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MicroStrategy Announces Second Quarter 2021 Financial Results

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July 29, 2021 04:01 PM Eastern Daylight Time

TYSONS CORNER, Va.–(BUSINESS WIRE)–MicroStrategy® (Nasdaq: MSTR), the largest independent publicly-traded business intelligence company, today announced financial results for the three-month period ended June 30, 2021 (the second quarter of its 2021 fiscal year).

“We continue to be pleased by the results of the implementation of our digital asset strategy. Our latest capital raise allowed us to expand our digital holdings, which now exceed 105,000 bitcoins. Going forward, we intend to continue to deploy additional capital into our digital asset strategy.”

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“MicroStrategy continued its strong 2021 by delivering an outstanding operational performance across the board and completing another successful capital raise to expand our digital asset holdings. We had one of our best operational quarters in our software business in years, highlighted by 13% revenue growth. Our success in the market is being driven by the investments we have made and the broad adoption of our innovative MicroStrategy platform,” said Michael J. Saylor, CEO, MicroStrategy Incorporated.

“We continue to be pleased by the results of the implementation of our digital asset strategy. Our latest capital raise allowed us to expand our digital holdings, which now exceed 105,000 bitcoins. Going forward, we intend to continue to deploy additional capital into our digital asset strategy.”

Second Quarter 2021 Financial Highlights

  • Revenues: Total revenues for the second quarter of 2021 were $125.4 million, a 13.4% increase, or a 10.1% increase on a non-GAAP constant currency basis, compared to the second quarter of 2020. Product licenses and subscription services revenues for the second quarter of 2021 were $32.5 million, a 42.3% increase, or a 40.5% increase on a non-GAAP constant currency basis, compared to the second quarter of 2020. Product support revenues for the second quarter of 2021 were $71.0 million, a 1.4% increase, or a 2.1% decrease on a non-GAAP constant currency basis, compared to the second quarter of 2020. Other services revenues for the second quarter of 2021 were $21.8 million, a 23.3% increase, or a 19.0% increase on a non-GAAP constant currency basis, compared to the second quarter of 2020.
  • Gross Profit: Gross profit for the second quarter of 2021 was $102.3 million, representing an 81.6% gross margin, compared to a gross margin of 78.3% in the second quarter of 2020.
  • Operating Expenses: Operating expenses for the second quarter of 2021 were $516.6 million, a 543.6% increase compared to the second quarter of 2020. Beginning in the third quarter of 2020, operating expenses included impairment losses on MicroStrategy’s digital assets, which were $424.8 million during the second quarter of 2021.
  • (Loss) Income from Operations: Loss from operations for the second quarter of 2021 was $414.2 million versus income from operations of $6.3 million for the second quarter of 2020. Non-GAAP income from operations, which excludes share-based compensation expense and impairment losses and gains on sale from intangible assets, which include digital assets, was $21.6 million for the second quarter of 2021 versus $8.6 million for the second quarter of 2020.
  • Net (Loss) Income: Net loss for the second quarter of 2021 was $299.3 million, or $30.71 per share on a diluted basis, as compared to net income of $3.4 million, or $0.35 per share on a diluted basis, for the second quarter of 2020. Non-GAAP net income, which excludes share-based compensation expense, impairment losses and gains on sale from intangible assets, which include digital assets, interest expense arising from the amortization of debt issuance costs, and related income tax effects, was $16.7 million, or $1.72 per share on a non-GAAP diluted basis, for the second quarter of 2021, as compared to non-GAAP net income of $5.9 million, or $0.60 per share on a non-GAAP diluted basis, for the second quarter of 2020.
  • Cash and Cash Equivalents: As of June 30, 2021, MicroStrategy had cash and cash equivalents of $56.4 million, as compared to $59.7 million as of December 31, 2020, a decrease of $3.3 million.
  • Digital Assets: As of June 30, 2021, the carrying value of MicroStrategy’s digital assets (comprised of approximately 105,085 bitcoins) was $2.051 billion, which reflects cumulative impairment losses of $689.6 million since acquisition and an average carrying amount per bitcoin of approximately $19,518. As of June 30, 2021, the non-GAAP digital asset cost basis and non-GAAP calculation of the market value of MicroStrategy’s bitcoin were $2.741 billion and $3.653 billion, respectively, which reflects an average cost per bitcoin of approximately $26,080 and a market price per bitcoin of $34,763.47. MacroStrategy LLC, a subsidiary of MicroStrategy, holds approximately 92,079 of the bitcoins.
  • Senior Secured Notes: In June 2021, MicroStrategy issued $500.0 million aggregate principal amount of 6.125% Senior Secured Notes due 2028 (the “2028 Secured Notes”). The 2028 Secured Notes are unconditionally guaranteed, jointly and severally, on a senior secured basis by MicroStrategy Services Corporation, a wholly owned subsidiary of MicroStrategy and certain subsidiaries of MicroStrategy that may be formed or acquired on or after June 14, 2021. The 2028 Secured Notes bear interest at a fixed rate of 6.125% per annum, payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2021. The 2028 Secured Notes have a stated maturity date of June 15, 2028, unless earlier redeemed or repurchased in accordance with their terms and subject to a springing maturity date of September 15, 2025 or November 16, 2026 under certain circumstances. The 2028 Secured Notes contain various customary covenants, including limitations with respect to indebtedness, liens, payment of dividends, investments, disposition of assets, mergers and acquisitions, and transactions with affiliates. The total net proceeds from the 2028 Secured Notes offering, after deducting initial purchaser discounts and issuance costs, were approximately $487.2 million. As of June 30, 2021, the carrying value of the 2028 Secured Notes was $487.3 million, net of unamortized issuance costs, and was classified as a long-term liability in the “Long-term debt, net” line item in MicroStrategy’s Consolidated Balance Sheet.

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP financial measures for the three and six months ended June 30, 2021 and 2020. 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 “Q2 2021 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.

MicroStrategy uses its Intelligent Enterprise platform across the enterprise and has created an interactive dossier with quarterly financial performance data. Anyone can access the MSTR Financials dossier via a web browser, or by downloading the MicroStrategy Library app on an iOS or Android device. To download the native apps, visit MicroStrategy Library for iOS or MicroStrategy Library for Android.

CFO Search

With MicroStrategy’s management team focusing on two corporate strategies – growing its enterprise analytics software business and acquiring and holding bitcoin – and with the increase in its public profile and operational complexity, MicroStrategy plans to engage in a search for a Chief Financial Officer to complement the management team and allow Phong Le to focus on his role as President, running the day-to-day business of MicroStrategy.

Non-GAAP Financial Measures

MicroStrategy is providing supplemental financial measures for (i) non-GAAP income from operations that excludes the impact of share-based compensation expense and impairment losses and gains on sale from intangible assets, which include its digital assets, (ii) non-GAAP net income and non-GAAP diluted earnings per share that exclude the impact of share-based compensation expense, impairment losses and gains on sale from intangible assets, which include its digital assets, interest expense arising from the amortization of debt issuance costs related to MicroStrategy’s long-term debt, and related income tax effects, (iii) non-GAAP digital asset cost basis as reported excluding cumulative impairment losses and a non-GAAP calculation of market value of MicroStrategy’s bitcoin holdings based on the market price of one bitcoin in its principal market at 4:00 p.m. Eastern Time on the last day of each period (see below for a more detailed explanation of the calculation and limitations applicable to this market value metric), and (iv) non-GAAP constant currency revenues that exclude foreign currency exchange rate fluctuations. These supplemental financial measures are not measurements of financial performance under generally accepted accounting principles in the United States (“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 (i) 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 and (ii) significant impairment losses and gains on sale from intangible assets, which include MicroStrategy’s bitcoin. The second set of supplemental financial measures excludes the impact of (i) share-based compensation expense, (ii) impairment losses and gains on sale from intangible assets, which include MicroStrategy’s bitcoin, (iii) non-cash interest expense arising from the amortization of debt issuance costs related to MicroStrategy’s long-term debt, and (iv) related income tax effects. The third set of supplemental financial measures provides MicroStrategy’s digital asset balances, as reported excluding non-cash cumulative impairment losses and discloses a non-GAAP calculation of market value of its bitcoin holdings based on the market price of one bitcoin in its principal market at 4:00 p.m. Eastern Time on the last day of each period (see below for a more detailed explanation of the calculation and limitations applicable to this market value metric). MicroStrategy believes this is useful to investors and analysts in comparing the value of its bitcoin holdings. The fourth 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 second quarter 2021 financial results on a live Video Webinar today beginning at approximately 5:00 p.m. EDT. 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,” 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 market price of bitcoin and any associated impairment charges that the Company may incur as a result of a decrease in the market price below the value at which the Company’s bitcoins are carried on its balance sheet; gains or losses on sales of bitcoins that the Company would incur upon any sale of its bitcoins; changes in the accounting treatment of the Company’s bitcoin holdings; changes in securities laws or other laws or regulations relating to bitcoin that could adversely affect the price of bitcoin or the Company’s ability to own bitcoin; a decrease in liquidity in the markets in which bitcoins are traded; security breaches, cyberattacks, unauthorized access, loss of private keys, or fraud that results in the Company’s loss of its 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 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; currency fluctuations; and other risks detailed in MicroStrategy’s registration statements and periodic reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update these forward-looking statements for revisions or changes after the date of this release.

MSTR-F

MICROSTRATEGY INCORPORATEDCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)
 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2021  2020  2021  2020 
  (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Revenues                
Product licenses $22,151  $14,816  $43,431  $27,400 
Subscription services  10,342   8,021   20,368   15,989 
Total product licenses and subscription services  32,493   22,837   63,799   43,389 
Product support  71,027   70,038   141,676   141,196 
Other services  21,831   17,709   42,778   37,423 
Total revenues  125,351   110,584   248,253   222,008 
                 
Cost of revenues                
Product licenses  419   514   907   1,184 
Subscription services  3,810   3,792   7,438   7,856 
Total product licenses and subscription services  4,229   4,306   8,345   9,040 
Product support  4,862   6,837   9,674   13,555 
Other services  13,947   12,846   27,568   25,939 
Total cost of revenues  23,038   23,989   45,587   48,534 
                 
Gross profit  102,313   86,595   202,666   173,474 
                 
Operating expenses                
Sales and marketing  40,321   34,951   78,519   74,469 
Research and development  28,548   25,867   58,031   51,968 
General and administrative  22,917   19,449   44,646   40,781 
Digital asset impairment losses  424,774   0   618,869   0 
Total operating expenses  516,560   80,267   800,065   167,218 
                 
(Loss) income from operations  (414,247)  6,328   (597,399)  6,256 
Interest (expense) income, net  (4,401)  563   (6,797)  2,418 
Other (expense) income, net  (897)  (1,995)  367   (1,561)
(Loss) income before income taxes  (419,545)  4,896   (603,829)  7,113 
(Benefit from) provision for income taxes  (120,198)  1,509   (194,462)  3,069 
Net (loss) income $(299,347) $3,387  $(409,367) $4,044 
                 
Basic (loss) earnings per share (1): $(30.71) $0.35  $(42.22) $0.41 
Weighted average shares outstanding used in computing basic (loss) earnings per share  9,746   9,739   9,697   9,858 
                 
Diluted (loss) earnings per share (1): $(30.71) $0.35  $(42.22) $0.41 
Weighted average shares outstanding used in computing diluted (loss) earnings per share  9,746   9,741   9,697   9,886 
(1)Basic and fully diluted (loss) earnings per share for class A and class B common stock are the same.
MICROSTRATEGY INCORPORATEDCONSOLIDATED BALANCE SHEETS(in thousands, except per share data)
 
  June 30,  December 31, 
  2021  2020* 
  (unaudited)     
Assets        
Current assets        
Cash and cash equivalents $56,399  $59,675 
Restricted cash  1,205   1,084 
Accounts receivable, net  131,516   197,461 
Prepaid expenses and other current assets  19,338   14,400 
Total current assets  208,458   272,620 
         
Digital assets  2,051,039   1,054,302 
Property and equipment, net  39,659   42,975 
Right-of-use assets  70,340   73,597 
Deposits and other assets  15,756   15,615 
Deferred tax assets, net  239,107   6,503 
Total Assets $2,624,359  $1,465,612 
         
Liabilities and Stockholders’ Equity        
Current liabilities        
Accounts payable, accrued expenses, and operating lease liabilities $41,236  $45,119 
Accrued compensation and employee benefits  50,944   49,249 
Deferred revenue and advance payments  182,818   191,250 
Total current liabilities  274,998   285,618 
         
Long-term debt, net  2,150,927   486,366 
Deferred revenue and advance payments  7,262   14,662 
Operating lease liabilities  80,900   84,328 
Other long-term liabilities  31,040   33,382 
Deferred tax liabilities  1,813   8,211 
Total Liabilities  2,546,940   912,567 
         
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; 16,468 shares issued and 7,784 shares outstanding, and 16,307 shares issued and 7,623 shares outstanding, respectively  16   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  697,274   763,051 
Treasury stock, at cost; 8,684 shares and 8,684 shares, respectively  (782,104)  (782,104)
Accumulated other comprehensive loss  (5,324)  (3,885)
Retained earnings  167,555   575,965 
Total Stockholders’ Equity  77,419   553,045 
Total Liabilities and Stockholders’ Equity $2,624,359  $1,465,612 
*Derived from audited financial statements.
MICROSTRATEGY INCORPORATEDCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)
 
  Six Months Ended 
  June 30, 
  2021  2020 
  (unaudited)  (unaudited) 
Operating activities:        
Net (loss) income $(409,367) $4,044 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:        
Depreciation and amortization  5,997   5,828 
Reduction in carrying amount of right-of-use assets  4,204   4,085 
Credit losses and sales allowances  365   990 
Deferred taxes  (197,383)  273 
Share-based compensation expense  18,807   5,337 
Digital asset impairment losses  618,869   0 
Amortization of issuance costs on long-term debt  2,977   0 
Changes in operating assets and liabilities:        
Accounts receivable  11,197   21,022 
Prepaid expenses and other current assets  (4,080)  (493)
Deposits and other assets  (1,071)  195 
Accounts payable and accrued expenses  (7,633)  (1,823)
Accrued compensation and employee benefits  1,368   (8,708)
Deferred revenue and advance payments  37,825   347 
Operating lease liabilities  (5,147)  (4,662)
Other long-term liabilities  (253)  86 
Net cash provided by operating activities  76,675   26,521 
         
Investing activities:        
Purchases of digital assets  (1,615,606)  0 
Proceeds from redemption of short-term investments  0   10,000 
Purchases of property and equipment  (1,342)  (1,162)
Purchases of short-term investments  0   (9,928)
Net cash used in investing activities  (1,616,948)  (1,090)
         
Financing activities:        
Proceeds from convertible senior notes  1,050,000   0 
Issuance costs paid for convertible senior notes  (24,742)  0 
Proceeds from senior secured notes  500,000   0 
Issuance costs paid for senior secured notes  (11,269)  0 
Proceeds from sale of class A common stock under exercise of employee stock options  24,098   1,902 
Purchases of treasury stock  0   (61,875)
Net cash provided by (used in) financing activities  1,538,087   (59,973)
         
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash  (969)  (1,154)
Net decrease in cash, cash equivalents, and restricted cash  (3,155)  (35,696)
Cash, cash equivalents, and restricted cash, beginning of period  60,759   457,816 
Cash, cash equivalents, and restricted cash, end of period $57,604  $422,120 
MICROSTRATEGY INCORPORATEDREVENUE AND COST OF REVENUE DETAIL(in thousands)
 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2021  2020  2021  2020 
  (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Revenues                
Product licenses and subscription services:                
Product licenses $22,151  $14,816  $43,431  $27,400 
Subscription services  10,342   8,021   20,368   15,989 
Total product licenses and subscription services  32,493   22,837   63,799   43,389 
Product support  71,027   70,038   141,676   141,196 
Other services:                
Consulting  20,622   16,578   40,333   35,019 
Education  1,209   1,131   2,445   2,404 
Total other services  21,831   17,709   42,778   37,423 
Total revenues  125,351   110,584   248,253   222,008 
                 
Cost of revenues                
Product licenses and subscription services:                
Product licenses  419   514   907   1,184 
Subscription services  3,810   3,792   7,438   7,856 
Total product licenses and subscription services  4,229   4,306   8,345   9,040 
Product support  4,862   6,837   9,674   13,555 
Other services:                
Consulting  12,438   10,168   24,770   21,596 
Education  1,509   2,678   2,798   4,343 
Total other services  13,947   12,846   27,568   25,939 
Total cost of revenues  23,038   23,989   45,587   48,534 
                 
Gross profit $102,313  $86,595  $202,666  $173,474 
MICROSTRATEGY INCORPORATEDRECONCILIATION OF GAAP TO NON-GAAP MEASURESINCOME FROM OPERATIONS(in thousands)
 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2021  2020  2021  2020 
  (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Reconciliation of non-GAAP income from operations:                
(Loss) income from operations $(414,247) $6,328  $(597,399) $6,256 
Share-based compensation expense  11,096   2,226   18,807   5,337 
Digital asset impairment losses  424,774   0   618,869   0 
Non-GAAP income from operations $21,623  $8,554  $40,277  $11,593 
MICROSTRATEGY INCORPORATEDRECONCILIATION OF GAAP TO NON-GAAP MEASURESNET (LOSS) INCOME AND (LOSS) EARNINGS PER SHARE(in thousands, except per share data)
 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2021  2020  2021  2020 
  (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Reconciliation of non-GAAP net income:                
Net (loss) income $(299,347) $3,387  $(409,367) $4,044 
Share-based compensation expense  11,096   2,226   18,807   5,337 
Digital asset impairment losses  424,774   0   618,869   0 
Interest expense arising from amortization of debt issuance costs  1,805   0   2,977   0 
Income tax effects (1)  (121,587)  274   (199,671)  436 
Non-GAAP net income $16,741  $5,887  $31,615  $9,817 
                 
Reconciliation of non-GAAP diluted earnings per share:                
Diluted (loss) earnings per share $(30.71) $0.35  $(42.22) $0.41 
Share-based compensation expense (per diluted share)  1.14   0.22   1.94   0.54 
Digital asset impairment losses (per diluted share)  43.58   0.00   63.82   0.00 
Interest expense arising from amortization of debt issuance costs (per diluted share)  0.19   0.00   0.31   0.00 
Income tax effects (per diluted share)  (12.48)  0.03   (20.59)  0.04 
Non-GAAP diluted earnings per share $1.72  $0.60  $3.26  $0.99 
(1)Income tax effects reflect the net tax effects of stock-based compensation expense, digital asset impairment losses, and interest expense for amortization of debt issuance costs.
MICROSTRATEGY INCORPORATEDRECONCILIATION OF GAAP TO NON-GAAP MEASURESDIGITAL ASSET HOLDINGS
 
  As Reported   Market Value 
  Digital Asset
Carrying
Value
(in thousands)
  Add Back:
Digital Asset
Impairment
Losses
(in thousands)
  Digital Asset
Original Cost
Basis
(in thousands)
  Approximate
Number of
Bitcoins Held
   Market Price
Per Bitcoin
  Market Value
of Bitcoin
Held
(in thousands)
 
Reconciliation of digital asset cost basis:                         
Balance at June 30, 2020 $0  $0  $0   0   n/a  n/a 
Digital asset purchases  425,000       425,000   38,250          
Digital asset impairment losses  (44,242)  44,242                  
Balance at September 30, 2020 $380,758  $44,242  $425,000   38,250   $10,706.00  $409,505 
Digital asset purchases  700,000       700,000   32,219          
Digital asset impairment losses  (26,456)  26,456                  
Balance at December 31, 2020 $1,054,302  $70,698  $1,125,000   70,469   $29,181.00  $2,056,356 
Digital asset purchases  1,086,375       1,086,375   20,857          
Digital asset impairment losses  (194,095)  194,095                  
Balance at March 31, 2021 $1,946,582  $264,793  $2,211,375   91,326   $58,601.28  $5,351,820 
Digital asset purchases  529,231       529,231   13,759          
Digital asset impairment losses  (424,774)  424,774                  
Balance at June 30, 2021 $2,051,039  $689,567  $2,740,606   105,085   $34,763.47  $3,653,119 

The amounts reported as “Market Value” in the above table represent only a mathematical calculation consisting of the price for one bitcoin reported in MicroStrategy’s principal market at 4:00 p.m. Eastern Time on the last day of each period multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period. The Securities and Exchange Commission has previously made findings 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 below 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” indicated below, at the market price as reported in its principal market on the date of sale, or at all.

MICROSTRATEGY INCORPORATEDRECONCILIATION OF GAAP TO NON-GAAP MEASURESCONSTANT CURRENCY(in thousands)
 
  Three Months Ended 
  June 30, 
  (unaudited) 
  GAAP  Foreign
Currency
Exchange
Rate Impact (1)
  Non-GAAP
Constant
Currency (2)
  GAAP  GAAP %
Change
  Non-GAAP
Constant
Currency
% Change (3)
 
  2021  2021  2021  2020  2021  2021 
Revenues                        
Product licenses $22,151  $132  $22,019  $14,816   49.5%  48.6%
Subscription services  10,342   264   10,078   8,021   28.9%  25.6%
Total product licenses and subscription services  32,493   396   32,097   22,837   42.3%  40.5%
Product support  71,027   2,425   68,602   70,038   1.4%  -2.1%
Other services  21,831   763   21,068   17,709   23.3%  19.0%
Total revenues  125,351   3,584   121,767   110,584   13.4%  10.1%
 
  Six Months Ended 
  June 30, 
  (unaudited) 
  GAAP  Foreign
Currency
Exchange
Rate Impact (1)
  Non-GAAP
Constant
Currency (2)
  GAAP  GAAP %
Change
  Non-GAAP
Constant
Currency
% Change (3)
 
  2021  2021  2021  2020  2021  2021 
Revenues                        
Product licenses $43,431  $457  $42,974  $27,400   58.5%  56.8%
Subscription services  20,368   454   19,914   15,989   27.4%  24.5%
Total product licenses and subscription services  63,799   911   62,888   43,389   47.0%  44.9%
Product support  141,676   4,342   137,334   141,196   0.3%  -2.7%
Other services  42,778   1,381   41,397   37,423   14.3%  10.6%
Total revenues  248,253   6,634   241,619   222,008   11.8%  8.8%
(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 INCORPORATEDDEFERRED REVENUE DETAIL(in thousands)
 
  June 30,  December 31,  June 30, 
  2021  2020*  2020 
  (unaudited)      (unaudited) 
Current:            
Deferred product licenses revenue $544  $1,495  $100 
Deferred subscription services revenue  25,916   26,258   17,934 
Deferred product support revenue  150,963   156,216   142,543 
Deferred other services revenue  5,395   7,281   7,066 
Total current deferred revenue and advance payments $182,818  $191,250  $167,643 
             
Non-current:            
Deferred product licenses revenue $76  $139  $168 
Deferred subscription services revenue  712   8,758   90 
Deferred product support revenue  5,920   5,055   5,152 
Deferred other services revenue  554   710   500 
Total non-current deferred revenue and advance payments $7,262  $14,662  $5,910 
             
Total current and non-current:            
Deferred product licenses revenue $620  $1,634  $268 
Deferred subscription services revenue  26,628   35,016   18,024 
Deferred product support revenue  156,883   161,271   147,695 
Deferred other services revenue  5,949   7,991   7,566 
Total current and non-current deferred revenue and advance payments $190,080  $205,912  $173,553 
*Derived from audited financial statements.

Contacts

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

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