Bitcoin Holdings and Strategy - As of March 31, 2023, the company held approximately 140,000 bitcoins, with a market value of $4.172 billion and an average purchase price of approximately $29,803 per bitcoin[122]. - The company has not set a specific target for the amount of bitcoin to hold and will continue to monitor market conditions for potential additional purchases[110]. - The bitcoin acquisition strategy is supported by stable cash flows from the enterprise analytics software business, which allows the company to hold bitcoin for the long term[109]. - The company views bitcoin as a long-term store of value and a potential hedge against inflation[111]. - As of March 31, 2023, the total original cost basis of the company's bitcoin holdings was $4.172 billion[122]. - The company may periodically sell bitcoin for corporate purposes, including treasury management and tax benefits[110]. - During the first quarter of 2023, the company purchased bitcoin using $179.3 million from the sale of class A common stock[116]. - As of March 31, 2023, the company held approximately 140,000 bitcoins, with 125,110 being unencumbered[170]. - The company issued $500.0 million in 2028 Secured Notes, using the proceeds to acquire bitcoin, with approximately 14,890 bitcoins held as collateral as of March 31, 2023[178]. - MacroStrategy, a wholly-owned subsidiary, entered into a $205.0 million 2025 Secured Term Loan, using $190.5 million to acquire bitcoin, and prepaid approximately $161.0 million to fully repay the loan on March 24, 2023[179]. Financial Performance - Total revenues for the three months ended March 31, 2023, were $121.915 million, a 2.0% increase from $119.277 million in the same period of 2022[131]. - Product licenses and subscription services revenues increased by 23.4% to $36.222 million for the three months ended March 31, 2023, compared to $29.358 million in 2022[137]. - Subscription services revenues grew by 46.4% to $18.810 million, driven by a 35.6% increase in domestic revenues and a 72.8% increase in international revenues[137]. - The company reported a gross profit of $93.974 million for the three months ended March 31, 2023, compared to $93.600 million in the same period of 2022[131]. - Operating expenses decreased significantly to $114.281 million in Q1 2023 from $263.560 million in Q1 2022, primarily due to a reduction in digital asset impairment losses[131]. - The company incurred digital asset impairment losses of $18.911 million in Q1 2023, a substantial decrease from $170.091 million in Q1 2022[131]. - Non-GAAP loss from operations for the three months ended March 31, 2023, was $(2,752) thousand, compared to $(155,566) thousand for the same period in 2022[185]. - Non-GAAP net income for the three months ended March 31, 2023, was $445,038 thousand, compared to a loss of $(117,672) thousand in 2022[186]. - Non-GAAP diluted earnings per share for the three months ended March 31, 2023, was $30.59, compared to $(10.42) for the same period in 2022[186]. Expenses and Costs - Share-based compensation expense increased to $17.555 million in Q1 2023, up from $14.394 million in Q1 2022, reflecting the expansion of equity award programs[133]. - Total cost of revenues increased by $2.264 million to $27.941 million for the three months ended March 31, 2023, driven by a 45.2% increase in subscription services costs and an 11.1% increase in product support costs[147]. - Research and development expenses decreased by $2.165 million to $31.358 million for the three months ended March 31, 2023, primarily due to a decrease in employee salaries and variable compensation[153]. - General and administrative expenses increased by $1.200 million to $27.906 million for the three months ended March 31, 2023, primarily due to a $1.7 million increase in share-based compensation expense[154]. - Sales and marketing expenses increased by 8.6% to $36,106 in Q1 2023, compared to $33,240 in Q1 2022[187]. Cash Flow and Liquidity - Cash and cash equivalents held by U.S. entities increased from $14.8 million as of December 31, 2022, to $26.5 million as of March 31, 2023, while non-U.S. entities increased from $29.0 million to $67.8 million[166]. - Net cash provided by operating activities decreased by 14.4% to $37.4 million for the three months ended March 31, 2023, compared to $43.7 million in the same period of the prior year[172]. - Net cash used in investing activities decreased by 16.8% to $179.8 million for the three months ended March 31, 2023, primarily due to a $36.2 million decrease in purchases of bitcoins[174]. - Net cash provided by financing activities decreased by 9.5% to $187.6 million for the three months ended March 31, 2023, compared to $207.3 million in the same period of the prior year[175]. - The company expects existing cash and cash equivalents to meet working capital requirements for at least the next 12 months, but may need to explore refinancing or other options for long-term obligations[168]. Market Conditions and Risks - The company anticipates that quarter-to-quarter comparisons of operating results may not be indicative of future performance due to the volatility in bitcoin prices and revenue trends in the software business[131]. - The market price of bitcoin fluctuated between $16,490.00 and $29,190.04 during Q1 2023, impacting the carrying value of digital assets[191]. - Impairment loss on bitcoin for Q1 2023 was $18.9 million, reflecting the volatility in market prices[191]. - A 10% adverse change in foreign currency exchange rates would have decreased reported cash and cash equivalents by 4.5% as of March 31, 2023[195]. - Revenues for Q1 2023 were lower by 3.3% due to a 6.5% unfavorable change in weighted average exchange rates compared to the same period in the prior year[195]. Employee and Operational Metrics - As of March 31, 2023, the total employee headcount was 2,123, a slight decrease from 2,152 as of December 31, 2022[132]. - The number of product licenses transactions recognized in Q1 2023 increased to 6, compared to 4 in Q1 2022, with significant growth in transactions over $1.0 million[137]. - The remaining performance obligation as of March 31, 2023, is $316.8 million, with an expected recognition of approximately $243.3 million over the next 12 months[164].

Bitcoin Acquisition and Holdings - In 2022, MicroStrategy purchased approximately 8,813 bitcoins for an aggregate price of approximately $287.9 million, averaging $32,670 per bitcoin, and sold about 704 bitcoins for $11.8 million at an average sale price of $16,786 per bitcoin [29]. - As of December 31, 2022, MicroStrategy held $1.840 billion in digital assets, consisting of approximately 132,500 bitcoins, with cumulative impairment losses of $2.153 billion due to trading price fluctuations [30]. - As of February 15, 2023, MicroStrategy's bitcoin holdings were acquired at a total cost of $3.993 billion, averaging $30,137 per bitcoin, while the market price was $24,163.86 [31]. - MicroStrategy's bitcoin acquisition strategy involves using liquid assets exceeding working capital requirements and may include issuing debt or equity securities to fund additional bitcoin purchases [22]. - The company has not set a specific target for the amount of bitcoin to hold and will continue to monitor market conditions for potential additional financings [27]. - MicroStrategy's treasury reserve policy includes cash assets and bitcoin as primary treasury reserve assets, with bitcoin serving as a long-term holding strategy [28]. - The company believes bitcoin serves as a store of value and a hedge against inflation due to its limited supply and decentralized nature [47]. - The company anticipates increasing its bitcoin holdings in the future, which may lead to greater volatility in earnings compared to prior periods [134]. - The concentration of bitcoin holdings enhances risks, particularly as the price of bitcoin has recently experienced significant declines [149]. - The company has entered into a bitcoin-collateralized loan and may consider issuing additional debt or financial instruments collateralized by bitcoin holdings [144]. - The company's bitcoin holdings are expected to represent a larger proportion of total assets in the future, increasing exposure to market volatility [134]. - The company’s bitcoin acquisition strategy exposes it to risks associated with the volatility of bitcoin and potential impairment losses [116]. - The company is subject to counterparty risks related to custodians of its bitcoin holdings, which could adversely affect financial condition [117]. - A significant decrease in the market value of bitcoin holdings could adversely affect the company's ability to service its indebtedness, as the majority of its assets are concentrated in bitcoin [161]. Financial Performance and Risks - The company generated a net loss for the fiscal year ended December 31, 2022, primarily due to digital asset impairment losses [106]. - The company reported a net loss of $1.470 billion for the year ended December 31, 2022, compared to a net loss of $535.5 million for the year ended December 31, 2021 [133]. - Digital asset impairment losses of $1.286 billion for the year ended December 31, 2022 represented 76.9% of the company's operating expenses, compared to 69.0% in the previous year [133]. - The company’s financial results may experience variability due to the potential impairment of bitcoin holdings, which could materially affect reported earnings [132]. - The price of bitcoin is subject to significant fluctuations influenced by various factors, including regulatory changes and market sentiment [131]. - The company may face increased tax liabilities due to changes in tax laws and regulations, particularly under the Inflation Reduction Act of 2022 [110]. - The company’s operating results may fluctuate significantly due to various factors, including bitcoin price volatility and changes in customer demand [102]. - The company faces risks related to non-performance by counterparties in its bitcoin acquisition strategy, which could result in significant losses [163]. Regulatory and Compliance - The company is committed to ongoing collaboration with regulatory bodies to ensure compliance with evolving digital asset regulations [51]. - Regulatory scrutiny is heightened due to the company's bitcoin acquisition strategy and potential compliance requirements [142]. - The company is subject to various global data protection laws, including GDPR, which can impose fines of up to €20 million or 4% of global annual revenue for non-compliance [86]. - Regulatory changes reclassifying bitcoin as a security could classify the company as an "investment company" under the Investment Company Act of 1940, potentially adversely affecting the market price of bitcoin and the company's Class A common stock [159]. - The company’s digital asset strategy is subject to evolving regulatory frameworks that could impact the price and transferability of bitcoin [135]. - Compliance with changing privacy regulations may require substantial resources and could materially affect the company's business operations [218]. Business Operations and Strategy - The company emphasizes the importance of its enterprise analytics software in empowering organizations to leverage data for actionable insights [54]. - MicroStrategy's cloud service received FedRAMP authorization on November 29, 2022, certifying compliance with U.S. federal cloud security standards [63]. - The MicroStrategy platform offers over 200 connectors to popular data sources, enhancing flexibility and agility for organizations [59]. - The company has established strategic alliances with third-party vendors to enhance customer success in enterprise intelligence initiatives [76]. - The company relies on its enterprise analytics software business for revenue, which is subject to evolving market demands and regulatory restrictions on data usage [166]. - The company faces risks related to government contracting, including budget constraints and potential contract terminations [198]. - The company is exposed to risks from geopolitical tensions, natural disasters, and pandemics, which could disrupt operations [190]. Employee and Organizational Structure - As of December 31, 2022, MicroStrategy had a total of 2,152 employees, with 719 based in the United States and 1,433 internationally [96]. - The company expanded equity compensation programs worldwide in 2022 to enhance employee engagement and retention [98]. - The company’s ability to attract and retain skilled personnel is critical for future success, particularly the retention of key executives [204]. Market Competition - The analytics market is highly competitive, with MicroStrategy competing against major players like IBM, Microsoft, and Oracle [81]. - The company faces risks related to software errors and security vulnerabilities that could adversely affect revenue and reputation [184]. - The company’s marketing strategy focuses on increasing brand awareness through digital media, events, and partnerships, particularly highlighting its bitcoin acquisition strategy [78].