MSTR earnings name for the interval ending December 31, 2024.
Picture supply: The Motley Idiot.
MicroStrategy (MSTR -3.33%)
This fall 2024 Earnings Name
Feb 05, 2025, 5:00 p.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Members
Ready Remarks:
Shirish Jajodia — MicroStrategy Integrated
Hi there, everybody, and good night. I’m Shirish Jajodia, company treasurer and head of investor relations at Technique. I will likely be your moderator for Technique’s 2024 fourth quarter earnings webinar. Earlier than we proceed, I’ll learn the secure harbor assertion.
Among the data we offer throughout immediately’s name concerning our future expectations, plans and prospects might represent forward-looking statements. Precise outcomes might differ materially from these forward-looking statements resulting from varied vital elements, together with the chance elements mentioned in our most up-to-date 10-Q filed with the SEC and our 8-Okay filed on January sixth, 2025. We assume no obligation to replace these forward-looking statements, which communicate solely as of immediately. Throughout immediately’s name, we’ll discuss with sure non-GAAP monetary measures.
Reconciliation exhibiting GAAP versus non-GAAP outcomes can be found in our earnings launch and presentation, which have been issued immediately and can be found on our web site at technique.com. I might now wish to welcome you all to immediately’s webinar and allow you to know that we’ll be taking questions utilizing the Q&A function on the backside of your display. You may submit questions all through the webinar and Michael, Phong, or Andrew will reply questions on the finish of the session. Please make sure to present your title and your organization’s title when submitting the questions.
Now I will stroll you thru the agenda for immediately’s name. First, Phong Le will cowl the enterprise highlights for the fourth quarter and full 12 months of 2024. Second, Andrew Kang will cowl the monetary outcomes for the fourth quarter and full 12 months of 2024. After which lastly, Michael Saylor will present a strategic overview and talk about the current Bitcoin market updates.
And lastly, we’ll confide in Q&A. With that, I’ll flip the decision over to Phong Le, president and CEO of Technique.
Phong Q. Le — President and Chief Government Officer
Thanks, Shirish. Hi there, everybody. I would wish to welcome you all to immediately’s webinar and our first ever earnings name as Technique. MicroStrategy Inc.
immediately introduced that it is now doing enterprise Technique. The MicroStrategy title and brand date again to our incorporation greater than three a long time in the past in 1989. At the moment, we positioned ourselves on the forefront of the microcomputer revolution. The time period Micro symbolizes precision and our deal with harnessing the facility of computing to create enterprise intelligence that modified how corporations function.
There have, in fact, been important adjustments since then, each within the know-how {industry} and to our technique. Know-how is now ubiquitous and our enterprise technique and worth to our prospects is now not restricted to know-how. At the moment, the corporate is worked up to announce its rebrand as Technique. For the next causes: one, simplicity.
Technique is a single phrase, simple to recollect, and has 40% fewer letters than MicroStrategy; Continuity, since Technique is a second half of MicroStrategy’s historic model title, it might signify an evolution however not an entire change or break from our previous; and three, ambition. The brand new title would additionally replicate our ambition to maintain pushing boundaries. For instance, we’re now not confined to the previous. However we’re centered on the massive image driving new improvements and digital capital and enterprise intelligence.
So, immediately, Technique is the world’s first and largest Bitcoin treasury firm. The most important unbiased publicly traded enterprise intelligence firm and likewise a NASDAQ 100 inventory. The model simplification is a pure evolution of the corporate, reflecting our focus and broad enchantment. The brand new brand features a stylized B signifying the corporate’s Bitcoin technique and our distinctive place as a Bitcoin treasury firm.
And our new model’s major colour is now Orange, which represents power, intelligence and Bitcoin. Alongside our rebranding, we’re beginning to launch the official technique merchandise retailer. A mirrored image of our dedication to our passionate retail shareholders who take pleasure in being a part of our journey. Simply as sports activities followers most likely signify the favourite groups, our shareholders and staff and prospects need to showcase their help for Bitcoin and for us.
Our retailer will function curated assortment of Technique attire and equipment and 12 months designed for many who share our imaginative and prescient. Now you can go to the shop at retailer.technique.com. We welcome your suggestions and look ahead to seeing our neighborhood signify Technique with pleasure. Subsequent, I am additionally excited to share that we launched a brand new web site, technique.com.
As you may see on this slide, it features a stay tracker of assorted metrics and market knowledge, together with share worth, efficiency, market cap Bitcoin depend, buying and selling quantity, choices open, curiosity and extra. We consider such a disclosure will present extra transparency and consistency and real-time data to our traders and stakeholders. Buyers can see each real-time knowledge and historic data comparable to previous Bitcoin purchases in a single easy, accessible place. We’ve many traders and analysts aggregating this data on their very own, and we thank them for his or her fastidious work.
Now we will present this data trusted and ruled multi functional place. Lastly, we have relaunched our software program web site, too, strategysoftware.com. We proceed to be on the forefront of innovation and AI-powered enterprise intelligence. We’re additionally progressing quickly with our cloud transition with a really cloud-native open multi-cloud strategy.
These are highlighted at our new software program web site. To have fun our new model, be taught extra about our improvements in AI, cloud and enterprise intelligence, spend time with our software program prospects and meet people on the forefront of Bitcoin for companies. I invite you all to hitch us in Technique World 2025 in Orlando, Florida. Go to our web sites to register for this occasion, and I look ahead to seeing a lot of you in Orlando.
And if a model launch was not sufficient, many know we have had a really busy quarter since our final earnings name. Listed below are some highlights. One, we proceed to see momentum in migrating present prospects and including new prospects to our managed cloud platform. In This fall 2024, we noticed a 50% year-over-year improve in present subscription billings and a 48% year-over-year improve in subscription providers revenues.
Second, we have adopted FASB’s truthful worth accounting commonplace for our Bitcoin holdings, and this accounting change will likely be mirrored in our Q1 2025 financials. It will result in a big onetime cumulative impact internet improve to the opening steadiness of our retained earnings of $12.75 billion in Q1 as our Bitcoin holdings will likely be revalued from the present carrying worth to the market values. We’re proud to have contributed to the company initiative advocating for the revision of prior reporting requirements that categorize Bitcoin as an indefinite-lived intangible asset. Three, in December 2024, Technique was formally included within the NASDAQ 100 Index.
Consequently, traders in QQQ and different NASDAQ 100 index funds will obtain publicity to our Bitcoin technique. In accordance with some estimates, ETFs monitoring the NASDAQ 100 have greater than $550 billion in belongings underneath administration. We view this as an vital milestone within the institutional adoption of Bitcoin and we’re proud to be a part of the NASDAQ 100. In December, we welcomed three new members to our board of administrators, Brian Brooks, Jane Dietze, and Gregg Winiarski.
This enlargement will increase our board from six to 9 members and reinforces our dedication to the best requirements of company governance. Every of those distinguished leaders brings a wealth of invaluable expertise and experience in digital belongings, capital markets, and regulatory issues. And we consider they may make important contributions to our technique as a Bitcoin treasury firm, additional strengthening our strategic imaginative and prescient and oversight. Lastly, we carried out a particular shareholder assembly in January, the place our shareholders voted to extend the approved Class A typical inventory to 10.33 billion shares and most popular inventory to 1.005 billion shares, respectively.
The expanded share depend will help the execution of Technique to boost capital opportunistically and successfully by way of each fairness and glued earnings securities to buy Bitcoin in a way that we consider is advantageous and accretive to our shareholders underneath the prevailing market circumstances. Transferring on to the Bitcoin highlights for 2024. Technique stays the biggest company holder of Bitcoin on the earth. Now, holding 471,107 Bitcoins with a complete Bitcoin market worth of $46 billion as of February 2nd.
Within the full 12 months 2024, we acquired an extra 258,320 Bitcoin for a complete buy value of $22.1 billion at a mean worth of $85,447. In 2024, the worth of Bitcoin appreciated spurred notably by the approval of spot Bitcoin change traded merchandise or ETPs. Moreover, the Professional-crypto stance of the brand new administration led by president Trump has drawn appreciable institutional consideration to the asset class. We consider the introduction and preliminary success of the spot at Bitcoin ETPs evidenced the rising maturation of Bitcoin as an institution-grade asset class, with broader regulatory recognition and institutional adoption.
On the capital markets entrance. We made important progress towards the development of our Bitcoin technique. We introduced our 21/21 plan within the Q3 earnings name in November to focus on elevating $21 billion of fairness and $21 billion from mounted earnings securities between 2025 and 2027. We’ve made progress underneath our 21/21 plan, a lot quicker than initially anticipated, with fast and accountable progress in our capital elevating given favorable market dynamics.
Within the full 12 months 2024 and quarter to this point in Q1 2025, we raised $18.8 billion internet proceeds by way of our at-the-market or ATM fairness providing program, and raised $6.2 billion by way of the issuance of 5 totally different tranches of convertible notes. This makes Technique the biggest issuer of convertible bonds in a single calendar 12 months within the final decade. We additionally raised $584 million gross proceeds by issuing Strike, a most popular perpetual inventory. Final week after submitting a shelf registration.
We anticipate to proceed issuing revolutionary mounted earnings securities and search to allow our frequent inventory to outperform Bitcoin by way of clever leverage to handle our general leverage intelligently and preserve a wholesome and sturdy steadiness sheet. We redeemed our $500 million senior secured notes due 2028 and known as our $650 million convertible notes due 2025 and $1.05 billion convertible notes due 2027. All of our Bitcoin serving as collateral securing our 2028 senior secured notes was launched. As illustrated on this slide, our new capital construction consists of the issuance of convertible most popular fairness for traders searching for decrease risky and leverage.
We consider that our new perpetual Strike Most well-liked Inventory or STRK, is a complementary addition to our convertible bonds and any future mounted debt devices we would have. Technique’s distinctive place allowed us to introduce Strike, which is a type of convertible most popular inventory with an embedded perpetual name possibility on MicroStrategy, our frequent inventory. There’s substantial publicity to Bitcoin. It is vital to notice that Bitcoin itself is likely one of the most risky and traditionally high-performing commodities obtainable.
We created a most popular safety convertible into extremely liquid fairness which, in flip, is issued by an organization that holds important quantities of Bitcoin, a risky and liquid commodity. To our information, Strike is the primary most popular fairness or convertible most popular fairness issued by an organization with important Bitcoin publicity. Its ticker image, STRK is the second publicly traded ticker for technique. Whereas Technique goals to subject leveraged fairness by way of which our traders acquire publicity to Bitcoin.
STRK, Strike provides an 8% mounted coupon and a perpetual uncapped name possibility in a publicly traded safety. This general capital construction is sort of distinctive and designed to broaden our investor base. The first goal of introducing Strike was to entry an investor base that’s involved in investing in securities with publicity to Bitcoin, however they need decrease sensitivity to Bitcoin’s volatility in efficiency, each on the upside and draw back. We acknowledge that these investing in MSTR Class A typical inventory sometimes search increased volatility and leverage, however we additionally noticed a chance to draw a brand new class of traders involved in diminished volatility and leverage, nonetheless wanting bitcoin publicity.
As mirrored within the snapshot of our capital markets exercise, 2024 was a milestone 12 months for Technique with over $22 billion raised to gas our Bitcoin technique. The tempo of our capital elevating and Bitcoin acquisition considerably accelerated in This fall 2024, throughout which we raised $15 billion by way of fairness issuances and $3 billion by way of convertible debt, in slightly below two months. To place the dimensions of final quarter’s actions in perspective, previous to final quarter, we had raised $10 billion over 17 quarters since adopting Bitcoin as our treasury reserve asset in August 2020. This exceptional ramp-up will not be solely a testomony to Bitcoin’s broader adoption and worth appreciation but additionally to help our numerous investor base, who acknowledge our capability to execute our Bitcoin technique with laser focus.
Andrew will present additional particulars on our capital markets and Bitcoin buy exercise. Final quarter, we developed a brand new descriptor for what we’re, which is the world’s first and largest Bitcoin Treasury Firm. The acronym being coincidentally BTC. We proceed to deal with buying extra Bitcoin by way of our capital market actions, and we consider that the worth proposition of the corporate set round facilities more and more on our Bitcoin treasury technique.
We’re a publicly traded firm that has adopted Bitcoin as our major treasury reserve asset. By utilizing proceeds from fairness and debt financings, in addition to money flows from our operations, we strategically accumulate Bitcoin and advocate for its position as digital capital. Our treasury technique is designed to offer traders various levels of financial publicity to Bitcoin by providing a variety of securities, together with fairness and glued earnings devices. As well as, we offer industry-leading AI-powered enterprise analytics software program, advancing our imaginative and prescient of intelligence in all places.
We leverage our growth capabilities to discover innovation in Bitcoin purposes and integrating analytics expertise with our dedication to digital asset progress. We consider our mixture of operational excellence, our strategic Bitcoin reserve and our deal with technological innovation positions as a frontrunner in each the digital asset and enterprise analytic sectors, providing a singular alternative for long-term worth creation. Since our adoption of our Bitcoin technique, we used three major mechanisms to accumulate extra Bitcoin. One, mounted earnings securities.
We have issued $8.6 billion of complete debt, of which $6.2 billion in principal quantity of convertible debt is excellent and a sexy blended value of debt mounted at 0.56% yearly. We additionally raised $584 million in gross proceeds by way of perpetual most popular inventory, and we’ll proceed searching for to innovate with different mounted earnings securities choices. Widespread inventory issuances. We’ve issued $21.7 billion in shares of Class A typical inventory in a way that we consider to be accretive to present shareholders and money circulation from operations.
Since August 2020, we have used $836 million of complete money generated by our software program operations to buy Bitcoin. These three capital market levers have allowed us to boost $31 billion of capital and deploy clever leverage to extend our Bitcoin holdings in a way that we consider has created large shareholder worth. Final quarter, we launched our 21/21 capital elevating plan, concentrating on $42 billion in capital. Break up equally between fairness and glued earnings over three years.
Since then, supportive macro circumstances led us to speed up the execution of our capital elevating plan. We have already raised 80% of our $21 billion fairness goal and 17% of our mounted earnings goal whereas accumulating important Bitcoin holdings. In 2025, we’re shifting our focus extra into mounted earnings issuance, together with convertible notes, most popular inventory and different securities designed to offer leverage that advantages our shareholders. As talked about up to now, our long-term leverage goal is 20% to 30% of our Bitcoin holding worth.
We stay versatile, and we’ll proceed to adapt swiftly to market circumstances. Now I will flip the decision over to Andrew to debate our financials for the quarter in additional element.
Andrew Kang — Senior Government Vice President, Chief Monetary Officer
Thanks, Phong. I will start with a overview of the software program outcomes, then go into additional element on Bitcoin’s technique and people outcomes. On Slide 16, you may see in This fall, complete software program revenues have been roughly $121 million, down 3% 12 months over 12 months. Full 12 months 2024 complete revenues have been roughly $464 million, down 7% 12 months over 12 months.
We absolutely anticipated product license revenues together with help revenues to lower in This fall and our income pattern continues to replicate the continuing profitable transition of our software program enterprise from on-premise to cloud. Turning to the Cloud outcomes. This fall subscription providers revenues elevated 48% 12 months over 12 months and now make up roughly 20% of complete revenues. Full 12 months 2024 subscription providers revenues have been roughly $106.7 million reflecting a rise of 32% 12 months over 12 months.
The expansion in subscription providers revenues is a results of the expansion in our subscription billings, which additionally grew by 57% in This fall to roughly $65 million, our fourth straight 12 months of quarterly double-digit progress. The sturdy progress in our subs billings was once more pushed by each present buyer migrations to the cloud, in addition to new buyer wins in This fall, and our buyer renewal charges proceed to stay elevated, in keeping with prior quarters. We proceed to see progress in demand for our cloud platform and This fall was the strongest quarter of buyer migrations to Cloud to this point. The lower in product license revenues and help revenues will likely be offset by progress in subscription providers revenues.
We anticipate this pattern will proceed in 2025 within the brief time period, however in the long term, cloud subscription providers revenues ought to offset this shift as we absolutely transition our enterprise to the Cloud. Value of revenues have been roughly $34 million, up 21% in comparison with This fall of final 12 months and roughly $130 million for the total 12 months, up 18% 12 months over 12 months. The rise was pushed primarily by increased Cloud internet hosting prices, which we anticipate to proceed in future durations as a direct results of our rising Cloud enterprise. Working bills for the software program enterprise have been roughly $94 million, down 6% in comparison with This fall of final 12 months, and full 12 months opex was roughly $396 million, which was up 2% 12 months over 12 months.
And lastly, digital asset impairment expenses in This fall have been roughly $1 billion and roughly $1.8 billion for the total 12 months. I am pleased to announce that This fall would be the final quarter the place we’ll acknowledge an impairment cost on our Bitcoin holdings as we transfer to truthful worth accounting in Q1. Now turning to our Bitcoin technique. This fall was probably the most profitable quarter of including Bitcoin on our steadiness sheet because the adoption of our Bitcoin strategic reserve.
We acquired 218,887 Bitcoins from the start of the fourth quarter till now for roughly $20.5 billion at a mean worth of $93,600 per Bitcoin. As of January twenty fourth, the corporate held a complete of 471,107 Bitcoins acquired for an mixture value of $30.4 billion or roughly $64,511 per Bitcoin. Technique has added Bitcoin to our steadiness sheet in each single quarter since August 2020 throughout 50-plus bulletins and 100% of our Bitcoin holdings stay absolutely unencumbered. As of February 2nd, 2025, the market worth of our Bitcoin holdings was $46.1 billion bought at an mixture value of $30.4 billion and a mean Bitcoin buy worth of $64,511.
Starting with our Q1 2025 reported outcomes, we’ll replicate the affect of the brand new FASB truthful worth accounting rule for our Bitcoin holdings as a part of internet earnings. Because of the change in accounting rule on January 1st, 2025, we acknowledged a constructive cumulative adjustment to the opening steadiness of our retained earnings of roughly $12.7 billion, which was largely as a result of important distinction between the upper market worth of our Bitcoin in comparison with the carrying worth of the Bitcoin on our steadiness sheet as of December thirty first. We’ll remeasure the truthful worth of our Bitcoin holdings on the final day of the primary quarter and any distinction within the worth of Bitcoin on the finish of the primary quarter in comparison with the ending worth on December thirty first will likely be acknowledged as earnings or loss as a part of our GAAP reported internet earnings. Since establishing the report $21 billion frequent fairness ATM program on October thirtieth of final 12 months, which was in truth, the biggest in capital markets historical past, we’ve got issued new shares swiftly but extraordinarily prudently whereas adapting to the sturdy market circumstances.
This chart illustrates the weekly breakdown for the common each day shares issued by way of our ATM in comparison with the general common each day buying and selling quantity for every of these weeks. You will word that whereas we’ve got bought $16.7 billion of frequent fairness since saying our new ATM program, that exercise accounted for less than a really modest 2.9% of the overall common each day buying and selling quantity of MSTR for all the interval. We repeatedly monitor Bitcoin worth, MSTR share worth, in addition to general buying and selling volumes in a programmatic and disciplined method to promote shares by way of our ATM and execute gross sales in a way we consider that doesn’t affect the general market worth at MSTR. Now turning to our treasury operations.
We had one in every of our most impactful quarters from a capital markets execution perspective. In This fall, we issued a brand new $3 billion convertible word in November which was upsized and properly obtained by the market. The notes due December 2029 had a 0% coupon and 55% conversion premium reflecting a conversion worth of roughly $672 per share. As up to now, the online proceeds from the brand new convert have been used to accumulate further Bitcoin.
In Q1, we known as for the redemption of our $1.05 billion 2027 convertible notes. As word, we’re considerably within the cash, we anticipate most holders will elect to transform their notes into shares of our Class A typical inventory on or previous to the redemption date. We consider this creates capability for extra clever leverage for our steadiness sheet within the type of new mounted earnings devices. After the redemption of our 2027 convertible notes, our nearest debt maturity is now greater than three years away and never till late 2028.
And the rest of our scheduled debt maturities are evenly unfold over a number of years out to 2032, with a weighted common scheduled debt maturity of roughly 5 years. Below our present capital construction, we now have $6.2 billion of unsecured convertible debt excellent with a blended rate of interest of roughly 0.56% with staggered acknowledged maturities starting in December of 2028 by way of June 2032. Final quarter, we filed a $21 billion fairness on the Market program, which was the one largest ATM program ever filed within the U.S. As of February 2nd, we issued $16.7 billion of frequent fairness underneath this program and roughly $4.3 billion of capability stays obtainable underneath the shelf.
This slide outlines the important thing phrases of Strike, our new newly issued perpetual convertible most popular inventory. We efficiently raised $584 million in gross proceeds by way of the issuance of seven.3 million shares at an providing worth of $80 per share. We anticipate that the safety will likely be listed on NASDAQ underneath the ticker STRK starting on February sixth. Wanting forward, we’ve got the pliability to discover an ATM shelf registration for issuing further Strike shares, much like our frequent inventory ATM program.
Strike represents the subsequent step within the evolution of our capital construction, increasing the vary of funding alternatives for traders with various threat profiles, and it enhances our fairness and present convertible bonds providing publicity to Bitcoin by way of MSTR with decrease volatility and leverage. We proceed to take care of important debt protection with $47 billion in Bitcoin holdings in opposition to simply $3 billion in out-of-the-money convertible debt or roughly 15 occasions protection. We’ve been requested how we consider our leverage targets? We measure leverage threat not in opposition to our Bitcoin value foundation, however fairly our debt protection ratio, which stays exceptionally sturdy. Our present leverage ratio stays under our long-term goal vary of 20% to 30%, which we offer capability to increase our capital construction prudently and primarily based on market circumstances.
In 2025, our focus will likely be on alternatives to boost further mounted earnings securities whereas preserving flexibility to boost fairness and sustaining a wholesome debt protection ratio. Equally, we consider we’ve got substantial protection to satisfy the dividend obligations for our Strike shareholders. The 8% mounted dividend on 7.3 million Strike shares ends in an annual money want of roughly $58 million. Even its netting out the $3 billion in out-of-the-money converts, our Bitcoin holdings leaves us with $44 billion of protection, greater than sufficient to cowl Strike dividends if wanted.
This slide illustrates our strategy to Clever Leverage and the mechanisms obtainable to extend or lower it. Our excellent debt and most popular inventory collectively account for roughly 8% of our market cap and roughly 15% of our Bitcoin asset worth. Presently, we’re under our long-term leverage goal of 20% to 30%, and we consider we’ve got capability to lever up by issuing new convertible debt or mounted earnings securities. Conversely, deleveraging can happen by way of debt compensation or conversion to fairness, issuing frequent fairness, in addition to a Bitcoin worth appreciates, which naturally lowers leverage because the market worth of our holdings improve.
Our leverage ratio declined in This fall 2024 and quarter to this point in Q1 2025 as a result of mixture of those deleveraging elements, as we strategically elevated our leverage ratio in 2025, we anticipate enhanced advantages for frequent shareholders by way of a better BTC yield and elevated volatility, each of which drive long-term worth. At the moment, we’re introducing two new KPIs, BTC acquire and BTC greenback acquire. BTC acquire is outlined because the variety of Bitcoins held by the corporate at the start of a interval multiplied by the BTC yield for a similar interval. This metric quantifies in Bitcoin phrases, our BTC yield for the quarter.
For the total 12 months 2024, our BTC acquire was 140,538 Bitcoins calculated by multiplying the 74.3% BTC yield to our beginning steadiness of 189,150 Bitcoin. Taking the year-end Bitcoin worth at $93,400, our BTC greenback acquire for 2024 will likely be calculated as $13.1 billion. It’s price noting that the BTC acquire and BTC greenback acquire metrics should not good points within the conventional monetary context. They’re additionally not measures of return on funding or measures of earnings generated by our treasury operations or Bitcoin holdings, and BTC greenback acquire doesn’t signify the truthful worth acquire on our Bitcoin holdings.
Our BTC yield in 2024 of 74.3% surpassed the annual BTC yield in all the earlier years, in addition to our preliminary goal of 6% to 10% this 12 months. We will not predict the worth of Bitcoin nor can we predict broader fairness and debt capital market circumstances. Nonetheless, we’re assured that our Bitcoin treasury technique will proceed to generate worth and are revising our targets for 2025 to realize a minimal of 15% BTC yield and a $10 billion BTC greenback acquire for 2025. We’ll proceed to think about the total spectrum of financing choices and discover accretive capital markets transactions and untapped swimming pools of capital to execute this technique successfully and prudently.
We plan to stay disciplined in the usage of each the ATM and different capital-raising options, doing so in a technique to obtain our BTC yield and BTC greenback acquire targets. Thanks once more on your time immediately and on your continued help of technique. I will now flip the decision over to Michael for his remarks.
Michael J. Saylor — Chair, President, and Chief Government Officer
Thanks. I respect the chance to handle you all immediately. I would like to speak about growth to date. Why do not we begin with the final 12 months within the Bitcoin market, I believe ranging from January of 2024, with the approval of the spot Bitcoin ETFs, we had a wonderful 12 months of institutional adoption.
I might say Wall Road adoption of these ETFs has been extraordinary. There’s now one thing on the vary of $140 billion of capital that is flowed into spot Bitcoin ETFs all over the world. We noticed this transition of truthful worth accounting in 2024. We have got a bitcoin president.
We have got a pro-Bitcoin cupboard. We have seen an finish to the warfare on Crypto. We have got 250-plus professional crypto legislators in Congress. We have seen the repeal of SAB-121, which an impact of stopping banks from with the ability to take into account banking Bitcoin.
We have got plenty of enthusiasm across the Strategic Bitcoin Reserve Act. And we have seen a dramatic improve in Bitcoin commonplace corporations, corporations like MARA, like Riot, like Semler, like Metaplanet, like Kohler are all starting to undertake Bitcoin as a treasury reserve asset. And there is simply been a constant improve in Bitcoin consciousness all through mainstream media and all through the normal investor neighborhood during the last 12 months. Subsequent slide.
I need to say just a few phrases about our technique rebrand. We’ve develop into a worldwide model. Folks acknowledge Technique in South America, in Europe and Asia, all the world over, all throughout the U.S. And so, this can be a very logical growth.
Technique is simpler to say, simpler to spell, simpler to search out, simpler to recollect. I have been 30 years within the enterprise, and I am unable to let you know what number of occasions I’ve heard somebody discuss with MicroStrategys and get the plural fallacious, and spell it fallacious. And I believe that this explicit instantiation and chic evolution of our model goes to permit us to achieve a wider group of shoppers, traders and companions. And I additionally assume it ties our identification way more carefully to Bitcoin and all the constructive facets of the Bitcoin community on the earth.
And so, I believe that is going to be very, very useful for us in communication. Subsequent slide. Our efficiency is pushed by Bitcoin. And as you may see, since we adopted Bitcoin as our major treasury reserve asset, we have been in a position to generate annualized efficiency of roughly 110% a 12 months which is absolutely extraordinary within the historical past of the capital markets.
Over that point interval, bonds are minus 5%. Gold and actual property between 6% and eight% ARR. The hurdle price actually is the S&P Index, which is about 14%. And if you wish to beat it, you choose the highest seven corporations, the Magnificent Seven, you may virtually double it.
You will get 29%. Bitcoin has outperformed that by an element of two. And naturally, we have been in a position to outperform Bitcoin by intelligently leveraging Bitcoin. Subsequent, this slide simply illustrates that one of many outcomes is that MicroStrategy has outperformed each inventory within the S&P 500.
So, that is as of February 4th, yesterday, my birthday. It is a good birthday current. We frequently benchmark ourselves in opposition to each firm within the S&P 500 each single day, and we’re all the time contemplating this. However as you may see, it is not shut.
We’re dramatically outperforming the technique of each different firm within the S&P 500 with our Bitcoin technique. Subsequent slide. Right here, you may see, on the finish of the day, when you simply purchased Bitcoin, you’ll outperform 99% of the S&P 500. So, Bitcoin as pure digital capital is a really, very compelling funding concept.
The Magnificent Seven is outperforming 94% of the S&P 500, and naturally, the Index is outperforming 62%. And the message right here actually is many, many corporations are struggling to outperform the Index, and it is time to take into account a Bitcoin technique. Subsequent, properly, as you realize, the key, in fact, to that technique is not simply efficiency. It is also the volatility.
Volatility is a measure of power. And as you may see, Technique is probably the most risky inventory out of the S&P 500 universe. So, we do not disguise from it. We’re fairly happy with it.
We engineer the enterprise in an effort to keep risky. Typical knowledge is to strip volatility from a publicly traded firm, strip it from the steadiness sheet, strip it from the P&L. MicroStrategy has embraced volatility. And never solely will we pursue it with Bitcoin, however we pursue it with our leveraged methods to really get a volatility that is larger than the native Bitcoin volatility.
There’s a results of that volatility. And the result’s liquidity and optionality. As you may see right here, we’ve got the biggest open choices curiosity of any firm within the S&P 500 universe as a measure of market cap. And you may see we’re quantity two in liquidity as a measure of our divided by market cap.
So, we have established a reasonably intense capital construction. It is quick cash, it is scorching cash. And it is that means by design subsequent. One of many outcomes is we’ve got the biggest, deepest choices pool within the Bitcoin universe.
And you may see that our choices are buying and selling by an element of greater than 5 versus EBIT. And we’ll proceed to pursue this technique, we predict this provides us a bonus. Subsequent that optionality and that volatility, in fact, is a profit within the convertible bond market. You may see right here the blended efficiency of our convertible bonds is 75% versus Bitcoin’s efficiency of 64% throughout the identical time-frame.
So, our convertible bonds are distinctive. When you wished to get Bitcoin publicity, however you wished to get the credit score assurances of a bond and/or the volatility traits of a bond MicroStrategy is exclusive. We have been the biggest convertible bond issuer in 2024. We expect we’ve got a bonus on this market as a result of we’ve got one of many nice use of proceeds for a convertible bond if you are going to subject a convertible bond, you need excessive volatility in an effort to subject the bond, however you need to take the usage of proceeds and reinvest it in a high-volatility asset, which is what Bitcoin is.
And so, by issuing a bond and issuing very risky securities after which shopping for again a risky commodity we’re in a position to preserve a scalable enterprise and proceed to return to the market over and over. Subsequent, and so forth the margin, you may see MicroStrategy is outperforming all main belongings, all main asset courses and the S&P. And we’re so captivated with this. We have determined that we might go forward and memorialize this and create a method.com web site.
And when you go to our technique.com web site, you will see you are in a position to really monitor MicroStrategy’s efficiency in opposition to the Magnificent Seven, in opposition to these asset courses each single day in actual time. And so, our objective is to assist educate the funding neighborhood, so they really perceive each the traits of Bitcoin and the traits of MicroStrategy versus all the opposite funding choices in that funding universe. Subsequent, you will see on the technique.com web site, a dashboard, and you will see all types of fascinating KPIs which can be being maintained in actual time. What you may see here’s a snapshot is we have an annualized return of 110% over the 12 months versus 59% for Bitcoin.
You may see our choices market is 5.6x as greatest, the subsequent largest Bitcoin choices market. We’ll proceed to trace metrics that are not all the time simple for folks to get like each day buying and selling quantity or each day buying and selling quantity as a proportion of market cap, or provide you with each single day real-time efficiency of our convertible bonds versus Bitcoin and our implied volatilities and our historic volatilities, and so I am actually enthusiastic to see what folks consider this. The web site, it is sort of tailored in one other means, which is you may very simply snapshot the web site and you may create graphics and snapshot them and share them and or use them in your evaluation. And we predict that is sort of a primary.
I am probably not conscious of one other public working firm that printed stay web site with so many alternative fascinating funding analytics trying on the universe of funding belongings. Subsequent, trying ahead to 2025, there is a set of catalysts that I believe are bullish. I believe all the deal with developing a digital belongings framework that is going down on the SEC and within the Senate and within the Home and inside the administration, I believe this can be a good thing for Bitcoin and all the crypto asset class typically. I believe there will be plenty of enhancements to Bitcoin ETFs.
The in-kind create redemptions, I believe you will see a deeper, richer choices market for lots extra spot ETFs. I believe you will see different ETFs coming alongside that give folks the power to tackle various kinds of Bitcoin publicity. I believe all of these are good issues for the asset. I believe you will see a continued transfer towards extra banking help for Bitcoin, the repeal of SAB-121 opened that door, however I believe we’ll see increasingly help from a supportive set of regulators.
And because the banks begin to take a recent have a look at supporting Bitcoin, it’ll be good for the asset class. We’ll proceed to see extra company adoption of Bitcoin each month. We hear about one other firm that is adopting Bitcoin as a treasury asset. And naturally, the prevailing corporations like Metaplanet, comparable like MARA are intensifying, their bitcoin acquisitions and their Bitcoin financing and capital markets-related actions.
That is solely going to be good for Bitcoin, the community and Bitcoin the asset class. We additionally see good indicators of institutional adoption. It is turning into extra regular. We’re seeing folks speak about 1% to three% allocations of a portfolio to Bitcoin.
We’re seeing Bitcoin pop up as an agenda merchandise in increasingly mainstream investor conferences. I am being invited to plenty and plenty of mainstream investor conferences. And one 12 months in the past, two years in the past, this wasn’t so frequent, however what’s clear is that Bitcoin is on the radar of worldwide traders and mainstream institutional traders and everybody’s beginning to assume they should kind an opinion. They should rise up to hurry on this, and so they want to determine what their technique goes to be.
So, Bitcoin international adoption is accelerating. The occasions of November fifth created a supportive political regime in america. However the regulators in Europe in Singapore, within the Center East, in South America, even in Hong Kong and China, all of them look to the regulators in Washington D.C. to take their cue.
And so, there is a wave of political help, which is spreading across the globe for Bitcoin. All of these items are going to be constructive catalysts for consciousness, adoption, funding within the coming 12 months. Subsequent. Supply Technique, with regard to MSTR, we would like that to be the excessive leverage, excessive volatility fairness within the Bitcoin ecosystem.
And we’ll proceed to pursue clever leverage by way of our convertible bond methods by way of our most popular inventory methods by way of opportunistic capital markets methods in an effort to generate that leverage and that efficiency for the Bitcoin maxi traders. Our convertible debt technique will proceed. We’ll, as we’ve got carried out, selectively refinance varied debt devices once they’re now not offering efficient leverage for our frequent inventory shareholders and once they’re now not fascinating for the convertible debt traders, we’ll change them with new issuance of convertible debt. And we predict there’s plenty of alternative for us to refinance our present convertible debt and to increase our convertible debt construction in an effort to create clever leverage.
We have got an excellent partnership with a convertible bond market, and we look ahead to persevering with it with them. The third space, Strike is the convertible most popular inventory market. There are those who need giant mounted earnings, giant dividends, and so Strike is an 8% dividend yield. They would not get that want met by a convertible bond.
And so, this attracts in these which can be involved in that earnings. If you wish to deploy an instrument that generated constant earnings right into a retirement account or right into a tax-deferred account then that is one thing very fascinating. There’s a big pool of traders which have mounted earnings funds and the necessity to spend money on mounted earnings devices. There are different traders which can be invested in most popular shares.
There are different traders which can be involved in Bitcoin upside, however they want some principal or draw back safety. And there are some that — if we have a look at volatility, Bitcoin is a 50- to 60-vol asset, and MicroStrategy is concentrating on increased 80- or 90- vol. And then again, there’s a big pool of traders that spend money on QQQ and SPY and so they’re round 15-vol, 15 to twenty vol. And so, between 15 vol and 60-vol, that is an enormous, large space the place when you can create an instrument that has extra volatility than, say, a typical most popular inventory or a typical diversified portfolio of high-yield bonds, then that is going to enchantment to a brand new class of traders.
There are plenty of traders that sort of need that sort of volatility. They could not need the intense leverage of MicroStrategy. They may not even need the uncooked unvarnished volatility of an IBIT or BTC, however Strike appeals to a brand new group, a special return profile, a special volatility profile. And but Strike may be very particular as a result of it is a perpetual dividend, proper? Like it’ll proceed.
We’re not going to name it, proper? So, the thought of a perpetual dividend may be very fascinating. And the opposite factor is it is a perpetual name possibility or perpetual conversion possibility. So, for very long-range traders which can be both in search of perpetual dividend proper or the perpetual conversion price. That is only a completely new a part of the market.
We’re enthusiastic to see what occurs. It creates large optionality for us. And naturally, on the backside of this chart, you may think about we’ve got not issued a set coupon instrument lately. We did have a set bond, the ’28 word was a set coupon company bond, however we repaid that.
However trying ahead, we predict that there is most likely a spot in our capital construction the place we might simply subject a set coupon kind most popular with no conversion proper, and that might be even a fourth class of traders. So, we’ll proceed to be very considerate and strategic about this. I imply, generally folks marvel, they’re like “Nicely, why do you select to subject fairness as an alternative of a convert?” Nicely, if we do not just like the premium that the fairness is fetching, we do not subject a lot. And if we just like the premium, we just like the liquidity, we might subject extra.
So, if we cease issuing for some purpose, most likely the reason being we simply do not assume it is that accretive for our shareholders. And at any given time, whether or not or not the perfect factor for the shareholders is fairness issuance or convertible debt issuance or most popular inventory issuance or compensation or refinancing. It is actually a perform of the capital markets, and it is a perform of all the clever leverage ratios and the BTC yield that we will generate — the BTC acquire that we will generate for a certain quantity of capital we would increase, and we’ve got very subtle fashions. We calculate this each minute of the day, proper, not day by day, each minute of the day, generally each second of the day.
So, we’re very considerate, and we’re very thoughtful about this. And I believe a very powerful factor for us is we hold our choices open, and we develop a wide range of totally different choices for capital elevating. Our view is that Strike is definitely accretive. It’s a profit to Bitcoin.
It is a profit to MSTR. It is a profit to the convertible bonds and it is a profit to Strike shareholders themselves. So, consider a quad reflective-type technique all the pieces we’re doing is with the considered the affect on each different a part of the capital construction and all the Bitcoin ecosystem. And we’ll proceed to be very considerate in how we pursue this.
Subsequent, A snapshot of our capital construction. As of yesterday, we had a bit greater than $100 billion in fairness market cap and so we have a $94 billion fairness market cushion over our mounted earnings liabilities. And naturally, you would see a few $39 billion Bitcoin cushion over our mounted earnings liabilities. So, we have a really sturdy capital construction.
We have led with fairness in an effort to create a really, very sturdy query, however that places us in a fantastic place to lever up, and to proceed to boost capital and take a management position on this market. Subsequent. A couple of phrases about BTC yield and BTC acquire. To start with, we had a goal of 6% to 10% for BTC yield.
At this level, we consider for the 2025 calendar 12 months we will set that focus on to fifteen%. So, we’re adjusting the goal up. And what’s BTC yield, proper? BTC yield is our accretion of Bitcoin per share. If we have been a spot ETF, there could be no BTC.
If we have been to promote fairness on the internet asset worth at a 0% premium to the underlying Bitcoin, there could be no BTC yield. If we have been to promote fairness at a reduction to our internet asset worth, there will likely be a unfavourable BTC yield. So, once we’re producing BTC yield, it is as a result of we’re engaged in what we consider are accretive capital markets transactions. If we’re promoting the fairness at 150% premium to the underlying belongings, it is a a lot bigger yield.
If it is a 250% premium it might be even bigger on a given capital foundation. As a basic rule, the mounted earnings devices have a a lot increased premium to underlying belongings than does the straight fairness. And so, if we’re issuing a convertible bond at a excessive premium, then for a given quantity of capital we increase, the BTC could be increased. Folks marvel what is the significance of BTC yield? Nicely, when you consider it, t’s not the funding acquire from simply holding the Bitcoin.
If we simply maintain $50 billion of Bitcoin and it goes up 20% subsequent 12 months. There is a $10 billion kind funding acquire. That is the identical acquire that an ETF would have. Nonetheless, once we subject $20 billion price of recent capital or new securities, and we do it in an efficient 100% premium to the underlying belongings, half of that’s in accretion.
And in order that’s like a $10 billion BTC acquire or it is $10 billion divided by the quantity of Bitcoin we’ve got by 50. So, that might appear like a 20%-type BTC yield. So, the extra intelligently, we function the treasury operations, and the extra accretive means we do this, the upper that BTC yield will likely be. And so, you would consider BTC yield as a proportion measure of the worth that we’re creating for the shareholders from clever treasury operations.
And other people speak about and so they marvel concerning the premium to underlying belongings and what’s merited? Nicely, I might say, determine what a number of you need to placed on the enterprise after which take that a number of, multiply it by the BTC yield — take a a number of, occasions 15%, and that is really an affordable goal for the premium that should set — that the corporate should recover from and above its underlying belongings. When you consider in a ten a number of, you multiply 10x 15% and have 150% premium. When you had a decrease a number of, when you thought we might solely do that as soon as and by no means once more, you’ll multiply one occasions 15%, say they’ll get a 15% BTC yield as soon as and by no means once more. However in fact, that a number of may very well be something.
And we go away it to our traders to resolve what the a number of ought to be, however the suitable means to consider BTC yield is a a number of of BTC yield is the premium {that a} Bitcoin treasury firm ought to recover from and above its underlying Bitcoin belongings. Why? As a result of if we simply stopped partaking in treasury operations, if all we did was develop into a holding firm, and we did not do any extra capital increase ever, then we’re simply watching the Bitcoin go up or go down primarily based upon the underlying Bitcoin efficiency, which is rather like an ETF. And in order that’s BTC yield for you. Some folks have a tough time with that, which is why we have launched BTC acquire.
BTC acquire, I consider as the quantity of Bitcoin we captured in a non-dilutive vogue. proper? If we really are partaking capital markets actions at a premium, we’re promoting $100 million price of fairness backed by $50 million of Bitcoin. We captured a $50 million acquire, proper? That is the best way we consider it. If we bought $100 million of fairness backed by $100 million of Bitcoin, we might be capturing a $0 BTC acquire.
And if we have been silly sufficient to promote $100 million of fairness backed by $200 million of Bitcoin, we might really generate $100 million BTC loss. So, clearly, we cannot be doing that. However the energy of the BTC acquire is — it is a technique to quantify the shareholder worth creation of the treasury operation in BTC phrases each quarter or on a deal-by-deal foundation or on a year-by-year foundation. And you may see right here, our goal is to generate $10 billion price of BTC greenback good points and the 2025 calendar 12 months.
If we did not interact in treasury operations, that might be zero. If we interact in impartial treasury operations with no accretion, no dilution, that might nonetheless be zero. We might increase our capital base, however we would not generate a BTC acquire. So, BTC acquire is that measure of worth creation does not undergo the P&L.
You will not see it as an funding acquire. It actually is because of clever Bitcoin acquisition actions. However we’ve got launched this in an effort to make it simpler for our shareholders to know the enterprise. So, when you’re questioning, properly, how do I take into consideration the enterprise, I believe the Bitcoin treasury operation, if it is in a position to create $10 billion of BTC good points, it is price a a number of of that.
And naturally, you may put the a number of on the operation, no matter you need. It may very well be 10, it may very well be 20, it may very well be 30, it may very well be one, it is as much as you. However take that a number of multiplied by BTC greenback acquire. That is what we predict the operation is price, then you may go forward and add the Bitcoin treasury to it, and that will get you to a worth for the enterprise.
So, with that, we created these two easy concepts. Our goal of the administration crew is to generate $10 billion of BTC good points this 12 months, and our goal is to generate 15% BTC yield this 12 months by way of our treasury operations. And subsequent, I believe I might similar to to thank all people on your help. And at this level, I would wish to cross the ground to Shirish for some questions from the viewers.
Shirish Jajodia — MicroStrategy Integrated
Nice. Thanks, Michael. We’re going to soar into the questions now. And the primary query is for Andrew.
That is concerning the Strike deal. The query is like congrats on the profitable capital increase by way of Strike convertible most popular. And the query is, might you please elaborate on the pliability for the strike dividend to be paid out in money or in frequent inventory? And the way do you intend to fund the dividends going ahead?
Andrew Kang — Senior Government Vice President, Chief Monetary Officer
Positive. Thanks for the query. I assume, first off, it is price simply saying once more, we consider strike is a particularly accretive device to boost capital. And but immediately, it is only a fairly small a part of our device chest, so to talk, in comparison with our ATM and our converts.
I assume when it comes to assembly the obligations, we is not going to have to rely solely on money from operations. we’ll use all of our capital sources to pay these dividends, together with primarily the ATM. I assume, it is price noting, too, look, we raised over $20 billion in capital, $20 billion in capital because the starting of This fall, you actually need to match that to the $14-ish million within the quarterly dividend funds for strike. So, it is simply our capability to boost capital relative to the duty on strike is in combine in comparison with what we have to pay.
So, look, I believe we’ve got numerous capability and plenty of flexibility to cowl the dividends. And I additionally assume that our capability to boost capital sooner or later ought to improve, in addition to our market cap continues to extend. So, general, I believe we’re very snug in our capability to pay these in perpetuity.
Shirish Jajodia — MicroStrategy Integrated
Thanks, Andrew. We’re really over the allotted time for this name. So, we’ll take one last query for Michael, and that’s concerning the tax subject. So, what are the corporate’s newest ideas on the taxes on unrealized capital good points and what steps are being taken to mitigate this threat? And what are the implications if this tax subject turns into efficient sooner or later sooner or later?
Michael J. Saylor — Chair, President, and Chief Government Officer
Good query. We have been in dialogue with the IRS on this matter. And we’re additionally in dialogue with members of the cupboard and with supporters on Capitol Hill and the Senate and the Home. We do not assume that there is any broad-based help for the thought of an unrealized capital good points tax on crypto belongings for big company holders, so we do not anticipate over time that this may come an excessive amount of.
However having stated all that, within the occasion that there was an unrealized capital good points tax on company holders, we see this a second order affect. It should not have an effect on our convertible bond technique, our mounted earnings technique, our fairness methods. It could be a nuisance that it might considerably decelerate our progress price. However at finish of the day, we’re arbitraging fairness and debt capital markets the place the price of capital is 5% to fifteen% and the volatilities are 5% to fifteen% in opposition to Bitcoin with efficiency of 60%, 60-vol.
And so, whether or not or not we’re arbitraging 60 versus 10 or 55 versus 10 or 52 versus 10 does not actually a lot change the enterprise technique would possibly simply barely decelerate our progress price. And we stay assured that we’ll handle this subject.
Shirish Jajodia — MicroStrategy Integrated
Nice. Thanks, Michael. So, thanks, everybody, on your questions. Hopefully, we addressed plenty of these over the course of the decision immediately.
This concludes the Q&A portion of the webinar. We wish to thank the ten,000-plus distinctive attendees that joined our name stay immediately. And I’ll now flip the decision over to Phong for closing remarks.
Phong Q. Le — President and Chief Government Officer
Thanks, Shirish. I need to thank everybody who joined us immediately. And as all the time, we actually do respect your whole help. Hopefully, you are as excited as we’re about our enterprise software program technique, our Bitcoin technique.
and our technique typically. We look ahead to seeing you once more in 12 weeks. And hopefully, we’ll see plenty of you in Orlando at Technique World 2025 in early Might. Thanks, and have a superb night.
Period: 0 minutes
Name members:
Shirish Jajodia — MicroStrategy Integrated
Phong Q. Le — President and Chief Government Officer
Andrew Kang — Senior Government Vice President, Chief Monetary Officer
Michael J. Saylor — Chair, President, and Chief Government Officer
Michael Saylor — Chair, President, and Chief Government Officer
Phong Le — President and Chief Government Officer
