Business Wire | Jan 28, 2021 04:01PM EST

MicroStrategy Announces Fourth Quarter 2020 Financial Results

Jan. 28, 2021

TYSONS CORNER, Va.--(BUSINESS WIRE)--Jan. 28, 2021--MicroStrategy(r) (Nasdaq: MSTR), the largest independent publicly-traded business intelligence company, today announced financial results for the three-month period ended December 31, 2020 (the fourth quarter of its 2020 fiscal year).

"2020 was a transformational year for MicroStrategy. In our enterprise intelligence business, we continue to embrace the virtual wave. We are successfully shifting our prospects and customers to our enterprise cloud platform, and also launched our new SaaS offering, Hyper.now. We also dramatically improved the efficiency and profitability of our business," said Michael J. Saylor, CEO, MicroStrategy Incorporated.

"Regarding our bitcoin strategy, our pioneering decision to make bitcoin our primary treasury reserve asset has made MicroStrategy a thought leader in the cryptocurrency market and generated great interest in MicroStrategy as a corporation. Going forward, we continue to plan to hold our bitcoin and invest additional excess cash flows in bitcoin. Additionally, we will explore various approaches to acquire additional bitcoin as part of our overall corporate strategy."

Fourth Quarter 2020 Financial Highlights

* Revenues: Total revenues for the fourth quarter of 2020 were $131.3 million, a 1.7% decrease, or a 3.4% decrease on a non-GAAP constant currency basis, compared to the fourth quarter of 2019. Product licenses and subscription services revenues for the fourth quarter of 2020 were $38.6 million, a 3.3% increase, or a 2.1% increase on a non-GAAP constant currency basis, compared to the fourth quarter of 2019. Product support revenues for the fourth quarter of 2020 were $71.9 million, a 3.8% decrease, or a 5.6% decrease on a non-GAAP constant currency basis, compared to the fourth quarter of 2019. Other services revenues for the fourth quarter of 2020 were $20.9 million, a 2.8% decrease, or an 5.3% decrease on a non-GAAP constant currency basis, compared to the fourth quarter of 2019.

* Gross Profit: Gross profit for the fourth quarter of 2020 was $110.5 million, representing an 84.2% gross margin, compared to a gross margin of 81.6% in the fourth quarter of 2019.

* Operating Expenses: Operating expenses for the fourth quarter of 2020 were $110.1 million, an 11.0% increase compared to the fourth quarter of 2019. Beginning in the third quarter of 2020, operating expenses included impairment losses on our digital assets, which were $26.5 million during the fourth quarter of 2020.

* Income from Operations: Income from operations for the fourth quarter of 2020 was $0.4 million versus income from operations of $9.6 million for the fourth quarter of 2019. Non-GAAP income from operations, which excludes share-based compensation expense and impairment losses and gains on sale from intangible assets, which include digital assets, was $30.1 million for the fourth quarter of 2020 versus $12.0 million for the fourth quarter of 2019.

* Net Income: Net income for the fourth quarter of 2020 was $2.7 million, or $0.27 per share on a diluted basis, as compared to net income of $12.2 million, or $1.18 per share on a diluted basis, for the fourth quarter of 2019. Non-GAAP net income, which excludes share-based compensation expense, impairment losses and gains on sale from intangible assets, which include digital assets, and interest expense arising from the amortization of debt discount and issuance costs was $20.4 million, or $2.07 per share on a non-GAAP diluted basis, for the fourth quarter of 2020, as compared to non-GAAP net income of $14.3 million, or $1.39 per share on a non-GAAP diluted basis, for the fourth quarter of 2019.

* Cash and Short-term Investments: As of December 31, 2020, MicroStrategy had cash and cash equivalents and short-term investments of $59.7 million, as compared to $565.6 million as of December 31, 2019, a decrease of $506.0 million.

* Digital Assets: As of December 31, 2020, the carrying value of MicroStrategy's digital assets (comprised solely of bitcoin) was $1.054 billion, which reflects cumulative impairment charges of $70.7 million since acquisition. MicroStrategy accounts for its digital assets as indefinite-lived intangible assets, which are initially recorded at cost. Subsequently, they are measured at cost, net of any impairment losses incurred since acquisition. MicroStrategy determines the fair value of its bitcoin based on quoted (unadjusted) prices on the active exchange that MicroStrategy has determined is its principal market for bitcoin. MicroStrategy considers the lowest price of one bitcoin quoted on the active exchange at any time since acquiring the specific bitcoin. If the carrying value of a bitcoin exceeds that lowest price, an impairment loss has occurred with respect to that bitcoin in the amount equal to the difference between its carrying value and such lowest price. Impairment losses are recognized as "Digital asset impairment losses" in MicroStrategy's Consolidated Statements of Operations. As of December 31, 2020, the average cost and average carrying value of MicroStrategy's bitcoin were approximately $15,964 and $14,961, respectively. As of January 27, 2021, at 4:00 p.m. EST, MicroStrategy had 70,784 bitcoins and the market price of one bitcoin in the principal market was approximately $31,784.

* Convertible Senior Notes: In December 2020, MicroStrategy issued $650 million aggregate principal amount of 0.75% Convertible Senior Notes due 2025 (the "Notes"). The Notes are convertible into shares of MicroStrategy's class A common stock at an initial conversion price of $397.99 per share. As of December 31, 2020, the carrying value of the Notes classified as a long-term liability in the "Convertible senior notes, net" line item was $486.4 million, net of unamortized debt discount and issuance costs. As of December 31, 2020, the carrying value of the Notes classified as equity in the "Additional paid-in capital" line item was $107.8 million, which reflects the debt discount, less issuance costs allocated to the equity component and related net deferred tax liabilities. The initial carrying amount of the liability component was determined by measuring the fair value of a similar debt instrument without any associated conversion features. The carrying amount of the equity component (representing the conversion option) was determined by deducting the fair value of the liability component from the principal value of the notes. The excess of the principal amount of the liability component over its carrying amount (i.e., the debt discount), along with any issuance costs allocated to the liability component, are amortized to interest expense over the term of the notes.

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP financial measures for the three and twelve months ended December 31, 2020 and 2019. 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 our "Q4 2020 Earnings Presentation", which will be available under the "Events and Presentation" section on MicroStrategy's investor relations website at https://www.microstrategy.com/en/investor-relations.MicroStrategy uses its Intelligent Enterprise(tm) 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(tm) app on an iOS or Android device. To download the native apps, visit MicroStrategy Library for iOS or MicroStrategy Library for Android.

Non-GAAP Financial Measures

MicroStrategy is providing supplemental financial measures for (i) non-GAAP income from operations that excludes the impact of share-based compensation expense and impairment losses and gains on sale from intangible assets, which include its digital assets, (ii) non-GAAP net income and non-GAAP diluted earnings per share that exclude the impact of share-based compensation expense, impairment losses and gains on sale from intangible assets, which include its digital assets and the sale of its Voice.com domain name in the second quarter of 2019 (the "Domain Name Sale"), interest expense arising from the amortization of the debt discount and issuance costs on the Company's convertible senior notes, 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 generally accepted accounting principles in the United States ("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 (i) 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 and (ii) significant impairment losses and gains on sale from intangible assets, which include MicroStrategy's bitcoin. The second set of supplemental financial measures excludes the impact of (i) share-based compensation expense, (ii) impairment losses and gains on sale from intangible assets, which include MicroStrategy's bitcoin and the Domain Name Sale, which was outside of MicroStrategy's normal business operations, (iii) non-cash interest expense arising from the amortization of the debt discount and issuance costs related to MicroStrategy's convertible senior notes, and (iv) related income tax effects. Although the portion of non-cash interest expense related to the amortization of the debt discount will be eliminated upon our planned adoption of ASU 2020-06 on January 1, 2021, excluding the current year non-cash interest expense related to both the amortization of the debt discount and the issuance costs will allow for greater comparability of our results after we adopt the new accounting rules. 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.

Bitcoin Acquisitions

As part of MicroStrategy's previously announced treasury management and capital allocation strategies, MicroStrategy purchased a total of approximately 32,220 bitcoins at an aggregate purchase price of $700.0 million in the fourth quarter of 2020 for an average purchase price of approximately $21,726 per bitcoin. Further, in the first quarter of 2021 to date, MicroStrategy has purchased approximately 314 bitcoins at an aggregate purchase price of $10.0 million for an average purchase price for such additional bitcoins of approximately $31,808 per bitcoin. In future periods, MicroStrategy may purchase additional bitcoins and increase its overall holdings of bitcoin or sell its bitcoins and decrease its overall holdings of bitcoin.

Convertible Senior Notes

In December 2020, the Company issued $650.0 million aggregate principal amount of Notes. The Notes are senior unsecured obligations of the Company and bear interest at a fixed rate of 0.75% per annum, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2021. Holders of the Notes may receive additional interest under specified circumstances as outlined in the indenture relating to the issuance of the Notes. The Notes are convertible into shares of MicroStrategy's class A common stock at an initial conversion price of $397.99 per share. The Notes will mature on December 15, 2025, unless earlier converted, redeemed or repurchased in accordance with their terms. The total net proceeds from the offering, after deducting initial purchaser discounts and issuance costs, were approximately $634.7 million.

Conference Call

MicroStrategy will be discussing its fourth quarter 2020 financial results on a live Video Webinar today beginning at approximately 5:00 p.m. EST. The live Video Webinar and accompanying presentation materials will be available under the "Events and Presentation" section on MicroStrategy's investor relations website at https://www.microstrategy.com/en/investor-relations. Dial-in instructions will be available after registering for the event. An archived replay will be available beginning approximately two hours after the call concludes.

About MicroStrategy Incorporated

MicroStrategy (Nasdaq: MSTR) is the largest independent publicly-traded business intelligence company, with the leading enterprise analytics platform. Our vision is to enable Intelligence Everywhere(tm). MicroStrategy provides modern analytics on an open, comprehensive enterprise platform used by many of the world's most admired brands in the Fortune Global 500. Optimized for cloud and on-premises deployments, the platform features HyperIntelligence(r), a breakthrough technology that overlays actionable enterprise data on popular business applications to help users make smarter, faster decisions. For more information about MicroStrategy, visit www.microstrategy.com.

MicroStrategy, Intelligent Enterprise, MicroStrategy Library, Intelligence Everywhere, HyperIntelligence, and MicroStrategy 2020 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; impacts of the COVID-19 pandemic; 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 below the value at which the Company's bitcoins are carried on its balance sheet; gains or losses on sales of bitcoins that the Company would incur upon any sale of any of its bitcoins; changes in the accounting treatment of the Company's holding of bitcoins; changes in securities laws or other laws or regulations relating to bitcoin which could adversely affect the price of bitcoin or the Company's ability to own bitcoin; a decrease in liquidity in the markets in which bitcoins are traded; security breaches, cyberattacks, unauthorized access, loss of private keys or fraud that causes us to lose any of our bitcoin; 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; customers shifting from a product license model to a cloud subscription model, which may delay our ability to recognize revenue; 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. The Company undertakes no obligation to update these forward-looking 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 Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019*

(unaudited) (unaudited) (unaudited)

Revenues

Product licenses $ 29,770 $ 30,087 $ 86,743 $ 87,471

Subscription 8,788 7,252 33,082 29,394 services

Total productlicenses and 38,558 37,339 119,825 116,865 subscriptionservices

Product support 71,886 74,722 284,434 292,035

Other services 20,875 21,470 76,476 77,427

Total revenues 131,319 133,531 480,735 486,327



Cost of revenues

Product licenses 564 534 2,293 2,131

Subscription 3,321 4,185 14,833 15,161 services

Total productlicenses and 3,885 4,719 17,126 17,292 subscriptionservices

Product support 4,743 6,607 23,977 28,317

Other services 12,157 13,310 49,952 54,365

Total cost of 20,785 24,636 91,055 99,974 revenues



Gross profit 110,534 108,895 389,680 386,353



Operating expenses

Sales and 39,111 50,267 148,910 191,235 marketing

Research and 24,955 25,987 103,561 109,423 development

General and 19,622 23,013 80,136 86,697 administrative

Digital asset 26,456 0 70,698 0 impairment losses

Total operating 110,144 99,267 403,305 387,355 expenses



Income (loss) 390 9,628 (13,625 ) (1,002 )from operations

Interest(expense) income, (1,917 ) 2,389 710 10,909 net

Other (expense) (2,506 ) (2,361 ) (7,038 ) 28,356 income, net

(Loss) incomebefore income (4,033 ) 9,656 (19,953 ) 38,263 taxes

(Benefit from)provision for (6,694 ) (2,511 ) (12,429 ) 3,908 income taxes

Net income (loss) $ 2,661 $ 12,167 $ (7,524 ) $ 34,355



Basic earnings(loss) per share $ 0.28 $ 1.19 $ (0.78 ) $ 3.35 (1):

Weighted averagesharesoutstanding used 9,408 10,208 9,684 10,256 in computingbasic earnings(loss) per share



Diluted earnings(loss) per share $ 0.27 $ 1.18 $ (0.78 ) $ 3.33 (1):

Weighted averagesharesoutstanding used 9,849 10,301 9,684 10,328 in computingdiluted earnings(loss) per share

(1)

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

*

Derived from audited financial statements.

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

* Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

December 31,

December 31,

2020

2019*

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

59,675

$

456,727

Restricted cash

1,084

1,089

Short-term investments

0

108,919

Accounts receivable, net

197,461

163,516

Prepaid expenses and other current assets

14,400

23,195

Total current assets

272,620

753,446

Digital assets

1,054,302

0

Property and equipment, net

42,975

50,154

Right-of-use assets

73,597

85,538

Deposits and other assets

15,615

8,024

Deferred tax assets, net

6,503

19,409

Total Assets

$

1,465,612

$

916,571

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable, accrued expenses, and operating lease liabilities

$

45,119

$

33,919

Accrued compensation and employee benefits

49,249

48,792

Deferred revenue and advance payments

191,250

187,107

Total current liabilities

285,618

269,818

Convertible senior notes, net

486,366

0

Deferred revenue and advance payments

14,662

4,344

Operating lease liabilities

84,328

103,424

Other long-term liabilities

33,382

30,400

Deferred tax liabilities

8,211

26

Total Liabilities

912,567

408,012

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; 16,307 shares issued and 7,623 shares outstanding, and 15,888 shares issued and 8,081 shares outstanding, respectively

16

16

Class B convertible common stock, $0.001 par value; 165,000 shares authorized; 1,964 shares issued and outstanding, and 2,035 shares issued and outstanding, respectively

2

2

Additional paid-in capital

763,051

593,583

Treasury stock, at cost; 8,684 shares and 7,807 shares, respectively

(782,104

)

(658,880

)

Accumulated other comprehensive loss

(3,885

)

(9,651

)

Retained earnings

575,965

583,489

Total Stockholders' Equity

553,045

508,559

Total Liabilities and Stockholders' Equity

$

1,465,612

$

916,571

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

December December 31, 31,

2020 2019*

(unaudited)

Assets

Current assets

Cash and cash equivalents $ 59,675 $ 456,727

Restricted cash 1,084 1,089

Short-term investments 0 108,919

Accounts receivable, net 197,461 163,516

Prepaid expenses and other current assets 14,400 23,195

Total current assets 272,620 753,446



Digital assets 1,054,302 0

Property and equipment, net 42,975 50,154

Right-of-use assets 73,597 85,538

Deposits and other assets 15,615 8,024

Deferred tax assets, net 6,503 19,409

Total Assets $ 1,465,612 $ 916,571



Liabilities and Stockholders' Equity

Current liabilities

Accounts payable, accrued expenses, and $ 45,119 $ 33,919 operating lease liabilities

Accrued compensation and employee benefits 49,249 48,792

Deferred revenue and advance payments 191,250 187,107

Total current liabilities 285,618 269,818



Convertible senior notes, net 486,366 0

Deferred revenue and advance payments 14,662 4,344

Operating lease liabilities 84,328 103,424

Other long-term liabilities 33,382 30,400

Deferred tax liabilities 8,211 26

Total Liabilities 912,567 408,012



Stockholders' Equity

Preferred stock undesignated, $0.001 par value;5,000 shares authorized; no shares issued or 0 0 outstanding

Class A common stock, $0.001 par value; 330,000shares authorized; 16,307 shares issued and7,623 shares outstanding, and 15,888 shares 16 16 issued and 8,081 shares outstanding,respectively

Class B convertible common stock, $0.001 parvalue; 165,000 shares authorized; 1,964 shares 2 2 issued and outstanding, and 2,035 shares issuedand outstanding, respectively

Additional paid-in capital 763,051 593,583

Treasury stock, at cost; 8,684 shares and 7,807 (782,104 ) (658,880 )shares, respectively

Accumulated other comprehensive loss (3,885 ) (9,651 )

Retained earnings 575,965 583,489

Total Stockholders' Equity 553,045 508,559

Total Liabilities and Stockholders' Equity $ 1,465,612 $ 916,571

*

Derived from audited financial statements.

* Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Twelve Months Ended

December 31,

2020

2019*

(unaudited)

Operating activities:

Net (loss) income

$

(7,524

)

$

34,355

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

13,332

8,594

Reduction in carrying amount of right-of-use assets

8,210

8,105

Credit losses and sales allowances

2,732

124

Net realized (gain) loss on short-term investments

(94

)

41

Deferred taxes

(20,830

)

(2,614

)

Release of liabilities for unrecognized tax benefits

0

(2,837

)

Share-based compensation expense

11,153

10,209

Digital asset impairment losses

70,698

0

Gain on partial lease termination

(2,820

)

0

Amortization of debt discount and issuance costs on convertible senior notes

1,543

0

Changes in operating assets and liabilities:

Accounts receivable

(774

)

(3,672

)

Prepaid expenses and other current assets

2,346

6,415

Deposits and other assets

416

761

Accounts payable and accrued expenses

9,445

(7,321

)

Accrued compensation and employee benefits

(6,827

)

(2,658

)

Deferred revenue and advance payments

(20,223

)

20,836

Operating lease liabilities

(11,171

)

(8,620

)

Other long-term liabilities

4,007

(851

)

Net cash provided by operating activities

53,619

60,867

Investing activities:

Purchases of digital assets

(1,125,000

)

0

Proceeds from redemption of short-term investments

119,886

684,356

Purchases of property and equipment

(3,651

)

(10,182

)

Purchases of short-term investments

(9,928

)

(320,487

)

Net cash (used in) provided by investing activities

(1,018,693

)

353,687

Financing activities:

Proceeds from convertible senior notes classified as debt

496,473

0

Proceeds from convertible senior notes classified as equity

153,527

0

Issuance costs paid for convertible senior notes

(14,625

)

0

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

51,082

6,569

Purchases of treasury stock

(123,224

)

(72,719

)

Net cash provided by (used in) financing activities

563,233

(66,150

)

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

4,784

(1,374

)

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

(397,057

)

347,030

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

457,816

110,786

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

$

60,759

$

457,816

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Twelve Months Ended

December 31,

2020 2019*

(unaudited)

Operating activities:

Net (loss) income $ (7,524 ) $ 34,355

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization 13,332 8,594

Reduction in carrying amount of right-of-use 8,210 8,105 assets

Credit losses and sales allowances 2,732 124

Net realized (gain) loss on short-term (94 ) 41 investments

Deferred taxes (20,830 ) (2,614 )

Release of liabilities for unrecognized tax 0 (2,837 )benefits

Share-based compensation expense 11,153 10,209

Digital asset impairment losses 70,698 0

Gain on partial lease termination (2,820 ) 0

Amortization of debt discount and issuance 1,543 0 costs on convertible senior notes

Changes in operating assets and liabilities:

Accounts receivable (774 ) (3,672 )

Prepaid expenses and other current assets 2,346 6,415

Deposits and other assets 416 761

Accounts payable and accrued expenses 9,445 (7,321 )

Accrued compensation and employee benefits (6,827 ) (2,658 )

Deferred revenue and advance payments (20,223 ) 20,836

Operating lease liabilities (11,171 ) (8,620 )

Other long-term liabilities 4,007 (851 )

Net cash provided by operating activities 53,619 60,867



Investing activities:

Purchases of digital assets (1,125,000 ) 0

Proceeds from redemption of short-term 119,886 684,356 investments

Purchases of property and equipment (3,651 ) (10,182 )

Purchases of short-term investments (9,928 ) (320,487 )

Net cash (used in) provided by investing (1,018,693 ) 353,687 activities



Financing activities:

Proceeds from convertible senior notes 496,473 0 classified as debt

Proceeds from convertible senior notes 153,527 0 classified as equity

Issuance costs paid for convertible senior (14,625 ) 0 notes

Proceeds from sale of class A common stock 51,082 6,569 under exercise of employee stock options

Purchases of treasury stock (123,224 ) (72,719 )

Net cash provided by (used in) financing 563,233 (66,150 )activities



Effect of foreign exchange rate changes on 4,784 (1,374 )cash, cash equivalents, and restricted cash

Net (decrease) increase in cash, cash (397,057 ) 347,030 equivalents, and restricted cash

Cash, cash equivalents, and restricted cash, 457,816 110,786 beginning of year

Cash, cash equivalents, and restricted cash, $ 60,759 $ 457,816 end of year

*

Derived from audited financial statements.

* Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2020

2019

2020

2019*

(unaudited)

(unaudited)

(unaudited)

Revenues

Product licenses and subscription services:

Product licenses

$

29,770

$

30,087

$

86,743

$

87,471

Subscription services

8,788

7,252

33,082

29,394

Total product licenses and subscription services

38,558

37,339

119,825

116,865

Product support

71,886

74,722

284,434

292,035

Other services:

Consulting

19,372

19,524

71,345

69,659

Education

1,503

1,946

5,131

7,768

Total other services

20,875

21,470

76,476

77,427

Total revenues

131,319

133,531

480,735

486,327

Cost of revenues

Product licenses and subscription services:

Product licenses

564

534

2,293

2,131

Subscription services

3,321

4,185

14,833

15,161

Total product licenses and subscription services

3,885

4,719

17,126

17,292

Product support

4,743

6,607

23,977

28,317

Other services:

Consulting

10,996

11,668

42,923

47,664

Education

1,161

1,642

7,029

6,701

Total other services

12,157

13,310

49,952

54,365

Total cost of revenues

20,785

24,636

91,055

99,974

Gross profit

$

110,534

$

108,895

$

389,680

$

386,353

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019*

(unaudited) (unaudited) (unaudited)

Revenues

Product licensesand subscription services:

Product licenses $ 29,770 $ 30,087 $ 86,743 $ 87,471

Subscription 8,788 7,252 33,082 29,394 services

Total productlicenses and 38,558 37,339 119,825 116,865 subscriptionservices

Product support 71,886 74,722 284,434 292,035

Other services:

Consulting 19,372 19,524 71,345 69,659

Education 1,503 1,946 5,131 7,768

Total other 20,875 21,470 76,476 77,427 services

Total revenues 131,319 133,531 480,735 486,327



Cost of revenues

Product licensesand subscription services:

Product licenses 564 534 2,293 2,131

Subscription 3,321 4,185 14,833 15,161 services

Total productlicenses and 3,885 4,719 17,126 17,292 subscriptionservices

Product support 4,743 6,607 23,977 28,317

Other services:

Consulting 10,996 11,668 42,923 47,664

Education 1,161 1,642 7,029 6,701

Total other 12,157 13,310 49,952 54,365 services

Total cost of 20,785 24,636 91,055 99,974 revenues



Gross profit $ 110,534 $ 108,895 $ 389,680 $ 386,353

*

Derived from audited financial statements.

* Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

INCOME (LOSS) FROM OPERATIONS

(in thousands)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2020

2019

2020

2019

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Reconciliation of non-GAAP income from operations:

Income (loss) from operations

$

390

$

9,628

$

(13,625

)

$

(1,002

)

Share-based compensation expense

3,256

2,322

11,153

10,209

Digital asset impairment losses

26,456

0

70,698

0

Non-GAAP income from operations

$

30,102

$

11,950

$

68,226

$

9,207

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

INCOME (LOSS) FROM OPERATIONS

(in thousands)

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

(unaudited) (unaudited) (unaudited) (unaudited)

Reconciliationof non-GAAP income fromoperations:

Income (loss) $ 390 $ 9,628 $ (13,625 ) $ (1,002 )from operations

Share-basedcompensation 3,256 2,322 11,153 10,209 expense

Digital assetimpairment 26,456 0 70,698 0 losses

Non-GAAP income $ 30,102 $ 11,950 $ 68,226 $ 9,207 from operations

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE

(in thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2020

2019

2020

2019

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Reconciliation of non-GAAP net income:

Net income (loss)

$

2,661

$

12,167

$

(7,524

)

$

34,355

Share-based compensation expense

3,256

2,322

11,153

10,209

Digital asset impairment losses

26,456

0

70,698

0

Gain from Domain Name Sale

0

0

0

(29,829

)

Interest expense arising from amortization of debt discount and issuance costs

1,543

0

1,543

0

Income tax effects (1)

(13,548

)

(142

)

(25,841

)

7,450

Non-GAAP net income

$

20,368

$

14,347

$

50,029

$

22,185

Reconciliation of non-GAAP diluted earnings per share:

Diluted earnings (loss) per share

$

0.27

$

1.18

$

(0.78

)

$

3.33

Share-based compensation expense (per diluted share)

0.33

0.22

1.15

0.99

Digital asset impairment losses (per diluted share)

2.69

0.00

7.31

0.00

Gain from Domain Name Sale (per diluted share)

0.00

0.00

0.00

(2.89

)

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

0.16

0.00

0.16

0.00

Income tax effects (per diluted share)

(1.38

)

(0.01

)

(2.67

)

0.72

Non-GAAP diluted earnings per share

$

2.07

$

1.39

$

5.17

$

2.15

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE

(in thousands, except per share data)

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

(unaudited) (unaudited) (unaudited) (unaudited)

Reconciliationof non-GAAP net income:

Net income $ 2,661 $ 12,167 $ (7,524 ) $ 34,355 (loss)

Share-basedcompensation 3,256 2,322 11,153 10,209 expense

Digital assetimpairment 26,456 0 70,698 0 losses

Gain fromDomain Name 0 0 0 (29,829 )Sale

Interestexpense arisingfromamortization of 1,543 0 1,543 0 debt discountand issuancecosts

Income tax (13,548 ) (142 ) (25,841 ) 7,450 effects (1)

Non-GAAP net $ 20,368 $ 14,347 $ 50,029 $ 22,185 income



Reconciliationof non-GAAPdiluted earnings pershare:

Dilutedearnings (loss) $ 0.27 $ 1.18 $ (0.78 ) $ 3.33 per share

Share-basedcompensation 0.33 0.22 1.15 0.99 expense (perdiluted share)

Digital assetimpairment 2.69 0.00 7.31 0.00 losses (perdiluted share)

Gain fromDomain Name 0.00 0.00 0.00 (2.89 )Sale (perdiluted share)

Interestexpense arisingfromamortization of 0.16 0.00 0.16 0.00 debt discountand issuancecosts (perdiluted share)

Income taxeffects (per (1.38 ) (0.01 ) (2.67 ) 0.72 diluted share)

Non-GAAPdiluted $ 2.07 $ 1.39 $ 5.17 $ 2.15 earnings pershare

(1) Income tax effects reflect the net tax effects of stock-based compensation expense, digital asset impairment losses, gain from the Domain Name Sale, and interest expense for amortization of debt discount and issuance costs.

(1) Income tax effects reflect the net tax effects of stock-based compensationexpense, digital asset impairment losses, gain from the Domain Name Sale, andinterest expense for amortization of debt discount and issuance costs.

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

CONSTANT CURRENCY

(in thousands)

Three Months Ended

December 31,

(unaudited)

GAAP

Foreign Currency Exchange Rate Impact (1)

Non-GAAP

Constant

Currency (2)

GAAP

GAAP % Change

Non-GAAP Constant Currency % Change (3)

2020

2020

2020

2019

2020

2020

Revenues

Product licenses

$

29,770

$

310

$

29,460

$

30,087

-1.1

%

-2.1

%

Subscription services

8,788

112

8,676

7,252

21.2

%

19.6

%

Total product licenses and subscription services

38,558

422

38,136

37,339

3.3

%

2.1

%

Product support

71,886

1,313

70,573

74,722

-3.8

%

-5.6

%

Other services

20,875

533

20,342

21,470

-2.8

%

-5.3

%

Total revenues

131,319

2,268

129,051

133,531

-1.7

%

-3.4

%

Twelve Months Ended

December 31,

(unaudited)

GAAP

Foreign Currency Exchange Rate Impact (1)

Non-GAAP Constant Currency (2)

GAAP

GAAP % Change

Non-GAAP Constant Currency % Change (3)

2020

2020

2020

2019

2020

2020

Revenues

Product licenses

$

86,743

$

(1,227

)

$

87,970

$

87,471

-0.8

%

0.6

%

Subscription services

33,082

121

32,961

29,394

12.5

%

12.1

%

Total product licenses and subscription services

119,825

(1,106

)

120,931

116,865

2.5

%

3.5

%

Product support

284,434

(358

)

284,792

292,035

-2.6

%

-2.5

%

Other services

76,476

304

76,172

77,427

-1.2

%

-1.6

%

Total revenues

480,735

(1,160

)

481,895

486,327

-1.1

%

-0.9

%

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

CONSTANT CURRENCY

(in thousands)

Three Months Ended

December 31,

(unaudited)

Foreign Non-GAAP Non-GAAP Currency Constant GAAP Exchange Constant GAAP GAAP % Currency Rate Change % Change Impact Currency (3) (1) (2)

2020 2020 2020 2019 2020 2020

Revenues

Product $ 29,770 $ 310 $ 29,460 $ 30,087 -1.1 % -2.1 %licenses

Subscription 8,788 112 8,676 7,252 21.2 % 19.6 %services

Totalproductlicenses and 38,558 422 38,136 37,339 3.3 % 2.1 %subscriptionservices

Product 71,886 1,313 70,573 74,722 -3.8 % -5.6 %support

Other 20,875 533 20,342 21,470 -2.8 % -5.3 %services

Total 131,319 2,268 129,051 133,531 -1.7 % -3.4 %revenues





Twelve Months Ended

December 31,

(unaudited)

Foreign Non-GAAP Currency Non-GAAP Constant GAAP Exchange Constant GAAP GAAP % Currency Rate Currency Change % Change Impact (2) (3) (1)

2020 2020 2020 2019 2020 2020

Revenues

Product $ 86,743 $ (1,227 ) $ 87,970 $ 87,471 -0.8 % 0.6 %licenses

Subscription 33,082 121 32,961 29,394 12.5 % 12.1 %services

Totalproductlicenses and 119,825 (1,106 ) 120,931 116,865 2.5 % 3.5 %subscriptionservices

Product 284,434 (358 ) 284,792 292,035 -2.6 % -2.5 %support

Other 76,476 304 76,172 77,427 -1.2 % -1.6 %services

Total 480,735 (1,160 ) 481,895 486,327 -1.1 % -0.9 %revenues

(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.

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(1) 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.



The "Non-GAAP Constant Currency % Change" reflects the percentage change(3) 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)

December 31,

December 31,

2020

2019*

(unaudited)

Current:

Deferred product licenses revenue

$

1,495

$

481

Deferred subscription services revenue

26,258

16,561

Deferred product support revenue

156,216

161,670

Deferred other services revenue

7,281

8,395

Total current deferred revenue and advance payments

$

191,250

$

187,107

Non-current:

Deferred product licenses revenue

$

139

$

293

Deferred subscription services revenue

8,758

97

Deferred product support revenue

5,055

3,417

Deferred other services revenue

710

537

Total non-current deferred revenue and advance payments

$

14,662

$

4,344

Total current and non-current:

Deferred product licenses revenue

$

1,634

$

774

Deferred subscription services revenue

35,016

16,658

Deferred product support revenue

161,271

165,087

Deferred other services revenue

7,991

8,932

Total current and non-current deferred revenue and advance payments

$

205,912

$

191,451

MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

December December 31, 31,

2020 2019*

(unaudited)

Current:

Deferred product licenses revenue $ 1,495 $ 481

Deferred subscription services revenue 26,258 16,561

Deferred product support revenue 156,216 161,670

Deferred other services revenue 7,281 8,395

Total current deferred revenue and advance $ 191,250 $ 187,107 payments



Non-current:

Deferred product licenses revenue $ 139 $ 293

Deferred subscription services revenue 8,758 97

Deferred product support revenue 5,055 3,417

Deferred other services revenue 710 537

Total non-current deferred revenue and advance $ 14,662 $ 4,344 payments



Total current and non-current:

Deferred product licenses revenue $ 1,634 $ 774

Deferred subscription services revenue 35,016 16,658

Deferred product support revenue 161,271 165,087

Deferred other services revenue 7,991 8,932

Total current and non-current deferred revenue and $ 205,912 $ 191,451 advance payments

*

Derived from audited financial statements.

* Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

WORLDWIDE EMPLOYEE HEADCOUNT

December 31,

September 30,

June 30,

March 31,

December 31,

2020

2020

2020

2020

2019

Subscription services

49

54

64

63

69

Product support

154

165

189

204

219

Consulting

393

397

421

425

392

Education

37

38

43

42

38

Sales and marketing

479

495

573

594

597

Research and development

642

666

684

721

743

General and administrative

243

258

285

314

338

Total headcount

1,997

2,073

2,259

2,363

2,396

View source version on businesswire.com: https://www.businesswire.com/news/home/20210128005989/en/

CONTACT: MicroStrategy Incorporated Investor Relations ir@microstrategy.com (703) 848-8600