MicroStrategy (MSTR) 1 May 232023 Q1 Earnings call transcript

Hello, everyone, and good evening. I'm Shirish Jajodia, Vice President of Investor Relations and Treasury at MicroStrategy. I will be your moderator for MicroStrategy's 2023 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 [Technical Difficulty].

Shirish. you, Thank Hello, everyone. all call. you our first welcome XXXX to earnings to quarter like I'd We're MicroStrategy live Orlando, reporting excited be to for Florida. World in XXXX and our in person We've the the first our day successful XXXX for BI, partners we're and bitcoin since today, innovation. share customers, all had see for excited employees one and time to passion a event of and

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On quarter, billings software a Slide subscription million, growth. total of slight increase of million billings increase first current license the double-digit in year-over-year, $XX.X straight quarter an Current XX, our were XXth of were year-over-year. XX% $XX.X X%

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here were Turning of first excludes $XXX quarter expenses, $XXX million first quarter the costs million Slide XX. Total in to shown in the XXXX. which compared compensation to non-GAAP share-based

Bitcoin last primarily of non-GAAP in total costs compared impairment year, due QX to to the quarter higher same were this Our XXXX. charges quarter significantly lower

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exchange however, increased a which hosting impacts. non-GAAP by of increased and revenues, new As year-over-year, subscription X% percentage currency is services million existing usage cloud due total of cloud offset expenses to by X% the in partially and revenues approximately primarily of result to sales the year-over-year costs, increase $X $XX or cost million. increased a Non-GAAP favorable marketing

costs a total As X% sales percentage higher year-over-year. by non-GAAP and of revenues, marketing were

in resulted QX certain commissions, in we that year. recall of may capitalized variable compensation lower which last You XXXX, costs

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or accounting Financial measuring adoption recommend Bitcoin. voted certain FASB, assets, Accounting last for to the digital value Late year, fair includes Board, of which the Standards unanimously

of recognized in QX. have whether only increases as Bitcoin impairments We price regardless it the of did

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XXXX, XX, of in billion our value last March $X of of based our billion the price $X compared approximately As the of as Bitcoin day of XX,XXX holdings market the was of approximately value QX. to approximately Bitcoin holdings carrying the on

the Bitcoin holdings of our the fair fair of which this $X.X a as recognized value market of has Bitcoin XX, $X.X to billion prices could continued have XXX,XXX on rally of value value value to As billion. approximately holdings, Bitcoins of increased under year, difference close market Friday, market our is April the between carrying our be That total and a model.

exposure newly X. draft We digital cause period, voice On the runs a MicroStrategy for fair in-scope as The we at to provide brings. encourage supportive through March improved it well. be transparency the proposed June others their investor FASB comment for XX, rules response of that is draft comment an exposure on the measured to plan during support comments to and fully cause FASB would value. that the in-scope issued which to -- assets, an digital Bitcoin deadline would includes and

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loan on Turning $XX of repaid recognizing gain million million to discount, the the debt. at XX. extinguishment XX% QX, we that a backed a $XXX Slide In Bitcoin

highest management all last our X.XX% us eliminated which were an we rate of rate year. goals. an debt, up our liability floated This By to leverage, collateral pledged environment to interest the repayment bitcoins interest transaction rate Company's rising retiring prior the reducing the of and had debt, and released just to rapidly loan. securing for we to also addition annualized In due that the was important the as strategic

of valuable in to with shareholders. of billion We not weighted and These interest our the of now cost X.X%. XXXX. convertible two maturity X.X% as compared low in of instruments prior attractive a of long-term of have senior notes carry debt December to our the the to a of This terms The notes interest of earliest the capital weighted rate a and total with XXXX. the until very most with $X.X be continues over until rate convertible remaining approximately blended, are blended debt end earliest maturity, cost outstanding capital accretive years outstanding is

million interest position. great the compared of Lastly, million to of our to strengthens our prior $XX.X fully end annualized expense $XX QX. overall expense is This fixed annualized now over liquidity

as the we net on our $XXX to sheet as our ongoing offering and debt the the Also or quarter, service continued of raised robust order As through our expense. to A million and well execute in on cash in in Class first at-the-market needs had our equity of liquidity end remains common proceeds overall balance we capital $XX ATM of manage sale million QX, approximately shares. our in working

We million of gross And stock at the we A which new approximately program, million per terminated million ATM announced shares of issued of program. today, we of prior an ATM $XXX aggregate $XXX.XX. average Since an capacity a of remained. million approximately share Class $XXX then, $XXX price X.XX common

repayment we redemption. for purchase of use debt purposes, program, or prior corporate general proceeds the include the the or Bitcoin with As for may which

to date. way in our we shares raise the to new under capital been be program No shareholders. believe We and will to continue most have will accretive opportunistically proceeds those that this use a issued

two-plus debt December QX debt managing in due no liability of with asset coming next flexibility our management giving Our maturities us XXXX pushed efforts in to more the XXXX, years from earliest maturity with challenges liabilities to position the X,XXX additional the time macroeconomic by Bitcoin Bitcoins. as QX, environment increased we net our navigate in as fluctuality markets. well the have Bitcoin our in price the In

XX, bitcoins held XX% pledged secured as MicroStrategy Of of compared March were our we end held And the which XX,XXX sheet. of the of XXXX unencumbered. XX% quarter, of XXX,XXX XXX,XXX holdings, and now are subsidiary, Bitcoins total the unpledged are are collateral The At remaining now and notes. at to holdings our fully the our Bitcoin the XXXX, by hold end on total balance of of XXXX. Bitcoins as securing parent are total a our at all Bitcoin unencumbered MicroStrategy

It's in that Bitcoin Bitcoin. and only custody worth mentioning strategy, acquisition and taken buy out our U.S.-based grade, approach the again simple our regulated reinforcing hold of buy and only have with we Bitcoin lent have we markets. U.S.-based We cold custodians Since we in big coin. to institutional a never Bitcoin adoption storage,

steps We risk along continue conduct all we and highest execution -- way throughout ensure custodians due of compliance. level Bitcoin to the we and our in the take markets. on only We U.S.-based diligence of partners minimize and buy

Turning XX. to Slide

XXXX We remains this eye. with cautious modest but revenue optimistic Our anticipate a total outlook growth year. for

cloud We for grow and dual to will our disciplined future. as of investing to the remain continue expect and as and intelligence platform. on transform in execute our revenue strengthen strategy while percentage revenue costs Bitcoin of business of total growing subscriptions our to a continue acquiring business continue to we recurring growth, our software quality the We we

impact continue may difficult mentioned, which As this to results conditions macro year. Phong our persist,

this and you MicroStrategy. an MicroStrategy for constant an time customers capabilities. architecture agile of in and with However, analytics environment, of extremely one-stop support environment your open today for that continues cloud encouraged change, serve your we Thank continued modern its to platform are with even

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

Bitcoin I quick our would like one start with Andrew. strategy. review of you, to Thank

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about very for it's think one. see, outlook can the good going we're we're a to as you looking be And forward Bitcoin, so We year. to the optimistic coming and

think can With and questions ahead we and I go take answers. that,

Michael. you, Thank

beginning, before the the Q&A. begin the Harbor will read we at not full complete As I it statement Safe did we

is So and the today's some safe during statement our statements. provided regarding we harbor of plans and forward-looking information provide expectations, may we what constitute prospects future call

assume forward-looking results recent no filed statements differ forward-looking SEC. factors which We update to to only XX-Q materially important including in factors, may Actual these today. of with various discussed statements, as due obligation risk speak the from the our these most

refer financial on non-GAAP measures. results release issued will available were to call, today's our Reconciliations at today GAAP our microstrategy.com. and during in certain website and are presentation Also, showing are we non-GAAP which earnings versus available

the are macro questions. today? migrations of first What is into progress product question the update against jump faring on we'll the and your cloud the Phong. us Could your Now for you expectations how business And are and customer for cloud growth capabilities backdrop?

Shirish. Thanks,

our I results continue revenue progress everyone basis. to cloud saw, on think direction with year-over-year as growth in good pretty a nearing a XX%

Azure. big as launched we've this and year, As evolution, on far our highlights on product AWS

actually last cloud, customer our FedRAMP we in which first quarter on brought QX. year, we our half this launched Second of

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little growth Looking of in to XX% in billings, forward a cloud a we QX. continued bit year-over-year slowdown growth, had

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Thank Phong. Great. you,

by for light key with are the is you In does what do of the the market, adoption volatility think intersect markets for crypto the the broader in of Bitcoin And question more and Michael. catalysts Bitcoin potential events recent institutions? how recent Next adoption? banking

have corporations an amounts put I important the are that to catalyst there the very sheet that Bitcoin be treatment. as be will long determination intangible current indefinite as a FASB they of balance material will lot accounting their reluctant I conservative fair think of on think

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for Can all swing Thank GAAP looks impact a large explain Andrew. quarter tax Bitcoin. The as there like Can the you works? you, you that it earnings? to next was It this relates Michael. please significantly clarify question is the in how

Shirish.

changes is are we've give being which is exists should today, me said, math. as it the just that high-level seen as accounting accounting some the I rules Michael in you the very and walk Sure. That easily try we welcome fun one, through guess. general You not concepts some anticipated The why of tax mentioned. and I'll understood

was holdings taken the deferred We had cumulative of based time. on a million, over effect and asset a X/XX, tax $XXX we've it on mostly Bitcoin impairments which tax on is our that

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coin We see the price higher. drive now

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Thanks, Andrew.

for Phong. question Next is

provide innovation of lots the some there's areas great innovation the any start to you to today Phong, the if can revenues? when guidance please of presentation expectation around commentary So new side, the on on in contribute

Yes.

in direct BI for the artificial lot to attribution think augmented the big We're lot and sort been core any doing working sort doing side. We're intelligence what we've would doing We're are analytics. cloud. on a anticipate Lightning revenue lot be areas of beyond of the premature a those four on in innovations. it on I our a

directly we'll answer them, the that months, to X to price the of think But solidify we'll the and more, figure how next little now better. going and XX right question revenue. it's we're early attribute but out these in release to any able we to uptake a innovation As products to to be I experience market

Great.

is current in sell expansion Next their tech deals as head or the difficult change counts. environment for it as been Phong has companies macro one well. If to different

Yes.

technology services our I it's I a seeing slow One is of think financials, there's down exactly our from But belt hard a And at and would the we IT is say, in second financial in of usually what's growth. and side. in especially bit by of happening look to companies little a slowdown a revenue macroeconomic couple see bit did little groups companies. tightening that's cloud you general, focused we're if an say indication indicators. a

more and not cycles, think it sales potentially of budgets. that's continue, seasonal I did delayed going probably to tightening some indicate Now belt but

cautious, be time, So, prudent the Andrew how will But of as rest be the this think I overall. is do to year to said, anticipate. in at go it's point hard to good

And Thanks, take one for Phong. we'll here last Andrew. question

of So decision any the you provide as on rules in change rule the a you the mentioned, an whether time line have FASB's the for and thoughts can implementation? you impact please expected accounting to follow-up

Shirish. Thanks, Sure.

that As I call, the right on draft the out. rule -- the changing has support will the put the fair value change. believe we mentioned FASB the is We

on advocating think their to strategy, transparency for and door we about think open been since we Bitcoin it it that more we've will our thinking provides balance the on better the I sheet. Bitcoin took people

we As I is year. hopefully will the the the and take the that comment when something early hope speculate for but timing, that become can't of place before period ends June, will end in this final, certainly rule certainly

-- for have question. our we guess the fingers thanks but So, crossed, I we

Great.

concludes remarks. And So now thank this for I will of Q&A portion over to webinar. the call question. the his the closing for you, the everyone, turn Phong

us for everyone thank with to I your appreciate today. being us want I support.

those us our ever about live live as are to in meet enterprise well For also. software forward as person our MicroStrategy enthusiastic an with as look strategy I as who Bitcoin We're to World, strategy. in person. opportunity you here at having

and quarter weeks. Thanks, wish we you XX seeing to forward good a look in And everyone. you again