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MicroStrategy Announces Separation of Chairman and CEO Roles and Second Quarter 2022 Financial Results;  Michael Saylor to Assume the Role of Executive Chairman and Phong Le to Serve as Chief Executive Officer

MicroStrategy Announces Separation of Chairman and CEO Roles and Second Quarter 2022 Financial Results;

 Michael Saylor to Assume the Role of Executive Chairman and

Phong Le to Serve as Chief Executive Officer

 

MicroStrategy® Incorporated (Nasdaq: MSTR) (“MicroStrategy”or the “Company”), the largest independent publicly-traded business intelligence company, announced today that, as of August 8, 2022, Michael Saylor will assume the new role of Executive Chairman and Phong Le, the Company’s President, will also serve as the Company’s new Chief Executive Officer and as a member of the Board of Directors. Mr. Saylor will remain the Chairman of the Board of Directors and an executive officer of the Company.

Michael Saylor has served as Chief Executive Officer and Chairman of the Board since founding MicroStrategy in 1989 and taking it public in 1998. Under Mr. Saylor’s leadership, MicroStrategy has become a global leader in business intelligence, serving the largest most respected enterprises and government organizations in the world. It has also been a technology pioneer in the fields of relational, web, mobile, and cloud analytics. More recently, MicroStrategy became the first publicly traded company to adopt bitcoin, a revolutionary financial technology, as its primary treasury reserve asset. As Executive Chairman, Mr. Saylor will focus primarily on innovation and long-term corporate strategy, while continuing to provide oversight of the Company’s bitcoin acquisition strategy as head of the Board’s Investments Committee.

“I believe that splitting the roles of Chairman and CEO will enable us to better pursue our two corporate strategies of acquiring and holding bitcoin and growing our enterprise analytics software business. As Executive Chairman I will be able to focus more on our bitcoin acquisition strategy and related bitcoin advocacy initiatives, while Phong will be empowered as CEO to manage overall corporate operations,” said Mr. Saylor.

Phong Le has served as President since July 2020 and has also served in various other senior executive positions since joining MicroStrategy in 2015, including Chief Financial Officer and Chief Operating Officer. Mr. Le has successfully managed the operations of the Company, delivering one of the best operational and financial years in the history of the Company’s software business in 2021. He has successfully led the transition of the software business to the cloud, driven growth in enterprise and embedded analytics, and led the implementation of the Company’s pioneering bitcoin acquisition strategy. Mr. Le has a passion for engaging with customers and employees, and has built a high-performing, experienced, and stable leadership team. As President & Chief Executive Officer, Mr. Le will lead the day- to-day execution of the Company’ corporate strategies and manage all business operations.

“I’m honored and excited to continue leading this truly innovative organization, as President & CEO. Our people and our brand carry incredible momentum. I would like to reinforce our commitment to our customers, shareholders, partners and employees, and I look forward to leading the organization for the long-term health and growth of our enterprise software and bitcoin acquisition strategies,” said Mr. Le.

The Company also announced today financial results for the second quarter of its fiscal year 2022, or the three month period ended June 30, 2022.

“We continue to see the durability of our enterprise analytics business and the attractiveness of our cloud platform in our results this past quarter. With total revenue growth on a constant currency basis, and 36% year-over-year growth in subscription services revenues, our business remains resilient even in light of the continuing macroeconomic uncertainties,” said Mr. Le.

Second Quarter 2022 Financial Highlights

  • Revenues: Total revenues for the second quarter of 2022 were $122.1 million, a 2.6% decrease, or a 1.7% increase on a non-GAAP constant currency basis, compared to the second quarter of 2021. Product licenses and subscription services revenues for the second quarter of 2022 were $34.1 million, a 5.1% increase, or an 8.4% increase on a non-GAAP constant currency basis, compared to the second quarter of 2021. Product support revenues for the second quarter of 2022 were $66.5 million, a 6.3% decrease, or a 2.1% decrease on a non-GAAP constant currency basis, compared to the second quarter of 2021. Other services revenues for the second quarter of 2022 were $21.4 million, a 1.9% decrease, or a 4.3% increase on a non-GAAP constant currency basis, compared to the second quarter of 2021.
  • Gross Profit: Gross profit for the second quarter of 2022 was $96.9 million, representing a 79.4% gross margin, compared to a gross profit of $102.3 million, representing a gross margin of 81.6%, for the second quarter of 2021.
  • Operating Expenses: Operating expenses for the second quarter of 2022 were $1.015 billion, a 96.5% increase compared to the second quarter of 2021. Operating expenses include impairment losses on MicroStrategy’s digital assets, which were $917.8 million during the second quarter of 2022, compared to $424.8 million in the second quarter of 2021.
  • Loss from Operations and Net Loss: Loss from operations for the second quarter of 2022 was $918.1 million, compared to $414.2 million for the second quarter of 2021. Net loss for the second quarter of 2022 was $1.062 billion, or $94.01 per share on a diluted basis, as compared to $299.3 million, or $30.71 per share on a diluted basis, for the second quarter of 2021. Digital asset impairment charges of $917.8 million and $424.8 million for the second quarter of 2022 and 2021, respectively, were reflected in these amounts.
  • Cash and Cash Equivalents: As of June 30, 2022, MicroStrategy had cash and cash equivalents of $69.4 million, as compared to $63.4 million as of December 31, 2021, an increase of $6.0 million.
  • Digital Assets: As of June 30, 2022, the carrying value of MicroStrategy’s digital assets (comprised of approximately 129,699 bitcoins) was $1.988 billion, which reflects cumulative impairment losses of $1.989 billion since acquisition and an average carrying amount per bitcoin of approximately $15,326. As of June 30, 2022, the original cost basis and market value of MicroStrategy’s bitcoin were $3.977 billion and $2.451 billion, respectively, which reflects an average cost per bitcoin of approximately $30,664 and a market price per bitcoin of $18,895.02, respectively. Additional information on MicroStrategy’s digital asset holdings is included in the “Digital Assets – Additional Information” tables at the end of this press release.

The tables provided at the end of this press release include a reconciliation of the most directly comparable financial measures prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) to non-GAAP financial measures for the three and six months ended June 30, 2022 and 2021. An explanation of non-GAAP financial measures is also included under the heading “Non-GAAP Financial Measures” below. Additional non-GAAP financial measures are included in MicroStrategy’s “Q2 2022 Earnings Presentation,” which will be available under the “Events and Presentations” section of MicroStrategy’s investor relations website at https://www.microstrategy.com/en/investor-relations.

Non-GAAP Financial Measures

MicroStrategy is providing supplemental financial measures for (i) non-GAAP loss from operations that excludes the impact of share-based compensation expense, (ii) non-GAAP net loss and non-GAAP diluted loss per share that exclude the impacts of share-based compensation expense, interest expense arising from the amortization of debt issuance costs related to MicroStrategy’s long-term debt, and related income tax effects, and (iii) non-GAAP constant currency revenues that exclude foreign currency exchange rate fluctuations. These supplemental financial measures are not measurements of financial performance under GAAP and, as a result, these supplemental financial measures may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP financial measures internally to help understand, manage, and evaluate business performance and to help make operating decisions.

MicroStrategy believes that these non-GAAP financial measures are also useful to investors and analysts in comparing its performance across reporting periods on a consistent basis. The first supplemental financial measure excludes a significant non-cash expense that MicroStrategy believes is not reflective of its general business performance, and for which the accounting requires management judgment and the resulting share-based compensation expense could vary significantly in comparison to other companies. The second set of supplemental financial measures excludes the impacts of (i) share-based compensation expense, (ii) non-cash interest expense arising from the amortization of debt issuance costs related to MicroStrategy’s long-term debt, and (iii) related income tax effects. The third set of supplemental financial measures excludes changes resulting from fluctuations in foreign currency exchange rates so that results may be compared to the same period in the prior year on a non-GAAP constant currency basis. MicroStrategy believes the use of these non-GAAP financial measures can also facilitate comparison of MicroStrategy’s operating results to those of its competitors.

Conference Call 

MicroStrategy will be discussing its second quarter 2022 financial results on a live Video Webinar today beginning at approximately 5:00 p.m. ET. The live Video Webinar and accompanying presentation materials will be available under the “Events and Presentations” section of MicroStrategy’s investor relations website at https://www.microstrategy.com/en/investor-relations. Log-in instructions will be available after registering for the event. An archived replay of the event will be available beginning approximately two hours after the call concludes.

About MicroStrategy Incorporated

MicroStrategy (Nasdaq: MSTR) is the largest independent publicly-traded analytics and business intelligence company. The MicroStrategy analytics platform is consistently rated as the best in enterprise analytics and is used by many of the world’s most admired brands in the Fortune Global 500. We pursue two corporate strategies: (1) grow our enterprise analytics software business to promote our vision of Intelligence Everywhere and (2) acquire and hold bitcoin, which we view as a dependable store of value supported by a robust, public, open-source architecture untethered to sovereign monetary policy. For more information about MicroStrategy, visit www.microstrategy.com.

MicroStrategy, Intelligent Enterprise, and MicroStrategy Library 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,” “will,” 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: fluctuations in the market price of bitcoin and any associated impairment charges that the Company may incur as a result of a decrease in the market price of bitcoin below the value at which the Company’s bitcoins are carried on its balance sheet; gains or losses on any sales of bitcoins; changes in the accounting treatment relating to the Company’s bitcoin holdings; changes in securities laws or other laws or regulations, or the adoption of new laws or regulations, relating to bitcoin that adversely affect the price of bitcoin or the Company’s ability to transact in or own bitcoin; a decrease in liquidity in the markets in which bitcoin is traded; security breaches, cyberattacks, unauthorized access, loss of private keys, fraud or other circumstances or events that result in the loss of the Company’s bitcoins; the level and terms of the Company’s substantial indebtedness and its ability to service such debt; the extent and timing of market acceptance of the Company’s new product offerings; continued acceptance of the Company’s other products in the marketplace; the Company’s ability to recognize revenue or deferred revenue through delivery of products or satisfactory performance of services; the timing of significant orders; delays in or the inability of the Company to develop or ship new products; customers shifting from a product license model to a cloud subscription model, which may delay the Company’s ability to recognize revenue; fluctuations in tax benefits or provisions; impacts of the COVID-19 pandemic; competitive factors; general economic conditions; currency fluctuations; and other risks detailed in MicroStrategy’s registration statements and periodic reports filed with the Securities and Exchange Commission (“SEC”). The Company undertakes no obligation to update these forward-looking statements for revisions or changes after the date of this release. 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

20,129

 

 

$

22,151

 

 

$

36,642

 

 

$

43,431

 

Subscription services

 

 

14,017

 

 

 

10,342

 

 

 

26,862

 

 

 

20,368

 

Total product licenses and subscription services

 

 

34,146

 

 

 

32,493

 

 

 

63,504

 

 

 

63,799

 

Product support

 

 

66,521

 

 

 

71,027

 

 

 

133,672

 

 

 

141,676

 

Other services

 

 

21,406

 

 

 

21,831

 

 

 

44,174

 

 

 

42,778

 

Total revenues

 

 

122,073

 

 

 

125,351

 

 

 

241,350

 

 

 

248,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

 

431

 

 

 

419

 

 

 

908

 

 

 

907

 

Subscription services

 

 

5,498

 

 

 

3,810

 

 

 

10,908

 

 

 

7,438

 

Total product licenses and subscription services

 

 

5,929

 

 

 

4,229

 

 

 

11,816

 

 

 

8,345

 

Product support

 

 

5,127

 

 

 

4,862

 

 

 

10,318

 

 

 

9,674

 

Other services

 

 

14,148

 

 

 

13,947

 

 

 

28,747

 

 

 

27,568

 

Total cost of revenues

 

 

25,204

 

 

 

23,038

 

 

 

50,881

 

 

 

45,587

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

96,869

 

 

 

102,313

 

 

 

190,469

 

 

 

202,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

36,862

 

 

 

40,321

 

 

 

70,102

 

 

 

78,519

 

Research and development

 

 

31,790

 

 

 

28,548

 

 

 

65,313

 

 

 

58,031

 

General and administrative

 

 

28,502

 

 

 

22,917

 

 

 

55,208

 

 

 

44,646

 

Digital asset impairment losses

 

 

917,838

 

 

 

424,774

 

 

 

1,087,929

 

 

 

618,869

 

Total operating expenses

 

 

1,014,992

 

 

 

516,560

 

 

 

1,278,552

 

 

 

800,065

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(918,123

)

 

 

(414,247

)

 

 

(1,088,083

)

 

 

(597,399

)

Interest expense, net

 

 

(13,187

)

 

 

(4,401

)

 

 

(24,226

)

 

 

(6,797

)

Other income (expense), net

 

 

5,120

 

 

 

(897

)

 

 

7,345

 

 

 

367

 

Loss before income taxes

 

 

(926,190

)

 

 

(419,545

)

 

 

(1,104,964

)

 

 

(603,829

)

Provision for (benefit from) income taxes

 

 

136,108

 

 

 

(120,198

)

 

 

88,085

 

 

 

(194,462

)

Net loss

 

$

(1,062,298

)

 

$

(299,347

)

 

$

(1,193,049

)

 

$

(409,367

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic loss per share (1):

 

$

(94.01

)

 

$

(30.71

)

 

$

(105.64

)

 

$

(42.22

)

Weighted average shares outstanding used in computing basic loss per share

 

 

11,300

 

 

 

9,746

 

 

 

11,294

 

 

 

9,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted loss per share (1):

 

$

(94.01

)

 

$

(30.71

)

 

$

(105.64

)

 

$

(42.22

)

Weighted average shares outstanding used in computing diluted loss per share

 

 

11,300

 

 

 

9,746

 

 

 

11,294

 

 

 

9,697

 

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

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021*

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

69,386

 

 

$

63,356

 

Restricted cash

 

 

6,155

 

 

 

1,078

 

Accounts receivable, net

 

 

118,645

 

 

 

189,280

 

Prepaid expenses and other current assets

 

 

25,496

 

 

 

14,251

 

Total current assets

 

 

219,682

 

 

 

267,965

 

 

 

 

 

 

 

 

 

 

Digital assets

 

 

1,987,781

 

 

 

2,850,210

 

Property and equipment, net

 

 

34,580

 

 

 

36,587

 

Right-of-use assets

 

 

65,169

 

 

 

66,760

 

Deposits and other assets

 

 

17,786

 

 

 

15,820

 

Deferred tax assets, net

 

 

243,367

 

 

 

319,782

 

Total Assets

 

$

2,568,365

 

 

$

3,557,124

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ (Deficit) Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses, and operating lease liabilities

 

$

35,960

 

 

$

46,084

 

Accrued compensation and employee benefits

 

 

47,773

 

 

 

54,548

 

Accrued interest

 

 

2,269

 

 

 

1,493

 

Deferred revenue and advance payments

 

 

188,098

 

 

 

209,860

 

Total current liabilities

 

 

274,100

 

 

 

311,985

 

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

2,374,863

 

 

 

2,155,151

 

Deferred revenue and advance payments

 

 

8,497

 

 

 

8,089

 

Operating lease liabilities

 

 

72,162

 

 

 

76,608

 

Other long-term liabilities

 

 

25,706

 

 

 

26,224

 

Deferred tax liabilities

 

 

105

 

 

 

109

 

Total liabilities

 

 

2,755,433

 

 

 

2,578,166

 

 

 

 

 

 

 

 

 

 

Stockholders’ (Deficit) 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; 18,021 shares issued and 9,337 shares outstanding, and 18,006 shares issued and 9,322 shares outstanding, respectively

 

 

18

 

 

 

18

 

Class B convertible common stock, $0.001 par value; 165,000 shares authorized; 1,964 shares issued and outstanding, and 1,964 shares issued and outstanding, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

1,760,288

 

 

 

1,727,143

 

Treasury stock, at cost; 8,684 shares

 

 

(782,104

)

 

 

(782,104

)

Accumulated other comprehensive loss

 

 

(13,665

)

 

 

(7,543

)

(Accumulated deficit) retained earnings

 

 

(1,151,607

)

 

 

41,442

 

Total Stockholders’ (Deficit) Equity

 

 

(187,068

)

 

 

978,958

 

Total Liabilities and Stockholders’ (Deficit) Equity

 

$

2,568,365

 

 

$

3,557,124

 

 *        Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(1,193,049

)

 

$

(409,367

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,767

 

 

 

5,997

 

Reduction in carrying amount of right-of-use assets

 

 

3,990

 

 

 

4,204

 

Credit losses and sales allowances

 

 

606

 

 

 

365

 

Deferred taxes

 

 

76,109

 

 

 

(197,383

)

Share-based compensation expense

 

 

29,688

 

 

 

18,807

 

Digital asset impairment losses

 

 

1,087,929

 

 

 

618,869

 

Amortization of issuance costs on long-term debt

 

 

4,297

 

 

 

2,977

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

9,281

 

 

 

11,197

 

Prepaid expenses and other current assets

 

 

(7,077

)

 

 

(4,080

)

Deposits and other assets

 

 

(6,578

)

 

 

(1,071

)

Accounts payable and accrued expenses

 

 

(10,216

)

 

 

(8,940

)

Accrued compensation and employee benefits

 

 

(9,802

)

 

 

1,368

 

Accrued interest

 

 

776

 

 

 

1,307

 

Deferred revenue and advance payments

 

 

36,945

 

 

 

37,825

 

Operating lease liabilities

 

 

(4,835

)

 

 

(5,147

)

Other long-term liabilities

 

 

32

 

 

 

(253

)

Net cash provided by operating activities

 

 

22,863

 

 

 

76,675

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Purchases of digital assets

 

 

(225,500

)

 

 

(1,615,606

)

Purchases of property and equipment

 

 

(1,519

)

 

 

(1,342

)

Net cash used in investing activities

 

 

(227,019

)

 

 

(1,616,948

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from convertible senior notes

 

 

0

 

 

 

1,050,000

 

Issuance costs paid for convertible senior notes

 

 

0

 

 

 

(24,742

)

Proceeds from senior secured notes

 

 

0

 

 

 

500,000

 

Issuance costs paid for senior secured notes

 

 

0

 

 

 

(11,269

)

Proceeds from secured term loan, net of lender fees

 

 

204,693

 

 

 

0

 

Issuance costs paid for secured term loan, excluding lender fees

 

 

(107

)

 

 

0

 

Proceeds from other long-term secured debt

 

 

11,100

 

 

 

0

 

Issuance costs paid for other long-term secured debt

 

 

(174

)

 

 

0

 

Proceeds from exercise of stock options

 

 

711

 

 

 

24,098

 

Proceeds from sales under employee stock purchase plan

 

 

2,805

 

 

 

0

 

Payment of withholding tax on vesting of restricted stock units

 

 

(541

)

 

 

0

 

Net cash provided by financing activities

 

 

218,487

 

 

 

1,538,087

 

 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

 

 

(3,224

)

 

 

(969

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

11,107

 

 

 

(3,155

)

Cash, cash equivalents, and restricted cash, beginning of period

 

 

64,434

 

 

 

60,759

 

Cash, cash equivalents, and restricted cash, end of period

 

$

75,541

 

 

$

57,604

 

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses and subscription services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

20,129

 

 

$

22,151

 

 

$

36,642

 

 

$

43,431

 

Subscription services

 

 

14,017

 

 

 

10,342

 

 

 

26,862

 

 

 

20,368

 

Total product licenses and subscription services

 

 

34,146

 

 

 

32,493

 

 

 

63,504

 

 

 

63,799

 

Product support

 

 

66,521

 

 

 

71,027

 

 

 

133,672

 

 

 

141,676

 

Other services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

20,273

 

 

 

20,622

 

 

 

41,708

 

 

 

40,333

 

Education

 

 

1,133

 

 

 

1,209

 

 

 

2,466

 

 

 

2,445

 

Total other services

 

 

21,406

 

 

 

21,831

 

 

 

44,174

 

 

 

42,778

 

Total revenues

 

 

122,073

 

 

 

125,351

 

 

 

241,350

 

 

 

248,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses and subscription services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

 

431

 

 

 

419

 

 

 

908

 

 

 

907

 

Subscription services

 

 

5,498

 

 

 

3,810

 

 

 

10,908

 

 

 

7,438

 

Total product licenses and subscription services

 

 

5,929

 

 

 

4,229

 

 

 

11,816

 

 

 

8,345

 

Product support

 

 

5,127

 

 

 

4,862

 

 

 

10,318

 

 

 

9,674

 

Other services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

12,837

 

 

 

12,438

 

 

 

26,137

 

 

 

24,770

 

Education

 

 

1,311

 

 

 

1,509

 

 

 

2,610

 

 

 

2,798

 

Total other services

 

 

14,148

 

 

 

13,947

 

 

 

28,747

 

 

 

27,568

 

Total cost of revenues

 

 

25,204

 

 

 

23,038

 

 

 

50,881

 

 

 

45,587

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

$

96,869

 

 

$

102,313

 

 

$

190,469

 

 

$

202,666

 

MICROSTRATEGY INCORPORATED

DIGITAL ASSETS – ADDITIONAL INFORMATION

 ROLLFORWARD OF BITCOIN HOLDINGS

(unaudited)

 

 

 

Source of

Capital Used to

Purchase

Bitcoin

 

Digital Asset

Original Cost

Basis

(in thousands)

 

 

Digital Asset

Impairment

Losses

(in thousands)

 

 

Digital Asset

Carrying Value

(in thousands)

 

 

Approximate

Number of

Bitcoins Held *

 

 

Approximate

Average

Purchase Price

Per Bitcoin

 

Balance at December 31, 2020

 

 

 

$

1,125,000

 

 

$

(70,698

)

 

$

1,054,302

 

 

 

70,469

 

 

$

15,964

 

Digital asset purchases

 

(a)

 

 

1,086,375

 

 

 

 

 

 

 

1,086,375

 

 

 

20,857

 

 

 

52,087

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(194,095

)

 

 

(194,095

)

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

 

$

2,211,375

 

 

$

(264,793

)

 

$

1,946,582

 

 

 

91,326

 

 

$

24,214

 

Digital asset purchases

 

(b)

 

 

529,231

 

 

 

 

 

 

 

529,231

 

 

 

13,759

 

 

 

38,464

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(424,774

)

 

 

(424,774

)

 

 

 

 

 

 

 

 

Balance at June 30, 2021

 

 

 

$

2,740,606

 

 

$

(689,567

)

 

$

2,051,039

 

 

 

105,085

 

 

$

26,080

 

Digital asset purchases

 

(c)

 

 

419,865

 

 

 

 

 

 

 

419,865

 

 

 

8,957

 

 

 

46,876

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(65,165

)

 

 

(65,165

)

 

 

 

 

 

 

 

 

Balance at September 30, 2021

 

 

 

$

3,160,471

 

 

$

(754,732

)

 

$

2,405,739

 

 

 

114,042

 

 

$

27,713

 

Digital asset purchases

 

(d)

 

 

591,058

 

 

 

 

 

 

 

591,058

 

 

 

10,349

 

 

 

57,113

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(146,587

)

 

 

(146,587

)

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

 

$

3,751,529

 

 

$

(901,319

)

 

$

2,850,210

 

 

 

124,391

 

 

$

30,159

 

Digital asset purchases

 

(e)

 

 

215,500

 

 

 

 

 

 

 

215,500

 

 

 

4,827

 

 

 

44,645

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(170,091

)

 

 

(170,091

)

 

 

 

 

 

 

 

 

Balance at March 31, 2022

 

 

 

$

3,967,029

 

 

$

(1,071,410

)

 

$

2,895,619

 

 

 

129,218

 

 

$

30,700

 

Digital asset purchases

 

(f)

 

 

10,000

 

 

 

 

 

 

 

10,000

 

 

 

481

 

 

 

20,790

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(917,838

)

 

 

(917,838

)

 

 

 

 

 

 

 

 

Balance at June 30, 2022

 

 

 

$

3,977,029

 

 

$

(1,989,248

)

 

$

1,987,781

 

 

 

129,699

 

 

$

30,664

 

*MicroStrategy owns and has purchased bitcoins both directly and indirectly through its wholly-owned subsidiary, MacroStrategy.  References to MicroStrategy below refer to MicroStrategy and its subsidiaries on a consolidated basis. 

(a)   In the first quarter of 2021, MicroStrategy purchased bitcoin using $1.026 billion in net proceeds from its issuance of its 0% Convertible Senior Notes due 2027 (the “2027 Convertible Notes” and, together with the 0.750% Convertible Senior Notes due 2025, the “Convertible Notes”) and excess cash.
(b)    In the second quarter of 2021, MicroStrategy purchased bitcoin using $487.2 million in net proceeds from its issuance of its 6.125% Senior Secured Notes due 2028 and excess cash.
(c)   In the third quarter of 2021, MicroStrategy purchased bitcoin using $399.5 million in net proceeds from its sale of 555,179 shares of class A common stock offered under an Open Market Sale Agreement (the “Open Market Sale Agreement”) with Jefferies LLC, as agent, and excess cash.
(d)    In the fourth quarter of 2021, MicroStrategy purchased bitcoin using $591.0 million in net proceeds from its sale of 858,588 shares of class A common stock offered under the Open Market Sale Agreement and excess cash.
(e)    In the first quarter of 2022, MicroStrategy purchased bitcoin using $190.5 million of the net proceeds from the issuance of the 2025 Secured Term Loan and excess cash.
(f)   In the second quarter of 2022, MicroStrategy purchased bitcoin using excess cash.

 MICROSTRATEGY INCORPORATED

 DIGITAL ASSETS – ADDITIONAL INFORMATION

 MARKET VALUE OF BITCOIN HOLDINGS

(unaudited)

 

 

 

Approximate

Number of

Bitcoins Held

at End of

Quarter *

 

 

Lowest

Market Price

Per Bitcoin

During

Quarter

(a)

 

 

Market Value

of Bitcoin

Held at End of

Quarter Using

Lowest

Market Price

(in thousands)

(b)

 

 

Highest

Market Price

Per Bitcoin

During

Quarter

(c)

 

 

Market Value

of Bitcoin

Held at End of

Quarter Using

Highest

Market Price

(in thousands)

(d)

 

 

Market Price

Per Bitcoin at

End of

Quarter

(e)

 

 

Market Value

of Bitcoin

Held at End of

Quarter Using

Ending

Market Price

(in thousands)

(f)

 

 December 31, 2020

 

 

70,469

 

 

$

10,363.76

 

 

$

730,324

 

 

$

29,321.90

 

 

$

2,066,285

 

 

$

29,181.00

 

 

$

2,056,356

 

 March 31, 2021

 

 

91,326

 

 

$

27,678.00

 

 

$

2,527,721

 

 

$

61,788.45

 

 

$

5,642,892

 

 

$

58,601.28

 

 

$

5,351,820

 

 June 30, 2021

 

 

105,085

 

 

$

28,800.00

 

 

$

3,026,448

 

 

$

64,899.00

 

 

$

6,819,911

 

 

$

34,763.47

 

 

$

3,653,119

 

 September 30, 2021

 

 

114,042

 

 

$

29,301.56

 

 

$

3,341,609

 

 

$

52,944.96

 

 

$

6,037,949

 

 

$

43,534.56

 

 

$

4,964,768

 

 December 31, 2021

 

 

124,391

 

 

$

42,333.00

 

 

$

5,265,844

 

 

$

69,000.00

 

 

$

8,582,979

 

 

$

45,879.97

 

 

$

5,707,055

 

 March 31, 2022

 

 

129,218

 

 

$

32,933.33

 

 

$

4,255,579

 

 

$

48,240.00

 

 

$

6,233,476

 

 

$

45,602.79

 

 

$

5,892,701

 

 June 30, 2022

 

 

129,699

 

 

$

17,567.45

 

 

$

2,278,481

 

 

$

47,469.40

 

 

$

6,156,734

 

 

$

18,895.02

 

 

$

2,450,665

 

 *MicroStrategy owns and has purchased bitcoins both directly and indirectly through its wholly-owned subsidiary, MacroStrategy.  References to MicroStrategy below refer to MicroStrategy and its subsidiaries on a consolidated basis. 

(a)   The "Lowest Market Price Per Bitcoin During Quarter" represents the lowest market price for one bitcoin reported on the Coinbase exchange during the respective quarter, without regard to when MicroStrategy purchased any of its bitcoin.
(b)   The "Market Value of Bitcoin Held at End of Quarter Using Lowest Market Price" represents a mathematical calculation consisting of the lowest market price for one bitcoin reported on the Coinbase exchange during the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.
(c)   The "Highest Market Price Per Bitcoin During Quarter" represents the highest market price for one bitcoin reported on the Coinbase exchange during the respective quarter, without regard to when MicroStrategy purchased any of its bitcoin.
(d)   The "Market Value of Bitcoin Held at End of Quarter Using Highest Market Price" represents a mathematical calculation consisting of the highest market price for one bitcoin reported on the Coinbase exchange during the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.
(e)   The "Market Price Per Bitcoin at End of Quarter" represents the market price of one bitcoin on the Coinbase exchange at 4:00 p.m. Eastern Time on the last day of the respective quarter.
(f)   The "Market Value of Bitcoin Held at End of Quarter Using Ending Market Price" represents a mathematical calculation consisting of the market price of one bitcoin on the Coinbase exchange at 4:00 p.m. Eastern Time on the last day of the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.

The amounts reported as “Market Value” in the above table represent only a mathematical calculation consisting of the price for one bitcoin reported on the Coinbase exchange (MicroStrategy’s principal market for bitcoin) in each scenario defined above multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period. The SEC has previously stated that there has not been a demonstration that (i) bitcoin and bitcoin markets are inherently resistant to manipulation or that the spot price of bitcoin may not be subject to fraud and manipulation; and (ii) adequate surveillance-sharing agreements with bitcoin-related markets are in place, as bitcoin-related markets are either not significant, not regulated, or both. Accordingly, the Market Value amounts reported above may not accurately represent fair market value, and the actual fair market value of MicroStrategy’s bitcoin may be different from such amounts and such deviation may be material. Moreover, (i) the bitcoin market historically has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, and various other risks that are, or may be, inherent in its entirely electronic, virtual form and decentralized network and (ii) MicroStrategy may not be able to sell its bitcoins at the Market Value amounts indicated above, at the market price as reported on the Coinbase exchange (its principal market) on the date of sale, or at all.

 MICROSTRATEGY INCORPORATED

 RECONCILIATION OF GAAP TO NON-GAAP MEASURES

LOSS FROM OPERATIONS

 (in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Reconciliation of non-GAAP loss from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

$

(918,123

)

 

$

(414,247

)

 

$

(1,088,083

)

 

$

(597,399

)

Share-based compensation expense

 

 

15,294

 

 

 

11,096

 

 

 

29,688

 

 

 

18,807

 

Non-GAAP loss from operations

 

$

(902,829

)

 

$

(403,151

)

 

$

(1,058,395

)

 

$

(578,592

)

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

NET LOSS AND DILUTED LOSS PER SHARE

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Reconciliation of non-GAAP net loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,062,298

)

 

$

(299,347

)

 

$

(1,193,049

)

 

$

(409,367

)

Share-based compensation expense

 

 

15,294

 

 

 

11,096

 

 

 

29,688

 

 

 

18,807

 

Interest expense arising from amortization of debt issuance costs

 

 

2,168

 

 

 

1,805

 

 

 

4,297

 

 

 

2,977

 

Income tax effects (1)

 

 

(3,898

)

 

 

(2,651

)

 

 

(7,342

)

 

 

(26,388

)

Non-GAAP net loss

 

$

(1,048,734

)

 

$

(289,097

)

 

$

(1,166,406

)

 

$

(413,971

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of non-GAAP diluted loss per share (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted loss per share

 

$

(94.01

)

 

$

(30.71

)

 

$

(105.64

)

 

$

(42.22

)

Share-based compensation expense (per diluted share)

 

 

1.35

 

 

 

1.14

 

 

 

2.63

 

 

 

1.94

 

Interest expense arising from amortization of debt issuance costs (per diluted share)

 

 

0.19

 

 

 

0.19

 

 

 

0.38

 

 

 

0.31

 

Income tax effects (per diluted share)

 

 

(0.34

)

 

 

(0.28

)

 

 

(0.65

)

 

 

(2.72

)

Non-GAAP diluted loss per share

 

$

(92.81

)

 

$

(29.66

)

 

$

(103.28

)

 

$

(42.69

)

 (1)  

Income tax effects reflect the net tax effects of share-based compensation expense, which includes tax benefits and expenses on exercises of stock options and vesting of share-settled restricted stock units, and interest expense for amortization of debt issuance costs.

 (2)  

 For reconciliation purposes, the non-GAAP diluted earnings (loss) per share calculations use the same weighted average shares outstanding as that used in the GAAP diluted earnings (loss) per share calculations for the same period. For example, in periods of GAAP net loss, otherwise dilutive potential shares of common stock from MicroStrategy’s share-based compensation arrangements and Convertible Notes are excluded from the GAAP diluted loss per share calculation as they would be antidilutive, and therefore are also excluded from the non-GAAP diluted earnings or loss per share calculation.

MICROSTRATEGY INCORPORATED

 

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

 

CONSTANT CURRENCY

 

(in thousands)

 
 

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

(unaudited)

 

 

 

GAAP

 

 

Foreign

Currency

Exchange

Rate Impact (1)

 

 

Non-GAAP

Constant

Currency (2)

 

 

GAAP

 

 

GAAP %

Change

 

 

Non-GAAP

Constant

Currency

% Change (3)

 

 

 

2022

 

 

2022

 

 

2022

 

 

2021

 

 

2022

 

 

2022

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

20,129

 

 

$

(608

)

 

$

20,737

 

 

$

22,151

 

 

 

-9.1

%

 

 

-6.4

%

Subscription services

 

 

14,017

 

 

 

(483

)

 

 

14,500

 

 

 

10,342

 

 

 

35.5

%

 

 

40.2

%

Total product licenses and subscription services

 

 

34,146

 

 

 

(1,091

)

 

 

35,237

 

 

 

32,493

 

 

 

5.1

%

 

 

8.4

%

Product support

 

 

66,521

 

 

 

(3,000

)

 

 

69,521

 

 

 

71,027

 

 

 

-6.3

%

 

 

-2.1

%

Other services

 

 

21,406

 

 

 

(1,365

)

 

 

22,771

 

 

 

21,831

 

 

 

-1.9

%

 

 

4.3

%

Total revenues

 

 

122,073

 

 

 

(5,456

)

 

 

127,529

 

 

 

125,351

 

 

 

-2.6

%

 

 

1.7

%

 

Six Months Ended

 

 

 

June 30,

 

 

 

(unaudited)

 

 

 

GAAP

 

 

Foreign

Currency

Exchange

Rate Impact (1)

 

 

Non-GAAP

Constant

Currency (2)

 

 

GAAP

 

 

GAAP %

Change

 

 

Non-GAAP

Constant

Currency

% Change (3)

 

 

 

2022

 

 

2022

 

 

2022

 

 

2021

 

 

2022

 

 

2022

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

36,642

 

 

$

(1,096

)

 

$

37,738

 

 

$

43,431

 

 

 

-15.6

%

 

 

-13.1

%

Subscription services

 

 

26,862

 

 

 

(688

)

 

 

27,550

 

 

 

20,368

 

 

 

31.9

%

 

 

35.3

%

Total product licenses and subscription services

 

 

63,504

 

 

 

(1,784

)

 

 

65,288

 

 

 

63,799

 

 

 

-0.5

%

 

 

2.3

%

Product support

 

 

133,672

 

 

 

(4,699

)

 

 

138,371

 

 

 

141,676

 

 

 

-5.6

%

 

 

-2.3

%

Other services

 

 

44,174

 

 

 

(2,167

)

 

 

46,341

 

 

 

42,778

 

 

 

3.3

%

 

 

8.3

%

Total revenues

 

 

241,350

 

 

 

(8,650

)

 

 

250,000

 

 

 

248,253

 

 

 

-2.8

%

 

 

0.7

%

(1)

 

The “Foreign Currency Exchange Rate Impact” reflects the estimated impact of fluctuations in foreign currency exchange rates on international revenues. It shows the increase (decrease) in international revenues from the same period in the prior year, based on comparisons to the prior year quarterly average foreign currency exchange rates. The term “international” refers to operations outside of the United States and Canada.

 (2)

 

The “Non-GAAP Constant Currency” reflects the current period GAAP amount, less the Foreign Currency Exchange Rate Impact.

(3)

 

The “Non-GAAP Constant Currency % Change” reflects the percentage change between the current period Non-GAAP Constant Currency amount and the GAAP amount for the same period in the prior year.

MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

 

 

 

June 30,

 

 

December 31,

 

 

June 30,

 

 

 

2022

 

 

2021*

 

 

2021

 

 

 

(unaudited)

 

 

 

 

 

 

(unaudited)

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

754

 

 

$

993

 

 

$

544

 

Deferred subscription services revenue

 

 

40,295

 

 

 

35,589

 

 

 

25,916

 

Deferred product support revenue

 

 

143,524

 

 

 

166,477

 

 

 

150,963

 

Deferred other services revenue

 

 

3,525

 

 

 

6,801

 

 

 

5,395

 

Total current deferred revenue and advance payments

 

$

188,098

 

 

$

209,860

 

 

$

182,818

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

0

 

 

$

68

 

 

$

76

 

Deferred subscription services revenue

 

 

2,639

 

 

 

1,064

 

 

 

712

 

Deferred product support revenue

 

 

5,272

 

 

 

6,203

 

 

 

5,920

 

Deferred other services revenue

 

 

586

 

 

 

754

 

 

 

554

 

Total non-current deferred revenue and advance payments

 

$

8,497

 

 

$

8,089

 

 

$

7,262

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current and non-current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

754

 

 

$

1,061

 

 

$

620

 

Deferred subscription services revenue

 

 

42,934

 

 

 

36,653

 

 

 

26,628

 

Deferred product support revenue

 

 

148,796

 

 

 

172,680

 

 

 

156,883

 

Deferred other services revenue

 

 

4,111

 

 

 

7,555

 

 

 

5,949

 

Total current and non-current deferred revenue and advance payments

 

$

196,595

 

 

$

217,949

 

 

$

190,080

 

*            Derived from audited financial statements.

MicroStrategy Incorporated
Shirish Jajodia
Investor Relations
ir@microstrategy.com
(703) 848-8600

View source version on businesswire.com: https://www.businesswire.com/news/home/20220802005504/en/