Marks Third Consecutive Quarter of GAAP Profitability; Fourth Consecutive Quarter of Pro Forma Profitability
MCLEAN, Va., (October 24, 2002) –
MicroStrategy® Incorporated (NASDAQ: MSTR), a leading worldwide provider of business intelligence software, today announced its financial results for the three-month period ended September 30, 2002 (the third quarter of its 2002 fiscal year), reporting both GAAP and pro forma profitability. This marked MicroStrategy’s third consecutive quarter of GAAP profitability and its fourth consecutive quarter of pro forma profitability.
Third quarter 2002 revenues were $33.4 million versus $36.8 million in the second quarter of 2002 and $41.4 million in the third quarter of 2001. Net income attributable to common stockholders for the third quarter of 2002, determined in accordance with Generally Accepted Accounting Principles (GAAP), was $37.4 million, or $0.18 per share on a diluted basis. Pro forma net income for the third quarter of 2002 was $1.0 million, or $0.08 per share on a diluted basis. Pro forma net income excludes restructuring and impairment charges, amortization of goodwill and intangible assets, loss on investments, amortization of the discount on notes payable, gains totaling $40.8 million attributable to the refinancing of MicroStrategy’s series B, C, and D preferred stock and the partial extinguishment of notes payable, and other non-recurring items. A reconciliation of GAAP to pro forma earnings is included in the attached financial exhibits.
“We’re pleased to report that we have once again achieved profitability, particularly during the challenging summer quarter,” said MicroStrategy President and CFO Eric Brown. “We also made significant improvements to our balance sheet through a preferred stock refinancing and maintained positive operating cash flow. We also generated $5.3 million in pro forma EBITDA for the third quarter and $19.0 million for the three quarters completed to date.”
“MicroStrategy has made remarkable progress strengthening itself financially during the last two years,” said MicroStrategy Chairman and CEO Michael J. Saylor. “We’re confident about our future and are expanding our sales force. We’re building on our technological leadership by enhancing our award-winning business intelligence platform with the latest release of MicroStrategy 7i, which has new features for financial reporting. Our impressive roster of customer deals this quarter demonstrates that we continue to win major business with leading companies and organizations worldwide.”
Highlights from Q3 2002
Signed Agreements with 21 Systems Integrators and OEMs (Original Equipment Manufacturers)
New partners include: Angoss Software Corporation, Asquare Global, LLC, AutomationOne, Inc., Born Information Services, Diversified Systems, Inc., e-Bank, LLC, General Technology, Inc., Honovi Solutions Inc., QuantiSense, Inc., Solution Builders, StrategyEdu, LLC and Weingartner Consulting.
Added 110 New Customers
New Customers and New Deals with Existing Customers in Q3 2002 Included: AdvancePCS, AmerisourceBergen, Alticor, Bull Moose Tube Company, Centers for Medicare and Medicaid Services, Cole National Corporation, Deutsche Lufthansa AG, El Corte Inglés, Federal Highway Administration, Garden Ridge, Interacciona, Katz Group, KeyBank, Liz Claiborne, Mixx Ltd., Nationwide Insurance, Pfizer, PPL Corporation, Prescription Solutions, RxWEST, Scottish Widows, Serpro, Siemens Business Services, Solucient, Thomas Cook AG, United States Department of Education, United States Postal Service, Universal Music Group, Verizon, Yamanouchi, Inc. and Zomax Incorporated.
Examples of Noteworthy Customer Deals from Q3 2002:
Liz Claiborne Inc.
Liz Claiborne Inc., a leading marketer and designer of apparel and accessories for women and men, purchased MicroStrategy software and services in the third quarter of 2002 to extend its business intelligence capabilities to over 200 employees within its wholesale division. With MicroStrategy technology, company employees will have the ability to dynamically examine retail sales information pertaining to product and classification performance, SKU level analysis, account/store performance and geographic analysis. This application will allow Liz Claiborne to refine future product lines, product assortments and retail account forecasts, and thereby improve customer intimacy.
AdvancePCS
In the third quarter of 2002, AdvancePCS, the nation’s largest provider of health improvement services, expanded its agreement with MicroStrategy for products and services that will enhance extranet applications for clients. AdvancePCS serves more than 75 million health plan members (approximately 1 in 4 Americans), links to nearly 60,000 pharmacies and manages $28 billion annually in health care expenditures.
Cole National Corporation
Cole National Corporation, a leading retailer of optical services with over 1,700 locations throughout North America and the Caribbean, purchased MicroStrategy software and services in the third quarter of 2002 to extend its business intelligence applications across the corporation. The application will enable the merchandising, finance, and field employees to perform detailed sales analysis over the web.
Solucient
Solucient, a leading provider of data-intensive, Internet-based tools in the health care field, licensed MicroStrategy software in 2002 to update and enhance Solucient’s suite of marketing and planning products. MicroStrategy enabled Solucient to meet both the product’s functional requirements and its very aggressive time-to-market objectives. Moreover, MicroStrategy was able to manage extremely large data sets — terabytes — which are characteristic of Solucient applications. The Company also provided strong analytic capabilities and a sophisticated web development API which allowed it to be integrated with other applications.
Serpro
Serpro, Brazil’s Federal Government IT Agency, renewed its commitment with MicroStrategy by purchasing additional software and services in the third quarter of 2002 in order to better service its customers. With MicroStrategy’s Web-based platform, Serpro’s customers (federal government organizations), with more than 800 end users, are able to access its several data warehouses with ease, and use the MicroStrategy platform to support decision-making at various strategic, tactical and operational levels within the organization. With MicroStrategy technology, Serpro expects to increase productivity, improve customer service and reduce costs.
Verizon
In the third quarter of 2002, Verizon purchased additional licenses from MicroStrategy to expand the reach of its MicroStrategy-based business intelligence application. End users of Verizon’s Network Metrics Portal will use MicroStrategy technology to analyze the information contained in its data warehouse in order to make better business decisions. Verizon Communications is one of the world’s leading providers of communications services.
MicroStrategy Further Expands the Capabilities of its Industrial-Strength Business Intelligence Platform
Earlier this year, MicroStrategy released its new, significantly enhanced version of its business intelligence software platform, MicroStrategy 7i. Winning high praise from customers and leading industry analysts alike, MicroStrategy 7i represents a technological breakthrough for the industry as it is the first truly integrated, 100-percent Web-based platform that puts a wide range of user functionality into a single business intelligence technology.
In the third quarter, MicroStrategy further expanded the capabilities of its business intelligence platform with the latest release of MicroStrategy 7i (7.2.1). Addressing the urgent industry need for transparent financial tracking and reporting, this latest release is designed specifically to meet the demanding new requirements for financial reporting and analysis imposed on business by new government mandates with highly sophisticated, yet easy-to-use features. These new features allow fast deployment of Web-based financial reporting systems — companies can deploy an operational system within 90-120 days rather than the usual 6-12 months. While other accounting systems provide only rudimentary reporting functionality, lack analytic breadth, and cannot provide interactive data analysis to a wide population of users, MicroStrategy 7i can drill down to the full depths of transactional data and perform automated fraud and anomaly detection.
MicroStrategy 7i can report on data contained in SAP, Oracle, J.D. Edwards, PeopleSoft, and Baan financial systems, as well as data in custom-developed financial applications, providing greater transparency without expensive modifications to these installed financial applications.
Finance Commentary
As previously announced, on August 6, 2002, the Company closed a refinancing transaction with all the holders of its Series B, Series C, and Series D preferred stock. This refinancing resulted in the elimination of approximately $13 million in preferred stock dividends that would otherwise have been due over the next 2 years. The refinancing resulted in a $36.1 million GAAP gain in Q3 2002; this gain has been excluded from the Q3 2002 pro forma results. As of October 24, 2002, all $21.0 million stated value of the Series F preferred stock issued in connection with this refinancing transaction has been converted into an aggregate of 1,397,174 shares of common stock.
On July 30, 2002, the Company effected a one-for-ten reverse stock split of its Class A Common Stock and Class B Common Stock. All references to shares and per share amounts are stated on a post-split basis.
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 2002 supersedes any previously announced guidance as to the Company’s expectations for financial results for 2002.
Management offers the following guidance for the consolidated continuing operations of MicroStrategy, for the quarter ending December 31, 2002:
Revenue is expected to be in the range of approximately $35 to $39 million. Pro forma results of operations, excluding special items, are expected to range from breakeven to a profit of $2 million. Pro forma earnings per share, excluding special items and assuming a diluted weighted average share count, is expected to range from approximately breakeven to $0.15 per share. Average share count in the quarter using the diluted weighted average share count method is expected to be 13 to 14 million.
Management offers the following guidance for the full year 2003, which supersedes any previously announced guidance as to the Company’s expectations for financial results for 2003:
Consolidated revenue is expected to be in the range of $150 to $160 million. License revenue for 2003 is expected to increase by approximately 15% versus 2002. Pro forma results of operations, excluding special items, are expected to be a profit in the range of $15 to $20 million. Pro forma earnings per share, excluding special items and assuming a diluted weighted average share count of 14 to 15 million shares, is expected to range from approximately $1.00 to $1.40 per share. The Company expects to be profitable, on a pro forma basis, in each quarter of 2003. The Company also expects to have positive operating cash flow in each quarter of 2003.
To view the Consolidated Statement of Operations, Balance Sheets and other charts please visit: http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=mstr&script=410&layout=-6&item_id=349183.
About MicroStrategy Incorporated
Leadership in a Critical Market: Founded in 1989, MicroStrategy is a worldwide leader in the increasingly critical business intelligence software market. Large and small companies alike are harnessing MicroStrategy’s business intelligence software to gain vital insights from their data to help them proactively enhance cost-efficiency, productivity and customer relations and optimize revenue-generating strategies. MicroStrategy’s business intelligence platform offers exceptional capabilities that provide organizations — in virtually all facets of their operations — with user-friendly solutions to their data query, reporting, and advanced analytical needs, and distributes valuable insight on this data to users via Web, wireless, and voice. PC Magazine selected MicroStrategy 7(TM) as the 2001 “Editors’ Choice” for business intelligence software.
Enterprise-Class Business Intelligence: MicroStrategy 7i(TM) is a truly integrated, enterprise-class, Web-based business intelligence platform. With MicroStrategy 7i, enterprises can now standardize on one business intelligence platform and deploy high-value business intelligence enterprise-wide. MicroStrategy 7i’s configurable query, reporting, and OLAP Web interface is designed to support all users, from casual report viewers to power analysts.
Diverse Customer Base: MicroStrategy’s customer base cuts across industry and sector lines, with over 1,700 enterprise-class customers, including Lowe’s Home Improvement Warehouse, AT&T Wireless Group, Wachovia and GlaxoSmithKline. MicroStrategy also has relationships with over 400 systems integrators and application development and platform partners, including IBM, PeopleSoft, Hewlett-Packard, and JD Edwards.
MicroStrategy is listed on Nasdaq under the symbol MSTR. For more information on the Company, or to purchase or demo MicroStrategy’s software, please visit MicroStrategy’s Web site at http://www.microstrategy.com.
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 Company’s ability to secure financing for its current operations and long-term plans on acceptable terms; the ability of the Company to implement and achieve widespread customer acceptance of its MicroStrategy 7i software on a timely basis; the Company’s ability to recognize deferred revenue through delivery of products or satisfactory performance of services; the Company’s ability to effect the sale of non-core assets on reasonable terms; 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, MicroStrategy Business Intelligence Platform, MicroStrategy 7i, Scalable Business Intelligence Platform Built for the Internet 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.
Marc Brailov
MicroStrategy Incorporated
(703) 770-1670
mbrailov@microstrategy.com
Source: MicroStrategy