BSY — Bentley Systems, Incorporated

Summary of Bentley Systems Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Total Revenues: $376 million, up 12% year-over-year (11% on a constant currency basis).
• Year-to-Date Revenues: Grew 11% (10% constant currency).
• Subscription Revenues: Increased 14% year-over-year, representing 92% of total revenues, up 2 percentage points from the previous year.
• Annual Recurring Revenue (ARR): Reached $1.405 billion, with a year-over-year growth rate of 10.5% (11% excluding China).
• Net Revenue Retention Rate: 109%.
• Adjusted Operating Income: $104 million for Q3 (27.7% margin), up 16% year-over-year.
• Free Cash Flow: $111 million for the quarter, $384 million year-to-date, on track for a full-year target of $430 million to $470 million.

2. Strategic Updates and Business Highlights

• AI Integration: Significant focus on AI capabilities, with engineering firms increasingly investing in AI for design automation and project delivery. Bentley is enhancing its applications to support AI initiatives.
• Infrastructure AI Co-Innovation Initiative: Bentley is collaborating with users to evolve applications and commercial models to better support AI use cases.
• New Product Announcements: Introduction of Bentley Infrastructure Cloud Connect, which improves collaboration and data management across projects.
• Market Performance: Strong growth in the resources sector and solid performance in public works and utilities. The company continues to see growth in Asia Pacific, particularly in India and Southeast Asia.

3. Forward Guidance and Outlook

• Q4 Expectations: Anticipated to have stronger ARR growth compared to Q3, driven by significant contract renewals and potential asset analytics deals.
• Full-Year Guidance: Positioned to achieve low double-digit ARR growth and approximately 100 basis points of margin expansion for the full year.

4. Bad News, Challenges, or Points of Concern

• Professional Services Revenue Decline: Professional services revenues decreased by 2%, now representing only 5% of total revenues, with expectations to remain flat for the remainder of the year.
• China Market Performance: China's contribution to ARR is minimal (2%), and ongoing geopolitical headwinds pose risks to future growth.
• Labor Availability: Ongoing engineering resource constraints could impact project delivery and budgets, although there is a shift towards AI investments as a solution.

5. Notable Q&A Insights

• Government Shutdown Impact: Minimal disruption noted so far, with federal projects continuing due to existing funding structures. However, future renewals may be impacted if the shutdown persists.
• AI Spending Trends: While firms are not yet specifically requesting AI capabilities, there is a strong interest in ensuring data stewardship and access for AI purposes.
• M&A Opportunities: Bentley is exploring potential acquisitions, with expectations to close at least one by year-end. The impact of M&A on ARR growth is expected to be within the historical range of 40 to 70 basis points.
• Market Dynamics: The company is optimistic about long-term demand for infrastructure, driven by the need for resilience and adaptation in response to climate concerns and geopolitical shifts.

Overall, Bentley Systems reported a solid quarter with strong revenue growth and strategic advancements in AI and infrastructure management, while navigating challenges such as labor constraints and geopolitical risks. The outlook for Q4 remains positive, with expectations for improved performance driven by contract renewals and new product initiatives.