MicroStrategy Inc.

10/30/2024 | Press release | Distributed by Public on 10/30/2024 14:03

Announces a $21 billion at the market (ATM) equity offering Form 8 K

Announces a $21 billion at-the-market (ATM) equity offering
•
Announces a target of raising $21 billion using fixed-income securities
•
Revises annual BTC Yield target to 6% to 10% for 2025 through 2027

TYSONS CORNER, Va., October 30, 2024 - MicroStrategy® Incorporated (Nasdaq: MSTR) ("MicroStrategy"or the "Company"), the largest corporate holder of bitcoin and the world's first Bitcoin Treasury Company, today announced financial results for the three-month period ended September 30, 2024 (the third quarter of its 2024 fiscal year).

"Our focus remains to increase value generated to our shareholders by leveraging the digital transformation of capital. Today, we are announcing a strategic goal of raising $42 billion of capital over the next 3 years, comprised of $21 billion of equity and $21 billion of fixed income securities, which we refer to as our "21/21 Plan." As a Bitcoin Treasury Company, we plan to use the additional capital to buy more bitcoin as a treasury reserve asset in a manner that will allow us to achieve higher BTC Yield," said Phong Le, President and Chief Executive Officer, MicroStrategy.

"Q3 2024 was another transformational quarter for MicroStrategy, as we raised $2.1 billion in equity and debt. Our proven track record of using intelligent leverage serves as the foundation to execute on our strategic three-year 21/21 Plan. Through our treasury strategy, we increased our bitcoin holdings by 11% in the quarter, increased our year-to-date BTC Yield to 17.8%, and reduced our total annualized interest expense by $24 million," said Andrew Kang, Chief Financial Officer, MicroStrategy.

On August 7, 2024, the Company completed a 10-for-1 stock split of the Company's class A and class B common stock. All prior period share and per share information presented herein has been retroactively adjusted to reflect the stock split.

Bitcoin Treasury Highlights

•
"BTC Yield" KPI: Year-to-date 2024, the Company's BTC Yield is 17.8%. The Company is revising its long-term target to achieve an annual BTC Yield of 6% to 10% between 2025 and 2027. BTC Yield is a key performance indicator ("KPI") that the Company uses to help assess the performance of its strategy of acquiring bitcoin in a manner the Company believes is accretive to shareholders. See "Important Information about BTC Yield KPI" in this press release for the definition of BTC Yield and how it is calculated.
•
Digital Assets: As of September 30, 2024, the carrying value of the Company's digital assets (comprised of approximately 252,220 bitcoins) was $6.851 billion. As of September 30, 2024, the original cost basis and market value of the Company's bitcoin were $9.904 billion and $16.007 billion, respectively, which reflects an average cost per bitcoin of approximately $39,266 and a market price per bitcoin of $63,463, respectively.
•
At-the-Market Equity Offering Program: During the three months ended September 30, 2024, the Company issued and sold 8,048,449 shares of its class A common stock for aggregate net proceeds of approximately $1.1 billion. As of September 30, 2024, approximately $891.3 million of the Company's class A common stock remained available for issuance and sale pursuant to our current at-the-market equity offering program.
•
New At-the-Market Equity Offering Program: On October 30, 2024, the Company announced a new At-the-Market Equity Offering Program pursuant to which MicroStrategy may issue and sell shares of its class A common stock having an aggregate offering price of up to $21 billion from time to time.
•
Issuance of 2028 Convertible Notes: In September 2024, the Company issued $1.010 billion aggregate principal amount of 0.625% Convertible Senior Notes due 2028 (the "2028 Convertible Notes") with an initial conversion price of $183.19 per share of class A common stock.
•
Redemption of 2028 Senior Secured Notes: On September 26, 2024, the Company used proceeds from the 2028 Convertible Notes to redeem all $500 million aggregate principal amount of the Company's 6.125% Senior Secured Notes due 2028 (the "2028 Secured Notes") at a redemption price equal to 103.063% of the principal amount of the 2028 Secured Notes, plus accrued and unpaid interest to but excluding September 26, 2024.

Q3 2024 Software Business Highlights

•
Revenues:
o
Total revenues were $116.1 million, a 10.3% decrease year-over-year.
o
Subscription Services Revenues were $27.8 million, a 32.5% increase year-over-year.
o
Product licenses and subscription services revenues were $38.9 million, a 13.6% decrease year-over-year.
o
Product support revenues were $61.0 million, an 8.7% decrease year-over-year.
o
Other services revenues were $16.2 million, an 8.0% decrease year-over-year.
•
Gross Profit: Gross profit was $81.7 million, representing a 70.4% gross margin, compared to $102.8 million, representing a gross margin of 79.4%, for the third quarter of 2023.

Other Q3 Financial Highlights

•
Operating Expenses: Operating expenses were $514.3 million, a 301.6% increase year-over-year. Operating expenses include impairment losses on the Company's digital assets, which were $412.1 million, compared to $33.6 million in the third quarter of 2023.
•
Loss from Operations and Net (Loss) Income: Loss from operations was $432.6 million, compared to $25.2 million for the third quarter of 2023. Net loss was $340.2 million, or $1.72 per share on a diluted basis, as compared to a net loss of $143.4 million, or $1.01 per share on a diluted basis, for the third quarter of 2023.
•
Cash and Cash Equivalents: As of September 30, 2024, the Company had cash and cash equivalents of $46.3 million, as compared to $46.8 million as of December 31, 2023, a decrease of $0.5 million.

The tables provided at the end of this press release include a reconciliation of the most directly comparable financial measures prepared in accordance with generally accepted accounting principles in the United States ("GAAP") to non-GAAP financial measures for the three and nine months ended September 30, 2024 and 2023. An explanation of non-GAAP financial measures is also included under the heading "Non-GAAP Financial Measures" below. Additional non-GAAP financial measures are included in MicroStrategy's "Q3 2024 Earnings Presentation," which will be available under the "Events and Presentations" section of MicroStrategy's investor relations website at https://www.microstrategy.com/en/investor-relations.

Conference Call

MicroStrategy will be discussing its third quarter 2024 financial results on a live Video Webinar today beginning at approximately 5:00 p.m. ET. The live Video Webinar and accompanying presentation materials will be available under the "Events and Presentations" section of MicroStrategy's investor relations website at https://www.microstrategy.com/en/investor-relations. Log-in instructions will be available after registering for the event. An archived replay of the event will be available beginning approximately two hours after the call concludes.

About MicroStrategy Incorporated

MicroStrategy (Nasdaq: MSTR) is the world's first and largest Bitcoin Treasury Company. We are a publicly traded company that has adopted Bitcoin as our primary treasury reserve asset. By using proceeds from equity and debt financings, as well as cash flows from our operations, we strategically accumulate Bitcoin and advocate for its role as digital capital. Our treasury strategy is designed to provide investors varying degrees of economic exposure to Bitcoin by offering a range of securities, including equity and fixed-income instruments. In addition, we provide industry-leading AI-powered enterprise analytics software, advancing our vision of Intelligence

Everywhere. We leverage our development capabilities to explore innovation in Bitcoin applications, integrating analytics expertise with our commitment to digital asset growth. We believe our combination of operational excellence, strategic Bitcoin reserve, and focus on technological innovation positions us as a leader in both the digital asset and enterprise analytics sectors, offering a unique opportunity for long-term value creation.

MicroStrategy, MicroStrategy AI, Intelligence Everywhere, Intelligent Enterprise, and MicroStrategy Library 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.

Non-GAAP Financial Measures

MicroStrategy is providing supplemental financial measures for (i) non-GAAP loss from operations that excludes the impact of share-based compensation expense, (ii) non-GAAP net (loss) income and non-GAAP diluted (loss) earnings per share that exclude the impacts of share-based compensation expense, interest expense arising from the amortization of debt issuance costs related to MicroStrategy's long-term debt, gains and losses on debt extinguishment, and related income tax effects, and (iii) non-GAAP constant currency revenues that exclude certain foreign currency exchange rate fluctuations. These supplemental financial measures are not measurements of financial performance under GAAP and, as a result, these supplemental financial measures may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP financial measures internally to help understand, manage, and evaluate business performance and to help make operating decisions.

MicroStrategy believes that these non-GAAP financial measures are also useful to investors and analysts in comparing its performance across reporting periods on a consistent basis. The first supplemental financial measure excludes a significant non-cash expense that MicroStrategy believes is not reflective of its general business performance, and for which the accounting requires management judgment and the resulting share-based compensation expense could vary significantly in comparison to other companies. The second set of supplemental financial measures excludes the impacts of (i) share-based compensation expense, (ii) non-cash interest expense arising from the amortization of debt issuance costs related to MicroStrategy's long-term debt, (iii) gains and losses on debt extinguishment, and (iv) related income tax effects. The third set of supplemental financial measures excludes changes resulting from certain fluctuations in foreign currency exchange rates so that results may be compared to the same period in the prior year on a non-GAAP constant currency basis. MicroStrategy believes the use of these non-GAAP financial measures can also facilitate comparison of MicroStrategy's operating results to those of its competitors.

Important Information about BTC Yield KPI

BTC Yield is a key performance indicator ("KPI") that represents the % change period-to-period of the ratio between the Company's bitcoin holdings and its Assumed Diluted Shares Outstanding. Assumed Diluted Shares Outstanding refers to the aggregate of the Company's actual shares of common stock outstanding as of the end of each period plus all additional shares that would result from the assumed conversion of all outstanding convertible notes, exercise of all outstanding stock option awards, and settlement of all outstanding restricted stock units and performance stock units. Assumed Diluted Shares Outstanding is not calculated using the treasury method and does not take into account any vesting conditions (in the case of equity awards), the exercise price of any stock option awards or any contractual conditions limiting convertibility of convertible debt instruments.

The Company uses BTC Yield as a KPI to help assess the performance of its strategy of acquiring bitcoin in a manner the Company believes is accretive to shareholders. The Company believes this KPI can be used to supplement an investor's understanding of its decision to fund the purchase of bitcoin by issuing additional shares of its common stock or instruments convertible to common stock. When the Company uses this KPI, management also takes into account the various limitations of this metric, including that it does not take into account debt and other liabilities and claims on company assets that would be senior to common equity and that it assumes that all indebtedness will be refinanced or, in the case of the Company's senior convertible debt instruments, converted into shares of common stock in accordance with their respective terms.

Additionally, this KPI is not, and should not be understood as, an operating performance measure or a financial or liquidity measure. In particular, BTC Yield is not equivalent to "yield" in the traditional financial context. It is not a measure of the return on investment the Company's shareholders may have achieved historically or can achieve in the future by purchasing stock of the Company, or a measure of income generated by the Company's operations or its bitcoin holdings, return on investment on its bitcoin holdings, or any other similar financial measure of the performance of its business or assets.

The trading price of the Company's class A common stock is informed by numerous factors in addition to the amount of bitcoins the Company holds and number of actual or potential shares of its stock outstanding, and as a result, the market value of the Company's shares may trade at a discount or a premium relative to the market value of the bitcoin the Company holds, and BTC Yield is not indicative nor predictive of the trading price of the Company's shares of class A common stock.

As noted above, this KPI is narrow in its purpose and is used by management to assist it in assessing whether the Company is using equity capital in a manner accretive to shareholders solely as it pertains to its bitcoin holdings.

In calculating this KPI, the Company does not take into account the source of capital used for the acquisition of its bitcoin. The Company notes in particular, it has acquired bitcoin using proceeds from the offerings of the 2028 Secured Notes (which the Company has since redeemed), which were not convertible to shares of the Company's common stock, as well as convertible senior notes, which at the time of issuance had, and may from time-to-time thereafter have, conversion prices above the current trading prices of the Company's common stock, or as to which the holders of such convertible notes may not then be entitled to exercise the conversion rights of the notes. Such offerings have had the effect of increasing the BTC Yield without taking into account the corresponding debt. Conversely, if any of the Company's convertible senior notes mature or are redeemed without being converted into common stock, the Company may be required to sell shares in quantities greater than the shares such notes are convertible into or generate cash proceeds from the sale of bitcoin, either of which would have the effect of decreasing the BTC Yield due to changes in the Company's bitcoin holdings and shares in ways that were not contemplated by the assumptions in calculating BTC Yield. Accordingly, this metric might overstate or understate the accretive nature of the Company's use of equity capital to buy bitcoin because not all bitcoin may be acquired using proceeds of equity offerings and not all issuances of equity may involve the acquisition of bitcoin.

The Company determines its KPI targets based on its history and future goals. The Company's ability to achieve positive BTC Yield may depend on a variety of factors, including its ability to generate cash from operations in excess of its fixed charges and other expenses, as well as factors outside of its control, such as the availability of debt and equity financing on favorable terms. Past performance is not indicative of future results.

The Company has historically not paid any dividends on its shares of common stock, and by presenting this KPI the Company makes no suggestion that it intends to do so in the future. Ownership of common stock does not represent an ownership interest in the bitcoin the Company holds.

Investors should rely on the financial statements and other disclosures contained in the Company's SEC filings. This KPI is merely a supplement, not a substitute. It should be used only by sophisticated investors who understand its limited purpose and many limitations.

Forward-Looking Statements

This press release may include statements that may constitute "forward-looking statements," including estimates of future business prospects or financial results, our targets relating to our BTC Yield, and statements containing the words "believe," "estimate," "project," "expect," "will," 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: fluctuations in the market price of bitcoin and any associated impairment charges that the Company may incur as a result of a decrease in the market price of bitcoin below the value at which the Company's bitcoins are carried on its balance sheet; the availability of debt and equity financing on favorable terms; gains or losses on any sales of bitcoins; changes in the accounting treatment relating to the Company's bitcoin holdings; changes in securities laws or other laws or regulations, or the adoption of new laws or regulations, relating to bitcoin that adversely affect the price of bitcoin or the Company's ability to transact in or own bitcoin; the impact of the availability of spot exchange traded products for bitcoin and other digital assets; a decrease in liquidity in the markets in which bitcoin is traded; security breaches, cyberattacks, unauthorized access, loss of private keys, fraud or other circumstances or events that result in the loss of the Company's bitcoins; impacts to the price and rate of adoption of bitcoin associated with financial difficulties and bankruptcies of various participants in the digital asset industry; the level and terms of the Company's substantial indebtedness and its ability to service such debt; the extent and timing of market acceptance of the Company's new product offerings; continued acceptance of the Company's other products in the marketplace; the Company's ability to recognize revenue or deferred revenue through delivery of products or satisfactory performance of services; the timing of significant orders; delays in or the inability of the Company to develop or ship new products; customers continuing to shift from a product license model to a cloud subscription model, which may delay the Company's ability to recognize revenue; fluctuations in tax benefits or provisions; changes in the market price of bitcoin as of period-end and their effect on our deferred tax assets, related valuation allowance, and tax expense; other potentially adverse tax consequences, including the potential taxation of unrealized gains on our bitcoin holdings; competitive factors; general economic conditions, including levels of inflation and interest rates; currency fluctuations; and other risks detailed in MicroStrategy's registration statements and periodic reports filed with the Securities and Exchange Commission ("SEC"). The Company undertakes no obligation to update these forward-looking statements for revisions or changes after the date of this release.

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2024

2023

2024

2023

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Revenues:

Product licenses

$

11,087

$

24,045

$

33,311

$

56,979

Subscription services

27,800

20,974

74,846

59,662

Total product licenses and subscription services

38,887

45,019

108,157

116,641

Product support

61,015

66,860

185,440

198,422

Other services

16,169

17,583

49,162

56,714

Total revenues

116,071

129,462

342,759

371,777

Cost of revenues:

Product licenses

769

342

2,130

1,320

Subscription services

11,454

8,028

29,618

23,100

Total product licenses and subscription services

12,223

8,370

31,748

24,420

Product support

8,572

5,531

25,312

17,115

Other services

13,554

12,760

38,239

40,188

Total cost of revenues

34,349

26,661

95,299

81,723

Gross profit

81,722

102,801

247,460

290,054

Operating expenses:

Sales and marketing

35,414

35,606

103,116

109,372

Research and development

33,301

29,660

92,795

90,372

General and administrative

33,505

29,223

104,300

85,959

Digital asset impairment losses

412,084

33,559

783,807

76,613

Total operating expenses

514,304

128,048

1,084,018

362,316

Loss from operations

(432,582

)

(25,247

)

(836,558

)

(72,262

)

Interest expense, net

(18,129

)

(11,006

)

(45,476

)

(37,031

)

(Loss) gain on debt extinguishment

(22,933

)

0

(22,933

)

44,686

Other (expense) income, net

(5,034

)

2,419

(2,644

)

726

Loss before income taxes

(478,678

)

(33,834

)

(907,611

)

(63,881

)

(Benefit from) provision for income taxes

(138,504

)

109,607

(411,760

)

(403,876

)

Net (loss) income

$

(340,174

)

$

(143,441

)

$

(495,851

)

$

339,995

Basic (loss) earnings per share (1)

$

(1.72

)

$

(1.01

)

$

(2.71

)

$

2.91

Weighted average shares outstanding used in computing basic (loss) earnings per share

197,273

142,214

182,695

116,648

Diluted (loss) earnings per share (1)

$

(1.72

)

$

(1.01

)

$

(2.71

)

$

2.39

Weighted average shares outstanding used in computing diluted (loss) earnings per share

197,273

142,214

182,695

145,125

(1) Basic and fully diluted (loss) earnings per share for class A and class B common stock are the same.

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

September 30,

December 31,

2024

2023*

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

46,343

$

46,817

Restricted cash

1,862

1,856

Accounts receivable, net

107,169

183,815

Prepaid expenses and other current assets

30,668

35,407

Total current assets

186,042

267,895

Digital assets

6,850,879

3,626,476

Property and equipment, net

27,517

28,941

Right-of-use assets

55,308

57,343

Deposits and other assets

51,109

24,300

Deferred tax assets, net

1,172,726

757,573

Total Assets

$

8,343,581

$

4,762,528

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable, accrued expenses, and operating lease liabilities

$

45,714

$

43,090

Accrued compensation and employee benefits

51,686

50,045

Accrued interest

5,800

1,493

Current portion of long-term debt, net

509

483

Deferred revenue and advance payments

184,402

228,162

Total current liabilities

288,111

323,273

Long-term debt, net

4,211,949

2,182,108

Deferred revenue and advance payments

6,344

8,524

Operating lease liabilities

57,495

61,086

Other long-term liabilities

5,676

22,208

Deferred tax liabilities

357

357

Total liabilities

4,569,932

2,597,556

Stockholders' Equity

Preferred stock undesignated, $0.001 par value; 5,000 shares authorized; no shares issued or outstanding

0

0

Class A common stock, $0.001 par value; 330,000 shares authorized; 191,684 shares issued and 183,000 shares outstanding, and 157,725 shares issued and 149,041 shares outstanding, respectively

192

24

Class B convertible common stock, $0.001 par value; 165,000 shares authorized; 19,640 shares issued and outstanding, and 19,640 shares issued and outstanding, respectively

20

2

Additional paid-in capital

6,060,206

3,957,728

Treasury stock, at cost; 8,684 shares and 8,684 shares, respectively

(782,104

)

(782,104

)

Accumulated other comprehensive loss

(9,580

)

(11,444

)

Accumulated deficit

(1,495,085

)

(999,234

)

Total Stockholders' Equity

3,773,649

2,164,972

Total Liabilities and Stockholders' Equity

$

8,343,581

$

4,762,528

* Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended

September 30,

2024

2023

(unaudited)

(unaudited)

Net cash (used in) provided by operating activities

$

(35,708

)

$

11,528

Net cash used in investing activities

(4,010,904

)

(690,550

)

Net cash provided by financing activities

4,046,067

676,025

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

77

(997

)

Net decrease in cash, cash equivalents, and restricted cash

(468

)

(3,994

)

Cash, cash equivalents, and restricted cash, beginning of period

48,673

50,868

Cash, cash equivalents, and restricted cash, end of period

$

48,205

$

46,874

MICROSTRATEGY INCORPORATED

DIGITAL ASSETS - ADDITIONAL INFORMATION

ROLLFORWARD OF BITCOIN HOLDINGS

(unaudited)

Source of Capital Used to Purchase Bitcoin

Digital Asset Original Cost Basis
(in thousands)

Digital Asset Impairment Losses
(in thousands)

Digital Asset Carrying Value
(in thousands)

Approximate Number of Bitcoins Held *

Approximate Average Purchase Price Per Bitcoin

Balance at December 31, 2022

$

3,993,190

$

(2,153,162

)

$

1,840,028

132,500

$

30,137

Digital asset purchases

(a)

179,275

179,275

7,500

23,903

Digital asset impairment losses

(18,911

)

(18,911

)

Balance at March 31, 2023

$

4,172,465

$

(2,172,073

)

$

2,000,392

140,000

$

29,803

Digital asset purchases

(b)

347,003

347,003

12,333

28,136

Digital asset impairment losses

(24,143

)

(24,143

)

Balance at June 30, 2023

$

4,519,468

$

(2,196,216

)

$

2,323,252

152,333

$

29,668

Digital asset purchases

(c)

161,681

161,681

5,912

27,348

Digital asset impairment losses

(33,559

)

(33,559

)

Balance at September 30, 2023

$

4,681,149

$

(2,229,775

)

$

2,451,374

158,245

$

29,582

Digital asset purchases

(d)

1,214,340

1,214,340

30,905

39,293

Digital asset impairment losses

(39,238

)

(39,238

)

Balance at December 31, 2023

$

5,895,489

$

(2,269,013

)

$

3,626,476

189,150

$

31,168

Digital asset purchases

(e)

1,639,309

1,639,309

25,128

65,238

Digital asset impairment losses

(191,633

)

(191,633

)

Balance at March 31, 2024

$

7,534,798

$

(2,460,646

)

$

5,074,152

214,278

$

35,164

Digital asset purchases

(f)

793,828

793,828

12,053

65,861

Digital asset impairment losses

(180,090

)

(180,090

)

Balance at June 30, 2024

$

8,328,626

$

(2,640,736

)

$

5,687,890

226,331

$

36,798

Digital asset purchases

(g)

1,575,073

1,575,073

25,889

60,839

Digital asset impairment losses

(412,084

)

(412,084

)

Balance at September 30, 2024

$

9,903,699

$

(3,052,820

)

$

6,850,879

252,220

$

39,266

* MicroStrategy owns and has purchased bitcoins both directly and indirectly through its wholly-owned subsidiary, MacroStrategy. References to MicroStrategy below refer to MicroStrategy and its subsidiaries on a consolidated basis.

(a)
In the first quarter of 2023, MicroStrategy purchased bitcoin using $179.3 million of the net proceeds from its sale of class A common stock under its at-the-market equity offering program.
(b)
In the second quarter of 2023, MicroStrategy purchased bitcoin using $336.9 million of the net proceeds from its sale of class A common stock under its at-the-market equity offering program and Excess Cash.
(c)
In the third quarter of 2023, MicroStrategy purchased bitcoin using $147.3 million of the net proceeds from its sale of class A common stock under its at-the-market equity offering program and Excess Cash.
(d)
In the fourth quarter of 2023, MicroStrategy purchased bitcoin using $1.201 billion of the net proceeds from its sale of class A common stock under its at-the-market equity offering program and Excess Cash.
(e)
In the first quarter of 2024, MicroStrategy purchased bitcoin using $782.0 million of the net proceeds from its issuance of the 2030 Convertible Notes, $592.3 million of the net proceeds from its issuance of the 2031 Convertible Notes, $137.3 million of the net proceeds from its sale of class A common stock under its at-the-market equity offering program, and Excess Cash.
(f)
In the second quarter of 2024, MicroStrategy purchased $793.8 million of bitcoin using net proceeds from its issuance of the 2032 Convertible Notes and Excess Cash.
(g)
In the third quarter of 2024, MicroStrategy purchased bitcoin using $1.105 billion of the net proceeds from its sale of class A common stock under its at-the-market offering program, $458.2 million of the net proceeds from its issuance of the 2028 Convertible Notes, and Excess Cash.

Excess Cash refers to cash in excess of the minimum Cash Assets that MicroStrategy is required to hold under its Treasury Reserve Policy, which may include cash generated by operating activities and cash from the proceeds of financing activities. Cash Assets refers to cash and cash equivalents and short-term investments.

MICROSTRATEGY INCORPORATED

DIGITAL ASSETS - ADDITIONAL INFORMATION

MARKET VALUE OF BITCOIN HOLDINGS

(unaudited)

Approximate Number of Bitcoins Held at End of Quarter *

Lowest Market Price Per Bitcoin During Quarter (a)

Market Value of Bitcoin Held at End of Quarter Using Lowest Market Price (in thousands) (b)

Highest Market Price Per Bitcoin During Quarter (c)

Market Value of Bitcoin Held at End of Quarter Using Highest Market Price (in thousands) (d)

Market Price Per Bitcoin at End of Quarter (e)

Market Value of Bitcoin Held at End of Quarter Using Ending Market Price (in thousands) (f)

December 31, 2022

132,500

$

15,460.00

$

2,048,450

$

21,478.80

$

2,845,941

$

16,556.32

$

2,193,712

March 31, 2023

140,000

$

16,490.00

$

2,308,600

$

29,190.04

$

4,086,606

$

28,468.44

$

3,985,582

June 30, 2023

152,333

$

24,750.00

$

3,770,242

$

31,443.67

$

4,789,909

$

30,361.51

$

4,625,060

September 30, 2023

158,245

$

24,900.00

$

3,940,301

$

31,862.21

$

5,042,035

$

27,030.47

$

4,277,437

December 31, 2023

189,150

$

26,521.32

$

5,016,508

$

45,000.00

$

8,511,750

$

42,531.41

$

8,044,816

March 31, 2024

214,278

$

38,501.00

$

8,249,917

$

73,835.57

$

15,821,338

$

71,028.14

$

15,219,768

June 30, 2024

226,331

$

56,500.00

$

12,787,702

$

72,777.00

$

16,471,691

$

61,926.69

$

14,015,930

September 30, 2024

252,220

$

49,050.01

$

12,371,394

$

70,000.00

$

17,655,400

$

63,462.97

$

16,006,630

* MicroStrategy owns and has purchased bitcoins both directly and indirectly through its wholly-owned subsidiary, MacroStrategy. References to MicroStrategy below refer to MicroStrategy and its subsidiaries on a consolidated basis.

(a)
The "Lowest Market Price Per Bitcoin During Quarter" represents the lowest market price for one bitcoin reported on the Coinbase exchange during the respective quarter, without regard to when MicroStrategy purchased any of its bitcoin.
(b)
The "Market Value of Bitcoin Heldat End of Quarter Using Lowest Market Price" represents a mathematical calculation consisting of the lowest market price for one bitcoin reported on the Coinbase exchange during the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.
(c)
The "Highest Market Price Per Bitcoin During Quarter" represents the highest market price for one bitcoin reported on the Coinbase exchange during the respective quarter, without regard to when MicroStrategy purchased any of its bitcoin.
(d)
The "Market Value of Bitcoin Held at End of Quarter Using Highest Market Price" represents a mathematical calculation consisting of the highest market price for one bitcoin reported on the Coinbase exchange during the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.
(e)
The "Market Price Per Bitcoin at End of Quarter" represents the market price of one bitcoin on the Coinbase exchange at 4:00 p.m. Eastern Time on the last day of the respective quarter.
(f)
The "Market Value of Bitcoin Held at End of Quarter Using Ending Market Price" represents a mathematical calculation consisting of the market price of one bitcoin on the Coinbase exchange at 4:00 p.m. Eastern Time on the last day of the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.

The amounts reported as "Market Value" in the above table represent only a mathematical calculation consisting of the price for one bitcoin reported on the Coinbase exchange (MicroStrategy's principal market for bitcoin) in each scenario defined above multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period. Bitcoin and bitcoin markets may be subject to manipulation and the spot price of bitcoin may be subject to fraud and manipulation. Accordingly, the Market Value amounts reported above may not accurately represent fair market value, and the actual fair market value of MicroStrategy's bitcoin may be different from such amounts and such deviation may be material. Moreover, (i) the bitcoin market historically has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks that are, or may be, inherent in its entirely electronic, virtual form and decentralized network and (ii) MicroStrategy may not be able to sell its bitcoins at the Market Value amounts indicated above, at the market price as reported on the Coinbase exchange (its principal market) on the date of sale, or at all.

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

LOSS FROM OPERATIONS

(in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2024

2023

2024

2023

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Reconciliation of non-GAAP loss from operations:

Loss from operations

$

(432,582

)

$

(25,247

)

$

(836,558

)

$

(72,262

)

Share-based compensation expense

19,377

16,806

57,789

49,855

Non-GAAP loss from operations

$

(413,205

)

$

(8,441

)

$

(778,769

)

$

(22,407

)

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

NET (LOSS) INCOME AND DILUTED (LOSS) EARNINGS PER SHARE

(in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2024

2023

2024

2023

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Reconciliation of non-GAAP net (loss) income:

Net (loss) income

$

(340,174

)

$

(143,441

)

$

(495,851

)

$

339,995

Share-based compensation expense

19,377

16,806

57,789

49,855

Interest expense arising from amortization of debt issuance costs

3,832

2,199

10,231

6,599

Loss (gain) on debt extinguishment

22,933

0

22,933

(44,686

)

Income tax effects (1)

(13,764

)

(3,230

)

(180,964

)

2,538

Non-GAAP net (loss) income

$

(307,796

)

$

(127,666

)

$

(585,862

)

$

354,301

Reconciliation of non-GAAP diluted (loss) earnings per share (2):

Diluted (loss) earnings per share

$

(1.72

)

$

(1.01

)

$

(2.71

)

$

2.39

Share-based compensation expense (per diluted share)

0.10

0.12

0.32

0.34

Interest expense arising from amortization of debt issuance costs (per diluted share) (3)

0.02

0.02

0.06

0.01

Loss (gain) on debt extinguishment (per diluted share)

0.12

0.00

0.13

(0.31

)

Income tax effects (per diluted share) (3)

(0.08

)

(0.03

)

(1.01

)

0.03

Non-GAAP diluted (loss) earnings per share

$

(1.56

)

$

(0.90

)

$

(3.21

)

$

2.46

(1)
Income tax effects reflect the net tax effects of share-based compensation, which includes tax benefits and expenses on exercises of stock options and vesting of share-settled restricted stock units, interest expense for amortization of debt issuance costs, and gains and losses on debt extinguishment.
(2)
For reconciliation purposes, the non-GAAP diluted earnings (loss) per share calculations use the same weighted average shares outstanding as that used in the GAAP diluted earnings (loss) per share calculations for the same period. For example, in periods of GAAP net loss, otherwise dilutive potential shares of common stock from MicroStrategy's share-based compensation arrangements and convertible notes are excluded from the GAAP diluted loss per share calculation as they would be antidilutive, and therefore are also excluded from the non-GAAP diluted earnings or loss per share calculation.
(3)
For the nine months ended September 30, 2023, interest expense from the amortization of issuance costs of the convertible notes has been added back to the numerator in the GAAP diluted earnings per share calculation, and therefore the per diluted share effects of the amortization of issuance costs of the convertible notes have been excluded from the "Interest expense arising from amortization of debt issuance costs (per diluted share)" and "Income tax effects (per diluted share)" lines in the above reconciliation for the nine months ended September 30, 2023.

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

CONSTANT CURRENCY

(in thousands)

Three Months Ended

September 30,

(unaudited)

GAAP

Foreign
Currency
Exchange Rate
Impact (1)

Non-GAAP Constant Currency (2)

GAAP

GAAP % Change

Non-GAAP Constant Currency %
Change (3)

2024

2024

2024

2023

2024

2024

Revenues

Product licenses

$

11,087

$

(163

)

$

11,250

$

24,045

-53.9

%

-53.2

%

Subscription services

27,800

109

27,691

20,974

32.5

%

32.0

%

Total product licenses and subscription services

38,887

(54

)

38,941

45,019

-13.6

%

-13.5

%

Product support

61,015

147

60,868

66,860

-8.7

%

-9.0

%

Other services

16,169

76

16,093

17,583

-8.0

%

-8.5

%

Total revenues

116,071

169

115,902

129,462

-10.3

%

-10.5

%

Nine Months Ended

September 30,

(unaudited)

GAAP

Foreign
Currency
Exchange Rate
Impact (1)

Non-GAAP Constant Currency (2)

GAAP

GAAP % Change

Non-GAAP Constant Currency %
Change (3)

2024

2024

2024

2023

2024

2024

Revenues

Product licenses

$

33,311

$

(265

)

$

33,576

$

56,979

-41.5

%

-41.1

%

Subscription services

74,846

70

74,776

59,662

25.5

%

25.3

%

Total product licenses and subscription services

108,157

(195

)

108,352

116,641

-7.3

%

-7.1

%

Product support

185,440

27

185,413

198,422

-6.5

%

-6.6

%

Other services

49,162

(12

)

49,174

56,714

-13.3

%

-13.3

%

Total revenues

342,759

(180

)

342,939

371,777

-7.8

%

-7.8

%

(1)
The "Foreign Currency Exchange Rate Impact" reflects the estimated impact of fluctuations in foreign currency exchange rates on international revenues. It shows the increase (decrease) in international revenues from the same period in the prior year, based on comparisons to the prior year quarterly average foreign currency exchange rates. "International revenues" refers to revenues from operations outside of the United States and Canada only where the functional currency is the local currency (i.e., excluding any location whose economy is considered highly inflationary).
(2)
The "Non-GAAP Constant Currency" reflects the current period GAAP amount, less the Foreign Currency Exchange Rate Impact.
(3)
The "Non-GAAP Constant Currency % Change" reflects the percentage change between the current period Non-GAAP Constant Currency amount and the GAAP amount for the same period in the prior year.

MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

September 30,

December 31,

September 30,

2024

2023*

2023

(unaudited)



(unaudited)

Current:







Deferred product licenses revenue

$

409

$

3,579

$

2,814

Deferred subscription services revenue

74,164

65,512

45,737

Deferred product support revenue

106,866

152,012

126,087

Deferred other services revenue

2,963

7,059

4,529

Total current deferred revenue and advance payments

$

184,402

$

228,162

$

179,167



Non-current:

Deferred product licenses revenue

$

0

$

0

$

9

Deferred subscription services revenue

3,373

3,097

2,845

Deferred product support revenue

2,635

4,984

4,304

Deferred other services revenue

336

443

480

Total non-current deferred revenue and advance payments

$

6,344

$

8,524

$

7,638



Total current and non-current:

Deferred product licenses revenue

$

409

$

3,579

$

2,823

Deferred subscription services revenue

77,537

68,609

48,582

Deferred product support revenue

109,501

156,996

130,391

Deferred other services revenue

3,299

7,502

5,009

Total current and non-current deferred revenue and advance payments

$

190,746

$

236,686

$

186,805

* Derived from audited financial statements.

MICROSTRATEGY INCORPORATED

SEGMENT INFORMATION

(in thousands, unaudited)

Three Months Ended September 30, 2024

Three Months Ended September 30, 2023

Software Business

Corporate & Other

Total Consolidated

Software Business

Corporate & Other

Total Consolidated

Total revenues

$

116,071

$

116,071

$

129,462

$

129,462

Total cost of revenues

34,349

34,349

26,661

26,661

Gross profit

$

81,722

$

81,722

$

102,801

$

102,801

Total operating expenses

100,182

414,122

514,304

93,725

34,323

128,048

(Loss) income from operations

$

(18,460

)

$

(414,122

)

$

(432,582

)

$

9,076

$

(34,323

)

$

(25,247

)

Nine Months Ended September 30, 2024

Nine Months Ended September 30, 2023

Software Business

Corporate & Other

Total Consolidated

Software Business

Corporate & Other

Total Consolidated

Total revenues

$

342,759

$

342,759

$

371,777

$

371,777

Total cost of revenues

95,299

95,299

81,723

81,723

Gross profit

$

247,460

$

247,460

$

290,054

$

290,054

Total operating expenses

295,541

788,477

1,084,018

283,733

78,583

362,316

(Loss) income from operations

$

(48,081

)

$

(788,477

)

$

(836,558

)

$

6,321

$

(78,583

)

$

(72,262

)

MicroStrategy manages its business in one reportable operating segment which is engaged in the design, development, marketing, and sales of its software platform through licensing arrangements and cloud subscriptions and related services. Beginning in 2024, MicroStrategy has broken out a Corporate & Other category, which is not considered an operating segment, and includes the impairment charges and other third-party costs associated with its digital asset holdings.