MicroStrategy Incorporated
Q4 2021 Earnings Call Transcript

Published: 2 Feb 2022

[Shirish Jajodia:]

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 2021 Fourth 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 factors -- 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 www.microstrategy.com. With that, I will turn the call over to Michael Saylor, Chairman and CEO of MicroStrategy. Michael?

[Michael Saylor:]

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 2021 fourth 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.

[Phong Le:]

Thank you, Michael. I'd like to start off with an update on our successful day 1 of our MicroStrategy World 2022 event today. We had 2 parallel tracks. The first was the enterprise analytics track featuring discussions with industry leaders, including Nice, Sainsbury's and the Schwarz Group about why the MicroStrategy platform is their tool of choice for the enterprise for cloud-powered analytics and for OEMs. And the second track was Bitcoin for Corporations, featuring Jack Dorsey, CEO, Chairman and Co-Founder of Block as the keynote speaker. This is our second annual Bitcoin for Corporations event, where we present our playbook to other corporates who are looking to explore how Bitcoin can provide an innovative treasury and product strategy. We had an amazing turnout with over 28,000 attendees viewing the event live worldwide. Replays for today's session will be available on our website. As a reminder, MicroStrategy World 2022 is 100% virtual and free of cost. So please feel free to register and tune in to the second and final day of the event tomorrow. Now turning to our results. 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 2021 for the company. First, we had a solid sales year, returning to positive year-over-year revenue growth for the first time since 2014. Total revenue for 2021 was $510.8 million, up 6.2% versus 2020. Product license revenues for the year was up 17%, growing for the first time since 2013. And subscription revenue was up 30% versus the full year 2020. The focus on term license sales contributed to the material growth in license revenue and subscription revenue. We also made important progress in our shift towards our cloud offering, which drove annual subscription billings up 39% year-over-year to $55.4 million as of year-end 2021, which is the highest level in our history. Second, on our balance sheet. Our pioneering decision to make Bitcoin our primary treasury reserve asset has made MicroStrategy a thought leader in the cryptocurrency market and generated great interest in MicroStrategy as a corporation. In 2021, we added a total of 53,922 Bitcoins to our balance sheet at an average price of $48,710 per bitcoin, net of fees and expenses. We believe that our brand value has benefited significantly because of our investment in Bitcoin. We believe that such market attention, when captured correctly, has helped to create software pipeline growth and sales growth. Thus, we believe our 2 corporate strategies are synergistic to each other, creating a virtuous flywheel. Our performance in 2021 is indicative of the multiple ways MicroStrategy is able to create meaningful value for our shareholders. Moreover, our strategy has also benefited our employees and increased general pride in our organization. As a result, we have seen improvement in our employee retention rates and ability to attract and retain top talent. Turning to our fourth quarter results. We're pleased with our performance in this quarter across both of our corporate strategies. For the sixth straight quarter, we posted strong financial and operational results for our software business and made incremental investments in Bitcoin. Our Enterprise Analytics business delivered another strong quarter, and we've seen increased adoption of the MicroStrategy platform, especially in the cloud by new and existing customers. We had another active quarter with our Bitcoin acquisition strategy, executing another successful capital raise through our at-the-market offering under our open market sale agreement and expanding our digital asset holdings. Total revenue in the quarter grew 2.4% year-over-year or 4.4% on a constant currency basis to $134.5 million. Product license revenues was up 9% year-over-year or 13% on a constant currency basis. Subscription revenue was up 35% year-over-year, also 35% on a constant currency basis. And current subscription billings grew 53% year-over-year, our seventh straight quarter of double-digit growth to $24.3 million. Before turning to our financial results in greater detail, I'd like to reiterate some of the key takeaways from the Investor Day we held in December. We are as excited as we have ever been about the opportunities that lie ahead for MicroStrategy. We are targeting a multibillion-dollar market opportunity that is at an early stage of moving off of legacy technology and to the cloud. We're well positioned to meet the demands of enterprise customers with our modern analytics platform, and we're targeting 3 key areas of growth. First, enterprise analytics. Our platform is expressly designed to address the needs of large corporations looking for analytics to unlock the power of their data and create value for their internal users and external stakeholders. We're replacing and consolidating legacy and departmental analytics use cases because of our full-scale enterprise capabilities. A great example of enterprise analytics in action is at the Schwarz Group, the fourth largest retailer in the world with worldwide brands, including Lidl and Kaufland. As they discussed at our MicroStrategy World event today, they have tens of thousands of users leveraging MicroStrategy reports on web and mobile in more than 30 countries. They've also adapted dossier for self-service BI, and hundreds of reports have been created by their power users to serve data analytics needs across their business all based on that same single version of the truth they've established with MicroStrategy. These solutions are used by team members in individual stores all the way up to their international Board of Directors. Second, OEM. We're number one in the market in our embedded OEM business. MicroStrategy is well positioned to further benefit from the trend in the embedded analytics and OEM marketplace where enterprises are now buying and not building analytics. We offer streamlined and differentiated developer-focused solutions for OEMs and technology companies. We believe our extensive investment in an open architecture driven by open APIs and SDKs provides OEMs with the best solution in the market. And we believe by targeting this market, we can grow our market share. Nice is the world's leading provider of cloud-native customer experience management and optimization software and a major OEM customer. They embed MicroStrategy into their entire solution suite because they like the scalability and sophistication it provides and they recognize we're a reliable partner. As I shared at World today, such adoption allowed them to get to market faster and to operate at the global scale they need, serving 125,000 organizations over 150 countries. They also discussed why they chose MicroStrategy in a competitive field. We align with their native cloud architecture, their data model, their modern user experience, and we share the same approach to our technology as they do in terms of velocity, openness and innovation. Beyond the technical benefits, they also value our partnership, and they've heard from their customers that the data and analytics visualization achieved within using MicroStrategy is out of this world. The third focus area is cloud. We offer an innovative enterprise analytics solution in the cloud, combining app-parity capabilities with our leading on-premise solution with strong security and cloud practices, reducing operational complexity and cost for our customers. We expect to grow by migrating on-premise customers, expanding existing cloud customers and defaulting new customers to the cloud. Sainsbury's, one of the largest retail chains in the U.K., replaced various legacy analytics tools with MicroStrategy Cloud as the enterprise standard. Today, they have a suite of over 30 applications, delivering data-driven insights to 12,000-plus users across their organization. In every 1 of their over 1,400 stores, their colleagues leveraged several applications on mobile devices for various functions so that they can maximize the time they spend on the store serving floor customers -- on the store floor serving customers. And that spans across all aspects of their organization right up to the C-suite. This is all built on 3 complementary cloud technologies, AWS, Snowflake and MicroStrategy as the analytics delivery mechanism for their entire business. MicroStrategy Cloud has continued to perform -- to become a growing mix of our business, while our on-prem product has continued to perform well. We had great subscription billings momentum in Q4 2021, and we seek to accelerate this momentum in 2022. We're committed to meeting the needs of our customers regardless of how they would like to deploy MicroStrategy, some of whom operate in highly regulated industries or countries where cloud deployment is not feasible. When you look at the overall growth of our subscription and license business, it is clear that underlying demand for our platform has demonstrated signs of strength. We believe that our pace of innovation is as impressive now as it has been in many years, with the company now producing quarterly and monthly software updates. Our team has rolled out a robust set of product features and enhancements that we believe will expand the value we provide customers and represent future incremental growth opportunities. We recently released our most secure, performant and innovative platform version ever, purpose-built to meet the most challenging and sophisticated needs of our user base. We've delivered low-code/no-code technologies that permit users to fully implement -- to implement fully functional analytics applications with a fantastic UI/UX, lowering the learning curve to deploy compelling interactive analytics solutions across the enterprise. We've also continued to invest in HyperIntelligence, our zero-click analytics product designed to deliver in-context insights to anyone, anywhere. Finally, this year, we rolled out a fully modernized reference architecture based on containers and microservices. This architecture is built to deliver scalable, multi-tenant SaaS solutions across tens of thousands of users and provide developers with a streamlined experience to leverage continuous integration and continuous deployment. Overall, I'm very pleased with the pace of product innovation and the way our analytics business is performing. We have shown consistent growth, and we're confident in our ability to achieve long-term growth targets while maintaining profitability. Turning now to our Bitcoin acquisition strategy. We had another active and successful quarter. We raised approximately $596 million in capital through the sale of Class A common shares as part of our at-the-market offering during the quarter. We used the net proceeds from this offering to purchase an additional 10,349 Bitcoins at an average price of $57,113 per Bitcoin, net of fees and expenses. This is the fourth successful capital raise we have done in the past year, having raised $2.6 billion of new debt and equity capital that we have deployed in support of our Bitcoin acquisition strategy. As of December 31, 2021, we've reached the maximum program amount of $1 billion under our existing ATM facility, which we used in Q3 and Q4 to issue around 1.4 million shares at a weighted average stock price of approximately $707 to purchase a total of 18,863 Bitcoin. As of December 31, 2021, MicroStrategy own 124,391 Bitcoins that we acquired for a total of $3.75 billion or $30,159 per Bitcoin, net of fees and expenses. The market value of our Bitcoin holdings was $5.7 billion at December 31, 2021, reflecting approximately $2 billion of unrealized gains or approximately 50% appreciation when compared to the original cost basis of our Bitcoin at December 31, 2021. The book value of our Bitcoin holdings was roughly $2.9 billion. This morning, we announced that we acquired an additional 660 Bitcoins for $25 million using our excess cash at an average price of approximately $37,865 per Bitcoin, net of fees and expenses. As of yesterday, January 31, 2022, we hold approximately 125,051 Bitcoins. They required an aggregate purchase price of $3.78 billion at an average purchase price of $30,200 per Bitcoin, inclusive of fees and expenses. As of 4

[Michael Saylor:]

Thank you, Phong. I will just comment on our business strategy. We have 2, our business intelligence strategy and our Bitcoin acquisition strategy. With regard to business intelligence, our path forward is to continue to improve the product to rotate our revenues from enterprise-software-based to cloud-based. And to general -- to continue to grow our installed base, we had 6% top line growth last year. That was awesome. I expect we'll continue to grow the business either by taking advantage of special marketing opportunities that our brand brings us for sales activity. And then we will continue to refine and automate the processes with which we provide our products and our services to our customers. So that's a mature but balanced, well-understood enterprise software business, and it's generating excellent free cash flows for us, cash flows in excess of what we need to reinvest in order to grow the business. So that leads us to our second strategy, which is Bitcoin acquisition strategy. We're going to continue to reinvest our free cash flows from the core business into Bitcoin. This morning, we announced we'd acquired $25 million worth of additional Bitcoin from free cash flow. I think that's a powerful strategy for us, and it's working well. Obviously, we'll hold the existing Bitcoin. We've crossed 125,000 Bitcoin now. And as Phong had pointed out, much of that Bitcoin is not pledged as collateral. So the company maintains options that we can consider, and we'll consider different options from time to time to put more leverage on that collateral or to generate yield on those assets if we find a compelling opportunity that we feel would be accretive and appropriate to our risk parameters. As Phong has said, we haven't really decided anything and we don't have any particular intent right now. But the option to pursue either leverage or yield or other kinds of strategic partnerships using our billions of dollars of Bitcoin, I think, is very important and it's an important benefit to our shareholders. And it's a way in which we will look to build shareholder value. When you're considering MicroStrategy, clearly, you can look at us as a software company. And I think people are going to evaluate our revenue growth rate. They're going to look at our ability to generate free cash flow, our efficiency. And they're going to also look at our progress in migrating to a cloud-first business model. And right now, we've got a very rapid growth rate to the cloud. So we're very pleased about that. When considering the Bitcoin MicroStrategy side of the business, I think that investors will compare us to ETFs or other sorts of Bitcoin operating companies. And I think investors understand if they invest a certain sum of money in an ETF, which is futures-based, there's a substantial cost each year in excess of 2% and potentially much, much higher to roll over the futures. And so holding a spot ETF would be more desirable than our futures ETF if you're concerned about the carrying cost over the course of a decade or even a year. There is no spot ETF available for Bitcoin right now, which means that current investors can compare us to, say, a gray-scale product, which has a multi-percent yield -- sorry, multi-percent cost, 2% or slightly more than that. If there ever is a Bitcoin spot market ETF, it would be 50 to 100 basis points cost annually for investors. MicroStrategy is in a fortunate situation because we are an operating company that generates free cash flow. And so rather than paying 1% of your Bitcoin per year or a 1% fee to hold it, we're actually acquiring Bitcoin via free cash flow from time to time. And so if you compare us to various spot and futures ETFs, I think we compare very favorably because we are an efficient operating company. If you compare us to other operating companies in the Bitcoin space, we're not a Bitcoin miner. So we don't have the same kind of capital obligations or competitive uncertainties that a Bitcoin miner has. And I think that if you are an investor in Bitcoin miners, then of course, it's reasonable to invest in them. But if you're looking for an operating company that's going to acquire more Bitcoin that isn't subject to the competitive and uncertain dynamics of the mining business, then MicroStrategy is a fairly unique player in the space. So we feel that our Bitcoin strategy is really accretive to our business intelligence strategy. And our business intelligence strategy is very accretive, very beneficial to our Bitcoin strategy. And it's worked together well. I think it's elevated our brand. It's opened up new sales opportunities for us, new marketing opportunities for us. And of course, being able to channel our proceeds from our software business into the Bitcoin strategy, I think, is a great opportunity and we'll pursue that. With regard to the outlook to Bitcoin, I think that in the last 12 months, the asset classes has evolved and matured. I see evidence of a lot more institutional adoption, greater adoption amongst macro and other hedge funds. We've made great progress with corporations. There will be 24 publicly traded Bitcoin miners by the end of the quarter, so lots of publicly traded companies in the Bitcoin space, more and more publicly traded companies holding Bitcoin on their balance sheets, more and more public investors with Bitcoin exposure, more banks rolling out Bitcoin acquisition and trading and custody services, more regulatory awareness and more clarity as to how the entire crypto industry is going to evolve. I think these are all good things for the asset class and they're positive developments. In the rest of the world, many of the macroeconomic developments have elevated the stature and the awareness of businesses and investors in the rest of the world to Bitcoin. The circumstances and the currency volatility in Turkey, the currency volatility in South America, the currency volatility in Africa, all of these things have elevated institutional awareness of Bitcoin. Of late in the past month, the capital markets volatility, the volatility of equities, the S&P Index, the volatility of NASDAQ, of big tech stocks, all of these things have elevated mainstream investors' awareness to Bitcoin. And there's a growing sentiment that we see across the mainstream that Bitcoin is here to stay. The crypto economy represents a great opportunity for the entire world. And politicians and investors and corporations are working diligently to come to terms on what this means and how they should adjust their practices. I see all these things as very positive steps forward versus where we were a year ago. I'm really hard-pressed to think of any material developments in the past 12 months that are putting us at a disadvantaged situation versus a year ago. I think generally, we've had a passage of positive developments. And we look forward to the next wave of institutional adoption that, I think, should be driven as people get more educated and more aware of what digital property is. And as all of the various vendors in the space, all enhance their product offerings and their service offerings in order to make adoption of digital assets and Bitcoin in specific easier. So with that, I think we're ready to go on to questions and answers, if we have questions from the analysts and investment community, Shirish?

[A - Shirish Jajodia:]

Okay. Great. Thank you, Michael. We are going to jump right into questions. We have a lot of good questions. First question is for Phong. Could you comment on the strength seen in total billings growth this quarter? Did you see any benefit from early renewals this quarter?

[Michael Saylor:]

You're on mute.

[Phong Le:]

The short answer is no. I think we’re seeing an acceleration of our software business. We saw it throughout the course of 2021, benefiting from our most recent product cycle, increased demand in the general market, and also, I think some – the flywheel effect I talked about from our Bitcoin strategy. So no, we’re not seeing an acceleration of billings from 2022 to 2021. I think we are seeing general growth.

[Shirish Jajodia:]

Okay. Another question for Phong. Non-GAAP operating margin, excluding the Bitcoin impairment, was slightly lower this quarter at 16.6%. What were the areas of investment this quarter? And how do you think about margins going forward we'll continue to see next year?

[Phong Le:]

Yes, I’d say there are 3 areas where we saw some margin dilution in the fourth quarter. The first is in our cloud business, we are starting to ramp up the team in anticipation, as you saw with our cloud billings of significant growth. So as that cloud business starts to scale, that margin dilution, I think, will reduce. And so that’s area #1. Area #2 is related to R&D. We’ll continue to invest in our technology team, more folks around the world. And as probably as well-known at this point in time, there is a lot of wage inflation and a very competitive marketplace for technology resources. And so to make sure we have the right team in place and we retain folks, we will see some wage increases there. I expect that portion in terms of margin dilution will continue for the near future. And then the third area that we saw some margin dilution is in our G&A costs as it relates to our Bitcoin strategy. So fees, custody fees, some onetime costs related to consulting fees, advisory fees, legal fees, that should reduce its dilution over time, too. So those are the 3 areas. And I do recognize the cost structure went up a little bit in Q4, but I think long term, we still expect our margins to be accretive as a business as we grow.

[Shirish Jajodia:]

Thank you, Phong. Next question is for Michael. Financial services infrastructure on the digital assets industry continues to quickly evolve. How do you view the opportunities to exploit your large Bitcoin balance in 2022 to drive shareholder value beyond spot appreciation this year versus last year and perhaps a new generation or other strategies?

[Michael Saylor:]

I think that as enthusiasm to trade and hold and bank digital assets and Bitcoin in particular grows, there are going to be – there’s going to be an increase in the number of creditworthy counterparties that we could do business with and increasing the options that we have. So we have a large amount of assets. So in theory, we could lend them out for yield. 2 years ago, there weren’t that many counterparties and there were no, say, FDIC-insured banks that might want to borrow and give us yield. But I think that as FDIC-insured banks get into the space, and it seems like it’s just a matter of time before they do get into the space and as very large $1 trillion balance sheet entities get in the space, we’ll have a much deeper selection of counterparties that we might work with to either borrow from or generate yield from either of those or – and/or maybe generate some yield on our own through selling volatility. I think all of these options that we have, they all come with a risk – a counterparty risk and they come with a theoretical opportunity cost. And then they also come with an execution cost and a whole set of compliance and other sorts of disclosure issues and strategy issues that we consider. So we’ll parse the opportunities carefully as they evolve. But certainly, in a world where, say, Goldman Sachs and Morgan Stanley and Merrill Lynch, Bank of America and Citigroup and JPMorgan are interested and involved in the space, then I think the options that will be available to us over time will be greater. And the counterparty risk that we would have to incur will be less – and I think that – that’s part of the maturing of the market, which will be good for everybody in it.

[Shirish Jajodia:]

And a follow-up on that, can you quantify how much more balance sheet capacity you have left right now and outside of further equity issuance to acquire more Bitcoin, considering both the core business and the MicroStrategy subsidiary?

[Michael Saylor:]

I think the most important number to focus on is the amount of Bitcoin that we have that is not pledged as collateral, which I think Phong pointed out. What was it, Phong, 110,000 or so?

[Phong Le:]

Yes, 110,000, exactly.

[Michael Saylor:]

So 110,000 Bitcoin would be the asset that is not pledged as collateral that we could potentially consider using either to generate yield or to leverage.

[Shirish Jajodia:]

We'll turn over to Phong now. Congratulations on the strong year. Should we expect any changes to the go-to-market process given the new head of sales?

[Phong Le:]

Well, thank you. No, I don’t think you’re going to – we would expect a lot of major changes. Kevin has been with the company 5 years now. He was instrumental to some of the changes that we made in 2020. As we embraced the virtual wave and went more to digital marketing, obviously, less in-person events, less in-person – fewer in-person meetings and also really moving to the cloud. So I think it’s an acceleration of those elements and better and better sales adoption and customer adoption of those strategies. But I don’t think we have any major fundamental changes planned in the short term.

[Shirish Jajodia:]

Another one for Phong. You have set a long-term target at the Investor Day to grow revenue more than 10% annually. What are some of the levers you can pull to get to this growth rate? And what's the -- and how is the timing impacted by the cloud transition?

[Phong Le:]

It’s a couple of things. First of all, if you see our product license revenue growth last year, 17% constant currency, subscription billings growth last year, 35% roughly, you combine those 2, those are really the foundational elements of growing the overall business. Product license revenue growth drives support revenue. Subscription revenue growth drives more cloud and more high-quality recurring revenue. So I think if you see those levels of growth, that should lead to greater than 10% revenue growth over time. We have a shift of decrease in support revenue, and it’s a large amount, but the other pieces should outweigh that. And then our consulting business continues to chug along, and it should grow sort of at the level that you see the product piece is growing. I put all of that together. I think 10% is very achievable. There – it could be slightly depressed this year as we really rapidly accelerate to cloud. But I don’t see that to be a long-term drag on our revenue growth potential.

[Shirish Jajodia:]

Okay. Switching to Michael now. Can you speak about the issuance of additional stock at the market to purchase Bitcoin and if it is accretive? Additionally, can you also talk about the ability to pay the interest on bond offerings from cash flows of current MicroStrategy business intelligence arm?

[Michael Saylor:]

Yes. So regarding the first question, we wouldn’t choose to issue stock if we didn’t think it was accretive. And whether it’s accretive or not depends on a variety of circumstances and – facts and circumstances. But we’re certainly not going to issue stock if we don’t believe it’s accretive. Regarding to the second question, we have free cash flow in excess of the debt service and the interest on the debt, and we’re comfortable that we can cover the interest on our debt from our free cash flows.

[Shirish Jajodia:]

Thank you. Turning to Phong. Could you talk about how far along in the cloud migration journey we are at currently? And are you seeing larger customers migrate? Or are they still waiting for more enhancements in the cloud product?

[Phong Le:]

Yes. So we saw for the full year of 2021, 35% growth in our cloud billings. In the fourth quarter, we saw it at 53%. And I think as we get into 2022, that number could further accelerate. And today at least, that is on the back of some medium-sized and sort of a few large customers. I do think we will start to see that trend more and more towards large customers in 2022. I think there is a comfort for large customers to move to the cloud more so in the next year or so, and then it’s just a process, right? It takes longer for a large customer to go through the cloud migration process. But I would say as we enter 2022, we’re sort of right in the meat of really starting to accelerate that cloud migration journey, which is exciting. We’ve done a lot of work on our product and on our processes and our operations to be prepared for that.

[Shirish Jajodia:]

Okay. Let's switch to Michael. Can you elaborate on what are your plans for Bitcoin for Corporations and whether this will have a revenue benefit for MicroStrategy?

[Michael Saylor:]

Well, this is our second annual Bitcoin for corporations conference. We kicked it off last year. To my knowledge, this has like been the primary, if not one of the fewer or the only Bitcoin-related conference, focused upon corporate adoption of Bitcoin as opposed to institutional investors or retail investors or technology or some other audience. We expect to continue to do the conference annually. We found that annual is good cadence. Our goal is to educate corporations on the benefits of Bitcoin and then the mechanics and the other nuances of integrating Bitcoin into their products or their services or their balance sheet. And there are going to be new developments every year. So I think that we’ll want to do a refresher each year, and we try to curate a set of institutional-grade vendors that can help with things like commercial banking a Bitcoin or investment banking Bitcoin companies or payments on Bitcoin rails or exchange trading Bitcoin or custody of Bitcoin. So we feel like it’s been good for our brand. It’s helped in our – it’s improved our marketing reach. We don’t see it as a revenue generator per se. We don’t have any intentions to monetize the event now or in the future. We’re primarily providing this as an educational service to the general public because we believe it’s in the best interest of the industry. To the extent of more corporations become comfortable integrating Bitcoin or a facility in their way to integrate Bitcoin to their product or service or they’re facilitated in integrating Bitcoin with their balance sheet, we think that it will be beneficial to Bitcoin, all Bitcoin holders and our shareholders included.

[Shirish Jajodia:]

Thank you. So moving to Phong now. Are there any bond covenants that could force MicroStrategy to liquidate Bitcoin holdings?

[Phong Le:]

No. We don’t have any covenants that will require us to liquidate any Bitcoin holdings. The covenants we have on our convertible notes and – are secured on or primarily incurrence covenants, which means they may limit our ability to kind of additional debt but nothing that would stop us in our tracks and say we have to do something prior to the bonds maturing. So really, the first maturity – as you saw, we mentioned in the prepared remarks, is December 2025 would be the first time we’d have to adjust any of our bonds.

[Shirish Jajodia:]

Okay. And one more question for Phong -- actually, we'll move to Mike now. And one question is whether do we plan to expand into Bitcoin products to grow our revenue?

[Michael Saylor:]

Right now, our strategy is to acquire and hold Bitcoin. So we don’t have any plans to offer additional products. Our product focus is business intelligence. Our treasury and our balance sheet focus is acquiring and hold Bitcoin. It’s always theoretically possible that we will find new and interesting opportunities, but if we were to find those things, we would vet them, consider them carefully, evaluate whether they’re likely to be accretive or dilutive and whether they’re a distraction or whether they’re really strategic. And if we deem it to be something material, we would disclose at that time.

[Shirish Jajodia:]

Great. I think -- thank you, Michael and Phong. This brings us to the end of our question-and-answer sessions. Thank you, everyone, for your questions. And now I will turn the call over to Michael again for the closing remarks.

[Michael Saylor:]

Thanks, Shirish. I want to thank all of our shareholders. Thanks for spending the time with us today. Thanks for your support. We couldn't do it without you. And I wish you a good quarter, and we'll see you again in 12 weeks.

[Phong Le:]

Thanks, everyone.