Palladyne AI Corp. Q1 FY2024 earnings call

• MicroStrategy is the largest corporate holder of Bitcoin globally, with 214,400 Bitcoins held as of April 26, 2024, having acquired 25,250 additional Bitcoins in Q1 2024.
• The company is positioned as the world's largest independent publicly traded business intelligence company, with over 1,800 employees focused on its software business. Subscription services revenues increased 22% year-over-year in Q1 2024 due to customer migrations to the cloud and new customer wins.
• MicroStrategy has key strategic goals in 2024: grow cloud, innovate with AI, and increase profitability. It offers various AI-powered functionalities like Auto SQL, Auto Dashboard, etc. and launched Auto Express for trialing AI capabilities.
• The company considers itself the world's first Bitcoin development company, using cash flows, equity, and debt financing to acquire Bitcoin as a primary treasury reserve asset. It has used $825 million in cash, $3.2 billion in equity, and $3.6 billion in debt to purchase Bitcoin since 2020.

In the first quarter of 2024, MicroStrategy's total revenues were $115.2 million, down 5% year-over-year. On-prem product license revenues, making up about 11% of total revenue, were approximately $12.9 million, down 26% year-over-year. Subscription services revenues, making up about 20% of total revenues, were $23 million, an increase of 22% year-over-year. The company remains the largest corporate holder of Bitcoin in the world, holding 214,400 Bitcoins with a total Bitcoin market value of $14 billion as of April 26, 2024. Since December 31, 2023, it acquired an additional 25,250 Bitcoins at a total purchase cost of $1.6 billion.

• Continue to grow cloud, innovate with AI, and increase profitability.
• Expect the shift from on-prem to cloud to result in short-term revenue decrease but long-term benefits from more recurring revenue.
• Plan to strategically and opportunistically buy more Bitcoin using excess cash from operations and proceeds from capital markets activities.

• Bitcoin price fluctuations can lead to impairment charges. For example, corporate and other operating expense category in Q1 2024 was almost entirely attributable to Bitcoin impairment charges of $192 million, compared to $20 million in Q1 2023.
• Volatility in the Bitcoin market and potential regulatory changes related to Bitcoin as an institutional asset class pose risks.

Q: Can you elaborate on the company's new positioning as the Bitcoin development company? And are there any new developments that you would like to highlight?

A: Yes. We talked about the Bitcoin development company. We'll have a half day on the technology ecosystem associated with Bitcoin at Bitcoin for corporations on Wednesday and share new developments in Bitcoin security.

Q: MicroStrategy's equity premium towards Bitcoin Holdings has expanded materially over the past few months. And, despite the recent Bitcoin pullback, the premium remains healthy? How do you think about the premium and what do you attribute this to?

A: If we have leverage and lower cost of capital, it justifies a premium. With $3 billion of converts at low interest and ability to issue equity at a premium, it strengthens the capital structure and justifies a higher premium.

Q: Has the 10B51 plan to exercise MicroStrategy stock options completed already? And can you please provide further color on the executed plan and the thought process behind the stock sales?

A: Yes, Michael's option exercises were planned and fully disclosed. The plan was related to 400,000 options set to expire in April. Sales were programmatic, selling 5,000 shares each trading day between Jan 2 and April 25 under the plan.

Q: Can you please elaborate on the progress of converting software clients to Cloud from license and the AI related partnerships?

A: We're aggressive with hyperscalers like Microsoft, AWS, and Google Cloud. Moving customers to cloud has short-term impact on product license revenue but long-term benefits. AI is only available in the cloud, which is an impetus for customers to move to cloud.