NEXTDC Limited (NXT.AX) Earnings Call Transcript & Summary

Good morning, and welcome to the 13th Annual General Meeting of NEXTDC Limited. My name is Doug Flynn, and I'm the Chairman of NEXTDC. Thank you for attending. And let me take a moment to outline today's proceedings. You will have the opportunity to participate today irrespective of whether you're here in person or attending virtually. For those online, the platform will allow you to ask questions either via the website or the dial-in facility and to vote using the electronic voting card. Links to the online guide can be found in your AGM notice letter, in the Notice of Meeting or you can also go directly to the Investors section of the NEXTDC website. A link can also be found in the portal you are now viewing. If we experience any technical issues that have an impact on aligning the 2 audiences attending this meeting, I'll assess the circumstances and communicate further with you. I've been informed that a quorum is present. Accordingly, I declare the meeting open. Let me introduce you to my fellow directors...

[indiscernible] in the dark? It's ridiculous. Anyway...

That's a very good question. But I think -- I didn't have control over that, I can assure you. But I think we'll -- can we press on?

[indiscernible]

We are webcasting. I think that's the reason why we're doing it this way. Thanks. Point taken. I have with me here my fellow directors here in Sydney: Mr. Stuart Davis, Dr. Greg Clark, Mrs. Jennifer Lambert, Dr. Eileen Doyle and Mrs. Maria Leftakis. Joining us from the U.S. is Mr. Steve Smith. Our CEO and Managing Director, Craig Scroggie, is also in attendance, together with our Company Secretary, Mr. Michael Helmer. On your screen, you will also see our leadership team. Each of them are joining the AGM today. Our CFO, Mr. Oskar Tomaszewski, will be managing the shareholder questions on the web interface. So I'll refer to him when it comes time to answer any questions shareholders have submitted. The Notice of Meeting was made available to all shareholders on the 18th of October 2023, and I will take that as read. I can confirm that holders of approximately 354 million ordinary shares or 68.7% of the company's total shares outstanding have submitted their proxies. The annual financial statements of the company and its controlled entities as well as the reports of the directors and auditors for the year ended 30th of June 2023 have been published and distributed to shareholders. They can also be accessed at our website. Our auditor, Mr. Michael Shewan from PricewaterhouseCoopers, is also present. Mike is available to answer questions relating to the conduct of the audit and the audit report and accounting policies and preparation of the financial statements. The auditor's report in our annual report, which is also available at our website. Now today, I intend to provide an overview of our performance in the past year and our CEO, Craig Scroggie, will update you on business activities. And after that, we will turn to the formal business of the meeting. As part of receiving the financial statements and reports, we will also take questions in relation to the Board, management or the auditor. Because we're conducting today's meeting both in person and online, I will explain the process to ensure you're clear on how to use the platform to vote and ask questions. For those joining us online, voting on the resolutions will be conducted by a poll using the electronic voting card you received after clicking the Get a Voting Card button. [Operator Instructions] I encourage shareholders who have questions to submit do so as soon as possible. We have functionality to allow shareholders to dial in and ask questions by voice. [Operator Instructions] If you have any trouble using the platform or dial-in facility, please check the online guide on the NEXTDC website or contact the helplines shown on the screen. If you're attending in person, there are also some matters to note. You should have registered your attendance as you entered the room today. If any member or proxyholder has not registered their attendance at the door, please do so now. Staff from Link are here to assist you. Listeners are also registered electronically on Link's meeting registration system. If you wish to speak on a matter, at an appropriate time, please raise your hand and state your name and if applicable, the name of the shareholder you represent. It'd be appreciated if all mobile phones are switched off and recording devices are not used. With that, I will move to my address. Ladies and gentlemen, welcome to NEXTDC's 13th Annual General Meeting. It's a gathering that gives us the opportunity to share details about the continued success of the business. The company's vision is to help enterprises harness the digital age, improving our society through the advancement of technology. NEXTDC's purpose is to be the leading customer-centric data center services company, delivering solutions that power, secure and connect enterprise and government customers to world's most valuable resource: data. Continued expansion of NEXTDC's network of data centers is driven by growth in colocation and cloud services as organizations leverage digital mega trends, such as AI, robotics, 5G and the Internet of Things, whilst meeting sustainability and networking demands, amongst others, to implement new ways of working to achieve success. I'm honored to stand before you as we reflect upon a remarkable fiscal year ended June 30. During the FY '23 reporting period, NEXTDC has once again set new benchmarks for performance, reinforcing our position as a leader in the Australian data center services industry, including: growing the revenue by 25% to $362.4 million; increasing underlying EBITDA by 15% to $193.7 million; and a record new sales year saw contracted utilization reach 122.2 megawatts, which is up 47%. As subsequent to year-end, we saw a further increase in contracted utilization to reach 145 megawatts towards the end of August; and interconnections strengthened, increasing 7% to 17,816. The past year has been a testament to our commitment to growth, business resilience and adaptability in a rapidly evolving marketplace. Despite the backdrop of a world facing rising geopolitic tensions, supply chain disruptions and inflationary pressures, the demand for digital infrastructure continues to surge. As technology adoption permeates through all areas of life, infrastructure strategy is critical to supporting sustainability goals, reducing operating costs and resilience. The role NEXTDC plays as Australia's premier customer-centric data center service provider has never been more important. In the 13 years since the company's inception, we've established a presence in all key Australian marketplaces with a road map of expansion facilities in planning and development and are now expanding overseas, starting with new strategic development projects in both Malaysia and New Zealand. We have also continued to build our domestic platform with new projects now underway, such as A1 in Adelaide, which is scheduled to open in the first half of calendar 2024, adding a total of 5 megawatts of planned power capacity to that market. We're also building in Darwin with our new D1 facility planned to eventually provide up to 7 megawatts of capacity in that market. We're also in the process of adding new edge -- emerging edge opportunities, such as PH1 in Port Hedland and NE1 Newman in the Pilbara, that will extend the availability of critical digital infrastructure to one of the most remote locations on earth. Notably, these remote facilities will operate in a hostile environment with temperatures regularly soaring over 45 degrees, where cyclones can strike and where fine red dust is an ever-present feature. We've mitigated these risks and already have customers benefiting from our facilities. Our funding position has further strengthened in FY '23. We upsized our debt facilities by an incremental $400 million and successfully raised $618 million in equity through an entitlement offer, resulting in total liquidity to $2.3 billion as at the end of FY '23, ensuring that we are well funded to seize the growth opportunities in front of us, both domestically and internationally. The emergence of generative artificial intelligence as a mainstream business tool and the accelerated -- accelerating adoption of other forms of AI has changed the game for digital infrastructure service providers. The significant growth in this technology and the data that underpins it has ushered in a new era for companies able to provide the heightened requirements for power, cooling, resilience and security. We're seeing practical applications for AI rapidly expanding across all industries with the major tech companies allocating billions of dollars in capital resource to meeting current and future demand for these applications. Now this, in turn, is placing increased pressure -- I might have turned my phone off but I didn't turn my watch off. Sorry about that. This, in turn, is placing increased pressure and demand on data center service providers to support their customers as they scale up their infrastructure. As a premium service provider in this area with a track record of delivering on customer requirements, our sales pipeline continues to hit record highs. Now pleasingly, as a result, we're also seeing our service order commitments grow larger in size and longer in terms, which augurs well for our long-term sustained growth. We've spent 13 years building a premium brand on unparalleled design and engineering and operational expertise in delivering a quality and flexible service that caters for the needs of our customers. NEXTDC is perfectly placed to support this next frontier as our Tier-certified platforms and go-to-market strategy aligns precisely with these developments. We have proven over many years in servicing some of the world's largest technology companies that our approach to innovation allows us to both deliver a 100% uptime guarantee while also being an industry leader in the way we design and operate our data centers to minimize their environmental impact. Now perhaps the most telling performance metric for NEXTDC in FY '23 was sheer volume of the many new and long-standing customers that demonstrated their commitments to us, including many who renewed their existing operational footprints in current and new locations. In FY '23, we achieved a record increase in contracted utilization, rising by 39.2 megawatts, a significant 47% jump, to reach 122.2 megawatts. And following year-end, we also announced a further increase in the level of contracted utilization, up a further 23.2 megawatts or 19% to 145.4 megawatts. Sydney, S3, the building you're in right now and Melbourne M2 and M3 are, in particular -- particularly high demand, with wins across enterprise, government and hyperscale customers, including cloud services, mining services, financial services, media and entertainment and energy providers. Now these new contracts not only secure future cash flow but have also stimulated an acceleration in planning for new developments in Sydney S4 and S5 and in Melbourne M4. We continue to expand our team, focusing on safety management, security, sustainability, customer service, global operations and facilities management. In Kuala Lumpur, we've now assembled a local team to lead our expansion into Asia. And as always, we remain committed to talent acquisition as well as the training and development of our existing employees. We recognize that human capital is at the heart of our expansion and central to our success. During Q4 of FY '23, the company launched a successful $618 million entitlement offer to help fund NEXTDC's international expansion and accelerated fit-out of new contracted hyperscale commitments at S3 Sydney, and we're very pleased with the confidence shown by our shareholders in taking up their entitlements. With one additional share available for every 8 shares held, the rate of take-up amongst institutional investors was 99% with a further 87% of retail shares also taken up by existing shareholders. All shares not taken up by institutional and retail investors were duly secured by sub-underwriters, all of whom were also existing shareholders in NEXTDC. So thank you for the trust you have placed in us. Meanwhile, our commitment to good governance, sustainability and community engagement is there for you to review via our environmental, social and governance report and our corporate governance statement available for download from the NEXTDC website. Regulatory compliance remains a focal point, particularly in our expansion into Asia. Achieving Malaysian digital status was critical to getting started on KL1, and [ commitments ] to the DTA Certified Strategic status we achieved via the Australian government for all our domestic facilities. We continue to maintain certifications for our existing fleet, including Uptime Institute Tier certifications, key ISO standards and relevant industry security standards, plus sustainability credentials, including Climate Active and TRUE waste management, all of which highlight our commitment to data security, sovereignty and ethical practices. Our commitment to operating efficiency is evident through our facilities' NABERS 5-star energy ratings and our efforts to maintain the lowest possible PUE utilization effectiveness metrics, which provide tangible evidence of our environment credentials, the efficiency of our infrastructure and our work to minimize energy usage of our customers and our business. In addition, we actively strive to achieve new industry benchmarks for sustainable data center design and sustainability best practice across energy and water usage and waste management. In closing, I want to express my gratitude to our dedicated staff, management team and Board for their unwavering support and contributions to the Board's success. At NEXTDC, we are thrilled about the opportunities that lie ahead. For our shareholders, we are confident that the best is yet to come, and thank you for your support and trust. I'd now like to welcome Craig Scroggie, NEXTDC's Chief Executive Officer, to provide more detail on the data center services market as well as the strategic direction the company is taking to capitalize on the opportunities before us. Thank you. Craig?

Thank you, Doug. Ladies and gentlemen, thank you for joining us today. It's my pleasure to be here reporting on a remarkable year for our company. It's been a year of redefining what's possible for us, a year of driving new opportunities where we've expanded our horizons and set new benchmarks for performance. We remain committed to and are 100% focused on delivering the world's highest standards of data center interconnection services. The financial metrics we reported earlier this year underscore our commitment to growth. With a record-breaking level of new sales in '23, combined with the accelerated opportunities created by artificial intelligence and digital transformation, the stage is set for sustained growth over the next decade and beyond. Total revenue was up 25% in '23, and underlying EBITDA increased 15%, which means our 6-year compound annual growth rate for these metrics were tracking at 20% and 21%, respectively. The growth in customer numbers and interconnections also continued to trend up. We welcomed 207 new customers into our ecosystem and provisioned 1,203 net new connectivity services. These accomplishments wouldn't be possible without our unwavering dedication to delivering large infrastructure projects, independently accredited premium services that meet our customers' needs and build enduring relationships based on positive experiences. The pace of digital transformation has reached unprecedented levels. Businesses worldwide are digitizing their operations and placing the highest priority on ensuring the availability of their systems and applications. The exponential growth of data, its capture, sharing, storage and analysis are all at record levels and continue to climb. In just the past 2 years, approximately 90% of the world's data has been generated with estimates that we have surpassed 2.5 quintillion bytes of new data on a daily basis. Resilient, secure and interconnected digital infrastructure has never been more important to ensuring the burgeoning digital economy continues to thrive. The cloud continues to evolve, driving operational transformation. Gartner predicts that 85% of organizations will have adopted cloud-first strategies by '25, while they also identified that spending on cloud in Australia reached $18.7 billion in '22. We're proud of our proven record of renewing and expanding service contracts with customers as well as attracting new customers. In both cases, they are looking to trusted partners offering solutions that address the new challenges they face in a rapidly evolving economy. We find ourselves at the threshold of the Fourth Industrial Revolution. It's a time marked by an unprecedented rate of change. Innovation cycles are shortening, and we're witnessing the convergence of technologies like AI, augmented reality, 5G, the Internet of Things and many more, all of which generate extraordinary volumes of data. As a leading player in the industry, we're very well positioned to leverage this digital acceleration and continue providing innovative, differentiated solutions to our customers. To stay at the forefront of this ever-evolving landscape, we've aligned our business strategy and services with key mega trends that need premium digital infrastructure. At present, artificial intelligence is stimulating unprecedented demand for data center services globally. The emergence of this technology requires new levels of power density, cooling, security and interconnection that we are able to provide. It's encouraging to note we're yet to experience AI's full impact on demand at NEXTDC. Our contract increases in '23 were driven by traditional cloud services demand and major enterprises moving to colocation. The wave of artificial intelligence infrastructure deployment is just arriving in Australia. And so we anticipate growth in onshore hosting for these premium environments to become a major factor in '24. As adoption rates accelerate, the facilities that solve the power, secure and connect challenge will be in demand. And this is central to our brand promise. The global AI market is expected to grow at an annual rate of 37% between '23 and '30. Generative AI, including tools such as ChatGPT, which can create multimodal context such as text, image and code, is forecast to reach a market size of $209 billion by '32. As an indicator of data center growth being driven by accelerated digital transformation and the urgency to scale up for AI, McKinsey analysts have forecasted the data center market in the U.S. will reach 35 gigawatts by 2030, up from 17 gigawatts in '22. Building upon our strong foundation, we continue to scale our platform domestically as cloud migration accelerates. During the early part of '23, new, state-of-the-art, generation 3 hyperscale facilities were opened in Sydney and Melbourne. Combined, and when fully fitted out, these 2 facilities will have introduced 230 megawatts of new capacity in Australia's 2 largest markets. In August this year, we opened Port Hedland, our second edge data center, which will introduce critical infrastructure and cloud connectivity within proximity of critical pit-to-port mining operations in the Pilbara region. A second Pilbara edge data center is currently under construction in Newman. Both of these facilities will advance digital transformation for the nation's booming resources industry and customers who are world leaders in leveraging digital mega trends to drive safety, productivity, cost efficiency and automation. We are very excited about the potential for our customer-led core-to-edge digital infrastructure strategy to solve exploding data management problems for organizations with remote and rural operations. Critical infrastructure close to production edges and interconnected to our cloud, carrier and digital services ecosystem will accelerate innovation cycles through the application of AI and other digital mega trends. Another major new product development in the last 12 months was the opening of our innovation center at M2 in Melbourne. This is where our customers deploy bespoke mission-critical operations services, such as network and security operation centers, ensuring their most important teams and processes can access the power, security, connectivity resilience required to manage 24/7 operational continuity. Digital growth in the Asia Pacific region is tracking ahead of global averages. Our developments underway in Kuala Lumpur and Auckland represent important new frontiers for NEXTDC. Work is already underway to build Malaysia's first Tier 4-certified colocation data center, which -- with Stage 1 on target to open in the first half of '26. And as we continue to plan our expansion across Asia, we are unwavering in our commitment to deliver sustainability, innovation and 100% uptime SLAs that set new critical infrastructure standards in these high-growth developing territories. At NEXTDC, safety, remains our #1 priority. Our goal is to achieve 0 injuries across all operations to ensure a safe and healthy working environment for every team member, contractor, customer and visitor. It is our mission to do everything we can to ensure everyone goes home from a NEXTDC data center in the same condition they arrived whether it'd be working at a construction site, in a facility or in an office. Our ISO 45001 health and safety certification is a testament to our commitment to safety in both construction and operational facilities management. Operating with the highest standards of energy efficiency, water preservation and waste management is integral to our mission. We aim to build a reliable, secure and highly energy-efficient infrastructure platform. Importantly, our strong emphasis on energy efficiency and sustainability is achieved without compromising world-class operational excellence. At NEXTDC, we also acknowledge that keeping pace with digital acceleration comes with sustainability challenges, and we are determined to lead the way to sustainable data center growth. We believe our industry faces a dual mandate when it comes to sustainability. One is a moral responsibility and the other a strategic necessity. We will continue to prioritize energy efficiency, as a central tenet across the full life cycle and supply of our data center design, construction and operations. We continue to place equal focus on advancing our waste diversion initiatives, improved power efficiency, water conservation and renewable energy and are staying attuned to emerging sustainability trends and challenges. Our company has always had ESG as a central part of its product and service offering. Doing what we do responsibly, sustainably and with an eye to the well-being of our team and our community is aligned with our personal beliefs and our stakeholders. Having a high value and profitable business is important to us. Innovation has always been at the core of our business. Indeed, in the technology space, it is an imperative to survive. In '23, we continue to be recognized for the global industry leadership in data center engineering, customer experience and energy efficiency. Our Uptime Institute certifications set benchmarks for the world's highest quality, resiliency and operational standards. Our benchmark PUE performance is a tribute to our commitment to market-leading energy-efficient design, and operation, while our prefabrication methodologies for hyperscale and Edge data centers is allowing us to deploy new infrastructure quickly and cost effectively. Looking forward, we'll continue winning new business by leading the hybrid cloud computing revolution and extending our interconnection and infrastructure services in and across the Asia Pacific. Our infrastructure platform and designs are AI workload density and liquid cooling ready and provide customers with the resilience, scale, sustainability and flexibility they need to address whatever comes next. We remain dedicated to innovation and operational excellence, making us the premier marketplace for the digital economy. Before closing, I'd like to mention that this year, we were once again honored to have been recognized as Frost & Sullivan's 2023 Australian Data Center Services Company of the Year. It is the third consecutive time we've received this award and acknowledges our industry expertise and dedication to customer experience. We also received the 2023 Asia Pacific Customer Value Leadership Award from Frost & Sullivan. And as we expand into Asian growth markets, this regional award further acknowledges how our innovation, our product portfolio, our energy efficiency and operational excellence creates differentiation. And we'll deliver new standards for customers in the region. In conclusion, I would like to express how proud I am of our entire team, of their incredible achievements. The next decade presents unlimited potential, and we are ready to realize the opportunities before us. The future is now. Together, we remain committed to delivering exceptional services to our customers, meeting their evolving needs and driving innovation in the industry. I would also like to extend my sincere gratitude to NEXTDC's Board of Directors, who play a very important role in setting the standards for good governance and risk management. I am confident that as we continue to execute our growth strategy, shareholder value will continue to be a feature of your equity in NEXTDC. As you may have heard, I'm a huge believer in Bill Gates' quote, "Most people overestimate what can be achieved in a year and underestimate what they can achieve in 10 years." Our success to date has been outstanding, but with AI looming as an enormous tailwind for the data center industry, I believe we are at the beginning of the most important technology change since the introduction of the Apple iPhone as a platform. The next 10 years promise to be very exciting, and we intend to grow and continue to take our unfair share of this very exciting market. Thank you for your trust and commitment to NEXTDC. Thank you.

Thanks, Craig. Before proceeding with the business of the meeting, a quick reminder of today's procedures. Link Market Services have been appointed returning officer for this meeting. I'm satisfied as to their independence. We'll be conducting all voting by poll. On a poll, every member present in person or by representative, attorney or proxy is entitled to 1 vote for each share held. If attending online, you can cast your vote using the electronic voting card received after you register to get a voting card. You will then be asked to enter your shareholder number, which is your SRN or HIN plus post code if in Australia or country if you're outside Australia. The proxy votes already received for each resolution will be viewable on the platform, as we move through the resolutions. These will be current as at the proxy voting deadline, which was 11:00 a.m. Sydney time on Wednesday, 22nd November 2023. Any undirected proxies in my favor as Chairman will be voted in favor of the relevant resolution. Following discussion on all items of business, I will close the poll 5 minutes from the meeting ends. At the result -- as results of the poll will take a little time, we will be announcing them to the ASX this afternoon. Shareholders can submit questions during the meeting. And if you're attending online, you can also do so by clicking on the Ask A Question button. To ensure your questions reach us in time, I ask that you submit them now if you've not already done so. If we're not able to get through all the questions today or if there are specific questions to be better addressed on an individual basis, we'll respond to them after the meeting. If we receive multiple questions that are the same or similar, we'll try to amalgamate them into one or choose to answer the broadest question, which covers off the others. To ensure all shareholders have an opportunity to ask a question today, the Chairman will accept up to 2 questions from each shareholder for each item of business. I'll now move to the formal resolutions. First item on the agenda deals with the receipt and consideration of the financial reports and the reports of the directors and auditor for the financial year ended 30th of June 2023. No shareholder vote is required in relation to this item of business. However, shareholders now can ask questions or have a discussion on these matters, and now is a good time to ask questions of a general nature about the company as opposed to questions that are specific to today's resolutions. NEXTDC's financial report, directors report and auditors report for the year to 30th of June 2023 is incorporated in the 2023 annual report, which has been sent towards shareholders who have requested that report and which is available on the company's website. At this time, I would encourage any shareholder to raise any questions they may have of the auditor, which are relevant to the conduct of the audit and the preparation and content of the audit report. Are there any shareholders in the audience who wish to ask a question? Go ahead.

Would you like me to stand or...

No, you're good.

My name is [ Mary Curran ], and I'm a new shareholder to your company. And first of all, I'd like to thank you for having the AGM in your premises. It's a really nice way for us to get to see what it's all about, so thank you for that. And thank you also for having the hybrid meeting. I think that's really important. And I do hope you continue to do that. So thank you. So my question -- I've got a few. I'll stick to 2. My question relates to the Page 21, the market growth. Now what I'm looking at is the differences in the percentage between the contracted capacity and the building capacity, which sort of means to me that someone said they're going to take it, but they haven't fronted up with the money. So if we look over the last few years, and you also actually had a very good graph, it was the red line on the black blocks. So if you look at 2023, you'll see the difference is from 58% to 92%. In 2022, it was 64%, 73%; '21, 68%, 79%, et cetera, so there's a much larger gap significantly actually. So I'm assuming that means you've contracted it, but the people haven't yet built or paid. Is that because it's not built? Is it because they haven't moved in? Is it just a factor of the financial year? Maybe you could fill me in on that one.

I'm going to pass it to Craig, but it's all in the timing. Craig?

I didn't say the year, the time. So will that graph then revert back to a more stable graph?

Yes. I'm not sure who's on the AV, but could you just put Slide 17 up for me, just want to make sure.

Yes, the one on the black. That's the slide. It's very evident on the slide, so even on the AR.

Yes. Thanks very much for the question. The black bars indicate what we have contracted. We generally don't build a lot of infrastructure before customers sign contracts with us. We build enough infrastructure to start the development, so to have the building shell in place. So the building you're sitting in today, we built the shell. We had some early customer orders, but we -- in order to be highly efficient with our capital, we only deploy the capital when we get customer orders. So we build the shell and then the generators, the UPS systems, the chillers, all the things that we need to run the customer's computing infrastructure is installed after the customer gives us an order. So what you can see there is -- in that beautiful chart is the timing between us having had sold record capacity. So in this last couple of quarters, we sold almost the equivalent of what we had sold over the past decade. So the industry is really, really growing at an extraordinary rate. It would normally take us about 1 to 1.5 years to build, manufacture, ship, install and commission the generators and the chillers and the UPS infrastructure. And once we've done all that work, the customer then moves in and the red line will meet the top of the black line because once we've delivered everything and they've installed their computers, they'll start paying us. So it's just a timing difference between us receiving the order from the customer and having a contracted commitment to build them and then the year to 1.5 years it takes for them to move in and start using our infrastructure.

So then generally, you're expecting that to narrow -- the gap to narrow, right? So you will be getting the money in.

That is correct.

And without the plant going into Malaysia, is that something that will throw the graph out again or...

Any individual facility today is really not large enough to create a big gap. What creates a big gap is a large customer order, so it's a very, very positive development. And that means that the customer has committed. These larger contract commitments can be a decade or a decade-and-a-half long in tenor. And we have very, very low churn. So once customers have moved in, they generally don't leave.

And just on -- I mentioned the Malaysian plant you -- I think you said $250 million in CapEx so far. Is that...

We haven't spent that number, but we will spend that over a number of years.

Right. So what are our thoughts there about, say, sovereign risk? I mean Malaysia hasn't always been very kind to Australian companies. You said you own a bit. Do you actually own the freehold?

Yes. So I was just trying to make sure I'm clear on the question. So was your question concerned about the sovereign risk of the operation or...

No, not your operation, the sovereign risk of operating in Malaysia really. I mean, as I said, it hasn't always been -- hasn't been very common to Australian companies.

So just a few points. First of all, we worked with Austrade with the Malaysian government directly through the Malaysian Economic Development Authority. They were incredibly welcoming of us to build a piece of world-class digital infrastructure that doesn't exist in Malaysia today. So we are building in Kuala Lumpur the first Tier 4 certified digital infrastructure asset in that country, so wonderful support. We also were given an exemption from the Malaysian government to own the underlying land. So in the ordinary part, the Bumiputera exemption process required express permissions to allow us to own those assets. The digital infrastructure that we will build not only will be important for cloud and artificial intelligence technologies but delivering Netflix and all the other types of services that we use as consumers every day, supporting telecommunications industry and other mission-critical services. So we think that the opportunity in those emerging markets, given the size of the population and the rate of growth of digital services is going to put us in a very, very good position. The government has been extremely welcoming. Customers can't wait for us to get started and be operational. And I'm thrilled that we've got the opportunity to be able to grow our world-class platform in Malaysia.

I did have one more question, but I will adhere...

If we've got time, we can come back to the other ones. Yes.

My name is [ Wayne Arthur ]. I've got a few questions for the auditor.

Okay. Go ahead, Mr. Arthur.

In an accounting sense, when a company buys property, plant and equipment, is that an expense in the profit and loss account? Or is that an additional -- addition to the capital items in the balance sheet?

Mike?

Can you hear me? Thank you for the question. So I mean, you'll see in our opinion at the back of the annual report, one of the key areas that we look at is the accounting treatment of plant, property and equipment. In there, it spells out our procedures that we undertake as auditors to determine whether the accounting policy is appropriate and in line with accounting standards. There are rules under accounting standards, whether you capitalize that expenditure or treated as OpEx. For the most part, for the data centers that NEXTDC are currently constructing, it's treated as a capital expense. And we would see that as appropriate in line with accounting standards. So for the most part, it's capitalized in the stage of construction.

In the audit report, you referred to the various significant audit items, and one of them is property, plant and equipment. And it says that one of the things that you did was assess the appropriateness of capitalization of internal costs, in particular, salaries and wages. Now what did you do when you made that assessment?

So certainly, that is one of the procedures that we undertake. We would look at whether the salaries and wages were attributable to employees that were solely responsible for construction of those assets. And then we would undertake testing to go back to the amount of money that they've been paid, employee contracts and the like to make sure that the costs were accurate.

So is what you're telling me that when the company buys new property, plant and equipment, the capital cost of buying those things is okay to be added to the capital account and that the cost of wages and salaries relevant to the buying is also okay to be added to the capital account?

It depends if the nature of those costs are in line with accounting standards, and there are various rules in accounting standards that you -- the company has to consider in preparation of the annual report and that we, as auditors, would then consider in our audit.

But if for this audit, did you determine that various wages and salaries will legitimate capital -- capitalization items?

In the context of the audit of the financial report as a whole, yes, that's the case. And we -- as you see, we issued an unqualified audit opinion, which as you'll be aware, we'd say that the financial report has been prepared in accordance with accounting standards and free of material misstatements.

Okay. One more question on the audit. In the course of the presentation that we've had today, we keep seeing the initials IB -- EBITDA. Does that stand for earnings before interest, taxation, depreciation and amortization? And do I take it that, that if a company is paying interest, that's a legitimate business expense?

Yes.

Yes. And if a company is making profits, taxation is a proper business expense?

Correct.

And if a company owns capital equipment, depreciation is a proper business expense?

Correct.

And if a company has intangible assets such as capitalized borrowing costs or computer programs, amortization is a legitimate business expense?

Correct.

And it's only after you've deducted all of those expenses such as interest, taxation, depreciation and amortization that you get to net profit after taxation.

Correct.

Yes. Now can I just ask another question of the auditor about this? You've been the auditor now for 3 years, and in those 3 years, the company only ever earned a profit once. Now in carrying out the audit, did you gain any insights as to why the company doesn't seem to be able to make a profit?

I might pass that back to the company. The role of the auditor is to undertake an independent audit as to whether the financial report presents a true and fair view. That's the role that we've taken. We've issued an unqualified opinion on that basis. The financial performance is probably a question for the company to answer.

Could -- the use of EBITDA is very common. It's not a statutory sort of numbers. We report EBITDA. We report EBIT. We report profit after tax, and it's all clearly laid out in our annual report. But using EBITDA is a very common metric that most -- many, many companies use. If you want us to make a profit, we should stop all CapEx now. We should stop all growth now. In a couple of years' time, the company will just churn out cash. But that's not going to be in the best interest of shareholders. The best interest of shareholders is continue to drive the growth, continue to drive the overall value and the value per share of the company because as we look at each project, each project has a significant internal rate of return, but that internal rate of return is against success cash flows off out into the future. So because of the rate at which the company is growing, we are growing off a relatively modest base of filled-up data centers. And think of those. It's M1. It's S1. It's B1. It's S2 and it's P1. So those data centers are essentially full, but this one is not. And as this one is very largely sold already, but as we know, because of the lag, the time it takes to fit out the data center and have that cash roll in, that goes on over the next 4 or 5 years until this is full with equipment, computers, et cetera, et cetera. And that cash flow then sits there for a very long time off into the future. So the issue of turning up profit is relatively easy, just stop growing. And that is not, in our view, in the best interest of shareholders.

When I look at your competitors, some of them are growing, and they are turning a profit. Let me give you a good example. Equinix, the largest data center company in the world, lots of data centers in Australia. When you look at its annual report, its profit is 9.6% of revenue. Now why can't this company make 9.6% of revenue?

It's easy. Let's not go back 13 years. Let's pretend we started the company back in, I don't know, 1980. If we grew -- we started in 1980 or 1990, then we'd be doing that as well. This company is only 13 years old. So the base of filled up data centers, as I said, is relatively small compared to the scale of what we're building now. We love Equinix. We think they are our model. As we look at them, we think they are -- we think that's where we want to be as the years go forward. We do have Steve Smith on the line, who was the key driver of that growth. I don't know, Steve, are you able to elaborate on that?

Yes. Can you hear me okay?

Yes.

Okay. It's a good question. But Doug, I think you hit the nail on the head. I was there for a decade running it. The company is 24, 25 years old versus 13 years old. And for the first 10 to 12 to 15 years, it ran at the same kind of basis that you see NEXTDC running. So the growth in the CapEx required to scale a company, you're going to be in this mode for quite some time. You got to remember, Equinix now is in 30, 40 countries, and it's just much bigger scale. It's a $7 billion company versus the size of this company. But when Equinix was running at this same size, had the same financial characteristics. So I think I'm in full support of Doug's comments on this. You want to focus on revenue growth, EBITDA growth, utilization going up, all the metrics that Craig went through are exactly what you want to see at this stage of this company. And as long as you're getting a return on that invested capital for the capital you're putting in the ground, that's where you want to put it.

Okay. Thanks, Steve.

But if you're not making profits, the only way you can fund extra capital expenditure is either borrowing or buy more capital raisings. And that could start to become a problem.

Your point on that is, one, absolutely correct and b, well made. So we must be -- take great care in the investment decisions we make. We must be highly confident that we're going to fill those data centers, and we're going to fill them profitably. So you're absolutely correct about that. And I can tell you that is 90% of what this Board focuses on, is to determine that whole investment framework as we go forward. We have another separate investment committee, which very few other companies have. So you're absolutely correct.

Okay. I'll let someone else have a go.

Thank you.

I'd like to -- my name is [indiscernible], I'm a shareholder for quite some time. And I'd like to endorse Mary's thanks for having the meeting here. It's much more exciting than going to the MLS. I was really excited when I came in today. I just got a couple of questions. With the -- I know we're all very excited about all the unending growth. What's the impact of some of the new competitors moving into the Australian environment? And some of those are existing customers. So do you expect them to waddle away or continue to have some options of their own or whether you have other people moving in instead?

I'll go to this a little bit, and I'm going to pass to Craig. It's a very good question. So we have some of the hyperscale customers. I will have to mention names. Amazon Web Services and Microsoft both do self-builds. They both do self-builds, but they typically maybe 50% to 30% of their demand in a particular significant marketplace, they might do self-builds. But once they've contracted with us, they're not going to take anything out of here and move to their own self-builds. There's such huge demand that I think they just want to keep their finger in this space. So we're not expecting that to change. As to new entrants coming into the marketplace, good luck to them. We feel like we're very, very well positioned. There's some strange new companies coming in. I won't go any further with that. But we're also seeing other things happen. We're seeing more public companies going to the private market. This is globally. And there's been a reduction in the number of private DC companies around the world. We're the only one in Australia that's a pure-bred DC company in the public market. So you're seeing some consolidation at one level, and you're still seeing new entrants coming into the sector, which is pretty unusual. Anyway, Craig?

Thanks. It's a great question. I'll give you a relatively simple answer. Doug was at a fair amount of detail in there. For our large global hyperscale customers, Microsoft, Amazon, Google, if you just think about something as simple as your mobile phone, every day, you take a photo of something. And the photos that you took a year ago, in 2 years, in 3 and 4 years ago are still on your phone. And every year, we create more information than we've ever created at any other point in time in history. And whether it's consumers taking photos or you're downloading videos or it's businesses storing information, every year, the amount of IT infrastructure required to store and share all of that continues to grow. I've been in the IT industry for 30 years, and I have never seen anything like what we're experiencing now in my career. It's something quite extraordinary. The industry's dynamics are a little bit unique. So just to explain the competition component is that we don't look at Microsoft or Amazon as competitors. They are customers. And sometimes they build their own offices and sometimes they build their own data centers and sometimes they buy their own transport companies, they generally tend to do a little bit of a lot of things. But the volume of growth that they are all experiencing requires them to work with key partners who can grow quickly to support their customers. So we have many customers who are growing faster than they can meet their own internal needs. There are many companies that want to invest in data centers. The world's largest pension funds are investing billions and billions every year because this is one of the most significant and high-returning digital infrastructure opportunities in the world. So I see that competition as a very, very positive endorsement of us being in quite an extraordinary space. And the fact that, generally, digital infrastructure customers stay for 10, 15 or 20 years, we feel very, very confident that the clients that we have will continue to renew with us as they have in the past.

So we're not the ant under the elephant's foot.

We would be in Australia, say, 12% to 15% market share.

I've got another question. I've been impressed each year by your passion in relation to your sustainability focus. That's one of the things I like about the company. Do your customers care about it?

I think sustainability is probably one of the most important factors for the future of data centers because the amount of power that we consume is obviously very, very significant. We need power to do everything from provide you your electricity at home to run your TV and cook meals through to supporting government infrastructure. The digital infrastructure component will have a large power footprint. One of the biggest challenges we have really is that we can't avoid using power, but we can have a very significant influence in the way in which we use it. So by creating containment systems that allow us to use the smallest amount of energy to cool computers rather than just putting a lot of cold air into a room, that allows us to get highly efficient PUEs, so the power utilization efficiency of the data center is low. We are the only operator in the country that independently government certifies our NABERS rating. So our energy efficiency is independently measured, and we publish that through the Australian government. Sustainable energy is a critically important factor, but it's a challenging one because, as you know, with solar and wind, the sun doesn't shine all day and the wind doesn't blow all the time. And for baseload fossil fuel energy, over time, we're going to have to find a sustainable baseload replacements that are renewable. So there are many things that I think the company is doing incredibly well today, carbon efficiency, reporting, the operating environment, building solar, using wind and signing PPAs for wind energy, but there's a lot more work to do. So I think we've made great progress, but we'll continue to put sustainability right at the top of our priorities.

So yes, I heard all that for a few times. That wasn't my question. My question was do the customers care. And if so, where does -- how does that play in them choosing you as a supplier?

The customers care deeply because they themselves are required to report on sustainability outcomes. So the largest -- our largest customers in the world, like Microsoft and Amazon have committed to 100% renewable energy by 2030 as an example. That's a highly challenging thing to do depending on where you live and the type of energy that's available in your market. So customers do care greatly. I don't think there's a customer that I've spoken with in the last 12 months that hasn't talked about energy efficiency or sustainability or baseload power and how they are using renewables themselves and how they're reporting on sustainability standards to their shareholders.

I know I only got 2 questions, but just one tiny one. I know you're building a -- did you say you're building S5 and M4?

It's S4 and S5. Yes.

Melbourne's supposed to be growing more than Sydney. What's the deal?

Melbourne's supposed to be growing more than Sydney. I think, today, Sydney is the largest market for digital infrastructure services in Australia. Melbourne is probably a few years behind. That's changing. We've obviously signed record business in Melbourne just recently. And between our M2 and M3 data centers, they're filling up quite quickly. So I think that the Melbourne market, over the course of the next couple of years, will continue to grow at a similar or the same rate to what the Sydney market has, but the Sydney market -- to put it into power context, the Sydney market for digital infrastructure and computing services would be probably 800 to 900 megawatts today.

There's a small point attached to that, and these are different scales sites. A site like this, very expensive site have to build vertically wide open planes. In Melbourne, we're able to build across the land and have some very big footprint sites. So that's the other part of that answer. Okay. Any further questions from the audience? Got one down the front here. Sorry, go ahead.

A quick single question. I'm a small shareholder. Name is Patrick [indiscernible]. I'm much impressed with what I heard today, but I just like to ask a slightly negative question. There is a well-known cross-section between community engagement and cooling. And as the Chief Executive is well aware, there's an issue with the first building, B1, which has an air conditioning system entirely different from those in all other NEXTDC buildings I understand. There's been an issue in the sense that surrounding residents are pretty upset about it, about the noise being generated. So the question is, is there any budgeting for future retrofitting of air conditioning in B1 and for compensation for residents who make claims. That's it.

Craig?

Yes, sure. Mr. [indiscernible], it's good to see you. You raised that question with me last year. It was the first time obviously, you had previously the team were engaged with you. I appreciate you raising it with me. We take the community engagement responsibility very seriously. When you raised it with me, I committed to you personally that I would investigate the concerns that you had about the noise that was being emitted from B1. It is true that as our first facility, it has a slightly different cooling system design. One of the things that's unique about NEXTDC is we do build these infrastructure assets in downtown CBD. You live right in the middle of the city in Brisbane. That doesn't mean that we don't have to comply with the law. And when you raised your concern with me, I investigated with the team what action we were taking to check our noise or our noise emissions were at or below the required guidelines because they are legislated. And what we could do over and above that, to try and ensure that we continue to be a good neighbor. I acknowledge and understand that you would like it to be silent, and it's a challenge. With the independent expert's opinion, we had the council investigate your concerns because you raised those with the council and they independently investigated our noise emissions. They recorded those emissions for a period of time, and then they delivered a determination that said we were operating below the legally required noise emissions. Now I recognize and acknowledge that you would like more. We are not the only emitter of noise in the downtown CBD in Brisbane. The pub 4 doors down makes a lot of noise as well. I understand and committed to you that we would continue to do everything that we can to invest CapEx as we have, and we've invested significant money to continue to find ways to reduce that even further. But today, I do hope that you can appreciate and acknowledge that when you raised your concern with me that we did everything that we were legally required to do and went further than that and invested additional money to try and do everything that we can do to be a good neighbor. I know the simple answer would be if we rebuilt the building today, we may be able to make it a little quieter. But when you live in the city -- I live in the city in Brisbane, planes go over my house every day, and they're exceptionally noisier than the data center is. So I hope that you can recognize that we take the community engagement issue very seriously, and I've personally done everything I can to try and ensure that we are a good neighbor.

I want to ask about the company's investment in Sovereign Cloud Holdings. This is referred to in Note 25(b) of the notes to the annual accounts. It seems to me it's raising an awful lot of red flags. NEXTDC has, by my calculations, pumped $22 million into Sovereign Cloud Holdings, and it's currently valued in the balance sheet at $6.2 million. So in the last 2 years, $16 million has gone up in smoke for that investment. Now not only that, NEXTDC has increased its holdings. It's increased it by virtue of placements and by being an underwriter for the last capital raising in June. And when I look at that capital raising, the take-up rate of existing shareholders was only 51%. In other words, half the existing shareholders didn't think it was a goer. When I read the audit report of that company, the auditor says there's a material uncertainty as to whether it's a going concern. At last month's Annual General Meeting, the Chair said that the -- given cash burn rates, the Board expects that it will need to raise new equity capital in the second half of '24 -- financial year 2024. So -- and recently, one of the founding directors of the company left. So all in all, an awful lot of cash has gone down the drain. In fact, had the $16 million not gone down the drain, it would have halved the loss in the last financial year. So the question is how many more red flags do you need about the investment in Sovereign Cloud Holdings?

I'll give you a very short answer, and I'll pass to Craig. We see this as a strategic opportunity. We do not -- we're not too bothered about the financial performance right now. We're a $7 billion company and the amount of money you're talking about to get a foothold in this sector, we think is a price well worth paying. Craig, would you like to advance on that?

Yes, thanks. I'm sure you've -- understand that venture investing in early-stage companies, they're not profitable. They're essentially always raising money because they're trying to build something that can prove that they can solve a problem. The challenging nature of running technology start-ups is that when you try and solve a big problem, sometimes you solve it quickly, and sometimes you don't solve it at all. We saw the security opportunity. We don't want to run a security company. We don't want to run their company, but we saw the opportunity in cybersecurity to make a small venture investment in them as a start-up as an interesting thing for us to learn more about. I think that they will continue to need funding for quite some time until they find a path to sustainable growth. But as a venture investment, as a technology start-up, we expected and knew exactly what that would look like. My last comment in relation to your observation on value is that the company, from a holding value perspective is purely an accounting standards outcome. The accounting standards tell us what to value it at, when the share price goes up. We don't revalue the holding of the investment up when the share price goes down. The auditor says you need to write down the value of the investment. Until at some point in time in the future, we either sell our shares or the company makes it or it doesn't make it, that will be the final determination as to whether that venture investment makes any sense.

We're going to have to draw this to a close. I think we've got a number of people online. We might be able to come back to the audience later if there are further questions. But Oskar, are there any shareholders online who wish to ask questions or make comments on the management of the company?

Mr. Chairman, I have an observation as well as a question from Mike Sackett, who is from the Australian Shareholders' Association. Mr. Sackett's observation, firstly, is that by most measures, NEXTDC has had a good year, in fact, a good decade. Total shareholder return, which is the measure of greatest interest to shareholders and on which 100% of the CEO's long-term incentive plan is based, was 32% over the past year, 15% per annum over the past 5 years and 20% per annum over the past 10 years. Congratulations to the Board and the company staff. Mr. Sackett's question is as follows. Page 49 of the annual report reads, NEXTDC is unique among ASX-listed companies. Due to its high capital intensity and growth prospects requiring further capital to be invested ahead of depositable revenues and profits. Initially, I was skeptical of the uniqueness of NEXTDC's position. However, long-term debt for the company stood at $1.4 billion at the end of FY '23. CapEx was $619 million in FY '23. The increase in long-term debt $306 million compared with gross revenues of $362 million. The question is, in a line of the above, Mr. Sackett would appreciate some explanation from the Board as to how it strikes a balance between planned CapEx and projected future revenue.

Mike, thanks for the comment. And broadly, we look at every project, the project demands and the combination of all of those and have a forward view on our CapEx demands and the money that's going to be thrown off through projects. This company is still going to be in the process of forming capital as we go forward over the next several years. And the combination between debt and equity will continue to be a subject of great scrutiny. We -- all of our projections going out as far as the eye can see in terms of our banking covenants are all well within the appropriate range. If we look at private companies, who are in the same business that we are, they are able to leverage up much more significantly or do leverage up much more significantly than companies in the public market who have probably greater scrutiny on them. And I think you can be assured that we will continue to be prudent in terms of the capital structure opposite, planned demands of CapEx and capital -- and earnings being thrown off by the company. Are there any further questions, Oskar?

Mr. Chairman, the next question comes from Paul Weibusch, would like to know you focus on EBITDA, but the real measure is NPAT and shareholder value. It is pleasing to see that capacity built by NEXTDC in a year is usually fully utilized the following year. However, despite this, NEXTDC continues to make losses after interest costs. It has lost $75 million before tax over the past 5 years, most of which has been in a low interest rate environment. If you haven't been able to make money in a low interest rate environment, how will NEXTDC generate NPAT in a higher for longer rate environment?

I think it's the same answer we had before. It's a stage of development that the company is in. If we look at the number of DCs that are full now, I think we mentioned 5, all of them relatively smaller data centers and the scale at which we're building now is simply about the maturation of the company. And as we look forward, this company will throw off significant cash flow and earnings over the years to come. But it's simply a stage of maturation of the company. So we have insights that are not able to be shared with companies, but we are -- we do a very good look forward. We have a detailed plan over the short term of 3 years, and we have longer plans in relation to every single one of the DCs and they all show very strong internal rates of return going forward, which takes into account all of those elements of interest, tax, depreciation as appropriate. So I'm feeling fairly confident about that. Oskar, are there any further questions?

Mr. Chairman, the next question comes from Peter Taylor, who notes that the data center space is a fragmented area with many players. Does NEXTDC, see consolidation of providers? And do there appear to be any imminent catalyst in sight?

So there is consolidation going on in the wider industry. There are global infrastructure players that are seeking to consolidate. I suppose I can name them. Brookfield, KKR, Digital Bridge, EQT, Stonepeak will be the main global infrastructure players that are out there around the world. Further, there are individual companies such as ours are but mostly in the private market, but some in the public market who also act as consolidators. So that process is going on. And as I said earlier, at the same time, there are still new entrants coming to the market drawn in by the growth that exists. Further questions, Oskar?

Mr. Chairman, the next question comes from Brent Shah who notes that we can't see the recording of the half year full year CEO address. NEXTDC also doesn't provide a chance for retail shareholders to attend half and full year conference calls. Is there a reason for this? I always thought as a technology company, it would be quite easy to provide Zoom or Microsoft Teams link for every shareholder.

I didn't quite catch the first part of it, but did you -- could you answer that?

I think the question's in relation to our half or full year institutional investor briefing, so we make the presentation materials available for the market, but we don't do retail Q&A. That is correct. We do institutional briefings, any retail shareholder that is a customer of any of the 13 banks that cover us. So whoever you trade with can provide you with access to those materials and their research and advice and invite you to briefing sessions, but we don't organize them ourselves. We do them through brokers.

Okay. Any further questions, Oskar?

There was one further question, Mr. Chairman from Paul Weibusch. The Chairman noted that the cost of building data centers are being capitalized and depreciation and amortization would not start until the CapEx is commissioned. So if the build costs are not in the P&L and the amortization is not in the P&L, why is your growth resulting in losses every year for 5 years?

Because -- very simply because a significant part of those assets do come on the books as a site is completed and finished, those assets come on the books. And there are fixed cost, people, security, et cetera, et cetera, also become a part of the P&L as soon as the data center is opened. So those aspects are there, whereas the revenue is still at the early stage of coming into the P&L. So are there any further questions, Oskar?

There are no further questions online, Mr. Chairman.

Do we have any questions, operator -- from the operator on the phone line?

Chair, there are no further questions.

Right. Okay. Thanks very much. If there are no further questions, I would now like to consider the formal motions of the meeting. I refer you to resolution 1 of the Notice of Meeting in respect of the adoption of the remuneration report. This is a nonbinding resolution. No votes may be cast on this resolution by or on behalf of a member of the company's key management personnel, including the Chairman and other directors or their closely related parties. If you do not provide proxy voting directions to me as Chairman, and you are not a prohibited voter, you will be taken to have authorized me to vote all available proxies in favor of this resolution, even though this resolution is connected directly or indirectly with the remuneration of the key personnel. You can now see the details of the valid proxies lodged on the screen. I would add that NEXTDC Board unanimously recommends you vote in favor of this resolution. Are there any shareholders in the audience who wish to ask a question?

Just a comment actually. It would be really helpful when you're putting up the voting to put the percentages. I don't know what 73,342,624 is against [ 278 ]. Do you know what percentage that is?

I could take it up with the company secretary, but since these are only the proxies and there may be votes to come in today, I'm not sure whether that's a super good thing to do. I don't know, Michael?

It just gives a bit of an indication whether the shareholders who've already voted have an issue with the remuneration report. It's just helpful to know that. So anyone come up with a percentage?

78%.

So 78% have voted for. So look, I -- to be quite frank, I haven't studied your remuneration report, but that is actually a pretty high vote against it. I would be looking at a minimum of sort of 90% to be really comfortable with it. So is there any reason that you'd like to put forward why the people have voted negatively?

We did have a couple of proxy -- or one of the proxy advisers did recommend against it. I spent a lot of time engaged with institutional shareholders and discussing these matters. And there's also a lot of support for what we're doing, but some people didn't see it that way. I don't feel -- I feel fine with where we've ended up. We do have a number of people who voted against. That's it really.

Is it maybe because your long-term incentives aren't particularly long or...

No, they're pretty long, 3, 4 and 5 years.

Yes. No, I'm just curious. And as I said, look, with all the other resolutions, it would be really good. Most of the companies do put the percentages up, so it's helpful.

We'll take your point. We'll take that point. Thank you.

The long-term incentive plan for the CEO is based entirely on total shareholder return. And perhaps the Chairman of the Remuneration Committee could answer this. Am I correct in thinking that total shareholder return is growth in the share price plus dividends?

That's the way the TSR kept, but of course, we don't pay any dividends.

That's right. And so does that mean that the long-term incentive plan for the CEO is basically dependent on the share price, which is a bit of a lottery isn't it?

Well, there's a lot of things that go into determining the share price, of which for a company like NEXTDC, a key one is the growth in EBITDA and growth in revenue, which is why you see in the STI that that's a significant portion of the targets, which the KMT, the key management team have there. And why there are market movements every now and again, the key thing that drives it for a growth company like NEXTDC is growth in EBITDA.

But it's basically dependent on how the market sees the share price, isn't it, total shareholder return?

It's a comparative. And so for the one [indiscernible] last year, it's a comparison against the TSR for the ASX 200 cumulative index.

Now the Chief Executive Officer received an award under the long-term incentive plan in this last financial year past. But the way I read item 6 of the business of this meeting is that the Chief Executive Officer won't receive an award under the long-term incentive plan for financial year '23, '24 because the share price was less that the 9% threshold of the total shareholder return index of the ASX. Is that correct?

The 3-year LTI, which was tested after results, so tested at the end of August 2023, the total shareholder return -- was less than the total shareholder return of the ASX 200.

So that means, in this current financial year, the CEO won't receive an award under that LTI.

That's correct. Are there any further questions from those present? Oskar, are there any questions online?

There are no further questions online, Mr. Chairman.

Call operator, do we have any questions on the phone line?

Chair, there are no great questions.

Thank you very much. If there is no further discussion, I now put the motion to approve to re-elect -- sorry, what have I done there? Just jumped over a page. So if we could now go to -- so if we can now move to -- no further discussion. I now put the motion to the meeting to adopt the remuneration report for the financial year ended 30th of June 2023. Please cast your vote. I now refer you to resolution 2 of the Notice of Meeting in respect of the reelection of Mr. Stuart Davis as a Director. Mr. Stuart -- Mr. Davis has been an independent Non-Executive Director since September 2013. In accordance with Article 58 of the company's constitution, he is retired by rotation and offers himself for re-election. The explanatory memorandum accompanying the Notice of Meeting sets out a brief description of the experience and qualifications. You can now see the details of the valid proxies lodged on the screen. The NEXTDC Board, other than Mr. Davis, unanimously recommend that you vote in favor of this resolution. Are there any shareholders in the audience who wish to ask a question? Do we have any shareholders online, Oskar?

Mr. Chairman, there are no questions online in relation to this resolution.

Thank you. Are there any questions on the phone line, operator?

Chair, there are no phone questions.

Okay. If there is no discussion, I now put the motion to approve the re-election of Mr. Davis as a Director of the company. Please cast your vote. I now refer you to resolution 3 of the Notice of Meeting in respect of the re-election of Dr. Doyle as a Director. Dr. Doyle has been an independent Non-Executive Director since August 2020. In accordance with Article 58 of the company's constitution, she has retired by rotation and offers herself for reelection. The explanatory memorandum accompanying the Notice of Meeting sets out a brief description of her experience and qualifications. You can now see the details of the valid proxies lodged on the screen. The NEXTDC Board, other than Dr. Doyle, unanimously recommend that you vote in favor of this resolution. Are there any shareholders in the audience who wish to ask a question? Oskar, do we have any shareholders online who wish to ask a question?

Mr. Chairman, there are no questions online in relation to this resolution.

Call operator, do we have any questions on the phone line?

Chair, there are no phone questions.

Thank you. If there's no discussion, I'll now put the motion to approve the re-election of Dr. Doyle as a Director of the company. Please cast your vote. I now refer you to resolution 4 of the Notice of Meeting in respect of the election of Mrs. Leftakis as a Director. Mrs. Leftakis has been an independent Non-executive Director of the company since August 2023. In accordance with Article 57.1 of the company's constitution and listing -- ASX Listing Rule 14.4, she's retired and offers herself for election. The explanatory memorandum accompanying the Notice of Meeting sets out a brief description of her experience and qualifications. You can now see the details of the valid proxies lodged on the screen. The NEXTDC Board other than Mrs. Leftakis unanimously recommend you vote in favor of this resolution. Are there any shareholders in the audience who wish to ask a question?

I'm pleased to see that you're a member of the Institute of Company Directors. It means that you have a good way of keeping up with governance and law concerning companies. Now one of the things that the AICD does is recommend to newbie directors that they do a due diligence before they join our Board, and I'm sure you did that. In doing your due diligence, did you gain any insights as to why this company has been consistently unprofitable, only making a profit 1 year out of 5?

I think you're going to have to answer that.

Thank you very much for the question. If you've had a look at my background, you've probably seen that I share something in common with the company, and that's that I'm a business builder, and I have been for the past 30 years. and I'm very accustomed to the life cycle of a company that's trying to grow and that requires an enormous amount of capital. And so in line with the Chair's comments and the CEO's comments, I absolutely know from my own personal experience as an entrepreneur that it is a case of where you are in a point in time and the investment needs to be made to enable us to be profitable in the future. So when I think of profitability, it's completely consistent with the comments that have already been made. I have nothing further to add. I have every confidence in this company and its strategy. And for that very reason, I've put my own money in as soon as I became a Director. I was an existing shareholder, and I've even invested more because I'm so confident in the future of this company, and I hope that gives you some comfort that I have skin in the game.

Do we have any further questions from the audience? Okay. Oskar, do we have any questions online?

Mr. Chairman, there are no questions in relation to this resolution online.

Are there any questions on the phone line, operator?

Chair, there are no phone questions.

Thank you very much. If there's no further discussion, I now put the motion to approve the election of Mrs. Leftakis. Please cast your vote. I now refer you to resolution 5 of the Notice of Meeting in respect of the increase in the maximum aggregate annual remuneration of non-executive directors. The listing rules and company's constitution require the maximum aggregate amount of non-executive director fees for services as directors in any year be determined by shareholders. The Board has reviewed the current aggregate fee limit, which has remained unchanged since the company's 2020 AGM. The company's reasoning in this regard has been detailed in the memorandum accompanying the Notice of Meeting. Accordingly, the Board believes it is appropriate that the current limit of $1.6 million be increased by $400,000. As also noted, the Board believes it is inappropriate for it or the key management personnel to vote on this resolution. Accordingly, the company will disregard any votes cast on resolution 5 by these parties. You can now see the details of the valid proxies lodged on the screen. And also given the interest of the non-executive directors in this item, the Board makes no recommendation in relation to resolution 5. Are there any shareholders in the audience who wish to ask a question?

Hi. I'm [indiscernible]. I'm also a very small shareholder. But this is 25% almost rise.

It's in the aggregate fee limit. It's not an increase going to directors. It's in the aggregate fee limit. So that's for increase in the size of the Board. We've just added Maria to the Board, and it's for the way in which the Board develops over the coming years. Now I can't give you a road map as to what that's going to look like right now, but it is to manage the company as we go forward, particularly with our international expansion.

This is my first meeting, so I think I'll take it as it is. But I feel it is a lot.

Thank you. Do we -- any further questions from the audience? Oskar, do we have any questions online?

Mr. Chairman, there are no questions in relation to this resolution online.

Are there -- operator, are there any questions on the phone line?

Chair, there are no phone questions.

Thank you. If there's no further discussion, I now put the motion to approve the increase of the maximum aggregate annual remuneration of non-executive directors. Please cast your vote. I now refer you to resolution 6 in respect of the approval of the grant of performance rights to Mr. Craig Scroggie. ASX Listing Rule 10.14 requires the approval of shareholders to be sought where the company intends to issue securities under an employee incentive scheme to a related party. Mr. Scroggie is considered such a related party. The proposed issuance of performance rights constitutes to giving you a financial benefit, so we seek shareholder approval. In his role as CEO, Craig is a key executive and plays an important role in the growth of the company's business and strategic objectives. A summary of the main terms of the pros grant divesting conditions and the valuation of the rights is included in the memorandum, which accompanies the Notice of Meeting. You can now see the details of the valid proxies lodged on the screen. The NEXTDC Board, other than Mr. Scroggie, unanimously recommends that you vote in favor of this resolution 6. And given his interest, Mr. Scroggie makes no recommendation with respect to this resolution and is precluding from casting his vote. Are there any shareholders in the audience who wish to ask a question. Oskar, do we have any questions online?

Mr. Chairman, there are no questions online.

Thank you. Call operator, are there any questions on the phone line?

Chair, there are no phone questions.

Thank you. If there's no discussion, I now put the motion to approve the grant of performance rights to Mr. Scroggie. Please cast your vote. Resolution 6 was the final resolution, and so that concludes the formal business of the meeting. We'd now like to take time if there's any further general questions we have from shareholders. Are there any questions in the audience who wish to ask -- are there shareholders in the audience who wish to ask a question? Oskar, are there any shareholders online who wish to ask a question?

Mr. Chairman, there are no further questions online.

Thank you. Call operator, are there any questions on the phone line?

Chair, there are no phone questions.

Thank you. My thanks to all for attending. Ladies and gentlemen, that brings us to the closure of our AGM. Who intend to vote on the formal business of the meeting should now finalize and submit them as voting will close in 5 minutes' time. As mentioned, the results of the vote will be published on the ASX later today. A sincere thanks to all our shareholders. I now declare the meeting closed. For those at the venue, I look forward to also speaking to you as we catch up over refreshments. Thanks very much.