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Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-27 · 109 added, 216 removed, 435 unchanged (43% of the section changed)

6 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10‑K for management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.

During the fourth quarter of 2023, we changed our definitions of constant currency and constant currency growth rates.

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

Our prior definition of constant currency calculated the effects of foreign currency fluctuations and constant currency information by translating current period results of our subsidiaries from their functional currencies to our reporting currency by using prior period average foreign currency exchange rates in reporting period‑over‑period results.

Prior period amounts have been revised to conform to the current period presentation using the updated constant currency and constant currency growth rates definitions.

We are providing what our constant currency and constant currency growth rates results would have been pursuant to the prior definition for the applicable periods so that investors and potential investors that have analyzed these non-GAAP financial measures historically using our prior definitions can compare our historical results to our current results with respect to these non-GAAP financial measures using the prior definitions.

Refer to the section titled “Non‑GAAP Financial measures” for reconciliations of constant currency non‑GAAP financial measures and their most directly comparable GAAP financial measures under the current and prior definitions.

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.

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• ARR (2) was $1,283,256 as of December 31, 2024, compared to $1,174,774 as of December 31, 2023, representing a constant currency (1) ARR growth rate (2) of 12%;

• Last twelve-month recurring revenues dollar-based net retention rate (2) was 109% as of the year ended December 31, 2023, compared to 110% as of December 31, 2022;

• Last twelve-month recurring revenues dollar-based net retention rate (2) was 110% as of December 31, 2024, compared to 109% as of December 31, 2023;

• Operating income was $302,150 for the year ended December 31, 2024, compared to $230,542 for the prior year;

• Adjusted operating income inclusive of stock-based compensation expense (“Adjusted OI w/SBC”) (1) was $372,222 for the year ended December 31, 2024, compared to $324,677 for the prior year;

• Cash flow from operations was $416,696 for the year ended December 31, 2023, compared to $274,324 for the prior year.

• Cash flows from operations was $435,292 for the year ended December 31, 2024, compared to $416,696 for the prior year.

(1) Constant currency and Adjusted OI w/SBC are non‑GAAP financial measures.

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(2) Refer to the “Key Business Metrics” section for additional information, including our definitions and our uses of ARR, ARR growth rate, and recurring revenues dollar-based net retention rate.

(3) Adjusted OI w/SBC is a non‑GAAP financial measure.

Refer to the “Non‑GAAP Financial Measures” section for additional information, including our definition and our use of Adjusted OI w/SBC.

Results of Operations:

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Our results of operations have been, and in the future will be, affected by changes in foreign currency exchange rates.

For the years ended December 31, 2023, 2022, and 2021, approximately 35%, 36%, and 47%, respectively, of our total revenues and 45%, 46%, and 42%, respectively, of our total operating expenses were denominated in foreign currencies from outside the U.S.

including most significantly:

For the years ended December 31, 2024, 2023, and 2022, approximately 34%, 35%, and 36%, respectively, of our total revenues and 42%, 45%, and 46%, respectively, of our total operating expenses were denominated in a currency other than the U.S.

dollar including most significantly:

euros, British pounds, Canadian dollars, Australian dollars, Chinese yuan renminbi, and New Zealand dollars.

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Our total revenues are diversified by account type, size, and geography.

Our sources of revenue growth, excluding the impact from acquisitions, come from additional subscriptions revenues from existing accounts using the same products and represent the majority of our revenue growth, additional subscriptions revenues from existing accounts using new products, and subscriptions revenues from new accounts.

Our sources of revenue growth, excluding the impact from acquisitions, primarily come from additional subscriptions revenues from existing accounts using the same products and represent the majority of our revenue growth, additional subscriptions revenues from existing accounts using new products, and subscriptions revenues from new accounts.

We believe that we have a loyal account base, with over 70% of our total revenues for the years ended December 31, 2024, 2023, and 2022 generated from organizations that have been our accounts for over ten years.

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Consolidated Revenues

Current Definition of Constant Currency:

% Change % Change

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(1) Constant currency is a non‑GAAP financial measure.

Refer to the “Non‑GAAP Financial Measures” section for additional information, including our current definition and our use of constant currency, and for a reconciliation of constant currency growth rates.

Prior Definition of Constant Currency:

% Change % Change

2022 to 2023 2021 to 2022

Constant Constant

Year Ended December 31, Currency Currency

2023 2022 2021 % % (1)

Subscriptions $ 1,080,307 $ 960,220 $ 812,807 12.5 % 11.7 % 18.1 % 24.3 %

Perpetual licenses 46,038 43,377 53,080 6.1 % 5.9 % (18.3 %) (12.1 %)

Subscriptions and licenses 1,126,345 1,003,597 865,887 12.2 % 11.4 % 15.9 % 22.1 %

Services 102,068 95,485 99,159 6.9 % 7.5 % (3.7 %) 0.4 %

Total revenues $ 1,228,413 $ 1,099,082 $ 965,046 11.8 % 11.1 % 13.9 % 19.8 %

(1) Constant currency is a non‑GAAP financial measure.

Refer to the “Non‑GAAP Financial Measures” section for additional information, including our prior definition and our use of constant currency, and for a reconciliation of constant currency growth rates.

The increase in total revenues for the year ended December 31, 2023 was primarily driven by increases in subscriptions revenues, and to a lesser extent, services and perpetual licenses revenues.

The increase in total revenues for the year ended December 31, 2024 was driven by an increase in subscriptions revenues, partially offset by decreases in services revenues.

Subscriptions .

For the year ended December 31, 2023, the increase in subscriptions revenues was primarily driven by improvements in our business performance of approximately $115,786 ($116,406 on a constant currency basis) and the impact of our platform acquisition of approximately $4,301 ($4,111 on a constant currency basis).

Our business performance excludes the impact of our platform acquisitions and includes the impact from programmatic acquisitions, which generally are immaterial, individually and in the aggregate.

The platform acquisition impact relates to our acquisition of PLS and is inclusive of PLS’ organic performance.

The improvements in business performance were primarily driven by expansion from accounts with revenues in the prior period (“existing accounts”), and growth of 3% attributable to new accounts, most notably small- and medium-sized accounts.

Improvements in business performance for the year ended December 31, 2023 were led by our engineering applications, geoprofessional applications, and our Bentley Infrastructure Cloud for project delivery.

For the year ended December 31, 2024, the increase in subscriptions revenues was primarily driven by improvements in our business performance of $143,055 ($144,846 on a constant currency basis).

Our business performance includes the impact from programmatic acquisitions, which generally are immaterial, individually and in the aggregate.

For the year ended December 31, 2024, the improvements in business performance were primarily driven by expansion from accounts with revenues in the prior period (“existing accounts”), and growth of 3% attributable to new accounts, most notably small- and medium-sized accounts.

Improvements in business performance for the year ended December 31, 2024 were led by our engineering applications, followed by Seequent geoprofessional applications, and our Bentley Infrastructure Cloud for project delivery.

Perpetual licenses .

For the year ended December 31, 2023, the increase in perpetual licenses revenues was primarily driven by improvements in business performance of approximately $2,661 ($3,181 on a constant currency basis).

For the year ended December 31, 2023, the increase in services revenues was primarily driven by improvements in our business performance of approximately $6,583 ($7,138 on a constant currency basis).

For the year ended December 31, 2023, the improvements in business performance were primarily driven by contributions from Cohesive digital integrator services of approximately $8,684 ($8,834 on a constant currency basis).

For the year ended December 31, 2024, perpetual licenses revenues were flat compared to the prior year.

For the year ended December 31, 2024, the decrease in services revenues was driven by a decline in our business performance of $18,296 ($18,526 on a constant currency basis), driven primarily from weakness in Maximo-related work within our digital integrator, Cohesive.

Revenues by Geographic Region

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

Current Definition of Constant Currency:

% Change % Change

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(1) Constant currency is a non-GAAP financial measure.

Refer to the “Non-GAAP Financial Measures” section for additional information, including our current definition and our use of constant currency, and for a reconciliation of constant currency growth rates.

Prior Definition of Constant Currency:

% Change % Change

2022 to 2023 2021 to 2022

Constant Constant

Year Ended December 31, Currency Currency

2023 2022 2021 % % (1)

Americas $ 650,926 $ 584,794 $ 483,087 11.3 % 11.0 % 21.1 % 22.1 %

EMEA 353,550 312,804 300,123 13.0 % 11.1 % 4.2 % 15.4 %

APAC 223,937 201,484 181,836 11.1 % 11.2 % 10.8 % 21.1 %

Total revenues $ 1,228,413 $ 1,099,082 $ 965,046 11.8 % 11.1 % 13.9 % 19.8 %

(1) Constant currency is a non-GAAP financial measure.

Refer to the “Non-GAAP Financial Measures” section for additional information, including our prior definition and our use of constant currency, and for a reconciliation of constant currency growth rates.

For the year ended December 31, 2023, the increase in revenues from the Americas was primarily driven by improvements in our business performance of approximately $62,442 ($63,450 on a constant currency basis) and the impact from our platform acquisition of approximately $3,690 ($3,237 on a constant currency basis).

The improvements in business performance for the year ended December 31, 2023 were primarily due to expansion of our subscriptions revenues from existing accounts in the U.S.

For the year ended December 31, 2023, the increase in revenues from EMEA was primarily driven by improvements in our business performance of approximately $40,297 ($37,345 on a constant currency basis).

The improvements in business performance for the year ended December 31, 2023 were primarily due to expansion of our subscriptions revenues from existing accounts in the United Kingdom (“U.K.”), and the Middle East and Africa, partially offset by reductions in Russia due to exiting our operations beginning in the second quarter of 2022.

For the year ended December 31, 2023, the increase in revenues from APAC was primarily driven by improvements in our business performance of approximately $22,291 ($25,930 on a constant currency basis).

The improvements in business performance for the year ended December 31, 2023 were primarily due to expansion of our subscriptions revenues from existing accounts in India, Australia, and Southeast Asia, partially offset by declines in China.

Total revenues in China for the year ended December 31, 2023 increased as compared to the same period in the prior year, primarily due to expansion of our perpetual licenses revenues.

For the year ended December 31, 2024, the increase in revenues from the Americas was primarily driven by improvements in our business performance of $66,076 ($68,067 on a constant currency basis).

The improvements in business performance for the year ended December 31, 2024 were primarily due to expansion of our subscriptions revenues from existing accounts in the U.S., partially offset by a decline in services revenues.

For the year ended December 31, 2024, the increase in revenues from EMEA was primarily driven by improvements in our business performance of $34,834 ($32,195 on a constant currency basis).

The improvements in business performance for the year ended December 31, 2024 were primarily due to expansion of our subscriptions revenues from existing accounts in the United Kingdom (“U.K.”), the Middle East, and Africa, partially offset by a decline in services revenues.

For the year ended December 31, 2024, the increase in revenues from APAC was primarily driven by improvements in our business performance of $23,772 ($26,308 on a constant currency basis).

The improvements in business performance for the year ended December 31, 2024 were primarily due to expansion of our subscriptions revenues from existing accounts in Australia, Southeast Asia, and India, partially offset by declines of our subscriptions revenues from existing accounts in China.

The future results in China remain uncertain as a result of continued geopolitical challenges, the obstacles there to cloud‑deployed software, and the financial timing impact of the preference there for license sales, rather than subscriptions.

Cost of Revenues and Operating Expense (Income)

Cost of Revenues and Operating Expenses

Headcount-Related Costs

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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.

During the fourth quarter of 2023, the Company approved a strategic realignment program to better serve our accounts and to better align resources with the strategy of the business, including reinvestment in go-to-market functions, as well as in AI product development.

The realignment program resulted in realignment costs of $12,579, which represent termination benefits for colleagues whose roles were impacted (less than five percent of total headcount).

The realignment program resulted in realignment costs of $847 and $12,579 for the years ended December 31, 2024 and 2023, respectively, which represent termination benefits for colleagues whose roles were impacted (less than five percent of total headcount).

See Note 21 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K for additional information.

The realignment program activities have been broadly implemented across our various businesses with the intention that substantially all actions, including payment of the termination benefits, will be fully completed by mid‑2024.

The impact of the realignment program on headcount-related costs for the year ended December 31, 2023 is included in our discussion below.

The realignment program activities have been broadly implemented across our various businesses, which were substantially completed by the end of the second quarter of 2024, and payment of termination benefits were completed as of December 31, 2024.

The impact of the realignment program on headcount-related costs for the year ended December 31, 2024 and 2023 is included in our discussion below.

Cost of Revenues

Current Definition of Constant Currency:

% Change % Change

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(1) Constant currency is a non-GAAP financial measure.

Prior Definition of Constant Currency:

% Change % Change

2022 to 2023 2021 to 2022

Constant Constant

Year Ended December 31, Currency Currency

2023 2022 2021 % % (1)

Cost of subscriptions and licenses $ 169,406 $ 147,578 $ 124,321 14.8 % 14.7 % 18.7 % 24.5 %

Cost of services 96,677 89,435 92,218 8.1 % 9.0 % (3.0 %) 2.3 %

Total cost of revenues $ 266,083 $ 237,013 $ 216,539 12.3 % 12.5 % 9.5 % 15.1 %

(1) Constant currency is a non-GAAP financial measure.

Cost of subscriptions and licenses .

Cost of subscriptions and licenses expenses primarily include headcount‑related costs, as well as depreciation of property and equipment and amortization of capitalized software costs associated with servicing software subscriptions, amortization of intangible assets associated with acquired software and technology, channel partner compensation for providing sales coverage to users, as well as cloud‑related costs incurred for servicing our accounts using cloud provisioned solutions and our license administration platform.

For the year ended December 31, 2023, on a constant currency basis, cost of subscriptions and licenses increased primarily due to an increase in headcount‑related costs of approximately $14,407, mainly due to an increase in headcount and annual compensation costs, and an increase in cloud‑related costs of approximately $4,949.

Cost of subscriptions and licenses expenses primarily include headcount‑related costs, as well as cloud‑related costs incurred for servicing our accounts using cloud provisioned solutions and our license administration platform.

Cost of subscriptions and licenses expenses also include channel partner compensation for providing sales coverage to users, depreciation of property and equipment, amortization of capitalized software costs associated with servicing software subscriptions and our Accelerated Commercial Development Program (“ACDP”), and amortization of intangible assets associated with acquired software and technology.

For the year ended December 31, 2024, on a constant currency basis, cost of subscriptions and licenses expenses increased primarily due to an increase in cloud‑related costs of $10,859.

Partially offsetting this increase was lower amortization of capitalized costs under our ACDP of $3,983 as compared to the prior year and lower headcount‑related costs of $2,090 primarily due to lower stock‑based compensation expense.

Cost of services.

Cost of services expenses primarily include headcount‑related costs, as well as depreciation of property and equipment and amortization of capitalized software costs used for providing training, implementation, configuration, and customization services to accounts.

For the year ended December 31, 2023, on a constant currency basis, cost of services increased primarily due to an increase in headcount‑related costs of approximately $7,991, mainly due to third‑party personnel costs, and to a lesser extent, increases in headcount and annual compensation costs, partially offset by lower acquisition-related retention incentives.

Operating Expense (Income)

Current Definition of Constant Currency:

% Change % Change

2022 to 2023 2021 to 2022

Constant Constant

Year Ended December 31, Currency Currency

2023 2022 2021 % % (1)

Research and development $ 274,619 $ 257,856 $ 220,915 6.5 % 7.5 % 16.7 % 21.8 %

Selling and marketing 224,336 195,622 162,240 14.7 % 14.9 % 20.6 % 25.8 %

General and administrative 180,738 174,647 150,116 3.5 % 3.6 % 16.3 % 19.1 %

Deferred compensation plan 13,580 (15,782) 95,046 NM NM NM NM

Amortization of purchased intangibles 38,515 41,114 25,601 (6.3 %) (6.3 %) 60.6 % 67.5 %

Total operating expenses $ 731,788 $ 653,457 $ 653,918 12.0 % 12.5 % (0.1 %) 3.8 %

Percentage changes that are considered not meaningful are denoted with NM.

(1) Constant currency is a non-GAAP financial measure.

Prior Definition of Constant Currency:

For the year ended December 31, 2024, on a constant currency basis, cost of services expenses decreased primarily due to a decrease in headcount‑related costs of $12,514, mainly due to a reduction in third‑party personnel costs.

Operating Expenses

% Change % Change

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General and administrative 210,374 180,738 174,647 16.4 % 16.5 % 3.5 % 3.6 %

Deferred compensation plan 13,580 (15,782) 95,046 NM NM NM NM

Deferred compensation plan 12,382 13,580 (15,782) (8.8 %) (8.8 %) NM NM

Amortization of purchased intangibles 33,998 38,515 41,114 (11.7 %) (11.8 %) (6.3 %) (6.3 %)

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Research and development.

Research and development expenses primarily include headcount‑related costs, as well as 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, which is generally shortly before the release of such products.

Research and development expenses primarily consist of headcount‑related 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, which is generally shortly before the release of such products.

Our research and development roadmap balances technology advances and new offerings with continuous enhancements to existing offerings.

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We anticipate that we will 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.

For the year ended December 31, 2023, on a constant currency basis, research and development expenses increased primarily due to an increase in headcount‑related costs of approximately $18,730, mainly due to an increase in annual compensation costs and headcount, and to a lesser extent, realignment expenses, partially offset by a decrease in stock‑based compensation expense primarily related to the April 2023 retirement of founder and former Chief Technology Officer, Keith Bentley.

The retirement of Mr.

Bentley contributed to a deceleration of research and development expenses growth during 2023.

For the year ended December 31, 2024, on a constant currency basis, research and development expenses increased primarily due to an increase in headcount‑related costs of $9,513, mainly due to an increase in annual and other compensation costs.

Offsetting the increase in headcount‑related costs were $4,995 of realignment expenses related to the 2023 Program recorded during the year ended December 31, 2023.

For the year ended December 31, 2024, our research and development headcount‑related costs reflect run‑rate savings associated with the 2023 Program, which we initiated during the fourth quarter of 2023.

While most of the realignment actions were completed at the beginning of 2024, our reinvestment of these run‑rate savings into priority investment areas, such as AI in product development, was not fully realized until the third quarter of 2024.

Selling and marketing.

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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.

For the year ended December 31, 2023, on a constant currency basis, selling and marketing expenses increased primarily due to an increase in headcount‑related costs of approximately $27,584, mainly due to an increase in headcount and annual compensation costs, and to a lesser extent, realignment expenses.

For the year ended December 31, 2024, on a constant currency basis, selling and marketing expenses increased primarily due to an increase in headcount‑related costs of $23,408, mainly due to an increase in annual and other compensation costs, and an increase in third-party personnel costs primarily related to our marketing activities.

Additionally, selling and marketing expenses further increased due to an increase in promotional costs of $5,449.

General and administrative .

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General and administrative expenses also include acquisition costs, which consist of costs related to legal, accounting, valuation, insurance, and other consulting and transaction fees.

Additionally, acquisition costs will drive fluctuations in general and administrative expenses depending on the timing of business combinations.

For the year ended December 31, 2023, on a constant currency basis, general and administrative expenses increased primarily due to an increase in headcount‑related costs of approximately $18,248, mainly due to an increase in headcount and annual compensation costs, and to a lesser extent, third‑party personnel costs.

Partially offsetting these increases were lower non‑income related taxes of approximately $6,001 and lower acquisition expenses of approximately $5,777.

Acquisition costs may drive fluctuations in general and administrative expenses depending on the timing of business combinations.

For the year ended December 31, 2024, on a constant currency basis, general and administrative expenses increased primarily due to an increase in headcount‑related costs of $11,048, mainly due to an increase in annual and other compensation costs, and to a lesser extent, higher charitable contributions focusing on education and sustainability of $4,143 and higher expense associated with non‑income related taxes of $3,585.

Additionally, during the year ended December 31, 2024, we recognized approximately $10,300 of costs associated with our internal-use software implementations, as well as approximately $2,200 of other corporate initiatives expenses.

Partially offsetting these increases were lower acquisition costs of $4,276.

Deferred compensation plan .

Deferred compensation plan reflects the expense (income) recorded related to changes in deferred compensation plan liabilities, which are marked to market at the end of each reporting period.

For the year ended December 31, 2023, deferred compensation plan expense (income) was attributable to the marked to market impact on deferred compensation plan liability balances period over period.

For the year ended December 31, 2024, deferred compensation plan expense was attributable to the marked to market impact on deferred compensation plan liability balances period over period.

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.

For the year ended December 31, 2023, on a constant currency basis, amortization of purchased intangibles decreased primarily due to previously acquired intangible assets that continue to become fully amortized and lower acquisition activity as compared to the prior year.

For the year ended December 31, 2024, on a constant currency basis, amortization of purchased intangibles decreased primarily due to previously acquired intangible assets that continue to become fully amortized and lower acquisition activity as compared to prior years.

Interest Expense, Net

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2024 2023 2022 to 2024 to 2023

Interest expense $ (41,331) $ (35,056) $ (11,527) 17.9 % NM

Interest expense $ (24,774) $ (41,331) $ (35,056) (40.1 %) 17.9 %

Interest income 2,730 1,538 421 77.5 % NM

Interest expense, net $ (39,793) $ (34,635) $ (11,221) 14.9 % NM

Interest expense, net $ (22,044) $ (39,793) $ (34,635) (44.6 %) 14.9 %

Percentage changes that are considered not meaningful are denoted with NM.

Interest expense, net primarily represents interest associated with the Credit Facility, the 2026 Notes, the 2027 Notes, amortization and write‑off of deferred debt issuance costs, and interest income from our investments in money market funds.

Interest expense, net primarily represents interest associated with credit facility borrowings, the 2026 Notes, the 2027 Notes, amortization of deferred debt issuance costs, and interest income from our investments in money market funds.

The majority of our debt is protected from rising interest rates, through either very low fixed coupon interest on our convertible notes or our $200,000 interest rate swap, which expires in 2030.

For the year ended December 31, 2023, interest expense, net increased primarily due to a higher weighted average interest rate on borrowings under the Credit Facility, partially offset by lower weighted average debt outstanding.

Other (Expense) Income, Net

For the year ended December 31, 2024, interest expense, net decreased primarily due to lower weighted average debt outstanding, as compared to the prior year, mainly related to the continued pay down of our revolving loan borrowings, and repayments of our senior secured term loan during 2024 under our amended and restated credit agreement, entered into on December 19, 2017 (the “2017 Credit Facility”).

Other Income (Expense), Net

Year Ended December 31,

2024 2023 2022

(Loss) gain from:

Gain (loss) from:

Change in fair value of interest rate swap $ 10 $ (5,038) $ 27,083

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Change in fair value of acquisition contingent consideration — — 1,427

Receipts (payments) related to interest rate swap

Receipts related to interest rate swap

9,309 8,803 1,947

Other (expense) income, net (2)

Other income (expense), net (2)

2,691 (13,484) 1,713

Total other (expense) income, net

Total other income (expense), net

$ 12,949 $ (7,222) $ 24,298

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dollar denominated cash and cash equivalents, account receivables, customer deposits, and intercompany balances held by foreign subsidiaries.

Intercompany finance transactions primarily denominated in U.S.

dollars resulted in unrealized foreign exchange gains (losses) of $3,163, $(7,369), and $(779) for the years ended December 31, 2023, 2022, and 2021, respectively.

(2) Other (expense) income, net includes investment impairment and other charges of $(16,988), partially offset by gains on investments of $2,360 for the year ended December 31, 2023.

(Benefit) Provision for Income Taxes

(2) Other income (expense), net for the year ended December 31, 2023 includes investment impairment and other charges of $(16,988), partially offset by gains on investments of $2,360.

Provision (Benefit) for Income Taxes

Year Ended December 31,

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$ 293,055 $ 183,527 $ 198,275

(Benefit) provision for income taxes

Provision (benefit) for income taxes

$ 58,726 $ (143,241) $ 21,283

Effective tax rate 20.0 % (78.0) % 10.7 %

(Benefit) provision for income taxes includes the aggregate consolidated income tax expense for U.S.

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

domestic and foreign income taxes.

For the year ended December 31, 2023, the effective tax rate was lower as compared to the year ended December 31, 2022 primarily due to the discrete tax benefit recognized as a result of the internal legal entity restructuring described below.

The benefit of the internal legal entity restructuring was partially offset by an increase in the effective tax rate impact of the Global Intangible Low‑Taxed Income (“GILTI”) inclusion due to the mandatory capitalization of research and development expenses for U.S.

tax purposes and a decrease in discrete tax benefits related to stock-based compensation, net of the impact from officer compensation limitation provisions, recognized during the current year.

For the year ended December 31, 2024, the effective tax rate was higher as compared to the year ended December 31, 2023 primarily due to the discrete tax benefit recognized as a result of the internal legal entity restructuring during the fourth quarter of 2023 described below, as well as a decrease in discrete tax benefits related to stock‑based compensation, net of the impact from officer compensation limitation provisions, partially offset by the decrease in the adverse effective tax rate impact of the net tax on foreign earnings.

The decrease in net tax on foreign earnings is primarily related to increased foreign creditable taxes available to reduce the net impact of the U.S.

Global Intangible Low‑Taxed Income (“GILTI”) inclusion.

For the years ended December 31, 2024 and 2023, we recorded discrete tax benefits of $5,583 and $14,648, respectively, associated with windfall tax benefits from stock‑based compensation, net of the impact from officer compensation limitation provisions.

1 unchanged sentence

These transactions resulted in the recognition of deferred tax benefits arising from the net increase in deferred tax assets related to intangibles and goodwill of $171,622.

The deferred tax assets represent the undiscounted future anticipated cash tax impacts of basis differences, which are expected to be realized through tax amortization over the next 13 years.

As of December 31, 2023, the deferred tax assets represented the undiscounted future anticipated cash tax impacts of basis differences, which were expected to be realized through tax amortization over the next 13 years, beginning in 2024.

See Note 16 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K for additional information.

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Constant currency ARR growth rate is the growth rate of ARR measured on a constant currency basis.

In reporting period-over-period ARR growth rates in constant currency, we calculate constant currency growth rates by translating current and prior period ARR on a transactional basis to our reporting currency using current year budget exchange rates.

We believe that ARR growth is an important metric indicating the scale and growth of our business.

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(3) Acquisition expenses .

We incur expenses for professional services rendered in connection with business combinations, which are included in our GAAP presentation of general and administrative expense (see Note 4 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K).

We incur expenses for professional services rendered in connection with business combinations, which are included in our GAAP presentation of general and administrative expense.

Also included in our acquisition expenses are retention incentives paid to executives of the acquired companies.

1 unchanged sentence

For the year ended December 31, 2022, $9,804 of our acquisition expenses related to our platform acquisition of PLS.

For the year ended December 31, 2021, $16,557 and $1,644 of our acquisition expenses related to our platform acquisitions of Seequent and PLS, respectively.

(4) Realignment expenses .

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We believe it is useful for investors to understand the effects of these items on our total operating expenses.

For the year ended December 31, 2023, Realignment expenses were primarily associated with a strategic realignment program to better serve our accounts and to better align resources with the strategy of the business during the fourth quarter of 2023.

In connection with these actions, we recognized $12,579 of realignment costs related to termination benefits for colleagues whose roles were impacted (see Note 21 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K).

Partially offsetting these costs was income associated with the continued wind down of our Russian entities.

During the fourth quarter of 2023, we approved the 2023 Program.

For the years ended December 31, 2024 and 2023, we recognized realignment costs related to the aforementioned program of $847 and $12,579, respectively, which represent termination benefits for colleagues whose roles were impacted (see Note 21 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K).

For the year ended December 31, 2023, Realignment expenses were partially offset by income associated with the continued wind down of our Russian entities.

For the year ended December 31, 2022, Realignment expenses were comprised of asset impairments and termination benefits as a result of our decision to wind down business and exit the Russian market beginning in the second quarter of 2022.

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We use constant currency and constant currency growth rates to evaluate the underlying performance of the business, and we believe it is helpful for investors to present operating results on a comparable basis period over period to evaluate its underlying performance.

During the fourth quarter of 2023, we changed our definitions of constant currency and constant currency growth rates.

We made this modification in order to better align with how we manage the business, to better reflect our performance during a reporting period, and to make the effects of foreign currency fluctuations and constant currency information more easily comparable on a period‑over‑period basis.

Prior period amounts have been revised to conform to the current period presentation using the updated constant currency and constant currency growth rates definition.

Reconciliations of constant currency non‑GAAP financial measures and their most directly comparable GAAP financial measures under the current and prior definitions are included below.

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

Reconciliation of consolidated revenues to consolidated revenues in constant currency:

Current definition:

Constant Currency Change 2023 to 2024:

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Total revenues $ 1,228,413 $ 2,486 $ 1,230,899 $ 1,099,082 $ 981 $ 1,100,063

Prior definition:

Year Ended December 31, 2023 Year Ended December 31, 2022

Actual Impact of Foreign Exchange Constant Currency Actual Impact of Foreign Exchange Constant Currency

Subscriptions $ 1,080,307 $ (8,095) $ 1,072,212 $ 960,220 $ 50,030 $ 1,010,250

Perpetual licenses 46,038 (107) 45,931 43,377 3,269 46,646

Subscriptions and licenses 1,126,345 (8,202) 1,118,143 1,003,597 53,299 1,056,896

Services 102,068 538 102,606 95,485 4,102 99,587

Total revenues $ 1,228,413 $ (7,664) $ 1,220,749 $ 1,099,082 $ 57,401 $ 1,156,483

Reconciliation of revenues by geographic region to revenues by geographic region in constant currency:

Current definition:

Constant Currency Change 2023 to 2024:

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Total revenues $ 1,228,413 $ 2,486 $ 1,230,899 $ 1,099,082 $ 981 $ 1,100,063

Prior definition:

Year Ended December 31, 2023 Year Ended December 31, 2022

Actual Impact of Foreign Exchange Constant Currency Actual Impact of Foreign Exchange Constant Currency

Americas $ 650,926 $ (1,594) $ 649,332 $ 584,794 $ 5,218 $ 590,012

EMEA 353,550 (6,099) 347,451 312,804 33,524 346,328

APAC 223,937 29 223,966 201,484 18,659 220,143

Total revenues $ 1,228,413 $ (7,664) $ 1,220,749 $ 1,099,082 $ 57,401 $ 1,156,483

Reconciliation of cost of revenues to cost of revenues in constant currency:

Current definition:

Constant Currency Change 2023 to 2024:

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Total cost of revenues $ 266,083 $ 1,154 $ 267,237 $ 237,013 $ (98) $ 236,915

Prior definition:

Year Ended December 31, 2023 Year Ended December 31, 2022

Actual Impact of Foreign Exchange Constant Currency Actual Impact of Foreign Exchange Constant Currency

Cost of subscriptions and licenses $ 169,406 $ (149) $ 169,257 $ 147,578 $ 7,253 $ 154,831

Cost of services 96,677 823 97,500 89,435 4,932 94,367

Total cost of revenues $ 266,083 $ 674 $ 266,757 $ 237,013 $ 12,185 $ 249,198

Reconciliation of operating expense (income) to operating expense (income) in constant currency:

Current definition:

Reconciliation of operating expenses to operating expenses in constant currency:

Constant Currency Change 2023 to 2024:

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Total operating expenses $ 731,788 $ 3,289 $ 735,077 $ 653,457 $ (22) $ 653,435

Prior definition:

Year Ended December 31, 2023 Year Ended December 31, 2022

Actual Impact of Foreign Exchange Constant Currency Actual Impact of Foreign Exchange Constant Currency

Research and development $ 274,619 $ 2,491 $ 277,110 $ 257,856 $ 11,791 $ 269,647

Selling and marketing 224,336 615 224,951 195,622 9,274 204,896

General and administrative 180,738 (11) 180,727 174,647 4,979 179,626

Deferred compensation plan 13,580 — 13,580 (15,782) — (15,782)

Amortization of purchased intangibles 38,515 95 38,610 41,114 1,680 42,794

Total operating expenses $ 731,788 $ 3,190 $ 734,978 $ 653,457 $ 27,724 $ 681,181

Liquidity and Capital Resources:

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In addition to operating expenses, we also use cash to service our debt obligations, to pay quarterly dividends, to repurchase our Class B common stock and convertible debt, and for capital expenditures in support of our operations.

We also use cash to fund our acquisitions of software assets and businesses, and other investment activities, including our iTwin Ventures initiative which makes seed, early, and growth stage investments in technology companies with promising and emerging opportunities for infrastructure digital twin solutions potentially relevant to our business.

We also use cash to fund our acquisitions of software assets and businesses, and other investment activities.

During the years ended December 31, 2024 and 2023, we made cash repatriations to the U.S.

of approximately $138,000 and $93,000, respectively, from earnings generated by our foreign subsidiaries.

In 2023, the repatriations were used to supplement our domestic working capital requirements and to pay down our Credit Facility.

In 2022, the repatriations, along with available cash and borrowings under our Credit Facility, were used to fund the acquisition of PLS in January 2022.

In 2024 and 2023, the repatriations were primarily used to pay down our credit facility borrowings and to supplement our domestic working capital needs.

We believe that cash generated from operations, together with existing cash and cash equivalent balances, and external borrowings including available liquidity under the Credit Facility, will be sufficient to meet our domestic and international working capital and capital expenditure requirements.

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 U.S.

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 strategy of regularly acquiring and integrating specialized infrastructure engineering software businesses, 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, market acceptance of our products, competitive factors, our discretionary payments of dividends or repurchases of our Class B common stock and convertible debt, fund of our purchase commitments, currency fluctuations, and overall economic conditions, globally.

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 strategy of regularly acquiring and integrating specialized infrastructure engineering software businesses, 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, market acceptance of our products, competitive factors, our discretionary payments of dividends or repurchases of our Class B common stock and convertible debt, funding of our purchase commitments, currency fluctuations, 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 additional debt financing, including convertible debt, would result in additional debt service obligations.

Such debt instruments also could introduce new or modified covenants that might restrict our operations and/or our ability to pay dividends, consummate acquisitions, or otherwise pursue our business strategies.

Such debt instruments also could introduce new or modified covenants that might restrict our operations and/or our ability to pay dividends,

consummate acquisitions, or otherwise pursue our business strategies.

We cannot provide assurance that we could obtain additional financing on favorable terms or at all.

Cash Flow Activity

Cash Flows Activity

Year Ended December 31,

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Operating Activities

For the year ended December 31, 2023, compared to the prior year, net cash provided by operating activities was higher by $142,372 due to an increase in net income of $152,007 and an increase in net cash flows from the change in operating assets and liabilities of $112,542, partially offset by a net decrease in non‑cash adjustments of $122,177.

Both the increase in net income and the net decrease in non‑cash adjustments were impacted by the fourth quarter of 2023 internal legal entity restructuring and related intra-entity transactions as part of our continuing efforts to align intellectual property ownership with our business operating model.

The net impact of the internal legal entity restructuring was a net discrete tax benefit of $170,784.

For the year ended December 31, 2024, compared to the prior year, net cash provided by operating activities was higher by $18,596 due to a net increase in non‑cash adjustments of $185,856, partially offset by a decrease in net income of $92,354 and a decrease in net cash flows from the change in operating assets and liabilities of $74,906.

Both the decrease in net income and the net increase in non‑cash adjustments were impacted by the fourth quarter of 2023 internal legal entity restructuring and related intra-entity transactions as part of our continuing efforts to align intellectual property ownership with our business operating model.

The net impact of the internal legal entity restructuring was a net discrete tax benefit of $170,784 for the year ended December 31, 2023.

See Note 16 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K for additional information.

The increase in cash flows from the change in operating assets and liabilities was primarily due to changes in accounts receivable period over period due to timing of collections from customers, higher CSS deposits, and an increase in deferred revenues period over period.

In addition, we expect cash payments of approximately $12,500 for termination benefits to colleagues in connection with our fourth quarter of 2023 strategic realignment program by mid-2024.

See Note 21 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K for additional information related to realignment costs.

The decrease in net cash flows from the change in operating assets and liabilities was primarily due to the timing of collections on our receivables, the overall timing of tax payments year over year, and a decrease in deferred revenues.

Investing Activities

Net cash used in investing activities was lower by $709,623 for the year ended December 31, 2023, compared to the prior year, primarily due to lower acquisition related payments, as three acquisitions were completed in 2023 compared to six acquisitions, including our platform acquisition of PLS for $695,968 in 2022.

Net cash used in investing activities was higher by $82,763 for the year ended December 31, 2024, compared to the prior year, primarily due to higher acquisition related payments of $104,384, partially offset by lower purchases of property and equipment and investment in capitalized software of $10,956 and lower purchases of investments of $10,167.

We used available cash and borrowings under our 2017 Credit Facility to fund an acquisition in September 2024.

Financing Activities

Net cash used in financing activities was $359,074 for the year ended December 31, 2023, as compared to net cash provided by financing activities of $243,034 for the year ended December 31, 2022, primarily due to the net paydown of the Credit Facility of $258,569 in 2023 as compared to an increase in net borrowings under the Credit Facility of $340,598 in 2022.

Payments for shares acquired were lower during the year ended December 31, 2023 by $12,874, as compared to the prior year.

The year ended December 31, 2022 payments for shares acquired includes $28,250 of share repurchases under the BSY Stock Repurchase Program (the “Repurchase Program”), whereas no repurchases were made under the Repurchase Program during 2023.

Refer to the section titled “Stock Repurchases” below for further detail.

Payments of dividends were higher during the year ended December 31, 2023 by $24,263 as compared to the prior year, primarily due to an increase in our quarterly dividend per share to $0.05 from $0.03.

Net cash used in financing activities was lower by $69,224 for the year ended December 31, 2024, compared to the prior year, primarily due to lower net paydowns of the credit facilities of $111,856, partially offset by higher payments for shares acquired of $17,926, including shares repurchased under the BSY Stock Repurchase Program (the “Repurchase Program”), and higher dividend payments of $13,359, primarily due to an increase in our quarterly dividend per share to $0.06 in 2024 from $0.05 in 2023.

Long-Term Debt

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Total debt $ 1,388,088 $ 1,528,403

As of December 31, 2023, we had $757,822 available under the Credit Facility.

We were in compliance with all covenants in its Credit Facility, the 2026 Notes, and the 2027 Notes as of December 31, 2023.

On October 18, 2024, we entered into the Credit Facility, which provides us with a $1,300,000 revolving credit facility, including a $125,000 swingline loan and $125,000 in letters of credit.

The Credit Facility also provides us with a $500,000 “accordion” feature to increase the facility in the form of both revolving indebtedness and/or incremental term loans.

On October 18, 2024, we used borrowings under the Credit Facility to repay all indebtedness outstanding under the 2017 Credit Facility, including the outstanding senior secured term loan.

As of December 31, 2024, we had $1,164,535 available under the Credit Facility, and we were in compliance with all covenants under the Credit Facility, the 2026 Notes, and the 2027 Notes.

Any failure to comply with such covenants under the Credit Facility would prevent us from being able to borrow additional funds under the Credit Facility, and, as with any failure to comply with such covenants under the 2026 Notes and the 2027 Notes, could constitute a default that may cause all amounts outstanding to become due and immediately payable in full.

Our Credit Facility, 2026 Notes, and 2027 Notes are described in Note 10 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K.

Our credit facilities, 2026 Notes, and 2027 Notes are described in Note 10 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K.

Stock Repurchases

BSY Stock Repurchase Program

Our Board of Directors has authorized us to repurchase up to $200,000 of our Class B common stock and/or outstanding convertible senior notes through June 30, 2024 under the Repurchase Program.

We may use available working capital and cash provided by operations to make repurchases.

For the year ended December 31, 2023, we did not repurchase shares under the Repurchase Program.

For the year ended December 31, 2022, we repurchased 896,126 shares for $28,250, and $2,170 aggregate principal amount of our outstanding 2026 Notes for $1,998.

The timing, as well as the number and value of shares and/or notes repurchased under the Repurchase Program, will be determined at our discretion and will depend on a variety of factors, including our assessment of the intrinsic value of our shares, the market price of our Class B common stock and outstanding notes, general market and economic conditions, available liquidity, compliance with our debt and other agreements, and applicable legal requirements.

Our Board of Directors had authorized us to repurchase up to $200,000 of our Class B common stock and/or outstanding convertible senior notes through June 30, 2024 under the Repurchase Program.

This authorization under the Repurchase Program expired on June 30, 2024.

In March 2024, our Board of Directors approved an extension to the Repurchase Program authorizing us to repurchase up to $200,000 of our Class B common stock and/or outstanding convertible senior notes from June 30, 2024 through June 30, 2026.

We may use available working capital, cash provided by operating activities, and/or external borrowings including available liquidity under our Credit Facility to make repurchases.

During the year ended December 31, 2024, we repurchased 1,292,733 shares for $64,359 under the Repurchase Program.

During the year ended December 31, 2023, we did not make repurchases under the Repurchase Program.

The timing, as well as the number and value of shares and/or outstanding convertible senior notes repurchased under the Repurchase Program, will be determined at our discretion and will depend on a variety of factors, including our assessment of the intrinsic value of our shares, the market price of our Class B common stock and outstanding convertible senior notes, general market and economic conditions, available liquidity, compliance with our debt and other agreements, and applicable legal requirements.

Withholding Taxes on Certain Equity Awards

We have the right to require that certain equity awardees receive gross or net quantities of shares of our Class B Common Stock, including in connection with share issuances under the amended and restated Bentley Systems, Incorporated Bonus Pool Plan (the “Bonus Plan”) and distributions from the DCP.

We have the right to require that certain equity awardees receive gross or net quantities of shares of our Class B common stock, including distributions from the DCP and share issuances under the amended and restated Bentley Systems, Incorporated Bonus Pool Plan (the “Bonus Plan”).

In the case of a gross issuance or distribution, an awardee is required to reimburse promptly to us the cash required for his or her tax withholding amounts.

Conversely, under a net issuance or distribution, shares are withheld in consideration of remitting withholding taxes on behalf of an equity awardee, thereby requiring us to remit cash for the tax withholdings.

During the year ended December 31, 2024, we exercised our right to require that impacted equity awardees receive gross quantities of our Class B common stock.

During the year ended December 31, 2023, we allowed impacted equity awardees the option to receive net quantities of shares of our Class B common stock during the first, second, and third quarters, but exercised our right to require that these awardees receive gross quantities of our Class B common stock during the fourth quarter.

During the year ended December 31, 2022, we permitted impacted awardees to elect to receive net quantities of shares of our Class B common stock in the first quarter, but exercised our right to require that these awardees receive gross quantities of our Class B common stock during the second, third, and fourth quarters.

We will continue to evaluate whether share awards will be required to be received by awardees on a gross basis, or if net settlement may be elected by awardees.

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Our largest contractual obligations relate to our outstanding debt, which include convertible notes due in 2026 and 2027.

Our Credit Facility matures on October 18, 2029, subject to a “revolving maturity date” on the date that is 91 days prior to the maturity date of our outstanding convertible debt, unless on such date we meet certain liquidity requirements.

We typically fund and expect to continue to fund debt maturities and interest payments with cash flows generated from operations, existing cash and cash equivalents, or proceeds from additional financing.

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See Note 10 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K for additional information on our debt obligations.

We have non‑cancelable future cash purchase commitments for services related to the provisioning of our hosted software solutions and for other software costs.

We have non‑cancelable future cash purchase commitments for services related to cloud provisioning of our software solutions and for internal‑use software costs.

Our purchase obligations are in addition to amounts included in our consolidated balance sheets.

We have funded and expect to continue to be able to fund our purchase obligations with cash flows generated from operations or existing cash and cash equivalents.

We have funded and expect to continue to be able to fund our purchase obligations with cash flows generated from operations, existing cash and cash equivalents or revolving loan borrowings under the Credit Facility.

See Note 18 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K for additional information on our purchase obligations.

Our DCP obligations represent DCP participants’ holdings in phantom investment funds, which are classified as liabilities as they will be settled in cash upon eventual distribution.

We have funded and expect to continue to be able to fund our DCP obligations with cash flows generated from operations or existing cash and cash equivalents.

We have funded and expect to continue to be able to fund our DCP obligations with cash flows generated from operations, existing cash and cash equivalents, or revolving loan borrowings under the Credit Facility.

See Note 12 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K for additional information on our DCP obligations.

Our other future contractual obligations were related to leases (see Note 8), and contingent and non‑contingent consideration from acquisitions (see Note 4).

For information about those obligations, see the above referenced notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K.

Our other future contractual obligations are related to leases.

See Note 8 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K for additional information on our lease obligations.

Critical Accounting Estimates:

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Portfolio balancing exchange rights are included in Deferred revenues in the consolidated balance sheets.

Business Combinations

We allocate the fair value of the consideration transferred to the assets acquired and liabilities assumed, including trademarks, customer relationships, in‑process research and development, and acquired software and technology, based on their estimated fair values at the acquisition date.

Any residual purchase price is recorded as goodwill.

The purchase price allocation requires us to make significant estimates and assumptions, especially at the acquisition date, with respect to intangible assets.

Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

Examples of critical estimates used in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:

• future expected cash flows from total revenues and acquired developed technologies;

• the acquired company’s trade name and customer relationships as well as assumptions about the period of time the acquired trade name and customer relationships will continue to be used in our product portfolio;

• expected costs to develop the in-process research and development into commercially viable software and estimated cash flows from the projects when completed;

• discount rates used to determine the present value of estimated future cash flows.

These estimates are inherently uncertain and unpredictable, and if different estimates were used the purchase price for the acquisition could be allocated to the acquired assets and liabilities differently from the allocation that we have made.

In addition, unanticipated events and circumstances may occur, which may affect the accuracy or validity of such estimates, and, if such events occur, we may be required to record a charge against the value ascribed to an acquired asset or an increase in the amounts recorded for assumed liabilities.

Goodwill and Other Intangible Assets

Intangible assets arise from acquisitions and principally consist of goodwill, trademarks, customer relationships, in‑process research and development, and acquired software and technology.

Intangible assets, other than goodwill and in‑process research and development, are amortized on a straight‑line basis over their estimated useful lives, which range from three to ten years.

Intangible assets, other than goodwill and in‑process research and development, are amortized on a straight‑line basis over their estimated useful lives.

Goodwill consists of the excess of cost over the fair value of net assets acquired in business combinations.

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If it is determined that a quantitative assessment is required and the carrying amount exceeds its fair value, we will recognize goodwill impairment in the amount in which the carrying amount of the reporting unit exceeds its fair value, but not to exceed the carrying amount of goodwill within the reporting unit.

The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points in the process.

The value of our goodwill could also be impacted by future adverse changes including declines in our stock price, market capitalization, or cash flows, and slower growth rates in our industry.

There was no impairment of goodwill as a result of our annual impairment assessments conducted for the years ended December 31, 2024, 2023, or 2022.

Other Intangible Assets

Intangible assets other than goodwill are tested annually for impairment on October 1, or more frequently if events occur or circumstances change that would more likely than not reduce its fair value below its carrying amount.

In testing intangible assets other than goodwill for impairment, we may first qualitatively assess whether it is more likely than not (a likelihood of more than 50 percent) that an intangible asset impairment exists.

If it is determined that a quantitative assessment is required, we will evaluate the cash flows generated by the underlying asset, including estimated future operation results, trends, or other determinants of fair value.

If the total of the expected future undiscounted cash flows were less than the carrying amount of the asset, we would recognize an impairment charge to the extent the carrying amount of the asset exceeded its estimated fair value.

There was no impairment of intangible assets for the years ended December 31, 2024, 2023, or 2022.

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis