As previously discussed, our business model produces reliable and efficient cash flows over a trailing 12-month period, but with some variability between quarters due to timing. Prospectively, we estimated our conversion rate of adjusted EBITDA to cash flow from operations will be approximately 80% and over future trailing 12-month period. Year-to-date through Q3, along with providing sufficiently for our growth initiatives, we paid $44 million in dividends. We spent about $58 million on de facto share repurchases to offset dilution from stock-based compensation, and we repaid $196 million of bank debt. As of the end of Q3, our net senior debt leverage was 0.7x, and including our 2026 and 2027 convertible notes full year step, our net debt leverage was 3.7x.
We are very comfortable with our capital structure as it stands today. We continued our strong deleveraging trajectory this quarter, delevering 1.0x adjusted EBITDA since the beginning of the year. With no debt maturing over the next two years and our strong free cash flow generation profile, we expect to organically delever and to increase our balance sheet strength over this period all while maintaining our programmatic M&A cadence, our dividend and share repurchases to offset dilution from stock-based compensation. And from a rates exposure perspective, approximately 90% of our debt is protected from rising interest rates for either very low fixed coupon interest on our convertible notes or our $200 million interest rate swap expiring in 2030.
So, the key message is, we are very comfortable with our current leverage, maturity profile and interest rate exposure. But of course, we continually evaluate ways to optimize as conditions change. Given our strong year-to-date and considerations for Q4, we are not changing our financial outlook, except we are increasing the range for this year’s cash flow from operations, as mentioned before. With regards to foreign exchange rates, on a year-to-date basis, the U.S. dollar has weakened relative to the exchange rates assumed in our 2023 annual financial outlook, resulting in approximately $6 million of incremental revenues from currency. Based on the most recent USD strength, if end of October exchange rates would prevail throughout the remainder of the year, our Q4 GAAP revenues will be negatively impacted by approximately $1 million relative to the exchange rates assumed in our 2023 financial outlook.
And with that, I think we are ready for Q&A. Over to Eric. Thank you
A – Eric Boyer: Thanks, Werner. In order to get to everyone’s questions today, we ask that you limit yourself to just one. Our first question comes from Matthew Hedberg from RBC.
Matthew Hedberg: Thanks for all the commentary on the call. I was just kind of curious, it sounds like a consistent outlook this year. I know there’s a lot of investors that are kind of wondering about some of the major trends including IIJA, it’s probably too early to kind of think about next year, but if you were kind of helping us with some of the major building blocks for growth next year. Is it consistent with kind of ’23? Are there things that you’re kind of particularly excited about maybe China joint venture is ramping? Just sort of any help you can kind of think about next year would be certainly helpful.
Greg Bentley: Well, the fourth quarter is going to inform our view of next year. And of course, we’ll have our annual outlook guidance after the first quarter — after the fourth quarter. Much happens for us in the fourth quarter it’s been almost 3/8 of our ARR renews. And even on E365, there are negotiations about floors and caps especially that consume the quarter we’re in just now. But generally, thinking of next year, our business at large is not that volatile, and there is considerable visibility in what we do. Now I suppose the exception that proves that rule is new mining exploration, which this year has a downturn, but it is a minority of what we do even in mining, things to be excited about for next year include the continued expansion of IIJA.
It’s now in water and also there has been grid funding. Now for grid improvements, there also needs to be permanent. That is yet to happen. But it will happen, we think, during the coming year, those are things to be excited about. Things that are complicated are China, so much of that new business happens in the fourth quarter. And the joint ventures are slowly coming on. But more significantly, we continue to have E365 — excuse me, to continue to have ARR accretion in China, but sometimes it’s now in favor of perpetual licenses. So, we’re going to have to balance that out and maybe that looking at next year, we have to factor in that not all new business is going to be new ARR subscriptions. But generally, that which we depend most upon doesn’t change very fast and it’s rather favorable momentum more so now than ever.
Eric Boyer: Next question comes from Joe Vruwink from Robert Baird.
Joe Vruwink: Great. Can you hear me?
Greg Bentley: Yes.
Joe Vruwink: Two related questions on ARR performance in the quarter. Do you have a sense of where ARR growth and network retention would be, if you just applied this quarter’s application usage rates across a normal amount of working days? And then part B of the question, I want to make sure I heard this right. So ARR growth outside of China remained at year-to-date highs. It sounds like industrial markets maybe softened relative to the trend. So is the correct interpretation that public works and the Americas actually improved a bit sequentially?
Greg Bentley: I think that is the correct interpretation. And as to industrial, those are very large EPCs on very large projects that are very production-oriented and maybe especially sensitive to this calendar phenomenon. And to go back to that, there isn’t quite a simple calculation to answer your questions and to explain, on the one hand, under E365 project lines, which is our single largest dollar program is not counted on usage days. It’s any usage in the quarter creates a charge for project life has already been — always been that way. Asset wise, it’s based on asset count. And then even for the applications, there are a lot of floors and caps that are binding at any point in time. And the calendar volatility can cause the caps and floors to come into play in a dynamic way.
