Welcome to the annual general meeting of Megaport Limited. My name is Bevan Slattery, chair of the company. I'd like to begin by acknowledging and paying my respects to the Turrbal people, who are the traditional custodians of the land on which Megaport's headquarters stands, and where we're presenting from today. I'd also like to pay my respects to elders past and present, and to extend my respects to the Aboriginal and Torres Strait Islanders who are joining our annual general meeting today. On behalf of the board and staff of Megaport, it is my pleasure to welcome you to our AGM for 2021. As we have a quorum, I declare the AGM open. I'd now like to introduce you to the members of the Megaport board of directors. Vincent English, our Executive Director and Chief Executive Officer, and I are together here in Brisbane.
Due to COVID-19 travel restrictions, our other Megaport directors, Naomi Seddon, Jay Adelson, Michael Klayko, Melinda Snowden, and Glo Gordon, are joining us online today. Also joining us online are Sean Cassidy, our Chief Financial Officer, and Celia Pheasant, our Company Secretary. I'd also like to introduce Richard Wanstall of Deloitte Touche Tohmatsu. Richard is available to take questions on the conduct of the audit and the preparation of the content of the independent external auditor's report. We have not received any apologies from shareholders unable to attend this meeting, and have not received any questions prior to the meeting. As you know, in response to COVID-19 conditions, today's meeting is being held online via the Lumi platform. This allows shareholders, proxies, and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting.
In addition, shareholders and proxies have the ability to ask questions and submit votes. Online attendees can submit questions at any time. To ask a question, just select the messaging tab at the top of the Lumi platform. At the top of that tab, there is a section for you to type your question. Once you've finished typing, please hit the arrow symbol and send. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your question may be moderated, or if we receive multiple questions on one topic, amalgamated together. Questions that have been submitted regarding other items of business will be held over until we come to those items. General questions about the business of the company will be addressed after the meeting closes.
For those shareholders who wish to ask a verbal question, an audio question facility is available during the meeting. To use this service, please pause the broadcast on the Lumi platform and then click on the link under the Ask Audio Questions. A new page will open, where you'll be prompted to enter your name and the topic of your question before being connected. You will listen to the meeting on this page while waiting to ask your question. If you have any issues using the system, please return to the Lumi platform. Finally, due to time constraints, we may not get to answer all your questions. If this happens, we will answer them in due course via email or by posting prompt responses to our website. Voting today will be conducted by way of a poll on all items in business.
In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you're eligible to vote at this meeting, a new voting tab will appear. Selecting this tab will bring up a list of resolutions and present you with the voting options. To cast your vote, simply select one of the options. There is no need to hit the submit or enter button, as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. The proxy votes already received are contained in our presentation today and will be displayed on screen at the appropriate time. All undirected proxies will be voted by me in favor of the resolution to the extent I'm permitted to do so. I now declare the voting open on all items of business.
The voting tab will soon appear. Please submit your votes at any time. I will give you a warning before I move to close the voting. I will now give the chairman's address. I'd like to refer all shareholders to the company's 2021 annual report, which was released on August 10th this year. This included a letter to shareholders from me, as well as extensive information about the company and its operations. As I set out in my letter, from humble beginnings, Megaport is now a global leader in automated connectivity. Our vision was simple: Be the world's leader in software-defined connectivity. What started in 2013 as a software-defined network in Australia now services over 2,200 customers in over 760 locations in 136 cities across 23 countries.
This year, we launched Megaport Virtual Edge, our service that takes our platform beyond the data centers and helps enterprises accelerate their journey into SD-WAN and SASE. Customers are now connecting branch locations like office buildings, corporate campuses, and storefronts through our rich ecosystem of service providers. We have integrated with many of the leading SD-WAN providers to deliver maximum flexibility. Our engineering teams are hard at work integrating new technology partners to further increase the power of choice in keeping with our neutral model. MVE is an incredibly exciting platform that provides a virtualized environment for hosting additional network functions on demand and with no need for additional hardware. SD-WAN support is only the first of many use cases to come. For our customers and partners, agility is the name of the game.
The past year has shown us that the ability to adapt to shifting demands on the IT system makes or breaks a business. Our acquisition of InnovoEdge, a service orchestration and automation company, will allow us to integrate the InnovaStudio service to Megaport's platform. This will give customers the ability to not just use Megaport to provision services to the cloud, but let us now take them through the cloud. The InnovoEdge team's expertise in developing and automating perfectly complements Megaport's software-defined networking capabilities.
Combined, we empower even greater agility for our partners and our customers alike. As the first mover in the thriving Network as a Service space, channel partners have always played a critical role in Megaport's success. We have learned much since launching services in 2013 and recognize an opportunity to truly align NaaS to play as a foundation role in the channel to speed up service adoption.
This is why we've developed Megaport PartnerVantage, a world-class channel program. With Megaport PartnerVantage, channel partners will greatly benefit from the ability to rapidly connect their customers to services directly through Megaport. Channel partners can accelerate providing solutions for their customers and seamlessly boost cloud service adoption. I'm incredibly excited about Megaport PartnerVantage and look forward to seeing the program provide a greater audience for our capabilities and scale to our operations. I'm very proud of Megaport's enduring drive to innovate and deliver value to our customers, partners, and shareholders.
I'm incredibly proud of our team, their resilience in the face of adversity, and the culture that has been created under the leadership of CEO Vincent English. I would like to take this opportunity to thank the Megaport team and you, our valued shareholders, for your continued support as we transform the way the world does business in a cloud economy. I'll now hand over to our CEO and Executive Director, Vincent English, who will provide his address.
Good morning. Thank you, Bevan. Megaport has fundamentally changed the way network services are bought and consumed. Point, click, connect is more than a motto. It's a philosophy that underpins our technology and innovation roadmap in order to make our customers' lives easier. The buying behavior for IT services has evolved significantly in the past few years. Today's IT decision-makers are focused on using platforms and tools to achieve a more agile infrastructure experience. They demand end-to-end control, ease of use, and services that work together with minimal to no manual work. In essence, automation and integration are now fundamental requirements. The shift in the IT enablement landscape has guided our journey from a service providing connections with data centers to a global platform powering holistic connectivity solutions for all aspects of IT enablement.
Through this journey, cloud connectivity has continued to play a central role in our success, representing 65% of the connections that happen on Megaport's software-defined network today. According to Gartner, worldwide public cloud services end-user spending will reach $397 billion in 2022. Multi-cloud adoption is a driving factor in these remarkable numbers, and 35% of Megaport's customers use our platform to connect to multiple cloud providers. That number continues to accelerate as we connect to more cloud on-ramps and innovate our platform to reduce the complexity of getting connected. A key enabler for this is Megaport Cloud Router, MCR. Since being launched in 2017, MCR has made it extraordinarily easy to connect cloud providers directly together in a point-and-click fashion, reducing the complexity of implementing multi-cloud and hybrid cloud architectures.
The number of production MCRs grew 65% in fiscal year 2021, with more than 500 of these innovative virtual routers in service. Using the same technology platform that supports MCR, we were able to develop Megaport Virtual Edge, MVE, which supports connections through leading SD-WAN technologies. With the formal launch of services in March 2021, customers are now connecting their branch locations to the Megaport platform to manage global network services on demand. Initial MVE adoption is similar to that of the MCR in its first few months, and we expect to see accelerated growth in the product based on a strong pipeline. We won't stop there. Since orchestration and automation play such important roles in today's IT landscape, we will leverage our acquisition of InnovoEdge to drive new features that empower our customers with predictive capacity management powered by AI.
Our platform will provide greater end-to-end control of IT resources and increase visibility to drive performance and efficiencies. Essentially, we will provide our customers with the tools they need to get their users, locations, and services all connected with ease. As I've said before, with our technology roadmap, including the integration of InnovoEdge services, Megaport will take customers to the cloud and through the cloud. Megaport achieved group EBITDA breakeven in June 2021. This is a strong validation of our business model, and there is additional operating leverage based on the investments to date. Asia Pacific, for example, is Megaport's most mature market and generated a profit after direct network cost margin of 73% in June 2021. Europe achieved a positive EBITDA position for the entire fiscal year in 2021.
North America, which represents the largest target addressable market, is growing at the fastest rate, with 47% growth year-over-year in monthly recurring revenue. The Megaport mission for this year is to scale up, scale out. This is a commitment by everybody at Megaport to accelerate our growth and our innovation cycle to increase our lead in the NaaS space. With a proven business model, the trust of partners and customers, and a leading platform built for innovation, we are well- positioned to achieve this.
We are investing in revenue growth by making investments in further market expansion, product and service innovation, and most critically, the people responsible for making Megaport the transformational technology company that is changing the way IT services are built today and tomorrow. To truly scale, we've developed our channel program, PartnerVantage, to take advantage of the power and the reach of the Megaport platform, which is built on continued product innovation. PartnerVantage bolsters our support for existing channels like data centers, networks, and managed service providers, and launches new features and capabilities to support the additional channel segments, such as value-added distributors and value-added resellers. For the first time ever, VADs and VARs will have the ability to offer real-time connectivity that ties services and locations together as part of a holistic solution.
The investments we are making in our channel program and the new services that we are driving through our product innovation will amplify our go-to-market capabilities and position us to capture greater market share as businesses increasingly adopt agile networking. I would like to thank the entire team for another hugely successful year. Without each team member driving our customer and partner solutions and executing on the wider global strategy with passion and enthusiasm, Megaport would not have delivered the massive achievements in fiscal year 2021. On behalf of the team, I sincerely thank you for your investment in Megaport. Thank you.
Thank you, Vinny. We now come to the formal business of the meeting. As set out in the notice of the meeting, there are 12 resolutions to be considered today. The resolutions have been outlined and explained in the explanatory memorandum that was included with the notice of meeting. Each resolution will be put to the meeting. Shareholder questions that are relevant to the resolution will be addressed by me. I will then advise the number of proxy votes received in each resolution before moving to the next item of business. Each resolution set out in the notice of the meeting is to be considered as an ordinary resolution, and as such, must be approved by a simple majority of the votes cast by shareholders entitled to vote in voting on the resolution.
Once the voting is cast, our share registry provider will tabulate the results, which will be released as soon as possible today on the ASX. Those results will also be displayed on our company website once available. I now turn to the financial statements for Megaport Limited. You've received the annual report of the directors, the auditor's report, and the financial report for the financial year ending June 30th, 2021. I now invite shareholders to comment or ask questions on the reports of the company. Questions may also be asked of the auditors about the conduct of the audit, the content of the audit report, the accounting policies adopted by the company, and the independence of the auditor in carrying out the audit. Celia, are there any questions or comments?
No, there are no questions on this item of business.
If there are no more questions or no questions, we'll now move to the formal resolutions. The first resolution in the notice of meeting is a non-binding resolution to adopt the remuneration report. Please note that the vote on this resolution is advisory only and does not bind the company or the directors. Voting exclusions to this resolution are set out in the notice of meeting. The resolution is the remuneration report of the directors for the financial year ended June 30, 2021, to be adopted. I now welcome questions with respect to the remuneration report. Celia, are there any questions on the rem report?
No, we haven't received any questions.
Okay. As there are no further questions, the proxy votes received in relation to this resolution are now on screen. For 64,654,106. Discretionary open, 92,256. Against, 25,073,901. Abstaining is 1,952,942. For resolution two, I ask you to consider, if in favor, to pass the following resolution as an ordinary resolution. That Michael Klayko, being a director who retires in accordance with Rule 19.2B of Megaport's Constitution and ASX Listing Rule 14.4, and being eligible, be elected as a director of Megaport. As set out in the notice of the meeting, Michael is seeking election as a director of the company. Michael's background and qualifications appear in the explanatory memorandum to the notice of meeting. For the reasons set out in the explanatory memorandum, Michael has the full support of the board for his election. Are there any questions or comments regarding Michael's election?
No. We've received no comments or questions on this item.
Okay. As there are no further questions, the proxy votes received in relation to this resolution are now on screen. Mike will not vote on this item. For 102,090,235. Discretionary or open, 88,101. Against, 19,877. Abstaining, 220,081. For resolution three, I ask you to consider, and if in favor, to pass the following resolution as an ordinary resolution. That Melinda Snowden, being a director who retires in accordance with Listing Rule 19.2B of Megaport's Constitution and ASX Listing Rule 14.4, and being eligible, be elected as a director of Megaport.
As set out in the notice of the meeting, Melinda is seeking election as a director of the company. Melinda's background, qualifications, and experience appear in the explanatory memorandum to the notice of meeting. For reasons set out in the explanatory memorandum, Melinda has the full support of the board for her election. Are there any questions or comments regarding Melinda's election?
No, there are no comments or questions on this item.
Okay. As there are no questions, the proxy votes received in relation to the resolution are now on screen. Melinda will not vote on the item. For 100,178,197. Discretionary or open, 113,184. Against, 1,906,794. Abstaining, 220,119. For resolution four, I ask you to consider, and if in favor, pass the following resolution as an ordinary resolution. That Ms. Glo Gordon, being a director who retires in accordance with Listing Rule 19.2B of Megaport's Constitution and ASX Listing Rule 14.4, and being eligible, be elected as a director of Megaport.
As set out in the notice of meeting, Glo is seeking election as a director of the company. Glo's background qualifications and experience appear in the explanatory memorandum for the notice of meeting. For reasons set out in the explanatory memorandum, Glo has the full support of the board for her election. Are there any comments or questions regarding Glo's election?
No, there are no questions.
Okay. As there are no further questions, the votes received in relation to this resolution are now on screen. Glo will not vote on this item. For 102,088,512. Discretionary or open, 89,101. Against, 20,600. Abstaining, 220,081. We now move to the special business of the meeting. The first special business is the approval of the Megaport Employee Share Plan. For resolution five, I ask you to consider, and if in favor, to pass the following resolution as an ordinary resolution.
For the purpose of ASX Listing Rule 7.2, exception 13, and all other purposes, issues of equity securities under the ESP, the details of which are set out in the explanatory memorandum, are approved as an exception to the ASX Listing Rule 7.1. The ESP was last approved by shareholders in 2018. The ESP was established by Megaport to offer eligible participants across Megaport's business the opportunity to become shareholders of Megaport and enhance employee engagement by aligning employee interests with Megaport's performance and interest to shareholders. The directors unanimously recommend that shareholders vote in favor of this resolution. Are there any comments or questions on resolution five?
No, there are no questions.
Okay. There are no questions, the proxy votes received in relation to this resolution are now on screen. Voting exclusions apply to this resolution as set out in the notice of meeting. For 89,641,141. Discretionary or open, 89,308. Against, 815,695. Abstaining, 2,834,543. For resolution six, I ask you to consider, and if in favor, to pass the following resolution as an ordinary resolution.
That, for the purposes of ASX Listing Rule 7.2, exception 13, and all other purposes, issues of securities under the Employee Share Option Plan General, the details of which are set out in the explanatory memorandum, be approved as an exception to ASX Listing Rule 7.1. The ESOP General was established prior to Megaport's listing on the ASX in December 2015 and was last approved by shareholders in 2018. The ESOP General is designed to focus executives on delivering long-term shareholder returns and retaining key employees of Megaport for the long term. The directors unanimously recommend that shareholders vote in favor of this resolution. Are there any comments or questions on resolution six?
No, there are no questions.
Okay. As there are no questions, the proxy votes received in relation to this resolution are now on screen. Voting exclusions apply to this resolution as set out in the notice of meeting. For 73,097,157. Discretionary open, 88,101. Against, 16,418,000. Abstaining, 3,777,335. We now go to resolution seven regarding the grant of options to non-executive director Michael Klayko.
For resolution seven, I ask you to consider, if in favor, to pass the following resolution as an ordinary resolution. That for the purpose of ASX Listing Rule 10.14, and all other purposes, shareholders approve the grant of 100,000 options with an exercise price equal to the closing price of Megaport shares on the ASX on the trading day before Michael Klayko was appointed a director, being AUD 11.78, and the issue of up to 100,000 Megaport shares on exercise of those options to Michael Klayko as detailed in the explanatory memorandum. The directors abstain in the interest of corporate governance from making a recommendation in relation to resolution seven. Are there any comments or questions on resolution seven?
No, there are no comments or questions.
As there are no further questions, the proxy votes received in relation to this resolution are now on screen. Voting exclusions apply to this resolution as set out in the notice of meeting. For 38,884,419. Discretionary open, 88,101. Against, 51,529,380. Abstaining, 2,788,787. It seems they really want your mic, but they're not prepared to pay for you. We now go to resolution eight regarding the grant of options to non-executive director Melinda Snowden.
For resolution eight, I ask you to consider, and if in favor, to pass the following resolution as an ordinary resolution. That for the purposes of ASX Listing Rule 10.14, and all other purposes, shareholders approve the grant of 100,000 options with an exercise price to the closing price of Megaport shares on the ASX on the trading day before Ms. Melinda Snowden was appointed a director, being AUD 14.99, and the issue of up to 100,000 Megaport shares on exercise of those options to Ms. Snowden as detailed in the explanatory memorandum. The directors abstain in the interest of corporate governance from making recommendations in relation to resolution eight. Are there any comments or questions on resolution eight?
No, there are no comments or questions.
As there are no further questions, the proxy votes received in relation to this resolution are now on screen. Voting solutions apply to this resolution as set out in the notice of the meeting. For 38,883,330. Discretionary open, 88,757. Against, 51,529,775. Abstaining, 2,788,825. The same goes for you, Melinda. We now turn to resolution nine regarding the grant of options to the non-executive director, Glo Gordon. For resolution nine, I ask you to consider, and if in favor, to pass the following resolution as an ordinary resolution.
That for the purpose of the ASX Listing Rule 10.14 and all other purposes, shareholders approve the grant of 100,000 options with an exercise price equal to the closing price of Megaport shares on the ASX on the trading day before Ms. Glo Gordon's appointment as a director, being AUD 18.43, and the issue of up to 100,000 Megaport shares on exercise of those options to Ms. Gordon as detailed in the explanatory memorandum. The directors abstain in the interest of corporate governance from making a recommendation in relation to resolution nine. Celia, are there any comments or questions on resolution nine?
No, there are no comments or questions.
There are no further questions. The proxy votes received in relation to this resolution are now on screen. Voting solutions apply to the resolution as set out in the notice of meeting. For 38,885,046. Discretionary open, 88,366. Against, 51,528,488. Abstaining, 2,788,787. Resolution 10, I'll ask you to consider, and if in favor, to pass the following resolution as an ordinary resolution.
That, for the purpose of ASX Listing Rule 10.17 and Rule 19.5A of Megaport's Constitution and all other purposes, the maximum aggregate amount of directors' fees that may be paid to Megaport non-executive directors per annum, as remunerated for their services , be increased by AUD 500,000 from AUD 1 million- AUD 1.5 million per annum. The board is seeking to increase the director fee pool to provide headroom to allow for temporary fluctuations in the size of the board, to allow for additional committees or advisory boards, and to allow for future increases in fees and to maintain market competitiveness. The directors abstain in the interest of corporate governance from making a recommendation in relation to resolution 10. Are there any comments or questions on resolution 10?
No, there are no comments or questions.
As there are no further questions, the proxy votes received in relation to this resolution are now on screen. Voting solutions apply to this resolution as set out in the notice of meeting. For 91,132,707. Discretionary, 98,894. Against, 334,455. Abstaining, 1,724,631. We now turn to resolution 11 regarding the amendment of the Constitution to ensure that Megaport can convene a virtual general meeting of shareholders. I ask you to consider, and if in favor, to pass the following resolution as a special resolution. That, for the purposes of Section 136(2) of the Corporations Act and all other purposes, Megaport's Constitution be amended in the manner set out in the explanatory memorandum, effective on the day on which this resolution is passed.
During the course of the current COVID-19 pandemic, Megaport has taken advantage of various legislative and other measures to allow the company to hold general meetings virtually using technology. Such measures are, however, temporary. The proposed amendments to the Constitution will enable Megaport to continue to hold general meetings using technology, either physical, hybrid, or virtual, after such measures have lapsed. While the board's preference is not to hold virtual-only meetings, if that is possible, this change has been proposed to avoid legislative uncertainty moving forward. The directors unanimously recommend that shareholders vote in favor of Resolution 11. Are there any comments or questions on Resolution 11?
No, there are no comments or questions.
As there are no questions, the proxy votes received in relation to this resolution are 80,806,366. 111,036 are discretionary and open. Against, 20,312,403. Abstaining, 1,188,499. For the final resolution, I ask you to consider, and if in favor, to pass the following resolution as a special resolution. That the proportional takeover approval provisions contained in Rule 15 of Megaport's Constitution be granted in effect for a further three years, effective on the date on which the resolution is passed.
Megaport's Constitution currently contains provisions dealing with proportional takeover bids for shares in accordance with the Corporations Act. These provisions must be renewed every three years, or they cease to have effect. The current provisions were last renewed in 2018. The directors unanimously recommend that shareholders vote in favor of Resolution 12. Are there any comments or questions on Resolution 12?
No, there are no comments or questions on this resolution.
There are no further questions. The proxy votes received in relation to this resolution are now on screen. 101,932,292. 98,974 are discretionary or open. Against, 150,004. Abstaining, 237,024. That concludes the items of business. In a couple of minutes, I will close the voting system. A reminder of the online voting instructions is now on screen. Please ensure that you've cast your vote on all resolutions. I'll now pause for you to have time to finalize those votes. I think I also might probably use some of this time just to say, I'm obviously pretty disappointed with how shareholders have treated the resolutions on the director's options that are there. It's a very competitive market, and we've managed to get hold of some of the best people, I think, in the world in the industry and the space that we're operating in.
The message that's certainly being sent to myself and the board and the executive and members there, that we're actually not really in control at all of trying to get the best talent in the world. To vote those resolutions down for 100,000 options issued at market, I think it's not really friendly to getting the best people in the world. I think the situation with proxy advisers is incredibly founder-unfriendly, and I think they're very technology-company-unfriendly. I think I'll just let institutions know that one of the things that I've always enjoyed is bringing technology companies to the Australian Securities Exchange and to sharing that prosperity and innovation with institutions. Yeah. I don't know why I'd keep doing that, because in terms of other businesses and things that are there, as a founder, my votes don't get counted.
I'm excluded, and I think it's actually pretty disappointing. It's up to the institutions to do what they want. I'll give it another 30 seconds before I close voting. Okay. Voting is now closed. The results of those votes will be released to the stock exchange later today. On behalf of the board, I'd like to thank you for your attendance and participation online today. Thank you for your interest in the company. We look forward to your ongoing support. Please stay safe, and I wish you the very best of health. I hope you'll have the opportunity to meet me face-to-face at the AGM in 2022. This does bring proceedings to an end, and I now declare the meeting closed. Shareholders are now invited to ask general questions about the business management of the company. Celia, are there any general questions?
No, we've not received any questions on the general business of the company.
No more?
No more.
Okay. Well, thank you very much.