FOR IMMEDIATE RELEASE
Contact:
Bill Chatterton
MicroStrategy Incorporated
(703) 848-8600
IR@microstrategy.com
MicroStrategy Provides Outlook and Financial Guidance Information
VIENNA, Va., October 30, 2000 - MicroStrategy(R) Incorporated
(NASDAQ: MSTR), a leading worldwide provider of Intelligent E-Business(TM)
software, today provided additional outlook and financial guidance
information following its third quarter earnings call last week.
The following statements are subject to the risks and uncertainties
described at the end of this press release.
Third Quarter 2000 Results Discussion
The Company (which is MicroStrategy in consolidation) 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 and 29% sequential revenue growth versus
the second quarter of 2000. In the third quarter of 2000, approximately
27% of sales were derived from International operations.
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 (which charges may be adjusted in the future based on the then
current fair market value of the instruments issued in the class action
settlement), 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.
The third quarter restructuring charge was comprised of $6.2
million of cash charges and $4.6 million of non-cash charges. The
restructuring was complete as of the end of the third quarter. Also in
the third quarter, the Company wrote down the value of the Exchange
Applications stock that it held resulting in a $9 million loss on
investments.
Outlook and Financial Guidance
Revenue Assumptions
For 2000, MicroStrategy expects that consolidated full year
revenue will increase by approximately 40 to 50% over the full year
1999. For the fourth quarter of 2000, Strategy.com revenue is expected
to be comparable to what was recorded in aggregate for the first half
of 2000. For 2001, MicroStrategy expects consolidated annual revenue
growth to increase by approximately 40 to 50% over 2000 results. The
Company expects that 5-10% of consolidated annual revenue in 2001 will
be from Strategy.com and anticipates that almost all of this
Strategy.com revenue in 2001 to be reported as services revenue, such
as OEM fees. Overall revenue growth for the consolidated business 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.
Margin Assumptions
For the fourth quarter of 2000, MicroStrategy believes that
services gross margins will improve versus the third quarter 2000,
moving the overall gross profit margin to an expected level of 59-63%.
For 2001, MicroStrategy expects that the ratio of license revenue to
service revenue will increase from the third quarter 2000 actual mix of
43% license and 57% services. Key factors that may impact this ratio
include: the number of software licenses transactions that are
accounted for under the percentage of completion method, the adoption
rate of our new MicroStrategy 7 software platform and standardized
pricing schedule, and total headcount in our services business.
Cost Assumptions
For the balance of 2000, MicroStrategy expects that total
worldwide headcount will remain essentially flat for the core
business. The Company expects to reallocate personnel between
functional areas to place greater emphasis on license revenue
generation and attempt to achieve greater revenue on a per head basis.
Investment Activity
On a year to date basis, MicroStrategy completed several large
capital investment projects including the Strategy.com network
operations centers, the Strategy.com Teradata back end database system
and buildout of new operations and office facilities located at 1861
International Drive in Vienna, VA. For 2001, MicroStrategy does not
expect to incur significant capital expenditures for new office
facilities or operations. We believe the Strategy.com business has
sufficient capacity to meet subscriber needs through the first half of
2001.
In the third quarter of 2000, MicroStrategy made a $5 million
minority investment in Price Interactive. The Company does not have any
currently planned minority investments.
Operating Objectives
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
Strategy.com business is expected to continue to operate under its
current model with more emphasis on OEM fee generation and less
emphasis on affiliation fee revenue.
During the third quarter of 2000, the Company had an average of
79.975 million total shares outstanding. This number is expected to
increase 2-3% through the end of 2001 as a result of the exercise of
stock options. This 2-3% increase does not include conversion of the
Series A preferred shares to Class A common stock which would result in
additional issuance of common shares or any securities issued in
connection with class action litigation settlement.
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 300 systems 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.
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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 of MicroStrategy and its
subsidiaries (collectively, the "Company") 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.