BENTLEY SYSTEMS INC 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our audited consolidated financial statements and notes thereto appearing in Part II, Item 8 of this Annual Report on Form 10‑K. In addition to historical information, this discussion contains 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 set forth in Part I, Item 1A. Risk Factors of this Annual Report on Form 10‑K. 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, geoprofessional, and plant engineering practitioners, their project delivery enterprises, and owner‑operators of infrastructure assets. We were founded in 1984 by the Bentley brothers and on September 25, 2020, we completed our 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% of the net infrastructure asset value of the global top 500 infrastructure owners based on the 2021 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 34% 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 14% of the global top 500 infrastructure owners’ net infrastructure asset value. We offer solutions for enterprises and professionals across the infrastructure lifecycle. Our Engineering Applications and Geoprofessional Applications support the breadth of engineering and geoprofessional disciplines and are primarily desktop applications for professional practitioners. Our project delivery and asset performance Enterprise systems are 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 Industry Solutions solve domain‑specific problems for owners of infrastructure assets, and the project delivery ecosystems that support these owners. Our cloud-native iTwin Platform solutions enable digital twin workflows, which can span project and asset lifecycles. 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. 50 We bring our offerings to market primarily through direct sales channels that generated approximately 92% of our 2021 total 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 37‑year history: Our sources of revenue growth, in order of magnitude and excluding the impact from acquisitions, come from the recurrence of existing subscriptions 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, 2021, subscriptions represented 84% of our total revenues, and together with certain services revenues that are recurring in nature and represented 2% of our total revenues, bring the proportion of our recurring revenues to 86% of our total revenues. The remaining 14% of our revenues were generated from the sale of perpetual licenses and the delivery of non‑recurring services. We have a highly‑diversified account base, with our largest account representing no more than 2.5% of our total revenues in 2021. Our 2021 total revenues were also diversified by account type, size, and geography. Additionally, we believe that we have a loyal account base, with over 70% of our 2021 total revenues from organizations that have been our accounts for over ten years. Between 2001 and 2021, our total revenues had an approximately 8% compound annual growth rate. 51 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 table below, 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. 52 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. 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 Blueprints, which are designed to achieve business outcomes through more efficient and effective use of our software. The E365 subscription offering was introduced during the fourth quarter of 2018. 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 Blueprints as recurring to ensure better business outcomes for our users. To the extent we succeed in transitioning subscribers to E365, we 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 Virtuoso subscriptions sold via our Virtuosity eStore for practitioner licenses. Virtuoso subscriptions are bundles with customizable training and expert consultation administered through “keys” or credits. 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 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 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. 53 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. 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. Certain of our fixed‑fee arrangements, including our Success Services offerings, are structured as subscription‑like, packaged offerings that are annually recurring in nature. Success Services are standard service offerings that provide a level of dedicated professional services above the standard technical support offered to all accounts as part of their SELECT or Enterprise agreement. 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. Year Ended December 31, 2021 2020 2019 Last twelve-months recurring revenues $ 834,150 $ 696,662 $ 631,097 Constant Currency: Annualized recurring revenues (“ARR”) growth rate 26 % 8 % 12 % Account retention rate 98 % 98 % 98 % (1) Recurring revenues dollar-based net retention rate 109 % 107 % 108 % (1) (1) On January 1, 2019, we adopted FASB 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. 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 services revenues in which the underlying contract is based on a fixed fee and contains automatic annual renewal provisions. 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 primarily 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 for the periods ended December 31, 2021, 2020, and 2019 compared to the last twelve‑months of the preceding twelve‑month period increased by $137,488, $65,565, and $44,631, respectively. This increase was primarily due to growth in ARR, which is primarily the result of 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 December 31, 2021, 2020, and 2019, 86%, 87%, and 86%, respectively, of our revenues were recurring revenues. 54 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”). 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 revenues as of the last day of the reporting period, and the annualized value of the last three months of recognized revenues for our contractually recurring consumption‑based software subscriptions with consumption measurement durations of less than one year. 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 38%, 36%, and 25% as of December 31, 2021, 2020, and 2019, respectively. Within our consumption‑measured ARR, the continuous uptake of our E365 subscription offering has introduced daily consumption‑measured ARR, representing 29% of total ARR as of December 31, 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 recurring revenues dollar‑based net retention rate, is a leading indicator of revenue growth. Our ARR as of December 31, 2021 was $921,218, calculated using the spot foreign exchange rates as of December 31, 2021. For the year ended December 31, 2021, our ARR growth rate was favorably impacted from the Seequent acquisition by 13%. 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 for the years ended December 31, 2021 and 2020 was calculated under Topic 606. For the year ended December 31, 2019, the account retention rate was calculated using revenues recognized pursuant to Topic 605 as we did not have all information that was necessary to calculate account retention rate pursuant to Topic 606. 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 for the years ended December 31, 2021 and 2020 was calculated under Topic 606. For the year ended December 31, 2019, the recurring revenues dollar‑based net retention rate was calculated using revenues recognized pursuant to Topic 605 as we did not have all information that was necessary to calculate recurring revenues dollar‑based net retention rate pursuant to Topic 606. 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 December 31, 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. Our calculation of these metrics may not be comparable to other companies with similarly‑titled metrics. 55 Non-GAAP Financial Measures: In addition to our results determined in accordance with U.S. GAAP, we also use the below non‑GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. Year Ended December 31, 2021 2020 2019 Adjusted EBITDA $ 324,948 $ 266,376 $ 188,537 Adjusted Net Income 266,940 192,812 135,357 Adjusted EBITDA. We define Adjusted EBITDA as net income adjusted for interest expense, net, provision (benefit) for income taxes, depreciation and amortization, stock‑based compensation, expense (income) relating to deferred compensation plan liabilities, acquisition expenses, realignment expenses, expenses associated with IPO, other non‑operating (income) 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, stock‑based compensation, expense (income) relating to deferred compensation plan liabilities, acquisition expenses, realignment expenses, expenses associated with IPO, other non‑operating (income) expense, net, the tax effect of the above adjustments to net income, 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 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. During the third quarter of 2021, we modified our definitions of Adjusted EBITDA and Adjusted Net Income to adjust for expense (income) relating to deferred compensation plan liabilities and amounts for all periods herein reflect application of the modified definition. 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. 56 Reconciliation of net income to Adjusted EBITDA: Year Ended December 31, 2021 2020 2019 Net income $ 93,192 $ 126,521 $ 103,096 Interest expense, net 12,491 7,476 8,199 (Benefit) provision for income taxes (3,448) 38,625 23,738 Depreciation and amortization (1) 52,793 36,117 32,160 Stock-based compensation (3) 48,152 32,114 8,091 Deferred compensation plan (4) 95,046 177 408 Acquisition expenses (5) 34,368 11,666 6,597 Realignment expenses (6) — 10,022 (584) Expenses associated with IPO (7) — 26,130 — Other (income) expense, net (8) (11,231) (24,946) 5,557 Loss from investment accounted for using the equity method, net of tax 3,585 2,474 1,275 Adjusted EBITDA $ 324,948 $ 266,376 $ 188,537 Reconciliation of net income to Adjusted Net Income: Year Ended December 31, 2021 2020 2019 Net income $ 93,192 $ 126,521 $ 103,096 Non-GAAP adjustments, prior to income taxes: Amortization of purchased intangibles and developed technologies (2) 34,001 20,721 18,731 Stock-based compensation (3) 48,152 32,114 8,091 Deferred compensation plan (4) 95,046 177 408 Acquisition expenses (5) 34,368 11,666 6,597 Realignment expenses (6) — 10,022 (584) Expenses associated with IPO (7) — 26,130 — Other (income) expense, net (8) (11,231) (24,946) 5,557 Total non-GAAP adjustments, prior to income taxes 200,336 75,884 38,800 Income tax effect of non-GAAP adjustments (30,173) (12,067) (7,814) Loss from investment accounted for using the equity method, net of tax 3,585 2,474 1,275 Adjusted Net Income $ 266,940 $ 192,812 $ 135,357 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 $7,020, $4,699, and $3,516 for the years ended December 31, 2021, 2020, and 2019, respectively, related to certain projects under our Accelerated Commercial Development Program (“ACDP”). 57 (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 $275, $388, and $723 for the years ended December 31, 2021, 2020, and 2019, respectively. Management finds it useful to exclude these 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) Stock‑based compensation . We exclude certain 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 FASB ASC Topic 718, Compensation—Stock Compensation , we believe excluding stock‑based compensation expenses allows investors to make meaningful comparisons between our recurring core business results of operations and those of other companies. (4) Deferred compensation plan . In August 2021, our board of directors approved an amendment to the Company’s unfunded Nonqualified Deferred Compensation Plan, as amended and restated, effective as of September 22, 2020 (the “DCP”), which offered to certain active executives in the DCP a one‑time, short‑term election to reallocate a limited portion of their DCP holdings from phantom shares of the Company’s Class B Common Stock into other DCP phantom investment funds. The offer to reallocate was subject to a proration mechanism which adjusted the aggregate elections to a maximum of 1,500,000 phantom shares of the Company’s Class B Common Stock. This one‑time reallocation opportunity was offered only to certain active executives (but not to Directors or Bentley family members) in order to encourage retention, as otherwise these executives could only have materially diversified their investments in Company equity (primarily held in the DCP) by voluntarily terminating employment to trigger DCP distributions. These executives in aggregate accordingly diversified 24% of their phantom shares of the Company’s Class B Common Stock. While DCP participants’ investments in phantom shares remain equity classified, as they will be settled in shares of Class B Common Stock upon eventual distribution, the amendment and elections resulted in a change to liability classification for the reallocated phantom investments, as they will be settled in cash upon eventual distribution. As a result, during the year ended December 31, 2021, we recognized a one‑time compensation charge of $90,721 to Deferred compensation plan expenses in the consolidated statements of operations to record the reallocated deferred compensation plan liabilities at their fair value. Deferred compensation plan liabilities are marked to market at the end of each reporting period, with changes in the liabilities recorded as an expense (income) to Deferred compensation plan in the consolidated statements of operations. 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. (5) 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 revenues from acquisitions that closed prior to 2021. The adjustment to acquired deferred revenues has no impact on our business or cash flow, but it does reduce reported U.S. GAAP revenues in the periods following an acquisition. 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. For the year ended December 31, 2021, $16,557 of our acquisition expenses related to the acquisition of Seequent. 58 (6) 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 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. (7) 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. (8) Other (income) expense, net . Primarily consists of foreign exchange (gains) losses of $(827), $(22,919), and $5,591 for the years ended December 31, 2021, 2020, and 2019, respectively. The foreign 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 (income) expense, net in the consolidated statements of operations. Intercompany finance transactions denominated in U.S. Dollars resulted in unrealized foreign exchange losses (gains) of $779, $(22,310), and $5,270 for the years ended December 31, 2021, 2020, and 2019, respectively. These U.S. Dollar denominated balances are being translated into their functional currencies at the rates in effect at the balance sheet date and are fully eliminated in consolidation. For the year ended December 31, 2021, other (income) expense, net includes a gain from the change in fair value of our interest rate swap of $9,770. For the year ended December 31, 2020, other (income) expense, net includes a gain from the change in fair value of our interest rate swap of $347 and a gain from the change in fair value of acquisition contingent consideration of $1,340. We exclude these charges because they are not reflective of ongoing business and results of operations. We believe it is useful for investors to understand the effects of these items on our total operating expenses. 59 Key Factors Impacting Comparability and Performance: Highlights for the year ended December 31, 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 year ended December 31, 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 $883,336 in cash, net of cash acquired, plus 3,141,342 shares of our Class B Common Stock. For the year ended December 31, 2021, we incurred $16,557 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. We incurred $15,065 of expenses in connection with the 2027 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 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. We incurred $18,055 of expenses in connection with the 2026 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 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 Credit Facility, 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. 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 December 22, 2021, we entered into the Fourth Amendment to the Credit Facility, which provided for a new $200,000 senior secured term loan with a maturity of November 15, 2025 (the “2021 Term Loan”). We incurred $540 of debt issuance costs related to the 2021 Term Loan. We used borrowings under the 2021 Term Loan to pay down borrowings under the swingline sub‑facility and revolving facility under the Credit Facility; 60 • In August 2021, our board of directors approved an amendment to the DCP, which offered to certain active executives in the DCP a one‑time, short‑term election to reallocate a limited portion of their DCP holdings from phantom shares of our Class B Common Stock into other DCP phantom investment funds. The offer to reallocate was subject to a proration mechanism which adjusted the aggregate elections to a maximum of 1,500,000 phantom shares of the Company’s Class B Common Stock. This one‑time reallocation opportunity was offered only to certain active executives (but not to Directors or Bentley family members) in order to encourage retention, as otherwise these executives could only have materially diversified their investments in Company equity (primarily held in the DCP) by voluntarily terminating employment to trigger DCP distributions. These executives in aggregate accordingly diversified 24% of their phantom shares of the Company’s Class B Common Stock. While DCP participants’ investments in phantom shares remain equity classified, as they will be settled in shares of Class B Common Stock upon eventual distribution, the amendment and elections resulted in a change to liability classification for the reallocated phantom investments, as they will be settled in cash upon eventual distribution. As a result, during the year ended December 31, 2021, we recognized a one‑time compensation charge of $90,721 to Deferred compensation plan expenses in the consolidated statements of operations to record the reallocated deferred compensation plan liabilities at their fair value. Subsequent to the one‑time reallocation, these diversified deferred compensation plan liabilities are marked to market at the end of each reporting period, with changes in the liabilities recorded as an expense (income) to Deferred compensation plan in the consolidated statements of operations; • 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 year ended December 31, 2021, we recorded $23,121 of stock‑based compensation expense related to this plan, as compared to $6,524 during the fourth quarter of 2020; and • Effective September 22, 2020, our board of directors and stockholders adopted and approved the Bentley Systems, Incorporated Global Employee Stock Purchase Plan (the “ESPP”). The ESPP has been 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 year ended December 31, 2021, we recorded $2,118 of stock‑based compensation expense related to this plan. Impact of foreign currency . A portion of our total revenues and operating expenses were derived from outside the U.S. and as such, were denominated in various foreign currencies, including most significantly: Euros, British Pounds, Australian Dollars, Canadian Dollars, Chinese Yuan Renminbi, and New Zealand Dollars. Our financial results are therefore affected by changes in foreign currency rates. In 2021, 47% of our total revenues were denominated in various foreign currencies. Correspondingly, in 2021, 42% of our total 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‑over‑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. 61 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 13 and six acquisitions for the years ended December 31, 2021 and 2020, respectively. Impact of COVID‑19 . 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. In response to the 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. We continue to monitor the global situation, with the health and safety of our colleagues and users as a top priority. Currently, the majority of our workforce remains remote due to COVID-19. Our business model is such that we have experienced minimal disruption to our ability to deliver our solutions to accounts. The COVID‑19 pandemic has had a modest impact on the usage of our solutions by our users. Throughout 2020 and 2021, usage rates fluctuated modestly when compared to the corresponding periods in the prior year. Usage declines have had a minimal impact on our recurring revenues, which are comprised primarily of longer term 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. Our services revenues have also been impacted as certain accounts have delayed new projects. Overall, while our rate of growth has been impacted, our revenues have continued to grow given the mission critical nature of our solutions. As a precaution in the COVID-19 environment, we have and continue to actively manage our spending. Actions taken during 2020 included efforts to 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 actions also included curtailment in variable compensation plans to align to COVID-19 pandemic related uncertainties. These actions have resulted in substantial cost savings during the pandemic, which are unlikely to be fully sustainable prospectively. For further discussion of the potential impact of COVID-19 on our business, see Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K. 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 services. Subscriptions SELECT subscriptions . We provide prepaid 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. 62 Enterprise subscriptions . We also provide Enterprise subscription offerings, which provide our largest accounts with complete and unlimited global access to our comprehensive portfolio of solutions. ELS provides access for a prepaid 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 Blueprints, which are designed to achieve business outcomes through more efficient and effective use of our software. The ELS and E365 offerings both contain a distinct term license component. ELS revenues are recognized as the distinct performance obligations are satisfied. E365 revenues are 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 and include our Virtuoso subscriptions sold via our Virtuosity eStore for practitioner licenses. Virtuoso subscriptions are bundles with customizable training and expert consultation administered through “keys” or credits. QTL subscriptions allow accounts to pay quarterly in arrears for license 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 users to access specific project or enterprise information and entitles users to certain functionality of our ProjectWise and AssetWise systems. Our standard offerings are usage based with monetization through our CSS program as described below. 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. Certain of our fixed‑fee arrangements, including our Success Services offerings, are structured as subscription‑like, packaged offerings that are annually recurring in nature. Success Services are standard service offerings that provide a level of dedicated professional services above the standard technical support offered to all accounts as part of their SELECT or Enterprise agreement. Revenues are recognized as services are performed. 63 Headcount-related costs For the years ended December 31, 2021, 2020, and 2019, approximately 80% of our aggregate cost of revenues, and research and development, selling and marketing, and general and administrative expenses were represented by what we refer to herein as “headcount-related” costs. These costs primarily include salaries, incentives, benefits, employment taxes, travel, and realignment of our colleagues, and third‑party personnel and related overhead. 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 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 and amortization of capitalized software costs, for providing training, implementation, configuration, and customization services to accounts. 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, incentives, and benefits, 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. In general, technological feasibility is 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. Under our ACDP (our structured approach to an in‑house business incubator function), we capitalize certain development costs related to certain projects 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 $6,608, $7,809, and $6,060 for the years ended December 31, 2021, 2020, and 2019, respectively. Additionally, total ACDP related amortization recorded in Costs of subscriptions and licenses was $7,020, $4,699, and $3,516 for the years ended December 31, 2021, 2020, and 2019, respectively. 64 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 continued 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 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 total 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. Deferred compensation plan . In August 2021, our board of directors approved an amendment to the DCP, which offered to certain active executives in the DCP a one‑time, short‑term election to reallocate a limited portion of their DCP holdings from phantom shares of the Company’s Class B Common Stock into other DCP phantom investment funds. The offer to reallocate was subject to a proration mechanism which adjusted the aggregate elections to a maximum of 1,500,000 phantom shares of the Company’s Class B Common Stock. This one‑time reallocation opportunity was offered only to certain active executives (but not to Directors or Bentley family members) in order to encourage retention, as otherwise these executives could only have materially diversified their investments in Company equity (primarily held in the DCP) by voluntarily terminating employment to trigger DCP distributions. These executives in aggregate accordingly diversified 24% of their phantom shares of the Company’s Class B Common Stock. While DCP participants’ investments in phantom shares remain equity classified, as they will be settled in shares of Class B Common Stock upon eventual distribution, the amendment and elections resulted in a change to liability classification for the reallocated phantom investments, as they will be settled in cash upon eventual distribution. As a result, during the year ended December 31, 2021, we recognized a one‑time compensation charge of $90,721 to Deferred compensation plan expenses in the consolidated statements of operations to record the reallocated deferred compensation plan liabilities at their fair value. Deferred compensation plan liabilities are marked to market at the end of each reporting period, with changes in the liabilities recorded as an expense (income) to Deferred compensation plan in the consolidated statements of operations. 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 initial public offering. 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 were expensed in the period incurred. 65 Interest expense, net Interest expense, net primarily represents interest associated with the Credit Facility, the 2026 Notes, and the 2027 Notes, amortization and write‑off of deferred 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. Other income (expense), net also includes the fair value valuation result of our interest rate swap and changes in fair value of acquisition contingent consideration. (Provision) benefit for income taxes (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. 66 Results of Operations: The following table sets forth selected consolidated statements of operations data for each of the periods indicated: Year Ended December 31, 2021 2020 2019 Revenues: Subscriptions $ 812,807 $ 679,273 $ 608,300 Perpetual licenses 53,080 57,382 59,693 Subscriptions and licenses 865,887 736,655 667,993 Services 99,159 64,889 68,661 Total revenues 965,046 801,544 736,654 Cost of revenues: Cost of subscriptions and licenses 124,321 95,803 71,578 Cost of services 92,218 71,352 72,572 Total cost of revenues 216,539 167,155 144,150 Gross profit 748,507 634,389 592,504 Operating expenses: Research and development 220,915 185,515 183,552 Selling and marketing 162,240 143,791 155,294 General and administrative 150,116 113,274 97,172 Deferred compensation plan 95,046 177 408 Amortization of purchased intangibles 25,601 15,352 14,213 Expenses associated with initial public offering — 26,130 — Total operating expenses 653,918 484,239 450,639 Income from operations 94,589 150,150 141,865 Interest expense, net ( 12,491 ) ( 7,476 ) ( 8,199 ) Other income (expense), net 11,231 24,946 ( 5,557 ) Income before income taxes 93,329 167,620 128,109 Benefit (provision) for income taxes 3,448 ( 38,625 ) ( 23,738 ) Loss from investment accounted for using the equity method, net of tax ( 3,585 ) ( 2,474 ) ( 1,275 ) Net income 93,192 126,521 103,096 Less: Net income attributable to participating securities ( 9 ) ( 234 ) ( 8 ) Net income attributable to Class A and Class B common stockholders $ 93,183 $ 126,287 $ 103,088 Per share information: Net income per share, basic $ 0.30 $ 0.44 $ 0.36 Net income per share, diluted $ 0.30 $ 0.42 $ 0.35 Weighted average shares, basic 305,711,345 289,863,272 284,625,642 Weighted average shares, diluted 314,610,814 299,371,129 293,796,707 67 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 Years Ended December 31, 2021 and 2020 Revenues Comparison Year Ended Constant December 31, Currency 2021 2020 Amount % % Revenues: Subscriptions $ 812,807 $ 679,273 $ 133,534 19.7 % 17.6 % Perpetual licenses 53,080 57,382 (4,302) (7.5) % (8.9) % Subscriptions and licenses 865,887 736,655 129,232 17.5 % 15.6 % Services 99,159 64,889 34,270 52.8 % 48.6 % Total revenues $ 965,046 $ 801,544 $ 163,502 20.4 % 18.2 % Total revenues increased by $163,502, or 20.4%, to $965,046 for the year ended December 31, 2021. This increase was primarily driven by improvements in our business performance and the impact from acquisitions in subscriptions 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 18.2% for the year ended December 31, 2021, as compared to the year ended December 31, 2020. • Subscriptions . For the year ended December 31, 2021, subscriptions revenues increased by $133,534, or 19.7%, as compared to the year ended December 31, 2020. This increase was driven primarily by improvements in our business performance, $51,557 related to our acquisition of Seequent, and the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies. On a constant currency basis, our subscriptions revenues increased by 17.6% for the year ended December 31, 2021 as compared to the year ended December 31, 2020. Our growth in subscriptions was primarily due to expansion within our existing accounts, growth of 2% attributable to new accounts exclusive of acquisitions, most notability smaller- and medium-sized accounts, and the acquisition of Seequent. The improvements in business performance for the year ended December 31, 2021 was led by our civil design, SYNCHRO , ProjectWise , and geoprofessional products. For the year ended December 31, 2021, the impact of the Seequent acquisition includes organic growth within their existing accounts compared to the prior periods. • Perpetual licenses . For the year ended December 31, 2021, perpetual licenses revenues decreased by $4,302, or 7.5%, as compared to the year ended December 31, 2020. This decrease was driven by a reduction in our business performance, partially offset by the impact of acquisitions and the 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 8.9% for the year ended December 31, 2021 as compared to the year ended December 31, 2020. 68 • Services. For the year ended December 31, 2021, services revenues increased by $34,270, or 52.8%, as compared to the year ended December 31, 2020. This increase was driven primarily by the impact of acquisitions of $30,013, as well as the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies. On a constant currency basis, our services revenues increased by 48.6% for the year ended December 31, 2021 as compared to the year ended December 31, 2020. For the year ended December 31, 2021, the acquisition impact is attributable to several digital integrator businesses acquired throughout 2020 and 2021. Business performance continued to be impacted by COVID‑19 related delays in new projects and the redeployment of some services colleagues to support Success Services of our E365 subscription offering. Revenues by Geographic Area Revenues are allocated to individual countries based upon the location of users. Revenues by geographic area are as follows: Comparison Year Ended Constant December 31, Currency 2021 2020 Amount % % Revenues by geographic area: Americas $ 483,087 $ 395,746 $ 87,341 22.1 % 21.4 % EMEA 300,123 254,036 46,087 18.1 % 14.2 % APAC 181,836 151,762 30,074 19.8 % 16.8 % Total revenues by geographic area $ 965,046 $ 801,544 $ 163,502 20.4 % 18.2 % • Americas. For the year ended December 31, 2021, revenues from the Americas increased by $87,341, or 22.1%, as compared to the year ended December 31, 2020. This increase was driven primarily by improvements in our business performance in subscriptions revenues and the impact from acquisitions in subscriptions and services revenues. On a constant currency basis, our revenues from the Americas increased by 21.4% for the year ended December 31, 2021 as compared to the year ended December 31, 2020. The constant currency growth in the Americas primarily reflects growth in recurring subscriptions revenues from our existing accounts in the U.S., the impact of the Seequent acquisition, and growth in services revenues in the U.S. and Canada from the acquisition of digital integrator businesses. • EMEA. For the year ended December 31, 2021, revenues from EMEA increased by $46,087, or 18.1%, as compared to the year ended December 31, 2020. On a constant currency basis, our revenues from EMEA increased by 14.2% for the year ended December 31, 2021 as compared to the year ended December 31, 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 subscriptions revenues in Europe. 69 • APAC. For the year ended December 31, 2021, revenues from APAC increased by $30,074, or 19.8%, as compared to the year ended December 31, 2020. This increase was driven primarily by improvements in our business performance in subscriptions revenues, the impact of the Seequent acquisition, and the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies. On a constant currency basis, our revenues from APAC increased by 16.8% for the year ended December 31, 2021 as compared to the year ended December 31, 2020. Excluding the impact of the Seequent acquisition, the constant currency growth was primarily due to expansion of our recurring subscriptions revenues in Australia, India, and China, net of attrition, for the year ended December 31, 2021. Cost of Revenues Comparison Year Ended Constant December 31, Currency 2021 2020 Amount % % Cost of subscriptions and licenses $ 124,321 $ 95,803 $ 28,518 29.8 % 27.3 % Cost of services 92,218 71,352 20,866 29.2 % 24.4 % Total cost of revenues $ 216,539 $ 167,155 $ 49,384 29.5 % 26.1 % For the year ended December 31, 2021, cost of revenues increased by $49,384, or 29.5%, to $216,539. 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 26.1% for the year ended December 31, 2021 as compared to the year ended December 31, 2020. For the year ended December 31, 2021, cost of subscriptions and licenses increased 29.8%, or 27.3% in constant currency, as compared to the year ended December 31, 2020. On a constant currency basis, this increase was substantially due to an increase in headcount‑related costs of approximately $20,200, primarily driven by the redeployment of certain colleagues to our User Success group in support of Success Services available to accounts under programs such as our E365 subscription offering. For the year ended December 31, 2021, cost of services increased by 29.2%, or 24.4% in constant currency, as compared to the year ended December 31, 2020. On a constant currency basis, this increase was substantially due to an increase in headcount‑related costs of approximately $15,800. The approximate $15,800 increase in headcount-related costs was primarily comprised of an increase in salaries and variable compensation costs of approximately $18,900, primarily driven by our digital integrator acquisitions, partially offset by a decrease in stock‑based compensation expense of approximately $1,700 and the realignment costs from the 2020 program of approximately $1,400. 70 Operating Expenses Comparison Year Ended Constant December 31, Currency 2021 2020 Amount % % Research and development $ 220,915 $ 185,515 $ 35,400 19.1 % 16.5 % Selling and marketing 162,240 143,791 18,449 12.8 % 10.1 % General and administrative 150,116 113,274 36,842 32.5 % 31.1 % Deferred compensation plan 95,046 177 94,869 * * Amortization of purchased intangibles 25,601 15,352 10,249 66.8 % 61.3 % Expenses associated with initial public offering — 26,130 (26,130) * * Total operating expenses $ 653,918 $ 484,239 $ 169,679 35.0 % 32.8 % * Not meaningful Research and development. For the year ended December 31, 2021, research and development expenses increased 19.1%, or 16.5% in constant currency, as compared to the year ended December 31, 2020. On a constant currency basis, this increase was primarily due to an increase in headcount-related costs of approximately $26,300. The approximate $26,300 increase in headcount-related costs was primarily comprised of an increase in salaries and variable compensation costs of approximately $34,400, 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 $7,400. Partially offsetting these increases in headcount-related costs is a decrease of approximately $14,700 in Bonus Plan related cash compensation due to the change in our Bonus Plan (see Note 11 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K), which allows participants within certain limitations to elect share delivery instead of cash compensation for their non-deferred incentive bonuses. Through the nine months ended September 30, 2020, non-deferred incentive bonuses earned under the Bonus Plan were paid in cash. The other component of the offsetting decrease in headcount-related costs is the realignment costs from the 2020 program of approximately $800. Selling and marketing. For the year ended December 31, 2021, selling and marketing expenses increased 12.8%, or 10.1% in constant currency, as compared to the year ended December 31, 2020. On a constant currency basis, this increase was primarily due to an increase in headcount-related costs of approximately $12,400. The approximate $12,400 increase in headcount-related costs was primarily comprised of an increase in salaries and variable compensation costs of approximately $19,200, primarily due to annual salary adjustments in 2021 combined with lower variable compensation costs in the prior period due to COVID‑19, partially offset by the realignment costs from the 2020 program of approximately $6,000 and a decrease in stock‑based compensation expense of approximately $800. General and administrative. For the year ended December 31, 2021, general and administrative expenses increased 32.5%, or 31.1% in constant currency, as compared to the year ended December 31, 2020. On a constant currency basis, this increase was primarily due to an increase in acquisition and other corporate initiatives expenses of approximately $17,200, primarily due to expenses related to the acquisition of Seequent, and an increase in headcount-related costs of approximately $15,000. The approximate $15,000 increase in headcount-related costs was primarily comprised of an increase in stock‑based compensation expense of approximately $12,300 and an increase in salaries and variable compensation costs of approximately $11,000, 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 $6,500 in Bonus Plan related cash compensation due to the change in our Bonus Plan as described above and the realignment costs from the 2020 program of approximately $1,800. 71 Deferred compensation plan . For the year ended December 31, 2021, deferred compensation plan expenses increased by $94,869 as compared to the year ended December 31, 2020. This increase was primarily attributable to a one‑time $90,721 compensation charge recognized during the year ended December 31, 2021 as discussed further below and an increase of $4,148 attributable to changes in the deferred compensation liabilities which are marked to market at the end of each reporting period and recorded as an expense (income). In August 2021, our board of directors approved an amendment to the DCP, which offered to certain active executives in the DCP a one‑time, short‑term election to reallocate a limited portion of their DCP holdings from phantom shares of the Company’s Class B Common Stock into other DCP phantom investment funds. The offer to reallocate was subject to a proration mechanism which adjusted the aggregate elections to a maximum of 1,500,000 phantom shares of the Company’s Class B Common Stock. This one‑time reallocation opportunity was offered only to certain active executives (but not to Directors or Bentley family members) in order to encourage retention, as otherwise these executives could only have materially diversified their investments in Company equity (primarily held in the DCP) by voluntarily terminating employment to trigger DCP distributions. These executives in aggregate accordingly diversified 24% of their phantom shares of the Company’s Class B Common Stock. While DCP participants’ investments in phantom shares remain equity classified, as they will be settled in shares of Class B Common Stock upon eventual distribution, the amendment and elections resulted in a change to liability classification for the reallocated phantom investments, as they will be settled in cash upon eventual distribution. As a result, during the year ended December 31, 2021, we recognized a one‑time compensation charge of $90,721 to Deferred compensation plan expenses in the consolidated statements of operations to record the reallocated deferred compensation plan liabilities at their fair value. Amortization of purchased intangibles. For the year ended December 31, 2021, amortization of purchased intangibles increased by 66.8%, or 61.3% in constant currency, as compared to the year ended December 31, 2020. On a constant currency basis, this increase was primarily attributable to amortization from recently acquired purchased intangibles. Expenses associated with initial public offering. For the year ended December 31, 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 were expensed in the period incurred. 72 Interest Expense, Net Year Ended December 31, 2021 2020 Interest expense $ (12,797) $ (7,913) Interest income 306 437 Interest expense, net $ (12,491) $ (7,476) Year Ended December 31, 2021 2020 Bank credit facility $ (3,448) $ (5,680) Term loans (117) (502) Interest rate swap (1,270) (696) Convertible senior notes, coupon interest (1,899) — Amortization and write-off of deferred debt issuance costs (5,955) (985) Other, net 198 387 Interest expense, net $ (12,491) $ (7,476) For the year ended December 31, 2021, interest expense, net increased from the year ended December 31, 2020 primarily due to the increase in amortization and write‑off of deferred debt issuance costs and an increase in interest expense in connection with the convertible senior notes, partially offset by a lower outstanding average balance under the Credit Facility. Other Income, Net Year Ended December 31, 2021 2020 Foreign exchange gain $ 827 $ 22,919 Other income, net 10,404 2,027 Total other income, net $ 11,231 $ 24,946 For the years ended December 31, 2021 and 2020, total other income, net consists of foreign exchange gains of $827 and $22,919, respectively. The foreign exchange gains derive primarily from U.S. Dollar denominated cash and cash equivalents, accounts receivable, and intercompany balances held by foreign subsidiaries. For the years ended December 31, 2021 and 2020, intercompany finance transactions denominated in U.S. Dollars resulted in unrealized foreign exchange (losses) gains of $(779) and $22,310, respectively. For the year ended December 31, 2021, other income, net includes a gain from the change in fair value of our interest rate swap of $9,770. For the year ended December 31, 2020, other income, net includes a gain from the change in fair value of our interest rate swap of $347 and a gain from the change in fair value of acquisition contingent consideration of $1,340. 73 (Benefit) Provision for Income Taxes The income tax provisions for the years ended December 31, 2021 and 2020 were based on the effective income tax rates for those periods presented. For the years ended December 31, 2021 and 2020, we recognized an aggregate consolidated income tax (benefit) expense of $(3,448) and $38,625, respectively, for U.S. domestic and foreign income taxes. For the years ended December 31, 2021 and 2020, we recorded discrete tax benefits of $49,031 and $8,644, respectively, associated with stock‑based compensation. The effective income tax rate of (3.7)% on Income before income taxes of $93,329 for the year ended December 31, 2021 was lower than the effective income tax rate of 23.0% on Income before income taxes of $167,620 for the year ended December 31, 2020 primarily due to significant windfall tax benefits from stock‑based compensation, partially offset by the impact from officer compensation limitation provisions. Net Income Year Ended December 31, 2021 2020 Net income $ 93,192 $ 126,521 For the year ended December 31, 2021, net income decreased by $33,329 compared to the year ended December 31, 2020. The changes are due to the factors described above. Adjusted EBITDA and Adjusted Net Income Year Ended December 31, 2021 2020 Adjusted EBITDA $ 324,948 $ 266,376 Adjusted Net Income $ 266,940 $ 192,812 For the year ended December 31, 2021, Adjusted EBITDA increased by $58,572 compared to the year ended December 31, 2020. For the years ended December 31, 2021 and 2020, Adjusted EBITDA as a percentage of total revenues was 33.7% and 33.2%, respectively. For the year ended December 31, 2021, Adjusted Net Income increased by $74,128 compared to the year ended December 31, 2020. For the years ended December 31, 2021 and 2020, Adjusted Net Income as a percentage of total revenues was 27.7% and 24.1%, 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‑GAAP Financial Measures.” 74 Comparison of the Years Ended December 31, 2020 and 2019 Revenues Comparison Year Ended Constant December 31, Currency 2020 2019 Amount % % Revenues: Subscriptions $ 679,273 $ 608,300 $ 70,973 11.7 % 11.0 % Perpetual licenses 57,382 59,693 (2,311) (3.9) % (4.6) % Subscriptions and licenses 736,655 667,993 68,662 10.3 % 9.6 % Services 64,889 68,661 (3,772) (5.5) % (5.7) % Total revenues $ 801,544 $ 736,654 $ 64,890 8.8 % 8.2 % Total revenues increased by $64,890, or 8.8%, to $801,544 for the year ended December 31, 2020. For the year ended December 31, 2020, the increase was driven by improvements in our organic performance of $26,757, the impact from acquisitions of $33,463, and the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies of $4,670. On a constant currency basis, our revenues increased by 8.2% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. • Subscriptions . For the year ended December 31, 2020, subscriptions revenues increased by $70,973, or 11.7%, as compared to the year ended December 31, 2019. This increase was driven primarily by improvements in our organic performance of $52,012, and to a lesser extent, the impact from acquisitions of $14,841, as well as the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies of $4,120. On a constant currency basis, our subscriptions revenues increased by 11.0% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. For the year ended December 31, 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 107% and approximately 2% of the increase was attributed to new accounts. Approximately 50% of our organic performance expansion was driven by ProjectWise and civil design products for the year ended December 31, 2020. • Perpetual licenses . For the year ended December 31, 2020, perpetual licenses revenues decreased by $2,311, or 3.9%, as compared to the year ended December 31, 2019. This decrease was driven by a reduction in our organic performance of $4,427, partially offset by the impact from acquisitions of $1,706, as well as the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies of $410. On a constant currency basis, our perpetual licenses revenues decreased by 4.6% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. We observed a decrease in organic performance for the year ended December 31, 2020 as certain accounts delayed purchase decisions or shifted spend to subscription solutions due to COVID‑19. • Services. For the year ended December 31, 2020, services revenues decreased by $3,772, or 5.5%, as compared to the year ended December 31, 2019. This decrease was driven primarily by a reduction in our organic performance of $20,828, partially offset by the impact from acquisitions of $16,916, as well as the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies of $140. On a constant currency basis, our services revenues decreased by 5.7% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. 75 For the year ended December 31, 2020, the decrease in organic performance was primarily due to the winding down or completion of several larger services projects during 2019 and 2020, COVID‑19 related delays of new projects while social distancing measures are in place, the inclusion of learning benefits in our subscription offerings, and the partial redeployment of our services colleagues to support Success Blueprints of our E365 subscription offering. 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 Year Ended Constant December 31, Currency 2020 2019 Amount % % Revenues by geographic area: Americas $ 395,746 $ 356,331 $ 39,415 11.1 % 11.3 % EMEA 254,036 236,602 17,434 7.4 % 5.8 % APAC 151,762 143,721 8,041 5.6 % 4.4 % Total revenues by geographic area $ 801,544 $ 736,654 $ 64,890 8.8 % 8.2 % • Americas. For the year ended December 31, 2020, revenues from the Americas increased by $39,415, or 11.1%, as compared to the year ended December 31, 2019. This increase was driven primarily by improvements in our organic performance of $18,002 and the impact from acquisitions of $22,226, partially offset by negative foreign currency effects due to a stronger U.S. Dollar relative to our other functional currencies of $813. On a constant currency basis, our revenues from the Americas increased by 11.3% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. The increase in organic performance was primarily due to expansion of our recurring subscription revenues from our existing accounts in the U.S. and Canada. Approximately 30% of our subscription‑related organic performance expansion was driven by ProjectWise for the year ended December 31, 2020. • EMEA. For the year ended December 31, 2020, revenues from EMEA increased by $17,434, or 7.4%, as compared to the year ended December 31, 2019. This increase was driven by improvements in our organic performance of $3,168, the impact from acquisitions of $10,554, and the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies of $3,712. On a constant currency basis, our revenues from EMEA increased by 5.8% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. The increase in organic performance was primarily due to expansion of our recurring subscription revenues throughout the region. Approximately 50% of our subscription‑related organic performance expansion was driven by ProjectWise for the year ended December 31, 2020. • APAC. For the year ended December 31, 2020, revenues from APAC increased by $8,041, or 5.6%, as compared to the year ended December 31, 2019. This increase was driven by improvements in our organic performance of $5,587 and, to a lesser extent, the impact from acquisitions of $683 and the positive foreign currency effects due to a weaker U.S. Dollar relative to our other functional currencies of $1,771. On a constant currency basis, our revenues from APAC increased by 4.4% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. 76 For the year ended December 31, 2020, the increase in organic performance was primarily due to expansion of our recurring subscription revenues from our existing accounts in Australia, China, and South East Asia. Approximately 40% of our subscription‑related organic performance expansion was driven by ProjectWise and Offshore Structural Analysis products. Cost of Revenues Comparison Year Ended Constant December 31, Currency 2020 2019 Amount % % Cost of subscriptions and licenses $ 95,803 $ 71,578 $ 24,225 33.8 % 32.9 % Cost of services 71,352 72,572 (1,220) (1.7) % (1.5) % Total cost of revenues $ 167,155 $ 144,150 $ 23,005 16.0 % 15.6 % For the year ended December 31, 2020, cost of revenues increased by $23,005, or 16.0%, to $167,155. This increase was driven primarily by an increase in cost of subscriptions and licenses, partially offset by lower cost of services relative to the prior period. On a constant currency basis, total cost of revenues increased by 15.6% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. For the year ended December 31, 2020, cost of subscriptions and licenses increased 33.8%, or 32.9% in constant currency, as compared to the year ended December 31, 2019. On a constant currency basis, this increase was primarily due to an increase in headcount‑related costs, excluding stock‑based compensation expense, of approximately $8,500, an increase in stock‑based compensation expense of approximately $800, an increase in hosting costs of approximately $8,000, an increase in amortization expense for software and technology of approximately $2,200, and an increase in facility‑related costs of approximately $600. For the year ended December 31, 2020, cost of services decreased by 1.7%, or 1.5% in constant currency, as compared to the year ended December 31, 2019. On a constant currency basis, the decrease was primarily due to a decrease in headcount‑related costs, excluding stock‑based compensation expense and incremental realignment costs from the 2020 program, of approximately $1,500 and a decrease in amortization of previously capitalized costs related to certain professional services projects of approximately $4,600, partially offset by an increase in stock‑based compensation expense of approximately $2,400, incremental realignment costs from the 2020 program of approximately $1,400, and an increase in facility‑related costs of approximately $1,400. 77 Operating Expenses Comparison Year Ended Constant December 31, Currency 2020 2019 Amount % % Research and development $ 185,515 $ 183,552 $ 1,963 1.1 % 1.0 % Selling and marketing 143,791 155,294 (11,503) (7.4) % (7.3) % General and administrative 113,274 97,172 16,102 16.6 % 16.0 % Deferred compensation plan 177 408 (231) (56.6) % (56.6) % Amortization of purchased intangibles 15,352 14,213 1,139 8.0 % 7.3 % Expenses associated with initial public offering 26,130 — 26,130 * * Total operating expenses $ 484,239 $ 450,639 $ 33,600 7.5 % 7.4 % * Not meaningful Research and development . For the year ended December 31, 2020, research and development expenses increased 1.1%, or 1.0% in constant currency, as compared to the year ended December 31, 2019. On a constant currency basis, the increase was primarily due to an increase in stock‑based compensation expense of approximately $8,900 and incremental realignment costs from the 2020 program of approximately $800, partially offset by a decrease in headcount-related costs, excluding stock‑based compensation expense and incremental realignment costs from the 2020 program, of approximately $7,300 due to COVID‑19 related modification to colleague travel and variable compensation plans. Selling and marketing. For the year ended December 31, 2020, selling and marketing expenses decreased 7.4%, or 7.3% in constant currency, as compared to the year ended December 31, 2019. On a constant currency basis, this decrease was primarily due to a decrease in headcount-related costs, excluding stock‑based compensation expense and incremental realignment costs from the 2020 program, of approximately $16,700 due to COVID‑19 related modification to colleague travel and variable compensation plans and a reduction in promotional costs of $5,000, 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 $4,400 and incremental realignment costs from the 2020 program of approximately $6,000. General and administrative. For the year ended December 31, 2020, general and administrative expenses increased 16.3%, or 16.0% in constant currency, as compared to the year ended December 31, 2019. On a constant currency basis, the increase was primarily due to an increase in headcount-related costs, excluding stock‑based compensation expense and incremental realignment costs from the 2020 program, of approximately $4,000, an increase in stock‑based compensation expense of approximately $8,100, incremental realignment costs from the 2020 program of approximately $1,800, and an increase in acquisition and other corporate initiatives expenses of $2,300. Deferred compensation plan . For the year ended December 31, 2020, deferred compensation plan expenses decreased by $231, or 56.6%, as compared to the year ended December 31, 2019. This decrease was attributable to changes in the deferred compensation liabilities which are marked to market at the end of each reporting period and recorded as an expense (income). Amortization of purchased intangibles. For the year ended December 31, 2020, amortization of purchased intangibles increased by 8.0%, or 7.3% in constant currency, as compared to the year ended December 31, 2019. The increase was primarily attributable to acquisitions that closed in 2020. 78 Expenses associated with initial public offering. For the year ended December 31, 2020, expenses associated with IPO included 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 were expensed in the period incurred. Interest Expense, Net Year Ended December 31, 2020 2019 Interest expense $ (7,913) $ (9,731) Interest income 437 1,532 Interest expense, net $ (7,476) $ (8,199) Year Ended December 31, 2020 2019 Bank credit facility $ (5,680) $ (8,971) Term loan (502) — Interest rate swap (696) — Amortization and write-off of deferred debt issuance costs (985) (553) Other, net 387 1,325 Interest expense, net $ (7,476) $ (8,199) For the year ended December 31, 2020, net interest expense decreased from the year ended December 31, 2019 primarily due to a lower average interest rate, partially offset by a higher outstanding average balance under the Credit Facility, which includes the term loan of $125,000 we entered into on September 2, 2020 via the First Amendment to the Credit Facility (the “2020 Term Loan”) and subsequently repaid in November 2020. Other Income (Expense), Net Year Ended December 31, 2020 2019 Foreign exchange gain (loss) $ 22,919 $ (5,591) Other income, net 2,027 34 Total other income (expense), net $ 24,946 $ (5,557) For the years ended December 31, 2020 and 2019, other income (expense), net primarily consists of foreign exchange gains (losses) of $22,919 and $(5,591), respectively. The foreign exchange gains (losses) derive primarily from U.S. Dollar denominated cash and cash equivalents, accounts receivable, and intercompany balances held by foreign subsidiaries. For the years ended December 31, 2020 and 2019, intercompany finance transactions denominated in U.S. Dollars resulted in unrealized foreign exchange gains (losses) of $22,310 and $(5,270), respectively. For the year ended December 31, 2020, other income, net also includes a gain from the change in fair value of our interest rate swap of $347 and a gain from the change in fair value of acquisition contingent consideration of $1,340. 79 (Provision) Benefit for Income Taxes The income tax provisions for the years ended December 31, 2020 and 2019 were based on the effective income tax rates applicable for those periods. For the years ended December 31, 2020 and 2019, we recognized an aggregate consolidated income tax expense of $38,625 and $23,738, respectively, for U.S. domestic and foreign income taxes. For the years ended December 31, 2020 and 2019, we recorded a discrete tax benefit of $8,644 and $2,940, respectively, associated with stock‑based compensation. The effective income tax rate of 23.0% for the year ended December 31, 2020 was higher than the effective income tax rate of 18.5% for the year ended December 31, 2019 primarily due to officer compensation limitation provisions resulting from our IPO, which went effective during the third quarter of 2020, and the non‑deductibility of expenses associated with our IPO, partially offset by increased discrete windfall tax benefits from stock‑based compensation. Net Income Year Ended December 31, 2020 2019 Net income $ 126,521 $ 103,096 For the year ended December 31, 2020, net income increased by $23,425, or 22.7%, compared to the year ended December 31, 2019. The changes are due to the factors described above. Adjusted EBITDA and Adjusted Net Income Year Ended December 31, 2020 2019 Adjusted EBITDA $ 266,376 $ 188,537 Adjusted Net Income $ 192,812 $ 135,357 For the year ended December 31, 2020, Adjusted EBITDA increased by $77,839 compared to the year ended December 31, 2019. For the years ended December 31, 2020 and 2019, Adjusted EBITDA as a percentage of total revenues was 33.2% and 25.6%, respectively. For the year ended December 31, 2020, Adjusted Net Income increased by $57,455 compared to the year ended December 31, 2019. For the years ended December 31, 2020 and 2019, Adjusted Net Income as a percentage of total revenues was 24.1% and 18.4%, 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‑GAAP Financial Measures.” 80 Liquidity and Capital Resources: Our primary source of operating cash is from the sale 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 pay quarterly dividends, to service our debt obligations, and for capital expenditures in support of our operations. We also use cash to fund our growth initiatives, which include acquisitions of software assets and businesses, and other investment activities of BSY Investments , including iTwin Ventures for which, over a period of approximately 5 years, we expect to invest up to $100 million of corporate venture capital funding for seed, early, and growth stage technology companies with promising and emerging opportunities for infrastructure digital twin solutions strategically relevant to our business. 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 U.S. As of December 31, 2021 and 2020, 48% and 94%, respectively, of our total cash and cash equivalents were located outside of the U.S. We intend to continue to permanently reinvest these funds outside of the U.S. 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 U.S. 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, market acceptance of our products, competitive factors, 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 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 provide assurance that we could obtain additional financing on favorable terms or at all. 81 Cash and cash 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: December 31, 2021 2020 Cash and cash equivalents: Held domestically $ 170,267 $ 7,861 Held by foreign subsidiaries 159,070 114,145 Total cash and cash equivalents $ 329,337 $ 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 other comprehensive loss on our consolidated balance sheets. Bank Credit Facility 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. 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 June 22, 2021, we entered into the Third Amendment to the Credit Facility, which increased the aggregate amount of approved convertible debt to permit the issuance and sale of additional convertible senior notes. See the section titled “—Convertible Senior Notes—2027 Notes” below. On December 22, 2021, we entered into the Fourth Amendment to the Credit Facility, which provided for a new $200,000 senior secured term loan with a maturity of November 15, 2025 and included certain other amendments. The 2021 Term Loan requires principal repayment at the end of each calendar quarter. Beginning with March 31, 2022 and ending with December 31, 2023, we are required to repay $1,250 per quarter. Beginning with March 31, 2024 and ending with the last such date prior to the maturity date, we are required to repay $2,500 per quarter. We incurred $540 of debt issuance costs related to the 2021 Term Loan. As of December 31, 2021, $45 of the transaction costs were recorded in Accruals and other current liabilities in the consolidated balance sheet. We used borrowings under the 2021 Term Loan to pay down borrowings under the swingline sub‑facility and revolving facility under the Credit Facility. Under the 2021 Term Loan, we may make either Euro currency or non-Euro currency interest rate elections. Interest on the Euro currency borrowings bear a base interest rate of LIBOR, plus a spread ranging from 100 basis points (“bps”) to 200 bps as determined by our net leverage ratio. Under the non-Euro currency elections, the 2021 Term Loan bears a base interest rate of the 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 0 bps to 100 bps as determined by our net leverage ratio. 82 On September 2, 2020, we entered into the First Amendment to the Credit Facility, which provided a new 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 to the net proceeds from any underwritten public offering by us, which prepayment shall be applied, first, to the 2020 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 2020 Term Loan and under the revolving facility under the Credit Facility to pay a special dividend declared by our board of directors on August 28, 2020. We incurred $432 of debt issuance costs related to the 2020 Term Loan. In November 2020, we used a portion of the net proceeds from our follow‑on public offering to repay the 2020 Term Loan. See Notes 10 and 13 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K. In addition to the senior secured revolving loan facility, the Credit Facility also provides up to $50,000 of letters of credit and other incremental borrowings subject to availability, including a $85,000 U.S. Dollar swingline sub‑facility and a $200,000 incremental “accordion” sub‑facility. We had $150 of letters of credit and surety bonds outstanding as of December 31, 2021 and 2020. As of December 31, 2021 and 2020, we had $849,850 and $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 bear a base interest rate of the London Interbank Offered Rate (“LIBOR”) plus a spread ranging from 125 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 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 25 bps to 125 bps as determined by our net leverage ratio. In addition, a commitment fee for the unused Credit Facility ranges from 20 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 net leverage ratios. As of December 31, 2021 and 2020, we were in compliance with all covenants in our Credit Facility. Interest rate risk associated with the Credit Facility is managed through an interest rate swap which we executed on March 31, 2020. The interest rate swap has an effective date of April 2, 2020 and a termination date of April 2, 2030. Under the terms of the interest rate 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 interest rate swap as either an asset or a liability in the consolidated balance sheets 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 December 31, 2021 and 2020, we recorded a swap related asset at fair value of $10,117 and $347, respectively, in Other assets in the consolidated balance sheets. The weighted average interest rate under the Credit Facility was 2.03%, 1.92%, and 3.47% for the years ended December 31, 2021, 2020, and 2019, respectively. 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 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. 83 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. 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. 84 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 over the term of the 2027 Notes. The effective interest rate for the 2027 Notes is 0.864%. As of December 31, 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 December 31, 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. 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. 85 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 discussed, we 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 over the term of the 2026 Notes. The effective interest rate for the 2026 Notes is 0.658%. 86 As of December 31, 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 December 31, 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 Year Ended December 31, 2021 and 2020 The following table summarizes our cash flow activities for the years ended December 31, 2021 and 2020: Year Ended December 31, 2021 2020 Net Cash Provided By (Used In): Operating activities $ 288,024 $ 258,340 Investing activities (1,056,603) (117,333) Financing activities 982,582 (136,511) Operating activities Net cash provided by operating activities was $288,024 for the year ended December 31, 2021. Compared to the prior year, net cash provided by operating activities was higher by $29,684 due to a net increase in non‑cash adjustments of $22,933 and a net increase in net cash flows from the change in operating assets and liabilities of $40,080, partially offset by a decrease in net income of $33,329. The net increase in cash flows from the change in operating assets and liabilities was primarily due to the increase in deferred compensation plan liabilities (as previously discussed above), partially offset by an increase in accounts receivable due to revenue growth and the timing of collections from accounts. 87 For the year ended December 31, 2020, net cash provided by operating activities was $258,340 due to net income of $126,521 increased by $60,747 of non‑cash adjustments and $71,072 from changes in operating assets and liabilities. Investing activities Net cash used in investing activities was $1,056,603 for the year ended December 31, 2021, primarily due to $17,539 related to purchases of property and equipment and investment in capitalized software and $1,034,983 in acquisition related payments, net of cash acquired. For the year ended December 31, 2020, net cash used in investing activities was $117,333, primarily due to $16,447 related to purchases of property and equipment and investment in capitalized software and $93,032 in acquisition related payments, net of cash acquired. Financing activities Net cash provided by financing activities was $982,582 for the year ended December 31, 2021. Compared to the prior year, net cash provided by financing activities increased by $1,119,093, primarily due to the net proceeds from the convertible senior notes of $1,233,377 in 2021 and a decrease in payments for dividends of $389,250, partially offset by $294,429 of proceeds from our follow‑on public offering, net of expenses, in 2020, a decrease in net borrowings of $58,745 under the Credit Facility, and the purchase of capped call options of $51,605 in 2021. For the year ended December 31, 2020, net cash used in financing activities was $136,511, primarily due to payments of dividends of $422,646, partially offset by $294,429 of proceeds from our follow‑on public offering, net of expenses. Subsequent Event after December 31, 2021 On January 31, 2022, we completed the acquisition of Power Line Systems, a leader in software for the design of overhead electric power transmission lines and their structures, for approximately $ 700,000 in cash, net of cash acquired, and subject to customary adjustments including for working capital. We used readily available cash and borrowings under our bank credit facility to fund the transaction. The acquisition is not expected to be material to our consolidated statements of operations. The acquisition is expected to be material to our financial position and cash flows. Contractual Obligations and Other Commitments: As of December 31, 2021, our future contractual obligations were related to debt (see Note 10), leases (see Note 8), purchase obligations (see Note 18), deferred compensation plan liabilities (see Note 12), 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, which are incorporated by reference into this section. As of December 31, 2021, our purchase obligations were $50,329, with $34,889 expected to be paid within one year and $15,440 thereafter. Purchase obligations include the non‑cancelable future cash purchase commitment for services related to the provisioning of our hosted software solutions. Our purchase obligations are in addition to amounts included in current liabilities and prepaid expenses in our consolidated balance sheet. As noted above, on January 31, 2022, we completed the acquisition of Power Line Systems for approximately $ 700,000 in cash, net of cash acquired, and subject to customary adjustments including for working capital. We used readily available cash and borrowings under our bank credit facility to fund the transaction. 88 Critical Accounting Policies and 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 consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K. 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 believe that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements. Revenue recognition . We recognize revenue in accordance with Topic 606. For a full description of our revenue accounting policy, see Note 1 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K. We generate revenues from subscriptions, perpetual licenses, and services. Our 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, we account 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 we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount that should be allocated based on the relative SSP of the various products and services. Our SELECT agreement provides users with perpetual licenses a right to exchange software for other eligible perpetual licenses on an annual basis upon renewal. We refer to this option as portfolio balancing and 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. We recognize the associated revenue upon election or when the portfolio balancing right expires. This right is included in the initial and subsequent renewal terms and we reestablish the revenue deferral for the material right upon the beginning of the renewal term. 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 and deferred revenue obligations. 89 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 sales, maintenance agreements, 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; and • 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, and acquired software and technology. Intangible assets, other than goodwill, are amortized on a straight‑line basis over their estimated useful lives, which range from three to ten years. Goodwill consists of the excess of cost over the fair value of net assets acquired in business combinations. Goodwill is not amortized. Instead, it is tested annually for impairment, or more frequently if events occur or circumstances change that would more likely than not reduce its fair value below its carrying amount. We operate as a single reporting unit. In testing for goodwill impairment, we may first qualitatively assess whether it is more likely than not (a likelihood of more than 50 percent) that a goodwill impairment exists. If it is determined that a quantitative assessment is required, we will recognize goodwill impairment as the difference between the carrying amount of the reporting unit and it’s fair value, but not to exceed the carrying amount of goodwill within the reporting unit. Based upon our most recent annual impairment assessment completed as of October 1, 2021, there were no indicators of impairment, and no impairment losses were recorded. There was no impairment of goodwill as a result of our annual impairment assessments conducted for the years ended December 31, 2021, 2020, and 2019. Income taxes . 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. Under this method, deferred tax assets and liabilities are determined based on net operating loss carryforwards, credit carryforwards, and temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the items are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period of the enactment date. We record net deferred tax assets to the extent we believe the assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial operations. In the event we determine that we will not be able to realize deferred income tax assets in the future in excess of our net recorded amount, an adjustment to the valuation allowance would be recorded that would increase the provision for income taxes. 90 We perform a quarterly assessment of the recoverability of the net deferred tax assets and believe that we will generate sufficient future taxable income in appropriate tax jurisdictions to realize the net deferred tax assets. Our judgment regarding future profitability may change due to future market conditions and other factors, including intercompany transfer pricing adjustments. Any change in future profitability may require material adjustments to these net deferred tax assets, resulting in a reduction in net income in the period when such determination is made. We believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which we conduct our business. It is possible that these positions may be challenged by jurisdictional tax authorities and may have a significant impact on our effective tax rate. We are subject to income taxes in the U.S. and in numerous foreign jurisdictions. As part of the process of preparing our consolidated financial statements, we are required to calculate our income tax expense based on taxable income by jurisdiction. There are many transactions and calculations about which the ultimate tax outcome is uncertain. As a result, our calculations involve estimates by management. Some of these uncertainties arise as a consequence of revenue‑sharing, cost‑reimbursement, and transfer pricing arrangements among related entities, and the differing tax treatment of revenue and cost items across various jurisdictions. If we were compelled to revise or to account differently for our arrangements, that revision could affect our tax liability. While we believe the positions we have taken are appropriate, we record reserves for taxes to address potential exposures involving tax positions that we believe could be challenged by taxing authorities. We record a benefit on a tax position when we determine that it is more likely than not that the position is sustainable upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax positions that are more likely than not to be sustained, we measure the tax position at the largest amount of benefit that has a greater than 50 percent likelihood of being realized when it is effectively settled. We review the tax reserves as circumstances warrant and adjust the reserves as events occur that affect our potential liability for additional taxes. We follow the applicable guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition with respect to uncertain tax positions. We recognize interest and penalties related to income taxes within the ( Provision) benefit for income taxes line in the consolidated statements of operations. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets. Fair value of common stock prior to IPO . We were a privately held company with no active public market of our common stock prior to our IPO. Therefore, the estimated fair value of the common stock underlying our stock‑based awards granted prior to our IPO was determined by our board of directors, with input from management and contemporaneous third‑party valuations. We believe that our board of directors had the relevant experience and expertise to determine the fair value of our common stock prior to our IPO. Prior to the IPO, and given the absence of a public trading market for our common stock, and in accordance with the American Institute of Certified Public Accountants practice guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, our board of directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our common stock, including: • contemporaneous independent valuations performed by an unrelated third-party valuation specialist; • the nature of our business and its history; • our operating and financial performance and forecast; • present value of estimated future cash flows; • the likelihood of achieving a liquidity event, such as an initial public offering, listing, or sale of our Company, given prevailing market condition and the nature and history of our business; • any adjustment necessary to recognize a lack of marketability for our common stock; • the market performance of comparable publicly traded companies; and 91 • the U.S. and global capital market conditions. In valuing our common stock, our board of directors determined the equity value of our business generally using the income approach and the market comparable approach valuation methods. The income approach estimates value based on the expectation of future cash flows that a company will generate such as cash earnings, cost savings, tax deductions, and proceeds from disposition. These future cash flows are discounted to their present values using a discount rate derived from an analysis of the cost of capital of comparable publicly traded companies in our industry or similar lines of business as of each valuation date and is adjusted to reflect the risks inherent in our cash flows. The market comparable approach estimates value based on a comparison of the Company to comparable public companies in a similar line of business. To determine our peer group of companies, we considered public enterprises with similar operations and selected those that are similar to our size, stage of life cycle, and financial leverage. From the comparable companies, a representative market value multiple is determined and applied to our results of operations to estimate the value of the Company. Application of these approaches involved the use of estimates, judgments, and assumptions that are highly complex and subjective, such as those regarding our expected future cash flows, cost savings and expenses, discount rates, market multiples, the selection of comparable companies, and the probability of possible future events. Emerging Growth Company: Effective December 31, 2021, we ceased to be an emerging growth company and are now categorized as a Large Accelerated Filer based upon the current market capitalization of the Company according to Rule 12b-2 of the Exchange Act. As a result, we must comply with all financial disclosure and governance requirements applicable to Large Accelerated Filers. Off-Balance Sheet Arrangements: We do not have any off‑balance sheet arrangements, as defined by applicable SEC regulations. Recent Accounting Pronouncements: For information regarding recent accounting guidance and the impact of this guidance on our consolidated financial statements, see Note 2 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10‑K. 92