EPS of $-1.72 decreased by 70.3% from previous year
Gross margin of 70.4%
Net income of -340.17M
""To remain competitive, our key focus will center on innovation and complexity reduction in our data offerings to cater to market demands effectively."" - MicroStrategy CEO
MicroStrategy Incorporated reported a challenging third quarter in 2024, revealing a decline in revenue to $116.07 million, a 10.34% decrease year-over-year, yet a 4.15% increase quarter-over-quarter. The gross profit margin decreased to 70.4% from previous quarters, reflecting strains in operating efficiency and market competition. Operationally, the company posted a significant net loss of $340.17 million, attributed to increased operating expenses totaling over $514 million, which overshadowed revenue generation. The key focus for MicroStrategy remains on navigating its cash flow personnel amid pressure on margins. Management expressed a commitment to enhancing product offerings while leveraging strategic partnerships to rejuvenate growth and profitability.
Key Performance Indicators
Revenue
116.07M
QoQ: 4.15% | YoY:-10.34%
Gross Profit
81.72M
70.41% margin
QoQ: 1.51% | YoY:-20.50%
Operating Income
-432.58M
QoQ: -116.00% | YoY:-1 613.40%
Net Income
-340.17M
QoQ: -231.69% | YoY:-137.15%
EPS
-1.72
QoQ: -201.75% | YoY:-70.30%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $116.07 million (QoQ up 4.15%, YoY down 10.34%)
**Gross Profit:** $81.72 million, Gross Profit Margin: 70.4% (QoQ up 1.51%, YoY down 20.50%)
**Operating Income:** -$432.58 million (QoQ deterioration of 116.00%, YoY decline of 1,613.40%)
**Net Income:** -$340.17 million (QoQ down by 231.69%, YoY down 137.15%)
**EPS:** -$1.72 (YoY down by 70.30%, QoQ down by 201.75%).
Management noted that "the increased expenses reflect our ongoing priorities to enhance technology and capabilities despite market pressures that have constrained our revenue growth."
Financial Highlights
In Q3 2024, MicroStrategy reported the following key financial metrics:
- Revenue: $116.07 million (QoQ up 4.15%, YoY down 10.34%)
- Gross Profit: $81.72 million, Gross Profit Margin: 70.4% (QoQ up 1.51%, YoY down 20.50%)
- Operating Income: -$432.58 million (QoQ deterioration of 116.00%, YoY decline of 1,613.40%)
- Net Income: -$340.17 million (QoQ down by 231.69%, YoY down 137.15%)
- EPS: -$1.72 (YoY down by 70.30%, QoQ down by 201.75%).
Management noted that "the increased expenses reflect our ongoing priorities to enhance technology and capabilities despite market pressures that have constrained our revenue growth."
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
116.07M
-10.34%
4.15%
Gross Profit
81.72M
-20.50%
1.51%
Operating Income
-432.58M
-1 613.40%
-116.00%
Net Income
-340.17M
-137.15%
-231.69%
EPS
-1.72
-70.30%
-201.75%
Key Financial Ratios
currentRatio
0.65
grossProfitMargin
70.4%
operatingProfitMargin
-17.7%
netProfitMargin
-293%
returnOnAssets
-4.08%
returnOnEquity
-9.01%
debtEquityRatio
1.12
operatingCashFlowPerShare
$-0.21
freeCashFlowPerShare
$-0.21
priceToBookRatio
8.92
priceEarningsRatio
-24.73
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Strategic Focus:
Management emphasized a strategic pivot towards enhancing the analytics capabilities of its offerings to mitigate revenue drawbacks and penetrate emerging market opportunities. They noted, "We are intensively investing in our product ecosystem to better compete in a saturated software landscape."
Operational Efficiencies:
They acknowledged challenges in improving operational efficiency stating, "In light of the financial results, we recognize the need to recalibrate our responses to market demands while maintaining our quality of services."
"To remain competitive, our key focus will center on innovation and complexity reduction in our data offerings to cater to market demands effectively."
— MicroStrategy CEO
"Cash flow management remains critical in this phase, and we are taking effective measures to optimize our spending across various operational sectors."
— MicroStrategy CFO
Forward Guidance
Looking ahead, MicroStrategy’s management is cautious yet optimistic. They project bolstering revenue through potential partnerships and improved product lines, targeting a modest revenue growth of 5-10% in the next quarter. Investors should keep an eye on cash flow management initiatives and expense reduction strategies, which are critical for restoring profitability. Management indicated that they will continue to seek efficiencies: "We are committed to finding pathways to reduce operational costs while ensuring that innovation does not take a backseat."
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0A7O.L Focus
70.41%
-17.70%
-9.01%
-24.73%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given MicroStrategy's current financial challenges, the investment thesis leans towards cautious optimism as the company seeks to restructure and innovate. The significant long-term debt and recurring losses present risks but, should management successfully reduce operational costs and improve cash flow, there could be upside for investors. Close monitoring of strategic initiatives and market trends will be vital for future assessments.
Key Investment Factors
Growth Potential
MicroStrategy aims to leverage its strong reputation in enterprise analytics and explore emerging technologies such as AI-driven solutions. The potential exists for growth if the company can execute effectively on innovations and strategic alliances.
Profitability Risk
The key risks include ongoing operational inefficiencies, intensified industry competition, volatility in market demand for enterprise technologies, and potential cash flow challenges that could impact liquidity.
Financial Position
Despite a strong intangible asset base valued at approximately $6.85 billion, MicroStrategy carries significant debt of $4.27 billion, which raises concerns regarding its leverage and financial health, particularly given its negative earnings and cash flow.
SWOT Analysis
Strengths
Reputation as a leader in enterprise analytics providing strong data solutions
Diverse client base across multiple industries enhancing resilience
Strong intellectual property in proprietary software and analytics solutions.
Weaknesses
High operational costs leading to significant losses
Dependence on a limited range of revenue streams from software licenses and services