01—Abstract
Summary
Summary of the 10-K filed February 23, 2007. Cited figures are marked; the original filing is the authoritative source.
MicroStrategy Incorporated's annual report on Form 10-K for fiscal 2006 shows a business intelligence software company with total revenues of $313.8 milliona in 2006, up from $268.7 million in 2005 and $231.2 million in 2004.
Product licenses revenue was $107.4 millionb, product support revenue was $142.1 million, and other services revenue was $64.3 million. Income from operations rose to $99.8 million from $93.9 million, and net income was $70.9 million, or $5.20 per diluted share, compared with $64.7 million in 2005. The company stated that its product licenses revenue growth was driven by more and larger transactions of at least $1.0 million, and that its installed base of technical support contracts grew 23.2% in 2006.
The balance sheet at December 31, 2006 showed cash and cash equivalents of $79.0 millionc, total assets of $248.8 million, and stockholders' equity of $133.2 million, down from $180.7 million a year earlier. Stockholders' equity declined mainly because treasury stock purchases totaled $132.0 million in 2006 under the $300.0 million 2005 Share Repurchase Program, of which $161.1 million remained available at year end. Management said existing cash and cash generated from operations would be sufficient to meet working capital and capital expenditure needs for at least the next twelve months.
Subsequent to year end, the company agreed on January 31, 2007 to buy a corporate aircraft for $46.0 milliond, with delivery expected in mid-2009. The filing also highlights concentration risks. Michael J.
Saylor, Chairman, President and CEO, together with other holders of class B common stock, controlled 73.7% of total voting power as of February 1, 2007, which the filing says allows that group to control the outcome of director elections and prevent a change of control. International sales accounted for 36.3% of 2006 revenues, and the company disclosed a $1.1 million adverse judgment in Spain, which it is appealing while paying the amount under provisional execution.
02—Key points
Key Highlights
- Total revenues rose 16.8% to $313.8 million in 2006, with product support revenue up 22.7% to $142.1 million.
- Net income was $70.9 million in 2006 ($5.20 per diluted share), compared with $64.7 million in 2005 and $168.3 million in 2004, which included a $107.4 million tax benefit from releasing a valuation allowance.
- Income from operations increased to $99.8 million in 2006 from $93.9 million in 2005, while sales and marketing expense rose 25.6% to $88.4 million.
- The company repurchased $132.0 million of class A common stock in 2006 and had $161.1 million remaining under its $300.0 million 2005 Share Repurchase Program at year end.
- Cash and cash equivalents reached $79.0 million at December 31, 2006, and management expects existing cash and operating cash flow to cover needs for at least the next twelve months.
- Michael J. Saylor and the class B holders controlled 73.7% of total voting power as of February 1, 2007, limiting outside shareholders' influence over corporate matters.
- International sales were 36.3% of 2006 revenues, down from 38.4% in 2005 and 40.7% in 2004.
03—Questions
Frequently Asked Questions
How much revenue and profit did MicroStrategy generate in 2006?
The company reported total revenues of $313.8 million for 2006, up from $268.7 million in 2005. Net income was $70.9 million, or $5.20 per diluted share, compared with $64.7 million, or $4.19 per diluted share, in 2005.
Why did stockholders' equity decline in 2006?
Stockholders' equity fell to $133.2 million from $180.7 million at year-end 2005. The filing attributes the decline mainly to $132.0 million of treasury stock purchases under the 2005 Share Repurchase Program, which offset the $70.9 million of net income for the year.
Who controls the company's voting power?
As of February 1, 2007, holders of class B common stock owned 73.7% of total voting power. Michael J. Saylor beneficially owned 317,800 class A shares and 2,429,582 class B shares, or 65.3% of total voting power. The filing states that Mr. Saylor or a majority of class B holders could transfer control or block a change of control without board or other shareholder approval.
What is the company's cash position and outlook for liquidity?
Cash and cash equivalents were $78.98 million at December 31, 2006, and cash, cash equivalents and investments totaled $79.0 million. Management believes existing cash and cash generated by operations will be sufficient for working capital and anticipated capital expenditures for at least the next twelve months, and does not currently expect to borrow to finance operations.
What significant commitments or legal matters did the company disclose?
On January 31, 2007, the company agreed to buy a corporate aircraft for $46.0 million, with delivery expected in mid-2009. A Spanish commercial court issued a $1.1 million adverse judgment in October 2006, which the company is appealing; in February 2007 the court granted provisional execution, requiring immediate cash payment of $1.1 million plus $0.2 million of estimated interest and costs.
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