Bentley Systems Earnings: E365 Renewals and SMB Wins Continue to Boost Topline Growth

We reduce the fair value estimate for narrow-moat Bentley Systems to $45 from $48 following the firm's second-quarter earnings result. While the firm reported strong growth in E365 renewals, we have lowered our top-line expectations to adjust for weaker-than-anticipated professional services sales in the near term. Nevertheless, we are pleased to see Bentley's enduring strength in the public services and utilities markets, and traction in the SMB space. Solid annual recurring revenue, or ARR, growth was driven by SMB retention, asset analytics deals, and subscription renewals, but was offset by continued preference for perpetual licenses in China. Management guidance for fiscal 2024 remains unchanged. While we expect end-market digitization to drive top-line growth over the long term, we remain cautious of the market's overly optimistic outlook of the same. Shares were up 6% following results and remain moderately overvalued relative to our valuation.