Strategy Inc

Hello, everyone, and good evening. I'm CJ, head of investor relations at Strategy. I'm excited to moderate Strategy's second quarter, 2026, earnings webinar for you. We will start the call with a 60-minute presentation, starting with Andrew Kang, followed by Fong Lee, and then Michael Saylor. This will be followed by a 30-minute interactive Q&A session with 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, and prospects may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements. due to various important factors, including fluctuations in the price of Bitcoin and the risk factors discussed under the caption Risk Factors in Strategy's quarterly report on Form 10Q filed with the SEC on May 6th, 2026, and the risks described in other filings that Strategy may make with the SEC. We assume no obligation to update these forward-looking statements which speak only as of today. With that, I will turn the call over to Andrew Kang, CFO of Strategy.

Thank you, CJ, and thank you all for joining our call today. Moving on to the first slide, we now hold 843,775,000 Bitcoin, representing approximately 4% of all Bitcoin that will ever exist. Bitcoin per share is currently 203,683 sats, which remains one of the cleanest measures of how we create long-term value for shareholders. Our market cap is approximately $38 billion, and year to date, we have raised $17 billion of capital across common equity and digital credit. That capital gives us the strength to continue building our overall Bitcoin holdings, manage our capital structure, meet our dividend and interest obligations, and support the growth of our digital credit platform. On this slide, we show that we adopted Bitcoin as a treasury asset beginning in Q3 of 2020. We have accumulated more Bitcoin in every single quarter across 113 acquisitions. And today we hold, again, 843,775 Bitcoin with a Bitcoin reserve value of approximately $55 billion. Our total acquisition cost is approximately $64 billion and our average purchase price is roughly $75,000 per Bitcoin. Strategy is now the largest institutional holder of Bitcoin in the world. Our holdings are larger than the largest Bitcoin ETFs shown here. They're larger than the estimated holdings of any nation state and larger than the major DeFi custody balances. That scale matters and it reinforces Strategy's unique position in the digital assets market. We are not just participating in institutional Bitcoin adoption, we are leading it. Doing so as an operating company with access to the capital markets, a growing digital credit platform, and a long-term objective of increasing Bitcoin per share for our shareholders. Now turning to the balance sheet, Q2 reflected active execution across all of our operations and our capital structure. Digital assets ended the quarter at $49.7 billion, having acquired a net 83,901 Bitcoin during the quarter, with the total balance sheet holdings now slightly lower due to the lower price of Bitcoin as of the end of Q2. Cash and short-term investments increased to $2.4 billion as of the quarter end, and now even further to $3.75 billion current quarter to date. And now we hold over two years of dividend interest coverage and also reflect our goal of continuing to replenish the USD Reserve to support our digital credit instruments. Long-term debt declined from $8.2 billion to $6.7 billion, driven by the $1.5 billion repurchase of convertible debt, which we executed at an 8% discount in Q2. and preferred equity increased from $9 billion to $14.4 billion driven by the strong issuance of STRC during Q2. We began the quarter with just over 762,000 Bitcoin with a market value of $51.6 billion. During that quarter, we accumulated more Bitcoin, adding a net 83,901 Bitcoin, an average price of approximately $75,500. At quarter end, we held 846,000 Bitcoin, and the quarter end Bitcoin price was approximately $58,700, resulting in a Q2 unrealized fair value loss of approximately $8.3 billion. After quarter end, we have seen a recovery in the market value of our Bitcoin holdings. Quarter to date through July 27th, we did sell 2,225 Bitcoin for approximately $135 million. And with Bitcoin price increasing to approximately $65,000 per Bitcoin, we currently would reflect an estimated fair value gain of about $5.2 billion on our total holdings. and our digital assets balance sheet will have increased to approximately $54.8 billion. As of July 27th, our total reserve, which includes our BTC reserve and our US dollar cash reserve was $58.5 billion with a net reserve of approximately $36.3 billion, which nets out our out of the money convertible debt and preferred equity balances. Here, amplification calculated as our BTC reserve of approximately $58 billion divided by net reserves of $36 billion is over 1.5 times. Amplification represents our total Bitcoin as a multiple of reserves remaining after taking into account our debt and preferred claims. We have $15.4 billion of preferred equity outstanding and $6.7 billion of convertible debt outstanding. and a low net leverage of 5.4%, which reflects our debt less our cash reserves divided by our BTC reserve. At a current Bitcoin price of roughly $65,000, our approximately $55 billion of Bitcoin reserves provides an 18.5x BTC rating against our net debt of about $3 billion. In an extreme stress case, as you can see here in the middle of the slide, even with a 95% Bitcoin price decline to roughly $4,000 per Bitcoin, our converts would remain fully covered at a 1.0x BTC rating. Over time, our plan remains to equitize, repay, or refinance existing convertible debt while continuing to maintain strong collateral coverage. And as we demonstrated in Q2, we believe the market remains open to all of these options. We plan to remain patient, monitor the market conditions, and continue to focus on the overall liability management of our outstanding debt. Turning to the Q2 financial results, we reported an operating loss of $8.3 billion, a net loss of $8.6 billion, and an EPS of negative $24.45 per share. These results were driven by the quarter end non-cash fair value mark to market of our Bitcoin holdings. Our focus remains on the long-term drivers we can control, which include capital allocation, balance sheet strength, the strengthening of our digital credit instruments and increasing Bitcoin per share over the long term. And I mentioned earlier, quarter to date with Bitcoin price having increased to closer to $65,000, our current fair value mark to market of our holdings would reflect about a $5.2 billion gain. Turning to our Bitcoin KPIs, as of July 26th, Bitcoin per share was 203,683 sats compared to about 191,904 sats in July of 2025, which is an increase of about 6% year-over-year. Year-to-date BTC yield is currently 4.5% compared to about 22.8% for the full year 2025. BTC gain is approximately 30,000 Bitcoin year to date, which is about 30% of last year's full year gain. And in dollar terms, BTC dollar gain is approximately $2 billion year to date compared to about $8.9 billion for the full year 2025. Despite the significant drawdown in BTC price year over year, we continue to execute positive performance across all of our core KPIs. Since 2020, our Bitcoin per share has increased from approximately 46,000 sats to 203,000 sats, which is more than a 4x increase over that period. And in 2006, we have delivered, as I mentioned, 4.5% BTC yield year to date. As you can see here, historical annual BTC yield performance does move sort of in conjunction with Bitcoin price and Bitcoin Bear markets, like we saw in 22 and 23, BTC yield was lower than the bull market years of 24 and 25. That being said, BTC yield this year does have the potential to outperform the prior bear market if BTC price improves and through the support and strengthening of our digital credit instruments. On this slide, we show here in Q2, within Q2, Bitcoin per share increased from approximately 201,170 sats at the end of Q1 to approximately 210,824 sats at the end of Q2. Despite the lower price of Bitcoin and the overall market volatility in Q2, the quarter's BTC yield of 5% outperformed the Q1 BTC yield of 3.2%. So we are continuing to make good progress. And lastly, I will end with a quick snapshot on the most recent view from our equity analysts. We added two new covering analysts from Barclays and Siebert for a total coverage of now 16. Across the firms shown here, the average analyst Bitcoin price target, for those that have one, is approximately $98,000. The average MSTR price target is approximately $296, and all with corresponding buy ratings. While we do not endorse any third-party forecasts, it's important to note that the banks are increasing their engagement with Bitcoin, with digital capital, and with a focus on strategy's role within that market. I think the growth also reflects the deep and growing demand from investors as well for independent institutional views on Bitcoin strategy and digital credit. And it helps deepen investor understanding of our business model, our capital structure and the long term value we are pursuing for our shareholders. So with that, I thank you all for your time and I will turn it over to Fong for his remarks.

Thank you, Andrew. Thank you, everyone, for joining us this evening. I'm going to provide an update on our capital market strategy and our capital markets programs. And before I go into some of those details, I do also want to recap Q2 2026. We acknowledge that it was an up and down quarter for Bitcoin. And our common equity and our preferred have gone down in that period of time. But if I look at the key metrics that we look at for performance and health of the business, things are generally speaking positive. Our Bitcoin holdings over the course of the quarter. Increased 11% from 762,099 Bitcoin to 846,000 Bitcoin. We reduced our debt outstanding from $8.2 billion to $6.7 billion. And on a net debt basis, we reduced it even more. This was down 18%. Our U.S. dollar reserve is up from $2.1 billion to $2.4 billion at the end of Q2. And as Andrew noted, we're now at $3.75 billion. That's a 12% increase quarter over quarter. And our Bitcoin per share, potentially our most important of our metrics, went from 201,170 satoshis to 210,824 satoshis, so a 5% increase. So many of these metrics show health in the overall business. How are we able to do that? Three months ago in our earnings call, we said that we were adding engines to the strategy playbook, if you will. We went from one-way capital issuance, buying Bitcoin through active issuance of MSTR, of our preferreds and our convertibles, to what we call active capital. active capital management. We're able to sell MSTR to buy Bitcoin, U.S. dollars, debt, prefs. We're able to sell our prefs to buy Bitcoin, U.S. dollars, debt, MSTR. And we're also able to sell our Bitcoin to buy U.S. dollars, buy debt, buy prefs, buy MSTR. And we're able to use those U.S. dollars to pay off dividends and to strengthen our balance sheet. Thank you. We bought 174,895 Bitcoin year-to-date 2026. We sold 3,620 Bitcoin during that same period of time. We bought 48x more Bitcoin than we sold, and we increased our Bitcoin 25% since the beginning of 2026 until now. When it comes to digital credit and stretch, we issued $7.52 billion of digital credit. We repurchased year-to-date $25 million. We issued 300x more digital credit than we repurchased, and we increased stretch's notional 250% since the beginning of the year. So I think we are carrying through Thank you. Another way to think about a robust access to the capital markets is to look at what we've done year to date 2026. So through seven months in 2026, we've now issued $17 billion of capital. As you can see here, that's approaching what we did in 2025, primarily used to buy Bitcoin. And you'll also see the percentage of capital that we issued that was digital credit, specifically primarily stretch, was 44% of the total capital we issued versus 28% last year. If you look at this same information on a quarter-to-quarter basis, Q2, we issued more capital than we did in Q1 of last year, Q1 of this year, and also we issued more capital in Q2 2026 than we did, or we raised more capital in 2026 than we did in any quarter of last year. So $8.4 billion total, of which $5.5 billion is digital credit. Q3, 2026, right? So this is the month of July of this year. We've issued about $1.3 billion of common equity. And of course, we want to see preferred equity added to that stack too. And so I'll talk a little bit more about why that's important. We've talked about the flywheel in the past. Our overall objective is to double Bitcoin per share in seven years through digital credit. And why is this important? We want digital credit to work because we're able to sell digital credit to buy Bitcoin. That generates amplification to the company. That would increase our Bitcoin per share for the company, especially as Bitcoin increases. And it allows the company ultimately to do what we have been doing and what we intend to do, which is to outperform Bitcoin. What are the inputs that can help us flex these levers? Decreasing our cost of credit. And we'll talk about that in a little bit. Higher digital credit sales. This is selling more stretch and a higher MNAV through accretion of our equity, our common equity, MSTR. So let me talk about the digital credit capital framework and how do we get this flywheel working even better than it has in the past. I'll start with our corporate objective. It's for stretch to trade at $99 to $100 over time. We recognize that that has not occurred over the course of the last month. Stretch is now trading at about $89.50. Our goal is to get this back to $99 to $100 because that helps our digital credit engine work and it helps us increase Bitcoin per share and ultimately accrue value to our common shareholders. So about a month ago, we issued five pillars that are gonna strengthen stretch and strengthen digital credit. The first major pillar is the US dollar reserve. We recognize the importance of the US dollar reserve to our digital credit shareholders, We decreased that over time in the month of June, and we realized that it's important to keep it strong. And so we've increased it now to $3.75 billion, which is about 2.1 years worth of dividend coverage, dividend and interest coverage. And we're going to keep one year a minimum. And I'll talk a little bit more about that in a minute. Bitcoin monetization, selling Bitcoin for three purposes. One, to fund U.S. dollar reserves. Two, to fund dividends and interest expenses. And three, to support our repurchase programs. And those are our third and our fourth pillar. The ability to repurchase digital credit up to a billion dollars. We've repurchased $25 million so far a year today. And to repurchase MSTR up to a billion dollars. And the fifth and last pillar is to manage our stretch dividend in a way that it's thoughtful and supports the price of stretch while also reducing our dividend burden. And we can review that one. The good news is we've built now an all-time high U.S. dollar reserve. So we started at the beginning of the year in January at $2.25 billion. We drew that down to pay down $1.5 billion notional of our 2029 converts. Thank you. And two, that on a duration basis, which is how many years of dividend interest expense coverage we have, our high in January is 2.7 years. Our low end of May was 0.5 years. We're now back to 2.1 years. And our target is to be somewhere between two and three years. I talked about our Bitcoin monetization program. Our intent is to sell Bitcoin for three reasons when we think it's appropriate for the company. One, fund the US dollar reserve up to $1.25 billion. That would take our US dollar reserve up to $5 billion if we were to do that fully using Bitcoin, which would take us up close to three years. Two, fund dividend interest payments of $1.76 billion currently, annually. And we've used Bitcoin sales to fund some dividend payments in the last month or so. And three is to fund up to $2 billion in our repurchase programs. So let's talk a little bit more about Bitcoin monetization and Bitcoin sales. This is a subject of much discussion during the month of May and June. So I thought I would provide some more clarity on to why we did it and what we believe the result to Bitcoin was when we did this. First, our first Bitcoin sale in the week ending May 31st was 32 Bitcoin. That was 0.004% of all of our Bitcoin holdings. And why did we do it? We did it to inoculate the market and test our processes. The average cost basis of that Bitcoin is $125,464. which came to a $4 million total cost basis with a proceeds of $2 million and the average sale price of $77,135. We took about a $1 million realized loss in that, and that gives us a potential tax asset, assuming a 29% corporate tax rate of about $400,000. Our second Bitcoin sale was about a month later. In the week ending July 5th, we sold 3,588 Bitcoin, about 0.4% of our Bitcoin holdings. So about 100x more than what we sold the month before. Why did we do that? We did that to fund our prep dividends that were due June 30th of 2026. Average cost basis of that Bitcoin $116,000, which came to $418 million. The sale price was $60,000. And so our proceeds are $216 million, which we used again to fund our dividends on our preferreds at the end of June. And we took a realized loss of $203 million, which allowed us to potentially book a tax loss of $59 million. If you see here, we have 843,000 Bitcoin. And you can see the size of the bars of our Bitcoin sales are almost not noticeable compared to our total Bitcoin holdings. Of course, then the question is, sorry, and so the next topic I'll get into is what is our overall potential tax benefit? We showed this slide last quarter. Of all of our Bitcoin, we have about $18.5 billion in unrealized losses, which equals a potential benefit of $5.4 billion on our taxes. So selling high cost basis Bitcoin at a low price gives us the potential to take tax losses that can then offset future capital gains. So did our Bitcoin sales have an effect on Bitcoin price? We have two data points, so I don't think we can make a definitive statement, but I thought it'd be useful to look at these two data points in a little bit more detail. Our 32 Bitcoin sale was about $2 million that week. And what happened after we sold the $2 million of Bitcoin? Well, in the week that we sold the $2 million, Bitcoin price went down 4%. The week after we announced the $2 million sale, Bitcoin went down 11%. And as a reminder, that was 0.001% of the liquidity of Bitcoin that week. So we were 0.001% of the Bitcoin trading volume when we made those sales. One month later, we sold about 100x more Bitcoin. The week that we sold 100x more Bitcoin, Bitcoin price went up 6%. The week after we announced it, Bitcoin price went down 1%. And we were 0.104% of the liquidity of Bitcoin in the week we sold. Did we have an impact on the price? Based on the liquidity, I would think not. Based on sentiment, perhaps. We'll continue to study this, but we thought it would be useful to share a couple of the data points. Another way to look at this, the bigger question we sometimes ask is, is strategy propping up Bitcoin price with our purchases? Is strategy moving down Bitcoin price with our sales? Does Bitcoin need strategy? And I think we've said many times strategy needs Bitcoin. So how would I look at this? As an example, average Bitcoin liquidity has been about $26 billion of trading on a daily basis. If we look at the week where we bought the most Bitcoin in the history of the company, our average daily purchase was $363 million. That's the max, right? In that particular week, we were 1.42% of the trading volume of Bitcoin. If you look at the last 12 months, we would average about $56 million of Bitcoin purchases a day, which sounds like a lot. It is a lot. But as a percentage of the $26 billion of daily liquidity, we were 0.22% of the trading volume of Bitcoin. Bitcoin is extremely liquid. We are a large purchaser. But looking at these numbers, I would say we were not a material purchaser. What about when we sell? The most we've sold so far is $19 million a day. And in that particular week, that would mean that we were 0.08% of the trading volume of Bitcoin. And that's a pretty small number. And if we were to sell to satisfy our $1.7 billion of dividend obligations, that would average to about $5 million a day. And that would be 0.02% of Bitcoin liquidity. All right. So my takeaway from this is we are a heavy participant in the Bitcoin market when we buy, but still not a material amount of the overall Bitcoin market. And we are a very, very small participant in the Bitcoin market when we sell. Back to the other pillars. So repurchasing up to $2 billion of our securities. All right, so this is 1 billion of our digital securities. We have a REACH purchase program now authorized. $13 billion is our market cap right now of our digital credit. A billion dollars has been authorized. We've said we'll prioritize Stretch right now. When would we buy Stretch? When it's trading at a discount to par. how much of a discount that's subject to management discretion. Why might we buy it? We might buy it to reduce our annual dividend, or we might buy it to strengthen the quality of digital credit, and we might buy it to capture net BPS accretion. On MSTRs, about $38 billion in market cap. We have an authorization to buy back up to $1 billion. We have not used it yet. Why might we buy it or when might we buy it? We might buy it when it's trading at a discount to net Bitcoin per share, which we have not seen that occur on a sustained basis yet this year. Why might we do it? Because we think it would create long term value by capturing that BPS accretion. How would we do this? We could buy in the open market. We could buy via block trades, tenders, exchange offers. And what's the timeframe that we might do this? We have no obligation, no expiration. We can modify, suspend, or terminate this program at any point in time. So how do we get stretch back to par? That is the focus of the company. That's the focus of the leadership and the management team. To climb stretch back to $99 to $100, we can adjust the U.S. dollar reserve. You've seen us actively do that. We can maintain the stretch rate. We're not planning on decreasing the stretch rate to bring it back to par. And we found that increasing the stretch rate is not really an effective way to bring it back to par. So our current plan is to keep the rate right at 12%. And of course, we can buy back stretch, which we've seen us start to do when we get back to par. We've learned a lot. We learned a lot about how stretch trades. We learned a lot about the types of people buying stretch. We learned a lot about the overall characteristics of digital credit leverage, what layer two players do on top of it. So what would we do? We could manage the ATM issuance, right? We could not issue necessarily as much as we have in the past. We could adjust the stretch rate, in this case down, right? If we see billions of dollars of demand for stretch and we don't want to grow digital credit too quickly, we could adjust the rate down from 12% to 11% to 10% or whatever we see fit. We can manage the BTC reserve, meaning we could decide how much of our stretch proceeds we put into Bitcoin. Historically, we put it all into Bitcoin, but we don't necessarily need to do that. We could put some of it into increasing the U.S. dollar reserve. And of course, we can manage our overall capital structure. We can manage our convertible bonds. We can manage what else is in that capital structure. And then we can manage some of the policies, including the one that I've discussed. The stretch rate is adjusted by observing multiple signals, right? We have a 12% annualized dividend rate right now. And when we return to par, we'll look at things like trading levels, market yields, the Bitcoin market, the U.S. dollar reserve coverage, and the capital structure to determine what the right rate is. And I want to reiterate our capital markets principles that we've shared in the past, and there are six of them. One, we're going to continue to create long-term value for MSTR. That's the most important of our principles. And we're going to do that primarily by increasing Bitcoin per share. How do we increase Bitcoin per share? We're going to do that by growing demand for stretch, getting it back to par, and observe the trading characteristics and learning from that. We're going to responsibly reduce the convertible market debt based on market conditions. We did that in Q2, right? And we would consider doing that on a go-forward basis. We'll monitor stretch demand and credit risk to determine the size of the U.S. dollar reserve. I think we've learned from Q2 that keeping a robust two to three year U.S. dollar reserve makes sense. And our minimum will be one year. We'll adjust the amplification based on market conditions. The price of Bitcoin is a big factor to the amplification. And we'll sell Bitcoin when it's advantageous to the company, which we've started to do. And you can expect that we may do that on a go forward basis, too. So with that, I'll pass it over to Michael Saylor.