MicroStrategy’s Q1 Profit Beats Expectations Amid Strong Bitcoin Belief

Business intelligence firm, MicroStrategy Incorporated, released its Q1 2023 financial report on Monday, May 1, 2023. The report indicates the company’s belief in Bitcoin and the value of its cryptocurrency holdings, as well as an increase in total revenues, product licenses and subscription services, gross profit, and cash reserves.

Growth Drivers and Business Strategies

MicroStrategy’s durable enterprise BI platform and strong customer base drove growth in total revenue during Q1 2023. The company’s conviction in Bitcoin strategy remained strong, with the digital asset environment continuing to mature. MicroStrategy CEO, Phong Le, expressed excitement at returning to an in-person MicroStrategy World event to showcase the MicroStrategy One platform’s competitive advantages and highlight key areas of product innovation.

Capital Structure Strengthened

In Q1 2023, MicroStrategy made strategic moves to manage its capital structure by reducing leverage through the full repayment of its Bitcoin-backed loan. The company added 7,500 Bitcoin to its holdings during the quarter, bringing its total to 140,000.

Financial Highlights of Microstrategy

The report shows a 2.2% increase in total revenues, reaching $121.9 million for Q1 2023, compared to the same period in 2022. Product licenses and subscription services revenues for Q1 2023 were $36.2 million, an increase of 23.4%, while product support revenues were $65.5 million, a 2.5% decrease. Other services revenues were $20.2 million, an 11.2% decrease.

The company recorded a gross profit of $94.0 million, a 77.1% gross margin, compared to $93.6 million in Q1 2022, representing a 78.5% gross margin.

Operating expenses were $114.3 million, a 56.6% decrease compared to Q1 2022, with impairment losses on MicroStrategy’s digital assets at $18.9 million during the first quarter of 2023, compared to $170.1 million in Q1 2022.

MicroStrategy reported a net income of $461.2 million, or $31.79 per share on a diluted basis, compared to a net loss of $130.8 million in Q1 2022.

Digital Assets and Repayment of 2025 Secured Term Loan

As of March 31, 2023, MicroStrategy held digital assets worth $2.000 billion, comprising approximately 140,000 Bitcoins.

This figure reflects cumulative impairment losses of $2.172 billion since acquisition and an average carrying amount per Bitcoin of about $14,289. As of the same date, the original cost basis and market value of the company’s Bitcoin holdings were $4.172 billion and $3.986 billion, respectively. The average cost per Bitcoin was about $29,803, while the market price per Bitcoin was $28,468.44.

On March 24, 2023, MacroStrategy LLC, a wholly-owned subsidiary of MicroStrategy, made a full repayment, satisfaction, and discharge of the 2025 Secured Term Loan. The amount paid was approximately $161.0 million.