Q3 2023 MicroStrategy Inc Earnings Call

Yeah.

[music] you have joined the meeting as an attendee and will be muted throughout the meeting.

Hello, everyone and good evening.

Actually judge Audia, Vice President of Investor Relations and Treasury at micro strategy I will be your moderator for Microstrategy 2023 tight quarter earnings Webinar before we proceed I haven't read the safe Harbor statement.

Some of the information we provide during todays call regarding our future expectations plans and prospects may constitute forward looking statements actual results may differ materially from these forward looking statements.

Various important factors.

The risk factors discussed in our most recent 10-Q filed with the SEC.

<unk> no obligation to update these forward looking statements, which speak only as of today.

During today's call, we will refer to certain non-GAAP financial measures reconciliations showing GAAP versus non-GAAP results.

In our earnings release and presentation, which were issued today and are available on our website Microstrategy dot com.

I would like to welcome you all to today's webinar and let you know that we will be taking questions using the Q&A feature at the bottom of your screen.

You can submit questions throughout the webinar and Michael Vaughan, our Andrew the answer questions at the end of the session.

Please be sure to provide yard name and your company's name when submitting your questions.

Now I will walk you through the agenda for today's call.

First folly will cover the business results for the third quarter of 2023.

Second Andrew.

Andrew Gangl covered the financial results for the third quarter of 2023.

Then Michael Saylor, who will provide a strategic review and discuss recent.

The coin market updates and lastly, we will open up to Q&A.

With that I will turn the call over to fondly president and CEO at micro strategy Tom.

Thank you <unk> Hello, everyone I'd like to welcome all of you to today's earnings Webinar I'll start with the highlights of our software business.

Total revenue was $129 $5 million, representing an increase of 3% year over year total.

Total software licenses revenues, which consists of total product licenses and subscription services revenues.

Consolidated statement of operations were $45 million, representing an increase of 16% year over year.

Philosophically or licenses revenues performance benefited from both increased adoption of our cloud platform and growth in product license revenues.

Subscription services revenue was $21 million, an increase of 28% year over year.

Our Q3 subscription billings growth was 17% year over year.

We achieved good revenue results in Q3 with year over year growth driven by our cloud business and a strong international license revenue quarter.

We plan to continue to drive growth in our recurring revenue model.

And to transition our business strategy and product offerings to a cloud native model, our focus will be on innovation at the intersection of artificial intelligence and business intelligence using our first to market advantage in the enterprise scale integration of AI and <unk> to grow revenue in the cloud.

I'm excited about the work we're doing in these areas and to share some updates with you on our progress.

We had a major period of innovation in the technology industry. We believe the next innovation is to change how the world does business, our digital money with a continuing development at bitcoin ecosystem and digital intelligence through AI.

The technological leaps that have occurred in the past year and generative they are real and we expect to be at the forefront of integrating AI would be I.

Micro strategy is well positioned to gain competitive leverage and win in both of these areas of growth.

<unk> mission for the past 30, plus years has been to enable intelligence everywhere for.

For our customers.

And with this mission ingrained in our corporate DNA through each major tech innovation, we have moved closer to accomplishing this goal.

Whether this was OLED technologies, our relational databases.

Implementing client based desktop VDI tools, introducing the semantic layer rolling out wed be eye or making the shift to mobile and then cloud each step to successfully enabled.

To making D I, a more ubiquitous component of business decision, making.

We believe generative AI is the next big innovation that will bring us closer to intelligence separate work.

Before diving into the integration jet a INR platform, it's important to distinguish widen like the strategy is poised to drive value in the AI space beyond the generic applications in height built up in the broader market.

Hyperscale or as a mega software companies are investing billions, amassing gpus and legions of data scientists to build the best large language models or L. L. Evans in the world.

Much like we have done with cloud hyperscale or who pay to openly partner with and leverage the technology investments in these companies rather than invest heavily to build our own models.

Hundreds of smaller AI companies are taking a similar approach to us, but we are already differentiating as we have done for decades and buy across four major areas are 30 years that.

Number one our 30 years of enterprise software services and sales capabilities.

Two our trusted secure scalable reusable data layer, what we call our semantic layer.

Number three the ability to quickly build and deploy actual applications utilizing this data through technologies like mobile embedding and micro services.

And number four an open multi cloud architecture, which in this case, we'll use to easily integrate multiple different LLS. We believe this uniquely positions us to win at the intersection of artificial intelligence.

You have joined the meeting as an attendee and will be muted throughout the meeting.

And business intelligence.

In addition, we believe the combination of a M. B I to be critical for enterprises looking to integrate AI into their day to day decision, making let.

Let me explain.

<unk> is precise use trusted calculations from secured sources of structured data to.

To make informed decisions.

But on the other hand be I can be rigid and difficult to engage with all levels of persona is a business users.

Shirish Jajodia: Hello everyone, and good evening. I am Shish Jajodia, Vice President of Investor Relations and Treasury at MicroStrategy. I will be your moderator for MicroStrategy's 2023-304 earnings webinar.

Our smart leveraging natural language generation reasoning and unstructured data to answer free form questions and ideas.

However results can be untrustworthy and producing determinant answers that are reliable and consistent enough to make informed business decisions.

Shirish Jajodia: Before we proceed, I will read the safe harbor statement. Some of the information we provide during today's call regarding our future expectations, plans and prospects may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements due to various important factors including the risk factors discussed in our most recent and acute file with the SEC. We assume no obligation to update these forward-looking statements which speak only as of today. Also, during today's call, we will refer to certain non-gap financial measures reconciliations showing gap versus non-gap results are available in our earnings release and presentation which were issued today in our available on our website, MicroStrategy.com.

This is where micro strategy, one delivers value, reaching a precise b I smart AI.

Right now many enterprise AI solutions, our focus on efficiency and cost gains building applications to help marketers right better corporate teams process more efficiently and engineers code faster.

There is even more value to be unlocked when AI helps analysts make better business decisions to drive topline growth and achieved true strategic advantage.

This can be done with generative AI on top of enterprise data, but in doing so combining AI and <unk> and the challenges with scale.

<unk> and trust with AI or amplified and security and access control are Paramount.

We expect to see increased customer demand as our platform tackles, the primary hurdles customers space with AI adoption.

Shirish Jajodia: I would like to welcome you all to today's webinar and let you know that we will be taking questions using the Q&A feature at the bottom of your screen. You can submit questions throughout the webinar and MicroForm or Andrew will answer questions at the end of the session. Please be sure to provide your name and your company's name when submitting your questions.

The main customer concerns of enterprise, a or I or one data access and security to integration of large language models natural language processing and product engineering solutions.

And three the ability to distribute AI solutions at scale.

<unk>, a ibi combinations did that do not have a semantic layer have unreliable intelligence. The bi tool acts as a simple repository that provides data to the generative AI engine.

Shirish Jajodia: Now, I will walk you through the agenda for today's call. First, fondly, we'll cover the business results for the third quarter of 2023.

Phong Le: Second, Andrew can go cover the financial results for the third quarter of 2023.

There's no intelligence and the L. L M results, producing false or inaccurate responses, commonly referred to as hallucinations.

Micro strategy, one in Microstrategy AI leveraged the semantic layer to defied all data objects within a customer configuration.

Phong Le: Then, MicroStrategy will provide a strategy review and discuss recent Bitcoin market updates and lastly, we will open up the Q&A.

Phong Le: With that, I will turn the call over to fondly, President and CEO at MicroStrategy. Thank you, Sharish. Hello, everyone.

RBI architecture provides a framework and structure to the AI solution.

The AI and micro strategy engines collaborate to generate higher higher quality queries by enhancing and tagging user prompts to pull more tailored results from customer data.

Phong Le: I'd like to welcome all of you today's earnings webinar. I'll show you the highlights of our software business. Total revenue was $129.5 million representing an increase of 3% year over year. Total software licenses revenues, which consists of total product licenses and subscription services revenues, and our consolidated statement of operations were $45 million representing an increase of 16% year over year. So, a software licenses revenues performance benefited from both increased adoption of our cloud platform and growth in product license revenues.

<unk> strategy is designed to generate answers that are secure accurate scalable and reliable.

In September we introduced our first set of micro strategy AI features to the market, which leverages our advance <unk> system fully embedding Microsoft Azure open AI.

This release marks one of the most exciting product innovations in the history of the company.

These new AI features are cloud native and only available through micro strategy one.

We've implemented four features to address the needs of different business users.

Phong Le: Total subscription services revenue was $21 million and increased to 28% year over year, year. Our Q3 subscription billings growth was 17% of year over year. We achieved good revenue results in Q3, with year over year growth driven by our cloud business and a strong international license revenue quarter. We plan to continue to drive growth in our recurring revenue model and to transition our business strategy and product offerings to a cloud native model.

One auto sequel Streamlines the database interaction process. This features intended to enhance the technical user experience a micro strategy. Our AI application can translate natural language into sequel queries.

Blayne is equal statements in natural language and review sequel code with suggested optimizations.

Two auto dashboard provides automatic dashboard creation transforming complex data into interactive and beautiful visual insights.

Phong Le: Our focus will be on innovation at the intersection of artificial intelligence and business intelligence using our first-to-market advantage in the enterprise scale integration of AI and BI to grow revenue in the cloud. I'm excited about the work we're doing in these areas and to share some updates with you and our progress. We're the major period of innovation in the technology industry. We believe the next innovation is to change how the world does business, our digital money, with a continuing development of the Bitcoin ecosystem, and digital intelligence through AI.

The strategy AI processes, the data and can produce it.

Beautiful and viable dashboard.

Auto expert as the automated support tool, it's like having a microstrategy employee guide you through the <unk> platform to answer your user base questions such as how do I build an advanced metric.

Auto expert is available for free to all registered users on our web site.

And auto answers my personal favorite transformed self service analytics user engages in natural language conversation asking the AI assisting questions related to their data for example, what is the forecast of revenue for Q1 2025.

Phong Le: The technological leaps that have occurred in the past year in generative AI are real and we expect to be at the forefront of integrating AI with BI. MicroStrategy is well positioned to gain competitive leverage in winning both of these areas of growth. MicroStrategy is mission for the past 30 plus years has been to enable intelligence everywhere for our customers. With this mission in grain and our corporate DNA through each major tech innovation, we have moved closer to accomplishing this goal.

What are the drivers of revenue growth micro.

Micro strategy AI processes. The requests we contextualized data to provide rapidly to rapidly provide answers with a deep level of understanding vastly increasing the data exploration capabilities of a basic user.

Micro strategy AI is the first to market with a fully integrated <unk> platform and delivers the <unk> features that enable enterprise great AI deployment with shortens, our customers' time to value and enhances the ability to optimize and automate.

Phong Le: Whether this was Olaf technology on relational databases, implementing client-based desktop BI tools, introducing the somatic layer, rolling out web BI or making the shift to mobile and then cloud each step to successfully enabled to making BI a more ubiquitous component of business decision making. We believe generative AI is the next big innovation that will bring us closer to intelligence everywhere.

Furthermore, cloud native solution drives net new business to the cloud, while incentivizing current customers to migrate and expand their footprint.

This offering is also our first entry into consumption based pricing customers will consume the AI product question by question.

Phong Le: Before diving into the integration of Gen AI and our platform, it's important to distinguish why microStrategy is poised to drive value in the AI space, beyond the generic applications and height built up in the broader market. Hyperscalors and mega software companies are investing billions, a math and GPUs, and lesions of data scientists to build the best large language models or LLNs in the world. Much like we have done with cloud hyperscalors who plan to openly partner with and leverage the technology investing in these companies, rather than invest heavily to build our own models.

Our initial starter packages $20000 to 20000 questions or simply a dollar a question.

We expect this pricing mechanism to drive adoption and grow the subscription revenue stream, while providing a relatively low cost of entry for customers to onboard next generation AI applications. We're already seeing this product driving existing on premise customers to move to the cloud.

Set up a new environment and the crowd to adopt Microstrategy AI.

Our vision for intelligence everywhere continues to inform our roadmap.

We believe that AI.

Phong Le: Hundreds of smaller AI companies are taking a similar approach to us. So we are already differentiating as we have done for decades in BI across four major areas. Our 30 years of number one, our 30 years of enterprise software services and sales capabilities. Number two are trusted secure, scalable, reusable data layer, what we call our semantic layer. Number three, the ability to quickly build and deploy actual applications utilizing this data through technologies like mobile and betting in micro services.

<unk> empowers customers when it is modular and can be embedded into existing workflows. We also believe that the data that feeds a ibi the platforms in which it runs and the L. L M and machine learning models used.

Must be flexible and open to fit our customers' needs. Therefore, our roadmap includes the ability to build analytic bots on the platform as our customers choice AWS Azure, Google cloud or private cloud and leverage a variety of L. L. Evans at the customer's choice.

The build your own bought tool and the Microstrategy platform harnesses advanced capabilities in enterprise security such as governance integration with third party tools and system audit ability to allow customers to easily deploy chat bots for broad use and trusted data. This feature standalone custom mineable for deployment by any easing in the us.

Phong Le: And number four, an open multi cloud architecture, which in this case will use the easily and a great multiple different LLMs. We believe this uniquely positions us to win at the intersection of artificial intelligence and business intelligence. In addition, we believe the combination of AI and BI to be critical for enterprises looking to integrate AI into their day-to-day decision making. Let me explain, BI is precise to use trusted calculations from secure sources of structured data to make informed decisions.

Cases are myriad for example, internal users can deploy an F. P&A chatbot to answer questions related to budget, where users can develop a product Q&A chatbot for customers on their website. We currently expect the build your own BOP capability to be available in December of this year.

Phong Le: But, at the other hand, BI can be rigid and difficult to engage with all levels of personas and businesses. AI is smart, leveraging natural language generation, reasoning, and unstructured data to answer free-form questions and ideas. However, results can be untrustworthy in producing determinate answers that are reliable and consistent enough to make informed business decisions. This is where Microsoft you want to live as value, bridging precise BI and smart AI. Right now, many enterprise AI solutions are focused on efficiency and cost gains, building applications to help marketers write better, corporate teams, process more efficiently and engineers code faster.

Cited about our initial AI offering to the market and for the future as we continue to tap into the potential of AI.

Solutions and our product roadmap.

Now moving to developments at our cloud offerings, we continue to build modern scalable resilient and cloud native applications that can transition customers from motto lytic B I configurations to a micro services architecture that embraces flexibility agility and technological diversity.

Micro services architecture, and containerized structure enable applications to be deployed and scaled independently. These design features are necessary to meet the technological demands of AI and to maintain the highest level of platform functionality.

Phong Le: There's even more value to be unlocked when AI helps analysts make better business decisions to drive top-lying growth and achieve true strategic advantage. This can be done with generative AI and path of enterprise data. But, in doing so, combining AI and BI and the challenges with scale, governance and trust with AI are amplified and security and access control are paramount. We expect to see increased customer demand as our platform tackles the primary hurdles customer space with AI adoption.

Microstrategy cloud architecture design in the cloud for multi cloud.

Q4, we plan to deploy our Google cloud implementation increased functionality to all three primary hyper scaler.

And further driving integration of AI and <unk> to every part of our customers' business.

As a fully containerized micro services based solution, which is the base modern cloud architecture for our micro strategy platform.

Mike Our strategy is now also available on both the Azure and AWS marketplaces firming up our partnership with these hyperscale.

Phong Le: The main customer concerns of enterprise AI are one data access and security, two integration of large language models, natural language processing, and prompt engineer solutions. And three, the ability to distribute AI solutions to scale. Typical AI BI combinations did that do not have a semantic layer have unreliable intelligence. The BI tool acts as a simple repository that provides data to the generative AI engine. There's no intelligence in the LLM results, producing faults or inaccurate responses commonly referred to as hallucinations.

We're also innovating the way we sell our products via partner sales channels with strategic focus aimed unlock growth enhanced customer success and deepen market penetration.

Happily evolving AI DIY market.

We've announced recent partnerships with Microsoft Azure, including with open AI AWS and Snowflake key highlights of our expanded partner program include a newly launched streamline partner portal that Centralizes, Mike strategy sales marketing and technical assets to facilitate increased partner engagement.

Expanded training resources to empower our partners and the necessary tools to excel and increase incentives and sales motions wrote synergy between micro strategies and its partners growth objectives.

Phong Le: Microstradue 1 and Microstradue AI leverage the semantic layer to define all data objects within a customer configuration. Our BI architecture provides a framework and structure to the AI solution. The AI and Microstradue engines collaborate to generate higher, higher quality queries by enhancing and tag and user prompts to pull more tailored results from customer data. Microstradue AI is designed to generate answers that are secure, accurate, scalable, and reliable. In September, we introduced our first set of Microstradue AI features the market, which leverages our advanced BI system fully embedding Microsoft Azure OpenAI.

I'm very excited about our product and the direction of the company.

Our goal is to be the innovation leader in AI, NPI and <unk> in the cloud and we believe we are delivering on this objective.

Q4, we're continuing to work through plans to transform our sales organization to be cloud focused and capitalize on our innovation and the strength of our cloud platform.

We're also creating customer success organization will be focused on better supporting customers as they attempt to innovate and maximize value for the organization and customers I look forward to sharing more details on these initiatives at our next earnings call.

Phong Le: This release marks one of the most exciting product innovations in the history of the company. These new AI features are cloud natives and only available through Microstradue 1. We've implemented four features to address the needs of different business users. One, our SQL, streamlines the database interaction process. This features intended enhanced the technical user experience of Microstradue. Our AI application can translate natural language into SQL queries, explain SQL statements and natural language, and review SQL code with suggested optimizations.

Now I'll turn the call over to Andrew to discuss the updates on our Bitcoin holdings and our financials for the quarter in further detail.

Okay.

Thank you <unk>.

I'll start with our third quarter operating results.

Which reflected year over year total revenue growth.

While macroeconomic headwinds have persisted over the past year, our Q3 results demonstrate both the depth of our customer base and our ability to generate revenue despite longer sales cycles and tighter customer spend.

Phong Le: 2 Auto Dashboards provides automatic dashboard creation, transforming complex data into interactive and beautiful visual insights. MicroStrategy AI processes the data and produces beautiful and viable dashboard. Auto Expert is the automated support tool, it's like having a microStrategy employee guide you through the BI platform to answer user-based questions such as how do I build an advanced metric. Auto Expert is available for free to all registered users on our website. An auto answers my personal favorite transform self-service analytics, the user engages the natural language conversation, asking the AI assistant questions related to their data.

GAAP total revenues for the quarter were $129 5 million up $4 1 million or 3% year over year.

Or up 1% year over year at constant currency.

Total software license revenues, which consist of product license revenues and subscription services revenues were $45 million up 16% year over year are up 14% at constant currency.

Product license revenues were $24 million for the quarter up 8% year over year or up 6% at constant currency the.

The growth in product license revenue in Q3 was primarily attributable to the execution of several large international deals during the quarter and partially offset by lower domestic license revenues we continue.

Phong Le: For example, what is the forecast of revenue for Q1 2025? What a driver is a revenue group. MicroStrategy AI processes the request we contextualize data to provide rapidly to rapidly provide answers with a deep level of understanding, vastly increasing the data exploration, capabilities of a basic user.

To expect our mix of revenue will continue to shift from license to subscription services over time as we continue to transition to the cloud.

Phong Le: MicroStrategy AI is the first to market with a fully integrated AI BI platform, and delivers BI features that enable enterprise-grade AI deployment, with shortens our customers' time to value, and enhances the ability to optimize and automate. Furthermore, cloud-native solution drives net new business to the cloud, while incentivizing current customers to migrate and expand their footprint. This offering is also our first entry into consumption-based pricing. Customers will consume the AI product question by question.

However, this past quarter demonstrates the demand for our software remains strong across all platforms.

Subscription services revenues, which reflect recurring revenues from our cloud business with $21 million, an increase of 28% year over year or 25% at constant currency.

Product support revenues were $66 9 million up 1% year over year or down 1% at constant currency.

Customer renewal rates remain high at 94% for the quarter and has been consistently above 90% in the seven consecutive quarters illustrating the durability of our customers. Even in spite of the ongoing challenges in the macroeconomic environment.

Phong Le: Our initial starter package is $20,000 to $20,000 in questions, or simply $1,000 a question. We expect this pricing mechanism to drive adoption and grow the subscription revenue stream, while providing a relatively low cost of entry for customers to onboard next-generation AI applications. We're already seeing this product driving existing on-premise customers to move to the cloud, or set up a new environment in a cloud to adopt MicroStrategy AI. Our vision for intelligence everywhere continues to inform our roadmap.

Finally, other services revenues were $17 6 million.

Which was a 15% decrease year over year or 17% lower at constant currency.

While we are seeing higher average consulting build rates worldwide.

Customer demand for consulting projects in the current macro and macroeconomic environment remain headwinds customer spend on professional services.

Phong Le: We believe that AI BI best empowers customers when it is modular and can be embedded into existing workflows. We also believe that the data that feeds AI BI, the platforms, and which it runs, and the LLM, and machine learning models used to must be flexible and open to fit our customers' needs. Therefore, our roadmap includes the ability to build analytic bots on the platform of the customer's choice, AWS, Azure, Google Cloud, or private cloud, and leverage your variety of LLM into the customer's choice.

On Slide 13 total current software license billings were $42 $7 million in the third quarter, an increase of 17% year over year.

Current subscription billings were $16 8 million, an increase of 17% year over year, our 14th straight quarter of double digit growth.

Transitioning customers to micro strategy cloud remains one of our highest priorities focusing on both new customer wins as well as migrating existing customers as well.

Phong Le: To build your own bot tool on the MicroStrategy platform, harnesses a task capabilities and enterprise security, such as governance, integration with third-party tools, and system auditability, to allow customers to easily deploy chat bots for broad use on trusted data. This feature is stand-alone and custom-measable for deployment by any user, and the use cases are myriad. For example, internal users can deploy an FPNA chat bot to answer questions related to budget, or users can develop a product Q&A chat bot for customers on their website. We currently expect to build your own bot capabilities to be available in December. This year.

I mentioned earlier, we are well positioned to capitalize on first to market AI integrated features already available on micro strategies platform and our go to market strategy will be highly focused on driving cloud growth.

AI adoption and increasing partner enabled deployments and driving further marketplace integration with Hyperscale.

We believe this will translate to new logos faster migrations and accelerated cloud transition in the coming year.

Shifting to costs on slide 14, total non-GAAP expenses were $138 million in the third quarter compared to approximately $102 million in the third quarter of 2022.

Phong Le: We're excited about our initial AI offering to the market. And for the future, as we continue to tap into the potential of AI, AI solutions in our product room.

Phong Le: Now, moving to developments that are cloud-offly, we continue to build modern, scalable, resilient, and cloud-native applications that can transition customers from monolithic, bi-configurations to a microservices architecture that embraces flexibility, agility, and technological diversity. Microservices architecture and containerized structure enable applications to be deployed and scaled independently. Use design features are necessary to meet the technological demands of AI and to maintain the highest level platform functionality. Microsharagic cloud architecture is designed in the cloud for multi-colon, and Q4, we plan to deploy our Google cloud implementation, increasing our functionality to all three primary-hyper scalars, and further driving integration of AI and BI to every part of the customer's business.

$34 million of the <unk>.

Expenses were due to the Q3 midpoint impairment charge compared to $1 million 1 million in Q3 of last year.

non-GAAP cost of revenues was $25 million in the third quarter, which was an increase of $1 2 million or 5% year over year, primarily driven by higher cloud hosting costs as we grow our cloud business.

However, as a percentage of total revenues non-GAAP cost of revenues remained flat year over year.

non-GAAP sales and marketing expenses increased $1 9 million or 6% year over year to $32 4 million.

As a percentage of total revenues non-GAAP sales and marketing costs were just 1% higher year over year.

non-GAAP research and development expenses were $26 million, a slight 1% decrease year over year and non-GAAP G&A costs were $20 million in Q3, which was flat year over year.

Phong Le: This is a fully containerized microservices base solution, which is the base modern cloud architecture for our microsharagic platform. Microsharagic is now also available on both the Azure and AWS marketplaces, for opening up our partnership with these hyper scalars. We're also in a vein the way we sell our product via partner sales channels, which strategic focus aimed on lock growth and hands-customer success in deep and market penetration in a rapidly evolving AI and BI market.

Spending on cloud growth and investing in sales and marketing activities are directly targeted towards growing revenue and acquiring new customers.

Focusing on strategic spend we also successfully launched our AI product in Q3, while carefully managing product development costs through global delivery center efficiencies and speed of execution.

Phong Le: We have announced recent partnerships with Microsoft Azure, including with OpenAI, AWS, and Snowflake. Key highlights of our expanded partner program include a newly launched streamlined partner portal that centralized like strategy sales, marketing, technical assets to facilitate increased partner engagement, expanding training resources, and power partners in the necessary toolstick fell, and increase incentives and sales motions throughout synergy between microsharagies and as partners growth objectives.

Our priority and results are rooted in the active management of costs in order to drive margin and profitable growth.

Turning to slide 15, we reported a total non-GAAP operating loss in the third quarter of $8 million of which the noncash digital asset impairment charge was $34 million for the quarter.

For the third quarter, we reported a GAAP net loss of $143 million.

Phong Le: I'm very excited about our product and the direction of the company. Our goal is to be the innovation leader in AI and BI and BI in the cloud, and we believe we're delivering on this objective. In Q4, we're continuing to work through plans to transform our sales organization to be cloud-focused and capitalize on our innovation and the strength of our cloud platform. We're also creating customer success organization. We focus on better supporting customers as they attempt to innovate and maximize value for the organization and customers. I look forward to sharing more details on these initiatives and our next earnings call.

Which included a $110 million tax provision expense.

This non cash tax expense was related to the reestablishment of our valuation allowance on our deferred tax assets directly related to a big point holdings.

Expense was recognized because the market value of bitcoin on the reporting date.

September 30th was below our aggregate cost basis.

At the end of Q4, we will reevaluate the fair value of Bitcoin again at 12, 31, and if the price of bitcoin on that date is above our aggregate cost of holdings, we would readjust the valuation allowance at the end of Q4, and CA core spend corresponding noncash tax benefit.

Andrew Kang: I'll now turn the call over to Andrew to discuss the updates on our Bitcoin holdings and our financials for the Q4 and further detail. Thank you, Fong. I'll start with our third Q4 operating results which reflected year over year total revenue growth. And while macro economic headwinds have persisted over the past year, our Q3 results demonstrate both the depth of our customer base and our ability to generate revenue despite longer sales cycles and tighter customer spent.

Turning now to our bitcoin strategy.

We again increased our total bitcoin holdings and acquired 5912 big coins in the third quarter.

After the end of the quarter, we purchased an additional 155 big clients using cash from operations.

As of October 31, 2023, the company held a total of 158400 declines acquired for an aggregate cost of $4 7 billion.

Andrew Kang: GAP total revenues for the quarter were $129.5 million, up $4.1 million, or 3% year-over-year, or up 1% year-over-year at constant currency. Total software license revenues, which consists of product license revenues and subscription services revenues, or $45 million, up 16% year-over-year, are up 14% at constant currency. Product license revenues were $24 million for the quarter, up 8% year-over-year, or up 6% at constant currency. The growth in product license revenue in Q3 was primarily attributable to the execution of several large international deals during the quarter and partially offset by lower domestic license revenues.

Or $29 $586 per bitcoin.

The coins purchased by micro strategy through cash generated by the software business are held at the micro strategy entity and as a result.

Bitcoins are pledged against our 2028 senior secured notes.

Bitcoins purchase through proceeds from capital markets activities, including equity and debt issuances.

That macro strategy, a wholly owned subsidiary of micro strategy Easter.

These bitcoins are not pledged to our senior secured notes and are fully unencumbered.

In Q3, we purchased 5445 big points for a $147 million using net proceeds from our aftermarket equity program and as noted a moment ago. These bitcoins are held at macro strategy.

Andrew Kang: We continue to expect our mix of revenue will continue to shift from product license to subscription services over time, as we continue to transition to the cloud. However, this past quarter demonstrates that the man for our software remains strong across all platforms. Subscription services revenues, which were recurring revenues from our cloud business were $21 million, and increased at 28% year-over-year, or 25% at constant currency. Product support revenues were $66.9 million, up 1% year-over-year, or down 1% at constant currency.

We also purchased an additional 467 big coins for $14 4 million using excess cash from operations, which are held at micro strategy.

Subsequent to the end of the quarter and October we use additional excess cash from operations to purchase the additional 155 big coins.

$5 $3 million also held at micro strategy.

Our big coin strategy remains unchanged, which is to acquire and hold bitcoin and we plan to accumulate more bitcoin overtime using both excess cash from operations and proceeds from the capital markets day.

Andrew Kang: Customer renewal rates remain high at 94% for the quarter, and have been consistently above 90% in the seven most consecutive quarters, illustrating the durability of our customers even in spite of the ongoing challenges in the macro economic environment. Finally, other services revenues were $17.6 million, which was a 15% decrease year-over-year, or 17% lower at constant currency. While we are seeing higher average consulting build rates worldwide, lower customer demand for consulting projects in the current macroeconomic environment remain a headwind to customer spend on professional services.

<unk> has outperformed much of the market this year and while we still see price volatility.

As the asset class continues to mature bitcoin prices have stabilized over narrow range over a narrower range compared to prior years.

Micro strategy as the largest publicly traded corporate holder of bitcoin in the world and we remain committed to a big point acquisition strategy with the highest conviction long term focus and with a strong risk managed approach.

As of September 32023, the carrying value of our Big point Holdings was approximately $2 5 billion compared to approximately $4 $3 billion in market value based on the bitcoin price as of the last day of the quarter.

Andrew Kang: On slide 13, total current software license billings were $42.7 million in the third quarter, and increased at 17% year-over-year, and current subscription billings were $16.8 million, and increased at 17% year-over-year, are 14th straight quarter of double digit growth. Transitioning customers to micro-strategy cloud remains one of our highest priorities, focusing on both new customer wins, as well as migrating existing customers. As Fong mentioned earlier, we are well-positioned to capitalize on first-the-market AI integrated features, already available on micro-strategy's platform, and our go-to-market strategy will be highly focused on driving cloud growth, AIBI adoption, and increasing partner-enabled deployments and driving further marketplace integration with hyper-scalers.

As of market close on Tuesday October 31.

The market value of our 158400 bitcoins was approximately $5 5 billion.

Our bitcoin remains subject to the current indefinite lived intangible asset accounting rules under which we must record an impairment when theres any decrease in the fair value below our carrying value at any time during the quarter, which occurred in Q3, when bitcoin price fell to 24900.

We remain optimistic that FASB will finalize the change in accounting rules for certain digital assets, including bitcoin to fair value accounting in the near term.

Now turning to slide 19.

Andrew Kang: We believe this will translate to new logos, faster migrations, and accelerated cloud transition in the coming year. Shifting to costs on slide 14, total non-gap expenses were $138 million in the third quarter, compared to approximately $102 million in the third quarter of 2022. $34 million of the expenses were due to the Q3 big point impairment charge compared to $1 million, $1 million in Q3 of last year. Non-Gap cost of revenues was $25 million in the third quarter, which was an increase of $1.2 million or 5% year-over-year, primarily driven by higher cloud posting costs, as we grow or cloud business.

In Q3, we continued to execute our aftermarket or ATM equity offering and raised approximately $147 $3 million in aggregate net proceeds through the sale of class a common stock in.

In the current ATM program, we have issued 403000 shares.

Approximately $602 million of.

Remaining ATM capacity.

As with prior programs, we may use the proceeds for general corporate purposes, which include the purchase of bitcoin as well as the repurchase of repayment of our outstanding debt.

Incremental ATM capacity will allow us to benefit from institutional demand for bitcoin exposure and will allow us to opportunistically raise capital to continue creating value for our shareholders.

Andrew Kang: However, as a percentage of total revenues, non-Gap cost of revenues remained flat year-over-year. Non-Gap sales and marketing expenses increased $1.9 million or 6% year-over-year to $32.4 million. As a percentage of total revenues, non-Gap sales and marketing costs were just 1% higher year-over-year. Non-Gap research and development expenses were $26 million, a slight 1% decrease year-over-year, and non-Gap G&A costs were $20 million in Q3, which was flat year-over-year. Spending on cloud growth and investing in sales and marketing activities are directly targeted towards boring revenue and acquiring new customers.

Our outstanding debt and.

Convertible notes remain unchanged at a totaled $2 2 billion with a blended weighted average interest rate of approximately one 6%.

Also at the end of the third quarter, we had $45 million in cash on our balance sheet and sufficient overall liquidity to manage our ongoing operating needs and our outstanding debt.

Since the third quarter of 2021, we have raised a total of approximately $1 $9 billion in gross proceeds through our ATM programs. The average price over all the issuances of approximately $419 per share.

Primary use of historical ATM proceeds to date has been to acquire additional bitcoin and we also used the proceeds to repay our $205 million breakpoint back loan at a discount.

Andrew Kang: While focusing on strategic spend, we also successfully launched our AI product in Q3 while carefully managing product development costs through global delivery center efficiencies and speed of execution. Our priority and results are rooted in the active management of costs in order to drive margin and profitable growth. During the slide 15, we reported a total non-Gap operating loss in the third quarter of $8 million, of which the non-cash digital asset impairment charge was $34 million for the quarter.

Our capital allocation strategy strategy continues to be focused on improving our overall capital structure by strengthening our balance sheet through additional bitcoin holdings and managing our debt very carefully.

On slide 21 as of October 31, we now hold a total of 158400 gig coins of which 15886 bitcoins are held at mic growth strategy, the parent and are pledged as collateral securing our 2028 notes the.

Andrew Kang: For the third quarter, we reported a gap net loss of $143 million, which included a $110 million tax provision expense. This non-cash tax expense was related to the reestablishment of our valuation allowance on our deferred taxes that directly related to our Bitcoin holdings. The expense was recognized because the market value of Bitcoin on the reporting date of September 30 was below our aggregate cost basis. At the end of Q4, we will re-evaluate the fair value of Bitcoin again at $1231, and if the price of Bitcoin on that date is above our aggregate cost of holdings, we would readjust the valuation allowance at the end of Q4 and see a corresponding non-cash tax benefit.

The remaining 142514 bitcoins are held that macro strategy, all of which are unpledged and unencumbered as of quarter end, representing 90% of our total Bill Clinton Holdings are $4 9 billion.

And current market value.

The earliest of our debt maturities is not until December 2025 for the 2025 convertible notes, which is eight quarters away from today.

Within that period of time, we also expect the bitcoin having to occur in Q2 of 2020 for.

We actively monitor our capital structure and are constantly evaluating liability management opportunities to manage and prepare to prepare for all upcoming debt.

Okay.

Overall, we believe the position the positive position in our cloud business along with it.

Andrew Kang: Turning now to our Bitcoin strategy, we again increased our total Bitcoin holdings and acquired 5,912 Bitcoins in the third quarter. After the end of the quarter, we purchased an additional 155 Bitcoins using cash from operations. As of October 31, 2023, the company held a total 158,400 Bitcoins acquired for an aggregate cost of $4.7 billion for $29,586 per Bitcoin. Bitcoins purchased by micro-strategy through cash generated by the stock or business are held at the micro-strategy entity, and as a result, those Bitcoins are pledged against our 2018 years that you have known.

When you gave license sales in combination with the release of our first to market enterprise scale integrated AI by product produces positive catalyst heading into the fourth quarter.

That being said, we maintain the Stanford cautious optimism due to the ongoing presence of macroeconomic headwinds.

We anticipate total revenue this year to be in line with last year, we continue to focus on product innovation and AI and cloud.

We will continue to grow cloud subscription revenues and strengthen the quality of our recurring revenue as we transform our platform.

We will remain disciplined and continue to manage to drive margin expansion and we will continue to acquire and hold bitcoin.

Thank you for your time today and for continued support of micro strategy I'll now turn the call over to Michael for his remarks.

Andrew Kang: Bitcoin's purchased through proceeds from capital markets activities, including equity and debt assuances, or held at macro strategy, a wholly owned subsidiary of micro strategy. These Bitcoin's are not pledged to our senior secured notes and are fully unencumbered. In Q3, we purchased 5,445 Bitcoin's for $147 million using net proceeds from our asset market equity program, and as noted a moment ago, these Bitcoins are held at macro strategy. We also purchased an additional $467 Bitcoins for $14.4 million using excess cash from operations, which are held at micro strategy.

Okay.

Thank you.

Thanks for joining us today.

I thought I would start with.

With.

Quite performance review of micro strategy since we adopted our bitcoin strategy.

Now approximately 37 months, so just slightly more than three years.

Since.

We adopted our bitcoin strategy.

<unk>.

And we benchmark ourselves against all major asset classes and against Big Tech stocks.

And also against enterprise software companies that are our enterprise software peers.

Andrew Kang: Subsequent to the end of the quarter, in October, we used additional excess cash from operations to purchase the additional 155 Bitcoins for $5.3 million also held at micro strategy. Our Bitcoin strategy remains unchanged, which is to acquire and hold Bitcoin, and we plan to accumulate more Bitcoin over time using both excess cash from operations and proceeds from the capital markets. Bitcoin has outperformed much of the market this year, and while we still see price volatility, as the asset class continues to mature, Bitcoin prices have stabilized over a narrow range compared to prior years.

Uh huh.

Happy to report to you that our performance over this time period as is.

Plus 242%.

And that exceeds the bitcoin performance in the same period.

192%, so micro strategy is outperforming the bitcoin asset index.

<unk>.

The S&P is up 25% over that time period. So.

With almost 10 X the S&P performance.

<unk> is up 17%.

Andrew Kang: Micro strategy is the largest publicly traded corporate holder of Bitcoin in the world, and we remain committed to our Bitcoin acquisition strategy with the highest conviction long-term focus and with a strong risk-managed approach. As of September 30, 2023, the carrying value of our Bitcoin holdings was approximately $2.5 billion, compared to approximately $4.3 billion in market value based on the Bitcoin price as of the last day of the quarter. As of market closed on Tuesday, October 31, the market value of our 158,400 Bitcoins was approximately $5.5 billion.

As you recall, we had to choose between gold and digital gold in August of 2020, and we chose digital gold.

That is bitcoin the actual gold is down 2%, so 192% versus minus 2% is the difference between choosing the right asset in the wrong asset. This totally makes sense because we're living in an age of digital transformation.

And there's just a growing awareness of bitcoin is the digital gold of the 20 <unk> century.

Silver is down 18% and that time period and of course bonds, which we were holding on our balance sheet.

Andrew Kang: Our Bitcoin remains subject to the current indefinite lived intangible asset accounting rules under which we must record an impairment when there is any decrease in the fair value below our carrying value at any time during the quarter, which occurred in Q3 when Bitcoin price fell to $24,900. We remain optimistic that FASB will finalize the change in accounting rules for certain digital assets, including Bitcoin to fair value accounting in the near term.

<unk> are down 24%.

And we had a concern about holding bonds because of the interest rate environment. That's why we wanted to buy some other tangible asset as you can say bitcoin is almost the opposite of bonds that coin being.

And are they accretive asset bonds have been dilutive to balance sheets, so we're holding them.

Micro strategies outperformed all the big Tech companies and you can see here, Google Microsoft Apple matter.

Andrew Kang: Now turning to slide 19, in Q3, we continue to execute our at-the-market or ATM equity offering and raise approximately $147.3 million in aggregate net proceeds to the sale of Class A common stock. In the current ATM program, we have issued 403,000 shares and have approximately $602 million of remaining ATM capacity. As with prior programs, we may use the proceeds for general corporate purposes which include the purchase of Bitcoin as well as the repurchase or repayment of our outstanding debt.

And some of the big tax haven't even had a positive return in that time period and micro strategy is has almost three acts. The next best competitor in the enterprise software space.

I would say based upon this over this time period that our bitcoin strategy is working.

In essence, we have.

Transformed the company with a 500 $500 million enterprise software company into a new kind of firm that has both a $500 million software business as well as and now have $5 billion plus digital assets business.

Andrew Kang: The incremental ATM capacity will allow us to benefit from institutional demand for Bitcoin exposure and will allow us to opportunistically raise capital to continue recruiting value for our share. $2.2 billion with a blended weighted average interest rate of approximately 1.6%. Also, at the end of the third quarter, we had $45 million in cash on our balance sheet and sufficient overall liquidity to manage our ongoing operating needs and our outstanding debt. Since the third quarter of 2021, we have raised a total of approximately $1.9 billion in gross proceeds through our ATM programs, the average price over all issuances of approximately $419 per share.

And we're able to get benefits from both the business intelligence.

Part of our business as well as the bitcoin part of our business.

We can go to the next slide now.

Okay.

One of the things Thats coming.

Is is more different options for institutional investors to get big coin exposure and often times people ask us so what's the difference between micro strategy and just buying the bitcoin outright.

Andrew Kang: The primary use of historical ATM proceeds today has been to acquire additional Bitcoin, and we also used the proceeds to repay our $205 million Bitcoin backbone at a discount. Our capital allocation strategy continues to be focused on improving our overall capital structure by strengthening our balance sheet through additional Bitcoin holdings and managing our debt very carefully. On slide 21, as of October 31st, we now hold a total of 158,400 Bitcoin's of which 15,886 Bitcoin's are held at MicroStrategy, the parent, and our pledge does collateral strutting our 2028 notes.

Or buying a bitcoin futures ETF AUM.

Or buying great scale or buying a potential spot that coin ETF, if and when they are available.

And so I think this chart is both useful to useful to explain what makes micro strategy different and you can also see in this chart. The structural reasons why we are able to outperform bitcoin itself over this last three year time period.

If youre, an investor and Youre looking for accessibility to bitcoin as an asset class micro strategies is a ticker on NASDAQ EMS TR.

Whereas buying the bitcoin itself as the commodity requires that you set up a new relationships, where the crypto exchange in and a crypto custodian.

Andrew Kang: The remaining 142,514 Bitcoin's are held at macro strategy, all of which are unplugged and unencumbered as of quarter end, representing 90% of our total Bitcoin holdings are $4.9 billion in current market value. The earliest of our debt maturities is not until December 2025 for the 2025 convertible notes, which is eight quarters away from today. Within that period of time, we also expect the Bitcoin having to occur in Q2 of 2024. We actively monitor our capital structure and are constantly evaluating liability management opportunities to manage and prepare for all upcoming debt.

And often times investors just don't have those exchange and custody relationships. So it's not so easy to buy the underlying bitcoin and some some cases.

Just not practical or not possible at all but they wouldn't be allowed to do it or they they wouldn't have the mandate to do it.

The futures ETF does provide that accessibility.

The spot Etfs have not been available up until now and of course <unk> has been an over the counter product and there are many institutional investors that struggle with over the counter aspects of access. So so that's been a benefit to us.

The second differentiator has been our operating company structure. We are we are an operating company that is providing bitcoin exposure, we're not a finance company and that means we have some options. One one option is we don't charge a fee. So if you.

Andrew Kang: Overall, we believe the position, the positive position in our cloud business, along with a recent license, in combination with the release of our first to market enterprise scale integrated AIBI product, produces positive catalysts heading into the fourth quarter. That being said, we maintain the stance of cautious optimism due to the ongoing presence of macroeconomic headphones. We anticipate total revenue this year to be in line with last year. We continue to focus on product innovation in AI and cloud.

We're an investor in micro strategy, you don't get charged an annual fee or some sort of custody fee in order to be invested in our company.

We cover the cost of cost city, using our operating cash flows and other cash flows from the operating business.

Andrew Kang: We will continue to grow cloud subscription revenues and strengthen the quality of our recurring revenue as we transform our platform. We will remain disciplined and continue to manage to drive margin expansion, and we will continue to acquire and hold Bitcoin.

If you were to buy bitcoin itself.

You normally have to place that we're the custodian of your institutional investor and saw all institutional custodians charge a fee.

There is an annual fee to invest in our future ETF as well.

Andrew Kang: Thank you for your time today, and for your continued support of MicroStrategy.

There will be fees to invest in spot Etf's and there has been a fee to invest in <unk>. So so the ability to get the corn exposure and not get charged a fee is another path for us a differentiator.

Michael Saylor: I'll now turn the call over to Michael for his remarks. Thank you. Thanks for joining us today.

Michael Saylor: I thought I would start with a quick performance review of MicroStrategy since we adopted our Bitcoin Strategy. It's now approximately 37 months, so just slightly more than 3 years since we adopted our Bitcoin Strategy. And we benchmark ourselves against all major asset classes and against big tech stocks, and also against enterprise software companies that are enterprise software peers. And I'm happy to report to you that our performance over this time period is plus 242%.

Third differentiator is as an operating company, we can acquire bitcoin with cash flows and weak and we can organically accrete more bitcoin.

Michael Saylor: And that exceeds the Bitcoin performance in the same period of 192%. So MicroStrategy is outperforming the Bitcoin asset index. The S&P is up 25% over that time period. So with almost 10x the S&P performance, the NASDAQ is up 17%.

And we can do with cash flows where we can do it with accretive financings of different story that are accretive that are accretive equity financings and that's a plus.

These other options don't allow you to organically create bitcoin.

So thats another plus for for institutional investors that our bitcoin balls.

The fourth differentiator is that as an operating company, we can use intelligent leverage.

We can we can do asset backed financing we can do convertible financing we can do senior secured debt financing, we could set up credit lines. So a lot of things on operating company can do that and ETP can't do and of course. If you are just holding the underlying bitcoin and a custodian the bitcoin is not going to leverage itself in there.

Really isn't you don't have those sort of types of debt financing you can do against that corner commodity right now as an institutional investor.

So that has been a nice differentiator for us and we have used that in order to create a product which is not just a straight bitcoin investment that the $2 $2 billion of debt with a one 6% blended interest rate is an example of intelligent leverage.

Michael Saylor: As you recall, we had to choose between gold and digital gold in August of 2020. And we chose digital gold, that is Bitcoin. The actual gold is down 2%. So 192% versus minus 2% is the difference between choosing the right asset and the wrong asset. This totally makes sense because we're living in an age of digital transformation, and there's just a growing awareness that Bitcoin is the digital gold of the 21st century.

The differentiator is that we have a non bitcoin business that we operate our enterprise software business.

<unk> been in that business for 30 years, and so we're not just a pure bitcoin play, but we provide some downside protection because we're able to able to rely upon cash flows and operating income from the enterprise software Corporation.

Michael Saylor: Silver's down 18% in that time period. And of course, bonds which we were holding on our balance sheet are down 24%. And we had a concern about holding bonds because of the interest rate environment. That's why we wanted to buy some other tangible asset. As you know, bonds have been diluted to balance sheets, so we're holding them.

And of course as a NASDAQ listed stock with a healthy spot volume, we have we have derivatives options or stock options that traded against micro strategy and you can use them for risk management. If you want to you want a buy sell trade volatility or hedge you were able to do that and.

Those are options available to institutional investors on exchanges they understand.

And those options aren't easily available to them with many of the other choices they have.

Michael Saylor: MicroStrategy is outperformed all the big tech companies, and you can see here, Google, Microsoft, Apple, Meta, and some of the big techs haven't even had a positive return in that time period. And MicroStrategy has almost 3x the next best competitor in the enterprise software space. So I would say based upon this, over this time period that our Bitcoin strategy is working. In essence, we have transformed the company with a $500 million enterprise software company into a new kind of firm that has both a $500 million software business as well as a $5 billion plus digital assets business.

So micro strategies.

We've created a unique investment vehicle it certainly not the only appropriate investment vehicle in there there are other investment vehicles, so it'll be more appropriate for a different class of investors.

And as we look forward to potential spot Etf's coming along we think that's going to actually grow the market dramatically and it's going to be.

Another great investment option for a different class of institutional investors that will be beneficial to all.

But we're committed.

Two our bitcoin operating model and being a hybrid enterprise software company.

And Bitcoin company.

Taking advantage of our intelligent options when they present themselves in order to provide our investors with a unique opportunity to get to.

Michael Saylor: And we're able to get benefits from both the business intelligence part of our business as well as the We can go to the next slide now. One of the things that's coming is, is more different options for institutional investors to get Bitcoin exposure. And oftentimes people ask us, so what's the difference between microstrategy and just buying the Bitcoin out right or buying a Bitcoin futures ETF or buying gray scale or buying a potential spot Bitcoin ETF if and when they're available.

They get long bitcoin exposure in an intelligent fashion.

So with that I think I'll say, just a few last words on the bitcoin market outlook.

First of all.

There's a lot of discussion of spot Etp's.

If and when they are approved we certainly think that they are beneficial to the entire asset class thing they will they will represents.

And on ramp for capital on Wall Street to come into the bitcoin ecosystem and they will dramatically increase the availability of bitcoin as an asset.

Michael Saylor: And so I think this chart is both useful to explain what makes microstrategy different. And you can also see in this chart, the structure reasons why we are able to outperform Bitcoin itself over this last three or time period. If you're an investor and you're looking for accessibility to Bitcoin as an asset class, microstrategy is a ticker on NASDAQ, MSTR. Whereas buying the Bitcoin itself as the commodity requires that you set up a new relationships with a cryptocurrency exchange and a crypto custodian and oftentimes investors just don't have those exchange and custody relationships.

To both retail investors as well as institutional investors corporate investors.

You know and trust.

And the documents and the like so we.

We think that there are many many types of investors that will benefit from that product I think that.

Two other things that it does is it provides comfort to institutional investors because when they see offerings from companies like Blackrock or fidelity or invesco that they're familiar with.

Then that's going to actually catalyze them to do research and to educate themselves.

Michael Saylor: So it's not so easy to buy the underlying Bitcoin. And in some cases, it's just not practical or not possible at all. They wouldn't be allowed to do it or they wouldn't have the mandate to do it. The futures ETF does provide that accessibility. The body ETFs have not been available up until now. And of course, GBTC has been an over-the-counter product and there are many institutional investors that struggle with over-the-counter aspects of access. So that's been a benefit to us.

And we've already seen.

An improvement and an expansion and analytical coverage from wall Street of the Bitcoin asset class I think we will see more and more analyst coverage.

From a traditional wall Street bank.

Banks.

As these etp's make bitcoin exposure available and so more coverage means more education means more awareness.

And and.

That resulted in more interest and more on ramps will facilitate that interest in <unk>.

Michael Saylor: The second differentiator has been our operating company structure. We are an operating company that is providing Bitcoin exposure. We're not finance company. And that means we have some options. One option is we don't charge a fee. So if you're an investor in micro strategy, you don't get charged an annual fee or some sort of custody fee in order to be invested in our company. We cover the cost of custody using our operating cash flows and other cash flows from the operating business.

Because our bitcoin is got a fixed supply as the demand increases and we think that'll be bullish for the entire asset.

Michael Saylor: If you were to buy Bitcoin itself, you normally have to place it with a custodian of your institutional investor and so all institutional custodians charge a fee. There is an annual fee to invest in a futures ETF as well. There will be fees to invest in spot ETFs and there has been a fee to invest in GBTC. So the ability to get the coin exposure and not get charged a fee is another plus for us, a differentiator.

Okay.

The second major factor we think.

And the market outlook is going to be the having.

They're having is coming right now it's forecast to be sometime in late April of 2024.

Much of the organic selling.

Demand or are the organic supply available for sale, a bitcoin or natural sellers, our bitcoin miners.

And after the having that that natural supply available for sale will be cut half.

At least from the bitcoin miners and the bitcoin miners are substantial part of all the natural sellers in the market. So the having all should have.

<unk> dramatic material effect on the supply available for sale at the same time that that.

The demand for the asset increases by a spot bitcoin ETP.

Michael Saylor: The third differentiator is as an operating company, we can acquire Bitcoin with cash flows and we can organically accrete more Bitcoin. And we can do cash flows or we can do it with a creative financing of different sort of creative debt or creative equity financing. And that's a plus and these other options don't allow you to organically accrete Bitcoin. So that's another plus for our institutional investors that are Bitcoin balls. The fourth differentiator is that as an operating company, we can use intelligent leverage.

So we think that's bullish for the asset class.

The third dynamic is going to be a fast these initiatives towards fair value accounting.

That can only be helpful.

Educating the market clarifying the assets and and creating more transparency.

That solves problems that are there.

Corporations would have if they were to take on large material amounts of bitcoin exposure.

And this.

This is not a near term, but more of a long term driver, but it's material has a long term driver.

Our fourth interesting driver in the market, which is positive is the entire crypto regulation developments and the progression of them.

Michael Saylor: We can do asset back financing. We can do convertible financing. We can do senior security debt financing. We could set up credit lines. So there are a lot of things that an operating company can do that an ETP can't do. And of course, if you're just holding the underlying Bitcoin and the custodian, the Bitcoin is not going to leverage itself and there really isn't. But you don't have those sort of types of debt financing you can do against Bitcoin, the commodity right now as an institutional investor.

As the entire crypto industry continues to be regs.

Regulated.

I think that's creating more clarity and more comfort for institutional investors.

To be able to participate in this space and so I think we will see positive regulatory initiatives that will create more clarity and more consistency in and.

Michael Saylor: So that has been a nice differentiator for us and we have used that in order to create a product which is not just a straight Bitcoin investment, you know, that the $2.2 billion of debt with a 1.6% blended interest rate is an example of intelligent leverage.

And more comfort during the coming 12 months.

<unk>.

Okay.

I think.

Another driver, which is material in the coming 12 months as macroeconomics.

Michael Saylor: The fifth differentiator is that we have a non Bitcoin business. So we operate our enterprise software business and we've been in the business for 30 years. And so we're not just a pure Bitcoin play, but we provide some downside protection because we're able to be able to rely upon cash flows and operating income from the enterprise software corporation. And of course, as a NASDAQ listed stock with a healthy spot volume, we have we have derivatives options or there's stock options that trade against micro strategy and you can use them for risk management if you want to.

Both the macroeconomic environment and in the United States as well as global Macroeconomics. There is continued global inflation and everywhere that that pops up its head.

It's driving interest and bitcoin and and it's.

It's catalyzing awareness.

I think the current macroeconomic environment.

With the fed slowing down on tightening.

As it has is positive certainly over the past year and a half with the interest rates going from almost nothing to more than 500 basis points, that's been a headwind.

Michael Saylor: You want to buy sell trade volatility or hedge you're able to do that and those are those are options available to institutional investors on exchanges they understand. And those options aren't easily available to them with many of the other choices they have.

Now in the current environment I don't think I don't think we expect some of our types of macroeconomic headwinds and just to pause on federal reserve activity that we've seen in the past too.

Michael Saylor: So micro strategies where we've created a unique investment vehicle, it's certainly not the only appropriate investment vehicle and there there are other investment vehicles that will be more appropriate for different class of investors. And as we look forward to potential spot ETFs coming along, we think that's going to actually grow the market dramatically and it's going to be another great investment option for a different class of institutional investors. It'll be beneficial to all, but we're committed to our Bitcoin operating model and and being a hybrid enterprise software company and and Bitcoin company taking advantage of our intelligent options when they present themselves in order to provide our investors with a unique opportunity to get. To get long Bitcoin exposure and an intelligent fashion.

Fed announcements have been positive I think for the outlook for the bitcoin asset class.

Bitcoin technology integration efforts continue I.

I think it's a it's another bullish trend.

The development of Lightning continues and the activity of corporations to integrate.

The Bitcoin protocol and the base layer of bitcoin as well as integrate with lightning.

A positive an auspicious and they continue and I think that.

As time goes on we're just going to see more and more in technology initiatives that'll be beneficial.

And creating utility for bitcoin.

Throughout the entire.

Retail community and business community.

And then I will end my my.

My thoughts with you.

The observation that mainstream awareness seems to be reaching new heights for bitcoin.

We have.

We have the likes of Larry Fink, referring to it as a flight to quality.

Michael Saylor: So with that, I think I'll say just a few last words on the Bitcoin market outlook. First of all, there's a lot of discussion of spot ETPs. If and when they are approved, we certainly think that they're beneficial to the entire asset class, they will they will represent an on ramp for capital on Wall Street to come into the Bitcoin ecosystem. And they'll dramatically increase the availability of Bitcoin as an asset to both retail investors as well as institutional investors corporate investors, and Trust and the Dalmons and the like.

We have.

Druckenmiller, noting that as illegitimate assets embraced by an entire generation and lamenting that he doesn't own more of it or own it.

Michael Saylor: So we think that there are many, many types of investors that will benefit from that product. I think that two other things that it does is it provides comfort to institutional investors because when they see offerings from companies like BlackRock or Fidelity or Invest Go that they're familiar with, then that's going to actually catalyze them to do research and to educate themselves. And we've already seen an improvement and an expansion and analytical coverage from Wall Street of the Bitcoin asset class.

Mohamed Al Ariane on TV, noting that bitcoin is being viewed now.

As a safe Haven asset.

We have a lot of coverage a bitcoin.

In TV on television networks news networks and also through mainstream media that should continue to grow.

As that coverage increases that combined with increasing availability of wall Street analysts coverage and new voices emerging in a community like like fidelity with their analysis bitcoin.

All of those new voices and new interest.

Is driving education of.

A new generation of investors I think we can expect more of that during the coming 12 months.

And all of these things together, just create a virtual cycle and as they drive bitcoin awareness, they should drive bitcoin investment and that should drive more news and that should drive more awareness.

That should catalyze more and more firms to take an interest in supporting bitcoin or investing in bitcoin.

Michael Saylor: I think we'll see more and more analyst coverage from traditional Wall Street banks as these ETPs make Bitcoin exposure available. And so more coverage means more education means more awareness. And that results in more interest and more on ramps will facilitate that interest. And because Bitcoin is got a fixed supply as the demand increases, then we think that'll be bullish for the entire asset.

And so with that I will go ahead and end My review and we can move on to Q&A.

Thank you Michael.

We are now going to jump right into questions.

And the first question is for Michael.

Okay.

The 10-Q discloses that Michael entered into.

Can be five one plan to exercise micro strategy stock options.

Can you. Please provide further color on the plan and the thought process.

Michael Saylor: But the second major factor we think in the market outlook is going to be the having. The having is coming right now. It's forecast to be sometime in late April of 2024 much of the organic selling demand or the organic supply available for sale of Bitcoin or natural sellers are Bitcoin miners. And after the having that that natural supply available for sale will be cut half least from the Bitcoin miners and the Bitcoin miners are substantial part of all the natural sellers in the market.

Sure Yeah. Thanks for that question.

I was granted stock option in 2014 with respect to 400000 shares which is going to expire next April if I don't exercise it by then.

Michael Saylor: So the having all should have a pretty dramatic material effect on the supply available for sale at the same time that that the demand for the asset increases via a spot the coin ETPs. So we think that's bullish for the asset class.

For almost a decade now at my request. The company has only paid me a $1 salary and I have chosen not to be eligible for any cash bonuses exercising. This option will allow me to address some financial obligations as well as to acquire additional bitcoin for my personal account.

Under my trading plan.

I plan to exercise and sell 5000 shares on each trading day beginning on January <unk>.

2024 and.

And ending on April 25th subject to a minimum price condition.

This means the sale will take place over almost four months.

If you'd like more details about the plan I would refer you to the 10-Q.

I continue to be optimistic about micro strategies prospects and should note that my equity stake in the company. After these sales will remain very significant.

Michael Saylor: The third dynamic is going to be fast these initiative toward fair value accounting. That can only be helpful in educating the market clarifying the assets and creating more transparency that solves problems that corporations would have if they were to take on large material amounts of Bitcoin exposure.

Thanks, Michael.

Next question is also for Michael.

What is management's view on the impacts to the bitcoin ecosystem at large if a spud bitcoin EDF is approved.

And what is management's view on the potential impact of micro strategy.

Michael Saylor: And this is not a near term, but more of a long term driver, but it's material has a long term driver. A fourth interesting driver in the market, which is positive is the entire crypto regulation developments and the progression of them as the entire crypto industry continues to be regulated. I think that's creating more clarity and more comfort for institutional investors to be able to participate in this space. And so I think we'll see positive regulatory initiatives that will create more clarity and more consistency and and more comfort during the coming 12 months.

I think that it's a catalytic event a big milestone in the institutional adoption of bitcoin as an asset class.

Thank you.

So I think it's going to be very very auspicious for the asset I think it will usher in a new generation of analysts it will usher in a lot more bitcoin awareness it will simplify the process of acquiring and holding bitcoin and allocating the bitcoin.

By an order of magnitude.

And and.

I think it will create.

Constructive competition, because all of these various ETF vendors will all be competing for assets share and as they do it.

It'll be in their best interest to communicate and educate all of their clients on bitcoin. So I think it's very good for the ecosystem I think it's complementary as as a way to participate.

Michael Saylor: I think another driver, which is material in the coming 12 months, is macroeconomics. Both macroeconomic environment in the United States, as well as global macroeconomics, there is continued global inflation and everywhere that pops up its head, its driving interest in Bitcoin and it's catalyzing awareness and I think the current macroeconomic environment with the Fed slowing down on tightening, as it has is positive, certainly over the past year and a half with the interest rates going from almost nothing to more than 500 basis points that's been a headwind and now in the current environment, I don't think we expect similar types of macroeconomic headwinds and just a pause on Federal Reserve activity that we've seen in the past two. Fed announcements have been positive, I think, for the outlook for the Bitcoin asset class.

There are many other ways, they're already participants in the ecosystem. They take different strategies. For example block has taken a very technology focused strategy and they are very interested in integrating into their products like cash app.

Micro strategy has assumed a bitcoin strategy, which consists of acquiring and holding the underlying asset.

I think other companies have offered options type strategies and trading strategies.

There are going to be a class of investors that will welcome the.

The ability to hold the spot product through and eat a T P wrapper and and so I think it's generally good for the ecosystem as from micro strategy I think it's going to be good for our company as well as our shareholders because it will expand the overall ecosystem none of these ETP.

Companies will be operating companies themselves, so they're not really pursuing our strategy of intelligent leverage as an operating company that.

Michael Saylor: Bitcoin technology integration efforts continue. I think it's another bullish trend.

They'll be pursuing various ETF and ETP type strategies.

Michael Saylor: The development of lightning continues and the activity of corporations to integrate the Bitcoin protocol and the base layer of Bitcoin as well as integrate with lightning are positive and auspicious and they continue and I think that as time goes on, we're just going to see more and more technology initiatives that will be beneficial in creating utility for Bitcoin throughout the entire retail community and business community and then I will end my thoughts with the observation that mainstream awareness seems to be reaching new heights for Bitcoin. We have the likes of Larry Fink referring to it as a flight quality.

And overall that means that it should expand the entire asset class to the benefit of all participants.

Thanks, Michael I think the connection issue so.

The next question we have.

This one is for <unk>.

How should we be thinking about the AI partnerships with Microsoft and their monetization can you.

Some color on the impact of AI offerings on margin.

Yes, Thanks, Andrew.

So one of the ways, we were able to be first to market with our AI by offering.

As we fully embedded Microsoft Azure is open AI product through a partnership with Microsoft.

Michael Saylor: We have Druck and Miller noting that it's a legitimate asset embraced by an entire generation and lamenting that he doesn't own more of it or own it. We have Muhammad El-Aryan on television noting that Bitcoin is being viewed now as a safe haven asset. We have a lot of coverage of Bitcoin on television networks, news networks and also through mainstream media that should continue to grow as that coverage increases that combined with increasing availability of Wall Street analyst coverage and new voices emerging in the community like Fidelity with their analysis of Bitcoin.

And it provides.

Real benefits to prospects and customers one is they don't need to bring their own LLM, which if you're a large enterprise you may not know exactly where to go or how to go do that and so we've integrated it fully.

Second is is as of now Azure open AI.

Tries technologies like chat GBT is the superior in the market and so it's something that that people are familiar with and know how to work with.

And the third carry with it a lot of the privacy and security capabilities of Azure open AI too.

That's our sort of first entre into the market over time, and we do plan to integrate other L. O N E.

Michael Saylor: All of those new voices and new interest is driving education of a new generation of investors. I think we can expect more of that during the coming 12 months and all of these things together just create a virtual cycle and as they drive Bitcoin awareness, they should drive Bitcoin investment and that should drive more news and that should drive more awareness and that should catalyze more and more firms to take an interest in supporting Bitcoin or and Bitcoin.

From the hyperscale or as to whether it be Google or AWS and allow our customers to bring their own hello that utilize a private <unk>.

Youll be seeing that as we enter into 2024.

As far as monetization.

We're today as I mentioned pricing this at $20000 for 20000 questions consumption base, obviously customer has to be using our curve by technology and if theyre not they will get microstrategy bye.

And the pricing associated with that and then add on AI on top of that.

Michael Saylor: And so with that, I will go ahead and end my review and we can move on to Q&A.

And I think as we get into 2024, we will see.

Some material revenue come out of this new product.

<unk> already seen some pretty strong pipeline with.

With Microstrategy AI as I mentioned earlier is causing customers to want to move to our cloud because it's only available in the clouds. So that's another nice tailwind that's created by our new AI offerings.

Shirish Jajodia: Thank you, Michael. We are now going to jump right into questions.

Michael Saylor: And the first question is for Michael. The 10Q discloses that Michael entered into a 10B 5-1 plan to exercise MicroStrategy stock options. Can you please provide further color on the plan and the talk process? Sure. Yeah, thanks for that question. I was granted a stock option in 2014 with respect to 400,000 shares, which is going to expire next April, if I don't exercise it by then. For almost a decade now, at my request, the company has only paid me a $1 salary and I've chosen not to be eligible for any cash bonuses.

Thanks, Paul.

I can answer the next question next for Andrew.

How does micro strategy think about the balance between investing in core business, while utilizing excess cash flow to acquire more bitcoin.

Thanks Krish.

I would say.

If you recall when we launched our bitcoin strategy we converted.

Our cash reserves as well as our investment holdings into bitcoin.

Which I think is served.

Micro strategy to be extremely accretive.

Michael Saylor: Exercising this option will allow me to address some financial obligations as well as to acquire additional Bitcoin for my personal account. Under my trading plan, I plan to exercise until 5,000 shares on each trading day, beginning on January 2nd, 2024 and ending on April 25th, subject to a minimum price condition. This means the sale will take place over almost four months. If you'd like more details about the plan, I would refer you to the 10Q. I continue to be optimistic about MicroStrategy's prospects and should note that my equity stake and the company after these sales will remain very significant.

And Michael shared some of those statistics earlier as part of our overall liquidity management.

Michael Saylor: Thanks, Michael.

We ensure working capital.

Adequate working capital to manage all of our operations. We also ensure we have adequate capital to invest in product development.

And as well as service our debt I'd say using excess cash from operations allows us.

To have the ability to organically create more bitcoin.

Again, Thats served us very well.

And has driven a lot of value for our shareholders. So I would expect us to continue along that strategy.

Thanks, Andrew.

The next question is for Andrew as well can you. Please provide tox. If you have an expected timeline for Fas B as fair value accounting rule implementation and how the street should think about its impact on micro strategies future bitcoin acquisitions and the impact on core business.

Michael Saylor: The next question is also for Michael. What does management's view on the impacts to the Bitcoin ecosystem at large if a spot Bitcoin ETF is approved and what does management's view on the potential impact to MicroStrategy? I think that it's a catalytic event, a big milestone in the institutional adoption of Bitcoin as an asset class. I think it's going to be very, very auspicious for the asset that I think it will usher in a new generation of analysts.

I'd say from from conversations we've had.

With various folks related that are kind of <unk>.

We're of the FASB progress it seems that they are the FASB is pretty much on track with what I would call maybe a normal timeline to finalize this accounting rule.

Michael Saylor: It will usher in a lot more Bitcoin awareness. It will simplify the process of acquiring and holding Bitcoin and allocating the Bitcoin by an order of magnitude. I think it will create a constructive competition because all of these various ETF vendors will all be competing for asset share and as they do it, it will be in their best interest to communicate and educate all of their clients on Bitcoin. I think it's very good for the ecosystem.

I, obviously can't predict when that will occur, but I think we believe it is likely to happen based on that normal timeline either later this year or early next year.

So.

I would say fairly in the in the near term.

Overall I think.

Mike will talk about it as well, but the change I believe will.

Help other institutions effectively more effectively evaluate holds.

Holding bitcoin on corporate balance sheets, and hopefully we will provide additional transparency for more adoption.

Michael Saylor: I think it's complementary as a way to participate to many other ways. There are already participants in the ecosystem that take different strategies. For example, Block has taken a very technology focused strategy and they're very interested in integrating into their products like CashApp. MicroStrategy has assumed a Bitcoin strategy which consists of acquiring and holding the underlying asset. I think other companies have offered options type strategies and trading strategies. There are going to be a class of investors that will welcome the ability to hold the spot product through an ETP wrapper.

A bitcoin as well.

Thanks, Andrew.

Next question is for Michael.

How does the recent move up in the price of Bitcoin.

The company's ongoing strategy to acquire more bitcoin should we think of micro strategy has an average cost buyer, adding two ex bitcoin stores.

As permitted by the capital markets and cash flow regardless of the price.

We have a laser focus on bitcoin acquisition.

So we will.

The volatility and the price movement has had one primary impact which is it has brought worldwide awareness to bitcoin and it has gotten everybody focused on bitcoin. So I think it's accelerating education.

Michael Saylor: It's generally good for the ecosystem. As for MicroStrategy, I think it's going to be good for our company as well as our shareholders because it will expand the overall ecosystem. None of these ETP companies will be operating companies themselves. They're not really pursuing our strategy of intelligent leverage as an operating company. They'll be pursuing various ETF and ETP type strategies. Overall, that means that it should expand the entire asset class to the benefit of all participants, participants.

Michael Saylor: Thanks, Michael.

And because bitcoin as a novel asset class education is critical for adoption. So I think generally it's long term bullish we try not to get too caught up in the volatility. So when we have excess cash flows from operations that that we don't Natus work.

Capital then we will generally acquire bitcoin with it because we view it as a credit accretive and then when the capital markets opera offer us opportunities to do financings that are accretive to our shareholders. So that we can buy bitcoin.

Phong Le: I think Shirish had a connection issue, so I'll read the next question we have. This one is for Phong. How should we be thinking about the AI partnerships with Microsoft and their monetization? Can you shed some color on the impact of AI offerings on margin? Thanks, Andrew. One of the ways we were able to be first to market with our AI BI offering is we fully embedded Microsoft Azure's OpenAI product through a partnership with Microsoft.

We will avail ourselves of that.

Those circumstances change month by month quarter by quarter end.

And we have you.

We have.

A good set of models that we use to keep track of all these changes and we're always monitoring opportunity so as to make sure that we.

We take advantage of it when it comes our way.

Thanks, Michael and we will take one last question here.

Phong Le: It provides several benefits to prospects and customers. One is they don't need to bring their own LLM, which if you're a large enterprise, you may not know exactly where to go, how to go, do that, and so we've integrated it fully. The second is as of now, Azure OpenAI tries technologies like ChatGBT is the superior LLM in the market, and so it's something that people are familiar with and know how to work with. In the third, we carry with it a lot of the privacy and security capabilities of Azure OpenAI too.

My phone.

You touched on the remainder of the year.

And outlook for 2024, and main drivers of growth and challenges to keep an eye on and what are some of the levers that can be placed to increase profitability in the future.

Yeah. Thanks, <unk> I guess, a few things one as we look into 2024 the.

Two big drivers of growth will be AI, and cloud and their related migrating more customers to the cloud getting them to adopt our cloud native platform.

Getting customers to adopt AI, which in turn will get customers to adopt cloud and moving more into the prospect space, because I think our AI and cloud Opticals are quite the prospects pilots. So I think those would be the big drivers of growth.

Phong Le: That's our sort of first entry into the market. Over time, we do plan to integrate other LLMs from the hyperscalers, whether it be Google or AWS, and allow our customers to bring their own LLM, or utilize a private LLM. So you'll be seeing that as we enter into 2024. As far as monetization, we're today, as I mentioned, pricing this at $20,000 for $20,000 questions, consumption-based. The customer has to be using our current BI technology, and if they're not, they'll get MicroShred GBI, and the pricing associated with that, and then add on AI and pop up that.

Concerns that we might have.

Macroeconomic headwinds we saw that in the first half of this year.

<unk> backup right, we have a lot of uncertainty right now whats happened.

And the macroeconomic environment.

And so those are the things that I think about and as far as the cash flows and margins go I do think we can do everything that we mentioned, while it's still being pretty disciplined about our margins, which I think you've seen us.

You're able to accrete margins in the last few quarters and I think we will continue to do that.

So I think with that I'm going to close this call I want to thank everyone for being with us today.

Phong Le: I think this would get into 2024. We'll see the material revenue come out of this new product. We're already seeing some pretty strong pipeline with MicroShred GBI. As I mentioned earlier, as the customers want to move to our cloud because it's only available in the clouds. That's another nice tailwind that's created by our new AI offer.

Andrew Kang: Thanks, Phon.

We appreciate your support we're enthusiastic as ever about our enterprise software strategy as well as our big question for Ajay I think we've seen positive momentum in both of those areas in the third quarter and we wish you all a good quarter and look forward to seeing getting 12 weeks in the 'twenty 'twenty four thanks al.

Okay.

Andrew Kang: I can ask the next question, next for Andrew. How does MicroShred G think about the balance between investing and core business while utilizing excess cash flow to acquire more Bitcoin? Thanks, Sherish.

Goodbye.

Andrew Kang: I'd say if you recall when we launched our Bitcoin strategy, we converted our cash reserves, as well as our investment holding into Bitcoin, which I think has served MicroShred G to be extremely creative. And Michael shared some of those statistics earlier as part of our overall liquidity management. We ensure working capital, adequate working capital to manage all of our operations. We also ensure we have adequate capital to invest in product development, and as well as service our debt.

Andrew Kang: I'd say using excess cash from operations allows us, to have the ability to organically creep more Bitcoin. Again, that's served us very well and it's driven a lot of value for shareholders so I'd expect us to continue along that strategy. Thanks, Andrew.

Andrew Kang: The next question is for Andrew as well.

Andrew Kang: Can you please provide thoughts if you have an expected timeline for FASB's fair value accounting rule implementation? And how this tree should think about its impact on MicroStrategy's future Bitcoin acquisitions and impact on core business? I'd say from conversations we've had with various folks related that are kind of aware of the FASB progress. As it seems that they are, the FASB is pretty much on track with what I would call maybe a normal timeline to finalize this accounting rule.

Andrew Kang: I obviously can't predict when that'll occur but I think we believe it is likely to happen based on that normal timeline either later this year or early next year. I would say fairly in the near term.

Andrew Kang: Overall, I think Michael talked about it as well but the change I believe will help other institutions effectively, more effectively evaluate holding Bitcoin on corporate balance sheets and hopefully will provide additional transparency for more adoption of Bitcoin as well. Thanks, Andrew.

Michael Saylor: Next question is for Michael. How does the recent move up in the price of Bitcoin impact the company's ongoing strategy to acquire more Bitcoin? Should we think of MicroStrategy as an average cost buyer adding to its Bitcoin stores as permitted by the capital markets and cash flow regardless of the price?

Michael Saylor: We have a laser focus on Bitcoin acquisition and so we will, the volatility and the price moment has had one primary impact which is it has brought worldwide awareness to Bitcoin and it has gotten everybody focused on Bitcoin. So I think it's it's accelerating education and because Bitcoin is a novel asset class education is critical for adoption. So I think generally it's long term bullish. We try not to get too caught up in the volatility.

Michael Saylor: So when we have access cash flows from operations that that we don't need is working capital, then we will generally acquire Bitcoin with it because we viewed as a creative. And then when the capital markets offer offer us opportunities to do finance things that are creative to our shareholders so that we can buy Bitcoin, you know, we will avail ourselves of that.

Michael Saylor: Those circumstances change month by month quarter by quarter and and we have you know we have a good set of models that we use to keep track of all these changes and we're always monitoring opportunity so as to make sure that we take advantage of it when it comes our way.

Phong Le: Thanks Michael and we'll take one last question here which is for Phong.

Phong Le: What are your thoughts on the remainder of the year and outlook for 2024 and main drivers of growth and challenges to keep an eye on and what are some of the livers that can be pulled to increase profitability in the future. Yeah, thanks, Shirish. I guess a few things. One is we look into 2024. The two big drivers of growth will be AI and cloud and they're related by creating more customers to cloud, giving them to adopt our cloud-native platform and getting customers to adopt AI, which in turn will get customers to adopt clouds and moving more into the prospect space because I think our AI and cloud hospitals are quite prospect-friendly.

Phong Le: So I think those are the big drivers of growth. Concerns that we might have, macroeconomic headwinds, you know, we saw that in the first half of this year could rear back up, right? We have a lot of uncertainty right now what's happened in the macroeconomic environment. And so those are the things that I think about and as far as cash flows and margins go I do think we can do everything that we mentioned while still being pretty disciplined about our margins which I think you've seen us able to accrete margins in the last few quarters and I think we can continue to do that.

Phong Le: So I think with that I'm going to close this call. I want to thank everyone for being with us today and we appreciate your support when enthusiastic as ever about our enterprise software strategy as well as our Bitcoin strategy. I think we've seen positive momentum in both of those areas in the third quarter and we wish you all a good quarter. We look forward to seeing getting 12 weeks in 2024. Thanks all. Good Bye.