Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong start to the year with total revenues of $338 million, up 7% year-over-year, driven by subscription revenue growth.
- Successful CEO transition plan announced, with a focus on continuity and leveraging the new CEO's strengths in marketing and product management.
- Significant progress in digital twin technologies, with iTwin platform enabling new capabilities and contributing to growth across various sectors.
- Expansion in international markets, particularly in India, contributing to overall growth with a focus on infrastructure and SMB sectors.
- Robust cash flow generation with operating cash flow up 16% for the quarter, demonstrating strong financial health and operational efficiency.
Negative Points
- Professional Services revenues declined by 22% year-over-year due to delays in Maximo related implementation work, impacting overall revenue growth.
- Challenges in the China market with difficult economic conditions and geopolitical tensions continuing to create headwinds.
- ARR growth affected by the increasing prevalence of E365 consumption floors and ceilings, aligning growth more with contract renewal timing rather than consistent quarterly growth.
- Resource constraints in the engineering sector, although driving demand for digital solutions, pose challenges in project delivery timelines and scaling.
- Dependence on government infrastructure spending and regulatory changes, which can introduce variability and affect project funding and timelines.
Q & A Highlights
Q: Congrats on the results. And actually, also congrats Greg, on your run as CEO, and Nicholas to this next phase of growth. I guess for you, Nicholas, we've known you for a while and you're a big part of the Bentley fabric. As we enter this next phase of growth, do you see any change in sort of your philosophy, and in terms of where you might look for some additional growth, potential synergies that might be a little bit different than Greg and sort of the prior growth phase?
A: Nicholas H. Cumins - Bentley Systems, Incorporated - COO: Well, as you said, I've been the CEO for a little bit more than 2 years now. And before that, I was the CPO. So you shouldn't expect any major change either from a strategic or an operational standpoint. And our priorities remain the same. When it comes to growth, E365, SMB, digital twins, from a product standpoint, operative remain the same as well as we move from far base to data centric book flows using digital twin technology. Using there for data, leveraging data for AI purposes, et cetera. So no major change, either in strategy and operations. The key word here is continuation.
Q: Just on the new logo growth in the quarter. I was wondering how much of that is specifically in the U.S. and you would say is related to this expanding ecosystem or at state DOTs that's happening, just as more engineering firms want to participate in infrastructure work. And I guess, related to the question, I think in the past, when you talked about a new logo contribution within your growth algorithm, you had typically hedge that a little bit just because smaller accounts might have propensity to churn a bit more. But if the new logo growth is lining up to support infrastructure activity and the outlays for that are going to be higher each year for the next several years. Do you think new logos just become a more reliable contributor to the model?
A: Gregory S. Bentley - Bentley Systems, Incorporated - CEO, President & Chairman of the Board: I want to ask Nicholas if he has a sense of the quantitative makeup of logos including the geographic distribution then. I know that qualitatively that phenomenon and you mentioned smaller firms, especially getting into linear infrastructure work in the U.S. is significant, but I don't have a feel for the relative magnitude of it, Nicholas?
Q: Great. Greg, Nicholas, Congrats. Nice to see the continuity here. So my question is actually for Werner. The explanation of the resets and the mix for the year was really helpful. But as we think about the sequential ARR guidance, what does that look like for 2Q and the rest of the year?
A: Werner Andre - Bentley Systems, Incorporated - CFO: Yes, our growth ARR sequentially aligns a little bit more with the contract renewal timing. We previously gave guidance on what the contract renewal timing is for the year, so that reset now that the correlation of ARR growth is more like 20%, 25%, 20% and 35% throughout the year, you would expect. So we would expect that for Q2, the sequential quarterly year ARPU is picking up again. And as I look into the ARR guidance for the remainder of the year. It is more that can loaded as we discussed last time, our expectations did not change. There is still growth opportunity from our asset analytics business that's working on bigger, bigger deal opportunities. There is still growth opportunities from acquisitions.
Q: Congratulations, Nicholas and Greg. Great quarter. But can you comment on the trends in the international business, which is close to now 58%. So what segments are more robust than others? And also in terms of geography, how specifically like Western Europe doing? And how do you see this election in different countries going to impact your business? Like India is almost wrapping up election. How should we expect post-election, and in the U.S. as you are heading into election.
A: Gregory S. Bentley - Bentley Systems, Incorporated - CEO, President & Chairman of the Board: I'm going to ask Nicholas to take that, but I myself, I wonder the same thing. India had led the world in growth rates through most of last year and then decline for a while, and now is boring back, and I don't know if that has to do with political situation there.
Q: Congrats to Greg and Nick as well from me. Just a quick one. Can you give us an update on the IIJA funding programs? How are you seeing where you're at there, particularly on the road side? And secondly, Greg, just like, Blyncsy, what's the go-to-market program look like there over the next couple of years. Is it embedded with your core go-to-market or because it's more of a specialized solution? Is it something you're going to do separately?
A: Gregory S. Bentley - Bentley Systems, Incorporated - CEO, President & Chairman of the Board: It's not so specialized that it can't come through. Our account managers covering the transportation agencies. However, a lot of the opportunity is with smaller municipalities and counties and metropolitan planning organizations, for instance. And they have an engineer of record, and we would like to work with that engineer to enable them to bring Blyncsy offerings to all of their funds.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
