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Shirish Jajodia: Hello, everyone, and good evening. I am Shirish Jajodia, Vice President of Investor Relations and Treasury at MicroStrategy. I’ll be your moderator for MicroStrategy’s 2022 Fourth Quarter Earnings Webinar. Before we proceed, I will read the Safe Harbor statement. Some of the information we provide during today’s call 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 the risk factors discussed in our most recent 10-Q filed with the SEC. We assume no obligation to update these forward-looking statements, which speak only as of today. Also, during today’s call, we will refer to certain non-GAAP financial measures.

Reconciliations showing GAAP versus non-GAAP results are available in our earnings release and presentation, which were issued today and are available on our website at microstrategy.com. I would like to welcome you all to today’s webinar and let you know that we will taking questions through the Q&A feature at the bottom of your screen. You can submit questions throughout the webinar, and Michael, Phong or Andrew will answer questions at the end of the session. Please be sure to provide your name and your company’s name when submitting your questions. Now I will walk you through the agenda for today’s call. First, Phong Le will cover the business results for the full year 2022. Second, Andrew Kang will cover the financial results for the fourth quarter of 2022; then Michael Saylor will provide a strategic review and discuss recent bitcoin market enlightening network market updates.

And lastly, we will open up to Q&A. With that, I will turn the call over to Phong Le, President and CEO of MicroStrategy.

Phong Le: Thank you, Shirish. I’d like to welcome all of you to today’s webinar regarding our 2022 fourth quarter and full year financial results. I want to start by recapping our strategy and underscoring our key highlights for the full year 2022. We have two corporate strategies, first, an operating strategy and second a balance sheet strategy. The Business Intelligence operating strategy is how we generate revenues and where most of our operating costs are incurred, and generates our cash flows. MicroStrategy at this point is the largest independent publicly traded business intelligence company in the world. Our goal is to remain a leader in this space by being modern, open and enterprise oriented. Substantially all our employees in the company over 2100 people are focused on our software business.

Our Bitcoin acquisition strategy is a balance sheet strategy. As of today, we’re the largest publicly traded corporate holder of Bitcoin in the world. We were the first public company to adopt Bitcoin as a primary treasury reserve asset. Our strategy is to acquire and hold Bitcoin for long term. We purchase Bitcoin using our excess cash, and with the net proceeds of capital raising transactions. I’ll address our Bitcoin acquisition strategy first. In the fourth quarter, we purchased 3,204 bitcoins at an average purchase price of $17,616 per Bitcoin. And we sold 704 Bitcoins for the first time, at an average sale price of approximately $16,786 per Bitcoin, resulting a net increase in our Bitcoin holdings of approximately 2,500 for a net aggregate purchase amount $45 million, or approximately $17,850 per Bitcoin, inclusive of fees and expenses.

Andrew will discuss our Bitcoin transactions in the fourth quarter later on this call. As of December 31 2022, we held a total of 132,500 bitcoins acquired an aggregate cost of $4 billion, or average cost of approximately $30,100 per Bitcoin. We remain committed to our Bitcoin acquisition strategy for the long term. In the fourth quarter, the broader crypto and digital assets markets witnessed significant financial distress. In addition, various prominent participants in the digital assets industry filed for bankruptcy, such as FTX, Voyager, Celsius and Genesis. And we do not have direct exposure to any of those companies. In addition, we conducted further diligence of our custodians and execution partners to assess their exposure to these companies and understand that their exposure was minimal.

Since the adoption of our Bitcoin acquisition strategy, we’ve taken a simple approach from day one, which is to buy and hold Bitcoin. We’ve taken steps along the way to minimize risk, particularly with counterparties. We buy only Bitcoin in U.S. based markets. We custody Bitcoin with institutional grade U.S. based regulated custodians and cold storage, and we have not lended our Bitcoin to third parties for yield or any other purposes. As a result, we’ve been able to avoid transacting with bad actors in the space. To summarize our view on Bitcoin. First, we continue to have a high level of conviction in the value proposition of Bitcoin. We’re very supportive of the Bitcoin network on a go forward basis. Second, we continue to follow a risk managed approach to executing our Bitcoin acquisition strategy.

And third, we’re long term focused, we plan to continue to accumulate Bitcoin over time, our core business is not impacted by near term bitcoin price fluctuations. With that, I will now turn to our software strategy highlights from 2022. We achieve constant currency total revenue growth for 2022 on the strength of our cloud business, despite a challenging macroeconomic environment last year, with high inflation, weakening foreign currencies in the ongoing war in Ukraine. Total Revenue for 2022 was $499.3 million, which increased 2% year-over-year on a constant currency basis. Total software licenses which consists of total product licenses and subscription services revenues in our consolidated statement of operations were $147.2 million, which increased 6% year-over-year on a constant currency basis.

We’ve also made important progress in our shift towards our cloud offering, resulting in annual subscription revenues of $60.7 million, an increase of 46% year-over-year on a constant currency basis. Annual subscription billings were $77 million growing 39% year-over-year. The strong growth in our subscription revenue and billings was driven by both existing customer migrations to the cloud, and new customer wins. Our customer revenue renewal rates continue to be among the highest we’ve ever experienced. Overall, we continue to see further global adoption of our cloud platform among our international customers. We’re also seeing the benefits of being a single analytics platform in the industry that is both enterprise grade and easy to use. As an enterprise grade platform, we’re benefiting from the trend of BI modernization and consolidation from enterprise tools like SAP Business Objects, and IBM Cognos.

As an easy to use platform for govern Ad Hoc Data Discovery, we are the tool of choice for corporations that have outgrown Microsoft Power BI and Salesforce Tableau are no longer want to be locked into a single vendor ecosystem. On the cost side, we believe in a thoughtful approach to cost management on an ongoing quarterly basis, rather than annual surges in hiring, followed by mass layoffs. We continue to invest in R&D to innovate our product, while being thoughtful about sales and marketing, and general and administrative cost. As a result, we saw relatively flat operating cost from 2021 to 2022. Next, I would like to discuss our key focus areas for 2023. First, we aim to launch something called MicroStrategy One , which will serve as our core analytics platform designed to meet all of an organization’s analytics needs.

It will be easy to use powerful, comprehensive and cutting edge. It’s intended to be a one stop shop for all of our business intelligence customers and prospects. You should expect to hear more about this from us throughout the first half of 2023, culminating in our MicroStrategy world event on May 1 through fourth in Orlando, Florida. Core differentiators for MicroStrategy continue to be our enterprise analytics, embedded analytics and cloud offerings. Our focus on these three areas has resulted in more customers choosing to decommission and consolidate legacy platforms in favor of an enterprise wide adoption of MicroStrategy. So this has led to increasing revenue renewal rates every year in the last three years. Our customers depend on these differentiating capabilities to build mission critical applications to run their field forces, store operations, bank branches, risk analysis groups, corporate operations and much more.

As such, it’s worthwhile to highlight the resiliency of our business even in the tough macro conditions that existed in 2022. We’re the only remaining publicly traded independent Enterprise BI company, and the stickiness of our products and the long standing tenure of our top customers are testament to our resiliency. Our continued investment research and development has enabled us to modernize our platform and enable our customers to transform how they do business through innovative analytics tools and techniques. These include personalized applications, immersive interactive, visualizations, simple no code and low code application development with open API’s, flexibility of consumption through mobile interfaces, and innovative capabilities like hyper intelligence.

We continue to see growth with customers who build MicroStrategy into the software solutions that they sell to end users, leveraging our open embedded analytics capabilities. Second, not new, but even more in our focus, is growth. We’re going to focus on simplifying our processes growing our pipeline and growing our revenues. We plan to get back in the market and in front of our prospects through in person field events, field marketing, aggressive account based marketing, and a revitalized partner program. Third, cloud is at front and center, when we talk about focus on growth. As MicroStrategy Cloud continues to be growing part of our business mix, we’re seeking to accelerate growth through increased cloud adoption by both new and existing customers.

New customers are increasingly cloud first and immediately reap the benefits of our managed service offering. That includes business agility, enterprise security, regular updates and upgrades and cost savings. At the same time, more and more existing on-premises customers are brought migrating to the cloud and expanding their MicroStrategy usage to new departments and user groups. Intentional in our approach to cloud is our belief in cloud agility and independence. The power of multi cloud hybrid and the portability between private and public clouds resonates with our customers who do not want to be locked into a single technology stack. We seek to take advantage of the best that each major cloud provider has to offer, optimizing our platform to run on and across each.

We’ll continue to invest in this area to support our customers need for flexibility, scalability and security. In Q4, MicroStrategy Cloud for Governments, or MCG is our new cloud offering received authorization to operate under FedRAMP guidelines. MCG is a managed software as a service solution and our first generally available release of our cloud platform that is built on a modern high performance cloud native architecture that also utilizes containers and micro services. It delivers on sophisticated security and data privacy requirements across the public and private sectors. It opens up the possibility migrating a large part of our business, federal government customers to the cloud. Our fourth area focus on our employees. Our employees are our key assets.

And we will continue to develop and promote people internally and seek to improve employee engagement. Our employee engagement survey results indicate that we have made great improvements to employees, mental wellbeing, loyalty, and belief in the company’s two corporate strategies. We’re also continuing to develop technical training and certifications to keep our employees up to date on the latest MicroStrategy software enhancements and soft skills training to keep our managers engaged and employees motivated. And the last thing is that we’ll focus more on innovation, both on business intelligence, as well as on our Bitcoin acquisition strategy. On the BI innovation side, MicroStrategy Insights is our first set of products released in the area of artificial intelligence and machine learning to augment more traditional reporting capabilities, and provide contextual and immediate insights.

The insights feature accelerates decision making uncovers data patterns with automated alerting, and library applications. The alerts are based on machine learning models working behind the scenes to proactively detect data trends, outliers and anomalies, equipping users with the timely insights to drive action. This is the basis on which we’re combining MicroStrategy semantic layer, hyper intelligence and open architecture to provide the data tracking alerts, forecasting recommendations, and ultimately artificial intelligence that will be key for the future of analytics and intelligence. We believe this is something MicroStrategy is uniquely positioned to provide and we expect to release more functionality in this area every quarter. On the Bitcoin innovation side is indicated on our last earnings call, today I’m delighted to share a preview of MicroStrategy Lightening, our new product that we’re developing, which utilizes the lightening network, a second layer network that sits atop to Bitcoin network.

We envision MicroStrategy lightening is an enterprise platform designed to leverage the power of the Bitcoin lightening network to enable new ecommerce use cases and tackle modern cybersecurity challenges. The first component of MicroStrategy lightening platform is lightening rewards, lightening rewards is attended allow any enterprise to reward their employees, customers, partners and prospects for their engagement. Companies spend vast amounts of time and money and digital marketing, driving engagement with their brand and their customers and for some monetizing online contents. We believe a platform like MicroStrategy lightening can enable them to drive that engagement, rewarding their customers for that engagement directly, rather than lining the pockets of online ad giants.

We expect future capabilities the lightening platform will provide opportunities for new business models to monetize online content, or minimize threats and the nuisance of bots and other malicious actors. While we envision MicroStrategy lightening is independent product offering, it builds on our core strengths and deep experience building highly available, easy to use enterprise software delivered in the cloud. We’re taking a very disciplined investment approach such that our lightning development efforts currently occupy less than 1% of our R&D capacity. We’re currently in the initial pilot stage of the product with our early prerelease version rolled out internally to MicroStrategy employees. While our core focus remains on BI innovation.

We believe we’re uniquely positioned to bring value here. Mike will elaborate further on this topic. Last but not least, I’m thrilled to share again, that our next MicroStrategy world will be in person from May 1 to fourth in Orlando, Florida. Our customers have expressed willingness and desire to for meaningful rich in person connections alongside virtual meetings. So we’re bringing back world €˜23 as a bigger scale event with multiple trucks. The Business Intelligence track on May 1 through fourth will be a working event designed to help modernize analytics for innovative organizations looking to transform with data. We’re excited to showcase some of the world’s best brands use modern experiences to break through and achieve extraordinary results.

The Bitcoin track on May 3 through fourth will include our third annual Bitcoin for corporations on May 3, and a dedicated lightening for corporations to and May 4. There’ll be a first of its kind gathering of corporations looking to integrate Bitcoin and Lightening as a part of their corporate treasury or product offerings. The conference will also include dedicated networking opportunities workshops and training. And finally MicroStrategy will be incomplete without an epic party. We’re hosting a theme park conference party Universal Studios, Florida featuring roller coasters and an evening of unforgettable fun and excitement. We look forward to your participation at the conference. Registrations are open and additional details can be found on our event website at microstrategy.com/world 23.

Now I’ll turn the call over to Andrew to discuss our financials for the quarter in further detail.

Andrew Kang: Thank you, Phong. Before jumping into the quarterly results, I’d like to quickly reemphasize MicroStrategy’s revenue priorities. Our three-decade long history of providing data analytics solutions to large and small corporations, has established a long tenured and diverse customer mix, where our platform has proven to be a critical component in running our customers businesses day to day. Our platform has demonstrated durability through tough economic cycles and has been strategic during times of growth, and important foundation to our revenue it is through supporting our existing customers as their businesses evolve. We continue to deliver for our customers as seen in our consistently high renewal rates. And over 90% for the last five consecutive quarters and as high as 95% in Q4 of last year.

Second, growing cloud revenue, which for us means migrating existing customers into a fully hosted and managed cloud subscription model, which Phong talked about earlier. Winning new logos into the cloud is important and uplifting services for existing cloud customers is also critical. We are very pleased with our performance in all these areas this past year. But keep in mind as we migrate to the cloud we inherently experienced some offsets in areas like audit license and support revenues. However, the transition to a subscription model will establish high quality annual recurring revenues that will allow us to scale even stronger growth in the future. And Q4 of last year approximately 64% of our total revenue was recurring, compared to approximately 60% in the same quarter over prior year, a trend that we expect will continue in 2023.

Lastly, our consulting business which has been and continues to be essential in providing expert support and solutions to our customers. They not only champion solutions, but they also drive modernization and also impact growth through partner opportunities. Okay, turning to the results. Total revenues for the fourth quarter were $132.6 million, down $2 million, or approximately 1% year-over-year. However, at constant currency Q4 total revenues were up 4% year-over-year, similar to the trend we saw in Q3. Total software license revenues were $45 million, up 1% year-over-year, and up 8% at constant currency. When we look at product license revenues and subscription service revenues together, year-over-year growth on both a GAAP basis and at constant currency continue to show the overall growth momentum or cloud transition.

Subscription service revenues were $17.5 million, an increase of 47% year-over-year and up 54% at constant currency. While product licensed revenues were $27.6 million for the quarter, down 15% year-over-year and product support revenues were $66.8 million down $2.3 million year-over-year, but up 1% at constant currency. These trends are consistent with revenue themes that I mentioned earlier. Finally, other services revenues were $28.7 million, a slight 1% decrease year-over-year, but an increase at 5% at constant currency. Our worldwide consulting business which makes up the majority of our other services revenues saw higher bill rates globally in Q4, with particularly strong performance among our European and Argentina consultants. To add to that, we’re also seeing early success and momentum in the build out number of India workforce, where we plan to grow strategically in future quarters.

Turning to slide 14, we continue to see growth in our software license and subscription billings driven by the continued strong momentum in cloud. Total current software license billings increased to $61 million in the fourth quarter, which was an increase of 10% year-over-year. Current subscription billings were $31 million, an increase of 28% year-over-year, our 11 straight quarter of double digit growth. And full year €˜22 annual subscription billings was 39% compared to the prior 12 months, with both subscription service revenue and current deferred subscription revenue growing over 40% each year for the full year 2022 compared to 2021. We are extremely pleased with cloud growth in 2022, which has exceeded expectations in the timeline for transforming and modernizing our BI platform.

2023, will provide to be a pivotal year as well, as we began to see the benefits of the scaling up of our cloud business and the adoption for our customers in the past two years. Turning to costs. Total non-GAAP expenses, which exclude share based compensation costs were $309 million in the fourth quarter, or $50 million higher year-over-year. $51 million of the year-over-year increase was attributed to Bitcoin impairment charges in the quarter as a result of the price volatility we saw in Q4. This was driven largely by the clubs of FTX and its impact to the broader digital asset market. The price of Bitcoin which fell to a low of approximately $15,460 during the quarter, which drove the additional impairment for Bitcoin holdings under the current accounting rules.

Non-GAAP cost of revenues were $26 million in the fourth quarter an increase of $2.5 million or 11% year-over-year. As a percentage of total revenues non-GAAP cost of revenues increased 2% year-over-year, related in part to the growth of our cloud business similar to what we’ve seen in recent quarters. Non-GAAP sales and marketing expense decreased $3 million, or 8% year-over-year to $37 million or as a percentage of total revenues lower by 2% year-over-year. This was due in part to a combination of higher net capitalized commissions this quarter, plus some favorable X FX impacts compared to the same quarter in the prior year. Non-GAAP R&D expenses were $28 million in Q4, a slight increase of $300,000 compared to the prior year. In this area, we continue to prioritize vendors, as Phong mentioned, and increase their talent and resources on average for the year.

But we did so intentionally and in a way that kept expenses flat by leveraging a more cost efficient global delivery centers. Our non-GAAP G&A costs were $21 million, pretty much flat, the decrease of about $400,000 or 2% year-over-year. As Phong mentioned earlier, our focus on lowering costs has been ongoing and frequent with a strict discipline in managing efficient personnel and non-personnel costs. It’s not something that we just started thinking about in the second half of last year. In fact, we were fortunate to add this focus even prior to this past year when we did see higher wages and expenses, revenue headwinds due to weaker foreign currencies and we also saw the negative impacts from the war in Ukraine. Aside from our Bitcoin impairment related expenses, we kept our costs flat year-over-year.

Looking forward, we plan to remain cost conscious while continuing to invest in higher end growth areas like optimizing our talent and resources across our growing global footprint focusing on lower cost markets. On slide 16, total non-GAAP operating loss in the fourth quarter was $177 million, while the digital asset impairment charge for the quarter was at $198 million. As I have said in past quarters since the adoption of our Bitcoin Strategy in Q3 of 2020, the digital asset impairment charges we have incurred each quarter has always been greater than our non-GAAP operating losses, showing the significant impact it has had on our reported income. On slide 17, as of December 31 2022, the carrying value of our Bitcoin holdings was approximately $1.8 billion, compared to approximately $2.2 billion, based on the price of $16,556 as of the last day of the year.

So far this year, Bitcoin prices have rallied significantly, along with the market value of our Bitcoins, increasing to approximately $3.1 billion as a close of markets yesterday, and trending even higher since then. To touch on the regulatory perspective, we continue to be optimistic with the progress that the Financial Accounting Standards Board has made and its steps update how companies measures certain digital assets, including Bitcoin on balance sheets. Since announcing this as an inject agenda item last year, the FASB has moved expeditiously and voted and agreed on how crypto assets should be presented in financial statements and what disclosures should be required under expected fair value accounting standards. We recognize that what has been completed thus far are just the initial steps in the standard setting process.

But we are encouraged that the progress up till now has been aligned with standard fair value practices. We continue to remain committed and supportive of FASB decisions under focus on improved investor transparency for digital assets. On slide 18, as of December 31 2022, we held a total 132,500 bitcoins, of which 14,890 bitcoins were held directly by MicroStrategy at the parent, with the remaining 117,610 bitcoins, held at the MicroStrategy subsidiary. Although bitcoins held at the sub approximately 34,600 bitcoins are pledged as collateral to Silvergate loan and just over 82,900 bitcoins or 63% of our total Bitcoin holdings, equivalent to approximately $2 billion at the current approximate market value of $23,800 remain unpledged and unencumbered.

Regarding the Silvergate loan, we remain fully in compliance with the loan to value requirements, and as we have detailed in the past, we continue to have sufficient unencumbered collateral to address any foreseeable volatility in Bitcoin prices in the near term. It is worth highlighting again to that if the Bitcoin prices increase and the loan to value ratio is less than 25%, we’re able to release any excess collateral from being pledged to the loan. Our current LTV on this loan is now very close, if not at that level. As Phong mentioned earlier, for the first time in the fourth quarter, we sold approximately 704 Bitcoins that carried a higher tax cost basis compared to the market price of the Bitcoin at the time we sale. The transactions generated capital losses of approximately $34 million which we expect to carry back against previous capital gains.

And to the extent such carry backs are available, we expect to generate a tax benefit. Even with the aforementioned sale, we increased our net holdings by 2500 bitcoins during the quarter. And we continually explore opportunities to use our bitcoins to generate shareholder value, and we may consider pursuing additional transactions that may take advantage of the volatility in Bitcoin prices, or other market dislocations that are consistent with their long term Bitcoin strategy. We will thoughtfully consider any other opportunities in the future and if we choose to pursue anything, we will carefully assess any potential risks and do so in a prudent manner as we have done in the past. Turning to slide 19, our debt capital structure remains unchanged with the total $2.4 billion of its outstanding debt and convertible instruments, which carry a blended interest rate of approximately 2.1%.

The convertible senior notes carry an extremely low cost of funds with the earliest debt maturity not until March 2025. These convertible notes are very attractive in terms of costs, and with over two years remaining until the earlier of the maturities, not outstanding long term capital remains very valuable. In Q4, we activated a $500 million at the market or ATM equity offering, an issued an aggregate 218,575,000 of shares Class A common stock at an average gross price per share of approximately $213.16. We raised approximately $46.6 million in gross proceeds, which leaves us with approximately $453 million of outstanding ATM capacity available under our program. We will continue to evaluate and sell equity under this existing program, when we believe there’s an embedded valuation premium in our stock, compared to the market value of our Bitcoin holdings and our estimated value of our software business.

Use of those proceeds will be for general corporate purposes, including for the purchase of Bitcoin, or for other general corporate liquidity needs. As we execute under the program, we will do so with a discipline focus on growing shareholder value, optimizing our capital structure and maintaining adequate liquidity to run and grow our business. The overall liquidity from both our operating and financing activities remains more than sufficient to manage our ongoing working capital needs grow our business as well as manage our debt expense. Our outlook for 2023 remains cautious but optimistic. We are planning for the recent trends in macro and market volatility to likely persist in the near term. However, we are encouraged that even in this environment of constant change, businesses need actionable data and analytics to succeed.

And open architecture to be agile and cloud capabilities to be cost efficient and effective. MicroStrategy delivers all of these. In 2023, we will target modest constant currency total revenue growth. We will continue to grow cloud subscription billings as a percentage of total revenue and we will continue to strengthen the quality of our recurring revenue as we continue to transform our platform to the cloud. We will remain disciplined and scrutinized costs on investing in growth areas. And we will continue to execute on our dual strategy of growing our business intelligence and acquiring and holding Bitcoin. Thank you for your time today and for your continued support of MicroStrategy. I’ll now turn the call over to Michael for his remarks.

Michael Saylor: Thank you, Andrew. I’m Michael Sailor, the Executive Chairman of MicroStrategy. First, I’d like to provide our performance review. When we think about the corporate strategy and its effectiveness, we go back to the summer of 2020 when we made our major strategic decision, and it was on August 11 of 2020 that we announced to the world that we had acquired $250 million worth of bitcoin, along with a tender offer. At that — on the day before our stock was about $121 to $122 a share. Today, the stock closed to $292 a share. So of course, we measure our success based upon the creation of shareholder value. And if we look at the performance of the company stock since August 10 2020 to the close of business 4pm Eastern Time February 1, you can see the MicroStrategy stock is up 117%.

We pick a number of different benchmarks. I think the most important benchmark is bitcoins performance. And you can see from this chart that Bitcoin notwithstanding the fact that it is — it is known by all to be volatile. Everyone that talks about Bitcoin talks about it being volatile, nobody that talks about Bitcoin actually points out that, despite its volatility, it is the number one performing asset over the past 2.5 years. So we can see bitcoin is up 98% versus August 10 2020. And that’s just a really critical day. So MicroStrategy stock is levered against the Bitcoin. And so through our execution, we’ve been able to outperform Bitcoin as an index. So we’re pretty pleased with that. We can trust the performance of Bitcoin to other major asset classes and indexes.

And you can see that while bitcoins up 98%. A diversified portfolio of high quality companies, such as the S&P 500 is up 23%, in that same time period. The NASDAQ is up 8% over the course of the 2.5 years. Gold is a loser, gold has lost 5% since the summer, since August 10 of 2020. Bonds have been even worse performers. So if you’d invested your treasury in long dated bonds, like the BOND and down 16% in your capital. And although people often talk about gold and silver is money, you can see that silver is even a weaker monetary asset than gold, it’s down 19% over that time period. So benchmarking a digital commodity or in this case, a digital scarcity like Bitcoin versus all of these other asset classes, you can see that Bitcoin has been the strongest performer not by even a small amount by a factor of five to 10x over other options.

We also benchmark ourselves against big tech stocks. And so if we look at big tech, you can see that Google, Apple and Microsoft, which are three effective digital monopolies, and three of the strongest companies in the world, without dispute, they’re up respectively 36% 29% and 21%. They’ve underperformed Bitcoin by a factor of three to four, or three to five, and MicroStrategy of course has outperformed them all substantially. Now Netflix, Amazon and Meta group, all down minus 25% minus 33% and minus 42%. So this is a sobering observation because most of those names are actually monopolies and they have overwhelming crushing domination. But what this illustrates is that in the summer of 2020, investors were faced with a very, very difficult challenge, because it’s just not easy to figure out what to invest in when interest rates went to zero and when we’d already had a substantial bounce in risk assets.

And you can see of all these choices, Bitcoin, clearly would have outperformed them all. We also benchmark ourselves against enterprise software stocks. So Oracle is very well known and it’s huge, its up 64%, it’s actually done quite well it’s done better than all the big tech stocks. It’s very conservatively managed industrial software company. But still dramatically underperformed Bitcoin and MicroStrategy as an asset and of course IBM up 11%, Salesforce down 13%, SAP down 24%. People often ask us so why did we do this and are we pleased with the result and of course there are lots of headlines about accounting charges and quarterly losses or GAAP losses but as you can see, if you’re a shareholder and your choice was to choose from any of the bars on this screen, MicroStrategy is still the number one choice and Bitcoin is the number two choice of what you want to invest in as commodity bitcoin is the winner as a commodity and asset class and if you want to invest in a security, MicroStrategy has worked very hard to provide shareholder value to our investors.

We have lots of decisions to make as quarters go by. And we always try to evaluate what is the best path forward for our shareholders, what is most accretive for the equity holders of MSTR. And I think that the scorecard illustrates that. To-date so far, we have been effective in that. And we’ll continue to focus. This chart really illustrates why we are so committed to our Bitcoin strategy. And as you can imagine, it also illustrates the benefits to the corporate brand and micro strategy, all of our employees, all of our partners, all of our customers and all of our shareholders of this strategy. I would like to say a few words about a couple of other areas. Let’s start with the macroeconomic situation. 2022 was a brutally difficult year on a macroeconomic basis as short term interest rates went from effectively nothing to 4.5% and that resulted in a drawdown in all financial assets.

That was quite painful. I expect as we go forward, there’ll be some normalization in 2023 and 2024. And I think the general macroeconomic environment is rotating to a more beneficial place for us, and generally for the Bitcoin community. We have always focused on Bitcoin rather than crypto. And so if you look at the micro economic situation the past 12 months, most of the crypto enterprises and the crypto assets, and the crypto use cases have melted down in that time period. Of course, we know the stories of the bankruptcies of BlockFi and Celsius and FTX and Genesis, and Voyager and Alameda. And we also know about the meltdowns of all the crypto tokens, the Luna token, the Terra token, the FTT, token etcetera. In our opinion, these were all very weak use cases, and they were very fragile structures, and it was a matter of time before they do meltdown.

The meltdown of that has created short term negative headwinds for Bitcoin because Bitcoin has cross collateralized with all these other cryptos. But long term, the rationalization of the crypto market will be beneficial for Bitcoin, it has educated an entire generation of investors on the benefits of Bitcoin as a decentralized digital commodity, and the benefits of not having counterparty risk. It’s made, I think, pretty clear what the difference between an asset with an issuer versus an asset without an issuer. And it’s also illustrated the benefits of being able to solve custody and the risks of being dependent upon another custodian. The reason that MicroStrategy was able to get through this entire crypto winner is because we weren’t exposed directly to any cryptos.

Nor did we do business with any of the crypto exchanges and we didn’t do it for very clear reasons, because we don’t believe in the value proposition of unregistered securities. And we felt that at some point, eventually, the combination of risky behavior in the crypto industry and the ethical and the legal overhang of the unregistered securities would eventually create a liability. I think as we go forward, you’re going to see much stronger institutions that will be entering the space and they’re going to be entering because the industry has rationalized. So the future is fewer assets, fewer — better institutions, less of the crypto risk taking. And if there is any other result of the crypto winner is, so we can see that everywhere in the world regulators and the general public are enthusiastic about the promise of digital assets.

They’re hungry for a clear digital asset framework. I think that there’ll be more focus on creating a constructive framework and I think people understand better. Why you can’t create a digital asset framework based upon unregistered securities without proper disclosure. We’ve said before, the only real safe haven for an institutional investor is Bitcoin. Bitcoin is the only universally acknowledged digital commodity. And so if you’re an investor, Bitcoin is your safe haven in this regard, the others are all question marks, they’re all generally unregistered securities and they operate in a regulatory gray zone. I expect that we will make progress with regard to regulatory developments that will be constructive for the industry. It’s not going as fast as we would like.

The consistent denial of Bitcoin spot ETFs has been a disappointment. The lack of a clear digital assets framework from coming from regulators or legislators is a disappointment. But having said that, it’s pretty clear that that will arrive in time and we do see signs of optimism here auspicious developments. All the FASB initiatives to introduce fair value accounting for Bitcoin is very auspicious development. The bipartisan support for Bitcoin and for digital assets in general in Congress is an auspicious development. The acknowledgement by all major public figures to Bitcoin is a digital commodity worthy of attention is an auspicious development. And the fact that Bitcoin has managed to survive the meltdown of most of the crypto banks and crypto lenders and most of the crypto exchanges and most of the other crypto assets is a very auspicious development.

So I think 2022 prove the resilience of Bitcoin and then also prove the resilience of MicroStrategy’s business model. And now we look excitedly forward to 2023 and 2024, where we think most of the poor behaviors or the irresponsible behaviors have been squeezed out of the system. And most of the inappropriate leverage has been squeezed out of the system. And I don’t think that people in the crypto market will, I don’t think they’ll engage in the same behaviors that they got away with in the previous few years, because I think the public has been educated. And I think generally, we have a much more sophisticated set of investors and actors in the space, all of which I think is good for Bitcoin. The last point I’ll make on Lightening, Lightening is really spreading rapidly.

And it’s being adopted by many, many, many businesses. We see dozens and dozens of lightening startups being launched, lots of lightening wallets. We see some exciting applications of lightening. And I think that’s only going to continue — lightening liquidity continues to increase. We as a company have been very pleased with the early results of our lightening R&D effort and MicroStrategy lightening product development. It’s quite impressive what you can do with lightening. I think. Traditionally, the primary criticism of Bitcoin was the slow transaction rate on the base chain made it difficult for people to see how billions of individuals would onboard to the network and how billions of transactions could take place. But now I think as lightening has spread, it’s becoming fairly straightforward and quite easy to see how that’s going to happen.

We’re going to see first dozens and then hundreds and then 1000s of layer three applications to move Bitcoin within a custodial network like cash app, or like a coin base, or a binance. And then we’re going to see, all of those applications start to knit together with a layer two protocol, which we call lightening. And as they adopt lightening as their Layer 2 protocol, we’ll see, there’ll be massive transaction throughput on the Layer 3, and then we will see people depositing and withdrawing satoshis, on layer 2s, and then we’ll see the layer 1 will evolve to become the settlement network of the entire global digital monetary system. And that’s why we decided to host a lightening for corporations track at MicroStrategy world coming up in May.

This will be a first, to my knowledge. No one’s actually hosted a lightening for corporations conference. But we think that 2023 is the right time, it’s become increasingly clear that you can build Bitcoin and Satoshis and micro transactions into your products and into your services using the lightening protocol. And I think that there’ll be a whole set of breakthrough applications and breakthrough products using lightening. So 2023 is an exciting year and I think we’re moving into the most exciting phase of Bitcoin development ever. Bitcoin is emerging as the grown up institutional asset in the digital ecosystem. And lightening is emerging as the universal language for moving money over IP. And so with that, I’d like to go and pass the floor back to Shirish to open us up to questions and answers.

A – Shirish Jajodia: Great. Thank you, Michael. So we are going to jump right into the questions. And the first question is for Phong. Phong, could you could you update us on the progress of your cloud product and capabilities? And how customer migrations are faring today? And what are your expectations for cloud business growth, given the different macro?

Phong Le: Thanks, Shirish. Cloud growth is going very well, in 2022, grew on a revenue basis 46% constant currency and on billions basis up 39%, which both represent a bit of an acceleration in 2022. I think we’ll be able to see that same pace of growth or something a little faster will be our goal in 2023. I don’t think the macroeconomic headwinds will slow or cloud growth. If anything, we might see a slowness of cloud growth because we’re getting into bigger and bigger customers. Now, we’ve moved at this point, about 20% of our recurring revenue is in the cloud. So we moved to a good amount of sort of medium sized customers. But that’s where MCG MicroStrategy Cloud for Government or a FedRAMP offering is going to help us. There’s quite a bit of federal customers, large banks that require some sort of a FedRAMP certification, those will take longer to migrate.

But I think that’s really this sort of next passion that we’ll go after. But I’m pretty excited about where cloud growth is going. And obviously, is getting to be more and more the standard sort of way we sell our software.

Shirish Jajodia: Thanks, Phong. Next question is for Andrew. Can you please provide more detail about your sale of Bitcoin in December? And do you intend to make any further sales?

Andrew Kang: Thanks, Shirish for the question. As I mentioned in the prepared remarks, we sold 704 Bitcoin in December, which generated a capital loss, which we expect to carry back against the capital gain from 2019, which was through an old domain name sale. Apart from that sale, we have not sold any other Bitcoin. And, in fact, I think the main takeaway should be that we have continued to increase our total Bitcoin holdings each quarter since inception, including Q4. And I mentioned this before as well. But, we don’t really stop exploring opportunities and thinking of ways to increase shareholder value related to our Bitcoin. And in the future, we may consider doing other things that may take advantage of market volatility or be opportunistic in the market I guess either way anything we do, we’ll do it consistently, within the construct of our long term Bitcoin strategy, which is to buy hold and grow.

Shirish Jajodia: Thanks, Andrew. Next question is for Michael. In light of the recent crypto market events, what do you think, are the key catalysts for more adoption of Bitcoin by corporations?

Andrew Kang: I think fair value accounting is going to be a big plus for corporate adoption. Since clearly, the gap volatility created by indefinite intangible accounting is a negative for CFOs. I think the rollout of lightening for corporations are going to be another big catalyst because the ability to build Bitcoin and play to earn or a Bitcoin rewards or Bitcoin into marketing programs, and to do micro transactions is going to be viewed as a real exciting benefit, it could be a great solution for Chief Marketing Officers, or CHR, or CEOs or heads of sales. I think that the overtime one big driver is payment networks are inefficient, and slow and expensive. So as companies figure out how to monetize their applications and move small micro transactions around friction free at zero cost, I think that there’s going to be an interesting use case for heads of sales and CEOs. So in short, maybe the last thing is any regulatory clarity that comes from Washington DC, with regard to the digital assets, ecosystem, will be a big driver.

And so I think we’re all eagerly awaiting some sort of digital assets framework. Bitcoin is, is right now, as I said, the only universally acknowledged digital commodity. And so in a way, it’s the one thing you can deal with in the absence of asset framework. But I also think Bitcoin will probably be the biggest winner if there is a digital assets framework, because it’ll just accelerate institutional adoption, both on the investor side and the corporate side. So I would look to those three drivers.

Shirish Jajodia: Thanks, Michael. Next question is for Phong. With respect to the competition and demand. So there are two parts? Have you seen any changes in the competitive environment, as customers look to bring down the cash burn? And what is the impact of macro on demand with respect to sales cycles and cloud migration?

Phong Le: Yes, the first item, I think the biggest trend we’re seeing as customers try to bring down their software costs is consolidation of vendors. And in the BI world, it’s really two credible choices for consolidation right now. It’s MicroStrategy, if you want a full enterprise solution, it’s Power BI, if you want a point, solution that integrates well with the rest of the Microsoft ecosystem. I think what we’ve seen in the last six to 12 months is that as more companies are trying to use Microsoft, whether it be Azure, Power BI or otherwise, they’re realizing the limitations, there’s not a common semantic model, there aren’t reusable objects. It’s not scalable, it’s not as secure. And I think customers are also realizing that free Power BI with your office 365 Enterprise license just means you’re going to pay more than Azure cost.

And it’s a well-worn model where you give certain things away for free to drive more usage costs. And so we see a lot of customers consolidating on MicroStrategy. And so even though there may be a reduction in overall spend, we get more of the pie. And I’m excited about that. As far as the macro environment, Q4 was more difficult, especially internationally as because customers are trying to spend a little bit less. With that said, we still had a reasonable outcome in terms of our Q4 financials driven by our move to cloud. And I do think 2023 is looking a little bit brighter in terms of companies needing to spend to improve their data and analytics environment. So I’m optimistic about the growth potential in 2023.

Shirish Jajodia: Thanks, Phong. Next question is for Andrew. Can you please provide your thought process on how do you plan to address the 2025 loan maturities coming up?

Andrew Kang: Thanks, Shirish. So there has been some volatility in our bond prices recently. And just looking back to Q4, we’ve seen that pretty clearly. But we’ve also seen that same volatility pretty dramatically rebound prices here in January in a very short period of time. I think with that kind of backdrop, and changes in the market, we are comfortable with our outstanding debt levels. And we’re confident than that when it does come due, we will be able to either refinance it, advertise it or pay it off. And we have a lot of different options available to us to manage those maturities. And the fact is, we still have a lot of time left to do so in the next two plus years.

Shirish Jajodia: Thanks, Andrew. We’ll take this one last question for Phong. What is your margin outlook for 2023? And how are you thinking about balancing revenue growth versus margin preservation?

Phong Le: Like that both are like, we’re going to focus on driving revenue growth and profitability or margin growth in 2023. I think big driver, that’s our acceleration of conversions to cloud, which allows us to see an uplift and cloud revenue and overall revenue from hosting term licenses and support fees. And a cost side Andrew mentioned it but we were we kept our costs relatively flat, our operating costs relatively flat from 2021 to 2022. The goal would be to do something similar or even reduce our costs a little bit. If you exclude the impact of the coin holdings. I’m talking about non-GAAP costs here. So if we can grow revenues and keep flat or reduce our costs in 2023, then we should be able to grow margins. And I think if the macroeconomic environment improves faster, we can do that even faster in 2023.

Shirish Jajodia: Great, thanks, Phong. I think that brings us to the end of the time for today’s webinar. Thank you everyone for the questions. This concludes the Q&A portion of the webinar and I will now hand over the call to Phong for closing remarks.

Phong Le: Thanks, Shirish. I want to thank everyone for being with us today. And we appreciate all of your support. We’re enthusiastic as ever on both of our strategies, our enterprise software strategy and our Bitcoin strategy. I wish you all a good quarter, and happy Spring and looking forward to seeing you again in 12 weeks. Thanks/