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MicroStrategy's Q4 2004 Revenue Increases 39% Over Q4 2003 and Operating Margin Rises to 38% in Q4 2004
MCLEAN, Va., Jan. 27 /PRNewswire-FirstCall/ -- MicroStrategy(R) Incorporated , 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. 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
CONTACT: Bill Chatterton of MicroStrategy Incorporated, +1-703-770-1670, or [email protected]
CONTACT: Bill Chatterton of MicroStrategy Incorporated, +1-703-770-1670,or [email protected]
Web site: http://www.microstrategy.com/http://www.microstrategy8.com/http://www.microstrategy.com/investor
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