Fourth Consecutive Quarter of Profitability; License Revenues Increase Versus Q4 of Prior Year
MCLEAN, Va. (January 30, 2003) –
MicroStrategy(R) Incorporated (Nasdaq: MSTR), a leading worldwide provider of business intelligence software, today announced its financial results for the three- month period ended December 31, 2002 (the fourth quarter of its 2002 fiscal year), reporting its fourth consecutive quarter of GAAP profitability and full year earnings of $3.12 per share on a diluted basis.
Fourth quarter 2002 revenues were $42.0 million versus $33.4 million in the third quarter of 2002 and $43.7 million in the fourth quarter of 2001. Fourth quarter 2002 license revenues were $20.5 million versus $12.9 million in the third quarter of 2002 and $18.7 million in the fourth quarter of 2001. Net income attributable to common stockholders for the fourth quarter of 2002, determined in accordance with Generally Accepted Accounting Principles (GAAP), was $4.6 million, or $0.33 per share on a diluted basis. This result included restructuring and impairment charges of $1.4 million, charges for amortization of goodwill and intangible assets of $0.5 million, a charge for discount amortization expense on notes payable of $1.0 million, and a gain on the partial extinguishment of notes payable of $2.0 million. Excluding these items, adjusted net earnings for the fourth quarter of 2002 was $5.5 million, or $0.40 per share on a diluted basis.
“A full year of profitability and four consecutive profitable quarters are significant achievements for MicroStrategy. Our license revenues in the fourth quarter grew by 9 percent over the same period in 2001, which indicates that our field operations, supported by several new product releases, had solid execution,” said MicroStrategy President and CFO, Eric F. Brown. “We have implemented rigorous changes to all aspects of our operations and made substantial improvements to our balance sheet.”
“The earnings speak for themselves. MicroStrategy has become a profitable, more cost-efficient and productive company,” said MicroStrategy Chairman and CEO Michael J. Saylor. “In 2002, in contrast to many software companies, we grew our sales force by approximately 30 percent, and we won major new business with leading companies across the globe. Acknowledging the strength of our scalable, pure web MicroStrategy 7i(TM) platform, industry leaders now view MicroStrategy as a technically superior alternative to vendors such as Business Objects and Cognos. These vendors have numerous small-scale implementations but are not well-architected to meet the deployment and on-going maintenance needs of mid-size and large organizations.”
Highlights from Q4 2002
Signed Agreements with 11 Systems Integrators and OEMs (Original Equipment Manufacturers)
New partners include: Wingspan Technology, Eureaka Technocrates, Inc., Miix Ltd, Vallence Solutions, LLC, SoftPro LLC, and Intelligent Communications.
Added 128 New Customers
New Customers and New Deals with Existing Customers in Q4 2002 Included:
Alitalia, Aventis Pasteur, BellSouth, Crane & Company, Discovery Communications, GE Medical Systems, Grange Insurance, Harris Teeter, IMS Health Canada, Katz Group, Koch Industries, Lending Tree, Prescription Solutions, Rheem Manufacturing, RBC Financial Group, Shaw Industries, Solucient, Toyota Financial Services, Universal Studios, Upsher-Smith Laboratories, U.S. Air Force Gunter Annex, and Wells Fargo & Company.
Examples of Noteworthy Customer Deals from Q4 2002:
Discovery Communications
In the fourth quarter of 2002, Discovery Communications, Inc., the leading global real world media and entertainment company with over 830 million subscribers around the world and home to the Discovery Channel, Travel Channel, Animal Planet, and The Learning Channel, selected the MicroStrategy platform as its enterprise business intelligence standard. The company selected MicroStrategy because of its platform’s integrated architecture, ease of use, and low cost of administration. Discovery plans to deploy sales, financial and management analytic applications with MicroStrategy. Eventually more than two hundred employees will perform analyses to optimize Discovery’s business performance.
Toyota Financial Services
In the fourth quarter of 2002, Toyota Financial Services, a leading captive finance company in the United States with managed assets totaling more than $40 billion dollars, purchased MicroStrategy software and services to expand its MicroStrategy financial reporting applications out to the enterprise. Impressed by the scalability and functionality of the MicroStrategy Business Intelligence Platform, Toyota Financial Services expects its user base to grow to over 400 associates across the country. TFS is the finance and insurance brand for Toyota in the U.S., offering retail auto financing and leasing through Toyota Motor Credit Corporation (TMCC) and extended service contracts through Toyota Motor Insurance Services (TMIS).
Alitalia
Alitalia is one of the leading airlines in Europe and the world. With more than 50 years of experience it is one of Italy’s largest and most successful companies, carrying more than 25 million passengers per year. To maintain its leadership position, Alitalia chose the MicroStrategy platform as its business intelligence solution for customer profiling and campaign management. Alitalia deploys MicroStrategy Web and MicroStrategy Narrowcast to analyze a multimillion record database of historical reservation data and provide dynamic Web reporting and information delivery. MicroStrategy offers Alitalia a solution for customer profiling, including client segmentation by frequency and relationship tenure; for campaign creation and management; and for market basket analysis, to analyze the relationship between flight purchases and the use of commercial partners.
IMS Health Canada
IMS Health Canada has developed an ASP application with the MicroStrategy Business Intelligence Platform(TM) that provides sales and marketing data to pharmaceutical companies. The recent purchase of additional MicroStrategy software and services will allow the company to expand its reach from 650 customers on the Web to 1,000, and from 2,000 subscribers who will receive personalized insight via e-mail based data stores in its Oracle data warehouse to 3,500. The company offers the services to its pharmaceutical customers to help them determine optimal sales and marketing strategies to improve their market presence.
Year of Technological Milestones & Innovation Solidifies MicroStrategy’s Leadership
In 2002, MicroStrategy solidified its technological leadership in enterprise-class, industrial strength business intelligence software with a series of major technological milestones and innovations. In April 2002, MicroStrategy released its new, significantly enhanced version of its business intelligence software platform, MicroStrategy 7i. Winning high praise from customers and leading industry analysts alike, MicroStrategy 7i represented a technological breakthrough for the industry, as it is the first truly integrated, 100-percent Web-based platform that puts a wide range of user functionality into a single business intelligence technology.
In the third quarter, MicroStrategy further expanded the capabilities of its business intelligence platform with an enhanced version of MicroStrategy 7i (7.2.1). Addressing the urgent industry need for transparent financial tracking and reporting, MicroStrategy 7.2.1 is designed specifically to meet the demanding new requirements for financial reporting and analysis imposed on business by new government mandates with highly sophisticated, yet easy-to-use features. These new features allow fast deployment of Web-based financial reporting systems — companies can deploy an operational system within 90-120 days rather than the usual 6-12 months.
November 2002 marked the release of an easy-to-deploy, scalable Web user interface, MicroStrategy Web Universal(TM), that will run on UNIX(R), Linux(R) and Windows(R) operating systems. MicroStrategy Web Universal is a fully functional, zero-footprint Web interface that can run on any major operating system. MicroStrategy Web Universal is J2EE(TM) compliant and runs on leading application servers, including BEA WebLogic Server(TM), IBM WebSphere(R) Application Server, Sun(TM) ONE Application Server and Apache Tomcat. MicroStrategy Web Universal’s platform-independent architecture enables it to run on Windows or Linux operating systems, or on UNIX operating systems such as Sun Solaris(TM), IBM AIX(R), and HP-UX.
The market-leading capabilities of MicroStrategy’s business intelligence software platform were validated in 2002 with the issuance of the second edition of the top independent survey of the online analytic market, the OLAP Survey. The survey found MicroStrategy’s software superior to that of Business Objects, Cognos, Hyperion and Brio in the critical, strategic areas of Web deployment and data scalability. MicroStrategy’s business intelligence software platform was found to be far ahead in its capacity to be deployed easily via the Web and to serve users enterprise-wide by harnessing very large databases. (Please see: http://www.microstrategy.com/Company/Analysts_OLAP_Survey.asp .)
In 2002, MicroStrategy won Reader’s Choice awards in Intelligent Enterprise, a leading IT publication, for its software’s advanced analysis and data mining capabilities and for customer relationship management (CRM) analysis. MicroStrategy won these awards in competition with Business Objects, Oracle, Cognos, Brio, Actuate, and SAS Institute.
Also in 2002, MicroStrategy 7 was found to be the most comprehensive analytical tool reviewed by the CRN Test Center, in an evaluation of analytical tools including Microsoft’s Data Analyzer 3.5 and ProClarity’s Analytic Platform 4.0. MicroStrategy’s interactive, pure-HTML Web client and extensive library of analytical functions were among the top features the review highlighted, and the MicroStrategy 7 platform was deemed the best solution for the Web.
Finance Commentary
As of December 31, 2002, all outstanding preferred stock had been converted to common stock. During Q4 2002, the company repurchased an additional $7.5 million face value worth of its five-year 7.5% notes at a discount to par resulting in a $2.1 million gain on the partial early extinguishment of the notes. The outstanding principal amount of the notes was $63.3 million at December 31, 2002. These notes are carried on the balance sheet at a discounted value of $45.0 million with the difference between carrying value and principal value amortized on a quarterly basis through a charge reflected on the company’s profit and loss statement. As a result of this amortization, $1.0 million in non-cash interest expense was reported in the Q4 2002 results. In Q4 2002, the company wrote off $1.4 million in intangibles relating to the Teracube asset, bringing the book value of this item to zero. In Q4 2002, the company paid a total of $8.3 million on its five-year 7.5% notes, which represented interest that had accrued on the notes since April 2001. Going forward, based on the $63.3 million of aggregate face value of the notes outstanding as of the end of 2002, the company expects to make semi-annual interest payments of approximately $2.4 million through maturity. The company previously announced plans to sell its two remaining non-core business units, Angel.com and Alarm.com. The sales process did not result in the company receiving any acceptable bids for these units. Accordingly, the sales process has been terminated.
Outlook and Financial Guidance Information
The following statements are subject to risks and uncertainties described at the end of this press release. Management guidance for 2003 supersedes any previously announced guidance as to the company’s expectations for financial results for 2003.
Management offers the following guidance for the consolidated continuing operations of MicroStrategy, for the quarter ending March 31, 2003:
Revenue is expected to be in the range of approximately $33 to $37 million. Net income (loss) is expected to range from approximately $(0.2) million to $0.6 million. Earnings (loss) per share, assuming a fully diluted weighted average share count, is expected to range from approximately $(0.02) to $0.04 per share. Adjusted net earnings (which excludes approximately $1.0 million in expected non-cash discount amortization expense and approximately $0.1 million in expected amortization expense of intangible assets) is expected to be approximately $0.9 million to $1.7 million or $0.06 to $0.12 per share on a diluted basis. Average share count in the quarter using the fully diluted weighted average share count method is expected to be approximately 13.5 to 14.5 million.
Management offers the following guidance for the full year 2003, which supersedes any previously announced guidance as to the Company’s expectations for financial results for 2003:
Consolidated revenue is expected to be in the range of approximately $150 to $160 million. License revenue for 2003 is expected to increase by approximately 10% versus 2002. Net income is expected to range from approximately $11.0 million to $16.0 million. Earnings per share, assuming a fully diluted weighted average share count, is expected to range from approximately $0.71 to $1.13 per share. Adjusted net earnings (which excludes approximately $3.8 million in expected non-cash discount amortization expense and approximately $0.2 million in expected amortization expense of intangible assets) is expected to be approximately $15 million to $20 million or $1.00 to $1.40 per share on a diluted basis. Average share count for the year using the fully diluted weighted average share count method is expected to be approximately 14 to 15 million. The Company also expects to have positive operating cash flow in each quarter of 2003.
About MicroStrategy Incorporated
Leadership in a Critical Market: Founded in 1989, MicroStrategy is a worldwide leader in the increasingly critical business intelligence software market. Large and small companies alike are harnessing MicroStrategy’s business intelligence software to gain vital insights from their data to help them proactively enhance cost-efficiency, productivity and customer relations and optimize revenue-generating strategies. MicroStrategy’s business intelligence platform offers exceptional capabilities that provide organizations — in virtually all facets of their operations — with user- friendly solutions to their data query, reporting, and advanced analytical needs, and distributes valuable insight on this data to users via Web, wireless, and voice. PC Magazine selected MicroStrategy 7(TM) as the 2001 “Editors’ Choice” for business intelligence software.
Enterprise-Class Business Intelligence: MicroStrategy 7i(TM) is a truly integrated, enterprise-class, Web-based business intelligence platform. With MicroStrategy 7i, enterprises can now standardize on one business intelligence platform and deploy high-value business intelligence enterprise-wide. MicroStrategy 7i’s configurable query, reporting, and OLAP Web interface is designed to support all users, from casual report viewers to power analysts.
Diverse Customer Base: MicroStrategy’s customer base cuts across industry and sector lines, with over 1,900 enterprise-class customers, including Lowe’s Home Improvement Warehouse, AT&T Wireless Group, Wachovia and GlaxoSmithKline. MicroStrategy also has relationships with over 500 systems integrators and application development and platform partners, including IBM, PeopleSoft, Hewlett-Packard, and JD Edwards.
MicroStrategy is listed on Nasdaq under the symbol MSTR. For more information on the Company, or to purchase or demo MicroStrategy’s software, please visit MicroStrategy’s Web site at http://www.microstrategy.com .
MicroStrategy, MicroStrategy Business Intelligence Platform, Scalable Business Intelligence Platform Built for the Internet, MicroStrategy Web Universal, and MicroStrategy 7i 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 estimates of future business prospects or financial results in the section above entitled “Outlook and Financial Guidance Information” 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 Incorporated and its subsidiaries (collectively, the “Company”) to differ materially from the forward-looking statements. Factors that could contribute to such differences include: 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 7i software on a timely basis; 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 (1) 2002 2001 (1)
(unaudited) (as adjusted) (unaudited) (as adjusted)
Revenues
Product licenses $20,466 $18,707 62,865 $72,781
Product support
and other services 21,503 24,973 84,962 109,300
Total revenues 41,969 43,680 147,827 182,081
Cost of Revenues
Product licenses 841 1,156 2,925 4,170
Product support
and other services 6,122 7,434 24,975 43,692
Total cost
of revenues 6,963 8,590 27,900 47,862
Gross profit 35,006 35,090 119,927 134,219
Operating Expenses
Sales and marketing 13,150 12,742 48,179 77,253
Research and
development 7,851 6,372 26,297 32,819
General and
administrative 7,571 5,200 27,635 34,153
Restructuring and
impairment charges 1,434 13,064 4,198 39,463
Amortization of
goodwill and
intangible assets 512 4,505 3,195 17,251
Total operating
expenses 30,518 41,883 109,504 200,939
Income (loss)
from operations 4,488 (6,793) 10,423 (66,720)
Financing and Other
Income (Expense)
Interest income 119 258 728 2,171
Interest expense
(Note 2) (2,363) (1,836) (8,413) (5,401)
Loss on investments – (1,351) (523) (3,603)
(Provision for)
reduction in
estimated cost of
litigation
settlement – (11,554) 11,396 30,098
Gain on contract
termination – – 16,837 –
Gain on early
extinguishment
of notes payable 2,089 – 6,750 –
Other income
(expense), net 356 (707) 2,109 (2,139)
Total financing
and other income
(expense) 201 (15,190) 28,884 21,126
Income (loss) from
continuing
operations before
income taxes 4,689 (21,983) 39,307 (45,594)
Provision for
income taxes 59 1,120 1,190 2,460
Net income (loss)
from continuing
operations 4,630 (23,103) 38,117 (48,054)
Discontinued
Operations
Income (loss) from
discontinued
operations – 4,178 – (30,739)
Loss from
abandonment – (2,075) – (2,075)
Income (loss)
from discontinued
operations – 2,103 – (32,814)
Net income (loss) 4,630 (21,000) 38,117 (80,868)
Dividends, accretion,
and beneficial
conversion feature
on convertible
preferred stock – (3,042) (6,874) (10,353)
Net gain on
refinancing of
series A redeemable
convertible
preferred stock – – – 29,370
Net gain on
refinancing of
series B, C and D
convertible
preferred stock – – 36,135 –
Gain on early
redemption of
redeemable convertible
preferred stock of
discontinued operations – – – 44,923
Net income (loss)
attributable to
common stockholders $4,630 $(24,042) $67,378 $(16,928)
Basic earnings (loss)
per share
Continuing operations $0.34 $(2.84) $3.20 $(3.35)
Discontinued operations $- $0.23 $- $1.40
Net income (loss)
attributable to
common stockholders $0.34 $(2.61) $3.20 $(1.95)
Basic weighted
average shares
outstanding 13,591 9,216 11,676 8,659
Diluted earnings (loss)
per share
Continuing operations $0.33 $(2.84) $3.12 $(3.35)
Discontinued operations $- $0.23 $- $1.40
Net income (loss)
attributable to
common stockholders $0.33 $(2.61) $3.12 $(1.95)
Diluted weighted
average shares
outstanding 13,837 9,216 11,986 8,659
(1) On July 30, 2002, the Company’s Board of Directors approved a reverse
stock split of the Company’s common stock at a ratio of one-for-ten.
All references to common share and per common share amounts for all
prior periods presented have been retroactively restated to reflect
this reverse split. Additionally, certain prior year amounts have
been reclassified to conform to the current year presentation.
(2) Interest expense for the three and twelve months ended December 31,
2002 includes discount amortization expense on notes payable of $1,033
and $2,098, respectively.
MICROSTRATEGY INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
December 31,
2002 2001
Assets (unaudited) (audited)
Current assets
Cash and cash equivalents $15,036 $38,409
Restricted cash 6,173 439
Short-term investments 44 904
Accounts receivable, net 28,195 22,281
Prepaid expenses and other current
assets 5,032 5,902
Deferred tax assets, net 495 –
Total current assets 54,975 67,935
Property and equipment, net 18,471 26,506
Goodwill and intangible assets, net 789 5,402
Deposits and other assets 5,638 3,789
Total Assets $79,873 $103,632
Liabilities and Stockholders’ Equity
(Deficit)
Current liabilities
Accounts payable and accrued expenses $15,267 $18,935
Accrued compensation and employee benefits 11,352 13,654
Accrued interest and preferred dividends 244 7,351
Accrued restructuring costs 5,222 7,422
Deferred revenue and advance payments 23,961 20,987
Contingency from terminated contract – 17,074
Working capital line of credit – 1,212
Notes payable 4,698 –
Net liabilities of discontinued operations 1,151 4,479
Total current liabilities 61,895 91,114
Deferred revenue and advance payments 1,381 5,431
Accrued litigation settlement – 68,637
Other long-term liabilities 2,402 3,536
Accrued restructuring costs 3,663 4,271
Notes payable 45,041 –
Total Liabilities 114,382 172,989
Series A redeemable convertible
preferred stock – 6,385
Series B redeemable convertible
preferred stock – 32,343
Series C redeemable convertible
preferred stock – 25,937
Series D convertible preferred stock – 3,985
Stockholders’ equity (deficit):
Preferred stock undesignated; $.001
par value; 4,971 shares
authorized; no shares issued or
outstanding – –
Series F convertible preferred
stock; $.001 par value; 2 shares
authorized; no shares issued or
outstanding – –
Class A common stock; $.001 par value;
330,000 shares authorized; 9,157 and
4,369 shares issued and outstanding,
respectively 9 4
Class B common stock; $.001 par value;
165,000 shares authorized; 4,619 and
4,823 shares issued and outstanding,
respectively 5 5
Additional paid-in capital 305,334 239,663
Deferred compensation (17) (99)
Accumulated other comprehensive income 2,170 2,547
Accumulated deficit (342,010) (380,127)
Total Stockholders’ Equity (Deficit) (34,509) (138,007)
Total Liabilities and Stockholders’
Equity (Deficit) $79,873 $103,632
MICROSTRATEGY INCORPORATED
Computation of basic and diluted earnings per share
(in thousands, except per share data)
(unaudited)
Three months ended
December 31, 2002
Income Shares Per Share
(Numerator) (Denominator) Amount
Net income (loss)
from continuing operations $4,630
Income from discontinued
operations –
Net income (loss) 4,630
Dividends, accretion and
beneficial conversion
feature on convertible
preferred stock –
Net income attributable
to common stockholders 4,630
Effect of common stock
and participating
convertible securities:
Weighted average shares of
class A common stock – 8,972
Weighted average shares of
class B common stock – 4,619
Basic earnings per share 4,630 13,591 $0.34
Effect of dilutive securities:
Employee stock options – 203
Series F preferred stock – 43
Diluted earnings per share $4,630 13,837 $0.33
Three months ended
December 31, 2001
Income Shares Per Share
(Numerator) (Denominator) Amount
Net income (loss)
from continuing operations $(23,103)
Income from discontinued
operations 2,103
Net income (loss) (21,000)
Dividends, accretion and
beneficial conversion
feature on convertible
preferred stock (3,042)
Net income attributable
to common stockholders (24,042)
Effect of common stock
and participating
convertible securities:
Weighted average shares of
class A common stock – 4,393
Weighted average shares of
class B common stock – 4,823
Basic earnings per share (24,042) 9,216 $(2.61)
Effect of dilutive securities:
Employee stock options – –
Series F preferred stock – –
Diluted earnings per share $(24,042) 9,216 $(2.61)
The basic and diluted loss per share calculation for the three months
ended December 31, 2001 excluded series A, B, C, and D preferred stock,
which were convertible into 234,304, 917,590, 770,775, and 290,220
weighted average shares of class A common stock, respectively, because
their effect would have been anti-dilutive. Additionally, employee stock
options of 215,493 were excluded from the diluted loss per share
calculation for the three months ended December 31, 2001 because their
effect would have been anti-dilutive.
MICROSTRATEGY INCORPORATED
Computation of basic and diluted earnings (loss) per share
(in thousands, except per share data)
(unaudited)
Twelve months ended
December 31, 2002
Income Shares Per Share
(Numerator) (Denominator) Amount
Net income (loss)
from continuing operations $38,117
Loss from discontinued
operations –
Net income (loss) 38,117
Dividends and accretion
on series A, B, C and D
convertible preferred stock
and beneficial conversion
feature on series F
convertible preferred stock (6,874)
Net gain on refinancing of
series A redeemable
convertible preferred stock –
Net gain on refinancing of
series B, C and D convertible
preferred stock 36,135
Gain on early redemption of
redeemable convertible
preferred stock of
discontinued operations –
Net income attributable to
common stockholders 67,378
Effect of common stock and
participating convertible
securities:
Weighted average shares of
class A common stock – 6,469
Weighted average shares of
class B common stock – 4,619
Series C preferred stock (12,054) 95
Series B preferred stock (15,311) 159
Series D preferred stock (2,992) 174
Series A preferred stock 327 160
Basic earnings (loss)
per share 37,348 11,676 $3.20
Effect of dilutive securities:
Series F preferred stock – 155
Employee stock options – 155
Diluted earnings (loss)
per share $37,348 11,986 $3.12
Twelve months ended
December 31, 2001
Income Shares Per Share
(Numerator) (Denominator) Amount
Net income (loss)
from continuing operations $(48,054)
Loss from discontinued
operations (32,814)
Net income (loss) (80,868)
Dividends and accretion
on series A, B, C and D
convertible preferred stock
and beneficial conversion
feature on series F
convertible preferred stock (10,353)
Net gain on refinancing of
series A redeemable
convertible preferred stock 29,370
Net gain on refinancing of
series B, C and D
convertible preferred stock –
Gain on early redemption of
redeemable convertible
preferred stock of
discontinued operations 44,923
Net income attributable
to common stockholders (16,928)
Effect of common stock and
participating convertible
securities:
Weighted average shares of
class A common stock – 3,836
Weighted average shares of
class B common stock – 4,823
Series C preferred stock – –
Series B preferred stock – –
Series D preferred stock – –
Series A preferred stock – –
Basic earnings (loss)
per share (16,928) 8,659 $(1.95)
Effect of dilutive securities:
Series F preferred stock – –
Employee stock options – –
Diluted earnings (loss)
per share $(16,928) 8,659 $(1.95)
The numerator in the basic and diluted earnings per share calculation for
the twelve months ended December 31, 2002 has been adjusted to deduct the
$36.1 million gain on the refinancing of the series B, C and D convertible
preferred stock and add back $6.1 million of dividends and accretion on
the series A, B, C and D convertible preferred stock that would have been
excluded from net income attributable to common stockholders assuming
conversion at the beginning of the period under the if-converted method.
The basic and diluted loss per share calculation for the twelve months
ended December 31, 2001 excluded series A, B, C, D and E preferred stock,
which were convertible into 297,153, 673,417, 565,670, 168,155, and 9,771
weighted average shares of class A common stock, respectively, because
their effect would have been anti-dilutive. Additionally, employee stock
options of 296,664 were excluded from the diluted loss per share
calculation for the twelve months ended December 31, 2001 because their
effect would have been anti-dilutive.
MICROSTRATEGY INCORPORATED
Non-Generally Accepted Accounting Principles (“Non-GAAP”) Financial
Measures
Management believes that the presentation of adjusted net earnings (loss)
is helpful in understanding the ongoing operating results and cash flow
indicators with respect to the Company’s core business because the
adjustments made in computing adjusted net earnings (loss) are non-cash or
cash related gains and expenses incurred during the period that are not
associated with ongoing operating results and are not cash flow indicators
of the Company’s core business operations.
Adjusted net earnings (loss)
(in thousands, except per share data)
(unaudited) Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Adjusted net earnings (loss) $5,472 $7,371 $13,174 $(18,180)
Adjusted net earnings (loss) divided
by basic weighted average shares
outstanding $0.40 $0.80 $1.13 $(2.10)
Adjusted net earnings (loss) divided
by diluted weighted average shares
outstanding $0.40 $0.65 (1) $1.10 $(2.10)
Basic weighted average shares
outstanding 13,591 9,216 11,676 8,659
Diluted weighted average shares
outstanding (1) 13,837 11,410 (1) 11,986 8,659
(1) The diluted weighted average shares outstanding of 11,410 for the
three months ended December 31, 2001 used in the analysis above
includes an additional 2,194 shares as compared to the diluted
weighted average shares outstanding of 9,216 shown on the face of the
Statement of Operations for the same period. Because the Company
generated a net loss in accordance with GAAP during this period, the
potential dilutive effect of the series A, B, C, and D preferred stock
was excluded from the GAAP diluted weighted average share count to
preclude an anti-dilutive impact on GAAP net loss per share. Because
the adjusted net earnings are positive, the diluted weighted average
shares outstanding as reflected above for the three months ended
December 31, 2001 have been increased by 2,194 to give effect to the
potential dilution of the series A, B, C and D preferred stock.
Reconciliation of net income (loss) from continuing operations
to adjusted net earnings (loss)
(in thousands)
(unaudited) Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Net income (loss) from continuing
operations $4,630 $(23,103) $38,117 $(48,054)
Restructuring and impairment charges 1,434 13,064 4,198 39,463
Amortization of goodwill and
intangible assets 512 4,505 3,195 17,251
Loss on investments – 1,351 523 3,603
Provision for (reduction in)
estimated cost of litigation
settlement – 11,554 (11,396) (30,098)
Gain on contract termination – – (16,837) –
Gain on early extinguishment of
notes payable (2,089) – (6,750) –
Discount amortization expense on
notes payable 1,033 – 2,098 –
Other non-recurring items (48) – 26 (345)
Total reconciling items 842 30,474 (24,943) 29,874
Adjusted net earnings (loss) $5,472 $7,371 $13,174 $(18,180)
Reconciling items in computing adjusted net earnings (loss) –
Cash vs. Non-cash
(in thousands)
(unaudited) Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Non-cash:
Restructuring and impairment charges 1,434 12,270 1,491 18,581
Amortization of goodwill and
intangible assets 512 4,505 3,195 17,251
Loss on investments – 1,351 523 3,603
Provision for (reduction in)
estimated cost of litigation
settlement – 11,554 (11,396) (30,098)
Gain on contract termination – – (16,837) –
Gain on early extinguishment of notes
payable (2,089) – (6,750) –
Discount amortization expense on
notes payable 1,033 – 2,098 –
Other non-recurring items – – 284 408
Total non-cash 890 29,680 (27,392) 9,745
Cash:
Restructuring and impairment charges – 794 2,707 20,882
Other non-recurring items (48) – (258) (753)
Total cash (48) 794 2,449 20,129
Total reconciling items $842 $30,474 $(24,943) $29,874
MICROSTRATEGY INCORPORATED
Non-Generally Accepted Accounting Principles (“Non-GAAP”) Financial
Measures – continued
Reconciliation of net income (loss) attributable to common stockholders
to adjusted net EBITDA
(in thousands)
(unaudited) Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Net income (loss) attributable to
common stockholders $4,630 $(24,042) $67,378 $(16,928)
Interest income (119) (258) (728) (2,171)
Interest expense 2,363 1,836 8,413 5,401
Provision for income taxes 59 1,120 1,190 2,460
Depreciation and amortization 2,311 1,943 9,916 12,306
Amortization of goodwill and
intangible assets 512 4,505 3,195 17,251
(Income) loss from discontinued
operations – (2,103) – 32,814
EBITDA before reconciling items 9,756 (16,999) 89,364 51,133
Reconciling items:
Restructuring and impairment charges 1,434 13,064 4,198 39,463
Loss on investments – 1,351 523 3,603
Provision for (reduction in)
estimated cost of litigation
settlement – 11,554 (11,396) (30,098)
Gain on contract termination – – (16,837) –
Gain on early extinguishment of
notes payable (2,089) – (6,750) –
Other (income) expense, net (356) 707 (2,109) 2,139
Dividends, accretion, and beneficial
conversion feature on convertible
preferred stock – 3,042 6,874 10,353
Net gain on refinancing of series A
redeemable convertible preferred
stock – – – (29,370)
Net gain on refinancing of series B,
C and D convertible preferred stock – – (36,135) –
Gain on early redemption of
redeemable convertible preferred
stock of discontinued operations – – – (44,923)
Adjusted net EBITDA $8,745 $12,719 $27,732 $2,300
SOURCE MicroStrategy Incorporated
CONTACT: Marc Brailov of MicroStrategy Incorporated, +1-703-770-1670;
cell, +1-703-407-9884; or mbrailov@microstrategy.com
Source: MicroStrategy