MicroStrategy Incorporated
10-30-08

MicroStrategy Announces Third Quarter 2008 Financial Results

Total Revenues of $90.6 Million and Diluted EPS of $0.90 Per Share

MCLEAN, Va., Oct 30, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- MicroStrategy(R) Incorporated (Nasdaq: MSTR), a leading worldwide provider of business intelligence software, today announced financial results for the three-month period ended September 30, 2008 (the third quarter of its 2008 fiscal year).

Third quarter 2008 revenues were $90.6 million versus $91.2 million for the third quarter of 2007, a 1% decrease. Product licenses revenues for the third quarter of 2008 were $24.8 million versus $30.2 million for the third quarter of 2007, an 18% decrease. Product support and other services revenues for MicroStrategy's core business intelligence (BI) business in the third quarter of 2008 were $63.2 million versus $59.2 million for the third quarter of 2007, a 7% increase.

Operating expenses for the third quarter of 2008 were $56.6 million versus $50.0 million for the third quarter of 2007, a 13% increase. The increase in third quarter operating expenses was primarily due to an increase in the worldwide employee headcount and related expenses of the Company's core BI business. During the third quarter of 2008, MicroStrategy capitalized $5.2 million in software development costs as compared to $0.2 million in capitalized software development costs during the third quarter of 2007. Consolidated income from continuing operations for the third quarter of 2008 was $11.1 million, or 12% of revenue, versus $19.4 million, or 21% of revenue, for the third quarter of 2007. Income from discontinued operations for the third quarter of 2008, which reflects the financial results of the Company's Alarm.com business, was $52,000. Net income for the third quarter of 2008 was $11.1 million, or $0.90 per share on a diluted basis, compared to $19.3 million, or $1.51 per share on a diluted basis, for the third quarter of 2007.

For the third quarter of 2008, MicroStrategy's effective tax rate on income from continuing operations was 40.7%, compared to 32.7% in the third quarter of 2007. The increase in the effective tax rate was primarily attributable to an increase in cross border withholding taxes and, to a lesser extent, net losses in certain foreign subsidiaries for which the Company is not currently able to recognize a tax benefit from those losses for financial reporting purposes.

As of September 30, 2008, MicroStrategy had cash and cash equivalents of approximately $127.3 million and 9,118,021 shares of class A common stock and 2,770,244 shares of class B common stock outstanding.

New Customers and New Deals with Existing Customers in Q3 2008 Included:

24 Hour Fitness; Air National Guard; AmerisourceBergen Services Corporation; Avon Products, Inc.; Booz, Allen & Hamilton Inc.; Cabela's Incorporated; Cancer Care Ontario; Capital Group Companies; Catalina Marketing Corporation; Dana-Farber Cancer Institute; GE Healthcare; Honeywell Federal Manufacturing & Technologies, LLC; Meijer Great Lakes Limited Partnership; Memorial Sloan Kettering Cancer Center; Meredith Corporation; National Aeronautics and Space Administration; Nordstrom, Inc.; NTT America, Inc.; Pacific Sunwear; PMSI, Inc.; PPL Services Corporation; Ross Stores, Inc.; Ryder System, Inc.; Saint-Gobain Abrasives Inc.; SOCAN; State of Tennessee; The Advisory Board; Transportation Security Administration; U.S. Department of State; and U.S. Postal Service.

Examples of Customer Deals from Q3 2008:

24 Hour Fitness

24 Hour Fitness, the largest fitness club chain in the U.S., has selected MicroStrategy to support its enterprise business intelligence applications. A new MicroStrategy customer, 24 Hour Fitness plans to use the MicroStrategy Business Intelligence Platform(TM) for reporting on and analyzing a wide range of key performance indicators for its 425 clubs. Club managers, field management, and corporate management will use MicroStrategy to gain greater insights into club traffic, member preferences, and sales and financial data to help them make more informed decisions. MicroStrategy was selected for its data and user scalability, broad range of reporting features and functionality, and excellent query performance.

Cabela's Incorporated

Cabela's, a leading specialty retailer of hunting, fishing, and outdoor gear, has chosen MicroStrategy as its enterprise reporting standard. MicroStrategy will be used across the organization for enhanced insights into key business areas, including inventory planning, customer service, sales administration, forecast analysis, and category management. In addition, MicroStrategy will be used to help Cabela's improve its online business by enabling Cabela's employees to review every item purchased online and better understand the items that customers typically purchase together.

Meredith Corporation

Meredith Corporation, headquartered in Des Moines, Iowa, is one of the nation's leading media and marketing companies with businesses centering on magazine and book publishing, television broadcasting, integrated marketing, and interactive media. Meredith Corporation recently selected MicroStrategy to expand its enterprise business intelligence deployment. Meredith Corporation relies on MicroStrategy for reporting, analysis, and Dynamic Enterprise Dashboards. End users in Consumer Marketing, Interactive Media, and Retail areas use the software to monitor customer behavior and understand their preferences to provide them with better products. MicroStrategy was selected for its intuitive dashboards, robust reporting, analytical capabilities, data scalability, and open platform to develop advanced visualizations.

NTT America, Inc.

NTT America, Inc., a wholly owned U.S. subsidiary of NTT Communications Corporation, selected MicroStrategy to analyze and monitor key customer service performance metrics. NTT America chose MicroStrategy's Dynamic Enterprise Dashboards(TM) to monitor customer service data, including response times to trouble tickets. NTT America executives and managers will use the MicroStrategy information dashboards for at-a-glance insights into customer service performance to help them make data-driven decisions. With MicroStrategy, NTT America expects to be able to improve its service response times, allocate resources more efficiently, and address other critical service areas to improve customer satisfaction and retention.

Latest Release of MicroStrategy Advanced Visualizations

In the third quarter of 2008, MicroStrategy announced the latest release of advanced visualization widgets for its Dynamic Enterprise Dashboards. MicroStrategy's library of advanced visualization widgets enables users to view data in a highly visual and interactive manner to augment data comprehension and enhance decision making. MicroStrategy leverages Adobe(R) Flash(R) to incorporate visualization, interactivity, and animation into its widgets.

MicroStrategy customers can use Adobe(R) Flex(TM) 2 and Flex 3 to create their own MicroStrategy-compatible visualization widgets to include in dashboards and reports. Some of the newest widgets include:

-- The Bubble Grid widget, which enables users to plot metric values as bubbles of different colors and sizes within a grid

-- The Funnel widget, a variation of a stacked percent bar chart in a funnel shape, which is well-suited for a variety of business purposes, including pipeline analyses for sales forecasts and sales process analysis

-- The Waterfall widget, which displays a series of increments and decrements that users can modify to perform a scenario analysis on the data and help identify causes for fluctuations in the business

MicroStrategy Recognized by Forbes

For the second consecutive year, MicroStrategy was named to the Forbes 200 Best Small Companies in America list. To qualify, companies must have sales between $5 million and $750 million and a stock price of at least $5 as of September 29, 2008. The ranking is based on return on equity, sales growth, and profit growth over the past 12 months and also over five years. Forbes also compared a company's stock performance with that of its industry peers.

Enhanced Curriculum for MicroStrategy's Introduction to Enterprise BI Class

MicroStrategy recently updated the curriculum for its Introduction to Enterprise Business Intelligence class to address the changing BI needs of organizations and provide insights into MicroStrategy's latest product enhancements. The one-day class is offered at no charge to companies interested in learning about enterprise BI and the MicroStrategy Business Intelligence Platform(TM). MicroStrategy has offered the class since 2006, with thousands of participants attending classes held in cities around the world. Each quarter, MicroStrategy offers approximately 100 classes.

MicroStrategy Events

MicroStrategy held numerous Business Intelligence Symposia during the third quarter, and has several more planned in the fourth quarter of 2008, including in Milan, Washington D.C., Paris, and Zurich. The Company's 12th annual user conference, MicroStrategy World 2009, will be held January 13-16, 2009 at the Wynn Las Vegas in Las Vegas, Nevada. The event will feature more than 100 educational sessions, dozens of customer speakers from industry- leading organizations, and an exhibit hall showcasing MicroStrategy partners. MicroStrategy World 2009 will also include an update on the Company's latest technology advances, insightful keynote presentations, and networking opportunities.

About MicroStrategy Incorporated

Founded in 1989, MicroStrategy is a global leader in business intelligence (BI) technology. MicroStrategy provides integrated reporting, analysis, and monitoring software that helps leading organizations worldwide make better business decisions every day. Companies choose MicroStrategy for its advanced technical capabilities, sophisticated analytics, and superior data and user scalability. More information about MicroStrategy (Nasdaq: MSTR) is available at www.microstrategy.com.

MicroStrategy, MicroStrategy 8, MicroStrategy Business Intelligence Platform, MicroStrategy Dynamic Enterprise Dashboards, MicroStrategy Mobile, and MicroStrategy Integrity Manager 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 ability of the Company to implement and achieve widespread customer acceptance of its MicroStrategy 8 software on a timely basis; the Company's ability to recognize deferred revenue through delivery of products or satisfactory performance of services; continued acceptance of the Company's products in the marketplace; the timing of significant orders; delays in the Company's ability to develop or ship new products; market acceptance of new products; the Company's ability to effect the sale of its Alarm.com business on acceptable terms, or at all; competitive factors; general economic conditions, including significant downturns in industries, including the financial services and retail industries, in which we have 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.

    Contact:
    MicroStrategy Incorporated
    Investor Relations
    ir@microstrategy.com
    (703) 848-8600



                            MICROSTRATEGY INCORPORATED
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)

                                  Three Months Ended       Nine Months Ended
                                      September 30,          September 30,
                                    2008        2007        2008        2007
                               (unaudited) (unaudited) (unaudited) (unaudited)
    Revenues
    Product licenses             $24,787     $30,210     $67,966     $68,608
    Product support and
     other services               65,841      61,022     197,422     171,539
      Total revenues              90,628      91,232     265,388     240,147

    Cost of Revenues
    Product licenses                 422         713       1,442       2,156
    Product support and
     other services               16,304      11,784      45,898      34,925
      Total cost of revenues      16,726      12,497      47,340      37,081

    Gross profit                  73,902      78,735     218,048     203,066

    Operating Expenses
    Sales and marketing           35,888      28,544     100,060      79,223
    Research and development       5,922       9,279      24,449      25,126
    General and administrative    14,744      12,170      47,055      37,176
      Total operating expenses    56,554      49,993     171,564     141,525

    Income from continuing
     operations before financing
     and other income and income
     taxes                        17,348      28,742      46,484      61,541

    Financing and Other Income
    Interest income, net             623         927       2,081       2,782
    Other income (expense), net      694        (828)       (269)       (791)
      Total financing and
       other income                1,317          99       1,812       1,991

    Income from continuing
     operations before income
     taxes                        18,665      28,841      48,296      63,532
      Provision for income taxes   7,593       9,439      20,365      22,797
    Income from continuing
     operations                   11,072      19,402      27,931      40,735
      Income (loss) from
       discontinued operations,
       net of tax provision
       (benefit) ($53 and ($54)
       for the three months
       ended, respectively, and
       $176 and $46 for the nine
       months ended,
       respectively)                  52        (67)        (383)         58
    Net Income                   $11,124    $19,335      $27,548     $40,793

    Basic earnings (loss) per
    share (1):
      From continuing
       operations                  $0.93      $1.58        $2.35       $3.28
      From discontinued
       operations                  $0.01     $(0.01)      $(0.03)      $0.01
         Basic earnings per
          share                    $0.94      $1.57        $2.32       $3.29
    Weighted average shares
     outstanding used in
     computing basic earnings
     per share                    11,887     12,286       11,890      12,416

    Diluted earnings (loss)
     per share (1):
      From continuing
       operations                  $0.90      $1.52        $2.26       $3.14
      From discontinued
       operations                  $0.00     $(0.01)      $(0.03)      $0.01
         Diluted earnings per
          share                    $0.90      $1.51        $2.23       $3.15
    Weighted average shares
     outstanding used in
     computing diluted
     earnings per share           12,306     12,771       12,332      12,953

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



                          MICROSTRATEGY INCORPORATED
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share data)
                                 (unaudited)

                        Core BI Business     Angel.com        Consolidated
                          Three Months      Three Months      Three Months
                             Ended             Ended              Ended
                          September 30,     September 30,      September 30,
                        2008     2007      2008     2007      2008      2007

    Revenues
    Product licenses  $24,787  $30,210        $-       $-   $24,787   $30,210
    Product support
     and other
     services          63,153   59,197         -        -    63,153    59,197
    Angel.com
     telephony
     services               -        -     2,688    1,825     2,688     1,825
      Total revenues   87,940   89,407     2,688    1,825    90,628    91,232

    Cost of Revenues
    Product licenses      422      713         -        -       422       713
    Product support
     and services
     revenues          15,908   11,277         -        -    15,908    11,277
    Angel.com
     telephony
     services               -        -       396      507       396       507
      Total cost of
       revenues        16,330   11,990       396      507    16,726    12,497
    Gross profit       71,610   77,417     2,292    1,318    73,902    78,735

    Operating
     Expenses
    Sales and
     marketing         33,767   26,932     2,121    1,612    35,888    28,544
    Research and
     development        5,234    8,615       688      664     5,922     9,279
    General and
     administrative    14,679   12,163        65(a)     7(a) 14,744    12,170
      Total
       operating
        expenses       53,680   47,710     2,874    2,283    56,554    49,993
    Income (loss)
     from continuing
     operations        17,930   29,707      (582)    (965)   17,348    28,742

    Financing and
     Other Income
    Interest income,
     net                  623      927         -        -       623       927
    Other income
     (expense), net       694     (828)        -        -       694      (828)
      Total financing
       and other
       income           1,317       99         -        -     1,317        99
    Income (loss)
     from continuing
     operations
     before
     income taxes     $19,247  $29,806     $(582)   $(965)  $18,665   $28,841
      Provision for
      income taxes                                            7,593     9,439
    Income from
     continuing
     operations                                              11,072    19,402
    Income (loss)
     from
     discontinued
     operations,
     net of tax                                                  52       (67)
    Net income                                              $11,124   $19,335

    Basic earnings
     (loss) per
     share:
      From continuing
       operations
                                                              $0.93     $1.58
      From
       discontinued
       operations                                             $0.01    $(0.01)
        Basic
         earnings
         per share                                            $0.94     $1.57

    Diluted earnings
     (loss) per share:
      From continuing
       operations                                             $0.90     $1.52
      From
       discontinued
       operations                                             $0.00    $(0.01)
        Diluted
         earnings
         per share                                            $0.90     $1.51

     Basic weighted
      average shares
      outstanding                                            11,887    12,286
     Diluted weighted
      average shares
      outstanding                                            12,306    12,771

    (a) An insignificant amount of general and administrative services is
        provided to the Angel.com business unit by MicroStrategy's core
        business operations.



                          MICROSTRATEGY INCORPORATED
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share data)
                                 (unaudited)

                        Core BI Business     Angel.com        Consolidated
                          Nine Months       Nine Months        Nine Months
                             Ended             Ended              Ended
                         September 30,      September 30,      September 30,
                        2008     2007      2008     2007      2008      2007

    Revenues
    Product licenses  $67,966  $68,608       $-       $-    $67,966   $68,608
    Product support
     and other
     services         189,629  166,622        -        -    189,629   166,622
    Angel.com
     telephony
     services               -        -    7,793    4,917      7,793     4,917
      Total
       revenues       257,595  235,230    7,793    4,917    265,388   240,147

    Cost of Revenues
    Product licenses    1,442    2,156        -        -      1,442     2,156
    Product support
     and services
     revenues          44,602   33,482        -        -     44,602    33,482
    Angel.com
     telephony
     services               -        -    1,296    1,443      1,296     1,443
      Total cost of
       revenues        46,044   35,638    1,296    1,443     47,340    37,081
    Gross profit      211,551  199,592    6,497    3,474    218,048   203,066

    Operating
     Expenses
    Sales and
     marketing         93,962   74,684    6,098    4,539    100,060    79,223
    Research and
     development       22,229   23,048    2,220    2,078     24,449    25,126
    General and
     administrative    46,840   37,169      215(a)     7(a)  47,055    37,176
      Total
       operating
       expenses       163,031  134,901    8,533    6,624    171,564   141,525
    Income (loss)
     from
     continuing
     operations        48,520   64,691   (2,036)  (3,150)    46,484    61,541

    Financing and
     Other Income
    Interest income,
     net                2,081    2,782        -        -      2,081     2,782
    Other expense,
     net                 (269)    (791)       -        -       (269)     (791)
      Total
       financing
       and other
       income           1,812    1,991        -        -      1,812     1,991
    Income (loss)
     from continuing
     operations
     before income
     taxes            $50,332  $66,682  $(2,036) $(3,150)   $48,296   $63,532
      Provision for
       income taxes                                          20,365    22,797
    Income from
     continuing
     operations                                              27,931    40,735
      Income (loss)
       from
       discontinued
       operations,
       net of tax                                              (383)       58
    Net income                                              $27,548   $40,793

    Basic earnings
    (loss) per share:
      From
       continuing
       operations                                             $2.35     $3.28
      From
       discontinued
       operations                                            $(0.03)    $0.01
        Basic
         earnings
         per share                                            $2.32     $3.29

    Diluted earnings
     (loss) per share:
      From
       continuing
       operations                                             $2.26     $3.14
      From
       discontinued
       operations                                            $(0.03)    $0.01
        Diluted
         earnings
         per share                                            $2.23     $3.15

    Basic weighted
     average shares
     outstanding                                             11,890    12,416
    Diluted weighted
     average shares
     outstanding                                             12,332    12,953

    (a) An insignificant amount of general and administrative services is
        provided to the Angel.com business unit by MicroStrategy's core
        business operations.



                           MICROSTRATEGY INCORPORATED
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except per share data)

                                               September 30,      December 31,
                                                    2008              2007
    Assets                                     (unaudited)         (audited)
    Current assets
      Cash and cash equivalents                   $127,287           $85,194
      Restricted cash and investments                  514             2,982
      Accounts receivable, net                      45,196            49,392
      Prepaid expenses and other current
       assets                                       11,553            12,106
      Deferred tax assets, net                      24,535            29,652
      Assets held-for-sale                           7,663             4,272
    Total current assets                           216,748           183,598

    Property and equipment, net                      8,543             9,473
    Capitalized software development
     cost, net                                       9,573             2,340
    Deposits and other assets                       37,313            11,433
    Deferred tax assets, net                        26,710            35,347
    Total Assets                                  $298,887          $242,191

    Liabilities and Stockholders' Equity
    Current liabilities
      Accounts payable and accrued expenses        $50,130           $22,083
      Accrued compensation and employee
       benefits                                     35,969            38,604
      Deferred revenue and advance
       payments                                     69,757            64,234
      Liabilities held-for-sale                      7,338             3,436
    Total current liabilities                      163,194           128,357

    Deferred revenue and advance payments            1,569             1,368
    Other long-term liabilities                      9,647             9,137

    Total Liabilities                              174,410           138,862

    Stockholders' Equity
      Preferred stock undesignated,
       $0.001 par value; 5,000 shares
       authorized; no shares issued or
       outstanding                                       -                 -
      Class A common stock, $0.001 par
       value; 330,000 shares authorized;
       14,165 shares issued and 9,118
       shares outstanding, and 14,113
       shares issued and 9,184 shares
       outstanding, respectively                        14                14
      Class B common stock, $0.001 par
       value; 165,000 shares authorized;
       2,770 issued and outstanding,
       respectively                                      3                 3
      Additional paid-in capital                   450,622           448,229
      Treasury stock, at cost; 5,047 and
       4,929 shares, respectively                 (366,191)         (357,804)
      Accumulated other comprehensive income         2,523             2,929
    Retained earnings                               37,506             9,958
    Total Stockholders' Equity                     124,477           103,329
    Total Liabilities and Stockholders' Equity    $298,887          $242,191



                           MICROSTRATEGY INCORPORATED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

                                                      Nine Months Ended
                                                         September 30,
                                                     2008              2007

    Operating activities:
      Net income                                   $27,548           $40,793
      Plus:  Loss (income) from
       discontinued operations, net                    383               (58)
          Income from continuing
           operations                               27,931            40,735
      Adjustments to reconcile net
       income to net cash provided by
       operating activities:
        Depreciation and amortization                4,825             5,710
        Bad debt expense                             1,074             1,447
        Deferred taxes                              13,655            18,559
        Stock-based compensation                        45               413
        Excess tax benefits from stock-based
         payment arrangements                         (241)           (2,269)
        Other, net                                      49               116
      Changes in operating assets and liabilities:
        Accounts receivable                          3,617             5,710
        Prepaid expenses and other current assets      176              (258)
        Deposits and other assets                     (218)           (1,414)
        Accounts payable and accrued expenses,
         compensation and employee benefits,
         accrued interest                              294            (8,447)
        Deferred revenue and advance payments        6,071             6,579
        Other long-term liabilities                    568                37
          Net cash provided by operating
           activities from continuing operations    57,846            66,918
          Net cash provided by (used in)
           operating activities from discontinued
           operations                                1,399            (2,184)
          Net cash provided by operating
           activities                               59,245            64,734
    Investing activities:
      Advance deposits on purchases of
       property and equipment                            -            (7,500)
      Purchases of property and equipment           (2,972)           (2,819)
      Capitalized software development costs        (8,078)           (2,650)
      Decrease in restricted cash and
       investments                                   1,062               997
          Net cash used in investing activities
           from continuing operations               (9,988)          (11,972)
          Net cash used in investing activities
           from discontinued operations               (158)              (49)
          Net cash used in investing activities    (10,146)          (12,021)
    Financing activities:
      Proceeds from sale of class A common stock
       under exercise of employee stock options
       and employee stock purchase plan              2,073             2,013
      Excess tax benefits from stock-based
       payment arrangements                            241             2,269
      Purchases of treasury stock                   (8,387)          (62,634)
          Net cash used in financing activities
           from continuing operations               (6,073)          (58,352)
          Net cash used in financing activities
           from discontinued operations                  -                 -
          Net cash used in financing activities     (6,073)          (58,352)
          Effect of foreign exchange rate changes
           on cash and cash equivalents               (933)            2,384
    Net increase (decrease) in cash and
     cash equivalents from continuing operations    42,093            (3,255)
    Cash and cash equivalents, beginning
     of period                                      85,194            78,980
    Cash and cash equivalents, end of period      $127,287           $75,725


SOURCE MicroStrategy Incorporated

http://www.microstrategy.com

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