SEC Filing | Bentley Systems, Incorporated

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bsy-20220331

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, 2022
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 3, 2022, the registrant had 11,601,757 shares of Class A and 275,932,539 shares of Class B Common Stock 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 3 1 , 202 2 and December 31, 202 1						3
Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021						4
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021						5
Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021						6
Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021						7
Notes to Consolidated Financial Statements						9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						41
Item 3. Quantitative and Qualitative Disclosures About Market Risk						62
Item 4. Controls and Procedures						62

PART II. OTHER INFORMATION
Item 1. Legal Proceedings						63
Item 1A. Risk Factors						63
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						63
Item 6. Exhibits						64

SIGNATURE						65

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, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	129,617	$	329,337
Accounts receivable	233,032		241,807
Allowance for doubtful accounts	(7,486)		(6,541)
Prepaid income taxes	26,254		16,880
Prepaid and other current assets	32,644		34,348
Total current assets	414,061		615,831
Property and equipment, net	32,043		31,823
Operating lease right-of-use assets	49,432		50,818
Intangible assets, net	329,029		245,834
Goodwill	2,217,578		1,588,477
Investments	8,680		6,438
Deferred income taxes	47,683		71,376
Other assets	59,797		48,646
Total assets	$	3,158,303	$	2,659,243
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	19,058	$	16,483
Accruals and other current liabilities	351,273		323,603
Deferred revenues	215,448		224,610
Operating lease liabilities	16,963		17,482
Income taxes payable	5,048		6,696
Current portion of long-term debt	5,000		5,000
Total current liabilities	612,790		593,874
Long-term debt	1,871,527		1,430,992
Deferred compensation plan liabilities	89,282		94,890
Long-term operating lease liabilities	34,907		35,274
Deferred revenues	13,006		7,983
Deferred income taxes	58,316		65,014
Income taxes payable	7,718		7,725
Other liabilities	13,104		14,269
Total liabilities	2,700,650		2,250,021
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, 2022 and December 31, 2021	—		—
Class A Common Stock, $0.01 par value, authorized 100,000,000 shares; issued and outstanding 11,601,757 shares as of March 31, 2022 and December 31, 2021, and Class B Common Stock, $0.01 par value, authorized 1,800,000,000 shares; issued and outstanding 273,532,336 and 270,924,962 shares as of March 31, 2022 and December 31, 2021, respectively	2,851		2,825
Additional paid-in capital	957,498		937,805
Accumulated other comprehensive loss	(75,324)		(91,774)
Accumulated deficit	(427,372)		(439,634)
Total stockholders’ equity	457,653		409,222
Total liabilities and stockholders’ equity	$	3,158,303	$	2,659,243

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,
		2022		2021
Revenues:
Subscriptions		$	241,233	$	188,125
Perpetual licenses		10,205		10,116
Subscriptions and licenses		251,438		198,241
Services		24,079		23,764
Total revenues		275,517		222,005
Cost of revenues:
Cost of subscriptions and licenses		33,727		28,945
Cost of services		22,058		20,344
Total cost of revenues		55,785		49,289
Gross profit		219,732		172,716
Operating expense (income):
Research and development		61,273		47,803
Selling and marketing		45,945		32,440
General and administrative		51,154		33,221
Deferred compensation plan		(5,138)		167
Amortization of purchased intangibles		9,906		3,438
Total operating expenses		163,140		117,069
Income from operations		56,592		55,647
Interest expense, net		(7,042)		(2,319)
Other income, net		10,641		14,482
Income before income taxes		60,191		67,810
Provision for income taxes		(3,231)		(10,358)
Loss from investment accounted for using the equity method, net of tax		(572)		(446)
Net income		56,388		57,006
Less: Net income attributable to participating securities		(9)		—
Net income attributable to Class A and Class B common stockholders		$	56,379	$	57,006
Per share information:
Net income per share, basic		$	0.18	$	0.19
Net income per share, diluted		$	0.18	$	0.18
Weighted average shares, basic		307,969,672		302,583,452
Weighted average shares, diluted		331,330,256		321,736,649

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,
	2022		2021
Net income	$	56,388	$	57,006
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments	16,437		(9,182)
Actuarial gain on retirement plan, net of tax effect of $(5) and $(8), respectively	13		21
Total other comprehensive income (loss), net of taxes	16,450		(9,161)
Comprehensive income	$	72,838	$	47,845

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, 2022
						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, 2021	282,526,719	$	2,825	$	937,805	$	(91,774)	$	(439,634)	$	409,222
Net income	—	—		—		—		56,388		56,388
Other comprehensive income	—	—		—		16,450		—		16,450
Dividends declared	—	—		—		—		(8,353)		(8,353)
Shares issued in connection with deferred compensation plan, net	809,751	8		—		—		(24,254)		(24,246)
Deferred compensation plan elective participant deferrals	—	—		669		—		—		669
Shares issued in connection with Executive Bonus Plan, net	72,105	1		4,995		—		(2,192)		2,804
Shares issued in connection with employee stock purchase plan	109,749	1		4,610		—		(121)		4,490
Stock option exercises, net	1,401,249	14		2,754		—		(7,651)		(4,883)
Acquisition option exercises, net	149,855	1		(1)		—		—		—

Stock-based compensation expense	—	—		6,667		—		—		6,667
Shares related to restricted stock, net	64,665	1		(1)		—		(1,555)		(1,555)
Balance, March 31, 2022	285,134,093	$	2,851	$	957,498	$	(75,324)	$	(427,372)	$	457,653


	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 elective participant deferrals	—	—		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

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,
	2022		2021
Cash flows from operating activities:
Net income	$	56,388	$	57,006
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	17,212		8,993
Bad debt allowance	955		746
Deferred income taxes	9,042		966
Stock-based compensation expense	15,099		8,913
Deferred compensation plan	(5,138)		1,021
Amortization and write-off of deferred debt issuance costs	1,778		1,229
Change in fair value of derivative	(12,084)		(13,661)
Change in fair value of contingent consideration	500		—
Change on fair value of investments	(112)		—
Gain on sale of aircraft	(2,029)		—
Foreign currency remeasurement loss (gain)	1,677		(583)
Loss from investment accounted for using the equity method, net of tax	572		446
Changes in assets and liabilities, net of effect from acquisitions:
Accounts receivable	8,691		14,903
Prepaid and other assets	5,718		8,257
Accounts payable, accruals, and other liabilities	26,791		54,977
Deferred revenues	(12,515)		(21,889)
Income taxes payable, net of prepaid income taxes	(10,814)		11,474
Net cash provided by operating activities	101,731		132,798
Cash flows from investing activities:
Purchases of property and equipment and investment in capitalized software	(4,176)		(2,655)
Proceeds from sale of aircraft	2,380		—
Acquisitions, net of cash acquired	(695,968)		(57,975)
Other investing activities	(2,811)		—
Net cash used in investing activities	(700,575)		(60,630)
Cash flows from financing activities:
Proceeds from credit facilities	563,912		16,000
Payments of credit facilities	(123,696)		(262,000)
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)

Repayment of term loan	(1,250)		—
Payments of financing leases	(48)		(50)
Payments of acquisition debt and other consideration	(2,721)		(25)
Payments of dividends	(8,528)		(8,219)
Payments for shares acquired including shares withheld for taxes	(35,117)		(18,763)
Proceeds from stock purchases under employee stock purchase plan	4,611		—
Proceeds from exercise of stock options	2,768		1,751
Net cash provided by financing activities	399,931		372,137
Effect of exchange rate changes on cash and cash equivalents	(807)		3,225
(Decrease) increase in cash and cash equivalents	(199,720)		447,530
Cash and cash equivalents, beginning of year	329,337		122,006
Cash and cash equivalents, end of period	$	129,617	$	569,536

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended
	March 31,
	2022		2021
Supplemental information:
Cash paid for income taxes	$	6,766	$	4,214
Income tax refunds	798		4,519
Interest paid	5,296		766
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	4,996		5,574
Deferred compensation plan elective participant deferrals	669		855

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 United States 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 2021 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 materially from those estimates. The December 31, 2021 consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements.

Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

Business Combinations — On January 31, 2022, the Company completed the acquisition of Power Line Systems, a leader in software for the design of overhead electric power transmission lines and their structures, for $695,968 in cash, net of cash acquired. 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 $883,336 in cash, net of cash acquired, plus 3,141,342 shares of the Company’s Class B Common Stock (see Note 4).

Note 2: Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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, 2022.

Note 3: Revenue from Contracts with Customers

Nature of Products and Services

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

Subscriptions

SELECT subscriptions — The Company provides prepaid annual recurring subscriptions 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 subscriptions 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 Blueprints, 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 and include the Company’s Virtuoso subscriptions sold via the Company’s Virtuosity eStore for practitioner licenses. Virtuoso subscriptions are bundles with customizable training and expert consultation administered through “keys” or credits. 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. For Virtuoso keys, revenue is recognized as services are delivered. 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 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

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.

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. Certain of the Company’s fixed‑fee arrangements, including its Success Services offerings, are structured as subscription‑like, packaged offerings that are annually recurring in nature. Success Services are standard service offerings that provide a level of dedicated professional services 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, 2022 and December 31, 2021, the Company has deferred $17,724 and $18,020, 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, 2022		December 31, 2021


Contract assets	$	309	$	336
Deferred revenues	228,454		232,593

As of March 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021.

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

For the three months ended March 31, 2022, $97,005 of revenues that were included in the December 31, 2021 deferred revenues balance were recognized. There were additional deferrals of $94,522, which were primarily related to new billings and acquisitions (see Note 4). For the three months ended March 31, 2021, $91,125 of revenues that were included in the December 31, 2020 deferred revenues balance were recognized. There were additional deferrals of $78,210, 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, 2022, amounts allocated to these remaining performance obligations are $228,454, of which the Company expects to recognize 94.3% over the next 12 months with the remaining amount thereafter.

Disaggregation of Revenues

The following table details revenues:


	Three Months Ended
	March 31,
	2022		2021
Subscriptions:
SELECT subscriptions	$	66,598	$	66,140
Enterprise subscriptions (1)	81,827		71,015
Term license subscriptions	92,808		50,970
Subscriptions	241,233		188,125
Perpetual licenses	10,205		10,116
Subscriptions and licenses	251,438		198,241
Services:
Recurring	4,701		6,077
Other	19,378		17,687
Services	24,079		23,764
Total revenues	$	275,517	$	222,005

(1)Enterprise subscriptions includes revenue attributable to E365 subscriptions of $68,598 and $48,265 for the three months ended March 31, 2022 and 2021, respectively.

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, 2022 and 2021, the Company recognized $125,225 and $95,625 of license related revenues, respectively, of which $115,020 and $85,509, 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 7% and 8% of its total revenues through channel partners for the three months ended March 31, 2022 and 2021, respectively.

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


	Three Months Ended
	March 31,
	2022		2021
Americas (1)	$	154,260	$	108,862
Europe, the Middle East, and Africa (“EMEA”) (2)	77,480		73,848
Asia-Pacific (“APAC”)	43,777		39,295
Total revenues	$	275,517	$	222,005

(1)Americas includes the United States (“U.S.”), Canada, and Latin America (including the Caribbean). Revenue attributable to the U.S. totaled $116,133 and $92,940 for the three months ended March 31, 2022 and 2021, respectively.

(2)Revenue attributable to the United Kingdom totaled $22,291 and $22,383 for the three months ended March 31, 2022 and 2021, respectively.

Note 4: Acquisitions

On January 31, 2022, the Company completed the acquisition of Power Line Systems, a leader in software for the design of overhead electric power transmission lines and their structures, for $695,968 in cash, net of cash acquired. For the year ended December 31, 2021, the Company completed a number of acquisitions, for an aggregate purchase price of $1,269,844. On June 17, 2021, the Company completed the acquisition of Seequent, a leader in software for geological and geophysical modeling, geotechnical stability, and cloud services for geodata management and collaboration, for $883,336 in cash, net of cash acquired, plus 3,141,342 shares of the Company’s Class B Common Stock. The operating results of the acquired businesses, except for Seequent, were not 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, 2022		December 31, 2021


Number of acquisitions	1		13
Cash paid at closing (1)	$	715,114	$	1,072,820
Cash acquired	(19,146)		(37,837)
Net cash paid	$	695,968	$	1,034,983

(1)Of the cash paid at closing for the three months ended March 31, 2022 and year ended December 31, 2021, $3,000 and $8,701, respectively, was deposited into an escrow account to secure any potential indemnification and other obligations of the seller.

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


	March 31, 2022		December 31, 2021


Accruals and other current liabilities	$	3,401	$	5,382
Other liabilities	960		1,231
Contingent consideration from acquisitions	$	4,361	$	6,613

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


	March 31, 2022		December 31, 2021


Accruals and other current liabilities	$	3,522	$	4,751
Other liabilities	6,180		6,177
Non-contingent consideration from acquisitions	$	9,702	$	10,928

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.

The Company is in the process of finalizing the purchase accounting for Power Line Systems. Identifiable assets acquired and liabilities assumed were provisionally recorded at their estimated fair values on the acquisition date. The initial accounting for Power Line Systems 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 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, 2022 and 2021, the Company incurred acquisition expenses of $10,574 and $6,861, respectively, which include costs related to legal, accounting, valuation, insurance, general administrative, and other consulting fees. For the three months ended March 31, 2022, $9,773 of the Company’s acquisition expenses related to the acquisition of Power Line Systems, and $6,716 of the Company’s acquisition expenses related to the acquisition of Seequent for the three months ended March 31, 2021.

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, 2022		December 31, 2021
Consideration:
Cash paid at closing	$	715,114	$	1,072,820
Shares issued at closing (1)(2)	—		182,390
Contingent consideration	—		4,544
Deferred, non-contingent consideration, net	—		10,090
Total consideration	$	715,114	$	1,269,844
Assets acquired and liabilities assumed:
Cash	$	19,146	$	37,837
Accounts receivable and other current assets	1,098		24,174
Operating lease right-of-use assets	1,237		12,095
Property and equipment	963		4,383
Other assets	—		874
Software and technology (weighted average useful life of 5 years)	9,700		43,560
Customer relationships (weighted average useful life of 10 and 9 years, respectively)	78,300		158,555
Trademarks (weighted average useful life of 10 years)	5,200		38,256

In-process research and development	—		3,700
Total identifiable assets acquired excluding goodwill	115,644		323,434
Accruals and other current liabilities	(610)		(27,649)
Deferred revenues	(10,219)		(26,245)
Operating lease liabilities	(1,237)		(11,988)
Deferred income taxes	(6,865)		(53,342)
Other liabilities	—		(716)
Total liabilities assumed	(18,931)		(119,940)
Net identifiable assets acquired excluding goodwill	96,713		203,494
Goodwill	618,401		1,066,350
Net assets acquired	$	715,114	$	1,269,844

(1)Of the total 3,141,342 shares issued at closing, 83,627 shares are subject to forfeiture if post‑closing employment service conditions are not met. Accordingly, $5,452 is being recorded as stock‑based compensation expense over the related forfeiture period of two years (see Note 15).

(2)A fair value adjustment of $16,943 was applied to the stock consideration due to restrictions on the transfer of securities.

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

The fair values of deferred revenues were determined in accordance with the Company’s revenue recognition policies (see Note 3).

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. The Company expects $519,564 of the goodwill recorded relating to the acquisition of Power Line Systems will be deductible for income tax purposes.

Unaudited Pro Forma Financial Information

Had the acquisition of Seequent been made at the beginning of 2020, unaudited pro forma total revenues for the three months ended March 31, 2021 would have been $255,783. Net income, net income per share, basic, and net income per share, diluted for the three months ended March 31, 2021 would not have been materially different than the amounts reported primarily due to the pro forma adjustments to reflect the amortization of purchased intangibles and the cost to finance the transaction, net of the related tax effects.

The unaudited pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of 2021. The unaudited pro forma financial information combines the historical results of the Company, the adjusted historical results of Seequent considering the date the Company completed the acquisition of Seequent, and the effects of the pro forma adjustments described above.

Acquisition Subsequent to March 31, 2022

In April 2022, the Company completed one acquisition. The acquisition is not expected to be material to the Company’s consolidated financial statements.

Note 5: Property and Equipment, Net

Property and equipment, net consist of the following:


	March 31, 2022		December 31, 2021
Land	$	2,811	$	2,811
Building and improvements	36,366		35,188
Computer equipment and software	49,169		47,651
Furniture, fixtures, and equipment	14,400		14,274
Aircraft	2,038		4,075
Other	59		61
Property and equipment, at cost	104,843		104,060
Less: Accumulated depreciation	(72,800)		(72,237)
Total property and equipment, net	$	32,043	$	31,823

Depreciation expense for the three months ended March 31, 2022 and 2021 was $2,490 and $2,497, respectively.

Related Party Equipment Sale

In January 2022, the audit committee of the Company’s board of directors authorized the Company to sell 50% of its interest in the Company’s aircraft at fair market value to an entity controlled by the Company’s Chief Executive Officer. The transaction was completed on February 1, 2022 for $2,380 and resulted in a gain of $2,029, which was recorded in Other income, net in the consolidated statement of operations for the three months ended March 31, 2022. Subsequent to the transaction, ongoing operating and fixed costs of the aircraft are shared on a proportional use basis subject to a cost-sharing agreement. Such costs were not material during the three months ended March 31, 2022. Pursuant to FASB Accounting Standards Codification (“ASC”) Topic 850, Related Party Disclosures, the Company determined this transaction was to a related party.

Note 6: Goodwill and Other Intangible Assets

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


Balance, December 31, 2021	$	1,588,477
Acquisitions	618,401
Foreign currency translation adjustments	10,828
Other adjustments	(128)
Balance, March 31, 2022	$	2,217,578

Details of intangible assets other than goodwill are as follows:


		March 31, 2022						December 31, 2021
	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	3-5 years	$	95,909	$	(50,327)	$	45,582	$	101,588	$	(63,225)	$	38,363
Customer relationships	3-10 years	324,657		(91,288)		233,369		245,325		(83,799)		161,526
Trademarks	3-10 years	68,703		(22,422)		46,281		63,080		(20,893)		42,187
Non-compete agreements	5 years	350		(156)		194		350		(139)		211
		489,619		(164,193)		325,426		410,343		(168,056)		242,287
Intangible assets not subject to amortization:
In-process research and development