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MicroStrategy Announces Second Quarter 2023 Financial Results

  • Acquired 12,800 bitcoins since Q1 for $361.4 million, or $28,233 per bitcoin
  • As of July 31, 2023, held 152,800 bitcoins acquired for total cost of $4.53 billion, or $29,672 per bitcoin
  • Total Revenues of $120.4 million, 1% decrease year-over-year, flat at constant currency
  • Software Licenses Revenues of $35.4 million, 4% increase year-over-year, 7% on a constant currency basis
  • Subscription Services Revenues of $19.9 million, 42% increase year-over-year, 44% on a constant currency basis

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 June 30, 2023 (the second quarter of its 2023 fiscal year).

“Our new MicroStrategy ONE platform is the most important product innovation in the history of our company because it represents a fundamental shift in our industry to harness the power of business intelligence and artificial intelligence together to upgrade the way organizations do business. The growth in our recurring revenue this quarter illustrated the strength of our enterprise cloud platform, despite ongoing macroeconomic headwinds,” said Phong Le, President and Chief Executive Officer, MicroStrategy.

“Our bitcoin holdings increased to 152,800 bitcoins as of July 31, 2023, with the addition in the second quarter of 12,333 bitcoins being the largest increase in a single quarter since Q2 2021. We efficiently raised capital through our at-the-market equity program and used cash from operations to continue to increase bitcoins on our balance sheet. And we did so against the promising backdrop of increasing institutional interest, progress on accounting transparency, and ongoing regulatory clarity for bitcoin,” said Andrew Kang, Chief Financial Officer, MicroStrategy.

Second Quarter 2023 Financial Highlights

  • Revenues: Total revenues for the second quarter of 2023 were $120.4 million, a 1.4% decrease, or a 0.5% decrease on a non-GAAP constant currency basis, compared to the second quarter of 2022. Product licenses and subscription services revenues for the second quarter of 2023 were $35.4 million, a 3.7% increase, or a 6.6% increase on a non-GAAP constant currency basis, compared to the second quarter of 2022. Product support revenues for the second quarter of 2023 were $66.1 million, a 0.7% decrease on both a GAAP basis and non-GAAP constant currency basis, compared to the second quarter of 2022. Other services revenues for the second quarter of 2023 were $18.9 million, an 11.6% decrease, or a 10.9% decrease on a non-GAAP constant currency basis, compared to the second quarter of 2022.
  • Gross Profit: Gross profit for the second quarter of 2023 was $93.3 million, representing a 77.5% gross margin, compared to a gross profit of $96.9 million, representing a gross margin of 79.4%, for the second quarter of 2022.
  • Operating Expenses: Operating expenses for the second quarter of 2023 were $120.0 million, an 88.2% decrease compared to the second quarter of 2022. Operating expenses include impairment losses on the Company’s digital assets, which were $24.1 million during the second quarter of 2023, compared to $917.8 million in the second quarter of 2022.
  • Loss from Operations and Net Income (Loss): Loss from operations for the second quarter of 2023 was $26.7 million, compared to $918.1 million for the second quarter of 2022. Net income for the second quarter of 2023 was $22.2 million, or $1.52 per share on a diluted basis, as compared to a net loss of $1.062 billion, or $94.01 per share on a diluted basis, for the second quarter of 2022. Digital asset impairment losses of $24.1 million and $917.8 million for the second quarter of 2023 and 2022, respectively, were reflected in these amounts. Benefit from income taxes of $60.3 million and provision for income taxes of $136.1 million for the second quarter of 2023 and 2022, respectively, were reflected in net income (loss).
  • Cash and Cash Equivalents: As of June 30, 2023, the Company had cash and cash equivalents of $66.0 million, as compared to $43.8 million as of December 31, 2022, an increase of $22.1 million.
  • Digital Assets: As of June 30, 2023, the carrying value of the Company’s digital assets (comprised of approximately 152,333 bitcoins) was $2.323 billion, which reflects cumulative impairment losses of $2.196 billion since acquisition and an average carrying amount per bitcoin of approximately $15,251. As of June 30, 2023, the original cost basis and market value of the Company’s bitcoin were $4.519 billion and $4.625 billion, respectively, which reflects an average cost per bitcoin of approximately $29,668 and a market price per bitcoin of $30,361.51, respectively.
  • Sales Agreement: On May 1, 2023, MicroStrategy entered into a Sales Agreement (the “2023 Sales Agreement”) with Cowen and Company, LLC and Canaccord Genuity LLC as agents (collectively, the “2023 Sales Agents”), pursuant to which MicroStrategy may issue and sell shares of its class A common stock having an aggregate offering price of up to $625.0 million from time to time through the 2023 Sales Agents. During the three months ended June 30, 2023, the Company issued and sold 1,079,170 shares of its class A common stock under the 2023 Sales Agreement for aggregate net proceeds (less sales commissions and expenses) of approximately $333.5 million. As of June 30, 2023, approximately $290.0 million of the Company’s class A common stock remained available for issuance and sale pursuant to the 2023 Sales Agreement.

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 months ended June 30, 2023 and 2022. 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 2023 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 loss from operations that excludes the impact of share-based compensation expense, (ii) non-GAAP net income (loss) and non-GAAP diluted earnings (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, gain on debt extinguishment, 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, (iii) a gain on debt extinguishment, and (iv) 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 second quarter 2023 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) 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 and (2) grow our enterprise analytics software business to promote our vision of Intelligence Everywhere. 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; impacts to the price and rate of adoption of bitcoin associated with financial difficulties and bankruptcies of various participants in the digital asset industry; 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; changes in the market price of bitcoin as of period-end and their effect on our deferred tax assets and related valuation allowance; competitive factors; general economic conditions, including levels of inflation and 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

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

15,522

 

 

$

20,129

 

 

$

32,934

 

 

$

36,642

 

Subscription services

 

 

19,878

 

 

 

14,017

 

 

 

38,688

 

 

 

26,862

 

Total product licenses and subscription services

 

 

35,400

 

 

 

34,146

 

 

 

71,622

 

 

 

63,504

 

Product support

 

 

66,081

 

 

 

66,521

 

 

 

131,562

 

 

 

133,672

 

Other services

 

 

18,919

 

 

 

21,406

 

 

 

39,131

 

 

 

44,174

 

Total revenues

 

 

120,400

 

 

 

122,073

 

 

 

242,315

 

 

 

241,350

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

 

444

 

 

 

431

 

 

 

978

 

 

 

908

 

Subscription services

 

 

7,216

 

 

 

5,498

 

 

 

15,072

 

 

 

10,908

 

Total product licenses and subscription services

 

 

7,660

 

 

 

5,929

 

 

 

16,050

 

 

 

11,816

 

Product support

 

 

5,816

 

 

 

5,127

 

 

 

11,584

 

 

 

10,318

 

Other services

 

 

13,645

 

 

 

14,148

 

 

 

27,428

 

 

 

28,747

 

Total cost of revenues

 

 

27,121

 

 

 

25,204

 

 

 

55,062

 

 

 

50,881

 

Gross profit

 

 

93,279

 

 

 

96,869

 

 

 

187,253

 

 

 

190,469

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

37,660

 

 

 

36,862

 

 

 

73,766

 

 

 

70,102

 

Research and development

 

 

29,354

 

 

 

31,790

 

 

 

60,712

 

 

 

65,313

 

General and administrative

 

 

28,830

 

 

 

28,502

 

 

 

56,736

 

 

 

55,208

 

Digital asset impairment losses

 

 

24,143

 

 

 

917,838

 

 

 

43,054

 

 

 

1,087,929

 

Total operating expenses

 

 

119,987

 

 

 

1,014,992

 

 

 

234,268

 

 

 

1,278,552

 

Loss from operations

 

 

(26,708

)

 

 

(918,123

)

 

 

(47,015

)

 

 

(1,088,083

)

Interest expense, net

 

 

(11,095

)

 

 

(13,187

)

 

 

(26,025

)

 

 

(24,226

)

Gain on debt extinguishment

 

 

0

 

 

 

0

 

 

 

44,686

 

 

 

0

 

Other (expense) income, net

 

 

(250

)

 

 

5,120

 

 

 

(1,693

)

 

 

7,345

 

Loss before income taxes

 

 

(38,053

)

 

 

(926,190

)

 

 

(30,047

)

 

 

(1,104,964

)

(Benefit from) provision for income taxes

 

 

(60,296

)

 

 

136,108

 

 

 

(513,483

)

 

 

88,085

 

Net income (loss)

 

$

22,243

 

 

$

(1,062,298

)

 

$

483,436

 

 

$

(1,193,049

)

Basic earnings (loss) per share (1)

 

$

1.68

 

 

$

(94.01

)

 

$

41.18

 

 

$

(105.64

)

Weighted average shares outstanding used in computing basic earnings (loss) per share

 

 

13,247

 

 

 

11,300

 

 

 

11,739

 

 

 

11,294

 

Diluted earnings (loss) per share (1)

 

$

1.52

 

 

$

(94.01

)

 

$

33.56

 

 

$

(105.64

)

Weighted average shares outstanding used in computing diluted earnings (loss) per share

 

 

16,095

 

 

 

11,300

 

 

 

14,534

 

 

 

11,294

 

 

(1) Basic and fully diluted earnings (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)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022*

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

65,968

 

 

$

43,835

 

Restricted cash

 

 

2,085

 

 

 

7,033

 

Accounts receivable, net

 

 

121,901

 

 

 

189,280

 

Prepaid expenses and other current assets

 

 

19,680

 

 

 

24,418

 

Total current assets

 

 

209,634

 

 

 

264,566

 

 

 

 

 

 

 

 

Digital assets

 

 

2,323,252

 

 

 

1,840,028

 

Property and equipment, net

 

 

30,507

 

 

 

32,311

 

Right-of-use assets

 

 

58,264

 

 

 

61,299

 

Deposits and other assets

 

 

22,421

 

 

 

23,916

 

Deferred tax assets, net

 

 

719,026

 

 

 

188,152

 

Total Assets

 

$

3,363,104

 

 

$

2,410,272

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity (Deficit)

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable, accrued expenses, and operating lease liabilities

 

$

33,660

 

 

$

42,976

 

Accrued compensation and employee benefits

 

 

41,492

 

 

 

53,716

 

Accrued interest

 

 

1,493

 

 

 

2,829

 

Current portion of long-term debt, net

 

 

468

 

 

 

454

 

Deferred revenue and advance payments

 

 

195,817

 

 

 

217,428

 

Total current liabilities

 

 

272,930

 

 

 

317,403

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

2,177,974

 

 

 

2,378,560

 

Deferred revenue and advance payments

 

 

11,244

 

 

 

12,763

 

Operating lease liabilities

 

 

63,814

 

 

 

67,344

 

Other long-term liabilities

 

 

17,826

 

 

 

17,124

 

Deferred tax liabilities

 

 

198

 

 

 

198

 

Total liabilities

 

 

2,543,986

 

 

 

2,793,392

 

 

 

 

 

 

 

 

Stockholders’ Equity (Deficit)

 

 

 

 

 

 

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; 20,803 shares issued and 12,119 shares outstanding, and 18,269 shares issued and 9,585 shares outstanding, respectively

 

 

21

 

 

 

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

 

 

2,559,268

 

 

 

1,841,120

 

Treasury stock, at cost; 8,684 shares and 8,684 shares, respectively

 

 

(782,104

)

 

 

(782,104

)

Accumulated other comprehensive loss

 

 

(13,150

)

 

 

(13,801

)

Accumulated deficit

 

 

(944,919

)

 

 

(1,428,355

)

Total Stockholders’ Equity (Deficit)

 

 

819,118

 

 

 

(383,120

)

Total Liabilities and Stockholders’ Equity (Deficit)

 

$

3,363,104

 

 

$

2,410,272

 

 

* Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

 

(unaudited)

 

 

(unaudited)

 

Net cash provided by operating activities

 

$

18,925

 

 

$

22,863

 

Net cash used in investing activities

 

 

(527,416

)

 

 

(227,019

)

Net cash provided by financing activities

 

 

525,911

 

 

 

218,487

 

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

 

 

(235

)

 

 

(3,224

)

Net increase in cash, cash equivalents, and restricted cash

 

 

17,185

 

 

 

11,107

 

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

 

 

50,868

 

 

 

64,434

 

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

 

$

68,053

 

 

$

75,541

 

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses and subscription services:

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

15,522

 

 

$

20,129

 

 

$

32,934

 

 

$

36,642

 

Subscription services

 

 

19,878

 

 

 

14,017

 

 

 

38,688

 

 

 

26,862

 

Total product licenses and subscription services

 

 

35,400

 

 

 

34,146

 

 

 

71,622

 

 

 

63,504

 

Product support

 

 

66,081

 

 

 

66,521

 

 

 

131,562

 

 

 

133,672

 

Other services:

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

17,980

 

 

 

20,273

 

 

 

37,317

 

 

 

41,708

 

Education

 

 

939

 

 

 

1,133

 

 

 

1,814

 

 

 

2,466

 

Total other services

 

 

18,919

 

 

 

21,406

 

 

 

39,131

 

 

 

44,174

 

Total revenues

 

 

120,400

 

 

 

122,073

 

 

 

242,315

 

 

 

241,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses and subscription services:

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

 

444

 

 

 

431

 

 

 

978

 

 

 

908

 

Subscription services

 

 

7,216

 

 

 

5,498

 

 

 

15,072

 

 

 

10,908

 

Total product licenses and subscription services

 

 

7,660

 

 

 

5,929

 

 

 

16,050

 

 

 

11,816

 

Product support

 

 

5,816

 

 

 

5,127

 

 

 

11,584

 

 

 

10,318

 

Other services:

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

13,180

 

 

 

12,837

 

 

 

26,192

 

 

 

26,137

 

Education

 

 

465

 

 

 

1,311

 

 

 

1,236

 

 

 

2,610

 

Total other services

 

 

13,645

 

 

 

14,148

 

 

 

27,428

 

 

 

28,747

 

Total cost of revenues

 

 

27,121

 

 

 

25,204

 

 

 

55,062

 

 

 

50,881

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

$

93,279

 

 

$

96,869

 

 

$

187,253

 

 

$

190,469

 

MICROSTRATEGY INCORPORATED

DIGITAL ASSETS – ADDITIONAL INFORMATION

ROLLFORWARD OF BITCOIN HOLDINGS

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Approximate

 

 

Digital Asset

 

 

Digital Asset

 

 

Digital Asset

 

 

Approximate

 

 

Average

Source of Capital

 

Original Cost

 

 

Impairment

 

 

Carrying

 

 

Number of

 

 

Purchase or

Used to Purchase

 

Basis

 

 

Losses

 

 

Value

 

 

Bitcoins Held

 

 

Sale Price Per

 

 

Bitcoin

 

(in thousands)

 

 

(in thousands)

 

 

(in thousands)

 

 

(Disposed) *

 

 

Bitcoin

 

Balance at December 31, 2021

 

 

 

$

3,751,529

 

 

$

(901,319

)

 

$

2,850,210

 

 

 

124,391

 

 

$

30,159

 

Digital asset purchases

 

(a)

 

 

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

 

(b)

 

 

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

 

(c)

 

 

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

 

Digital asset purchases

 

(d)

 

 

56,443

 

 

 

 

 

 

56,443

 

 

 

3,204

 

 

 

17,616

 

Digital asset impairment losses

 

 

 

 

 

 

 

(198,557

)

 

 

(198,557

)

 

 

 

 

 

 

Digital asset sales **

 

 

 

 

(46,260

)

 

 

35,370

 

 

 

(10,890

)

 

 

(704

)

 

 

16,786

 

Balance at December 31, 2022

 

 

 

$

3,993,190

 

 

$

(2,153,162

)

 

$

1,840,028

 

 

 

132,500

 

 

$

30,137

 

Digital asset purchases

 

(e)

 

 

179,275

 

 

 

 

 

 

179,275

 

 

 

7,500

 

 

 

23,903

 

Digital asset impairment losses

 

 

 

 

 

 

 

(18,911

)

 

 

(18,911

)

 

 

 

 

 

 

Balance at March 31, 2023

 

 

 

$

4,172,465

 

 

$

(2,172,073

)

 

$

2,000,392

 

 

 

140,000

 

 

$

29,803

 

Digital asset purchases

 

(f)

 

 

347,003

 

 

 

 

 

 

347,003

 

 

 

12,333

 

 

 

28,136

 

Digital asset impairment losses

 

 

 

 

 

 

 

(24,143

)

 

 

(24,143

)

 

 

 

 

 

 

Balance at June 30, 2023

 

 

 

$

4,519,468

 

 

$

(2,196,216

)

 

$

2,323,252

 

 

 

152,333

 

 

$

29,668

 

*

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.

**

In the fourth quarter of 2022, MicroStrategy sold approximately 704 bitcoins having an original cost basis of $46.3 million and cumulative digital asset impairment losses of $35.4 million, resulting in a carrying value of $10.9 million at the time of sale. The approximately 704 bitcoins were sold for cash proceeds of $11.8 million, net of fees and expenses, resulting in gains on sale of $0.9 million.

 

(a)

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.

(b)

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

(c)

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

(d)

In the fourth quarter of 2022, MicroStrategy purchased bitcoin using $44.6 million of the net proceeds from its sale of class A common stock under its at-the-market offering program, and $11.8 million in proceeds from sales of bitcoin.

(e)

In the first quarter of 2023, MicroStrategy purchased bitcoin using $179.3 million of the net proceeds from its sale of class A common stock under its at-the-market offering program.

(f)

In the second quarter of 2023, MicroStrategy purchased bitcoin using $336.9 million of the net proceeds from its sale of class A common stock under its at-the-market offering program, and 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)

 

Market Value

Market Value

Market Value

of Bitcoin

of Bitcoin

of Bitcoin

Held at End

Held at End

Held at End

Approximate

Lowest

of Quarter

Highest

of Quarter

of Quarter

Number of

Market Price

Using Lowest

Market Price

Using Highest

Market Price

Using Ending

Bitcoins Held

Per Bitcoin

Market Price

Per Bitcoin

Market Price

Per Bitcoin at

Market Price

at End of

During

(in thousands)

During

(in thousands)

End of Quarter

(in thousands)

 

 

Quarter *

 

 

Quarter (a)

 

 

(b)

 

 

Quarter (c)

 

 

(d)

 

 

(e)

 

 

(f)

 

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

 

December 31, 2022

 

 

132,500

 

 

$

15,460.00

 

 

$

2,048,450

 

 

$

21,478.80

 

 

$

2,845,941

 

 

$

16,556.32

 

 

$

2,193,712

 

March 31, 2023

 

 

140,000

 

 

$

16,490.00

 

 

$

2,308,600

 

 

$

29,190.04

 

 

$

4,086,606

 

 

$

28,468.44

 

 

$

3,985,582

 

June 30, 2023

 

 

152,333

 

 

$

24,750.00

 

 

$

3,770,242

 

 

$

31,443.67

 

 

$

4,789,909

 

 

$

30,361.51

 

 

$

4,625,060

 

*

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, compliance and internal control failures at exchanges, 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

LOSS FROM OPERATIONS

(in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Reconciliation of non-GAAP loss from operations:

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

$

(26,708

)

 

$

(918,123

)

 

$

(47,015

)

 

$

(1,088,083

)

Share-based compensation expense

 

 

15,494

 

 

 

15,294

 

 

 

33,049

 

 

 

29,688

 

Non-GAAP loss from operations

 

$

(11,214

)

 

$

(902,829

)

 

$

(13,966

)

 

$

(1,058,395

)

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

NET INCOME (LOSS) AND DILUTED EARNINGS (LOSS) PER SHARE

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Reconciliation of non-GAAP net income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

22,243

 

 

$

(1,062,298

)

 

$

483,436

 

 

$

(1,193,049

)

Share-based compensation expense

 

 

15,494

 

 

 

15,294

 

 

 

33,049

 

 

 

29,688

 

Interest expense arising from amortization of debt issuance costs

 

 

2,190

 

 

 

2,168

 

 

 

4,400

 

 

 

4,297

 

Gain on debt extinguishment

 

 

0

 

 

 

0

 

 

 

(44,686

)

 

 

0

 

Income tax effects (1)

 

 

(2,998

)

 

 

(3,898

)

 

 

5,768

 

 

 

(7,342

)

Non-GAAP net income (loss)

 

$

36,929

 

 

$

(1,048,734

)

 

$

481,967

 

 

$

(1,166,406

)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share

 

$

1.52

 

 

$

(94.01

)

 

$

33.56

 

 

$

(105.64

)

Share-based compensation expense (per diluted share)

 

 

0.96

 

 

 

1.35

 

 

 

2.27

 

 

 

2.63

 

Interest expense arising from amortization of debt issuance costs (per diluted share) (3)

 

 

0.03

 

 

 

0.19

 

 

 

0.06

 

 

 

0.38

 

Gain on debt extinguishment (per diluted share)

 

 

0.00

 

 

 

0.00

 

 

 

(3.07

)

 

 

0.00

 

Income tax effects (per diluted share) (3)

 

 

(0.16

)

 

 

(0.34

)

 

 

0.46

 

 

 

(0.65

)

Non-GAAP diluted earnings (loss) per share

 

$

2.35

 

 

$

(92.81

)

 

$

33.28

 

 

$

(103.28

)

(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, interest expense for amortization of debt issuance costs, and gain on debt extinguishment.

 

(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.

 

(3)

For the three and six months ended June 30, 2023, interest expense from the amortization of issuance costs of the Convertible Notes has been added back to the numerator in the GAAP diluted earnings per share calculation, and therefore the per diluted share effects of the amortization of issuance costs of the Convertible Notes have been excluded from the “Interest expense arising from amortization of debt issuance costs (per diluted share)” and “Income tax effects (per diluted share)” lines in the above reconciliation for the three and six months ended June 30, 2023.

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

CONSTANT CURRENCY

(in thousands)

 

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

(unaudited)

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

Currency

 

 

Non-GAAP

 

 

 

 

 

 

 

 

Constant

 

 

 

Exchange Rate

 

 

Constant

 

 

 

 

 

GAAP %

 

 

Currency %

 

 

GAAP

 

 

Impact (1)

 

 

Currency (2)

 

 

GAAP

 

 

Change

 

 

Change (3)

 

 

 

2023

 

 

2023

 

 

2023

 

 

2022

 

 

2023

 

 

2023

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

15,522

 

 

$

(658

)

 

$

16,180

 

 

$

20,129

 

 

 

-22.9

%

 

 

-19.6

%

Subscription services

 

 

19,878

 

 

 

(328

)

 

 

20,206

 

 

 

14,017

 

 

 

41.8

%

 

 

44.2

%

Total product licenses and subscription services

 

 

35,400

 

 

 

(986

)

 

 

36,386

 

 

 

34,146

 

 

 

3.7

%

 

 

6.6

%

Product support

 

 

66,081

 

 

 

34

 

 

 

66,047

 

 

 

66,521

 

 

 

-0.7

%

 

 

-0.7

%

Other services

 

 

18,919

 

 

 

(147

)

 

 

19,066

 

 

 

21,406

 

 

 

-11.6

%

 

 

-10.9

%

Total revenues

 

 

120,400

 

 

 

(1,099

)

 

 

121,499

 

 

 

122,073

 

 

 

-1.4

%

 

 

-0.5

%

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

(unaudited)

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

Currency

 

 

Non-GAAP

 

 

 

 

 

 

 

 

Constant

 

 

 

Exchange Rate

 

 

Constant

 

 

 

 

 

GAAP %

 

 

Currency %

 

 

GAAP

 

 

Impact (1)

 

 

Currency (2)

 

 

GAAP

 

 

Change

 

 

Change (3)

 

 

 

2023

 

 

2023

 

 

2023

 

 

2022

 

 

2023

 

 

2023

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

32,934

 

 

$

(1,715

)

 

$

34,649

 

 

$

36,642

 

 

 

-10.1

%

 

 

-5.4

%

Subscription services

 

 

38,688

 

 

 

(1,062

)

 

 

39,750

 

 

 

26,862

 

 

 

44.0

%

 

 

48.0

%

Total product licenses and subscription services

 

 

71,622

 

 

 

(2,777

)

 

 

74,399

 

 

 

63,504

 

 

 

12.8

%

 

 

17.2

%

Product support

 

 

131,562

 

 

 

(1,458

)

 

 

133,020

 

 

 

133,672

 

 

 

-1.6

%

 

 

-0.5

%

Other services

 

 

39,131

 

 

 

(986

)

 

 

40,117

 

 

 

44,174

 

 

 

-11.4

%

 

 

-9.2

%

Total revenues

 

 

242,315

 

 

 

(5,221

)

 

 

247,536

 

 

 

241,350

 

 

 

0.4

%

 

 

2.6

%

(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)

 

June 30,

 

 

December 31,

 

 

June 30,

 

2023

 

 

2022*

 

 

2022

 

(unaudited)

 

 

 

(unaudited)

 

Current:

 

 

 

 

Deferred product licenses revenue

$

974

 

 

$

2,825

 

 

$

754

 

Deferred subscription services revenue

 

49,898

 

 

 

51,861

 

 

 

40,295

 

Deferred product support revenue

 

141,605

 

 

 

155,366

 

 

 

143,524

 

Deferred other services revenue

 

3,340

 

 

 

7,376

 

 

 

3,525

 

Total current deferred revenue and advance payments

$

195,817

 

 

$

217,428

 

 

$

188,098

 

 

 

 

 

Non-current:

 

 

 

 

 

 

 

 

Deferred product licenses revenue

$

2,493

 

 

$

2,742

 

 

$

0

 

Deferred subscription services revenue

 

2,888

 

 

 

3,030

 

 

 

2,639

 

Deferred product support revenue

 

5,340

 

 

 

6,387

 

 

 

5,272

 

Deferred other services revenue

 

523

 

 

 

604

 

 

 

586

 

Total non-current deferred revenue and advance payments

$

11,244

 

 

$

12,763

 

 

$

8,497

 

 

 

 

 

 

 

 

 

Total current and non-current:

 

 

 

 

 

 

 

 

Deferred product licenses revenue

$

3,467

 

 

$

5,567

 

 

$

754

 

Deferred subscription services revenue

 

52,786

 

 

 

54,891

 

 

 

42,934

 

Deferred product support revenue

 

146,945

 

 

 

161,753

 

 

 

148,796

 

Deferred other services revenue

 

3,863

 

 

 

7,980

 

 

 

4,111

 

Total current and non-current deferred revenue and advance payments

$

207,061

 

 

$

230,191

 

 

$

196,595

 

 

* Derived from audited financial statements.

 

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