Bentley’s 2019 corporate update: again no drama, solid growth
Bentley’s spring business update call turned out to be an interesting view into the company and its products — but we learned few new details about how the company is doing. A couple of weeks ago, Bentley released its “annual report”, the key points of which I summarized and put into a limited historical context here. You can download a copy of the Advancement Update here or go to Bentley’s their website and scroll down to Advancement Update at very bottom on the right.
The call amplified a bunch of topics; my top picks:
- CEO Greg Bentley was very clear: Bentley is privately-held and can choose what it discloses. He said that he understands the frustration of people trying to compare Bentley to publicly-traded companies that use different metrics, but this disclosure models how Bentley sees its business:
- Bentley’s annual revenue run-rate surpassed $700 million in 2018
- Organic revenue grew 6.5% in constant currencies in 2018
- By geo, 47.5% of revenue came from the Americas, 33.5% from EMEA and 19% from Asia — see more below about China
- Mr. Bentley said that the company already has the business and financial model many of its peers aspire to, with 83% of revenue coming from annual, recurring sources
- The 35-year-old year old company strives to be free of drama. That’s why they model organic, constant currency revenue — and with the strong recurring component, there are no wild jumps
- Bentley does sell perpetual licenses to customers who prefer that mechanism, but that accounts for less than 10% of overall revenue. Mr Bentley didn’t say it, but the company prides itself on offering customers that choice
- Given his comments on public versus private disclosures, it’s funny that Mr. Bentley got sucked into a brief discussion of accounting rules. Last year, 93% of revenue was ratable and this year, it’s 83%. Why the perceived decline? Because accounting rule changes mean the company can no longer recognize ratably some perpetual (upfront) revenue
- In any case, Mr. Bentley is satisfied with Bentley’s long, stable track record of growth
- Profitable growth generates cash, which enables the company to invest in R&D at a rate that Mr. Bentley believes is much higher than his peers’. It also helps fund acquisitions (Bentley does/did have a credit line which wasn’t mentioned on the call), with the company making seven in 2018 and two so far in 2019, including Keynetix, more below
- China remains a special place for Bentley. It is Bentley’s second largest market in terms of new business and third largest in terms of total sales (after the US and UK). Bentley follows a “China first” R&D model because of how quickly companies there adopt the its technology. Bentley also maintains what sounds like a substantial presence in the country to support local clients. Mr. Bentley voiced concern about trade restrictions but didn’t quantify a potential impact on Bentley
- At the time of the call Bentley announced that it has acquired Keynetix, a UK provider of cloud-based software for capturing, visualizing, modeling, and sharing geotechnical data. Mr. Bentley said several times during the call how important soil and rock data is to all infrastructure projects, and that recent acquisitions enable it to offer borehole report management with Bentley’s gINT software, geotechnical analysis with PLAXIS and SoilVision and, now, underground environment information management via Keynetix. Mr. Bentley said that Keynetix technology that applies to Autodesk Civil3D will continue to be supported. Terms of the deal were not announced
Mr. Bentley said that 2019 will be about advancing the company’s products and working with key partners Siemens, Microsoft and Topcon to bring to market offerings that Bentley can’t do on its own. PlantSight, the product Bentley is pursuing with Siemens, came up often on the call (likely because the opportunity to create digital twins of operating plants is massive) but the partnerships with Microsoft and Topcon are also important for cloud, visualization and other user types.
The construction industry, and the opportunity to digitize the job site, remains an area of focus, but Mr. Bentley said that Bentley is taking a different approach. He sees competitors going after the 2D opportunity of plans and documents; what’s needed, he argues is 4D–the complete 3D model plus the fourth dimension of schedule or time. Construction deliverables should be migrated forward into operations, he said. Bentley and Topcon already do this to some extent in areas like road construction; the challenge is to expand to other areas of AEC and to make it even more accessible via immersive technologies. The construction projects I talk to want to jump on this but are slow to roll out because of skill shortages and, in a lot of cases, fear of buying the wrong AR/VR hardware (think Betamax vs VHS). It’ll come.
Bottom line: Bentley is chugging ahead with its portfolio build-out and adding what it sees as critical capabilities, via internal R&D or acquisition. Its private-ish status enables it to take risks that public companies find more challenging –like open source, a large presence in markets before revenue warrants it, participation in public-good initiatives, and so on– but that could ultimately be very successful. And it seems to generate enough cash to keep that machine ticking over very nicely.
Steady progress, no drama.