EPS of $-3.03 decreased by 622.4% from previous year
Gross margin of 71.7%
Net income of -670.81M
""Today, the company is excited to announce its rebrand as Strategy for the following reasons: simplicity, continuity, and ambition." - Phong Le" - Phong Le
In the fourth quarter of 2024, MicroStrategy Incorporated, now operating under the brand name Strategy, reported total revenues of $120.7 million, experiencing a year-over-year decline of 3.04%. Despite this decline, the firm reported a significant 48% increase in Subscription Services revenue compared to the previous year, underscoring a critical shift towards its cloud service offerings. Management emphasized the successful transition to cloud-based solutions as a key growth area, with current subscription billings rising 50% year-over-year. However, the company's financial performance was heavily impacted by digital asset impairment charges of approximately $1 billion, leading to a net loss of $670.8 million for the quarter. This profound loss was attributed to both operational and market factors affecting Bitcoin valuation amid strategic investments. Management showcased notable commitments to raising capital through innovative debt instruments, notably highlighting the company’s status as the largest corporate holder of Bitcoin in the world, with holdings now valued at $46 billion, a testament to their Bitcoin treasury strategy.
Key Performance Indicators
Revenue
120.70M
QoQ: 3.99% | YoY:-3.04%
Gross Profit
86.53M
71.69% margin
QoQ: 5.88% | YoY:-10.11%
Operating Income
-1.02B
QoQ: -134.97% | YoY:-28 555.77%
Net Income
-670.81M
QoQ: -97.20% | YoY:-852.65%
EPS
-3.03
QoQ: -76.16% | YoY:-622.41%
Revenue Trend
Margin Analysis
Key Insights
Total revenue was $120.7 million, down 3% year-over-year and up 4% quarter-over-quarter.
Gross profit stood at $86.5 million, with a gross profit margin of 71.69%. Operating loss was substantial at $1.02 billion, largely due to other operational challenges.
The EBITDA was -$1.00 billion, with an operating income margin ratio of -841.25%.
**Balance Sheet and Cash Flow Health:**
Cash ratio at 0.107, indicating limited liquidity relative to short-term obligations. Total debts are substantially backed by Bitcoin, with $47 billion in Bitcoin holdings against $3 billion in convertible debt.
Financial Highlights
Revenue Performance:
- Total revenue was $120.7 million, down 3% year-over-year and up 4% quarter-over-quarter.
- Subscription Services revenue increased 48% year-over-year, reflecting ongoing transformation to cloud services.
Profitability:
- Gross profit stood at $86.5 million, with a gross profit margin of 71.69%. Operating loss was substantial at $1.02 billion, largely due to other operational challenges.
- The EBITDA was -$1.00 billion, with an operating income margin ratio of -841.25%.
Balance Sheet and Cash Flow Health:
- Cash ratio at 0.107, indicating limited liquidity relative to short-term obligations. Total debts are substantially backed by Bitcoin, with $47 billion in Bitcoin holdings against $3 billion in convertible debt.
- Strong leverage ratios emphasizing a debt equity ratio of 0.00603.
Management Commentary:
- "Our focus on the Bitcoin treasury strategy will become central to our future operations. We aim to create a Bitcoin-driven financial ecosystem that enhances shareholder value through intelligent leverage strategies." - Phong Le, President and CEO.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
120.70M
-3.04%
3.99%
Gross Profit
86.53M
-10.11%
5.88%
Operating Income
-1.02B
-28 555.77%
-134.97%
Net Income
-670.81M
-852.65%
-97.20%
EPS
-3.03
-622.41%
-76.16%
Key Financial Ratios
currentRatio
0.71
grossProfitMargin
71.7%
operatingProfitMargin
-842%
netProfitMargin
-556%
returnOnAssets
-2.6%
returnOnEquity
-3.68%
debtEquityRatio
0.01
operatingCashFlowPerShare
$-0.08
freeCashFlowPerShare
$-81.64
priceToBookRatio
3.52
priceEarningsRatio
-23.92
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Strategic Vision and Branding:
- Phong Le highlights the rebranding from MicroStrategy to Strategy as a simplification aimed at enhancing market presence and aligning closer to their Bitcoin-centric operations.
Capital Raising Initiatives:
- The company launched a $21 billion equity ATM program and successfully raised $18.8 billion through various capital markets activities.
- Andrew Kang noted, "Our successful capital raise reflects investor confidence in our strategic direction toward becoming the premier Bitcoin treasury company."
Impending Transition to Fair Value Accounting:
- Significant future adjustments to retained earnings, projected at $12.75 billion as a result of adopting the new accounting standards set forth by FASB for the revaluation of Bitcoin holdings.
Digital Asset Holdings:
- Management confirmed aggregate Bitcoin holdings of 471,107 BTC, with acquisition activity ramping up significantly during the quarter, emphasizing the company's aim to maintain high exposure to Bitcoin as a treasury asset.
"Today, the company is excited to announce its rebrand as Strategy for the following reasons: simplicity, continuity, and ambition." - Phong Le
— Phong Le
"Our successful capital raise reflects investor confidence in our strategic direction toward becoming the premier Bitcoin treasury company." - Andrew Kang
— Andrew Kang
Forward Guidance
Management provided a bullish outlook focusing on the acceleration of capital raising and Bitcoin acquisitions. With targets established in the previously introduced 21-21 plan, they aim to raise $21 billion from both equity and debt across 2025-2027. The expected BTC yield for 2025 has been revised to a minimum of 15%, with a BTC dollar gain target of $10 billion. Management stated, "We are confident that our Bitcoin treasury strategy will continue to create substantial shareholder value and we will leverage our operational excellence to push forward with innovative capital-raising strategies." Key factors for investors to monitor include Bitcoin market dynamics, regulatory landscape developments, and execution of their capital raising strategy.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MSTR Focus
71.69%
-8.42%
-3.68%
-23.92%
ADSK
90.60%
22.30%
11.60%
55.23%
INTU
75.40%
-4.74%
-0.11%
-2,265.73%
ZM
75.70%
19.00%
4.12%
18.11%
SNOW
66.20%
-39.20%
-10.60%
-45.93%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
MicroStrategy's strategic pivot towards becoming a Bitcoin treasury company positions it under unique circumstances. While the firm has established a strong balance sheet backed by digital assets, profitability remains tenuous due to recent operational losses. Nonetheless, the anticipated capital raising efforts and momentum in subscription services reflect a forward-looking potential for growth. Given current industry trends and projected shifts toward digital assets, MicroStrategy presents a compelling investment opportunity for risk-tolerant investors looking to capitalize on the growing significance of Bitcoin within corporate treasury strategies.
Key Investment Factors
Growth Potential
The transition to cloud-based solutions is showing strong momentum, with Subscription Services revenues soaring. The potential for significant capital appreciation from Bitcoin holdings also provides substantial upside for investors.
Profitability Risk
Heavy reliance on Bitcoin purchase strategies increases volatility in earnings. Additionally, any adverse regulatory changes related to cryptocurrency holdings could pose risks to operational strategies.
Financial Position
Although cash ratios are low, the company maintains a highly favorable debt-to-asset profile backed by substantial Bitcoin holdings, affording them strategic maneuverability in capital markets.
SWOT Analysis
Strengths
Leading position as the largest corporate holder of Bitcoin, providing unique strategic advantage
Successful transition toward Cloud services with significant growth trends