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February 13, 2020
Gregory S. Bentley
Chairman, Chief Executive Officer and President
Bentley Systems, Incorporated
685 Stockton Drive
Exton, PA 19341
Re: Bentley Systems, Incorporated
Draft Registration Statement on Form S-1
Submitted January 10, 2020
CIK No. 0001031308
Dear Mr. Bentley:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary, page 1
1. Please revise to describe how you define "accounts" and confirm that you
will include
comparable accounts data for each reported period when you update to
include fiscal 2019
financial statements.
Risk Factors, page 17
2. We note that the interest rate elections for your credit facility are
tied, in part, to LIBOR.
In light of the expected discontinuation of LIBOR and the inability of
the company to
make an Euro-currency election at such time under the terms of your
credit facility,
consider including a risk factor if the discontinuation of LIBOR could
affect your liquidity
Gregory S. Bentley
FirstName LastNameGregory S. Bentley
Bentley Systems, Incorporated
Comapany NameBentley Systems, Incorporated
February 13, 2020
Page 2
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FirstName LastName
and results operations.
The results of the United Kingdom's referendum on withdrawal from the European
Union...,
page 23
3. We note your disclosure that the decision by the United Kingdom to
exit from the
European Union could have adverse practical or operational
implications on your
business. Expand this discussion to disclose what steps, if any,
management is preparing
to take to mitigate and manage the risks posed to your business by
Brexit (e.g., no
agreements on data migration between the U.K. and the European Union).
Our amended and restated certificate of incorporation provides that the Court
of Chancery of the
State of Delaware..., page 50
4. Your disclosure indicates that your certificate of incorporation has
an exclusive forum
provision but that no provision in your bylaws or certificate of
incorporation precludes
stockholders from bringing claims under the Securities Act or the
Exchange Act in state or
federal court. Please clarify to state, if true, that the provision
does not apply to claims
brought under the Securities Act or Exchange Act. Please ensure that
the exclusive forum
provision in your certificate of incorporation states this clearly.
Selected Consolidated Financial Data
Non-GAAP Financial Measures, page 61
5. Your discussion and analysis of your non-GAAP measures "adjusted
EBITDA" and
"adjusted net income" should not be given greater prominence than your
GAAP results of
operations discussion. Please revise. Refer to Item 10(e)(1)(i)(A) of
Regulation S-K
and Question 102.10 of our Compliance and Disclosure Interpretations
of Non-GAAP
Measures.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Business Metrics, page 73
6. You state that in order to enhance comparability during your
transition to ASC 606, your
key business metrics are calculated assuming revenue was recognized
pursuant to ASC
605 for all periods. Considering you also present revenue as if ASC
606 was adopted
using the full retrospective method, it appears that you have the
information necessary to
calculate your metrics assuming revenue was recognized pursuant to ASC
606 for all
periods. Therefore, tell us whether you considered also presenting
your metrics on an
ASC 606 basis to allow for future comparability. At a minimum, to the
extent that the
adoption of ASC 606 resulted in differing trends in these measures,
please revise to
include a discussion of such measures under current GAAP.
7. We note that ARR includes the annualized value of revenue recognized
during the last
three months for your consumption-based software. Please revise to
explain how usage in
a given period is indicative of recurring revenue on an annualized
basis. Tell us what
Gregory S. Bentley
Bentley Systems, Incorporated
February 13, 2020
Page 3
percentage of your revenues are derived from consumption-based
arrangements for each
period presented. Also, please quantify the impact of acquisitions on
your ARR growth
rate for each period presented.
8. Please revise your definition of recurring revenues dollar-based net
retention rate to
clarify what you mean by "existing accounts."
Comparison of the Nine Months Ended September 30, 2018 and 2019, page 81
9. Your results of operations discussion includes a comparison of revenue
as if ASC 606 was
not adopted during fiscal 2019. Please note that management's
discussion and analysis
should be based on your GAAP results of operations. While you may
supplement
this with a discussion assuming revenue was recognized under ASC 605
in fiscal 2019,
such discussion should not replace or be given greater prominence than
your GAAP
discussion. Please revise. Also, please clarify your current
disclosures regarding the
change in EMEA revenue. In this regard, you state such revenues were
negatively
impacted by the change in the pattern of revenue recognition from upon
delivery in 2018
to ratable in 2019 under 605. If you are comparing revenue as if ASC
605 was applied
during both periods, it is unclear why the pattern of recognition
would have changed.
10. In your discussion of subscription revenue and revenues from the
Americas, you attribute
your organic growth to the E365 program and updated offerings for your
ProjectWise and
civil design products. Please revise to further clarify the extent to
which such growth was
attributable to changes in price and/or volume. Also clarify how new
versus existing
customers contributed to such growth. Refer to Item 303(a)(3)(iii) of
Regulation S-K.
11. Where a material change in a line item is attributed to two or more
factors, including any
offsetting factors, the contribution of each factor should be
described in quantified terms.
For example, you state that revenue from EMEA was positively impacted
by acquisitions,
which was offset by a decrease in license revenue due to a change in
the pattern of
revenue recognition. You also attribute the increase in APAC revenues
to improvements
in organic growth and to a lesser extent the impact from acquisitions.
Please revise
accordingly. Refer to Section III.D of SEC Release No. 33-6835.
Significant Judgments and Estimates
Fair Value of Common Stock, page 97
12. Please provide us with a breakdown of all equity-based awards granted
since your most
recent balance sheet date. To the extent there were any significant
fluctuations in the fair
value of your underlying common stock from period-to-period, please
describe for us the
factors that contributed to these fluctuations, including any
intervening events within the
company or changes in your valuation assumptions or methodology. Also,
continue to
FirstName LastNameGregory S. Bentley
provide us with a breakdown of all equity-based awards granted
subsequent to year end
Comapany NameBentleyvalue of the underlying common stock used to determine the
fair value
including the fair Systems, Incorporated
of such awards.
February 13, 2020 Page 3
FirstName LastName
Gregory S. Bentley
FirstName LastNameGregory S. Bentley
Bentley Systems, Incorporated
Comapany NameBentley Systems, Incorporated
February 13, 2020
Page 4
February 13, 2020 Page 4
FirstName LastName
Business, page 101
13. You disclose here and in the prospectus summary that you have
relationships with the
largest global infrastructure engineering firms, including 454 of the
2019 Engineering
News Record (615) Top Design firms and 319 of the 2019 Bentley
Infrastructure 500 Top
Owners. Please provide further context regarding the nature of these
relationships and
explain whether these customers together represent a material portion
of your revenue or
are among the 88 accounts that have contributed over $1 million to
your revenue.
Executive and Director Compensation
Employment Agreements, page 137
14. Please disclose the material terms of the intellectual property
assignment agreements that
you have with your executive officers. Please identify the executive
officers who are
parties to these agreements.
Certain Relationships and Related Party Transactions
Our Relationship with Siemens AG, page 140
15. Please file your strategic collaboration agreement with Siemens, a
principal shareholder of
the company, or advise why you believe this agreement is not required
to be filed. Refer
to Item 601(b)(10)(ii)(A) of Regulation S-K.
Second Amended and Restated Stockholders Agreement, page 142
16. You disclose that upon the effectiveness of this registration
statement, the provisions of
the stockholders agreement will terminate. You also disclose that upon
the effectiveness
of this registration statement, you will amend and restate your
stockholders agreement to
eliminate certain provisions. Currently, it is unclear whether you
intend to terminate the
entire stockholders agreement upon effectiveness of this registration
statement or whether
you intend to only eliminate certain provisions. Please revise your
disclosure to clarify
this. To the extent, you will only eliminate certain provisions,
please: (i) revise to clarify
which provisions will remain in effect; (ii) disclose the material
terms of the stockholders
agreement in the prospectus summary or provide a cross-reference; and
(iii) file a form of
the amended and restated stockholders agreement that will be in effect
upon the
effectiveness of this registration statement.
Plan of Distribution, page 160
17. Please clarify how the Current Reference Price will be calculated and
disseminated under
the Nasdaq Listing Rules. Clarify that the underlying purpose of the
Current Reference
Price is to effectively match anticipated supply with demand. For
example, under clause
(iii) of the definition, you state that, if certain conditions exist,
the Current Reference Price
may be set at "the entered price at which [the] Class B common stock
will remain
unexecuted in the cross." It is not clear how this scenario would
match supply with
Gregory S. Bentley
FirstName LastNameGregory S. Bentley
Bentley Systems, Incorporated
Comapany NameBentley Systems, Incorporated
February 13, 2020
February 13, 2020 Page 5
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FirstName LastName
demand. Consider including an example or examples of how the Current
Reference Price
will be calculated to aid potential investors' understanding of this
process.
18. You disclose that you have engaged Goldman Sachs and BofA Securities
as your financial
advisors to advise and assist with respect to certain matters relating
to your listing. You
also note that these financial advisors will act as registered and
active market makers.
Please revise to summarize the responsibilities Goldman Sachs and BofA
Securities have
as your financial advisors and, separately, as registered and active
market makers,
including a discussion of the timing of these dual responsibilities.
19. Clarify what factors your financial advisor will consider before
notifying the Nasdaq that
the company's Class B common stock is ready to trade and the Current
Reference Price is
calculated.
20. Clarify what factors your financial advisor will consider in
determining whether there has
been "sufficient price discovery" and "a reasonable amount of volume
crosses on the
opening trade."
Where You Can Find More Information, page 162
21. You disclose that "[s]tatements contained in this prospectus
concerning the contents of
any contract or any other document are not necessarily complete" and
that each statement
in the prospectus relating to a contract or document filed as an
exhibit is "qualified in all
respects by the filed exhibit." As you are responsible for the
accuracy and completeness
of the information in the registration statement, this type of
disclaimer is not appropriate.
While disclosure may direct investors to read the entirety of the
applicable agreement for
a more complete discussion, the description of the material terms of
the applicable
agreement must be complete. Please revise to remove language that
disclaims the
completeness of your prospectus disclosure.
Note 3: Revenue from Contracts with Customers
Nature of Products and Services, page F-19
22. Please revise to describe the performance obligations included in your
ELS arrangements
and specify when each obligation is satisfied. Refer to ASC
606-10-50-12. With regards
to your E365 subscriptions, please explain further the terms of these
arrangements and
specifically address how usage is defined.
23. In your discussion regarding the impact of adopting ASC 606, you state
that revenue from
term-based software licenses is recognized upfront upon delivery;
however, your
disclosures on page 70 appear to indicate that revenue for your term
license subscriptions
is recognized annually, quarterly or monthly. Please describe further
the terms of you
annual term licenses, clarify the performance obligations included in
such arrangements
and specify the timing of revenue recognition for each. With regards
to your quarterly
term licenses, please clarify whether these arrangements include a
license component.
Also, tell us how usage is determined, when revenue is recognized for
license usage and
Gregory S. Bentley
Bentley Systems, Incorporated
February 13, 2020
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FirstName LastNameGregory S. Bentley
Comapany NameBentley Systems, Incorporated usage at the end of each reporting
period to the
specifically address whether you estimate
extent actual information is not yet available. Refer to ASC
606-10-55-65.
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FirstName LastName
Gregory S. Bentley
FirstName LastNameGregory S. Bentley
Bentley Systems, Incorporated
Comapany NameBentley Systems, Incorporated
February 13, 2020
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February 13, 2020 Page 7
FirstName LastName
Significant Judgments and Estimates, page F-21
24. Please tell us when revenue is recognized for the material rights
included in your SELECT
subscription arrangements. Clarify when such rights can be exercised,
when they
expire, and whether additional rights are recognized each time the
subscription is
renewed.
Disaggregation of Revenues, page F-22
25. Please disclose your basis for attributing revenues from external
customer to individual
countries. Also, to the extent that revenue from any one country is
material, separately
disclose the revenue related to such country. Refer to ASC
280-10-50-41(a).
Note 13: Equity Awards and Instruments
Restricted Stock, page F-34
26. Please revise to describe the performance criteria for both your
performance-based
restricted stock awards and restricted stock units. Also, disclose the
number of restricted
stock units outstanding at each period end. Refer to ASC 718-10-50-1.
Note 14: Income Taxes, page F-37
27. Please tell us the authoritative accounting literature you relied upon
in recording the tax
benefit associated with the intercompany sales of certain intangible
assets between your
foreign subsidiaries and specifically address your consideration of
ASC 740-10-25-3(e).
Alternatively, to the extent you have early adopted ASU 2016-16,
revise to include the
transition disclosures required by ASC 740-10-65-5(d).
General
28. Please be advised that the Division of Trading and Markets has joined
us in our review
and may contact you with questions about your offering.
You may contact David Edgar, Staff Accountant, at (202) 551-3459 or
Kathleen Collins,
Accounting Branch Chief, at (202) 551-3499 if you have questions regarding
comments on the
financial statements and related matters. Please contact Mitchell Austin, Staff
Attorney, at (202)
551-3574 or Jan Woo, Legal Branch Chief, at (202) 551-3453 with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Richard Fenyes, Esq.