MicroStrategy Incorporated reports 91.3% EBITDA decline in 2018 and 1.2% Revenue decline
01/29/2019 • About MicroStrategy Incorporated (
$MSTR) • By InTwits
MicroStrategy Incorporated reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is declining: 1.5% in 2018 vs. 17.6% in 2017 vs. 5.2% in 2014
- EBITDA Margin is quite volatile: 1.5% in 2018, 17.6% in 2017, 25.2% in 2016, 29.3% in 2015, 5.2% in 2014
- MicroStrategy Incorporated has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.7%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: $7m in 2018, $4m in 2017, $2m in 2016, $13m in 2015, $21m in 2014
- The company has potentially unprofitable business model: ROIC is 0.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
MicroStrategy Incorporated's Revenue decreased slightly on 1.2%. Revenue decline showed acceleration in 18Q4 - it was 3.3% YoY. During the last 5 years Revenue growth bottomed in 2015 at -8.6% and was accelerating since that time. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin dropped on 16.1 pp from 17.6% to 1.5% in 2018. During the last 5 years EBITDA Margin topped in 2015 at 29.3% and was declining since that time.
Gross Margin decreased slightly on 0.81 pp from 80.8% to 80.0% in 2018. During the last 5 years Gross Margin topped in 2016 at 81.9% and was declining since that time. SG&A as a % of Revenue increased on 8.0 pp from 50.7% to 58.6% in 2018. During the last 5 years SG&A as a % of Revenue bottomed in 2015 at 43.3% and was growing since that time.
Net Income margin increased slightly on 0.91 pp from 3.6% to 4.5% in 2018.
Investments (CAPEX, working capital and M&A)
MicroStrategy Incorporated's CAPEX/Revenue was 1.4% in 2018. CAPEX/Revenue decreased slightly on 1.1 pp from 2.5% in 2015 to 1.4% in 2018. Average CAPEX/Revenue for the last three years was 0.87%. MicroStrategy Incorporated invested a big chunk of EBITDA (89.1%) to CAPEX which didn't stop revenue from falling. During the last 5 years CAPEX as a % of Revenue bottomed in 2016 at 0.46% and was growing since that time.
Return on investment
The company operates at low ROIC (0.7%) and ROE (4.0%). ROIC dropped on 12.1 pp from 12.8% to 0.71% in 2018. ROE increased slightly on 0.82 pp from 3.1% to 4.0% in 2018. During the last 5 years ROIC topped in 2015 at 34.2% and was declining since that time.
Leverage (Debt)
The company has no debt. Cash dropped on 73.8%.
Valuation and dividends
The company's trades at EV/EBITDA 140.5x and P/E 52.9x.
Management team
The company's CEO Michael J Saylor is a founder and has spent 3 years with the company.
Financial and operational results
FY ended 12/31/2018
MicroStrategy Incorporated ($MSTR) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 579.8 | 529.9 | 513.6 | 503.8 | 497.6 | -1.2% |
| Gross Profit | 444.6 | 428.8 | 420.4 | 407.2 | 398.1 | -2.2% |
| SG&A | 321.4 | 229.3 | 237.7 | 255.2 | 291.7 | 14.3% |
| EBITDA | 30.4 | 155.2 | 129.5 | 88.8 | 7.7 | -91.3% |
| Net Income | 5.0 | 105.9 | 92.2 | 18.2 | 22.5 | 23.7% |
Balance Sheet
|
|---|
| Cash | 146.9 | 292.3 | 402.0 | 420.2 | 109.9 | -73.8% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 20.8 | 13.1 | 2.3 | 4.0 | 6.8 | 71.9% |
Ratios
|
|---|
| Revenue growth | 0.7% | -8.6% | -3.1% | -1.9% | -1.2% | |
| EBITDA growth | -33.7% | 410.7% | -16.6% | -31.4% | -91.3% | |
|
|---|
| Gross Margin | 76.7% | 80.9% | 81.9% | 80.8% | 80.0% | -0.8% |
| EBITDA Margin | 5.2% | 29.3% | 25.2% | 17.6% | 1.5% | -16.1% |
| SG&A, % of revenue | 55.4% | 43.3% | 46.3% | 50.7% | 58.6% | 8.0% |
| Net Income Margin | 0.9% | 20.0% | 18.0% | 3.6% | 4.5% | 0.9% |
| CAPEX, % of revenue | 3.6% | 2.5% | 0.5% | 0.8% | 1.4% | 0.6% |
|
|---|
| ROIC | 1.6% | 34.2% | 22.0% | 12.8% | 0.7% | -12.1% |
| ROE | 1.6% | 27.2% | 18.3% | 3.1% | 4.0% | 0.8% |
| Net Debt/EBITDA | -4.8x | -1.9x | -3.1x | -4.7x | -14.3x | -9.6x |
MicroStrategy Incorporated ($MSTR) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 123 | 121 | 122 | 132 | | 0.6% | 1.2% | -3.1% | -3.3% |
| Net Income | 2 | 5 | 13 | 3 | | -89.2% | -51.5% | -30.2% | |
Balance Sheet
|
|---|
| Cash | 152 | 90 | 112 | 110 | | -57.6% | -76.2% | -71.0% | -73.8% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 79.5% | 79.2% | 80.9% | 80.4% | | -1.6% | -0.3% | 0.2% | -1.5% |
| Net Income Margin | 1.4% | 4.0% | 10.4% | 2.5% | | -11.4% | -4.3% | -4.0% | 21.2% |
Peers in Application Software
Below you can find MicroStrategy Incorporated benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (151 companies) | -43.3% | 14.0% | 14.3% | 15.7% | 15.2% |
|---|
| MicroStrategy Incorporated ($MSTR) | | -8.6% | -3.1% | -1.9% | -1.2% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (150 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.7% |
|---|
| MicroStrategy Incorporated ($MSTR) | 76.7% | 80.9% | 81.9% | 80.8% | 80.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (152 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| MicroStrategy Incorporated ($MSTR) | 5.2% | 29.3% | 25.2% | 17.6% | 1.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (153 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| MicroStrategy Incorporated ($MSTR) | 3.6% | 2.5% | 0.5% | 0.8% | 1.4% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (179 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -10.4% |
|---|
| MicroStrategy Incorporated ($MSTR) | 1.6% | 34.2% | 22.0% | 12.8% | 0.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.2x | -0.9x | -0.9x | -0.8x | -0.6x |
|---|
| MicroStrategy Incorporated ($MSTR) | -4.8x | -1.9x | -3.1x | -4.7x | -14.3x |
