MSTR - Earnings call transcript Q4 2019 | MicroStrategy Incorporated

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the MicroStrategy Q4 2019 Earnings Call. At this time all participant lines are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]

to Chairman, conference President like today, your now Saylor, Michael and would hand to the speaker I CEO. Please go ahead sir.

Michael Saylor

Michael I'd Operating Lisa Financial all am here Hello. CEO Officer; XXXX fourth conference and is Saylor. Phong results. Chairman, our the Officer. This I financial President call of regarding MicroStrategy. Chief you Le, like Mayr, of welcome with our quarter to to today's I'm and our Chief

to to I'd safe read to going the who First, the floor statement. Lisa, like harbor is pass

Lisa Mayr

by Thank may and the forward-looking under the important as good result prospects SEC. quarterly expectations, with Act of that XXXX. you, of evening, including Actual factors report results Michael, filed may provision constitute everyone. make our forward-looking plans Private indicated on remarks Securities Various statements may of a these future most various vary the discussed those purposes harbor we those for Litigation in materially the XX-Q recently Form about statements Reform our safe and from

statements as company's relied views may subsequent events the and developments We views change. our to anticipate today only of date. as and of our as representing be that upon cause not subsequent should views These reflect any

some elect these to While specifically the company may the forward-looking point statements future, any to update do at obligation in disclaims company the so.

in website financial Also, located close during available is the release issued Reconciliation earnings at schedules measures. refer non-GAAP market GAAP course www.microstrategy.com. we showing non-GAAP on of certain call, which after of are our today's that to today, versus results our will the was

performance. will provide the call fourth turn to a quarter now who our like Phong, would to I summary of operational over

Phong Le

solid today. results of joining us fourth capped important the company. to you Thanks, an Lisa, MicroStrategy thanks for all year quarter and that for delivered

in history the and in In the set MicroStrategy and these drove operational release XX As year XXXX and the across our you and we positive our saw from with go-to-market particular, our we innovative efficiency of experience significant people products customer investments. results HyperIntelligence improved we product introduced investments made recall, most business. of and

established teams independent companies as previous has position products, is in a stronger and itself MicroStrategy of business the in entering financial enterprise XXXX the much years. than intelligence one with world, largest

drive goal in XXXX, newest cloud XXXX of XXXX our purchased primary year Our HyperIntelligence. We was with HyperIntelligence MicroStrategy to XXX upgraded including having ended adoption our MicroStrategy customers products and the platform. managed to who XXX have and

materials and in seconds. Saint-Gobain, the insights large quarter a We service French large providers Latin added building leading actions Co-operators, distribution XX We've company delivers organization and medical, the Swiss a customers including HyperIntelligence HyperIntelligence Global manufacturing alone and strong services into customers. financial Zero-Click We're fourth hospitals HyperIntelligences penetration during analytics our and America. company, that a Canadian and of seeing also growing seen Fortune in interest medical of in XXX triggers a

their jobs. problem and We e-mails, are the by used greater progress that XXXX. for in to We suggestions ERP our this Overall, believe processes a opportunity with business into in we market systems employees revolutionizing do and is actions and solving HyperIntelligence analytics, spreadsheets, analytics critical see embedding adoption already calendars pleased area. in

which focus cloud area offer our managed for Azure. in we XXXX and fully us of AWS major other was platform, on Our now

our platforms, cloud allows multiple across differentiated and move customers We industry-leading at This product. deploy grade which a highly vendor to offering, to a customers provide is on-premise lock enterprise full avoiding parody in. seamlessly

API be and and infrastructure also offers could run and to applications. customers robust security help extended business intelligence, platform to their cloud Our infrastructure

is of HyperIntelligence adoption from and MicroStrategy dramatic has paying our practice that services of strategy XXXX, our dividends. customers of industry drive engaging shift and is historical it and been and our part Proactively This another cloud. key to a our

be platform is Our and our MicroStrategy transformations customers cloud. the analytics to our to doing proven the showing an and facilitating capabilities improvements latest to migrations drivers measurable can of digital excellent has in our new solutions team one how provide key job in

in our believe consulting in the Our also help this our revenue. an growth drive helped revenue strong sign is is area working, this strategy focus to growth We lead it encouraging will that future. services in

review our turn to it I for key for to you priorities over the quarter results for Before, to outline Lisa our want I XXXX. financial

cloud focused increasingly on our strategy go-to-market First strategy platform. the will be micro

mentioned, I market. we the seen have traction exciting As in

our by own to that Our organization. total their their and get appreciate our has it's of have that or cost they increase adoption they product in cloud, understand and flexibility our lower ownership, cloud feature faster infrastructure using full run greater throughout on customers updates, parity, whether can

We see migration customers to cloud new well the some as to of customer as expect existing growth.

our Second, we continue our to version. encourage platform latest will customers migrate to to

latest Building open this we'll cutting-edge XXXX week will success functionality Next conference, on our architecture. HyperIntelligence well release, World. as XXXX platform enhanced be MicroStrategy introducing at user as to latest to related and for modern MicroStrategy MicroStrategy our include release its functionality annual our

describe sustain that revenue our more migrations existing rates renewal let enhancements these in Michael strong will growth. and to should customer I'll these detail. believe lead We

our growth revenue about Overall, grow and our and objective positive in performance our is generate optimistic overall XXXX constant Third, we to XXXX. XXXX. full-year revenue in to revenue in ability currency feel

transition benefit product about license in face cloud migration new increase financial modest While and growth. growth perspective. deals, contributors customer be the from and will believe strategy cloud may product we to describe a we impact Lisa support of revenue to I'll let our positive model think we some that related how

the on focused continued organization. across driving of operating efficiency parts all are we Finally,

I can quarter, out our and we've see more achieved you leverage of mentioned principle three this QX we've in and last ways. As as existing structure our cost in results done

which large marketing in to investment we spend was R&D initial efforts. back believe the cut MicroStrategy our able release, after groundbreaking, some were First, XXXX we in and

Poland. costs. revisited we've sales sales China And in lower territories we teams, growth development large over and by locations, cost finally and technology and workforce Second, have focused overhead the reduced and since focusing specifically centers our on lowering headcount I've taken in productivity

MicroStrategy. very place the were and our new forward We we deliver future products results the you that look of the people, about year. to we the pipeline let over CFO, progress improve shareholders. have customers We to our excited giving financial our to turn Overall, Lisa to updates With me greater for in throughout value and our believe on Mayr. call

Lisa Mayr

been learned you Phong. of to been look its excited working and MicroStrategy’s I investment people the with today many CFO. very I've new products company class what the with that forward ahead. months meeting impressed drawn I of and company. to to in with I've because three I'm this and the Thanks in as with the was you very be I've in months community world

services, our from revenues basis. results subscription product currency to the support, business, constant classified Growth statement. quarter our Turning on which the were for financial up financial a services is as came on consulting and X% X% and almost other

I'd it MicroStrategy basic like categories, how but remind in I want of to platform. we do sell revenue to ways. I two before do, the We listeners each the reiterate as to

our is managed which sell on customers we their we is it access MicroStrategy products, and way for in way And is subscription deploy to to first second the sell infrastructure. to hosted cloud. them customers by a product our The the

licenses product related us. product makeup for also excellent way and buy our and product revenues rates for in item product statements. are renewal license financial to these Customers who support product first of conducted support, stream our Currently the sales our an with strong sales annual recurring license the majority revenues is under a line our vast buy revenue subscription this the

in support managed product revenues part cloud hosted platform million in item cloud business subscription. contained our annual is our financial A under statements. recurring similar our selling a is the what but revenue. The revenue growing and is line services in XXXX almost In subscription to $XXX represented fully small from of revenues

associated would to a support transaction. revenue a is costs one of a that had from the MicroStrategy cloud revenues opposed been third the buys about one license note, from deal cloud we done recognized the deal on first recognized a perpetual the customer of when the as revenue first and revenue license, have typically as year Subscription related half total include perpetual is year basis total to over if to a infrastructure us term. Of and ratable subscription subscription services

expect Assuming we create our revenue stream license cloud customers more renew predictable stable, perpetual we at a customers can rate as similar long the our run. a in

we of years data. large of pace the the customer investments transitioning will amounts tends our over large a cloud large support to because Regarding in with very selling number from be infrastructure transition a licenses to of to sign companies occur product subscriptions, expect

to continue gradual for future. be business As be the the license we majority product of the of from will a revenue result, the our our will towards expect and then derived foreseeable sales transition cloud

this a to Now, results. let's on down discussion were XXXX, $XX.X or a basis. decrease year-over-year, $X.X quarter's million, and currency revenues a X.X%, Product million X% little apply over constant license in this QX

do we the year-over-year. QX compared slightly occurred seen revenue growth months that While in sales, license of primarily Subscription quarter were up September would perpetual or have product year-over-year ended disclose catch-up our incremental due to the third revenues we had to bookings been license performance three down cloud bookings not XXXX in XXXX revenues if modest XX, services a were XXXX.

quarter increase change or and you'll QX allowance growth underlying currency a in million increase revenues this that note satisfied basis. on year-over-year. related our XXXX, a X% included revenue to the are Product $X estimate in in X.X% in year-over-year, the that related during $XX.X with subscription a nearly revenues benefit we our support support a million sales Product Overall, revenues constant business to X.X% reserve. quarter deferred in were the or

largely that our the due which services, other Finally, discussed. factors almost services, will year-over-year Phong you to previously X% is increased note consulting

up at delayed the were is revenue bookings system year-over-year This our in XX, and as as year payments CPQ to and well deferred that we attributable billing $XXX.X last the growth issue implementation. resolved related Total X% to advanced fact December million. had XXXX we is

is healthy us. leading for deferred indicator a revenue Our growth

in slightly and of can organization remain – the The were decrease for structure million and cost better largely largely sales X.X% our while XXXX company $XX.X Phong three cost year-over-year up to Turning in previously QX to year-over-year core described. to and a and will XXXX with consulting meaningful quarter-over-quarter. higher believe decrease quarter cost products. focus the operating this we continue to make maintain through revenues, margin expenses for improved Expense optimization. to continuing gross we investments the utilization and reflects discipline Total due initiatives X.X% in

continue almost cash we a with investments. strong maintain and to $XXX short-term ended the year and million in balance Finally, sheet

shareholders, for You'll approximately a we one We value intentions Class not our useful can balance A common is but during XX discuss We to our believe long-term component a just MicroStrategy note that strategy. in it's be capital million the of evaluate buybacks substantial policy keeping we repurchased how opportunistically way stocks. quarter prudent to in balance believe our and is buyback a sheet allocation our reminder cash evaluate advance. on as

to generate shift to revenue key as mentioned, constant variable level a is year. the XXXX, of this sales. and our year objective subscription One be growth our currency will to of Turning towards this cloud Phong timing growth magnitude reported

important this at MicroStrategy As all for focus during we we early cloud with be are will make insight in Once I thrilled we in believe our in during and into year. successful its to efficiency, progress to operating person time another are MicroStrategy. history meeting on forward year to you evaluate XXXX I shift. again, positioned an mentioned, we and ways as the cycle still adoption the to well provide we such look I'm Altogether

turn to to Saylor. back it like I'd Michael Now,

Michael Saylor

Lisa. Thanks,

look the of Salesforce mantle We're closing market the is leadership the the opportunities the us. and intelligence company industry largest public independent to to acquisition, With of assume consolidated that the Tableau in is now offering excited business MicroStrategy world. the forward

SAP might open We're XXX technology of as and like We sources to are We're them day. We're we or another. it use. open matter bias. and open open are it might what there Azure or means the all all and databases they to support AWS, to every and split the applications tool data Workday about Salesforce all platform leading enterprise all clouds be client to all without and open the more what we be now coming that or enterprise modern or might no we're interfaces

keep AWS or prevent demand. Oracle tend like in puts application Switzerland they that Salesforce, enviable the MicroStrategy large enterprises their options. sole into I position Amazon, course have locked market. of never source. a all a cloud Microsoft, have full do or them in switch interface database have of strategy a interest like responsible a like they the SAP, favour multiple a time this open their Oracle, always the or client to IBM, they to have business being in would business options an the in a ability that or general. they massive want to offerings Large stack platforms They support particular at SAP like same the of that tailoring They a and to we a run integral that strategy companies, in is either from be conflicting particular interest like most business to to with, and technologies to ability the enterprises IT to

beneficiary. I the this expect in the we’ll beneficiary for of years to been trend continue past the enterprise be We that and the have XX

largest free sets. business year. these a combine attention self been drive XX lot lot always our we're enterprises the company, electricity vendor than XXXX, powerful that capability see to to and It's now upgrade most data platform means ever. choice I emergences that we're in and made upgraded a dramatically build faster with the that is of form enthusiasm to this avoid service the with enterprise regard traded development intelligence enterprise functionality. times to publicly lock really We've at since XX looking with and the excited governed think are in. in application more with expect our order functional compound We our capability. traditional agile grids the of We're we the get power that XXXX. this we've in of releasing It's security dossier for are going they to going as about more It's And dossiers the for marketplace more to reports going form of the particularly canvases faster. ever This It's to than the into of stable. market. to MicroStrategy advances brought worldwide

more we cloud the most past relationships the the upgraded generating with support We're really represents HyperIntelligence Azure Our we've year And we've is upgrades offering dramatic that very they the us both opening doors expanding at proposition is well regard – product cloud cloud the already seeing throughout excitement XXXX line. environment made and to also full cloud our proven has existing regard new marketplace. made XXXX impact with launched in XXXX, well customer accounts our due with than during to platform and successful we the and services. to for as decade made upgrades prospective value the offering a also as successful our from sorry, with boost in capabilities new that positive to ride feel ever. parody the and it's and the reenergizing our past to position to be customers This upgrades AWS now I regard wave. to to our adoption cloud to

was the one of age year HyperIntelligence. of XXXX

market drive too they're to wait to decade like find. next need the years weak continued and increase at based to applications impatient answer. see intelligence contribute the becoming XX wave. the of the and are over the for Existing too and iOS and difficult slow. and operating the innovations of just multi-threaded Edge, number clicks browsers they too to hyper the are memory, They're we'll trends utilize. CPU We to number hard too get very past business seconds proliferation to of all built They're the in to and the Chrome like ecosystem systems device of Android explosion the this and to the expect chromium People

to HyperIntelligence and of years and too they're lack used both mobile and for entire of of things of ERP these both chromium-based interface and by or weeks. enterprise or days applications solves a a intelligence the is new Projects can what look running impatient to increasingly far in to enterprises they're them percentage latest to and like because are wave on deploy across application enthusiasm would into impatience apps allowing small only speed Customers browsers. create CRM see. becoming running HyperCard creating This greatest with built the matter convenience the to expensive Most upgrade. on of a a solution. companies the applications problems take and iPhones achieve most of the these enterprise

and can cloud Our platform strategy our should upgrade and we that and HyperIntelligence customers support whenever ahead for to us busy thank to XXXX And questions. to we'll – everyone is to the them deploy today. product the for our latest with migrate keep their floor to their our to want time I the go analysts pass coming year. for to for that and

Operator

And Hamed [Operator our line the first Khorsand question from Instructions] from BWS will come of Financial.

may You begin.

Vahid Khorsand

this calling actually Hamed. for in Hi, Vahid is

could subscription on cloud question whether growth? provide the revenue, revenue quarter-over-quarter on subscription First some and you color the down is on

Lisa Mayr

So constant revenue. at subscription our slightly on revenue as is we currency basis up indicators, and also deferred then of one the a look we're just

So subscription different revenues, you the up which look related can at revenue to year-over-year. is

question So year-over-year? sequential your would around or

Vahid Khorsand

Sequential.

Lisa Mayr

Yeah.

mentioned in So, QX, then increase down in my in prepared have I saw QX. back that did remarks, so a we one-time QX in you as catch-up, and

for renewal we in caught that a for QX. customer had So our late up we

of was onetime that a pickup. a So bit

So it it where to expected we is be.

Vahid Khorsand

from what upgrading Okay. resistance to is And the customers from MicroStrategy? seeing you're

Phong Le

We're not seeing upgrading. resistance customers from

between greater have we XX% and percentage and So upgraded that our a XXXX. to XXX our customers of upgraded XX% of enterprise about total have customers represents have customers somewhere and who

the the XXXX barrier we've a to with done effort. release XXXX, reduced upgrade and And XXXX we've release upgrade. XXXX started which significantly moving forward with to annual and an any cycle, going with As to what our cycle, it see is large by customers in be we

customers straightforward, what and overtime simple historically upgrade train industry. an is opposed the very in I think something as to our software we're So, they're used that going to to enterprise

is more only As and us the cloud has customer customers we to to completed move the upgraded experience, by regression testing. to generally do

pleased progress over of I'm it time. upgrade with the accelerate we'll I cycle to think So, our continue and

Vahid Khorsand

them I ask way, out upgrades but of product you're you basis, answer, upgrade not if a and you how maintain do Let can annual over? get doing repeat. to essentially, But the me new question an strategy a on customers going year's think that rolling different in And prior hit you on probably the upgrade? you're

Phong Le

maintain their products can customer primary to A product to old. a much to we XXXX Yes. whether year as will faster. want three is perform upgrade years The as reason for it provide products or Typically, support previous release, release. the customer is be now that XXXX latest going

show benchmark perform and faster two our that our dashboards certain new of Some certain product. three times reports to with

avail also they so that product themselves example. of an support, can of like some as things Michael part functionality mentioned, free-form And as a canvas the the new

if just planned move them a previous of and a but the send take the come want customers upgrades, it's if functionality So, a know like because and aggressively performance upgrade we feature of upgrade, they'll to the release, every properly. more April it can on. clock, customer at new we'd upgrade a an and them Like they and as customer right? upgrade to will help upgrade yes, improved few week a the as And days stay think little in, to time. the ease can with to we We

Vahid Khorsand

much. so Okay. Thank you,

Operator

from question Thank comes of Citi. from And next you. Radke the line our Tyler

You may begin.

Tyler Radke

on revenue. cloud to we question call And subscription to you that it peers Xx typical had you. in a I frame, many you obviously are Michael. of Thank is sequentially is signed customers to support uplift you of kind doing subscription and Lisa the your see? think to deferred existing and a as would services. migrations whether subscription when to kind the that there and on subscription line that subscription us of on-premise I of uplift of that how on business leaning hosting some performance Phong the deferred then, cloud, have the kind type revenue up as business Xx evening you business, take just good of the as cloud or revenue follow-up encourage a of business much Hey, a sometimes you would is evaluate just the or indicator be the say the revenue year-over-year help

Michael Saylor

part answer have the on-prem through the the When one. an and we answer to revenue on-premise we into of on take paying question revenue will cloud main an the that on we second a migrating we who revenues – I'll drivers. impact is customer support and Lisa question support customer move product a the two from expectation the cloud, and increase first customer

a The first is paying support a license perpetual license. they'll convert term from to

cloud And provides customer and of And years. more we customer. product. value in do sees the something something our that three and we've our It's tooled additional perfected expect for features course it's that over automation security the the we last that

expect And compelling. they'll result is that so they'll more decrease so the ROI and a cost their also pay we that pretty for overall as

So you two is from then one. or as managing cloud And A customers, environment it. their infrastructure. environment expect the piece piece cloud is for and managing their call support that's more to out, what receive do pointed we we revenues

that it, a the I before has mentioned platform run and run to services build the can then their and is So piece call also then be as them. I'll think is much other much Xx it X.Xx mentioned to customer. on logical Lisa I've to sell of customer X.XXx to to And the system sort as as as, for applications next go their add-on

development that likely also outsource and of their customer and their willing to application work. are likely their their A be more outsource work willing to to support is infrastructure much some

XXX Fortune So transition yes, who've have we to that with some examples we name us. starting of experience that customers made good some brand and

Lisa Mayr

to pickup new growth second a we're of mentioned answer a think a had related is to the a pickup one-time to in we we that sequential it customer. the one-time an see in QX we yes, revenues quarter example our revenues. question, expect would subscription continue simple for the your actually where I contracts amortizing part into revenues I And subscription Unless like was we – as had into had

and then in subscription look at that continue absolutely And increase well. to related as to change we so, to yes, deferred revenue

I mentioned about we insight going. this we business provide thinking at. prepared in definitely are to is the for shift greater two be as for now would our look I through on my think indicate ways of So – can we're those remarks now And gradual we eyes going both if keep those, where I but things as would the that

Tyler Radke

you, and follow-up Great a for Lisa.

you're under just with looked kind that about Now basis of and potentially operating the thinking decline curious, a had you're about curious optimizing your business. past meaningfully in first expenses CFO full I – how potentially Phong think talked quarter on a revenue to I over the I'm the year-over-year like time, belt, support title perspective your to It the pretty you're from potential and kind the and the margins revenue of framework I'm around what double-digit needed and that. double-digit has and how cost business revenue evolved you. think at growth margins thoughts Thank just growth curious, looking are with growth base your did there

Lisa Mayr

or great Well, claim of only week for I first But, I work wish this quarter. in could twelfth is my any I of fourth Sure. credit the here. – all, the optimization eleventh

So, was lot a motion. there in

for feel XXXX. in I remarks, we did that the a I a, what cost we think think place I as about said revenue in we growth have we can perspective, deliver on good some from

said commentary. past to on, the consistent not haven't growth. based going in prepared that's in providing so be We level not But change. and done the in feel guidance, I we think of about right it is remarks good revenue to the going what We’re the we

we're I've in to a a growth to continue for about we're and operating right this impressed insight. have and assets that so been business is carefully how modest currency pipeline. at I've our very of structure found, terms we're thinking making revenue what sure with about think correctly, We very current the think looking pipeline provide ways constant product the and allocating cost XXXX I more basis on we'll

Tyler Radke

Thanks.

Operator

Our Instructions] [Operator Analysis. next Frank you. the comes Sparacino from Thank question from of line First

You may begin.

Frank Sparacino

guys. Hi

you Just deployment a one feel Thanks. question In good standpoint for the from you? bad or cloud, competitive has anything do changed me. cycle the sales situation for like

Phong Le

to from it XXXX to you. Good the it our we plan in I hear BI XXXX, cloud Frank. the that further in and about to move at There In road contemplating seen or the and load isn't that accelerating cloud. would every a sort we’ve with it's or externally is pretty say most much some mapping Hi, upgrade for dynamic, of isn't a asking us one talked of beginning general, customers one an in participate of of to process.

BI would on wanting and workloads to increased The seen cloud leading say grade second had cloud. we've the enterprise dynamic effect to in I loads warehousing that data customers significantly of moving increase move interest their the data advent to providers, halo XXXX the XXXX is and into in warehouse the has cloud a definitely

perspective, Salesforce. impacts how as – reaction. cloud. of in to relates to changes over competitive stages or the of any change And I still seen Mike wouldn't seeing had Tableau customer a From the we've significant of it say that we're early the ownership mentioned

of lot a from some seeing noise BI. Power are competition We and

be But getting the from upgraded in overall what happy to cloud. of And seeing warehouse, we're customers less fairly cloud of And BI and our part cloud. more traction data from call I'll your we're some traditional niche market the it's it, we're share – rapidly to players, edge less takes leading our that's definitely Power over I seeing BI noise them. and think

Frank Sparacino

you, Phong. Thank

Operator

I any over at questions turn showing not back the remarks. call time. closing to I'm And to this you. further Thank any like Michael for

Michael Saylor

for then, XX in weeks, forward we with look support their to until again like and to I'd the everybody Again thank you best. speaking all

Operator

this for participating. gentlemen, today's you and Thank concludes conference Ladies call.

disconnect. now may You

MicroStrategy (MSTR) 28 Jan 202019 Q4 Earnings call transcript