Strategy Inc Q3 FY2025 earnings call

• Capital markets activity: Raised $19.8 billion year-to-date, reduced reliance on convertible debt, increased preferreds raises, with $6.7 billion raised through preferreds this year. Robinhood listed preferreds, more brokerages listing them. Plan to distribute through various channels like wealth management, field marketing, digital marketing. - Bitcoin treasury company comparison: Compare to largest corporate treasuries, aim to be #2 and then #1 in next 5 - 10 years. - S&P rating: Assigned B- issuer credit rating, which gives access to larger pools of capital, and meets criteria to be in S&P 500 Index. - IRS interim guidance: Excludes unrealized gains from Bitcoin holdings from adjusted financial statement income for CAMT, benefiting Strategy and paving way for other corporations to hold Bitcoin. - Products: Strike, Stride, Strife, Stretch are different structured Bitcoin products with various yields, durations, and risk profiles. Strike has convertible preferred with upside, effective yield, and ROC dividends. Stride is long-duration high-yield credit. Strife is long-duration senior credit. Stretch is structured to strip volatility and offer pure USD yield. - Digital credit innovations: Collateral is appreciating Bitcoin instead of depreciating assets, digital risk is transparent, homogeneous, continuous, using preferred equity as permanent capital, public branded global securities, digital creation, and tax-deferred ROC dividends.

Strategy holds 640,808 Bitcoin, which is over 3% of all Bitcoin ever to exist. Market cap is $83 billion. Year-to-date, $19.8 billion in capital raised to acquire more Bitcoin. In Q3 2025, GAAP operating income was $3.9 billion, net income $2.8 billion, earnings per share $8.43. First nine months of the year had $12 billion in GAAP operating income, $8.6 billion in net income, and $27.80 per share in earnings. Bitcoin per share as of October 26 was $41,370, up from $39,716 as of July 31. Since 2020, Bitcoin per share has grown from 56,598 to 200,197. Year-to-date BTC yield is 26% compared to revised full-year target of 30%, BTC gain year-to-date is 116,555 BTC, translating to approximately $12.9 billion in BTC dollar gain year-to-date compared to $20 billion full-year goal. Holds 640,808 Bitcoin worth $71 billion, purchased at an average $74,000 per Bitcoin, representing about 3.1% of all Bitcoin ever to exist. Digital assets grew from under $7 billion in Q3 2024 to over $73 billion in Q3 2025. Enterprise value was $98 billion with market cap $83 billion, Bitcoin net asset value $71 billion. Total annual interest and dividend obligations totaled $689 million, which is less than 1% of total Bitcoin.

• BTC guidance: Target BTC yield of 30% and BTC dollar gain of $20 billion at year-end assuming Bitcoin price $150,000. - Earnings guidance: Operating income target $34 billion, net income target $24 billion, EPS target $80 at year-end assuming Bitcoin price $150,000. - Stretch dividend guidance: Based on 5-day VWAP of Stretch price, adjust dividend rate accordingly. If 5-day VWAP above $101, consider rate decrease or follow-on offering; between $95 - $99, recommend 25 basis point rate increase; below $95, recommend 50 basis point rate increase. - Return of capital guidance: Preferred equity dividends are taxed as return of capital, expected to continue for foreseeable future, 10 years or more.

• Bitcoin price fluctuations: Can materially affect forward-looking statements. - Credit rating agency views: Bitcoin not viewed as capital by traditional credit ratings industry, affecting access to certain capital pools. - Regulatory and market uncertainties: Including unique regulatory hurdles in international markets, which may impact expansion of digital credit instruments.

Q: A lot of investor questions are focused on the company's ability to pay dividends, especially as the preferred equity strategy continues to grow. Can you just shed some additional color and light on plans to fund those dividends? And then if there was a period where the mNAV compressed or was even below 1x, how could that plan potentially change?

A: Phong Le said right now dividends and interest on convertible notes totaled $689 million annually. Primary strategy when mNAV is above 1x is to fund through ATM issuances. In last 12 months, issued about $27 billion of equity. If below 1x NAV, could sell equity derivatives, Bitcoin derivatives, sell high basis Bitcoin to cover dividend needs while preserving ROC dividends on preferreds.

Q: It was mentioned that there would be marketing and advertising around the preferreds. What do you anticipate that expense looking like? And what the return on investment would be for those efforts?

A: Phong Le said just starting to get into this, experiment with paid advertising on platforms like X or YouTube, expense expected to be minimal compared to increased inflows. Michael Saylor added he's doing a lot of outreach, getting invited to speak at conferences, on television, with simple messages about Stretch's 10.5% tax-deferred dividends.

Q: We have already seen the beginnings of consolidation within the digital asset treasury space. Is there a circumstance under which Strategy would step into the market as an acquirer of a Bitcoin treasury company that was trading at a materially lower mNAV in a transaction that would be, by definition, accretive as a means of accelerating its acquisition of Bitcoins?

A: Michael Saylor said they've done 84 acquisitions of Bitcoin, but generally don't have plans to pursue M&A activity as it can be distracting and there's uncertainty. Phong Le agreed, saying management is laser-like focused on selling credit instruments, improving balance sheet, equitizing convertible bonds.

Q: Beyond Bitcoin price action, can you identify two or three very specific challenges that are serving as headwinds for the growth and performance of strategy and even the Bitcoin treasury industry more broadly? And what actions can be taken to overcome those?

A: Michael Saylor said one challenge is Bitcoin not viewed as capital by traditional credit ratings industry, need to educate banks, insurance companies, credit rating agencies. Another is banking acceptance, custody and credit banks issuing credit on Bitcoin, need to lobby and educate them. Also, educating traditional fixed income investors.

Q: You received a credit rating, and I agree that, that's a very important first step to opening doors at pension funds and insurance companies. I know it's very early days, but are you already having conversations with those investors? And if so, what's the feedback? And then as a second part to that question, would you have the preferreds and converts rated separately?

A: Phong Le said before rating, large institutions couldn't invest in unrated instrument, now rating opens doors. Feedback is they're interested in structure but couldn't invest before. On separate rating, thinks investors will infer instrument ratings from general company rating.

Q: The 30% BTC yield target for 2025, I'm surprised you maintained it given the recent decel in Bitcoin accumulation. And getting to 30% would seem to require you to raise at least another couple of billion dollars, and we only have 2 months left in the year. You're not going to get there on ATMs alone. Are you currently contemplating a big underwritten transaction perhaps in an overseas market? Is that sort of how you get to the 30%?

A: Phong Le said need to raise roughly $2 billion in non-dilutive capital, will be racing to accomplish, working on credit factory and new things.

Q: Over the last 12 months, strategy has been extremely successful at building the capital base and expanding the balance sheet using primarily equity in the IPOs from the preferred markets. And over that 12 months, you saw MSTR underperform Bitcoin in a fairly significant manner. Do you guys view the strategic priorities moving forward as focusing more on increasing amplification and less on expanding the balance sheet? And how has this past year informed your go-forward strategy and how you might prioritize the prefs over the common equity moving forward?

A: Michael Saylor said aim to create monster company, prefer disciplined growth, coast with bulletproof balance sheet rather than stretch for capital, want to create digital credit instruments that are 2x to 4x better than everything in the market, prioritize creating revolutionary digital credit products for comfortable retirement of people.