Strategy, Inc. Q3 FY2024 earnings call

Bitcoin Highlights - MicroStrategy remains the largest corporate holder of Bitcoin, with 252,220 Bitcoins and a total market value of $18 billion as of recent data. Acquired 25,889 Bitcoins in Q3 2024 at an average price of $60,839. Raised $1.1 billion net proceeds via ATM equity offering and $1.01 billion through 2028 convertible notes, and redeemed $500 million senior secured notes, making all Bitcoin holdings unencumbered. ### Software Business - Continues shift to cloud, with Q3 cloud bookings strong. Non-GAAP subscription billings have grown for four consecutive years. Transition from on-premise to cloud leads to decline in product license and support revenues but growth in cloud recurring revenues. Customer renewal rates remain high, and MicroStrategy ONE is available on major cloud marketplaces.

In Q3, software business revenues were $116 million, down 10% year-over-year. Non-GAAP subscription billings, representing cloud revenues in the quarter along with the next 12 months of deferred subscription services revenues, grew by 93% in Q3 to $32.4 million, marking the fourth straight year of quarterly double-digit growth. Subscription services revenues increased 32% year-over-year and now make up approximately 24% of total revenues. The Corporate and other category includes non-software related areas associated with digital assets holdings, such as impairment charges and other third-party costs.

Capital Plan - Announced a 21/21 three-year strategic capital plan to raise $42 billion ( $21 billion equity + $21 billion fixed income) from 2025 to 2027. Revised BTC yield target to 6%-10% per year for the next three years by responsibly using intelligent leverage and capital market activities, aiming to accumulate more Bitcoin holdings using proceeds from equity and software business cash flows.

Risks - Bitcoin price volatility impacting the value of Bitcoin holdings. Uncertainties in equity and debt financing for capital raising. Regulatory changes related to Bitcoin and financial instruments that could affect operations and strategies.

Q: Can you provide a framework around how you might cover interest expense, if we continue to issue convertible or fixed income notes that might be beyond servicing from the software cash flows?

A: Sure. We redeemed the 28 notes, which was our highest cost debt, reducing our annual cost by about $30 million, or about 50% of our debt load. This frees up cash in the near term. Taking out the 28s also releases us from all covenants. We plan to use the $42 billion capital plan to service interest if needed.

Q: Given your ambitious ATM plan, are you concerned about the controlled company status, and how do you view it in the long-term?

A: I have slightly more than 50% of the voting stock right now. As we raise additional capital, I expect my voting interest to slip. I'm not at all concerned. We're going to run this company in partnership with our common stock shareholders. The company will operate fine, and common stockholders are our partners who deserve a say in the company.