Thank you for standing by, and welcome to the NEXTDC 1H 2021 Results Briefing. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Craig Scroggie, CEO. Please go ahead.
Thank you, Harmony. Good morning, ladies and gentlemen, and welcome to the NEXTDC Results Presentation for the First Half of FY 2021. Joined today by our CFO, Oskar Tomaszewski. Beginning on slide two, we are pleased to present another set of record results. Total revenue of AUD 122 million and underlying EBITDA of AUD 66 million. Contracted utilization now stands at 71 MW. Our networks continue to expand, growing to more than 13,900 interconnections, up 16% in the last 12 months. Our ecosystem continues to evolve with over 1,460 customers, more than 660 partners, including 70 connectivity service providers.
Turning to slide three. Our strong performance in 1H 2021 is highlighted by robust key operating metrics. Revenue from data center services increased by AUD 26 million or 27% to AUD 122 million. Contracted utilization increased by a net 18 MW or 33% to 71 MW. While interconnection revenue accounted for 7.6% of first half recurring revenue. Our results continue to demonstrate the company's operating leverage. Underlying EBITDA increased 29% to AUD 66 million. Operating cash flow grew 219% to AUD 64 million, and billing utilization, which grew at 32% over the last 12 months, reflects the company's focus on delivery of its strong order book, which in turn is expected to lead to customers exercising of existing reservations into future orders.
We remain well-capitalized to support our growth plans. Total liquidity at 30 June was approximately AUD 1.8 billion, inclusive of over AUD 1 billion of undrawn headroom in our senior debt facility, which achieved financial close in December 2020. Our balance sheet remains underpinned by AUD 2.6 billion of total tangible assets. At December 31, we held property with a carrying value of over AUD 900 million and plant equipment with a carrying value of AUD 820 million. Our data center fleet continues to evolve at a rapid pace.
The fit out of our M2 and S2 facilities in the high-growth markets of Sydney and Melbourne, with 10 MW of installed capacity added in the six months to December 31. Our S3 development is on schedule for practical completion of phase I in the second half of FY 2022. Groundworks are now largely complete and base building construction has commenced. M3 has well progressed with its design and development approval formally submitted to council, where it has received endorsement. I'll now hand over to Oskar to discuss our financial results in greater detail.
Thank you, Craig. Let's now turn to slide six, which provides a summary of our profit and loss for the half year. The statutory results reflect data center services revenue of AUD 121.6 million, an increase of 27% on the same period last year. Net loss after tax of AUD 17.5 million, a result which primarily reflects increased depreciation and finance costs. Our non-statutory highlights include underlying EBITDA of AUD 65.7 million, an increase of 29% on the same period last year. Direct costs of AUD 23.3 million, which rose in line with customer power consumption and energy costs, offset by improved efficiency. Facility costs, which increased to AUD 11.8 million as we ramped up operations across our facilities, particularly at S2, as well as increased property holding costs.
Corporate costs increased to AUD 20.5 million, reflecting the investments NEXTDC is making into the ongoing growth of our business, as well as the market-wide increase in insurance costs, particularly for D&O cover. On to slide seven. Revenue generated from racks, suites, cross connects, and other recurring sources accounted for 96% of total data center services revenue, with project revenues representing a lower proportion of revenue each year. The underlying EBITDA performance highlights NEXTDC's operating leverage, as demonstrated by the 29% growth in earnings relative to 27% growth in data center services revenue. This trend is further demonstrated by the longer-term revenue and earnings CAGR figures on this page. Slide eight sets out our revenue per unit metrics. Annualized revenue per square meter continued to grow during the first half of 2021, benefiting from contracted price escalation and increased connectivity, power density, and power recharge revenues.
Annualized revenue per megawatt reflects some new large customer deployments coming online over the past few reporting periods. It's worth noting that revenues from larger ecosystem-enhancing customer deployments increase over time due to high usage of contracted power capacity, increased demand for interconnection, and the use of ancillary services over time. Slide nine summarizes our balance sheet position and cash flows. At December 31, NEXTDC held property with a carrying value of AUD 904 million, as well as plant and equipment with a carrying value of AUD 819 million. Our net assets stood at just under AUD 1.7 billion. Finally, we remain well-capitalized to continue our growth trajectory, with total liquidity comprising cash and undrawn debt facilities of close to AUD 1.8 billion. I'll now hand you back across to Craig to go through our business performance and outlook for the 2021 financial year.
Thanks, Oskar. On slide 11, our key non-financial metrics are set out. Total number of customers up 16% year-on-year to 1,465. Total interconnection growth, 16% year-on-year to 13,911. Total cross connects are at 9.5 per customer. On slide 12, further insight into the diversity of our business. Breakdown of customers by industry shows strong representation from enterprise and cloud, as well as system integrators and connectivity partners. The increasing skew towards higher density deployments reflects growth of hyper converged infrastructure and hybrid clouds. Turning to slide 13. At December 31, 80% of installed capacity was under contract and 80% of the contracted capacity was billing and generating revenue. In the past 12 months, we've seen a 32% increase in billing capacity, which now stands at 56.8 MW .
With over 14 MW of contracted capacity at December 31 still to commence billing, there is scale for continued improvement in operating leverage and strong revenue and earnings growth. On slide 14, our capacity and utilization. In New South Wales and A.C.T., we added 4 MW capacity at S2, taking total capacity installed at S2 to 26 MW. Work is in progress on the final data hall. S3 development continues at a rapid pace, with building construction commenced. We are fitting out the first 12 MW and on a target for practical completion in the second half of FY 2022. In Melbourne, M2's expansion is on track, with 6 MW delivered in the first half and a further 9 MW still under construction. At M3, design and development approval was formally submitted to council, where it received endorsement.
Preparing for Tier IV certifications of constructed facility and gold certification of operational sustainability at S2 and P2. On slide 16, our upgraded guidance. Data center services revenue is increased to a range of AUD 246 million-AUD 251 million, up from a range of AUD 242 million-AUD 250 million previously. The updated revenue guidance remains underpinned by strong growth in recurring revenues and long-term customer contracts, with substantial contracted capacity yet to commence billing. Our underlying EBITDA guidance is increased to AUD 130 million-AUD 133 million, versus a range of AUD 125 million-AUD 130 million previously, with scale and earnings growth continued to be driven by generation two facilities. Total CapEx for the year is expected to be between AUD 380 million and AUD 400 million, which is unchanged from our earlier guidance. FY 2021 is a year of continuing acceleration of growth for NEXTDC.
The foundations have been put in place over recent years, and we'll see the company continue to scale rapidly through the second half of FY 2021 and beyond. Operator, could we now open the line for questions, please?
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on speaker phone, please pick up your handset to ask our question. Your first question comes from Kane Hannan from Goldman Sachs. Please go ahead.
Good morning, guys. Just three quick ones from me, please. Firstly, just keen to understand the comments in the media release in a little bit more detail. I think you're talking about expected new customer contracts in the second half. Is that referencing more enterprise contracts coming online, or is that in reference to expectations around hyperscalers? Secondly, is there any more details you can provide around the design specs on M3 and some of the plans that you've submitted? Finally, just confirming, has there been any change to that 57 MW in options that you've previously disclosed in the half?
Thanks, Kane. Commentary in relation to second half sales. Obviously both enterprise and hyperscale continue to grow. We've had a very strong start to the second half. The enterprise performance in the first half is very solid. Clearly, we expect that as a result of COVID-19-related circumstances and changes to the office environment, that we'll see further moving out of on-premise data centers. Many large-scale customers recognize that the change in the office is a permanent state and that they need to accelerate that move into colo. The second half sales, we expect to see both enterprise and hyperscale opportunities accelerate. Needless to say, it has been a very, very good start to the second half. We have a number of large-scale opportunities..
Obviously, delivering the initial capacity, particularly for S2 and M2, means that once those are delivered, we can continue to follow on with additional capacity. In relation to M3, Kane, the development approval for the initial design has been endorsed by the council. That is now being stamped, and we'll be able to start development of M3 very soon. We're in a good position with M3. Quite excited, obviously, because we have a number of early customer engagements. We're working through contracting with clients for expansion capacity into M3, and that's both in an enterprise and a hyperscale sense.
M3 is certainly shaping up to be a very, very exciting development for us and the potential for another 10 MW worth of expansion capacity in a similar vein to what we've experienced with M2's demand. Finally, in relation to the 57 MW worth of options, we continue to work on the conversion of those options into orders both in Sydney and in Melbourne. Whether that be M2 into M3 or S2 into S3, both of those markets obviously performing extremely well. Thanks, Kane.
Thanks, Craig. Cheers.
Thank you. Your next question comes from Nick Harris from Morgans. Please go ahead.
Thanks. Good morning, guys. Great results. three questions from me, please, Craig. First one, just the guidance upgrade. It looks like the EBITDA dollar uplift is more than the revenue dollar uplift when you look at the change. Just wondering, does that mean you're running the business more efficiently than you expected six months ago, or are you just pushing things out a little bit? That's question one. Question two, M1, it's running at 100% utilization, which is a pretty amazing outcome, and despite being totally full, it's doing AUD 1.5 million project fees in the half. Just curious, is that a temporary spike, some over-usage because of the COVID-19, or could it actually run around those levels going forward? My third question was just on B1. It's over 10 years old now. Just curious, I mean, is that utilization broadly holding?
Is the return profile broadly holding and it basically charging along printing money, or how should we think about, I guess, a more mature facility? Thanks.
Thanks very much, Nick. In relation to the guidance upgrade, EBITDA versus revenue. Clearly, you would have noticed the power prices have shifted and for us in a positive sense, that is down. We have certainly benefited from that change. The operational efficiency, operational leverage of the business played a key role as well. Certainly positive catalyst in that regard to improve the operating leverage, and that's what you're seeing come through in the numbers there. In relation to M1, 100% utilization, we have managed, as we have done previously, to continue to optimize the facility, both for its efficiency and the space and designs. We continue to find opportunities to optimize pockets of space. Critically important for us to look for opportunities both in S1 and M1. Both of those facilities are being highly utilized, continue to improve from a performance perspective.
As we optimize the operation of the facility, we're seeing very, very good performance there. Both S1 and M1 are reflecting that. B1, yes, our first facility, and as you would recognize, Nick, has been an extremely strong performer from a financial perspective and continues to be a great business in its own right. Utilization continues to be full. For us, the smaller scale facilities ultimately that are highly enterprise and government-focused are very, very strong from a margin contribution perspective. Thank you very much, Nick.
Thanks very much, Craig.
Thank you. Your next question comes from Jonathan Atkin from RBC Capital Markets. Please go ahead.
Thanks. I guess I've got three questions as well. We seem to be talking about older facilities. The question kind of arose in my mind about any kind of lumpy CapEx items around maintenance on some of these older sites to keep in mind as we think about the free cash flow profile going forward on the first-generation sites. The second question is just around the commercial momentum that you're seeing and book-to-bill, number of months or calendar quarters till commencement. Are you noticing any changes in what your customers are telling you? Is it solely a function of you delivering the inventory? Are there any potential delays in customers moving in based on their timeframes?
Thirdly, the council approval for M3, I'm just interested, in the year 2021, are there any kind of different questions that you are getting or that the public sector is grappling with when they give you development approval? Is it a different set of topics now than would have been the case on earlier projects years back, or is it pretty similar? Thank you.
Thanks, Jonathan. First question in lumpy CapEx. No, look, I think obviously the earning profile. We have a fairly well-mapped-out maintenance program where we're continuing to maintain and upgrade the fleet. Even in the facilities that were built first, in the first generation, there's nothing that we would see outside of where we would have already planned in the ordinary course. The R&M line primarily goes through OpEx, so you're seeing everything that we see there on a half-on-half basis. Second question in relation to commercial momentum. Number of months in book-to-bill, largely, really, is just driven by customers' capacity to get to site and deploy. One of the things that we experienced in the COVID-19 timeframe, Jonathan, was that it was difficult, particularly for our North American customers, to get to site.
For us, playing a deeper role insofar as the service delivery support for customers became critically important for those that didn't have the same flexibility to travel. Largely the timing of that is dependent on the customer's ability to be able to stand up infrastructure. Nothing out of the ordinary despite COVID-19 being a challenging environment, and challenging both in terms of operational support, getting people to site, getting infrastructure to site, and then just in the capital work sense. Very strong performance from my perspective in a disciplined way. In a challenging environment, we managed to ensure that we delivered on time, on budget, and in some cases, a little early for customers in that COVID-19 circumstance. Very positive from my perspective. No delays on the customer side, really, nor any delays from us in terms of capital works delivery.
Strong from a commercial momentum perspective and leaning in quite heavily. That Melbourne market is evolving rapidly, and obviously the size and the success that we've had in M2 is starting to shape up to be potentially replicated in M3 as well. Certainly, very strong growth in the Melbourne market for us, and I expect there'll be more to come soon. The third question, John, in relation to the M3 council approval, I was on the call with the council in Melbourne just last Tuesday night. Questions from council, largely, they're quite excited, obviously, just at the base building, over a quarter of a billion-dollar infrastructure investment before we scale that site out. It's a big deal for the community there. It's a great opportunity. What they are focused on very heavily, from a community engagement perspective, is local employment and ESG.
Most of the questions in relation to the development were about what we can do to support the local community and jobs. As the nature of work changes, those communities are looking to grow employment for their own constituents, and they're extremely sensitive to ESG. We spent a lot of time talking about, obviously, our investments in solar, the technology that we use that's highly sustainable, our participation in carbon neutrality programs, that are all leading in the industry in that context, and they're all very well received. Much of the effort that we're putting over time, John, to focus on leadership in sustainability, carbon neutrality, renewable energy, is extremely well received by those local communities. A positive and great experience now with the DA endorsed by the council members.
They've stamped the development approval, and we can get underway with construction, which we're pretty excited about given the demand profile for M3. Thank you, Jonathan.
Thank you.
Thank you. Your next question comes from Entcho Raykovski from Credit Suisse. Please go ahead.
Hi, Craig. Hi, Oskar. My first question is just on the contracted utilization. I noticed that grew by 1 MW over the past six months after much higher growth in the previous six months. Can you perhaps comment on the reason for the slowdown? Was a lot of the activity effectively pulled forward to the start of calendar year 2020? Secondly, has this in any way been impacted by the supply environment? Obviously, we've seen news there, Equinix and Digital Realty have both set out plans to expand and build new facilities in recent months. I guess in conjunction with that, if you can comment on how you see the supply environment at the moment. Finally, your comment that sales in 2H 2021 have already exceeded expectations. Just for the avoidance of doubt, should we then see an increase in contracted utilization in the second half?
Thank you.
Thanks, Entcho. The first question is in relation to the 1 MW of sales in Enterprise in the first half. Very strong performance. That's exactly what we expect with Enterprise. From a run rate perspective, despite the environment, if you think that getting around and transitioning out of office, we've seen people recognize very quickly that the office environment is challenging to operate your data center out of. We managed to still deliver that full megawatt despite the challenging circumstances in the Enterprise. Strong performance from that perspective. As that relates to what we sold in Hyperscale, as I think everyone's pretty familiar with Hyperscale business generally moves in waves. We had our largest year in the history of the company, obviously, in new signed signings in FY 2020, not a surprise that you have to digest what you've sold and deliver that.
It's becoming fairly commonly understood that when you have very large scale commitments that are signed, you then deliver those, and you move on to the next set of large scale commitments. The more we deliver, the more momentum we have, the deeper the relationship with our customers, and obviously that flows to new business in multiple locations. As far as we're concerned, strong performance and leaning into a very strong second half for us. The answer to, I'll go to the last question now, before I tackle the supply environment question, and that was the second half. Yes, we've already exceeded our first half sales, already totally exceeded our first half sales, by a number of multiples in the second half, and have a number of large commitments that we're working through with customers. Again, very strong environment.
I don't think the strength of the environment will be a surprise to anyone. Most people would expect that we're going to be experiencing that level of demand given what's happening in the industry, migration to public and private clouds. Obviously enterprise migration out of offices has continued to be a key topic because people recognize getting access to the office and living in a COVID-19 normal environment means that that will be a challenging circumstance. Certainly, what we've seen on a global scale has been larger enterprises wanting to ensure that they are operating out of colo at a minimum, and then they can manage their migration to public and private clouds.
Just in relation to the question on the supply environment, Entcho, also don't think that that would be a surprise to anyone, particularly for two big global players like Equinix and Digital Realty to continue to invest in the local market, both being very successful, run good businesses, disciplined competitors. We enjoy competing against them because they run quality businesses. They've certainly raised the bar in terms of educating the market and customers on what a world-class quality data center product looks like. There's no real concern from us in the context of the further developments and the expected capacities that we're seeing. This is going to be another 10x opportunity over the course of the next three to five years. We've got plenty more to come ourselves.
I would expect that as we start to make further announcements, we're obviously very close to announcing the total size and scale of the opportunity at M3. As we're now well advanced into the base building development of S3, we'll be revealing more about S4 in the not-too-distant future as well. Whether it be Equinix, Digital Realty or ourselves, I would expect that the sort of 10X opportunity that most people would be comfortable with today as a result of that acceleration is not going to be a surprise. I don't see the supply environment as out of sync with the demand environment. Our biggest challenge today really is obviously just keeping up with delivery of that demand. Very few of us build in advance of those commitments. All of our competitors have been, and largely continue to be, very disciplined with how they deploy their capital.
You don't know where you're going to need it. Capital is a scarce resource, and we see that demand coming in many and varied different markets, and we need to be sure that obviously we're investing that capital where the opportunity is. Ourselves and others continue to take land banking opportunities and clearly, as we're moving towards M3 and S4 as new developments, they will be of significant scale and customer demand is very strong. Thanks, Entcho.
Okay. Thanks, folks.
Thank you. Your next question comes from Mitchell Sonogan from Macquarie. Please go ahead.
Good morning, Craig and Oskar. Thanks for taking my questions. Just number one, on S2, that's ramping up very quickly. Can you maybe provide some broad guidance on the profile we should be expecting and when full billing might be achieved on existing contracted capacity? Number two, over in Perth, are you hearing anything more from the hyperscalers over there? Can you provide a bit of an update on the conversations you're having with your major customers and expectations over in Perth over the next few years? Finally, just on the cash conversion, that was really strong in the first half. Should we expect that to normalize over the full year? Thank you.
Thanks, Mitchell. Everyone's got three questions today. Well done. On S2, yeah, obviously very strong. As it relates to cash conversion across the business, yes to normalizing. P2, without tipping off our competitors and everybody else, obviously the cable routes that are coming into Perth, particularly out of Singapore, you've got two new routes, ASC and INDIGO, and then you've got the Perth-Darwin cable, very strong, obviously supporting all of those. You would have seen announcements from those companies saying that they'll be distributing their services at P2. We remain very excited about what that means for the Perth market. We made announcements previously on hosting the Microsoft connectivity nodes and Amazon connectivity nodes. They're in partnership with those key players in that market. Strong demand, both in enterprise and in hyperscale. They certainly have the potential to be capable of deploying regions.
As we're seeing across the whole region, those companies continue to deploy and get closer to the customer. I think the theme of getting closer to the customer is what we will expect to see that will drive demand in those markets, that will drive network to grow into compute capacity. We're very well prepared and ready to support that growth and working closely with customers to plan for that support. Without preempting too much what's going to happen there, I do expect that Perth is going to offer us some fantastic opportunities in the not-too-distant future. Thank you, Mitchell.
Thank you. Your next question comes from Paul Mason from E&P. Please go ahead.
Hey, guys. I'll do the three questions as well. The first one, just on your guidance structure. I've been thinking about your FY 2021 trajectory as a bit more second half-weighted because of the M2 contracts, which sort of referenced starting billing in the second half. I'm just wondering if you could maybe comment on, is that actually more like a very late start and it's more like first half 2022 that we should think about that? The second question is about, following from Jonathan's one, you guys had obviously done some front of house refurbishments at M1 and I think S1 as well. Just where that's up to? The third is in relation to S2.
I just wondered if you could make a comment about what your sort of runway that's left to sell enterprise deals at S2 looks like, given we're still about a year and a half away from S3 opening. Do you think you've got enough space in there to actually consistently sell in, or is there a risk that you might run out of inventory again? Those are the three from me. Thanks.
Thanks, Paul. I think you might have almost got four in there. Second half weighted, yeah, look, I mean, obviously, we continue to be pretty disciplined and conservative in relation to how we manage the forecast. Clearly strong numbers in the first half. The team got a good handle on what billing activation and ramp looks like. We continue to be pretty flexible with customers. Just got to continue to be disciplined and be conservative in terms of how we forecast the ramps and we always benefit from positive delivery in that regard. Just one thing to keep in mind, we don't know where power will go. We've had some positive benefits from power prices in the first half and don't know what that necessarily will mean in the second half.
We just continue to be a little conservative as it relates to our estimations for power costs and obviously its impact on the revenue mix. Second question in relation to the front-of-house refit. Yeah, we absolutely have gone through the front-of-house refits for M1, S1, continuing to upgrade and keep those facilities fresh. Whilst the front of house is important from a customer experience perspective, so too is continuing to optimize those facilities for margin expansion, the density of the networks, and obviously the important role that they play delivering highly diversified Cross Connect revenue. You're seeing all of that come through those upgrades are reflected in the maintenance costs. The R&M line residential, the investments that we've made as we've upgraded N1 and S1 front of house. Yeah, that's pretty much reflected in the numbers today.
A question in relation to the S2 runway on enterprise. We've got a little inventory, but obviously not very much. It is our goal not to go dark. I'd like to think that we will have enough inventory to try and make it through to the opening of S3. It'll be a positive, as it always, it's a double-edged sword. We run out of inventory, and we've got to wait a little while. I think we've got enough, the FY 2022 open date, March, still being the target. We're going to go as fast as we can to hit those dates. It'll be 12 months before we can really get into selling S3, with those confirmed delivery dates. I'm hoping that we'll just have enough to get us there, Paul.
Again, it'll be a positive if we run out in that context because we'll have sold it to enterprise. I think it's a positive either way. Thanks, Paul.
All right. Thanks.
Thank you. Your next question comes from Siraj Ahmed from Citi. Please go ahead.
Thanks. I just have two. First one, Craig, you spoke to a pickup in enterprise pipeline, second half as being really strong. I think previously you've mentioned that typically the one megawatt a half in enterprise deals. I mean, where do you think that can go to in the future, given the increased demand? Secondly, looking at the margin guidance for the second half, it implies a step down. Just trying to understand, there's any additional cost that we should be considering, or is it just conservative? Thanks.
Thanks, Siraj. That's only two questions. You don't want a third? I'm just joking, mate.
I'm good.
Oh, it's all good. Thank you, Siraj. Enterprise, the one megawatt run rate is exactly what we expect. When you think about that one megawatt, when you break that down into enterprise customers, you've got to remember that a 1 MW deal, part of the challenge when everyone looks at Hyperscale, when you're selling in megawatts and customers are deploying tens of thousands of servers, that they are the largest in the world, but there are very few of them. When you're looking at the enterprise, like 10 kW for an enterprise customer or 20 kW for an enterprise customer can be a very high margin, critically important ecosystem enhancing opportunity. Those enterprise customers are the ones that the Hyperscalers want to connect to. The reason we have and continue to focus very, very deeply on the enterprise business is that it's created a beautiful ecosystem.
That connectivity, 75% of data not leaving the building, it's running around inside the four walls of the facility. It drives both physical and electric cross connect depths. I guess in an enterprise context, one and a half is what we hope for. That also includes churn and customers consolidating and migrating to cloud and then upgrading infrastructure into smaller or more efficient footprints. I think that it's exactly what we want to continue to see. As a result of public and private cloud adoption and then enterprise becoming more efficient as well, we're actually selling more and more and more, and that's sort of being maintained at that 1 MW run rate number.
It's a good performance, and I expect that we want to continue to maintain that. Just on the margin guidance, really at the end of the day, power pass-through tends to distort what's going on the margin side. As the larger hyperscale customers consume more power, obviously that power is not take or pay, that power is power pass-through, so it tends to be a larger percentage overall. Just to be clear, the EBITDA margin improved based on guidance, and there is an overall improvement in the margin position. Thanks, Siraj.
Thank you. Your next question comes from Tim Plumbe from UBS. Please go ahead.
Hi, guys. Most of my questions have been asked already. I'm going to mix it up and I'll keep it to two questions, if that's all right. Craig, you touched on it a little bit when you mentioned S4 earlier. Just wondering how you think about weighing up offshore versus local opportunities, maybe if you can talk about the appetite to expand offshore. Secondly, in terms of the corporate costs, quite a uplift year-over-year. Historically, you guys have had a half-over-half uplift in the second half as you take on some more projects, et cetera. Should we be expecting more of the same? How do we think about that medium-term trajectory on the corporate cost line?
Thanks, Tim. Yeah, look, M3, S4, and more to come. There's a number of other initiatives we will be unveiling. Obviously, the expansion of the Edge strategy for us locally will be an important piece that we'll reveal more about shortly. As Edge becomes a greater feature, many people have been talking about it for a long time. We've been carefully evaluating the opportunity and what it looks like. Outside of the big, what you'd call metro data centers, there will be other opportunities. We'll take advantage of those. We'll be investing in those areas to continue to grow not just the depth of the business in the context of metros, but the breadth of the business. That is important. As it relates to offshore, look, we have and continue to evaluate opportunities, particularly in Singapore and Japan.
A bit of a difficult environment because it's tough to travel for everybody given the last 12 months worth of COVID, but it's not discouraged us from wanting to take advantage of those opportunities. We've got a site in Singapore, despite the moratorium, working with the government to see if we're capable of obviously building our first facility there and moving forward. As much as patience is not necessarily easy for me, given I want to be making progress on every single front. We do have a site, we've got a design, we've selected our builders and engineers. They're looking at when they need to get started, but we just need the government support to move forward on that. Ourselves and a number of others are waiting patiently to get cracking in that market.
In Japan, it's a little more complicated because we focus, again, we're not just looking at hyperscale opportunities. We're looking at building a very similar business, obviously, to what we've built successfully here. It's deeply enterprise-focused. It's got a strong connectivity base, we've got to do that in the major metros. Finding sites in the major metros in places like Tokyo is a little trickier than it is going out to say, the larger regional areas where you can get land that's available. Look, we'll continue to focus on international as an opportunity. I just have to look at that and say, if it takes us 10 years to build a successful business internationally, it's taken us 10 years to build a wonderful, successful business domestically. We'll just have to be patient and look for the opportunity. Customers want to work for us.
Customers want to work with us. Customers want to grow with us in that context. They love the quality of the product, the service delivery, each of us, our brand promise, and the things that we do to build ecosystem-enhancing enterprise businesses. That's where I think we're differentiated. It's easy to chase very large scale hyper opportunities. There's a handful of those, and everybody wants a piece of them. It takes time and it takes discipline to build an enterprise business, and that's where a huge amount of value is created. We're not going to lose sight of creating the most valuable part. Getting big for the sake of it's not the number one most important priority. The most important priority is building a quality business.
Sometimes it comes in big orders, sometimes it comes in small orders. Most of the time, it takes time to build anything of quality. We'll continue to be patient, we'll continue to be disciplined. The last question, Tim, just in relation to corporate costs. I think the very simple answer is that there's one significant item that really puts pressure on us and everybody else. That is insurance premiums year on year. It was a pretty significant impact. You're talking about D&O insurance and other things just being AUD millions more than what most people would have wanted them to be rather than expected them to be. I don't think that'll be a surprise to anyone. Largely outside of our control. We'll control the things that we can control, which is always the costs and investments that we make on our side.
The outside costs, we benchmarked insurance costs on a global scale. We went to market. We've tested every opportunity we can, but we just don't have a lot of flexibility in that regard. Some things you can't control. Those ones we'll accept that they are what they are, and we'll focus on the ones that we can influence. Thanks, Tim.
Thanks, Craig.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Fraser McLeish from MST Marquee. Please go ahead.
Hi, Craig. Thanks very much. Just a quick one from me. Just on the revenue per MW number, I think came down about 3% in the half. Would you be able to just give a little bit of granularity on the key drivers of that, I guess so being what mixed power prices and probably contracted price increases and just how you are seeing that trending going forward would be very helpful. Thanks.
Thanks, Fraser. That one's actually relatively straightforward insofar as the revenue per MW number is really a direct reflection of what's happening in the mix of power. As we get a larger percentage uptake of Hyperscale, every time we deliver a large chunk of Hyperscale, that will have a direct impact on the revenue per MW number. As we're activating, as you saw in the first half, we were activating a fairly significant amount of billing, and it comes as a power pass-through rather than a take or pay. The other element being, and this is the return metric that is important that we continue to focus on, and that's the AUD generated per square meter.
The balance of those two, as you've seen over time, the per megawatt pricing goes up and down dependent on the size of the customer and billing at any given time. The revenue per square meter continues to rise, and that's the one that is obviously important for us to continue to improve margins over time. Thanks, Fraser.
Great. Thank you.
Thank you.
I think we're around pretty much exactly on the hour. Are there any further questions?
There are no further questions at this time. I'll now hand back for closing remarks.
Thanks very much, Shelley. Ladies and gentlemen, thanks for joining the first half of the results call. We appreciate the continued support. Thank you to everyone for the questions. It's been an exciting period for us despite challenging circumstances for most, domestically and globally. COVID-19 has unquestionably caused many businesses to think differently about how they operate. A lot of those changes in the environment have been very positive catalysts for us. We are hugely excited about what's happening in the overall continued development of the business. There are many, many new opportunities, obviously emerging as we go from M2 into M3 and obviously S3 into new developments. We'll be sharing more about like S4. It's a great environment coming into a very strong second half for us, and it's wonderful to be able to share an upgrade to guidance in the year.
Thanks to everyone for joining the call today. Thank you for support, and I'm sure we'll talk again soon. Bye for now.
That does conclude our conference for today. Thank Thank you for participating. You may now disconnect.