SEC Filing | Bentley Systems, Incorporated

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bsy-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

___________________________________


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, 2021
OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to

Commission File Number: 001-39548

___________________________________

BENTLEY SYSTEMS, INCORPORATED

(Exact name of registrant as specified in its charter)

___________________________________


Delaware						95-3936623
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

685 Stockton Drive
Exton, Pennsylvania						19341
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (610) 458-5000

___________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class B Common Stock, par value $0.01 per share

BSY

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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 ☐			Accelerated filer ☐
Non-accelerated filer ☒			Smaller reporting company ☐
			Emerging growth company ☒

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 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒

As of May 4, 2021, the registrant had 11,601,757 shares of Class A and 265,119,441 shares of Class B Common Stock, par value $0.01 per share, outstanding.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS


						Page
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020						3
Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020						4
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020						5
Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020						6
Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020						7
Notes to Consolidated Financial Statements						9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						38
Item 3. Quantitative and Qualitative Disclosures About Market Risk						64
Item 4. Controls and Procedures						65

PART II. OTHER INFORMATION
Item 1. Legal Proceedings						66
Item 1A. Risk Factors						66
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						66
Item 6. Exhibits						67

SIGNATURE						68

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	569,536	$	122,006
Accounts receivable	189,530		195,782
Allowance for doubtful accounts	(6,370)		(5,759)
Prepaid income taxes	3,994		3,535
Prepaid and other current assets	25,118		24,694
Total current assets	781,808		340,258
Property and equipment, net	27,767		28,414
Operating lease right-of-use assets	41,691		46,128
Intangible assets, net	53,697		45,627
Goodwill	622,756		581,174
Investments	5,245		5,691
Deferred income taxes	42,133		39,224
Other assets	51,771		39,519
Total assets	$	1,626,868	$	1,126,035
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	15,947	$	16,492
Accruals and other current liabilities	296,497		226,793
Deferred revenues	186,396		202,294
Operating lease liabilities	15,894		16,610
Income taxes payable	11,721		3,366
Total current liabilities	526,455		465,555
Long-term debt	672,599		246,000
Long-term operating lease liabilities	27,861		31,767
Deferred revenues	7,108		7,020
Deferred income taxes	14,305		10,849
Income taxes payable	7,883		7,883
Other liabilities	16,660		15,362
Total liabilities	1,272,871		784,436
Commitments and contingencies (Note 18)
Stockholders’ equity:
Preferred stock, $0.01 par value, authorized 100,000,000 shares; none issued or outstanding as of March 31, 2021 and December 31, 2020	—		—
Class A Common Stock, $0.01 par value, authorized 100,000,000 shares; issued and outstanding 11,601,757 shares as of March 31, 2021 and December 31, 2020, and Class B Common Stock, $0.01 par value, authorized 1,800,000,000 shares; issued and outstanding 262,120,726 and 260,552,747 shares as of March 31, 2021 and December 31, 2020, respectively	2,737		2,722
Additional paid-in capital	732,635		741,113
Accumulated other comprehensive loss	(35,394)		(26,233)
Accumulated deficit	(345,981)		(376,003)
Total stockholders’ equity	353,997		341,599
Total liabilities and stockholders’ equity	$	1,626,868	$	1,126,035

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended
	March 31,
	2021		2020
Revenues:
Subscriptions	$	188,125	$	170,182
Perpetual licenses	10,116		10,814
Subscriptions and licenses	198,241		180,996
Services	23,764		13,694
Total revenues	222,005		194,690
Cost of revenues:
Cost of subscriptions and licenses	28,945		21,327
Cost of services	20,344		15,932
Total cost of revenues	49,289		37,259
Gross profit	172,716		157,431
Operating expenses:
Research and development	47,803		45,135
Selling and marketing	32,440		36,095
General and administrative	33,388		26,804
Amortization of purchased intangibles	3,438		3,436
Total operating expenses	117,069		111,470
Income from operations	55,647		45,961
Interest expense, net	(2,319)		(1,388)
Other income (expense), net	14,482		(7,390)
Income before income taxes	67,810		37,183
Provision for income taxes	(10,358)		(7,176)
Loss from investment accounted for using the equity method, net of tax	(446)		(338)
Net income	57,006		29,669
Less: Net income attributable to participating securities	—		—
Net income attributable to Class A and Class B common stockholders	$	57,006	$	29,669
Per share information:
Net income per share, basic	$	0.19	$	0.10
Net income per share, diluted	$	0.18	$	0.10
Weighted average shares, basic	302,583,452		285,486,972
Weighted average shares, diluted	321,736,649		292,378,627

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)


	Three Months Ended
	March 31,
	2021		2020
Net income	$	57,006	$	29,669
Other comprehensive loss, net of taxes:
Foreign currency translation adjustments	(9,182)		(5,085)
Actuarial gain on retirement plan, net of tax effect of $(8) and $(7), respectively	21		9
Total other comprehensive loss, net of taxes	(9,161)		(5,076)
Comprehensive income	$	47,845	$	24,593

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


	Three Months Ended March 31, 2021
						Accumulated
	Class A and Class B			Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Par Value		Capital		Loss		Deficit		Equity
Balance, December 31, 2020	272,154,504	$	2,722	$	741,113	$	(26,233)	$	(376,003)	$	341,599
Net income	—	—		—		—		57,006		57,006
Other comprehensive loss	—	—		—		(9,161)		—		(9,161)
Purchase of capped call options, net of tax of $6,250	—	—		(19,430)		—		—		(19,430)
Dividends declared	—	—		—		—		(8,219)		(8,219)
Shares issued in connection with deferred compensation plan, net	339,503	3		—		—		(8,862)		(8,859)
Deferred compensation plan voluntary contributions	—	—		854		—		—		854
Shares issued in connection with Executive Bonus Plan, net	79,961	1		5,573				(2,037)		3,537
Stock option exercises, net	1,263,121	12		1,739		—		(7,158)		(5,407)
Stock-based compensation expense	—	—		2,786		—		—		2,786
Shares related to restricted stock, net	(114,606)	(1)		—		—		(708)		(709)
Balance, March 31, 2021	273,722,483	$	2,737	$	732,635	$	(35,394)	$	(345,981)	$	353,997


	Three Months Ended March 31, 2020
						Accumulated
	Class A and Class B			Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Par Value		Capital		Loss		Deficit		Equity
Balance, December 31, 2019	254,842,949	$	2,548	$	408,667	$	(23,927)	$	(52,669)	$	334,619
Net income	—	—		—		—		29,669		29,669
Other comprehensive loss	—	—		—		(5,076)		—		(5,076)
Dividends declared	—	—		—		—		(7,666)		(7,666)
Profit‑sharing plan shares, net	(186,715)	(2)		—		—		(1,848)		(1,850)
Shares issued in connection with deferred compensation plan, net	683,072	7		—		—		(308)		(301)
Deferred compensation plan voluntary contributions	—	—		1,003		—		—		1,003
Payment of shareholder Put and Call rights	(37,870)	—		—		—		(302)		(302)
Stock option exercises, net	697,833	6		712		—		(1,336)		(618)
Shares issued for stock grants	10,951	—		119		—		—		119
Stock-based compensation expense	—	—		1,653		—		—		1,653
Shares related to restricted stock, net	(285,019)	(3)		(116)		—		(121)		(240)
Balance, March 31, 2020	255,725,201	$	2,556	$	412,038	$	(29,003)	$	(34,581)	$	351,010

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended
	March 31,
	2021		2020
Cash flows from operating activities:
Net income	$	57,006	$	29,669
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,993		8,050
Bad debt allowance (recovery)	746		(256)
Deferred income taxes	966		1,742
Deferred compensation plan activity	1,021		676
Stock-based compensation expense	8,913		1,653
Amortization and write-off of deferred debt issuance costs	1,229		138
Change in fair value of derivative	(13,661)		—
Change in fair value of contingent consideration	—		(1,390)
Foreign currency remeasurement (gain) loss	(583)		6,985
Loss from investment accounted for using the equity method, net of tax	446		338
Changes in assets and liabilities, net of effect from acquisitions:
Accounts receivable	14,903		38,273
Prepaid and other assets	8,257		5,653
Accounts payable, accruals and other liabilities	54,977		6,778
Deferred revenues	(21,889)		(28,247)
Income taxes payable	11,474		2,550
Net cash provided by operating activities	132,798		72,612
Cash flows from investing activities:
Purchases of property and equipment and investment in capitalized software	(2,655)		(4,500)
Acquisitions, net of cash acquired of $1,326 and $1,986, respectively	(57,975)		(39,329)
Other investing activities	—		(1,414)
Net cash used in investing activities	(60,630)		(45,243)
Cash flows from financing activities:
Proceeds from credit facilities	16,000		58,907
Payments of credit facilities	(262,000)		(133,625)
Proceeds from convertible senior notes, net of discounts and commissions	672,750		—
Payments of debt issuance costs	(3,777)		—
Purchase of capped call options	(25,530)		—
Payments of financing leases	(50)		(47)
Payments of acquisition debt and other consideration	(25)		(127)
Payments of dividends	(8,219)		(7,802)
Payments for shares acquired including shares withheld for taxes	(18,763)		(3,918)
Proceeds from exercise of stock options	1,751		724
Net cash provided by (used in) financing activities	372,137		(85,888)
Effect of exchange rate changes on cash and cash equivalents	3,225		(2,293)
Increase (decrease) in cash and cash equivalents	447,530		(60,812)
Cash and cash equivalents, beginning of year	122,006		121,101
Cash and cash equivalents, end of period	$	569,536	$	60,289

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended
	March 31,
	2021		2020
Supplemental information:
Cash paid for income taxes	$	4,214	$	4,181
Income tax refunds	4,519		117
Interest paid	766		1,842
Non-cash investing and financing activities:
Contingent acquisition consideration	549		—
Deferred, non-contingent consideration, net	1,718		—
Convertible senior notes expenses included in Accounts payable and Accruals and other current liabilities	605		—
Capped call options expenses included in Accounts payable	150		—
Share-settled Executive Bonus Plan awards	5,574		—
Voluntary deferred compensation plan contributions	855		1,003

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

(unaudited)

Note 1: Basis of Presentation

Basis of Presentation — The accompanying unaudited consolidated financial statements include the accounts of Bentley Systems, Incorporated (“Bentley” or the “Company”) and its wholly-owned subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all the information and notes required by U.S. GAAP for annual financial statements. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Part II, Item 8 of the Company’s 2020 Annual Report on Form 10‑K on file with the SEC. In management’s opinion, the Company made all adjustments (consisting of normal, recurring and non-recurring adjustments) during the quarter that were considered necessary for the fair statement of the financial position and operating results of the Company. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. The December 31, 2020 consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements.

Convertible Notes — On January 26, 2021, the Company completed a private offering of $690,000 of 0.125% convertible senior notes due 2026 (the “2026 Notes”). The Company incurred $18,055 of expenses in connection with the 2026 Notes offering consisting of the payment of initial purchasers’ discounts and commissions, professional fees, and other expenses (“transaction costs”). In connection with the pricing of the 2026 Notes, the Company entered into capped call options with certain of the initial purchasers or their respective affiliates and certain other financial institutions. The capped call options are expected to reduce potential dilution to the Company’s Class B Common Stock upon any conversion of 2026 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. The Company paid premiums of $25,530 in connection with the capped call options (See Note 10).

Initial Public Offering — On September 25, 2020, the Company completed its initial public offering (“IPO”). The selling stockholders sold 12,360,991 shares of Class B Common Stock at a public offering price of $22.00 per share. The Company did not sell any shares in the IPO and did not receive any of the proceeds from the sale of the Class B Common Stock sold by the selling stockholders. For further detail, see the audited consolidated financial statements and notes thereto included in Part II, Item 8 of the Company’s 2020 Annual Report on Form 10‑K on file with the SEC.

Follow-On Public Offering — On November 17, 2020, the Company completed its follow‑on public offering of 11,500,000 shares of Class B Common Stock at a public offering price of $32.00 per share (the “Follow‑On Offering”). The Company sold 9,603,965 shares of Class B Common Stock (inclusive of 1,500,000 shares sold upon the exercise by the underwriters of their option to purchase additional shares of the Company’s Class B Common Stock). The selling stockholders sold 1,896,035 shares of Class B Common Stock. The Company received net proceeds of $294,429 after deducting expenses of $12,898. The Company did not receive any of the proceeds from the sale of the Class B Common Stock sold by the selling stockholders. For further detail, see the audited consolidated financial statements and notes thereto included in Part II, Item 8 of the Company’s 2020 Annual Report on Form 10‑K on file with the SEC.

Risks and Uncertainties — COVID‑19 Pandemic — In March 2020, the World Health Organization declared a global pandemic related to the rapidly growing outbreak of the disease COVID‑19, caused by a novel strain of coronavirus, SARS‑CoV‑2. The COVID‑19 outbreak and certain preventative or protective actions that governments, businesses, and individuals have taken in respect of COVID‑19 have resulted in global business disruptions.

In response to the COVID‑19 pandemic, the Company implemented a number of initiatives to ensure the safety of its colleagues and enable them to move to a work from home environment seamlessly and continue working effectively. The Company’s business model is such that there was minimal disruption to the Company’s ability to deliver its solutions to accounts, and the Company believes it did not have any significant loss of productivity during this transition. The Company has also taken measures to reduce selected operating expenses, including various costs associated with travel and facilities.

Note 2: Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020‑04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020‑04”), which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020‑04 applies only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform between March 12, 2020 and December 31, 2022. The expedients and exceptions provided by ASU 2020‑04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company had no transactions that were impacted by ASU 2020‑04 during the three months ended March 31, 2021.

Recently Adopted Accounting Guidance

In January 2017, the FASB issued ASU No. 2017‑04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test. A goodwill impairment will now be calculated as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The new guidance is required to be applied on a prospective basis and as such, the Company will use the simplified test in its annual fourth quarter testing or more often if circumstances indicate a potential impairment may exist. The Company does not believe this ASU will have a material impact on its consolidated results of operations and financial position.

In August 2018, the FASB issued ASU No. 2018‑15, Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350‑40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018‑15”), which aligns the requirements for capitalizing implementation costs in cloud computing arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal‑use software. The Company prospectively adopted the ASU effective January 1, 2021. Capitalized costs related to cloud computing arrangements for the three months ended March 31, 2021, which are included in Prepaid and other current assets in the consolidated balance sheet, were not material.

In August 2020, the FASB issued ASU No. 2020‑06, Debt–Debt with Conversion and Other Options (Subtopic 470‑20) and Derivatives and Hedging–Contracts in Entity’s Own Equity (Subtopic 815‑40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020‑06”), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if‑converted method. The Company early adopted the ASU effective January 1, 2021 using the modified retrospective method of adoption (see Notes 10 and 23).

Note 3: Revenue from Contracts with Customers

The Company recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the expected consideration received in exchange for those goods or services.

Nature of Products and Services

The Company generates revenues from subscriptions, perpetual licenses, and professional services.

Subscriptions

SELECT subscriptions — A prepaid annual recurring subscription that accounts (which are based on distinct contractual and billing relationships with the Company, where affiliated entities of a single parent company may each have an independent account with the Company) 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 cloud collaboration services, mobility advantages, and access to other available benefits. SELECT subscription revenues are recognized as distinct performance obligations are satisfied. The performance obligations within the SELECT offering, outside of the portfolio balancing exchange right, are concurrently delivered and have the same pattern of recognition. These performance obligations are accounted for ratably over the term as a single performance obligation.

Enterprise subscriptions — The Company also provides Enterprise subscription offerings which provide its largest accounts with complete and unlimited global access to the Company’s comprehensive portfolio of solutions. Enterprise License Subscriptions (“ELS”) provide access for a prepaid fee, which is based on the account’s usage of software in the preceding year, to effectively create a fee‑certain consumption‑based arrangement. ELS contain a term license component, SELECT maintenance and support, and performance consulting days. The SELECT maintenance and support benefits under ELS do not include a portfolio balancing performance obligation. Revenue is allocated to the various performance obligations based on their respective standalone selling price (“SSP”). Revenue allocated to the term license component is recognized upon delivery at the start of the subscription term while revenues for the SELECT maintenance and support and the performance consulting days are recognized as delivered over the subscription term. Billings in advance are recorded as Deferred revenues in the consolidated balance sheets.

Enterprise 365 (“E365”) subscriptions provide unrestricted access to the Company’s comprehensive software portfolio, similar to ELS, however, the accounts are charged based upon daily usage. The daily usage fee also includes a term license component, SELECT maintenance and support, hosting, and Success Plan services, which are designed to achieve business outcomes through more efficient and effective use of the Company’s software. E365 revenues are recognized based upon usage incurred by the account. Usage is defined as distinct user access on a daily basis. E365 subscriptions can contain quarterly usage floors or collars as accounts transition to the usage model or for accounts within the public sector. The term of E365 subscriptions aligns with calendar quarters and revenue is recognized based on actual usage.

Term license subscriptions — The Company provides annual, quarterly, and monthly term licenses for its software products. Term license subscriptions contain a term license component and SELECT maintenance and support. Revenue is allocated to the various performance obligations based on their SSP. Annual term licenses (“ATL”) are generally prepaid annually for named user access to specific products. Quarterly term license (“QTL”) subscriptions allow accounts to pay quarterly in arrears for license usage that is beyond their prepaid subscriptions. Monthly term license (“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 Cloud Services Subscription (“CSS”), which is described below. For ATL, revenue allocated to the term license component is recognized upon delivery at the start of the subscription term while revenue for the SELECT maintenance and support is recognized as delivered over the subscription term. Billings in advance are recorded as Deferred revenues in the consolidated balance sheets. For usage‑based QTL and MTL subscriptions, revenues are recognized based upon usage incurred by the account. Usage is defined as peak usage over the respective terms. The terms of QTL and MTL subscriptions align with calendar quarters and calendar months, respectively, and revenue is recognized based on actual usage.

Visas and Passports are quarterly or annual term licenses enabling users to access specific project or enterprise information and entitles users to certain functionality of the Company’s ProjectWise and AssetWise systems. The Company’s standard offerings are usage based with monetization through the Company’s CSS program as described below.

CSS is a program designed to streamline the procurement, administration, and payment process. The program requires an account to estimate their annual usage for CSS eligible offerings and deposit 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

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. Perpetual license revenue is recognized upon delivery of the license to the user.

Services

The Company provides professional services including training, implementation, configuration, customization, and strategic consulting services. The Company performs projects on both a time and materials and a fixed fee basis. The Company’s recent and preferred contractual structures for delivering professional services include (i) delivery of the services in the form of subscription‑like, packaged offerings which are annually recurring in nature, and (ii) delivery of the Company’s growing portfolio of Success Plans in standard offerings which 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. Revenues are recognized as services are performed.

The Company primarily utilizes its direct internal sales force and also has arrangements through independent channel partners to promote and sell Bentley products and subscriptions to end‑users. Channel partners are authorized to promote the sale of an authorized set of Bentley products and subscriptions within an authorized geography under a Channel Partner Agreement.

Significant Judgments and Estimates

The Company’s contracts with customers may include promises to transfer licenses (perpetual or term‑based), maintenance, and services to a user. Judgment is required to determine if the promises are separate performance obligations, and if so, the allocation of the transaction price to each performance obligation. When an arrangement includes multiple performance obligations which are concurrently delivered and have the same pattern of transfer to the customer, the Company accounts for those performance obligations as a single performance obligation. For contracts with more than one performance obligation, the transaction price is allocated among the performance obligations in an amount that depicts the relative SSP of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately and needs to determine whether there is a discount that should be allocated based on the relative SSP of the various products and services.

The Company’s SELECT agreement provides users with perpetual licenses a right to exchange software for other eligible perpetual licenses on an annual basis upon renewal. The Company refers to this option as portfolio balancing and has concluded that the portfolio balancing feature represents a material right resulting in the deferral of the associated revenue. Judgment is required to estimate the percentage of users who may elect to portfolio balance and considers inputs such as historical user elections. This feature is available once per term and must be exercised prior to the respective renewal term. The Company recognizes the associated revenue upon election or when the portfolio balancing right expires. This right is included in the initial and subsequent renewal terms and the Company reestablishes the revenue deferral for the material right upon the beginning of the renewal term. As of March 31, 2021 and December 31, 2020, the Company has deferred $18,016 and $18,166, respectively, related to portfolio balancing exchange rights which is included in Deferred revenues in the consolidated balance sheets.

Contract Assets and Contract Liabilities


	March 31, 2021		December 31, 2020
Contract assets	$	395	$	446
Deferred revenues	193,504		209,314

As of March 31, 2021 and December 31, 2020, the Company’s contract assets relate to performance obligations completed in advance of the right to invoice and are included in Prepaid and other current assets in the consolidated balance sheets. Contract assets were not impaired as of March 31, 2021 and December 31, 2020.

Deferred revenues consist of billings made or payments received in advance of revenue recognition from subscriptions and professional services. The timing of revenue recognition may differ from the timing of billings to users.

For the three months ended March 31, 2021, $91,125 of revenue that was included in the December 31, 2020 deferred revenue balance was recognized. There were additional deferrals of $78,210, which were primarily related to new billings. For the three months ended March 31, 2020, $98,928 of revenue that was included in the December 31, 2019 deferred revenue opening balance was recognized. There were additional deferrals of $73,512, which were primarily related to new billings.

Remaining Performance Obligations

The Company’s contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. As of March 31, 2021, amounts allocated to these remaining performance obligations are $193,504, of which the Company expects to recognize 96.3% over the next 12 months with the remaining amount thereafter.

Disaggregation of Revenues

The following table details revenues:


	Three Months Ended
	March 31,
	2021		2020
Revenues:
Subscriptions:
SELECT subscriptions	$	66,140	$	67,891
Enterprise subscriptions	71,015		58,734
Term license subscriptions	50,970		43,557
Subscriptions	188,125		170,182
Perpetual licenses:
Perpetual licenses	10,116		10,814
Subscriptions and licenses	198,241		180,996
Services:
Professional services (recurring)	6,077		3,780
Professional services (other)	17,687		9,914
Services	23,764		13,694
Total revenues	$	222,005	$	194,690

The Company recognizes perpetual licenses and the term license component of subscriptions as revenue when either the licenses are delivered or at the start of the subscription term. For the three months ended March 31, 2021 and 2020, the Company recognized $95,625 and $85,417 of license related revenues, respectively, of which $85,509 and $74,603, respectively, were attributable to the term license component of the Company’s subscription based commercial offerings recorded in Subscriptions in the consolidated statements of operations.

The Company derived 8% and 7% and of its total revenues through channel partners for the three months ended March 31, 2021 and 2020, respectively.

Revenue to external customers is attributed to individual countries based upon the location of the customer.


	Three Months Ended
	March 31,
	2021		2020
Revenues:
Americas (1)	$	108,862	$	97,900
Europe, the Middle East, and Africa (“EMEA”) (2)	73,848		62,114
Asia-Pacific (“APAC”)	39,295		34,676
Total revenues	$	222,005	$	194,690

(1)Americas includes the United States (“U.S.”), Canada, and Latin America (including the Caribbean). Revenue attributable to the U.S. totaled $92,940 and $82,420 for the three months ended March 31, 2021 and 2020, respectively.

(2)Revenue attributable to the United Kingdom (“U.K.”) totaled $22,383 and $13,680 for the three months ended March 31, 2021 and 2020, respectively.

Note 4: Acquisitions

For the three months ended March 31, 2021 and the year ended December 31, 2020, the Company completed a number of acquisitions, none of which were material, individually or in the aggregate, to the Company’s consolidated statements of operations and financial position. The aggregate details of the Company’s acquisition activity are as follows:


	Acquisitions Completed in
	Three Months Ended		Year Ended
	March 31, 2021		December 31, 2020
Number of acquisitions	3		6
Cash paid at closing	$	59,301	$	98,298
Cash acquired	(1,326)		(5,266)
Net cash paid	$	57,975	$	93,032

The fair value of the contingent consideration from acquisitions is included in the consolidated balance sheets as follows:


	March 31, 2021		December 31, 2020
Accruals and other current liabilities	$	3,093	$	2,884
Other liabilities	1,692		1,415
Contingent consideration from acquisitions	$	4,785	$	4,299

The fair value of non-contingent consideration from acquisitions is included in the consolidated balance sheets as follows:


	March 31, 2021		December 31, 2020
Accruals and other current liabilities	$	2,323	$	685
Other liabilities	2,635		1,774
Non-contingent consideration from acquisitions	$	4,958	$	2,459

The operating results of the acquired businesses are included in the Company’s consolidated financial statements from the closing date of each respective acquisition. The purchase price for each acquisition has been allocated to the net tangible and intangible assets and liabilities based on their estimated fair values at the respective acquisition date. Independent valuations are obtained to support purchase price allocations when deemed appropriate.

In connection with the purchase price allocations related to the Company’s acquisitions, the Company has estimated the fair values of the support obligations assumed relative to acquired deferred revenue. The estimated fair values of the support obligations assumed were determined using a cost‑build‑up approach. The cost‑build‑up approach determines fair value by estimating the costs related to fulfilling the obligations plus a normal profit margin. For accounting purposes, the sum of the costs and operating profit approximates the amount that the Company would be required to pay a third party to assume the support obligations. These fair value adjustments reduce the revenues recognizable over the remaining support contract term of the Company’s acquired contracts. For the three months ended March 31, 2021 and 2020, the fair value adjustments to reduce revenue were $12 and $116, respectively.

The purchase accounting for the three acquisitions completed for the three months ended March 31, 2021 and two of the acquisitions completed during the year ended December 31, 2020 are not yet completed. Identifiable assets acquired and liabilities assumed were provisionally recorded at their estimated fair values on the respective acquisition date. The initial accounting for these business combinations is not complete because the evaluation necessary to assess the fair values of certain net assets acquired is still in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date. The allocation of the purchase price may be modified from the date of the acquisition as more information is obtained about the fair values of assets acquired and liabilities assumed, however such measurement period cannot exceed one year.

Acquisition and integration costs are expensed as incurred and are recorded in General and administrative in the consolidated statements of operations. For the three months ended March 31, 2021 and 2020, the Company incurred acquisition and integration costs of $6,861 and $813, respectively, which include costs related to legal, accounting, valuation, general administrative, and other consulting fees. For the three months ended March 31, 2021, $6,716 of the Company’s acquisition and integration costs related to entering into the definitive agreement to acquire Seequent Holdings Limited (“Seequent”). See the section titled “—Acquisitions Subsequent to March 31, 2021” below.

The following summarizes the fair values of the assets acquired and liabilities assumed, as well as the weighted average useful lives assigned to acquired intangible assets at the respective date of each acquisition (including contingent consideration):


	Acquisitions Completed in
	Three Months Ended		Year Ended
	March 31, 2021		December 31, 2020
Consideration:
Cash paid at closing	$	59,301	$	98,298
Contingent consideration	549		2,380
Deferred, non-contingent consideration, net	1,718		1,416
Total consideration	$	61,568	$	102,094
Assets acquired and liabilities assumed:
Cash	$	1,326	$	5,266
Prepaid and other current assets	5,617		8,701
Operating lease right-of-use assets	192		2,529
Property and equipment	550		499
Other assets	300		36
Customer relationship asset (weighted average useful life of 5 and 6 years, respectively)	11,326		11,371
Software and technology (weighted average useful life of 3 years)	1,399		2,207
Non-compete agreement (useful life of 5 years)	—		200
Trademarks (weighted average useful life of 3 and 7 years, respectively)	481		3,953
Total identifiable assets acquired excluding goodwill	21,191		34,762
Accruals and other current liabilities	(3,678)		(4,991)
Deferred revenues	(1,902)		(5,351)
Operating lease liabilities	(192)		(2,529)
Deferred income taxes	(3,280)		(1,701)
Other liabilities	(178)		(86)
Total liabilities assumed	(9,230)		(14,658)
Net identifiable assets acquired excluding goodwill	11,961		20,104
Goodwill	49,607		81,990
Net assets acquired	$	61,568	$	102,094

The fair values of the working capital, other assets (liabilities), and property and equipment approximated their respective carrying values as of the acquisition date.

As discussed above, the fair values of deferred revenues were determined using the cost‑build‑up approach.

The fair values of the intangible assets were primarily determined using the income approach. When applying the income approach, indications of fair values were developed by discounting future net cash flows to their present values at market‑based rates of return. The cash flows were based on estimates used to price the acquisitions and the discount rates applied were benchmarked with reference to the implied rate of return from the Company’s pricing model and the weighted average cost of capital.

Goodwill recorded in connection with the acquisitions was attributable to synergies expected to arise from cost saving opportunities, as well as future expected cash flows. Of the goodwill recorded as of March 31, 2021, none is expected to be deductible for tax purposes.

Acquisitions Subsequent to March 31, 2021

In April 2021, the Company completed two acquisitions and entered into a definitive agreement to acquire a third company totaling approximately $54,200 in cash, net of cash acquired and subject to customary adjustments, including for working capital. The third acquisition is expected to close during May 2021. The acquisitions are not expected to be material to the Company’s consolidated statements of operations and financial position.

On March 11, 2021, the Company entered into a definitive agreement to acquire Seequent, a leader in software for geological and geophysical modeling, geotechnical stability, and cloud services for geodata management and collaboration, for approximately $900,000 in cash, net of cash acquired and subject to customary adjustments, including for working capital, plus 3,141,361 shares of the Company’s Class B Common Stock. The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close during the second quarter of 2021. The Company expects to use readily available cash, including a portion of the net proceeds from the January 26, 2021 convertible debt offering (see Note 10), and borrowings under its bank credit facility (see Note 10), to fund the cash component of the transaction.

Note 5: Property and Equipment, Net

Property and equipment, net consist of the following:


	March 31, 2021		December 31, 2020
Land	$	2,811	$	2,811
Building and improvements	33,243		33,094
Computer equipment and software	45,161		44,369
Furniture, fixtures, and equipment	13,210		12,849
Aircraft	4,075		4,075
Other	60		58
Property and equipment, at cost	98,560		97,256
Less: Accumulated depreciation	(70,793)		(68,842)
Total property and equipment, net	$	27,767	$	28,414

Depreciation expense for the three months ended March 31, 2021 and 2020 was $2,497 and $2,423, respectively.

Note 6: Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill are as follows:


Balance, December 31, 2020	$	581,174
Acquisitions	49,607
Foreign currency translation adjustments	(7,861)
Other adjustments	(164)
Balance, March 31, 2021	$	622,756

Details of intangible assets other than goodwill are as follows:


		March 31, 2021						December 31, 2020
	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Intangible assets subject to amortization:
Software and technology	3 years	$	68,501	$	(63,646)	$	4,855	$	67,691	$	(63,046)	$	4,645
Customer relationships	3-10 years	106,976		(68,043)		38,933		97,008		(66,030)		30,978
Trademarks	3-10 years	27,002		(17,357)		9,645		26,610		(16,888)		9,722
Non-compete agreements	5 years	350		(86)		264		350		(68)		282
Total intangible assets		$	202,829	$	(149,132)	$	53,697	$	191,659	$	(146,032)	$	45,627

The aggregate amortization expense for purchased intangible assets with finite lives was reflected in the Company’s consolidated statements of operations as follows:


	Three Months Ended
	March 31,
	2021		2020
Cost of subscriptions and licenses	$	1,151	$	1,013
Amortization of purchased intangibles	3,438		3,436
Total amortization expense	$	4,589	$	4,449

Note 7: Investments

In September 2020, the Company acquired an interest in a platform as a service technology company with a focus on digital twin integration in the energy sector, which the Company accounts for using the cost method. As of March 31, 2021 and December 31, 2020, the carrying amount of the Company’s cost method investment was $3,440.

In September 2019, the Company and Topcon Positioning Systems, Inc. (“Topcon”) formed Digital Construction Works, Inc. (“DCW”), a joint venture which operates as a digital integrator of software and cloud services for the construction industry, which the Company accounts for using the equity method. DCW’s focus is to transform the construction industry from its legacy document‑centric paradigm by simplifying and enabling digital automated workflows and processes, technology integration, and digital twinning services for infrastructure. The Company and Topcon each have a 50% ownership in DCW. As of March 31, 2021 and December 31, 2020, the carrying amount of the Company’s investment in DCW was $1,805 and $2,251, respectively.

The Company tests its investments for impairment whenever circumstances indicate that the carrying value of the investment may not be recoverable. The Company’s investments were not impaired as of March 31, 2021.

Related Party Disclosures — Pursuant to Accounting Standards Codification (“ASC”) 850‑10‑20, Related Party Disclosures, the Company has determined that DCW is a related party. For the three months ended March 31, 2021 and 2020, transactions between the Company and DCW were not material to the Company’s consolidated financial statements.

Note 8: Leases

The Company’s operating leases consist of office facilities, office equipment, and automobiles, and the Company’s finance lease consists of computer equipment. The finance lease is not material for the periods presented. As of March 31, 2021, the Company’s leases have remaining terms of less than one year to nine years, some of which include one or more options to renew, with renewal terms from one year to ten years and some of which include options to terminate the leases from less than one year to ten years.

For contracts with lease and non‑lease components, the Company has elected not to allocate the contract consideration, and account for the lease and non-lease components as a single lease component. Payments under the Company’s lease arrangements are primarily fixed, however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease assets and liabilities. Variable lease cost may include common area maintenance, property taxes, utilities, and fluctuations in rent due to a change in an index or rate. The Company has elected not to recognize a right‑of‑use asset or lease liability for short‑term leases (leases with a term of twelve months or less). Short‑term leases are recognized in the consolidated statement of operations on a straight‑line basis over the lease term. Short‑term lease expense was not material for the periods presented.

The components of operating lease cost reflected in the consolidated statement of operations were as follows:


	Three Months Ended
	March 31,
	2021		2020
Operating lease cost (1)	$	4,543	$	4,345
Variable lease cost	968		1,021
Short-term lease cost	4		25
Total operating lease cost	$	5,515