Good day, ladies and gentlemen and welcome to the MicroStrategy Q1 2018 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Michael Saylor, Chairman, President and CEO of MicroStrategy. Sir, you may begin.

Hello. This is Michael Saylor. I am the Chairman, President and CEO of MicroStrategy. I’d like to welcome all of you to today’s conference call regarding our 2018 first quarter financial results. I’m here with our CFO, Phong Le. First, I’d like to pass the floor to Phong, who is going to read the Safe Harbor statement and make some comments on our results for the first quarter.

Thank you, Michael, and good evening, everyone. Various remarks that we may make about our future expectations, plans and prospects may constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recent Quarterly Report on Form 10-Q filed with the SEC. These statements reflect our views only as of today and should not be relied upon as representing our views as of any subsequent date. We anticipate that subsequent events and developments may cause the company’s views to change. While the company may elect to update these forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so. Also, during the course of today’s call, we will refer to certain non-GAAP financial measures. There’s a reconciliation schedule showing GAAP versus non-GAAP results currently available in our press release issued after the close of market today, which is located on our website at www.microstrategy.com. Our Q1 2018 financial results continue to be on track with our overall strategy. We continue to invest in sales and marketing technology, and our customers and our people with the objective of growing total revenues. Our map with the Intelligent Enterprise is resonating with both customers and prospects that are looking for a roadmap for the digital transformation. Our Dossier, Workstation and Library products have significantly improved our products to ease of use. Across the MicroStrategy organization adoption, the usage of our platform have increased. And I’m excited to share the release of our Q1 financials of MicroStrategy, Dossier and Library products, and you can get to our Q1 financials Dossier by downloading the MicroStrategy Library…

Thanks, Phong. I’d like to share my enthusiasm around a number of various initiatives we have in 2018. We have exciting things going on in marketing, sales, services, technology at the corporate level, and I think they’re all integrated with a common theme, which is to drive our mission of making every enterprise and Intelligent Enterprise. In the area of the marketing, I’m enthusiastic about improvements to our field marketing programs; we’ve built out our field marketing organization. we’ve expanded our Trade Show Roster and we’re in a lot more places than we used to be. We’ve also started to engage heavily in a number of CXO, CDO, CIO summits, where we’re presenting the MicroStrategy Intelligent Enterprise message to very qualified groups of senior executives and enterprise organizations around the world. We’ve seen that’s generating a lot of high-quality leads, and also brand awareness for us, and we expect to continue. I’ve been very enthusiastic about those kind of initiatives. Our digital marketing programs have ramped up versus a year ago, and we’re putting the MicroStrategy message out in a lot more places, and we’re starting to see increased lead flow there and qualified lead flow. We’ve moved on to a focus on the lead conversion and we’re putting more energy into the conversion of qualified leads and the sales opportunities than ever, and I’m enthusiastic about our initiatives there to improve this conversion rate. We’ve got some exciting business development initiatives plan for the remainder of the year to begin delivering the MicroStrategy message out to all of the senior executives within our named accounts, and our customer base, and we continue to organize and refine our efforts in order to achieve new efficiencies and business development. And one of the ways we do that is with very structured…

Thank you. [Operator Instructions] Our first question comes from Karl Keirstead of Deutsche Bank. Your line is open.

Hey guys. This is Austin Dietz on for Karl. So maybe, first if you could just talk about what triggered the sales leadership changes and then what sales structure strategy changes Kevin may have in mind. And then just the second question, despite the license declines you guys still posted mid-single-digit maintenance growth. So maybe, if you could provide some color on what drove the string to maintenance and then any thoughts on the durability of mid-single-digit maintenance growth going forward would be great? Thanks.

Yeah. Our commitment to analytics and mobility over the last three years, I think has created a solid reputation within the marketplace from MicroStrategy is the champion of enterprise intelligence. And I think that’s created the opportunity for us to attract some great industry talent and leadership to contribute to the firm, Marge and Les joined the board are two indicators of that, Kevin has got a great history in the enterprise software industry providing sales leadership and we thought that he would be able to make a contribution to the sales execution of the firm, and we’re always looking for talent to contribute to the mission.

On your question on our support revenue growth in the mid-single-digit, we’re obviously we’re very happy with the outcome 6% up year-over-year. if you want to know about 4% of that was due to improvement in FX. So effectively, it was about a 2% year-over-year improvement normalized and that’s about what we’ve been seeing for the last few years. we have made upper 90% renewal rates in our business. our customers are very happy with our software. I think our recent innovations in our software especially with Dossier and library, and Workstation have let our customers to know that we’re innovating and I think we’re really starting to find our space well and enterprise analytics. So, all those things together including our internal initiatives we’ve taken to improve customer satisfaction to improve backlog and helped us tickets. all those things are just overall helping our support revenue phase. So we’re pretty happy with where we are in that metric right now.

Great, thanks.

Our next question comes from Abhey Lamba of Mizuho Securities. your line is open.

Yeah. Thanks. This is Parthiv on for Abhey. Mike, on the last call, you’ve talked about some net new customer activity, just wanted to get an update on that front. I guess what’s the funnel looking like now that we’re well into 2018 and any change in conversion as leads flow through?

We’re enthusiastic about our opportunities in 2018. I don’t think we have any particular changes to report one way or the other, but we’ve got a number of initiatives to continue to drive sales and marketing effectiveness, and we’re looking forward to executing on them.

Yes, I think Mike – general improvement in our leads data coming in from all of our incremental marketing activities, but I think it’s early yet to determine how that’s going to result in revenue whether with net new customers or existing customers.

Okay, great. And then given the announcements from one of your competitors earlier this week, I guess in your conversations with enterprise customers, how developed are their data preparation capabilities and I guess, how does the MicroStrategy platform either directly or through partnerships sort of support those efforts?

I think we’re living in a world, where there are exploding number of data sources. so there are more and more enterprise data sources than ever before and there really aren’t many enterprise assets that are going away. So if you want to be credible in the enterprise marketplace, you need to support lots of different enterprise data sources. And so it’s not surprising that they’re interested in that business. I think that most of Tableau’s announcements of late have to deal with them working to appeal to departmental analytics customers in order to address the threat from Microsoft and the challenges that Microsoft has with their business. In our particular case, we just continue to focus upon the enterprise and we feel comfortable with our strategy.

Okay. Got it. And then one last on the capital return front, any – could you give us an update there, any inclination towards incremental buybacks or even the dividend some time in the near-term?

We continue to evaluate the situation and consider the best use of our capital, and it will remain an important topic for us as we go forward.

Okay, perfect. Thanks guys.

[Operator Instructions] Our next question comes from Frank Sparacino of First Analysis. Your line is open.

Hi guys. Maybe, just to start Mike, you made some comments early on about the sales and lead gen field marketing effort. Is there anything that you can relate us in terms of actual numbers around the improvement in lead gen and I assume your comments around the higher sales conversion was more of a forward-looking comment than it is kind of current state, but maybe those two things?

Well, I think our lead generation has increased in a material fashion year-over-year and we definitely see improvement in the quality of lead flow and also in the quantity of lead flow. And that we see as an auspicious trend.

And then on the sales conversion side, I mean your kind of current level of happiness with where that today and where you think it should be down the road?

Well, we’ve aligned all of our sales and marketing talent to focus upon ways to improve conversion of leads into sales opportunities. and we think we’ve got more focus and energy on that than before, and we’re excited about the opportunities that we have in order to improve that part of the business.

I think it’s early still Frank to you, just to know, we came out, I believe, in July of last year and talked about our incremental investment activities in marketing. We didn’t really launch them until October. So we’re really six months into it and as Mike mentioned, we’re seeing good incremental lead flow, this is early to judge the success of that in terms of conversion to sales and revenue.

Great. And maybe just last from me, just anything you can provide in terms of kind of footprint related to Workstation to-date?

The Workstation is part of the version 11 release. and so we’re seeing a lot of people starting to use Workstation as part of the 10.11 feature release. but I would say that the broad adoption of workstation will come until the version 11 platform release later this year. and then as customers deploy MicroStrategy version 11 environment. So I’ll start to use the Workstation as part of that deployment.

Yeah. Frank, I think you’re familiar with our product release strategy. But our last platform release was 10.4 and for large enterprise customers that typically standardize on a platform release. and then we’ll deploy the individual releases beyond that in a test environment or in a sandbox environment, but you typically wait until a platform release to do a full deployment to 10 to 1000 [ph] of users.

great, thank you.

Our next question comes from Tyler Radke of Citi. Your line is open.

Hey, thanks guys. Good evening. So Mike, I wanted to ask you, you made some comments about the SAP business objects opportunity with SAP, kind of forcibly moving their customers of the cloud. And if I think about your strategy over the last year or two, it seems like it’s really centered around getting net new customers and going after the market, where Tableau has had some success. With that having played out the last two years and obviously, not seeing any inflection on the on the top liner and particularly with the new head of sales coming be onboard, are you starting to think about maybe going back to kind of the core roots of where MicroStrategy has had success with the kind of traditional enterprise accounts, especially if you see this SAP opportunity coming up.

I think that both SAP and oracle have this massive corporate agenda to convert all of their on-premise customers to cloud. And I think that that’s a financially-driven agenda for them to which they’re driving as financial engineers. So I don’t think it’s in the best interest of their customers. And we’ve heard that – heard so much of that from their customers. So if you’re – if you’re a business object customer and you deployed applications on the business objects 4.2 platform, then SAP’s recent announcement is basically telling you that if you stick on that, you’re not going to get any functional investment and that’s not going to leave you without access to modern APIs for rest that’s going to leave you without a great mobile product, it’s going to leave you without a path to take advantage of AWS, it’s going to leave you without the modern geospatial collaboration and responsive design capabilities that people wanted. So, that’s kind of a dead-end and on the other hand, if you follow SAP’s path, you have to rebuild your applications on a new platform, and nobody wants to do that, many of the re-buy part of the platform and nobody wants to do that, and many have to trust your IT operations, the SAP’s cloud, which is going to be the high-cost provider of cloud services. Certainly, there’s nobody in the world and thinks that SAP is going to sell their stuff cheaper than Amazon or Microsoft or Google, so – or even Oracle, so that matters. So if you wanted to find the single most expensive provider of cloud services, that would probably be SAP. So if you’re an IT executive, and you’ve got some of that works fine and you look at that announcement, right you’ve got…

Great. And just I guess to follow up on that. So obviously, these customers have had these platforms for multiple years, but I mean what’s kind of your confidence in their willingness to move off of these platforms and on to something like MicroStrategy and do you feel that from a technical and cost perspective, that that’s actually easier or cheaper than just to go with cloud, because ultimately it is a migration front one vendor to the other, which aren’t the easiest things to do?

I think that if SAP was 100% committed to the business objects, BI platform, then you would typically see renewal rates for those customers in the 90% range or better. But I think that when your vendor drops commitment publicly to the platform and says there is no upgrade path and you have to switch to a new platform. The fact that you have to rebuild your applications to the new platform, that heavily drops that renewal rate by some number of percentage points. And then if you also bundle that and say not only you have to rebuild the app in a new platform, but you also have to find my cloud services with it, and I will sell them one-bundled, that drops your renewal rate by another number of percentage point. So as for exactly, what the impact that’s going to have on their customer commitment. I can’t give you the exact number, but common sense shows if I tell you, you got to rebuild everything and pay me three times as much to keep running it. Then that’s not going to be viewed favorably by large enterprise IT organizations and I’ve spent about 30 years in this industry and I’ve seen how they react, and although they do like to stay with a platform, which is working for them, when they get strongarmed by vendors, most of those organizations will either spend up RFP process or even if they stay with the vendor over the next three years, they’ll generally start to put it in containment, and then when they have new projects, they’ll consider new platforms and new vendors for the new projects, because they want to have a second source or more control over their destiny. So, I think this is only a positive thing as for exactly the rate of which people move well, when a vendor does not within perfect they move slower but and in an environment where the vendor is maybe making strategic missteps or strong arming or pressuring our customer, you’ll find these enterprises have a lot of choices and they have good memories and very effective. And so for our point of view we’d like to be invited to the table, it’s a lot easier for us to get into the RFP process at these large enterprises and be stabilized by what I view as a vendor strategic misstep, and that’s what we have right now.

And with all that said, how are you thinking about the return to license both, I think you’ve talked about that that still will offer 2018 obviously, the Q1 with license being down double digits, that’s kind of a bit harder, are you still confident in license growth this year or you’re thinking more at the second half of that?

Phong, do you want to comment on this?

Yes, I think we said at the beginning of the year, that we’re excited to see revenue and product license revenue growth in 2018 and that still an aspirational words.

Great, thank you.

And I’m showing no further questions at this time. I’d like to turn the call back to Michael Saylor for any closing remarks.

I want to thank everybody for your support and we look forward to speaking with you again in 12 more weeks. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.