FOR IMMEDIATE RELEASE
Contact:
Bill Chatterton
MicroStrategy Incorporated
(703) 848-8600
IR@microstrategy.com
MicroStrategy Announces Third Quarter Financial Results
VIENNA, Va., October 26, 2000 - MicroStrategy(R) Incorporated (NASDAQ:
MSTR), a leading worldwide provider of Intelligent E-Business(TM) software,
today announced results for the three month period ended September 30, 2000,
which was the third quarter of its 2000 fiscal year.
Financial Overview
The Company reported revenues for the third quarter of $64.9 million,
compared to $35.3 million in the same quarter last year, representing an 84%
increase versus the prior year quarter. The Company reported a net operating
loss, which excludes certain charges, for the quarter of $29.9 million, or
$0.37 per share. This compares with an operating loss of $12.8 million or
$0.17 per share versus the prior year quarter. This result also represents a
30% improvement versus the comparable second quarter 2000 net operating loss
of $42.8 million.
The Company incurred several non-cash and other non-operating charges in
the quarter. These charges, including a $113.7 million non-cash charge
related to an estimate of the costs to settle the consolidated class action
lawsuit and shareholder derivative action lawsuit, bring the net loss for the
quarter to $170.4 million, or $2.13 per share. Other charges include goodwill
and intangible asset amortization, restructuring and related charges, loss on
investments, and preferred dividends.
"We are pleased with the third quarter results announced today," said
Michael J Saylor, president and CEO of MicroStrategy Incorporated. "We
demonstrated strong revenue growth versus last year -- a clear indication of
the vitality of our business. In addition, last week we announced a $52.75
million round of financing for Strategy.com that serves as an independent
validation of that business and our ability to incubate new lines of
business. We have over $100 million in cash today which we believe is
sufficient to allow us to continue to grow our business. We recently launched
a significant business restructuring, highlighted by an e-business initiative
centered around a web store with no haggle pricing and standard contracts for
all customers. Since its opening on October 2, our web store has already
shipped software to over 300 customers and partners. In addition, our
MicroStrategy 7(TM) platform technology continues to be well received by
customers and the technical analyst community. Finally, this week we reached
agreements to settle the consolidated class action and shareholder derivative
lawsuits filed against the Company and certain of its officers and
directors. These actions taken together show that MicroStrategy is now well
positioned to continue exerting a leadership role in the Business
Intelligence market."
Quarterly Highlights
The Company achieved a number of important operating achievements, including:
Sales & Marketing
o MicroStrategy launched a new e-business strategy designed to make it
easier for companies of all sizes to do business with MicroStrategy. The
centerpiece of this strategy is a web store, located at
www.microstrategy.com, where new and existing customers can demo,
configure, upgrade and order software directly online via a standard
pricing model. MicroStrategy hopes to make it easy for thousands of
companies to order software and conduct business with MicroStrategy in a
no-haggle, no-hassle environment. The store opened for business on October
2, 2000, and has already shipped software to over 300 customers and
partners.
o MicroStrategy announced an alliance with IBM Corporation to provide
information broadcasting and narrowcasting solutions for Business
Intelligence and Customer Relationship Management. The agreement is an
extension of a long-standing relationship between the two companies. IBM
Global Services will assemble a large team from across IBM to focus on the
sale, integration and implementation of MicroStrategy software to their
enterprise customers.
o MicroStrategy added 62 new customers across a broad range of industries
during the quarter, bringing the worldwide total to more than 1,000. New
customers include C.I. Better Brands LLC, Celarix, Chase Manhattan Bank,
Circuit City Stores, Inc., Quest and TV Guide.
o MicroStrategy expanded its relationship with several existing customers
in the quarter, including KPMG, Buena Vista Home Entertainment, Cardinal
Health, EarthLink, Egghead, Evite, Inc., Integon, Liz Claiborne,
Metropolitan Life Insurance, Novartis, and Sara Lee (Bill Mar Foods).
o MicroStrategy and Deutsche Bank agreed to restructure their previously
announced relationship, terminating the Strategy.com affiliation and joint
R&D agreement and replacing it with a standard enterprise software license
and maintenance agreement. MicroStrategy recorded a total of $9.5 million
in software and services revenues during the quarter pursuant to this
restructuring.
o MicroStrategy entered into agreements with 24 system integrators,
application development and platform partners during the quarter,
increasing the number of partners supporting the Company's Intelligent
E-Business Platform to approximately 300.
o MicroStrategy and its customer, the Ohio Department of Education, won
CMP Media's Business Intelligence Group's RealWare Award in the category of
Best Business Intelligence Application. The Ohio Department of Education
and MicroStrategy developed the Interactive Local Report Card (iLRC)
application to promote educational accountability and academic excellence
in the state of Ohio.
Technology
o MicroStrategy launched the beta of MicroStrategy eCRM 7(TM), continuing
the Company's aggressive push into the electronic customer relationship
management (eCRM) market. MicroStrategy eCRM 7 is designed to empower
companies to build valuable relationships with their customers by
leveraging their vast amounts of online and offline customer data to
perform sophisticated campaign management and customer analysis.
MicroStrategy eCRM 7 is built on the open and flexible MicroStrategy 7
platform.
o MicroStrategy entered into a multi-year agreement with PriceInteractive,
Inc., a leading speech Application Service Provider (ASP). MicroStrategy
will use PriceInteractive's SpeechPort(TM) platform to enable voice browsing
for its suite of MicroStrategy Voice Services(TM) that deliver one-to-one
messaging and information
services. The relationship is designed to enable MicroStrategy customers to
easily access business intelligence by using the power of MicroStrategy's
customer analytics and segmentation capability to dynamically create
intelligent voice applications via telephone, mobile phone or voicemail
system.
o In a deal announced early in the fourth quarter, MicroStrategy and
Aether Systems will develop a new product, MicroStrategy 7M(TM), that will be
designed to combine Aether's wireless technology with the functionality and
performance of the MicroStrategy 7(TM) platform to deliver personalized,
intelligent information services to a full range of wireless devices.
o MicroStrategy launched MicroStrategy Web Business Analyzer(TM).
MicroStrategy Web Business Analyzer allows marketers and web site designers
to answer questions like how many unique visitors come to their web site,
the duration of the visits, the depth of the visits, the click-through
rates and conversion rates and revenue by product, customer or referral.
o MicroStrategy launched MicroStrategy eTrainer(TM)for MicroStrategy Web(TM)
and MicroStrategy Agent(TM), two electronic education courses designed by
MicroStrategy Education(TM). MicroStrategy eTrainer is designed to enhance
adoption of the MicroStrategy 7 platform.
Strategy.com
o Strategy.com named John Sidgmore to the newly created position of
Chairman of the Board. As Chairman, Mr. Sidgmore will provide direction to
Strategy.com's management team, lead an effort to bring additional talent
to the Board of Directors, help secure long-term financing, and assist the
business development team in identifying strategic partners.
o As part of the financing completed in the fourth quarter, Aether
Chairman and CEO Dave Oros has joined the Board of Directors of
Strategy.com.
o Aether Systems will offer Strategy.com services to its customers. These
services will enable Aether to broaden the range of products and services
it brings to leading enterprise customers in transportation, healthcare,
financial services and other industries.
o Strategy.com signed an agreement with Verizon Wireless whereby Verizon
customers will be able to access Strategy.com's wireless web portal through
the Mobile Web service, allowing them to look up personalized finance,
news, weather, sports and entertainment information. Additionally,
customers can receive personalized alerts and reports about finance,
weather and current news via their wireless handset, email, telephone or
pager.
o Strategy.com signed 36 new affiliates, bringing the total number of
companies on the Strategy.com network to 231.
o Strategy.com added 80,000 new subscribers, bringing the total number of
subscribers on the Strategy.com network to more than 460,000.
Corporate
o Eric Brown, an executive with over ten years experience in senior
financial management roles at companies including Electronic Arts, DataSage
and Haagen-Dazs, was named Vice President, Finance and Chief Financial
Officer.
o Timothy C. Clayton, an executive with 25 years of experience in
accounting and finance at companies including Building One Services and
Price Waterhouse, joined MicroStrategy as acting Director of Internal Audit
and Financial Controls. Most recently Mr. Clayton served as Executive Vice
President and Chief Financial Officer of Building One Services. Previously
Mr. Clayton worked with Price Waterhouse for 21 years, with 9 years
experience as an audit partner where his clients included a number of
software industry companies and other rapidly growing businesses.
o Mark LaRow was hired as Vice President and General Manager of
MicroStrategy's Applications Group. Mr. LaRow brings a wealth of experience
to MicroStrategy with over 17 years in the technology industry. Most
recently, he was a partner at Ernst & Young and a member of the executive
team responsible for managing Ernst & Young's Critical Technologies
business unit, holding responsibility for sales and operations for the High
Growth market sector.
o Announced in the fourth quarter, Aether Capital, the investment arm of
Aether Systems, will lead a $52.75 million round of financing for
Strategy.com(TM). Aether's initial $15 million investment will be followed by
an additional $10 million investment subject to the satisfaction of certain
conditions, including the expiration of the Hart-Scott-Rodino waiting
period.
MicroStrategy Reaches Agreements to Settle Class Action Lawsuit and
Shareholder Derivative Lawsuit
In October MicroStrategy announced that it has reached agreements to
settle two lawsuits filed against the Company and certain of its officers and
directors relating to the Company's restatement of financial results for
1997, 1998, and 1999. The first settlement agreement relates to the
consolidated securities class action lawsuit filed in the United States
District Court for the Eastern District of Virginia. The second settlement
agreement relates to the shareholder derivative lawsuit filed in the Delaware
Court of Chancery. Both settlements are subject to confirmatory discovery,
final documentation, and court approval.
Finance Commentary
o Eric Brown, CFO of MicroStrategy, made the following remarks regarding
the Company's restructuring efforts: "As discussed in our last quarterly
financial announcement, one of our main corporate goals is to implement
financial controls and metrics designed to emphasize profitability across
the entire organization, and to tie employee performance and compensation
to these metrics. In order to get expenses more in line with our revenues,
we are taking steps to significantly reduce expenses across the Company and
decrease the growth rate of headcount, and are working aggressively with a
goal of making the core MicroStrategy business breakeven on an operating
basis by the end of 2001. We are starting to make progress in realigning
our cost structure. We were also successful in meeting our financing
objectives. The financing of Strategy.com is an important milestone as it
allows that business to operate in a more autonomous manner and pursue its
plan."
Outlook and Financial Guidance
The following statements are subject to the risks and uncertainties
described at the end of this press release.
For 2000, MicroStrategy expects that full year revenue will increase by
approximately 40 to 50% over 1999. For 2001, MicroStrategy expects annual
revenue growth to increase by approximately 40 to 50% over 2000. This growth
will to a significant extent depend on market acceptance of the Company's
technology and the business intelligence software market growing 30%, as
currently expected. The Company expects total costs to grow at a slower pace
than revenues in 2001 as it puts costs in line with revenue. The Company's
goal is to achieve breakeven in net operating income for the core business by
the end of 2001, excluding amortization, preferred dividend costs, other
non-cash operating expenses, and extraordinary items.
The attached summary of financial highlights compares the 2000 third quarter
results to the same period last year.
MicroStrategy will hold a conference call chaired by Michael Saylor today at
5:30 p.m. (EST). Investors can call (888) 869-0374, or for international
(904) 779-4767, prior to 5:30 p.m. (EST). A replay will be available for 48
hours after the call at (800) 252-6030, or for international (402) 220-2491,
with access code 7185101. Also, a live Webcast and replay can be accessed at
the investor relation section of the MicroStrategy web site,
www.microstrategy.com, or from the StreetEvents site, www.streetevents.com.
About MicroStrategy Incorporated
MicroStrategy is a leading worldwide provider of Intelligent E-Business(TM)
software and related services. MicroStrategy's technology platform is
creating a new generation of one-to-one e-business solutions that enable
global 2000 organizations to build personal relationships with their
partners, supply-chains, and customers. MicroStrategy delivers these
solutions via web, wireless, and voice. In addition to its industry leading
technology, MicroStrategy also offers a comprehensive set of consulting,
training and support services for its customers and partners.
MicroStrategy has approximately 1000 customers across such diverse
industries as retail, finance,
telecommunications, dot-com, insurance, healthcare, pharmaceuticals and
consumer packaged goods. MicroStrategy also has entered into relationships
with more than 300systems integrators, application development and platform
partners.
For more information, please visit MicroStrategy's Web site:
http://www.microstrategy.com.
About Strategy.com
Strategy.com(TM), a subsidiary of MicroStrategy(R) Incorporated, helps
companies connect with their customers by delivering personalized, timely
information to consumers via web, wireless and voice. Using advanced wireless
technology, Strategy.com also allows users to access information using
"smart" mobile phones. Strategy.com's suite of programming is syndicated
through a network of more than 200 affiliates, including Verizon, Wall Street
Journal Interactive, EarthLink, Ameritrade, Belo Interactive, Metrocall, and
USATODAY.com.
###
MicroStrategy, Intelligent E-Business, MicroStrategy 7, MicroStrategy eCRM 7,
MicroStrategy 7M, MicroStrategy Web Business Analyzer, MicroStrategy
eTrainer, MicroStrategy Agent, MicroStrategy Web, MicroStrategy Narrowcast
Server, and Strategy.com are either trademarks or registered trademarks of
MicroStrategy Incorporated in the United States and certain other countries.
Other product and company names mentioned herein may be the trademarks 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 to differ materially from the forward-looking statements. Factors
that could contribute to such differences include: the possibility that the
securities class action and shareholder derivative settlement agreements will
not obtain court approval or that the other conditions to the settlements
will not be satisfied; the Company's ability to secure financing for its
current operations and long-term plans on acceptable terms; the ability of
the Company to implement and achieve widespread customer acceptance of its
MicroStrategy software and the Strategy.com network on a timely basis;
adverse reaction by the Company's employees, investors, customers, vendors
and lenders to the restatement of the Company's financial results or its
future prospects; 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
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
Three Months Ended
September 30,
-------------------------
2000 1999
-------------------------
(unaudited) (unaudited)
Revenues
Product licenses $28,124 $18,159
Product support and other services 36,731 17,150
------------ -----------
Total revenues 64,855 35,309
------------ -----------
Cost of Revenues
Product licenses 120 844
Product support and other services 26,153 9,023
------------ -----------
Total cost of revenues 26,273 9,867
------------ -----------
Gross profit 38,582 25,442
------------ -----------
Operating Expenses
Sales and marketing 40,817 24,324
Research and development 16,031 8,082
General and administrative 12,710 6,223
Amortization of intangible assets 4,798 20
Restructuring and related charges 10,835 ---
------------ -----------
Total operating expenses 85,191 38,649
------------ -----------
Loss from operations (46,609) (13,207)
Financing & Other
Net interest 1,360 594
Loss on investments (8,985) ---
Provision for litigation settlement (113,700) ---
Other expense, net 56 (6)
------------ -----------
Total other (expense) income (121,269) 588
------------ -----------
Loss before income taxes (167,878) (12,619)
Provision for income taxes 350 155
------------ -----------
Net loss $(168,228) $(12,774)
------------ -----------
Accrued preferred stock dividends $(2,188) $ ---
Beneficial conversion feature $ --- $ ---
------------ -----------
Net loss attributable to common
stockholders $(170,416) $(12,774)
============ ===========
Net loss per share (basic and diluted) $(2.13) $(0.17)
============ ===========
Weighted average outstanding shares
(basic and diluted) 79,975,373 76,722,676
============ ===========
Supplemental Data (1):
Core operating loss $(29,910) $(12,754)
Pro forma net loss income per share
(basic and diluted) $ (0.37) $ (0.17)
(1) Excludes charges for amortization of intangibles assets of $4,798, loss on
investment of $8,985, restructuring charges of $10,835, preferred dividend of
$2,188 and provision for litigation settlement of $113,700
MICROSTRATEGY INCORPORATED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
Nine Months Ended
2000 1999
-------------------------
(unaudited) (unaudited)
Revenues
Product licenses $75,964 $59,754
Product support and other services 89,850 45,342
------------ -----------
Total revenues 165,814 105,096
Cost of Revenues
Product licenses 1,117 1,927
Product support and other services 63,690 23,538
------------ -----------
Total cost of revenues 64,807 25,465
------------ -----------
Gross profit 101,007 79,631
------------ -----------
Operating Expenses
Sales and marketing 120,672 62,243
Research and development 48,044 19,231
General and administrative 42,213 15,731
Amortization of intangible assets 12,946 61
Restructuring and related charges 10,835 ---
------------ -----------
Total operating expenses 234,710 97,266
------------ -----------
Loss from operations (133,703) (17,635)
Financing & Other
Net interest 2,251 1,626
Loss on investments (7,629) ---
Provision for litigation settlement (113,700) ---
Other expense, net 161 26
------------ -----------
Total other (expense) income (118,917) 1,652
------------ -----------
Loss before income taxes (252,620) (15,983)
Provision for income taxes 600 598
------------ -----------
Net loss $(253,220) $ (16,581)
------------ -----------
Accrued preferred stock dividends $ (2,500) $ ---
Beneficial conversion feature $ (19,375) $ ---
------------ -----------
Net loss attributable to common
stockholder
$(275,095) $ (16,581)
============ ===========
Net loss per share (basic and diluted) $ (3.46) $ (0.22)
============ ===========
Weighted average outstanding shares
(basic and diluted) 79,546,148 75,420,460
============ ===========
Supplemental Data (1):
Core operating loss $(108,110) $ (16,520)
Pro forma net loss per share (basic
and diluted) $ (1.36) $ (0.22)
(1) Excludes charges for amortization of intangibles assets of $12,946,
loss on investment of $7,629, preferred dividends of $2,500, restructuring
charge of $10,835, beneficial conversion feature of $19,375, and provision for
litigation settlement of $113,700.
MICROSTRATEGY INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
September 30, December 31,
2000 1999
------------ -----------
(unaudited) (audited)
Assets
Current assets
Cash and cash equivalents $64,924 $25,941
Short-term investments 2,364 42,418
Accounts receivable, net 39,465 37,586
Prepaid expenses and other current
assets 14,148 15,461
------------ -----------
Total current assets 120,901 121,406
Property and equipment, net 61,655 30,594
Long term investments 5,261 ---
Intangible assets, net of accumulated
amortization of $13,449 and $503,
respectively 38,295 47,154
Deposits and other assets 15,951 4,214
------------ -----------
Total Assets $242,063 $203,368
============ ===========
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities
Accounts payable and accrued
expenses $42,382 $15,357
Accrued compensation and employee
benefits 19,142 14,912
Deferred revenue and advance payments 59,866 38,028
------------ -----------
Total current liabilities 121,390 68,297
Deferred revenue and advance payments 16,227 33,255
Accrued litigation settlement 123,950 ---
Other long-term liabilities 2,710 ---
------------ -----------
Total Liabilities 264,277 101,552
------------ -----------
Series A convertible preferred stock 119,667 ---
Stockholders' equity (deficit):
Preferred stock undesignated;
$.001 par value; 4,982 shares
authorized; no shares issued or
outstanding --- ---
Class A common stock; $.001 par
value; 330,000 shares authorized;
24,994 and 22,384 shares issued
and outstanding, respectively 25 22
Class B common stock; $.001 par value;
165,000 shares authorized; 55,147 and
55,867 shares issued and outstanding,
respectively 55 56
Additional paid-in capital 150,319 138,943
Deferred compensation (692) (895)
Accumulated other comprehensive income (415) 1,643
Accumulated deficit (291,173) (37,953)
------------ -----------
Total Stockholders' Equity (Deficit) (141,881) 101,816
Total Liabilities and Stockholders'
Equity (Deficit) $242,063 $203,368
============ ===========