UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-24435

MICROSTRATEGY INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

51-0323571

(I.R.S. Employer

Identification Number)

1850 Towers Crescent Plaza, Tysons Corner, VA

(Address of Principal Executive Offices)

22182

(Zip Code)

(703) 848-8600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on which Registered
Class A common stock, par value $0.001 per share	MSTR	The Nasdaq Global Select Market

Indicate by check mark whether the registrant,: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 25, 2023, the registrant had 12,121,369 and 1,964,025 shares of class A common stock and class B common stock outstanding, respectively.

MICROSTRATEGY INCORPORATED

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (unaudited)	1
	Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	1
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022	2
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2023 and 2022	3
	Consolidated Statements of Stockholders’ Equity (Deficit) as of June 30, 2023	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION	46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 5.	Other Information	73
Item 6.	Exhibits	73

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	June 30,			December 31,
	2023			2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	65,968		$	43,835
Restricted cash		2,085			7,033
Accounts receivable, net		121,901			189,280
Prepaid expenses and other current assets		19,680			24,418
Total current assets		209,634			264,566
Digital assets		2,323,252			1,840,028
Property and equipment, net		30,507			32,311
Right-of-use assets		58,264			61,299
Deposits and other assets		22,421			23,916
Deferred tax assets, net		719,026			188,152
Total assets	$	3,363,104		$	2,410,272
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable, accrued expenses, and operating lease liabilities	$	33,660		$	42,976
Accrued compensation and employee benefits		41,492			53,716
Accrued interest		1,493			2,829
Current portion of long-term debt, net		468			454
Deferred revenue and advance payments		195,817			217,428
Total current liabilities		272,930			317,403
Long-term debt, net		2,177,974			2,378,560
Deferred revenue and advance payments		11,244			12,763
Operating lease liabilities		63,814			67,344
Other long-term liabilities		17,826			17,124
Deferred tax liabilities		198			198
Total liabilities		2,543,986			2,793,392
Commitments and Contingencies
Stockholders’ Equity (Deficit)
Preferred stock undesignated, $0.001 par value; 5,000 shares authorized; no shares issued or outstanding		0			0
Class A common stock, $0.001 par value; 330,000 shares authorized; 20,803 shares issued and 12,119 shares outstanding, and 18,269 shares issued and 9,585 shares outstanding, respectively		21			18
Class B convertible common stock, $0.001 par value; 165,000 shares authorized; 1,964 shares issued and outstanding, and 1,964 shares issued and outstanding, respectively		2			2
Additional paid-in capital		2,559,268			1,841,120
Treasury stock, at cost; 8,684 shares and 8,684 shares, respectively		(782,104	)		(782,104	)
Accumulated other comprehensive loss		(13,150	)		(13,801	)
Accumulated deficit		(944,919	)		(1,428,355	)
Total stockholders’ equity (deficit)		819,118			(383,120	)
Total liabilities and stockholders’ equity (deficit)	$	3,363,104		$	2,410,272

The accompanying notes are an integral part of these Consolidated Financial Statements.

1

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues:
Product licenses	$	15,522		$	20,129		$	32,934		$	36,642
Subscription services		19,878			14,017			38,688			26,862
Total product licenses and subscription services		35,400			34,146			71,622			63,504
Product support		66,081			66,521			131,562			133,672
Other services		18,919			21,406			39,131			44,174
Total revenues		120,400			122,073			242,315			241,350
Cost of revenues:
Product licenses		444			431			978			908
Subscription services		7,216			5,498			15,072			10,908
Total product licenses and subscription services		7,660			5,929			16,050			11,816
Product support		5,816			5,127			11,584			10,318
Other services		13,645			14,148			27,428			28,747
Total cost of revenues		27,121			25,204			55,062			50,881
Gross profit		93,279			96,869			187,253			190,469
Operating expenses:
Sales and marketing		37,660			36,862			73,766			70,102
Research and development		29,354			31,790			60,712			65,313
General and administrative		28,830			28,502			56,736			55,208
Digital asset impairment losses		24,143			917,838			43,054			1,087,929
Total operating expenses		119,987			1,014,992			234,268			1,278,552
Loss from operations		(26,708	)		(918,123	)		(47,015	)		(1,088,083	)
Interest expense, net		(11,095	)		(13,187	)		(26,025	)		(24,226	)
Gain on debt extinguishment		0			0			44,686			0
Other (expense) income, net		(250	)		5,120			(1,693	)		7,345
Loss before income taxes		(38,053	)		(926,190	)		(30,047	)		(1,104,964	)
(Benefit from) provision for income taxes		(60,296	)		136,108			(513,483	)		88,085
Net income (loss)	$	22,243		$	(1,062,298	)	$	483,436		$	(1,193,049	)
Basic earnings (loss) per share (1)	$	1.68		$	(94.01	)	$	41.18		$	(105.64	)
Weighted average shares outstanding used in computing basic earnings (loss) per share		13,247			11,300			11,739			11,294
Diluted earnings (loss) per share (1)	$	1.52		$	(94.01	)	$	33.56		$	(105.64	)
Weighted average shares outstanding used in computing diluted earnings (loss) per share		16,095			11,300			14,534			11,294

(1) Basic and fully diluted earnings (loss) per share for class A and class B common stock are the same.

The accompanying notes are an integral part of these Consolidated Financial Statements.

2

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023		2022
	(unaudited)			(unaudited)			(unaudited)		(unaudited)
Net income (loss)	$	22,243		$	(1,062,298	)	$	483,436	$	(1,193,049	)
Other comprehensive (loss) income, net of applicable taxes:
Foreign currency translation adjustment		(87	)		(4,113	)		651		(6,122	)
Total other comprehensive (loss) income		(87	)		(4,113	)		651		(6,122	)
Comprehensive income (loss)	$	22,156		$	(1,066,411	)	$	484,087	$	(1,199,171	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

3

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, unaudited)

				Class A				Class B Convertible				Additional									Accumulated Other			(Accumulated Deficit)
				Common Stock				Common Stock				Paid-in			Treasury Stock						Comprehensive			Retained
	Total			Shares		Amount		Shares		Amount		Capital			Shares			Amount			Loss			Earnings
Balance at January 1, 2022	$	978,958			18,006	$	18		1,964	$	2	$	1,727,143			(8,684	)	$	(782,104	)	$	(7,543	)	$	41,442
Net loss		(130,751	)		0		0		0		0		0			0			0			0			(130,751	)
Other comprehensive loss		(2,009	)		0		0		0		0		0			0			0			(2,009	)		0
Issuance of class A common stock upon exercise of stock options		288			2		0		0		0		288			0			0			0			0
Issuance of class A common stock under employee stock purchase plan		2,805			7		0		0		0		2,805			0			0			0			0
Issuance of class A common stock upon vesting of restricted stock units, net of withholding taxes		(501	)		3		0		0		0		(501	)		0			0			0			0
Share-based compensation expense		14,209			0		0		0		0		14,209			0			0			0			0
Balance at March 31, 2022	$	862,999			18,018	$	18		1,964	$	2	$	1,743,944			(8,684	)	$	(782,104	)	$	(9,552	)	$	(89,309	)
Net loss		(1,062,298	)		0		0		0		0		0			0			0			0			(1,062,298	)
Other comprehensive loss		(