MicroStrategy Announces Third Quarter 2020 Financial Results

October 27, 2020

TYSONS CORNER, Va.--(BUSINESS WIRE)--Oct. 27, 2020-- MicroStrategy® (Nasdaq: MSTR), the largest independent publicly-traded business intelligence company, today announced financial results for the three-month period ended September 30, 2020 (the third quarter of its 2020 fiscal year).

“MicroStrategy delivered one of its stronger quarters in years, with meaningful growth in both product licenses and deferred subscription services revenues and a significant improvement in non-GAAP operating margin. We believe our performance demonstrates growing customer demand for scalable, flexible enterprise-grade solutions that enable better business performance through data-driven decisions,” said Michael J. Saylor, CEO, MicroStrategy Incorporated.

“Our recent decision to make bitcoin our primary treasury reserve asset is the latest example of MicroStrategy’s embrace of virtual technologies. The purchase of $425 million of bitcoin during the quarter offers the possibility of greater return potential for investors than holding such balances in cash and has increased the overall visibility of MicroStrategy in the market. We believe our proactive management of our balance sheet, together with our improved revenue and profitability performance, can serve as catalysts to generate substantial long-term value for our shareholders,” continued Mr. Saylor.

Third Quarter 2020 Financial Highlights

  • Revenues: Total revenues for the third quarter of 2020 were $127.4 million, a 6.4% increase, or a 5.9% increase on a non-GAAP constant currency basis, compared to the third quarter of 2019. Product licenses and subscription services revenues for the third quarter of 2020 were $37.9 million, a 41.0% increase, or a 41.9% increase on a non-GAAP constant currency basis, compared to the third quarter of 2019. Product support revenues for the third quarter of 2020 were $71.4 million, a 2.1% decrease, or a 3.0% decrease on a non-GAAP constant currency basis, compared to the third quarter of 2019. Other services revenues for the third quarter of 2020 were $18.2 million, an 8.8% decrease, or a 10.2% decrease on a non-GAAP constant currency basis, compared to the third quarter of 2019.
  • Gross Profit: Gross profit for the third quarter of 2020 was $105.7 million, representing an 82.9% gross margin, compared to a gross margin of 80.1% in the third quarter of 2019.
  • Operating Expenses: Operating expenses for the third quarter of 2020 were $125.9 million, a 38.0% increase compared to the third quarter of 2019. Beginning in the third quarter of 2020, operating expenses include impairment losses on our digital assets, which were $44.2 million during the third quarter of 2020.
  • (Loss) Income from Operations: Loss from operations for the third quarter of 2020 was $20.3 million versus income from operations of $4.6 million for the third quarter of 2019. Non-GAAP income from operations, which excludes share-based compensation expense and impairment losses and gains on sale from intangible assets, which include digital assets, was $26.5 million for the third quarter of 2020 versus $6.4 million for the third quarter of 2019.
  • Net (Loss) Income: Net loss for the third quarter of 2020 was $14.2 million, or $1.48 per share on a diluted basis, as compared to net income of $9.7 million, or $0.94 per share on a diluted basis, for the third quarter of 2019. Non-GAAP net income, which excludes share-based compensation expense and impairment losses and gains on sale from intangible assets, which include digital assets, was $19.8 million, or $2.06 per share on a non-GAAP diluted basis, for the third quarter of 2020, as compared to non-GAAP net income of $11.6 million, or $1.13 per share on a non-GAAP diluted basis, for the third quarter of 2019.
  • Cash and Short-term Investments: As of September 30, 2020, MicroStrategy had cash and cash equivalents and short-term investments of $52.7 million, as compared to $565.6 million as of December 31, 2019, a decrease of $513.0 million.
  • Digital Assets: As of September 30, 2020, the carrying value of MicroStrategy’s digital assets (comprised solely of bitcoin) was $380.8 million, which reflects cumulative impairments of $44.2 million since acquisition. MicroStrategy accounts for its digital assets as indefinite-lived intangible assets, which are initially recorded at cost. Subsequently, they are measured at cost, net of any impairment losses incurred since acquisition. MicroStrategy determines the fair value of its bitcoin based on quoted (unadjusted) prices on the active exchange that MicroStrategy has determined is its principal market for bitcoin.  MicroStrategy considers the lowest price of one bitcoin quoted on the active exchange at any time since acquiring the specific bitcoin.  If the carrying value of a bitcoin exceeds that lowest price, an impairment loss has occurred with respect to that bitcoin in the amount equal to the difference between its carrying value and such lowest price.  Impairment losses are recognized as “Digital asset impairment losses” in MicroStrategy’s Consolidated Statements of Operations. As of September 30, 2020, the average cost and average carrying value of MicroStrategy’s bitcoin were approximately $11,111 and $9,954, respectively.  As of October 26, 2020, at 4:00 p.m. EDT, MicroStrategy had 38,250 bitcoins and the market price of one bitcoin in the principal market was approximately $13,023.

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP financial measures for the three and nine months ended September 30, 2020 and 2019. An explanation of non-GAAP financial measures is also included under the heading “Non-GAAP Financial Measures” below. Additional non-GAAP financial measures are included in our “3Q 2020 Earnings Presentation” presentation, which will be available under the “Events” section on MicroStrategy’s investor relations website at https://ir.microstrategy.com/events-presentations.

MicroStrategy uses its Intelligent Enterprise platform across the enterprise and has created an interactive dossier with quarterly financial performance data. Anyone can access the MSTR Financials dossier via a web browser, or by downloading the MicroStrategy Library app on an iOS or Android device. To download the native apps, visit MicroStrategy Library for iPad, MicroStrategy Library for iPhone, or MicroStrategy Library for Android tablet and smartphone.

Non-GAAP Financial Measures

MicroStrategy is providing supplemental financial measures for (i) non-GAAP income (loss) from operations that excludes the impact of share-based compensation expense and impairment losses and gains on sale from intangible assets, which include its digital assets, (ii) non-GAAP net income and non-GAAP diluted earnings per share that exclude the impact of share-based compensation expense and impairment losses and gains on sale from intangible assets, which include its digital assets and the sale of its Voice.com domain name in the second quarter of 2019 (the “Domain Name Sale”), and (iii) non-GAAP constant currency revenues that exclude foreign currency exchange rate fluctuations. These supplemental financial measures are not measurements of financial performance under generally accepted accounting principles in the United States (“GAAP”) and, as a result, these supplemental financial measures may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP financial measures internally to help understand, manage, and evaluate business performance and to help make operating decisions.

MicroStrategy believes that these non-GAAP financial measures are also useful to investors and analysts in comparing its performance across reporting periods on a consistent basis. The first supplemental financial measure excludes (i) a significant non-cash expense that MicroStrategy believes is not reflective of its general business performance, and for which the accounting requires management judgment and the resulting share-based compensation expense could vary significantly in comparison to other companies and (ii) significant impairment losses and gains on sale from intangible assets, which include MicroStrategy’s bitcoin. The second set of supplemental financial measures excludes the impact of (i) share-based compensation expense and (ii) impairment losses and gains on sale from intangible assets, which include MicroStrategy’s bitcoin and the Domain Name Sale, which was outside of MicroStrategy’s normal business operations. The third set of supplemental financial measures excludes changes resulting from fluctuations in foreign currency exchange rates so that results may be compared to the same period in the prior year on a non-GAAP constant currency basis. MicroStrategy believes the use of these non-GAAP financial measures can also facilitate comparison of MicroStrategy’s operating results to those of its competitors.

Treasury Management Strategy and Bitcoin Acquisitions

In July 2020, MicroStrategy announced a capital allocation strategy pursuant to which it intended to use capital in excess of working capital requirements to (i) return up to $250.0 million to its stockholders over a 12-month period and (ii) invest up to another $250.0 million during the same period in one or more alternative investments or assets, which may include stocks, bonds, commodities such as gold, digital assets such as bitcoin, or other asset types. In August 2020, MicroStrategy’s Board of Directors authorized the investment of up to $250.0 million in bitcoin. In September 2020, MicroStrategy’s Board of Directors adopted a new Treasury Reserve Policy that updated MicroStrategy’s treasury management and capital allocation strategies, under which its treasury reserve assets will consist of (i) cash and cash equivalents and short-term investments (“Cash Assets”) held by MicroStrategy that exceed working capital requirements and (ii) bitcoin held by MicroStrategy, with bitcoin serving as the primary treasury reserve asset on an ongoing basis, subject to market conditions and anticipated needs of the business for Cash Assets. As part of these treasury management and capital allocation strategies, MicroStrategy purchased a total of approximately 38,250 bitcoins at an aggregate purchase price of $425.0 million in the third quarter of 2020 for an average purchase price of approximately $11,111 per bitcoin. As a result of the Treasury Reserve Policy, in future periods, MicroStrategy may purchase additional bitcoins and increase its overall holdings of bitcoin or sell its bitcoins and decrease its overall holdings of bitcoin.

Tender Offer

In August 2020, MicroStrategy announced that it commenced a “modified Dutch Auction” tender offer (the “Offer”) to purchase up to $250.0 million in value of shares of its issued and outstanding class A common stock, or such lesser number of shares as are properly tendered and not properly withdrawn, at a price not greater than $140.00 nor less than $122.00 per share. The Offer expired at 5:00 p.m., New York City time, on September 10, 2020. During the third quarter of 2020, MicroStrategy repurchased an aggregate of 432,313 shares of its class A common stock through the Offer at a price of $140.00 per share for an aggregate cost of $61.3 million, inclusive of $0.8 million in certain fees and expenses related to the Offer. As of September 30, 2020, MicroStrategy had 7.3 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 2020 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 4698795. A live and archived webcast and accompanying presentation materials will be available under the “Events” section on MicroStrategy’s investor relations website at https://ir.microstrategy.com/events-presentations. A replay of the conference call will be available beginning approximately two hours after the call concludes until November 3, 2020 at (855) 859-2056 (domestically) or (404) 537-3406 (internationally) using the passcode 4698795.

About MicroStrategy Incorporated

MicroStrategy (Nasdaq: MSTR) is the largest independent publicly-traded business intelligence company, with the leading enterprise analytics platform. Our vision is to enable Intelligence Everywhere. MicroStrategy provides modern analytics on an open, comprehensive enterprise platform used by many of the world’s most admired brands in the Fortune Global 500. Optimized for cloud and on-premises deployments, the platform features HyperIntelligence®, a breakthrough technology that overlays actionable enterprise data on popular business applications to help users make smarter, faster decisions. For more information about MicroStrategy, visit www.microstrategy.com.

MicroStrategy, Intelligent Enterprise, MicroStrategy Library, Intelligence Everywhere, HyperIntelligence, and MicroStrategy 2020 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 2020; impacts of the COVID-19 pandemic; 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; changes in the value of the Company’s bitcoin and impairment losses that may be associated therewith; 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; customers shifting from a product license model to a cloud subscription model; competitive factors; general economic conditions; currency fluctuations; and other risks detailed in MicroStrategy’s registration statements and periodic reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update these forward-looking statements for revisions or changes after the date of this release.

MSTR-F

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

29,573

 

 

$

18,972

 

 

$

56,973

 

 

$

57,384

 

Subscription services

 

 

8,305

 

 

 

7,894

 

 

 

24,294

 

 

 

22,142

 

Total product licenses and subscription services

 

 

37,878

 

 

 

26,866

 

 

 

81,267

 

 

 

79,526

 

Product support

 

 

71,352

 

 

 

72,885

 

 

 

212,548

 

 

 

217,313

 

Other services

 

 

18,178

 

 

 

19,942

 

 

 

55,601

 

 

 

55,957

 

Total revenues

 

 

127,408

 

 

 

119,693

 

 

 

349,416

 

 

 

352,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

 

545

 

 

 

526

 

 

 

1,729

 

 

 

1,597

 

Subscription services

 

 

3,656

 

 

 

3,889

 

 

 

11,512

 

 

 

10,976

 

Total product licenses and subscription services

 

 

4,201

 

 

 

4,415

 

 

 

13,241

 

 

 

12,573

 

Product support

 

 

5,679

 

 

 

6,922

 

 

 

19,234

 

 

 

21,710

 

Other services

 

 

11,856

 

 

 

12,478

 

 

 

37,795

 

 

 

41,055

 

Total cost of revenues

 

 

21,736

 

 

 

23,815

 

 

 

70,270

 

 

 

75,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

105,672

 

 

 

95,878

 

 

 

279,146

 

 

 

277,458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

35,330

 

 

 

43,935

 

 

 

109,799

 

 

 

140,968

 

Research and development

 

 

26,638

 

 

 

27,457

 

 

 

78,606

 

 

 

83,436

 

General and administrative

 

 

19,733

 

 

 

19,900

 

 

 

60,514

 

 

 

63,684

 

Digital asset impairment losses

 

 

44,242

 

 

 

0

 

 

 

44,242

 

 

 

0

 

Total operating expenses

 

 

125,943

 

 

 

91,292

 

 

 

293,161

 

 

 

288,088

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations

 

 

(20,271

)

 

 

4,586

 

 

 

(14,015

)

 

 

(10,630

)

Interest income, net

 

 

209

 

 

 

2,941

 

 

 

2,627

 

 

 

8,520

 

Other (expense) income, net

 

 

(2,971

)

 

 

1,882

 

 

 

(4,532

)

 

 

30,717

 

(Loss) income before income taxes

 

 

(23,033

)

 

 

9,409

 

 

 

(15,920

)

 

 

28,607

 

(Benefit from) provision for income taxes

 

 

(8,804

)

 

 

(291

)

 

 

(5,735

)

 

 

6,419

 

Net (loss) income

 

$

(14,229

)

 

$

9,700

 

 

$

(10,185

)

 

$

22,188

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per share (1):

 

$

(1.48

)

 

$

0.95

 

 

$

(1.04

)

 

$

2.16

 

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

 

 

9,616

 

 

 

10,251

 

 

 

9,777

 

 

 

10,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted (loss) earnings per share (1):

 

$

(1.48

)

 

$

0.94

 

 

$

(1.04

)

 

$

2.15

 

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

 

 

9,616

 

 

 

10,309

 

 

 

9,777

 

 

 

10,336

 

(1) Basic and fully diluted (loss) 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,

 

 

 

2020

 

 

2019*

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

52,653

 

 

$

456,727

 

Restricted cash

 

 

1,231

 

 

 

1,089

 

Short-term investments

 

 

0

 

 

 

108,919

 

Accounts receivable, net

 

 

148,512

 

 

 

163,516

 

Prepaid expenses and other current assets

 

 

16,040

 

 

 

23,195

 

Total current assets

 

 

218,436

 

 

 

753,446

 

 

 

 

 

 

 

 

 

 

Digital assets

 

 

380,758

 

 

 

0

 

Property and equipment, net

 

 

45,473

 

 

 

50,154

 

Right-of-use assets

 

 

79,296

 

 

 

85,538

 

Deposits and other assets

 

 

15,405

 

 

 

8,024

 

Deferred tax assets, net

 

 

33,537

 

 

 

19,409

 

Total Assets

 

$

772,905

 

 

$

916,571

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses, and operating lease liabilities

 

$

38,668

 

 

$

33,919

 

Accrued compensation and employee benefits

 

 

44,177

 

 

 

48,792

 

Deferred revenue and advance payments

 

 

160,845

 

 

 

187,107

 

Total current liabilities

 

 

243,690

 

 

 

269,818

 

 

 

 

 

 

 

 

 

 

Deferred revenue and advance payments

 

 

11,657

 

 

 

4,344

 

Operating lease liabilities

 

 

95,591

 

 

 

103,424

 

Other long-term liabilities

 

 

32,651

 

 

 

30,400

 

Deferred tax liabilities

 

 

24

 

 

 

26

 

Total Liabilities

 

 

383,613

 

 

 

408,012

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

Preferred stock undesignated, $0.001 par value; 5,000 shares authorized; no shares issued or outstanding

 

 

0

 

 

 

0

 

Class A common stock, $0.001 par value; 330,000 shares authorized; 15,937 shares issued and 7,253 shares outstanding, and 15,888 shares issued and 8,081 shares outstanding, respectively

 

 

16

 

 

 

16

 

Class B convertible common stock, $0.001 par value; 165,000 shares authorized; 2,014 shares issued and outstanding, and 2,035 shares issued and outstanding, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

604,974

 

 

 

593,583

 

Treasury stock, at cost; 8,684 shares and 7,807 shares, respectively

 

 

(782,104

)

 

 

(658,880

)

Accumulated other comprehensive loss

 

 

(6,900

)

 

 

(9,651

)

Retained earnings

 

 

573,304

 

 

 

583,489

 

Total Stockholders’ Equity

 

 

389,292

 

 

 

508,559

 

Total Liabilities and Stockholders’ Equity

 

$

772,905

 

 

$

916,571

 

* Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

(unaudited)

 

Operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(10,185

)

 

$

22,188

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9,342

 

 

 

5,456

 

Reduction in carrying amount of right-of-use assets

 

 

6,134

 

 

 

6,087

 

Credit losses and sales allowances

 

 

1,874

 

 

 

892

 

Net realized (gain) loss on short-term investments

 

 

(94

)

 

 

41

 

Deferred taxes

 

 

(13,341

)

 

 

(3,352

)

Release of liabilities for unrecognized tax benefits

 

 

0

 

 

 

(1,077

)

Share-based compensation expense

 

 

7,897

 

 

 

7,887

 

Digital asset impairment losses

 

 

44,242

 

 

 

0

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

6,439

 

 

 

11,781

 

Prepaid expenses and other current assets

 

 

391

 

 

 

4,513

 

Deposits and other assets

 

 

(175

)

 

 

349

 

Accounts payable and accrued expenses

 

 

902

 

 

 

(11,618

)

Accrued compensation and employee benefits

 

 

(7,221

)

 

 

(7,368

)

Deferred revenue and advance payments

 

 

(12,385

)

 

 

23,612

 

Operating lease liabilities

 

 

(7,148

)

 

 

(6,394

)

Other long-term liabilities

 

 

1,625

 

 

 

(674

)

Net cash provided by operating activities

 

 

28,297

 

 

 

52,323

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Purchases of digital assets

 

 

(425,000

)

 

 

0

 

Proceeds from redemption of short-term investments

 

 

119,886

 

 

 

589,357

 

Purchases of property and equipment

 

 

(1,162

)

 

 

(9,382

)

Purchases of short-term investments

 

 

(9,928

)

 

 

(320,487

)

Net cash (used in) provided by investing activities

 

 

(316,204

)

 

 

259,488

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

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

 

 

3,616

 

 

 

5,442

 

Purchases of treasury stock

 

 

(122,480

)

 

 

(48,244

)

Net cash used in financing activities

 

 

(118,864

)

 

 

(42,802

)

 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

 

 

2,839

 

 

 

(3,926

)

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

 

(403,932

)

 

 

265,083

 

Cash, cash equivalents, and restricted cash, beginning of period

 

 

457,816

 

 

 

110,786

 

Cash, cash equivalents, and restricted cash, end of period

 

$

53,884

 

 

$

375,869

 

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses and subscription services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

29,573

 

 

$

18,972

 

 

$

56,973

 

 

$

57,384

 

Subscription services

 

 

8,305

 

 

 

7,894

 

 

 

24,294

 

 

 

22,142

 

Total product licenses and subscription services

 

 

37,878

 

 

 

26,866

 

 

 

81,267

 

 

 

79,526

 

Product support

 

 

71,352

 

 

 

72,885

 

 

 

212,548

 

 

 

217,313

 

Other services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

16,954

 

 

 

18,038

 

 

 

51,973

 

 

 

50,135

 

Education

 

 

1,224

 

 

 

1,904

 

 

 

3,628

 

 

 

5,822

 

Total other services

 

 

18,178

 

 

 

19,942

 

 

 

55,601

 

 

 

55,957

 

Total revenues

 

 

127,408

 

 

 

119,693

 

 

 

349,416

 

 

 

352,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses and subscription services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

 

545

 

 

 

526

 

 

 

1,729

 

 

 

1,597

 

Subscription services

 

 

3,656

 

 

 

3,889

 

 

 

11,512

 

 

 

10,976

 

Total product licenses and subscription services

 

 

4,201

 

 

 

4,415

 

 

 

13,241

 

 

 

12,573

 

Product support

 

 

5,679

 

 

 

6,922

 

 

 

19,234

 

 

 

21,710

 

Other services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

10,331

 

 

 

11,102

 

 

 

31,927

 

 

 

35,996

 

Education

 

 

1,525

 

 

 

1,376

 

 

 

5,868

 

 

 

5,059

 

Total other services

 

 

11,856

 

 

 

12,478

 

 

 

37,795

 

 

 

41,055

 

Total cost of revenues

 

 

21,736

 

 

 

23,815

 

 

 

70,270

 

 

 

75,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

$

105,672

 

 

$

95,878

 

 

$

279,146

 

 

$

277,458

 

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

INCOME (LOSS) FROM OPERATIONS

(in thousands)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations

 

$

(20,271

)

 

$

4,586

 

 

$

(14,015

)

 

$

(10,630

)

Share-based compensation expense

 

 

2,560

 

 

 

1,834

 

 

 

7,897

 

 

 

7,887

 

Digital asset impairment losses

 

 

44,242

 

 

 

0

 

 

 

44,242

 

 

 

0

 

Non-GAAP income (loss) from operations

 

$

26,531

 

 

$

6,420

 

 

$

38,124

 

 

$

(2,743

)

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

NET INCOME AND EARNINGS PER SHARE

(in thousands, except per share data)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Reconciliation of non-GAAP net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(14,229

)

 

$

9,700

 

 

$

(10,185

)

 

$

22,188

 

Share-based compensation expense, net of tax

 

 

2,608

 

 

 

1,932

 

 

 

8,381

 

 

$

7,428

 

Digital asset impairment losses, net of tax

 

 

31,465

 

 

 

0

 

 

 

31,465

 

 

 

0

 

Gain from Domain Name Sale, net of tax

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(21,778

)

Non-GAAP net income

 

$

19,844

 

 

$

11,632

 

 

$

29,661

 

 

$

7,838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of non-GAAP diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted (loss) earnings per share

 

$

(1.48

)

 

$

0.94

 

 

$

(1.04

)

 

$

2.15

 

Share-based compensation expense, net of tax (per diluted share)

 

 

0.27

 

 

 

0.19

 

 

 

0.85

 

 

 

0.72

 

Digital asset impairment losses, net of tax (per diluted share)

 

 

3.27

 

 

 

0.00

 

 

 

3.22

 

 

 

0.00

 

Gain from Domain Name Sale, net of tax (per diluted share)

 

 

0.00

 

 

 

0.00

 

 

 

0.00

 

 

 

(2.11

)

Non-GAAP diluted earnings per share

 

$

2.06

 

 

$

1.13

 

 

$

3.03

 

 

$

0.76

 

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

CONSTANT CURRENCY

(in thousands)

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

(unaudited)

 

 

 

GAAP

 

 

Foreign
Currency
Exchange
Rate Impact (1)

 

 

Non-GAAP
Constant
Currency (2)

 

 

GAAP

 

 

GAAP %
Change

 

 

Non-GAAP
Constant
Currency
% Change (3)

 

 

 

2020

 

 

2020

 

 

2020

 

 

2019

 

 

2020

 

 

2020

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

29,573

 

 

$

(341

)

 

$

29,914

 

 

$

18,972

 

 

 

55.9

%

 

 

57.7

%

Subscription services

 

 

8,305

 

 

 

91

 

 

 

8,214

 

 

 

7,894

 

 

 

5.2

%

 

 

4.1

%

Total product licenses and subscription services

 

 

37,878

 

 

 

(250

)

 

38,128

 

 

 

26,866

 

 

 

41.0

%

 

41.9

%

Product support

 

 

71,352

 

 

 

670

 

 

 

70,682

 

 

 

72,885

 

 

 

-2.1

%

 

 

-3.0

%

Other services

 

 

18,178

 

 

 

269

 

 

 

17,909

 

 

 

19,942

 

 

 

-8.8

%

 

 

-10.2

%

Total revenues

 

 

127,408

 

 

 

689

 

 

 

126,719

 

 

 

119,693

 

 

 

6.4

%

 

 

5.9

%

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

(unaudited)

 

 

 

GAAP

 

 

Foreign
Currency
Exchange
Rate Impact (1)

 

 

Non-GAAP
Constant
Currency (2)

 

 

GAAP

 

 

GAAP %
Change

 

 

Non-GAAP
Constant
Currency
% Change (3)

 

 

 

2020

 

 

2020

 

 

2020

 

 

2019

 

 

2020

 

 

2020

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

56,973

 

 

$

(1,537

)

 

$

58,510

 

 

$

57,384

 

 

 

-0.7

%

 

 

2.0

%

Subscription services

 

 

24,294

 

 

 

9

 

 

 

24,285

 

 

 

22,142

 

 

 

9.7

%

 

 

9.7

%

Total product licenses and subscription services

 

 

81,267

 

 

 

(1,528

)

 

 

82,795

 

 

 

79,526

 

 

 

2.2

%

 

 

4.1

%

Product support

 

 

212,548

 

 

 

(1,671

)

 

 

214,219

 

 

 

217,313

 

 

 

-2.2

%

 

 

-1.4

%

Other services

 

 

55,601

 

 

 

(229

)

 

 

55,830

 

 

 

55,957

 

 

 

-0.6

%

 

 

-0.2

%

Total revenues

 

 

349,416

 

 

 

(3,428

)

 

 

352,844

 

 

 

352,796

 

 

 

-1.0

%

 

 

0.0

%

(1)

The “Foreign Currency Exchange Rate Impact” reflects the estimated impact of fluctuations in foreign currency exchange rates on international revenues. It shows the increase (decrease) in international revenues from the same period in the prior year, based on comparisons to the prior year quarterly average foreign currency exchange rates. The term “international” refers to operations outside of the United States and Canada.

 

(2)

The “Non-GAAP Constant Currency” reflects the current period GAAP amount, less the Foreign Currency Exchange Rate Impact.

 

(3)

The “Non-GAAP Constant Currency % Change” reflects the percentage change between the current period Non-GAAP Constant Currency amount and the GAAP amount for the same period in the prior year.

MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

 

2020

 

 

2019*

 

 

2019

 

 

 

(unaudited)

 

 

 

 

 

 

(unaudited)

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

186

 

 

$

481

 

 

$

470

 

Deferred subscription services revenue

 

 

19,535

 

 

 

16,561

 

 

 

12,812

 

Deferred product support revenue

 

 

134,632

 

 

 

161,670

 

 

 

139,402

 

Deferred other services revenue

 

 

6,492

 

 

 

8,395

 

 

 

7,560

 

Total current deferred revenue and advance payments

 

$

160,845

 

 

$

187,107

 

 

$

160,244

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

140

 

 

$

293

 

 

$

368

 

Deferred subscription services revenue

 

 

5,988

 

 

 

97

 

 

 

142

 

Deferred product support revenue

 

 

4,759

 

 

 

3,417

 

 

 

3,440

 

Deferred other services revenue

 

 

770

 

 

 

537

 

 

 

537

 

Total non-current deferred revenue and advance payments

 

$

11,657

 

 

$

4,344

 

 

$

4,487

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current and non-current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

326

 

 

$

774

 

 

$

838

 

Deferred subscription services revenue

 

 

25,523

 

 

 

16,658

 

 

 

12,954

 

Deferred product support revenue

 

 

139,391

 

 

 

165,087

 

 

 

142,842

 

Deferred other services revenue

 

 

7,262

 

 

 

8,932

 

 

 

8,097

 

Total current and non-current deferred revenue and advance payments

 

$

172,502

 

 

$

191,451

 

 

$

164,731

 

* Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

WORLDWIDE EMPLOYEE HEADCOUNT

 

 

September 30,

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

 

2020

 

 

2020

 

 

2020

 

 

2019

 

 

2019

 

Subscription services

 

 

54

 

 

 

64

 

 

 

63

 

 

 

69

 

 

 

66

 

Product support

 

 

165

 

 

 

189

 

 

 

204

 

 

 

219

 

 

 

231

 

Consulting

 

 

397

 

 

 

421

 

 

 

425

 

 

 

392

 

 

 

390

 

Education

 

 

38

 

 

 

43

 

 

 

42

 

 

 

38

 

 

 

38

 

Sales and marketing

 

 

495

 

 

 

573

 

 

 

594

 

 

 

597

 

 

 

616

 

Research and development

 

 

666

 

 

 

684

 

 

 

721

 

 

 

743

 

 

 

775

 

General and administrative

 

 

258

 

 

 

285

 

 

 

314

 

 

 

338

 

 

 

337

 

Total headcount

 

 

2,073

 

 

 

2,259

 

 

 

2,363

 

 

 

2,396

 

 

 

2,453

 

 

MicroStrategy Incorporated
Matt Basil
Investor Relations
ir@microstrategy.com
(703) 848-8600

Source: MicroStrategy