Good evening, everyone. I’m Jeremy Price MicroStrategy Senior Vice President of Financial Planning and Analysis and Head of Investor Relations. I'll be your moderator for MicroStrategy is 2020 Fourth Quarter Earnings Webinar. And before we proceed, I will read the Safe Harbor statement. Some of the information we provide during today's call regarding our future expectations, plans and prospects may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements due to various important factors, including the risk factors discussed in our most recent 10-Q filed with the SEC. We assume no obligation to update these forward-looking statements, which speak only as of today. Also, during today's call, we'll refer to certain non-GAAP financial measures. Reconciliations showing GAAP versus non-GAAP results were available in our earnings release and presentation, which were issued today and are available on our website at www.microstrategy.com.

Hi, this is Michael Saylor. I'm the Chairman and CEO of MicroStrategy I'd like to welcome all of you here today to our webinar regarding our 2020 fourth quarter financial results. I'm here with Phong Le, our President and Chief Financial Officer. I'd like to pass the floor to Phong who is going to discuss our operational and financial results for the quarter.

Thank you, Jeremy. Thank you, Michael. The fourth quarter was a good finish to what was an exciting and transformational year for MicroStrategy. Before I review our fourth quarter results in detail. I want to underscore the key highlights from 2020 for the company. First we had a solid sales year in light of the economic environment. Total revenue for the year was down only modestly and our performance in the second half of the year was notably strong. We also made important progress and our shift towards our cloud offering which drove current subscription billings to $15.5 million as of December 31, 2020 up 41% year-over-year. Second, we embrace the virtual wave to dramatically improve the cost structure and operating efficiency of the business. For the year, we reduced non-GAAP operating expenses by 15% or $55.8 million and increased non-GAAP operating income of $68.2 million dollars from $9.2 million in 2019. Third, we deploy the excess capital on our balance sheet to generate substantial shareholder value. We return, a $123 million to shareholders via share repurchases and instituted the unique an innovative treasury reserve policy that made MicroStrategy the first publicly traded company to utilize bitcoin as its primary treasury reserve rights. Over the course of the year, we purchased 70,469 bitcoins for an aggregate price $1.125 billion or an average price $15,964 per bitcoin. As of 4:00 p.m. in January 27 our digital assets had a market value of $2.2 billion. Finally regarding our bitcoin strategy our pioneering decision to make bitcoin our primary study reserve asset has made MicroStrategy a thought leader in crypto currency market in generating great interest in MicroStrategy as a corporation.

Thanks Phong. I'm really excited about 2021 looking forward if we think about the really exciting technology opportunities we have HyperIntelligence is really the cutting edge of MicroStrategy’s business development strategy. HyperNow really represents giving people the power of HyperIntelligence out of the cloud in a multi-tenant environment in less than an hour. I think the HyperNow gives us scalable HyperIntelligence. If we can take all of the human labor out of the mix and all of the software downloads and installations of the mix then it’s possible for a mid-sized company and Singapore on a Saturday afternoon to find our website sign up for HyperNow plug into our SaaS offering, integrate into one of their databases, plug in their enterprise security, build an application and deploy it out to thousands, tens of thousands or hundreds of thousands of their employees. Customers and partners all not even on a week-day without talking anybody on the phone, without going into the office it's just really compelling. HyperIntelligence is not just compelling because we're going to be deploying it out of the cloud in 2021. It's also exciting because we've made a lot of nice upgrades to HyperIntelligence. For example, we provided HyperVision and you can see an example of HyperVision on our strategy.com website. But the idea is, I look at the documents and I lighted up in 10 different colors based upon the underlying metrics that the HyperIntelligence engine sees and codifies. So wouldn't it be great if I can read a list of one thousand names and see the ones in green that are making me money, the ones in red that are losing money and the ones in the yellow that I need to be focused on my see it in a split-second that's HyperVision. We made it…

Thank you, Michael. We've got some good questions here and we'll start off with Michael. Michael, how do you envision the role of MicroStrategy participation in the bitcoin network evolving in the future and will the company look to build a software business that leverages the growth of bitcoin – the bitcoin monetary network will you expand the company go beyond being a leader for bitcoin treasury education?

We have a strong team and we're actively studying the bitcoin industry and all the activities in the process in the industry and all the data in the industry to determine the best way for us to add value with our existing business intelligence and HyperIntelligence. Although we don't have anything that we are ready to announce, right now. We are enthusiastic about the opportunity to bring our intelligence to the industry at the right time in the right fashion.

All right. Just as a reminder, please use the Q&A feature at the bottom of your zoom screen in order to ask questions. Next question for Phong, how should we think about the growth of license in 2021 given the momentum around cloud in subscription?

Yes thanks, Jeremy. Obviously we're pretty excited about the ability to transition to the cloud. We are still early in that process. I think as I noted, we saw 21% growth in our cloud revenue on a year-over-year basis and 41% growth on our cloud billings on a year-over-year basis that was off of Q3 where we saw an 80% growth in cloud billings on a year-over-year basis. So, although early on we're starting to see good momentum. Obviously when we see subscription revenue come through it’s recognized on a ratable basis so it ends up depressing slightly our product license revenue. And many people study cloud transition models and have experienced that. So if not for that cloud growth in Q4, we would have seen higher product license revenues. All that said, our revenue is generally speaking were flat from Q4, and flat for the full year. I think as we start to accelerate our growth in 2021 across perpetual licenses and cloud. My goal is to not see a significant change in our product license revenue, not a significant impact from our transition to cloud and see growth in both. And I think with the momentum that we see in our business that is a potential positive outcome its growth across all of our revenue segment.

Good, thank you, Phong. Next question and I think there are a couple of people who have asked this or some version of this. Are you planning to do another convertible debt offering or have you considered issuing equity debt or others securities to allow you to purchase more bitcoins?

We're continuing and continuously evaluating our capital position, as well as the market conditions in the capital markets. We have sufficient liquidity to operate our business as it's currently conducted while it's possible to raise additional capital if we think it makes sense to, it would be inappropriate for me to comment on any future financial plans.

Okay and I think a follow-up question there is, will you purchase additional bitcoins in future periods?

Well bitcoin is an important part of our overall strategy. So going forward, we will continue to plan to hold our bitcoin we will invest additional excess cash flows in bitcoin. And we'll explore various approaches to acquire additional bitcoin as part of our general corporate strategy.

All right, thank you Michael. Let's see here. Are you a software company or just a bitcoin investment vehicle?

We’re a global leader enterprise analytics software and services. We continue to operate the software business as we have over the last 30 years. I mean, but at the same time bitcoins an important part of our strategy, we have a bitcoin strategy. In addition to our software strategies so if you just keep in mind that we've got two strategies we're going to pursue them both very enthusiastically. Then I think that's the best way to think about the company. We're going to grow our enterprise software business and we're going to acquire additional bitcoin on the balance sheet.

All right. This one is another bitcoin question, does your bitcoin strategy depend on selling high and buying back more bitcoin at lower prices?

No, no, it doesn't. Our belief is that that bitcoin is the first effective digital monetary network and it's going to grow over time. We're early adopters. The early bitcoin holders are adopters. It's the solution to every company's problem and every individual investor’s problem. And so, as more and more corporations adopt the bitcoin’s standard and they use it as a store of value. As more investors and mutual funds and hedge funds use it as a store of value, as more individuals use it as a store of value, the overall amount of monetary energy, the total amount of capital flowing into the network is just going to increase in time. And because there's a fixed amount of Bitcoin, that just means the price is going to go up. And as I've said to many people, if you - the nature in the free market is in a free market capital flows from the weakest assets to the strongest assets. If you were in an economy that had a collapse in currency like Venezuela, and you had dollars and you had Venezuelan Bolivar. Well, the dollar is going to go up in value versus the Bolivar continuously and forever, as long as the one currency is weakening, the other is strengthening. And I think free capital markets were continuously adjusting as the capital flows to the place where you get the highest return. I think because Bitcoin is the technically superior asset, it's thermodynamically sound money, I think that more and more monetary energy or capital will flow into it. I think the price will continue. And certainly, there's no reason why it shouldn't replace gold as a nonsovereign store of wealth, and gold is a $10 trillion asset class. So we don't try to time the market. We don't think there's any particular point at which you would ever trade out of the market. Bitcoin is a better safe haven asset than gold. If, in the future, God comes down and invent something better than Bitcoin and more money and more people adopted that, and that becomes bigger and stronger and better, and we see that, well, we'll share that with our shareholders. And we may incorporate that into our treasury reserve strategy. But right now, Bitcoin seems to be a dynamically strongest asset and a technically superior asset. So we just intend to progressively acquire more Bitcoin. And we'll probably do it at prices that are going up. I think when we acquired Bitcoin at $11,800, then we did it at $10,000 when it dipped down, and we did it at $19,000, then we did at $21,000, then we did it at $31,000. We're not really attempting to time the market. We're strategic buyers, and we're looking out a decade or longer, which we think is the right way to think about this.

All right. Thank you, Michael. I'm going to give a question to Phong here. I think Michael has been working too hard. From the time a CFO or a CEO of a publicly traded company mentally commits to buying Bitcoin for their company, to the time it confirms on the blockchain and is on their balance sheet, what's the average time frame for the whole process?

Yes, it's a good question and something actually we'll be addressing in our Bitcoin for Corporations Summit next week. There's really no sort of straight answer or one-size-fits-all answer. It depends on how a publicly traded company might decide to invest in Bitcoin. If they decide to invest in a fund, it could be quite a bit faster. There are corporate governance issues and treasury issues that need to be worked through. If they decide to invest directly into Bitcoin on the exchange and through a custom solution, that could take longer as they identify the right platform, the right custodian or custodians, and the associated controls to it. So it literally can be done in a matter of weeks if somebody wanted to invest via a fund, and it could take months, as long as six or nine months depending on the corporate governance structure and how detailed the corporation wants to be in.

Thank you, Phong. Next question is, is MicroStrategy using a self-custody cold storage solution for the company Bitcoin holdings or are services of a third-party custodian being utilized?

We can't comment on that for security reasons, unfortunately, but thanks for asking.

All right. We've got another cryptocurrency question. Are you interested in acquiring other cryptocurrencies or diversifying beyond Bitcoin?

Is this for me or for Phong?

I'll let you take that one, Mike.

This is for you, Mike.

Yes. Our view is that Bitcoin is an institutional grade treasury reserve asset. It's 95% dominant as a proof of work crypto asset network. That makes it the crypto asset winner if the use case is money or long-term store of value, i.e., digital gold. So what we wanted with our treasury was, in essence, digital gold from the dominant monetary network in the world, the one that was most secure, the one that was most adopted by other institutional grade investors. And that would be Bitcoin. I think the other cryptos are investment theses. They are more like venture capital investments, and they have a different risk reward profile. And so we don't have a portion of our treasury allocated to venture capital, so it wouldn't be appropriate for us.

All right. Thank you, Michael. This one will be for Phong. When do you think your subscription revenue will become over 50% of total revenue? And would you agree that it's conservative to assume, based on the current product offering, your total revenue to grow, let's say, 7% to 9% CAGR during the next five years and generate over $500 million of free cash flow?

Yes. So a lot of interesting questions in there. First, on our split of revenue, subscription revenue versus support revenue, I think it's probably the way you think about it. We're, right now, we have about $280 million in support revenue and $35 million in subscription revenue, so maybe 10% of total subscription. We are looking to aggressively change that mix shift, right, and move customers who are currently on-prem perpetual maintenance paying customers to subscription customers. We think it's a higher quality customer, a better level of engagement, and it's something that the whole organization that is working hard on. That said, not every customer is ready to move to the cloud, and we're not going to force them to move to the cloud. So like in 2019 when we had a big program to upgrade all our customers to our latest version of MicroStrategy, this year and going forward, we'll have a program to move our customers to what we call our enterprise cloud. And then over time, we'll have them move to our SaaS cloud. We think it's an important core part to the business. What is that pacing? I think we'll know a lot better after this year at what pace we can move because we're not forcing our customers and we'll move as fast as can with respect to our customers. As far as our growth levels, we've talked about a long-term plan, call it three to five years, where we think we can achieve 10% revenue growth. We talked about that in our Analyst Day. Now does that translate to 7% to 9% CAGR over the next five years? I don't think we can get quite that specific yet. But we think that range is not unreasonable. And as a result of that, we think we can see some more incremental cash flow generated from the business so that we can reinvest it for corporate purposes or into Bitcoin.

Thank you, Phong. And next question is, how are you hedging the volatility in the price of Bitcoin in your financial statements? If Bitcoin is being accounted for as an indefinitely lived intangible asset with annual impairment tests, will there not be a lot of volatility in the financials year-over-year?

Yes. It's a good accounting question, but it's sort of the, I'll call it, book value of our Bitcoin versus what may be perceived as the market value of our Bitcoin. How we get to, based on the accounting of Bitcoin as an intangible asset, is every single quarter, we take each and every one of our wallets of Bitcoin and we look at the prevailing low price on our current exchange that we look at and we write-down or impair each of those wallets' stock price. And that's what's led to, I'll call it, sort of GAAP changes in our balance sheet that you saw in Q3 and Q4. And there is a - it creates a perceived disconnect between the book value and what one might interpret as the market value of our Bitcoin. What we've done is we provided non-GAAP financials that back out that impact in our financial statements and in our earnings report. And as a result, I think there's transparency into both means, the book value and a potential market value that someone can understand better. And I think the market understands that very well and it's very mature. So we don't really need to do any other, I'll call it, hedging of the volatility of our Bitcoin assets as a result.

And if I could piggyback, Jeremy, we don't hedge the Bitcoin. I don't think it would be a good idea to hedge the Bitcoin. I think that the volatility comes hand-in-hand with the appreciation and the value of the Bitcoin. So it's a mistake to pursue any particular hedging strategy. We would be losing the alpha or the theoretical return on the Bitcoin over time. Our financing time frame is five years. We have five year convertible note. So we certainly don't look at the volatility over the course of a day, a week, a month or even a year. And over five years, we don't really have any financing against the Bitcoin itself marked to the value of the Bitcoin. The financing is just against the business in general. So I would characterize us as being very patient, long-term holders a Bitcoin, not overly concerned with near-term or even midterm volatility for that matter.

All right. Thank you both for those answers. And I'd like to thank everyone for submitting questions and participating in the call. I'm going to turn it back over to Michael for some closing remarks.

Okay, Jeremy. I want to thank everybody that joined us today. For our shareholders on the call, thank you for your support. We look forward to speaking with you again in 12 weeks. And until then, all the best.