MicroStrategy® Incorporated (Nasdaq: MSTR), a leading worldwide
provider of enterprise analytics and mobility software, today
announced financial results for the three-month period ended
December 31, 2018 (the fourth 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.
Fourth quarter 2018 revenues were $131.9 million versus $136.4
million for the fourth quarter of 2017, a 3.3% decrease. Product
licenses and subscription services revenues for the fourth quarter
of 2018 were $38.3 million versus $39.1 million for the fourth
quarter of 2017, a 2.0% decrease. Product support revenues for the
fourth quarter of 2018 were $73.7 million versus $75.0 million for
the fourth quarter of 2017, a 1.8% decrease. Other services
revenues for the fourth quarter of 2018 were $20.0 million versus
$22.3 million for the fourth quarter of 2017, a 10.5% decrease.
Foreign currency effects had an unfavorable impact on revenues for
the fourth quarter of 2018.
Operating expenses for the fourth quarter of 2018 were $108.2
million versus $94.5 million for the fourth quarter of 2017, a
14.5% 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.
Loss from operations for the fourth quarter of 2018 was $2.2
million versus income from operations of $17.1 million for the
fourth quarter of 2017. Net income for the fourth quarter of 2018
was $3.3 million, or $0.30 per share on a diluted basis, as
compared to net loss of $25.5 million, or $2.23 per share on a
diluted basis, for the fourth quarter of 2017. The net loss in the
fourth quarter of 2017 included an estimated one-time tax charge of
$44.0 million resulting from the enactment of U.S. corporate tax
reform legislation. Excluding the impact of this legislation,
non-GAAP net income for the fourth quarter of 2017 was $18.5
million, or $1.62 per share on a diluted basis.
Additionally, non-GAAP income from operations, which excludes
share-based compensation expense, was $1.3 million for the fourth
quarter of 2018 versus $20.8 million for the fourth 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 December 31, 2018 and 2017. An explanation of
non-GAAP financial measures is also included under the heading
“Non-GAAP Financial Measures” below.
As of December 31, 2018, MicroStrategy had cash and cash
equivalents and short-term investments of $576.1 million, as
compared to $675.2 million as of December 31, 2017, a decrease of
$99.1 million. As of December 31, 2018, MicroStrategy had 8.6
million shares of class A common stock and 2.0 million shares of
class B common stock outstanding. During the fourth quarter of
2018, MicroStrategy repurchased an aggregate of 0.9 million shares
of its class A common stock at an average price per share of
$126.02 for an aggregate cost of $111.0 million.
MicroStrategy expects to report a material weakness in its
internal control over financial reporting as of December 31, 2018
in its upcoming Annual Report on Form 10-K for the year ended
December 31, 2018. The material weakness relates to general
information technology controls in the areas of user access,
program change-management and other matters impacting information
technology systems that support MicroStrategy’s financial reporting
processes. There have been no misstatements identified in the
financial statements as a result of this material weakness and
MicroStrategy expects to timely file its Form 10-K. Remediation of
this material weakness is expected to be completed prior to the end
of fiscal year 2019.
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 fourth quarter 2018
financial results on a conference call today beginning at
approximately 5:00 p.m. EST. To access the conference call, dial
(844) 824-7425 (domestically) or (716) 220-9429 (internationally)
and use conference ID 1957548. 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 February 5,
2019 at (855) 859-2056 (domestically) or (404) 537-3406
(internationally) using the passcode 1957548.
Recent Business Highlights
- MicroStrategy announced the general
availability of MicroStrategy 2019™, the industry’s first and only
enterprise platform for HyperIntelligence™, transformational
mobility, and federated analytics. On January 7, 2019, Founder,
Chairman of the Board, President & CEO Michael J. Saylor and
other members of MicroStrategy’s management team rang the Nasdaq
opening bell to celebrate the launch of MicroStrategy 2019.
MicroStrategy 2019 delivers modern analytics on an enterprise
platform that can be deployed on-premises or on multiple private
and public cloud platforms. It is designed to make every enterprise
a more Intelligent Enterprise by delivering:
- HyperIntelligence. This new
category of analytics is designed to transform the way people
interact with information and find answers by seamlessly delivering
intelligence through zero-click experiences. With the HyperCard™
application, users with Google Chrome can hover over highlighted
words on websites and other browser-based applications to instantly
bring up relevant, contextual insights. With HyperIntelligence,
users can also leverage APIs to design and deploy AI applications
that deliver zero-click experiences via voice assistants, image
recognition software, and GPS applications.
- Transformational mobility. This
category of analytical applications is targeted at the increasingly
mobile workforce and delivers more ways for organizations to
quickly deploy mobile productivity apps for a variety of business
functions and roles. Users can build apps using mobile dossiers, no
code drag-and-drop, and customized development using XCode or
JavaScript.
- Federated analytics. This
mainstream category of analytics is targeted at analysts and data
scientists, who enable long-term decision making. Whether it’s
with dossiers, dashboards, or predictive models, or reporting for
project performance, financial statements, or billing,
MicroStrategy 2019 is designed to empower users with trusted
analytics. Analysts who access data using Excel, Power BI,
Qlik, or Tableau and data scientists who leverage RStudio or
Jupyter Notebook can boost their productivity by using the
MicroStrategy 2019 platform for trusted, scalable, federated
analytics.
At the core of MicroStrategy 2019 is its Enterprise
Semantic Graph™. This proprietary metadata foundation delivers a
robust business glossary and index for a vast range of corporate
information, making it a powerful method to consolidate disparate
sources of data and deliver a single version of truth.
Learn more
about MicroStrategy 2019 today. 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 announced that its
customer Corporación Hijos de Rivera S.L., producer of Estrella
Galicia beer and other leading beverage brands, piloted a new
voice-powered business analytics and artificial intelligence (AI)
application with Amazon’s customizable virtual assistant, Alexa, to
simplify decision-making for its employees. Hijos de Rivera’s
Estrella Galicia business created a voice-activated AI application
for its users to glean data from its MicroStrategy analytics
platform. By implementing Alexa across the business, Estrella
Galicia is driving adoption to more decision makers, who can turn
to Alexa for a direct pathway to the data they need. Users can more
easily discern opportunities to be explored and make data-driven
decisions to accelerate productivity and drive out operational
inefficiencies.
- MicroStrategy released the results of a
Harvard Business Review Analytic Services (HBR-AS) study, “An
Inflection Point for the Data-Driven Enterprise”, which polled 729
business leaders and personnel across various industries around the
world. The HBR-AS study revealed concerning statistics for
data-driven transformation, including that nearly one-third (32%)
of respondents indicate that their organizations are still
operating on static and backward-looking reporting. While 75% say
it’s very important to deliver actionable intelligence to employees
across the enterprise – the foundation for an Intelligent
Enterprise – less than a quarter (24%) indicate their organizations
are able to do so. Download An Inflection Point for
the Data-Driven Enterprise today to learn more about these
findings.
- MicroStrategy won a NetworkWorld Asia
2018 Readers’ Choice Product Excellence Award in the Data Analytics
and Business Intelligence category. MicroStrategy secured the top
spot for the only award related to analytics and business
intelligence. Readers chose MicroStrategy as the top technology
vendor out of 21 business intelligence providers.
MicroStrategy World™ 2019
MicroStrategy will host its 22nd annual enterprise analytics and
mobility conference, MicroStrategy World 2019, from February 4 to
February 6 at the Phoenix Convention Center in Phoenix, Arizona.
Keynote presentations at MicroStrategy World 2019 will take place
on Tuesday, February 5, from 9:00 a.m. to 11:00 a.m. (MST) and
Wednesday, February 6, from 10:00 a.m. to 12:00 p.m. (MST). Anyone
can register to watch the MicroStrategy World 2019 live stream.
Join or follow the conversation on Twitter using the hashtag
#analytics19.
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 leading worldwide provider of
enterprise analytics and mobility software. A pioneer in the BI and
analytics space, MicroStrategy delivers a world-class software
platform and expert services to enable each of our customers to
become a more Intelligent Enterprise. To learn more, visit
MicroStrategy online, and follow us on LinkedIn, Twitter and
Facebook.
MicroStrategy, Intelligent Enterprise, MicroStrategy Library,
MicroStrategy 2019, HyperIntelligence, HyperCard, Enterprise
Semantic Graph, 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, 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 press release.
MSTR-F
MICROSTRATEGY INCORPORATED
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share
data)
Three Months Ended Twelve Months Ended
December 31, December 31, 2018
2017 2018 2017 (unaudited)
(as adjusted,unaudited)
(unaudited)
(as adjusted,unaudited)
Revenues Product licenses $ 31,200 $ 30,529 $ 88,057 $
93,259 Subscription services 7,084 8,525
29,570 32,368 Total product licenses and subscription
services 38,284 39,054 117,627 125,627 Product support 73,662
75,025 296,216 289,184 Other services 19,971 22,302
83,795 89,032
Total revenues
131,917 136,381 497,638
503,843 Cost of revenues Product licenses 609
1,994 4,864 7,176 Subscription services 3,667 3,404
13,620 13,435 Total product licenses and subscription
services 4,276 5,398 18,484 20,611 Product support 5,557 4,387
20,242 17,481 Other services 16,052 14,968
60,773 58,557
Total cost of revenues
25,885 24,753 99,499
96,649 Gross profit 106,032
111,628 398,139 407,194
Operating expenses Sales and marketing 57,783 51,832
205,525 175,045 Research and development 28,028 21,419 102,499
78,766 General and administrative 22,378 21,240
86,134 80,161
Total operating expenses
108,189 94,491 394,158
333,972 (Loss) income from operations
(2,157 ) 17,137 3,981 73,222
Interest income, net 3,157 1,756 11,855 5,205 Other income
(expense), net 981 (576 ) 4,646 (6,953
)
Income before income taxes 1,981 18,317
20,482 71,474 (Benefit from) provision for income
taxes (1,320 ) 43,816 (2,019 ) 53,279
Net income (loss) $ 3,301 $
(25,499 ) $ 22,501 $
18,195 Basic earnings (loss) per share (1):
$ 0.30 $ (2.23 ) $
1.98 $ 1.59 Weighted average shares
outstanding used in computing basic earnings (loss) per share
11,129 11,447 11,375
11,444 Diluted earnings (loss) per share
(1): $ 0.30 $ (2.23 )
$ 1.97 $ 1.58 Weighted average shares
outstanding used in computing diluted earnings (loss) per share
11,151 11,447 11,412
11,547
(1) Basic and fully diluted earnings (loss) per share for class
A and class B common stock are the same.
MICROSTRATEGY INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share
data)
December 31, December 31, 2018
2017 (unaudited)
(as adjusted,unaudited)
Assets Current assets Cash and cash equivalents $ 109,924 $
420,244 Restricted cash 862 938 Short-term investments 466,186
254,927 Accounts receivable, net 171,359 165,364 Prepaid expenses
and other current assets 30,068 19,180 Total current
assets 778,399 860,653 Property and equipment, net 51,919
53,359 Capitalized software development costs, net 0 2,499 Deposits
and other assets 8,134 7,411 Deferred tax assets, net 17,316
9,297
Total Assets $ 855,768 $
933,219 Liabilities and Stockholders' Equity
Current liabilities Accounts payable and accrued expenses $ 33,684
$ 30,711 Accrued compensation and employee benefits 48,045 41,498
Deferred revenue and advance payments 176,540 198,734
Total current liabilities 258,269 270,943 Deferred revenue
and advance payments 6,469 6,400 Other long-term liabilities 61,262
50,146 Deferred tax liabilities 37 4
Total
Liabilities 326,037 327,493
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 8,552 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 576,957 559,918 Treasury stock, at cost; 7,285 shares and
6,405 shares, respectively (586,161 ) (475,184 ) Accumulated other
comprehensive loss (10,217 ) (5,659 ) Retained earnings
549,134 526,633
Total Stockholders' Equity
529,731 605,726 Total Liabilities and
Stockholders' Equity $ 855,768 $
933,219
MICROSTRATEGY INCORPORATED
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
Twelve Months Ended December 31, 2018
2017 (unaudited)
(as adjusted,unaudited)
Operating activities: Net income $ 22,501 $ 18,195
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 3,701 15,532
Bad debt expense 1,912 2,269 Net realized loss on short-term
investments 153 0 Deferred taxes (8,274 ) (3,605 ) Share-based
compensation expense 14,636 14,267 Changes in operating assets and
liabilities: Accounts receivable (8,357 ) 15,348 Prepaid expenses
and other current assets (6,561 ) (4,739 ) Deposits and other
assets (1,201 ) 3,029 Accounts payable and accrued expenses 3,378
(9,093 ) Accrued compensation and employee benefits 5,116 (6,209 )
Deferred revenue and advance payments (22,126 ) (589 ) Other
long-term liabilities 5,749 33,917 Net cash provided
by operating activities 10,627 78,322
Investing activities: Proceeds from redemption of short-term
investments 491,800 390,720 Purchases of property and equipment
(6,846 ) (3,982 ) Purchases of short-term investments
(694,018 ) (456,468 ) Net cash used in investing activities
(209,064 ) (69,730 )
Financing
activities: Proceeds from sale of class A common stock under
exercise of employee stock options 2,471 1,677 Purchases of
treasury stock (110,977 ) 0 Payments on capital lease obligations
and other financing arrangements (9 ) (21 ) Net cash
(used in) provided by financing activities (108,515 )
1,656
Effect of foreign exchange rate changes on cash,
cash equivalents, and restricted cash (3,444 )
8,222
Net (decrease) increase in cash, cash equivalents, and
restricted cash (310,396 ) 18,470
Cash, cash equivalents,
and restricted cash, beginning of year 421,182
402,712
Cash, cash equivalents, and restricted cash, end of
year $ 110,786 $ 421,182
MICROSTRATEGY INCORPORATED
REVENUE AND COST OF REVENUE
DETAIL
(in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31, 2018
2017 2018 2017 (unaudited)
(as adjusted,unaudited)
(unaudited)
(as adjusted,unaudited)
Revenues Product licenses and subscription services: Product
licenses $ 31,200 $ 30,529 $ 88,057 $ 93,259 Subscription services
7,084 8,525 29,570 32,368 Total product
licenses and subscription services 38,284 39,054
117,627 125,627 Product support 73,662 75,025 296,216
289,184 Other services: Consulting 17,611 20,336 74,609 79,818
Education 2,360 1,966 9,186 9,214 Total
other services 19,971 22,302 83,795
89,032
Total revenues 131,917
136,381 497,638 503,843
Cost of revenues Product licenses and subscription services:
Product licenses 609 1,994 4,864 7,176 Subscription services
3,667 3,404 13,620 13,435 Total product
licenses and subscription services 4,276 5,398
18,484 20,611 Product support 5,557 4,387 20,242 17,481
Other services: Consulting 13,746 13,439 53,605 52,018 Education
2,306 1,529 7,168 6,539 Total other
services 16,052 14,968 60,773 58,557
Total cost of revenues 25,885
24,753 99,499 96,649
Gross profit $ 106,032 $ 111,628
$ 398,139 $ 407,194
MICROSTRATEGY INCORPORATED
DEFERRED REVENUE DETAIL
(in thousands)
December 31, December 31, 2018
2017 (unaudited)
(as adjusted,unaudited)
Current: Deferred product licenses revenue $ 1,768 $ 3,760
Deferred subscription services revenue 13,508 17,324 Deferred
product support revenue 152,501 168,185 Deferred other services
revenue 8,763 9,465 Total current deferred revenue
and advance payments $ 176,540 $ 198,734
Non-current:
Deferred product licenses revenue $ 542 $ 820 Deferred subscription
services revenue 2,384 126 Deferred product support revenue 3,091
4,826 Deferred other services revenue 452 628 Total
non-current deferred revenue and advance payments $ 6,469 $ 6,400
Total current and non-current: Deferred product
licenses revenue $ 2,310 $ 4,580 Deferred subscription services
revenue 15,892 17,450 Deferred product support revenue 155,592
173,011 Deferred other services revenue 9,215 10,093
Total current and non-current deferred revenue and advance payments
$ 183,009 $ 205,134
MICROSTRATEGY INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP
MEASURES
(in thousands, except per share
data)
Three Months Ended Twelve Months Ended
December 31, December 31, 2018
2017 2018 2017 (unaudited) (unaudited)
(unaudited) (unaudited)
Reconciliation of non-GAAP income from
operations: (Loss) income from operations $ (2,157 ) $ 17,137 $
3,981 $ 73,222 Share-based compensation expense 3,504
3,710 14,636 14,267 Non-GAAP income from operations $
1,347 $ 20,847 $ 18,617 $ 87,489
Reconciliation of
non-GAAP net income: Net income (loss) $ 3,301 $ (25,499 ) $
22,501 $ 18,195 Tax charges and adjustments related to U.S. tax
reform 0 44,018 (3,106 ) 44,018
Non-GAAP net income $ 3,301 $ 18,519 $ 19,395 $ 62,213
Reconciliation of non-GAAP diluted earnings per share:
Diluted earnings (loss) per share $ 0.30 $ (2.23 ) $ 1.97 $ 1.58
Impact of tax charges and adjustments related to U.S. tax reform
(per diluted share) 0.00 3.85 (0.27 )
3.81 Non-GAAP diluted earnings per share $ 0.30 $ 1.62 $ 1.70 $
5.39
MICROSTRATEGY INCORPORATED
WORLDWIDE EMPLOYEE HEADCOUNT
December 31, September 30, June 30,
March 31, December 31, 2018 2018
2018 2018 2017 Subscription services 56
55 54 57 53 Product support 202 194 184
182 172 Consulting 452 458 443 441 441 Education 47 44 39 42 41
Sales and marketing 707 699 687 667 652 Research and development
716 688 651 604 559 General and administrative 348
326 322 313 298 Total headcount 2,528
2,464 2,380 2,306 2,216
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MicroStrategy IncorporatedInvestor RelationsClaudia
Cahillir@microstrategy.com(703) 848-8600
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