The chart attached above provides a breakdown of MicroStrategy revenue by segment. MicroStrategy is a leading worldwide provider of enterprise analytics and mobility software. Their mission is to provide enterprise customers with a world-class software platform and expert services so they can deploy unique intelligence applications.
MicroStrategy Revenue By Segment
|Revenue By Segment||Q1 2018 (Thousand)|
MicroStrategy manages its business in one reportable operating segment. The Company’s one reportable operating segment is engaged in the design, development, marketing, and sales of its software platform through licensing arrangements and cloud-based subscriptions and related services. The chart attached above provides a breakdown of MicroStrategy revenue by segment within its operating categories. It primarily sells goods and services that fall into the categories discussed below.
Product Licenses: The Company sells different types of on-premise business intelligence software, licensed on a term or perpetual basis. Although license arrangements are sold with product support, the software is fully functional at the outset of the arrangement and is considered a distinct performance obligation. Revenue from product license sales is recognized when control of the software license has transferred to the customer, which is the later of delivery or commencement of the license term. The Company may also sell through resellers and original equipment manufacturers (“OEMs”) who purchase the Company’s products for resale. In reseller arrangements, revenue is recognized when control of the product is transferred to the end user. In OEM arrangements, revenue is recognized upon delivery to the OEM.
Subscription Services: The Company also sells access to its software through a subscription-based cloud offering, wherein customers access the software through a third-party hosting service. Control of the software itself does not transfer to the customer under this arrangement and is not considered a separate performance obligation. Subscription services are regularly sold on a standalone basis with telephone support only. Revenue related to this subscription service is recognized on a straight-line basis over the contract period, which is the period over which the customer has continuous access to the software.
Product Support: In all license arrangements, customers are required to purchase a standard product support package and may also purchase a premium product support package for a fixed annual fee. All product support packages include both technical support and when-and-if-available software upgrades, which are treated as a single performance obligation as they are considered a series of distinct services that are substantially the same and have the same duration and measure of progress. Revenue from product support is recognized on a straight-line basis over the contract period, which is the period over which the customer has continuous access to product support.
Consulting Services: Microstrategy Revenue by Segment chart reveals that a small portion of its revenue comes from other services. It sells consulting services to help customers plan and execute deployment of the Company’s software. Customers are not required to use consulting services to fully benefit from the software license. Consulting services are regularly sold on a standalone basis and either (i) prepaid upfront or (ii) sold on a time and materials basis. Consulting arrangements are each considered separate performance obligations because they do not integrate with each other or with other products and services to deliver a combined output to the customer, do not modify or customize (or are not modified or customized by) each other or other products and services, and do not affect the customer’s ability to use the other consulting offerings or other products and services. Revenue under consulting arrangements is recognized over time as services are delivered. For time and materials-based consulting arrangements, the Company has elected the practical expedient of recognizing revenue upon invoicing since the invoiced amount corresponds directly to the value of the Company’s service to date.
Education Services: The Company sells various education and training services to its customers. Education services are sold on a standalone basis under three different arrangements: (i) prepaid bulk training units that may be redeemed on training courses based on standard redemption rates, (ii) an annual subscription to unlimited training courses, and (iii) individual courses purchased a la carte. Education arrangements are each considered separate performance obligations because they do not integrate with each other or with other products and services to deliver a combined output to the customer, do not modify or customize (or are not modified or customized by) each other or other products and services, or affect the customer’s ability to use the other education offerings or other products and services. Revenue on prepaid bulk training units and individual course purchases are recognized when the courses are delivered. Revenue on the annual subscription is recognized on a straight-line basis over the contract period, which is the period over which the customer has continuous access to unlimited training courses.
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