MicroStrategy Incorporated
10-27-16

MicroStrategy Announces Third Quarter 2016 Financial Results

TYSONS CORNER, Va., Oct. 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 September 30, 2016 (the third quarter of its 2016 fiscal year).

Third quarter 2016 revenues were $129.9 million versus $129.5 million for the third quarter of 2015, essentially flat year over year.  Product licenses and subscription services revenues for the third quarter of 2016 were $37.3 million versus $34.1 million for the third quarter of 2015, a 9% increase.  Product support revenues for the third quarter of 2016 were $72.5 million versus $71.4 million for the third quarter of 2015, a 1% increase.  Other services revenues for the third quarter of 2016 were $20.2 million versus $24.1 million for the third quarter of 2015, a 16% decrease.  Foreign currency headwinds continued to have a negative impact on revenues for the third quarter of 2016.

Operating expenses for the third quarter of 2016 were $77.0 million versus $74.1 million for the third quarter of 2015, a 4% increase.  MicroStrategy did not capitalize any software development costs during the third quarter of 2016 or 2015. 

Income from operations for the third quarter of 2016 was $30.0 million, as compared to income from operations of $30.7 million for the third quarter of 2015.  Net income for the third quarter of 2016 was $26.6 million, or $2.31 per share on a diluted basis, as compared to net income of $23.9 million, or $2.06 per share on a diluted basis, for the third quarter of 2015.

Non-GAAP income from operations, which excludes share-based compensation expense and restructuring costs, was $33.4 million for the third quarter of 2016 versus $35.4 million for the third quarter of 2015. 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 September 30, 2016 and 2015. An explanation of this non-GAAP measure is also included under the heading "Non-GAAP Financial Measure" below.

As of September 30, 2016, MicroStrategy had cash and cash equivalents and short-term investments of $578.9 million, as compared to $485.7 million as of December 31, 2015, an increase of $93.2 million.  As of September 30, 2016, MicroStrategy had 9.4 million shares of class A common stock and 2.0 million shares of class B common stock outstanding.

Conference Call

MicroStrategy will be discussing its third 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 87893779.  A live webcast and replay of the conference call will be available under the "Events" 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 November 3, 2016 at (855) 859-2056 (domestically) or (404) 537-3406 (internationally) using the passcode 87893779.  An archived webcast will also be available under the "Events" section on MicroStrategy's investor relations website at http://ir.microstrategy.com/events.cfm.

MicroStrategy Desktop™ Available at No Charge

Earlier this month, MicroStrategy announced that MicroStrategy Desktop is available at no charge. Users new to the field of analytics and business intelligence, including students and young professionals, can leverage MicroStrategy Desktop to explore popular data sources and build insightful visualizations to help make better business decisions. To download MicroStrategy Desktop for Mac® or PC, visit: https://www.microstrategy.com/us/desktop

MicroStrategy Launched Jump Start, Free Education Program to Kickstart MicroStrategy 10™ Adoption

In August 2016, MicroStrategy announced the launch of Jump Start, a free educational program designed to help MicroStrategy customers, partners, and prospects build practical skills and learn MicroStrategy 10 functionality to drive faster adoption across the enterprise. The five-day program is appropriate for all skills levels and is being held monthly in cities around the world.

Jump Start training is being delivered in nine different languages including English, Spanish, French, Italian, Portuguese, German, Korean, Japanese and Chinese, and taking place in 29 cities around the world.  The program teaches MicroStrategy fundamentals, as well as more advanced topics such as creating visually compelling dashboards; connecting to data from a variety of sources including Salesforce®, Facebook and Hadoop; and creating mobile apps that deliver critical insights to users. Each day-long class is structured to stand on its own, so participants can choose to sign up for a single day or attend the full week program.  To sign up for Jump Start training near you, visit: www.microstrategy.com/jumpstart.

"Excellence in BI doesn't start and end with selecting an enterprise software platform—it takes ongoing training and education to build an empowered user community capable of great things," said Michael J. Saylor, CEO, MicroStrategy Incorporated. "We recognize that standing up an enterprise analytics platform is a long-term investment. We are excited about the Jump Start program and look forward to training customers, partners and prospective customers interested in using our newest and most innovative analytics technology to transform their data."

MicroStrategy 10.5 Empowers Organizations to Connect to More Enterprise Assets

In September 2016, MicroStrategy announced the general availability of MicroStrategy 10.5, the latest update to the company's MicroStrategy 10 platform. The feature release delivered the industry's latest drivers and gateways with new certifications to support more enterprise assets, allowing organizations to easily leverage their data investments. Beyond enhanced connectivity to data assets, MicroStrategy 10.5 delivered several features that make it easier to consume analytics across MicroStrategy Desktop, MicroStrategy Web™, MicroStrategy Mobile™ and Usher™.

"The latest edition of our platform makes MicroStrategy much more compelling to our enterprise customers and OEM partners who deploy business intelligence at a larger scale," said Tim Lang, CTO of MicroStrategy Incorporated. "MicroStrategy 10.5 enables organizations to connect to enterprise resources with new native support for RESTful APIs, new connectivity to OData and SAS data files, and faster access to large volumes of data on Hadoop® and other distributed files systems. It also delivers an extensive list of new features for MicroStrategy Desktop, MicroStrategy Web, MicroStrategy Mobile and Usher."

MicroStrategy 10.5 delivered an extensive collection of enhancements focused on empowering users to access more information and systems, including native support for RESTful APIs, connectivity to OData and SAS data files, and new certifications for more enterprise assets. Exciting new features for MicroStrategy Desktop and MicroStrategy Mobile in version 10.5 include improved visualizations and charts for MicroStrategy Mobile, customizable error messages on iOS mobile devices, and reduced memory footprint for MicroStrategy Desktop. 

MicroStrategy 10.5 also introduced several new features for Usher, which is comprised of two main client interfaces: Usher Security™ and Usher Professional™. Usher Security is a mobile identity application that replaces physical IDs, passwords, keys and security tokens with secure digital badges. Usher Professional is an analytics and mobile productivity application that allows managers to monitor user activity on interactive maps and communicate in real-time. Usher's new features include 2-way messaging between Usher Professional and Usher Security users, auto server configuration for Usher Security, and Usher Network Manager™.

MicroStrategy highlighted the functionalities of MicroStrategy 10.5 at its October 2016 Symposium Series, where Symposium attendees were able to learn about the new features in MicroStrategy 10.5. To learn more about MicroStrategy 10.5 and see the full list of new features across MicroStrategy Desktop, MicroStrategy Web and MicroStrategy Mobile, visit https://www.microstrategy.com/us/platform/whats-new.

MicroStrategy Presented at Strata + Hadoop World and Introduced New Partner Certification Program for Data Platform Vendors

In September 2016, MicroStrategy announced that it would sponsor and present at the Strata + Hadoop World Conference. The event took place over three days on September 27-29, 2016 at the Javits Center in New York City, New York.  During the conference, MicroStrategy experts conducted live demos of MicroStrategy 10.5.

"Enterprise data assets have become increasingly larger and diverse, and choosing the right enterprise analytics solution that can perform and deliver in a dynamic marketplace is critically important. MicroStrategy 10 empowers users to access more data and allows organizations to easily leverage their technology investments," said Mark Gambill, CMO at MicroStrategy Incorporated. "MicroStrategy 10 offers a holistic enterprise analytics platform with incredible horsepower for both IT and business users, and events like Strata + Hadoop World are an excellent place to test drive the platform in person."

For the first time, MicroStrategy hosted TechTalks, an exclusive one-on-one session with an expert MicroStrategy Professional Services™ consultant at Strata + Hadoop WorldMicroStrategy also introduced a Partner Certification Program at Strata + Hadoop. Data storage and platform vendors attending the event were able to enroll in this program to partner with and certify their offerings with MicroStrategy 10.  Through this program, vendors can jointly work with MicroStrategy through a self-driven initiative and deliver certified drivers to new data sources. To enroll, vendors can submit their information here

MicroStrategy Held its July 2016 Symposium Series

In July 2016, MicroStrategy's Symposium Series took place in cities across North America, Europe, the Middle East and Asia.  The Symposium Series offered IT and business users an opportunity to network, take workshops, and hear about real-world applications for MicroStrategy 10 from MicroStrategy customers such as Boston Children's Hospital, Coach, Colis Privé, Dallas/Fort Worth International Airport, Huntington National Bank, IM Associates, Jabil Circuit, LifeWay Christian Resources, Parallon, Saint-Gobain Abrasives, Sutter Health, and T-Systems International. It also featured topics on analytics and mobile applications in retail, banking, higher education, healthcare and other sectors being transformed by big data.

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 customers with a world-class software platform and expert services so they can deploy unique intelligence applications. To learn more, visit MicroStrategy online, and follow us on Facebook and Twitter

MicroStrategy, MicroStrategy Desktop, MicroStrategy 10, MicroStrategy 10.5, MicroStrategy Web, MicroStrategy Mobile, Usher, Usher Security, Usher Professional, Usher Network Manager and MicroStrategy Professional Services 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 10.5; 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.

 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)












Three Months Ended


Nine Months Ended



September 30,


September 30,



2016


2015


2016


2015



(unaudited)


(unaudited)


(unaudited)


(unaudited)

Revenues









Product licenses


$          29,632


$          27,511


$          75,490


$          77,634

Subscription services


7,639


6,546


22,775


20,285

  Total product licenses and subscription services


37,271


34,057


98,265


97,919

Product support


72,460


71,392


212,408


211,444

Other services


20,165


24,087


61,380


76,984

  Total revenues


129,896


129,536


372,053


386,347










Cost of revenues









Product licenses


2,370


2,680


6,828


5,895

Subscription services


3,219


3,075


9,667


9,800

  Total product licenses and subscription services


5,589


5,755


16,495


15,695

Product support


3,959


3,174


10,919


9,734

Other services


13,387


15,755


42,445


52,265

  Total cost of revenues


22,935


24,684


69,859


77,694










Gross profit


106,961


104,852


302,194


308,653










Operating expenses









Sales and marketing


39,169


36,403


113,448


109,142

Research and development


18,069


17,789


54,804


48,051

General and administrative


19,703


19,843


63,014


63,071

Restructuring costs


12


86


45


261

  Total operating expenses


76,953


74,121


231,311


220,525










Income from operations


30,008


30,731


70,883


88,128

  Interest income, net


507


116


1,449


129

  Other (expense) income, net


(473)


766


(386)


2,601

Income before income taxes


30,042


31,613


71,946


90,858

  Provision for income taxes


3,414


7,720


12,162


24,038

Net income


$        26,628


$        23,893


$        59,784


$        66,820










Basic earnings per share (1):


$             2.33


$             2.10


$             5.23


$             5.89

Weighted average shares outstanding used in computing basic earnings per share


11,431


11,365


11,422


11,345










Diluted earnings per share (1):


$             2.31


$             2.06


$             5.20


$             5.80

Weighted average shares outstanding used in computing diluted earnings per share


11,521


11,589


11,503


11,521










(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)








September 30,


December 31,



2016


2015*

Assets


(unaudited)



Current assets





  Cash and cash equivalents


$         365,555


$         292,341

  Restricted cash


566


618

  Short-term investments


213,347


193,320

  Accounts receivable, net


58,052


68,154

  Prepaid expenses and other current assets

11,597


10,881

Total current assets


649,117


565,314






Property and equipment, net


59,668


65,664

Capitalized software development costs, net

9,997


15,855

Deposits and other assets


5,624


2,072

Deferred tax assets, net


11,103


7,989

Total Assets


$       735,509


$       656,894






Liabilities and Stockholders' Equity




Current liabilities





  Accounts payable and accrued expenses

$           26,064


$           31,840

  Accrued compensation and employee benefits

41,417


40,067

  Accrued restructuring costs


2


56

  Deferred revenue and advance payments

115,626


100,695

Total current liabilities


183,109


172,658






Deferred revenue and advance payments

15,151


8,995

Other long-term liabilities


17,221


19,943

Deferred tax liabilities


127


17

Total Liabilities


215,608


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;




    15,801 shares issued and 9,396 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


540,038


534,651

  Treasury stock, at cost; 6,405 shares

(475,184)


(475,184)

  Accumulated other comprehensive loss

(7,959)


(7,408)

  Retained earnings


462,988


403,204

Total Stockholders' Equity


519,901


455,281

Total Liabilities and Stockholders' Equity

$       735,509


$       656,894






*Derived from audited financial statements.




 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)







Nine Months Ended






September 30,






2016


2015






(unaudited)


(unaudited)

Operating activities:






Net income


$      59,784


$      66,820


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







Depreciation and amortization


13,089


16,172



Bad debt expense


1,219


683



Unrealized net loss on foreign currency forward contracts


-


1,641



Non-cash restructuring costs and adjustments


-


(127)



Deferred taxes


(4,439)


11,015



Release of liabilities for unrecognized tax benefits


(394)


(61)



Share-based compensation expense


8,424


12,503



Excess tax benefits from share-based compensation arrangements


(1,208)


(963)



Reclassification of foreign currency translation adjustment from other comprehensive income


-


(280)


Changes in operating assets and liabilities:







Accounts receivable


8,983


19,511



Prepaid expenses and other current assets


(657)


3,377



Deposits and other assets


(3,905)


1,562



Accounts payable and accrued expenses


(4,668)


(4,933)



Accrued compensation and employee benefits


717


(10,275)



Accrued restructuring costs


(56)


(1,940)



Deferred revenue and advance payments


19,435


11,153



Other long-term liabilities


(2,288)


(2,415)




Net cash provided by operating activities 


94,036


123,443









Investing activities:






Proceeds from redemption of short-term investments


273,520


316,000


Purchases of property and equipment


(1,560)


(3,352)


Purchases of short-term investments


(292,948)


(344,033)


Capitalized software development costs


-


(9,598)


Decrease in restricted cash


92


113




Net cash used in investing activities


(20,896)


(40,870)









Financing activities:






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


1,157


5,439


Payment of taxes relating to net exercise of employee stock options


(3,739)


-


Excess tax benefits from share-based compensation arrangements


1,208


963


Payments on capital lease obligations and other financing arrangements


(166)


(1,430)




Net cash (used in) provided by financing activities 


(1,540)


4,972









Effect of foreign exchange rate changes on cash and cash equivalents


1,614


(4,276)

Net increase in cash and cash equivalents


73,214


83,269

Cash and cash equivalents, beginning of period


292,341


146,919

Cash and cash equivalents, end of period


$    365,555


$    230,188









 

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)












Three Months Ended


Nine Months Ended



September 30,


September 30,



2016


2015


2016


2015



(unaudited)


(unaudited)


(unaudited)


(unaudited)

Revenues









Product licenses and subscription services:









    Product licenses


$          29,632


$          27,511


$          75,490


$          77,634

    Subscription services


7,639


6,546


22,775


20,285

        Total product licenses and subscription services


37,271


34,057


98,265


97,919

Product support


72,460


71,392


212,408


211,444

Other services:









    Consulting


17,669


22,018


54,297


70,475

    Education


2,496


2,069


7,083


6,509

        Total other services


20,165


24,087


61,380


76,984

        Total revenues


129,896


129,536


372,053


386,347










Cost of revenues









Product licenses and subscription services:









    Product licenses


2,370


2,680


6,828


5,895

    Subscription services


3,219


3,075


9,667


9,800

        Total product licenses and subscription services


5,589


5,755


16,495


15,695

Product support


3,959


3,174


10,919


9,734

Other services:









    Consulting


11,909


14,723


38,309


49,526

    Education


1,478


1,032


4,136


2,739

        Total other services


13,387


15,755


42,445


52,265

        Total cost of revenues


22,935


24,684


69,859


77,694










Gross profit


$      106,961


$      104,852


$      302,194


$      308,653

 

MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

















September 30,


December 31,


September 30,



2016


2015*


2015



(unaudited)




(unaudited)

Current:







Deferred product licenses revenue


$          11,401


$          13,506


$         13,155

Deferred subscription services revenue


12,820


15,763


11,172

Deferred product support revenue


140,593


158,738


135,999

Deferred other services revenue


9,226


9,149


6,794

        Gross current deferred revenue and advance payments


174,040


197,156


167,120

Less: unpaid deferred revenue


(58,414)


(96,461)


(51,616)

        Net current deferred revenue and advance payments


$        115,626


$        100,695


$       115,504








Non-current:







Deferred product licenses revenue


$            9,918


$            5,397


$           6,344

Deferred subscription services revenue


1,594


2,138


808

Deferred product support revenue


6,394


7,607


6,962

Deferred other services revenue


763


795


1,166

        Gross non-current deferred revenue and advance payments


18,669


15,937


15,280

Less: unpaid deferred revenue


(3,518)


(6,942)


(4,983)

        Net non-current deferred revenue and advance payments


$          15,151


$            8,995


$         10,297








Total current and non-current:







Deferred product licenses revenue


$          21,319


$          18,903


$         19,499

Deferred subscription services revenue


14,414


17,901


11,980

Deferred product support revenue


146,987


166,345


142,961

Deferred other services revenue


9,989


9,944


7,960

        Gross current and non-current deferred revenue and advance payments


192,709


213,093


182,400

Less: unpaid deferred revenue


(61,932)


(103,403)


(56,599)

        Net current and non-current deferred revenue and advance payments


$        130,777


$        109,690


$       125,801








*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,



2016


2015


2016


2015



(unaudited)


(unaudited)


(unaudited)


(unaudited)



















Income from operations


$          30,008


$          30,731


$          70,883


$          88,128

Share-based compensation expense


3,349


4,546


8,424


12,503

Restructuring costs


12


86


45


261

Non-GAAP income from operations


$          33,369


$          35,363


$          79,352


$        100,892










 

MICROSTRATEGY INCORPORATED

WORLDWIDE EMPLOYEE HEADCOUNT




























September 30,


December 31,


March 31,


June 30,


September 30,




2015


2015


2016


2016


2016














Subscription services


33


37


37


39


49


Product support


127


131


135


156


162


Consulting


480


467


455


452


458


Education


27


28


31


31


35


Sales and marketing


507


513


531


541


571


Research and development


464


461


499


532


528


General and administrative


301


310


317


314


317


  Total headcount


1,939


1,947


2,005


2,065


2,120













 

 

MSTR-F

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

 

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SOURCE MicroStrategy Incorporated

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