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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, 2021

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 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.

 

1


 

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.

 

 

2


 

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.

 

3


 

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.

 

 

4


 

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

)