MicroStrategy Incorporated

MicroStrategy Announces Fourth Quarter 2010 Financial Results

01-25-11

59% Growth in License Revenue Year-Over-Year

VIENNA, Va., Jan. 25, 2011 /PRNewswire/ -- MicroStrategy® Incorporated (Nasdaq: MSTR), a leading worldwide provider of business intelligence software, today announced financial results for the three-month period ended December 31, 2010 (the fourth quarter of its 2010 fiscal year).

Fourth quarter 2010 revenues were $139.1 million, the highest quarterly total revenues in Company history, versus $105.8 million for the fourth quarter of 2009, a 32% increase.  Product licenses revenues for the fourth quarter of 2010 were $47.7 million versus $30.0 million for the fourth quarter of 2009, a 59% increase.  Product support and other services revenues for MicroStrategy's core business intelligence (BI) business in the fourth quarter of 2010 were $85.8 million versus $71.5 million for the fourth quarter of 2009, a 20% increase.  

Operating expenses for the fourth quarter of 2010 were $87.4 million versus $59.8 million for the fourth quarter of 2009, a 46% increase.  The increase in operating expenses was primarily due to an increase in the Company's worldwide employee headcount and related expenses, and to an increase in variable compensation resulting from the increase in revenue.

Net income for the fourth quarter of 2010 was $17.9 million, or $1.60 per share on a diluted basis, compared to $20.5 million, or $1.66 per share on a diluted basis, for the fourth quarter of 2009.  

For the fourth quarter of 2010, MicroStrategy's effective tax rate was 9% compared to 24% for the fourth quarter of 2009.  The lower effective tax rate in the fourth quarter of 2010 was primarily attributable to stronger results outside the U.S., the release of foreign valuation allowances, and the reinstatement of the research and development tax credit.

During the fourth quarter of 2010, MicroStrategy repurchased 309,139 shares of its class A common stock at an average price per share of $88.55 and an aggregate cost of $27.4 million.  As of December 31, 2010, MicroStrategy had 7,946,748 shares of class A common stock and 2,694,362 shares of class B common stock outstanding.

General Availability of MicroStrategy 9 Release 3:

The latest release of the MicroStrategy platform, MicroStrategy 9™ Release 3, was made generally available on October 15, 2010.  MicroStrategy 9 Release 3 features enhancements that deliver business information significantly faster and make BI easier to use.

MicroStrategy's highly-visual dashboards display a tremendous amount of information in an easy-to-use and compelling manner.  With MicroStrategy 9 Release 3, typical dashboards can contain up to 3 times more data, run up to 2 times faster, and respond to user interactions up to 5 times faster than previously. Performance tests have shown a 4.2MB dashboard reduced in size to 0.8MB, and a dashboard that took 4 seconds to run now runs in 1.3 seconds.

The latest MicroStrategy release accelerates BI performance with new features and functionality.  New algorithms automatically detect when a report can use in-memory data sources to deliver reports, analyses, and dashboards up to 6 times faster than previously.   In performance tests, a typical report request that took 7.3 seconds is now delivered within 1.2 seconds.

With MicroStrategy 9 Release 3, companies can get new BI reports up and running in less than 30 minutes. The new Data Import capability allows business users to publish personal data from Excel spreadsheets or local databases into the BI system.  Once the data is published, users can immediately create reports, charts, and dashboards from the personal data and share them with others.  New applications can be set up quickly using pre-designed dashboards and app templates that include layouts, formatting, and analytic workflows. Within minutes, a fully-functioning dashboard or mobile app can be deployed by rewiring the pre-designed dashboard template to the new data.

New MicroStrategy Mobile Enhancements for iPhone® and iPad®:

In November 2010, MicroStrategy announced enhancements to MicroStrategy Mobile™ that enable users to easily extend BI applications to the Apple® iPhone and iPad using a point-and-click interface. MicroStrategy 9 Release 3 includes major enhancements to MicroStrategy Mobile functionality, including:

  • Support for iOS4 and Multi-Tasking MicroStrategy 9 Release 3 is fully certified on Apple's latest operating system, iOS4. MicroStrategy 9 takes advantage of the iOS4 multi-tasking capability and allows users to resume their BI sessions from exactly where they left off when interrupted by a phone call or other mobile app activity.

  • Enhanced Mobile Alerts MicroStrategy's new release allows users to set information thresholds in the MicroStrategy system that will trigger mobile alerts.  Using Apple's push notification system, users will receive a notification on their iPhone or iPad whenever business conditions exceed their preset thresholds.

  • Richer Information Workflows With MicroStrategy 9 Release 3, app designers can create sequences of interlinked screens and reports that guide users through a business problem or decision-making process. This new workflow capability conveys information from one screen to the next to maintain business context and improve productivity.

  • Improved Collaboration MicroStrategy 9 Release 3 enhances information sharing and business collaboration for iPad users. Users can e-mail any iPad report or dashboard directly to colleagues.

  • New Data Visualizations for Mobile BI MicroStrategy has introduced new native visualizations for MicroStrategy Mobile that provide a richer BI experience on the iPad and the iPhone. Written in Objective-C, the new MicroStrategy visualizations include animations that provide easier viewing and data interaction.  MicroStrategy Mobile now supports RSS feeds on the iPhone, allowing mobile apps to incorporate external data feeds. On the iPad, MicroStrategy Mobile offers three new visualizations: integration with Google™ Maps, animated and interactive time series graphs, and highly compact micro-charts that condense volumes of information into a small screen space.

MicroStrategy's Latest Software Release Delivers High Performance:

In January 2011, MicroStrategy announced performance benchmark test results for MicroStrategy 9 Release 3.  The tests show that an 8-CPU configuration of MicroStrategy Intelligence Server™ can deliver a sustained output power rating of 147 KiloCycles, which equates to 147,000 round-trip queries per hour. This query volume can support more than 26,000 active users with an average user response time of 1.3 seconds.  MicroStrategy customers will be able to support up to 6 times greater usage with up to 3 times faster average response time by simply upgrading from MicroStrategy 9.0 to MicroStrategy's latest release.

The benchmark tests also show that MicroStrategy 9 Release 3 can support more than 100,000 active users while delivering average response times under 2 seconds.  In tests, a 4-node clustered configuration of MicroStrategy Intelligence Server containing a total of 32 CPU cores delivered a power rating of 560 KiloCycles, which equates to 560,000 round-trip queries per hour.

MicroStrategy also recently announced that in mobile BI application benchmark tests, MicroStrategy can support approximately 42,000 active iPhone users on an 8-CPU configuration, delivering average response times as fast as 1.6 seconds.  This user population equates to approximately 210,000 total users assuming a 20% ratio of active users to total users.

For more details, visit http://www.microstrategy.com/high-performance-bi/test-results/

MicroStrategy Recognized as a Top Software Provider for Retailers by Retail Info Systems News:

MicroStrategy was named by Retail Info Systems (RIS) News to its 2010 Software LeaderBoard, which highlights the top 20 software vendors for retailers.  The RIS Software LeaderBoard compares software companies serving the retail industry in a head-to-head ranking that is based largely on retailer evaluations. MicroStrategy was ranked in the top 10 in two other categories: Top Software Vendors for Tier One Retailers and Leaders in Product Reliability by Tier One Retailers. Tier One Retailers are defined as retailers with more than $1 billion in annual revenue.

New Customers and New Deals with Existing Customers in Q4 2010 Included:

AT&T Services; Banco Bilbao Vizcaya Argentaria, S.A.; Bank of the West; Barnes and Noble; Cabela's; Cancer Care Ontario; Carrefour; Centers for Medicare & Medicaid Services; Chevron Products Company; Cisco Systems; Classmates Online; Compania Suramericana de Seguros S.A.; Danone Group; Dean Foods Company; Dick's Sporting Goods; Express; Guess?; Herbalife; Hudson's Bay Company; IMS Health; Japan Post Network Co., Ltd.; JD Power and Associates; Kelley Blue Book; KeyBank National Association; LinkedIn; Liz Claiborne; Lund Food Holdings; Marriott International; Meredith Corporation; Metropolitan Life Insurance Co.; Michelin France; Michelin North America; PepsiCo; Polo Ralph Lauren Corporation; PPL Services Corporation; Radio Shack; Reitmans Canada Limited; Rosen's Diversified; Sanofi Pasteur; Sears Holdings Management Corporation; Sherwin-Williams; Starwood Hotels & Resorts Worldwide; SuperMedia; Target; Telefonica de Argentina; Telefonica O2 UK Limited; The Coca Cola Company; The Dress Barn; Time Warner Cable; Toys R Us; US Navy Navair; VHA; and Wyeth Consumer Healthcare

Examples of Customer Deals from Q4 2010:

Banco Bilbao Vizcaya Argentaria, S.A. (BBVA)

BBVA, a financial services provider in the Spanish and global market, employs 105,000 people in over 30 countries, and has more than 50 million customers.  BBVA recently expanded its deployment of MicroStrategy to provide its bank employees with intuitive dashboards that display a vast amount of sales, financial, and risk information.  A wide range of BBVA employees rely on MicroStrategy for their day-to-day activities, including branch employees who access customer information, regional office end users who analyze statistics and trends, and agents and managers who require a global vision to make informed, fast decisions.  MicroStrategy was selected for its robust, flexible, and scalable platform, and for its ease-of-use and low total cost of ownership.

Compania Suramericana de Seguros S.A. (SURA)

Colombian privately held insurer Compania Suramericana de Seguros S.A. (SURA) offers a range of insurance products and services, including pension insurance, life annuities, and social security.  SURA uses MicroStrategy to analyze its banking products, financial data, customer base, and sales activity.  A recent expansion of the MicroStrategy deployment at SURA now allows 4,000 SURA users to more effectively analyze cross-sell and up-sell opportunities, optimize sales activity, and strengthen customer relationships. SURA selected MicroStrategy for its ease-of-use, integrated platform, and its proven expertise in the financial services industry.  

Hudson's Bay Company

Hudson's Bay Company is the Canadian retail entity of Hudson's Bay Trading Company (HBTC).  Founded in 1670, The Hudson's Bay Company operates the Bay, a major department store, Zellers, a mass merchandise format, Home Outfitters, a kitchen, bed and bath specialty store, and value-priced Fields stores.  Hudson's Bay Company recently expanded its agreement with MicroStrategy to provide each of the company's banners with reports and dashboards to analyze and forecast merchandise performance, sales activity, and supply chain performance.  MicroStrategy-based reports will also help enable users to quickly identify and act upon merchandise opportunities with an "exception-based view" of the business. MicroStrategy is used by more than 5,000 Hudson's Bay Company employees and partner vendors, including store managers, company executives, and financial and marketing analysts.

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 ease-of-use, sophisticated analytics, and superior data and user scalability. MicroStrategy offers free reporting software that can be downloaded from its website, http://www.microstrategy.com/freereportingsoftware.  More information about MicroStrategy (Nasdaq: MSTR) is available at www.microstrategy.com.

MicroStrategy, MicroStrategy 9, MicroStrategy Intelligence Server and MicroStrategy Mobile 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 acceptance in the market of the MicroStrategy Mobile application platform; 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; the timing of significant orders; delays in the Company's ability to develop or ship new products, such as new or modified products the Company may seek to develop as a result of its high performance initiatives; market acceptance of new products; the Company's ability to sustain or increase profitability as it continues to increase headcount; 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; impairment charges that may be required with respect to the Company's damaged corporate aircraft 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


Twelve Months Ended


December 31,


December 31,


2010


2009


2010


2009


(unaudited)


(unaudited)


(unaudited)


(audited)

Revenues








Product licenses

$    47,653


$    29,959


$  126,717


$ 101,856

Product support and other services

91,467


75,813


327,860


275,932

 Total revenues

139,120


105,772


454,577


377,788









Cost of Revenues








Product licenses

1,896


2,084


7,637


6,607

Product support and other services

30,982


17,382


98,454


59,996

 Total cost of revenues

32,878


19,466


106,091


66,603









Gross profit

106,242


86,306


348,486


311,185









Operating Expenses








Sales and marketing

50,982


35,096


165,732


128,472

Research and development

13,748


11,389


50,566


41,796

General and administrative

22,649


13,265


81,599


54,613

 Total operating expenses

87,379


59,750


297,897


224,881









Income from continuing operations before








financing and other income and income taxes

18,863


26,556


50,589


86,304









Financing and Other Income (Expense)








Interest income, net

80


438


389


955

Other income (expense), net

806


167


3,982


(1,459)

 Total financing and other income (expense)

886


605


4,371


(504)









Income from continuing operations before income taxes

19,749


27,161


54,960


85,800

 Provision for income taxes

1,827


6,620


11,168


25,293

Income from continuing operations

17,922


20,541


43,792


60,507









Discontinued operations:








 Gain from sale of discontinued operations, net of tax provision of $11,190

-


-


-


14,437

 Loss from discontinued operations, net of tax benefit of $54

-


-


-


(107)

Discontinued operations, net of tax

-


-


-


14,330









Net Income

$    17,922


$    20,541


$    43,792


$   74,837









Basic earnings per share (1):








 From continuing operations

$        1.66


$        1.72


$        3.85


$       5.08

 From discontinued operations

$           -


$           -


$           -


$       1.20

    Basic earnings per share

$        1.66


$        1.72


$        3.85


$       6.28

Weighted average shares outstanding used in computing basic








    earnings per share

10,802


11,929


11,378


11,906









Diluted earnings per share (1):








 From continuing operations

$        1.60


$        1.66


$        3.72


$       4.92

 From discontinued operations

$           -


$           -


$           -


$       1.17

    Diluted earnings per share

$        1.60


$        1.66


$        3.72


$       6.09

Weighted average shares outstanding used in computing diluted








    earnings per share

11,196


12,350


11,779


12,284









(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 Ended


Three Months Ended


Three Months Ended


December  31,


December  31,


December  31,


2010


2009


2010


2009


2010


2009

Revenues












Product licenses

$   47,653


$   29,959


$        -


$        -


$   47,653


$   29,959

Product support and other services

85,753


71,507


-


-


85,753


71,507

Angel.com services

-


-


5,714


4,306


5,714


4,306

 Total revenues

133,406


101,466


5,714


4,306


139,120


105,772













Cost of Revenues












Product licenses

1,896


2,084


-


-


1,896


2,084

Product support and other services

28,002


15,845


-


-


28,002


15,845

Angel.com services

-


-


2,980


1,537


2,980


1,537

 Total cost of revenues

29,898


17,929


2,980


1,537


32,878


19,466

Gross profit

103,508


83,537


2,734


2,769


106,242


86,306













Operating Expenses












Sales and marketing

47,817


33,679


3,165


1,417


50,982


35,096

Research and development

12,823


10,460


925


929


13,748


11,389

General and administrative

21,975


12,664


674


601


22,649


13,265

 Total operating expenses

82,615


56,803


4,764


2,947


87,379


59,750













Income (loss) from continuing operations before












financing and other income and income taxes

20,893


26,734


(2,030)


(178)


18,863


26,556













Financing and Other Income












Interest income, net

80


438


-


-


80


438

Other income, net

771


164


35


3


806


167

 Total financing and other income

851


602


35


3


886


605

Income (loss) from continuing operations before income taxes

$   21,744


$   27,336


$ (1,995)


$    (175)


$   19,749


$   27,161

 Provision for income taxes









1,827


6,620

Income from continuing operations









17,922


20,541













Discontinued operations:












 Gain from sale of discontinued operations, net of tax









-


-

 Income from discontinued operations, net of tax









-


-

Discontinued operations, net of tax









-


-













Net income









$   17,922


$   20,541













Basic earnings per share:












   From continuing operations









$       1.66


$       1.72

   From discontinued operations









$           -


$           -

       Basic earnings per share









$       1.66


$       1.72













Diluted earnings per share:












   From continuing operations









$       1.60


$       1.66

   From discontinued operations









$           -


$           -

       Diluted earnings per share









$       1.60


$       1.66













    Basic weighted average shares outstanding









10,802


11,929

    Diluted weighted average shares outstanding









11,196


12,350



MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)














Core BI Business


Angel.com


Consolidated


Twelve  Months Ended


Twelve  Months Ended


Twelve  Months Ended


December  31,


December  31,


December  31,


2010


2009


2010


2009


2010


2009

Revenues












Product licenses

$ 126,717


$ 101,856


$        -


$        -


$ 126,717


$ 101,856

Product support and other services

309,371


261,956


-


-


309,371


261,956

Angel.com services

-


-


18,489


13,976


18,489


13,976

 Total revenues

436,088


363,812


18,489


13,976


454,577


377,788













Cost of Revenues












Product licenses

7,637


6,607


-


-


7,637


6,607

Product support and other services

89,718


54,625


-


-


89,718


54,625

Angel.com services

-


-


8,736


5,371


8,736


5,371

 Total cost of revenues

97,355


61,232


8,736


5,371


106,091


66,603

Gross profit

338,733


302,580


9,753


8,605


348,486


311,185













Operating Expenses












Sales and marketing

157,459


123,690


8,273


4,782


165,732


128,472

Research and development

47,239


38,042


3,327


3,754


50,566


41,796

General and administrative

79,390


52,741


2,209


1,872


81,599


54,613

 Total operating expenses

284,088


214,473


13,809


10,408


297,897


224,881













Income (loss) from continuing operations before












financing and other income and income taxes

54,645


88,107


(4,056)


(1,803)


50,589


86,304













Financing and Other Income (Expense)












Interest income, net

389


955


-


-


389


955

Other income (expense), net

3,956


(1,462)


26


3


3,982


(1,459)

 Total financing and other income (expense)

4,345


(507)


26


3


4,371


(504)

Income (loss) from continuing operations before income taxes

$   58,990


$   87,600


$ (4,030)


$ (1,800)


$   54,960


$   85,800

 Provision for income taxes









11,168


25,293

Income from continuing operations









43,792


60,507













Discontinued operations:












 Gain from sale of discontinued operations, net of tax









-


14,437

 Loss from discontinued operations, net of tax









-


(107)

Discontinued operations, net of tax









-


14,330













Net income









$   43,792


$   74,837













Basic earnings per share:












   From continuing operations









$       3.85


$       5.08

   From discontinued operations









$           -


$       1.20

       Basic earnings per share









$       3.85


$       6.28













Diluted earnings per share:












   From continuing operations









$       3.72


$       4.92

   From discontinued operations









$           -


$       1.17

       Diluted earnings per share









$       3.72


$       6.09













    Basic weighted average shares outstanding









11,378


11,906

    Diluted weighted average shares outstanding









11,779


12,284



MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)






December 31,


December 31,


2010


2009

Assets

(unaudited)


(audited)

Current assets




 Cash and cash equivalents

$        174,097


$        224,769

 Restricted cash and investments

284


549

 Accounts receivable, net

82,056


56,399

 Prepaid expenses and other current assets

26,751


10,861

 Deferred tax assets, net

13,670


12,642

Total current assets

296,858


305,220





Property and equipment, net

65,033


54,906

Capitalized software development costs, net

9,059


13,431

Deposits and other assets

5,587


3,283

Deferred tax assets, net

5,029


6,490

Total Assets

$        381,566


$        383,330





Liabilities and Stockholders' Equity




Current liabilities




 Accounts payable and accrued expenses

$          36,683


$          28,460

 Accrued compensation and employee benefits

60,201


46,277

 Deferred revenue and advance payments

89,331


77,783

 Deferred tax liabilities

355


115

Total current liabilities

186,570


152,635





Deferred revenue and advance payments

7,878


3,845

Other long-term liabilities

37,946


12,622





Total Liabilities

232,394


169,102





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;




  14,351 shares issued and 7,947 shares outstanding, and 14,302 shares




  issued and 9,255 shares outstanding, respectively

14


14

 Class B common stock, $0.001 par value; 165,000 shares authorized;




   2,694 shares issued and outstanding

3


3

 Additional paid-in capital

455,374


453,170

 Treasury stock, at cost; 6,405 and 5,047 shares, respectively

(475,184)


(366,191)

 Accumulated other comprehensive (loss) income

(1,455)


604

Retained earnings

170,420


126,628

Total Stockholders' Equity

149,172


214,228

Total Liabilities and Stockholders' Equity

$        381,566


$        383,330



MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)






Twelve Months Ended





December 31,





2010


2009





(unaudited)


(audited)

Operating activities:





Net income

$    43,792


$   74,837


Less:  Income from discontinued operations, net

-


(14,330)




Income from continuing operations

43,792


60,507


Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation and amortization

12,799


10,631



Bad debt expense

3,436


1,863



Deferred taxes

1,689


16,146



Excess tax benefits from stock-based payment arrangements

(741)


(907)



Other, net

70


10


Changes in operating assets and liabilities:






Accounts receivable

(30,134)


(9,264)



Prepaid expenses and other current assets

(13,159)


(1,168)



Deposits and other assets

(2,353)


553



Accounts payable and accrued expenses

4,651


1,076



Accrued compensation and employee benefits

14,178


2,041



Deferred revenue and advance payments

16,285


12,108



Other long-term liabilities

25,312


3,319




Net cash provided by operating activities from continuing operations

75,825


96,915




Net cash used in operating activities from discontinued operations

-


(472)




Net cash provided by operating activities

75,825


96,443

Investing activities:





Purchases of property and equipment

(16,289)


(18,265)


Capitalized software development costs

(2,185)


(4,218)


Decrease in restricted cash and investments

1,047


575




Net cash used in investing activities from continuing operations

(17,427)


(21,908)




Net cash provided by investing activities from discontinued operations

-


24,546




    Net cash (used in) provided by investing activities

(17,427)


2,638

Financing activities:





Proceeds from sale of class A common stock under exercise of employee stock options

1,154


1,216


Excess tax benefits from stock-based payment arrangements

741


907


Purchases of treasury stock

(108,993)


-


Distribution to Alarm.com minority shareholders

-


(60)




Net cash (used in) provided by financing activities from continuing operations

(107,098)


2,063




Net cash provided by financing activities from discontinued operations

-


-




Net cash (used in) provided by financing activities

(107,098)


2,063




Effect of foreign exchange rate changes on cash and cash equivalents

(1,972)


710

Net (decrease) increase in cash and cash equivalents

(50,672)


101,854

Cash and cash equivalents, beginning of period

224,769


122,915

Cash and cash equivalents, end of period

$  174,097


$ 224,769



MSTR-F

SOURCE MicroStrategy Incorporated

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