[Starts abruptly] -- Investor Relations and Treasury at MicroStrategy. I'll be your moderator for MicroStrategy's 2024 Second Quarter Earnings Webinar. Before we proceed, I will read the Safe Harbor statement. Some of the information we provide during today's call regarding our future expectations, plans, and prospects may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements due to various important factors, including the risk factors discussed in our most recent 10-Q filed with the SEC. We assume no obligation to update these forward-looking statements, which speak only as of today. Also, during today's call, we will refer to certain non-GAAP financial measures. Reconciliations showing GAAP versus non-GAAP results are available in our earnings release and presentation, which were issued today and are available on our Web site at microstrategy.com. I would like to welcome you all to today's webinar and let you know that we will be taking questions using the Q&A feature at the bottom of your screen. You can submit questions throughout the webinar, and Michael, Phong, or Andrew will answer questions at the end of the session. Please be sure to provide your name and your company's name when submitting your questions. Now, I'll walk you through the agenda for today's call. First, Phong Le will cover the business and operational results for the second quarter of 2024. Second, Andrew Kang will cover the financial results for the second quarter of 2024. And then, Michael Saylor will provide a strategic review and discuss recent bitcoin market updates. And lastly, we will open up to Q&A. With that, I will turn the call over to Phong Le, President and CEO of MicroStrategy.

Thank you, Shirish. Hello everyone. I'd like to welcome all of you to today's webinar. As we discussed in the last two quarters, MicroStrategy considers itself to be the world's first bitcoin development company. We're a publicly traded operating company committed to the continued development of the bitcoin network through our activities in the financial markets, advocacy, and technology innovation. As an operating business, we're able to use cash flows, as well as proceeds from equity and debt financings to accumulate bitcoin, which serves as our primary treasury reserve asset. We believe that the combination of our operating structure, bitcoin strategy, and focus on technology innovation provides a unique opportunity for value creation. Being an operating company, our Software Technology business remains our core revenue and cash flow generator. In addition, it also enables us to acquire bitcoin thorough the use of excess cash or proceeds from equity capital raises or corporate debt capital raises. These capital market levers allow us to deploy intelligent leverage to increase our bitcoin holdings in a manner which we believe has created shareholder value. Since our adoption of our bitcoin strategy, we have used three primary mechanisms to acquire more bitcoin. Cash flows from software orations; since August, 2020, we've invested $836 million of total cash in our balance sheet. Equity issuances; we have issued $3.2 billion in equity in a manner that we believe to be accretive to existing shareholders; and debt financing, we had $3.8 billion in debt outstanding through the issuance of both Senior Secured Notes and Convertible Notes. We've used the proceeds from these issuances, principally, to purchase bitcoin. The blended cost of our outstanding debt is fixed at 1.6% annually. Turning to the bitcoin highlights for Q2 2024, MicroStrategy remains the largest corporate holder of bitcoin in the world,…

Thank you, Phong. I'll continue with the recap of our software financial results, and then I'll move on to our bitcoin strategy. Total revenues for the second quarter were $111.4 million, down 7% year-over-year. Consistent with recent quarters, the overall revenue trend reflects the transition of our business from on-premise to cloud. As we migrate customers to the cloud, we shift upfront product license revenues to subscription services revenues, which are recognized readily over the life of a contract. As a result, we fully expect product license revenues, along with support revenues to decline, both of which were down 40% and down 7% respectively year-over-year. What isn't immediately seen through reported revenue is that we are building up stronger, more durable cloud recurring revenue that comes in over time, which is consistent for any on-prem to cloud transition. And more robust or faster cloud migrations will have a larger, but temporary reduction in upfront revenues, which is what we saw in last quarter's results. The cloud contracts booked in Q2 were the strongest single quarter bookings we have seen to date, more than double Q1 or any prior quarter for that matter. This acceleration last quarter makes up for the lower than expected cloud contracts we closed in Q1, meets and beats last year's quarters targets, and directly reflects the transition starting to take shape. While we'll see the initial benefits of last quarter's strong cloud migrations float through revenue beginning next quarter, the lower product license bookings in 2024 will result in lower than expected recognized revenue for the full-year by somewhere between 4% and 5%. Overall total annual revenues have been generally flat in the past couple of years, but with our transition beginning to take shape in the first-half of this year, we expect to see similar…

Thank you, Andrew, and thank you to all our shareholders who are with us here today. I would like to give a few thoughts on bitcoin, the macro environment, and MicroStrategy's operations. So, I'm going to start with the Bitcoin Conference 2024. It was extraordinary, and what was very clear is that bitcoin has entered the political conversation; Governors, Senators, House Members, and Presidential Candidates were all in attendance at the conference. There was a Lummis bill presented at the conference. Robert F. Kennedy made some very interesting commitments at the conference. Donald Trump made some very interesting commitments at the conference. Four years ago, all of this was unconceivable. So, we've come a long way in the past four years. Bitcoin has also entered the corporate conversation. During the conference Marathon announced that they're adopting a full hurdle strategy, they acquired additional bitcoin on their balance sheet, and they announced they're not going to sell a bitcoin from their mining activities. Some who are scientific was there at the conference speaking. We have companies like Metaplanet that are very vocally adopting a bitcoin standard. So, lots of conversations and lots of Main Street, Wall Street, and Capital Hill participants, in Nashville. There is a growing consensus that digital, private property is a right, and it's a natural right. Likewise, right to self-custody is rippling throughout all of these speakers and throughout the public, discussion of the public forums. There is also growing enthusiasm for building a strategic bitcoin reserve at various levels. The Lummis bill is a bill to create a strategic bitcoin reserve for the United States government that was announced at the conference, and just rolled out or presented yesterday. The Trump speech was a milestone. He reaffirmed the right to self-custody, and also quite salient was…

Thank you, Michael. We are now going to jump into questions. And the first question is for Michael. MicroStrategy's equity premium to its bitcoin holdings has remained healthy over the past few months despite the bitcoin price swings and Board directions. Would you attribute this to your ability to achieve a positive BTC Yield?

Yes, I think that long-term bitcoin holders and bitcoin really is the longest duration asset. People that believe in bitcoin are thinking this is apex property, that you do not sell your bitcoin. So, when you have an investment in bitcoin you're not thinking about holding it for a short period of time and flipping it. Now, when you think about holding something for 30 years, or 40 years, and if you have a vehicle like a closed-in fund that charges 250 basis points as a fee; that looks like a negative BTC Yield of 2.5%. We have experience with those sort of things, and we've seen they trade at a discount to net asset value. Closed-in funds with a long fee on an asset you're going to hold forever, they start to look like a multiple of the negative BTC Yield. And on the other hand, if we can get away from that and we can create the opposite, but a positive BTC Yield, we expect that, over time, investors are going to say, "How much does it cost me, or how much do I benefit from holding my capital in that closed-in fund versus that ETF versus that operating company?" All things equal, I'd rather have a company that generates plus-250 basis points a year instead of minus-250 basis points a year. The market is going to value our equity based upon their assumptions about the risk and their assumptions about the bitcoin market, and their holding period. And they'll make assumptions about what kind of BTC Yield we can generate and how important that is. And then, they'll put a multiple on it. But I know that, in the debt, our fixed income market, if you have 30-year swap and interest, or a long-dated treasury bond; and…

Thank you, Michael. Next question is for Phong. On the software side, how did you feel about the Q2 cloud conversions relative to your expectations? And how should we think about the rest of the year with respect to your cloud migrations and the AI-related partnerships?

Thanks, Shirish. We had in Q2, the largest cloud bookings quarter, including conversions that we've had in the history of the company, and by about twofold, a little bit more than twofold. So, the conversions are accelerating, which is great. It's going to help our long-term ARR and our long-term recognized revenue. But as Andrew mentioned, it depresses short-term recognized revenue because it doesn't show up and get recognized in a quarter. It gets recognized readily over the course of the year. So, we had a really good quarter in terms of Cloud conversions. Of course, that helps with the overall health of the business. But the other thing it does is it accelerates the adoption of AI, because our AI products are only available in the cloud. And so, we also saw a big uptick in the purchase and the use of AI in the second quarter. And I think that's going to start to accelerate also. And so, we'll see nice adoption and usage of our first-to-market AI products. So, both of those are positive trends in the business and bode well overall.

Thanks, Phong. Next question is again for Michael. How does management decide between raising proceeds from debt or equity issuances and whether to use the convertible debt or ATM equity issuances? And how do we think about different options?

Well, we have lots of options. We have options including cash purchases, straight debt, convertible debt, equity, or other types of operational measures that might generate income that we can use to acquire bitcoin. We're continually evaluating the capital markets and the relationship between the options market, the futures market, the bitcoin spot market, our equity market, and then developments in our business and then opportunities we have from various counterparties all go into the mix. This year we did acquire bitcoin with equity issuance, and we thought that that was extremely accretive. Then we did a debt offering and a convertible debt offering. That was extremely accretive. It turns out that the next week, the bitcoin market surge and the convertible market surge and the equity market surge, and we could do another convert offering. That was literally a decision-making process that took place over a matter of days. And so, sometimes in days we'll move when the market offers an opportunity. Then we went ahead and redeemed the 25 note that was in response to the capital markets. The next debt deal in Q2 was a response to the capital markets. We're always going to consider things like the duration of the deal. We consider the nature of the pricing of the deal. We didn't really choose to pursue equity so much in Q2 as we did in Q4 of last year or early Q1 just because the markets are shifting. And the relationship between bitcoin, the options market, the convertible debt market, the fixed income market, the equity market, those are all changing. They literally change. To say they change every quarter is a reasonable statement, but sometimes they change week-by-week and month-by-month. So, I think the great situation we're in is that we don't have to do anything quarter-by-quarter. We can afford to take a quarter off, but we can also, like in Q1, we can do an ATM deal, a convertible debt deal, a second convertible debt deal, and a cash purchase and we can use all four different things and we can do that in a hurry. So, we tend to let the capital markets drive our decision-making by keeping an open mind and being flexible. And what we wanted to do was give our shareholders a useful KPI that helps them understand how we think about a deal that's a good deal to do. We think if we can generate BTC Yield and a substantial BTC Yield, then probably we'll entertain it. If the market is offering us a proposition that looks like a de minimis yield or no yield or negative yield, obviously, we just pass on that.

Thank you, Michael. I think we have time for one last question, and this is for Andrew. How do you think about the incremental leverage capacity and interest expense capacity given the increased overall interest expense related to the operating cash flows from software business?

Thanks, Shirish, for the question. I guess I'd start by saying we actively manage and forecast our cash. And at the moment we forecast adequate cash to service our existing debt based on the overall software revenues, which continue to remain durable. And as we mentioned before, we're building stronger ARR as we transition to the cloud. We also manage our cash after taking into account a fully funded software business as well as our debt service needs. So, we take the full picture when we're thinking about incremental debt and interest expense. And I just would say we manage it extremely carefully. And keep in mind too, we also have additional sources of liquidity available to us, as Michael mentioned, via the capital markets if needed. And we continually assess various liability management opportunities across the debt stack. That kind of gives us a profile of our needs as well as our capacity. So, overall, I'd say we feel very comfortable with our ability to service the debt. And we'll continue to be active in ways that will continue to generate that BTC Yield KPI that we announced earlier today.

Great. Thanks, Andrew. So, thank you, everyone, for your questions. And this concludes the Q&A portion of the webinar. I will now hand over the call to Phong for final closing remarks.

I want to thank everyone for their time today and appreciate all of your support and I look forward to seeing everybody again next quarter. Thanks.