Q1 2024 MicroStrategy Incorporated Earnings Call

Shirish Jajodia: Hello everyone, and good afternoon. I am Shirish Jajodia, Vice President of Investor Relations and Treasury at MicroStrategy. I'll be your moderator for MicroStrategy's 2024 First Quarter Earnings Webinar. Before we proceed, I will read the safe harbor statement. Some of the information we provide during today's call regarding our future expectations, plans, and prospects may constitute forward-looking statements. However, actual results may differ materially from these forward-looking statements due to various important factors, including the risk factors discussed in our most recent 10-K filing with the SEC.

Hello, everyone and good afternoon.

I am sure you Judge Audia, Vice President of Investor Relations and Treasury at Microstrategy.

And why do we care for Microstrategy 2024 first quarter earnings webinar.

Speaker Change: Before we proceed I will read the safe Harbor statement.

Speaker Change: Some of the information we provide during todays call regarding our future expectations plans and prospects may constitute forward looking statements.

Speaker Change: Actual results may differ materially from these forward looking statements due to various important factors, including the risk factors discussed in our most recent 10-K filed with the SEC.

Shirish Jajodia: We assume no obligation to update these forward-looking statements, which speak only as of today. Also, during today's call, we will refer to certain non-GAAP financial measures. 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.

Speaker Change: We assume no obligation to update these forward looking statements, which speak only as of today.

Speaker Change: So during today's call, we will refer to certain non-GAAP financial measures reconciliation showing GAAP versus non-GAAP results are available in our earnings release and presentation.

Speaker Change: Issued today and are available on our website at Microstrategy Dot com.

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

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.

You can submit questions throughout the webinar and Michael fall or Andrew.

Speaker Change: So your questions at the end of the session.

Speaker Change: Please be sure to provide your name and your company's name then submitting your questions now I'll walk you through the agenda for today's call first suddenly they will cover the business results and to keep less of our strategy.

Shirish Jajodia: Now, I'll walk you through the agenda for today's call. First, Phong Le will discuss the business results and the key pillars of our strategy. Second, Andrew Kang will cover the financial results for the first quarter of 2024. Then, Michael Saylor will provide a strategic review and discuss our 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.

Speaker Change: Second Andrew Kay will cover the financial results for the first quarter of 2024.

Andrew Kang: Michael Saylor will provide a strategic review and discuss our recent decline market updates and lastly, we will open up to Q&A.

Andrew Kay: With that.

Speaker Change: I will turn the call over to <unk>, President and CEO of Microstrategy.

Phong Q. Le: Thanks, Shirish. Hello, everyone. I'd like to welcome all of you to today's webinar. We're excited to be reporting live from MicroStrategy World 2024 in Las Vegas, Nevada. We have a packed agenda lined up for the next three days, and we're excited to see our customers, partners, analysts, shareholders, and employees all in person to share our passion for BI, AI, Bitcoin, and innovation. The Business Intelligence Track tomorrow will feature my keynote presentation titled, Let the Data Lifeblood Flow, and we'll explore how to create more innovative, competitive, high-performance organizations by using AI and BI to make smart data Our chief product officer, Sarabha Vyankar, will share the latest MicroStrategy technologies for delivering convenient, flexible, and reliable data within operational workflows, not just in dashboards, to everyone who needs it.

Speaker Change: Thanks, <unk> Hello, everyone I would like to welcome all of you to today's webinar.

Speaker Change: We're excited to be reporting alive for Microstrategy World 2024 in Las Vegas, Nevada, with a packed agenda lined up for the next three days and we're excited to see our customers partners analysts shareholders and employees all in person to share our passion for <unk> AI bitcoin and.

Speaker Change: Yeah.

Speaker Change: The business intelligence track Tomorrow will feature my keynote presentation titled let the data life blood flow and we will explore how to create more innovative competitive high performing organizations by using a I N T.

Speaker Change: To make smart data more accessible to the frontline employees.

Speaker Change: Our chief product officer, Sourav of Yonker will share the latest micro strategy technologies for delivering convenient flexible and reliable data within operational workflows, not just in dashboards to everyone who needs it.

Phong Q. Le: The keynote presentation will feature guest speakers from Microsoft, Amazon Web Services, Bayer Pharmaceuticals, the U.S. Department of State, and Vuori. Throughout MicroStrategy World, more than 30 top brands, including MassMutual, Pfizer, Fannie Mae, Victoria's Secret, and NBCUniversal, will present how they use the MicroStrategy platform, GenAI, and the cloud to become truly data-driven The Bitcoin for Corporations track on Wednesday and Thursday will feature notable institutions and industry luminaries highlighting the advantages of integrating Bitcoin as a part of their corporate treasury and product offering.

Speaker Change: The keynote presentation will feature guest speakers from Microsoft Amazon Web services, Bayer Pharmaceuticals, the U S Department of state and Boree throughout Microstrategy world more than 30 top brands, including mass mutual Pfizer, Fannie Mae Victorias secret and NBC Universal will present, how do you.

Speaker Change: Use the micro strategy platform Gen AI and the cloud to become truly data driven businesses.

Speaker Change: The big point for corporations track on Wednesday, and Thursday will feature notable institutions and industry luminaries highlighting the advantages of integrating bitcoin as a part of their corporate treasury and product offerings.

Phong Q. Le: It will be a unique gathering of corporations that are already adopting or looking to adopt Bitcoin's strategy, and we are very excited to host it. Also, for the first time, we will live stream our world keynote, as well as all the Bitcoin for Corporations sessions. For those of you attending the conference here in Las Vegas, we look forward to seeing you.

Speaker Change: We'll be a unique gathering of corporations that are already adopting or looking to adopt a claim strategies and we are very excited to host this event.

Speaker Change: Also for the first time, we will live stream our world keynote as well as all of the bitcoin for corporations sessions for those of you attending the conference here in Las Vegas, We look forward to seeing you in person.

Phong Q. Le: Turning to the business highlights for Q1 2024, MicroStrategy remains the largest corporate holder of Bitcoin in the world, now holding 214,400 Bitcoin, with a total Bitcoin market value of $14 billion as of yesterday. Since December 31, 2023, we acquired an additional 25,250 Bitcoin for a total purchase cost of $1.6 billion, an average price of $65,232. This past quarter, the price of Bitcoin appreciated significantly, spurred notably by the approval of the SPOC Bitcoin Exchange Traded Products, or ETP, which has drawn considerable institutional attention. We believe the introduction of SPOT Bitcoin ETPs further evidences the maturation of Bitcoin as an institutional-grade asset, with broader regulatory recognition and institutional adoption.

Speaker Change: Turning to the business highlights for Q1 2024.

Micro strategy remains the largest corporate holder decline in the world now holding 214400, bitcoin with a total bitcoin market value of $14 billion.

Speaker Change: As of yesterday.

Speaker Change: Since December 31, 2023, we acquired an additional 25250 bitcoin for a total purchase cost $1 6 billion.

Speaker Change: And average price of $65232.

Speaker Change: This past quarter, the price of bitcoin appreciated significantly spur, notably by the approval of the spot Bitcoin exchange traded products or Etp's, which has drawn considerable institutional attention.

Speaker Change: We believe the introduction of spot Bitcoin ETP further evidences the maturation of bitcoin as an institutional grade asset class with broader regulatory recognition and institutional adoption.

Phong Q. Le: We remain highly committed to our Bitcoin strategy with a long-term focus. Andrew will provide further details on our Bitcoin purchase activity for the. MicroStrategy is also positioned as the world's largest independent publicly traded business intelligence company. Our objective is to grow in AI and cloud-powered BI software. We have over 1,800 employees focused on our software, devoted to achieving our vision of intelligence.

Speaker Change: 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.

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

Speaker Change: Our objective to grow and AI, our objective is to grow in AI and cloud powered by software.

Speaker Change: We have over 1800 employees focus on our software business devoted to achieving our vision of intelligence everywhere in.

Phong Q. Le: In the first quarter of 2024, we continued our shift towards our cloud offering, resulting in subscription services revenues of $23 million, an increase of 22% year-over-year. A strong growth in our subscription services revenue was driven by both existing customers' migrations to the cloud and new customers. Our customer renewal rate continues to remain high, and our subscription billings remain strong.

Speaker Change: In the first quarter of 2024, we continue to shift towards we continued our shift towards our cloud offering resulting in subscription services revenues of $23 million.

Speaker Change: An increase of 22% year over year.

Speaker Change: Strong growth in our subscription services revenue was driven by both existing customers migrations to the cloud and new customer wins or customer renewal rate continues to remain high and our subscription billings remained strong.

Phong Q. 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 licensed software company to a cloud-native organization. Our key strategic goals in 2024 are to grow cloud, innovate with AI, and increase profitability. Customers can benefit from a range of innovative first-to-market AI-powered functions powered by the Azure OpenAI LLL.

Speaker Change: 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.

Speaker Change: Our key strategic goals in 2024 are to grow cloud innovate with AI and increased profitability.

Customers can benefit from a range of innovative first to market AI powered functionality powered by Azure open AI.

Phong Q. Le: Capabilities include Auto SQL, which allows users to generate SQL using natural language, Auto Dashboard, which allows natural language generation and new visualization, and AutoAnswers, which allows customers to ask questions about their data sets and dashboards. AutoExpert, which allows users to ask questions about our MicroStrategy knowledge base and log support tickets on our website, and our custom auto bot, which enables end users to access BI insights from within a custom bot, standalone, or embedded in any app.

Speaker Change: Capabilities include auto sequel, which allows users to generate sequel, using natural language auto dashboard, which allows natural language generation of new visualization auto answers, which allows customers to ask questions of their datasets and dashboards auto expert which allows users to ask.

Speaker Change: <unk> of our Microstrategy knowledge base and log support tickets on our website.

Speaker Change: And our custom auto part, which enables the end users to access <unk> insights from within accustomed bought standalone or embedded in any application.

Phong Q. Le: We also just launched Auto Express, which offers a simple way to trial our AI capabilities. In April, MicroStrategy 1 became available on Google Cloud Marketplace, in addition to prior deployments on Azure and AWS, allowing enterprises to easily find and deploy this cloud-native platform.

We also just launched auto express, which offers a simple way to trial, our AI capabilities in minutes.

In April micro strategy, one became available on Google Cloud marketplace. In addition to prior deployments on Azure and AWS, allowing enterprises to easily find and deploy this cloud native platform.

Phong Q. Le: Additionally, we expect to provide the ability to deploy MicroStrategy in a private cloud later this year. This will distinguish us from other BI platforms with the flexibility and automation that enterprise customers desire. We believe such investment and capability will encourage current on-prem 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 transformation, we expect to see a continued decrease in product license revenue, which will in part be offset by increases in subscription services rates. This will be most pronounced in the balance of 2024.

Speaker Change: Additionally, we expect to provide the ability to deploy micro strategy in a private cloud later this year.

Speaker Change: This will distinguish us from other bi platforms with the flexibility and the automation that enterprise customers desire, we believe such investment and capability will encourage current on prem customers to embrace the benefits of micro strategy.

Speaker Change: Clouds, such as containerized architecture proactive cloud management from experts seamless backups and single quick updates Tran.

Speaker Change: 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.

Speaker Change: As customers and prospects move to the cloud to empower their AI driven digital transformations, we expect to see a continued decrease in product license revenues, which will in part be offset by increases in subscription services revenue. Yes. This will be most pronounced in the balance of 2024.

Phong Q. Le: This may result in a decrease in total recognized revenue in the short term, but in the long run, we expect it to be more than offset by increases in subscription services. Additional benefits include more engaged customers using our very latest software, higher retention rates, and ultimately, more recurring revenue. As we discussed last quarter, MicroStrategy considers itself to be the world's first Bitcoin development company.

Speaker Change: This may result in a decrease in total recognized revenue in the short term, but in the long run we expect it to be more than offset by increases in subscription services revenue.

Additional benefits include more engaged customers using our very latest software higher retention rates and ultimately more recurring revenues.

Speaker Change: As we discussed last quarter micro strategy considers itself to be the world's first bitcoin development company.

Phong Q. Le: We are a publicly traded operating company committed to the continued development of the Bitcoin network through our activities in the financial markets, advocacy, and technological innovation. As an operating business, we are 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 bring our enterprise analytics software development capabilities to develop Bitcoin apps. We believe that the combination of our operating structure, Bitcoin strategy, and focus on technology innovation provides a unique opportunity for value. Being an operating company, our software technology business remains our core revenue and cash flow generator.

Speaker Change: We are a publicly traded operating company committed to the continued development at the Bitcoin network direct our activities in the financial markets advocacy and technology innovation.

Speaker Change: As an operating business, we are able to use cash flows as well as proceeds from equity and debt financing is to accumulate bitcoin, which serves as our primary Treasury reserve asset.

Speaker Change: We also bring our enterprise analytic software development capabilities to develop bitcoin applications. We believe that the combination of our operating structure Bitcoin strategy and focus on technology innovation provides a unique opportunity for value creation.

Speaker Change: Being an operating company our software technology business remains our core revenue and cash flow generator. In addition, it also enables us to acquire a bitcoin through the use of excess cash.

Phong Q. Le: In addition, it also enables us to acquire Bitcoin through the use of excess cash, or proceeds from equity capital, or Corporate Debt Capital. These capital market levers allow us to deploy intelligent leverage to increase our Bitcoin holdings in a manner which we believe has created shareholder value. Since our adoption of our Bitcoin strategy, we've used three primary mechanisms to acquire more: Cash Flows from Software Operations.

Speaker Change: Or proceeds from equity capital raises or corporate debt capital raise these capital market levers allow us to deploy intelligent leverage to increase our bitcoin holdings in a manner, which we believe has created shareholder value.

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

Speaker Change: Cash flows from software operations since 2020, we've invested $825 million of total cash on our balance sheet.

Phong Q. Le: Since 2020, we've invested $825 million of total cash on our balance. Equity Assurance. We've issued $3.2 billion in equity in a manner that we believe to be creative to existing and Debt Financing. We've issued $3.6 billion in debt through the issuance of both senior secured notes and convertibles. We've used the proceeds from these issuances principally to purchase

Speaker Change: Equity issuances.

Speaker Change: Issued $3 2 billion in equity in a manner that we believe to be accretive to existing shareholders.

Speaker Change: Net financing, we've issued $3 6 billion in debt through the issuance of both senior secured notes and convertible notes. We've used the proceeds from these issuances principally to purchase bitcoin.

Phong Q. Le: The blended cost of our outstanding debt is fixed at 1.3%, and in the first quarter of 2024, we generated approximately $7.2 billion of incremental value from the effect of increases in the price of Bitcoin on our existing Bitcoin holdings, as well as our strategic use of equity and debt capital market activity. We began the year with 189,150 Bitcoin holdings with a market value of approximately $8 billion. As Bitcoin prices increased from $42,500 to $71,000 by the end of the first quarter, we experienced an increase of $5.4 billion in value based on our Bitcoin holdings at the start of the year.

Speaker Change: The blended cost of our outstanding debt is fixed at one 3% annually.

Speaker Change: In the first quarter of 2024, we generated approximately $7 2 billion of.

Speaker Change: Of incremental value from the effect of increases in the price of bitcoin on our existing debt coin holdings as well as our strategic use of equity and debt capital market activities.

Speaker Change: We began the year with 189150, Bitcoin holdings with a market value of approximately $8 billion.

Speaker Change: Bitcoin prices increased from $42500 to $71000 by the end of the first quarter, we experienced an increase of $5 $4 billion in value based on our Bitcoin holdings at the start of the year.

Phong Q. Le: In addition to the incremental value from the price appreciation of the Bitcoin we held as of the beginning of the year, we purchased an additional $1.6 billion of Bitcoin in the first quarter using proceeds from the issuance of additional equity and two convertible senior note offers, as well as excess cash from operations. As a result, we added an additional 25,128 Bitcoin to our holdings at an average price of roughly $65,200, which generated an incremental approximately $145 million of value from an increase in the price of Bitcoin after those purchases were made through the end of the first quarter.

Speaker Change: In addition to the incremental value from the price appreciation of the bitcoin, we held as of the beginning of the year, we purchased an additional $1 $6 billion of bitcoin and the first quarter using proceeds from the issuance of additional equity and two convertible senior note offerings as well as excess cash from our operations.

Speaker Change: As a result, we added an additional 25128 the coin to our holdings, an average price of roughly $65200, which generated an incremental approximately $145 million of value from an increase in the price of bitcoin. After those purchases were made through.

Speaker Change: And for the first quarter.

Phong Q. Le: Overall, 2024 started off as a tremendously successful year, taking into account our Bitcoin purchases and appreciation of our Bitcoin holdings year-to-year. While the overall market benefited from the increase in Bitcoin price as well, we believe our opportunistic use of leverage and excess cash to acquire Bitcoin, as well as our capital market strategy, generated $1.8 billion of incremental shareholder value, demonstrating our track record of generating value for our shareholders. This slide shows an illustrative example of how intelligent leverage can be used to boost returns when Bitcoin prices are increasing.

Overall 2024 started off as a tremendously successful year, taking into account, our bitcoin purchases and appreciation of our bitcoin holdings year to date.

Speaker Change: While the overall market benefited from the increase in bitcoin prices well, we believe our opportunistic use of leverage and excess cash to acquire a bitcoin as well as our capital market strategy journey generated $1 8 billion incremental shareholder value demonstrating our track record of generating value for.

Speaker Change: For our shareholders.

Speaker Change: This slide shows an illustrative example of how intelligent leverage can be used to boost returns when bitcoin prices are increasing.

Speaker Change: The baseline returns of any long that coin strategy for spot bitcoin price appreciation.

Speaker Change: Bitcoin ETP has also benefited from this offset by the management fees that are charged for those products.

Phong Q. Le: The baseline returns of any long Bitcoin strategy from the spot Bitcoin price appreciated. Bitcoin ETPs also benefit from this, offset by the management fees that are charged for those products. Leverage provides the opportunity to generate higher returns if the price, In this illustration, assuming the Bitcoin price reaches $250,000, keeping the Bitcoin count constant. Spot Bitcoin Without Leverage would return approximately $290. In this example, adding leverage to acquire more Bitcoin would return between approximately 395% and 425%, depending on the amount of leverage, further boosting returns compared to simply holding the spot.

Speaker Change: Leverage provides the opportunity to generate higher returns if the price increases.

Speaker Change: And this illustration, assuming bitcoin price reaches $250000, keeping bitcoin count constant spot bitcoin without leverage would return approximately 290%.

Speaker Change: In this example, adding leverage to acquire more bitcoin, we returned approximately 395% to 425% depending on the amount of leverage further boosting returns compare to simply holding spot bitcoin.

Speaker Change: If the market value of our bitcoin increases we believe this would create more opportunities to manage our leverage targets with.

Speaker Change: With the opportunity to take on more leverage and a prudent risk manage fashion.

Phong Q. Le: If the market value of our Bitcoin increases, we believe this would create more opportunities to manage our leverage targets. 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. We believe our unique value proposition as the world's first Bitcoin development company has 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.

Speaker Change: Value generated from our increasing bitcoin holdings would be expected to outperform even further if bitcoin prices continue to rise.

Speaker Change: We believe our unique value proposition is the world's first bitcoin development company has enabled us to generate tremendous value for our shareholders.

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

Andrew: Thank you Paul.

Andrew: Ill start with first a recap of.

Andrew: Our software financial results.

Andrew: For the first quarter total revenues were $115 2 million, which was down about 5% a year.

Andrew Kang: Thank you, Phong. I'll start with a recap of our software financial results. For the first quarter, total revenues were $115.2 million, which was down about 5% year-over-year, consistent with prior recent quarters. The slight decline remains in part due to our ongoing shift of revenue from on-prem to cloud. Q1 on-prem product license revenues, which make up about 11% of total revenue, were about $12.9 million, which is down 26% year-over-year. As I mentioned in prior calls, we continue to transition our business to the cloud, and we fully anticipate lower product license revenues to continue as we migrate existing customers off on-prem licenses and bring them to the cloud.

Andrew: Year over year.

Andrew: Consistent with prior recent quarters.

Andrew: A slight decline remains in part due to our ongoing shift of <unk>.

Andrew: Revenue from on Prem to cloud.

Andrew: Q1 on Prem product license revenues, which make up about 11% of total revenue.

Andrew: About $12 9 million, which was down 26% year over year as.

Andrew: As I mentioned in prior calls we continue to transition our business to the cloud and we fully anticipate lower product license revenues to continue as we migrate existing customers on prem licenses and bring them onto the cloud.

Andrew: More importantly, as Paul mentioned earlier, we continue to grow subscription services revenues.

Andrew: It reflects stronger more durable recurring software revenue.

Andrew: In Q1 subscription services revenues, which now make up about 20% of total revenues were $23 million, which reflects an increase of 22% year over year.

Andrew Kang: More importantly, as Phong mentioned earlier, we continue to grow subscription services revenues, which reflect stronger, more durable, recurring software revenues. In Q1, subscription services revenues, which now make up about 20% of total revenues, were $23 million, which reflects an increase of 22% year over year.

Andrew: non-GAAP subscription billings, which represent new cloud bookings in the quarter.

Andrew: Also grew by 30% in the first quarter to $17 7 million, which was our fourth straight year of quarterly double digit growth in cloud bookings.

Andrew: Q4 last year was an important milestone for us and the progress toward cloud transition where for the first time, our subscription services revenues were higher than our product license revenues.

Andrew Kang: Non-GAAP subscription billings, which represent new cloud bookings in the quarter, also grew by 30% in the first quarter to $17.7 million, which is our fourth straight year of quarterly double-digit growth in cloud bookings. Q4 last year was an important milestone for us in the progress toward the cloud transition, where for the first time, our subscription services revenues were higher than our product licenses. This successful trend continued in the first quarter of 2024, which reflects the ongoing progress towards converting our revenue into recurring subscription services.

Andrew: This successful trends continued in the first quarter of 2024, which reflect the ongoing progress towards converting our revenue to recurring subscription services.

The mix of revenue will continue to shift from on premise product license to subscription services throughout 2024, as we focus on delivering meaningful AI based products to our customers, which is only available in the cloud.

We are pleased with the progress we have made from the adoption from our customers to our cloud platform worldwide.

Andrew: And we still have more to do and we will continue to focus on new products and innovation to drive more demand in that space.

Andrew Kang: The mix of revenue will continue to shift from on-premise product licensing to on-premises, and subscription services throughout 2024 as we focus on delivering meaningful AI-based products to our customers, which is only available in the cloud. We are pleased with the progress we have made with the adoption of our customers to our cloud platform worldwide. We still have more to do, and we'll continue to focus on new products and innovation to drive more demand in that space.

Andrew: Okay.

Andrew: Beginning with the first quarter of 2024, we modified our reported financials to breakout our quarter quarterly results into two categories first the software business category reflects income or loss from operations related distinctly to our enterprise software business and the corporate and other.

Category reflects the other non software related components associated with our digital asset holdings, which include impairment charges and other related third party costs.

Andrew Kang: Beginning with the first quarter of 2024, we modified our report of financials to break out our quarterly quarterly results into two categories. First, the software business category reflects income or loss from operations related distinctly to our enterprise BI software, and the corporate and other category reflects the other non-software-related components associated with a digital asset holding, which include impairment charges and other related third-party costs. While we continue to operate under one reportable operating segment, which is engaged in design, development, and sales of our software platform through licensing arrangements, Cloud Subscriptions, and Related Services, we believe this breakdown of our operating results into these two categories provides better transparency with respect to the performance of our software business while isolating the impacts related to changes in Bitcoin.

Andrew: While we continue to operate under one reportable operating segment, which is engaged in design development and sales of our software platform.

Andrew: Platform through licensing arrangements cloud subscriptions and related services. We believe this breakout of our operating results into these two categories provides better transparency with respect to the performance of our software business, while isolating the impacts related to changes in bitcoin prices.

Andrew: In Q1, the software business revenues were $115 million as mentioned a moment ago, while the cost of revenues were $30 million up 774% compared to Q1 of last year.

Andrew: The increase in costs were in part due to higher cloud hosting.

Andrew: A result of higher usage by new and existing cloud subscription services customers.

Andrew: It also attributed to costs associated with standing up an enhanced customer success function with an added focus on transitioning customers to our cloud platform. In addition to servicing and managing our strong existing customer base.

Andrew Kang: In Q1, the software business revenues were $115 million, as mentioned a moment ago, while the cost of revenues was $30 million, up 7.4% compared to Q1 of last year. The increase in costs was in part due to higher cloud hosting, a result of higher usage by new and existing cloud subscription services customers. It is also attributed to costs associated with standing up an enhanced customer success function with an added focus on transitioning customers to our cloud platform, in addition to servicing and managing our strong existing customer base.

Andrew: Software business operating expenses were $96 1 million up one 7% compared to $94 $5 million in Q1 of last year.

Andrew: The increase was primarily due to higher G&A expenses this quarter, which was specifically related to an increase in employer paid payroll taxes and conduct in connection with employee stock option exercises in the first quarter.

Andrew: However, overall operating expenses were also offset by lower costs and sales marketing and R&D.

Andrew: Also consistent with recent quarters as we maintained strong discipline in expenses and we continue to optimize overall head count.

Andrew Kang: Software business operating expenses were $96.1 million, up 1.7% compared to $94.5 million in Q1 of last year. The increase was primarily due to higher G&A expenses this quarter, which was specifically related to an increase in employer-paid payroll taxes in connection with employee stock option exercises in the first quarter. However, overall operating expenses were also offset by lower costs in sales, marketing, and R&D, also consistent with recent quarters as we maintain strong discipline and expenses and we continue to optimize overall headcount.

Andrew: Noncash stock based compensation expense was mostly flat year over year at $17 8 million for the quarter.

Andrew: And overall non-GAAP adjusted operating income or profit from the software business category was $6 $9 million.

Andrew: If you take into account the employer paid payroll taxes related to stock option exercises in Q1, which were not material in prior periods non-GAAP adjusted operating income from the core software business would have reflected $14 3 million for the first quarter.

Andrew: More appropriately, reflecting the quarter's profitability profitability from our software business.

Andrew: Lastly, the corporate <unk> other operating expense category for the quarter is almost entirely attributable to bitcoin impairment charges, which were $192 million compared.

Andrew Kang: Non-cash, stock-based compensation expense was mostly flat year-over-year at $17.8 million for the quarter, and overall non-GAAP adjusted operating income or profit from the software business category was $6.9 million. If you take into account the employer-paid payroll taxes related to stock option exercises in Q1, which were not material in prior periods, non-GAAP-adjusted operating income from the core software business would have reflected $14.3 million for the first quarter, more appropriately reflecting the profitability of our softwood.

Andrew: Compared to $20 million in Q1 of last year. The result of bitcoin price fluctuations throughout this past quarter.

Turning to our bitcoin strategy more specifically, we had one of the most successful quarters of adding more big coin to our balance sheet as we acquired 25128 big coins in the first quarter, our second largest single quarter increase in Bitcoin holdings since Q4 2000.

Andrew: Yeah.

Andrew: Additionally, after the end of the first quarter, we purchased an additional 122 big clients using $8 million of excess cash.

Andrew Kang: Lastly, the corporate and other operating expense category for the quarter is almost entirely attributable to Bitcoin impairment charges, which are $192 million compared to $20 million in Q1 of last year, the result of Bitcoin price fluctuations throughout this past. Turning to our Bitcoin strategy more specifically, we had one of the most successful quarters of adding more Bitcoin to our balance sheet. As we acquired 25,128 bitcoins in the first quarter, our second largest single quarter increase in bitcoin holdings since Q4 2020.

Andrew: And as a as of April 26, 2024, the company held a total of 214400 big coins.

Andrew: Wired for an aggregate cost of 754 billion.

Andrew: We're at $35180 perfect.

Andrew: Yeah.

Andrew: To breakdown, the big point acquisition activity year to date by entity.

Andrew: Cohen acquired through proceeds from equity capital markets activities that occurred after the issuance of our senior secured notes are held at macro strategy a wholly owned subsidiary of micro strategy.

Andrew: Year to date, we have added 2652 big coins to macro strategies holdings at an aggregate purchase price of $137 million using net proceeds from our at the market or ATM equity issuance programs in February.

Andrew Kang: Additionally, after the end of the first quarter, we purchased an additional 122 bitcoins using $8 million of excess cash. And as of April 26, 2024, the company held a total of 214,400 bitcoins acquired for an aggregate cost of $7.54 billion or $35,180 per bit. To break down the Bitcoin acquisition activity year to date by, Bitcoin acquired the proceeds from equity capital markets activities that occurred after the issuance of our senior secured notes, are held at MacroStrategy, a wholly owned subsidiary of MicroStrategy.

Andrew: Currently we hold 175721 unencumbered bitcoins, representing 82% of our total holdings or 11 $2 billion in current market value, which you are held at macro strategy. These are all unrestricted and provides the option to potentially leverage this.

Andrew: <unk> asset in the future.

Andrew: The coins acquired through proceeds for debt activities that occurred after the issuance of our senior secured notes, namely the two recent convertible note issuances in Q1 are held at micro strategy the parent.

Andrew: And also serve as collateral securing our 2028 senior secured notes.

Andrew Kang: Year-to-date, we have added 2,652 bitcoins to MacroStrategy's holdings at an aggregate purchase price of $137 million using net proceeds from our at-the-market or ATM equity issuance programs in February. Currently, we hold 175,721 unencumbered bitcoins, representing 82% of our total holdings or $11.2 billion in current market value, which are held at MicroStrategy. These are all unrestricted and provide the option to potentially leverage this strategic asset in the future.

Andrew: Year to date, we have added 20180 <unk> points to micro strategies holdings at an aggregate purchase price of $1 4 billion.

Using net proceeds from our two convertible note issuances in March.

Andrew: Lastly, bitcoins purchased the excess cash from the software business are also held that micro strategy the parent entity and also collateralize, our 2028 senior secured notes year.

Andrew: Year to date, we have added 2418 big points to Microstrategy holdings at an aggregate purchase price of $136 million using proceeds from excess cash.

Andrew Kang: Bitcoins acquired through proceeds from debt activities that occurred after the issuance of our senior secured notes, namely the two recent convertible note issuances in Q1, are held at MicroStrategy, the parent, and also serve as collateral securing our 2028 Senior Secured Notes. Year-to-date, we have added 20,180 Bitcoins to MicroStrategy's holdings at an aggregate purchase price of $1.4 billion using net proceeds from our two Lastly, bitcoins purchased through excess cash from the software business are also held at MicroStrategy, the parent entity, and they also collateralize our 2028 Senior Secured Notes.

Andrew: As of April 26, there are in total 38679, bitcoins held at micro strategy or to $4 billion in current market value.

Andrew: Our commitment to a big point strategy remains unchanged and steadfast and we plan to strategically and Opportunistically buy more bitcoin as we have in every quarter since August of 2020, using excess cash from operations and proceeds from any capital markets activities.

Andrew: Micro strategy remains the largest corporate holder a big point in the world and we remain committed to our big point acquisition strategy with the utmost conviction long term focus and with a strong risk managed approach.

Andrew: As a bitcoin development company the unique ability to access the capital markets and the positive impact from using intelligent leverage are illustrated on this slide.

Andrew Kang: Year to date, we have added 2418 bitcoins to MicroStrategy's holdings at an aggregate purchase price of $136 million using proceeds from excess cash. As of April 26, there are in total 38,679 bitcoins held at MicroStrategy for $2.4 billion in current market value.

During the first quarter of 2024, our total Bitcoin holdings increased by 13, 3%.

Andrew: During the same period, our total basic share count comprised of total basic class a shares outstanding and total basic class B shares outstanding increased by only four 6%.

Andrew: This is in part due to the deferred dilution impact of leveraging convertible debt and our opportunistic execution of these financings, which has resulted in tremendous value creation for our shareholders. The.

Andrew Kang: Our commitment to our Bitcoin strategy remains unchanged and steadfast, and we plan to strategically and opportunistically buy more Bitcoin as we have in every quarter since August of 2020 using excess cash from operations and proceeds from any capital markets activity. MicroStrategy remains the largest corporate holder of Bitcoin in the world, and we remain committed to our Bitcoin acquisition strategy with the utmost conviction, long-term focus, and with a strong risk-managed As a Bitcoin development company, the unique ability to access the capital markets and the positive impact from using intelligent leverage are illustrated on this slide.

The difference between our bitcoin accretion and the share dilution is representative of the yield we were able to generate for our shareholders as a bitcoin development company.

Andrew: Hypothetically, assuming all outstanding convertible notes are fully converted at their respective conversion prices all outstanding options are fully exercise and all restricted stock units.

Performance stock units fully vest.

Andrew: The fully diluted share count would have increased by only four 8% during the first quarter.

Andrew: Thus the increase in our Big point Holdings has outpaced the increase in our total share counts in Q1.

Andrew: Turning to slide 15 bitcoin.

Andrew: Bitcoin has significantly outperformed most other asset classes year to date.

Andrew Kang: During the first quarter of 2024, our total Bitcoin holdings increased by 13.3%. However, during the same period, our total basic share count, comprised of total basic Class A shares outstanding and total basic Class B shares outstanding, increased by only 4.6%.

As of March 31, 2024, the aggregate cost of our bitcoin purchases were seven 5 billion.

Andrew: Versus the carrying value of our big point holdings of $5 1 billion.

Andrew: This is compared to the market value of our holdings.

Andrew: <unk> dollars 2 billion.

Andrew: Based on the bitcoin prices for the last day of the quarter.

Andrew Kang: This is in part due to the deferred dilution impact of leveraging convertible debt and our opportunistic execution of these financings, which has resulted in tremendous value creation for our shareholders. The difference between our Bitcoin accretion and the share dilution is representative of the yield we are able to generate for our shareholders as a Bitcoin development company. Hypothetically, assuming all outstanding convertible notes are fully converted at their respective conversion prices, all outstanding options are fully exercised, and all restricted stock units and performance stock units are fully vested, the fully diluted share top would have increased by only 4.8% during the first quarter.

Currently the market value of our Big point Holdings is cigna.

Andrew: Significantly above our average cost basis, which is equal to an average purchase price of approximately $35200.

Andrew: The new accounting rule that was approved by the FASB last December requires companies holding digital assets, including bitcoin to adopt fair value accounting treatment by Q1 of 2025.

Andrew: We fully plan to plan to adopt the change by when the rule takes effect and we are determining when the most appropriate time to do so it would be.

Andrew: Okay.

Andrew: Now turning to our capital markets activities.

Andrew: Since the inception of our Bitcoin strategy, we have issued three 6 billion corporate debt. The senior secured notes and convertible notes with a very attractive blended interest rate of approximately one 3%.

Andrew Kang: Thus, the increase in our Bitcoin holdings has outpaced the increase in our total share counts in Q1. Turning to slide 15, Bitcoin has significantly outperformed most other asset classes year-to-date. As of March 31st, 2024, the aggregate cost of our Bitcoin purchases was $7.5 billion versus the carrying value of our Bitcoin holdings of $5.1 billion. This is compared to the market value of our holdings of $15.2 billion based on the Bitcoin price of the last day of the quarter.

Andrew: With staggered maturities over several several years through March 2031.

Andrew: Leverage remains a key component of our active capital allocation strategy, which when Opportunistically deploys deployed enables us to add more bitcoin holdings at an attractive cost.

Andrew: Our two recent convertible note financings, where both upsides and well received by the market.

Andrew: We issued $800 million of convertible notes due March 2030 at an annual interest rate of 0.625% and a conversion premium of 42, 5% to the closing price of our class a common stock on the pricing data.

Andrew Kang: Currently, the market value of our Bitcoin holdings is significantly above our average cost basis, which is equal to an average purchase price of approximately $35,200. The new accounting rule that was approved by the FASB last December requires companies holding digital assets, including Bitcoin, to adopt fair value accounting treatment by Q1 of 2025. We fully plan to adopt the change by when the rule takes effect, and we are determining when the most appropriate time to do so would be.

Reflecting a conversion price of approximately $1498 per share.

Andrew: The following week given the strong rally in MST, our stock price, we were able to access the market again, and our follow on offering and issued an additional $603 $75 million.

Andrew: Convertible notes due March 2031.

The annual interest rate of 0.8, 75%.

A conversion premium of 40% to the volume weighted average price of our class a common stock on the pricing data and a conversion price of approximately $2327 per share.

Andrew Kang: Now turning to our Capital Markets Act. Since the inception of our Bitcoin strategy, we have issued $3.6 billion of corporate debt through senior secured notes and convertible notes with a very attractive blended interest rate of approximately 1.3%, with staggered maturities over several years through March 2031. Leverage remains a key component of our active capital allocation strategy, which when opportunistically deployed enables us to add more Bitcoin holdings at an attractive cost. Our two recent convertible note financings were both upsized and well-received by the market.

Andrew: The net proceeds from both convertible note issuances were used expeditiously to acquire additional bitcoin.

In addition to raising debt, we continue to demonstrate a solid track record of issuing permanent equity in a manner that we believe is accretive to shareholders. Since the third quarter of 2021, we have raised a total of $3 2 billion in proceeds through our ATM offerings with an average price of approximately four.

<unk> hundred $64 per share across total equity raised.

Andrew: As we have done in the past, we will continue to actively monitor the capital markets and carefully evaluate the most accretive use of the capital markets to drive incremental value for our shareholders.

Andrew: Debt financing helps us maintain healthy leverage relative to the market value of our bitcoin holdings and raising equity helps us to deleverage our balance sheet and when needed.

Andrew Kang: We issued $800 million of convertible notes due March 2030 at an annual interest rate of 0.625% and a conversion premium of 42.5% to the closing price of our Class A common stock on the pricing day, reflecting a conversion price of approximately $1,498 per share. The following week, given the strong rally in MSTR stock prices, we were able to access the market again in a follow-on offering and issued an additional $603.75 million.

Andrew: The primary use of proceeds from our debt and equity capital activities to date have been to acquire additional bitcoin, which we have done in a manner, we believe to be extremely accretive.

Andrew: Our overall capital allocation strategy continues to be focused on increasing our total bitcoin holdings, while managing our debt very closely and prudently.

Andrew: Lastly, as of the end of the first quarter, we grew unrestricted cash and cash equivalents on our balance sheet to 81 $3 million and we continue to maintain more than sufficient overall liquidity to manage our ongoing operating needs.

Andrew Kang: Convertible Notes due March 2031 at an annual interest rate of 0.875%, a conversion premium of 40% to the volume-weighted average price of our Class A common stock on the pricing date, and a conversion price of approximately $2,327 per share. The net proceeds from both convertible note issuances were used expeditiously to acquire additional bids.

Andrew: The next slide illustrates our debt maturity profile and as you can see the nearest maturity is more than six quarters away and not until late 2025.

Andrew: While the 2025 convertible notes have been trading well in the market as we have said previously we continue to monitor the markets and evaluate liability management opportunity opportunities in order to manage our debt as well as opportunities to raise additional financing in the future.

Andrew Kang: In addition to raising debt, we continue to demonstrate a solid track record of issuing permanent equity in a manner that we believe is accretive to shareholders. Since the third quarter of 2021, we have raised a total of $3.2 billion in proceeds through our ATM offerings with an average price of approximately $464 per share across total equity rates. As we have done in the past, we will continue to actively monitor the capital markets and carefully evaluate the most secretive use of the capital markets to drive incremental value for our shareholders.

Andrew: The management team has demonstrated a strong track record of disciplined approach to navigate through volatile times in the <unk> market and.

Andrew: And we believe we have established significant credibility to execute on our strategic goal of generating value for our shareholders.

Andrew: As <unk> said earlier, we believe that the combination of our operating structure Bitcoin strategy and focus on technology innovation provides a unique value proposition for shareholder value creation, when compared to other forms of exposure to bitcoin.

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

Andrew Kang: Debt financing helps us maintain healthy leverage relative to the market value of our Bitcoin holdings, and raising equity helps us to deleverage our balance sheet when needed. The primary use of proceeds from our debt and equity capital activities to date has been to acquire additional Bitcoin, which we have done in a manner we believe to be extremely accretive. Our overall capital allocation strategy continues to be focused on increasing our total Bitcoin holdings while managing our debt very closely and prudently.

Michael J. Saylor: Thank you Andrew.

Michael J. Saylor: And thank you for everybody for being with us here today.

Michael J. Saylor: Yes.

Michael J. Saylor: I'd just like to add a few comments on our strategy and bitcoin in general following up on the words of Fang and Andrew.

Michael J. Saylor: I'll start with our performance scorecard we.

Michael J. Saylor: We like to keep score every quarter.

Michael J. Saylor: Evaluate ourself against all of the relevant benchmarks.

Michael J. Saylor: So I think this slide is very instructive.

Michael J. Saylor: What you can see here in a nutshell is all of the enterprise software companies that we compete against in the business intelligence business.

Andrew Kang: Lastly, as of the end of the first quarter, we grew unrestricted cash and cash equivalents on our balance sheet to $81.3 million, and we continue to maintain more than sufficient overall liquidity to manage our ongoing operations. The next slide illustrates our Debt Maturity Program, and as you can see, the nearest maturity is more than six quarters away and not until late 2025.

Michael J. Saylor: And their performance since we embarked on our bitcoin strategy in the summer of 2020.

Michael J. Saylor: And you can see.

Michael J. Saylor: Proximately 10 to 30 X more and performance to any of those companies you can see all the big Tech stocks over the last three and three quarters of years.

Michael J. Saylor: The strongest one is Google.

Andrew Kang: While the 2025 convertible notes have been trading well in the market, as we have said previously, we continue to monitor the markets and evaluate liability management opportunities in order to manage our debt, as well as opportunities to raise additional financing in the future. The management team has demonstrated a strong track record of a disciplined approach to navigate through volatile times in the Bitcoin market. And we believe we have established significant credibility to execute on our strategic goal of generating value for our shareholders.

We've outperformed them anywhere by a factor of eight.

Michael J. Saylor: To 280%.

Speaker Change: And we're very pleased with that.

Speaker Change: But of course, our primary strategy is a bitcoin strategy and so I think to understand why is micro strategy able to return, 937% and a period when the S&P returned 52% and.

Speaker Change: I think.

Speaker Change: And we just have to start with the idea of what's the right Treasury strategy or how do you capitalize the company.

Andrew Kang: As Phong said earlier, we believe that the combination of our operating structure, Bitcoin strategy, and focus on technology innovation provides a unique value proposition for shareholder value creation when compared to other forms of exposure to Bitcoin. Thank you for your time today and for your continued support of MicroStrategy. I'll now turn the call over to Michael for his remarks.

Speaker Change: And you can see if you capitalize the company on bonds bonds have a negative 21% return over this timeframe.

Speaker Change: Bonds have been negative real yields are not returning the cost of capital.

Speaker Change: The best surrogate for the cost of capital I think is the S&P index of 52%.

Michael J. Saylor: And thank you, everybody, for being with us here today. I'd just like to add a few comments on our strategy and Bitcoin in general, following up on the words of Phong and Andrew. I'll start with our performance scorecard. We like to keep score every quarter and evaluate ourselves against all the relevant benchmarks.

Speaker Change: And so if you were able to capitalize your company on the S&P Index, you can maybe keep up with the cost of capital.

Speaker Change: You can see here is that the.

Gold and silver don't really work.

Speaker Change: As as the money supply expands the S&P index tracks it in.

Michael J. Saylor: So I think this slide is very instructive. What you can see here, in a nutshell, are all of the enterprise software companies that we compete against in the business intelligence business and their performance since we embarked on our Bitcoin strategy in the summer of 2020. And you can see we're approximately 10 to 30x more profitable than any of those companies. You can see all the big tech stocks over the last three and three quarters of years. The strongest one is Google.

Speaker Change: Gold silver and bonds underperform NASDAQ is is pretty close statistically.

Speaker Change: Why is bitcoin better because micro strategies performance is really based on bed client performance start and.

I think the coin illustrates a couple of principles one.

Speaker Change: One is digital is better than analog bitcoin is digital property and it's digital.

Speaker Change: So so bitcoin is outperforming because its digital in a world of digital transformation I think the second thing. It illustrates is our commodity is better than our security and bitcoin as an asset without an insurer, which makes it a global asset.

Michael J. Saylor: And, you know, we've outperformed them anywhere by a factor of eight to 80, and we're very pleased with that. But, of course, our primary strategy is the Bitcoin strategy. And so I think to understand why MicroStrategy is able to return 937% in a period when the S&P returned 52%, and I think we just have to start with the idea of what's the right treasury strategy or how do you capitalize the company?

Speaker Change: Security will never be a global asset because because security is an issue or an insurance company and a company has in excess and in a country and has an operation.

Speaker Change: So big clients perform well because it's digital because it's commodity and.

Speaker Change: The third thing this illustrates is that a scarcity is better than commodity.

Michael J. Saylor: And you can see, if you capitalize the company on bonds, bonds have a negative 21% return over this time frame. Bonds have a negative real yield. They're not returning the cost of capital. The best surrogate for the cost of capital, I think, is the S&P 500 index, at 52%. And so if you were able to capitalize your company on the S&P index, you could maybe keep up with the cost of capital. But what you can see here is that gold and silver don't really work.

Speaker Change: So the fact is yes, bitcoin as commodity but its hard cap at $21 million and gold is not hard capped and silver is not hard cap. So commodities generally make very very poor investments.

Speaker Change: The World has learned to invest in market baskets of securities <unk>, S&P index, but but it would be the wrong lesson to say that therefore securities are better than commodities securities have their own risk factors.

Michael J. Saylor: As the money supply expands, the S&P index tracks it, and gold, silver, and bonds underperform. NASDAQ is pretty close statistically. Why is Bitcoin better? Because MicroStrategy's performance is really based on Bitcoin performance to start. And I think Bitcoin illustrates a couple of principles. One is that digital is better than analog.

Speaker Change: Right lesson to takeaway.

Speaker Change: Is that.

Speaker Change: Is that.

Speaker Change: Something digital is better than something analog something scarce is better than something abundant.

Speaker Change: And something global is better than something local.

Speaker Change: And bitcoin represents all of those things in the last four years it has emerged and <unk>.

Michael J. Saylor: Bitcoin is digital property, and it's digital. So Bitcoin is outperforming because it's digital in a world of digital transformation. I think the second thing it illustrates is that a commodity is better than a security. And Bitcoin is an asset without an issuer, which makes it a global asset. And a security will never be a global asset because it has an issuer. An issuer is a company, and a company has a nexus with a country and has an operation.

Speaker Change: The western World as that global digital.

Speaker Change: Scarce commodity I E.

Speaker Change: Digital property now micro strategy if it did.

Speaker Change: Simply adopted bitcoin purely perhaps it would've had the same performance as bitcoin, but how do we actually outperformed bitcoin.

Speaker Change: I think the key here is.

Speaker Change: Volatility is a benefit to us and so we've harnessed volatility and we've also harnessed our unique ability to issue securities such as convertible bonds and the fact that we embrace the securitization of bitcoin and we embraced the volatility of the App.

Michael J. Saylor: So bitcoins perform well because it's digital, because it's a commodity, and the third thing this illustrates is that a scarcity is better than a commodity. So the fact is, yeah, Bitcoin is a commodity, but it's hard capped at 21 million, and gold is not hard capped, and silver is not hard capped. So commodities generally make very, very poor investments. The world has learned to invest in market baskets of securities like the S&P index, but it would be the wrong lesson to say that, therefore, securities are better than commodities, or that something digital is better than something analog. Something scarce is better than something abundant, and something global is better than something local.

Asset class has given us the ability to raise capital.

As you as you recall.

Speaker Change: We've raised billions of dollars of equity capital in billions of dollars of debt capital, we wouldn't have been able to raise as much capital without volatility.

Speaker Change: And you could see with our convertible bonds, we managed to raise $3 billion in convertible bonds at substantially less than 1% interest really about 50 basis points half a percent interest. So micro strategies performance is being driven by two things first.

Michael J. Saylor: And Bitcoin represents all of those things. In the last four years, it has emerged in the Western world as that global digital, scarce commodity, i.e., digital property. Now, MicroStrategy, if it had just simply adopted Bitcoin purely, perhaps it would have had the same performance as Bitcoin, but how do we actually outperform Bitcoin?

Speaker Change: We're raising $3 billion at half a percent.

Instead of paying a non volatile interest rate.

Speaker Change: Non volatile it could be 8% to 10% so instead of paying 8% to 10% interest we're paying 5%. So clearly that's a big performance boost us and the second is.

Michael J. Saylor: I think the key here is volatility is a benefit to us. And so we have harnessed volatility, and we've also harnessed our unique ability to issue securities such as convertible bonds. And the fact that we embrace the securitization of Bitcoin and embrace the volatility of the asset class has given us the ability to raise capital, right? As you recall, we've raised billions of dollars of equity capital and billions of dollars of debt capital.

Speaker Change: If we were non volatile and we didn't have an asset rich strategy, we couldnt raise the 3 billion at all.

Speaker Change: <unk>.

Speaker Change: A lot of time senior debt would be capped at some EBIT door multiple of some sorts how it would be we would have access to a small amount of capital.

Speaker Change: At a high cost of capital.

Michael J. Saylor: We wouldn't have been able to raise as much capital without volatility. And you can see, with our convertible bonds, we managed to raise $3 billion in convertible bonds at substantially less than 1% interest, really about 50 basis points, half a percent interest. So MicroStrategy's performance is being driven by two things. We're raising $3 billion at half a percent instead of paying a non-volatile interest rate. Non-volatile, you know, could be 8 to 10 percent. So instead of paying 8 to 10 percent interest, we're paying half a percent. So clearly, that's a big performance boost. And the second is...

Speaker Change: So micro strategy has got a very low cost of capital and access to a lot of capital because of our particular strategy, but we're capitalizing on what clearly is the best capital asset decline in the world over this period and the combination of those two things is what catapulted us to that 937% <unk>.

Speaker Change: <unk>.

Speaker Change: Let me go to next slide now.

Speaker Change: Okay.

Speaker Change: I would say this quarter the first quarter of 2024, it's the end of the crypto childhood or that crypto Cowboy era, where you had had 15 years of lots of confusion chaos and jockeying of thousands and thousands of crypto.

Speaker Change: Assets.

Speaker Change: Bitcoin is the winner and it is the one emergent institutional asset that has come out of that 15 years.

Michael J. Saylor: If we were non-volatile and we didn't have an asset-rich strategy, we couldn't raise the $3 billion at all because a lot of times senior debt would be capped at some EBITDA multiple of some sort. We would have access to a small amount of capital at a high-cost account. So MicroStrategy has got a very low cost of capital and access to a lot of capital because of our particular strategy. But we're capitalizing on what clearly is the best capital asset, Bitcoin, in the world over this period. And the combination of those two things is what catapulted us to that 937% performance. Let me go to the next slide now.

Speaker Change: <unk> Cohen spot Etfs were approved in January.

Speaker Change: <unk> this quarter and that was a very big milestone.

And as we as we go into this.

Speaker Change: This next quarter.

Speaker Change: It's pretty clear that bitcoin is the only crypto asset that's going to be approved for for sale in the form of a spot ETF in the United States and so bitcoin is very unique it is the one crypto asset that has.

Michael J. Saylor: I would say this quarter, the first quarter of 2024, it's the end of crypto childhood, or the crypto cowboy era, where you have had 15 years of lots of confusion, chaos, and jockeying of thousands and thousands of crypto assets. Well, Bitcoin is the winner. And it is the one emerging institutional asset that has come out of that 15 years. Bitcoin spot ETFs were approved in January of this quarter. And that was a very big milestone.

Been embraced as an institutional asset it's the one.

Speaker Change: It's the one crypto asset a publicly traded company can hold on its balance sheet can capitalize upon its the one crypto asset to wall Street firms are going to be able to sell on a spot ETF basis the entire.

Speaker Change: The entire modern institutional asset economy, the options market securities market the money manager system.

Michael J. Saylor: And as we go into this next quarter, it's pretty clear that Bitcoin is the only crypto asset that's going to be approved for sale in the form of a spot ETF in the United States. And so Bitcoin is very unique. It is the one crypto asset that has been embraced as an institutional asset. It's the one crypto asset that a publicly traded company can hold on its balance sheet and can capitalize upon.

Speaker Change: The institutional mutual funds institutional Etfs, they're all going to be centered around bitcoin as the digital property going forward.

While we are at the end of.

The beginning.

Speaker Change: We're now I always say at the beginning of the middle where at the beginning of the stage of rapid institutional adoption of digital property in the form of bitcoin.

Michael J. Saylor: It's the one crypto asset that Wall Street firms are going to be able to sell on a spot ETF basis. The entire modern institutional asset economy, the options market, the securities market, the money manager system, the institutional mutual funds, the institutional ETFs, they're all going to be centered around Bitcoin as the digital property going forward. And so while we're at the end of the beginning, we are now, I would say, at the beginning of the middle.

Speaker Change: This chart shows.

Speaker Change: Did that at the end of the first stage.

<unk> is a bit more than a trillion dollar asset.

Speaker Change: And from this stage forward it wont really compete against other crypto assets. It will compete against gold art equities real estate bonds.

Michael J. Saylor: We're at the beginning of the stage of rapid institutional adoption of digital property in the form of Bitcoin. This chart shows that at the end of the first stage, Bitcoin is a bit more than a trillion dollar asset. And from this stage forward, it won't really compete against other crypto assets; it will compete against gold, art, equities, real estate, bonds, and other types of store of value money in wealth creation, wealth preservation, and the capital markets. And as you can see, If you look at this chart, probably some number between 10 and 50% of all this wealth is really just pure capital. The use case is a store of value.

Speaker Change: Are there other types of store of value money.

Speaker Change: In wealth.

<unk> wealth preservation and account, but all markets and as you can see.

Speaker Change: If you look at this chart.

Speaker Change: Probably some number between 10 and 50% of all this wealth is really just pure capital they use cases store of value.

Speaker Change: Many people buy equities real estate bonds in arts and other monetary instruments as a store of value just like they buy gold as a store of value.

Speaker Change: <unk> Cohen as digital property is a store of value, but it's the emerge in high performance high volatility high functionality high utility store of value and it's global.

Michael J. Saylor: Many people buy equities, real estate, bonds, and arts, and other monetary instruments as a store of value, just like they buy gold as a store of value. Bitcoin as digital property is a store of value, but it's the emergent high-performance Store of Value, and it's global. So we actually think that it's going to continue to grow from here, and this is kind of the second quarter of about a 40-quarter Bitcoin gold rush where we're going to see Bitcoin embraced by more and more banks, more and more money managers, more and more nations.

Speaker Change: So we actually think that it's going to continue to grow from here and and.

Speaker Change: This is kind of the second quarter of about a 40 quarter Bitcoin gold rush, where we are going to see big coin.

Speaker Change: Embraced by more and more banks more and more money.

Speaker Change: Money managers more and more nations Youll see more bitcoin Etfs at Hong Kong, and Australia, Youll see more derivative products and other types of related products built on top of it or youll see it built into more things and and so then the next decade, we think as auspicious we can go to.

Michael J. Saylor: You'll see more Bitcoin ETFs in Hong Kong and Australia. You'll see more derivative products and other types of related products built on top of it, or you'll see it built into more things. And so the next decade, we think is auspicious. We can go to the next slide. The halving just took place a week ago, a couple of weeks ago. April 19, I guess, specifically.

The next slide.

Speaker Change: Having just took place and.

Speaker Change: A week ago, a couple of weeks ago and.

Speaker Change: April 19th I guess, specifically and when you consider the impact of the having.

Speaker Change: It's pretty profound first of all it reminds us that bitcoin is a scarcity and not a digital commodity Illinois.

Michael J. Saylor: And when you consider the impact of the halving, it's pretty profound. First of all, it reminds us that Bitcoin is a scarce resource and not just a digital commodity because its supply is asymptotically approaching 21 million. As of now, Bitcoin has the highest stock flow ratio in the world. So it is the hardest investment asset in the world, and the most scarce or certain. In the first quarter, about 2600 Bitcoin a day were acquired by the spot ETFs that were launched.

Speaker Change: Because bitcoin supply is asymptotically approaching $21 million.

Speaker Change: As of now Bitcoin has the highest stock flow ratio in the world. So it is the hardest investment asset in the world and the most.

Speaker Change: Scarce or or certain.

Speaker Change: In the first quarter.

Speaker Change: About 2600 Bitcoin a day were acquired by the spot Etfs that were launched and during that timeframe. We had about 900 bitcoin per day sold by minors.

Michael J. Saylor: And during that timeframe, we had about 900 Bitcoin per day sold by miners. But then, following the halving on the 19th of April, we moved to 450 Bitcoin a day from available from natural sellers, the miners. Um, this is pretty critical.

Speaker Change: But then following the having.

Speaker Change: On the 19th of April we moved to 450 that coin a day from available from natural sellers the miners.

Speaker Change: This is pretty critical and you can see there is there is a.

Michael J. Saylor: And you can see that there is an imbalance between organic demand and organic supply. I don't think that the halving is priced in. I don't think that the market fully appreciates just how profound this is. But the chart on the right gives you a way to think of it, which is if a large investor, a sovereign wealth fund, or a mega-institutional investor decided that they wanted to buy 450 bitcoin every day for the next four years.

Speaker Change: Imbalance between organic demand and our organic supply.

Speaker Change: I don't think.

Speaker Change: Debt to having is priced and I don't think that the market fully appreciates just how profound this is.

Speaker Change: But this chart on the right gives you a way to think of it which is if a large investor a sovereign wealth fund or Mega Mega Mega institutional Investor decided they wanted to buy 450 bitcoin per day.

Speaker Change: And they were going to buy it at the market price of Bitcoin every day for the next four years.

Michael J. Saylor: Assuming the price of Bitcoin stayed constant at $60,000, they would have to invest $39.4 billion of capital. But if Bitcoin's price moved up to $100,000, it's a $65 billion commitment. At $150,000, it's a $98 billion commitment.

Speaker Change: Assuming the price of Bitcoin stayed constant at 60000, they would have to invest $39 $4 billion of capital.

Speaker Change: But a bitcoin price moved up at a 100000, it's a $65 billion commitment at 150000, it's a $98 billion commitment.

Michael J. Saylor: And if the average price of Bitcoin in that time frame is $250,000, that's the same as $164 billion of capital being put into this network. So the network was chopping along at 900 BTC a day before the halving, but after the halving, you just have a very reflexive protocol change that is going to remove 450 BTC a day from sale at any price for the next four years. And of course, there'll be another halving four years from now. They'll remove another 225 Bitcoin a day from their supply. And there will be another halving four years after that to move another 112.

And if the average price of bitcoin during that timeframe is 250000, that's the same as a $164 billion of capital being put into this network.

Speaker Change: So the network was chopping along at 900 BTC a day.

Speaker Change: Before the having but after the having you just have.

Speaker Change: A very reflexive protocol change that that is is going to remove 450 bitcoin today for sale at any price for the next four years and of course, another having four years from now.

Speaker Change: That will remove another 225 <unk> a day from the supply and there will be another having four years after that to move another 112 bitcoin per day out of the supply.

Michael J. Saylor: Bitcoin per day out of the supply. This is unique to Bitcoin. You won't see it in any other commodity in the world. You're not going to see it in any analog commodity because it's impossible.

Speaker Change: This is unique to bitcoin you won't see it in any other commodity in the world you're not going to see it in the analog commodity because it's impossible, but you won't see it in any other digital commodity in the world because bitcoin is the winner bitcoin is going to be in all likelihood the only.

Michael J. Saylor: But you won't see it in any other digital commodity in the world because Bitcoin is the winner. Bitcoin is going to be, in all likelihood, the only digital commodity that is institutionalized by a spot ETF in the American capital markets. So this is a profound insight, and we view this as being very bullish for the asset class. We can go to the next slide.

Speaker Change: Digital commodity that is made institutional grade by a spot.

T F.

Speaker Change: And the American capital markets. So this is a profound insight and we view this as being very bullish for the asset class.

Speaker Change: We go to the next slide.

Speaker Change: Okay.

Speaker Change: Micro strategies.

Michael J. Saylor: MicroStrategy's approach is the same as it has been, but I think we're getting a little bit better at it, and I think we're starting to understand our unique advantages as time goes on. We are a Bitcoin development company in the same way that you might have a real estate development company if you're able to create or create a company and then take it public and then issue securities in the capital markets in order to buy and develop commercial real estate, you would have an advantage over private companies doing the same thing because public companies always have an advantage in financing.

Speaker Change: Approach and is the same as it has been but I think we're getting a little bit.

Speaker Change: Better at it and I think we're starting to understand our unique advantages as time goes on.

Speaker Change: We are a bitcoin development company in the same way that.

You might have a real estate development company.

Speaker Change: If you are able to create or create a company and then take it public and then issue securities in the capital markets in order to.

Speaker Change: Bye and develop commercial real estate.

Speaker Change: You would have an advantage over private companies doing the same thing because public companies always have an advantage in and financing you would have the option to raise financing not just from banks, but also from the public capital markets. So we are we are a public company and <unk>.

Michael J. Saylor: You would have the option to raise financing not just from banks but also from the public capital markets. So we are a public company and an operating company, and that gives us flexible control or active control over our capital structure. The second thing that we have is the ability to innovate with software development, and we'll be showing some innovations at our conference this week that we're very excited about. We're also unique because we can generate cash from operations, and, as Phong and Andrew pointed out, we've been able to invest $825 million in cash to date in order to acquire Bitcoin, and we're able to leverage the capital markets.

Speaker Change: Operating company.

Speaker Change: And that gives us a flexible control or active control over our capital structure and.

The second thing that we have is the ability to innovate with with software development and we will be showing some innovations at our conference. This week.

We're very excited about.

Speaker Change: We're also unique because we can generate cash from operations.

Speaker Change: And as far along and Andrew pointed out we were able to been able to invest $825 million in cash to date in order to acquire that coin.

Speaker Change: And we're able to leverage the capital markets.

Michael J. Saylor: And I think we take a very balanced view toward capital markets. When we think it's appropriate for us to issue equity or raise permanent equity capital via shelf registration, we do that. And we've done that to raise $3.2 billion in equity capital. And when we think the markets are more supportive of us issuing debt, or especially convertible debt, then we do that. Um, as Andrew pointed out, this strategy was very accretive in Q1, and the effective difference between the accretion of Bitcoin and the dilution of our share count was more than 8%.

Speaker Change: And I think we would take a very balanced view toward capital markets.

Speaker Change: When we think it's appropriate for us to issue equity or raise permanent equity capital by a shelf registration and we do that and we've done that to raise $3 2 billion in equity capital and when we think the markets are more supportive of us issuing debt or.

Speaker Change: Especially convertible debt than we do that.

Speaker Change:

As as Andrew pointed out this strategy was very accretive in Q1.

And the effective difference between.

The accretion of bitcoin and the dilution of our share count was more than 8%. So if we're able to generate an 8% yield in a single quarter.

Michael J. Saylor: So if we're able to generate an 8% yield in a single quarter, then we believe that's going to support a premium to our underlying net asset value going forward, and it's going to allow us to find more accretive capital markets opportunities in the future that we will avail ourselves of to the benefit of our shareholders. And so, in summary, Bitcoin has crossed the chasm to institutional adoption. Bitcoin is unique and is being uniquely recognized as the one institutional crypto asset, and MicroStrategy has now developed a very balanced strategy of acquiring Bitcoin with cash flows, with equity, and with debt.

Speaker Change: Then we believe that's going to support a premium to our underlying net asset value going forward.

Speaker Change: And it's going to allow us to find more accretive capital markets opportunities in the future that we will avail ourselves of to the benefit of our shareholders.

Speaker Change: And so.

Speaker Change: <unk>.

Speaker Change: In summary.

Speaker Change: Bitcoins cross the chasm to institutional adoption.

Speaker Change: Bitcoin is unique and is being uniquely recognized as the one institutional crypto asset.

Speaker Change: And micro strategy has now developed a very balanced strategy of acquiring <unk> client cash flows with equity with debt.

Speaker Change: And.

Michael J. Saylor: And we're providing a useful set of public securities, both equity, as well as options, as well as debt instruments that institutional investors can use in order to tailor their portfolio as they invest, whether it's long or short or hedged in the macro economy and the crypto economy, doing it on exchanges and in a way that's compliant with all of their operating charters. And that, in a nutshell, I think, explains the MicroStrategy value proposition and our opportunity going forward. And with that, I'll go ahead and pass the floor back to Shirish.

Speaker Change: And we're providing you.

Speaker Change: Useful.

Speaker Change: Set of public securities, both equity as well as options as well as debt instruments that institutional investors can use in order to Taylor.

Speaker Change: Their portfolio as they invest.

It's long or short or hedged and the macro economy and the crypto economy doing it on <unk>.

Speaker Change: On exchanges and in a way that's compliant with all of their operating charters and that in a nutshell I think explains the micro strategy value proposition and our opportunity going forward.

Speaker Change: And with that.

Speaker Change: I'll go ahead and pass the floor back to <unk>.

Speaker Change: Thank you Michael.

Shirish Jajodia: Now we will begin our Q&As, and the first question is for Phong. Can you elaborate on the company's new positioning as a Bitcoin development company, and are there any new developments that you would like to highlight?

Speaker Change: Now we will begin our Q&A.

Speaker Change: The first question.

Speaker Change: <unk>.

Speaker Change: Can you elaborate on the company's new positioning as the Bitcoin development company and are there any new developments that you would like to highlight.

Phong Q. Le: Yeah, thanks, Shirish. I guess, you know, we talked quite extensively during our prepared remarks about the Bitcoin development company. I think perhaps the question is more specific about the development portion and whether we're doing any software development in the Bitcoin area. For those who are attending Bitcoin for Corporations on Wednesday, we'll have about half a day talking about the technology ecosystem associated with Bitcoin. It will also share some new developments in the area of Bitcoin security that we're working on.

Speaker Change: Yes, Thanks <unk>.

Speaker Change: And so we talked quite extensively during our prepared remarks about the bitcoin development company I think per taps. The question is more specific about the development portion.

Speaker Change: And whether we're doing any software development in the <unk> area.

Speaker Change: For those who are attending bitcoin for corporations on Wednesday, we will have about a half day talking about the technology ecosystem associated with Bitcoin and will also share some new developments in an area between security.

Speaker Change: That we're working on.

Phong Q. Le: And I think people will be excited to see some of the things we're doing in that space. We continue to experiment and continue to advocate for Bitcoin development. And so there's more work going on in that area that we'll share in a couple of days.

Speaker Change: And I think people will be excited to see some of the things we're doing in that space. We continue to experiment and continue to advocate for bitcoin development and so theres more work going on in that area that will share in a couple of days.

Michael J. Saylor: Next question is for Michael. MicroStrategy's equity premium towards Bitcoin holdings has expanded materially over the past few months, and despite the recent Bitcoin pullback, the premium remains healthy. What do you think about the premium, and what do you attribute this to?

Speaker Change: Great. Thanks, Tom.

Our next question is from Michael <unk>.

Strategy's equity premium to ex Bitcoin holdings has expanded materially over the past few months and despite the recent mcquain pulled back the premium remains healthy.

Michael J. Saylor: Do you think about the premium and what do you attribute this to.

Michael J. Saylor: I think that if we had no leverage and we generated no accretion, then we would start to look like a spot Bitcoin ETF. But the fact that we have leverage, then the leverage will justify a premium. If the leverage was, if we just had a billion dollars of leverage and we were paying 10% interest, it would be a small premium. We would be basically levering a billion dollars at 10% interest that's yielding where Bitcoin is appreciating at 40% or more.

Michael J. Saylor: I think that if if.

Michael J. Saylor: If we had no leverage and we generated no accretion there.

Michael J. Saylor: Then we would start to look like a spot bitcoin Etfs.

Michael J. Saylor: The fact, if we have leverage there.

Michael J. Saylor: Then the leverage will justify a premium.

Michael J. Saylor: If the leverage wise, if we just had $1 billion of leverage and we were paying 10% interest.

Michael J. Saylor: It would be a small premium will be basically levering $1 billion at 10% interest debt, yielding where bitcoin is depreciating at 40% or more and more so there would be definitely a premium but it would be the difference between the leverage and the yield a bitcoin or had depreciated bitcoin on a small amount.

Michael J. Saylor: So there would definitely be a premium, but it would be the difference between the leverage and the yield of Bitcoin or the depreciation of Bitcoin on a small amount of money on a billion. But if we have more leverage, and if the cost of capital is lower, then that justifies a higher premium. So when you get to $3 billion in converts and when the converts are 50 basis points, then you've got more leverage, and you've got a lower cost of capital.

And our money on $1 billion, but if we have more leverage.

Michael J. Saylor: And if the cost of capital is lower than that justifies a higher premium. So when you get to $3 billion of converts and when that converts or 50 basis points. Then you got more leverage and you've got a lower cost of capital. So I think that justifies a higher premium when.

Michael J. Saylor: So I think that justifies a higher premium. When you're able to issue billions of dollars of equity at a pre-tax rate of that premium, then that justifies and turns an even higher premium. And it also strengthens the capital structure, providing us with unpledged assets that we can use for future financings to leverage future corporate opportunities.

Michael J. Saylor: When you were able to issue billions of dollars of equity at a premium at that premium then that justifies and turn it even higher premium and it also strengthens our capital structure, providing us with a unpledged assets that we can use for future financings are used to leverage future corporate opportune.

Michael J. Saylor: And then, of course, when we're able to do convertible issuances and then convert them into Bitcoin and capture not just the premium up front but the benefits over the next six years of Bitcoin appreciation, that justifies another premium. So, you can imagine if you thought you could generate an 8% accretion per year, there's no reason why you couldn't justify 100% or more of a premium in that asset value. If you could generate an 8% accretion more often than once a year, if you could do it from quarter to quarter or every other quarter or do anything consistently over time, then it's quite possible to come up with any number of different premium calculations.

Michael J. Saylor: <unk>.

Michael J. Saylor: And then of course.

Michael J. Saylor: When we're able to do <unk>.

Michael J. Saylor: Convertible issuances, and then converted to bitcoin and capture.

Michael J. Saylor: Not just the premium upfront but.

Michael J. Saylor: But the benefits over the next six years of bitcoin appreciation that justifies neither premium so.

You could imagine if you could if you thought you could generate an 8% accretion per year. There's no reason why you couldn't justify a 100 per cent or more premium to net asset value have you could generate.

Michael J. Saylor: Percent accretion more often than once a year if you could do it from.

Michael J. Saylor: From quarter to quarter or every other quarter or do anything consistently.

Michael J. Saylor: Consistently over time, then it's quite possible to come to <unk> to any number of different premium calculations.

Michael J. Saylor: Ultimately, the company's premium is a function of our ability to execute over a long period of time and also the market's view as to whether or not they appreciate that. And, of course, that's a shifting sentiment, and there's uncertainty into the future. So there will continue to be uncertainty about what the right premium ought to be. And I think that's what drives the market.

Michael J. Saylor: Ultimately the company's premium is a function of our ability to execute over a long period of time and also the market's view as to whether or not they appreciate that and of course, that's a that's a shifting sentiment and there is uncertain.

Michael J. Saylor: At the end of the future. So there will continue to be uncertainty about what the right premium ought to be and I think that's what makes the market.

Shirish Jajodia: The next question is regarding Michael's 10B51 plan. Has the plan to exercise MicroStrategy stock options been completed already? And can you please provide further color on the executed plan and the thought process behind the stock sales?

Speaker Change: Thank you Michael.

Next question is regarding Michaels can be five one plan.

Speaker Change: Hence the mic has the plan to exercise Microstrategy stock options completed already and can you. Please provide further color on the executed plan and the thought process behind the stock sales.

Andrew Kang: Yeah, Shirish, let me, let me take that one. So I guess first off... Michael's option exercises were planned and actually fully disclosed. I believe it was in our Q3 filing last year. And, as most know, as officers and directors of the company, we have to put in place a 10B51 plan, which discloses that up front. The plan was related to 400,000 options that Michael received back in 2014, which were set to expire this April.

Speaker Change: Yeah sure. So let me let me take that one.

Speaker Change: So I guess first off.

Speaker Change: Michael.

Speaker Change: Option exercises.

Speaker Change: Were planned and actually fully disclosed.

Speaker Change: I believe it was in our Q3 filing of last year.

Speaker Change: And as most know as officers.

Speaker Change: And directors of the company, we have to put in place are tend to be five one plan, which discloses that upfront.

Speaker Change: The plan was related to 400000 options, which.

Michael received back in 2014.

Speaker Change: Which were set to expire.

Andrew Kang: So, you know, the sales were programmatic. Michael sold 5,000 shares on each trading day between Jan 2 and April 25 at market prices. And again, the sales were executed under the plan. It was completed on the 25th as disclosed, and he did not have any additional 10b51 plans in place at the time. So it's worth noting also that obviously Michael still holds a significant ownership stake in the company. And I know there have been a lot of questions and chatter around about the sales, but it's really as simple as they were. They were put in place, disclosed, and programmed to do so before his options expired.

Speaker Change: This April so the sales were programmatic.

Speaker Change: Michael So 5000 shares on each trading day between Jan two in April 25 at.

Speaker Change: That market prices.

Speaker Change: And again the sales were executed.

Speaker Change: Under the plan.

Speaker Change: It was completed on the 25th.

Speaker Change: As disclosed then he does not have any additional <unk> one plan in place at the time, so it's worth noting.

So that obviously, Michael still holds a significant ownership stake in the company.

Speaker Change: And I know theres been a lot of some questions and chatter around on that on the sales, but it's really as simple as they were they were put in place disclosed and programmatic.

Speaker Change: To do so before his options exercised or expired.

Andrew Kang: Thanks Andrew. We're coming to the end of our time. We'll take one last question here. This one is for Phong.

Speaker Change: Thanks, Andrew.

Andrew: Yeah coming to the end of the time, we'll take one last question here.

Phong Q. Le: Can you please elaborate on the progress of converting software clients to the cloud from licenses and AI related partnerships?

Andrew: This one is for a phone can you. Please elaborate on the progress of converting software clients to cloud from license and the AI related partnerships.

Phong Q. Le: Yeah, so, you know, they're one in the same. A lot of our AI and cloud partnerships are with the large hyperscalers, especially Microsoft, AWS, and Google Cloud. We're being pretty aggressive working with our hyperscalers and our partners this year to get as many customers to the cloud as possible. We have some pretty ambitious plans.

Speaker Change: Yes so.

Phone: They're one and the same a lot of our AI and cloud partnerships or with the large hyperscale or especially in Microsoft AWS and Google cloud.

Phone: We're being pretty aggressive working with our hyperscale or us and our partners. This year to get as many customers to cloud as possible, we have some pretty ambitious plans.

Phong Q. Le: You'll note, and Andrew noted, that that does have a short-term impact on product license revenue because product license revenue represents the incremental revenue of on-prem customers. And we're trying to, as we move customers to the cloud, you'll see that offset over time. So moving fast, using our partners. AI is only available in the cloud.

Phone: Youll note in Andrew noted at that does have a short term impact of product license revenue because product license revenue.

Phone: Representative of incremental revenue on Prem customers and.

Phone: And we're trying to as we move customers to cloud, you'll see that offset overtime. So moving fast using our partners AI is only available in the cloud. So it's another impetus for customers to move to cloud but.

Phong Q. Le: So it's another impetus for customers to move to the cloud, but it'll have some short-term disruption in our product license revenue and our total revenue. Many companies have gone through this transition. We're well equipped to do the same, and I'm excited about the prospect of what that means for us in the long run.

Phone: But it will have some short term disruption.

Phone: Product license revenue, our total revenue many companies who've gone through this transition.

Phone: We're well equipped to do the same and I'm excited about the prospects of what that means for us in the long term.

Speaker Change: Thank you Paul.

Shirish Jajodia: And thank you everyone for your questions. We received a lot of great questions, and we tried to address the prepared remarks and the Q&A afterwards. So this concludes the Q&A portion of the webinar today. I will now turn the call over to Phong for the final closing remarks.

Speaker Change: And thank you everyone for your questions received a lot of great questions and we tried to address in the prepared remarks and the Q&A afterwards.

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

Phong Q. Le: Thank you, everyone. I really want to thank everyone for being with us today. We appreciate your support. We're also excited to host MicroStrategy World in Las Vegas over the next three days and looking forward to seeing customers, prospects, partners, analysts, and shareholders alike at this one-of-a-kind event. For those who aren't able to be here in person, we're also live streaming our keynotes for MicroStrategy World, which starts at 9.30 a.m. Pacific time tomorrow, and the entirety of Bitcoin for Corporations. So you'll be able to watch both of those online.

Thanks, everyone I really want to thank everyone for being with US today. We appreciate your support we're also excited to host Microstrategy World.

In Las Vegas over the next three days and looking forward to seeing customers prospects partners analysts and shareholders alike. At this one of a one of a kind event.

Speaker Change: For those who aren't able to be here in person. We're also live streaming our keynotes from micro strategy World, which starts at 930, a M Pacific time Tomorrow.

Speaker Change: And the entirety of the claim for corporations, so youll be able to watch both of those on the line if youre not able to be here in person you are invited to join get details at our website www dot micro strategy Dot com.

Phong Q. Le: If you're not able to be here in person, you're invited to join us. Get details at our website, www.microstrategy.com. We're as enthusiastic as ever about both our enterprise software strategy as well as our Bitcoin strategy. And we wish you a good quarter and look forward to seeing you all again in 12 weeks. Thank you all.

Whereas enthusiastic as ever with both our enterprise software strategy as well as our bitcoin strategy.

Speaker Change: And we wish you a good quarter and look forward to seeing you all again in 12 weeks. Thank you all.

Speaker Change: Goodbye.