Significance of Bitcoin to Corporations

I want to bring in the mad himself,

MicroStrategy CEO and founder,

Michael Saylor, Michael, great to have you back with us.

We're going to get to the investor question in a moment,

but I actually want to start with software

because it was the best year for your software business, 2021,

in a decade.

And I wonder what that says about 2022,

what is the outlook ahead?

I think we got a real nice boost in 2021.

Our cloud subscriptions business was up 39% year over year.

Our top line was up 6% year over year.

We had a big boost in free cash flow.

We ran about an 18% free cash flow margin.

So we generated a bit more than 90 million in free cash flow.

We were able to invest that in acquiring more Bitcoin

and easily cover our debt service.

So we're comfortable with the business.

It's nice.

So some of your margins did miss estimates due to wage inflation,

wage inflation investments in the cloud.

Do you think these pressures will keep up in the near term?

I you know, there's some challenges with wages in the tech business,

as you know, and yeah, we expect that'll continue.

We'll have to just continue to get more efficient.

Then if you're doing business internationally, international currencies,

like the Argentine layer is lost 90, sorry,

the Argentine pace has lost 93% of its value over the last four years, Emily.

Turkish, Turkish layer is also struggling.

The news last night was the Lebanese pound lost 93% of its value.

So international currencies will be a bit of a weight,

but our domestic business and Western European business looks good to us.

And we're again, as we rotate to the cloud,

that's a nice efficiency gain for us.

So let's talk about investors.

Why should investors buy into micro strategy rather than

buying Bitcoin into itself for some of the ETFs that now exist?

Well, you know, if you had a spot Bitcoin ETF and you held a spot,

but you charge 0% fees, that would be better.

And micro strategy doesn't charge any fees.

We're an operating company and that means not only do we not charge fees,

we make money and we can generate additional yield.

And we can get fairly cheap leverage, you know,

like the 2.2 billion dollars in debt that's got like a 1.5% interest cost for us.

So so your choices as an investor would be to buy into a non-existent spot ETF

that charged your 50 to 100 basis points with no leverage and no yield

or to buy into the futures ETF.

And that's much more expensive than 2 or 3% more invested in grayscale,

which is a 2% cost per year.

And so I think that, you know, as an operating company,

you're pretty compelling also.

We're not a Bitcoin miner.

So we don't take any Bitcoin mining risk.

So if you're looking for a leverage, a leverage Bitcoin play with spot exposure

that's got positive yield, then micro strategy is the only game in town.

Now you bought about 660 additional Bitcoin during the dip,

25 million dollars worth or so.

That's actually your smallest purchase since last May.

What should we read into this?

Are you are you are you have plans to buy more or are you hedging your bets?

You know, and we did that out of free cash flow, Emily.

So we did an issue any debt and we didn't issue any equity to buy it.

So that's a pure accretion to all of our common stock shareholders.

And as I said, we generated about 90 million dollars in free cash flow last year.

So as we generate that cash flow, we'll pay our debt service and then we'll sweep the remainder

into Bitcoin and we'll continue with that.

If we're going to be more aggressive about buying Bitcoin, then we'll, you know,

look at various financing options.

Probably the most compelling and interesting ones are to generate yield off of the 110,000

Bitcoin that's currently unpleashed or to borrow against that 110,000 Bitcoin and then

reinvest that in more Bitcoin.

We haven't made any decisions on that yet.

We'll have to make sure that anything we do is accretive and meets our risk parameters.

You just held your big micro strategy world conference.

I believe 70,000 or so people tuned in.

You interviewed Jack Dorsey and of course, he rarely gives interviews.

He had this to say about corporations considering getting into Bitcoin.

Take a quick listen.

Even if you don't use or don't believe you could use Bitcoin in your company,

I think it's worth your study because there's a number of lessons in it that will make

your company better.

How you operate your company, how you interact with the world, how you think, how you execute.

I've just learned so much from it that have made everything about my company and what we do

much better.

And, you know, if I were to start another company, those lessons would just be so great.

Michael, I'm curious if there's anywhere where you and Jack disagree on Bitcoin.

What do you think you have to learn from each other?

We agree pretty enthusiastically.

Jack, Jack's a man on a mission.

And his view of Bitcoin and Lightning as they're open, they're fair, they're global,

they're permissionless digital monetary networks.

And you can use them to provide financial inclusion to billions of people.

And you can actually do business at the speed of light friction free.

And so as a technologist, he's a technologist.

I am. We both agree on the idea of moving money at the speed of light to 8 billion people for free.

And as a humanitarian, we both agree there's billions of people that are unbanked and

non-included in the current system.

And, you know, again, if your current sees collapsing and you just lost 93% of your wealth overnight,

and the bank seized all your assets, which is just what happened in Lebanon this week,

what choice do you have?

Like there's billions of people that don't have any better alternative.

And Jack wants to deliver a better alternative to them.

And I agree with him wholeheartedly.

Dorsey threw some serious shade at Facebook and Mark Zuckerberg for the way they handled their

big crypto-bat DM, which of course hasn't worked out.

We're also tracking meta's results today, not looking good.

Facebook meta trying to make this big pivot to the metaverse that nobody knows,

whether it will pay off or not.

You've seen so many big shifts in technology in your many decades in the industry.

And I'm curious what your view is on what's happening over there.

Well, I think that meta will figure it out.

Mark Zuckerberg's brilliant.

And I have a greatest respect for him.

But what I'll say, in regard to crypto-currency, is the world doesn't want a digital,

monetary network controlled by one company.

It doesn't want a currency from one company.

It doesn't matter whether you're the greatest company on earth.

The beauty of Bitcoin is it's open, it's common property.

Nobody controls it.

Nobody, a hundred years from now, will control it.

And that makes it ethically sound.

So I think Jack's frustration is he knows that Facebook and now meta could deliver

utilitarian economic empowerment to billions of people and an ethical, technically sound,

politically sound, economically sound fashion.

And he's frustrated to see that we all use our power as a force of good.

All right, MicroStrategy Founder and CEO, Michael Sailor, I was good to have you here on the show.

Thanks for taking the time to join us.