Bentley Systems Earnings: Subscriptions Continue to Drive Growth Despite Perpetual License Headwinds

We raise our fair value estimate for narrow-moat Bentley Systems to $48 from $42, following a solid first-quarter earnings report. Annualized recurring revenue, or ARR, continues to be affected by perpetual license sales in China, but the firm’s solid public services sales base and growing SMB market kept the firm’s top-line growth strong. Looking ahead, we expect savings from scaled-based operating leverage and increased sales from digitization in end markets to fatten margins. Shares were up marginally following the earnings release but continue to screen as overvalued relative to our raised valuation.