MicroStrategy Announces Fourth Quarter 2023 Financial Results; Now Holds 190,000 BTC

• 31,755 bitcoins acquired since the end of Q3 for $1.25 billion, or $39,411 per bitcoin
• 190,000 bitcoin holdings at a total cost of $5.93 billion, or $31,224 per bitcoin, as of February 5, 2024
• Total Revenues of $124.5 million, down 6% year-over-year
• Subscription Services Revenues of $21.5 million, up 23% year-over-year

MicroStrategy^® Incorporated (NASDAQ:MSTR) ("MicroStrategy" or the "Company"), the largest corporate holder of bitcoin and the largest independent publicly-traded business intelligence company, today announced financial results for the three-month period ended December 31, 2023 (the fourth quarter of its 2023 fiscal year).

"2023 was an extraordinary year for MicroStrategy as we strategically raised capital to significantly increase our bitcoin holdings, and continued to innovate, including by developing and launching MicroStrategy AI, our first to market AI-based BI tool. We achieved double-digit subscription services revenue growth for both the fourth quarter and full year, demonstrating our ongoing commitment to transition our business to the cloud. We believe that the combination of our operating structure, bitcoin strategy, and focus on technology innovation provides a unique opportunity for value creation for our shareholders," said Phong Le, President and Chief Executive Officer, MicroStrategy.

"We acquired 31,755 additional bitcoins since the end of the third quarter, marking the largest quarterly bitcoin holding increase in the last 3 years and the 13th consecutive quarter of adding more bitcoin on our balance sheet. We benefited from the significant increase in bitcoin prices in Q4 and we also continued to leverage our strategic capital markets activities and cash on hand to accumulate more bitcoin and accrete incremental value for our shareholders. It is through our unique bitcoin strategy and solid track record that we now hold 190,000 bitcoins at an aggregate purchase price of $31,224," said Andrew Kang, Chief Financial Officer, MicroStrategy.

Fourth Quarter 2023 Financial Highlights

• Revenues: Total revenues for the fourth quarter of 2023 were $124.5 million, a 6.1% decrease, or a 7.8% decrease on a non-GAAP constant currency basis, compared to the fourth quarter of 2022. Product licenses and subscription services revenues for the fourth quarter of 2023 were $39.9 million, an 11.4% decrease, or a 13.1% decrease on a non-GAAP constant currency basis, compared to the fourth quarter of 2022. Product support revenues for the fourth quarter of 2023 were $65.5 million, a 2.1% decrease, or a 3.8% decrease on a non-GAAP constant currency basis, compared to the fourth quarter of 2022. Other services revenues for the fourth quarter of 2023 were $19.1 million, a 7.5% decrease, or a 9.4% decrease on a non-GAAP constant currency basis, compared to the fourth quarter of 2022.
• Gross Profit: Gross profit for the fourth quarter of 2023 was $96.3 million, representing a 77.3% gross margin, compared to a gross profit of $105.8 million, representing a gross margin of 79.8%, for the fourth quarter of 2022.
• Operating Expenses: Operating expenses for the fourth quarter of 2023 were $139.0 million, a 53.6% decrease compared to the fourth quarter of 2022. Operating expenses include impairment losses, net of gains on sale, on the Company's digital assets, which were $39.2 million during the fourth quarter of 2023, compared to $197.6 million in the fourth quarter of 2022.
• Loss from Operations and Net Income (Loss): Loss from operations for the fourth quarter of 2023 was $42.8 million, compared to a loss from operations of $193.7 million for the fourth quarter of 2022. Net income for the fourth quarter of 2023 was $89.1 million, or $4.96 per share on a diluted basis, as compared to a net loss $249.7 million, or $21.93 per share on a diluted basis, for the fourth quarter of 2022. Digital asset impairment losses, net of gains on sale, of $39.2 million and $197.6 million for the fourth quarter of 2023 and 2022, respectively, were reflected in these amounts. Benefit from income taxes of $149.8 million and provision for income taxes of $35.3 million for the fourth quarter of 2023 and 2022, respectively, were reflected in net income (loss), principally reflecting changes in the valuation allowance on the Company's deferred tax asset related to the impairment on its bitcoin holdings.
• Cash and Cash Equivalents: As of December 31, 2023, the Company had cash and cash equivalents of $46.8 million, as compared to $43.8 million as of December 31, 2022, an increase of $3.0 million.
• Digital Assets: As of December 31, 2023, the carrying value of the Company's digital assets (comprised of approximately 189,150 bitcoins) was $3.626 billion, which reflects cumulative impairment losses of $2.269 billion since acquisition and an average carrying amount per bitcoin of approximately $19,172. As of December 31, 2023, the original cost basis and market value of the Company's bitcoin were $5.895 billion and $8.045 billion, respectively, which reflects an average cost per bitcoin of approximately $31,168 and a market price per bitcoin of $42,531.41, respectively.
• At-the-Market Equity Offering Programs: During the three months ended December 31, 2023, the Company issued and sold 2,266,503 shares of its class A common stock pursuant to our at-the-market equity offering programs for aggregate net proceeds (less sales commissions and expenses) of approximately $1.2 billion. As of December 31, 2023, approximately $137.8 million of the Company's class A common stock remained available for issuance and sale pursuant to our current at-the-market equity offering program.

The tables provided at the end of this press release include a reconciliation of the most directly comparable financial measures prepared in accordance with generally accepted accounting principles in the United States ("GAAP") to non-GAAP financial measures for the three and twelve months ended December 31, 2023 and 2022. An explanation of non-GAAP financial measures is also included under the heading "Non-GAAP Financial Measures" below. Additional non-GAAP financial measures are included in MicroStrategy's "Q4 2023 Earnings Presentation," which will be available under the "Events and Presentations" section of MicroStrategy's investor relations website at https://www.microstrategy.com/en/investor-relations.

Non-GAAP Financial Measures

MicroStrategy is providing supplemental financial measures for (i) non-GAAP loss from operations that excludes the impact of share-based compensation expense, (ii) non-GAAP net income (loss) and non-GAAP diluted earnings (loss) per share that exclude the impacts of share-based compensation expense, interest expense arising from the amortization of debt issuance costs related to MicroStrategy's long-term debt, gain on debt extinguishment, and related income tax effects, and (iii) non-GAAP constant currency revenues that exclude certain foreign currency exchange rate fluctuations. These supplemental financial measures are not measurements of financial performance under GAAP and, as a result, these supplemental financial measures may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP financial measures internally to help understand, manage, and evaluate business performance and to help make operating decisions.

MicroStrategy believes that these non-GAAP financial measures are also useful to investors and analysts in comparing its performance across reporting periods on a consistent basis. The first supplemental financial measure excludes a significant non-cash expense that MicroStrategy believes is not reflective of its general business performance, and for which the accounting requires management judgment and the resulting share-based compensation expense could vary significantly in comparison to other companies. The second set of supplemental financial measures excludes the impacts of (i) share-based compensation expense, (ii) non-cash interest expense arising from the amortization of debt issuance costs related to MicroStrategy's long-term debt, (iii) a gain on debt extinguishment, and (iv) related income tax effects. The third set of supplemental financial measures excludes changes resulting from certain fluctuations in foreign currency exchange rates so that results may be compared to the same period in the prior year on a non-GAAP constant currency basis. MicroStrategy believes the use of these non-GAAP financial measures can also facilitate comparison of MicroStrategy's operating results to those of its competitors.

Conference Call

MicroStrategy will be discussing its fourth quarter 2023 financial results on a live Video Webinar today beginning at approximately 5:00 p.m. ET. The live Video Webinar and accompanying presentation materials will be available under the "Events and Presentations" section of MicroStrategy's investor relations website at https://www.microstrategy.com/en/investor-relations. Log-in instructions will be available after registering for the event. An archived replay of the event will be available beginning approximately two hours after the call concludes.

About MicroStrategy Incorporated

MicroStrategy (NASDAQ:MSTR) considers itself the world's first Bitcoin development company. We are a publicly-traded operating company committed to the continued development of the bitcoin network through our activities in the financial markets, advocacy and technology innovation. As an operating business, we are able to use cashflows as well as proceeds from equity and debt financings to accumulate bitcoin, which serves as our primary treasury reserve asset. We also develop and provide industry-leading AI-powered enterprise analytics software that promotes our vision of Intelligence Everywhere, and are using our software development capabilities to develop bitcoin applications. We believe that the combination of our operating structure, bitcoin strategy and focus on technology innovation provides a unique opportunity for value creation. For more information about MicroStrategy, visit www.microstrategy.com.

MicroStrategy, MicroStrategy AI, Intelligence Everywhere, Intelligent Enterprise, and MicroStrategy Library are either trademarks or registered trademarks of MicroStrategy Incorporated in the United States and certain other countries. Other product and company names mentioned herein may be the trademarks of their respective owners.

This press release may include statements that may constitute "forward-looking statements," including estimates of future business prospects or financial results and statements containing the words "believe," "estimate," "project," "expect," "will," or similar expressions. Forward-looking statements inherently involve risks and uncertainties that could cause actual results of MicroStrategy Incorporated and its subsidiaries (collectively, the "Company") to differ materially from the forward-looking statements. Factors that could contribute to such differences include: fluctuations in the market price of bitcoin and any associated impairment charges that the Company may incur as a result of a decrease in the market price of bitcoin below the value at which the Company's bitcoins are carried on its balance sheet; gains or losses on any sales of bitcoins; changes in the accounting treatment relating to the Company's bitcoin holdings; changes in securities laws or other laws or regulations, or the adoption of new laws or regulations, relating to bitcoin that adversely affect the price of bitcoin or the Company's ability to transact in or own bitcoin; a decrease in liquidity in the markets in which bitcoin is traded; security breaches, cyberattacks, unauthorized access, loss of private keys, fraud or other circumstances or events that result in the loss of the Company's bitcoins; impacts to the price and rate of adoption of bitcoin associated with financial difficulties and bankruptcies of various participants in the digital asset industry; the level and terms of the Company's substantial indebtedness and its ability to service such debt; the extent and timing of market acceptance of the Company's new product offerings; continued acceptance of the Company's other products in the marketplace; the Company's ability to recognize revenue or deferred revenue through delivery of products or satisfactory performance of services; the timing of significant orders; delays in or the inability of the Company to develop or ship new products; customers continuing to shift from a product license model to a cloud subscription model, which may delay the Company's ability to recognize revenue; fluctuations in tax benefits or provisions; changes in the market price of bitcoin as of period-end and their effect on our deferred tax assets and related valuation allowance; other potentially adverse tax consequences; competitive factors; general economic conditions, including levels of inflation and interest rates; currency fluctuations; and other risks detailed in MicroStrategy's registration statements and periodic reports filed with the Securities and Exchange Commission ("SEC"). The Company undertakes no obligation to update these forward-looking statements for revisions or changes after the date of this release.

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