Bitcoin focused MicroStrategy Announces Separation of Chairman, CEO Roles, Second Q2 2022 Financial Results

MicroStrategy Incorporated (Nasdaq: MSTR), which claims to be the largest independent publicly-traded business intelligence company, announced that, as of August 8, 2022, Michael Saylor will “assume the new role of Executive Chairman” and Phong Le, the Company’s President, will also serve as the Company’s new Chief Executive Officer and as a member of the Board of Directors.”

Saylor will “remain the Chairman of the Board of Directors and an executive officer of the company.”

Michael Saylor has “served as Chief Executive Officer and Chairman of the Board since founding MicroStrategy in 1989 and taking it public in 1998.”

Under Saylor’s leadership, MicroStrategy claims it has become “a global leader in business intelligence, serving the largest most respected enterprises and government organizations in the world.”

It has also been “a technology pioneer in the fields of relational, web, mobile, and cloud analytics.”

MicroStrategy recently became “the first publicly traded company to adopt bitcoin,” which they describe as “a revolutionary financial technology.” BTC serves as  the firm’s “primary treasury reserve asset.”

As Executive Chairman, Saylor will “focus primarily on innovation and long-term corporate strategy, while continuing to provide oversight of the company’s bitcoin acquisition strategy as head of the Board’s Investments Committee.”

Saylor stated:

“I believe that splitting the roles of Chairman and CEO will enable us to better pursue our two corporate strategies of acquiring and holding bitcoin and growing our enterprise analytics software business. As Executive Chairman I will be able to focus more on our bitcoin acquisition strategy and related bitcoin advocacy initiatives, while Phong will be empowered as CEO to manage overall corporate operations.” 

Phong Le has “served as President since July 2020 and has also served in various other senior executive positions since joining MicroStrategy in 2015, including Chief Financial Officer and Chief Operating Officer.”

Le has successfully “managed the operations of the company, delivering one of the best operational and financial years in the history of the company’s software business in 2021.”

He has successfully “led the transition of the software business to the cloud, driven growth in enterprise and embedded analytics, and led the implementation of the Company’s pioneering bitcoin acquisition strategy.”

Le has “a passion for engaging with customers and employees, and has built a high-performing, experienced, and stable leadership team.” As President & Chief Executive Officer, Le will “lead the day- to-day execution of the Company’ corporate strategies and manage all business operations.”

Le remarked:

“I’m honored and excited to continue leading this truly innovative organization, as President & CEO. Our people and our brand carry incredible momentum. I would like to reinforce our commitment to our customers, shareholders, partners and employees, and I look forward to leading the organization for the long-term health and growth of our enterprise software and bitcoin acquisition strategies.”

The company also announced financial results “for the second quarter of its fiscal year 2022, or the three month period ended June 30, 2022.”

Le commented:

“We continue to see the durability of our enterprise analytics business and the attractiveness of our cloud platform in our results this past quarter. With total revenue growth on a constant currency basis, and 36% year-over-year growth in subscription services revenues, our business remains resilient even in light of the continuing macroeconomic uncertainties.”

Second Quarter 2022 Financial Highlights

  • Revenues: Total revenues for the second quarter of 2022 were $122.1 million, a 2.6% decrease, or a 1.7% increase on a non-GAAP constant currency basis, compared to the second quarter of 2021.
  • Gross Profit: Gross profit for the second quarter of 2022 was $96.9 million, representing a 79.4% gross margin, compared to a gross profit of $102.3 million, representing a gross margin of 81.6%, for the second quarter of 2021.
  • Operating Expenses: Operating expenses for the second quarter of 2022 were $1.015 billion, a 96.5% increase compared to the second quarter of 2021. Operating expenses include impairment losses on MicroStrategy’s digital assets, which were $917.8 million during the second quarter of 2022, compared to $424.8 million in the second quarter of 2021.
  • Loss from Operations and Net Loss: Loss from operations for the second quarter of 2022 was $918.1 million, compared to $414.2 million for the second quarter of 2021. Net loss for the second quarter of 2022 was $1.062 billion, or $94.01 per share on a diluted basis, as compared to $299.3 million, or $30.71 per share on a diluted basis, for the second quarter of 2021. Digital asset impairment charges of $917.8 million and $424.8 million for the second quarter of 2022 and 2021, respectively, were reflected in these amounts.
  • Cash and Cash Equivalents: As of June 30, 2022, MicroStrategy had cash and cash equivalents of $69.4 million, as compared to $63.4 million as of December 31, 2021, an increase of $6.0 million.
  • Digital Assets: As of June 30, 2022, the carrying value of MicroStrategy’s digital assets (comprised of approximately 129,699 bitcoins) was $1.988 billion, which reflects cumulative impairment losses of $1.989 billion since acquisition and an average carrying amount per bitcoin of approximately $15,326. As of June 30, 2022, the original cost basis and market value of MicroStrategy’s bitcoin were $3.977 billion and $2.451 billion, respectively, which reflects an average cost per bitcoin of approximately $30,664 and a market price per bitcoin of $18,895.02, respectively.

Charges related to the firm’s relatively large Bitcoin position doesn’t really tell MicroStrategy’s complete story, according to Mark Palmer, an analyst at BTIG who has referred to it “accounting noise.”

Based on Generally Accepted Accounting Principles (GAAP), MicroStrategy needs to account for its BTC purchases by reporting their initial cost with a mark down if BTC’s value drops.

Under such rules, the cryptocurrency’s value from this past quarter’s low to its end may not be reported unless the digital asset gets sold – which means the impairment charge is indicative of BTC’s lowest value during the last quarter, and not its actual market value at end of Q2 2022

Palmer added:

“The reality is that the overwhelming driver, the value of MicroStrategy is the company’s Bitcoin holdings. The driver of that, of course, is the price of Bitcoin at any point in time.”

For more details on this update, check here.

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