NEXTDC Limited

Thank you for standing by. Welcome to NextDC Limited Financial Year 2026 Results Announcement Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be question and answer sessions. To ask a question during the session, you will need to press star 11 on your telephone. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Mr Craig Scroggie, Chief Executive Officer and Managing Director. Please go ahead.

Thank you, Amber, and good morning, ladies and gentlemen. Welcome to the NextDC Results presentation for FY26. I'm joined today by our CFO, Oscar Tomaszewski. Our results announcement, presentation and annual report were lodged with the ASX overnight. I draw your attention to the forward-looking statements disclaimer in the presentation. We're beginning on slide four. FY26 was the largest contracting year in NextDC's history. Contracted utilization tripled to 740 megawatts on a pro forma basis, and we exceeded guidance on both net revenue and underlying EBITDA. Net revenue was $405 million. was up 16% on FY25. Underlying EBITDA of $248.8 million was up 15%. Contractor utilization increased 202% to 740 megawatts. Billing utilization increased 58% to 175 megawatts. Turning to slide five. NextDC's forward order book hit a new high, now 565MW on the back of a record sales year where we contracted 495MW. Every MW in that forward order book is a binding customer contract. Importantly, the forward order book will ramp into faster billing growth As data falls, it delivers to our clients quicker and in time for each company district, with record revenue growth in FY27, with 197MW of new billing activation as multiple cloud and AI deployments ramp up. Turning to slide 6, our strong performance is highlighted by record key operating metrics. net revenue, which is total revenue less direct costs, grew 16%. Billing utilisation grew 58% during the year to 175MW, and our forward order book grew to a record 565MW, which will more than quadruple billing utilisation to 740MW by FY30, underwriting substantial organic revenue and EBITDA growth. We remain well capitalised to support our growth plans. Total assets of $10.2 billion, including $5.8 billion of property, plant and equipment, as well as $3.2 billion of investment properties. We have available liquidity of $8.7 billion, giving us substantial balance sheet flexibility to fund our committed pipeline. Our first asset revaluations were included this year for M3 and S4, increasing reported assets and improving reported gearing. Qualifying assets will be revalued annually. Any movements may be gains or losses. Our funding and capital strategy continues to mature. We raised $9.75 billion in FY26, which included a senior debt upsizing of $5.8 billion, subordinated notes of $750 million, hybrid securities of $1.7 billion and $1.5 billion of new equity. Further capital initiatives are underway. including partnerships with third party capital through joint venture structures for S4, S7 and M5 as those projects continue to secure new customer commitments, advance through key development milestones and are further de-risked through a growing base of contracted revenues. We had another record development year. 42 megawatts were delivered at M3 and 12 delivered at M2. S4 is on track with its first slab on ground. Kuala Lumpur 1 opened to Foundation customers and our edge network builds continue in Geelong, the Sunshine Coast and Darwin. I'll now hand over to Oscar to discuss the financial results in more detail.

Thank you Craig. Let's now turn to slide 8, which provides a summary of our profit and loss for the year. The statutory results reflect total revenue of $496.5 million, up 16% on FY25, and net profit after tax of $82.1 million, which includes $129 million fair value gain on investment properties, as well as the recognition of previously unrecognised tax losses. Our non-statutory highlights include net revenue, which was up 16% to $405 million. Direct costs and power pass-through revenues rose in line with customer consumption. Our facility costs grew $11.3 million or 17% with targeted investments ahead of record capacity expansion, including land acquisitions, headcounts across new and expanded facilities as well as maintenance costs across capacity additions and expansions. Our corporate costs increased by 11.1 million, or 17%, as we invest in systems and people to support new site expansion and accelerating customer deployments, with over 400 megawatts of build capacity growth expected across FY27 and 28. underlying EBITDA was up 15% to $248.8 million, almost 4% above the top end of the guidance range. This year, resulting from two of our material customer contract wins, we have an accounting reclassification and a measurement policy change, which we'll talk to later in the presentation. On to slide nine. net revenue growth accelerated in the second half, with strong growth expected to continue to FY27 and beyond. Underlying data growth also accelerated, with the company's core operating platform now ready to deliver operating leverage and record earnings growth. Slide 10 sets out our revenue per unit metrics. The blended rate per megawatt reflects a deliberate shift to more efficient hyperscale and AI deployments. Deals reflect a lower annual per megawatt rate on a 10 to 15 year initial contract term with extension options up to 35 years. Rapid growth in billing from high-intensity hyperscale is rapidly changing the revenue mix. with more than 70% of billing capacity now coming from hyperscale workloads. Our new and existing facility expansions are increasingly using highly efficient cooling technologies, including liquid to chip, which is driving down the cost per megawatt to deliver capacity. And higher power volumes with more efficient cost structures are driving returns. With new hyperscale and AI deployments targeting over 10% yield on cost. Slide 11 summarised our balance sheet and liquidity position. At 30 June, NextDC had property, plant and equipment with a carrying value of $5.8 billion as well as investment properties with a carrying value of $3.2 billion. The investment property values come from revaluing our M3 and S4 Tata Centre assets. We will now have periodic property valuations for qualifying assets going forward, with those assets revalued at least annually. The change to investment property accounting also reduces depreciation and introduces straight line revenue recognition for the relevant sites going forward. We have included significant detail on the accounting policy changes and the valuation process and governance in today's results materials. Our net assets stand at approximately $6.1 billion and NextDC has approximately $8.7 billion of liquidity as we completed several capital initiatives during FY26, including those previously mentioned by Craig. Slide 12. details our debt funding profile. This slide illustrates our evolving capital structure, detailing where the $8.7 billion of available liquidity comes from and confirming all drawn senior debt at 32 and subordinated capital is fully hedged. Importantly, due to the company's credit spending, it is no longer subject to any leverage ratio covenants. Our debt facilities are currently subject to a gearing ratio and an interest cover ratio, where contracted revenues, not yet billing, are included in EBITDA for covenant testing purposes. Slide 13, details our debt funding maturity profile. Across our diversified debt capital stack, our facilities have a weighted average maturity of approximately five years, with no debt maturities until FY30 and a staggered maturity profile beyond that year. Slide 14 details our disciplined approach to capital. In the second half, NextDC has completed a $2.3 billion senior debt upsizing, issuance of hybrid securities with $1.7 billion of base value, providing flexible long-term capital to support growth, subordinated notes of $750 million, broadening the capital stack to include a new pool of investors, and completed a pro rata entitlement offer of $1.5 billion, which was extremely well supported. Additional capital initiatives are underway, including, but not limited to, project financing, where S4 and S7 are expected to transition to a ring-fenced asset-level debt structure over time, ahead of formation of JADCO, and JADCO itself, where we continue to evaluate capital partnership options across our development portfolio. We believe the combination of existing liquidity, additional debt and hybrid capacity, other financing options in flight, as well as selective asset capital recycling initiatives, provides us with multiple pathways to fund the contracted pipeline while protecting shareholder value. I'll now hand you back across to Craig to go through our business performance and outlook for the 2027 financial year.

Thank you, Oscar. Turning now to slide 16. Customers have now contracted 740 megawatts. We have built 288. Demand is running two and a half times ahead of everything we have ever delivered and less than a quarter of what is contracted in billing today. That gap is not options or reservations. It is signed customer contracts and it converts to revenue as we deliver. Billing utilization grew 58% to 175 MW this year, and the contracts already signed take it to 740 by FY30. Billing more than quadruples from here. Turning to slide 17, our non-financial metrics. The breakdown of contracted capacity by customer category shows 95% of our capacity is now contracted across multiple key cloud and AI customers. These customers are the key driver of density and scale, delivering operational and cost efficiency and improving returns. Interconnection by customer category shows the ecosystem is built on key network and provider partners as well as enterprise and government customers. with ICT providers leveraging AI and cloud to deliver critical services to the enterprise. Slide 18 sets out our capacity and utilisation. We now have a total planned capacity of over 3 gigawatts across our land bank portfolio of facilities that are either open, in development or development ready subject to development approval. S4 had another capacity upgrade this half to 365 megawatts of IT load. As customers are contracting higher density deployments, often for artificial intelligence, we now expect to deliver more billable IT power in the same size footprint. AI is also accelerating the speed of deployment. significantly built into time and cash generation, supporting a faster pace of growth in the business. Now construction activity is matching the faster pace of customer deployments. 537 megawatts of built capacity is currently in progress and a further 130 megawatts is in plan. we added 16MW at S3, the last 12MW for S3, 10.8MW for S6 and the first 250MW for S4 is now under construction. In Victoria we added 12MW at M2 and 42MW at M3. Both facilities have their remaining capacity to complete now in progress. M4's early works have commenced with 10MW in progress. Expansion works are in progress across key metro and edge locations, backed by key customer wins, including material enterprise and government customers, as well as strategic network, cable landing station infrastructure and satellite partners. KL1 opened to a foundation customer this year with 10 megawatts. It has a further 15 megawatts in progress and another 15 in plan. In Japan, Tokyo 1's construction works have commenced with early excavation and retaining construction development underway. Discipline site selection activities continue for additional sites across Asia. On slide 20, we provide a summary of our ESG highlights. As the data centre landscape continues to grow as a major feature in our landscape, our focus on sustainability is crucial. With cloud and AI demand exploding, powering digital infrastructure growth sustainably is critical. This year we published our first sustainability report under AASB S2. S2 Sydney received the Upchart Institute Sustainability Assessment Award. M3 is running 27% below its embodied carbon baseline and our construction partners achieved waste diversion of 94.7% at M3. On slide 21 we provide a summary on our safety highlights. As our national fleet of mission-critical infrastructure assets continues to grow in size, so too does the importance of keeping our workforce safe. Across a record construction program, we delivered a construction LTIFA of 0.3 and an operational LTIFA of 2.2, both well below industry benchmarks. On slide 23, Before I turn to guidance, a comment on the proposed energy reforms in New South Wales and at the federal government level. These proposals apply at the point of new grid connection and planning approval. Our operating portfolio and the entire 565 megawatt forward order book are unaffected, and we have written confirmation from Transgrid that its new capacity allocation policy does not apply to S4. None of these proposals are law yet, and we are engaged in every consultation, including chairing the industry's Energy Policy and Technical Committee. We expect these reforms to play to our strengths, and our FY27 capital expenditure guidance allows for these matters. Turning to slide 23 and our FY27 guidance. We are pleased to provide our revenue and earnings guidance for FY27 with net revenue of $615 to $640 million, reflecting annual growth of more than 50%. The forward order book of 565 megawatts is now accelerating its billing ramp with 197 MW of billing conversion in FY27 and a further 221 MW in FY28. NextDC's national metro footprint positions us for AI inferencing capability, where sovereignty and data gravity require workloads to co-locate with enterprise and government. Underlying EBITDA of $385 to $410 million as we make key investments to deliver a record increase in data centre capacity in line with contracted customer commitments. Operating leverage expected in FY27 is accelerating in line with the conversion of the forward order book driving rapid near-term earnings growth. Total capital expenditure for the year is expected to be between $5.25 and $5.75 billion as we accelerate investment following 495 megawatts of new contract wins in FY26. Important to note, inside this capital expenditure forecast, we estimate $500 million of reimbursable customer fit-out. 537 megawatts of built capacity is under development in line with contracted capacity. Accelerated expansion works for M2, M3, KL1 and S4 are all on schedule. Early works for M4 are in progress. and S5 is expected to commence construction in FY27. Strategic metro and edge development continues across all our sites, supporting enterprise, government and critical national network infrastructure, with co-location, inferencing, satellite and cable landing station capability featuring Stronglink. In FY27, we signed record contracts, setting us up for a record revenue and earnings growth. The operating platform is now in place and it positions the company to scale materially through 28 and beyond. Demand from both established hyperscale and emerging AI customers continues at a scale and pace that creates an enormous opportunity for the business. As AI adoption moves from experimentation into production, demand is no longer the question. Demand is shifting towards inference. That inference needs to sit close to the enterprise and government data it draws on. NextDC's Metro presence positions us for that shift. The infrastructure being built today underpins the next decade of productivity growth. FTC is proud to be building that platform at scale, at speed, safely, securely and sustainably. Ember, we can now open the line for questions.

Thank you. As a reminder to ask a question, you will need to press star 11 on your telephone and if you would like to cancel your request, please press star 11 again. Please stand by while we compile the Q&A roster. A moment for our first question. And our first question comes from the line of Eric Choi from Baron Joey. Please ask your question, Eric. Your line is open.

Hey, good morning, team. I have a few questions. Thanks very much. The first one, I'm kind of used that you've given us to work out what the true value of the $9.2 billion that you've historically spent on land, building and fit-out is. And specifically, you've said your hyperscale yield on cost is 10%, plus DC cap rates are usually 6% to 7%. So if I put my REIT hat on, it sort of suggests you're generating a 1.5 times development spread on every dollar that you deploy. So again, just through a REIT investor lens, The value of what you have already spent, that could be $14 billion before I add future build and the value of your platform. So maybe for Oscar or Craig, is that broadly correct? Because I'm also conscious I might be undercooking that development spread because you've got some other historic projects like S1 and N1 in that base as well. So that's the first one.

Thanks, Derek. As you've pointed out, those numbers I think are directionally right. I think that math is reasonable. I would just note that the yield on cost is a forward-looking estimate so won't include obviously the higher yielding historical co-location business but is focused on our expectations as it relates to the entire development for these hyperscale and AI deployments in the future.

Awesome. Can I take it one step further? Craig, obviously, that excludes the value of your pipeline. And if I just hone in on the S4 and S7 portion of that pipeline, you're going to spend $15 billion of CapEx on that. Same rough math suggests that project could be worth $23 billion once complete. So I think you previously said you're going to have $10 billion of debt for that. But if you take $10 billion of debt off, assume you guys have a 20% piece of the residual equity It suggests those projects could be worth $2 to $3 billion for you guys, like pre-ending the management fees, obviously a future value. Sorry, can I just check that's broadly in the zone?

I think your comments, Eric, on S4 and S7 capital requirements are reasonable. The one thing I would make clear is is that we have made no final decisions in relation to the structure of JVCo. So the commentary regarding 20% is not decided. Based on the conversations with the partners that we continue to undertake, there are many and varied structures that range from a number of different percentages. So I would just caution you to note that whilst 20% may be one end of the spectrum, there are plenty of other options and alternatives as it relates to the considerations on JV code. So I think that your S4 and S7 Commentary is reasonable, but I would just note that no decisions on the final equity or management structure in relation to JVCo have been made and they remain under negotiation as part of our JVCo review at this point in time.

Thanks so much for being helpful, Craig. While I'm annoying you with so many numbers, can I just buy you one last one, which is on 5.5, you're explicitly guiding to about $400 million a week regarding FY27. If I just take 5.5 and assume you're adding megawatts at, I don't know, $1.5 to $2 million, is that kind of implying a $700 to $800 million outcome in 28 and then maybe close to a billion in FY29, just ballpark?

Again, I won't endorse your number, but I will say that I think it's directionally right. The key thing to watch will be the shape of the slope and how quickly revenue is activated in 27 and 28. extremely high degree of certainty over the 27 forecast and revenue and capex that will flow to support it. The 28 number, we deliberately don't give out years because as the program develops, if we see the opportunity to accelerate the delivery program, that may mean that we can activate capacity earlier depending on the progress of the site development. So again I think your numbers are directionally reasonable. Difficult for us to give the firm number on 28 because it is subject to how fast the construction program is able to progress in FY27. One year is a very, very long time in our business here. And now, every year that moves forward, the overall speed at which we develop, deploy, activate, and converting to cash is significantly accelerating.

Thanks for the detail, Greg.

Thank you. We will now pick our next questions. And our next question comes from the line of Paul Mason from EMP. Please ask your question. Paul, your line is open.

Hi, Tim. The first one, you've given pretty explicit guidance on 10% time and cost for these hyperscale deals. In private, we get to talk about it in the industry, but we haven't actually talked about these things in public before. You've probably been a little bit hesitant to discuss things explicitly on calls before. So can you tell us what change it means that you're able to be as open as this now?

Thanks, Paul. Your line was a little hard to hear, but I think I got the gist of your question. What's changed is that When you considered the historical co-location business, whilst the numbers were small and the returns were pretty significant, the time at which we would sell and over what period of time and what period the facilities would fill was really the uncertain or unanswered question. We were designing facilities for an unknown future. The key point of difference when you are doing build to suit at scale, you go from doing 10 or 20 or 50 megawatts to doing 250 or 500 or even potentially 1,000, the economics essentially are locked at the contract point. the costs on the estimate for the development, the long lead time items, the bulk procurement, the negotiation with the general contractor, all of those variables are certain on day one at the outset. And so as we start to think about a more mature financial position for the company, Those conversations with joint venture partners show us that whilst the returns in the scale business in deploying tens of billions of capital may be lower than the traditional or historical co-location business, they are absolutely certain. That gives us a high degree of confidence to be able to take a more mature approach and have a higher degree of certainty. over what the returns will look like on these scale projects. So that's the key change for us in communicating what our return expectations are, is that once we have negotiated the contract with the customer and have the build cost in place, we have a high degree of certainty of the return.

Okay, great. And just for the second one, just on your comments on Eric's question about potentially being able to move things forward depending on the pace of development on your sites, maybe just like as a customer contract actually framed in a way where there's not like a fixed billing date but you're actually able to start billing as soon as you hand things over or like is there like a change to sort of normal contracting that's gone on there to enable that?

yeah yeah sort of what what's sort of the difference there versus previously when you'd have like a fixed date a couple of comments Paul first one obviously for Dave Janschel and the commercial organization this year was a record year selling half a gigawatt was a really great result. I think it was probably four or five years in the making, Landbank preparing for those scale sites to be putting us in a position to take advantage of that. So it wasn't one year's worth of work. I mean, the team did an extraordinary job on the execution side, but there's probably four or five years of historical work gone into putting us in a position to be successful. As it relates to then delivering those, almost every customer would take the capacity as early as we can deliver it. Now there are a number of factors that come into play when we are doing BTS that are different to doing colo and preparing shelves because largely the delivery program is just fit out. The reason you can't build 250 megawatts of inventory is that every hyperscaler or foundational model player or neocloud has a different design requirement and given the significant variability of those designs and the sheer speed at which the GPU architecture itself is continuing to change. Just this year was the first time that we had locked a gigawatt scale reference architecture. So designing single sites for more than a thousand megawatts of capacity, the reference architecture for those designs didn't exist before that. And so now as we enter this new age and we are required to plan for the development of these multiple hundred megawatt single buildings, and over a campus there may be many of those, it does mean that we can speed up the development if we're able to largely produce a manufacturing style of methodology for deploying the site off-site containerisation manufacturing, the preparation of the transmission infrastructure for scale power, and then the delivery of those which would speed up our time to activation. So there is a very, very good chance that as we are improving the manufacturing methodology, of containerising the development of the sites at up to 1000MW or greater, we will be able to very significantly increase the time to cash by simplifying the construction methodology and playing a larger assembly on site style of role. It does mean that my expectation is over time. Whilst we haven't started a construction program given the variability of design requirements, historically it may have taken us 18 months to build capacity and deliver it. My expectation now is that we can go from ground to fully operating facility within approximately nine months.

Well, yeah. All right. I've taken up a bit of time here, so I'll let somebody else have a turn, but I'll jump back in with you. Thank you.

Thank you. We will now take our next question, and the question comes from the line of Jonathan Ecken from RBC Capital Markets. Please ask your question, Jonathan. Your line is open.

Thank you, and good morning. So a question about slide 17, and is there any way to unpack the composition of the order book? You give kind of cloud and AI, but any way to kind of think about notionally the mix of traditional cloud operators versus neo-clouds versus LLMs and other types of AI startups, and then I have a follow-up. Thanks.

Thanks, John. We haven't split it out. I'll just give you one comment. As it stands today, all of that business is largely, the majority of it is double A credit rated counterparties or better. So whilst we do have some NeoCloud customers in addition to the traditional hyperscale customers, those neocloud customers are backstopped in contract by nvidia for a decade or more so where we have minimum decade to 15 year long contract agreements with up to 35 year options for our hyperscale customers we are very pleased with the outcome of NVIDIA's role in financially backstopping our AI cloud customers in that category. So today I wouldn't necessarily need to split out the number because in Australia all of the AI deployments are for inferencing, not for training. hasn't changed. The regulatory environment in relation to training of models has not changed. That may change at some point in the future, but certainly no indication on whether that will or what timeframe that could happen. So all deployments today are hyperscale or backstopped by NVIDIA of scale on 10 or 15 minimum year agreements with out to 35 year options. So the credit quality question for us is the primary one that we need to consider and when that credit quality for the large majority of all of the half a gigawatt we signed in FY26 is AA or better, that would be how I would answer your question.

That's right, Claire, and you answered most of my second question, but when you get to, say, the non-AA or better category that is backstopped, what do you think about kind of yield? You've talked about 10%, but to you, is there an opportunity for yield enhancement by dealing a little bit more with that latter category? How do you think about target development yields for the latter category versus the former category, in other words?

John, the forecast we've given is obviously a conservative one. Anytime you make these commitments, you need to carefully consider that we are 100% certain that we can deliver on those promises. And whilst they are forward-looking statements, we have a very high degree of confidence that that will be the minimum expectation. Where that starts to lean into upside is based on the scale of the deployments. What I can tell you, based on the S4 site today, we've made those estimates on a 365 megawatt site at the minimum yield on cost but as you start to consider sites like S7 at 650 megawatts or even the recently acquired Melbourne M5 site at 1200 megawatts of IT load there are substantial opportunities to improve yield on cost given the sheer volume of containerization and the manufacturing style of methodology and approach that we're taking to the construction of the site. The other key engineering point of difference for us outside of the actual manufacturing led approach to the construction is that those build to suit hyperscale campuses for a one gigawatt DSX reference architecture will be single storey buildings. So once you have slab on ground and in ground services activated, the timeline is quite certain because we're not building up, we're not exposed to weather and other things as much as you would be in a multi-storey development. So single-storey developments of 1,000 megawatts or greater certainly have an opportunity to improve on our minimum yield on cost return expectations for a site like S4 at 365 megawatts. So, yes, I do believe that that opportunity exists, John. Thank you.

Thank you. We will now take our next question from the line of Tim Plumb from UBS. Please ask your question, Tim. Your line is open.

Hi, guys. Two questions from me, if possible, please. Apologies, but going back to that activation profile, I guess the 73 megawatt announcement that you guys did at the end of July is kind of the newest bit of news that we've had the least amount of information on. Craig, I've just conservatively assumed that it's pretty back-end graded, and you mentioned there might be scope to accelerate that, but is that just fair to assume that, like all the other AI contracts, once it does deploy, it basically... accelerates and is fully deployed relatively rapidly.

And then when you mentioned site development, et cetera, are there any other constraints that you have to think about in terms of availability of gear, ability to be able to unlock and draw down on the power, or is it purely just how quickly you can build the site?

Thanks, Tim. As it relates to the 73 megawatts that we announced most recently, obviously that NVIDIA deal and having NVIDIA obviously as a partner on that was a really important strategic piece of business because that will continue to grow. That 73 megawatts is under construction, will be delivered in record time, obviously we're already forecasting a relatively short activation period. So I think that the FY27 number is clear that it is back-ended. So your observation is correct, and that is that yes, it will activate quickly, but it will be back-ended for the timeframe for that to turn on. But it will all turn on largely at one time. So the activation schedule itself doesn't have the type of ramp that you would have traditionally associated with a cloud style of deployment that would have been ramped or grown into. As it relates to your question on constraints, there are many in the long lead time category One of the benefits of scale that play to our advantage as a company versus many that are entering the industry don't have the history or the balance sheet or the existing supplier relationships is when you're securing hundreds of generators, you can deploy them depending on where you need them at any given time. I think our size, scale, financial capacity capability puts us in a very strong position to manage those constraints effectively and as we move to more a manufacturing style of construction methodology it does allow the Lego pieces to be moved around the construction program depending on the time requirements. The third point that you asked in relation to power, of course as we have made very clear as it relates to the existing development program, certainly the half a gigawatt that we have contracted in FY26, we have all of the certainty required in order to deliver those programs and the power that's required. We did put a reasonably succinct summary of the current legislative issues into the PAC in order to help people understand what is certain and what is uncertain as it relates to federal and state government changes on the regulatory requirements and capital contributions and augmentation costs further upstream in the energy system that would be potentially required to be paid. So I would just add to that, Tim, that none of those things are certain for the future developments for us as a company and for the industry broadly. There are no clear outcomes as a result of those determinations, but they certainly don't change the degree of confidence that we have over the existing program, they will be considered as it relates to all of the future program outside of things that we have currently contracted. Great. I have another question, but I recognise there are a few sub-points there, so I'll leave it to all of you to go and I'll jump back in with you. Thanks, Dave.

Thanks, Tim.

Thank you. We will now move to our next question, and the next question comes from Andrew Gillis from Macquarie. Please ask your question. Andrew, please. Your line is open.

Good morning, guys. Just a quick one on debt. Like high-level unlisted assets would comfortably run LVRs sort of above 60%. You obviously made some changes to the accounting for these hyperscale only or build-to-suit assets. It would sort of suggest that financiers are quite comfortable with higher gearing levels, especially relative to how the equity market might think about it. Can you just give us a bit of a steer on how you think about reported group level metrics and maybe why the way that we look at things might not reflect how your financiers are thinking about it? Just really interested in the cadence, given you're talking about project financing and eventually JVCO, which sounds like it's closer as well. That'd be great.

I'm happy to take that one. Thanks for the question, Andrew. And there's a few elements to it. To keep it brief, the way that financiers look at the capital stack is a little bit different to the way that, I guess, you might look at it traditionally. If you have a look at the subordinated capital, $1.7 billion of hybrids and $750 million of subordinated notes As far as senior lenders are concerned, that is subordinated to them. There is a reasonable amount of flexibility in that capital structure. So they don't look at it like equity, but they do understand that it is subordinated to them and therefore that capital does not go directly to covenants. If you then sort of extend the question out to project finance and some of the other flexibility that we have in further financing developments, we have a certain percentage of our assets that are granted as security for the senior debt facilities. Within that, we have flexibility to move certain projects around. so for example if we wanted to we could exclude the S4 development from the guarantor group which would allow us flexibility to fund the development of S4 through project finance and then we're approaching essentially project financiers with those project financiers looking at the S4 development underpinned by very highly credit worthy counterparty under long duration contracts and have a sensible conversation with them as to how best to finance that project. Project finance is quite a healthy market. There's quite a lot of volume in that space and the nature of our counterparties, the fact that we've got a very strong track record of developing our facilities on time, on budget, gives that market a lot of confidence and appetite to finance those sorts of projects. And as far as the senior lenders are concerned, again, that project is excluded from the current whole group, and therefore it doesn't go towards the covenants that we reported and they see So hopefully that gives you a bit more insight into how the lenders think about funding and how they get comfortable with our funding structure.

Yeah, certainly. And then maybe just moving to another quick one. NVIDIA overnight obviously started talking about the removal of revenue share agreements on antitrust concerns. I'm sure you guys have probably had some conversations there. It doesn't sound like it's affecting the capacity backstop, but if you could maybe talk to, you know, NVIDIA support for the industry remaining on that capacity backstop side and maybe the impacts, you know, the lack of revenue share might have on these new NeoCloud customers, although I do appreciate they are a relatively small part of the contract book at the moment.

Thanks, Andrew. I'll take that one as well. The credit quality of NVIDIA is obviously very strong. I think they're double A rated and have provided significant support to the industry. We take a lot of comfort in the backstop that NVIDIA has put in place. The exact contractual nature of their arrangements with MCPs or Neo-Cloud operators is a matter for them. We're less affected by any revenue sharing arrangements, which takes a lot of comfort in the fact that the video is a backstop, and obviously that significantly helps get us comfortable with those counterparties, and it also obviously helps those counterparties finance their deployments as well.

Okay, thanks, guys. We'll jump back in the queue.

Thank you.

Thank you. We will now move to our next question, and our next question comes from Siraj Ahmed from Citi. Please ask your question, Siraj. Your line is open.

Morning, Craig and Oscar. Maybe it's three questions. This first one, Craig, 26 was a record year, right? Close to half gigawatts of contracting. Just in terms of 27, how are you thinking about it? Do you need to get the DAs for S7, especially the power allocation, and how are you just thinking of contracting this year? That would be great. Thanks.

Thanks, Arash.

As it relates to 27, we don't need to do anything that we haven't already done. So 100% of everything that we require to deliver our FY27 numbers is already locked in. As it relates to 28, I would just restate my earlier comments that depending on progress during 27, that will help us understand the activation schedule and our ability to deliver on time or potentially deliver early in some of the 28 components. So as it relates to development approvals or power, we do not require anything in the 27 forecasts that we don't already have. But obviously as it relates to new developments in future years, 29 and 30, we would like to see the development approvals for S5, S7, M5. S5 and S7 have been in the state significant development approval process for quite some time. and I won't forecast how long it will take the government to make a decision because that is their responsibility but they have been in the approval process for considerable time and we have addressed all issues that we are required to clarify in order for those development approvals to be granted. So it's my expectation that those will move forward and we will begin construction of them as soon as we possibly can. On our side of the program, early works, ground readiness, designs, long lead time, item procurement are all in place. So the moment that we receive those final development approvals, the programs to deliver S7 and S5 will immediately be undertaken.

Craig, so just to clarify, that's super helpful. So on S7 specifically, this new wind power requirement and the transcript allocation policy, you don't really expect that to hold S7 back from a timeframe perspective?

Well I think we don't know what we don't know at the moment. The government haven't made a clear policy position, certainly in a regulatory sense. That's not law. There's a lot of policy discussion. and so we will see what the final position is on cost allocation but I guess the point I would make I think is important Suraj regardless of what happens with the cost arrangements on network augmentation doesn't really change anything for us in so far as how those costs would have historically been dealt with We have been required to pay transmission infrastructure costs for as long as we've been developing data centres. Some of the further steps that the government are looking to legislate on renewable components are already undertaken by our customers. So if we compartmentalise the responsibilities on the power regulatory side, The first category is the things that we have always controlled and been responsible for, the building and development of the substation, the funding of the transmission infrastructure in order to get the electrons to site. But our customers have always been responsible for the second category, which is the procurement of the electrons themselves, and on larger sites that will only continue to be true. So some of the regulatory considerations as it relates to the further upstream augmentation costs that may flow into the net generating cost that will be an output of the cost per megawatt to deliver power at the site will still be the responsibility of our customer. I think we have a high degree of certainty over things that we have always controlled. is a little bit more uncertainty for our customers as far as their final net energy cost is concerned as it relates to that energy procurement determination. But again I'll just state that no determinations have been made and there's no current legislative proposal and those are the things that are being reviewed at this point in time. So we will certainly continue to stay highly engaged were on all the relevant energy and advisory committees with government and through the industry association. I think we're well positioned and at the table providing good advice and feedback to government on what is practical implementation and obviously practical to support the continued growth of the industry in Australia.

In this last one, just on M5, that's a large site at 1.2 gigawatts. Doesn't sound like your future builds are being underwritten by Neoclouds, right? So is there an increasing mix of frontier labs that you're seeing in this new build-to-shoot site, or is it still by Toscana that's driving your pipeline? Thanks.

Pipeline options, reservations, are at a level that historically we've never seen. Demand really is insatiable and whether it's a hyperscaler, the neo cloud or the model builder, there is an enormous amount of optionality on how we would consider selling sites for them five sites and so at the moment We continue to engage with customers on the M5 design and how potentially that would be sold to them under what structure, what JV structure. So yeah, they are all live conversations. But as far as the right customer is concerned, Siraj, the right customer is the best quality at the best price to generate the highest return for our shareholders. so plenty of optionality in front of us right now as far as that is concerned.

Got it. Thanks Frank.

Thank you. We will now move to our next question and our next question comes from Roger Samuel from Jefferies. Please ask your question Roger, your line is open.

Oh hi, morning guys. I've just got one question. So you've reclassified the three assets into investment properties in PEPA 26. Are you considering any further assets in the future and does it have to be single-tenanted sites or could it be a co-location site as well?

Thanks.

Yeah, thanks for the question, Roger. I'll take that one. We'll continue to assess sites on a case-by-case basis. I think it is likely that we will have further data centre sites that are accounted for under lease and investment property accounting. S7 springs to mind. We haven't made a determination on that one at this point, but that's certainly one we're keeping an eye on. It does very much depend on the nature of the underlying customer base, though. In the more traditional sites where we've got lots of smaller customers, some of who might take a quarter rack, it gets very messy if you try and apply lease accounting. And if you have a look at our peers, especially here in Australia, who also use lease investment property accounting, many of them have less than 10 customers that take large chunks of capacity so it's relatively straightforward to adopt that accounting treatment for that style of business which is what you're seeing from us so it'll very much depend on the site characteristics but I think it's reasonable to assume that the larger sites that are really well suited to large customer deployments. It doesn't have to be a single customer. It could be a small number of customers, say three, four, five customers, who each take a significant portion of the overall site. I think it's reasonable to assume that that type of deployment would lend itself to lease and investment property accounting.

Right, okay. And maybe just to follow up, as the valuation of these assets goes up, does it mean that you've got more head limit against your debt covenant?

In the short term, no. In the short term, in order to make sure that there is stability and there aren't any adverse accounting policy changes either for us as the borrower or for the lending group, our covenants are... on a constant accounting basis. However, in the medium to longer term, as we change or replace our common terms deed, I think it's reasonable to assume that the adoption of investment property accounting, which over time will result in higher valuations and higher balance sheet values, will result in us being able to accommodate more gearing on the balance sheet. Got it. Thank you.

Thank you. We will now take our next question from the line of Fraser McLeish from MSC. Great.

Thanks. Just two quick ones from me. I think you said the cost per or your cost to build has been coming down with the larger capacity builds. Just wondering if you could give us an update on what your kind of latest cost per megawatt for those large deployments is. Please, that's the first one. And second one, just on the straight line revenue recognition under the new accounting, does, I assume that means that, you know, we're going to see higher revenue per megawatt and EBITDA for, than we would have done otherwise as of the old accounting, certainly, you know, in the early years. Thanks.

Fraser, I'm happy to do the first one. Oscar can do the second. As it relates to the larger developments and what an updated cost per megawatt may look like, it's not possible for us to put a single cost per megawatt on future developments because every future development now for hyperscale or AI is a build-to-suit specific to the customer's design. For the cost per megawatt of those larger builds, in every case will be specifically unique to the customer's design and the requirement, the availability, the volume of liquid to chip versus air, whether the site is using recycled water or using more power specifically, because it's not using water. So there are many variables now that make the traditional colo business cost a lot, not something that you can simply put one number on. Every design will be unique. Oscar, you can do the second one.

Sorry, just taking myself off mute. Yeah, so the short answer is we provided disclosure in relation to FY26 and FY27. The impact on FY26 of the straight line accounting treatment is less than a million. The impact on FY27 is approximately 10 million. So in the first half of contract terms, we will tend to report higher revenue than we otherwise would have. And then in the second half of contract terms, we will report lower revenue than we otherwise would have. Net-net over the life of the contract, the recognised revenue and the recognised earnings are exactly the same. It's just a different way of accounting for things. The final point I would note is the lease Accounting treatment where we straight line revenue is entirely consistent with the sort of accounting that you see elsewhere in the industry. So if anything, it brings us a little closer in line with some of our domestic and international peers. Thank you.

Thank you. We will now take our next question from the line of Nick Harris from Morgans. Please ask your question.

Hi Craig and Oscar. Thank you for taking my question. It's this one on S4. Just given you've already signed a sizeable customer contract and you're building now, which I presume is fixed price, so you kind of netted off the key risks on both sides of that. Are there any other key milestones NextDC would need to complete? before you could potentially sign that JVCo or third-party funding deal? And I'm thinking about it in the context of S4 capital requirements, but also S7, could you actually have this all lined up specifically with S7 if you're able to lock in a customer in construction and put it in the new vehicle ahead of actually the funding?

Yeah. Thanks, Nick. So just to restate the question, S4, could we... move with the JV co-structure ahead of the 115 megawatts that's still there. In order for us to get the very best return outcome for shareholders, the timing of that requires us to lock in the final 115 megawatts that we have available that we have secured power for to sell on the best terms that we can and so it's in our best interest and the best interest of our shareholders for us to sell the balance of S4 at the highest possible rate of return to have been fully completed a 365 megawatt site to AA or better credit quality counterparts that would allow us to get the very lowest cost of funding into the S4 vehicle. That's partly the reason the earlier comments relating to the timing of JV see it as a ring-fenced asset financing vehicle first. And so sequencing becomes the primary driver based on the number one priority being maximising return for shareholders. So it's our intention to secure a contract for the balance of 115MW and then that will give us 365MW fully sold and contracted that we would then undertake the capital recycling process in the JB Co structure. And so that is the current plan as it relates to the sequencing of S4's joint venture program.

Thank you.

Thank you.

We will now move to our next question. And our next question comes from James Drews from CLFA, please. Please ask your question. James, your line is open.

Yeah, hi. Good morning, Craig and Oscar. Just actually following up on Eric's first question, I just wanted to clarify something. If you do have a, just theoretically have a hyperscale lease, you have a GC signed and you sell it to a partner in a JV fund, you've substantially transferred most of the risk of that development to the JV partner. Do you recognise a profit or development profit in underlying earnings up front at that point, or is that not going to underlying earnings?

I think you comment on processes and procedures correct, Oscar. You can comment on the accounting outcome, even though the... I'm not sure it's certain, but... Oscar?

If it's one-off in nature and not particularly certain or predictable, we normalise for it. So we strip it out of underlying EBITDA. So as you would have seen, we booked some revaluation gains. We don't consider that part of our underlying EBITDA because they are somewhat unpredictable and one-off in nature. And similar to development profits, we don't expect to account for those as part of... underlying EBITDA because they can be quite lumpy as one of in nature. We'd rather provide investors with visibility on the underlying profitability of the business.

Yeah, I get that. But I suppose you are rolling out like a hyperscaler business though as well, right? Is that fair?

Yeah, look, to the extent that there are development profits, we will obviously book them, disclose them. They'll be on the front page of the P&L. As part of our underlying EBITDA adjustments, we provide a lot of visibility and clarity in terms of what adjustments we make. To the extent that investors take a different view, it's very easy for investors to make their own adjustments as they see fit.

Yeah, sure. One more, if I may. How do we think about the binding contract risk to, say, the 67 megawatts in the forward order book in FY30? Are you actually taking on... What construction risk are you taking on for that, for instance?

Well, we take on 100% of the construction risk. That is our job. And the... timing in the forecast of those out years in 28, 29 and 30, they are all fully contracted. So as far as the binding nature. There are no reservations or options. Everything that has been included in the revenue ramp slide is 100% contracted and will be delivered. So the entirety of those are 100% committed and contracted, and we are 100% responsible for delivering them.

Well, what I'd like to say is that So what I'd also just add is the fact that these capacity deployments are booked in advance gives us obviously a lot of visibility and a lot of flexibility with regards to ordering long lead time equipment. Different proposition if we were thinking about forecasting what sort of business we may do in FY30 versus having it contracted and having visibility. So the fact that we have That business book then up front does actually help quite a bit in terms of locking and managing our costs in as we go.

Okay. Can you provide a bit of a sense of the wriggle room you have on delivery dates for that capacity thing in FY30? Is there like 18 months, 12 months? How does it work?

As far as the contracting schedule is, we've given the dates that the contracts need to be delivered under. As far as any further timing of that, if we can deliver some of them early, we may deliver some of them early, but I'm not sure I understand the question exactly.

So where I'm going at is if you look around the world, like 50% of projects are running more than six months late. Now, Australia might be an exception to that, but obviously there's increasing risk around labour in particular. I know you guys have and trying to sort of ameliorate that. I'm just trying to understand, you know, that capacity that you're delivering in FY30, like, you know, what asset does that pertain to? Have you started building it? You know, just trying to understand the actual risk around that delivery and what happens if things actually get pushed out a bit.

The delivery risk is significantly lower because if you consider the capacity that we have sold and contracted, that FY30 component is the tail end of all of the other delivery handed over in a sequence every year. Rather than building all of that, it will be ready early and if the customer can take we may hand it over early and activate revenue early. So the risk component is materially less on the out year than it is on current year because the building will have been fully built and delivered well in advance of the tail end being handed over. Perfect. Again, thank you.

Thank you. Next, we have a follow-up question from the line of Siraj Ahmed from Citi. Please ask your question, Siraj. Your line is open.

Just a quick question. Oscar, you mentioned that you're looking at selective asset recycling, right? Can you just maybe elaborate on that as to, you know, what sort of assets, how should we think about that? Thanks.

Siraj, there was a comment in relation to what we previously disclosed in JVCO. So, S4 and S7. I think it's reasonable to assume that M5 would be another asset that we would consider doing a JV on. Okay.

All right. Thank you. Yeah.

Thank you. That completes our question and answer session. I'd now like to turn the conference back to Mr. Craig Scroggie for his closing remarks.

Thank you, ladies and gentlemen. I appreciate you all joining us today. Before we close, a housekeeping note. We have our Investor Days in Sydney and Melbourne next Monday and Tuesday, and they are currently fully subscribed. So if you have registered, obviously we look forward to seeing you there. The venue is S3 Theatre in Sydney and the M2 Theatre in Melbourne. They do require security registration, so there will be no walk-ins on the day. Please ensure you have registered and secured your ticket for the event. I will be joined by our C-level leadership team, and we'll have the opportunity to spend plenty of time on further Q&A with investors and analysts. So look forward to those days. There's three things to remember from today's call. FY26 was the largest contracting year in our history, with contractors utilisation now at 740MW. Every MW of the 565MW forward order book is a binding customer contract, and it takes billing to more than four times today's level by FY30. Lastly, the capital. is in place to rapidly grow our business. $9.75 billion were raised, $8.7 billion of liquidity and no debt maturities until FY30. The contracts are signed, the capital is raised and our job in FY27 is execution. That is where our focus sits. Thank you for joining us today. for the results call. Thank you to our customers, our dedicated team members and to our shareholders. Bye for now.

This concludes today's conference call. Thank you for participating. You may now disconnect your lines.