have been no material changes in our market risk exposure as described in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2022 Annual Report on Form 10‑K.

## Controls and procedures

As filed, 2,343 characters.

### Evaluation of Effectiveness of Disclosure Controls and Procedures

Our management maintains disclosure controls and procedures as defined in Rules 13a‑15(e) and 15d‑15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is processed, recorded, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), as appropriate, to allow for timely decisions regarding required disclosure.

We evaluated, under the supervision and with the participation of management, including our principal executive and principal financial officers, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Bentley Systems, Incorporated have been detected.

### Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a or 15d of the Exchange Act that occurred during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 151 characters.

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A. Risk Factors in our 2022 Annual Report on Form 10‑K.

Filed May 9, 2023.
Source: SEC EDGAR, the filing index for accession 0001628280-23-016837. Last ingested by Listed: Oct 27, 2026, 16:16 ET. No prices; not investment advice.