Business Wire | Jul 29, 2021 04:02PM EDT

MicroStrategy Announces Second Quarter 2021 Financial Results

Jul. 29, 2021

TYSONS CORNER, Va.--(BUSINESS WIRE)--Jul. 29, 2021--MicroStrategy(r) (Nasdaq: MSTR), the largest independent publicly-traded business intelligence company, today announced financial results for the three-month period ended June 30, 2021 (the second quarter of its 2021 fiscal year).

"MicroStrategy continued its strong 2021 by delivering an outstanding operational performance across the board and completing another successful capital raise to expand our digital asset holdings. We had one of our best operational quarters in our software business in years, highlighted by 13% revenue growth. Our success in the market is being driven by the investments we have made and the broad adoption of our innovative MicroStrategy platform," said Michael J. Saylor, CEO, MicroStrategy Incorporated.

"We continue to be pleased by the results of the implementation of our digital asset strategy. Our latest capital raise allowed us to expand our digital holdings, which now exceed 105,000 bitcoins. Going forward, we intend to continue to deploy additional capital into our digital asset strategy."

Second Quarter 2021 Financial Highlights

* Revenues: Total revenues for the second quarter of 2021 were $125.4 million, a 13.4% increase, or a 10.1% increase on a non-GAAP constant currency basis, compared to the second quarter of 2020. Product licenses and subscription services revenues for the second quarter of 2021 were $32.5 million, a 42.3% increase, or a 40.5% increase on a non-GAAP constant currency basis, compared to the second quarter of 2020. Product support revenues for the second quarter of 2021 were $71.0 million, a 1.4% increase, or a 2.1% decrease on a non-GAAP constant currency basis, compared to the second quarter of 2020. Other services revenues for the second quarter of 2021 were $21.8 million, a 23.3% increase, or a 19.0% increase on a non-GAAP constant currency basis, compared to the second quarter of 2020.

* Gross Profit: Gross profit for the second quarter of 2021 was $102.3 million, representing an 81.6% gross margin, compared to a gross margin of 78.3% in the second quarter of 2020.

* Operating Expenses: Operating expenses for the second quarter of 2021 were $516.6 million, a 543.6% increase compared to the second quarter of 2020. Beginning in the third quarter of 2020, operating expenses included impairment losses on MicroStrategy's digital assets, which were $424.8 million during the second quarter of 2021.

* (Loss) Income from Operations: Loss from operations for the second quarter of 2021 was $414.2 million versus income from operations of $6.3 million for the second quarter of 2020. 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 $21.6 million for the second quarter of 2021 versus $8.6 million for the second quarter of 2020.

* Net (Loss) Income: Net loss for the second quarter of 2021 was $299.3 million, or $30.71 per share on a diluted basis, as compared to net income of $3.4 million, or $0.35 per share on a diluted basis, for the second quarter of 2020. Non-GAAP net income, which excludes share-based compensation expense, impairment losses and gains on sale from intangible assets, which include digital assets, interest expense arising from the amortization of debt issuance costs, and related income tax effects, was $16.7 million, or $1.72 per share on a non-GAAP diluted basis, for the second quarter of 2021, as compared to non-GAAP net income of $5.9 million, or $0.60 per share on a non-GAAP diluted basis, for the second quarter of 2020.

* Cash and Cash Equivalents: As of June 30, 2021, MicroStrategy had cash and cash equivalents of $56.4 million, as compared to $59.7 million as of December 31, 2020, a decrease of $3.3 million.

* Digital Assets: As of June 30, 2021, the carrying value of MicroStrategy's digital assets (comprised of approximately 105,085 bitcoins) was $2.051 billion, which reflects cumulative impairment losses of $689.6 million since acquisition and an average carrying amount per bitcoin of approximately $19,518. As of June 30, 2021, the non-GAAP digital asset cost basis and non-GAAP calculation of the market value of MicroStrategy's bitcoin were $2.741 billion and $3.653 billion, respectively, which reflects an average cost per bitcoin of approximately $26,080 and a market price per bitcoin of $34,763.47. MacroStrategy LLC, a subsidiary of MicroStrategy, holds approximately 92,079 of the bitcoins.

* Senior Secured Notes: In June 2021, MicroStrategy issued $500.0 million aggregate principal amount of 6.125% Senior Secured Notes due 2028 (the "2028 Secured Notes"). The 2028 Secured Notes are unconditionally guaranteed, jointly and severally, on a senior secured basis by MicroStrategy Services Corporation, a wholly owned subsidiary of MicroStrategy and certain subsidiaries of MicroStrategy that may be formed or acquired on or after June 14, 2021. The 2028 Secured Notes bear interest at a fixed rate of 6.125% per annum, payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2021. The 2028 Secured Notes have a stated maturity date of June 15, 2028, unless earlier redeemed or repurchased in accordance with their terms and subject to a springing maturity date of September 15, 2025 or November 16, 2026 under certain circumstances. The 2028 Secured Notes contain various customary covenants, including limitations with respect to indebtedness, liens, payment of dividends, investments, disposition of assets, mergers and acquisitions, and transactions with affiliates. The total net proceeds from the 2028 Secured Notes offering, after deducting initial purchaser discounts and issuance costs, were approximately $487.2 million. As of June 30, 2021, the carrying value of the 2028 Secured Notes was $487.3 million, net of unamortized issuance costs, and was classified as a long-term liability in the "Long-term debt, net" line item in MicroStrategy's Consolidated Balance Sheet.

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP financial measures for the three and six months ended June 30, 2021 and 2020. 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 2021 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.

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.

CFO Search

With MicroStrategy's management team focusing on two corporate strategies - growing its enterprise analytics software business and acquiring and holding bitcoin - and with the increase in its public profile and operational complexity, MicroStrategy plans to engage in a search for a Chief Financial Officer to complement the management team and allow Phong Le to focus on his role as President, running the day-to-day business of MicroStrategy.

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, interest expense arising from the amortization of debt issuance costs related to MicroStrategy's long-term debt, and related income tax effects, (iii) non-GAAP digital asset cost basis as reported excluding cumulative impairment losses and a non-GAAP calculation of market value of MicroStrategy's bitcoin holdings based on the market price of one bitcoin in its principal market at 4:00 p.m. Eastern Time on the last day of each period (see below for a more detailed explanation of the calculation and limitations applicable to this market value metric), and (iv) 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, (iii) non-cash interest expense arising from the amortization of debt issuance costs related to MicroStrategy's long-term debt, and (iv) related income tax effects. The third set of supplemental financial measures provides MicroStrategy's digital asset balances, as reported excluding non-cash cumulative impairment losses and discloses a non-GAAP calculation of market value of its bitcoin holdings based on the market price of one bitcoin in its principal market at 4:00 p.m. Eastern Time on the last day of each period (see below for a more detailed explanation of the calculation and limitations applicable to this market value metric). MicroStrategy believes this is useful to investors and analysts in comparing the value of its bitcoin holdings. The fourth 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 2021 financial results on a live Video Webinar today beginning at approximately 5:00 p.m. EDT. 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," 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 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 its bitcoins; changes in the accounting treatment of the Company's bitcoin holdings; changes in securities laws or other laws or regulations relating to bitcoin that 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 results in the Company's loss of its 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 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. 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 Six Months Ended

June 30, June 30,

2021 2020 2021 2020

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

Revenues

Product $ 22,151 $ 14,816 $ 43,431 $ 27,400 licenses

Subscription 10,342 8,021 20,368 15,989 services

Total productlicenses and 32,493 22,837 63,799 43,389 subscriptionservices

Product support 71,027 70,038 141,676 141,196

Other services 21,831 17,709 42,778 37,423

Total revenues 125,351 110,584 248,253 222,008



Cost of revenues

Product 419 514 907 1,184 licenses

Subscription 3,810 3,792 7,438 7,856 services

Total productlicenses and 4,229 4,306 8,345 9,040 subscriptionservices

Product support 4,862 6,837 9,674 13,555

Other services 13,947 12,846 27,568 25,939

Total cost of 23,038 23,989 45,587 48,534 revenues



Gross profit 102,313 86,595 202,666 173,474



Operating expenses

Sales and 40,321 34,951 78,519 74,469 marketing

Research and 28,548 25,867 58,031 51,968 development

General and 22,917 19,449 44,646 40,781 administrative

Digital assetimpairment 424,774 0 618,869 0 losses

Total operating 516,560 80,267 800,065 167,218 expenses



(Loss) income (414,247 ) 6,328 (597,399 ) 6,256 from operations

Interest(expense) (4,401 ) 563 (6,797 ) 2,418 income, net

Other (expense) (897 ) (1,995 ) 367 (1,561 )income, net

(Loss) incomebefore income (419,545 ) 4,896 (603,829 ) 7,113 taxes

(Benefit from)provision for (120,198 ) 1,509 (194,462 ) 3,069 income taxes

Net (loss) $ (299,347 ) $ 3,387 $ (409,367 ) $ 4,044 income



Basic (loss)earnings per $ (30.71 ) $ 0.35 $ (42.22 ) $ 0.41 share (1):

Weightedaverage sharesoutstandingused in 9,746 9,739 9,697 9,858 computing basic(loss) earningsper share



Diluted (loss)earnings per $ (30.71 ) $ 0.35 $ (42.22 ) $ 0.41 share (1):

Weightedaverage sharesoutstandingused in 9,746 9,741 9,697 9,886 computingdiluted (loss)earnings pershare

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

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

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

June 30,

December 31,

2021

2020*

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

56,399

$

59,675

Restricted cash

1,205

1,084

Accounts receivable, net

131,516

197,461

Prepaid expenses and other current assets

19,338

14,400

Total current assets

208,458

272,620

Digital assets

2,051,039

1,054,302

Property and equipment, net

39,659

42,975

Right-of-use assets

70,340

73,597

Deposits and other assets

15,756

15,615

Deferred tax assets, net

239,107

6,503

Total Assets

$

2,624,359

$

1,465,612

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable, accrued expenses, and operating lease liabilities

$

41,236

$

45,119

Accrued compensation and employee benefits

50,944

49,249

Deferred revenue and advance payments

182,818

191,250

Total current liabilities

274,998

285,618

Long-term debt, net

2,150,927

486,366

Deferred revenue and advance payments

7,262

14,662

Operating lease liabilities

80,900

84,328

Other long-term liabilities

31,040

33,382

Deferred tax liabilities

1,813

8,211

Total Liabilities

2,546,940

912,567

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; 16,468 shares issued and 7,784 shares outstanding, and 16,307 shares issued and 7,623 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 1,964 shares issued and outstanding, respectively

2

2

Additional paid-in capital

697,274

763,051

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

(782,104

)

(782,104

)

Accumulated other comprehensive loss

(5,324

)

(3,885

)

Retained earnings

167,555

575,965

Total Stockholders' Equity

77,419

553,045

Total Liabilities and Stockholders' Equity

$

2,624,359

$

1,465,612

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

June 30, December 31,

2021 2020*

(unaudited)

Assets

Current assets

Cash and cash equivalents $ 56,399 $ 59,675

Restricted cash 1,205 1,084

Accounts receivable, net 131,516 197,461

Prepaid expenses and other current assets 19,338 14,400

Total current assets 208,458 272,620



Digital assets 2,051,039 1,054,302

Property and equipment, net 39,659 42,975

Right-of-use assets 70,340 73,597

Deposits and other assets 15,756 15,615

Deferred tax assets, net 239,107 6,503

Total Assets $ 2,624,359 $ 1,465,612



Liabilities and Stockholders' Equity

Current liabilities

Accounts payable, accrued expenses, and $ 41,236 $ 45,119 operating lease liabilities

Accrued compensation and employee benefits 50,944 49,249

Deferred revenue and advance payments 182,818 191,250

Total current liabilities 274,998 285,618



Long-term debt, net 2,150,927 486,366

Deferred revenue and advance payments 7,262 14,662

Operating lease liabilities 80,900 84,328

Other long-term liabilities 31,040 33,382

Deferred tax liabilities 1,813 8,211

Total Liabilities 2,546,940 912,567



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; 16,468 shares issued and7,784 shares outstanding, and 16,307 shares 16 16 issued and 7,623 shares outstanding,respectively

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

Additional paid-in capital 697,274 763,051

Treasury stock, at cost; 8,684 shares and 8,684 (782,104 ) (782,104 )shares, respectively

Accumulated other comprehensive loss (5,324 ) (3,885 )

Retained earnings 167,555 575,965

Total Stockholders' Equity 77,419 553,045

Total Liabilities and Stockholders' Equity $ 2,624,359 $ 1,465,612

*Derived from audited financial statements.

* Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Six Months Ended

June 30,

2021

2020

(unaudited)

(unaudited)

Operating activities:

Net (loss) income

$

(409,367

)

$

4,044

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

Depreciation and amortization

5,997

5,828

Reduction in carrying amount of right-of-use assets

4,204

4,085

Credit losses and sales allowances

365

990

Deferred taxes

(197,383

)

273

Share-based compensation expense

18,807

5,337

Digital asset impairment losses

618,869

0

Amortization of issuance costs on long-term debt

2,977

0

Changes in operating assets and liabilities:

Accounts receivable

11,197

21,022

Prepaid expenses and other current assets

(4,080

)

(493

)

Deposits and other assets

(1,071

)

195

Accounts payable and accrued expenses

(7,633

)

(1,823

)

Accrued compensation and employee benefits

1,368

(8,708

)

Deferred revenue and advance payments

37,825

347

Operating lease liabilities

(5,147

)

(4,662

)

Other long-term liabilities

(253

)

86

Net cash provided by operating activities

76,675

26,521

Investing activities:

Purchases of digital assets

(1,615,606

)

0

Proceeds from redemption of short-term investments

0

10,000

Purchases of property and equipment

(1,342

)

(1,162

)

Purchases of short-term investments

0

(9,928

)

Net cash used in investing activities

(1,616,948

)

(1,090

)

Financing activities:

Proceeds from convertible senior notes

1,050,000

0

Issuance costs paid for convertible senior notes

(24,742

)

0

Proceeds from senior secured notes

500,000

0

Issuance costs paid for senior secured notes

(11,269

)

0

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

24,098

1,902

Purchases of treasury stock

0

(61,875

)

Net cash provided by (used in) financing activities

1,538,087

(59,973

)

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

(969

)

(1,154

)

Net decrease in cash, cash equivalents, and restricted cash

(3,155

)

(35,696

)

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

60,759

457,816

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

$

57,604

$

422,120

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Six Months Ended

June 30,

2021 2020

(unaudited) (unaudited)

Operating activities:

Net (loss) income $ (409,367 ) $ 4,044

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

Depreciation and amortization 5,997 5,828

Reduction in carrying amount of right-of-use 4,204 4,085 assets

Credit losses and sales allowances 365 990

Deferred taxes (197,383 ) 273

Share-based compensation expense 18,807 5,337

Digital asset impairment losses 618,869 0

Amortization of issuance costs on long-term 2,977 0 debt

Changes in operating assets and liabilities:

Accounts receivable 11,197 21,022

Prepaid expenses and other current assets (4,080 ) (493 )

Deposits and other assets (1,071 ) 195

Accounts payable and accrued expenses (7,633 ) (1,823 )

Accrued compensation and employee benefits 1,368 (8,708 )

Deferred revenue and advance payments 37,825 347

Operating lease liabilities (5,147 ) (4,662 )

Other long-term liabilities (253 ) 86

Net cash provided by operating activities 76,675 26,521



Investing activities:

Purchases of digital assets (1,615,606 ) 0

Proceeds from redemption of short-term 0 10,000 investments

Purchases of property and equipment (1,342 ) (1,162 )

Purchases of short-term investments 0 (9,928 )

Net cash used in investing activities (1,616,948 ) (1,090 )



Financing activities:

Proceeds from convertible senior notes 1,050,000 0

Issuance costs paid for convertible senior (24,742 ) 0 notes

Proceeds from senior secured notes 500,000 0

Issuance costs paid for senior secured notes (11,269 ) 0

Proceeds from sale of class A common stock 24,098 1,902 under exercise of employee stock options

Purchases of treasury stock 0 (61,875 )

Net cash provided by (used in) financing 1,538,087 (59,973 )activities



Effect of foreign exchange rate changes on (969 ) (1,154 )cash, cash equivalents, and restricted cash

Net decrease in cash, cash equivalents, and (3,155 ) (35,696 )restricted cash

Cash, cash equivalents, and restricted cash, 60,759 457,816 beginning of period

Cash, cash equivalents, and restricted cash, $ 57,604 $ 422,120 end of period

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Revenues

Product licenses and subscription services:

Product licenses

$

22,151

$

14,816

$

43,431

$

27,400

Subscription services

10,342

8,021

20,368

15,989

Total product licenses and subscription services

32,493

22,837

63,799

43,389

Product support

71,027

70,038

141,676

141,196

Other services:

Consulting

20,622

16,578

40,333

35,019

Education

1,209

1,131

2,445

2,404

Total other services

21,831

17,709

42,778

37,423

Total revenues

125,351

110,584

248,253

222,008

Cost of revenues

Product licenses and subscription services:

Product licenses

419

514

907

1,184

Subscription services

3,810

3,792

7,438

7,856

Total product licenses and subscription services

4,229

4,306

8,345

9,040

Product support

4,862

6,837

9,674

13,555

Other services:

Consulting

12,438

10,168

24,770

21,596

Education

1,509

2,678

2,798

4,343

Total other services

13,947

12,846

27,568

25,939

Total cost of revenues

23,038

23,989

45,587

48,534

Gross profit

$

102,313

$

86,595

$

202,666

$

173,474

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

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

Revenues

Productlicenses and subscriptionservices:

Product $ 22,151 $ 14,816 $ 43,431 $ 27,400 licenses

Subscription 10,342 8,021 20,368 15,989 services

Total productlicenses and 32,493 22,837 63,799 43,389 subscriptionservices

Product support 71,027 70,038 141,676 141,196

Other services:

Consulting 20,622 16,578 40,333 35,019

Education 1,209 1,131 2,445 2,404

Total other 21,831 17,709 42,778 37,423 services

Total revenues 125,351 110,584 248,253 222,008



Cost of revenues

Productlicenses and subscriptionservices:

Product 419 514 907 1,184 licenses

Subscription 3,810 3,792 7,438 7,856 services

Total productlicenses and 4,229 4,306 8,345 9,040 subscriptionservices

Product support 4,862 6,837 9,674 13,555

Other services:

Consulting 12,438 10,168 24,770 21,596

Education 1,509 2,678 2,798 4,343

Total other 13,947 12,846 27,568 25,939 services

Total cost of 23,038 23,989 45,587 48,534 revenues



Gross profit $ 102,313 $ 86,595 $ 202,666 $ 173,474

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

INCOME FROM OPERATIONS

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Reconciliation of non-GAAP income from operations:

(Loss) income from operations

$

(414,247

)

$

6,328

$

(597,399

)

$

6,256

Share-based compensation expense

11,096

2,226

18,807

5,337

Digital asset impairment losses

424,774

0

618,869

0

Non-GAAP income from operations

$

21,623

$

8,554

$

40,277

$

11,593

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

INCOME FROM OPERATIONS

(in thousands)

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

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

Reconciliationof non-GAAP income fromoperations:

(Loss) income $ (414,247 ) $ 6,328 $ (597,399 ) $ 6,256 from operations

Share-basedcompensation 11,096 2,226 18,807 5,337 expense

Digital assetimpairment 424,774 0 618,869 0 losses

Non-GAAP income $ 21,623 $ 8,554 $ 40,277 $ 11,593 from operations

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

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

(in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Reconciliation of non-GAAP net income:

Net (loss) income

$

(299,347

)

$

3,387

$

(409,367

)

$

4,044

Share-based compensation expense

11,096

2,226

18,807

5,337

Digital asset impairment losses

424,774

0

618,869

0

Interest expense arising from amortization of debt issuance costs

1,805

0

2,977

0

Income tax effects (1)

(121,587

)

274

(199,671

)

436

Non-GAAP net income

$

16,741

$

5,887

$

31,615

$

9,817

Reconciliation of non-GAAP diluted earnings per share:

Diluted (loss) earnings per share

$

(30.71

)

$

0.35

$

(42.22

)

$

0.41

Share-based compensation expense (per diluted share)

1.14

0.22

1.94

0.54

Digital asset impairment losses (per diluted share)

43.58

0.00

63.82

0.00

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

0.19

0.00

0.31

0.00

Income tax effects (per diluted share)

(12.48

)

0.03

(20.59

)

0.04

Non-GAAP diluted earnings per share

$

1.72

$

0.60

$

3.26

$

0.99

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

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

(in thousands, except per share data)

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

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

Reconciliationof non-GAAP net income:

Net (loss) $ (299,347 ) $ 3,387 $ (409,367 ) $ 4,044 income

Share-basedcompensation 11,096 2,226 18,807 5,337 expense

Digital assetimpairment 424,774 0 618,869 0 losses

Interestexpense arisingfrom 1,805 0 2,977 0 amortization ofdebt issuancecosts

Income tax (121,587 ) 274 (199,671 ) 436 effects (1)

Non-GAAP net $ 16,741 $ 5,887 $ 31,615 $ 9,817 income



Reconciliationof non-GAAPdiluted earnings pershare:

Diluted (loss)earnings per $ (30.71 ) $ 0.35 $ (42.22 ) $ 0.41 share

Share-basedcompensation 1.14 0.22 1.94 0.54 expense (perdiluted share)

Digital assetimpairment 43.58 0.00 63.82 0.00 losses (perdiluted share)

Interestexpense arisingfromamortization of 0.19 0.00 0.31 0.00 debt issuancecosts (perdiluted share)

Income taxeffects (per (12.48 ) 0.03 (20.59 ) 0.04 diluted share)

Non-GAAPdiluted $ 1.72 $ 0.60 $ 3.26 $ 0.99 earnings pershare

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

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

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

DIGITAL ASSET HOLDINGS

As Reported

Market Value

Digital Asset Carrying Value (in thousands)

Add Back: Digital Asset Impairment Losses (in thousands)

Digital Asset Original Cost Basis (in thousands)

Approximate Number of Bitcoins Held

Market Price Per Bitcoin

Market Value of Bitcoin Held (in thousands)

Reconciliation of digital asset cost basis:

Balance at June 30, 2020

$

0

$

0

$

0

0

n/a

n/a

Digital asset purchases

425,000

425,000

38,250

Digital asset impairment losses

(44,242

)

44,242

Balance at September 30, 2020

$

380,758

$

44,242

$

425,000

38,250

$

10,706.00

$

409,505

Digital asset purchases

700,000

700,000

32,219

Digital asset impairment losses

(26,456

)

26,456

Balance at December 31, 2020

$

1,054,302

$

70,698

$

1,125,000

70,469

$

29,181.00

$

2,056,356

Digital asset purchases

1,086,375

1,086,375

20,857

Digital asset impairment losses

(194,095

)

194,095

Balance at March 31, 2021

$

1,946,582

$

264,793

$

2,211,375

91,326

$

58,601.28

$

5,351,820

Digital asset purchases

529,231

529,231

13,759

Digital asset impairment losses

(424,774

)

424,774

Balance at June 30, 2021

$

2,051,039

$

689,567

$

2,740,606

105,085

$

34,763.47

$

3,653,119

The amounts reported as "Market Value" in the above table represent only a mathematical calculation consisting of the price for one bitcoin reported in MicroStrategy's principal market at 4:00 p.m. Eastern Time on the last day of each period multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period. The Securities and Exchange Commission has previously made findings 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 below 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" indicated below, at the market price as reported in its principal market on the date of sale, or at all.

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

DIGITAL ASSET HOLDINGS

As Reported Market Value

Digital Add Back: Digital Market Asset Digital Asset Approximate Value Carrying Asset Original Number of Market of Bitcoin Value Impairment Cost Bitcoins Price Held (in Losses Basis Held Per Bitcoin (in thousands) (in (in thousands) thousands) thousands)

Reconciliationof digital asset costbasis:

Balance at $ 0 $ 0 $ 0 0 n/a n/a June 30, 2020

Digital asset 425,000 425,000 38,250 purchases

Digital assetimpairment (44,242 ) 44,242 losses

Balance atSeptember 30, $ 380,758 $ 44,242 $ 425,000 38,250 $ 10,706.00 $ 409,505 2020

Digital asset 700,000 700,000 32,219 purchases

Digital assetimpairment (26,456 ) 26,456 losses

Balance atDecember 31, $ 1,054,302 $ 70,698 $ 1,125,000 70,469 $ 29,181.00 $ 2,056,356 2020

Digital asset 1,086,375 1,086,375 20,857 purchases

Digital assetimpairment (194,095 ) 194,095 losses

Balance at $ 1,946,582 $ 264,793 $ 2,211,375 91,326 $ 58,601.28 $ 5,351,820 March 31, 2021

Digital asset 529,231 529,231 13,759 purchases

Digital assetimpairment (424,774 ) 424,774 losses

Balance at $ 2,051,039 $ 689,567 $ 2,740,606 105,085 $ 34,763.47 $ 3,653,119 June 30, 2021

The amounts reported as "Market Value" in the above table represent only a mathematical calculation consisting of the price for one bitcoin reported in MicroStrategy's principal market at 4:00 p.m. Eastern Time on the last day of each period multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period. The Securities and Exchange Commission has previously made findings 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 below 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" indicated below, at the market price as reported in its principal market on the date of sale, or at all.

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

CONSTANT CURRENCY

(in thousands)

Three Months Ended

June 30,

(unaudited)

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

2021 2021 2021 2020 2021 2021

Revenues

Product $ 22,151 $ 132 $ 22,019 $ 14,816 49.5 % 48.6 %licenses

Subscription 10,342 264 10,078 8,021 28.9 % 25.6 %services

Totalproductlicenses and 32,493 396 32,097 22,837 42.3 % 40.5 %subscriptionservices

Product 71,027 2,425 68,602 70,038 1.4 % -2.1 %support

Other 21,831 763 21,068 17,709 23.3 % 19.0 %services

Total 125,351 3,584 121,767 110,584 13.4 % 10.1 %revenues

Six Months Ended

June 30,

(unaudited)

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

2021 2021 2021 2020 2021 2021

Revenues

Product $ 43,431 $ 457 $ 42,974 $ 27,400 58.5 % 56.8 %licenses

Subscription 20,368 454 19,914 15,989 27.4 % 24.5 %services

Totalproductlicenses and 63,799 911 62,888 43,389 47.0 % 44.9 %subscriptionservices

Product 141,676 4,342 137,334 141,196 0.3 % -2.7 %support

Other 42,778 1,381 41,397 37,423 14.3 % 10.6 %services

Total 248,253 6,634 241,619 222,008 11.8 % 8.8 %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.

The "Non-GAAP Constant Currency" reflects the current period GAAP amount,(2) 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)

June 30,

December 31,

June 30,

2021

2020*

2020

(unaudited)

(unaudited)

Current:

Deferred product licenses revenue

$

544

$

1,495

$

100

Deferred subscription services revenue

25,916

26,258

17,934

Deferred product support revenue

150,963

156,216

142,543

Deferred other services revenue

5,395

7,281

7,066

Total current deferred revenue and advance payments

$

182,818

$

191,250

$

167,643

Non-current:

Deferred product licenses revenue

$

76

$

139

$

168

Deferred subscription services revenue

712

8,758

90

Deferred product support revenue

5,920

5,055

5,152

Deferred other services revenue

554

710

500

Total non-current deferred revenue and advance payments

$

7,262

$

14,662

$

5,910

Total current and non-current:

Deferred product licenses revenue

$

620

$

1,634

$

268

Deferred subscription services revenue

26,628

35,016

18,024

Deferred product support revenue

156,883

161,271

147,695

Deferred other services revenue

5,949

7,991

7,566

Total current and non-current deferred revenue and advance payments

$

190,080

$

205,912

$

173,553

MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

June 30, December June 30, 31,

2021 2020* 2020

(unaudited) (unaudited)

Current:

Deferred product licenses revenue $ 544 $ 1,495 $ 100

Deferred subscription services 25,916 26,258 17,934 revenue

Deferred product support revenue 150,963 156,216 142,543

Deferred other services revenue 5,395 7,281 7,066

Total current deferred revenue and $ 182,818 $ 191,250 $ 167,643 advance payments



Non-current:

Deferred product licenses revenue $ 76 $ 139 $ 168

Deferred subscription services 712 8,758 90 revenue

Deferred product support revenue 5,920 5,055 5,152

Deferred other services revenue 554 710 500

Total non-current deferred revenue $ 7,262 $ 14,662 $ 5,910 and advance payments



Total current and non-current:

Deferred product licenses revenue $ 620 $ 1,634 $ 268

Deferred subscription services 26,628 35,016 18,024 revenue

Deferred product support revenue 156,883 161,271 147,695

Deferred other services revenue 5,949 7,991 7,566

Total current and non-currentdeferred revenue and advance $ 190,080 $ 205,912 $ 173,553 payments

*Derived from audited financial statements.

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