MICROSTRATEGY Inc [MSTR] Filings

10-Q 1 mstr-10q_20210930.htm 10-Q mstr-10q_20210930.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 September 30, 2021

☐	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 21, 2021, the registrant had 8,393,584 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, 2021 and December 31, 2020	1

	Consolidated Statements of Operations for the Three Months Ended September 30, 2021 and 2020	2

	Consolidated Statements of Operations for the Nine Months Ended September 30, 2021 and 2020	3

	Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2021 and 2020	4

	Consolidated Statements of Stockholders’ Equity as of September 30, 2021	5

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43

Item 4.	Controls and Procedures	44

PART II.	OTHER INFORMATION	45

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66

Item 5.	Other Information	66

Item 6.	Exhibits	66

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	September 30,			December 31,
	2021			2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	56,975		$	59,675
Restricted cash		1,149			1,084
Accounts receivable, net		123,748			197,461
Prepaid expenses and other current assets		15,750			14,400
Total current assets		197,622			272,620
Digital assets		2,405,739			1,054,302
Property and equipment, net		38,133			42,975
Right-of-use assets		68,755			73,597
Deposits and other assets		14,857			15,615
Deferred tax assets, net		261,138			6,503
Total assets	$	2,986,244		$	1,465,612
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable, accrued expenses, and operating lease liabilities	$	45,454		$	45,119
Accrued compensation and employee benefits		47,759			49,249
Deferred revenue and advance payments		160,697			191,250
Total current liabilities		253,910			285,618
Long-term debt, net		2,153,034			486,366
Deferred revenue and advance payments		8,302			14,662
Operating lease liabilities		78,939			84,328
Other long-term liabilities		28,934			33,382
Deferred tax liabilities		1,811			8,211
Total liabilities		2,524,930			912,567
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; 17,078 shares issued and 8,394 shares outstanding, and 16,307 shares issued and 7,623 shares outstanding, respectively		17			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		1,118,761			763,051
Treasury stock, at cost; 8,684 shares and 8,684 shares, respectively		(782,104	)		(782,104	)
Accumulated other comprehensive loss		(6,781	)		(3,885	)
Retained earnings		131,419			575,965
Total stockholders’ equity		461,314			553,045
Total liabilities and stockholders’ equity	$	2,986,244		$	1,465,612

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
	September 30,
	2021			2020
	(unaudited)			(unaudited)
Revenues:
Product licenses	$	25,830		$	29,573
Subscription services		10,853			8,305
Total product licenses and subscription services		36,683			37,878
Product support		70,387			71,352
Other services		20,924			18,178
Total revenues		127,994			127,408
Cost of revenues:
Product licenses		383			545
Subscription services		4,282			3,656
Total product licenses and subscription services		4,665			4,201
Product support		4,679			5,679
Other services		12,975			11,856
Total cost of revenues		22,319			21,736
Gross profit		105,675			105,672
Operating expenses:
Sales and marketing		38,209			35,330
Research and development		28,211			26,638
General and administrative		23,751			19,733
Digital asset impairment losses		65,165			44,242
Total operating expenses		155,336			125,943
Loss from operations		(49,661	)		(20,271	)
Interest (expense) income, net		(10,723	)		209
Other income (expense), net		1,264			(2,971	)
Loss before income taxes		(59,120	)		(23,033	)
Benefit from income taxes		(22,984	)		(8,804	)
Net loss	$	(36,136	)	$	(14,229	)
Basic loss per share (1)	$	(3.61	)	$	(1.48	)
Weighted average shares outstanding used in computing basic loss per share		9,999			9,616
Diluted loss per share (1)	$	(3.61	)	$	(1.48	)
Weighted average shares outstanding used in computing diluted loss per share		9,999			9,616

(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)

	Nine Months Ended
	September 30,
	2021			2020
	(unaudited)			(unaudited)
Revenues:
Product licenses	$	69,261		$	56,973
Subscription services		31,221			24,294
Total product licenses and subscription services		100,482			81,267
Product support		212,063			212,548
Other services		63,702			55,601
Total revenues		376,247			349,416
Cost of revenues:
Product licenses		1,290			1,729
Subscription services		11,720			11,512
Total product licenses and subscription services		13,010			13,241
Product support		14,353			19,234
Other services		40,543			37,795
Total cost of revenues		67,906			70,270
Gross profit		308,341			279,146
Operating expenses:
Sales and marketing		116,728			109,799
Research and development		86,242			78,606
General and administrative		68,397			60,514
Digital asset impairment losses		684,034			44,242
Total operating expenses		955,401			293,161
Loss from operations		(647,060	)		(14,015	)
Interest (expense) income, net		(17,520	)		2,627
Other income (expense), net		1,631			(4,532	)
Loss before income taxes		(662,949	)		(15,920	)
Benefit from income taxes		(217,446	)		(5,735	)
Net loss	$	(445,503	)	$	(10,185	)
Basic loss per share (1)	$	(45.47	)	$	(1.04	)
Weighted average shares outstanding used in computing basic loss per share		9,798			9,777
Diluted loss per share (1)	$	(45.47	)	$	(1.04	)
Weighted average shares outstanding used in computing diluted loss per share		9,798			9,777

(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
	September 30,
	2021			2020
	(unaudited)			(unaudited)
Net loss	$	(36,136	)	$	(14,229	)
Other comprehensive (loss) income, net of applicable taxes:
Foreign currency translation adjustment		(1,457	)		2,612
Unrealized loss on short-term investments		0			(325	)
Total other comprehensive (loss) income		(1,457	)		2,287
Comprehensive loss	$	(37,593	)	$	(11,942	)

	Nine Months Ended
	September 30,
	2021			2020
	(unaudited)			(unaudited)
Net loss	$	(445,503	)	$	(10,185	)
Other comprehensive (loss) income, net of applicable taxes:
Foreign currency translation adjustment		(2,896	)		2,898
Unrealized loss on short-term investments		0			(147	)
Total other comprehensive (loss) income		(2,896	)		2,751
Comprehensive loss	$	(448,399	)	$	(7,434	)

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

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, unaudited)

				Class A				Class B Convertible				Additional								Accumulated Other
				Common Stock				Common Stock				Paid-in		Treasury Stock						Comprehensive			Retained
	Total			Shares		Amount		Shares		Amount		Capital		Shares			Amount			Loss			Earnings
Balance at January 1, 2020	$	508,559			15,888	$	16		2,035	$	2	$	593,583		(7,807	)	$	(658,880	)	$	(9,651	)	$	583,489
Net income		657			0		0		0		0		0		0			0			0			657
Other comprehensive loss		(547	)		0		0		0		0		0		0			0			(547	)		0
Issuance of class A common stock under stock option plans		340			3		0		0		0		340		0			0			0			0
Purchases of treasury stock		(50,747	)		0		0		0		0		0		(355	)		(50,747	)		0			0
Share-based compensation expense		3,164			0		0		0		0		3,164		0			0			0			0
Balance at March 31, 2020	$	461,426			15,891	$	16		2,035	$	2	$	597,087		(8,162	)	$	(709,627	)	$	(10,198	)	$	584,146
Net income		3,387			0		0		0		0		0		0			0			0			3,387
Other comprehensive income		1,011			0		0		0		0		0		0			0			1,011			0
Issuance of class A common stock under stock option plans		1,562			12		0		0		0		1,562		0			0			0			0
Purchases of treasury stock		(11,128	)

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