Good day ladies and gentlemen, and welcome to the MicroStrategy, Third Quarter 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference, Michael Saylor, Chairman, President and CEO. Sir, you may begin.

Hello! This is Michael Saylor. I’m Chairman, President and CEO of MicroStrategy. I’d like to welcome all of you to today’s conference call regarding our 2018 third quarter financial results. I’m here with our Chief Operating Officer and 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 third 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’ll 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 the market today, which is located on our website at www.microstrategy.com. I’d like to start with financial highlights for the quarter. We delivered the initial version of our MicroStrategy 11 software in September with great new capabilities and improved ease of use performance, augmented analytics and artificial intelligence that Michael will highlight later. We are now working towards our MicroStrategy 2019 platform release, which we plan to launch in December this year. We, as well as our customers and prospects are eagerly awaiting our first platform releases since June 2016 and are excited about our plan to annual platform release schedule going forward. This has been a significant journey in MicroStrategy’s transformation. Starting in 2014 with our transition to an agile development process, our MicroStrategy 10 release in…

Thanks Phong. MicroStrategy is a modern, multiplatform enterprise, analytics and mobility platform. We are focused upon being open, being unified and our architecture supporting all the types of tools that data scientist, application developers and analysts use throughout the enterprise. Supporting every type of data source application in the Cloud, enterprise applications, NoSQL sources, MDX sources, Hadoop sources and the like. And I think that what defines MicroStrategy is a commitment to that modern analytics platform combined with a commitment to methodology for enterprise success and we call that methodology our Intelligence Center Program and we have packaged that as part of our enterprise support program and we've been building that throughout the past 12 months. Recently I flew around the world to meet with dozens of our customers and I spent time in Vienna and Milan and Warsaw. I went to Riyadh, I went to Dubai. I was in Hong Kong, Shin Shin. I went to South Korea, Tokyo and then I went south to Sydney, Australia before returning to Washington DC. And I engaged in half a dozen conversations in every city I went to, with our customers and with perspective customers and I was very, very excited to hear from them and came back with a conviction that they want things from us that they just can't get with desktop analytics tools like Tableau or with departmental analytics tools like Microsoft’s Power BI. Specifically there are three things that are really compelling and exciting for the enterprises around the world in the year 2019 that they want, that I don't think they can get with other tools. The first one is Federated Analytics. Everybody wants to be able to deploy a common data infrastructure, what we call a single version of the truth and they want to…

Thank you [Operator Instructions]. Your first question comes from Tyler Radke with Citi. Your line is open.

Hi, thank you, thanks for taking the question. Maybe we’ll start off Michael, so it sounds like a lot of excitement around Version 11. I'm just curious how you're thinking about the impact of Version 11 on 2019 license revenue growth? You know it seems like with Version 10 there was obviously a lot of excitement, but certainly customers want to wait until stable release is out in the market before they migrate. So just how you’re thinking about this? Is it going to be a Version 2 or Version 3 when you really see the meaning migrations and just how you are thinking about that catalyzing license revenue growth in 2019?

You know, I think we learned a lot from our Version 10 launch and the production release of Version 10 was 10.4 and so I don't think we managed it as well as we could have and we took the lessons learned as we thought about Version 11 and we folded them into our plan. So Version 11.1 will be the production release and we’ve spent quite a bit of time hardening that version and already putting the features out in the market. So I think that Version 11.1 will actually be a very solid release and I expect that our customers will upgrade to that version in large numbers and we should see benefit in 2019 and it should drive revenue growth for us in a license side.

Okay, great. And you also mentioned a 1000 – I think you said 1000 engagements in the coming months. Could you just elaborate on that? Is that with both new and…

I said 1000 engagements in the coming year. What that means is we are now getting to the point where we’re engaged in about 200, 250 places in any given quarter with our customers to provide them with advisory services, we've been ramping that up. So I think at the rate that we’re ramping up, we should see in 2019 engagements that are providing intelligent enterprise advisory services, at least 1000 of them.

Okay. And then just lastly on the product side, the kind of its vision around having MicroStrategy being able to connect to other analytics tools like Tableau or Data Science platforms. I'm just curious how you’re strategizing the go-to-market of that? I mean it seems like – are you thinking about this as like a meaningful change from what you're used to and I know in 10.9 I think you released kind of some connectors the Tableau already. So I'm just curious how like – you know how that vision kind of compared to what's out there today and how you're thinking about the go-to-market on that as well?

You know we released some technology and we tested the technology in order to get more comfortable with it and so we won't be releasing the technology for the first time with 11.1; we've actually got some decent experience. What we have done is spent a lot of time working with customers to understand what they need in the area of federated analytics and I think that the summary would be federated analytics will be a major, you know one of our three major themes in the year 2019 and it’s a major theme for the MicroStrategy platform in 2019 and the promise of deploying a set of common data sets to any tool in the enterprise is a promise that all customers you know resonate with. I mean why wouldn't you like that, right. I mean it solves a lot of problems. You know nobody in a corporation, not the CEO, not anybody from the Executive Vice President can dictate and tell people what single tool they’ll use. They are going to use a bunch of different tools. If I told them they had to use Excel, they wouldn't; if I told them they had to use Tableau, they wouldn’t. If I told them they can’t use it, they would, and so you have this heterogeneous situation and what we've realized over time is it doesn't make sense to spend a lot of time trying to tell someone why you know the tool of choice they have you know isn't the best one. A much better idea is to be a corporate citizen and support their tool, but give them a single version of the truth with security. In fact, there is almost no push back from analyst or developers. If you say to them “Hey, I've got this one data as a service, served up as restful APIs or I’ve got this data service and you can just plug into it from Excel, Tableau, Power BI whatever, now there is no push back from that. Everybody is happy to clean enterprise certified date. The push back is when I tell someone that uses Excode they got to use Swift or when the use Swift they got to use Visual Studio or when they use Visual Studio they got to use Python or when they use Python they got to use Tableau, and when they use Tableau they got to use Power BI. Nobody wants to switch that tool that they got comfortable with at the end use, but everybody wants to avoid you know fishing for data in a very complicated fashion and they don't want to reinvent the wheel. So we believe that the federated analytics message is one that will resonate and will allow us to take market share and to work side by side with a heterogeneous set of tools that are going to flow out there for quite a while.

Okay, and then last one for me, Phong on expenses. I think you talked about sales and marketing investments, kind of where – you know at a level that you think is good going forward. Could you just talk about the other lines where we are on the ramp?

Yeah, so and your right and you saw a start to reduce our marketing expenses a little bit from Q2 2018 to Q3 2018 as we focus our activities a bit more on our 2019 launch. On the R&D side we’ll continue to grow that organization. We've been growing at a pretty aggressive click and we’ve been happy with the success we've had there hiring around the world. I think the majority of our incremental hiring going forward will be in some of our lower cost areas like China and Warsaw and we’ll still hire some folks here in the headquarters, but we won’t see substantial cost increases. And on the G&A side, generally speaking we're trying to keep that as an organization flat going forward.

Okay, thank you.

Thank you. Your next question comes from Frank Sparacino with First Analysis. Your line is open.

Hi Phong. Maybe to start with you. Just on the deferred revenue explanation you gave, can you give a little more detail in terms of the movement away towards the multi-year agreements?

Yeah, we found historically we would offer multi-year agreements to customers, let’s say two or three years at pretty steep discounts, call it greater than 5%. And we found that given our renewal rates, that that just wasn't necessary and so we've moved more to sort of single year, one or two year agreements with a flatter, no discount model and as a result, that causes are deferred revenue balance to decrease over time.

Okay and then maybe lastly just looking at 2019 for Mike, you know in terms of the sales force and strategy, sort of the go-to-market, is there going to be any changes, meaningful changes around the sales part?

I think that the sales organization is going to be catalyzed and charged up with the 2019 product, because it's a comprehensive platform release and the first one they had in nearly three years and it checks all the boxes of what’s hot in the market place right now. We will continue to build out and add additional sales leadership from time-to-time and different places. I believe that our sales approach is a bit more services lead or methodology rich than it has been in the past. I think our sales organization is getting much more confident assuming the role of trusted advisors with the map of the intelligent enterprise and the MicroStrategy Intelligence programs than they were a year ago and as that program grows, I think it positions them to a much more prescriptive sale than we've had before. But otherwise, no particular thing I would choose to highlight.

Thank you. [Operator Instructions] And I am showing no further questions at this time. I would like to turn the call back over to Michael Saylor for closing remarks.

Okay, I would like to thank everyone for your support. We are really excited about what’s going to happen during the final quarter of the year. I'm looking forward to the release of MicroStrategy 2019 and I’ll look forward to speaking with all of you again in 12 weeks. Have a great day! Bye.

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