Good morning. Good morning, everyone. Welcome to the Annual General Meeting of Megaport. My name's Melinda Snowden, and I'm the Chair of Megaport. On behalf of the Board and our team of Megaporters, good morning. Sorry, I think everyone's microphone wasn't quite on. So, good morning. Welcome to the AGM for Megaport. My name's Melinda Snowden, and I'm the Chair of Megaport. On behalf of the Board and our team of Megaporters, it's my pleasure to welcome you to our AGM for 2024, my first as Chair of the Company. It's 10:00 A.M., and as we have a quorum, I declare the meeting open. We request that cameras and recording devices are not used during the meeting. Before we commence the official business of the meeting, I'd like to point out the fire exits in the event of an emergency or evacuation.
These are located out by the lifts to your right. I'd like to also begin by acknowledging and paying my respects to the Turrbal people, who are the traditional custodians of the land on which Megaport's head office stands and where we are presenting from today. I would also like to pay my respects to Elders past, present, and to extend that respect to other Aboriginal and Torres Strait Islanders who are joining our Annual General Meeting today. I'd like now to introduce the members of the Megaport Board of Directors and our Company Secretary. I'm joined in person here by Michael Reid, our Executive Director and Chief Executive Officer. Our other Megaport Directors, Jay Adelson, Mike Klayko, and Glo Gordon, who are based in the U.S., are joining us online today.
Also here in Brisbane with me are Leticia Dorman, our Chief Financial Officer, and Celia Pheasant, our Company Secretary, along with other Megaport team members. The Company's Auditor, Richard Wanstall from Deloitte, is in attendance and will be available to answer any questions you may have about the audit of the financial statements later in the meeting. Lewis Brimlow from Computershare, Megaport's share registry provider, is also in the room today and is our returning officer for the meeting. We have not received any apologies from shareholders unable to attend, and I have not received any questions prior to the meeting. The purpose of today's meeting is to deal with the formal business as set out in the Notice of Annual General Meeting.
I'll deliver the Chair's address, and then our CEO, Michael Reid, will present an overview of Megaport's 2024 financial year results and themes, as well as give a brief update on our strategic priorities and outlook. We will then consider the resolutions as set out in the notice of meeting. I will outline the voting arrangements ahead of that section. There'll be an opportunity for shareholders to ask questions during the formal items of business as they relate to the resolution being considered. I'll now give the Chair's address. As announced in August, Megaport delivered a strong turnaround result in the 2024 financial year with revenue of AUD 195.3 million, up 28% year on year. This was an outstanding achievement, with annual recurring revenue surpassing AUD 200 million. We were pleased to deliver a significant lift in margins and profitability with EBITDA for FY 2024 of AUD 57.1 million.
This was achieved within a context of considerable operational change and a rebuild and renewal of our go-to-market and customer success teams. As the market leader in NaaS, the opportunities for Megaport in the flexible networking and cloud connectivity space globally remain vast. We continue to solidify our position as the global leader in Network as a Service with over 2,600 customer logos and a global reach of over 930 data centers. As new markets evolve and new technologies emerge, Megaport remains well-positioned to adapt, innovate, and lead. Technologies such as AI and machine learning continue to drive connectivity, demand for bandwidth, and access to data centers around the world. Megaport works with all major industry players, including the Magnificent Seven, who are innovating and expanding at an unprecedented rate.
As such, we are well-positioned to enable, embrace, and accelerate the uptake of these technologies, interconnecting the world's data to new and ever-growing AI models. Our core strategy remains to land new logos, protect our existing base of revenue while expanding our existing customers through upsell and cross-sell motions. The full management team is vigorously and effectively executing on this. Megaport now operates in 26 countries and will thoughtfully consider entering markets where it is profitable to do so. I recently spent time with a selection of Megaport's Australian corporate customers with national and international operations. It was reaffirming to hear firsthand clients expressing their support for the flexibility and reliability of Megaport's products and our solutions-focused client interactions. The Board remains positive and supportive of the CEO and the management team to deliver this strategy, which will provide returns in the medium and long term for shareholders.
The Company continues to deliver profitable, efficient growth, and since Q4 FY 2023, Megaport has been net cash flow positive and ended the financial FY 2024 year with a net cash balance of $61.2 million. The Board is committed to maximizing shareholder value and will continue to monitor and evaluate a range of initiatives consistent with this objective. In relation to our Board, as shareholders would be aware, Megaport's founder, Bevan Slattery, stepped down at the end of June this year, and I was pleased to step into the Chair role, having spent three years as Chair of the Audit and Risk Committee. We are continuing to review the composition and skill set of the Board to best support management for growth for the business, recognizing that a mix of skills, knowledge, experience, diversity, and independence is required to help us fulfill our role.
With the assistance of advisors, we are currently recruiting additional directors, including what is expected to be Australian-based directors to chair the Audit and Risk and Remuneration and Nomination Committees. We expect to update the market on progress on this front soon. As set out in the notice of meeting, I am up for re-election at this year's AGM. After three and a half years on the Board and now especially as Chair, I continue to feel privileged to support the business on its growth strategy. As a Board, we recognize that it's important for Megaport that Megaport grows in a sustainable way, delivering long-term value for shareholders. Our ESG working group, consisting of representatives from across the business, is developing an ESG roadmap to ensure continuous improvement in this space. The Company will also publish soon its third Modern Slavery Statement.
Michael Reid has been CEO since May 2023 and quickly adopted a transparent and inclusive leadership style that has reinvigorated the organization, with an unwavering focus on Megaport's vision and values. Megaport has strategies to support an inclusive work environment and understands that further efforts in this area are an important feature for attracting and retaining our talent. The Megaport team around the globe and at head office here in Brisbane now sits at 311 people. Pleasingly, a majority of staff are shareholders or hold restricted stock units. Personally, as well as on behalf of the Board, I would like to thank Michael and the broader management team for their passion, hard work, and innovation in laying the foundation for continued profitable growth globally. Your dedication, values-driven team culture, and vibrant leadership style are key to the foundation of our successes this year and in future years.
I'd also like to thank my fellow directors for their commitment, expertise, time, and effort in guiding Megaport as the global leader in Network as a Service. Finally, I'd like to thank you, our shareholders, for your ongoing support. I'll now hand over to Michael for his CEO address before we commence the formal part of the business of the meeting.
Thank you, Melinda, and thank you for all those joining us in the room and all those live wherever you are in the world. Let me get this set up. Shareholders and guests, 2024 was a big year for Megaport. We saw huge changes across the business, from leadership and strategy to product, engineering, sales, and marketing, and it's paying off. We broke through AUD 200 million in annual recurring revenue, and after implementing a significant cost-cutting program, we hit AUD 57.1 million in EBITDA in FY 2024, a 182% jump from the previous year. Even better still, we posted our first-ever net cash flow positive year, generating AUD 28 million, a AUD 62.5 million improvement in net cash flow, and delivered four years of profitability after tax. A huge achievement.
Innovation took center stage as our product and engineering teams rolled out more launches in FY 2024 than in the prior five years combined. Megaport released Global WAN, Data Center Interconnect, and Megaport Internet. These products make it easier for businesses to adopt hybrid and multi-cloud, connect global data centers, and scale their networks with confidence. Global WAN even landed us our largest deal ever at $4.2 million in total contract value. We also supercharged our network with a 400-gig backbone, enabling us to 10x the speed of our customer connectivity with 100-gig VXCs, delivering faster, more reliable connections for our customers. At the same time, we expanded our ecosystem with more data centers, internet exchange locations, and Megaport Virtual Edge providers.
Behind the scenes, we delivered the single biggest product and pricing update in our history, designed to deliver more value to our customers and make us even more competitive on a global scale. Our customers keep evolving and accelerating, and so do we. AI and cloud demand continues to drive data center growth at an unprecedented pace, and hybrid and multi-cloud adoption has become the norm, with customers mixing and matching between the hyperscalers and niche cloud and GPU-as-a-Service providers for their specific needs. It's clear the world needs more and more connectivity, and Megaport is perfectly positioned as a global leader to capitalize on this growth. More than a decade in, Megaport is still leading the way. Our ecosystem and global footprint continues to grow, with 930 enabled locations and a presence in 26 countries, having recently launched Italy and Brazil.
It's also thanks to the incredible dedication from the Megaport team. Can't thank them enough for their passion and hard work. Our robust balance sheet position and strong cash generation has allowed us to reinvest back into the business in the areas where we have seen success and where it's financially accretive to do so. In Q1 FY 2025, saw us strategically hire key go-to-market roles across sales executives, solutions architects, channel managers, and customer success managers. We will continue to evaluate opportunities to reinvest in FY 2026, provided it supports our relentless focus on net revenue retention and new logos, accelerating annual recurring revenue growth. Today, we are reaffirming four-year guidance, FY 2025 EBIT guidance of $57 million-$65 million, FY 2025 revenue guidance of $214 million-$222 million. Early trends are indicative of a continuation of this revenue growth trajectory into FY 2026. Finally, to you, our shareholders, your support means everything.
The stage is set, and we're geared up to take our network revolution to this incredible addressable market, disrupting the status quo with tremendous value for our customers. Game on.
Thank you, Michael. We'll now turn to the conduct of the meeting today. Upon registering for the meeting this morning, you will have received either a yellow, blue, or white-colored admission card. Those who received a yellow or blue admission card may speak and ask questions. The persons entitled to vote are all shareholders, representatives, and attorneys of shareholders and proxy holders who hold blue voting admission cards, which will also be used as poll voting cards. Yep, thanks. If you are attending in more than one of those capacities, you will have been issued with as many blue voting admission cards as you have separate capacities. If anyone believes they are entitled to vote in any capacity and does not have a blue voting admission card, please raise your hand now, and a member of Computershare will assist you. Okay.
If you're a proxy holder, a summary of the votes to which you are entitled has been attached to the blue voting admission card. If you have already voted, you will be given a yellow non-voting admission card. White cards have been assigned to visitors other than shareholders and do not carry any rights to speak and ask questions when the business of the meeting is being conducted, nor the right to vote. If you have a question, please hold up either your yellow or blue admission card, state your name prior to the question being asked. Please direct any questions you may have to me as the Chair. I'll either deal with the question personally or ask someone who's better placed to respond. We will do our best to answer all questions that are relevant, that are raised. This meeting is being held as a hybrid meeting.
In addition to shareholders and guests who join us here in our Brisbane office, we also have shareholders and guests joining us online via the Computershare meeting platform. This online platform allows shareholders, proxies, and guests to attend the meeting virtually no matter where they are located. In addition, shareholders and proxies have the ability to ask questions and submit votes online. To ensure an orderly process, I'll be first taking questions from shareholders and proxies in the room. After all the questions in the room have been answered, I will then ask for any questions that are submitted online. Finally, I will move to any audio questions that come through. Online attendees can submit a question at any time. To ask a question, select the Q&A icon on the virtual meeting platform. Type your question in the text box.
Once you have finished typing, please hit the send button. For those shareholders who wish to ask a verbal question, an audio questions facility is available during the meeting. To use this service, please follow the instructions written below the broadcast tab. Please note that while you can submit questions from now on, I will not address them until the relevant time during the meeting. Please note that your questions may be moderated, or if we receive multiple questions on one topic, they might be amalgamated together. Questions that have been submitted regarding other items of business will be held over till we come to those items, and general questions on the business of the company will be addressed after the meeting closes. Finally, due to time constraints, we don't get to answer all your questions.
We will answer them in due course via email or by posting responses on our website. For those of you online, if you are eligible to vote, once voting opens, select the vote icon and all resolutions will be activated with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You will receive a vote confirmation notification on your screen. You can change your vote up to the time that I declare the voting closed. For those of you in Brisbane, you have been issued with two voting cards, one for resolution one to seven and one for the contingent item of business. Computershare will collect the card for resolutions one to seven later in the meeting.
Once the poll has been conducted on resolution one, this will determine if the contingent item is required to be put to the meeting or not. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open the voting for resolutions one to seven. 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 resolutions one to seven to the extent that I am permitted to do so. I now declare voting open on resolutions one to seven. For online participants, the voting tab will soon appear. Please submit your votes at any time. I will give you a warning before I move to close voting.
We now come to the formal business of the meeting. As set out in the notice of meeting, there are seven resolutions of ordinary business and special business to be considered today. The resolutions have been outlined in the explanatory memorandum that was included with the notice of meeting. Each resolution will be put to the meeting. Shareholder questions that are submitted which are relevant to the resolution will be addressed by me. I will then advise the number of proxy votes received on each resolution before moving to the next item of business. Resolution one to six set out in the notice of meeting are to be considered as ordinary resolutions and as such must be approved by a simple majority of votes cast by shareholders.
Resolution seven is to be considered as a special resolution and must be approved by at least 75% of the votes cast by shareholders. Once the voting is closed, Computershare 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. Ladies and gentlemen, a copy of the notice of meeting and explanatory statement containing the resolutions to be considered today were provided to shareholders last month. I will take the notice of meeting as read, and I will now move to the formal agenda of the meeting. The first item of business is to receive and consider the annual financial report of the company for the financial year ended 30 June 2024, together with the declaration of the directors, the Directors' Report, the Remuneration Report, and the Auditor's Report.
The reports are contained in the Annual Report, which was released to the ASX on 22 August 2024. I will take the reports as read and now formally lay them before the meeting. I now invite shareholders to comment or ask questions on the report of the company, reports of the company. Questions may also be asked of the auditors about the conduct of the audit, the content of the audit report, accounting policies adopted by the company, and the independence of the auditor in carrying out the audit. Are there any questions in the room?
Thank you. Good morning. My name's Paul Donohue, and I'm representing the Australian Shareholders' Association today. I've got proxies from 18 shareholders. Firstly, congratulations on what I thought were very good results and also on the way you've pivoted your messaging from being very product-centric to more solution-centric, so talk about data center to cloud, cloud to cloud, etc., rather than the super nerdy terminology that we're used to. My first question is about the future pricing strategy. The CEO's letter in the Annual Report talks about a future pricing strategy. Can you tell us a bit more about that because it's not really well explained?
I'd actually suggest we defer that to the general business of the meeting at the close of the formal part of the business. That's okay.
No worries.
Celia, are there any questions online regarding resolution one?
No, there are no questions online on this item.
Operator, are there any audio questions?
Yeah, there are no phone questions.
Thank you. As there are no more questions, we'll now move on to the formal resolutions. The first resolution in the notice of meeting is an advisory non-binding resolution required by the Corporations Act in relation to the adoption of the Rem Report, which forms part of Megaport's Annual Report. The Remuneration Report is set out on pages 37-63 of the Annual Report and provides information on executive and director remuneration. The resolution is displayed on screen. Are there any questions in the room on this resolution? Yes.
Thank you. Mike Fitness, my name. I'm a shareholder in Megaport, and thank you, Michael, for the year that you've had. With regard to the Remuneration Report and probably also relevant to the next few agendas on the item, the re-election of yourself and other directors, I mean, Michael has commented about the amount of change that this organization's undertaken in the last 12 months. If you had to play devil's advocate, that would suggest something was wrong before Michael arrived. Now, our Board has had numerous members who have sat in an oversight role and have helped the executives in directing this business.
I guess my question is, is that are you comfortable, are you confident that our Board, who has been in these chairs for some time, that allowed this business to be in the position where Michael had to make so much change, are the right people and are capable of taking this business to where it should be?
The answer is, a simple answer is yes. I don't think you should interpret change per se as suggesting something was wrong. I think change can be indicating that there's improvement, not necessarily something wrong. So I'm very confident with the skill set around the Board. As I mentioned in my Chair's address, we're currently recruiting for directors, and we remain focused on working out what's best for the company and the right blend of skills. And the directors who are currently on the Board are all certainly contributing very effectively, in my view, to the growth in the business. Any other questions? Thank you. Are there any questions online?
No, there are no questions that have come in.
Okay. Operator, are there any audio questions?
Chair, there are no phone questions.
Okay, thank you. So no further questions. The proxy votes in relation to this resolution are now on screen. Voting exclusions apply to this resolution as set out in the notice of meeting. The directors unanimously recommend you vote in favor of resolution one. We now move to resolution two. As this resolution relates to my own re-election, I will hand over to Jay Adelson, acting Chair of our Remuneration and Nomination Committee, to address this item.
Thank you, Melinda. Resolution two relates to the re-election of Miss Melinda Snowden as a director of the company. The resolution being considered is displayed on the screen. I ask you to consider and, if in favor, to pass the following resolution as an ordinary resolution: that Miss Melinda Snowden, being director, who retires in accordance with Rule 19.3(b) of Megaport's constitution and ASX listing rules 14.4 and 14.5, and being eligible, be re-elected as a director of Megaport. Melinda's background, qualifications, and experience appear in the explanatory memorandum to the notice of the meeting. For the reasons set out in the explanatory memorandum, Melinda has the full support of the Board for her re-election. Are there any comments or questions in the room regarding Melinda's re-election? Okay. Celia, do we have any comments or questions online?
No, we don't have any comments or questions online, Jay.
Finally, Operator, are there any audio questions?
There are no phone questions.
Okay. As there are no further questions, the proxy votes received in relation to this resolution are now on screen. We can move on. The directors, with Melinda abstaining, recommend that you vote in favor of resolution two. As we have considered resolution two, I will pass back to Melinda.
Thank you, Jay. Resolution three relates to the re-election of Mr. Michael Klayko as director of the company. The resolution being considered is displayed on the screen. Mike's background, qualifications, and experience appear in the explanatory memorandum to the notice of meeting. For the reasons set out in the explanatory memorandum, Mike has the full support of the Board for his re-election. Are there any comments or questions in the room regarding Mike's re-election? No? Celia, are there any audio questions?
No, there are no online questions.
Thank you. Operator, any questions?
Chair, there are no phone questions.
Thank you. As there are no questions, the proxy votes received in relation to this resolution are now on screen. The directors, with Mike abstaining, recommend that you vote in favor of resolution three. We'll now move to resolution four. Resolution four relates to the re-election of Miss Glo Gordon as a director of the company. The resolution being considered is displayed on the screen. Glo's background, qualifications, and experience appear in the explanatory memorandum to the notice of meeting. For the reasons set out in the explanatory memorandum, Glo has the full support of the Board for her re-election. Are there any comments or questions in the room regarding Glo's re-election? No? Celia, any?
No questions online.
Operator, any audio questions?
Chair, there are no phone questions.
Thank you. As there are no questions, the proxy votes received in relation to this resolution are now on screen. The directors, with Glo abstaining, recommend that you vote in favor of resolution four. I will now move to the special business of the meeting. Resolution five relates to changes to be made to existing performance-restricted stock units and restricted stock units issued to employees. The resolution being considered is displayed on the screen. Are there any questions or comments in the room regarding this resolution? No? Celia, any questions online?
No, there are no questions online.
Thank you. Operator, any audio questions?
Chair, there are no phone questions.
Thank you. 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. The directors, with Michael Reid abstaining, recommend that you vote in favor of resolution five. Resolution six relates to a grant of long-term incentive performance-restricted stock units to the CEO, Michael Reid. The resolution being considered is displayed on the screen. Are there any comments or questions in the room regarding resolution six? Yes?
Thank you, Chairman. Good morning. George Palmer, Director of Faircase Proprietary Limited. Could you give us in a few words an indication as to the hurdles that are required to issue these and if there are any provisions for the Board to change the hurdles at some point in time? Oftentimes, we're seeing these where these long-term incentives are issued, and then the Board will change the rules and the hurdles that are necessary to get them so that the person can get these, even though the initial hurdles haven't been met. Thank you.
The hurdles are set, but the actual dollar values of the hurdles are retrospectively disclosed because of commercial in confidence. The hurdles that are being set relate to ARR, CAGR growth, EBITDA per share, and RTSR. My understanding is the Board doesn't have a discretion to change those hurdles. So they are set, mindful of budgets and earnings guidance and a range of other measures to make sure that they appropriately have enough stretch in them for the team for Michael to achieve. We don't have the dollar. We don't state the dollar amounts.
What has to be achieved to get those? What is the hurdle? Is there a profit area that has to be achieved, or what is the hurdle that brings those into play?
The first hurdle is annual recurring revenue growth.
Of recurring growth of?
We don't state what that is, do we?
No, so you're asking us to vote for something that we really don't know what we're voting for. That's what I'm trying to establish. What are we actually voting for? Does the growth have to be 15%? Does it have to be 20%? Or does it have to be 1%? What is the hurdle that has to be achieved to get these incentives? It has to be something that is a benefit to the shareholders as well as the person that's getting the grant. That's what I'm trying to establish. Thank you.
We don't actually state the actual amount. We state what the hurdles are in nature, and then retrospectively, we state what they are, what the percentages were.
You might have decided it was going to be 10%, but then it gets to 5%, so you change the hurdle to 5%. Is that what you're saying?
No.
Well, that's what it sounds like. Now, what I want to know is, what is the hurdle? And you're saying that you don't have an established hurdle. You're going to establish it at some other point.
The issue around actually stating what a particular percentage is, if we disclose that now because it relates to future performance, we're effectively giving earnings guidance, which creates an issue for the company, and it creates a competitive situation which is commercially disadvantageous. So we, like other companies, state what the hurdles are in their nature and then retrospectively state how the management team performed against those.
Yeah, but the hurdle has to be set at a point where the profit has to increase by 5% or 10% or something, and you're not prepared to say what that is. Is that the case?
That's correct. That's what we do.
I would suggest that very strongly that the resolution should be scrapped. How can we vote for something that you're not giving us the details of, of what we're voting for? It's absolutely ridiculous to expect shareholders to say, "Hey, yeah, we'll give him a bonus. Hey, profit's gone up 1%. He gets his bonus." That's not the way business should be done. You have to say, "Okay, the profit has to go up by x percentage for him to get this, and this percentage has to recur over five years or whatever.
We do set those. We just don't disclose them. They are set, but we don't disclose them.
Yeah, but you're asking the shareholders to vote in favor of it without letting the shareholders know what they're voting for. I would suggest you withdraw that from the meeting until you're prepared to disclose to the shareholders what they are actually voting for.
Okay, thank you. Next question up the back or?
Thank you. Brock from Blue Stamp. Just a clarification. I couldn't find it in the Remuneration Report, but the EBITDA per share, is that including lease depreciation?
I don't think it, pardon?
Steve's waving his hand.
We'll clarify that offline if that's okay.
Yeah, no problem.
I know it's shared dilution aspects, but.
How are you going? How are you going, Clayco? Now, you've got two pages of conditions on here, obviously written by a lawyer for us laypeople to try and understand. Now, my way of thinking revenue doesn't exactly mean profit either. It could relate in a loss for the year. So more clarification would be good, thanks. And can you put it in the minutes? The satisfaction.
Would you mind repeating that question? Because I'm sorry, I didn't hear it.
This resolution is like two pages of explanation in here, obviously written by lawyers, understood by lawyers, but not us people that come along to meeting that own shares.
Okay, thank you. I mean, it is complex, and yeah, there's a lot of conditions around how the remuneration packages work, but.
A better explanation would have been to have a whiteboard and put a scenario on the board and show how it actually works. Thanks.
Okay, thank you. Any other questions in the room? Any questions online, Celia?
No, there are no questions online.
Operator, any questions on audio?
Chair, there are no phone questions.
Thank you. So 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. The directors, with Michael Reid abstaining, recommend that you vote in favor of resolution six. Resolution seven relates to the renewal of the proportional takeover provisions contained in Rule 15 of Megaport's constitution. The resolution being considered is displayed on screen. Are there any questions or comments in the room regarding resolution seven? No? Any online, Celia?
No, there are no questions online.
Thank you. Operator, any questions on resolution seven?
Chair, there are no phone questions.
Okay, thank you. As there are no questions, the proxy votes received in relation to this resolution are on screen. The directors unanimously recommend that you vote in favor of resolution seven. I'd like to advise that voting on resolutions one to seven will now close shortly. I ask shareholders, proxy holders, and corporate representatives holding blue voting cards to complete the card if you have not already done so, finalize your poll votes. I will provide you with a few minutes to finish your voting. For those here in Brisbane, a member of Computershare will come and collect your voting card. Please finalize your voting now. Thank you. I now declare the poll on the resolutions closed. Celia, do we have the results of voting on resolution one?
Yes, we do. I'm advised by our returning officer that resolution one has passed with more than 75% in favor.
Thank you, Celia. This means that the business of the meeting has now been concluded. The results will be announced to the ASX later today. On behalf of the Board, I'd like to thank you for your attendance and participation online today. I'd also like to thank our shareholders, suppliers, and customers, the executive leadership team and global team generally, and our advisors and auditors. That brings the formal proceedings to an end and I now declare the meeting closed. Shareholders are now invited to ask general questions about the business and the management of the company. Are there any questions in the room?
Thank you. I'll ask my question again. The CEO's letter and the Annual Report talks about a future pricing strategy. Can you tell us more about that?
I'd pass to Michael Reid to talk through that one.
Thanks, Paul. Good to see you again. Last year, this year, so the pricing strategy was a massive turnaround in the business. It's super detailed and complex. I won't go into the depth of it, but in short, if you look at Megaport, we're a giant automated network across 900 and something plus data centers, 26 countries, etc. There's 4,000 carrier connections and 3,000 network devices, 30,000 connections, and every single thing is automated, and each one of those connections is measured and charged by the second, so you can imagine there are two factors. One is a giant network, and the other is a giant billing machine, and the billing machine, if you get that wrong, or if you don't have that perfectly aligned, you don't have a product.
That billing engine was built 11 years ago and hadn't really evolved to enable us to basically offer different pricing depending upon those 30,000 different connections. The pricing, what would happen is if I made a price change, it would subsequently roll across the entire platform. It's one of the beauties of being totally automated in a single price book, but it didn't allow us to have different price books for different locations, different areas, different depending upon what customers were procuring from us, whether they were buying large, small, etc. The rebuild was the actual platform itself to enable us to actually make changes to pricing. As an example, Megaport never had an ability to change prices down, which is kind of astounding.
But if you think about that, the global WAN platform that we rolled out was substantial price changes globally around the world. So connectivity from, say, London to Sydney, Sydney to San Francisco, etc. And those prices needed a lot of altering to ensure that we can offer a very competitive product and continue to win great new logos. So enabling, that's just one example, and again, there's 30,000 different connections. So that overhaul enabled us to actually deliver that into the business. And that took quite a substantial amount of engineering resource. We delivered that in June. It took them about four and a half months to actually rebuild the platform to do that, which, by the way, if you've ever seen a telco business, that is astounding, but super critical to the ability for us to open up new products, new markets, and actually remain competitive.
So, like an astounding achievement from the team. Surprising it didn't exist, but we're there. And so that was solved in June. Hopefully, it can go down a rabbit hole, that one, because you end up with pricing and there's millions of locations. So yeah.
That's a good explanation. Thanks for that. Would that let you have dynamic pricing in the future or say we got excess capacity at a discount, for example?
That pricing structure gives us the ability to do anything. That's what's so important because you see huge customers come along and need really sort of bespoke solutions that we can deliver upon, but we would price that in a different way depending upon what capacity we had available. We quite often have a scenario where a really good example is one of our large financial services customers based in Sydney just spun up a lot of connectivity between Sydney and London. That was full. Our capacity withstood that without any increase. In effect, for us, that's a very profitable deal that we should be doing. When you try to apply one price to all, it's very difficult.
And so for us to do that in the past, if we changed that price, it would just change it through the entire system as opposed to actually being clever about how we went about it. And being able to do that ongoing, like I'll give you an example, a connection between Belarus and London is going to be different to Sydney to Melbourne. And it changes all the time. And so we have a commercial team that can constantly evolve those pricing throughout the business. So the theory is at any point, a customer should be able to jump on Megaport, and so long as it's on our network, we should be incredibly well priced and we can deliver it in 60 seconds. And that should be the thesis forever. We can do that now. Yeah.
That's great. Sounds like an enormous advantage you've got there. Probably deserve more than a single mention in the Annual Report. Such a good thing.
Yeah, thank you. Appreciate it.
Second question.
Celia, do we have any questions online?
Yes, we do, Melinda. The first question is from Stephen Mayne. Thank you for offering shareholders a hybrid AGM this year. Will you commit to doing this in future to maximize shareholder participation? And what was the experience like from your end?
Sorry, I couldn't quite hear it. On my list, what?
I'll repeat the question.
Yep.
Thank you for offering shareholders a hybrid AGM this year. Will you commit to doing this in future years to maximize shareholder participation? And what was the experience like from your end?
It's been fine from my end, and I think we'll continue to hold hybrid meetings while people find it helpful. It's good to have the interaction with shareholders in a way that is convenient for people to participate, whichever that may be in person or online.
The next question is also from Stephen Mayne. When disclosing the outcome of voting on all resolutions today, could you please advise the ASX how many shareholders voted for and against each item, similar to what happens with a scheme of arrangement? This will provide a better gauge of retail shareholder sentiment on all resolutions and insight into the chronically low retail shareholder participation rate. Do you have any comment on this?
I think we can consider that for next year's AGM.
Thank you. Next question is also from Stephen Mayne. This may be a question for Michael. The five most valuable U.S. big tech stocks, Microsoft, Apple, Amazon, Alphabet, and NVIDIA, are together worth more than $20 trillion. Could the CEO comment on how reliant we are on big technology and what we would do if any of them suddenly put up their prices by 30%?
Fairly broad. I think there's multiple answers to that. We use infrastructure. Our network infrastructure is predominantly Cisco infrastructure. So if Cisco decided to dramatically increase price, we would then have a consistent increase in line with whatever that hardware is, but that's not in the group that was mentioned. We actually, Stephen, we actually connect to those folks. So in effect, we're not charged to connect to them. We enable our customers to connect. So if you think of AWS, Azure being Microsoft, GCP being Google, Oracle as the major cloud providers in the world, our customers actually pay for the connectivity from us to that cloud, but the cloud charges them for their connectivity separately. So if all those providers, for example, decided to dramatically increase cloud prices, then that price would be passed through to the customer and not to Megaport, in effect.
So I don't see that as a risk for our business. I don't expect dramatic price increases from a hardware perspective, but I don't think it would be much challenge for us. We're a pretty CapEx-light business as opposed to, say, something like a cloud provider themselves who are constantly having to cycle through masses of amounts of compute. NVIDIA is the last one, which is we don't deploy GPUs in our network. What we do is enable customers to connect to GPU-as-a-Service provider company. So there's a whole heap of companies out there right now procuring tons and tons, that's probably the appropriate term, of NVIDIA chips, deploying them in data centers and then offering them up as sort of AI farms. Our mission is to enable customers to connect to those in 60 seconds.
So if anything, that's an incredible trend that we're riding off the back of, and it's perfectly suited for us. So I don't think there's really much that could cause us damage there. It would just be passed through to our customers. But ultimately, the market is pretty competitive. Last thing I'll say is inside what you're seeing is fragmentation in the cloud markets more so than ever before. So if you had a scenario where AWS was the one cloud to rule them all, it's a very likely scenario where they could sort of play that forward. But the pressure on AWS from Azure and GCP and between the three of them and now Oracle holds a very competitive market. But the second thing is we're seeing lots of other niche players enter in, Wasabi and things like that as well, that enable that competition.
So I think what you would see is commercial competitions playing out naturally in that space. And we become the connector to enable choice for customers. So hopefully that answers it.
Thank you. You might stay there, Michael, because I think the next question is also for you. With all the good financial results, this is not being reflected in the share value. Can you explain why?
I'll never try and explain the movements of a share price. That's definitely not my expertise. What I can say is that we have had dramatic change inside the business. The business is in incredible shape. If you look at the key priority for us and any tech company, the most important thing is that you have incredible technology. And that technology has to be differentiated, solve a customer's problem, be priced appropriately, be in a market that can scale with an appropriate TAM that you can go and address. And you need to be able to get to that TAM without burning all of your cash. And so there's always questions about any one of those elements. And what Megaport's proven in the last year is that every one of those is key. And actually, we are highly differentiated.
And in fact, we're becoming more differentiated in the market as we see other competitors in tougher positions. Megaport's actually enabled to continue forward because of the financial position that we've got ourselves into, which is really incredibly healthy. And the second piece is that you need to take that incredible product to market. And that is the go-to-market team themselves. And so the biggest turnaround inside the business have been those two elements. Our focus is very clearly on the long term. I'm incredibly bullish about the long term of Megaport. We have an incredible future. We are so disruptive in this space, and we disrupt a space that is traditionally very non-disruptive. In fact, a very old legacy space. We are disrupting telcos. And it's incredibly difficult for telcos to disrupt themselves. And we've seen that.
We're 11 years old, and yet we're the largest Network as a Service platform on the planet. We have 300 and something people. We're based here in Brisbane, and we're disrupting the giants that come close. So I won't comment on where the shares and how that's playing out. Our goal, and I think Melinda said it, is to be incredibly transparent and give you as much information that we can, focus on those two key elements being continued innovation in product, and there's a whole strategy behind that that we shared in the full year results, and continue to ensure that we're investing appropriately so that is profitable and efficient growth inside the go-to-market team wherever we see opportunity, so you'll always see us land those two key pillars along the way.
I think as long as that, what I said before with the product component stays true, you have an incredible business in tech. But if you don't innovate, you end up in trouble. That's why in the last year, we released more products than we'd ever released in the last five years because that is the key for the future.
The next question is a three-part question, so I'll ask each of the three parts separately. At the end of FY 2024, Megaport reported a cash balance of $72 million and achieved positive cash flow. Could you elaborate on how the Board and management approach capital allocation decisions? What framework do you use to evaluate and select opportunities from the options available?
Megaport's in a different position to where it's actually accreting cash for the last year and a half, which has been an interesting experience for the financial team who get excited about where they move cash and so forth and how they manage it, which has been a punch in the air daily on that. It also gives us the opportunity, as I said before, to make investments back into the business where it makes sense. I think the most important, again, it's a very broad question in terms of what you could allocate that cash towards. I'll go back to those key two pieces of the strategy. The two biggest focuses that we should be constantly thinking about is how do we invest to build world-class disruptive product, add new products to that portfolio, ideally inside that vertical.
Anything that would make sense in that realm, which ultimately drives revenue growth, is the end game we should be investing in. That can take many different forms. That could be new data center locations, new countries that we go into, higher speed, different capacities from a fiber connectivity perspective. It could be acquisitions. It could be entering into different markets in terms of, like we just added internet. That in itself is a giant TAM that Megaport was not in this time last year when I gave this speech. Entering into those locations constantly and investing in that is critical. There are different ways you can invest when you look at when you get into sort of the tedious land and IFRS and goodness knows what. Again, we're not trying to play a financial game.
The focus is about building this company to deliver great outcome to the customers and extract ultimately revenue from our services. So that's the decision. It's not a decision like there's some financial trickery or something that needs to be done. It's constantly as a focus on what brings value. The second piece, again, I go back to, is the two things will constantly grow in unison. Innovation and engineering and product teams. Humans build products. Just to remind you, it's not ChatGPT yet, so great humans build incredible products. So you need to constantly invest in that space, and the other side is this constant investment in go-to-market. As you scale your business, as your recurring revenue increases, the capacity of a salesperson does not really increase. It does to an extent if you add product, but let's say that that capacity stays the same.
So in order to continue to deliver percentage growth consistent with the base. So if you've got $100 million of ARR, $10 million is 10% growth. If you're at $200 million, $10 million is 5%. $10 million is 5% growth. So what you need to constantly do is expand the number of humans that are selling the technology and taking it to market. And just so you know, we are scratching the surface. We are a tiny company that can address literally every company that has a data center or cloud presence on the planet. That's a lot. And we have a very small team that's currently doing that. So we've got a long, long way to go to access growth for this business. Hopefully, that helps.
The second part of the question is in relation to InnovoEdge. In relation to the InnovoEdge acquisition, how would you assess its success? Has it delivered as expected? On a related note, has Megaport ONE been discontinued given that it was a product transformation linked to the InnovoEdge acquisition?
The vision for InnovoEdge was always to take the innovation out of InnovoEdge, the traditional platform that was Megaport that we all know and love, and merge them together. You never want a situation where you're managing two separate portals in our case. So the goal was to take the innovation from this product and bring it in. Either way, you merge the two together. And so we merge the two products together so that if you are a customer, you're not having to think of a Megaport ONE platform, which is what the InnovoEdge platform was, and a separate different platform. You just want one. If you're using Facebook, you don't want multiple Facebook, whatever. It's like you just want one. And so the answer was we've merged those two together. And the innovation out of the InnovoEdge platform is built into the core business. So tick.
Thank you. And the last part of the question was, how do you view the current competitive landscape? Do you see industry consolidation on the horizon? And if so, is Megaport open to playing such a role in such consolidation?
We're always open. We will always play a role in consolidating if we can, if it makes sense. I feel that the world's been through pretty wild change. So if you think of, I mean, we all went through COVID, but during that time, valuations of companies and the mindset of Silicon Valley, particularly VCs in the U.S., we'll call it everything, was in this constant state of basically burn, like growth at all costs. So they were burning huge amounts of capital. They were raising $150 million and burning it by the end of the year only to raise it at the end without any side of profitability. It was just a focus around growth. So a lot of companies came into being at that point in time, and then it was a dramatic shift back.
So when the handbrake gets pulled and you have a massive pendulum swing, companies that can't get profitable in that time end up in a really difficult position. And Megaport went through that journey, and that result was shown. So we ended up proving out that the profitability of this platform is there. There are plenty of others that did not. And so what we're seeing, I actually predicted that we would have seen this earlier, is this consolidation where folks run out of cash and run out of an ability to raise capital because of the complexity of the way they've built their companies and what they were previously valued at and the current appetite to invest in that space. And so it's a holding game. So it's how long can folks hold on before they need to actually do something?
We're always there to explore companies that make sense that would be accretive to our business, but valuations would always need to be appropriate, and the other piece is I see that we have become really the only one other than Equinix's platform if you genuinely look at it in the detail. There are a couple of others there, but they're small, they're niche, they only service certain markets, and they've got their own challenges. Equinix only services their data center, so to be clear, Equinix is in a healthy position. They're a much bigger company, but their platform only services Equinix data centers. There's 200 Equinix data centers globally, and we're in 900. So we're in such a unique position, which is why I'm so bullish on the future.
Long-winded answer, but it's an interesting space, and there's been so much movement in the last, just so much change through the financial models and what the world's used to in the last three years, two to three years since 2022.
Thanks, Michael. I think I've got a couple more questions here.
Would you like me to read them out?
Yeah, yes, please. Yeah.
The question is, Australia is currently in the midst of an unprecedented deluge of takeovers that has contributed to listed entities on the ASX falling by 7.5%. Why are public markets not valuing ASX-listed companies like ours more highly? And what are we doing to avoid being gobbled up like so many other companies? Does the chair agree this is a problem for the nation, particularly with so few new floats replenishing the ASX ranks?
I can't say that it's a problem for the nation. It's a problem for investors seeking to invest capital who like to participate in listed companies. There's plenty of investment flows coming from superannuation funds and offshore. But yes, there is a huge amount of private capital and private equity-related capital looking for investment. And to the extent that Australian companies meet their returns that they are seeking and are preferable to other markets, you'll continue to see that happen. As far as Megaport goes, our strategy is really just to ensure that we're performing, we've got the right team in place, that the market is fully informed as to how we're doing. We can't be too influenced by short-term share price movements as one of the other questions was related to.
So as a Board and management team, we spend a considerable amount of time at regular intervals looking at where our share price is relative to earnings guidance relative to brokers. But ultimately, it's our role to ensure that the market is fully informed and the company is performing. If the company is fully performing, then that's ideally reflected in our share price. We're fortunate that we have a high free float of this company. And so that's a good thing. That means that the share price is generally liquid and reflecting investor views. But all I can say is that we focus on performance and having the right team in place.
Thank you. There's one more question online, and then we have one audio question. The online question is, did any of the five main proxy advisors recommend a vote against any of today's resolutions? And if so, what reasons did they give?
All of the proxy advisors except ISS voted in favor of all of the resolutions. ISS voted in favor of all of the resolutions except for the Remuneration Report. It's unclear completely why that was the case given that we addressed, we felt, the concerns that had been raised last year relating to the strike. So yeah, so largely everything in favor.
There's no more questions online.
Okay. Any other questions? Okay. I think we've just got to get our microphone holder to come back.
Thank you very much. All right. So yep, here's the card. Someone earlier mentioned the Magnificent Seven tech companies in Silicon Valley. And it got me thinking about a trend that I've been seeing with companies like Microsoft and Amazon. They're trying to get more vertical integration involved. Some of them, obviously, they're building their own data centers with their own power plants, and some of them are even manufacturing their own CPUs and components. Are you concerned about that trend continuing into the domain Megaport currently occupies?
Yes.
Sorry, do you mind repeating that?
Hey, so are you guys concerned about the increasing vertical integration in the bigger tech companies? Are you concerned about them interfering in your space, sort of taking over what you do?
That's a good question. Lots of folks actually see that or ask me that as a concern. The reason we've been doing this 11 years and the reason we haven't seen that change is back to my original statement. If there was one cloud provider only to rule them all, that would change that statement. So for example, if everyone lived in one cloud, no one had a data center anymore, then there's not a lot of need for Megaport. But what's happening is more and more of these behemoths just keep competing with each other, and they're constantly creating this space where they're requiring all this connectivity. So it's almost impossible for each one cloud, for example, you could enable a connection just to Amazon Web Services, but they're not going to build out for Azure or GCP or NVIDIA or Oracle or, or, or.
So what you end up in this situation is we become this sort of Switzerland connected to everyone and anyone that needs that connectivity. So I actually don't see that as a concern. I would only ever see that as a concern if one, literally one dominated, but that never happens. What you can see is actually AWS was the closest to that, and now Microsoft is at the same market share as them. And so then you go Google's fighting behind them and Oracle's coming up the ranks. NVIDIA's building their own cloud. It's like a world just never stops, and we just keep connecting to it. So I don't personally see that as an issue for us, but I see where you're sort of leading to.
It would be a difficult thing being a cloud provider if you were a small Brisbane-based cloud provider trying to compete with those folks very hard. Yeah.
Thank you. And I'd also like to extend my appreciation for your sustainable growth model. It's something that I think we need a lot more of in the industry. Thank you.
Appreciate it. Thank you.
Another question probably for Michael from the Annual Report. Why is ARR per customer so much higher in North America than in Europe or Asia-Pacific?
Good question. Pretty simply, just the size of businesses. So the U.S. is just an incredibly large market. I mean, we are scratching the surface in our penetration into the United States, and yet it is our largest revenue. We landed there, I think it was in 2018. So I'll tell you what's interesting to see from Megaport. If you measure every sort of global SaaS-style business or recurring revenue company, usually you end up in the same. They look the same. 70% of their revenue is in the U.S., sort of 20% in EMEA, and Asia-Pac makes up about 10%. And it's just probably a reflection of total GDP and where sort of more westernized companies are rolling out. For us, we reflect the cloud. It's the same thing.
So I'm sure if you looked at AWS's and Azure's breakdown, it'd be very, it's actually not similar to us, but it'd be similar to the model I just explained. What's different for us is we have a much larger Asia-Pac percentage, and that's because we were founded here and built out and grew here. Most companies build out in the U.S., then go Europe, and then go Asia-Pac. We're quite different. We went Asia-Pac, U.S., and exploded, which is very rare for an Australian company to do, and then EMEA. So it's sort of an interesting mix. The vast majority of our future revenue will always come from the United States, and that is a very undertapped market from our perspective. Think about this. We've got 14 frontline sellers in North America. If you've ever been in North America, it's a pretty large place.
You could put thousands of people in those countries and still not touch the customer base. So that will always be a strategic element. As we always used to say, if you're successful in EMEA and Asia-Pac, but you fail in the United States, you fail. And so that's such a key focus for us, which is the massive turnaround has actually been in the North American region. Yeah.
Okay. So more customers and bigger customers in the U.S., is that it?
Significantly larger. If you just look at the Nasdaq as an example and just think of those companies that we referred to, significantly larger with significantly more presence. So we've got a 300 million population. The Woolworths equivalent is enormous. If you look at B of A, just as like servicing the consumers, like the Westpac equivalent here, it's just ridiculous. There's 400,000 people working there and thousands and thousands and thousands and thousands of branches. So yeah, just a totally different scale compared to anything we see here. It's awesome for us. It's the place you want to be successful in.
And can I have one more while you're there? Total services, so like ports, MCRs, etc., are growing at 11%. The customer logos are only growing at 4%. Is that new customers buying multiple services at the outset when you sign them up, or is it existing customers buying additional services or a mixture of those?
It's a mix. One of the things that is tricky with our metrics is that we give a customer logo. And so one of the things that can be deceptive is if customers spending $1,000 a month, if you lost 10 of those customers and added one customer that spends $1 million a year, it would look like a negative nine, and that would look like a very bad thing. But I can tell you that's a very good thing. So what you've inside the business, you needed to separate between the companies that are going to make value to the company and separate that out. And so it's hard to see externally because you'd be never-endingly slicing every metric constantly, constantly. But we did give insight into the growth.
I think it was 20% growth of our large customers in, it was a Q4, I think it was, that we announced in Q1. We announced in the full year. That's a good indication to what we're doing. Now think about it. When you invest in frontline sales, who get paid commission based upon the size of the deal that they bring in, they are hunting larger deals. They're not playing around here. So what's important for us to is constantly see, are we successful in that top end of town or the larger deals, and what is that growing? That'll come off the existing base. We've got a huge, you'd be surprised. We've got 2,600 customers. And if I showed you our list of customers, it'd blow your mind. We have the, if there was a Fortune 3000 globally, that would be the list of companies that Megaport has.
Every startup in the valley couldn't believe that you have paper with these companies. We actually papered with them, which is just astounding. If you think about trying to get through some of these incredibly large organizations and getting through the procurement machine, Megaport's there. So our opportunity is twofold. One, add the new logos, but two, expand into that existing base. Much easier to expand into an existing base who love you, but you've got to turn up with a new product. And that's what we've been invested in in the last year. And high-revenue-generating products, data center interconnect, and those in global WAN are perfect for us.
Thanks very much, so the message again is not all customers are equal.
Pardon?
The message again is not all your customers are equal.
Correct.
You can't just look at that single number because it's better than others.
That's the trick with it. It's like you've probably always got a curve where 80% of your revenue is probably coming from 20% of your customers. And so if some of those customers are churning down, then that's obviously a very, very—you need to weigh that. But yeah, in the end, it's difficult to see. Going back to annual recurring revenue is the key for us. That is the key. So overall, growing all of that. And what I would expect you'll see is an increase in ARR per customer based upon that statement.
Thanks very much.
Thank you. Brock from Blue Stamp. Sorry, Michael, you can sit down. This is for Mel inda, actually. Should have asked this a bit earlier, but just you mentioned there's a few additional or maybe two additional directors that you guys are looking for. Just wondering what specific skill sets you think are missing from the Board or gaps you want to fill with these additional hires. Any sort of comments you can provide there?
Yeah. In terms of the audit chair candidate, which will effectively replace myself, we've probably got a preference of someone with a CFO or accounting background, but Australian-based, experienced person. There's lots of great candidates out there. They don't necessarily need to be tech, but growth and understanding some of the dynamism that comes with being a growth company and also the global aspect is clearly important in who we're looking for. So we'll find someone who will be the right fit and with those capabilities. And as I said, we've got some very good candidates that we're talking to. The remuneration nomination chair seat, that can be a bit of a diversifier type of candidate. Probably, again, someone who's familiar with that landscape, both in Australia and ideally exposure to offshore.
As to George's question earlier, it's a complex area, and it obviously gets a lot of focus, understandably and rightfully so, from investors and proxy advisors. But ultimately, for the Board, it's about retaining the right and hiring, hiring, then retaining the right management team and backing them. So again, we're looking at candidates who have had that exposure as an ASX director, looking after other Boards or filling that slot. So again, not necessarily tech, but probably someone who's interested in this business, who's possibly got that sort of exposure to offshore markets as well, because it's the issue we face with the CEO who's technically doing a U.S.-based job out of Australia. And then it's a complementary type of thing that you look at.
You don't want, obviously, a whole lot of people who are the same, but we've obviously got three U.S. directors, and so those two slots on the Board will be Australian-based and ASX experienced directors.
Awesome. Thank you. One for Michael. Sorry, mate. Just in the announcement this morning, there was a line about FY 2026. I'm sure one of us was going to ask it in here, but just wondering if you're seeing any challenges in terms of new customer logos, any sort of commentary you can provide around that? Is there increased competitive incursions from the likes of Equinix? Or yeah, just want to hear your thoughts on that.
We're not seeing competitive changes. If anything, I'm seeing less competition play out in terms of what I described before with some of those competitors. The carriers are always our competitors, but we deliver a different experience versus the outcome. We deliver a similar outcome, but they can't deliver that in time. That takes time. The comment around FY 2026 was basically a continuation of the growth that we're seeing today. I would say I would consider that the short term. If you've been following us, there's always been movement in net retention with Megaport. Globally, we've seen since 2022, the market as a whole has had net retention declines. In our case, that's not a result of churn. That's just the expansion inside the existing base, which had reduced slightly or has been reducing since 2022. Again, this is across the board.
What's important is how do you roll forward a trend and where does that trend line hit? By giving that insight, we've been as transparent as we can to give you the information that we can see inside the business here and now from a trending perspective.
Thank you.
Our focus, again, is net retention and driving that business for the long term. But what we can see here and now from the short term is there. Hopefully, that's got you.
Michael, just as an extension of the answer to that question, what do you think is the most important change that's happened over the last 12 months that could actually accelerate net retention and maybe drive growth there where it's been in decline? And I guess, has it got anything to do with dynamic pricing as well? Because most telcos have had price decline. There's been deflation there for years. It's been about volume. Is that part of the reason why growth still for a tech company looks pretty anemic in all fairness?
That's a good question. So the question is, what are the, I sort of bring it back to what are the factors that affect net retention, which is really, really important. There's actually, I would call it sort of five. So one is market.
And market is outside of our power, but market has been powerful, and we can compare that to. It's hard to find a company just like us that's. None of them are public. You can see inside Equinix's business, and you can see their growth specifically for our platform, and it's actually in line. So you actually see a very similar trend there. But if you look at Cloudflare as probably the example that's in a network-style space that reports net retention, they went from 122 to 110 most recently inside that timeframe. So there is a market element, absolutely. But separate to that, if you don't add new products, you can't sell your customers more stuff. So that is probably the most important thing that you turn up and do. The second thing, you need to be competitive on the new services that customers want to roll out.
And that goes back to the pricing that we had to go and build. So those two things alone can drive significant opportunity to expand inside the existing customer base, which was why we were maniacally focused about this. By the way, this has all been executed. So it's something that we picked up maybe this time last year and executed all the way through. So we added all those different product sets, solved the pricing structure challenge. The next one, these are all pretty obvious, by the way, but if you've got 1,600 customers in North America and you have one human responsible for communicating with them and calling them, it's a very difficult job. And so the first time you call the first one, they ask you about a billing discrepancy, and you spend the next week trying to solve that.
We've actually, I think we've got 11 customer success managers now whose purpose is to support and protect our customers and expand them. They've actually paid on net retention. We had one. We've got 11 there. So it's whatever that is. It's a 1,200% increase or something ridiculous. And so that ability to go and take these new products to the customer is the next piece of that puzzle. The last piece is customers - newer customers expand faster than older customers. And so it's really important to constantly add new logos to this space, which is why the frontline sales become a key part of that story as well. So if you look at the sort of five factors, one is outside of our control. And so that is an industry trend. But we are not like a Cisco where we just roll with the market.
We have all of these other levers. So we should be able to smash through that. But you have to be innovating unless if you stop that innovation, that five years of stopping is a massive issue. So turning all these things back on starts to provide the growth for the future. And nothing happens overnight. Even when you release a product, you've got to get it to market, get the customers on board, start to turn off their existing contracts, bring them over. So they become the four pieces. And then people always ask me, "Well, what percentage is each one?" And no one can answer that question. If I even gave you a number, it'd be a lie because what percentage of each one is which? It's very difficult to say. So the only answer is, strategically, should you be doing all these four? Can't do the five.
The answer is 100%. So we've executed on all of those. Market will turn as well. So then these things sort of all play together. Hopefully, that covers that. What are we doing? Yeah. Yeah.
I believe we've got one question. What audio question, Celia?
Yes, you have a phone question from shareholder Bruce Dixon. Please go ahead.
Thank you very much. First, I'll make a quick comment on the hybrid nature of the meeting. Not totally satisfactory. I do like this format, but I found it very frustrating not being able to submit my question online, repeatedly trying to do it, but I'm sure that can be attended to. So my question is an audio question in lieu of that. And it relates to the issue of competition. Now, I've tried to raise these questions several times in the past and haven't even got to the question time. And before I go to the question, I have, can I make a comment that I think Michael has done an exceptional job in his role, his new role in recent times as CEO?
But most importantly, Michael, I certainly, as a long-standing shareholder, have appreciated your explanation and depth of explanation you have around the questions that are being asked. I think it's been missing greatly in the past. Now, my question regards competition. You've spoken to this at some level about a number of players, most notably Equinix. But this regards Lumen. I know you'd be aware of Lumen, obviously, a telco which is trying to sort of recover from a very bad period. But the current CEO, Kate Johnson, recently commented on this. She said, "Who are doing this business?" This is a very large American telco. Megaport and PacketFabric are two examples of companies that have high valuation that are completely digital, but they don't even own the network. They provide Network as a Service, and they lease their fiber from us.
And so they can never get there from an economics perspective. But also, what they can't do is they can't embed these capabilities natively into fiber. Could you make a comment on that particular one by Kate Johnson from Lumen and also maybe broadly in any other area of the competition that Megaport is facing, please? Appreciate it.
I'm incredibly proud that Megaport actually landed on her statements, and we are a fly in an ointment of an organization that is - what is it? - market cap's low, but I think their enterprise value would be -
$27 billion.
$27 billion. And what are they? $5 billion in market cap? So.
Correct.
The rest is debt. And that is probably the important point that Kate maybe needs to think about when those statements are sort of thrown at us. We do not need to roll out physical fiber anywhere in the world. Imagine that we did. We would be in more debt than them. And so the beautiful opportunity that we have is to monetize fiber assets that they are trying to monetize themselves at very low costs in most cases because we can play off all those carriers against themselves. And Lumen is not the only telco with fiber, to be clear. They form portions of our network. But we have an opportunity to take a choice at the connectivity at that point in time with whatever carrier provides that: subsea, cable, land, you name it.
And the magic that we bring, which no other telco can bring, is Lumen would be a multiplication of. I don't know, you could probably answer this, but maybe 40-something different acquisitions would roll into that company. They cannot automate that network. It's actually not possible because they turn up with more CapEx because imagine it: 42 different companies made decisions to buy 42 different types of network infrastructure. Each one of them could be aged between 10, 15, one year. They have different connections. And even the GBICs that sit in these things, when we procure from telcos, it still takes six, 9, 10 months for them to roll out the connections that we need because they'll often turn up to site with a fiber connection that's not the right connection because it's the wrong switch because that was from a different acquisition.
Now, that makes it harder for us to roll out the big 400-gig rings and so forth that we're doing. But as we sort of punch the desk because it's not moving fast enough, we then punch the air and remind ourselves we do that in 60 seconds, and that's the value that we bring. The second thing is because of the way we build our network, we're a packet network, not a fiber network like waves. They are selling wavelength. They can't run multiple customers down a single wavelength. We can buy a 400-gig pipe and slice that into 400 1-gig connections so that our customers can land on that. And here's the really interesting cost dynamics for that, just to be clear.
A 1-gig connection from a carrier, if you bought a 1-gig connection as a customer, and then you said, "Oh, we wanted to increase that pipe to 10 gigs," it's not 10 times the price. We buy it at three or four times or whatever it may be. Guess what? Going from 10 to 100 is not 10 times the price of 10. It's three to four. The same applies for 400. We buy a 400 pipe, and we slice that to 2,800 customers and 30,000 services across that and always be incredibly highly profitable with offering incredibly great pricing. I just don't think we're actually the same company at all. It's not even to say that, "Hey, we are a competitor." It's to say that we will absolutely continue to use Lumen services.
But our value proposition is not to dig holes and lay fiber and try to monetize that asset over 30 years. It's just not our game. We are a pure NaaS play that overlays across that. And we are 100% automated. Not a single human touches our network once it's deployed. And that is why we are so profitable in comparison to any telco who can only throw humans at it. So I just think that that's—I feel nice that we actually got noticed. It's nice. This AUD 200 million ARR Aussie company. Good question. Appreciate the vote of confidence at the start.
Michael, before you go, one more. Talking about your competitors, do you ever experience pushback or friction from the data center owners when you try and put your kit into their data centers? Or is your product offering so compelling to their customers that they're just walking with open arms? And following on from that, is that the same with Equinix, given that they're a competitor?
So basically, the connectivity gain, all data centers must really, to be successful, they have to, if you had to put it this way, if you had a data center that had no connectivity, that's probably an easier way to look at it. It's kind of pointless. There might be some government installations, but beyond that, if you've got a data center that you cannot get to, then you fail. So therefore, the key piece for data centers becomes connectivity. And so a lot of data centers will decide on where they're landing based on the fiber connectivity, the ability for folks to access. And then their game is to offer as much choice as possible between any of those telcos and carriers and fiber providers and what have you. And so for us to land there, it's the same value proposition we had 11 years ago.
When we land and you connect to Megaport, in 60 seconds, we deliver you something that will take two, three, 10 months from another carrier. And that is so important when you're building out a business. Now, if we offered it at three times the price, then I would say that that's probably not a long-term solution. But if we can be at the same or if we can be competitive, shall we say, why would you ever choose anything else? And the other thing is, what's unique about us, if you go to a telco and buy a 10-gig link, as an example, that's contracted. It sits there. And then someone says to you, "I need to run backups on Friday," and it's punching, "I need 100 gig," we can allow you to spin up just like a cloud and down. That flexibility is totally programmable.
So it's just, again, I go, "We're not even the same." Last piece on the telco piece, which is really interesting, and it took me a while to get my head around this. I just think Megaport's one of the most impressive global telcos there is, if not the only global telco. Tell me one country where telecommunications, traditional telcos are successful beyond the country where they inherited the government assets. And this plays globally. You can play that game in every country, in every location. And it's the same problem that we go back to that Lumen statement. They have to roll their own fiber. It's very difficult to do that. We're not constrained by that. So it's just very different plays.
But with the data center owners, so you said Equinix is your only real competitor in this space, but they own their own data centers and they connect between their own data centers, but they also have your kit in there to get them out of their ecosystem. Is that correct?
That's a good question. We are one of the largest connectors to the clouds on the planet. Equinix is one of our largest locations globally that we would distribute across. They kicked us out. Thousands of companies would then lose connectivity to their connectivity. So I would say that doesn't make a lot of sense and goes back to the piece where data centers are traditionally what they would call as carrier neutral, and so they want to attract as many carriers as possible. Interestingly, we partner a lot with Equinix, and when we talk about actually diversity, a lot of companies will use both of us inside an Equinix data center to get that diversity. So we actually add value to the Equinix stack, even for Equinix customers that choose to use Equinix Fabric. Sort of an interesting lens on it.
So what I will say is Equinix are not turning up, giving us customers to connect to our platform. But I'll give you, let me just paint this scenario for you. We've got some big banking customers here in Australia. They have NEXTDC. They have Global Switch. They have LD9, which is Equinix in London. They have DataBank in New York. Now, the point is they're an Equinix customer in one location, but Equinix cannot provide anything beyond that one Equinix site. So Equinix, in that instance, don't even view us as a competitor because they can't add that connectivity. And in that case, we allow all those data centers to connect together. So that becomes the piece. And so then you say, "Well, what does that percentage look like?" Again, Equinix probably got 200 data centers, and we're in 950, so you can sort of play that out.
I think the question before was how much capital has been. We saw AirTrunk as an acquisition most recently in Australia. It was like a AUD 23 billion acquisition. The capital that's been poured into these data centers is not on public markets. It's actually all these private data centers that are growing at a rate of knots. So it's not like Equinix is the one data center to rule them all either. There is just so much investment going. I think we have 120-ish data center providers on the platform. So again, I don't see that as a. It'll be more fragmented, if anything.
Thank you. It's a remarkable achievement. You've effectively got your biggest competitor almost reselling your product for you, like offering it through their premises.
Yeah, that's the thing. It's sort of, it's weird space. I wouldn't even say they're a competitor because if they're outselling Equinix, they're not really a competitor, and we live inside of them as well. A lot of our expenditure for data center space is to Equinix, so we're a big customer of theirs, and so I don't view it like a competitive environment in that sense, actually. We're actually close with Equinix. We're a fan, to be honest.
Th anks.
I'd like to say we're out of time for questions. I think we've had a good session. Thank you, everybody, for attending. And hopefully, see you all next year and stay around for some refreshment if you need to and stay dry. Thank you.