MicroStrategy’s adjusted earnings beat forecasts with bitcoin holdings little changed
MicroStrategy’s ( MSTR ) adjusted third-quarter earnings beat expectations on Tuesday, even as revenue fell short of forecasts. Its crypto holdings this quarter also played a minor role.
The company reported adjusted earnings of 96 cents per share, versus the Bloomberg consensus estimate of 44 cents per share. Revenue came in at $125.4 million, slightly lower than the $127.25 million analysts were expecting.
The book value of MicroStrategy’s digital assets was $1.99 billion, reflecting a cumulative loss of $1.99. billion since first acquiring bitcoin in August 2020 and is little changed for the quarter.
MicroStrategy shares rose 3% in aftermarket after sale 3.8% on the day. Through Tuesday’s closing time, the share is down 52.7% year to date.
Losses in the quarter totaled $93.9 million, with $93.2 million attributed to operating costs and $700,000 to bitcoin holdings, a far cry from the $917 million writedown for bitcoin in the previous quarter.
Headquartered in Northern Virginia, the enterprise cloud platform is now the largest corporate bitcoin holder and faced headwinds against the falling price of bitcoin last quarter. BTC holdings are currently incurring 50% unrealized loss over the total investment in the cryptocurrency.
“We incurred a minimal impairment charge for bitcoin as bitcoin prices were stable in the third quarter and were encouraged by the FASB’s recent announcement of support for fair value accounting for bitcoin,” said Andrew Kang, CFO of MicroStrategy.
“If finally adopted and implemented, we believe that fair value accounting will improve the current unfavorable intangible accounting treatment applicable to bitcoin holdings and will promote further institutional use of bitcoin as an asset class,” Kang said in the release.
Based on generally accepted accounting principles (GAAP), MicroStrategy must account for its bitcoin purchases by recording their original cost with a mark-down if the bitcoin’s value declines. Bitcoin’s year-to-date low was set in June, so the company’s third-quarter losses did little to dampen the asset’s hold.
While not reflective of the company’s bitcoin holdings at market value, the drop in value is a profit and loss risk for other public companies considering the same strategy, according to Mark Palmer, a senior equity analyst at BTIG.
But the practice is likely to change in the coming months as the Financial Accounting Standards Board (FASB) is in talks to propose changes to allow US-listed companies to account for digital assets at fair value.
MicroStrategy ended Q3 with approximately 130,000 bitcoins on its balance sheet, acquired at a total purchase price of $3.98 billion and an average price of $30.639 per bitcoin.
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Income: $125.25 million versus the consensus estimate of $127.25 million
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Adj. Earnings per share: $0.96 vs. the estimate of $0.44
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GAAP value of holdings of digital assets: $1.98 with $1.99 write down loss for a total of 130,000 bitcoins
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