What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-01 · 156 added, 79 removed, 435 unchanged (35% of the section changed)

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During 2023 and 2024, we used proceeds from various capital raising transactions to purchase bitcoin.

As of March 31, 2024, we held an aggregate of approximately 214,278 bitcoins, with 38,557 bitcoins held directly by MicroStrategy and 175,721 bitcoins held by MacroStrategy, a wholly-owned subsidiary of MicroStrategy.

As of March 31, 2024, all of the approximately 38,557 bitcoins held directly by MicroStrategy Incorporated, which had a market value of $2.739 billion based on the $71,028.14 market price of one bitcoin on the Coinbase exchange at 4:00 p.m.

Eastern Time on March 31, 2024, are held in a separate custodial account from those held by MacroStrategy and serve as part of the collateral securing our 2028 Secured Notes.

As of June 30, 2024, we held an aggregate of approximately 226,331 bitcoins, with 50,610 bitcoins held directly by MicroStrategy and 175,721 bitcoins held by MacroStrategy, a wholly-owned subsidiary of MicroStrategy.

As of June 30, 2024, all of the approximately 50,610 bitcoins held directly by MicroStrategy Incorporated, which had a market value of $3.134 billion based on the $61,926.69 market price of one bitcoin on the Coinbase exchange at 4:00 p.m.

Eastern Time on June 30, 2024, are held in a separate custodial account from those held by MacroStrategy and serve as part of the collateral securing our 2028 Secured Notes.

See below for further disclosure surrounding market value calculations of our bitcoin.

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Balance at March 31, 2024

Digital asset purchases

Digital asset impairment losses

Balance at June 30, 2024

(a) In the first quarter of 2023, we purchased bitcoin using $179.3 million of the net proceeds from our sale of class A common stock under our at-the-market offering program.

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(e) In the first quarter of 2024, we purchased bitcoin using $782.0 million of the net proceeds from our issuance of the 2030 Convertible Notes, $592.3 million of the net proceeds from our issuance of the 2031 Convertible Notes, $137.3 million of the net proceeds from our sale of class A common stock under our at-the-market equity offering program, and Excess Cash.

(f) In the second quarter of 2024, we purchased $793.8 million of bitcoin using net proceeds from our issuance of the 2032 Convertible Notes and Excess Cash.

Excess Cash refers to cash in excess of the minimum Cash Assets that we are required to hold under our Treasury Reserve Policy, which may include cash generated by operating activities and cash from the proceeds of financing activities.

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March 31, 2024

June 30, 2024

(a) The "Lowest Market Price Per Bitcoin During Quarter" represents the lowest market price for one bitcoin reported on the Coinbase exchange during the respective quarter, without regard to when we purchased any of our bitcoin.

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Our digital asset impairment losses have significantly contributed to our operating expenses.

During the three months ended March 31, 2024, digital asset impairment losses of $191.6 million represented 66.3% of our operating expenses, compared to digital asset impairment losses of $18.9 million, representing 16.5% of our operating expenses, during the three months ended March 31, 2023.

As of April 26, 2024, we held approximately 214,400 bitcoins that were acquired at an aggregate purchase price of $7.543 billion and an average purchase price of approximately $35,180 per bitcoin, inclusive of fees and expenses.

As of April 26, 2024, at 4:00 p.m.

During the three months ended June 30, 2024, digital asset impairment losses of $180.1 million represented 64.1% of our operating expenses, compared to digital asset impairment losses of $24.1 million, representing 20.1% of our operating expenses, during the three months ended June 30, 2023.

During the six months ended June 30, 2024, digital asset impairment losses of $371.7 million represented 65.2% of our operating expenses, compared to digital asset impairment losses of $43.1 million, representing 18.4% of our operating expenses, during the six months ended June 30, 2023.

As of August 5, 2024, we held approximately 226,500 bitcoins that were acquired at an aggregate purchase price of $8.340 billion and an average purchase price of approximately $36,821 per bitcoin, inclusive of fees and expenses.

As of August 5, 2024, at 4:00 p.m.

Eastern Time, the market price of one bitcoin reported on the Coinbase exchange was $53,469.63.

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Operating Highlights

The following table sets forth certain operating highlights (in thousands) for the three months ended March 31, 2024 and 2023:

The following table sets forth certain operating highlights (in thousands) for the three and six months ended June 30, 2024 and 2023:

Three Months Ended

Six Months Ended

Product licenses

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We therefore believe that quarter-to-quarter comparisons of our operating results may not be a good indication of our future performance.

As of March 31, 2024, we had a total of 1,851 employees, of whom 595 were based in the United States and 1,256 were based internationally.

As of June 30, 2024, we had a total of 1,839 employees, of whom 603 were based in the United States and 1,236 were based internationally.

The following table summarizes employee headcount as of the dates indicated:

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Three Months Ended

Six Months Ended

Cost of subscription services revenues

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Total share-based compensation expense

The $0.2 million increase in share-based compensation expense during the three months ended March 31, 2024, as compared to the same period in the prior year, was primarily due to the grant of additional awards under the Stock Incentive Plans and the revaluation and exercise of certain liability-classified stock-based awards, partially offset by the forfeiture of certain stock awards and certain awards that became fully vested.

As of March 31, 2024, we estimated that an aggregate of approximately $177.8 million of additional share-based compensation expense associated with the Stock Incentive Plans and the 2021 ESPP will be recognized over a remaining weighted average period of 2.7 years.

The $5.1 million increase in share-based compensation expense during the three months ended June 30, 2024, as compared to the same period in the prior year, was primarily due to the grant of additional awards under the Stock Incentive Plans, partially offset by the forfeiture of certain stock awards and certain awards that became fully vested.

The $5.4 million increase in share-based compensation expense during the six months ended June 30, 2024, as compared to the same period in the prior year, was primarily due to the grant of additional awards under the Stock Incentive Plans and the revaluation and exercise of certain liability-classified stock-based awards, partially offset by the forfeiture of certain stock awards and certain awards that became fully vested.

As of June 30, 2024, we estimated that an aggregate of approximately $158.4 million of additional share-based compensation expense associated with the Stock Incentive Plans and the 2021 ESPP will be recognized over a remaining weighted average period of 2.6 years.

Critical Accounting Estimates

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Results of Operations

Comparison of the three months ended March 31, 2024 and 2023

Comparison of the three and six months ended June 30, 2024 and 2023

Except as otherwise indicated herein, the term “domestic” refers to operations in the United States and Canada and the term “international” refers to operations outside of the United States and Canada.

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Three Months Ended

Six Months Ended

Product Licenses and Subscription Services Revenues:

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Product licenses revenues.

Product licenses revenues decreased $4.5 million for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to an overall decrease in the volume of deals.

For the three months ended March 31, 2024, our top three product licenses transactions totaled $3.0 million in recognized revenue, or 23.4% of total product licenses revenues, compared to $4.0 million, or 22.9% of total product licenses revenues, for the three months ended March 31, 2023.

Product licenses revenues decreased $6.2 million and $10.7 million for the three and six months ended June 30, 2024, as compared to the same periods in the prior year, primarily due to an overall decrease in the volume and average size of deals.

Our product licenses revenues may continue to experience declines in future periods as we continue to promote our cloud offering to new and existing customers.

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Subscription services revenues are derived from our MCE cloud subscription service and are recognized ratably over the service period in the contract.

Subscription services revenues increased $4.2 million for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to conversions to cloud-based subscriptions from existing on-premises customers, a net increase in the use of subscription services by existing customers, and sales contracts with new customers.

Subscription services revenues increased $4.2 million and $8.4 million for the three and six months ended June 30, 2024, as compared to the same periods in the prior year, primarily due to conversions to cloud-based subscriptions from existing on-premises customers, a net increase in the use of subscription services by existing customers, and sales contracts with new customers.

We expect our subscription services revenues to continue to grow in future periods as we continue to promote our cloud offering to new and existing customers.

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Three Months Ended

Six Months Ended

Product Support Revenues:

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Product support revenues are recognized ratably over the term of the contract, which is generally one year.

Product support revenues decreased $2.8 million for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to certain existing customers converting from perpetual product licenses with separate support contracts to our subscription services or term product licenses offerings.

Product support revenues decreased $4.3 million and $7.1 million for the three and six months ended June 30, 2024, as compared to the same periods in the prior year, primarily due to certain existing customers converting from perpetual product licenses with separate support contracts to our subscription services offerings.

Our product support revenues may experience declines in future periods as we continue to promote our cloud offering to new and existing customers.

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Three Months Ended

Six Months Ended

Other Services Revenues:

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Consulting revenues are derived from helping customers plan and execute the deployment of our software.

Consulting revenues decreased $3.5 million for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to a decrease in billable hours worldwide.

Consulting revenues decreased $2.4 million and $5.9 million for the three and six months ended June 30, 2024, as compared to the same periods in the prior year, primarily due to a decrease in billable hours worldwide.

Education revenues.

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These offerings include self-tutorials, custom course development, joint training with customers’ internal staff, and standard course offerings, with pricing dependent on the specific offering delivered.

Education revenues did not materially change for the three months ended March 31, 2024, as compared to the same period in the prior year.

Education revenues did not materially change for the three and six months ended June 30, 2024, as compared to the same periods in the prior year.

Costs and Expenses

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Three Months Ended

Six Months Ended

Cost of Revenues:

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Cost of product licenses revenues consists of referral fees paid to channel partners, the costs of product manuals and media, and royalties paid to third-party software vendors.

Cost of product licenses revenues did not materially change for the three months ended March 31, 2024, as compared to the same period in the prior year.

Cost of product licenses revenues did not materially change for the three and six months ended June 30, 2024, as compared to the same periods in the prior year.

Cost of subscription services revenues.

Cost of subscription services revenues consists of equipment, facility and other related support costs (including cloud hosting infrastructure costs), and personnel and related overhead costs.

Cost of subscription services revenues increased $0.7 million for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to a $0.9 million increase in cloud hosting infrastructure costs, which is a result of the increased usage by new and existing cloud subscription services customers.

Cost of subscription services revenues increased $2.3 million for the three months ended June 30, 2024, as compared to the same period in the prior year, primarily due to a $2.4 million increase in cloud hosting infrastructure costs, which is a result of the increased usage by new and existing cloud subscription services customers.

Cost of subscription services revenues increased $3.1 million for the six months ended June 30, 2024, as compared to the same period in the prior year, primarily due to a $3.3 million increase in cloud hosting infrastructure costs, which is a result of the increased usage by new and existing cloud subscription services customers.

Cost of product support revenues.

Cost of product support revenues consists of personnel and related overhead costs.

Cost of product support revenues increased $2.8 million for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to (i) a $1.0 million increase in variable compensation, (ii) a $0.8 million increase in salaries and personnel costs attributable to an increase in average staffing levels, and (iii) a $0.4 million net increase in share-based compensation expense.

Cost of product support revenues increased $2.4 million for the three months ended June 30, 2024, as compared to the same period in the prior year, primarily due to (i) a $0.7 million increase in salaries and personnel costs, (ii) a $0.7 million increase in variable compensation, and (iii) a $0.5 million net increase in share-based compensation expense, which were all primarily attributable to an increase in average staffing levels, partially offset by the discontinuance of our Enterprise Support program in the current year, which previously resulted in compensation costs for certain consulting personnel being allocated to cost of product support revenues.

Cost of product support revenues increased $5.2 million for the six months ended June 30, 2024, as compared to the same period in the prior year, primarily due to (i) a $1.7 million increase in variable compensation, (ii) a $1.5 million increase in salaries and personnel costs, and (iii) a $1.0 million net increase in share-based compensation expense, which were all primarily attributable to an increase in average staffing levels, partially offset by the discontinuance of our Enterprise Support program in the current year.

Cost of consulting revenues.

Cost of consulting revenues consists of personnel and related overhead costs.

Cost of consulting revenues decreased $1.3 million for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to (i) a $0.5 million decrease in variable compensation and (ii) a $0.4 million decrease in severance costs.

Cost of consulting revenues decreased $1.4 million for the three months ended June 30, 2024, as compared to the same period in the prior year, primarily due to (i) a $0.8 million decrease in variable compensation and (ii) a $0.7 million decrease in salaries and personnel costs attributable to a decrease in average staffing levels, partially offset by the discontinuance of our Enterprise Support program in the current year.

Cost of consulting revenues decreased $2.7 million for the six months ended June 30, 2024, as compared to the same period in the prior year, primarily due to (i) a $1.4 million decrease in variable compensation and (ii) a $1.1 million decrease in salaries and personnel costs attributable to a decrease in average staffing levels, partially offset by the discontinuance of our Enterprise Support program in the current year.

Cost of education revenues.

Cost of education revenues consists of personnel and related overhead costs.

Cost of education revenues did not materially change for the three months ended March 31, 2024, as compared to the same period in the prior year.

Cost of education revenues did not materially change for the three and six months ended June 30, 2024, as compared to the same periods in the prior year.

Sales and marketing expenses.

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Three Months Ended

Six Months Ended

Sales and marketing expenses

Sales and marketing expenses decreased $2.7 million for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to (i) a $2.1 million decrease in employee salaries primarily attributable to a decrease in average staffing levels, partially offset by wage increases, (ii) a $2.0 million decrease in variable compensation primarily attributable to an increase in net capitalized commissions, partially offset by an increase in commissions earned, and (iii) a $0.4 million net decrease in share-based compensation expense primarily attributable to the forfeiture of certain equity awards, partially offset by the fair value remeasurement of certain liability-classified awards upon exercise or at the end of the reporting period and the grant of additional awards under the Stock Incentive Plans, partially offset by (iv) a $1.5 million increase in employer payroll taxes related to stock option exercises during the first quarter of 2024 and (v) a $0.7 million increase in marketing costs.

Sales and marketing expenses decreased $3.4 million for the three months ended June 30, 2024, as compared to the same period in the prior year, primarily due to (i) a $2.1 million decrease in variable compensation primarily attributable to an increase in net capitalized commissions, partially offset by an increase in commissions earned, (ii) a $1.5 million decrease in employee salaries primarily attributable to a decrease in average staffing levels, partially offset by wage increases, (iii) a $0.5 million decrease in facility and other related support costs, and (iv) a $0.4 million net decrease in share-based compensation expense primarily attributable to the forfeiture of certain awards, partially offset by the grant of additional awards under the Stock Incentive Plans, partially offset by (v) a $1.0 million increase in marketing costs, and (vi) a $0.5 million increase in subcontractor costs.

Sales and marketing expenses decreased $6.1 million for the six months ended June 30, 2024, as compared to the same period in the prior year, primarily due to (i) a $3.8 million decrease in variable compensation primarily attributable to an increase in net capitalized commissions, partially offset by an increase in commissions earned, (ii) a $3.6 million decrease in employee salaries primarily attributable to a decrease in average staffing levels, partially offset by wage increases, (iii) a $0.9 million decrease in facility and other related support costs, and (iv) a $0.8 million net decrease in share-based compensation expense primarily attributable to the forfeiture of certain awards, partially offset by the grant of additional awards under the Stock Incentive Plans and the fair value remeasurement of certain liability-classified awards upon exercise or at the end of the reporting period, partially offset by (v) a $1.7 million increase in marketing costs, and (vi) a $1.2 million increase in personnel costs primarily attributable to an increase in employer payroll taxes related to the exercise or vesting of certain awards under the Stock Incentive Plans.

Research and development expenses.

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Three Months Ended

Six Months Ended

Research and development expenses

Research and development expenses decreased $2.2 million for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to (i) a $1.7 million decrease in employee salaries primarily attributable to a decrease in average staffing levels, partially offset by wage increases and (ii) a $0.8 million net decrease in share-based compensation expense primarily attributable to the forfeiture of certain awards, partially offset by the grant of additional awards under the Stock Incentive Plans, partially offset by (iii) a $0.6 million increase in variable compensation.

Research and development expenses increased $1.0 million for the three months ended June 30, 2024, as compared to the same period in the prior year, primarily due to (i) a $1.8 million net increase in share-based compensation expense primarily attributable to the grant of additional awards under the Stock Incentive Plans and (ii) a $0.9 million increase in personnel costs primarily attributable to an increase in employer payroll taxes related to the exercise or vesting of certain awards under the Stock Incentive Plans, partially offset

by (iii) a $1.0 million decrease in employee salaries primarily attributable to a decrease in average staffing levels, partially offset by wage increases.

Research and development expenses decreased $1.2 million for the six months ended June 30, 2024, as compared to the same period in the prior year, primarily due to (i) a $2.6 million decrease in employee salaries primarily attributable to a decrease in average staffing levels, partially offset by wage increases and (ii) a $0.4 million decrease in cloud hosting infrastructure costs, partially offset by (iii) a $1.3 million increase in personnel costs primarily attributable to an increase in employer payroll taxes related to the exercise or vesting of certain awards under the Stock Incentive Plans and (iv) a $1.0 million net increase in share-based compensation expense primarily attributable to the grant of additional awards under the Stock Incentive Plans, partially offset by the forfeiture of certain awards.

General and administrative expenses.

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Three Months Ended

Six Months Ended

General and administrative expenses

General and administrative expenses increased $6.8 million for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to (i) a $5.1 million increase in employer payroll taxes related to stock option exercises during the first quarter of 2024, (ii) a $1.0 million net increase in share-based compensation expense primarily attributable to the grant of additional awards under the Stock Incentive Plans, partially offset by certain awards that became fully vested, (iii) a $1.0 million increase in legal, consulting, and other advisory costs, and (iv) a $0.5 million increase in custodial fees incurred on our bitcoin holdings, partially offset by (v) a $0.8 million decrease in employee salaries primarily attributable to a decrease in average staffing levels, partially offset by wage increases.

General and administrative expenses increased $7.3 million for the three months ended June 30, 2024, as compared to the same period in the prior year, primarily due to (i) a $3.0 million net increase in share-based compensation expense primarily attributable to the grant of additional awards under the Stock Incentive Plans, partially offset by certain awards that became fully vested, (ii) a $2.9 million increase in legal, consulting, and other advisory costs, (iii) a $2.4 million increase in personnel costs primarily attributable to an increase in employer payroll taxes related to the exercise or vesting of certain awards under the Stock Incentive Plans, and (iv) a $1.0 million increase in custodial fees incurred on our bitcoin holdings, partially offset by (v) a $1.2 million loss recorded in the prior year with respect to the Brazilian matters noted in Note 6, Commitments and Contingencies, to the Consolidated Financial Statements, and (vi) a $0.8 million decrease in employee salaries primarily attributable to a decrease in average staffing levels, partially offset by wage increases.

General and administrative expenses increased $14.1 million for the six months ended June 30, 2024, as compared to the same period in the prior year, primarily due to (i) a $7.6 million increase in personnel costs primarily attributable to an increase in employer payroll taxes related to the exercise or vesting of certain awards under the Stock Incentive Plans, (ii) a $4.1 million net increase in share-based compensation expense primarily attributable to the grant of additional awards under the Stock Incentive Plans, partially offset by certain awards that became fully vested and the forfeiture of certain awards, (iii) a $3.9 million increase in legal, consulting, and other advisory costs, and (iv) a $1.5 million increase in custodial fees incurred on our bitcoin holdings, partially offset by (v) a $1.6 million decrease in employee salaries primarily attributable to a decrease in average staffing levels, partially offset by wage increases and (iv) a $1.2 million loss recorded in the prior year with respect to the Brazilian matters noted in Note 6, Commitments and Contingencies, to the Consolidated Financial Statements.

Digital asset impairment losses.

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Three Months Ended

Six Months Ended

Digital asset impairment losses

We did not sell any of our digital assets during the three months ended March 31, 2024 and 2023.

We did not sell any of our digital assets during the three and six months ended June 30, 2024 and 2023.

We may continue to incur significant digital asset impairment losses in the future.

For example, we have incurred at least $24.9 million in digital asset impairment losses during the second quarter of 2024 on bitcoin we held as of March 31, 2024.

For example, we have incurred at least $275.5 million in digital asset impairment losses during the third quarter of 2024 on bitcoin we held as of June 30, 2024.

Interest Expense, Net

For the three months ended March 31, 2024 and 2023, interest expense, net, of $11.9 million and $14.9 million, respectively, were primarily related to the contractual interest expense and amortization of issuance costs related to our long-term debt arrangements.

Interest expense in the first quarter of 2024 decreased compared to the same period in 2023 primarily as a result of the repayment of the 2025 Secured Term Loan in March 2023, partially offset by interest incurred during the first quarter of 2024 related to the 2030 Convertible Notes and 2031 Convertible Notes (which were each issued in March 2024).

Interest expense for future periods in 2024 is expected to increase compared to the same periods in 2023 as a result of the issuances of our 2030 Convertible Notes and 2031 Convertible Notes.

Interest expense, net, primarily relates to the contractual interest expense and amortization of issuance costs related to our long-term debt arrangements.

The following table sets forth interest expense, net (in thousands) and related percentage changes for the periods indicated:

Three Months Ended

Six Months Ended

Interest expense, net:

2025 Convertible Notes

2027 Convertible Notes

2030 Convertible Notes

2031 Convertible Notes

2032 Convertible Notes

2028 Secured Notes

2025 Secured Term Loan

Other interest (income) expense, net

Total interest expense, net

Interest expense, net, increased $4.4 million for the three months ended June 30, 2024, as compared to the same period in the prior year, primarily as a result of interest incurred related to the 2030 Convertible Notes and 2031 Convertible Notes (which were each issued in March 2024) and interest incurred related to the 2032 Convertible Notes (which were issued in June 2024).

Interest expense, net, increased $1.3 million for the six months ended June 30, 2024, as compared to the same period in the prior year, primarily as a result of interest incurred related to the 2030 Convertible Notes, 2031 Convertible Notes, and 2032 Convertible Notes, partially offset by the repayment of the 2025 Secured Term Loan in March 2023.

Interest expense for future periods in 2024 is expected to increase compared to the same periods in 2023 as a result of the issuances of our 2030 Convertible Notes, 2031 Convertible Notes, and 2032 Convertible Notes, partially offset by the 2025 Convertible Notes having been converted or redeemed in their entirety by July 15, 2024.

Refer to Note 5, Long-term Debt, to the Consolidated Financial Statements for further information.

Gain on Debt Extinguishment

For the three months ended March 31, 2023, the $44.7 million gain on debt extinguishment resulted from the repayment of the 2025 Secured Term Loan.

For the six months ended June 30, 2023, the $44.7 million gain on debt extinguishment resulted from the repayment of the 2025 Secured Term Loan.

Refer to Note 5, Long-term Debt, to the Consolidated Financial Statements for further information.

Other Income (Expense), Net

For the three months ended March 31, 2024, other income, net, of $1.7 million was comprised primarily of foreign currency transaction net gains.

For the three months ended March 31, 2023, other expense, net, of $1.4 million was comprised primarily of foreign currency transaction net losses.

We recorded a benefit from income taxes of $160.8 million on a pretax loss of $213.9 million that resulted in an effective tax rate of 75.2% for the three months ended March 31, 2024, as compared to a benefit from income taxes of $453.2 million on a pretax income of $8.0 million that resulted in an effective tax rate of (5660.6)% for the three months ended March 31, 2023.

During the three months ended March 31, 2024, our benefit from income taxes primarily related to (i) a tax benefit related to share-based compensation (including the income tax effects of exercises of stock options and vesting of share-settled restricted stock units) and (ii) a tax benefit from an increase in our deferred tax asset related to the impairment on our bitcoin holdings.

During the three months ended March 31, 2023, our benefit from income taxes primarily related to the release of a portion of the valuation allowance on our deferred tax asset related to the impairment on our bitcoin holdings, attributable to the increase in market value of bitcoin as of March 31, 2023 compared to December 31, 2022.

As of March 31, 2024, we had a valuation allowance of $1.4 million primarily related to our deferred tax assets related to foreign tax credits in certain jurisdictions.

For the three and six months ended June 30, 2024, other income, net, of $0.7 million and $2.4 million, respectively, were comprised primarily of foreign currency transaction net gains.

For the three and six months ended June 30, 2023, other expense, net, of $0.3 million and $1.7 million, respectively, were comprised primarily of foreign currency transaction net losses.

We recorded a benefit from income taxes of $273.3 million on a pretax loss of $428.9 million that resulted in an effective tax rate of 63.7% for the six months ended June 30, 2024, as compared to a benefit from income taxes of $513.5 million on a pretax loss of $30.0 million that resulted in an effective tax rate of 1,708.9% for the six months ended June 30, 2023.

During the six months ended June 30, 2024, our benefit from income taxes primarily related to (i) a tax benefit related to share-based compensation (including the income tax effects of exercises of stock options and vesting of share-settled restricted stock units) and (ii) a tax benefit from an increase in our deferred tax asset related to the impairment on our bitcoin holdings.

During the six months ended June 30, 2023, our benefit from income taxes primarily related to the release of a portion of the valuation allowance on our deferred tax asset related to the impairment on our bitcoin holdings, attributable to the increase in market value of bitcoin as of June 30, 2023 compared to December 31, 2022.

As of June 30, 2024, we had a valuation allowance of $1.4 million primarily related to our deferred tax assets related to foreign tax credits in certain jurisdictions.

The largest deferred tax asset relates to the impairment on our bitcoin holdings.

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The portions of multi-year contracts that will be invoiced in the future are not presented on the balance sheet in “Accounts receivable, net” and “Deferred revenue and advance payments” and instead are included in the remaining performance obligation disclosure below.

Total deferred revenue and advance payments decreased $14.2 million as of March 31, 2024, as compared to December 31, 2023, primarily due to the timing of product support and subscription services renewals and an increase in revenue recognized from previously deferred subscription services, other services, and product licenses.

Total deferred revenue and advance payments decreased $1.0 million as of March 31, 2024, as compared to March 31, 2023, primarily due to decrease in deferred product support revenue from an increase in conversions from on-premises to subscription services contracts, substantially offset by an increase in deferred revenue from subscription services contracts.

Total deferred revenue and advance payments decreased $25.9 million as of June 30, 2024, as compared to December 31, 2023, primarily due to (i) a decrease in deferred product support revenue from an increase in conversions from on-premises to subscription services contracts and (ii) a decrease in deferred other services revenue from an increase in revenue recognized from previously deferred other services, partially offset by (iii) an increase in deferred revenue from subscription services contracts.

Total deferred revenue and advance payments increased $3.7 million as of June 30, 2024, as compared to June 30, 2023, primarily due to (i) an increase in deferred revenue from subscription services contracts, partially offset by (ii) a decrease in deferred product support revenue from an increase in conversions from on-premises to subscription services contracts.

Our remaining performance obligation represents all future revenue under contract and includes deferred revenue and advance payments and billable non-cancelable amounts that will be invoiced and recognized as revenue in future periods.

The remaining performance obligation excludes contracts that are billed in arrears, such as certain time and materials contracts.

As of March 31, 2024, we had an aggregate transaction price of $338.1 million allocated to the remaining performance obligation related to product support, subscription services, product licenses, and other services contracts.

As of June 30, 2024, we had an aggregate transaction price of $360.7 million allocated to the remaining performance obligation related to subscription services, product support, product licenses, and other services contracts.

We expect to recognize approximately $242.4 million of the remaining performance obligation over the next 12 months and the remainder thereafter.

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Under our Treasury Reserve Policy and bitcoin acquisition strategy, we use a significant portion of our cash, including cash generated from capital raising transactions, to acquire bitcoins, which are classified as indefinite-lived intangible assets.

As of March 31, 2024 and December 31, 2023, the amount of cash and cash equivalents held by our U.S.

2024, we filed a prospectus for a new at-the-market equity offering program pursuant to which we may sell class A common stock having an aggregate offering price of up to $2.0 billion from time to time.

For additional information, see “—At-the-Market Equity Offerings” below.

As of June 30, 2024 and December 31, 2023, the amount of cash and cash equivalents held by our U.S.

entities was $30.3 million and $10.5 million, respectively, and by our non-U.S.

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We earn a significant amount of our revenues outside the United States.

We did not repatriate any foreign earnings and profits during the three months ended March 31, 2024 or 2023.

We did not repatriate any foreign earnings and profits during the six months ended June 30, 2024 or 2023.

Our material contractual obligations and cash requirements consist of:

• principal and interest payments related to our long-term debt;

• principal and interest payments related to our long-term debt, which includes:

o principal due upon maturity of our long-term debt instruments in the aggregate of $3.762 billion, excluding the 2025 Convertible Notes, which were converted or redeemed in their entirety on or before July 15, 2024;

o $2.5 million in coupon interest due each semi-annual period for the 2030 Convertible Notes;

o $2.6 million in coupon interest due each semi-annual period for the 2031 Convertible Notes;

o $9.0 million in coupon interest due each semi-annual period for the 2032 Convertible Notes;

o $15.3 million in coupon interest due each semi-annual period for the 2028 Secured Notes;

o $0.1 million due monthly in principal and interest related to our other long-term secured debt.

• rent payments under noncancellable operating leases;

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Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in the Notes to the Consolidated Financial Statements included therein.

Other than our issuances of the 2030 Convertible Notes and 2031 Convertible Notes described more fully below and in Note 5, Long-term Debt, to the Consolidated Financial Statements included in this Quarterly Report, there have been no changes to our material contractual obligations and cash requirements since December 31, 2023.

Other than our issuances of the 2030 Convertible Notes, 2031 Convertible Notes, and 2032 Convertible Notes described more fully below and in Note 5, Long-term Debt, to the Consolidated Financial Statements included in this Quarterly Report, and the conversions and redemption of the 2025 Convertible Notes described more fully below and in Note 5, Long-term Debt, and Note 13, Subsequent Events, to the Consolidated Financial Statements included in this Quarterly Report, there have been no changes to our material contractual obligations and cash requirements since December 31, 2023.

We believe that existing cash and cash equivalents held by us and cash and cash equivalents anticipated to be generated by us are sufficient to meet working capital requirements, anticipated capital expenditures, and contractual obligations for at least the next 12 months.

Beyond the next 12 months, our long-term cash requirements are primarily for obligations related to our long-term debt.

We have principal due upon maturity of our long-term debt instruments in the aggregate of $3.612 billion in addition to $2.4 million in coupon interest due each semi-annual period for the 2025 Convertible Notes, $2.5 million in coupon interest due each semi-annual period for the 2030 Convertible Notes, $2.6 million in coupon interest due each semi-annual period for the 2031 Convertible Notes, $15.3 million in coupon interest due each semi-annual period for the 2028 Secured Notes, and $0.1 million due monthly in principal and interest related to our other long-term secured debt.

We also have long-term cash requirements for obligations related to our operating leases, the Transition Tax, and our various purchase agreements.

As of March 31, 2024, we do not expect cash and cash equivalents generated by our enterprise analytics software business to be sufficient to satisfy these obligations.

As of June 30, 2024, we do not expect cash and cash equivalents generated by our enterprise analytics software business to be sufficient to satisfy these obligations.

As a result, we would seek to satisfy these obligations through various options that we expect to be available to us, such as refinancing our debt or generating cash from other sources, which may include the issuance and sale of shares of our class A common stock, borrowings collateralized by bitcoin, or the sale of our bitcoin.

Furthermore, if the conditional conversion features of the Convertible Notes are triggered, we may elect to settle the conversions of Convertible Notes in shares of our class A common stock, or a combination of cash and shares of class A common stock, rather than in all cash, which may enable us to reduce the amount of our cash obligations under the Convertible Notes.

The 2028 Secured Notes have a stated maturity date of June 15, 2028, but include a springing maturity feature that will cause the stated maturity date to spring ahead to the date that is (i) 91 days prior to the existing maturity date of the 2025 Convertible Notes (which is September 15, 2025), (ii) 91 days prior to the existing maturity date of the 2027 Convertible Notes (which is November 16, 2026), or (iii) 91 days prior to the maturity date of any future convertible debt that we may issue that is then outstanding, unless on such dates we meet specified liquidity requirements or less than $100,000,000 of aggregate principal amount of the 2025 Convertible Notes, the 2027 Convertible Notes, or such future convertible debt, as applicable, remains outstanding.

In addition, while the 2030 Convertible Notes and the 2031 Convertible Notes have maturity dates of March 15, 2030 and March 15, 2031, respectively, the holders of the 2030 Convertible Notes and 2031 Convertible Notes each have the right to require us to repurchase for cash all or any portion of their 2030 Convertible Notes or 2031 Convertible Notes, respectively, on September 15, 2028 at a repurchase price equal to 100% of the principal amount of the 2030 Convertible Notes or 2031 Convertible Notes, respectively, to be repurchased, plus any accrued and unpaid interest to, but excluding the repurchase date.

As of March 31, 2024, we held approximately 214,278 bitcoins, of which approximately 175,721 are unencumbered.

We do not believe we will need to sell or engage in other transactions with respect to any of our bitcoins within the next twelve months to meet our working capital requirements, although we may from time to time sell or engage in other transactions with respect to our bitcoins as part of treasury management operations, as noted above.

The 2028 Secured Notes have a stated maturity date of June 15, 2028, but include a springing maturity feature that will cause the stated maturity date to spring ahead to the date that is (i) 91 days prior to the existing maturity date of the 2027 Convertible Notes (which is November 16, 2026) or (ii) 91 days prior to the maturity date of any future convertible debt that we may issue that is then outstanding, unless on such dates we meet specified liquidity requirements or less than $100,000,000 of aggregate principal amount of the 2027 Convertible Notes or such future convertible debt, as applicable, remains outstanding.

In addition, while the 2030 Convertible Notes, the 2031 Convertible Notes, and the 2032 Convertible Notes have maturity dates of March 15, 2030, March 15, 2031, and June 15, 2032, respectively, the holders of these Convertible Notes each have the right to require us to repurchase for cash all or any portion of these Convertible Notes on September 15, 2028, in the case of the 2030 Convertible Notes and the 2031 Convertible Notes, or June 15, 2029, in the case of the 2032 Convertible Notes, at a repurchase price in each case equal to 100% of the principal amount of the applicable Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding the repurchase date.

As of June 30, 2024, we held approximately 226,331 bitcoins, of which approximately 175,721 are unencumbered.

We do not believe we will need to sell or engage in other transactions with respect to any of our bitcoins within the next twelve months to meet our working

capital requirements, although we may from time to time sell or engage in other transactions with respect to our bitcoins as part of treasury management operations, as noted above.

The bitcoin market historically has been characterized by significant volatility in its price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network.

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The following table sets forth a summary of our cash flows (in thousands) and related percentage changes for the periods indicated:

Six Months Ended June 30,

Net cash provided by operating activities

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Non-cash items to further reconcile net (loss) income to net cash provided by operating activities consist primarily of depreciation and amortization, reduction in the carrying amount of operating lease right-of-use assets, credit losses and sales allowances, deferred taxes, release of liabilities for unrecognized tax benefits, share-based compensation expense, digital asset impairment losses, amortization of the issuance costs on our long-term debt, and gain on extinguishment of debt.

Net cash provided by operating activities decreased $8.8 million for the three months ended March 31, 2024, as compared to the same period in the prior year, due to a $514.3 million decrease in net income and an $11.1 million decrease from changes in operating assets and liabilities, which was partially offset by a $516.6 million increase in non-cash items (principally related to changes in deferred taxes, digital asset impairment losses, and a gain on extinguishment of debt in the first quarter of 2023).

Net cash provided by operating activities decreased $13.7 million for the six months ended June 30, 2024, as compared to the same period in the prior year, due to a $639.1 million decrease in net income and a $7.2 million decrease from changes in operating assets and liabilities, which was partially offset by a $632.7 million increase in non-cash items (principally related to changes in digital asset impairment losses, deferred taxes, and a gain on extinguishment of debt in the first quarter of 2023).

Net cash used in investing activities.

The changes in net cash used in investing activities primarily relate to purchases of digital assets and expenditures on property and equipment.

Net cash used in investing activities increased $1.461 billion for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to a $1.460 billion increase in purchases of bitcoins.

During the three months ended March 31, 2024, we purchased $1.639 billion of bitcoin using net proceeds from the issuances of our 2030 Convertible Notes and 2031 Convertible Notes, net proceeds from the sale of class A common stock under our at-the-market equity offering program, and Excess Cash, while during the three months ended March 31, 2023, we purchased $179.3 million of bitcoin using net proceeds from the sale of class A common stock under our at-the-market offering program.

Net cash used in investing activities increased $1.908 billion for the six months ended June 30, 2024, as compared to the same period in the prior year, primarily due to a $1.907 billion increase in purchases of bitcoins.

During the six months ended June 30, 2024, we purchased $2.433 billion of bitcoin using net proceeds from the issuances of our 2030 Convertible Notes, 2031 Convertible Notes, and 2032 Convertible Notes, net proceeds from the sale of class A common stock under our at-the-market equity offering program, and Excess Cash, while during the six months ended June 30, 2023, we purchased $526.3 million of bitcoin using net proceeds from the sale of class A common stock under our at-the-market equity offering program and Excess Cash.

Net cash provided by financing activities.

The changes in cash provided by and used in financing activities primarily relate to the issuance and subsequent repayment of long-term debt, the sale of class A common stock under our at-the-market equity offering program, the exercise or vesting of certain awards under the Stock Incentive Plans, and the sales of class A common stock under the 2021 ESPP.

Net cash provided by financing activities increased $1.461 billion for the three months ended March 31, 2024, as compared to the same period in the prior year, primarily due to (i) a $1.376 billion increase in long-term debt proceeds, net of issuance costs, during the three months ended March 31, 2024 as compared to the same period in the prior year, (ii) the $159.9 million repayment of the 2025 Secured Term Loan during the three months ended March 31, 2023, which was repaid using proceeds from our sale of class A common stock offered under our at-the-market equity offering program, and (iii) a $128.1 million increase in proceeds from the exercise of stock options under the Stock Incentive Plans in the three months ended March 31, 2024, as compared to the same period in the prior year, partially offset by, (iv) a $201.9 million decrease in net proceeds from the sale of class A common stock under our at-the-market equity offering program during the three months ended March 31, 2024 as compared to the same period in the prior year.

Net cash provided by financing activities increased $1.926 billion for the six months ended June 30, 2024, as compared to the same period in the prior year, primarily due to (i) a $2.162 billion increase in long-term debt proceeds, net of issuance costs, during the six months ended June 30, 2024 as compared to the same period in the prior year, (ii) the $160.0 million repayment of the 2025 Secured Term Loan and related third-party extinguishment costs during the six months ended June 30, 2023, which was repaid using proceeds from our sale of class A common stock offered under our at-the-market equity offering program, and (iii) a $141.2 million increase in proceeds from the exercise of stock options under the Stock Incentive Plans in the six months ended June 30, 2024, as compared to the same period in the prior year, partially offset by, (iv) a $535.3 million decrease in net proceeds from the sale of class A common stock under our at-the-market equity offering program during the six months ended June 30, 2024 as compared to the same period in the prior year.

Long-term Debt

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in February 2021, we issued $1.050 billion aggregate principal amount of the 2027 Convertible Notes;

and in March 2024, we issued $800.0 million aggregate principal amount of the 2030 Convertible Notes and $603.8 million aggregate principal amount of the 2031 Convertible Notes.

We used the net proceeds from the issuance of the Convertible Notes to acquire bitcoin.

During each of the three months ended March 31, 2024 and 2023, we did not pay any interest to holders of the Convertible Notes.

in March 2024, we issued $800.0 million aggregate principal amount of the 2030 Convertible Notes and $603.8 million aggregate principal amount of the 2031 Convertible Notes;

and in June 2024, we issued $800.0 million aggregate principal amount of the 2032 Convertible Notes.

We principally used the net proceeds from the issuances of the Convertible Notes to acquire bitcoin.

During each of the six months ended June 30, 2024 and 2023, we paid $2.4 million in interest to holders of the Convertible Notes.

During the period from April 1, 2024 to July 15, 2024, we issued 1,632,305 shares of class A common stock and paid a nominal amount of cash in lieu of fractional shares in connection with conversions of $649.7 million aggregate principal amount of 2025 Convertible Notes and on July 15, 2024 redeemed $0.3 million aggregate principal amount of 2025 Convertible Notes, constituting all of the 2025 Convertible Notes then outstanding, at an aggregate redemption price of $0.3 million, equal to 100% of the principal amount of the 2025 Convertible Notes redeemed, plus accrued and unpaid interest, to but excluding such date.

In June 2021, we issued $500.0 million aggregate principal amount of the 2028 Secured Notes.

We used the net proceeds from the issuance of the 2028 Secured Notes to acquire bitcoin.

As of March 31, 2024, approximately 38,557 of the bitcoins held by the Company serve as part of the collateral for the 2028 Secured Notes.

We did not pay any interest to holders of the 2028 Secured Notes during the three months ended March 31, 2024 and 2023.

As of June 30, 2024, approximately 50,610 of the bitcoins held by the Company serve as part of the collateral for the 2028 Secured Notes.

During each of the six months ended June 30, 2024 and 2023, we paid $15.3 million in interest to holders of the 2028 Secured Notes.

In March 2022, MacroStrategy, our wholly-owned subsidiary, entered into a Credit and Security Agreement with Silvergate Bank, pursuant to which Silvergate Bank issued the $205.0 million 2025 Secured Term Loan to MacroStrategy.

We used $190.5 million of the net proceeds from the issuance of the 2025 Secured Term Loan to acquire bitcoin, $5.0 million of the net proceeds to establish a

reserve account that served as collateral for the 2025 Secured Term Loan, and the remaining net proceeds to pay fees, interest, and expenses related to the 2025 Secured Term Loan.

We used $190.5 million of the net proceeds from the issuance of the 2025 Secured Term Loan to acquire bitcoin, $5.0 million of the net proceeds to establish a reserve account that served as collateral for the 2025 Secured Term Loan, and the remaining net proceeds to pay fees, interest, and expenses related to the 2025 Secured Term Loan.

On March 24, 2023, MacroStrategy and Silvergate Bank entered into a Prepayment, Waiver and Payoff to Credit and Security Agreement, pursuant to which MacroStrategy voluntarily prepaid Silvergate approximately $161.0 million (the “Payoff Amount”), in full repayment, satisfaction, and discharge of the 2025 Secured Term Loan and all other obligations under the Credit and Security Agreement.

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In June 2022, we, through one of our wholly-owned subsidiaries, entered into a secured term loan agreement in the amount of $11.1 million, bearing interest at an annual rate of 5.2%, and maturing in June 2027.

During the three months ended March 31, 2024 and 2023, we paid $0.3 million and $0.3 million, respectively, in principal and interest to the lender.

During each of the six months ended June 30, 2024 and 2023, we paid $0.5 million in principal and interest to the lender.

Other than as discussed above, during the six months ended June 30, 2024 and 2023, we did not repurchase or prepay any of our outstanding debt.

We or our affiliates may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise.

Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

We may also prepay our outstanding indebtedness.

The amounts involved in any such repurchase or prepayment may be material.

We may effect debt repurchases or prepayments of certain debt using proceeds from the sale of our class A common stock pursuant to the August 2024 Sales Agreement (under which $2.0 billion is available for sale as of the date hereof), as described in the Use of Proceeds section of the related prospectus.

At-the-Market Equity Offerings

From time to time, we have entered into sales agreements with agents pursuant to which we could issue and sell shares of our class A common stock through at-the-market equity offering programs.

See Note 10, At-the-Market Equity Offerings, to the Consolidated Financial Statements for additional information regarding sales of our class A common stock pursuant to each of the sales agreements that were active during 2024 or 2023.

On August 1, 2024, we filed a prospectus for a new at-the-market equity offering program pursuant to which we may sell class A common stock having an aggregate offering price of up to $2.0 billion from time to time, through TD Securities (USA) LLC, The Benchmark Company, LLC, BTIG, LLC, Canaccord Genuity LLC, Maxim Group LLC and SG Americas Securities, LLC, as agents (the “August 2024 Sales Agents”) under a sales agreement dated August 1, 2024 (the “August 2024 Sales Agreement”).

The following table sets forth total shares sold and total net proceeds received (net of sales commissions and expenses) from shares sold under our at-the-market equity offering programs for the periods indicated (in thousands, except number of shares):

Three Months Ended

Six Months Ended

Total shares sold pursuant to at-the-market equity offering programs

Total net proceeds received from shares sold pursuant to at-the-market equity offering programs

Debt Repurchases and Prepayments.

During the first quarter of 2023, MacroStrategy voluntarily prepaid Silvergate the Payoff Amount in full repayment, satisfaction, and discharge of the 2025 Secured Term Loan and all other obligations under the Credit and Security Agreement.

During the three months ended March 31, 2024 and 2023, we did not repurchase or prepay any of our other outstanding debt.

We may also prepay our outstanding indebtedness.

The amounts involved in any such repurchase or prepayment may be material.

Non-GAAP Financial Measures

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Three Months Ended

Six Months Ended

Reconciliation of non-GAAP loss from operations:

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Three Months Ended

Six Months Ended

Reconciliation of non-GAAP net (loss) income:

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For example, in periods of GAAP net loss, otherwise dilutive potential shares of common stock from our share-based compensation arrangements and Convertible Notes are excluded from the GAAP diluted loss per share calculation as they would be antidilutive, and therefore are also excluded from the non-GAAP diluted earnings or loss per share calculation.

(3) For the three months ended March 31, 2023, interest expense from the amortization of issuance costs of the Convertible Notes has been added back to the numerator in the GAAP diluted earnings per share calculation (as disclosed in Note 9, Basic and Diluted (Loss) Earnings per Share, to the Consolidated Financial Statements), and therefore the per diluted share effects of the amortization of issuance costs of the Convertible Notes have been excluded from the “Interest expense arising from amortization of debt issuance costs (per diluted share)” and “Income tax effects (per diluted share)” lines in the above reconciliation for the three months ended March 31, 2023.

(3) For the three and six months ended June 30, 2023, interest expense from the amortization of issuance costs of the Convertible Notes has been added back to the numerator in the GAAP diluted earnings per share calculation (as disclosed in Note 9, Basic and Diluted (Loss) Earnings per Share, to the Consolidated Financial Statements), and therefore the per diluted share effects of the amortization of issuance costs of the Convertible Notes have been excluded from the “Interest expense arising from amortization of debt issuance costs (per diluted share)” and “Income tax effects (per diluted share)” lines in the above reconciliation for the three and six months ended June 30, 2023.

Non-GAAP Constant Currency Revenues, Cost of Revenues, and Operating Expenses

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General and administrative expenses

Six Months Ended

Exchange Rate

Non-GAAP Constant Currency (2)

GAAP % Change

Non-GAAP Constant Currency %

Product licenses revenues

Subscription services revenues

Product support revenues

Other services revenues

Cost of product support revenues

Cost of other services revenues

Sales and marketing expenses

Research and development expenses

General and administrative expenses

Exchange Rate

Non-GAAP Constant Currency (2)

GAAP % Change

Non-GAAP Constant Currency %

Product licenses revenues

Subscription services revenues

Product support revenues

Other services revenues

Cost of product support revenues

Cost of other services revenues

Sales and marketing expenses

Research and development expenses

General and administrative expenses

(1) The “Foreign Currency Exchange Rate Impact” reflects the estimated impact of fluctuations in foreign currency exchange rates on international components of our Consolidated Statements of Operations.

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Market Price Risk of Bitcoin.

We have used a significant portion of our cash, including cash generated from capital raising transactions, to acquire bitcoin and, as of March 31, 2024, we held approximately 214,278 bitcoins.

The carrying value of our bitcoins as of March 31, 2024 was $5.074 billion, which reflects cumulative impairments of $2.461 billion, on our Consolidated Balance Sheet.

We have used a significant portion of our cash, including cash generated from capital raising transactions, to acquire bitcoin and, as of June 30, 2024, we held approximately 226,331 bitcoins.

The carrying value of our bitcoins as of June 30, 2024 was $5.688 billion, which reflects cumulative impairments of $2.641 billion, on our Consolidated Balance Sheet.

We account for our bitcoin as indefinite-lived intangible assets, which are subject to impairment losses if the fair value of our bitcoin decreases below their carrying value at any time since their acquisition.

Impairment losses cannot be recovered for any subsequent increase in fair value.

For example, the market price of one bitcoin on the Coinbase exchange (our principal market for bitcoin) ranged from a low of $38,501.00 to a high of $73,835.57 during the three months ended March 31, 2024, but the carrying value of each bitcoin we held at the end of the reporting period reflects the lowest price of one bitcoin quoted on the active exchange at any time since its acquisition.

For example, the market price of one bitcoin on the Coinbase exchange (our principal market for bitcoin) ranged from a low of $38,501.00 to a high of $73,835.57 during the six months ended June 30, 2024, but the carrying value of each bitcoin we held at the end of the reporting period reflects the lowest price of one bitcoin quoted on the active exchange at any time since its acquisition.

Therefore, negative swings in the market price of bitcoin could have a material impact on our earnings and on the carrying value of our digital assets.

Positive swings in the market price of bitcoin are not reflected in the carrying value of our digital assets and impact earnings only when the bitcoin is sold at a gain.

For the three months ended March 31, 2024, we incurred an impairment loss of $191.6 million on our bitcoin.

For the six months ended June 30, 2024, we incurred an impairment loss of $371.7 million on our bitcoin.

Foreign Currency Risk.

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dollar, the currency in which we report our Consolidated Financial Statements.

International revenues accounted for 44.1% and 42.8% of our total revenues for the three months ended March 31, 2024 and 2023, respectively.

International revenues accounted for 42.8% and 40.7% of our total revenues for the three months ended June 30, 2024 and 2023, respectively, and 43.5% and 41.8% of our total revenues for the six months ended June 30, 2024 and 2023, respectively.

We anticipate that international revenues will continue to account for a significant portion of our total revenues.

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dollar-denominated cash and investment accounts.

As of March 31, 2024 and December 31, 2023, a 10% adverse change in foreign currency exchange rates versus the U.S.

As of June 30, 2024 and December 31, 2023, a 10% adverse change in foreign currency exchange rates versus the U.S.

dollar would have decreased our aggregate reported cash and cash equivalents by 3.9% and 5.4%, respectively.

If average exchange rates during the three months ended March 31, 2024 had changed unfavorably by 10%, our revenues for the three months ended March 31, 2024 would have decreased by 3.9%.

During the three months ended March 31, 2024, our revenues were not materially impacted as a result of a 0.9% favorable change in weighted average exchange rates, as compared to the same period in the prior year.

If average exchange rates during the six months ended June 30, 2024 had changed unfavorably by 10%, our revenues for the six months ended June 30, 2024 would have decreased by 3.8%.

During the six months ended June 30, 2024, our revenues were lower by 0.2% as a result of a 0.2% unfavorable change in weighted average exchange rates, as compared to the same period in the prior year.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis