Q4 2023 MicroStrategy Inc Earnings Call

Operator: to update these forward-looking statements, which speak only as of today. Also, during today's call, we will refer to certain non-GAAP financial measures.

Statements that speak only as of today.

Also during today's call, we will refer to certain non-GAAP financial measures.

Operator: Reconciliations showing GAAP versus non-GAAP results are available in our earnings release and presentation, which were issued today and are available on our website at microstrategy.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, Phong, or Andrew will answer questions at the end of the session.

Reconciliation showing GAAP versus non-GAAP results are available in our earnings release and presentation.

Mitchell ratio today and are available on our website at Microstrategy Dot com.

Speaker Change: 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.

Speaker Change: You can submit questions throughout the webinar and Michael form or Andrew the answer questions at the end of the session.

Operator: Please be sure to provide your name and your company's name when submitting your question. Now, I'll walk you through the agenda for today's call. First, Phong Le will cover the business results and the key pillars of our business strategy. Second, Andrew Kang will cover the financial results for the fourth quarter and full year of 2023, then Michael Saylor will provide a strategic review and discuss recent Bitcoin market updates. And lastly, we will open up to Q&A. With that, I will turn the call over to Phong Le, President and CEO of MicroStrategy. Thank you, Suresh.

Speaker Change: Please be sure to provide your name and your company's named when submitting your questions now.

Speaker Change: Now I'll walk you through.

Speaker Change: The agenda for today's call first <unk>.

Speaker Change: Lee will cover the business results and the key pillars of our business strategy second Andrew Ken will cover the financial results for the fourth quarter and full year of 2023.

Speaker Change: Then Michael Saylor will provide a strategic review.

Speaker Change: And discuss recent bitcoin market updates and lastly, we will open up to Q&A.

Michael J. Saylor: With that I will turn the call over to formerly President and CEO of micro strategy.

Michael J. Saylor: Thank you Shirley Hello, everyone I would like to welcome all of you to today's webinar on a start by providing an update on the state of the company and achievements over the past year.

Phong Le: Hello, everyone. I'd like to welcome all of you to today's webinar. I want to start by providing an update on the state of the company and achievements over the past. Today, MicroStrategy is the largest corporate holder of Bitcoin in the world, holding 190,000 Bitcoins with a total Bitcoin market value of $8.1 billion as of yesterday. In 2023, we acquired 56,650 bitcoins for a total purchase cost of $1.9 billion, an average price of $33,580. In 2024 so far, we've acquired an additional 850 bitcoins for a total purchase cost of $37 million. Over the past year, we've seen Bitcoin mature further as an institutional-grade asset class with broader regulatory recognition and institutional adoption. We remain highly committed to our Bitcoin strategy with a long-term focus. Andrew will provide further details on our Bitcoin purchase activity for this quarter later. MicroStrategy is also positioned as the world's largest independent publicly traded business intelligence company.

Michael J. Saylor: Today micro strategy is the largest corporate holder of bitcoin and the world holding 190000, bitcoin with a total bitcoin market value of $8 $1 billion as of yesterday.

Michael J. Saylor: In 2023, we acquired 56650 bed coins for a total purchase cost of $1 $9 billion, an average price of $33580 in 2024, so far we required an additional 850 bitcoins for a total purchase cost.

Michael J. Saylor: A $37 million.

Michael J. Saylor: Over the past year, we've seen bitcoin mature further as an institutional grade asset class with broader regulatory recognition and institutional adoption.

Michael J. Saylor: We remain highly committed to our bitcoin strategy with a long term focus.

Michael J. Saylor: Andrew will provide further details at our bitcoin purchase activity for this quarter later.

Michael J. Saylor: Microstrategy is also position as the world's largest independent publicly traded business intelligence company.

Phong Le: Our objective is to grow an AI and cloud-powered BI software business. We have over 1,900 employees focused on our software business, devoted to achieving our vision of intelligence everywhere. The past year has marked the most transformative in our 25-year history of being a public company as we released MicroStrategy 1, MicroStrategy AI, MicroStrategy Cloud for Azure, AWS, and now Google Cloud Platform, and continue to focus on growth in both cloud and AI plus. In 2023, we made important progress in our shift toward our cloud offering, resulting in annual subscription services revenue of $81.2 million, an increase of 3 The strong growth in our subscription services revenue was driven by both existing customer migrations to the cloud and new customer acquisition. Our customer renewal rates continue to be among the highest we have ever experienced, and our subscription billings remain strong.

Michael J. Saylor: Our objective is to grow in AI and cloud powered by software we have over 1900 employees focused on our software business devoted to achieving our vision of intelligence everywhere.

Michael J. Saylor: The past year. It has marked the most transformative and our 25 year history of being a public company as it released Microstrategy, one micro strategy AI Microstrategy cloud for Azure AWS and now the Google Cloud platform and continue to focus on growth in both cloud and AI.

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Michael J. Saylor: In 2023, we made important progress in our shift towards our cloud offering resulting in annual subscription services revenue of $81 2 million, an increase of 34% year over year.

Michael J. Saylor: The growing the strong growth in our subscription services revenue was driven by both existing customer migrations to the cloud and new customer wins.

Michael J. Saylor: Our customer renewal rates continue to be among the highest we've ever experience in our subscription billings remained strong.

Phong Le: Overall, we continue to see further global adoption of our cloud platform as a result of transitioning our business strategy and product offerings from an on-prem perpetual license software company to a cloud native organization. In addition, we've transformed the way we function as an organization. We reorganized and invested in our go-to-market approach to help develop sales opportunities and convert more customers to our cloud office. We've created a customer success function to focus on the customer experience, including onboarding, adoption, retention, migration, and upsell.

Michael J. Saylor: Overall, we've continued to see further global adoption of our cloud platform as a result of transitioning our business strategy and product offerings from an on Prem perpetual license software company to a cloud native organization.

Michael J. Saylor: Further we've transformed the way we function as an organization.

Michael J. Saylor: We reorganized and invest in our go to market approach to help develop sales opportunities convert more customers to our cloud offering.

Michael J. Saylor: We've created a customer success function to focus on the customer experience, including Onboarding adoption and retention migration and upsell.

Phong Le: This enables our sales teams to focus on selling to new customers in the cloud. We've revised our sales compensation plans to prioritize new business and cloud transactions. We've rebuilt our marketing leadership team and have invested in product marketing, field enablement, brand development, and demand generation. We have expanded our partner sales channel with strategic partnerships with Microsoft, AWS, Google, and Snowflake, harnessing thousands of eager sellers ready to deploy MicroStrategy on their platform. I believe MicroStrategy is entering 2024 stronger than ever and will continue to provide a unique value proposition for our shareholders. With our Bitcoin strategy being so significant to our overall business value, while we also continue to pursue growth in our enterprise analytics business, some may ask, what kind of a company is MicroStrategy now? It's a fair question and a question that takes on even more significance with the approval of spot Bitcoin ETPs in the United States. We consider MicroStrategy to be unique. We consider MicroStrategy to be the world's first Bitcoin development company. Let me explain what we need.

Michael J. Saylor: This enables our sales teams to focus on selling to new customers in the cloud.

Michael J. Saylor: We've revised our sales compensation plans to prioritize new business and cloud transactions, we rebuilt our marketing leadership team and have invested in product marketing field enablement brand development and demand generation.

Michael J. Saylor: We have expanded our partner sales channel with strategic partnerships with Microsoft AWS, Google and Snowflake artisanal thousands of eager sellers ready to deploy microstrategy on their platforms.

Michael J. Saylor: I believe microstrategy is entering 2020 for stronger than ever and we'll continue to provide a unique value proposition for our shareholders.

Michael J. Saylor: With our bitcoin strategy being so significant to our overall business value. While we also continue to pursue growth in our enterprise analytics business semi ask what kind of a company is micro strategy now.

Michael J. Saylor: It's a fair question and a question that takes on even more significance with the approval of spot Bitcoin ETP is in the United States.

Michael J. Saylor: We consider microstrategy to be unique we consider micro strategy to be the world's first bitcoin development company.

Michael J. Saylor: Let me explain what we need.

Phong Le: We are a publicly traded operating company committed to the continued development of the Bitcoin network through activities in the financial markets, advocacy, and technological innovation. As an operating business, we're able to use cash flows as well as proceeds from equity and debt financings to accumulate Bitcoin, which serves as our primary Treasury Reserve asset. We also develop and provide industry-leading AI-powered enterprise analytic software that promotes our vision of intelligence everywhere, and we are also using our software development capabilities to develop the Bitcoin app. We believe that the combination of our operating structure, Bitcoin strategy, and focus on technology innovation provides a unique opportunity for value creation. Being an operating company, our software business remains our core revenue and cash flow generator. In addition, it also enables us to acquire Bitcoin through the use of excess cash or proceeds from equity capital raises or corporate debt capital raises, and to pursue software innovations that leverage the Bitcoin blockchain.

We are a publicly traded operating company committed to the continued development of the Bitcoin network through our activities in the financial markets.

Michael J. Saylor: Advocacy and technology innovation.

Michael J. Saylor: As an operating business, we're able to use cash flows as well as proceeds from equity and debt financings to accumulate bitcoin, which serve as our primary Treasury reserve asset.

Michael J. Saylor: We also develop and provide industry, leading AI powered enterprise analytic software that promotes our vision of intelligence everywhere and are also using our software development capabilities to develop the coin applications. We believe that the combination of our operating structure bitcoin strategy and focus on technology innovation.

Michael J. Saylor: <unk> provides a unique opportunity for value creation.

Michael J. Saylor: Being an operating company our software business remains our core revenue and cash flow generator.

Michael J. Saylor: In addition, it also enables us to acquire a bitcoin through the use of excess cash or proceeds from equity capital raises or corporate debt capital raises and pursue software innovations that leverage the bitcoin blockchain.

Phong Le: We've deployed these levers to increase our Bitcoin holdings in a manner which we believe has created shareholder value. Bitcoin development includes our Bitcoin Acquisition Strategy and Bitcoin Advocacy Initiative. Our software development includes BI, AI, cloud, or Bitcoin and Lightning-related software development.

We've deployed these levers to increase our bitcoin holdings in a manner, which we believe has created shareholder value.

Michael J. Saylor: We coined development includes our bitcoin acquisition strategy and bitcoin advocacy initiatives. Our software development includes by AI cloud or bitcoin and lightning related software development.

Phong Le: Let me elaborate on our 2024 software strategic. In 2024, we'll continue our transformation focus to win and grow in AI plus BI while accelerating our transition to a cloud-centric operating model. Our key strategic goals are to grow the cloud, innovate with AI, and increase profitability. So first, let me cover growing with quality.

Speaker Change: Let me elaborate on our 2024 software strategic focus.

Speaker Change: In 2024, we will continue our transformation focus to win and grow in AI, plus while accelerating our transition to a cloud centric operating model are.

Speaker Change: Our key strategic goals are to grow cloud innovate with AI and increase profitability.

Speaker Change: So first let me cover growing with clouds.

Phong Le: MicroStrategy Cloud is a key area of our research and development efforts as we expand our platform's flexibility, scalability, and security. In December, we successfully deployed our Google Cloud Platform integration, furthering our multi-cloud capabilities and providing greater optionality to our customers. This offering is microservices and container-based and uses our most recent cloud innovation. As of today, MicroStrategy can be deployed and fully hosted on Azure, AWS, and GCP.

Speaker Change: Microstrategy cloud is a key area of our research and development efforts as we expand our platform's flexibility scalability and security.

Speaker Change: In December we successfully deployed our Google cloud platform integration, furthering our multi cloud capabilities, providing greater optionality to our customers.

Speaker Change: This offering is micro services and container base and use our most recent cloud innovations as of today Microstrategy can be deployed and fully hosted on Azure AWS and G. C. P.

Phong Le: Additionally, we'll provide the ability to automate the deployment of MicroStrategy with many of the same benefits of a public cloud, but in a private cloud later this year. This distinguishes us from other BI platforms with the flexibility and automation that enterprise customers require. We believe such investment and capability will encourage current on-premise customers to embrace the benefits of MicroStrategy Cloud, such as containerized architecture, proactive cloud management from experts, seamless backups, and single-click updates. Transitioning our customer base to the technology of the future remains a key focus, and our resource deployment underscores our commitment to the cloud-first approach. As customers and prospects move to the cloud to empower their AI-driven digital transformations, we expect a decrease in product license revenue. This will, in part, be offset by increases in subscription services revenues in the same year and will be more than offset by higher recurring revenues in the following year.

Additionally, we will provide the ability to automate deployment of micro strategy with many of the same benefits of public cloud, but in a private cloud later this year.

Speaker Change: This distinguishes us from other bi platforms with the flexibility and automation that enterprise customers require.

Speaker Change: We believe such investment and capability, we will encourage current on premise customers to embrace the benefits of Microstrategy cloud such as containerized architecture proactive cloud management from experts seamless backups and single quick updates.

Speaker Change: Transitioning our customer base to the technology of the future remains a key focus and our resource deployment underscores our commitment.

Speaker Change: To the cloud first approach.

As customers and prospects moved to the cloud to empower their AI driven digital transformations, we expect a decrease in product license revenues. This will in part be offset by increases in subscription services revenues in the same year, and we will be more than offset with higher recurring revenues in the following years.

Phong Le: This will be most pronounced in 2024 as we expect to increase the pace of cloud adoption. Besides more healthy recurring revenues, additional benefits of moving customers and prospects to the cloud include more engaged and happy customers using our latest software, resulting in higher retention. The second area of focus for a software business is to innovate with AI. We will continue to focus on product innovation and AI-powered BI in the cloud. In September, MicroStrategy released its most innovative product to date, MicroStrategy AI. Our innovative, first-to-market AI solution offers capabilities designed to deliver an exceptional user experience on trusted data, featuring out-of-the-box resources that streamline adoption on our multi-cloud platform. The initial reception from customers has been positive. Our platform's AI-BI capabilities enable customers to automate their BI workflows, including data wrangling, dashboard creation, and data exploration.

Speaker Change: This will be most pronounced in 2024, as we expect to increase the pace of cloud adoption.

Speaker Change: <unk> is more healthy recurring revenues additional benefits of moving customers and prospects to cloud include more engaged and happy customers using our latest software, resulting in higher retention rates.

The second area of focus for our software businesses to innovate with AI.

Speaker Change: We will continue to focus on product innovation and AI powered <unk> in the cloud.

Speaker Change: In September Microstrategy released its most innovative product to date Microstrategy AI.

Speaker Change: Our innovative first to market AI solution offers capabilities designed to deliver an exceptional user experience on trusted data.

Speaker Change: Turning out of the box resources that streamline adoption on our multi cloud platform.

Speaker Change: The initial reception from customers has been positive our platforms AI capabilities enable customers to automate their workflows, including building data wrangling.

Speaker Change: For creation and data exploration.

Phong Le: This elevates the role of data throughout the organization, allowing companies to make better database decisions and take action. We believe that our continued thought leadership and innovation focus in the AI plus BI intersection will serve as a growth catalyst for MicroStrategy into the future. As business continues to search for efficiencies to reduce cost, increase productivity, and increase revenues, AI solutions and trusted data will continue to gain prevalence as a necessity. In addition, in December, we released our standalone bot feature as an extension of our MicroStrategy AI capability. With the release of Build Your Own Bot, MicroStrategy has entered the adjacent bot market with the capabilities and pedigree of our BI product to address a wide range of use cases. When considering the services currently offered in the bot market, we noticed customer demand for a bot builder that addresses Gen-I resource constraints, improved structured data processing, and solves for the lack of enterprise trust provided by current LLM solutions. The current landscape of bot offerings, such as domain-specific bots, LLM customizations, and flexible build bots, either lack the flexibility to address broad use cases or face limitations with structured data.

Speaker Change: This elevates the role of data throughout the organization, allowing companies to make better database decisions and take actions.

Speaker Change: We believe that our continued thought leadership and innovation focus and the AI plus b I intersection will serve as a growth catalyst for micro strategy into the future.

Speaker Change: As business continues to search for efficiencies to reduce cost increase productivity and increase revenues.

Speaker Change: <unk> solutions and trusted data will continue to gain prevalence as a necessity.

Speaker Change: In addition in December we released our Standalone, Bob feature as an extension of our Microstrategy AI capabilities.

Speaker Change: With the release of build your own bought micro strategies entered the adjacent BOPP market with the capabilities and pedigree of our by product to address a wide range of use cases.

Speaker Change: When considering the services currently offered in the bond market, we noticed customer demand for a bot builder that addresses gen I resource constraints improve structured data processing and solving for the lack of enterprise Trust provided by current <unk> solutions.

Speaker Change: The current landscape of bought offerings, such as domain specific bots L O N customization and flexible.

Speaker Change: Build box either lack the flexibility.

Speaker Change: To address broad use cases or face limitations with structured data Mike.

Phong Le: MicroStrategy bots are one of the easiest to use products we've ever developed. Combining our structured data horsepower with our open AI integrated LLM capabilities, we've created an AI bot flexible enough to support any industry vertical or departmental scenario with trusted analytics. Leveraging the MicroStrategy platform's advanced capabilities in the enterprise, such as security, governance, integration with third-party tools, and system auditability, we enable customers to easily deploy chatbots for broad use on trusted data. The third area of focus for our software business is to increase profitability. We'll continue to optimize our internal organizational structure in 2024. This means being mindful of financial objectives when choosing investment areas, collapsing organizational layers to improve internal velocity, reducing our dependence on low-margin consulting in favor of external partners, and leveraging our leadership team to guide both strategy and execution to deliver increased profitability.

Speaker Change: Microstrategy bots are one of the easiest to use product we've ever developed combining our structured data hub horsepower with our open AI integrated LLM capabilities, we've created an AI bot flexible enough to support any industry vertical or departmental scenario with trusted analytics.

Speaker Change: Leveraging the micro strategy platforms advanced capabilities in the enterprise such as security governance integration with third party tools and system order bit auto the ability, we enable customers to easily deploy chatbot for broad use and trusted data.

And the third area of focus for our software business is to increase profitability.

Speaker Change: We will continue to optimize our internal organizational structure in 2024. This means being mindful of financial objectives, when choosing investment areas collapsing organizational layers to improve internal velocity, reducing our dependence on low margin consulting in favor external partners and leverage our leadership team.

Speaker Change: Both strategy and execution to deliver increased profitability.

Phong Le: For 2024, operating goals for our software business are to increase overall top-line revenue compared to 2023 and target non-GAAP operating income, excluding impairment losses of $70 to $90 million. Increased profitability would further enable us to increase our Bitcoin hold. As a Bitcoin development company, we're focused on generating value for our stockholders by using various capital markets and technological levers. As an operating company, we can make use of intelligent leverage. Since our adoption of our Bitcoin strategy, we've used three primary mechanisms to acquire more Bitcoins. One is cash flow from software operators.

Speaker Change: For 2024 operating goals for our software business are to increase overall topline revenue compared to 2023 and target non-GAAP operating income excluding impairment losses of $70 million to $90 million.

Speaker Change: Increased profitability with further enable us to increase our bitcoin holdings.

Speaker Change: As a bitcoin development company, we're focused on generating value for our stockholders by using various capital markets and technology levers as an operating company, we can make use of intelligent leverage.

Speaker Change: Since our adoption of our bitcoin strategy, we've used three primary mechanisms to acquire more bitcoin.

Speaker Change: One cash flow from software operations since August 2020, we've invested $726 million of total cash on our balance sheet and bitcoin.

Phong Le: Since August 2020, we've invested $726 million of total cash on our balance sheet in Victoria to equity issuers. We have issued $3.1 billion in equity in a manner that we believe to be accretive to existing shareholders to acquire Bitcoin. And three, debt financing.

Speaker Change: Two equity issuances, we issued $3 $1 billion in equity in a manner that we believe to be accretive to existing shareholders to acquire a bitcoin.

Speaker Change: And three debt financing, we've obtained $2 $2 billion in corporate debt proceeds through the issuance of the senior secured notes and convertible notes that we used to purchase bitcoin.

Andrew: We've obtained $2.2 billion in corporate debt proceeds through the issuance of both senior secured notes and convertible notes that we use to purchase Bitcoin. The blended cost of our debt is fixed at 1.6%, and we believe each of these techniques and our unique positioning as the world's first Bitcoin development company have enabled us to generate tremendous value for our shareholders. I'll now turn the call over to Andrew to discuss our financials for the quarter in further detail. Thank you, Phong.

Speaker Change: The blended cost of our debt is fixed at 1.6% annually.

Speaker Change: We believe each of these techniques and our unique positioning as the world's first bitcoin development company have enabled us to generate tremendous value for our shareholders.

Speaker Change: I'll now turn the call over to Andrew to discuss our financials for the quarter in further detail.

Speaker Change: Okay.

Andrew Ken: Thank you Paul.

Andrew Ken: Thank you all for joining us I'll first start with our software financial results.

Andrew: Thank you all for joining me. I'll first start with our software financial results. Total revenues for the fourth quarter were $124.5 million, down 6% year-over-year. For the full year, total revenues were $496.3 million, down slightly 1% year-over-year. Our fourth quarter operating results were mixed, with a decline in year-over-year revenues, in part due to the ongoing revenue shift to the cloud and the lingering macroeconomic headwinds impacting overall customer spend. Product license revenues were $18.4 million, which is down 33% year over year into four, and $75.4 million, down about 13% year over year for the full year. However, as we transition our business to the cloud, we fully anticipate lower product license revenues as we migrate both existing and new customers to the cloud. But more importantly, we continue to grow subscription services revenues, which reflect the recurring revenues from our expanding cloud business. In Q4, subscription services revenues were $21.5 million, which is an increase of 23% year-over-year, and $81.2 million for the full year, an increase of 34% year-over-year.

Andrew Ken: Total revenues for the fourth quarter were $124 5 million.

Andrew Ken: Down 6% year over year.

Andrew Ken: For the full year total revenues were $496 3 million down slightly 1% year over year.

Andrew Ken: Our fourth quarter operating results were mixed with a decline in year over year revenues.

Andrew Ken: Part due to the ongoing revenue shifts to cloud.

Andrew Ken: The lingering macroeconomic headwinds impacting overall customer side.

Andrew Ken: Product license revenues were $18 $4 million, which is down 33% year over year in Q4, and $75 $4 million down about 13% year over year for the full year.

Andrew Ken: However, as we transition our business to the cloud we fully anticipate lower product license revenues as we migrate both existing and new customers to the cloud.

Andrew Ken: More importantly, we continue to grow subscription services revenues, which reflect the recurring revenues for our expanding cloud business.

Andrew Ken: In Q4 subscription services revenues were $21 5 million, which.

Andrew Ken: It was an increase of 23% year over year.

Andrew Ken: And $81 2 million for the full year, an increase of 34% year over year.

Andrew Ken: Current subscription billings, which reflect new cloud bookings grew 33% in the fourth quarter to $41 $3 million and $94 $8 million for the full year, a 23% increase year over year, which was our fifth straight quarter of double digit growth in cloud bookings.

Andrew: Current subscription billings, which reflect new cloud bookings, grew 33% in the fourth quarter to $41.3 million and $94.8 million for the full year, a 23% increase year over year, which is our 15th straight quarter of double-digit growth in cloud bookings. Q4 was an important milestone for us, where for the first time in both Q4 and for the full year, our subscription services revenues were higher than our product license revenues. This was a significant achievement to show the continued progress in our transition to stronger recurring revenues in the cloud. As I mentioned before, we expect the mix of revenue will continue to shift from product licenses to subscription services revenues in 2024, as we focus on delivering AI-based products to our customers in the cloud. Moving to costs, total non-GAAP expenses were $148 million in the fourth quarter, 52% lower compared to the fourth quarter of 2022.

Andrew Ken: Yes.

Andrew Ken: Q4 was an important milestone for us where for the first time in both Q4 and for the full year, our subscription services revenues were higher than our product license revenues.

Andrew Ken: This was a significant achievement that show the continued progress in our transition to stronger recurring revenues in the cloud.

Andrew Ken: And as I mentioned before we expect the mix of revenue will continue to shift from product license to subscription services revenues in 2024, as we focus on delivering AI based products to our customers in the cloud.

Andrew Ken: Moving to costs total non-GAAP expenses were $148 million in the fourth quarter, 52% lower compared to the fourth quarter of 2022.

Andrew Ken: <unk> impairment charges for the quarter were $39 million compared to $198 million in Q4 of last year.

Andrew Ken: Total non-GAAP expenses, excluding breakpoint impairment or $108 million in the fourth quarter down 3% year over year.

Andrew: Bitcoin impairment charges for the quarter were $39 million compared to $198 million in Q4 of last year. Total non-GAAP expenses excluding Bitcoin impairment were $108 million in the fourth quarter, down 3% year-over-year. While we're spending more on cloud hosting costs as we grow our cloud business, we have been able to offset those increases with cost reductions in corporate overhead and while optimizing tech count, which was down 10 percent year over year. We reported a total non-gap operating loss in the fourth quarter of $23 million, of which the loss on the Bitcoin impairment was $39 million. For the fourth quarter, we reported a gap in the income of $89 million, which included a $150 million tax benefit, primarily due to changes in the valuation allowance on our deferred tax asset directly related to our Bitcoin.

Andrew Ken: While we are spending more on cloud hosting costs as we grow our cloud business, we have been able to offset those increases with cost reductions in corporate overhead and while optimizing head count, which was down 10% year over year.

Andrew Ken: We reported a total non-GAAP operating loss in the fourth quarter of $23 million.

Andrew Ken: Of which the loss on the bitcoin impairment was $39 million.

Andrew Ken: In the quarter.

Andrew Ken: For the fourth quarter, we reported GAAP net income of $89 million, which included $850 million tax benefit.

Andrew Ken: Merely due to changes in the valuation allowance on our deferred tax asset directly related to a bitcoin holdings.

Andrew Ken: And at the end of Q4 fair market value of the coin as of December 31 was above our accurate aggregate cost basis, resulting in a release of a previously established valuation allowance and a corresponding noncash tax provision benefit.

Andrew: And at the end of Q4, the fair market value of Bitcoin as of December 31 was above our aggregate cost basis, resulting in a release of the previously established valuation allowance and a corresponding non-cash tax provision. Turning to our Bitcoin strategy, we had an extremely successful Q4, adding more Bitcoin to our holdings, acquiring 30,905 Bitcoins in the quarter, the largest single quarter increase in Bitcoin holdings since Q4 of 2020. After the end of the quarter, we purchased an additional 850 bitcoins using $37 million of excess cash. And as of February 5, 2024, the company held a total of 190,000 bitcoins acquired for an aggregate cost of $5.93 billion, or $31,224 per bit. Bitcoins purchased through excess cash from the software business are held at MicroStrategy, the parent entity, and are secured under our 2028 secured note. As of yesterday, there were 16,931 bitcoins held at MicroStrategy.

Turning to our bitcoin strategy, we had an extremely successful Q4, adding more big points, where holdings acquiring 30905 points in the quarter the largest single quarter Bitcoin holdings increase since Q4 of 2020.

Andrew Ken: After the end of the quarter, we purchased an additional 850 big points using $37 million of excess cash.

Andrew Ken: And as of February five 2024, the company held a total of 190000 breakpoints acquired for an aggregate cost of $5 nine $3 billion.

Andrew Ken: Or $31224 perfect.

Andrew Ken: <unk> purchased through excess cash in the software business are held at micro strategy the parent entity.

Andrew Ken: And our secured under our 2028 secured notes.

Andrew Ken: As of yesterday, there were 16931 big points held at Microstrategy.

Andrew Ken: Bitcoins acquired through proceeds from our capital markets activities. After the issuance of our senior secured notes, which include equity and debt issuances are held at macro strategy, which is a wholly owned subsidiary of micro strategy.

Andrew Ken: We hold 173069 big points, representing 91% of our total bitcoin holdings over seven.

Andrew: Bitcoins acquired through proceeds from capital markets activities, after the issuance of our senior secured notes, which include equity and debt issuances, are held at MacroStrategy, which is a wholly owned subsidiary of MicroStrategy. We hold 173,069 bitcoins, representing 91% of our total bitcoin holdings over $7.3 billion in current market value at the macro strategy level, all of which are currently unrestricted and unencumbered, providing us with optionality to potentially leverage this strategic asset in the future. In Q4, we purchased a total of 30,555 bitcoins for $1.2 billion using net proceeds from our ATM program. As noted a moment ago, these big points are held at macro strategy and remain unencumbered.

Andrew Ken: Seven 3 billion in the current market value at the macro strategy level.

Andrew Ken: All of which are currently unrestricted and unencumbered.

Andrew Ken: Aiding us with Optionality to potentially leverage this strategic asset in the future.

Andrew Ken: In Q4, we purchased a total of 30555 bitcoins for $1 $2 billion is a net proceeds from our ATM program.

Andrew Ken: As noted a moment ago. These breakpoints withheld at macro strategy and remain unencumbered.

Andrew Ken: In Q4, we also purchased an additional 350 base points or $13 4 million using excess cash from operations, which are held at microstrategy.

Andrew Ken: And subsequently in January 2024, we used additional excess cash from operations to purchase an additional 856 points to $37 million.

Andrew Ken: <unk> are also held at Microstrategy.

Andrew: In Q4, we also purchased an additional 350 bitcoins, or $13.4 million, using excess cash from operations, which is held at MicroStrategy. And subsequently, in January 2024, we used additional excess cash from operations to purchase an additional 850 bitcoins, worth $37 million, which are also held at MicroStrategy. Our commitment to our Bitcoin strategy remains unchanged and unwavering, and we plan to add more Bitcoin over time using our excess cash from operations, as well as proceeds from any capital markets activity. MicroStrategy is the largest corporate holder of Bitcoin in the world, and we have remained committed to our Bitcoin acquisition strategy with the highest conviction, with a consistent track record, long-term focus, and a strong risk-managed approach to acquiring and holding more Bitcoin Turning to slide 15, we saw Bitcoin outperform the US equity markets in 2023. As of December 31, 2023, the carrying value of our Bitcoin holdings was approximately $3.6 billion, compared to approximately $8 billion in market value based on the Bitcoin price as of the last day of the quarter.

Andrew Ken: Our commitment to a bitcoin strategy remains unchanged and unwavering.

Andrew Ken: To add more big point over time, using our excess cash from operations as well as proceeds from any capital markets activities.

Micro strategy as the largest four burkholder, a big point in the World and we have remained committed to our big point acquisition strategy with the highest conviction.

Andrew Ken: Consistent track record long term focus and a strong risk managed approach to acquiring and holding more big point on our balance sheet.

Andrew Ken: Turning to slide 15, we saw it outperform the U S equity markets in 2023.

Andrew Ken: As of December 31, 2023, the carrying value of our bitcoin holding is approximately $3 $6 billion.

Andrew Ken: Care to approximately $8 billion in market value based on the big corn price as of the last day of the quarter.

Andrew Ken: Year to date the market value of our Big point Holdings is approximately $8 1 billion, which is significantly above our average purchase price of approximately 31000.

On developments.

Andrew Ken: In late December badly approved the change in accounting rules as certain digital assets, including bitcoin to.

Andrew Ken: To be measured using fair value accounting.

Andrew Ken: We are delighted by FASB is expeditious move to create more transparent reporting and we aren't.

Andrew Ken: <unk> by the continuing maturity of the regulatory environment surrounding the <unk> and <unk>.

Andrew Ken: We hope these enhanced accounting rules will serve as a positive on ramp for other corporates to adopt it big point as a treasury reserve.

Andrew Ken: The new accounting rule requires companies holding digital assets, including Bridgepoint to adopt fair value accounting treatment by Q1 of 2025.

Andrew: Year to date, the market value of our Bitcoin holdings is approximately $8.1 billion, which is significantly above our average purchase price of approximately $31,200. In late December, FASB approved the change in accounting rules for certain digital assets, including Bitcoin, to be measured using fair value accounting. We are delighted by FASB's expeditious move to create more transparent reporting, and we are encouraged by the continuing maturity of the regulatory environment surrounding Bitcoin. And we hope these enhanced accounting rules will serve as a positive on-ramp for other corporations to adopt Bitcoin as a treasury reserve. The new accounting rule requires companies holding digital assets, including Bitcoin, to adopt fair value accounting treatments by Q1 of 2025. And while we have not yet elected to early adopt the new accounting standard, which was only just finalized late in the fourth quarter, we continue to evaluate the timing along with the accounting and tax impacts of adoption.

Andrew Ken: And while we have not yet elected to early adopt the new accounting standard which is only just finalized late in the fourth quarter. We continue to evaluate the timing along with the accounting and tax impacts of adoption.

Andrew Ken: If we elect to adopt the new accounting standard in 2024, we estimate that our 2024, beginning breakpoint holdings value would be marked up to a fair value of approximately $8 billion.

Andrew Ken: As of January one 2024.

Andrew Ken: As Tom mentioned earlier, we have effectively used excess cash flows to grow our bitcoin holdings.

Andrew Ken: At the inception of our big when balance sheet strategy in 2020, we allocated a substantial portion of our cash reserves generated over many previous years into bitcoin.

Andrew Ken: Acquiring over 43000 points of $595 million.

Andrew Ken: Beyond that initial acquisition, we have continued to acquire an average of $40 million at this point each year with excess cash on our balance sheet.

Andrew Ken: Approximately 3500 big points since 2022.

Andrew Ken: Our ability to leverage cash from operations enables us to increase our big point holdings in a manner that we believe is accretive to our shareholders.

Andrew: If we elect to uphold the new accounting standard in 2024, we estimate that our 2024 beginning Bitcoin holdings value would be marked up to a fair value of approximately $8 billion as of January 1, 2024. As Phong mentioned earlier, we have effectively used excess cash flows to grow our Bitcoin holdings. At the inception of our Bitcoin balance sheet strategy in 2020, we allocated a substantial portion of our cash reserves generated over many previous years into Bitcoin, acquiring over 43,000 Bitcoin for $595 million. Beyond that initial acquisition, we have continued to acquire an average of $40 million of Bitcoin each year with excess cash on our balance sheet, totaling approximately 3,500 Bitcoin since 2022. Our ability to leverage cash from operations enables us to increase our Bitcoin holdings in a manner that we believe is accretive to our shareholders. And in total, we have issued approximately $726 million of excess cash to acquire more customers, accounting for approximately 48,000 Bitcoin added to our balance sheet, or about 25% of our total Bitcoin holders.

Andrew Ken: And in total we have issued approximately $726 million of excess cash to acquire more pixels.

Andrew Ken: Accounting for approximately 48000, breakpoint added to our balance sheet or about 25% of our total portfolio.

Andrew Ken: Now turning to our capital markets activities also since the inception of our <unk> strategy, we have raised $2 2 billion.

Andrew Ken: The senior secured notes and convertible notes with an attractive blended interest rate of approximately one 6%.

Andrew Ken: The earliest maturity not until 2025.

Andrew Ken: Leverage remains a key component of our active capital management strategy, which went intelligently deployed enables us to accrete more big point on our balance sheet at an attractive cost.

Andrew Ken: We will continue to actively monitor the capital markets evaluating liability management opportunities to manage our debt maturities as well as opportunities to raise additional debt in the future.

Andrew Ken: In addition to raising that we have demonstrated a solid track record of issuing permanent equity capital in a manner that we believe has been accretive to our shareholders.

Andrew Ken: Since the third quarter of 2021, we have raised a total of $3 1 billion in proceeds through our aftermarket or ATM programs with the average price of approximately $457 a share of total equity rates.

Andrew Ken: In Q4 of last year, we accelerated the execution of our current ATM program and raised $1 2 billion in aggregate net proceeds and in Q4 alone we issued approximately two 7 million shares.

Andrew: Now turning to our capital markets activities. Also, since the inception of our Bitcoin strategy, we have raised $2.2 billion of debt in the form of senior secured notes and convertible notes with an attractive funded interest rate of approximately 1.6%, with the earliest maturity not until 2025. Leverage remains a key component of our active capital management strategy, which when intelligently deployed enables us to add more Bitcoin to our balance sheet at an attractive cost. We will continue to actively monitor the capital markets, evaluating liability management opportunities to manage our debt maturities, as well as opportunities to raise additional debt in the future. In addition to raising debt, we have demonstrated a solid track record of issuing permanent equity capital in a manner that we believe has been accretive to our shareholders.

Andrew Ken: Class a common stock.

Approximately $138 million of capacity remaining under our current program.

Andrew Ken: As we have done in the past we will continue to carefully evaluate the most accretive use of proceeds from the sale of equity to create incremental value for our shareholders.

Andrew Ken: The primary use of proceeds from the sale of equity to date has been to acquire additional big one.

Andrew Ken: But we also used proceeds of our ATM program to prepay the $250 million of Big one backbone in Q1 of 2023, which generated a $45 million gain on extinguishment.

Andrew Ken: Our capital allocation strategy continues to be focused on increasing the value generated from our balance sheet.

Andrew Ken: Through the addition of more big point, while managing our debt very carefully.

Andrew: Since the third quarter of 2021, we have raised a total of $3.1 billion in proceeds through our at-the-market, or ATM, programs, with an average price of approximately $457 per share across total equity rates. In Q4 of last year, we accelerated the execution of our current ATM program and raised $1.2 billion in aggregate net proceeds. And in Q4 alone, we issued approximately 2.27 million shares of Class A common stock at approximately $138 million of capacity remaining under our current program.

Also at the end of the fourth quarter, we had $46 $8 million in cash on our balance sheet, which is sufficient overall liquidity to manage our ongoing operating.

Andrew Ken: 2023 was an extremely successful year for us where we generated approximately $5 8 billion.

Andrew Ken: Of incremental value from both the increase in the price of bitcoin or our existing holdings as well as through our strategic use of equity capital markets activities.

Andrew Ken: We began the year with 132500 <unk> on our balance sheet with a market value of approximately $2 2 billion.

Andrew: As we have done in the past, we will continue to carefully evaluate the most repeated use of proceeds from the sale of equity to increase incremental value for our shareholders. The primary use of proceeds from the sale of equity to date has been to acquire additional bitcoins. But we also used proceeds of our ATM program to prepay the $250 million Bitcoin backloan in Q1 of 2023, which generated a $45 million gain on extinguisher. Our capital allocation strategy continues to be focused on increasing the value generated from our balance sheet through the addition of more Bitcoin while managing our debt very carefully. Also, at the end of the fourth quarter, we had $46.8 million in cash on our balance sheet, which is sufficient overall liquidity to manage our ongoing operations.

Andrew Ken: As bitcoin prices increase from approximately $16500 to approximately $42500 by the end of the year. It resulted in an increase of over $3 4 billion in value based on our Big point holdings at the start of the year.

Andrew Ken: In addition to the price appreciation of bitcoin withheld as of the beginning of the year micro strategies issuance of additional equity and use of excess cash from operations, which is even more big point in 2023 led to an increase of an additional one $9 billion in value of our holdings.

Andrew Ken: In total we added an additional 56650 pick points. So our balance sheet at an average price of 33000 $580 million, which generated an approximately $500 million of value.

Andrew: 2023 was an extremely successful year for us, where we generated approximately $5.8 billion of incremental value from both the increase in the price of Bitcoin of our existing holding, as well as through our Strategic Use of Equity Capital Market Check. We began the year with 132,500 bitcoins on our balance sheet with a market value of approximately $2.2 billion. As Bitcoin prices increased from approximately $16,500 to approximately $42,500 by the end of the year, this resulted in an increase of over $3.4 billion in value based on our Bitcoin holdings at the start of the year.

The increase in the price of Big point after those purchases.

Andrew Ken: Okay.

Andrew Ken: Again overall 2023 was a tremendously successful year and taking into account our purchases and appreciation of our holdings, we increase the value of our big point holdings by 267% to $8 billion over the course of the year.

Andrew Ken: While the overall market benefited from the increase in bitcoin prices well, we believe our intelligent use of leverage and excess cash to acquire more bitcoin as well as our equity capital market strategy contributed $2 $4 billion of incremental value for our balance sheet, demonstrating our track record.

Andrew Ken: Generating value for our shareholders.

Andrew Ken: This slide shows an illustrative example of how recent responsible and intelligent leverage we've used to boost returns when big corn prices are increasing.

Andrew Ken: The baseline returns of any long bitcoin strategy benefit from spot corn price appreciation.

Andrew: In addition to the price appreciation of Bitcoin we've held, as of the beginning of the year, MicroStrategy's issuance of additional equity and use of excess cash from operations to purchase even more Bitcoin in 2023 led to an increase of an additional $1.9 billion in value of our Bitcoin holdings. In total, we added an additional 56,650 bitcoins to our balance sheet at an average price of $33,580, which generated approximately $500 million of value from the increase in the price of bitcoin after those purchases. Again, overall, 2023 was a tremendously successful year.

Andrew Ken: <unk> also benefit from this offset of course by the management fees that are charged for those products.

Andrew Ken: Leverage provides us the opportunity to generate higher returns if price increases.

Andrew Ken: In this illustration, assuming the corn price at just $250000, keeping bitcoin count constant spot pick point without leverage with returned approximately 480%.

Andrew Ken: In this example, adding leverage to acquire more bitcoin would return between 660% to 740.

Andrew Ken: Depending on the amount of leverage further boosting returns compared to simply pull those thoughts.

Andrew Ken: If the market value of our big point increases we believe this will create more opportunities to manage our leverage targets with the opportunity to take on more leverage and a prudent risk managed fashion.

Andrew: And, taking into account our purchases and appreciation of our holdings, we increased the value of our Bitcoin holdings by 267% to $8 billion over the course of the year. While the overall market benefited from the increase in Bitcoin prices, well, we believe our intelligent use of leverage and excess cash to acquire more Bitcoin, as well as our equity capital market strategy, contributed $2.4 billion of incremental value to our balance sheet, demonstrating our track record of generating value for our share. This slide shows an illustrative example of how responsible and intelligent leverage can be used to boost returns when Bitcoin prices are increasing. The baseline returns of any long Bitcoin strategy benefit from spot Bitcoin price appreciation. Bitcoin ETPs also benefit from this offset, of course, through the management fees that are charged for those products. Leverage provides us with the opportunity to generate higher returns if the price increases. In this illustration, assuming the Bitcoin price reaches $250,000, keeping the Bitcoin count constant, spot Bitcoin without leverage would return approximately $480,000. In this example, adding leverage to acquire more Bitcoin would return between 660% and 740%, depending on the amount of leverage, further boosting returns compared to simply folders.

Andrew Ken: <unk> generated from our increasing <unk> holdings would be expected to outperform even further if bitcoin prices continue to rise.

Andrew Ken: Micro strategy value proposition is clear when compared to other forms of exposure to bitcoin.

Andrew Ken: And as Paul said earlier, we believe that the combination of our operating structure.

Andrew Ken: <unk> strategy and focus on technology innovation provides a unique opportunity for shareholder value creation.

Andrew Ken: The management team has demonstrated a track record of disciplined approach to navigate through volatile times, and the bitcoin market and establish credibility and achieving our goal of generating more value for our shareholders.

Speaker Change: Thank you for your time today and thank you for your continued support of micro strategy.

Speaker Change: I'll now turn the call over to Michael for his remarks.

Michael J. Saylor: Thank you Andrew.

Michael J. Saylor: I'm, Michael Saylor, the executive chairman of micro strategy.

Michael J. Saylor: First I'd like to go over a few performance statistics with you.

Michael J. Saylor: Since August 10th.

Michael J. Saylor: August 11th when we adopted our bitcoin strategy.

Michael J. Saylor: Our stock has outperformed bitcoin as well as every major asset class along with every major big Tech stock as well as every major enterprise software stock.

Michael J. Saylor: We're very proud of this and.

Michael J. Saylor: <unk>.

Michael J. Saylor: Now for those of you who have followed US on this journey and now it's been a number of steps every single quarter that got us here.

Andrew: If the market value of our Bitcoin increases, we believe this will create more opportunities to manage our leverage. With the opportunity to take on more leverage in a prudent, risk-managed fashion, the value generated from our increasing Bitcoin holdings would be expected to outperform even further if Bitcoin prices continue to rise. MicroStrategy's value proposition is clear when compared to other forms of exposure to Bitcoin.

Michael J. Saylor: I think that this is a very useful chart to illustrate and discuss some some key elements in our strategy and our business outlook.

Michael J. Saylor: First of all.

Michael J. Saylor: With regard to bitcoin to.

Michael J. Saylor: <unk> thousand 24 is the year of <unk>.

Michael J. Saylor: First a bitcoin as an institutional grade asset class.

Michael J. Saylor: As Phong said earlier, we believe that the combination of our operating structure, Bitcoin strategy, and focus on technological innovation provides a unique opportunity for shareholder value creation. The management team has demonstrated a track record of a disciplined approach to navigate through volatile times in the Bitcoin market and establish credibility in achieving our goal of generating more value for our shareholders. Thank you for your time today, and thank you for your continued support of MicroStrategy. I'll now turn the call over to Michael for his presentation. Thank you, Andrew.

Michael J. Saylor: Bitcoin is is being increasingly referred to as I knew as an asset class and as a new asset class and in fact, it's the first new asset class of the modern era.

Michael J. Saylor: It's difficult to really name another asset class gold when it was commodity Etfs wasn't a new asset commodities were a number of new asset.

Michael J. Saylor: 30 years ago, the S&P index was converted into an ETF despite or not.

Michael J. Saylor: That wasn't the new asset then, but it was certainly a revolution and finance.

Michael J. Saylor: And so bitcoin represents many things, but one thing it represents the first institutional grade digital asset.

Michael J. Saylor: I'm Michael Saylor, the executive chairman of MicroStrategy. First, I'd like to go over a few performance statistics with you. Since August 10th, when we adopted our Bitcoin strategy, our stock has outperformed Bitcoin, as well as every major asset class, along with every major big tech stock, as well as every major enterprise software stock. We're very proud of this, and for those of you who have followed us on this journey, you know, it's been a number of steps every single quarter that got us here.

Michael J. Saylor: And so.

Michael J. Saylor: We've now completed the first 15 years.

Michael J. Saylor: One of the Bitcoin life lifecycle and in that first 15 years it was largely unregulated.

Michael J. Saylor: Retail.

Michael J. Saylor: Asset misunderstood.

Michael J. Saylor: The next 15 years.

Michael J. Saylor: I would expect will be a regulated institutional high growth period of bitcoin.

Michael J. Saylor: Very very different in many ways from the last 15 years.

Michael J. Saylor: But I think that this is a very useful chart to illustrate and discuss some key elements in our strategy and in our business outlook. First of all, with regard to Bitcoin, 2024 is the year of birth for Bitcoin as an institutional grade asset class. Bitcoin is being increasingly referred to as an asset class and as a new asset class. In fact, it's the first new asset class of the modern era. It's difficult to really name another asset class. Gold, when it was converted to ETFs, wasn't a new asset. Commodities were never a new asset class.

Michael J. Saylor: Bitcoin itself.

Michael J. Saylor: <unk> is performing well for a number of reasons, but one reason is because it represents the digital transformation of capital.

Michael J. Saylor: If we look at some of these other great performers on the chart.

Michael J. Saylor: Microsoft and Google and meta and Apple, they're all digital transformation.

Michael J. Saylor: So they represent a digital transformation of devices in the digital transformation of relationships.

Michael J. Saylor: Digital transformation of information and books, and libraries, and entertainment and education and the digital transformation of corporate processes at say Microsoft.

Michael J. Saylor: 30 years ago, the S&P index was converted into an ETF, the SPDR. That wasn't a new asset then, but it was certainly a revolution in finance. And so Bitcoin represents many things, but one thing it represents is the first institutional-grade digital asset.

Michael J. Saylor: Well.

Michael J. Saylor: Bitcoins very profound idea is what if we actually transformed capital.

Michael J. Saylor: From its analog form capital in the form of land or buildings or capital in the form of shares and an actual physical company or bushels of corn or diamonds more bars of gold more capital in the form of Fiat currency, our bonds and <unk>.

Michael J. Saylor: We've now completed the first 15 years of the Bitcoin life cycle, and in that first 15 years, it was largely unregulated and retail assets were misunderstood. The next 15 years, I would expect will be a regulated institutional high growth period of Bitcoin, very, very different in many ways from the last 15 years. Bitcoin itself is performing well for a number of reasons. But one reason is that it represents the digital transformation of capital. If we look at some of these other great performers on the chart, like Microsoft and Google and Meta and Apple, they're all digital transformation plays. They represent the digital transformation of devices and the digital transformation of relationships, and the digital transformation of information, books, libraries, entertainment, and education, and the digital transformation of corporate processes at, say, Microsoft.

Michael J. Saylor: Wonder if we could actually make that into a digital asset that that's created in order to address all of the historic perceived shortcomings of analog assets.

Michael J. Saylor: What if we had.

Michael J. Saylor: Had all of the benefits of goal, but nonetheless, the abilities of gold what if we had the benefits of a share of stock, but none of the liabilities of a share of stock what if we had the benefits of a building, but not the liabilities of the building.

Michael J. Saylor: Our synthetic digital asset.

Michael J. Saylor: And so increasingly investors are recognizing this that's why bitcoin is up 260%.

Michael J. Saylor: Since we embarked on our bitcoin strategy, that's why it's outperforming the S&P and the NASDAQ that's why it's outperforming gold silver and bonds.

Michael J. Saylor: Well, Bitcoin is a very profound idea. It's as if we actually transformed capital from its analog form, capital in the form of land or buildings? or capital in the form of shares in an actual physical company or bushels of corn or diamonds or bars of gold or capital in the form of fiat currency or bonds. And what if we could actually make that into a digital asset that's created in order to address all of the historic perceived shortcomings of analog assets?

Michael J. Saylor: Bitcoin it isn't the company.

Michael J. Saylor: And it's kind of it's profoundly important.

Michael J. Saylor: Understand that it's not a company, it's an asset class and as such.

Michael J. Saylor: Based on our commodity it has spawned an entire universe.

Michael J. Saylor: The company's products and services built on that asset class. So part of the driver Bitcoins performance is not just it's us it's protocol and superior fundamental characteristics, but.

Michael J. Saylor: What if we had all the benefits of gold but none of the liabilities of gold? What if we had the benefits of a share of stock but none of the liabilities of a share of stock? What if we had the benefits of a building but none of the liabilities of a building?

Michael J. Saylor: Another driver is the is the industry a bit coin miners Betsy.

Michael J. Saylor: That secure the network and and Beckman custodians.

Michael J. Saylor: And outside of Bitcoin exchanges. So we see we see lots of public companies that are bit coin miners now we see many many companies that are entering into bitcoin custody.

Michael J. Saylor: A synthetic digital asset. And so increasingly, investors are recognizing this. That's why Bitcoin is up 260%. Since we embarked on our Bitcoin strategy, that's why it's outperforming the S&P and the Nasdaq. That's why it's outperforming gold, silver, and bonds. Bitcoin isn't a company, and it's kind of it's profoundly important to understand that it's not a company; it's an asset class, and as such, Based on a commodity, it has spawned an entire universe of companies, products, and services built on that asset class. So part of the driver of Bitcoin's performance is not just its protocol and superior fundamental characteristics, but another driver is the industry of Bitcoin miners, that secure the network and Bitcoin custodians, and a set of Bitcoin exchanges. So we see lots of public companies that are Bitcoin miners now. We see many, many companies that are entering into Bitcoin custody, like Anchorage, like Bitco, like Fidelity, like Coinbase.

Michael J. Saylor: Mike Anchorage, like Petco like fidelity like Coinbase waste.

Michael J. Saylor: We see bitcoin exchanges.

Michael J. Saylor: Mike block acting as an exchange like fidelity like Coinbase like chairman I et cetera, we're going to see more exchanges.

Michael J. Saylor: We see an explosion in bitcoin wallets different software software applications for mobile phones or devices in order to move bitcoin around.

Michael J. Saylor: Got bitcoin devices themself for signing in securing the network there.

Michael J. Saylor: There's a whole host of companies and the lightning ecosystem.

Michael J. Saylor: Other bitcoin al twos.

Michael J. Saylor: That are scaling the network.

Michael J. Saylor: Now of course this year, we have bitcoin ETP spot etp's and even even derivatives of those etp's.

Michael J. Saylor: Companies that are going to trade the volatility of the underlying spot etp's are starting to pop up an application form.

Michael J. Saylor: We see Bitcoin exchanges, like Block, acting as an exchange, like Fidelity, like Coinbase, like Gemini, etc. We're going to see more exchanges. We see an explosion in Bitcoin wallets, different software applications for mobile phones or devices in order to move Bitcoin around. We've got Bitcoin devices themselves for signing and securing the network.

Michael J. Saylor: And of course, these etp's aren't just local or arent just.

Michael J. Saylor: United States space, but they're global.

Michael J. Saylor: And that's significant because every single company everywhere in the World is meeting a different set of compliance requirements.

Michael J. Saylor: Now.

Michael J. Saylor: Big coin ETP in Hong Kong will serve a different need meet different compliance requirements and meet the needs of different types of investors from our bitcoin ETP in Canada or in in France, or in the U K or in the United States.

Michael J. Saylor: There's a whole host of companies in the Lightning ecosystem and other Bitcoin L2s that are scaling the network. And now, of course, this year, we have Bitcoin ETPs, SPOT ETPs, and even derivatives of those ETPs, companies that are going to trade the volatility of the underlying spot ETPs are starting to pop up in application form. And, of course, these ETPs aren't just local or aren't just United States-based, but they're global. And that's significant because every single company everywhere in the world is meeting a different set of compliance requirements. You know, a Bitcoin ETP in Hong Kong will serve a different need, meet different compliance requirements, and meet the needs of different types of investors from a Bitcoin ETP in Canada or in France or in the UK or in the United States.

Michael J. Saylor: And so all of these various actors are scaling the bitcoin network with increasing enthusiasm.

Michael J. Saylor: Micro strategy as we've noted.

Michael J. Saylor: As unique as of now is the first pet coin development company.

Michael J. Saylor: But hopefully not for long, we published our playbook and we're showing other companies how to do it.

Michael J. Saylor: And there's a lot of real estate development companies in the world.

Companies that issue securities and develop real estate, there are a lot of oil or petroleum exploration and development companies in the world. There are natural gas development companies in the World. There are software development companies in the world. So.

Michael J. Saylor: We believe that as awareness builds a bitcoin as a commodity as global commodity is a unique asset class.

Michael J. Saylor: And so all of these various actors are scaling the Bitcoin network with increasing enthusiasm. MicroStrategy, as we've noted, is unique as of now as the first Bitcoin development company, but hopefully, not for long. We've published our playbook, and we're showing other companies how to do it. And there are a lot of real estate development companies in the world, companies that issue securities and develop real estate. There are a lot of oil or petroleum exploration and development companies in the world. There are also natural gas development companies in the world.

Michael J. Saylor: I think we're going to see more entrepreneurs enter the space and start to work in these various areas to add value to the ecosystem.

Michael J. Saylor:

Michael J. Saylor: It's worthwhile to note.

Michael J. Saylor: People are.

Michael J. Saylor: In the early days right.

Michael J. Saylor: At a bitcoin is currency and a medium of exchange and that creates a lot of misunderstanding and a lot of it.

Michael J. Saylor: And a lot of inappropriate.

Michael J. Saylor: Inappropriate or irrelevant criticisms.

Michael J. Saylor: With the advent of these new Etp's from Blackrock and from Fidelity awareness of Bitcoin could you. Please go back.

Michael J. Saylor: There are software development companies in the world. So we believe that as awareness builds of Bitcoin as a commodity, as a global commodity, as a unique asset class, I think we're going to see more entrepreneurs enter the space and start to work in these various areas to add value to the ecosystem. It's worthwhile to note that in the early days, people thought of Bitcoin as currency and a medium of exchange, and that created a lot of misunderstandings and a lot of inappropriate or irrelevant criticisms. With the advent of these new ETPs from BlackRock and from Fidelity, awareness of Bitcoin... Can you please go back? Yeah, yeah, let's stay on the slide.

Michael J. Saylor: Yeah.

Speaker Change: Yeah, Yeah, let's say on the slide awareness of bitcoin as.

Speaker Change: A store of value asset is growing and people are starting to see bitcoin not as digital currency, but as digital property or digital gold.

Speaker Change: A digital store of value you could think of it as gold or you could think of it as property or think of it is.

Speaker Change: Another kind of digital store of value, but in that regard you kind of have to compare it against other liquid stores of value that people are using so for right now.

Speaker Change: The most common alternative to bitcoin for a tech enthusiasts would be to invest in big Tex Lycra magnificent seven when Microsoft Google the matters.

Michael J. Saylor: Awareness of Bitcoin as a store of value asset is growing, and people are starting to see Bitcoin not as digital currency but as digital property or digital gold, a digital store of value. You could think of it as gold, or you could think of it as property, or you could think of it as another kind of digital store of value. But in that regard, you kind of have to compare it with other liquid stores of value that people are using.

Speaker Change: But as you can see when the market cap of a big Tech company doubles.

Speaker Change: You have a company doing a lot of work generating a lot of cash flow to support the market cap.

Speaker Change: And the work that they have to do doubles and if they want a double their market cap their value again, they have to keep generate an effort to keep doing more work generating more cash because traditional finance technique is I dividend out my cash flows or I buy the stock back to very famous examples of this traditional approach or Apple.

Michael J. Saylor: So for right now, the most common alternative to Bitcoin for a tech enthusiast would be to invest in big tech like the Magnificent Seven, Microsoft, Google, and Metas. But as you can see, when the market cap of a big tech company doubles, you have a company doing a lot of work, generating a lot of cash flow to support the market cap, and the work that they have to do doubles.

Speaker Change: And meta who are both engaging and monstrous capital return programs.

Speaker Change: So our stock is returning its capital and its value our store of value promise is based upon being able to grow its cash flows faster than the rate of inflation. So theyre working increasingly hard if you want to make a 10 times more valuable eventually you got to come up with a way to get 10 times more.

Michael J. Saylor: And if they want to double their market cap, their value, again, they have to keep generating, they have to keep doing more work, generating more cash. Because the traditional finance technique is I dividend out my cash flows, or I buy the stock back. Two very famous examples of this traditional approach are Apple and Meta, who are both engaging in monstrous capital return programs. So a stock is returning its capital, and its value, or store of value promise, is based upon being able to grow its cash flows faster than the rate of inflation. So they're increasingly working harder.

Speaker Change: Cash flows and that's.

And that's very different than the.

Speaker Change: The bitcoin because bitcoin.

Speaker Change: It is the asset so, whereas big Texas asset poor cash flow rich bitcoin is asset rich and our strategy with bitcoin becomes asset asset rich now, we're moving into a macroeconomic environment, where we're going to see increasing monetary inflation to pay off the debt.

Speaker Change: That's well understood that was even acknowledged by Jerome Powell and Ah 60 minutes interview this weekend.

Speaker Change: Were he expressed concern and so as as.

Michael J. Saylor: If you wanna make it 10 times more valuable, eventually, you gotta come up with a way to get 10 times more cash flows. And that's very different than Bitcoin because Bitcoin is an asset. So whereas big tech is asset poor and cash flow rich, Bitcoin is asset-rich, and a strategy with Bitcoin becomes asset-rich. Now, we're moving into a macroeconomic environment where we're going to see increasing monetary inflation to pay off the debt. That's well understood.

Speaker Change: The monetary supply expands.

Speaker Change: If your strategy is is to generate more cash flows you're going to have to grow your cash flow is faster than the rate of monetary inflation.

Speaker Change: And that means that a big tax strategy becomes increasingly difficult.

Speaker Change: So you could almost say.

Speaker Change: Big Tech company becomes.

Speaker Change: Becomes more difficult it gets harder right as the value increases, but bitcoin gets more compelling as.

Michael J. Saylor: That was even acknowledged by Jerome Powell in a 60 Minutes interview this weekend, where he expressed concern. And so as the monetary supply expands, if your strategy is to generate more cash flows, you're going to have to grow your cash flows faster than the rate of monetary inflation. And that means that a big tech strategy becomes increasingly difficult. And so you could almost say that a big tech company becomes more difficult, and gets harder, right, as its value increases. But Bitcoin gets more compelling as the value of Bitcoin increases because the liquidity increases and the network of holders increases. So we're in the first year of Bitcoin being viewed seriously as a possible institutional great store of value. And I believe that over time, it's going to appeal to technology investors as they understand it as digital capital and the digital transformation of capital. And there's a reason that we believe we can outperform other strategies and why we believe a commodity like Bitcoin is a better long-term store of value than just buying a portfolio of stocks because it isn't a cash derivative. Um,

Speaker Change: As the value of bitcoin increases because of the liquidity increases and and the network of holders increases.

Speaker Change: So so we're in the first year, a bitcoin being viewed seriously as a possible institutional grade store of value.

Speaker Change: And I believe that over time, it's going to appeal to technology investors as they understand it as digital capital and the digital transformation of capital.

Speaker Change: And there's a reason.

Speaker Change: We believe we can outperform other strategies and why we believe a commodity like bitcoin is a better long term store of value than just buying a portfolio of stocks.

Speaker Change: Because it isn't a cash derivative.

Speaker Change:

Speaker Change: I think that it's worthwhile to point out that that the arrival of the Etfs have been a catalytic moment.

Speaker Change: Because if you believe if you believe bitcoin is only valuable as a medium of exchange, that's very easy to say well its slow its not good medium exchanges not the dollar.

Speaker Change: There are lots of tax problems and liabilities, where there are lots of lots of Ky see problems. There are a lot of pricing problems accounting problems and you just dismiss it.

Michael J. Saylor: I think that it's worthwhile to point out that the arrival of the ETFs has been a catalytic moment. Because if you believe that Bitcoin is only valuable as a medium of exchange, then it's very easy to say, well, it's slow. It's not a good medium of exchange.

Speaker Change: But of course, if we look at all the wealth in the world only a small percentage of the wealth is stored in a checking account as a medium of exchange most of the wealth is really store of value or its useful capital and so as that narrative shifts from digital currency to digital property and for medium of exchange to store them.

Michael J. Saylor: It's not the dollar. You know, there are lots of tax problems and liabilities where there are lots of KYC problems there, you know, a lot of pricing problems, accounting problems, and you just dismiss it. But of course, if we look at all the wealth in the world, only a small percentage of the wealth is stored in a checking account as a medium of exchange. Most of the wealth is really a store of value, or it's useful capital. And so as that narrative shifts from digital currency to digital property and from medium of exchange to store of value, past criticisms are becoming irrelevant. And now, if you look at Bitcoin as digital gold, like gold, it can be 10x what it is. And as property, it could be 100x what it is now, and we don't need to address any of the traditional currency criticisms or medium of exchange criticisms.

Speaker Change: Value pass critics systems are becoming irrelevant.

Speaker Change: And <unk>.

Speaker Change: Now if you look at bitcoin as a digital gold gold it can be 10 X what it is and as property. It could be 100 X. What it is and we don't need to address any of the traditional currency criticisms or medium of exchange criticisms and.

Speaker Change: In fact, one could say simply as a store of value. There's no reason why bitcoin can't continue to outperform and can't become a 100 <unk> what it is.

Speaker Change: And these etp's that have been released are doing a tremendous job of scaling bitcoin as a store of value because they are putting it within the grasp you can buy a $100 worth of it in millions or tens of millions or hundreds of millions of accounts with one one hundreds of the friction.

Michael J. Saylor: In fact, one could say simply as a store of value, there's no reason why Bitcoin can't continue to outperform and can't become 100x what it is. And these ETPs that have been released are doing a tremendous job of scaling Bitcoin as a store of value because they're putting it within the grasp of everyone. You can buy $100 worth of it in millions or tens of millions or 100 millions of accounts with a 1,100th of the friction, perhaps a 1,1000th of the friction that traditional investors faced just a few years ago when they had to go set up a crypto account on a crypto exchange. And then they had to figure out who their Bitcoin custodian was going to be or whether they're going to do self-custody.

Speaker Change: Perhaps one 1000th of the friction that the traditional investors faced.

Speaker Change: Just a few years ago when they had to go set up a crypto account on a crypto exchange and then they had to figure out who their bitcoin custodians is going to be or whether they're going to do self custody.

Speaker Change: And there are a large classes of investors and institutional investors that either can't or won't do that.

So where we're living through a very exciting period.

Speaker Change: Now we can go to the next slide.

Speaker Change: The question is whats micro strategy going to do in order to in order to support the Bitcoin network in order to to benefit our shareholders from these trends.

Michael J. Saylor: And there are large classes of investors and institutional investors that either can't or won't do that. So we're living through a very exciting period. Now we can go to the next slide.

Speaker Change: As you can see and as we've said, we view ourselves as a bitcoin development company and.

Michael J. Saylor: The question is, what's MicroStrategy going to do in order to support the Bitcoin network in order to benefit our shareholders from these trends? Well, as you can see, and as we've said, we view ourselves as a Bitcoin development company. What does that mean?

Speaker Change: What does that mean well that means we're going to do everything we can to grow the bitcoin network, we're going to do everything we can to acquire a more bitcoin and we're going to do everything we can to benefit our shareholders and do this in an accretive fashion.

Michael J. Saylor: Well, that means we're going to do everything we can to grow the Bitcoin network. We're going to do everything we can to acquire more Bitcoin, and we're going to do everything we can to benefit our shareholders and do this in a creative fashion. And when we consider our options and our unique strengths, we boil it down to four.

Speaker Change: And when.

Speaker Change: When we consider our options and our unique strengths, we boil it down to four first of all our company structure. We are unique as an operating company.

Speaker Change: And that means we have active control over our capital structure.

Speaker Change: And we can do things operating companies can do that that trust companies like say spot bitcoin etp's they can't do.

Michael J. Saylor: First of all, our company structure. We are unique as an operating company, and that means we have active control over our capital structure. And we can do things operating companies can do that trust companies like, say, spot Bitcoin ETPs they can't do. And that's a wide range of things.

Speaker Change: And that's a wide range of things one of those things as we can develop software and of course, we'll continue to develop business intelligence software. There is extraordinary opportunities to blend artificial intelligence with our traditional business intelligence customer base.

Michael J. Saylor: One of those things is that we can develop software. And, of course, we'll continue to develop business intelligence software. There are extraordinary opportunities to blend artificial intelligence with our traditional business intelligence customer base. Great value.

Speaker Change: Great value and we will also continue to pursue bitcoin development opportunities. So develop applications that are that create value from the bitcoin network either either working on the base layer or working with al two protocols like the Lightning protocol in order to do this.

Michael J. Saylor: And we will also continue to pursue Bitcoin development opportunities. Therefore, develop applications that create value from the Bitcoin network, either working on the base layer or working with L2 protocols like the Lightning protocol in order to do this. We're very enthusiastic about that, and as we develop this software, we will release it either to the benefit of the Bitcoin network, or we will release it to generate more revenue and work to generate more cash flow so that we can buy more Bitcoin. Another thing that we can do uniquely as an operating company is generate cash from operations. There are lots and lots of ways to generate cash from operations, too many for me to enumerate right now.

Speaker Change: We're very enthusiastic about that.

Speaker Change: And as we develop the software we will we will release it either to the benefit of the bitcoin network or will release it to generate more revenue and work to generate more cash flow. So that we could buy more bitcoin.

Speaker Change: Another thing that we can do uniquely as an operating company as we can generate cash from operations.

Speaker Change: There are lots and lots of ways to generate cash from operations too. Many for me too and Numerate right now as Andrew pointed out we reinvested $726 million in cash to date and the Bitcoin network, we expect to continue to be able to reinvest cash into bitcoin acquisitions.

Speaker Change: And when we do this this is this is we believe very accretive to our shareholders.

Michael J. Saylor: As Andrew pointed out, we've reinvested $726 million in cash to date in the Bitcoin network. We expect to continue to be able to reinvest cash into Bitcoin acquisitions. And when we do this, this is, we believe, very beneficial to our shareholders. And the last point that I would want to make is we're very fortunate to be able to leverage the capital markets. There are no companies that have, to the extent that we have, been able to leverage the capital markets to acquire Bitcoin.

Speaker Change: And the last point that I would want to make is we're very fortunate to be able to leverage the capital markets.

Speaker Change: There really are.

Speaker Change: There are no companies that have to the extent that we have been able to leverage the capital markets to acquire bitcoin, we've acquired bitcoin with senior secured debt issuance, we've acquired bitcoin with convertible debt issuance, we've acquired bitcoin with equity.

Speaker Change: <unk> issuance.

Speaker Change: And and those are just three ways, we've done it in the past.

Michael J. Saylor: We have acquired Bitcoin with senior secured debt issuance. We've acquired Bitcoin with convertible debt issuance. We've acquired Bitcoin with equity issuance. And those are just three ways we've done it in the past.

Speaker Change: And.

Speaker Change: As we look forward, we're going to consider all possible capital market opportunities. So.

Speaker Change: Perhaps preferred equity would be a route for us to acquire bitcoin with leveraged its beneficial to our shareholders. Perhaps other types of equity would be a continued equity like we have with our Atms, perhaps convertible debt, perhaps structured notes.

Michael J. Saylor: And, as we look forward, we're going to consider all possible capital market opportunities. Perhaps preferred equity would be a route for us to acquire Bitcoin with leverage that's beneficial to our shareholders. Perhaps other types of equity would be, or continued equity like we have with our ATMs. Perhaps convertible debt, perhaps structured notes, perhaps secured debt, or perhaps unsecured debt. We try to evaluate all options, we keep our options open, and we ask ourselves the question, is this prudent? And then also, is this acquisitive?

Speaker Change: Perhaps secured debt or perhaps unsecured debt.

Speaker Change:

Speaker Change: We try to evaluate all options, we keep our options open.

Speaker Change: So the question is this prudent and then also is this accretive is this going to be good for our shareholders.

Speaker Change: And of course with any discussion of leverage.

Speaker Change: We don't want too much.

Michael J. Saylor: Is this going to be good for our shareholders? And, of course, with any discussion of leverage, we don't want to get into that too much. We want to pick just the right amount of leverage, the leverage that allows us to benefit our shareholders without creating undue uncertainty. So this is an ongoing opportunistic exercise of ours, quarter by quarter. And of course, every single quarter, we expect the Bitcoin market, the capital markets, the debt markets to evolve. And so we pride ourselves on being nimble and being able to take advantage of opportunities as they present themselves, as we did in Q4 with our equity issuance. Sometimes it's appropriate to go fast. Sometimes it's appropriate to go slow.

Speaker Change: We wanted to just pick just the right amount of leverage the leverage that allows us to benefit our shareholders without creating undue uncertainty. So this is an ongoing.

Speaker Change: Opportunistic exercise of ours quarter by quarter and of course every single quarter, we expect the bitcoin market the capital markets the debt markets will evolve and so we pride ourselves on being nimble.

Speaker Change: And and being able to take advantage of opportunities as they as they present themselves.

Speaker Change: As we did in Q4 with our our equity issuance.

Speaker Change: Sometimes it's appropriate to go fast sometimes it's appropriate to go slow sometimes it's appropriate to do nothing and wait for better opportunities to present themself.

Michael J. Saylor: Sometimes it's appropriate to do nothing and wait for better opportunities to present themselves. The nice thing about our situation right now is that we have all these options and we believe we're structured very, very well to take advantage of opportunities as they present themselves in the Bitcoin era of institutional adoption that we will see over the coming 15 years. It won't be like the first 15 years, but we believe it will be a healthy growth period presenting many, many opportunities for corporations such as ours. As more and more institutional investors and retail investors become aware of Bitcoin, and as regulatory clarity spreads everywhere in the world. And with that, I guess I'd like to pass the floor to Sharif for questions. Thank you, Michael.

Speaker Change: Nice thing about our situation right now is that we have all these options and and we believe we're structured very very well to take advantage of opportunities as they present themselves and the bitcoin error of institutional adoption that we see over the coming.

Speaker Change: 15 years.

Speaker Change: It won't be like the first 15 years.

But we believe it will be a healthy growth period, presenting many many opportunities for corporations such as ours.

Speaker Change: As more and more institutional investors and retail investors become aware of bitcoin.

Speaker Change: And as regulatory clarity spreads everywhere in the world.

Speaker Change: And with that I guess I'd like to pass the floor to Sharif for questions.

Sharif: Thank you Michael.

Operator: We're going to jump into the questions, and the first question is for Phong. Phong, can you elaborate on the company's new positioning as a Bitcoin development company and does this mean any different allocation of R&D, and will you be allocating more R&D into Lightning and Layer 2 applications? If you can elaborate a little more on that. Thanks, Suresh.

Sharif: I'm going to jump into the questions and the first question as far Fong.

Sharif: Finally, if you can elaborate on the company's new positioning as a bitcoin development company and does this mean.

Sharif: Any different allocation of R&D.

Sharif: Now that youll be allocating more R&D into lightning alere due applications can elaborate a little more on that.

Phong Le: And thanks for the question. I think our press release and our prepared remarks, and Mike actually did a really nice job of explaining our positioning as a Bitcoin development company. We thought long and hard about the positioning and the right words to describe our unique value proposition.

Speaker Change: Thanks <unk> thanks for the question.

Speaker Change: I think our press release and in our prepared remarks, and Mike as you did a really nice job of explaining our positioning as a bitcoin development company.

Speaker Change: We thought long and hard about the positioning and the right words to describe our unique value proposition I suggest everyone take a quick look or a long look at that.

Phong Le: I suggest everyone take a quick look or a long look at that. On the R&D piece, we will invest more in R&D into Bitcoin software development. It will not be at the expense of our business intelligence and AI and cloud-based software development. Some of the things that we've been doing, you may have seen at our Bitcoin and Lightning for Corporations MicroStrategy World event last year, where we implemented a Lightning Rewards program on the Layer 2 network.

Speaker Change: On the R&D.

Speaker Change: We will invest more in R&D into bitcoin and software development.

Speaker Change: Will not be at the expense of our business intelligence and AI and cloud based software development.

Speaker Change: Some of the things that we've been doing.

Speaker Change: You've seen at our bitcoin and lightning for corporations Microstrategy World event last year, where we implemented a lightning we rewards program on the layer two network.

Phong Le: We're also looking at some things that will leverage the native Bitcoin blockchain technology, some security applications that we'll reveal at our next MicroStrategy World conference. So we're excited about Bitcoin overall but very excited about some of the software development capabilities that we'll be able to create coming out of this. All right. The next question is for Andrew.

Speaker Change: We're also looking at some things that will leverage the native bitcoin blockchain technology.

Speaker Change: And security applications that will reveal at our next Microstrategy World Conference. So we're excited about bitcoin overall, but very excited about some of the software development capabilities that we'll be able to create coming out of it.

Speaker Change: Great.

Speaker Change: Our next question is for Andrew.

Andrew: You talked about excess cash and leverage, highlighting the value proposition for MicroStrategy. How do you plan to acquire more Bitcoin in 2024? Thanks for the question. I think Michael summed it up really well in the last few minutes of his remark.

Andrew Ken: You talked about excess cash and AR.

Andrew Ken: Leverage highlighting the value proposition for micro strategy, how do you plan to acquire more bitcoin in 2024.

Andrew Ken: Thanks for the question.

Andrew Ken: I think.

Speaker Change: Hey, Michael summed it up really well in the last few minutes.

Andrew: I believe we have all options available to us, which includes excess cash, but also all the different forms of capital that we could issue through debt and equity markets. I think, as we've done in the past, those are the levers that we'll use to acquire more Bitcoin. I think 2024 will offer some opportunities for us to do so. You know, I think as our market value increases with the increasing price of Bitcoin, there will be additional opportunities for us to access the capital market. And, you know, similar to what we've always said, right? We will look to assess which is the most acquisitive.

Speaker Change: His remarks.

Speaker Change: I believe we have all options available to us.

Speaker Change: Which includes excess cash but also.

Speaker Change: All the different forms of.

Speaker Change: Capital that equal.

Speaker Change: Issued new debt and equity markets.

Speaker Change: I think as we've done in the past those are the levers that we're used to.

Speaker Change: Acquired more bitcoin.

Speaker Change: 'twenty 'twenty four will offer some opportunities for us to do so.

Speaker Change: <unk>.

Speaker Change: I think as our market value increases will be increasing prices decline.

Speaker Change: I think there will be additional opportunities to access the capital markets.

Speaker Change: And similar to what we've always said.

Speaker Change: We will look to assess which is the most accretive.

Andrew: We've issued debt in certain markets. We've issued equity in different types of markets. I think we've demonstrated the track record of our ability to think through those complex ideas. And so, as Michael alluded to, I think we have all of those options available to us to acquire more Bitcoin in 2020. Thank you.

Speaker Change: We issued debt in certain markets, you've issued equity in different types of markets.

Speaker Change: I think we've demonstrated a track record of our ability to think through those complex ideas and so.

Speaker Change: As Mike alluded to I think we have all of them all of those options available to us.

Speaker Change: Two acquired loan equivalent to 2024.

Speaker Change: Thank you. The next question is for Fang.

Phong Le: Regarding cloud, can you please elaborate on the progress of converting software clients to the cloud from licenses, and how is the timing of the transition looking overall? Yeah, 2023 is a pretty pivotal year for us. One, our subscription services revenue has now surpassed our product license revenue. And two, our subscription services revenue has surpassed our other services revenue. And so that was a pretty big transition.

Fang: Regarding cloud. So can you. Please elaborate on the progress of converting software clients to cloud from license and how is the timing of transition looking over on.

Fang: Yeah, 2023 is a pretty pivotal year for us.

Speaker Change: One our subscription services revenue has now surpassed our product license revenue.

Fang: And two our subscription services revenue has surpassed our other services revenue and so that was a pretty big transition is now the second biggest revenue line item behind product support which represents the maintenance the on Prem customers pay us.

Phong Le: It's now the second biggest revenue line item behind product support, which represents the maintenance that on-prem customers pay us. Another data point I'll give you is that we are near or exceeding the $100 million ARR in the cloud, which is a pretty major milestone for any software company and a very major milestone for us as we're transitioning from on-prem to the cloud. That said, we still have less than 25% of our recurring revenue in the cloud.

Fang: Another data point I'll give you is we are near or exceeding the $100 million of <unk> in the cloud, which is a pretty major milestone for any software company and a very major milestone for us as we are transitioning from on Prem to the cloud.

Fang: That said, we still have less than 25% of our recurring revenue in the cloud. So there's still a pretty major opportunity at other greater than 75% of on Prem revenue that we need to move I think 'twenty 'twenty four is going to be a.

Phong Le: So there's still a pretty major opportunity, another greater than 75% of on-premise revenue that we need to move. I think 2024 is going to be an acceleration year in terms of moving existing customers to the cloud and getting more new customers to move to the cloud. One reason for that I talked about is our partnerships with our hyperscalers, including Microsoft, Azure, Amazon, AWS, and Google GCP.

Fang: The acceleration year in terms of moving existing customers to the cloud.

Fang: And getting more new customers move to cloud reasons for that I talked about one is our partnerships with our hyperscale errors, including Microsoft Azure.

Amazon AWS and Google.

Phong Le: Another reason is the maturity of our technology offering, container-based, and microservices-based, and the fact that we're going to roll out a private cloud offering this year. So, a lot of progress, but more opportunity to move to the cloud. And I would say 2024 will be probably the most important year for our transition we've seen in the history of the company in terms of moving to the cloud. And we have the entire organization aligned behind it, and we have our customers ready to roll. Thank you. The next question is also for Phong.

Fang: G C. P. Another reason is the maturity of our technology offering.

Fang: Container based micro services based and the fact that we're going to rollout a private cloud offering this year. So a lot of progress, but more opportunity to move to the cloud and I would say 2024 will be.

Fang: Probably the most important year for our transition we've seen in the history of the company in terms of moving to the cloud and we have the entire organization aligned behind it and we have our customers ready to roll.

Speaker Change: Thank you. The next question is also for phone.

Phong Le: How's the initial perception of the AI product and what do you think this will contribute to product mix or profit margins? I think it's like a lot of AI products that are already in the market. First, I'll remind everyone, we went GA with our AI plus BI product in September, so essentially, four months ago, the end of September, four months ago. And we were the first in the BI space to do so.

Speaker Change: How's the initial.

Phone: Reception of the AI product and what do you think this will contribute to product mix our profit margins.

Speaker Change: I think it's like a lot of AI products that are actually in the market.

Speaker Change: First of all I'll remind everyone. We went GA with our AI plus EI product in September so essentially four months ago.

Speaker Change: End of September four months ago, and we were the first in the <unk> space to have done so.

Phong Le: And we have a lot of customers who are starting to kick the tires, play around with it, and get excited about it. And what we're really doing is trying to understand what are the production use cases that are going to drive further growth in AI plus BI. The exciting side effect, if you will, is that our AI product is built cloud native and, therefore, only available in the cloud. This is accelerating our cloud migration even further.

And we have a lot of customers who are starting to kick the tires play around with the debt getting excited about it and what we're really doing is trying to understand what are the production use cases that are going to drive further growth in AI plus hi.

Speaker Change: The the exciting side effect. If you will is because our AI product is build cloud native and therefore only available in the cloud is accelerating our cloud migration even further.

Phong Le: So, while the revenue impact of AI directly may not be extremely significant in 2024, it could be, but we're not positive yet. What will be significant is how AI is driving our customers to migrate to the cloud. And back to the previous question, that'll show up in our revenues and our transition to subscription services revenue and our increase in cloud ARR. And we're seeing that happen already. We're seeing CIOs, CEOs, and COOs saying, This gives us a really important reason to want to move Microstrategy and all of our workloads to the cloud. Thanks, Phong.

Speaker Change: So while the revenue impact of AI directly.

Speaker Change: May not be extremely significant in 2024, it could be but we're not positive yet what will be significant as how it's driving our customers to migrate to the cloud and back to the previous question that'll show up in our revenues and our transition to subscription services revenue and our increase in cloud a R. R.

Speaker Change: And we're seeing that happened already we're seeing.

Speaker Change: CIO Ceos.

Speaker Change: C O O saying this to this gives us a real important reason to want to move micro strategy in all of our workloads to the cloud.

Andrew: Next question is for Andrew. Regarding tech maturity, how do you plan to address your upcoming 2025 maturity, and what are the different ways the company can pursue it? Oh, thanks, Rish.

Speaker Change: Thanks <unk> next question is for Andrew.

Speaker Change: Regarding the debt maturity, how do you plan to address upcoming 2025 convert maturity and what are the different ways. The company can.

Speaker Change: Brazil.

Andrew: I guess, first note, right, we still have a good amount of time before that maturity arises in December 2025. We've always, you know, managed our maturities from a timing perspective that gives us ample time to figure out these types of questions. But that being said, you know, I think we are getting closer, and we're continually evaluating the market opportunities in regards to 2025. And we could, of course, you know, they could equitize at the conversion price. That's clearly one option.

Andrew Ken: Thanks Krish.

Speaker Change: I guess.

Andrew Ken: First to note right, we still have.

Andrew Ken: A good amount of time before that maturity arises in December 2025.

Andrew Ken: We've always.

Andrew Ken: Manage our maturities.

Andrew Ken: From a timing perspective that gives us ample time to figure out these types of questions, but that being said.

Andrew Ken: I think we are getting closer and we're continually evaluating the market opportunities in regards to 2025.

Andrew Ken: We could of course, they could appetizer at the converted by such clearly one option.

Andrew: I think other options out there exist and potentially being able to refinance those converts, which could allow us to even send out maturities further. Of course, all that is based on market conditions. But the point is, I think we're evaluating everything. And, you know, I think it's something that we'll keep very close consideration in the coming months. Thanks, Andrew.

Andrew Ken: I think other options out there existing essentially being able to refinance those converts.

Andrew Ken: Which could allow us to even extend out maturities further.

Andrew Ken: Of course, all of that was based on market conditions, but the point is.

Andrew Ken: I think we're evaluating everything.

Andrew Ken: And I think thats something that will keep a very.

Very close consideration in the coming years.

Speaker Change: Thanks, Andrew.

Speaker Change: And.

Michael J. Saylor: And I'll ask one last question for Michael here, given that we are coming to the end of the time. How important is the SEC acceptance of spot Bitcoin ETPs in terms of the eventual mainstreaming of Bitcoin as a legitimate form of money? Yeah, I think it's tremendously important. I think the approval of the spot ETPs marked an inflection point in the history of Bitcoin, and it demarcates the era of retail offshore unregulated crypto adoption versus the era of onshore regulated institutional Bitcoin adoption by mainstream investors and the investment community. We can already see that.

Speaker Change: I'll ask one last question for Michael here.

Speaker Change: Given that we're coming to the end of the time.

Speaker Change: How important is the SEC acceptance of spot Bitcoin ETP is in terms of eventual mainstreaming of bitcoin as a legitimate form of money.

Michael J. Saylor: Yes, I think it's tremendously important I think I think the approval of the spot Etp's marked an inflection point in the history of bitcoin and it demarcate the era of retail offshore unregulated a crib.

Michael J. Saylor: Crypto.

Michael J. Saylor: Crypto adoption versus the hair of onshore regulated institutional.

Michael J. Saylor: Bitcoin adoption by the mainstream investors.

Michael J. Saylor: And investment community.

Michael J. Saylor: We can already see.

Michael J. Saylor: These ETPs have been a screaming success as a launch. They're sucking all the oxygen out of the room, and getting all the attention in the ETF industry. They've already marched up the leaderboard amongst the top commodity ETFs in the world very rapidly. It's pretty clear that Bitcoin is now on a path to eat gold, and sassoon gold's monetary value. And, of course, it's a fairly easy trade for someone now to sell their gold ETF and buy a Bitcoin ETF. It just takes a matter of a 30-second phone call. And so. The, uh...

Michael J. Saylor: These etp's had been a screaming success as our launch there sucking all the oxygen out of out of the room are getting all the attention and the ETF industry, they've already March jumped a leader board amongst the top commodity Etfs in the world very rapidly.

Michael J. Saylor: It's pretty clear that bitcoin is now on a path to to eat gold to Sassoon, Gold's monetary value and and and of course, it's a fairly easy trade for someone now to sell their gold ETF and buy a bitcoin ETF.

Michael J. Saylor: It's just takes a matter of 32nd phone call and so.

Michael J. Saylor: The.

Michael J. Saylor: Yeah.

Michael J. Saylor: The amount of the frequency with which people are comparing Bitcoin to gold is dramatically increasing. The frequency of Bitcoin in a conversation with a registered financial advisor is going up by orders of magnitude. So this has catalyzed the adoption and the normalization of Bitcoin throughout the traditional finance industry. I think the implication is Bitcoin will become everybody's favorite commodity investment because other investments like gold, silver, basic commodities, natural gas, oil, they have not been terribly successful strategies. And Bitcoin has an order of magnitude more enthusiasm behind it. So first, Bitcoin takes over commodities, but then it spreads throughout the entire traditional finance industry in the U.S. And as it's doing that, it's entering legitimately into the political conversation, the banking conversations, the regulatory conversations, and the mainstream media.

Michael J. Saylor: Amount of.

Michael J. Saylor: The frequency with which people are comparing bitcoin to gold.

Michael J. Saylor: Is dramatically increasing the frequency of bitcoin and a conversation with a registered financial advisors.

Michael J. Saylor: Going up by orders of magnitude.

Michael J. Saylor: So this has catalyzed the adoption and the normalization of bitcoin throughout the traditional finance industry.

Speaker Change: I think.

Speaker Change: The implication is bitcoin will become everybody's favorite commodity investment because the other investments like gold silver.

Speaker Change: You know basic commodities natural gas oil they have not been terribly successful strategies in and.

Speaker Change: And Bitcoin is has an order of magnitude more enthusiasm behind it. So so first bitcoin takes over commodities, but then bitcoin spread throughout the entire traditional finance industry in the U S and as it's doing that it's it's entering.

Speaker Change: With legitimacy ended the political conversation.

Speaker Change: Banking conversations the regulatory conversations in the mainstream media.

Michael J. Saylor: It's coming onto college campuses and education institutions, and it's beginning to be talked about much more frequently in technology organizations, startups, and big tech companies. So, in general, this is just a massive catalytic event for Bitcoin throughout the United States. And that leads to global acceptance and a surge in global interest. We're already seeing a lot more talk about Bitcoin outside of the U.S., and many other countries take their lead from U.S. regulators, so we already have seen discussions of Bitcoin spot ETFs in Hong Kong, but I think you'll see any resistance to a similar product in South America, Africa, Europe, Asia is going to decrease dramatically in the aftermath of the SEC

Speaker Change: It's coming on to college campuses and in education institutions, and it's and it's beginning to be talked about much more frequently and technology organization startups and big Tech companies. So in general. This is just a massive catalytic event for bitcoin throughout the year.

Speaker Change: And as states and that leads to global acceptance and Adam.

Speaker Change: A surge in global interest.

Speaker Change: Already seeing a lot more talk about bitcoin outside of the U S.

Speaker Change: And many other countries take their lead from U S. Regulators. So so we already have seen discussions of bitcoin spot Etfs in Hong Kong, but I think you'll see any resistance.

Speaker Change: A similar products in South America Africa, Europe Asia is is going to decrease dramatically in the aftermath of the FCC approval.

Michael J. Saylor: There used to be a little structure of Bitcoin investors, and there were five classes. There were the deniers that thought it was tulip bulbs and it was not legitimate, and then the skeptics that thought, oh, it's too good to be true, it's going to be banned. And then you've got the traders that they recognize as an asset, and they just trade it for the volatility because it's fun to trade

Speaker Change: They used to be a little.

Speaker Change: Our structure, our bitcoin investors and there were five classes, there where the denier.

Speaker Change: That thought it was tulip bulbs and it was not legitimate and then the skeptics that thought Oh, it's too good to be true it's gonna be banned.

Speaker Change: And then you've got the traders that they recognize as an asset and they just traded for the volatility because it's fun to trade and then you've got the investors to think while maybe it's something like the next big Tech company like an Apple or Facebook, So I'll kind of buy it as a store of value and my tech portfolio.

Michael J. Saylor: And then you've got the investors that think, well, maybe it's something like the next big tech company, like Apple or Facebook. So I'll kind of buy it as a store of value in my tech portfolio. And then you've got the maximalists, and the maximalists think it's an instrument of economic empowerment. It's a way to spread global freedom and sovereignty, and it's a way to make the world a better place. And, of course...

Speaker Change: And then you've got the maximal less and the Maximus. Thank it's a it's a instrument of economic empowerment, it's a way to spread global freedom and sovereignty and it's a way to make the world a better place.

Speaker Change: And of course.

Michael J. Saylor: The maximalists can be found on Twitter, but the significance of this SEC approval is that the deniers have been discredited, and the skeptics are being silenced. That is to say, if you think it's not a legitimate asset, well, there's no way that the SEC would have approved an ETP on, you know, fake, you know, counterfeit tulip bulbs or something random and ridiculous. So, the deniers don't really have a lot of credibility anymore. And the skeptics? The ones that said...

Speaker Change: The maximized, we can find on Twitter, but the significance of this FCC approval.

Speaker Change: Is that the denier has have been discredited.

Speaker Change: And the skeptics are being silenced.

Speaker Change: That is to say if you think it's not a legitimate asset well theres no way that the FCC would have approved.

Speaker Change: And a T. P. On fake you know counterfeit tulip bulbs or something random and ridiculous. So so the denials.

Speaker Change: Don't really have a lot of credibility anymore and the skeptics the ones I've said.

Michael J. Saylor: I get it, but it's too good to be true and it's, you know, it's too threatening to the establishment, so it'll be banned. Well, they typically were the ones that thought of it as a medium of exchange and a currency and a competition for the dollar. And now they're beginning to realize that the establishment views this as a store of value, maybe a speculative asset, maybe they're not going to endorse the asset, but it's an asset, it's not a currency substitute. And as such, no, it's not going to be banned. If BlackRock can sell it to you, if Fidelity can sell it to you, it's not being banned.

Speaker Change: I get it but it's too good to be true and it's you know, it's two threatening to the establishment so it'll be banned well.

Speaker Change: Well they typically they were the ones who are thought of as a medium of exchange and a currency in a competition for the dollar and now they're beginning to realize that the establishment views. This as a store of value maybe of speculative asset, maybe maybe theyre not going to endorse the asset, but its an asset it's not a currency subs.

Speaker Change: And as such no it's not going to be banned if Blackrock consolidator you have fidelity can sell it to you it's not being banned so the denier has are out of the picture. The skeptics are increasingly looking out of touch.

Michael J. Saylor: So the deniers are out of the picture, the skeptics are increasingly looking out of touch, and the entire investment community has shifted right toward either being a trader, an investor, or a maximalist. Profoundly, profoundly positive and auspicious for Bitcoin as an asset class. You put these things together, and awareness is spreading, and support is spreading everywhere in the world. Now you're probably not going to get fired if you're working at a bank or a financial institution and you say, hey, maybe we should look at this and maybe write a piece about it or do some research on it or consider whether we can trade it or custody it or build a product on it. And that wasn't really something that was easy to consider two, three, four years ago.

Speaker Change: And the entire investment community has shifted right toward either being a trader in investor or a maximalist and this is <unk>.

Speaker Change: Profoundly.

Speaker Change: Profoundly positive and auspicious for bitcoin as an asset class.

Speaker Change: You put these things together and awareness is spreading and support is spreading everywhere in the world now now you're probably not going to get fired if you're working at a bank or a financial institution and you say hey, maybe we should look at this and maybe write a piece about or to do some research on and or consider whether we can trade it or cost.

Speaker Change: See it or build a product on it and that that wasn't really something that was easy to consider two.

Speaker Change: 234 years ago in fact, we've even shift to the point, where now there's a lot of mainstream and even political lobbying to say revoke staff accounting Bulletin, one 'twenty one that makes it difficult for banks to custody bitcoin. So there's a lot of political pressure.

Michael J. Saylor: In fact, we've even shifted the point where now there's a lot of mainstream and even political lobbying to revoke Staff Accounting Bulletin 121 that makes it difficult for banks to custody Bitcoin. So there's a lot of political pressure to normalize the asset, embrace the asset, and allow companies to do business with this asset. And so I think that this ETP launch really was the beginning of the next stage of growth for the entire Bitcoin network, and it was really the catalytic event necessary for institutions everywhere in the world to begin to invest material amounts of capital or material amounts of time or energy or to risk their brands and their reputations to do business with and support Bitcoin. And so we're only like three and a half weeks into it.

Speaker Change: To normalize the asset to embrace the asset to allow.

Speaker Change: Companies.

Speaker Change: To do business with this asset.

And so I think that.

Speaker Change: This this ETP launch really was the beginning of the next stage of growth of the entire Bitcoin network and it was it was really the catalytic event necessary for institutions everywhere in the world to begin to invest material.

Speaker Change: Mounts of capital or material amounts of time or energy or to risk their brands and their reputations to do business with and support their coin in and so.

Speaker Change: We're only like three and a half weeks into it and so it's hard to see all of the positive developments.

Michael J. Saylor: And so it's hard to see all of the positive developments that are being catalyzed by this, but I do believe we will see them manifest themselves over time, and quarter by quarter and year by year, we're going to see many, many positive developments that bring Bitcoin to many, many more investors and many, many organizations, many more companies, many more countries, and increasingly bring utility to the world. Great. Thank you so much, Michael. We received so many great questions that we couldn't answer, but we would like to thank everyone for attending and asking the questions. We will try to cover these in our future remarks, but this concludes the Q&A portion of the webinar. I will now turn the call over to Phong for closing remarks.

Speaker Change: That had been catalyzed by this.

Speaker Change: But I do believe we will see them manifest themselves over time and quarter by quarter and year by year, we're going to see many many positive developments that that bring bitcoin to many many more investors and many more organizations many more companies many more countries and and increasingly.

Speaker Change: Bring utility to the world.

Speaker Change: Great. Thank you so much Michael.

Speaker Change: We received so many great questions that we couldn't answer but if he would like to thank you everyone for attending and asking the questions.

Speaker Change: They are trying to cover these in our future remarks.

Speaker Change: This concludes the Q&A portion of the webinar I will now turn the call over to <unk> for closing remarks.

Phong Le: I want to thank everyone for being with us today and for your continued support of MicroStrategy. Before we wrap up, I'm pleased to share that our next in-person MicroStrategy World Conference will be held from April 29th to May 2nd in Las Vegas, Nevada. There will be a business intelligence track and a Bitcoin for Corporations track, and you can expect that we'll further expand on a lot of the discussion we had today at that MicroStrategy World event, and it's a great way for you to interact with us live and in-person. Registrations are open, and additional details can be found on our event website page, microstrategy.com slash world24. We're excited and looking forward to seeing customers, prospects, and shareholders at this one-of-a-kind event. We're as enthusiastic as ever with both our enterprise software strategy as well as our Bitcoin strategy. We wish you a good quarter and look forward to seeing you again, if not at MicroStrategy World, and again in 12 weeks. Thank you all.

Speaker Change: I want to thank everyone for being with US today are for your.

Speaker Change: Your continued support of micro strategy.

Speaker Change: Before we wrap up I am pleased to share that our next in person Microstrategy World Conference will be held from April 29th day may 2nd in Las Vegas, Nevada.

Speaker Change: There'll be a business intelligence truck and a bitcoin for corporations track and you can expect that will.

Speaker Change: Further expand on a lot of the discussion we had today at that Microstrategy World event, and it's a great way for you to interact with us.

Speaker Change: Live and in person Reggie.

Speaker Change: Our registrations are open and additional details can be found on our event website page micro strategy Dot com Slash World 24.

Speaker Change: We're excited and looking forward to seeing customers prospects and shareholders at this one of a kind of it.

Speaker Change: As enthusiastic as ever with both our enterprise software strategy as well as our bitcoin strategy. We wish you a good quarter and look forward to seeing you again, if not at Microstrategy World and again in 12 weeks. Thank you all.

Speaker Change: Okay.