Bentley Systems Inc.

(BSY)
www.bentley.com
Investment Thesis: Bentley Systems, Incorporated (BSY) is a
fundamentally strong operator in the application software industry with only
5% market share but operates at 8times the operating margins compared to
peers and at almost 5times higher ROIC.

Current Price: $52.26 Market Cap ($mil): 16,401

Fiscal Year End: December 3 Mo. Avg Daily ($mil) Vol: 0.958
Upside Target: $59.30 13.00%
EBIT Margin of 24.00% applied to 2025 revenue give $0.91 EPS x hi-mult of 65x = $59.3
Downside Target: $50.20 -4.00%
EBIT Margin of 24.00% applied to 2025 revenue give $0.91 EPS x lo-mult of 55x= $50.2
Differentiation from Consensus
FY Consensus P/E GBA-SMF P/E EPS
EPS EPS Above/Below
2024 Est 0.89 59.64 0.74 71.01 Above
2025 Est 1.01 52.55 0.91 57.29 Above
FY Consensus P/S GBA-SMF P/S SPS
Revenue Revenue Above/Below
2024 Est 1,368 12.88 1,470 11.83 Below
2025 Est 1,500 11.60 1,743 9.98 Below

Headquarters YTD Chg. LTM PE

Pennsylvania, US +42.3% 84.30x
Sector 1 Yr. Chg. Price to Book
Information Technology +37.2% 21.83x
Industry 52 Wk L/H Price to Sales
Application Software 33.75/ 55.37 15.78x
Exchange Beta vs S&P500 Price to EBITDA
NASDAQ 1.18 0.22x
Dividend Payout L.T. Growth Rate EV to EBITDA
36.9% 15.00% 53.06x

Srishti Goenka
Information Technology,
Tech & Comm Services
Team
srishti.goenka@fordham.edu

Source Cap IQ.

November 30, 2023
1
Company Background:
Bentley Systems is an Infrastructure Engineering Software company that
enables infrastructure professionals and organizations, by “going digital”
through their software and cloud services offerings, to better design, build,
and operate better infrastructure. It was founded in 1984 by the Bentley
brothers, the company completed its IPO on September 25, 2020 and was
listed on the NASDAQ under the ticker of “BSY”.

BSY has clients which are engineers, architects, geospatial professionals,

constructors and owner-operators for the design, construction and operations
of infrastructure. BSY is based in Exton, Pennsylvania. It operates in the AEC
industry which refers to the "Architecture, Engineering, and Construction"
industry. AEC industry encompasses a wide range of professionals, firms, and
organizations involved in the planning, design, construction, and maintenance
of buildings and infrastructure projects.

They offer solutions via on-premises, cloud, and hybrid environments.

Their users operate projects and assets across the following infrastructure
sectors:
 public works (including roads, rail, bridges, tunnels, airports, ports,
and federal, state, and municipal agencies)/utilities (including
networks for electricity, gas, communications, and water, wastewater,
and drainage).
 resources (including mining, oil and gas “upstream,” offshore,
pipelines, environmental management, and renewable energy).
 industrial (including discrete and process manufacturing, oil and gas
“downstream,” and power generation).
 commercial/facilities (including office buildings, retail facilities,
hospitals, and campuses).

The company operates under one reportable business segment.

2
Primary Growth Initiatives:

For Accretion in Enterprise Accounts: E365 Success Teams. Enterprise 365

(“E365”) is the premier enterprise subscription that bundles virtually-
delivered expert services through our Success Force with our software
solutions.

For Penetration and Accretion in Small and Medium-Sized Businesses

(“SMBs”): Virtuosity. Virtuoso subscription, the first ecommerce offering
ever, combines the benefits of their software as well as our Success Force.

Exhibit 2 Company investor presentation.

3
FY2022A Revenue by:
Company Financial graphs:
Revenue split By Geography

Exhibit 1 Sourced from Excel Model

Revenue split By Product category

Exhibit 2 Sourced from Excel Model

Exhibit 3 Sourced from Excel Model.

4
Recurring Revenue over the years:

Exhibit 4 Annual report 2022.

Exhibit 5 Excel model.

2023E to 2025E Projected Recurring Revenue chart:

Figure 6 Based on excel model.

5
Reasons To Buy:
1. Acquisitions and Partnerships: Bentley Systems has a history of
Risks: acquiring companies in related industries to broaden its product
3. Strong financial
offerings growth potential
and capabilities. Theseand valuation:
strategic Exhibitcan
acquisitions below shows
contribute
BSY’s EBITDA
to growth by margin
openinghas up improved
new revenue everstreams
since aand
dropenhancing
after its IPO
its in
Thecompetitive
2020 general
but grownmarket sentiment
consistently
position. infor
(refer thethis
laststock
Exhibit is Over
18)year. to HOLD. However,
the next 3 yearsif we
do the risk analysis, we have the following
2023E to 2025E EBITDA margins are expected at 26-27% rangesuggestions on the risk
profile
Keyindicating
developments strongandoperating
acquisitionprofitability
history: and stability.
 Low market share of 5% in application software industry and very
easy to be challenged by new players to take away 5% by new
players or existing market dominant players by pricing power.
 Financial leverage risk: high, in 2021 and 2022, LT debt 2021 is 7
times that of 2020
 Technological Risk and Cybersecurity Threats: Bentley Systems
handles sensitive data and intellectual property related to
Exhibit 8 Macrotrends.net
infrastructure projects.
Based on EV/EBITDA 2025 multiple, the stock has a 12.6% upside to
 Since BSY is high in inorganic expansion, bringing in platform from
current share price of $52.26 and based on PE valuation, the stock has an
various companies is difficult to integrate and can lead to post
upside of 13% and downside of 4% leading to an average Target price
merger integration failures.
based on both methods at $56.69
 Complex learning curve to BSY’s products is also another
challenge.
Exhibit 7 Information from annual filings and news.

Industry Sentiment:
2. Diverse customer mix: BSY provides software solutions to over
40,000 accounts in 194 countries worldwide. Their revenues are
balanced and diversified between engineering and construction
contracting firms who work together to deliver the design and
construction of capital projects (representing 50%, 56%, and 57% of
2022, 2021, and 2020 total revenues, respectively), and their clients,
the world’s public and private infrastructure asset owners and
operators (representing 50%, 44%, and 43% of our 2022, 2021, and
4. Competitive positioning: BSY operates at a clear distinction operating
2020 total revenues, respectively).
profits 20% for BSY vs 2.5% of peers and Net income margins 16% vs
-0.05% compared to its peers as seen in exhibit 10 below. ROIC for BSY
is also better than its peers which allows BSY to trade at a premium even
though it does not enjoy a market share dominance.

Exhibit 10 ACEC Research Institute Report.

6
Exhibit 9 CFRA report.
Competitive Positioning:
SWOTSystems
Bentley Analysis:
faces competition from other software providers in the
AEC industry. The company's ability to differentiate itself through
innovation
Strength: and superior offerings can impact its growth prospects. BSY has
a 5.3% market share
Specialized in BIM
Software and architectural
Solutions: design software
Bentley Systems industry.
offers a wide range of
specialized software tailored for the infrastructure and construction
Porter’s 5 forces:
sectors, which positions the company as an industry leader.
Bentley Systems is a software company that primarily serves the
 Strong Brand: The company has a strong reputation and brand
infrastructure and construction sectors. For BSY, Porter’s five forces
recognition in the AEC (Architecture, Engineering, and Construction).
highlight the competitive nature of software industry and the importance of
 Well balanced global presence
differentiation, innovation, and strategic partnerships.
Buyer Power: High
Weakness:
Customers in the infrastructure and construction sectors have a significant
say Dependence
in the choice on the Construction
of software solutions.Industry:
They canBentley Systems'
easily switch revenue is
to competing
products closely tied to the
or negotiate health prices,
for better of theespecially
construction
if theyand
are infrastructure
making bulk
industries. Economic downturns in these
purchases. This makes customer bargaining power high. Bentley sectors can have a negative
Systems
impact on the company's financial performance.
needs to continually provide value and support to retain customers.
SupplierComplexity
Power:and Learning Curve: Some of Bentley's software products
Moderate
Bentley can be complex,
Systems may requiring
rely onextensive training for
some suppliers and hardware
expertise and software
components,
Competitive Pressure
but it has the flexibility to choose from multiple suppliers. The
software
Customer Support
industry Challenges:
doesn't Serving on
depend heavily a global
specificcustomer base can
raw materials or
inputs. The bargaining power of suppliers is moderated by the customer
present challenges in providing consistent and efficient fact that
support.
Bentley can switch suppliers relatively easily.
Competitive Rivalry: High
Opportunity:
The competition within the software industry, particularly in the fields of
engineering,
Technological Advancements:
infrastructure, The adoption
and construction, is of emerging
intense. technologies
Bentley Systems
like BIM
competes with(Building Information
well-established Modeling)
players and IoT (Internet
like Autodesk, Dassault of Things)
Systèmes,
and Trimble, among others. Competing companies continually innovatefor
in the construction and infrastructure sectors presents opportunities to
Bentley
improve to develop
their software,new software
expand theirsolutions.
services, and capture market share,
resulting
Partnerships
in high and Alliances: Collaborating with other industry players or
rivalry.
technology
Threat of New companies
Entrants: Low can open up new avenues for innovation and
market reach.
High barriers to entry: The software industry typically requires significant
investments in research and development, highly skilled personnel, and
Threat:
intellectual property. Bentley Systems has an established brand and a wide
 Economic
range Downturns:
of specialized softwareEconomic
products,recessions
making it or marketfor
difficult downturns can
new entrants
lead to reduced
to compete effectively.construction and infrastructure spending
 Rapid
Threat of Technological
Substitutes: Moderate
Changes
While
 Regulatory Changes: offers
Bentley Systems Changes specialized
in industry software for infrastructure
regulations or standards and
can
construction, there are potential
affect the development and adoptionsubstitutes, suchsoftware.
of Bentley's as custom in-house
solutions or software
 Cybersecurity Threats:fromAscompetitors.
a software However, the complexity
provider, Bentley Systems of is
infrastructure
vulnerable and constructionandprojects
to cyberattacks often necessitates
data breaches, specialized
which can damage its 7
software, reducing
reputation the immediate
and customer trust. threat of substitutes.
 Intense Competition: The software market is highly competitive, and
new entrants or advances by existing competitors can erode market
share.
Sector-wise Key Competitors:
Peer Comparison:
Key competitors in public works/utilities applications include Autodesk,
Inc., Trimble Inc., and Hexagon AB;

Key competitors in industrial applications include Hexagon AB, the

AVEVA unit of Schneider Electric, and Dassault Systems;

Key competitors in resources applications include Hexagon AB, the

AVEVA unit of Schneider Electric, and Dassault Systems;

Key competitors in commercial/facilities applications include Autodesk,

Inc., Nemetschek SE, and Trimble Inc.;
Exhibit 11 CFRA Report.
Key competitors in project delivery systems include Autodesk, Inc. and
Oracle Corporation;

Key competitors in asset performance systems include Aspen Technology,

Inc., the AVEVA unit of Schneider Electric, Environmental Systems
Research Institute, Inc., and General Electric Corp.

Exhibit 12 CFRA Report.

8
Monitoring Points:

 Market Dependency: Economic downturns, fluctuations in construction

activity, or delays in infrastructure projects can impact the company's
financial performance.
 Competitive Pressure: The software industry is highly competitive, with
established players like Autodesk and Dassault Systems. New entrants and
advances by competitors can erode Bentley Systems' market share.
 Potential lawsuits and reputational harm: 8% of the revenue are
through channel partners and they do not have brand loyalty and can sell
BSY’s software solutions and services, these can lead to lawsuits and
reputational harm because of channel partners.

ESG:

 BSY strongly supports the United Nations’ SDGs and focus to innovate in
ways that promote sustainable infrastructure and drive progress towards
ambitious global goals.
 Their purpose is to empower SDGs through their users’ use of our
technology, most notably through infrastructure digital twin solutions,
helping to drive resilient and sustainable infrastructure outcomes.
 In support of that vision, BSY has combined the two acronyms ESG and
SDG to form ES(D)G, our approach to conducting our business in ways
that ensures trust and responsibility by empowering sustainable
development goals and bringing to light the environmental handprint of
our software and services.
 ESG Disclosure: BSY enhanced several areas of disclosure in 2022,
including publishing greenhouse gas inventory, Employment Information
Report (EEO-1) data, Sustainability Accounting Standards Board (SASB)
index, and Global Reporting Index (GRI) index on our ESG data center
 Also reported to Climate Disclosure Program (CDP) and other relevant
questionnaires to ensure our current performance is understood and easy
to reference for our stakeholders
 ESG Strategy: 2022 is the 2nd year implementation of formal ESG
strategy.
 One area of focus is climate strategy, where BSY has made significant
progress in the last year. In 2022, BSY worked with a climate consultancy
firm to quantify their entire greenhouse gas footprint, including value
chain emissions, to understand their current performance and trends. BSY
submitted a near term (2030) climate target to the Science Based Targets
initiative (SBTi) to reduce absolute emissions for direct operations (Scope
1 and 2) and the emissions intensity of value chain emissions (Scope 3) on
an economic intensity basis.
9
ESG (continued):

 ESG score:

Exhibit 13 Sustainanalytics.

Exhibit 14 MSCI. Exhibit 15 MSCI.

10
Short term and Long term compensation plan:
The executive compensation at BSY is based on company performance.

Elements of executive compensation plan:

1. Base Salary:

Exhibit 16 Proxy statement 2023

2. Bonus Pool plan: Three of the NEO (Gregory Bentley, Keith Bentley and
David Hollister) are grandfathered into BSY bonus pool plans.
3. Annual Incentives: 2 other NEOs (Werner Andre and Nicholas Cumins) are
eligible for short term cash incentive opportunity which is based on
personalized management by objective (“MBO”) goals.
4. Equity Incentives: Werner and Nicholas were both also awarded RSU and
PSU in 2022.
Summary:

11
Short term and Long term compensation plan
(cont’d):

Exhibit 17 Proxy statement 2023.

Exhibit 18 Proxy statement 2023.

12
Exhibit 19 Excel Valuation model.

13
Exhibit 20 Excel Valuation model.

14
Exhibit 21 Excel Valuation model.

15
Appendix:

Exhibit 22 CFRA Report.

16