MICROSTRATEGY Inc [MSTR] Filings

10-Q 1 mstr-10q_20220630.htm 10-Q mstr-10q_20220630.htm

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 June 30, 2022

☐	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 July 26, 2022, the registrant had 9,336,881 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 June 30, 2022 and December 31, 2021	1

	Consolidated Statements of Operations for the Three Months Ended June 30, 2022 and 2021	2

	Consolidated Statements of Operations for the Six Months Ended June 30, 2022 and 2021	3

	Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2022 and 2021	4

	Consolidated Statements of Stockholders’ (Deficit) Equity as of June 30, 2022	5

	Consolidated Statements of Cash Flows for the Six Months Ended June 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	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40

Item 4.	Controls and Procedures	41

PART II.	OTHER INFORMATION	42

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65

Item 5.	Other Information	65

Item 6.	Exhibits	66

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	June 30,			December 31,
	2022			2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	69,386		$	63,356
Restricted cash		6,155			1,078
Accounts receivable, net		118,645			189,280
Prepaid expenses and other current assets		25,496			14,251
Total current assets		219,682			267,965
Digital assets		1,987,781			2,850,210
Property and equipment, net		34,580			36,587
Right-of-use assets		65,169			66,760
Deposits and other assets		17,786			15,820
Deferred tax assets, net		243,367			319,782
Total assets	$	2,568,365		$	3,557,124
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable, accrued expenses, and operating lease liabilities	$	35,960		$	46,084
Accrued compensation and employee benefits		47,773			54,548
Accrued interest		2,269			1,493
Deferred revenue and advance payments		188,098			209,860
Total current liabilities		274,100			311,985
Long-term debt, net		2,374,863			2,155,151
Deferred revenue and advance payments		8,497			8,089
Operating lease liabilities		72,162			76,608
Other long-term liabilities		25,706			26,224
Deferred tax liabilities		105			109
Total liabilities		2,755,433			2,578,166
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; 18,021 shares issued and 9,337 shares outstanding, and 18,006 shares issued and 9,322 shares outstanding, respectively		18			18
Class B convertible common stock, $0.001 par value; 165,000 shares authorized; 1,964 shares issued and outstanding, and 1,964 shares issued and outstanding, respectively		2			2
Additional paid-in capital		1,760,288			1,727,143
Treasury stock, at cost; 8,684 shares		(782,104	)		(782,104	)
Accumulated other comprehensive loss		(13,665	)		(7,543	)
(Accumulated deficit) retained earnings		(1,151,607	)		41,442
Total stockholders’ (deficit) equity		(187,068	)		978,958
Total liabilities and stockholders’ (deficit) equity	$	2,568,365		$	3,557,124

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

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Three Months Ended
	June 30,
	2022			2021
	(unaudited)			(unaudited)
Revenues:
Product licenses	$	20,129		$	22,151
Subscription services		14,017			10,342
Total product licenses and subscription services		34,146			32,493
Product support		66,521			71,027
Other services		21,406			21,831
Total revenues		122,073			125,351
Cost of revenues:
Product licenses		431			419
Subscription services		5,498			3,810
Total product licenses and subscription services		5,929			4,229
Product support		5,127			4,862
Other services		14,148			13,947
Total cost of revenues		25,204			23,038
Gross profit		96,869			102,313
Operating expenses:
Sales and marketing		36,862			40,321
Research and development		31,790			28,548
General and administrative		28,502			22,917
Digital asset impairment losses		917,838			424,774
Total operating expenses		1,014,992			516,560
Loss from operations		(918,123	)		(414,247	)
Interest expense, net		(13,187	)		(4,401	)
Other income (expense), net		5,120			(897	)
Loss before income taxes		(926,190	)		(419,545	)
Provision for (benefit from) income taxes		136,108			(120,198	)
Net loss	$	(1,062,298	)	$	(299,347	)
Basic loss per share (1)	$	(94.01	)	$	(30.71	)
Weighted average shares outstanding used in computing basic loss per share		11,300			9,746
Diluted loss per share (1)	$	(94.01	)	$	(30.71	)
Weighted average shares outstanding used in computing diluted loss per share		11,300			9,746

(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.

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Six Months Ended
	June 30,
	2022			2021
	(unaudited)			(unaudited)
Revenues:
Product licenses	$	36,642		$	43,431
Subscription services		26,862			20,368
Total product licenses and subscription services		63,504			63,799
Product support		133,672			141,676
Other services		44,174			42,778
Total revenues		241,350			248,253
Cost of revenues:
Product licenses		908			907
Subscription services		10,908			7,438
Total product licenses and subscription services		11,816			8,345
Product support		10,318			9,674
Other services		28,747			27,568
Total cost of revenues		50,881			45,587
Gross profit		190,469			202,666
Operating expenses:
Sales and marketing		70,102			78,519
Research and development		65,313			58,031
General and administrative		55,208			44,646
Digital asset impairment losses		1,087,929			618,869
Total operating expenses		1,278,552			800,065
Loss from operations		(1,088,083	)		(597,399	)
Interest expense, net		(24,226	)		(6,797	)
Other income, net		7,345			367
Loss before income taxes		(1,104,964	)		(603,829	)
Provision for (benefit from) income taxes		88,085			(194,462	)
Net loss	$	(1,193,049	)	$	(409,367	)
Basic loss per share (1)	$	(105.64	)	$	(42.22	)
Weighted average shares outstanding used in computing basic loss per share		11,294			9,697
Diluted loss per share (1)	$	(105.64	)	$	(42.22	)
Weighted average shares outstanding used in computing diluted loss per share		11,294			9,697

(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.

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

	Three Months Ended
	June 30,
	2022			2021
	(unaudited)			(unaudited)
Net loss	$	(1,062,298	)	$	(299,347	)
Other comprehensive (loss) income, net of applicable taxes:
Foreign currency translation adjustment		(4,113	)		397
Total other comprehensive (loss) income		(4,113	)		397
Comprehensive loss	$	(1,066,411	)	$	(298,950	)

	Six Months Ended
	June 30,
	2022			2021
	(unaudited)			(unaudited)
Net loss	$	(1,193,049	)	$	(409,367	)
Other comprehensive loss, net of applicable taxes:
Foreign currency translation adjustment		(6,122	)		(1,439	)
Total other comprehensive loss		(6,122	)		(1,439	)
Comprehensive loss	$	(1,199,171	)	$	(410,806	)

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

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	$	697,274		(8,684	)	$	(782,104	)	$	(5,324	)	$	167,555
Net loss		(36,136	)		0		0

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10-Q	[2014-04-29]
10-K	[2014-02-12]
10-Q	[2013-10-30]
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