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MicroStrategy(MSTR) - 2024 Q3 - Earnings Call Transcript
MSTRMicroStrategy(MSTR)2024-10-31 03:26
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Financial Data and Key Metrics Changes - MicroStrategy reported a total Bitcoin market value of 18billionasoftheendofQ32024,holding252,220Bitcoins[6]−Thecompanyacquiredanadditional25,889Bitcoinsatanaveragepriceof18 billion as of the end of Q3 2024, holding 252,220 Bitcoins [6] - The company acquired an additional 25,889 Bitcoins at an average price of 60,839, totaling a purchase cost of 1.6billion[7]−Year−to−date,thepriceofBitcoinhasappreciatedsignificantly,drivenbytheapprovalofSpotBitcoinExchangeTradedProducts(ETPs)[7]−Softwarebusinessrevenueswere1.6 billion [7] - Year-to-date, the price of Bitcoin has appreciated significantly, driven by the approval of Spot Bitcoin Exchange Traded Products (ETPs) [7] - Software business revenues were 116 million, down 10% year-over-year, reflecting the transition from on-premise to cloud services [27] - Non-GAAP subscription billings grew by 93% year-over-year to 32.4million,markingfourconsecutiveyearsofdouble−digitgrowth[20][30]BusinessLineDataandKeyMetricsChanges−Thesoftwarebusinessistransitioningtocloudofferings,withsubscriptionservicesrevenuesnowcomprisingapproximately2432.4 million, marking four consecutive years of double-digit growth [20][30] Business Line Data and Key Metrics Changes - The software business is transitioning to cloud offerings, with subscription services revenues now comprising approximately 24% of total revenues, having increased by 32% year-over-year [31] - Product license revenues are expected to decline further as the company shifts focus to cloud services [28][32] - The company reported strong cloud bookings, which helped offset lower product license contracts [29] Market Data and Key Metrics Changes - The market value of MicroStrategy's Bitcoin holdings was 16 billion as of September 30, 2024, with an average purchase price of 39,000perBitcoin[40]−ThecompanyisthelargestcorporateholderofBitcoinglobally,withastrategyfocusedonBitcoinasatreasuryreserveasset[6][10]CompanyStrategyandDevelopmentDirection−MicroStrategyaimstoraise39,000 per Bitcoin [40] - The company is the largest corporate holder of Bitcoin globally, with a strategy focused on Bitcoin as a treasury reserve asset [6][10] Company Strategy and Development Direction - MicroStrategy aims to raise 42 billion in capital over the next three years, targeting 21billioneachinequityandfixedincomecapitalprimarilyforBitcoinacquisition[16][18]−Thecompanyhasadoptedanewdescriptorastheworld′sfirstandlargestBitcointreasurycompany,focusingonBitcoinasitsprimarytreasuryreserveasset[10]−ThestrategicplanincludesleveragingintelligentcapitalallocationtoincreaseBitcoinholdingswhilemanagingoverallleverage[50][57]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementexpressedoptimismaboutthematurationofBitcoinasaninstitutional−gradeassetclass,citingincreasedregulatoryrecognitionandinstitutionaladoption[7]−Thecompanyanticipatescontinuedstrongdemandforitscloudplatformandexpectssubscriptionservicesrevenuestogrowinthelongtermdespiteshort−termdeclinesintotalrecognizedrevenue[21][24]−ManagementhighlightedtheimportanceofachievingapositiveBTCyield,revisingthetargetto621 billion each in equity and fixed income capital primarily for Bitcoin acquisition [16][18] - The company has adopted a new descriptor as the world's first and largest Bitcoin treasury company, focusing on Bitcoin as its primary treasury reserve asset [10] - The strategic plan includes leveraging intelligent capital allocation to increase Bitcoin holdings while managing overall leverage [50][57] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the maturation of Bitcoin as an institutional-grade asset class, citing increased regulatory recognition and institutional adoption [7] - The company anticipates continued strong demand for its cloud platform and expects subscription services revenues to grow in the long term despite short-term declines in total recognized revenue [21][24] - Management highlighted the importance of achieving a positive BTC yield, revising the target to 6% to 10% annually for the next three years [57][58] Other Important Information - The company redeemed 500 million in senior secured notes, resulting in all Bitcoin holdings becoming unencumbered [9][38] - MicroStrategy plans to adopt new FASB fair value accounting rules for Bitcoin holdings starting Q1 2025, which will impact retained earnings [40][41] Q&A Session Summary Question: What is the outlook for Bitcoin as a treasury reserve asset? - Management believes Bitcoin is becoming increasingly recognized as a digital capital asset, with significant institutional interest and adoption [61][62] Question: How does MicroStrategy's performance compare to traditional asset classes? - MicroStrategy has outperformed the S&P 500 and other asset classes significantly since adopting the Bitcoin standard, demonstrating the strength of Bitcoin as an investment [68][69] Question: What are the implications of the new capital raising strategy? - The new strategy aims to leverage capital markets effectively to enhance Bitcoin holdings while maintaining shareholder value through intelligent leverage [50][57]