Bentley(BSY) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q2 2024 were $330 million, an increase of 11% year-over-year and 12% in constant currency [26] - Subscription revenues grew 15% year-over-year, representing 90% of total revenues, up from 87% in Q2 2023 [26] - Adjusted operating income with stock-based compensation was$ 95 million for the quarter, up 30% year-over-year, with a margin of 28.8%, up 410 basis points [30] - Operating cash flow was $63 million for the quarter and$ 268 million for the first half of 2024 [32] Business Line Data and Key Metrics Changes - The E365 program remains a major growth driver, with continued conversions from the select subscription program [18] - Perpetual license revenues for the quarter were $11 million, down$ 1 million year-over-year, making up only 3% of total revenues [27] - Professional services revenues declined by $4 million, down 15% year-over-year, primarily due to delays in IBM Maximo-related implementation [27] Market Data and Key Metrics Changes - ARR growth was 11% year-over-year, with contributions from programmatic acquisitions becoming negligible [18] - China now represents only 2.5% of total ARR, down from 3% a year ago, reflecting ongoing economic challenges [28] - The Americas was the fastest-growing region, driven by strong infrastructure spending, particularly in North America [20] Company Strategy and Development Direction - The company is focusing on AI as a major driver for future growth, particularly in asset analytics and infrastructure lifecycle management [15][16] - The transition to a new CEO is seen as an opportunity to perpetuate a growth mindset culture and ensure long-term success [10][12] - The company aims to leverage its digital twin technology and AI capabilities to enhance productivity and efficiency in infrastructure projects [16][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for infrastructure services, despite challenges in resource availability [38] - The sentiment among infrastructure engineering organizations is positive, with concerns primarily around capacity rather than demand [37] - The company expects ARR growth to accelerate in the second half of the year, particularly due to E365 renewal timing [35] Other Important Information - The company has reduced its outstanding senior debt to$ 85 million at the end of the quarter, reflecting strong cash flow generation [33] - The board finalized a new CEO compensation plan designed to align long-term incentives with company performance [10][11] Q&A Session Summary Question: Confidence around E365 renewals in the second half - Management noted that sentiment among infrastructure engineering organizations is focused on capacity, not demand, indicating strong backlogs and visibility [37][38] Question: Opportunities for Bentley to grow at enterprise accounts - The extended timeline for project starts due to IIJA funding is seen as beneficial for engaging with enterprise accounts [40][42] Question: Update on SMB retention rates - Retention in the SMB segment is high, with existing accounts using software beyond their subscription terms [43] Question: Impact of AI on traditional portfolio - The company is seeing traction with AI-based asset analytics solutions, which are expected to complement existing applications [45][46] Question: Status of Phase 2 of product development - Phase 2 involves leveraging iTwin capabilities across existing applications, with ongoing development of next-generation engineering applications [48][49] Question: Growth of Power Line Systems (PLS) fundamentals - Strong growth in PLS is noted, with expectations for further expansion as permitting reforms take effect [51][52] Question: ARR growth guidance for the year - The company is optimistic about reaching the high end of its ARR growth range, driven by asset analytics and E365 renewals [54][56]