MicroStrategy® Incorporated (Nasdaq: MSTR), a leading worldwide
provider of enterprise analytics and mobility software, today
announced financial results for the three-month period ended
September 30, 2018 (the third 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.
Third quarter 2018 revenues were $122.2 million versus $126.0
million for the third quarter of 2017, a 3.1% decrease. Product
licenses and subscription services revenues for the third quarter
of 2018 were $27.5 million versus $30.1 million for the third
quarter of 2017, an 8.6% decrease. Product support revenues for the
third quarter of 2018 were $74.5 million versus $72.9 million for
the third quarter of 2017, a 2.2% increase. Other services revenues
for the third quarter of 2018 were $20.2 million versus $23.0
million for the third quarter of 2017, a 12.4% decrease. Foreign
currency effects had an unfavorable impact on revenues for the
third quarter of 2018.
Operating expenses for the third quarter of 2018 were $91.5
million versus $80.4 million for the third quarter of 2017, a 13.8%
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 third quarter
of 2018 or 2017.
Income from operations for the third quarter of 2018 was $7.2
million versus $21.2 million for the third quarter of 2017. Net
income for the third quarter of 2018 was $12.7 million, or $1.10
per share on a diluted basis, as compared to net income of $18.2
million, or $1.58 per share on a diluted basis, for the third
quarter of 2017. Previously, in the fourth quarter of 2017, we
recorded an estimated one-time tax charge of $44.0 million
resulting from the enactment of U.S. corporate tax reform
legislation. This charge included a $40.3 million tax expense
related to the mandatory deemed repatriation of certain foreign
earnings and profits. During the third quarter of 2018, we recorded
a measurement-period adjustment to reduce our previously recorded
one-time tax charge by $3.1 million. Excluding the impact of this
measurement-period adjustment, non-GAAP net income for the third
quarter of 2018 was $9.6 million, or $0.83 per share on a diluted
basis.
Additionally, non-GAAP income from operations, which excludes
share-based compensation expense, was $10.2 million for the third
quarter of 2018 versus $24.8 million for the third quarter of 2017.
The tables at the end of this press release include a
reconciliation of GAAP to non-GAAP financial measures for the three
months ended September 30, 2018 and 2017. An explanation of
non-GAAP financial measures is also included under the heading
“Non-GAAP Financial Measures” below.
As of September 30, 2018, MicroStrategy had cash and cash
equivalents and short-term investments of $699.2 million, as
compared to $675.2 million as of December 31, 2017, an
increase of $24.0 million. As of September 30, 2018,
MicroStrategy had 9.4 million shares of class A common stock and
2.0 million shares of class B common stock outstanding.
The Company uses the MicroStrategy 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 third 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 5562168. 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 November 1,
2018 at (855) 859-2056 (domestically) or (404) 537-3406
(internationally) using the passcode 5562168.
Recent Business Highlights
- MicroStrategy announced that Marge
Breya was named Senior Executive Vice President & Chief
Marketing Officer on July 23. Ms. Breya’s expertise as a software
industry Chief Operating Officer, General Manager and CMO as well
as board veteran spans over 25 years at some of the world’s
best-known software companies. She previously served as COO at
Ionic Security, a privately-held provider of data protection and
control software. Before moving to Ionic Security, Ms. Breya was
EVP and CMO at Informatica Corporation. Prior to that, she was SVP
of Marketing Services at HP, EVP and GM of Solutions Management at
SAP, GM/CMO at BusinessObjects, CMO/Chief Strategy Officer at BEA
Systems, and SVP of Marketing at Sun Microsystems. Ms. Breya has
also held public company board positions at LSC Communications,
Jive Software, and Document Sciences Corporation.
- Dresner Advisory Services honored
MicroStrategy with a 2018 Technology Leader for Business
Intelligence award for its strong position in the 2018 Wisdom of
Crowds® Business Intelligence (BI) report. The Dresner Advisory
Services Industry Excellence Awards go to brands that were ranked
as leaders in two user-rating models included in the Wisdom of
Crowds series of global Dresner research reports. The reports are
based on data collected from a large base of end users in the BI
and analytics industry and provide a broad and detailed assessment
of each market, including current product usage, key buying
drivers, technology priorities, and future intentions, as well as
performance ratings of all relevant vendors.
- MicroStrategy won two Brazilian Retail
Week (BRWeek) awards. MicroStrategy received the highest scores in
both the Big Data and Business Intelligence (BI) categories. Hosted
by the Centro de Inteligência Padrão (CIP), the fourth annual
BRWeek awards recognized retailers and suppliers that received the
highest evaluations by Brazil’s retail industry. Organizations were
scored across a number of categories based on an exclusive
methodology developed by the CIP and questionnaires completed by
leading retailers operating in Brazil, including Avon, Pão de
Açúcar, Walmart, and Carrefour.
- MicroStrategy released the results of
its “2018 Global State of Enterprise Analytics” report.
MicroStrategy surveyed 500 enterprise analytics and business
intelligence professionals from around the world on the state of
their organizations’ analytics initiatives. 90% of respondents
reported that data and analytics are either very important or
somewhat important to their organizations’ digital transformation
efforts, and that their investments in data and analytics this year
and in the next five years are accelerating. The data showed that
while many analytics and business intelligence professionals are
confident about their organizations’ analytics proficiency in 2018,
they still face common challenges that hinder their ability to
become an Intelligent Enterprise. MicroStrategy also found that the
top uses for data and analytics are to drive process, cost
efficiency, strategy and change, and that when selecting an
enterprise analytics solution, security stands out as a top concern
for decision makers across the board.
- MicroStrategy announced that ESC
Clermont Graduate School of
Management in Clermont-Ferrand, France is
participating in the MicroStrategy Academic Program to
enrich its BI curriculum for its students and train its instructors
on business intelligence and analytics. Through the program, ESC
Clermont students and teachers receive free analytics resources,
including MicroStrategy Desktop™ licenses and training,
for classroom instruction so the students can graduate with bona
fide data analytics skills needed in today’s business
landscape.
Non-GAAP Financial Measures
MicroStrategy is providing supplemental financial measures for
income from operations that excludes the impact of share-based
compensation arrangements and for net income and diluted earnings
per share that exclude the impact from the enactment of U.S.
corporate tax reform legislation. These supplemental financial
measures are not measurements of financial performance under
generally accepted accounting principles in the United States
(“GAAP”) and, as a result, these supplemental financial measures
may not be comparable to similarly titled measures of other
companies. Management uses these non-GAAP financial measures
internally to help understand, manage, and evaluate business
performance and to help make operating decisions. MicroStrategy
believes that these non-GAAP financial measures are also useful to
investors and analysts in comparing its performance across
reporting periods on a consistent basis because in the case of the
supplemental measure for income from operations, it excludes a
significant non-cash expense that MicroStrategy believes is not
reflective of its general business performance, and in the case of
the supplemental measures for net income and diluted earnings per
share, they exclude one-time tax adjustments related to the
enactment of U.S. corporate tax reform legislation. 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 these non-GAAP financial measures
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 Library, MicroStrategy Desktop, and
Intelligent Enterprise 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; 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. The Company undertakes no
obligation to update these forward-looking 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 Nine Months Ended
September 30, September 30, 2018
2017 2018 2017 (unaudited)
(as adjusted,unaudited)
(unaudited)
(as adjusted,unaudited)
Revenues Product licenses $ 20,264 $ 22,356 $ 56,857 $
62,730 Subscription services 7,240 7,725
22,486 23,843 Total product
licenses and subscription services 27,504 30,081 79,343 86,573
Product support 74,463 72,881 222,554 214,159 Other services
20,185 23,048 63,824
66,730
Total revenues 122,152
126,010 365,721
367,462 Cost of revenues Product
licenses 377 1,763 4,255 5,182 Subscription services 3,259
3,592 9,953 10,031
Total product licenses and subscription services 3,636 5,355 14,208
15,213 Product support 5,079 4,218 14,685 13,094 Other services
14,674 14,816 44,721
43,589
Total cost of revenues
23,389 24,389
73,614 71,896 Gross
profit 98,763 101,621
292,107 295,566
Operating expenses Sales and marketing 45,429 42,005 147,742
123,213 Research and development 25,829 19,360 74,471 57,347
General and administrative 20,285 19,082
63,756 58,921
Total operating
expenses 91,543 80,447
285,969 239,481
Income from operations 7,220 21,174
6,138 56,085 Interest income, net 3,441 1,449 8,698
3,449 Other income (expense), net 798 (1,903 )
3,665 (6,377 )
Income before income
taxes 11,459 20,720 18,501 53,157
(Benefit from) provision for income taxes (1,240 )
2,536 (699 ) 9,463
Net income
$ 12,699 $ 18,184
$ 19,200 $ 43,694
Basic earnings per share (1): $ 1.11
$ 1.59 $ 1.68 $
3.82 Weighted average shares outstanding used in
computing basic earnings per share
11,467
11,447 11,458
11,443 Diluted earnings per share (1):
$ 1.10 $ 1.58 $
1.67 $ 3.78 Weighted average
shares outstanding used in computing diluted earnings per share
11,538 11,499
11,502 11,567 (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) September 30,
December 31, 2018 2017 (unaudited)
(as adjusted,unaudited)
Assets Current assets Cash and cash equivalents $ 112,082 $
420,244 Restricted cash 901 938 Short-term investments 587,093
254,927 Accounts receivable, net 110,761 165,364 Prepaid expenses
and other current assets 27,629 19,180
Total current assets 838,466 860,653 Property and equipment,
net 51,861 53,359 Capitalized software development costs, net 0
2,499 Deposits and other assets 7,549 7,411 Deferred tax assets,
net 15,628 9,297
Total Assets
$ 913,504 $ 933,219
Liabilities and Stockholders' Equity Current
liabilities Accounts payable and accrued expenses $ 23,002 $ 30,711
Accrued compensation and employee benefits 37,819 41,498 Deferred
revenue and advance payments 151,043 198,734
Total current liabilities 211,864 270,943 Deferred
revenue and advance payments 4,923 6,400 Other long-term
liabilities 61,290 50,146 Deferred tax liabilities 4
4
Total Liabilities 278,081
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
573,474 559,918 Treasury stock, at cost; 6,405 shares (475,184 )
(475,184 ) Accumulated other comprehensive loss (8,718 ) (5,659 )
Retained earnings 545,833 526,633
Total Stockholders' Equity 635,423
605,726 Total Liabilities and Stockholders'
Equity $ 913,504 $ 933,219
MICROSTRATEGY INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Nine Months Ended September 30, 2018
2017 (unaudited)
(as adjusted,unaudited)
Operating activities: Net income $ 19,200 $ 43,694
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 3,483 12,009
Bad debt expense 1,053 1,726 Deferred taxes (6,667 ) (5,508 )
Share-based compensation expense 11,132 10,557 Changes in operating
assets and liabilities: Accounts receivable 9,300 18,804 Prepaid
expenses and other current assets (1,075 ) (5,042 ) Deposits and
other assets (956 ) (1,288 ) Accounts payable and accrued expenses
(5,816 ) (14,468 ) Accrued compensation and employee benefits
(3,901 ) (10,437 ) Deferred revenue and advance payments (4,032 )
1,140 Other long-term liabilities 1,527 (1,904
) Net cash provided by operating activities 23,248
49,283
Investing activities: Proceeds
from redemption of short-term investments 348,980 340,920 Purchases
of property and equipment (4,457 ) (2,282 ) Purchases of short-term
investments (674,528 ) (411,666 ) Net cash used in
investing activities (330,005 ) (73,028 )
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 ) (17 ) Net cash provided by financing activities
2,462 1,660
Effect of foreign
exchange rate changes on cash, cash equivalents, and restricted
cash (3,904 ) 6,992
Net decrease in
cash, cash equivalents, and restricted cash (308,199 ) (15,093
)
Cash, cash equivalents, and restricted cash, beginning of
period 421,182 402,712
Cash,
cash equivalents, and restricted cash, end of period $ 112,983
$ 387,619
MICROSTRATEGY
INCORPORATED REVENUE AND COST OF REVENUE DETAIL (in
thousands) Three Months Ended Nine Months
Ended September 30, September 30, 2018
2017 2018 2017 (unaudited)
(as adjusted,unaudited)
(unaudited)
(as adjusted,unaudited)
Revenues Product licenses and subscription services: Product
licenses $ 20,264 $ 22,356 $ 56,857 $ 62,730 Subscription services
7,240 7,725 22,486 23,843 Total product
licenses and subscription services 27,504 30,081
79,343 86,573 Product support 74,463 72,881 222,554
214,159 Other services: Consulting 18,001 20,645 56,998 59,482
Education 2,184 2,403 6,826 7,248 Total
other services 20,185 23,048 63,824
66,730
Total revenues 122,152
126,010 365,721 367,462
Cost of revenues Product licenses and subscription services:
Product licenses 377 1,763 4,255 5,182 Subscription services
3,259 3,592 9,953 10,031 Total product
licenses and subscription services 3,636 5,355
14,208 15,213 Product support 5,079 4,218 14,685 13,094
Other services: Consulting 12,996 13,295 39,859 38,579 Education
1,678 1,521 4,862 5,010 Total other
services 14,674 14,816 44,721 43,589
Total cost of revenues 23,389
24,389 73,614 71,896
Gross profit $ 98,763 $ 101,621
$ 292,107 $ 295,566
MICROSTRATEGY INCORPORATED DEFERRED REVENUE
DETAIL (in thousands) September 30,
December 31, September 30, 2018 2017
2017 (unaudited)
(as adjusted,unaudited)
(as adjusted,unaudited)
Current: Deferred product licenses revenue $ 584 $ 3,760 $
2,752 Deferred subscription services revenue 11,736 17,324 15,583
Deferred product support revenue 131,185 168,185 141,675 Deferred
other services revenue 7,538 9,465 8,743 Total
current deferred revenue and advance payments $ 151,043 $ 198,734 $
168,753
Non-current: Deferred product licenses
revenue $ 730 $ 820 $ 646 Deferred subscription services revenue -
126 406 Deferred product support revenue 3,701 4,826 5,790 Deferred
other services revenue 492 628 990 Total
non-current deferred revenue and advance payments $ 4,923 $ 6,400 $
7,832
Total current and non-current: Deferred product
licenses revenue $ 1,314 $ 4,580 $ 3,398 Deferred subscription
services revenue 11,736 17,450 15,989 Deferred product support
revenue 134,886 173,011 147,465 Deferred other services revenue
8,030 10,093 9,733 Total current and
non-current deferred revenue and advance payments $ 155,966 $
205,134 $ 176,585
MICROSTRATEGY
INCORPORATED RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands, except per share data) Three Months
Ended Nine Months Ended September 30,
September 30, 2018 2017 2018
2017 (unaudited)
(as adjusted,unaudited)
(unaudited)
(as adjusted,unaudited)
Reconciliation of non-GAAP income from operations: Income
from operations $ 7,220 $ 21,174 $ 6,138 $ 56,085 Share-based
compensation expense 3,011 3,668 11,132
10,557 Non-GAAP income from operations $ 10,231
$ 24,842 $ 17,270 $ 66,642
Reconciliation
of non-GAAP net income: Net income $ 12,699 $ 18,184 $ 19,200 $
43,694 Measurement-period adjustment related to U.S. tax reform
(3,106 ) 0 (3,106 ) 0 Non-GAAP net
income $ 9,593 $ 18,184 $ 16,094 $ 43,694
Reconciliation of non-GAAP diluted earnings per share:
Diluted earnings per share $ 1.10 $ 1.58 $ 1.67 $ 3.78 Impact of
measurement-period adjustment related to U.S. tax reform (per
diluted share) (0.27 ) 0.00 (0.27 )
0.00 Non-GAAP diluted earnings per share $ 0.83 $ 1.58 $
1.40 $ 3.78
MICROSTRATEGY INCORPORATED WORLDWIDE
EMPLOYEE HEADCOUNT September 30, June 30,
March 31, December 31, September 30,
2018 2018 2018 2017 2017
Subscription services 55 54 57 53 50 Product support 194 184 182
172 163 Consulting 458 443 441 441 447 Education 44 39 42 41 41
Sales and marketing 699 687 667 652 635 Research and development
688 651 604 559 539 General and administrative 326 322 313 298 303
Total headcount 2,464 2,380 2,306 2,216 2,178
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MicroStrategy IncorporatedClaudia CahillInvestor
Relations703-848-8600ir@microstrategy.com
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