MicroStrategy Announces First Quarter 2019 Financial Results

TYSONS CORNER, Va.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24MSTR&src=ctag” target=”_blank”gt;$MSTRlt;/agt; lt;a href=”https://twitter.com/hashtag/MSTR?src=hash” target=”_blank”gt;#MSTRlt;/agt;–MicroStrategy^®
Incorporated (Nasdaq: MSTR), a leading worldwide provider of enterprise
analytics and mobility software, today announced financial results for
the three-month period ended March 31, 2019 (the first quarter of its
2019 fiscal year).

MicroStrategy adopted Accounting Standards Update No. 2016-02, Leases
(Topic 842), and its subsequent amendments (“ASU 2016-02”),
effective January 1, 2019. Comparative prior period consolidated
financial statements have not been restated and are not directly
comparable to the current period consolidated financial statements.

First quarter 2019 revenues were $115.4 million versus $123.0 million
for the first quarter of 2018, a 6.2% decrease. Product licenses and
subscription services revenues for the first quarter of 2019 were $25.4
million versus $25.0 million for the first quarter of 2018, a 1.9%
increase. Product support revenues for the first quarter of 2019 were
$71.5 million versus $74.4 million for the first quarter of 2018, a 4.0%
decrease. Other services revenues for the first quarter of 2019 were
$18.5 million versus $23.6 million for the first quarter of 2018, a
21.7% decrease. Foreign currency effects had an unfavorable impact on
revenues for the first quarter of 2019.

Operating expenses for the first quarter of 2019 were $99.6 million
versus $97.1 million for the first quarter of 2018, a 2.6% increase.

Loss from operations for the first quarter of 2019 was $10.4 million
versus income from operations of $0.7 million for the first quarter of
2018. Net loss for the first quarter of 2019 was $7.9 million, or $0.77
per share on a diluted basis, as compared to net income of $1.7 million,
or $0.15 per share on a diluted basis, for the first quarter of 2018.

Non-GAAP loss from operations, which excludes share-based compensation
expense, was $7.4 million for the first quarter of 2019 versus non-GAAP
income from operations of $5.5 million for the first quarter of 2018.
The tables at the end of this press release include a reconciliation of
(loss) income from operations to non-GAAP (loss) income from operations
for the three months ended March 31, 2019 and 2018. An explanation of
this non-GAAP financial measure is also included under the heading
“Non-GAAP Financial Measure” below.

As of March 31, 2019, MicroStrategy had cash and cash equivalents and
short-term investments of $551.1 million, as compared to $576.1 million
as of December 31, 2018, a decrease of $25.1 million. During the first
quarter of 2019, MicroStrategy repurchased 362,148 shares of its class A
common stock for an aggregate purchase price of approximately $48.2
million. As of March 31, 2019, MicroStrategy had 8.2 million shares of
class A common stock and 2.0 million shares of class B common stock
outstanding.

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.

Conference Call

MicroStrategy will be discussing its first quarter 2019 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 7634017. A
live and archived webcast will be available under the “Events” section
on MicroStrategy’s investor relations website at http://ir.microstrategy.com/events.cfm.
A replay of the conference call will be available beginning
approximately two hours after the call concludes until May 7, 2019 at
(855) 859-2056 (domestically) or (404) 537-3406 (internationally) using
the passcode 7634017.

Recent Business Highlights

MicroStrategy announced the general availability
of MicroStrategy 2019™, the industry’s first and only enterprise
platform for Federated Analytics, Transformational Mobility, and
HyperIntelligence™. MicroStrategy 2019 delivers modern analytics on an
enterprise platform that can be deployed on-premises or on multiple
private and public cloud platforms. MicroStrategy customers on
MicroStrategy 2019 platform can get started on HyperIntelligence by
downloading the MicroStrategy HyperIntelligence extension at the Chrome
Web Store. Customers can provision MicroStrategy 2019 in the cloud
with the MicroStrategy for AWS and MicroStrategy for Azure
provisioning consoles. A 30-day free trial is available for MicroStrategy
2019 on AWS and Microsoft Azure.
MicroStrategy was recognized by industry analysts in the following
published research:
- Recognized by Gartner, Inc. as the sole Challenger in the “2019
  Magic Quadrant for Analytics and Business Intelligence Platforms”⁽¹⁾
- Named a Technology Innovation Leader by Dresner Advisory Services
  for the second consecutive year
- Ranked the #1 Overall Value Index Leader in Embedded Analytics and
  Business Intelligence by Ventana Research
- Ranked the #1 Overall Value Index Leader in Mobile Analytics and
  Business Intelligence by Ventana Research
MicroStrategy held its 22^nd annual user conference,
MicroStrategy World™ 2019, which brought together thousands of product
experts, thought leaders and MicroStrategy users for three days of
inspirational keynotes, educational workshops, and customer
presentations on how analytics can transform the way people use
information to make each organization a more Intelligent Enterprise.
Attendees also learned about MicroStrategy’s new platform, robust
partner network, and services offerings as well as how they can employ
new digital strategies to increase the adoption of analytics across
the enterprise.
- MicroStrategy announced the ability of customers to leverage
  MicroStrategy 2019 on Microsoft Azure and Amazon Web Services,
  which allows customers to launch fully-configured analytics,
  mobility, and HyperIntelligence projects on Azure and AWS.
- MicroStrategy presented Customer Awards to American Express Global
  Business Travel, The Coca-Cola Company, Hilton, Ola, and TAP Air
  Portugal for their outstanding enterprise analytics and mobility
  applications.
- MicroStrategy hosted its second annual Datathon at MicroStrategy
  World 2019, challenging participants to create innovative
  analytics, AI, big data, or mobile applications using
  MicroStrategy 2019 with aggregated data from CharityBase, a free,
  open source charity data portal with public information on the
  activities, locations, and finances of thousands of charities
  registered in England and Wales.

Non-GAAP Financial Measure

MicroStrategy is providing a supplemental financial measure for (loss)
income from operations that excludes the impact of share-based
compensation arrangements. This supplemental financial measure is not a
measurement of financial performance under generally accepted accounting
principles in the United States (“GAAP”) and, as a result, this
supplemental 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. 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

MicroStrategy (Nasdaq: MSTR) is a leading worldwide provider of
enterprise analytics and mobility software and services. Our mission is
to make every enterprise a more Intelligent Enterprise. MicroStrategy
2019 delivers modern analytics on an open, comprehensive enterprise
platform designed to drive business results with Federated Analytics,
Transformational Mobility, and HyperIntelligence. To learn more, visit MicroStrategy
online, and follow us on LinkedIn,
Twitter
and Facebook.

MicroStrategy, Intelligent Enterprise, MicroStrategy Library,
MicroStrategy 2019, HyperIntelligence, and MicroStrategy World 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 2019; 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, including as a result of
changes to U.S. federal tax laws; the timing of significant orders;
delays in or the inability of the Company to develop or ship new
products; competitive factors; general economic conditions; currency
fluctuations; and other risks detailed in the Company’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

⁽¹⁾ Gartner, Magic Quadrant for Analytics and Business
Intelligence Platforms, Cindi Howson, James Richardson, Rita Sallam,
Austin Kronz, 11 February 2019. Gartner does not endorse any vendor,
product or service depicted in its research publications, and does not
advise technology users to select only those vendors with the highest
ratings or other designation. Gartner research publications consist of
the opinions of Gartner’s research organization and should not be
construed as statements of fact. Gartner disclaims all warranties,
express or implied, with respect to this research, including any
warranties of merchantability or fitness for a particular purpose.


MICROSTRATEGY INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

	Three Months Ended
	March 31,
	2019			2018
	(unaudited)			(unaudited)
Revenues
Product licenses	$	18,291		$	17,301
Subscription services		7,144			7,662
Total product licenses and subscription services		25,435			24,963
Product support		71,450			74,415
Other services		18,481			23,589
Total revenues		115,366			122,967

Cost of revenues
Product licenses		519			2,211
Subscription services		3,598			3,249
Total product licenses and subscription services		4,117			5,460
Product support		7,067			4,796
Other services		14,989			14,929
Total cost of revenues		26,173			25,185

Gross profit		89,193			97,782

Operating expenses
Sales and marketing		48,760			51,335
Research and development		28,215			23,560
General and administrative		22,604			22,172
Total operating expenses		99,579			97,067

(Loss) income from operations		(10,386	)		715
Interest income, net		2,566			2,034
Other expense, net		(596	)		(1,594	)
(Loss) income before income taxes		(8,416	)		1,155
Benefit from income taxes		(510	)		(518	)
Net (loss) income	$	(7,906	)	$	1,673

Basic (loss) earnings per share (1):	$	(0.77	)	$	0.15
Weighted average shares outstanding used in computing basic (loss) earnings per share		10,328			11,447

Diluted (loss) earnings per share (1):	$	(0.77	)	$	0.15
Weighted average shares outstanding used in computing diluted (loss) earnings per share		10,328			11,488

(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)

	March 31,			December 31,
	2019			2018*
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	258,743		$	109,924
Restricted cash		922			862
Short-term investments		292,314			466,186
Accounts receivable, net		133,922			171,359
Prepaid expenses and other current assets		32,511			30,068
Total current assets		718,412			778,399

Property and equipment, net		54,832			51,919
Right-of-use assets		87,743			0
Deposits and other assets		8,374			8,134
Deferred tax assets, net		18,983			17,316
Total Assets	$	888,344		$	855,768

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable, accrued expenses, and operating lease liabilities	$	37,227		$	33,684
Accrued compensation and employee benefits		36,713			48,045
Deferred revenue and advance payments		190,070			176,540
Total current liabilities		264,010			258,269

Deferred revenue and advance payments		4,539			6,469
Operating lease liabilities		106,661			0
Other long-term liabilities		34,793			61,262
Deferred tax liabilities		35			37
Total Liabilities		410,038			326,037

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; 15,850 shares issued and 8,202 shares outstanding, and 15,837 shares issued and 8,552 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		581,429			576,957
Treasury stock, at cost; 7,648 shares and 7,285 shares, respectively		(634,405	)		(586,161	)
Accumulated other comprehensive loss		(9,964	)		(10,217	)
Retained earnings		541,228			549,134
Total Stockholders’ Equity		478,306			529,731
Total Liabilities and Stockholders’ Equity	$	888,344		$	855,768

*		Derived from audited financial statements.


MICROSTRATEGY INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Three Months Ended
	March 31,
	2019			2018
	(unaudited)			(unaudited)
Operating activities:
Net (loss) income	$	(7,906	)	$	1,673
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		3,664			3,298
Bad debt expense		827			165
Net realized loss on short-term investments		41			0
Deferred taxes		(1,694	)		(2,662	)
Share-based compensation expense		3,017			4,743
Changes in operating assets and liabilities:
Accounts receivable		10,266			422
Prepaid expenses and other current assets		(3,070	)		(3,783	)
Deposits and other assets		(134	)		228
Accounts payable and accrued expenses		(3,108	)		(6,016	)
Accrued compensation and employee benefits		(12,195	)		(8,085	)
Deferred revenue and advance payments		38,502			19,570
Operating lease liabilities		(2,074	)		0
Other long-term liabilities		320			9,164
Net cash provided by operating activities		26,456			18,717

Investing activities:
Proceeds from redemption of short-term investments		314,403			195,820
Purchases of property and equipment		(6,011	)		(1,294	)
Purchases of short-term investments		(138,099	)		(483,440	)
Net cash provided by (used in) investing activities		170,293			(288,914	)

Financing activities:
Proceeds from sale of class A common stock under exercise of employee stock options		1,507			0
Purchases of treasury stock		(48,244	)		0
Payments on capital lease obligations and other financing arrangements prior to the adoption of ASU 2016-02		0			(7	)
Net cash used in financing activities		(46,737	)		(7	)

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash		(1,133	)		2,202
Net increase (decrease) in cash, cash equivalents, and restricted cash		148,879			(268,002	)
Cash, cash equivalents, and restricted cash, beginning of period		110,786			421,182
Cash, cash equivalents, and restricted cash, end of period	$	259,665		$	153,180


MICROSTRATEGY INCORPORATED
REVENUE AND COST OF REVENUE DETAIL
(in thousands)

	Three Months Ended
	March 31,
	2019		2018
	(unaudited)		(unaudited)
Revenues
Product licenses and subscription services:
Product licenses	$	18,291	$	17,301
Subscription services		7,144		7,662
Total product licenses and subscription services		25,435		24,963
Product support		71,450		74,415
Other services:
Consulting		16,603		21,287
Education		1,878		2,302
Total other services		18,481		23,589
Total revenues		115,366		122,967

Cost of revenues
Product licenses and subscription services:
Product licenses		519		2,211
Subscription services		3,598		3,249
Total product licenses and subscription services		4,117		5,460
Product support		7,067		4,796
Other services:
Consulting		12,985		13,321
Education		2,004		1,608
Total other services		14,989		14,929
Total cost of revenues		26,173		25,185

Gross profit	$	89,193	$	97,782


MICROSTRATEGY INCORPORATED
DEFERRED REVENUE DETAIL
(in thousands)

	March 31,		December 31,		March 31,
	2019		2018*		2018
	(unaudited)				(unaudited)
Current:
Deferred product licenses revenue	$	555	$	1,768	$	3,064
Deferred subscription services revenue		15,641		13,508		16,742
Deferred product support revenue		166,306		152,501		173,156
Deferred other services revenue		7,568		8,763		8,756
Total current deferred revenue and advance payments	$	190,070	$	176,540	$	201,718

Non-current:
Deferred product licenses revenue	$	479	$	542	$	843
Deferred subscription services revenue		247		2,384		385
Deferred product support revenue		3,231		3,091		3,854
Deferred other services revenue		582		452		586
Total non-current deferred revenue and advance payments	$	4,539	$	6,469	$	5,668

Total current and non-current:
Deferred product licenses revenue	$	1,034	$	2,310	$	3,907
Deferred subscription services revenue		15,888		15,892		17,127
Deferred product support revenue		169,537		155,592		177,010
Deferred other services revenue		8,150		9,215		9,342
Total current and non-current deferred revenue and advance payments	$	194,609	$	183,009	$	207,386

*		Derived from audited financial statements.


MICROSTRATEGY INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP MEASURE
(in thousands)

	Three Months Ended
	March 31,
	2019			2018
	(unaudited)			(unaudited)
Reconciliation of non-GAAP (loss) income from operations:
(Loss) income from operations	$	(10,386	)	$	715
Share-based compensation expense		3,017			4,743
Non-GAAP (loss) income from operations	$	(7,369	)	$	5,458


MICROSTRATEGY INCORPORATED
WORLDWIDE EMPLOYEE HEADCOUNT

	March 31,	December 31,	September 30,	June 30,	March 31,
	2019	2018	2018	2018	2018
Subscription services	54	56	55	54	57
Product support	224	202	194	184	182
Consulting	429	452	458	443	441
Education	50	47	44	39	42
Sales and marketing	675	707	699	687	667
Research and development	733	716	688	651	604
General and administrative	329	348	326	322	313
Total headcount	2,494	2,528	2,464	2,380	2,306

Contacts

MicroStrategy Incorporated
Investor Relations
Claudia Cahill
ir@microstrategy.com
(703)
848-8600