Bentley says economy on track

Bentley Systems today held a conference call to update analysts and journalists on its progress in 2011 and offer outlook for 2012. The company did this for the first time last year to satisfy credit ratings agencies but, I think, also wants to also put its strength and success out there for all to see alongside its publicly-reporting peers. After all, Bentley is one of the largest privately held software companies in the world, and its customers are very curious about it. The highlights: revenue growth of 10% in 2011, solid liquidity and cash reserves, an evolving ownership structure and an acquisition. Subtext: the company feels that the economic recovery is on track and will continue, and that it stands to benefit. The details:

• CEO Greg Bentley said that revenue was $523 million for 2011, up 10%. Given that almost 3/4 of Bentley’s revenue is from subscriptions, that’s very good growth indeed.
• By product, the company saw double-digit growth from ProjectWise, STAAD, Bentley Map, ProSteel and AutoPipe.
• Revenue from Asia was up over 30% to almost $100 million in 2011, or 19% of total, up from 16% in 2010. While Mr. Bentley did not break it down, China was clearly a stand-out region, while EMEA also performed well and Europe showed “resilience”. The US, he said, is trending “sideways” – privately-financed work is trending upward; public finances is not going as strongly.
• Software subscriptions accounted for 72% of revenues and are back at historic renewal rates.
• Industries that are privately funded performed better than those relying on public funds. Building and plant were stronger in 2011 than were civil and the other infrastructure verticals except in countries (like the UK) where infrastructure is seen as a national priority and not only an economic incentive.
• For 2012, Mr. Bentley sees organic growth of about 6%, which would bring total revenue to about $550 million. So far, Q1 has been stronger than Q1 2011 and Q1 2011, helping to fuel optimism that the “new normal” will continue.
• Mr. Bentley said that the company took out a$350 million credit line — likely to fund future acquisitions, although nothing specific was said. Since this call was held in part to satisfy the requirements of debt ratings agencies, Mr. Bentley made a point of saying that the company’s net debt leverage was down to 1.7x. [That’s very good. Vastly simplified, “net debt leverage” is the ratio of debt divided by operating profit. It is commonly used to evaluate and compare the level of indebtedness of a company and its ability to pay back debt. A quick scan of recent earnings, for example, found that a number of companies have a net debt leverage of 4x.]
• Mr. Bentley also said that the company “generates a strong cash flow and has available liquidity of $175 million.” Start speculating: what are they going to buy next?
• Wait – they just did! Mr. Bentley announced that the company had acquired elcoSystems of Germany, makers of the cable and raceway software already embedded in the Bentley offering. [But there would appear to be plenty of money left for other acquisitions.]
• As part of the financial restructuring, the Bentley family and current and former company employees now own 92% of the company’s equity (up from 85% a year ago).
• Bentley Systems made great progress in China in 2011, and Mr. Bentley spent a significant amount of time on the call detailing customer and product successes there. Revenue from the country is doubling every two years (it was doubling every three years as of last March).

Factoids aside, what’s the bottom line? Bentley’s broad product portfolio enables it to serve a diverse set of customer requirements. Architecture market not doing so well? Process is. Need to redesign the land around a new wastewater plant? Bentley has a product for that, too. Workload shifts require swapping out licenses for structural analysis and adding pipe stress? Bentley’s business model can do that. As Mr. Bentley said, growing subscription revenue may not be sexy, but it sure does work. Bentley Systems will be releasing a more formal report in a few weeks, and I’ll update then.