EPS of $-1.72 decreased by 70.3% from previous year
Gross margin of 70.4%
Net income of -340.17M
""We are a publicly traded company that has adopted Bitcoin as our primary treasury reserve asset... This positions us as a leader in both the digital asset and enterprise analytics sectors, offering a unique opportunity for long-term value creation."" - Phong Le
MicroStrategy Incorporated (MSTR) QQ3 2024 Financial Results: Navigating Change in a Transformative Quarter
Executive Summary
MicroStrategy Incorporated (MSTR) reported its Q3 2024 results, emphasizing a challenging transition with significant ongoing investments in its Bitcoin treasury strategy and a continued pivot toward cloud services. Despite a decline in year-over-year revenue and net income, management underscored its confidence in leveraging its sizeable Bitcoin holdings as a cornerstone for long-term value creation. With a robust capital strategy aimed at raising a total of $42 billion over three years, MSTR aims to position itself at the forefront of both the digital asset landscape and enterprise analytics sector. Key metrics reveal heightened operational expenses driven by strategic investments, while future growth will hinge upon effective utilization of capital and ongoing adoption of digital currencies by institutional investors.
Key Performance Indicators
Revenue
116.07M
QoQ: 4.15% | YoY:-10.34%
Gross Profit
81.72M
70.40% margin
QoQ: 1.51% | YoY:-20.50%
Operating Income
-432.58M
QoQ: -2 043.19% | YoY:-1 613.40%
Net Income
-340.17M
QoQ: -231.69% | YoY:-137.15%
EPS
-1.72
QoQ: -201.75% | YoY:-70.30%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $116.1 million, down 10% YoY; up 4% QoQ.
**Net Income:** -$340.2 million, reflecting a 137.15% decline YoY.
**EPS:** -$1.72, showing a 70.30% decrease YoY.
**Operating Expenses:** Increased to $479.96 million, primarily due to higher research and development and cloud-related costs.
**Total Bitcoin Holdings:** 252,220 Bitcoins valued at $18 billion as of September 30, 2024.
Financial Highlights
### Key Financial Metrics
- Revenue: $116.1 million, down 10% YoY; up 4% QoQ.
- Net Income: -$340.2 million, reflecting a 137.15% decline YoY.
- EPS: -$1.72, showing a 70.30% decrease YoY.
- Operating Expenses: Increased to $479.96 million, primarily due to higher research and development and cloud-related costs.
- Total Bitcoin Holdings: 252,220 Bitcoins valued at $18 billion as of September 30, 2024.
- Debt Issued in Q3: $1.01 billion in convertible notes at a 0.625% interest rate.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
116.07M
-10.34%
4.15%
Gross Profit
81.72M
-20.50%
1.51%
Operating Income
-432.58M
-1 613.40%
-2 043.19%
Net Income
-340.17M
-137.15%
-231.69%
EPS
-1.72
-70.30%
-201.75%
Key Financial Ratios
currentRatio
0.65
grossProfitMargin
70.4%
operatingProfitMargin
-373%
netProfitMargin
-293%
returnOnAssets
-4.08%
returnOnEquity
-9.01%
debtEquityRatio
1.14
operatingCashFlowPerShare
$-0.21
freeCashFlowPerShare
$-8.19
priceToBookRatio
8.81
priceEarningsRatio
-24.44
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management Commentary:
- Phong Le (President & CEO): "Our treasury strategy is designed to provide investors varying degrees of economic exposure to Bitcoin...We are the world's first and largest Bitcoin treasury company."
- Andrew Kang (CFO): "We are seeing strong demand for our cloud platform and increased customer renewals, indicating a positive trajectory despite lower sales from product licenses."
- Michael Saylor (Executive Chairman): "Bitcoin is proving itself as the strongest asset...Our equity has outperformed Bitcoin and even the S&P 500 since we adopted our Bitcoin standard."
Management emphasized the importance of Bitcoin as a long-term growth asset, with confidence in the execution of its capital markets strategy.
"We are a publicly traded company that has adopted Bitcoin as our primary treasury reserve asset... This positions us as a leader in both the digital asset and enterprise analytics sectors, offering a unique opportunity for long-term value creation."
â Phong Le
"The growth of our subscription and the shift towards cloud computing indicates our confidence that the company will see greater revenue generation in the upcoming periods."
â Andrew Kang
Forward Guidance
Management has laid out an ambitious plan targeting $42 billion in capital raising efforts over the next three years, segregated into $21 billion each from equity and fixed income. The strategic aim is the continuous acquisition of Bitcoin, leveraging favorable market conditions and operational cash flows to supplement finance costs associated with debt instruments. MSTR targets an increase in cash flows from subscription services, positioning the firm favorably against its peers in the analytics and broader technology sectors. Investors are encouraged to monitor Bitcoin market dynamics and regulatory developments surrounding Bitcoin ETFs, which could significantly influence capital flow into MSTR's holdings.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MSTR Focus
70.40%
-3.73%
-9.01%
-24.44%
ADSK
90.60%
22.00%
10.50%
55.47%
INTU
82.40%
46.10%
12.70%
18.33%
ZM
75.90%
15.50%
2.39%
27.75%
SNOW
67.20%
-38.90%
-11.10%
-29.49%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
MicroStrategy's business model, particularly its Bitcoin treasury strategy, positions it distinctly within both the technology and financial sectors. The firm has successfully raised capital while maintaining a focus on long-term growth through strategic use of intelligent leverage. The potential for substantial Bitcoin gains, coupled with the shift to cloud-driven revenue, provides a strong investment case as long as Bitcoin's regulatory landscape remains favorable. Investors should keep an eye on financial performance metrics aligned with the aforementioned capital strategy and the company's ability to maintain revenue growth in the software space.
Key Investment Factors
Growth Potential
### Growth Potential
MSTR aims to capture the growth from the expanding Bitcoin market, efficient Acquisitions through intelligent leverage, and a marked transition towards cloud-based revenue models. With a projected 6% to 10% annual BTC yield over the next three years, MSTR's value proposition extends beyond traditional software measures, promising enhanced performance against significant Bitcoin holdings.
Profitability Risk
### Risk Factors
MSTR remains highly exposed to Bitcoin price volatility, making it sensitive to market changes that could severely impact both operational cash flows and market valuation. Ongoing transitions associated with cloud operations present uncertainty in revenue streams as traditional license-based sales decline. Further, the need for extensive capital raises poses risks related to market perceptions and shareholder sentiment.
Financial Position
### Financial Position
MSTR's balance sheet reflects a significant commitment to Bitcoin as its main asset, with $18 billion in Bitcoin holdings. Enthusiasts and investors cite the importance of a pristine balance sheet, reflecting only Bitcoin-linked assets, which, while robust, also comes with challenges in maintaining liquidity and managing ongoing capital market risks. The firm is noted for recently redeeming higher-cost debt, thus saving on interest expense, as a measure of improving financial efficiency.
SWOT Analysis
Strengths
Largest corporate holder of Bitcoin, providing a robust asset base.
Innovative capital market strategy that emphasizes both debt and equity raises for Bitcoin acquisitions.
Strong brand recognition as a software analytics pioneer, transitioning effectively to cloud services.
Weaknesses
Heavy reliance on Bitcoin value creates volatility in financial performance.
Recent decline in revenue highlights struggles during market transitions and organizational restructurings.
High operational costs due to substantial investment in personnel and platforms.
Opportunities
Expansion into the growing market for Bitcoin investment vehicles, including ETFs and treasury-linked products.
Increased institutional adoption of Bitcoin may drive demand for both software services and Bitcoin exposure.
Strategic partnerships with cloud service providers to boost subscription growth.
Threats
Market volatility in Bitcoin pricing could impact both holdings and investor sentiment negatively.
Increased regulatory scrutiny surrounding cryptocurrencies could affect operations and market perceptions.
Competition from other companies adopting similar strategies may dilute MicroStrategy's unique market position.