We'll get started. Hello, everyone, and good evening. I am Shirish Jajodia, MicroStrategy's Senior Director of Treasury and Head of Investor Relations. I'll be your moderator for MicroStrategy's 2022 First Quarter Earnings webinar. 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 will refer to certain non-GAAP financial measures. Reconciliations showing GAAP versus non-GAAP results are available in our earnings release and presentation, which were issued today and are available on our website at microstrategy.com. I would like to welcome you all to today's webinar and let you know that we will taking questions using the Q&A feature at the bottom of your screen. With that, I will turn the call over to Michael Saylor, Chairman and CEO of MicroStrategy. Michael?

Thank you, Shirish. I'm Michael Saylor. I'm the Chairman and CEO of MicroStrategy. I'd like to welcome all of you to today's webinar regarding our 2022 first quarter financial results. I'm here with Phong Le, our President and Chief Financial Officer. First, I'd like to pass the floor to Phong, who's going to provide an update on our operations and the financials for the quarter.

Thank you, Michael. We continue to be pleased across both our corporate strategies in the first quarter of 2022. Here is a summary of our first quarter software results. Revenues declined 3% year-over-year and were flat on a constant currency basis. We saw some revenue headwinds in Q1. This included a more challenging macroeconomic environment due to war in Ukraine, a tough comparison in Q1 2021, where we saw license revenue grow 69% and total revenue grow 10% year-over-year, and ongoing cloud growth, which has a short-term negative impact on product license and total revenue. Our cloud business continues its momentum with subscription revenue growing 28% year-over-year and current subscription billings growing 18% year-over-year, our eighth straight quarter of double-digit growth. We had several large cloud deals slipped from Q1 due to macroeconomic uncertainty, which caused billings growth to decline sequentially. Turning now to our Bitcoin strategy. We had another active and successful quarter. We purchased $215 million of Bitcoin at an average purchase price of $44,645 per Bitcoin, net of fees and expenses. We have not sold any bitcoin to-date. These purchases were funded by excess cash in our business as well as through a $205 million first-ever public company Bitcoin back term loan. I'll discuss the terms of the loan in more detail in our financial section. In total, we have raised an aggregate of $3.4 billion in new debt and equity capital that we've deployed in support of our Bitcoin acquisition strategy. To reiterate our strategy, we seek to acquire and hold Bitcoin long term. We view our Bitcoin holdings as long-term holdings and we do not currently plan to engage in sales of Bitcoin. As of March 31, 2022, the company own an aggregate of 129,218 bitcoins that we acquired for a total cost of $3.97…

Thank you, Phong and I want to thank everybody for being with us at here today. I thought I'd start with a few observations of global developments. In Q1, we saw some fairly seminal events, the trucker crisis in Canada, the Ukrainian war, Russian sanctions, continued inflation, supply chain chaos, concerns about food and energy shortages, all of those things have been combined with a weakening currency environment, the Chinese currency, the Japanese currency, South Africa -- South America and African currencies, and a lot of Asian currencies were all collapsing against the dollar. In fact, just about every currency in the world, except for two, I think, are collapsing against the dollar right now. This is creating a very challenging macroeconomic environment. It's going to continue to create uncertainty and challenges for all businesses. I think that it has had the impact of increasing awareness of and the understanding of the need for a digital asset like Bitcoin and so the silver-lining is that hundreds of millions, if not billions of people are now becoming aware of the need for non-sovereign store value digital asset like Bitcoin. The negative is it creates a very challenging operating environment. Over the last few months in the world of Bitcoin, the interesting developments worth highlighting are the Executive Order coming out of the Biden White House on March 9th, which was really a first as long as anyone can remember, the first time that we had the executive branch in the United States in essence highlighting and endorsing an asset class as being critical to the future of the nation. And so I thought that, that was extraordinarily auspicious. Janet Yellen gave a speech on April 7th at American University, equally auspicious. We had the Secretary of the Treasury of the United…

Thank you, Michael. We're going to jump right into questions. We have received a lot of good questions, and we'll try to cover as many as we can. So the first question is for fun. On the software business, clearly, you have been through a few economic cycles over the years, how discretionary is BI software? And do you see the current macro, just pushing deal cycles out or do you think there are certain deals that will be put on hold for a while?

Yes. Thanks for the question, Jo. The short answer is, there is a portion of BI spend as discretionary and I'll call that speculative, try out new things without necessarily a concrete use case or operational outcome. And then there's a portion that's required and that's the piece that is required to operate and run an enterprise. And fortunately, MicroStrategy falls more into the latter than the former. So that kind of spending might get pushed out one quarter when there's uncertain macroeconomic conditions like we had in Q1, but it isn't permanently shelved for the whole year or multiple years. So generally speaking, I feel good about our ability to weather macroeconomic downturns better than we've seen in some of our newer competitors who've joined the market recently

Thank you, Fang. The next question is for Michael. When you purchase Bitcoin, how much do you consider dollar cost averaging into the purchase during the quarter versus a more OLED once purchase strategy?

Yes. We try to be thoughtful about the way that we acquire Bitcoin, and we do it in such a way that we wouldn't impact the market, and we'll spread it over a time period, sometimes a long time period, sometimes a shorter time period, depending upon our perception of the market and the volatility, as a practical matter because we purchased Bitcoin on many, many different occasions over the past two years, we are dollar cost averaging as we acquire more capital. And I guess I -- that's what I would say to that.

And one more question for Michael. Are you comfortable with the leverage level? And what is your long-term debt strategy?

Yeah. I think we're comfortable with our leverage level and our long-term debt strategy is not to take on more debt than we can reasonably manage.

I can add to that a little bit. You saw us share a little bit earlier. Right now, our interest expenses are around $44 million annually, which compared to last year's earnings before interest, tax, depreciation, if you were to adjust out the Bitcoin depreciation is about half of that. And so I think we have plenty of earnings and cash flow to cover our interest expense. So we're in a pretty comfortable place right now with our leverage.

Thank you. Next question is for Phong. How far does Bitcoin have to fall for MicroStrategy to receive a margin call on the Silver Gate done? And was this loan needed for cash flow purposes.

I'll take the second part first. No, the loan was not needed for cash flow purposes. We took out the loan primarily so that we could continue to invest more in Bitcoin and also really to create a market for a Bitcoin-backed term loan. So being the first company to do that in the public markets is consistent with what Mike said, which is really us being a leader in the Bitcoin space in general. As far as where Bitcoin needs to fall, we took out the loan at a 25% LTV, the margin call occurs 50% LTV. So essentially, Bitcoin needs to cut in half or around $21,000 before we'd have a margin call. That said, before it gets to 50%, we could contribute more Bitcoin to the collateral package, so it never gets there, so we don't ever get into a situation of March call also.

And continue with the next question for Phong as well. Are there any risks of bitcoin collateral being liquidated due to extreme market volatility regarding the Silvergate loan?

It sort of related to just that last question. The risk of really are that we would have to contribute more bitcoin. As you can see, we mentioned previously, we have quite a bit of uncollateralized bitcoin. So we have 95,643encumbered bitcoin. So we have more that we could contribute in the case that we have a lot of downward volatility. But again, we're talking about $21,000 before we get to a point where there needs to be more margin or more collateral contributors. So I think we're in a pretty comfortable place where we are right now.

Next question is for Michael. What would be the company's strategy, if the price of Bitcoin stays flat for a prolonged amount of time?

We'll continue with our strategy. We'll keep generating cash flow in the core business and from time to time, we'll acquire more Bitcoin.

And I'll follow up one more for Michael. Can MicroStrategy provide any details on exploring the yield generation opportunities on unencumbered macro strategy Bitcoins?

No.

Is there anything else on that?

Yes. I mean we're looking at a lot of different things out there. It's sort of part of our role that we've been playing as a as a leader in the market. But what we're going to do, when we're going to do it, the -- and with deal generation, there is a lot more to it in terms of accounting implications, et cetera. So they are all things we look at from time to time.

Next question is perform. How did you get comfortable including Bitcoin in your 401(k) program? Can you please provide some details on the plan and whether it's already active?

Yes. It's similar to the question of how do we get comfortable with Bitcoin in general, right? And Mike talked about this a little bit. First of all, I think it's great what Fidelity is doing as a leader in the market. As one of the leading retirement savings plan providers, it's great to see what they're doing from a leadership perspective. We got comfortable because the executive team, the Board, leadership, employees has spent the last two years learning about studying, understanding details about Bitcoin, especially as a store value, especially as an investment. And so the idea that it's a great long-term historic value, which is why we put so much of our investment into Bitcoin, would make sense for a certain number of employees. It doesn't make sense for everyone and ultimately, it will be something that's voluntary. We have not rolled this out yet. It's something we plan on doing in the second half of the year. And we're still working through details as exactly how we're going to go about it.

Thank you, Phong. I'll ask one more question for Phong. How much longer do you expect product license revenue to face headwinds, how large will be the segment – will the segment be by the time it stabilizes?

Yes. So as we go through this transition to cloud, product license revenues start to decline as we replace that with faster-growing subscription revenues. I can imagine last year was a pretty big increase from the previous year and that we wouldn't expect to see that level of growth on a go-forward basis on a year-over-year basis for product license revenue. As we replace that with cloud and subscription revenues over time, that will be the engine of growth in the organization and our revenue line.

Thank you, Phong. Next question is for Michael. Can you provide any thoughts into if it's better to buy MicroStrategy stock or the comparison of buying MicroStrategy stock versus buying Bitcoin direct?

I think that there are some companies in some situations where people literally can't buy the Bitcoin like either legally or by charter, they can't buy the Bitcoin, but they can buy securities. There are other situations where people can't or don't wish to buy securities, but they wish to buy property. So there are very different things. One of them is digital property. The other is a security that happens to hold on its balance sheet digital property. So I think that those are the primary issues. For those people that prefer to own securities and their portfolio but want Bitcoin exposure, then will be one of their options. And for those that prefer to own property than Bitcoin's digital property, and I think that's the right way to think of it.

Thank you, Michael. I think one last question for Phong, is the top-line miss this quarter driven by a faster-than-expected migration to the cloud, or is it a reflection of weaker demand due to macroeconomic risk.

I think it's more of the latter. And I think that is primarily manifested in slippages of both cloud and perpetual deals into the second quarter. So I don't think this is a permanent change or impact. We do have a little bit of the impact coming from stronger cloud, but I think it's more on the macroeconomic side in the war in Ukraine.

Great. So I think we are at the top of the time now. So thank you, everyone, for your questions. This concludes the Q&A portion of the webinar. I will now turn the call over to Michael for any closing remarks.

I want to thank everybody for being with us today, and thanks for your support. We wouldn't be here without you. So we'll continue with our strategy, and we look forward to speaking with you again in 12 weeks. Wishing you the best.

Thank you.