MicroStrategy Incorporated
10-26-15

MicroStrategy Announces Third Quarter 2015 Financial Results

TYSONS CORNER, Va., Oct. 26, 2015 /PRNewswire/ -- MicroStrategy® Incorporated (Nasdaq: MSTR), a leading worldwide provider of enterprise software platforms, today announced financial results for the three-month period ended September 30, 2015 (the third quarter of its 2015 fiscal year).

MicroStrategy logo.

Third quarter 2015 revenues were $129.5 million versus $151.2 million for the third quarter of 2014, a 14% decrease.  Product licenses and subscription services revenues for the third quarter of 2015 were $34.1 million versus $40.0 million for the third quarter of 2014, a 15% decrease.  Product support revenues for the third quarter of 2015 were $71.4 million versus $75.0 million for the third quarter of 2014, a 5% decrease.  Other services revenues for the third quarter of 2015 were $24.1 million versus $36.2 million for the third quarter of 2014, a 33% decrease.  Foreign currency headwinds continued to have a negative impact on revenues for the third quarter of 2015.

Operating expenses for the third quarter of 2015 were $74.1 million versus $123.2 million for the third quarter of 2014, a 40% decrease.  Third quarter 2015 operating expenses included $0.1 million in restructuring costs, as compared to $11.6 million in restructuring costs in the third quarter of 2014.  In addition, MicroStrategy did not capitalize any software development costs during the third quarter of 2015, as compared to $2.3 million in software development costs capitalized during the third quarter of 2014. 

Income from operations for the third quarter of 2015 was $30.7 million, as compared to a loss from operations of $7.0 million for the third quarter of 2014.  Net income for the third quarter of 2015 was $23.9 million, or $2.06 per share on a diluted basis, as compared to a net loss of $0.8 million, or $0.07 per share on a diluted basis, for the third quarter of 2014.

Non-GAAP income from operations, which excludes share-based compensation expense and restructuring costs, was $35.4 million for the third quarter of 2015 versus $8.5 million for the third quarter of 2014.

As of September 30, 2015, MicroStrategy had cash and cash equivalents and short-term investments of $456.9 million, as compared to $345.5 million as of December 31, 2014, an increase of $111.4 million.  As of September 30, 2015, MicroStrategy had 9.3 million shares of class A common stock and 2.0 million shares of class B common stock outstanding.

The tables at the end of this press release include a reconciliation of income (loss) from operations to non-GAAP income (loss) from operations for the three and nine months ended September 30, 2015 and 2014. An explanation of this non-GAAP measure is also included under the heading "Non-GAAP Financial Measure" below.

Conference Call

MicroStrategy will be discussing its third quarter 2015 financial results on a conference call today beginning at approximately 6:00 p.m. EDT. To access the conference call, dial (844) 824-7425 (domestically) or (716) 220-9429 (internationally) and use conference ID 57551320.  A live webcast and replay of the conference call will be available under the "Events & Presentations" section on MicroStrategy's investor relations website at http://ir.microstrategy.com/events.cfm.  The replay will be available beginning approximately two hours after the call concludes until October 31, 2015 at (855) 859-2056 (domestically) or (404) 537-3406 (internationally) using the passcode 57551320.  An archived webcast will also be available under the "Events & Presentations" section on MicroStrategy's investor relations website at http://ir.microstrategy.com/events.cfm.

MicroStrategy's Worldwide Symposium Series Sets Record Attendance

Throughout Q3 of 2015, MicroStrategy's Worldwide Symposium Series events set record attendance on their tour around the globe, demonstrating that business and IT audiences have a keen interest in learning about the powerful capabilities of MicroStrategy 10 Secure Enterprise™.  MicroStrategy enthusiasts gathered for keynote presentations, hands-on enterprise data discovery workshops, and live Q&A and networking opportunities with innovators from MicroStrategy's leading customers, partners, and sponsors.

More than 4,000 companies and organizations in the U.S., EMEA, and APAC rely on MicroStrategy to make sense of large data volumes, get answers in an instant, build stunning visualizations, and present a single version of the truth — securely, at scale, and on all standard devices. MicroStrategy's customers who presented at the 2015 Symposium Series included AGBAR; Ahold; AIG; Amadeus Travel; Caisse d'Epargne; Carphone; Ceva Sante; Groupe BPCE; Hilton Worldwide; ING DIRECT Espana; Ipsen; Lottoland; McDonald's Espana; McDonald's UK; O2; Spar; Telefonica, S.A.; Weiler Corporation;  and Zurich. 

MicroStrategy 10.1™ Delivers New Features and Enhancements that Bolster Performance for Enterprise Data Discovery, Analytics, and Mobile

In September, MicroStrategy announced the general availability of MicroStrategy 10.1.  The release included hundreds of new and improved features and a wide range of performance enhancements across the product platform. Further extending the self-service capabilities of MicroStrategy 10 Secure Enterprise, MicroStrategy Desktop™ 10.1 and MicroStrategy Web™ 10.1 added new enhancements for enterprise data discovery users, enabling data preparation and data wrangling across more data sources, while delivering a clean, new look with modern grid styles, navigation, and consolidated views and search. Other highlights included new capabilities for D3 visualizations, ESRI geospatial visualizations, and iOS 9 within MicroStrategy Mobile™ and custom Mobile Productivity Apps.  To learn more about MicroStrategy Analytics™, visit: http://www.microstrategy.com/us/platform/whats-new.

The MicroStrategy 10.1 release came shortly after the release of MicroStrategy 10 Secure Enterprise, a groundbreaking enterprise analytics solution that combines traditional business intelligence functionality with data discovery, mobile analytics, and powerful enterprise security. MicroStrategy 10.1 builds on the version 10 foundation with a significant collection of new capabilities in speed, flexibility, and performance.

"Our customer focus has guided the development of MicroStrategy 10.1, helping to ensure that we continue to bring cutting-edge technology to the market," said Paul Zolfaghari, President, MicroStrategy Incorporated.  "Our new agile engineering development methods are resulting in new features and enhancements being rolled out to our global customer base on a more frequent basis.  We are confident that 10.1 delivers an even higher level of analytics value for organizations and institutions around the world."

MicroStrategy Connector to Presto Opens Door to Fast, Interactive Analytics for Big Data Exploration

In September, MicroStrategy announced that through its optimized Presto Connector, MicroStrategy 10 Secure Enterprise enables organizations with immense amounts of data to run thousands of quick, interactive analytic queries against multiple data stores.  Developed by Facebook, Presto is an open source distributed SQL query engine for running interactive analytic queries against data sources of all sizes ranging from gigabytes to petabytes.

"The impact of having a JDBC connector to Presto is huge for the analytics community," said Tim Lang, Senior Executive Vice President and Chief Technology Officer, MicroStrategy Incorporated.  "MicroStrategy 10 Secure Enterprise's optimized Presto Connector empowers our Big Data customers to query into their data quickly, interactively, at petabyte scale. It enables users to query and explore their immense amounts of data, sometimes spread across multiple data sources, without performance constraints. Having this connector in MicroStrategy Desktop and Web opens the door to build quick analytics for the masses who typically access Presto pragmatically and dump results in files or databases to connect with additional visualization tools."

Targeted at analysts who expect fast interactive response times, Presto allows querying data where it lives, including Hive, Cassandra, relational databases or even proprietary data stores. A single Presto query can combine data from multiple sources, and Presto supports data exploration across an entire organization. Presto breaks the false choice between having fast analytics using an expensive commercial solution or using a slow "free" solution that requires excessive hardware.

Usher™ Achieves FIDO Alliance Certification for its Innovative Enterprise Mobile Security Solution

In August, Usher, MicroStrategy's advanced enterprise security solution that is designed to replace vulnerable security measures such as passwords and keycards, was certified by The FIDO (Fast IDentity Online) Alliance. Usher passed a rigorous series of tests that measure compliance with the FIDO Universal Authentication Framework (UAF) and confirm interoperability with other FIDO Certified products and services that support FIDO 1.0 specifications.

"Achieving FIDO certification demonstrates MicroStrategy's dedication to providing our customers and the marketplace with an innovative mobile security solution that ends the password nightmare," said Jonathan Klein, President, MicroStrategy Incorporated.  "Our customers can now use Usher to adopt the FIDO UAF standard in a matter of minutes—quickly making great improvements to their security. We encourage governments, businesses, and organizations to move beyond the antiquated password model and try out Usher's robust and secure multi-factor authentication solution."

Non-GAAP Financial Measure

MicroStrategy is providing a supplemental financial measure for income from continuing operations that excludes the impact of share-based compensation arrangements and restructuring activities. This financial measure is not a measurement of financial performance under generally accepted accounting principles in the United States ("GAAP") and, as a result, this financial measure may not be comparable to similarly titled measures of other companies. Management uses this non-GAAP financial measure internally to help understand, manage, and evaluate business performance and to help make operating decisions. MicroStrategy believes that this non-GAAP financial measure is also useful to investors and analysts in comparing its performance across reporting periods on a consistent basis because it excludes a significant non-cash share-based compensation expense that MicroStrategy believes is not reflective of its general business performance and significant restructuring charges that we believe are not reflective of ongoing operating results.  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 this non-GAAP financial measure can also facilitate comparison of MicroStrategy's operating results to those of its competitors.

About MicroStrategy Incorporated

Founded in 1989, MicroStrategy (Nasdaq: MSTR) is a leading worldwide provider of enterprise software platforms.  The Company's mission is to provide enterprise analytics, mobility, and security platforms that are flexible, powerful, scalable, and user-friendly. To learn more, visit MicroStrategy online, and follow us on Facebook and Twitter

MicroStrategy, MicroStrategy 10, MicroStrategy 10 Secure Enterprise, MicroStrategy 10.1, MicroStrategy Mobile, MicroStrategy Analytics, MicroStrategy Desktop, MicroStrategy Web, and Usher 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 10 Secure Enterprise; the impact on our business of the restructuring plan we adopted in the third quarter of 2014; 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; 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. 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,



2015


2014


2015


2014



(unaudited)


(unaudited)


(unaudited)


(unaudited)

Revenues









Product licenses


$          27,511


$          33,969


$          77,634


$          91,208

Subscription services


6,546


5,993


20,285


16,317

  Total product licenses and subscription services


34,057


39,962


97,919


107,525

Product support


71,392


75,019


211,444


221,069

Other services


24,087


36,221


76,984


102,365

  Total revenues


129,536


151,202


386,347


430,959










Cost of revenues









Product licenses


2,680


1,542


5,895


5,456

Subscription services


3,075


4,502


9,800


13,829

  Total product licenses and subscription services


5,755


6,044


15,695


19,285

Product support


3,174


3,695


9,734


10,713

Other services


15,755


25,214


52,265


73,577

  Total cost of revenues


24,684


34,953


77,694


103,575










Gross profit


104,852


116,249


308,653


327,384










Operating expenses









Sales and marketing


36,403


58,195


109,142


178,028

Research and development


17,789


28,659


48,051


89,469

General and administrative


19,843


24,811


63,071


76,376

Restructuring costs


86


11,578


261


11,578

  Total operating expenses


74,121


123,243


220,525


355,451










Income (loss) from operations


30,731


(6,994)


88,128


(28,067)

  Interest income, net


116


53


129


133

  Other income, net


766


4,928


2,601


3,336

Income (loss) before income taxes


31,613


(2,013)


90,858


(24,598)

  Provision for (benefit from) income taxes


7,720


(1,168)


24,038


(6,934)

Net income (loss)


$         23,893


$            (845)


$         66,820


$       (17,664)










Basic earnings (loss) per share (1):


$             2.10


$           (0.07)


$             5.89


$           (1.56)

Weighted average shares outstanding used in computing basic earnings (loss) per share

11,365


11,301


11,345


11,301










Diluted earnings (loss) per share (1):


$             2.06


$           (0.07)


$             5.80


$           (1.56)

Weighted average shares outstanding used in computing diluted earnings (loss) per share

11,589


11,301


11,521


11,301










(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)








September 30,


December 31,



2015


2014*

Assets


(unaudited)



Current assets





  Cash and cash equivalents


$         230,188


$         146,919

  Restricted cash


487


661

  Short-term investments


226,689


198,547

  Accounts receivable, net


55,039


78,633

  Prepaid expenses and other current assets

12,078


17,669

  Deferred tax assets, net


12,373


19,936

Total current assets


536,854


462,365






Property and equipment, net


68,862


77,852

Capitalized software development costs, net

17,807


13,469

Deposits and other assets


2,184


3,951

Deferred tax assets, net


2,247


1,160

Total Assets


$        627,954


$        558,797






Liabilities and Stockholders' Equity




Current liabilities





  Accounts payable and accrued expenses

$          26,609


$          35,458

  Accrued compensation and employee benefits

38,570


50,588

  Accrued restructuring costs


98


2,284

  Deferred revenue and advance payments

115,504


108,413

  Deferred tax liabilities


395


557

Total current liabilities


181,176


197,300






Deferred revenue and advance payments

10,297


10,818

Other long-term liabilities


20,166


22,679

Deferred tax liabilities


7,803


3,529

Total Liabilities


219,442


234,326






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;




    15,734 shares issued and 9,329 shares outstanding, and 15,660 shares




     issued and 9,255 shares outstanding, respectively

16


16

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




     2,035 shares issued and outstanding, and 2,055 shares issued and outstanding, respectively

2


2

  Additional paid-in capital


525,632


506,727

  Treasury stock, at cost; 6,405 shares

(475,184)


(475,184)

  Accumulated other comprehensive loss

(6,047)


(4,363)

  Retained earnings


364,093


297,273

Total Stockholders' Equity


408,512


324,471

Total Liabilities and Stockholders' Equity

$        627,954


$        558,797






*Derived from audited financial statements.

 

 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)







Nine Months Ended






September 30,






2015


2014






(unaudited)


(unaudited)

Operating activities:






Net income (loss)


$      66,820


$    (17,664)


Adjustments to reconcile net income (loss) to net cash provided by operating activities:







Depreciation and amortization


16,172


19,305



Bad debt expense


683


2,242



Unrealized net loss (gain) on foreign currency forward contracts


1,641


(926)



Non-cash portion of adjustments to accrued restructuring costs


(127)


165



Deferred taxes


11,015


(12,337)



Release of liabilities for unrecognized tax benefits


(61)


-



Share-based compensation expense


12,503


8,561



Excess tax benefits from share-based compensation arrangements


(963)


-



Reclassification of foreign currency translation adjustment from other comprehensive income


(280)


-


Changes in operating assets and liabilities:







Accounts receivable


19,511


23,488



Prepaid expenses and other current assets


3,377


(5,197)



Deposits and other assets


1,562


412



Accounts payable and accrued expenses


(4,933)


(2,757)



Accrued compensation and employee benefits


(10,275)


(19,380)



Accrued restructuring costs


(1,940)


8,083



Deferred revenue and advance payments


11,153


11,723



Other long-term liabilities


(2,415)


603




Net cash provided by operating activities 


123,443


16,321









Investing activities:






Proceeds from redemption of short-term investments


316,000


222,300


Purchases of property and equipment


(3,352)


(11,856)


Purchases of short-term investments


(344,033)


(303,565)


Capitalized software development costs


(9,598)


(2,254)


Decrease (increase) in restricted cash


113


(1,013)




Net cash used in investing activities


(40,870)


(96,388)









Financing activities:






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


5,439


-


Excess tax benefits from share-based compensation arrangements


963


-


Payments on capital lease obligations and other financing arrangements


(1,430)


(2,035)




Net cash provided by (used in) financing activities 


4,972


(2,035)









Effect of foreign exchange rate changes on cash and cash equivalents


(4,276)


(2,063)

Net increase (decrease) in cash and cash equivalents


83,269


(84,165)

Cash and cash equivalents, beginning of period


146,919


220,171

Cash and cash equivalents, end of period


$    230,188


$    136,006









 

 

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)












Three Months Ended


Nine Months Ended



September 30,


September 30,



2015


2014


2015


2014



(unaudited)


(unaudited)


(unaudited)


(unaudited)

Revenues









Product licenses and subscription services:









    Product licenses


$          27,511


$          33,969


$          77,634


$          91,208

    Subscription services


6,546


5,993


20,285


16,317

        Total product licenses and subscription services


34,057


39,962


97,919


107,525

Product support


71,392


75,019


211,444


221,069

Other services:









    Consulting


22,018


32,812


70,475


91,510

    Education


2,069


3,409


6,509


10,855

        Total other services


24,087


36,221


76,984


102,365

        Total revenues


129,536


151,202


386,347


430,959










Cost of revenues









Product licenses and subscription services:









    Product licenses


2,680


1,542


5,895


5,456

    Subscription services


3,075


4,502


9,800


13,829

        Total product licenses and subscription services


5,755


6,044


15,695


19,285

Product support


3,174


3,695


9,734


10,713

Other services:









    Consulting


14,723


23,841


49,526


68,830

    Education


1,032


1,373


2,739


4,747

        Total other services


15,755


25,214


52,265


73,577

        Total cost of revenues


24,684


34,953


77,694


103,575










Gross profit


$        104,852


$       116,249


$       308,653


$        327,384

 

 

MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

















September 30,


December 31,


September 30,



2015


2014*


2014



(unaudited)




(unaudited)

Current:







Deferred product licenses revenue


$          13,155


$          10,927


$         10,010

Deferred subscription services revenue


11,172


16,018


10,382

Deferred product support revenue


135,999


168,833


145,917

Deferred other services revenue


6,794


10,564


10,216

        Gross current deferred revenue and advance payments


167,120


206,342


176,525

Less: unpaid deferred revenue


(51,616)


(97,929)


(55,818)

        Net current deferred revenue and advance payments


$        115,504


$        108,413


$       120,707








Non-current:







Deferred product licenses revenue


$            6,344


$            8,012


$           7,700

Deferred subscription services revenue


808


750


669

Deferred product support revenue


6,962


7,505


7,062

Deferred other services revenue


1,166


1,047


951

        Gross non-current deferred revenue and advance payments


15,280


17,314


16,382

Less: unpaid deferred revenue


(4,983)


(6,496)


(4,903)

        Net non-current deferred revenue and advance payments


$          10,297


$          10,818


$         11,479








Total current and non-current:







Deferred product licenses revenue


$          19,499


$          18,939


$         17,710

Deferred subscription services revenue


11,980


16,768


11,051

Deferred product support revenue


142,961


176,338


152,979

Deferred other services revenue


7,960


11,611


11,167

        Gross current and non-current deferred revenue and advance payments


182,400


223,656


192,907

Less: unpaid deferred revenue


(56,599)


(104,425)


(60,721)

        Net current and non-current deferred revenue and advance payments


$        125,801


$        119,231


$       132,186








*Derived from audited financial statements.







 

 


MICROSTRATEGY INCORPORATED


RECONCILIATION OF GAAP TO NON-GAAP MEASURES


(in thousands)














Three Months Ended


Nine Months Ended




September 30,


September 30,




2015


2014


2015


2014




(unaudited)


(unaudited)


(unaudited)


(unaudited)











Reconciliation of non-GAAP income (loss) from operations:










Income (loss) from operations


$          30,731


$           (6,994)


$          88,128


$         (28,067)


Share-based compensation expense


4,546


3,879


12,503


8,561


Restructuring costs


86


11,578


261


11,578


Non-GAAP income (loss) from operations


$          35,363


$            8,463


$        100,892


$           (7,928)

 

 

MICROSTRATEGY INCORPORATED

WORLDWIDE EMPLOYEE HEADCOUNT




























September 30,


December 31,


March 31,


June 30,


September 30,




2014


2014


2015


2015


2015














Subscription services


61


57


43


37


33


Product support


144


138


138


130


127


Consulting


676


600


554


508


480


Education


35


24


19


25


27


Sales and marketing


827


662


577


515


507


Research and development


965


645


580


508


464


General and administrative


417


344


321


303


301


  Total headcount


3,125


2,470


2,232


2,026


1,939

 

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