mstr-ex991

TYSONS CORNER, Va., April 30, 2019 - 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.

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.

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.

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.

⁽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.

	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

	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

	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

	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

	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

	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