Earnings Call Transcript - MSTR Q2 2025

Shirish Jajodia, Corporate Treasurer and Head of Investor Relations

Hello, everyone, and good evening. I am Shirish Jajodia, Corporate Treasurer and Head of Investor Relations at Strategy. I will be your moderator for Strategy's 2025 Second Quarter Earnings Webinar. Today marks a historic day for Strategy and all our investors. We believe this deserves an exciting brand-new format for our earnings call in line with our mission to digitally transform Investor Relations and be the most transparent company in the world. We will start the call with a presentation of approximately 60 minutes. This time, we have shuffled the order of the presenters. Andrew Kang will begin first, followed by Michael Saylor and then Phong Le. This will be followed by a 30-minute interactive Q&A session with our four Wall Street equity analysts and four Bitcoin analysts. Before we proceed, I will read the safe harbor statement. Some of the information we provide in this presentation regarding our future expectations, plans, guidance and prospects may constitute forward-looking statements, including, without limitation, our guidance with respect to 2025 operating income, net income, earnings per share, BTC Yield and BTC $ Gain, and the hypothetical valuation models contained in this presentation. Actual results may differ materially from these forward-looking statements due to various important factors, including the risk factors discussed in our most recent quarterly report on Form 10-Q filed with the SEC on May 5, 2025, and our current report on Form 8-K filed with the SEC on July 7, 2025. And in the case of our guidance with respect to 2025 operating income, net income, earnings per share, BTC Yield and BTC $ Gain, and the hypothetical valuation models contained in this presentation, each of which is based on assumed Bitcoin price at the end of the year, the risk that the price of Bitcoin as of such date may be substantially different than assumed target price. This could cause our actual results to vary substantially from such guidance and the hypothetical values generated by such models. So we assume no obligation to update these forward-looking statements, which speak only as of today. Also in this presentation, we refer to certain non-GAAP financial measures. Reconciliations are available in our earnings release and the appendix of this presentation, which was issued today and available on our website. With that, I will turn the call over to Andrew Kang, CFO of Strategy.

Andrew Kang, CFO

Thank you, Shirish. And I'd like to welcome everyone to today's webinar, and thank you for joining what I think will be one of the most important quarterly earnings calls in the history of our company. I'll start with some key highlights from Q2 and year-to-date. Through July 29, our Bitcoin holdings were 628,791, which now accounts for 3% of all Bitcoin ever to be in existence and positions us as the most dominant player in the Bitcoin Treasury Company space. Our market cap has eclipsed over $112 billion, making Strategy the 96th largest public company in the U.S. And as part of our expanding and innovative capital markets plan this year, so far, we've launched four listed preferred equity offerings, STRF, STRK, STRD and STRC, with STRC representing the largest IPO in the U.S. so far this year. And finally, we raised an impressive $18.3 billion in capital year-to-date, which already accounts for 81% of the total capital we raised in all of last year combined. And we accomplished that in just seven months. So in addition to expanding the depth of Bitcoin-backed credit instruments in the market, we are raising capital more quickly and more efficiently than we ever have before. Now moving on to our EPS results. Q2 '25 stands out as a transformational quarter for Strategy driven by two major factors: the substantial appreciation in Bitcoin price between the end of Q1 and Q2 in conjunction with the adoption of FASB's fair value accounting rule at the beginning of this year. We achieved a record $14 billion in GAAP operating income and $10 billion in net income, reflecting a fully diluted EPS of $32.60 per share for the quarter, the highest in the company's history and what may be among the highest of all S&P 500 companies this quarter. Our results for the first half reflect $8.1 billion in GAAP operating income, $5.7 billion in net income and an EPS of $19.43 per share, also a record high for the company. This sets us up for continued momentum through the remaining second half of the year. Here, we introduced an important metric, bitcoin per share or BPS. This measures the accretion of Bitcoin on a per share basis by calculating the ratio between the company's Bitcoin holdings and its assumed diluted shares outstanding. We are presenting bitcoin per share using Satoshis, where 100 million Satoshis equal 1 Bitcoin. In 2021, we achieved a Bitcoin per share of $26,752. The trend in '22 and '23 reflected the then market conditions. However, in '24, we saw a massive increase in our Bitcoin per share of $67,730 on the strong price performance of Bitcoin. This year, the positive performance continues with a year-to-date bitcoin per share of $39,716 as of July 31, close to 60% of what we achieved last year with much of the second half remaining for further execution. In short, our BPS performance shows how the Bitcoin treasury model is consistently accumulating more Bitcoin per share, the highest of any Bitcoin Treasury Company directly and measurably increases value for our shareholders. Beginning in 2020, and over the last 4.5 years, we have increased our cumulative Bitcoin per share to 198,543 as of the end of July and positive growth around BTC Yield across those same years has consistently contributed to our Bitcoin per share outperformance. We have now achieved a BTC Yield of 25% year-to-date, meeting our initial full year target in the first seven months of the year. Our BTC Gain year-to-date is 111,894 Bitcoin, fueled by a strong Q1 and Q2 through the IPOs of our credit instruments as well as through disciplined activation of our common stock ATM. In terms of BTC $ Gain, our treasury operations have generated $13.2 billion so far this year, closing in on our initial $15 billion full year target. Overall, these results reflect the real incremental value from our ability to strategically manage and maximize our treasury operations, showing strong momentum into the second half and supporting the increase in our full year targets that Phong will detail later in the call. Moving on to our balance sheet. We have added Bitcoin to our balance sheet in every single quarter since August 2020, and 100% of our Bitcoin remains fully unencumbered. We now hold over $74 billion of Bitcoin, which was purchased at a cost of $46 billion or just over $73,000 per Bitcoin. Our attractive low-cost basis reflects the benefit of starting our acquisitions over 4.5 years ago, which makes us the most committed and consistent corporate holder of Bitcoin in the world. This slide highlights the increase in the value of our digital assets following the adoption of FASB's fair value accounting standard on January 1, 2025. Under fair value accounting, as of January 1, we recorded a one-time adjustment of $17.9 billion to our Bitcoin balance sheet and an offsetting $5.1 billion deferred tax liability, which increased our total stockholders' equity by $12.7 billion. As of June 30, the value of our total digital assets has grown to over $64 billion with a deferred tax liability of $5.9 billion. With our current long-term debt and added preferred equity, our total stockholders' equity stands at $47.5 billion. The change in accounting to fair value now better reflects our Bitcoin market value, improves balance sheet transparency while driving significant growth in shareholder equity. At the end of Q1, under the new FASB fair value accounting rules and due to the change in the price of Bitcoin between January 1 and March 31, we reported a Q1 unrealized loss of $5.9 billion. However, in Q2, we recognized a dramatic increase in the fair value of our Bitcoin holdings due to the increase of an additional $6.8 billion to our balance sheet, along with the dramatic Bitcoin price increase between the first and the last day of the quarter, which drove the $14 billion unrealized fair value gain for Q2. Quarter-to-date, we have further increased the total fair value of our Bitcoin holdings to over $74 billion, having added $3.7 billion through capital markets proceeds and also through the change in Bitcoin price since the end of Q3. At current prices, we sit on approximately $6.2 billion in fair value gains so far this quarter, which will be finalized on the last day of Q3.

Michael J. Saylor, CEO

Thank you, Andrew. And I want to thank everybody for being with me today. So I thought I'd start with a macro overview of the Bitcoin universe. The first thing that I'll note is we have a very supportive White House, and that started with the establishment of the Bitcoin strategic reserve, but it continues across the board. Next, as you can see, we have 12 cabinet members in this administration that are all pro Bitcoin. A year ago, we had one cabinet member who was neutral and 11 that were indifferent or uninterested and certainly not supportive. So this is a major change in the political landscape. Yesterday, the White House released a Crypto Policy Report. It's about 150 pages long. I did a scan. I'm sure some of you have done a scan. The takeaway is that this administration is going to be very enthusiastic and supportive of the entire crypto industry and the Bitcoin ecosystem. In particular, some of the things they're doing include work in the area of taxation to cure unfair tax treatments of digital assets and that includes relief or de minimis digital asset transfers like de minimis Bitcoin payments. It also includes guidance that digital assets should not be included when calculating CAMT unrealized capital gains taxes or when calculating CAMT minimum taxes. So we have the support of the administration on this, and that was made very precise in writing just yesterday, and this is an excerpt of it. I think this is just very positive for the entire crypto industry and very positive for Bitcoin. And of course, it's very positive for the hundreds of companies that are starting to put crypto assets on their balance sheet. Wall Street has embraced Bitcoin. We've now got 80 ETFs launched, $170 billion of value flowing into these ETFs. These continue to pick up steam and they're growing more powerful day by day. Public companies are capitalizing on Bitcoin. This is an extraordinary move. And of course, we're seeing these every day. There's a new announcement, whether it's coming from a pure Bitcoin company or whether it's coming from a hybrid or just a random new entrant. But we've now got 950,000 Bitcoin that have been acquired by 160 different listed companies. Looking at the trend, we were the first in 2020. There were two at the end of the year, then there were 33, 39, 43. There were 64 last year. And of course, as you look at this trend right now, 160 when we're not even to the end of 2025 is extraordinary. So we're in a hyper growth or hyper adoption phase for Bitcoin as a treasury reserve asset. Companies are racing to get into the Bitcoin 100. You can see there's even competition to track the Bitcoin 100 right now. Generally, any given week, there are 20 or more companies that are acquiring more Bitcoin. Just a few minutes ago, Coinbase announced that they acquired more Bitcoin this quarter, thousands of Bitcoin. So I see very positive trends here. Each of these companies could, in theory, acquire just as much bitcoin or attempt to acquire just as much bitcoin and dollar value as we have acquired. Obviously, they won't get 3% of the Bitcoin supply, but you can imagine what happens when 100 companies compete to acquire as much Bitcoin as possible. The analysts are all starting to cover and track Bitcoin, and they have outlooks for Bitcoin. If you're going to cover the 160 Bitcoin companies that have Bitcoin on their balance sheets, you're going to have to form an opinion about Bitcoin. The average end-of-the-year price forecast of an equity analyst covering MSTR is $168,000. So keep that in mind, $168,000 by the end of the year—this is the consensus of the analyst community that tracks our stock right now. Technology investors are looking for the next great thing. Everybody knows AI is the next thing. They’re now starting to realize that Bitcoin is also the next thing, and it’s being lumped as a technology transformation and digital disruption. This is really positive because it will draw lots of Magnificent 7 investors into our space. Financial regulators are embracing Bitcoin. You see a new positive Bitcoin announcement just about every other day now from all parts of the government. Just a few days ago, the SEC released a memo allowing an in-kind creation and redemption of Bitcoin ETFs. This is a huge deal. It will accelerate the development of the industry. They also loosened restrictions on options trading of Bitcoin ETFs. Paul Atkins just released—gave a speech and made a number of comments about the digital assets industry. It is clear that he is very supportive of innovation, very supportive of the crypto economy, very supportive of your right to self-custody and this is a welcome development from the SEC. Another welcome development is the guidance that came from William Pulte to Fannie Mae and Freddie Mac, where he said they should prepare their businesses to count cryptocurrency as an asset in the mortgage. This will accelerate the institutional adoption of Bitcoin as collateral in the banking industry. Capitol Hill's embracing Bitcoin. There are three bills, one of them, the GENIUS Act, has already been passed. CLARITY is coming in September and the Bitcoin Act allows for the government to acquire 1 million Bitcoin. These are picking up momentum and this is a positive development. U.S. states are also embracing Bitcoin. We've now got three strategic Bitcoin reserves, including one in Texas, just recently that was funded with $10 million. So this is a trend that’s growing. International governments are enthusiastic about Bitcoin, and we're seeing this everywhere in the world with politicians in Ireland, the U.K., Pakistan, UAE, Ukraine, etc., all of them making pro Bitcoin moves. The crypto industry has coalesced around Bitcoin. There used to be some conflict 2-3 years ago. I think the previous administration played the crypto industry against the Bitcoin industry. Now they've come together, and it’s pretty clear that Bitcoin is viewed as the foundation of the entire crypto economy. Let me talk about our financial products and our business. As you can see here on this slide, our company Strategy sits between the crypto economy and the traditional finance economy. So the primary asset and the foundation of the crypto economy is Bitcoin, which is worth $2.3 trillion. And when I consider the crypto economy, I think about every country on Earth and every capitalist on Earth, acting rationally in whatever their economic interest is 24/7, 365 days a year. That's being manifested on Saturday night, creating extraordinary performance and extraordinary demand in the underlying collateral, which is BTC. However, most of the world is unable to access the crypto economy. What we're doing is refining and harnessing the power of the Bitcoin asset. We are able to refine it into low volatility, low leverage, less risky financial products and, then higher volatility, higher leverage financial products. Just like you might refine a barrel of crude oil into kerosene, which would be very, very pure and asphalt, which is not so much, we are basically providing a function that, say, an ETF cannot provide. You can see IBIT, the most famous example here in this chart. It wraps Bitcoin and serves up a security flavor of raw Bitcoin to the investment community. We, on the other hand, are offering stepped-down elements, convertible bonds, convertible preferred stock, senior fixed stock, junior high yield, and of course, this treasury preferred stock in the form of Stretch. We're offering those. In essence, we're stripping and modifying the duration of the asset. We're also stepping down the volatility of the asset, and we’re extracting the yield from the asset, which is Bitcoin, serving it to each of these fixed income investors. But the excess yield, excess volatility, excess performance that does not go in those fixed income instruments goes into the MSTR common stock. All of these are different instruments. They're all targeted at a different type of investor. Some of them offer yield, some of them offer return. Let's delve into them a little bit closer. Strike, S-T-R-K, is structured Bitcoin. Some people don’t want high vol, high return Bitcoin. They want something with less downside, less risk, less volatility, more certainty. How do I actually keep the growth but get some yield certainty, strip some risk? The way to do it is with convertible preferred stock. If we look at the spec sheet here, you can see that, in essence, at $100 a share, Strike offers about $40 worth of equity. So it's like—at that level, it’s a 40 delta—35 to 40 delta instrument. You’re getting partial upside on MSTR. You're getting a guaranteed 8% dividend and you're getting a liquidation preference and seniority in the capital structure. So less volatility, less downside, articulated yield that you can count on, but you can still keep some of the growth. What’s the market universe for that product? Growth investors, right? The S&P 500, they’ve got 9% year-to-date performance, and they’ve got 1.3% yield. Well, Strike is giving you a 7.5% yield effectively, and it’s 34% year-to-date performance. Between the two of them, there is about $55 trillion in that bucket. Then you've got commercial real estate, people that want some yield, but they also want some growth over time. That’s another very large bucket, $30 trillion. Then you have hedge funds that provide downside protection, they may or may not give you performance. Oftentimes, they don't outperform the S&P, but they purport to be hedges and people like the idea of some structured investment, and that's what hedge funds do. Another target audience is Bitcoin investors. Maybe someone that doesn’t want 55% vol, 55% performance, but they want some guaranteed yield and some downside protection. But they still want to keep some of the upside of Bitcoin. That also goes for spot ETFs of Bitcoin. You can see they're all different pools of capital. The idea of Strike is kind of simple. What if I could have most of the upside of Bitcoin, not so much of the downside and a guaranteed dividend while I’m waiting? And that’s very compelling for a lot of people. The second product in our portfolio is Strife. Strife is long-duration senior credit. It’s for income-focused investors. They want a premium yield, but they also want seniority and enhanced payment protection. Here’s the term sheet. It’s the most senior thing in our capital structure. It’s 8x overcollateralized. As of the date of the term sheet, it’s got an 8.7% yield. There are a lot of investor protections. The dividends are cumulative. If we miss a dividend, there’s an escalating penalty provision. If you’re looking for the most senior form of long duration preferred dividend, this would be it. The target market? There’s a $40 trillion capital market here: long-term treasuries, agencies, mortgage-backed securities, investment-grade corporate bonds, municipal bonds. Strife is yielding double what typical instruments give you. The third product is Stride, long-duration, high-yield credit, okay? If you’re looking for the maximum high yield, and you want it for a long commitment, this is it. It’s more junior in the capital structure, but it’s still got a BTC rating of 5.1. 5 overcollateralization is more than any investment-grade bond we could find in the market. And it's more than mortgage-backed securities. Stride is 5x overcollateralized, more than most of our competitors, but it’s paying a higher yield, right? It’s just a better instrument if that’s what you’re looking for. We could also talk about Stretch, our latest IPO, short duration high-yield credit, what I call strong credit. It’s for short duration investors, and that means they want to take one month of interest rate risk, not 10 years, not 20 years, just a month of interest rate risk and they’re seeking stable value but they want higher yield than a money market. It’s got an effective yield right now of 9.5%. It pays 9% at par. If you’re running a crypto company or a Bitcoin company and you’ve got a treasury, maybe you’re going to place 20%, 30% of your treasury into cash because you need it to make payroll or do something six months out. You would want a stable instrument. But if you could find some Bitcoin-backed money market-type thing, credit instrument that yielded double what you would get from a normal money market, this might be interesting to you. Here, you can see how these things stack up. We have purposely engineered MSTR to be the most volatile security in our portfolio and engineered Stretch to be the least volatile thing. Strike is just after MSTR because it's got that 40% conversion rate. Strife and Stride are in the middle. We’re building out a yield curve for BTC credit. Stretch looks like a 1-month instrument. It’s way pegged to the left. It’s like a 1-month T-bill. Stride has a Macaulay Duration of about 8 to 9. Strife, more like almost 11 and Stride getting closer to 14. Those instruments like Strife, Stride and Strike are perpetual. As the credit of the company improves, as Bitcoin increases in price, as the BTC ratings go up, it’s not unlikely that those durations will keep stretching, right? At some point, if someone thinks that Strife should be yielding 5%, the duration will stretch 20 years. Stretch, on the other hand, will always be pegged at one month. What’s the opportunity? The opportunity is between 1 year and 10 years. We’re in a position to issue a perpetual preferred instrument that’s a 1-year credit instrument, 3-year, 5-year, 7-year or 10-year, built based on Stretch, the Stretch rate. We have higher yield on the short end of the curve, higher yield in the middle and we’re offering higher yield on the end. That means our credit is stronger. Longer duration, higher yield. What you can see here is that we’ve also created a much stronger credit from a liquidity point of view. Stride, Strife, and Strike are somewhere between 50 and 100 times as liquid as typical preferred stock. And that’s extraordinary. When you’re trading $30 million to $50 million a day, typical preferred stock is trading $400,000 a day. We’ve created a breakthrough instrument by combining—by creating a perpetual preferred by not including calls and by not crippling the instruments. As far as we can see, no one has ever issued a truly variable monthly dividend preferred stock. The floaters you've heard of have a fixed credit spread, and they float on SOFR, and the others are fixed. We created a variable credit spread monthly stock, and we did it with AI. In fact, all four of these instruments we did with AI. The key to the outperformance of them is we use digital intelligence, and we built them with digital capital. That means that, yes, they’re going to have superior yield and superior liquidity. There are also they have superior collateral. They’re overcollateralized. The worst thing in our portfolio is a 5x collateralization, better than best things in most other credit portfolios. So here we are competing against ETFs. You can see, net assets in the many, many billions, but the yield handles are 6 to 7, we're offering 7, 9, 12, 10 and of course, we don’t charge any fees. Right now, we have long durations if you want them and shorter duration if you want that. This takes us to MSTR. It’s amplified Bitcoin. If you want more Bitcoin, if you want 2x Bitcoin or 3x or 4x the return and 4x the volatility of Bitcoin, you need a Bitcoin-backed equity. We are aiming this for Magnificent 7 investors that they want—they believe in the digital transformation of capital. We aim to be the Amazon of capital markets, completely disrupt the business model. You can see it in our metrics, where we’re running 101% annualized performance five years in a row, and in 10 days, it will be five years. Doubling every year for five years—it’s hard to say that’s a fluke. Here’s another illustration of amplified Bitcoin. You can see bonds are underperforming, real estate is at 6%, gold is at 10% and the S&P is at 14%. The MAG7 doubles that, Bitcoin doubles that, we double Bitcoin. In the last year, it’s the same exact thing, even more so. So I want to explain how we amplify Bitcoin. We begin with 199,000 Satoshis a share. Suppose we have no leverage and no credit strategy—we couldn’t issue credit. In that case, 10 years from now, we have 199,000 Satoshis a share, that’s like an ETF. That’s a BTC factor of 1. With 10% leverage, we have 267,000 Satoshis a share at the end of the period because we’re not diluting the common stock as rapidly as we build Bitcoin. At 20% leverage, you see you end up with 376,000 Satoshis a share. At 30% leverage, the expected outcome is 555,000 Satoshis per share. The green bars indicate what the treasury operation is doing. When people wonder what's the value added of a Bitcoin Treasury Company, it's the ability to create the green bar over the orange bar, that’s a 2.8 BTC factor. In essence, you would think that the floor for mNAV for a company with this performance is 2.8. The mNAV of the company should be higher than 2.8. Now let’s delve deeper into this idea. What happens as you increase the leverage of a Bitcoin Treasury Company? If we have 30% leverage and Bitcoin appreciates at 30% ARR over the time period, you end up with amplification of 2.8. Bitcoin performance could provide about 2.8 the Bitcoin volatility as well. As Bitcoin appreciates faster, the amplification increases. We can also see what happens when Bitcoin grows at 50%. You can be 4.7 lever. By adjusting credit at a much lower rate, we yield higher leverage rates. With that, I want to pass the floor over to Phong, who’s going to talk about our capital plan moving forward.

Phong Q. Le, CEO

Thank you, Michael. I am excited to talk about four things today: one, our capital plan; two, I’ll go through our guidance for 2025; three, I will talk about comparables to MSTR; and four, I’ll address how you should think about valuing MSTR going forward. I’ll start with our capital plan. As Mike mentioned, our goal is to take Bitcoin, wrap it in Strategy securities, and provide it to the largest possible capital base in the world for folks interested in equities, folks who are interested in debt—the largest addressable market—and doing it with premium returns and premium yields. A few things I’ll point out about this slide: our converts represent a small addressable market of $500 billion, compared to our preferreds, which represent markets of $90 trillion, $40 trillion, $2 trillion, $30 trillion. Thinking about how we should address our capital structure going forward, I want to share what the midterm looks like. Mike talked about what our BTC ratings and our credit profile would look like if we didn’t have convertible bonds in our structure. That’s our plan going forward. In about three years, we’ll be able to equitize and retire some of our convertible bonds. What will remain at the top of our capital structure will be our Strife and Stretch, which we plan to have a BTC rating of 10x plus over time, which means that they’ll be investment-grade equivalents. Strike will have a BTC rating of 6x-plus, which means it will be mezzanine equivalent, and Stride, a BTC rating of 3x plus, which means it’s a high-yield equivalent. We’ll have a preferred structure, a stack of preferreds starting with four today. You could see us having more in the future, and that will sit on top of our Bitcoin, which continues to be unencumbered. Our objective is to be the largest treasury company in the world, not just the largest Bitcoin Treasury Company. Our Bitcoin holdings, compared to cash and short-term investments of companies in the S&P 500, means we are currently number 5 today. By the end of the year or in the next year, I could see us being number 2 and passing the Magnificent 7, Microsoft, Google and Amazon, great companies. I see us being in a place in 3 to 5 years where we could surpass Berkshire Hathaway's $348 billion of capital, thus having the largest capital base in the world based on Bitcoin. How are we going to accomplish this? Primarily through tapping the preferred markets. In the last year, we were able to add $22.6 billion in capital to our capital structure. Year-to-date, through 7 months, we’re nearing close to the $22.6 billion, and you’ll see a lot of that has been through preferred equity—four IPOs in the first 7 months of the year have led to about $5.6 billion of capital added. We’re optimistic that preferreds, historically a sleepy underutilized, under-invested market, can become the base of our capital structure and another leap forward for our growth. Another extraordinary evolution or discovery from last week is the retail interest in preferreds. We went from raising about $153 million and 15% in our previous preferred offering, Stride, to increasing that retail adoption by 3.7 times, $570 million, 23% of the total capital raised in Stretch. That’s thanks to our partners, Morgan Stanley, Fidelity and others. We’re seeing demand for a product that we haven’t seen before. This is a retail-focused product, but also institutional investors will show interest. Our fourth time into the preferred market, we think will unlock something that’s going to help us with our capital structure. That’s how this looks over time with our convertible bonds. Through the course of 2029, taking the earliest allowable call date, we should be able to let these equitize over time or we'll be able to call them. So what does our capital plan and credit strategy look like moving forward? There’s really four pieces to this. One, we want to ensure that we maintain what we think are reasonable collateral coverage for our preferreds. If you look at Strife and Stretch, that means 10x overcollateralized, for Strike and Stride, 6x and 3x respectively. It doesn’t mean that we can’t increase the leverage we have today, as long as we’re able to address our capital structure responsibly and thoughtfully. Secondly, we intend to reduce the overall exposure to senior convertible debt outstanding over time. It’s a much smaller addressable market, and it’s a more illiquid market. Retail investors cannot partake in convertible bonds, and pricing is less favorable. Our preferreds will remain perpetual over time. It’s important for us to preserve flexibility and minimize default risk, credit instruments that we don’t have to return. Third, our goal is to be the leading issuer of Bitcoin-backed credit. We’re going to do this responsibly, clearly, and transparently. With our learnings over the last five years using various credit instruments, from margin loans, secured loans, convertible loans, now to preferreds—we think we found what is most responsible. I think we’ve also built a robust market for this. Let’s talk about guidance. This is a first for the company as we will provide BTC guidance. We will also provide GAAP guidance for 2025. I’ll start with our BTC guidance here, and we start with an assumption of BTC price because it drives our BTC and GAAP guidance. You saw earlier that the consensus is $167,000 by the end of the year for equity analysts covering Strategy. We thought we’d be conservative and start with a $150,000 BTC price by the end of 2025. Feeding that in drives a BTC yield percentage and BTC dollar gain at 30% and $20 billion. That is our guidance for the end of year 2025, building off of starting at 25% through year-to-date and about $13.2 billion in BTC dollar gain. You might look at the 30% in the $20 billion and say, that’s pretty conservative. Shouldn't it be higher? There are a couple of things to consider. First, we started the year with a BTC Yield percentage target of 15%, thus we’re doubling that number 7 months into the year. We also started with a BTC $ Gain target of $10 billion, and we’re now doubling that target. Any company able to double their targets throughout the year would consider that success. Moving onto earnings guidance, this is our GAAP guidance for 2025. You’ll see through the first half of the year; we achieved $8.1 billion in operating income. Our guidance based on a $150,000 Bitcoin price is $34 billion of operating income by the end of the year. For net income through the first half of the year, we’re at $5.7 billion, and we believe we can increase that to more than 4 times, totaling $24 billion by the end of the year. Our earnings per share is predicted to land at $21.60; we think we could achieve $80 by the end of the year. Some of you may be thinking, are those big numbers? Yes, they are big numbers. What about relative to the rest of the market? I’ll share that shortly. I talked about the fact that we think MSTR is undervalued and, in some cases, perhaps significantly undervalued. Issuing equity above 1.0x mNAV is accretive to Bitcoin Yield and Bitcoin Gain. We will, on a go-forward basis, be more disciplined about how we issue our MicroStrategy ATM. I want to provide guidelines to create more transparency with shareholders so you don’t have to guess about when a seller might tap the ATM. Below 1.0x mNAV, we’ll consider issuing credit to repurchase shares of MicroStrategy, meaning we trade below net asset value. It would make sense to be accretive to our shareholders if we were to issue credit and buy back MSTR. The borrowing setting for issuing the ATM on a go-forward basis is 2.5x mNAV. If you see our mNAV below 2.5x, you should expect we won’t issue our MSTR ATM and issue more equity for the purpose of buying Bitcoin. We’d issue equity below 2.5x mNAV to pay interest on our debt obligations, our convertible notes, and to fund preferred equity dividends. As you saw from Andrew, the amounts we’d need to issue compared to our asset base and amounts we’ve issued in the past are relatively small. When we get to 2.5x mNAV and up to 4x mNAV, we will opportunistically issue MicroStrategy equity to acquire Bitcoin. Implicitly, between 2.5x mNAV to 4x mNAV, that would be an MSTR price of about $600 to $1,000. Once above 4x mNAV, above $1,000, which we believe is the minimum our equity should trade at, we will begin to aggressively issue MicroStrategy to acquire more Bitcoin. I hope this provides transparency on our guidance. I also want to offer some more credit guidance clarifying details we talked about last week during the launch of Stretch. At the end of every month, we will issue guidance or propose a rate structure for the next month. Let’s say hypothetically, if the 5-day VWAP is below $95 for Stretch, we’ll recommend a 50 basis point or higher rate increase. If the 5-day VWAP is between $95 and $99, we’ll recommend a 25 basis point rate increase. If trading within our target range of $99 to $101, we won't take any action unless the Fed changes the overnight rate on SOFR, and we may change our rate accordingly. If trading above $101 at the end of the month, we’ll suggest a rate decrease or issue a SNAP follow-on offering. This will provide clarity on how we manage our credit. Now, let’s discuss comparables. How do you think about our GAAP net income and GAAP EPS compared to other companies in the S&P 500 universe? Our GAAP operating income target and guidance for the end of the year is $34 billion. This would rank us as the #9 company in the U.S. in terms of operating income, exceeding household names like Walmart, AT&T, or Pfizer, but not quite as large as some great companies in the MAG7, including Meta, Amazon, NVIDIA, and Microsoft. Although we estimate to be #9 in operating income, our market cap is #96. Companies above us have valuation multiples 10, 20, 30, times greater than us. For our estimated net income, we will be #13, and in terms of the market cap again, #96. Now considering the P/E multiple for the S&P 500 universe, we have a P/E multiple of 4.7x. Only five companies have a lower P/E multiple than us. Therefore, we're capitalized on the most innovative technology and capital assets in the history of mankind. However, we're possibly the most misunderstood and undervalued stock in the U.S. and potentially in the world. Comparing to top crypto companies, our estimated net income of $24 billion is nearly double that of Tether, which is a great digital asset and stablecoin company. It's far above other companies like Block, Coinbase, Circle, Riot and Mira. Regarding Bitcoin Treasury Companies, our estimated BTC dollar gain of $13 billion for 2025 is more than 13 times that of the #2 Bitcoin Treasury Company in terms of BTC $ Gain, Metaplanet, and far ahead of other companies in this space. If you look across all our other performance metrics, whether it’s annualized return, BSE return, or the size of the options market, our options open interest also ranks #1. We have a lot of #1 superlatives with our company, and we remain misunderstood and undervalued. Thus, we spend time on relationships like this to provide our activities and communications. What could a hypothetical valuation be if we were better understood? A traditional valuation model would be to take your earnings and multiply that by a PE multiple. You might look for growth, margins, efficiency, industry, and market position. Do you innovate? Is your product incumbent? How do you manage the balance sheet? What is your strategic vision? Is there a track record of performance? And how is your Investor Relations? The Bitcoin Treasury Company isn’t very different. You would take BTC $ Gain, multiply that by a multiple, add the value of Bitcoin on its balance sheet, not earnings growth but BTC $ Gain growth, scale and liquidity, banking market partners, innovation, and do you have the strategic vision? Our average P/E multiple of the S&P 500 is 24x, compared to our 4.7x. Using this method, 24x would mean a $600 billion valuation for Strategy, about 5x undervalued, while the range at a 10x multiple might indicate $240 billion. Where are we headed? If you were to base it on a Bitcoin treasury approach to the valuation, take the $20 billion BTC $ Gain and multiply by 10x to 40x, also applying a parallel multiple structure, and then add in the $75 billion BTC NAV. This could yield a valuation of $575 billion with a range of $250 billion to $900 billion. Utilizing this valuation model, it suggests that the multiple to net asset value (mNAV) for MSTR could hypothetically fall between 2.5x to 4.0x or reach as high as 12x. Why we would trade at a premium to Bitcoin NAV or spot Bitcoin ETPs? We cannot utilize intelligent leverage, we've cracked the code of preferred equity. Spot Bitcoin ETPs can't do that, and we offer access to passive flows via inclusion in NASDAQ 100 and MSCI Russell 1000. This means passive flows of capital are funneling into MSTR even without Bitcoin Maxis or MSTR initiates. Our largest shareholder is Vanguard, investing in Strategy primarily through passive ETFs. We also have access to an extremely large addressable market because institutions can only invest in equities ($35 trillion) or bonds ($60 trillion), they cannot access spot Bitcoin ETPs or Bitcoin directly. You’ve heard throughout the presentation that we are undervalued and misunderstood. I think we will come to understand Bitcoin Treasury Companies better over time and it’s still early. I’d like to summarize our BTC principles. One, we buy and hold BTC securely, meaning we won’t sell it, we won’t diversify. Our primary focus is how to secure and custody Bitcoin, spending a lot of time and resources on it. Second, we prioritize MSTR common stock for long-term value creation, looking at a 5-10 year horizon. The actions taken today are creating value for our MSTR shareholders over 5 years or more. Third, we're treating all investors with respect to consistent transparency, including convertible holders, preferred stockholders, as well as the derivatives. It’s important to think about the entire ecosystem and transparency is crucial. That’s why we’re providing guidance on BTC KPIs, GAAP metrics today, and how we utilize our MSTR ATM. Our MNAV calculation is based on enterprise value, our Bitcoin NAV plus outstanding debt, plus outstanding preferred stock on our balance sheet. All those metrics displayed on strategy.com. We endeavor to ensure that MSTR outperforms Bitcoin via intelligent leverage. We've shared slides reflecting outperformance of Bitcoin and will continue doing so. We aim to acquire Bitcoin continually with the goal of achieving positive BTC yield. This is one of our critical KPIs when considering issuing equity or credit to acquire Bitcoin. Our growth will be rapid, but responsible, based on market dynamics while growing BTC dollar gain similar to EPS traditional companies. We’ll issue innovative fixed income securities backed by Bitcoin. Hopefully, you’ve seen throughout this presentation, as we did last week, we’re using AI for product innovation. We’re disrupting traditional capital markets and preferred markets by giving the market, consumers, and institutions what they want. We’re creating AI-generated capital instruments to improve the market and the future of finance. We will maintain a healthy balance sheet, creating new metrics around credit ratings for the Bitcoin world. Our capital structure must be pristine. We will continue to prioritize this. Finally, we will promote global adoption of BTC as a treasury reserve asset, continuing to advocate and work with nation-states around the world and with companies globally, complementing crypto assets to enhance understanding of Bitcoin. That concludes our presentation. Thank you for your attention, and I will now turn it over to Shirish Jajodia, who will facilitate a new form of Q&A, the first time we've ever done this.

Shirish Jajodia, Corporate Treasurer and Head of Investor Relations

Thank you, Phong. We will now proceed to the interactive live Q&A section of our webinar. I would invite all our analysts to come on video now. We look forward to your questions. We'll go one at a time. I will call your names, and you can direct questions to the management team. First, we will begin with Lance Vitanza, our research analyst from TD Bank.

Lance William Vitanza, Research Analyst

Let me see if I can get two, and if I can. The first is, at some point, does concentration of Bitcoin holdings at a single corporation impede adoption of Bitcoin as a store of value, let alone other potential monetary functions, such as medium of exchange or unit of account? And if so, when might that point realistically come for Strategy? Is that five years out? Ten years out? Longer? Shorter? Or is it just the wrong question?

Michael J. Saylor, CEO

I’m sure everybody's got an opinion, but I'll start. I think we're accelerating institutional adoption, but we're also accelerating the adoption of Bitcoin just like BlackRock is accelerating adoption of Bitcoin, because we're channeling new forms of capital into the ecosystem. If we get to 5%, Bitcoin could be at $1 million a coin, and if we hit 7.5%, it could explode to $10 million a coin, causing immense innovation in the world. For all we know, the harder we try to acquire it, the more it will decentralize to other areas as everyone else will have all this Bitcoin valued at millions.

Lance William Vitanza, Research Analyst

As a follow-up, Phong, you touched on this. You've been actively encouraging other public companies to follow in Strategy's footsteps and create their own Bitcoin treasury models. Are you worried that you may have been too successful in making that pitch? At what point does the plethora of public Bitcoin Treasury Companies or PBTCs become an issue either regarding access to capital or potential bad actors, etc.?

Phong Q. Le, CEO

I don’t think we’ll get to that point. The positive of more Bitcoin Treasury Companies is creating knowledge. The more there are, the more analysts will cover them, allowing retail investors and large banks to get involved, thus leading to a broader appreciation of how to value a Bitcoin Treasury company. They’re additive and accretive right now, and most of the smaller PBTCs aren’t close to us in size or capability.

Michael J. Saylor, CEO

The Bitcoin companies aren’t competing with one another but with 20th-century credit instruments. The more BTC companies there are, the more capital markets we can provide digital solutions to; the more users, the more value rises.

Lyn Alden, Research Analyst

Strategy navigated the 2022 bear market successfully. My question concerns stress tests relating to your midterm BTC ratings. Given that Strategy’s credit products are backed more by assets and capital access than operating cash flows, are there specific Bitcoin bear market assumptions or thresholds—whether in terms of drawdown magnitudes or lengths of time—where capital markets might become unconducive for new capital issuance that you’re planning for as you design these forward leverage ratios and overall capital structure?

Michael J. Saylor, CEO

If you equitize convertible bonds and go for a preferred equity plan, Bitcoin can draw down 80% and you're fine. You could even stretch to 90% and still forecast your liabilities, and we're truly antifragile. Our structure absorbs shocks better than conventional structures.

Phong Q. Le, CEO

We've covered a lot and learned from 2022 about what not to do. Entering into this phase, we don't have the fragile debt structure of margin loans or secured notes. With our focus now more stable on preferred stocks alongside our bond-free framework, we're preparing better to manage drawdowns.

Samson Mow, Analyst

0.15 by year-end is very conservative but necessary per analysts. My question is regarding the preferred shares. They have a BTC/credit rating ranging somewhere between 3 to 9 or 5 to 9. How effective are those preferreds in generating yield assuming we have periods of crab markets? After a 1.25x increase in Bitcoin price, you might have to wait time before you buy again? Can you increase it above 9 or 10?

Michael J. Saylor, CEO

With Bitcoin’s volatility decreasing, we’ll see more education about our credit strategy yielding better results. It’s almost a selling proposition when you can offer structures that outperform traditional financing techniques combined with market education—we could see a high level of leverage.

Brian Dobson, Research Analyst

Given the positive regulatory changes for Bitcoin made by the Trump administration, if you had your way, what would be the next area of improvement for regulators?

Michael J. Saylor, CEO

It would be beneficial if they nailed down a digital assets taxonomy: under what circumstances can you tokenize a security? That clarity about token assets and securities would revolutionize crypto markets and enable a business to operate effectively.

Brian Dobson, Research Analyst

You've had some very successful offerings this year. Could you share feedback you've received from the buy-side regarding those offerings, and what kind of securities might we expect to see offered in the future, in addition to the ones already on offer?

Andrew Kang, CFO

We launched our first preferred early this year, and it was a significant education process. We’ve seen increased retail demand, institutional demand has also risen, and we expect to have more offerings in the future that can potentially tap into different markets.

Preston Pysh, Analyst

Congrats on the amazing results. You’re at a pivotal point given performance has exceeded that of NVIDIA. Education remains a barrier to institutional investors as they view preferred issuance likely as a perpetual drag during a downturn. What steps are being taken to overcome these education hurdles?

Michael J. Saylor, CEO

The product itself is key. We need to build distribution channels and create educational content for the market while growing relationships across investor communities.

Mark Palmer, Analyst

Considering that Bitcoin is trustless, do you see potential in moving toward proof of reserves for your Bitcoin treasury strategy to gain investor confidence?

Michael J. Saylor, CEO

Yes, we're analyzing proof of reserves to provide transparency but must balance this against operational security. It requires careful consideration to avoid potential disruptions and chaos in the market.

Phong Q. Le, CEO

It's ironic that people want to use Bitcoin's transparent decentralized nature while purchasing Bitcoin-backed securities through U.S. companies. We're concentrating efforts on our product innovation rather than creating proof of reserves while keeping transparency in communications and investor relations.

Jeff Walton, Analyst

Given the recent volatility leading to multiyear lows, do you plan to revisit the leverage framework, reflecting the characteristics of preferred leverage?

Michael J. Saylor, CEO

Absolutely. 20-30% leverage is appropriate for conventional bonds, but as we move to preferreds becoming our chief funding strategy, that ratio adjusts naturally to be more reflective of the risks our credit products carry.

Phong Q. Le, CEO

Just to conclude, our planned strategies will rely heavily on preferred securities. For us, the mixed exposures of convertible bonds will not characterize our plans moving forward. We have precise benchmarks to adapt as our risk environment changes.

Shirish Jajodia, Corporate Treasurer and Head of Investor Relations

Thank you, everyone, for staying with us for more than 2 hours. This was awesome. This concludes the Q&A portion of our webinar. I would like to thank all of our analysts for their questions and the audience for staying with us. We had thousands of people watching live across different mediums. I would now like to turn the call over to Phong for the closing remarks.

Phong Q. Le, CEO

Thanks, Shirish. Thanks, Mike. Thanks to Andrew and to all of the analysts that joined us. Thanks to Bitcoin Magazine and Bitcoin for Corporations for cohosting this event, and thanks to the tens of thousands of people that watched us. We appreciate your enthusiasm for Bitcoin, Strategy and our enterprise software. We wish everyone a good quarter and look forward to seeing you all again next year, if not sooner. Thank you, everyone, and have a good evening.