Strategy Inc · NASDAQ:MSTR
Strategy — MicroStrategy — Investor Day (December 2021)
45 slides from Strategy's investor day presentation, Dec 16, 2021
Slide 1: Investor Day
INVESTOR DAY December 16, 2021 Copyright © 2021 MicroStrategy Incorporated. All Rights Reserved.
Slide 2: Safe Harbor Statement
MICROSTRATEGY INVESTOR DAY 2021 SAFE HARBOR STATEMENT FORWARD-LOOKING STATEMENTS 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
Slide 3: Agenda and Presenters
AGENDA AND PRESENTERS INTRODUCTION Jeremy Price Jeremy Price Senior Vice President, FP&A COMPANY VISION Michael J. Saylor BITCOIN STRATEGY Michael J. Saylor Michael Saylor Chairman and Chief Executive Officer SOFTWARE STRATEGY Phong Le FINANCIALS Phong Le Phong Le President and Chief Financial Offic
Slide 4: Company Vision
COMPANY VISION Copyright © 2021 MicroStrategy Incorporated. All Rights Reserved. 4
Slide 5: MicroStrategy Has a Rich History of Innovation
MICROSTRATEGY HAS A RICH HISTORY OF INNOVATION 1993 1999 2003 2008 2014 2019 2020 Industry’s first World’s first First to release a BI reporting and MicroStrategy Introduced Bitcoin relational OLAP web-based Business fully integrated dashboard available available on cloud HyperIntelligence® strategy
Slide 6: MicroStrategy At-a-Glance
MICROSTRATEGY AT-A-GLANCE BUSINESS ANALYTICS BITCOIN Who are we: MicroStrategy is the largest independent Who are we: MicroStrategy is the largest publicly traded publicly-traded business intelligence company with the corporate holder of bitcoin in the world and the first public leading enterprise a
Slide 7: Bitcoin + BI Synergy
BITCOIN + BI SYNERGY UNIQUE ADVANTAGE OF A VIRTUOUS “BITCOIN + BI” FLYWHEEL Market Attention Pipeline & Sales Growth $1,200 $1,000 $800 $600.84 Dec 10, 2021 Bitcoin/BI $600 Brand Value $400 $118.29 $200 Jun 30, 2020 Increased Operating $0 Revenue Investment in Bitcoin and Superior Technology Intelli
Slide 8: Experienced and Visionary Management Team
EXPERIENCED AND VISIONARY MANAGEMENT TEAM AVERAGE TENURE OF MORE THAN 13 YEARS Michael J. Saylor Phong Le Timothy Lang Hugh Owen W. Ming Shao Chairman and CEO President and CFO SEVP and CTO EVP, Chief Marketing Officer SEVP and General Counsel 31+ years at MicroStrategy 6+ years at MicroStrategy 7+
Slide 9: Bitcoin Strategy
BITCOIN STRATEGY “Macro” Strategy Copyright © 2021 MicroStrategy Incorporated. All Rights Reserved. 9
Slide 10: Significant Shareholder Value Creation
SIGNIFICANT SHAREHOLDER VALUE CREATION SINCE THE ADOPTION OF BITCOIN ACQUISITION STRATEGY Q1 21: Issued $1.05B in $1,400 convertible debt Q4 21(1): Issued ~$501M in stock under the ATM $1,200 Q2 21: Issued $500M in senior secured notes, established an Q3 21: Issued ~$404M in Open Market Sales stock
Slide 11: Simplified Corporate Structure Chart
SIMPLIFIED CORPORATE STRUCTURE CHART Number of Bitcoins ~13,449 $500M 6.125% Senior Secured Notes due 2028, MicroStrategy $650M 0.750% Senior Convertible Notes due 2025, Average Purchase Price $37,865 $1,050M 0.000% Senior Convertible Notes due 2027 Incorporated(1) Cost Basis $509M Number of Bitcoin
Slide 12: Bitcoin Holdings Evolution
BITCOIN HOLDINGS EVOLUTION Approximate Number of Bitcoins Held at End of Quarter Bitcoin Price ($) $80,000 122,478 120,000 114,042 $70,000 105,085 $60,000 100,000 $58,601 91,326 $48,300 $50,000 $43,535 80,000 $40,000 $34,763 70,469 109,029 $29,181 100,593 $30,000 60,000 92,079 $29,861 $27,713 $20,00
Slide 13: Balance Sheet and Future Capital Allocation
BALANCE SHEET AND FUTURE CAPITAL ALLOCATION • We are creating a family of bitcoin-backed instruments using the entire spectrum across the capital structure • We will continue to leverage our balance sheet as an asset to purchase more bitcoins Amount at Entity Holding the Instrument Issued Maturity T
Slide 14: MicroStrategy Advantage
MICROSTRATEGY ADVANTAGE UNIQUE VALUE PROPOSITION VERSUS OTHER BITCOIN INVESTMENT VEHICLES “Regulation for “Non-bitcoin “Borrow “Healthy operating “Generate yield” institutions” business value” competitively” business” Sweep Excess Ease to Get Downside Use of Leverage Operating Cash Manage Bitcoin Ov
Slide 15: We Believe It's Still Early
WE BELIEVE IT’S STILL EARLY BITCOIN IS A VERY TINY FRACTION OF WORLD’S ASSETS $350 $325+ $300 $300 Market Value (USD Trillions) $250 $200 $150 $120+ $100 $50 $40 $4 $11 $0.9 $1.2 $2 $0 Bitcoin Silver Digital US Corporate Gold S&P 500 Market Global Equities Global Debt Global Real Mined Assets Cash M
Slide 16: Long-Term View
LONG-TERM VIEW INCREASED INSTITUTIONAL AND MAINSTREAM ADOPTION TO DRIVE PRICE APPRECIATION “Citibank Analyst says bitcoin could pass $300k” Warren Buffet – November 2020 “Cryptocurrencies basically have no value, and they don't produce anything. In terms of value: zero.” “JP Morgan revises bitcoin t
Slide 17: Digital Assets Macro Landscape
DIGITAL ASSETS MACRO LANDSCAPE KEY DEVELOPMENTS Regulatory Geo-Political ESG Intelligence Everywhere 17
Slide 18: Software Strategy
SOFTWARE STRATEGY “Micro” Strategy Copyright © 2021 MicroStrategy Incorporated. All Rights Reserved. 18
Slide 19: Analytics Platform Is Positioned to Grow in 2022
ANALYTICS PLATFORM IS POSITIONED TO GROW IN 2022 AN INDUSTRY LEADER IN WELL-POSITIONED FOR MULTI BILLION- ENTERPRISE ANALYTICS DOLLAR MARKET OPPORTUNITY • MicroStrategy is the world's largest, independent business • MicroStrategy is targeting a multi billion-dollar market intelligence platform oppor
Slide 20: Demand for Enterprise Analytics Is Accelerating
DEMAND FOR ENTERPRISE ANALYTICS IS ACCELERATING 1a AND LEGACY VENDORS ARE LOSING GROUND Overall BI Market Revenue Forecast ($ Billions) • Overall BI market revenue is expected to grow at 11% CAGR $30 through 2025 • Departmental analytics is crowded and commoditized $25 $24.7 $21.9 • Enterprise analy
Slide 21: Modern Analytics with Advanced Self-Service Capabilities
MICROSTRATEGY UNIQUELY COMBINES MODERN ANALYTICS 1b EXPERIENCES WITH ADVANCED SELF-SERVICE CAPABILITIES Modern Analytics. Rapid development and distribution of pervasive, impactful dashboards, Modern Analytics infographics, and interactive analytics applications. Pervasive Intelligence. Only vendor
Slide 22: Significant Growth in Enterprise BI Through Net New Logos
SIGNIFICANT GROWTH IN ENTERPRISE BI THROUGH 1c NET NEW LOGOS AND LICENSE EXPANSION MULTINATIONAL MEDIA TOP-TIER LIFE INSURANCE GLOBAL COMMERCIAL AND ENTERTAINMENT AND FINANCIAL SERVICES PROPERY & PERSONAL STREAMING SERVICE ORGANIZATION INSURANCE FIRM Experiencing rapid growth, this organization Expa
Slide 23: OEM Market Attributable to BI & Analytics Is Growing
OEM MARKET ATTRIBUTABLE TO BI & ANALYTICS IS GROWING 2a LOW-CODE NO-CODE IS FAVORING BUY VS. BUILD DECISIONS 2025E: $375 Billion • Enterprises are increasingly expecting analytics as a core attribute of any 3rd-party software solution 2020A: $215 Billion • A growing number of enterprise software ven
Slide 24: Analytics Platform Enables Rapid Customization and Extension
MICROSTRATEGY’S ANALYTICS PLATFORM ENABLES RAPID 2b CUSTOMIZATION, EXTENSION, AND INJECTION OF ANALYTICS Open Architecture. "API-first" architecture, with a comprehensive SDK suite that covers 85%+ of core application capability. Democratized Development. Low-code / no-code options for white labelin
Slide 25: Footprint Expansion in OEM Solutions
FOOTPRINT EXPANSION IN OEM SOLUTIONS WITH NET NEW 2c LOGOS AND GROWTH ACROSS A VARIETY OF INDUSTRIES INTERNATIONAL PROVIDER GLOBAL AUTOMOTIVE LEADING GLOBAL CLOUD OF HUMAN RESOURCES INDUSTRY & SERVICES CUSTOMER EXPERIENCE & SERVICES & SOLUTIONS SOLUTIONS PROVIDER MANAGEMENT SOLUTION This leading pro
Slide 26: Cloud Adoption Continues to Accelerate
CLOUD ADOPTION CONTINUES TO ACCELERATE 3a CLOUD ANALYTICS ADOPTION CLOUD APPLICATION SOFTWARE Public Cloud ($ Billion) $10 $8 $6 2025E: 2020A: $356 Billion $4 $171 Billion $2 $0 2019A 2020A 2021E 2022E 2023E 2024E • Cloud analytics enable organizations to empower the workforce, • Cloud applications
Slide 27: MicroStrategy Cloud Delivers Military-Grade Security
MICROSTRATEGY CLOUD DELIVERS MILITARY-GRADE SECURITY 3b ON A MODERN MICROSERVICES-BASED ARCHITECTURE Agnostic Enterprise Cloud Analytics. Full platform parity and optimization for multiple market-leading cloud platforms (AWS, Azure). Optimized reference Elite Data Protection & architecture (microser
Slide 28: Significant Growth in Enterprise BI Through Net New Logos
SIGNIFICANT GROWTH IN ENTERPRISE BI THROUGH 3c NET NEW LOGOS AND LICENSE EXPANSION PREMIER MULTINATIONAL LEADING RETAIL INTERNATIONAL ONLINE BIOPHARMAEUTICAL GROCER AND E-TAILER TRAVEL AGENCY & ORGANIZATION IN THE UNITED KINGDOM RESERVATION SERVICE Standardized its commercial business on Invested in
Slide 29: Financials
FINANCIALS Copyright © 2021 MicroStrategy Incorporated. All Rights Reserved. 29
Slide 30: MicroStrategy Is Well-Positioned for Growth
MICROSTRATEGY IS WELL-POSITIONED FOR GROWTH • Generating consistent product revenue growth World Class Software • $500+ million revenue with 60%+ recurring revenue base that is growing(1) Product with Healthy Financial Profile • Efficient and scalable business model with a focus on improving gross m
Slide 31: Revenue Profile Is Attractive
REVENUE PROFILE IS ATTRACTIVE 63%+ RECURRING REVENUE AND 80%+ TOTAL GROSS MARGIN Revenue By Type ($M) Gross Margin By Revenue Type (%) $504 $498 $508 98% 97% 98% $486 $481 94% 94% 93% 92% $93 $88 $87 $99 90% $87 93% 92% $89 $84 $77 $76 $85 83% $30 81% 80% 81% $32 $29 $33 $40 79% 62% 58% $289 $296 $2
Slide 32: Diverse, Loyal Blue-Chip Customer Base
WE HAVE A DIVERSE, LOYAL BLUE-CHIP CUSTOMER BASE Summary Metrics Recurring Revenue Distribution by Industry(1) Other Apparel 27 41% Technology 15% 4% 5% Banking Countries of Operation % of recurring revenue 20% from international 23 yrs $3M+ Retail 15% Communications/Media Average lifetime of top Av
Slide 33: Transition to Cloud Is Well Underway
TRANSITION TO CLOUD IS WELL UNDERWAY SUBSCIPTION BILLINGS IS A KEY PERFORMANCE INDICATOR Current Subscription Billings ($M) improving 35% year-over-year (2) (1) $15.9 New Billings Customer Migrations Resulting Customer Renewals $13.3 in Uplift of 50-60%+ $11.0 • Driven by new customer and • Existing
Slide 34: Cloud Conversion and Growth Financials
TRANSITION TO CLOUD IS WELL UNDERWAY CLOUD CONVERSION AND GROWTH FINANCIALS Cloud Growth Illustrative Financials ($M) Cloud Conversion Illustrative Financials ($M) $2.4 Revenue Incremental Margin $1.8 $1.8 $0.3 $1.6 $0.2 $0.3 $1.4 $0.2 $0.2 $1.2 $1.2 $0.2 $0.2 $0.6 $1.0 $1.0 $0.9 $1.0 Year 1 Year 2
Slide 35: Cost Structure
COST STRUCTURE UNDERGONE SIGNIFICANT OPTIMIZATION AND WILL CONTINUE TO IMPROVE FURTHER Non-GAAP Operating Expenses By Type ($M) $380 $378 $79 $81 Implemented optimization $322 $322 Recent and future initiatives G&A $74 $74 G&A Cost reduction in IT, Finance, HR, Further cost reduction in IT, Finance,
Slide 36: Redirecting Savings from Sales Productivity into R&D Spend
REDIRECTING SAVINGS FROM IMPROVED SALES PRODUCTIVITY INTO R&D SPEND Productivity ($000’s) (1) R&D Spend ($M) Increased investments in cloud, security, and OEM $293.8 $111.2 $109.4 +31% $103.6 $102.5 $223.9 $185.1 $170.5 $78.8 FY 18A FY 19A FY 20A FY 21 TTM FY 17A FY 18A FY 19A FY 20A FY 21 TTM (1) P
Slide 37: Cash Flow
CASH FLOW PROVEN HISTORY OF FREE CASH FLOW GENERATION 35% Free Cash Flow (Non-GAAP; $M) 28% 30% Free Cash Flow % FCF margin 25% 21% 22% 20% 15% 15% $146 10% $108 $112 10% 6% $74 5% 1% $50 $4 $29 0% FY 15A FY 16A FY 17A FY 18A FY 19A FY 20A FY 21 TTM Prioritize Invest for Prioritize both profitabilit
Slide 38: Long-Term Outlook
LONG-TERM OUTLOOK STRONGER COMPETITIVE ADVANTAGES TO DRIVE PREMIUM VALUATIONS Industry Median Margin Line Relatively stronger MSTR Long-Term Trajectory competitive advantages Revenue growth >10% Fast growth companies Outperformers with further improvement in Superior growth Superior growth profitabi
Slide 39: Valuation: SOTP Analysis Framework
VALUATION SOTP ANALYSIS FRAMEWORK Item Label Commentary 2022E Revenue ($M) A Based on consensus Software 2022 EV/Sales Multiple (x) B Improving the quality of revenue and margins to drive multiple expansion Software Enterprise Value ($M) C = A*B Number of Bitcoins Held (#) D Current number of bitco
Slide 40: Valuation: SOTP Analysis Indicative Ranges
VALUATION SOTP ANALYSIS INDICATIVE RANGES Item Label Commentary 2022E Revenue ($M) A About $530M - $540M based on research analyst estimates Software 2022 EV/Sales Multiple (x) B 4x - 10x based on the range of multiples for comparable companies Software Enterprise Value ($M) C = A*B Number of Bitco
Slide 41: MSTR Hypothetical Stock Price Sensitivity Exercise
VALUATION MSTR HYPOTHETICAL STOCK PRICE SENSITIVITY EXERCISE Note: Mathematical Outputs Below Based Solely on SOTP Analysis and Underlying Assumptions Outlined on Slides 39, 40 and the Footnotes of this Slide 41. Not a Projection or Prediction of Future Operating Results or Anticipated Stock Price P
Slide 42: MicroStrategy's Innovative Value Proposition
MICROSTRATEGY’S INNOVATIVE VALUE PROPOSITION SUMMARY Value-Creating World Class Treasury Policy Software Product Attractive Growth with Levered with Healthy Outlook Long Approach Financial Profile to Bitcoin Intelligence Everywhere 42
Slide 43: Appendix
APPENDIX Copyright © 2021 MicroStrategy Incorporated. All Rights Reserved. 43
Slide 44: Non-GAAP Reconciliations ($M)
NON-GAAP RECONCILIATIONS ($M) Reconciliation of GAAP to Non-GAAP Income (loss) from Operations FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 TTM Revenue $504 $498 $486 $481 $508 Cost of Revenues $97 $99 $100 $91 $89 Operating Expenses $334 $394 $387 $403 $1,066 Income (Loss) from Operations $73 $4 -$1 -$1
Slide 45: Non-GAAP Reconciliations ($M)
NON-GAAP RECONCILIATIONS ($M) Reconciliation of Subscription Services Revenues to Current Subscription Billings Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Current Deferred Subscription Services Revenue $12.8 $16.6 $16.6 $17.9 $16.2 (1) $23.3 (1) $23.0 (1) $25.9 $23.1 Subscription Services