Bentley saw a rebound in infrastructure in Q2 but is cautious about China
Bentley continues to grow its deep expertise in various AEC disciplines — most recently, expanding its focus in underground resource mapping and analysis. This diversity serves it well; read on.
- Total revenue was $223 million, up 21% as reported. Seequent contributed about $4 million per the quarterly report filed with the US SEC, so almost all of this growth was organic
- Subscription revenue was $186 million, up 18%
- Perpetual license revenue was $11 million, down 8% as Bentley continues to focus on selling subscriptions
- Services revenue was $26 million, up 86% as Bentley continues to build out its Maximo-related consulting and implementation business, the Cohesive Companies
Unlike AspenTech, Bentley’s revenue growth is speeding up (total revenue up 21% in Q2, including a wee bit from Seequent, and up 17% for the first six months of 2021). Why the difference? IMHO, because Bentley has a much broader base, selling into many more end industries as well as to road/bridge/water/wastewater infrastructure projects that keep going, Covid or not. CEO Greg Bentley told investors that some parts of the business are back to —or even better than— pre-pandemic levels, but not yet all. He said that the company continues to struggle in industrial and resources capital expenditure projects, and therefore in the geographies (theMiddle East and Southeast Asia) that are the most dependent on this sector. This is balanced against continued success in new accounts and the company’s reinvigorated selling to small and medium enterprises via its Virtuosity subsidiary — and in a resurgence in the overall commercial/facilities sector. In general, it appears that sales to contractors such as architects and engineers lag behind those to owners and operators of commercial facilities —makes sense as many new projects are still on pause until pandemic-related effects settle down.
One unusual comment from Bentley’s earnings call that we’re going to listen for on others: The government of China is asking companies to explain why they are not using locally-grown software solutions; it appears to be offering preferential tax treatment for buyers of local software. As Greg Bentley told investors, “[d]uring the year to date, we have experienced a rash of unanticipated subscription cancellations within the mid-sized accounts in China that have for years subscribed to our China-specific enterprise program … Because we don’t think there are product issues, we will try to reinstate these accounts through E365 programs, where we can maintain continuous visibility as to their usage and engagement”. So, to recap: the government is using taxation to prefer one set of vendors over another, and all Bentley can do (really) is try to bring these accounts back and then monitor them constantly to keep on top of emerging issues. FWIW, in the pre-pandemic filings for Bentley’s IPO, “greater China, which we define as the Peoples’ Republic of China, Hong Kong and Taiwan … has become one of our largest (among our top five) and fastest-growing regions as measured by revenue, contributing just over 5% of our 2019 revenues”. Something to watch.
The company updated its financial outlook for 2021 to include the recent Seequent acquisition and this moderate level of economic uncertainty. Bentley might actually join the billion-dollar club on a pro forma basis — as if the acquisition of Seequent had occurred at the beginning of 2021. On a reported basis, the company sees total revenue between $945 million and $960 million, or an increase of around 18%, including Seequent. Excluding Seequent, Bentley sees organic revenue growth of 10% to 11%.
Much more here, on Bentley’s investor website.