MicroStrategy Announces First Quarter 2019 Financial Results

TYSONS CORNER, Va.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24MSTR&src=ctag” target=”_blank”gt;$MSTRlt;/agt; lt;a href=”https://twitter.com/hashtag/MSTR?src=hash” target=”_blank”gt;#MSTRlt;/agt;–MicroStrategy®
Incorporated (Nasdaq: MSTR), a leading worldwide provider of enterprise
analytics and mobility software, today announced financial results for
the three-month period ended March 31, 2019 (the first quarter of its
2019 fiscal year).


MicroStrategy adopted Accounting Standards Update No. 2016-02, Leases
(Topic 842), and its subsequent amendments (“ASU 2016-02”),
effective January 1, 2019. Comparative prior period consolidated
financial statements have not been restated and are not directly
comparable to the current period consolidated financial statements.


First quarter 2019 revenues were $115.4 million versus $123.0 million
for the first quarter of 2018, a 6.2% decrease. Product licenses and
subscription services revenues for the first quarter of 2019 were $25.4
million versus $25.0 million for the first quarter of 2018, a 1.9%
increase. Product support revenues for the first quarter of 2019 were
$71.5 million versus $74.4 million for the first quarter of 2018, a 4.0%
decrease. Other services revenues for the first quarter of 2019 were
$18.5 million versus $23.6 million for the first quarter of 2018, a
21.7% decrease. Foreign currency effects had an unfavorable impact on
revenues for the first quarter of 2019.


Operating expenses for the first quarter of 2019 were $99.6 million
versus $97.1 million for the first quarter of 2018, a 2.6% increase.


Loss from operations for the first quarter of 2019 was $10.4 million
versus income from operations of $0.7 million for the first quarter of
2018. Net loss for the first quarter of 2019 was $7.9 million, or $0.77
per share on a diluted basis, as compared to net income of $1.7 million,
or $0.15 per share on a diluted basis, for the first quarter of 2018.


Non-GAAP loss from operations, which excludes share-based compensation
expense, was $7.4 million for the first quarter of 2019 versus non-GAAP
income from operations of $5.5 million for the first quarter of 2018.
The tables at the end of this press release include a reconciliation of
(loss) income from operations to non-GAAP (loss) income from operations
for the three months ended March 31, 2019 and 2018. An explanation of
this non-GAAP financial measure is also included under the heading
“Non-GAAP Financial Measure” below.


As of March 31, 2019, MicroStrategy had cash and cash equivalents and
short-term investments of $551.1 million, as compared to $576.1 million
as of December 31, 2018, a decrease of $25.1 million. During the first
quarter of 2019, MicroStrategy repurchased 362,148 shares of its class A
common stock for an aggregate purchase price of approximately $48.2
million. As of March 31, 2019, MicroStrategy had 8.2 million shares of
class A common stock and 2.0 million shares of class B common stock
outstanding.


MicroStrategy uses its Intelligent Enterprise platform across the
enterprise and has created an interactive dossier with quarterly
financial performance data. Anyone can access the
MSTR Financials dossier via a web browser, or by downloading the
MicroStrategy Library app on an iOS or Android device. To download the
native apps, visit MicroStrategy
Library for iPad, MicroStrategy
Library for iPhone, or MicroStrategy
Library for Android tablet and smartphone.


Conference Call


MicroStrategy will be discussing its first quarter 2019 financial
results on a conference call today beginning at approximately 5:00 p.m.
EDT. To access the conference call, dial (844) 824-7425 (domestically)
or (716) 220-9429 (internationally) and use conference ID 7634017. A
live and archived webcast will be available under the “Events” section
on MicroStrategy’s investor relations website at
A replay of the conference call will be available beginning
approximately two hours after the call concludes until May 7, 2019 at
(855) 859-2056 (domestically) or (404) 537-3406 (internationally) using
the passcode 7634017.


Recent Business Highlights


MicroStrategy announced the general availability
of MicroStrategy 2019, the industry’s first and only enterprise
platform for Federated Analytics, Transformational Mobility, and
HyperIntelligence. MicroStrategy 2019 delivers modern analytics on an
enterprise platform that can be deployed on-premises or on multiple
private and public cloud platforms. MicroStrategy customers on
MicroStrategy 2019 platform can get started on HyperIntelligence by
downloading the MicroStrategy HyperIntelligence extension at the Chrome
Web Store. Customers can provision MicroStrategy 2019 in the cloud
with the MicroStrategy for AWS and MicroStrategy for Azure
provisioning consoles. A 30-day free trial is available for MicroStrategy
2019 on AWS and Microsoft Azure.


MicroStrategy was recognized by industry analysts in the following
published research:

Recognized by Gartner, Inc. as the sole Challenger in the “2019
Magic Quadrant for Analytics and Business Intelligence Platforms”
(1)

Named a Technology Innovation Leader by Dresner Advisory Services
for the second consecutive year


Ranked the #1 Overall Value Index Leader in Embedded Analytics and
Business Intelligence by Ventana Research


Ranked the #1 Overall Value Index Leader in Mobile Analytics and
Business Intelligence by Ventana Research


MicroStrategy held its 22nd annual user conference,
MicroStrategy World 2019, which brought together thousands of product
experts, thought leaders and MicroStrategy users for three days of
inspirational keynotes, educational workshops, and customer
presentations on how analytics can transform the way people use
information to make each organization a more Intelligent Enterprise.
Attendees also learned about MicroStrategy’s new platform, robust
partner network, and services offerings as well as how they can employ
new digital strategies to increase the adoption of analytics across
the enterprise.

MicroStrategy announced the ability of customers to leverage
MicroStrategy 2019 on Microsoft Azure and Amazon Web Services,
which allows customers to launch fully-configured analytics,
mobility, and HyperIntelligence projects on Azure and AWS.


MicroStrategy presented Customer Awards to American Express Global
Business Travel, The Coca-Cola Company, Hilton, Ola, and TAP Air
Portugal for their outstanding enterprise analytics and mobility
applications.


MicroStrategy hosted its second annual Datathon at MicroStrategy
World 2019, challenging participants to create innovative
analytics, AI, big data, or mobile applications using
MicroStrategy 2019 with aggregated data from CharityBase, a free,
open source charity data portal with public information on the
activities, locations, and finances of thousands of charities
registered in England and Wales.


Non-GAAP Financial Measure


MicroStrategy is providing a supplemental financial measure for (loss)
income from operations that excludes the impact of share-based
compensation arrangements. This supplemental financial measure is not a
measurement of financial performance under generally accepted accounting
principles in the United States (“GAAP”) and, as a result, this
supplemental financial measure may not be comparable to similarly titled
measures of other companies. Management uses this non-GAAP financial
measure internally to help understand, manage, and evaluate business
performance and to help make operating decisions. MicroStrategy believes
that this non-GAAP financial measure is also useful to investors and
analysts in comparing its performance across reporting periods on a
consistent basis because it excludes a significant non-cash expense that
MicroStrategy believes is not reflective of its general business
performance. In addition, accounting for share-based compensation
arrangements requires significant management judgment and the resulting
expense could vary significantly in comparison to other companies.
Therefore, MicroStrategy believes the use of this non-GAAP financial
measure can also facilitate comparison of MicroStrategy’s operating
results to those of its competitors.


About MicroStrategy Incorporated


MicroStrategy (Nasdaq: MSTR) is a leading worldwide provider of
enterprise analytics and mobility software and services. Our mission is
to make every enterprise a more Intelligent Enterprise. MicroStrategy
2019 delivers modern analytics on an open, comprehensive enterprise
platform designed to drive business results with Federated Analytics,
Transformational Mobility, and HyperIntelligence. To learn more, visit MicroStrategy
online, and follow us on LinkedIn,
Twitter
and Facebook.


MicroStrategy, Intelligent Enterprise, MicroStrategy Library,
MicroStrategy 2019, HyperIntelligence, and MicroStrategy World are
either trademarks or registered trademarks of MicroStrategy Incorporated
in the United States and certain other countries. Other product and
company names mentioned herein may be the trademarks of their respective
owners.


This press release may include statements that may constitute
“forward-looking statements,” including estimates of future business
prospects or financial results and statements containing the words
“believe,” “estimate,” “project,” “expect” or similar expressions.
Forward-looking statements inherently involve risks and uncertainties
that could cause actual results of MicroStrategy Incorporated and its
subsidiaries (collectively, the “Company”) to differ materially from the
forward-looking statements. Factors that could contribute to such
differences include: the extent and timing of market acceptance of
MicroStrategy’s new offerings, including MicroStrategy 2019; the
Company’s ability to recognize revenue or deferred revenue through
delivery of products or satisfactory performance of services; continued
acceptance of the Company’s other products in the marketplace;
fluctuations in tax benefits or provisions, including as a result of
changes to U.S. federal tax laws; the timing of significant orders;
delays in or the inability of the Company to develop or ship new
products; competitive factors; general economic conditions; currency
fluctuations; and other risks detailed in the Company’s registration
statements and periodic reports filed with the Securities and Exchange
Commission. The Company undertakes no obligation to update these
forward-looking statements for revisions or changes after the date of
this release.


MSTR-F


(1) Gartner, Magic Quadrant for Analytics and Business
Intelligence Platforms, Cindi Howson, James Richardson, Rita Sallam,
Austin Kronz, 11 February 2019. Gartner does not endorse any vendor,
product or service depicted in its research publications, and does not
advise technology users to select only those vendors with the highest
ratings or other designation. Gartner research publications consist of
the opinions of Gartner’s research organization and should not be
construed as statements of fact. Gartner disclaims all warranties,
express or implied, with respect to this research, including any
warranties of merchantability or fitness for a particular purpose.


 


MICROSTRATEGY INCORPORATED


CONSOLIDATED STATEMENTS OF OPERATIONS


(in thousands, except per share data)


 




 


 


Three Months Ended










March 31,










2019




 


 


2018










(unaudited)








(unaudited)




Revenues






















Product licenses






$


18,291








$


17,301




Subscription services






 


7,144








 


7,662




Total product licenses and subscription services








25,435










24,963




Product support








71,450










74,415




Other services






 


18,481








 


23,589




Total revenues






 


115,366








 


122,967
























 


Cost of revenues






















Product licenses








519










2,211




Subscription services






 


3,598








 


3,249




Total product licenses and subscription services








4,117










5,460




Product support








7,067










4,796




Other services






 


14,989








 


14,929




Total cost of revenues






 


26,173








 


25,185
























 


Gross profit






 


89,193








 


97,782
























 


Operating expenses






















Sales and marketing








48,760










51,335




Research and development








28,215










23,560




General and administrative






 


22,604








 


22,172




Total operating expenses






 


99,579








 


97,067
























 


(Loss) income from operations








(10,386


)








715




Interest income, net








2,566










2,034




Other expense, net






 


(596


)






 


(1,594


)


(Loss) income before income taxes








(8,416


)








1,155




Benefit from income taxes






 


(510


)






 


(518


)


Net (loss) income






$


(7,906


)






$


1,673
























 


Basic (loss) earnings per share (1):






$


(0.77


)






$


0.15




Weighted average shares outstanding used in computing basic (loss)
earnings per share






 


10,328








 


11,447
























 


Diluted (loss) earnings per share (1):






$


(0.77


)






$


0.15




Weighted average shares outstanding used in computing diluted (loss)
earnings per share






 


10,328








 


11,488
























 


(1)


 


Basic and fully diluted (loss) earnings per share for class A and
class B common stock are the same.






 


 


MICROSTRATEGY INCORPORATED


CONSOLIDATED BALANCE SHEETS


(in thousands, except per share data)


 




 


 


March 31,




 


 


December 31,










2019








2018*










(unaudited)














Assets






















Current assets






















Cash and cash equivalents






$


258,743








$


109,924




Restricted cash








922










862




Short-term investments








292,314










466,186




Accounts receivable, net








133,922










171,359




Prepaid expenses and other current assets






 


32,511








 


30,068




Total current assets








718,412










778,399
























 


Property and equipment, net








54,832










51,919




Right-of-use assets








87,743










0




Deposits and other assets








8,374










8,134




Deferred tax assets, net






 


18,983








 


17,316




Total Assets






$


888,344








$


855,768
























 


Liabilities and Stockholders’ Equity






















Current liabilities






















Accounts payable, accrued expenses, and operating lease liabilities






$


37,227








$


33,684




Accrued compensation and employee benefits








36,713










48,045




Deferred revenue and advance payments






 


190,070








 


176,540




Total current liabilities








264,010










258,269
























 


Deferred revenue and advance payments








4,539










6,469




Operating lease liabilities








106,661










0




Other long-term liabilities








34,793










61,262




Deferred tax liabilities






 


35








 


37




Total Liabilities






 


410,038








 


326,037
























 


Stockholders’ Equity






















Preferred stock undesignated, $0.001 par value; 5,000 shares
authorized; no shares issued or outstanding








0










0




Class A common stock, $0.001 par value; 330,000 shares authorized;
15,850 shares issued and 8,202 shares outstanding, and 15,837 shares
issued and 8,552 shares outstanding, respectively








16










16




Class B convertible common stock, $0.001 par value; 165,000 shares
authorized; 2,035 shares issued and outstanding, and 2,035 shares
issued and outstanding, respectively








2










2




Additional paid-in capital








581,429










576,957




Treasury stock, at cost; 7,648 shares and 7,285 shares, respectively








(634,405


)








(586,161


)


Accumulated other comprehensive loss








(9,964


)








(10,217


)


Retained earnings






 


541,228








 


549,134




Total Stockholders’ Equity






 


478,306








 


529,731




Total Liabilities and Stockholders’ Equity






$


888,344








$


855,768
























 


*


 


Derived from audited financial statements.






 


 


MICROSTRATEGY INCORPORATED


CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands)


 




 


 


Three Months Ended










March 31,










2019




 


 


2018










(unaudited)








(unaudited)




Operating activities:






















Net (loss) income






$


(7,906


)






$


1,673




Adjustments to reconcile net (loss) income to net cash provided by
operating activities:






















Depreciation and amortization








3,664










3,298




Bad debt expense








827










165




Net realized loss on short-term investments








41










0




Deferred taxes








(1,694


)








(2,662


)


Share-based compensation expense








3,017










4,743




Changes in operating assets and liabilities:






















Accounts receivable








10,266










422




Prepaid expenses and other current assets








(3,070


)








(3,783


)


Deposits and other assets








(134


)








228




Accounts payable and accrued expenses








(3,108


)








(6,016


)


Accrued compensation and employee benefits








(12,195


)








(8,085


)


Deferred revenue and advance payments








38,502










19,570




Operating lease liabilities








(2,074


)








0




Other long-term liabilities






 


320








 


9,164




Net cash provided by operating activities






 


26,456








 


18,717
























 


Investing activities:






















Proceeds from redemption of short-term investments








314,403










195,820




Purchases of property and equipment








(6,011


)








(1,294


)


Purchases of short-term investments






 


(138,099


)






 


(483,440


)


Net cash provided by (used in) investing activities






 


170,293








 


(288,914


)






















 


Financing activities:






















Proceeds from sale of class A common stock under exercise of
employee stock options








1,507










0




Purchases of treasury stock








(48,244


)








0




Payments on capital lease obligations and other financing
arrangements prior to the adoption of ASU 2016-02






 


0








 


(7


)


Net cash used in financing activities






 


(46,737


)






 


(7


)






















 


Effect of foreign exchange rate changes on cash, cash
equivalents, and restricted cash






 


(1,133


)






 


2,202




Net increase (decrease) in cash, cash equivalents, and restricted
cash








148,879










(268,002


)


Cash, cash equivalents, and restricted cash, beginning of period






 


110,786








 


421,182




Cash, cash equivalents, and restricted cash, end of period






$


259,665








$


153,180
























 


 


MICROSTRATEGY INCORPORATED


REVENUE AND COST OF REVENUE DETAIL


(in thousands)


 




 


 


Three Months Ended








March 31,








2019


 


 


 


2018








(unaudited)








(unaudited)


Revenues




















Product licenses and subscription services:




















Product licenses






$


18,291








$


17,301


Subscription services






 


7,144








 


7,662


Total product licenses and subscription services






 


25,435








 


24,963


Product support








71,450










74,415


Other services:




















Consulting








16,603










21,287


Education






 


1,878








 


2,302


Total other services






 


18,481








 


23,589


Total revenues






 


115,366








 


122,967




















 


Cost of revenues




















Product licenses and subscription services:




















Product licenses








519










2,211


Subscription services






 


3,598








 


3,249


Total prod