BENTLEY SYSTEMS INC Q4 FY2024 earnings call

• 2024 showed strong financial performance with adjusted operating income exceeding margin improvement targets, and subscriptions reaching 90% of total revenues.
• Announced organizational changes, including a new Chief Operating Officer, to accelerate innovation and align product execution with technology strategy.
• Q4 ARR growth was 12% year-over-year (12.5% excluding China), with E365 driving growth and net revenue retention rebounding to 110%.
• Product portfolio progress included the introduction of Open Site Plus and acquisition of Cesium for geospatial capabilities, with Bentley Asset Analytics showing potential in asset operations and construction.
• Industry trends highlighted workforce productivity and data management as priorities for engineering firms, aligning with Bentley's product investments.

Subscription revenues represent 90% of total revenues, growing 16% year-over-year in Q4 and 13% for the full year in reported and constant currency. E365 accounts for 42% of 2024 subscription revenues. Perpetual license revenues grew 11% in Q4 and were flat for the full year. Service revenues declined 21% in Q4 and 18% for the year. ARR ended Q4 at $1.283 billion, with trailing 12 months ARR growth of 12% year-over-year (12.5% excluding China).

• Total GAAP revenues expected in the range of $1.461 billion to $1.490 billion (constant currency $1.481 billion to $1.510 billion).
• Subscription revenues growth outlook 10.5% to 12.5% constant currency.
• Adjusted operating income with stock-based compensation margin expected around 28.5%, aiming for 100 basis points margin expansion annually.
• Free cash flow outlook $450 million to $455 million.
• Quarterly dividend increased by $0.01.

• Continued headwinds in China with expected ARR decline due to state-owned enterprises shifting to local software and perpetual licenses.
• Geopolitical issues affecting business in China and challenges in executing growth strategies there.

Q: About potential tailwinds for ARR growth A: Permitting reform in the U.S. could boost mining and power grid expansion; improvement in China and commercial facilities could help Q: Signs of permitting reform A: Executive order but early, bipartisan priority with hope for progress this year Q: Macro environment and U.S. priorities A: Infrastructure investment needed globally, U.S. engineering firms busy with backlogs, shift in infrastructure spending mix but no air pocket in demand Q: Asset analytics monetization A: Commercial model is asset-based, difference in revenue treatment based on usage (recurring vs. one-time) Q: COO objectives A: Simplification, cross-functional coordination, portfolio development including asset analytics Q: Competitive environment A: Bentley's focus on infrastructure gives competitive edge, competitors dropping prices not affecting account loyalty Q: China business outlook A: Continued decline in China ARR due to local alternatives and geopolitical issues; James Lee's role to address China strategies Q: AI impact on renewal and monetization A: Open Sight Plus revenue impact marginal this year, AI in asset analytics and design has long-term potential Q: Data center opportunity A: Data centers impact multiple sectors (industrial, infrastructure) through related infrastructure needs