MicroStrategy Incorporated

MicroStrategy Announces First Quarter 2016 Financial Results

04-27-16

TYSONS CORNER, Va., April 27, 2016 /PRNewswire/ -- MicroStrategy® Incorporated (Nasdaq: MSTR), a leading worldwide provider of enterprise software platforms, today announced financial results for the three-month period ended March 31, 2016 (the first quarter of its 2016 fiscal year).

MicroStrategy logo. (PRNewsFoto/MicroStrategy Incorporated)

First quarter 2016 revenues were $119.0 million versus $123.9 million for the first quarter of 2015, a 4% decrease.  Product licenses and subscription services revenues for the first quarter of 2016 were $29.8 million versus $27.4 million for the first quarter of 2015, a 9% increase.  Product support revenues for the first quarter of 2016 were $68.5 million versus $69.3 million for the first quarter of 2015, a 1% decrease.  Other services revenues for the first quarter of 2016 were $20.8 million versus $27.1 million for the first quarter of 2015, a 24% decrease.  Foreign currency headwinds continued to have a negative impact on revenues for the first quarter of 2016.

Operating expenses for the first quarter of 2016 were $76.4 million versus $74.1 million for the first quarter of 2015, a 3% increase.  In addition, MicroStrategy did not capitalize any software development costs during the first quarter of 2016, as compared to $5.4 million in software development costs capitalized during the first quarter of 2015. 

Income from operations for the first quarter of 2016 was $19.8 million, as compared to income from operations of $22.6 million for the first quarter of 2015.  Net income for the first quarter of 2016 was $14.3 million, or $1.24 per share on a diluted basis, as compared to net income of $20.5 million, or $1.79 per share on a diluted basis, for the first quarter of 2015.

Non-GAAP income from operations, which excludes share-based compensation expense and restructuring costs, was $21.3 million for the first quarter of 2016 versus $26.3 million for the first quarter of 2015.

As of March 31, 2016, MicroStrategy had cash and cash equivalents and short-term investments of $536.3 million, as compared to $485.7 million as of December 31, 2015, an increase of $50.6 million.  As of March 31, 2016, MicroStrategy had 9.4 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 from operations to non-GAAP income from operations for the three months ended March 31, 2016 and 2015. 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 first quarter 2016 financial results on a conference call today beginning at approximately 5:00 p.m. EDT. To access the conference call, dial (844) 824-7425 (domestically) or (716) 220-9429 (internationally) and use conference ID 95287609.  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 May 2, 2016 at (855) 859-2056 (domestically) or (404) 537-3406 (internationally) using the passcode 95287609.  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 Launched MicroStrategy 10.3

In March, MicroStrategy unveiled MicroStrategy 10.3, the latest release of its groundbreaking enterprise analytics platform MicroStrategy 10 Secure Enterprise™. This release features new data discovery capabilities and a collection of ease-of-use enhancements designed to advance business user adoption within the enterprise. To try MicroStrategy 10.3 using the new Express Install, visit: http://www.microstrategy.com/us/free-trial.

Available as a free upgrade to all cloud and on-premises customers who are current on maintenance, version 10.3 introduces new visualization capabilities for data discovery users, new gateways to leverage existing enterprise assets, a simplified express installation, and a variety of ease-of-use improvements throughout the platform.  To learn more about MicroStrategy 10.3, visit: http://ir.microstrategy.com/releasedetail.cfm?ReleaseID=960648.

"We take great pride in delivering a relevant, powerful and easy-to-use analytics platform to the market," said Tim Lang, CTO, MicroStrategy Incorporated. "Both business and technology leaders rely on MicroStrategy as an across-the-board enterprise analytics platform because it strikes the right balance between the agility of self-service data discovery and the large-scale enterprise demands of governance, security, and performance."

MicroStrategy 10™ Showcased in BI Bake-Off at Gartner Business Intelligence and Analytics Summit

In March, MicroStrategy announced that MicroStrategy 10 was showcased in the BI Bake-Off, a product face-off that took place at the Gartner Business Intelligence and Analytics Summit at the Gaylord Texan Hotel & Convention Center in Grapevine, Texas.  MicroStrategy customers Dr Pepper Snapple Group, Interstate Batteries, and Ryder System presented on enterprise data discovery with MicroStrategy 10.  Each customer speaker explained how they have deployed self-service to decentralized teams and expanded analytics to new business groups while managing data governance through a centralized semantic architecture.

At this year's BI Bake-Off, MicroStrategy was invited, along with Microsoft, Qlik and Tableau, to demonstrate its data discovery capabilities in an interactive and light-hearted environment - see MicroStrategy's bake-off video here. Each vendor was asked to make data-driven decisions analyzing publicly available College Scorecard Data provided by the U.S. Department of Education. The questions asked of vendors were designed with specific data discovery functionalities and business user challenges in mind. MicroStrategy demonstrated the capabilities of MicroStrategy 10, including its data blending, data preparation, governed data discovery, and mobile features.

"MicroStrategy emerged as a top performer in 13 of the 15 categories Gartner considers critical to success with BI and analytics," said Mark Gambill, CMO, MicroStrategy Incorporated. "Our inclusion in the BI Bake-Off underscores the importance of our groundbreaking enterprise analytics platform in the market and motivates us to continue to expand its innovative capabilities and value for our customers."

Gartner Report "MicroStrategy's Version 10 Blends Agile Data Discovery With Governed BI and Analytics" Published

In February, MicroStrategy announced that leading analyst firm Gartner published a report titled "MicroStrategy's Version 10 Blends Agile Data Discovery With Governed BI and Analytics"[1]. A copy of the Gartner report is available, compliments of MicroStrategy, at: http://www.microstrategy.com/us/go/gartner-report-microstrategy-10

The Gartner report outlines the following strategic planning assumptions: "By 2018, data discovery and data management evolution will drive most organizations to augment centralized analytic architectures with decentralized approaches. By 2017, 75% of IT organizations will have a bimodal capability; half will not handle this well, by either remaining overcontrolling or outright ignoring the risks of more agile approaches. By 2018, smart, governed, Hadoop-based, search-based and visual-based data discovery will converge into a single set of next-generation data discovery capabilities, as components of a modern BI and analytics platform."

"MicroStrategy's innovative capabilities strike the right balance between agile data discovery and enterprise scalability, giving the market both data discovery and enterprise BI in a single analytics platform," said Michael J. Saylor, Chairman, President and CEO, MicroStrategy Incorporated. "We welcome Gartner's assessment of MicroStrategy 10's capabilities and our overall company strategy."

MicroStrategy Held its 19th Annual User Conference in Miami

In February, MicroStrategy held its 19th annual user conference, MicroStrategy World 2016, at the Miami Beach Convention Center.  The conference featured more than 160 distinct sessions and 50 customer speakers, inspiring keynotes, numerous hands-on workshops, and countless opportunities to network with MicroStrategy's vast ecosystem of partners.  All technical sessions and brand new training workshops highlighted MicroStrategy 10 and how attendees can leverage its latest features and capabilities to build apps and dashboards, find answers, and complete tasks faster. 

Speakers included 24 Hour Fitness, Ahold, AIG, Amazon Web Services, Boston Children's Hospital, Cisco Systems, International Post Corporation, Jabil Circuit, Netflix, Overstock.com, and Ryder Systems.  Customers were trained to successfully extract value from big data, build mobile productivity apps, move their on-premises analytics to the cloud, and deploy smartphone-based security applications. 

MicroStrategy Announced its 2016 Symposium Series

In March, MicroStrategy announced its 2016 Symposium Series, a global tour showcasing the MicroStrategy 10.3 release of its groundbreaking enterprise analytics platform MicroStrategy 10 Secure Enterprise™.  The 20-city global tour represented a unique opportunity for participants to learn about the latest advances in big data analytics, data discovery, mobile application development, and enterprise data security enabled by MicroStrategy's unified analytics platform. 

Each one-day event, which took place in cities across North America, Europe, the Middle East, and Asia in April, demonstrated version 10.3's functionality during an executive keynote, followed by a day filled with 12 to 16 breakout sessions and hands-on workshops that covered: Analytics - big data, predictive analytics, data discovery, dashboards and visualizations, and enterprise-wide deployments; Mobility - mobile analytics, workforce productivity apps, and custom mobile app development for end users; and Security - employee access, customer access, enterprise security and analytics.

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 expense that MicroStrategy believes is not reflective of its general business performance and 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 10.2, MicroStrategy 10.3, and MicroStrategy Analytics 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 10.3; 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

[1]  Gartner "MicroStrategy's Version 10 Blends Agile Data Discovery With Governed BI and Analytics" by Cindi Howson, Rita L. Sallam, Josh Parenteau, December 11, 2015.

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




March 31,




2016


2015




(unaudited)


(unaudited)


Revenues






Product licenses


$

22,399


$

20,757


Subscription services


7,354


6,665


  Total product licenses and subscription services


29,753


27,422


Product support


68,497


69,305


Other services


20,765


27,144


  Total revenues


119,015


123,871








Cost of revenues






Product licenses


2,136


1,309


Subscription services


3,092


3,379


  Total product licenses and subscription services


5,228


4,688


Product support


3,273


3,336


Other services


14,322


19,074


  Total cost of revenues


22,823


27,098








Gross profit


96,192


96,773








Operating expenses






Sales and marketing


36,577


36,520


Research and development


17,575


15,398


General and administrative


22,219


22,125


Restructuring costs


25


85


  Total operating expenses


76,396


74,128








Income from operations


19,796


22,645


  Interest income, net


403


2


  Other (expense) income, net


(1,668)


4,750


Income before income taxes


18,531


27,397


  Provision for income taxes


4,259


6,937


Net income


$

14,272


$

20,460








Basic earnings per share (1):


$

1.25


$

1.81


Weighted average shares outstanding used in computing basic earnings per share


11,408


11,321








Diluted earnings per share (1):


$

1.24


$

1.79


Weighted average shares outstanding used in computing diluted earnings per share


11,479


11,455








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











 

 

 

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)








March 31,


December 31,



2016


2015*

Assets


(unaudited)



Current assets





  Cash and cash equivalents


$

308,887


$

292,341

  Restricted cash


701


618

  Short-term investments


227,410


193,320

  Accounts receivable, net


56,558


68,154

  Prepaid expenses and other current assets

14,563


10,881

Total current assets


608,119


565,314






Property and equipment, net


63,228


65,664

Capitalized software development costs, net

13,902


15,855

Deposits and other assets


2,103


2,072

Deferred tax assets, net


5,826


7,989

Total Assets


$

693,178


$

656,894






Liabilities and Stockholders' Equity




Current liabilities





  Accounts payable and accrued expenses

$           27,836


$           31,840

  Accrued compensation and employee benefits

36,573


40,067

  Accrued restructuring costs


33


56

  Deferred revenue and advance payments

131,437


100,695

Total current liabilities


195,879


172,658






Deferred revenue and advance payments

10,183


8,995

Other long-term liabilities


19,252


19,943

Deferred tax liabilities


16


17

Total Liabilities


225,330


201,613






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;




    15,794 shares issued and 9,389 shares outstanding, and 15,771 shares




     issued and 9,366 shares outstanding, respectively

16


16

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




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

2


2

  Additional paid-in capital


532,284


534,651

  Treasury stock, at cost; 6,405 shares

(475,184)


(475,184)

  Accumulated other comprehensive loss

(6,746)


(7,408)

  Retained earnings


417,476


403,204

Total Stockholders' Equity


467,848


455,281

Total Liabilities and Stockholders' Equity

$

693,178


$

656,894






*Derived from audited financial statements.









 

 

 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)







Three Months Ended






March 31,






2016


2015






(unaudited)


(unaudited)

Operating activities:






Net income


$

14,272


$

20,460


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







Depreciation and amortization


4,553


5,103



Bad debt expense


531


364



Unrealized net gain on foreign currency forward contracts


-


(949)



Non-cash restructuring costs and adjustments


-


(98)



Deferred taxes


688


4,788



Release of liabilities for unrecognized tax benefits


-


(61)



Share-based compensation expense


1,504


3,597



Excess tax benefits from share-based compensation arrangements


(1,266)


(468)


Changes in operating assets and liabilities:







Accounts receivable


11,915


16,164



Prepaid expenses and other current assets


(3,551)


377



Deposits and other assets


4


190



Accounts payable and accrued expenses


(3,093)


(6,161)



Accrued compensation and employee benefits


(4,083)


(12,951)



Accrued restructuring costs


(26)


(1,120)



Deferred revenue and advance payments


30,065


27,620



Other long-term liabilities


(686)


(1,009)




Net cash provided by operating activities 


50,827


55,846









Investing activities:






Proceeds from redemption of short-term investments


63,500


90,000


Purchases of property and equipment


(193)


(1,535)


Purchases of short-term investments


(97,417)


(118,155)


Capitalized software development costs


-


(5,354)


Increase in restricted cash


(56)


(80)




Net cash used in investing activities


(34,166)


(35,124)









Financing activities:






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


241


1,467


Payment of taxes relating to net exercise of employee stock options


(3,739)


-


Excess tax benefits from share-based compensation arrangements


1,266


468


Payments on capital lease obligations and other financing arrangements


(122)


(164)




Net cash (used in) provided by financing activities 


(2,354)


1,771









Effect of foreign exchange rate changes on cash and cash equivalents


2,239


(4,318)

Net increase in cash and cash equivalents


16,546


18,175

Cash and cash equivalents, beginning of period


292,341


146,919

Cash and cash equivalents, end of period


$

308,887


$

165,094










 

 

 

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)









Three Months Ended




March 31,




2016


2015




(unaudited)


(unaudited)


Revenues






Product licenses and subscription services:






    Product licenses


$

22,399


$

20,757


    Subscription services


7,354


6,665


        Total product licenses and subscription services


29,753


27,422


Product support


68,497


69,305


Other services:






    Consulting


18,486


24,704


    Education


2,279


2,440


        Total other services


20,765


27,144


        Total revenues


119,015


123,871








Cost of revenues






Product licenses and subscription services:






    Product licenses


2,136


1,309


    Subscription services


3,092


3,379


        Total product licenses and subscription services


5,228


4,688


Product support


3,273


3,336


Other services:






    Consulting


13,033


18,147


    Education


1,289


927


        Total other services


14,322


19,074


        Total cost of revenues


22,823


27,098








Gross profit


$

96,192


$

96,773








 

 

 

MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

















March 31,


December 31,


March 31,



2016


2015*


2015



(unaudited)




(unaudited)

Current:







Deferred product licenses revenue


$

13,088


$

13,506


$

12,946

Deferred subscription services revenue


17,593


15,763


15,300

Deferred product support revenue


164,667


158,738


162,875

Deferred other services revenue


7,411


9,149


7,966

        Gross current deferred revenue and advance payments


202,759


197,156


199,087

Less: unpaid deferred revenue


(71,322)


(96,461)


(67,619)

        Net current deferred revenue and advance payments


$

131,437


$

100,695


$

131,468








Non-current:







Deferred product licenses revenue


$

7,573


$

5,397


$

6,863

Deferred subscription services revenue


2,340


2,138


735

Deferred product support revenue


6,425


7,607


6,865

Deferred other services revenue


755


795


2,124

        Gross non-current deferred revenue and advance payments


17,093


15,937


16,587

Less: unpaid deferred revenue


(6,910)


(6,942)


(5,221)

        Net non-current deferred revenue and advance payments


$

10,183


$

8,995


$

11,366








Total current and non-current:







Deferred product licenses revenue


$

20,661


$

18,903


$

19,809

Deferred subscription services revenue


19,933


17,901


16,035

Deferred product support revenue


171,092


166,345


169,740

Deferred other services revenue


8,166


9,944


10,090

        Gross current and non-current deferred revenue and advance payments


219,852


213,093


215,674

Less: unpaid deferred revenue


(78,232)


(103,403)


(72,840)

        Net current and non-current deferred revenue and advance payments


$

141,620


$

109,690


$

142,834








*Derived from audited financial statements.














 

 

 


MICROSTRATEGY INCORPORATED


RECONCILIATION OF GAAP TO NON-GAAP MEASURES


(in thousands)











Three Months Ended





March 31,





2016


2015





(unaudited)


(unaudited)









Reconciliation of non-GAAP income from operations:







Income from operations


$

19,796


$

22,645



Share-based compensation expense


1,504


3,597



Restructuring costs


25


85



Non-GAAP income from operations


$

21,325


$

26,327









 

 

 

MICROSTRATEGY INCORPORATED


WORLDWIDE EMPLOYEE HEADCOUNT































March 31,


June 30,


September 30,


December 31,


March 31,





2015


2015


2015


2015


2016
















Subscription services


43


37


33


37


37



Product support


138


130


127


131


135



Consulting


554


508


480


467


455



Education


19


25


27


28


31



Sales and marketing


577


515


507


513


531



Research and development


580


508


464


461


499



General and administrative


321


303


301


310


317



  Total headcount


2,232


2,026


1,939


1,947


2,005















 

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