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MicroStrategy's Sales Flat, Earnings Tumble in Q1

By Chris Neiger – Updated Apr 27, 2018 at 3:01PM

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The company hired a new global sales director, who it hopes will help improve its top line.

Enterprise analytics and mobility software specialist MicroStrategy (MSTR 6.99%) reported its first-quarter 2018 results on April 26. The company's total revenue was relatively flat, growing by just 0.6% year over year to $123 million. Net income fell considerably, from $15.6 million in the year-ago quarter to just $1.7 million in Q1 2018. 

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MicroStrategy results: The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Change

Sales

$123.0 million

$122.2 million

0.6%

Net income

$1.7 million

$15.6 million

(89%)

Adjusted earnings per share

$0.15

$1.34

(89%)

Data source: MicroStrategy.

What happened with MicroStrategy this quarter?

  • The company's product licensing revenue fell by 24% year over year to $17.3 million.
  • Sales of MicroStrategy's subscription services, which are primarily driven by its cloud computing customers, decreased by 1% to $7.7 million.
  • Product support revenue ticked up by 6% to $74.4 million in the quarter.
  • MicroStrategy's "other services" revenue popped by 11% year over year, to $23.6 million.
  • Operating expenses were $97.1 million, a 24% increase year over year.
  • Non-GAAP income from operations, which excludes share-based compensation, was $5.5 million in the first quarter, down from $24 million in the year-ago quarter.
  • Research and development expenses jumped $5.1 million, or 28% from the year-ago quarter.
  • MicroStrategy had cash and cash equivalents and short-term investments of $695.5 million at the end of the first quarter and remains debt free.

What management had to say

MicroStrategy's management made a point of mentioning that it's focusing on generating more high-quality sales leads and said that it has hired a new senior executive vice president for worldwide sales, Kevin Norlin.

While the company grew its most important sales segment, product support, in the first quarter, it still has lots of work to do in the licensing sales segment. MicroStrategy's management has said it plans to see growth in 2018 for its licensing sales, despite the 24% drop in Q1, and CFO Phong Le said that "[W]e're excited to see revenue and product license revenue grow in 2018, and that's still an aspiration of ours."

Looking ahead

MicroStrategy is tight-lipped when it comes to giving forward guidance or talking about future growth -- and this quarter wasn't any different. But Le did say that the company is continuing to hire more staff in tech support, consulting, and technology to improve its product and customer engagement. He also mentioned that the company will continue to review its process for creating high-quality sales leads, adding that, "All these discipline investments are in place to drive revenue growth in 2018."



Chris Neiger has no position in any of the stocks mentioned. The Motley Fool recommends MicroStrategy. The Motley Fool has a disclosure policy.

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