MicroStrategy Profitable in Q4 2002 and Full Year 2002
Fourth Consecutive Quarter of Profitability; License Revenues Increase Versus Q4 of Prior Year
MCLEAN, Va., Jan. 30 -- MicroStrategy(R) Incorporated (Nasdaq: MSTR), a leading worldwide provider of business intelligence software, today announced its financial results for the three- month period ended December 31, 2002 (the fourth quarter of its 2002 fiscal year), reporting its fourth consecutive quarter of GAAP profitability and full year earnings of $3.12 per share on a diluted basis.
Fourth quarter 2002 revenues were $42.0 million versus $33.4 million in the third quarter of 2002 and $43.7 million in the fourth quarter of 2001. Fourth quarter 2002 license revenues were $20.5 million versus $12.9 million in the third quarter of 2002 and $18.7 million in the fourth quarter of 2001. Net income attributable to common stockholders for the fourth quarter of 2002, determined in accordance with Generally Accepted Accounting Principles (GAAP), was $4.6 million, or $0.33 per share on a diluted basis. This result included restructuring and impairment charges of $1.4 million, charges for amortization of goodwill and intangible assets of $0.5 million, a charge for discount amortization expense on notes payable of $1.0 million, and a gain on the partial extinguishment of notes payable of $2.0 million. Excluding these items, adjusted net earnings for the fourth quarter of 2002 was $5.5 million, or $0.40 per share on a diluted basis.
"A full year of profitability and four consecutive profitable quarters are significant achievements for MicroStrategy. Our license revenues in the fourth quarter grew by 9 percent over the same period in 2001, which indicates that our field operations, supported by several new product releases, had solid execution," said MicroStrategy President and CFO, Eric F. Brown. "We have implemented rigorous changes to all aspects of our operations and made substantial improvements to our balance sheet."
"The earnings speak for themselves. MicroStrategy has become a profitable, more cost-efficient and productive company," said MicroStrategy Chairman and CEO Michael J. Saylor. "In 2002, in contrast to many software companies, we grew our sales force by approximately 30 percent, and we won major new business with leading companies across the globe. Acknowledging the strength of our scalable, pure web MicroStrategy 7i(TM) platform, industry leaders now view MicroStrategy as a technically superior alternative to vendors such as Business Objects and Cognos. These vendors have numerous small-scale implementations but are not well-architected to meet the deployment and on-going maintenance needs of mid-size and large organizations."
Highlights from Q4 2002
Signed Agreements with 11 Systems Integrators and OEMs (Original Equipment Manufacturers)
New partners include: Wingspan Technology, Eureaka Technocrates, Inc., Miix Ltd, Vallence Solutions, LLC, SoftPro LLC, and Intelligent Communications.
Added 128 New Customers
New Customers and New Deals with Existing Customers in Q4 2002 Included:
Alitalia, Aventis Pasteur, BellSouth, Crane & Company, Discovery Communications, GE Medical Systems, Grange Insurance, Harris Teeter, IMS Health Canada, Katz Group, Koch Industries, Lending Tree, Prescription Solutions, Rheem Manufacturing, RBC Financial Group, Shaw Industries, Solucient, Toyota Financial Services, Universal Studios, Upsher-Smith Laboratories, U.S. Air Force Gunter Annex, and Wells Fargo & Company.
Examples of Noteworthy Customer Deals from Q4 2002:
Discovery Communications
In the fourth quarter of 2002, Discovery Communications, Inc., the leading global real world media and entertainment company with over 830 million subscribers around the world and home to the Discovery Channel, Travel Channel, Animal Planet, and The Learning Channel, selected the MicroStrategy platform as its enterprise business intelligence standard. The company selected MicroStrategy because of its platform`s integrated architecture, ease of use, and low cost of administration. Discovery plans to deploy sales, financial and management analytic applications with MicroStrategy. Eventually more than two hundred employees will perform analyses to optimize Discovery`s business performance.
Toyota Financial Services
In the fourth quarter of 2002, Toyota Financial Services, a leading captive finance company in the United States with managed assets totaling more than $40 billion dollars, purchased MicroStrategy software and services to expand its MicroStrategy financial reporting applications out to the enterprise. Impressed by the scalability and functionality of the MicroStrategy Business Intelligence Platform, Toyota Financial Services expects its user base to grow to over 400 associates across the country. TFS is the finance and insurance brand for Toyota in the U.S., offering retail auto financing and leasing through Toyota Motor Credit Corporation (TMCC) and extended service contracts through Toyota Motor Insurance Services (TMIS).
Alitalia
Alitalia is one of the leading airlines in Europe and the world. With more than 50 years of experience it is one of Italy`s largest and most successful companies, carrying more than 25 million passengers per year. To maintain its leadership position, Alitalia chose the MicroStrategy platform as its business intelligence solution for customer profiling and campaign management. Alitalia deploys MicroStrategy Web and MicroStrategy Narrowcast to analyze a multimillion record database of historical reservation data and provide dynamic Web reporting and information delivery. MicroStrategy offers Alitalia a solution for customer profiling, including client segmentation by frequency and relationship tenure; for campaign creation and management; and for market basket analysis, to analyze the relationship between flight purchases and the use of commercial partners.
IMS Health Canada
IMS Health Canada has developed an ASP application with the MicroStrategy Business Intelligence Platform(TM) that provides sales and marketing data to pharmaceutical companies. The recent purchase of additional MicroStrategy software and services will allow the company to expand its reach from 650 customers on the Web to 1,000, and from 2,000 subscribers who will receive personalized insight via e-mail based data stores in its Oracle data warehouse to 3,500. The company offers the services to its pharmaceutical customers to help them determine optimal sales and marketing strategies to improve their market presence.
Year of Technological Milestones & Innovation Solidifies MicroStrategy`s Leadership
In 2002, MicroStrategy solidified its technological leadership in enterprise-class, industrial strength business intelligence software with a series of major technological milestones and innovations. In April 2002, MicroStrategy released its new, significantly enhanced version of its business intelligence software platform, MicroStrategy 7i. Winning high praise from customers and leading industry analysts alike, MicroStrategy 7i represented a technological breakthrough for the industry, as it is the first truly integrated, 100-percent Web-based platform that puts a wide range of user functionality into a single business intelligence technology.
In the third quarter, MicroStrategy further expanded the capabilities of its business intelligence platform with an enhanced version of MicroStrategy 7i (7.2.1). Addressing the urgent industry need for transparent financial tracking and reporting, MicroStrategy 7.2.1 is designed specifically to meet the demanding new requirements for financial reporting and analysis imposed on business by new government mandates with highly sophisticated, yet easy-to-use features. These new features allow fast deployment of Web-based financial reporting systems -- companies can deploy an operational system within 90-120 days rather than the usual 6-12 months.
November 2002 marked the release of an easy-to-deploy, scalable Web user interface, MicroStrategy Web Universal(TM), that will run on UNIX(R), Linux(R) and Windows(R) operating systems. MicroStrategy Web Universal is a fully functional, zero-footprint Web interface that can run on any major operating system. MicroStrategy Web Universal is J2EE(TM) compliant and runs on leading application servers, including BEA WebLogic Server(TM), IBM WebSphere(R) Application Server, Sun(TM) ONE Application Server and Apache Tomcat. MicroStrategy Web Universal`s platform-independent architecture enables it to run on Windows or Linux operating systems, or on UNIX operating systems such as Sun Solaris(TM), IBM AIX(R), and HP-UX.
The market-leading capabilities of MicroStrategy`s business intelligence software platform were validated in 2002 with the issuance of the second edition of the top independent survey of the online analytic market, the OLAP Survey. The survey found MicroStrategy`s software superior to that of Business Objects, Cognos, Hyperion and Brio in the critical, strategic areas of Web deployment and data scalability. MicroStrategy`s business intelligence software platform was found to be far ahead in its capacity to be deployed easily via the Web and to serve users enterprise-wide by harnessing very large databases. (Please see: http://www.microstrategy.com/Company/Analysts_OLAP_Survey.asp .)
In 2002, MicroStrategy won Reader`s Choice awards in Intelligent Enterprise, a leading IT publication, for its software`s advanced analysis and data mining capabilities and for customer relationship management (CRM) analysis. MicroStrategy won these awards in competition with Business Objects, Oracle, Cognos, Brio, Actuate, and SAS Institute.
Also in 2002, MicroStrategy 7 was found to be the most comprehensive analytical tool reviewed by the CRN Test Center, in an evaluation of analytical tools including Microsoft`s Data Analyzer 3.5 and ProClarity`s Analytic Platform 4.0. MicroStrategy`s interactive, pure-HTML Web client and extensive library of analytical functions were among the top features the review highlighted, and the MicroStrategy 7 platform was deemed the best solution for the Web.
Finance Commentary
As of December 31, 2002, all outstanding preferred stock had been converted to common stock. During Q4 2002, the company repurchased an additional $7.5 million face value worth of its five-year 7.5% notes at a discount to par resulting in a $2.1 million gain on the partial early extinguishment of the notes. The outstanding principal amount of the notes was $63.3 million at December 31, 2002. These notes are carried on the balance sheet at a discounted value of $45.0 million with the difference between carrying value and principal value amortized on a quarterly basis through a charge reflected on the company`s profit and loss statement. As a result of this amortization, $1.0 million in non-cash interest expense was reported in the Q4 2002 results. In Q4 2002, the company wrote off $1.4 million in intangibles relating to the Teracube asset, bringing the book value of this item to zero. In Q4 2002, the company paid a total of $8.3 million on its five-year 7.5% notes, which represented interest that had accrued on the notes since April 2001. Going forward, based on the $63.3 million of aggregate face value of the notes outstanding as of the end of 2002, the company expects to make semi-annual interest payments of approximately $2.4 million through maturity. The company previously announced plans to sell its two remaining non-core business units, Angel.com and Alarm.com. The sales process did not result in the company receiving any acceptable bids for these units. Accordingly, the sales process has been terminated.
Outlook and Financial Guidance Information
The following statements are subject to risks and uncertainties described at the end of this press release. Management guidance for 2003 supersedes any previously announced guidance as to the company`s expectations for financial results for 2003.
Management offers the following guidance for the consolidated continuing operations of MicroStrategy, for the quarter ending March 31, 2003:
Revenue is expected to be in the range of approximately $33 to $37 million. Net income (loss) is expected to range from approximately $(0.2) million to $0.6 million. Earnings (loss) per share, assuming a fully diluted weighted average share count, is expected to range from approximately $(0.02) to $0.04 per share. Adjusted net earnings (which excludes approximately $1.0 million in expected non-cash discount amortization expense and approximately $0.1 million in expected amortization expense of intangible assets) is expected to be approximately $0.9 million to $1.7 million or $0.06 to $0.12 per share on a diluted basis. Average share count in the quarter using the fully diluted weighted average share count method is expected to be approximately 13.5 to 14.5 million.
Management offers the following guidance for the full year 2003, which supersedes any previously announced guidance as to the Company`s expectations for financial results for 2003:
Consolidated revenue is expected to be in the range of approximately $150 to $160 million. License revenue for 2003 is expected to increase by approximately 10% versus 2002. Net income is expected to range from approximately $11.0 million to $16.0 million. Earnings per share, assuming a fully diluted weighted average share count, is expected to range from approximately $0.71 to $1.13 per share. Adjusted net earnings (which excludes approximately $3.8 million in expected non-cash discount amortization expense and approximately $0.2 million in expected amortization expense of intangible assets) is expected to be approximately $15 million to $20 million or $1.00 to $1.40 per share on a diluted basis. Average share count for the year using the fully diluted weighted average share count method is expected to be approximately 14 to 15 million. The Company also expects to have positive operating cash flow in each quarter of 2003.
About MicroStrategy Incorporated
Leadership in a Critical Market: Founded in 1989, MicroStrategy is a worldwide leader in the increasingly critical business intelligence software market. Large and small companies alike are harnessing MicroStrategy`s business intelligence software to gain vital insights from their data to help them proactively enhance cost-efficiency, productivity and customer relations and optimize revenue-generating strategies. MicroStrategy`s business intelligence platform offers exceptional capabilities that provide organizations -- in virtually all facets of their operations -- with user- friendly solutions to their data query, reporting, and advanced analytical needs, and distributes valuable insight on this data to users via Web, wireless, and voice. PC Magazine selected MicroStrategy 7(TM) as the 2001 "Editors` Choice" for business intelligence software.
Enterprise-Class Business Intelligence: MicroStrategy 7i(TM) is a truly integrated, enterprise-class, Web-based business intelligence platform. With MicroStrategy 7i, enterprises can now standardize on one business intelligence platform and deploy high-value business intelligence enterprise-wide. MicroStrategy 7i`s configurable query, reporting, and OLAP Web interface is designed to support all users, from casual report viewers to power analysts.
Diverse Customer Base: MicroStrategy`s customer base cuts across industry and sector lines, with over 1,900 enterprise-class customers, including Lowe`s Home Improvement Warehouse, AT&T Wireless Group, Wachovia and GlaxoSmithKline. MicroStrategy also has relationships with over 500 systems integrators and application development and platform partners, including IBM, PeopleSoft, Hewlett-Packard, and JD Edwards.
MicroStrategy is listed on Nasdaq under the symbol MSTR. For more information on the Company, or to purchase or demo MicroStrategy`s software, please visit MicroStrategy`s Web site at http://www.microstrategy.com .
MicroStrategy, MicroStrategy Business Intelligence Platform, Scalable Business Intelligence Platform Built for the Internet, MicroStrategy Web Universal, and MicroStrategy 7i are either trademarks or registered trademarks of MicroStrategy Incorporated in the United States and certain other countries. Other product and company names mentioned herein may be the trademarks of their respective owners.
This press release may include statements that may constitute "forward- looking statements," including estimates of future business prospects or financial results in the section above entitled "Outlook and Financial Guidance Information" and statements containing the words "believe," "estimate," "project," "expect" or similar expressions. Forward-looking statements inherently involve risks and uncertainties that could cause actual results of MicroStrategy Incorporated and its subsidiaries (collectively, the "Company") to differ materially from the forward-looking statements. Factors that could contribute to such differences include: the Company`s ability to secure financing for its current operations and long-term plans on acceptable terms; the ability of the Company to implement and achieve widespread customer acceptance of its MicroStrategy 7i software on a timely basis; the Company`s ability to recognize deferred revenue through delivery of products or satisfactory performance of services; continued acceptance of the Company`s products in the marketplace; the timing of significant orders; delays in the Company`s ability to develop or ship new products; market acceptance of new products; competitive factors; general economic conditions; currency fluctuations; and other risks detailed in the Company`s registration statements and periodic reports filed with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.
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