Bentley Systems, Incorporated (BSY) Cash Flow Statement

The OCF/NI ratio of 0.91 in 2026Q2, down from 2.03 in the prior quarter, suggests that earnings quality is heavily influenced by working capital swings rather than operational deterioration. The negative working capital change of -$36.3M in 2026Q2, following a +$52.7M in Q1, points to seasonal billing patterns or E365 consumption timing. Investors should monitor whether this volatility persists as the E365 model scales, as it may obscure the underlying cash generation capacity.

Despite the quarterly dip, the trailing twelve-month FCF margin of approximately 29% is strong and consistent with peers like ADSK (36.4%) and CDNS (28.8%). The FCF trajectory appears stable, with cumulative FCF over the last four quarters exceeding $500M, supporting continued investment in growth initiatives. However, the 2026Q2 FCF margin contraction to 15.5% warrants attention, as it may signal increased working capital needs or slower collections in the E365 transition.

The low capital intensity (CapEx/Revenue of 1.9% in 2026Q2) underscores the scalability of BSY's software business, with minimal fixed asset investment required to support growth. This allows the company to convert a high proportion of operating cash flow into free cash flow, which is a key differentiator versus more capital-intensive peers. The modest CapEx suggests that most investment is directed toward R&D and acquisitions rather than physical infrastructure, aligning with the company's strategic focus on software innovation.

The pronounced quarterly swings in working capital, particularly in accounts receivable and deferred revenue, appear to be driven by the timing of E365 consumption-based billing and annual renewals. The positive working capital changes in Q1 quarters likely reflect upfront billings, while Q2 quarters show the offsetting collections and usage adjustments. This pattern suggests that cash flow seasonality is a structural feature of the business model, and investors should focus on annualized cash flow rather than quarterly fluctuations.

The significant increase in share repurchases, from $20.0M in 2025Q2 to $70.8M in 2026Q2, suggests management is confident in the company's cash generation and sees the stock as undervalued. Dividends have grown modestly from $18.0M to $21.2M over the same period, reflecting a consistent payout policy. The absence of major acquisitions in recent quarters, aside from the $93.3M in 2025Q4, may indicate a temporary pause in the 'string of pearls' strategy, allowing more cash to be returned to shareholders.

The cumulative OCF/NI ratio of approximately 1.8 over the ten-quarter period indicates that BSY's earnings are backed by robust cash generation, with non-cash charges like D&A and SBC adding back significantly. This divergence suggests that reported net income understates the company's true cash-generating ability, which is a positive signal for valuation. However, the gap also reflects the impact of working capital timing, so investors should not extrapolate this ratio indefinitely without monitoring changes in the E365 model.