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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 September 30, 2022

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 October 25, 2022, the registrant had 9,353,694 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 September 30, 2022 and December 31, 2021

1

 

 

 

 

 

 

Consolidated Statements of Operations for the Three Months Ended September 30, 2022 and 2021

2

 

 

 

 

 

 

Consolidated Statements of Operations for the Nine Months Ended September 30, 2022 and 2021

3

 

 

 

 

 

 

Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2022 and 2021

4

 

 

 

 

 

 

Consolidated Statements of Stockholders’ (Deficit) Equity as of September 30, 2022

5

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

6

 

 

 

 

 

 

Notes to Consolidated Financial Statements

7

 

 

 

 

Item 2.

 

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

22

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

42

 

 

 

 

Item 4.

 

Controls and Procedures

42

 

 

 

 

PART II.

 

OTHER INFORMATION

43

 

 

 

 

Item 1.

 

Legal Proceedings

43

 

 

 

 

Item 1A.

 

Risk Factors

43

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

67

 

 

 

 

Item 5.

 

Other Information

67

 

 

 

 

Item 6.

 

Exhibits

67

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

60,390

 

 

$

63,356

 

Restricted cash

 

 

6,578

 

 

 

1,078

 

Accounts receivable, net

 

 

109,926

 

 

 

189,280

 

Prepaid expenses and other current assets

 

 

25,399

 

 

 

14,251

 

Total current assets

 

 

202,293

 

 

 

267,965

 

Digital assets

 

 

1,993,032

 

 

 

2,850,210

 

Property and equipment, net

 

 

33,033

 

 

 

36,587

 

Right-of-use assets

 

 

62,902

 

 

 

66,760

 

Deposits and other assets

 

 

20,992

 

 

 

15,820

 

Deferred tax assets, net

 

 

233,034

 

 

 

319,782

 

Total assets

 

$

2,545,286

 

 

$

3,557,124

 

Liabilities and Stockholders’ (Deficit) Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses, and operating lease liabilities

 

$

36,846

 

 

$

46,084

 

Accrued compensation and employee benefits

 

 

46,346

 

 

 

54,548

 

Accrued interest

 

 

11,394

 

 

 

1,493

 

Deferred revenue and advance payments

 

 

165,934

 

 

 

209,860

 

Total current liabilities

 

 

260,520

 

 

 

311,985

 

Long-term debt, net

 

 

2,376,935

 

 

 

2,155,151

 

Deferred revenue and advance payments

 

 

8,754

 

 

 

8,089

 

Operating lease liabilities

 

 

69,278

 

 

 

76,608

 

Other long-term liabilities

 

 

30,088

 

 

 

26,224

 

Deferred tax liabilities

 

 

0

 

 

 

109

 

Total liabilities

 

 

2,745,575

 

 

 

2,578,166

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Stockholders’ (Deficit) Equity

 

 

 

 

 

 

 

 

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

 

 

0

 

 

 

0

 

Class A common stock, $0.001 par value; 330,000 shares authorized; 18,038 shares issued and 9,354 shares outstanding, and 18,006 shares issued and 9,322 shares outstanding, respectively

 

 

18

 

 

 

18

 

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

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

1,778,660

 

 

 

1,727,143

 

Treasury stock, at cost; 8,684 shares

 

 

(782,104

)

 

 

(782,104

)

Accumulated other comprehensive loss

 

 

(18,179

)

 

 

(7,543

)

(Accumulated deficit) retained earnings

 

 

(1,178,686

)

 

 

41,442

 

Total stockholders’ (deficit) equity

 

 

(200,289

)

 

 

978,958

 

Total liabilities and stockholders’ (deficit) equity

 

$

2,545,286

 

 

$

3,557,124

 

 

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

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

Revenues:

 

 

 

 

 

 

 

 

Product licenses

 

$

22,286

 

 

$

25,830

 

Subscription services

 

 

16,414

 

 

 

10,853

 

Total product licenses and subscription services

 

 

38,700

 

 

 

36,683

 

Product support

 

 

66,010

 

 

 

70,387

 

Other services

 

 

20,650

 

 

 

20,924

 

Total revenues

 

 

125,360

 

 

 

127,994

 

Cost of revenues:

 

 

 

 

 

 

 

 

Product licenses

 

 

406

 

 

 

383

 

Subscription services

 

 

6,395

 

 

 

4,282

 

Total product licenses and subscription services

 

 

6,801

 

 

 

4,665

 

Product support

 

 

5,224

 

 

 

4,679

 

Other services

 

 

13,360

 

 

 

12,975

 

Total cost of revenues

 

 

25,385

 

 

 

22,319

 

Gross profit

 

 

99,975

 

 

 

105,675

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

 

35,409

 

 

 

38,209

 

Research and development

 

 

30,498

 

 

 

28,211

 

General and administrative

 

 

27,283

 

 

 

23,751

 

Digital asset impairment losses

 

 

727

 

 

 

65,165

 

Total operating expenses

 

 

93,917

 

 

 

155,336

 

Income (loss) from operations

 

 

6,058

 

 

 

(49,661

)

Interest expense, net

 

 

(14,073

)

 

 

(10,723

)

Other income, net

 

 

4,897

 

 

 

1,264

 

Loss before income taxes

 

 

(3,118

)

 

 

(59,120

)

Provision for (benefit from) income taxes

 

 

23,961

 

 

 

(22,984

)

Net loss

 

$

(27,079

)

 

$

(36,136

)

Basic loss per share (1)

 

$

(2.39

)

 

$

(3.61

)

Weighted average shares outstanding used in computing basic loss per share

 

 

11,308

 

 

 

9,999

 

Diluted loss per share (1)

 

$

(2.39

)

 

$

(3.61

)

Weighted average shares outstanding used in computing diluted loss per share

 

 

11,308

 

 

 

9,999

 

 

(1)

Basic and fully diluted loss 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 OPERATIONS

(in thousands, except per share data)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

Revenues:

 

 

 

 

 

 

 

 

Product licenses

 

$

58,928

 

 

$

69,261

 

Subscription services

 

 

43,276

 

 

 

31,221

 

Total product licenses and subscription services

 

 

102,204

 

 

 

100,482

 

Product support

 

 

199,682

 

 

 

212,063

 

Other services

 

 

64,824

 

 

 

63,702

 

Total revenues

 

 

366,710

 

 

 

376,247

 

Cost of revenues:

 

 

 

 

 

 

 

 

Product licenses

 

 

1,314

 

 

 

1,290

 

Subscription services

 

 

17,303

 

 

 

11,720

 

Total product licenses and subscription services

 

 

18,617

 

 

 

13,010

 

Product support

 

 

15,542

 

 

 

14,353

 

Other services

 

 

42,107

 

 

 

40,543

 

Total cost of revenues

 

 

76,266

 

 

 

67,906

 

Gross profit

 

 

290,444

 

 

 

308,341

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

 

105,511

 

 

 

116,728

 

Research and development

 

 

95,811

 

 

 

86,242

 

General and administrative

 

 

82,491

 

 

 

68,397

 

Digital asset impairment losses

 

 

1,088,656

 

 

 

684,034

 

Total operating expenses

 

 

1,372,469

 

 

 

955,401

 

Loss from operations

 

 

(1,082,025

)

 

 

(647,060

)

Interest expense, net

 

 

(38,299

)

 

 

(17,520

)

Other income, net

 

 

12,242

 

 

 

1,631

 

Loss before income taxes

 

 

(1,108,082

)

 

 

(662,949

)

Provision for (benefit from) income taxes

 

 

112,046

 

 

 

(217,446

)

Net loss

 

$

(1,220,128

)

 

$

(445,503

)

Basic loss per share (1)

 

$

(107.99

)

 

$

(45.47

)

Weighted average shares outstanding used in computing basic loss per share

 

 

11,299

 

 

 

9,798

 

Diluted loss per share (1)

 

$

(107.99

)

 

$

(45.47

)

Weighted average shares outstanding used in computing diluted loss per share

 

 

11,299

 

 

 

9,798

 

 

(1)

Basic and fully diluted loss 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.

 

3


 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

Net loss

 

$

(27,079

)

 

$

(36,136

)

Other comprehensive loss, net of applicable taxes:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(4,514

)

 

 

(1,457

)

Total other comprehensive loss

 

 

(4,514

)

 

 

(1,457

)

Comprehensive loss

 

$

(31,593

)

 

$

(37,593

)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

Net loss

 

$

(1,220,128

)

 

$

(445,503

)

Other comprehensive loss, net of applicable taxes:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(10,636

)

 

 

(2,896

)

Total other comprehensive loss

 

 

(10,636

)

 

 

(2,896

)

Comprehensive loss

 

$

(1,230,764

)

 

$

(448,399

)

 

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

 

 

4


 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(in thousands, unaudited)

 

 

 

 

 

 

Class A

 

 

Class B Convertible

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Accumulated Other

 

 

(Accumulated Deficit)

 

 

 

 

 

 

 

Common Stock

 

 

Common Stock

 

 

Paid-in

 

 

Treasury Stock

 

 

Comprehensive

 

 

Retained

 

 

 

Total

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Earnings

 

Balance at January 1, 2021

 

$

446,192

 

 

 

16,307

 

 

$

16

 

 

 

1,964

 

 

$

2

 

 

$

655,241

 

 

 

(8,684

)

 

$

(782,104

)

 

$

(3,885

)

 

$

576,922

 

Net loss

 

 

(110,020

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(110,020

)

Other comprehensive loss

 

 

(1,836

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(1,836

)

 

 

0

 

Issuance of class A common stock upon exercise of stock options

 

 

23,854

 

 

 

159

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

23,854

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Share-based compensation expense

 

 

6,848

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

6,848

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Balance at March 31, 2021

 

$

365,038

 

 

 

16,466

 

 

$

16

 

 

 

1,964

 

 

$

2

 

 

$

685,943

 

 

 

(8,684

)

 

$

(782,104

)

 

$

(5,721

)

 

$

466,902

 

Net loss

 

 

(299,347

)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(299,347

)

Other comprehensive income

 

 

397

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

397

 

 

 

0

 

Issuance of class A common stock upon exercise of stock options

 

 

244

 

 

 

2

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

244

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Share-based compensation expense

 

 

11,087

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

11,087

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Balance at June 30, 2021

 

$

77,419

 

 

 

16,468

 

 

$

16

 

 

 

1,964

 

 

$

2

 

 

$

697,2