01—Abstract
Summary
Summary of the 10-Q filed August 6, 2024. Cited figures are marked; the original filing is the authoritative source.
MicroStrategy Incorporated (now Strategy Inc) reported a net loss of $102.6 milliona for the second quarter of 2024 and a net loss of $155.7 million for the six months ended June 30, 2024, compared with net income of $22.2 million and $483.4 million in the same periods of 2023.
The results were driven mainly by digital asset impairment losses of $180.1 millionb in the quarter and $371.7 million year to date. Total revenues were $111.4 million for the quarter, down from $120.4 million, with product licenses down 40.2% and subscription services up 21.1%. The company held approximately 226,331 bitcoins at June 30, 2024, with a carrying value of $5.69 billion, reflecting cumulative impairments of $2.64 billion.
Its digital assets accounted for most of its total assets of $7.05 billionc. Debt rose sharply during the period. Total debt was $3.85 billion at June 30, 2024, up from $2.18 billion at December 31, 2023, following the issuance of 2030, 2031 and 2032 Convertible Notes.
The 2025 Convertible Notes were converted or redeemed by July 15, 2024. Subsequent events include the company's purchase of approximately 169 bitcoins for $11.4 milliond, at least $275.5 million of digital asset impairment losses in the third quarter of 2024 on bitcoin held at June 30, a $2.0 billion at-the-market equity program filed August 1, 2024, and an announced 10-for-1 stock split with trading expected on a split-adjusted basis from August 8, 2024.
The filing also notes that the company's bitcoin is concentrated in its holdings, and that bitcoin-related accounting under ASU 2023-08 is expected to materially change future earnings volatility. Under the Treasury Reserve Policy, bitcoin is the primary treasury reserve asset, and 50,610 bitcoins serve as collateral for the 6.125% 2028 Secured Notes.
02—Key points
Key Highlights
- Q2 2024 net loss of $102.6 million versus net income of $22.2 million in Q2 2023, driven by $180.1 million of digital asset impairment losses
- Six-month net loss of $155.7 million versus net income of $483.4 million in the prior-year period
- Quarterly total revenues of $111.4 million, down from $120.4 million; product licenses revenue fell 40.2% while subscription services rose 21.1%
- Bitcoin holdings of approximately 226,331 bitcoins with carrying value of $5.69 billion after $2.64 billion of cumulative impairments; market value at June 30, 2024 was $14.02 billion using the ending market price
- Total debt increased to $3.85 billion from $2.18 billion, after issuing $800.0 million 2030, $603.8 million 2031 and $800.0 million 2032 Convertible Notes
- Subsequent events include at least $275.5 million of Q3 2024 impairment losses, a new $2.0 billion at-the-market program, and a 10-for-1 stock split effective August 2024
- Management reports a material expected impact on earnings volatility from adopting ASU 2023-08 for crypto assets, effective January 1, 2025
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 6, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $111.44M$120.40M | −7.4% |
| Cost of Revenue | $30.93M$27.12M | +14.1% |
| Gross Profit | $80.51M$93.28M | −13.7% |
| R&D Expenses | $30.31M$29.35M | +3.3% |
| Operating Expenses | $280.78M$119.99M | +134.0% |
| Operating Income | -$200.27M-$26.71M | −649.9% |
| Net Income | -$102.56M$22.24M | −561.1% |
| EPS (Basic) | $-0.57$1.68 | −133.9% |
| EPS (Diluted) | $-0.57$1.52 | −137.5% |
| Shares Outstanding (Basic) | 178.61M13.25M | +1248.3% |
| Shares Outstanding (Diluted) | 178.61M16.09M | +1009.7% |
05—Questions
Frequently Asked Questions
Why did the company report a net loss this quarter after a profit in the prior year?
The loss was primarily driven by digital asset impairment losses of $180.1 million in the second quarter of 2024, compared with $24.1 million in the prior-year quarter. Impairments are recorded when bitcoin's market price falls below its carrying value at any point since acquisition, and they cannot be reversed for later price increases.
How much bitcoin does the company hold and how is it valued?
As of June 30, 2024, the company held approximately 226,331 bitcoins with a carrying value of $5.69 billion, which reflects cumulative impairments of $2.64 billion. The filing states that the market value at the June 30, 2024 ending price of $61,926.69 was $14.02 billion, a mathematical calculation rather than a reported fair value.
How much debt does the company carry, and what are the key maturities?
Total net carrying value of debt was $3.85 billion at June 30, 2024. The 2025 Convertible Notes were converted or redeemed by July 15, 2024. The 2030, 2031 and 2032 Convertible Notes and the 6.125% 2028 Secured Notes remain outstanding, with the 2028 Secured Notes subject to a springing maturity feature tied to the 2027 Convertible Notes.
What is the company's plan for raising more capital?
On August 1, 2024, the company filed a prospectus for a new at-the-market equity program allowing it to sell up to $2.0 billion of Class A common stock through several agents. The Prior November 2023 program of up to $750 million was terminated on July 31, 2024. The filing also notes that the company may issue additional debt collateralized by its bitcoin.
06—Continue