Strategy Inc

Hello, everyone, and good evening. I am Shirish Jajodia, Corporate Treasurer and Head of Investor Relations at Strategy. I will be your moderator for Strategy's 2024 Fourth 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. Actual results may differ materially from these forward-looking statements due to various important factors, including the risk factors discussed in our most recent 10Q filed with the SEC and our 8K filed on January 6, 2025. We assume no obligation to update these forward-looking statements, but speak only as of today. During today's call, we will refer to certain non-GAAP financial measures. Reconciliations showing GAAP versus non-GAAP results are available in our earnings release and presentation, which were issued today and are available on our website at strategy.com. I would now 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, Fong, 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 the questions. Now, I'll walk you through the agenda for today's call. First, Fong Lee will cover the business highlights for the fourth quarter and full year of 2024. Second, Andrew Kang will cover the financial results for the fourth quarter and full year of 2024. And then finally, Michael Saylor will provide a strategic review and discuss the recent Bitcoin market updates. And lastly, we will open up to Q&A. With that, I will turn the call over to Fong Lee, President and CEO of Strategy.

Fong? Thank you, Sharish. Hello, everyone. I'd like to welcome you all to today's webinar and our first ever earnings call as strategy. MicroStrategy Incorporated today announced that it's now doing business in strategy. The MicroStrategy name and logo date back to our incorporation more than three decades ago in 1989. At that time, we positioned ourselves at the forefront of the microcomputer revolution. The term micro symbolized precision and our focus on harnessing the power of computing to create business intelligence that changed how companies operate. There have, of course, been significant changes since then, both in the technology industry and to our strategy. Technology is now ubiquitous, and our business strategy and value to our customers is no longer limited to technology. Today, the company is excited to announce its rebrand as Strategy for the following reasons. One, simplicity. Strategy is a single word, easy to remember, and has 40% fewer letters than MicroStrategy. Continuity. Since Strategy is the second half of MicroStrategy's historical brand name, it would represent an evolution, but not a complete change or break from our past. And three, ambition. The new name would also reflect our ambition to keep pushing boundaries. For example, we are no longer confined to the past, but we're focused on the big picture, driving new innovations in digital capital and business intelligence. So today, Strategy is the world's first and largest Bitcoin treasury company, the largest independent publicly traded business intelligence company, and also a NASDAQ 100 stock. The brand simplification is a natural evolution of the company, reflecting our focus and broad appeal. The new logo includes a stylized B, signifying the company's Bitcoin strategy and our unique position as a Bitcoin treasury company. And our new brand's primary color is now orange, which represents energy, intelligence, and Bitcoin. Alongside our rebranding, we're excited to launch the official Strategy Merchandise Store, a reflection of our commitment to our passionate retail shareholders who take pride in being part of our journey. Just as sports fans proudly represent their favorite teams, our shareholders and employees and customers want to showcase their support for Bitcoin and for us. Our store will feature a curated collection of strategy apparel, accessories, and gear designed for those who share our vision. You can now visit the store at store.strategy.com. We welcome your feedback and look forward to seeing our community represent strategy with pride. Next, I'm also excited to share that we launched a new website, strategy.com. As you can see in this slide, it includes a live tracker of various metrics and market data, including share price, performance, market cap, Bitcoin count, trading volume, options, open interest, and more. We believe such a disclosure will provide more transparency and consistency and real-time information to our investors and stakeholders. Investors can see both real-time data and historical information, such as past Bitcoin purchases, in one simple, accessible place. We have many investors and analysts aggregating this information on their own, and we thank them for their fastidious work. Now we can provide this information, trusted and governed, all in one place. Finally, we've relaunched our software website too, strategysoftware.com. We continue to be at the forefront of innovation and AI-powered business intelligence. We're also progressing rapidly with our cloud transition with a truly cloud-native, open, multi-cloud approach. These are highlighted at our new software website. To celebrate our new brand, learn more about our innovations in AI, cloud, and business intelligence, spend time with our software customers, and meet folks on the forefront of Bitcoin for corporations, I invite you all to join us at Strategy World 2025 in Orlando, Florida. Go to our websites to register for this event, and I look forward to seeing many of you in Orlando. And if a brand launch was not enough, many of you know we've had a very busy quarter since our last earnings call. Here are some highlights. One, we continue to see momentum in migrating existing customers and adding new prospects to our managed cloud platform. In Q4 2024, we saw a 50% year-over-year increase in current subscription billings and a 48% year-over-year increase in subscription services revenues. Second, we've adopted FASB's fair value accounting standard for our Bitcoin holdings, and this accounting change will be reflected in our Q1 2025 financials. This will lead to a large one-time cumulative effect net increase, the opening balance of our retained earnings of $12.75 billion in Q1, as our Bitcoin holdings will be revalued from the current carrying value to the market value. We are proud to have contributed to the corporate initiative advocating for the revision of prior reporting standards that categorize Bitcoin as an indefinite lived intangible asset. Three, in December 2024, strategy was officially included in the NASDAQ 100 index. As a result, investors in QQQ and other NASDAQ 100 index funds will receive exposure to our Bitcoin strategy. According to some estimates, ETFs tracking the NASDAQ 100 have more than $550 billion in assets under management. We view this as an important milestone in the institutional adoption of Bitcoin, and we're proud to be part of the NASDAQ 100. In December, we welcomed three new members to our board of directors, Brian Brooks, Jane Dietz, and Greg Winiarski. This expansion increases our board from six to nine members and reinforces our commitment to the highest standards of corporate governance. Each of these distinguished leaders brings a wealth of invaluable experience and expertise in digital assets, capital markets, and regulatory matters. And we believe they will make significant contributions to our strategy as a Bitcoin treasury company, further strengthening our strategic vision and oversight. Lastly, we conducted a special shareholder meeting in January where our shareholders voted to increase the authorized Class A common stock to 10.33 billion shares and preferred stock to 1.005 billion shares, respectively. The expanded share count will support the execution of our strategy to raise capital opportunistically and effectively through both equity and fixed income securities to purchase Bitcoin in a manner that we believe is advantageous and accretive to our shareholders under the prevailing market conditions. Moving on to the Bitcoin highlights for 2024, Strategy remains the largest corporate holder of Bitcoin in the world, now holding 471,107 Bitcoins, with a total Bitcoin market value of $46 billion as of February 2nd. In the full year of 2024, we acquired an additional 258,320 Bitcoin for a total purchase cost of $22.1 billion at an average price of $85,447. In 2024, the price of Bitcoin appreciated, spurred notably by the approval of spot Bitcoin exchange-traded products, or ETPs. Additionally, the pro-crypto stance of the new administration led by President Trump has drawn considerable institutional attention to the asset class. We believe the introduction and initial success of the spot Bitcoin ETPs evidence the growing maturation of Bitcoin as an institution grade asset class with broader regulatory recognition and institutional adoption. On the capital markets front, we made significant progress towards the advancement of our Bitcoin strategy. We announced our 21-21 plan and the key three earnings call in November to target raising $21 billion of equity and $21 billion from fixed income securities between 2025 and 2027. We have made progress under our 21-21 plan much faster than originally anticipated, with rapid and responsible growth in our capital raising given favorable market dynamics. In the full year 2024 and quarter to date in Q1 2025, we raised $18.8 billion net proceeds through our at-the-market or ATM equity offering program and raised $6.2 billion through the issuance of five different tranches of convertible notes. This makes Strategy the largest issuer of convertible bonds in a single calendar year in the last decade. We also raised $584 million gross proceeds by issuing Strike, a preferred perpetual stock, last week after filing a shelf registration. We expect to continue issuing innovative fixed income securities and seek to enable our common stock to outperform Bitcoin via intelligent leverage. To manage our overall leverage intelligently and maintain a healthy and robust balance sheet, we redeemed our $500 million senior secured notes due 2028 and called our $650 million convertible notes due 2025 and $1.05 billion convertible notes due 2027. All of our Bitcoin serving as collateral securing our 2028 senior secured notes was released. As illustrated on this slide, our new capital structure includes the issuance of convertible preferred equity for investors seeking lower volatility and leverage. We believe that our new perpetual strike preferred stock, or STRK, is a complementary addition to our convertible bonds and any future fixed debt instruments we might have. Strategy's unique position allowed us to introduce Strike, which is a form of convertible preferred stock with an embedded perpetual call option on MicroStrategy, our common stock, which has substantial exposure to Bitcoin. It's important to note that Bitcoin itself is one of the most volatile and historically high performing commodities available. We created a preferred security convertible into highly liquid equity, which in turn is issued by a company that holds significant amounts of Bitcoin, a volatile and liquid commodity. To our knowledge, Strike is the first preferred equity or convertible preferred equity issued by a company with significant Bitcoin exposure. Its ticker symbol, STRK, is the second publicly traded ticker for strategy. While strategy aims to issue leveraged equity through which our investors gain exposure to Bitcoin, STRK Strike offers an 8% fixed coupon and a perpetual uncapped call option and a publicly traded security. This overall capital structure is quite unique and designed to broaden our investor base. The primary objective of Introduction Strike was to access an investor base that is interested in investing in securities with exposure to Bitcoin, but that wants lower sensitivity to Bitcoin's volatility and performance, both on the upside and downside. We recognize that those investing in MSTR class A common stock typically seek higher volatility and leverage, but we also saw an opportunity to attract a new class of investors interested in reduced volatility and leverage, yet still wanting Bitcoin exposure. As reflected in the snapshot of our capital markets activity, 2024 was a milestone year for strategy, with over $22 billion raised to fuel our Bitcoin strategy. The pace of our capital raising and Bitcoin acquisition significantly accelerated in Q4 2024, during which we raised $15 billion through equity issuances and $3 billion via convertible debt in just under two months. To put the scale of last quarter's activities in perspective, prior to last quarter, we had raised $10 billion over 17 quarters since adopting Bitcoin as our treasury reserve asset in August 2020. This remarkable ramp up is not only a testament to Bitcoin's broader adoption and price appreciation, but also to support our diverse investor base who recognize our ability to execute our Bitcoin strategy with laser focus. Andrew will provide further details on our capital markets and Bitcoin purchase activity. Last quarter, we developed a new descriptor for what we are, which is the world's first and largest Bitcoin treasury company, the acronym being coincidentally BTC. We continue to focus on acquiring more Bitcoin through our capital market activities, and we believe that the value proposition of the company centers increasingly on our Bitcoin treasury strategy. We're a publicly traded company that has adopted Bitcoin as our primary treasury reserve asset. By using proceeds from equity and debt financings, as well as cash flows from our operations, we strategically accumulate Bitcoin and advocate for its role as digital capital. Our treasury strategy is designed to provide investors varying degrees of economic exposure to Bitcoin by offering a range of securities, including equity and fixed income instruments. In addition, we provide industry-leading AI-powered enterprise analytics software, advancing our vision of intelligence everywhere. We leverage our development capabilities to explore innovation in Bitcoin applications and integrating analytics experience with our commitment to digital asset growth. We believe our combination of operational excellence, our strategic Bitcoin reserve, and our focus on technological innovation positions us as a leader in both the digital asset and enterprise analytics sectors, offering a unique opportunity for long-term value creation. Since our adoption of our Bitcoin strategy, we've used three primary mechanisms to acquire more Bitcoin. One, fixed income securities. We've issued $8.6 billion of total debt, of which $6.2 billion in principal amount of convertible debt is outstanding, and an attractive blended cost of debt fixed at 0.56% annually. We also raised $584 million in gross proceeds through perpetual preferred stock, and we will continue seeking to innovate with other fixed income securities offerings. Common stock issuances. We've issued $21.7 billion in shares of Class A common stock in a manner that we believe to be accretive to existing shareholders. And cash flow from operations. Since August 2020, we've used $836 million of total cash generated by our software operations to purchase Bitcoin. These three capital market levers have allowed us to raise $31 billion of capital and deploy intelligent leverage to increase our Bitcoin holdings in a manner that we believe has created tremendous shareholder value. Last quarter, we introduced our 2021 capital raising plan targeting $42 billion in capital, split equally between equity and fixed income over three years. Since then, supportive macro conditions led us to accelerate the execution of our capital raising plan. We've already raised 80% of our $21 billion equity target and 17% of our fixed income target while accumulating significant Bitcoin holdings. In 2025, we are shifting our focus more to fixed income issuances, including convertible notes, preferred stock, and other securities designed to provide leverage that benefits our shareholders. As mentioned in the past, our long-term leverage target is 20-30% of our Bitcoin holding value. We remain flexible and will continue to adapt swiftly to market conditions. Now I'll turn the call over to Andrew to discuss our financials for the quarter in further detail.

Thank you, Fong. I'll begin with a review of the software results, then go into further detail on our Bitcoin strategy and those results. On slide 16, you can see in Q4, total software revenues were approximately $121 million, down 3% year over year. Full year 2024, total revenues were approximately $464 million, down 7% year over year. We fully anticipated product license revenues along with support revenues to decrease in Q4, and our revenue trend continues to reflect the ongoing successful transition of our software business from on-premise to cloud. Turning to the cloud results, Q4 subscription services revenues increased 48% year-over-year and now make up approximately 20% of total revenues. Full year 2024 subscription services revenues were approximately $106.7 million, reflecting an increase of 32% year over year. The growth in subscription services revenues is a result of the growth in our subscription billings, which also grew by 57% in Q4 to approximately $65 million, our fourth straight year of quarterly double-digit growth. The strong growth in our subs billings was again driven by both existing customer migrations to the cloud as well as new customer wins in Q4. And our customer renewal rates continue to remain elevated, consistent with prior quarters. We continue to see growth in demand for our cloud platform, and Q4 was the strongest quarter of customer migrations to cloud to date. The decrease in product license revenues and support revenues will be offset by growth in subscription services revenues. We expect this trend will continue in 2025 in the short term, but in the long run, cloud subscription services revenues should offset this shift as we fully transition our business to the cloud. Cost of revenues were approximately $34 million, up 21% compared to Q4 of last year, and approximately $130 million for the full year, up 18% year-over-year. The increase was driven primarily by higher cloud hosting costs which we expect to continue in future periods as a direct result of our growing cloud business. Operating expenses for the software business were approximately $94 million, down 6% compared to Q4 of last year. And full year OpEx was approximately $396 million, which was up 2% year over year. And lastly, digital asset impairment charges in Q4 were approximately $1 billion, and approximately $1.8 billion for the full year. I am happy to announce that Q4 will be the last quarter where we will recognize an impairment charge on our Bitcoin holdings as we move to fair value accounting in Q1. Now, turning to our Bitcoin strategy, Q4 was the most successful quarter of adding Bitcoin on our balance sheet since the adoption of our Bitcoin strategic reserve. We acquired 218,887 Bitcoins from the beginning of the fourth quarter till now for approximately $20.5 billion at an average price of $93,600 per Bitcoin. As of January 24th, the company held a total of 471,107 Bitcoins acquired for an aggregate cost of $30.4 billion, or approximately $64,511 per Bitcoin. Strategy has added Bitcoin to our balance sheet in every single quarter since August 2020, across 50-plus announcements, and 100% of our Bitcoin holdings remain fully unencumbered. As of February 2nd, 2025, the market value of our Bitcoin holdings was $41.4 $46.1 billion, purchased at an aggregate cost of $30.4 billion, and an average Bitcoin purchase price of $64,511. Beginning with our Q1 2025 reported results, we will reflect the impact of the new FASB fair value accounting rule for our Bitcoin holdings as part of net income. As a result of the change in accounting rule on January 1st, 2025, we recognized a positive cumulative adjustment to the opening balance of our retained earnings of approximately $12.7 billion, which was in large part due to the significant difference between the higher market value of our Bitcoin compared to the carrying value of the Bitcoin on our balance sheet as of December 31st. We will remeasure the fair value of our Bitcoin holdings on the last day of the first quarter, and any difference in the price of Bitcoin at the end of the first quarter compared to the ending price on December 31st will be recognized as income or loss as part of our GAAP report in net income. Since establishing the record $21 billion common equity ATM program on October 30th of last year, which was in fact the largest in capital markets history, we have issued new shares swiftly yet extremely prudently while adapting to the strong market conditions. This chart illustrates the weekly breakdown for the average daily shares issued via our ATM compared to the overall average daily trading volume for each of those weeks. You'll note that while we have sold $16.7 billion of common equity since announcing our new ATM program, that activity accounted for only a very modest 2.9% of the total average daily trading volume of MSTR for the entire period. We continuously monitor Bitcoin price, MSTR share price, as well as overall trading volumes in a programmatic and disciplined manner to sell shares through our ATM and execute sales in a manner we believe that does not impact the overall market price of MSGR. Now, turning to our treasury operations, we had one of our most impactful quarters from a capital markets execution perspective. In Q4, we issued a new $3 billion convertible note in November, which was upsized and well-received by the market. The notes, due December 2029, had a 0% coupon and 55% conversion premium, reflecting a conversion price of approximately $670 per share. As in the past, the net proceeds from the new convert were used to acquire additional Bitcoin. In Q1, we called for the redemption of our $1.05 billion 2027 convertible notes. As the notes were substantially in the money, we expect most holders will elect to convert their notes into shares of our Class A common stock on or prior to the redemption date. We believe this creates capacity for additional intelligent leverage for our balance sheet in the form of new fixed income instruments. After the redemption of our 2027 convertible nodes, our nearest debt maturity is now more than three years away and not until late 2028. And the remainder of our scheduled debt maturities are evenly spread over several years out to 2032 with a weighted average scheduled debt maturity of approximately five years. Under our current capital structure, we now have $6.2 billion of unsecured convertible debt outstanding with a blended interest rate of approximately 0.56%, with staggered stated maturities beginning in December of 2028 through June 2032. Last quarter, we filed a $21 billion equity at the market program, which was the single largest ATM program ever filed in the U.S., As of February 2nd, we issued $16.7 billion of common equity under this program, and approximately $4.3 billion of capacity remains available under the shelf. This slide outlines the key terms of Strike, our newly issued perpetual convertible preferred stock. We successfully raised $584 million in gross proceeds through the issuance of 7.3 million shares at an offering price of $80 per share. We expect that the security will be listed on NASDAQ under the ticker STRK beginning on February 6th. Looking ahead, we have the flexibility to explore an ATM shelf registration for issuing additional strike shares, similar to our common stock ATM program. Strike represents the next step in the evolution of our capital structure, expanding the range of investment opportunities for investors with varying risk profiles. And it complements our equity and existing convertible bonds, offering exposure to Bitcoin through MSTR with lower volatility and leverage. We continue to maintain significant debt coverage with $47 billion in Bitcoin holdings against just $3 billion in out-of-the-money convertible debt, or approximately 15 times coverage. We have been asked how we evaluate our leverage targets. We measure leverage risk not against our Bitcoin cost basis, but rather our debt coverage ratio, which remains exceptionally strong. Our current leverage ratio remains below our long-term target range of 20% to 30%, which we provide capacity to expand our capital structure prudently and based on market conditions. In 2025, our focus will be on opportunities to raise additional fixed income securities while preserving flexibility to raise equity and maintaining a healthy debt coverage ratio. Similarly, we believe we have substantial coverage to meet the dividend obligations for our strike shareholders. The 8% fixed dividend on 7.3 million strike shares results in an annual cash need of approximately $58 million. Even if netting out the $3 billion in out-of-the-money converts, our Bitcoin holdings leaves us with $44 billion of coverage, more than enough to cover strike dividends if needed. This slide illustrates our approach to intelligent leverage and the mechanisms available to increase or decrease it. Our outstanding debt and preferred stock together account for approximately 8% of our market cap and approximately 15% of our Bitcoin asset value. Currently, we are below our long-term leverage target of 20 to 30%, and we believe we have capacity to lever up by issuing new convertible debt or fixed income securities. Conversely, deleveraging can occur through debt repayment or conversion to equity, issuing common equity, as well as if Bitcoin price appreciates, which naturally lowers leverage as the market value of our holdings increase. Our leverage ratio declined in Q4 2024 and quartered to date in Q1 2025 due to the combination of these deleveraging factors. As we strategically increase our leverage ratio in 2025, we expect enhanced benefits for common shareholders through a higher BTC yield and elevated volatility, both of which drive long-term value. Today, we are introducing two new KPIs, BTC gain and BTC dollar gain. BTC gain is defined as the number of Bitcoins held by the company at the beginning of a period multiplied by the BTC yield for the same period. This metric quantifies in Bitcoin terms our BTC yield for the quarter. For the full year 2024, our BTC gain was 140,538 Bitcoins. calculated by multiplying the 74.3% BTC yield to our starting balance of 189,150 Bitcoin. Taking the year-end Bitcoin price of 93,400, our BTC dollar gain for 2024 would be calculated as $13.1 billion. It is worth noting that the BTC gain and BTC dollar gain metrics are not gains in the traditional financial context. They're also not measures of return on investment or measures of income generated by our treasury operations or Bitcoin holdings. And BTC dollar gain does not represent the fair value gain on our Bitcoin holdings. Our BTC yield in 2024 of 74.3% surpassed the annual BTC yield in all of the previous years, as well as our initial target of 6% to 10% this year. We can't predict the price of Bitcoin, nor can we predict broader equity and debt capital market conditions. However, we are confident that our Bitcoin treasury strategy will continue to generate value and are revising our targets for 2025 to achieve a minimum of 15% BTC yield and a $10 billion BTC dollar gain for 2025. We will continue to consider the full spectrum of financing options and explore creative capital markets, transactions, and untapped pools of capital to execute this strategy effectively and prudently. We plan to remain disciplined in the use of both the ATM and other capital-raising alternatives, doing so in a way to achieve our BTC yield and BTC dollar gain targets. Thank you again for your time today and for your continued support of strategy. I'll now turn the call over to Michael for his remarks.