Strategy Inc

Good afternoon everyone, and thank you for joining us for Strategy's 3rd Quarter, 2026 Earnings Webinar. I am CJ, Head of Investor Relations at Strategy. Joining us today are Andrew Kang, Chief Financial Officer, Phong Le, President and Chief Executive Officer, and Michael Saylor, Founder and Executive Chairman. We'll begin with approximately 60 minutes of prepared remarks, starting with Andrew. followed by Phong and Michael. We'll then move to a 30-minute live Q&A. Before we begin, I'll briefly cover our 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 August 3, 2026, and the risks described in other filings that Strategy may make with the SEC. Except as required by law, 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. Q3 was an exceptionally strong quarter across all parts of our business. We now hold 848,517 Bitcoin and recorded a record $21 billion fair value gain on our Bitcoin holdings in Q3. MSPR share price increased 76% during the quarter, and our market cap rose to $62 billion as of October 23rd. STRC's one-month volume-weighted average price was $99.27 as of the closing markets on October 23rd, and as we speak today, we are just one penny away from par. Our combined Bitcoin and dollar reserves represent 49 years of interest and dividend coverage, strengthening the credit quality of our digital credit platform. Q3 marked our 25th consecutive quarter, more than six years of building a consistent and ongoing track record of adding more Bitcoin to our balance sheet. Since Q3 of 2020, our holdings have grown from approximately 38,000 Bitcoin to the 848,517 Bitcoin accounting for 4% of all Bitcoin that will ever exist. Strategy remains the largest institutional holder of Bitcoin in the world. Our Bitcoin holdings exceed that of iBit, that of the largest nation states, other ETFs, and all other major DeFi institutions. The sheer scale of our reserves gives us a market-leading advantage to actively manage our strategy and goals through both bull and bear market cycles. Our treasury assets have grown from approximately $54 billion at the end of Q1 this year to $74 billion in this comparison. That makes strategy the seventh largest treasury among S&P 500 companies when we include all cash and Bitcoin on our balance sheet. As you know, the number 21 has a great deal of significance for us. We all know that there will only ever be 21 million Bitcoin in existence. In this last quarter, we recorded an approximately $21 billion in fair value gain on our digital assets in the third quarter. We started Q3 with about 846,000 Bitcoin valued at approximately $50 billion. And during the quarter, Bitcoin's price increased from approximately $58,700 to close around $83,600, adding $21 billion in value. We also added a net 1,666 Bitcoin during the quarter. And as a result of the recent rally in Bitcoin price, at the end of Q3, we recorded a $20.9 billion fair value gain on digital assets. and ended September with over 847,600 Bitcoin worth approximately $71 billion. For the third quarter, we reported a record $20.9 billion of operating income, $19.1 billion of net income and $44.75 in diluted earnings per share. This was the highest operating net income for any quarter in the history of the company. This milestone achievement for the company highlights the resilience and strength of our capital base and balance sheet, which allows us to weather the storm through bear markets, but also readies us for exponential growth in bull markets. Bitcoin per share has grown from approximately 56,600 sats at the end of 2020 to over 187,700 sats as of October 23rd. reflecting a CAGR of approximately 23% over that same period. Year-to-date, Bitcoin per share is 3.7% lower as we effectively deployed and managed through our capital management framework with a focus on strengthening the underlying credit of our capital structure. As we enter the next stage of Bitcoin price appreciation, we will be further positioned with a stronger capital base and more robust reserves to amplify BTC yield in the long term. We raised approximately $5.4 billion of total capital during Q3, bringing the total year-to-date capital raise to $21.2 billion. We raised $22.6 billion of capital in 2024 and $25.3 billion in 2025, importantly reflecting our effective and impactful access to the capital markets in both rising and falling Bitcoin cycles. During Q3, digital assets increased from $49.7 billion to $70.8 billion reflecting Bitcoin price appreciation and the net addition of Bitcoin during the quarter. Cash and short-term investments increased to just under $5.9 billion including $5.8 billion of total USD assets at the end of Q3, which provides more than sufficient liquidity to meet our interest and dividend payments, Strengthen our overall credit quality and provide liquidity for general Bitcoin treasury needs. Our preferred equity ended the quarter at $13.1 billion down from the previous quarter with the execution of our stretch open market repurchase program. Common equity increased to $55.4 billion bringing total equity to $68.5 billion up $23.2 billion or 51% during the quarter. Our treasury assets as of October 23rd were approximately $74 billion, consisting of $68.9 billion of Bitcoin and $5.1 billion in USD assets. After taking into account $6.7 billion of convertible debt and $13.3 billion of preferred stock at their notional amounts, our net reserve is approximately $53.9 billion, or approximately $67.3 billion net of the out-of-the-money converts. Our MNAT is currently 1.15x, amplification 1.28x, with a low net leverage of approximately 2.4%. And our U.S. dollar assets provide 3.4 years of interest and dividends coverage at current payment obligations. We have approximately $6.7 billion of total convertible debt outstanding compared with the $69 billion of Bitcoin and $5.1 billion of U.S. dollar assets, representing a BTC rating of 42X. Four of the six converts are currently trading above par. For the two that are at the moment below par, the earliest put date remains significantly in the future and not until March 2028. We have substantial asset coverage and the staggered put maturity schedule gives us ample levers to effectively manage these obligations in the future. We now have 17 equity analysts covering us, all which carry buy ratings, an average MSDR price target of approximately $248, and an average published Bitcoin target of approximately $111,000. I am pleased to announce that our shareholder proposal to move our preferred equity dividends to daily record and payment dates has been resoundingly approved by our shareholders. The final vote reflects 99.3% of approvals of votes cast in support of the amendment. Daily dividends for stretch will begin on November 1st record date with a November 2nd payment date. Strike, strike, and stride are scheduled to follow with a January 1st record date and a January 4th and many more. to the future of tokenized products and increasingly around the clock markets. Thank you to everyone who voted in favor of this change. And finally, as announced earlier today, I will be stepping down as Chief Financial Officer effective November 5th for personal reasons. It has been an honor to serve as Strategy CFO for the past four and a half years and to be part of such an extraordinary period of growth and innovation. I am extremely grateful to Michael, Phong and the board for their trust and support and to all of our employees, thank you for your hard work, perseverance and dedication. To the entire finance team, a special thank you. It has been a privilege to work alongside each of you and I am incredibly proud of what we have accomplished together. To our shareholders, analysts, and everyone who has joined us over these last 18 quarters, thank you for your time, your engagement, and your support. It has meant a great deal to me. And for the last time as CFO, I will turn the call over to Phong.

Thank you, Andrew. We will miss you. And I do appreciate your four and a half years of service to strategy. You've seen the company through great times and also through a couple bear markets with a steady hand and I wish you well in the future. The plan going forward throughout the course of 2026 is for myself to step back into the CFO and principal financial officer role. Starting in January 2027, will split the CFO role between our software and our Bitcoin businesses, which are quite different. Stepping into the principal financial officer role covering our software business will be a longtime veteran of strategy, Reza Virasteh, who currently runs operations reporting to me and has previously been a part of the finance leadership team running FP&A. He knows our software business inside out and will do a great job overseeing that. The principal financial officer of our Bitcoin business will be myself, and also I'll continue to be the CEO of the company. Looking forward to wearing those dual hats and looking forward to continuing to lead with strong folks in our Bitcoin business that you're all familiar with. CJ here, who runs investor relations and product, and Sharish, who runs our treasury, will report to me directly. And I think for all intents and purposes, the transition will be seamless to our shareholders, our investors, our analysts, and our employees. And I'm looking forward to a bright future for the company. Speaking of bright futures, I will cover off on our digital equity strategy and our digital credit strategy with a recap of Q3 and 2026 years of date and why I believe we have a very bright next year ahead of us. Now I'll hand it over to Michael who will cover our digital capital and Bitcoin overall outlook and just general strategy for the company. So first, let's talk about digital equity. We had what I would consider to be, and what Andrew mentioned, a very strong Q3. I'll start with MSTR, our common equity, as amplified Bitcoin. We are built to outperform Bitcoin, and we did exactly that in the return to a bull market in Q3. Bitcoin increased 43% over the course of the quarter. MSTR increased 76%. In addition, we added 176,000 Bitcoin since the beginning of the year. So through a fair market cycle, we were able to significantly increase our Bitcoin. And that's more than 3x the second largest Bitcoin treasury company in the world added all in the course of three quarters. And it is allowed us to be the number seven ranked treasury in all of the S&P 500, Pearson. As Andrew said, we raised $21 billion of capital year to date, another 21 number, coincidentally, and we have the fourth largest issuer of capital in the U.S., again, in a Bitcoin bear market. We reduced our net leverage 2.4 to 2.4%, down from 8.4% in Q2, and our downside is really now well protected. where Bitcoin could fall 78% to $18,000 before we are 1x covered for our liabilities by our Bitcoin value, asset value. And our objective still stands. We're going to double Bitcoin for sure over the course of the next seven years. And we think we are on our way to that. So I feel very strong about MSTR and where we're able to go on a go-forward basis. As a reminder, digital equity, that's MSTR, is a combination of two things. One, amplified Bitcoin. We're going to increase Bitcoin per share. And two, digital credit. And you've seen strife, stretch, stream, strike, stride, and potential future innovation on top of that. For example, daily calendar day dividends. Our cash structure is really a volatility transformer. What do we do? We take digital capital, Bitcoin, which has a vol of 36. We reduce that vol in our digital credit stretch down to what is about 10% right now. We believe we can reduce that further down to potentially even 5% with a 12% dividend rate. All of that excess vol and the excess returns gets accreted to our digital equity, MSTR. That's basically the formula of the company. and what we're able to do with Bitcoin, which is such a rare capital asset. We're among the most liquid stocks relative to our size and amongst the most liquid stocks in the S&P 500 universe. You'll see here, if we take a look at our options open interest as a percentage of our market cap, we're number two in the S&P 500 universe and our daily traded volume as a percentage of market cap is also number two in the S&P 500 universe. What does that mean? That means there's a lot of interest in what we are, which is a amplified Bitcoin company. And there still is a lot of interest in Bitcoin, despite all of the attention that is growing towards AI and other related stocks. If you take away the market cap and don't look at us as a percentage of market cap, but just on total value, We're the number 17 options open interest company amongst the S&P 500 universe. And we're number 18 in terms of daily traded volume. And that's a pretty big deal for a company like ours, which has grown from about a billion dollars to over $70 billion in market cap in the course of six years. Last year, we were the number one equity issuer in the world. A year before, in 2024, we were the number two equity issuer in the world. And this year, year to date, we're number four, raising $21 billion in the equity capital markets. Three AI companies are ahead of us, AI in space, SpaceX, AI in search, Alphabet, AI in semiconductors, Intel. What does this tell you? It tells you that in any Bitcoin market, we're able to access the equity capital markets. And it also tells you that there is still significant interest in Bitcoin and digital assets. And we see a bright future for the category overall. If you take a comparison to the 2023-2024 bull market, in that market, we outperformed Bitcoin significantly. That's the last real bull market we saw. During that two-year period from 2023 through 2024, Bitcoin returned 454%, MSTR returned 3.6%, 1,897%. So as we believe we're entering another Bitcoin bull market, we believe because we're amplified Bitcoin, we have the potential to similarly outperform Bitcoin during the next year to two years. What's the difference between the previous bull market in 2023 and 2024 and what we expect to see in 2026, 2027 and beyond is we are a very different shaped company. The last bull market we had 132,500 Bitcoin, of which 37% were encumbered by Bitcoin-backed loans. Now we have 848,500 Bitcoin, nearly seven times what we had before, and 0% of that Bitcoin is encumbered by any of our debt or our preferreds. We added 18,000 Bitcoin in the last bull market. We have since added about 200,000 Bitcoin in this market. The Bitcoin floor in the previous market was 18,000. This time around at $17,000. Our BTC rating was 0.9x, which actually meant we had less than 1x coverage on our liabilities. This time we have 4.6x coverage on our liabilities. Our net leverage bottomed out at 110% in the past market. This time around, 2.4%. And the USD duration that we had was zero. We didn't have any US dollars on our balance sheet in this time around. is 3.4 years. So compared to the previous bear market to this bear market, we have strengthened the company significantly over the course of the last year. And what means as we exit the bear market into a bull market, we have a stronger balance sheet. And we think that creates even more opportunity for amplification and more opportunity for growth for our common equity over the course of the next couple year bull run that we expect to see. Bitcoin Reserve, as I mentioned, was $132,000. Now it's $848,000. $2.2 billion versus nearly $70 billion. $0 in U.S. assets versus $5.1 billion now. No digital credit versus $13.3 billion now. And a net leverage of 108% versus 24%. So what have we been doing for the last year? We've been building a fortress balance sheet. So that as we enter a bull cycle, we think we can outperform the last bull cycle that we went through. Since the Bitcoin all-time high, Bitcoin's fallen 35%, while our holdings of Bitcoin rose 33%. So as Bitcoin price went down from $124,000 to $81,200, we've taken that opportunity to buy Bitcoin. at a less expensive price and grow our Bitcoin holdings 33% to $849,000. So why do we think that there's an opportunity for MSTR to grow? Not just because we believe that Bitcoin price is going to grow, but we think MSTR is the combination of two things. One is the net Bitcoin that we have on our balance sheet. And two is the BTC dollar gain multiplied by whatever multiple you might attribute to that, which is really the functioning of our digital credit business. So we can grow Bitcoin per share and we can grow MSTR through two levers, essentially. One is through increase of Bitcoin price amplified to our common equity and increase of our digital credit business, which increases the Bitcoin gain, which can be ascribed a multiple. and we think both of those components will start to take effect over the course of the next couple of years. What else happens during a bull market? Well, what else happens during a bull market is we see MNav start to expand, right? The 2021 bull market saw MNav median daily MNav at 2.28, 2023 2.57, 2024 2.60. We currently sit at 1.15, but we see the potential for that to also grow. over the course of the bull cycle. And as I mentioned before, ultimately, what is the goal? The goal is to double Bitcoin per share in seven years through the use of digital credit. How does that work? And it's important to emphasize the interplay between digital credit and digital equity. If we can sell digital credit by selling Stretch at $100 into the market, that generates amplification to the company. It means that we are able to buy Bitcoin and pay 12% on that digital credit and accrete all the benefits of a greater than 12% gain, which generates amplification. The amplification increases Bitcoin per share and the increase in Bitcoin per share allows the common equity to outperform Bitcoin over time. What are the levers? Levers are a lower cost of credit, which we look at very closely. The levers are higher digital credit sales, which we think we'll be able to turn on again soon and third lever is a higher MNav. So let's talk about digital credit. I talked about MSTR, digital equity. Now let's talk about digital credit and our five instruments that we have. The first, the ecosystem is scaling really fast. We're really still only 22 months into digital credit. We have six issuers, not just ourselves, in a $16 billion market. Stretch is returning the help. is trading between $99 and $100 per our commitment. And today's stretch closed at $99.99. We strengthened our U.S. dollar coverage. We've heard from our shareholders of our digital credit. That's important. Grew the digital U.S. dollar assets from $2.5 billion to double to $5 billion. And we're supporting our digital credit security stretch. We repurchased $2 billion of stretch, and we have $957 million capacity remaining. and, of course, yesterday, daily dividends were approved for Stretch, which takes effect November 1st, and Stripe, Stripe and Stripe, which take effect January 1st. And we're excited about that innovation. And we're continuing to improve our credit profile, which I'll talk through in a little bit. So how do you think about digital credit? One thing to think about is digital credit is really a combination, an alloy of Bitcoin and U.S. dollar. So much like when you take iron and you combine it with chromium, we create an alloy of stainless steel, which is stronger, which is lighter, which is better than the combination of the two. Bitcoin, with 46 years of coverage, and dollars with 3.4 years of coverage, creates a 60-40% alloy called digital credit. That's what digital credit is. It's ultimately a better version for certain shareholders of Bitcoin and of U.S. dollars, and the sum is stronger than it. This market, as I mentioned, scaled to $16 billion in 20 months, and it's still fairly nascent and early. It is a brand-new product never seen before in the history of capital markets, and we're pretty excited to see others come into the market. I mentioned our five IPOs that we did last year, and Strive has since IPO Sata and recently Sats, two additional great products. Metaplanet has announced that they plan to issue digital credit. BMNP, which is an Ethereum-based digital credit instrument, was launched earlier this year. CHAD, which is a Solana-based digital credit instrument, was also launched earlier this year. More was launched. And we'll see other products start to launch and Layer 2 products start to build on top of this. It is early, but it is very promising to see the digital credit ecosystem start to build out. And why is digital credit attractive? Well, if you look at the market today, there's been a lot of talk about AI private credit. Yields aren't bad at 10%, but they are opaque instruments and they're not nearly comparable in terms of the yields that you can get on a tax equivalent basis with other forms of digital credit like the ones we've issued. and of course, worse than private credit are junk bonds, bank preferreds, investment grade, mortgage back, et cetera, other instruments in terms of lower yields and different risk return profiles. As tax rates start to go up, both at the municipal level and the state level, you'll start to see that digital credit becomes even more attractive because it is a return of capital instrument. What does that mean? The return of capital means that Thank you for watching. A tax-deferred status for as long as 10 years. That compares to qualified dividends, which might pay a 20% to 35% tax. So $100 of dividends to stretch and digital credit stays at $100. $100 of dividends on a qualified dividend instrument becomes $65 to $80. And $100 of interest and earnings on a taxable interest instrument like a money market becomes half of that when taxes are taken out. So this is one of the reasons that we think digital credit is a superior instrument. We spent a lot of time thinking about, after the downturn of Q2, to stretch some of our digital credit instruments and how to improve our digital credit. And we put a capital framework in place, and we spoke about that at length on our previous earnings call. We built up a US dollar reserve that is a minimum of one year of dividends and interest, and now is three years of dividends and interest. We said that we would monetize Bitcoin for the purposes of funding the US dollar reserve, servicing our debt and interest obligations, and repurchasing securities. We sold a little bit of Bitcoin as a result of that, but a fraction of the Bitcoin we hold. We began a digital credit repurchase program, and we spent about $2 billion buying back stretch, and we have $957 million remaining authorized. We put in an MSTR repurchase program of $1 billion, of which we have used none of it so far. And we said we're going to keep the stretch dividend right around 12%. We're not really going to increase it because we don't think that it will drive more demand for the product in a material way. We don't think it's best for our common shareholders to increase the dividend obligations associated with stretch. The sixth pillar that we added over the course of the last quarter is we added USD cash. And we added 242, which is currently at about $242 million. So what's the point of the USD cash? I'll start with the point of the USD reserve. It is designed to support the preferred dividends and debt interests. In fact, it is... Reserved and set aside explicitly for the purpose of paying dividends and interest. The U.S. dollar cash balance