MicroStrategy Announces First Quarter 2019 Financial Results

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    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 http://ir.microstrategy.com/events.cfm.
    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 product licenses and subscription services   4,117   5,460
    Product support 7,067 4,796
    Other services:
    Consulting 12,985 13,321
    Education   2,004   1,608
    Total other services   14,989   14,929
    Total cost of revenues   26,173   25,185
     
    Gross profit $ 89,193 $ 97,782
     
     
    MICROSTRATEGY INCORPORATED
    DEFERRED REVENUE DETAIL
    (in thousands)
     
        March 31,     December 31,     March 31,
    2019 2018* 2018
    (unaudited) (unaudited)
    Current:
    Deferred product licenses revenue $ 555 $ 1,768 $ 3,064
    Deferred subscription services revenue 15,641 13,508 16,742
    Deferred product support revenue 166,306 152,501 173,156
    Deferred other services revenue   7,568   8,763   8,756
    Total current deferred revenue and advance payments $ 190,070 $ 176,540 $ 201,718
     
    Non-current:
    Deferred product licenses revenue $ 479 $ 542 $ 843
    Deferred subscription services revenue 247 2,384 385
    Deferred product support revenue 3,231 3,091 3,854
    Deferred other services revenue   582   452   586
    Total non-current deferred revenue and advance payments $ 4,539 $ 6,469 $ 5,668
     
    Total current and non-current:
    Deferred product licenses revenue $ 1,034 $ 2,310 $ 3,907
    Deferred subscription services revenue 15,888 15,892 17,127
    Deferred product support revenue 169,537 155,592 177,010
    Deferred other services revenue   8,150   9,215   9,342
    Total current and non-current deferred revenue and advance payments $ 194,609 $ 183,009 $ 207,386
     
    *   Derived from audited financial statements.
     
     
    MICROSTRATEGY INCORPORATED
    RECONCILIATION OF GAAP TO NON-GAAP MEASURE
    (in thousands)
     
        Three Months Ended
    March 31,
    2019     2018
    (unaudited) (unaudited)
    Reconciliation of non-GAAP (loss) income from operations:
    (Loss) income from operations $ (10,386 ) $ 715
    Share-based compensation expense   3,017   4,743
    Non-GAAP (loss) income from operations $ (7,369 ) $ 5,458
     
     
    MICROSTRATEGY INCORPORATED
    WORLDWIDE EMPLOYEE HEADCOUNT
     
        March 31,     December 31,     September 30,     June 30,     March 31,
    2019 2018 2018 2018 2018
    Subscription services 54 56 55 54 57
    Product support 224 202 194 184 182
    Consulting 429 452 458 443 441
    Education 50 47 44 39 42
    Sales and marketing 675 707 699 687 667
    Research and development 733 716 688 651 604
    General and administrative 329 348 326 322 313
    Total headcount 2,494 2,528 2,464 2,380 2,306
     

    Contacts

    MicroStrategy Incorporated
    Investor Relations
    Claudia Cahill
    [email protected]
    (703)
    848-8600