MicroStrategy Reports 19 Percent Increase in Revenues and 23 Percent Increase in License Revenues in 2003
GAAP Profitable in Q4 2003; Best Revenue Quarter in Three Years
MCLEAN, Va., (January 29, 2004) –
MicroStrategy(R) Incorporated (Nasdaq: MSTR), a leading worldwide provider of business intelligence software, today announced its financial results for the three- month period ended December 31, 2003 (the fourth quarter of its 2003 fiscal year), reporting GAAP profitability and significant revenue growth from the preceding year. Full year 2003 revenues were $175.6 million versus $147.8 million in 2002, a 19 percent increase. License revenues in 2003 were $77.2 million versus $62.9 million in 2002, a 23 percent increase.
In terms of both overall and license revenues, the fourth quarter of 2003 was MicroStrategy’s best quarter in three years. In the fourth quarter, revenues increased by approximately 23 percent and license revenues grew by approximately 14 percent, in comparison to the same period last year. This marked the fifth consecutive quarter of year-over-year license revenue growth.
Fourth quarter 2003 revenues were $51.7 million versus $42.0 million in the fourth quarter of 2002 and $42.8 million in the third quarter of 2003. Fourth quarter 2003 license revenues were $23.4 million versus $20.5 million in the fourth quarter of 2002 and $17.7 million in the third quarter of 2003. Net income attributable to common stockholders for the fourth quarter of 2003, determined in accordance with Generally Accepted Accounting Principles (GAAP), was $17.5 million, or $1.02 per share on a diluted basis. This result included a non-cash income tax benefit from a change in the deferred tax valuation allowance of $5.2 million and a non-cash benefit from discontinued operations of $0.8 million. Fourth quarter 2003 income from operations was $12.5 million versus $4.5 million in the fourth quarter of 2002 and $7.0 million in the third quarter of 2003.
“By all objective financial measures, 2003 was an outstanding year for MicroStrategy, and Q4 was a particularly solid quarter,” said MicroStrategy President and CFO Eric F. Brown. “In 2003, our revenue growth was healthy; our license revenue growth especially robust; and the year was finished as it was started, with MicroStrategy being GAAP profitable.”
“MicroStrategy starts 2004 as a financially strong company with very positive market awareness and momentum,” said MicroStrategy Chairman and CEO Michael J. Saylor. “With the recent release of MicroStrategy Report Services(TM), we are extending our offerings beyond business analytics to the fast-growing enterprise-reporting space. We now offer an industrial-strength business intelligence platform that provides integrated reporting, analysis and information delivery. Customers are responding very positively to MicroStrategy Report Services, and we believe 2004 is shaping up to be an exciting year.”
Added 201 New Customers and New Deals
New customers and new deals with existing customers in Q4 2003 included:
Agriliance, LLC, Albertsons, Inc., Applebee’s International, Inc., AutoTrader.com, Bank of Montreal, Barnesandnoble.com, CareerBuilder, Inc., Cascade Natural Gas Company, CCC Information Services Group Inc., Cox Communications, Darden Corporation, First Franklin Financial Corporation, Giorgio Armani Corporation, Grange Insurance, Guess?, Inc., H&R Block, Inc., Hannaford Bros. Co., Hawaii Medical Service Association, IMS Health Incorporated, Ingenix, Inc., Lowe’s Companies, Inc., The May Department Stores Company, Meijer, Inc., Metropolitan Life Insurance Co., Michaels Stores, Inc., National Institutes of Health, Novartis Pharmaceuticals, R. H. Donnelley Corporation, Shaw Industries, Inc., Spectrum Health, State of Tennessee, The Wet Seal, Inc., TRX Data Services, Inc., Twentieth Century Fox Television, Universal Studios, Verizon Communications.
Examples of Noteworthy Customer Deals from Q4 2003:
Agriliance
Agriliance, LLC (www.agriliance.com) of St. Paul, MN has selected the MicroStrategy Business Intelligence Platform for their enterprise business intelligence environment. Against an Oracle 9 database, over 600 users will utilize the MicroStrategy platform to track and assess business data across the sales, marketing and financial functions. End users will gain an enhanced ability to track and assess their business in today’s dynamically changing agribusiness environment.
AutoTrader.com
AutoTrader.com, the Internet’s leading auto classifieds marketplace and consumer information website, selected MicroStrategy Report Services for enterprise-wide reporting and analysis. Over 800 AutoTrader.com employees will run reports against a 7-terabyte data warehouse and will use MicroStrategy Report Services for sales analysis and reporting to improve operational efficiencies and competitive insight.
Grange Insurance
Grange Insurance, a property and casualty insurer, has expanded its deployment of the MicroStrategy platform as its enterprise-wide standard for reporting and analysis. More than 300 associates, including internal marketing, pricing and customer management personnel, access product sales, transaction and customer interaction data via the Web to analyze and identify areas of improvement in product design and customer management, and to recognize cross and up-sell opportunities. With the addition of MicroStrategy Report Services, Grange associates have an integrated reporting solution that provides a single dashboard for each individual agent with pixel perfect printing quality.
Hawaii Medical Service Association
Hawaii Medical Service Association (HMSA), a nonprofit, mutual benefit society founded in 1938, has selected MicroStrategy for their Corporate Business Intelligence solution. The company will utilize the MicroStrategy platform to track and assess business data across clinical and financial areas to provide end users with greater insight into the company’s benefit costs. HMSA selected the MicroStrategy platform for its scalability and functionality.
Meredith Corporation
Meredith Corporation, one of the nation’s leading media and marketing companies with businesses centering on magazine and book publishing, television broadcasting, and interactive and integrated marketing, selected MicroStrategy for enterprise-wide enhanced customer analysis. The MicroStrategy platform will enable Meredith Corporation to perform query and reporting applications through a user-friendly Web interface against a Teradata(R) data warehouse. With the new MicroStrategy-based applications, Meredith Corporation will be able to conduct a wide range of Web-enabled reports and investigative data patterns and a full scope of query and statistical analyses.
Metropolitan Life
Metropolitan Life has expanded its deployment of the MicroStrategy platform for sales reporting and analysis. Approximately 1,500 users, including underwriters, sales managers and marketing personnel perform sales analysis against an IBM DB2 data warehouse. In the most recent deployment, MetLife is utilizing the MicroStrategy platform to track and assess business data across its Individual Business department to provide end users with greater insight into business operations.
MicroStrategy’s Strategic Partnerships
Signed 29 Agreements with Systems Integrators and OEMs (Original Equipment Manufacturers)
New partners include:
C3i, Incorporated, CGE&Y, CGI, Inc., Cognizant Technology Solutions, CSI, Dynix, HR Vista, JaiTech Systems, Inc., Jelecos Systems, Inc., Vivare, Inc., and XeoMatrix Incorporated.
MicroStrategy Releases Breakthrough Business Intelligence Reporting Technology
In November 2003, MicroStrategy released its breakthrough business intelligence reporting technology, MicroStrategy Report Services, which allows the extension of high-value business intelligence to the whole enterprise, and is specifically designed to appeal to non-technical users. The new technology is winning high praise from MicroStrategy customers and partners for its ability to deliver a wide range of enterprise report types. MicroStrategy Report Services simplifies the deployment of business intelligence applications throughout a large organization — to all its employees, customers, and suppliers. It provides content-rich, user-friendly reports that can enrich existing business intelligence applications and ease the creation of numerous new ones. MicroStrategy Report Services can deliver scorecards to executives, ‘managed metrics’ reports to business-unit leaders, business performance reports to divisional managers, operational reports to all personnel, and invoices and statements to external consumers.
In November, MicroStrategy won two 2003 DM Review Readership Awards for the categories of Analytic Applications, Business Performance Management and Web Analytics and Business Intelligence. MicroStrategy was the only company to win multiple awards from the readers of this leading trade publication. “Each year our highly informed readers identify the companies that provide industry-leading solutions. Our readers recognize the quality of MicroStrategy’s Business Intelligence Platform for overall business intelligence, as well as for analytic applications,” said Jean Schauer, Editor in Chief of DM Review. “We sincerely congratulate MicroStrategy and commend them for their commitment to excellence.”
Outlook and Financial Guidance Information
The following statements are subject to risks and uncertainties described at the end of this press release. Management guidance for 2004 contained herein is valid as of the date of this press release only and supersedes any previously announced guidance as to the company’s expectations for financial results for 2004.
(in millions, except
for per share data) Q1 2004 Range Full Year 2004 Range
Revenue $40.0 – $43.0 $185.0 – $195.0
Net Income $2.5 – $4.5 $28.8 – $33.2
GAAP diluted earnings
per share $0.14 – $0.26 $1.70 – $1.90
GAAP diluted weighted
average shares
outstanding 17.0 – 17.5 17.0 – 17.5
Additional Financial
Information
Amortization of
intangible assets ($0.02) – ($0.02) ($0.07) – ($0.07)
Total of Additional
Financial Information ($0.02) – ($0.02) ($0.07) – ($0.07)
MicroStrategy will be discussing its fourth quarter 2003 results on a conference call today beginning at approximately 5:30 p.m. EST. To access the conference call dial 877-597-9704 (domestically) or 706-364-6550 (internationally) and mention Michael Saylor as Chairperson. A live Webcast and replay of the conference call will be available at http://www.microstrategy.com/investor. A 48-hour replay of the call will also be available by dialing 800-642-1687 (domestically) or 706-364-6550 (internationally), conference ID4803489.
About MicroStrategy Incorporated
Founded in 1989, MicroStrategy is a worldwide leader in the increasingly critical business intelligence software market. Leading Fortune 2000 companies are integrating MicroStrategy’s industrial-strength software into virtually all facets of their businesses. The MicroStrategy Business Intelligence Platform(TM) distills vast amounts of data into vital, probing insight to help drive cost-efficiency, productivity, customer relations and revenue-generation. MicroStrategy offers exceptional capabilities – excellent scalability, powerful analytics, user-friendly query and reporting features and an outstanding, easy-to-use Web interface. Top companies are using MicroStrategy to cost-effectively harness large, multi-terabyte databases; empower thousands of employees at all operational levels; and extend the benefits of business intelligence enterprise-wide and beyond to customers, partners and suppliers.
MicroStrategy has over 2,300 enterprise-class customers, including General Motors, Best Buy, Lowe’s Home Improvement Warehouse, Yahoo!, Visa International, Wells Fargo, Telecom Italia, AT&T Wireless Group and Aventis. MicroStrategy also has relationships with over 500 systems integrators and application development and platform partners, including IBM, PeopleSoft, Sun, and HP. MicroStrategy is listed on Nasdaq under the symbol MSTR. For more information or to purchase or demo MicroStrategy’s software, visit MicroStrategy’s Web site at http://www.microstrategy.com.
MicroStrategy, MicroStrategy 7, MicroStrategy Business Intelligence Platform, MicroStrategy 7i, and MicroStrategy Report Services 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 its 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 ability of the Company to implement and achieve widespread customer acceptance of its MicroStrategy 7i and MicroStrategy Report Services software on a timely basis; the Company’s ability to recognize deferred revenue through delivery of products or satisfactory performance of services; continued acceptance of the Company’s products in the marketplace; the timing of significant orders; delays in the Company’s ability to develop or ship new products; market acceptance of 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. 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.
MICROSTRATEGY INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (audited)
Revenues
Product licenses $23,403 $20,466 $77,221 $62,865
Product support and
other services 28,269 21,503 98,356 84,962
Total revenues 51,672 41,969 175,577 147,827
Cost of Revenues
Product licenses 899 841 3,240 2,925
Product support and
other services 6,388 6,122 24,745 24,975
Total cost of
revenues 7,287 6,963 27,985 27,900
Gross profit 44,385 35,006 147,592 119,927
Operating Expenses
Sales and marketing 16,846 13,150 57,475 48,179
Research and development 6,048 7,851 27,684 26,297
General and
administrative 8,955 7,571 32,580 27,635
Restructuring and
impairment charges – 1,434 1,699 4,198
Amortization of
intangible assets 16 512 182 3,195
Total operating
expenses 31,865 30,518 119,620 109,504
Income from operations 12,520 4,488 27,972 10,423
Financing and Other
Income (Expense)
Interest income 99 119 644 728
Interest expense (note 1) (61) (2,363) (5,109) (8,413)
Loss on investments – – – (523)
Reduction in estimated
cost of litigation
settlement – – – 11,396
Gain (loss) on early
extinguishment of
notes payable – 2,089 (31,069) 6,750
Gain on contract
termination – – – 16,837
Other income, net 449 356 307 2,109
Total financing and
other income (expense) 487 201 (35,227) 28,884
Income (loss) from
continuing operations
before income taxes 13,007 4,689 (7,255) 39,307
(Benefit) provision
for income taxes (3,722) 59 (2,587) 1,190
Net income (loss)
from continuing
operations 16,729 4,630 (4,668) 38,117
Discontinued Operations
Gain on discontinued
operations 765 – 765 –
Net income (loss) 17,494 4,630 (3,903) 38,117
Dividends, accretion,
and beneficial
conversion feature
on convertible
preferred stock – – – (6,874)
Net gain on refinancing
of series B, C and D
convertible preferred
stock – – – 36,135
Net income (loss)
attributable to common
stockholders $17,494 $4,630 $(3,903) $67,378
Basic earnings (loss)
per share
Continuing
operations $1.05 $0.34 $(0.31) $3.20
Discontinued
operations $0.05 $- $0.05 $-
Net income (loss)
attributable to
common stockholders $1.10 $0.34 $(0.26) $3.20
Basic weighted
average shares
outstanding 15,950 13,591 14,804 11,676
Diluted earnings
(loss) per share
Continuing
operations $0.98 $0.33 $(0.31) $3.12
Discontinued
operations $0.04 $- $0.05 $-
Net income (loss)
attributable to
common stockholders $1.02 $0.33 $(0.26) $3.12
Diluted weighted
average shares
outstanding 17,152 13,837 14,804 11,986
(1) Interest expense for the three months ended December 31, 2003 and
2002, includes discount amortization expense on notes payable of $0 and
$1,033, respectively. Interest expense for the twelve months ended December
31, 2003 and 2002, includes discount amortization expense on notes payable of
$2,137 and $2,098, respectively.
MICROSTRATEGY INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
December December
31, 31,
2003 2002
Assets (unaudited) (audited)
Current assets
Cash and cash equivalents $51,882 $15,036
Restricted cash 747 6,173
Accounts receivable, net 30,993 28,195
Prepaid expenses and other current
assets 3,888 5,076
Deferred tax assets, net 1,807 495
Total current assets 89,317 54,975
Property and equipment, net 16,113 18,471
Goodwill and intangible assets, net 604 789
Capitalized software development
costs, net 3,693 4,414
Deposits and other assets 1,380 1,224
Deferred tax assets, net 3,686 –
Total Assets $114,793 $79,873
Liabilities and Stockholders’ Equity
(Deficit)
Current liabilities
Accounts payable and accrued
expenses $12,768 $15,267
Accrued compensation and employee
benefits 17,968 11,352
Accrued interest – 244
Accrued restructuring costs 2,599 5,222
Deferred revenue and advance
payments 28,374 23,961
Notes payable – 4,698
Net liabilities of discontinued
operations – 1,151
Total current liabilities 61,709 61,895
Deferred revenue and advance payments 2,750 1,381
Other long-term liabilities 2,443 2,402
Accrued restructuring costs 3,544 3,663
Notes payable – 45,041
Total Liabilities 70,446 114,382
Stockholders’ Equity (Deficit):
Preferred stock undesignated; $0.001
par value; 4,971 shares authorized;
no shares issued or outstanding – –
Class A common stock; $0.001 par
value; 330,000 shares authorized;
12,362 and 9,157 shares
issued and outstanding,
respectively 12 9
Class B common stock; $0.001 par
value; 165,000 shares authorized;
3,604 and 4,619 shares
issued and outstanding,
respectively 4 5
Additional paid-in capital 387,625 305,334
Deferred compensation – (17)
Accumulated other comprehensive
income 2,619 2,170
Accumulated deficit (345,913) (342,010)
Total Stockholders’ Equity (Deficit) 44,347 (34,509)
Total Liabilities and Stockholders’
Equity (Deficit) $114,793 $79,873
MICROSTRATEGY INCORPORATED
Computation of basic and diluted earnings per share
(in thousands, except per share data)
(unaudited)
Three months ended Three months ended
December 31, 2003 December 31, 2002
Income Shares Per Income Shares Per
(Numerator)(Denomi- Share (Numerator)(Denomi- Share
nator) Amount nator) Amount
Net income from
continuing operations $16,729 $4,630
Gain on discontinued
operations 765 –
Net income 17,494 4,630
Effect of common stock:
Weighted average shares
of class A common stock – 12,346 – 8,972
Weighted average shares
of class B common stock – 3,604 – 4,619
Basic earnings per share 17,494 15,950 $1.10 4,630 13,591 $0.34
Effect of dilutive
securities:
Employee stock options – 1,202 – 203
Series F preferred stock – – – 43
Diluted earnings per
share $17,494 17,152 $1.02 $4,630 13,837 $0.33
MICROSTRATEGY INCORPORATED
Computation of basic and diluted earnings (loss) per share
(in thousands, except per share data)
(unaudited)
Twelve months ended Twelve months ended
December 31, 2003 December 31, 2002
Income Shares Per Income Shares Per
(Numerator)(Denomi- Share (Numerator)(Denomi- Share
nator) Amount nator) Amount
Net (loss) income from
continuing
operations $(4,668) $38,117
Gain on discontinued
operations 765 –
Net (loss) income (3,903) 38,117
Dividends, accretion and
beneficial
conversion feature on
convertible
preferred stock – (6,874)
Net gain on refinancing
of series B, C and D
convertible preferred
stock – 36,135
Net (loss) income
attributable to common
stockholders (3,903) 67,378
Effect of common stock:
Weighted average shares
of class A common stock – 11,200 – 6,469
Weighted average shares
of class B common stock – 3,604 – 4,619
Series A preferred stock – – 327 160
Series B preferred stock – (15,311) 159
Series C preferred stock – (12,054) 95
Series D preferred stock – – (2,992) 174
Basic (loss) earnings
per share (3,903) 14,804 $(0.26) 37,348 11,676 $3.20
Effect of dilutive
securities:
Employee stock options – – – 155
Series F preferred stock – – – 155
Diluted (loss) earnings
per share $(3,903) 14,804 $(0.26) $37,348 11,986 $3.12
The diluted loss per share calculation for the twelve months ended
December 31, 2003 excluded employee stock options of 858,227 because
their effect would have been anti-dilutive.
The numerator in the basic and diluted earnings per share calculation
for the twelve months ended December 31, 2002 has been adjusted to
deduct the $36.1 million gain on the refinancing of the series B, C and D
convertible preferred stock and add back $6.1 million of dividends and
accretion on the series A, B, C and D convertible preferred stock that
would have been excluded from net income attributable to common
stockholders assuming conversion at the beginning of the period under the
if-converted method.
MICROSTRATEGY INCORPORATED
Additional Financial Information
Net Income (Loss) from Continuing Operations and Additional Financial
Information
(in thousands)
Three Months Twelve Months
(unaudited) Ended Ended
December 31, December 31,
2003 2002 2003 2002
Net income (loss) from continuing
operations $16,729 $4,630 $(4,668) $38,117
Additional Financial Information
Restructuring and impairment charges – 1,434 1,699 4,198
Amortization of intangible assets 16 512 182 3,195
Loss on investments – – – 523
Reduction in estimated cost of
litigation settlement – – – (11,396)
(Gain) loss on early extinguishment
of notes payable – (2,089) 31,069 (6,750)
Gain on contract termination – – – (16,837)
Discount amortization expense on
notes payable – 1,033 2,137 2,098
Income tax benefit – change in
deferred tax valuation allowance (5,175) – (5,175) –
Other items 26 (48) 26 26
Total $(5,133) $842 $29,938 $(24,943)
Additional Financial Information — Cash vs. Non-cash
(in thousands)
Three Months Twelve Months
(unaudited) Ended Ended
December 31, December 31,
2003 2002 2003 2002
Non-cash:
Restructuring and impairment charges $- $1,434 $- $1,491
Amortization of intangible assets 16 512 182 3,195
Loss on investments – – – 523
Reduction in estimated cost of
litigation settlement – – – (11,396)
(Gain) loss on early extinguishment
of notes payable – (2,089) 31,069 (6,750)
Gain on contract termination – – – (16,837)
Discount amortization expense on
notes payable – 1,033 2,137 2,098
Income tax benefit – change in
deferred tax valuation allowance (5,175) – (5,175) –
Other items – – – 284
Total non-cash (5,159) 890 28,213 (27,392)
Cash:
Restructuring and impairment charges – – 1,699 2,707
Other items 26 (48) 26 (258)
Total cash 26 (48) 1,725 2,449
Total $(5,133) $842 $29,938 $(24,943)
Additional Financial Information — Diluted Weighted Average Shares
Outstanding
The GAAP diluted loss per share calculation for the twelve months ended
December 31, 2003 excluded employee stock options of 858,227 because their
effect would have had an anti-dilutive impact on the net loss per share
calculation during such period. Had the Company generated net income in
accordance with GAAP, it would have been required under GAAP to include the
dilutive effect of employee stock options in the computation of GAAP diluted
weighted average shares outstanding.
MICROSTRATEGY INCORPORATED
Non-Generally Accepted Accounting Principles (“Non-GAAP”) Financial
Measures
Management believes that the presentation of the additional financial
information is helpful in understanding the ongoing operating results and
cash flow indicators with respect to the Company’s core business because the
additional financial items are non-cash or cash related gains and expenses
incurred during the period that are not associated with ongoing operating
results and are not cash flow indicators of the Company’s core business
operations.
EBITDA and Additional Financial Information
(in thousands)
(unaudited) Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2002 2003 2002
Net income (loss) attributable to
common stockholders $17,494 $4,630 $(3,903) $67,378
Interest income (99) (119) (644) (728)
Interest expense 61 2,363 5,109 8,413
(Benefit) provision for income
taxes (3,722) 59 (2,587) 1,190
Depreciation and amortization 1,989 2,311 8,652 9,916
Amortization of intangible assets 16 512 182 3,195
Gain on discontinued operations (765) – (765) –
EBITDA $14,974 $9,756 $6,044 $89,364
Additional Financial Information:
Restructuring and impairment
charges – 1,434 1,699 4,198
Loss on investments – – – 523
Reduction in estimated cost of
litigation settlement – – – (11,396)
(Gain) loss on early extinguishment
of notes payable – (2,089) 31,069 (6,750)
Gain on contract termination – – – (16,837)
Other income (449) (356) (307) (2,109)
Dividends, accretion, and
beneficial conversion feature on
convertible preferred stock – – – 6,874
Net gain on refinancing of series
B, C and D convertible preferred
stock – – – (36,135)
Total $(449) $(1,011) $32,461 $(61,632)
Marc Brailov of MicroStrategy Incorporated, +1-703-770-1670, or
mbrailov@microstrategy.com
http://www.microstrategy.com
Source: MicroStrategy