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ertibleDebtSecuritiesMember2022-01-012022-09-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________

FORM 10-Q
___________________________________

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission File Number: 001-39548
___________________________________

BENTLEY SYSTEMS, INCORPORATED
(Exact name of registrant as specified in its charter)
___________________________________
Delaware
95-3936623
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
685 Stockton Drive
Exton, Pennsylvania
19341
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (610) 458-5000
___________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading SymbolName of each exchange on which registered
Class B Common Stock, par value $0.01 per shareBSY
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
Large accelerated filer
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐  No 

As of October 31, 2023, the registrant had 11,567,627 shares of Class A and 284,354,543 shares of Class B Common Stock outstanding.



BENTLEY SYSTEMS, INCORPORATED
FORM 10-Q
TABLE OF CONTENTS

Page

2


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report includes forward‑looking statements. All statements contained in this report other than statements of historical facts, including statements regarding our future results of operations and financial position, our business strategy, and plans and our objectives for future operations, are forward‑looking statements. The words “believe,” “may,” “will,” “could,” “would,” “seeks,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions, as well as statements regarding our focus for the future, 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, including those described in the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward‑looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward‑looking statements. The forward‑looking statements, as well as our report as a whole, are subject to risks and uncertainties.
These statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from those anticipated by the forward‑looking statements. We discuss many of these risks in this report in greater detail in the section titled “Risk Factors” and elsewhere in this report. You should not rely upon forward‑looking statements as predictions of future events.
Although we believe that the expectations reflected in the forward‑looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, events, or circumstances reflected in the forward‑looking statements will occur. Except as required by law, we undertake no obligation to update any of these forward‑looking statements after the date of this report to conform these statements to actual results or revised expectations.
3



PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
BENTLEY SYSTEMS, INCORPORATED
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)

September 30, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$66,963 $71,684 
Accounts receivable243,488 296,376 
Allowance for doubtful accounts(8,312)(9,303)
Prepaid income taxes25,972 18,406 
Prepaid and other current assets46,128 38,732 
Total current assets374,239 415,895 
Property and equipment, net38,309 32,251 
Operating lease right-of-use assets41,434 40,249 
Intangible assets, net259,979 292,271 
Goodwill2,251,312 2,237,184 
Investments30,332 22,270 
Deferred income taxes61,664 52,636 
Other assets77,574 72,249 
Total assets$3,134,843 $3,165,005 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$26,389 $15,176 
Accruals and other current liabilities403,428 362,048 
Deferred revenues211,815 226,955 
Operating lease liabilities11,430 14,672 
Income taxes payable18,879 4,507 
Current portion of long-term debt8,750 5,000 
Total current liabilities680,691 628,358 
Long-term debt1,580,752 1,775,696 
Deferred compensation plan liabilities79,537 77,014 
Long-term operating lease liabilities31,355 27,670 
Deferred revenues15,189 16,118 
Deferred income taxes43,530 51,235 
Income taxes payable7,317 8,105 
Other liabilities4,311 7,355 
Total liabilities2,442,682 2,591,551 
Commitments and contingencies (Note 18)
Stockholders’ equity:
Preferred stock, $0.01 par value, authorized 100,000,000 shares; none issued or outstanding as of September 30, 2023 and December 31, 2022
  
Class A Common Stock, $0.01 par value, authorized 100,000,000 shares; issued and outstanding 11,567,627 and 11,601,757 shares as of September 30, 2023 and December 31, 2022, respectively, and Class B Common Stock, $0.01 par value, authorized 1,800,000,000 shares; issued and outstanding 283,676,579 and 277,412,730 shares as of September 30, 2023 and December 31, 2022, respectively
2,952 2,890 
Additional paid-in capital1,108,816 1,030,466 
Accumulated other comprehensive loss
(95,128)(89,740)
Accumulated deficit(325,183)(370,866)
Non-controlling interest704 704 
Total stockholders’ equity692,161 573,454 
Total liabilities and stockholders’ equity
$3,134,843 $3,165,005 

See accompanying notes to consolidated financial statements.
4



BENTLEY SYSTEMS, INCORPORATED
Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)

Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Revenues:
Subscriptions$270,751 $235,307 $807,839 $708,731 
Perpetual licenses11,887 9,460 33,152 31,213 
Subscriptions and licenses282,638 244,767 840,991 739,944 
Services23,974 23,565 76,781 72,190 
Total revenues306,612 268,332 917,772 812,134 
Cost of revenues:
Cost of subscriptions and licenses42,088 37,371 124,175 107,904 
Cost of services22,588 21,812 74,111 66,758 
Total cost of revenues64,676 59,183 198,286 174,662 
Gross profit241,936 209,149 719,486 637,472 
Operating expense (income):
Research and development65,465 63,827 203,382 189,966 
Selling and marketing53,757 46,114 160,262 141,676 
General and administrative42,678 37,794 128,743 128,981 
Deferred compensation plan(3,160)(4,576)4,763 (21,873)
Amortization of purchased intangibles9,517 10,446 29,567 30,869 
Total operating expenses168,257 153,605 526,717 469,619 
Income from operations
73,679 55,544 192,769 167,853 
Interest expense, net(10,047)(9,134)(30,623)(23,521)
Other income, net
5,953 932 7,207 14,793 
Income before income taxes
69,585 47,342 169,353 159,125 
Provision for income taxes
(16,514)(9,664)(22,107)(8,221)
Loss from investments accounted for using the equity method, net of tax
(44)(681)(44)(1,846)
Net income
$53,027 $36,997 $147,202 $149,058 
Per share information:
Net income per share, basic
$0.17 $0.12 $0.47 $0.48 
Net income per share, diluted
$0.16 $0.12 $0.46 $0.46 
Weighted average shares, basic313,069,132 310,116,104 311,915,808 308,959,801 
Weighted average shares, diluted332,825,186 325,170,383 332,144,893 332,077,834 

See accompanying notes to consolidated financial statements.
5



BENTLEY SYSTEMS, INCORPORATED
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)

Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Net income
$53,027 $36,997 $147,202 $149,058 
Other comprehensive loss, net of taxes:
Foreign currency translation adjustments(7,294)(12,809)(5,416)(10,192)
Actuarial (loss) gain on retirement plan, net of tax effect of $(8), $(5), $(15), and $(15), respectively
(6)11 28 37 
Total other comprehensive loss, net of taxes
(7,300)(12,798)(5,388)(10,155)
Comprehensive income
$45,727 $24,199 $141,814 $138,903 

See accompanying notes to consolidated financial statements.
6


BENTLEY SYSTEMS, INCORPORATED
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
(unaudited)

Three Months Ended September 30, 2023
Accumulated
Class A and Class BAdditionalOtherNon-Total
Common StockPaid-InComprehensiveAccumulatedControllingStockholders’
SharesPar ValueCapitalLossDeficitInterestEquity
Balance, June 30, 2023294,712,983 $2,947 $1,085,066 $(87,828)$(357,117)$704 $643,772 
Net income
— — — — 53,027 — 53,027 
Other comprehensive loss
— — — (7,300)— — (7,300)
Dividends declared— — — — (14,768)— (14,768)
Shares issued in connection with deferred compensation plan, net
63,267 — — — (2,127)— (2,127)
Deferred compensation plan elective participant deferrals— — 61 — — — 61 
Shares issued in connection with executive bonus plan, net
34,313 — 3,251 — (1,430)— 1,821 
Shares issued and repurchased in connection with employee stock purchase plan, net
162,459 2 5,429 — (623)— 4,808 
Stock option exercises, net185,255 2 888 — (419)— 471 
Stock-based compensation expense— — 14,122 — — — 14,122 
Shares related to restricted stock, net85,929 1 (1)— (1,726)— (1,726)
Balance, September 30, 2023295,244,206 $2,952 $1,108,816 $(95,128)$(325,183)$704 $692,161 

Nine Months Ended September 30, 2023
Accumulated
Class A and Class BAdditionalOtherNon-Total
Common StockPaid-InComprehensiveAccumulatedControllingStockholders’
SharesPar ValueCapitalLossDeficitInterestEquity
Balance, December 31, 2022289,014,487 $2,890 $1,030,466 $(89,740)$(370,866)$704 $573,454 
Net income
— — — — 147,202 — 147,202 
Other comprehensive loss
— — — (5,388)— — (5,388)
Dividends declared— — — — (43,992)— (43,992)
Shares issued in connection with deferred compensation plan, net
2,845,448 28 (28)— (38,456)— (38,456)
Deferred compensation plan elective participant deferrals— — 1,712 — — — 1,712 
Shares issued in connection with executive bonus plan, net
171,510 2 13,055 — (5,756)— 7,301 
Shares issued in connection with employee stock purchase plan, net
315,840 3 9,985 — (845)— 9,143 
Stock option exercises, net2,422,082 24 10,566 — (6,408)— 4,182 
Shares issued for stock grants, net12,639 — 600 — — — 600 
Stock-based compensation expense— — 42,465 — — — 42,465 
Shares related to restricted stock, net462,200 5 (5)— (6,062)— (6,062)
Balance, September 30, 2023295,244,206 $2,952 $1,108,816 $(95,128)$(325,183)$704 $692,161 

See accompanying notes to consolidated financial statements.
7


BENTLEY SYSTEMS, INCORPORATED
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
(unaudited)

Three Months Ended September 30, 2022
Accumulated
Class A and Class BAdditionalOtherTotal
Common StockPaid-InComprehensiveAccumulatedStockholders’
SharesPar ValueCapitalLossDeficitEquity
Balance, June 30, 2022288,154,159 $2,882 $981,203 $(89,131)$(397,961)$496,993 
Net income
— — — — 36,997 36,997 
Other comprehensive loss
— — — (12,798)— (12,798)
Dividends declared— — — — (8,592)(8,592)
Shares issued in connection with deferred compensation plan97,591 1 (1)— —  
Deferred compensation plan elective participant deferrals— — 1,586 — — 1,586 
Shares issued in connection with executive bonus plan, net125,195 1 4,416 — — 4,417 
Shares issued in connection with employee stock purchase plan, net197,657 2 5,722 — (152)5,572 
Stock option exercises, net218,018 2 992 — (59)935 
Stock-based compensation expense— — 11,158 — — 11,158 
Shares related to restricted stock, net58,270 — (1)— (1,060)(1,061)
Repurchases of Class B Common Stock under approved program(433,125)(4)— — (15,004)(15,008)
Balance, September 30, 2022288,417,765 $2,884 $1,005,075 $(101,929)$(385,831)$520,199 

Nine Months Ended September 30, 2022
Accumulated
Class A and Class BAdditionalOtherTotal
Common StockPaid-InComprehensiveAccumulatedStockholders’
SharesPar ValueCapitalLossDeficitEquity
Balance, December 31, 2021282,526,719 $2,825 $937,805 $(91,774)$(439,634)$409,222 
Net income
— — — — 149,058 149,058 
Other comprehensive loss
— — — (10,155)— (10,155)
Dividends declared— — — — (25,623)(25,623)
Shares issued in connection with deferred compensation plan, net3,523,386 35 (27)— (24,254)(24,246)
Deferred compensation plan elective participant deferrals— — 4,694 — — 4,694 
Shares issued in connection with executive bonus plan, net284,992 3 16,307 — (5,197)11,113 
Shares issued in connection with employee stock purchase plan, net307,406 3 10,332 — (273)10,062 
Stock option exercises, net2,272,603 23 6,832 — (8,459)(1,604)
Acquisition option exercises, net185,178 2 (2)— —  
Shares issued for stock grants, net13,632 — 450 — — 450 
Stock-based compensation expense— — 28,687 — — 28,687 
Shares related to restricted stock, net199,975 2 (3)— (3,208)(3,209)
Repurchases of Class B Common Stock under approved program(896,126)(9)— — (28,241)(28,250)
Balance, September 30, 2022288,417,765 $2,884 $1,005,075 $(101,929)$(385,831)$520,199 

See accompanying notes to consolidated financial statements.
8



BENTLEY SYSTEMS, INCORPORATED
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Nine Months Ended
September 30,
20232022
Cash flows from operating activities:
Net income
$147,202 $149,058 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization52,787 53,644 
Deferred income taxes(14,632)(13,670)
Stock-based compensation expense56,092 51,359 
Deferred compensation plan4,763 (21,873)
Amortization of deferred debt issuance costs5,469 5,468 
Change in fair value of derivative(4,102)(29,318)
Foreign currency remeasurement loss
3,198 14,445 
Other2,464 4,193 
Changes in assets and liabilities, net of effect from acquisitions:
Accounts receivable56,065 12,550 
Prepaid and other assets(1,246)7,779 
Accounts payable, accruals, and other liabilities33,437 28,765 
Deferred revenues(17,688)(26,725)
Income taxes payable, net of prepaid income taxes5,834 2,523 
Net cash provided by operating activities
329,643 238,198 
Cash flows from investing activities:
Purchases of property and equipment and investment in capitalized software(18,906)(12,982)
Proceeds from sale of aircraft 2,380 
Acquisitions, net of cash acquired (23,110)(719,539)
Purchases of investments(11,352)(10,304)
Proceeds from investments2,123  
Net cash used in investing activities
(51,245)(740,445)
Cash flows from financing activities:
Proceeds from credit facilities442,566 753,376 
Payments of credit facilities(634,718)(408,714)
Repayments of term loan(3,750)(3,750)
Payments of contingent and non-contingent consideration(3,039)(6,996)
Payments of dividends(43,992)(25,828)
Proceeds from stock purchases under employee stock purchase plan9,988 10,335 
Proceeds from exercise of stock options10,590 6,855 
Payments for shares acquired including shares withheld for taxes(57,527)(42,213)
Repurchases of Class B Common Stock under approved program (28,250)
Other(137)(123)
Net cash (used in) provided by financing activities
(280,019)254,692 
Effect of exchange rate changes on cash and cash equivalents(3,100)(8,926)
Decrease in cash and cash equivalents
(4,721)(256,481)
Cash and cash equivalents, beginning of year71,684 329,337 
Cash and cash equivalents, end of period
$66,963 $72,856 
9



BENTLEY SYSTEMS, INCORPORATED
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Nine Months Ended
September 30,
20232022
Supplemental information:
Cash paid for income taxes$29,467 $20,696 
Income tax refunds764 2,194 
Interest paid29,370 17,647 
Non-cash investing and financing activities:
Cost method investment3,500 6,022 
Deferred, non-contingent consideration, net525 157 
Share-settled executive bonus plan awards13,057 16,310 
Deferred compensation plan elective participant deferrals1,712 4,694 

See accompanying notes to consolidated financial statements.
10



BENTLEY SYSTEMS, INCORPORATED
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
(unaudited)

Note 1: Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of Bentley Systems, Incorporated and its wholly-owned subsidiaries (“Bentley Systems, Incorporated” or the “Company”), and have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all the information and notes required by U.S. GAAP for annual financial statements. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2022 Annual Report on Form 10K. In management’s opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal, recurring and non-recurring adjustments) that were considered necessary for the fair statement of the Company’s financial position, results of operations, and cash flows as of the dates and for the periods indicated. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. Actual results could differ materially from those estimates. The December 31, 2022 consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements.
Certain reclassifications of prior period amounts have been made to conform to the current period presentation. For the three and nine months ended September 30, 2023, payments related to the Company’s interest rate swap were recognized in Other income (expense), net in the consolidated statements of operations and the corresponding prior period amounts, which were previously recognized in Interest expense, net, were reclassified to conform to the current period presentation. For the three and nine months ended September 30, 2022, the amounts reclassified were not material, and Income before income taxes and Net income in the consolidated statements of operations did not change as a result of these reclassifications.
Note 2: Recent Accounting Pronouncements
Recently Adopted Accounting Guidance
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020‑04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020‑04”), which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020‑04 applies only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform between March 12, 2020 and December 31, 2022. In December 2022, the FASB issued ASU No. 2022‑06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting by extending the sunset date of Topic 848 to December 31, 2024. The expedients and exceptions provided by these ASUs do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2024, except for hedging relationships existing as of December 31, 2024, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company adopted these ASUs during the second quarter of 2023 (see Note 10) and the adoption did not have a material impact on the Company’s consolidated financial statements.
11



Note 3: Revenue from Contracts with Customers
Disaggregation of Revenues
The Company’s revenues consist of the following:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Subscriptions:
Enterprise subscriptions (1)
$111,318 $89,041 $318,896 $252,461 
SELECT subscriptions63,406 63,609 190,834 196,786 
Term license subscriptions96,027 82,657 298,109 259,484 
Subscriptions270,751 235,307 807,839 708,731 
Perpetual licenses11,887 9,460 33,152 31,213 
Subscriptions and licenses282,638 244,767 840,991 739,944 
Services:
Recurring3,606 4,557 12,733 13,431 
Other20,368 19,008 64,048 58,759 
Services23,974 23,565 76,781 72,190 
Total revenues$306,612 $268,332 $917,772 $812,134 
(1)Enterprise subscriptions includes revenue attributable to Enterprise 365 (“E365”) subscriptions of $107,681 and $80,298 for the three months ended September 30, 2023 and 2022, respectively, and $301,260 and $221,801 for the nine months ended September 30, 2023 and 2022, respectively.
The Company recognizes perpetual licenses and the term license component of subscriptions as revenue when either the licenses are delivered or at the start of the subscription term. For the three months ended September 30, 2023 and 2022, the Company recognized $147,340 and $125,140 of license related revenues, respectively, of which $135,453 and $115,680, respectively, were attributable to the term license component of the Company’s subscription‑based commercial offerings recorded in Subscriptions in the consolidated statements of operations. For the nine months ended September 30, 2023 and 2022, the Company recognized $444,186 and $380,237 of license related revenues, respectively, of which $411,034 and $349,024, respectively, were attributable to the term license component of the Company’s subscription‑based commercial offerings recorded in Subscriptions in the consolidated statements of operations.
The Company derived 8% and 7% of its total revenues through channel partners for the three months ended September 30, 2023 and 2022, respectively, and 7% of its total revenues through channel partners for the nine months ended September 30, 2023 and 2022.
12



Revenue from external customers is attributed to individual countries based upon the location of the customer. Revenues by geographic region are as follows:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Americas (1)
$162,367 $141,599 $489,548 $440,218 
Europe, the Middle East, and Africa (“EMEA”)86,956 75,416 263,232 227,696 
Asia-Pacific (“APAC”)
57,289 51,317 164,992 144,220 
Total revenues$306,612 $268,332 $917,772 $812,134 
(1)Americas includes the United States (“U.S.”), Canada, and Latin America (including the Caribbean). Revenue attributable to the U.S. totaled $129,510 and $122,372 for the three months ended September 30, 2023 and 2022, respectively, and $384,807 and $346,961 for the nine months ended September 30, 2023 and 2022, respectively.
Contract Assets and Contract Liabilities
September 30, 2023December 31, 2022
Contract assets$472 $575 
Deferred revenues227,004 243,073 
As of September 30, 2023 and December 31, 2022, the Company’s contract assets relate to performance obligations completed in advance of the right to invoice and are included in Prepaid and other current assets in the consolidated balance sheets. Contract assets were not impaired as of September 30, 2023 or December 31, 2022.
Deferred revenues consist of billings made or payments received in advance of revenue recognition from subscriptions and services. The timing of revenue recognition may differ from the timing of billings to users.
For the nine months ended September 30, 2023, $183,335 of revenues that were included in the December 31, 2022 deferred revenues balance were recognized. There were additional deferrals of $169,368 for the nine months ended September 30, 2023, which were primarily related to new billings and acquisitions. For the nine months ended September 30, 2022, $174,194 of revenues that were included in the December 31, 2021 deferred revenues balance were recognized. There were additional deferrals of $158,125 for the nine months ended September 30, 2022, which were primarily related to new billings and acquisitions.
As of September 30, 2023 and December 31, 2022, the Company has deferred $17,873 and $17,338, respectively, related to portfolio balancing exchange rights which is included in Deferred revenues in the consolidated balance sheets.
Remaining Performance Obligations
The Company’s contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. As of September 30, 2023, amounts allocated to these remaining performance obligations are $227,004, of which the Company expects to recognize approximately 93% over the next 12 months with the remaining amount thereafter.
13



Note 4: Acquisitions
The aggregate details of the Company’s acquisition activity are as follows:
Acquisitions Completed during
Nine Months Ended
September 30,
20232022
Number of acquisitions2 4 
Cash paid at closing (1)
$23,375 $738,810 
Cash acquired(265)(19,271)
Net cash paid$23,110 $719,539 
(1)Of the cash paid at closing for the nine months ended September 30, 2023 and 2022, $1,000 and $3,000, respectively, was deposited into an escrow account to secure any potential indemnification and other obligations of the seller.
On January 31, 2022, the Company completed the acquisition of Power Line Systems (“PLS”), a leader in software for the design of overhead electric power transmission lines and their structures, for $695,968 in cash, net of cash acquired. The operating results of the acquired businesses were not material, individually or in the aggregate, to the Company’s consolidated statements of operations.
The fair value of the contingent consideration from acquisitions is included in the consolidated balance sheets as follows:
September 30, 2023December 31, 2022
Accruals and other current liabilities$3 $1,196 
Contingent consideration from acquisitions$3 $1,196 
The fair value of non-contingent consideration from acquisitions is included in the consolidated balance sheets as follows:
September 30, 2023December 31, 2022
Accruals and other current liabilities$3,966 $2,434 
Other liabilities 2,977 
Non-contingent consideration from acquisitions$3,966 $5,411 
The operating results of the acquired businesses are included in the Company’s consolidated financial statements from the closing date of each respective acquisition. The purchase price for each acquisition has been allocated to the net tangible and intangible assets and liabilities based on their estimated fair values at the respective acquisition date.
The Company is in the process of finalizing the purchase accounting for one acquisition completed during the nine months ended September 30, 2023 and one acquisition completed during the year ended December 31, 2022. Identifiable assets acquired and liabilities assumed were provisionally recorded at their estimated fair values on the respective acquisition date. The initial accounting for these business combinations is not complete because the evaluation necessary to assess the fair values of certain net assets acquired is still in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date. The allocation of the purchase price may be modified from the date of the acquisition as more information is obtained about the fair values of assets acquired and liabilities assumed, however, such measurement period cannot exceed one year.
14



Acquisition costs are expensed as incurred and are recorded in General and administrative in the consolidated statements of operations. For the three months ended September 30, 2023 and 2022, the Company’s acquisition expenses were insignificant, and for the nine months ended September 30, 2023 and 2022 were $5,803 and $10,824, respectively, which include costs related to legal, accounting, valuation, insurance, general administrative, and other consulting and transaction fees. For the three and nine months ended September 30, 2022, $350 and $10,149, respectively, of the Company’s acquisition expenses related to the acquisition of PLS.
The following summarizes the fair values of the assets acquired and liabilities assumed, as well as the weighted average useful lives assigned to acquired intangible assets at the respective date of each acquisition (including contingent consideration):
Acquisitions Completed in
Nine Months EndedYear Ended
September 30, 2023December 31, 2022
Consideration:
Cash paid at closing$23,375 $763,228 
Contingent consideration 1,390 
Deferred, non-contingent consideration, net525 749 
Other56 (269)
Total consideration$23,956 $765,098 
Assets acquired and liabilities assumed:
Cash$265 $20,221 
Accounts receivable and other current assets1,706 8,890 
Operating lease right-of-use assets397 1,237 
Property and equipment 1,316 
Deferred income taxes2,151  
Other assets6 7 
Software and technology (weighted average useful life of 3 and 5 years, respectively)
2,600 10,608 
Customer relationships (weighted average useful life of 6 and 10 years, respectively)
3,900 82,278 
Trademarks (weighted average useful life of 5 and 8 years, respectively)
1,000 6,972 
Total identifiable assets acquired excluding goodwill12,025 131,529 
Accruals and other current liabilities(584)(4,079)
Deferred revenues(4,599)(14,176)
Operating lease liabilities(397)(1,237)
Deferred income taxes (5,745)
Total liabilities assumed(5,580)(25,237)
Net identifiable assets acquired excluding goodwill6,445 106,292 
Goodwill17,511 658,806 
Net assets acquired$23,956 $765,098 
15



The fair values of the working capital, other assets (liabilities), and property and equipment approximated their respective carrying values as of the acquisition date.
Deferred revenues were determined in accordance with the Company’s revenue recognition policies.
The fair values of the intangible assets were primarily determined using the income approach. When applying the income approach, indications of fair values were developed by discounting future net cash flows to their present values at market‑based rates of return. The cash flows were based on estimates used to price the acquisitions and the discount rates applied were benchmarked with reference to the implied rate of return from the Company’s pricing model and the weighted average cost of capital.
Goodwill recorded in connection with the acquisitions was attributable to synergies expected to arise from cost saving opportunities, as well as future expected cash flows. The Company expects $7,289 of the goodwill recorded relating to the 2023 acquisitions will be deductible for income tax purposes.
Note 5: Property and Equipment, Net
Property and equipment, net consist of the following:
September 30, 2023December 31, 2022
Land$2,811 $2,811 
Building and improvements36,293 35,717 
Computer equipment and software64,639 54,636 
Furniture, fixtures, and equipment14,848 14,600 
Aircraft2,038 2,038 
Other93 156 
Property and equipment, at cost120,722 109,958 
Less: Accumulated depreciation(82,413)(77,707)
Total property and equipment, net$38,309 $32,251 
Depreciation expense was $3,135 and $2,613 for the three months ended September 30, 2023 and 2022, respectively, and $8,769 and $8,025 for the nine months ended September 30, 2023 and 2022, respectively.
Related Party Equipment Sale
In January 2022, the Audit Committee of the Company’s Board of Directors authorized the Company to sell 50% of its interest in the Company’s aircraft at fair market value to an entity controlled by the Company’s Chief Executive Officer. The transaction was completed on February 1, 2022 for $2,380 and resulted in a gain of $2,029, which was recorded in Other income, net in the consolidated statements of operations for the nine months ended September 30, 2022 (see Note 20). Subsequent to the transaction, ongoing operating and fixed costs of the aircraft are shared on a proportional use basis subject to a cost-sharing agreement. Such costs were not material during the nine months ended September 30, 2023 and 2022. The Company determined this transaction was with a related party.
16


Note 6: Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill are as follows:
Balance, December 31, 2022$2,237,184 
Acquisitions17,511 
Foreign currency translation adjustments(3,179)
Other adjustments(204)
Balance, September 30, 2023$2,251,312 
Details of intangible assets other than goodwill are as follows:
September 30, 2023December 31, 2022
Estimated
Useful Life
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Intangible assets subject to amortization:
Software and technology
3-5 years
$88,675 $(55,305)$33,370 $92,390 $(51,938)$40,452 
Customer relationships
3-10 years
323,223 (135,237)187,986 323,164 (114,387)208,777 
Trademarks
3-10 years
70,510 (31,979)38,531 69,803 (26,904)42,899 
Non-compete agreements
5 years
350 (258)92 350 (207)143 
Total intangible assets$482,758 $(222,779)$259,979 $485,707 $(193,436)$292,271 
The aggregate amortization expense for purchased intangible assets with finite lives was reflected in the Company’s consolidated statements of operations as follows:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Cost of subscriptions and licenses$3,161 $3,129 $9,471 $9,305 
Amortization of purchased intangibles9,517 10,446 29,567 30,869 
Total amortization expense$12,678 $13,575 $39,038 $40,174 
Note 7: Investments
Investments consist of the following:
September 30, 2023December 31, 2022
Cost method investments$27,957 $22,174 
Equity method investments2,375 96 
Total investments$30,332 $22,270 
17


Cost Method Investments
Through its iTwin Ventures initiative, the Company invests in technology development companies, generally in the form of equity interests or convertible notes. In March 2023, the Company acquired an equity interest in Worldsensing, a leading global connectivity hardware platform company for infrastructure monitoring, via contribution of its sensemetrics’ Thread connectivity device business (the “Thread business”) and cash. The non‑cash contribution of the Thread business resulted in an insignificant gain, which was recorded in Other income, net in the consolidated statements of operations for the nine months ended September 30, 2023 (see Note 20). In July 2022, the Company acquired an equity interest in Teralytics Holdings AG (“Teralytics”), a global platform company for human mobility analysis.
During the second quarter of 2023, the Company recognized impairment charges of $7,318 to write-down certain cost method investments to their fair value primarily as a result of the investees’ decline in operating performance and the overall decline in the venture investment valuation environment. The impairment charges were recorded in Other income, net in the consolidated statements of operations for the nine months ended September 30, 2023 (see Note 20).
During the third quarter of 2023, the Company recognized gains on investments of $2,360, which was recorded in Other income, net in the consolidated statements of operations for the three and nine months ended September 30, 2023 (see Note 20).
During the nine months ended September 30, 2023, the Company invested a total of $12,591, including $8,928 of cash and non-cash for our investment in Worldsensing. During the nine months ended September 30, 2022, the Company invested a total of $14,921, including $11,130 of cash and non-cash for our investment in Teralytics. As of September 30, 2023, our investment balance in Worldsensing and Teralytics was $8,928 and $7,270, respectively. As of December 31, 2022, our investment balance in Teralytics was $11,130.
Equity Method Investments
The Company is party to joint ventures, which are accounted for using the equity method. For the nine months ended September 30, 2023 and 2022, the Company invested $2,261 and $1,700, respectively.
Note 8: Leases
The Company’s operating leases consist of office facilities, office equipment, and automobiles. As of September 30, 2023, the Company’s leases have remaining terms of less than one year to ten years, some of which include one or more options to renew, with renewal terms from one year to five years and some of which include options to terminate the leases from less than one year to five years.
The components of operating lease cost reflected in the consolidated statements of operations were as follows:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Operating lease cost (1)
$4,312 $4,703 $13,474 $15,651 
Variable lease cost1,133 1,115 3,481 3,356 
Short-term lease cost 6  16 
Total operating lease cost$5,445 $5,824 $16,955 $19,023 
(1)Operating lease cost includes rent cost related to operating leases for office facilities of $4,180 and $4,553 for the three months ended September 30, 2023 and 2022, respectively, and $12,926 and $15,120 for the nine months ended September 30, 2023 and 2022, respectively.
18



Supplemental operating cash flow and other information related to leases was as follows:
Nine Months Ended
September 30,
20232022