EPS of $-0.57 decreased by 435.3% from previous year
Gross margin of 72.2%
Net income of -102.56M
"Phong Le: "We had in Q2 the largest cloud bookings quarter... the conversions are accelerating. It's going to help our long-term ARR and our long-term recognized revenue."" - Phong Le, CEO
MicroStrategy Incorporated (MSTR) reported its financial results for the second quarter of 2024, showcasing a continued commitment to its bitcoin strategy while transitioning its business model to a cloud-based revenue structure. The company generated total revenues of $111.4 million, marking a 7% decline year-over-year, largely attributed to its strategic shift from on-premise solutions to subscription-based services. Despite challenges in revenue consistency, MicroStrategy remains the largest corporate holder of bitcoin globally, bolstered by significant market interest and a reported strategy focused on intelligent leverage through capital markets. The outlook remains cautiously optimistic as management targets a BTC yield of 4% to 8% over the next three years, reflecting a robust operational strategy amid a fluctuating bitcoin market.
Key Performance Indicators
Revenue
111.44M
QoQ: -3.30% | YoY:-7.44%
Gross Profit
80.51M
72.20% margin
QoQ: -5.54% | YoY:-13.69%
Operating Income
-20.18M
QoQ: -67.24% | YoY:24.43%
Net Income
-102.56M
QoQ: -93.08% | YoY:-561.08%
EPS
-0.57
QoQ: -83.87% | YoY:-435.29%
Revenue Trend
Margin Analysis
Key Insights
**Revenue**: $111.4 million, down 7% YoY; down 3.30% QoQ
**Gross Profit**: $80.5 million, with a gross profit margin of 72.2%, maintaining strong profitability amid revenue transition.
**Operating Expenses**: $100.7 million, largely stable with rigorous cost management in G&A.
**Net Income**: -$102.6 million, a notable dip due to significant bitcoin impairment charges of $180 million this quarter, reflecting an increased vulnerability to bitcoin market volatility.
**Cash Flow**: Negative cash flow from operations of $23.3 million, indicating pressures on liquidity despite the cash reserve of $68.8 million at the end of the quarter.
Financial Highlights
- Revenue: $111.4 million, down 7% YoY; down 3.30% QoQ
- Gross Profit: $80.5 million, with a gross profit margin of 72.2%, maintaining strong profitability amid revenue transition.
- Operating Expenses: $100.7 million, largely stable with rigorous cost management in G&A.
- Net Income: -$102.6 million, a notable dip due to significant bitcoin impairment charges of $180 million this quarter, reflecting an increased vulnerability to bitcoin market volatility.
- Cash Flow: Negative cash flow from operations of $23.3 million, indicating pressures on liquidity despite the cash reserve of $68.8 million at the end of the quarter.
- Debt Position: Total debt stood at $3.9 billion, with a favorable blended interest rate of 1.6%. Management emphasized their commitment to leveraging capital for accumulating bitcoin, citing $800 million raised via convertible notes in June 2024, reflecting an ability to access capital markets under favorable conditions.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
111.44M
-7.44%
-3.30%
Gross Profit
80.51M
-13.69%
-5.54%
Operating Income
-20.18M
24.43%
-67.24%
Net Income
-102.56M
-561.08%
-93.08%
EPS
-0.57
-435.29%
-83.87%
Key Financial Ratios
currentRatio
0.47
grossProfitMargin
72.2%
operatingProfitMargin
-18.1%
netProfitMargin
-92%
returnOnAssets
-1.45%
returnOnEquity
-3.62%
debtEquityRatio
1.38
operatingCashFlowPerShare
$-0.13
freeCashFlowPerShare
$-4.58
priceToBookRatio
8.61
priceEarningsRatio
-59.47
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategic Revenue Transition: Phong Le reiterated the importance of the shift to cloud services, showcasing a record 21% YoY increase in subscription services, although overall revenue reflected a strategic transition that temporarily suppressed recognized revenues.
- Bitcoin Positioning: Management reiterated their commitment to bitcoin with a current holding of 226,500 bitcoins, valued at approximately $15 billion, underlining the strategic positioning of bitcoin as a treasury reserve asset to navigate financial markets unwillingly.
- Market Dynamics: Michael Saylor pointed out growing institutional interest in bitcoin, reinforced by the successful introduction of Spot Bitcoin ETPs, which indicate a maturation within institutional adoption.
- BTC Yield: They introduced a new KPI termed 'BTC Yield' which aims to demonstrate their effectiveness in acquiring more bitcoin relative to share dilution. Q2 saw a BTC yield of 3.7%, with an objective to maintain yields in the 4%-8% range annually going forward, emphasized as a differentiator against traditional investment vehicles.
Phong Le: "We had in Q2 the largest cloud bookings quarter... the conversions are accelerating. It's going to help our long-term ARR and our long-term recognized revenue."
â Phong Le, CEO
Michael Saylor: "We believe that the combination of our operating structure, bitcoin strategy, and focus on technology innovation provides a unique value proposition for shareholders."
â Michael Saylor, Executive Chairman
Forward Guidance
Management expressed cautious optimism regarding the transition to a cloud-based revenue model, projecting robust growth as more customers migrate to cloud services. They indicated a forthcoming growth in total revenues within the next 12-18 months, stemming from prior cloud migrations. Management noted that maintaining profitability alongside cloud-growth strategies is a priority, anticipating significant upside potential as recurring revenues mature. Specific targets for achieving a bitcoin yield of 4% to 8% annually from 2025 to 2027 reflect a disciplined approach towards leveraging capital effectively, amidst a backdrop of volatile bitcoin prices. Saylor remained confident in using capital market channels wisely to ensure ongoing growth in bitcoin holdings against a backdrop of fluctuating prices.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MSTR Focus
72.20%
-18.10%
-3.62%
-59.47%
ADSK
90.70%
22.80%
11.40%
47.40%
INTU
74.70%
10.90%
2.09%
125.19%
ZM
75.50%
17.40%
2.57%
21.31%
SNOW
66.80%
-40.90%
-7.67%
-34.36%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
MicroStrategy remains an intriguing investment opportunity amid the evolving landscape of digital assets. Management's commitment to a disciplined investment strategy indicates strategic positioning capable of navigating the volatility while capitalizing on the growing adoption of bitcoin. Investors should monitor upcoming quarterly results for tangible evidence of transitioning revenue streams and the impact of bitcoin price fluctuations on financial stability. The long-term vision of fostering a strong BTC yield could provide an innovative value proposition against traditional asset classes.
Key Investment Factors
Growth Potential
Transition to cloud subscriptions shows promise for stronger recurring revenues and forecasted growth in the upcoming years. The significant increase in cloud bookings indicates a positive trajectory within this strategy.
Profitability Risk
The company's aggressive bitcoin acquisition strategy exposes it to substantial market volatility, with impairment charges significantly impacting net income. Its capital structure relies heavily on further equity and debt financing, which may face increased scrutiny given current market conditions.
Financial Position
MicroStrategy's balance sheet is fundamentally strong despite substantial debt levels. Their access to capital markets through low-cost debt permits strategic leveraging for bitcoin acquisitions, showcasing robust liquidity management.
SWOT Analysis
Strengths
Largest holder of bitcoin among public companies, providing inherent asset stability and potential for appreciation.
Transition towards a robust cloud revenue model with increasing recurring revenue streams.
Strong management team committed to strategic growth and shareholder value through innovation.
Weaknesses
High operating losses and reliance on bitcoin valuation can deter investors due to potential market volatility.
Complex capital structure due to extensive debt may raise concerns regarding long-term sustainability, especially in adverse market conditions.
Opportunities
Growing market acceptance and institutional adoption of bitcoin present a significant opportunity for capital appreciation.
Continuing cloud growth may enhance long-term revenue stability and improve margin profiles as customers migrate to these services.
Threats
Regulatory changes or market actions against cryptocurrencies could significantly impact the company's strategies and financial position.
Intense competitive pressures within the software industry could challenge MicroStrategy's market share in the business intelligence space.