MicroStrategy Ends 2004 With $132.5 Million in Cash Plus Short and Long-Term Investments, an $80.6 Million Increase Over 2003
MCLEAN, Va., (January 27, 2005) –
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, 2004 (the fourth quarter of its 2004 fiscal year) and for the full year ended December 31, 2004.
Fourth quarter 2004 revenue was $71.6 million versus $51.7 million in the fourth quarter of 2003, a 39% increase. License revenue for the quarter was $34.1 million versus $23.4 million in the fourth quarter of 2003, a 46% increase. Net income for the fourth quarter of 2004, determined in accordance with GAAP, was $24.5 million, or $1.43 per share on a diluted basis. Fourth quarter 2004 income from operations was $27.2 million, or 38% of revenue, versus $12.5 million, or 24% of revenue, in the fourth quarter of 2003. MicroStrategy’s cash plus short and long-term investments at the end of the fourth quarter of 2004 was $132.5 million versus $51.9 million at the end of the fourth quarter 2003.
Full year 2004 revenue was $231.2 million versus $175.6 million in 2003, a 32% increase. License revenue for the full year 2004 was $97.0 million versus $77.2 million in 2003, a 26% increase. Net income for the full year 2004, determined in accordance with GAAP, was $168.3 million, or $9.83 per share on a diluted basis. The full year 2004 tax benefit of $99.0 million included a net non-cash benefit of $102.1 million related to the release of the Company’s U.S. and Canadian deferred tax asset valuation allowance and the utilization of non-cash U.S. deferred tax assets. Full year 2004 income from operations was $68.5 million, or 30% of revenue, versus $28.0 million, or 16% of revenue, in 2003.
Highlights of the Fourth Quarter 2004
* Customer wins at Albertson’s, Alticor, Cingular Wireless, Emory
Healthcare, Ingenix, Lending Tree, McGraw-Hill Companies, Metropolitan
Life Insurance, Oakwood Homes, Pacific Gas and Electric, PPL Services
Corporation, The Bank of New York, The Container Store, and Wausau
Benefits
* Services revenue increased 33% over the fourth quarter of 2003
* Deferred revenue increased by $14.2 million, or 46% over the fourth
quarter of 2003
* The revenue mix for the quarter was 57% domestic and 43% international
* License contracts during the quarter totaled approximately 505, an
increase of approximately 32% over the fourth quarter 2003
* 29 contracts greater than $500K and 12 contracts greater than $1 million
* Days sales outstanding was 52 days
* Headcount at the end of the fourth quarter was 945
“MicroStrategy delivered another strong quarter, with record revenues, excellent operating margins, and outstanding license revenue growth,” said MicroStrategy President and CEO Michael Saylor. “Sales execution was excellent, and we continued to drive operational efficiency throughout our business. MicroStrategy benefited from a robust new product cycle, including the release of MicroStrategy Report Services(TM), MicroStrategy Office(TM), and MicroStrategy Universal(TM) in the past fourteen months. With the scheduled release next week of MicroStrategy 8(TM), we believe we are well positioned for another solid year in 2005.”
Examples of Noteworthy Customer Deals from Q4 2004:
Oakwood Homes
Oakwood Homes has phased out its Crystal Reports environment and recently expanded its MicroStrategy deployment. Several hundred Oakwood Homes’ employees across finance, HR, sales and building operations groups receive MicroStrategy-based operational reports daily. A MicroStrategy- powered extranet environment lets trade partners, lenders and realtors prepare home buyers for the purchasing and closing of their new home. These reports enable the lender to gather proper documentation to ensure a more efficient home closing process.
Oncology Therapeutics Network
Oncology Therapeutics Network (OTN) is a leading distributor of chemotherapeutic drugs for treatment of cancer. OTN selected MicroStrategy for its ease-of-use, advanced analytical capabilities, and scalability for large databases and thousands of users. Approximately 120 employees will use MicroStrategy to report, analyze and monitor sales and marketing information against an Oracle(R) data warehouse. Such analyses will provide Oncology Therapeutics Network with the insight needed to be more responsive to its customers, increase sales force productivity and support the company’s business objectives.
Winn-Dixie Stores, Inc.
Winn-Dixie Stores, Inc., with headquarters in Jacksonville, FL, is one of the nation’s largest food retailers. After an in-depth evaluation of many of the competing products in the industry, Winn-Dixie selected the MicroStrategy platform for its ease-of-use, scalability, and superior Web-based platform. Approximately 50 merchandising analysts, pricing analysts, and category managers will perform sales and customer reporting and analyses against a 3.4-terabyte Teradata(R) data warehouse. The company will utilize MicroStrategy to more effectively monitor pricing and sales in order to improve revenue and profitability.M
Update on Recently Released MicroStrategy Products
MicroStrategy Report Services(TM) continued to garner increased customer adoption in 2004. MicroStrategy Report Services allows business users to retrieve information from corporate databases for display in boardroom-quality documents over the web or in email. Since its release in November 2003, hundreds of customers worldwide have adopted MicroStrategy Report Services. MicroStrategy Report Services provides content-rich, user-friendly reports that can enrich existing business intelligence applications and ease the creation of new ones.
New MicroStrategy Report Services customers have praised this product:
Campbell Soup Company
“Campbell Soup Company is utilizing MicroStrategy Report Services for
sales, finance, customer service and marketing applications,” said Paul
Williams, Director IT of Campbell Soup Company. “MicroStrategy Report
Services provides many options for presenting highly formatted
information in a consistent user-friendly format. This exciting new
reporting capability also leverages our existing MicroStrategy
investment.”
R.H. Donnelley
“As a direct result of customer demand, R.H. Donnelley became an early
adopter of MicroStrategy’s Report Services solution,” explained R.H.
Donnelley’s IT Director of Programming Services Jill Mertens. “With
MicroStrategy Report Services, R.H. Donnelley’s senior executives will
leverage pixel-perfect sales and marketing reports to provide daily
feedback on sales and product performance.”
Grange Insurance
“Grange Insurance has deployed a number of MicroStrategy Report Services
reports to more than 100 users in various departments. These users,
including Personal Lines, Commercial Lines, Claims and Agency Relations
personnel, have access to dashboard reports that allow them to analyze
overall agency performance and reveal areas that need improvement,” said
Grange Insurance’s Data Warehouse Project Manager Tony Simpkins.
In April 2004, we introduced MicroStrategy Office allowing business users using Microsoft Word, PowerPoint(R), Excel and Outlook to rapidly call up information stored in corporate databases without starting another program. This corporate information is immediately pasted into Word documents, presentations, spreadsheets and emails. These documents, presentations and emails can automatically update the corporate information each time they are opened because of “SmartTag” technology. Business users can improve their efficiency and productivity because they no longer have to repeatedly cut and paste data from different programs.
Using MicroStrategy Report Services and MicroStrategy Office, non- technical business employees can easily access corporate information to make better informed business decisions that ultimately benefit the bottom line.
In June 2004 MicroStrategy launched the MicroStrategy Universal Edition of its business reporting technology. This Universal edition provides the capacity and high-performance needed for thousands of additional business users, ranging from line-workers to top executives, to benefit from business intelligence. This 64-bit software is compatible with Microsoft Windows, IBM AIX(R) and Sun Solaris(TM) operating systems.
In September 2004, MicroStrategy 8, in development for over two years, went into beta testing. With innovative, easy-to-use functionality and more than 2,000 enhancements across the MicroStrategy Business Intelligence platform, MicroStrategy 8 enables thousands of users throughout an organization to make faster, better-informed business decisions. MicroStrategy 8 raises the bar for BI ease-of-use by providing reporting, analysis, and business monitoring capabilities that users require, as well as an even more sophisticated level of report design and formatting. Additionally, MicroStrategy 8 broadens the data sources available to include data warehouses, data marts, and operational systems.
“The OLAP Surveys have consistently found that MicroStrategy sites have the most users, and the highest level of Web-deployment,” said Nigel Pendse, author of The OLAP Survey 4 (http://www.survey.com/olap) and The OLAP Report (http://www.olapreport.com). “MicroStrategy 8 provides further improvements in the Web user interface and better source data connectivity while still providing the only fully integrated product set ideally suited for large scale, complex data analysis, highly formatted reporting, proactive exception reporting and advanced queries.”
MicroStrategy 8 will be unveiled January 31, 2005 at MicroStrategy World, our annual user’s conference. For additional information on the product launch, please visit http://www.microstrategy8.com/
Outlook and Financial Guidance Information
As of January 1, 2005, the Company determined that it will no longer provide revenue or EPS guidance. The Company believes that it is in the best interests of shareholders to avoid engaging in predictions of short-term financial performance, which are inherently uncertain. We believe that this will allow the management team to more effectively run operations and build long-term shareholder value.
MicroStrategy will be discussing its fourth quarter 2004 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 706-645-9291 (internationally), conference ID 3342446.
About MicroStrategy Incorporated
Founded in 1989, MicroStrategy is a worldwide leader in the business intelligence software market. Leading Fortune 2000 companies are increasingly integrating MicroStrategy’s business monitoring, reporting, and analysis software into their operations. The MicroStrategy Business Intelligence Platform(TM) distills vast amounts of data into vital insight to help drive cost-efficiency, revenue-generation, and productivity. Top companies are using MicroStrategy to cost-effectively empower thousands of employees, partners, and suppliers with the business insight they need to make better business decisions everyday.
MicroStrategy’s enterprise-class customers include Aventis, eBay, General Motors, Lowe’s Companies, Pfizer, Sprint, Telecom Italia, U.S. Postal Service, Visa International, Wells Fargo, and Yahoo!. MicroStrategy also has relationships with over 300 systems integrators and application development and platform partners, including IBM, HP, PeopleSoft, Sun, and Teradata, a division of NCR. 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 8, MicroStrategy Business Intelligence Platform, MicroStrategy Report Services, and MicroStrategy 7i are either trademarks or registered trademarks of MicroStrategy Incorporated in the United States and certain other countries. IBM, WebSphere, IBM Workplace and Lotus Notes are registered trademarks. All other brands, product names, company names, trademarks and service marks are the properties 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 8, MicroStrategy 7i, MicroStrategy Universal Edition, 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,
2004 2003 2004 2003
(unaudited) (unaudited) (unaudited) (audited)
Revenues
Product licenses $34,100 $23,403 $96,995 $77,221
Product support and other
services 37,492 28,269 134,213 98,356
Total revenues 71,592 51,672 231,208 175,577
Cost of Revenues
Product licenses 1,110 899 3,875 3,240
Product support and other
services 7,365 6,388 28,996 24,745
Total cost of revenues 8,475 7,287 32,871 27,985
Gross profit 63,117 44,385 198,337 147,592
Operating Expenses
Sales and marketing 20,753 16,846 69,924 57,475
Research and development 4,322 6,048 24,915 27,684
General and administrative 10,817 8,955 34,977 32,580
Restructuring and impairment
charges – – – 1,699
Amortization of intangible
assets 18 16 71 182
Total operating expenses 35,910 31,865 129,887 119,620
Income from operations 27,207 12,520 68,450 27,972
Financing and Other (Expense)
Income
Interest income 554 99 1,221 644
Interest expense (1) (9) (61) (53) (5,109)
Gain (loss) on investments 4 – (83) –
Loss on early extinguishment
of notes payable – – – (31,069)
Other (expense) income, net (620) 449 (215) 307
Total financing and other
(expense) income (71) 487 870 (35,227)
Income (loss) from continuing
operations before income
taxes 27,136 13,007 69,320 (7,255)
Provision (benefit) for
income taxes 2,619 (3,722) (98,993) (2,587)
Net income (loss) from
continuing operations 24,517 16,729 168,313 (4,668)
Discontinued Operations
Gain on discontinued
operations – 765 – 765
Net income (loss) $24,517 $17,494 $168,313 $(3,903)
Basic earnings (loss)
per share
Continuing operations $1.52 $1.05 $10.48 $(0.31)
Discontinued operations – 0.05 – 0.05
Net income (loss)
attributable to common
stockholders $1.52 $1.10 $10.48 $(0.26)
Basic weighted average
shares outstanding 16,103 15,950 16,055 14,804
Diluted earnings (loss)
per share
Continuing operations $1.43 $0.98 $9.83 $(0.31)
Discontinued operations – 0.04 – 0.05
Net income (loss)
attributable to common
stockholders $1.43 $1.02 $9.83 $(0.26)
Diluted weighted average
shares outstanding 17,195 17,152 17,119 14,804
(1) Interest expense for the twelve months ended December 31, 2004 and
2003, includes discount amortization expense on notes payable of $0
and $2,137, respectively.
MICROSTRATEGY INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
December 31, December 31,
2004 2003
Assets (unaudited) (audited)
Current assets
Cash and cash equivalents $68,314 $51,882
Restricted cash 1,210 747
Short-term investments 37,816 36
Accounts receivable, net 40,917 30,993
Prepaid expenses and other current
assets 6,337 3,852
Deferred tax assets, net 20,583 1,807
Total current assets 175,177 89,317
Property and equipment, net 16,096 16,113
Capitalized software development
costs, net 5,479 3,693
Long-term investments 26,365 –
Deposits and other assets 3,021 1,984
Deferred tax assets, net 110,818 3,686
Total Assets $336,956 $114,793
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued
expenses $18,906 $12,768
Accrued compensation and employee
benefits 25,292 17,968
Accrued restructuring costs 1,762 2,599
Deferred revenue and advance
payments 43,674 28,374
Total current liabilities 89,634 61,709
Deferred revenue and advance payments 1,681 2,750
Other long-term liabilities 3,157 2,443
Accrued restructuring costs 1,906 3,544
Total Liabilities 96,378 70,446
Stockholders’ Equity:
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;
12,909 shares issued and 12,841
shares outstanding, and 12,362
shares issued and outstanding,
respectively 13 12
Class B common stock; $0.001 par
value; 165,000 shares authorized;
3,394 and 3,604 shares issued and
outstanding, respectively 3 4
Additional paid-in capital 417,287 387,625
Treasury stock, at cost; 68 shares
and 0 shares, respectively (2,331) –
Accumulated other comprehensive
income 3,206 2,619
Accumulated deficit (177,600) (345,913)
Total stockholders’ equity 240,578 44,347
Total Liabilities and Stockholders’
Equity $336,956 $114,793
MICROSTRATEGY INCORPORATED
Additional Financial Information
Net Income and Additional Financial Information
(in thousands)
(unaudited) Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
Net income (loss) from
continuing operations $24,517 $16,729 $168,313 $(4,668)
Additional Financial
Information:
Restructuring and impairment
charges – – – 1,699
Amortization of intangible
assets 18 16 71 182
(Gain) loss on investments (4) – 83 –
Loss on early extinguishment
of notes payable – – – 31,069
Discount amortization expense
on notes payable – – – 2,137
Noncash deferred tax valuation
allowance and other tax items 1,538 (5,175) (102,075) (5,175)
Other items (113) 26 (346) 26
Total $1,439 $(5,133) $(102,267) $29,938
Additional Financial Information –
Cash vs. Non-cash
(in thousands)
(unaudited) Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
Non-cash:
Amortization of intangible
assets $18 $16 $71 $182
(Gain) loss on investments (4) – 83 –
Loss on early extinguishment
of notes payable – – – 31,069
Discount amortization expense
on notes payable – – – 2,137
Noncash deferred tax valuation
allowance and other tax items 1,538 (5,175) (102,075) (5,175)
Total non-cash 1,552 (5,159) (101,921) 28,213
Cash:
Restructuring and impairment
charges – – – 1,699
Other items (113) 26 (346) 26
Total cash (113) 26 (346) 1,725
Total $1,439 $(5,133) $(102,267) $29,938
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 Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
Net income (loss) $24,517 $17,494 $168,313 $(3,903)
Interest income (554) (99) (1,221) (644)
Interest expense 9 61 (53) 5,109
Provision (benefit) for income
taxes 2,619 (3,722) (98,993) (2,587)
Depreciation and amortization 2,095 1,989 8,252 8,652
Amortization of intangible assets 18 16 71 182
Gain on discontinued operations – (765) – (765)
EBITDA $28,704 $14,974 $76,369 $6,044
Additional Financial Information:
Restructuring and impairment
charges – – – 1,699
(Gain) loss on investments (4) – (83) –
Loss on early extinguishment
of notes payable – – – 31,069
Other expense (income) 620 (449) 215 (307)
Total $616 $(449) $132 $32,461
MICROSTRATEGY INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years ended December 31,
2004 2003
Operating activities:
Net income (loss) from continuing
operations $168,313 $(4,668)
Adjustments to reconcile net (loss)
income from continuing operations
to net cash provided by operating
activities:
Depreciation and amortization 8,323 8,834
Bad debt expense 290 171
Deferred income taxes 5,753 (7,634)
Change in deferred tax asset
valuation allowance (107,413) 2,715
Net realized loss on sale and
write-down of short-term
investments 83 –
Loss on early extinguishment of
notes payable – 31,069
Discount amortization expense on
notes payable – 2,137
Other, net 171 89
Changes in operating assets and
liabilities:
Accounts receivable (8,798) (1,055)
Prepaid expenses and other
current assets (2,398) 347
Deposits and other assets (1,034) 162
Accounts payable and accrued
expenses, compensation and employee
benefits, interest and preferred
dividends 11,793 3,002
Accrued restructuring costs (2,515) (2,791)
Deferred revenue and advance payments 12,200 4,925
Other long-term liabilities 714 (245)
Net cash provided by
operating activities 85,482 37,058
Investing activities:
Purchases of property and equipment, net (5,649) (4,179)
Capitalized software development costs (4,268) (1,174)
Purchases of short-term investments, net (37,742) –
Purchases of long-term investments (26,353) –
(Increase) decrease in restricted cash (379) 5,554
Net cash (used in) provided
by investing activities (74,391) 201
Financing activities:
Proceeds from sale of class A common
stock and exercise of stock options,
net of offering costs 5,759 3,717
Purchases of treasury stock (2,331) –
Repayments of promissory notes
issued to former preferred
stockholders – (5,000)
Other – 328
Net cash used in financing activities 3,428 (955)
Effect of foreign exchange rate
changes on cash and cash
equivalents 1,837 957
Net increase in cash and cash equivalents
from continuing operations 16,356 37,261
Net cash received from (used in)
discontinued operations 76 (415)
Net increase in cash and cash equivalents 16,432 36,846
Cash and cash equivalents, beginning
of period 51,882 15,036
Cash and cash equivalents, end of
period $68,314 $51,882
Supplemental disclosure of noncash
investing and financing activities:
Early extinguishment of notes payable $- $(46,875)
Issuance of class A common stock in
connection with early extinguishment of
notes payable $- $78,576
Supplemental disclosure of cash flow
information:
Cash paid during the year for interest $51 $2,530
Cash paid during the year for
income taxes $2,615 $2,057
SOURCE MicroStrategy Incorporated
CONTACT: Bill Chatterton of MicroStrategy Incorporated, +1-703-770-1670,
or bchatterton@microstrategy.com
Source: MicroStrategy