MicroStrategy® Incorporated (Nasdaq: MSTR), a leading worldwide
provider of enterprise analytics and mobility software, today
announced financial results for the three-month period ended
June 30, 2018 (the second quarter of its 2018 fiscal
year).
MicroStrategy adopted Accounting Standards Update No. 2014-09,
Revenue from Contracts with Customers (Topic 606) and its
subsequent amendments (“ASU 2014-09”), effective January 1, 2018,
and has adjusted its prior period consolidated financial statements
to reflect full retrospective adoption.
Second quarter 2018 revenues were $120.6 million versus $119.2
million for the second quarter of 2017, a 1.2% increase. Product
licenses and subscription services revenues for the second quarter
of 2018 were $26.9 million versus $26.1 million for the second
quarter of 2017, a 3.1% increase. Product support revenues for the
second quarter of 2018 were $73.7 million versus $70.8 million for
the second quarter of 2017, a 4.1% increase. Other services
revenues for the second quarter of 2018 were $20.1 million versus
$22.4 million for the second quarter of 2017, a 10.4% decrease.
Foreign currency effects had a favorable impact on revenues for the
second quarter of 2018.
Operating expenses for the second quarter of 2018 were $97.4
million versus $80.8 million for the second quarter of 2017, a
20.5% increase, reflecting MicroStrategy’s previously announced
strategy to seek to take greater advantage of the opportunities in
the market by increasing its sales and marketing expenditures and
increasing its research and development expenditures as it invests
in its technology products and personnel. MicroStrategy did not
capitalize any software development costs during the second quarter
of 2018 or 2017.
Loss from operations for the second quarter of 2018 was $1.8
million versus income from operations of $14.1 million for the
second quarter of 2017. Net income for the second quarter of 2018
was $4.8 million, or $0.42 per share on a diluted basis, as
compared to net income of $10.0 million, or $0.86 per share on a
diluted basis, for the second quarter of 2017. Contributing to net
income for the second quarter of 2018 was $4.5 million in other
income, net, comprised primarily of foreign currency transaction
gains, and $3.2 million in interest income, net.
Non-GAAP income from operations, which excludes share-based
compensation expense, was $1.6 million for the second quarter of
2018 versus $17.9 million for the second quarter of 2017. The
tables at the end of this press release include a reconciliation of
(loss) income from operations to non-GAAP income from operations
for the three months ended June 30, 2018 and 2017. An
explanation of this non-GAAP measure is also included under the
heading “Non-GAAP Financial Measure” below.
As of June 30, 2018, MicroStrategy had cash and cash
equivalents and short-term investments of $699.6 million, as
compared to $675.2 million as of December 31, 2017, an
increase of $24.4 million. As of June 30, 2018, MicroStrategy
had 9.4 million shares of class A common stock and 2.0 million
shares of class B common stock outstanding.
MicroStrategy uses its own software across the Company 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 second quarter 2018
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 8369038. A live webcast and replay of the
conference call will be available under the “Events” section on
MicroStrategy’s investor relations website at
http://ir.microstrategy.com/events.cfm. The replay will be
available beginning approximately two hours after the call
concludes until August 2, 2018 at (855) 859-2056 (domestically) or
(404) 537-3406 (internationally) using the passcode 8369038. An
archived webcast will also be available under the “Events” section
on MicroStrategy’s investor relations website at
http://ir.microstrategy.com/events.cfm.
Recent Business Highlights:
- MicroStrategy received the highest
product scores for 3 of 5 use cases in the “Critical Capabilities
for Analytics and Business Intelligence Platforms” report1 by
Gartner, Inc., the leading provider of research and analysis on the
global information technology industry. According to the findings,
the Gartner report has scored MicroStrategy:
- First in Governed Data Discovery,
scoring a 4.22 (out of 5)
- First in Agile, Centralized BI
Provisioning, scoring a 4.37
- First in Decentralized Analytics,
scoring a 4.19
- Second in Extranet Deployment, scoring
a 4.16
- MicroStrategy introduced three new
gateways with its MicroStrategy 10.11™ release that enable
MicroStrategy users to easily visualize, analyze and distribute
data using Microsoft Azure. Built in collaboration with Microsoft,
these gateways establish integrations and workflows between the
MicroStrategy 10™ platform and Azure data and analytics services.
These gateways expand on MicroStrategy’s existing integrations with
other Microsoft solutions, including Azure IoT, Machine Learning
and Power BI.
- MicroStrategy won a 2018 NetworkWorld
Asia Information Management award in the Advanced Analytics
Solution category. After a review of numerous analytics vendors in
the market, MicroStrategy was selected the winner by a panel of
Questex Media editors and regional CIOs, CISOs, IT directors, and
data center heads representing organizations across a variety of
industries. MicroStrategy, which secured the top spot for the only
award related to analytics, was honored at the 7th annual
NetworkWorld Asia Information Management Awards in Singapore.
- MicroStrategy announced that Kasasa, an
Austin, Texas-based fintech and martech provider, integrated
MicroStrategy 10 into Insight, its BI platform, enabling an even
higher performing analytics solution for its customers. In
addition, MicroStrategy announced that Vibes, a leading mobile
engagement platform for enterprises, integrated the MicroStrategy
10 platform into its new product, Advanced Analytics, a performance
management solution.
- MicroStrategy announced that The
University of Auckland’s ICT Graduate School and the University of
Colorado Denver School of Business are providing its students and
faculty with free MicroStrategy software licenses, technical
support and training through the MicroStrategy Academic
Program.
1
Gartner, Critical Capabilities for Analytics and Business
Intelligence Platforms, James Laurence Richardson, Joao Tapadinhas,
et al., May 7, 2018. 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, expressed or implied, with respect to this
research, including any warranties of merchantability or fitness
for a particular purpose.
Non-GAAP Financial Measure
MicroStrategy is providing a supplemental financial measure for
income from operations that excludes the impact of share-based
compensation arrangements. This financial measure is not a
measurement of financial performance under generally accepted
accounting principles in the United States (“GAAP”) and, as a
result, this 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 worldwide leader in enterprise
analytics and mobility software. A pioneer in the BI and analytics
space, MicroStrategy delivers innovative software that empowers
people to make better decisions and transform the way they do
business. We provide our enterprise customers with world-class
software and expert services so they can deploy unique intelligence
applications. To learn more, visit MicroStrategy online, and follow
us on LinkedIn, Twitter and Facebook.
MicroStrategy, MicroStrategy 10, MicroStrategy 10.11, and
MicroStrategy Library 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 10.11; 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, including economic
uncertainty in the retail industry, in which the Company has a
significant number of customers; currency fluctuations; and other
risks detailed in the Company’s registration statements and
periodic reports filed with the Securities and Exchange Commission.
By making these forward-looking statements, the Company undertakes
no obligation to update these statements for revisions or changes
after the date of this release.
MSTR-F
MICROSTRATEGY INCORPORATED
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share
data)
Three Months Ended
Six Months Ended June 30, June 30, 2018
2017 2018 2017 (unaudited)
(as adjusted,unaudited)
(unaudited)
(as adjusted,unaudited)
Revenues Product licenses $ 19,292 $ 17,728 $ 36,593 $
40,374 Subscription services 7,584 8,346
15,246 16,118 Total product licenses and subscription
services 26,876 26,074 51,839 56,492 Product support 73,676 70,766
148,091 141,278 Other services 20,050 22,380
43,639 43,682
Total revenues 120,602
119,220 243,569 241,452
Cost of revenues Product licenses 1,667 1,747 3,878
3,419 Subscription services 3,445 3,400 6,694
6,439 Total product licenses and subscription services 5,112
5,147 10,572 9,858 Product support 4,810 4,542 9,606 8,876 Other
services 15,118 14,686 30,047 28,773
Total cost of revenues 25,040
24,375 50,225 47,507
Gross profit 95,562 94,845
193,344 193,945 Operating
expenses Sales and marketing 50,978 41,626 102,313 81,208
Research and development 25,082 19,561 48,642 37,987 General and
administrative 21,299 19,582 43,471
39,839
Total operating expenses 97,359
80,769 194,426 159,034
(Loss) income from operations (1,797 )
14,076 (1,082 ) 34,911 Interest income,
net 3,223 1,163 5,257 2,000 Other income (expense), net
4,461 (2,618 ) 2,867 (4,474 )
Income before
income taxes 5,887 12,621 7,042
32,437 Provision for income taxes 1,059 2,668
541 6,927
Net income $ 4,828
$ 9,953 $ 6,501 $ 25,510
Basic earnings per share (1): $ 0.42
$ 0.87 $ 0.57 $ 2.23
Weighted average shares outstanding used in computing basic
earnings per share
11,459 11,444
11,453 11,441 Diluted earnings per
share (1): $ 0.42 $ 0.86 $
0.57 $ 2.20 Weighted average shares
outstanding used in computing diluted earnings per share
11,493 11,592 11,488
11,593 (1) Basic and fully
diluted 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)
June 30, December
31, 2018 2017 (unaudited)
(as adjusted,unaudited)
Assets Current assets Cash and cash equivalents $ 90,427 $
420,244 Restricted cash 964 938 Short-term investments 609,167
254,927 Accounts receivable, net 125,115 165,364 Prepaid expenses
and other current assets 27,863 19,180 Total current
assets 853,536 860,653 Property and equipment, net 51,918
53,359 Capitalized software development costs, net 0 2,499 Deposits
and other assets 7,112 7,411 Deferred tax assets, net 14,761
9,297
Total Assets $ 927,327 $
933,219 Liabilities and Stockholders' Equity
Current liabilities Accounts payable and accrued expenses $ 22,670
$ 30,711 Accrued compensation and employee benefits 38,617 41,498
Deferred revenue and advance payments 175,358 198,734
Total current liabilities 236,645 270,943 Deferred revenue
and advance payments 5,816 6,400 Other long-term liabilities 64,503
50,146 Deferred tax liabilities 4 4
Total
Liabilities 306,968 327,493
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; 15,837 shares issued and 9,432 shares outstanding, and
15,817 shares issued and 9,412 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 570,502 559,918 Treasury stock, at cost; 6,405 shares
(475,184 ) (475,184 ) Accumulated other comprehensive loss (8,111 )
(5,659 ) Retained earnings 533,134 526,633
Total
Stockholders' Equity 620,359
605,726 Total Liabilities and Stockholders' Equity
$ 927,327 $ 933,219
MICROSTRATEGY INCORPORATED
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
Six Months Ended June 30,
2018 2017 (unaudited)
(as adjusted,unaudited)
Operating activities: Net income $ 6,501 $ 25,510
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 3,870 8,540 Bad
debt expense 948 1,835 Deferred taxes (5,758 ) (3,654 ) Share-based
compensation expense 8,121 6,889 Changes in operating assets and
liabilities: Accounts receivable 5,044 16,033 Prepaid expenses and
other current assets 453 (992 ) Deposits and other assets (344 )
(275 ) Accounts payable and accrued expenses (7,775 ) (15,472 )
Accrued compensation and employee benefits (3,015 ) (10,712 )
Deferred revenue and advance payments 10,502 11,058 Other long-term
liabilities 4,780 (1,647 ) Net cash provided by
operating activities 23,327 37,113
Investing activities: Proceeds from redemption of short-term
investments 245,680 151,860 Purchases of property and equipment
(2,644 ) (1,467 ) Purchases of short-term investments
(596,376 ) (216,602 ) Net cash used in investing activities
(353,340 ) (66,209 )
Financing
activities: Proceeds from sale of class A common stock under
exercise of employee stock options 2,471 1,677 Payments on capital
lease obligations and other financing arrangements (9 )
(12 ) Net cash provided by financing activities 2,462
1,665
Effect of foreign exchange rate changes on
cash, cash equivalents, and restricted cash (2,240 )
5,246
Net decrease in cash, cash equivalents, and
restricted cash (329,791 ) (22,185 )
Cash, cash equivalents,
and restricted cash, beginning of period 421,182
402,712
Cash, cash equivalents, and restricted cash, end of
period $ 91,391 $ 380,527
MICROSTRATEGY INCORPORATED
REVENUE AND COST OF REVENUE
DETAIL
(in thousands)
Three Months Ended
Six Months Ended June 30, June 30, 2018
2017 2018 2017
(unaudited)
(as adjusted,unaudited)
(unaudited)
(as adjusted,unaudited)
Revenues Product licenses and subscription services: Product
licenses $ 19,292 $ 17,728 $ 36,593 $ 40,374 Subscription services
7,584 8,346 15,246 16,118 Total product
licenses and subscription services 26,876 26,074
51,839 56,492 Product support 73,676 70,766 148,091
141,278 Other services: Consulting 17,710 19,791 38,997 38,837
Education 2,340 2,589 4,642 4,845 Total
other services 20,050 22,380 43,639
43,682
Total revenues 120,602
119,220 243,569 241,452
Cost of revenues Product licenses and subscription services:
Product licenses 1,667 1,747 3,878 3,419 Subscription services
3,445 3,400 6,694 6,439 Total product
licenses and subscription services 5,112 5,147
10,572 9,858 Product support 4,810 4,542 9,606 8,876 Other
services: Consulting 13,542 12,867 26,863 25,284 Education
1,576 1,819 3,184 3,489 Total other services
15,118 14,686 30,047 28,773
Total
cost of revenues 25,040 24,375
50,225 47,507 Gross
profit $ 95,562 $ 94,845 $
193,344 $ 193,945
MICROSTRATEGY INCORPORATED
DEFERRED REVENUE DETAIL
(in thousands)
June 30,
December 31, June 30, 2018
2017 2017 (unaudited)
(as adjusted,unaudited)
(as adjusted,unaudited)
Current: Deferred product licenses revenue $ 1,819 $ 3,760 $
2,320 Deferred subscription services revenue 13,847 17,324 17,741
Deferred product support revenue 151,909 168,185 156,984 Deferred
other services revenue 7,783 9,465 8,681 Total
current deferred revenue and advance payments $ 175,358 $ 198,734 $
185,726
Non-current: Deferred product licenses
revenue $ 794 $ 820 $ 620 Deferred subscription services revenue 9
126 784 Deferred product support revenue 3,950 4,826 7,211 Deferred
other services revenue 1,063 628 856 Total
non-current deferred revenue and advance payments $ 5,816 $ 6,400 $
9,471
Total current and non-current: Deferred product
licenses revenue $ 2,613 $ 4,580 $ 2,940 Deferred subscription
services revenue 13,856 17,450 18,525 Deferred product support
revenue 155,859 173,011 164,195 Deferred other services revenue
8,846 10,093 9,537 Total current and
non-current deferred revenue and advance payments $ 181,174 $
205,134 $ 195,197
MICROSTRATEGY INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP
MEASURES
(in thousands)
Three Months Ended
Six Months Ended June 30, June 30, 2018
2017 2018 2017 (unaudited)
(as adjusted,unaudited)
(unaudited)
(as adjusted,unaudited)
Reconciliation of non-GAAP income from operations: (Loss)
income from operations $ (1,797 ) $ 14,076 $ (1,082 ) $ 34,911
Share-based compensation expense 3,378 3,774
8,121 6,889 Non-GAAP income from operations $ 1,581 $ 17,850
$ 7,039 $ 41,800
MICROSTRATEGY INCORPORATED
WORLDWIDE EMPLOYEE HEADCOUNT
June 30, March
31, December 31,
September 30, June 30, 2018
2018 2017 2017 2017 Subscription
services 54 57 53 50 49 Product
support 184 182 172 163 176 Consulting 443 441 441 447 448
Education 39 42 41 41 42 Sales and marketing 687 667 652 635 642
Research and development 651 604 559 539 526 General and
administrative 322 313 298 303
301 Total headcount 2,380 2,306 2,216
2,178 2,184
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MicroStrategy IncorporatedInvestor RelationsClaudia Cahill,
703-848-8600ir@microstrategy.com
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