MicroStrategy Incorporated
10-31-11

MicroStrategy Announces Third Quarter 2011 Financial Results

Record $141.7 Million in Total Revenues

TYSONS CORNER, Va., Oct. 31, 2011 /PRNewswire/ -- MicroStrategy® Incorporated (Nasdaq: MSTR), a leading worldwide provider of business intelligence software, today announced financial results for the three-month period ended September 30, 2011 (the third quarter of its 2011 fiscal year).

Third quarter 2011 revenues were $141.7 million, the highest quarterly total revenues in Company history, versus $114.5 million for the third quarter of 2010, a 24% increase.  Product licenses revenues for the third quarter of 2011 were $39.3 million versus $32.2 million for the third quarter of 2010, a 22% increase.  Product support and other services revenues for MicroStrategy's core business intelligence (BI) business in the third quarter of 2011 were $96.6 million versus $77.8 million for the third quarter of 2010, a 24% increase.  

Operating expenses for the third quarter of 2011 were $103.5 million versus $77.5 million for the third quarter of 2010, a 34% increase.  The increase in operating expenses was primarily due to increased headcount and related expenses, particularly for engineering and sales personnel.  

Net income for the third quarter of 2011 was $4.9 million, or $0.44 per share on a diluted basis, compared to $7.4 million, or $0.63 per share on a diluted basis, for the third quarter of 2010.  Third quarter 2011 net income included a $3.4 million pre-tax gain on the sale of an equity investment.

For the third quarter of 2011, MicroStrategy's effective tax rate was 17% compared to 10% for the third quarter of 2010.  The higher effective tax rate in the third quarter of 2011 was primarily attributable to certain discrete adjustments that were recorded in the third quarter of 2010, partially offset by stronger results outside the U.S. in the third quarter of 2011 compared to the same period in 2010.

As of September 30, 2011, MicroStrategy had cash and cash equivalents of $186.3 million versus $174.1 million as of December 31, 2010, an increase of $12.2 million.  As of September 30, 2011, MicroStrategy had 8,268,079 shares of class A common stock and 2,492,830 shares of class B common stock outstanding.

MicroStrategy Expands Launch of New Mobile, Cloud and Social Media Technologies:

In September 2011, MicroStrategy unveiled several new technologies.

  • MicroStrategy announced the release of Cloud Personal™, a free cloud-based business intelligence service.  Cloud Personal combines the Company's latest technology innovations — MicroStrategy Cloud™, MicroStrategy Visual Insight™, and MicroStrategy Mobile™ — enabling users to easily upload data to the MicroStrategy Cloud, analyze it via rich visualizations, and share powerful insights with colleagues or friends as a mobile application or web browser dashboard.
  • MicroStrategy introduced Wisdom™ for Facebook, a free application that is now available worldwide for both the iPhone® and iPad® on the Apple® iTunes® App Store, as well as in a web-based Facebook app format.  Wisdom organizes your Facebook content and provides insights into your network of Facebook friends, so you do not have to contend with information overload and can easily learn from the collective experience of your friends.
  • MicroStrategy also introduced MicroStrategy Wisdom™, a cloud-based application that injects social intelligence into the Facebook applications of corporations.
  • MicroStrategy additionally announced Emma™, a new marketplace for Facebook users.  Emma enhances the concept of free classifieds by attaching Facebook credentials to classified listings.  Because everyone in the Emma community has a Facebook profile, they can trade with more confidence, whether they are buying or selling products and services or engaging in social transactions such as finding a roommate or rideshare.

The launch of these new offerings followed the release in July 2011 of several other innovative MicroStrategy technologies designed to enable companies to capitalize on the big data, mobile, cloud, and social media trends that are transforming the way commerce is conducted.

  • The Company announced the general availability of MicroStrategy 9.2.1.  This latest release of the MicroStrategy Business Intelligence Platform™ features a new product, MicroStrategy Transaction Services™, which allows users to initiate actions and transactions from a mobile device.  MicroStrategy Transaction Services helps companies increase the speed and productivity of their businesses by building mobile apps that connect to back-end transactional systems and databases.
  • MicroStrategy also announced the general availability of MicroStrategy Cloud™, a cloud-based platform-as-a-service.  MicroStrategy Cloud enables rapid, cost-effective development of business intelligence and mobile and social apps.  Compared to traditional on-premises BI approaches, MicroStrategy Cloud is faster to deploy, delivers world-class performance, and offers significant financial advantages.
  • The Company introduced Gateway for Facebook, a new cloud-based service that can interconnect enterprise IT environments and enterprise applications with the Facebook social graph.  Gateway for Facebook converts the Facebook social graph data structure into a tabular data structure, making it easier for enterprise applications like CRM, marketing, service, sales, loyalty, and mobile applications to be personalized using data from Facebook.
  • In connection with the Gateway for Facebook launch, MicroStrategy also introduced Alert, a mobile Facebook application that gives Facebook users a new way to follow all of their favorite celebrity and brand Facebook pages.  Alert presents users with a consolidated view of the news, events, photos, and videos from their favorite pages, while allowing users to organize those pages into customized groups.

New Customers and New Deals with Existing Customers in Q3 2011 Included:

Activision; Aeropostale; AIG Global Asset Management Holdings Corp.; Banco Espirito Santo; Bank Of America; Belgacom Group; CareSource Management Group Co.; Comcast Entertainment Group; CSC Holdings; Dana Farber Cancer Institute; Dell Computer Corporation; Deutsche Bank Securities; Diageo North America; Electronic Arts; Endo Pharmaceuticals; ESPN; Google; Grange Insurance; Groupon.com; Hannover Ruckversicherung AG; Kassenarztliche Bundesvereinigung; Kohl's Department Stores; MacIntosh Retail Group NV; McDonald's Corporation; MedStar Health; Mercer (US) Inc.; Metropolitan Life Insurance Co.; Navteq; Nedbank Ltd; Netflix; Olympus Corporation; Pacific Sunwear; PF Chang's China Bistro; Polo Ralph Lauren Corporation; Radio Shack Corporation; Rogers Communications Partnership; Salesforce.com; Securitas Direct AB; Shionogi & Co., Ltd.; Social Security Administration; Speedway SuperAmerica LLC; Standard & Poor's Corporation; Staples, Inc.; Starwood Hotels & Resorts Worldwide, Inc.; TARP Worldwide; and US Capitol Police.

Examples of Customer Deals from Q3 2011:

Pacific Sunwear

Pacific Sunwear, with headquarters in Anaheim, California, is a leading specialty retailer with more than 800 stores in 50 states and Puerto Rico.  Pacific Sunwear employees, including executives, merchants and planners, rely on MicroStrategy dashboards to analyze key merchandise sales and inventory metrics, and make real-time business decisions.  A recent expansion of MicroStrategy licenses will allow Pacific Sunwear to upgrade to 64-bit functionality to improve performance, scalability, and capacity to support their growing BI environment.  Ad-hoc capabilities will also enable end-users to perform drill-down analyses, eliminating the reliance on IT to support the end-user community with reporting needs.  Pacific Sunwear selected MicroStrategy for its ease-of-use, superior visualizations and analytical reporting capabilities, as well as its outstanding scalability for big data.

CareSource Management Group Co.

CareSource, based in Dayton, Ohio, is a major not-for-profit, public-sector managed healthcare company that offers services to roughly 870,000 members in Ohio and Michigan.  A new MicroStrategy customer, CareSource has chosen the MicroStrategy platform to measure service quality within its provider network. CareSource plans to develop a reporting iPhone app built on the MicroStrategy Mobile platform that will allow employees to remotely access key Healthcare Effectiveness Data and Information Set (HEDIS) quality measures in a visual, intuitive way.  The mobile app will leverage HEDIS measures, which are used by more than 90 percent of America's health plans to measure performance on important dimensions of care and service.  MicroStrategy was chosen following an extensive analysis of competitive business intelligence products.

About MicroStrategy Incorporated

Founded in 1989, MicroStrategy is a leading provider of enterprise software platforms for business intelligence (BI), mobile intelligence, and social intelligence applications.  MicroStrategy's BI platform enables leading organizations worldwide to analyze the vast amounts of data stored across their enterprises to make better business decisions.  Companies choose MicroStrategy BI for its ease-of-use, sophisticated analytics, and superior data and user scalability.  The MicroStrategy BI platform delivers actionable information to business users via the web and mobile devices.  MicroStrategy's mobile intelligence platform helps companies and organizations build, deploy, and maintain mobile apps across a range of solutions by embedding intelligence, transactions, and multimedia into apps.  MicroStrategy's social intelligence platform includes a number of applications that help enterprises harness the power of social networks for marketing and e-commerce, as well as a suite of free "friendly" consumer apps that use MicroStrategy's enterprise technologies.  MicroStrategy's social intelligence platform helps companies leverage the value of social networks to better understand and engage their customers and fans.  The MicroStrategy Cloud offering combines MicroStrategy and third-party software, hardware, and services to enable rapid, cost-effective development of hosted BI, mobile, and social applications.  To learn more about MicroStrategy (Nasdaq: MSTR), visit www.microstrategy.com and follow us on Facebook (http://www.facebook.com/microstrategy) and Twitter (http://www.twitter.com/microstrategy).

MicroStrategy, MicroStrategy Business Intelligence Platform, MicroStrategy Cloud, MicroStrategy Mobile, Cloud Personal, MicroStrategy Transaction Services, Wisdom, MicroStrategy Wisdom and Emma 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 9.2.1, MicroStrategy Cloud, Gateway for Facebook, Alert, Cloud Personal, Wisdom for Facebook, MicroStrategy Wisdom, and Emma; 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; 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.

MSTR-F

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,


2011


2010


2011


2010


(unaudited)


(unaudited)


(unaudited)


(unaudited)

Revenues








Product licenses

$    39,262


$    32,180


$  100,072


$    79,064

Product support and other services

102,442


82,350


301,812


236,393

 Total revenues

141,704


114,530


401,884


315,457









Cost of Revenues








Product licenses

2,284


1,966


6,514


5,741

Product support and other services

34,380


25,274


97,854


67,472

 Total cost of revenues

36,664


27,240


104,368


73,213









Gross profit

105,040


87,290


297,516


242,244









Operating Expenses








Sales and marketing

61,451


42,002


173,904


114,750

Research and development

20,434


13,675


50,306


36,818

General and administrative

21,618


21,816


67,218


58,950

 Total operating expenses

103,503


77,493


291,428


210,518









Income from operations before








financing and other income and income taxes

1,537


9,797


6,088


31,726









Financing and Other Income (Expense)








Interest income, net

18


192


139


309

Gain on sale of investment

3,371


-


3,371


-

Other income (expense), net

969


(1,817)


22


3,176

 Total financing and other income (expense)

4,358


(1,625)


3,532


3,485









Income from operations before income taxes

5,895


8,172


9,620


35,211

 Provision for income taxes

974


821


680


9,341









 Net income

$      4,921


$      7,351


$      8,940


$    25,870









 Basic earnings per share (1)

$        0.46


$        0.66


$        0.84


$        2.24

 Weighted average shares outstanding used in computing basic earnings per share

10,729


11,206


10,703


11,572









 Diluted earnings per share (1)

$        0.44


$        0.63


$        0.81


$        2.16

 Weighted average shares outstanding used in computing diluted earnings per share

11,072


11,603


11,061


11,976









 (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


September 30,


September 30,


September 30,


2011


2010


2011


2010


2011


2010

























Revenues












Product licenses

$   39,262


$ 32,180


$        -


$        -


$   39,262


$ 32,180

Product support and other services

96,561


77,753


-


-


96,561


77,753

Angel.com services

-


-


5,881


4,597


5,881


4,597

 Total revenues

135,823


109,933


5,881


4,597


141,704


114,530













Cost of Revenues












Product licenses

2,284


1,966


-


-


2,284


1,966

Product support and other services

31,478


23,162


-


-


31,478


23,162

Angel.com services

-


-


2,902


2,112


2,902


2,112

 Total cost of revenues

33,762


25,128


2,902


2,112


36,664


27,240

Gross profit

102,061


84,805


2,979


2,485


105,040


87,290













Operating Expenses












Sales and marketing

58,494


39,979


2,957


2,023


61,451


42,002

Research and development

19,144


12,773


1,290


902


20,434


13,675

General and administrative

20,793


21,223


825


593


21,618


21,816

 Total operating expenses

98,431


73,975


5,072


3,518


103,503


77,493













Income (loss) from operations before












financing and other income and income taxes

3,630


10,830


(2,093)


(1,033)


1,537


9,797













Financing and Other Income (Expense)












Interest income, net

18


192


-


-


18


192

Gain on sale of investment

3,371


-


-


-


3,371


-

Other income (expense), net

925


(1,785)


44


(32)


969


(1,817)

 Total financing and other income (expense)

4,314


(1,593)


44


(32)


4,358


(1,625)

Income (loss) from operations before income taxes

$     7,944


$   9,237


$ (2,049)


$ (1,065)


$     5,895


$   8,172

 Provision for income taxes









974


821













 Net income









$     4,921


$   7,351













 Basic earnings per share









$       0.46


$     0.66

 Weighted average shares outstanding used in computing basic earnings per share









10,729


11,206













 Diluted earnings per share









$       0.44


$     0.63

 Weighted average shares outstanding used in computing diluted earnings per share









11,072


11,603







































MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)














Core BI Business


Angel.com


Consolidated


Nine Months Ended


Nine Months Ended


Nine Months Ended


September 30,


September 30,


September 30,


2011


2010


2011


2010


2011


2010

























Revenues












Product licenses

$ 100,072


$ 79,064


$        -


$        -


$ 100,072


$ 79,064

Product support and other services

283,127


223,618


-


-


283,127


223,618

Angel.com services

-


-


18,685


12,775


18,685


12,775

 Total revenues

383,199


302,682


18,685


12,775


401,884


315,457













Cost of Revenues












Product licenses

6,514


5,741


-


-


6,514


5,741

Product support and other services

89,385


61,716


-


-


89,385


61,716

Angel.com services

-


-


8,469


5,756


8,469


5,756

 Total cost of revenues

95,899


67,457


8,469


5,756


104,368


73,213

Gross profit

287,300


235,225


10,216


7,019


297,516


242,244













Operating Expenses












Sales and marketing

164,876


109,642


9,028


5,108


173,904


114,750

Research and development

46,917


34,416


3,389


2,402


50,306


36,818

General and administrative

64,949


57,415


2,269


1,535


67,218


58,950

 Total operating expenses

276,742


201,473


14,686


9,045


291,428


210,518













Income (loss) from operations before












financing and other income and income taxes

10,558


33,752


(4,470)


(2,026)


6,088


31,726













Financing and Other Income (Expense)












Interest income, net

139


309


-


-


139


309

Gain on sale of investment

3,371


-


-


-


3,371


-

Other income (expense), net

55


3,186


(33)


(10)


22


3,176

 Total financing and other income (expense)

3,565


3,495


(33)


(10)


3,532


3,485

Income (loss) from operations before income taxes

$   14,123


$ 37,247


$ (4,503)


$ (2,036)


$     9,620


$ 35,211

 Provision for income taxes









680


9,341













 Net income









$     8,940


$ 25,870













 Basic earnings per share









$       0.84


$     2.24

 Weighted average shares outstanding used in computing basic earnings per share









10,703


11,572













 Diluted earnings per share









$       0.81


$     2.16

 Weighted average shares outstanding used in computing diluted earnings per share









11,061


11,976



MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)






September 30,


December 31,


2011


2010

Assets

(unaudited)


(audited)

Current assets




 Cash and cash equivalents

$          186,300


$        174,097

 Restricted cash and short-term investments

413


284

 Accounts receivable, net

77,084


82,056

 Prepaid expenses and other current assets

19,956


26,751

 Deferred tax assets, net

26,640


13,670

Total current assets

310,393


296,858





Property and equipment, net

87,497


65,033

Capitalized software development costs, net

9,188


9,059

Deposits and other assets

5,807


5,587

Deferred tax assets, net

2,309


5,029

Total Assets

$          415,194


$        381,566





Liabilities and Stockholders' Equity




Current liabilities




 Accounts payable and accrued expenses

$            40,754


$          36,683

 Accrued compensation and employee benefits

54,875


60,201

 Deferred revenue and advance payments

97,452


89,331

 Deferred tax liabilities

371


355

Total current liabilities

193,452


186,570





Deferred revenue and advance payments

11,039


7,878

Other long-term liabilities

42,992


37,946

Deferred tax liabilities

3,733


-





Total Liabilities

251,216


232,394





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;




   14,673 shares issued and 8,268 shares outstanding, and 14,351 shares




    issued and 7,947 shares outstanding, respectively

15


14

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




    2,493 and 2,694 shares issued and outstanding, respectively

2


3

 Additional paid-in capital

461,469


455,374

 Treasury stock, at cost; 6,405 shares

(475,184)


(475,184)

 Accumulated other comprehensive loss

(1,684)


(1,455)

 Retained earnings

179,360


170,420

Total Stockholders' Equity

163,978


149,172

Total Liabilities and Stockholders' Equity

$          415,194


$        381,566



MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


Nine Months Ended


September 30,


2011


2010





Operating activities:





Net income

$     8,940


$   25,870


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






Depreciation and amortization

12,905


9,313



Bad debt expense

941


2,429



Deferred taxes

(2,734)


(509)



Excess tax benefits from share-based compensation arrangements

(3,791)


(115)



Gain on sale of investment

(3,371)


-



Other, net

-


26


Changes in operating assets and liabilities:






Accounts receivable

4,389


(4,180)



Prepaid expenses and other current assets

4,960


(2,615)



Deposits and other assets

(316)


(707)



Accounts payable and accrued expenses

(762)


1,462



Accrued compensation and employee benefits

(5,261)


1,243



Deferred revenue and advance payments

11,411


12,922



Other long-term liabilities

5,065


10,799


Net cash provided by operating activities

32,376


55,938

Investing activities:





Proceeds from sale of investment

3,371


-


Purchases of property and equipment

(29,128)


(11,817)


Capitalized software development costs

(5,907)


(2,185)


Insurance proceeds

5,675


-


(Increase) decrease in restricted cash and investments

(161)


248


Net cash used in investing activities

(26,150)


(13,754)

Financing activities:





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

2,207


240


Excess tax benefits from share-based compensation arrangements

3,791


115


Purchases of treasury stock

-


(81,618)


Net cash provided by (used in) financing activities

5,998


(81,263)



Effect of foreign exchange rate changes on cash and cash equivalents

(21)


(1,388)

Net increase (decrease) in cash and cash equivalents

12,203


(40,467)

Cash and cash equivalents, beginning of period

174,097


224,769

Cash and cash equivalents, end of period

$ 186,300


$ 184,302



SOURCE MicroStrategy Incorporated

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