Hello, everyone, and good evening. I'm Shirish Jajodia, Vice President of Investor Relations and Treasury at MicroStrategy. I will be your moderator for MicroStrategy's 2023 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 [Technical Difficulty].

Thank you, Shirish. Hello, everyone. I'd like to welcome you all to our 2023 first quarter earnings call. We're excited to be reporting live for MicroStrategy World 2023 in Orlando, Florida. We've had a successful day one of the event today, and we're excited to see our customers, partners and employees all in person for the first time since 2020 and share our passion for BI, bitcoin and innovation. The business intelligence track tomorrow will feature MicroStrategy One and features keynotes, including how we are integrating augmented analytics, artificial intelligence to drive innovative experiences. We'll also showcase how some of the world's best brands use MicroStrategy to break through and achieve extraordinary results. This includes keynote presentations from Hilton, Sony and Amica Insurance. The Bitcoin for Corporations track on Wednesday and Lightning for Corporations track on Thursday will feature keynotes from notable institutions and industry luminaries highlighting the advantages of integrating Bitcoin and Lightning as a part of their corporate treasury and product offerings. It will be a unique gathering of corporations looking to adopt Bitcoin and Lightning strategies, and we are very excited to host this event. The conference also includes workshops, training, dedicated networking opportunities and some fun too. For those of you attending the conference in Orlando, we look forward to seeing you in person. Turning to our business results for Q1. We continue to see strong demand for MicroStrategy software, both on-premise and in the cloud with total revenue growing despite a continuing challenging macroeconomic environment. Total revenue was $121.9 million, representing an increase of 2% year-over-year or 6% on a constant currency basis. Total software licenses revenues, which consists of total product licenses and subscription services revenue and our consolidated statement of operations were $36.2 million, representing an increase of 23% year-over-year or 29% on…

Thank you, Phong. It's great to be my first MicroStrategy world. There's a ton of energy and buzz here, and I'm definitely looking forward to meeting many of our customers as well as those interested in learning more about Bitcoin for Corporations. But let me get to our financial results. Our first quarter enterprise analytics business results were strong, showing total year-over-year revenue growth. This was in light of persisting macroeconomic headwinds, as Phong mentioned earlier, which reflects our deep customer base and the durability of our platform during economic volatility. GAAP total revenues for the quarter were $121.9 million, up $2.6 million or 2% year-over-year and up 6% year-over-year at constant currency. Total software license revenues, which made up -- make up product license revenues and subscription services revenues were $36.2 million, up 23% year-over-year and up 29% at constant currency, outperforming last year's Q1 year-over-year results. Subscription services revenues, which reflect recurring revenues from our cloud business were $18.8 million, an increase of 46% year-over-year or an increase of 52% at constant currency. Product licenses revenues were $17.4 million for the quarter, up 5% year-over-year, which reflected strong performance in our international business. Product support revenues were $65.5 million, down $1.7 million year-over-year, but were flat at constant currency. Renewal rates have remained high at over 90% in Q1, and for the last six consecutive quarters. Finally, other services revenues were $20.2 million, an increase of 11 -- sorry, 11% decrease year-over-year or a decrease of 8% at constant currency, primarily due to a decrease in our consulting revenues. On Slide 15, total current software license billings were $28.7 million in the first quarter, a slight increase of 2% year-over-year. Current subscription billings were $13.7 million, an increase of 19% year-over-year, our 12th straight quarter of double-digit growth.…

Thank you, Andrew. I would like to start with one quick review of our Bitcoin strategy. As you know, in the third quarter and the second -- the third quarter of 2020, we embarked on a strategy and an analysis to determine what we thought would be the best treasury reserve asset. And we adopted a Bitcoin strategy at that point. And we adopted Bitcoin because we thought of it as digital gold, but without any of the liabilities or imperfections of gold, and with all of the more compelling characteristics of a dominant big tech network. So we kind of -- we were looking for a Google or Facebook or Apple of digital gold. And we looked at all possibilities we considered investing in bonds, we consider silver, and we considered gold, and we considered if we could invest in big tech and we consider that we could invest in real estate or collectibles. And our conclusion at that point was that the fundamentals of Bitcoin were superior to all these other asset classes. If we wanted a non-sovereign store of value asset, then that was provably scarce that would scale as technology improved that would serve as a hedge against monetary expansion, then Bitcoin was the best choice. So you can see on this chart, the result I think I make the first point, I'm proud to say Bitcoin is the winner. Bitcoin has outperformed all the competing assets over this time period. It has outperformed all of the big tech stocks. It has outperformed all of the major enterprise software stocks. And again, I think the reason why it is a dominant digital network, and there is no dilution. It is never going to be more than 21 million Bitcoin and as the world gets educated and…

Thank you, Michael. As we did not complete the full Safe Harbor statement at the beginning, I will read it before we begin the Q&A. So safe harbor statement is some of the information we provide during today's call and what we provided 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. Now we'll jump into the questions. And the first question is for Phong. Could you update us on the progress of your cloud product and capabilities and how customer migrations are faring today? What are your expectations for cloud business growth against the macro backdrop?

Thanks, Shirish. I think as everyone saw, our cloud revenue results continue to progress in a pretty good direction with growth nearing 50% on a year-over-year basis. As far as our product evolution, big highlights this year, we've launched on AWS and on Azure. Second half of last year, we launched our FedRAMP cloud, which we actually brought on our first customer this quarter in Q1. And later in this year, we plan to also offer Google Cloud Platform in MicroStrategy Cloud Enterprise too. And obviously, we're doing a lot on the automation side. We're continuing to work on micro services and our container-based strategy. But it's a big area of continued innovation. And obviously, our multi-cloud strategy is very attractive to large enterprises. Looking forward to continued growth, we had a little bit of a slowdown in cloud billings, 19% year-over-year growth in Q1. I think that speaks a little bit to the macroeconomic environment and a little bit of a slowdown in some deals. But I do anticipate cloud is going to be a big driver of growth going forward. And you probably see the positive impact it's having on our revenue already.

Great. Thank you, Phong. Next question is for Michael. In light of the recent events and the broader crypto market, what do you think are the key catalysts for more adoption of Bitcoin by institutions? And how does the recent volatility in the banking markets intersect with potential Bitcoin adoption?

I think that the FASB fair accounting determination will be an important catalyst I think there are a lot of very conservative corporations that will be reluctant to put material amounts of Bitcoin on their balance sheet as long as they have the current indefinite intangible treatment. So, I think fair value is important milestone. I think that when there is -- when there is a national security exchange, a regulated national securities exchange trading Bitcoin, I think that will be a big milestone. So when the uncertainty lifts around crypto exchanges in the U.S., I think when we get more clarity on stable coin usage from regulators, I think that will be a big milestone. I expect that will probably drive a lot of Bitcoin adoption. I think that with regard to the banking environment, all of the uncertainty in the banking environment is driving awareness of Bitcoin's value proposition. And there's a set of mainstream investors that have not really understood Bitcoin or they haven't understood what Bitcoin was good for until now. And it's beginning to -- it's very clear that it's resonating with lots of mainstream investors that Bitcoin is a bank in cyberspace, that offers an alternative to those that don't have a bank they can trust. And there's -- most American investors haven't really been focused upon the problem of unreliable currency and an unreliable bank because they've always had reliable banks and a reliable currency. But of course, everywhere in South America, everywhere in Africa, most places in Asia, the population doesn't have a reliable currency and it doesn't have a reliable bank. They can't buy dollars even if they wanted to buy dollars. And if they did buy dollars, if they have to buy them from a bank and the bank is…

Thank you, Michael. The next question is for Andrew. Can you explain the significantly large swing in the GAAP earnings? It looks like there was a tax impact this quarter as it relates to Bitcoin. Can you please clarify how that all works?

Shirish. You should give me the fun one, I guess. Sure. The general accounting and tax concepts is as we've seen are not very easily understood as it exists today, which is why we welcome some of the anticipated changes in the accounting rules that Michael just mentioned. That being said, I'll try and walk you through some high-level math. We had a deferred tax asset on 3/31, which was $653 million, and it is mostly based on the tax effect of a cumulative impairments that we've taken on our Bitcoin holdings over time. If you recall, at the end of last year, we recognized a large valuation of allowance, which was about $500 million because the coin prices were at the lows of about $16,500 at the time versus a cost basis of just over $30,000. Fast forward to 3/31, as Bitcoin price increased to about $28,500 we released about $456 million of that valuation we took at the end of last year, which in turn drove the large tax benefit line item in our Q1 income statement. I mean, look, we saw Bitcoin prices decline last year. We are on the receiving end of a lot of focus on reported losses we took. We now see the coin price drive higher. I think this is an example of the reversal of those hits. We took last year and a benefit as we see prices continue to improve. Hopefully, we'll get the similar recognition for these types of improvements as we did when Bitcoin price was trending downward. Hopefully, that helps.

Thanks, Andrew. Next question is for Phong. So Phong, lots of great commentary in the presentation today on the innovation side, can you please provide some guidance on if there's any expectation around when the new areas of innovation start to contribute to the revenues?

Yes. I think it would be premature to anticipate any direct revenue attribution for our innovations. We're doing a lot in the core BI side. We're doing a lot on augmented analytics. We're doing a lot on artificial intelligence and Lightning those are sort of the four big areas beyond sort of what we've been working on in the cloud. As we release these products to market and experience the uptake and solidify how we're going to price them, we'll figure out more, but I think it's a little early right now to attribute any of the innovation directly to revenue. But in the next 6 to 12 months, we'll be able to answer that question better.

Great. Next one is for Phong as well. If it has been different or difficult to sell expansion deals in the current macro environment as tech companies change their head counts.

Yes. I think it's hard to say exactly what's happening from a macroeconomic side. But I would say, if you look at our financials, there's a couple of indicators. One is we're seeing our services revenue slow down a little bit and that's usually an indication of financial belt tightening by IT groups and companies in general, especially in technology focused companies. And the second is we did see a little bit of a slowdown in cloud growth. Now I think that's probably more seasonal and potentially not going to continue, but it did indicate delayed sales cycles, some belt tightening of budgets. So, how the rest of the year will go is hard to anticipate. But I do think at this point in time, as Andrew said, it's to be cautious, good to be prudent overall.

Thanks, Phong. And we'll take one last question here for Andrew. So as a follow-up to the change in the accounting rules you mentioned, can you please provide any thoughts on the impact of FASB's decision and whether you have an expected time line for the rule implementation?

Sure. Thanks, Shirish. As I mentioned on the call, we believe the rule will -- changing the fair value is the right change. We support the draft that the FASB has put out. I think it provides the better transparency that we've been advocating for since we took on our Bitcoin strategy, and we think it will open the door to more people thinking about Bitcoin on their balance sheet. As for timing, I certainly can't speculate when the rule will become final, but the comment period ends in early June, and we certainly hope that this is something that will hopefully take place before the end of the year. So, we -- I guess we have our fingers crossed, but thanks for the question.

Great. So thank you, everyone, for the question. And this concludes the Q&A portion of the webinar. I will now turn the call over to Phong for his closing remarks.

I want to thank everyone for being us with us today. I appreciate your support. For those who are here with us at MicroStrategy World, live in person. I look forward to having an opportunity to meet you in person live also. We're as enthusiastic as ever about our enterprise software strategy as well as our Bitcoin strategy. And we wish you a good quarter and look forward to seeing you again in 12 weeks. Thanks, everyone.