Bitcoin Holdings and Strategy - As of March 31, 2023, the company held approximately 140,000 bitcoins, with a market value of $4.172 billion and an average purchase price of approximately $29,803 per bitcoin[122]. - The company has not set a specific target for the amount of bitcoin to hold and will continue to monitor market conditions for potential additional purchases[110]. - The bitcoin acquisition strategy is supported by stable cash flows from the enterprise analytics software business, which allows the company to hold bitcoin for the long term[109]. - The company views bitcoin as a long-term store of value and a potential hedge against inflation[111]. - As of March 31, 2023, the total original cost basis of the company's bitcoin holdings was $4.172 billion[122]. - The company may periodically sell bitcoin for corporate purposes, including treasury management and tax benefits[110]. - During the first quarter of 2023, the company purchased bitcoin using $179.3 million from the sale of class A common stock[116]. - As of March 31, 2023, the company held approximately 140,000 bitcoins, with 125,110 being unencumbered[170]. - The company issued $500.0 million in 2028 Secured Notes, using the proceeds to acquire bitcoin, with approximately 14,890 bitcoins held as collateral as of March 31, 2023[178]. - MacroStrategy, a wholly-owned subsidiary, entered into a $205.0 million 2025 Secured Term Loan, using $190.5 million to acquire bitcoin, and prepaid approximately $161.0 million to fully repay the loan on March 24, 2023[179]. Financial Performance - Total revenues for the three months ended March 31, 2023, were $121.915 million, a 2.0% increase from $119.277 million in the same period of 2022[131]. - Product licenses and subscription services revenues increased by 23.4% to $36.222 million for the three months ended March 31, 2023, compared to $29.358 million in 2022[137]. - Subscription services revenues grew by 46.4% to $18.810 million, driven by a 35.6% increase in domestic revenues and a 72.8% increase in international revenues[137]. - The company reported a gross profit of $93.974 million for the three months ended March 31, 2023, compared to $93.600 million in the same period of 2022[131]. - Operating expenses decreased significantly to $114.281 million in Q1 2023 from $263.560 million in Q1 2022, primarily due to a reduction in digital asset impairment losses[131]. - The company incurred digital asset impairment losses of $18.911 million in Q1 2023, a substantial decrease from $170.091 million in Q1 2022[131]. - Non-GAAP loss from operations for the three months ended March 31, 2023, was $(2,752) thousand, compared to $(155,566) thousand for the same period in 2022[185]. - Non-GAAP net income for the three months ended March 31, 2023, was $445,038 thousand, compared to a loss of $(117,672) thousand in 2022[186]. - Non-GAAP diluted earnings per share for the three months ended March 31, 2023, was $30.59, compared to $(10.42) for the same period in 2022[186]. Expenses and Costs - Share-based compensation expense increased to $17.555 million in Q1 2023, up from $14.394 million in Q1 2022, reflecting the expansion of equity award programs[133]. - Total cost of revenues increased by $2.264 million to $27.941 million for the three months ended March 31, 2023, driven by a 45.2% increase in subscription services costs and an 11.1% increase in product support costs[147]. - Research and development expenses decreased by $2.165 million to $31.358 million for the three months ended March 31, 2023, primarily due to a decrease in employee salaries and variable compensation[153]. - General and administrative expenses increased by $1.200 million to $27.906 million for the three months ended March 31, 2023, primarily due to a $1.7 million increase in share-based compensation expense[154]. - Sales and marketing expenses increased by 8.6% to $36,106 in Q1 2023, compared to $33,240 in Q1 2022[187]. Cash Flow and Liquidity - Cash and cash equivalents held by U.S. entities increased from $14.8 million as of December 31, 2022, to $26.5 million as of March 31, 2023, while non-U.S. entities increased from $29.0 million to $67.8 million[166]. - Net cash provided by operating activities decreased by 14.4% to $37.4 million for the three months ended March 31, 2023, compared to $43.7 million in the same period of the prior year[172]. - Net cash used in investing activities decreased by 16.8% to $179.8 million for the three months ended March 31, 2023, primarily due to a $36.2 million decrease in purchases of bitcoins[174]. - Net cash provided by financing activities decreased by 9.5% to $187.6 million for the three months ended March 31, 2023, compared to $207.3 million in the same period of the prior year[175]. - The company expects existing cash and cash equivalents to meet working capital requirements for at least the next 12 months, but may need to explore refinancing or other options for long-term obligations[168]. Market Conditions and Risks - The company anticipates that quarter-to-quarter comparisons of operating results may not be indicative of future performance due to the volatility in bitcoin prices and revenue trends in the software business[131]. - The market price of bitcoin fluctuated between $16,490.00 and $29,190.04 during Q1 2023, impacting the carrying value of digital assets[191]. - Impairment loss on bitcoin for Q1 2023 was $18.9 million, reflecting the volatility in market prices[191]. - A 10% adverse change in foreign currency exchange rates would have decreased reported cash and cash equivalents by 4.5% as of March 31, 2023[195]. - Revenues for Q1 2023 were lower by 3.3% due to a 6.5% unfavorable change in weighted average exchange rates compared to the same period in the prior year[195]. Employee and Operational Metrics - As of March 31, 2023, the total employee headcount was 2,123, a slight decrease from 2,152 as of December 31, 2022[132]. - The number of product licenses transactions recognized in Q1 2023 increased to 6, compared to 4 in Q1 2022, with significant growth in transactions over $1.0 million[137]. - The remaining performance obligation as of March 31, 2023, is $316.8 million, with an expected recognition of approximately $243.3 million over the next 12 months[164].
MicroStrategy Inc Series A Pfd(STRK) - 2023 Q1 - Quarterly Report