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Bentley Systems (BSY) intends to raise $194 million for selling shareholders from the sale of its Class B stock in an IPO, according to an amended registration statement.

The company provides infrastructure engineering software to clients worldwide.

BSY is growing topline revenue at a moderate rate, is producing strong profits and free cash flow, and the IPO appears reasonably valued.

Exton, Pennsylvania-based Bentley was founded to develop workflow software for infrastructure engineering for public works, industrial and commercial facilities globally.

Management is headed by president, Chairman and CEO Mr. Gregory Bentley, who has been with the firm since August 2000 and was previously founder and CEO of Devon Systems.

In addition, the firm was co-founded by Chief Technology Officer/EVP Keith Bentley and Director and EVP Barry Bentley.

Below is a brief overview video of the firm's 'Digital Twin' approach:

Source: Bentley Systems

The company’s primary offerings include:

  • Project Delivery - ProjectWise
  • Asset and Network Performance - AssetWise
  • Design Integration
  • Digital Cities

The graphic below shows the firm's systems and applications breakdown:


Bentley has received at least $415 million from investors including Richard Bentley and Siemens Corp (SIEGY).

The firm sells primarily through direct sales channels, generating approximately 92% of its 2019 revenues.

In geographic regions where it does not have a physical presence, BSY relies upon local specialist channel partners.

Below is a chart showing the firm's growth rate history:


Selling & Marketing expenses as a percentage of total revenue have been dropping as revenues have increased.

The Selling & Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Selling & Marketing spend, rose to 0.5x in the most recent reporting period.

The Rule of 40 is a software industry rule of thumb that says that as long as the combined revenue growth rate and EBITDA percentage rate equal or exceed 40%, the firm is on an acceptable growth trajectory. BSY’s most recent calculation was 37% as of the year ended December 31, 2019, so the firm is close to reaching this hurdle rate.

Bentley’s dollar-based revenue retention rate was 110% in the most recent period. A figure above 100% indicates the firm is generating more revenue from an existing cohort of customers and indicates good product market fit as well as sales & marketing efficiency.

According to a 2018 market research report by The Business Research Company, the global market for infrastructure software was estimated at $231 billion in 2017, with Western Europe as the largest region accounting for $83 billion (36%) and the U.S. representing $49 billion (21.4%) of global demand.

The main drivers for expected growth are continued development of infrastructure in both the developed and developing regions of the world.

Also, the delivery of software through cloud, whether public, private or hybrid, has gained acceptance from customers.

Major competitive or other industry participants include:

  • Autodesk
  • Trimble
  • Hexagon
  • Dassault Systemes
  • AVEVA Group
  • Nemetschek
  • Oracle
  • Aspen Technology
  • Environmental Systems Research Institute
  • General Electric

Bentley’s recent financial results can be summarized as follows:

  • Increasing topline revenue
  • Growing gross profit and gross margin
  • Increasing operating profit and operating margin
  • Growing cash flow from operations

Below are relevant financial results derived from the firm’s registration statement:


Source: Company registration statement

As of June 30, 2020, Bentley had $125.5 million in cash and $679.4 million in total liabilities.

Free cash flow during the twelve months ended June 30, 2020, was $206.1 million.

Selling shareholders in BSY intend to sell 10.75 million shares of Class B stock at a midpoint price of $18.00 per share for gross proceeds of approximately $193.5 million, not including the sale of customary underwriter options.

Class A stockholders will be entitled to 29 votes per share and Class B shareholders will be entitled to one vote per share.

The S&P 500 Index no longer admits firms with multiple classes of stock into its index.

Funds affiliated with Capital Research Global Investors have indicated an interest in purchasing up to $40 million worth of Class B shares in the offering.

Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $4.6 billion.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 4.12%.

Per the firm’s most recent regulatory filing, BSY described the Use of Proceeds as follows:

The selling stockholders will receive all of the proceeds from the sale of shares of our Class B common stock in this offering. We will not receive any proceeds from the sale of shares by the selling stockholders.

Management’s presentation of the company roadshow is available here.

Listed underwriters of the IPO are Goldman Sachs, BofA Securities, RBC Capital Markets, Baird, KeyBanc Capital Markets and Mizuho Securities.


Bentley is seeking to go public but won’t receive any proceeds from the IPO; instead, selling shareholders, which include Richard Bentley and a number of individual shareholders, will receive all the IPO proceeds.

BSY’s financials show moderate topline revenue growth, strong operating profit and net income and significant operating cash flow and free cash flow.

Selling and marketing expenses as a percentage of total revenue have been uneven but have recently trended lower; its selling and marketing efficiency rate has improved recently.

The company’s dollar based net retention rate stood at 110%, a positive result indicating growing revenue from each customer cohort.

The market opportunity for infrastructure software is large and expected to grow as enterprises and organizations seek to gain the benefits from a transition to cloud-delivered software as well as continued infrastructure development activities in both the developing and developed regions of the world.

Goldman Sachs is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 67.7% since their IPO. This is a top-tier performance for all major underwriters during the period.

As a comparable-based valuation to Dassault Systemes, Bentley’s IPO appears reasonably priced at around a 6x EV/Revenue multiple.

The firm isn’t growing revenue as quickly as DASTY but the IPO is valued at a lower multiple; so as long as investors don’t overpay, the IPO should be a fair value.

My opinion on the IPO is a BUY at up to $18.00 per share.

Expected IPO Pricing Date: September 22, 2020.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)


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