Strategy, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Rebranding: MicroStrategy rebranded as Strategy. Reasons include simplicity, continuity, and ambition. Launched official Strategy merchandise store, new website strategy.com, and relaunched software website strategysoftware.com. Included in NASDAQ 100 Index. Welcomed new Board members. Shareholders voted to increase authorized Class A common stock and preferred stock.
• Bitcoin Highlights: Held 471,107 Bitcoins with a total market value of $46 billion as of February 2. Acquired 258,320 Bitcoin in 2024. Made progress on capital markets with $18.8 billion net proceeds from equity offerings and $6.2 billion from convertible notes in 2024 and Q1 2025. Redeemed certain notes and called convertible notes. Introduced Strike, a perpetual convertible preferred stock.
• Software and Cloud: Subscription Services revenues growing due to customer migrations and new wins. Cost of revenues increasing due to cloud-hosting costs. Operating expenses for software business had some fluctuations. Q4 will be last quarter with Bitcoin impairment charge as moving to fair-value accounting in Q1.

Segment Performance

• Software: In Q4 2024, total Software revenues were approximately $121 million, down 3% year-over-year. Full year 2024 total revenues were approximately $464 million, down 7% year-over-year. The revenue trend reflects the ongoing transition from on-premise to cloud.
• Cloud: Q4 Subscription Services revenues increased 48% year-over-year and now make up approximately 20% of total revenues. Full year 2024 Subscription Services revenues were approximately $106.7 million, up 32% year-over-year. Subscription billings grew by 57% in Q4. Cost of revenues for software were up due to higher cloud-hosting costs.
• Bitcoin: Strategy remains the largest corporate holder of Bitcoin in the world, holding 471,107 Bitcoins with a total market value of $46 billion as of February 2. In full year 2024, acquired an additional 258,320 Bitcoin for a total purchase cost of $22.1 billion at an average price of $85,447.

Guidance

• Targeting a minimum of 15% BTC Yield and a $10 billion BTC dollar gain for 2025. Will consider full spectrum of financing options and explore accretive capital markets transactions to execute strategy effectively and prudently. Plan to remain disciplined in use of ATM and other capital raising alternatives to achieve targets.

Risks

• Bitcoin price volatility. Broader equity and debt capital market conditions. Potential tax policy changes related to unrealized capital gains, which could impact growth rate though seen as second-order impact.

Question and Answer

Q: Congrats on the successful capital raise through Strike convertible preferred and could you please elaborate on the flexibility for the Strike dividend to be paid out in cash or in common stock? And how do you plan to fund the dividends going forward?

A: Sure. We believe Strike is an extremely accretive tool to raise capital. We will not need to rely solely on cash from operations. Will use all capital sources including primarily the ATM. Our ability to raise capital relative to the obligation on Strike is immense compared to what we need to pay. We are very comfortable in our ability to pay these in perpetuity.

Q: What are the company's latest thoughts on the taxes on unrealized capital gains, and what steps are being taken to mitigate this risk? And what are the implications if this tax issue becomes effective at some point in the future?

A: We've been in dialogue with the IRS and members of the cabinet. Don't think there is broad-based support for unrealized capital gains tax on crypto assets for large corporate holders. In event of such tax, it would be a second-order impact, somewhat slow down growth rate but we remain confident in managing this issue.