SEC Filing | Bentley Systems, Incorporated

View:

bsy-20210630

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 June 30, 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 August 3, 2021, the registrant had 11,601,757 shares of Class A and 270,068,341 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 June 3 0 , 2021 and December 31, 2020						3
Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020						4
Consolidated Statements of Comprehensive Income for the three and six months ended June 3 0 , 2021 and 2020						5
Consolidated Statements of Stockholders’ Equity for the three and six months ended June 3 0 , 2021 and 2020						6
Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020						8
Notes to Consolidated Financial Statements						10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						44
Item 3. Quantitative and Qualitative Disclosures About Market Risk						78
Item 4. Controls and Procedures						79

PART II. OTHER INFORMATION
Item 1. Legal Proceedings						80
Item 1A. Risk Factors						80
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						80
Item 6. Exhibits						81

SIGNATURE						82

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)


	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	131,154	$	122,006
Accounts receivable	221,764		195,782
Allowance for doubtful accounts	(6,396)		(5,759)
Prepaid income taxes	32,108		3,535
Prepaid and other current assets	26,864		24,694
Total current assets	405,494		340,258
Property and equipment, net	31,439		28,414
Operating lease right-of-use assets	52,599		46,128
Intangible assets, net	262,234		45,627
Goodwill	1,593,670		581,174
Investments	6,870		5,691
Deferred income taxes	54,705		39,224
Other assets	47,104		39,519
Total assets	$	2,454,115	$	1,126,035
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	14,891	$	16,492
Accruals and other current liabilities	314,529		226,793
Deferred revenues	215,678		202,294
Operating lease liabilities	18,694		16,610
Income taxes payable	5,761		3,366
Total current liabilities	569,553		465,555
Long-term debt	1,269,842		246,000
Long-term operating lease liabilities	35,968		31,767
Deferred revenues	7,308		7,020
Deferred income taxes	70,683		10,849
Income taxes payable	7,613		7,883
Other liabilities	21,334		15,362
Total liabilities	1,982,301		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 June 30, 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 June 30, 2021 and December 31, 2020, and Class B Common Stock, $0.01 par value, authorized 1,800,000,000 shares; issued and outstanding 269,587,370 and 260,552,747 shares as of June 30, 2021 and December 31, 2020, respectively	2,812		2,722
Additional paid-in capital	910,951		741,113
Accumulated other comprehensive loss	(54,886)		(26,233)
Accumulated deficit	(387,063)		(376,003)
Total stockholders’ equity	471,814		341,599
Total liabilities and stockholders’ equity	$	2,454,115	$	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				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenues:
Subscriptions	$	185,452	$	157,655	$	373,577	$	327,837
Perpetual licenses	11,391		12,379		21,507		23,193
Subscriptions and licenses	196,843		170,034		395,084		351,030
Services	26,088		14,256		49,852		27,950
Total revenues	222,931		184,290		444,936		378,980
Cost of revenues:
Cost of subscriptions and licenses	29,881		21,801		58,826		43,128
Cost of services	23,570		14,904		43,914		30,836
Total cost of revenues	53,451		36,705		102,740		73,964
Gross profit	169,480		147,585		342,196		305,016
Operating expenses:
Research and development	52,776		44,218		100,579		89,353
Selling and marketing	38,014		29,632		70,454		65,727
General and administrative	41,878		25,465		75,266		52,269
Amortization of purchased intangibles	4,589		3,679		8,027		7,115
Total operating expenses	137,257		102,994		254,326		214,464
Income from operations	32,223		44,591		87,870		90,552
Interest expense, net	(2,453)		(1,128)		(4,772)		(2,516)
Other (expense) income, net	(3,777)		405		10,705		(6,985)
Income before income taxes	25,993		43,868		93,803		81,051
Benefit (provision) for income taxes	20,746		(4,264)		10,388		(11,440)
Loss from investment accounted for using the equity method, net of tax	(1,829)		(528)		(2,275)		(866)
Net income	44,910		39,076		101,916		68,745
Less: Net income attributable to participating securities	(3)		—		(3)		—
Net income attributable to Class A and Class B common stockholders	$	44,907	$	39,076	$	101,913	$	68,745
Per share information:
Net income per share, basic	$	0.15	$	0.14	$	0.34	$	0.24
Net income per share, diluted	$	0.14	$	0.13	$	0.32	$	0.23
Weighted average shares, basic	304,066,038		286,945,592		303,311,423		286,068,766
Weighted average shares, diluted	324,478,086		295,187,194		323,094,045		295,595,234

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net income	$	44,910	$	39,076	$	101,916	$	68,745
Other comprehensive (loss) income, net of taxes:
Foreign currency translation adjustments	(19,513)		582		(28,695)		(4,503)
Actuarial gain on retirement plan, net of tax effect of $(9), $(8), $(17), and $(15), respectively	21		17		42		26
Total other comprehensive (loss) income, net of taxes	(19,492)		599		(28,653)		(4,477)
Comprehensive income	$	25,418	$	39,675	$	73,263	$	64,268

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 June 30, 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, March 31, 2021	273,722,483	$	2,737	$	732,635	$	(35,394)	$	(345,981)	$	353,997
Net income	—	—		—		—		44,910		44,910
Other comprehensive loss	—	—		—		(19,492)		—		(19,492)
Shares issued related to acquisition	3,141,342	31		182,359		—		—		182,390
Purchase of capped call options, net of tax of $6,334	—	—		(19,591)		—		—		(19,591)
Dividends declared	—	—		—		—		(8,372)		(8,372)
Shares issued in connection with deferred compensation plan, net	1,862,576	19		—		—		(53,072)		(53,053)
Deferred compensation plan voluntary contributions	—	—		639		—		—		639
Shares issued in connection with Executive Bonus Plan, net	69,486	1		6,148		—		(2,679)		3,470
Stock option exercises, net	2,393,937	24		2,549		—		(21,869)		(19,296)
Shares issued for stock grants, net	7,824	—		450		—		—		450
Stock-based compensation expense	—	—		5,762		—		—		5,762
Shares related to restricted stock, net	(8,521)	—		—		—		—		—
Balance, June 30, 2021	281,189,127	$	2,812	$	910,951	$	(54,886)	$	(387,063)	$	471,814


	Six Months Ended June 30, 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	—	—		—		—		101,916		101,916
Other comprehensive loss	—	—		—		(28,653)		—		(28,653)
Shares issued related to acquisition	3,141,342	31		182,359		—		—		182,390
Purchase of capped call options, net of tax of $12,584	—	—		(39,021)		—		—		(39,021)
Dividends declared	—	—		—		—		(16,591)		(16,591)
Shares issued in connection with deferred compensation plan, net	2,202,079	22		—		—		(61,934)		(61,912)
Deferred compensation plan voluntary contributions	—	—		1,493		—		—		1,493
Shares issued in connection with Executive Bonus Plan, net	149,447	2		11,721		—		(4,716)		7,007
Stock option exercises, net	3,657,058	36		4,288		—		(29,027)		(24,703)
Shares issued for stock grants, net	7,824	—		450		—		—		450
Stock-based compensation expense	—	—		8,548		—		—		8,548
Shares related to restricted stock, net	(123,127)	(1)		—		—		(708)		(709)
Balance, June 30, 2021	281,189,127	$	2,812	$	910,951	$	(54,886)	$	(387,063)	$	471,814

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 June 30, 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, March 31, 2020	255,725,201	$	2,556	$	412,038	$	(29,003)	$	(34,581)	$	351,010
Net income	—	—		—		—		39,076		39,076
Other comprehensive income	—	—		—		599		—		599
Dividends declared	—	—		—		—		(7,771)		(7,771)
Profit‑sharing plan shares, net	(198,853)	(2)		—		—		(2,576)		(2,578)
Shares issued in connection with deferred compensation plan, net	2,276,659	23		—		—		(1,552)		(1,529)
Deferred compensation plan voluntary contributions	—	—		795		—		—		795
Payment of shareholder Put and Call rights	(90,306)	(1)		—		—		(1,151)		(1,152)
Common Stock Purchase Agreement, net	169	—		—		—		(57)		(57)
Stock option exercises, net	1,486,795	16		1,491		—		(1,716)		(209)
Shares issued for stock grants	6,460	—		100		—		—		100
Stock-based compensation expense	—	—		1,340		—		—		1,340
Shares related to restricted stock, net	3,230	—		119		—		1		120
Balance, June 30, 2020	259,209,355	$	2,592	$	415,883	$	(28,404)	$	(10,327)	$	379,744


	Six Months Ended June 30, 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	—	—		—		—		68,745		68,745
Other comprehensive loss	—	—		—		(4,477)		—		(4,477)
Dividends declared	—	—		—		—		(15,437)		(15,437)
Profit‑sharing plan shares, net	(385,568)	(4)		—		—		(4,424)		(4,428)
Shares issued in connection with deferred compensation plan, net	2,959,731	30		—		—		(1,860)		(1,830)
Deferred compensation plan voluntary contributions	—	—		1,798		—		—		1,798
Payment of shareholder Put and Call rights	(128,176)	(1)		—		—		(1,453)		(1,454)
Common Stock Purchase Agreement, net	169	—		—		—		(57)		(57)
Stock option exercises, net	2,184,628	22		2,203		—		(3,052)		(827)
Shares issued for stock grants	17,411	—		219		—		—		219
Stock-based compensation expense	—	—		2,993		—		—		2,993
Shares related to restricted stock, net	(281,789)	(3)		3		—		(120)		(120)
Balance, June 30, 2020	259,209,355	$	2,592	$	415,883	$	(28,404)	$	(10,327)	$	379,744

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended
	June 30,
	2021		2020
Cash flows from operating activities:
Net income	$	101,916	$	68,745
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	19,280		16,664
Bad debt allowance	291		293
Deferred income taxes	(915)		5,284
Deferred compensation plan activity	1,855		1,633
Stock-based compensation expense	20,598		3,212
Amortization and write-off of deferred debt issuance costs	2,371		277
Change in fair value of derivative	(7,735)		4,174
Change in fair value of contingent consideration	—		(1,390)
Foreign currency remeasurement (gain) loss	(2,371)		3,538
Loss from investment accounted for using the equity method, net of tax	2,275		866
Changes in assets and liabilities, net of effect from acquisitions:
Accounts receivable	(4,665)		44,263
Prepaid and other assets	10,485		9,089
Accounts payable, accruals, and other liabilities	37,623		11,208
Deferred revenues	(4,756)		(29,500)
Income taxes payable, net of prepaid income taxes	(27,230)		(2,174)
Net cash provided by operating activities	149,022		136,182
Cash flows from investing activities:
Purchases of property and equipment and investment in capitalized software	(4,750)		(9,970)
Acquisitions, net of cash acquired of $36,847 and $2,064, respectively	(1,002,551)		(67,595)
Other investing activities	(700)		(1,414)
Net cash used in investing activities	(1,008,001)		(78,979)
Cash flows from financing activities:
Proceeds from credit facilities	581,233		164,375
Payments of credit facilities	(790,846)		(191,125)
Proceeds from convertible senior notes, net of discounts and commissions	1,233,377		—
Payments of debt issuance costs	(4,951)		—
Purchase of capped call options	(51,555)		—
Payments of financing leases	(101)		(93)
Payments of acquisition debt and other consideration	(544)		(1,091)
Payments of dividends	(16,591)		(15,901)
Payments for shares acquired including shares withheld for taxes	(87,836)		(69,307)
Proceeds from Common Stock Purchase Agreement	—		58,349
Proceeds from exercise of stock options	4,324		2,237
Net cash provided by (used in) financing activities	866,510		(52,556)
Effect of exchange rate changes on cash and cash equivalents	1,617		(232)
Increase in cash and cash equivalents	9,148		4,415
Cash and cash equivalents, beginning of year	122,006		121,101
Cash and cash equivalents, end of period	$	131,154	$	125,516

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended
	June 30,
	2021		2020
Supplemental information:
Cash paid for income taxes	$	25,109	$	7,180
Income tax refunds	5,895		298
Interest paid	1,871		3,162
Non-cash investing and financing activities:
Shares issued related to acquisition	182,390		—
Contingent acquisition consideration	4,991		1,706
Deferred, non-contingent consideration, net	9,593		1,069
Convertible senior notes expenses included in Accounts payable and Accruals and other current liabilities	692		—
Capped call options expenses included in Accounts payable and Accruals and other current liabilities	50		—
Share-settled Executive Bonus Plan awards	11,723		—
Voluntary deferred compensation plan contributions	1,493		1,798

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 accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal, recurring and non-recurring adjustments) that were considered necessary for the fair statement of the Company’s financial position, results of operations, and cash flows at the dates and for the periods indicated. 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.

Seequent Acquisition — On June 17, 2021, the Company completed the acquisition of Seequent Holdings Limited (“Seequent”), a leader in software for geological and geophysical modeling, geotechnical stability, and cloud services for geodata management and collaboration, for $910,997 in cash, net of cash acquired, plus 3,141,342 shares of the Company’s Class B Common Stock (see Note 4).

Convertible Senior 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).

On June 28, 2021, the Company completed a private offering of $575,000 of 0.375% convertible senior notes due 2027 (the “2027 Notes”). The Company incurred $15,065 of expenses in connection with the 2027 Notes offering consisting of transaction costs. In connection with the pricing of the 2027 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 2027 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 $25,875 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 $