Bentley Systems Inc

One company that meets these criteria particularly well is Bentley Systems (BSY), a new position initiated during the second quarter. Bentley provides software that helps design, build, and manage critical infrastructure assets, including roads, bridges, utilities, transportation networks, water systems, and buildings. What attracted us to Bentley is the growing disconnect between the company’s business performance and its stock price. Fundamental trends continue to strengthen, driven by accelerating growth, high subscription retention rates, and increasing demand for its software solutions. Yet, despite improving fundamentals, the stock has moved in the opposite direction. We believe this dislocation has created a compelling opportunity to acquire an outstanding business with durable competitive advantages at what we view as an attractive valuation.

We believe Bentley Systems can continue to grow revenue and earnings at a healthy rate by providing meaningful productivity benefits to labour-constrained engineering firms. The broad sell-off of software businesses over the last 18 months has provided an opportunity for us to invest in this resilient, steady-growth business at an unusually attractive discount to our fair value. We are confident that Bentley can protect its business from new AI entrants due to its longstanding, deeply embedded relationships within the industry, and that infrastructure is a highly regulated industry with high barriers to entry, where any software errors have material safety consequences.

Bentley Systems is positioned to benefit significantly from AI advancements, particularly through the development of AI agents that can enhance design suggestions, run simulations, and assist in project management. This capability allows a single engineer to manage multiple AI agents, potentially increasing the usage and revenue of Bentley's tools. The proprietary nature of infrastructure project data limits competition from third-party AI models, further enhancing the value of Bentley's offerings. Additionally, Bentley's shift towards enterprise-wide, usage-based contracts mitigates risks associated with AI reducing the number of knowledge workers.

The construction industry is under pressure, driving meaningful change and increasing demand for innovation. Bentley Systems plays a critical role in how projects are designed, managed, and delivered, with software becoming more embedded in workflows. Despite market concerns about software disruption, the observed trend suggests that these systems are becoming increasingly integral to the construction value chain. The investment case for Bentley Systems is strengthened by the growing necessity for digital solutions in construction, which is essential for addressing the industry's structural challenges.

Bentley Systems' software is increasingly being used alongside real-world data capture to create dynamic, continuously updated models of infrastructure. The manager observed that this software is becoming central to the ecosystem, reinforcing confidence that the trends supporting its growth are not just theoretical but are scaling. The shift towards digital twins is now delivering ROI, with a focus on return on investment, energy savings, and process optimization, which further supports Bentley's position in the market.

Bentley Systems (BSY) has sold off amid concerns AI presents to software companies; however, we believe Bentley has unique characteristics that position it well to withstand the threat. This suggests that despite market fears, Bentley's fundamentals remain strong, and its resilience in the face of AI challenges makes it an attractive investment opportunity.

Founded in 1984 by five Bentley brothers, Bentley Systems maintains a leadership position in software that enables the design, construction and monitoring of civil infrastructure assets. Bentley is growing recurring subscription revenues at a consistent low-double digit rate while expanding operating margins annually. AI is beginning to enhance the productivity of designers, and will help the architecture, engineering, and construction industry attack the growing backlog of both developed and emerging market infrastructure projects. We foresee many years of strong growth ahead.