Earnings Call Transcript - MSTR Q2 2023

Shirish Jajodia, Vice President of Investor Relations and Treasury

Hello, everyone, and good evening. I'm Shirish Jajodia, Vice President of Investor Relations and Treasury at MicroStrategy. I'll be your moderator for MicroStrategy's 2023 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 website at microstrategy.com. I would like to now welcome you all to today's webinar and let you know that we will be taking questions during the Q&A 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 will walk you through the agenda for today's call. First, Phong Le will cover the business results for the second quarter of 2023. Second, Andrew Kang will cover the financial results for the second quarter of 2023. Then, Michael Saylor will provide a strategic review and discuss the recent bitcoin market updates. And lastly, we will open up to Q&A. With that, I'll turn the call over to Phong Le, President and CEO of MicroStrategy. Phong?

Phong Le, President and CEO

Thank you, Shirish. Hello, everyone. I'd like to welcome all of you to today's webinar, and I'll start with the highlights of our software business. Our total revenue results in the second quarter of 2023 were mixed with challenges in product license revenue, balanced by strength in our cloud business. Revenues were primarily impacted by an uncertain macroeconomic environment leading to longer and delayed sales cycles. Growth in our recurring revenue illustrates the durability of our enterprise-grade platform and continued traction in cloud. We also saw continued strong profitability as we thoughtfully manage our cost structure. Total revenue was $120.4 million, representing a decrease of 1% year-over-year or flat on a constant-currency basis. Total software license revenues, which consist of total product licenses and subscription services revenues, were $35.4 million, representing an increase of 4% year-over-year or 7% on a constant-currency basis. Total software license revenue performance benefited from increased adoption of our cloud platform, which was partially offset by a decrease in product license revenues. Total subscription services revenue was $19.9 million, an increase of 42% year-over-year or 44% on a constant-currency basis. And our Q2 subscription billings growth was 15% year-over-year. Even though difficult macroeconomic conditions continue to persist and may continue to impact our revenue in the coming quarters, MicroStrategy continues to invest in and focus on innovation, and I'm excited to tell you more about our product developments. At our MicroStrategy World User Conference held in person in May 2023, we highlighted and introduced MicroStrategy ONE, our enterprise AI/BI platform. In our keynote address, we highlighted how some of the biggest brands in the world, including organizations like Hilton Hotels, Amica Insurance, and Sony Interactive Entertainment leverage the power and unified capabilities of MicroStrategy to transform how they operate and succeed amidst fierce competition. With an eye to the future, we unveiled our vision of Intelligence Everywhere in the age of artificial intelligence and what our engineering team is building today. We also announced the development of our Lightning Rewards product, an innovative approach to monetizing interactions, which leverages the Lightning Network, the bitcoin Layer 2 payment protocol. And we've heard from industry experts across the bitcoin and Lightning Network ecosystems about the practical application of the Lightning Network for business today and tomorrow. Our new MicroStrategy ONE platform is the most important product innovation in the history of our company because it represents a fundamental shift in our industry to harness the power of business intelligence and artificial intelligence together to upgrade the way organizations do business. Said plainly, AI and BI are better together, and MicroStrategy has unique advantages for developing an AI/BI platform. Let me explain. This next-generation product suite is built to unleash new levels of efficiency and creativity. Organizations are looking to consolidate vendors to save costs, simplify deployment and maximize impact. They are looking to deploy AI-enabled applications to drive efficiency, productivity, and impact to their operations. MicroStrategy ONE offers a comprehensive solution of flexibility and scale to address all types of use cases. We're extremely proud of the work done to build MicroStrategy ONE and are excited for customers and prospects alike to experience how it changes the way they think about the future of AI and BI. MicroStrategy is well-positioned how our organizations build and deploy AI applications to users by leveraging the core capabilities of our leading BI platform. In our experience, 80% of the complexity in building AI applications and solutions is procuring, transforming, organizing, securing, and maintaining data. The challenges with scale, governance, and trust with AI are amplified by an order of magnitude compared to traditional BI, and security and access control are paramount. All these are very similar to large-scale massive analytics deployments, something we believe we do best. By leveraging an open cloud-native compostable architecture, access to structured and unstructured inputs in a semantic graph connected to advanced deep learning and large language models, we believe we have a proven framework for success. With the launch of the MicroStrategy ONE platform, we are now able to increasingly focus on MicroStrategy's hallmark, product innovation. Our innovation is focused on native cloud, artificial intelligence, and the Lightning Network. Building on the launch of MicroStrategy ONE in May, we'll be sharing details online and in-person around the globe starting in September. MicroStrategy Cloud is the foundation of MicroStrategy ONE and a key area of our research and development investments. The flexibility, scalability, and security required to embrace AI further underscore the importance we have seen in this area in the more traditional analytics space. The power of multi-cloud deployment and containerized microservices architecture, enterprise-grade security, proactive cloud management from experts, seamless migration and backups, and single-click updates and upgrades allow cloud customers to appreciate immediate benefits of our platform. The comprehensive set of tools on our platform and scalable data governance ensures customers benefit from the ability to make fast, accurate, and informed decisions, while accelerating access to the technology of the future. These needs necessitate a cloud-first, cloud-native approach that will be transformative for customers, and as such, will be an area of continued focus for us. Talking further about our AI innovation, the Q3 upgrade to our AI/BI platform planned for release this September will bring advanced AI capabilities in a new dimension. MicroStrategy AI empowering organizations to rapidly deploy, secure, govern, and trusted AI applications. We brought the same care and expertise around data definitions, multi-source data access, and governance from the traditional BI world and our approach to AI. The MicroStrategy semantic graph combined with generative AI and deep learning will enable organizations to better understand their data and their relationships, resulting in more accurate predictions, better data quality, improved model training and output, and faster actionable insights. MicroStrategy's AI innovation focuses on productivity to empower each type of user within an organization to become more intelligent. As an example, MicroStrategy data whisperer supports the business user, providing access to an AI-powered Chatbot, that surfaces answers and self-service insights that understand the why behind the data. Companies can make every consumer a data scientist by extending these experiences through MicroStrategy Insights. By asking questions via chat, users can unlock advanced algorithms that detect data patterns, outliers, anomalies, key drivers, and more. Insights uses AI models and evaluates incoming data to surface insights immediately to the user via web and email alerts. For the analysts and authors, simply ask your point, our AI assistant at your dataset of choice, and once you build a Dossier that provides a 360-degree analysis of the data in seconds. Looking forward holistically, we're developing further capabilities to extend how our line of business owners can accelerate business results across industries and departments as well as the composability of the platform to embed AI workflows and productivity into applications. As we look to expand our customer base and drive revenue growth, strategic alliances will become increasingly important. In Q2, we expanded our relationship with Microsoft, announcing a multiyear partnership that integrates the Azure OpenAI service and Microsoft 365 with MicroStrategy's advanced analytics capabilities and makes MicroStrategy available on the Azure Marketplace. OpenAI has emerged as the leader in generative AI and we're excited about the Azure service and our further marketplace offering that enhances the access, speed, and capabilities of MicroStrategy ONE for all our customers', current and future. The partnership between MicroStrategy and Microsoft will empower business users to make faster, more informed decisions and accelerate the development and deployment of new AI applications. Additionally, as discussed at the MicroStrategy World conference, we're actively working on our Google Cloud platform relationship and we expect to share further updates in Q4. Turning to our development of MicroStrategy Lightning, which utilizes the second layer of the Lightning Network sitting on top of the bitcoin network, we envision MicroStrategy Lightning as an enterprise platform designed to leverage the power of the Bitcoin Lightning Network to enable new e-commerce use cases and tackle modern cybersecurity challenges. The first use case of the MicroStrategy Lightning platform is Lightning Rewards, which is intended to allow any enterprise to reward their employees, customers, partners, and prospects for their engagement. Companies spend vast amounts of time and money in digital marketing, driving engagement with their brand and their customers, and for some, monetizing online content. We believe a platform like MicroStrategy Lightning can enable them to drive that engagement and reward their customers with that engagement directly rather than aligning with the pockets of marketing or financial intermediaries. We expect future capabilities of the Lightning platform will provide opportunities for new business models to monetize online content or minimize threats and the nuisance of bots and other malicious actors. While we envision Lightning as an independent product offering, it builds on our core strengths and deep expertise building highly available, easy-to-use enterprise software delivered in the cloud. While our focus remains on BI innovation, we believe we are uniquely positioned to bring value here. These incremental areas of product focus and innovation will drive MicroStrategy's strategy of being at the forefront of analytics. Turning to our Bitcoin strategy, we continue increasing our Bitcoin holdings in the second quarter. In Q2, we acquired 12,333 bitcoins, the most in a single quarter since the second quarter of 2021. After the end of Q2, we purchased an additional 467 bitcoins using cash from our operations. As of July 31, 2023, the company held 152,800 bitcoins acquired for a total cost of $4.53 billion or $29,672 per bitcoin. As you know, our strategy is to acquire and hold bitcoin and we plan to continue to accumulate bitcoin over time using excess cash and the net proceeds of capital markets transactions. Our core business is not impacted by near-term bitcoin price fluctuations. MicroStrategy is the largest publicly traded corporate holder of bitcoin in the world and we remain committed to our bitcoin acquisition strategy with a high degree of conviction, long-term focus, and a risk-managed approach. Finally, before I hand it over to Andrew, I'd like to take a moment to discuss personnel changes this quarter. Our Chief Revenue Officer, Kevin Adkisson announced his resignation earlier in July. It's been my privilege to work with Kevin for nearly seven years and we wish him luck with his future endeavors. With Kevin's departure, I've assumed his responsibilities of head of the sales organization and sales function. I enjoy working directly with our field leaders and team as well as meeting with customers, and this will give me an opportunity to spend more time in this area. Additionally, we're excited to welcome back Saurabh Abhyankar, back to MicroStrategy as our Chief Product Officer. Saurabh brings more than 20 years of industry experience to the role and has previously served at MicroStrategy as the Senior Vice President of Product Management and also Executive Vice President of Marketing. Thus, we continue to opportunistically hire top talent worldwide. In addition, we started to return to the office to enable our employees to make the best of the convenience offered by the hybrid work model while also benefiting from in-person interactions. I'll now turn the call over to Andrew to discuss our financials for the quarter in further detail.

Andrew Kang, Chief Financial Officer

Thank you, Phong. I'll start by recapping some of the key GAAP financial results for the quarter. GAAP total revenues for Q2 were $120.4 million, down $1.7 million or 1% year-over-year and flat year-over-year at constant currency. Total software license revenues, which consist of product license revenues and subscription services revenues were $35.4 million, up 4% year-over-year and up 7% at constant currency. Subscription service revenues which reflect recurring revenues from our cloud business were $19.9 million, an increase of 42% year-over-year or an increase of 44% at constant currency. Product license revenues were $15.5 million for the quarter, down 23% year-over-year or down 20% at constant currency. While we saw some ongoing headwinds from the overall challenging macroenvironment this past quarter, our results continue to reflect the expected decline in product license revenues as we transition our BI business to the cloud. We expect the mix of this revenue will continue to shift from product license to subscription services as we transition the platform over time. Product support revenues were $66.1 million, down 1% year-over-year and down 1% in constant currency. Customer renewal rates were 93% for the quarter and remained above 90% for the sixth consecutive quarter continuing to demonstrate the durability of our customer base even with a tough macroeconomic backdrop. Lastly, other services revenues were $18.9 million or a 12% decrease year-over-year or 11% at constant currency, primarily due to lower consulting revenues. While we have seen higher average bill rates worldwide, we did experience lower customer demand for consulting services in the quarter. However, we do expect consulting engagements to normalize in the second half of the year. On Slide 16, total current software license billings were $39.1 million in the second quarter, a slight decrease of 2% year-over-year. Current subscription billings were $23.1 million, an increase of 15% year-over-year, our 13th straight quarter of double-digit growth. We continue to focus our efforts on transitioning customers to our cloud solution and selling new cloud deployments to new and existing customers. In Q2, we enhanced our go-to-market capabilities through a partnership with Microsoft, which makes MicroStrategy available on the Azure Marketplace. This partnership allows existing customers to transition to our cloud solution on Azure and provides us with the opportunity to sell into new net accounts, which we believe have the potential to drive significant incremental subscription revenue in the future. We intend to continue to enhance our go-to-market capabilities through hyper-scaler partnerships in the coming year. In 2022, approximately two-thirds of our total revenue was recurring and we continue to focus and improve in this area as 70% of total revenue from the first half of 2023 was recurring in nature. The ongoing transition to a subscription model will help establish high-quality annual recurring revenues in the future. Shifting to costs on Slide 17. Total non-GAAP expenses were $132 million in the second quarter compared to approximately $1 billion in the second quarter of 2022. The most notable difference overall year-over-year was the much lower bitcoin impairment charge this past quarter of $24 million in contrast to $918 million in Q2 of last year. Non-GAAP cost of revenues was $26 million in the second quarter, an increase of $1.9 million or 8% year-over-year. However, as a percentage of total revenues, non-GAAP cost of revenues were up approximately 2% year-over-year, primarily due to increasing cloud hosting costs consistent with prior quarters and in conjunction to the year-over-year increase in our cloud subscription services revenue. Non-GAAP sales and marketing expenses increased $1 million or 3% year-over-year to $33 million. As a percentage of total revenues, non-GAAP sales and marketing costs were higher by 1% year-over-year. Sales and marketing costs continued to normalize compared to the last few years due to higher demand for in-person customer meetings and events, such as our successful MicroStrategy World event in Q2. Non-GAAP research and development expenses were $27 million, a decrease of $1.5 million or 5% year-over-year, which reflects continuing cost efficiencies from our global tech delivery centers. Non-GAAP G&A costs were $21 million, a decrease of $1 million or 4% year-over-year or a slight decrease of 1% as a percentage of revenue. Our cost focus is on growing our cloud business, prioritizing revenue-generating and customer-facing activities and optimizing tech R&D globally while prioritizing strategic innovation in our platform and we remain disciplined in overall cost controls, including closely managing our headcount and salary costs to minimize our controllable expenses. Turning to Slide 18, we reported a total non-GAAP operating loss in the second quarter of 2023 of $11 million, of which, the loss on the digital asset impairment charge, as mentioned a moment ago, was $24 million for the quarter. The digital asset impairment charge continues to be the primary driver impacting the comparison of our operating results year-over-year, and it's worth noting that in the first two quarters of 2023, the bitcoin impairment charges have been some of the lowest charges since launching our strategy in Q3 of 2020, which we believe reflects the continuing maturity of the overall bitcoin asset class. Part of the volatility in our reported earnings has been due to current GAAP accounting as you know, which treats our bitcoin holdings as indefinite intangible assets, which in turn results in recognizing impairments each quarter if there is any decrease in the fair value below our carrying value at any point during the quarter. At the end of 2022, the FASB unanimously voted to recommend a change to the adoption of fair value accounting for measuring certain digital assets including bitcoin. If finalized and we are able to recognize both decreases and increases in the fair value of bitcoin, we believe our reported earnings will be far more transparent to investors and far more relevant in reflecting changes in market prices. This past May, MicroStrategy submitted our response letter to the FASB on the proposed change, so we noted there was an overwhelming response from interested parties, which included support from sophisticated institutional asset managers, large accounting and audit firms, crypto exchanges, and banks. As the largest publicly traded corporate holder of bitcoin in the world, MicroStrategy remains fully supportive of the proposed rules and the improved investor transparency we hope it brings. On Slide 19, as of June 30, 2023, the carrying value of our Bitcoin holdings was approximately $2.3 billion compared to approximately $4.6 billion in market value based on the bitcoin price at the end of Q2. The $2.3 billion difference between the carrying value and the fair market value of our total bitcoin would be recognized under a fair value model. And as of market close on Friday, July 28th, the market value of our 152,800 bitcoins was approximately $4.5 billion. Now turning to Slide 20. In Q2, we continued to execute on our at-the-market or ATM equity offering and raised $335 million in gross proceeds through the sale of Class-A common stock. We issued an aggregate of approximately $1.1 million shares at an average gross price per share of approximately $310. We have since terminated the prior $625 million ATM, of which approximately $290 million of the capacity remained. And today, we announced a new $750 million at-the-market program, establishing a net incremental issuance capacity of $460 million. As with prior programs, we may use the proceeds for general corporate purposes, which include the purchase of bitcoin as well as the repurchase or repayment of our outstanding debt. MicroStrategy stock outperformed bitcoin in Q2 reflecting a high demand for institutional bitcoin exposure, especially following the additional positive momentum from increasing institutional interest and potentially new bitcoin ATS and exchanges. The incremental ATM capacity will allow us to benefit from this increased demand and will allow us to opportunistically raise capital based on market conditions. Our outstanding debt and convertible notes remain unchanged at a total of $2.2 billion with a bundled weighted average interest rate of approximately 1.6%. This is compared to the blended weighted average interest rate of 2.1% at the end of 2022, which equates to a decrease of over $15 million in annualized interest expense, strengthening our overall liquidity position. And at the end of the second quarter, we held $66 million in cash on our balance sheet which is more than enough overall liquidity to manage our ongoing working capital needs and the debt service obligations. Since the third quarter of 2021, we have raised a total of $1.7 billion in gross proceeds through our ATM programs with the average price of all issuances of approximately $424 per share. The primary use of prior ATM proceeds has been to acquire additional bitcoin, increasing bitcoin per share for our shareholders. In Q1 2023, we also used ATM proceeds to deleverage our balance sheet by repaying our bitcoin-backed secured term loan at an attractive discount. On Slide 22, in Q2, we increased our net Bitcoin position by 12,333 bitcoin using net proceeds from ATM issuances as well as excess cash from operations. Subsequent to the end of the quarter, we acquired an additional 467 bitcoins or $14.4 million, again using excess cash from our operations. And as of July 31st, we now hold a total of 152,800 bitcoins on our balance sheet, of which 15,731 bitcoins are held at MicroStrategy, the parent, and are pledged as collateral securing our 2028 secured notes. The remaining 137,069 Bitcoins are held at the macro strategy subsidiary, all of which are fully unpledged and unencumbered, representing 90% of our total bitcoin holdings or $4 billion in current market value. Despite the recent macro headwinds, we continue to remain optimistic for the remainder of the year. We anticipate total revenue this year to be similar to last year. We will continue to focus on innovation in cloud and artificial intelligence as we innovate our products and increase demand from our customers. We expect to grow cloud subscription revenue and strengthen recurring revenue continuing to transform our platform to the cloud. We will remain disciplined and continue to manage costs and headcount effectively and we will continue to execute on our dual strategy of growing our BI software business and acquiring and holding bitcoin. With that, thank you for your time today and for your continued support of MicroStrategy. I'll now turn the call over to Michael for his remarks.

Michael Saylor, Executive Chairman

Thank you, Andrew. I want to take this opportunity to discuss our corporate strategy regarding bitcoin and outline our future plans. First, let's review the outcomes of our strategy since August 10, 2020. We are just days away from the three-year mark of initiating our bitcoin strategy, which was a pivotal moment, especially during the uncertain times post-COVID. Back in 2020, as we grappled with the effects of monetary inflation, we considered how to preserve wealth. Interest rates were at 0%, and asset values were fluctuating. Since then, the S&P 500 has increased by 37%, averaging about 12% annually over these three years. While the Nasdaq has lagged behind, 37% sets a benchmark for preserving wealth; falling short means losing shareholder value, while exceeding it implies wealth creation. In contrast, bitcoin has significantly outperformed, with a return of 145% during this period, making it the top asset class, outpacing every major tech and enterprise software stock. Bitcoin is often likened to digital gold, possessing all the advantages of gold without its downsides, and functions as a robust tech network with similar benefits to major tech firms but without the same liabilities. Over these three years, gold has actually declined by 3%. If we consider monetary expansion during this timeframe, it is evident that while the S&P captured some benefits, gold did not. As a result, we faced a choice: convert $250 million of our cash into gold or bitcoin. Had we chosen gold, we would currently hold less than $250 million in our treasury, severely limiting our capacity to raise further capital and garner investor support. This stark contrast reinforces that bitcoin is the superior investment choice. Silver has also underperformed gold due to its lower scarcity, while bonds have been the worst-performing asset class due to rising interest rates. The narratives from key assets and indexes clearly demonstrate bitcoin as a winning strategy, in contrast to the S&P, which maintains the status quo. Investing in major tech stocks like Google, Apple, and Microsoft outshined the S&P, as they remain powerful global players. However, even within the tech space, not all companies deliver consistent returns, as shown by the performance of Meta, Netflix, and Amazon. Comparing ourselves to enterprise software stocks, we are proud to have outperformed all sectors over the past three years, including bitcoin itself. Our strategy involves intelligent active management of our balance sheet by utilizing strategic leverage. This bitcoin strategy has proven effective, as nothing else could have worked better for us. On a risk-adjusted basis, it seems bitcoin is the least risky route to surpass the S&P. MicroStrategy's distinct attributes have allowed us to excel. One common query is why invest in MicroStrategy rather than just buying bitcoin directly. Consider an analogy involving home investment: a prime location versus a less desirable one at a discount. Most would opt for the easier, safer purchase that provides financing and quick access. Similarly, investing in MicroStrategy offers a more straightforward, compliant pathway to bitcoin. MicroStrategy provides downside protection with a non-Bitcoin business. This means our software revenues and cash flows, which are not tied to bitcoin, add stability for investors. We utilize intelligent leverage, with our $2.2 billion in leverage against $4.6 billion in bitcoin assets, significantly lowering our interest rates compared to prevailing market rates. We maintain flexibility in our borrowing, avoiding potential margin calls with our debt strategy, which offers a unique advantage for our investors. We also actively generate yield through our operational model, which allows us to reinvest cash flows into bitcoin. Our risk management options further enhance our position compared to those who directly hold bitcoin. When comparing to bitcoin ETFs, while they are available, they lack operational businesses, unable to utilize leverage or generate yield effectively. We are aware that futures ETFs have underperformed bitcoin significantly, a concern for institutional investors seeking reliability. The outlook for bitcoin has never been brighter, with institutions increasingly recognizing its global demand. Approvals for spot ETFs could enhance the landscape, although they may not match the leverage or yield advantages we provide. As we navigate these developments, MicroStrategy remains committed to responsibly managing our resources to enhance bitcoin acquisition for our investors. Thank you for your continued support. I'll now turn the floor over to Michael for further remarks.

Shirish Jajodia, Vice President of Investor Relations and Treasury

Great. Thank you, Michael. We're going to jump right into questions and the first question is for Michael. How would a spot ETF impact your strategy of serving as a vehicle to gain exposure to bitcoin? And how would an approval or rejection of a spot ETF impact MicroStrategy?

Michael Saylor, Executive Chairman

I believe the key milestones for the institutional adoption of bitcoin in the coming year will include fair value accounting, the spot ETF, the halving, and any specific regulatory changes from Washington DC. We are anticipating all of these developments. The approval of the spot ETF is not essential for our continued success. Generally speaking, there is a group of investors, such as sovereign wealth funds, who may wish to purchase significant amounts of bitcoin, perhaps $1 billion in a week or more. For them to make such large purchases, they will need the spot ETFs because MicroStrategy cannot accommodate that volume in our capital structure. I think the introduction of spot ETFs will significantly expand the entire asset class and offer a smoother path for retail, institutional, and sovereign wealth investors to adopt bitcoin. It addresses concerns raised by industry leaders, such as Larry Fink on CNBC, who noted that it could reduce acquisition fees dramatically. It also alleviates the question of whether investors must open new accounts with crypto exchanges or can simply use their current banking or investment relationships. This will enhance access for a wide range of investors. It will democratize access and enable larger investments that the market currently cannot support, as the futures ETFs and futures market are not effective enough for substantial exposure without incurring very high fees, which rational investors would avoid over time. I do believe we will have spot ETFs at some point, but I cannot specify when they will be available. When they do become available, MicroStrategy will maintain its unique bitcoin operating strategy, while spot ETFs will cater to a different audience, working in synergy to grow the entire asset class.

Andrew Kang, Chief Financial Officer

Thanks, Mike. So we might be having some technical difficulties from Shirish. So I'll maybe ask the next question for Phong. Phong, how should we be thinking about the AI partnership with Microsoft and its monetization? Are you expecting any kind of incremental boost from that in 2023 or is it more of a 2024 growth driver?

Phong Le, President and CEO

Thanks, Andrew. First, I'm pretty excited about our AI capabilities that we're bringing to market in Q3, so in September. And part of the capabilities will include a new product or a new SKU, if you will, that will sell separately from our existing BI platform and sort of on top of that. So I do anticipate some incremental revenue, whether it comes in Q4, whether it comes in 2024, I think time will tell as to how quickly the market is willing to adopt and pay for AI capabilities. I do think there's a couple of things that we're doing that's pretty unique from the rest of the BI market, if you will. One is, we're directly embedding OpenAI into the MicroStrategy Platform, which means you do not need to go and have a separate Microsoft agreement or separate OpenAI agreement, it will be fully embedded in the MicroStrategy Platform. And second, as you mentioned, we're going to partner directly with Microsoft, which there are a lot of companies who are trying to build their own AI capabilities or use a different platform that's inferior at this point in time to OpenAI. So I think what we're going to rollout is quite differentiated. And I'm excited about the revenue opportunity that will bring.

Shirish Jajodia, Vice President of Investor Relations and Treasury

Thanks, Phong. Next question is for Andrew. We are projecting the company to improve its cash position in 2023 and beyond. Bearing in mind the company's strategy to purchase bitcoins with excess cash above working capital needs, is there a minimum cash balance that the company targets and what is a reasonable number to anchor to?

Andrew Kang, Chief Financial Officer

I'd say just to comment on kind of our treasury reserve policy or how we think about cash. Our goal is to always be as efficient as possible with our cash and then really minimize any excess cash in the business. Since we operate globally we ensure we maintain adequate cash in each region and country we operate in and we manage cash in the U.S., primarily to take into account, meaning, working capital needs, as well as our debt interest payments needs as well. I'd say, probably anywhere between $40 million based on the calendar to maybe as high as $50 million probably is a little bit high, but I think about those ranges being kind of where we think working capital needs are. That being said, sometimes you will see cash balances that are slightly higher as we build towards working capital needs and sometimes you will see them lower when we're operating efficiently as possible. So, hopefully that answers the question.

Shirish Jajodia, Vice President of Investor Relations and Treasury

Thanks, everyone for your questions. We received a lot of good questions. But this concludes the Q&A portion of the webinar and I will now turn the call over to Phong for final closing remarks.

Phong Le, President and CEO

Thanks, Shirish. I want to thank everyone for being with us today and we appreciate your support. We're as enthusiastic as ever with both of our strategies, our enterprise software strategy and our bitcoin strategy and we wish everyone a good quarter and good rest of your summer and look forward to seeing you again in 12 weeks. Thank you.