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~~June 30, ~~2020~~2021
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 class

Trading Symbol

Name of each exchange on which registered

Class B Common Stock, par value $0.01 per share

BSY

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~~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~~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~~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~~12b‑2 of the Exchange Act). Yes ☐ No ☒

As of ~~November~~August 3, ~~2020,~~2021, the registrant had 11,601,757 shares of Class A and ~~250,374,256~~270,068,341 shares of Class B Common Stock, par value $0.01 per share, outstanding.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

~~Form~~FORM 10-Q

~~Table of Contents~~TABLE OF CONTENTS


						Page
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
C ~~onsolidated~~Consolidated Balance Sheets as of ~~September 30, 2020~~June 3 0 , 2021 and December 31, ~~2019~~2020						3
Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020						4
Consolidated Statements of Comprehensive Income for the three and ~~nine~~ six months ended ~~September 30,~~June 3 0 , 2021 and 2020 ~~and 2019~~						5
Consolidated Statements of Stockholders’ Equity for the three and ~~nine~~ six months ended ~~September 30,~~June 3 0 , 2021 and 2020 ~~and 2019~~						6
Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020						8
Notes to Consolidated Financial Statements						910
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						4344
Item 3. Quantitative and Qualitative Disclosures About Market Risk						7378
Item 4. Controls and Procedures						7379

PART II. OTHER INFORMATION
Item 1. Legal Proceedings						7580
Item 1A. Risk Factors						7580
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						7580
Item 6. Exhibits						7681

SIGNATURE						7782

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


		September 30,		December 31,
		2020		2019			June 30, 2021		December 31, 2020
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	137,598	$	121,101	Cash and cash equivalents	$	131,154	$	122,006
Accounts receivable	Accounts receivable	172,600		211,775		Accounts receivable	221,764		195,782
Allowance for doubtful accounts	Allowance for doubtful accounts	(6,492)		(7,274)		Allowance for doubtful accounts	(6,396)		(5,759)
Prepaid income taxes	Prepaid income taxes	7,307		4,543		Prepaid income taxes	32,108		3,535
Prepaid and other current assets	Prepaid and other current assets	27,897		23,413		Prepaid and other current assets	26,864		24,694
Total current assets	Total current assets	338,910		353,558		Total current assets	405,494		340,258
Property and equipment, net	Property and equipment, net	29,332		29,632		Property and equipment, net	31,439		28,414
Operating lease right-of-use assets	Operating lease right-of-use assets	46,006		0		Operating lease right-of-use assets	52,599		46,128
Intangible assets, net	Intangible assets, net	46,560		46,313		Intangible assets, net	262,234		45,627
Goodwill	Goodwill	542,239		480,065		Goodwill	1,593,670		581,174
Investments	Investments	5,218		1,725		Investments	6,870		5,691
Deferred income taxes	Deferred income taxes	44,543		51,068		Deferred income taxes	54,705		39,224
Other assets	Other assets	37,689		32,238		Other assets	47,104		39,519
Total assets	Total assets	$	1,090,497	$	994,599	Total assets	$	2,454,115	$	1,126,035
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	15,086	$	17,669	Accounts payable	$	14,891	$	16,492
Accruals and other current liabilities	Accruals and other current liabilities	212,866		167,517		Accruals and other current liabilities	314,529		226,793
Deferred revenues	Deferred revenues	173,578		204,991		Deferred revenues	215,678		202,294
Operating lease liabilities	Operating lease liabilities	15,629		0		Operating lease liabilities	18,694		16,610
Income taxes payable	Income taxes payable	5,100		2,236		Income taxes payable	5,761		3,366
Total current liabilities	Total current liabilities	422,259		392,413		Total current liabilities	569,553		465,555
Long-term debt	Long-term debt	589,583		233,750		Long-term debt	1,269,842		246,000
Long-term operating lease liabilities	Long-term operating lease liabilities	32,555		0		Long-term operating lease liabilities	35,968		31,767
Deferred revenues	Deferred revenues	6,322		8,154		Deferred revenues	7,308		7,020
Deferred income taxes	Deferred income taxes	9,502		8,260		Deferred income taxes	70,683		10,849
Income taxes payable	Income taxes payable	7,874		8,140		Income taxes payable	7,613		7,883
Other liabilities	Other liabilities	15,229		9,263		Other liabilities	21,334		15,362
Total liabilities	Total liabilities	1,083,324		659,980		Total liabilities	1,982,301		784,436
Commitments and contingencies (Note 18)	Commitments and contingencies (Note 18)					Commitments and contingencies (Note 18)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Class A Common Stock, $0.01 par value, authorized 100,000,000 shares; issued 11,601,757 shares as of September 30, 2020 and December 31, 2019, and Class B Common Stock, $0.01 par value, authorized 1,800,000,000 shares; issued 250,625,279 and 243,241,192 shares as of September 30, 2020 and December 31, 2019, respectively (Note 13)		2,622		2,548
Preferred stock, $0.01 par value, authorized 100,000,000 shares; NaN issued or outstanding as of June 30, 2021 and December 31, 2020						Preferred stock, $0.01 par value, authorized 100,000,000 shares; NaN issued or outstanding as of June 30, 2021 and December 31, 2020	0		0
Class A Common Stock, $0.01 par value, authorized 100,000,000 shares; issued and outstanding 11,601,757 shares as of June 30, 2021 and December 31, 2020, and Class B Common Stock, $0.01 par value, authorized 1,800,000,000 shares; issued and outstanding 269,587,370 and 260,552,747 shares as of June 30, 2021 and December 31, 2020, respectively						Class A Common Stock, $0.01 par value, authorized 100,000,000 shares; issued and outstanding 11,601,757 shares as of June 30, 2021 and December 31, 2020, and Class B Common Stock, $0.01 par value, authorized 1,800,000,000 shares; issued and outstanding 269,587,370 and 260,552,747 shares as of June 30, 2021 and December 31, 2020, respectively	2,812		2,722
Additional paid-in capital	Additional paid-in capital	441,723		408,667		Additional paid-in capital	910,951		741,113
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(29,211)		(23,927)		Accumulated other comprehensive loss	(54,886)		(26,233)
Accumulated deficit	Accumulated deficit	(407,961)		(52,669)		Accumulated deficit	(387,063)		(376,003)
Total stockholders’ equity	Total stockholders’ equity	7,173		334,619		Total stockholders’ equity	471,814		341,599
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,090,497	$	994,599	Total liabilities and stockholders’ equity	$	2,454,115	$	1,126,035

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenues:	Revenues:									Revenues:
Subscriptions	Subscriptions	$	173,174	$	155,191	$	501,011	$	445,338	Subscriptions	$	185,452	$	157,655	$	373,577	$	327,837
Perpetual licenses	Perpetual licenses	12,827		13,787		36,020		38,255		Perpetual licenses	11,391		12,379		21,507		23,193
Subscriptions and licenses	Subscriptions and licenses	186,001		168,978		537,031		483,593		Subscriptions and licenses	196,843		170,034		395,084		351,030
Services	Services	16,996		17,610		44,946		50,139		Services	26,088		14,256		49,852		27,950
Total revenues	Total revenues	202,997		186,588		581,977		533,732		Total revenues	222,931		184,290		444,936		378,980
Cost of revenues:	Cost of revenues:									Cost of revenues:
Cost of subscriptions and licenses	Cost of subscriptions and licenses	23,338		17,370		66,466		48,201		Cost of subscriptions and licenses	29,881		21,801		58,826		43,128
Cost of services	Cost of services	19,290		17,681		50,126		56,048		Cost of services	23,570		14,904		43,914		30,836
Total cost of revenues	Total cost of revenues	42,628		35,051		116,592		104,249		Total cost of revenues	53,451		36,705		102,740		73,964
Gross profit	Gross profit	160,369		151,537		465,385		429,483		Gross profit	169,480		147,585		342,196		305,016
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	50,217		44,756		139,570		136,617		Research and development	52,776		44,218		100,579		89,353
Selling and marketing	Selling and marketing	41,824		36,721		107,551		111,889		Selling and marketing	38,014		29,632		70,454		65,727
General and administrative	General and administrative	33,006		25,108		85,275		71,415		General and administrative	41,878		25,465		75,266		52,269
Amortization of purchased intangibles	Amortization of purchased intangibles	3,869		3,550		10,984		10,402		Amortization of purchased intangibles	4,589		3,679		8,027		7,115
Expenses associated with initial public offering		26,130		0		26,130		0
Total operating expenses	Total operating expenses	155,046		110,135		369,510		330,323		Total operating expenses	137,257		102,994		254,326		214,464
Income from operations	Income from operations	5,323		41,402		95,875		99,160		Income from operations	32,223		44,591		87,870		90,552
Interest expense, net	Interest expense, net	(1,934)		(2,029)		(4,450)		(6,503)		Interest expense, net	(2,453)		(1,128)		(4,772)		(2,516)
Other income (expense), net		13,741		(12,306)		6,756		(14,053)
Other (expense) income, net										Other (expense) income, net	(3,777)		405		10,705		(6,985)
Income before income taxes	Income before income taxes	17,130		27,067		98,181		78,604		Income before income taxes	25,993		43,868		93,803		81,051
Provision for income taxes		(10,705)		(6,640)		(22,145)		(11,759)
Benefit (provision) for income taxes										Benefit (provision) for income taxes	20,746		(4,264)		10,388		(11,440)
Loss from investment accounted for using the equity method, net of tax	Loss from investment accounted for using the equity method, net of tax	(581)		0		(1,447)		0		Loss from investment accounted for using the equity method, net of tax	(1,829)		(528)		(2,275)		(866)
Net income	Net income	5,844		20,427		74,589		66,845		Net income	44,910		39,076		101,916		68,745
Less: Net income attributable to participating securities	Less: Net income attributable to participating securities	(4)		(10)		(4)		(10)		Less: Net income attributable to participating securities	(3)		0		(3)		0
Net income attributable to Class A and Class B common stockholders	Net income attributable to Class A and Class B common stockholders	$	5,840	$	20,417	$	74,585	$	66,835	Net income attributable to Class A and Class B common stockholders	$	44,907	$	39,076	$	101,913	$	68,745
Per share information:	Per share information:									Per share information:
Net income per share, basic	Net income per share, basic	$	0.02	$	0.07	$	0.26	$	0.23	Net income per share, basic	$	0.15	$	0.14	$	0.34	$	0.24
Net income per share, diluted	Net income per share, diluted	$	0.02	$	0.07	$	0.25	$	0.23	Net income per share, diluted	$	0.14	$	0.13	$	0.32	$	0.23
Weighted average shares outstanding, basic		289,318,391		286,075,323		287,063,892		286,024,263
Weighted average shares outstanding, diluted		299,634,961		289,629,555		297,251,349		294,586,354
Weighted average shares, basic										Weighted average shares, basic	304,066,038		286,945,592		303,311,423		286,068,766
Weighted average shares, diluted										Weighted average shares, diluted	324,478,086		295,187,194		323,094,045		295,595,234

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net income	Net income	$	5,844	$	20,427	$	74,589	$	66,845	Net income	$	44,910	$	39,076	$	101,916	$	68,745
Other comprehensive (loss) income, net of taxes:	Other comprehensive (loss) income, net of taxes:									Other comprehensive (loss) income, net of taxes:
Foreign currency translation adjustments	Foreign currency translation adjustments	(812)		3,357		(5,315)		5,763		Foreign currency translation adjustments	(19,513)		582		(28,695)		(4,503)
Actuarial gain on retirement plan, net of tax effect of $(6), $(2), $(21) and $(8), respectively		5		5		31		15
Actuarial gain on retirement plan, net of tax effect of $(9), $(8), $(17), and $(15), respectively										Actuarial gain on retirement plan, net of tax effect of $(9), $(8), $(17), and $(15), respectively	21		17		42		26
Total other comprehensive (loss) income, net of taxes	Total other comprehensive (loss) income, net of taxes	(807)		3,362		(5,284)		5,778		Total other comprehensive (loss) income, net of taxes	(19,492)		599		(28,653)		(4,477)
Comprehensive income	Comprehensive income	$	5,037	$	23,789	$	69,305	$	72,623	Comprehensive income	$	25,418	$	39,675	$	73,263	$	64,268

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


		Three Months Ended September 30, 2020												Three Months Ended June 30, 2021
							Accumulated												Accumulated
		Class A and Class B			Additional		other				Total			Class A and Class B			Additional		Other				Total
		Common Stock			paid-in		comprehensive		Accumulated		stockholders’			Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
		Shares	Par value		capital		loss		deficit		equity			Shares	Par Value		Capital		Loss		Deficit		Equity
Balance as of June 30, 2020		259,209,355	$	2,592	$	415,883	$	(28,404)	$	(10,327)	$	379,744
Balance, March 31, 2021													Balance, March 31, 2021	273,722,483	$	2,737	$	732,635	$	(35,394)	$	(345,981)	$	353,997
Net income	Net income	—	—		—		—		5,844		5,844		Net income	—	—		—		—		44,910		44,910
Other comprehensive loss	Other comprehensive loss	—	—		—		(807)		—		(807)		Other comprehensive loss	—	—		—		(19,492)		—		(19,492)
Dividends declared (Note 13)		—	—		—		—		(400,311)		(400,311)
Profit‑sharing plan shares, net		(164,266)	(1)		—		—		(2,541)		(2,542)
Shares issued related to acquisition													Shares issued related to acquisition	3,141,342	31		182,359		—		—		182,390
Purchase of capped call options, net of tax of $6,334													Purchase of capped call options, net of tax of $6,334	—	—		(19,591)		—		—		(19,591)
Dividends declared													Dividends declared	—	—		—		—		(8,372)		(8,372)
Shares issued in connection with deferred compensation plan, net	Shares issued in connection with deferred compensation plan, net	24,800	—		—		—		(47)		(47)		Shares issued in connection with deferred compensation plan, net	1,862,576	19		—		—		(53,072)		(53,053)
Deferred compensation plan voluntary contributions	Deferred compensation plan voluntary contributions	—	—		804		—		—		804		Deferred compensation plan voluntary contributions	—	—		639		—		—		639
Shares issued in connection with Executive Bonus Plan, net													Shares issued in connection with Executive Bonus Plan, net	69,486	1		6,148		—		(2,679)		3,470
Stock option exercises, net	Stock option exercises, net	1,321,475	13		5,538		—		(566)		4,985		Stock option exercises, net	2,393,937	24		2,549		—		(21,869)		(19,296)
Shares issued for stock grants, net													Shares issued for stock grants, net	7,824	—		450		—		—		450
Stock-based compensation expense	Stock-based compensation expense	—	—		19,517		—		—		19,517		Stock-based compensation expense	—	—		5,762		—		—		5,762
Shares related to restricted stock, net	Shares related to restricted stock, net	1,835,672	18		(19)		—		(13)		(14)		Shares related to restricted stock, net	(8,521)	0		—		—		0		0
Balance as of September 30, 2020		262,227,036	$	2,622	$	441,723	$	(29,211)	$	(407,961)	$	7,173
Balance, June 30, 2021													Balance, June 30, 2021	281,189,127	$	2,812	$	910,951	$	(54,886)	$	(387,063)	$	471,814


		Nine Months Ended September 30, 2020												Six Months Ended June 30, 2021
							Accumulated												Accumulated
		Class A and Class B			Additional		other				Total			Class A and Class B			Additional		Other				Total
		Common Stock			paid-in		comprehensive		Accumulated		stockholders’			Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
		Shares	Par value		capital		loss		deficit		equity			Shares	Par Value		Capital		Loss		Deficit		Equity
Balance as of December 31, 2019		254,842,949	$	2,548	$	408,667	$	(23,927)	$	(52,669)	$	334,619
Balance, December 31, 2020													Balance, December 31, 2020	272,154,504	$	2,722	$	741,113	$	(26,233)	$	(376,003)	$	341,599
Net income	Net income	—	—		—		—		74,589		74,589		Net income	—	—		—		—		101,916		101,916
Other comprehensive loss	Other comprehensive loss	—	—		—		(5,284)		—		(5,284)		Other comprehensive loss	—	—		—		(28,653)		—		(28,653)
Dividends declared (Note 13)		—	—		—		—		(415,748)		(415,748)
Profit‑sharing plan shares, net		(549,834)	(5)		—		—		(6,965)		(6,970)
Shares issued related to acquisition													Shares issued related to acquisition	3,141,342	31		182,359		—		—		182,390
Purchase of capped call options, net of tax of $12,584													Purchase of capped call options, net of tax of $12,584	—	—		(39,021)		—		—		(39,021)
Dividends declared													Dividends declared	—	—		—		—		(16,591)		(16,591)
Shares issued in connection with deferred compensation plan, net	Shares issued in connection with deferred compensation plan, net	2,984,531	30		—		—		(1,907)		(1,877)		Shares issued in connection with deferred compensation plan, net	2,202,079	22		—		—		(61,934)		(61,912)
Deferred compensation plan voluntary contributions	Deferred compensation plan voluntary contributions	—	—		2,602		—		—		2,602		Deferred compensation plan voluntary contributions	—	—		1,493		—		—		1,493
Payment of shareholder Put and Call rights		(128,176)	(1)		—		—		(1,453)		(1,454)
Common Stock Purchase Agreement, net		169	—		—		—		(57)		(57)
Shares issued in connection with Executive Bonus Plan, net													Shares issued in connection with Executive Bonus Plan, net	149,447	2		11,721		—		(4,716)		7,007
Stock option exercises, net	Stock option exercises, net	3,506,103	35		7,741		—		(3,618)		4,158		Stock option exercises, net	3,657,058	36		4,288		—		(29,027)		(24,703)
Shares issued for stock grants, net	Shares issued for stock grants, net	17,411	—		219		—		—		219		Shares issued for stock grants, net	7,824	—		450		—		—		450
Stock-based compensation expense	Stock-based compensation expense	—	—		22,510		—		—		22,510		Stock-based compensation expense	—	—		8,548		—		—		8,548
Shares related to restricted stock, net	Shares related to restricted stock, net	1,553,883	15		(16)		—		(133)		(134)		Shares related to restricted stock, net	(123,127)	(1)		—		—		(708)		(709)
Balance as of September 30, 2020		262,227,036	$	2,622	$	441,723	$	(29,211)	$	(407,961)	$	7,173
Balance, June 30, 2021													Balance, June 30, 2021	281,189,127	$	2,812	$	910,951	$	(54,886)	$	(387,063)	$	471,814

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


		Three Months Ended September 30, 2019												Three Months Ended June 30, 2020
							Accumulated												Accumulated
		Class A and Class B			Additional		other				Total			Class A and Class B			Additional		Other				Total
		Common Stock			paid-in		comprehensive		Accumulated		stockholders’			Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
		Shares	Par value		capital		loss		deficit		equity			Shares	Par Value		Capital		Loss		Deficit		Equity
Balance as of June 30, 2019		255,086,392	$	2,550	$	401,439	$	(26,998)	$	(88,670)	$	288,321
Balance, March 31, 2020													Balance, March 31, 2020	255,725,201	$	2,556	$	412,038	$	(29,003)	$	(34,581)	$	351,010
Net income	Net income	—	—		—		—		20,427		20,427		Net income	—	—		—		—		39,076		39,076
Other comprehensive income	Other comprehensive income	—	—		—		3,362		—		3,362		Other comprehensive income	—	—		—		599		—		599
Dividends declared (Note 13)		—	—		—		—		(6,380)		(6,380)
Dividends declared													Dividends declared	—	—		—		—		(7,771)		(7,771)
Profit‑sharing plan shares, net	Profit‑sharing plan shares, net	(97,140)	(1)		—		—		(725)		(726)		Profit‑sharing plan shares, net	(198,853)	(2)		—		—		(2,576)		(2,578)
Shares issued in connection with deferred compensation plan, net	Shares issued in connection with deferred compensation plan, net	3,377	0		—		—		(19)		(19)		Shares issued in connection with deferred compensation plan, net	2,276,659	23		—		—		(1,552)		(1,529)
Deferred compensation plan voluntary contributions and vesting of awards		—	—		788		—		—		788
Deferred compensation plan voluntary contributions													Deferred compensation plan voluntary contributions	—	—		795		—		—		795
Payment of shareholder Put and Call rights	Payment of shareholder Put and Call rights	(231,507)	(2)		—		—		(1,801)		(1,803)		Payment of shareholder Put and Call rights	(90,306)	(1)		—		—		(1,151)		(1,152)
Common Stock Purchase Agreement, net													Common Stock Purchase Agreement, net	169	—		—		—		(57)		(57)
Stock option exercises, net	Stock option exercises, net	322,004	3		855		—		(105)		753		Stock option exercises, net	1,486,795	16		1,491		—		(1,716)		(209)
Shares issued for stock grants													Shares issued for stock grants	6,460	—		100		—		—		100
Stock-based compensation expense	Stock-based compensation expense	—	—		2,021		—		—		2,021		Stock-based compensation expense	—	—		1,340		—		—		1,340
Shares related to restricted stock, net	Shares related to restricted stock, net	(7,415)	0		0		—		(175)		(175)		Shares related to restricted stock, net	3,230	—		119		—		1		120
Other		1,727	—		14		—		—		14
Balance as of September 30, 2019		255,077,438	$	2,550	$	405,117	$	(23,636)	$	(77,448)	$	306,583
Balance, June 30, 2020													Balance, June 30, 2020	259,209,355	$	2,592	$	415,883	$	(28,404)	$	(10,327)	$	379,744


		Nine Months Ended September 30, 2019												Six Months Ended June 30, 2020
							Accumulated												Accumulated
		Class A and Class B			Additional		other				Total			Class A and Class B			Additional		Other				Total
		Common Stock			paid-in		comprehensive		Accumulated		stockholders’			Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
		Shares	Par value		capital		loss		deficit		equity			Shares	Par Value		Capital		Loss		Deficit		Equity
Balance as of December 31, 2018		250,283,513	$	2,502	$	392,896	$	(29,414)	$	(218,553)	$	147,431
Cumulative effect of accounting changes		—	—		—		—		107,822		107,822
Balance, December 31, 2019													Balance, December 31, 2019	254,842,949	$	2,548	$	408,667	$	(23,927)	$	(52,669)	$	334,619
Net income	Net income	—	—		—		—		66,845		66,845		Net income	—	—		—		—		68,745		68,745
Other comprehensive income		—	—		—		5,778		—		5,778
Dividends declared (Note 13)		—	—		—		—		(19,023)		(19,023)
Other comprehensive loss													Other comprehensive loss	—	—		—		(4,477)		—		(4,477)
Dividends declared													Dividends declared	—	—		—		—		(15,437)		(15,437)
Profit‑sharing plan shares, net	Profit‑sharing plan shares, net	(258,103)	(3)		—		—		(1,936)		(1,939)		Profit‑sharing plan shares, net	(385,568)	(4)		—		—		(4,424)		(4,428)
Shares issued in connection with deferred compensation plan, net	Shares issued in connection with deferred compensation plan, net	2,233,807	22		—		—		(4,994)		(4,972)		Shares issued in connection with deferred compensation plan, net	2,959,731	30		—		—		(1,860)		(1,830)
Deferred compensation plan voluntary contributions and vesting of awards		—	—		2,664		—		—		2,664
Deferred compensation plan voluntary contributions													Deferred compensation plan voluntary contributions	—	—		1,798		—		—		1,798
Payment of shareholder Put and Call rights	Payment of shareholder Put and Call rights	(632,859)	(6)		—		—		(4,946)		(4,952)		Payment of shareholder Put and Call rights	(128,176)	(1)		—		—		(1,453)		(1,454)
Common Stock Purchase Agreement, net	Common Stock Purchase Agreement, net	64,509	1		466		—		(47)		420		Common Stock Purchase Agreement, net	169	—		—		—		(57)		(57)
Stock option exercises, net	Stock option exercises, net	2,979,031	30		3,009		—		(2,255)		784		Stock option exercises, net	2,184,628	22		2,203		—		(3,052)		(827)
Shares issued for stock grants													Shares issued for stock grants	17,411	—		219		—		—		219
Stock-based compensation expense	Stock-based compensation expense	—	—		6,046		—		—		6,046		Stock-based compensation expense	—	—		2,993		—		—		2,993
Shares related to restricted stock, net	Shares related to restricted stock, net	402,250	4		(4)		—		(344)		(344)		Shares related to restricted stock, net	(281,789)	(3)		3		—		(120)		(120)
Other		5,290	—		40		—		(17)		23
Balance as of September 30, 2019		255,077,438	$	2,550	$	405,117	$	(23,636)	$	(77,448)	$	306,583
Balance, June 30, 2020													Balance, June 30, 2020	259,209,355	$	2,592	$	415,883	$	(28,404)	$	(10,327)	$	379,744

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Nine Months Ended
September 30,
2020 2019
Cash flows from operating activities:
Net income $ 74,589 $ 66,845
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 25,836 23,334
Provision for accounts receivable allowance (541) 2,109
Deferred income taxes 7,853 833
Deferred compensation plan activity 2,487 2,968
Stock-based compensation expense 23,617 6,046
Amortization of deferred debt issuance costs 430 415
Change in fair value of derivative 3,365 159
Change in fair value of contingent consideration (1,340) 62
Foreign currency remeasurement (gain) loss (9,067) 13,956
Loss from investment accounted for using the equity method, net of tax 1,447 0
Changes in assets and liabilities, net of effect from acquisitions:
Accounts receivable 46,661 40,847
Prepaid and other assets 8,907 (6,505)
Accounts payable, accruals and other liabilities 31,486 18,545
Deferred revenues (35,134) (39,655)
Income taxes payable (4,571) (11,710)
Net cash provided by operating activities 176,025 118,249
Cash flows from investing activities:
Purchases of property and equipment and investment in capitalized software (12,805) (11,622)
Capitalization of costs to translate software products into foreign languages (728) (553)
Acquisitions, net of cash acquired of $2,064 and $980, respectively (68,920) (9,662)
Other investing activities (6,355) 0
Net cash used in investing activities (88,808) (21,837)
Cash flows from financing activities:
Proceeds from credit facilities 432,375 136,750
Payments of credit facilities (201,125) (147,500)
Proceeds from term loan 125,000 0
Payments of debt issuance costs (432) 0
Payments of financing leases (141) 0
Payments of acquisition debt and other consideration (2,034) (9,878)
Payments of dividends (412,852) (18,830)
Payments for shares acquired including shares withheld for taxes (72,476) (18,417)
Proceeds from Common Stock Purchase Agreement 58,349 4,510
Net proceeds from exercise of common stock options and restricted stock 3,206 3,039
Net cash used in financing activities (70,130) (50,326)
Effect of exchange rate changes on cash and cash equivalents (590) (1,272)
Increase in cash and cash equivalents 16,497 44,814
Cash and cash equivalents, beginning of year 121,101 81,183
Cash and cash equivalents, end of period $ 137,598 $ 125,997
Supplemental information:
Cash paid for income taxes $ 17,338 $ 24,453
Income tax refunds 1,630 1,126
Interest paid 4,658 7,214
Non-cash contingent acquisition consideration 1,902 50
Non-cash deferred acquisition consideration (141) 0


	Six Months Ended
	June 30,
	2021		2020
Cash flows from operating activities:
Net income	$	101,916	$	68,745
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	19,280		16,664
Bad debt allowance	291		293
Deferred income taxes	(915)		5,284
Deferred compensation plan activity	1,855		1,633
Stock-based compensation expense	20,598		3,212
Amortization and write-off of deferred debt issuance costs	2,371		277
Change in fair value of derivative	(7,735)		4,174
Change in fair value of contingent consideration	0		(1,390)
Foreign currency remeasurement (gain) loss	(2,371)		3,538
Loss from investment accounted for using the equity method, net of tax	2,275		866
Changes in assets and liabilities, net of effect from acquisitions:
Accounts receivable	(4,665)		44,263
Prepaid and other assets	10,485		9,089
Accounts payable, accruals, and other liabilities	37,623		11,208
Deferred revenues	(4,756)		(29,500)
Income taxes payable, net of prepaid income taxes	(27,230)		(2,174)
Net cash provided by operating activities	149,022		136,182
Cash flows from investing activities:
Purchases of property and equipment and investment in capitalized software	(4,750)		(9,970)
Acquisitions, net of cash acquired of $36,847 and $2,064, respectively	(1,002,551)		(67,595)
Other investing activities	(700)		(1,414)
Net cash used in investing activities	(1,008,001)		(78,979)
Cash flows from financing activities:
Proceeds from credit facilities	581,233		164,375
Payments of credit facilities	(790,846)		(191,125)
Proceeds from convertible senior notes, net of discounts and commissions	1,233,377		0
Payments of debt issuance costs	(4,951)		0
Purchase of capped call options	(51,555)		0
Payments of financing leases	(101)		(93)
Payments of acquisition debt and other consideration	(544)		(1,091)
Payments of dividends	(16,591)		(15,901)
Payments for shares acquired including shares withheld for taxes	(87,836)		(69,307)
Proceeds from Common Stock Purchase Agreement	0		58,349
Proceeds from exercise of stock options	4,324		2,237
Net cash provided by (used in) financing activities	866,510		(52,556)
Effect of exchange rate changes on cash and cash equivalents	1,617		(232)
Increase in cash and cash equivalents	9,148		4,415
Cash and cash equivalents, beginning of year	122,006		121,101
Cash and cash equivalents, end of period	$	131,154	$	125,516

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended
	June 30,
	2021		2020
Supplemental information:
Cash paid for income taxes	$	25,109	$	7,180
Income tax refunds	5,895		298
Interest paid	1,871		3,162
Non-cash investing and financing activities:
Shares issued related to acquisition	182,390		0
Contingent acquisition consideration	4,991		1,706
Deferred, non-contingent consideration, net	9,593		1,069
Convertible senior notes expenses included in Accounts payable and Accruals and other current liabilities	692		0
Capped call options expenses included in Accounts payable and Accruals and other current liabilities	50		0
Share-settled Executive Bonus Plan awards	11,723		0
Voluntary deferred compensation plan contributions	1,493		1,798

See accompanying notes to consolidated financial statements.

BENTLEY SYSTEMS, INCORPORATED AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

(unaudited)

Note 1: Basis of Presentation ~~and Significant Accounting Policies~~

~~Description~~Basis of ~~Business and Operations~~Presentation — The accompanying unaudited consolidated financial statements include the accounts of Bentley Systems, Incorporated (“Bentley” or the “Company”) ~~is a Delaware corporation that was founded~~and its wholly-owned subsidiaries, and have been prepared in ~~1984 and is headquartered in Exton, Pennsylvania. The Company, together~~accordance with ~~its subsidiaries, is a leading global provider of infrastructure engineering software solutions for professionals and organizations involved~~accounting principles generally accepted in the ~~project delivery~~United States of America (“U.S. GAAP”) and ~~operational performance of infrastructure assets. The Company is dedicated to advancing infrastructure through its comprehensive software solutions that span engineering disciplines, assets,~~in accordance with the rules and lifecycle processes. The Company’s integrated software platform encompasses both the design and construction of infrastructure, which the Company refers to as project delivery, and the operation of infrastructure assets, which the Company refers to as asset performance. The Company’s software solutions are designed to enable information mobility for a more complete flow of information among applications, across distributed project teams, from offices to the field, and throughout the infrastructure lifecycle. The Company believes its solutions extend the reach and scope of digital engineering models from the project delivery phase into the asset performance phaseregulations of the ~~infrastructure lifecycle, which enables engineers to make infrastructure assets more intelligent~~U.S. Securities and ~~sustainable. Users~~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 Part II, Item 8 of the Company’s ~~solutions include engineers~~2020 Annual Report on Form 10‑K on file with the SEC. In management’s opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal, recurring and ~~construction professionals who collaborate on project delivery,~~non-recurring adjustments) that were considered necessary for the fair statement of the Company’s financial position, results of operations, and ~~owner‑operators who maintain, adapt,~~cash flows at the dates and ~~optimize~~for the ~~performance~~periods indicated. The preparation of ~~infrastructure assets.~~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 from those estimates. The December 31, 2020 consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements.

Seequent Acquisition — On June 17, 2021, the Company completed the acquisition of Seequent Holdings Limited (“Seequent”), a leader in software for geological and geophysical modeling, geotechnical stability, and cloud services for geodata management and collaboration, for $910,997 in cash, net of cash acquired, plus 3,141,342 shares of the Company’s Class B Common Stock (see Note 4).

Convertible Senior Notes — On January 26, 2021, the Company completed a private offering of $690,000 of 0.125% convertible senior notes due 2026 (the “2026 Notes”). The Company incurred $18,055 of expenses in connection with the 2026 Notes offering consisting of the payment of initial purchasers’ discounts and commissions, professional fees, and other expenses (“transaction costs”). In connection with the pricing of the 2026 Notes, the Company entered into capped call options with certain of the initial purchasers or their respective affiliates and certain other financial institutions. The capped call options are expected to reduce potential dilution to the Company’s Class B Common Stock upon any conversion of 2026 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. The Company paid premiums of $25,530 in connection with the capped call options (see Note 10).

On June 28, 2021, the Company completed a private offering of $575,000 of 0.375% convertible senior notes due 2027 (the “2027 Notes”). The Company incurred $15,065 of expenses in connection with the 2027 Notes offering consisting of transaction costs. In connection with the pricing of the 2027 Notes, the Company entered into capped call options with certain of the initial purchasers or their respective affiliates and certain other financial institutions. The capped call options are expected to reduce potential dilution to the Company’s Class B Common Stock upon any conversion of 2027 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. The Company paid premiums of $25,875 in connection with the capped call options (see Note 10).

Initial Public Offering — On September 25, 2020, the Company completed its initial public offering (“IPO”). The selling stockholders ~~identified in the Company’s registration statement on Form S-1, as amended, on file with the U.S. Securities and Exchange Commission (“SEC”)~~ sold 12,360,991 shares of Class B Common Stock at a public offering price of $22.00 per share. The Company did 0tnot sell any shares in the IPO and did 0tnot receive any of the proceeds from the sale of the Class B Common Stock sold by the selling ~~stockholders (see Notes 13~~stockholders. For further detail, see the audited consolidated financial statements and ~~15). For~~notes thereto included in Part II, Item 8 of the ~~three and nine months ended September 30,~~Company’s 2020 Annual Report on Form 10‑K on file with the SEC.

Follow-On Public Offering — On November 17, 2020, the Company ~~recorded $26,130 in~~ ~~Expenses associated with initial~~completed its follow‑on public offering ~~in the consolidated statements~~ of ~~operations. Expenses associated with initial~~11,500,000 shares of Class B Common Stock at a public offering ~~include certain non‑recurring costs relating~~price of $32.00 per share (the “Follow‑On Offering”). The Company sold 9,603,965 shares of Class B Common Stock (inclusive of 1,500,000 shares sold upon the exercise by the underwriters of their option to purchase additional shares of the Company’s ~~IPO, consisting~~Class B Common Stock). The selling stockholders sold 1,896,035 shares of Class B Common Stock. The Company received net proceeds of $294,429 after deducting expenses of $12,898. The Company did not receive any of the ~~payment of underwriting discounts and commissions applicable to~~proceeds from the sale of ~~shares~~the Class B Common Stock sold by the selling ~~stockholders, professional fees,~~stockholders. For further detail, see the audited consolidated financial statements and ~~other expenses.~~

~~Special Dividend —~~ ~~On August 28, 2020, the Company’s board of directors declared a special dividend of $1.50 per share~~notes thereto included in Part II, Item 8 of the Company’s ~~common stock ($392,489 in the aggregate) (the “Special Dividend”), payable to all stockholders of record as of August 31,~~ 2020 ~~including dividends which accrue~~Annual Report on ~~certain unvested restricted stock and restricted stock units (“RSUs”). The Company used its bank credit facility to pay the Special Dividend (see Note 10). In connection~~Form 10‑K on file with the Special Dividend declaration, an in kind adjustment was made to phantom shares issuable pursuant to the amended and restated Bentley Systems, Incorporated Nonqualified Deferred Compensation Plan (the “DCP”) (see Note 12) and the exercise price of all outstanding stock options at that time were reduced by $1.50, but not lower than $0.01 (see Note 15).SEC.

Risks and Uncertainties — COVID‑19 Pandemic — In March 2020, the World Health Organization declared a global pandemic related to the rapidly growing outbreak of the disease COVID‑19, caused by a novel strain of coronavirus, SARS‑CoV‑2. The COVID‑19 outbreak and certain preventative or protective actions that governments, businesses, and individuals have taken in respect of COVID‑19 have resulted in global business disruptions.

In response to the COVID‑19 pandemic, the Company implemented a number of initiatives to ensure the safety of its colleagues and enable them to move to a work from home environment seamlessly and continue working effectively. The Company’s business model is such that there was minimal disruption to the Company’s ability to deliver its solutions to ~~accounts, and the Company believes it did not have any loss of productivity during this transition.~~

accounts. The Company has also taken measures to reduce selected operating expenses, including various costs associated with travel and facilities. ~~Much of those resulting savings have been or will be re-invested in a portfolio of businesses outside of the Company’s core software business.~~

~~Basis of Presentation and Consolidation~~ — The unaudited consolidated financial statements and accompanying notes have been prepared in United States (“U.S.”) Dollars and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information along with the instructions to Form 10‑Q and Article 10 of SEC Regulation S‑X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair statement of the Company’s financial position, results of operations, and cash flows at the dates and for the periods indicated. The December 31, 2019 consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements included in the Company’s registration statement on Form S‑1, as amended, on file with the SEC. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the results expected for the remainder of the fiscal year.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company is party to a joint venture and an investment, both of which are accounted for using the equity method. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company’s principal subsidiaries are Bentley Systems International Limited (Ireland), Bentley Software International, Limited (Bermuda), Bentley Canada Inc. (Canada), Bentley Systems Europe BV (the Netherlands), Bentley Systems Pty Ltd. (Australia), Bentley Systems Co., Ltd. (Japan), Bentley Systems Germany GmbH (Germany), Bentley Systems Ltd. (UK), and Bentley Systems India Private Limited (India).

~~Use of Estimates —~~ The preparation of consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company’s significant estimates and assumptions include revenue recognition, adequacy of allowance for accounts receivable, determination of the fair value of acquired assets and liabilities, the fair value of derivative financial instruments, the fair value of common stock and stock‑based compensation, operating lease assets and liabilities, useful lives for depreciation and amortization, impairment of goodwill and intangible assets, and accounting for income taxes. Actual results could differ materially from these estimates.

~~Derivatives Not Designated As Hedging Instruments —~~ On March 31, 2020, the Company entered into an interest rate swap with a notional amount of $200,000 and a ten‑year term to reduce the interest rate risk associated with the Company’s Credit Facility (see Note 10). The interest rate swap is not designated as a hedging instrument for accounting purposes. The Company accounts for the swap as either an asset or a liability on the consolidated balance sheet and carries the derivative at fair value. Gains and losses from the change in fair value are recognized in ~~Other income (expense), net~~ ~~and payments related to the swap are recognized in~~ ~~Interest expense, net~~ in the consolidated statements of operations. The bank counterparty to the derivative potentially exposes the Company to credit-related losses in the event of nonperformance. To mitigate that risk, the Company only contracts with counterparties who meet the Company’s minimum requirements under its counterparty risk assessment process. The Company monitors counterparty risk on at least a quarterly basis and adjusts its exposure as necessary. The Company does not enter into derivative instrument transactions for trading or speculative purposes.

~~Leases —~~ ~~The Company determines if an arrangement is a lease at inception. Operating leases are included in~~ ~~Operating lease right‑of‑use assets, Operating lease liabilities, and~~ ~~Long‑term operating lease liabilities~~ in the Company’s consolidated balance sheet. Operating lease right‑of‑use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right‑of‑use assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate, if the Company’s leases do not provide an implicit rate, based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is determined based on the Company’s estimated credit rating, the term of the lease, economic environment where the asset resides, and full collateralization. The operating lease right‑of‑use assets also include any lease payments made and are reduced by any lease incentives. Options to extend or terminate the lease are considered in determining the lease term when it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight‑line basis over the lease term. The Company’s operating leases are primarily for office space, cars, and office equipment. The Company’s finance lease is included in ~~Property and equipment, net~~, ~~Accruals and other current liabilities, and~~ ~~Other liabilities~~ ~~in the Company’s consolidated balance sheet.~~

~~Significant Accounting Policies~~ — There have been no changes other than what is discussed herein to the Company’s significant accounting policies as compared to the significant accounting policies described in Note 1 to the Company’s consolidated financial statements as of and for the year ended December 31, 2019 included in the Company’s registration statement on Form S‑1, as amended, on file with the SEC. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes as of and for the year ended December 31, 2019 included in the Company’s registration statement on Form S‑1, as amended, on file with the SEC.

Note 2: Recent Accounting Pronouncements

In ~~August 2018,~~March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. ~~2018‑15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350‑40)~~2020‑04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ~~Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract~~(“ASU 2020‑04”), which ~~clarifies~~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 ~~accounting for implementation costs in cloud computing arrangements.~~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. The expedients and exceptions provided by ASU ~~2018‑15 is effective for the Company for the annual reporting period beginning~~2020‑04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December ~~15, 2020,~~31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and ~~interim periods beginning after December 15, 2021. Early adoption is permitted, including adoption in an interim period.~~that are retained through the end of the hedging relationship. The Company ~~is currently evaluating~~had no transactions that were impacted by ASU 2020‑04 during the ~~accounting, transition, and disclosure requirements of the standard and its impact on the Company’s consolidated results of operations and financial position.~~six months ended June 30, 2021.

Recently Adopted Accounting Guidance

In January 2017, the FASB issued ASU No. 2017‑04, ~~Intangibles-Goodwill~~Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test. A goodwill impairment will now be calculated as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ~~This ASU~~The new guidance is ~~effective for~~required to be applied on a prospective basis and as such, the Company ~~for~~will use the ~~interim and~~simplified test in its annual ~~reporting periods beginning after December 15, 2021. Early adoption is permitted, including adoption in an interim period.~~fourth quarter testing or more often if circumstances indicate a potential impairment may exist. The Company does not believe ~~that~~ this ASU will have a material impact on ~~the Company’s consolidated results of operations and financial position.~~

~~Recently Adopted Accounting Guidance~~

~~In February 2016, the FASB issued~~ ~~ASU No. 2016‑02~~ ~~regarding ASC Topic 842,~~ ~~Leases~~ (“Topic 842”). This ASU requires balance sheet recognition of lease assets and lease liabilities by lessees for leases classified as operating leases, with an optional policy election to not recognize lease assets and lease liabilities for leases with a term of 12 months or less. The amendments also require new disclosures, including qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. Subsequent to the issuance of ASU 2016‑02, the FASB issued ASU Nos. 2018‑01, ~~Land Easement Practical Expedient for Transition to Topic 842, 2018‑10,~~ ~~Codification Improvements to Topic 842~~, ~~Leases, 2018‑11, Leases (Topic 842):~~ ~~Targeted Improvements,~~ ~~and 2018‑20,~~ ~~Narrow-Scope Improvements for Lessors~~. These ASUs do not change the core principle of the guidance in Topic 842. Instead, these amendments are intended to clarify and improve operability of certain topics included within the lease standard.

~~The Company adopted Topic 842 as of January 1, 2020 using the~~ ~~modified retrospective method~~ ~~for all existing leases. Upon adoption, the Company recognized~~ its ~~lease assets and lease liabilities measured at the present value of all future fixed lease payments, discounted using the Company’s incremental borrowing rate.~~

The Company elected the package of practical expedients as permitted under the transition guidance, which allows the Company: (1) to not reassess whether any existing contracts are leases or contain a lease; (2) to not reassess the lease classification of existing leases; and (3) to not reassess treatment of initial direct costs for existing leases. Additionally, the Company elected the practical expedients to combine lease and non-lease components for new leases post adoption and to not recognize lease assets and lease liabilities for leases with a term of 12 months or less.

Upon adoption of Topic 842, the Company recognized right‑of‑use assets of $45,850 and lease liabilities of $47,666 calculated based on the present value of the remaining minimum lease payments as of the adoption date. Topic 842 did not have a material impact to the Company’s consolidated statement of operations (see Note 8).

~~In June 2016, the FASB issued ASU No. 2016‑13,~~ ~~Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ ~~(“Topic 326”)~~. Previous guidance required the allowance for doubtful accounts to be estimated based on an incurred loss model, which considers past and current conditions. Topic 326 requires companies to use an expected loss model that also considers reasonable and supportable forecasts of future conditions. Additionally, Topic 326 requires the allowance for doubtful accounts balance (contra‑asset) to be presented separately in the consolidated balance sheets. Topic 326 is effective for the Company for the annual period beginning after December 15, 2020, including interim periods within that annual period. The Company adopted Topic 326 as of January 1, 2020 using the modified retrospective method of adoption. The adoption of the standard did not have a material impact on the Company’s consolidated results of operations and financial position.

In August 2018, the FASB issued ASU No. 2018‑~~13,~~15, ~~Fair Value Measurement (Topic 820)~~Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350‑40):~~Disclosure Framework-Changes to the Disclosure Requirements~~ Customer’s Accounting for ~~Fair Value Measurement~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018‑~~13”~~15”)~~. ASU 2018‑13 modifies certain required disclosures and establishes new~~, which aligns the requirements ~~related~~for capitalizing implementation costs in cloud computing arrangements with the requirements for capitalizing implementation costs incurred to fair value measurement. Additionally, the disclosure requirement to state the reasons for transfers between Level 1 and Level 2, the policy for timing transfers between levels, and the valuation process for Level 3 measurements have been removed. ASU 2018‑13 is effective for thedevelop or obtain internal‑use software. The Company ~~for the annual period beginning after December 15, 2019, including interim periods within that annual period. The Company~~prospectively adopted the ASU effective January 1, ~~2020. The adoption of this ASU did~~2021. Capitalized costs related to cloud computing arrangements for the six months ended June 30, 2021, which are included in Prepaid and other current assets in the consolidated balance sheet, were not ~~have a material impact on the Company’s consolidated results of operations and financial position.~~material.

1211

In ~~December 2019,~~August 2020, the FASB issued ASU No. ~~2019‑12,~~2020‑06, ~~Income Taxes (Topic 740)~~Debt–Debt with Conversion and Other Options (Subtopic 470‑20) and Derivatives and Hedging–Contracts in Entity’s Own Equity (Subtopic 815‑40): ~~Simplifying the~~ Accounting for ~~Income Taxes~~Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU ~~2019‑12”~~2020‑06”), which ~~is intended to simplify various aspects related to~~simplifies the accounting for ~~income taxes. ASU 2019‑12 removes certain exceptions~~convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the ~~general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. ASU 2019‑12 is effective for~~use of the ~~Company for the annual period beginning after December 15, 2021, including interim periods within that annual period.~~if‑converted method. The Company early adopted the ASU effective January 1, ~~2020. The~~2021 using the modified retrospective method of adoption ~~of this ASU did not have a material impact on the Company’s consolidated results of operations~~(see Notes 10 and ~~financial position.~~23).

Note 3: Revenue from Contracts with Customers

The Company recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the expected consideration received in exchange for those goods or services.

Nature of Products and Services

The Company generates revenues from subscriptions, perpetual licenses, and professional services.

Subscriptions

SELECT subscriptions — A prepaid annual recurring subscription that accounts (which are based on distinct contractual and billing relationships with the Company, where affiliated entities of a single parent company may each have an independent account with the Company) can elect to add to a new or previously purchased perpetual license. SELECT provides accounts with benefits, including upgrades, comprehensive technical support, pooled licensing benefits, annual portfolio balancing exchange rights, learning benefits, certain Azure‑based cloud collaboration services, mobility advantages, and access to other available benefits. SELECT subscription revenues are recognized as distinct performance obligations are satisfied. The performance obligations within the SELECT offering, outside of the portfolio balancing exchange right, are concurrently delivered and have the same pattern of recognition. These performance obligations are accounted for ratably over the term as a single performance obligation.

Enterprise subscriptions— The Company also provides Enterprise subscription offerings which provide its largest accounts with complete and unlimited global access to the Company’s comprehensive portfolio of solutions. Enterprise License Subscriptions (“ELS”) provide access for a prepaid fee, which is based on the account’s usage of software in the preceding year, to effectively create a fee‑certain consumption‑based arrangement. ELS contain a term license component, SELECT maintenance and support, and performance consulting days. The SELECT maintenance and support benefits under ELS do not include a portfolio balancing performance obligation. Revenue is allocated to the various performance obligations based on their respective standalone selling price (“SSP”). Revenue allocated to the term license component is recognized upon delivery at the start of the subscription term while revenues for the SELECT maintenance and support and the performance consulting days are recognized as delivered over the subscription term. Billings in advance are recorded as Deferred revenues in the consolidated balance sheets.

Enterprise 365 (“E365”) subscriptions ~~which were introduced during the fourth quarter of 2018,~~ provide unrestricted access to the Company’s comprehensive software portfolio, similar to ELS, however, the accounts are charged based upon daily usage. The daily usage fee also includes a term license component, SELECT maintenance and support, hosting, and Success Plan services, which are designed to achieve business outcomes through more efficient and effective use of the Company’s software. E365 revenues are recognized based upon usage incurred by the account. Usage is defined as distinct user access on a daily basis. E365 subscriptions can contain quarterly usage floors or collars as accounts transition to the usage model or for accounts within the public sector. The term of E365 subscriptions aligns with calendar quarters and revenue is recognized based on actual usage.

1312

Term license subscriptions — The Company provides annual, quarterly, and monthly term licenses for its software products. Term license subscriptions contain a term license component and SELECT maintenance and support. Revenue is allocated to the various performance obligations based on their SSP. Annual term licenses (“ATL”) are generally prepaid annually for named user access to specific products. Quarterly term license (“QTL”) subscriptions allow accounts to pay quarterly in arrears for license usage that is beyond their prepaid subscriptions. Monthly term license (“MTL”) subscriptions are identical to QTL subscriptions, except for the term of the license, and the manner in which they are monetized. MTL subscriptions require a Cloud Services Subscription (“CSS”), which is described below. For ATL, revenue allocated to the term license component is recognized upon delivery at the start of the subscription term while revenue for the SELECT maintenance and support is recognized as delivered over the subscription term. Billings in advance are recorded as Deferred revenues in the consolidated balance sheets. For usage‑based QTL and MTL subscriptions, revenues are recognized based upon usage incurred by the account. Usage is defined as peak usage over the respective terms. The terms of QTL and MTL subscriptions align with calendar quarters and calendar months, respectively, and revenue is recognized based on actual usage.

Visas and Passports are quarterly or annual term licenses enabling users to access specific project or enterprise information and ~~entitle~~entitles users to certain functionality of the Company’s ProjectWise and AssetWise systems. The Company’s standard offerings are usage based with monetization through the Company’s CSS program as described below.

CSS is a program designed to streamline the procurement, administration, and payment process. The program requires an account to estimate their annual usage for CSS eligible offerings and deposit funds in advance. Actual consumption is monitored and invoiced against the deposit on a calendar quarter basis. CSS balances not utilized for eligible products or services may roll over to future periods or are refundable. Paid and unconsumed CSS balances are recorded in Accruals and other current liabilities in the consolidated balance sheets. Software and services consumed under CSS are recognized pursuant to the applicable revenue recognition guidance for the respective software or service and classified as subscriptions or services based on their respective nature.

Perpetual licenses

Perpetual licenses may be sold with or without attaching a SELECT subscription. Historically, attachment and retention of the SELECT subscription has been high given the benefits of the SELECT subscription. Perpetual license revenue is recognized upon delivery of the license to the user.

Services

The Company provides professional services including training, implementation, configuration, customization, and strategic consulting services. The Company performs projects on both a time and materials and a fixed fee basis. The Company’s recent and preferred contractual structures for delivering professional services include (i) delivery of the services in the form of subscription‑like, packaged offerings which are annually recurring in nature, and (ii) delivery of the Company’s growing portfolio of Success Plans in standard offerings which offer a level of subscription service over and above the standard technical support offered to all accounts as part of their SELECT or Enterprise agreement. Revenues are recognized as services are performed.

The Company primarily utilizes its direct internal sales force and also has arrangements through independent channel partners to promote and sell Bentley products and subscriptions to end‑users. Channel partners are authorized to promote the sale of an authorized set of Bentley products and subscriptions within an authorized geography under a Channel Partner Agreement.

1413

Significant Judgments and Estimates

The Company’s contracts with customers may include promises to transfer licenses (perpetual or term‑based), maintenance, and services to a user. Judgment is required to determine if the promises are separate performance obligations, and if so, the allocation of the transaction price to each performance obligation. When an arrangement includes multiple performance obligations which are concurrently delivered and have the same pattern of transfer to the customer, the Company accounts for those performance obligations as a single performance obligation. For contracts with more than one performance obligation, the transaction price is allocated among the performance obligations in an amount that depicts the relative SSP of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately and needs to determine whether there is a discount that should be allocated based on the relative SSP of the various products and services.

The Company’s SELECT agreement provides users with perpetual licenses a right to exchange software for other eligible perpetual licenses on an annual basis upon renewal. The Company refers to this option as portfolio balancing and has concluded that the portfolio balancing feature represents a material right resulting in the deferral of the associated revenue. Judgment is required to estimate the percentage of users who may elect to portfolio balance and considers inputs such as historical user elections. This feature is available once per term and must be exercised prior to the respective renewal term. The Company recognizes the associated revenue upon election or when the portfolio balancing right expires. This right is included in the initial and subsequent renewal terms and the Company reestablishes the revenue deferral for the material right upon the beginning of the renewal term. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company has deferred ~~$18,231~~$18,429 and ~~$18,060~~$18,166, respectively, related to portfolio balancing exchange rights which is included in Deferred revenues in the consolidated balance sheets.

Contract Assets and Contract Liabilities


		September 30,		December 31,
		2020		2019			June 30, 2021		December 31, 2020
Contract assets	Contract assets	$	313	$	644	Contract assets	$	581	$	446
Deferred revenues	Deferred revenues	179,900		213,145		Deferred revenues	222,986		209,314

As of ~~September~~June 30, 2021 and December 31, 2020, 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~~0t impaired as of ~~September~~June 30, 2021 and December 31, 2020.

Deferred revenues consist of billings made or payments received in advance of revenue recognition from subscriptions and professional services. The timing of revenue recognition may differ from the timing of billings to users.

~~During~~For the ~~nine~~six months ended ~~September~~June 30, 2021, $135,237 of revenue that was included in the December 31, 2020 deferred revenue balance was recognized. There were additional deferrals of $152,143, which were primarily related to new billings and acquisitions (see Note 4). For the six months ended June 30, 2020, ~~$177,462~~$144,391 of revenue that was included in the December 31, 2019 deferred revenue opening balance was recognized. There were additional deferrals of ~~$142,678,~~$118,767, which were primarily related to new billings.

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~~June 30, ~~2020,~~2021, amounts allocated to these remaining performance obligations are ~~$179,900,~~$222,986, of which the Company expects to recognize ~~96.5%~~96.7% over the next 12 months with the remaining amount thereafter.

1514

Disaggregation of Revenues

The following table details revenues:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenues:	Revenues:									Revenues:
Subscriptions:	Subscriptions:									Subscriptions:
SELECT subscriptions	SELECT subscriptions	$	67,509	$	65,450	$	199,848	$	196,564	SELECT subscriptions	$	66,934	$	64,448	$	133,074	$	132,339
Enterprise license subscriptions		55,978		48,320		165,268		135,959
Enterprise subscriptions (1)										Enterprise subscriptions (1)	67,662		50,556		138,677		109,290
Term license subscriptions	Term license subscriptions	49,687		41,421		135,895		112,815		Term license subscriptions	50,856		42,651		101,826		86,208
Subscriptions	Subscriptions	173,174		155,191		501,011		445,338		Subscriptions	185,452		157,655		373,577		327,837
Perpetual licenses:	Perpetual licenses:									Perpetual licenses:
Perpetual licenses	Perpetual licenses	12,827		13,787		36,020		38,255		Perpetual licenses	11,391		12,379		21,507		23,193
Subscriptions and licenses	Subscriptions and licenses	186,001		168,978		537,031		483,593		Subscriptions and licenses	196,843		170,034		395,084		351,030
Services:	Services:									Services:
Professional services (recurring)	Professional services (recurring)	4,308		5,238		11,624		15,682		Professional services (recurring)	5,006		3,536		11,083		7,316
Professional services (other)	Professional services (other)	12,688		12,372		33,322		34,457		Professional services (other)	21,082		10,720		38,769		20,634
Services	Services	16,996		17,610		44,946		50,139		Services	26,088		14,256		49,852		27,950
Total revenues	Total revenues	$	202,997	$	186,588	$	581,977	$	533,732	Total revenues	$	222,931	$	184,290	$	444,936	$	378,980

(1)Enterprise subscriptions includes revenue attributable to E365 subscriptions of $53,753 and $25,179 for the three months ended June 30, 2021 and 2020, respectively, and $102,018 and $47,173 for the six months ended June 30, 2021 and 2020, 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~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized ~~$85,369~~$87,885 and ~~$82,179~~$74,853 of license related revenues, respectively, of which ~~$72,542~~$76,494 and ~~$68,392,~~$62,474, respectively, ~~was~~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~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized ~~$245,639~~$183,510 and ~~$225,921~~$160,270 of license related revenues, respectively, of which ~~$209,619~~$162,003 and ~~$187,666,~~$137,077, respectively, ~~was~~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 7% and 8% of its total revenues through channel partners for the three ~~and nine~~ months ended ~~September~~June 30, 2021 and 2020, respectively, 8% and ~~2019.~~8% of its total revenues through channel partners for the six months ended June 30, 2021 and 2020, respectively.

1615

Revenue to external customers is attributed to individual countries based upon the location of the customer.


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenues:	Revenues:									Revenues:
Americas (1)	Americas (1)	$	102,104	$	91,776	$	287,942	$	259,216	Americas (1)	$	112,308	$	87,938	$	221,170	$	185,838
Europe, the Middle East, and Africa (“EMEA”) (2)	Europe, the Middle East, and Africa (“EMEA”) (2)	63,335		55,793		184,913		171,604		Europe, the Middle East, and Africa (“EMEA”) (2)	69,015		59,464		142,863		121,578
Asia-Pacific (“APAC”)	Asia-Pacific (“APAC”)	37,558		39,019		109,122		102,912		Asia-Pacific (“APAC”)	41,608		36,888		80,903		71,564
Total revenues	Total revenues	$	202,997	$	186,588	$	581,977	$	533,732	Total revenues	$	222,931	$	184,290	$	444,936	$	378,980

(1)Americas includes the United States (“U.S.”), Canada, and Latin America (including the Caribbean). Revenue attributable to the ~~United States~~U.S. totaled ~~$91,993~~$91,500 and ~~$79,974~~$76,781 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$251,194~~$184,440 and ~~$222,769~~$159,201 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

(2)Revenue attributable to the United Kingdom (“U.K.”) totaled ~~$18,470~~$20,242 and ~~$14,146~~$14,205 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$46,355~~$42,625 and ~~$41,443~~$27,885 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Note 4: Acquisitions

~~During~~For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and the year ended December 31, ~~2019,~~2020, the Company completed a number of acquisitions, ~~none~~for an aggregate purchase price of ~~which~~$1,236,372 and $102,094, respectively. On June 17, 2021, the Company completed the acquisition of Seequent, a leader in software for geological and geophysical modeling, geotechnical stability, and cloud services for geodata management and collaboration, for $910,997 in cash, net of cash acquired, plus 3,141,342 shares of the Company’s Class B Common Stock. The operating results of the acquired businesses, except for Seequent, were not material, individually or in the aggregate, to the Company’s consolidated statements of operations and financial position.

The aggregate details of the Company’s acquisition activity are as follows:


		Acquisitions Completed in
		Nine Months Ended		Year Ended			Acquisitions Completed in
		September 30,		December 31,			Six Months Ended		Year Ended
		2020		2019			June 30, 2021		December 31, 2020
Number of acquisitions	Number of acquisitions	4		4		Number of acquisitions	8		6
Cash paid at closing (1)	Cash paid at closing (1)	$	70,984	$	36,577	Cash paid at closing (1)	$	1,039,398	$	98,298
Cash acquired	Cash acquired	(2,064)		(2,523)		Cash acquired	(36,847)		(5,266)
Net cash paid	Net cash paid	$	68,920	$	34,054	Net cash paid	$	1,002,551	$	93,032

(1)Of the cash paid at closing ~~during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2020, $3,413~~2021, $5,250 was deposited into an escrow account to secure any potential indemnification and other obligations of the seller.

The fair value of the contingent consideration from acquisitions is included in the consolidated balance sheets as follows:

September 30, December 31,
2020 2019
Accruals and other current liabilities $ 3,583 $ 5,100
Other liabilities 1,560 1,499
Contingent consideration from acquisitions $ 5,143 $ 6,599

~~Non-contingent consideration from acquisitions of $91 and $900 as of September 30, 2020 and December 31, 2019, respectively, is included in~~ ~~Accruals and other current liabilities~~ ~~in the consolidated balance sheets.~~


	June 30, 2021		December 31, 2020
Accruals and other current liabilities	$	6,561	$	2,884
Other liabilities	2,167		1,415
Contingent consideration from acquisitions	$	8,728	$	4,299

1716

The fair value of non-contingent consideration from acquisitions is included in the consolidated balance sheets as follows:


	June 30, 2021		December 31, 2020
Accruals and other current liabilities	$	5,952	$	685
Other liabilities	6,986		1,774
Non-contingent consideration from acquisitions	$	12,938	$	2,459

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. ~~Independent valuations are obtained to support purchase price allocations when deemed appropriate.~~

In connection with the purchase price allocations related to the Company’s acquisitions, the Company has estimated the fair values of the support obligations assumed relative to acquired deferred revenue. The estimated fair values of the support obligations assumed were determined using a cost‑build‑up approach. The cost‑build‑up approach determines fair value by estimating the costs related to fulfilling the obligations plus a normal profit margin. ~~For accounting purposes, the sum of the costs and operating profit approximates the amount that the Company would be required to pay a third party to assume the support obligations.~~ These fair value adjustments reduce the revenues ~~recognized~~recognizable over the remaining support contract term of the Company’s acquired contracts. ~~During~~For the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the fair value adjustments to reduce revenue were ~~$288~~$998 and ~~$36,~~$79, respectively, and ~~$483~~$1,010 and ~~$310 during~~$195 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

The purchase accounting for the 48 acquisitions completed ~~during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2020 is~~2021 are not yet completed. 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.

Acquisition and integration costs are expensed as ~~incurred. During~~incurred and are recorded in General and administrative in the consolidated statements of operations. For the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company incurred acquisition and integration costs of ~~$531~~$10,233 and ~~$196,~~$265, respectively, and ~~$1,609~~$17,094 and ~~$447 during~~$1,078 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, which include costs related to legal, accounting, valuation, general administrative, and other consulting fees. ~~Such costs are recorded in~~ ~~General~~For the three and ~~administrative~~ insix months ended June 30, 2021, $9,180 and $15,896, respectively, of the Company’s ~~consolidated statements~~acquisition and integration costs related to the acquisition of ~~operations.~~Seequent.

1817

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 Ended		Year Ended			Acquisitions Completed in
		September 30,		December 31,			Six Months Ended		Year Ended
		2020		2019			June 30, 2021		December 31, 2020
Consideration:	Consideration:					Consideration:
Cash paid at closing	Cash paid at closing	$	70,984	$	36,577	Cash paid at closing	$	1,039,398	$	98,298
Shares issued at closing (1)(2)						Shares issued at closing (1)(2)	182,390		0
Contingent consideration	Contingent consideration	1,902		4,498		Contingent consideration	4,991		2,380
Deferred payment obligations to (from) sellers		(141)		0
Deferred, non-contingent consideration, net						Deferred, non-contingent consideration, net	9,593		1,416
Total consideration	Total consideration	$	72,745	$	41,075	Total consideration	$	1,236,372	$	102,094
Assets acquired and liabilities assumed:	Assets acquired and liabilities assumed:					Assets acquired and liabilities assumed:
Cash	Cash	$	2,064	$	2,523	Cash	$	36,847	$	5,266
Prepaid and other current assets	Prepaid and other current assets	5,671		1,782		Prepaid and other current assets	21,594		8,701
Operating lease right-of-use assets	Operating lease right-of-use assets	1,668		0		Operating lease right-of-use assets	12,418		2,529
Property and equipment	Property and equipment	172		411		Property and equipment	6,310		499
Investments						Investments	2,211		0
Other assets	Other assets	36		84		Other assets	523		36
Customer relationship asset (weighted average useful life of 7 years)		8,854		6,534
Software and technology (weighted average useful life of 3 years)		2,207		2,423
Software and technology (weighted average useful life of 5 and 3 years, respectively)						Software and technology (weighted average useful life of 5 and 3 years, respectively)	44,735		2,207
Customer relationships (weighted average useful life of 9 and 6 years, respectively)						Customer relationships (weighted average useful life of 9 and 6 years, respectively)	140,299		11,371
Trademarks (weighted average useful life of 10 and 7 years, respectively)						Trademarks (weighted average useful life of 10 and 7 years, respectively)	41,417		3,953
Non-compete agreement (useful life of 5 years)	Non-compete agreement (useful life of 5 years)	200		150		Non-compete agreement (useful life of 5 years)	0		200
Trademarks (weighted average useful life of 9 and 5 years, respectively)		3,050		1,431
In-process research and development						In-process research and development	4,300		0
Total identifiable assets acquired excluding goodwill	Total identifiable assets acquired excluding goodwill	23,922		15,338		Total identifiable assets acquired excluding goodwill	310,654		34,762
Accruals and other current liabilities	Accruals and other current liabilities	(2,458)		(3,538)		Accruals and other current liabilities	(24,580)		(4,991)
Deferred revenues	Deferred revenues	(4,274)		(2,897)		Deferred revenues	(16,041)		(5,351)
Operating lease liabilities	Operating lease liabilities	(1,668)		0		Operating lease liabilities	(12,336)		(2,529)
Deferred income taxes	Deferred income taxes	(1,005)		(1,869)		Deferred income taxes	(54,142)		(1,701)
Other liabilities	Other liabilities	(87)		0		Other liabilities	(895)		(86)
Total liabilities assumed	Total liabilities assumed	(9,492)		(8,304)		Total liabilities assumed	(107,994)		(14,658)
Net identifiable assets acquired excluding goodwill	Net identifiable assets acquired excluding goodwill	14,430		7,034		Net identifiable assets acquired excluding goodwill	202,660		20,104
Goodwill	Goodwill	58,315		34,041		Goodwill	1,033,712		81,990
Net assets acquired	Net assets acquired	$	72,745	$	41,075	Net assets acquired	$	1,236,372	$	102,094

(1)Of the total 3,141,342 shares issued at closing, 83,627 shares are subject to forfeiture if post‑closing employment service conditions are not met. Accordingly, $5,452 is being recorded as stock‑based compensation expense over the related forfeiture period of two years.

(2)A fair value adjustment of $16,943 was applied to the stock consideration due to restrictions on the transfer of securities.

The fair values of the working capital, other assets (liabilities), and property and equipment approximated their respective carrying values as of the acquisition date.

As discussed above, the fair values of deferred revenues were determined using the cost‑build‑up approach.

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. Of the goodwill recorded as of ~~September~~June 30, ~~2020, $24,085~~2021, $16,606 is expected to be deductible for tax purposes.

Unaudited Pro Forma Financial Information

~~Acquisition Subsequent~~Had the acquisition of Seequent been made at the beginning of 2020, unaudited pro forma total revenues for the three months ended June 30, 2021 and 2020 would have been $241,762 and $199,339, respectively, and $497,545 and $419,180 for the six months ended June 30, 2021 and 2020, respectively. Net income, net income per share, basic, and net income per share, diluted for the three and six months ended June 30, 2021 and 2020 would not have been materially different than the amounts reported primarily due to ~~September 30, 2020~~the pro forma adjustments to reflect the amortization of purchased intangibles and the cost to finance the transaction, net of the related tax effects.

~~In October 2020,~~The unaudited pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of 2020. The unaudited pro forma financial information combines the historical results of the Company, the adjusted historical results of Seequent considering the date the Company completed the acquisition of ~~Professional Construction Strategies Group Ltd.~~Seequent, and the effects of the pro forma adjustments described above.

Acquisitions Subsequent to ~~further advance its digital integrator capabilities.~~June 30, 2021

In July 2021, the Company completed 2 acquisitions. The ~~acquisition is~~acquisitions are not expected to be material to the Company’s consolidated statements of operations and financial position.

Note 5: Property and Equipment, Net

Property and equipment, net consist of the ~~following as of September 30, 2020 and December 31, 2019:~~following:


		September 30,		December 31,
		2020		2019			June 30, 2021		December 31, 2020
Land	Land	$	2,811	$	2,811	Land	$	2,811	$	2,811
Building and improvements	Building and improvements	32,803		31,619		Building and improvements	34,639		33,094
Computer equipment and software	Computer equipment and software	50,087		47,472		Computer equipment and software	48,549		44,369
Furniture, fixtures, and equipment	Furniture, fixtures, and equipment	12,930		12,593		Furniture, fixtures, and equipment	14,857		12,849
Aircraft	Aircraft	4,075		3,910		Aircraft	4,075		4,075
Other	Other	58		79		Other	60		58
Property and equipment, at cost	Property and equipment, at cost	102,764		98,484		Property and equipment, at cost	104,991		97,256
Less accumulated depreciation		(73,432)		(68,852)
Less: Accumulated depreciation						Less: Accumulated depreciation	(73,552)		(68,842)
Total property and equipment, net	Total property and equipment, net	$	29,332	$	29,632	Total property and equipment, net	$	31,439	$	28,414

Depreciation expense was ~~$2,630~~$2,617 and ~~$2,413~~$2,503 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$7,556~~$5,114 and ~~$7,212~~$4,926 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Note 6: Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill ~~for the nine months ended September 30, 2020~~ are as follows:


Balance, December 31, ~~2019~~2020	$	~~480,065~~581,174
Acquisitions	~~58,315~~1,033,712
Foreign currency translation adjustments	~~3,935~~ (21,084)
Other adjustments	~~(76)~~(132)
Balance, ~~September~~June 30, ~~2020~~2021	$	~~542,239~~1,593,670

Details of intangible assets other than goodwill ~~as of September 30, 2020 and December 31, 2019~~ are as follows:

September 30, 2020 December 31, 2019
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 years $ 68,650 $ (62,661) $ 5,989 $ 66,063 $ (58,866) $ 7,197
Customer relationships 3-10 years 98,602 (68,217) 30,385 88,904 (59,744) 29,160
Trademarks 3-10 years 25,353 (15,466) 9,887 22,278 (12,461) 9,817
Non-compete agreements 5 years 350 (51) 299 150 (11) 139
Total intangible assets $ 192,955 $ (146,395) $ 46,560 $ 177,395 $ (131,082) $ 46,313


		June 30, 2021						December 31, 2020
	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	$	111,455	$	(65,064)	$	46,391	$	67,691	$	(63,046)	$	4,645
Customer relationships	3-10 years	234,543		(72,366)		162,177		97,008		(66,030)		30,978
Trademarks	3-10 years	67,265		(18,063)		49,202		26,610		(16,888)		9,722
Non-compete agreements	5 years	350		(103)		247		350		(68)		282
		413,613		(155,596)		258,017		191,659		(146,032)		45,627
Intangible assets not subject to amortization:
In-process research and development		4,217		—		4,217		0		—		0
Total intangible assets		$	417,830	$	(155,596)	$	262,234	$	191,659	$	(146,032)	$	45,627

The aggregate amortization expense for purchased intangible assets with finite lives ~~recorded for the three and nine months ended September 30, 2020 and 2019~~ was reflected in ~~our~~the Company’s consolidated statements of operations as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Cost of subscriptions and licenses	Cost of subscriptions and licenses	$	1,265	$	915	$	3,426	$	2,760	Cost of subscriptions and licenses	$	1,095	$	1,148	$	2,246	$	2,161
Amortization of purchased intangibles	Amortization of purchased intangibles	3,869		3,550		10,984		10,402		Amortization of purchased intangibles	4,589		3,679		8,027		7,115
Total amortization expense	Total amortization expense	$	5,134	$	4,465	$	14,410	$	13,162	Total amortization expense	$	5,684	$	4,827	$	10,273	$	9,276

Note 7: Investments

In June 2021, in connection with the acquisition of Seequent, the Company recorded an equity method investment arising from a pre‑existing investment made by a Seequent subsidiary. The investee offers a broad range of data and software related services with a focus on the mining and exploration industry. As of June 30, 2021, the carrying amount of the Company’s equity method investment was $2,234.

In September 2020, the Company acquired an interest in a ~~platform as a service technology~~software company with a focus on digital twin integration in the energy ~~sector.~~ sector, which the Company accounts for using the cost method. As of June 30, 2021 and December 31, 2020, the carrying amount of the Company’s cost method investment was $3,440.

In September 2019, the Company and Topcon Positioning Systems, Inc. (“Topcon”) formed Digital Construction Works, Inc. (“DCW”), a joint venture which operates as a digital integrator of software and cloud services for the construction ~~industry.~~industry, which the Company accounts for using the equity method. DCW’s focus is to transform the construction industry from its legacy document‑centric paradigm by simplifying and enabling digital automated workflows and processes, technology integration, and digital twinning services for infrastructure. The Company and Topcon each have a 50% ownership in DCW.

The Company applies the cost method of accounting for its investment over which it does not have the ability to exercise significant influence over operating and financial policies. Under the cost method, the Company records the investment based on original cost less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same investee. The Company’s share of income or loss of such companies is not included in the Company’s consolidated statements of operations. The Company applies the equity method of accounting for its investment over which it does have the ability to exercise significant influence over operating and financial policies. Under the equity method, the Company recognizes its initial investment at cost and subsequently adjusts it by the Company’s proportional share of income or losses from the investment. The Company accounts for its investment in DCW using the equity method and accounts for its other investment using the cost method. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company invested ~~$3,440 and $1,500~~$200 in ~~cost and equity method investments, respectively.~~DCW. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the carrying amount of the Company’s investment in DCW was ~~$1,778~~$174 and ~~$1,725,~~$2,251, respectively.

The Company tests its investments for impairment whenever circumstances indicate that the carrying value of the investment may not be recoverable. The Company’s investments were 0t impaired as of ~~September~~June 30, ~~2020.~~2021.

Related Party Disclosures — Pursuant to ~~ASC~~Accounting Standards Codification (“ASC”) 850‑10‑20, Related Party Disclosures, the Company has determined that DCW is a related party. For the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, transactions between the Company and DCW were ~~immaterial~~not material to the Company’s consolidated financial statements.

Note 8: Leases

The Company’s operating leases consist of office facilities, office equipment, and ~~cars,~~automobiles, and the Company’s finance lease consists of computer equipment. The finance lease is not material for the periods presented. As of ~~September~~June 30, ~~2020,~~2021, the Company’s leases have remaining terms of less than one year to ~~seven~~nine years, some of which include one or more options to renew, with renewal terms ~~of up~~from one year to ~~six~~ten years and some of which include options to terminate the leases ~~within the next four~~from less than one year to five years.

For contracts with lease and non‑lease components, the Company has elected not to allocate the contract consideration, and account for the lease and non-lease components as a single lease component. Payments under the Company’s lease arrangements are primarily fixed, however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease assets and liabilities. Variable lease cost may include common area maintenance, property taxes, utilities, and fluctuations in rent due to a change in an index or rate. The Company has elected not to recognize a right‑of‑use asset or lease liability for short‑term leases (leases with a term of twelve months or less). Short‑term leases are recognized in the consolidated ~~statements~~statement of operations on a straight‑line basis over the lease term. Short‑term lease expense was not material for the periods presented.

The components of operating lease cost reflected in the consolidated ~~statements~~statement of operations ~~for the~~ ~~three and nine months ended September 30, 2020~~ were as follows:


							Three Months Ended				Six Months Ended
		Three Months Ended		Nine Months Ended			June 30,				June 30,
		September 30, 2020		September 30, 2020			2021		2020		2021		2020
Operating lease cost (1)	Operating lease cost (1)	$	4,565	$	13,424	Operating lease cost (1)	$	4,845	$	4,514	$	9,388	$	8,859
Variable lease cost	Variable lease cost	1,016		2,898		Variable lease cost	920		861		1,888		1,882
Short-term lease cost	Short-term lease cost	20		27		Short-term lease cost	7		(18)		11		7
Total operating lease cost	Total operating lease cost	$	5,601	$	16,349	Total operating lease cost	$	5,772	$	5,357	$	11,287	$	10,748

(1)Operating lease cost includes rent cost related to operating leases for office facilities of ~~$4,386~~$4,618 and ~~$12,857~~$4,325 for the three ~~and nine~~ months ended ~~September~~June 30, ~~2020.~~2021 and 2020, respectively, and $8,969 and $8,471 for the six months ended June 30, 2021 and 2020, respectively.

Other information related to leases ~~for the nine months ended September 30, 2020~~ was as follows:


	Six Months Ended
	June 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9,573	$	9,003
Right-of-use assets obtained in exchange for new operating lease liabilities (1)	$	3,457	$	13,118


	~~Nine Months Ended~~
	~~September 30, 2020~~
~~Cash paid for amounts included in the measurement of lease liabilities:~~
~~Operating cash flows from operating leases~~	$	~~13,589~~
~~Right-of-use assets obtained in exchange for new operating lease liabilities~~	$	~~14,530~~
~~Weighted average remaining lease term~~ — ~~operating leases (in years)~~	~~3.68~~
~~Weighted average discount rate~~ — ~~operating leases~~	~~2.22~~		%

(1)Right‑of‑use assets obtained in exchange for new operating lease liabilities does not include the impact from acquisitions of $12,418 and $1,668 for the six months ended June 30, 2021 and 2020, respectively.

The weighted average remaining lease term for operating leases was 3.9 years and 3.7 years as of June 30, 2021 and December 31, 2020, respectively. The weighted average discount rate was 2.1% and 2.1% as of June 30, 2021 and December 31, 2020, respectively.

Maturities of operating lease liabilities ~~as of September 30, 2020~~ are as follows:


		September 30, 2020			June 30, 2021
Remainder of 2020		$	4,679
2021		16,862
Remainder of 2021				Remainder of 2021	$	10,264
2022	2022	12,876		2022	17,228
2023	2023	8,120		2023	11,747
2024	2024	4,254		2024	7,341
2025				2025	5,287
Thereafter	Thereafter	4,666		Thereafter	5,013
Total future lease payments	Total future lease payments	51,457		Total future lease payments	56,880
Less: imputed interest		(3,273)
Less: Imputed interest				Less: Imputed interest	(2,218)
Total operating lease liabilities	Total operating lease liabilities	$	48,184	Total operating lease liabilities	$	54,662

As of ~~September~~June 30, ~~2020,~~2021, the Company had additional operating lease minimum lease payments of ~~$106~~$6,523 for executed leases that have not yet commenced, primarily for office locations.

~~Total financing lease liabilities as of September 30, 2020 were $324.~~ Supplemental balance sheet information related to the financing lease ~~as of September 30, 2020 is~~was as follows:

~~September 30, 2020~~


	June 30, 2021		December 31, 2020
Property and equipment	$	496	$	572
Accumulated depreciation	(348)		(229)
Property and equipment, net	$	148	$	343

Accruals and other current liabilities	$	201	$	197
Other liabilities	0		99
Total financing lease liabilities	$	201	$	296

~~Property and equipment~~

~~574~~

~~Accumulated depreciation~~

~~(197)~~

~~Property and equipment, net~~

~~377~~

~~Accruals and other current liabilities~~

~~184~~

~~Other liabilities~~

~~140~~

~~Total financing lease liabilities~~

~~324~~

~~As of~~ ~~December 31, 2019, under the prior lease standard (Topic 840), future minimum lease payments under non~~‑~~cancelable operating leases are as follows:~~

December 31, 2019
2020 $ 15,886
2021 13,186
2022 10,385
2023 6,572
2024 3,216
Thereafter 2,771
Total minimum lease payments $ 52,016

Note 9: Accruals and Other Current Liabilities

Accruals and other current liabilities consist of the following:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Cloud Services Subscription deposits		$	78,671	$	54,688
CSS deposits						CSS deposits	$	164,645	$	110,291
Accrued benefits	Accrued benefits	32,074		33,184		Accrued benefits	46,701		36,613
Accrued compensation	Accrued compensation	24,113		31,537		Accrued compensation	24,218		22,131
Accrued expenses associated with initial public offering		22,066		0
Accrued severance and realignment costs		10,336		1,688
Due to customers	Due to customers	9,507		8,945		Due to customers	12,176		9,869
Accrued acquisition stay bonuses		6,006		4,143
Accrued hosting costs		5,664		2,215
Sales taxes payable		3,596		5,287
Accrued indirect taxes						Accrued indirect taxes	8,659		6,361
Accrued cloud provisioning costs						Accrued cloud provisioning costs	6,584		7,988
Contingent consideration from acquisitions	Contingent consideration from acquisitions	3,583		5,100		Contingent consideration from acquisitions	6,561		2,884
Accrued professional fees	Accrued professional fees	2,867		4,382		Accrued professional fees	5,962		4,210
Non-contingent consideration from acquisitions						Non-contingent consideration from acquisitions	5,952		685
Accrued acquisition stay bonus						Accrued acquisition stay bonus	5,680		5,599
Employee stock purchase plan contributions (see Note 13)						Employee stock purchase plan contributions (see Note 13)	3,851		0
Accrued facility costs	Accrued facility costs	1,981		2,168		Accrued facility costs	2,174		2,095
Non-contingent consideration from acquisitions		91		900
Accrued rent		0		1,909
Accrued severance and realignment costs						Accrued severance and realignment costs	1,519		7,209
Other accrued and current liabilities	Other accrued and current liabilities	12,311		11,371		Other accrued and current liabilities	19,847		10,858
Total accruals and other current liabilities	Total accruals and other current liabilities	$	212,866	$	167,517	Total accruals and other current liabilities	$	314,529	$	226,793

Note 10: Long‑Term Debt

Long‑term debt consists of the ~~following as of September 30, 2020 and December 31, 2019:~~following:

September 30, 2020 December 31, 2019
Bank credit facility:
Senior secured revolver $ 465,000 $ 233,750
Term loan 124,583 0
Total long‑term debt $ 589,583 $ 233,750


	June 30, 2021		December 31, 2020
Bank credit facility:
Senior secured revolving loan facility	$	36,387	$	246,000
2026 Notes:
Principal	690,000		0
Unamortized debt issuance costs	(16,493)		0
Net carrying value	673,507		0
2027 Notes:
Principal	575,000		0
Unamortized debt issuance costs	(15,052)		0
Net carrying value	559,948		0
Total long-term debt	$	1,269,842	$	246,000

Bank Credit Facility—

On December 19, 2017, the Company entered into an amended and restated credit agreement (the “Credit Facility”), which matures on December 18, 2022. Upon entry into the Credit Facility, the Company obtained a $500,000 senior secured revolving facility and refinanced all indebtedness outstanding under its prior facility. On September 2, 2020,January 25, 2021, the Company entered into the ~~First~~Second Amendment to the Amended and Restated Credit Agreement dated December 19, 2017, which increased the senior secured revolving loan facility from $500,000 to $850,000 and extended the maturity date from December 18, 2022 to November 15, 2025 (the “Credit Facility”). In connection with the Second Amendment, certain lenders exited the Credit Facility. The Company performed an extinguishment versus modification assessment on a lender‑by‑lender basis resulting in the write‑off of unamortized debt issuance costs of $353 and the capitalization of fees paid to lenders and third parties of $3,577. Debt issuance costs are amortized to interest expense through the maturity date of November 15, 2025.

On June 22, 2021, the Company entered into the Third Amendment to the Credit Facility, which ~~provided a new term loan of $125,000 (the “Term Loan”) with a maturity of December 18, 2022 and included certain other amendments, including~~increased the ~~addition of a mandatory prepayment provision requiring the Company to prepay borrowings under the Credit Facility in an~~ aggregate amount ~~equal~~of approved convertible debt to permit the ~~net proceeds from any underwritten public offering by~~issuance and sale of additional convertible senior notes. See the Company, which prepayment shall be applied, first, to the Term Loan and, second, to any borrowings outstanding under the revolving facility under the Credit Facility without reducing the revolving commitments thereof. The Company used borrowings under the Term Loan and under the revolving facility under the Credit Facility to pay the Special Dividend declared by the Company’s board of directors on August 28, 2020 (see Note 13). As of September 30, 2020, Term Loan borrowings are net of $417 in unamortized debt issuance costs.section titled “—Convertible Senior Notes—2027 Notes” below.

In addition to the senior secured revolving ~~line of credit,~~loan facility, the Credit Facility also provides up to $50,000 of letters of credit and other incremental borrowings subject to availability, including a ~~$50,000~~$85,000 multi‑currency swing‑line sub‑facility and a ~~$100,000~~$200,000 incremental “accordion” sub‑facility. The Company had $150 ~~and $546~~ of letters of credit and surety bonds outstanding as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$34,850~~$813,463 and ~~$265,704, respectively,~~$253,850 available under the Credit Facility.

Under the Credit Facility, the Company may make either Euro currency or non‑Euro currency interest rate elections. Interest on the Euro currency borrowings ~~is at the one‑month London Interbank Offered Rate (“LIBOR”)~~bear a base interest rate of LIBOR plus a spread ranging from ~~100~~125 basis points (“bps”) to 225 bps as determined by the Company’s net leverage ratio. Under the non‑Euro currency elections, Credit Facility borrowings bear a base interest rate of the ~~greater~~highest of (i) the prime rate, (ii) the overnight bank funding effective rate plus 50 bps, or (iii) LIBOR plus 100 bps, plus a spread ranging from 025 bps to 125 bps as determined by the Company’s leverage ratio. In addition, a commitment fee for the unused Credit Facility ranges from 1520 bps to 30 bps as determined by the Company’s net leverage ratio.

Borrowings under the Credit Facility are guaranteed by all of the Company’s first tier domestic subsidiaries and are secured by a first priority security interest in substantially all of the Company’s and the guarantors’ U.S. assets and 65% of the stock of their directly owned foreign subsidiaries. The Credit Facility contains both affirmative and negative covenants, including maximum leverage ratios. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company was in compliance with all covenants in its Credit Facility debt agreements.

The agreement governing the Credit Facility contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenants defaults, cross-defaults to certain other indebtedness in excess of $50,000, certain events of bankruptcy and insolvency, judgment defaults in excess of $10,000, failure of any security document supporting the Credit Facility to be in full force and effect, and a change of control.

Voluntary prepayments of amounts outstanding under the Credit Facility, in whole or in part, are permitted at any time, so long as the Company gives notice as required by the Credit Facility. However, if prepayment is made with respect to a LIBOR‑based loan and the prepayment is made on a date other than an interest payment date, the Company must pay customary breakage costs.

Convertible Senior Notes

2026 Notes

On January 26, 2021, the Company completed a private offering of $690,000 of 0.125% convertible senior notes due 2026. The 2026 Notes were issued pursuant to an indenture, dated as of January 26, 2021, between the Company and Wilmington Trust, National Association, as trustee (the “2026 Trustee”) (the “2026 Indenture”). Interest will accrue from January 26, 2021 and will be payable semi‑annually in arrears in cash on January 15 and July 15 of each year, with the first payment due on July 15, 2021. The 2026 Notes will mature on January 15, 2026, unless earlier converted, redeemed or repurchased. The Company incurred $18,055 of expenses in connection with the 2026 Notes offering consisting of transaction costs. The Company used $25,530 of the net proceeds from the sale of the 2026 Notes to pay the premiums of the capped call options described further below, and approximately $250,500 to repay outstanding indebtedness under the Credit Facility and to pay related fees and expenses. The Company used the remainder of the net proceeds from the sale of the 2026 Notes for general corporate purposes and towards funding certain acquisitions, including Seequent (see Note 4).

Prior to October 15, 2025, the 2026 Notes will be convertible at the option of the holder only under the following circumstances: (1) during any calendar quarter (and only during such quarter) commencing after the calendar quarter ending on June 30, 2021, if the last reported sale price per share of the Company’s Class B Common Stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the 5 consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s Class B Common Stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s Class B Common Stock, as described in the 2026 Indenture; and (4) if the Company calls the 2026 Notes for redemption. On or after October 15, 2025 until 5:00 p.m., New York City time, on the second scheduled trading day immediately before the maturity date, the 2026 Notes will be convertible at the option of the holder at any time.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s Class B Common Stock or a combination of cash and shares of the Company’s Class B Common Stock, at the Company’s election, based on the applicable conversion rate. The initial conversion rate is 15.5925 shares of the Company’s Class B Common Stock per $1 principal amount of 2026 Notes, which represents an initial conversion price of approximately $64.13 per share, and is subject to adjustment as described in the 2026 Indenture. If a “make-whole fundamental change” (as defined in the 2026 Indenture) occurs, then the Company will, in certain circumstances, increase the conversion rate for a specified period of time.

The Company will have the option to redeem the 2026 Notes in whole or in part at any time on or after January 20, 2024 and on or before the 40th scheduled trading day immediately before the maturity date if the last reported sale price per share of the Company’s Class B common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during any 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (2) the trading day immediately before the date the Company sends such notice. The redemption price will be equal to the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Upon a fundamental change (as defined in the 2026 Indenture), holders may, subject to certain exceptions, require the Company to purchase their 2026 Notes in whole or in part for cash at a price equal to the principal amount of the 2026 Notes to be purchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date (as defined in the 2026 Indenture). In addition, upon a Make‑Whole Fundamental Change (as defined in the 2026 Indenture), the Company will, under certain circumstances, increase the applicable conversion rate for a holder that elects to convert its 2026 Notes in connection with such Make‑Whole Fundamental Change. No adjustment to the conversion rate will be made if the stock price in such Make‑Whole Fundamental Change is either less than $44.23 per share or greater than $210.00 per share. The Company will not increase the conversion rate to an amount that exceeds 22.6090 shares per $1 principal amount of 2026 Notes, subject to adjustment. The 2026 Indenture also contains a customary merger covenant.

Under the 2026 Indenture, the 2026 Notes may be accelerated upon the occurrence of certain customary events of default. If certain bankruptcy and insolvency‑related events of default with respect to the Company occur, the principal of, and accrued and unpaid interest on, all of the then outstanding 2026 Notes shall automatically become due and payable. If any other event of default occurs and is continuing, the 2026 Trustee by notice to the Company, or the holders of the 2026 Notes of at least 25% in principal amount of the outstanding 2026 Notes by notice to the Company and the 2026 Trustee, may declare the principal of, and accrued and unpaid interest on, all of the then outstanding 2026 Notes to be due and payable. Notwithstanding the foregoing, the 2026 Indenture provides that, to the extent the Company elects, the sole remedy for an event of default relating to certain failures by the Company to comply with reporting covenant in the 2026 Indenture consists exclusively of the right to receive additional interest on the 2026 Notes.

As discussed in Note 2, the Company early adopted ASU 2020‑06 as of January 1, 2021 and concluded the 2026 Notes will be accounted for as debt, with no bifurcation of the embedded conversion feature. Transaction costs were recorded as a direct deduction from the related debt liability in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the 2026 Notes. The effective interest rate for the 2026 Notes is 0.658%.

As of June 30, 2021, none of the conditions of the 2026 Notes to early convert has been met.

The 2026 Notes are the Company’s senior, unsecured obligations that rank senior in right of payment to the Company’s future indebtedness that is expressly subordinated to the 2026 Notes, rank equally in right of payment with the Company’s existing and future senior unsecured indebtedness that is not so subordinated (including the Company’s 2027 Notes, see the section titled “—2027 Notes” below), effectively subordinated to the Company’s existing and future secured indebtedness (including obligations under the Company’s senior secured credit facilities), to the extent of the value of the collateral securing such indebtedness, and structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables and preferred equity (to the extent the Company is not a holder thereof)) of the Company’s subsidiaries. The 2026 Notes contain both affirmative and negative covenants. As of June 30, 2021, the Company was in compliance with all covenants in the 2026 Notes.

Capped Call Options

In connection with the pricing of the 2026 Notes, the Company entered into capped call options with certain of the initial purchasers or their respective affiliates and certain other financial institutions. The Company incurred $150 of expenses in connection with the capped call options. The capped call options are expected to reduce potential dilution to the Company’s Class B Common Stock upon any conversion of 2026 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the capped call options is initially $72.9795 per share, which represents a premium of 65% above the last reported sale price per share of the Company’s Class B Common Stock on the Nasdaq Global Select Market on January 21, 2021 and is subject to customary adjustments under the terms of the capped call options.

The capped call options were entered into in conjunction with the issuance of the 2026 Notes, however, they are legally separate agreements that can be separately exercised, with the receipt of shares under the capped call options having no effect on the 2026 Notes, and are legally detachable. As the capped call options are both legally detachable and separately exercisable from the 2026 Notes, the Company accounts for the capped call options separately from the 2026 Notes. The capped call options are indexed to the Company’s own common stock and classified in stockholders’ equity. As such, the premiums paid for the capped call options have been included as a net reduction to Additional paid-in capital in the consolidated balance sheet.

2027 Notes

On June 28, 2021, the Company completed a private offering of $575,000 of 0.375% convertible senior notes due 2027. The 2027 Notes were issued pursuant to an indenture, dated as of June 28, 2021, between the Company and Wilmington Trust, National Association, as trustee (the “2027 Trustee”) (the “2027 Indenture”). Interest will accrue from June 28, 2021 and will be payable semi‑annually in arrears in cash on January 1 and July 1 of each year, with the first payment due on January 1, 2022. The 2027 Notes will mature on July 1, 2027, unless earlier converted, redeemed or repurchased. The Company incurred $15,065 of expenses in connection with the 2027 Notes offering consisting of transaction costs. As of June 30, 2021, $300 and $392 of the transaction costs were recorded in Accounts payable and Accruals and other current liabilities in the consolidated balance sheet, respectively. The Company used $25,875 of the net proceeds from the sale of the 2027 Notes to pay the premiums of the capped call options described further below, and $536,062 to repay outstanding indebtedness under the Credit Facility and to pay related fees and expenses.

Prior to April 1, 2027, the 2027 Notes will be convertible at the option of the holder only under the following circumstances: (1) during any calendar quarter (and only during such quarter) commencing after the calendar quarter ending on September 30, 2021, if the last reported sale price per share of the Company’s Class B Common Stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the 5 consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1 principal amount of 2027 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s Class B Common Stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s Class B Common Stock, as described in the 2027 Indenture; and (4) if the Company calls the 2027 Notes for redemption. On or after April 1, 2027 until 5:00 p.m., New York City time, on the second scheduled trading day immediately before the maturity date, the 2027 Notes will be convertible at the option of the holder at any time.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s Class B Common Stock or a combination of cash and shares of the Company’s Class B Common Stock, at the Company’s election, based on the applicable conversion rate. The initial conversion rate is 12.0153 shares of the Company’s Class B Common Stock per $1 principal amount of 2027 Notes, which represents an initial conversion price of approximately $83.23 per share, and is subject to adjustment as described in the 2027 Indenture. If a “make-whole fundamental change” (as defined in the 2027 Indenture) occurs, then the Company will, in certain circumstances, increase the conversion rate for a specified period of time.

The Company will have the option to redeem the 2027 Notes in whole or in part at any time on or after July 5, 2024 and on or before the 40th scheduled trading day immediately before the maturity date if the last reported sale price per share of the Company’s Class B common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during any 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (2) the trading day immediately before the date the Company sends such notice. The redemption price will be equal to the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Upon a fundamental change (as defined in the 2027 Indenture), holders may, subject to certain exceptions, require the Company to purchase their 2027 Notes in whole or in part for cash at a price equal to the principal amount of the 2027 Notes to be purchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date (as defined in the 2027 Indenture). In addition, upon a Make‑Whole Fundamental Change (as defined in the 2027 Indenture), the Company will, under certain circumstances, increase the applicable conversion rate for a holder that elects to convert its 2027 Notes in connection with such Make‑Whole Fundamental Change. No adjustment to the conversion rate will be made if the stock price in such Make‑Whole Fundamental Change is either less than $61.65 per share or greater than $325.00 per share. The Company will not increase the conversion rate to an amount that exceeds 16.2206 shares per $1 principal amount of 2027 Notes, subject to adjustment. The 2027 Indenture also contains a customary merger covenant.

Under the 2027 Indenture, the 2027 Notes may be accelerated upon the occurrence of certain customary events of default. If certain bankruptcy and insolvency‑related events of default with respect to the Company occur, the principal of, and accrued and unpaid interest on, all of the then outstanding 2027 Notes shall automatically become due and payable. If any other event of default occurs and is continuing, the 2027 Trustee by notice to the Company, or the holders of the 2027 Notes of at least 25% in principal amount of the outstanding 2027 Notes by notice to the Company and the 2027 Trustee, may declare the principal of, and accrued and unpaid interest on, all of the then outstanding 2027 Notes to be due and payable. Notwithstanding the foregoing, the 2027 Indenture provides that, to the extent the Company elects, the sole remedy for an event of default relating to certain failures by the Company to comply with reporting covenant in the 2027 Indenture consists exclusively of the right to receive additional interest on the 2027 Notes.

As discussed in Note 2, the Company early adopted ASU 2020‑06 as of January 1, 2021 and concluded the 2027 Notes will be accounted for as debt, with no bifurcation of the embedded conversion feature. Transaction costs were recorded as a direct deduction from the related debt liability in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the 2027 Notes. The effective interest rate for the 2027 Notes is 0.864%.

As of June 30, 2021, none of the conditions of the 2027 Notes to early convert has been met.

The 2027 Notes are the Company’s senior, unsecured obligations that rank senior in right of payment to the Company’s future indebtedness that is expressly subordinated to the 2027 Notes, rank equally in right of payment with the Company’s existing and future senior unsecured indebtedness that is not so subordinated (including the Company’s 2026 Notes), effectively subordinated to the Company’s existing and future secured indebtedness (including obligations under the Company’s senior secured credit facilities), to the extent of the value of the collateral securing such indebtedness, and structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables and preferred equity (to the extent the Company is not a holder thereof)) of the Company’s subsidiaries. The 2027 Notes contain both affirmative and negative covenants. As of June 30, 2021, the Company was in compliance with all covenants in the 2027 Notes.

Capped Call Options

In connection with the pricing of the 2027 Notes, the Company entered into capped call options with certain of the initial purchasers or their respective affiliates and certain other financial institutions. The Company incurred $50 of expenses in connection with the capped call options, which were recorded in Accruals and other current liabilities in the consolidated balance sheet as of June 30, 2021. The capped call options are expected to reduce potential dilution to the Company’s Class B Common Stock upon any conversion of 2027 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the capped call options is initially $95.5575 per share, which represents a premium of 55% above the last reported sale price per share of the Company’s Class B Common Stock on the Nasdaq Global Select Market on June 23, 2021 and is subject to customary adjustments under the terms of the capped call options.

The capped call options were entered into in conjunction with the issuance of the 2027 Notes, however, they are legally separate agreements that can be separately exercised, with the receipt of shares under the capped call options having no effect on the 2027 Notes, and are legally detachable. As the capped call options are both legally detachable and separately exercisable from the 2027 Notes, the Company accounts for the capped call options separately from the 2027 Notes. The capped call options are indexed to the Company’s own common stock and classified in stockholders’ equity. As such, the premiums paid for the capped call options have been included as a net reduction to Additional paid-in capital in the consolidated balance sheet.

Interest Expense

Interest expense consists of the following:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Bank credit facility:
Senior secured revolving loan facility (1)	$	850	$	1,004	$	1,579	$	2,544
Interest rate swap	316		0		617		0
Amortization and write-off of deferred debt issuance costs	221		139		796		277
	1,387		1,143		2,992		2,821
2026 Notes:
Coupon interest	217		0		371		0
Amortization of deferred debt issuance costs	907		0		1,561		0
	1,124		0		1,932		0
2027 Notes:
Coupon interest	12		0		12		0
Amortization of deferred debt issuance costs	14		0		14		0
	26		0		26		0
Other obligations	45		13		33		25
Total interest expense	$	2,582	$	1,156	$	4,983	$	2,846

(1)The weighted average interest rate was 2.11% and 1.48% for the three months ended June 30, 2021 and 2020, respectively, and 2.02% and 2.18% for the six months ended June 30, 2021 and 2020, respectively.

Interest rate risk associated with the Credit Facility is managed through an interest rate swap which the Company executed on March 31, 2020. The swap has an effective date of April 2, 2020 and a termination date of April 2, 2030. Under the terms of the swap, the Company fixed its LIBOR borrowing rate at 0.73% on a notional amount of $200,000. The interest rate swap is not designated as a hedging instrument for accounting purposes. The Company accounts for the swap as either an asset or a liability on the consolidated balance sheet and carries the derivative at fair value. Gains and losses from the change in fair value are recognized in Other (expense) income, ~~(expense),~~ net, in the consolidated ~~statements~~statement of operations. As of ~~September~~June 30, 2021 and December 31, 2020, the Company recorded a swap related ~~liability~~asset at fair value of ~~$3,365.~~$8,082 and $347, respectively, in

Other assets

~~The weighted average interest rate under~~ in the Credit Facility was 1.59% and 3.43% for the three months ended September 30, 2020 and 2019, respectively, and 1.92% and 3.63% for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, accrued interest and fees were $26. There were 0 accrued interest or fees as of December 31, 2019. Interest expense was $1,807 and $2,305 for the three months ended September 30, 2020 and 2019, respectively, and $4,351 and $6,905 for the nine months ended September 30, 2020 and 2019, respectively.

For the three and nine months ended September 30, 2020, the Company incurred $432 of debt issuance costs related to the Term Loan. In addition, interest expense includes amortization of deferred financing costs of $153 and $138 for the three months ended September 30, 2020 and 2019, respectively, and $430 and $415 for the nine months ended September 30, 2020 and 2019, respectively.

~~Other —~~ Interest expense related to other obligations was $15 and $13 for the three months ended September 30, 2020 and 2019, respectively, and $40 and $157 for the nine months ended September 30, 2020 and 2019, respectively.consolidated balance sheets.

Note 11: Executive Bonus Plan

Certain of the Company’s key employees, including its named executive officers, participate in the Bentley Systems, Incorporated Bonus Pool Plan, as amended and restated, effective as of September 3,22, 2020 (the “Bonus Plan”). Pursuant to the Bonus Plan, participants are eligible to receive incentive bonuses that are determined based on the Company’s adjusted Management Report Operating Income (“MROI”), as defined in the plan agreement and before deduction for such plan payments. For purposes of the Bonus Plan, the bonus pool thereunder may be funded with up to an aggregate of 20% of the Company’s adjusted MROI, subject to approval by the board of directors, with payments made to plan participants based on each such participant’s allocated interest in the bonus pool. The plan permits the deduction of certain holdback amounts from the plan’s pool, from which amounts can then be allocated to fund items including equity and/or cash incentive compensation for non‑plan participants and participant charitable contributions.

A participant may defer any portion, or all, of such participant’s incentive bonus payable pursuant to the Bonus Plan into the ~~DCP~~amended and restated Bentley Systems, Incorporated Nonqualified Deferred Compensation Plan (the “DCP”) (see Note 12). Prior to September 3,22, 2020, a participant’s non‑deferred incentive bonus was payable in cash. OnEffective September 3,22, 2020, ~~the Company amended and restated~~ the Bonus Plan ~~to provide,~~provides, in part, that a participant may elect to receive any portion, or all, of such participant’s non‑deferred incentive bonus in the form of shares of fully vested Class B Common Stock issued under the ~~Company’s~~Bentley Systems, Incorporated 2020 Omnibus Incentive Plan (the “2020 Incentive Award ~~Plan (see Note 15)~~Plan”) beginning in the fourth quarter of 2020, subject to the limitation described below. The Company records the election of non‑deferred incentive bonus in the form of shares of fully vested Class B Common Stock as stock‑based compensation expense in the consolidated statement of operations (see Note 15). Such election must be made prior to the start of the applicable calendar quarter for which the incentive bonus is to be paid, and the number of shares of Class B Common Stock payable in respect of such elected amount is calculated using a volume-weighted average price of the Company’s Class B Common Stock for the period commencing on the 10th trading day prior to the end of the applicable calendar quarter and ending on the 10th trading day following the end of the applicable calendar quarter. Notwithstanding participants’ elections to receive shares of fully vested Class B Common Stock in respect of their non‑deferred incentive bonus payments, if, in any calendar quarter, the aggregate ~~dollar~~U.S. Dollar value of shares of fully vested Class B Common Stock payable in respect of the non‑deferred incentive bonuses exceeds $7,500, the portion of each participant’s non‑deferred incentive bonus payable in shares of fully vested Class B Common Stock will be reduced pro rata such that the $7,500 limit is not exceeded, and, for each affected participant, the amount of such reduction will be payable in cash.

~~During~~For the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the incentive compensation, including cash payments, election to receive shares of fully vested Class B Common Stock beginning in the fourth quarter of 2020, and deferred compensation to plan participants, recognized under this plan (net of all applicable holdbacks) was ~~$9,905~~$7,683 and ~~$8,397,~~$8,467, respectively, and ~~$26,469~~$16,558 and ~~$22,036~~$16,564 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Note 12: Retirement Plans

The Company maintains a qualified 401(k) profit‑sharing plan (the “Plan”) for the benefit of substantially all U.S.‑based full‑time colleagues. The Company may make discretionary profit‑sharing contributions to the Plan up to a maximum of 5% of “qualified cash compensation” for each eligible participating colleague. Non‑discretionary (matching) 401(k) contributions to the Plan, for full‑time U.S. colleagues, were $2,600 and $2,423, for the nine months ended September 30, 2020 and 2019, respectively. The Company also maintains various retirement benefit plans (primarily defined contribution plans) for colleagues of its international subsidiaries. Contributions to these plans were $5,566 and $5,956, for the nine months ended September 30, 2020 and 2019, respectively.

The Company also has a nonqualified DCP, which was amended and restated effective September 22, 2020, under which certain officers and key colleagues may defer all or any part of their incentive compensation, and the Company may make discretionary awards on behalf of such participants. Elective participant deferrals and discretionary Company awards are required to be in the form of phantom shares of the Company’s Class B Common Stock, which are valued for tax and accounting purposes in the same manner as actual shares of Class B Common Stock. The Company’s discretionary awards made prior to January 1, 2016 vest 20% on the date of grant and 20% on each of the four subsequent anniversary dates. The Company’s discretionary awards made on or after January 1, 2016 are 100% vested at the time of grant. NaN discretionary contributions were made to the DCP ~~during~~for both the ~~nine~~three and six months ended ~~September~~June 30, 2021 and 2020. As of June 30, 2021 and December 31, 2020, ~~and 2019. Pursuant to the terms of~~phantom shares issuable by the DCP ~~in connection with the Special Dividend (see Note 13) declared on August 28, 2020, participants received phantom shares valued at $41,948 in lieu of the Special Dividend.~~were 27,130,916 and 30,590,955, respectively.

Amounts in the DCP attributable to certain non‑colleague participants are settled in cash and are classified as liabilities which are marked to market at the end of each reporting period. The total liability related to the DCP for non‑colleague participants was ~~$2,300~~$2,777 and ~~$2,544~~$2,591 as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

~~The table below shows compensation (income) expense related to the DCP recorded during the three and nine months ended September 30, 2020 and 2019, respectively:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
DCP related compensation (income) expense $ 50 $ 9 $ (115) $ 304

Note 13: Common Stock

~~Initial Public Offering~~

On September 25, 2020, the Company completed its IPO. The selling stockholders identified in the Company’s registration statement on Form S-1, as amended, on file with the SEC, sold 12,360,991 shares of Class B Common Stock at a public offering price of $22.00 per share. The Company did not sell any shares in the IPO and did not receive any of the proceeds from the sale of the Class B Common Stock sold by the selling stockholders.

~~In connection with the IPO, the Company’s amended and restated Certificate of Incorporation authorizes shares of undesignated preferred stock. See below for further detail.~~

~~Authorized Common Shares~~ — Upon the closing of the IPO, the Company’s amended and restated Certificate of Incorporation authorizes the Company to issue up to 100,000,000 shares of Class A Common Stock and up to 1,800,000,000 shares of Class B Common Stock. Prior to the IPO, the Company amended and restated its Certificate of Incorporation on April 20, 2018 to authorize 320,000,000 shares of Class A Common Stock and 600,000,000 shares of Class B Common Stock. As of September 30, 2020 and December 31, 2019, outstanding shares of Class A Common Stock totaled 11,601,757. As of September 30, 2020 and December 31, 2019, outstanding shares of Class B Common Stock totaled 250,625,279 and 243,241,192, respectively.

Sales, Repurchases, and Issuances of Company ~~Capital~~Common Stock

On June 17, 2021, the Company issued 3,141,342 shares of the Company’s Class B Common Stock pursuant to the acquisition of Seequent (see Note 4).

In September 2016, the Company entered into a Class B Common Stock Purchase Agreement with a strategic investor (the “Common Stock Purchase Agreement”), pursuant to which the investor could acquire in a series of transactions up to $200,000 of the Company’s Class B Common Stock at the then prevailing fair market value, either directly from selling stockholders, in which case the Company would act as pass through agent, or by funding the Company’s repurchase and subsequent sale to the investor of shares acquired by the Company from existing Company stockholders.

The Common Stock Purchase Agreement grants to the strategic investor certain informational and protective rights, including, for so long as the Company remains party to a long-term strategic collaboration agreement with the investor, a pre‑IPO right of first refusal on any sale of the Company and a post‑IPO right to participate in any sale process the Company may undertake. The strategic investor’s right of first refusal terminated upon the effectiveness of the Company’s IPO registration statement.

On April 23, 2018, the Company entered into an amendment to the Common Stock Purchase Agreement, which (i) increased the maximum purchase amount from $200,000 to $250,000 thereunder, (ii) extended the expiration of the agreement from 2026 to 2030, and (iii) granted the Company the right to retain a portion of the shares that would otherwise be sold to the investor.

During the ~~nine~~six months ended ~~September~~June 30, 2020, the investor purchased 4,574,567 shares under the Common Stock Purchase Agreement, with ~~3,769,345~~3,769,346 of such shares having been repurchased by the Company and ~~re‑sold~~re-sold to the investor for consideration of $58,349 and 805,053 shares acquired directly by the investor for consideration of $12,462. ~~During the nine months ended September 30,~~As of December 31, 2020, the investor reached the maximum purchase amount of $250,000.

~~During~~For the ~~nine~~six months ended ~~September~~June 30, 2019, the investor purchased 791,873 shares under the Common Stock Purchase Agreement, with 622,873 of such shares having been repurchased by the Company and re‑sold to the investor for consideration of $4,510 and 169,000 shares acquired directly by the investor for consideration of $1,224.

~~During the nine months ended September 30, 2020,~~2021, the Company issued ~~3,506,103~~3,657,058 shares of Class B Common Stock to colleagues who exercised their stock options, net of 860,335 shares withheld at ~~exercise. Of the total options exercised for 4,864,944 shares, 1,358,841 shares were sold back to the Company~~exercise to pay for the cost of the stock options, as well as for $29,027 of applicable income tax ~~withholdings~~withholdings. The Company received $4,324 in proceeds from the exercise of ~~$3,618. Of~~stock options.

For the ~~total options exercised, 1,761,769 shares were issued for cash totaling $7,776. During the nine~~six months ended ~~September~~June 30, 2020, the Company issued 2,184,628 shares of Class B Common Stock to colleagues who exercised their stock options, net of 1,225,926 shares withheld at exercise to pay for the cost of the stock options, as well as for $3,064 of applicable income tax withholdings. The Company received $2,237 in proceeds from the exercise of stock options. For the six months ended June 30, 2020, the Company paid $1,454 for 128,176 shares sold back to the Company upon exercise of the Put and Call provisions under ~~the Amended and Restated 2015 Equity Incentive Plan (the “Equity Incentive Plan”) (see Note 15).~~

During the nine months ended September 30, 2019, the Company issued 2,979,031 shares of Class B Common Stock to colleagues who exercised their stock options, net of shares withheld at exercise. Of the total options exercised for 4,372,294 shares, 1,393,263 shares were sold back to the Company to pay for the cost of the options as well as applicable income tax withholdings of $2,270. Of the total options exercised, 1,125,506 shares were issued for cash totaling $3,054. During the nine months ended September 30, 2019, the Company paid $4,952 for 632,859 shares sold back to the Company upon exercise of the Put and Call provisions under its applicable equity incentive ~~plans (see Note 15).~~

plans. Upon the completion of the IPO, the Put and Call provisions of the Company’s Amended and Restated 2015 Equity Incentive Plan (the “2015 Equity Incentive Plan”) terminated automatically.

~~During~~For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company issued ~~2,984,531~~149,447 shares of Class B Common Stock ~~to DCP participants~~ in connection with ~~distributions from~~Bonus Plan incentive compensation, net of shares withheld. Of the ~~plan. During~~total 249,189 shares awarded, 99,742 shares were sold back to the ~~nine~~Company to pay for applicable income tax withholdings of $4,716.

For the six months ended ~~September~~June 30, ~~2019,~~2021 and 2020, the Company issued ~~2,233,807~~2,202,079 and 2,959,731 shares of Class B Common Stock to DCP participants in connection with distributions from the plan. The distribution in shares for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 totaled ~~3,165,759~~3,527,023 shares of which ~~181,228~~1,324,944 shares were sold back to the Company in the same period to pay for applicable income tax withholdings of ~~$1,877.~~$61,912. The distribution in shares for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 totaled ~~2,913,613~~3,137,961 shares of which ~~679,806~~178,230 shares were sold back to the Company to pay for the cost of applicable income tax withholding of ~~$4,972.~~$1,830.

~~During~~For the ~~nine~~six months ended ~~September~~June 30, ~~2020 and 2019,~~2021, the Company did not repurchase shares from its profit‑sharing plan. The Company repurchased ~~549,834 and 258,103~~385,568 shares from its profit‑sharing plan for ~~$6,970 and $1,939, respectively.~~

~~Selected Terms of Class A Common Stock and Class B Common Stock —~~ ~~Upon~~$4,428 for the closing of the IPO, the rights of the holders of Class A Common Stock and Class B Common Stock are identical, except with respect to voting and conversion rights. Each share of Class B Common Stock is entitled to 1 vote per share, while each share of Class A Common Stock is entitled to 29 votes per share and is convertible at any time into one share of Class B Common Stock. Class A Common Stock will automatically convert into Class B Common Stock upon certain transfers, and its votes per share will be reduced to 11 in the event none of the Bentleys, as defined, serves as a Company director or executive officer. Class A Common Stock also will automatically convert into shares of Class B Common Stock upon the affirmative vote of at least 90% of the then outstanding shares of Class A Common Stock or such time that the Bentley family, as defined, collectively, directly or indirectly, own less than 20% of the issued and outstanding Class B Common Stock on a fully-diluted basis (assuming the conversion of all issued and outstanding Class A Common Stock). Pursuant to the terms of the Company’s amended and restated Certificate of Incorporation in effect prior to the IPO, each share of Class B Common Stock had the same rights and privileges as each share of Class A Common Stock, except that the holders of outstanding shares of Class B Common Stock did not have any right to vote on, or consent with respect to, any matters to be voted on or consented to by the stockholders of the Company except as was required by law, and the shares of Class B Common Stock were not included in determining the number of shares voting or entitled to vote on any such matters.

~~Selected Terms of Preferred Stock —~~ Upon the closing of the IPO, the Company’s amended and restated Certificate of Incorporation authorizes the Company to issue up to 100,000,000 shares of preferred stock. Preferred stock has rights, preferences, and privileges which may be designated from time to time by the Company’s board of directors. As of Septembersix months ended June 30, ~~2020, there were 0 shares of preferred stock outstanding.~~2020.

2831

Dividends — The Company declared cash dividends during the periods presented as follows:

Dividend
Per Share Amount
2020:
Third quarter (1)
$ 1.530 $ 400,311
Second quarter 0.030 7,771
First quarter 0.030 7,666
Total $ 1.590 $ 415,748
2019:
Third quarter $ 0.025 $ 6,380
Second quarter 0.025 6,375
First quarter 0.025 6,268
Total $ 0.075 $ 19,023

~~(1)~~On August 28, 2020, the Company’s board of directors declared a Special Dividend of $1.50 per share of the Company’s common stock ($392,489 in the aggregate) payable to all stockholders of record as of August 31, 2020, including dividends which accrue on certain unvested restricted stock and RSUs. In connection with the Special Dividend declaration, an in kind adjustment was made to phantom shares issuable pursuant to the DCP (see Note 12) and the exercise price of all outstanding stock options at that time were reduced by $1.50, but not lower than $0.01 (see Note 15).


	Dividend
	Per Share		Amount
2021:
Second quarter	$	0.03	$	8,372
First quarter	0.03		8,219
2020:
Second quarter	$	0.03	$	7,771
First quarter	0.03		7,666

Global Employee Stock Purchase Plan — Effective September 22, 2020, the Company’s Board and its stockholders adopted and approved the Bentley Systems, Incorporated Global Employee Stock Purchase Plan (the “ESPP”). The ESPP provides eligible colleagues of the Company with an opportunity to contribute up to 15% of their eligible compensation toward the purchase of the Company’s Class B Common Stock at a discounted price, up to a maximum of $25 per year and subject to any other plan ~~limitations, toward the purchase of the Company’s Class B Common Stock at a discounted price.~~limitations. The ESPP has 25,000,000 shares of Class B Common Stock reserved for issuance. The ESPP ~~will be~~has been implemented by means of consecutive offering periods, with the first offering period ~~expected to commence~~commencing on the first trading day on or after January 1, 2021 and ending on the last trading day on or before June 30, 2021. Unless otherwise determined by the board of directors, offering periods will run from January 1st (or the first trading day thereafter) through June 30th (or the first trading day prior to such date), and from July 1st (or the first trading day thereafter) through December 31st (or the first trading day prior to such date). The purchase price per share at which shares of Class B Common Stock are sold in an offering period under the ESPP will be equal to the lesser of 85% of the fair market value of a share of Class B Common Stock (i) on the first trading day of the offering period, or (ii) on the purchase date (i.e., the last trading day of the purchase period). As of ~~September~~June 30, ~~2020, 0 shares~~2021, $3,851 of ESPP withholding via colleague payroll deduction were ~~issued under~~recorded in Accruals and other current liabilities in the ~~ESPP.~~consolidated balance sheet.

2932

Note 14: Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following during the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:

Foreign Actuarial (Loss)
Currency Gain on
Translation Retirement Plan Total
Balance, June 30, 2020 $ (27,411) $ (993) $ (28,404)
Other comprehensive (loss) income, before taxes (812) 11 (801)
Tax benefit 0 (6) (6)
Other comprehensive (loss) income, net of taxes (812) 5 (807)
Balance, September 30, 2020 $ (28,223) $ (988) $ (29,211)


	Foreign		Actuarial (Loss)
	Currency		Gain on
	Translation		Retirement Plan		Total
Balance, March 31, 2021	$	(34,401)	$	(993)	$	(35,394)
Other comprehensive (loss) income, before taxes	(19,513)		30		(19,483)
Tax expense	0		(9)		(9)
Other comprehensive (loss) income, net of taxes	(19,513)		21		(19,492)
Balance, June 30, 2021	$	(53,914)	$	(972)	$	(54,886)

Foreign Actuarial (Loss)
Currency Gain on
Translation Retirement Plan Total
Balance, June 30, 2019 $ (26,461) $ (537) $ (26,998)
Other comprehensive income, before taxes 3,357 7 3,364
Tax benefit 0 (2) (2)
Other comprehensive income, net of taxes 3,357 5 3,362
Balance, September 30, 2019 $ (23,104) $ (532) $ (23,636)


	Foreign		Actuarial (Loss)
	Currency		Gain on
	Translation		Retirement Plan		Total
Balance, March 31, 2020	$	(27,993)	$	(1,010)	$	(29,003)
Other comprehensive income, before taxes	582		25		607
Tax expense	0		(8)		(8)
Other comprehensive income, net of taxes	582		17		599
Balance, June 30, 2020	$	(27,411)	$	(993)	$	(28,404)

Accumulated other comprehensive loss consists of the following during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:

Foreign Actuarial (Loss)
Currency Gain on
Translation Retirement Plan Total
Balance, December 31, 2019 $ (22,908) $ (1,019) $ (23,927)
Other comprehensive (loss) income, before taxes (5,315) 52 (5,263)
Tax benefit 0 (21) (21)
Other comprehensive (loss) income, net of taxes (5,315) 31 (5,284)
Balance, September 30, 2020 $ (28,223) $ (988) $ (29,211)


	Foreign		Actuarial (Loss)
	Currency		Gain on
	Translation		Retirement Plan		Total
Balance, December 31, 2020	$	(25,219)	$	(1,014)	$	(26,233)
Other comprehensive (loss) income, before taxes	(28,695)		59		(28,636)
Tax expense	0		(17)		(17)
Other comprehensive (loss) income, net of taxes	(28,695)		42		(28,653)
Balance, June 30, 2021	$	(53,914)	$	(972)	$	(54,886)

Foreign Actuarial (Loss)
Currency Gain on
Translation Retirement Plan Total
Balance, December 31, 2018 $ (28,867) $ (547) $ (29,414)
Other comprehensive income, before taxes 5,763 23 5,786
Tax benefit 0 (8) (8)
Other comprehensive income, net of taxes 5,763 15 5,778
Balance, September 30, 2019 $ (23,104) $ (532) $ (23,636)


	Foreign		Actuarial (Loss)
	Currency		Gain on
	Translation		Retirement Plan		Total
Balance, December 31, 2019	$	(22,908)	$	(1,019)	$	(23,927)
Other comprehensive (loss) income, before taxes	(4,503)		41		(4,462)
Tax expense	0		(15)		(15)
Other comprehensive (loss) income, net of taxes	(4,503)		26		(4,477)
Balance, June 30, 2020	$	(27,411)	$	(993)	$	(28,404)

3033

Note 15: Equity Awards and Instruments

~~Effective September 22,~~Stock-Based Compensation Expense

Total stock‑based compensation expense was as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Stock option expense	$	723	$	1,422	$	1,721	$	2,956
Restricted stock and restricted stock units (“RSUs”) expense	4,961		37		6,458		37
Stock grants expense	450		100		450		219
Bonus Plan expense (see Note 11)	5,471		0		11,595		0
ESPP expense (see Note 13)	428		0		877		0
Total pre-tax expense (1)	$	12,033	$	1,559	$	21,101	$	3,212

(1)As of June 30, 2021 and December 31, 2020, ~~the Company adopted~~$6,169 and approved the Bentley Systems, Incorporated 2020 Omnibus Incentive Plan (the “2020 Incentive Award Plan”). The 2020 Incentive Award Plan provides for the granting of stock, stock options, restricted stock, RSUs,$6,835 remained in Accruals and other ~~stock-based or performance-based awards to certain directors, officers, colleagues, consultants, and advisors~~current liabilities in the consolidated balance sheets, respectively.

Total stock‑based compensation expense is included in the consolidated statements of operations as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Cost of subscriptions and licenses	$	410	$	19	$	499	$	47
Cost of services	207		79		450		175
Research and development	4,887		536		8,842		1,155
Selling and marketing	1,515		404		2,303		804
General and administrative	5,014		521		9,007		1,031
Total pre-tax expense	$	12,033	$	1,559	$	21,101	$	3,212

Stock‑based compensation expense is measured at the grant date fair value of the ~~Company. The 2020 Incentive Award Plan provides that~~award and is recognized ratably over the ~~total number of shares of Class B Common Stock that may be issued under~~requisite service period, which is generally the 2020 Incentive Award Plan is 25,000,000 (the “Absolute Share Limit”); provided, however, that the Absolute Share Limit is automatically increased on the first day of each fiscal year in an amount equal to the lower of 1% of the total number of shares of Class B Common Stock outstanding on the last day of the immediately preceding fiscal year and a lower number of shares of Class B Common Stock as determined by the Company’s board of directors. The 2020 Incentive Award Plan terminates in September 2030. As of September 30, 2020, 0 awards had been made pursuant to the 2020 Incentive Award Plan.

vesting period. The Company ~~also has~~accounts for forfeitures of equity awards outstanding under its Equity Incentive Plan which provided for the granting of awards in the form of stock options, stock appreciation rights, dividend equivalent rights, restricted stock, RSUs, and stock grants. The following is a summary of activity under the equity incentive plans.as those forfeitures occur.

~~Stock Options —~~ Stock options generally vest ratably on each of the first four anniversaries of the grant date. Prior to the IPO, stock options granted under the Equity Incentive Plan included Put and Call provisions that allowed colleagues who have exercised an option to sell all or part of their shares acquired upon such exercise to the Company at the fair market value at the time of the sale. The exercise period for the Put right began on the second day after the ~~six~~‑month anniversary of the date the option was exercised and ended after an additional 30 days. The Call right provision allowed the Company to purchase all or a part of the shares acquired by a colleague upon exercise of an option, at the fair market value at the time of such purchase. The Company could exercise the Call right at any time within seven months of the later of i) the optionee’s termination of service with the Company, or ii) the optionee’s (or his or her beneficiary’s) exercise of such option after a termination of service. These Put and Call rights terminated upon the completion of the IPO.

In accordance with the terms of the Equity Incentive Plan, in connection with the payment of the Special Dividend of $1.50 per share of the Company’s common stock on September 2, 2020, the Company equitably reduced the exercise price of each outstanding option granted under the Equity Incentive Plan by $1.50 (see Note 13).

~~The Company granted options for a total of 10,000 shares on March 12, 2020.~~ The fair value of the ~~awards was estimated on the date of grant using the Black‑Scholes option pricing model. The grant date fair value of each option to acquire a share of Class B Common Stock was $2.49.~~

The Company granted options for a total of 4,816,000 shares on March 22, 2019 and 10,000 shares on May 15, 2019. The fair value of the awards was estimated on the date of grant using the Black‑Scholes option pricing model. The grant date fair value of each option to acquire a share of Class B Common Stock was $1.66 and $1.65, respectively.

~~Stock Grants —~~ ~~Under the equity incentive plans, the Company may grant unrestricted, fully vested shares of Class B Common Stock to eligible colleagues. Prior~~common stock during periods prior to the IPO ~~any such shares awarded had Put~~was determined by the board of directors at each award grant date based upon a variety of factors, including the results obtained from independent third‑party valuations, the Company’s financial position, and ~~Call rights similar to those described above with respect to stock options, which terminated upon the completion of the IPO~~.

The Company granted 17,411 fully vested shares of Class B Common Stock during the nine months ended September 30, 2020. The Company did 0t grant fully vested shares of Class B Common Stock during the nine months ended September 30, 2019.historical financial performance.

3134

~~Restricted~~ Stock ~~and Restricted Stock Units~~ — Under the equity incentive plans, the Company may grant both time and performance‑based shares of restricted Class B Common Stock to eligible colleagues. Additionally, the Company may grant both time and performance‑based RSUs to eligible colleagues, which entitle the grantee to receive a specific number of shares of the Company’s Class B Common Stock upon vesting. These RSUs also have dividend equivalent rights.

~~On March 31, 2020, the Company granted 12,454 shares of restricted stock, which are subject to a quarterly time‑based vesting schedule ending March 31, 2021.~~

On July 10, 2020 and July 21, 2020, the Company granted a total of 179,188 shares of restricted stock and RSUs and 6,136 shares of restricted stock, respectively, under the Company’s Equity Incentive Plan, at a grant date fair value of $15.48 per share, all of which are subject to performance‑based vesting as determined by the achievement of certain business growth targets, which include growth in annual recurring revenues as well as actual bookings for perpetual licenses and non‑recurring services. Annual performance targets are seasonalized and targets are set for quarterly and annual performance periods ending on December 31, 2020. These performance‑based restricted shares and RSUs carry dividend, but not voting rights. During the nine months ended September 30, 2020, the performance conditions to vesting were satisfied in respect of 37,237 of these shares, of which 998 shares were sold back to the Company to settle applicable income tax withholdings of $15.

Of the performance shares that vested in 2019, 8,774 shares were sold back to the Company to settle applicable income tax withholdings of $95, with the remaining shares delivered to participants in the ~~nine months ended September 30, 2020. Of the performance shares granted in 2019, 292,131 shares did not vest and were canceled during the~~ ~~nine months ended September 30, 2020~~.

On July 10, 2020 and July 13, 2020, the Company granted a total of 179,188 shares and 10,000 shares, respectively, of restricted stock and RSUs under the Equity Incentive Plan at a grant date fair value of $15.48 per share, which vest ratably on each of the first four anniversaries of the grant date. These restricted shares and RSUs do not have voting rights and any dividends declared accrue on such shares and are paid only upon vesting.

On July 10, 2020, the Company granted a total of 994,912 shares of restricted stock and RSUs, including 32,238 cash‑settled RSUs, under the Equity Incentive Plan at a grant date fair value of $15.48 per share, which vested upon the Company’s completion of the IPO on September 25, 2020. These restricted shares and RSUs do not have voting or dividend rights, except in the case of any extraordinary dividend (as described in the Equity Incentive Plan) declared by the Company, if any, which would accrue on such shares and be paid only upon vesting. During the nine months ended September 30, 2020, 10,742 of the shares were canceled.

On July 21, 2020, the Company granted a total of 1,020,472 shares of restricted stock and RSUs including 46,300 RSUs that will be settled in cash, under the Equity Incentive Plan at a grant date fair value of $15.48 per share, which vest ratably on each of the first four anniversaries of the grant date. These restricted shares and RSUs do not have voting rights and any dividends declared accrue on such shares and are paid only upon vesting. During the nine months ended September 30, 2020, 12,500 of the shares were canceled.

For the nine months ended September 30, 2019, the Company granted 493,840 shares of restricted stock, all of which were subject to performance‑based vesting as determined by the achievement of business growth targets which included growth in annual recurring revenues as well as actual bookings for perpetual licenses and non‑recurring services. Annual performance targets were seasonalized and targets were set for quarterly and annual performance periods that ended on December 31, 2019. These restricted shares carried dividend, but not voting rights. During the nine months ended September 30, 2019, the performance conditions to vesting were satisfied in respect of 172,714 of these shares, of which 18,763 shares were sold back to the Company to settle applicable income tax withholdings of $136. During the nine months ended September 30, 2020, 292,131 of the shares were canceled.

Of the performance shares that vested in 2018, 23,343 shares were sold back to the Company to settle applicable income tax withholdings of $170, with the remaining shares delivered to participants in the ~~nine months ended September 30, 2019. Of the performance shares granted in 2018, 60,832 shares did not vest and were canceled during the~~ ~~nine months ended September 30, 2019~~.

In 2016, the Company granted RSUs subject to performance‑based vesting as determined by the achievement of business growth targets which included growth in annual recurring revenues as well as actual bookings for perpetual licenses and non‑recurring services. Annual performance targets were seasonalized and targets were set for quarterly and annual performance periods that ended on December 31, 2016. Certain colleagues elected to defer delivery of such shares upon vesting. During the nine months ended September 30, 2020 and 2019, 26,760 and 11,348 shares, respectively, were delivered to colleagues and, during the nine months ended September 30, 2020, 3,168 shares were sold back to the Company to settle income tax withholdings of $25. As of September 30, 2020 and December 31, 2019, 31,015 and 54,770, respectively, of these RSUs remained outstanding.Options

The following is a summary of stock option activity and related information under the Company’s applicable equity incentive ~~plans and after giving effect to the $1.50 downward exercise price adjustment as a result of the Special Dividend:~~plans:

Exercise Price Per Share
Options Weighted
Outstanding Range Average
Balance, December 31, 2019 18,691,667 $2.00 – $5.74 $ 4.47
Option activity:
Granted 10,000 9.34 9.34
Exercised (4,864,944) 2.00 – 5.74 3.37
Canceled (223,250) 2.00 – 9.34 5.30
Balance, September 30, 2020 13,613,473 $3.73 – $5.74 $ 4.85

The following is a summary of options outstanding and exercisable by exercise price under the Company’s applicable equity incentive plans as of September 30, 2020 and after giving effect to the $1.50 downward exercise price adjustment as a result of the Special Dividend:

Weighted
Remaining
Number of Contractual
Exercise Options Life
Prices Outstanding (in years) Exercisable
$3.73 – $4.00 5,407,315 1.07 4,424,881
4.01 – 5.74 8,206,158 3.08 2,536,658
Total 13,613,473 6,961,539


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Stock	Exercise Price		Contractual	Intrinsic
	Options	Per Share		Life (in years)	Value
Outstanding, December 31, 2020	12,842,226	$	4.87
Exercised	(4,517,393)	4.30
Forfeited	(120,500)	5.54
Outstanding, June 30, 2021	8,204,333	$	5.18	1.97	$	488,976
Exercisable, June 30, 2021	4,973,958	$	4.91	1.67	$	297,780

For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~the year ended December 31, 2019,~~2020, the Company received cash proceeds of ~~$7,776~~$4,324 and ~~$3,612,~~$2,237, respectively, related to the exercise of stock options.

The ~~following is a summary of the~~total intrinsic value of stock options ~~outstanding~~exercised for the six months ended June 30, 2021 and ~~exercisable under the Company’s applicable equity incentive plans as~~2020 was $206,097 and $30,536, respectively.

As of ~~September~~June 30, ~~2020 and after giving effect~~2021, there was $4,642 of unrecognized compensation expense related to ~~the $1.50 downward exercise price adjustment as~~unvested stock options, which is expected to be recognized over a ~~result~~weighted average period of ~~the Special Dividend:~~

Weighted
Weighted Remaining
Average Aggregate Contractual
Number of Exercise Intrinsic Life
Options Price Value (in years)
Options as of September 30, 2020
Outstanding 13,613,473 $ 4.85 $ 361,441 2.3
Exercisable 6,961,539 $ 4.40 $ 187,962 1.7
approximately 1.5 years.

Acquisition Options — In addition to stock options granted under the Company’s ~~Equity Incentive Plan,~~equity incentive plans, in connection with an acquisition completed in March 2018, the Company issued to certain selling shareholder entities options to acquire an aggregate of up to 900,000 shares of Class B Common Stock. The options have a five‑year term, are exercisable on the fourth anniversary of the closing of the acquisition, and have an initial exercise price of $6.805 per share. The options ~~have~~had a four‑year service condition, which ~~is incorporated into~~terminated automatically upon the ~~Company’s Call rights.~~completion of the IPO, and therefore, total stock‑based compensation expense associated with these options was fully recognized as of September 30, 2020. The exercise price of the options is subject to a cap and collar adjustment mechanism that automatically reduces (but not to less than $0.01) or increases the exercise price based on the difference between the exercise price and the fair market value of the Company’s Class B Common Stock on the exercise date. The fair value of the awards was estimated on the date of grant using the Black‑Scholes option pricing model. The grant date fair value of each option was $3.44. Any shares of Class B Common Stock acquired upon exercise of the options were generally entitled to the Put and Call rights summarized above under “Stock Options,” and the options contain customary adjustment provisions in case of stock splits, stock dividends, or other corporate transactions. Upon the completion of the IPO, the Put and Call provisions, as well as the incorporated service condition, of the Company’s acquisition options terminated automatically and as such, the Company accelerated $1,548 of previously unrecognized share‑based compensation associated with these options for the three months ended September 30, 2020. The Company recorded a total of $2,012 of share‑based compensation expense associated with these options for the nine months ended September 30, 2020. As of ~~September~~June 30, ~~2020 and December 31, 2019,~~2021, all options to acquire 900,000 shares remain outstanding. As of ~~September~~June 30, ~~2020,~~2021, these options are non‑exercisable and have an aggregate intrinsic value of $7,992.

~~Stock-based compensation expense~~Restricted Stock and RSUs

Under the equity incentive plans, the Company may grant both time‑based and performance‑based shares of restricted Class B Common Stock and RSUs to eligible colleagues. Time‑based awards generally vest ratably on each of the first four anniversaries of the grant date. Performance‑based awards vesting is ~~recognized~~determined by the achievement of certain business profitability and growth targets, which include growth in annual recurring revenues, as well as actual bookings for perpetual licenses and non‑recurring services, and certain non‑financial performance targets. Performance targets are set for annual performance periods.

The fair value of restricted stock and RSUs is determined by the product of the number of shares granted and the Company’s common stock price (as described above) on ~~a straight‑line basis over~~ the ~~vesting period during which colleagues perform related services.~~

~~Total stock-based compensation expense was as follows:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
IPO vested restricted stock and RSU expense $ 15,445 $ 0 $ 15,445 $ 0
Stock option expense 2,893 1,575 5,849 4,795
Restricted stock expense 2,067 446 2,104 1,251
Stock grants expense 0 0 219 0
Total pre-tax expense $ 20,405 $ 2,021 $ 23,617 $ 6,046

As of September 30, 2020, there was $7,825 of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of approximately 1.9 years.grant date.

3435

AsThe following is a summary of ~~September 30, 2020, there was $16,915 of unrecognized compensation cost related to~~ unvested restricted stock and RSU activity and related information under the Company’s applicable equity incentive plans:


						Time-		Performance-
						Based		Based
			Time-	Performance-		Weighted		Weighted
	Total		Based	Based		Average		Average
	Restricted		Restricted	Restricted		Grant Date		Grant Date
	Stock		Stock	Stock		Fair Value		Fair Value
	and RSUs		and RSUs	and RSUs		Per Share		Per Share
Unvested, December 31, 2020	1,423,715		1,263,193	160,522	(3)	$	16.38	$	16.62
Granted	602,616	(1)	502,808	99,808	(4)	49.85		49.93
Vested	(41,695)		(6,765)	(34,930)	(3)	24.15		17.53
Forfeited	(147,672)		(22,080)	(125,592)		17.17		16.36
Unvested, June 30, 2021	1,836,964	(2)	1,737,156	99,808		$	26.02	$	49.93

(1)For the six months ended June 30, 2021, the Company only granted RSUs. NaN shares of restricted stock were granted during the six months ended June 30, 2021.

(2)Includes 56,360 RSUs ~~excluding cash‑~~which are expected to be settled in cash.

(3)Relates to the 2020 annual performance period. Total stock‑based compensation expense associated with these awards was fully recognized as of December 31, 2020.

(4)Relates to the 2021 annual performance period.

For the six months ended June 30, 2020, the Company granted 12,454 shares of restricted stock, which were subject to a quarterly time‑based vesting schedule ending March 31, 2021, and had a weighted average grant date fair value of $10.84. NaN performance shares were granted during the six months ended June 30, 2020.

For the six months ended June 30, 2021, the weighted average grant date fair value of time‑based and performance‑based RSUs was $49.85 and $49.93, respectively. NaN RSUs were granted during the six months ended June 30, 2020.

In 2016, the Company granted RSUs subject to performance‑based vesting as determined by the achievement of certain business growth targets. Certain colleagues elected to defer delivery of such shares upon vesting. During the six months ended June 30, 2021 and 2020, 10,864 and 9,830 shares, respectively, were delivered to colleagues, and 23 and 211 additional shares, respectively, were earned as a result of dividends. As of June 30, 2021 and December 31, 2020, 20,199 and 31,040 shares, respectively, of these RSUs remained outstanding.

For the six months ended June 30, 2021 and 2020, restricted stock and RSUs were issued net of 14,869 and 11,942 shares, respectively, which were sold back to the Company to settle applicable income tax withholdings of $708 and $120, respectively.

As of June 30, 2021, there was $41,102 of unrecognized compensation expense related to unvested time‑based restricted stock and RSUs, which is expected to be recognized over a weighted average period of approximately ~~3.7~~3.5 years. There was 0 remaining unrecognized compensation expense related to unvested performance‑based restricted stock. As of June 30, 2021, there was $2,043 of unrecognized compensation expense related to unvested performance‑based RSUs, which is expected to be recognized over a weighted average period of approximately 0.5 years.

~~The total intrinsic~~

Stock Grants

For the six months ended June 30, 2021 and 2020, the Company granted 7,824 and 17,411 fully vested shares of Class B Common Stock, respectively, with a fair value of ~~stock options exercised~~$450 and $219, respectively.

ESPP

In accordance with the guidance in ASC 718-50, Compensation—Stock Compensation, the ~~nine months ended September 30, 2020~~ability to purchase shares of the Company’s Class B Common Stock for 85% of the of the lower of the price of the first day of the offering period or the last day of the offering period (i.e., the purchase date) represents an option and, ~~2019 was $58,502 and $21,555, respectively.~~therefore, the ESPP is a compensatory plan under this guidance.

The fair value of each ~~stock~~purchase right under the ESPP was calculated as a sum of its components, which includes the discount, a six‑month call option, ~~award was estimated on the date of grant~~and a six‑month put option. The call and put options were valued using the Black‑Scholes option pricing model. ~~The determination of the fair value of share‑~~Stock‑based ~~payment awards using an option pricing model~~compensation expense is ~~affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the Company’s expected stock price volatility~~recognized ratably over the ~~term of the awards, actual and projected colleague stock option exercise behaviors, risk‑free interest rates, and expected dividends, which are estimated as follows:~~six‑month offering period.

Equity Awards Subsequent to June 30, 2021

~~Expected volatility~~. The expected stock price volatility for the Company’s common stock was estimated by taking the average historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. The Company intends to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of the Company’s own common stock share price becomes available.

~~Expected dividend yield. Prior to 2015,~~In July 2021, the Company ~~had never declared or paid a cash dividend. Consequently, the Company used an expected dividend yield of 0 for all option grants prior~~granted 90,400 time‑based RSUs. The unrecognized compensation expense related to 2015. In February 2015, the Company’s board of directors established a policy to pay a quarterly dividend with the first such quarterly dividend paid in June 2015. While the Company intends to continue paying quarterly dividends, any future determination and amount per share will be subject to the discretion of the Company’s board of directors and will be dependent on a number of factors, including the Company’s operating results, capital requirements, restrictions under Delaware law, and overall financial conditions, as well as any other factors the Company’s board of directors considers relevant.

~~Expected term. The expected term represents the period that the Company’s stock‑based awards are~~these RSUs is approximately $5,300, which is expected to be ~~outstanding. The expected term is based on the simplified method, which represents the~~recognized over a weighted average period ~~from vesting to the expiration~~ of ~~the award.~~approximately three years.

~~Risk‑free rate. The risk‑free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.~~

Nine Months Ended Year Ended
September 30, December 31,
2020 2019
Expected volatility 31.04% 29.57%
Expected dividend yield 1.11% 1.38%
Risk-free interest rate 1.31% 2.48%
Expected term (in years) 3.75 3.75
Weighted average grant date fair value of options issued $2.49 $1.66

The fair value of the common stock during periods prior to the IPO was determined by the board of directors at each award grant date based upon a variety of factors, including the results obtained from independent third‑party valuations, the Company’s financial position, and historical financial performance.

The Company paid $1,454 and $4,952 during the nine months ended September 30, 2020 and 2019, respectively, to stockholders who exercised their options and elected to sell the shares back to the Company after the mandatory six‑month holding period as well as for shares acquired by the Company exercising its Call rights.

Note 16: Income Taxes

The Company calculates its interim income tax provision in accordance with ~~FASB~~ ASC Topics 270, Interim Reporting, and 740, Income Taxes. At the end of each interim period, the Company makes an estimate of the annual ~~United States~~U.S. domestic and foreign jurisdictions’ expected effective tax rates and applies these rates to its respective year‑to‑date taxable income or loss. The computation of the estimated effective tax rates at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the fiscal year, projections of the proportion of income (or loss) earned and taxed in the ~~United States~~U.S. and foreign tax jurisdictions, along with permanent differences, and the likelihood of deferred tax asset utilization. The Company’s estimates and assumptions may change as new events occur, additional information is obtained, or as the tax environment changes. Should facts and circumstances change during a period causing a material change to the estimated effective income tax rate, a cumulative adjustment will be recorded.

The income tax provisions for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 were based on the estimated annual effective income tax rates adjusted for discrete items occurring during the periods presented. ~~During~~For the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized an aggregate consolidated income tax (benefit) expense of ~~$10,705~~$(20,746) and ~~$6,640,~~$4,264, respectively, for U.S. domestic and foreign income taxes. ~~During~~For the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recorded a discrete tax benefit of ~~$3,826~~$28,967 and ~~$103,~~$5,281, respectively, associated with stock‑based compensation. The effective income tax rate of ~~62.5%~~(79.8)% for the three months ended ~~September~~June 30, ~~2020~~2021 was ~~higher~~lower than the effective income tax rate of ~~24.5%~~9.7% for ~~the same period in the prior year primarily due to officer compensation limitation provisions resulting from the Company’s IPO, which went effective during~~ the three months ended ~~September~~June 30, 2020 ~~and~~primarily due to the ~~non‑deductibility of expenses~~tax benefit associated with ~~the Company’s IPO,~~stock‑based compensation, partially offset by ~~increased discrete windfall tax benefits~~the impact from ~~stock‑based compensation.~~officer compensation limitation provisions.

The income tax provisions for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 were based on the estimated annual effective income tax rates adjusted for discrete items occurring during the periods presented. ~~During~~For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized an aggregate consolidated income tax (benefit) expense of ~~$22,145~~$(10,388) and ~~$11,759,~~$11,440, respectively, for U.S. domestic and foreign income taxes. ~~During~~For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recorded a discrete tax benefit of ~~$10,511~~$36,452 and ~~$3,861,~~$6,423, respectively, associated with stock‑based compensation. The effective income tax rate of ~~22.6%~~(11.1)% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~higher~~lower than the effective income tax rate of ~~15.0%~~14.1% for the ~~same period in the prior year~~six months ended June 30, 2020 primarily due to the tax benefit associated with stock‑based compensation, partially offset by the impact from officer compensation limitation provisions resulting from the Company’s IPO and the non‑deductibility of expenses associated with the Company’s IPO, partially offset by increased discrete windfall tax benefits from stock‑based compensation.provisions.

Note 17: Fair Value of Financial Instruments

Derivatives Not Designated As Hedging Instrument

On March 31, 2020, the Company entered into an interest rate swap with a notional amount of $200,000 and a ten‑year term to reduce the interest rate risk associated with the Company’s Credit Facility. The interest rate swap is not designated as a hedging instrument for accounting purposes. The Company accounts for the swap as either an asset or a liability on the consolidated balance sheet and carries the derivative at fair value. ~~Gains~~

The following is a summary of the interest rate swap activity and ~~losses from~~ the ~~change in fair value are~~location the activity is recognized in ~~Other income (expense), net~~ ~~and payments related to the swap are recognized in~~ ~~Interest expense, net~~ in the consolidated statements of ~~operations. For the three and nine months ended September 30, 2020, the Company recorded a gain (loss) of $809 and $(3,365), respectively, in~~ ~~Other income (expense), net,~~ ~~and total payments recognized in~~ ~~Interest expense, net~~ ~~related to the swap were $288 and $398, respectively.~~operations:


	Three Months Ended				Six Months Ended
	June 30,				June 30,				Recognized in Consolidated
	2021		2020		2021		2020		Statements of Operations
Interest rate swap:
(Loss) gain from change in fair value	$	(5,926)	$	(4,174)	$	7,735	$	(4,174)	Other (expense) income, net
Payments	316		110		617		110		Interest expense, net

Fair Value

The Company applies the provisions of ASC Topic 820, Fair Value Measurement, for fair value measurements of financial assets and financial liabilities and for fair value measurements of non‑financial items that are recognized or disclosed at fair value in the consolidated financial statements.

The Company’s financial instruments include cash equivalents, account receivables, certain other assets, accounts payable, accruals, certain other current and long‑term liabilities, and long‑term debt.

The carrying values of the Company’s financial instruments excluding long‑term debt approximate their fair value due to the short‑term nature of those instruments. Additionally, as of ~~September 30, 2020 and~~ December 31, ~~2019,~~2020, the fair value of the Company’s ~~long‑term debt~~borrowings under its Credit Facility approximated its carrying value based upon discounted cash flows at current market rates for instruments with similar remaining terms. The Company considers these valuation inputs to be Level 2 inputs in the fair value hierarchy. The estimated fair value of the 2026 Notes and 2027 Notes was $825,620 and $591,238, respectively, as of June 30, 2021 based on quoted market prices of the Company’s instrument in markets that are not active and are classified as Level 2 within the fair value hierarchy. Considerable judgment is necessary to interpret the market data and develop estimates of fair values. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold, or settled.

A financial asset or liability classification is determined based on the lowest level input that is significant to the fair value measurement. The fair value hierarchy consists of the following three levels:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value.

The following tables provide the financial assets and financial liabilities carried at fair value measured on a recurring basis:


September 30, 2020		Level 1		Level 2		Level 3		Total
June 30, 2021										June 30, 2021	Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Money market funds (1)	Money market funds (1)	$	30,794	$	0	$	0	$	30,794	Money market funds (1)	$	22	$	0	$	0	$	22
Interest rate swap (2)										Interest rate swap (2)	0		8,082		0		8,082
Total assets	Total assets	$	30,794	$	0	$	0	$	30,794	Total assets	$	22	$	8,082	$	0	$	8,104
Liabilities:	Liabilities:									Liabilities:
Acquisition contingent consideration (2)		$	0	$	0	$	5,143	$	5,143
Interest rate swap (3)		0		3,365		0		3,365
Acquisition contingent consideration (3)										Acquisition contingent consideration (3)	$	0	$	0	$	8,728	$	8,728
Deferred compensation plan (4)	Deferred compensation plan (4)	2,300		0		0		2,300		Deferred compensation plan (4)	2,777		0		0		2,777
Cash-settled equity awards (5)	Cash-settled equity awards (5)	743		0		0		743		Cash-settled equity awards (5)	699		0		0		699
Total liabilities	Total liabilities	$	3,043	$	3,365	$	5,143	$	11,551	Total liabilities	$	3,476	$	0	$	8,728	$	12,204


December 31, 2019		Level 1		Level 2		Level 3		Total
December 31, 2020										December 31, 2020	Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Money market funds (1)	Money market funds (1)	$	70,000	$	0	$	0	$	70,000	Money market funds (1)	$	34,696	$	0	$	0	$	34,696
Interest rate swap (2)										Interest rate swap (2)	0		347		0		347
Total assets	Total assets	$	70,000	$	0	$	0	$	70,000	Total assets	$	34,696	$	347	$	0	$	35,043
Liabilities:	Liabilities:									Liabilities:
Acquisition contingent consideration (2)		$	0	$	0	$	6,599	$	6,599
Acquisition contingent consideration (3)										Acquisition contingent consideration (3)	$	0	$	0	$	4,299	$	4,299
Deferred compensation plan (4)	Deferred compensation plan (4)	2,544		0		0		2,544		Deferred compensation plan (4)	2,591		0		0		2,591
Cash-settled equity awards (5)										Cash-settled equity awards (5)	195		0		0		195
Total liabilities	Total liabilities	$	2,544	$	0	$	6,599	$	9,143	Total liabilities	$	2,786	$	0	$	4,299	$	7,085

(1)Included in Cash and cash equivalents in the ~~accompanying~~ consolidated balance sheets.

(2)Included in Other assets in the consolidated balance sheets.

(3)Included in Other liabilities, except for current liabilities of ~~$3,583~~$6,561 and ~~$5,100~~$2,884 as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, which are included in Accruals and other current liabilities in the ~~accompanying~~ consolidated balance sheets. Acquisition contingent consideration liability is measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions the Company believes would be made by a market participant.

~~(3)~~
~~Included in~~ ~~Other liabilities~~ ~~in the accompanying consolidated balance sheet.~~

(4)Included in Other liabilities, except for current liabilities of ~~$149~~$201 and ~~$153~~$169 as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, which are included in Accruals and other current liabilities in the ~~accompanying~~ consolidated balance sheets.

(5)Included in Accruals and other current liabilities in the ~~accompanying~~ consolidated balance ~~sheet.~~sheets.

The following table is a reconciliation of the changes in fair value of the Company’s financial liabilities which have been classified as Level 3 in the fair value ~~hierarchy for the nine months ended September 30, 2020 and the year ended December 31, 2019.~~hierarchy.


		Nine Months Ended		Year Ended			Six Months Ended		Year Ended
		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Balance, beginning of year	Balance, beginning of year	$	6,599	$	4,316	Balance, beginning of year	$	4,299	$	6,599
Payments	Payments	(2,034)		(2,513)		Payments	(544)		(3,425)
Addition	Addition	1,902		4,498		Addition	4,991		2,380
Reclassification		0		180
Change in fair value	Change in fair value	(1,340)		62		Change in fair value	0		(1,340)
Foreign currency translation adjustments	Foreign currency translation adjustments	16		56		Foreign currency translation adjustments	(18)		85
Balance, end of period	Balance, end of period	$	5,143	$	6,599	Balance, end of period	$	8,728	$	4,299

The Company did not have any transfers between levels within the fair value hierarchy.

Note 18: Commitments and Contingencies

Purchase Commitment — In the normal course of business, the Company enters into various purchase commitments for goods and services. As of ~~September~~June 30, ~~2020,~~2021, the non‑cancelable future cash purchase commitment for services related to the cloud provisioning of the Company’s ~~hosted~~ software solutions was ~~$90,650~~$67,598 through May 2023. The Company expects to fully consume its contractual commitment in the ordinary course of operations.

Operating Leases — The Company leases certain facilities, ~~cars,~~automobiles, and equipment under operating leases having initial or remaining non‑cancelable terms in excess of one ~~year. See~~year (see Note ~~8 for further detail.~~8).

Litigation — From time to time, the Company is involved in certain legal actions arising in the ordinary course of business. In management’s opinion, based upon the advice of counsel, the outcome of such actions is not expected to have a material adverse effect on the Company’s future financial position, or results of ~~operations.~~operations, or cash flows.

Note 19: Geographic Data

Revenues by geographic area are presented as part of the discussion in Note 3. The following table presents the Company’s ~~long-lived~~long‑lived assets (other than goodwill), net of depreciation and amortization by geographic ~~region. See~~region (see Notes 5, 6, and ~~8 for further detail around these assets.~~8).


		September 30,		December 31,
		2020		2019			June 30, 2021		December 31, 2020
Long-lived assets:	Long-lived assets:					Long-lived assets:
Americas (1)	Americas (1)	$	52,893	$	34,758	Americas (1)	$	105,884	$	50,306
EMEA	EMEA	54,181		34,039		EMEA	51,136		56,322
APAC	APAC	14,824		7,148		APAC	189,252		13,541
Total long-lived assets	Total long-lived assets	$	121,898	$	75,945	Total long-lived assets	$	346,272	$	120,169

(1)Americas includes the ~~United States,~~U.S., Canada, and Latin America (including the Caribbean).

3940

Note 20: Interest Expense, Net

Interest expense, net is comprised of the following:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Interest expense	Interest expense	$	(1,975)	$	(2,456)	$	(4,821)	$	(7,477)	Interest expense	$	(2,582)	$	(1,156)	$	(4,983)	$	(2,846)
Interest income	Interest income	41		427		371		974		Interest income	129		28		211		330
Total interest expense, net		$	(1,934)	$	(2,029)	$	(4,450)	$	(6,503)
Interest expense, net										Interest expense, net	$	(2,453)	$	(1,128)	$	(4,772)	$	(2,516)

Note 21: Other (Expense) Income, ~~(Expense),~~ Net

Other (expense) income, ~~(expense),~~ net is comprised of the following:

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Foreign exchange gain (loss) (1)
$ 12,830 $ (12,465) $ 8,567 $ (14,053)
Other income (expense), net (2)
911 159 (1,811) 0
Total other income (expense), net $ 13,741 $ (12,306) $ 6,756 $ (14,053)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Foreign exchange gain (loss) (1)	$	1,406	$	4,518	$	2,198	$	(4,263)
Other (expense) income, net (2)	(5,183)		(4,113)		8,507		(2,722)
Total other (expense) income, net	$	(3,777)	$	405	$	10,705	$	(6,985)

(1)Foreign exchange gain (loss) is primarily attributable to foreign currency translation derived primarily from U.S. Dollar denominated cash and cash equivalents, account receivables, and intercompany balances held by foreign subsidiaries. Intercompany finance transactions denominated in U.S. Dollars resulted in unrealized foreign ~~currency translation~~exchange gains (losses) of ~~$12,284~~$963 and ~~$(12,302)~~$5,012 for the three months ended ~~September~~June 30, 2021 and 2020, respectively, $1,443 and ~~2019, respectively, and $10,519 and $(13,982)~~$(1,765) for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

(2)~~Other~~For the three months ended June 30, 2021 and 2020, other (expense) income, net includes a loss from the change in fair value of the Company’s interest rate swap of $5,926 and $4,174, respectively (see Note 17). For the six months ended June 30, 2021, other (expense), income, net includes a gain from the change in fair value of the Company’s interest rate swap of ~~$809, partially offset by a loss from~~$7,735 (see Note 17). For the ~~change in fair value of acquisition contingent consideration of $50 for the three~~six months ended ~~September~~June 30, ~~2020. Other~~2020, other (expense) income, ~~(expense),~~ net includes a loss from the change in fair value of the Company’s interest rate swap of ~~$3,365, partially~~$4,174 (see Note 17), partly offset by a gain from the change in fair value of acquisition contingent consideration of ~~$1,340 for the nine months ended September 30, 2020, respectively (see Note 17).~~

$1,390.

4041

Note 22: Realignment Costs

During the third quarter of 2020, the Company initiated a strategic realignment program in order to better serve the Company’s users and to better align resources with the evolving needs of the ~~business.~~business (the “2020 Program”). The Company incurred realignment costs of ~~$10,020~~$10,046 for the ~~three and nine months~~year ended ~~September 30,~~December 31, 2020 related to the aforementioned program, which represents termination benefits for colleagues whose positions were eliminated. The ~~third quarter of~~ 2020 ~~realignment~~Program activities have been broadly implemented across the Company’s various businesses with substantially all actions ~~expected to be~~ completed ~~by the beginning of~~ in mid‑2021.

Accruals and other current liabilities in the consolidated balance sheets included amounts related to the realignment activities as follows:

2020 Program Prior Program Total
Balance, December 31, 2019 $ 0 $ 491 $ 491
Realignment costs 10,020 (8) 10,012
Payments (379) (360) (739)
Adjustments (1)
(71) 0 (71)
Balance, September 30, 2020 $ 9,570 $ 123 $ 9,693


Balance, December 31, 2020	$	6,240
Payments	(5,356)
Adjustments (1)	(229)
Balance, June 30, 2021	$	655

(1)Adjustments includes foreign currency translation.

~~Realignment costs by expense classification were as follows:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Cost of revenues:
Cost of subscriptions and licenses $ 50 $ 0 $ 50 $ (51)
Cost of services 1,548 (12) 1,548 (185)
Total cost of revenues 1,598 (12) 1,598 (236)
Operating expenses:
Research and development 841 (37) 910 (79)
Selling and marketing 5,183 0 5,183 (263)
General and administrative 2,321 0 2,321 86
Total operating expenses 8,345 (37) 8,414 (256)
Total realignment costs $ 9,943 $ (49) $ 10,012 $ (492)

Note 23: Earnings Per Share

Earnings per share (“EPS”) of Class A and Class B Common Stock amounts are computed using the two‑class method required for participating ~~securities.~~ securities and using the if‑converted method for the convertible senior notes in accordance with ASU 2020‑06.

The Company issues certain restricted stock awards determined to be participating securities because holders of such shares have ~~non‑forfeitable~~non-forfeitable dividend rights in the event of the Company’s declaration of a dividend for common shares. As of ~~September~~June 30, ~~2020 and September 30, 2019~~2021, there were ~~148,087 and 382,616~~99,808 participating securities ~~outstanding, respectively.~~outstanding. As of June 30, 2020, there were 0 participating securities outstanding.

Undistributed earnings allocated to participating securities are subtracted from net income in determining basic net income attributable to common stockholders. Basic EPS is computed by dividing basic net income attributable to common stockholders by the weighted average number of shares ~~of Class A and Class B Common Stock outstanding~~, inclusive of undistributed shares ~~of the Company’s Class B Common Stock~~ held in the DCP as phantom shares.

For the ~~calculation~~Company’s diluted EPS numerator, interest expense, net of ~~diluted EPS,~~tax, attributable to the conversion of the convertible senior notes is added back to basic net income attributable to common ~~stockholders for~~stockholders. For the Company’s diluted EPS denominator, the basic ~~EPS~~weighted average number of shares is adjusted by the effect of dilutive securities, including awards under the Company’s equity compensation ~~plans.~~ plans and ESPP, and by the dilutive effect of the assumed conversion of the convertible senior notes. Diluted EPS attributable to common stockholders is computed by dividing diluted net income attributable to common stockholders by the weighted average number of fully diluted common ~~shares outstanding.~~shares.

Except with respect to voting and conversion, the rights of the holders of the Company’s Class A Common Stock and the Company’s Class B Common Stock are identical. Each class of shares has the same rights to dividends and allocation of income (loss) and, therefore, earnings per share would not differ under the two‑class method.

The details of basic and diluted EPS are as follows~~(in thousands, except per share amounts)~~:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Numerator:	Numerator:									Numerator:
Net income	Net income	$	5,844	$	20,427	$	74,589	$	66,845	Net income	$	44,910	$	39,076	$	101,916	$	68,745
Less: Net income attributable to participating securities	Less: Net income attributable to participating securities	(4)		(10)		(4)		(10)		Less: Net income attributable to participating securities	(3)		0		(3)		0
Net income attributable to Class A and Class B common stockholders		$	5,840	$	20,417	$	74,585	$	66,835
Net income attributable to Class A and Class B common stockholders, basic										Net income attributable to Class A and Class B common stockholders, basic	44,907		39,076		101,913		68,745
Add: Interest expense, net of tax, attributable to assumed conversion of convertible senior notes										Add: Interest expense, net of tax, attributable to assumed conversion of convertible senior notes	841		0		1,430		0
Net income attributable to Class A and Class B common stockholders, diluted										Net income attributable to Class A and Class B common stockholders, diluted	$	45,748	$	39,076	$	103,343	$	68,745

Denominator:	Denominator:									Denominator:
Denominator for basic net income per share—weighted average shares		289,318,391		286,075,323		287,063,892		286,024,263
Effect of dilutive securities		10,316,570		3,554,232		10,187,457		8,562,091
Denominator for dilutive net income per share		299,634,961		289,629,555		297,251,349		294,586,354
Weighted average shares, basic										Weighted average shares, basic	304,066,038		286,945,592		303,311,423		286,068,766
Dilutive effect of stock options, restricted stock, and RSUs										Dilutive effect of stock options, restricted stock, and RSUs	9,389,339		8,241,602		10,388,725		9,526,468
Dilutive effect of ESPP										Dilutive effect of ESPP	110,355		0		112,360		0
Dilutive effect of assumed conversion of convertible senior notes										Dilutive effect of assumed conversion of convertible senior notes	10,912,354		0		9,281,537		0
Weighted average shares, diluted										Weighted average shares, diluted	324,478,086		295,187,194		323,094,045		295,595,234

Net income per share, basic	Net income per share, basic	$	0.02	$	0.07	$	0.26	$	0.23	Net income per share, basic	$	0.15	$	0.14	$	0.34	$	0.24
Net income per share, diluted	Net income per share, diluted	$	0.02	$	0.07	$	0.25	$	0.23	Net income per share, diluted	$	0.14	$	0.13	$	0.32	$	0.23

~~For the nine months ended September 30, 2020, 1,150,860~~The following potential common shares ~~of restricted stock and RSUs~~ were excluded from the ~~computation~~calculation of diluted net income per share attributable to common stockholders asbecause their effect would have been ~~antidilutive. NaN shares were excluded from the computation of diluted net income per share attributable to common stockholders~~anti‑dilutive for the ~~three months ended September 30, 2020 or for the three and nine months ended September 30, 2019.~~periods presented:


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2021	2020	2021	2020
Stock options, restricted stock, and RSUs	495,368	0	495,368	0
Total anti-dilutive securities	495,368	0	495,368	0

4243

Item 2.7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited consolidated financial statements and ~~related~~ notes thereto appearing in Part I, Item I1 of this Quarterly Report on Form 10‑Q and with our audited consolidated financial statements and notes thereto ~~for the year ended December 31, 2019,~~ included in Part II, Item 8 of our ~~registration statement~~2020 Annual Report on Form ~~S‑1, as amended,~~10‑K on file with the U.S. Securities and Exchange Commission (“SEC”). In addition to historical information, this discussion contains ~~forward-looking~~forward‑looking statements that involve risks, uncertainties, and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are ~~discussed in the sections titled “Risk Factors” appearing~~set forth in Part II, Item 1A1A. Risk Factors of this Quarterly Report on Form 10‑10‑Q.

All amounts presented in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, except share and per share amounts, are presented in thousands. Additionally, many of the amounts and percentages have been rounded for convenience of presentation.

Overview:

We are a leading global provider of software for infrastructure engineering, enabling the work of civil, structural, geotechnical, and plant engineering practitioners, their project delivery enterprises, and owner‑operators of infrastructure assets. We were founded in 1984 by the Bentley ~~brothers. On~~brothers and on September 25, 2020, we completed our initial public offering (“IPO”). The selling stockholders identified in our registration statement on Form S-1, as amended, on file with the SEC, sold 12,360,991 Class B Common Stock at a public offering price of $22.00 per share. The Company did not sell any shares in the IPO and did not receive any of the proceeds from the sale of the Class B Common Stock sold by the selling stockholders.IPO.

Our enduring commitment is to develop and support the most comprehensive portfolio of integrated software offerings across professional disciplines, project and asset lifecycles, infrastructure sectors, and geographies. Our software enables digital workflows across engineering disciplines, distributed project teams, from offices to the field, and across computing form factors, including desktops, on‑premises servers, cloud‑native services, mobile devices, and web browsers. We deliver our solutions via on‑premise, cloud, and hybrid environments. Our users engineer, construct, and operate projects and assets across the following infrastructure sectors:

•public works (including roads, rail, airports, ports, and water and wastewater networks)/utilities (including electric, gas, water, and communications). We estimate that this sector represents ~~52%~~51% of the net infrastructure asset value of the global top 500 infrastructure owners ~~(the “global top 500 infrastructure owners”)~~ based on the ~~2019~~2020 edition of the Bentley Infrastructure 500 Top Owners, our annual compilation of the world’s largest infrastructure owners ranked by net depreciated value of their tangible fixed assets;

•industrial (including discrete and process manufacturing, power generation, and water treatment plants)/resources (including oil and gas, mining, and offshore). We estimate that this sector represents ~~38%~~37% of the global top 500 infrastructure owners’ net infrastructure asset value; and

•commercial/facilities (including office buildings, hospitals, and campuses). We estimate that this sector represents ~~10%~~12% of the global top 500 infrastructure owners’ net infrastructure asset value.

We offer solutions for enterprises and professionals across the infrastructure lifecycle. Our Project Delivery and Asset and Network Performance solutions are systems provided via cloud and hybrid environments, developed respectively to extend enterprise collaboration during project delivery, and to manage and leverage engineering information during operations and maintenance. Our Design Integration and Digital Cities solutions are primarily desktop applications and cloud‑provisioned solutions for professional practitioners and workgroups.

We continue to make substantial investments in research and development because we believe the infrastructure engineering software market presents compelling opportunities for the application of new technologies that advance our current solutions. Our research and development roadmap balances technology advances and new offerings with continuous enhancements to existing offerings. Our allocation of research and development resources is guided by management‑established priorities, input from product managers, and user and sales force feedback.

We bring our offerings to market primarily through direct sales channels that generated approximately 92% of our ~~2019~~2020 revenues.

Since its founding, Bentley Systems has remained focused on our mission to provide software in support of the professional needs of those responsible for creating and managing the world’s infrastructure. We have methodically grown through periods of global expansion, periods of expansion in our portfolio of solutions, and periods of rapid technological change. The following provides key corporate milestones over our 35‑year history:

Our sources of revenue growth, in order of magnitude, come from the recurrence of existing subscription revenues, additional revenue and growth from existing accounts using the same products, additional revenue and growth from existing accounts using new products, and growth from new accounts. For the year ended December 31, ~~2019, under Topic 606~~1,2020, subscriptions represented ~~83%~~85% of our revenues, and together with certain professional services revenues that are recurring in nature and represented 3%2% of our revenues, bring the proportion of our recurring revenues to ~~86%~~87% of total revenues. The remaining ~~14%~~13% of our revenues were generated from the sale of perpetual licenses and the delivery of non‑recurring professional services. We have a highly‑diversified

1 ~~On January 1, 2019, we adopted ASU No. 2014‑09,~~ ~~Revenue from Contracts with Customers, and related amendments (“Topic 606”), which supersedes the guidance provided by Accounting Standards Codification (“ASC”) 985‑605,~~ ~~Software-Revenue Recognition, and Topic 605‑25,~~ ~~Revenue Recognition, Multiple-Element Arrangements~~. We refer to ASC 985‑605 and Topic 605‑25 collectively as “Topic 605.” We adopted Topic 606 using the modified retrospective method and applied the standard only to contracts that were not completed as of the date of initial application. See Note 2 to our audited consolidated financial statements for the year ended December 31, 2019 included in our registration statement on Form S‑1, as amended, on file with the SEC for further information on the impact upon adoption of Topic 606 as of January 1, 2019.

account base, with our largest account representing no more than 2.5% of total revenues in ~~2019.~~2020. Our ~~2019~~2020 revenues were also diversified by account type, size, and geography. Additionally, we believe that we have a loyal account base, with 80% of our ~~2019~~2020 revenues from organizations that have been our accounts for over ten years. Between 2000 and ~~2019,~~2020, our revenues had an approximately 8% compound annual growth rate.

Our Commercial Offerings:

Our solutions are made available to our accounts in a broad range of commercial offerings designed to accommodate the diverse preferences of our accounts, which range from owned versus subscribed, short‑term subscriptions versus longer term annual subscriptions, and fee‑certain arrangements versus variable or consumption‑based arrangements with consumption measurement durations of less than one year. We contract our commercial offerings under a single form of standard contract, which includes liability and other risk protections in our favor, and appropriate standard addendums to the primary contract, which specifically address the commercial offerings provided. Our standard commercial offerings are summarized in the below table, with further descriptions following the table:

SELECT Subscriptions. Our SELECT subscription is a prepaid annual recurring subscription that accompanies a new or previously purchased perpetual license. We believe that the SELECT benefits summarized below support our favorable rates of account retention and growth:

•Software upgrades;

•Comprehensive technical support;

•License pooling providing accounts with efficiency advantages;

•Portfolio balancing providing accounts the opportunity to exchange unused or under used licenses with other of our license offerings;

•Learning benefits, Azure‑based cloud collaboration services, and mobility advantages; and

•Access to our entire application portfolio with usage of licenses not previously purchased monetized quarterly in arrears based on consumption. See the section titled “—Term License Subscriptions” below.

Enterprise Subscriptions. Our Enterprise subscription offerings provide our largest accounts with complete and unlimited global access to our comprehensive portfolio of solutions.

•Enterprise License Subscriptions (“ELS”). Our ELS offering provides access to our comprehensive portfolio of solutions for a fixed annual fee. Subsequent annual renewals are based on the account’s usage of software in the preceding year, effectively resulting in an annual consumption‑based arrangement. The majority of our ELS subscribers were historically SELECT subscribers that have grown into a position to take full advantage of our ELS offering.

•Enterprise 365 (“E365”) Subscriptions. Under our E365 subscription, participating accounts have unrestricted access to our comprehensive software portfolio, similar to ELS, however they are charged based upon daily ~~usage, effectively creating a daily consumption-based arrangement.~~usage. The daily usage fee also includes a term license component, SELECT maintenance and support, hosting, and Success Plan services, which are designed to achieve business outcomes through more efficient and effective use of our software. The E365 subscription offering was introduced in 2018. ~~Prospectively, we plan to prioritize~~We are prioritizing efforts to transition ELS subscribers to E365 subscriptions, primarily to simplify pricing, more closely align consumption to monetization, and to establish Success Plan services as recurring to ensure better business outcomes for our users. To the extent we succeed in transitioning subscribers to E365, ~~under Topic 606~~ we ~~would~~ recognize a greater proportion of our revenues on a quarterly basis rather than substantially upfront. See the section titled “—Key Factors Impacting Comparability and Performance.”

Term License Subscriptions

Annual Term Licenses (“ATL”) Subscription. Annual term licenses are generally prepaid annually for named user access to specific products and include our newly introduced Practitioner Licenses. ATL are also used to monetize site or enterprise wide access for certain of our AssetWise solutions within given usage bands.

Quarterly Term License (“QTL”) Subscription. Through quarterly term licenses, accounts pay quarterly in arrears for licenses they have used representing usage beyond their contracted quantities. Much like our Enterprise subscription programs, a QTL allows smaller and medium‑sized accounts to match usage to ongoing project requirements.

Monthly Term License (“MTL”) Subscription. Monthly term licenses are identical to QTL subscriptions, except for the term of the license, and the manner in which they are monetized. MTL subscriptions require a Cloud Services Subscription, which is discussed below.

Visas and Passports. Visas and Passports are quarterly or annual term licenses enabling users to access specific project or enterprise information and ~~entitle~~entitles our users to certain functionality of our ProjectWise and AssetWise systems. Generally, a Passport provides desktop, web, and mobile application access to project information and certain functions, and a Visa provides similar access, plus added functionality depending upon the product to which the Visa is aligned.

While certain legacy arrangements are supported, our standard offering requires Visas and Passports to be fulfilled and contracted via a CSS, which is discussed below.

Cloud Services Subscription (“CSS”). CSS is designed to streamline the procurement, administration, and payment process for us and our accounts. A CSS requires an upfront annual estimation of MTL, Visa and Passport consumption, and any Success Plan services expected for the upcoming year. A deposit for the annual estimated consumption is submitted in advance. Actual consumption is monitored and invoiced against the deposit on a calendar quarter basis. Accounts are charged only for what gets used and deposited amounts never expire.

Perpetual Licenses

We historically have sold perpetual licenses and continue to offer them to our accounts as an available option for most of our applications. Perpetual licenses are available for accounts that prefer to own their software licenses and may be sold with or without attaching a SELECT subscription. Historically, attachment and retention of the SELECT subscription has been high given the benefits of the SELECT subscription.

Professional Services

We offer professional services, including training, implementation, configuration, customization, and strategic consulting services for all types of projects as requested by our accounts. We perform projects on both a time and materials and a fixed fee basis. We also offer our services using contractual structures based on (i) delivery of the services in the form of subscription‑like, packaged offerings that are annually recurring in nature; and (ii) delivery of our growing portfolio of Success Plans in standard offerings that offer a level of subscription service over and above the standard technical support offered to all accounts as part of their SELECT or Enterprise agreement. Over time, we expect professional services revenues using subscription and subscription‑like contractual structures to make up a greater proportion of our professional services revenues.

~~Examples of Typical Commercial Offering Combinations~~

For the year ended December 31, 2019, under Topic 606, 25% of our revenues derive from ELS or E365 offerings, and 36% of our revenues derive from SELECT subscriptions. Our users often add further sources of revenue upon each of these foundational subscription offerings. Typical examples are as follows:

•An account contracts for its application solutions under its ELS or E365 subscription as described above. In addition, if the account also utilizes our ProjectWise enterprise solution, it will estimate its prospective annual usage and make an incremental deposit into its CSS account. The CSS account will be drawn down quarterly based on actual usage and consumption of Passports and Visas. We deliver professional services for E365 accounts via the embedded Success Plan. An ELS account may contract for professional services under fixed fee or “days and rates” episodic arrangements billed separately, or it may contract for professional services in the form of Success Plans, which it pays for via its CSS.

•A SELECT subscription account pays a fixed annual subscription fee based on the number of perpetual licenses for applications which it owns. The account may purchase additional perpetual licenses to which an additional annual SELECT subscription fee will apply for each. Alternatively, the account may grow its application use via term licenses, which will be billed quarterly in arrears based on actual term license consumption. Alternatively, the account may estimate its annual term license requirements and make a deposit into its CSS account, with quarterly draw down based on actual usage and consumption. Contracting for term license usage via the CSS provides the account a slight economic advantage. Similar to the ELS or E365 subscriber, if the SELECT subscriber also utilizes our ProjectWise enterprise system, prospective annual usage will be estimated and a deposit made into a CSS account. The CSS account will be drawn down quarterly based on actual usage and consumption of Passports and Visas. For any professional services, the account may contract for professional services under fixed fee or “days and rates” episodic arrangements billed separately, or it may contract for professional services in the form of Success Plans, which it will pay for via its CSS.

Key Business Metrics:

We regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, and make strategic decisions.


		Twelve Months Ended							Twelve Months Ended
		September 30,							June 30,
		2020			2019				2021			2020
Last twelve-months recurring revenues (Topic 606)		$	682,712		$	615,169
Last twelve-months recurring revenues (Topic 605)		$	686,201		$	616,753
Last twelve-months recurring revenues								Last twelve-months recurring revenues	$	746,168		$	665,659
Constant Currency:	Constant Currency:							Constant Currency:
Annualized recurring revenues (“ARR”) growth rate	Annualized recurring revenues (“ARR”) growth rate	9		%	12		%	Annualized recurring revenues (“ARR”) growth rate	23		%	11		%
Account retention rate	Account retention rate	98		%	98		%	Account retention rate	98		%	98		%	(1)
Recurring revenues dollar-based net retention rate	Recurring revenues dollar-based net retention rate	110		%	107		%	Recurring revenues dollar-based net retention rate	106		%	110		%	(1)

(1)On January 1, 2019, we adopted ASU No. 2014‑09, Revenue from Contracts with Customers, and related amendments (“Topic 606”), which superseded the guidance provided by Accounting Standards Codification (“ASC”) 985‑605, Software-Revenue Recognition, and Topic 605‑25, Revenue Recognition, Multiple-Element Arrangements. We refer to ASC 985‑605 and Topic 605‑25 collectively as “Topic 605.” Prior to the year ended December 31, 2020, the account retention rate and recurring revenues dollar‑based net retention rate were calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606 as we did not have all information that was necessary to calculate account retention rate pursuant to Topic 606 for earlier periods. For further information on the impact upon adoption of Topic 606 as of January 1, 2019, see Note 3 to our audited consolidated financial statements included in Part II, Item 8 of our 2020 Annual Report on Form 10‑K on file with the SEC. For further information on the comparability of recurring revenues recognized under Topic 606 versus Topic 605, see the section titled “—Key Factors Impacting Comparability and Performance” included in Part II, Item 7 of our 2020 Annual Report on Form 10‑K on file with the SEC.

Last twelve‑months recurring revenues. Last twelve‑months recurring revenues is calculated as recurring revenues recognized over the preceding twelve‑month period. We define recurring revenues as 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. Last twelve‑months recurring revenues is presented using revenues recognized pursuant to Topic 606 as well as Topic 605 for all periods in order to enhance comparability during our transition to Topic 606. On an annual and trailing twelve‑month basis, we expect our recurring revenues recognized under Topic 606 to be comparable to such revenues recognized under Topic 605. This expectation is attributable to the annual, recurring nature of our subscription agreements. However, under Topic 606, the conversion of our existing subscription users to consumption‑based offerings with consumption measurement durations of less than one year, such as our E365 program, as well as the term start date of new annual term license subscriptions, will introduce some volatility between annual and trailing twelve‑month periods and impact period over period comparability.

We believe that last twelve‑months recurring revenues is an important indicator of our performance during the immediately preceding twelve‑month time period. We believe that we will continue to experience favorable growth in recurring revenues due to our strong account retention and recurring revenues dollar‑based net retention rates, as well as the addition of new accounts with recurring revenues. The last twelve‑months recurring revenues ~~under Topic 606~~ for the ~~period~~periods ended ~~September~~June 30, ~~2020~~2021 compared to the last twelve‑months of the preceding twelve‑month period increased by ~~$67,543 (or $69,448 under Topic 605). The~~$80,509. This increase was primarily due to growth in ARR, which is primarily the result of ~~consistent performance in our account retention rate and~~growth in our recurring revenues dollar‑based net retention rate, as well as additional recurring revenues resulting from new accounts and acquisitions. For the twelve months ended ~~September~~June 30, ~~2020, 87%~~2021, 86% of our revenues ~~under Topic 606~~ were recurring revenues. Prospectively, we expect that this percentage is likely to remain consistent or modestly increase as we continue to target shifting episodic professional services revenues to subscriptions classified as recurring revenues.

Constant currency metrics. In reporting period‑over‑period results, we calculate the effects of foreign currency fluctuations and constant currency information by translating current period results using prior period average foreign currency exchange rates. Our definition of constant currency may differ from other companies reporting similarly named measures, and these constant currency performance measures should be viewed in addition to, and not as a substitute for, our operating performance measures calculated in accordance with accounting principles generally accepted in the United States of America (“U.S. ~~GAAP.~~GAAP”).

ARR growth rate. Our ARR growth rate is the growth rate of our ARR, measured on a constant currency basis. Our ARR is defined as the sum of the annualized value of our portfolio of contracts that produce recurring revenue 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. 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. ARR resulting from the annualization of recurring contracts with consumption measurement durations of less than one year, as a percentage of total ARR, was ~~31%~~36% and ~~22%~~29% as of ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Within our consumption‑measured ARR, the ~~successful~~continuous uptake of our ~~new~~ E365 subscription offering has introduced daily consumption‑measured ARR, representing ~~18%~~27% of total ARR as of ~~September~~June 30, ~~2020.~~2021. ARR is inclusive of the ARR of acquired companies as of the date they are acquired. We believe that ARR and ARR growth are important metrics indicating the scale and growth of our business. Furthermore, we believe ARR, considered in connection with our ~~account retention rate and our~~ recurring revenues dollar‑based net retention rate, is a leading indicator of revenue growth. Our ARR as of ~~September~~June 30, ~~2020~~2021 was ~~$715,336,~~$882,415, calculated using the spot foreign exchange rates as of ~~September~~June 30, ~~2020.~~2021.

Our ARR growth rate was favorably impacted from ~~acquisitions~~the Seequent acquisition by ~~2% and 1%~~13% for the twelve months ended ~~September~~June 30, ~~2020 and 2019, respectively.~~2021.

Account retention rate. Our account retention rate for any given twelve-month period is calculated using the average currency exchange rates for the prior period, as follows: the prior period recurring revenues from all accounts with recurring revenues in the current and prior period, divided by total recurring revenues from all accounts during the prior period. The account retention rate is calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606 as we do not have all information available to us necessary to present account retention rate pursuant to Topic 606 for any period prior to January 1, 2019. Our account retention rate is an important indicator that provides insight into the long‑term value of our account relationships and our ability to retain our account base. We believe that our consistent and high account retention rates illustrate our ability to retain and cultivate long‑term relationships with our accounts.

Recurring revenues dollar‑based net retention rate. Our 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. The recurring revenues dollar‑based net retention rate is calculated using revenues recognized pursuant to Topic 605 for all periods in order to enhance comparability during our transition to Topic 606 as we do not have all information available to us necessary to present recurring revenues dollar‑based net retention rate pursuant to Topic 606 for any period prior to January 1, 2019. We believe our recurring revenues dollar‑based net retention rate is a key indicator of our success in growing our revenues within our existing accounts. Given that recurring revenues represented 86% of our total revenues for the twelve months ended ~~September~~June 30, ~~2020 recurring revenues represented 87% of our total revenues under Topic 606,~~2021, this metric helps explain our revenue performance as primarily growth into existing accounts. We believe that our consistent and high recurring revenues dollar‑based net retention rate illustrates our ability to consistently retain accounts and grow them.

As discussed above, we expect annual and trailing twelve‑month recurring revenues recognized under Topic 606 to be comparable to such revenues recognized under Topic 605 due to the annual, recurring nature of our subscription agreements. We, therefore, also expect, that our account retention rate and our recurring revenue dollar‑based net retention rate under Topic 606 will be comparable to such metrics under Topic 605. However, under Topic 606, the conversion of our existing subscription users to consumption‑based offerings with consumption measurement durations of less than one year, such as our E365 program, as well as the term start date of new subscriptions, will introduce some volatility between annual, and trailing twelve-month periods and impact period over period comparability. See the section titled “—~~Key Factors Impacting Comparability and Performance.”~~

Our calculation of these metrics may not be comparable to other companies with similarly‑titled metrics.

Non-GAAP Financial Measures:

In addition to our results determined in accordance with U.S. GAAP, we ~~believe the below non‑GAAP measures are useful in evaluating our operating performance. We~~also use the below non‑GAAP financial information ~~collectively,~~ to evaluate our ongoing operations and for internal planning and forecasting purposes.


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Adjusted EBITDA	Adjusted EBITDA	$	73,605	$	52,772	$	189,111	$	132,156	Adjusted EBITDA	$	69,139	$	57,575	$	151,948	$	115,506
Adjusted Net Income	Adjusted Net Income	$	51,386	$	39,300	$	140,589	$	99,278	Adjusted Net Income	74,316		46,047		138,320		89,203

Adjusted EBITDA. We define Adjusted EBITDA as net income adjusted for interest expense, net, provision (benefit) for income taxes, depreciation and amortization, ~~equity‑~~stock‑based compensation, acquisition expenses, realignment expenses, ~~expenses associated with IPO,~~ other non‑operating ~~income~~(income) and expense, net, and (income) loss from investment accounted for using the equity method, net of tax.

Adjusted Net Income. We define Adjusted Net Income as net income adjusted for the following: amortization of purchased intangibles and developed technologies, ~~equity‑~~stock‑based compensation, acquisition expenses, realignment expenses, ~~expenses associated with IPO,~~ other non‑operating income and expense, net, the tax effect of the above adjustments to net income, non‑recurring income tax expense and benefit, and (income) loss from investment accounted for using the equity method, net of tax. The tax effect of adjustments to net income is based on the estimated marginal effective tax rates in the jurisdictions impacted by such adjustments.

Adjusted EBITDA and Adjusted Net Income are not presentations made in accordance with U.S. GAAP, and our use of the terms Adjusted EBITDA and Adjusted Net Income may vary from the use of similarly titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation. We believe the presentation of Adjusted EBITDA and Adjusted Net Income provides useful information to management and investors regarding financial and business trends related to our results of operations and that when ~~non-GAAP~~non‑GAAP financial information is viewed with U.S. GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance. We also use Adjusted EBITDA and Adjusted Net Income to compare our results to those of our competitors and to consistently measure our performance from period to period.

Adjusted EBITDA and Adjusted Net Income should not be considered as alternatives to net income, operating income, or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance. Adjusted EBITDA and Adjusted Net Income have important limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.

5049

Reconciliation of net income to Adjusted EBITDA:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net income	Net income	$	5,844	$	20,427	$	74,589	$	66,845	Net income	$	44,910	$	39,076	$	101,916	$	68,745
Interest expense, net	Interest expense, net	1,934		2,029		4,450		6,503		Interest expense, net	2,453		1,128		4,772		2,516
Provision for income taxes		10,705		6,640		22,145		11,759
(Benefit) provision for income taxes										(Benefit) provision for income taxes	(20,746)		4,264		(10,388)		11,440
Depreciation and amortization (1)	Depreciation and amortization (1)	9,172		7,968		25,836		23,334		Depreciation and amortization (1)	10,287		8,614		19,280		16,664
Equity-based compensation (3)		19,548		2,026		22,760		6,051
Stock-based compensation (3)										Stock-based compensation (3)	11,685		1,559		20,598		3,212
Acquisition expenses (4)	Acquisition expenses (4)	3,489		1,425		8,498		4,103		Acquisition expenses (4)	14,944		2,734		24,200		5,009
Realignment expenses (5)	Realignment expenses (5)	9,943		(49)		10,012		(492)		Realignment expenses (5)	—		77		—		69
Expenses associated with IPO (6)		26,130		—		26,130		—
Other (income) expense, net (7)		(13,741)		12,306		(6,756)		14,053
Other expense (income), net (6)										Other expense (income), net (6)	3,777		(405)		(10,705)		6,985
Loss from investment accounted for using the equity method, net of tax	Loss from investment accounted for using the equity method, net of tax	581		—		1,447		—		Loss from investment accounted for using the equity method, net of tax	1,829		528		2,275		866
Adjusted EBITDA	Adjusted EBITDA	$	73,605	$	52,772	$	189,111	$	132,156	Adjusted EBITDA	$	69,139	$	57,575	$	151,948	$	115,506

Reconciliation of net income to Adjusted Net Income:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net income	Net income	$	5,844	$	20,427	$	74,589	$	66,845	Net income	$	44,910	$	39,076	$	101,916	$	68,745
Non-GAAP adjustments, prior to income taxes:	Non-GAAP adjustments, prior to income taxes:									Non-GAAP adjustments, prior to income taxes:
Amortization of purchased intangibles and developed technologies (2)	Amortization of purchased intangibles and developed technologies (2)	5,236		4,638		14,694		13,699		Amortization of purchased intangibles and developed technologies (2)	5,781		4,919		10,464		9,458
Equity-based compensation (3)		19,548		2,026		22,760		6,051
Stock-based compensation (3)										Stock-based compensation (3)	11,685		1,559		20,598		3,212
Acquisition expenses (4)	Acquisition expenses (4)	3,489		1,425		8,498		4,103		Acquisition expenses (4)	14,944		2,734		24,200		5,009
Realignment expenses (5)	Realignment expenses (5)	9,943		(49)		10,012		(492)		Realignment expenses (5)	—		77		—		69
Expenses associated with IPO (6)		26,130		—		26,130		—
Other (income) expense, net (7)		(13,741)		12,306		(6,756)		14,053
Other expense (income), net (6)										Other expense (income), net (6)	3,777		(405)		(10,705)		6,985
Total non-GAAP adjustments, prior to income taxes	Total non-GAAP adjustments, prior to income taxes	50,605		20,346		75,338		37,414		Total non-GAAP adjustments, prior to income taxes	36,187		8,884		44,557		24,733
Income tax effect of non-GAAP adjustments	Income tax effect of non-GAAP adjustments	(5,644)		(1,473)		(10,785)		(4,981)		Income tax effect of non-GAAP adjustments	(8,610)		(2,441)		(10,428)		(5,141)
Loss from investment accounted for using the equity method, net of tax	Loss from investment accounted for using the equity method, net of tax	581		—		1,447		—		Loss from investment accounted for using the equity method, net of tax	1,829		528		2,275		866
Adjusted Net Income	Adjusted Net Income	$	51,386	$	39,300	$	140,589	$	99,278	Adjusted Net Income	$	74,316	$	46,047	$	138,320	$	89,203

Further explanation of certain of our adjustments in arriving at Adjusted EBITDA and Adjusted Net Income are as follows:

(1)Depreciation and amortization. Depreciation and amortization includes amortization of ~~$1,167~~$1,785 and ~~$889~~$1,058 for the three months ended ~~September~~June 30, 2021 and 2020, respectively, $3,472 and ~~2019, respectively, and $3,189 and $2,337~~$2,022 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, related to certain projects under our Accelerated Commercial Development Program (“ACDP”).

5150

(2)Amortization of purchased intangibles and developed technologies. Amortization of purchased intangibles varies in amount and frequency and is significantly impacted by the timing and size of our acquisitions. Amortization of acquisition related developed technologies under our ACDP was ~~$102~~$97 and ~~$174~~$92 for the three months ended ~~September~~June 30, 2021 and 2020, respectively, $191 and ~~2019, respectively, and $284 and $537~~$182 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Management finds it useful to exclude these ~~variable~~non‑cash charges from our operating expenses to assist in budgeting, planning, and forecasting future periods. The use of intangible assets and developed technologies contributed to our revenues earned during the periods presented and will also contribute to our revenues in future periods. Amortization of purchased intangible assets and developed technologies will recur in future periods.

(3)~~Equity‑~~Stock‑based compensation. We exclude certain ~~equity‑~~stock‑based compensation expenses from our non‑GAAP measures primarily because they are non‑cash expenses and management finds it useful to exclude certain non‑cash charges to assess the appropriate level of various operating expenses to assist in budgeting, planning, and forecasting future periods. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under ASC 718, Compensation—Stock Compensation, we believe excluding ~~equity‑~~stock‑based compensation expenses allows investors to make meaningful comparisons between our recurring core business results of operations and those of other companies.

(4)Acquisition expenses. We incur expenses for professional services rendered in connection with business combinations, which are included in our U.S. GAAP presentation of general and administrative expense. Also included in our acquisition expenses are retention incentives paid to executives of the acquired companies, as well as adjustments related to deferred revenue from acquired companies. We exclude these acquisition expenses when we evaluate our continuing operational performance as we would not have otherwise incurred these expenses in the periods presented as part of our continuing operations. Acquired deferred revenue is recorded on the opening balance sheet at an amount that typically is lower than historical carrying value. The adjustment to acquired deferred revenue has no impact on our business or cash flow, but it does reduce reported U.S. GAAP revenue in the periods following an acquisition. For the three and six months ended June 30, 2021, $9,180 and $15,896, respectively, of our acquisition expenses related to the acquisition of Seequent Holdings Limited (“Seequent”).

(5)Realignment expenses. These expenses are associated with realigning our business strategies to better serve our accounts and to better align resources with the evolving needs of the business. In connection with these actions, we recognize costs related to termination benefits for colleagues whose positions were eliminated. We exclude these charges because they are not reflective of our ongoing business and results of ~~operation.~~operations. We believe it is useful for investors to understand the effects of these items on our total operating expenses. In the ordinary course of operating our business, we incur severance expenses that are not included in this adjustment.

(6)~~Expenses associated with IPO~~. These expenses include certain non‑recurring costs relating to our IPO, consisting of the payment of underwriting discounts and commissions applicable to the sale of shares by the selling stockholders, professional fees, and other expenses. We exclude these charges because they are not reflective of our ongoing business and results of operation. We believe it is useful for investors to understand the effects of these items on our total operating expenses.

~~(7)~~Other expense (income) ~~expense,~~, net. Primarily consists of foreign ~~currency translation~~exchange (gains) losses of ~~$(12,830)~~$(1,406) and ~~$12,465~~$(4,518) for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$(8,567)~~$(2,198) and ~~$14,053~~$4,263 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The foreign ~~currency translation~~exchange (gains) losses derive primarily from U.S. Dollar denominated cash and cash equivalents, accounts receivable, and intercompany balances held by foreign subsidiaries. The gains and losses from such translations are included in Other expense (income), net in the consolidated statements of operations. Intercompany finance transactions denominated in U.S. Dollars resulted in unrealized foreign ~~currency translation~~exchange (gains) losses of ~~$(12,284)~~$(963) and ~~$12,302~~$(5,012) for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$(10,519)~~$(1,443) and ~~$13,982~~$1,765 for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively. ~~Foreign currency translation gains and losses~~These U.S. Dollar denominated balances are ~~driven by~~being translated into their functional currencies at the ~~volume of foreign currency transactions and~~rates in effect at the ~~foreign currency exchange rates for the year. A significant amount of such gains and losses is derived from the translation of intercompany balances which eliminate in consolidation~~balance sheet date and are ~~unrealized. Other (income) expense, net also includes a gain from the change~~fully eliminated in ~~fair value of our interest rate swap of $809, partially offset by a loss from the change in fair value of acquisition contingent consideration of $50 for~~consolidation. For the three months ended ~~September~~June 30, ~~2020. Other~~2021 and 2020, other expense (income) ~~expense,~~, net

also includes a loss from the change in fair value of our interest rate swap of ~~$3,365, partially~~$5,926 and $4,174, respectively. For the six months ended June 30, 2021, other expense (income), net includes a gain from the change in fair value of our interest rate swap of $(7,735). For the six months ended June 30, 2020, other expense (income), net includes a loss from the change in fair value of our interest rate swap of $4,174, partly offset by a gain from the change in fair value of acquisition contingent consideration of ~~$1,340 for the nine months ended September 30, 2020.~~$(1,390). We exclude these charges because they are not reflective of ongoing business and results of ~~operation.~~operations. We believe it is useful for investors to understand the effects of these items on our total operating expenses.

Key Factors Impacting Comparability and Performance:

Highlights for the six months ended June 30, 2021. In addition to our performance previously discussed in “—Key Business Metrics” and “—Non-GAAP Financial Measures,” and as discussed further below in “—Results of Operations” and “—Liquidity and Capital Resources,” our consolidated financial statements for the six months ended June 30, 2021 were impacted by the following:

•On June 17, 2021, we completed the acquisition of Seequent, a leader in software for geological and geophysical modeling, geotechnical stability, and cloud services for geodata management and collaboration, for approximately $910,997 in cash, net of cash acquired, plus 3,141,342 shares of our Class B Common Stock. For the six months ended June 30, 2021, we incurred $15,896 of expenses related to the acquisition of Seequent;

•On June 28, 2021, we completed a private offering of $575,000 of 0.375% convertible senior notes due 2027 (the “2027 Notes”). We incurred $15,065 of expenses in connection with the 2027 Notes offering consisting of transaction costs. Transaction costs were recorded as a direct deduction from the related debt liability in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the 2027 Notes;

•In connection with the pricing of the 2027 Notes, we entered into capped call options with certain of the initial purchasers or their respective affiliates and certain other financial institutions. The capped call options are expected to reduce potential dilution to our Class B Common Stock upon any conversion of 2027 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. We paid premiums of $25,875 in connection with the capped call options. The capped call options are indexed to our common stock and classified in stockholders’ equity. As such, the premiums paid for the capped call options have been included as a net reduction to Additional paid-in capital in the consolidated balance sheet;

•On January 26, 2021, we completed a private offering of $690,000 of 0.125% convertible senior notes due 2026 (the “2026 Notes”). We incurred $18,055 of expenses in connection with the 2026 Notes offering consisting of the payment of initial purchasers’ discounts and commissions, professional fees, and other expenses (“transaction costs”). Transaction costs were recorded as a direct deduction from the related debt liability in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the 2026 Notes;

•In connection with the pricing of the 2026 Notes, we entered into capped call options with certain of the initial purchasers or their respective affiliates and certain other financial institutions. The capped call options are expected to reduce potential dilution to our Class B Common Stock upon any conversion of 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. We paid premiums of $25,530 in connection with the capped call options. The capped call options are indexed to our common stock and classified in stockholders’ equity. As such, the premiums paid for the capped call options have been included as a net reduction to Additional paid-in capital in the consolidated balance sheet;

•On January 25, 2021, we entered into the Second Amendment to the Amended and Restated Credit Agreement dated December 19, 2017, which increased the senior secured revolving loan facility from $500,000 to $850,000 and extended the maturity date from December 18, 2022 to November 15, 2025 (the “Credit Facility”). We performed an extinguishment versus modification assessment on a lender‑by‑lender basis resulting in the write‑off of unamortized debt issuance costs of $353 and the capitalization of fees paid to lenders and third parties of $3,577. Debt issuance costs are amortized to interest expense through the maturity date of November 15, 2025;

•Effective as of the beginning of the fourth quarter of 2020, participants in the Bentley Systems, Incorporated Bonus Pool Plan, as amended and restated, effective as of September 22, 2020 (the “Bonus Plan”) may elect to receive any portion, or all, of such participants’ non‑deferred incentive bonus in the form of shares of fully vested Class B Common Stock instead of cash payments and subject to a combined quarterly limit of $7,500. For the six months ended June 30, 2021, we recorded $11,595 of stock‑based compensation expense related to this plan;

•Effective September 22, 2020, our Board and stockholders adopted and approved the Bentley Systems, Incorporated Global Employee Stock Purchase Plan (the “ESPP”). The ESPP will be implemented by means of consecutive offering periods, with the first offering period commencing on the first trading day on or after January 1, 2021 and ending on the last trading day on or before June 30, 2021. For the six months ended June 30, 2021, we recorded $877 of stock‑based compensation expense related to this plan.

Impact of foreign currency. A portion of our revenues and operating expenses were derived from outside the United States and as such, were denominated in various foreign currencies, including most significantly: Euros, British Pounds, Australian Dollars, Canadian Dollars, and Chinese Yuan Renminbi. Our financial results are therefore affected by changes in foreign currency rates. In ~~2019, 47%~~2020, 43% of our revenues were denominated in various foreign currencies. Correspondingly, in ~~2019, 46%~~2020, 47% of our operating expenses were denominated in various foreign currencies. Other than the natural hedge attributable to matching revenues and expenses in the same currencies, we do not currently hedge foreign currency exposure. Accordingly, our results of operations have been, and in the future will be, affected by changes in foreign exchange rates.

We identify the effects of foreign currency on our operations and present constant currency growth rates and fluctuations because we believe exchange rates are an important factor in understanding period to period comparisons and enhance the understanding of our results and evaluation of our performance. In reporting period to period results, we calculate the effects of foreign currency fluctuations and constant currency information by translating current period results using prior period average foreign currency exchange rates. Our definition of constant currency may differ from other companies reporting similarly named measures, and these constant currency performance measures should be viewed in addition to, and not as a substitute for, our operating performance measures calculated in accordance with U.S. GAAP.

Acquisitions. Historically, we have enhanced our business with acquisitions of businesses, software solutions, and technologies. Going forward, we plan to selectively acquire adjacent software solutions that can be sold broadly across our account base, as well as to acquire new technologies that we can leverage across our existing software solution portfolio. We completed ~~four~~eight and ~~two~~three acquisitions ~~during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Impact of COVID‑19. ~~In March~~As described in our 2020 the World Health Organization declared a global pandemic related to the rapidly growing outbreak of the disease COVID‑19, caused by a novel strain of coronavirus, SARS‑CoV‑2. The COVID‑19 outbreak and certain preventative or protective actions that governments, businesses, and individuals have takenForm 10-K, in ~~respect of COVID‑19 have resulted in global business disruptions.~~

In response to the ~~COVID‑19~~COVID-19 pandemic, we implemented a number of initiatives to ensure the safety of our colleagues and enable them to move to a work from home environment seamlessly and continue working effectively. ~~These initiatives included providing~~We continue to monitor the global situation, with the health and safety of our colleagues ~~with necessary equipment, making certain that all colleagues had means~~and users as a top priority. Currently, the majority of ~~video and audio communications online, and guaranteeing that~~ our ~~network bandwidth was sufficient.~~ workforce remains remote due to COVID-19.

Our business model is such that we ~~had~~have experienced minimal disruption to our ability to deliver our solutions to ~~accounts, and we believe we did not have any loss of productivity during this transition. Almost all of our colleagues have been working from home since March 16, 2020, with~~accounts. The COVID‑19 pandemic has had a ~~minority of our colleagues working in our office environments~~modest impact on ~~a voluntary basis and abiding by appropriate distancing and sanitary regulations for their region. We communicated regularly and provided on‑demand learning and support to our colleagues throughout~~ the transition period. Based on a May 2020 internal survey, a majority of our colleagues are confident in the decisions that Bentley leadership is making regarding employee well‑being and safety during this pandemic, and a majority of our colleagues believe that Bentley’s response to and communication regarding COVID‑19 has been timely and helpful.

The impact of the pandemic on our financial performance has been modest; our revenues have continued to grow given the mission critical nature of our solutions. For the months of March and April 2020, our accounts’ usage of our ~~applications was down approximately 3‑5%~~solutions by our users. Throughout 2020 and the six months ended June 30, 2021, usage rates fluctuated modestly when compared to ~~levels from~~ the ~~same~~corresponding periods in ~~2019. Those same usage metrics showed improvement to be nearly equivalent to past usage during May and June 2020, but~~the prior year. Usage declines have since reflected modest declines of 2‑3% relative to equivalent 2019 usage. The most recent pattern of decline in usage follows capital projects within sectors, as opposed to the initial 2020 declines which we observed to follow the geographic spread of the pandemic. The modest, yet persisting, dip in usage has had ~~limited~~a minimal impact on our recurring revenues, which are comprised primarily of longer term ~~contracts. To~~contracts where short‑term usage rate declines do not adversely impact revenues. However, to the extent declines in usage have also occurred within our recurring revenue contracts with shorter term resets, as is the case with our E365 contracts, the usage declines have modestly impacted ~~revenues, notably in those accounts also exposed to capital projects in the industrial and resources sectors, and to a lesser extent, commercial and facilities sectors. The growth of our~~revenues. Our revenues from ~~perpetual licenses and~~ professional services have also been impacted as certain accounts have delayed new projects. Overall, while our rate of growth has been impacted, ~~as selected accounts~~our revenues have ~~shifted spend~~continued to ~~subscription solutions or delayed new projects.~~grow given the mission critical nature of our solutions.

~~Moreover,~~

As a precaution in the COVID-19 environment, we ~~were quick~~have and continue to ~~find ways~~actively manage our spending. Actions taken during 2020 included efforts to ~~support~~minimize colleague travel, and to reduce and recharacterize promotional spending with a shift to virtual events. Although compensation levels and incentive plan payouts have returned to normal for 2021, during 2020, our ~~accounts and users, including the launch of a “Bentley Has Your Back” campaign~~actions also included curtailment in variable compensation plans to help our accounts take full advantage of their Bentley software. This campaign included producing over 50 self‑help documents, 20 webinars, and several messages guiding users on various topics including how Bentley’s solutions should be configured when working with limited bandwidth, howalign to ~~use a SmartTV as a monitor, and how to leverage specific offerings such as ProjectWise to facilitate collaboration~~COVID-19 pandemic related uncertainties. These actions have resulted in ~~their own businesses in remote working environments. This guidance and assistance was well received by accounts and we believe helped maximize usage~~substantial cost savings during the ~~pandemic.~~pandemic, which are unlikely to be fully sustainable prospectively.

~~We have also taken measures to reduce selected operating expenses, including various costs associated with travel and facilities. Much~~For further discussion of ~~those resulting savings have been or will be re‑invested in a portfolio~~the potential impact of ~~businesses outside~~COVID-19 on our business, see Part II, Item IA. Risk Factors of ~~our core software business, with the objective of cultivating an ecosystem of digital integrator businesses.~~this Quarterly Report on Form 10-Q.

Our business benefits from a resilient business model backed by industry tailwinds and a strong financial profile. We believe that significant public and private investment will continue to drive spend for infrastructure globally, which will continue to drive demand for our solutions. Additionally, we do not have any material account concentration; no single account or group of affiliated accounts represented more than 2.5% of our revenues for the year ended December 31, 2019. As of September 30, 2020, we had $137,598 of cash and cash equivalents, and $34,850 was available under our amended and restated credit agreement, entered into on December 19, 2017 (the “Credit Facility”).

Components of Results of Operations:

We manage our business globally within one operating segment, the development and marketing of computer software and related services, which is consistent with how our chief operating decision maker reviews and manages our business.

Revenues:

We generate revenues from subscriptions, perpetual licenses, and professional services.

Subscriptions

SELECT subscriptions: We provide annual recurring subscriptions that accounts can elect to add to a new or previously purchased perpetual license. SELECT provides accounts with benefits, including upgrades, comprehensive technical support, pooled licensing benefits, annual portfolio balancing exchange rights, learning benefits, certain Azure‑based cloud collaboration services, mobility advantages, and access to other available benefits. SELECT subscriptions revenues are recognized as distinct performance obligations are satisfied.

Enterprise subscriptions: We provide Enterprise subscription offerings that provides our largest accounts with complete and unlimited global access to our comprehensive portfolio of solutions. ELS provides access for a prepaid annual fee. Our E365 subscription, which was introduced during the fourth quarter of 2018, provides unrestricted access to our comprehensive software portfolio, similar to ELS, however is charged based upon daily usage. E365 subscriptions can contain quarterly usage floors or collars as accounts transition to the usage model or for accounts within the public sector. The daily usage fee also includes a term license component, SELECT maintenance and support, hosting, and Success Plan services, which are designed to achieve business outcomes through more efficient and effective use of our software. The ELS and E365 ~~programs~~offerings both contain a distinct term license component. ELS revenue is recognized as the distinct performance obligations are satisfied. E365 revenue is recognized based upon usage incurred by the account.

Term license subscriptions: We provide annual, quarterly, and monthly term licenses for our software products. ATL subscriptions are generally prepaid annually for named user access to specific products. QTL subscriptions allow accounts to pay quarterly in arrears for licenses usage that is beyond their SELECT contracted quantities. MTL subscriptions are identical to QTL subscriptions, except for the term of the license, and the manner in which they are monetized. MTL subscriptions require a CSS, which is described below.

Visas and Passports are quarterly or annual term licenses enabling accounts to access specific project or enterprise information and ~~entitle~~entitles our users to certain functionality of our ProjectWise and AssetWise systems. Our standard offerings are usage based with monetization through our CSS program. Annual, quarterly, and monthly term licenses revenues are recognized as the distinct performance obligations for each are satisfied. Billings in advance are recorded as Deferred revenues in the consolidated balance sheets. QTL, MTL, Visas and Passports subscriptions are recognized based upon usage incurred by the account.

CSS is a program designed to streamline the procurement, administration, and payment process. The program requires an estimation of annual usage for CSS eligible offerings and a deposit of funds in advance. Actual consumption is monitored and invoiced against the deposit on a calendar quarter basis. CSS balances not utilized for eligible products or services may roll over to future periods or are refundable. Paid and unconsumed CSS balances are recorded in Accruals and other current liabilities in the consolidated balance sheets. Software and services consumed under CSS are recognized pursuant to the applicable revenue recognition guidance for the respective software or service and classified as subscriptions or services based on their respective nature.

Perpetual licenses

Perpetual licenses may be sold with or without attaching a SELECT subscription. Historically, attachment and retention of the SELECT subscription has been high given the benefits of the SELECT subscription discussed above. Perpetual licenses revenues are recognized upon delivery of the license to the user.

Services

We provide professional services including training, implementation, configuration, customization, and strategic consulting services. We perform projects on both a time and materials and a fixed fee basis. Our recent and preferred contractual structures for delivering professional services include (i) delivery of services in the form of subscription‑like, packaged offerings that are annually recurring in nature, and (ii) delivery of our growing portfolio of Success Plans. Success Plans are standard offerings that offer a level of subscription service above the standard technical support offered to all accounts as part of their SELECT or Enterprise agreement. Revenues are recognized as services are performed.

Headcount-related costs

For the year ended December 31, ~~2019,~~2020, 80% of our aggregate cost of revenues, research and development, selling and marketing, and general and administrative costs were represented by what we refer to herein as “headcount-related” costs. These costs include the salary costs of our colleagues (our employees) and the corresponding incentives, benefits, employment taxes, and travel‑related costs. Our headcount‑related costs are variable in nature. We actively manage these costs to align to our trending run rate of revenue performance, with the objective of enhancing visibility and predictability of resulting operating profit margins.

Cost of subscriptions, licenses, and services

Cost of subscriptions and licenses. Cost of subscriptions and licenses includes salaries and other related costs, including the depreciation of property and equipment and the amortization of capitalized software costs associated with servicing software subscriptions, the amortization of intangible assets associated with acquired software and technology, channel partner compensation for providing sales coverage to subscribers, as well as cloud‑related costs incurred for servicing our accounts using cloud ~~deployed hosted~~provisioned solutions and our license administration platform.

Cost of services. Cost of services includes salaries for internal and third‑party personnel and related overhead costs, including depreciation of property and equipment, for providing training, implementation, configuration, and customization services to accounts, amortization of capitalized software costs, and related out‑of‑pocket expenses incurred.

Operating expenses

Research and development. Research and development expenses, which are generally expensed as incurred, primarily consist of personnel and related costs of our research and development staff, including salaries, benefits, bonuses, stock‑based compensation, and costs of certain third‑party contractors, as well as allocated overhead costs. We expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external accounts, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products and as a result, development costs that meet the criteria for capitalization were not material for the periods presented.

We capitalize certain development costs related to certain projects under our ACDP (our structured approach to an in‑house business incubator function) once technological feasibility is established. Technological feasibility is established when a detailed program design has been completed and documented; we have established that the necessary skills, hardware, and software technology are available to produce the product; and there are no unresolved high‑risk development issues. Once the software is ready for its intended use, amortization is recorded over the software’s estimated useful life (generally three years). Total costs capitalized under the ACDP were ~~$1,922~~$1,606 and ~~$1,626 during~~$1,776 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$6,182~~$2,649 and ~~$3,807 during~~$4,260 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Additionally, total ACDP related amortization recorded in Costs of subscriptions and licenses was ~~$1,167~~$1,785 and ~~$889 during~~$1,058 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$3,189,~~$3,472 and ~~$2,337 during~~$2,022 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Selling and marketing. Selling and marketing expenses include salaries, benefits, bonuses, and stock‑based compensation expense for our selling and marketing colleagues, the expense of travel, entertainment, and training for such personnel, online marketing, product marketing and other brand‑building activities, such as advertising, trade shows, and expositions, various sales and promotional programs, and costs of computer equipment and facilities used in selling and marketing activities. We anticipate that we will continue to make strategic investments in our global business systems and methods to enhance major account sales activities and to support our worldwide sales and marketing strategies, and the business in general. We capitalize certain incremental costs of obtaining a contract and recognize these expenses over the period of benefit associated with these costs, resulting in a deferral of certain contract costs each period. The contract costs are amortized based on the economic life of the goods and services to which the contract costs relate. We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. These costs include our internal sales force compensation program and certain channel partner sales incentive programs for which the annual compensation is commensurate with annual sales activities.

General and administrative. General and administrative expenses include salaries, bonuses, benefits, and stock‑based compensation expense for our finance, human resources, and legal colleagues, the expense of travel, entertainment, and training for such personnel, professional fees for legal and accounting services, and costs of computer equipment and facilities used in general and administrative activities. Following the completion of the IPO, we expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a U.S. securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC. In addition, as a public company, we expect to incur increased expenses in the areas of insurance, investor relations, and professional services. As a result, we expect the dollar amount of our general and administrative expenses to increase for the foreseeable future. We expect, however, that our general and administrative expenses will decrease as a percentage of our revenues over time, although the percentage may fluctuate from period to period depending on fluctuations in our revenue and the timing and extent of our general and administrative expenses.

Amortization of purchased intangibles. Amortization of purchased intangibles includes the amortization of acquired non‑product related intangible assets, primarily customer relationships, trademarks, and non‑compete agreements recorded in connection with completed acquisitions.

~~Expenses associated with IPO~~. Expenses associated with IPO include certain non‑recurring costs relating to our IPO, consisting of the payment of underwriting discounts and commissions applicable to the sale of shares by the selling stockholders, professional fees, and other expenses. We completed our IPO on September 25, 2020. These fees are being expensed in the period incurred.

Interest expense, net. Interest expense, net primarily represents interest associated with the Credit Facility, amortization of deferred ~~financing~~debt issuance costs, and interest income from our investments in money market funds.

Other income (expense), net. Other income (expense), net primarily consists of foreign currency translation results derived primarily from U.S. Dollar denominated cash and cash equivalents, accounts receivable, and intercompany balances held by foreign subsidiaries with non‑U.S. Dollar functional currencies.

~~Provision~~(Provision) benefit for income taxes.~~Provision~~ (Provision) benefit for income taxes includes the aggregate consolidated income tax expense for U.S. domestic and foreign income taxes.

Loss from investment accounted for using the equity method, net of tax. Loss from investment accounted for using the equity method includes our proportional share of loss in a joint venture.

5758

Results of ~~operations:~~Operations:

The following table sets forth selected consolidated statements of operations data for each of the periods indicated:

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Revenues:
Subscriptions $ 173,174 $ 155,191 $ 501,011 $ 445,338
Perpetual licenses 12,827 13,787 36,020 38,255
Subscriptions and licenses 186,001 168,978 537,031 483,593
Services 16,996 17,610 44,946 50,139
Total revenues 202,997 186,588 581,977 533,732
Cost of revenues:
Cost of subscriptions and licenses 23,338 17,370 66,466 48,201
Cost of services 19,290 17,681 50,126 56,048
Total cost of revenues 42,628 35,051 116,592 104,249
Gross profit 160,369 151,537 465,385 429,483
Operating expenses:
Research and development 50,217 44,756 139,570 136,617
Selling and marketing 41,824 36,721 107,551 111,889
General and administrative 33,006 25,108 85,275 71,415
Amortization of purchased intangibles 3,869 3,550 10,984 10,402
Expenses associated with initial public offering 26,130 — 26,130 —
Total operating expenses 155,046 110,135 369,510 330,323
Income from operations 5,323 41,402 95,875 99,160
Interest expense, net (1,934) (2,029) (4,450) (6,503)
Other income (expense), net 13,741 (12,306) 6,756 (14,053)
Income before income taxes 17,130 27,067 98,181 78,604
Provision for income taxes (10,705) (6,640) (22,145) (11,759)
Loss from investment accounted for using the equity method, net of tax (581) — (1,447) —
Net income 5,844 20,427 74,589 66,845
Less: Net income attributable to participating securities (4) (10) (4) (10)
Net income attributable to Class A and Class B common stockholders $ 5,840 $ 20,417 $ 74,585 $ 66,835
Per share information:
Net income per share, basic $ 0.02 $ 0.07 $ 0.26 $ 0.23
Net income per share, diluted $ 0.02 $ 0.07 $ 0.25 $ 0.23
Weighted average shares outstanding, basic 289,318,391 286,075,323 287,063,892 286,024,263
Weighted average shares outstanding, diluted 299,634,961 289,629,555 297,251,349 294,586,354

~~Comparison of the Three and Nine Months Ended September 30, 2020 and 2019~~


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenues:
Subscriptions	$	185,452	$	157,655	$	373,577	$	327,837
Perpetual licenses	11,391		12,379		21,507		23,193
Subscriptions and licenses	196,843		170,034		395,084		351,030
Services	26,088		14,256		49,852		27,950
Total revenues	222,931		184,290		444,936		378,980
Cost of revenues:
Cost of subscriptions and licenses	29,881		21,801		58,826		43,128
Cost of services	23,570		14,904		43,914		30,836
Total cost of revenues	53,451		36,705		102,740		73,964
Gross profit	169,480		147,585		342,196		305,016
Operating expenses:
Research and development	52,776		44,218		100,579		89,353
Selling and marketing	38,014		29,632		70,454		65,727
General and administrative	41,878		25,465		75,266		52,269
Amortization of purchased intangibles	4,589		3,679		8,027		7,115
Total operating expenses	137,257		102,994		254,326		214,464
Income from operations	32,223		44,591		87,870		90,552
Interest expense, net	(2,453)		(1,128)		(4,772)		(2,516)
Other (expense) income, net	(3,777)		405		10,705		(6,985)
Income before income taxes	25,993		43,868		93,803		81,051
Benefit (provision) for income taxes	20,746		(4,264)		10,388		(11,440)
Loss from investment accounted for using the equity method, net of tax	(1,829)		(528)		(2,275)		(866)
Net income	44,910		39,076		101,916		68,745
Less: Net income attributable to participating securities	(3)		—		(3)		—
Net income attributable to Class A and Class B common stockholders	$	44,907	$	39,076	$	101,913	$	68,745
Per share information:
Net income per share, basic	$	0.15	$	0.14	$	0.34	$	0.24
Net income per share, diluted	$	0.14	$	0.13	$	0.32	$	0.23
Weighted average shares, basic	304,066,038		286,945,592		303,311,423		286,068,766
Weighted average shares, diluted	324,478,086		295,187,194		323,094,045		295,595,234

In reporting period‑over‑period results, we calculate the effects of foreign currency fluctuations and constant currency information by translating current period results using prior period average foreign currency exchange rates. Our definition of constant currency may differ from other companies reporting similarly named measures, and these constant currency performance measures should be viewed in addition to, and not as a substitute for, our operating performance measures calculated in accordance with U.S. GAAP.

Comparison of the Three and Six Months Ended June 30, 2021 and 2020

Revenues


						Comparison											Comparison
		Three Months Ended								Constant			Three Months Ended								Constant
		September 30,								Currency			June 30,								Currency
		2020		2019		Amount		%		%			2021		2020		Amount		%		%
Revenues:	Revenues:											Revenues:
Subscriptions	Subscriptions	$	173,174	$	155,191	$	17,983	11.6	%	9.5	%	Subscriptions	$	185,452	$	157,655	$	27,797	17.6	%	13.5	%
Perpetual licenses	Perpetual licenses	12,827		13,787		(960)		(7.0)	%	(8.6)	%	Perpetual licenses	11,391		12,379		(988)		(8.0)	%	(12.7)	%
Subscriptions and licenses	Subscriptions and licenses	186,001		168,978		17,023		10.1	%	8.0	%	Subscriptions and licenses	196,843		170,034		26,809		15.8	%	11.6	%
Services	Services	16,996		17,610		(614)		(3.5)	%	(4.5)	%	Services	26,088		14,256		11,832		83.0	%	75.1	%
Total revenues	Total revenues	$	202,997	$	186,588	$	16,409	8.8	%	6.8	%	Total revenues	$	222,931	$	184,290	$	38,641	21.0	%	16.5	%


						Comparison											Comparison
		Nine Months Ended								Constant			Six Months Ended								Constant
		September 30,								Currency			June 30,								Currency
		2020		2019		Amount		%		%			2021		2020		Amount		%		%
Revenues:	Revenues:											Revenues:
Subscriptions	Subscriptions	$	501,011	$	445,338	$	55,673	12.5	%	12.6	%	Subscriptions	$	373,577	$	327,837	$	45,740	14.0	%	9.7	%
Perpetual licenses	Perpetual licenses	36,020		38,255		(2,235)		(5.8)	%	(4.9)	%	Perpetual licenses	21,507		23,193		(1,686)		(7.3)	%	(12.1)	%
Subscriptions and licenses	Subscriptions and licenses	537,031		483,593		53,438		11.1	%	11.2	%	Subscriptions and licenses	395,084		351,030		44,054		12.5	%	8.2	%
Services	Services	44,946		50,139		(5,193)		(10.4)	%	(10.0)	%	Services	49,852		27,950		21,902		78.4	%	70.8	%
Total revenues	Total revenues	$	581,977	$	533,732	$	48,245	9.0	%	9.2	%	Total revenues	$	444,936	$	378,980	$	65,956	17.4	%	12.9	%

Total revenues increased by ~~$16,409,~~$38,641, or ~~8.8%~~21.0%, to ~~$202,997~~$222,931 for the three months ended ~~September~~June 30, ~~2020~~2021 and by ~~$48,245,~~$65,956, or ~~9.0%~~17.4%, to ~~$581,977~~$444,936 for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. This increase was primarily driven by improvements in our business performance in subscription revenues, the impact from acquisitions in services revenues, and the overall positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies. We define business performance as our organic growth results inclusive of the impact from certain programmatic acquisitions, which generally are immaterial, individually and in the aggregate. On a constant currency basis, our revenues increased by 16.5% and 12.9% for the three and six months ended June 30, 2021, respectively, as compared to the prior periods.

•Subscriptions. For the three months ended ~~September~~June 30, ~~2020,~~2021, subscriptions revenues increased by $27,797, or 17.6%, as compared to the three months ended June 30, 2020. This increase was driven primarily by improvements in our ~~organic~~business performance, ~~of $3,374,~~the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies, and the impact ~~from acquisitions~~ of ~~$9,394,~~$3,852 related to our acquisition of Seequent. On a constant currency basis, our subscriptions revenues increased by 13.5% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

For the six months ended June 30, 2021, subscriptions revenues increased by $45,740, or 14.0%, as compared to the six months ended June 30, 2020. This increase was driven primarily by improvements in our business performance and the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies of $3,641. For the nine months ended September 30, 2020, the increase was driven by improvements in our organic performance of $28,556 and the impact from acquisitions of $20,778, partially offset by negative foreign currency effects due to a stronger U.S. Dollar relative to our other functional currencies of $1,089.currencies. On a constant currency basis, our subscriptions revenues increased by ~~6.8%~~9.7% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Our growth in subscriptions is primarily due to expansion within our existing accounts and ~~9.2%~~growth of 3% attributable to new accounts, most notability small and medium sized accounts. The improvements in business performance for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively, as compared to the prior period.~~2021 was led by our ProjectWise, Asset and Network Performance, civil design, and geotechnical products.

•~~Subscriptions~~Perpetual licenses. For the three months ended ~~September~~June 30, ~~2020, subscriptions~~2021, perpetual licenses revenues ~~increased~~decreased by ~~$17,983,~~$988, or ~~11.6%~~8.0%, as compared to the three months ended ~~September~~June 30, ~~2019.~~2020. This decrease was driven by a reduction in our business performance and partially offset by the impact of positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies. On a constant currency basis, our perpetual licenses revenues decreased by 12.7% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

For the six months ended June 30, 2021, perpetual licenses revenues decreased by $1,686, or 7.3%, as compared to the six months ended June 30, 2020. This decrease was driven by a reduction in our business performance and partially offset by the impact of positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies. On a constant currency basis, our perpetual licenses revenues decreased by 12.1% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

We believe some of the decrease in perpetual licenses business performance for the three and six months ended June 30, 2021 is because accounts delayed purchase decisions due to COVID‑19 or shifted spend to subscription solutions.

•Services. For the three months ended June 30, 2021, services revenues increased by $11,832, or 83.0%, as compared to the three months ended June 30, 2020. This increase was driven primarily by ~~improvements in our organic performance of $10,816,~~ the impact ~~from~~of acquisitions of ~~$3,930, and~~$9,468, as well as the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional ~~currencies of $3,237.~~currencies. On a constant currency basis, our ~~subscriptions~~services revenues increased by ~~9.5%~~75.1% for the three months ended ~~September~~June 30, ~~2020 as compared to the prior period.~~

For the nine months ended September 30, 2020, subscriptions revenues increased by $55,673, or 12.5%, as compared to the nine months ended September 30, 2019. This increase was driven primarily by improvements in our organic performance of $46,326, and to a lesser extent, the impact from acquisitions of $9,910, partially offset by negative foreign currency effects due to a stronger U.S. Dollar relative to our other functional currencies of $563. On a constant currency basis, our subscriptions revenues increased by 12.6% for the nine months ended September 30, 2020 as compared to the prior period.

For the three and nine months ended September 30, 2020, the increase in organic performance was primarily due to expansion within our existing accounts, as reflected by our recurring revenues dollar-based net retention rate of 110% and approximately 3% of the increase was attributed to new accounts. Approximately 40% and 50% of our organic performance expansion was driven by ProjectWise and civil design products for the three and nine months ended September 30, 2020, respectively.

•~~Perpetual licenses. For the three months ended September 30, 2020, perpetual licenses revenues decreased by $960, or 7.0%,~~2021 as compared to the three months ended ~~September~~June 30, ~~2019.~~2020.

For the six months ended June 30, 2021, services revenues increased by $21,902, or 78.4%, as compared to the six months ended June 30, 2020. This ~~decrease~~increase was driven ~~by a reduction in our organic performance of $1,698, partially offset~~primarily by the impact ~~from~~of acquisitions of ~~$512,~~$19,130, as well as bythe positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional ~~currencies of $226. On a constant currency basis, our perpetual licenses revenues decreased by 8.6% for the three months ended September 30, 2020 as compared to the prior period.~~

For the nine months ended September 30, 2020, perpetual licenses revenues decreased by $2,235, or 5.8%, as compared to the nine months ended September 30, 2019. This decrease was driven by a reduction in our organic performance of $3,591, as well as by negative foreign currency effects due to a stronger U.S. Dollar relative to our other functional currencies of $344, partially offset by the impact from acquisitions of $1,700. On a constant currency basis, our perpetual licenses revenues decreased by 4.9% for the nine months ended September 30, 2020 as compared to the prior period.

We observed a decrease in organic performance during the three and nine months ended September 30, 2020 as certain accounts delayed purchase decisions or shifted spend to subscription solutions due to COVID‑19.

•~~Services.~~ For the three months ended September 30, 2020, services revenues decreased by $614, or 3.5%, as compared to the three months ended September 30, 2019. This decrease was driven primarily by a reduction in our organic performance of $5,744, partially offset by the impact from acquisitions of $4,952, as well as by positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies of $178.currencies. On a constant currency basis, our services revenues ~~decreased~~increased by ~~4.5%~~70.8% for the ~~three~~six months ended ~~September~~June 30, ~~2020~~2021 as compared to the ~~prior period.~~

~~For the nine~~six months ended ~~September~~June 30, 2020, services revenues decreased by $5,193, or 10.4%, as compared to the nine months ended September 30, 2019. This decrease was driven primarily by a reduction in our organic performance of $14,179, as well as by negative foreign currency effects due to a stronger U.S. Dollar relative to our other functional currencies of $182, partially offset by the impact from acquisitions of $9,168. On a constant currency basis, our services revenues decreased by 10.0% for the nine months ended September 30, 2020 as compared to the prior period.2020.

For the three and ~~nine~~six months ended ~~September~~June 30, 2021, the acquisition impact is attributable to several digital integrator businesses acquired throughout 2020 ~~the decreases in organic~~and 2021. Business performance ~~were primarily due~~continued to ~~the winding down or completion of several larger services projects during 2019 and 2020,~~be impacted by COVID‑19 related delays ofin new projects ~~while social distancing measures are in place, the inclusion of learning benefits in our subscription offerings,~~ and the ~~partial~~ redeployment of ~~our~~some services colleagues to support Success Plan services of our E365 subscription offering.

6061

Revenues by Geographic Area

Revenues are allocated to individual countries based upon the location of ~~the~~ users. Revenues by geographic area are as follows:


						Comparison											Comparison
		Three Months Ended								Constant			Three Months Ended								Constant
		September 30,								Currency			June 30,								Currency
		2020		2019		Amount		%		%			2021		2020		Amount		%		%
Revenues by geographic area:	Revenues by geographic area:											Revenues by geographic area:
Americas	Americas	$	102,104	$	91,776	$	10,328	11.3	%	11.2	%	Americas	$	112,308	$	87,938	$	24,370	27.7	%	27.2	%
Europe, the Middle East, and Africa (“EMEA”)		63,335		55,793		7,542		13.5	%	8.7	%
Asia-Pacific (“APAC”)		37,558		39,019		(1,461)		(3.7)	%	(6.1)	%
EMEA												EMEA	69,015		59,464		9,551		16.1	%	7.2	%
APAC												APAC	41,608		36,888		4,720		12.8	%	6.1	%
Total revenues by geographic area	Total revenues by geographic area	$	202,997	$	186,588	$	16,409	8.8	%	6.8	%	Total revenues by geographic area	$	222,931	$	184,290	$	38,641	21.0	%	16.5	%


						Comparison											Comparison
		Nine Months Ended								Constant			Six Months Ended								Constant
		September 30,								Currency			June 30,								Currency
		2020		2019		Amount		%		%			2021		2020		Amount		%		%
Revenues by geographic area:	Revenues by geographic area:											Revenues by geographic area:
Americas	Americas	$	287,942	$	259,216	$	28,726	11.1	%	11.3	%	Americas	$	221,170	$	185,838	$	35,332	19.0	%	18.2	%
EMEA	EMEA	184,913		171,604		13,309		7.8	%	7.8	%	EMEA	142,863		121,578		21,285		17.5	%	8.8	%
APAC	APAC	109,122		102,912		6,210		6.0	%	6.5	%	APAC	80,903		71,564		9,339		13.0	%	6.0	%
Total revenues by geographic area	Total revenues by geographic area	$	581,977	$	533,732	$	48,245	9.0	%	9.2	%	Total revenues by geographic area	$	444,936	$	378,980	$	65,956	17.4	%	12.9	%

•Americas. For the three months ended ~~September~~June 30, ~~2020,~~2021, revenues from the Americas increased by ~~$10,328,~~$24,370, or ~~11.3%~~27.7%, as compared to the three months ended ~~September~~June 30, ~~2019.~~2020. This increase was driven primarily by improvements in our business performance in subscription revenues and the impact from acquisitions ~~of $7,067,~~in services revenues. On a constant currency basis, our revenues from the Americas increased by 27.2% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

For the six months ended June 30, 2021, revenues from the Americas increased by $35,332, or 19.0%, as compared to the six months ended June 30, 2020. This increase was driven primarily by improvements in our ~~organic~~business performance in subscription revenues and the impact from acquisitions in service revenues. On a constant currency basis, our revenues from the Americas increased by 18.2% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

The constant currency growth in the Americas primarily reflects growth in recurring subscription revenues from our existing accounts in the United States, and growth in services revenues in the United States and Canada from the acquisition of ~~$3,214,~~digital integrator businesses.

•EMEA. For the three months ended June 30, 2021, revenues from EMEA increased by $9,551, or 16.1%, as compared to the three months ended June 30, 2020. On a constant currency basis, our revenues from EMEA increased by 7.2% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The positive foreign currency effects were due to a weaker U.S. Dollar relative to our other functional currencies.

For the six months ended June 30, 2021, revenues from EMEA increased by $21,285, or 17.5%, as compared to the six months ended June 30, 2020. On a constant currency basis, our revenues from EMEA increased by 8.8% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The positive foreign currency effects were due to a weaker U.S. Dollar relative to our other functional currencies.

The constant currency growth primarily reflects growth in services revenues from the 2020 acquisitions of two digital integrator businesses in Europe. Constant currency growth also includes modest business growth in subscription revenues in Europe, with a partially offsetting reduction in the Middle East.

•APAC. For the three months ended June 30, 2021, revenues from APAC increased by $4,720, or 12.8%, as compared to the three months ended June 30, 2020. This increase was driven by improvements in our business performance in subscription revenues and bythe positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional ~~currencies of $47.~~currencies. On a constant currency basis, our revenues from ~~the Americas~~APAC increased by ~~11.2%~~6.1% for the three months ended ~~September~~June 30, ~~2020 as compared to the prior period.~~

For the nine months ended September 30, 2020, revenues from the Americas increased by $28,726, or 11.1%, as compared to the nine months ended September 30, 2019. This increase was driven primarily by improvements in our organic performance of $15,488 and the impact from acquisitions of $13,856, partially offset by negative foreign currency effects due to a stronger U.S. Dollar relative to our other functional currencies of $618. On a constant currency basis, our revenues from the Americas increased by 11.3% for the nine months ended September 30, 2020 as compared to the prior period.

The increases in organic performance were primarily due to expansion of our recurring subscription revenues from our existing accounts in the United States and Canada. Approximately 30% of our subscription-related organic performance expansion was driven by civil design products for the three and nine months ended September 30, 2020.

•~~EMEA.~~ ~~For the three months ended September 30, 2020, revenues from EMEA increased by $7,542, or 13.5%,~~2021 as compared to the three months ended ~~September~~June 30, ~~2019.~~2020.

For the six months ended June 30, 2021, revenues from APAC increased by $9,339, or 13.0%, as compared to the six months ended June 30, 2020. This increase was driven ~~primarily~~ by improvements in our ~~organic~~business performance ~~of $2,742, by~~in subscription revenues and the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies of $2,674, and the impact from acquisitions of $2,126. On a constant currency basis, our revenues from EMEA increased by 8.7% for the three months ended September 30, 2020 as compared to the prior period.

For the nine months ended September 30, 2020, revenues from EMEA increased by $13,309, or 7.8%, as compared to the nine months ended September 30, 2019. This increase was driven primarily by improvements in our organic performance of $7,092 and the impact from acquisitions of $6,239, partly offset by negative foreign currency effects due to a stronger U.S. Dollar relative to our other functional currencies of $22. On a constant currency basis, our revenues from EMEA increased by 7.8% for the nine months ended September 30, 2020 as compared to the prior period.

The increases in organic performance were primarily due to expansion of our recurring subscription revenues throughout the region. Approximately 40% of our subscription-related organic performance expansion was driven by ProjectWise for both the three and nine months ended September 30, 2020.

•~~APAC.~~ For the three months ended September 30, 2020, revenues from APAC decreased by $1,461, or 3.7%, as compared to the three months ended September 30, 2019. This decrease was driven primarily by declines in our organic performance of $2,583, partially offset by positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies of $921 and, to a lesser extent, the impact from acquisitions of $201. On a constant currency basis, our revenues from APAC decreased by 6.1% for the three months ended September 30, 2020 as compared to the prior period.

For the nine months ended September 30, 2020, revenues from APAC increased by $6,210, or 6.0%, as compared to the nine months ended September 30, 2019. This increase was driven primarily by improvements in our organic performance of $5,975 and, to a lesser extent, the impact from acquisitions of $683, partially offset by negative foreign currency effects due to a stronger U.S. Dollar relative to our other functional currencies of $448.currencies. On a constant currency basis, our revenues from APAC increased by ~~6.5%~~6.0% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 as compared to the ~~prior period.~~

~~For the three~~six months ended ~~September~~June 30, ~~2020, the decline in organic performance was primarily due to the reduction of our perpetual licenses revenues in China, India, and South East (“SE”) Asia.~~ 2020.

The reductions were driven by certain accounts delaying purchase decisions or shifting spend from perpetual licenses to subscription solutions due to COVID‑19. For the nine months ended September 30, 2020, the increase in organic performanceconstant currency growth was primarily due to expansion of our recurring subscription revenues ~~from our existing accounts~~ in ~~Australia,~~India for the three months ended June 30, 2021 and in China ~~and SE Asia. Approximately 40% of our subscription-related organic performance expansion was driven by ProjectWise and Offshore Structural Analysis products.~~for the six months ended June 30, 2021.

Cost of Revenues


						Comparison											Comparison
		Three Months Ended								Constant			Three Months Ended								Constant
		September 30,								Currency			June 30,								Currency
		2020		2019		Amount		%		%			2021		2020		Amount		%		%
Cost of subscriptions and licenses	Cost of subscriptions and licenses	$	23,338	$	17,370	$	5,968	34.4	%	31.9	%	Cost of subscriptions and licenses	$	29,881	$	21,801	$	8,080	37.1	%	31.2	%
Cost of services	Cost of services	19,290		17,681		1,609		9.1	%	8.2	%	Cost of services	23,570		14,904		8,666		58.1	%	47.1	%
Total cost of revenues	Total cost of revenues	$	42,628	$	35,051	$	7,577	21.6	%	20.0	%	Total cost of revenues	$	53,451	$	36,705	$	16,746	45.6	%	37.7	%

Comparison
Nine Months Ended Constant
September 30, Currency
2020 2019 Amount % %
Cost of subscriptions and licenses $ 66,466 $ 48,201 $ 18,265 37.9 % 38.3 %
Cost of services 50,126 56,048 (5,922) (10.6) % (9.7) %
Total cost of revenues $ 116,592 $ 104,249 $ 12,343 11.8 % 12.5 %


					Comparison
	Six Months Ended								Constant
	June 30,								Currency
	2021		2020		Amount		%		%
Cost of subscriptions and licenses	$	58,826	$	43,128	$	15,698	36.4	%	31.2	%
Cost of services	43,914		30,836		13,078		42.4	%	33.8	%
Total cost of revenues	$	102,740	$	73,964	$	28,776	38.9	%	32.3	%

For the three months ended ~~September~~June 30, ~~2020,~~2021, cost of revenues increased by ~~$7,577,~~$16,746, or ~~21.6%~~45.6%, to ~~$42,628.~~$53,451. This increase was driven by an increase in both cost of subscriptions and licenses and cost of services relative to the prior period. On a constant currency basis, total cost of revenues increased by ~~20.0%~~37.7% for the three months ended ~~September~~June 30, ~~2020~~2021 as compared to the ~~prior period.~~three months ended June 30, 2020.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, cost of revenues increased by ~~$12,343,~~$28,776, or ~~11.8%~~38.9%, to ~~$116,592.~~$102,740. This increase was driven ~~primarily~~ by an increase in both cost of subscriptions and licenses ~~partially offset by lower~~and cost of services relative to the prior period. On a constant currency basis, total cost of revenues increased by ~~12.5%~~32.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 as compared to the ~~prior period.~~six months ended June 30, 2020.

For the three months ended ~~September~~June 30, ~~2020,~~2021, cost of subscriptions and licenses increased ~~34.4%~~37.1%, or ~~31.9%~~31.2% in constant currency, as compared to the three months ended ~~September~~June 30, ~~2019.~~2020. On a constant currency basis, this increase was substantially due to an increase in headcount‑related costs of approximately $4,000, primarily driven by the redeployment of certain colleagues to our User Success team in support of success services available to accounts under programs such as our E365 subscription offering.

For the six months ended June 30, 2021, cost of subscriptions and licenses increased 36.4%, or 31.2% in constant currency, as compared to the six months ended June 30, 2020. On a constant currency basis, this increase was substantially due to an increase in headcount‑related costs of approximately $8,600, primarily driven by the redeployment of certain colleagues to our User Success team in support of success services available to accounts under programs such as our E365 subscription offering.

For the three months ended June 30, 2021, cost of services increased by 58.1%, or 47.1% in constant currency, as compared to the three months ended June 30, 2020. On a constant currency basis, this increase was substantially due to an increase in headcount‑related costs of approximately $5,900, primarily driven by our digital integrator acquisitions.

For the six months ended June 30, 2021, cost of services increased by 42.4%, or 33.8% in constant currency, as compared to the six months ended June 30, 2020. On a constant currency basis, this increase was substantially due to an increase in headcount‑related costs of approximately $8,900, primarily driven by our digital integrator acquisitions.

Operating Expenses


					Comparison
	Three Months Ended								Constant
	June 30,								Currency
	2021		2020		Amount		%		%
Research and development	$	52,776	$	44,218	$	8,558	19.4	%	14.0	%
Selling and marketing	38,014		29,632		8,382		28.3	%	21.4	%
General and administrative	41,878		25,465		16,413		64.5	%	61.4	%
Amortization of purchased intangibles	4,589		3,679		910		24.7	%	15.4	%
Total operating expenses	$	137,257	$	102,994	$	34,263	33.3	%	27.9	%


					Comparison
	Six Months Ended								Constant
	June 30,								Currency
	2021		2020		Amount		%		%
Research and development	$	100,579	$	89,353	$	11,226	12.6	%	8.1	%
Selling and marketing	70,454		65,727		4,727		7.2	%	2.2	%
General and administrative	75,266		52,269		22,997		44.0	%	41.8	%
Amortization of purchased intangibles	8,027		7,115		912		12.8	%	5.4	%
Total operating expenses	$	254,326	$	214,464	$	39,862	18.6	%	14.4	%

Research and development. For the three months ended June 30, 2021, research and development expenses increased 19.4%, or 14.0% inconstant currency, as compared to the three months ended June 30, 2020. On a constant currency basis, this increase was primarily due to an increase in ~~salaries, incentive compensation, and other~~ headcount-related costs of approximately ~~$2,600,~~$5,700. The approximate $5,700 increase in headcount-related costs is primarily comprised of an increase in salaries and variable compensation costs of approximately $6,100, primarily due to annual salary adjustments in 2021 combined with lower variable compensation costs in the prior period due to COVID‑19, and an increase in stock‑based compensation expense of approximately ~~$900, an increase~~$4,300. Partially offsetting these increases in ~~hosting~~headcount-related costs is a decrease of approximately ~~$1,400, and an increase~~$4,700 in ~~amortization expense~~Bonus Plan related cash compensation due to the change in our Bonus Plan (see Note 11 to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q), which allows participants within certain limitations to elect share delivery instead of cash compensation for ~~software and technology of approximately $500.~~their non-deferred incentive bonuses. In the comparative period, non-deferred incentive bonuses earned under the Bonus Plan were paid in cash.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020, cost of subscriptions~~2021, research and ~~licenses~~development expenses increased ~~37.9%~~12.6%, or ~~38.3%~~8.1% inconstant currency, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. On a constant currency basis, this increase was primarily due to an increase in ~~salaries, incentive compensation, and other~~ headcount-related costs of approximately ~~$7,600,~~$7,100. The approximate $7,100 increase in headcount-related costs is primarily comprised of an increase in salaries and variable compensation costs of approximately $8,700, primarily due to annual salary adjustments in 2021 combined with lower variable compensation costs in the prior period due to COVID‑19, and an increase in stock‑based compensation expense of approximately ~~$900, an increase~~$7,600. Partially offsetting these increases in ~~hosting~~headcount-related costs is a decrease of approximately ~~$7,400, an increase~~$9,200 in ~~amortization expense for software~~Bonus Plan related cash compensation due to the change in our Bonus Plan as described above.

Selling and ~~technology of approximately $1,500, and an increase in facility-related costs of approximately $1,100.~~

marketing. For the three months ended ~~September~~June 30, ~~2020, cost of services~~2021, selling and marketing expenses increased ~~by 9.1%~~28.3%, or ~~8.2%~~21.4% in constantcurrency, as compared to the three months ended ~~September~~June 30, ~~2019.~~2020. On a constant currency basis, this increase was primarily due to an increase in headcount-related costs of approximately $4,600. The approximate $4,600 increase in headcount-related costs is primarily comprised of an increase in salaries and variable compensation costs of approximately $3,600, primarily due to annual salary adjustments in 2021 combined with lower variable compensation costs in the prior period due to COVID‑19, and an increase in stock‑based compensation expense of approximately $1,000.

For the six months ended June 30, 2021, selling and marketing expenses increased 7.2%, or 2.2% in constantcurrency, as compared to the six months ended June 30, 2020. On a constant currency basis, this increase was primarily due to an increase in stock‑based compensation expense of approximately $2,500 and incremental realignment costs from the 2020 program of approximately $1,500, partially offset by a decrease in salaries, incentive compensation, and other headcount-related costs due to COVID‑19 related modification to employee travel and variable compensation plans of approximately $2,100, and a decrease in amortization of previously capitalized costs related to certain professional services projects of approximately $500.

For the nine months ended September 30, 2020, cost of services decreased by 10.6%, or 9.7% in constant currency, as compared to the nine months ended September 30, 2019. On a constant currency basis, the decrease was primarily due to a decrease in salaries, incentive compensation, and other headcount-related costs due to COVID‑19 related modification to employee travel and variable compensation plans of approximately $5,100 and a decrease in amortization of previously capitalized costs related to certain professional services projects of approximately $4,100, partially offset by an increase in stock‑based compensation expense of approximately $2,400 and incremental realignment costs from the 2020 program of approximately $1,500.

~~Operating Expenses~~

Comparison
Three Months Ended Constant
September 30, Currency
2020 2019 Amount % %
Research and development $ 50,217 $ 44,756 $ 5,461 12.2 % 10.9 %
Selling and marketing 41,824 36,721 5,103 13.9 % 12.1 %
General and administrative 33,006 25,108 7,898 31.5 % 30.2 %
Amortization of purchased intangibles 3,869 3,550 319 9.0 % 6.6 %
Expenses associated with initial public offering 26,130 — 26,130 * *
Total operating expenses $ 155,046 $ 110,135 $ 44,911 40.8 % 39.3 %

*~~Not meaningful~~

Comparison
Nine Months Ended Constant
September 30, Currency
2020 2019 Amount % %
Research and development $ 139,570 $ 136,617 $ 2,953 2.2 % 2.7 %
Selling and marketing 107,551 111,889 (4,338) (3.9) % (3.1) %
General and administrative 85,275 71,415 13,860 19.4 % 19.5 %
Amortization of purchased intangibles 10,984 10,402 582 5.6 % 5.7 %
Expenses associated with initial public offering 26,130 — 26,130 * *
Total operating expenses $ 369,510 $ 330,323 $ 39,187 11.9 % 12.4 %

*~~Not meaningful~~$1,400.

~~Research~~General and ~~development.~~administrative. For the three months ended ~~September~~June 30, ~~2020, research~~2021, general and ~~development~~administrative expenses increased ~~12.2%~~64.5%, or ~~10.9%~~61.4% in constant currency, as compared to the three months ended ~~September~~June 30, 2019. On a constant currency basis, the increase was primarily due to an increase in stock‑based compensation expense of approximately $6,100 and incremental realignment costs from the 2020 program of approximately $800, partially offset by a decrease in salaries, incentive compensation, and other headcount-related costs due to COVID‑19 related modification to employee travel and variable compensation plans of approximately $1,700 and a decrease in facility‑related costs of approximately $400.

~~For the nine months ended September 30, 2020, research and development expenses increased 2.2%, or 2.7% in~~constant currency, as compared to the nine months ended September 30, 2019. On a constant currency basis, the increase was primarily due to an increase in stock‑based compensation expense of approximately $5,700 and incremental realignment costs from the 2020 program of approximately $800, partially offset by a decrease in salaries, incentive compensation, and other headcount-related costs due to COVID‑19 related modification to employee travel and variable compensation plans of approximately $1,900 and a decrease in facility‑related costs of approximately $1,000.

~~Selling and marketing.~~ ~~For the three months ended September 30, 2020, selling and marketing expenses increased 13.9%, or 12.1% in constantcurrency, as compared to the three months ended September 30, 2019.~~2020. On a constant currency basis, this increase was primarily due an increase in stock‑based compensation expense of approximately $4,400 and incremental realignment costs from the 2020 program of approximately $5,200, partially offset by a decrease in salaries, incentive compensation, and other headcount-related costs due to COVID‑19 related modification to employee travel and variable compensation plans of approximately $4,500 and a reduction in promotional costs of $500, substantially from rationalizing our marketing spend and shifting to virtual events given the evolving business environment as a result of COVID‑19.

~~For the nine months ended September 30, 2020, selling and marketing expenses decreased 3.9%, or 3.1% in constant~~currency, as compared to the nine months ended September 30, 2019. On a constant currency basis, this decrease was primarily due to a decrease in salaries, incentive compensation, and other headcount-related costs due to COVID‑19 related modification to employee travel and variable compensation plans of approximately $10,400 and a reduction in promotional costs of $1,600, substantially from rationalizing our marketing spend and shifting to virtual events given the evolving business environment as a result of COVID‑19, partially offset by an increase in stock‑based compensation expense of approximately $4,200 and incremental realignment costs from the 2020 program of approximately $5,200.

~~General and administrative.~~ ~~For the three months ended September 30, 2020, general and administrative expenses increased 31.5%, or 30.2% in~~constant currency, as compared to the three months ended September 30, 2019. On a constant currency basis, the increase was primarily caused by an increase in salaries, incentive compensation, and other headcount-related costs of approximately $2,000, an increase in stock‑based compensation expense of approximately $2,700, incremental realignment costs from the 2020 program of approximately $2,300, and an increase in acquisition and integration costs and other corporate initiatives of ~~$600.~~approximately $9,200, primarily due to expenses related to the acquisition of Seequent, and an increase in headcount-related costs of approximately $6,700. The approximate $6,700 increase in headcount-related costs is primarily comprised of an increase in salaries and variable compensation costs of approximately $5,400, primarily due to annual salary adjustments in 2021 combined with lower variable compensation costs in the prior period due to COVID‑19, and an increase in stock‑based compensation expense of approximately $4,500. Partially offsetting these increases in headcount-related costs is a decrease of approximately $3,200 in Bonus Plan related cash compensation due to the change in our Bonus Plan as described above.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, general and administrative expenses increased ~~19.4%~~44.0%, or ~~19.5%~~41.8% in constant currency, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. On a constant currency basis, ~~the~~this increase was primarily caused by an increase in salaries, incentive compensation, and other headcount-related costs of approximately $6,400, an increase in stock‑based compensation expense of approximately $2,500, incremental realignment costs from the 2020 program of approximately $2,300, anddue to an increase in acquisition and integration costs and other corporate initiatives of ~~$2,200.~~approximately $15,300, primarily due to expenses related to the acquisition of Seequent, and an increase in headcount-related costs of approximately $7,700. The approximate $7,700 increase in headcount-related costs is primarily comprised of an increase in stock‑based compensation expense of approximately $8,300 and an increase in salaries and variable compensation costs of approximately $4,900, primarily due to annual salary adjustments in 2021 combined with lower variable compensation costs in the prior period due to COVID‑19. Partially offsetting these increases in headcount-related costs is a decrease of approximately $5,500 in Bonus Plan related cash compensation due to the change in our Bonus Plan as described above.

Amortization of purchased intangibles. For the three months ended ~~September~~June 30, ~~2020,~~2021, amortization of purchased intangibles increased by ~~9.0%~~24.7%, or ~~6.6%~~15.4% in constant currency, as compared to the three months ended ~~September~~June 30, ~~2019.~~ 2020. On a constant currency basis, this increase was primarily attributable to amortization from recently acquired purchased intangibles.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, amortization of purchased intangibles increased by ~~5.6%~~12.8%, or ~~5.7%~~5.4% in constant currency, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019. The increases were~~2020. On a constant currency basis, this increase was primarily attributable to ~~acquisitions that closed in the first nine months of 2020 and the last three months of 2019.~~

~~Expenses associated with initial public offering.~~ For the three and nine months ended September 30, 2020, expenses associated with IPO include certain non‑recurring costs relating to our IPO, consisting of the payment of underwriting discounts and commissions applicable to the sale of shares by the selling stockholders, professional fees, and other expenses. We completed our IPO on September 25, 2020. These fees are being expensed in the period incurred.

~~Interest Expense, Net~~

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Interest expense $ (1,975) $ (2,456) $ (4,821) $ (7,477)
Interest income 41 427 371 974
Total interest expense, net $ (1,934) $ (2,029) $ (4,450) $ (6,503)
amortization from recently acquired purchased intangibles.

6566

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Bank credit facility $ (1,807) $ (2,305) $ (4,351) $ (6,905)
Amortization of deferred financing costs (153) (138) (430) (415)
Other, net 26 414 331 817
Total interest expense, net $ (1,934) $ (2,029) $ (4,450) $ (6,503)
Interest Expense, Net


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Interest expense	$	(2,582)	$	(1,156)	$	(4,983)	$	(2,846)
Interest income	129		28		211		330
Interest expense, net	$	(2,453)	$	(1,128)	$	(4,772)	$	(2,516)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Bank credit facility	$	(850)	$	(1,004)	$	(1,579)	$	(2,544)
Interest rate swap	(316)		—		(617)		—
Convertible senior notes, coupon interest	(229)		—		(383)		—
Amortization and write-off of deferred debt issuance costs	(1,142)		(139)		(2,371)		(277)
Other, net	84		15		178		305
Interest expense, net	$	(2,453)	$	(1,128)	$	(4,772)	$	(2,516)

For the three ~~and nine~~ months ended ~~September~~June 30, ~~2020, net~~2021, interest expense, ~~decreased~~net increased from the ~~prior year period~~three months ended June 30, 2020 primarily due to ~~a lower average interest rate,~~the increase in amortization and write‑off of deferred debt issuance costs in connection with the Second Amendment to the Credit Facility and the convertible senior notes, partially offset by a ~~higher~~lower outstanding average balance under the Credit ~~Facility, which includes~~Facility.

For the ~~new term loan~~six months ended June 30, 2021, interest expense, net increased from the six months ended June 30, 2020 primarily due to the increase in amortization and write‑off of ~~$125,000 we entered into on September 2, 2020 via~~deferred debt issuance costs in connection with the ~~First~~Second Amendment to the Credit Facility ~~(the “Term Loan”).~~and the convertible senior notes, partially offset by a lower outstanding average balance under the Credit Facility.

Other (Expense) Income, ~~(Expense),~~ Net

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Foreign exchange gain (loss) $ 12,830 $ (12,465) $ 8,567 $ (14,053)
Other income (expense), net 911 159 (1,811) —
Total other income (expense), net $ 13,741 $ (12,306) $ 6,756 $ (14,053)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Foreign exchange gain (loss)	$	1,406	$	4,518	$	2,198	$	(4,263)
Other (expense) income, net	(5,183)		(4,113)		8,507		(2,722)
Total other (expense) income, net	$	(3,777)	$	405	$	10,705	$	(6,985)

For the three months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~total other (expense) income, ~~(expense),~~ net ~~primarily~~ consists of foreign ~~currency translation~~exchange gains (losses) of ~~$12,830~~$1,406 and ~~$(12,465),~~$4,518, respectively, and ~~$8,567~~$2,198 and ~~$(14,053)~~$(4,263) for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The foreign ~~currency translation~~exchange gains (losses) ~~derive~~derives primarily from U.S. Dollar denominated cash and cash equivalents, accounts receivable, and intercompany balances held by foreign subsidiaries. These U.S. Dollar denominated balances are being translated into their functional currencies at the rates in effect at the balance sheet date and fully eliminate in consolidation. The gains and losses from such translations are included in ~~Other income (expense), net~~. For the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, intercompany finance transactions denominated in U.S. Dollars resulted in unrealized foreign ~~currency translation~~exchange gains (losses) of ~~$12,284~~$963 and ~~$(12,302),~~$5,012, respectively, and ~~$10,519~~$1,443 and ~~$(13,982)~~$(1,765) for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.

For the three months ended ~~September~~June 30, 2021 and 2020, other (expense) income, ~~(expense),~~ net ~~also~~includes a loss from the change in fair value of our interest rate swap of $5,926 and $4,174, respectively. For the six months ended June 30, 2021, other (expense) income, net includes a gain from the change in fair value of our interest rate swap of ~~$809, partially offset by a loss from the change in fair value of acquisition contingent consideration of $50.~~$7,735. For the ~~nine~~six months ended ~~September~~June 30, 2020, other (expense) income, ~~(expense),~~ net ~~also~~ includes a loss from the change in fair value of our interest rate swap of ~~$3,365,~~$4,174, partially offset by a gain from the change in fair value of acquisition contingent consideration of ~~$1,340.~~$(1,390).

(Benefit) Provision for Income Taxes

The income tax provisions for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 were based on the estimated annual effective income tax rates adjusted for discrete items occurring during the periods presented. ~~During~~For the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we recognized an aggregate consolidated income tax (benefit) expense of ~~$10,705~~$(20,746) and ~~$6,640,~~$4,264, respectively, for U.S. domestic and foreign income taxes. ~~During~~For the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we recorded a discrete tax benefit of ~~$3,826~~$28,967 and ~~$103,~~$5,281, respectively, associated with stock‑based compensation. The effective income tax rate of ~~62.5%~~(79.8)% for the three months ended ~~September~~June 30, ~~2020~~2021 was ~~higher~~lower than the effective income tax rate of ~~24.5%~~9.7% for ~~the same period in the prior year primarily due to officer compensation limitation provisions resulting from our IPO, which went effective during~~ the three months ended ~~September~~June 30, 2020 ~~and~~primarily due to the ~~non‑deductibility of expenses~~tax benefit associated with ~~our IPO,~~stock‑based compensation, partially offset by ~~increased discrete windfall tax benefits~~the impact from ~~stock‑based compensation.~~

officer compensation limitation provisions.

The income tax provisions for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 were based on the estimated annual effective income tax rates adjusted for discrete items occurring during the periods presented. ~~During~~For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we recognized an aggregate consolidated income tax (benefit) expense of ~~$22,145~~$(10,388) and ~~$11,759,~~$11,440, respectively, for U.S. domestic and foreign income taxes. ~~During~~For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we recorded a discrete tax benefit of ~~$10,511~~$36,452 and ~~$3,861,~~$6,423, respectively, associated with stock‑based compensation. The effective income tax rate of ~~22.6%~~(11.1)% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~higher~~lower than the effective income tax rate of ~~15.0%~~14.1% for the ~~same period in the prior year~~six months ended June 30, 2020 primarily due to the tax benefit associated with stock‑based compensation, partially offset by the impact from officer compensation limitation ~~provisions resulting from our IPO and the non‑deductibility of expenses associated with our IPO, partially offset by increased discrete windfall tax benefits from stock‑based compensation.~~provisions.

Net Income

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Net income $ 5,844 $ 20,427 $ 74,589 $ 66,845


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net income	$	44,910	$	39,076	$	101,916	$	68,745

For the three months ended ~~September~~June 30, ~~2020,~~2021, net income ~~decreased~~increased by ~~$14,583,~~$5,834, or ~~71.4%~~14.9%, compared to the three months ended ~~September~~June 30, ~~2019.~~2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, net income increased by ~~$7,744,~~$33,171, or ~~11.6%~~48.3%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The changes are due to the factors stated above.

Adjusted EBITDA and Adjusted Net Income


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30,				September 30,					June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Adjusted EBITDA	Adjusted EBITDA	$	73,605	$	52,772	$	189,111	$	132,156	Adjusted EBITDA	$	69,139	$	57,575	$	151,948	$	115,506
Adjusted Net Income	Adjusted Net Income	$	51,386	$	39,300	$	140,589	$	99,278	Adjusted Net Income	$	74,316	$	46,047	$	138,320	$	89,203

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, Adjusted EBITDA increased by ~~$20,833~~$11,564 and ~~$56,955~~$36,442 compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. For the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, Adjusted EBITDA as a percentage of revenue was ~~36.3%~~31.0% and ~~28.3%~~31.2%, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, Adjusted EBITDA as a percentage of revenue was ~~32.5%~~34.2% and ~~24.8%~~30.5%, respectively.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, Adjusted Net Income increased by ~~$12,086~~$28,269 and ~~$41,311~~$49,117 compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2019, respectively.~~2020. For the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, Adjusted Net Income as a percentage of revenue was ~~25.3%~~33.3% and ~~21.1%~~25.0%, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, Adjusted Net Income as a percentage of revenue was ~~24.2%~~31.1% and ~~18.6%~~23.5%, respectively.

For additional information, including the limitations of using non‑GAAP financial measures, and reconciliations of the non‑GAAP financial measures to the most directly comparable financial measures stated in accordance with U.S. GAAP, see the section titled ~~“Non‑~~“—Non‑GAAP Financial Measures.”

6769

Liquidity and Capital Resources:

Our primary source of cash is generated from the delivery of subscriptions, perpetual licenses, and services. Our primary use of cash is payment of our operating costs, which consist primarily of colleague-related expenses, such as compensation and benefits, as well as general operating expenses for marketing, facilities, and overhead costs. In addition to operating expenses, we also use cash to fund growth initiatives, which include acquisitions of software assets and businesses. In connection with the acquisition of Seequent in June 2021, we used readily available cash, including a portion of the net proceeds from the 2026 Notes, and borrowings under our Credit Facility to fund the cash component of the transaction. As described further below, we used $25,875 of the net proceeds from the sale of the 2027 Notes to pay the premiums of the capped call options, and $536,062 to repay outstanding indebtedness under the Credit Facility and to pay related fees and expenses. We used $25,530 of the net proceeds from the sale of the 2026 Notes to pay the premiums of the capped call options, and approximately $250,500 to repay outstanding indebtedness under the Credit Facility and to pay related fees and expenses. We used the remainder of the net proceeds from the sale of the 2026 Notes for general corporate purposes and towards funding certain acquisitions, including Seequent.

Our cash and cash equivalent balances are concentrated in a few locations around the world, with substantial amounts held outside of the United States. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, 75%~~2020, 93% and ~~98%~~94%, respectively, of our total cash and cash equivalents were located outside of the United States. ~~Under the U.S. Tax Cuts and Jobs Act (“JOBS Act”), we are subject to U.S. taxes for the deemed repatriation of certain cash balances held by foreign corporations.~~ We intend to continue to permanently reinvest these funds outside of the United States and current plans do not demonstrate a need to repatriate them to fund our U.S. operations. We expect to meet our U.S. liquidity needs through ongoing cash flows or external borrowings including available liquidity under the Credit Facility described below. We regularly review our capital structure and consider a variety of potential financing alternatives and planning strategies to ensure that we have the proper liquidity available in the locations in which it is needed and to fund our operations and growth investments with cash that has not been permanently reinvested outside the United States.

We believe that existing cash and cash equivalent balances, together with cash generated from operations, and liquidity under the Credit Facility, will be sufficient to meet our domestic and international working capital and capital expenditure requirements through the next twelve months. However, our future capital requirements may be materially different than those currently planned in our budgeting and forecasting activities and depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development, the expansion of our sales and marketing activities, the timing of new product introductions, currency fluctuations, market acceptance of our products, competitive factors, and overall economic conditions, globally. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders, while the incurrence of debt financing, including convertible debt, would result in debt service obligations. Such debt instruments also could introduce covenants that might restrict our operations. We cannot ~~assure you~~provide assurance that we could obtain additional financing on favorable terms or at all.

Cash and cash ~~equivalents.~~ equivalents

We consider all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Our cash and cash equivalents consisted of cash held in checking accounts and money market funds maintained at various financial institutions. The following table presents our foreign and domestic holdings of cash and cash equivalents:


		September 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
Cash and cash equivalents:	Cash and cash equivalents:					Cash and cash equivalents:
Held domestically	Held domestically	$	33,981	$	2,291	Held domestically	$	9,331	$	7,861
Held by foreign subsidiaries	Held by foreign subsidiaries	103,617		118,810		Held by foreign subsidiaries	121,823		114,145
Total cash and cash equivalents	Total cash and cash equivalents	$	137,598	$	121,101	Total cash and cash equivalents	$	131,154	$	122,006

The amount of cash and cash equivalents held by foreign subsidiaries is subject to translation adjustments caused by changes in foreign currency exchange rates as of the end of each respective reporting period, the offset to which is recorded in ~~accumulated~~Accumulated other comprehensive loss on our consolidated balance ~~sheet.~~sheets.

Bank Credit ~~Facility.~~ Facility

On ~~December 19, 2017,~~January 25, 2021, we entered into the Second Amendment to the Amended and Restated Credit ~~Facility,~~Agreement dated December 19, 2017, which ~~matures onDecember 18, 2022. Upon entry into~~increased the ~~Credit Facility, we obtained a $500,000~~ senior secured revolving loan facility from $500,000 to $850,000 and ~~refinanced all indebtedness outstanding under our prior facility.~~ extended the maturity date from December 18, 2022 to November 15, 2025. In connection with the Second Amendment, certain lenders exited the Credit Facility. We performed an extinguishment versus modification assessment on a lender‑by‑lender basis resulting in the write‑off of unamortized debt issuance costs of $353 and the capitalization of fees paid to lenders and third parties of $3,577. Debt issuance costs are amortized to interest expense through the maturity date of November 15, 2025.

On ~~September 2, 2020,~~June 22, 2021, we entered into the ~~First~~Third Amendment to the Credit Facility, which ~~provided~~increased the Term Loan of $125,000 with a maturity of December 18, 2022 and included certain other amendments, including the addition of a mandatory prepayment provision requiring us to prepay borrowings under the Credit Facility in an aggregate amount ~~equal~~of approved convertible debt to permit the ~~net proceeds from any underwritten public offering by us, which prepayment shall be applied, first, to~~issuance and sale of additional convertible senior notes. See the Term Loan and, second, to any borrowings outstanding under the revolving facility under the Credit Facility without reducing the revolving commitments thereof. We used borrowings under the Term Loan and under the revolving facility under the Credit Facility to pay a special dividend of $1.50 per share of our common stock (approximately $389,300 in the aggregate) (the “Special Dividend”) and a regular quarterly dividend of $0.03 per share of our common stock. The Special Dividend was declared by our board of directors on August 28, 2020. As of September 30, 2020, Term Loan borrowings are net of $417 in unamortized debt issuance costs.section titled “—Convertible Senior Notes—2027 Notes” below.

In addition to the senior secured revolving ~~line of credit,~~loan facility, the Credit Facility also provides up to $50,000 of letters of credit and other incremental borrowings subject to availability, including a ~~$50,000~~$85,000 multi‑currency swing‑line sub‑facility and a ~~$100,000~~$200,000 incremental “accordion” sub‑facility. We had $150 ~~and $546~~ of letters of credit and surety bonds outstanding as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~$34,850~~$813,463 and ~~$265,704, respectively,~~$253,850 available under the Credit Facility.

Under the Credit Facility, we may make either Euro currency or non‑Euro currency interest rate elections. Interest on the Euro currency borrowings ~~is at the one‑month London Interbank Offered Rate (“LIBOR”)~~bear a base interest rate of LIBOR plus a spread ranging from ~~100~~125 basis points (“bps”) to 225 bps as determined by our net leverage ratio. Under the non‑Euro currency elections, Credit Facility borrowings bear a base interest rate of the ~~greater~~highest of (i) the prime rate, (ii) the overnight bank funding effective rate plus 50 bps, or (iii) LIBOR plus 100 bps, plus a spread ranging from 025 bps to 125 bps as determined by our leverage ratio. In addition, a commitment fee for the unused Credit Facility ranges from 1520 bps to 30 bps as determined by our net leverage ratio.

Borrowings under the Credit Facility are guaranteed by all of our first tier domestic subsidiaries and are secured by a first priority security interest in substantially all of our and the guarantors’ U.S. assets and 65% of the stock of their directly owned foreign subsidiaries. The Credit Facility contains both affirmative and negative covenants, including maximum leverage ratios. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we were in compliance with all covenants in our Credit Facility debt agreements.

Interest rate risk associated with the Credit Facility is managed through an interest rate swap which we executed on March 31, 2020. The swap has an effective date of April 2, 2020 and a termination date of April 2, 2030. Under the terms of the swap, we fixed our LIBOR borrowing rate at 0.73% on a notional amount of $200,000. The interest rate swap is not designated as a hedging instrument for accounting purposes. We account for the swap as either an asset or a liability on the consolidated balance sheet and carry the derivative at fair value. Gains and losses from the change in fair value are recognized in Other income (expense), net, in the consolidated statements of operations. As of ~~September~~June 30, 2021 and December 31, 2020, we recorded a swap related ~~liability~~asset at fair value of ~~$3,365.~~$8,082 and $347, respectively, in Other assets in the consolidated balance sheets.

The weighted average interest rate under the Credit Facility was ~~1.59%~~2.11% and ~~3.43%,~~1.48% for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~1.92%~~2.02% and ~~3.63%~~2.18% for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively. As of September 30, 2020, accrued interest and fees were $26. There were no accrued interest or fees as of December 31, 2019. Interest expense was $1,807 and $2,305 for the three months ended September 30, 2020 and 2019, respectively, and $4,351 and $6,905 for the nine months ended September 30, 2020 and 2019, respectively.

For the three and nine months ended September 30, 2020, we incurred $432 of debt issuance costs related to the Term Loan. In addition, interest expense includes amortization of deferred financing costs of $153 and $138 for the three months ended September 30, 2020 and 2019, respectively, and $430 and $415 for the nine months ended September 30, 2020 and 2019.

The agreement governing the Credit Facility contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenants defaults, cross-defaults to certain other indebtedness in excess of ~~$10,000,~~$50,000, certain events of bankruptcy and insolvency, judgment defaults in excess of $10,000, failure of any security document supporting the Credit Facility to be in full force and effect, and a change of control.

Voluntary prepayments of amounts outstanding under the Credit Facility, in whole or in part, are permitted at any time, so long as we give notice as required by the Credit Facility. However, if prepayment is made with respect to a LIBOR‑based loan and the prepayment is made on a date other than an interest payment date, we must pay customary breakage costs.

Convertible Senior Notes

2027 Notes. On June 28, 2021, we completed a private offering of $575,000 of 0.375% convertible senior notes due 2027. The 2027 Notes were issued pursuant to an indenture, dated as of June 28, 2021, between the Company and Wilmington Trust, National Association, as trustee (the “2027 Trustee”) (the “2027 Indenture”). Interest will accrue from June 28, 2021 and will be payable semi‑annually in arrears in cash on January 1 and July 1 of each year, with the first payment due on January 1, 2022. The 2027 Notes will mature on July 1, 2027, unless earlier converted, redeemed or repurchased. We incurred $15,065 of expenses in connection with the 2027 Notes offering consisting of transaction costs. As of June 30, 2021, $300 and $392 of the transaction costs were recorded in Accounts payable and Accruals and other current liabilities in the consolidated balance sheet, respectively. We used $25,875 of the net proceeds from the sale of the 2027 Notes to pay the premiums of the capped call options described further below, and $536,062 to repay outstanding indebtedness under the Credit Facility and to pay related fees and expenses.

Prior to April 1, 2027, the 2027 Notes will be convertible at the option of the holder only under the following circumstances: (1) during any calendar quarter (and only during such quarter) commencing after the calendar quarter ending on September 30, 2021, if the last reported sale price per share of our Class B Common Stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any ten consecutive trading day period (such ten consecutive trading day period, the “measurement period”) in which the trading price per $1 principal amount of 2027 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our Class B Common Stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on our Class B Common Stock, as described in the 2027 Indenture; and (4) if we call the 2027 Notes for redemption. On or after April 1, 2027 until 5:00 p.m., New York City time, on the second scheduled trading day immediately before the maturity date, the 2027 Notes will be convertible at the option of the holder at any time.

We will settle conversions by paying or delivering, as applicable, cash, shares of our Class B Common Stock or a combination of cash and shares of our Class B Common Stock, at our election, based on the applicable conversion rate. The initial conversion rate is 12.0153 shares of our Class B Common Stock per $1 principal amount of 2027 Notes, which represents an initial conversion price of approximately $83.23 per share, and is subject to adjustment as described in the 2027 Indenture. If a “make-whole fundamental change” (as defined in the 2027 Indenture) occurs, then we will, in certain circumstances, increase the conversion rate for a specified period of time.

We will have the option to redeem the 2027 Notes in whole or in part at any time on or after July 5, 2024 and on or before the 40th scheduled trading day immediately before the maturity date if the last reported sale price per share of our Class B common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during any 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice; and (2) the trading day immediately before the date we send such notice. The redemption price will be equal to the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Upon a fundamental change (as defined in the 2027 Indenture), holders may, subject to certain exceptions, require us to purchase their 2027 Notes in whole or in part for cash at a price equal to the principal amount of the 2027 Notes to be purchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date (as defined in the 2027 Indenture). In addition, upon a Make‑Whole Fundamental Change (as defined in the 2027 Indenture), we will, under certain circumstances, increase the applicable conversion rate for a holder that elects to convert its 2027 Notes in connection with such Make‑Whole Fundamental Change. No adjustment to the conversion rate will be made if the stock price in such Make‑Whole Fundamental Change is either less than $61.65 per share or greater than $325.00 per share. We will not increase the conversion rate to an amount that exceeds 16.2206 shares per $1 principal amount of 2027 Notes, subject to adjustment. The 2027 Indenture also contains a customary merger covenant.

Under the 2027 Indenture, the 2027 Notes may be accelerated upon the occurrence of certain customary events of default. If certain bankruptcy and insolvency‑related events of default with respect to us occur, the principal of, and accrued and unpaid interest on, all of the then outstanding 2027 Notes shall automatically become due and payable. If any other event of default occurs and is continuing, the 2027 Trustee by notice to us, or the holders of the 2027 Notes of at least 25% in principal amount of the outstanding 2027 Notes by notice to us and the 2027 Trustee, may declare the principal of, and accrued and unpaid interest on, all of the then outstanding 2027 Notes to be due and payable. Notwithstanding the foregoing, the 2027 Indenture provides that, to the extent we elect, the sole remedy for an event of default relating to certain failures by us to comply with reporting covenant in the 2027 Indenture consists exclusively of the right to receive additional interest on the 2027 Notes.

We early adopted ASU 2020‑06 as of January 1, 2021 and concluded the 2027 Notes will be accounted for as debt, with no bifurcation of the embedded conversion feature. Transaction costs were recorded as a direct deduction from the related debt liability in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the 2027 Notes. The effective interest rate for the 2027 Notes is 0.864%.

As of June 30, 2021, none of the conditions of the 2027 Notes to early convert has been met.

The 2027 Notes are our senior, unsecured obligations that rank senior in right of payment to our future indebtedness that is expressly subordinated to the 2027 Notes, rank equally in right of payment with our existing and future senior unsecured indebtedness that is not so subordinated (including our 2026 Notes), effectively subordinated to our existing and future secured indebtedness (including obligations under our senior secured credit facilities), to the extent of the value of the collateral securing such indebtedness, and structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables and preferred equity (to the extent we are not a holder thereof)) of our subsidiaries. The 2027 Notes contain both affirmative and negative covenants. As of June 30, 2021, we were in compliance with all covenants in the 2027 Notes.

Capped Call Options. In connection with the pricing of the 2027 Notes, we entered into capped call options with certain of the initial purchasers or their respective affiliates and certain other financial institutions. We incurred $50 of expenses in connection with the capped call options, which were recorded in Accruals and other current liabilities in the consolidated balance sheet as of June 30, 2021. The capped call options are expected to reduce potential dilution to our Class B Common Stock upon any conversion of 2027 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the capped call options is initially $95.5575 per share, which represents a premium of 55% above the last reported sale price per share of our Class B Common Stock on the Nasdaq Global Select Market on June 23, 2021 and is subject to customary adjustments under the terms of the capped call options.

The capped call options were entered into in conjunction with the issuance of the 2027 Notes, however, they are legally separate agreements that can be separately exercised, with the receipt of shares under the capped call options having no effect on the 2027 Notes, and are legally detachable. As the capped call options are both legally detachable and separately exercisable from the 2027 Notes, we account for the capped call options separately from the 2027 Notes. The capped call options are indexed to our own common stock and classified in stockholders’ equity. As such, the premiums paid for the capped call options have been included as a net reduction to Additional paid-in capital in the consolidated balance sheet.

2026 Notes. On January 26, 2021, we completed a private offering of $690,000 of 0.125% convertible senior notes due 2026. The 2026 Notes were issued pursuant to an indenture, dated as of January 26, 2021, between the Company and Wilmington Trust, National Association, as trustee (the “2026 Trustee”) (the “2026 Indenture”). Interest will accrue from January 26, 2021 and will be payable semi‑annually in arrears in cash on January 15 and July 15 of each year, with the first payment due on July 15, 2021. The 2026 Notes will mature on January 15, 2026, unless earlier converted, redeemed or repurchased. We incurred $18,055 of expenses in connection with the 2026 Notes offering consisting of transaction costs. We used $25,530 of the net proceeds from the sale of the 2026 Notes to pay the premiums of the capped call options described further below, and approximately $250,500 to repay outstanding indebtedness under the Credit Facility and to pay related fees and expenses. We used the remainder of the net proceeds from the sale of the 2026 Notes for general corporate purposes and towards funding certain acquisitions, including Seequent.

Prior to October 15, 2025, the 2026 Notes will be convertible at the option of the holder only under the following circumstances: (1) during any calendar quarter (and only during such quarter) commencing after the calendar quarter ending on June 30, 2021, if the last reported sale price per share of our Class B Common Stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any ten consecutive trading day period (such ten consecutive trading day period, the “measurement period”) in which the trading price per $1 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our Class B Common Stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on our Class B Common Stock, as described in the 2026 Indenture; and (4) if we call the 2026 Notes for redemption. On or after October 15, 2025 until 5:00 p.m., New York City time, on the second scheduled trading day immediately before the maturity date, the 2026 Notes will be convertible at the option of the holder at any time.

We will settle conversions by paying or delivering, as applicable, cash, shares of our Class B Common Stock or a combination of cash and shares of our Class B Common Stock, at our election, based on the applicable conversion rate. The initial conversion rate is 15.5925 shares of our Class B Common Stock per $1 principal amount of 2026 Notes, which represents an initial conversion price of approximately $64.13 per share, and is subject to adjustment as described in the 2026 Indenture. If a “make-whole fundamental change” (as defined in the 2026 Indenture) occurs, then we will, in certain circumstances, increase the conversion rate for a specified period of time.

We will have the option to redeem the 2026 Notes in whole or in part at any time on or after January 20, 2024 and on or before the 40th scheduled trading day immediately before the maturity date if the last reported sale price per share of our Class B common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during any 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice; and (2) the trading day immediately before the date we send such notice. The redemption price will be equal to the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Upon a fundamental change (as defined in the 2026 Indenture), holders may, subject to certain exceptions, require us to purchase their 2026 Notes in whole or in part for cash at a price equal to the principal amount of the 2026 Notes to be purchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date (as defined in the 2026 Indenture). In addition, upon a Make‑Whole Fundamental Change (as defined in the 2026 Indenture), we will, under certain circumstances, increase the applicable conversion rate for a holder that elects to convert its 2026 Notes in connection with such Make‑Whole Fundamental Change. No adjustment to the conversion rate will be made if the stock price in such Make‑Whole Fundamental Change is either less than $44.23 per share or greater than $210.00 per share. We will not increase the conversion rate to an amount that exceeds 22.6090 shares per $1 principal amount of 2026 Notes, subject to adjustment. The 2026 Indenture also contains a customary merger covenant.

Under the 2026 Indenture, the 2026 Notes may be accelerated upon the occurrence of certain customary events of default. If certain bankruptcy and insolvency‑related events of default with respect to us occur, the principal of, and accrued and unpaid interest on, all of the then outstanding 2026 Notes shall automatically become due and payable. If any other event of default occurs and is continuing, the 2026 Trustee by notice to us, or the holders of the 2026 Notes of at least 25% in principal amount of the outstanding 2026 Notes by notice to us and the 2026 Trustee, may declare the principal of, and accrued and unpaid interest on, all of the then outstanding 2026 Notes to be due and payable. Notwithstanding the foregoing, the 2026 Indenture provides that, to the extent we elect, the sole remedy for an event of default relating to certain failures by us to comply with reporting covenant in the 2026 Indenture consists exclusively of the right to receive additional interest on the 2026 Notes.

As previously mentioned, we early adopted ASU No. 2020‑06, Debt–Debt with Conversion and Other Options (Subtopic 470‑20) and Derivatives and Hedging–Contracts in Entity’s Own Equity (Subtopic 815‑40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020‑06”) as of January 1, 2021 and concluded the 2026 Notes will be accounted for as debt, with no bifurcation of the embedded conversion feature. Transaction costs were recorded as a direct deduction from the related debt liability in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the 2026 Notes. The effective interest rate for the 2026 Notes is 0.658%.

As of June 30, 2021, none of the conditions of the 2026 Notes to early convert has been met.

The 2026 Notes are our senior, unsecured obligations that rank senior in right of payment to our future indebtedness that is expressly subordinated to the 2026 Notes, rank equally in right of payment with our existing and future senior unsecured indebtedness that is not so subordinated (including our 2027 Notes, see the section titled “—2027 Notes” below), effectively subordinated to our existing and future secured indebtedness (including obligations under our senior secured credit facilities), to the extent of the value of the collateral securing such indebtedness, and structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables and preferred equity (to the extent we are not a holder thereof)) of our subsidiaries. The 2026 Notes contain both affirmative and negative covenants. As of June 30, 2021, we were in compliance with all covenants in the 2026 Notes.

Capped Call Options. In connection with the pricing of the 2026 Notes, we entered into capped call options with certain of the initial purchasers or their respective affiliates and certain other financial institutions. We incurred $150 of expenses in connection with the capped call options. The capped call options are expected to reduce potential dilution to our Class B Common Stock upon any conversion of 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the capped call options is initially $72.9795 per share, which represents a premium of 65% above the last reported sale price per share of our Class B Common Stock on the Nasdaq Global Select Market on January 21, 2021 and is subject to customary adjustments under the terms of the capped call options.

The capped call options were entered into in conjunction with the issuance of the 2026 Notes, however, they are legally separate agreements that can be separately exercised, with the receipt of shares under the capped call options having no effect on the 2026 Notes, and are legally detachable. As the capped call options are both legally detachable and separately exercisable from the 2026 Notes, we account for the capped call options separately from the 2026 Notes. The capped call options are indexed to our own common stock and classified in stockholders’ equity. As such, the premiums paid for the capped call options have been included as a net reduction to Additional paid-in capital in the consolidated balance sheet.

Comparison of the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

The following table summarizes our cash flow activities for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


		Nine Months Ended
		September 30,					Six Months Ended June 30,
		2020		2019			2021		2020
Net Cash Provided By (Used In):	Net Cash Provided By (Used In):					Net Cash Provided By (Used In):
Operating activities	Operating activities	$	176,025	$	118,249	Operating activities	$	149,022	$	136,182
Investing activities	Investing activities	(88,808)		(21,837)		Investing activities	(1,008,001)		(78,979)
Financing activities	Financing activities	(70,130)		(50,326)		Financing activities	866,510		(52,556)

Operating activities

Net cash provided by operating activities was ~~$176,025 during~~$149,022 for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Compared to the same period in the prior year, ~~comparative period,~~ net cash from operating activities was higher by ~~$57,776~~$12,840 due to an increase in net income of ~~$7,744, a~~$33,171 and the net increase in non‑cash adjustments of ~~$4,205, and an~~$1,098 primarily related to the increase in stock‑based compensation expense, partially offset by a gain from the change in fair value of our interest rate swap. Partially offsetting these increases in net cash provided by operating activities was a net decrease in net cash flows from the change in operating assets and liabilities of ~~$45,827.~~$21,429. The net increase in non‑cash adjustments primarily related to a $2,502 increase in depreciation and amortization, an increase of $7,020 in deferred income taxes, an increase of $17,571 in stock‑based compensation expense, an increase of $3,206 related to the change in the fair value of our interest rate swap, partly offset by an increase of $23,023 related to foreign currency remeasurement gains. The net increasedecrease in cash flows from ~~changes~~the change in operating assets and liabilities ~~of $45,827~~ was primarily due to ~~increased cash flows related to the collection of~~an increase in accounts receivable due to timing of ~~$5,814,~~collections from customers and an increase ~~from the change~~ in prepaid ~~and other assets of $15,412,~~income taxes, partially offset by an increase ~~from the change~~ in accounts payable, accruals, and other liabilities ~~of $12,941,~~primarily related to the increase in CSS deposits and an increase from the change in deferred ~~revenues of $4,521, and an increase from the change in income taxes payable of $7,139.~~revenues.

For the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, net cash provided by operating activities was ~~$118,249~~$136,182 due to net income of ~~$66,845~~$68,745 increased by ~~$49,882~~$34,551 of non‑cash adjustments and ~~$1,522~~$32,886 from changes in operating assets and liabilities.

Investing activities

Net cash used in investing activities was ~~$88,808 during~~$1,008,001 for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, primarily due to ~~$12,805~~$4,750 related to purchases of property and equipment and investment in capitalized software and ~~$68,920~~$1,002,551 in acquisition related payments, net of cash acquired.

For the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, net cash used in investing activities was ~~$21,837,~~$78,979, primarily due to ~~$11,622~~$9,970 related to purchases of property and equipment and investment in capitalized software and ~~$9,662~~$67,595 in acquisition related payments, net of cash acquired.

Financing activities

Net cash ~~used in~~provided by financing activities was ~~$70,130 during~~$866,510 for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Compared to the prior year comparative period, net cash ~~used in~~provided by financing activities increased by ~~$19,804,~~$919,066, primarily due to ~~an increase~~the net proceeds from the convertible senior notes of $1,233,377, partially offset by a decrease in net borrowings of $182,863 under the Credit Facility, the purchase of capped call options of $51,555, payments ~~for dividends~~ of ~~$394,022, partly offset by~~debt issuance costs of $4,951, and an increase in net ~~borrowings~~payments for shares acquired of ~~$367,000 under the Credit Facility and a decrease in the payment of acquisition debt and other consideration of $7,844.~~$18,529.

For the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, net cash used in financing activities was ~~$50,326,~~$52,556, primarily due to net payments under the Credit Facility of ~~$10,750, payment of a contingent acquisition liability of $9,878,~~$26,750, payments of dividends of ~~$18,830,~~$15,901, and net payments for shares acquired of ~~$13,907.~~$10,958.

~~Acquisition~~ Subsequent ~~to September~~Events After June 30, ~~2020~~2021

Acquisitions. In ~~October 2020, the Company~~July 2021, we completed ~~the acquisition of Professional Construction Strategies Group Ltd. to further advance its digital integrator capabilities.~~two acquisitions. The ~~acquisition is~~acquisitions are not expected to be material to ~~the Company’s~~our consolidated statements of operations and financial position.

Contractual Obligations and Other Commitments:

As noted above, on January 26, 2021, we ~~used borrowings under~~completed the ~~Term Loan, obtained in September 2020,~~2026 Notes private offering, and ~~under~~on June 28, 2021, we completed the ~~revolving facility under the Credit Facility to pay the Special Dividend.~~2027 Notes private offering. See Note 10 to our unaudited consolidated financial statements included in Part I, Item I1 of this Quarterly Report on Form 10‑Q. As a result of a net increase in long‑term debt, our obligation for interest on long‑term debt will also increase. In May 2020, we entered into a $100,000 non‑cancelable future cash purchase commitment for services related to the provisioning of our hosted software solutions through May 2023. As of September 30, 2020, the non‑cancelable future cash purchase commitment was $90,650. See Note 18 to our unaudited consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10‑Q.

There have been no other material changes to ~~the~~our contractual obligations ~~table~~and other commitments as ~~of December 31, 2019 presented~~disclosed in ~~“Management’s~~Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations in our ~~registration statement~~2020 Annual Report on Form ~~S-1, as amended,~~10‑K on file with the SEC.

~~Critical Accounting Policies and Use of Estimates:~~

Our consolidated financial statements are prepared in conformity with U.S. GAAP. In preparing our consolidated financial statements, we make assumptions, judgments, and estimates that can have a significant impact on amounts reported in the consolidated financial statements. We base our assumptions, judgments, and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We regularly reevaluate our assumptions, judgments, and estimates. Our significant accounting policies are described in Note 1 to our unaudited consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10‑Q and in Note 1 to our consolidated financial statements as of and for the year ended December 31, 2019 included in our registration statement on Form S‑1, as amended, on file with the SEC.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We highlighted those policies that involve a higher degree of judgment and complexity with further discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our registration statement on Form S‑1, as amended, on file with the SEC. There have been no material changes to our critical accounting policies and estimates during the three and nine months ended September 30, 2020, as compared to those disclosed for the year ended December 31, 2019 in our registration statement on Form S‑1, as amended, on file with the SEC.

Emerging Growth Company:

Section 107 of the ~~JOBS~~U.S. Tax Cuts and Jobs Act (the “JOBS Act”) provides that an “emerging growth company” can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, as amended by Section 102(b)(1) of the JOBS Act, for complying with new or revised accounting standards. This permits an “emerging growth company” to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies. We have elected to use the extended transition period provided in Section 7(a)(2)(B) for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an “emerging growth company” or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B). As a result, our consolidated financial statements may not be comparable to those of companies that comply with public company effective dates.

~~Off-Balance Sheet Arrangements:~~

We ~~do not have any off‑balance sheet arrangements,~~expect that we will no longer qualify as ~~defined by applicable SEC regulations.~~

~~Recent Accounting Pronouncements:~~

~~For information regarding recent accounting guidance and the impact~~an emerging growth company as of ~~this guidance on our unaudited consolidated financial statements, see Note 2 to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.~~December 31, 2021.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes in our market risk exposure as described in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2020 Annual Report on Form 10‑K on file with the SEC other than the following:

Interest rate risk. The fair value of our 2026 and 2027 Notes is subject to interest rate risk, ~~represents~~market risk, and other factors due to the ~~risk~~conversion feature. The capped call options that were entered into concurrently with the issuance of ~~loss that may~~our 2026 and 2027 Notes were completed to reduce the potential dilution from the conversion of the 2026 and 2027 Notes. The fair value of the 2026 and 2027 Notes will generally increase as interest rates fall and decrease as interest rates rise. In addition, the fair value of the 2026 and 2027 Notes will generally increase as our Class B Common Stock price increases and will generally decrease as the common stock price declines. The interest and market value changes affect the fair value of the 2026 Notes, but do not impact our financial position, results of operations, or cash flows due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency rates, although we also have exposure due to potential changes in interest rates. We do not hold financial instruments for trading purposes.

~~Foreign currency exchange risk.~~ ~~Our revenue, earnings, cash flows, receivables, and payables aresubject to fluctuations due to changes in foreign currency exchange rates. We regularly evaluate our foreign currency positions in~~ the ~~context~~fixed nature of the natural hedging of revenues and expenses and corresponding exposure. We have concluded that our naturally hedged positions support our strategy and no incremental hedging strategies have been deployed. The primary currencies for which we have exchange rate exposure are the U.S. Dollar versus Euros, British Pounds, Australian Dollars, Canadian Dollars, and Chinese Yuan Renminbi. For the year ended December 31, 2019, approximately 58% of our revenues are derived from outside of the United States and approximately 47% of our revenues are denominated in foreign currencies. In 2019, 53%, 14%, 7%, and 26% of our revenues were denominated in U.S. Dollars, Euros, British Pounds, and other currencies, respectively, and 54%, 17%, 8%, and 21% of our expenses were denominated in U.S. Dollars, Euros, British Pounds, and other currencies, respectively. Financial results therefore are affected by changes in foreign currency rates. We estimate that a 10% strengthening of the U.S. Dollar versus our other currencies would have lowered our 2019 annual operating income by approximately $10,200.debt obligation.

~~Interest rate risk.~~ ~~We had cash~~The Second and cash equivalents of $137,598 and $121,101 as of September 30, 2020 and December 31, 2019, respectively, which consisted of bank deposits and money market funds maintained at various financial institutions. The cash and cash equivalents are held primarily for working capital purposes. Such interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been significant. The primary objective of our investment activities isThird Amendments to preserve principal while maximizing income without significantly increasing risk. The interest rates on our Credit Facility also fluctuate based on various market conditions that affect London Interbank Offered Rate (“LIBOR”), the prime rate, or the overnight bank funding effective rate. The cost of borrowing thereunder may be impacted as a result of our interest rate risk exposure. Interest rate risk associated with the Credit Facility ~~is managed through an interest~~did not change our Interest rate swap which we executed on March 31, 2020. Under the terms of the swap, we fixed our LIBOR borrowing rate at 0.73% on a notional amount of $200,000 and for a period of ten years. We do not enter into investments or derivative instruments for trading or speculative purposes. Duerisk disclosure related to the ~~short-term nature of~~Credit Facility included in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our ~~investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of~~2020 Annual Report on Form 10‑K on file with the ~~periods presented would not have had a material impact on our consolidated financial statements.~~

~~Inflation risk.~~ ~~We do not believe that inflation has had a material effect on our business, financialcondition, or results of operations.~~

SEC.

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Item 4. Controls and Procedures

Evaluation of Effectiveness of Disclosure Controls and Procedures

Our management maintains disclosure controls and procedures as defined in Rules 13a‑15(e) and 15d‑15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is processed, recorded, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), as appropriate, to allow for timely decisions regarding required disclosure.

We evaluated, under the supervision and with the participation of management, including our principal executive and principal financial officers, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this ~~quarterly~~ report. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2021, our disclosure controls and procedures were effective at the reasonable assurance ~~level as of September 30, 2020.~~level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a or 15d of the Exchange Act that occurred during the quarter ended ~~September~~June 30, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact in our internal control over financial reporting despite our ~~employees~~colleagues working remotely due to the COVID‑19 pandemic. We are continually monitoring and assessing the COVID‑19 pandemic on our internal controls including changes to their design and operating effectiveness.

Inherent Limitations on Effectiveness of Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

7479

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are subject from time to time to various legal proceedings and claims which arise in the ordinary course of our business. Although the outcome of these and other claims cannot be predicted with certainty, we do not believe that the ultimate resolution of pending matters will have a material adverse effect on our financial condition, ~~cash flows, or~~ results of ~~operations.~~operations, or cash flows. We currently believe that we do not have any material litigation pending against us.

See Note 18 to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.

Item 1A. Risk Factors

~~For a discussion of potential risks or uncertainties, see “Risk Factors”~~In addition to other information set forth in this report, you should carefully consider the ~~Company’s registration statement~~risk factors described in Part I. Item 1A. Risk Factors in our 2020 Annual Report on Form ~~S‑1, as amended (File No. 333‑248246),~~10‑K on file with the ~~SEC. There have been no material changes~~SEC, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to ~~the risk factors disclosed in such registration statement.~~us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Equity Securities

From ~~July~~April 1, ~~2020~~2021 to ~~September~~June 30, 2020, we granted to our employees and directors restricted stock awards and restricted stock units representing an aggregate of 2,274,121 shares of our Class B Common Stock under our 2015 Equity Incentive Plan.

~~From July 1, 2020 to September 30, 2020,~~2021, we issued ~~294,764~~3,141,342 shares of our Class B Common Stock pursuant to ~~option exercised under~~ our ~~2015 Equity Incentive Plan for exercise prices ranging from $3.73 to $5.74 per share (after giving effect to the $1.50 downward exercise price adjustment as a result~~acquisition of ~~the Special Dividend declared by our board of directors on August 28, 2020).~~Seequent Holdings Limited.

From ~~July~~April 1, ~~2020~~2021 to ~~September~~June 30, ~~2020,~~2021, we issued ~~36,239 shares of our Class B Common Stock pursuant to the vesting of restricted stock awards and restricted stock units.~~

~~From July 1, 2020 to September 30, 2020, we issued 27,799~~1,862,576 shares of our Class B Common Stock in connection with ~~the~~distributions from our amended and restated Bentley Systems, Incorporated Nonqualified Deferred Compensation Plan.

The offers, sales, and issuances of these securities were exempt from registration under the Securities Act in reliance upon Rule 701 promulgated under the Securities Act as transactions under compensatory benefit plans and contracts relating to compensation in compliance with Rule 701 or in reliance upon Section 4(a)(2) of the Securities Act as transactions by an issuer not involving any public offering. None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance on Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. All recipients had adequate access, through their relationships with us, to information about us. The ~~issuance~~issuances of these securities were made without any general solicitation or advertising.

~~Use of Proceeds from our Public Offering of Common Shares~~

On September 25, 2020, we completed our IPO. The selling stockholders identified in our registration statement on Form S-1, as amended, on file with the SEC, sold 12,360,991 shares of Class B Common Stock at a public offering price of $22.00 per share. The Company did not sell any shares in the IPO and did not receive any of the proceeds from the sale of the Class B Common Stock sold by the selling stockholders.

The offer and sale of all of our Class B Common Stock were registered under the Securities Act pursuant to a registration statement on Form S‑1, as amended (File No. 333‑248246), which was declared effective by the SEC on September 22, 2020. Goldman Sachs & Co. LLC and BofA Securities, Inc. acted as joint book-running managers of the offering and as representatives of the underwriters.

7580

Item 6. Exhibits

Report or SEC File or
Exhibit Registration Registration Exhibit
Number Description Statement Number Reference
3.1
Amended and Restated Certificate of Incorporation of Bentley Systems, Incorporated
Form 8‑K filed September 25, 2020
001-39548 3.1
3.2
Amended and Restated Bylaws of Bentley Systems, Incorporated
Form 8‑K filed September 25, 2020
001-39548 3.2
10.1
First Amendment to Amended and Restated Credit Agreement, dated as of September 2, 2020
Form S-1/A filed September 8, 2020 333-248246 10.10
10.2†
Bentley Systems, Incorporated 2020 Omnibus Incentive Plan
Form 8‑K filed September 25, 2020
001-39548 10.1
10.3†
Bentley Systems, Incorporated Global Employee Stock Purchase Plan
Form 8‑K filed September 25, 2020
001-39548 10.2
10.4†
Bentley Systems, Incorporated Nonqualified Deferred Compensation Plan
Form 8‑K filed September 25, 2020
001-39548 10.3
10.5†
Bentley Systems, Incorporated Bonus Pool Plan
Form 8‑K filed September 25, 2020
001-39548 10.4
31.1
Manag ement Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Management Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Purs uant to Section 9 0 6 of the Sarbanes-Oxley Act of 2002
101.INS Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB Inline XBRL Taxonomy Extension Label Linkbase
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase
104 Cover page formatted as Inline XBRL and contained in Exhibit 101


Exhibit
Number						Description
4.1						Indenture, dated as of June 28, 2021, between Bentley Systems, Incorporated and Wilmington Trust, National Association, as trustee (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on June 29, 2021 (File No. 001-39548) and incorporated herein by reference)
4.2						Form of 0.375% Convertible Senior Note due 2027 (included as Exhibit A in Exhibit 4.1 and incorporated herein by reference)
10.1						Form of Capped Call Confirmation (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on June 29, 2021 (File No. 001-39548) and incorporated herein by reference)
10.2						Third Amendment, dated as of June 22, 2021, to the Amended and Restated Credit Agreement dated as of December 19, 2017, by and am ong the Company, PNC Bank National Association, as administrative agent, and the lenders party thereto (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on June 22, 2021 (File No. 001-39548) and incorporated herein by reference)
31.1*						Certification of CEO pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2*						Certification of CFO pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1*						Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase
104						Cover page formatted as Inline XBRL and contained in Exhibit 101


†			~~Management contract or compensatory plan or arrangement.~~
*			Filed or furnished herewith. The ~~certifications~~certification attached as Exhibit 32.1 that ~~accompany~~accompanies this Quarterly Report on Form 10‑10‑Q ~~are~~is not deemed filed with the U.S. Securities and Exchange Commission and ~~are~~is not to be incorporated by reference into any filing of Bentley Systems, Incorporated under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10‑10‑Q, irrespective of any general incorporation language contained in such filing.

7681

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Bentley Systems, Incorporated

Date: ~~November~~August 10, ~~2020~~2021	By:	/s/ ~~David~~DAVID J. ~~Hollister~~HOLLISTER
	~~Name:~~	David J. Hollister
	~~Title:~~	Chief Financial Officer


	December 31, 2019
2020	$	15,886
2021	13,186
2022	10,385
2023	6,572
2024	3,216
Thereafter	2,771
Total minimum lease payments	$	52,016


	Dividend Per Share		Amount
2020:
Third quarter (1)	$	1.530	$	400,311
Second quarter	0.030		7,771
First quarter	0.030		7,666
Total	$	1.590	$	415,748
2019:
Third quarter	$	0.025	$	6,380
Second quarter	0.025		6,375
First quarter	0.025		6,268
Total	$	0.075	$	19,023


		Exercise Price Per Share
	Options		Weighted
	Outstanding	Range	Average
Balance, December 31, 2019	18,691,667	$2.00 – $5.74	$	4.47
Option activity:
Granted	10,000	9.34	9.34
Exercised	(4,864,944)	2.00 – 5.74	3.37
Canceled	(223,250)	2.00 – 9.34	5.30
Balance, September 30, 2020	13,613,473	$3.73 – $5.74	$	4.85


	2020 Program		Prior Program		Total
Balance, December 31, 2019	$	0	$	491	$	491
Realignment costs	10,020		(8)		10,012
Payments	(379)		(360)		(739)
Adjustments (1)	(71)		0		(71)
Balance, September 30, 2020	$	9,570	$	123	$	9,693