01—Abstract
Summary
Summary of the 10-K filed March 12, 2004. Cited figures are marked; the original filing is the authoritative source.
MicroStrategy Incorporated reported total revenues of $175.6 milliona for 2003, up 18.8% from $147.8 million in 2002, with product licenses revenue rising to $77.2 million and product support and other services revenue to $98.4 million.
Income from operations was $28.0 millionb, compared with $10.4 million in 2002, but the company posted a net loss of $3.9 million for 2003 after a $31.1 million loss on early extinguishment of notes payable, which was tied to the July 2003 conversion of the remaining $53.0 million of Series A Notes into class A common stock. Management stated it expects to be profitable in 2004, though it may not achieve profitability, and the accumulated deficit stood at $345.9 million at December 31, 2003. Balance sheet and cash flow figures improved over the year.
Stockholders' equity was $44.3 millionc, compared with a deficit of $34.5 million a year earlier. Cash and cash equivalents rose to $51.9 million, and net cash provided by operating activities was $37.1 million. The company has no outstanding notes payable at year-end 2003, and it had a $10 million secured revolving credit facility with $4.9 million of available borrowing capacity.
Risks noted in the filing include concentrated voting control: Chairman and CEO Michael J. Saylor controlled 58.8%d of total voting power as of March 1, 2004, through class B shares.
The company is also pursuing patent litigation against Business Objects and Crystal Decisions, and it carries vacant office space with restructuring reserves of $6.1 million. Its international revenues were 34.0% of total revenues in 2003.
02—Key points
Key Highlights
- Total revenues of $175.6 million in 2003, up 18.8% from $147.8 million in 2002
- Income from operations of $28.0 million in 2003, compared with $10.4 million in 2002
- Net loss of $3.9 million in 2003, including a $31.1 million loss on early extinguishment of notes payable
- Series A Notes of $53.0 million principal converted into class A common stock in July 2003, eliminating the remaining principal and interest obligations
- Stockholders' equity of $44.3 million at December 31, 2003, versus a deficit of $34.5 million at year-end 2002
- Net cash provided by operating activities of $37.1 million in 2003, with cash and cash equivalents of $51.9 million
- Chairman and CEO Michael J. Saylor controlled 58.8% of total voting power as of March 1, 2004
03—Questions
Frequently Asked Questions
Did MicroStrategy return to profitability in 2003?
Not on a net basis. The company reported a net loss of $3.9 million for 2003, but it generated income from operations of $28.0 million. The net loss reflects a $31.1 million loss on early extinguishment of notes payable, tied mainly to the conversion of the Series A Notes. The company states it expects to be profitable in 2004, but it cannot assure that it will be.
How did revenue trend across product lines in 2003?
Product licenses revenue increased 22.8% to $77.2 million from $62.9 million, and product support and other services revenue increased 15.8% to $98.4 million from $85.0 million. Technical support services grew, while education and consulting revenue remained relatively unchanged. International revenues were 34.0% of total revenues in 2003.
What is the company's debt position at the end of 2003?
The company had no notes payable outstanding at December 31, 2003, after the Series A Notes were converted and the promissory notes issued to former preferred stockholders were repaid in July 2003. It had a $10 million secured revolving credit facility with Bank of America, of which $4.9 million of borrowing capacity was available at year-end, and it had not drawn on the facility.
Who controls voting power in the company?
Holders of class B common stock controlled 74.4% of total voting power as of March 1, 2004. Michael J. Saylor controlled 58.8% of total voting power through his holdings of class B and class A shares. The filing states he can determine the outcome of director elections and can prevent a change of control.
What major litigation is the company involved in?
The company is in patent and trade secret litigation with Business Objects, S.A. and its subsidiary. Business Objects' suit over a relational database patent was dismissed in August 2003 on summary judgment and is under appeal. The company's claims on its '050 patent are scheduled for trial on June 15, 2004. The company also filed a patent infringement suit against Crystal Decisions in December 2003, with trial scheduled for November 2005. It is also defending an ePlus breach-of-contract claim of approximately $2.0 million.
04—Continue