01—Abstract
Summary
Summary of the 10-K filed February 17, 2012. Cited figures are marked; the original filing is the authoritative source.
MicroStrategy Incorporated's 10-K for fiscal 2011 reports total revenues of $562.15 milliona, up from $454.58 million in 2010, and net income of $17.94 million, down from $43.79 million.
Diluted EPS was $1.62b, versus $3.72 in 2010. Product licenses revenue rose to $154.57 million, while product support and other services revenue reached $407.58 million. Income from continuing operations before financing and other income and income taxes was $15.04 million, compared with $50.59 million in 2010, as sales and marketing expense rose to $243.03 million and research and development to $72.62 million, reflecting investment in its big data, mobile, cloud, and social intelligence initiatives.
The company stated that it did not generate significant revenue from its new cloud and social intelligence offerings during 2011. The company ended 2011 with $199.63 millionc in cash and cash equivalents and total stockholders' equity of $168.98 million. Management stated it believes existing cash and cash equivalents, together with cash anticipated to be generated, are sufficient to meet working capital, capital expenditure, and contractual obligations for at least the next 12 months.
Operating cash flow was $60.81 milliond in 2011, compared with $75.83 million in 2010. The company repurchased no shares in 2011, leaving $454.71 million available under its 2005 Share Repurchase Program. Key risks disclosed include ongoing patent infringement suits filed by Datatern, Inc. and Vasudevan Software, Inc., a pending matter with Acacia Research and Database Application Solutions LLC (trial scheduled for May 29, 2012), and the corporate aircraft damaged in a 2010 hangar collapse, which carried $8.6 million in cumulative impairment charges.
Michael J. Saylor controls 64.4% of total voting power through class B shares.
02—Key points
Key Highlights
- Total revenues rose to $562.15 million in 2011 from $454.58 million in 2010, with product support and other services at $407.58 million and product licenses at $154.57 million.
- Net income declined to $17.94 million ($1.62 diluted EPS) from $43.79 million ($3.72 diluted EPS) in 2010, as operating expenses grew faster than revenue.
- Sales and marketing expense increased to $243.03 million from $165.73 million, and research and development expense increased to $72.62 million from $50.57 million.
- Cash and cash equivalents were $199.63 million at December 31, 2011, and the company reported no share repurchases in 2011.
- Four patent infringement or related lawsuits were pending, including Datatern, Vasudevan Software, and Acacia Research/DAS, with outcomes described as not presently determinable.
- International revenues accounted for 41.4% of total revenues in 2011, compared with 39.7% in 2010.
- Class B common stockholders held 73.9% of total voting power as of February 3, 2012, with Michael J. Saylor controlling 64.4%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Strategy kept $0.03.
- Revenue$537.2M100.0%
- Cost of revenue−$130.7M24.3%
- Gross profit$406.5M75.7%
- Operating costs−$385.6M71.8%
- Operating income$20.9M3.9%
- Interest, other & tax−$2.9M0.5%
- Net income$17.9M3.3%
Where FY2011 revenue went
$537.2M- Other operating costs: $317.7M, 59% of revenue
- Cost of revenue: $130.7M, 24% of revenue
- R&D: $67.9M, 13% of revenue
- Net income: $17.9M, 3.3% of revenue
- Interest, other & tax: $2.9M, 0.5% of revenue
Kept 3.3% as net incomeNet income $17.9M · 3.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 17, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $537.17M$454.58M | +18.2% |
| Cost of Revenue | $130.70M$106.09M | +23.2% |
| Gross Profit | $406.47M$348.49M | +16.6% |
| R&D Expenses | $67.86M$50.57M | +34.2% |
| Operating Expenses | $385.60M$297.90M | +29.4% |
| Operating Income | $20.87M$50.59M | −58.8% |
| Net Income | $17.94M$43.79M | −59.0% |
| EPS (Basic) | $1.67$3.85 | −56.6% |
| EPS (Diluted) | $1.62$3.72 | −56.5% |
| Shares Outstanding (Basic) | 10.72M11.38M | −5.8% |
| Shares Outstanding (Diluted) | 11.07M11.78M | −6.1% |
05—Questions
Frequently Asked Questions
Why did net income fall in 2011 despite revenue growth?
Revenue grew 23.7% in product support and other services and 22.0% in product licenses, but total operating expenses rose to $405.09 million from $297.90 million. The filing attributes this to significant headcount additions and investment in new products and sales capacity, and it states that cost of revenues and operating expenses increased significantly.
What did the company say about its cloud and social intelligence offerings?
The filing states that during 2011 MicroStrategy did not generate significant revenues from its new cloud and social intelligence offerings, which include MicroStrategy Cloud, Gateway for Facebook, Wisdom, Alert, Emma, and Usher.
Does the company have enough cash to fund operations?
Management believes existing cash and cash equivalents, along with anticipated cash generation, are sufficient for working capital, anticipated capital expenditures, and contractual obligations for at least the next 12 months, and does not expect to need to borrow to finance operations. Cash and cash equivalents totaled $199.63 million at year-end 2011.
What legal risks does the company face?
The company faces patent infringement complaints from Datatern, Inc. (filed December 14, 2011) and Vasudevan Software, Inc. (filed December 28, 2011), and a dispute with Acacia Research and DAS over a 2009 settlement, with trial scheduled for May 29, 2012. The filing states that the outcome of these matters is not presently determinable.
Who controls shareholder voting power?
As of February 3, 2012, holders of class B common stock owned 73.9% of total voting power, and Michael J. Saylor beneficially owned 64.4% of total voting power. Class B shares carry ten votes each, so Mr. Saylor can determine the outcome of director elections and other stockholder votes.
06—Continue