UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2004
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 of incorporation)
1861 International Drive, McLean, VA
(Address of Principal Executive Offices)
22102
(Zip Code)
51-0323571
(I.R.S. Employer
Identification Number)
Registrant’s telephone number, including area code: (703) 848-8600
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 x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
The number of shares of the registrant’s class A common stock and class B common stock outstanding on August 1, 2004 was 12,517,701 and 3,549,399, respectively.
FORM 10-Q
TABLE OF CONTENTS
| Page | ||||
| PART I. |
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| Item 1. |
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| Consolidated Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003 |
1 | |||
| 2 | ||||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | ||
| Item 3. |
30 | |||
| Item 4. |
31 | |||
| PART II. |
||||
| Item 1. |
32 | |||
| Item 5. |
33 | |||
| Item 6. |
33 | |||
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| June 30, 2004 |
December 31, 2003 |
|||||||
| (unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 60,817 | $ | 51,882 | ||||
| Restricted cash |
722 | 747 | ||||||
| Accounts receivable, net |
27,456 | 30,993 | ||||||
| Prepaid expenses and other current assets |
5,055 | 3,888 | ||||||
| Deferred tax assets, net |
1,726 | 1,807 | ||||||
| Total current assets |
95,776 | 89,317 | ||||||
| Property and equipment, net |
16,198 | 16,113 | ||||||
| Capitalized software development costs, net |
3,979 | 3,693 | ||||||
| Long-term investments |
26,353 | — | ||||||
| Deposits and other assets |
3,407 | 1,984 | ||||||
| Deferred tax assets, net |
3,416 | 3,686 | ||||||
| Total assets |
$ | 149,129 | $ | 114,793 | ||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable and accrued expenses |
$ | 13,562 | $ | 12,768 | ||||
| Accrued compensation and employee benefits |
15,831 | 17,968 | ||||||
| Accrued restructuring costs |
2,030 | 2,599 | ||||||
| Deferred revenue and advance payments |
40,626 | 28,374 | ||||||
| Total current liabilities |
72,049 | 61,709 | ||||||
| Deferred revenue and advance payments |
2,299 | 2,750 | ||||||
| Other long-term liabilities |
4,126 | 2,443 | ||||||
| Accrued restructuring costs |
2,654 | 3,544 | ||||||
| Total liabilities |
81,128 | 70,446 | ||||||
| Commitments and Contingencies |
||||||||
| Stockholders’ Equity: |
||||||||
| Preferred stock undesignated, par value $0.001 per share, 4,971 shares authorized, no shares issued or outstanding |
— | — | ||||||
| Class A common stock, par value $0.001 per share, 330,000 shares authorized, 12,518 and 12,362 shares issued and outstanding, respectively |
13 | 12 | ||||||
| Class B common stock, par value $0.001 per share, 165,000 shares authorized, 3,549 and 3,604 shares issued and outstanding, respectively |
4 | 4 | ||||||
| Additional paid-in capital |
390,037 | 387,625 | ||||||
| Accumulated other comprehensive income |
2,054 | 2,619 | ||||||
| Accumulated deficit |
(324,107 | ) | (345,913 | ) | ||||
| Total stockholders’ equity |
68,001 | 44,347 | ||||||
| Total liabilities and stockholders’ equity |
$ | 149,129 | $ | 114,793 | ||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
1
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Revenues: |
||||||||
| Product licenses |
$ | 18,323 | $ | 19,637 | ||||
| Product support and other services |
31,561 | 23,996 | ||||||
| Total revenues |
49,884 | 43,633 | ||||||
| Cost of revenues: |
||||||||
| Product licenses |
870 | 739 | ||||||
| Product support and other services |
7,269 | 6,419 | ||||||
| Total cost of revenues |
8,139 | 7,158 | ||||||
| Gross profit |
41,745 | 36,475 | ||||||
| Operating expenses: |
||||||||
| Sales and marketing |
15,538 | 14,279 | ||||||
| Research and development |
6,516 | 7,798 | ||||||
| General and administrative |
7,503 | 7,963 | ||||||
| Restructuring and impairment charges |
— | 1,699 | ||||||
| Amortization of intangible assets |
17 | 18 | ||||||
| Total operating expenses |
29,574 | 31,757 | ||||||
| Income from operations |
12,171 | 4,718 | ||||||
| Financing and other (expense) income: |
||||||||
| Interest income |
174 | 281 | ||||||
| Interest expense, including discount amortization expense on notes payable of $0 and $883, respectively |
(11 | ) | (2,049 | ) | ||||
| Loss on investments |
(85 | ) | — | |||||
| Loss on early extinguishment of notes payable |
— | (858 | ) | |||||
| Other (expense) income, net |
(241 | ) | 133 | |||||
| Total financing and other (expense) income |
(163 | ) | (2,493 | ) | ||||
| Income before income taxes |
12,008 | 2,225 | ||||||
| Provision (benefit) for income taxes |
581 | (71 | ) | |||||
| Net income |
$ | 11,427 | $ | 2,296 | ||||
| Basic earnings per share |
$ | 0.71 | $ | 0.16 | ||||
| Diluted earnings per share |
$ | 0.67 | $ | 0.15 | ||||
| Basic weighted average shares outstanding |
16,056 | 14,088 | ||||||
| Diluted weighted average shares outstanding |
17,128 | 14,940 | ||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
2
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Revenues: |
||||||||
| Product licenses |
$ | 37,134 | $ | 36,166 | ||||
| Product support and other services |
61,856 | 44,902 | ||||||
| Total revenues |
98,990 | 81,068 | ||||||
| Cost of revenues: |
||||||||
| Product licenses |
1,714 | 1,529 | ||||||
| Product support and other services |
14,180 | 12,377 | ||||||
| Total cost of revenues |
15,894 | 13,906 | ||||||
| Gross profit |
83,096 | 67,162 | ||||||
| Operating expenses: |
||||||||
| Sales and marketing |
31,944 | 26,962 | ||||||
| Research and development |
13,246 | 14,731 | ||||||
| General and administrative |
15,456 | 15,147 | ||||||
| Restructuring and impairment charges |
— | 1,699 | ||||||
| Amortization of intangible assets |
35 | 148 | ||||||
| Total operating expenses |
60,681 | 58,687 | ||||||
| Income from operations |
22,415 | 8,475 | ||||||
| Financing and other income (expense): |
||||||||
| Interest income |
289 | 371 | ||||||
| Interest expense, including discount amortization expense on notes payable of $0 and $1,856, respectively |
(25 | ) | (4,347 | ) | ||||
| Loss on investments |
(85 | ) | — | |||||
| Loss on early extinguishment of notes payable |
— | (840 | ) | |||||
| Other income, net |
565 | 95 | ||||||
| Total financing and other income (expense) |
744 | (4,721 | ) | |||||
| Income before income taxes |
23,159 | 3,754 | ||||||
| Provision for income taxes |
1,353 | 793 | ||||||
| Net income |
$ | 21,806 | $ | 2,961 | ||||
| Basic earnings per share |
$ | 1.36 | $ | 0.21 | ||||
| Diluted earnings per share |
$ | 1.27 | $ | 0.20 | ||||
| Basic weighted average shares outstanding |
16,033 | 13,939 | ||||||
| Diluted weighted average shares outstanding |
17,190 | 14,500 | ||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Six months ended June 30, |
||||||||
| 2004 |
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