MicroStrategy Sales Up Slightly in the First Quarter, Still Hurt by Foreign-Currency Headwinds

By Chris NeigerMarketsFool.com

MicroStrategy (NASDAQ: MSTR) reported its first-quarter results on April 27, and the company saw its total revenue tick up by 1.3% year over year. Just as with the company's fourth-quarter results, MicroStrategy's management said foreign-currency headwinds continued to have a negative impact on the company's overall sales.

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MicroStrategy results: The raw numbers

Metric Q1 2016 Q1 2017 Year-Over-Year Change
Sales $119 million $120.6 million 1.3%
Net income from continuing operations $14.3 million $14.9 million 4.1%
Adjusted earnings per share $1.24 $1.28 3.2%

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Data source: MicroStrategy.

What happened with MicroStrategy this quarter?

  • Product licenses and subscription services revenues fell by 3.3% year over year, to $28.8 million.
  • The company's total revenues grew 2% on a constant-currency basis.
  • Product support revenues hit $70.5 million in the first quarter, up 2.9% year over year.
  • The company's "other services" revenue increased by 2.6% compared to the year-ago quarter, rising to $21.3 million.
  • MicroStrategy's operating expenses increased by 2.2% in the first quarter, hitting $78.1 million.
  • The company's North American business now represents 57% of its total product-license revenue, compared to 56% in the first quarter of 2016.
  • Income from operations fell slightly to $19.4 million in the first quarter, down from $19.8 million in the year-ago quarter.
  • The company's cash and cash equivalents increased 4.9% year over year to $618.5 million.

What management had to say

MicroStrategy's chief financial officer, Phong Le, said the first-quarter results were "generally in line with our expectations," but also noted that foreign-currency headwinds "negatively impacted" the company's revenues by $1.1 million, or 1%.

Le said that management believes the company will be able to continue growing revenue for the rest of the year and added that:

MicroStrategy CEO Michael Saylor said that overall the company "started off the year with a solid quarter" and noted that revenues ticked up slightly, earnings per share grew, and that the company has "solid" cash flow.

Le also said on the call that the first quarter is historically the company's lowest-revenue quarter and, as a result, also its lowest-operating-margin quarter. "And that would be our expectation with this year, too, is that the first quarter is typically a low watermark," he said.

Looking ahead

On the company's fourth-quarter 2016 call, Le said that MicroStrategy could expect to "see some choppiness" in 2017, but he wasn't so quick to reiterate those thoughts this time around. When asked about full-year revenue growth by an analyst, Le only said that management was happy with the first-quarter growth and that "our objective is still to grow revenue this year."

Going forward, MicroStrategy is hoping to keep its operating margins in the range of the mid-20s. But management said that current investments in marketing could eventually help boost those margins a bit throughout the year, and that the company might "increase that level" throughout 2017.

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