Hello, everyone, and good evening. I'm Shirish Jajodia, Vice President of Investor Relations and Treasury at MicroStrategy. I'll be your moderator for MicroStrategy's 2023 Third 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 be taking questions using the Q&A feature at the bottom of your screen. You can submit questions throughout the webinar, and Michael, Phong or Andrew will answer questions at the end of the session. Please be sure to provide your name and your company's name when submitting your questions. Now, I will walk you through the agenda for today's call. First, Phong Le will cover the business results for the third quarter of 2023. Second, Andrew Kang will cover the financial results for the third quarter of 2023. Then, Michael Saylor will provide a strategic review and discuss the recent bitcoin market updates. And lastly, we will open up to Q&A. With that, I'll turn the call over to Phong Le, President and CEO of MicroStrategy. Phong?

Thank you, Shirish. Hello, everyone. I'd like to welcome all of you to today's earnings webinar. I'll start with the highlights of our software business. Total revenue was $129.5 million, representing an increase of 3% year-over-year, total software licenses revenues which consists of total product licenses and subscription services revenues. And our consolidated statement of operations were $45 million, representing an increase of 16% year-over-year. Total software licenses revenues performance benefited for both increased adoption of our cloud platform and growth in product license revenues. Total subscription services revenue was $21 million and increase at 28% year-over-year. Our Q3 subscription billings growth was 17% year-over-year. We achieve good revenue results in Q3 with year-over-year growth driven by our cloud business and a strong international license revenue quarter. We plan to continue to drive growth in our recurring revenue model, and to transition our business strategy and product offerings to a cloud native model. Our focus will be on innovation at the intersection of artificial intelligence and business intelligence, using our first to market advantage in the enterprise scale integration of AI and BI to grow revenue in the cloud. I'm excited about the work we're doing in these areas and to share some updates with you and our progress. We're at a major period of innovation in the technology industry. We believe the next innovation is to change how the world does business or digital money, with the continuing development of the Bitcoin ecosystem in digital intelligence through AI. The technological leaps that occurred in the past year in generative AI are real, and we expect to be at the forefront of integrating AI with BI. MicroStrategy is well positioned to gain competitive leverage in winning both of these areas of growth. MicroStrategy's mission for the past 30 plus years…

Thank you, Phong. I'll start with our third quarter operating results, which reflected year-over-year total revenue growth. And while macroeconomic headwinds have persisted over the past year, our Q3 results demonstrate, both the depths of our customer base and our ability, to generate revenue despite longer sales cycles, and tighter customer spend. GAAP total revenues for the quarter were $129.5 million, up $4.1 million or 3% year-over-year, or up 1% year-over-year at constant currency. Total software license revenues with which consists of product license revenues and subscription services revenues were $45 million, up 16% year-over-year, or up 14% at constant currency. Product licensed revenues were $24 million for the quarter of 8% year-over-year, or up 6% at constant currency. The growth in product license revenue in Q3 was primarily attributable to the execution of several large international deals during the quarter, and partially offset by lower domestic license revenues. We continue to expect our mix of revenue will continue to shift from product license to subscription services over time as we continue to transition to the cloud. However, this past quarter demonstrates that demand for our software remains strong across all platforms. Subscription services revenues, which reflect recurring revenues from our cloud business were $21 million, an increase of 28% year-over-year or 25% at constant currency. Product support revenues were $66.9 million, up 1% year-over-year or down to 1% at constant currency. Customer renewal rates remain high at 94% for the quarter, and have been consistently above 90% in the seven most consecutive quarters, illustrating the durability of our customers even in spite of the ongoing challenges in the macroeconomic environment. Finally, other services revenues were $17.6 million, which was a 15% decrease year-over-year, or 17% lower at constant currency. While we are seeing higher average consulting build rates worldwide,…

Thank you. Thanks for joining us today, I thought I would start with some - a quick performance review of MicroStrategy since we adopted our Bitcoin strategy. It's now approximately 37 months. So just slightly more than three years, since - we adopted our Bitcoin strategy. And we benchmark ourselves against all major asset classes and against big tech stocks, and also against enterprise software companies that our enterprise software peers. And I'm happy to report to you that our performance over this time period is plus 242%. And that exceeds the Bitcoin performance in the same period of 192%. So MicroStrategy is outperforming the Bitcoin asset index. The S&P is up 25% over that time period, so we've almost 10xed the S&P performance. The NASDAQ is up 17%. As you recall, we had to choose between gold and digital gold in August of 2020. And we chose digital gold that is Bitcoin, the actual gold is down 2%. So 192% versus minus 2%, is the difference, between choosing the right asset and the wrong asset. This totally makes sense, because we're living in an age of digital transformation and there's just a growing awareness that Bitcoin is the digital gold of the 21st century. Silver is down 18%, and that time period, and of course, bonds, which we were holding on our balance sheet, are down 24%. And we had a concern about holding bonds, because of the interest rate environment. That's why we wanted to buy some other tangible asset. As you can see, Bitcoin is almost the opposite of bonds. Bitcoin being, the accreting asset, bonds have been diluted to balance sheets, so we're holding them. MicroStrategy has outperformed all the big tech companies. And you can see here, Google, Microsoft, Apple Meta, and some of the…

Thank you, Michael. We are now going to jump right into questions. And the first question is for Michael. The 10-Q discloses that Michael entered into a 10B51 plan to exercise MicroStrategy stock options. Can you please provide further color on the plan and the thought process?

Sure, yes, thanks for that question. I was granted a stock option in 2014 with respect to 400,000 shares, which is going to expire next April if I don't exercise it by then. For almost a decade now at my request, the company has only paid me a $1 salary and I've chosen not to be eligible for any cash bonuses. Exercising this option will allow me to address some financial obligations as well as to acquire additional Bitcoin for my personal account. Under my trading plan, I plan to exercise and sell 5,000 shares on each trading day beginning on January 2nd, 2024 and ending on April 25th, subject to a minimum price condition. This means the sale will take place over almost four months. If you'd like more details about the plan, I would refer you to the 10-Q. I continue to be optimistic about MicroStrategy's prospects and should note that my equity stake in the company after these sales will remain very significant.

Thanks, Michael. The next question is also for Michael. What is management's view on the impacts to the Bitcoin ecosystem at large if a spot Bitcoin ETF is approved? And what is management's view on the potential impact to MicroStrategy?

I think that it's a catalytic event, a big milestone in the institutional adoption of Bitcoin as an asset class. So I think it's going to be very, very auspicious for the asset. I think it will usher in a new generation of analysts. It'll usher in a lot more Bitcoin awareness. It will simplify the process of acquiring and holding Bitcoin and allocating to Bitcoin by an order of magnitude. And I think it will create a constructive competition because all of these various ETF vendors will all be competing for asset share. And as they do it, it'll be in their best interest to communicate and educate all of their clients on Bitcoin. So I think it's very good for the ecosystem. I think it's complimentary as a way to participate in many other ways. There are already participants in the ecosystem that take different strategies. For example, Block has taken a very technology-focused strategy and they're very interested in integrating into their products like Cash App. MicroStrategy has assumed a Bitcoin strategy which consists of acquiring and holding the underlying asset. I think other companies have offered options type strategies and trading strategies. There are going to be a class of investors that will welcome the ability to hold the spot product through an ATP wrapper. And so, I think it's generally good for the ecosystem. As for MicroStrategy, I think it's going to be good for our company as well as our shareholders because it will expand the overall ecosystem. None of these ETP companies will be operating companies themselves. So they're not really pursuing our strategy of intelligent leverage as an operating company. They'll be pursuing various ETF and ETP type strategies. And overall that means that it should expand the entire asset class to the benefit of all participants.

Thanks, Michael. I think Shirish had a connection issue, so I'll read the next question we have. This one is for Phong. How should we be thinking about the AI partnerships with Microsoft and their monetization? Can you shed some color on the impact of AI offerings on margin?

Yes, thanks, Andrew. So one of the ways we were able to be first to market with our AI BI offering is we fully embedded Microsoft Azure's OpenAI product through a partnership with Microsoft. And it provides several benefits to prospects and customers. One is they don't need to bring their own LLM, which if you're a large enterprise, you may not know exactly where to go, how to go do that. And so we've integrated it fully. The second is as of now, Azure OpenAI which drives technologies like ChatGPT is the superior LLM in the market. And so it's something that people are familiar with and know how to work with. And the third, we carry with it a lot of the privacy and security capabilities of Azure OpenAI too. That's our sort of first entree into the market. Over time, we do plan to integrate other LLMs from the hyperscalers. So whether it be Google or AWS and allow our customers to bring their own LLM or utilize a private LLM. So you'll be seeing that as we enter into 2024. As far as monetization, we're today, as I mentioned, pricing this at $20,000 for 20,000 questions, it's consumption-based. Obviously, the customer has to be using our current BI technology. And if they're not, they'll get MicroStrategy BI and the pricing associated with that and then add on AI on top of that. And I think as we get into 2024, we'll see some material revenue come out of this new product. We're already seeing some pretty strong pipeline. With MicroStrategy AI, and as I mentioned earlier, it's causing customers to want to move to our cloud because it's only available in the cloud. So that's another nice tailwind that is created by our new AI offering.

Thanks, Phong. I can ask the next question, it's for Andrew. How does MicroStrategy think about the balance between investing in core business while utilizing excess cash flow to acquire more Bitcoin?

Thanks, Shirish. I'd say, if you recall, when we launched our Bitcoin strategy, we converted our cash reserves as well as our investment holdings into Bitcoin, which I think has served MicroStrategy to be extremely accretive. And Michael shared some of those statistics earlier. As part of our overall liquidity management, we ensure working capital, adequate working capital to manage all of our operations. We also ensure we have adequate capital to invest in product development and as well as service our debt. I'd say using excess cash from operations allows us to have the ability to organically create more Bitcoin. Again, that's served us very well and has driven a lot of value for our shareholders. So I'd expect us to continue along that strategy.

Thanks, Andrew. The next question is for Andrew as well. Can you please provide thoughts if you have an expected timeline for FASB's fair value accounting rule implementation. And how the street should think about its impact on MicroStrategy's future Bitcoin acquisitions and the impact on core business?

I'd say from conversations we've had with various folks related that are kind of aware of the FASB progress, it seems that the FASB is pretty much on track with what I would call maybe a normal timeline to finalize this accounting rule. I obviously can't predict when that'll occur, but I think we believe it is likely to happen based on that normal timeline either later this year or early next year. So I would say fairly in the near term. Overall, I think Michael talked about it as well, but the change I believe will help other institutions effectively, more effectively evaluate holding Bitcoin on corporate balance sheets and hopefully will provide additional transparency for more adoption of Bitcoin as well.

Thanks, Andrew. Next question is for Michael. How does the recent move up in the price of Bitcoin impact the company's ongoing strategy to acquire more Bitcoin? Should we think of MicroStrategy as an average cost buyer adding to its Bitcoin stores as permitted by the capital markets and cash flow regardless of the price?

We have a laser focus on Bitcoin acquisition. And so we will, the volatility and the price movement has had one primary impact, which is it has brought worldwide awareness to Bitcoin and it has gotten everybody focused on Bitcoin. So I think its accelerating education. And because Bitcoin is a novel asset class, education is critical for adoption. So I think generally it's long-term bullish. We try not to get too caught up in the volatility. So when we have excess cash flows from operations that we don't need as working capital, then we will generally acquire Bitcoin with it because we view it as accretive. And then when the capital markets offer us opportunities to do financing that are accretive to our shareholders so that we can buy Bitcoin, we will avail ourself of that. Those circumstances change month by month, quarter by quarter. And we have a good set of models that we use to keep track of all these changes. And we're always monitoring opportunities so as to make sure that we take advantage of it when it comes our way.

Thanks, Michael. And we'll take one last question here, just for Phong. What are your thoughts on the remainder of the year and outlook for 2024, and main drivers of growth and challenges to keep an eye on? And what are some of the levers that can be pulled to increase profitability in the future?

Yes, thanks, Shirish. I guess a few things. One is we look into 2024, the two big drivers of growth will be AI and cloud, and they're related. Migrating more customers to the cloud, getting them to adopt our cloud native platform, and getting customers to adopt AI, which in turn will get customers to adopt cloud, and moving more into the prospect space, because I think our AI and cloud offerings are quite prospect-friendly. So I think those would be the big drivers of growth. Concerns that we might have, macroeconomic headwinds. We saw that in the first half of this year, could rear back up. We have a lot of uncertainty right now, what's happening in the macroeconomic environment. And so those are the things that I think about. And as far as cash flows and margins go, I do think we can do everything that we mentioned while still being pretty disciplined about our margins, which I think you've seen us able to accrete margins in the last few quarters. And I think we can continue to do that.

So I think with that, I'm going to close this call. I want to thank everyone for being with us today, and we appreciate your support. We're enthusiastic as ever about our enterprise software strategy, as well as our Bitcoin strategy. I think we've seen positive momentum in both of those areas in the third quarter. And we wish you all a good quarter. Look forward to seeing you get in 12 weeks in 2024. Thanks all.