Bentley Systems just shared a bit of what it is seeing in the world — unusual because it’s a privately held company and important because it is by far the largest software vendor focused only on AEC.
Bentley has published its annual report and held a corporate update call for the last couple of years. It all started when the company took on debt to repurchase shares held by outsiders. The ratings agencies needed information to rank the debt, and so these calls. The company is no longer required to do this because its repaid much of the debt, but it’s still a good way for Bentley to get out the word that it’s doing well in a world where its publicly traded competitors that talk to the market (and customers) every quarter.
The main headline for Bentley’s 2013: revenue grew faster than expected, up 8% to $593 million. (Can you imagine the sales review meetings: “Come on, there’s got to be $7 million more somewhere!”) Almost exactly a year ago, CEO Greg Bentley had forecast 7% growth for 2013 because of the continued economic slowdown, but told us that the company was able to beat this goal by focusing on asset performance, or helping its customers make the most of the assets already built.
There’s a second headline buried in the first: professional services revenue grew 35% in 2013 (though no total is given). Some of this was due to acquisition, but much is due to Bentley’s growing portfolio of products outside the design realm. Asset performance, moving information out to the construction site, involving more internal and external partners in project collaboration are all strategic imperatives for many of its customers, leading to enterprise engagements. That’s a big step — a company that used to be known for MicroStation is now gaining traction as something much more.
- Total revenue in 2013 was $593 million, up 8% as reported and up 8% in constant currency.
- Once again, 74% of revenue came from software subscriptions, steady with 2012 and up from 72% in 2011. Recurring revenue is a double-edged sword: it’s steady income that helps fund continuing R&D, but it makes it hard to grow revenue at double-digit rates. It also means that Bentley has to keep innovating to keep the renewal rates high —
- Which seems to be working, as renewal rates were again over 97%. That’s tied to what may be an industry-high —
- Investment of close to 25% of revenue in R&D.
- By geography, 45% of revenue came from the Americas, 36% from EMEA and 19% from Asia. Even so —
- The company highlighted growth in the BRICs (Brazil, Russia, India and China), South Korea, Malaysia, Singapore, UK and the Middle East but didn’t give any details. One can surmise that some of the growth is due to infrastructure build-out in Asia and the Middle East. Growth in the UK may be due to the nation’s BIM standardization and to Bentley’s involvement in the giant Crossrail project.
- Public companies often disclose when a single customer accounts for a significant part of revenue — it’s often seen as a risk, since that customer could go elsewhere. For Bentley, it’s a badge of honor: the company says over 70 “user organizations” account for more than $1 million in revenue.
- Bentley’s annual report says that 98% of the company is now owned by the Bentley family and colleagues (employees), up from 92% in 2012 and up from 58% in 2008 as a result of the stock buyback program. Left unsaid were the reasons and benefits of such a program: better control, stronger motivation and higher rewards.
- Bentley tracks how customers are using its products and in 2013, it noted more than 1 million commercial users in 165 countries of its desktop apps and over 2 million including users when including Passports and mobile device apps.
Mr. Bentley also gets excited about how the company is changing the way its customers pay for and use its products. Bentley has sold subscriptions for a long time; new is a no-cost opt-in to Bentley’s entire portfolio via the SELECT Open Access program. This gives all subscribers (regardless of size) access to any product in the portfolio without committing to an annual license. Quarterly billing means that firms pay for only what they need at any given time, which could enable them to charge their software costs back to their clients or at least know the true cost of their software per project. The companion Bentley LEARNservice offers quick-start training so that users can get up to speed on each app, when they need to. Why does this matter? Users that switch between products often need a refresher, so quick access is key — and the combination of easy access, on-demand training tools and painless purchasing almost make it a no-brainer to investigate other Bentley solutions before calling in another software vendor for a demo. Smart business.
But Bentley is, at heart, a technology company. This year the annual report includes an interview with CTO Keith Bentley, a technogeek of the first order. You should read the entire piece for yourself, but Keith reinforces the company’s longtime vision and bridges it into the future:
[T]he goal is to end up with something you can build, maintain, and reuse effectively and efficiently, and the information generated can be as important as the physical asset. And when you can have a computer in your pocket, no one presumes, like we did [in the 70s and 80s], that the workflow is fixed, and that all you can do is optimize the steps in between. So we’ve gone from process automation to performance automation – that is, automation of the end result rather than of the steps to get there. This is so much more valuable in terms of the return on our users’ investments in their computing resources, and allows us to do a lot more for our users than ever before.
This ties directly to the company’s mission in 2014, as Greg Bentley singled out three areas of focus: mapping and monitoring subsurface assets like buried wires and other utilities; further integrating asset management into processes to maintain, operate and improve roadways, railways, campuses and other complex systems; and to make this experience more immersive with 3D models and other techniques for training, inspections, and maintenance.
Mr. Bentley expects revenue to grow 6% in 2014 on an organic basis and expects to add to that with acquisitions during the year. He said that the company reduced its net debt by half in 2013 and has “significant credit capacity available at borrowing rates of less than 2%”. What do you think Bentley will acquire in 2014? Me? I’m betting on more tools to keep tabs on asset performance (like InspectTech, the bridge monitoring acquisition from 2012).
Bentley may not be the largest AEC software vendor (that’s Autodesk), but it is growing a percentage point or two faster than its peers, even with its heavy reliance on subscription revenue. Its focus on improving performance over the 20, 30 or 50 year lifespan of the assets its customers operate is, for now, unique among AEC competitors and ties Bentley to its customers in ways that a design-only vendor can’t approach. I think Bentley may come in ahead a point or two of forecast in 2014 — just a feeling.
Note: Bentley made a review copy of the 2013 annual report available to media and analysts. The final should be available soon on the company website. Select Company on the right, then pulldown to Annual Report.