EX-99.1 5 mstr-ex991_6.htm EX-99.1

Exhibit 99.1

Contact:

MicroStrategy Incorporated

Investor Relations

ir@microstrategy.com

(703) 848-8600

MicroStrategy Announces

Second Quarter 2019 Financial Results

TYSONS CORNER, Va., July 30, 2019 - MicroStrategy® Incorporated (Nasdaq: MSTR), a leading worldwide provider of enterprise analytics and mobility software, today announced financial results for the three-month period ended June 30, 2019 (the second quarter of its 2019 fiscal year).

Second Quarter 2019 Financial Highlights

| • | Revenues: Total revenues for the second quarter of 2019 were $117.7 million, a 2.4% decrease or a 0.4% increase on a non-GAAP constant currency basis compared to the second quarter of 2018. Product licenses and subscription services revenues for the second quarter of 2019 were $27.2 million, a 1.3% increase or a 3.9% increase on a constant currency basis compared to the second quarter of 2018. Product support revenues for the second quarter of 2019 were $73.0 million, a 0.9% decrease or a 1.9% increase on a constant currency basis compared to the second quarter of 2018. Other services revenues for the second quarter of 2019 were $17.5 million, a 12.5% decrease or a 9.5% decrease on a constant currency basis compared to the second quarter of 2018.

| • | Gross Profit: Gross profit for the second quarter of 2019 was $92.4 million, representing a 78.5% gross margin, compared to a gross margin of 79.2% in the second quarter of 2018.

| • | Operating Expenses: Operating expenses for the second quarter of 2019 were $97.2 million versus $97.4 million for the second quarter of 2018, essentially flat year over year.

| • | Loss from Operations: Loss from operations for the second quarter of 2019 was $4.8 million versus $1.8 million for the second quarter of 2018. Non-GAAP loss from operations, which excludes share-based compensation expense, was $1.8 million for the second quarter of 2019 versus non-GAAP income from operations of $1.6 million for the second quarter of 2018.

| • | Net Income: Net income for the second quarter of 2019 was $20.4 million, or $1.98 per share on a diluted basis, as compared to net income of $4.8 million, or $0.42 per share on a diluted basis, for the second quarter of 2018. In the second quarter of 2019, MicroStrategy completed the sale of its Voice.com domain name for a gain of $21.8 million, net of tax (the “Domain Name Sale”). Excluding the impact of the Domain Name Sale, non-GAAP net loss for the second quarter of 2019 was $1.4 million, or $0.14 per share on a diluted basis.

| • | Cash and Short-term Investments: As of June 30, 2019, MicroStrategy had cash and cash equivalents and short-term investments of $574.8 million, as compared to $576.1 million as of December 31, 2018, a decrease of $1.3 million.

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, 2019 and 2018. An explanation of non-GAAP financial measures is also included under the heading “Non-GAAP Financial Measures” below.

MicroStrategy adopted Accounting Stand ards Update No. 2016-02, Leases (Topic 842), and its subsequent amendments (“ASU 2016-02”), effective January 1, 2019. Comparative prior period consolidated financial statements have not been restated and are not directly comparable to the current period c onsolidated financial statements.

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 iPad, MicroStrategy Library for iPhone, or MicroStrategy Library for Android tablet and smartphone.

Recent Business Highlights

MicroStrategy has been successfully driving its growth and productivity initiatives throughout the first half of 2019, and its initiatives around the MicroStrategy 2019™ platform, cloud, and customer adoption have been gaining more traction.

“I am very pleased with our accomplishments in the second quarter of 2019,” said Michael J. Saylor, CEO, MicroStrategy Incorporated. “The MicroStrategy 2019 platform won multiple industry awards, we have seen increased demand for our innovative Cloud and HyperIntelligence™ offerings, and we have improved key operational metrics for our business at the same time. Considering these accomplishments, I believe there is now a tremendous opportunity for MicroStrategy to take advantage of the dislocations that Tableau is likely to experience as a result of its pending acquisition by Salesforce.”

The following are some key business highlights from the second quarter of 2019:

| • | MicroStrategy announced the general availability of MicroStrategy 2019 Update 2, adding powerful new capabilities and products to the industry’s first and only platform for Federated Analytics, Transformational Mobility, and HyperIntelligence. The latest update expands the platform’s suite of HyperIntelligence products to enrich web browsing, accelerate access to intuitive intelligence on iOS and Android devices, and add windows of contextual insights to email on Outlook. The new update also delivers powerful enhancements designed to augment user productivity on popular BI tools including Tableau, Power BI, and Qlik, putting trusted insights into the hands of a larger number of users within the enterprise. The HyperIntelligence for Mobile app can be easily downloaded and installed from the Google Play store and Apple AppStore.

| • | MicroStrategy 2019 was recognized by Gartner, Inc. with the highest product scores across four use cases in the “Critical Capabilities for Analytics and Business Intelligence Platforms” report.1 According to Gartner’s findings, MicroStrategy ranks:

| o | #1 in Agile, Centralized BI Provisioning Use Case, scoring 4.34 (out of 5)

| o | #1 in Governed Data Discovery Use Case, scoring 4.24 (out of 5)

| o | #1 in OEM or Embedded BI Use Case, scoring 4.64 (out of 5)

| o | #1 in Extranet Deployment Use Case, scoring 4.38 (out of 5)

| o | #2 in Decentralized Analytics Use Case, scoring 4.23 (out of 5)

| • | MicroStrategy announced that the MicroStrategy Analytics Platform™ in the cloud is available on the Federal Risk and Authorization Management Program (FedRAMP) marketplace via IntelliCog Enterprise Cloud Analytics. With this first and only FedRAMP-ready enterprise analytics solution in the cloud, government agencies can rapidly adapt from old, insecure legacy IT to mission-enabling, secure, and cost-effective cloud-based IT.

| • | To promote adoption of its award-winning MicroStrategy 2019 platform within the existing installed base, MicroStrategy bundled expert services into its premium support offerings and issued complimentary upgrades to its largest customers. MicroStrategy also launched the MicroStrategy Elite Support program, which includes 400 hours of platform upgrade and advisory services annually.

| • | Following the announcements of the acquisitions of Tableau by Salesforce and Looker by Google, MicroStrategy reiterated its belief that its platform offering is a better long-term solution for organizations caught in the analytics industry upheaval. MicroStrategy’s independence, longevity, focus, and innovation uniquely position MicroStrategy as a preferred partner for companies seeking a better, long-term alternative for their analytics and mobility needs.

| • | MicroStrategy sold the Voice.com domain name for $30 million in cash in a transaction facilitated by GoDaddy. MicroStrategy holds more than a dozen evocative and powerful domain names. While MicroStrategy’s focus continues to be on its core analytics and mobility business, it is open to leveraging these domain names in equity or other strategic transactions with well-funded parties. To learn more about these domain names, please visit www.microstrategy.com/domains.

[1] Gartner, Critical Capabilities for Analytics and Business Intelligence Platforms, James Richardson, Rita Sallam, Austin Kronz, 14 May 2019.

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

Conference Call

MicroStrategy will be discussing its second quarter 2019 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 9389810. A live and archived webcast will be available under the “Events” section on MicroStrategy’s investor relations website at https://ir.microstrategy.com/events-presentations. A replay of the conference call will be available beginning approximately two hours after the call concludes until August 6, 2019 at (855) 859-2056 (domestically) or (404) 537-3406 (internationally) using the passcode 9389810.

Non-GAAP Financial Measures

MicroStrategy is providing supplemental financial measures for (i) (loss) income from operations that excludes the impact of share-based compensation arrangements, (ii) net (loss) income and diluted (loss) earnings per share that exclude the impact from the Domain Name Sale, and (iii) 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 a significant non-cash expense that MicroStrategy believes is not reflective of its general business performance, and for which the accounting requires significant management judgment and the resulting share-based compensation expense could vary significantly in comparison to other companies. The second category of supplemental financial measures excludes the impact from the Domain Name Sale, which is outside of MicroStrategy’s normal business operations. The third category 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 “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.

About MicroStrategy Incorporated

MicroStrategy (Nasdaq: MSTR) is a leading worldwide provider of enterprise analytics and mobility software and services. Our mission is to make every enterprise a more Intelligent Enterprise. MicroStrategy 2019 delivers modern analytics on an open, comprehensive enterprise platform designed to drive business results with Federated Analytics, Transformational Mobility, and HyperIntelligence. To learn more, visit MicroStrategy online, and follow us on LinkedIn, Twitter, and Facebook.

MicroStrategy, Intelligent Enterprise, MicroStrategy Library, MicroStrategy 2019, HyperIntelligence, and MicroStrategy Analytics Platform 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 MicroStrategy’s new offerings, including MicroStrategy 2019; the Company’s ability to recognize revenue or deferred revenue through delivery of products or satisfactory performance of services; continued acceptance of the Company’s other products in the marketplace; fluctuations in tax benefits or provisions, including as a result of changes to U.S. federal tax laws; the timing of significant orders; delays in or the inability of the Company to develop or ship new products; competitive factors; general economic conditions; currency fluctuations; and other risks detailed in the Company’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 INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

|  | Three Months Ended |  |  | Six Months Ended |
|  | June 30, |  |  | June 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
|  | (unaudited) |  |  | (unaudited) |  |  | (unaudited) |  |  | (unaudited) |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Product licenses |  | $ | 20,121 |  |  | $ | 19,292 |  |  | $ | 38,412 |  |  | $ | 36,593 |
Subscription services |  |  | 7,104 |  |  |  | 7,584 |  |  |  | 14,248 |  |  |  | 15,246 |
Total product licenses and subscription services |  |  | 27,225 |  |  |  | 26,876 |  |  |  | 52,660 |  |  |  | 51,839 |
Product support |  |  | 72,978 |  |  |  | 73,676 |  |  |  | 144,428 |  |  |  | 148,091 |
Other services |  |  | 17,534 |  |  |  | 20,050 |  |  |  | 36,015 |  |  |  | 43,639 |
Total revenues |  |  | 117,737 |  |  |  | 120,602 |  |  |  | 233,103 |  |  |  | 243,569 |
Cost of revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Product licenses |  |  | 552 |  |  |  | 1,667 |  |  |  | 1,071 |  |  |  | 3,878 |
Subscription services |  |  | 3,489 |  |  |  | 3,445 |  |  |  | 7,087 |  |  |  | 6,694 |
Total product licenses and subscription services |  |  | 4,041 |  |  |  | 5,112 |  |  |  | 8,158 |  |  |  | 10,572 |
Product support |  |  | 7,721 |  |  |  | 4,810 |  |  |  | 14,788 |  |  |  | 9,606 |
Other services |  |  | 13,588 |  |  |  | 15,118 |  |  |  | 28,577 |  |  |  | 30,047 |
Total cost of revenues |  |  | 25,350 |  |  |  | 25,040 |  |  |  | 51,523 |  |  |  | 50,225 |
Gross profit |  |  | 92,387 |  |  |  | 95,562 |  |  |  | 181,580 |  |  |  | 193,344 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  |  | 48,273 |  |  |  | 50,978 |  |  |  | 97,033 |  |  |  | 102,313 |
Research and development |  |  | 27,764 |  |  |  | 25,082 |  |  |  | 55,979 |  |  |  | 48,642 |
General and administrative |  |  | 21,180 |  |  |  | 21,299 |  |  |  | 43,784 |  |  |  | 43,471 |
Total operating expenses |  |  | 97,217 |  |  |  | 97,359 |  |  |  | 196,796 |  |  |  | 194,426 |
Loss from operations |  |  | (4,830 | ) |  |  | (1,797 | ) |  |  | (15,216 | ) |  |  | (1,082 | )
Interest income, net |  |  | 3,013 |  |  |  | 3,223 |  |  |  | 5,579 |  |  |  | 5,257 |
Other income, net |  |  | 29,431 |  |  |  | 4,461 |  |  |  | 28,835 |  |  |  | 2,867 |
Income before income taxes |  |  | 27,614 |  |  |  | 5,887 |  |  |  | 19,198 |  |  |  | 7,042 |
Provision for income taxes |  |  | 7,220 |  |  |  | 1,059 |  |  |  | 6,710 |  |  |  | 541 |
Net income |  | $ | 20,394 |  |  | $ | 4,828 |  |  | $ | 12,488 |  |  | $ | 6,501 |
Basic earnings per share (1): |  | $ | 1.99 |  |  | $ | 0.42 |  |  | $ | 1.21 |  |  | $ | 0.57 |
Weighted average shares outstanding used in computing basic earnings per share |  |  | 10,240 |  |  |  | 11,459 |  |  |  | 10,283 |  |  |  | 11,453 |
Diluted earnings per share (1): |  | $ | 1.98 |  |  | $ | 0.42 |  |  | $ | 1.21 |  |  | $ | 0.57 |
Weighted average shares outstanding used in computing diluted earnings per share |  |  | 10,310 |  |  |  | 11,493 |  |  |  | 10,350 |  |  |  | 11,488 |

(1) | Basic and fully diluted earnings 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, |
|  | 2019 |  |  | 2018* |
|  | (unaudited) |  |  |  |  |
Assets |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 261,497 |  |  | $ | 109,924 |
Restricted cash |  |  | 1,039 |  |  |  | 862 |
Short-term investments |  |  | 313,349 |  |  |  | 466,186 |
Accounts receivable, net |  |  | 129,144 |  |  |  | 171,359 |
Prepaid expenses and other current assets |  |  | 22,259 |  |  |  | 30,068 |
Total current assets |  |  | 727,288 |  |  |  | 778,399 |
Property and equipment, net |  |  | 54,285 |  |  |  | 51,919 |
Right-of-use assets |  |  | 89,631 |  |  |  | 0 |
Deposits and other assets |  |  | 7,981 |  |  |  | 8,134 |
Deferred tax assets, net |  |  | 20,535 |  |  |  | 17,316 |
Total Assets |  | $ | 899,720 |  |  | $ | 855,768 |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |
Accounts payable, accrued expenses, and operating lease liabilities |  | $ | 32,300 |  |  | $ | 33,684 |
Accrued compensation and employee benefits |  |  | 41,561 |  |  |  | 48,045 |
Deferred revenue and advance payments |  |  | 176,786 |  |  |  | 176,540 |
Total current liabilities |  |  | 250,647 |  |  |  | 258,269 |
Deferred revenue and advance payments |  |  | 4,175 |  |  |  | 6,469 |
Operating lease liabilities |  |  | 108,183 |  |  |  | 0 |
Other long-term liabilities |  |  | 33,990 |  |  |  | 61,262 |
Deferred tax liabilities |  |  | 36 |  |  |  | 37 |
Total Liabilities |  |  | 397,031 |  |  |  | 326,037 |
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; 15,853 shares issued and 8,205 shares outstanding, and 15,837 shares issued and 8,552 shares outstanding, respectively |  |  | 16 |  |  |  | 16 |
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 |  |  | 2 |  |  |  | 2 |
Additional paid-in capital |  |  | 584,764 |  |  |  | 576,957 |
Treasury stock, at cost; 7,648 shares and 7,285 shares, respectively |  |  | (634,405 | ) |  |  | (586,161 | )
Accumulated other comprehensive loss |  |  | (9,310 | ) |  |  | (10,217 | )
Retained earnings |  |  | 561,622 |  |  |  | 549,134 |
Total Stockholders’ Equity |  |  | 502,689 |  |  |  | 529,731 |
Total Liabilities and Stockholders’ Equity |  |  | 899,720 |  |  |  | 855,768 |

* | Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

|  | Six Months Ended |
|  | June 30, |
|  | 2019 |  |  | 2018 |
|  | (unaudited) |  |  | (unaudited) |
Operating activities: |  |  |  |  |  |  |  |
Net income |  | $ | 12,488 |  |  | $ | 6,501 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 7,687 |  |  |  | 3,870 |
Write-offs and sales allowances |  |  | 796 |  |  |  | 948 |
Net realized loss on short-term investments |  |  | 41 |  |  |  | 0 |
Deferred taxes |  |  | (3,219 | ) |  |  | (5,758 | )
Share-based compensation expense |  |  | 6,053 |  |  |  | 8,121 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | 5,985 |  |  |  | 5,044 |
Prepaid expenses and other current assets |  |  | 7,089 |  |  |  | 453 |
Deposits and other assets |  |  | 96 |  |  |  | (344 | )
Accounts payable and accrued expenses |  |  | (8,396 | ) |  |  | (7,775 | )
Accrued compensation and employee benefits |  |  | (8,082 | ) |  |  | (3,015 | )
Deferred revenue and advance payments |  |  | 33,489 |  |  |  | 10,502 |
Operating lease liabilities |  |  | (4,316 | ) |  |  | 0 |
Other long-term liabilities |  |  | (509 | ) |  |  | 4,780 |
Net cash provided by operating activities |  |  | 49,202 |  |  |  | 23,327 |
Investing activities: |  |  |  |  |  |  |  |
Proceeds from redemption of short-term investments |  |  | 369,603 |  |  |  | 245,680 |
Purchases of property and equipment |  |  | (8,432 | ) |  |  | (2,644 | )
Purchases of short-term investments |  |  | (212,248 | ) |  |  | (596,376 | )
Net cash provided by (used in) investing activities |  |  | 148,923 |  |  |  | (353,340 | )
Financing activities: |  |  |  |  |  |  |  |
Proceeds from sale of class A common stock under exercise of employee stock options |  |  | 1,836 |  |  |  | 2,471 |
Purchases of treasury stock |  |  | (48,244 | ) |  |  | 0 |
Payments on capital lease obligations and other financing arrangements prior to the adoption of ASU 2016-02 |  |  | 0 |  |  |  | (9 | )
Net cash (used in) provided by financing activities |  |  | (46,408 | ) |  |  | 2,462 |
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash |  |  | 33 |  |  |  | (2,240 | )
Net increase (decrease) in cash, cash equivalents, and restricted cash |  |  | 151,750 |  |  |  | (329,791 | )
Cash, cash equivalents, and restricted cash, beginning of period |  |  | 110,786 |  |  |  | 421,182 |
Cash, cash equivalents, and restricted cash, end of period |  | $ | 262,536 |  |  | $ | 91,391 |

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)

|  | Three Months Ended |  |  | Six Months Ended |
|  | June 30, |  |  | June 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
|  | (unaudited) |  |  | (unaudited) |  |  | (unaudited) |  |  | (unaudited) |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Product licenses and subscription services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Product licenses |  | $ | 20,121 |  |  | $ | 19,292 |  |  | $ | 38,412 |  |  | $ | 36,593 |
Subscription services |  |  | 7,104 |  |  |  | 7,584 |  |  |  | 14,248 |  |  |  | 15,246 |
Total product licenses and subscription services |  |  | 27,225 |  |  |  | 26,876 |  |  |  | 52,660 |  |  |  | 51,839 |
Product support |  |  | 72,978 |  |  |  | 73,676 |  |  |  | 144,428 |  |  |  | 148,091 |
Other services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consulting |  |  | 15,494 |  |  |  | 17,710 |  |  |  | 32,097 |  |  |  | 38,997 |
Education |  |  | 2,040 |  |  |  | 2,340 |  |  |  | 3,918 |  |  |  | 4,642 |
Total other services |  |  | 17,534 |  |  |  | 20,050 |  |  |  | 36,015 |  |  |  | 43,639 |
Total revenues |  |  | 117,737 |  |  |  | 120,602 |  |  |  | 233,103 |  |  |  | 243,569 |
Cost of revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Product licenses and subscription services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Product licenses |  |  | 552 |  |  |  | 1,667 |  |  |  | 1,071 |  |  |  | 3,878 |
Subscription services |  |  | 3,489 |  |  |  | 3,445 |  |  |  | 7,087 |  |  |  | 6,694 |
Total product licenses and subscription services |  |  | 4,041 |  |  |  | 5,112 |  |  |  | 8,158 |  |  |  | 10,572 |
Product support |  |  | 7,721 |  |  |  | 4,810 |  |  |  | 14,788 |  |  |  | 9,606 |
Other services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consulting |  |  | 11,909 |  |  |  | 13,542 |  |  |  | 24,894 |  |  |  | 26,863 |
Education |  |  | 1,679 |  |  |  | 1,576 |  |  |  | 3,683 |  |  |  | 3,184 |
Total other services |  |  | 13,588 |  |  |  | 15,118 |  |  |  | 28,577 |  |  |  | 30,047 |
Total cost of revenues |  |  | 25,350 |  |  |  | 25,040 |  |  |  | 51,523 |  |  |  | 50,225 |
Gross profit |  | $ | 92,387 |  |  | $ | 95,562 |  |  | $ | 181,580 |  |  | $ | 193,344 |

MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

|  | June 30, |  |  | December 31, |  |  | June 30, |
|  | 2019 |  |  | 2018* |  |  | 2018 |
|  | (unaudited) |  |  |  |  |  |  | (unaudited) |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Deferred product licenses revenue |  | $ | 633 |  |  | $ | 1,768 |  |  | $ | 1,819 |
Deferred subscription services revenue |  |  | 15,393 |  |  |  | 13,508 |  |  |  | 13,847 |
Deferred product support revenue |  |  | 152,866 |  |  |  | 152,501 |  |  |  | 151,909 |
Deferred other services revenue |  |  | 7,894 |  |  |  | 8,763 |  |  |  | 7,783 |
Total current deferred revenue and advance payments |  | $ | 176,786 |  |  | $ | 176,540 |  |  | $ | 175,358 |
Non-current: |  |  |  |  |  |  |  |  |  |  |  |
Deferred product licenses revenue |  | $ | 405 |  |  | $ | 542 |  |  | $ | 794 |
Deferred subscription services revenue |  |  | 116 |  |  |  | 2,384 |  |  |  | 9 |
Deferred product support revenue |  |  | 3,083 |  |  |  | 3,091 |  |  |  | 3,950 |
Deferred other services revenue |  |  | 571 |  |  |  | 452 |  |  |  | 1,063 |
Total non-current deferred revenue and advance payments |  | $ | 4,175 |  |  | $ | 6,469 |  |  | $ | 5,816 |
Total current and non-current: |  |  |  |  |  |  |  |  |  |  |  |
Deferred product licenses revenue |  | $ | 1,038 |  |  | $ | 2,310 |  |  | $ | 2,613 |
Deferred subscription services revenue |  |  | 15,509 |  |  |  | 15,892 |  |  |  | 13,856 |
Deferred product support revenue |  |  | 155,949 |  |  |  | 155,592 |  |  |  | 155,859 |
Deferred other services revenue |  |  | 8,465 |  |  |  | 9,215 |  |  |  | 8,846 |
Total current and non-current deferred revenue and advance payments |  | $ | 180,961 |  |  | $ | 183,009 |  |  | $ | 181,174 |

* | Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

EXCLUSION OF SHARE-BASED COMPENSATION EXPENSE

(in thousands)

|  | Three Months Ended |  |  | Six Months Ended |
|  | June 30, |  |  | June 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
|  | (unaudited) |  |  | (unaudited) |  |  | (unaudited) |  |  | (unaudited) |
Reconciliation of non-GAAP (loss) income from operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss from operations |  | $ | (4,830 | ) |  | $ | (1,797 | ) |  | $ | (15,216 | ) |  | $ | (1,082 | )
Share-based compensation expense |  |  | 3,036 |  |  |  | 3,378 |  |  |  | 6,053 |  |  |  | 8,121 |
Non-GAAP (loss) income from operations |  | $ | (1,794 | ) |  | $ | 1,581 |  |  | $ | (9,163 | ) |  | $ | 7,039 |

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

EXCLUSION OF DOMAIN NAME SALE

(in thousands, except per share data)

|  | Three Months Ended |  |  | Six Months Ended |
|  | June 30, |  |  | June 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
|  | (unaudited) |  |  | (unaudited) |  |  | (unaudited) |  |  | (unaudited) |
Reconciliation of non-GAAP net (loss) income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 20,394 |  |  | $ | 4,828 |  |  | $ | 12,488 |  |  | $ | 6,501 |
Gain from Domain Name Sale, net of tax |  |  | (21,778 | ) |  |  | 0 |  |  |  | (21,778 | ) |  |  | 0 |
Non-GAAP net (loss) income |  | $ | (1,384 | ) |  | $ | 4,828 |  |  | $ | (9,290 | ) |  | $ | 6,501 |
Reconciliation of non-GAAP diluted (loss) earnings per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Diluted earnings per share |  | $ | 1.98 |  |  | $ | 0.42 |  |  | $ | 1.21 |  |  | $ | 0.57 |
Gain from Domain Name Sale, net of tax (per diluted share) |  |  | (2.12 | ) |  |  | 0.00 |  |  |  | (2.11 | ) |  |  | 0.00 |
Non-GAAP diluted (loss) earnings per share |  | $ | (0.14 | ) |  | $ | 0.42 |  |  | $ | (0.90 | ) |  | $ | 0.57 |

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

CONSTANT 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) |
|  | 2019 |  |  | 2019 |  |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2019 |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Product licenses |  | $ | 20,121 |  |  | $ | (616 | ) |  | $ | 20,737 |  |  | $ | 19,292 |  |  |  | 4.3 | % |  |  | 7.5 | %
Subscription services |  |  | 7,104 |  |  |  | (93 | ) |  |  | 7,197 |  |  |  | 7,584 |  |  |  | -6.3 | % |  |  | -5.1 | %
Total product licenses and subscription services |  |  | 27,225 |  |  |  | (709 | ) |  |  | 27,934 |  |  |  | 26,876 |  |  |  | 1.3 | % |  |  | 3.9 | %
Product support |  |  | 72,978 |  |  |  | (2,091 | ) |  |  | 75,069 |  |  |  | 73,676 |  |  |  | -0.9 | % |  |  | 1.9 | %
Other services |  |  | 17,534 |  |  |  | (603 | ) |  |  | 18,137 |  |  |  | 20,050 |  |  |  | -12.5 | % |  |  | -9.5 | %
Total revenues |  |  | 117,737 |  |  |  | (3,403 | ) |  |  | 121,140 |  |  |  | 120,602 |  |  |  | -2.4 | % |  |  | 0.4 | %

(1) | The “Foreign Currency Exchange Rate Impact” reflects the estimated impact from 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

WORLDWIDE EMPLOYEE HEADCOUNT

|  | June 30, |  |  | March 31, |  |  | December 31, |  |  | September 30, |  |  | June 30, |
|  | 2019 |  |  | 2019 |  |  | 2018 |  |  | 2018 |  |  | 2018 |
Subscription services |  |  | 62 |  |  |  | 54 |  |  |  | 56 |  |  |  | 55 |  |  |  | 54 |
Product support |  |  | 234 |  |  |  | 224 |  |  |  | 202 |  |  |  | 194 |  |  |  | 184 |
Consulting |  |  | 404 |  |  |  | 429 |  |  |  | 452 |  |  |  | 458 |  |  |  | 443 |
Education |  |  | 40 |  |  |  | 50 |  |  |  | 47 |  |  |  | 44 |  |  |  | 39 |
Sales and marketing |  |  | 637 |  |  |  | 675 |  |  |  | 707 |  |  |  | 699 |  |  |  | 687 |
Research and development |  |  | 764 |  |  |  | 733 |  |  |  | 716 |  |  |  | 688 |  |  |  | 651 |
General and administrative |  |  | 336 |  |  |  | 329 |  |  |  | 348 |  |  |  | 326 |  |  |  | 322 |
Total headcount |  |  | 2,477 |  |  |  | 2,494 |  |  |  | 2,528 |  |  |  | 2,464 |  |  |  | 2,380 |