MicroStrategy Inc. (NASDAQ:MSTR) Q4 2019 Earnings Conference Call - Final Transcript

Jan 28, 2020 • 05:00 pm ET

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MicroStrategy Inc. (NASDAQ:MSTR) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] And our first question will come from the line of Hamed Khorsand from BWS Financial. You may begin.

Analyst
Vahid Khorsand

Hi, this is actually Vahid calling in for Hamed. First question, on subscription revenue, could you provide some color on whether the subscription revenue is down quarter-over-quarter and on the cloud growth?

Executive
Lisa Mayr

So, subscription revenue is up just slightly on a constant currency basis and then we're also, as one of our indicators, we look at the deferred revenue. So, you can look at the different revenue related to subscription revenues, which is up year-over-year. So, was your question around sequential or year-over-year?

Analyst
Vahid Khorsand

Sequential.

Executive
Lisa Mayr

Yeah. So, as I mentioned in my prepared remarks, in Q3, we did have a one-time catch-up, so you saw that increase in Q3 and then back down in Q4. So we had a late renewal for our customer that we caught up for in Q3. So that was a bit of a one-time pickup. So it is where we expected it to be.

Analyst
Vahid Khorsand

Okay. And what is the resistance from customers you're seeing from upgrading to MicroStrategy?

Executive
Phong Le

We're not seeing resistance from customers upgrading. So we have about 740 customers who have upgraded and that represents somewhere between 20% and 25% of our total customers and a greater percentage of our enterprise customers have upgraded to 2019.

As with any upgrade cycle, our customers see it to be a large effort. And what we've done is by moving to an annual release cycle, which we started in 2019 with the 2019 release and going forward with 2020 and 2021, we've reduced significantly the barrier to upgrade. So, I think we're going to train our customers overtime that an upgrade is something very simple and straightforward, as opposed to what they're used to historically in the enterprise software industry. As we move more customers to cloud to the upgraded experience, is generally completed by us and the customer only has to do regression testing. So, I'm pleased with the progress of our upgrade cycle and I think we'll continue to accelerate it over time.

Analyst
Vahid Khorsand

Let me ask you that question in a different way, but I think you hit on the answer, you're probably going to repeat. But if you're rolling out a new strategy of doing upgrades on an annual basis, can customers maintain the prior year's product and not upgrade? And essentially, how do you get them to upgrade over?

Executive
Phong Le

Yeah. A customer can maintain their previous year release. Typically, we provide product support for products as much as three years old. The primary reason a customer is going to want to upgrade to the latest release, whether it'd be 2019 or now 2020 is that, product will perform faster. Some of our benchmark show that certain reports and certain dashboards perform two times to three times faster with our new product. And they also can avail themselves a new functionality as part of product support, so some of the things that Mike will mention