MicroStrategy(MSTR) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q2 2024 were $111.4 million, down 7% year-over-year, reflecting the transition from on-premise to cloud services [20][21] - Non-GAAP subscription billings grew by 45% to$ 33.4 million, marking the fourth consecutive year of quarterly double-digit growth [22] - Software business operating income was $1.9 million, with non-cash stock-based compensation expense increasing by 33% year-over-year to$ 20.6 million [25][24] Business Line Data and Key Metrics Changes - Subscription services revenue increased by 21% year-over-year to $24 million, driven by customer migrations to the cloud and new customer acquisitions [17][20] - Product license revenues declined by 40% year-over-year, while support revenues decreased by 7% [20] - The cloud contracts booked in Q2 were the strongest single quarter bookings to date, more than double Q1 [21] Market Data and Key Metrics Changes - MicroStrategy remains the largest corporate holder of bitcoin, holding 226,500 bitcoins valued at approximately$ 15 billion as of the end of Q2 2024 [7][28] - The company acquired an additional 12,222 bitcoins in Q2 at an average price of $65,882, reflecting a strong institutional interest in bitcoin [7][28] Company Strategy and Development Direction - The company aims to achieve a bitcoin yield of 4% to 8% annually for the next three years, focusing on accumulating bitcoin through excess cash flows and capital market activities [15][31] - The transition to cloud services is a key strategic focus, with an emphasis on enhancing AI capabilities and customer engagement [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growing institutional adoption of bitcoin and the maturation of bitcoin as an asset class, particularly following the approval of Spot Bitcoin ETPs [7][8] - The company anticipates that the transition to cloud services will lead to stronger recurring revenue in the long term, despite short-term revenue declines [20][22] Other Important Information - The company announced a 10-for-1 stock split to enhance liquidity and accessibility for investors [32] - The market value of bitcoin holdings was reported at$ 14 billion, with a significant difference between market value and carrying value expected to be realized under new accounting rules [28] Q&A Session Summary Question: MicroStrategy's equity premium to its bitcoin holdings - Management attributes the healthy equity premium to the ability to achieve a positive BTC Yield, which differentiates the company from traditional investment vehicles [50][51] Question: Q2 cloud conversions relative to expectations - Q2 saw the largest cloud bookings in company history, indicating strong momentum in cloud migrations and AI adoption [54][55] Question: Decision-making between debt and equity issuances - Management evaluates various capital market options, including cash purchases, debt, and equity, to optimize bitcoin acquisition strategies [56][59] Question: Incremental leverage capacity and interest expense management - The company actively manages cash flows and forecasts adequate cash to service existing debt, ensuring a careful approach to incremental debt and interest expenses [60][61]