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01/10 19:54
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial performance, strategic product development, and positive market strategies. The Q&A section reveals optimistic management responses, especially regarding AI integration and asset analytics, which are potential growth drivers. Despite minor concerns about engineering capacity and NRR, the overall sentiment is positive, supported by strong cash flow, revenue growth, and strategic focus on AI and partnerships. The sentiment is further bolstered by the positive impact of the OBBA benefits and the strategic geographic diversification reducing China exposure.
ARR (Annual Recurring Revenue) ARR grew 11.5% year-over-year and 12% when excluding the impact of China. Growth was driven by a net revenue retention rate of 109%, with 300 basis points of ARR growth from new logos, primarily within the SMB segment. The reasons for growth include strong renewals, higher contractual commitments, and the addition of over 600 new SMB logos.
Total Revenues Total revenues for Q2 2025 were $364 million, up 10% year-over-year on a reported basis and 9% on a constant currency basis. The growth was driven by strong subscription revenue growth, which now represents 92% of total revenues, up 2 percentage points from the same period last year.
Subscription Revenues Subscription revenues grew 12% year-over-year for the quarter in reported and constant currency. This growth was supported by SMB and E365 initiatives, reflecting improvement in revenue visibility, growth consistency, and margin contribution.
Professional Services Revenues Professional services revenues declined 7% year-over-year in reported and 9% in constant currency, now representing 6% of total revenues, down 1 percentage point from the same period last year. The decline was attributed to reduced IBM Maximo implementation and upgrade work.
Adjusted Operating Income less Stock-Based Compensation Expense Adjusted operating income less SBC expense was $105 million for the quarter, up 10% year-over-year, with a margin of 28.9%, up 10 basis points. The growth was driven by a mix shift towards higher-margin subscription revenues and discretionary OpEx spend being more back-half loaded in 2025.
Free Cash Flow Free cash flow was $57 million for the quarter and $273 million year-to-date. The year-to-date performance aligns with expectations that the first half would account for about 60% of the full-year free cash flow outlook. The increase was supported by tax benefits from the recently enacted One Big Beautiful Bill.
Cesium Developer Conference: The first-ever Cesium Developer Conference was held, attracting over 400 attendees globally. It showcased Cesium's 3D geospatial platform, talent, and developer community. Bentley highlighted its integration of iTwin capabilities into Cesium, including reality modeling and AI-based feature detection services.
Regional Performance: Americas showed solid growth, with Latin America standing out. The U.S. market remains optimistic despite uncertainties. EMEA saw strong growth, led by the Middle East and the U.K., with significant investments in transportation, energy, and water infrastructure. Asia Pacific remained steady, with India performing well, while ANZ faced a slowdown in transportation spending.
Infrastructure Investment: The U.K. announced a 10-year infrastructure strategy with GBP 725 billion funding. The European Commission proposed a EUR 1.8 trillion budget prioritizing infrastructure investment. In the U.S., Congress is working on surface transportation reauthorization, emphasizing civil infrastructure investment.
ARR Growth: ARR grew 11.5% year-over-year, with a net revenue retention rate of 109%. E365 renewals showed stronger commitment levels, and over 600 new SMB logos were added for the 14th consecutive quarter.
Subscription Revenue: Subscription revenues grew 12% year-over-year, now representing 92% of total revenues. This reflects improved revenue visibility, growth consistency, and margin contribution.
Focus on Infrastructure Engineering: Bentley emphasized its leadership in infrastructure engineering software, particularly for horizontal networks like public works, utilities, and transportation. The company highlighted its differentiation from competitors like Autodesk and Hexagon.
Digital Twin and Asset Analytics: Bentley sees significant potential in digital twins for infrastructure operations and maintenance, monetized per asset rather than per engineer. Asset analytics is expected to drive future growth.
Economic and Geopolitical Headwinds in China: China's ongoing economic and geopolitical challenges have negatively impacted growth, with the region now representing only 2% of total ARR. This poses a risk to revenue diversification and growth in Asia.
Regulatory and Policy Uncertainty in the U.S.: Uncertainty related to tariffs, policy shifts, and regulatory changes in the U.S. could impact customer confidence and operational planning, despite some optimism around permitting reform.
Slowdown in Australian Infrastructure Spending: A slowdown in transportation spending in Australia has softened performance in the ANZ region, potentially impacting revenue growth tied to major infrastructure projects.
Dependence on Subscription Revenue: Subscription revenues now represent 92% of total revenues, which, while improving revenue visibility, increases reliance on this revenue stream and exposes the company to risks if subscription growth slows.
Competitive Pressures in BIM Design Market: The BIM design market is highly competitive, with major players like Autodesk holding significant market share. This competition could limit Bentley's ability to expand its market share.
Economic Sensitivity of SMB Segment: While SMB accounts have shown resilience, they are more sensitive to economic uncertainties, which could impact retention and growth in this segment during economic downturns.
Seasonal and Acquisition Timing Risks: ARR growth is expected to be seasonally low in Q3 due to the timing of acquisitions and asset analytics deals, which could affect short-term financial performance.
Exposure to Currency Fluctuations: Foreign exchange rate fluctuations have impacted revenues, with a favorable impact in the first half of 2025. However, continued currency volatility could pose risks to financial performance.
ARR Growth: The company expects low double-digit ARR growth for the full year, with a year-over-year constant currency ARR growth rate of 11.5% in Q2 and 12% excluding China. Sequential ARR growth in Q3 is expected to be seasonally lower due to timing of acquisitions and deals.
Margin Expansion: The company anticipates approximately 100 basis points of margin expansion for the full year, supported by a mix shift towards higher-margin subscription revenues and back-half loaded discretionary OpEx spending.
Free Cash Flow: The free cash flow outlook for 2025 has been raised to a range of $430 million to $470 million, up from $415 million to $455 million, due to tax benefits from recent U.S. policy changes.
Regional Performance: Growth in Americas is solid, with optimism in U.S. infrastructure investment and permitting reform. EMEA shows strong growth, led by the Middle East and U.K., with supportive funding environments. Asia Pacific remains steady, with India showing positive sentiment and Australia experiencing a slowdown in transportation spending.
Sector Performance: Public works and utilities are performing well, driven by global infrastructure investment. Resources sector shows strong growth, particularly in mining. Industrial sector growth is modest, and commercial facilities are flat.
Currency Impact: If current exchange rates persist, second-half GAAP revenues could see a positive impact of approximately $17 million.
Dividends Paid: EUR 42 million on dividends during the first half of the year.
Share Repurchases: $75 million in effective share repurchases to offset dilution from stock-based compensation.
The company's earnings call reveals a positive outlook with strong ARR growth expectations, margin expansion, and increased free cash flow projections. The strategic partnership with Google and AI integration enhance their asset analytics capabilities, while regional and sector performance indicates robust demand. Although there are some uncertainties in M&A and asset analytics, the overall sentiment is positive, supported by optimistic guidance and strategic initiatives.
The earnings call highlights strong financial performance, strategic product development, and positive market strategies. The Q&A section reveals optimistic management responses, especially regarding AI integration and asset analytics, which are potential growth drivers. Despite minor concerns about engineering capacity and NRR, the overall sentiment is positive, supported by strong cash flow, revenue growth, and strategic focus on AI and partnerships. The sentiment is further bolstered by the positive impact of the OBBA benefits and the strategic geographic diversification reducing China exposure.
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