01—Abstract
Summary
Summary of the 10-K filed February 26, 2016. Cited figures are marked; the original filing is the authoritative source.
MicroStrategy Incorporated's 10-K for fiscal 2015 reports total revenues of $529.9 milliona for 2015, down from $579.8 million in 2014, with product licenses revenue of $119.1 million and product support revenue of $281.7 million.
Income from continuing operations, net of tax, rose to $105.9 millionb in 2015 from $5.0 million in 2014, helped by lower operating expenses; the filing notes restructuring costs of $0.3 million in 2015 versus $14.7 million in 2014, and a 2015 tax provision at a 23.2% effective rate. Cash and cash equivalents were $292.3 million at year-end 2015, with short-term investments of $193.3 million, and net cash provided by operating activities from continuing operations was $149.7 million. The company emphasized its MicroStrategy 10 Secure Enterprise platform (analytics, mobile, and Usher security) and MicroStrategy Secure Cloud.
Usher, the security product, had not generated significant revenue in 2013 through 2015 despite significant development spending. The filing also discloses that Michael J. Saylor controls roughly 67.7%c of total voting power through class B shares, and that a patent infringement lawsuit by DataTern remains unresolved, with the outcome not presently determinable.
In January 2016, the company reorganized its executive management, eliminating the Office of the President and the departures of Paul N. Zolfaghari and Jonathan F. Klein, which will result in a roughly $1.6 milliond reversal of share-based compensation expense in the first quarter of 2016.
02—Key points
Key Highlights
- Total revenues were $529.9 million in 2015, compared with $579.8 million in 2014 and $575.9 million in 2013.
- Income from continuing operations, net of tax, was $105.9 million in 2015, up from $5.0 million in 2014; diluted EPS from continuing operations was $9.18 versus $0.44.
- Product licenses revenue fell to $119.1 million from $126.0 million, while subscription services revenue grew to $27.8 million from $22.3 million.
- Total operating expenses fell to $294.7 million from $439.5 million, reflecting the 2014 Restructuring Plan and cost-saving initiatives; restructuring costs were $0.3 million in 2015 versus $14.7 million in 2014.
- Cash and cash equivalents of $292.3 million and short-term investments of $193.3 million at December 31, 2015; the company has never paid cash dividends.
- Michael J. Saylor holds about 67.7% of total voting power via class B common stock, making the company a 'controlled company' under NASDAQ rules.
- The DataTern patent infringement litigation remains pending, with the District Court denying the company's summary judgment motions on September 4, 2015; the outcome is not presently determinable.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Strategy kept $0.20.
- Revenue$529.9M100.0%
- Cost of revenue−$101.1M19.1%
- Gross profit$428.8M80.9%
- Operating costs−$294.7M55.6%
- Operating income$134.0M25.3%
- Interest, other & tax−$28.1M5.3%
- Net income$105.9M20.0%
Where FY2015 revenue went
$529.9M- Other operating costs: $229.5M, 43% of revenue
- Net income: $105.9M, 20% of revenue
- Cost of revenue: $101.1M, 19% of revenue
- R&D: $65.2M, 12% of revenue
- Interest, other & tax: $28.1M, 5.3% of revenue
Kept 20% as net incomeR&D $65.2M · 12%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 26, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $529.87M$579.83M | −8.6% |
| Cost of Revenue | $101.11M$135.21M | −25.2% |
| Gross Profit | $428.76M$444.62M | −3.6% |
| R&D Expenses | $65.21M$103.36M | −36.9% |
| Operating Expenses | $294.74M$439.52M | −32.9% |
| Operating Income | $134.02M$5.10M | +2525.8% |
| Net Income | $105.93M$5.04M | +2003.9% |
| EPS (Basic) | $9.33$0.45 | +1973.3% |
| EPS (Diluted) | $9.18$0.44 | +1986.4% |
| Shares Outstanding (Basic) | 11.36M11.30M | +0.5% |
| Shares Outstanding (Diluted) | 11.54M11.36M | +1.6% |
05—Questions
Frequently Asked Questions
How did MicroStrategy's revenue and profitability change in 2015?
Total revenues declined to $529.9 million from $579.8 million, mainly due to lower product licenses, product support, and other services revenues, with negative foreign currency effects cited. Income from continuing operations, net of tax, increased to $105.9 million from $5.0 million, as operating expenses fell substantially.
What is the status of the Usher security product?
The filing states that Usher did not generate significant revenues in 2013, 2014, or 2015, even though the company has expended significant resources on its development and marketing. Failure to differentiate Usher from competitors could materially affect its ability to generate significant revenue.
Who controls MicroStrategy's voting power?
As of February 22, 2016, holders of class B common stock owned 68.5% of total voting power. Chairman, CEO & President Michael J. Saylor beneficially owned 67.7% of total voting power, allowing him to control elections of directors and major corporate actions.
What is the DataTern lawsuit about?
DataTern, Inc. filed a patent infringement complaint in December 2011 alleging that several MicroStrategy products infringe U.S. Patent No. 6,101,502. After appeal and remand, the District Court denied the company's summary judgment motions in September 2015. The company has also received indemnification requests from channel partners and customers sued in related lawsuits, and the outcome is not presently determinable.
What executive changes occurred after year-end 2015?
In January 2016 the Board eliminated the separate Office of the President, resulting in the departures of former President Paul N. Zolfaghari and former President and Chief Legal Officer Jonathan F. Klein. About 200,000 unvested options were forfeited, leading to an expected reversal of roughly $1.6 million in share-based compensation expense in Q1 2016, and possible severance costs in 2016.
06—Continue