Bitcoin Surge Helps MicroStrategy Post Profit for First Time Since 2020

The largest independent and publicly traded business intelligence company, MicroStrategy, the largest public holder of Bitcoin, reported its first quarterly profit in nine years due to a tax gain from its holdings.

The Virginia-based firm, led by Bitcoin maxi Michael Saylor, earned a profit of US$461 million, or US$31.79 per share, in the first quarter.

In addition, with Bitcoin's recent 72% price increase, MicroStrategy effectively lowered a reserve tied to prior significant impairment charges for the cryptocurrency, resulting in a US$453.2 million one-time tax gain.

MicroStrategy (MSTR), according to a Berenberg analysis, is in a prime position to profit from the rising price of Bitcoin.

For the first time in almost a year, long-term Bitcoin investors are making money, according to data from blockchain analytics startup Glassnode.

Saylor's business analytics software firm is the largest corporate holder of Bitcoin, holding about 140,000 BTC as a balance sheet treasury asset.

In the earnings call, Phong Le, president and chief executive officer of MicroStrategy, said, "The durability of our enterprise BI platform and the depth of our existing customer base continued to act as the drivers of growth in total revenue during the first quarter of 2023. The conviction in our Bitcoin strategy remains strong as the digital asset environment continues to mature.

"Furthermore, we are extremely excited to return to an in-person MicroStrategy World, showcasing the competitive advantages of our MicroStrategy One platform and highlighting the key areas of product innovation that will carry MicroStrategy into the future," added Le.

Saylor stepped down as CEO last year to pursue his plan to include Bitcoin in MicroStrategy's financial statements.

During Monday's earnings call, Saylor said, "Ultimately, it's not easy to see what better strategy there might be.

"We found by simply acquiring and holding Bitcoin, we can outperform our peers in the enterprise software business. The regulatory environment for Bitcoin is improving. As capital flows out of the crypto industry, it flows into Bitcoin," he added.

In 2020, Saylor started buying Bitcoin to reduce the company's cash reserves ahead of the waning inflationary threat.

MicroStrategy's financials show that the company had amassed 140,000 Bitcoin at the end of March. The firm spent about $179 million during the quarter to acquire 7,500 Bitcoin.

MicroStrategy's stock price rose in tandem with Bitcoin's price. Its year-to-date growth rate is 118%. Bitcoin's value has increased by almost 70% so far this year.

Andrew Kang, chief financial officer of MicroStrategy, said, "In Q1, we strengthened our capital structure by reducing leverage by fully repaying our bitcoin-backed loan. We also continued to strategically manage our balance sheet by adding 7,500 bitcoin in the quarter for a total of 140,000."

"Our goals for the enterprise analytics software business remain to grow our revenues and transition that business to the cloud while rigorously managing costs and strengthening margin as we focus on product innovation and winning market share," added the CFO.

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