EPS of $-0.31 decreased by 108% from previous year
Gross margin of 74.0%
Net income of -53.12M
""We are positioned as the world's largest independent publicly traded business intelligence company, and the commitment to our Bitcoin strategy remains unchanged and steadfast."" - Phong Le
MicroStrategy Incorporated reported mixed financial results for Q1 2024, with total revenues of $115.2 million, reflecting a 5% decline year-over-year, driven primarily by their strategic transition from on-premises licensing to cloud solutions. Notably, while on-prem license revenue saw a significant drop, subscription services revenues grew by 22% year-over-year, driven by effective cloud migrations. Management emphasized their commitment to the Bitcoin strategy, highlighting an increase to 214,400 Bitcoins held, with a current market value of approximately $14 billion, indicating a robust position within the cryptocurrency market despite fluctuations. The company remains optimistic about future growth driven by AI advancements and cloud offerings, displaying a focus on long-term strategic goals.
Key Performance Indicators
Revenue
115.25M
QoQ: -7.42% | YoY:-5.47%
Gross Profit
85.23M
74.00% margin
QoQ: -11.46% | YoY:-9.30%
Operating Income
-12.07M
QoQ: -240.26% | YoY:-325.11%
Net Income
-53.12M
QoQ: -159.60% | YoY:-111.52%
EPS
-0.31
QoQ: -153.45% | YoY:-107.95%
Revenue Trend
Margin Analysis
Key Insights
Net income for the quarter stood at -$53.1 million, a 111.5% decline compared to the previous year.
- Non-GAAP adjusted software business operating income was $6.9 million (adjusted to $14.3 million after excluding one-time payroll tax impacts).
3. **Operating Expenses**: Total operating expenses were $97.3 million with a 1.7% increase year-over-year, indicating cost management amid transition.
4. **Balance Sheet Health**: Cash reserves improved to $81.3 million, while total liabilities were $3.95 billion and total equity was $2.40 billion, ensuring adequate liquidity for operational needs.
5. **Cash Flow**: Negative free cash flow of -$1.61 billion due to heavy capital expenditures aimed at growth in software and Bitcoin acquisition.
Financial Highlights
1. Revenue Performance: Q1 2024 total revenue was $115.2 million, a decrease of 5% year-over-year and 7.4% quarter-over-quarter. Subscription services revenue reached $23 million, a 22% year-over-year increase, indicating successful market transition strategies.
2. Profitability Metrics:
- Net income for the quarter stood at -$53.1 million, a 111.5% decline compared to the previous year.
- Non-GAAP adjusted software business operating income was $6.9 million (adjusted to $14.3 million after excluding one-time payroll tax impacts).
3. Operating Expenses: Total operating expenses were $97.3 million with a 1.7% increase year-over-year, indicating cost management amid transition.
4. Balance Sheet Health: Cash reserves improved to $81.3 million, while total liabilities were $3.95 billion and total equity was $2.40 billion, ensuring adequate liquidity for operational needs.
5. Cash Flow: Negative free cash flow of -$1.61 billion due to heavy capital expenditures aimed at growth in software and Bitcoin acquisition.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
115.25M
-5.47%
-7.42%
Gross Profit
85.23M
-9.30%
-11.46%
Operating Income
-12.07M
-325.11%
-240.26%
Net Income
-53.12M
-111.52%
-159.60%
EPS
-0.31
-107.95%
-153.45%
Key Financial Ratios
currentRatio
0.78
grossProfitMargin
74%
operatingProfitMargin
-10.5%
netProfitMargin
-46.1%
returnOnAssets
-0.84%
returnOnEquity
-2.21%
debtEquityRatio
1.51
operatingCashFlowPerShare
$0.17
freeCashFlowPerShare
$-9.38
priceToBookRatio
11.73
priceEarningsRatio
-132.45
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management Insights:
- Phong Le (CEO) highlighted the company’s strategic emphasis on transitioning to cloud solutions and innovative AI technologies, stating, "Our objective is to grow in AI and cloud-powered BI software."
- Andrew Kang (CFO) remarked on the transition impact: "We continue to anticipate lower product license revenues as we migrate existing customers off on-prem licenses and bring them on to the cloud."
- Michael Saylor (Co-founder) communicated strong confidence in MicroStrategy’s Bitcoin strategy, mentioning, "We believe our opportunistic use of leverage and excess cash to acquire Bitcoin has created shareholder value. Our strategy generated $7.2 billion of incremental value from Bitcoin price increases in Q1."
"We are positioned as the world's largest independent publicly traded business intelligence company, and the commitment to our Bitcoin strategy remains unchanged and steadfast."
— Phong Le
"We generated approximately $7.2 billion of incremental value from the effect of increases in the price of Bitcoin on our existing Bitcoin holdings."
— Michael Saylor
Forward Guidance
Management indicated a cautious but positive outlook for 2024 with expectations of sustained revenue growth through cloud and AI solutions. They forecast further increases in subscription revenue as the migration accelerates. There is an anticipated short-term dip in total recognized revenue due to on-prem licensing declines but are optimistic that long-term shifts will yield more predictable recurring revenue streams. Bitcoin remains central to their capital strategy, with plans to continue opportunistically enhancing their holdings.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MSTR Focus
74.00%
-10.50%
-2.21%
-132.45%
ADSK
90.30%
21.10%
11.70%
45.40%
INTU
74.50%
10.30%
1.42%
143.76%
ZM
70.70%
24.20%
2.61%
21.80%
SNOW
65.70%
-41.90%
-6.95%
-40.83%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
MicroStrategy’s dual focus on software innovation and Bitcoin positions it uniquely within the technology and cryptocurrency sectors. However, the company's reliance on Bitcoin introduces risks that are compounded by its current operating losses. Investors should closely monitor the progress of cloud migration efforts and the performance of Bitcoin in the market. With strategic innovations in AI and productive capital allocation, MicroStrategy holds potential for recovery and growth, but must navigate volatility in both its operational and financial prospects.
Key Investment Factors
Growth Potential
MicroStrategy's strategic focus on AI integration and cloud-based solutions, alongside their significant Bitcoin holdings, positions the company for potential high growth in the rapidly evolving technology landscape. The transition to subscription models is expected to provide more stable revenue streams.
Profitability Risk
The company's profitability is significantly impacted by Bitcoin price volatility and impairment charges. Additionally, the ongoing shift from traditional licensing to cloud models could disrupt revenue in the short term.
Financial Position
MicroStrategy maintains a robust liquidity position with cash exceeding $81 million while managing significant long-term debt related to its Bitcoin strategy. However, the high level of liabilities relative to equity highlights potential financial leverage risks.
SWOT Analysis
Strengths
Largest corporate holder of Bitcoin, with a strategic focus on its acquisition
Strong subscription revenue growth showing successful transition to cloud services
Established brand presence in business intelligence software
Weaknesses
Negative net income indicating ongoing losses despite revenue generational potential
High dependency on Bitcoin for treasury strategy, exposing to cryptocurrency volatility