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Form 10-Q MICROSTRATEGY Inc For: Mar 31

May 1, 2024 4:01 PM
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2024

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission File Number 000-24435

MICROSTRATEGY INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

51-0323571

(I.R.S. Employer

Identification Number)

1850 Towers Crescent Plaza, Tysons Corner, VA

(Address of Principal Executive Offices)

22182

(Zip Code)

(703) 848-8600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol

 

Name of Each Exchange on which Registered

Class A common stock, par value $0.001 per share

 

MSTR

 

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant,: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of April 24, 2024, the registrant had 15,773,406 and 1,964,025 shares of class A common stock and class B common stock outstanding, respectively.

 


MICROSTRATEGY INCORPORATED

FORM 10-Q

TABLE OF CONTENTS

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

1

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

1

 

 

 

 

 

 

Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

1

 

 

 

 

 

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023

2

 

 

 

 

 

 

Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended March 31, 2024 and 2023

3

 

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity (Deficit) as of March 31, 2024

4

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023

5

 

 

 

 

 

 

Notes to Consolidated Financial Statements

6

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

39

 

 

 

 

Item 4.

 

Controls and Procedures

39

 

 

 

 

PART II.

 

OTHER INFORMATION

40

 

 

 

 

Item 1.

 

Legal Proceedings

40

 

 

 

 

Item 1A.

 

Risk Factors

40

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

67

 

 

 

 

Item 5.

 

Other Information

67

 

 

 

 

Item 6.

 

Exhibits

68

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

81,326

 

 

$

46,817

 

Restricted cash

 

 

2,402

 

 

 

1,856

 

Accounts receivable, net

 

 

115,150

 

 

 

183,815

 

Prepaid expenses and other current assets

 

 

42,714

 

 

 

35,407

 

Total current assets

 

 

241,592

 

 

 

267,895

 

Digital assets

 

 

5,074,152

 

 

 

3,626,476

 

Property and equipment, net

 

 

29,108

 

 

 

28,941

 

Right-of-use assets

 

 

55,093

 

 

 

57,343

 

Deposits and other assets

 

 

31,757

 

 

 

24,300

 

Deferred tax assets, net

 

 

919,837

 

 

 

757,573

 

Total assets

 

$

6,351,539

 

 

$

4,762,528

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable, accrued expenses, and operating lease liabilities

 

$

41,866

 

 

$

43,090

 

Accrued compensation and employee benefits

 

 

40,617

 

 

 

50,045

 

Accrued interest

 

 

10,878

 

 

 

1,493

 

Current portion of long-term debt, net

 

 

492

 

 

 

483

 

Deferred revenue and advance payments

 

 

215,955

 

 

 

228,162

 

Total current liabilities

 

 

309,808

 

 

 

323,273

 

Long-term debt, net

 

 

3,558,801

 

 

 

2,182,108

 

Deferred revenue and advance payments

 

 

6,486

 

 

 

8,524

 

Operating lease liabilities

 

 

58,430

 

 

 

61,086

 

Other long-term liabilities

 

 

17,552

 

 

 

22,208

 

Deferred tax liabilities

 

 

357

 

 

 

357

 

Total liabilities

 

 

3,951,434

 

 

 

2,597,556

 

Commitments and Contingencies

 

 

 

 

 

 

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; 24,367 shares issued and 15,683 shares outstanding, and 23,588 shares issued and 14,904 shares outstanding, respectively

 

 

24

 

 

 

24

 

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

 

 

4,247,704

 

 

 

3,957,728

 

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

 

 

(782,104

)

 

 

(782,104

)

Accumulated other comprehensive loss

 

 

(13,169

)

 

 

(11,444

)

Accumulated deficit

 

 

(1,052,352

)

 

 

(999,234

)

Total stockholders’ equity

 

 

2,400,105

 

 

 

2,164,972

 

Total liabilities and stockholders’ equity

 

$

6,351,539

 

 

$

4,762,528

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

1


 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(unaudited)

 

 

(unaudited)

 

Revenues:

 

 

 

 

 

 

Product licenses

 

$

12,938

 

 

$

17,412

 

Subscription services

 

 

22,966

 

 

 

18,810

 

Total product licenses and subscription services

 

 

35,904

 

 

 

36,222

 

Product support

 

 

62,685

 

 

 

65,481

 

Other services

 

 

16,657

 

 

 

20,212

 

Total revenues

 

 

115,246

 

 

 

121,915

 

Cost of revenues:

 

 

 

 

 

 

Product licenses

 

 

567

 

 

 

534

 

Subscription services

 

 

8,604

 

 

 

7,856

 

Total product licenses and subscription services

 

 

9,171

 

 

 

8,390

 

Product support

 

 

8,547

 

 

 

5,768

 

Other services

 

 

12,297

 

 

 

13,783

 

Total cost of revenues

 

 

30,015

 

 

 

27,941

 

Gross profit

 

 

85,231

 

 

 

93,974

 

Operating expenses:

 

 

 

 

 

 

Sales and marketing

 

 

33,451

 

 

 

36,106

 

Research and development

 

 

29,183

 

 

 

31,358

 

General and administrative

 

 

34,666

 

 

 

27,906

 

Digital asset impairment losses

 

 

191,633

 

 

 

18,911

 

Total operating expenses

 

 

288,933

 

 

 

114,281

 

Loss from operations

 

 

(203,702

)

 

 

(20,307

)

Interest expense, net

 

 

(11,881

)

 

 

(14,930

)

Gain on debt extinguishment

 

 

0

 

 

 

44,686

 

Other income (expense), net

 

 

1,696

 

 

 

(1,443

)

(Loss) income before income taxes

 

 

(213,887

)

 

 

8,006

 

Benefit from income taxes

 

 

(160,769

)

 

 

(453,187

)

Net (loss) income

 

$

(53,118

)

 

$

461,193

 

Basic (loss) earnings per share (1)

 

$

(3.09

)

 

$

38.97

 

Weighted average shares outstanding used in computing basic (loss) earnings per share

 

 

17,194

 

 

 

11,834

 

Diluted (loss) earnings per share (1)

 

$

(3.09

)

 

$

31.79

 

Weighted average shares outstanding used in computing diluted (loss) earnings per share

 

 

17,194

 

 

 

14,575

 

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

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

2


 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(unaudited)

 

 

(unaudited)

 

Net (loss) income

 

$

(53,118

)

 

$

461,193

 

Other comprehensive (loss) income, net of applicable taxes:

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(1,725

)

 

 

738

 

Total other comprehensive (loss) income

 

 

(1,725

)

 

 

738

 

Comprehensive (loss) income

 

$

(54,843

)

 

$

461,931

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

3


 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, unaudited)

 

 

 

 

 

 

Class A

 

 

Class B Convertible

 

 

Additional

 

 

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Common Stock

 

 

Paid-in

 

 

Treasury Stock

 

 

Comprehensive

 

 

Accumulated

 

 

 

Total

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Deficit

 

Balance at January 1, 2023

 

$

(383,120

)

 

 

18,269

 

 

$

18

 

 

 

1,964

 

 

$

2

 

 

$

1,841,120

 

 

 

(8,684

)

 

$

(782,104

)

 

$

(13,801

)

 

$

(1,428,355

)

Net income

 

 

461,193

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

461,193

 

Other comprehensive income

 

 

738

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

738

 

 

 

0

 

Issuance of class A common stock upon exercise of stock options

 

 

6,750

 

 

 

44

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

6,750

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock under employee stock purchase plan

 

 

2,380

 

 

 

13

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

2,380

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock upon vesting of restricted stock units, net of withholding taxes

 

 

(514

)

 

 

4

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(514

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock under public offerings, net of issuance costs

 

 

338,962

 

 

 

1,349

 

 

 

2

 

 

 

0

 

 

 

0

 

 

 

338,960

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Share-based compensation expense

 

 

16,822

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

16,822

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Balance at March 31, 2023

 

$

443,211

 

 

 

19,679

 

 

$

20

 

 

 

1,964

 

 

$

2

 

 

$

2,205,518

 

 

 

(8,684

)

 

$

(782,104

)

 

$

(13,063

)

 

$

(967,162

)

Net income

 

 

22,243

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

22,243

 

Other comprehensive loss

 

 

(87

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(87

)

 

 

0

 

Issuance of class A common stock upon exercise of stock options

 

 

5,354

 

 

 

39

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

5,354

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock upon vesting of restricted stock units, net of withholding taxes

 

 

(242

)

 

 

6

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(242

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock under public offerings, net of issuance costs

 

 

333,494

 

 

 

1,079

 

 

 

1

 

 

 

0

 

 

 

0

 

 

 

333,493

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Share-based compensation expense

 

 

15,145

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

15,145

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Balance at June 30, 2023

 

$

819,118

 

 

 

20,803

 

 

$

21

 

 

 

1,964

 

 

$

2

 

 

$

2,559,268

 

 

 

(8,684

)

 

$

(782,104

)

 

$

(13,150

)

 

$

(944,919

)

Net loss

 

 

(143,441

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(143,441

)

Other comprehensive loss

 

 

(2,205

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(2,205

)

 

 

0

 

Issuance of class A common stock upon exercise of stock options

 

 

2,113

 

 

 

10

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

2,113

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock under employee stock purchase plan

 

 

1,575

 

 

 

7

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,575

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock upon vesting of restricted stock units, net of withholding taxes

 

 

(747

)

 

 

4

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(747

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock under public offerings, net of issuance costs

 

 

147,218

 

 

 

403

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

147,218

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Share-based compensation expense

 

 

16,764

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

16,764

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Balance at September 30, 2023

 

$

840,395

 

 

 

21,227

 

 

$

21

 

 

 

1,964

 

 

$

2

 

 

$

2,726,191

 

 

 

(8,684

)

 

$

(782,104

)

 

$

(15,355

)

 

$

(1,088,360

)

Net income

 

 

89,126

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

89,126

 

Other comprehensive income

 

 

3,911

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

3,911

 

 

 

0

 

Issuance of class A common stock upon exercise of stock options

 

 

16,302

 

 

 

82

 

 

 

1

 

 

 

0

 

 

 

0

 

 

 

16,301

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock upon vesting of restricted stock units, net of withholding taxes

 

 

(2,841

)

 

 

12

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(2,841

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock under public offerings, net of issuance costs

 

 

1,200,415

 

 

 

2,267

 

 

 

2

 

 

 

0

 

 

 

0

 

 

 

1,200,413

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Share-based compensation expense

 

 

17,664

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

17,664

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Balance at December 31, 2023

 

$

2,164,972

 

 

 

23,588

 

 

$

24

 

 

 

1,964

 

 

$

2

 

 

$

3,957,728

 

 

 

(8,684

)

 

$

(782,104

)

 

$

(11,444

)

 

$

(999,234

)

Net loss

 

 

(53,118

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(53,118

)

Other comprehensive loss

 

 

(1,725

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(1,725

)

 

 

0

 

Issuance of class A common stock upon exercise of stock options

 

 

136,088

 

 

 

573

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

136,088

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock under employee stock purchase plan

 

 

2,071

 

 

 

7

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

2,071

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock upon vesting of restricted stock units, net of withholding taxes

 

 

(1,273

)

 

 

4

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(1,273

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Issuance of class A common stock under public offerings, net of issuance costs

 

 

137,152

 

 

 

195

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

137,152

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Share-based compensation expense

 

 

15,938

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

15,938

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Balance at March 31, 2024

 

$

2,400,105

 

 

 

24,367

 

 

$

24

 

 

 

1,964

 

 

$

2

 

 

$

4,247,704

 

 

 

(8,684

)

 

$

(782,104

)

 

$

(13,169

)

 

$

(1,052,352

)

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

4


 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(unaudited)

 

 

(unaudited)

 

Operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(53,118

)

 

$

461,193

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

3,050

 

 

 

3,431

 

Reduction in carrying amount of right-of-use assets

 

 

2,110

 

 

 

2,124

 

Credit losses and sales allowances

 

 

24

 

 

 

21

 

Deferred taxes

 

 

(161,097

)

 

 

(460,061

)

Release of liabilities for unrecognized tax benefits

 

 

(73

)

 

 

(102

)

Share-based compensation expense

 

 

17,791

 

 

 

17,555

 

Digital asset impairment losses

 

 

191,633

 

 

 

18,911

 

Amortization of issuance costs on long-term debt

 

 

2,557

 

 

 

2,210

 

Gain on debt extinguishment

 

 

0

 

 

 

(44,686

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

12,166

 

 

 

10,241