MSTR - Earnings call transcript Q2 2018 | MicroStrategy Incorporated

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Operator

Good day ladies and gentlemen, and welcome to the MicroStrategy, Second Quarter 2018 Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions).

As a reminder, this conference is being recorded. to President host and like Michael today’s now Chairman, Saylor, CEO. would introduce for your conference I Sir, you may begin.

Michael Saylor

of like Thank Phong you. and welcome call I’d President with XXXX I’m Officer, second Chief I’m Saylor. today’s quarter all regarding to financial our Hello! This Financial CEO Operating is of Officer Le. Michael Chief you conference to here results. Chairman, our MicroStrategy. and

floor make First, safe to statements to I’d the Phong, the for and pass to results harbor going our statement quarter. some who’s on read second like the

Phong Le

in Michael Reform statements Thank safe forward-looking the Form that expectations, our of as may the results Act forward-looking recent statements about from good plans you, may relied future various Litigation of may purposes including most harbor quarterly and subsequent developments our XXXX. indicated those a remarks Actual factors, upon only as as on company’s that views the These to provision discussed evening everyone. SEC. our views by materially constitute should of of anticipate these of events for today subsequent differ we representing under Various and report not important date. any as and the result cause and those may prospects with be our statements filed Securities views make Private change. XX-Q We reflect

measures. issued today, year is MicroStrategy to available our at initial located which the close to One drive improvement. the plan currently reconciliation of point today’s do certain company showing these the There’s financial see the may so. some of the signs in in statements in after specifically non-GAAP versus future, during schedule refer call www.microstrategy.com. starting course the disclaims While invest elect we’re a growth, to our GAAP update of obligation our Also, to company on non-GAAP at we’ll website press sharing to after release any results to forward-looking market

revenue by For the revenue by we $X.X or increased also $X.X or quarters license first by services excluding year-over-year. million to Total $X.X X% revenue saw time product X% in seven year-over-year. million increase Total increased X% million year-over-year.

in see the to is in our the the and technology high-quality new XXX been increased where XX.X our marketing net result improved to team, company-wide our and and headcount of of our added X% improvement introduces or headcount on emphasis XX.X pipeline. recently generation and marketing year-over-year. made result in technology three investments software efforts where market marketing MicroStrategy people This customer awareness, significant XX.X of were Enterprise digital a support as support product In major and releases platform. XX% of a service. over leads product a most investments we of September, continue our or more to and outreach Version XX.X release, next Version We by field area to proactive success MicroStrategy’s announced in grew the our customer. year-over-year marketing generated prospects customer has year-over-year brand Version XX.X million will followed $X.X revenue. we’ve investments These X% deliver Intelligence years. platform plan Versions by significant The in to we possible added our result in our the be December. platform; in In

based collateral, based marketing social our and introduced marketing. presence improve to hard worked persona solution media and also We

resulted or of and efforts in increased year-over-year. million marketing XX% marketing increased Our expenses sales $X.X

people the In and people, last adding growing recently Marge in CMO, area in XX arrival organization, Breya, We’re our also years the quarter. Board Directors excited new of invest year continue software marketing our XXX in of heavily XX our and who of on MicroStrategy to than of the and brings people the served we about experience. more enterprise last

recruiting, activities. heavily addition In retention, to analytics in employee HR and investing development we’re

million a detailed million, financials: increase revenue was or XXXX our to QX, $XXX.X for Total Now year-over-year. X% $X.X

Foreign license revenue currency $XX.X X% QX, effects total XXXX, was $X.X in million revenue million QX, or a Product in X%. XXXX million our by or increase $X.X favorably year-over-year. impacted

in effects product XXX. by currency revenue million the of QX, favorably impacted decrease Foreign a license reflected XXXX X%. or product due QX, to our adoption million $X.X $X.X XXXX revenues license ASC of

our statements. retrospective XXXX a XXX, adoption chose XX-Q As announced we part our QX, financial on full adjusting and provided our in other these filed of the SEC. adjustments Further that we ASC of details earnings, are prior-period with

was million primarily by X% cloud a XXXX, decrease driven QX, our year-over-year. $X.X Our revenue, in subscription customers services

was X% million or a $X.X such Our foreign X%. $XX.X impacting by with year-over-year changes XXXX, support revenue increase revenue million currency in favorably QX,

consulting Our primarily million foreign QX, business. in a X%. billable in hours with other $XX.X XX% $X.X was decrease our and services to bookings, decrease is due revenue XXXX, favorably impacting changes million currency such utilization revenue This year-over-year lower by or

on However, as services. focus to increase higher-end our continue rates we bill

cost, XX% $X.X of a implemented $XX.X to expenses base employee in our and $XX.X or a cost Turning year-over-year was marketing quarter-over-quarter. flat million, X% and $X.X QX QX, X% X% and across revenues increased increase compensation year-over-year year-over-year Sales operating quarter-over-quarter. increase XXXX million, XX% were and increases decrease QX, million million expenses decreased We or XXXX. quarter-over-quarter.

or and ROI $X.X and X% expenses quarter-over-quarter. campaigns, or XX% improving we’ll expenses sales while effective managers were Research headcount primarily These our investments marketing million half marketing most on channels the and the continuing marketing people development. field in our lot second XX about as business focus increased a and learned sales $X.X inside increased X% XXXX. We field development year-over-year marketing, Our of year-over-year. and such and in million or partner and

year-over-year XX Our headcount increased development or X% XXX XX% people, quarter-over-quarter. and and research people

as costs. across for of We earnings China; margin income. $XXX.X We Tysons from the Poland. This or and income, of and no to had QX, loss ago. negative IT $X.X implementation expect in compared a gains and quarter-over-quarter. diluted $X.XX. foreign of share million X% recruiting to $X.X other million as the short-term per to headcount key of compensation XX% is Hangzhou, in debt. of contributed net at Improvements in exchange expenses net and operations continue million income in and strong in end our of increases period primarily from to and XXXX Virginia; well QX continue development the $X.X XXXX centers same XXXX and or increase due X% have year-over-year an and cash XXXX administrative had $X.X income, investments million Warsaw, had decreased well We the operating a research in systems X% our to pace development growth equivalents Corner, and cash, million QX, as throughout General of increased year interest We as

the entered XXXX, half we product we As to revenue. growth continue and target license to second of total

investment continued leadership, field to excellence in of XXX, product impacts are However, empowerment, due XXXX prospects. of and particular believe revenue sales revenue focus, with in people and of customers our starting and marketing to customer We adoption be ASC the and show of that our quarter externally inspired project. the any continues to in internally growth volatility our business results our difficult to

the business present for XX, these MicroStrategy. a growth We of opportunities driver also are future version the platform, all excited think the of for and the investments Intelligent the will MicroStrategy for out role Enterprise about be of

back turn it to I’d to Michael Now Saylor. like

Michael Saylor

Thanks Phong.

three plan plan, on into reasonable year with thought provide color. on we’re that call some to progress Now our that year growth everybody it one talk about I an to the observations be update would against and provide

investments itself. four plan the marketing; and make focused It’s with make make start Let’s sales; make programs; pronged; investments our investments programs. our in in services in investments technology in targeted,

So past accounts customers; set accounts, we I’m accounts, and and of on with have a more begun drive named to an focused segmented our sophisticated, planning processes. way more basis. those identified that clear and mature take the time, sales, of with both account regard support over them and one the account to account We’ve of pleased at a year based to energies customer those set prospects assigned

various campaign message in second been CXO’s, starting groups each put that off alignment a manager with of a we’ve general a degree in organization the in review very more programs, launched partners We in we’ve prospect one in doing of conjunction we’ve new result of have and quality a relationships extend global to XXX them are is place these regions and In we’ve implemented local If these and we’re on the to red marketing and start the and of field we’ve CISO’s prospect processes for of sales, a I our past to starting we’ve ways an these teamwork has be to we and prong new encouraging at change, seen to a we’re and as managers been the marketing in able around set put manager the that place where a popular field these in and level, with building deliver put business think marketing and than result improve marketing place and our out to CDO’s and we’ve across them coordination and we’ve these a and the the of been in our to XX in CFO’s field partner box that activities. region targeted prospects, our relationship regions. We’ve currently been form I of investments. of with. marketing everywhere the our and the a our and focus, to We’ve drive new activities including in off with while we to This momentum build our strategy, investments are speak into our of able to CIO’s to has alliances the outreach base structure these outreach and manager, XXX of of and pay a go executives marketing, improved brand in our aligned also and done organized of improvement some believe accounts improve to meant upgraded MicroStrategy a with the we’re each and us area. ecosystem build base, programs, pipeline transparency, world, and not XX engagement effective move and events engagement general months to to sales where with world. engagement so partners marketing the with with our local XX

Intelligent the We mission, and message marketing of more map Enterprise aligned around corporate the our to a make and that’s Enterprise have is the enterprise every Intelligent resonating. which

pipeline our didn’t more a to future. polished So got the like ways executive-level we’re that feel this in an working our the we and indication this based to be have and upon does is will community a all, and prospect we’ve in message, ago, pay and seem finding we’re reach I that opportunities that getting, year dividends

the and out third of invest our begun over defined to in programs The to pillar strategic we services, last XX months XX help strategy build our is customers. We’ve programs. those have

and We assessment more become help our customers, have with advisory of than Intelligent with services providing Enterprises. to engaged them XXX more them

and we provide tailored our customers account services are integrate program, have programs preliminary sales to to those successful, and and We we services we on goodwill enhanced generate is planning together with reading our that a that better of sales to modified as package customers. make our managing them the so with seek

and is get of their opportunities us. that we’re platform, ability We’re new and configurations to the in having new successes improving MicroStrategy pipeline generating use sales their and service for creating out of lots

make the release. easier, very the they’re are powerful, new our pleased into agile platform, that and build and to MicroStrategy the make it intelligence; these and capabilities; version continue to they’re awareness some open, faster, we of their strategy excitement see about of but with are are excited The the more for People that is deploy program presence ability capabilities believe integration I technology programs, we and really dossiers; excited it of technology pillar promise of Geospatial overall more auspicious especially final even is and our things. our applications strategy and building to about evolving. that’s so our more the potential they’re flexible, very hyper delivering that on an new with our collaboration build of about simpler, And top excited so about to XX I’m identity with and technology, excited

additive the working and Phong a technology added As attractive launched commitment talented mentioned, that are very engineering to product we’ve believe this of for that’s had managers in an more business center number has professionals managers our MicroStrategy our recruit a plan successfully Warsaw technology XXX core about to place to that made got to development the platform. complementary I multiple decent We’ve teams, work. organization. and support managed We’ve efforts. engineering to all

to Intelligent Enterprise. competitors that bright are the coming other in We’re really space mission this and finding supporting really powering executives the about us enthusiastic our from from of companies

As cycle major been platform the a each we’ll Phong release and had platform our mentioned, that release on release to release for in year and received a we’re we’ve by customers. that fourth base that’s and target quarter, one-year to development means full a settled our that customer has enthusiastically a very in

reasons manage that each committed So one year all I to we’re in all continue tailor things year these to and need these into only a I like three these potential and be plan, there to believe of stay about our are words still to to of few investments, a order we and to lot to but well. of right optimistic in full now. a say organization as realize to programs the would

senior additional of now platform. across of enters on organization, adding in this working our sales driving for commitment product consistent organization from our number a I of BEA, job And all then believe company. grow and of drive to Kevin continually Worldwide assumed support feel the has is the that execute corporate announce our effectiveness account and running benefited company. operational driving us and class, to I Steve mission. Worldwide talented Services as the Chief on programs an this really area to We’re growth. brings executives day-to-day influx programs, has and Chief fourth we role sales, help efficiency after in vision In our programs. to us she’s program our Officer, organization. Operating sales to enterprise going keep really I’m key be at we technology executives great the new three executives attracted we’re She and Objects pleased our Le Breya is role to to the new sales, Informatica, leading increased as settling has finally, to world us focused on Holdridge Officer at now His our integrate marketing see like organization and talent organization and strengthening. we’ve senior basis with Marge functions deliver help is Phong and is sales revenue on good and on the the is technology additional of of across that management new that in experience some our Technology to execute help quarter MicroStrategy. Head going execute He likewise a enterprise us the services, about all engagements extraordinary joining other our adding some to excited into services, the and thing to been so programs. a just to Sales that Marketing months, across focused and work a and on believe marketing Business In services of we’re focus mandate Norlin and customers, I’ve marketing

scaling account up focus service polishing XX support is our Our together. focused going on intensifying rest activities come on delivering to our all the to release activity a this programs, and of year we’re as the version and platform company the key for be enterprise see excited our of marketing

the ahead with call and for analysts. the I’ll open from go that, So guess questions up I

Operator

(Operator you. Thank Instructions).

from Karl with Our Deutsche comes first Bank. Keirstead question

open. now is line Your

Karl Keirstead

XXXX. Phong of product for a license articulated Thank plan in reaffirmed continued, growth you. Michael, sort Hey

first minus the I you’re X%. in think half

some So that the sensing is better fairly it’s half hit picking hit really that demand end feel benefit well? you made and need growth changes if and some can aspirational actually on of product a about as color target, can changes you Thank the to back Maybe give little half how you second solid you’re to perhaps that going I’m Are on us you second wondering a you. fruit. license. in and target on the the that you’ve comfort that market sales of to from just economy the up function marketing a bearing and that

Phong Le

Mike I’ll Hey Karl. will sure add I’m start this. and to

we’ve second of result in organization when we our through know quarter had services sales activities. and seeing license growth and we’re from mentioned. it a pipeline improvement the quarter stronger revenue technologies a first done You perspective, the tougher as a to that comes as you things walked all those a marketing and product and and in Michael

second know to quarter. growing think difficult but is in you our external to I the more always done we’re going positivity it the I factors. more about So, any revenue, than is mentioned, we’ve into any good as that feeling to particular But is go half related volatility predict what internally

Karl Keirstead

maybe for Thank maintenance good to metrics of guys you. thank Most you The one balance minus there’s actually statement just growth highlighted, in DR deferred DR growth growth something Okay, you of was been were revenue follow X%. license Maybe growth; we wondering good up. you. but the down. support see of And revenue to or pretty of have on X% funky the lot terms X% as billing I’m balance Phong, some and balance then might the would invoicing the of income have metrics, why call a out.

Phong Le

I maintenance in and our in we quarter line out’s the and first was me out, item see of that XXX. if revenue actually not quarter in’s of that, line revenue. support balance the of we because the in follow each happen item, look the so to so to part you XXXX, of the items There deferred at some our because and of Nothing our to specific biggest are a that of implementation because the about year, business that on that’s Yes, we drop revenue the much that second And product large at driver. actually are the line hard when tend related deferred from XXX the deferred product revenue concerns Q amount comes look have impact license.

Karl Keirstead

it. Got

for to growth to you on thank the both side. the congrats and you license Okay, return

Phong Le

Thank you.

Operator

comes our Citi. you. from Thank next Tyler question Radke And with

is open. now line Your

Tyler Radke

from up. XQ. Good you. that out there thank talk to if about XX-Q deals whether to was if or I’m curious just making that Hey, what in ticked the large was like wondering anything changes those the evening. could disclosure I outperformance? you seems in It the it’s that drove there, your organization you’ve call been

Phong Le

we a it very Yes, on lot the run. we I marketing this so said, quarter XXXk That and internationally due hard want we and relates you in pretty mean of field if Tyler, that of over I good had to a A of of of teams relates and had at as you as it sales years. is deals, the the that more large over teams year-over-year last should few our the deals it think and so to what look quarter to bolstered last saw year business. basis, activity work million, the $X business to tough indicative QX type be over

quarter. we So output happy this their deal were with large

Tyler Radke

And you year, uncertainty. heading still think into obviously as there’s about next some

growth. positive you’ll in overall You licensed the revenue two or quarters the next see know,

plan into to thoughts, is of mean but your we saw what license expect kind it high I XQ? something year? digits grow, growth of like next are we imagine is single the could in that heading terms in Just I level, double-digit high or the obviously

Phong Le

as to any Yes, XXXX. in particular it growth provide we comes don’t guidance revenue

year we’ve as what three about think we enter talked journey. is I this

greater but to over aspiration think is particular the XXXX. growth predict period it revenue premature relates be than of would double-digit it time, to I anything in as to to Our get

Tyler Radke

it. Got

initiatives So three in of the more years be a comment, XXXX would you given started XXXX?

Phong Le

three that along journey. year Somewhere

Tyler Radke

answered. I up apologize And a on – if Okay. the this was just and then follow

as also like maintenance there? Was well. and like revenue, was looked then renewal there On you’d it kind change Any down maintenance you rate? the if it maintenance that billings, deferred calculate in declined out deferred. anything It call the of year-over-year, looks

Phong Le

No.

In fact had – question. a similar and asked Karl

of two deferred you related renewals our our a so accounting to is we as second I think first one first product is, renewal quarter, standard, in drop there’s largest is quarter, the the lot implementation back factors causes in there; close our know and balance out and the revenue our the to support maintenance it of new of quarter. quarter sort second

when at to year and in Overall, support results here, lot we’ve there And our holistically importance our our a improving the this seasonality we’ve QX has of you operations we mentioned, that had done we’re so team of QX bit service of best business product my sales, in how been the product, pretty in work rates I strong, of our as our a of points maintenance renewal extremely fact that to of customers some marketing businesses. the there’s and this our across and about customers’ improving seen point. of tenure continued our from many go that So renewal rates of our the I’ve and QX. happy

Tyler Radke

understand Okay. list that Just proactively how priority And to to bookings you’d gross you that? services, question, contributed lower and high talked all last software trying on revenue. prefer margin something about I are day. Obviously the they Are services you in lower lower the address sell to to doing think just are?

license you outlook like more an Just deals? impact potentially had your curious or think growth signing that if either on

Phong Le

what’s of much in with items said, a That across revenue think it’s it. focus and improve on that weren’t happy of the an part. I we’ll services bill try our continue we or improve think view our how so want business, of that focus driving to is improving can grow license deals ways improving, don’t on I to providing and our results to are to And right bill business impacting rates we But customers. line one our to our slightly. is QX, we’re services. part and I revenue. including predictor understand and to we’re doing so our important and rates of everything our Obviously, potential to all believe it’s types We margins

Tyler Radke

you. Thank

Operator

Our comes Thank next Sparacino from First question Analysis. you. Instructions) Frank with (Operator

Your line now open. is

Frank Sparacino

Hi Michael. Phong, hi

two questions Just for me.

on the which lumpy which was in recognize domestic I terms product performance the quarter-to-quarter, under business fairly just the is this million, low is going but $X number back, First is of quarter; license I think a Is terms all anything or couple know out North you America related? international disruption of is in there just versus it external of call years. potential internally in market just would you

Phong Le

You’re right Frank.

Our domestic business driving steady in out business has are last There so. – point wouldn’t in in been internally competitive rather are declining at the I anything factors a particular or that. our years rate two that’s the some we’re and America, But I it’s and North of that can our around doing to we factor. that’s turn along identify to with ours. sales and ways especially leadership think business, leadership a everything our big services focus challenging, a

Frank Sparacino

you double one software obviously and mean you guys what your think the are growing, is view I delta markets internal to now, don’t at, from know know overall it’s of and just curious getting of but and what don’t know the you know digit you kind some back I I growth, be be overall where can I’d point right. at perspective, maybe I to look market goal is I’d at kind follow-up, industry a of growing. be the mean reports get sense And of in that below of that terms curious. where external you going the is. obviously where

Michael Saylor

market look its of see When and we lot and analytics could the overall enthusiasm you you enthusiasm excitement when say, the where applications, know the to embedded we think the the what existing mobile market’s There’s you look a marketplace, like. call building. at a into we I growing. at embedding intelligence in lot of regard space "Well, with numbers, Yes,

the growing too also getting into think is lots in not know key piece is new We’re market mind and fragmenting as marketplace and the you of pie. their the all entrants the there’s fast." they’re of I keep to coming

all providers, and up of the the between and infrastructure complicated that also between down a types to So various entrants shifting it like. tends value providers dynamic all be of various the value the fairly service and chain

confidence We have our in plan.

nothing XX takes in weeks. place I think

in before three we’re to have start normally for and to of impact it, about something impact in to see starting You customer opportunities us also product that our years technology you are sell enhancing and of more be go some and are for and see to investments investments we’re we’re the making and the more committed both to our services making they services. relationship with increasing

day think is just real think keep stay there marketplace stay there’s services programs. for every it’s of in an segment could proposition, I on to the more not was to us ago platform, noise XX be XX our So things certainly than stay the delivering particular today focused the and our and same mission, our to focused on know market and on noisy, distracted the years single or committed other here so of the I people years same and because all that ago on value and more key of important same and the energy, and product particular package focused integrated maybe get there’s you by

Frank Sparacino

just ago, months look six up in is the versus today a at that. or those win there if XX mean, rates you win ago following Mike, I rates? discernible And improvement on months

Michael Saylor

I think are about, in been have winning, lot enthusiastic customers if seeing the wins we large we’re platform. because investments about where excited to we be look very things there’s of we’re of indicative making enthusiasm a the about, at that

analytic existing wins like Tableau. tool, over vendors We’re large seeing

we’re by custom into AWS extend embedding large to and applications wins the wins of apps to large seeing intelligence seeing deploy analytics large We’re installations cloud. top on

and and customers into mix. sophisticated, our buying from and service vision extremely after buy competitive commitments serious getting we’re cycles they world-class actual So value our are product where our proposition

So I got then you with deal do do many dollar figure can one, if a million can more. plus to many, you

that focus what the initiatives do. upon scaling to We we’ve up, it our to means right just and need that’s just got that So thing. operational are meant

Operator

This Michael now call to like Chairman, session. I President CEO turn Saylor, back over closing you. the Thank today’s and remarks. Q&A concludes to would for

Michael Saylor

on shareholders you our the call again of Have We’ll a for in thanks support. weeks. with look all your thank to everybody to XX want I speaking good evening. forward and

Operator

thank conclude gentlemen, and Ladies you This today’s does in for the conference. program. participating

You have a Everyone, great may all day! disconnect.

MicroStrategy (MSTR) 28 Jul 182018 Q2 Earnings call transcript