01—Abstract
Summary
Summary of the 8-K filed February 6, 2024. Cited figures are marked; the original filing is the authoritative source.
MicroStrategy Incorporated reported its financial results for the quarter ended December 31, 2023 (fourth quarter of fiscal 2023) in a press release attached as Exhibit 99.1 to this Form 8-K, filed February 6, 2024.
Total revenues for the quarter were $124.5 milliona, down 6.1% year-over-year, while Subscription services revenues were $21.5 million, up 23.2%. Gross profit was $96.3 million (a 77.3% gross margin), and the company reported a loss from operations of $42.8 million, compared with a loss of $193.7 million in the prior-year quarter. Net income for the quarter was $89.1 million, or $4.96 per diluted share, driven largely by a $149.8 million income tax benefit, with digital asset impairment losses of $39.2 million reflected in operating expenses.
The filing's most prominent theme is the company's bitcoin holdings. As of December 31, 2023, the carrying value of its digital assets (about 189,150 bitcoins) was $3.626 billionb, after cumulative impairment losses of $2.269 billion since acquisition. The original cost basis and market value of the bitcoin were $5.895 billion and $8.045 billion, respectively, at a market price of $42,531.41 per bitcoin.
During the quarter, the company acquired 31,755 bitcoins for $1.25 billionc and sold about 2.27 million class A shares under its at-the-market programs for net proceeds of approximately $1.2 billion. As of February 5, 2024, the company held 190,000 bitcoins at a total cost of $5.93 billion. On the operating side, subscription services growth was the bright spot, with management citing double-digit subscription revenue growth for both the quarter and full year.
Total revenues for the full year 2023 were $496.3 milliond, down slightly from $499.3 million in 2022. Cash and cash equivalents at year-end were $46.8 million. Investors will weigh the strong bitcoin accumulation and equity-funded capital raising against the continued decline in core product license and product support revenues and the sensitivity of the balance sheet to bitcoin prices.
02—Key points
Key Highlights
- Total revenues of $124.5 million for Q4 2023, down 6.1% year-over-year; Subscription services revenues rose 23.2% to $21.5 million
- Net income of $89.1 million, or $4.96 per diluted share, versus a net loss of $249.7 million in Q4 2022, mainly reflecting a $149.8 million income tax benefit
- Digital asset impairment losses, net of gains on sale, of $39.2 million in Q4 2023 compared with $197.6 million in Q4 2022
- Acquired 31,755 bitcoins during the quarter for $1.25 billion, or $39,411 per bitcoin, bringing holdings to 190,000 bitcoins as of February 5, 2024
- Digital assets carrying value of $3.626 billion at December 31, 2023, versus a bitcoin market value of $8.045 billion at the ending market price of $42,531.41
- Net proceeds of approximately $1.2 billion from sales of 2,266,503 class A shares under at-the-market programs during the quarter, with $137.8 million remaining available
- Full-year 2023 net income of $429.1 million and total revenues of $496.3 million, versus a full-year net loss of $1.47 billion in 2022
03—Questions
Frequently Asked Questions
How did MicroStrategy perform financially in the fourth quarter of 2023?
Total revenues were $124.5 million, down 6.1% from the prior-year quarter. The company posted a loss from operations of $42.8 million, but net income was $89.1 million, or $4.96 per diluted share, helped by a $149.8 million income tax benefit and by the smaller digital asset impairment charge compared with the prior year.
How much bitcoin does MicroStrategy hold and what did it cost?
As of February 5, 2024, the company held 190,000 bitcoins at a total cost of $5.93 billion, or $31,224 per bitcoin. As of December 31, 2023, the carrying value of its digital assets was $3.626 billion, reflecting cumulative impairment losses of $2.269 billion.
How was the bitcoin purchase in the quarter funded?
The filing states that the company used $1.201 billion of net proceeds from its sale of class A common stock under its at-the-market equity offering program, plus Excess Cash, to purchase bitcoin in the fourth quarter of 2023. During the quarter it sold 2,266,503 shares for aggregate net proceeds of approximately $1.2 billion.
Is the subscription business growing?
Yes. Subscription services revenues were $21.5 million in the fourth quarter, up 23.2% year-over-year, and $81.2 million for the full year 2023, up from $60.7 million in 2022. Management cited double-digit subscription services revenue growth for both the quarter and the full year.
Why do the bitcoin holdings affect reported earnings?
Digital assets are carried at cost less impairment losses. The filing reports $39.2 million of digital asset impairment losses in Q4 2023 and $115.9 million for full-year 2023, and it notes that changes in the bitcoin market price affect the company's deferred tax assets and related valuation allowance, which drove the quarter's income tax benefit.
04—Continue