MicroStrategy(MSTR) - 2023 Q3 - Quarterly Report

Bitcoin Holdings and Strategy - As of September 30, 2023, MicroStrategy held approximately 158,245 bitcoins, with a market value of $425.2 million based on a bitcoin price of$27,030.47[121] - The total original cost basis of bitcoins held by MicroStrategy as of September 30, 2023, was approximately $4.68 billion, with impairment losses totaling$2.23 billion[122] - In Q3 2023, MicroStrategy purchased bitcoins using $147.3 million from the proceeds of its class A common stock sales and excess cash[123] - The average purchase price per bitcoin in Q3 2023 was approximately$27,348, with a total of 5,912 bitcoins acquired[122] - MicroStrategy's bitcoin acquisition strategy aims to accumulate bitcoin as long-term holdings, with no specific target for the total amount[119] - The company believes bitcoin serves as a store of value and a hedge against inflation, enhancing brand awareness through its related activities[120] - The market value of bitcoins held by MicroStrategy at the end of Q3 2023, using the ending market price, was approximately $4.28 billion[124] - The company held approximately 158,400 bitcoins as of October 31, 2023, with an aggregate purchase price of$4.686 billion, averaging $29,586 per bitcoin, while the market price was$34,555.58[131] Financial Performance - Total revenues for Q3 2023 reached $129.462 million, a slight increase from$125.360 million in Q3 2022, while total revenues for the nine months ended September 30, 2023, were $371.777 million, compared to$366.710 million in the same period of 2022[144] - Operating expenses for Q3 2023 totaled $128.048 million, significantly higher than$93.917 million in Q3 2022, driven by increased digital asset impairment losses[144] - The gross profit for Q3 2023 was $102.801 million, compared to$99.975 million in Q3 2022, indicating a stable gross margin despite rising operating expenses[144] - Digital asset impairment losses for Q3 2023 were $33.6 million, accounting for 26.2$0.7 million (0.8%) in Q3 2022[130] - Non-GAAP loss from operations for the nine months ended September 30, 2023, was $(22,407,000), compared to a loss of$(1,035,438,000) in the same period of 2022[207] - Non-GAAP net loss for Q3 2023 was $127,666,000 compared to a loss of$10,831,000 in Q3 2022, while for the nine months ended September 30, 2023, it was $354,301,000 compared to a loss of$1,177,237,000 in the same period of 2022[208] Revenue Breakdown - Total product licenses and subscription services revenues increased by 16.3% to $45,019,000 for the three months ended September 30, 2023, compared to$38,700,000 in the same period of 2022[151] - Domestic product licenses revenues decreased by 33.4% to $10,338,000 for the three months ended September 30, 2023, compared to$15,526,000 in the same period of 2022[152] - International product licenses revenues increased by 102.8% to $13,707,000 for the three months ended September 30, 2023, compared to$6,760,000 in the same period of 2022[152] - Subscription services revenues increased by 27.8% to $20,974,000 for the three months ended September 30, 2023, compared to$16,414,000 in the same period of 2022[151] - Consulting revenues decreased by 14.7% to $16,676,000 for the three months ended September 30, 2023, compared to$19,545,000 in the same period of 2022[158] - Education revenues decreased by 17.9% to $907,000 for the three months ended September 30, 2023, compared to$1,105,000 in the same period of 2022[159] - The company reported a non-GAAP constant currency revenue growth of 25.3% for subscription services in Q3 2023[210] Expenses and Cost Management - Research and development expenses decreased by 2.7% to $29,660,000 for the three months ended September 30, 2023, compared to$30,498,000 in the same period of 2022[165] - General and administrative expenses increased by 7.1% to $29,223,000 for the three months ended September 30, 2023, compared to$27,283,000 in the same period of 2022[168] - Total cost of revenues for Q3 2023 was $26,661,000, a 5.0$25,385,000 in the same period of 2022[160] - The cost of product support revenues for Q3 2023 was $5,531,000, reflecting a 5.9$11,528,000 for the nine months ended September 30, 2023, compared to $21,409,000 in the same period of 2022[188] - Net cash used in investing activities increased by 196.0$(690,550,000) for the nine months ended September 30, 2023, primarily due to a $456.5 million increase in bitcoin purchases[190] - Net cash provided by financing activities increased by 207.2$676,025,000 for the nine months ended September 30, 2023, driven by $819.7 million in net proceeds from the sale of class A common stock[191] - The company issued and sold 1,348,855 shares of class A common stock under the 2022 Sales Agreement for net proceeds of approximately$339.0 million during the nine months ended September 30, 2023[201] Market and Currency Exposure - The company is exposed to market price changes in bitcoin and foreign currency fluctuations, which could materially impact earnings[214] - A 10% adverse change in foreign currency exchange rates would have decreased reported cash and cash equivalents by 4.2% as of September 30, 2023[219] - If average exchange rates had changed unfavorably by 10% during the nine months ended September 30, 2023, revenues would have decreased by 3.6%[219] - The company attempts to minimize foreign currency risk by converting excess foreign currency to U.S. dollar-denominated cash and investment accounts[218] Future Outlook and Strategic Initiatives - The company is transitioning to a cloud-native model, enhancing go-to-market strategies to acquire new customers and drive revenue growth[134] - The company expects subscription services revenues to continue to grow in future periods as it promotes its cloud offering to new and existing customers[156] - Product licenses revenues may experience declines in future periods as the company continues to promote its cloud offering[152]