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MicroStrategy: First Quarter 2016 Financial Results

The following excerpt is from the company's SEC filing.

TYSONS CORNER, Va., April 27, 2016 - MicroStrategy

Incorporated (Nasdaq: MSTR), a leading worldwide provider of enterprise software platforms, today announced financial results for the three-month period ended March 31, 2016 (the first quarter of its 2016 fiscal year).

First quarter 2016 revenues were $119.0 million versus $123.9 million for the first quarter of 2015, a 4% decrease. Product licenses and subscription services revenues for the first quarter of 2016 were $29.8 million versus $27.4 million for the first quarter of 2015, a 9% increase. Product support revenues for the first quarter of 2 016 were $68.5 million versus $69.3 million for the first quarter of 2015, a 1% decrease. Other services revenues for the first quarter of 2016 were $20.8 million versus $27.1 million for the first quarter of 2015, a 24% decrease. Foreign currency headwinds continued to have a negative impact on revenues for the first quarter of 2016.

Operating expenses for the first quarter of 2016 were $76.4 million versus $74.1 million for the first quarter of 2015, a 3% increase. In addition, MicroStrategy did not capitalize any software development costs during the first quarter of 2016, as compared to $5.4 million in software development costs capitalized during the first quarter of 2015.

Income from operations for the first quarter of 2016 was $19.8 million, as compared to income from operations of $22.6 million for the first quarter of 2015. Net income for the first quarter of 2016 was $14.3 million, or $1.24 per share on a diluted basis, as compared to net income of $20.5 million, or $1.79 per share on a diluted basis, for the first quarter of 2015.

Non-GAAP income from operations, which excludes share-based compensation expense and restructuring costs, was $21.3 million for the first quarter of 2016 versus $26.3 million for the first quarter of 2015.

As of March 31, 2016, MicroStrategy had cash and cash equivalents and short-term investments of $536.3 million, as compared to $485.7 million as of December 31, 2015, an increase of $50.6 million. As of March 31, 2016, MicroStrategy had 9.4 million shares of class A common stock and 2.0 million shares of class B common stock outstanding.

The tables at the end of this press release include a reconciliation of income from operations to non-GAAP income from operations for the three months ended March 31, 2016 and 2015. An explanation of this non-GAAP measure is also included under the heading Non-GAAP Financial Measure below.

Conference Call

MicroStrategy will be discussing its first quarter 2016 financial results on a conference call today beginning at approximately 5:00 p.m. EDT. To access the conference call, dial (844) 824-7425 (domestically) or (716) 220-9429 (internationally) and use conference ID 95287609. A live webcast and replay of the conference call will be available under the Events & Presentations section on MicroStrategys investor relations website at

http://ir.microstrategy.com/events.cfm

. The replay will be available beginning approximately two hours after the call concludes until May 2, 2016 at (855) 859-2056 (domestically) or (404) 537-3406 (internationally) using the passcode 95287609. An archived webcast will also be available under the Events & Presentations section on MicroStrategys investor relations website at

MicroStrategy Launched MicroStrategy 10.3

In March, MicroStrategy unveiled MicroStrategy 10.3, the latest release of its groundbreaking enterprise analytics platform MicroStrategy 10 Secure Enterprise. This release features new data discovery capabilities and a collection of ease-of-use enhancements designed to advance business user adoption within the enterprise. To try MicroStrategy 10.3 using the new Express Install, visit:

http://www.microstrategy.com/us/free-trial

Available as a free upgrade to all cloud and on-premises customers who are current on maintenance, version 10.3 introduces new visualization capabilities for data discovery users, new gateways to leverage existing enterprise assets, a simplified express installation, and a variety of ease-of-use improvements throughout the platform. To learn more about MicroStrategy 10.3, visit:

http://ir.microstrategy.com/releasedetail.cfm?ReleaseID=9606...

We take great pride in delivering a relevant, powerful and easy-to-use analytics platform to the market, said Tim Lang, CTO, MicroStrategy Incorporated. Both business and technology leaders rely on MicroStrategy as an across-the-board enterprise analytics platform because it strikes the right balance between the agility of self-service data discovery and the large-scale enterprise demands of governance, security, and performance.

MicroStrategy 10 Showcased in BI Bake-Off at Gartner Business Intelligence and Analytics Summit

In March, MicroStrategy announced that MicroStrategy 10 was showcased in the BI Bake-Off, a product face-off that took place at the Gartner Business Intelligence and Analytics Summit at the Gaylord Texan Hotel & Convention Center in Grapevine, Texas. MicroStrategy customers Dr Pepper Snapple Group, Interstate Batteries, and Ryder System presented on enterprise data discovery with MicroStrategy 10. Each customer speaker explained how they have deployed self-service to decentralized teams and expanded analytics to new business groups while managing data governance through a centralized semantic architecture.

At this years BI Bake-Off, MicroStrategy was invited, along with Microsoft, Qlik and Tableau, to demonstrate its data discovery capabilities in an interactive and light-hearted environment see MicroStrategys bake-off video here. Each vendor was asked to make data-driven decisions analyzing publicly available College Scorecard Data provided by the U.S. Department of Education. The questions asked of vendors were designed with specific data discovery functionalities and business user challenges in mind. MicroStrategy demonstrated the capabilities of MicroStrategy 10, including its data blending, data preparation, governed data discovery, and mobile features.

MicroStrategy emerged as a top performer in 13 of the 15 categories Gartner considers critical to success with BI and analytics, said Mark Gambill, CMO, MicroStrategy Incorporated. Our inclusion in the BI Bake-Off underscores the importance of our groundbreaking enterprise analytics platform in the market and motivates us to continue to expand its innovative capabilities and value for our customers.

Gartner Report MicroStrategys Version 10 Blends Agile Data Discovery With Governed BI and Analytics Published

In February, MicroStrategy announced that leading analyst firm Gartner published a report titled MicroStrategys Version 10 Blends Agile Data Discovery With Governed BI and Analytics[1]. A copy of the Gartner report is available, compliments of MicroStrategy, at:

http://www.microstrategy.com/us/go/gartner-report-microstrat...

The Gartner report outlines the following strategic planning assumptions: By 2018, data discovery and data management evolution will drive most organizations to augment centralized analytic architectures with decentralized approaches. By 2017, 75% of IT organizations will have a bimodal capability; half will not handle this well, by either remaining overcontrolling or outright ignoring the risks of more agile approaches. By 2018, smart, governed, Hadoop-based, search-based and visual-based data discovery will converge into a single set of next-generation data discovery capabilities, as components of a modern BI and analytics platform.

MicroStrategys innovative capabilities strike the right balance between agile data discovery and enterprise scalability, giving the market both data discovery and enterprise BI in a single analytics platform, said Michael J. Saylor, Chairman, President and CEO, MicroStrategy Incorporated. We welcome Gartners assessment of MicroStrategy 10s capabilities and our overall company strategy.

MicroStrategy Held its 19

Annual User Conference in Miami

In February, MicroStrategy held its 19th annual user conference, MicroStrategy World 2016, at the Miami Beach Convention Center. The conference featured more than 160 distinct sessions and 50 customer speakers, inspiring keynotes, numerous hands-on workshops, and countless opportunities to network with MicroStrategys vast ecosystem of partners. All technical sessions and brand new training workshops highlighted MicroStrategy 10 and how attendees can leverage its latest features and capabilities to build apps and dashboards, find answers, and complete tasks faster.

Speakers included 24 Hour Fitness, Ahold, AIG, Amazon Web Services, Boston Childrens Hospital, Cisco Systems, International Post Corporation, Jabil Circuit, Netflix, Overstock.com, and Ryder Systems. Customers were trained to successfully extract value from big data, build mobile productivity apps, move their on-premises analytics to the cloud, and deploy smartphone-based security applications.

MicroStrategy Announced its 2016 Symposium Series

In March, MicroStrategy announced its

, a global tour showcasing the MicroStrategy 10.3 release of its groundbreaking enterprise analytics platform MicroStrategy 10 Secure Enterprise. The 20-city global tour represented a unique opportunity for participants to learn about the latest advances in big data analytics, data discovery, mobile application development, and enterprise data security enabled by MicroStrategys unified analytics platform.

Each one-day event, which took place in cities across North America, Europe, the Middle East, and Asia in April, demonstrated version 10.3s functionality during an executive keynote, followed by a day filled with 12 to 16 breakout sessions and hands-on workshops that covered: Analytics big data, predictive analytics, data discovery, dashboards and visualizations, and enterprise-wide deployments; Mobility mobile analytics, workforce productivity apps, and custom mobile app development for end users; and Security employee access, customer access, enterprise security and analytics.

Gartner MicroStrategys Version 10 Blends Agile Data Discovery With Governed BI and Analytics by Cindi Howson, Rita L. Sallam, Josh Parenteau, December 11, 2015.

Non-GAAP Financial Measure

MicroStrategy is providing a supplemental financial measure for income from continuing operations that excludes the impact of share-based compensation arrangements and restructuring activities. This financial measure is not a measurement of financial performance under generally accepted accounting principles in the United States (GAAP) and, as a result, this financial measure may not be comparable to similarly titled measures of other companies. Management uses this non-GAAP financial measure internally to help understand, manage, and evaluate business performance and to help make operating decisions. MicroStrategy believes that this non-GAAP financial measure is also useful to investors and analysts in comparing its performance across reporting periods on a consistent basis because it excludes a significant non-cash expense that MicroStrategy believes is not reflective of its general business performance and restructuring charges that we believe are not reflective of ongoing operating results. In addition, accounting for share-based compensation arrangements requires significant management judgment and the resulting expense could vary significantly in comparison to other companies. Therefore, MicroStrategy believes the use of this non-GAAP financial measure can also facilitate comparison of MicroStrategys operating results to those of its competitors.

About MicroStrategy Incorporated

Founded in 1989, MicroStrategy (Nasdaq: MSTR) is a leading worldwide provider of enterprise software platforms. The Companys mission is to provide enterprise analytics, mobility, and security platforms that are flexible, powerful, scalable, and user-friendly. To learn more, visit MicroStrategy online, and follow us on

Facebook

Twitter

MicroStrategy, MicroStrategy 10, MicroStrategy 10 Secure Enterprise, MicroStrategy 10.2, MicroStrategy 10.3, and MicroStrategy Analytics 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 market acceptance of MicroStrategys new offerings, including MicroStrategy 10.3; the impact on our business of the restructuring plan we adopted in the third quarter of 2014; the Companys ability to recognize revenue or deferred revenue through delivery of products or satisfactory performance of services; continued acceptance of the Companys other products in the marketplace; fluctuations in tax benefits or provisions; the timing of significant orders; delays in or the inability of the Company to develop or ship new products; competitive factors; general economic conditions, including economic uncertainty in the retail industry, in which the Company has a significant number of customers; currency fluctuations; and other risks detailed in the Companys 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.

MSTR-F

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended

(unaudited)

Revenues

22,399

20,757

Subscription services

Total product licenses and subscription services

29,753

27,422

68,497

69,305

20,765

27,144

Total revenues

119,015

123,871

Cost of revenues

14,322

19,074

Total cost of revenues

22,823

27,098

Gross profit

96,192

96,773

Sales and marketing

36,577

36,520

Research and development

17,575

15,398

General and administrative

22,219

22,125

Restructuring costs

Total operating expenses

76,396

74,128

19,796

22,645

Interest income, net

Other (expense) income, net

(1,668

Income before income taxes

18,531

27,397

Provision for income taxes

14,272

20,460

Basic earnings per share (1):

Weighted average shares outstanding used in computing basic earnings per share

11,408

11,321

Diluted earnings per share (1):

Weighted average shares outstanding used in computing diluted earnings per share

11,479

11,455

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

CONSOLIDATED BALANCE SHEETS

Assets

Current assets

Cash and cash equivalents

308,887

292,341

Restricted cash

Short-term investments

227,410

193,320

Accounts receivable, net

56,558

68,154

Prepaid expenses and other current assets

14,563

10,881

Total current assets

608,119

565,314

Property and equipment, net

63,228

65,664

Capitalized software development costs, net

13,902

15,855

Deposits and other assets

Deferred tax assets, net

Total Assets

693,178

656,894

Liabilities and Stockholders Equity

Current liabilities

Accounts payable and accrued expenses

27,836

31,840

Accrued compensation and employee benefits

36,573

40,067

Accrued restructuring costs

Deferred revenue and advance payments

131,437

100,695

Total current liabilities

195,879

172,658

10,183

Other long-term liabilities

19,252

19,943

Deferred tax liabilities

Total Liabilities

225,330

201,613

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; 15,794 shares issued and 9,389 shares outstanding, and 15,771 shares issued and 9,366 shares outstanding, respectively

Class B convertible common stock, $0.001 par value; 165,000 shares authorized; 2,035 shares issued and outstanding, and 2,035 shares issued and outstanding, respectively

Additional paid-in capital

532,284

534,651

Treasury stock, at cost; 6,405 shares

(475,184

Accumulated other comprehensive loss

(6,746

(7,408

Retained earnings

417,476

403,204

Total Stockholders Equity

467,848

455,281

Total Liabilities and Stockholders Equity

Derived from audited financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Operating activities:

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

Depreciation and amortization

Bad debt expense

Unrealized net gain on foreign currency forward contracts

Non-cash restructuring costs and adjustments

Deferred taxes

Release of liabilities for unrecognized tax benefits

Share-based compensation expense

Excess tax benefits from share-based compensation arrangements

(1,266

Changes in operating assets and liabilities:

11,915

16,164

(3,551

(3,093

(6,161

(4,083

(12,951

(1,120

30,065

27,620

(1,009

Net cash provided by operating activities

50,827

55,846

Investing activities:

Proceeds from redemption of short-term investments

63,500

90,000

Purchases of property and equipment

(1,535

Purchases of short-term investments

(97,417

(118,155

(5,354

Increase in restricted cash

Net cash used in investing activities

(34,166

(35,124

Financing activities:

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

Payment of taxes relating to net exercise of employee stock options

(3,739

Payments on capital lease obligations and other financing arrangements

Net cash (used in) provided by financing activities

(2,354

Effect of foreign exchange rate changes on cash and cash equivalents

(4,318

Net increase in cash and cash equivalents

16,546

18,175

Cash and cash equivalents, beginning of period

146,919

Cash and cash equivalents, end of period

165,094

REVENUE AND COST OF REVENUE DETAIL

Product licenses and subscription services:

Other services:

Consulting

18,486

24,704

Total other services

13,033

18,147

DEFERRED REVENUE DETAIL

Current:

Deferred product licenses revenue

13,088

13,506

12,946

Deferred subscription services revenue

17,593

15,763

15,300

Deferred product support revenue

164,667

158,738

162,875

Deferred other services revenue

Gross current deferred revenue and advance payments

202,759

197,156

199,087

Less: unpaid deferred revenue

(71,322

(96,461

(67,619

Net current deferred revenue and advance payments

131,468

Non-current:

Gross non-current deferred revenue and advance payments

17,093

15,937

16,587

(6,910

(6,942

(5,221

Net non-current deferred revenue and advance payments

11,366

Total current and non-current:

20,661

18,903

19,809

19,933

17,901

16,035

171,092

166,345

169,740

10,090

Gross current and non-current deferred revenue and advance payments

219,852

213,093

215,674

(78,232

(103,403

(72,840

Net current and non-current deferred revenue and advance payments

141,620

109,690

142,834

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

Reconciliation of non-GAAP income from operations:

21,325

26,327

WORLDWIDE EMPLOYEE HEADCOUNT

June 30,

September 30,

Total headcount

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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MicroStrategy Incorporated releases salary data. CEO sees compensation fall -97% - April 21, 2016