Strategy Inc

Hello everyone and good evening. I am Shireen Jajodia, Corporate Treasurer and Head of Investor Relations at Strategy. I'll be your moderator for Strategy's 2025 Second Quarter Earnings Webinar. Today marks a historic day for Strategy and all our investors. We believe this deserves an exciting brand new format of our earnings call in line with our mission to digitally transform investor relations and be the most transparent company in the world. We will start the call with 60-minute presentation. Approximately this time, we have shuffled the order of the presenters. Andrew Kang will begin first, followed by Michael Saylor and then Fong Lee. This will be followed by a 30-minute interactive Q&A session with our four Wall Street equity analysts and four Bitcoin analysts. Before we proceed, I will read the Safe Harbor statement. Some of the information we provide in this presentation regarding our future expectations, plans, guidance, and prospects may constitute forward-looking statements, including without limitation our guidance with respect to 2025 operating income, net income, earnings per share, BTC yield, and BTC dollar gain, and the hypothetical valuation models contained in this presentation. Actual results may differ materially from these forward-looking statements due to various important factors including the risk factors discussed in our most recent quarterly report on Form 10Q filed with the SEC on May 5, 2025, and our current report on Form 8K filed with the SEC on July 7, 2025. And in the case of our guidance with respect to 2025 operating income, net income, earnings per share, BTC yield and BTC dollar gain, and the hypothetical valuation models contained in this presentation, each of which is based on assumed Bitcoin price at the end of the year, the risk that the price of Bitcoin as of such date may be substantially different than assumed target price, this could cause our actual results to vary substantially from such guidance and the hypothetical values generated by such models. So, we assume no obligation to update these forward-looking statements which speak only as of today. Also in this presentation, we refer to certain non-GAAP financial measures. Reconciliations are available in our earnings release and the appendix of this presentation, which was issued today and available on our website. With that, I will turn the call over to Andrew Kang, CFO of Strategy.

Thank you, Suresh. And I'd like to welcome everyone to today's webinar, and thank you for joining but I think will be one of the most important quarterly earnings calls in the history of our company. I'll start with some key highlights from Q2 and year to date. Through July 29th, our Bitcoin holdings were 628,791, which now accounts for 3% of all Bitcoin ever to be in existence and positions us as the most dominant player in the Bitcoin treasury company space. Our market cap has eclipsed over $112 billion, making Strategy the 96th largest public company in the U.S. And as part of our expanding and innovative capital markets plan this year, so far we've launched four listed preferred equity offerings, STRF, STRK, STRD, and STRC, with STRC representing the largest IPO in the U.S. so far this year. And finally, we raised an impressive $18.3 billion in capital year-to-date, which already accounts for 81% of the total capital we raised in all of last year combined. And we accomplished that in just seven months. So in addition to expanding the depth of Bitcoin-backed credit instruments to the market, we are raising capital more quickly and more efficiently than we have ever before. Now moving on to our EPS results. Q2.25 stands out as a transformational quarter for strategy driven by two major factors, the substantial appreciation in Bitcoin price between the end of Q1 and Q2 in conjunction with the adoption of FASB's fair value accounting rule at the beginning of this year. We achieved a record $14 billion in GAAP operating income and $10 billion in net income, reflecting a fully diluted EPS of $32.60 per share for the quarter. the highest in the company's history and what may be among the highest of all S&P 500 companies this quarter. Our results for the first half reflect $8.1 billion in GAAP operating income, $5.7 billion in net income, and an EPS of $19.43 per share, also a record high for the company. This sets us up for continued momentum through the remaining second half of the year. Here, we introduce an important metric, Bitcoin per share or BPS. This measures the accretion of Bitcoin on a per share basis by calculating the ratio between the company's Bitcoin holdings and its assumed diluted shares outstanding. We are presenting Bitcoin per share using Satoshis where 100 million Satoshis equal one Bitcoin. In 2021, we achieved a Bitcoin per share of 26,752. The trend in 22 and 23 reflected the then market conditions. However, in 24, we saw a massive increase in our Bitcoin per share of 67,730 on the strong price performance of Bitcoin. This year, the positive performance continues with a year-to-date Bitcoin per share of 39,716 as of July 31st, close to 60% of what we achieved last year, with much of the second half remaining for further execution. In short, our BPS performance shows how Bitcoin Treasury model is consistently accumulating more Bitcoin per share, the highest of any Bitcoin Treasury company, directly and measurably increasing value for our shareholders. Beginning in 2020 and over the last four and a half years, we have increased our cumulative Bitcoin per share to 198,543 as of the end of July, and the positive growth around BTC yield across those same years has consistently contributed to our Bitcoin per share outperformance. We have now achieved a BTC yield of 25% year-to-date, meeting our initial full-year target in the first seven months of the year. Our BTC gain year-to-date is 111,894 Bitcoin, fueled by a strong Q1 and Q2 through the IPOs of our credit instruments, as well as through disciplined activation of our common stock ATM. In terms of BTC dollar gain, our treasury operations have generated $13.2 billion so far this year, closing in on our initial $15 billion full-year target. Overall, these results reflect the real incremental value from our ability to strategically manage and maximize our treasury operations, showing strong momentum into the second half and supporting the increase in our full-year targets that Pham will detail later in the call. Moving on to our balance sheet. We have added Bitcoin to our balance sheet in every single quarter since August 2020, and 100% of our Bitcoin remain fully unencumbered. We now hold over $74 billion of Bitcoin, which was purchased at a cost of $46 billion, or just over $73,000 per Bitcoin. Our attractive low-cost basis reflects the benefit of starting our acquisitions over four and a half years ago, which makes us the most committed and consistent corporate holder of Bitcoin in the world. This slide highlights the increase in the value of our digital assets following the adoption of FASB's Fair Value Accounting Standard on January 1, 2025. Under fair value accounting, as of January 1st, we recorded a one-time adjustment of $17.9 billion of our Bitcoin balance sheet and an offsetting $5.1 billion deferred tax liability, which increased our total stockholders' equity by $12.7 billion. As of June 30th, the value of our total digital assets have grown to over $64 billion with a deferred tax liability of $5.9 billion. With our current long-term debt and added preferred equity, our total stockholders' equity stands at $47.5 billion. The change in accounting to fair value now better reflects our Bitcoin market value, improves balance sheet transparency, while driving significant growth in shareholder equity. At the end of Q1, under the new FASB fair value accounting rules, and due to the change in the price of Bitcoin between January 1st and March 31st, we reported a Q1 unrealized loss of $5.9 billion. However, in Q2, we recognized a dramatic increase in the fair value of our Bitcoin holdings due to the increase of an additional $6.8 billion of Bitcoin to our balance sheet, along with a dramatic Bitcoin price increase between the first and last day of the quarter, which drove the $14 billion unrealized fair value gain for Q2. Quarter to date, we have further increased the total fair value of our Bitcoin holdings to over $74 billion, having added $3.7 billion through capital markets proceeds and also through the change in Bitcoin price since the end of Q3. At current prices, we sit on approximately $6.2 billion in fair value gains so far this quarter, which will be finalized on the last day of Q3. Here we show $8.2 billion in total notional debt across our convertible instruments with a market value of over $12.3 billion. All but two of the converts are in the money with a total weighted average maturity of 4.7 years, giving us flexibility to manage our long-term obligations. The earliest of the embedded call dates begin in December 2026, and we plan to be strategic in managing our outstanding convert complex. Our current preferred equity outstandings are $6.3 billion, all of which are perpetual and provide stable and long-term capital matched to our long-term strategic asset, Bitcoin. The combination of our large Bitcoin holdings and sizable equity base ensures that both our debt and preferred securities are backed by robust assets and are well-fortified. Our $74 billion in Bitcoin holdings provides $60 billion in surplus balance against the $8 billion in convertible debt and preferred equity obligations. And our $126 billion of enterprise value consists of $112 billion in equity on top of our debt and preferred stock. Our total annualized interest and dividend obligations today stand at $614 million, which consists of $35 million in interest expense on our converts, or about 42 basis points weighted average cost. We have $459 million in dividend obligations against our cumulative preferreds, STRF, C, and K, and an additional $120 million related to our non-cumulative preferred stock, STRC. Here we show that we have more than sufficient access to liquidity to manage our total annual interest and dividend obligations through our proven track record of capital raising activities. Our total annual obligations represent a mere 1.6% of total capital raised in the last 12 months and only 2.3% of total common equity raised in the last 12 months. There's also ample daily market liquidity to more than satisfy our annual obligations based on the current average daily trading volumes of our common stock. With $74 billion in Bitcoin holdings, we are 15 times over collateralized against our current $5 billion in out of the money converts. Our Fortress Bitcoin balance sheet provides significant cushion to manage these maturities if needed. And after converting And after covering our out-of-the-money converts, our Bitcoin holdings at current prices are enough to cover approximately 120 years of our annual preferred dividend needs. So with that, I will now turn it over to Michael for an update on Bitcoin, our financial products, as well as our BTC credit model.

Thank you, Andrew. And I want to thank everybody for being with me today. So I thought I'd start with a macro overview of the Bitcoin universe. And the first thing that I'll note is we have a very supportive White House. And that started with the establishment of the Bitcoin Strategic Reserve. But it continues across the board. Next. As you can see, we have 12 cabinet members in this administration that are all pro-Bitcoin. A year ago, we had one cabinet member who was neutral and 11 that were indifferent or uninterested and certainly not supportive. So this is a major change in the political landscape. Yesterday, the White House released a crypto policy report. It's about 150 pages long. I did a scan. I'm sure some of you have done a scan. The takeaway is that this administration is going to be very enthusiastic in its support of the entire crypto industry and the Bitcoin ecosystem. And in particular... Some of the things they're doing include work in the area of taxation to cure unfair tax treatments of digital assets. And that includes relief for de minimis digital asset transfers like de minimis Bitcoin payments. And it also includes guidance that digital assets should not be included when calculating CAMT unrealized capital gains taxes or when calculating CAMT minimum taxes. And so we have the support of the administration on this, and that was made very precise in writing just yesterday, and this is a excerpt of it. I think this is just very positive for the entire crypto industry and very positive for Bitcoin and of course it's very positive for the hundreds of companies that are starting to put crypto assets on their balance sheet. Wall Street's embraced Bitcoin. We've now got, you know, 80 ETFs launched, $170 billion of value flowing into these ETFs. These continue to pick up steam and they're growing more powerful day by day. Public companies are capitalizing on Bitcoin. This is an extraordinary move. And of course, we're seeing these every day. There's a new announcement, whether it's coming from a pure Bitcoin company or whether it's coming from a hybrid or just a random new entrance. But we've now got 950,000 Bitcoin that have been acquired by 160 different listed companies. And we look at the trend. We were the first in 2020. There were two at the end of the year. Then there were 33, 39, 43. There were 64 last year. And, of course, as you look at this trend right now, 160 when we're not even to the end of 2025 is extraordinary. So we're in a hyper growth or hyper adoption phase for Bitcoin as a Treasury Reserve asset. Companies are racing to get into the Bitcoin 100. You can see there's even competition to track the Bitcoin 100 right now. And generally any given week, there are 20 or more companies that are acquiring more Bitcoin. Just a few minutes ago, Coinbase announced that they acquired more Bitcoin this quarter, thousands of Bitcoin. So I see very positive trends here. And each of these companies could, in theory, acquire just as much Bitcoin or attempt to acquire just as much Bitcoin in a dollar value as we have acquired. Obviously, they won't get 3% of the Bitcoin supply. But you can imagine what happens when 100 companies are all competing to acquire as much Bitcoin as possible. The analysts are all starting to cover and track Bitcoin, and they have outlooks for Bitcoin. So if you're going to cover the 160 companies that have Bitcoin on their balance sheet, you're going to have to form an opinion about Bitcoin. And so you can see that the average end-of-the-year price forecast of an equity analyst covering MSTR is $168,000. And so keep that in mind, $168,000 by the end of the year. That's the consensus of the analyst community that tracks our stock right now. Technology investors are looking for the next great thing. And everybody, the consensus trade is AI. Everybody knows AI is the next thing. But now they're starting to realize that Bitcoin is also the next thing. And it's being lumped as a technology transformation and a digital disruption. This is really positive because this is going to draw lots of magnificent seven investors into our space. Financial regulators are embracing Bitcoin. You see a new positive Bitcoin announcement just about every other day now from all parts of the government. Just a few days ago, the SEC released a memo allowing an in-kind creation and redemption of Bitcoin ETFs. This is a huge deal. This is going to accelerate the development of the industry. They also loosened restrictions on options trading of Bitcoin ETFs. Paul Atkins just released, gave a speech and made a number of comments about the digital assets industry. It's clear that he's very supportive of innovation, very supportive of the crypto economy, very supportive of your right to self-custody. And this is a welcome development from the SEC. Another welcome development is the guidance that came from William Pulte to Fannie Mae and Freddie Mac, where he said they should prepare their businesses to count cryptocurrency as an asset in the mortgage. This is going to accelerate the institutional adoption of Bitcoin as collateral in the banking industry. There could be no more legitimate driver of the collateralization of credit with Bitcoin than the U.S. Federal Housing Authority. Capitol Hill is embracing Bitcoin. There are three bills. One of them, the Genius Act, has already been passed. Clarity is coming in September and the Bitcoin Act allows for the government to acquire a million Bitcoin. These are picking up momentum. This is a positive development. U.S. states are also embracing Bitcoin. We've now got three strategic Bitcoin reserves, including one in Texas just recently that was funded with $10 million. So this is a trend that's growing. International governments are enthusiastic about Bitcoin, and we're seeing this everywhere in the world with politicians in Ireland, in the UK, in Pakistan, in UAE, in Ukraine, etc. All of them making pro-Bitcoin moves. The crypto industry has coalesced around Bitcoin. There used to be some conflict two, three years ago. I think the previous administration played the crypto industry against the Bitcoin industry. And now they've come together. And it's pretty clear that Bitcoin is viewed as the foundation of the entire crypto economy. And we see that as really, really constructive for the growth of the entire industry. Now I'd like to talk about our financial products and our business. As you can see here on this slide, our company's strategy sits between the crypto economy and the traditional finance economy. So the primary asset in the foundation of the crypto economy is Bitcoin, which is worth $2.3 trillion. And when I think about the crypto economy, I think about every country on Earth and every capitalist on Earth 24-7, 365. acting rationally in whatever their economic interest is. That's being manifested on Saturday night, and that's creating extraordinary performance and extraordinary demand for the underlying collateral, which is BTC. However, most of the world is unable to access the crypto economy. And so what we're doing is refining and we're harnessing the power of the Bitcoin asset. And we're able to actually refine it into low volatility, low leverage, less risky financial products. And then higher volatility, higher leverage financial products. So just like you might refine a barrel of crude oil into kerosene, which would be very, very pure, and asphalt, which is not so much. We are we're basically providing a function that, say, an ETF cannot provide. You can see I bet the most famous example here in this chart. It basically wraps Bitcoin and it serves up a security flavor of raw Bitcoin to the investment community. We, on the other hand. are offering stepped-down elements, convertible bonds, convertible preferred stock, senior fixed stock, junior high-yield preferred stock, and, of course, this treasury preferred stock in the form of stretch. We're offering those, and those, in essence, we're stripping and modifying the duration of the asset. And we're also stepping down the volatility of the asset, and we're actually extracting the yield from the asset, which is Bitcoin, and we're serving it to each of these fixed income investors. But the excess yield, excess volatility, excess performance that does not go in those fixed income instruments goes into the MSTR common stock. And then, of course, that feeds to the MSTR-based ETFs and the MSTR options. So all of these are different instruments. They're all targeted at a different type of investor. Some of them offer yield, some of them offer return. So let's delve into them a little bit closer. First, Strike, SDRK. Strike is structured Bitcoin. So some people, they don't want high return Bitcoin. What they want is something with less downside, less risk, less volatility, more certainty. So how do I actually keep the growth? but get some yield certainty, strip some of the risk. And the way to do it is with a convertible preferred stock. If we look at the spec sheet here, what you can see is that, in essence, at $100, a share of Strike offers about $40 worth of equity. So it's like at that level, it's a 40 delta, 35 to 40 delta instrument. So you're getting partial upside on MSTR. You're getting a guaranteed 8% dividend, and you're getting a liquidation preference and seniority in the capital structure. So less volatility. Less downside, you know, articulated yield, you know, that you can count on, but you can still keep some of the growth. What's the market universe for that product? Well, you have growth investors, right? The S&P 500, they've got 9% year-to-date performance, and they've got 1.3% yield. while strike is 7.5% yield effectively, and it's 34% year-to-date performance. So maybe the S&P index buyer, maybe a NASDAQ 100 index buyer. Between the two of them, there's about $55 trillion in that bucket. Then you've got commercial real estate, people that want some yield, but they also want some growth over time. That's another very large bucket. $30 trillion. Then you have hedge funds that give you downside protection. They may or may not give you performance. Oftentimes they don't outperform the S&P. but they purport to be hedges, and people like the idea of some structured investment, and that's what hedge funds do. And then another target audience is Bitcoin investors, maybe someone that doesn't want 55 vol, 55% performance. What they want is they want some guaranteed yield, some downside protection, but they still want to keep some of the upside of Bitcoin. And then that also goes for spot ETFs of Bitcoin. So you can see they're all different pools of capital. The idea of Strike is kind of simple. What if I could have most of the upside of Bitcoin, not so much of the downside, and a guaranteed dividend while I'm waiting? And that's very compelling for a lot of people. The second product in our portfolio is Strife. Strife is long-duration senior credit. It's for income-focused investors. They want a premium yield, but they also want seniority and enhanced payment protection. So here's the term sheet. It's the most senior thing in our capital structure. It's 8X over collateralized, you know, as of the date of the term sheet. It's got an 8.7% yield. There are a lot of investor protections. You know, the dividends are cumulative. If we miss a dividend, there's an escalating penalty provision. And so if you're looking for the most senior form of long-duration preferred dividend, this would be it. And, of course, what's the target audience, the target market? Well, there's a $40 trillion capital market here, long-term treasuries, agencies, mortgage-backed securities, investment-grade corporate bonds, municipal bonds. And you can see strife is yielding double. You know, basically it's giving you 8.7% as opposed to a 4 or 5. Third product is stride, long-duration high-yield credit. Okay, so if you're looking for the maximum high yield and you want a long commitment, this is it. And you can see it's more junior in the capital structure, but it's still got a BTC rating of 5.1. Five over collateralization is more than any investment-grade bond we could find in the market. And it's more than mortgage-backed securities. It's more than junk. It's more than private credit. So actually it's, you know, five times over collateralized is more than just about anything else we would be competing with. But the effective yield is 11.9%. So we've structured this so that it will always have a higher yield than strife. And for those that understand Bitcoin and want the high yield and they want it for a long period of time, this is how you get it. So what's the addressable market? About $2 trillion of high-yield corporate bonds, closed-end funds, preferred stock ETFs, emerging market debt. And you can see, even though we're pretty well way over collateralized versus this other stuff, we're actually also paying a higher yield, right? It's just a better instrument if that's what you're looking for. And then we've got stretch. Our latest IPO, short-duration high-yield credit, what I call strong credit. It's for short-duration investors, and that means they want to take one month of interest rate risk, not 10 years, not 20 years, just a month of interest rate risk. And they're seeking a stable value, but they want higher yield in a money market. And so we designed that for them. You know, it's got a higher BTC rating than strike or stride because it comes senior in the capital structure, like 6x over collateralized. It's got an effective yield right now of 9.5%. It pays 9% at par. And who is it targeted at? Well, there's $18 trillion of bank accounts that yield 0 or 0.1 to 4% interest. There's $7.4 trillion in money markets that yield 4.2% interest. There's short-term treasuries. There's corporate commercial paper. What you see is that for the most part, all of the short-duration credit is going to be close to SOFR. It's going to be about 420 basis points or less. And you won't really see a lot more than that. We're offering 950 basis points right now. And, of course, at par, it would be 9%. And so you can see the idea of this is a high-yield savings account that just pays twice your normal savings account. if you understand and if you believe in Bitcoin. The other appeal of this is there's just a lot of people that do believe in Bitcoin, but they need money for the next 30 days or 90 days or six months or a year or two years. If you're running a crypto company or a Bitcoin company, and you've got a treasury, maybe you're going to put 20%, 30% of your treasury into cash because you need it to make payroll or do something six months out. You would want a stable instrument. But if you could find some Bitcoin-backed money market type thing, credit instrument that yielded double what you would get from a normal money market, this might be interesting to you. This, of course, is also interesting because it's monthly and because it's monthly and it's variable with, you know, engineered to be stable. You know, it's the sort of instrument that's interesting for individuals. It's interesting for retirees. It's interesting for a whole class of people that, you know, if you go down the street and you ask 100 people, would you like a one-month instrument that actually pays you 500 basis points more than SOFR? or a savings account that pays 9.5%, they would generally say yes. But if you ask them, would you like a 30-year bond or a 20-year bond that pays 9.5%, They might stop and think about it. Like when I ran our corporate treasury, I never wanted to invest in anything with a duration of more than six months. So there are a lot of people with a lot of money. They don't want to take interest rate risk. They don't want a 10-year corporate bond or a 20-year bond. What they want is a savings account that gives them double what they can get from their bank. And we power that kind of credit with Bitcoin. So here you can see how these things stack up. We have purposely engineered MSTR to be the most volatile security in our portfolio and engineered Stretch to be the least volatile thing in our portfolio. And strike is just after MSTR because it's got that, you know, 40% conversion rate. And then strife and stride are sort of in the middle. And we can go to the next slide. What we're doing here is we're building out a yield curve for BTC credit. And so what you can see here is that Stretch looks like a one-month instrument. It's way pegged to the left. It's like a one-month T-bill. Stride has a Macaulay duration of about 8 to 9, Strife more like almost 11, and Stride getting closer to 14. Now, those instruments like Strife and Stride and Strike, they're perpetual. So as the credit of the company improves, as Bitcoin increases in price, as the BTC ratings go up, it's not unlikely that those durations will keep stretching, right? At some point, if someone thinks that Strife should be yielding 5%, the duration will stretch 20 years. And so they're going to stretch out on a duration curve, and that's a function of credit spreads and SOFR and Bitcoin. Stretch, on the other hand, will always be pegged at one month. And then what's the opportunity? The opportunity is between one year and ten years. So we're in a position to issue a perpetual preferred instrument that's a one-year credit instrument or three-year or five-year or seven-year or ten-year instrument. And it would be based on stretch, the stretch rate, and it would be precisely exactly seven years rolling forward one month, just clicking forward. So it would always be seven years out or it would always be 36 months out. And what's the alternative for that? Well, there's $30 trillion of medium duration corporate credit, right, you know, out there. So $30 trillion capital, that's the opportunity. And that means we're in a position to build a perpetual yield curve one month, one year, three years, five years, seven years, 10 years, and then perpetual going out 15 to 20 years or longer. And what you'll also notice from this chart is that at all parts on this duration curve, we've got higher yield, right? So we're offering higher yield on the short end of the curve, we're offering higher yield in the middle, and we're offering higher yield on the end. That means our credit is stronger, right? Longer duration, higher yield. What you can see here is that we've also created much stronger credit from a liquidity point of view. Stride, strife, and strike they're somewhere between 50 and 100 times as liquid as the typical preferred stock and that's extraordinary right when you're trading 30 to 50 million a day and the typical preferred stocks trading 400 000 a day right um that's amazing but now if you look at stretch stretches up in the hundreds of millions of dollars a day it traded uh quite extraordinary amount of volume today and yesterday And so we we believe we've created a breakthrough instrument by combining by by creating a perpetual preferred by not including calls and by not crippling the instruments. We created extraordinary new instruments with stride, strike, strife and and with stretch instruments. When we made a variable instrument, we did something no one's ever done. As far as we can see, no one's ever issued a truly variable monthly dividend preferred stock. the floaters that you've heard of they have a fixed credit spread and they float on sofa and the others are fixed we actually created a variable credit spread monthly stock and we did it with ai in fact all four of these instruments we did with ai right the real key to the outperformance of them is we use digital intelligence and we built them with digital capital and we're the first company that ever was ever able to create a new digital security with digital intelligence based on digital capital. And that means that, yeah, they're going to have superior yield and they're going to have superior liquidity. They're also, they have superior collateral. They're over collateralized. And you can see here, The worst thing in our portfolio is a 5x collateralization. Well, that's better than the best thing in most other credit portfolios. You won't find very many credit instruments that are 5x over collateralized. And, of course, you can see ours range from 5 to 9. And this is a big advantage we have as well. And then if we look at the overall market we're competing against here, ETFs, and you can see, You've got net assets that are in the many, many billions, but the yield handles are 6 to 7, and we're offering 7, 9, 12, 10. And, of course, we don't charge any fees. We have higher liquidity. And right now you can see we have longer durations if you want duration and shorter duration if you want that. And then we've got that opportunity in the middle. Here's another universe of comparable assets. And what you can see here is that some things have liquidity, but they're under collateralized like mortgage backed securities, you know, and investment grade bonds and junk and preferreds. They're all they're all collateralized less than two and a half to one. And some don't have much liquidity, like junk bonds and preferreds. And what we've got is a nice combination of high collateral, long duration, high yield, large liquidity. So that takes us to MSTR. What is MSTR? It's amplified Bitcoin, right? If you want more Bitcoin, if you want 2x Bitcoin or 3x or 4x the return and 4x the volatility of Bitcoin, you need a Bitcoin-backed equity. And we're aiming this for Magnificent Seven investors. They believe in a digital transformation of capital, right? We aim to be the Amazon of capital markets, right, completely disrupt the business model. And you can see it in our metrics where, you know, we're running 101% annualized performance five years in a row, right? In nine and ten days, it'll be five years. So doubling every year for five years, it's hard to say that's a fluke. You know, and here's another illustration of amplified Bitcoin. You can see, you know, bonds are underperforming. Real estate is a 6 percenter. Gold is a 10 percenter. The S&P is the cost of capital, 14 percent. The MAG7 doubles that. Bitcoin doubles that. We double Bitcoin. Right. And you can see in the last year, it's the same exact thing. Right. Even more so. So I want to explain how we amplify Bitcoin. Okay, so we start with 199,000 Satoshis a share. And if we have no leverage, if we have no credit strategy, if we couldn't issue credit, then 10 years from now, we've got 199,000 Satoshis a share. That's like an ETF. That's a BTC factor of one. But if we issue preferred that's equal to 10% of our Bitcoin assets, that's 10% leverage, it turns out that we have 267,000 Satoshis a share at the end of the period because we're not diluting the common stock as rapidly as we're building the Bitcoin. And if we go to 20% leverage, you see you end up with 376,000 Satoshis a share. And now let's go to 30% leverage. So you can see at 30% leverage, we would have 555,000 Satoshis per share. The green bars you see, that is the work that the treasury operation is doing. When people wonder what's the value added of a Bitcoin treasury company, it's the ability to create the green bar over the orange bar. And that's a 2.8 BTC factor. That means that What does it mean? It means, in essence, you would think that the floor for MNAV for a company that's got this sort of performance is 2.8, right? It's not the MNAV, but it's at least the floor. The MNAV of the company should be higher than 2.8. Now let's delve a little bit deeper into this idea. So I'm going to show you what happens as you increase the leverage in a Bitcoin treasury company like ours. You see, if we have 30% leverage and a Bitcoin appreciates at 30% ARR over the time period, you end up with an amplification of 2.8. You're getting 2.8 the Bitcoin performance, probably 2.8 the Bitcoin volatility, right? And you can see here, as Bitcoin grows faster, the amplification increases. If we hold the leverage constant, the Bitcoin grows at 50%, you're a 4.7 lever. And you can also see that if you hold the growth rate of Bitcoin constant but increase the leverage, like we're growing Bitcoin at 30% a year, but we go to 50% leverage, now we're 7.8 amplified, a BTC factor of nearly 8. You're getting 8 times the performance of Bitcoin. In the extreme... If you go to 50% leverage and Bitcoin goes on a tear and grows 50% a year, you're getting 22x performance on the equity versus just holding the ETF. Let's take a different slice of this. If I have Bitcoin growing at 30% a year and my credit improves or the interest rates fall, if SOFR falls to 100 basis points and we're able to reduce our interest, reduce our dividend rate from 10 to 6% You can see the amplification goes from 2.6 to 3. And you can see that, you know, as the credit improves of the company, the amplification increases. And then if we consider the next slide. When you actually combine leverage with credit, if you actually get the 50% leverage and the interest rates fall to 5%, or if your credit spreads compress to 5%, this equity is providing 9.9 times Bitcoin. So the BTC factor goes almost to 10%. And so you can see that the blue zone is where you're 2 to 4x Bitcoin, and the green zone is just 4 to 20x. It's screaming. So what is the universe of assets that would be interested in MSTR? Well, it's the S&P 500. It's NASDAQ. It's the MAG7 investors. It's Bitcoin investors. And as you can see, MSTR is outperforming all of those competitors right now. And so if what you want is the Amazon of digital capital, then that's strategy. Now, the question in your mind is, can you actually go to 30% leverage or 40% or 50% leverage? So let's look at the credit model. So here we go. This is the existing capital structure, assuming the 40 vol and assuming zero percent Bitcoin return. So this is a skeptical outlook for Bitcoin. It's going up zero percent forever and it's going to stay volatile. And what this shows you is that. is that the theoretical credit spread for all of the convertible bonds is investment grade, right? And the credit of the preferreds looks to be mezzanine with a slight high yield one. Now, you can see there are spread premiums across the board here. So even if you're a skeptic and you think Bitcoin's going to zero or going up zero forever and it's volatile, you've still got massive spread premiums. These are all underpriced by the market. The risk is misunderstood. Next. So here, you see what happens if the volatility comes from 40 to 35, and all of a sudden, all of the preferreds become mezzanine quality, and the risk just drops away from the bonds. We go to 30. At 30 ball, you see you've pretty much stripped all the risk off the bonds, and you've even got investment grade credit at the strife level, even assuming a skeptical view of the outlook of Bitcoin. Now, let's assume you're not a skeptic. What if you think Bitcoin's as good as the S&P? If Bitcoin goes up 10% a year, even if it stays volatile at 40 vol, every one of these instruments is investment grade or investment grade equivalent, you know, by our BTC model. And if you think that Bitcoin's going up 20% a year. you can see the risk just drops away and now you've got credit spreads zero basis points 5, 8, 9, 14 basis points. So you can see anybody in the world running fixed income that wants fixed income that has a positive view toward Bitcoin looking at this model will see that these are all really compelling instruments. Now what happens if you're a maximalist? If you're a maximalist you can see the BTC risk drops to basis points, the credit spreads go to nothing. You know, the spread premiums blow out. And is the world got a lot of maximalists? Yeah, there's a lot of people that believe in Bitcoin. They're running fixed income funds and they have treasuries. Or how about people that run Bitcoin companies that have treasuries? So just because you believe Bitcoin is going to go up forever, it doesn't mean that you can put 100 percent of your corporate treasury in it for the next four weeks. So we've got a solution to people that are Bitcoin believers, which is pretty compelling right now. Now we've done a pro forma. What happens if we actually equitize all the convertible bonds? So we convert all the convertible bonds to equity, and now we've just got $6 billion of preferred equity. This isn't liability. It's never coming due. We're never paying back the $6.3 billion. So it's equity as opposed to debt. And yet it's the best form of leverage, right? It's all of the benefits, all the benefits of debt leverage, but none of the liabilities of debt leverage. So we get the leverage of $6 billion in preferreds. You can see the BTC rating of these things goes through the roof. Strike goes to $70. Stretch goes to $20. Strike goes to $15. Stride goes to $12. The BTC risk falls to single, double digits. Three of the four are investment-grade credit. One of them is an extremely high-quality mezzanine credit. And that is assuming, as you can see, that you're a skeptic and you think Bitcoin is not going to appreciate a single dollar forever. And it's going to stay volatile. Now, let's look at... Another model. What if you're an investor or a trader in this case? You think Bitcoin's going up 10% a year? Now you can see all these instruments are investment grade, like good high quality investment grade, 0 to 15 or 0 to 17 basis points. Now let's do another model. What if we actually went to 30% leverage? What if we issued another like 15, actually 16 to 17, call it 16 to $17 billion worth of preferreds, and we have $22 billion of preferred outstanding against $75 billion in Bitcoin. Well, now you're looking at an overall BTC rating of 3.3, a leverage of 30%. And even if Bitcoin is volatile, you can see that Strife and Stretch are both investment grade. And Strike and Stride are pretty high quality, pretty decent quality mezzanine grade, even with high volatility. Now, what happens if I go to 50%? You can imagine, maybe not tomorrow or in a year, but over time, Bitcoin's volatility will probably move off of 40% to 30%. The 30-day trailing volatility of Bitcoin is less than 30% right now. And so at a 30 BTC vol and a 10% BTC outlook, three of these four instruments are investment grade. Stride is decent-grade mezzanine. And so, you know, I remind you what happens when you go to 50% leverage. You're looking at, you know, BTC factors that go from 4 to 20 or more. So can we actually generate 2, 3, 4, 5, 6 times Bitcoin performance with intelligent leverage? Yeah, we can. We just have to be thoughtful about our capital structure and we got to adjust to evolving Bitcoin volatility. Now, with that, I want to pass the floor over to Fong, who's going to talk about our capital plan moving forward.