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8-K - FORM 8-K - MICROSTRATEGY Incd184813d8k.htm

Exhibit 99.1

Contact:

MicroStrategy Incorporated

Investor Relations

ir@microstrategy.com

(703) 848-8600

MicroStrategy Announces

First Quarter 2016 Financial Results

TYSONS CORNER, Va., April 27, 2016 - MicroStrategy® Incorporated (Nasdaq: MSTR), a leading worldwide provider of enterprise software platforms, today announced financial results for the three-month period ended March 31, 2016 (the first quarter of its 2016 fiscal year).

First quarter 2016 revenues were $119.0 million versus $123.9 million for the first quarter of 2015, a 4% decrease. Product licenses and subscription services revenues for the first quarter of 2016 were $29.8 million versus $27.4 million for the first quarter of 2015, a 9% increase. Product support revenues for the first quarter of 2016 were $68.5 million versus $69.3 million for the first quarter of 2015, a 1% decrease. Other services revenues for the first quarter of 2016 were $20.8 million versus $27.1 million for the first quarter of 2015, a 24% decrease. Foreign currency headwinds continued to have a negative impact on revenues for the first quarter of 2016.

Operating expenses for the first quarter of 2016 were $76.4 million versus $74.1 million for the first quarter of 2015, a 3% increase. In addition, MicroStrategy did not capitalize any software development costs during the first quarter of 2016, as compared to $5.4 million in software development costs capitalized during the first quarter of 2015.

Income from operations for the first quarter of 2016 was $19.8 million, as compared to income from operations of $22.6 million for the first quarter of 2015. Net income for the first quarter of 2016 was $14.3 million, or $1.24 per share on a diluted basis, as compared to net income of $20.5 million, or $1.79 per share on a diluted basis, for the first quarter of 2015.

Non-GAAP income from operations, which excludes share-based compensation expense and restructuring costs, was $21.3 million for the first quarter of 2016 versus $26.3 million for the first quarter of 2015.

As of March 31, 2016, MicroStrategy had cash and cash equivalents and short-term investments of $536.3 million, as compared to $485.7 million as of December 31, 2015, an increase of $50.6 million. As of March 31, 2016, MicroStrategy had 9.4 million shares of class A common stock and 2.0 million shares of class B common stock outstanding.

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 March 31, 2016 and 2015. An explanation of this non-GAAP measure is also included under the heading “Non-GAAP Financial Measure” below.


Conference Call

MicroStrategy will be discussing its first 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 95287609. A live webcast and replay of the conference call will be available under the “Events & Presentations” 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 May 2, 2016 at (855) 859-2056 (domestically) or (404) 537-3406 (internationally) using the passcode 95287609. An archived webcast will also be available under the “Events & Presentations” section on MicroStrategy’s investor relations website at http://ir.microstrategy.com/events.cfm.

MicroStrategy Launched MicroStrategy 10.3™

In March, MicroStrategy unveiled MicroStrategy 10.3, the latest release of its groundbreaking enterprise analytics platform MicroStrategy 10 Secure Enterprise™. This release features new data discovery capabilities and a collection of ease-of-use enhancements designed to advance business user adoption within the enterprise. To try MicroStrategy 10.3 using the new Express Install, visit: http://www.microstrategy.com/us/free-trial.

Available as a free upgrade to all cloud and on-premises customers who are current on maintenance, version 10.3 introduces new visualization capabilities for data discovery users, new gateways to leverage existing enterprise assets, a simplified express installation, and a variety of ease-of-use improvements throughout the platform. To learn more about MicroStrategy 10.3, visit: http://ir.microstrategy.com/releasedetail.cfm?ReleaseID=960648.

“We take great pride in delivering a relevant, powerful and easy-to-use analytics platform to the market,” said Tim Lang, CTO, MicroStrategy Incorporated. “Both business and technology leaders rely on MicroStrategy as an across-the-board enterprise analytics platform because it strikes the right balance between the agility of self-service data discovery and the large-scale enterprise demands of governance, security, and performance.”

MicroStrategy 10™ Showcased in BI Bake-Off at Gartner Business Intelligence and Analytics Summit

In March, MicroStrategy announced that MicroStrategy 10 was showcased in the BI Bake-Off, a product face-off that took place at the Gartner Business Intelligence and Analytics Summit at the Gaylord Texan Hotel & Convention Center in Grapevine, Texas. MicroStrategy customers Dr Pepper Snapple Group, Interstate Batteries, and Ryder System presented on enterprise data discovery with MicroStrategy 10. Each customer speaker explained how they have deployed self-service to decentralized teams and expanded analytics to new business groups while managing data governance through a centralized semantic architecture.

At this year’s BI Bake-Off, MicroStrategy was invited, along with Microsoft, Qlik and Tableau, to demonstrate its data discovery capabilities in an interactive and light-hearted environment – see MicroStrategy’s bake-off video here. Each vendor was asked to make data-driven decisions analyzing publicly available College Scorecard Data provided by the U.S. Department of Education. The questions asked of vendors were designed with specific data discovery functionalities and business user challenges in mind. MicroStrategy demonstrated the capabilities of MicroStrategy 10, including its data blending, data preparation, governed data discovery, and mobile features.

“MicroStrategy emerged as a top performer in 13 of the 15 categories Gartner considers critical to success with BI and analytics,” said Mark Gambill, CMO, MicroStrategy Incorporated. “Our inclusion in the BI Bake-Off underscores the importance of our groundbreaking enterprise analytics platform in the market and motivates us to continue to expand its innovative capabilities and value for our customers.”


Gartner Report “MicroStrategy’s Version 10 Blends Agile Data Discovery With Governed BI and Analytics” Published

In February, MicroStrategy announced that leading analyst firm Gartner published a report titled “MicroStrategy’s Version 10 Blends Agile Data Discovery With Governed BI and Analytics”[1]. A copy of the Gartner report is available, compliments of MicroStrategy, at: http://www.microstrategy.com/us/go/gartner-report-microstrategy-10.

The Gartner report outlines the following strategic planning assumptions: “By 2018, data discovery and data management evolution will drive most organizations to augment centralized analytic architectures with decentralized approaches. By 2017, 75% of IT organizations will have a bimodal capability; half will not handle this well, by either remaining overcontrolling or outright ignoring the risks of more agile approaches. By 2018, smart, governed, Hadoop-based, search-based and visual-based data discovery will converge into a single set of next-generation data discovery capabilities, as components of a modern BI and analytics platform.”

“MicroStrategy’s innovative capabilities strike the right balance between agile data discovery and enterprise scalability, giving the market both data discovery and enterprise BI in a single analytics platform,” said Michael J. Saylor, Chairman, President and CEO, MicroStrategy Incorporated. “We welcome Gartner’s assessment of MicroStrategy 10’s capabilities and our overall company strategy.”

MicroStrategy Held its 19th Annual User Conference in Miami

In February, MicroStrategy held its 19th annual user conference, MicroStrategy World 2016, at the Miami Beach Convention Center. The conference featured more than 160 distinct sessions and 50 customer speakers, inspiring keynotes, numerous hands-on workshops, and countless opportunities to network with MicroStrategy’s vast ecosystem of partners. All technical sessions and brand new training workshops highlighted MicroStrategy 10 and how attendees can leverage its latest features and capabilities to build apps and dashboards, find answers, and complete tasks faster.

Speakers included 24 Hour Fitness, Ahold, AIG, Amazon Web Services, Boston Children’s Hospital, Cisco Systems, International Post Corporation, Jabil Circuit, Netflix, Overstock.com, and Ryder Systems. Customers were trained to successfully extract value from big data, build mobile productivity apps, move their on-premises analytics to the cloud, and deploy smartphone-based security applications.

MicroStrategy Announced its 2016 Symposium Series

In March, MicroStrategy announced its 2016 Symposium Series, a global tour showcasing the MicroStrategy 10.3 release of its groundbreaking enterprise analytics platform MicroStrategy 10 Secure Enterprise™. The 20-city global tour represented a unique opportunity for participants to learn about the latest advances in big data analytics, data discovery, mobile application development, and enterprise data security enabled by MicroStrategy’s unified analytics platform.

Each one-day event, which took place in cities across North America, Europe, the Middle East, and Asia in April, demonstrated version 10.3’s functionality during an executive keynote, followed by a day filled with 12 to 16 breakout sessions and hands-on workshops that covered: Analytics – big data, predictive analytics, data discovery, dashboards and visualizations, and enterprise-wide deployments; Mobility – mobile analytics, workforce productivity apps, and custom mobile app development for end users; and Security – employee access, customer access, enterprise security and analytics.

 

[1] Gartner “MicroStrategy’s Version 10 Blends Agile Data Discovery With Governed BI and Analytics” by Cindi Howson, Rita L. Sallam, Josh Parenteau, December 11, 2015.


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 analytics, mobility, and security platforms that are flexible, powerful, scalable, and user-friendly. To learn more, visit MicroStrategy online, and follow us on Facebook and Twitter.

MicroStrategy, MicroStrategy 10, MicroStrategy 10 Secure Enterprise, MicroStrategy 10.2, MicroStrategy 10.3, and MicroStrategy Analytics 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 10.3; 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.

MSTR-F


MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

     Three Months Ended  
     March 31,  
     2016     2015  
     (unaudited)     (unaudited)  

Revenues

    

Product licenses

   $ 22,399      $ 20,757   

Subscription services

     7,354        6,665   
  

 

 

   

 

 

 

Total product licenses and subscription services

     29,753        27,422   

Product support

     68,497        69,305   

Other services

     20,765        27,144   
  

 

 

   

 

 

 

Total revenues

     119,015        123,871   
  

 

 

   

 

 

 

Cost of revenues

    

Product licenses

     2,136        1,309   

Subscription services

     3,092        3,379   
  

 

 

   

 

 

 

Total product licenses and subscription services

     5,228        4,688   

Product support

     3,273        3,336   

Other services

     14,322        19,074   
  

 

 

   

 

 

 

Total cost of revenues

     22,823        27,098   
  

 

 

   

 

 

 

Gross profit

     96,192        96,773   
  

 

 

   

 

 

 

Operating expenses

    

Sales and marketing

     36,577        36,520   

Research and development

     17,575        15,398   

General and administrative

     22,219        22,125   

Restructuring costs

     25        85   
  

 

 

   

 

 

 

Total operating expenses

     76,396        74,128   
  

 

 

   

 

 

 

Income from operations

     19,796        22,645   

Interest income, net

     403        2   

Other (expense) income, net

     (1,668     4,750   
  

 

 

   

 

 

 

Income before income taxes

     18,531        27,397   

Provision for income taxes

     4,259        6,937   
  

 

 

   

 

 

 

Net income

   $ 14,272      $ 20,460   
  

 

 

   

 

 

 

Basic earnings per share (1):

   $ 1.25      $ 1.81   
  

 

 

   

 

 

 

Weighted average shares outstanding used in computing basic earnings per share

     11,408        11,321   
  

 

 

   

 

 

 

Diluted earnings per share (1):

   $ 1.24      $ 1.79   
  

 

 

   

 

 

 

Weighted average shares outstanding used in computing diluted earnings per share

     11,479        11,455   
  

 

 

   

 

 

 

 

(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)

 

     March 31,     December 31,  
     2016     2015*  
     (unaudited)        

Assets

    

Current assets

    

Cash and cash equivalents

   $ 308,887      $ 292,341   

Restricted cash

     701        618   

Short-term investments

     227,410        193,320   

Accounts receivable, net

     56,558        68,154   

Prepaid expenses and other current assets

     14,563        10,881   
  

 

 

   

 

 

 

Total current assets

     608,119        565,314   

Property and equipment, net

     63,228        65,664   

Capitalized software development costs, net

     13,902        15,855   

Deposits and other assets

     2,103        2,072   

Deferred tax assets, net

     5,826        7,989   
  

 

 

   

 

 

 

Total Assets

   $ 693,178      $ 656,894   
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current liabilities

    

Accounts payable and accrued expenses

   $ 27,836      $ 31,840   

Accrued compensation and employee benefits

     36,573        40,067   

Accrued restructuring costs

     33        56   

Deferred revenue and advance payments

     131,437        100,695   
  

 

 

   

 

 

 

Total current liabilities

     195,879        172,658   

Deferred revenue and advance payments

     10,183        8,995   

Other long-term liabilities

     19,252        19,943   

Deferred tax liabilities

     16        17   
  

 

 

   

 

 

 

Total Liabilities

     225,330        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; 15,794 shares issued and 9,389 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

     532,284        534,651   

Treasury stock, at cost; 6,405 shares

     (475,184     (475,184

Accumulated other comprehensive loss

     (6,746     (7,408

Retained earnings

     417,476        403,204   
  

 

 

   

 

 

 

Total Stockholders’ Equity

     467,848        455,281   
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 693,178      $ 656,894   
  

 

 

   

 

 

 

 

* Derived from audited financial statements.


MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Three Months Ended  
     March 31,  
     2016     2015  
     (unaudited)     (unaudited)  

Operating activities:

    

Net income

   $ 14,272      $ 20,460   

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

    

Depreciation and amortization

     4,553        5,103   

Bad debt expense

     531        364   

Unrealized net gain on foreign currency forward contracts

     —          (949

Non-cash restructuring costs and adjustments

     —          (98

Deferred taxes

     688        4,788   

Release of liabilities for unrecognized tax benefits

     —          (61

Share-based compensation expense

     1,504        3,597   

Excess tax benefits from share-based compensation arrangements

     (1,266     (468

Changes in operating assets and liabilities:

    

Accounts receivable

     11,915        16,164   

Prepaid expenses and other current assets

     (3,551     377   

Deposits and other assets

     4        190   

Accounts payable and accrued expenses

     (3,093     (6,161

Accrued compensation and employee benefits

     (4,083     (12,951

Accrued restructuring costs

     (26     (1,120

Deferred revenue and advance payments

     30,065        27,620   

Other long-term liabilities

     (686     (1,009
  

 

 

   

 

 

 

Net cash provided by operating activities

     50,827        55,846   

Investing activities:

    

Proceeds from redemption of short-term investments

     63,500        90,000   

Purchases of property and equipment

     (193     (1,535

Purchases of short-term investments

     (97,417     (118,155

Capitalized software development costs

     —          (5,354

Increase in restricted cash

     (56     (80
  

 

 

   

 

 

 

Net cash used in investing activities

     (34,166     (35,124

Financing activities:

    

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

     241        1,467   

Payment of taxes relating to net exercise of employee stock options

     (3,739     —     

Excess tax benefits from share-based compensation arrangements

     1,266        468   

Payments on capital lease obligations and other financing arrangements

     (122     (164
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (2,354     1,771   

Effect of foreign exchange rate changes on cash and cash equivalents

     2,239        (4,318
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     16,546        18,175   

Cash and cash equivalents, beginning of period

     292,341        146,919   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 308,887      $ 165,094   
  

 

 

   

 

 

 


MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)

 

     Three Months Ended  
     March 31,  
     2016      2015  
     (unaudited)      (unaudited)  

Revenues

     

Product licenses and subscription services:

     

Product licenses

   $ 22,399       $ 20,757   

Subscription services

     7,354         6,665   
  

 

 

    

 

 

 

Total product licenses and subscription services

     29,753         27,422   
  

 

 

    

 

 

 

Product support

     68,497         69,305   

Other services:

     

Consulting

     18,486         24,704   

Education

     2,279         2,440   
  

 

 

    

 

 

 

Total other services

     20,765         27,144   
  

 

 

    

 

 

 

Total revenues

     119,015         123,871   
  

 

 

    

 

 

 

Cost of revenues

     

Product licenses and subscription services:

     

Product licenses

     2,136         1,309   

Subscription services

     3,092         3,379   
  

 

 

    

 

 

 

Total product licenses and subscription services

     5,228         4,688   
  

 

 

    

 

 

 

Product support

     3,273         3,336   

Other services:

     

Consulting

     13,033         18,147   

Education

     1,289         927   
  

 

 

    

 

 

 

Total other services

     14,322         19,074   
  

 

 

    

 

 

 

Total cost of revenues

     22,823         27,098   
  

 

 

    

 

 

 

Gross profit

   $ 96,192       $ 96,773   
  

 

 

    

 

 

 


MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

 

     March 31,     December 31,     March 31,  
     2016     2015*     2015  
     (unaudited)           (unaudited)  

Current:

      

Deferred product licenses revenue

   $ 13,088      $ 13,506      $ 12,946   

Deferred subscription services revenue

     17,593        15,763        15,300   

Deferred product support revenue

     164,667        158,738        162,875   

Deferred other services revenue

     7,411        9,149        7,966   
  

 

 

   

 

 

   

 

 

 

Gross current deferred revenue and advance payments

     202,759        197,156        199,087   

Less: unpaid deferred revenue

     (71,322     (96,461     (67,619
  

 

 

   

 

 

   

 

 

 

Net current deferred revenue and advance payments

   $ 131,437      $ 100,695      $ 131,468   
  

 

 

   

 

 

   

 

 

 

Non-current:

      

Deferred product licenses revenue

   $ 7,573      $ 5,397      $ 6,863   

Deferred subscription services revenue

     2,340        2,138        735   

Deferred product support revenue

     6,425        7,607        6,865   

Deferred other services revenue

     755        795        2,124   
  

 

 

   

 

 

   

 

 

 

Gross non-current deferred revenue and advance payments

     17,093        15,937        16,587   

Less: unpaid deferred revenue

     (6,910     (6,942     (5,221
  

 

 

   

 

 

   

 

 

 

Net non-current deferred revenue and advance payments

   $ 10,183      $ 8,995      $ 11,366   
  

 

 

   

 

 

   

 

 

 

Total current and non-current:

      

Deferred product licenses revenue

   $ 20,661      $ 18,903      $ 19,809   

Deferred subscription services revenue

     19,933        17,901        16,035   

Deferred product support revenue

     171,092        166,345        169,740   

Deferred other services revenue

     8,166        9,944        10,090   
  

 

 

   

 

 

   

 

 

 

Gross current and non-current deferred revenue and advance payments

     219,852        213,093        215,674   

Less: unpaid deferred revenue

     (78,232     (103,403     (72,840
  

 

 

   

 

 

   

 

 

 

Net current and non-current deferred revenue and advance payments

   $ 141,620      $ 109,690      $ 142,834   
  

 

 

   

 

 

   

 

 

 

 

* Derived from audited financial statements.


MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(in thousands)

 

     Three Months Ended  
     March 31,  
     2016      2015  
     (unaudited)      (unaudited)  

Reconciliation of non-GAAP income from operations:

     

Income from operations

   $ 19,796       $ 22,645   

Share-based compensation expense

     1,504         3,597   

Restructuring costs

     25         85   
  

 

 

    

 

 

 

Non-GAAP income from operations

   $ 21,325       $ 26,327   
  

 

 

    

 

 

 


MICROSTRATEGY INCORPORATED

WORLDWIDE EMPLOYEE HEADCOUNT

 

     March 31,      June 30,      September 30,      December 31,      March 31,  
     2015      2015      2015      2015      2016  

Subscription services

     43         37         33         37         37   

Product support

     138         130         127         131         135   

Consulting

     554         508         480         467         455   

Education

     19         25         27         28         31   

Sales and marketing

     577         515         507         513         531   

Research and development

     580         508         464         461         499   

General and administrative

     321         303         301         310         317   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total headcount

     2,232         2,026         1,939         1,947         2,005