MicroStrategy® Incorporated (Nasdaq: MSTR) (“MicroStrategy” or the “Company”), the largest independent publicly-traded business intelligence company, today announced financial results for the three-month period ended September 30, 2022 (the third quarter of its 2022 fiscal year).

“For the third quarter, MicroStrategy achieved strong 51% growth year-over-year in subscription services revenues, record growth year-over-year in current subscription billings, and total revenue growth year-over-year on a constant currency basis. We are continuing to see the global adoption of our cloud platform by both domestic and international customers, and to benefit from the longstanding durability of our enterprise analytics business, with a third quarter renewal rate of 95%, despite the ongoing macroeconomic headwinds,” said Phong Le, President and Chief Executive Officer, MicroStrategy.

“Furthering the commitment to our bitcoin strategy, MicroStrategy acquired approximately 301 additional bitcoins this quarter and remains the world’s largest publicly traded corporate owner of bitcoin, with total holdings of 130,000 bitcoins. We incurred a minimal bitcoin impairment charge as bitcoin prices were stable during the third quarter, and were encouraged by FASB’s recent announcement of its support for fair value accounting for bitcoin. If finally adopted and implemented, we believe fair value accounting will improve upon the current, unfavorable intangible accounting treatment applicable to bitcoin holdings and will promote additional institutional adoption of bitcoin as an asset class,” said Andrew Kang, Chief Financial Officer, MicroStrategy.

Third Quarter 2022 Financial Highlights

  • Revenues: Total revenues for the third quarter of 2022 were $125.4 million, a 2.1% decrease, or a 3.9% increase on a non-GAAP constant currency basis, compared to the third quarter of 2021. Product licenses and subscription services revenues for the third quarter of 2022 were $38.7 million, a 5.5% increase, or an 11.1% increase on a non-GAAP constant currency basis, compared to the third quarter of 2021. Product support revenues for the third quarter of 2022 were $66.0 million, a 6.2% decrease, or a 0.8% decrease on a non-GAAP constant currency basis, compared to the third quarter of 2021. Other services revenues for the third quarter of 2022 were $20.7 million, a 1.3% decrease, or a 7.0% increase on a non-GAAP constant currency basis, compared to the third quarter of 2021.
  • Gross Profit: Gross profit for the third quarter of 2022 was $100.0 million, representing a 79.8% gross margin, compared to a gross profit of $105.7 million, representing a gross margin of 82.6%, for the third quarter of 2021.
  • Operating Expenses: Operating expenses for the third quarter of 2022 were $93.9 million, a 39.5% decrease compared to the third quarter of 2021. Operating expenses include impairment losses on MicroStrategy’s digital assets, which were $0.7 million during the third quarter of 2022, compared to $65.2 million in the third quarter of 2021.
  • Income (Loss) from Operations and Net Loss: Income from operations for the third quarter of 2022 was $6.1 million, compared to loss from operations of $49.7 million for the third quarter of 2021. Net loss for the third quarter of 2022 was $27.1 million, or $2.39 per share on a diluted basis, as compared to $36.1 million, or $3.61 per share on a diluted basis, for the third quarter of 2021. Digital asset impairment charges of $0.7 million and $65.2 million for the third quarter of 2022 and 2021, respectively, were reflected in these amounts.
  • Cash and Cash Equivalents: As of September 30, 2022, MicroStrategy had cash and cash equivalents of $60.4 million, as compared to $63.4 million as of December 31, 2021, a decrease of $3.0 million.
  • Digital Assets: As of September 30, 2022, the carrying value of MicroStrategy’s digital assets (comprised of approximately 130,000 bitcoins) was $1.993 billion, which reflects cumulative impairment losses of $1.990 billion since acquisition and an average carrying amount per bitcoin of approximately $15,331. As of September 30, 2022, the original cost basis and market value of MicroStrategy’s bitcoin were $3.983 billion and $2.532 billion, respectively, which reflects an average cost per bitcoin of approximately $30,639 and a market price per bitcoin of $19,480.51, respectively. Additional information on MicroStrategy’s digital asset holdings is included in the “Digital Assets – Additional Information” tables at the end of this press release.

The tables provided at the end of this press release include a reconciliation of the most directly comparable financial measures prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) to non-GAAP financial measures for the three and nine months ended September 30, 2022 and 2021. An explanation of non-GAAP financial measures is also included under the heading “Non-GAAP Financial Measures” below. Additional non-GAAP financial measures are included in MicroStrategy’s “Q3 2022 Earnings Presentation,” which will be available under the “Events and Presentations” section of MicroStrategy’s investor relations website at https://www.microstrategy.com/en/investor-relations.

Non-GAAP Financial Measures

MicroStrategy is providing supplemental financial measures for (i) non-GAAP income (loss) from operations that excludes the impact of share-based compensation expense, (ii) non-GAAP net loss and non-GAAP diluted loss per share that exclude the impacts of share-based compensation expense, interest expense arising from the amortization of debt issuance costs related to MicroStrategy’s long-term debt, and related income tax effects, and (iii) non-GAAP constant currency revenues that exclude foreign currency exchange rate fluctuations. These supplemental financial measures are not measurements of financial performance under GAAP and, as a result, these supplemental financial measures may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP financial measures internally to help understand, manage, and evaluate business performance and to help make operating decisions.

MicroStrategy believes that these non-GAAP financial measures are also useful to investors and analysts in comparing its performance across reporting periods on a consistent basis. The first supplemental financial measure excludes a significant non-cash expense that MicroStrategy believes is not reflective of its general business performance, and for which the accounting requires management judgment and the resulting share-based compensation expense could vary significantly in comparison to other companies. The second set of supplemental financial measures excludes the impacts of (i) share-based compensation expense, (ii) non-cash interest expense arising from the amortization of debt issuance costs related to MicroStrategy’s long-term debt, and (iii) related income tax effects. The third set of supplemental financial measures excludes changes resulting from fluctuations in foreign currency exchange rates so that results may be compared to the same period in the prior year on a non-GAAP constant currency basis. MicroStrategy believes the use of these non-GAAP financial measures can also facilitate comparison of MicroStrategy’s operating results to those of its competitors.

Conference Call

MicroStrategy will be discussing its third quarter 2022 financial results on a live Video Webinar today beginning at approximately 5:00 p.m. ET. The live Video Webinar and accompanying presentation materials will be available under the “Events and Presentations” section of MicroStrategy’s investor relations website at https://www.microstrategy.com/en/investor-relations. Log-in instructions will be available after registering for the event. An archived replay of the event will be available beginning approximately two hours after the call concludes.

About MicroStrategy Incorporated

MicroStrategy (Nasdaq: MSTR) is the largest independent publicly-traded analytics and business intelligence company. The MicroStrategy analytics platform is consistently rated as the best in enterprise analytics and is used by many of the world’s most admired brands in the Fortune Global 500. We pursue two corporate strategies: (1) grow our enterprise analytics software business to promote our vision of Intelligence Everywhere and (2) acquire and hold bitcoin, which we view as a dependable store of value supported by a robust, public, open-source architecture untethered to sovereign monetary policy. For more information about MicroStrategy, visit www.microstrategy.com.

MicroStrategy, Intelligent Enterprise, and MicroStrategy Library 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,” “will,” 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: fluctuations in the market price of bitcoin and any associated impairment charges that the Company may incur as a result of a decrease in the market price of bitcoin below the value at which the Company’s bitcoins are carried on its balance sheet; gains or losses on any sales of bitcoins; changes in the accounting treatment relating to the Company’s bitcoin holdings; changes in securities laws or other laws or regulations, or the adoption of new laws or regulations, relating to bitcoin that adversely affect the price of bitcoin or the Company’s ability to transact in or own bitcoin; a decrease in liquidity in the markets in which bitcoin is traded; security breaches, cyberattacks, unauthorized access, loss of private keys, fraud or other circumstances or events that result in the loss of the Company’s bitcoins; the level and terms of the Company’s substantial indebtedness and its ability to service such debt; the extent and timing of market acceptance of the Company’s new product offerings; continued acceptance of the Company’s other products in the marketplace; the Company’s ability to recognize revenue or deferred revenue through delivery of products or satisfactory performance of services; the timing of significant orders; delays in or the inability of the Company to develop or ship new products; customers shifting from a product license model to a cloud subscription model, which may delay the Company’s ability to recognize revenue; fluctuations in tax benefits or provisions; impacts of the COVID-19 pandemic; competitive factors; general economic conditions, including high levels of inflation and increased interest rates; currency fluctuations; and other risks detailed in MicroStrategy’s registration statements and periodic reports filed with the Securities and Exchange Commission (“SEC”). The Company undertakes no obligation to update these forward-looking 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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

22,286

 

 

$

25,830

 

 

$

58,928

 

 

$

69,261

 

Subscription services

 

 

16,414

 

 

 

10,853

 

 

 

43,276

 

 

 

31,221

 

Total product licenses and subscription services

 

 

38,700

 

 

 

36,683

 

 

 

102,204

 

 

 

100,482

 

Product support

 

 

66,010

 

 

 

70,387

 

 

 

199,682

 

 

 

212,063

 

Other services

 

 

20,650

 

 

 

20,924

 

 

 

64,824

 

 

 

63,702

 

Total revenues

 

 

125,360

 

 

 

127,994

 

 

 

366,710

 

 

 

376,247

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

 

406

 

 

 

383

 

 

 

1,314

 

 

 

1,290

 

Subscription services

 

 

6,395

 

 

 

4,282

 

 

 

17,303

 

 

 

11,720

 

Total product licenses and subscription services

 

 

6,801

 

 

 

4,665

 

 

 

18,617

 

 

 

13,010

 

Product support

 

 

5,224

 

 

 

4,679

 

 

 

15,542

 

 

 

14,353

 

Other services

 

 

13,360

 

 

 

12,975

 

 

 

42,107

 

 

 

40,543

 

Total cost of revenues

 

 

25,385

 

 

 

22,319

 

 

 

76,266

 

 

 

67,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

99,975

 

 

 

105,675

 

 

 

290,444

 

 

 

308,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

35,409

 

 

 

38,209

 

 

 

105,511

 

 

 

116,728

 

Research and development

 

 

30,498

 

 

 

28,211

 

 

 

95,811

 

 

 

86,242

 

General and administrative

 

 

27,283

 

 

 

23,751

 

 

 

82,491

 

 

 

68,397

 

Digital asset impairment losses

 

 

727

 

 

 

65,165

 

 

 

1,088,656

 

 

 

684,034

 

Total operating expenses

 

 

93,917

 

 

 

155,336

 

 

 

1,372,469

 

 

 

955,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

6,058

 

 

 

(49,661

)

 

 

(1,082,025

)

 

 

(647,060

)

Interest expense, net

 

 

(14,073

)

 

 

(10,723

)

 

 

(38,299

)

 

 

(17,520

)

Other income, net

 

 

4,897

 

 

 

1,264

 

 

 

12,242

 

 

 

1,631

 

Loss before income taxes

 

 

(3,118

)

 

 

(59,120

)

 

 

(1,108,082

)

 

 

(662,949

)

Provision for (benefit from) income taxes

 

 

23,961

 

 

 

(22,984

)

 

 

112,046

 

 

 

(217,446

)

Net loss

 

$

(27,079

)

 

$

(36,136

)

 

$

(1,220,128

)

 

$

(445,503

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic loss per share (1):

 

$

(2.39

)

 

$

(3.61

)

 

$

(107.99

)

 

$

(45.47

)

Weighted average shares outstanding used in computing basic loss per share

 

 

11,308

 

 

 

9,999

 

 

 

11,299

 

 

 

9,798

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted loss per share (1):

 

$

(2.39

)

 

$

(3.61

)

 

$

(107.99

)

 

$

(45.47

)

Weighted average shares outstanding used in computing diluted loss per share

 

 

11,308

 

 

 

9,999

 

 

 

11,299

 

 

 

9,798

 

 

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

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

 

 

 

 

 

 

 

 

 

 

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

 

 

* Derived from audited financial statements.

 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(1,220,128

)

 

$

(445,503

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

6,917

 

 

 

8,639

 

Reduction in carrying amount of right-of-use assets

 

 

6,020

 

 

 

6,190

 

Credit losses and sales allowances

 

 

1,189

 

 

 

748

 

Deferred taxes

 

 

90,166

 

 

 

(221,328

)

Release of liabilities for unrecognized tax benefits

 

 

0

 

 

 

(152

)

Share-based compensation expense

 

 

46,587

 

 

 

30,973

 

Digital asset impairment losses

 

 

1,088,656

 

 

 

684,034

 

Amortization of issuance costs on long-term debt

 

 

6,490

 

 

 

5,084

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

5,586

 

 

 

10,634

 

Prepaid expenses and other current assets

 

 

(7,837

)

 

 

(1,693

)

Deposits and other assets

 

 

(8,314

)

 

 

(594

)

Accounts payable and accrued expenses

 

 

(8,880

)

 

 

(10,788

)

Accrued compensation and employee benefits

 

 

(13,105

)

 

 

(1,698

)

Accrued interest

 

 

9,901

 

 

 

10,182

 

Deferred revenue and advance payments

 

 

25,401

 

 

 

24,385

 

Operating lease liabilities

 

 

(7,390

)

 

 

(7,714

)

Other long-term liabilities

 

 

150

 

 

 

(813

)

Net cash provided by operating activities

 

 

21,409

 

 

 

90,586

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Purchases of digital assets

 

 

(231,478

)

 

 

(2,035,471

)

Purchases of property and equipment

 

 

(1,851

)

 

 

(1,882

)

Net cash used in investing activities

 

 

(233,329

)

 

 

(2,037,353

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from convertible senior notes

 

 

0

 

 

 

1,050,000

 

Issuance costs paid for convertible senior notes

 

 

0

 

 

 

(24,742

)

Proceeds from senior secured notes

 

 

0

 

 

 

500,000

 

Issuance costs paid for senior secured notes

 

 

0

 

 

 

(12,792

)

Proceeds from secured term loan, net of lender fees

 

 

204,693

 

 

 

0

 

Issuance costs paid for secured term loan, excluding lender fees

 

 

(107

)

 

 

0

 

Proceeds from other long-term secured debt

 

 

11,100

 

 

 

0

 

Issuance costs paid for other long-term secured debt

 

 

(214

)

 

 

0

 

Repayments of other long-term secured debt

 

 

(121

)

 

 

0

 

Proceeds from sale of common stock under public offerings

 

 

0

 

 

 

403,970

 

Issuance costs paid related to sale of common stock under public offerings

 

 

0

 

 

 

(4,501

)

Proceeds from exercise of stock options

 

 

1,332

 

 

 

31,380

 

Proceeds from sales under employee stock purchase plan

 

 

4,473

 

 

 

2,854

 

Payment of withholding tax on vesting of restricted stock units

 

 

(1,105

)

 

 

0

 

Net cash provided by financing activities

 

 

220,051

 

 

 

1,946,169

 

 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

 

 

(5,597

)

 

 

(2,037

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

2,534

 

 

 

(2,635

)

Cash, cash equivalents, and restricted cash, beginning of period

 

 

64,434

 

 

 

60,759

 

Cash, cash equivalents, and restricted cash, end of period

 

$

66,968

 

 

$

58,124

 

 

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses and subscription services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

22,286

 

 

$

25,830

 

 

$

58,928

 

 

$

69,261

 

Subscription services

 

 

16,414

 

 

 

10,853

 

 

 

43,276

 

 

 

31,221

 

Total product licenses and subscription services

 

 

38,700

 

 

 

36,683

 

 

 

102,204

 

 

 

100,482

 

Product support

 

 

66,010

 

 

 

70,387

 

 

 

199,682

 

 

 

212,063

 

Other services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

19,545

 

 

 

19,738

 

 

 

61,253

 

 

 

60,071

 

Education

 

 

1,105

 

 

 

1,186

 

 

 

3,571

 

 

 

3,631

 

Total other services

 

 

20,650

 

 

 

20,924

 

 

 

64,824

 

 

 

63,702

 

Total revenues

 

 

125,360

 

 

 

127,994

 

 

 

366,710

 

 

 

376,247

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses and subscription services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

 

406

 

 

 

383

 

 

 

1,314

 

 

 

1,290

 

Subscription services

 

 

6,395

 

 

 

4,282

 

 

 

17,303

 

 

 

11,720

 

Total product licenses and subscription services

 

 

6,801

 

 

 

4,665

 

 

 

18,617

 

 

 

13,010

 

Product support

 

 

5,224

 

 

 

4,679

 

 

 

15,542

 

 

 

14,353

 

Other services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

12,267

 

 

 

11,745

 

 

 

38,404

 

 

 

36,515

 

Education

 

 

1,093

 

 

 

1,230

 

 

 

3,703

 

 

 

4,028

 

Total other services

 

 

13,360

 

 

 

12,975

 

 

 

42,107

 

 

 

40,543

 

Total cost of revenues

 

 

25,385

 

 

 

22,319

 

 

 

76,266

 

 

 

67,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

$

99,975

 

 

$

105,675

 

 

$

290,444

 

 

$

308,341

 

 

MICROSTRATEGY INCORPORATED

DIGITAL ASSETS – ADDITIONAL INFORMATION

ROLLFORWARD OF BITCOIN HOLDINGS

(unaudited)

 

 

 

Source of

Capital Used to

Purchase

Bitcoin

 

Digital Asset

Original Cost

Basis

(in thousands)

 

 

Digital Asset

Impairment

Losses

(in thousands)

 

 

Digital Asset

Carrying Value

(in thousands)

 

 

Approximate

Number of

Bitcoins Held *

 

 

Approximate

Average

Purchase Price

Per Bitcoin

 

Balance at December 31, 2020

 

 

 

$

1,125,000

 

 

$

(70,698

)

 

$

1,054,302

 

 

 

70,469

 

 

$

15,964

 

Digital asset purchases

 

(a)

 

 

1,086,375

 

 

 

 

 

 

 

1,086,375

 

 

 

20,857

 

 

 

52,087

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(194,095

)

 

 

(194,095

)

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

 

$

2,211,375

 

 

$

(264,793

)

 

$

1,946,582

 

 

 

91,326

 

 

$

24,214

 

Digital asset purchases

 

(b)

 

 

529,231

 

 

 

 

 

 

 

529,231

 

 

 

13,759

 

 

 

38,464

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(424,774

)

 

 

(424,774

)

 

 

 

 

 

 

 

 

Balance at June 30, 2021

 

 

 

$

2,740,606

 

 

$

(689,567

)

 

$

2,051,039

 

 

 

105,085

 

 

$

26,080

 

Digital asset purchases

 

(c)

 

 

419,865

 

 

 

 

 

 

 

419,865

 

 

 

8,957

 

 

 

46,876

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(65,165

)

 

 

(65,165

)

 

 

 

 

 

 

 

 

Balance at September 30, 2021

 

 

 

$

3,160,471

 

 

$

(754,732

)

 

$

2,405,739

 

 

 

114,042

 

 

$

27,713

 

Digital asset purchases

 

(d)

 

 

591,058

 

 

 

 

 

 

 

591,058

 

 

 

10,349

 

 

 

57,113

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(146,587

)

 

 

(146,587

)

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

 

$

3,751,529

 

 

$

(901,319

)

 

$

2,850,210

 

 

 

124,391

 

 

$

30,159

 

Digital asset purchases

 

(e)

 

 

215,500

 

 

 

 

 

 

 

215,500

 

 

 

4,827

 

 

 

44,645

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(170,091

)

 

 

(170,091

)

 

 

 

 

 

 

 

 

Balance at March 31, 2022

 

 

 

$

3,967,029

 

 

$

(1,071,410

)

 

$

2,895,619

 

 

 

129,218

 

 

$

30,700

 

Digital asset purchases

 

(f)

 

 

10,000

 

 

 

 

 

 

 

10,000

 

 

 

481

 

 

 

20,790

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(917,838

)

 

 

(917,838

)

 

 

 

 

 

 

 

 

Balance at June 30, 2022

 

 

 

$

3,977,029

 

 

$

(1,989,248

)

 

$

1,987,781

 

 

 

129,699

 

 

$

30,664

 

Digital asset purchases

 

(g)

 

 

5,978

 

 

 

 

 

 

 

5,978

 

 

 

301

 

 

 

19,860

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(727

)

 

 

(727

)

 

 

 

 

 

 

 

 

Balance at September 30, 2022

 

 

 

$

3,983,007

 

 

$

(1,989,975

)

 

$

1,993,032

 

 

 

130,000

 

 

$

30,639

 

*MicroStrategy owns and has purchased bitcoins both directly and indirectly through its wholly-owned subsidiary, MacroStrategy. References to MicroStrategy below refer to MicroStrategy and its subsidiaries on a consolidated basis.

(a)

 

In the first quarter of 2021, MicroStrategy purchased bitcoin using $1.026 billion in net proceeds from its issuance of its 0% Convertible Senior Notes due 2027 (together with the 0.750% Convertible Senior Notes due 2025, the “Convertible Notes”) and Excess Cash.

(b)

 

In the second quarter of 2021, MicroStrategy purchased bitcoin using $487.2 million in net proceeds from its issuance of its 6.125% Senior Secured Notes due 2028 and Excess Cash.

(c)

 

In the third quarter of 2021, MicroStrategy purchased bitcoin using $399.5 million in net proceeds from its sale of 555,179 shares of class A common stock offered under an Open Market Sale Agreement (the “Open Market Sale Agreement”) with Jefferies LLC, as agent, and Excess Cash.

(d)

 

In the fourth quarter of 2021, MicroStrategy purchased bitcoin using $591.0 million in net proceeds from its sale of 858,588 shares of class A common stock offered under the Open Market Sale Agreement and Excess Cash.

(e)

 

In the first quarter of 2022, MicroStrategy purchased bitcoin using $190.5 million of the net proceeds from the issuance of the 2025 Secured Term Loan and Excess Cash.

(f)

In the second quarter of 2022, MicroStrategy purchased bitcoin using Excess Cash.

(g)

In the third quarter of 2022, MicroStrategy purchased bitcoin using Excess Cash.

Excess Cash refers to cash in excess of the minimum Cash Assets that MicroStrategy is required to hold under its Treasury Reserve Policy, which may include cash generated by operating activities and cash from the proceeds of financing activities. Cash Assets refers to cash and cash equivalents and short-term investments.

  MICROSTRATEGY INCORPORATED

DIGITAL ASSETS – ADDITIONAL INFORMATION

MARKET VALUE OF BITCOIN HOLDINGS

(unaudited)

 

 

 

Approximate

Number of

Bitcoins Held

at End of

Quarter *

 

 

Lowest

Market Price

Per Bitcoin

During

Quarter

(a)

 

 

Market Value

of Bitcoin

Held at End of

Quarter Using

Lowest

Market Price

(in thousands)

(b)

 

 

Highest

Market Price

Per Bitcoin

During

Quarter

(c)

 

 

Market Value

of Bitcoin

Held at End of

Quarter Using

Highest

Market Price

(in thousands)

(d)

 

 

Market Price

Per Bitcoin at

End of

Quarter

(e)

 

 

Market Value

of Bitcoin

Held at End of

Quarter Using

Ending

Market Price

(in thousands)

(f)

 

December 31, 2020

 

 

70,469

 

 

$

10,363.76

 

 

$

730,324

 

 

$

29,321.90

 

 

$

2,066,285

 

 

$

29,181.00

 

 

$

2,056,356

 

March 31, 2021

 

 

91,326

 

 

$

27,678.00

 

 

$

2,527,721

 

 

$

61,788.45

 

 

$

5,642,892

 

 

$

58,601.28

 

 

$

5,351,820

 

June 30, 2021

 

 

105,085

 

 

$

28,800.00

 

 

$

3,026,448

 

 

$

64,899.00

 

 

$

6,819,911

 

 

$

34,763.47

 

 

$

3,653,119

 

September 30, 2021

 

 

114,042

 

 

$

29,301.56

 

 

$

3,341,609

 

 

$

52,944.96

 

 

$

6,037,949

 

 

$

43,534.56

 

 

$

4,964,768

 

December 31, 2021

 

 

124,391

 

 

$

42,333.00

 

 

$

5,265,844

 

 

$

69,000.00

 

 

$

8,582,979

 

 

$

45,879.97

 

 

$

5,707,055

 

March 31, 2022

 

 

129,218

 

 

$

32,933.33

 

 

$

4,255,579

 

 

$

48,240.00

 

 

$

6,233,476

 

 

$

45,602.79

 

 

$

5,892,701

 

June 30, 2022

 

 

129,699

 

 

$

17,567.45

 

 

$

2,278,481

 

 

$

47,469.40

 

 

$

6,156,734

 

 

$

18,895.02

 

 

$

2,450,665

 

September 30, 2022

 

 

130,000

 

 

$

18,153.13

 

 

$

2,359,907

 

 

$

25,214.57

 

 

$

3,277,894

 

 

$

19,480.51

 

 

$

2,532,466

 

*MicroStrategy owns and has purchased bitcoins both directly and indirectly through its wholly-owned subsidiary, MacroStrategy. References to MicroStrategy below refer to MicroStrategy and its subsidiaries on a consolidated basis.

(a)

 

The "Lowest Market Price Per Bitcoin During Quarter" represents the lowest market price for one bitcoin reported on the Coinbase exchange during the respective quarter, without regard to when MicroStrategy purchased any of its bitcoin.

(b)

 

The "Market Value of Bitcoin Held at End of Quarter Using Lowest Market Price" represents a mathematical calculation consisting of the lowest market price for one bitcoin reported on the Coinbase exchange during the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.

(c)

 

The "Highest Market Price Per Bitcoin During Quarter" represents the highest market price for one bitcoin reported on the Coinbase exchange during the respective quarter, without regard to when MicroStrategy purchased any of its bitcoin.

(d)

 

The "Market Value of Bitcoin Held at End of Quarter Using Highest Market Price" represents a mathematical calculation consisting of the highest market price for one bitcoin reported on the Coinbase exchange during the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.

(e)

 

The "Market Price Per Bitcoin at End of Quarter" represents the market price of one bitcoin on the Coinbase exchange at 4:00 p.m. Eastern Time on the last day of the respective quarter.

(f)

The "Market Value of Bitcoin Held at End of Quarter Using Ending Market Price" represents a mathematical calculation consisting of the market price of one bitcoin on the Coinbase exchange at 4:00 p.m. Eastern Time on the last day of the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.

The amounts reported as “Market Value” in the above table represent only a mathematical calculation consisting of the price for one bitcoin reported on the Coinbase exchange (MicroStrategy’s principal market for bitcoin) in each scenario defined above multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period. The SEC has previously stated that there has not been a demonstration that (i) bitcoin and bitcoin markets are inherently resistant to manipulation or that the spot price of bitcoin may not be subject to fraud and manipulation; and (ii) adequate surveillance-sharing agreements with bitcoin-related markets are in place, as bitcoin-related markets are either not significant, not regulated, or both. Accordingly, the Market Value amounts reported above may not accurately represent fair market value, and the actual fair market value of MicroStrategy’s bitcoin may be different from such amounts and such deviation may be material. Moreover, (i) the bitcoin market historically has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, and various other risks that are, or may be, inherent in its entirely electronic, virtual form and decentralized network and (ii) MicroStrategy may not be able to sell its bitcoins at the Market Value amounts indicated above, at the market price as reported on the Coinbase exchange (its principal market) on the date of sale, or at all.

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

INCOME (LOSS) FROM OPERATIONS

(in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Reconciliation of non-GAAP income (loss) from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

6,058

 

 

$

(49,661

)

 

$

(1,082,025

)

 

$

(647,060

)

Share-based compensation expense

 

 

16,899

 

 

 

12,166

 

 

 

46,587

 

 

 

30,973

 

Non-GAAP income (loss) from operations

 

$

22,957

 

 

$

(37,495

)

 

$

(1,035,438

)

 

$

(616,087

)

 

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

NET LOSS AND DILUTED LOSS PER SHARE

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Reconciliation of non-GAAP net loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(27,079

)

 

$

(36,136

)

 

$

(1,220,128

)

 

$

(445,503

)

Share-based compensation expense

 

 

16,899

 

 

 

12,166

 

 

 

46,587

 

 

 

30,973

 

Interest expense arising from amortization of debt issuance costs

 

 

2,193

 

 

 

2,107

 

 

 

6,490

 

 

 

5,084

 

Income tax effects (1)

 

 

(2,844

)

 

 

(6,489

)

 

 

(10,186

)

 

 

(32,877

)

Non-GAAP net loss

 

$

(10,831

)

 

$

(28,352

)

 

$

(1,177,237

)

 

$

(442,323

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of non-GAAP diluted loss per share (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted loss per share

 

$

(2.39

)

 

$

(3.61

)

 

$

(107.99

)

 

$

(45.47

)

Share-based compensation expense (per diluted share)

 

 

1.49

 

 

 

1.21

 

 

 

4.12

 

 

 

3.16

 

Interest expense arising from amortization of debt issuance costs (per diluted share)

 

 

0.19

 

 

 

0.21

 

 

 

0.57

 

 

 

0.52

 

Income tax effects (per diluted share)

 

 

(0.25

)

 

 

(0.65

)

 

 

(0.89

)

 

 

(3.35

)

Non-GAAP diluted loss per share

 

$

(0.96

)

 

$

(2.84

)

 

$

(104.19

)

 

$

(45.14

)

(1)

Income tax effects reflect the net tax effects of share-based compensation expense, which includes tax benefits and expenses on exercises of stock options and vesting of share-settled restricted stock units, and interest expense for amortization of debt issuance costs.

(2)

For reconciliation purposes, the non-GAAP diluted earnings (loss) per share calculations use the same weighted average shares outstanding as that used in the GAAP diluted earnings (loss) per share calculations for the same period. For example, in periods of GAAP net loss, otherwise dilutive potential shares of common stock from MicroStrategy’s share-based compensation arrangements and Convertible Notes are excluded from the GAAP diluted loss per share calculation as they would be antidilutive, and therefore are also excluded from the non-GAAP diluted earnings or loss per share calculation.

 

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

CONSTANT CURRENCY

(in thousands)

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

(unaudited)

 

 

 

GAAP

 

 

Foreign

Currency

Exchange

Rate Impact (1)

 

 

Non-GAAP

Constant

Currency (2)

 

 

GAAP

 

 

GAAP %

Change

 

 

Non-GAAP

Constant

Currency

% Change (3)

 

 

 

2022

 

 

2022

 

 

2022

 

 

2021

 

 

2022

 

 

2022

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

22,286

 

 

$

(1,219

)

 

$

23,505

 

 

$

25,830

 

 

 

-13.7

%

 

 

-9.0

%

Subscription services

 

 

16,414

 

 

 

(828

)

 

 

17,242

 

 

 

10,853

 

 

 

51.2

%

 

 

58.9

%

Total product licenses and subscription services

 

 

38,700

 

 

 

(2,047

)

 

 

40,747

 

 

 

36,683

 

 

 

5.5

%

 

 

11.1

%

Product support

 

 

66,010

 

 

 

(3,848

)

 

 

69,858

 

 

 

70,387

 

 

 

-6.2

%

 

 

-0.8

%

Other services

 

 

20,650

 

 

 

(1,747

)

 

 

22,397

 

 

 

20,924

 

 

 

-1.3

%

 

 

7.0

%

Total revenues

 

 

125,360

 

 

 

(7,642

)

 

 

133,002

 

 

 

127,994

 

 

 

-2.1

%

 

 

3.9

%

   

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

(unaudited)

 

 

 

GAAP

 

 

Foreign

Currency

Exchange

Rate Impact (1)

 

 

Non-GAAP

Constant

Currency (2)

 

 

GAAP

 

 

GAAP %

Change

 

 

Non-GAAP

Constant

Currency

% Change (3)

 

 

 

2022

 

 

2022

 

 

2022

 

 

2021

 

 

2022

 

 

2022

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

58,928

 

 

$

(2,315

)

 

$

61,243

 

 

$

69,261

 

 

 

-14.9

%

 

 

-11.6

%

Subscription services

 

 

43,276

 

 

 

(1,516

)

 

 

44,792

 

 

 

31,221

 

 

 

38.6

%

 

 

43.5

%

Total product licenses and subscription services

 

 

102,204

 

 

 

(3,831

)

 

 

106,035

 

 

 

100,482

 

 

 

1.7

%

 

 

5.5

%

Product support

 

 

199,682

 

 

 

(8,547

)

 

 

208,229

 

 

 

212,063

 

 

 

-5.8

%

 

 

-1.8

%

Other services

 

 

64,824

 

 

 

(3,914

)

 

 

68,738

 

 

 

63,702

 

 

 

1.8

%

 

 

7.9

%

Total revenues

 

 

366,710

 

 

 

(16,292

)

 

 

383,002

 

 

 

376,247

 

 

 

-2.5

%

 

 

1.8

%

(1)

 

The “Foreign Currency Exchange Rate Impact” reflects the estimated impact of fluctuations in foreign currency exchange rates on international revenues. It shows the increase (decrease) in international revenues from the same period in the prior year, based on comparisons to the prior year quarterly average foreign currency exchange rates. The term “international” refers to operations outside of the United States and Canada.

(2)

 

The “Non-GAAP Constant Currency” reflects the current period GAAP amount, less the Foreign Currency Exchange Rate Impact.

(3)

 

The “Non-GAAP Constant Currency % Change” reflects the percentage change between the current period Non-GAAP Constant Currency amount and the GAAP amount for the same period in the prior year.

 

MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

 

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

 

2022

 

 

2021*

 

 

2021

 

 

 

(unaudited)

 

 

 

 

 

 

(unaudited)

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

442

 

 

$

993

 

 

$

2,315

 

Deferred subscription services revenue

 

 

38,272

 

 

 

35,589

 

 

 

23,089

 

Deferred product support revenue

 

 

123,203

 

 

 

166,477

 

 

 

130,339

 

Deferred other services revenue

 

 

4,017

 

 

 

6,801

 

 

 

4,954

 

Total current deferred revenue and advance payments

 

$

165,934

 

 

$

209,860

 

 

$

160,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

70

 

 

$

68

 

 

$

74

 

Deferred subscription services revenue

 

 

2,943

 

 

 

1,064

 

 

 

590

 

Deferred product support revenue

 

 

5,172

 

 

 

6,203

 

 

 

6,973

 

Deferred other services revenue

 

 

569

 

 

 

754

 

 

 

665

 

Total non-current deferred revenue and advance payments

 

$

8,754

 

 

$

8,089

 

 

$

8,302

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current and non-current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

512

 

 

$

1,061

 

 

$

2,389

 

Deferred subscription services revenue

 

 

41,215

 

 

 

36,653

 

 

 

23,679

 

Deferred product support revenue

 

 

128,375

 

 

 

172,680

 

 

 

137,312

 

Deferred other services revenue

 

 

4,586

 

 

 

7,555

 

 

 

5,619

 

Total current and non-current deferred revenue and advance payments

 

$

174,688

 

 

$

217,949

 

 

$

168,999

 

 

* Derived from audited financial statements.

 

MicroStrategy Incorporated Shirish Jajodia Investor Relations ir@microstrategy.com (703) 848-8600

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