Over time, we do plan to integrate other LLMs from the hyperscalers. So whether it be Google or AWS and allow our customers to bring their own LLM or utilize a private LLM. So you’ll be seeing that as we enter into 2024. As far as monetization, we’re today, as I mentioned, pricing this at $20,000 for 20,000 questions, it’s consumption-based. Obviously, the customer has to be using our current BI technology. And if they’re not, they’ll get MicroStrategy BI and the pricing associated with that and then add on AI on top of that. And I think as we get into 2024, we’ll see some material revenue come out of this new product. We’re already seeing some pretty strong pipeline. With MicroStrategy AI, and as I mentioned earlier, it’s causing customers to want to move to our cloud because it’s only available in the cloud.
So that’s another nice tailwind that is created by our new AI offering.
Shirish Jajodia: Thanks, Phong. I can ask the next question, it’s for Andrew. How does MicroStrategy think about the balance between investing in core business while utilizing excess cash flow to acquire more Bitcoin?
Andrew Kang: Thanks, Shirish. I’d say, if you recall, when we launched our Bitcoin strategy, we converted our cash reserves as well as our investment holdings into Bitcoin, which I think has served MicroStrategy to be extremely accretive. And Michael shared some of those statistics earlier. As part of our overall liquidity management, we ensure working capital, adequate working capital to manage all of our operations. We also ensure we have adequate capital to invest in product development and as well as service our debt. I’d say using excess cash from operations allows us to have the ability to organically create more Bitcoin. Again, that’s served us very well and has driven a lot of value for our shareholders. So I’d expect us to continue along that strategy.
Shirish Jajodia: Thanks, Andrew. The next question is for Andrew as well. Can you please provide thoughts if you have an expected timeline for FASB’s fair value accounting rule implementation. And how the street should think about its impact on MicroStrategy’s future Bitcoin acquisitions and the impact on core business?
Andrew Kang: I’d say from conversations we’ve had with various folks related that are kind of aware of the FASB progress, it seems that the FASB is pretty much on track with what I would call maybe a normal timeline to finalize this accounting rule. I obviously can’t predict when that’ll occur, but I think we believe it is likely to happen based on that normal timeline either later this year or early next year. So I would say fairly in the near term. Overall, I think Michael talked about it as well, but the change I believe will help other institutions effectively, more effectively evaluate holding Bitcoin on corporate balance sheets and hopefully will provide additional transparency for more adoption of Bitcoin as well.
Shirish Jajodia: Thanks, Andrew. Next question is for Michael. How does the recent move up in the price of Bitcoin impact the company’s ongoing strategy to acquire more Bitcoin? Should we think of MicroStrategy as an average cost buyer adding to its Bitcoin stores as permitted by the capital markets and cash flow regardless of the price?
Michael Saylor: We have a laser focus on Bitcoin acquisition. And so we will, the volatility and the price movement has had one primary impact, which is it has brought worldwide awareness to Bitcoin and it has gotten everybody focused on Bitcoin. So I think its accelerating education. And because Bitcoin is a novel asset class, education is critical for adoption. So I think generally it’s long-term bullish. We try not to get too caught up in the volatility. So when we have excess cash flows from operations that we don’t need as working capital, then we will generally acquire Bitcoin with it because we view it as accretive. And then when the capital markets offer us opportunities to do financing that are accretive to our shareholders so that we can buy Bitcoin, we will avail ourself of that.
Those circumstances change month by month, quarter by quarter. And we have a good set of models that we use to keep track of all these changes. And we’re always monitoring opportunities so as to make sure that we take advantage of it when it comes our way.
Shirish Jajodia: Thanks, Michael. And we’ll take one last question here, just for Phong. What are your thoughts on the remainder of the year and outlook for 2024, and main drivers of growth and challenges to keep an eye on? And what are some of the levers that can be pulled to increase profitability in the future?
Phong Le: Yes, thanks, Shirish. I guess a few things. One is we look into 2024, the two big drivers of growth will be AI and cloud, and they’re related. Migrating more customers to the cloud, getting them to adopt our cloud native platform, and getting customers to adopt AI, which in turn will get customers to adopt cloud, and moving more into the prospect space, because I think our AI and cloud offerings are quite prospect-friendly. So I think those would be the big drivers of growth. Concerns that we might have, macroeconomic headwinds. We saw that in the first half of this year, could rear back up. We have a lot of uncertainty right now, what’s happening in the macroeconomic environment. And so those are the things that I think about.
And as far as cash flows and margins go, I do think we can do everything that we mentioned while still being pretty disciplined about our margins, which I think you’ve seen us able to accrete margins in the last few quarters. And I think we can continue to do that.
Shirish Jajodia: So I think with that, I’m going to close this call. I want to thank everyone for being with us today, and we appreciate your support. We’re enthusiastic as ever about our enterprise software strategy, as well as our Bitcoin strategy. I think we’ve seen positive momentum in both of those areas in the third quarter. And we wish you all a good quarter. Look forward to seeing you get in 12 weeks in 2024. Thanks all.
