Bentley Earnings: Solid Q1, Navigating Macro Volatility With Strong ARR Growth and Expanding Margins

Bentley Systems reported solid first-quarter performance, which largely met our top-line estimates and exceeded our bottom-line expectations. We are particularly encouraged to see the shift in revenue mix toward high-margin, recurring subscription revenue (through its E365 enterprise contracts), which helps improve visibility and profitability. Looking at the macroeconomic environment, China represents a smaller proportion of total annual recurring revenue, or ARR (currently 2.5%, which is half its previous exposure), and exposure to sectors that are vulnerable to demand and interest rate cyclicality, like commercial and industrial sectors, has also decreased by half since the IPO. We maintain our fair value estimate of $45 per share and continue to see strong demand drivers like critical infrastructure needs, engineering shortages, and extended backlogs, all creating a maintained demand for Bentley’s solutions.