MicroStrategy Announces Third Quarter 2010 Financial Results

Record $114.5 Million in Total Revenues

News provided by

MicroStrategy Incorporated

Nov 01, 2010, 08:05 ET

VIENNA, Va., Nov. 1, 2010 /PRNewswire-FirstCall/ -- MicroStrategy® Incorporated (Nasdaq: MSTR), a leading worldwide provider of business intelligence software, today announced financial results for the three-month period ended September 30, 2010 (the third quarter of its 2010 fiscal year).

Third quarter 2010 revenues were $114.5 million, the highest quarterly total revenues in Company history, versus $104.0 million for the third quarter of 2009, a 10% increase.  Product licenses revenues for the third quarter of 2010 were $32.2 million versus $34.4 million for the third quarter of 2009, a 7% decrease.  Product support and other services revenues for MicroStrategy's core business intelligence (BI) business in the third quarter of 2010 were $77.8 million versus $65.7 million for the third quarter of 2009, an 18% increase.  

Operating expenses for the third quarter of 2010 were $77.5 million versus $57.1 million for the third quarter of 2009, a 36% increase.  The increase in operating expenses was primarily due to an increase in the Company's worldwide employee headcount and related expenses.

Net income for the third quarter of 2010 was $7.4 million, or $0.63 per share on a diluted basis, compared to $21.4 million, or $1.73 per share on a diluted basis, for the third quarter of 2009.  

For the third quarter of 2010, MicroStrategy's effective tax rate was 10% compared to 29% for the third quarter of 2009.  The lower effective tax rate in the third quarter of 2010 was primarily attributable to stronger results outside the U.S. and a benefit recorded due to certain tax provision adjustments.  

During the third quarter of 2010, MicroStrategy repurchased 510,733 shares of its class A common stock at an average price per share of $78.21 and an aggregate cost of $39.9 million.  As of September 30, 2010, MicroStrategy had 8,218,640 shares of class A common stock and 2,694,362 shares of class B common stock outstanding.

MicroStrategy Receives Highest Overall Ranking in The BI Survey 9:

MicroStrategy achieved the highest overall ranking of the 23 products analyzed in The BI Survey 9, a comprehensive survey of companies using business intelligence software products. The BI Survey 9, conducted by Business Application Research Center (BARC), is the world's largest independent survey of business intelligence users, with more than 3,000 respondents. The 23 products analyzed were MicroStrategy, QlikTech, Microsoft SSAS, SAP BW / BEx Suite, Cubeware, Board, SAP BusinessObjects WebIntelligence, Bissantz, IBM Cognos Reporting, Information Builders, arcplan, TARGIT, Jedox PALO, Microsoft SSRS, MIK, Oracle BIEE, SAS, IBM Cognos Analysis, Pentaho, Infor PM, Oracle Hyperion, SAP BusinessObjects Desk Intelligence, and IBM Cognos TM1.

MicroStrategy Rated #1 in 16 Key Performance Areas in Peer Group Analysis of Largest BI Product Suites:

In addition to comparing all 23 products, The BI Survey 9 separately analyzed the product suites of the seven largest BI vendors: MicroStrategy, SAP BusinessObjects, SAP BW / BEx, Oracle BIEE, IBM Cognos, SAS, and Microsoft. Within this group, MicroStrategy received the highest ratings in 16 of the 32 key performance indicators ("KPIs") analyzed, which is more than any other product suite. Some of the areas in which MicroStrategy was rated #1 include:

  • Business benefits – The BI Survey 9 cited the Business Benefits Index as one of the most important KPIs, with its focus on the bottom-line benefits of BI projects rather than individual technical aspects.
  • Product support quality – MicroStrategy's customer support was 44% better than the weighted average of the seven product suites analyzed.
  • Deployed seats per administrator head – MicroStrategy customers deployed 1.23 times the number of users (61 users) per administrator than the weighted average (50 users) of the seven product suites, reflective of its low total cost of ownership.
  • Intention to buy more licenses – MicroStrategy customers are over 65% more inclined to expand their use of MicroStrategy than the weighted average of all product suites.
  • Data volumes – For nine consecutive years, MicroStrategy has been the top performer for analyzing the largest data volumes.
  • Query performance (adjusted for data volumes) – Fast query performance emerged as the criterion most closely linked to project success. MicroStrategy's performance was 3.5 times better than the weighted average of all seven product suites.
  • Loyalty – For six consecutive years, MicroStrategy has been among the leading vendors for customer loyalty.
  • Range of applications deployed – MicroStrategy customers reported the greatest range of applications deployed at five per site.
  • Scalability – MicroStrategy customers expressed high interest in both data and user scalability. In The BI Survey 9, scalability included the proportion of employees using a product, the range of applications deployed, the number of departments served, and data volumes.

MicroStrategy Offers Free Software Package to Develop Mobile Business Intelligence Applications:

In July 2010, MicroStrategy announced the general availability of MicroStrategy Mobile™, a platform that easily extends business intelligence applications to the Apple iPhone® and iPad™. Using a point-and-click interface, mobile BI applications can be built using an intuitive array of iPhone and iPad-optimized displays and controls.

MicroStrategy recently announced the availability of MicroStrategy Mobile Suite, an easy-to-access, no cost software package that allows companies to get started using MicroStrategy Mobile. The MicroStrategy Mobile Suite includes:

  • 25 perpetual named user licenses of MicroStrategy Mobile, MicroStrategy Report Services®, MicroStrategy OLAP Services™, and MicroStrategy Intelligence Server™
  • Free e-mail support for 60 days for two named support liaisons for one-on-one problem solving
  • Free online support featuring an easily searchable technical knowledge repository
  • Free online training with self-paced instruction and product simulations
  • Free online forum to pose questions to experts and peers, and share best practices and tips.

To learn more about the free software, visit the MicroStrategy Mobile Suite website, http://www.microstrategy.com/freemobilebi.

MicroStrategy Mobile iPad and iPhone Apps Featured on Apple's iTunes App Store:

The MicroStrategy Mobile iPad App was recently listed on the iTunes Best Seller list of Free Business iPad Apps and the MicroStrategy Mobile iPhone App was featured on Apple's "What's Hot" List on the iTunes App Store. From the App Store, users can download these apps, which include numerous data-rich reports and interactive dashboards to sample the functionality of MicroStrategy Mobile. To download the MicroStrategy Mobile iPad App, visit http://itunes.apple.com/us/app/microstrategy-mobile-for-ipad/id382821025?mt=8 and to download the MicroStrategy Mobile iPhone App, visit http://itunes.apple.com/us/app/microstrategy-mobile/id376256699?mt=8.

New Customers and New Deals with Existing Customers in Q3 2010 Included:

ABN AMRO Bank; Ahold USA Holdings; AT&T Services; Bank of Montreal; Bank of the West; Branch Banking & Trust Company; Bayer HealthCare; Buena Vista Home Entertainment; CBS Interactive; Centers for Medicare & Medicaid Services; Charming Shoppes of Delaware; Classic Residence by Hyatt; Dell Computer Corporation; Department of Homeland Security; DFW International Airport; Dick's Sporting Goods; Disney Consumer Products; General Motors Corporation; Gregg Appliances; Guitar Center; Hachette Book Group; HE Butt Grocery Company; Kaiser Permanente; La Capitale Assurances Generales; McAfee; McDonald's Corporation; MySpace; National Institutes of Health; New York Life Retirement Plan Services; Payless ShoeSource Worldwide; PepsiCo; QVC; Philips Electronics Nederland; Royal & Sun Alliance Insurance Company of Canada; Ryder System; Sanmina SCI Corporation; Sears Canada; Siemens IT Solutions and Services; Sensormatic Electronics Corporation; Sony Network Entertainment International; Sterling Jewelers; TACA International Airlines; The Disney Store; The Interpublic Group of Companies; Things Remembered; Time Warner; US Department of Education; Valpak Direct Marketing Systems; Verizon Wireless; and Whole Foods Market Services.

Examples of Customer Deals from Q3 2010:

Bayer HealthCare

Bayer HealthCare, a business area of Bayer, selected MicroStrategy as its global enterprise BI standard. Approximately 10,000 end users across Bayer HealthCare's Global Operations and R&D business areas will use MicroStrategy for reporting and analysis of business data. Bayer HealthCare selected MicroStrategy for its self-service capabilities, ability to drill easily into data for detailed insights, and its data and user scalability to support a global enterprise.

Dallas/Fort Worth (DFW) International Airport

DFW International Airport, the world's third busiest airport, selected MicroStrategy software for enterprise-wide reporting.  A new MicroStrategy customer, DFW Airport will use MicroStrategy to analyze its business operations and gain insights into the airport's operational performance and costs. MicroStrategy will provide executives and managers with information dashboards that display volumes of data in a highly visual and interactive manner.  With MicroStrategy dashboards, DFW International Airport personnel will have easy access to actionable data that supports informed decision making, strategic planning and analysis, and tactical responses to changing conditions.

Siemens IT Solutions and Services GmbH

Siemens AG is a leader in electronics and electrical engineering, operating in the industry, energy, and healthcare sectors. Siemens IT Solutions and Services GmbH, a subsidiary of Siemens AG, uses MicroStrategy to analyze quality standards in service deliverables. A recent expansion of MicroStrategy products and services now allows 2,000 Siemens users to receive reports via BlackBerry®, iPad, iPhone, email, and Web. Siemens selected MicroStrategy for its ease-of-use, integrated platform, and its ability to accommodate a global enterprise and growing support platform.

About MicroStrategy Incorporated

Founded in 1989, MicroStrategy is a global leader in business intelligence (BI) technology.  MicroStrategy provides integrated reporting, analysis, and monitoring software that helps leading organizations worldwide make better business decisions every day.  Companies choose MicroStrategy for its ease-of-use, sophisticated analytics, and superior data and user scalability. MicroStrategy offers free reporting software that can be downloaded from its website, http://www.microstrategy.com/freereportingsoftware.  More information about MicroStrategy (Nasdaq: MSTR) is available at www.microstrategy.com.

MicroStrategy, MicroStrategy 9, MicroStrategy Intelligence Server, MicroStrategy Mobile, MicroStrategy OLAP Services and MicroStrategy Report Services are either trademarks or registered trademarks of MicroStrategy Incorporated in the United States and certain other countries.  Other product and company names mentioned herein may be the trademarks of their respective owners.

This press release may include statements that may constitute "forward-looking statements," including estimates of future business prospects or financial results and statements containing the words "believe," "estimate," "project," "expect" or similar expressions.  Forward-looking statements inherently involve risks and uncertainties that could cause actual results of MicroStrategy Incorporated and its subsidiaries (collectively, the "Company") to differ materially from the forward-looking statements.  Factors that could contribute to such differences include: the extent and timing of acceptance in the market of the MicroStrategy Mobile application platform; the Company's ability to recognize revenue or deferred revenue through delivery of products or satisfactory performance of services; continued acceptance of the Company's other products in the marketplace; the timing of significant orders; delays in the Company's ability to develop or ship new products, such as new or modified products the Company may seek to develop as a result of its high performance initiatives; market acceptance of new products; competitive factors; general economic conditions, including significant downturns in industries, including the financial services and retail industries, in which we have a significant number of customers; currency fluctuations; impairment charges that may be required with respect to the Company's damaged corporate aircraft and other risks detailed in the Company's registration statements and periodic reports filed with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)









Three Months Ended

Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Revenues






Product licenses

$    32,180

$    34,443

$    79,064

$    71,897

Product support and other services

82,350

69,574

236,393

200,120

 Total revenues

114,530

104,017

315,457

272,017








Cost of Revenues






Product licenses

1,966

1,947

5,741

4,523

Product support and other services

25,274

14,592

67,472

42,614

 Total cost of revenues

27,240

16,539

73,213

47,137








Gross profit

87,290

87,478

242,244

224,880








Operating Expenses






Sales and marketing

42,002

31,489

114,750

93,376

Research and development

13,675

11,400

36,818

30,407

General and administrative

21,816

14,204

58,950

41,348

 Total operating expenses

77,493

57,093

210,518

165,131








Income from continuing operations before






financing and other income and income taxes

9,797

30,385

31,726

59,749








Financing and Other (Expense) Income






Interest income, net

192

121

309

516

Other (expense) income, net

(1,817)

(422)

3,176

(1,626)

 Total financing and other (expense) income

(1,625)

(301)

3,485

(1,110)








Income from continuing operations before income taxes

8,172

30,084

35,211

58,639

 Provision for income taxes

821

8,730

9,341

18,673

Income from continuing operations

7,351

21,354

25,870

39,966








Discontinued operations:






 Gain from sale of discontinued operations, net of tax provision of $11,190

-

-

-

14,437

 Loss from discontinued operations, net of tax benefit of $54

-

-

-

(107)

Discontinued operations, net of tax

-

-

-

14,330








Net Income

$      7,351

$    21,354

$    25,870

$    54,296








Basic earnings per share (1):






 From continuing operations

$        0.66

$        1.79

$        2.24

$        3.36

 From discontinued operations

$           -

$           -

$           -

$        1.20

    Basic earnings per share

$        0.66

$        1.79

$        2.24

$        4.56

Weighted average shares outstanding used in computing basic






    earnings per share

11,206

11,909

11,572

11,898








Diluted earnings per share (1):






 From continuing operations

$        0.63

$        1.73

$        2.16

$        3.26

 From discontinued operations

$           -

$           -

$           -

$        1.17

    Diluted earnings per share

$        0.63

$        1.73

$        2.16

$        4.43

Weighted average shares outstanding used in computing diluted






    earnings per share

11,603

12,311

11,976

12,262








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

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)













Core BI Business

Angel.com

Consolidated

Three Months Ended

Three Months Ended

Three Months Ended

September 30,

September 30,

September 30,

2010

2009

2010

2009

2010

2009
























Revenues










Product licenses

$ 32,180

$ 34,443

$           -

$         -

$ 32,180

$ 34,443

Product support and other services

77,753

65,721

-

-

77,753

65,721

Angel.com services

-

-

4,597

3,853

4,597

3,853

 Total revenues

109,933

100,164

4,597

3,853

114,530

104,017












Cost of Revenues










Product licenses

1,966

1,947

-

-

1,966

1,947

Product support and other services

23,162

13,048

-

-

23,162

13,048

Angel.com services

-

-

2,112

1,544

2,112

1,544

 Total cost of revenues

25,128

14,995

2,112

1,544

27,240

16,539

Gross profit

84,805

85,169

2,485

2,309

87,290

87,478












Operating Expenses










Sales and marketing

39,979

30,364

2,023

1,125

42,002

31,489

Research and development

12,773

10,443

902

957

13,675

11,400

General and administrative

21,223

13,817

593

387

21,816

14,204

 Total operating expenses

73,975

54,624

3,518

2,469

77,493

57,093












Income (loss) from continuing operations before










financing and other income and income taxes

10,830

30,545

(1,033)

(160)

9,797

30,385












Financing and Other (Expense) Income










Interest income, net

192

121

-

-

192

121

Other (expense) income, net

(1,785)

(422)

(32)

-

(1,817)

(422)

 Total financing and other (expense) income

(1,593)

(301)

(32)

-

(1,625)

(301)

Income (loss) from continuing operations before income taxes

$   9,237

$ 30,244

$   (1,065)

$     (160)

$   8,172

$ 30,084

 Provision for income taxes







821

8,730

Income from continuing operations







7,351

21,354












Discontinued operations:










 Gain from sale of discontinued operations, net of tax







-

-

 Income from discontinued operations, net of tax







-

-

Discontinued operations, net of tax







-

-












Net income







$   7,351

$ 21,354












Basic earnings per share:










   From continuing operations







$     0.66

$     1.79

   From discontinued operations







$         -

$         -

       Basic earnings per share







$     0.66

$     1.79












Diluted earnings per share:










   From continuing operations







$     0.63

$     1.73

   From discontinued operations







$         -

$         -

       Diluted earnings per share







$     0.63

$     1.73












    Basic weighted average shares outstanding







11,206

11,909

    Diluted weighted average shares outstanding







11,603

12,311

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)













Core BI Business

Angel.com

Consolidated

Nine  Months Ended

Nine Months Ended

Nine  Months Ended

September 30,

September 30,

September 30,

2010

2009

2010

2009

2010

2009
























Revenues










Product licenses

$ 79,064

$ 71,897

$           -

$         -

$ 79,064

$ 71,897

Product support and other services

223,618

190,451

-

-

223,618

190,451

Angel.com services

-

-

12,775

9,669

12,775

9,669

 Total revenues

302,682

262,348

12,775

9,669

315,457

272,017












Cost of Revenues










Product licenses

5,741

4,523

-

-

5,741

4,523

Product support and services revenues

61,716

38,780

-

-

61,716

38,780

Angel.com services

-

-

5,756

3,834

5,756

3,834

 Total cost of revenues

67,457

43,303

5,756

3,834

73,213

47,137

Gross profit

235,225

219,045

7,019

5,835

242,244

224,880












Operating Expenses










Sales and marketing

109,642

90,012

5,108

3,364

114,750

93,376

Research and development

34,416

27,582

2,402

2,825

36,818

30,407

General and administrative

57,415

40,077

1,535

1,271

58,950

41,348

 Total operating expenses

201,473

157,671

9,045

7,460

210,518

165,131












Income (loss) from continuing operations before










financing and other income and income taxes

33,752

61,374

(2,026)

(1,625)

31,726

59,749












Financing and Other Income (Expense)












Interest income, net

309

516

-

-

309

516

Other income (expense), net

3,186

(1,626)

(10)

-

3,176

(1,626)

 Total financing and other income (expense)

3,495

(1,110)

(10)

-

3,485

(1,110)

Income (loss) from continuing operations before income taxes

$ 37,247

$ 60,264

$   (2,036)

$  (1,625)

$ 35,211

$ 58,639

 Provision for income taxes







9,341

18,673

Income from continuing operations







25,870

39,966












Discontinued operations:










 Gain from sale of discontinued operations, net of tax







-

14,437

 Loss from discontinued operations, net of tax







-

(107)

Discontinued operations, net of tax







-

14,330












Net income







$ 25,870

$ 54,296












Basic earnings per share:










   From continuing operations







$     2.24

$     3.36

   From discontinued operations







$         -

$     1.20

       Basic earnings per share







$     2.24

$     4.56












Diluted earnings per share:










   From continuing operations







$     2.16

$     3.26

   From discontinued operations







$         -

$     1.17

       Diluted earnings per share







$     2.16

$     4.43












    Basic weighted average shares outstanding







11,572

11,898

    Diluted weighted average shares outstanding







11,976

12,262

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)





September 30,

December 31,

2010

2009

Assets

(unaudited)

(audited)

Current assets


 Cash and cash equivalents

$          184,302

$        224,769

 Restricted cash and investments

1,061

549

 Accounts receivable, net

57,729

56,399

 Prepaid expenses and other current assets

14,562

10,861

 Deferred tax assets, net

18,113

12,642

Total current assets

275,767

305,220




Property and equipment, net

63,732

54,906

Capitalized software development costs, net

10,723

13,431

Deposits and other assets

3,979

3,283

Deferred tax assets, net

1,765

6,490

Total Assets

$          355,966

$        383,330




Liabilities and Stockholders' Equity


Current liabilities


 Accounts payable and accrued expenses

$            33,307

$          28,460

 Accrued compensation and employee benefits

47,507

46,277

 Deferred revenue and advance payments

85,802

77,783

 Deferred tax liabilities

254

115

Total current liabilities

166,870

152,635




Deferred revenue and advance payments

8,429

3,845

Other long-term liabilities

23,427

12,622




Total Liabilities

198,726

169,102




Stockholders' Equity


 Preferred stock undesignated, $0.001 par value; 5,000 shares authorized;



     no shares issued or outstanding

-

-

 Class A common stock, $0.001 par value; 330,000 shares authorized;



  14,314 shares issued and 8,219 shares outstanding, and 14,302 shares



  issued and 9,255 shares outstanding, respectively

14

14

 Class B common stock, $0.001 par value; 165,000 shares authorized;



   2,694 shares issued and outstanding

3

3

 Additional paid-in capital

453,548

453,170

 Treasury stock, at cost; 6,095 and 5,047 shares, respectively

(447,809)

(366,191)

 Accumulated other comprehensive (loss) income

(1,014)

604

Retained earnings

152,498

126,628

Total Stockholders' Equity

157,240

214,228

Total Liabilities and Stockholders' Equity

$          355,966

$        383,330

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)




Nine Months Ended




September 30,




2010

2009







Operating activities:



Net income

$   25,870

$   54,296

Less:  Income from discontinued operations, net

-

(14,330)



Income from continuing operations

25,870

39,966

Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

9,313

7,681


Bad debt expense

2,429

1,153


Deferred taxes

(509)

14,294


Excess tax benefits from stock-based payment arrangements

(115)

(200)


Other, net

26

(10)

Changes in operating assets and liabilities:




Accounts receivable

(4,180)

(7,900)


Prepaid expenses and other current assets

(2,615)

(445)


Deposits and other assets

(707)

254


Accounts payable and accrued expenses

1,462

(1,948)


Accrued compensation and employee benefits

1,243

(4,224)


Deferred revenue and advance payments

12,922

7,085


Other long-term liabilities

10,799

1,572



Net cash provided by operating activities from continuing operations

55,938

57,278



Net cash used in operating activities from discontinued operations

-

(472)



Net cash provided by operating activities

55,938

56,806

Investing activities:



Purchases of property and equipment

(11,817)

(1,860)

Capitalized software development costs

(2,185)

(4,218)

Decrease in restricted cash and investments

248

504



Net cash used in investing activities from continuing operations

(13,754)

(5,574)



Net cash provided by investing activities from discontinued operations

-

24,546



    Net cash (used in) provided by investing activities

(13,754)

18,972

Financing activities:



Proceeds from sale of class A common stock under exercise of employee stock options

240

565

Excess tax benefits from stock-based payment arrangements

115

200

Purchases of treasury stock

(81,618)

-

Distribution to Alarm.com minority shareholders

-

(60)



Net cash (used in) provided by financing activities from continuing operations

(81,263)

705



Net cash provided by financing activities from discontinued operations

-

-



Net cash (used in) provided by financing activities

(81,263)

705



Effect of foreign exchange rate changes on cash and cash equivalents

(1,388)

1,272

Net (decrease) increase in cash and cash equivalents

(40,467)

77,755

Cash and cash equivalents, beginning of period

224,769

122,915

Cash and cash equivalents, end of period

$ 184,302

$ 200,670

Contact:

MicroStrategy Incorporated

Investor Relations

[email protected]

(703) 848-8600

MSTR-F

SOURCE MicroStrategy Incorporated

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