01—Abstract
Summary
Summary of the 10-Q filed October 31, 2024. Cited figures are marked; the original filing is the authoritative source.
MicroStrategy Incorporated's Form 10-Q for the quarter ended September 30, 2024 reports a net loss of $340.2 milliona for the third quarter and $495.9 million for the nine months, driven primarily by digital asset impairment losses of $412.1 million and $783.8 million, respectively.
Total revenues were $116.1 millionb for the quarter, down from $129.5 million a year earlier, and $342.8 million for the nine months, down from $371.8 million. The company describes itself as a Bitcoin treasury company and held approximately 252,220 bitcoins with a carrying value of $6.85 billion against a market value of $16.0 billion at the September 30, 2024 ending price, per the filing's table. The balance sheet shows total liabilities rising to $4.57 billion from $2.60 billion at year-end 2023, largely reflecting long-term debt of $4.21 billion after new convertible note issuances in 2024 (2030, 2031, 2032 and 2028 Convertible Notes) and the redemption of the 2028 Secured Notes.
Cash and cash equivalents were $46.3 millionc. The company funded bitcoin purchases of $4.01 billion during the nine months through debt and at-the-market equity sales, with net cash used in operating activities of $35.7 million.
The filing notes that the company will adopt ASU 2023-08 effective January 1, 2025, which will require bitcoin to be measured at fair value with gains and losses recognized in net income, and states that the company could become subject to the corporate alternative minimum tax beginning in 2026 under current proposed regulations. Subsequent to quarter-end, the company filed a prospectus for a new at-the-market equity program of up to $21 billiond.
02—Key points
Key Highlights
- Net loss of $340.2 million for Q3 2024 and $495.9 million for nine months, versus net income of $340.0 million for the nine months of 2023, primarily due to digital asset impairment losses.
- Digital asset impairment losses of $412.1 million in Q3 2024 and $783.8 million for nine months, representing 80.1% and 72.3% of operating expenses, respectively.
- Holdings of approximately 252,220 bitcoins with a carrying value of $6.85 billion, after cumulative impairments of $3.05 billion; the ending-quarter market value is stated as $16.0 billion.
- Total revenues of $116.1 million for Q3 2024 (down from $129.5 million) and $342.8 million for nine months (down from $371.8 million); product licenses revenue declined 53.9% in the quarter.
- Long-term debt rose to $4.21 billion, including new 2028, 2030, 2031 and 2032 Convertible Notes, while the $500.0 million 2028 Secured Notes were redeemed on September 26, 2024 with a $22.9 million loss on extinguishment.
- Nine-month bitcoin purchases of $4.01 billion were funded by convertible note issuances and $1.25 billion of net at-the-market equity proceeds.
- Adoption of ASU 2023-08 effective January 1, 2025 is expected to have a material impact on financial statements, and the company may become subject to the corporate alternative minimum tax from 2026.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 31, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $116.07M$129.46M | −10.3% |
| Cost of Revenue | $34.35M$26.66M | +28.8% |
| Gross Profit | $81.72M$102.80M | −20.5% |
| R&D Expenses | $33.30M$29.66M | +12.3% |
| Operating Expenses | $514.30M$128.05M | +301.6% |
| Operating Income | -$432.58M-$25.25M | −1613.4% |
| Net Income | -$340.17M-$143.44M | −137.2% |
| EPS (Basic) | $-1.72$-1.01 | −70.3% |
| EPS (Diluted) | $-1.72$-1.01 | −70.3% |
| Shares Outstanding (Basic) | 197.27M142.21M | +38.7% |
| Shares Outstanding (Diluted) | 197.27M142.21M | +38.7% |
05—Questions
Frequently Asked Questions
Why did the company report a large net loss this quarter?
The net loss of $340.2 million in Q3 2024 was primarily driven by digital asset impairment losses of $412.1 million. Under current accounting, bitcoin is written down when its market price falls below its carrying value at any time since acquisition, and recoveries are not recognized until the bitcoin is sold.
How much bitcoin does the company hold and what is it worth?
As of September 30, 2024, the company held approximately 252,220 bitcoins with a carrying value of $6.85 billion, reflecting $3.05 billion in cumulative impairments. The filing's market value table shows $16.0 billion at the September 30, 2024 ending market price, a mathematical calculation the filing states may not reflect fair market value.
How is the company financing its bitcoin purchases?
During the nine months ended September 30, 2024, the company used net proceeds from 2030, 2031, 2032 and 2028 Convertible Notes, at-the-market sales of class A common stock, and excess cash to buy bitcoin. Total bitcoin purchases were $4.01 billion, and total long-term debt principal was $4.27 billion as of September 30, 2024.
What accounting change will affect future results?
The company will adopt ASU 2023-08 effective January 1, 2025. Bitcoin will be measured at fair value each period, with gains and losses recognized in net income, and prior periods will not be restated. The filing states this will have a material impact on financial statements and may make future results not comparable to prior periods.
What is the company's near-term liquidity position?
The company reported cash and cash equivalents of $46.3 million at September 30, 2024. It states it believes existing cash and anticipated cash generation are sufficient for working capital, capital expenditures and contractual obligations for at least the next 12 months, and that its bitcoin is unencumbered and not expected to need sale to meet working capital requirements within twelve months.
06—Continue