01—Abstract
Summary
Summary of the 10-K filed February 12, 2014. Cited figures are marked; the original filing is the authoritative source.
MicroStrategy Incorporated, filed under that name, reported total revenues of $575.9 milliona for 2013, up from $565.7 million in 2012, and income from continuing operations, net of tax, of $26.6 million, compared with $22.5 million in 2012.
Net income was $83.3 millionb, driven largely by a $57.4 million after-tax gain on the March 2013 sale of its Angel.com subsidiary. Product licenses and subscription services revenue rose 6.4% to $160.1 million, with subscription services growing to $12.2 million from $3.1 million as MicroStrategy Cloud expanded. Product support revenue grew 5.9% to $277.5 million, while other services revenue fell 9.8% to $138.3 million, mainly from lower consulting billable hours.
Operating expenses rose to $417.9 millionc from $391.6 million, led by research and development, which increased to $98.1 million, and general and administrative costs, which increased to $104.7 million. Management stated it expects 2014 investment and related expenses to be higher than in 2013 and warned that profitability could decline if revenue does not keep pace. The company reported $220.2 million in cash and cash equivalents and $137.2 million in short-term investments at year end, and it had $173.7 million in unrecognized...
02—Key points
Key Highlights
- Total revenues were $575.9 million in 2013, up from $565.7 million in 2012.
- Income from continuing operations, net of tax, was $26.6 million, up from $22.5 million, while net income reached $83.3 million including the $57.4 million after-tax gain on the Angel.com sale.
- Subscription services revenue rose to $12.2 million from $3.1 million as MicroStrategy Cloud grew.
- Product support revenue increased 5.9% to $277.5 million; other services revenue declined 9.8% to $138.3 million.
- Operating expenses increased to $417.9 million, with management expecting higher investment and expenses in 2014.
- The Loyalty Platform and Identity Platform did not generate significant revenue in 2013, 2012, or 2011.
- Pending patent litigation (DataTern and Vasudevan) has outcomes the company described as not presently determinable.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Strategy kept $0.14.
- Revenue$575.9M100.0%
- Cost of revenue−$138.6M24.1%
- Gross profit$437.3M75.9%
- Operating costs−$417.9M72.6%
- Operating income$19.4M3.4%
- Interest, other & tax$63.9M11.1%
- Net income$83.3M14.5%
Where FY2013 revenue went
$575.9M- Other operating costs: $319.8M, 56% of revenue
- Cost of revenue: $138.6M, 24% of revenue
- R&D: $98.1M, 17% of revenue
- Operating income: $19.4M, 3.4% of revenue
Kept 3.4% as operating incomeOperating income $19.4M · 3.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 12, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $575.89M$565.72M | +1.8% |
| Cost of Revenue | $138.57M$141.08M | −1.8% |
| Gross Profit | $437.32M$424.65M | +3.0% |
| R&D Expenses | $98.06M$88.19M | +11.2% |
| Operating Expenses | $417.88M$391.55M | +6.7% |
| Operating Income | $19.44M$33.10M | −41.3% |
| Net Income | $83.33M$20.55M | +305.6% |
| EPS (Basic) | $7.37$1.87 | +294.1% |
| EPS (Diluted) | $7.37$1.84 | +300.5% |
| Shares Outstanding (Basic) | 11.30M10.99M | +2.8% |
| Shares Outstanding (Diluted) | 11.30M11.17M | +1.1% |
05—Questions
Frequently Asked Questions
How did the Angel.com sale affect MicroStrategy's 2013 results?
The company sold Angel.com on March 15, 2013 for about $111.2 million in consideration, a net cash inflow of $100.7 million after $10.5 million in transaction costs. The sale produced a gain of $57.4 million net of tax, which is included in discontinued operations and largely explains why 2013 net income was $83.3 million versus $26.6 million from continuing operations.
Is MicroStrategy's profitability expected to continue?
The company states it generated income from continuing operations in 2011, 2012, and 2013 but cannot guarantee it will sustain profitability. It expects 2014 investment and related expenses to exceed 2013 levels, and warns that profitability could decrease or it could incur operating losses if revenue does not offset these expenses.
Who controls MicroStrategy's voting power?
Michael J. Saylor, Chairman and CEO, beneficially owned 2,011,668 shares of class B common stock, representing 64.2% of total voting power as of February 3, 2014. Class B holders collectively held 71.1% of voting power. The company is a controlled company under NASDAQ rules, so it is not required to maintain majority independent directors or an independent nominating committee.
What are the main legal proceedings disclosed?
DataTern, Inc. filed a patent infringement complaint in December 2011 alleging infringement of U.S. Patent No. 6,101,502, and the company has received indemnification requests from resellers named in related suits. Vasudevan Software, Inc. filed a separate infringement complaint in December 2011; in October 2013 the court entered non-infringement judgment and found the four asserted patents invalid, and Vasudevan has appealed. The company says the outcomes of both matters are not presently determinable.
How concentrated is MicroStrategy's revenue?
The company depends on a single suite of products, the MicroStrategy Analytics Platform and related services, which account for a substantial portion of revenue. International revenues made up 40.4% of total revenues from continuing operations in 2013, down from 42.3% in 2012, and no individual customer accounted for 10% or more of revenue in any of the three years presented.
06—Continue