01—Abstract
Summary
Summary of the 10-K filed February 18, 2011. Cited figures are marked; the original filing is the authoritative source.
MicroStrategy Incorporated's annual report for fiscal year 2010 shows total revenues of $454.6 milliona, up from $377.8 million in 2009, with product licenses revenues of $126.7 million and product support and other services revenues of $327.9 million.
Income from continuing operations before financing and other income and income taxes fell to $50.6 millionb from $86.3 million, and net income was $43.8 million compared with $74.8 million in 2009, which included a $14.4 million gain on the sale of Alarm.com. Diluted earnings per share from continuing operations were $3.72, versus $4.92 in 2009. Management attributed the 2010 revenue growth to higher average deal sizes and growth in technical support contracts, and noted a $5.3 million non-recurring increase in operating expenses tied to paying rent on the former headquarters.
Cash and cash equivalents declined to $174.1 millionc from $224.8 million, largely because the company spent $109.0 million repurchasing class A common stock during 2010. Management stated that existing cash and cash expected to be generated from operations would be sufficient to meet working capital and capital expenditure needs for at least the next 12 months. Total stockholders' equity fell to $149.2 million from $214.2 million, reflecting the buybacks.
Class B holders controlled 77.2% of total voting power as of February 10, 2011. The filing also highlights risks including a pending insurance lawsuit over the corporate aircraft damaged in a February 2010 hangar collapse, where the carrying value was reduced to $42.6 milliond after a $3.6 million impairment, with damage estimates ranging up to $46.2 million. A separate patent dispute with Acacia Research affiliate DAS is unresolved, and the company is under tax examination in Germany.
02—Key points
Key Highlights
- Total revenues rose 20.3% to $454.6 million in 2010 from $377.8 million in 2009, driven by product support and other services revenue of $327.9 million.
- Operating income before financing and other income and taxes fell to $50.6 million from $86.3 million, as total operating expenses rose to $297.9 million from $224.9 million.
- Net income declined to $43.8 million ($3.72 diluted EPS from continuing operations) from $74.8 million ($6.09 diluted EPS) in 2009, which included a $14.4 million gain on the Alarm.com sale.
- The company repurchased $109.0 million of class A common stock in 2010, reducing cash and cash equivalents to $174.1 million from $224.8 million and stockholders' equity to $149.2 million from $214.2 million.
- Class B shareholders held 77.2% of total voting power as of February 10, 2011, with Chairman and CEO Michael J. Saylor controlling 67.9% of voting power.
- The corporate aircraft, damaged in a February 2010 hangar collapse, carries a $42.6 million net book value after a $3.6 million impairment, with possible further impairment; the company sued its insurance carriers in February 2011.
- International revenues were 39.7% of total revenues in 2010, and the company had 2,597 employees at December 31, 2010.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Strategy kept $0.10.
- Revenue$454.6M100.0%
- Cost of revenue−$106.1M23.3%
- Gross profit$348.5M76.7%
- Operating costs−$297.9M65.5%
- Operating income$50.6M11.1%
- Interest, other & tax−$6.8M1.5%
- Net income$43.8M9.6%
Where FY2010 revenue went
$454.6M- Other operating costs: $247.3M, 54% of revenue
- Cost of revenue: $106.1M, 23% of revenue
- Net income: $43.8M, 9.6% of revenue
- R&D: $50.6M, 11% of revenue
- Interest, other & tax: $6.8M, 1.5% of revenue
Kept 9.6% as net incomeInterest, other & tax $6.8M · 1.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 18, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $454.58M$377.79M | +20.3% |
| Cost of Revenue | $106.09M$66.60M | +59.3% |
| Gross Profit | $348.49M$311.19M | +12.0% |
| R&D Expenses | $50.57M$41.80M | +21.0% |
| Operating Expenses | $297.90M$224.88M | +32.5% |
| Operating Income | $50.59M$86.30M | −41.4% |
| Net Income | $43.79M$74.84M | −41.5% |
| EPS (Basic) | $3.85$6.28 | −38.7% |
| EPS (Diluted) | $3.72$6.09 | −38.9% |
| Shares Outstanding (Basic) | 11.38M11.91M | −4.4% |
| Shares Outstanding (Diluted) | 11.78M12.28M | −4.1% |
05—Questions
Frequently Asked Questions
Why did net income fall in 2010 despite higher revenue?
Operating expenses rose to $297.9 million from $224.9 million, and gross profit grew less than expenses. Net income from continuing operations was $43.8 million, compared with $60.5 million in 2009. The 2009 net income of $74.8 million also included $14.3 million from discontinued operations, mainly the Alarm.com sale gain. The filing attributes the expense increase to higher staffing, a new headquarters lease, and a $5.3 million non-recurring increase in operating expenses from paying rent on the former headquarters.
How much did the company spend on share repurchases and how much authorization remains?
During 2010 the company repurchased 1,357,474 class A shares at an average price of $80.29, for an aggregate cost of $109.0 million. As of December 31, 2010, $454.7 million remained available under the 2005 Share Repurchase Program, which runs through April 29, 2013.
What is the status of the corporate aircraft insurance claim?
The aircraft was damaged when a leased hangar at Dulles International Airport collapsed in February 2010. The company received a $3.6 million payment in January 2011 for the minimum estimated damage. Damage could be as much as $46.2 million, and the company sought $50.0 million under its policy. On February 4, 2011, the company filed suit against the insurance carriers and the USAU Group in Virginia, and the outcome is not presently determinable.
Who controls the company's voting power?
Class B common stock carries ten votes per share and is held by current employees, directors and related parties. As of February 10, 2011, holders of class B stock owned 77.2% of total voting power. Michael J. Saylor beneficially owned 67.9% of total voting power, and the filing notes he can determine the outcome of director elections and affect mergers or other transactions.
06—Continue