Bentley Systems Announces Fourth Quarter and Full Year 2025 Results and 2026 Financial Outlook

Declares Quarterly Dividend

EXTON, Pa.--(BUSINESS WIRE)--Bentley Systems, Incorporated (Nasdaq: BSY), the infrastructure engineering software company, today announced results for the quarter ended December 31, 2025 and its financial outlook for 2026.

Fourth Quarter 2025 Results

• Total revenues were $391.6 million, up 11.9% or 9.7% on a constant currency basis, year-over-year;
• Subscriptions revenues were $356.6 million, up 13.0% or 10.8% on a constant currency basis, year-over-year;
• Annualized Recurring Revenues (“ARR”) were $1,462.1 million as of December 31, 2025, compared to $1,283.3 million as of December 31, 2024; Constant currency ARR growth rate was 11.5%;
• Last twelve-month recurring revenues dollar-based net retention rate was 109%, compared to 110% for the same period last year;
• Operating income margin was 20.0%, compared to 17.6% for the same period last year;
• Adjusted operating income less stock-based compensation expense (“AOI less SBC”) margin was 24.1%, compared to 21.5% for the same period last year;
• Net income per diluted share was $0.18, compared to $0.16 for the same period last year;
• Adjusted net income per diluted share (“Adjusted EPS”) was $0.27, compared to $0.21 for the same period last year;
• Cash flows from operating activities were $141.6 million, compared to $81.6 million for the same period last year; and
• Free cash flow was $136.2 million, compared to $76.1 million for the same period last year.

Full Year 2025 Results

• Total revenues were $1,501.8 million, up 11.0% or 10.1% on a constant currency basis over 2024;
• Subscriptions revenues were $1,376.7 million, up 12.5% or 11.7% on a constant currency basis over 2024;
• Operating income margin was 24.1%, compared to 22.3% for 2024;
• AOI less SBC margin was 28.6%, compared to 27.5% for 2024;
• Net income per diluted share was $0.85, compared to $0.72 for 2024;
• Adjusted EPS was $1.21, compared to $1.07 for 2024;
• Cash flows from operating activities were $538.5 million, compared to $435.3 million for 2024; and
• Free cash flow was $520.2 million, compared to $421.2 million for 2024.

Executive Chair Greg Bentley said, “BSY’s stalwart operating results and strategic acquisitions in 2025 set the stage for what I expect to be—increasingly accelerated by AI!—even better days and decades ahead, for colleagues, user organizations, and shareholders. Throughout crosscurrents of evolution within infrastructure engineering our consumption-based business model proves consistently reliable in aggregate. AI-agentic automation can greatly increase the value generated by our modeling and simulation functionality—and ultimately captured through A(P)I consumption—in optimizing infrastructure designs.

“A tremendous incremental opportunity for us has already been opened by AI, for continuous optimization of infrastructure operations and maintenance. Now, it is gratifying to report the long-anticipated critical mass being achieved through our Asset Analytics platform with the acquisitions of Pointivo and of Talon. This positions us for asset consumption leadership, proceeding from roadways and communications towers to the integrated grid for energy transmission and distribution. Here’s to 2026!”

CEO Nicholas Cumins said, “We delivered a strong finish to the year, giving us great momentum for our 2026 outlook, and I want to thank our colleagues for their outstanding dedication and our users for their continued partnership. The standout growth of our Seequent business continues to successfully expand our addressable market into critical resources. In parallel, we are building momentum in AI, from the growing commercial traction of Bentley Asset Analytics in operations, to our strategic push in the foundational area of AI in design—where we see enormous potential and are building the market to secure long-term leadership.”

CFO Werner Andre said, “Our 2025 results reflect a year of disciplined execution where we delivered on our commitments across the board. Our constant-currency growth of 11.5% in ARR, with less than half of a percent onboarded with acquisitions, was of notably high quality. Adjusted Operating Income less Stock-Based Compensation expense margin of 28.6% achieved our year-over-year margin improvement target of 100 basis-points (in constant currency), and free cash flow of $520 million significantly exceeded our raised outlook by virtue of strong collections and effective working capital management.

“We enter 2026 from a position of financial strength, having reduced our net debt leverage to a healthy 2.1 times, a four-year low, while the retirement of our 2026 convertible notes in January reduced our fully-diluted share count by approximately 3%. Our current leverage range and cash generation affords capacity to fund dividends, ongoing share repurchases, and up to $400 million in programmatic acquisitions annually. We are confident in our consistent outlook for 2026, starting with ARR growth range, again, of 10.5% to 12.5%.”

Recent Developments

• On January 5, 2026, we announced the acquisitions of Talon Aerolytics and the technology and technical expertise of Pointivo. These acquisitions, which closed in December, significantly strengthen our Asset Analytics portfolio, which applies digital twins and AI to help owner-operators improve asset performance and resilience across infrastructure sectors; and
• On January 15, 2026, we announced we repaid at maturity the $678 million principal balance and accrued interest on our 0.125% Convertible Senior Notes due 2026. The repayment was funded by cash on hand and $610 million drawn from our previously unused revolving credit facilities. $575 million of 0.375% Convertible Senior Notes due mid-2027 remain outstanding.

2026 Financial Outlook

The Company is sharing the following financial outlook for the full year 2026:

• Total revenues in the range of $1,685 million to $1,715 million, or growth rate of 11% to 13% in constant currency;
• Subscriptions revenues growth rate of 11% to 13% in constant currency;
• Perpetual licenses revenues growth rate approximately flat in constant currency;
• Services revenues growth rate of 15% to 20% in constant currency;
• Constant currency ARR growth rate (business performance, including programmatic acquisitions) of 10.5% to 12.5%;
• Adjusted operating income less operating stock-based compensation expense (“AOI less Operating SBC”) of $495 million to $510 million (representing annual margin improvement of approximately 100 bps in constant currency);
• Effective tax rate of approximately 21%; and
• Free cash flows in the range of $500 million to $570 million.

The 2026 outlook information provided above includes non-GAAP financial measures management uses in measuring performance and liquidity. The Company is unable to reconcile these forward-looking non-GAAP measures to GAAP without unreasonable efforts because it is not possible to predict with a reasonable degree of certainty the actual impact of certain items and unanticipated events, including stock‑based compensation charges, amortization of acquired intangible assets, realignment expenses, and other items, which would be included in GAAP results. The impact of such items and unanticipated events could be potentially significant.

The 2026 outlook is forward-looking, subject to significant business, economic, regulatory, and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and based upon assumptions with respect to future decisions, which are subject to change. Actual results may vary and those variations may be material. As such, our results may not fall within the ranges contained in this outlook. The Company uses these forward-looking measures to evaluate its ongoing operations and for internal planning and forecasting purposes.

First Quarter 2026 Dividend Declaration

On February 23, 2026, the Company’s Board of Directors declared a $0.07 per share dividend for the first quarter of 2026. The cash dividend is payable on March 19, 2026 to all stockholders of record of Class A and Class B common stock as of the close of business on March 10, 2026.

Call Details

Bentley Systems will host a live Zoom video webinar on February 26, 2026 at 8:15 a.m. EST to discuss results for its fourth quarter ended December 31, 2025.

Those wishing to participate should access the live Zoom video webinar of the event through a direct registration link at https://bentley-com.zoom.us/webinar/register/WN_IDE1r6AxQBK6Ltjwe2tpJg#/registration. Alternatively, the event can be accessed from the Events & Presentations page on Bentley Systems’ Investor Relations website at https://investors.bentley.com. In addition, a replay and transcript will be available after the conclusion of the live event on Bentley Systems’ Investor Relations website for one year.

Non-GAAP Financial Measures

In this press release, we sometimes refer to financial measures that are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain of these measures are considered non‑GAAP financial measures under the United States Securities and Exchange Commission (“SEC”) regulations. Those rules require the supplemental explanations and reconciliations that are in Bentley Systems’ Form 8‑K (Quarterly Earnings Release) furnished to the SEC.

In future periods, we will discuss AOI less Operating SBC rather than AOI less SBC as our primary performance measure, as management believes AOI less Operating SBC better captures the Company’s core business operating results. AOI less Operating SBC excludes certain expenses and charges, including cash- and equity-settled retention incentives provided to key employees of acquired companies, which we believe may not be indicative of the Company’s core business operating results. For comparability, we have provided reconciliations of our non‑GAAP primary performance measure under both the current and future period definitions for all periods presented.

Forward-Looking Statements

This press release includes forward-looking statements regarding the future results of operations and financial condition, business strategy, and plans and objectives for future operations of Bentley Systems, Incorporated (the “Company,” “we,” “us,” and words of similar import). All such statements contained in this press release, other than statements of historical facts, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations, projections, and assumptions about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, and there are a significant number of factors that could cause actual results to differ materially from statements made in this press release including: adverse changes in global economic and/or political conditions; the impact of tariffs and related policies on our business and the businesses of the industries we serve; the impact of current and future sanctions, embargoes and other similar laws at the state and/or federal level that impose restrictions on our counterparties or upon our ability to operate our business within the subject jurisdictions; political, economic, regulatory and public health and safety risks and uncertainties in the countries and regions in which we operate; failure to retain personnel necessary for the operation of our business or those that we acquire; failure to effectively manage succession; changes in the industries in which our accounts operate; the competitive environment in which we operate; the quality of our products; our ability to develop and market new products to address our accounts’ rapidly changing technological needs; changes in capital markets and our ability to access financing on terms satisfactory to us or at all; the impact of changing or uncertain interest rates on us and on the industries we serve; our ability to integrate acquired businesses successfully; and our ability to identify and consummate future investments and/or acquisitions on terms satisfactory to us or at all.

Further information on potential factors that could affect the financial results of the Company are included in the Company’s Form 10‑K and subsequent Form 10‑Qs, which are on file with the SEC. The Company disclaims any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

About Bentley Systems

Around the world, infrastructure professionals rely on software from Bentley Systems to help them design, build, and operate better and more resilient infrastructure for transportation, water, energy, cities, and more. Founded in 1984 by engineers for engineers, Bentley is the partner of choice for engineering firms and owner-operators worldwide, with software that spans engineering disciplines, industry sectors, and all phases of the infrastructure lifecycle. Through our digital twin solutions, we help infrastructure professionals unlock the value of their data to transform project delivery and asset performance.

© 2026 Bentley Systems, Incorporated. Bentley, the Bentley logo, Pointivo, Seequent, and Talon are either registered or unregistered trademarks or service marks of Bentley Systems, Incorporated or one of its direct or indirect wholly owned subsidiaries. All other brands and product names are trademarks of their respective owners.

BENTLEY SYSTEMS, INCORPORATED
Consolidated Balance Sheets
(in thousands)
(unaudited)
	December 31,
		2025			2024
Assets
Current assets:
Cash and cash equivalents	$	123,278		$	64,009
Accounts receivable		350,299			322,862
Allowance for doubtful accounts		(7,609	)		(8,395	)
Prepaid income taxes		19,805			13,066
Prepaid and other current assets		53,260			50,531
Total current assets		539,033			442,073
Property and equipment, net		36,031			33,798
Operating lease right-of-use assets		31,141			32,303
Intangible assets, net		193,018			213,959
Goodwill		2,482,154			2,367,179
Investments		27,920			25,764
Deferred income taxes		170,368			198,286
Other assets		75,502			86,445
Total assets	$	3,555,167		$	3,399,807
Liabilities and Equity
Current liabilities:
Accounts payable	$	26,952		$	16,479
Accruals and other current liabilities		173,255			169,522
Cloud Services Subscription deposits		463,312			366,895
Deferred revenues		278,244			245,729
Operating lease liabilities		13,669			11,656
Income taxes payable		4,778			4,053
Current portion of long-term debt		—			—
Total current liabilities		960,210			814,334
Long-term debt		1,248,912			1,388,088
Deferred compensation plan liabilities		106,831			96,684
Long-term operating lease liabilities		22,150			26,894
Deferred revenues		18,410			16,641
Deferred income taxes		4,368			8,612
Income taxes payable		—			3,615
Other liabilities		4,794			3,819
Total liabilities		2,365,675			2,358,687
Equity:
Common stock		3,024			3,020
Additional paid-in capital		1,301,205			1,217,986
Accumulated other comprehensive loss		(74,558	)		(104,078	)
Accumulated deficit		(40,258	)		(75,941	)
Total Bentley Systems stockholders’ equity		1,189,413			1,040,987
Noncontrolling interest		79			133
Total equity		1,189,492			1,041,120
Total liabilities and equity	$	3,555,167		$	3,399,807

BENTLEY SYSTEMS, INCORPORATED
Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
	Three Months Ended						Year Ended
	December 31,						December 31,
		2025			2024			2025			2024
Revenues:
Subscriptions	$	356,633		$	315,590		$	1,376,696		$	1,223,362
Perpetual licenses		14,282			14,312			46,180			45,961
Subscriptions and licenses		370,915			329,902			1,422,876			1,269,323
Services		20,667			19,920			78,903			83,772
Total revenues		391,582			349,822			1,501,779			1,353,095
Cost of revenues:
Cost of subscriptions and licenses		53,325			46,470			201,405			173,340
Cost of services		17,575			21,442			76,125			84,427
Total cost of revenues		70,900			67,912			277,530			257,767
Gross profit		320,682			281,910			1,224,249			1,095,328
Operating expense (income):
Research and development		80,990			77,099			307,576			281,247
Selling and marketing		84,504			78,722			289,543			255,177
General and administrative		66,429			57,679			217,332			210,374
Deferred compensation plan		2,038			(1,283	)		14,409			12,382
Amortization of purchased intangibles		8,211			8,281			32,768			33,998
Total operating expenses		242,172			220,498			861,628			793,178
Income from operations		78,510			61,412			362,621			302,150
Interest expense, net		(2,381	)		(5,755	)		(12,435	)		(22,044	)
Other (expense) income, net		(243	)		8,619			547			12,949
Income before income taxes		75,886			64,276			350,733			293,055
Provision for income taxes		(17,357	)		(14,627	)		(72,977	)		(58,726	)
Equity in net income of investees, net of tax		138			90			38			104
Net income		58,667			49,739			277,794			234,433
Less: Net income (loss) attributable to noncontrolling interest		29			(354	)		(67	)		(354	)
Net income attributable to Bentley Systems	$	58,638		$	50,093		$	277,861		$	234,787
Net income per share attributable to Bentley Systems stockholders:
Basic	$	0.19		$	0.16		$	0.88		$	0.75
Diluted	$	0.18		$	0.16		$	0.85		$	0.72
Weighted average shares:
Basic		314,203,618			315,035,554			314,690,707			314,886,615
Diluted		332,633,891			333,874,529			333,089,213			333,774,167

BENTLEY SYSTEMS, INCORPORATED
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
	Year Ended
	December 31,
		2025			2024
Cash flows from operating activities:
Net income	$	277,794		$	234,433
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and impairment		65,880			64,608
Deferred income taxes		24,333			12,571
Stock-based compensation expense		72,576			74,417
Deferred compensation plan		14,409			12,382
Amortization of deferred debt issuance costs		7,575			7,338
Change in fair value of derivative		10,238			(10	)
Foreign currency remeasurement loss (gain)		664			(785	)
Other		5,674			7,794
Changes in assets and liabilities, net of effect from acquisitions:
Accounts receivable		(18,584	)		(32,064	)
Prepaid and other assets		10,543			(6,006	)
Accounts payable, accruals, and other liabilities		(18,440	)		(16,642	)
Cloud Services Subscription deposits		77,190			91,595
Deferred revenues		19,006			(1,789	)
Income taxes payable, net of prepaid income taxes		(10,394	)		(12,550	)
Net cash provided by operating activities		538,464			435,292
Cash flows from investing activities:
Purchases of property and equipment and investment in capitalized software		(18,255	)		(14,046	)
Acquisitions, net of cash acquired		(93,252	)		(130,407	)
Purchases of investments		(981	)		(1,435	)
Other		179			2,621
Net cash used in investing activities		(112,309	)		(143,267	)
Cash flows from financing activities:
Proceeds from credit facilities		289,567			517,643
Payments of credit facilities		(424,882	)		(474,356	)
Repayments of term loan		—			(190,000	)
Repurchase of convertible senior notes		(9,797	)		—
Payments of debt issuance costs		—			(6,184	)
Payments of contingent and non-contingent consideration		(310	)		(3,022	)
Payments of dividends		(84,963	)		(72,115	)
Proceeds from stock purchases under employee stock purchase plan		11,534			11,228
Proceeds from exercise of stock options		—			4,007
Payments for shares acquired including shares withheld for taxes		(32,187	)		(12,504	)
Repurchases of Class B common stock under approved program		(125,057	)		(64,359	)
Other		(203	)		(188	)
Net cash used in financing activities		(376,298	)		(289,850	)
Effect of exchange rate changes on cash and cash equivalents		9,412			(6,578	)
Increase (decrease) in cash and cash equivalents		59,269			(4,403	)
Cash and cash equivalents, beginning of year		64,009			68,412
Cash and cash equivalents, end of year	$	123,278		$	64,009

BENTLEY SYSTEMS, INCORPORATED
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except share and per share data)
(unaudited)
Current Periods Definition: Reconciliation of operating income to AOI less SBC and to Adjusted operating income:
	Three Months Ended					Year Ended
	December 31,					December 31,
		2025		2024			2025		2024
Operating income	$	78,510	$	61,412		$	362,621	$	302,150
Amortization of purchased intangibles		11,470		11,520			45,658		46,679
Deferred compensation plan		2,038		(1,283	)		14,409		12,382
Acquisition expenses (cash-settled)		2,430		3,440			7,229		10,222
Realignment (income) expenses		—		(29	)		—		789
AOI less SBC		94,448		75,060			429,917		372,222
Stock-based compensation expense		17,452		16,417			71,949		73,505
Adjusted operating income	$	111,900	$	91,477		$	501,866	$	445,727

Future Periods Definition: Reconciliation of operating income to AOI less Operating SBC and to Adjusted operating income:
	Three Months Ended					Year Ended
	December 31,					December 31,
		2025		2024			2025		2024
Operating income	$	78,510	$	61,412		$	362,621	$	302,150
Amortization of purchased intangibles		11,470		11,520			45,658		46,679
Deferred compensation plan		2,038		(1,283	)		14,409		12,382
Acquisition expenses (cash- and equity-settled)		3,771		5,604			13,767		16,752
Realignment (income) expenses		—		(29	)		—		789
AOI less Operating SBC		95,789		77,224			436,455		378,752
Operating stock-based compensation expense		16,111		14,253			65,411		66,975
Adjusted operating income	$	111,900	$	91,477		$	501,866	$	445,727

Reconciliation of net income attributable to Bentley Systems to Adjusted net income:
	Three Months Ended												Year Ended
	December 31,												December 31,
	2025						2024						2025						2024
	$			EPS^(1)			$			EPS^(1)			$			EPS^(1)			$			EPS^(1)
Net income attributable to Bentley Systems	$	58,638		$	0.18		$	50,093		$	0.16		$	277,861		$	0.85		$	234,787		$	0.72
Non-GAAP adjustments, prior to income taxes:
Amortization of purchased intangibles		11,470			0.03			11,520			0.03			45,658			0.14			46,679			0.14
Stock-based compensation expense		17,452			0.05			16,417			0.05			71,949			0.22			73,505			0.22
Deferred compensation plan		2,038			0.01			(1,283	)		—			14,409			0.04			12,382			0.04
Acquisition expenses (cash-settled)		2,430			0.01			3,440			0.01			7,229			0.02			10,222			0.03
Realignment (income) expenses		—			—			(29	)		—			—			—			789			—
Other expense (income), net		243			—			(8,619	)		(0.03	)		(547	)		—			(12,949	)		(0.04	)
Total non-GAAP adjustments, prior to income taxes		33,633			0.10			21,446			0.06			138,698			0.42			130,628			0.39
Income tax effect of non-GAAP adjustments		(4,620	)		(0.01	)		(2,775	)		(0.01	)		(20,795	)		(0.06	)		(14,375	)		(0.04	)
Equity in net income of investees, net of tax		(138	)		—			(90	)		—			(38	)		—			(104	)		—
Adjusted net income^(2)	$	87,513		$	0.27		$	68,674		$	0.21		$	395,726		$	1.21		$	350,936		$	1.07
Adjusted diluted weighted average shares	332,633,891						333,874,529						333,089,213						333,774,167

_______________________________
(1)	Adjusted EPS was computed independently for each reconciling item presented; therefore, the sum of Adjusted EPS for each line item may not equal total Adjusted EPS due to rounding.
(2)	Adjusted EPS numerator includes $1,715 and $1,717 for the three months ended December 31, 2025 and 2024, respectively, and $6,720 and $6,880 for the years ended December 31, 2025 and 2024, respectively, related to interest expense, net of tax, attributable to the convertible senior notes using the if‑converted method.

Reconciliation of cash flows from operating activities to free cash flow:
	Three Months Ended						Year Ended
	December 31,						December 31,
		2025			2024			2025			2024
Cash flows from operating activities	$	141,588		$	81,632		$	538,464		$	435,292
Purchases of property and equipment and investment in capitalized software		(5,419	)		(5,547	)		(18,255	)		(14,046	)
Free cash flow	$	136,169		$	76,085		$	520,209		$	421,246

Reconciliation of cash flows from operating activities to Adjusted EBITDA:
	Three Months Ended						Year Ended
	December 31,						December 31,
		2025			2024			2025			2024
Cash flows from operating activities	$	141,588		$	81,632		$	538,464		$	435,292
Cash interest		2,002			5,072			7,846			17,202
Cash taxes		25,068			24,503			59,095			57,526
Cash deferred compensation plan distributions		—			—			3,766			2,436
Cash acquisition expenses		1,520			2,951			10,874			8,522
Cash realignment costs		—			162			—			12,768
Changes in operating assets and liabilities		(49,855	)		(14,351	)		(86,894	)		(59,069	)
Other^(1)		(1,744	)		(2,089	)		(7,390	)		(9,309	)
Adjusted EBITDA	$	118,579		$	97,880		$	525,761		$	465,368

_______________________________
(1)	Includes receipts related to interest rate swap.

Reconciliation of total revenues and subscriptions revenues to total revenues and subscriptions revenues in constant currency:
	Three Months Ended December 31, 2025							Three Months Ended December 31, 2024
	Actual		Impact of Foreign Exchange at 2024 Rates			Constant Currency		Actual		Impact of Foreign Exchange at 2024 Rates			Constant Currency
Total revenues	$	391,582	$	(8,008	)	$	383,574	$	349,822	$	(317	)	$	349,505
Subscriptions revenues	$	356,633	$	(7,442	)	$	349,191	$	315,590	$	(330	)	$	315,260

	Year Ended December 31, 2025							Year Ended December 31, 2024
	Actual		Impact of Foreign Exchange at 2024 Rates			Constant Currency		Actual		Impact of Foreign Exchange at 2024 Rates			Constant Currency
Total revenues	$	1,501,779	$	(12,387	)	$	1,489,392	$	1,353,095	$	(797	)	$	1,352,298
Subscriptions revenues	$	1,376,696	$	(11,533	)	$	1,365,163	$	1,223,362	$	(791	)	$	1,222,571

Explanation of Non-GAAP and Other Financial Measures

Constant currency

Constant currency and constant currency growth rates are non-GAAP financial measures that present our results of operations excluding the estimated effects of foreign currency exchange rate fluctuations. A significant amount of our operations is conducted in foreign currencies. As a result, the comparability of the financial results reported in U.S. dollars is affected by changes in foreign currency exchange rates. We use constant currency and constant currency growth rates to evaluate the underlying performance of the business, and we believe it is helpful for investors to present operating results on a comparable basis period over period to evaluate its underlying performance.

In reporting period‑over‑period results, except for ARR as discussed further below, we calculate the effects of foreign currency fluctuations and constant currency information by translating current and prior period results on a transactional basis to our reporting currency using prior period average foreign currency exchange rates in which the transactions occurred.

Recurring revenues

Recurring revenues are the basis for our other revenue-related key business metrics. We believe this measure is useful in evaluating our ability to consistently retain and grow our revenues from accounts with revenues in the prior period (“existing accounts”).

Recurring revenues are subscriptions revenues that recur monthly, quarterly, or annually with specific or automatic renewal clauses and professional services revenues in which the underlying contract is based on a fixed fee and contains automatic annual renewal provisions.

Annualized recurring revenues (“ARR”)

ARR is a key business metric that we believe is useful in evaluating the scale and growth of our business as well as to assist in the evaluation of underlying trends in our business. Furthermore, we believe ARR, considered in connection with our last twelve‑month recurring revenues dollar‑based net retention rate, is a leading indicator of revenue growth.

ARR is defined as the sum of the annualized value of our portfolio of contracts that produce recurring revenues as of the last day of the reporting period, and the annualized value of the last three months of recognized revenues for our contractually recurring consumption‑based software subscriptions with consumption measurement durations of less than one year, calculated using the spot foreign currency exchange rates. We believe that the last three months of recognized revenues, on an annualized basis, for our recurring software subscriptions with consumption measurement period durations of less than one year is a reasonable estimate of the annual revenues, given our consistently high retention rate and stability of usage under such subscriptions.

Constant currency ARR growth rate is the growth rate of ARR measured on a constant currency basis. In reporting period‑over‑period ARR growth rates in constant currency, we calculate constant currency growth rates by translating current and prior period ARR on a transactional basis to our reporting currency using current year budget exchange rates. Constant currency ARR growth rate from business performance excludes the ARR onboarding of our platform acquisitions and includes the impact from the ARR onboarding of programmatic acquisitions, which generally are immaterial, individually and in the aggregate. We believe these ARR growth rates are important metrics indicating the scale and growth of our business.

Last twelve‑month recurring revenues dollar‑based net retention rate

Last twelve‑month recurring revenues dollar‑based net retention rate is a key business metric that we believe is useful in evaluating our ability to consistently retain and grow our recurring revenues.

Last twelve‑month recurring revenues dollar‑based net retention rate is calculated, using the average exchange rates for the prior period, as follows: the recurring revenues for the current period, including any growth or reductions from existing accounts, but excluding recurring revenues from any new accounts added during the current period, divided by the total recurring revenues from all accounts during the prior period. A period is defined as any trailing twelve months. Related to our platform acquisitions, recurring revenues into new accounts will be captured as existing accounts starting with the second anniversary of the acquisition when such data conforms to the calculation methodology. This may cause variability in the comparison.

Current Periods Definition: Adjusted operating income less stock-based compensation expense (“AOI less SBC”)

AOI less SBC is a non-GAAP financial measure and was used to measure the operational strength and performance of our business, as well as to assist in the evaluation of underlying trends in our business.

AOI less SBC is defined as operating income adjusted for the following: amortization of purchased intangibles, expense (income) relating to deferred compensation plan liabilities, acquisition expenses (inclusive of cash-settled retention incentives provided to key employees of acquired companies), and realignment expenses (income), for the respective periods.

AOI less SBC was our primary performance measure, which excludes certain expenses and charges, including cash-settled retention incentives provided to key employees of acquired companies, as we believed these may not be indicative of the Company’s core business operating results. We intentionally included stock-based compensation expense in this measure as we believed it better captured the economic costs of our business.

Management used this non-GAAP financial measure to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, to evaluate financial performance, and in our comparison of our financial results to those of other companies. It was also a significant performance measure in certain of our executive incentive compensation programs.

AOI less SBC margin is calculated by dividing AOI less SBC by total revenues.

Future Periods Definition: Adjusted operating income less operating stock-based compensation expense (“AOI less Operating SBC”)

AOI less Operating SBC is a non-GAAP financial measure and is used to measure the operational strength and performance of our business, as well as to assist in the evaluation of underlying trends in our business.

AOI less Operating SBC is defined as operating income adjusted for the following: amortization of purchased intangibles, expense (income) relating to deferred compensation plan liabilities, acquisition expenses (inclusive of cash- and equity-settled retention incentives provided to key employees of acquired companies), and realignment expenses (income), for the respective periods.

AOI less Operating SBC will be our primary performance measure, which excludes certain expenses and charges, including cash- and equity-settled retention incentives provided to key employees of acquired companies, which we believe may not be indicative of the Company’s core business operating results. We intentionally include operating stock-based compensation expense in this measure as we believe it better captures the economic costs of our business.

Management uses this non-GAAP financial measure to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, to evaluate financial performance, and in our comparison of our financial results to those of other companies. It is expected to be a significant performance measure in certain of our executive incentive compensation programs.

AOI less Operating SBC margin is calculated by dividing AOI less Operating SBC by total revenues.

Current Periods Definition: Adjusted operating income (“AOI”)

Adjusted operating income is a non-GAAP financial measure that we believe is useful to investors in making comparisons to other companies, although this measure may not be directly comparable to similar measures used by other companies.

Adjusted operating income is defined as operating income adjusted for the following: amortization of purchased intangibles, expense (income) relating to deferred compensation plan liabilities, acquisition expenses (inclusive of cash-settled retention incentives provided to key employees of acquired companies), realignment expenses (income), and stock‑based compensation expense, for the respective periods.

Future Periods Definition: Adjusted operating income (“AOI”)

Adjusted operating income is a non-GAAP financial measure that we believe is useful to investors in making comparisons to other companies, although this measure may not be directly comparable to similar measures used by other companies.

Adjusted operating income is defined as operating income adjusted for the following: amortization of purchased intangibles, expense (income) relating to deferred compensation plan liabilities, acquisition expenses (inclusive of cash- and equity-based retention incentives provided to key employees of acquired companies), realignment expenses (income), and operating stock‑based compensation expense, for the respective periods.

Adjusted net income and Adjusted EPS

Adjusted net income and Adjusted EPS are non-GAAP financial measures presenting the earnings generated by our ongoing operations that we believe is useful to investors in making meaningful comparisons to other companies, although these measures may not be directly comparable to similar measures used by other companies, and period-over-period comparisons.

Adjusted net income is defined as net income attributable to Bentley Systems adjusted for the following: amortization of purchased intangibles, stock‑based compensation expense, expense (income) relating to deferred compensation plan liabilities, acquisition expenses (inclusive of cash-settled retention incentives provided to key employees of acquired companies), realignment expenses (income), other non‑operating (income) expense, net, the tax effect of the above adjustments to net income, and equity in net (income) losses of investees, net of tax, for the respective periods. The income tax effect of non‑GAAP adjustments was determined using the applicable rates in the taxing jurisdictions in which income or expense occurred, and represent both current and deferred income tax expense or benefit based on the nature of the non‑GAAP adjustments, including the tax effects of non‑cash stock‑based compensation expense.

Adjusted EPS is calculated as Adjusted net income, less net income attributable to Bentley Systems allocated to participating securities, plus interest expense, net of tax, attributable to the convertible senior notes using the if‑converted method, if applicable, (numerator) divided by Adjusted diluted weighted average shares (denominator). Adjusted diluted weighted average shares is calculated by adding incremental shares related to the dilutive effect of convertible senior notes using the if‑converted method, if applicable, to diluted weighted average shares.

Free cash flow

Free cash flow is a non-GAAP financial measure and our primary liquidity measure that we believe provides a meaningful measure of liquidity and a useful basis for assessing our ability to service our debt obligations, make strategic acquisitions and investments, and return capital to investors through dividends and stock repurchases. Additionally, we believe free cash flow is useful to investors as a basis for comparing our results with other companies in our industries, although our measure of free cash flow may not be directly comparable to similar measures used by other companies. Free cash flow has certain limitations, including that it does not represent the residual cash flow available for discretionary expenditures since other non-discretionary payments, such as mandatory debt repayments, are not deducted from the measure.

Free cash flow is defined as cash flows from operating activities less purchases of property and equipment and investment in capitalized software.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we believe provides a meaningful measure of liquidity and a useful basis for assessing our ability to repay debt, make strategic acquisitions and investments, and return capital to investors.

Adjusted EBITDA is defined as cash flows from operating activities adjusted for the following: cash interest, cash taxes, cash deferred compensation plan distributions, cash acquisition expenses, cash realignment costs, changes in operating assets and liabilities, and other cash items (such as those related to our interest rate swap). From time to time, we may exclude from Adjusted EBITDA the impact of certain cash receipts or payments that affect period-to-period comparability.