mstr-10q_20200331.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from            to           

Commission File Number 000-24435

MICROSTRATEGY INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

51-0323571

(I.R.S. Employer

Identification Number)

1850 Towers Crescent Plaza , Tysons Corner , VA

(Address of Principal Executive Offices)

22182

(Zip Code)

( 703 ) 848-8600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol

 

Name of Each Exchange on which Registered

Class A common stock, par value $0.001 per share

 

MSTR

 

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes        No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes        No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

As of April 20, 2020, the registrant had 7,728,917 and 2,035,184 shares of class A common stock and class B common stock outstanding, respectively.

 

 


MICROSTRATEGY INCORPORATED

FORM 10-Q

TABLE OF CONTENTS

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

1

 

 

 

 

 

 

Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

1

 

 

 

 

 

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019

2

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2020 and 2019

3

 

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity as of March 31, 2020

4

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019

5

 

 

 

 

 

 

Notes to Consolidated Financial Statements

6

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

27

 

 

 

 

Item 4.

 

Controls and Procedures

28

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

29

 

 

 

 

Item 1A.

 

Risk Factors

29

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

42

 

 

 

 

Item 5.

 

Other Information

43

 

 

 

 

Item 6.

 

Exhibits

43

 

 

 

 


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

429,276

 

 

$

456,727

 

Restricted cash

 

 

2,742

 

 

 

1,089

 

Short-term investments

 

 

109,946

 

 

 

108,919

 

Accounts receivable, net

 

 

124,935

 

 

 

163,516

 

Prepaid expenses and other current assets

 

 

26,163

 

 

 

23,195

 

Total current assets

 

 

693,062

 

 

 

753,446

 

Property and equipment, net

 

 

47,623

 

 

 

50,154

 

Right-of-use assets

 

 

82,690

 

 

 

85,538

 

Deposits and other assets

 

 

7,757

 

 

 

8,024

 

Deferred tax assets, net

 

 

18,139

 

 

 

19,409

 

Total assets

 

$

849,271

 

 

$

916,571

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses, and operating lease liabilities

 

$

32,539

 

 

$

33,919

 

Accrued compensation and employee benefits

 

 

35,207

 

 

 

48,792

 

Deferred revenue and advance payments

 

 

184,891

 

 

 

187,107

 

Total current liabilities

 

 

252,637

 

 

 

269,818

 

Deferred revenue and advance payments

 

 

3,660

 

 

 

4,344

 

Operating lease liabilities

 

 

100,251

 

 

 

103,424

 

Other long-term liabilities

 

 

31,273

 

 

 

30,400

 

Deferred tax liabilities

 

 

24

 

 

 

26

 

Total liabilities

 

 

387,845

 

 

 

408,012

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

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; 15,891 shares issued and 7,729 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; 2,035 shares issued and outstanding, and 2,035 shares issued and outstanding, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

597,087

 

 

 

593,583

 

Treasury stock, at cost; 8,162 shares and 7,807 shares, respectively

 

 

( 709,627

)

 

 

( 658,880

)

Accumulated other comprehensive loss

 

 

( 10,198

)

 

 

( 9,651

)

Retained earnings

 

 

584,146

 

 

 

583,489

 

Total stockholders’ equity

 

 

461,426

 

 

 

508,559

 

Total liabilities and stockholders’ equity

 

$

849,271

 

 

$

916,571

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

1


MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

(unaudited)

 

Revenues:

 

 

 

 

 

 

 

 

Product licenses

 

$

12,584

 

 

$

18,291

 

Subscription services

 

 

7,968

 

 

 

7,144

 

Total product licenses and subscription services

 

 

20,552

 

 

 

25,435

 

Product support

 

 

71,158

 

 

 

71,450

 

Other services

 

 

19,714

 

 

 

18,481

 

Total revenues

 

 

111,424

 

 

 

115,366

 

Cost of revenues:

 

 

 

 

 

 

 

 

Product licenses

 

 

670

 

 

 

519

 

Subscription services

 

 

4,064

 

 

 

3,598

 

Total product licenses and subscription services

 

 

4,734

 

 

 

4,117

 

Product support

 

 

6,718

 

 

 

7,067

 

Other services

 

 

13,093

 

 

 

14,989

 

Total cost of revenues

 

 

24,545

 

 

 

26,173

 

Gross profit

 

 

86,879

 

 

 

89,193

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

 

39,518

 

 

 

48,760

 

Research and development

 

 

26,101

 

 

 

28,215

 

General and administrative

 

 

21,332

 

 

 

22,604

 

Total operating expenses

 

 

86,951

 

 

 

99,579

 

Loss from operations

 

 

( 72

)

 

 

( 10,386

)

Interest income, net

 

 

1,855

 

 

 

2,566

 

Other income (expense), net

 

 

434

 

 

 

( 596

)

Income (loss) before income taxes

 

 

2,217

 

 

 

( 8,416

)

Provision for (benefit from) income taxes

 

 

1,560

 

 

 

( 510

)

Net income (loss)

 

 

657

 

 

 

( 7,906

)

Basic earnings (loss) per share (1)

 

$

0.07

 

 

$

( 0.77

)

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

 

 

9,976

 

 

 

10,328

 

Diluted earnings (loss) per share (1)

 

$

0.07

 

 

$

( 0.77

)

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

 

 

10,031

 

 

 

10,328

 

 

(1)

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

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

2


MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

(unaudited)

 

Net income (loss)

 

$

657

 

 

$

( 7,906

)

Other comprehensive income (loss), net of applicable taxes:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

( 1,171

)

 

 

( 162

)

Unrealized gain on short-term investments

 

 

624

 

 

 

415

 

Total other comprehensive (loss) income

 

 

( 547

)

 

 

253

 

Comprehensive income (loss)

 

$

110

 

 

$

( 7,653

)

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

3


MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

Convertible

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Common Stock

 

 

Paid-in

 

 

Treasury Stock

 

 

Comprehensive

 

 

Retained

 

 

 

Total

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Income (Loss)

 

 

Earnings

 

Balance at January 1, 2019

 

$

529,731

 

 

 

15,837

 

 

$

16

 

 

 

2,035

 

 

$

2

 

 

$

576,957

 

 

 

( 7,285

)

 

$

( 586,161

)

 

$

( 10,217

)

 

$

549,134

 

Net loss

 

 

( 7,906

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

( 7,906

)

Other comprehensive income

 

 

253

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

253

 

 

 

0

 

Issuance of class A common stock under stock option plans

 

 

1,507

 

 

 

13

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,507

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Purchases of treasury stock

 

 

( 48,244

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

( 363

)

 

 

( 48,244

)

 

 

0

 

 

 

0

 

Share-based compensation expense

 

 

2,965

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

2,965

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Balance at March 31, 2019

 

$

478,306

 

 

 

15,850

 

 

$

16

 

 

 

2,035

 

 

$

2

 

 

$

581,429

 

 

 

( 7,648

)

 

$

( 634,405

)

 

$

( 9,964

)

 

$

541,228

 

Net income

 

 

20,394

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

20,394

 

Other comprehensive income

 

 

654

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

654

 

 

 

0

 

Issuance of class A common stock under stock option plans

 

 

329

 

 

 

3

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

329

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Share-based compensation expense

 

 

3,006

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

3,006

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Balance at June 30, 2019

 

$

502,689

 

 

 

15,853

 

 

$

16

 

 

 

2,035

 

 

$

2

 

 

$

584,764

 

 

 

( 7,648

)

 

$

( 634,405

)

 

$

( 9,310

)

 

$

561,622

 

Net income

 

 

9,700

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

9,700

 

Other comprehensive loss

 

 

( 2,364

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

( 2,364

)

 

 

0

 

Issuance of class A common stock under stock option plans

 

 

3,606

 

 

 

27

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

3,606

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Share-based compensation expense

 

 

1,788

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,788

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Balance at September 30, 2019

 

$

515,419

 

 

 

15,880

 

 

$

16

 

 

 

2,035

 

 

$

2

 

 

$

590,158

 

 

 

( 7,648

)

 

$

( 634,405

)

 

$

( 11,674

)

 

$

571,322

 

Net income

 

 

12,167

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

12,167

 

Other comprehensive income

 

 

2,023

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

2,023

 

 

 

0

 

Issuance of class A common stock under stock option plans

 

 

1,127

 

 

 

8

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,127

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Purchases of treasury stock

 

 

( 24,475

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

( 159

)

 

 

( 24,475

)

 

 

0

 

 

 

0

 

Share-based compensation expense

 

 

2,298

 

 

 

0