Bentley (NASDAQ:BSY) Misses Q4 Sales Targets

Infrastructure design software provider Bentley Systems (NASDAQ:BSY) missed analysts' expectations in Q4 FY2023, with revenue up 8.3% year on year to $310.6 million. The company's full-year revenue guidance of $1.36 billion at the midpoint also came in slightly below analysts' estimates. It made a non-GAAP profit of $0.20 per share, improving from its profit of $0.18 per share in the same quarter last year.

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CEO Greg Bentley said, “Our financial results for 23Q4 and the full year underscore the sustained combination of auspicious infrastructure engineering markets and the strength of our operations. I enthusiastically congratulate COO Nicholas Cumins and our teams for delivering another year of unsurpassed performance, resourcefully reaching fully 100% of our new business target while also clearing our established hurdle of 100 basis points in annual operating margin improvement. Most notably, we achieved ARR growth (year‑over‑year constant currency business performance, including programmatic acquisitions) of 12.5%, and excluding China, as our purposeful transitions from direct subscriptions there gain traction, we achieved a high-water mark of 13.5%".

Founded by brothers Keith and Barry Bentley, Bentley Systems (NASDAQ:BSY) offers a software-as-a-service platform that addresses the lifecycle of infrastructure projects such as road networks, tunnel systems, and wastewater facilities.

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Sales Growth

As you can see below, Bentley's revenue growth has been unremarkable over the last two years, growing from $267.7 million in Q4 FY2021 to $310.6 million this quarter.

Bentley's quarterly revenue was only up 8.3% year on year, which might disappoint some shareholders. Additionally, its growth did slow down compared to last quarter as the company's revenue increased by just $4.03 million in Q4 compared to $9.86 million in Q3 2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

For the upcoming financial year, management expects revenue to be $1.36 billion at the midpoint, growing 10.9% year on year compared to the 11.8% increase in FY2023.

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Product Success

One of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company's products and services over time.

Bentley's net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 109% in Q4. This means that even if Bentley didn't win any new customers over the last 12 months, it would've grown its revenue by 9%.

Bentley has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.

Key Takeaways from Bentley's Q4 Results

We enjoyed seeing Bentley beat analysts' adjusted EPS estimates this quarter, driven by better-than-expected ARR (annualized recurring revenue) and net revenue retention. It's always more profitable to sell to existing customers than to new customers. On the other hand, this quarter's revenue and its full-year revenue guidance missed Wall Street's estimates.

The company also announced it would raise its dividend by 20% on 2/21/24. It will be payable on 3/28/24 to shareholders of record on 3/20/34.

Overall, the results could have been better. The stock is flat after reporting and currently trades at $52 per share.

Bentley may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.