Earnings call transcript Q4 2022

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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. the materially including forward-looking in the recent filed differ various due our may XX-Q factors, important risk with results from statements these to most Actual SEC. factors discussed update We assume as today. forward-looking which speak of these no only statements, to obligation

during earnings refer certain release and which issued measures. we and non-GAAP results are are will versus today our microstrategy.com. showing presentation, GAAP non-GAAP call, website available available today's financial Also, to Reconciliations in at on our were

to all Q&A taking your you webinar the let like today's would will I of we you welcome questions and to screen. bottom know feature that the through at

You can your your company's the and at end Phong submit of your name the when name or and submitting be webinar, questions. provide Michael, Andrew session. will to questions throughout questions answer Please the sure

you Now the I will walk today's agenda for call. through

results cover will Le Phong the XXXX. First, the business full year for

financial XXXX; and will the will lastly, Kang for fourth up results we Andrew bitcoin will recent discuss a of quarter market provide enlightening open market cover updates. Second, Q&A. network And Saylor Michael strategic the to then review

With call will turn Phong to President CEO I of over and MicroStrategy. that, Le, the

Phong Le

our all full to Thank the year to Shirish. like our highlights webinar quarter underscoring recapping key our you by XXXX. year for start full fourth welcome I'd today's to regarding financial you, results. want XXXX and of I strategy and

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is independent and traded most are and flows. in incurred, Business company this MicroStrategy cash Intelligence is costs the operating world. publicly The of generates our generate largest strategy intelligence we point where operating business the how our revenues at

enterprise modern, all our software in remain being by oriented. the XXXX employees business. people goal leader in on a open to this focused over company Our Substantially are space our is and

Our sheet strategy Bitcoin a is strategy. acquisition balance

primary treasury adopt traded today, a reserve the the were of company corporate public to largest Bitcoin of holder Bitcoin As first in the publicly we're as We world. asset.

and to net Bitcoin Our of long raising Bitcoin We capital is with the and acquire hold for term. cash, proceeds purchase strategy excess our using transactions.

first. a call. for we net resulting at Bitcoin amount I'll our Bitcoins purchase of transactions approximately quarter Bitcoin. a of $XX $XX,XXX sold Bitcoin, will strategy aggregate an approximately Bitcoin our holdings we average fourth first increase XXX price per price per Andrew million, or in at an address And time, $XX,XXX of acquisition the X,XXX of inclusive X,XXX approximately our the purchased in per fourth average bitcoins sale Bitcoin In purchase Bitcoin, and the $XX,XXX on this net expenses. discuss later fees for quarter,

strategy bitcoins term. As acquisition and distress. held digital a an assets of the financial of Bitcoin XXX,XXX or remain December of cost committed of quarter, We witnessed broader In XXXX, to we markets $X our approximately cost the fourth $XX,XXX acquired total billion, Bitcoin. per significant XX aggregate long the average for crypto

companies. filed and those In various as not exposure prominent assets digital Celsius such the we FTX, Voyager, have participants to any direct do for industry Genesis. addition, bankruptcy, And in of

these diligence exposure understand further execution was of conducted our we and to assess their addition, minimal. companies In to custodians partners exposure their that and

We and minimize risk, for any simple our yield to to purposes. a with Bitcoin way We've strategy, institutional is adoption taken the acquisition hold grade day along and only or one, the based approach custodians from based steps Bitcoin third not which Bitcoin Since we've taken buy parties Bitcoin lended custody regulated we storage, and markets. particularly with We other of counterparties. our to U.S. U.S. buy Bitcoin. in cold have

bad space. actors avoid able been As a transacting we've to with the in result,

view summarize To our on Bitcoin.

a on very high to a supportive of the We're go value Bitcoin. conviction First, basis. in proposition Bitcoin level of continue have of forward network we the

accumulate we term to we by plan a time, core we're third, continue approach fluctuations. our acquisition long to And to bitcoin executing over price continue to impacted term is strategy. focused, near not risk Second, Bitcoin follow managed Bitcoin our business

that, in challenging growth will from turn constant strength achieve inflation, software I weakening business, year, XXXX. foreign war our environment despite our on strategy ongoing in highlights XXXX currency total for to We cloud of now With high last the Ukraine. revenue macroeconomic a with currencies the

licenses Revenue which X% licenses million, which subscription constant in on XXXX currency consolidated year-over-year year-over-year our total constant product increased basis. Total for increased $XXX.X million, on which and services consists were of was X% Total revenues a currency a basis. $XXX.X of statement operations software

in offering, cloud made year-over-year. an subscription also year-over-year basis. million, currency $XX annual increase in million billings constant XX% of a XX% our progress We've of subscription important resulting our revenues growing on shift Annual were $XX.X towards

in strong by cloud, was the migrations to customer The and growth existing our customer and revenue billings subscription driven both wins. new

experienced. ever see customer continue our platform Our rates to our to renewal of among adoption global Overall, the among international be customers. revenue further highest cloud we we've continue

enterprise is seeing a industry the easy being of also that the We're and to analytics both grade in platform use. benefits single

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have we that want the no for Salesforce and As choice to Microsoft platform an into Ad corporations vendor longer a BI use Discovery, locked tool Hoc for govern be easy outgrown Power single are ecosystem. are to Tableau Data of

a mass believe in quarterly on than ongoing the On surges rather in cost annual management by an thoughtful followed basis, side, to hiring, layoffs. approach cost we

to in and R&D sales product, We about innovate and thoughtful cost. general to continue marketing, invest while our being administrative and

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

Andrew Kang

Phong. Thank you,

the into revenue quickly MicroStrategy’s results, jumping priorities. like Before reemphasize quarterly I'd to

long day. platform has analytics established a solutions long of businesses day Our be where proven in history small three-decade our providing to to our large a customers tenured to data critical and and diverse has corporations, mix, running component customer

our during Our it strategic durability economic growth, important as and through their through to of times supporting platform evolve. our and demonstrated foundation been has tough revenue has customers cycles is existing businesses

year. as to deliver XX% quarters last QX for last in rates. high We high in And as our of our customers continue XX% over for renewal seen as five and consistently consecutive the

which Phong revenue, services new subscription is important about cloud for customers earlier. into cloud growing fully for logos into and a and hosted us talked means which Second, cloud cloud the Winning migrating is customers critical. existing model, existing managed also uplifting

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continue last year that was recurring, of year, a approximately XX% our same XX% XXXX. we approximately QX of in in quarter total revenue expect prior compared the And will to trend over

partner business customers. they not been essential be and opportunities. drive our and has Lastly, support through champion solutions which but also in to impact solutions, our to consulting and expert continues modernization growth providing also They only

million, for X% million, Total results. the down $XXX.X to turning year-over-year. $X were the fourth approximately quarter or Okay, revenues

at trend $XX saw in constant software license revenues at year-over-year, Total QX total were currency and to up up X% we However, X% were revenues up X% constant QX. the currency. year-over-year, similar million,

When and transition. look at show growth we cloud together, the or year-over-year and continue revenues both product a growth basis currency overall GAAP license constant to subscription at service on momentum revenues

increase service XX% constant at Subscription and year-over-year XX% up of million, $XX.X were an currency. revenues

million were revenues at $XX.X product support revenues down were While million down licensed year-over-year year-over-year, XX% product constant quarter, $X.X for million $XX.X currency. X% up but the and

I with themes These revenue trends earlier. are consistent that mentioned

Finally, at other revenues constant but $XX.X were an year-over-year, at X% slight million, a increase currency. services X% decrease

other up in to add grow services our out business of we're To seeing early plan among particularly Argentina higher saw strategically European worldwide our Our makes performance majority the consultants. future the momentum quarters. rates that, workforce, QX, of with bill revenues which in where in globally build strong consulting and success number we India also and to

license billings by we fourth million increased the was XX, continued in year-over-year. an driven see the which quarter, XX% software momentum slide Total software license billings to our subscription in to cloud. $XX Turning strong to growth continue and current of increase in

compared of current Current was annual year-over-year, for increase to XX full XX% digit the straight subscription And to our subscription growth. over XX% billings both subscription growing XXXX months, were ‘XX subscription $XX XX billings an XX% XXXX. the with prior of service each and double year year deferred million, compared year quarter revenue revenue full

modernizing our growth benefits cloud for be timeline We the expectations to which XXXX, up pivotal are past as extremely our will XXXX, in business for to the our platform. we and BI two has well, years. the pleased year of a provide exceeded with in the of in began transforming adoption cloud and customers as the see scaling

to year-over-year quarter $XX million price share impairment costs million million saw the the costs. QX. of year-over-year. $XXX Turning exclude higher to were in attributed which or was in the volatility a expenses, non-GAAP of result compensation based fourth increase quarter, the in we $XX Total charges Bitcoin as

to the quarter, approximately and the of fell which largely rules. during impact the under of which for to its Bitcoin holdings impairment was a broader additional Bitcoin $XX,XXX market. FTX The price current This digital the the accounting low by of driven drove clubs asset

revenues million of in the million quarter year-over-year. cost of $XX fourth XX% an Non-GAAP increase $X.X or were

business As part a of cloud in to total revenues cost the year-over-year, our revenues recent we've of X% percentage what growth seen to non-GAAP quarters. in similar related increased of

favorable year-over-year year. plus a or higher This by X% to capitalized lower in impacts the of to due a quarter, or million, of X as FX total same some was to percentage revenues $X decreased expense compared net prior commissions marketing part year-over-year. and combination sales quarter Non-GAAP $XX this in the million X%

centers. the global mentioned, talent million were so delivery expenses of leveraging continue increase resources to But prior in the that slight efficient cost year. In way for we average more compared year. a a their $XXX,XXX as to area, increase in did R&D kept Non-GAAP vendors, prioritize expenses and this Phong flat and intentionally QX, a $XX on we and by

G&A much decrease non-GAAP $XXX,XXX X% or year-over-year. about Our flat, were million, costs pretty the of $XX

and lowering our frequent year. not ongoing the Phong that in It's efficient costs. earlier, As half just started non-personnel costs personnel second in mentioned we has thinking discipline about strict managing of last on and a focus something been with

this to In revenue due fact, and saw Ukraine. also higher past wages this to did expenses, even the currencies focus we year were we see from fortunate when in weaker to prior and negative impacts war add we headwinds foreign the

Aside from expenses, costs our flat Bitcoin we impairment related kept year-over-year. our

like end while markets. higher optimizing to areas talent on Looking continuing forward, to conscious lower remain resources our growth and footprint plan growing in across we cost cost global our focusing invest

digital $XXX total for XX, the was slide million. million, quarter at loss impairment the in $XXX was the while non-GAAP fourth asset charge quarter On operating

have has in have XXXX, our QX impact said showing reported in I quarter our since digital of adoption the greater asset past the non-GAAP it of each than losses, we As been quarters always our significant Bitcoin income. had incurred has charges impairment Strategy operating on the

On XX, billion, December of last billion, as approximately on of $X.X the the $XX,XXX approximately compared holdings XXXX, our of was based as the slide to price day value Bitcoin year. carrying XX of of $X.X the

far have billion of to So markets year, with this since yesterday, a then. significantly, the Bitcoins, of Bitcoin increasing value and $X.X prices our close higher approximately even trending market as rallied along

Accounting on the Standards perspective, be on moved and last should expeditiously be in should on inject an accounting required expected and statements FASB presented as and agreed has continue under Bitcoin financial sheets. including assets, the digital fair agenda year, progress disclosures that we assets voted standards. this what measures to be optimistic item certain the crypto how has how value companies regulatory balance steps Board and its announcing touch the To with Since made Financial update

has encouraged the aligned we that process. fair has the till up steps initial completed value just now that been the But with standard what are recognize are thus progress in standard practices. far setting We been

decisions to for continue assets. supportive and of investor on We remain focus committed transparency under FASB digital improved

of bitcoins, subsidiary. as remaining XX, the the XXX,XXX XX,XXX with bitcoins MicroStrategy we were December held parent, by directly total XXX,XXX held XXXX, XX a at slide the On at MicroStrategy which held of bitcoins,

Bitcoin bitcoins current loan our collateral value held Silvergate bitcoins XX% $XX,XXX to of Although approximately and approximately at at XX,XXX to as bitcoins billion or equivalent sub over the XX,XXX total market and of just the approximate unencumbered. are $X pledged unpledged remain holdings,

worth and to the requirements, the prices in to than loan in we near loan, Bitcoin is loan Silvergate foreseeable prices release the with collateral the being It the sufficient term. any unencumbered to to have as highlighting we the continue increase value address if compliance XX%, the any to we're and again ratio is Regarding past, from value in detailed remain that to we to collateral excess have able loan. in Bitcoin fully pledged less volatility

Our LTV that very loan close, on level. current this not is if at now

in XXX cost time fourth sold the price tax As mentioned quarter, we time to Bitcoins higher we basis the the for losses to first which a And that generated earlier, at of benefit. approximately back sale. Phong extent compared carried the the expect capital market approximately capital to Bitcoin gains. The against previous generate backs million tax transactions a carry we of we are available, to $XX such carry expect the

prices, quarter. we advantage by that sale, may continually that their XXXX net we Bitcoin or shareholder market explore pursuing term Even are dislocations strategy. in the consistent increased and value, may Bitcoin consider the additional take bitcoins we with holdings transactions generate of use other long to aforementioned our And during opportunities to with volatility bitcoins our the

choose in and anything, so future opportunities any if a potential We consider manner we other past. the in risks prudent assess pursue we have any carefully will we will the as done do in thoughtfully to and

billion earlier very earliest very over with costs, cost The long the term remains its in XX, with structure not senior convertible the low not and total are blended unchanged which our March $X.X Turning notes with These maturities, of convertible XXXX. attractive outstanding instruments, terms until extremely convertible valuable. to remaining debt X.X%. maturity outstanding capital of carry and debt capital two remains of debt funds until carry years the a rate notes interest slide of the approximately an of

we common $XXX.XX. $XXX issued at of Class leaves ATM QX, ATM In market approximately under partXX] an A offering, per $XXX $XX.X approximately an capacity at with the activated proceeds, [ph an million million us X:XX:XX raised We of stock million our share of shares price outstanding which in or aggregate approximately a average gross equity program. gross available XXX,XXX,XXX

there's or We purposes, of will an those existing market software the in continue premium liquidity evaluate valuation for our business. of Bitcoin, general program, holdings to proceeds the compared purchase value believe our of other corporate and equity needs. under sell for estimated of and Use this our Bitcoin corporate stock, our to when including value we will be general embedded for

grow we the grow under focus working value, will expense. and remains activities as The manage shareholder adequate more as on our structure both capital As do run from overall we ongoing than so business. program, capital our our and needs optimizing our with to debt our operating discipline growing our business financing liquidity well sufficient execute a manage to and maintaining liquidity

Our optimistic. cautious outlook but XXXX for remains

the are near planning the in market volatility term. We to recent persist macro in likely and trends for

need cloud these. open delivers architecture and efficient in However, to agile and we And succeed. effective. of be that of are constant and encouraged analytics capabilities businesses to environment this all be cost actionable even data change, MicroStrategy to

we XXXX, target will modest constant total revenue growth. currency In

the grow cloud. our of we continue strengthen billings a quality will continue as revenue subscription revenue to cloud We we will as platform transform continue and our to the total to recurring to percentage of

Bitcoin. will will on and costs areas. remain business to continue And scrutinized and on in holding our growing disciplined investing acquiring execute of intelligence we We and dual our strategy growth

and your today to remarks. the his time call MicroStrategy. for continued over your I'll support turn Michael for of for now you Thank

Michael Saylor

I'm of Chairman Andrew. Executive you, Thank the Michael MicroStrategy. Sailor,

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levered the MicroStrategy against is Bitcoin. So stock

so index. And been outperform to able execution, our through we've Bitcoin as an

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quality you X% We up that NASDAQ as is bitcoins A such diversified The asset indexes. of the can in and XXX up period. up course see while of And can is high performance major X.X the that years. XX%, same time of Bitcoin the classes other XX%. to the companies, over portfolio trust S&P

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institutional is up asset grown emerging the digital moving the And as emerging in universal money ecosystem. lightening as for is over the language Bitcoin IP.

Shirish And back so us with that, I'd the and questions like to to pass go to to up open answers. floor and

Shirish Jajodia

Great. Thank you, Michael.

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

Phong Le

constant acceleration on Shirish. growth both up going very and XX% grew XX%, in which revenue bit billions on XXXX, is represent well, a in Thanks, Cloud basis XXXX. of a currency basis an

into of we'll growth able in of or be might the think see because XXXX. think anything, bigger growth. bigger we're be that our cloud slowness goal headwinds see getting cloud I or pace growth will don't we If customers. to a little will something a faster I same macroeconomic and slow

recurring moved this at in revenue we've our XX% cloud. the Now, about is point, of

to certification, of that's going. be MCG offering or And go require migrate. large way more cloud of growth But for of of sell federal longer getting obviously, to sort we pretty customers. a sort that's the standard So sort customers, we I'm where think bit to a that a sized Government help passion But and really good There's of medium moved next that about But those more after. is some is us. will we'll excited banks take I where this software. FedRAMP our of going sort Cloud amount is MicroStrategy a to quite FedRAMP

Shirish Jajodia

Thanks, Phong.

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

Andrew Kang

Shirish the Thanks, question. for

in not mentioned generated in since sold sale, that name that total prepared inception, from Bitcoin Bitcoin we from we each the have an should we capital XXX sold takeaway gain Bitcoin. our I And, including to Apart fact, a domain which loss, against which XXXX, in be carry I old which through expect holdings the back we QX. As remarks, capital December, think sale. the increase was continued main have to quarter other any

the well. to and we shareholder But, buy I really And opportunistic in Bitcoin. strategy, don't mentioned related future, take our is And other the our we thinking long do this advantage we either of of grow. do, things opportunities and ways that may I doing of exploring to the market consider term value may hold market within in to before increase as way volatility or consistently, construct we'll guess be anything which it Bitcoin stop

Shirish Jajodia

Andrew. Thanks,

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

Andrew Kang

I a be the accounting think indefinite created fair value by volatility for Since a clearly, going big is adoption. to is CFOs. intangible plus gap negative corporate for accounting

a or as build micro and of CEOs rollout Bitcoin great is or corporations earn CHR, because lightening rewards to Chief heads for Marketing be sales. another do big benefit, to a be are of the or be to Bitcoin real going for play the think and ability to programs, Officers, into viewed I or going marketing a Bitcoin or solution transactions exciting could to it catalyst

are is networks expensive. think slow big inefficient, the I one driver that and payment overtime and

going how out use around free zero figure transactions to their applications companies small for interesting heads as be move So and micro I and case sales at an cost, of think to there's CEOs. monetize friction that

DC, maybe regulatory big So last any the in assets, to driver. comes that the is will short, Washington thing be with from digital regard ecosystem, clarity a

framework. eagerly said, only is, I so And we're universally some the of as digital commodity. is awaiting assets think acknowledged digital Bitcoin right now, I all sort

on framework, just with it'll and asset accelerate in the you Bitcoin deal the be side will it's And investor thing both can assets winner so in way, the framework. think the there of biggest digital one also corporate adoption, a But the because I absence a is institutional probably side. if

three I would those drivers. to look So

Shirish Jajodia

Thanks, Michael.

demand. for to and With is competition question Phong. the Next respect

as So demand migration? cloud you there in to customers and the impact Have the down competitive sales any of is respect are seen cash changes And the environment, look two what macro burn? with to cycles on parts? bring

Phong Le

two as seeing their of trend is credible costs biggest first consolidation to integrates that BI item, point, And right with ecosystem. the if for It's we're of you bring consolidation if well want a world, enterprise it's try a rest you full choices think customers Power in the the software the I down Microsoft now. Yes, BI, solution really it's MicroStrategy, solution, want the vendors.

semantic secure. model means I it's your the or BI Enterprise think license XX six they're there whether more realizing pay And Microsoft, costs. more that seen aren't realizing to model, where Azure use with not more And XXX going usage It's drive Azure, the to for otherwise, to what limitations, cost. a think Power there's to last Power companies certain objects. as common in also trying that you're things be than a scalable, as we've BI it are months is not you just customers it's office well-worn are I not free give away reusable free

customers And so lot we on consolidating see MicroStrategy. a of

And overall about even we spend, get so may a I'm the that. pie. be in And more reduction though excited of there

driven financials a QX And do terms a QX bit reasonable think are less. terms analytics said, macro still outcome we move that far of their bit and in of to As difficult, needing a environment. With our the to improve trying XXXX little spend as as is in was I internationally more companies brighter little looking environment, by because cloud. our to customers spend data to especially had

in about optimistic growth the XXXX. I'm So potential

Shirish Jajodia

Thanks, Phong.

how please maturities is address you up? Andrew. provide on coming thought Can you for the loan your question to process Next do plan XXXX

Andrew Kang

Thanks, Shirish.

has we've very rebound dramatically short prices time. been prices our to pretty But seen pretty bond some in back clearly. we've seen same of there that January So QX, volatility just And in here in a looking period volatility that also recently.

to our changes lot to it, off. it lot available we with advertise next able backdrop, that think confident have left we so comfortable time in outstanding we with pay will a or years. have maturities. to do us are and two we plus And fact is, does kind those be it come either levels. than refinance the in of that I different we're a debt options still manage it the to of the And when And market, of due,

Shirish Jajodia

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

Phong Le

Like growth like, XXXX. focus on margin revenue driving in profitability or growth we're to are going that both and

which our that's cloud, conversions cloud acceleration overall support us hosting driver, big to of think an and to see allows and revenue from term revenue fees. uplift I and licenses

Andrew be mentioned to a little to but kept XXXX. we from even costs relatively were bit. our our it would we cost XXXX side reduce a flat, The something And costs goal flat operating costs similar relatively our do or

impact the I'm of If about coin you exclude the holdings. talking here. non-GAAP costs

can margins. XXXX. And or our should costs So even and flat XXXX, able we grow reduce be if if can faster that to I do in faster, we macroeconomic improves keep then grow in revenues we think the environment

Shirish Jajodia

thanks, Great, Phong.

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

Phong Le

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

MicroStrategy (MSTR) 2 Feb 232022 Q4 Earnings call transcript