Infrastructure design software provider Bentley Systems (NASDAQ: BSY) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 9.7% year on year to $370.5 million. Its non-GAAP profit of $0.35 per share was 16.6% above analysts’ consensus estimates.
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Bentley (BSY) Q1 CY2025 Highlights:
- Revenue: $370.5 million vs analyst estimates of $365.4 million (9.7% year-on-year growth, 1.4% beat)
- Adjusted EPS: $0.35 vs analyst estimates of $0.30 (16.6% beat)
- Adjusted Operating Income: $143.5 million vs analyst estimates of $130.7 million (38.7% margin, 9.8% beat)
- Operating Margin: 31.1%, up from 27.2% in the same quarter last year
- Free Cash Flow Margin: 58.4%, up from 21.7% in the previous quarter
- Net Revenue Retention Rate: 110%, in line with the previous quarter
- Annual Recurring Revenue: $1.32 billion at quarter end, up 11.2% year on year
- Market Capitalization: $13.81 billion
CEO Nicholas Cumins said, “We started the year off strong and our results position us well in regard to our financial outlook for the year. Our accounts remain cautiously optimistic about their businesses, following the tariff announcements, as countries continue to prioritize infrastructure funding, some even more than before. The fundamentals of our demand environment remain the same: a critical need for better and more resilient infrastructure, a continued shortage of engineers, and backlogs extending further out.”
Company Overview
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.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last three years, Bentley grew its sales at a 10.8% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.
This quarter, Bentley reported year-on-year revenue growth of 9.7%, and its $370.5 million of revenue exceeded Wall Street’s estimates by 1.4%.
Looking ahead, sell-side analysts expect revenue to grow 9% over the next 12 months, a slight deceleration versus the last three years. This projection doesn't excite us and indicates its products and services will see some demand headwinds.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
Bentley’s ARR punched in at $1.32 billion in Q1, and over the last four quarters, its growth slightly outpaced the sector as it averaged 10.8% year-on-year increases. This performance aligned with its total sales growth and shows the company is securing longer-term commitments. Its growth also contributes positively to Bentley’s revenue predictability, a trait long-term investors typically prefer. 
Customer Retention
One of the best parts about the software-as-a-service business model (and a reason why they trade at 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 Q1. This means Bentley would’ve grown its revenue by 9.3% even if it didn’t win any new customers over the last 12 months.
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 Q1 Results
We were impressed by how significantly Bentley blew past analysts’ EBITDA expectations this quarter. We were also happy its annual recurring revenue narrowly outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 1.7% to $44.51 immediately following the results.
Sure, Bentley had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
