Earnings Call Transcript - MSTR Q3 2024

Shirish Jajodia, Vice President of Investor Relations and Treasury

Hello everyone and good evening. I am Shirish Jajodia, Vice President of Investor Relations and Treasury at MicroStrategy. I will be your moderator for MicroStrategy's 2024 Third 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 now like to welcome you all to today's webinar, and let you know that we will be taking questions using the Q&A feature at the bottom of your screen. You can submit questions throughout the webinar and Michael, Phong, or Andrew will answer questions at the end of the session. Please be sure to provide your name and your company's name when submitting your questions. Now, I'll walk you through the agenda for today's call. First, Phong Le will cover the business and operational results for the third quarter of 2024. Second, Andrew Kang will cover the financial results for the third quarter of '24. Then Michael Saylor will provide a strategic review, and the vision and discuss the recent Bitcoin market updates. And lastly, we will open up to the Q&A. With that, I will now turn the call over to Phong Le, President and CEO of MicroStrategy.

Phong Le, President and CEO

Thank you, Shirish. Hello everyone. I'd like to welcome all of you to today's webinar, starting with the Bitcoin highlights for Q3. 2024 MicroStrategy remains the largest corporate holder of Bitcoin in the world, now holding 252,220 Bitcoins with a total Bitcoin market value of $18 billion as of yesterday. Since June 30, 2024, we acquired an additional 25,889 Bitcoin for a total purchase cost of $1.6 billion, an average price of $60,839. Year-to-date, 2024, the price of Bitcoin has appreciated, spurred notably by the approval of the Spot Bitcoin Exchange traded products or ETPs, which has drawn considerable institutional attention to the asset class. We believe the introduction and initial success of the Spot Bitcoin ETPs evidences the maturation of Bitcoin as an institution-grade asset class, with broader regulatory recognition and institutional adoption. On the capital markets front, we made significant progress towards the advancement of our Bitcoin strategy. In September, we raised $1.1 billion net proceeds, through our at-the-market, or ATM, equity offering program and raised $1.01 billion through the issuance of our 2028 convertible notes. Using part of the proceeds from the 2028 convertible notes, we also redeemed our $500 million senior secured notes, due 2028 in full. As a result, all of our Bitcoin holdings are now unencumbered. Andrew will provide further details on our capital markets and Bitcoin purchase activity for this quarter. As we continue to focus on acquiring more Bitcoin through our capital market activities, we believe that the value proposition of the company centers increasingly on our Bitcoin treasury strategy. As a result, we've developed a new descriptor for what we are, which is the world's first and largest Bitcoin treasury company, the acronym being coincidentally BTC. So what does this mean? We are a publicly traded company that has adopted Bitcoin as our primary treasury reserve asset. By using proceeds from equity and debt financings, as well as cash flows from our operations, we strategically accumulate Bitcoin and advocate for its role as digital capital. Our treasury strategy is designed to provide investors varying degrees of economic exposure to Bitcoin, by offering a range of securities, including equity and fixed income instruments. In addition, we provide industry-leading AI-powered enterprise analytics software, advancing our vision of intelligence everywhere. We leverage our development capabilities, to explore innovation in Bitcoin applications, integrating analytics expertise with our commitment to digital asset growth. We believe our combination of operational excellence, our strategic Bitcoin reserve, and our focus on technological innovation, positions us as a leader in both the digital asset and enterprise analytics sectors, offering a unique opportunity for long-term value creation. Michael will further elaborate on our vision as a Bitcoin treasury company. Since our adoption of our Bitcoin strategy, we've used three primary mechanisms to acquire more Bitcoin. One, debt financing. We have $4.3 billion in principal amount of convertible debt outstanding and an attractive blended cost of debt fixed at 0.8% annually. Two, equity issuances. We've issued $4.3 billion in equity in a manner that we believe to be accretive to existing shareholders. And three, cash flows from our software operations. Since August 2020, we've invested $836 million of total cash on our balance sheet. These capital market levers allow us to deploy intelligent leverage to increase our Bitcoin holdings in a manner, which we believe enhances shareholder value. So where do we go next from here? For those who are familiar with the Hitchhiker's Guide to the Galaxy by Douglas Adams, they would know the answer to the ultimate question of life, the universe and everything. In this science fiction series, an enormous supercomputer named Deep Thought calculated the answer to this question over a period of 7.5 million years. And of course, the answer to the ultimate question of life, the universe, and everything is the number 42. We also think it's the answer to an important question. We spent about four years thinking about this question. We believe it's a unique number with some special characteristics. It's the sum of 21 plus 21. And we all know that 21 is a magical number. In the world of Bitcoin, there can only ever be a maximum of 21 million Bitcoins in circulation. MicroStrategy owns about 1.2% of this Bitcoin today. Today, MicroStrategy is announcing its ambitious capital market strategic plan for the next three years. From the years 2025 to 2027, the company is targeting to raise $42 billion of capital, comprised of $21 billion of equity capital and $21 billion of fixed income capital, primarily for the purpose of acquiring Bitcoin. Today, we have filed a prospectus supplement for a new $21 billion ATM equity program. This is the largest ATM in the history of capital markets. Fixed income capital can consist of various debt and debt-like instruments, including convertible debt, preferred equity, hybrid capital or other similar instruments. So I'd like to provide more detail on our capital raising targets over the next three years. For the year 2025, we target raising $10 billion total comprised of approximately $5 billion each of equity capital, and fixed income capital. For the year 2026, we target raising $14 billion, comprised of approximately $7 billion each of equity capital and fixed income capital. And for the year 2027, we target raising $18 billion, comprised of approximately $9 billion each of equity capital and fixed income capital. We plan to address increased interest costs from any incremental fixed income capital raise through efficient management of our overall capital raising plan, including alternating between equity raises and debt raises as appropriate. To maintain our overall intelligent leverage. By managing our treasury strategy in this way, as long as we continue to have access to equity capital in favorable terms, we believe we will not be limited by the cash flows from our software business, to scale up our Bitcoin capital markets initiatives. Turning to the software business, MicroStrategy is also positioned as the world's largest independent publicly traded business intelligence company. In the third quarter of 2024, we continued our shift towards our cloud offering, non-GAAP subscription billings, which represent cloud revenues in the quarter, along with just the next 12 months of deferred subscription services revenues grew by 93% in Q3 to $32.4 million, our fourth straight year of quarterly double-digit growth. The strong growth in our subscription billings was driven by both existing customer migrations to the cloud, and new customer wins. Our customer renewal rates continue to remain high, and our subscription services revenues remain strong. Overall, we see strong demand for our cloud platform, and Q3 was a particularly strong quarter for customers migrating to the cloud. Our objective continues to be to increase cloud revenue by migrating customers to cloud while maintaining profitability. MicroStrategy ONE is now available on Azure, AWS, and Google Cloud marketplaces, allowing enterprises to easily find and deploy this cloud-native platform. Customers can benefit from a range of innovative first-to-market AI-powered functionality, powered by the Azure OpenAI LLM, which also creates demand for our cloud platform. Transitioning our customer base to the technology of the future remains a key focus, and our hyperscaler partners are a key part of this migration. As customers and prospects move to the cloud to empower their AI-driven digital transformations, we expect to continue to see a decrease in product license revenues and support revenues, which will in part be offset by increases in subscription services revenues. We expect this trend to continue in the balance of 2024. This may result in a decrease in total recognized revenue in the short term, but in the long run, we expect it to be more than offset by increases in subscription services revenues. Additional benefits include more engaged customers using our very latest software, higher retention rates, and ultimately growing recurring and overall revenues. I'll now turn the call over to Andrew, to discuss our financials for the first quarter in further detail.

Andrew Kang, CFO

Thank you, Phong. First, I'll take a few minutes to expand upon the software business results. Moving to Slide 12, earlier this year we enhanced our reported numbers to breakout our quarterly results into two categories. First, the software business category reflects income or loss from operations related specifically to our BI business. The Corporate and other category represents the non-software related areas associated with our digital assets holdings, which include impairment charges and other related third-party costs. While we continue to operate under one reportable operating segment, we believe the breakout of our operating results into these two categories provides more transparency with respect to the performance of our software business while isolating the impacts related to changes in Bitcoin price. In Q3, software business revenues were $116 million, down 10% year-over-year consistent with recent quarters. The overall revenue trend reflects the ongoing transition of our business from on-premise to cloud. As part of that transition, we fully expect product license along with support revenues to decline impacting total revenues consistent with this quarter's results. We are building up stronger, more durable cloud recurring revenues that come in over time, which is consistent for any on-prem to cloud transition. Q3 Cloud bookings were strong in line with the prior quarter and if you recall, Q2 was the strongest single quarter cloud bookings to date. This increase last quarter helps offset the lower than expected product license contracts we closed this quarter and reflects the transition taking shape. As Phong mentioned earlier, non-GAAP subscription billings, which represent cloud revenues in the quarter along with the next 12 months of deferred subscription services revenues, grew by 93% in Q3 year-over-year to $32.4 million, reflecting double-digit growth in every quarter for the last four straight years since launching our cloud transition. Q3 subscription services revenues increased 32% year-over-year and now make up approximately 24% of total revenues. Subscription services revenues are now larger than our product license revenues and will continue to grow while product license revenue will continue to decline further going forward. While we will see the initial benefits of last quarter's strong cloud migrations flow through revenue beginning next quarter, the lower product license bookings in 2024 will result in recognized revenue below our target for the full year, but in line with the revised target we discussed last quarter. Cost of revenues were $34 million, which was up 29% compared to Q3 of last year. The increase was due in part to higher cloud hosting costs, a direct result of our growing cloud, which we expect to continue in future periods. Software business operating expenses were $100 million, up 7% compared to Q3 of last year, while overall personnel costs were down year-over-year. The increase that I just described year-over-year was in part largely attributed to higher stock-based compensation, and higher custody fees related to our increased Bitcoin holdings, but also offset by savings in other G&A categories. In Q3, we also recognized close to $14 million in severance costs related to workforce optimization in the quarter, which will result in approximately $30 million in lower salary costs next year. This strategic planning across all departments in the company is focused on right-sizing overall staffing levels, optimizing organizational structures, and focusing on a disciplined performance management culture. As a result, annual staffing costs are expected to be approximately 13% lower next year, which will further benefit our margin profile in 2025. Overall, non-GAAP operating income or profit from the software business category was $0.9 million. Lastly, the corporate and other operating expense category for the quarter was $414 million, the majority of which was due to Bitcoin impairment in Q3. Now turning to our Bitcoin strategy, we had another very successful quarter in adding more Bitcoin to our treasury reserves, as we acquired 25,889 Bitcoins in the third quarter for approximately $1.6 billion at an average price of $60,839 per Bitcoin. As of September 30, the company held a total of 252,200 Bitcoins acquired for an aggregate cost of $9.9 billion, or approximately $39,000 per Bitcoin. I will speak to our overall treasury operations for the quarter in a moment, but a significant result of redeeming our 2028 senior secured notes in Q3 was to release all Bitcoin that was held at the MicroStrategy entity. Now 100% of our Bitcoin holdings are fully unencumbered, including now all Bitcoins held at both MicroStrategy and MicroStrategy entities. We have added Bitcoin to our treasury balance sheet in every quarter since August 2020, and as we continue to champion Bitcoin as a strategic treasury reserve asset, we are encouraged by the number of both public and private companies that are adopting the Bitcoin treasury standard to help impact shareholder value. As of September 30, 2024, the market value of our Bitcoin holdings was $16 billion at an aggregate cost of $9.9 billion, and an average purchase price of $39,000. This is in contrast to the carrying value of our Bitcoin holdings of $6.9 billion as of the last day of the quarter. We will adopt the new FASB fair accounting rule, which will require fair value treatment for Bitcoin holdings when the rule takes effect in Q1, 2025. As of January 1, 2025, we will recognize a cumulative adjustment to the opening balance of our retained earnings, reflecting in large part the significant difference between the market value and carrying value of our Bitcoin holdings. Now turning to our treasury operations, we had one of our most impactful quarters from a capital markets execution perspective. Following the two convertible note financings we completed earlier in March and in June of this year, we executed a new convertible note financing in September, which was upsized and well received by the market. We issued $1.01 billion of convertible senior notes, due September 2028, at an annual interest rate of 0.625% with a conversion premium of 40% and a conversion price of approximately $183 per share. The net proceeds from the new convert were used to redeem the 2028 senior secured notes and to acquire additional Bitcoin. We redeemed in full the $500 million 2028 senior secured notes at a redemption price equal to 103.063% of the principal amount of the 2028 secured notes, plus accrued and unpaid interest. We achieved multiple benefits through early redemption. All restrictive covenants in connection with the secured notes were eliminated, all of our Bitcoin holdings became fully unencumbered, and we realized a net annualized interest expense savings of $24 million for the next four years, equaling close to $100 million in total future debt expense savings. In Q3, we also issued $1.1 billion worth of common equity under our at-the-market ATM program. Under the existing ATM program, approximately $891 million of common equity remains available for issuance. As Phong mentioned earlier today, as part of our new 21/21 three-year strategic capital plan, we filed a new prospectus supplement for a $21 billion ATM program. This will be the single largest ATM program filed in the U.S. across all sectors. Under our current capital structure, we now have $4.3 billion of unsecured convertible debt outstanding with a sub 1% blended interest rate of approximately 0.81% with staggered maturities over several years starting in February 2027, through June 2032, all of which are currently trading above par value. Year-to-date 2024, we are the number one issuer of convertible notes in the U.S. by aggregate principal raised. Intelligent leverage remains a key component of our active capital allocation strategy which when deployed in a thoughtful and disciplined manner enables us to add more Bitcoin to our treasury reserve, at an attractive cost and in a manner that achieves BTC yield. I'll elaborate on the intelligent leverage and BTC yield concepts in the next few slides. This slide lays out our debt maturity profile, and as you can see, the nearest debt maturity is more than two years away and not until early 2027. The remainder of our debt maturities are evenly spread over several years out to 2032 with and weighted average debt maturity of approximately five years. We actively monitor the capital markets and will continuously evaluate liability management opportunities, to manage our debt and interest expense, as well as opportunities to raise additional financings in the future. Year-to-date in 2024, our total Bitcoin holdings increased by 33.3%. During the same period, our assumed diluted shares outstanding increased by only 13.2%. When we refer to assumed diluted shares outstanding, we are assuming all outstanding convertible notes are fully converted, at their respective conversion prices, all outstanding options are fully exercised, and all restricted stock units and performance stock units fully vest in each case without regard to exercise or conversion price, or vesting or any other contractual condition. As a Bitcoin treasury company based on market conditions, we intend to continue to access equity capital markets and to explore various opportunities in the debt and fixed income capital markets, to effectively manage our overall leverage. Our track record of using equity, debt, and excess cash to acquire Bitcoin as part of our treasury operations has resulted in value creation for our shareholders and establishes the foundation to execute on our 21/21 capital plan. Our objective continues to be to accumulate Bitcoin holdings at a faster rate than we issue shares, and we have demonstrated a solid track record of doing so. To assess our performance in achieving this strategic objective, we introduced a new key performance indicator last quarter, which we refer to as BTC yield. To reiterate again, we define BTC yield as a period-to-period percentage change in the ratio of our total Bitcoin holdings to our assumed diluted shares outstanding. We use this KPI to help assess the achievement of our strategic objective and to evaluate capital allocation decisions. If we increase our total Bitcoin holdings over a given period at a faster pace than we increase our assumed diluted shares outstanding, we achieve a positive BTC yield. I should note here that BTC yield is not equivalent to yield in the traditional financial context. It is simply a measure of the percentage change period-to-period in the ratio of our Bitcoin holdings to our assumed diluted shares outstanding. In addition, when we use BTC yield, we assume that all indebtedness will be refinanced or, in the case of our convertible notes, converted into shares of common stock, at their respective conversion prices, and that it does not take into account debt and or other liabilities. Although BTC yield is not actually a yield in the traditional sense, we internally think about this metric as some might think about a bond yield, or a yield of another financial instrument. We view this metric as helping us and our shareholders assess whether we're using our capital most efficiently to increase our Bitcoin holdings over time. The historical performance of this KPI is shown on this slide, we achieved an annual BTC yield of 43.3% in 2021, 1.8% in 2022, and 7.3% in 2023. As we have achieved quarterly BTC yield of 8.1% in Q1, 3.7% in Q2, and 5.1% in Q3. Management uses BTC yield to evaluate capital allocation decisions and to measure the achievement of our strategy. Achieving BTC yield sets us apart from Spot Bitcoin ETPs and other Bitcoin investment vehicles that charge a management fee, which would therefore reflect a negative BTC yield as we measure it. Building on the 21/21 Plan Phong discussed, we have a clear strategy to increase our Bitcoin holdings and deliver a positive annual BTC yield. Our year-to-date 2024 BTC yield of 17.8% has surpassed the annual BTC yield in 2023. Last quarter, we laid out our target to achieve a BTC yield of 4% to 8% annually for the next three years through 2027. Today, we are revising our target up to achieve BTC yield of 6% to 10% per year for each of the next three years. To do this, we will seek to accumulate more Bitcoin holdings by responsibly using intelligent leverage, with a risk-managed approach, using proceeds from equity when we believe it is accretive and using the excess cash generated by our software business. We will continue to consider the full spectrum of financing options, and also explore creative capital market transactions and untapped pools of capital. To execute this strategy effectively and prudently, we will remain disciplined in the use of both the ATM and other capital raising alternatives and financings, doing so in a manner to achieve BTC yield in line with our targets. By providing a three-year KPI, we are reinforcing our goal of achieving consistent positive BTC yield over time. We pride ourselves on being at the forefront of institutional Bitcoin adoption, and as we look to the future, we anticipate that our ability to consistently achieve BTC yield will become a crucial benchmark for investors. MicroStrategy has demonstrated a strong track record of applying a disciplined approach to navigate through volatile times in the Bitcoin market. And we believe we have established the credibility to execute on our strategic goal of adding value for our shareholders. 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'm pleased to see everyone on the call today. Thank you for joining us, and I appreciate the support from all of our shareholders. I was really looking forward to this call as it gives us the opportunity to share our strategy and vision for the next three years in greater detail than before. So, Shirish, please go to the next slide. I think it's important to recognize that we are still in the early stages of Bitcoin adoption as Digital Capital. The year 2024 has been remarkably positive for us. The launch of the ETFs at the year’s beginning marked a significant milestone, alongside the increasing acceptance of Bitcoin by major political parties. We are seeing a trend towards the normalization of Bitcoin. The advancement of options trading for ETFs is noteworthy, and the movement of banks beginning to custody Bitcoin is also encouraging. This year, many companies have switched to fair value accounting, which is another exciting development. Recently, we've witnessed an uptick in inflows into Bitcoin ETFs, which are widely considered the most successful ETFs ever launched. While we are at the beginning, the outlook is quite promising. Bitcoin represents about a $1.4 trillion asset class and is gradually attracting capital from equities, real estate, bonds, currency derivatives, and gold. Let’s move to the next slide. This slide powerfully illustrates investment trends over the last four years. Since MicroStrategy adopted the Bitcoin standard on August 10, 2020, bonds have declined by 5% annually. We had previously invested $500 million of our treasury in bonds, which we recognized was a dead end, prompting us to pursue other avenues. Additionally, there has been significant monetary expansion, with the best surrogate being the S&P 500, which is up 14%. This 14% growth represents the traditional cost of capital for financial and physical assets. If an investment yields less than 14%, then wealth is being eroded; conversely, exceeding this threshold creates wealth. Currently, gold is not keeping pace, bonds are ineffective, and while real estate is struggling to keep up, companies like Apple, Amazon, Google, and Facebook are significantly outperforming the S&P. Remarkably, Bitcoin has substantially outperformed even these tech giants. Our thesis has been that Bitcoin acts like the Facebook or Google of money—a vital digital monetary network that cannot be stopped, even if many conventional investors fail to grasp this notion. Bitcoin's performance has been exceptional. MicroStrategy has aligned itself with Bitcoin, and I’m proud to say that not only have we become 100% Bitcoin-focused, but we’ve also nearly doubled Bitcoin's performance through our unique capabilities as an operating company. This is a fantastic outcome. Shall we go to the next slide? Not only has MicroStrategy outperformed asset classes, but we have also surpassed all 500 companies in the S&P 500. We've examined various companies, even those outside the S&P like Tesla and Microsoft, and found that MicroStrategy has achieved an astounding growth of 1989% in equity value during this period. Our performance is clear; we’ve significantly outshone even major players like Super Micro and Nvidia. Our results illustrate the potency of digital capital when properly understood. Now, onto the next slide. MicroStrategy stands out as a remarkable company in various ways. When comparing us to a diversified portfolio of the S&P and Nasdaq, our performance is notably superior. This chart clearly demonstrates that Bitcoin is the leading asset class. Bitcoin not only excels over major asset classes but is also shown to be the best reserve asset for publicly traded operational companies. Companies might hold small portions of securities or bonds, but Bitcoin remains the unequivocal choice. We’ve outperformed big tech stocks, all great in their own right, but they have yet to embrace digital capital. While Nvidia has ventured into digital intelligence, replicating that strategy is rather challenging. Conversely, MicroStrategy is an easy model to emulate; we've been transparently sharing our approach through our published Playbook. We are at the forefront of the digital transformation of capital, and we believe Bitcoin as digital capital will be embraced by many companies in the future. Next slide, please. The dilemma for most companies is that only 1% of S&P 500 firms are generating most gains, leaving 99% unable to keep pace. The Magnificent Seven dominate the show, while Bitcoin continues to outshine them. To align with the Magnificent Seven, a Bitcoin strategy is your best option. An aggressive leveraged long strategy can be particularly effective. Next slide. Here’s an interesting revelation we haven’t shared before: MicroStrategy is not just the top performer among S&P 500 stocks, but we’re also the most volatile. Conventional wisdom suggests that volatility is harmful, advising against risks with balance sheets. We challenge that notion. Investing entirely in treasuries restricts volatility to around five, while Bitcoin carries a volatility of about 50 or 55. By reducing volatility, companies often see their returns diminish in comparison to the S&P index. When capital is treated as toxic, it can be detrimental to a company’s health. Conversely, embracing volatility allows for outperformance relative to the S&P. A conventional approach leads to declining capital effectiveness, resulting in stagnant equity markets. Companies unaware of their issues face a weakening investor appeal. So why be public without leveraging that appeal to capital markets? This volatility produces intriguing effects, as I will outline in the next slide, Shirish. In the top 10 performers among S&P 500 firms, MicroStrategy ranks seventh for options open interest. Despite being a smaller company than household names like Walmart or Coca-Cola, our high volatility attracts trading in our options, placing us on the leaderboard. In daily trading volume, we also rank seventh, showcasing remarkable liquidity compared to much larger firms. In terms of market cap weighted metrics, we lead S&P 500 companies in both options open interest relative to market cap and daily trading volume as a percentage of market cap. Essentially, MicroStrategy has become the hottest stock in this category. As we say, volatility equates to vitality. Think about volatility as RPM on an engine. When spinning a lightweight object at high speed, it can act like a toy. However, increasing the mass of that object and maintaining that speed can yield far more powerful effects—like a turbine capable of significant energy. Conventional wisdom promotes returning capital to shareholders, advocating for buybacks or dividends. Yet, investing in low volatility assets restricts growth and locks capital away. In our model, we embrace volatility and high-performing assets like Bitcoin, which empowers us to gather and leverage capital to benefit our shareholders. Many in the market fear dilution from equity sales. Still, if the proceeds are directed toward avenues yielding higher performance than the S&P, such actions can be beneficial. Next slide, please. There’s another slide here that hasn't been seen before in our presentations. Many are aware of MSTR stock's excellent performance relative to the S&P 500. What you may not know is that MSTR options are among the most actively traded in the S&P 500. We excel in terms of volatility, liquidity, and performance. Additionally, MicroStrategy has successfully sold six convertible bonds, with each demonstrating impressive returns, outperforming Bitcoin itself. This unique opportunity allows investors to benefit from Bitcoin's upside with downside protection, something traditional equities or ETFs cannot provide. The strong performance and unique offerings distinguish MicroStrategy and justify our market capitalization. We are possibly the largest issuer of Bitcoin-backed bonds globally, with the expertise and permanent capital to scale these offerings effectively. Let’s look to the right side. Investors are eager for securities, particularly spot Bitcoin ETFs. There are many options available globally, but many lack clear pathways for effective use of capital. Bitcoin represents the most compelling option in capital markets. We are creating efficient securities with a clear return on investment that provide our shareholders with transparency and quick results. Investors can generate BTC yields, driving value back into the company. Next slide, please. I appreciate everyone’s attention throughout this call. I want to conclude by emphasizing several key principles that are crucial for MicroStrategy's shareholders. We are committed to this long-term journey and aim for clarity and consistency. Our core principles include a commitment to purchasing and holding Bitcoin indefinitely and securely. We prioritize our shareholders' long-term value creation—if you own MSTR, you are our partner in this endeavor, and your interests align with our management team. We value all investors equally and conduct our business with consistency and transparency. We are focused on the long game and will prioritize our core strategy. Our aim is to structure MicroStrategy to deliver higher performance than Bitcoin itself, and we are committed to continuously acquiring Bitcoin while pursuing a positive BTC yield. Finally, we will grow our operations responsibly, innovate in fixed-income securities backed by Bitcoin, and maintain a robust and transparent balance sheet. Our goal is to promote global adoption of Bitcoin as a treasury reserve asset for companies and governments alike, positioning us at the forefront of a digital capital revolution. Thank you for your time, and Shirish, let's proceed to the questions.

Shirish Jajodia, Vice President of Investor Relations and Treasury

Great. Thank you so much, Michael. That was a fantastic session. We went far over our assigned time of one hour. However, what we'll do is we'll take two quick questions. By the way, thank you to all the viewers. There were 4,000 people who joined in and there are hundreds of questions that we received. So we'll take just two questions in the interest of time. The first question is for Andrew. Andrew, can you please provide a framework around how you might cover interest expense, if we continue to issue convertible or fixed income notes that might be beyond servicing from the software cash flows?

Andrew Kang, CFO

Sure. Thanks for the question. In the near term, I guess I'd say I mentioned earlier, we redeemed the 2028 notes, which was our highest cost debt, and by doing so, we reduced our annual cost by about $30 million, or about 50% of our debt load. This obviously frees up cash in the near term. Taking out the 2028s also releases this from all the covenants. Opportunities may arise to be accretive there. The 21/21 Plan involves raising $42 billion of capital that capital could be used to service interest if needed. Overall, I think we feel pretty good about our ability to issue new debt and new fixed-income securities, and we'll look forward to those opportunities in the future.

Shirish Jajodia, Vice President of Investor Relations and Treasury

Great. We'll take one last question for Michael. Given your ambitious ATM plan, are you concerned about the controlled company status, and how do you view it in the long-term?

Michael Saylor, Executive Chairman

I have slightly more than 50% of the voting stock right now. As we raise additional capital, I expect that my voting interest will slip below into the high 40s. If we raise a lot of capital, it might slip into the mid-40s or the low-40s, but I'm not at all concerned about it. First of all, we're going to run this company in partnership with our common stock shareholders. I meet with them routinely. There's nothing that we are going to do that they're not going to want us to do. Perhaps in order to get over 50%, I might have two or three of them join with me on occasion. But I actually look forward to that. I believe our common stock shareholders should know they're our partners, and they deserve a say in the company. They'll have a greater say in the company and that's fine. I don't think there's any reason that our company can't operate just fine with me having 48% of the vote instead of 52%. As you can see in our principles, you can see our plan. I think that substantially I'll have enough voting shares to ensure the company stays on track, but I’m not really concerned at all about issuing additional equity.

Shirish Jajodia, Vice President of Investor Relations and Treasury

Thank you, Michael. I think with that, we will conclude the Q&A portion of the webinar. I will hand the call over to Phong for the final closing remarks.

Phong Le, President and CEO

Look, I want to thank the several thousands of you who attended our earnings call today. I understand it's an elongated session, and I appreciate your support. Hopefully, you've seen from our remarks, we are quite enthusiastic about the future of Bitcoin and the future of MicroStrategy, and the potential for value creation for all of our shareholders. We believe that the Bitcoin treasury company strategy and the enterprise software strategy are going to create growth and value. So we wish everybody a good quarter, happy holidays, and we look forward to seeing all of you again in 12 weeks. Thank you all.