Bitcoin Holdings and Strategy - As of September 30, 2024, the company held approximately 252,220 bitcoins, with a carrying value of $6,850,879,000[137]. - The total original cost basis of bitcoin holdings was $9,903,699,000, with impairment losses amounting to $3,052,820,000[139]. - The average purchase price per bitcoin held as of September 30, 2024, was $39,266[139]. - In Q3 2024, the company purchased bitcoin using $1.105 billion from the sale of class A common stock and $458.2 million from the issuance of convertible notes[142]. - The company’s bitcoin strategy includes funding acquisitions primarily through equity and fixed-income instruments, with no specific target for total bitcoin holdings[135]. - The market value of bitcoin held at the end of Q3 2024, using the highest market price, was approximately $17,006,630,000[145]. - The company has engaged in various capital raising transactions to fund bitcoin purchases, totaling $1.214 billion in Q4 2023 and $793.8 million in Q2 2024[141][142]. - The company’s treasury reserve policy emphasizes bitcoin as the primary reserve asset, supplemented by cash and cash equivalents exceeding working capital needs[138]. - The company held approximately 252,220 bitcoins as of October 30, 2024, with an aggregate purchase price of $9.904 billion, averaging $39,266 per bitcoin[149]. - The market price of one bitcoin was $71,812.70 as of October 30, 2024[149]. - The company may incur significant digital asset impairment losses in the future, with at least $18.9 million incurred during the fourth quarter of 2024 on bitcoin holdings[182]. - As of September 30, 2024, the company held approximately 252,220 bitcoins, all unencumbered, and does not anticipate needing to sell any bitcoins within the next twelve months to meet working capital requirements[199]. Financial Performance - Total revenues for the three months ended September 30, 2024, were $116.1 million, a decrease of 10.3% from $129.5 million in 2023[156]. - Product licenses revenues decreased by 53.9% to $11.1 million for the three months ended September 30, 2024, compared to $24.0 million in 2023[164]. - Subscription services revenues increased by 32.5% to $27.8 million for the three months ended September 30, 2024, compared to $21.0 million in 2023[165]. - Product support revenues decreased by 8.7% to $61.0 million for the three months ended September 30, 2024, compared to $66.9 million in 2023[166]. - Total operating expenses for the three months ended September 30, 2024, were $514.3 million, significantly higher than $128.0 million in 2023[156]. - Digital asset impairment losses for the three months ended September 30, 2024, were $412.1 million, representing 80.1% of operating expenses, compared to $33.6 million (26.2%) in the same period of 2023[148]. - Non-GAAP loss from operations for the three months ended September 30, 2024, was $413,205,000, compared to a loss of $8,441,000 in the same period of 2023[220]. - Non-GAAP net loss for the three months ended September 30, 2024, was $307,796,000, compared to a loss of $127,666,000 in the same period of 2023[223]. - General and administrative expenses increased by 21.3% to $104.300 million for the nine months ended September 30, 2024, compared to $85.959 million in 2023[228]. Revenue Breakdown - Other services revenues decreased by 8.0% to $16,169,000 for the three months ended September 30, 2024, compared to $17,583,000 in the same period of 2023[168]. - Total consulting revenues fell by 7.1% to $15,489,000 for the three months ended September 30, 2024, down from $16,676,000 in the prior year[168]. - Total other services revenues for the nine months ended September 30, 2024, decreased by 13.3% to $49,162,000 compared to $56,714,000 in the same period of 2023[168]. - Consulting revenues decreased by $1.2 million for the three months ended September 30, 2024, primarily due to decreased demand for domestic consulting services[168]. - Education revenues did not materially change for the three and nine months ended September 30, 2024, compared to the same periods in the prior year[169]. - Product licenses revenues for the nine months ended September 30, 2024, decreased by 41.5% to $33.311 million compared to $56.979 million in the same period of 2023[228]. - Subscription services revenues increased by 25.5% to $74.846 million for the nine months ended September 30, 2024, up from $59.662 million in 2023[228]. - Product support revenues decreased by 6.5% to $185.440 million for the nine months ended September 30, 2024, compared to $198.422 million in 2023[228]. Expenses and Impairments - The company reported digital asset impairment losses of $39,238,000 in Q3 2024[139]. - Digital asset impairment losses for the three months ended September 30, 2024, were $412.1 million, a 1127.9% increase from $33.6 million in the same period of 2023; for the nine months ended September 30, 2024, losses were $783.8 million, up 923.1% from $76.6 million[182]. - Interest expense, net, increased by $7.1 million and $8.4 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in the prior year, primarily due to new convertible notes issued in 2024[183]. - A loss of $22.9 million on debt extinguishment was recorded for the three and nine months ended September 30, 2024, resulting from the redemption of the 2028 Secured Notes[185]. - Other expense, net, was $5.0 million and $2.6 million for the three and nine months ended September 30, 2024, respectively, primarily due to foreign currency transaction net losses[187]. Cash Flow and Financing Activities - The company reported a net cash used in operating activities of $(35.7) million for the nine months ended September 30, 2024, compared to $11.5 million for the same period in 2023, representing a 409.8% decrease[201]. - Net cash used in investing activities increased by $3.320 billion for the nine months ended September 30, 2024, primarily due to a $3.320 billion increase in purchases of bitcoins, totaling $4.008 billion during this period[203]. - Net cash provided by financing activities increased by $3.370 billion for the nine months ended September 30, 2024, largely due to a $3.160 billion increase in long-term debt proceeds compared to the prior year[204]. - The company has approximately $891.3 million of class A common stock available for issuance under its August 2024 Sales Agreement, and filed a prospectus for a new equity offering program with an aggregate offering price of up to $21 billion on October 30, 2024[194]. - The company may utilize proceeds from the sale of class A common stock, with $891.3 million available as of the date of the report, for potential debt repurchases or prepayments[211]. - The company terminated the November 2023 Sales Agreement on July 31, 2024, and initiated a new sales agreement on August 1, 2024, allowing for the sale of up to $2.0 billion in class A common stock[213]. Tax and Deferred Revenue - The company recorded a benefit from income taxes of $411.8 million on a pretax loss of $907.6 million for the nine months ended September 30, 2024, resulting in an effective tax rate of 45.4%[188]. - Total current and non-current deferred revenue and advance payments decreased by $45.9 million as of September 30, 2024, compared to December 31, 2023, primarily due to a decrease in deferred product support revenue[192]. - As of September 30, 2024, the remaining performance obligation was $380.5 million, with approximately $237.1 million expected to be recognized over the next 12 months[193]. - The effective tax rate may fluctuate due to changes in domestic and foreign earnings and losses, as well as material discrete tax items[188]. Employee and Operational Metrics - As of September 30, 2024, the total employee headcount was 1,637, a decrease from 1,984 in the same period of 2023[158]. - Share-based compensation expense increased by $2.6 million for the three months ended September 30, 2024, compared to the same period in the prior year, totaling $19.4 million[159]. - Research and development expenses rose by 12.3% to $33,301,000 for the three months ended September 30, 2024, up from $29,660,000 in the prior year[178]. - General and administrative expenses increased by 14.7% to $33,505,000 for the three months ended September 30, 2024, compared to $29,223,000 in the same period of 2023[180]. - Sales and marketing expenses decreased by 0.5% to $35,414,000 for the three months ended September 30, 2024, down from $35,606,000 in the prior year[176]. Currency and International Revenue - International revenues accounted for 44.9% of total revenues for the three months ended September 30, 2024, compared to 44.5% in 2023[233]. - A 10% adverse change in foreign currency exchange rates would have decreased reported cash and cash equivalents by 4.5% as of September 30, 2024[236]. - Revenues for the nine months ended September 30, 2024, would have decreased by 3.9% if average exchange rates had changed unfavorably by 10%[236]. - The company anticipates that international revenues will continue to account for a significant portion of total revenues[233].
MicroStrategy Inc Series A Pfd(STRD) - 2024 Q3 - Quarterly Report