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TABLE OF CONTENTS
BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

As confidentially submitted to the Securities and Exchange Commission on January 10, 2020.
This draft registration statement has not been filed publicly with the Securities and Exchange Commission,
and all information herein remains strictly confidential.

Registration No. 333-            

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



BENTLEY SYSTEMS, INCORPORATED
(Exact name of registrant as specified in its charter)



Delaware
(State or other jurisdiction of
incorporation or organization)
  7372
(Primary Standard Industrial
Classification Code Number)
  95-3936623
(I.R.S. Employer
Identification Number)

685 Stockton Drive
Exton, PA 19341
(610) 458-5000

(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)



David R. Shaman
Chief Legal Officer and Corporate Secretary
Bentley Systems, Incorporated
685 Stockton Drive
Exton, PA 19341
(610) 458-5000

(Name, address, including zip code and telephone number, including area code, of agent for service)



Copies to:

Arthur D. Robinson
Richard A. Fenyes
Jonathan R. Ozner
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000

 

Gregory S. Bentley
David J. Hollister
685 Stockton Drive
Exton, PA 19341
(610) 458-5000



Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.



            If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    ý

            If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

            If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

            If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

            Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý   Smaller reporting company o

Emerging growth company ý

            If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. o



CALCULATION OF REGISTRATION FEE

               
 
Title of Each Class of Securities
to be Registered

  Amount to be
Registered

  Proposed Maximum
Offering Price
Per Share

  Proposed Maximum
Aggregate Offering
Price(1)

  Amount of
Registration Fee

 

Class B Common Stock, $0.01 par value per share

      Not applicable        

 

(1)
Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(a) of the Securities Act of 1933, as amended. Given that there is no proposed maximum offering price per share of Class B common stock, the registrant calculates the proposed maximum aggregate offering price, by analogy to Rule 457(f)(2), based on the book value of the Class B common stock the registrant registers, which will be calculated from its audited balance sheet as of December 31, 2019. Given that the registrant's shares of Class B common stock are not traded on an exchange or over-the-counter, the registrant did not use the market prices of its ordinary shares in accordance with Rule 457(c).



            The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this prospectus is not complete and may be changed The securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated                        , 2020

BENTLEY SYSTEMS, INCORPORATED

GRAPHIC

Shares of Class B Common Stock



          This prospectus relates to the registration of the resale of up to            shares of our Class B common stock by our stockholders identified in this prospectus (the "Registered Stockholders"). Unlike an initial public offering, the resale by the Registered Stockholders is not being underwritten by any investment bank. The Registered Stockholders may, or may not, elect to sell their shares of Class B common stock covered by this prospectus, as and to the extent they may determine. Such sales, if any, will be made through brokerage transactions on The Nasdaq Global Select Market, or other public exchanges or registered alternative trading venues. See the section titled "Plan of Distribution." If the Registered Stockholders choose to sell their shares of Class B common stock, we will not receive any proceeds from the sale of shares of Class B common stock by the Registered Stockholders.

          We have two classes of authorized common stock: Class A common stock and Class B common stock. Upon the effectiveness of the registration statement of which this prospectus forms a part, the rights of the holders of our Class A common stock and our Class B common stock will be identical, except with respect to voting and conversion rights. Each share of our Class B common stock will be entitled to one vote per share. Each share of our Class A common stock will be entitled to            votes per share and is convertible at any time into one share of our Class B common stock. Our Class A common stock will automatically convert into our Class B common stock upon certain transfers. The beneficial owners of our Class A common stock consist primarily of the Bentleys (as defined herein). As of December 31, 2019 after giving effect to the Charter Amendments (as defined herein), our Class A common stock accounted for approximately        % of the voting power of our outstanding capital stock and the Bentleys held, or had the ability to control, approximately        % of the voting power of our outstanding capital stock. This ownership means that, for the foreseeable future, holders of our Class B common stock will not have a meaningful voice in our corporate affairs and that the control of our company will be concentrated with the Bentleys. See the section titled "Risk Factors—Risks Related to Ownership of Our Class B Common Stock" for additional information.

          No public market for our Class B common stock currently exists. However, our shares of Class B common stock have a history of trading in private transactions. Based on information available to us, the sales price per share of Class B common stock for such private transactions during the year ended December 31, 2019 was $7.24, and we are not aware of any private transactions in our common stock during the period from January 1, 2020 through                        , 2020. For more information, see the section titled "Sale Price History of our Capital Stock." Our recent trading prices in private transactions may have little or no relation to the opening public price of shares of our Class B common stock on The Nasdaq Global Select Market or the subsequent trading price of shares of our Class B common stock on The Nasdaq Global Select Market. Further, the listing of our Class B common stock on The Nasdaq Global Select Market without underwriters is a novel method for commencing public trading in shares of our Class B common stock, and consequently, the trading volume and price of shares of our Class B common stock may be more volatile than if shares of our Class B common stock were initially listed in connection with an underwritten initial public offering.

          Based on information provided by The Nasdaq Global Select Market, at market open on the day that shares of our Class B common stock are initially listed on The Nasdaq Global Select Market, The Nasdaq Stock Market LLC (the "Nasdaq Stock Market"), will begin accepting, but not executing, orders. Once                        , in its capacity as our financial advisor, has notified the Nasdaq Stock Market that our Class B common stock is ready to trade, the Nasdaq Stock Market will calculate the Current Reference Price (as defined below) for our Class B common stock, in accordance with the Nasdaq Marketplace Rules (the "Nasdaq Listing Rules"). If            then approves proceeding at the Current Reference Price, the applicable orders that have been entered will be executed at such price and regular trading of our Class B common stock on The Nasdaq Global Select Market will commence, subject to the Nasdaq Stock Market conducting validation checks in accordance with the Nasdaq Listing Rules. Under the Nasdaq Listing Rules, the "Current Reference Price" means: (i) the single price at which the maximum number of orders to buy or sell our Class B common stock can be paired; (ii) if more than one price exists under (i), then the price that minimizes the number of our Class B common stock for which orders cannot be matched; (iii) if more than one price exists under (ii), then the entered price at which our Class B common stock will remain unexecuted in the cross; and (iv) if more than one price exists under (iii), a price determined by the Nasdaq Stock Market after consultation with            in its capacity as our financial advisor.            will determine when our Class B common stock is ready to trade and approve proceeding at the Current Reference Price primarily based on consideration of volume, timing and price. In particular,            will determine when a reasonable amount of volume will cross on the opening trade such that sufficient price discovery has been made to open trading at the Current Reference Price. For more information, see the section titled "Plan of Distribution."

          We intend to list our Class B common stock on The Nasdaq Global Select Market under the symbol "BSY." We expect our Class B common stock to begin trading on The Nasdaq Global Select Market on or about                        , 2020.

          We are an "emerging growth company" as defined under the federal securities laws and, as such, we have elected to comply with reduced reporting requirements for this prospectus and may elect to do so in future filings.

          We will be a "controlled company" under the corporate governance rules of the Nasdaq Listing Rules, and therefore we will be permitted to, and we intend to, elect not to comply with certain corporate governance requirements thereunder. For more information, see the section titled "Management—Controlled Company."



          Investing in our Class B common stock involves risks that are described in the section titled "Risk Factors" beginning on page 17 of this prospectus.

          Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

   

                        , 2020


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TABLE OF CONTENTS

ABOUT THIS PROSPECTUS

    ii  

TRADEMARKS

    ii  

PROSPECTUS SUMMARY

    1  

RISK FACTORS

    17  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

    53  

MARKET AND INDUSTRY DATA

    55  

USE OF PROCEEDS

    55  

DIVIDEND POLICY

    55  

CAPITALIZATION

    56  

SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER DATA

    57  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    68  

BUSINESS

    100  

MANAGEMENT

    128  

EXECUTIVE AND DIRECTOR COMPENSATION

    133  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    140  

PRINCIPAL AND REGISTERED STOCKHOLDERS

    143  

DESCRIPTION OF CAPITAL STOCK

    146  

SHARES ELIGIBLE FOR FUTURE SALE

    152  

SALE PRICE HISTORY OF OUR CAPITAL STOCK

    154  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-US HOLDERS

    155  

PLAN OF DISTRIBUTION

    160  

LEGAL MATTERS

    162  

EXPERTS

    162  

WHERE YOU CAN FIND MORE INFORMATION

    162  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

    F-1  



        You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission (the "SEC"). Neither we nor any of the Registered Stockholders have authorized anyone to provide any information or make any representations other than those contained in this prospectus or in any free writing prospectus we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The Registered Stockholders are offering to sell, and seeking offers to buy, shares of their Class B common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Class B common stock. Our business, financial condition, results of operations, and prospects may have changed since such date.

        For investors outside of the United States: Neither we nor any of the Registered Stockholders have done anything that would permit the use of or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about, and to observe any restrictions relating to, the offering of Class B common stock by the Registered Stockholders and the distribution of this prospectus outside of the United States.

        Except as otherwise indicated herein or as the context otherwise requires, references to "Bentley Systems," "the Company," "we," "us," "our" and similar references refer to Bentley Systems, Incorporated and, where appropriate, its direct and indirect wholly-owned subsidiaries. References to the "Bentleys" refer to Barry J. Bentley, Gregory S. Bentley, Keith A. Bentley, and Raymond B. Bentley, and, where context requires, certain of their family members and family trusts, collectively.

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ABOUT THIS PROSPECTUS

        This prospectus is a part of a registration statement on Form S-1 that we filed with the SEC using a "shelf" registration or continuous offering process. Under this shelf process, the Registered Stockholders may, from time to time, sell the Class B common stock covered by this prospectus in the manner described in the section titled "Plan of Distribution." Additionally, we may provide a prospectus supplement to add information to, or update or change information contained in, this prospectus, including the section titled "Plan of Distribution." You may obtain this information without charge by following the instructions under the section titled "Where You Can Find More Information" appearing elsewhere in this prospectus. You should read this prospectus, any prospectus supplement and any free writing prospectus before deciding to invest in our Class B common stock.


TRADEMARKS

        This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies' trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

        This prospectus contains references to certain data derived from external publications:

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PROSPECTUS SUMMARY

        This summary highlights selected information that is presented in greater detail elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. This summary does not contain all of the information you should consider before investing in our Class B common stock. You should read this entire prospectus carefully, including the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Some of the statements in this prospectus constitute forward-looking statements. See the section titled "Cautionary Note Regarding Forward-Looking Statements."

Our Mission

        Bentley Systems' mission is to provide innovative software to advance the design, construction, and operations of the world's infrastructure—sustaining both the global economy and environment, for improved quality of life.

Bentley Systems: The Infrastructure Engineering Software Company

        We are a leading global provider of software for infrastructure engineering, enabling the work of civil, structural, geotechnical, and plant engineering practitioners, their project delivery enterprises, and owner-operators of infrastructure assets. We were founded in 1984 by the Bentley brothers. Our enduring commitment is to develop and support the most comprehensive portfolio of integrated software offerings across professional disciplines, project and asset lifecycles, infrastructure sectors, and geographies. Our software enables digital workflows across engineering disciplines, distributed project teams, from offices to the field, and across computing form factors, including desktops, on-premises servers, cloud-native services, mobile devices, and web browsers. We deliver our solutions via on-premise, cloud, and hybrid environments. Our users engineer, construct, and operate projects and assets across infrastructure sectors:

    public works (including roads, rail, airports, ports, and water and wastewater networks) / utilities (including electric, gas, water, and communications). We estimate that this sector represents 52% of the net infrastructure asset value of the global top 500 infrastructure owners based on the 2019 edition of the Bentley Infrastructure 500 Top Owners, our annual compilation of the world's largest infrastructure owners ranked by net depreciated value of their tangible fixed assets;

    industrial (including discrete and process manufacturing, power generation, and water treatment plants) / resources (including oil and gas, mining, and offshore), which we estimate represents 38% of the global top 500 infrastructure owners' net infrastructure asset value; and

    commercial/facilities (including office buildings, hospitals, and campuses), which we estimate represents 10% of the global top 500 infrastructure owners' net infrastructure asset value.

        Infrastructure assets are among the world's largest and longest-lived investments, vital to both economic prosperity and environmental health. The quality of a region's infrastructure directly affects the region's capacity to meet constituents' essential needs for water, sanitation, energy, transport, and productive industries. Moreover, infrastructure considerations can affect the rate of global climate change and communities' vulnerability and resilience to negative climate change outcomes.

        Infrastructure is complex due both to its physical scale and to its need for information connectedness at and between every stage of its lifecycle. Infrastructure design requires the structured collaboration of many engineering disciplines, often requiring globally dispersed teams. Infrastructure construction requires a distributed supply chain to reach an often remote location to realize a unique design. Infrastructure operations are mission critical, and require maintaining performance throughput and fitness-for-purpose for multiple generations. The design, construction, and operations of

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infrastructure require comprehensive solutions that can support and integrate rigorous workflows across professional disciplines in concert over the infrastructure lifecycle.

        Our business, comprised of more than 3,500 colleagues, includes a "success force" of more than 900 colleagues with experience and credentials in infrastructure engineering. Our success force, coupled with 35 years of singular focus, has enabled us to create what we believe to be the most comprehensive infrastructure engineering software portfolio available today. Our comprehensiveness creates a formidable competitive advantage by providing our users integrated solutions for infrastructure projects and assets of nearly any type, scale, and complexity.

        We address both the project and asset lifecycle phases of infrastructure, each with applications and enterprise information systems. Our project lifecycle solutions encompass conception, planning, surveying, design, engineering, simulation, and construction, as well as the collaboration offerings required to coordinate and share the work of interdisciplinary and/or distributed project teams. Our asset lifecycle solutions span the operating life of commissioned infrastructure assets, allowing our accounts to manage engineering changes for safety and compliance and to model performance and reliability to support operating and maintenance decisions.

        Our revenues are balanced and diversified between engineering and construction contracting firms who work together to deliver the design and construction of capital projects (representing 54% of our 2018 revenues), and their clients, public and private infrastructure asset owners and operators (representing 46% of our 2018 revenues). While engineering and construction contracting firms typically use our project lifecycle solutions, owner-operators are often involved in engineering and management for many of their own projects, and so can be users of our project lifecycle as well as our asset lifecycle solutions.

        Our company's "Advancing Infrastructure" tagline reflects our enduring track record in successfully leveraging new technologies to improve and integrate the design, construction, and operations of infrastructure, leading to our infrastructure digital twins. An infrastructure digital twin is a cloud-native 4D digital representation of a physical project and resulting asset, incorporating its underlying engineering information, that is applied to model, simulate, analyze, chronicle, and predict its performance over time. By adding digital twin services to our existing solutions, our users can more fully extend digital workflows across project delivery and asset performance, increasing the value of infrastructure engineers' work.

        We are the only infrastructure engineering software vendor to lead in market share in categories related to both the project and the asset lifecycle phases in the most recent rankings by The ARC Advisory Group ("ARC"). In August 2019, for Engineering Design Tools for Plants, Infrastructure, and BIM (building information modeling), ARC ranked us #2 overall, as well as #1 in each of Electric Transmission & Distribution and Communications and Water/Wastewater Distribution. In August 2019, ARC ranked us #1 in its inaugural market share study for Collaborative BIM. In December 2019, for Asset Reliability Software & Services, ARC ranked us #1 overall for software, as well as #1 in each of Transportation, Oil and Gas, and Electric Power Transmission and Distribution.

        During the last two years, Microsoft recognized us as its 2019 "CityNext Partner of the Year" (citing our Azure-hosted ProjectWise for the Mumbai Trans Harbour Sea Link in India), its 2018 "CityNext Partner of the Year" (citing our Azure-hosted ProjectWise and AssetWise for the Klang Valley MRT in Kuala Lumpur, Malaysia), and a Finalist for the 2019 "Mixed Reality Partner of the Year Award" (citing our SYNCHRO XR 4D construction modeling application for the new HoloLens 2 device). Also, according to Microsoft, in 2019 we were one of the top 25 companies in terms of Azure usage globally.

        We have spent decades cultivating trusted relationships with the largest global infrastructure engineering firms, including 454 of the 2019 Engineering News Record (615) Top Design firms and 319 of

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the 2019 Bentley Infrastructure 500 Top Owners. Our solutions are, in many cases, mission critical both for our accounts and for our professional users and foster a high degree of loyalty, with 80% of our 2018 revenues coming from accounts of more than ten years' standing.

        We are a significant software vendor to major infrastructure engineering organizations. In 2018, 88 accounts each contributed over $1 million to our revenues. 50% of our 2018 revenues came from 376 accounts each spending over $250,000. We serve over 35,000 accounts in total, and no single account provided more than 2% of our 2018 revenues.

        Our business is comprehensively global. In 2018, the majority of our revenues were generated across 171 countries outside the United States, with 33% from EMEA and 19% from APAC. We have purposefully invested and are fully established in developing international markets where rapid infrastructure growth will continue to present compelling opportunities for us to scale efficiently. In particular, China, where we now have over 200 colleagues, has become one of our largest (among our top five) and fastest growing countries as measured by revenue.

        In 2018, we generated subscription revenues of $557 million, total revenues of $692 million, net income of $142 million, and Adjusted EBITDA of $172 million. For additional information on our financial results, key metrics, and non-GAAP financial metrics, see the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics."

Our Solutions

        We offer solutions for enterprises and professionals across the infrastructure lifecycle. Our Project Delivery and Asset and Network Performance solutions are systems provided via cloud and hybrid environments, developed respectively to extend enterprise collaboration during project delivery, and to manage and leverage engineering information during operations and maintenance. Our Design Integration and Digital Cities solutions are primarily desktop applications and cloud-provisioned solutions for professional practitioners and workgroups.

GRAPHIC

        Project Lifecycle Solutions. Our Project Lifecycle solutions span conception, planning, surveying, design, simulation, and construction, as well as the collaboration software services required to coordinate and share the work of interdisciplinary and/or distributed project teams.

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        Design Integration. Our Design Integration solutions consist of modeling and simulation applications. Our modeling applications are domain-specific authoring tools used by professionals for the 3D design and documentation of infrastructure assets. Our simulation applications enable engineers to analyze the functional performance of the designs created with our modeling applications (or those of competitive vendors), preferably in iterative digital workflows, to improve engineering outcomes and to ensure compliance with design codes.

        Benefits of our Design Integration applications to infrastructure engineers include:

    Better designs.  Our modeling and simulation applications work together to improve infrastructure engineering quality, for instance to eliminate "clashes" across respective disciplines' work. Each application is for a specific purpose (asset-type or discipline; for example, OpenRoads for roadway design) and supports corresponding asset-specific engineering workflows (for example, the workflow a civil engineer would use in designing a road);

    Better deliverables.  Our applications share a common modeling environment to enable streamlined coordination and production of multi-discipline documentation; and

    Better handoff.  Our comprehensive modeling environment and our supplemental cloud services enable projects to enrich information sharing (and to minimize problematic translations) across project delivery processes.

        Project Delivery. Our Project Delivery solutions support information and document management, engineering-specific collaboration and work-sharing for distributed project teams and enterprises, and construction planning, modeling and execution. The scope of these solutions is not limited to users of only our own design applications.

        Our 4D construction modeling software spatially and temporally integrates a project's 3D engineering models into its construction schedules to assess sequencing strategies and to visualize and understand planned and actual progress over the project timeline. Our solutions also enable project delivery teams to optimally define and manage discrete engineering, construction, and installation work packages, including the construction trades' "workface planning," which considers crafts and materials by day and zone. For work packages which increasingly take advantage of modular offsite fabrication and manufacturing, our software manages and enables 4D visualization of the necessary spatial and logistical interfaces.

        Benefits of our Project Delivery solutions to project delivery enterprises include:

    Distributed work-sharing:  Our solutions incorporate the rigorous workflow protocols required for structured coordination across engineering and construction supply chains, enabling global sourcing for integrated project delivery, while maximizing economics, quality, and safety;

    Comprehensive collaboration:  Our software leverages cloud and hybrid environments to streamline the aggregation, distribution, and interaction for project deliverables, ensuring that the right project participants have the right information in the right format at the right time, including at the project site and on every device; and

    Construction visibility:  Our solutions' broad span and continuous detail across design integration, construction modeling and work packaging, and mixed-reality 4D visualization, advances predictability, accountability, and safety throughout the construction process.

        Asset Lifecycle Solutions. Our asset lifecycle solutions span the operating life of commissioned infrastructure assets, capturing and managing changes to engineering models and enterprise information for compliance and safety, and to model performance and reliability to support operating and maintenance decisions.

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        Asset and Network Performance. Our Asset and Network Performance Solutions are used to manage engineering information and geospatial relationships for operating and provisioning infrastructure across all sectors, including linear networks for transportation and energy transmission and distribution. Our asset performance modeling provides the needed analytical context for "right-time" data, including from Internet of Things ("IoT") sensor capabilities, to yield actionable insights.

        Benefits of our Asset and Network Performance solutions for owner-operators include:

    Better compliance and assurance:  Our systems intrinsically enforce the rigor appropriate for operating infrastructure assets in order to provide dependable visibility into the impact of changes;

    Better asset performance:  Our solutions include operational dashboards that provide decision support insights to maintain and improve throughput and reliability; and

    Better risk management:  Our solutions include predictive analytics that identify potential problems before they occur, and ensure the accessibility of best-available engineering information and models for mitigation and resilience.

        Digital Cities. Our Digital Cities solutions incorporate reality modeling (leveraging drone and mobile mapping "survey" inputs) and geospatial context to continuously capture as-operated infrastructure conditions at city and regional scale. Our offerings support department-level applications for municipal engineering, such as simulation of pedestrian and vehicle traffic, and water and drainage systems.

        Benefits of our Digital Cities solutions to cities, regions, and their constituents include:

    Evergreen 3D city models:  Our reality modeling software maintains engineering-ready 3D models, incorporating incrementally updated surveys, and thus ensures that engineering departments can rely on up-to-date geospatial context for digital workflows;

    Better resilience:  Our solutions can integrate geotechnical, structural/seismic, and hydrological engineering modeling with evergreen 3D city models to harden infrastructure from flood and other natural hazards, and to apply engineering simulations for mitigation and emergency response; and

    Resource conservation:  Taking full advantage of our solutions can significantly increase efficiency and reduce waste. For instance, our water network modeling tools, applied to compare as-designed specifications to observed flows and pressures, can help to non-invasively locate subsurface water network leaks.

Infrastructure Digital Twins.

        Our digital twins offerings enable our users to create and curate cloud-native 4D digital representations of physical projects and resulting assets, incorporating underlying engineering information, and then to model, simulate, analyze, chronicle, and predict performance over time. Using digital twins, our users can more fully extend digital workflows across project delivery and asset performance, increasing the value of infrastructure engineers' work.

        Benefits of our digital twins solutions to project delivery firms and owner-operators include:

    Advanced insights.  For project delivery, digital twins can reveal insights beyond what would be visible with traditional workflows; for example, a digital twin can show 3D heat maps highlighting where changes in a design have been unusually pervasive, indicating possible design flaws. For asset performance, such insights from digital twins can be used to evaluate different strategies for optimizing operational efficiencies and throughput;

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    Predictive analytics.  For project delivery, digital twins and machine learning can compare the progress of a current project with similar projects that have been previously completed, and identify in advance potential bottlenecks, in time to take corrective action. For asset performance, a digital twin can track observations from various operational inputs against design intelligence to predict future failures and recommend maintenance actions to minimize downtime;

    Continuous and comprehensive design reviews.  For project delivery, digital twins can aggregate and align design models and data from all sources "on the fly" (without interruptions for translations, and without specialized software) to present immersive 3D status visualization in a web browser for any authorized stakeholder to participate in ongoing interactive design reviews; and

    Convergence of OT, IT, and now "ET."  Infrastructure owner-operators are increasingly able to instrument their assets with IoT sensors, producing torrents of Operational Technology ("OT") data that are difficult to interpret. Software advances in Information Technology ("IT") can in turn make data from enterprise transaction systems, such as maintenance work order history, accessible for analytics. But even OT and IT together cannot inform decisions for improved asset performance as sufficiently as when combined with accessibility to comparable analytics from the assets' engineering models, which we refer to as the Engineering Technology ("ET"). Infrastructure digital twins notably enable the convergence of ET with OT and IT. With infrastructure digital twins, the design intent (the "digital DNA" captured in the digital twins' engineering models and simulations) can serve as a baseline for comparison to IoT-monitored "as-operated" performance, in light of the asset's operations and maintenance history stored in IT systems, to enable integrated analytics to provide timely insights and recommended actions to optimize safety and performance.

Comprehensiveness of Our Offerings

        Our offerings are comprehensive across professional disciplines, lifecycle stages, infrastructure sectors, and geographies, resulting in what we believe to be durable competitive advantages:

        Professional Disciplines. Each infrastructure project requires seamless and deep collaboration among professional disciplines, which can include civil, structural, geotechnical, and process engineers, architects, geospatial professionals, city and regional planners, contractors, fabricators, and operations and maintenance engineers. Our open modeling and open simulation applications facilitate iterative interactions between disciplines and coordination across project participants. Additionally, we believe our collaboration systems lead the market in managing infrastructure engineering firms' preferred work-in-progress workflows.

        Lifecycle Stages. Both project delivery enterprises and owner-operators benefit from our solutions which enable digital workflows to extend between project and asset lifecycles, from design to construction and ultimately asset management. This capability allows our users' digital engineering models to be leveraged as the context for real-time condition monitoring to achieve better and safer operations and maintenance.

        Infrastructure Sectors. Most major engineering and project delivery firms pursue an ever-changing mix of projects across the public works/utilities, industrial/resources, and commercial/facilities sectors and for flexibility tend to favor an infrastructure engineering software vendor whose portfolio correspondingly spans their full breadth. This comprehensiveness provides diversification for our own business, as an incidental advantage. For example, when there have been cyclical downturns in the primarily privately-financed industrial/resources and commercial/facilities sectors, we have historically witnessed offsetting counter-cyclical government investment in public works/utilities.

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        Geographies. While design codes may vary by country, infrastructure purposes and engineering practices are fundamentally the same throughout the world, which makes it possible for our infrastructure modeling applications to be used globally. Our offerings are available in most major languages, supporting country-specific standards and conventions. Our development teams are also globally dispersed, due in part to acquisitions made in various countries, but also to provide any needed last mile localization of our applications. Our global comprehensiveness enables our project delivery accounts to compete more efficiently across geographic markets, thus also providing global supply-chain sourcing choices for owners.

Our Opportunity

        We believe we are successful and well-established in enterprise-level relationships with the world's largest infrastructure engineering organizations, including both project-delivery contracting firms and owner-operators. Today, we address a significant market opportunity, which we refer to as our serviceable addressable market ("SAM"). We estimate our global SAM is approximately $9.5 billion, $6.1 billion of which is attributable to project delivery firms and $3.4 billion of which is attributable to owner-operators. Further, of our $9.5 billion SAM, approximately $1.6 billion is in Greater China.

        We also view our market opportunity in terms of the total addressable market ("TAM"), which we believe we can address over the long term. We estimate our TAM is approximately $            . We believe that digital progress in infrastructure advancement has to date lagged behind other economic domains. Over time, as project delivery firms and owner-operators increasingly recognize the value of going digital and increase their spend on solutions such as digital twins, we believe our SAM will approach our TAM.

Our Growth Strategies

        We employ the following growth strategies to address the infrastructure engineering software market opportunities:

    Accretion within existing accounts.  We believe we can further penetrate our existing accounts by broadening their use of our portfolio. There are three primary mechanisms for this expansion:

    New commercial formulations.  We continually innovate with new commercial formulations to align the use of our software to the needs of our users. We believe the flexibility in our commercial models and deployment options will allow our accounts to grow usage continuously;

    Automating user engagement.  We employ various technologies to drive user engagement. We will continue to leverage these interactive technologies to virtually assist our users and drive engagement across our software offerings; and

    Adding new offerings.  We have a history of building and maintaining leadership in infrastructure software engineering comprehensiveness and intend to continue to innovate and develop our software offerings. We intend to continue to develop and integrate new products and capabilities over time;

    Focusing on Asia.  We believe Asia represents a large market opportunity and will continue to do so over the foreseeable future. We intend to continue investing in strategies to enhance our market position in Asia;

    Increasing inside sales.  We will continue to expand our global inside sales resources and to multiply their reach and effectiveness with superior digital tools to convert leads and to provide the self-service administration that engineering practitioners prefer; and

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    Digital co-ventures.  We have forged substantial alliances with other major participants in the infrastructure engineering supply chain (for example, Topcon, Siemens, and Microsoft), primarily to jointly develop and offer digital twin cloud services that extend the scope of our software.

Risk Factor Summary

        Investing in our Class B common stock involves a high degree of risk. You should carefully consider all information in this prospectus prior to investing in our Class B common stock. These risks are discussed more fully in the section titled "Risk Factors." These risks and uncertainties include, but are not limited to, the following:

    Demand for our software solutions is subject to volatility in our accounts' underlying businesses, which includes infrastructure projects that typically have long timelines;

    The majority of our revenues and an increasing percentage of our operations are attributable to operations outside the United States, and our results of operations therefore may be materially affected by the legal, regulatory, social, political, economic and other risks of foreign operations;

    Recent and potential tariffs imposed by the U.S. government or a global trade war could increase the cost of our products and services and the cost of conducting our business, which could harm our business, financial condition and results of operations;

    Global economic conditions may negatively impact our business, financial results and financial condition;

    Decreased investment by APAC, including China, may have a negative effect on our business;

    The sales cycle for some of our solutions can be long and unpredictable and requires considerable time and expense, which may cause our results of operations to fluctuate;

    If we do not keep pace with technological changes, and effectively market our new product solutions, our solutions may become less competitive and our business may suffer;

    Interruptions in the availability of server systems or communications with Internet, third-party hosting facilities or cloud-based services, or failure to maintain the security, confidentiality, accessibility or integrity of data stored on such systems, could harm our business or impair the delivery of our managed services;

    If our security measures or those of our third-party cloud data hosts, cloud computing platform providers, or third-party service partners, are breached, and unauthorized access is obtained to an account's data, our data or our information technology ("IT") systems, our services may be perceived as not being secure, accounts may curtail or stop using our services, and we may incur significant legal and financial exposure and liabilities;

    We face intense competition;

    Our revenue recognition policy and other factors may create volatility in our financial results in any given period and make them difficult to predict;

    Failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand;

    We depend on our senior management team and other key personnel, and we could be subject to substantial risk of loss if any of them terminate their relationship with us;

    Our listing differs significantly from an underwritten initial public offering;

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    The public price of our Class B common stock may be volatile, and could, upon listing on The Nasdaq Global Select Market, decline significantly and rapidly. Market volatility may affect the value of an investment in our Class B common stock and could subject us to litigation;

    None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, sales of substantial amounts of our Class B common stock in the public markets or the perception that sales might occur, could cause the market price of our Class B common stock to decline; and

    The dual class structure of our common stock has the effect of concentrating voting control with the Bentleys and their affiliates.

Channels for Disclosure of Information

        Investors, the media, and others should note that, following the effectiveness of the registration statement of which this prospectus forms a part, we intend to announce material information to the public through filings with the SEC, the investor relations page on our website, press releases, public conference calls and webcasts.

        The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels.

        Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.

Corporate Information

        Bentley Systems, Incorporated was incorporated in Delaware in 1987. We were originally incorporated in California in 1984 upon our founding. Our principal offices are located at 685 Stockton Drive, Exton, PA 19341, and our telephone number is (610) 458-5000. Our website address is www.bentley.com. Information contained on or that can be accessed through our website does not constitute part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.

Emerging Growth Company

        The Jumpstart Our Business Startups Act (the "JOBS Act") was enacted in April 2012 with the intention of encouraging capital formation in the United States and reducing the regulatory burden on newly-public companies that qualify as "emerging growth companies." We are an "emerging growth company" within the meaning of the JOBS Act. As an "emerging growth company," we intend to take advantage of certain exemptions from various public reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), certain requirements related to the disclosure of executive compensation in this prospectus and in our periodic reports and proxy statements, and the requirement that we hold a non-binding advisory vote on executive compensation and any golden parachute payments. Additionally, as an "emerging growth company" we are required to have only two years of audited financial statements and only two years of related selected financial data and Management's Discussion and Analysis of Financial Condition and Results of Operations disclosure. We may take advantage of these exemptions until we are no longer an "emerging growth company."

        In addition, under the JOBS Act, "emerging growth companies" can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to avail ourselves of this exemption from new or revised accounting standards. Accordingly, we will not be

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subject to the same new or revised accounting standards as other public companies that are not "emerging growth companies."

        We will remain an "emerging growth company" until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a "large accelerated filer," with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the listing of our Class B common stock on The Nasdaq Global Select Market.

        For certain risks related to our status as an "emerging growth company," see the section titled "Risk Factors—Risks Related to Our Business and Industry—We are an 'emerging growth company,' and the reduced disclosure requirements applicable to 'emerging growth companies' may make our Class B common stock less attractive to investors."

Controlled Company Status

        We will be a "controlled company" within the meaning of the corporate governance rules of the Nasdaq Listing Rules. Under these rules, a company for which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain of the Nasdaq Listing Rules' corporate governance requirements, including: (i) the requirement that a majority of our board of directors consist of "independent directors" as defined under the Nasdaq Listing Rules; (ii) the requirement that we have a compensation committee that is composed entirely of independent directors; and (iii) the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors. We intend to use these exemptions upon our listing. As a result, we will not have a majority of independent directors on our board of directors. Additionally, upon our listing, we do not intend to have a compensation committee, nor do we intend to have a nominating and corporate governance committee or an independent nominating function. Instead, our full board of directors will be directly responsible for reviewing and approving compensation and benefit arrangements for our executive officers and directors, as well as for nominating members of our board. Accordingly, in the future our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq Listing Rules' corporate governance requirements.

Capitalization

        As of December 31, 2019, we had 11,601,757 shares of Class A common stock outstanding and 243,241,192 shares of Class B common stock outstanding, including 476,466 restricted shares of Class B common stock. Except as otherwise indicated, the number of outstanding shares of Class B common stock excludes: (i) 19,602,042 shares of Class B common stock issuable upon exercise of stock options outstanding at a weighted-average exercise price of $5.90 per share of Class B common stock, (ii) 54,771 shares of Class B common stock issuable upon the settlement of restricted stock units outstanding, (iii) 28,101,504 shares of Class B common stock reserved for issuance under our 2015 Equity Incentive Plan, and (iv) 30,756,936 shares of Class B common stock held by colleagues and directors as phantom shares under our nonqualified deferred compensation plans.

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SUMMARY CONSOLIDATED FINANCIAL DATA

        The following tables set forth summary consolidated financial data. The summary consolidated statement of operations data for the year ended December 31, 2018 has been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statement of operations data for the year ended December 31, 2017 has been derived from our audited consolidated financial statements not included in this prospectus, which were audited in accordance with the auditing standards of the American Institute of Certified Public Accountants rather than the auditing standards of the Public Company Accounting Oversight Board. The consolidated statements of operations data for the nine months ended September 30, 2018 and 2019 and the consolidated balance sheet data as of September 30, 2019 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements include all adjustments, consisting of normal recurring accruals, that we consider necessary for a fair presentation of the financial position and the results of operations for these periods. You should read this summary consolidated financial data in conjunction with the sections titled "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future, and our results of operations for the nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the entire year ended December 31, 2019.

        All amounts presented in this summary consolidated financial data, except share and per share amounts, are presented in thousands. Additionally, many of the amounts and percentages have been rounded for convenience of presentation.

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Consolidated Statements of Operations Data:

 
  Year Ended December 31,   Nine Months Ended September 30,  
 
  2017   2018   2018   2019   2019  
 
  Topic 605
  Topic 605(1)
  Topic 606
 

Revenues:

                               

Subscriptions

  $ 501,098   $ 557,421   $ 414,701   $ 449,957   $ 445,338  

Perpetual licenses

    61,661     61,065     46,149     38,899     38,255  

Subscriptions and licenses

    562,759     618,486     460,850     488,856     483,593  

Services

    66,164     73,224     54,110     49,244     50,139  

Total revenues

    628,923     691,710     514,960     538,100     533,732  

Cost of revenues:

                               

Cost of subscriptions and licenses

    53,662     55,113     40,796     48,129     48,201  

Cost of services

    66,928     76,211     57,467     56,048     56,048  

Total cost of revenues

    120,590     131,324     98,263     104,177     104,249  

Gross profit

    508,333     560,386     416,697     433,923     429,483  

Operating expenses:

                               

Research and development

    151,194     175,032     127,598     136,617     136,617  

Selling and marketing

    139,259     160,635     113,168     111,985     111,889  

General and administrative

    87,467     89,328     66,491     71,415     71,415  

Amortization of purchased intangibles

    9,014     14,000     9,961     10,402     10,402  

Total operating expenses

    386,934     438,995     317,218     330,419     330,323  

Income from operations

    121,399     121,391     99,479     103,504     99,160  

Interest expense, net

    (10,320 )   (8,765 )   (6,363 )   (6,503 )   (6,503 )

Other income (expense), net

    (5,773 )   236     (1,966 )   (14,053 )   (14,053 )

Income before income taxes

    105,306     112,862     91,150     82,948     78,604  

Provision for income taxes

    46,141     (29,250 )   11,375     11,285     11,759  

Net income

  $ 59,165     142,112     79,775     71,663     66,845  

Less: Net income attributable to participating securities

          (4 )   (7 )   (10 )   (10 )

Net income per share attributable to Class A and Class B common shares

        $ 142,108   $ 79,768   $ 71,653   $ 66,835  

Net income per share:

                               

Basic

        $ 0.50   $ 0.28   $ 0.25   $ 0.23  

Diluted

        $ 0.49   $ 0.27   $ 0.24   $ 0.23  

Weighted average shares outstanding, basic

          285,805,096     285,684,596     286,024,263     286,024,263  

Weighted average shares outstanding, diluted

          292,624,496     291,845,931     294,586,354     294,586,354  

(1)
The Topic 605 unaudited amounts presented for the nine months ended September 30, 2019 give effect to revenue adjustments as if the adoption of Topic 606 had not occurred on January 1, 2019. For a reconciliation of the impact of adopting Topic 606 on our unaudited consolidated financial statements for the nine months ended September 30, 2019, see Note 2 to our consolidated financial statements included elsewhere in this prospectus.

Revenue Comparison—Topic 605 versus Topic 606:

        On January 1, 2019, we adopted ASU No. 2014-09, Revenue from Contracts with Customers, and related amendments ("Topic 606"), which supersedes substantially all existing revenue recognition

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guidance under accounting principles generally accepted in the United States ("U.S. GAAP"). We adopted Topic 606 using the modified retrospective method, under which the cumulative effect of initially applying Topic 606 was recorded as a reduction to the opening balance of Accumulated deficit of $125,464 ($101,489, net of tax) as of January 1, 2019. We applied the standard only to contracts that were not completed as of the date of initial application. The comparative information in our consolidated financial statements included elsewhere in this prospectus has not been adjusted and continues to be reported under Accounting Standards Codification ("ASC") 985-605, Software-Revenue Recognition, and Topic 605 (together referred to as Topic 605).

        The below table presents a comparison of our revenues as recognized under Topic 605 and Topic 606. We believe that an understanding of the impact of the revenue recognition guidance under Topic 606 on our revenues and revenue trends is useful in evaluating our operating performance.

 
  Year Ended
December 31,
  Nine Months Ended
September 30,
 
 
  2017   2018   2018   2019  

Topic 605:(1)

                         

Subscriptions

  $ 501,098   $ 557,421   $ 414,701   $ 449,957  

Perpetual licenses

    61,661     61,065     46,149     38,899  

Services

    66,164     73,224     54,110     49,244  

Total Revenues

  $ 628,923   $ 691,710   $ 514,960   $ 538,100  

Topic 606:(2)

                         

Subscriptions

  $ 505,720   $ 560,485   $ 413,237   $ 445,338  

Perpetual licenses

    49,983     57,353     38,438     38,255  

Services

    66,164     73,224     54,110     50,139  

Total Revenues

  $ 621,867   $ 691,062   $ 505,785   $ 533,732  

(1)
The Topic 605 unaudited amounts presented for the nine months ended September 30, 2019 give effect to revenue adjustments as if the adoption of Topic 606 had not occurred on January 1, 2019. For a reconciliation of the impact of adopting Topic 606 on our unaudited consolidated financial statements for the nine months ended September 30, 2019, see Note 2 to our consolidated financial statements included elsewhere in this prospectus.

(2)
The Topic 606 unaudited amounts presented for the years ended December 31, 2017 and 2018, and the nine months ended September 30, 2018 give effect to revenue adjustments as if the adoption of Topic 606 had occurred as of January 1, 2017 rather than January 1, 2019. For a reconciliation of the impact of adopting Topic 606 as if it had occurred as of January 1, 2017 on our audited consolidated statements of operations data for the years ended December 31, 2017 and 2018 and the unaudited consolidated statement of operations data for the nine months ended September 30, 2018, see the section titled "Selected Consolidated Financial Data—Non-GAAP Financial Measures."

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Key Business Metrics

        We regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, and make strategic decisions.

 
  As of and Year Ended
December 31,
  As of and Period Ended
September 30,
 
 
  2017   2018   2018   2019  

Last twelve-months recurring revenues

  $ 523,502   $ 583,403   $ 571,559   $ 616,753  

Constant Currency:

                         

Annualized recurring revenues (ARR) growth rate

    8.6 %   10.4 %   10.3 %   11.6 %

Account retention rate

    98 %   98 %   98 %   98 %

Recurring revenues dollar-based net retention rate

    105 %   107 %   106 %   107 %

        Last twelve-months recurring revenues. Last twelve-months recurring revenues is calculated as recurring revenues recognized over the preceding twelve-month period. We define recurring revenues as subscriptions revenues that recur monthly, quarterly, or annually with specific or automatic renewal clauses and professional services revenues in which the underlying contract is based on a fixed fee and contains automatic annual renewal provisions. Last twelve-months recurring revenues is calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606. We believe that last twelve-months recurring revenues is an important indicator of our performance during the immediately preceding twelve-month time period. We believe that we will continue to experience favorable growth in recurring revenues due to our strong account retention and recurring revenues dollar-based net retention rates as well as the addition of new accounts with recurring revenues. The last twelve-months recurring revenues under Topic 605 for the periods ended December 31, 2018 and September 30, 2019, compared to the last twelve-months of the preceding twelve-month period for each period, increased by $59,901 and $45,194, respectively. This increase was primarily due to growth in annualized recurring revenue ("ARR") during the prior and current periods for each period, which is primarily the result of consistent performance in our account retention rate and in our recurring revenues dollar-based net retention rate, as well as additional recurring revenues resulting from new accounts and acquisitions. For the last twelve-month period ended September 30, 2019, 86% of our total revenues were recurring revenues. Prospectively, we expect that this percentage is likely to remain consistent or modestly increase as we continue to target shifting episodic professional services revenues to subscriptions classified as recurring revenues.

        Constant currency metrics. In reporting period-over-period results, we calculate the effects of foreign currency fluctuations and constant currency information by translating current period results using prior period average foreign currency exchange rates. Our definition of constant currency may differ from other companies reporting similarly named measures, and these constant currency performance measures should be viewed in addition to, and not as a substitute for, our operating performance measures calculated in accordance with U.S. GAAP.

        ARR growth rate. Our ARR growth rate is the growth rate of our ARR, measured on a constant currency basis. Our ARR is defined as the sum of the annualized value of our portfolio of contracts that produce recurring revenue as of the last day of the reporting period, and the annualized value of the last three months of recognized revenues for our consumption-based software. ARR is inclusive of the ARR of acquired companies as of the date they are acquired. We believe that ARR and ARR growth are important metrics indicating the scale and growth of our business. Furthermore, we believe ARR, considered in connection with our account retention rate and our recurring revenues dollar-based net retention rate, is a leading indicator of revenue growth. Our ARR as of September 30, 2019 was $647.0 million, calculated using the spot foreign exchange rates as of September 30, 2019. Our ARR growth rate was favorably impacted by acquisitions during 2018 and 2019 and as a result was higher in these periods than in prior periods.

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        Account retention rate. Our account retention rate for any given twelve-month period is calculated using the average currency exchange rates for the prior period, as follows: the prior period recurring revenues from all accounts with recurring revenues in the current and prior period, divided by total recurring revenues from all accounts during the prior period. The account retention rate is calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606. Our account retention rate is an important indicator that provides insight into the long-term value of our account relationships and our ability to retain our account base. We believe that our consistent and high account retention rates during 2017 and 2018 and the first nine months of 2019 illustrate our ability to retain and cultivate long-term relationships with our accounts.

        Recurring revenues dollar-based net retention rate. Our recurring revenues dollar-based net retention rate is calculated using the average exchange rates for the prior period, as follows: the recurring revenues for the current period, including any growth or reductions from existing accounts, but excluding recurring revenues from any new accounts added during the current period, divided by the total recurring revenues from all accounts during the prior period. A period is defined as any trailing twelve months. The recurring revenues dollar-based net retention rate is calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606. We believe our recurring revenues dollar-based net retention rate is a key indicator of our success in growing our revenues within our existing accounts. Given that for the last twelve-month period ended September 30, 2019 recurring revenues represented 86% of our total revenues, this metric helps explain our revenue performance as primarily growth into existing accounts. We believe our 105%, 107%, and 107% recurring revenues dollar-based net retention rate for the twelve-month periods ended December 31, 2017, December 31, 2018, and September 30, 2019, respectively, illustrates our ability to consistently retain accounts and grow them.

        Our calculation of these metrics may not be comparable to other companies with similarly-titled metrics.

        For additional information about our key metrics, see the sections titled "Selected Consolidated Financial Data—Key Business Metrics" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics."

Non-GAAP Financial Measures

        In addition to our results determined in accordance with U.S. GAAP, we believe the below non-GAAP measures are useful in evaluating our operating performance. We use the below non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.

 
  Year Ended
December 31,
  Nine Months Ended
September 30,
 
 
  2017   2018   2018   2019  

Topic 605:(1)

                         

Adjusted EBITDA

  $ 160,886   $ 171,768   $ 130,907   $ 136,577  

Adjusted Net Income

  $ 115,389   $ 132,246   $ 100,407   $ 104,167  

Topic 606:(2)

   
 
   
 
   
 
   
 
 

Adjusted EBITDA

  $ 153,830   $ 171,120   $ 121,732   $ 132,156  

Adjusted Net Income

  $ 109,398   $ 131,697   $ 92,377   $ 99,278  

(1)
The Topic 605 unaudited amounts presented for the nine months ended September 30, 2019 give effect to revenue adjustments as if the adoption of Topic 606, had not occurred on January 1, 2019. For a reconciliation of the impact of adopting Topic 606 on our

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    unaudited consolidated financial statements for the nine months ended September 30, 2019, see Note 2 to our consolidated financial statements included elsewhere in this prospectus.

(2)
The Topic 606 unaudited amounts presented for the years ended December 31, 2017 and 2018 and the nine months ended September 30, 2018 give effect to revenue adjustment as if the adoption of Topic 606 had occurred as of January 1, 2017 rather than January 1, 2019. For a reconciliation of the impact of adopting Topic 606 as if it had occurred as of January 1, 2017 on our audited consolidated statements of operations data for the years ended December 31, 2017 and 2018 and the unaudited consolidated statement of operations data for the nine months ended September 30, 2018, see the section titled "Selected Consolidated Financial Data—Non-GAAP Financial Measures."

        For additional information, including the limitations of using non-GAAP financial measures, and reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with U.S. GAAP, see the section titled "Selected Consolidated Financial Data—Non-GAAP Financial Measures."

Consolidated Balance Sheet Data:

        The following table presents summary consolidated balance sheet data as of September 30, 2019:

 
  September 30,
2019
 

Cash and cash equivalents

  $ 125,997  

Working capital, excluding deferred revenues

    143,991  

Total assets

    908,601  

Deferred revenues, current and long-term

    169,724  

Total debt

    248,000  

Total stockholders' equity

    306,583  

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RISK FACTORS

        Investing in our Class B common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including the consolidated financial statements and the related notes and the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations," before deciding whether to invest in shares of our Class B common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks, or other risks and uncertainties that are not yet identified or that we currently think are immaterial, actually occur, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In that event, the market price of our Class B common stock could decline, and you could lose part or all of your investment.

Risks Related to Our Business and Industry

Demand for our software solutions is subject to volatility in our accounts' underlying businesses, which includes infrastructure projects that typically have long timelines.

        Our sales are based significantly on accounts' demand for software solutions in the following infrastructure sectors: (i) public works/utilities; (ii) industrial/resources; and (iii) commercial/facilities. Although these sectors are typically countercyclical to one another in nature, each periodically experiences economic declines and may be exacerbated by other economic factors. If participants in any of these sectors reduce spending or allocate future funding in a manner that results in fewer infrastructure improvement or expansion projects, then our accounts' underlying business may be impacted and demand for our software solutions may decrease or our rate of contract renewals may decrease. A prolonged decrease in such spending may harm our results of operations. Our accounts may request discounts or extended payment terms on new arrangements or seek to extend payment terms on existing arrangements due to lower levels of infrastructure spending or for other reasons, all of which may reduce revenue. We may not be able to adjust our operating expenses to offset such discounts or other arrangements because a substantial portion of our operating expenses is related to personnel, facilities and marketing programs. The level of personnel and related expenses may not be able to be adjusted quickly and is based, in significant part, on our expectations for future revenues and demand.

        Infrastructure projects typically have long timelines and we may invest in building capacity based on expected demand for our software solutions that takes longer to develop than we expect or fails to develop at all. Additionally, government spending on infrastructure may decrease, which could decrease the demand for our software solutions and have a negative impact on our results of operations. We may not be successful in forecasting future demand levels and could fail to win business at the expected rates. If we underestimate the demand for our software solutions, we may be unable to fulfill the increased demand in a timely fashion or at all. If we overestimate the demand for our software solutions, we may incur additional expenses for which we would not have corresponding revenues, negatively impacting our results of operations.

The majority of our revenues and an increasing percentage of our operations are attributable to operations outside the United States, and our results of operations therefore may be materially affected by the legal, regulatory, social, political, economic and other risks of foreign operations.

        Approximately 60% and 58% of our total revenues were from outside the United States in the year ended December 31, 2018 and the nine months ended September 30, 2019, respectively. We anticipate that revenues from accounts outside the United States will continue to comprise a majority of our total revenues for the foreseeable future.

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        Our international revenues, including from emerging economies, are subject to general economic and political conditions in foreign markets and our revenues are impacted by the relative geographical and country mix of our revenues over time. These factors could adversely impact our international revenues and, consequently, our business. Our dependency on international revenues also makes us more exposed to global economic and political trends, which can negatively impact our financial results. Further, our operations outside the United States are subject to certain legal, regulatory, social, political, economic and other risks inherent in international business operations, including, without limitation:

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        The occurrence of any one of these risks could negatively affect our international business and, consequently, our business, financial condition and results of operations. Additionally, operating in international markets requires significant management attention and financial resources. We cannot be certain that the investment and additional resources required to operate in other countries will produce desired levels of revenue or profitability.

Recent and potential tariffs imposed by the U.S. government or a global trade war could increase the cost of our products and services and the cost of conducting our business, which could harm our business, financial condition and results of operations.

        Recent and potential tariffs imposed by the U.S. government or a global trade war could increase the cost of our products and services and the cost of conducting our business, which could harm our business, financial condition and results of operations. The U.S. government has threatened substantial changes to trade agreements and has raised the possibility of imposing significant increases on tariffs on goods imported into the United States, particularly from China. The imposition of additional tariffs by the United States could result in the adoption of tariffs by other countries, leading to a global trade war. In addition, certain of these risks may be heightened as a result of changing political climates. For example, throughout 2018 and 2019, the United States and China have been levying tariffs on their respective imports. Such tariffs could have a significant impact on our business and the business of our accounts. While we may attempt to renegotiate prices with suppliers or diversify our supply chain in response to tariffs, such efforts may not yield immediate results or may be ineffective. We might also consider increasing prices to the end consumer; however, this could reduce the competitiveness of our products and services and adversely affect revenue. If we fail to manage these dynamics successfully, our gross margins and profitability could be adversely affected.

        In addition, increases in the extent to which global trade is limited by tariffs or other trade barriers could negatively affect decisions to invest in infrastructure projects due to decreasing confidence in future profitability of such projects. Such resulting decreases in infrastructure spending could negatively affect demand for our software solutions, which could harm our business, financial condition, and results of operations.

Global economic conditions may negatively impact our business, financial condition, and results of operations.

        Our operations and performance depend significantly on foreign and domestic economic conditions. Uncertainty regarding economic conditions may negatively impact us as accounts defer spending or postpone infrastructure projects in response to tighter credit, higher unemployment, financial market volatility, government austerity programs, negative financial news, escalations of hostilities or the threat of hostilities, declining valuations of investments and other factors. In addition, certain of our accounts' budgets may be constrained and they may be unable to procure our solutions at the same level as in prior periods. Our accounts' ability to pay for our software solutions and services may also be impaired, which may lead to an increase in our allowance for doubtful accounts and write-offs of accounts receivable. Since we are exposed to the majority of major world markets, uncertainty in any significant market may negatively impact our performance and results, particularly with respect to our largest geographic accounts. Our accounts include government entities, including the U.S. government, and if spending cuts impede the ability of governments to purchase our products and services, our revenues could decline. In addition, a number of our accounts rely, directly and

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indirectly, on government spending. We are unable to predict economic conditions or the likelihood of additional economic uncertainty arising in any of our key markets. Changes in economic conditions could result in us not meeting our revenue growth objectives, and could harm our cash flows, business, financial condition and results of operations.

        Geopolitical trends toward nationalism and protectionism and the weakening or dissolution of international trade pacts may increase the cost of, or otherwise interfere with, conducting our business. These trends have increased levels of political and economic unpredictability globally, and may increase the volatility of global financial markets; the impact of such developments on the global economy remains uncertain. Political instability or adverse political developments in any of the countries in which we do business could harm our business, financial condition and results of operations.

Decreased investment by APAC, including China, may have a negative effect on our business.

        Approximately 19% of our revenues in the year ended December 31, 2018 relate to infrastructure projects in APAC, including China. We cannot assure you that spending in these countries on infrastructure projects will continue at historical levels or increase in the future, or that demand for our software solutions in APAC in general will not be negatively affected by reductions in spending or other limitations.

The sales cycle for some of our solutions can be long and unpredictable and requires considerable time and expense, which may cause our results of operations to fluctuate.

        The sales cycle for some of our solutions, from initial contact with a potential lead to contract execution and implementation, varies widely by brand and account, and can be lengthy. Some of our accounts undertake a significant evaluation process that frequently involves not only our solution, but also solutions of our competitors, which may result in extended sales cycles. Our sales efforts involve educating our accounts and prospective accounts about the use, technical capabilities and benefits of our solutions. We also put a significant amount of time into discussing with our accounts the value and importance of migrating to the latest versions of our software solutions. We have no assurance that the substantial time and money spent on our sales efforts will increase sales or cause existing accounts to migrate to the latest versions of our software solutions. Furthermore, our sales and marketing efforts in a given period may only result in sales in subsequent periods, or not at all. If we do not realize sales in the time period expected or at all, our business, financial condition, and results of operations could be adversely affected.

If we do not keep pace with technological changes, and effectively market our new product solutions, our solutions may become less competitive and our business may suffer.

        We operate in an industry generally characterized by rapidly changing technology and frequent new software introductions, which can render existing software obsolete or unmarketable. A major factor in our future success will be our ability to anticipate technological changes and to develop and introduce, in a timely manner, enhancements to our existing software solutions, new software solutions and software solutions acquired in acquisitions to meet those changes. In particular, the software industry has undergone a transition from developing and selling perpetual licenses and on-premises products to cloud, mobile, and social applications. If we are unable to adapt our software solutions to the changing needs of our accounts and infrastructure engineers and to respond quickly to sector changes, our business, financial condition, results of operations, and cash flows could be harmed.

        The introduction and marketing of new or enhanced software solutions require us to manage the transition from existing software to minimize disruption in account use and purchasing patterns. There can be no assurance that we will be successful in developing and marketing, on a timely basis, new software or enhancements, that our new software solutions will adequately address the changing needs

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of the marketplace or that we will successfully manage the transition from existing software solutions. In addition, our future software solutions may require a higher level of sales and support expertise. Any inability of our sales team, including our channel partners, to obtain this expertise and to sell the new software offerings effectively could have an adverse impact on our sales in future periods. Any of these problems may result in the loss of or delay in account acceptance, decreased demand for or usage of our software solutions, damage to our reputation, or increased service and warranty costs, any of which could harm our business, financial condition, results of operations, and cash flows.

        We must act quickly, continuously, and with vision, given the rapidly changing expectations and technology advancements inherent in the software industry, the extensive and complex efforts required to create useful and widely accepted products and the rapid evolution of cloud computing, mobile devices, new computing platforms, and other technologies. Although we have articulated a strategy that we believe will fulfill these challenges, if we fail to execute properly on that strategy or adapt that strategy as market conditions evolve, we may fail to meet our accounts' expectations, fail to compete with our competitors' products and technology, and lose the confidence of our channel partners and colleagues, which in turn could adversely affect our business and financial performance.

Interruptions in the availability of server systems or communications with Internet, third-party hosting facilities or cloud-based services, or failure to maintain the security, confidentiality, accessibility, or integrity of data stored on such systems, could harm our business or impair the delivery of our managed services.

        A significant portion of our software development personnel, source code, and computer equipment is located at operating facilities outside the United States. We also depend on data maintained on servers running third-party enterprise resource planning, account relationship management, and other business operations systems. We further rely upon a variety of Internet service providers, third-party hosting facilities, and cloud computing platform providers, such as Microsoft Azure, as well as local service providers to support project teams and users in most regions and countries throughout the world, particularly with respect to our cloud service solutions. Failure to maintain the security, confidentiality, accessibility, or integrity of data stored on such systems could damage our reputation in the market and our relationships with our accounts, cause us to lose revenue or market share, increase our service costs, cause us to incur substantial costs, cause us to lose accounts, subject us to liability for damages and divert our resources from other tasks, any one of which could adversely affect our business, financial condition, results of operations, and prospects. Any damage to, or failure of, such systems, or communications to and between such systems, could result in interruptions in our operations, managed services and software development activities. Such interruptions may reduce our revenue, delay billing, cause us to issue credits or pay penalties, cause accounts to terminate their subscriptions or adversely affect our attrition rates and our ability to attract new accounts. Our business would also be harmed if our accounts and potential accounts believe our products or services are unreliable.

If our security measures or those of our third-party cloud data hosts, cloud computing platform providers, or third-party service partners, are breached, and unauthorized access is obtained to an account's data, our data or our IT systems, our services may be perceived as not being secure, accounts may curtail or stop using our services, and we may incur significant legal and financial exposure and liabilities.

        As we digitize and use cloud and web-based technologies to leverage account data to deliver a more complete account experience, we are exposed to increased security risks and the potential for unauthorized access to, or improper use of, our and our accounts' information. Certain of our services involve the storage and transmission of accounts' proprietary information, and security breaches could expose us to a risk of loss of this information, litigation and possible liability. Although we devote resources to maintaining our security and integrity, we may not prevent security incidents.

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        The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. These threats include but are not limited to identity theft, unauthorized access, domain name system attacks, wireless network attacks, viruses and worms, advanced persistent threat, application centric attacks, peer-to-peer attacks, phishing, backdoor trojans, and distributed denial of service attacks. Any of the foregoing could attack our accounts' data (including their employees' personal data), our data (including colleagues' personal data) or our IT systems. It is virtually impossible for us to entirely eliminate this risk. Like all software, our software is vulnerable to cyber attacks. The impact of cyber attacks could disrupt the proper functioning of our software solutions or services, cause errors in the output of our accounts' work, allow unauthorized access to sensitive, proprietary or confidential information of ours or our accounts, and other destructive outcomes.

        Additionally, third parties may attempt to fraudulently induce colleagues or accounts into disclosing sensitive information such as user names, passwords or other information in order to gain access to our accounts' data, our data or our IT systems. Malicious third parties may also conduct attacks designed to temporarily deny accounts access to our services. Any security breach could result in a loss of confidence in the security of our products and services, damage our reputation, negatively impact our future sales, disrupt our business and lead to regulatory inquiry and legal liability.

We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.

        We sell our solutions in 172 countries, primarily through a direct salesforce located throughout the world. Approximately 60% and 58% of our total revenues were derived from outside of the United States in the year ended December 31, 2018 and in the nine months ended September 30, 2019, respectively. As we continue to expand our presence in international regions, the portion of our revenue, expenses, cash, accounts receivable and payment obligations denominated in foreign currencies continues to increase. Further, we anticipate that revenues from accounts outside of the United States will continue to comprise the majority of our total revenues for the foreseeable future.

        Because of our international activities, we have revenue, expenses, cash, accounts receivable and payment obligations denominated in foreign currencies. In the year ended December 31, 2018 and the nine months ended September 30, 2019, 49% and 47% of our total revenues, respectively, were denominated in a currency other than the U.S. Dollar. As a result, we are subject to currency exchange risk. Our revenues and results of operations are adversely affected when the U.S. Dollar strengthens relative to other currencies and are positively affected when the U.S. Dollar weakens. As a result, changes in currency exchange rates will affect our financial position, results of operations and cash flows. In the event that there are economic declines in countries in which we conduct transactions, the resulting changes in currency exchange rates may affect our financial condition, results of operations, and cash flows. We are most impacted by movements in and among the Euro, British Pound, Australian Dollar, Canadian Dollar and Chinese Yuan Renminbi. For example, the Chinese Yuan Renminbi has fluctuated against the U.S. Dollar, at times significantly and unpredictably, due to changes in foreign exchange for a wide variety of reasons, including actions instituted by China. Because of changes in trade between the United States and China and Renminbi internationalization, the China may in the future announce further changes to the exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. Dollar in the future.

        In addition, countries in which we operate may be classified as highly inflationary economies, requiring special accounting and financial reporting treatment for such operations, or such countries' currencies may be devalued, or both, which may harm our business, financial condition, and results of operations.

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        We cannot predict the impact of foreign currency fluctuations and we may not be successful in minimizing the risks of these fluctuations. In addition, the fluctuation and volatility of currencies, even when it increases our revenues or decreases our expenses, impacts our ability to accurately predict our future results and earnings.

The results of the United Kingdom's referendum on withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

        The United Kingdom's intended withdrawal from the European Union ("Brexit"), has created political and economic uncertainty, particularly in the United Kingdom and the European Union, and this uncertainty may last for years. Demand for our software solutions or services could be affected during this period of uncertainty, and perhaps longer, by the impact of Brexit. The impending Brexit has caused and may continue to cause delays in purchasing decisions by our potential and current accounts affected by this transition and there is considerable uncertainty as to when the long-term nature of the United Kingdom's relationship with the European Union will be agreed and implemented. Any exit by the United Kingdom from the European Union may result in new regulatory and cost challenges to our U.K. and global operations. In addition, our and channel partners' business could be negatively affected by new trade agreements between the United Kingdom and other countries, including the United States and by the possible imposition of trade or other regulatory barriers in the United Kingdom. The outcome of the referendum has also created uncertainty with regard to the regulation of data protection in the United Kingdom. In particular, it is unclear how the United Kingdom's vote to leave the European Union will affect the United Kingdom's enactment of the GDPR, and how data transfers to and from the United Kingdom will be regulated. Depending on the terms reached regarding any exit from the European Union, it is possible that there may be adverse practical or operational implications on our business.

We face intense competition.

        We continue to experience competition across all markets for our software solutions and services. Our competitors include large, global, publicly-traded companies, small, specialty or geographically-focused firms and organizations who develop their own solutions internally. Some of our current and possible future competitors have greater financial, technical, sales, marketing and other resources than us, some specialize in developing niche software solutions and some have well-established relationships with our current and potential accounts. There is no assurance that we will be able to continue to compete effectively. Parties among our current or future strategic alliances may diminish or sever technical, software development and marketing relationships with us for competitive purposes. These competitive pressures may result in decreased sales volumes, price reductions and/or increased operating costs, and could result in lower revenues, margins and net income.

We may not be able to increase the number of new subscription-based accounts or cause existing accounts to renew their subscriptions, which could have a negative impact on our future revenues and results of operations.

        We may not be able to increase demand for our subscription-based services in line with our growth strategy. Our accounts are not obligated to renew their subscriptions for our offerings, and they may elect not to renew. We cannot assure renewal rates, or the mix of subscriptions renewals. Account renewal rates may decline or fluctuate due to a number of factors, including offering pricing, competitive offerings, account satisfaction, and reductions in account spending levels or account activity due to economic downturns or financial markets uncertainty. If our accounts do not renew their subscriptions or if they renew on less favorable terms, our revenues may decline, which could harm our business, financial condition, and results of operations.

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Our revenue recognition policy and other factors may create volatility in our financial results in any given period and make them difficult to predict.

        As described in Note 3 to our consolidated financial statements for the year ended December 31, 2018 and the nine months ended September 30, 2019 and September 30, 2018 included elsewhere in this prospectus, we adopted ASC 606 effective January 1, 2019. The new revenue guidance significantly impacts our timing of subscriptions and perpetual licenses revenue. Under previous revenue guidance, we historically maintained stable recurring revenue from the sale of software subscriptions and perpetual licenses. Under ASC 606, perpetual licenses and the license component of applicable subscriptions are recognized up front. The maintenance portion of subscription contracts continues to be recognized over the contract term.

        The adoption of the new revenue recognition guidance creates the likelihood for subscriptions and licenses revenue volatility to increase across quarterly periods, particularly as compared to our results under the previous revenue recognition standard. Annual and trailing twelve-months subscription revenues will be more consistent between periods, and as compared to our results under the previous revenue recognition standard, due to the annual, recurring nature of our subscription agreements. However, annual results are still subject to volatility due to the timing of renewals between periods, timing of new sales contracts, changes in contract term and length, changes in perpetual license sales, and conversion of existing subscription users to other commercial offerings, particularly consumption-based offerings

Our quarterly results of operations have fluctuated in the past and may fluctuate in the future, which could cause the price of our Class B common stock to decline or become volatile. These potential fluctuations can make our future results difficult to predict and cause our results of operations to fall below analyst or investor expectations.

        Our quarterly results of operations have fluctuated in the past and may fluctuate in the future as a result of a variety of factors, many of which are outside of our control. If our quarterly results of operations or guidance fall below the expectations of research analysts or investors, the price of our Class B common stock could decline substantially. The following factors, among others, could cause fluctuations in our quarterly results of operations:

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        Our quarterly revenues and results of operations may vary in the future, and period-to-period comparisons of our results of operations may not be meaningful. Any one or more of the factors above may result in significant fluctuations in our quarterly results of operations. You should not rely on the results of one quarter as an indication of future performance.

        The variability and unpredictability of our quarterly results of operations or other operating metrics could result in our failure to meet our expectations or those of analysts that cover us or investors with respect to revenues or other key metrics for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our Class B common stock could fall, and we could face costly lawsuits, including securities class action suits.

Failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.

        Our future success and competitive position depend in large part on our ability to protect our intellectual property and proprietary technologies. We rely on a combination of copyright, patent, trademark and trade secret laws, as well as confidentiality procedures and contractual restrictions, to secure and protect our intellectual property rights, all of which provide only limited protection and may not currently or in the future provide us with a competitive advantage. Patents or trademarks may not issue from any of our pending or future patent or trademark applications. Patents or trademarks that do issue from such applications may not give us the protection that we seek, and such patents or trademarks may be challenged, invalidated, or circumvented. Any patents or trademarks that may issue in the future from our pending or future patent and trademark applications may not provide sufficiently broad protection and may not be enforceable in actions against alleged infringers.

        The steps we take may not be adequate to protect our technologies and intellectual property, our patent and trademark applications may not lead to issued patents or registered trademarks, others may develop or patent similar or superior technologies or solutions, and our patents, trademarks, and other intellectual property may be challenged, invalidated, designed around or circumvented by others. Furthermore, effective copyright, patent, trademark and trade secret protection may not be available in every country in which our solutions are available or where we do business.

        The steps we have taken, and will take, may not prevent unauthorized use, reverse engineering, or misappropriation of our technologies and we may not be able to detect any of the foregoing. Others may independently develop technologies that infringe on our intellectual property rights. In addition, we cannot control the use of our open source components, which could allow third parties to create products or solutions that compete with our offerings or that contain errors, defects or other performance problems that could hurt our reputation and reduce the adoption of our solutions in new and existing accounts. Defending and enforcing our intellectual property rights may result in litigation or other contentious actions, any such litigation may not be successful, and even if successful, such litigation can be costly and divert management attention and resources. Further, if we are unsuccessful

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in asserting our intellectual property rights, an adverse decision could place limitations on the scope of our rights. If our efforts to protect our technologies and intellectual property are inadequate, the value of these intangible assets may be diminished and competitors may be able to replicate our solutions and methods of operations. Any of these events could harm our business, financial condition, and results of operations.

        Although copyright protection is available for works of authorship such as computer code, we primarily rely on trade secrets laws to protect our proprietary software code, and have chosen not to register copyrights for the code. Under the United States Copyright Act, copyrights must be registered before the copyright owner may bring an infringement suit in the United States, and if a copyright is not registered within three months of publication of the underlying work, there are limitations on the damages that the copyright owner may be awarded for infringement. Accordingly, because we have chosen not to register the copyrights in our software, the causes of action, remedies and damages available to us in an enforcement action may be limited.

Consolidation among our accounts and other enterprises in the markets in which we operate may result in loss of business.

        It is likely that some of our existing accounts will consolidate, be acquired or experience a change in management, which could lead to a decrease in the size of our account base. We expect consolidation among our accounts as they attempt to strengthen or maintain their market positions. If two or more of our accounts consolidate, they may also wish to consolidate the software solutions and services that we provide to them. If an existing account is acquired by another company that uses the solutions of one of our competitors, we may lose business in that account to our competitor. In addition, if an account experiences a change in management, the new management team may be accustomed to the software of one of our competitors, and we could lose that account. Any such consolidation, acquisition or management change could lead to pricing pressure, erosion of our margins, loss of accounts and loss of market share, all of which could harm our business, financial condition, and results of operations.

We have in the past and expect to continue in the future to seek to grow our business through acquisitions of or investments in new or complementary businesses, software solutions or technologies, and the failure to manage acquisitions or investments, or the failure to integrate them with our existing platform and business, could harm us.

        Since our founding, we have strategically acquired and integrated numerous software assets and businesses. We may, however, be unable to identify suitable acquisition candidates in the future or, if suitable candidates are identified, we may be unable to complete the business combination on commercially acceptable terms. The process of exploring and pursuing acquisition opportunities may result in devotion of significant management and financial resources.

        Even if we are able to consummate acquisitions that we believe will be successful, these transactions present many risks including, among others:

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        We may also incur unanticipated costs, expenses or other liabilities as a result of an acquisition target's violation of applicable laws, such as the Foreign Corrupt Practices Act ("FCPA") or similar worldwide anti-bribery and anti-corruption laws in foreign jurisdictions, as well as data security and privacy laws such as the GDPR. If we do not achieve the anticipated benefits of our acquisitions as rapidly or to the extent anticipated by management and financial or industry analysts, or if we are subject to unanticipated costs, expenses or other liabilities in connection with our acquisitions, there could be an adverse effect on our stock price, business, financial position, results of operations or cash flows.

        We may not be successful in overcoming such risks, and such acquisitions may negatively impact our business. In addition, such acquisitions may contribute to potential fluctuations in our quarterly financial results. These fluctuations could arise from transaction-related costs and charges associated with eliminating redundant expenses or write-offs of impaired assets recorded in connection with acquisitions. These costs or charges could negatively impact our financial results for a given period, cause quarter to quarter variability in our financial results or negatively impact our financial results for several future periods.

Increasingly stringent and growing data protection and privacy laws with respect to cloud computing, cross-border data transfer restrictions and other restrictions may apply to our business and non-compliance with such rules may limit the use and adoption of our services and adversely affect our business.

        As a global software and service provider, we collect and process personal data and other data from our users and prospective users. We use this information to provide solutions and applications to our accounts, to validate user identity, to fulfill contractual duties and administer billing and support, to expand and improve our business, and to communicate and recommend products and services through our marketing and advertising efforts. We may also share accounts' personal data with certain third parties as described in the privacy policy provided to each account. As a result, we are required to comply with local laws and regulations, including data protection requirements in the countries where we do business.

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        Globally, new and evolving regulations regarding data protection and privacy and other standards governing the collection, processing, storage and use of personal data impose additional burdens for us due to increasing compliance standards that could restrict the use and adoption of our solutions and applications (in particular cloud services).

        We have significant business operations in the European Union ("E.U.") and European Economic Area ("EEA"), where the GDPR went into effect on May 25, 2018. The GDPR harmonized data protection regulations across the E.U. and EEA, implementing stringent requirements for the protection of E.U. and EEA individuals' ("data subjects") personal data. These requirements include expanded requirements for our users as E.U. and EEA data subjects, new obligations on us as data controllers and processors, and mandatory breach notification to affected individuals and data protection supervisory authorities. Non-compliance with GDPR could result in fines and penalties up to the greater of €20 million or 4% of global turnover for the preceding financial year. Moreover, individuals can claim damages resulting from infringement of the GDPR. As a result of the GDPR, as a personal data processor for our business-to-business accounts we must commit to detailed contractual obligations, including to ensure we only process such data on our accounts' instructions, keep it secure, require our sub-processors to commit to similar commitments, delete data when the contract ends and let our accounts audit our compliance.

        In addition, E.U. and EEA data protection rules regulate the transfers of E.U. and EEA individuals' personal data to other countries that have been deemed by the European Commission not to provide adequate protection to personal data. The United States is not deemed to have adequate laws to protect personal data. The E.U. and the United States formally entered into a new framework in July 2016 that provides a mechanism for companies to lawfully transfer personal data from E.U. member states to the United States. This framework, called the Privacy Shield, was developed as a means to address shortcomings identified by the European Court of Justice in a predecessor mechanism. In July 2017, the Privacy Shield was also adopted by the EEA. The Privacy Shield and other mechanisms for transfer of personal data outside the E.U. and EEA are currently subject to challenges in European courts, which may lead to uncertainty about the legal basis for data transfers from the E.U. and EEA to the United States. The Privacy Shield and other potential rules on the flow of data across borders could increase the cost and complexity of delivering our products and services in some markets and may lead to governmental enforcement actions, litigation, fines and penalties or adverse publicity, which could have an adverse effect on our reputation and business.

        Further, laws such as the E.U.'s Privacy and Electronic Communications Directive 2002 ("ePrivacy Directive"), national legislation across the E.U. implementing the ePrivacy Directive and the proposed ePrivacy Regulation are increasingly aimed at the use of personal data for marketing purposes, and the tracking of individuals' online activities. These existing or proposed laws and regulations are subject to differing interpretations and may be inconsistent among jurisdictions and member states. These and other requirements may have a negative effect on businesses, including ours, that collect and use online usage information for consumer acquisition and marketing. As the text of the ePrivacy Regulation is still under development, and as further guidance is issued and interpretation of both the ePrivacy Regulation and GDPR develop, we could incur costs to comply with these regulations.

        In the Asia-Pacific region, where we have significant business operations, changes in privacy and cybersecurity regulation, some of which is similar to changes effected by the GDPR, have come into effect in 2018 and 2019, and similar significant regulatory changes are expected across the Asia-Pacific region in the future. These changes introduce more stringent requirements, including that we register our data processing activities in certain jurisdictions, appoint local representatives in-country, restrict the cross-border transfer of personal, confidential and commercially sensitive information in some cases, provide expanded disclosures to tell our accounts about how we use their personal information, and obtain detailed consents from accounts to processing of personal information. There are also increased rights for accounts to access, control and delete their personal information. In addition, there

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are mandatory data breach notification requirements that differ depending on the jurisdiction as well as increases to penalties and expanded enforcement powers for regulators.

        We also expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the E.U., the EEA, and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. For example, in June 2018 California enacted the California Consumer Privacy Act (the "CCPA"), which took effect on January 1, 2020. The CCPA broadly defines personal information, gives California residents expanded privacy rights and protections and provides for civil penalties for violations and a private right of action for data breaches. In addition to government activity, privacy advocacy groups and technology and other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on us. Future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could impair our ability to collect, use or disclose personally identifiable information, increase our costs and impair our ability to maintain and grow our account base and increase our revenue. New laws, amendments to or re-interpretations of existing laws and regulations, industry standards, contractual obligations and other obligations may require us to incur additional costs and restrict our business operations. Such laws and regulations may require companies to implement privacy and security policies, permit users to access, correct and delete personal data stored or maintained by such companies, inform individuals of security breaches that affect their personal data, and, in some cases, obtain individuals' consent to use personal data for certain purposes. If we, or the third parties on which we rely, fail to comply with federal, state and international data privacy laws and regulations, our ability to successfully operate our business and pursue our business goals could be harmed.

        Our failure to comply with applicable laws and regulations, or to protect such data, could result in enforcement action against us, including fines and public censure, claims for damages by accounts and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing accounts and prospective accounts), any of which could harm our business, financial condition, and results of operations.

        Around the world, there are numerous lawsuits in process against various technology companies that process personal data. If those lawsuits are successful, it could increase the likelihood that our company may be exposed to liability for our own policies and practices concerning the processing of personal data and could hurt our business.

        In addition to government activity, privacy advocacy and other industry groups have established or may establish new self-regulatory standards that may place additional burdens on us. Our accounts expect us to meet voluntary certification or other standards established by third parties or imposed by the accounts themselves. If we are unable to maintain these certifications or meet these standards, it could adversely affect our ability to provide our solutions to certain accounts and could harm our business. Further, if we were to experience a breach of systems compromising our accounts' sensitive data, our brand and reputation could be adversely affected, use of our software solutions and services could decrease, and we could be exposed to a risk of loss, litigation, and regulatory proceedings.

        The costs of compliance with and other burdens imposed by laws, regulations and standards may limit the use and adoption of our services and reduce overall demand for it, or lead to significant fines, penalties or liabilities for any noncompliance.

        Furthermore, concerns regarding data privacy may cause our accounts' customers to resist providing the data necessary to allow our accounts to use our services effectively. Even the perception that the privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our software solutions or services, and could limit adoption of our cloud-based solutions.

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We depend on our senior management team and other key personnel, and we could be subject to substantial risk of loss if any of them terminate their relationship with us.

        Our success depends upon the continued services of our key personnel, including our Chief Executive Officer, Gregory S. Bentley, and one of our founders, Keith A. Bentley, each of whom plays an important role in day-to-day operations. The Bentleys and each of our other executive officers, key technical personnel and colleagues could terminate his or her relationship with us at any time. Failure to effectively implement our succession planning efforts and to ensure effective transfers of knowledge and smooth transitions involving key personnel could disrupt or adversely affect our business and results of operations. Additionally, the Bentleys and most of our senior management team and other key personnel are not subject to employment or other agreements containing non-compete provisions. Accordingly, the adverse effect resulting from the loss of certain key personnel could be compounded by our inability to prevent them from competing with us. Further, we do not maintain key person insurance on any of our senior management team or other key personnel in the event of their death or extended incapacity. The loss of any of our senior executives might significantly delay or prevent the achievement of our business objectives and could harm our business and account relationships.

If we are not successful in attracting, integrating and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

        Our ability to establish and maintain a position of technology leadership in the highly competitive software market depends in large part upon our ability to attract, integrate and retain highly skilled engineering and development personnel in the United States and internationally. The market for this talent is highly competitive, and our recruiting efforts are widespread and conducted in varying hiring climates throughout the world. Due to restrictive immigration laws in the United States, we are also sometimes limited in our ability to integrate our international colleagues to locations where their skills may be particularly well-suited. If we are not successful in recruiting and retaining key personnel or integrating our personnel effectively, our business, reputation and results of operations could be adversely affected.

Quality problems, defects, errors, failures or vulnerabilities in our software solutions or services could harm our reputation and adversely affect our business, financial condition, results of operations, and prospects.

        Our solutions are, in some cases, highly complex and incorporate advanced software technologies that we attempt to make interoperable with the products of other software providers. Despite testing prior to release, our software may contain undetected defects or errors. Further, the combined use of our software with those of other software providers may cause errors or failures, or it may expose undetected defects, errors or failures in our software. These defects, errors or failures could affect software performance and damage the businesses of our accounts as well as delay the development or release of new software or new versions of software. Further, we cannot guarantee that all of our accounts are using the latest versions of our software solutions with enhanced security features, and may be more vulnerable to cyber attacks. Allegations of unsatisfactory performance in any of these situations could damage our reputation in the market and our relationships with our accounts, cause us to lose revenue or market share, increase our service costs, cause us to incur substantial costs in analyzing, correcting or redesigning the software, cause us to lose accounts, subject us to liability for damages and divert our resources from other tasks, any one of which could adversely affect our business, financial condition, results of operations, and prospects. We may also be required to provide full replacements or refunds for such defective software. We cannot assure you that such remediation would not harm our business, financial condition, results of operations, and prospects.

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Our business, financial condition, results of operations, and prospects may be harmed if we are unable to cross-sell our solutions.

        A significant component of our growth strategy is to increase the cross-selling of our solutions to current and future accounts, however, we may not be successful in doing so if our accounts find our additional solutions to be unnecessary or unattractive. We have invested, and intend to continue to invest, significant resources in developing and acquiring additional solutions, which resources may not be recovered if we are unable to successfully cross-sell these solutions to accounts using our existing solutions. Any failure to sell additional solutions to current and future accounts could harm our business, financial condition, results of operations and prospects.

We license third-party technologies for the development of certain of our software solutions, and, in some instances, we incorporate third-party technologies, including open source software, into our software solutions. If we fail to maintain these licenses or are unable to secure alternative licenses on reasonable terms, our business could be adversely affected.

        We license third-party technologies to develop certain of our products, and, in some cases, we incorporate third-party technologies into our own software solutions, including technologies owned by our competitors. If we were to seek to expand the scope of this activity in the future, we could be required to obtain additional licenses and enter into long-term arrangements with third parties on whose technology we could become substantially dependent.

        If we are unable to use or license these third-party technologies on reasonable terms, including commercially justifiable royalty rates, or if these technologies fail to operate properly or be appropriately supported, maintained or enhanced, we may not be able to secure alternatives in a timely manner and our ability to develop and commercialize our own software solutions could be adversely impacted. In addition, licensed technology may be subject to claims that it infringes others' intellectual property rights, and we may lose access to or have restrictions placed on our use of the licensed technology.

        Furthermore, we are unable to predict whether future license agreements and arrangements with third parties can be obtained, and, if obtained, whether they can be renewed on acceptable terms, or at all. If we become substantially dependent upon any such third-party technology and we are unable to successfully license it, we may not be able to develop or commercialize our software solutions in a timely manner or at all. Any of the foregoing could adversely impact our business and results of operations.

        We also incorporate open source software into our products. While we have attempted not to use open source code in a manner which could adversely impact our proprietary code, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to market or sell our products or to develop new products. In such event, we could be required to seek licenses from third-parties in order to continue offering our products, to disclose and offer royalty-free licenses to our own source code, to re-engineer our products, or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could adversely impact our business and results of operations.

As a result of our strategy of strategic partnerships with other companies for product development, our product delivery schedules could be adversely affected if we experience difficulties with our product development partners.

        We have strategic partnerships with certain independent firms and contractors to perform some of our product development activities. We believe our strategic partnerships allow us to, among other things, achieve efficiencies in developing new products and maintaining and enhancing existing product

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offerings. Our strategic partnerships create a dependency on such independent developers. Independent developers, including those who currently develop solutions for us in the United States and throughout the world, may not be able or willing to provide development support to us in the future. In addition, use of development resources through consulting relationships, particularly in non-U.S. jurisdictions with developing legal systems, may be adversely impacted by, and expose us to risks relating to, evolving employment, export and intellectual property laws. These risks could, among other things, expose our intellectual property to misappropriation and result in disruptions to product delivery schedules, which in turn could harm our business, financial condition, and results of operations.

There are significant costs and restrictions associated with the repatriation of cash from our non-U.S. operations.

        Our cash and cash equivalents balances are concentrated in a few locations around the world, with approximately 97% of those balances held outside of the United States as of September 30, 2019. Cash repatriation restrictions may limit our ability to repatriate cash held by our foreign subsidiaries. Additionally, the repatriation of cash held by our foreign subsidiaries may result in adverse tax consequences. Any repatriation of cash may be restricted or may result in our incurring substantial costs. As a result, we may be required to seek sources of cash to fund our operations, including through the issuance of equity securities, which may be dilutive to existing stockholders, or by incurring additional indebtedness. There can be no assurance that we will be able to secure sources of financing on terms favorable to us, or at all.

Assertions by third parties of infringement or other violations by us of their intellectual property rights could result in significant costs and harm our business and results of operations.

        Vigorous protection and pursuit of intellectual property rights has resulted in protracted and expensive litigation for many companies in our industry. Although claims of this kind have not materially affected our business to date, there can be no assurance such claims will not arise in the future. Any claims or proceedings against us, regardless of whether meritorious, could be time consuming, result in costly litigation, require significant amounts of management time, result in the diversion of significant operational resources, or require us to enter into royalty or licensing agreements, any of which could harm our business, financial condition, and results of operations.

        Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we will be successful in defending ourselves against intellectual property claims. In addition, we may not be able to effectively use our intellectual property portfolio to assert defenses or counterclaims in response to copyright, patent and trademark infringement claims or litigation, as well as claims for trade secret misappropriation and unfair competition, brought against us by third parties. Further, litigation may involve patent holding companies or other adverse patent owners who have no relevant products and against whom our patent portfolio may provide little or no deterrence.

        Many potential litigants have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, a successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing certain solutions or performing certain services. We might also be required to seek a license and pay royalties for the use of such intellectual property, which may not be available on commercially acceptable terms or at all. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and may ultimately not be successful.

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If our solutions infringe on the intellectual property rights of others, we may be required to indemnify our accounts for any damages they suffer.

        We generally indemnify our accounts with respect to infringement by our products of the proprietary rights of third parties. Third parties may assert infringement claims against our accounts. These claims may require us to initiate or defend protracted and costly litigation on behalf of our accounts, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of our accounts or may be required to obtain licenses for the products they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our accounts may stop using our products.

Pricing pressure from our competitors and our accounts may impact our ability to sell our software solutions at prices necessary to support our current business strategies.

        The intense competition we face in the sales of our software solutions and services, and general economic and business conditions, can put pressure on us to lower our prices. If our competitors offer deep discounts on certain software solutions or services, or develop software solutions that the marketplace considers more valuable, we may need to lower prices or offer discounts or other favorable terms to compete successfully. Any such changes may reduce operating margins and could adversely affect results of operations. Any broad-based change to our prices and pricing policies could cause new software subscription and service revenues to decline or be delayed as our salesforce implements and our accounts adjust to the new pricing policies.

Our credit agreement contains restrictive covenants that may limit our operating flexibility, and certain changes in ownership of equity interests in us by the Bentleys constitutes an event of default.

        The agreement governing the Credit Facility (as defined below) contains certain restrictive covenants that limit our ability to enter into new agreements, incur indebtedness other than amounts under the Credit Facility and specified baskets, incur additional liens, merge or consolidate with other companies or consummate certain changes of control, enter into new lines of business, pay dividends to our stockholders, make investments in and acquire other businesses and transfer or dispose of assets. In certain circumstances, the agreement governing the Credit Facility may also limit our ability to transfer cash among our subsidiaries and between us and our subsidiaries, including our foreign subsidiaries. It also contains certain financial covenants, including a covenant requiring us not to permit the net leverage ratio to exceed 3.50 to 1.00 and a covenant requiring the fixed charge coverage ratio for any period of four consecutive fiscal quarters to not be less than 3.0 to 1.00, and financial reporting requirements. Borrowings under the Credit Facility are secured by a first priority security interest in substantially all of our U.S. assets and 65% of the stock our foreign subsidiaries owned by a party to the agreement governing the Credit Facility.

        Further, if the Bentleys, their family members and their family trusts cease to collectively own equity interests in us representing at least a majority of the aggregate voting power of the Company, then such change in ownership will be an event of default under the agreement governing the Credit Facility and, among other things, the commitments under the Credit Facility may be terminated immediately and the outstanding loans and accrued interest may become due and payable immediately.

        In addition, there is no guarantee that we will be able to generate sufficient cash flow or revenues to meet these financial covenants or pay the principal and interest on any debt. Furthermore, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance any debt. Any inability to make scheduled payments or meet the financial covenants in the agreement governing the Credit Facility would adversely affect our business.

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We may incur substantial additional debt, which could exacerbate the risks described above.

        We may incur additional debt in the future. Although the agreement governing the Credit Facility contains restrictions on our ability to incur indebtedness, those restrictions are subject to a number of exceptions which permit us and our subsidiaries to incur substantial debt. Adding new debt to current debt levels could intensify the related risks that we and our subsidiaries now face. See the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

We may need to raise additional capital, which may not be available to us.

        We may require substantial funds to operate our business and pursue our strategies. Our future liquidity and capital requirements are difficult to predict as they depend upon many factors, including the success of our solutions and competing technological and market developments. In the future, we may require additional capital to respond to business opportunities, challenges, acquisitions, a decline in the level of account prepayments or unforeseen circumstances and may determine to engage in equity or debt financings or enter into credit facilities for other reasons, and we may not be able to timely secure additional debt or equity financing on favorable terms, or at all. Any additional debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we raise funds through issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

From time to time we realign or introduce new business initiatives, including reorganizing our sales and marketing, research and development and administrative functions; if we fail to successfully execute and manage these initiatives, our results of operations could be negatively impacted.

        We rely heavily on our direct salesforce. From time to time, we reorganize and make adjustments to our sales leadership and/or our salesforce in response to such factors as management changes, performance issues, market opportunities and other considerations. These changes may result in a temporary lack of sales production and may adversely impact revenues in future quarters. Market acceptance of any new business or sales initiative is dependent on our ability to match our accounts' needs at the right time and price. There can be no assurance that we will not restructure our salesforce in future periods or that the transition issues associated with such a restructuring will not occur. Similarly, reorganization of our research and development and administrative functions can disrupt our operations and negatively impact our results of operations if the execution is not managed properly. If any of our assumptions about expenses, revenues or revenue recognition principles from these initiatives proves incorrect, or our attempts to improve efficiency are not successful, our actual results may vary materially from those anticipated, and our financial results could be negatively impacted.

We may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively affect our results of operations.

        We devote substantial resources to research and development. New competitors, technological advances in the software industry or by competitors, our acquisitions, our entry into new markets, or other competitive factors may require us to invest significantly greater resources than we anticipate. If we are required to invest significantly greater resources than anticipated without a corresponding increase in revenue, our results of operations could decline. Additionally, our periodic research and

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development expenses may be independent of our level of revenue, which could negatively impact our financial results.

        Further, technology for which we spend a significant amount of time and resources on in our research and development, such as our digital twin technology, may prove to be less marketable than we expect. There can be no guarantee that our research and development investments will result in products that create additional revenue.

A portion of our revenues are from sales by our channel partners, and we could be subject to loss or liability based on their actions.

        Sales through our global network of independent, regional channel partners accounted for 9% of our revenues for the year ended December 31, 2018. These channel partners sell our software solutions to smaller accounts, in geographic regions where we do not have a meaningful presence, and in niche markets where they have specialized industry and technical knowledge. Where we rely on channel partners, we may have reduced contact with ultimate users that purchase through such channel partners, thereby making it more difficult to establish brand awareness, ensure proper installation, service ongoing requirements, estimate demand and respond to the evolving needs of an account. Any of our channel partners may choose to terminate its relationship with us at any time. As a result, our ability to service the ultimate users who were interfacing with that channel partner may take time to develop as we divert resources to service those users directly or find a suitable alternative channel partner to continue the relationship. Any disruption in service may damage our reputation and business. In addition, our channel partners may be unable to meet their payment obligations to us, which would have a negative impact on our results of operations and revenues. Our channel partners may also not have loyalty to our brand and therefore may not be particularly motivated to sell our software solutions or services.

        The use of channel partners could also subject us to lawsuits, potential liability and reputational harm if, for example, any channel partners misrepresent the functionality of our software solutions or services to accounts, fail to comply with their contractual obligations or violate laws or our corporate policies. Such actions may impact our ability to distribute our software solutions into certain regions and markets, and may have an adverse effect on our results of operations and cash flows.

Some of our solutions are complex, and accounts may experience difficulty in implementing, upgrading or otherwise achieving the benefits attributable to them.

        Due to the scope and complexity of some of the solutions that we provide, our implementation cycle for them can be lengthy and unpredictable. Some solutions require configuration and integration with existing computer systems and applications of our accounts and their trading partners, which can be time-consuming and expensive for our accounts and can result in implementation delays. As a result, some accounts may have difficulty implementing those solutions successfully or otherwise achieving their expected benefits. Delayed or ineffective implementation or upgrades may limit our future sales opportunities, negatively affect revenue, result in account dissatisfaction and harm our reputation.

Determining our effective income tax rate is complex and subject to uncertainty.

        We make significant estimates in determining our worldwide income tax provision. These estimates involve complex tax laws and regulations in a number of jurisdictions across our global operations and are subject to many transactions and calculations in which the ultimate tax outcome is uncertain. The final outcome of tax matters could be different than the estimates reflected in the historical income tax provision and related accruals. These differences could have a material impact on income tax expense and net income in the periods in which such determinations are made.

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        The amount of income tax we pay is subject to ongoing audits by federal, state and foreign tax authorities. These audits can often result in additional assessments, including interest and penalties. Our estimate for liabilities associated with uncertain tax positions is highly judgmental and actual future outcomes may result in favorable or unfavorable adjustments to our estimated tax liabilities, including estimates for uncertain tax positions, in the period the assessments are made or resolved, audits are closed or when statutes of limitation on potential assessments expire. As a result, our effective tax rate may fluctuate significantly on a quarterly or annual basis.

The intended efficiency of our corporate structure depends on the application of the tax laws and regulations in the countries where we operate, and we may have exposure to additional tax liabilities or our effective tax rate could change, which could have a material impact on our financial condition and results of operations.

        As a company with international operations, we are subject to income taxes, as well as non-income based taxes, in both the United States and various foreign jurisdictions. Currently, the majority of our revenues is generated from accounts located outside the United States, and a large portion of our assets are located outside the United States. We have designed our corporate structure, the manner in which we develop and use our intellectual property, and our intercompany transactions between our subsidiaries in a way that is intended to enhance our operational and financial efficiency and increase our overall profitability. United States income taxes and foreign withholding taxes have not been provided on undistributed earnings of non-U.S. subsidiaries to the extent those earnings are considered to be indefinitely reinvested in the operations of those subsidiaries. The application of the tax laws and regulations of various countries in which we operate and to our global operations is subject to interpretation. We also must operate our business in a manner consistent with our corporate structure to realize such efficiencies. The tax authorities of the countries in which we operate may challenge our methodologies for valuing developed technology or for transfer pricing. If, for one or more of these reasons, tax authorities determine that the manner in which we operate results in our business not achieving the intended tax consequences, our effective tax rate could increase and harm our financial condition and results of operations.

        A change in the tax law in the jurisdictions in which we do business, including an increase in tax rates, an adverse change in the treatment of an item of income or expense, a decrease in tax rates in a jurisdiction in which we have significant deferred tax assets, or a new or different interpretation of applicable tax law, could result in a material increase in tax expense. The United States government and other governments are considering and may adopt tax law changes that significantly increase our worldwide tax liabilities. The U.S. Congress and other government legislatures and agencies in countries where we and our subsidiaries operate have focused on issues related to the taxation of multinational corporations. For example, in Ireland, where one of our significant subsidiaries is domiciled, tax authorities recently announced changes to the treatment of non-resident Irish entities. The changes are expected to take effect for existing non-resident Irish entities, such as ours, in 2021. These changes, and other prospective changes in the United States and other countries in which we and our subsidiaries operate, could increase our effective tax rate, and harm our financial condition and results of operations.

We are subject to legal proceedings and regulatory inquiries, and we may be named in additional legal proceedings or become involved in regulatory inquiries in the future, any of which may be costly, distracting to our core business and could result in an unfavorable outcome, or harm on our business, financial condition, results of operations, cash flows, or the trading price for our securities.

        We are subject to various investigations, claims and legal proceedings that arise in the ordinary course of business, including commercial disputes, labor and employment matters, tax audits, alleged infringement of intellectual property rights and other matters. As the global economy has changed, our industry has seen an increase in litigation activity and regulatory inquiries. Like many other high

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technology companies, on a regular and ongoing basis, we receive inquiries from U.S. and foreign regulatory agencies regarding our business and our business practices, and the business practices of others in our industry. In the event that we are involved in significant disputes or are the subject of a formal action by a regulatory agency, we could be exposed to costly and time consuming legal proceedings that could result in any number of outcomes. Any claims or regulatory actions initiated by or against us, whether successful or not, could result in expensive costs of defense, costly damage awards, injunctive relief, increased costs of business, fines or orders to change certain business practices, significant dedication of management time, diversion of significant operational resources, or otherwise harm our business. In any of these cases, our financial results could be negatively impacted.

Failure to comply with the FCPA and similar anti-bribery and anti-corruption laws associated with our activities outside the United States could subject us to penalties and other adverse consequences.

        The majority of our revenues are from jurisdictions outside of the United States. We are subject to the FCPA, which generally prohibits U.S. companies and their intermediaries from making payments to foreign officials for the purpose of directing, obtaining or keeping business, and requires companies to maintain reasonable books and records and a system of internal accounting controls. The FCPA applies to companies and individuals alike, including company directors, officers, employees and agents. Under the FCPA, U.S. companies may be held liable for corrupt actions taken by employees, strategic or local partners or other representatives. In addition, the government may seek to rely on a theory of successor liability and hold us responsible for FCPA violations committed by companies or associated with assets that we acquire.

        In many foreign jurisdictions where we operate, particularly countries with developing economies, it may be a local custom for businesses to engage in practices that are prohibited by the FCPA or other similar laws and regulations. There can be no assurance that our colleagues, partners and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of the FCPA or our policies for which we may be ultimately held responsible. If we or our intermediaries fail to comply with the requirements of the FCPA or similar anti-bribery and anti-corruption legislation such as the United Kingdom Bribery Act and the China Unfair Competition law, governmental authorities in the United States and elsewhere could seek to impose civil and/or criminal fines and penalties, which could harm our business, financial conditions, and results of operations. We may also face collateral consequences such as debarment and the loss of our export privileges.

We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate the controls.

        Our offerings may be subject to U.S. export controls and economic sanctions laws and regulations that restrict the delivery of our solutions and services to certain locations, governments, and persons. While we have processes in place to prevent our offerings from being exported in violation of these laws, including obtaining authorizations as appropriate and screening against U.S. government lists of restricted and prohibited persons, we cannot guarantee that these processes will prevent all violations of export control and sanctions laws.

        Further, if our channel partners fail to obtain appropriate import, export or re-export licenses or permits, we may also be adversely affected, for example, through reputational harm as well as other negative consequences including government investigations and penalties. Complying with export control and sanctions regulations for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities.

        Violations of U.S. sanctions or export control laws can result in fines, penalties, denial of export and trading privileges, and seizure of goods and assets. Other consequences include negative publicity

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and harm to business reputation, increased government scrutiny (including intrusive audits, and increased difficulty obtaining government licenses and approvals), and/or remedial compliance measures as a condition of settling government charges.

Our business may be significantly disrupted upon the occurrence of a catastrophic event.

        Our business is highly automated and relies extensively on the availability of our network and data center infrastructure, our internal technology systems and our websites. We also rely on hosted computer services from third parties for services that we provide to our accounts and computer operations for our internal use. The failure of our systems or hosted computer services due to a catastrophic event, such as an earthquake, fire, flood, tsunami, weather event, telecommunications failure, power failure, cyber attack, terrorism, or war, could adversely impact our business, financial condition, or results of operations. We have developed disaster recovery plans and maintain backup systems in order to reduce the potential impact of a catastrophic event, however there can be no assurance that these plans and systems would enable us to return to normal business operations. In addition, any such event could negatively impact a country or region in which we conduct business. This could in turn decrease that country's or region's demand for our products and services, thereby negatively impacting our financial results.

We may face exposure to product or professional liability claims that could cause us to be liable for damages.

        The use of our software could lead to the filing of product liability claims against us were someone to allege that our software provided inaccurate or incomplete information at any stage of the infrastructure lifecycle or otherwise failed to perform according to specifications. In the event that accounts or third parties sustain property damage, injury, death or other loss in connection with their use of our software or infrastructure for which our software solutions and services were used to engineer, we, along with others, may be sued, and whether or not we are ultimately determined to be liable, we may incur significant legal expenses, management's attention could be diverted from operations and market acceptance of our software could decrease. Our risk of exposure to litigation in these situations could rise as our software solutions and services are used for increasingly complex and high-profile infrastructure projects. Litigation could also impair our ability to obtain professional liability or product liability insurance or increase the cost of such insurance. These claims may be brought by individuals seeking relief on their own behalf or purporting to represent a class. In addition, product liability claims may be asserted against us in the future based on events we are not aware of at the present time.

        The limitations of our liability included in our contracts with accounts may not be enforceable or may not otherwise protect us from liability for damages. Additionally, we may be subject to claims that are not explicitly covered by contract, such as a claim directly by a third party. There is no assurance that our insurance coverage will be adequate to cover incurred liabilities or that we will be able to obtain acceptable product and professional liability coverage in the future.

If the accounting estimates we make, and the assumptions on which we rely, in preparing our financial statements prove inaccurate, our actual results may be adversely affected.

        Our financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments about, among other things, taxes, revenue recognition, stock-based compensation costs, investments, contingent obligations, allowance for doubtful accounts and intangible assets. These estimates and judgments affect the reported amounts of our assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances and at the time they are made. If our estimates or the assumptions underlying them are not correct, actual results may differ materially from

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our estimates and we may need to, among other things, accrue additional charges that could adversely affect our results of operations, which in turn could adversely affect our stock price. In addition, new accounting pronouncements and interpretations of accounting pronouncements have occurred and may occur in the future that could adversely affect our reported financial results.

Changes in existing financial accounting standards or practices may harm our results of operations.

        Changes in existing accounting rules or practices, new accounting pronouncements rules, or varying interpretations of current accounting pronouncements practice could have a significant, adverse effect on our results of operations or the manner in which we conduct our business. Further, such changes could potentially affect our reporting of transactions completed before such changes are effective.

        U.S. GAAP is subject to interpretation by the Financial Accounting Standards Board ("FASB"), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. In particular, in February 2016, the FASB issued ASC 842, Leases, which supersedes the lease accounting guidance in ASC 840, Leases. The core principle of ASC 842 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. As an "emerging growth company," we are allowed under the JOBS Act to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to take advantage of this extended transition period under the JOBS Act with respect to ASC 842, which resulted in ASC 842 becoming effective for us beginning on January 1, 2020. Any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors' confidence in us.

        We are evaluating the impact of the adoption of ASC 842 and currently believe the most significant impact upon adoption will be the recognition of material right-of-use assets and lease liabilities on our consolidated balance sheets associated with operating leases. We do not believe this standard will have a material impact on our consolidated statements of operations data.

We are an "emerging growth company," and the reduced disclosure requirements applicable to "emerging growth companies" may make our Class B common stock less attractive to investors.

        We are an "emerging growth company," as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Additionally, as an "emerging growth company" we are required to have only two years of audited financial statements and only two years of related selected financial data and Management's Discussion and Analysis of Financial Condition and Results of Operations disclosure. We may take advantage of these exemptions until we are no longer an "emerging growth company," which could be as long as five full fiscal years following the listing of our Class B common stock on The Nasdaq Global Select Market. We cannot predict if investors will find our Class B common stock less attractive because we will rely on these exemptions. If some investors find our Class B common stock less attractive as a

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result, there may be a less active trading market for our Class B common stock and the price of our Class B common stock may be more volatile.

        We will remain an "emerging growth company" until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a "large accelerated filer," with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the listing of our Class B common stock on The Nasdaq Global Select Market.

Because we have elected under Section 107 of the JOBS Act to use the extended transition period with respect to complying with new or revised accounting standards, our financial statements may not be comparable to companies that comply with public company effective dates, making it more difficult for an investor to compare our results with other public companies.

        Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act") by Section 102(b)(1) of the JOBS Act, for complying with new or revised accounting standards. In other words, as an emerging growth company we can delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, which will result in less available information for our investors. We have elected to take advantage of the benefits of this extended transition period. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.

Risks Related to Ownership of Our Class B Common Stock

Our listing differs significantly from an underwritten initial public offering.

        This listing is not an underwritten initial public offering of our Class B common stock. The listing of our Class B common stock on The Nasdaq Global Select Market differs from an underwritten initial public offering in several significant ways, which include, but are not limited to, the following:

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The public price of our Class B Common stock may be volatile, and could, upon listing on The Nasdaq Global Select Market, decline significantly and rapidly. Market volatility may affect the value of an investment in our Class B common stock and could subject us to litigation.

        The listing of our Class B common stock and the registration of the Registered Stockholders' shares of Class A common stock is a novel process that is not an underwritten initial public offering. We have engaged Goldman Sachs & Co. LLC and BofA Securities, Inc. as our financial advisors. There will be no book building process and no price at which underwriters initially sold shares to the public to help inform efficient and sufficient price discovery with respect to the opening trades on The Nasdaq Global Select Market. Pursuant to the Nasdaq Listing Rules, once                                    , in its capacity as our financial advisor, has notified the Nasdaq Stock Market that our Class B common stock is ready to trade, the Nasdaq Stock Market will calculate the Current Reference Price for our Class B common stock, in accordance with the Nasdaq Listing Rules. If                        then approves proceeding at the Current Reference Price, the applicable orders that have been entered will be executed at such price and regular trading of our Class B common stock on The Nasdaq Global Select Market will commence, subject to the Nasdaq Stock Market conducting validation checks in accordance with the Nasdaq Listing Rules. Under the Nasdaq Listing Rules, the "Current Reference Price" means: (i) the single price at which the maximum number of orders to buy or sell our Class B common stock can be paired; (ii) if more than one price exists under (i), then the price that minimizes the number of our Class B common stock for which orders cannot be matched; (iii) if more than one price exists under (ii), then the entered price at which our Class B common stock will remain unexecuted in the cross; and (iv) if more than one price exists under (iii), a price determined by the Nasdaq Stock Market after consultation with                         in its capacity as our financial advisor.                                    will determine when our Class B common stock is ready to trade and approve proceeding at the Current Reference Price primarily based on consideration of volume, timing and price. In particular,                        will determine when a reasonable amount of volume will cross on the opening trade such that sufficient price discovery has been made to open trading at the Current Reference Price. If                        does not approve proceeding at the Current Reference Price (for example, due to the absence of adequate preopening buy and sell interest),                        will request that the Nasdaq Stock Market delay the open until such a time that sufficient price discovery has been made to ensure a reasonable amount of volume crosses on the opening trade. The length of such delay could vary greatly, from a short period of time such as one day, to a decision to not list our shares on The Nasdaq Global Select Market at all. As a result, the absence of sufficient price discovery may result in delays in the opening of trading and, volatile prices and supply once trading commences. The opening public price may bear no relationship to the market price for our Class B common stock after our listing, and thus may decline below the opening public price. For more information, see the section titled "Plan of Distribution."

        Moreover, prior to the opening trade, there will not be a price at which underwriters initially sold shares of Class B common stock to the public as there would be in an underwritten initial public offering. The absence of a predetermined initial public offering price could impact the range of buy and sell orders collected by The Nasdaq Global Select Market from various broker-dealers. Consequently, upon listing on The Nasdaq Global Select Market, the public price of our Class B common stock may be more volatile than in an underwritten initial public offering and could decline significantly and rapidly.

        Moreover, because of our novel listing process, individual investors, retail or otherwise, may have greater influence in setting the opening public price and subsequent public prices of our Class B

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common stock on The Nasdaq Global Select Market and may participate more in our initial trading than is typical for an underwritten initial public offering. These factors could result in a public price of our Class B common stock that is higher than other investors (such as institutional investors) are willing to pay, which could cause volatility in the trading price of our Class B common stock and an unsustainable trading price if the price of our Class B common stock significantly rises upon listing and institutional investors believe our Class B common stock is worth less than retail investors, in which case the price of our Class B common stock may decline over time. Further, if the public price of our Class B common stock is above the level that investors determine is reasonable for our Class B common stock, some investors may attempt to short our Class B common stock after trading begins, which would create additional downward pressure on the public price of our Class B common stock. To the extent that there is a lack of consumer awareness among retail investors, such lack of consumer awareness could reduce the value of our Class B common stock and cause volatility in the trading price of our Class B common stock.

        Technology stocks have historically experienced high levels of volatility. The market price of our Class B common stock could be subject to wide fluctuations in response to the risk factors listed in this prospectus and others beyond our control, including:

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        Furthermore, the stock markets recently have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, and technology companies in particular. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our Class B common stock. These fluctuations may be even more pronounced in the trading market for our Class B common stock shortly following the listing of our Class B common stock on The Nasdaq Global Select Market as a result of the supply and demand forces described above. If the market price of our Class B common stock after our listing does not exceed the opening public price, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could harm our business.

The public price of our Class B common stock, upon listing on The Nasdaq Global Select Market, may have little or no relationship to the historical sales prices of our capital stock in private transactions.

        Prior to the listing of our Class B common stock on The Nasdaq Global Select Market, there has been no public market for our capital stock. We intend to apply to list our Class B common stock on The Nasdaq Global Select Market. However, we can give no assurances that The Nasdaq Global Select Market will grant our application for listing. The historical sales prices of our capital stock is primarily from sales of shares of our Class B common stock in private transactions, which, at the time of the sale, had no voting power (as opposed to one vote per share of our Class A common stock). Upon the effectiveness of the registration statement of which this prospectus forms a part, our Class B common stock will be entitled to one vote per share, and our Class A common stock will be entitled to                 votes per share. In the section titled "Sale Price History of our Capital Stock," we have provided the historical sales prices of our capital stock in private transactions. However, given that prior to the effectiveness of the registration statement of which this prospectus forms a part, our Class B common stock did not have voting rights, among other factors, this information may have little or no relation to broader market demand for our Class B common stock and thus the opening public price of our Class B common stock on The Nasdaq Global Select Market once trading begins. As a result, you should not place undue reliance on these historical sales prices as they may differ materially from the opening public prices and subsequent public prices of our Class B common stock on The Nasdaq Global Select Market. For more information about how the initial public price on The Nasdaq Global Select Market will be determined, see the section titled "Plan of Distribution."

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If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, or if our actual results differ significantly from our guidance, our stock price and trading volume could decline.

        The trading market for our Class B common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our Class B common stock could be negatively affected. If one or more of the analysts who cover us downgrade our Class B common stock or publish inaccurate or unfavorable research about our business, the price of our Class B common stock would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Class B common stock could decrease, which might cause our Class B common stock price and trading volume to decline.

Although we have paid dividends in periods preceding our listing, there can be no assurance that we will pay dividends on our Class B common stock in the future. As a result, any return on investment may be limited to the value of our Class B common stock.

        In 2019, we paid quarterly dividends of $0.025 per share of common stock. While we intend to continue paying quarterly dividends after our listing, there can be no assurance that we will pay such dividends in the amounts described herein or at all in the future. Any determination to pay dividends in the future will be at the discretion of our board of directors. The payment of dividends on our Class B common stock is restricted by Delaware law and the agreement governing the Credit Facility, and will, in all cases, depend on our earnings, financial condition and other business and economic factors as our board of directors may consider relevant. If we do not pay dividends in future periods, our Class B common stock may be less valuable to you as an investor and investors must rely on sales of their Class B common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. See the section titled "Dividend Policy" for more information.

An active, liquid and orderly market for our Class B common stock may not develop or be sustained. You may be unable to sell your shares of Class B common stock at or above the price you bought them for.

        We currently expect our Class B common stock to be listed and traded on The Nasdaq Global Select Market. Prior to listing on The Nasdaq Global Select Market, there has been no public market for our common stock. Moreover, consistent with Regulation M and other federal securities laws applicable to our listing, we have not consulted with Registered Stockholders or other existing stockholders regarding their desire or plans to sell shares in the public market following the listing or discussed with potential investors their intentions to buy our Class B common stock in the open market. While our Class B common stock may be sold after our listing on The Nasdaq Global Select Market by the Registered Stockholders pursuant to this prospectus or by our other existing stockholders in accordance with Rule 144 of the Securities Act ("Rule 144"), unlike an underwritten initial public offering, there can be no assurance that any Registered Stockholders or other existing stockholders will sell any of their shares of Class B common stock and there may initially be a lack of supply of, or demand for, Class B common stock on The Nasdaq Global Select Market. Conversely, there can be no assurance that the Registered Stockholders and other existing stockholders will not sell all of their shares of Class B common stock, resulting in an oversupply of our Class B common stock on The Nasdaq Global Select Market. In the case of a lack of supply of our Class B common stock, the trading price of our Class B common stock may rise to an unsustainable level. Further, institutional investors may be discouraged from purchasing our Class B common stock if they are unable to purchase a block of our Class B common stock in the open market due to a potential unwillingness of our existing stockholders to sell a sufficient amount of Class B common stock at the price offered by such institutional investors and the greater influence individual investors have in setting the trading

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price. If institutional investors are unable to purchase our Class B common stock, the market for our Class B common stock may be more volatile without the influence of long-term institutional investors holding significant amounts of our Class B common stock. In the case of a lack of demand for our Class B common stock, the trading price of our Class B common stock could decline significantly and rapidly after our listing. Therefore, an active, liquid, and orderly trading market for our Class B common stock may not initially develop or be sustained, which could significantly depress the public price of our Class B common stock and/or result in significant volatility, which could affect your ability to sell your shares of Class B common stock.

None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, sales of substantial amounts of our Class B common stock in the public markets or the perception that sales might occur, could cause the market price of our Class B common stock to decline.

        In addition to the supply and demand and volatility factors discussed above, sales of a substantial number of shares of our Class B common stock into the public market, particularly sales by our directors, executive officers and principal stockholders, or the perception that these sales might occur in large quantities, could cause the market price of our Class B common stock to decline.

        As of                        , 2020, we have                        shares of common stock outstanding, of which                        are Class A common stock and                        are Class B common stock, all of which are "restricted securities" (as defined in Rule 144). Approximately                        of these shares of Class B common stock and                        of these shares of Class A common stock (after being converted to Class B common stock) may be immediately sold either by the Registered Stockholders pursuant to this prospectus or by our other existing stockholders under Rule 144 since such shares held by such other stockholders will have been beneficially owned by non-affiliates for at least one year. Moreover, once we have been a reporting company subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") for 90 days and assuming the availability of certain public information about us, (i) non-affiliates who have beneficially owned our common stock for at least six months may rely on Rule 144 to sell their shares of common stock, and (ii) our directors, executive officers, and other affiliates who have beneficially owned our common stock for at least six months, including certain of the shares of Class B common stock covered by this prospectus to the extent not sold hereunder, will be entitled to sell their shares of our common stock subject to volume limitations under Rule 144 and various vesting agreements.

        Further, as of                        , 2020, we had                        options outstanding that, if fully exercised, would result in the issuance of shares of Class B common stock. All of the shares of Class B common stock issuable upon the exercise of stock options will be registered for public resale under the Securities Act. Accordingly, these shares will be able to be freely sold in the public market upon issuance, subject to applicable vesting requirements and compliance by affiliates with Rule 144.

        None of our stockholders are subject to any contractual lock-up or other contractual restriction on the transfer or sale of their shares.

        Following the effectiveness of the registration statement of which this prospectus forms a part, the holders of up to                        shares of our Class B common stock will have rights, subject to some conditions, to require us to file registration statements for the public resale of the Class B common stock issuable upon conversion of such shares or to include such shares in registration statements that we may file for us or other stockholders. Any registration statement we file to register additional shares, whether as a result of registration rights or otherwise, could cause the market price of our Class B common stock to decline or be volatile.

        We also may issue our capital stock or securities convertible into our capital stock from time to time in connection with a financing, acquisition, investments, or otherwise. Any such issuance could

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result in substantial dilution to our existing stockholders and cause the public price of our Class B common stock to decline.

The dual class structure of our common stock has the effect of concentrating voting control with the Bentleys and their affiliates.

        Upon the effectiveness of the registration statement of which this prospectus forms a part, our Class A common stock will have                         votes per share, and our Class B common stock, which is the stock we are listing, will have one vote per share. As of                        , 2020, the Bentleys held in the aggregate         % of the voting power of our capital stock. Our Class A common stock will account for approximately        % of the voting power of our outstanding capital stock upon our listing. Moreover, as a result of the                        to one voting ratio between our Class A and Class B common stock, the Bentleys will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval, subject to the occurrence of certain events that would reduce the voting power of our Class A common stock or cause the conversion thereof. See the section titled "Description of Capital Stock." This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future and may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders. The Bentleys may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. Furthermore, upon the effectiveness of the registration statement of which this prospectus forms a part, the Bentleys and their affiliates will be subject to a stockholders agreement, whereby the parties thereto agree to vote all their shares in an agreed upon manner. See the section titled "Certain Relationships and Related Party Transactions—Stockholders Agreement."

        In addition, we expect to be a "controlled company" for the purposes of Nasdaq Listing Rules, which will provide us with exemptions from certain of the corporate governance standards imposed by the rules of The Nasdaq Global Select Market. These provisions will further allow the Bentleys to exercise significant control over our corporate decisions and limit the ability of the public stockholders to influence our decision making. See "—We will be a 'controlled company' within the meaning of the Nasdaq Listing Rules and, as a result, will be exempt from certain corporate governance requirements."

        Future transfers by holders of Class A common stock will generally result in those shares converting to Class B common stock, subject to limited exceptions, including certain transfers to family members and transfers effected for estate planning purposes. The conversion of Class A common stock to Class B common stock will have the effect, over time, of increasing the relative voting power of those holders of Class A common stock who retain their shares in the long term. If, for example, the Bentleys retain a significant portion of their holdings of Class A common stock for an extended period of time, and a significant portion of the Class A common stock initially held by others is converted to Class B common stock, the Bentleys could, as a result, acquire a higher proportion of the combined voting power. As directors and executive officers, the Bentleys owe a fiduciary duty to our stockholders and must act in good faith in a manner they reasonably believe to be in the best interests of our stockholders. As stockholders, however, each Bentley is entitled to vote his shares in his own interests, which may not always be in the interests of our stockholders generally. For a description of the dual class structure, see the section titled "Description of Capital Stock."

        In addition, while we do not expect to issue any additional shares of Class A common stock following the listing of our Class B common stock on The Nasdaq Global Select Market, any future issuances of Class A common stock would be dilutive to holders of Class B common stock.

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We cannot predict the effect our dual class structure may have on the market price of our Class B common stock.

        We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class B common stock, in adverse publicity, or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices. In July 2017, FTSE Russell (whose indices include the Russell 2000) announced that it plans to require new constituents of its indices to have greater than 5% of the company's voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multiple-class share structures to certain of its indices. Affected indices include the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Also in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices; however, in October 2018, MSCI announced its decision to include equity securities "with unequal voting structures" in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. Under such announced policies, the dual class structure of our common stock would make us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track those indices would not invest in our Class B common stock. These policies are relatively new and it is unclear what effect, if any, they will have on the valuations of publicly-traded companies excluded from such indices, but it is possible that they may depress valuations, as compared to similar companies that are included. Because of the dual class structure of our common stock, we will likely be excluded from certain indices and we cannot assure you that other stock indices will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our Class B common stock less attractive to other investors. As a result, the market price of our Class B common stock could be adversely affected.

We will be a "controlled company" within the meaning of the Nasdaq Listing Rules and, as a result, will be exempt from certain corporate governance requirements.

        Upon our listing, the Bentleys will continue to hold capital stock representing a majority of our outstanding voting power. So long as the Bentleys maintain holdings of more than 50% of the voting power of our capital stock for the election of directors, we will be a "controlled company" within the meaning of the Nasdaq Listing Rules and Nasdaq corporate governance standards. Under these standards, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain Nasdaq corporate governance requirements, including:

        We intend to use these exemptions upon our listing. As a result, we will not have a majority of independent directors on our board of directors. Additionally, upon our listing, we do not intend to have a compensation committee, nor do we intend to have a nominating and corporate governance

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committee or an independent nominating function. Instead, our full board of directors will be directly responsible for reviewing and approving compensation and benefit arrangements for our executive officers and directors, as well as for nominating members of our board.

        Even as a controlled company, we will remain subject to the rules of Sarbanes-Oxley as well as the rules of the Nasdaq Listing Rules that require us to have an audit committee composed entirely of independent directors, subject to permitted phase-in rules. Under these phase-in rules, we are required to have one independent audit committee member upon the listing date of our Class B common stock, a majority of independent audit committee members within 90 days from the listing date and all independent audit committee members within one year from the listing date. Upon our listing, we expect that our audit committee will be comprised of three members, two of whom will be independent.

        If we are no longer eligible to rely on the "controlled company" exceptions, we will need to comply with all applicable Nasdaq corporate governance requirements, but we will be able to rely on phase-in periods for certain of these requirements in accordance with the Nasdaq Listing Rules. Accordingly, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all Nasdaq corporate governance requirements.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our Class B common stock.

        Provisions in our amended and restated certificate of incorporation and amended and restated by-laws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated by-laws include provisions that:

        These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are a Delaware corporation and governed by the provisions of Section 203 of the Delaware General Corporation Law (the "DGCL"), which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with a stockholder owning 15% or more of our outstanding voting stock, unless the stockholder has held the stock for a period of at least three years or, among other things, the board of directors has approved the transaction that resulted in the

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stockholder owning 15% or more of our outstanding voting stock. See the section titled "Description of Capital Stock—Anti-Takeover Provisions."

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or colleagues.

        Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of a breach of fiduciary duty owed by any of our directors or officers, any action asserting a claim against us arising pursuant to the DGCL, our amended and restated certificate of incorporation or amended and restated by-laws, or any action seeking to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or amended and restated by-laws, and any action asserting a claim against us that is governed by the internal affairs doctrine. Nothing in our amended and restated certificate of incorporation or amended and restated by-laws will preclude stockholders that assert claims under the Securities Act or the Exchange Act, from bringing such claims in state or federal court, subject to applicable law. The choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other colleagues, which may discourage such lawsuits against us and our directors, officers and other colleagues. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

We will incur significantly increased costs and devote substantial management time as a result of operating as a public company.

        As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Exchange Act, and will be required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Act, as well as rules and regulations subsequently implemented by the SEC and the Nasdaq, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time consuming and costly. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. We expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when we are no longer an "emerging growth company," as defined by the JOBS Act. We may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs. As a result, management's attention may be diverted from other business concerns, which could adversely affect our business and results of operations.

        In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as regulatory and governing bodies provide new guidance. These

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factors could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We will continue to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management's time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business could be adversely affected.

        As a result of disclosure of information as a public company, our business and financial condition have become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If the claims are successful, our business operations and financial results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business operations and financial results. These factors could also make it more difficult for us to attract and retain qualified colleagues, executive officers and members of our board of directors.

        We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance on the terms that we would like. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.

Our internal control over financial reporting does not currently meet the standards required by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could harm our business and stock price.

        As a privately held company, we have not been required to maintain internal control over financial reporting in a manner that meets the standards of publicly traded companies as required by Section 404(a) of the Sarbanes-Oxley Act ("Section 404(a)"). As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K. Additionally, once we are no longer an "emerging growth company," our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting on an annual basis. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

        Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. We are currently in the process of reviewing, documenting and testing our internal control over financial reporting, but we are not currently in compliance with, and we cannot be certain when we will be able to implement the requirements of Section 404(a). We may encounter problems or delays in implementing any changes necessary to make a favorable assessment of our internal control over financial reporting. In addition, we may encounter problems or delays in completing the implementation of any requested improvements and receiving a favorable attestation in connection with the attestation provided by our independent registered public accounting firm. If we cannot favorably assess the effectiveness of our internal control over financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified attestation report on our internal controls, investors could lose confidence in our financial information and the price of our Class B common stock could decline.

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        Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an "emerging growth company" as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could harm our business, financial condition, and results of operations, and could cause a decline in the price of our Class B common stock.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus includes forward-looking statements. All statements contained in this prospectus other than statements of historical facts, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect" and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations, projections and assumptions about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled "Risk Factors." Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties, including the following:

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        These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this prospectus in greater detail in the section titled "Risk Factors" and elsewhere in this prospectus. You should not rely upon forward-looking statements as predictions of future events.

        Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, events, or circumstances reflected in the forward-looking statements will occur. Except as required by law, we undertake no obligation to update any of these forward-looking statements after the date of this prospectus to conform these statements to actual results or revised expectations.

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MARKET AND INDUSTRY DATA

        We obtained the industry, market and competitive position data contained throughout this prospectus from our own internal estimates and research as well as from industry publications and studies conducted by third parties. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. The industry publications and third-party studies generally state that the information that they contain has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these publications and third-party studies and our internal data are reliable as of their respective dates, the industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled "Risk Factors." These and other factors could cause results to differ materially from those expressed in these publications.

        The source of certain statistical data, estimates and forecasts contained in this prospectus are the following independent industry publications or reports:


USE OF PROCEEDS

        Registered Stockholders may, or may not, elect to sell shares of our Class B common stock covered by this prospectus. To the extent any Registered Stockholder chooses to sell shares of our Class B common stock covered by this prospectus, we will not receive any proceeds from any such sales of our Class B common stock. See the section titled "Principal and Registered Stockholders."


DIVIDEND POLICY

        The declaration and payment of dividends is within the discretion of our board of directors. In 2018, we paid quarterly dividends of $0.02 per share of common stock, and in 2019, we paid quarterly dividends of $0.025 per share of common stock. While we intend to continue paying quarterly dividends, any future determination will be subject to the discretion of our board of directors and will be dependent on a number of factors, including our results of operations, capital requirements, restrictions under Delaware law and overall financial condition, as well as any other factors our board of directors considers relevant. In addition, the terms of the agreement governing the credit facility limit the amount of dividends we can pay. See the section titled "Management's Discussion and Analysis of Financial Conditions and Results of Operations—Liquidity and Capital Resources" for a summary of the material terms of the agreement governing the credit facility.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2019. You should read this table together with the sections titled "Selected Consolidated Financial Data and Other Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

        Except as otherwise indicated, all information in this prospectus assumes the filing and effectiveness of our amended and restated certificate of incorporation ("Charter Amendments").

 
  As of
September 30, 2019
 
 
  (in thousands, except
share and per share
data)
(unaudited)

 

Cash and cash equivalents

  $ 125,997  

Long-term debt:

  $ 248,000  

Stockholders' Equity:

       

Class A common stock, $0.01 par value per share; 320,000,000 shares authorized, 11,601,757 shares issued and outstanding

    116  

Class B common stock, $0.01 par value per share; 600,000,000 shares authorized, 243,475,681 shares issued and outstanding

    2,434  

Additional paid-in capital

    405,117  

Accumulated other comprehensive loss

    (23,636 )

Accumulated deficit

    (77,448 )

Total stockholders' equity

    306,583  

Total capitalization

  $ 554,583  

        Except as otherwise indicated, the number of outstanding shares of Class B common stock excludes, as of December 31, 2019: (i) 19,602,042 shares of Class B common stock issuable upon exercise of stock options outstanding at a weighted-average exercise price of $5.90 per share of Class B common stock, (ii) 54,771 shares of Class B common stock issuable upon the settlement of restricted stock units outstanding, (iii) 28,101,504 shares of Class B common stock reserved for issuance under our 2015 Equity Incentive Plan, and (iv) 30,756,936 shares of Class B common stock held by colleagues and directors as phantom shares under our nonqualified deferred compensation plans.

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SELECTED CONSOLIDATED FINANCIAL DATA

        The following tables set forth selected consolidated financial data. The selected consolidated statement of operations data for the year ended December 31, 2018 and the consolidated balance sheet data as of December 31, 2018 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statement of operations data for the year ended December 31, 2017 has been derived from our audited consolidated financial statements not included in this prospectus, which were audited in accordance with the auditing standards of the American Institute of Certified Public Accountants rather than the auditing standards of the Public Company Accounting Oversight Board. The consolidated statements of operations data for the nine months ended September 30, 2018 and 2019 and the consolidated balance sheet data as of September 30, 2019 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements include all adjustments, consisting of normal recurring accruals, that we consider necessary for a fair presentation of the financial position and the results of operations for these periods. You should read this selected consolidated financial data in conjunction with the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future, and our results of operations for the nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the entire year ended December 31, 2019.

        All amounts presented in this selected consolidated financial data, except share and per share amounts, are presented in thousands. Additionally, many of the amounts and percentages have been rounded for convenience of presentation.

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Consolidated Statements of Operations Data:

 
  Year Ended
December 31,
  Nine Months Ended September 30,  
 
  2017   2018   2018   2019   2019  
 
  Topic 605
  Topic 605(1)
  Topic 606
 

Revenues:

                               

Subscriptions

  $ 501,098   $ 557,421   $ 414,701   $ 449,957   $ 445,338  

Perpetual licenses

    61,661     61,065     46,149     38,899     38,255  

Subscriptions and licenses

    562,759     618,486     460,850     488,856     483,593  

Services

    66,164     73,224     54,110     49,244     50,139  

Total revenues

    628,923     691,710     514,960     538,100     533,732  

Cost of revenues:

                               

Cost of subscriptions and licenses

    53,662     55,113     40,796     48,129     48,201  

Cost of services

    66,928     76,211     57,467     56,048     56,048  

Total cost of revenues

    120,590     131,324     98,263     104,177     104,249  

Gross profit

    508,333     560,386     416,697     433,923     429,483  

Operating expenses:

                               

Research and development

    151,194     175,032     127,598     136,617     136,617  

Selling and marketing

    139,259     160,635     113,168     111,985     111,889  

General and administrative

    87,467     89,328     66,491     71,415     71,415  

Amortization of purchased intangibles

    9,014     14,000     9,961     10,402     10,402  

Total operating expenses

    386,934     438,995     317,218     330,419     330,323  

Income from operations

    121,399     121,391     99,479     103,504     99,160  

Interest expense, net

    (10,320 )   (8,765 )   (6,363 )   (6,503 )   (6,503 )

Other income (expense), net

    (5,773 )   236     (1,966 )   (14,053 )   (14,053 )

Income before income taxes

    105,306     112,862     91,150     82,948     78,604  

Provision for income taxes

    46,141     (29,250 )   11,375     11,285     11,759  

Net income

  $ 59,165     142,112     79,775     71,663     66,845  

Less: Net income attributable to participating securities

          (4 )   (7 )   (10 )   (10 )

Net income per share attributable to Class A and Class B common shares

        $ 142,108   $ 79,768   $ 71,653   $ 66,835  

Net income per share:

                               

Basic

        $ 0.50   $ 0.28   $ 0.25   $ 0.23  

Diluted

        $ 0.49   $ 0.27   $ 0.24   $ 0.23  

Weighted average shares outstanding, basic

          285,805,096     285,684,596     286,024,263     286,024,263  

Weighted average shares outstanding, diluted

          292,624,496     291,845,931     294,586,354     294,586,354  

(1)
The Topic 605 unaudited amounts presented for the nine months ended September 30, 2019 give effect to revenue adjustments as if the adoption of Topic 606 had not occurred on January 1, 2019. For a reconciliation of the impact of adopting Topic 606 on our unaudited consolidated financial

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    statements for the nine months ended September 30, 2019, see Note 2 to our consolidated financial statements included elsewhere in this prospectus.

Revenue Comparison—Topic 605 versus Topic 606:

        On January 1, 2019, we adopted Topic 606, which supersedes substantially all existing revenue recognition guidance under U.S. GAAP. We adopted Topic 606 using the modified retrospective method, under which the cumulative effect of initially applying Topic 606 was recorded as a reduction to the opening balance of Accumulated deficit of $125,464 ($101,489, net of tax) as of January 1, 2019. We applied the standard only to contracts that were not completed as of the date of initial application. The comparative information in our consolidated financial statements included elsewhere in this prospectus has not been adjusted and continues to be reported under Topic 605.

        The below table presents a comparison of our revenues as recognized under Topic 605 and Topic 606. We believe that an understanding of the impact of the revenue recognition guidance under Topic 606 on our revenues and revenue trends is useful in evaluating our operating performance.

 
  Year Ended
December 31,
  Nine Months Ended
September 30,
 
 
  2017   2018   2018   2019  

Topic 605:(1)

                         

Subscriptions

  $ 501,098   $ 557,421   $ 414,701   $ 449,957  

Perpetual licenses

    61,661     61,065     46,149     38,899  

Services

    66,164     73,224     54,110     49,244  

Total Revenues

  $ 628,923   $ 691,710   $ 514,960   $ 538,100  

Topic 606:(2)

                         

Subscriptions

  $ 505,720   $ 560,485   $ 413,237   $ 445,338  

Perpetual licenses

    49,983     57,353     38,438     38,255  

Services

    66,164     73,224     54,110     50,139  

Total Revenues

  $ 621,867   $ 691,062   $ 505,785   $ 533,732  

(1)
The Topic 605 unaudited amounts presented for the nine months ended September 30, 2019 give effect to revenue adjustments as if the adoption of Topic 606 had not occurred on January 1, 2019. For a reconciliation of the impact of adopting Topic 606 on our unaudited consolidated financial statements for the nine months ended September 30, 2019, see Note 2 to our consolidated financial statements included elsewhere in this prospectus.

(2)
The Topic 606 unaudited amounts presented for the years ended December 31, 2017 and 2018 and the nine months ended September 30, 2018 give effect to revenue adjustments as if the adoption of Topic 606 had occurred as of January 1, 2017 rather than January 1, 2019. For a reconciliation of the impact of adopting Topic 606 as if it had occurred as of January 1, 2017 on our audited consolidated statements of operations data for the years ended December 31, 2017 and 2018 and the unaudited consolidated statement of operations data for the nine months ended September 30, 2018, see the section titled "—Non-GAAP Financial Measures" below.

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Key Business Metrics

        We regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, and make strategic decisions.

 
  As of and Year Ended
December 31,
  As of and Period Ended
September 30,
 
 
  2017   2018   2018   2019  

Last twelve-months recurring revenues

  $ 523,502   $ 583,403   $ 571,559   $ 616,753  

Constant Currency:

                         

Annualized recurring revenues (ARR) growth rate

    8.6 %   10.4 %   10.3 %   11.6 %

Account retention rate

    98 %   98 %   98 %   98 %

Recurring revenues dollar-based net retention rate

    105 %   107 %   106 %   107 %

        Last twelve-months recurring revenues. Last twelve-months recurring revenues is calculated as recurring revenues recognized over the preceding twelve-month period. We define recurring revenues as subscriptions revenues that recur monthly, quarterly, or annually with specific or automatic renewal clauses and professional services revenues in which the underlying contract is based on a fixed fee and contains automatic annual renewal provisions. Last twelve-months recurring revenues is calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606. We believe that last twelve-months recurring revenues is an important indicator of our performance during the immediately preceding twelve-month time period. We believe that we will continue to experience favorable growth in recurring revenues due to our strong account retention and recurring revenues dollar-based net retention rates as well as the addition of new accounts with recurring revenues. The last twelve-months recurring revenues under Topic 605 for the periods ended December 31, 2018 and September 30, 2019, compared to the last twelve-months of the preceding twelve-month period for each period, increased by $59,901 and $45,194, respectively. This increase was primarily due to growth in ARR during the prior and current periods for each period, which is primarily the result of consistent performance in our account retention rate and in our recurring revenues dollar-based net retention rate, as well as additional recurring revenues resulting from new accounts and acquisitions. For the last twelve-month period ended September 30, 2019, 86% of our total revenues were recurring revenues. Prospectively, we expect that this percentage is likely to remain consistent or modestly increase as we continue to target shifting episodic professional services revenues to subscriptions classified as recurring revenues.

        Constant currency metrics. In reporting period-over-period results, we calculate the effects of foreign currency fluctuations and constant currency information by translating current period results using prior period average foreign currency exchange rates. Our definition of constant currency may differ from other companies reporting similarly named measures, and these constant currency performance measures should be viewed in addition to, and not as a substitute for, our operating performance measures calculated in accordance with U.S. GAAP.

        ARR growth rate. Our ARR growth rate is the growth rate of our ARR, measured on a constant currency basis. Our ARR is defined as the sum of the annualized value of our portfolio of contracts that produce recurring revenue as of the last day of the reporting period, and the annualized value of the last three months of recognized revenues for our consumption-based software. ARR is inclusive of the ARR of acquired companies as of the date they are acquired. We believe that ARR and ARR growth are important metrics indicating the scale and growth of our business. Furthermore, we believe ARR, considered in connection with our account retention rate and our recurring revenues dollar-based net retention rate, is a leading indicator of revenue growth. Our ARR as of September 30, 2019 was $647.0 million, calculated using the spot foreign exchange rates as of September 30, 2019. Our ARR growth rate was favorably impacted by acquisitions during 2018 and 2019 and as a result was higher in these periods than in prior periods.

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        Account retention rate. Our account retention rate for any given twelve-month period is calculated using the average currency exchange rates for the prior period, as follows: the prior period recurring revenues from all accounts with recurring revenues in the current and prior period, divided by total recurring revenues from all accounts during the prior period. The account retention rate is calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606. Our account retention rate is an important indicator that provides insight into the long-term value of our account relationships and our ability to retain our account base. We believe that our consistent and high account retention rates during 2017 and 2018 and the first nine months of 2019 illustrate our ability to retain and cultivate long-term relationships with our accounts.

        Recurring revenues dollar-based net retention rate. Our recurring revenues dollar-based net retention rate is calculated using the average exchange rates for the prior period, as follows: the recurring revenues for the current period, including any growth or reductions from existing accounts, but excluding recurring revenues from any new accounts added during the current period, divided by the total recurring revenues from all accounts during the prior period. A period is defined as any trailing twelve months. The recurring revenues dollar-based net retention rate is calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606. We believe our recurring revenues dollar-based net retention rate is a key indicator of our success in growing our revenues within our existing accounts. Given that for the last twelve-month period ended September 30, 2019 recurring revenues represented 86% of our total revenues, this metric helps explain our revenue performance as primarily growth into existing accounts. We believe our 105%, 107%, and 107% recurring revenues dollar-based net retention rate for the twelve-month periods ended December 31, 2017, December 31, 2018, and September 30, 2019, respectively, illustrates our ability to consistently retain accounts and grow them.

        Our calculation of these metrics may not be comparable to other companies with similarly-titled metrics.

        For additional information about our key metrics, see the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics."

Non-GAAP Financial Measures

        In addition to our results determined in accordance with U.S. GAAP, we believe the below non-GAAP measures are useful in evaluating our operating performance. We use the below non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.

 
  Year Ended
December 31,
  Nine Months Ended
September 30,
 
 
  2017   2018   2018   2019  

Topic 605:(1)

                         

Adjusted EBITDA

  $ 160,886   $ 171,768   $ 130,907   $ 136,577  

Adjusted Net Income

  $ 115,389   $ 132,246   $ 100,407   $ 104,167  

Topic 606:(2)

   
 
   
 
   
 
   
 
 

Adjusted EBITDA

  $ 153,830   $ 171,120   $ 121,732   $ 132,156  

Adjusted Net Income

  $ 109,398   $ 131,697   $ 92,377   $ 99,278  

(1)
The Topic 605 unaudited amounts presented for the nine months ended September 30, 2019 give effect to revenue adjustments as if the adoption of Topic 606, had not occurred on January 1, 2019. For a reconciliation of the impact of adopting Topic 606 on our unaudited consolidated

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    financial statements for the nine months ended September 30, 2019, see Note 2 to our consolidated financial statements included elsewhere in this prospectus.

(2)
The Topic 606 unaudited amounts presented for the years ended December 31, 2017 and 2018 and the nine months ended September 30, 2018 give effect to revenue adjustment as if the adoption of Topic 606 had occurred as of January 1, 2017 rather than January 1, 2019.

        Adjusted EBITDA. We define Adjusted EBITDA as net income adjusted for interest expense, net, provision for income taxes, depreciation and amortization, equity-based compensation, acquisition expenses, realignment expenses, and other non-operating income and expense, net. For the years ended December 31, 2017 and 2018, Adjusted EBITDA under Topic 605 increased by $10,882 (or $17,290 under Topic 606) and, for the nine months ended September 30, 2018 and 2019, by $5,670 (or $10,424 under Topic 606). These increases were primarily due to an increase in income from operations, net of adjustments discussed above. The larger increase under Topic 606 is primarily driven by the upfront recognition of perpetual license revenue as compared to ratable recognition over a three-year period under Topic 605.

        Under Topic 605, Adjusted EBITDA as a percentage of revenue was 25.6% and 24.8% for the years ended December 31, 2017 and 2018, respectively, and 25.4% and 25.4% for the nine months ended September 30, 2018 and 2019, respectively. Under Topic 606, Adjusted EBITDA as a percentage of revenue was 24.7% and 24.8% for the years ended December 31, 2017 and 2018, respectively, and 24.1% and 24.8% for the nine months ended September 30, 2018 and 2019, respectively.

        Adjusted Net Income. We define Adjusted Net Income as net income adjusted for the following: amortization of purchased intangibles and developed technologies, equity-based compensation, acquisition expenses, realignment expenses, other non-operating income and expense, net, the tax effect of the above adjustments to net income, and non-recurring income tax expense and benefit. The tax effect of adjustments to net income is based on the estimated marginal effective tax rates in the jurisdictions impacted by such adjustments, which is 24.5% in the United States, and an average of 10% for all other jurisdictions. For the years ended December 31, 2017 and 2018, Adjusted Net Income under Topic 605 increased by $16,857 (or $22,299 under Topic 606) and, for the nine months ended September 30, 2018 and 2019, by $3,760 (or $6,901 under Topic 606). These increases were primarily due to an increase in income from operations, net of adjustments discussed above. The larger increase under Topic 606 is primarily driven by the upfront recognition of perpetual license revenue as compared to ratable recognition over a three-year period under Topic 605.

        Under Topic 605, Adjusted Net Income as a percentage of revenue was 18.3% and 19.1% for the years ended December 31, 2017 and 2018, respectively, and 19.5% and 19.4% for the nine months ended September 30, 2018 and 2019, respectively. Under Topic 606, Adjusted Net Income as a percentage of revenue was 17.6% and 19.1% for the years ended December 31, 2017 and 2018, respectively, and 18.3% and 18.6% for the nine months ended September 30, 2018 and 2019, respectively.

        Adjusted EBITDA and Adjusted Net Income are not presentations made in accordance with U.S. GAAP, and our use of the terms Adjusted EBITDA and Adjusted Net Income may vary from the use of similarly titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation. We believe the presentation of Adjusted EBITDA and Adjusted Net Income provides useful information to management and investors regarding financial and business trends related to our results of operations and that when non-GAAP financial information is viewed with U.S. GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance. We also use Adjusted EBITDA and Adjusted Net Income to compare our results to those of our competitors and to consistently measure our performance from period to period.

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        Adjusted EBITDA and Adjusted Net Income should not be considered as alternatives to net income, operating income, or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance. Adjusted EBITDA and Adjusted Net Income have important limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.

 
  Year Ended
December 31,
  Nine Months Ended
September 30,
 
 
  2017   2018   2018   2019  

Net income(1)

  $ 59,165   $ 142,112   $ 79,775   $ 71,663  

Interest expense, net

    10,320     8,765     6,363     6,503  

Provision for income taxes

    46,141     (29,250 )   11,375     11,285  

Depreciation and amortization(3)(a)

    26,544     29,200     21,112     23,334  

Equity-based compensation(3)(c)

    4,985     7,989     5,801     6,051  

Acquisition expenses(3)(d)

    3,020     6,410     4,646     4,180  

Realignment expenses(3)(e)

    4,938     6,778     (131 )   (492 )

Other (income) expense, net(3)(f)

    5,773     (236 )   1,966     14,053  

Adjusted EBITDA

  $ 160,886   $ 171,768   $ 130,907   $ 136,577  
 
  Year Ended
December 31,
  Nine Months Ended
September 30,
 
 
  2017   2018   2018   2019  

Net income(1)

  $ 59,165   $ 142,112   $ 79,775   $ 71,663  

Non-GAAP adjustments, prior to income taxes:

                         

Amortization of purchased intangibles and developed technologies(3)(b)

    13,879     17,215     12,251     13,699  

Equity-based compensation(3)(c)

    4,985     7,989     5,801     6,051  

Acquisition expenses(3)(d)

    3,020     6,410     4,646     4,180  

Realignment expenses(3)(e)

    4,938     6,778     (131 )   (492 )

Other (income) expense, net(3)(f)

    5,773     (236 )   1,966     14,053  

Non-GAAP adjustments, prior to income taxes

    32,595     38,156     24,533     37,491  

Income tax effect of non-GAAP adjustments

    (6,644 )   (5,971 )   (3,901 )   (4,977 )

Non-recurring income tax expense related to Tax Cuts and Jobs Act(3)(g)

    30,273     4,318          

Non-recurring income tax benefit related to intercompany transactions(3)(h)

        (46,369 )        

Adjusted Net Income

  $ 115,389   $ 132,246   $ 100,407   $ 104,167  

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  Year Ended
December 31,
  Nine Months Ended
September 30,
 
 
  2017   2018   2018   2019  

Net income(2)

  $ 53,174   $ 141,563   $ 71,745   $ 66,845  

Interest expense, net

    10,320     8,765     6,363     6,503  

Provision for income taxes

    45,076     (29,349 )   10,230     11,759  

Depreciation and amortization(3)(a)

    26,544     29,200     21,112     23,334  

Equity-based compensation(3)(c)

    4,985     7,989     5,801     6,051  

Acquisition expenses(3)(d)

    3,020     6,410     4,646     4,103  

Realignment expenses(3)(e)

    4,938     6,778     (131 )   (492 )

Other (income) expense, net(3)(f)

    5,773     (236 )   1,966     14,053  

Adjusted EBITDA

  $ 153,830   $ 171,120   $ 121,732   $ 132,156  
 
  Year Ended
December 31,
  Nine Months Ended
September 30,
 
 
  2017   2018   2018   2019  

Net income(2)

  $ 53,174   $ 141,563   $ 71,745   $ 66,845  

Non-GAAP adjustments, prior to income taxes:

                         

Amortization of purchased intangibles and developed technologies(3)(b)

    13,879     17,215     12,251     13,699  

Equity-based compensation(3)(c)

    4,985     7,989     5,801     6,051  

Acquisition expenses(3)(d)

    3,020     6,410     4,646     4,103  

Realignment expenses(3)(e)

    4,938     6,778     (131 )   (492 )

Other (income) expense, net(3)(f)

    5,773     (236 )   1,966     14,053  

Non-GAAP adjustments, prior to income taxes

    32,595     38,156     24,533     37,414  

Income tax effect of non-GAAP adjustments

    (6,644 )   (5,971 )   (3,901 )   (4,977 )

Non-recurring income tax expense related to Tax Cuts and Jobs Act(3)(g)

    30,273     4,318          

Non-recurring income tax benefit related to intercompany transactions(3)(h)

        (46,369 )        

Adjusted Net Income

  $ 109,398   $ 131,697   $ 92,377   $ 99,278  

(1)
The Topic 605 unaudited amounts presented for the nine months ended September 30, 2019 give effect to revenue adjustments as if the adoption of Topic 606 had not occurred on January 1, 2019. For a reconciliation of the impact of adopting Topic 606 on our unaudited consolidated financial statements for the nine months ended September 30, 2019, see Note 2 to our consolidated financial statements included elsewhere in this prospectus.

(2)
The Topic 606 unaudited amounts presented for the years ended December 31, 2017 and 2018 and the nine months ended September 30, 2018 give effect to revenue and income tax adjustments as if the adoption of Topic 606 had occurred as of January 1, 2017 rather than January 1, 2019. The most significant impact from the adoption of Topic 606 relates to timing of revenue recognition for perpetual licenses and the accounting for certain of our subscription arrangements that include term-based software licenses bundled with support. Under prior guidance, revenue for perpetual licenses was recognized over a three-year period, while revenue attributable to the term-based software licenses was recognized ratably over the term. Under Topic 606, both perpetual license

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    and term-based software license revenue will be recognized upfront upon delivery of the software license. Our revenue recognition for services, as well as our accounting for costs to obtain a contract with a customer, remained substantially unchanged and were not adjusted. See Note 2 to our consolidated financial statements included elsewhere in this prospectus for additional information regarding the adoption of Topic 606.

      Reconciliation of Topic 605 to Topic 606:

 
  Year Ended December 31, 2017  
 
  As reported
Topic 605
  Adjustments   Topic 606  

Subscriptions

  $ 501,098   $ 4,622   $ 505,720  

Perpetual licenses

    61,661     (11,678 )   49,983  

Provision for income taxes

    46,141     (1,065 )   45,076  

Net Income

    59,165   $ (5,991 )   53,174  

 

 
  Year Ended December 31, 2018  
 
  As reported
Topic 605
  Adjustments   Topic 606  

Subscriptions

  $ 557,421   $ 3,064   $ 560,485  

Perpetual licenses

    61,065     (3,712 )   57,353  

Provision for income taxes

    (29,250 )   (99 )   (29,349 )

Net Income

    142,112   $ (549 )   141,563  

 

 
  Nine Months Ended September 30, 2018  
 
  As reported
Topic 605
  Adjustments   Topic 606  

Subscriptions

  $ 414,701   $ (1,464 ) $ 413,237  

Perpetual licenses

    46,149     (7,711 )   38,438  

Provision for income taxes

    11,375     (1,145 )   10,230  

Net Income

    79,775   $ (8,030 )   71,745  
(3)
Further explanation of certain of our adjustments in arriving at Adjusted EBITDA and Adjusted Net Income are as follows:

(a)
Depreciation and amortization. Depreciation and amortization includes amortization of $1,617 and $2,052 for the years ended December 31, 2017 and 2018, respectively, and $1,307 and $2,337, for the nine months ended September 30, 2018 and 2019, respectively, related to certain projects under our Accelerated Commercial Development Program ("ACDP").

(b)
Amortization of purchased intangibles and developed technologies. Amortization of purchased intangibles varies in amount and frequency and is significantly impacted by the timing and size of our acquisitions. For the years ended December 31, 2017 and 2018 and the nine months ended September 30, 2018 and 2019, amortization of acquisition related developed technologies under our ACDP was $359, $375, $284, and $537, respectively. Management finds it useful to exclude these variable charges from our operating expenses to assist in budgeting, planning and forecasting future periods. The use of intangible assets and developed technologies contributed to our revenues earned during the periods presented and will also contribute to our revenues in future periods. Amortization of purchased intangible assets and developed technologies will recur in future periods.

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    (c)
    Equity-based compensation. We exclude equity-based compensation expenses from our non-GAAP measures primarily because they are non-cash expenses and management finds it useful to exclude certain non-cash charges to assess the appropriate level of various operating expenses to assist in budgeting, planning and forecasting future periods. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under ASC 718, Compensation—Stock Compensation, we believe excluding equity-based compensation expenses allows investors to make meaningful comparisons between our recurring core business results of operations and those of other companies.

    (d)
    Acquisition expenses. We incur expenses for professional services rendered in connection with business combinations, which are included in our U.S. GAAP presentation of general and administrative expense. Also included in our acquisition expenses are retention incentives paid to executives of the acquired companies as well as adjustments related to deferred revenue from acquired companies. We exclude these acquisition expenses when we evaluate our continuing operational performance as we would not have otherwise incurred these expenses in the periods presented as part of our continuing operations. Acquired deferred revenue is recorded on the opening balance sheet at an amount that typically is lower than historical carrying value. The adjustment to acquired deferred revenue has no impact on our business or cash flow, but it does reduce reported U.S. GAAP revenue in the periods following an acquisition.

    (e)
    Realignment expenses. These expenses are associated with realigning our business strategies to better serve our accounts and to better align resources with the evolving needs of the business. In connection with these actions, we recognize costs related to termination benefits for former colleagues whose positions were eliminated. We exclude these charges because they are not reflective of our ongoing business and results of operation. We believe it is useful for investors to understand the effects of these items on our total operating expenses. In the ordinary course of operating our business, we incur severance expenses that are not included in this adjustment.

    (f)
    Other (income) expense, net. Primarily consists of foreign currency translation losses of $6,294, $418, $2,087, and $14,053 for the years ended December 31, 2017 and 2018 and the nine months ended September 30, 2018 and 2019, respectively. The foreign currency translation losses derive primarily from U.S. Dollar denominated intercompany balances, cash and cash equivalents and accounts receivable held by foreign subsidiaries with non-U.S. Dollar functional currencies. In October 2018, we had intercompany sales of certain intangible operating assets between our foreign subsidiaries, which resulted in significant U.S. Dollar denominated intercompany liabilities at foreign subsidiaries with a non-U.S. Dollar functional currency (mainly Euro). These U.S. Dollar denominated balances are being translated into their functional currencies at the rates in effect at the balance sheet date and are fully eliminated in consolidation. The gains and losses from such translations are included in Other income (expense), net. For the nine months ended September 30, 2019, such intercompany balances resulted in unrealized foreign currency translation losses of $13,982. Foreign currency translation gain and losses are driven by the volume of foreign currency transactions and the foreign currency exchange rates for the year. A significant amount of such gains and losses is derived from the translation of intercompany balances which eliminate in consolidation and are unrealized. We exclude these charges because they are not reflective of ongoing business and results of operation. We believe it is useful for investors to understand the effects of these items on our total operating expenses.

    (g)
    Non-recurring income tax expense related to Tax Cuts and Jobs Act. The U.S. Tax Cuts and Jobs Act was enacted on December 22, 2017 and resulted in a provisional tax expense of $30,273 in

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      2017 primarily due to the one-time transition tax on accumulated foreign subsidiary earnings and deferred tax impacts. For the year ended December 31, 2018, the Company recorded a $4,318 increase to tax expense related to provisional amounts recorded in 2017.

    (h)
    Non-recurring income tax benefit related to intercompany transactions. For the year ended December 31, 2018, we had intercompany sales of certain intangible operating assets between our foreign subsidiaries, which resulted in a non-recurring net tax benefit of $46,369.

Consolidated Balance Sheet Data:

        The following table presents summary consolidated balance sheet data as of December 31, 2018 and September 30, 2019:

 
  December 31,
2018
  September 30,
2019
 

Cash and cash equivalents

  $ 81,183   $ 125,997  

Working capital, excluding deferred revenues

    135,163     143,991  

Total assets

    923,596     908,601  

Deferred revenues, current and long-term

    337,451     169,724  

Total debt

    258,750     248,000  

Total stockholders' equity

    147,431     306,583  

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion should be read in conjunction with the section titled "Selected Consolidated Financial Data" and our consolidated financial statements and related notes thereto included elsewhere in this prospectus. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. Factors that could cause such differences are discussed in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors."

        All amounts presented in this Management's Discussion and Analysis of Financial Condition and Results of Operations, except share and per share amounts, are presented in thousands. Additionally, many of the amounts and percentages have been rounded for convenience of presentation.

Overview

        We are a leading global provider of software for infrastructure engineering, enabling the work of civil, structural, geotechnical, and plant engineering practitioners, their project delivery enterprises, and owner-operators of infrastructure assets. We were founded in 1984 by the Bentley brothers. Our enduring commitment is to develop and support the most comprehensive portfolio of integrated software offerings across professional disciplines, project and asset lifecycles, infrastructure sectors, and geographies. Our software enables digital workflows across engineering disciplines, distributed project teams, from offices to the field, and across computing form factors, including desktops, on-premises servers, cloud-native services, mobile devices, and web browsers. We deliver our solutions via on-premise, cloud, and hybrid environments. Our users engineer, construct, and operate projects and assets across infrastructure sectors:

Since its founding, Bentley Systems has remained focused on our mission to provide software in support of the professional needs of those responsible for creating and managing the world's infrastructure. We have methodically grown through periods of global expansion, periods of expansion

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in our portfolio of solutions, and periods of rapid technological change. The following provides key corporate milestones over our 35-year history:

GRAPHIC

        The growth of our business is driven by growth in infrastructure spending. Infrastructure can be divided into three significant sectors: (i) public works/utilities; (ii) industrial/resources; and (iii) commercial facilities. We empower professionals across a wide variety of engineering disciplines to address the challenges facing participants in the infrastructure project delivery and asset performance phases of the infrastructure lifecycle through our comprehensive software solutions, which are accessible via desktop computers, on-premises servers, cloud services, and mobile devices. Our portfolio of open modeling and simulation applications leverages a shared application framework across engineering disciplines to help create robust digital assets that maximize real-world performance of physical assets. Our connected data environment enables our applications to intra-operate, empowering substantive multi-discipline collaboration while also supporting backward compatibility across current and earlier generations of software, and interoperability among many other vendors' software. Our collaboration systems enable distributed design and construction teams to effectively and securely share information, while providing visibility into project performance. Finally, the engineering content management capabilities of our assets lifecycle system and our digital twins cloud services enable digital engineering models to be leveraged within the context of right-time condition monitoring for better operations and maintenance decisions.

        We market and sell our offerings primarily through our direct sales force. Our sales organization reaches accounts across: (i) the Americas; (ii) EMEA; and (iii) APAC. Our marketing efforts focus on building corporate brand awareness, brand equity, and thought leadership, as well as obtaining sales leads through digital marketing channels, including webinars, and traditional marketing channels, including industry-specific trade shows and conferences.

        Our sources of revenue growth, in order of magnitude, come from the recurrence of existing subscription revenues, additional revenue and growth from existing accounts using the same products, additional revenue and growth from existing accounts using new products, and growth from new accounts. For the nine months ended September 30, 2019, we generated 83% of our revenues through recurring subscriptions, with the remaining revenue generated from the sale of perpetual licenses and

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the delivery of professional services, some of which are recurring in nature. Our subscription revenue, and our professional services revenue in which the underlying contract is based on a fixed fee and contains automatic annual renewal provisions, together representing our recurring revenues, were 86% of our total revenues for the nine months ended September 30, 2019. We have a highly-diversified account base, with our largest account representing no more than 2% of total revenues in 2018. Our 2018 revenues were also diversified by account type, size, and geography. Additionally, we believe that we have a loyal account base, with 80% of our 2018 revenues from organizations that have been our accounts for over 10 years.

Our Commercial Offerings:

        Our solutions are made available to our accounts in a broad range of commercial offerings designed to accommodate the diverse preferences of our accounts, which range from owned versus subscribed, short-term subscriptions versus longer term annual subscriptions, and fee-certain arrangements versus variable or consumption-based arrangements. We contract our commercial offerings under a single form of standard contract, which includes liability and other risk protections in our favor, and appropriate standard addendums to the primary contract, which specifically address the commercial offerings provided. Our standard commercial offerings are summarized in the below table, with further descriptions following the table:

GRAPHIC

        SELECT Subscriptions. Our SELECT subscription is a prepaid annual recurring subscription that accompanies a new or previously purchased perpetual license. We believe that the SELECT benefits summarized below support our favorable rates of account retention and growth:

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        Enterprise Subscriptions. Our enterprise subscription offerings provide our largest accounts with complete and unlimited global access to our comprehensive portfolio of solutions.

        Annual Term Licenses ("ATL") Subscription. Annual term licenses are generally prepaid annually for named user access to specific products and include our newly introduced Practitioner Licenses. Annual term licenses are also used to monetize site or enterprise wide access for certain of our AssetWise solutions within given usage bands.

        Quarterly Term License ("QTL") Subscription. Through quarterly term licenses, accounts pay quarterly in arrears for licenses they have used representing usage beyond their contracted quantities. Much like our Enterprise Subscription programs, a QTL allows smaller and medium-sized accounts to match usage to ongoing project requirements.

        Monthly Term License ("MTL") Subscription. Monthly term licenses are identical to QTL subscriptions, except for the term of the license, and the manner in which they are monetized. MTL subscriptions require a Cloud Services Subscription, which is discussed below.

        Visas and Passports. Visas and Passports are quarterly or annual term licenses enabling users to access specific project or enterprise information and entitle certain functionality of our ProjectWise and AssetWise systems. Generally, a Passport provides desktop, web, and mobile application access to project information and certain functions, and a Visa provides similar access, plus added functionality depending upon the product to which the Visa is aligned.

        While certain legacy arrangements are supported, our standard offering requires Visas and Passports to be fulfilled and contracted via a CSS, which is discussed below.

        Cloud Services Subscription ("CSS"). CSS is designed to streamline the procurement, administration, and payment process for us and our accounts. A CSS requires an upfront annual estimation of MTL, Visa and Passport consumption, and any Success Plan services expected for the upcoming year. A deposit for the annual estimated consumption is submitted in advance. Actual consumption is monitored and invoiced against the deposit on a calendar quarter basis. Accounts are charged only for what gets used and deposited amounts never expire.

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        We historically have sold perpetual licenses and continue to offer them to our accounts as an available option for most of our applications. Perpetual licenses are available for accounts that prefer to own their software licenses and may be sold with or without attaching a SELECT subscription. Historically, attachment and retention of the SELECT subscription has been high given the benefits of the SELECT subscription.

        We offer professional services, including training, implementation, configuration, customization, and strategic consulting services for all types of projects as requested by our accounts. We perform projects on both a time and materials and a fixed fee basis. We also offer our services using contractual structures based on (i) delivery of the services in the form of subscription-like, packaged offerings that are annually recurring in nature; and (ii) delivery of our growing portfolio of Success Plans in standard offerings that offer a level of subscription service over and above the standard technical support offered to all accounts as part of their SELECT or Enterprise agreement. Over time, we expect professional revenues using subscription and subscription-like contractual structures to make up a greater proportion of our professional services revenues.

Examples of Typical Commercial Offering Combinations

        For the nine months ended September 30, 2019, approximately 27% of our revenues derive from ELS or E365 offerings, and approximately 38% of our revenues derive from SELECT subscriptions. Our users often add further sources of revenue upon each of these foundational subscription offerings. Typical examples are as follows:

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Key Business Metrics

        We regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, and make strategic decisions.

 
  As of and Year Ended
December 31,
  As of and Period Ended
September 30,
 
 
  2017   2018   2018   2019  

Last twelve-months recurring revenues

  $ 523,502   $ 583,403   $ 571,559   $ 616,753  

Constant Currency:

                         

Annualized recurring revenues (ARR) growth rate

    8.6 %   10.4 %   10.3 %   11.6 %

Account retention rate

    98 %   98 %   98 %   98 %

Recurring revenues dollar-based net retention rate

    105 %   107 %   106 %   107 %

        Last twelve-months recurring revenues. Last twelve-months recurring revenues is calculated as recurring revenues recognized over the preceding twelve-month period. We define recurring revenues as subscriptions revenues that recur monthly, quarterly, or annually with specific or automatic renewal clauses and professional services revenues in which the underlying contract is based on a fixed fee and contains automatic annual renewal provisions. Last twelve-months recurring revenues is calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606. We believe that last twelve-months recurring revenues is an important indicator of our performance during the immediately preceding twelve-month time period. We believe that we will continue to experience favorable growth in recurring revenues due to our strong account retention and recurring revenues dollar-based net retention rates as well as the addition of new accounts with recurring revenues. The last twelve-months recurring revenues under Topic 605 for the periods ended December 31, 2018 and September 30, 2019, compared to the last twelve-months of the preceding twelve-month period for each period, increased by $59,901 and $45,194, respectively. This increase was primarily due to growth in ARR during the prior and current periods for each period, which is primarily the result of consistent performance in our account retention rate and in our recurring revenues dollar-based net retention rate, as well as additional recurring revenues resulting from new accounts and acquisitions. For the last twelve-month period ended September 30, 2019, 86% of our total revenues were recurring revenues. Prospectively, we expect that this percentage is likely to remain consistent or modestly increase as we continue to target shifting episodic professional services revenues to subscriptions classified as recurring revenues.

        Constant currency metrics. In reporting period-over-period results, we calculate the effects of foreign currency fluctuations and constant currency information by translating current period results using prior period average foreign currency exchange rates. Our definition of constant currency may differ from other companies reporting similarly named measures, and these constant currency performance measures should be viewed in addition to, and not as a substitute for, our operating performance measures calculated in accordance with U.S. GAAP.

        ARR growth rate. Our ARR growth rate is the growth rate of our ARR, measured on a constant currency basis. Our ARR is defined as the sum of the annualized value of our portfolio of contracts that produce recurring revenue as of the last day of the reporting period, and the annualized value of the last three months of recognized revenues for our consumption-based software. ARR is inclusive of the ARR of acquired companies as of the date they are acquired. We believe that ARR and ARR growth are important metrics indicating the scale and growth of our business. Furthermore, we believe ARR, considered in connection with our account retention rate and our recurring revenues dollar-based net retention rate, is a leading indicator of revenue growth. Our ARR as of September 30, 2019 was $647.0 million, calculated using the spot foreign exchange rates as of September 30, 2019. Our ARR growth rate was favorably impacted by acquisitions during 2018 and 2019 and as a result was higher in these periods than in prior periods.

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        Account retention rate. Our account retention rate for any given twelve-month period is calculated using the average currency exchange rates for the prior period, as follows: the prior period recurring revenues from all accounts with recurring revenues in the current and prior period, divided by total recurring revenues from all accounts during the prior period. The account retention rate is calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606. Our account retention rate is an important indicator that provides insight into the long-term value of our account relationships and our ability to retain our account base. We believe that our consistent and high account retention rates during 2017 and 2018 and the first nine months of 2019 illustrate our ability to retain and cultivate long-term relationships with our accounts.

        Recurring revenues dollar-based net retention rate. Our recurring revenues dollar-based net retention rate is calculated using the average exchange rates for the prior period, as follows: the recurring revenues for the current period, including any growth or reductions from existing accounts, but excluding recurring revenues from any new accounts added during the current period, divided by the total recurring revenues from all accounts during the prior period. A period is defined as any trailing twelve months. The recurring revenues dollar-based net retention rate is calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606. We believe our recurring revenues dollar-based net retention rate is a key indicator of our success in growing our revenues within our existing accounts. Given that for the last twelve-month period ended September 30, 2019 recurring revenues represented 86% of our total revenues, this metric helps explain our revenue performance as primarily growth into existing accounts. We believe our 105%, 107%, and 107% recurring revenues dollar-based net retention rate for the twelve-month periods ended December 31, 2017, December 31, 2018, and September 30, 2019, respectively, illustrates our ability to consistently retain accounts and grow them.

        Our calculation of these metrics may not be comparable to other companies with similarly-titled metrics.

Non-GAAP Financial Measures

        In addition to our results determined in accordance with U.S. GAAP, we believe the below non-GAAP measures are useful in evaluating our operating performance. We use the below non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.

 
  Year Ended
December 31,
  Nine Months Ended September 30,  
 
  2018   2018   2019  
 
  Topic 605   Topic 605   Topic 605   Topic 606  

Adjusted EBITDA

  $ 171,768   $ 130,907   $ 136,577   $ 132,156  

Adjusted Net Income

  $ 132,246   $ 100,407   $ 104,167   $ 99,278  

        For additional information, including the limitations of using non-GAAP financial measures, and reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with U.S. GAAP, see the section titled "Selected Consolidated Financial Data."

Key Factors Impacting Comparability and Performance

        Impact of Topics 606 and 340-40. On January 1, 2019, we adopted Topic 606, which supersedes substantially all existing revenue recognition guidance under U.S. GAAP. We adopted Topic 606 using the modified retrospective method, under which the cumulative effect of initially applying Topic 606 was recorded as a reduction to the opening balance of Accumulated deficit of $125,464 ($101,489, net of tax) as of January 1, 2019. We applied the standard only to contracts that were not completed as of the

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date of initial application. The comparative information has not been adjusted and continues to be reported under Topic 605.

        The most significant impact from the adoption of Topic 606 relates to timing of revenue recognition for perpetual licenses and the accounting for certain of our subscription arrangements that include term-based software licenses bundled with support. Under Topic 605, revenue for perpetual licenses was recognized over a three-year period, while revenue attributable to the term-based software licenses was recognized ratably over the term. Under Topic 606, both perpetual license and term-based software license revenue will be recognized upfront upon delivery of the software license. Revenue recognition related to support, hosting, usage-based offerings, and services is substantially unchanged, with support and hosting revenue recorded ratably over the contract term, usage-based revenue recognized upon usage or delivery, and services revenue as delivered.

        On an annual and trailing twelve-month basis, we expect our subscriptions revenues recognized under Topic 606 to be comparable to such revenues recognized under Topic 605. This expectation is attributable to the annual, recurring nature of our subscription agreements. However, quarterly subscription revenue and profitability trends, will be impacted by the subscription term as well as the term start date of new and renewals subscriptions, due to the upfront revenue recognition of the associated term-license component. Refer to the sections titled "—Quarterly Results of Operations" and "—Quarterly Trends" below.

        Under Topic 605, our perpetual licenses revenues were recognized over a three-year period due to the portfolio balancing feature users obtain through their SELECT subscriptions. Under Topic 606, our perpetual licenses revenues are recognized upon delivery and will closely align with the respective license sales of the period.

        Further, under Topic 606, the conversion of our existing subscription users to consumption-based offerings, such as our E365 program, will introduce some volatility between annual, quarterly and trailing twelve-month periods and impact period over period comparability. This effect is because the term-based software license is recognized upfront upon delivery for subscription-based offerings, but upon usage for consumption-based offerings. For example, if an account renews an annual ELS at the beginning of July 2019, then we will recognize in 2019 the term-based software license of the annual subscription upon renewal for the twelve-month period from July 1, 2019 to June 30, 2020. However, if such account instead switches from our ELS offering to our consumption based E365 offering, then we will only recognize in 2019 the distinct license component for the consumption period July 1, 2019 to December 31, 2019.

        See Note 2 to our consolidated financial statements included elsewhere in this prospectus for further information on the impact upon adoption of Topics 606 and 340-40 as of January 1, 2019.

        Impact of foreign currency. A portion of our revenues and operating expenses were derived from outside the United States and as such, were denominated in various foreign currencies, including most significantly: Euros, British Pounds, Australian Dollars, Canadian Dollars, and Chinese Yuan Renminbi. Our financial results are therefore affected by changes in foreign currency rates. In 2018, 49% of our revenues were denominated in various foreign currencies. Correspondingly, in 2018, 48% of our operating expenses were denominated in various foreign currencies. Other than the natural hedge attributable to matching revenues and expenses in the same currencies, we do not currently hedge foreign currency exposure. Accordingly, our results of operations have been, and in the future will be, affected by changes in foreign exchange rates.

        We identify the effects of foreign currency on our operations and present constant currency growth rates and fluctuations because we believe exchange rates are an important factor in understanding period to period comparisons and enhance the understanding of our results and evaluation of our performance. In reporting period to period results, we calculate the effects of foreign currency

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fluctuations and constant currency information by translating current period results using prior period average foreign currency exchange rates. Our definition of constant currency may differ from other companies reporting similarly named measures, and these constant currency performance measures should be viewed in addition to, and not as a substitute for, our operating performance measures calculated in accordance with U.S. GAAP.

        Acquisitions. Historically, we have enhanced our business with acquisitions of businesses, software solutions, and technologies. Going forward, we plan to selectively acquire adjacent software solutions that can be sold broadly across our account base, as well as to acquire new technologies that we can leverage across our existing software solution portfolio. We completed seven, five, and two acquisitions during the year ended December 31, 2018 and the nine months ended September 30, 2018 and 2019, respectively.

        In accordance with Rule 3-05 of Regulation S-X, separate financial statements are not required for any of our acquisitions individually or in the aggregate.

        Income taxes. The U.S. Tax Cuts and Jobs Act was enacted on December 22, 2017 and resulted in a provisional tax expense primarily due to the one-time transition tax on accumulated foreign subsidiary earnings and deferred tax impacts. For the year ended December 31, 2018, we recorded a $4,318 increase to tax expense related to provisional amounts recorded in 2017. In October 2018, we had intercompany sales of certain intangible operating assets between our foreign subsidiaries, which resulted in a non-recurring net tax benefit of $46,369.

Components of Results of Operations:

        We manage our business globally within one operating segment, the development and marketing of computer software and related services, which is consistent with how our chief operating decision maker reviews and manages our business.

Revenues

        We generate revenues from subscriptions, perpetual licenses, and professional services.

        SELECT subscriptions: We provide prepaid annual recurring subscriptions that accounts can elect to add to a new or previously purchased perpetual license. SELECT provides accounts with benefits, including upgrades, comprehensive technical support, pooled licensing benefits, annual portfolio balancing exchange rights, learning benefits, certain Azure-based collaboration services, mobility advantages, and access to other available benefits. Under Topic 606, SELECT subscriptions revenues are recognized as distinct performance obligations are satisfied. Under Topic 605, SELECT subscriptions revenue was recognized on a ratable basis, over the subscription term.

        Enterprise subscriptions: We provide enterprise subscription offerings that provides our largest accounts with complete and unlimited global access to our comprehensive portfolio of solutions. Enterprise License Subscriptions ("ELS") provide access for a prepaid annual fee. E365 subscriptions ("E365"), which were introduced during the fourth quarter of 2018, provide unrestricted access to our comprehensive software portfolio, similar to ELS, however are charged based upon daily usage. The daily usage fee also includes maintenance and Success Plan services, which are designed to achieve business outcomes through more efficient and effective use of our software. The ELS and E365 programs both contain a distinct term license component. Under Topic 606, ELS subscriptions revenue is recognized as the distinct performance obligations are satisfied. Under Topic 605, ELS subscriptions revenue is recognized on a ratable basis, over the subscription term. E365 revenue is recognized based upon usage incurred by the account under both Topic 606 and 605.

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        Term license subscriptions: We provide annual, quarterly, and monthly term licenses for our software products. ATL subscriptions are generally prepaid annually for named user access to specific products. QTL subscriptions allow accounts to pay quarterly in arrears for licenses usage that is beyond their SELECT contracted quantities. MTL subscriptions are identical to QTL subscriptions, except for the term of the license, and the manner in which they are monetized. MTL subscriptions require a CSS, which is described below.

        Visas and Passports are quarterly or annual term licenses enabling accounts to access specific project or enterprise information and entitle certain functionality of our ProjectWise and AssetWise systems. Our standard offerings are usage based with monetization through our CSS program. Under Topic 606, annual, quarterly, and monthly term licenses revenues are recognized as the distinct performance obligations for each are satisfied. Billings in advance are recorded as Deferred revenues in the consolidated balance sheets. Under Topic 605, the subscriptions revenues are recognized on a ratable basis, over the subscription term. QTL, MTL, Visas and Passports subscriptions are recognized based upon usage incurred by the account under both Topic 606 and 605.

        CSS is a program designed to streamline the procurement, administration, and payment process. The program requires an estimation of annual usage for CSS eligible offerings and a deposit of funds in advance. Actual consumption is monitored and invoiced against the deposit on a calendar quarter basis. CSS balances not utilized for eligible products or services may roll over to future periods or are refundable. Paid and unconsumed CSS balances are recorded in Accruals and other current liabilities in the consolidated balance sheets. Software and services consumed under CSS are recognized pursuant to the applicable revenue recognition guidance for the respective software or service and classified as subscriptions or services based on their respective nature.

        Perpetual licenses may be sold with or without attaching a SELECT subscription. Historically, attachment and retention of the SELECT subscription has been high given the benefits of the SELECT subscription discussed above. Perpetual licenses revenues are recognized upon delivery of the license to the user under Topic 606. Under Topic 605, we recognized perpetual licenses revenues ratably over a three-year term due to the portfolio balancing feature users obtain through their SELECT subscriptions.

        We provide professional services including training, implementation, configuration, customization, and strategic consulting services. We perform projects on both a time and materials and a fixed fee basis. Our recent and preferred contractual structures for delivering professional services include (i) delivery of services in the form of subscription-like, packaged offerings that are annually recurring in nature, and (ii) delivery of our growing portfolio of Success Plans. Success Plans are standard offerings that offer a level of subscription service above the standard technical support offered to all accounts as part of their SELECT or Enterprise agreement. Revenues are recognized as services are performed under both Topic 606 and 605.

Headcount-related costs

        For the year ended December 31, 2018, 81% of our aggregate cost of revenues, research and development, selling and marketing, and general and administrative costs, are represented by what we refer to herein as "headcount-related" costs. These costs include the salary costs of our colleagues (our employees) and the corresponding incentives, benefits, employment taxes, and travel-related costs. Our headcount-related costs are variable in nature. We actively manage these costs to align to our trending

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run rate of revenue performance, with the objective of enhancing visibility and predictability of resulting operating profit margins.

Cost of subscriptions, licenses, and services

        Cost of subscriptions and licenses. Cost of subscriptions and licenses includes salaries and other related costs, including the depreciation of property and equipment and the amortization of capitalized software costs associated with servicing software subscriptions, the amortization of intangible assets associated with acquired software and technology, channel partner compensation for providing sales coverage to subscribers, as well as cloud-related costs incurred for servicing our accounts using cloud deployed hosted solutions and our license administration platform.

        Cost of services. Cost of services includes salaries for internal and third-party personnel and related overhead costs, including depreciation of property and equipment, for providing training, implementation, configuration, and customization services to accounts, amortization of capitalized software costs, and related out-of-pocket expenses incurred.

Operating expenses

        Research and development. Research and development expenses, which are generally expensed as incurred, primarily consist of personnel and related costs of our research and development staff, including salaries, benefits, bonuses, stock-based compensation, and costs of certain third-party contractors, as well as allocated overhead costs. We expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external accounts, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products and as a result, development costs that meet the criteria for capitalization were not material for the periods presented.

        We capitalize certain development costs related to certain projects under our ACDP (our structured approach to an in-house business incubator function) once technological feasibility is established. Technological feasibility is established when a detailed program design has been completed and documented; we have established that the necessary skills, hardware, and software technology are available to produce the product; and there are no unresolved high-risk development issues. Once the software is ready for its intended use, amortization is recorded over the software's estimated useful life (generally three years). During the year ended December 31, 2018 and the nine months ended September 30, 2018 and September 30, 2019, total costs capitalized under the ACDP were $5,735, $4,155, and $3,807, respectively. Additionally, during the year ended December 31, 2018 and the nine months ended September 30, 2018 and September 30, 2019, total ACDP related amortization recorded in Costs of subscriptions and licenses was $2,052, $1,307, and $2,337, respectively.

        Selling and marketing. Selling and marketing expenses include salaries, benefits, bonuses and stock-based compensation expense for our selling and marketing colleagues, the expense of travel, entertainment and training for such personnel, online marketing, product marketing and other brand-building activities, such as advertising, trade shows, and expositions, various sales and promotional programs, and costs of computer equipment and facilities used in selling and marketing activities. We anticipate that we will continue to make strategic investments in our global business systems and methods to enhance major account sales activities and to support our worldwide sales and marketing strategies, and the business in general. Topic 340-40 requires the capitalization of certain incremental costs of obtaining a contract, which impacts the period in which we record sales commission expense. Historically, under Topic 605, we recognized commissions expense as incurred. Under Topic 340-40, we are required to recognize these expenses over the period of benefit associated with these costs, resulting in a deferral of certain contract costs each period. The contract costs are amortized based on the economic life of the goods and services to which the contract costs relate. We have determined that

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certain sales incentive programs meet the requirements to be capitalized. We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. These costs include our internal sales force compensation program and certain channel partner sales incentive programs for which the annual compensation is commensurate with annual sales activities.

        General and administrative. General and administrative expenses include salaries, bonuses, benefits, and stock-based compensation expense for our finance, human resources, and legal colleagues, the expense of travel, entertainment, and training for such personnel, professional fees for legal and accounting services, and costs of computer equipment and facilities used in general and administrative activities.

        We expect to recognize certain non-recurring costs as part of our transition to a publicly-traded company, consisting of professional fees and other expenses. These fees are being expensed in the period incurred. We expect to incur $            in audit fees and $            in legal fees and expenses. In the quarter of the listing of our Class B common stock on The Nasdaq Global Select Market, we expect to incur approximately $            in fees paid to our financial advisors and associate financial advisors. Following the listing of our Class B common stock on The Nasdaq Global Select Market, we expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a U.S. securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC. In addition, as a public company, we expect to incur increased expenses in the areas of insurance, investor relations, and professional services. As a result, we expect the dollar amount of our general and administrative expenses to increase for the foreseeable future. We expect, however, that our general and administrative expenses will decrease as a percentage of our revenues over time, although the percentage may fluctuate from period to period depending on fluctuations in our revenue and the timing and extent of our general and administrative expenses.

        Amortization of purchased intangibles. Amortization of purchased intangibles includes the amortization of acquired non-product related intangible assets, primarily customer relationships, trademarks, and non-compete agreements recorded in connection with completed acquisitions.

        Interest expense, net. Interest expense, net primarily represents interest associated with the Credit Facility, amortization of deferred financing costs, and interest income from our investments in money market funds.

        Other income (expense), net. Other income (expense), net primarily consists of foreign currency translation results derived primarily from U.S. Dollar denominated intercompany balances, cash and cash equivalents and accounts receivable held by foreign subsidiaries with non-U.S. Dollar functional currencies.

        Provision for income taxes. Provision for income taxes includes the aggregate consolidated income tax expense for U.S. domestic and foreign income taxes.

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Results of operations:

        The following table sets forth selected consolidated statements of operations data for each of the periods indicated:

 
  Year Ended
December 31,
  Nine Months Ended September 30,  
 
  2018   2018   2019   2019  
 
  Topic 605
  Topic 605
  Topic 605
  Topic 606
 

Revenues:

                         

Subscriptions

  $ 557,421   $ 414,701   $ 449,957   $ 445,338  

Perpetual licenses

    61,065     46,149     38,899     38,255  

Subscriptions and licenses

    618,486     460,850     488,856     483,593  

Services

    73,224     54,110     49,244     50,139  

Total revenues

    691,710     514,960     538,100     533,732  

Cost of revenues:

                         

Cost of subscriptions and licenses

    55,113     40,796     48,129     48,201  

Cost of services

    76,211