Bentley Systems, Incorporated (BSY) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance with a 16% increase in adjusted operating income and a 110 basis point margin improvement. AI-driven initiatives and digital twins are positively impacting growth, with strategic investments in these areas. The Q&A session reveals optimism about AI's role in future revenue, despite some uncertainties in monetization timelines. The company's focus on expanding M&A and leveraging AI for strategic growth is well-received. Overall, the sentiment is positive, driven by strong financial metrics and strategic growth initiatives.
Key Financial Performance
Annual Constant Currency ARR Growth Sustained in the low-double digits since 2022. In 2025, the growth from smaller programmatic acquisitions was at a low of under 40 basis points. This growth was maintained despite inflation rates being significantly higher earlier in the period.
Adjusted Operating Income (AOI) less Stock-Based Compensation (SBC) Compounded at over 16% per year since 2022. Institutionalized annual improvement of about 100 basis points in margin contributed to this growth.
Free Cash Flow Margin Reached 35% in 2025, with truly free cash flow margin (less SBC) at 30%. Favorable factors included variations in working capital, taxes, and interest.
Asset Consumption Revenue Reached a $50 million run rate milestone in 2025, driven by acquisitions and advancements in asset analytics.
ARR (Annual Recurring Revenue) Ended Q4 2025 at $1.462 billion, with a constant currency growth rate of 11.5% year-over-year. Sequential quarterly growth was 4%, reflecting typical seasonality and timing of asset analytics deals and acquisitions.
Total Revenues For 2025, total revenues were $1.502 billion, growing 11% on a reported basis and 10% in constant currency. Subscription revenues grew 13% reported and 12% in constant currency, now representing 92% of total revenues.
Net Revenue Retention Stable at 109% for Q4 2025, indicating strong customer retention and growth within existing accounts.
Free Cash Flow Totaled $520 million for 2025, up 24% year-over-year, driven by strong collections and effective working capital management.
Adjusted Operating Income less Stock-Based Compensation Margin For 2025, it was $430 million, up 16% year-over-year, with a margin of 28.6%, representing a 110 basis point improvement year-over-year.
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Operating Highlights
AI Integration: Bentley Systems is embedding AI capabilities into its products and platforms, enabling users to build AI-driven workflows. Examples include AI-assisted design tasks in OpenRoads and OpenSite+ and Copilot AI for script creation.
Asset Analytics: The company achieved a $50 million run rate milestone for asset consumption revenue in 2025, driven by acquisitions and AI-enabled digital twins for infrastructure maintenance.
New Acquisitions: Acquired Pointivo and Talon Analytics to enhance AI-based asset analytics and digital twin capabilities.
Geographic Expansion: Strong growth in the Americas, Middle East, and Europe, driven by infrastructure investments and mining activities. Asia-Pacific shows recovery in Australia and growth in India.
Sector Growth: Public Works Utilities and Resources sectors are key growth drivers, with Seequent expanding into mining and new energy sources.
ARR Growth: Annual constant currency ARR growth sustained at 11.5% in Q4 2025, with strong contributions from SME logos and E365 initiatives.
Subscription Revenue: Subscription revenues grew 13% in 2025, now representing 92% of total revenues.
Profitability: Adjusted operating income less stock-based compensation grew 16% in 2025, with a margin improvement of 110 basis points.
AI Strategy: Focused on embedding AI in design and asset analytics, with a long-term approach to building trust and adoption in infrastructure engineering.
Data Stewardship: Commitment to user-controlled data for AI training, ensuring transparency and trust.
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Risk or Challenges
Market Perceived Risks of AI Interloping: Concerns about AI interloping have led to a perceived discount in the company's value, despite the company's positioning AI as an opportunity rather than a risk.
Regulatory and Institutional Constraints: The deliberate pace of technology adoption in infrastructure engineering, rooted in regulatory requirements and institutional norms, poses challenges to the adoption of AI tools.
Economic and Geopolitical Headwinds in China: China, representing approximately 2% of ARR, continues to face economic and geopolitical challenges, which are likely to persist through 2026.
Currency Exchange Rate Exposure: The company's evolving business mix, particularly with Seequent, has increased exposure to currency fluctuations, creating potential headwinds to reported margin percentages.
Dependence on Engineering Capacity: Chronic shortages of engineering capacity could limit the adoption of AI-driven workflows and the company's ability to scale its solutions.
Slow Growth in Asset Performance Revenue: Despite years of investment, the proportion of revenue from asset performance remains small, indicating slow growth in this area.
Economic and Political Uncertainty in Key Markets: Economic and political uncertainties in regions like the U.K. and Australia have impacted project pipelines and growth rates.
Dependence on Subscription Revenue: With 92% of revenue coming from subscriptions, any disruption in this model could significantly impact financial performance.
Interest Rate and Debt Management: The repayment of 2026 convertible notes will result in increased cash interest outflows, impacting free cash flow growth.
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Guidance & Outlook
2026 Financial Outlook: Bentley Systems projects total revenue growth in constant currency to be between 11% and 13%, translating to $1.685 billion to $1.750 billion. Subscription revenues, which make up 92% of the business, are expected to grow at the same rate. Service revenues are anticipated to grow between 15% and 20%, driven by Asset Analytics and Cohesive Maximo business. Perpetual license revenues are expected to remain flat.
ARR Growth: Annual Recurring Revenue (ARR) is projected to grow between 10.5% and 12.5% in constant currency, reflecting momentum in the established business and potential upside from AI-powered Asset Analytics initiatives.
Profitability: Adjusted operating income less operating stock-based compensation is expected to range between $495 million and $510 million, incorporating a 100 basis point annual improvement commitment in constant currency. Free cash flow is projected to range between $500 million and $570 million, with 45%-50% generated in the first half of 2026.
AI and Digital Twin Strategy: Bentley Systems plans to leverage AI to transform infrastructure engineering, focusing on embedding AI capabilities into products and enabling users to build AI-driven workflows. The company aims to monetize API consumption at scale and expand its asset analytics platform, with a focus on AI-powered digital twins for asset monitoring and optimization.
Geographic and Sector Growth: Growth in the Americas is expected to continue, driven by infrastructure investments and private sector projects like data centers. EMEA growth will be led by the Middle East and Europe, with significant investments in transportation, utilities, and mining. Asia Pacific growth will be supported by India's grid modernization and Australia's mining sector recovery.
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Shareholder Return Plan
Dividend Payments: We delivered substantial returns of capital, deploying $85 million for dividends in 2025.
Share Repurchases: We deployed $157 million for share repurchases in 2025.
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Key Q&A
Q:What are the most important elements that could push constant currency ARR growth closer to the higher end of the range, and is AI one of those?
A:AI is contributing to asset analytics growth, but it is not yet classified as annual recurring revenue (ARR) due to the non-annual nature of infrastructure asset inspections. The company aims to make it annual over time through automated AI-based asset analytics.
Q:Is the $400 million annual programmatic acquisitions consistent with past levels, and could there be a pickup in tuck-ins going forward?
A:The company has been focused on asset analytics opportunities in the past due to higher leverage. With leverage now at an optimal level, they are open to expanding M&A beyond asset analytics. While they are not necessarily aiming for $400 million in annual acquisitions, even reaching that amount would not increase leverage.
Q:Is the attention on digital twins opening up pipelines or making it easier to fund digital twin projects?
A:The company is making investments into digital twins easier by integrating the technology into their products. Digital twins are now underlying various processes like design reviews, 4D modeling, and asset inspections, often without accounts being explicitly aware of it.
Q:What assumptions have been made in the guidance regarding the macro demand environment and infrastructure budgets?
A:The macro environment for 2026 is assumed to be consistent with 2025. While there has been a slowdown in commercial facilities, other sectors like resources, public works utilities, and industrial have shown strong growth. China is noted as slowing down, and revenue from acquisitions is not broken out.
Q:What is driving the services revenue recovery in the 2026 guidance?
A:The recovery is driven by improvements in the IBM Maximo-related services business, particularly upgrades to the newest versions (MAS 8 and 9). Asset analytics acquisitions bring minimal data acquisition services, and the company aims to minimize this further.
Q:What is the update on new product packaging and its impact on 2026 guidance?
A:The new packaging, released in Q4, simplifies ProjectWise tiers and introduces Connect as the entry point to Bentley Infrastructure Cloud. This has been positively received, with 50% of active projects in ProjectWise 365 already migrated to Connect. The new packaging is expected to drive higher consumption and support growth.
Q:How is the company leveraging its network and customer base to design its AI roadmap?
A:The company is co-innovating with accounts through the infrastructure.ai initiative, engaging with representative accounts to prioritize APIs for AI-driven workflows. The focus is on adoption rather than monetization, with the belief that value creation will lead to future monetization.
Q:What is the go-to-market approach for the asset analytics business?
A:The company aims to white-label its asset analytics platform for engineering firms to bundle with their services. Initially, the company is establishing itself directly in asset types like distribution poles and transmission towers.
Q:Is the long-term ownership debate being impacted by AI disruption dynamics?
A:There is no indication of AI disruption affecting long-term ownership deals. Engineering firms are budgeting more for technology, and AI is seen as an opportunity for strategic conversations with accounts.
Q:What is the impact of the upcycle in minerals, metals, and mining on the Seequent business?
A:The Seequent business has shown resilience, growing faster than the rest of the company even during a slowdown in mining capital investments. The business benefits from its use in day-to-day operations and civil engineering projects, making it less dependent on commodity price fluctuations.
Q:Which AI opportunities are likely to materialize sooner, and how will monetization show up in the model?
A:Asset analytics is immediate, with API consumption expanding modeling and simulation. The focus is on helping users adopt APIs for AI agents, with monetization expected to evolve as adoption increases.
Q:What is the pace of monetization potential for design software data?
A:The company is already monetizing data through ProjectWise and Bentley Infrastructure Cloud, allowing accounts to use their own data. Future opportunities include monetizing third-party data and engineering insights for design and maintenance.
Q:Review of Unclear Management Responses
A:Management avoided directly answering questions about the specific revenue contribution from acquisitions in Q4 or 2026, and the exact timeline for monetization of AI-driven opportunities in design workflows.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI design
AI portfolio
AI twin
AI workflow
API consumption
Asset Analytics
Bentley Asset
Owner operator
Pointivo
Project
SME
Talon
advantage
analytics platform
approach
asset Bentley
asset consumption
capture
commitment
component
design engineering
design optimization
distribution pole
drone
engineer AI
engineer project
experience
figure
flow margin
foundation
fundamental
iTwin
infrastructure AI
norm
outcome
platform acquisition
risk
software AI
standard
strength
tool
training
BSY Transcript
Bentley Systems, Incorporated (BSY) Q4 2025 Earnings Call Transcript
Positive2-26
The earnings call highlights strong financial performance with a 16% increase in adjusted operating income and a 110 basis point margin improvement. AI-driven initiatives and digital twins are positively impacting growth, with strategic investments in these areas. The Q&A session reveals optimism about AI's role in future revenue, despite some uncertainties in monetization timelines. The company's focus on expanding M&A and leveraging AI for strategic growth is well-received. Overall, the sentiment is positive, driven by strong financial metrics and strategic growth initiatives.
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Positive11-5
The company's earnings call reveals a positive outlook with strong ARR growth expectations, margin expansion, and increased free cash flow projections. The strategic partnership with Google and AI integration enhance their asset analytics capabilities, while regional and sector performance indicates robust demand. Although there are some uncertainties in M&A and asset analytics, the overall sentiment is positive, supported by optimistic guidance and strategic initiatives.
BSY Slides
BSY Report
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