Strategy Inc (MSTR) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us today for MicroStrategy's December 2021 Investor Day Webinar. My name is Jeremy Price, Senior Vice President of FP&A at MicroStrategy, and I'll be your moderator for today's event. Before we get started, I'm going to read the safe harbor statement. Some of the information we provide in this presentation 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 in this presentation, we will refer to certain non-GAAP financial measures. Reconciliation showing GAAP versus non-GAAP results are available in the appendix of this presentation, which is available on our website at www.microstrategy.com. We have a rather enthralling agenda for you today. First, you'll hear from Michael Saylor, MicroStrategy's Chairman and CEO, on the company's vision and Bitcoin strategy. Next, MicroStrategy's President and CFO, Phong Le, will discuss our software strategy and our financials. Finally, both Michael and Phong will answer questions from you. We'll collect the questions throughout the webinar using the Q&A feature on the Zoom platform at the bottom of your screen, and Michael or Phong will answer the questions at the end of the webinar. So without further delay, I will hand the webinar over to Michael Saylor, Chairman and CEO of MicroStrategy.

Thank you, Jeremy. And I really appreciate everybody being with us today. I thought I'd start with the company's vision. So first of all. We've been in business since 1989, and we're a technology company. So we have a rich history of innovation. We invented the technology of online analytic processing for a relational databases, what's called ROLAP. And that was our first big technology breakthrough and that allowed us to provide business intelligence to most of the larger retailers and the banks in the world. And it positioned us well to come public. We came public in 1998. We're always very focused upon where is business intelligence going to go next and where is technology to go next. And the next big wave after graphical interfaces was the web. And so in 1999, we delivered business intelligence over the web, and we were the first in the market with a web intelligence offering. By 2003, we had integrated a full suite of reporting tools into our web intelligence application. Then around 2008, we got interested in the mobile wave. And we built out a set of mobile capabilities, and we started delivering mobile intelligence, and that allowed us to expand our customer base dramatically and also the number of users on the MicroStrategy platform. In 2014, we delivered our first MicroStrategy platform in the cloud, and we've continuously improved that over the preceding 6 years or so. In 2019, we took advantage of next-generation web browsers to create something we call HyperIntelligence and embedded the intelligence right into the application itself in order to make it 100x easier to get the insight you wanted. 2020, of course, brought a lot of innovations. And for us, it brought the Bitcoin strategy as we realized that the world was digitally transforming balance sheets as well as operations and products. The company's really got 2 parts. We've got an operating strategy and we've got a balance sheet strategy. The operating strategy is how we generate revenues and where most of our costs are incurred and it generates our cash flows. And so we're focused uniquely and 100% on business analytics. MicroStrategy at this point is the largest independent publicly traded business intelligence company in the world. We've had 100 competitors come and go, and we have stayed in the business by being very, very focused and diligent and not getting distracted by trying to plug other types of software into our platform. So the MicroStrategy platform is organic. And it has -- it started with a very powerful object model in 1993, and we have just built out progressively on that powerful object model over these many years with integrity. Our strategy is to remain that leader in the space by being modern and open and focusing upon enterprises. The size of that business, about $500 million in annual revenue. We run an 80% gross margin. About 60% of our revenues are reoccurring. Our maintenance renewal rates are 95%. So the average lifetime of the customer is 20 years or more. So we pride ourselves on very long-term continuous customer relationships. Substantially, all of the employees in the company, about 2,000 people, are focused upon the business analytics business and that's how we make money. Now the Bitcoin strategy is a balance sheet strategy. It really replaces a treasury strategy, which for the first 30 years of the company, all the way from 1989 until 2020, our treasury strategy was to hold a very, very small amount of our capital as working capital in foreign subsidiaries. So the amount of capital we need in Japan or Korea or Europe to do business, we had a small layer. Then we had a larger layer of capital we swept into U.S. dollars. And then any money we didn't need in the near term, it didn't need to be working capital, we put into sovereign debt, normally short-dated treasuries or very secure fixed income without a lot of duration risk. We didn't want to have a 10-year, 20-year, 30-year bonds, but we might take a 2-year or a 1-year bond. So that treasury strategy stopped working in 2020 when interest rates pegged to 0. And we decided we need to try something different. And as you know, we adopted a Bitcoin strategy. As of today, we're the largest publicly traded corporate holder of Bitcoin in the world. We were the first public company to adopt Bitcoin as a primary treasury reserve asset. There are lots and lots of public companies now that have Bitcoin on their balance sheet. So we look forward to the date when we're just one of many, but we were an early pioneer in that space. Our strategy with regard to Bitcoin is simply to acquire it and to hold it for the long term. So we purchased Bitcoin through cash flows and through debt and equity transactions. The key figure to keep in mind right now is we own 122,478 Bitcoin at an average purchase price of $29,861. So it's approximately $3.7 billion cost basis. We can go to the next slide. Now these 2 strategies are very synergistic in a variety of ways. First of all, we made that investment in Bitcoin because Bitcoin is superior technology. It's digital property. And in fact, it's the dominant digital property network in an age where we're seeing the digital transformation of assets from the 20th century analog to the 21st century digital flavor. And so we see it as the technology investment, just like we see MicroStrategy's business intelligence as a technology investment. As we've done that, our brand in both the Bitcoin space and the business intelligence space has strengthened. I'm closing in on 2 million followers on Twitter. We have many, many millions of views on YouTube. Now we've gone from being one of 100 enterprise software companies to being the best-known enterprise software company to being probably one of the best-known software companies. And the most important thing is for CEOs and CFOs and heads of sales, the CXOs of the Global 2,000 or Global 10,000 companies for them to recognize our name and know who we are and what we stand for. And so MicroStrategy's brand throughout our entire CXO target customer base has dramatically strengthened. That market attention, again, has come from Twitter, it's come from YouTube, it's come from CNBC and other popular media. And it drives prospects into our pipeline, and it helps us drive sales growth. And of course, it also makes our employees more effective. Our sales teams are more effective because our brand is well known. It's easier for us to recruit because our brand is better known. Our employee retention has improved, our attrition rates have fallen because of our Bitcoin strategy. All of these things together result in higher operating revenue and higher operating income and of course, that higher operating income and that strength in business performance allows us to continue with our Bitcoin strategy. So we'll go to the next slide. The company itself has got a tenured management team. The average tenure of the CXOs at MicroStrategy is 13 years or more. So you can see here -- of course, I've been with the company for quite some while. But I'm very proud of everybody on the team. We're very experienced. We've spent a lot of time working together. And at this point, because we've been so focused in laser light fashion on our enterprise business intelligence business model, we've tuned our programs. We've tuned our systems. We've tuned our products. We have evolved our culture, so that we're a fairly well-oiled machine able to do business everywhere in the world and where everybody on the team kind of has a pretty good understanding of what the customer expects, what the partners expect, what the company expects, what our employees expect. And I think that that consistency of focus has resulted in improved productivity and improved effectiveness. And it's really the secret to success in technology industry, where the customer expects the best in the world, delivered at world-class standards, and they don't have a lot of patients for anything less than excellent. So we go to the next slide. A few words on our Bitcoin strategy. Well, when we started, our stock was $118.29. And we had about $60 a share in cash out of that $118.29. And our choice was, in essence, to decapitalize the company and hope that we could keep the $118 stock price or perhaps to see it sag. So when we imparted on the Bitcoin strategy, we did it with the expectation that interest rates were going to remain low for a while. And here we are 18 months later, and interest rates are still effectively 0 and 30-year yields are effectively 170 basis points so and the Federal Reserve has just acknowledged that perhaps interest rates will increase next year. So I think we made the right decision to embark on the strategy. We can see what's happened throughout. Initially, I'd characterize the strategy as defensive. We felt like our $500 million in capital was going to lose 20% or 25% of its purchasing power a year over the course of the following 4 to 8 years. In time, our strategy went from being defensive to being opportunistic. And then we realized that we could raise money under very favorable terms, and we thought Bitcoin was priced very favorably. And around Q4 when we issued $650 million of convertible debt at 75 basis points and we bought Bitcoin, we thought that was a really good opportunity for us. And then I think by about Q1 between -- in the February time frame when we filed our 10-K, we noted that now the company had 2 strategies: a business intelligence strategy and a Bitcoin strategy. And I would say, at that point, we rotated from defensive through opportunistic to strategic, and Bitcoin became a strategy of the company and our macro strategy. And we did that because we developed much more experience, and we realized that we were uniquely positioned as a publicly traded operating company with supportive shareholders and a Bitcoin strategy in order to meet requirements that the market had and to aid the digital transformation of balance sheets everywhere in the world. So you can see we've methodically moved to every corner to acquire more Bitcoin. We're the first company to do it with an explicit treasury strategy. Then we were the first company to do a Dutch auction and invest the proceeds in Bitcoin. Then we were the first company to do a convertible debt offering and invest proceeds in Bitcoin. In Q1, we did a second convertible debt offering. Again, it was at 0% coupon, and we invested that in Bitcoin, and I think that was the first. And then in the second quarter, we were the first company to do a senior secured debt offering and invested in Bitcoin. We were also the first publicly traded company to pledge Bitcoin as collateral against a piece of debt, and we thought that that was a unique pioneering event or a milestone in the industry. We followed up with -- by putting in place a $1 billion shelf registration to issue equity at the market. And I think we went forward and we issued $404 million of that equity in Q3. And in Q4, we issued $501 million more under that shelf registration. That makes us the first company to actually issue the serious amounts, probably the first company to actually file a shelf registration and then use the proceeds to buy Bitcoin certainly in that size. And that takes us to today. I want to share a few words on our capital structure. We think this is very unique. MicroStrategy is the parent company. MicroStrategy has 3 pieces of debt. It has an unsecured $1,050 million convertible notes due 2027. And again, there's no security. There's no collateral pledged against that. That is -- it's, in essence, no convertible to equity at about $1,432 a share. We have a $650 million convertible note due 2025, convertible at $398 a share. So that's currently in the money, and that yields 75 basis points. Again, that's unsecured. And then we have a senior secured note. And so we have a $500 million note, which is senior to the other 2. And that is secured against effectively all the property of the company, the cash flows of the company, and it is secured against the Bitcoin we hold at the MicroStrategy level. We owe 13,449 Bitcoin at the MicroStrategy level with a cost basis of $509 million. So that's the parent company. We have created a subsidiary called MacroStrategy. MacroStrategy holds 109,029 Bitcoin with an average purchase price of $28,874, cost basis of about $3.15 billion. Now that Bitcoin is unpledged, unencumbered, which means that it is not collateral against any of the 3 notes you see at the MicroStrategy level. And that gives us a great degree of freedom with regard to what we might do with the 109,000 Bitcoin in the future. We go to the next slide. This slide illustrates pretty effectively how our Bitcoin holdings are evolving over time. For those of you who know me, you know the plan is to acquire and hold Bitcoin. There's no plan to trade it. We're actually going to keep acquiring Bitcoin. That is the plan. That's the strategy. We started with 38,250 Bitcoin in Q3. You can see how we accreted in Q4 to 70,469. In Q1, we got up to 91,326. Then we adopted our more sophisticated capital structure. And you can see the red bar shows the Bitcoin that's at the MacroStrategy subsidiary and the dark bar is the MicroStrategy pledged Bitcoin against the senior secured loan. Now both stacks at Bitcoin have been increasing. The MicroStrategy stacks created from 13,005 Bitcoin to 13,449. That's because the cash flows that are generated by the MicroStrategy operating business result in Bitcoin, which stays as collateral against that senior note. And of course, the MacroStrategy has accreted, for the most part, due to capital we've raised through equity issuances under the shelf-registration and that has the effect in a way of deleveraging the balance sheet. We can see the price of Bitcoin throughout this time period, and there is volatility. But -- although some people run from volatility, we choose not to hedge the volatility. We could hedge the volatility if we so choose to do so, but our view is that the cost of the hedge would be greater than the benefit, and we would rather have all of the alpha, all of the upside on the Bitcoin, we're just a pure long Bitcoin play. And we feel that statistically that will be -- that will yield the highest ROI if you have a long-time horizon. If you had a 1-year time horizon or a 12-week time horizon or a 1-month time horizon, obviously, you would probably think more about hedging. But if you're looking out to infinity, and publicly traded companies really need to look for the long term, certainly to a 10-year-plus time horizon, then it just makes sense to hold it and let the world evolve the way you expect it to evolve. We go to the next slide. This table gives you a sense of how our balance sheet has developed. And you can see each of the various components, the equity component, $900 million; the convertible senior notes, you can see when they were issued, when they're due, the terms; you can see the senior secured note. And I've described this in detail, so we can move on to the next slide. MicroStrategy is -- it has many advantages versus a simple Bitcoin ETF or holding Bitcoin or certain other investment vehicles. So oftentimes, I get asked, why should I buy MicroStrategy stock instead of just buying a Bitcoin ETF or buying the Bitcoin itself? And so we put together this table to help illustrate the differences between owning MSTR, the equity versus owning either BTC or owning BITO or owning some other ETF, if the spot ETF should arrive sometime in the future, how should I think about it? And the answer, of course, is every investor has different criteria. They have different charters. They have different limited partner expectations. They have different compliance rules. And if you're that investor with that pool of capital, you have to figure out what your charter allows and what your tax and compliance rules and what your limited partners expect, et cetera? So let's just start with the first value proposition. Is this something an institution could invest in? Is it regulated for institutions? So MicroStrategy is easy for an institution to buy because you can buy us through your prime broker. We trade on the NASDAQ. We've got a long history on the NASDAQ, and we're an operating company. Some institutions they need to buy operating companies as opposed to a finance company like an ETF, and so we have certain appeal to them. A lot of institutions can't buy the underlying property. They could buy a gold miner, but they couldn't buy the gold. They could buy a Bitcoin operator, but they can't buy the Bitcoin. Maybe you can't buy it because you're an SEC 40 reporting company and the great majority, 90% of your capital has to be invested in securities, not property. Maybe there's a tax concern. Maybe you don't have a relationship with a Bitcoin institutional-grade custodian or institutional-grade trader. If you don't have that relationship and you're a conservative company, you would probably take a year to vet their auditors, vet their compliance and security routines, be comfortable with them as a counterparty. And it might take you up to 3 years. So sometime between 1 and 3 years are required to put in place a new relationship, whereas if you got a relationship with Goldman Sachs or Morgan Stanley, you could trade anything on their platform in 60 seconds by picking up the phone. And you wouldn't run afoul of your compliance accounting, risk control relationship issue. So MicroStrategy is a nice on-ramp whereas Bitcoin is not necessarily. ETFs and other crypto exposed corporations of Bitcoin miners that are publicly traded may offer the same benefits, although, of course, MicroStrategy is publicly traded since 1998 and most of these other instruments are weeks old or months old in the public market. So we're a seasoned security for an institutional investor, and we're a known entity and that's an advantage. I think the second differentiator for us is we offer a non-Bitcoin business value because we've got an enterprise software company that is profitable that generates cash flows and those cash flows can be used to -- and are being used to buy Bitcoin and any leverage we get on those cash flows can also be used to buy Bitcoin. So as we improve our leverage on the cash flows or we generate more cash flows, we buy more Bitcoin. If you just buy a Bitcoin ETF, you can't get that. You're not getting an operating company with cash flow. So it's just a bucket of Bitcoin. And if you're buying the Bitcoin itself, it's the same issue. So with MicroStrategy, you can expect that we will acquire more Bitcoin over time, whereas Bitcoin and Bitcoin ETF is just you're getting exactly that amount of Bitcoin over time in a property instrument or a security instrument. Crypto exposed corporates may buy more Bitcoin. No one has adopted a Bitcoin treasury reserve strategy where an explicit expectation of sweeping cash flows into Bitcoin like we have. So there's a lot of uncertainty with regard to how much more Bitcoin you'll get if you invest in another crypto exposed company. And Bitcoin miners are continually generating Bitcoin to the extent that they're explicit about holding their Bitcoin, well then you can expect more. But on the other hand, none of them have -- or a few of them have the same ability to generate Bitcoin from non-Bitcoin businesses. So we're uncorrelated to Bitcoin in that regard since our Bitcoin acquisition is also coming from enterprise software, cash flows and enterprise software revenues. And that's an advantage that we have over another Bitcoin miner. If you look at the third column. We can borrow competitively. If you invest -- if you buy 100 Bitcoin on an exchange, while you don't really have that same ability to issue publicly traded debt or convertible debt to buy Bitcoins. So you're not really getting that access to the competitive fixed income markets. You just own the Bitcoin property. If you buy Bitcoin through the ETF, an ETF management team can't lever up their ETF with long-dated fixed income bonds. They couldn't do a convertible bond offering on an ETF. They couldn't really do the kind of senior secured debt offering that we did in June just because they're just there to hold Bitcoin. They might be able to generate some leverage through short-term futures contracts, but those are really expensive cost of capital. And so far, no levered Bitcoin ETF has been approved. I think there was one where someone applied and it was rejected by the SEC. So they're really -- it's hard to get leverage through an ETF. And if you got it, you wouldn't get competitive long-term leverage. The crypto-exposed corporates, none of them have adopted a leverage long Bitcoin strategy. Bitcoin miners, well, in theory, they could over time. Marathon has done one convertible debt offering. None of the other Bitcoin miners have done convertible debt offerings like us. So we will see what happens there. I'm hopeful that we'll actually see. And I'm optimistic that we'll see Bitcoin miners in time start to issue competitive equity and convertible debt and senior debt. But they don't have the 22-year track record as a publicly traded company and the long track record in a noncorrelated business like enterprise software. So it will be a little bit more challenging for them, and we still get to see how that will evolve. So that's a nice differentiator for us. In essence, we are a synthetic Bitcoin miner and we can tap into the fixed income markets and the debt markets to aggressively mine Bitcoin through synthetic debt instruments and equity instruments. If we look at the fourth column, healthy operating business. Well, I kind of talked about this in a second, but the key point here is we can sweep our excess cash flows to buy Bitcoin from an uncorrelated operating company. And this is an advantage over just buying the Bitcoin itself or just buying the ETF. And I guess I would distinguish it from Column 2. Column 2 is really basically downside protection because we have intellectual property and enterprise software company that has a liquidation value because we have domains like MI and Azure and Wisdom and Hope because we have Business Intelligence software that's valued by our thousands of customers, we provide downside protection to the investor that is uncorrelated to Bitcoin itself. Now the fifth column is an interesting one that isn't really well appreciated. One of the objectives of an institutional investor would be to see that you generate yield from your assets. And as you see, we have more than 100,000 Bitcoin at the macro strategy level. So on any given day, we can have $5 billion or more of assets that are not pledged as collateral that are currently not generating yield. If those assets were sitting in an ETF, you wouldn't be able to generate yield with them because if they're sitting there, you just have to stare at them. So a Bitcoin ETF is kind of dead money in that way. And if those assets are sitting just as Bitcoin on an exchange, it's the same thing. They're just sitting there as property, but it's not rental income property. So the real beauty of property rights is you could rent the property, you could develop the property, you could mortgage the property, you could put a lean on the property. Everybody understands that with a building, if I had $5 billion worth of commercial real estate, and I said there's no mortgage against it and there's no one paying to lease it right now, and it's $5 billion of parking lots in New York City, but we think that we can build a 100-story building on it. And if we don't build a 100-story building on it, we think we can sell the air rights above the parking lots for hundreds of millions of dollars to our neighbor. You can see that's a much more exciting value proposition if you can exercise those property rights than if you're just going to hold the $5 billion worth of property and do nothing with it. The Bitcoin itself is just sitting as property. The ETF, they've just got to hold the property. Crypto-exposed corporates might end up with some Bitcoin, but because they're not focused on Bitcoin as a strategy, they're not really thinking about the liens, the partnerships, the yield, the leverage that they could get off of the property, right? And then the Bitcoin miners, they've got a Bitcoin mining business to focus upon and that kind of -- that takes up their time. So MicroStrategy is kind of 3 years -- 2 to 3 years ahead of everybody else in this space in terms of sophistication and thinking about how we're going to generate yield and actively manage our Bitcoin. Now we haven't -- we have not taken any formal step here yet. And when we do, of course, we'll announce it and you'll be reading about it. But I think we're very enthusiastic about the opportunities to generate yield off of our Bitcoin. We think that the future, there may be opportunities to either put a mortgage against it and generate long-term debt under favorable circumstances, which we could leverage up against the Bitcoin or we think that we could lend it to a trustworthy counterparty. And when we find the counterparty that we trust and the circumstance we trust, we might lend it out and generate yield or the third possibility would be to put it into some kind of partnership. You could think of that as putting a lien on it. And if we did a partnership with a big tech company, or a big bank or some other player that really wanted that access to that Bitcoin that could become a good source of income for us. Or we could develop it with some kind of interesting application. And I've described Bitcoin as digital property before. You think about it as it's the ideal property to build the digital economy, the 21st century on. There's a lot of things people will build on top of it, right? The lightning network will be based upon Bitcoin. There are all sorts of interesting products, insurance products, mutual fund products, et cetera, that could be enhanced with Bitcoin. We will look for those opportunities to actively manage our Bitcoin. And this ability to actively manage, this is what differentiates an operating company from just a finance company. An ETF can't actively manage their Bitcoin. We could, in theory, for example, sell volatility against the Bitcoin. We don't choose to do so because we don't like the cost benefit trade-offs of it. But we could decide to sell out of the money calls, right, or puts or some other kind of derivative trading strategy, which would generate substantial amounts of near period income in Bitcoin or the like. So these are the things that distinguish MicroStrategy as an investment vehicle versus just buying Bitcoin as property or buying an ETF or buying another company that owns some Bitcoin or buying a Bitcoin miner. I think the last point I'll make is that our Bitcoin position is scale, right? So if you have $6 billion worth of Bitcoin on your balance sheet and your market cap is some multiple of that but less than 2x, right? Our market cap is somewhat more than $6 billion, but it's not 10x more or 100x more. So Bitcoin on our balance sheet is more meaningful than Bitcoin on Tesla's balance sheet or even Square's balance sheet. And if what you're wanting is Bitcoin exposure at scale from a leveraged operator that's going to actively manage it, then we think we represent a differentiated vehicle for that, and that will be appealing to the public investor that's looking for a way to get Bitcoin exposure in an intelligent fashion. We can go to the next slide. We think it's still early. How early? Look, Bitcoin is $900 billion in market cap, just slightly less than $1 trillion right now. And it is digital property. So as digital property, for those of you who follow me, digital property is much lower maintenance cost than real property. It's a lot easier to own $5 billion of Bitcoin than $5 billion of commercial real estate. It's a lot easier to own it than $5 billion of gold or $5 billion in silver or $5 billion in equity. So digital property is advantageous versus analog property. It's also easier to generate yield off of digital property. $5 billion of buildings in Istanbul are impaired by the collapse of the lira. $5 billion worth of buildings in New York are at the mercy of the governments of New York State and New York City. And whether you love New York, I think it's the greatest city on earth, it's not the greatest city on earth every minute of the day for the next decade. There will be certain minutes and certain periods where you would wish that that building was sitting in Tokyo or London or Paris or it was put to a different use. So Bitcoin as digital property, it is much more flexible, it's high speed. I can move it anywhere in earth. I can move it rapidly at a higher frequency. And that's why we think that gradually digital property is going to demonetize or at least it's going to grab capital flows from 20th Century analog property. So the obvious candidates are sell your silver or monetary silver to buy Bitcoin, sell your gold to buy Bitcoin. And of course, if people start to sell gold to buy Bitcoin, we could see Bitcoin grow by an order of magnitude. Gold is $11 trillion asset class. Another very popular property for store value for institutional investors is just the S&P Index. So if you're thinking about buying the index of U.S. stocks, you might think I'd rather buy an index of the global crypto economy or the global property economy ala Bitcoin. Now you might want to have global exposure through equities, there's $120 trillion worth of global equities. But equities are partial currency derivatives. So when the Argentine peso or the Turkish lira crash, equities that have exposure that sell things in Argentina and Turkey, they see their value of their cash flows also deteriorate. In fact, the value of the cash flows of every company is deteriorating since the U.S. dollar is losing purchasing power and just about every other currency in the world is losing purchasing power faster. So to the extent that the currency is -- to the extent that an equity is a partial currency derivative, then it makes sense that in an inflationary environment, investors are going to reallocate capital from equities to Bitcoin because Bitcoin is a dominant digital property. Now of course, the 3 -- the 2 big bars are global debt, $300 trillion worth of credit. And of course, would you like to have a bunch of international credit right now that's paying off in currencies that are weaker than the dollar, it's got a negative real yield? There's trillions, $17 trillion of negative real yielding debt if you just use official numbers, but I would suspect the number is going to be $30 trillion, $40 trillion, $50 trillion of negative yielding debt floating around out there. And so we see that flow -- that capital will flow into a stronger property like Bitcoin. And then the global real estate market is in excess of $325 trillion. And so it's just very early. If Bitcoin simply grabs 5% of these other property asset classes, then it's going to grow by an order of magnitude or more. And of course, we're very bullish on it because everything you can achieve with a diversified portfolio of real estate or a diversified portfolio of credit or a diversified portfolio of equity can be achieved with Bitcoin, which is, in essence, a diversified portfolio of monetary asset. It is basically plugging into the entire 21st century crypto economy, which is growing at a rapid rate. Shall we go to the next slide? So institutional investors are becoming increasingly interested in Bitcoin. There are bears, there are bulls. A year ago, we didn't see that much sentiment expressed in favor of Bitcoin. It was a bit unique. But today, Citibank is saying the Bitcoin could surpass $300,000 per coin. JPMorgan has begun to cover Bitcoin. Fidelity is covering Bitcoin. Cathie Wood of ARK Investment is very bullish on Bitcoin. Now some people are not bullish on Bitcoin. Warren Buffett, Nicholas Taleb are not bullish on Bitcoin. We understand it's a controversial business. On the other hand, Warren Buffett never bought Microsoft stock, and he was best friends with Bill Gates for nearly a generation. So just because successful investors don't embrace Bitcoin doesn't mean that it's not going to grow. Microsoft has been quite successful even without a Berkshire Hathaway investment. And we think Bitcoin will be very successful based upon just institutional awareness even if we get to the point where 5% of institutional investors start to take this seriously, it's going to be extraordinarily successful. Next slide. There have been a lot of key developments in the digital assets landscape over the past 6 months. Some that have taken place in the last 12 weeks, they're worth highlighting. I saw a memo just a couple of days ago that suggested that the FASB, Financial Accounting Standards Board, is going to take up the accounting of digital exchange traded assets as a research matter formally. So I thought that was a big success. That's exciting. If the accounting evolves from indefinite intangible that will be bullish in the fact that FASB is considering the matter formally today, I think it's very bullish. The memos that have come out of the administration, the President's Working Group memo and stable coins is very bullish for the digital assets community. Just yesterday, Jerome Powell was asked on his press conference about whether crypto assets represented a threat to the global financial system. He said, no. He said they're assets. They're speculative, right? And he left it to the retail investor or to the investor to determine their risk tolerance for it. But I thought it was -- there were 2 very bullish comments made. One, he suggested that that there is a demand for stable coins. And if the country issues stable coins backed by an FDIC-approved institutions, that adoption could grow dramatically. And so he sees the power of the crypto economy and the power of digital currency in the form of the U.S. dollar on a crypto rail. I think that he also sees the power -- he acknowledges the legitimacy of crypto assets. I think we're seeing across the board politicians acknowledge the legitimacy of Bitcoin as the dominant crypto asset and as another alternative store of value property in a world that's increasingly concerned about store of value. We've seen that from the EU. We've seen it from senators. We've seen it from Congressmen. We've seen it from the administration. I think in the latest discussion between Gary Gensler and Jay Clayton, the current Head of the SEC and the former Head of the SEC, they both acknowledged Bitcoin is not a security. They've acknowledged in essence that the regulatory agenda of the SEC is going to be to focus on security tokens, to focus upon stable coins, to focus upon DeFi. And as they focus upon these things, the implicit message is, Bitcoin is digital property. And if you're acquiring Bitcoin as digital property, you have a clear safe haven, if you will. So I think what we see from the regulators is a green light for FDIC-insured banks to begin issuing stable coins, right? And regulators are embracing digital currency in the form of stable coins, and they'd like to see the U.S. dollar spread on that stable coin. I think that's very good for the asset class. I think they've also embraced Satoshi's innovation of a proof-of-work, decentralized crypto asset network that was created without any initial coin offering, that is truly decentralized, that is global common property. That is Bitcoin. I think that that is a very positive development. I think the embrace of Bitcoin in the United States following the China crackdown has been a very positive development. I think the approval of 3 Bitcoin ETFs, starting with BITO and continuing with the additional ETFs, I think that's been a positive. I mean in essence, endorsement of the asset class. I think that if you read the spot denial ETF -- the spot ETF denial memo from the SEC, the clear implication is they would like to see crypto exchanges adopt national securities rules and they acknowledge that this is an asset class that's going to need to be normalized for the protection of the public. And I see that as being very positive for Bitcoin. Ultimately, there's 2 parts of the economy here. There's the crypto economy, which is entrepreneurial and it revolves around security tokens, DeFi, exchanges and digital currencies. And there's a lot of regulatory work there to bring that into the public policy framework. And then there's another part of this economy, which is Bitcoin, digital property. And Bitcoin as digital property is an immediate solution for public investors, publicly traded companies and FDIC banks, right? Not to hold on their balance sheet yet because we're still waiting for guidance from the FDIC, but we know that the FDIC has taken this up as an issue. We know that the initiatives of FASB, the FDIC, the SEC, the President's Working Group as well as congressional initiatives, all of these things coming together are going to contribute to a normalized environment, which is going to be good for Bitcoin as an asset class. Until all the regulatory activity around security tokens and DeFi exchanges and digital currencies is resolved, those are all questionable and they're complex, competitive and risky areas. That's why we choose not to invest in them. And that's why we think that Bitcoin is the institutional-grade treasury reserve asset in the crypto space. In fact, Bitcoin Essence is the risk off asset in the crypto economy. And I think that every single month that goes by, it's becoming clearer to both investors in the crypto economy, and it's also becoming clear to institutional investors. I think that -- having said all that, the other incredibly legitimizing trend that we've seen in the past 12 weeks is just the parade of Bitcoin miners coming public and raising capital. I count somewhere between 16 and 20 publicly traded Bitcoin mining companies in the next 3 months. So it's just -- it's really an extraordinary number, right? When you get to the point where you've got more than a dozen publicly traded Bitcoin miners that are trading on NASDAQ, the New York Stock Exchange, et cetera, right? And that's really a seal of approval, I think, for institutional investors. It gives institutional investors a lot of on-ramps to get Bitcoin exposure other than simply buying the Bitcoin itself. I think all the Bitcoin miners are raising capital. Riot raised $600 million in an ATM offering of equity, I think between October 1 and November 15. Marathon raised $650 million in a successful convertible debt offering. TeraWulf just this week came public on the NASDAQ raised $200 million in equity and debt instruments recently. So you're seeing large sums of capital flow into the Bitcoin mining industry. And if you think about it a bit, you realize that if a Bitcoin miner raises $600 million in equity capital, there's only 2 things they can do with it. They can, in essence, not sell Bitcoin, which is the same as buying Bitcoin. That $600 million of Bitcoin that won't be sold, but rather will be held in a treasury or they can buy Bitcoin mining equipment, which is the same as buying Bitcoin in the future, right? They're committing to buying Bitcoin in the future and mining it or they can buy the Bitcoin now. And so what we have is a large flow, billions and billions of dollars of capital flowing via a publicly traded Bitcoin mining companies into the Bitcoin ecosystem. This is unique. We don't see this with any other crypto asset, right? Bitcoin is the only crypto network that has achieved enough institutional status and reliability that you can see companies come public with the value proposition of mining Bitcoin. I think this is, in essence, a symbol of the maturity of Bitcoin network. And I think it ought to be a source of comfort for an institutional investor going forward. Geopolitically, I think that the network continues to distribute and decentralize and the China crackdown was a great thing for the asset earlier this year. I think it's pretty clear that Bitcoin has become Westernized, but it is really distributed everywhere in the world. And everywhere in the world, Bitcoin exchanges, Bitcoin mining, Bitcoin derivative product spread that creates more support for Bitcoin. So you can see the Canadian ETFs, the ETF in Australia, the ETFs in Singapore, the Bitcoin miners everywhere in the world, right? All of these are good things. A note on ESG. Sometimes people ask about ESG, how ESG friendly is Bitcoin? Well, I want to make the key point. First of all, Bitcoin is the most cost efficient, the most cost-effective industry in the world. If you look at the price to sales multiple of Bitcoin versus every other industry, Bitcoin is like 57 price to sales multiple. That is to say you put in $1 -- max $1 and you get out $57 of value. The S&P index is only 3 and it was only 1.5 18 months ago. So if you allow that every single dime of Bitcoin mining revenue was used to burn energy, it would still be more efficient than Google or Netflix or any company on earth, right? That's just how efficient Bitcoin is. If you delve a little bit deeper, you find that Bitcoin is getting more technically efficient and more energy-efficient at a more rapid rate than any other industry in the world. Bitcoin mining became 42x more energy efficient in the past 8 years. The BMC survey indicates our forecast is it gets up to 24x more efficient over the next 8 years from an energy point of view. For those of you who studied Satoshi's protocol, you know that every 4 years, mining block rewards are cut in half. And since 99% -- 98% to 99% of the revenue in the mining business is driven by block rewards, what that means is that the Bitcoin mining revenues are decreasing by 18% a year or another way to say it is, the protocol dictates 18% technology efficiency improvement every year for the foreseeable future, likely for the next 10 to 20 years. If you combine the 18% protocol improvement with the fact that ASICs keep getting more energy efficient, we went from S9s that were like 99 joules per terahash to S19s, which are 29 joules per terahash. When you think about that, that means instead of 99 megawatts per exahash, you used 29 megawatts per exahash. When you crank that in, you realize that, in fact, you're getting another 18% improvement in energy efficiency every year. That gets you to 36% improvement in energy efficiency overall, as the Bitcoin mining network rotates from being energy-intensive to being silicon or semiconductor intensive, technology intensive, if you will. And that dynamic is not very well understood, but the conclusion is this is really the most ESG-friendly industry in the world. Its's incredibly energy efficient. There is no major industry that is more energy efficient. There's no industry that's getting more efficient at a more rapid rate. If you are concerned about society, well Bitcoin is giving property rights to 8 billion people. It's also making possible light speed payments to 8 billion people. And if you are concerned about governance, it is the only universally acknowledged common property in the entire crypto ecosystem. And in fact, it's the only universally acknowledged crypto property in the world, which makes it safer and better governed, right, and more ethical than just about any other property you can invest in or any other security that you could invest in. So I think we've got a really good story there. I guess one last point I'll make is, sometimes people say, "Well, couldn't you do this without energy on a proof-of-stake network?" And I think the answer is you could actually fly in an imaginary car to an imaginary house, and you could be operated upon by an imaginary doctor and you could take an imaginary vacation and you could eat imaginary food, and it all tastes fine in the metaverse with no energy. But of course, in the universe, you need a real car, a real plane, a real house, real medical care and real food, and it takes real energy. So comparing proof-of-work network to a proof-of-stake network is a false equivalence. It's like comparing a hotel chain run by Hilton to the metaverse run by Facebook. They're not the same thing. And of course, if you think about it enough, you realize that in a world where you could spin up, give everybody a castle on Lake Tahoe for no energy, well, then 8 billion people will have a castle on Lake Tahoe. But of course, 10,000 companies will compete to be the one that provides them with the castle on Lake Tahoe. And you're just going to have a very competitive marketing war between Facebook and Twitter and Fortnite and Google and Roblox in every crypto network and 6,000 proof-of-stake networks. And it's going to be a marketing/competition thing. And I guess the last point that I'll make here for public investors is proof-of-stake networks are generally deemed as securities by securities attorneys and any regulator thinking about it, right, and all of the guidance we see coming out of the regulators for the past year are that if you're actually staking a token for yield, it's probably a security under securities law. So those networks are going to compete with Google and Apple and Facebook and Fortnite. And you can make money in them. You can make money in an online casino. You can make money in a video game. You can make money running a social network and you can probably make money offering a virtual universe, but it's not property in the real world. If you want real money in the real world, you need to back it with real energy, real technology and real political support. And all of those things come from the Bitcoin mining network. If you want an imaginary life and you want to trade imaginary things and live in imaginary house, you can trade it with an imaginary token, secured by imaginary energy. And yes, that's a different thing. It's metaverse as opposed to universe. Bitcoin is a digital asset and is a digital property for the universe. And it is the dominant, overwhelming winner in that space, and it will continue to be the winner because of the competitive dynamics, the technical dynamics, the political dynamics and the legal dynamics that revolve around the nonenergy intensive alternatives. So shall we go to the next slide. I'd like to introduce and pass the floor over to Phong Le, who's going to talk about our software strategy.

Thank you, Mike, and thank you, everyone, for joining. I'm going to share some thoughts on our software strategy and the recent success we've had and the reasons why we've had that success, and we're optimistic that our growth will continue. I'll also talk about our company financials overall and give you a sense of a structure by which you may value MicroStrategy and MacroStrategy together. And I'll talk about that for about 45 minutes, and then we'll have a Q&A session. And just as a reminder to those who are joining live, if you have questions you'd like us to address during the Q&A session, you can put your questions at any point in time into the Q&A capabilities or functionality of Zoom? So as many of you know, in the last 12 months ending the third quarter of 2021, we've had tremendous success in growth in a marketplace with our software strategy. We've had the greatest revenue growth we've seen in over 7 years. And our operating margin has grown more than we've seen in the last decade and that combined success is some of the strongest that the company has ever seen in over 20 years. And there's 2 reasons why the software business is doing really well. On the left-hand side here, we are the enterprise leader in Enterprise Analytics. We're the world's largest independent Business Intelligence platform. We've been investing more and more in R&D. The most recent platform release released in 2019 has really been a platform upon which we've grown significantly with new modern capabilities like HyperIntelligence with a complete and enterprise-leading cloud business intelligence capability and now more investments into the embedded and OEM market. And that toolset that we are delivering to the market has been built organically, which is important. We built it organically over 30 years, which provides seamless, integrated, consistent and, most importantly, nowadays, a secure analytics experience for enterprises. And because we've grown it organically and because we're independent, we really take an agnostic approach to business intelligence and enterprise software. And so that independence is quite important for us, and it's quite important for our customers. So we think we're really uniquely positioned. We know we're uniquely positioned to meet the demands of large enterprises with our analytics platform. And we're going after a multibillion-dollar market, which has really what we think, 3 major vectors for growth. And I'll go through each of these in detail. The first is expanding the analytics and BI market share that MicroStrategy has through enterprise BI replacement and growth in the enterprise BI space, and I'll explain what I mean by that. The second is continuing to grow via penetration and expansion in the OEM and ISV market. And the third is accelerating our revenue growth that we've already demonstrated, but growing even further by moving analytics environments to the cloud and selling new analytics environments in the cloud. Let me talk a little bit about the demand for Enterprise Analytics and why this is accelerating. If you look at the overall BI markets, it is growing 11% per year on a CAGR basis looking from 2019 and forward to 2025. If you further segment that into what we'll call enterprise analytics, it is also growing at a similar rate. And within that Enterprise Analytics space are 3 sort of major mega vendors, Oracle, BusinessObjects and IBM, who are actually losing share because of the lack of capabilities and investments in their platforms. So you look at this overall market that's right now about $16.1 billion, and we see in the next 4 years or 5 years growing at $24 billion, so by growing by 50% in 5 years. There's a few segments. There's what we'll call departmental analytics, dominated by primarily Microsoft Power BI and Tableau. It's crowded, it's commoditized. Prices are decreasing over time, and it will become a price play. I think Microsoft will drive that price lower and lower as part of inclusion and sort of their enterprise license agreement. The piece that we think is growing in importance is really what we call enterprise analytics. So it's not departmental dashboarding, it's not pretty visualization. It's building applications on top of analytics sitting in a semantic layer that is secure, that's scalable and that's performing. And what we've seen happen over the course of the last 2 years, especially with the advent of COVID, our large enterprises realizing that to be strategic and thoughtful about analytics, understanding their supply chains, being able to forecast accurately, being able to take business disruptions and turn that into business advantages, they need to have true at-scale enterprise analytics capabilities. And we've seen significant growth as a result of that. And again, in that space today, it's dominated by primarily installed bases that are 10, 15 years old of SAP, Oracle, IBM. And what we started to see is a lack of investment there, really causing large enterprises to move off and move in large part to MicroStrategy. And those demands of those large organizations to modernize their analytics capabilities with enterprise-grade scale, security, that is where MicroStrategy is the most logical option. And so we see continued growth of replacing these platforms, taking more share in existing customers and taking on new customers too. And we're pretty excited about that. That's a trend we've seen occur for the last 18 months or so, and we expect that to continue to accelerate our growth capabilities. If you look about some of our product capabilities in this area, we really combine what I would call a modern analytics experience, right, beautiful visualizations, beautiful dashboards and really pervasive capabilities to put analytics into the hands of everybody within the organization and self-service capabilities, right? We have that ability through our MicroStrategy Dossier, MicroStrategy Library offerings and MicroStrategy HyperIntelligence, with HyperIntelligence which we released in 2019, and it's one of the fastest-growing products we've ever produced. We're the only vendor that allows you to extend the power of analytics into the hands of the entire organization and answer analytics questions for folks before they know the answer, before they -- they know the question -- before they've asked the question, providing them the answer on top of existing enterprise applications. So not necessarily even in an analytics form of factor. And that's faster. It promotes faster and smarter decision-making. And of course, our open architecture is something that large enterprises are looking for, right? We have out-of-the-box connectivity to really any data source, a standard database, big data, unstructured, local data with APIs also. And so that capability, along with some of the more modern things we're doing in augmented analytics and AI and machine learning really provide a great enterprise analytics capability to replace legacy vendors and also to standardize on one platform across all of your analytics needs. Just a few case studies of examples where we've done this recently, is sort of multinational media and entertainment streaming service, which is experiencing rapid growth, accelerated through the global pandemic in 2020, who've decided to use MicroStrategy Enterprise Analytics to replace their multiple legacy vendors, including one of the large mega vendors and really start to sunset all tools and standardize on MicroStrategy. Another example is a top-tier life insurance and financial services organization, which is also looking to replace a large set of legacy vendors and really chose MicroStrategy because our modern data visualizations, our scalability, our high performance, and we were the really only option for them to standardize across the enterprise for analytics. Similarly at a global property and personal insurance firm, they've doubled their MicroStrategy footprint by standardizing on MicroStrategy, replacing multiple legacy and niche BI tools in the MicroStrategy Cloud. And because of our product road map, our constant innovation, they were pretty confident that we are the right platform going forward. The second big growth area is what we call the OEM market, and we've seen tremendous growth again in the last year or so, and we see this as an area that we should be the dominant player. In terms of sizing this, this is not your traditional BI market, right? This is not your traditional enterprise buying business intelligence to build internal applications to run their business better. But these are software and technology companies who are providing software to their end users, B2B and B2C companies in some cases, and they want to provide an analytics component. And because analytics may not be core to what they're building, it's 5% or 10% of the total platform they're building, rather than take their valuable software developers and focusing on something they're not great at core at, they choose to buy it instead. In that case, we are the logical vendor. We size this market looking at the overall software market, right, and see that as a $215 billion market, growing 12% to $375 billion. And we take a segment of that market, right, that we consider R&D spend, right, as a percentage of revenue, around 25%. And we say of that R&D spend, about 10% of that is attributable to BI. So today, that's about a $5 billion market and growing to about $9 billion. And we have a piece of that pie today. We think we can get a bigger piece. And in some cases, the real competition here is not another BI vendor but it's really the decision of the software company, do I build it myself with my engineers or do I focus my engineers on my core product capabilities and buy the embedded analytics capability for MicroStrategy? And we're seeing that happen more and more that they're deciding to buy because we can accelerate a product development cycle and provide something that's better at a lower cost. And so we see that starting to really grow over time. And the biggest drivers for someone selecting a BI vendor in this case is they need something that's enterprise grade, right? They need software that's high quality, that's scalable, that's flexible, that's open, and if they know it is going to be around to support them for the next 10 years. And we are the most logical and most qualified of the software vendors to provide that. And we find ourselves to be very well positioned and are excited about this market going forward. And as I said, this is independent from the standard analytics market that I talked about before. As far as product capabilities, we have a fully open architecture, right? We have now driven about 85% of our core application capability through an API-first architecture, meaning people basically can call MicroStrategy capabilities using code as opposed to needing to drag and drop through our user interface. And we take an API-first approach to everything we build now. The second is we've really started to democratize our development process, right? And so we have low-code, no-code options for white-labeling our software, right? Someone can take MicroStrategy, plug it into their software and white label it. They can build custom applications on top of that. We have a developer sandboxes. We have a CICD methodology that is consistent with what the standards of a lot of large software vendors and software methodology today. So we worked alongside some of our OEM vendors to build out capabilities from an application development perspective that are consistent with what they're looking for. So overall, because of the way we built our software because we're independent, because we're open, we are really thinking about sort of the OEM space as a growth opportunity that we're pretty excited about. A few examples here of companies that we worked with. One is an international provider in human resources services and solutions here. They provide HR, payroll benefit, talent acquisition capabilities, and they've adopted MicroStrategy as their enterprise solution for operational reporting. And ultimately, they're going to support over 600,000 small- and medium-sized businesses across the U.S. and Europe with MicroStrategy as the core embedded analytics capability. Another example, we're very strong in the global automotive industry and services and solution providers, software providers to the global automotive industry here. We have a sample where 40,000-plus automotive dealers over 5 continents are serviced by the software provider, where MicroStrategy, again, is the embedded analytics tool for them. And the last example in the area of cloud customer experience and customer management solutions, call center as a service solutions, we are the #1 player in terms of embedded analytics. And there is an example of a software provider that's really doubled their investment in MicroStrategy and really modernizing their analytics capabilities. And they like our pixel-perfect solutions, near real-time reporting and our cloud platform adoption also. So those are just a few examples of wins and growth that we're seeing in this area. The third area that I'll talk about is really our shift to cloud. And when we released our 2019 platform release, we really created an at-parity cloud solution. That means that when you deploy MicroStrategy in a managed cloud versus when you deploy it on-prem, it is the same set of capabilities plus, right? Plus meaning we manage it, we host it. et cetera. And if you -- I think everyone is aware on the right-hand side here, the growth of cloud application software in general, 16% CAGR, more than doubling in size over the next 5 years from $171 billion to $356 billion. What's been interesting over the course of the last 18 months, I'd say, is the acceleration of adoption of cloud analytics. And that acceleration in some cases has been led by the adoption of cloud data warehousing. And so what we're projecting or what we've seen projected is the adoption and growth of cloud analytics of roughly 23% CAGR over the course of the next 5 years. And what we've heard is 40%-or-so organizations are investing in big data and analytics to enable better business visibility in the cloud and 30% of organizations are accelerating, moving faster they're moving to the cloud. So there's significant growth that we've already seen, 35% year-over-year increase in cloud billings, and we expect that to grow and expand because of this growth in the market but also because of the extraordinary product capabilities. We have what we consider to be military-grade security on a modern microservices-based architecture. We're cloud-agnostic, first of all. We offer our platform on AWS and Azure. Over time, we'll offer it on pretty much any operating system, any cloud platform. And that's because we have built a reference architecture that's microservices based or container based that will allow us to be deployed seamlessly across any cloud platform. And that's important. That avoids vendor lock-in, and for the large enterprise that we work in, it will also allow a multi-cloud strategy or a cloud plus on-prem strategy with very little additional lift, if any. We pride ourselves in our cloud security. We have elite data protection and security standards across ISO 27001. We're a PCI certified. We have SOC2 certification, HIPAA. We are in process with FedRAMP and hope to have that available next year. And so it's a lot of work to put into the cloud platform that we have, and we're excited about where we're going to go with this. And as I mentioned, the FedRAMP authorization, just having that in process, but all of the work underlying that around data control, around storage, access, encryption really makes this what we consider to be the most enterprise-grade, military-grade cloud platform for analytics in the world. Our acceleration of moving customers and adding new customers in the cloud has been the fastest that we've ever seen, and we're very excited about it. A few examples, premier multinational biopharmaceutical organization that we've been working with has standard on MicroStrategy replaced or is in the process of replacing all of their legacy BI applications in their commercial business. So these are pharmaceutical sales reps all around the world, over 20,000 of them moving to use MicroStrategy. Leading retail grocer and e-tailer in the United Kingdom has standardized on MicroStrategy Cloud across a suite of over 30 business applications and over 12,000 users. And an international online travel agency reservation services also use MicroStrategy and cloud; in fact, moved to MicroStrategy right during the global pandemic, understanding that they need greater capabilities and flexibility as variability in their business continues and they standardize the MicroStrategy in the cloud also. So we're very excited about that. I'm going to talk about our financials next. And I want to share sort of where we've been as a company and where we think we're going as a company and how to think about the sum of the parts, the 2 pieces of our business. The MacroStrategy or Bitcoin strategy that Mike has talked about and then the MicroStrategy and the software business that I have briefly discussed. First of all, we're well positioned for growth, and we have over the course of the last 12 months proven out our ability to grow more so than we have in the past. We're a world-class software company, and we have a very healthy financial profile. We're now generating consistent product revenue growth. We have over $500 million in revenue with 60-plus percent of that, that is recurring in nature, and that portion is also growing in nature as we accelerate to the cloud. And we started to really increase our gross margins and our total margins. And we have the ability to do more in that area also. Obviously, Mike talked about our Bitcoin holdings. We own 122,478 Bitcoin as of now, and we really provide to our shareholders an asymmetric upside opportunity with that Bitcoin holdings. And we're using that and our balance sheet associated with our software business and our Bitcoin business as a strategic asset to acquire additional Bitcoin. We've done that. So we've done that really every quarter for the last 6 quarters. And the growing free cash flow from our BI business can be used also to acquire additional Bitcoin. We successfully returned to consistent growth. We will look to accelerate that growth. Some of the levers that I talked about, really growing in the enterprise BI space, growing in the OEM space and growing via cloud are going to accelerate our growth going forward. And we're confident that over time, we should be able to deliver 10-plus percent revenue growth. If you look at our revenue profile overall, I'll start on the left-hand side here, 63% of our revenue is recurring. So that is support revenue, subscription revenue, the bottom 2 bars in this graph here and those pieces will shift from support to subscription and overall expand over time. Other services is primarily our consulting business, which ensures that our customers are successful with their use of MicroStrategy and then product license revenue, which is really our perpetual license business and term license business that's not in the cloud. That number has grown significantly in the last year, while our cloud revenue has also grown. And I'll explain some of those dynamics a little bit. Because of our large support base, we're able to actually grow both components without -- and grow in the cloud without having a big sacrifice of product license revenue. And so that recurring revenue base is really what's attractive about our business. And I'll talk a little bit about the retention profile on that, but it's very high, over 95% retention rates on the recurring revenue in support and even higher for subscription. Our gross margins, 75% of revenue is running at 90% plus gross margins. And so you'll see there our product license revenue. It's the top line. We see gross margin in the high 90s, and they have expanded over time. You'll see the next line, support revenues, also gross margins over 90% expanding over time. And the bottom line there, subscription, this is our cloud business, approaching 60% gross margins, big expansion over the course of the last 2 years. And as that business scales, its margins, gross margins will approach 80% and the missing component there, that 20% are really the infrastructure associated with our cloud business. Our customer base is something we're very proud of. You saw some of those logos that I presented in the previous section. And not only are we proud of it, they're quite diverse, right? If you look on the right-hand side here, we don't have great exposure to any single industry. Banking is our largest industry, about 20% of our recurring revenue over the last 12 months, similar, I would say, to the global economy. Retail next at 15%, technology at 15%, followed by government at 11%. So a really nice distribution across all sectors. In terms of geographic distribution, we operate in 27 countries worldwide and 41% of our recurring revenue comes from our international business, a non-North American business. One of my favorite statistics, this number was 22 last year. It's 23 this year. The average lifetime of our top 15 customers, they've been around with us since 1998, which is a long time. And their average annual recurring revenue is over $3 million. And so significant relationships with very large companies around the world. We have over 700 customers that spend over $100,000 a year with us. And as I mentioned, we have about 95%, slightly higher than 95% revenue renewal rates. The transition to cloud is well underway, and I have some updates here from when we last talked about this a year ago. There's multiple components to what I consider our cloud transition. The first is just new customers, new billings or add-ons to existing customers, and we're seeing significant growth there. The major factors driving that growth; one is macro factors, work from home, focus on cost reductions, so customers coming and deciding that deploying in the cloud is better than deploying on-prem. The second is the prevalence of data warehouse. Companies like Snowflake and Amazon Redshift, as examples. As companies decide to deploy their data warehouse in the cloud, it's very logical at the same time or even before to move their BI to the cloud. And then just greater cloud adoption of large enterprises, that acceleration that we're seeing in the companies that we typically serve. We're starting to see as we migrate existing customers to the cloud, an uplift of 50% to 60% on the annual recurring revenue, and we're moving customers from a perpetual license model to an even stickier cloud subscription license model. In fact, in the last 4 quarters, the uplift we've seen by moving customers from on-prem to the cloud is about a 90% increase in their ARR. Now that number will steady over time, but that typically represents earlier adopters in small, medium-sized footprints. So that's why we're projecting close to 50% to 60%. But we've been about a year into aggressively pursuing these migrations. And I think we'll have better data as to whether it's closer to 90% over time. But we're optimistic regardless of the revenue uplift opportunity this provides. And obviously, the value that we're providing to our customers at the same time. This increase in subscription revenue is obviously offset partially by a reduction in support revenue. So it's moving from one line to the other and arguably a healthier line. And what we're seeing in the renewals as customers move to the cloud is actually greater renewal rates than customers who are on-prem paying maintenance. And each time we move a customer to the cloud, we have an upsell opportunity in terms of more software. And each time we renew those customers, we see -- we are seeing upsell opportunities too. And we're really focusing on 3-year commitments as we work with the customers. So what we've seen over the course of the last year is an increase in subscription billings of 35% year-over-year, and we do foresee that that will accelerate going into 2022. When you think about the economics of a cloud transition, there are 2 types, right? I talked about the new customers on the cloud. This is the left-hand side. And what we typically see is a breakeven point for about 3 years. So the customer who's buying new MicroStrategy licenses in the cloud that are new to MicroStrategy rather than paying a large perpetual license fee that shows up as product support in the first year, they'll pay a slightly smaller, call it, about 50% fee that is annually recurring over the course of the 3 years. And here, this illustrative model shows you that that breaks even at about a 3-year point. On the right-hand side is what I was mentioning about some of the uplift that we're seeing from our existing customers, right? So an existing customer that's paying $1 million or so in support revenue a year, when we move them to subscription, that $1 million holds, but they pay a little bit more in support because they're also getting cloud support. And so we're running not just their software, but running the platform underlying that software, too. And that's hypothetically, let's call that about $200,000. We also are seeing a just baseline revenue increase there, sorry, a term uplift of another $200,000. This is moving customers from maintenance to term and they're paying another $200,000 in hosting. What's really interesting that we're seeing is when a customer makes the decision to move from MicroStrategy on-prem to cloud, they're also just buying more licenses, what we call term upsell. And that's averaged over the course of the last year about $300,000. As far as gross margin, that's all gross margin uplift, except for the hosting fees, right? And so the 90% uplift in revenue results in a 70% uplift for gross margin. And so we're excited about where this is really providing financial benefit to us, stickier customers. And the customer value is that they are actually breakeven on their incremental cost in usually about a year. Meaning they're able to offset their own infrastructure costs, their own cost to run MicroStrategy either on-prem or in their own private cloud. I'll talk about our cost structure a little bit. We've done a lot, as many of you know, to optimize our cost structure as we enter 2020 or towards the middle of 2020. We did a lot of things from 2019 to 2020, a big significant reduction in G&A in areas like IT, finance, HR and legal. We reduced slightly our R&D headcount from 2019 to 2020, and we reduced the costs accordingly from about $107 million to about $101 million. The big rationalization was in sales and marketing. We really moved from in-person marketing to digital marketing, which we found success with and we plan to continue with that shift and not shift back. We reduced significantly our travel, our need to be in front of customers and then replaced that with a Zoom experience, and we reduced our physical events. We'll return to some of that in 2022, but not significantly. And so if you look at what happened from 2020 to 2021, our cost structure has been -- really started to stabilize, right? And so our G&A costs were stable at $74 million. We're starting to increase and invest in R&D a little bit more and really keeping sales and marketing stable while growing revenue. As we go into 2022, we think there's some more opportunities for some reductions in G&A and sales and marketing. And we do plan to invest more in research and development and expand the headcount while keeping the costs relatively stable with growth by focusing more on hiring and offshore development locations that tend to be lower cost, but still high productivity. If I double click on this a little bit more, especially on the productivity side of sales and marketing. So we reduced cost in sales and marketing, and we grew our top line. And so obviously, that results in significant increases in productivity. And from 2020 to 2021, we've seen about a 30% increase in productivity in our sales and marketing expenses versus our revenues. And so we're excited about that. And what that allowed us to do is redirect some of that cost into R&D. And so you'll see on the right-hand side here, we're starting to invest more in R&D in 2021 as the most we spent in that area since 2014. As we go into 2022, we'll expand that further, and it will be the most we spent in R&D since -- in the history of the company, and they are in areas that I talked about, cloud, OEM, security. And obviously, we'll continue to modernize our infrastructure or architecture user experiences. And we have things planned in the areas of augmented analytics, artificial intelligence, machine learning, real-time reporting, some things there that we're very excited about that will roll out over the course of the next year or so. Our cash flow history sort of speaks for itself in some ways. We have a proven history of free cash flow generation, fairly high in 2015 as we went through a significant cost optimization and product rationalization effort. And we really went through then a large period of investment to build our 2019 platform. So we've increased sales and marketing, increased R&D. We developed HyperIntelligence. We released most recent version of our MicroStrategy Cloud, and we rebuilt the platform and really modernized the entire tool set. Significant effort over that 5-year period, 4-year period from '15 to '19, that puts our platform in the place where it is today, which is the most robust strongest enterprise platform for analytics in the world. Now that we've put that investment in, closed some of what I'll call that technical debt and that gap in our technology capabilities, we continue to invest in R&D, but we're able to start to pull back on areas like sales and marketing. And obviously, some of the things that we talk about cost optimization and growing back our free cash flow to the level that it's $112 million in the last 4 months. So we're excited about the cash flow trajectory. And the difference between now and 5 years ago is we have platform to grow off of, and we're able to provide both cash flow generation, cash flow growth and also, obviously, revenue growth, which we're excited about. If you look longer term past 2021 and into next year and the following years, we think we really transitioned our business in the last 3 years from what I would call no growth to low growth and low profitability to high growth and improving profitability. And we think we can get to the upper quadrant in the course of the next 3 or 5 years or maybe even faster than that depending on our acceleration into the cloud and some of the other growth drivers we have. But longer term, I think we can produce revenue growth that's greater than 10% as a business, perhaps even more as we transition and accelerate into the cloud and even further improving our profitability and our operating margins. So we're excited about where we're able to take this business going forward. We get a lot of questions around, so how do you value MicroStrategy? Or how do you value the combined strategies, what we do on the BI side and on the Bitcoin side? And we thought it would be useful to share a framework, one potential way to think about the sum of the parts. That's an amalgamation of different analyses we've seen. We understand we have a very unique business. And so we thought it would be useful to share a framework that could be utilized if you choose to. If you look at our software business, the probably most straightforward way to value a growing software business like ourselves is based on a multiple of revenue. So take whatever we might believe is the 2022, the next 12 months revenue potential based on consensus and multiply that by a multiple. And usually, that multiple is driven by the quality of the revenue. Are we moving to the cloud or not? The quality of the margins. Are we driving margin expansion or not? And that would give you sort of, on the one hand, a software enterprise valuation. On the Bitcoin side, obviously, you can start with just the market value of the Bitcoin, right? And so you take the number of Bitcoins held, 122,000 or so for us and multiply that by what you might believe is the future forward price of Bitcoin over the next 12 months. And then as Mike talked about earlier, we have a unique value proposition, MicroStrategy, to whether it be a stand-alone Bitcoin or an ETF or a Bitcoin mining company or crypto-exposed corporates. And that we've seen over the course of the time result in some premium to the market value of just our stand-alone Bitcoin, whatever you might ascribe that premium to be. So if you were to take sort of the market value of our Bitcoin and ascribe a premium to that, that would be the value of the Bitcoin that we have on our balance sheet. You combine those 2 together, you take the sum of the parts, you take out our net debt, and that would be our equity value. And so that is one way -- a structure to consider to value MicroStrategy and sum of the parts. And here, we've inserted some numbers that you may choose to use. Like right now, research analyst estimates have us at about $530 million to $540 million in revenue next year, which represents about a 5% growth rate. If you look at comparable companies in the software space, our size, depending again on the quality of the revenue, the operating margin, also depending on the growth of the revenue, you might take a 4x to 10x multiple on that. I mentioned the number of Bitcoin held. Obviously, the Bitcoin price, Mike showed some projections, they're quite all over the place, but you could put something in the range of $50,000 to $100,000 or whatever value you think is appropriate and then some positive market-driven premium. The net debt, as you know, we have $1.7 billion in convertible senior notes and $500 million in senior secured notes, so $2.2 billion of net debt on our balance sheet. This is a, I'll call it, a mathematical exercise if you were to plug in certain sample numbers that we have in the footnotes here. What's interesting is to look at this exercise and understand the sensitivity of MicroStrategy's enterprise value and MicroStrategy’s stock price, using assumptions and shares outstanding. Here, for the sake of the mathematical exercise, we put in 20% hypothetical market-driven Bitcoin premium. We used 11.736 million diluted shares outstanding. And what you'll see here using a certain range of software multiples, using a certain range of Bitcoin price examples, it gives you a view of potential valuations of MicroStrategy stock. And we provide this again as a way for you to look at how you might create a model to value MicroStrategy over time. And again, what numbers you plug in would depend on how you view our MacroStrategy and our Bitcoin strategy that Mike went through and how you view our MicroStrategy or our software business that I went through. Obviously, we're very bullish on both of those components. We think we have -- we know we have a world-class software product and a very healthy financial profile and great growth opportunities in the MicroStrategy business that we've exhibited over the course of the last 12 months. And we look forward to continuing to grow over the course of the next 12 months and further beyond that. And we have a unique, innovative, first of its kind treasury policy. And we led many corporates to adopt the same thing, and we think more will come. And on top of that, we've shown the ability to issue equity and debt on top of our business to add more value in terms of Bitcoin. Both of those things together, we think, create a very attractive growth outlook for our software and our BI business and the combined entities going forward, and we're very excited about where the business will go going forward. So with that, I will turn it over to Jeremy Price, who will go through some of the Q&A we've already received. And just a reminder to everybody, if you have any questions, please go ahead and type it into the Q&A window within your Zoom session. And we'll spend the next 45 minutes or so getting through as many questions as we can.

Yes. Thanks, Phong. That's a really good update on the company. And we're going to jump right in. The first question is for Michael. What is management's current thinking with regard to the potential for a secured financing with current Bitcoin holdings as collateral as a means of generating proceeds to be used to purchase more Bitcoin?

I think at some point in time, there'll be a market to issue bonds backed by Bitcoin. And so when we actually see that market ready, and we think we can do a bond offering that will be accretive to the common stock shareholders and it looks kind of compelling versus our other options, and I think we're open to it. Right now, we've got the convertible market, the senior secured market, and we've got the equity market, and we've got our own cash flows. I think that we've also got potential to negotiate or to do deals with other counterparties privately. We're considering all those things, generally, every quarter, we just look at the state of the markets and we try to figure out what's accretive. Sometimes it makes sense to do the senior debt financings like in last June because the equity markets aren't good. Sometimes it makes sense to do the equity-linked financing. I think that we're still a little bit too soon to say whether there's a good Bitcoin back bond market, but I look forward to exploring that in the future.

Phong, where do you think the long-term margins could head for the business? And will we see any negative impact in the near term to margins and cash flows from the cloud transition?

A lot of companies, as they transition to SaaS, you see negative impacts on revenue growth and negative impacts on margin. And those typically are companies that don't have as large or recurring revenue base as us, product support revenue. Because we have that larger product support revenue base and because we believe we can transition that with an immediate uplift of 40%, 50%, 60% revenue as I mentioned, we've experienced about 90%, that actually is quite revenue accretive, and our expectation is that outpaces any revenue loss occurring on the product license side as we take customers from perpetual -- new customers from perpetual to cloud. So all that said, we shouldn't have short-term impacts that would cause our revenue to decrease via cloud. That's our sort of objective or goal. But once we get through some of that cycling out of that product license revenue moving to cloud, we can accelerate beyond that. So which is why we believe, over time, we can see 10-plus percent revenue growth. What that does to our operating margins, I think we'll see operating margin growth to beyond 25% if you were to net out some of the Bitcoin impairment and look at just a non-GAAP number, minus Bitcoin impairment. That would be -- I think we can get north of 25% operating margins, too. So both strong growth and strong profitability as we transition our business.

Right. Michael, we will come back to you. Can you explain the company's thinking behind making Bitcoin purchases using the ATM equity issuances? And how does the company view it to be accretive to the shareholders?

Well, it depends upon the price of Bitcoin. We look at the amount of Bitcoin we have per share. And if we saw a substantial premium versus that by selling the equity and buying the Bitcoin, let me take that back. We look at the effective price, the amount of Bitcoin per share with a model where we also value our existing software business. And so we run our own models. And there are times when we feel like Bitcoin is attractively priced or the equity markets are such that by selling the equity to buy the Bitcoin, it's accretive to the shareholders. There are other times when we don't feel that way. So we're just continually reviewing the marketplace to determine whether it is accretive to issue equity to buy Bitcoin. And that will change from time to time as the markets do.

All right. And maybe to follow up on that a little bit more. Is there an upper limit to the Bitcoin purchases? We've invested $3.7 billion till now raising debt and equity. Will you be limited in how much more you can buy in the future?

Yes. There's no upper limit. We'll just continue with the strategy in a consistent fashion.

Okay. And Phong, we'll switch back to you. Where are you focusing your R&D investments? And how should we expect to see the product evolve in coming years? What impact do you see or expect from the consolidation of BI and visualization tools and the impact that will have on your business?

Yes. So first, just where are we investing, right? There's really 3 key areas that align a bit to our 3 areas of differentiation. One is, I'll call it, modern enterprise capabilities, right? So making our user interface and our visualizations beautiful and easy to use. And beyond that, moving from just simple visualization to something that's much more pervasive, HyperIntelligence. Building a tool for analytics that understands what questions people are going to ask, give them the answer before they ask it and give it to them in a beautiful form factor. And beyond HyperIntelligence, there are some things that we can do with augmented analytics, right? Some things that we can do in artificial intelligence and machine learning, where we'll partner with certain customers and are starting to innovate in those areas, too. I won't get more specific than that because there are things that are still in sort of the development phase. That's one. Two is our OEM space, making our product completely open, code-based and be able to be part of sort of the product development process of large technology companies. It's something that we do very well today, and we want to continue along that path, partnering with large tech companies. And then the third is really cloud. And with cloud comes container and micro services-based infrastructure, moving to a full multi-tenant infrastructure and making sure that we're full FedRAMP certified. That our security capabilities are better than everybody else's. And so those are our 3 areas of innovation. And like HyperIntelligence, there's something that will come up that we're working on that we don't even know about that will become the next innovation in the next 2 to 3 years also. We're constantly doing things to find out what's next also. So we're pretty excited about sort of where the product direction went in 2019 and sort of where we can go after that. So that's sort of where the product innovation is coming. As far as consolidation in the BI and visualization tools, what you're seeing is positive for us, right? There was a period of consolidation in 2008, and consolidation typically also means decrease in innovation as companies are trying to figure out how to integrate their software and some other software vendor integrate the channels. We typically stay out of that, so that we can continue to innovate our software, increase our R&D spend and do better than everybody else. The other thing that you're seeing with consolidation is typically with the, I'll call it, data visualization, departmental analytics vendors. And in that regard, it's just really folks becoming a part of a large technology stack vendor, taking choice away from the customer and taking innovation away from the customer. And we're not really interested in those types of things.

All right. Thank you, Phong. Michael, we'll come back to you. Do you believe there's more innovation in other cryptocurrencies outside of Bitcoin and when I have a basket of cryptocurrencies and mitigate your exposure.

No. First of all, I think that what's not really appreciated is that there's thousands and thousands of other cryptos, but there's also thousands and thousands of other applications in the mainstream economy. And they're all innovating at the same time. And Bitcoin is kind of an essential component to both. So companies like Apple and Google and Square and PayPal and Fidelity and JPMorgan and the like, they're all going to embed the Bitcoin one way or the other into some application or service over time and they're ferociously innovating. Lots of small entrepreneurial mobile app and other app and website companies that are innovating ferociously. I mean, including the ones we know like FTX and finance and coin-based. I think there's lots of innovation going on in other cryptos, but ultimately Bitcoin is unique and the universe is digital property. Nothing else has proven to be digital property. There's only 1 universal agreement, which is Bitcoin as property. So to the extent that there are lots of other interesting applications in the crypto world, they'll probably create demand for Bitcoin and, of course, innovations in mainstream mobile apps or web apps or traditional finance services or the like will also create demand for Bitcoin. We don't diversify because for the same reason, Bitcoin is not -- the other cryptos don't -- aren't really -- they're not really the same as Bitcoin. Bitcoin is the only community property. So diversifying it to buy anything else would be swapping out the dominant digital property network to buy an entrepreneurial experiment with a 99% failure rate. It's the same as like buying 157 mobile apps instead of buying Facebook. It's like they're all venture capital start-ups. So we don't wish to express a venture capital opinion. We're not speculators. So we're not going to buy 1 of 48 Dogecoins. We're not going to buy or invest in 48 Silicon Valley start-ups either. Both have very, very high mortality rates, and they're just highly risky. In fact, everything outside of Bitcoin is just highly risky. So you're expressing a sentiment. Do you want to invest in another publicly traded company, do you want to invest in a private company? Most of the other cryptos are probably going to be treated as private companies. It looks like they're all securities, which makes them companies. There are technology companies that are pursuing some kind of crypto strategy. And if guidance evolves and it becomes clear that those are security tokens, they're not going to be any different than any other venture capital investment. And so our strategy is to focus upon the institutional grade asset where there's clarity that is property and not a security and Bitcoin is the only one. And then we're not really -- we're not wanting to get into competitive risky businesses. Lots of businesses are competitive and risky. All the cryptos are competitive and risky other than Bitcoin. All the private companies are competitive and risky. Public companies are competitive and risky. Our strategy is to buy the Bitcoin. We think Bitcoin is going to be universally useful to tens of thousands of companies and tens of thousands of other crypto network should they continue to grow. And so that's why we stick to our strategy.

All right. Phong, we'll switch back to you. Continuing on the concept of cloud, how should investors think about the cloud growth over the next few years? How big will it be as a percentage of the business? And is there a point where it reaches a sufficient scale to accelerate total revenue growth?

Yes. So we saw our cloud billings grow 35% in the last year, where I think it's reasonable to see that accelerate pretty rapidly, right. Potentially north of 50% in the next year. And if you're -- hypothetically take that 50% growth rate, that would mean that our cloud revenue would triple in about 4 years. And some of that is a replacement of support revenue, but maybe half of it or so, and the other half is just accretive to our top line. And so if you think about that over the course of the next 3 to 5 years, our business flips from being an on-prem business to a primarily cloud business. And when that happens, with higher recurring revenues and a higher upsell, I think our revenue can grow even more. But I think from the base that we have a revenue growth of about 5% today, if we can really accelerate that cloud growth, we can accelerate the revenue growth in the short term. So that's sort of how I would think about it. And we're sort of getting into the middle phase of this cloud growth, where over the last couple of years, we really had to prove out the product, prove out our operations, improve our channels, improve our pitch now where we can start to see some acceleration. So it's quite exciting to run fully as a full cloud business. And we know there is demand out there from our customers and from prospects for a true enterprise cloud BI offering, which we think is very unique.

And similarly, can you talk just briefly about the channel and direct sales efforts, perhaps even the embedded space and the momentum you're seeing there?

Yes. So that's interesting, right? Like we have historically been very heavy on our direct channel. I'll call it, about 80% of our revenue comes in via our direct channel. And as we modernize our infrastructure and modernize our software and as we move to the cloud and especially in the OEM, there is an opportunity to reinvigorate the indirect channel worldwide, and it's something that's going to be a big focus area of ours in 2022. Organizationally, we're making some changes to focus even more on the indirect channel. So that, I think, now that we have the right product in place and the right investments in place, we have something that we can really take to the indirect channel and get them excited about selling that. And in many cases, the OEM of ours is a software technology company. And in many cases, they are also a channel for new sales for us, too.

All right. Michael, given the global recognition of high inflation, why do you think Bitcoin prices are not moving up at this time?

I think you got to look at Bitcoin over the course of the year from year to year. And I think it's still the best performing asset class this year. So if you look at it over 10 years, it's the best performing asset. If you look at it year-to-date, it's the best performing asset. If you focus on it hourly or daily or maybe week by week, then you may get caught up in the noise. But ultimately, I think Bitcoin is performing just fine. And if you compare Bitcoin's performance in the last 12 months to gold's performance in the last 12 months, you can see that Bitcoin is doing exactly what you would expect it to do, and you can see that gold isn't. And so clearly, Bitcoin's performing is digital gold. If you just take a long view perspective, like a 1-year to 4-year perspective.

And kind of continuing on that track, MicroStrategy's debt taken on to purchase Bitcoin is quite significant in reference or in comparison to its historical market cap. So if the price of Bitcoin drops to levels below the average price it was acquired, can MicroStrategy be confident in serving its debt long term?

Yes, I think we can. First of all, I think our debt-to-asset ratio or debt-to-equity ratio is pretty low. I mean, we've got maybe $2.2 billion in debt and $6 billion -- some range and $6 billion worth of assets. So we're maybe 25%, 30% sometimes. More importantly though, I mean, that's talking about if we needed to just pay it all off tomorrow. Could we? Yes, sure, we could. But more importantly, the blended interest rate on our debt is like 1.5% interest. So we can cover the entire interest bill just out of operating income from the core business. We've been very thoughtful about the way that we structure that debt. So I don't think we have issues there.

All right. And we'll continue on the Bitcoin route. Just 1 more question, Michael, for this section. And how do you see the profile of Bitcoin adopters trending in the next 1 to 2 years based on your conversations with other management teams and institutions? Do you expect to see a more diverse set of owners to begin adopting cryptocurrency?

Yes. I mean I think if you look at some of the results from like quarterly statements from coin-based, they've made clear, they've got 9,000 or more institutional grade accounts now. There's been a real parade of institutions entering into the asset class in the last 12 months at a rapid rate. I think the ETFs brought a lot more institutions. Anecdotally, I hear a lot of private companies coming into Bitcoin, a lot of family offices, a lot of high net worth individuals. Every month, another 1 or 2 publicly traded companies comes public, that's a Bitcoin company. So I think that you can just expect more of the same adoption dynamic we've seen since August. August of 2020, Bitcoin was not perceived to be an institutional-grade asset. We were the first mover. And today, there are thousands and thousands of institutions that have invested in Bitcoin, and I think you'll just see a continuing progression of more of the same going into 2022 and beyond.

Thank you, Michael. Phong, back to you. One of the exciting trends in the BI analytics space is the growing spend on data science/ML software, benefiting from some pure plays such as Databricks and DataRobot. So what is the opportunity for MicroStrategy to play here?

Yes. So first of all, we have partnerships with Databricks and DataRobot. So the ability to plug into our semantic layer and our data sets and run data science and ML algorithms off of that is something that a lot of our customers are doing. We are exploring, building some capabilities directly into our software. We're partnering with some customers to do that. Not quite ready to sort of talk through the details of what we're doing, but we do have some innovation in those areas that we'll be putting out in the next year or 2.

All right. Michael, back to you. Do you still expect Bitcoin to be primarily used as a store value or you see potential for broader adoption for micro payments such as in El Salvador, cross-border payments or other used cases? And have your views on the function of Bitcoin changed over the last year?

I think that Bitcoin running on the base layer is best thought of right now is digital gold and the world's best store value or maybe digital property. But I think that the Lightning Network -- there are layer 2 and layer 3 applications that dramatically matured in the past 12 months that cause you to conclude the Bitcoin's going to actually be running on hundreds, if not thousands of layer 2 and layer 3 networks. For example, Lightning is 1, and Lightning is just a decentralized noncustodial layer 2 network. And there's an explosion of Lightning wallets and Lightning applications right now that we see. And El Salvador is an example of that. They're able to deploy to 3 million people in a few weeks. And on a Lightning Network, you can move Bitcoin in 1 second for about 20th of $0.01. So it's really money at the speed of light, friction free. But Lightning Network is just 1 example. If we look at what Square has done with Cash App, they just added support for Taproot and you can move Bitcoin on the Square network instantly for free or near free right now as well. I think we see initiatives at PayPal and Robinhood and Visa or Mastercard and all of the Bitcoin companies, obviously, the Bitcoin exchanges, Binance, FTX, Coinbase. They're all allowing you to move Bitcoin very, very rapidly, and they're extending their ecosystems. There's really no limit to the number of layer 2 and layer 3 networks and applications that can be plugged into Bitcoin. I think we're going to see that continue to grow, and then we're going to see those applications grow. I think that it's also been made pretty clear by the regulators is there are 2 things that they support. One thing they support is Bitcoin is digital property. And the second thing they support is the idea of 24/7/365 money moving at the speed of light on crypto-type rails or modern digital rails. And that will take the form either of maybe a stable coin U.S. dollar or it will take the form of Bitcoin moving on similar Lightning rails or proprietary application rails like Square's. It's a supported use case. 1.5 years ago, a year ago, we really didn't see a lot of that. Now we're seeing an explosion of renaissance and investment in all those areas and you've got the endorsement of all of the major financial regulators in the world. So I think with their endorsement, it's going to accelerate the investments of all the fintech companies, all of the payment companies, all of the FDIC banks, et cetera. And as that happens, I think what you see is there is the first use case digital property for billions of people. And the second use case is digital payments for billions of people. And Bitcoin isn't used for the payment directly. It will be used as the collateral or perhaps the open network to move the currency of payment around. So I'm pretty optimistic about all the opportunities that exist there, and I think that we'll see more and more every month from this point forward.

Thank you, Mike. Phong, for you. Could you take -- talk a bit about your net new logo transactions? Are you seeing more traction? And who are you typically replacing in the space?

Yes. So I'll sort of split it into sort of our different businesses again. If you look at our enterprise BI business, we're seeing a lot of growth in our existing customers. And net new logos represent about 20% of our business there. And it hasn't been growing yet, but we are yet to Mike's point earlier around sort of the flywheel of BI and Bitcoin. We're seeing more traction in terms of pipeline. So we -- I would expect over time to see more net new logos come into that space of growth. If you look at our OEM business, we are seeing net new logo traction there. We are seeing growth as that business expands, and we're well known in that space. So that's been positive. And that's driven just by the quality of the product that we have. And then if you look at cloud, I would say, sort of mirrors our enterprise BI business, where the net new logo expansion, in terms of percentage of revenue is starting to grow a little bit, but the pipeline is really starting to accelerate in terms of net new logos. So I'm pretty excited about sort of finally being able to turn from being mostly a customer revenue growth business, which we'll continue to have to driving more revenue growth through net new logos over the course of the next few years, given our sort of renewed brand and our renewed product capabilities.

Thanks, Phong. And Michael, back to you. As we talk about using Bitcoin as a store of value, I think a couple of questions have come on this next one. So how should others think about how MicroStrategy thinks of the embedded earnings power of our Bitcoin holdings? Is it fair to assume that we'll use the Bitcoin to generate yield and maybe buy even more Bitcoin or even buy back stock with the earnings from that yield?

I think over time, we'll find a way to generate yield with Bitcoin. It will either be yield from a counterparty giving us the yield or it will be yield by raising additional funds that get reinvested in Bitcoin or it will be some -- it could be yield from selling volatility or finally, it could be yield from a partnership with another technology company or another Bitcoin interested banking or financial institution. And I can't say which of those. And in fact, it may be a mix of those things over time. We'll just evaluate our opportunities as they come along and make a rational choice when we think it's in our best interest. We try to evaluate everything. We're not interested in doing something just to do it. We want to make sure that it's accretive on a risk-adjusted fashion. So sometimes the wisest thing to do is to do nothing. But there will be opportunities that will come our way, and I expect we'll find a way to generate yield with the asset.

And continuing down that path a bit. Has MicroStrategy explored any long-term ROI difference between buying and holding Bitcoin versus buying miners and having them third-party hosted, some large miners with extra power capacity or investing in hosted miners is more profitable over 5 years?

Well, we keep an eye on the mining business. It's an interesting one. But I think the real key to keep in mind is that Bitcoin is a key component of lots of businesses. For example, you can revolutionize the insurance business with Bitcoin in it. You can have an exchange with Bitcoin in it. You can revolutionize a social media company with Bitcoin in it. You can create a good Bitcoin mining business, but pretty much every business would benefit from embedding Bitcoin in it. We're not going to enter a business unless we feel that we can be competitive. So Bitcoin mining is in and of itself a competitive business and it has uncertainty. There's execution risk. There is competitive risk. You have to make assumptions about what the hash rate will be over time and to what extent you can acquire the equipment and you can operate the equipment and the political stability of where you operate the miner. So lots of question marks, and we just decided not to get in that business, but we could enter any number of businesses if we wanted to. Right now, we feel that the best risk-adjusted return is to acquire the Bitcoin given our current circumstances.

All right. And this one is probably maybe a joint question for Phong and Mike. What controls and safety procedures do you have in place to protect your Bitcoins? And how do you ensure a safe storage of your Bitcoins?

I guess I'll start. We obviously would go through an institutional grade vetting process, and we've considered just a variety of issues and we only trade with institutionally vetted exchanges, and we only would store with an institutional-grade custodian. And other than that, I really can't comment any more on what we do. Phong?

We go through SOCs controls, and we are -- have independent internal auditor review sort of our controls around our Bitcoin. As Mike mentioned, we use institutional-grade custodians. Sometimes I get the question asked, do Mike or I have a key, like with a password around our neck? No. Neither -- no single person in the company can do anything with our Bitcoin just like no single person in the company could do anything with our cash. We have controls that require 2 or 3 people at all times, to authorize movements, et cetera. So it's not much different than how we would control cash in a bank account. It's extremely secure and it's audited and reviewed multiple times, as you can imagine.

Thank you for that. And next question is for Phong. What do you expect your total cost of the notes per year will be?

Yes. So we have -- I think we have -- our secured notes, we have about $500 million in secured notes at 6.125%. So that's about $30 million annually. And then we've got $650 million in convertibles at 0.750% and that's about $5 million annually. So it's about $35 million, $36 million. And then obviously, we have our $1.05 billion in convertibles that are a 0% coupon. So there is no annual interest on that. I like the questions that are just straight math.

Yes. That's -- that was an easier one. Okay. I think that is it for the questions that we've received. So I'd like to turn the call back over to Michael for closing remarks.

I want to thank everybody on the phone today. All of our shareholders, we appreciate your support. All prospective shareholders, we appreciate your interest. Everyone that's a supporter of Bitcoin, we appreciate your interest. And I wish you the best during this upcoming holiday season. Phong?

Thank you, everyone. Thanks for your interest. Thanks for your time, and look forward to talking to you more in the future.

Happy holidays.

Happy holidays.