Bentley Systems Announces Operating Results for Third Quarter 2020

We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure, and to view these non-GAAP financial measures in conjunction with the related GAAP financial measures.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES Consolidated Balance Sheets (in thousands, except share and per share data) (unaudited)

	September 30,			December 31,
	2020			2019
Assets
Current assets:
Cash and cash equivalents	$	137,598		$	121,101
Accounts receivable		172,600			211,775
Allowance for doubtful accounts		(6,492	)		(7,274	)
Prepaid income taxes		7,307			4,543
Prepaid and other current assets		27,897			23,413
Total current assets		338,910			353,558
Property and equipment, net		29,332			29,632
Operating lease right-of-use assets		46,006			—
Intangible assets, net		46,560			46,313
Goodwill		542,239			480,065
Investments		5,218			1,725
Deferred income taxes		44,543			51,068
Other assets		37,689			32,238
Total assets	$	1,090,497		$	994,599
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	15,086		$	17,669
Accruals and other current liabilities		212,866			167,517
Deferred revenues		173,578			204,991
Operating lease liabilities		15,629			—
Income taxes payable		5,100			2,236
Total current liabilities		422,259			392,413
Long-term debt		589,583			233,750
Long-term operating lease liabilities		32,555			—
Deferred revenues		6,322			8,154
Deferred income taxes		9,502			8,260
Income taxes payable		7,874			8,140
Other liabilities		15,229			9,263
Total liabilities		1,083,324			659,980
Stockholders’ equity:
Common stock		2,622			2,548
Additional paid-in capital		441,723			408,667
Accumulated other comprehensive loss		(29,211	)		(23,927	)
Accumulated deficit		(407,961	)		(52,669	)
Total stockholders’ equity		7,173			334,619
Total liabilities and stockholders’ equity	$	1,090,497		$	994,599

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES Consolidated Statements of Operations (in thousands, except share and per share data) (unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Revenues:
Subscriptions	$	173,174		$	155,191		$	501,011		$	445,338
Perpetual licenses		12,827			13,787			36,020			38,255
Subscriptions and licenses		186,001			168,978			537,031			483,593
Services		16,996			17,610			44,946			50,139
Total revenues		202,997			186,588			581,977			533,732
Cost of revenues:
Cost of subscriptions and licenses		23,338			17,370			66,466			48,201
Cost of services		19,290			17,681			50,126			56,048
Total cost of revenues		42,628			35,051			116,592			104,249
Gross profit		160,369			151,537			465,385			429,483
Operating expenses:
Research and development		50,217			44,756			139,570			136,617
Selling and marketing		41,824			36,721			107,551			111,889
General and administrative		33,006			25,108			85,275			71,415
Amortization of purchased intangibles		3,869			3,550			10,984			10,402
Expenses associated with initial public offering		26,130			—			26,130			—
Total operating expenses		155,046			110,135			369,510			330,323
Income from operations		5,323			41,402			95,875			99,160
Interest expense, net		(1,934	)		(2,029	)		(4,450	)		(6,503	)
Other income (expense), net		13,741			(12,306	)		6,756			(14,053	)
Income before income taxes		17,130			27,067			98,181			78,604
Provision for income taxes		(10,705	)		(6,640	)		(22,145	)		(11,759	)
Loss from investment accounted for using the equity method, net of tax		(581	)		—			(1,447	)		—
Net income		5,844			20,427			74,589			66,845
Less: Net income attributable to participating securities		(4	)		(10	)		(4	)		(10	)
Net income attributable to Class A and Class B common stockholders	$	5,840		$	20,417		$	74,585		$	66,835
Per share information:
Net income per share, basic	$	0.02		$	0.07		$	0.26		$	0.23
Net income per share, diluted	$	0.02		$	0.07		$	0.25		$	0.23
Weighted average shares outstanding, basic		289,318,391			286,075,323			287,063,892			286,024,263
Weighted average shares outstanding, diluted		299,634,961			289,629,555			297,251,349			294,586,354

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands) (unaudited)

	Nine Months Ended
	September 30,
	2020			2019
Cash flows from operating activities:
Net income	$	74,589		$	66,845
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		25,836			23,334
Provision for accounts receivable allowance		(541	)		2,109
Deferred income taxes		7,853			833
Deferred compensation plan activity		2,487			2,968
Stock-based compensation expense		23,617			6,046
Amortization of deferred debt issuance costs		430			415
Change in fair value of derivative		3,365			159
Change in fair value of contingent consideration		(1,340	)		62
Foreign currency remeasurement (gain) loss		(9,067	)		13,956
Loss from investment accounted for using the equity method, net of tax		1,447			—
Changes in assets and liabilities, net of effect from acquisitions:
Accounts receivable		46,661			40,847
Prepaid and other assets		8,907			(6,505	)
Accounts payable, accruals and other liabilities		31,486			18,545
Deferred revenues		(35,134	)		(39,655	)
Income taxes payable		(4,571	)		(11,710	)
Net cash provided by operating activities		176,025			118,249
Cash flows from investing activities:
Purchases of property and equipment and investment in capitalized software		(12,805	)		(11,622	)
Capitalization of costs to translate software products into foreign languages		(728	)		(553	)
Acquisitions, net of cash acquired of $2,064 and $980, respectively		(68,920	)		(9,662	)
Other investing activities		(6,355	)		—
Net cash used in investing activities		(88,808	)		(21,837	)
Cash flows from financing activities:
Proceeds from credit facilities		432,375			136,750
Payments of credit facilities		(201,125	)		(147,500	)
Proceeds from term loan		125,000			—
Payments of debt issuance costs		(432	)		—
Payments of financing leases		(141	)		—
Payments of acquisition debt and other consideration		(2,034	)		(9,878	)
Payments of dividends		(412,852	)		(18,830	)
Payments for shares acquired including shares withheld for taxes		(72,476	)		(18,417	)
Proceeds from Common Stock Purchase Agreement		58,349			4,510
Net proceeds from exercise of common stock options and restricted stock		3,206			3,039
Net cash used in financing activities		(70,130	)		(50,326	)
Effect of exchange rate changes on cash and cash equivalents		(590	)		(1,272	)
Increase in cash and cash equivalents		16,497			44,814
Cash and cash equivalents, beginning of year		121,101			81,183
Cash and cash equivalents, end of period	$	137,598		$	125,997

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES Reconciliation of GAAP to Non-GAAP Measures For the Three and Nine Months Ended September 30, 2020 and 2019 (in thousands) (unaudited)
Reconciliation of net income to Adjusted EBITDA:
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Net income	$	5,844		$	20,427		$	74,589		$	66,845
Interest expense, net	1,934			2,029			4,450			6,503
Provision for income taxes	10,705			6,640			22,145			11,759
Depreciation and amortization	9,172			7,968			25,836			23,334
Equity-based compensation	19,548			2,026			22,760			6,051
Acquisition expenses	3,489			1,425			8,498			4,103
Realignment expenses	9,943			(49		)	10,012			(492		)
Expenses associated with IPO	26,130			—			26,130			—
Other (income) expense, net	(13,741		)	12,306			(6,756		)	14,053
Loss from investment accounted for using the equity method, net of tax	581			—			1,447			—
Adjusted EBITDA	$	73,605		$	52,772		$	189,111		$	132,156

Reconciliation of net income to Adjusted Net Income:
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Net income	$	5,844		$	20,427		$	74,589		$	66,845
Non-GAAP adjustments, prior to income taxes:
Amortization of purchased intangibles and developed technologies	5,236			4,638			14,694			13,699
Equity-based compensation	19,548			2,026			22,760			6,051
Acquisition expenses	3,489			1,425			8,498			4,103
Realignment expenses	9,943			(49		)	10,012			(492		)
Expenses associated with IPO	26,130			—			26,130			—
Other (income) expense, net	(13,741		)	12,306			(6,756		)	14,053
Total non-GAAP adjustments, prior to income taxes	50,605			20,346			75,338			37,414
Income tax effect of non-GAAP adjustments	(5,644		)	(1,473		)	(10,785		)	(4,981		)
Loss from investment accounted for using the equity method, net of tax	581			—			1,447			—
Adjusted Net Income	$	51,386		$	39,300		$	140,589		$	99,278

Reconciliation of GAAP Financial Statement Line Items to non-GAAP Adjusted Financial Statement Line Items:
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Cost of subscriptions and licenses	$	23,338		$	17,370		$	66,466		$	48,201
Amortization of purchased intangibles and developed technologies		(1,367	)		(1,088	)		(3,710	)		(3,297	)
Equity-based compensation		(861	)		(27	)		(908	)		(60	)
Realignment expenses		(50	)		—			(50	)		51
Adjusted cost of subscriptions and licenses	$	21,060		$	16,255		$	61,798		$	44,895

Cost of services	$	19,290		$	17,681		$	50,126		$	56,048
Equity-based compensation		(2,526	)		(84	)		(2,701	)		(363	)
Acquisition expenses		(615	)		—			(1,050	)		—
Realignment expenses		(1,548	)		12			(1,548	)		185
Adjusted cost of services	$	14,602		$	17,609		$	44,827		$	55,870

Research and development	$	50,217		$	44,756		$	139,570		$	136,617
Equity-based compensation		(6,661	)		(749	)		(7,817	)		(2,306	)
Acquisition expenses		(1,969	)		(1,129	)		(5,113	)		(3,083	)
Realignment expenses		(841	)		37			(910	)		79
Adjusted research and development	$	40,746		$	42,915		$	125,731		$	131,308

Selling and marketing	$	41,824		$	36,721		$	107,551		$	111,889
Equity-based compensation		(4,803	)		(632	)		(5,607	)		(1,757	)
Acquisition expenses		(86	)		(61	)		(243	)		(164	)
Realignment expenses		(5,183	)		—			(5,183	)		263
Adjusted selling and marketing	$	31,752		$	36,027		$	96,518		$	110,231

General and administrative	$	33,006		$	25,108		$	85,275		$	71,415
Equity-based compensation		(4,696	)		(535	)		(5,726	)		(1,565	)
Acquisition expenses		(532	)		(199	)		(1,611	)		(546	)
Realignment expenses		(2,321	)		—			(2,321	)		(86	)
Adjusted general and administrative	$	25,456		$	24,374		$	75,617		$	69,217

Income from operations	$	5,323		$	41,402		$	95,875		$	99,160
Amortization of purchased intangibles and developed technologies		5,236			4,638			14,694			13,699
Equity-based compensation		19,548			2,026			22,760			6,051
Acquisition expenses		3,489			1,425			8,498			4,103
Realignment expenses		9,943			(49	)		10,012			(492	)
Expenses associated with IPO		26,130			—			26,130			—
Adjusted income from operations	$	69,669		$	49,443		$	177,968		$	122,520

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