MicroStrategy (MSTR 2.38%) reported fourth-quarter results on Jan. 31 and the company saw its total revenue fall once again, down just over 2% year over year. In the previous quarter, MicroStrategy's revenue increased for the first time in two years (on a yearly basis), but management said foreign currency headwinds in Q4 accounted for the 2% drop.
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MicroStrategy results: The raw numbers
| Metric | Q4 2016 | Q4 2015 | Year-Over-Year Change |
|---|---|---|---|
| Sales | $140.1 million | $143.5 million | (2.3%) |
| Net income from continuing operations | $31.1 million | $39.1 million | (20%) |
| Adjusted EPS | $2.69 | $3.38 | (20%) |
Data source: MicroStrategy.
What happened with MicroStrategy this quarter?
- Revenue from product licenses fell by 8% year over year to $38 million.
- Subscription services revenue, primarily driven by cloud customers, hit $8 million in the fourth quarter, a 3% increase year over year.
- The company's North American business now represents 56% of MicroStrategy's total product licensing revenue, up from 51% in the fourth quarter of 2015.
- Product support revenues came in at $72.7 million in the fourth quarter, marking a 3% increase on a year-over-year basis.
- MicroStrategy's "other services" revenue fell by 11% year over year to $21.6 million.
- Operating expenses continued to increase, jumping 8% from the fourth quarter of last year, to $80.1 million.
- Cash, cash equivalents, and short-term investments increased to $589.4 million, up from $485.7 million in the fourth quarter of 2015.
What management had to say
MicroStrategy Chief Financial Officer Phong Le said on the earnings call that the fourth-quarter financial results were "in line with our expectations" and noted that the drop in revenues could be attributed to foreign currency headwinds, "which negatively impacted our revenues by $2.6 million or 2%."
Le also mentioned that the company is pleased with its overall full-year 2016 performance and has made investments in sales and marketing, research and development, internal systems, and recruiting that will "start 2017 strong."
MicroStrategy CEO Michael Saylor reiterated a positive outlook for the company, saying:
As I look at the beginning-of-the-year status of the Company, as we entered 2017, we are coming off of two strong years of financial performance and if we were to measure and evaluate operating results based upon operating income or operating cash flows, I believe these are the two best years in the history of the firm and so they were very, very strong years in terms of operating income and cash flow and they materially improved our balance sheet and gave us a good degree of momentum going into 2017.
Looking forward
While MicroStrategy is making key investments to build out its business this year, Le said on the call that investors should expect more revenue fluctuations in the coming quarters.
"I think it's likely to be expected that we will still continue to see choppiness in 2017, especially as the nature of the work that we do and the deals that we sell are so big," Le said. "Obviously, as our pipeline fills up and we get more large volume deals and small volume deals to pad the choppiness, it will get better over time."
He also reiterated that 2016 was an investment year for MicroStrategy, and that those investments should put the company on a "trajectory for growth" in 2017. Le said that the company's overall objective going into the new year is to grow cost in line with revenues, and keep the company's margins in the range of 20% to 30%.
