Good day, ladies and gentlemen, and welcome to the MicroStrategy Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Michael Saylor, Chairman, President and CEO. Sir, you may begin.

Hello. This is Michael Saylor. I'm Chairman, President and CEO of MicroStrategy. I'd like to welcome all of you to today's conference call regarding our 2018 fourth quarter financial results. I'm here with our Chief Operating Officer and CFO, Phong Le. First, I'd like to pass the floor to Phong, who's going to read the safe harbor statement and make some comments on our results for the fourth quarter.

Thank you, Michael, and good evening, everyone. Various remarks that we may make about our future expectations, plans and prospects may constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recent quarterly report on Form 10-Q filed with the SEC. These statements reflect our views only as of today and should not be relied upon as representing our views as of any subsequent date. We anticipate that subsequent events and developments may cause the company's views to change. While the company may elect to update these forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so. Also during the course of today's call, we will refer to certain non-GAAP financial measures. There is a reconciliation schedule showing GAAP versus non-GAAP results currently available in our press release issued after the close of market today, which is located on our website at www.microstrategy.com. We entered 2018 with a plan to invest across sales, marketing, customers, technology and our people with the purpose of growing revenue across our business. We feel we executed well on our investment plan and are on the path to revenue growth. In sales, we strengthened our field resources placing field marketing, business development and global alliances people around the world. We also added new head of worldwide sales in April and head of international sales in December. In marketing, we launched a new campaign focused on three core product features, federated analytics, transformational mobility and HyperIntelligence; and three core concepts for the platform, moderated analytics, open architecture and an enterprise platform. We added a…

Thank you, Phong. I would like to elaborate on Phong's comments with a few thoughts about 2018 and then speak about our plans for 2019. As I look back on 2018, I think we made great progress, strengthening the talent pool at MicroStrategy, adding hundreds of very, very talented professionals all around the world, including a large pool of talented engineers in the technology organization. And I think that was a great success for the company. I'm also pleased with the way we strengthened our executive team in 2018, adding a new head of sales, a new head of marketing, a new head of IT, a new head of worldwide consulting, a new head of international sales, a new head of Latin America and a new head of international -- of enterprise support, and a new head of direct marketing and demand generation. They were all seminal achievements for the company. We're extraordinarily pleased with the talent that we've been able to attract and the engagement of these new executives, and they're already making a big difference here at the firm. In 2018, we also made good strides strengthening our systems. And although, it's not without a few growing pains, I think, the implementation of our CPQ system and new quotation system and sales force was a big step forward in integrating all of our sales and marketing systems together in a common environment. And we also implemented Workday, which will lay down a very strong modern platform for all of our HR systems going forward. As Phong mentioned, we delivered MicroStrategy 2019 at the end of the year, and we dramatically strengthened our product offering, the biggest product release in three years. And we returned $111 million of capital to the shareholders and that's also a material achievement. We're…

[Operator Instructions]. And our first question comes from the line of Karl Keirstead with Deutsche Bank.

This is Austin Dietz on for Karl. Phong, I had a couple questions for you. Just first on the 2019 platform release, was there any pause in customer buying ahead of the early 2019 platform release this quarter? And then second, how should we think about the revenue contribution or a revenue lift from the 2019 platform release? Could it be a little bit more pronounced than the first half? Perhaps, if there is one, would it be a little more, kind of, gradual, kind of, throughout the year? And then I had a follow-up.

Austin, thanks for the question. I think it's fair to say that in the second half of 2018, we saw some customers who may have taken a little time on their purchasing decision to see the 2019 platform and test it out. I don't know that I can quantify the amount that, that impacted our second half revenue in 2018. As far as 2019 goes, we started to aggressively market our 2019 product starting on January 7, which was our external launch. We have our MicroStrategy world event coming up next week in Phoenix, Arizona, which is another major milestone for us to be able to communicate to our customers about the 2019 platform. And so I'd expect over the course of the year, as we upgrade customers and we get our marketing message out, that we should see uplift in terms of our product license revenue.

I agree. And then the domestic product license business, I think it had been declining plus 20% in the past few quarters, but certainly it flipped this quarter. So maybe just what seemed to change, kind of, in the quarter, what you'd maybe call out there?

We had good large deal activity in North America. And it obviously was a positive for us to see that business start to rebound. I wouldn't call out anything specific about Q4. I think we're starting to see the team get their legs back underneath them and see some of the leadership hires and some of the management hires and account executives that we brought in, whether it'd be 12 or 24 months ago, start to see their traction take place. So overall, it was a positive quarter for North America for sure.

[Operator Instructions]. And our next question comes from the line of Tyler Radke with Citi.

Phong or Michael, I was wondering if you could comment on your outlook for 2019. Do you -- you've obviously made a lot of investments. Your headcount is up nicely. It sounds like you're getting things going in terms of execution here in North America. And you have a major product release coming. So what can we expect in terms of license revenue growth in 2019?

Yes, I think, Tyler, as I mentioned in my prepared remarks and Mike reiterated, we're very optimistic about the prospects for the year 2019 for some of the reasons you mentioned. 2018 was, as we had stated at the beginning of the year, our investment year. And you saw that both in our cost and our operating income. As I think we entered 2019, we're looking to grow product license revenue, frankly, revenue across all our major line items. I'm not going to comment specifically as to the magnitude of the growth. But we did mention we'd like to see revenue grow for the overall business. And we'll start to see operating margin expansion as our investment activity and our investment acceleration that you saw in 2018 start to scale back a little bit.

Great. And a follow-up on maintenance revenue. I know you talked about some invoicing delays and changes based on the new system as well as some currency headwinds. I'm just curious from a -- if we look at deferred maintenance revenue, it looks like that was down, on a year-over-year basis, kind of for three quarters now. Is there any way you can, kind of, quantify what those impacts were? I mean, what would have maintenance revenue or maintenance deferred grown excess in tax? And do you expect maintenance revenue to return to a growth rate -- nice growth rate next year?

Yes, I think on a constant currency basis, Tyler, for the full year, we saw our maintenance revenues grow by about 2% year-over-year on a full year basis. And any particular quarter, there's some ups and downs related to when we close large maintenance deals. So I wouldn't read too much into the fact that we were, on a constant currency basis, flat year-over-year in Q4. And your question in terms of deferred product support revenue and deferred revenue overall, there were two main factors that I stated. One is a portion of that deferred revenue that's in foreign currency saw a depreciation just due to the strengthening of the dollar. And the second piece, as I mentioned, is related to a system that we put in place that caused us to delay a little bit our ability to send out quotes and invoice, and as a result, put deferred revenue on the balance. I don't expect that to be a long-term effect. So I don't expect it to affect our ability to collect the maintenance from our customers and ultimately, recognize and receive product support revenue. But I think over the course of the first half of the year, 2019, you'll see that amount start to stabilize on a year-over-year basis again.

Okay. And last question for me. I know you addressed briefly the buyback in the quarter. But just curious what the motivation was behind that. I think in the past you've talked about potentially deploying capital as you get more confidence in the business and the business stabilizing. So curious what you're seeing there. And what your outlook for buybacks going forward is?

It's a good question, Tyler. And I appreciate the curiosity. As you know and we've talked about in the past, there's quite a few different factors that would address our decision making on the buyback, and I wouldn't point to any particular factor. I mean, the most important part is, we wanted to return capital to our investors. And so that's what we did, and you'll see in our 10-K a more fulsome disclosure on that as we file that and in future SEC filings.

And ladies and gentlemen, this concludes today's Q&A session. I would now like to turn the call back over to Mr. Saylor for any closing remarks.

I'd like to thank everybody for being with us today, and we appreciate your support. We look forward to speaking with you again in three months. All the best.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.