# FY23  Annual Report


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Awards and Certifications

Awards Certifications and global standards

Frost & Sullivan ISO 27001:2013

Information Security Management System

**2023** **Winner: Australian Data Centre**

(ISMS) certification (S1, S2, B1, B2, M1, 

Company of the Year 

M2, P1, P2, C1 and Head office) 

**2023** **Winner: APAC Customer Value**

Leadership Award ISO 14001:2015

Environmental Management System

**2022** **Winner: Australian Data Centre**

Company of the Year certification (S1, S2, B1, B2, M1, M2, P1, P2, C1 and Head office) 

**2021** **Winner: Australian Data Centre**

Company of the Year ISO 9001:2015

Quality Management System

**2021** **Winner: APAC Australia’s Most Reliable**

Data Centre Provider certification (S1, S2, B1, B2, M1, M2, P1, P2, C1 and Head office) 

**2020** **Leader: Australian Data Centre**

Services Radar Report ISO 45001:2018

Occupational health and safety

**2019** **Winner: Visionary Innovation**

Leadership Award, Global Data Centre management systems (S1, S2, B1, B2, 

M1, M2, P1, P2, C1 and Head office) 

Infrastructure and Operations

SOC 1 / SOC 2

Australian Business Awards

Suite of assurance reports from the

**2020** **Winner: Sustainable Company of the** AICPA issued to provide assurance on

Year system‑level controls operated as a

data centre service organisation.

Uptime Brill Awards, Asia-Pacific

PCI-DSS

**2019** **Winner: Best Practices Award - Global**

Payment Card Industry Data Security

Data Centre Infrastructure and Standard certification issued scope of

Operations Visionary Innovation information security controls operated

Leadership Award as a data centre service provider.

Energy and sustainability Uptime Institute certifications
certifications

NABERS
National Australian Built Environment
Rating System. NEXTDC's M1 and S1
certified to NABERS 5-Star and P1 to
4.5-Star rating for energy efficiency.

Climate Active
Australian Government, Climate
Active certified for carbon neutrality.

TRUE certification
True (Total Resource Use and Efficiency)
is a zero waste certification program
focused on waste reduction and
recycling. NEXTDC S1 Sydney achieved
Certified level TRUE Certification.


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Contents

Awards and Certifications **2**

Highlights **4**

Letter from the Chairman **5**

Letter from the CEO **9**

About NEXTDC **12**

Environmental Sustainability **13**

Climate Change **14**

NEXTDC’s Business Features **17**

Our People and Culture **19**

Market Growth Demonstrated by NEXTDC **21**

Directors’ Report **22**

Remuneration Report – Audited **34**

Auditor’s Independence Declaration **60**

Corporate Governance Statement **61**

Financial Report **62**

Directors’ Declaration **114**

Independent Auditor’s Report **115**

Shareholder Information **121**

Corporate Directory **123**


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**D1 Darwin**

[operational data centres]
Highlights 12

**B1 Brisbane** **B2 Brisbane**

1,820
customers

**C1 Canberra** **M1 Melbourne**

100%

**M2 Melbourne** **M3 Melbourne**

carbon neutral
corporate operations

750[+] **P1 Perth** **P2 Perth**

partners

8 **S1 Sydney** **S2 Sydney**
public clouds

**S3 Sydney** **SC1 Sunshine Coast**

15
cloud on-ramps

**A1 Adelaide**

**PH1 Port Hedland**

6 3
data centres in **KL1 Kuala Lumpur** data centres
development **AK1 Auckland** in planning


**M4 Melbourne**

**S4 Sydney**

**S5 Sydney**


17,816
interconnections


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Welcome to NEXTDC’s Annual Report for the fiscal year
ended 30 June, 2023. It has been another outstanding
12 months for the Company with our key financial
metrics once again showing record growth during the
reporting period.

The ongoing scaling of our national platform and
expansion into Asia has been driven by a focussed
commitment from our team and its leadership. They
have driven the growth of our business and taken
colocation revenues, interconnection, ecosystem
development, EBITDA and contracted utilisation to
new heights.

In an environment where macro-economic forces such
as rising geo-political tensions, supply chain constraints
and rising inflation have created domestic and
international disruption, the demand for digital

##### Letter from 

infrastructure has never been stronger and our role as
Australia’s leading, customer-centric data centre
services provider has never been more relevant.

##### the Chairman

Appetite for growth

After nearly 13 years since foundation, we have now

_AI is expected to fundamentally_ consolidated a presence in all key Australian markets
_change the infrastructure_ and are making ongoing strategic investments in key

growth markets while we also extend the platform

_requirements of many of_ further abroad.
_our customers."_ Our foundations in the industry are also supporting

entry into new domestic markets. This includes
Adelaide and Darwin as well as key customer-driven
edge opportunities such as in Port Hedland and
Newman in Western Australia, where the resources
sector continues to be focussed on seeking business
advantage from digital transformation.

One of the pleasing developments in FY23 was our
May announcement that we are executing on our Asian
growth strategy, with our first Malaysian data centre
being the A$1 billion development of the Kuala Lumpur
(KL1) facility.

Kuala Lumpur is an ideal location for NEXTDC to launch
its Asian expansion. With subsea fibre optic cable and
new global satellite communications infrastructure
being deployed at this location, Malaysia is within
milliseconds of all the key economic centres in the
region.

Its location, stable democracy, well-educated
population, historic English language and governance
rules, and commitment to economic development
makes it ideal for us to help accelerate our customers’
digital journey.

With the exception of mature markets like Singapore
and Australia, the Asian countries of interest to us are
at a much earlier stage in their digital transformation.
Without question, the pathway of a developing digital
economy requires significant investment in digital
infrastructure that NEXTDC can profitably contribute to.

It is with great confidence that we forge ahead with
the development of our first overseas data centres in
**Douglas Flynn** Kuala Lumpur, Malaysia and Auckland, New Zealand.

**CHAIRMAN**


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Funded for growth

Having upsized NEXTDC’s debt facilities in FY23 by an incremental A$400 million to A$2.9 billion, as well as having
raised an additional A$618 million in equity, we are well-funded for the growth opportunities before us.

Our strategy continues to be centred on supporting the growth requirements of existing customers, both
domestically and now internationally. NEXTDC has strong relationships with key customers and the decision makers
who make deployment decisions both in Australia and Asia.

Our company has world competitive technology and engineering design intellectual property with a differentiated
offering that is as relevant in key Asian markets as it is in Australia. Accordingly, we are confident that the business is
well placed to win an attractive share of the rising opportunities in these markets.

As customers become even more dependent on the resilience, security and interconnection of their digital
infrastructure, the relevance of our value proposition continues to be enhanced. Our third-generation facilities at S3
Sydney and M3 Melbourne offer unrivalled flexibility in the spaces available for our customers. Our independently
certified Tier IV sites deliver a level of fault tolerance that allows us to offer our 100% uptime guarantee. These are
strategic differentiators that are valued by our customers.

Our third generation M3 Melbourne data centre in West Footscray is now fully operational.


-----

Positive key
financial metrics

During FY23, we saw total
revenue, underlying EBITDA
and contracted utilisation
grow by 25%, 15% and
47%, respectively, while
interconnections (up by 7%
to 17,816) and customer
numbers (up 13% to 1,820)
also continue to strengthen,
all of which is very positive
for the bottom line.

Our ecosystem continues to flourish as one
of the premier marketplaces in the digital
economy with over 750 cloud, carrier and
digital service provider partners offering
Enterprise and Government customers the
data sovereignty and security they require.

AI changes everything two largest markets for the burgeoning demands of

hyperscale, enterprise and Government customers.

In recent months, we have started to see the rapid

The majority of wins achieved in FY23 are so large and

emergence of artificial intelligence (AI) applications.

long-term in nature that they will take several years to

This is encouraging the major cloud service providers

go live in full. Importantly they lock in future cashflow

as well as a range of technology suppliers to scale up

for the Company.

in support of the massive data management challenges
that come with bringing these megatrends into Meanwhile, these new FY23 contracts have stimulated
common use. accelerated planning for new developments in Sydney

(S4 and S5) and Melbourne (M4), with land now

AI is expected to fundamentally change the secured for all three of these projects.
infrastructure requirements of many of our customers.
Traditional on-premise data centres are not suited to
this technology given its requirement for denser power Growing the team and capabilities
deployments, liquid cooling solutions, 100% uptime

From a resourcing point-of-view, we are well positioned

and a thriving ecosystem of interconnected services.

to take advantage of the opportunities before us. We

Meanwhile, higher power consumption means energy have substantially bolstered the team across the
efficiency, carbon accountability and broader country with particular attention to safety management,

security, customer service and experience, global

sustainability challenges remain critical. These are all

operations and facilities management.

value propositions NEXTDC has built its business on,
leaving us well-placed to play an important role in this At the same time, we have built a quality team in Kuala
technological revolution. Lumpur to lead the development there and serve as

the beach head for our expansion into other Asian
markets.

Contracted utilisation jumps

Across the business, we continue to invest in talent

FY23 saw the Company achieve a record increase in acquisition, training and development to ensure we
the level of contracted utilisation, which rose 39.2MW have the skills and experience to support our growth
(47%) to finish at 122.2MW, with the Company’s objectives. Ultimately, it is our human capital that will

remain at the heart of our expansion and success.

Sydney (S3) and Melbourne (M2 and M3) facilities
particularly in demand. The large boost to contracted To that end, I have to say that I take comfort from the
utilisation for the year is a direct result of these extraordinary commitment and expertise shown by our


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Investor confidence, good governance standards for quality assurance, information security,

environmental management and workplace health

During Q4, the Company launched a very successful and safety.
A$618 million Entitlement Offer to help fund NEXTDC’s
international expansion as well as the accelerated
fit-out of new contracted hyperscale commitments at Supporting sustainable digital growth
S3. We are very pleased with the confidence
shareholders showed in taking up their entitlements. NEXTDC maintains commitment to demonstrating

operating efficiency credentials. During FY23, our S1

With one additional share available for every eight and M1 data centres maintained their NABERS 5-star
shares held, the rate of take up amongst institutional energy ratings while P1 was awarded 4.5-star status
investors came in at 99%, with a further 87% of retail during the reporting period. All our facilities continue to
shares also taken up by existing shareholders. All target the lowest possible Power Utilisation
shares not taken up by institutional and retail investors Effectiveness (PUE) operating metrics. PUE is the
were taken up by sub-underwriters, all of whom were internationally standardised measurement for energy
also existing shareholders in NEXTDC. efficiency and sustainable data centre performance and

critical to a scorecard closely scrutinised by hyperscale,

We have also been vigilant in the management of

government and enterprise customers.

corporate governance, sustainability and community
engagement priorities with details shared via our Business risk is another area we continue to actively
Environmental, Social and Governance (ESG) Report monitor. NEXTDC’s risk management framework is an
and Corporate Governance Statement (CGS) with integral component of our corporate governance and is
FY23 iterations now published on our website at central to achieving our operational objectives. NEXTDC
www.nextdc.com. continues to review enterprise risk in alignment with

its Board-endorsed Risk Appetite Statement.

Our performance in these areas is important to
maintaining the confidence of our customers, I would like to thank our staff, our management team
employees, investors and other stakeholders who are and our Board members for their support and
focussed on our commitment to ethical and sustainable contribution this year.
operating practices.

In conclusion, I’d like to say that all of us at NEXTDC
are excited about what comes next. In the 12 years

Certified as sovereign since NEXTDC’s foundation, we have achieved

outstanding growth and proven NEXTDC’s ability to

Regulatory compliance continues to be an important, succeed in a globally competitive industry. As we make
complex and evolving task for the Company and our our first infrastructure investments beyond Australian
customers, particularly as we expand into the Asian shores, we have every confidence we can bring that
region, with data security and sovereignty continuing success to bear in the broader region.
to be key objectives.

We are just at the beginning of the most exciting time

We were particularly pleased to work closely with the in the history of humankind, where data is the most
Malaysian Government on the recent launch of our KL1 precious business commodity in the world.
Kuala Lumpur facility. Through close cooperation with
local authorities in Malaysia we were able to achieve NEXTDC is in an outstanding position to continue
Malaysia Digital status, replicating that nation’s building and operating the platforms that will enable
equivalent to the Australian Government’s Certified current and future digital acceleration.
Strategic status we already hold domestically.

We continue to invest in our Uptime Institute Tier IV
certification for Design and Construct, with both our
Gen 3 facilities in Sydney (S3) and Melbourne (M3)
completing this process during FY23. We are no less **Douglas Flynn**
committed to maintaining certification to key ISO **CHAIRMAN**

_In the almost 13 years since_
_NEXTDC’s foundation,_
_we have achieved_
_outstanding growth and_
_proven NEXTDC’s ability_
_to succeed in a globally_
_competitive industry._


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I am pleased to present to you NEXTDC s Annual Report
for the financial year ended 30 June 2023. It has been
another extraordinary year of growth and achievement,
driven by our unwavering commitment to the pursuit of
excellence, delivering the world’s highest standard of
data centre and interconnection services.

The strong financial metrics in this annual report along
with the record-breaking level of new sales in FY23 lock
in a solid rate of growth over the next decade as we
deliver these very large infrastructure projects for our
customers for many years to come.

Digital acceleration

The increasing digitisation of businesses as well as the
exponential growth of data capture, sharing, storage
and analysis have combined to create a thriving digital
economy. Forbes estimates that approximately 90% of
the world’s data has been generated in just the past
two years, with over 2.5 quintillion bytes of additional

##### Letter from 

data produced daily.

Thriving ecosystems of clouds, carriers, service

##### the CEO providers and customers required to manage all this

information, have become ever-more dependent on
resilient, secured and interconnected digital
infrastructure.

_As a leading player in this industry,_

Record level of contract wins

_we are well positioned to leverage_

During FY23 we were very pleased to experience

_this growth and continue to provide_

unprecedented demand for the Company’s services,

_innovative solutions to our customers."_ resulting in overall contracted utilisation growing

39.2MW (47%) to finish the year with 122.2MW in total.
Pleasingly, this demand came from a broad range of
industries including hyperscale cloud providers, financial
services, mining, retail, satellite communications,
government, media and entertainment. We were also
successful renewing and expanding service contracts
with pre-existing customers during the reporting period
based on our ongoing service quality.

Opportunity knocks

We are in the beginning of the fourth industrial
revolution. Change is happening at an unprecedented
rate, and with innovation cycles shortening, we find
ourselves at the precipice of unprecedented digital
economic growth. This is further fuelled everyday by AI,
which itself is accelerating other megatrends such as
robotics, virtual reality, 5G, the Internet of Things and
many more.

Ubiquitous and democratised technology adoption is
and will continue to drive an explosion of global data
with commerce and lifestyle evolutions taking digital
services into exciting new frontiers.

Increasingly, colocation services, cloud platforms and
interconnection services are enabling organisations to
leverage these capabilities rapidly, sustainably and
without the traditional time to build and capital
constraints.

As a leading player in this industry, we are well-
positioned to leverage this growth and continue to

**Craig Scroggie** provide innovative solutions to our customers.

Enterprises are embracing digital transformation and we

**CHIEF E XECUTIVE OFFICER**

have successfully navigated this landscape over the last


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AI and megatrends driving pipeline and
influencing strategic direction

We have identified several key megatrends shaping the
industry and influencing our strategic direction. Trends
such as AI, augmented reality, 5G, IoT, 3D printing, and
cloud computing are converging to form a new wave of
innovation.

By aligning our business strategy and services with
these megatrends, we are poised to stay ahead of the
curve and deliver the innovative solutions our
customers need now and into the future.

Demand forecasts continue to surge

The data centre services industry continues to
experience remarkable growth and presents abundant
opportunities for NEXTDC, our customers and partners.
[Research company, Arizton’s latest market report,](https://www.arizton.com/market-reports/australia-data-center-market-investment-analysis)
forecast Australia’s data centre industry to grow at a
compound annual growth rate (CAGR) of 7.1% during
[2022-2028, while ResearchAndMarkets predicts that](https://www.researchandmarkets.com/reports/5740677/asia-pacific-data-centre-market-size)
the Asia-Pacific Data Centre Market will reach
US$53.58 billion in 2028 and expand at a CAGR of 12%
from 2023 to 2028.

We have spent 12 years developing a world class
service offering as well as a unique customer
ecosystem and we have a successful business model
in Australia that has proven to be scalable and that is
ready to expand into the broader Asia-Pacific region.

During FY23, we purchased land and made
announcements for new data centre developments in
Kuala Lumpur and Auckland. We look forward to sharing
further such developments in the years ahead as we
take advantage of the growth opportunities in Asia
Pacific markets.

Domestic growth

Building on our strong foundation, we continue to scale
our platform domestically. We saw new, state-of-theart, hyperscale facilities opened in Sydney (S3) and
Melbourne (M3) in the first half of FY23. More recently,
we also completed construction of an Innovation
Centre that is home to our new Mission Critical
Operations (MCX) services in M2 Melbourne.

Stage 2 of S3 also reached practical completion in
FY23, giving us capacity to serve immediate record


customer growth requirements and to meet forecast
future demand. To take advantage of growth
opportunities, we also purchased land for the
development of M4 in Port Melbourne, S5 in Macquarie
Park (Sydney) as well as new mining industry driven
edge sites in Port Hedland and Newman (Western
Australia).

Construction of PH1 Port Hedland and A1 Adelaide
commenced during FY23. D1 Darwin also progressed
and will be the most advanced modular data centre
designed and built by NEXTDC yet, with site works and
module delivery during 1H24 that will be open in
Q4 FY24. NEXTDC’s third Edge Data Centre (NE1
Newman) began development in early FY24, shortly
after the land was secured. All four of these new sites
are expected to go live during FY24 or early FY25.

Opportunity in Asia Pacific

Meanwhile, digital growth in Asia is tracking ahead of
global averages, which is why the development of our
KL1 Kuala Lumpur, and AK1 Auckland data centres
represent significant new frontiers.

As we expand across the region, we will continue to
deliver the same sustainability innovations and critical
infrastructure standards that have been the foundations
of our success to date.

Commitment to safety

At NEXTDC, we continue to place the highest priority
on the safety of our operations. We strive tirelessly to
ensure every team member, contractor, customer, and
visitor is safe whilst at one of our facilities.

We have a proactive safety program implemented to
provide a safe and healthy working environment as
evidenced by our ISO 45001 (Health and Safety)
certification. We manage a range of initiatives to
mitigate the risks associated with both our construction
projects as well as our operational facilities
management.

We empower all employees and contractors to act in a
safe manner and to be an active advocate on safety
issues. We seek out global best practices through
these engagements and with our customers, industry
and WHS peak bodies with the aim of achieving our
Safety-First goal of zero injuries in the workplace.


The official launch of our new S3 Sydney data centre, located in Artarmon.


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Sustainability more important than ever

Operating to the highest standards of energy
efficiency, water preservation and waste management
have been priorities for NEXTDC from its foundation.
We are committed to building an infrastructure platform
that is reliable, secure and highly energy efficient.

Our strong emphasis on energy efficiency and
sustainability must be achieved without compromising
world-class operational excellence. Our aggressive
sustainability targets will be supported by design and
operational innovation to reduce and optimise power
consumption.

We continue to invest in improving water efficiency and
waste management. Early in FY24 we were pleased to
receive the TRUE Certification level for our S1 Sydney
facility. This is only granted by independent body, Green
Business Certification Inc. to companies that can
demonstrate they have held a land-fill waste diversion
rate of over 90% for a full 12-month period.

We seek to design, build and operate the most energy
efficient digital platform in the country. NEXTDC has
been certified as carbon neutral for its own internal
operations since 2018. In 2021 we launched
NEXTneutral allowing customers to offset the carbon
footprint of their digital infrastructure in our facilities
through our ONEDC infrastructure management portal.
It is an accessible and easily self-provisioned solution
costing customers less than a cup of coffee per kW of
power usage.

Innovation is in our DNA

Innovation is and always has been at the core of our
business. In FY23, NEXTDC continued to be recognised
for global industry leadership in data centre
engineering, customer experience and energy
efficiency. We continue to invest in our Uptime Institute
(UI) Tier III certification for first-generation facilities and
Tier IV certification for the design, construction, and
operations for our second and third generation sites.

Both S3 and M3 have now undergone and received Tier
IV certification which continues to help us set the
benchmark for the world’s highest quality, resiliency
and operational standards.


Award recognition

More broadly, the industry continues to recognise our
achievements in engineering and operational
excellence. NEXTDC was recently recognised for the
third consecutive year as Frost & Sullivan’s 2023
Australian Data Centre Services Company of the Year.
This award was presented for NEXTDC’s expertise in
the industry and our dedication to customer
experience.

Supporting the Company’s international growth
ambitions, we were also pleased to be awarded with
Frost & Sullivan’s 2023 Asia-Pacific Customer Value
Leadership Award. This award similarly recognised
NEXTDC’s innovation, product portfolio, energy
efficiency and operational excellence.

FY24 strategic priorities and key initiatives

Our goal is to continue winning new business by
leading the hybrid computing revolution and taking our
proven interconnection and infrastructure services into
new markets across the Asia-Pacific. We will continue
to demonstrate industry leadership through innovation,
operational and technical excellence, and ecosystem
strength to make us the premier marketplace for the
digital economy.

In conclusion, I am extremely proud of our team and
their FY23 achievements. We remain dedicated to
delivering exceptional services to our customers,
meeting their evolving needs and driving innovation in
the industry.

I would also like to express my sincere gratitude to our
investors for their continued support, as well as the
guidance we receive from our Board of Directors and
the dedication of our outstanding team members.

I have complete confidence that, together, we will
continue to grow our share of this exciting market and
build the infrastructure that powers the digital
economy.

**Craig Scroggie**

**CHIEF E XECUTIVE OFFICER**


In FY23, we celebrated NEXTDC’s first step into Asia with the KL1 Kuala Lumpur launch.


-----

About NEXTDC

Vision and purpose

NEXTDC’s vision is to help
enterprises harness the digital age
and improve our society through the
advancement of technology.

Our purpose is to be the leading
customer‑centric data centre
services company, delivering
solutions that power, secure
and connect enterprise and
Government customers.

Value proposition and business strategy

NEXTDC is an ASX 100-listed technology company,
enabling businesses through customer-focused data
centre and mission critical services and network
solutions. With a national footprint of 12 highly
resilient, certified data centres, NEXTDC provides
secure, reliable, high-performance infrastructure
solutions in Australia’s most cloud-connected data
centre network.

Recognised by Frost & Sullivan as Australian Data
Centre Services Provider of the Year for the last three
years, NEXTDC is Australia’s only independent data
centre provider operating a nationwide network of
Tier III and IV facilities in all major national
growth markets.

Our capital investments involve nationally significant
and interconnected facilities, including projects now
under development in Port Hedland, Newman, Adelaide
and Darwin. We are also poised for expansion into
Kuala Lumpur, Malaysia, where we have established a
regional office, have announced the development of
KL1 and are recruiting staff.

Our digital infrastructure platform addresses the rapidly
growing demand for next generation data centres with
high interconnectivity, high-density power capability,
first-class physical security and industry benchmark
energy efficiency.

Advanced digital infrastructure platform

As the leading independent Australian data centre
operator with a nationwide network of Uptime Institute
certified Tier III and Tier IV facilities in the market, we
provide world-class services to local and international
organisations.

Our facilities are designed, built and operated to the
highest standards. We remain the only provider in the
Australian market to offer a 100% uptime guarantee for


-----

Environmental FY23 Sustainability Highlights
Sustainability

NEXTDC's M1 and S1 have

We are passionate about preserving our planet and

maintained their NABERS

achieving our corporate mission in the most sustainable

5-Star ratings for energy

and ethical way possible. We place strong emphasis on

efficiency throughout FY23,

energy efficiency and sustainability without

with P1 achieving 4.5-Star

compromising the delivery of world-class operational

rating this year.

excellence.

Our aim is to develop a net zero pathway quantifying
the Company’s full value chain to 2030 and beyond.
NEXTDC recognises this is a major ambition and is
committed to disclosing its roadmap to net zero, taking
into consideration our operational, regulatory and Both our Power Usage
legislative constraints in a competitive market. Effectiveness (PUE) and Water

Usage Effectiveness (WUE)

Our goal is to build and operate the most energy

metrics are consistently

efficient at-scale data centres in Australia and have an

improving as facilities reach

ongoing focus on sustainable and innovative design,

full utilisation, a trend that

engineering and operational excellence.

continued in FY23.

Managing digital carbon footprints

In the face of ongoing digital transformation and
the growing carbon footprints of IT

Achieved more than 90%

infrastructure, our carbon offset program

diversion rate at four of our

(NEXTneutral) offers an approachable and easy

facilities in FY23, with S1

to use solution for customers striving to reach

facility becoming the first data

their corporate ESG goals. Our customers’

centre in Australia to achieve

appreciate the simple and convenient option we

TRUE Zero Waste certification

are providing to help them realise their own

well ahead of the plan in

carbon neutral goals. In FY23, we have seen a

August 2023.

40% increase in customer uptake of our
NEXTneutral program compared to previous
year.

We have continued our certification as carbon
neutral for our corporate function up to FY22,
with FY23 certification expected in October
2023. This is a process we have undertaken National PUE average:
since 2018 under the Climate Active program,
Australia’s only Commonwealth Government-
accredited carbon neutral certification scheme.
Other ways we seek to manage and reduce our 1.39
carbon footprint include: (Power Usage Effectiveness)

-  Prioritising renewable energy in our data
centres, including solar installations

-  Procuring carbon credits for our unavoidable
carbon usage through the Qantas Future
Planet program

-  Rooftop solar panels installed in S1, P1, SC1
and M3 sites in addition to the existing array

Refer to FY23 ESG

of panels at M1.

Report for more
details on our
sustainability journey

Read now


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Governance

##### Climate

The Board of Directors (‘the Board’) is ultimately
responsible for identifying and assessing the nature

##### Change and extent of internal and external risks, including

climate-related risks. Several Non-Executive Directors

Continuing NEXTDC’s on the Board have previous executive experience in

emissions-intensive sectors including engineering,

climate journey operations, mining and resources, and are well-versed

in climate-related issues. The Audit and Risk

NEXTDC acknowledges that the global climate Management Committee (ARMC) supports the Board in
is warming at unprecedented levels, with considering climate-related risks as part of the
widespread impacts on human and natural Company’s financial reporting process, internal control
systems. We share the aim of the Paris structure, risk management systems (financial and
Agreement to keep a global temperature rise non-financial), and the internal and external audit
this century to well below 2 degrees Celsius process. The Investment Committee also considers
above pre-industrial levels and the ambition to these issues in the business development context.
further limit warming to below 1.5 degrees The Chief Legal Officer updates the Board on risk and
Celsius. We are committed to decarbonisation compliance activities every quarter. It further receives
to prevent or minimise severe, pervasive, and ongoing reporting through its ARMC and direct
irreversible climate change impacts on people reporting at least twice annually. Both forms of update
and the ecosystem in the future. include content on climate-related risks, opportunities,

NEXTDC’s vision is to help enterprises harness and compliance issues faced by the Company. The
the digital age with a view to improving society Board also receives regular briefings on management’s
through the advancement of technology. We progress in implementing the TCFD work plan and the
believe digitalisation acts as an enabler of ongoing development and implementation of NEXTDC’s
decarbonisation and plays an important role in climate change strategy.
climate action, for example, by providing digital NEXTDC’s Executive Leadership Team (CXO) reports
solutions that can improve energy efficiency, directly to the Board and is responsible for climate
inventory management, and business efficiency action and environmental sustainability in NEXTDC’s
by aggregating computing into energy efficient operations. The Chief Operating Officer (COO) and the
environments, reducing travel and Chief Financial Officer (CFO), hold primary
transportation and substituting physical responsibility for strategic leadership on climate-related
products for digital information. issues and their financial impact. The Chief of

NEXTDC continues to support the important Engineering and Design (CE&D) also holds climate-
work of the Task Force on Climate‑Related related responsibilities.
Financial Disclosures (TCFD) and is Performance against a number of the metrics outlined
implementing its recommendations based on in the Metrics and Targets section is included in
the four key pillars: governance; strategy; risk relevant CXO remuneration plans. The short-term
management; and metrics and targets. incentive hurdles include a range of operational and
Following the previous work completed to climate-related metrics, including operational uptime,
identify the Company’s climate-related risks Power Usage Efficiency (PUE) metrics (directly linked
and opportunities, in FY23, NEXTDC has to greenhouse gas (GHG) emissions) and other
deepened its understanding of the impacts of compliance and operational criteria which are reviewed
climate change on the business. This year the in line with the Board’s strategic priorities.
Company further developed its approach and
plans to address climate change and its related NEXTDC’s analysis of the impact of climate-related
impacts across the business and disclose its risks and opportunities is supported by external climate
actions and alignment with the change subject matter experts.
recommendations of TCFD.

We are committed to
decarbonisation to prevent or
minimise severe, pervasive,
and irreversible climate
change impacts on people and
the ecosystem in the future.


-----

Strategy

NEXTDC’s aim is to offer customers Australia’s most energy efficient, sustainably managed data centre services. This
core objective is supported by high standards of engineering, design and operational excellence. Climate-related
issues and their impact on data centre performance are intrinsically linked to NEXTDC’s business strategy and
financial performance.

In FY21, NEXTDC undertook a process to identify the climate-related risks and opportunities for its business,
strategy, and financial planning. Both physical and transition risks and opportunities were identified using the TCFD
framework. This work continued in FY22 as the Company further defined its climate related performance metrics.

Scenario analysis

In FY23, NEXTDC deepened its understanding of the impacts of climate change on its operations by conducting its
first scenario analysis exercise. This consisted of a qualitative assessment of how climate risks and opportunities may
change under future scenarios based on high level assumptions of how the energy and the physical climate system
might evolve in the future. Three scenarios were selected by NEXTDC to conduct its climate scenario analysis with
respect to the level of warming compared to pre-industrial levels. The scenarios and their inputs and assumptions are
summarised in the table below.

Scenario Base case (BAU) High transition risk (1.5°C) High physical risk (>3°C)

Description Under a BAU scenario, while The transition to a low Climate change impacts
global emissions will continue carbon economy will be could be severe and
to increase, the increase will be supported by market and far-reaching, including
slower than historical trends, regulatory reform, widespread displacement,
as recent mitigation efforts and including increased food and water insecurity,
legislated policies come into demand for sustainable and loss of biodiversity.
action. These efforts, however, products and services and This may lead to political
will not be enough to meet reallocation of capital instability, conflicts, and
global climate goals and towards the low carbon humanitarian crises.
prevent the most catastrophic economy. Companies that Business as usual may be
climate impacts in some fail to adapt will face largely unsustainable, and
regions in line with an above market risks and potential businesses may need to
2-degree temperature stranded assets in adapt by shifting to more
trajectory. A BAU scenario emissions intensive resilient business models
combines transition risks industries. Climate policy and developing new
(recent policy and regulatory will be introduced globally, products and services that
developments in progressive including carbon pricing. align with a 3-degree
markets) and physical risks world.
(climate impacts in vulnerable
regions). Impacts will be
particularly felt in emerging
economies, creating political
instability, conflict and
migration.

Assumptions -  IEA STEPS scenario[1] -  IEA NZE scenario[2] -  Little climate regulation
and inputs -  Increase in volatility and price -  Mandatory carbon and limited enforcement

of electricity, gas and water pricing -  Increasing volatility,

prices and disruption of

-  Limited deployment of -  Australian Government’s

electricity, gas and water

renewables Rewiring the Nation

supply

Policy leading to lower

-  Increased frequency of

electricity prices and -  Limited deployment of

extreme flood events,

growth of clean renewables

particularly in QLD, NT and

economy

WA -  Extreme weather events

-  Increased and more are felt more severely

-  Increase in high wildfire risk

volatile prices for gas than BAU

days

and water

-  Increased flood and
rainfall risk (not as
severe as BAU)

**1**  The International Energy Agency (IEA)’s Stated Policies Scenario reflects current policy settings based on specific policies that are in place as well
as those that have been announced by governments around the world.
**2**  The IEA’s Net Zero Emissions scenario sets out a pathway for the global energy sector to achieve net zero emissions by 2050 and does not rely on
emissions reductions from outside the energy sector to achieve its goals.


-----

The following transition and physical risk-related Risk Management
parameters were considered when assessing the

NEXTDC’s Risk Management framework and

impact of the base case, high transition risk and high

procedures set the baseline for us to assess, monitor

physical risk scenarios on NEXTDC’s operations:

and manage our climate change risks.

-  Legislated/regulated carbon pricing

NEXTDC’s Enterprise-Wide Risk Register (EWRR)

-  Rising electricity and gas costs captures risks that can affect the achievement of its

-  Increase in water prices goals, including addressing climate change related

-  Flood risk exposure (direct and indirect) risks. The EWRR is updated and shared with the Board

at least annually. In addition, the Environmental and

-  Wildfire exposure (direct and indirect)

Climate Risk Register, supplementary to the EWRR,

Consistent with TCFD recommendations, short, captures all transitional and physical climate change
medium and long-term timeframes were used to risks identified for long term monitoring. Please also
structure the risk assessment in the context of refer to the climate change risk and opportunities
NEXTDC’s growth plans: disclosed within the FY23 ESG Report, for details

around the most significant risks. Other processes that

-  **(S) Short term time horizon of 0-3 years:**

carefully consider climate-related risks include the

Focussed on existing operations and conditions in

Engineering and Design Risk Register and the Central

Australia and further near-term domestic growth.

Operations Risk Register. These are reviewed and

-  **(M) Medium term time horizon of 3-10 years:** updated periodically, with their review cadence
Focussed on potential climate driven changes to dependent on the subject matter and business unit.
conditions in Australia and considerations for
international growth.

Metric and targets

-  **(L) Long term time horizon of beyond 10 years:**

NEXTDC’s metrics and targets demonstrate its

To consider additional large-scale changes, including

commitment to adapting to climate change and

substantial physical impacts of climate change.

increasing the resilience of its services. The Company’s
disclosure currently focuses on a subset of climate-

Risk and opportunities related metrics with sufficiently reliable data. As noted

in the Strategy section, in FY23 NEXTDC reviewed the

In 2021, NEXTDC identified its climate risks and metrics it reports to ensure that they align with
opportunities and developed a Risk and Opportunity industry standards, compliance requirements and
Inventory. In FY23, the Company reviewed and updated stakeholder expectations. The metrics reported for
its climate risk and opportunity inventory, to consider FY23 can be found within the FY23 Environmental,
impacts to its business practices from changes in the Social and Governance Report.
transition and/or physical climate landscape.

NEXTDC continued to be certified carbon neutral under

NEXTDC’s potentially significant climate-related risks the Climate Active Carbon Neutral Standard for
and opportunities, as well as the key controls and risk Organisations for FY23. As noted earlier, performance
reduction measures, are detailed within its FY23 against sustainability goals is an element of the KMP’s
Environmental, Social and Governance Report. remuneration plans. The short-term incentive (STI)

hurdles include a range of operational and climate-
related metrics, including operational uptime, PUE

Monitoring climate-related risks and

metrics (directly linked to GHG), and other compliance

opportunities

operational criteria. In order to incorporate different

NEXTDC monitors its climate-related risks and perspectives on climate-related matters and gain
opportunities as well as its climate impact and actions experience with the metrics and measurement
using a number of performance metrics. In FY23, the methods, the Company continues to track a selection
Company reviewed the climate metrics it measures and of different metrics internally. This allows NEXTDC to
reports, to consider the appropriateness for providing gain deeper insights into the relationship between its
meaningful updates to the industry and to meet operations, climate related metrics, and disclosure
stakeholder expectations. framework.

Moving forward

In FY23, NEXTDC completed a qualitative scenario analysis to test the resilience of its strategies and
financial performance. In FY24, the Company will further this by developing quantitative inputs to stress
test the financial impacts of climate change on its operations (using the scenarios outlined in the Strategy
section above).

NEXTDC intends to continue the journey to convert its operational performance ambitions for efficiency and
energy usage into short/medium GHG reduction targets. Ultimately the aim is to develop a net zero
pathway quantifying the Company’s full value chain to 2030 and beyond. NEXTDC recognises this is a major
ambition and is committed to disclosing its roadmap to net zero, taking into consideration its operational,
regulatory and legislative constraints in a competitive market.


-----

NEXTDC’s
Business Features

Connecting to the cloud in world‑class
facilities

Since 2010, we have been helping our customers’
business transformations through innovative data
centre solutions, connectivity services and
infrastructure management software.

The power of our network-rich ecosystem enables our
customers to source and connect with cloud platforms,
service providers and vendors to build and scale their
integrated hybrid cloud deployments.

Our competitive advantage

Our nationwide, and soon to be international data
centre network sets us apart. We have facilities in five
Australian capital cities: Brisbane, Sydney, Canberra,
Melbourne and Perth; as well as our first regional
facility at Maroochydore on the Sunshine Coast. New
data centres in Adelaide, Darwin, Port Hedland and
Newman are currently under development with
NEXTDC's first offshore facilities in Kuala Lumpur and
Auckland now also in development.

This seamless digital infrastructure platform offers our
customers a streamlined experience with one
agreement and consistent pricing and service levels.

Market-leading expertise

Our award-winning in-house engineers and operational
teams are recognised as leaders in their industry. Our
people work together with our customers to create
customised solutions that solve real-world challenges.

Strong commitment to safety

We aim to provide
and maintain a safe
and healthy working
environment for all
workers, customers and
visitors. Our Safety First
corporate goal is zero
workplace injuries. Mission Critical spaces (MCX)

In FY23 we announced the launch of MCX
– our mission critical operations centres.

Having achieved ISO 45001 (Health and Safety) Within selected data centres, we now
certification, our safety culture is also documented and offer our customers highly secure,
audited. Our safety management system is resilient and interconnected operational
implemented and managed by our dedicated in-house spaces for mission critical functions. This
team and addresses the unique operating environment ensures mission critical customer teams
of a data centre. However, we also believe that safety and processes are always on, always
is everyone’s responsibility, and we encourage all secured and always connected.
employees and partners to be an advocate for safety in


-----

Data protection, security and compliance

We adhere to the Australian Privacy Act and other
regulatory frameworks to ensure the protection of
personal data. As such, we:

-  collect a minimal amount of customer Personally
Identifiable Information (PII), limited to activities such
as account and contact management, marketing and
to permit entry to facilities

-  maintain a clear delineation between the data we
hold as part of managing our business and the data
that our customers hold or process

-  do not interact with or manage any data stored on
our customers’ equipment.

Addressing concerns around data sovereignty, all our
facilities, except for the recently acquired SC1 Edge
data centre, have been independently assessed and
certified by the Digital Transformation Agency (DTA) as
Certified Strategic (Enclave).

Our security practice adheres to a best practice ‘All
Hazards’ approach, supported by advanced biometric
and surveillance security technology. Each of our data
centres feature multi-zone security layers.

We operate in compliance with globally recognised
best practice standards in critical areas including
security (ISO 27001, SOC1, SOC2, PCI DSS and SCEC),
environmental sustainability (ISO 14000), workplace
health and safety (ISO 45001), quality assurance
(ISO 9001), energy efficient built environments
(NABERS) and operational sustainability (Uptime
Institute Tier IV Gold).

We comply with the Clean Energy Regulator’s
annual reporting requirement on National
Greenhouse Gas and Emissions (NGER
Report) and continue to report to the
Workplace Gender Equality Agency (WGEA).
Our Modern Slavery Statement is issued
annually in complying with the requirement
of Modern Slavery Act 2018 (Cth).

Interconnectivity made easy

Secure and resilient interconnectivity (both physical
and virtual) is the backbone of the modern digital
economy. Our data centres are home to 16 direct
on-ramps to the world’s largest cloud platforms, as well
as Australia’s richest sovereign ecosystem of carriers
and digital services providers.

In addition to the direct physical connections offered
within NEXTDC facilities, our AXON virtual
interconnection platform unites our customers with the
organisations, networks and cloud providers to which
they need to be successful. Meanwhile, our data
centre footprint is connected to Asia and the world.

Scalable solutions

Our hyperscale colocation services consist of secure,
resilient and reliable high-density data centre
outsourcing solutions. Our customers benefit from
scalability and flexibility with solutions customised to


#### 750+
trusted ecosystem partners


Leading with our partner ecosystem

Our partner ecosystem is one of the largest and most
diverse independent networks of IT service providers,
carriers and cloud providers in Australia. This includes a
broad range of local and international cloud platforms,
as-a-Service providers, independent software vendors,
advisory firms, telecommunications carriers and other
connectivity partners.

Our Partner Program centres around a channel-first
go-to-market model, incorporating more than 750
providers including:

-  **Global public cloud providers:**
AWS, Microsoft, Google, IBM, Oracle, OVHcloud and
Alibaba

-  **Large IT services providers:**
NTT Group, Atos, DXC, NEC, IBM, Kyndryl, Logicalis,
Data#3, Interactive, Infosys and Wipro

-  **Technology advisory firms:**
Accenture and Deloitte

-  **Telecommunications providers:**
Optus, Telstra, Vocus, TPG, AT&T, PCCW, Aussie
Broadband, Spirit, Uniti, ViaSat, Starlink
and Superloop

-  **Specialist cloud and managed service providers:**
Netskope, Iron Mountain, Over the Wire, AUCloud,
Blue Connections, Nexthop, ZettaNet, Teradata,
Cloud Plus and Somerville Group, 11:11 Systems,
LeaseWeb, Datto and Akamai

Government partner

In FY23 we were appointed by the Digital
Transformation Agency (DTA) as a panellist on the Data
Centre Facilities Supply Panel Contract. This allows us
to service all Federal, State and Local Government
agencies directly. In addition, we are a DTA Certified
Strategic hosting partner for government bodies.

ONEDC data centre management

ONEDC is our data centre infrastructure management
tool, allowing customers to simplify, streamline and
securely manage their data centre operations. It can be
used for everything from real-time temperature,
humidity and power monitoring; managing access
requests and user permissions; to booking parking,
deliveries and staging rooms - and much more.

Onsite customer support

Our Remote Hands service supports customers
throughout their infrastructure lifecycle, performing the
day-to-day infrastructure and interconnection tasks to
keep things running smoothly. Our highly skilled team
members hold awards and accreditations with leading


-----

Living our values

##### Our People Our goal as a company is to have every one of our

people living our six core values. We encourage our
employees to share their stories and we empower staff
to speak out when they see behaviours that are

##### and Culture

inconsistent with our values.

Customer First

We are obsessed with
delivering the world’s best
customer experience.

One Team

We are an elite team working
together with super stars
playing in every position.

Bright Ideas

The best way to predict
the future is to create it.

Pursuit of Excellence

We are relentless in our
pursuit of excellence,
not perfection.

Straight Talk

We don’t talk bull, we have
crucial conversations, we
disagree and then we commit.

Frugal Not Cheap

We spend our money where
it matters the most.


-----

Giving back to communities

Our purpose is to help create opportunity for our future
generations. We place immense value and take pride in
the relationships we form in business, and in the
communities in which we live and work.

With our community project called, ‘Live to Give’, we
are proud to support the lives of those around us,
through six charity and giving programs - The Smith
Family, UN Women, SolarBuddy, Beyond Blue, Cancer
Council and The Red Cross. We are also part of the
Pledge 1% movement and have an active workplace

Above: Some of NEXTDC’s proud winners at the staff

giving program with dollar-for-dollar donation matching

awards night during the NEXT Frontier All Company

for these six partner charitable organisations.

Conference.

Our people can access up to three days of paid
volunteer days per year as well as an emergency
management leave benefit of up to four weeks. They
can also take up additional paid volunteer days to
participate in skills-based volunteering opportunities in
our local communities.

Diversity, Equity and Inclusion

We believe our greatest strengths come from the
people who make up our team. Diversity, Equity and
Inclusion (DEI) are core to our success strategy.​ We
embrace our differences and diversity of identity,
experience and ideas, pushing boundaries to promote
inclusive behaviours across the company.

Our aim is to achieve a 40:40:20 ratio; meaning 40%
men, 40% women, 20% flexible across our employees,
management, and the Board by 2030. This approach
drives meaningful female representation and is
inclusive of people who identify as non-binary. To
further show our support for achieving this gender Above: NEXTDC staff assembling StudentBuddy
balance, we are working in partnership with 40:40 solar lights for NEXTDC’s workplace giving partner,
Vision, which seeks to move beyond tokenism and SolarBuddy.
achieve a 40:40 ratio through business-oriented,
structural transformation. We have joined their pledge
to achieve gender balance at an executive leadership
level by 2030.

Currently, 34% of NEXTDC’s workforce is female with a
strong representation of mature workers. The company
also demonstrates gender diversity at Board level.
29% of our Board members were female during FY23,
increasing to 38% in August 2023, with the
appointment of Maria Leftakis to the Board, a strong
reflection of gender diversity being a key focus and
priority for the Company at all levels. Our parental leave
program offers primary caregivers up to 20 weeks of
paid leave. We also facilitate 10 keeping-in-touch days
for staff on parental leave to help them transition back
to work.

As another step forward in fostering gender equality,
we have now established a partnership with Work180
whose vision is to create a world in which there is fair
and equal representation, opportunities, and pay for all
women. Through this partnership, Work180 will support Goal to achieve by 2030
NEXTDC with industry insights, benchmarking and have
endorsed NEXTDC as an employer of choice for women
to help us attract, retain and support all women
at NEXTDC.

# 40 40: 20:

WOMEN MEN FLEXIBLE


-----

Market Growth Demonstrated by NEXTDC

30 June 2023 30 June 2022 30 June 2021 30 June 2020 30 June 2019

ECONOMIC INDICATORS

Customers[1] 1,820 1,613 1,507 1,324 1,145

Cross Connects[2] 17,816 16,613 14,718 13,051 10,972

CAPACITY AND UTILISATION

Operating facilities [3] 12 11 9 9 9

Installed capacity[4] 133.4MW 113.9MW 95.8MW 78.8MW 58.4MW

Contracted customer utilisation [5] 122.2MW 83.0MW 75.5MW 70.0MW 52.5MW

% of installed capacity 92% 73% 79% 89% 90%

Billing customer utilisation [6] 77.7MW 72.8MW 65.4MW 52.8MW 37.7MW

% of installed capacity 58% 64% 68% 67% 65%


**1** Customers: the number of counterparties (including partners) which have executed a Master Services Agreement with NEXTDC.
**2** Cross Connects: the number of both physical and elastic cross connects.
**3** Operating Facilities: The number of facilities which were operational at the reporting date.
**4** Installed Capacity: MW built includes the designed power capacity of the data centre halls fitted out at each facility. Further investment into
customer related infrastructure, such as backup power generation, cooling equipment or rack infrastructure may be made in line with customer
requirements.
**5** Contracted Customer Utilisation: Total of all sold capacity in MW including customers with deferred contract commencement dates.
**6** Billing Customer Utilisation: Total of all sold capacity in MW where the service has commenced.


-----

Directors’ Report

The Directors present their report on the consolidated

The Directors present their report on the consolidated entity (referred to hereafter as ‘NEXTDC’, the ‘Company’
entity (referred to hereafter as ‘NEXTDC’, the ‘Company’ or the ‘Group’) consisting of NEXTDC Limited and the
or the ‘Group’) consisting of NEXTDC Limited and the entities it controlled at the end of, or during, the year ended
entities it controlled at the end of, or during, the year ended 30 June 2023.
30 June 2023.

Directors

Directors

The following persons were Directors of the Company

The following persons were Directors of the Company during the year, and up to the date of this report:
during the year, and up to the date of this report:

-  Douglas Flynn

-  Douglas Flynn

-  Craig Scroggie


Key financial highlights include:

Key financial highlights include:

-  Revenue of $362.4 million vs upgraded guidance

-  Revenue of $362.4 million vs upgraded guidance range of $350 - 360 million (FY22: $291.0 million)
range of $350 - 360 million (FY22: $291.0 million)

-  Underlying EBITDA[1,2] of $193.7 million vs upgraded

-  Underlying EBITDAguidance range of $192 - 196 million (FY22: $169.0 [1,2] of $193.7 million vs upgraded
guidance range of $192 - 196 million (FY22: $169.0 million)
million)

-  Capital expenditure of $690.4 million vs guidance

-  Capital expenditure of $690.4 million vs guidance range of $670 - 720 million (FY22: $604.8 million)
range of $670 - 720 million (FY22: $604.8 million)

-  Statutory net profit/(loss) after tax of $(25.6) million

-  Statutory net profit/(loss) after tax of $(25.6) million (FY22: profit of $9.1 million)
(FY22: profit of $9.1 million)

-  Operating cash flow of $126.5 million (FY22: $117.2

-  Operating cash flow of $126.5 million (FY22: $117.2 million)
million)

-  Cash of $766 million at 30 June 2023

-  Cash of $766 million at 30 June 2023

-  Successfully upsized its existing $2.5 billion senior

-  Successfully upsized its existing $2.5 billion senior debt facility to a new aggregate limit of $2.9 billion
debt facility to a new aggregate limit of $2.9 billion

-  Contracted 39.2MW of new capacity

-  Contracted 39.2MW of new capacity

Financial performance

Financial performance

NEXTDC achieved a number of significant milestones and

NEXTDC achieved a number of significant milestones and enjoyed a period of strong growth in the 12 months to 30
enjoyed a period of strong growth in the 12 months to 30 June 2023.
June 2023.

The Group continued to experience significant growth in

The Group continued to experience significant growth in the number of customers, orders and total revenue. As at
the number of customers, orders and total revenue. As at 30 June 2023, NEXTDC was billing for 77.7MW (2022:
30 June 2023, NEXTDC was billing for 77.7MW (2022: 72.8MW) of capacity.
72.8MW) of capacity.



-  Craig Scroggie

-  Stuart Davis

-  Stuart Davis

-  Dr Gregory J Clark AC

-  Dr Gregory J Clark AC

-  Stephen Smith

-  Stephen Smith

-  Jennifer Lambert

-  Jennifer Lambert

-  Dr Eileen Doyle

-  Dr Eileen Doyle

-  Maria Leftakis (appointed 24 August 2023)

-  Maria Leftakis (appointed 24 August 2023)

Principal activities

Principal activities

During the year, the principal continuing activities of the

During the year, the principal continuing activities of the Group consisted of the development and operation of
Group consisted of the development and operation of independent data centres in Australia.
independent data centres in Australia.

Operating and financial review

Operating and financial review

During the year, the Company has:

During the year, the Company has:

-  Completed the final building of S3 Sydney to support

-  Completed the final building of S3 Sydney to support continued customer growth, with an additional data hall
continued customer growth, with an additional data hall available for customers, increasing built capacity in
available for customers, increasing built capacity in NSW/ACT from 60MW at the end of FY22 to 64MW at
NSW/ACT from 60MW at the end of FY22 to 64MW at the end of FY23. A new site for S5 Sydney was
the end of FY23. A new site for S5 Sydney was acquired, close to our S1 and S2 Sydney sites, which
acquired, close to our S1 and S2 Sydney sites, which will be able to support a new 60MW facility.
will be able to support a new 60MW facility.

-  M3 Melbourne completed on time and on budget, with

-  M3 Melbourne completed on time and on budget, with three new data halls available to support customers.
three new data halls available to support customers. 13.5MW of new capacity was added, increasing built
13.5MW of new capacity was added, increasing built capacity in Victoria from 40MW at the end of FY22 to
capacity in Victoria from 40MW at the end of FY22 to 53.5MW at the end of FY23. A new site for M4
53.5MW at the end of FY23. A new site for M4 Melbourne was acquired, close to our M1 Melbourne
Melbourne was acquired, close to our M1 Melbourne site, which will support a new 80MW facility.
site, which will support a new 80MW facility.

-  Acquired new international sites KL1 Kuala Lumpur

-  Acquired new international sites KL1 Kuala Lumpur and AK1 Auckland. These sites are able to deliver new
and AK1 Auckland. These sites are able to deliver new facilities of 65MW and 10MW+ respectively.
facilities of 65MW and 10MW+ respectively.


1 EBITDA is a non-statutory financial metric representing earnings before interest, tax,
depreciation and amortisation Non statutory financial metrics have been extracted from the


2 FY23 underlying EBITDA excludes costs related to early stage offshore operating expenses,
acquisition and funding opportunities as well as investment in associates


-----

A summary of consolidated revenues and segment EBITDA for the year is set out below:

**Segment revenues** **Segment EBITDA**

**30 June 2023** **30 June 2022** **30 June 2023** **30 June 2022**

**$’000** **$’000** **$’000** **$’000**

Vic 117,404 101,870 86,130 81,849

NSW/ACT 182,915 135,614 112,731 98,507

Rest of Australia 58,644 50,890 40,894 37,936

International 144 -  (2,105) (2,319)

Other 3,262 2,670 2,054 40

Total segment revenue/EBITDA 362,369 291,044 239,704 216,013

Net profit/(loss) after tax was $(25.6) million (2022: $9.1 million).

Non-statutory underlying earnings before interest, tax, depreciation and amortisation (EBITDA) improved from $169.0 million in
FY22 to $193.7 million in FY23. Reconciliation of statutory profit to EBITDA and underlying EBITDA is as follows:


**30 June 2023**

**$’000**


**30 June 2022**

**$’000**


**Change**


Net profit/(loss) after tax (25,641) 9,139

Add: finance costs 78,988 49,269

Less: interest income (10,969) (1,757)

Add/(less): income tax expense/(benefit) 2,402 (10,797)

Add: depreciation and amortisation 137,870 106,853

**EBITDA** 182,650 **152,707** 20%

Add: expensed SaaS costs previously capitalised -  3,071

Add: early stage offshore operating expenses 2,885 2,410

Add: acquisition and funding opportunities 2,065 1,049

Add: share of loss on investment in associate 4,262 1,879

Add: impairment of investment in associate 1,799 7,921

**Underlying EBITDA** 193,661 **169,037** 15%


Funding and financial position

In FY23, NEXTDC secured an incremental $400 million in
senior debt capacity, bringing the facility to a new
aggregate limit of $2.9 billion, as well as favourable
amendments to existing financial covenants and terms.
The additional debt capacity is expected to provide
NEXTDC with additional headroom to fund its medium to
longer term growth aspirations.

Details of the new facility limits are summarised as follows:

-  $800 million – Term Loan Facility

-  $600 million – Capital Expenditure Facility

-  $800 million – Revolving Credit Facility (multicurrency)

-  $300 million – Term Loan Facility

-  $100 million – New Term Loan Facility

-  $300 million – New Revolving Credit Facility

The $100 million New Term Loan Facility was drawn down
in February 2023.


Cash and cash equivalents at 30 June 2023 totalled $766
million (2022: $457 million), which combined with the
undrawn senior syndicated debt facility of $1.5 billion, gave
the Group access to $2.3 billion in available liquidity at 30
June 2023.

NEXTDC’s balance sheet position is underpinned by
approximately $3.8 billion in total assets.

Sales performance

We have continued to focus our sales strategy on
partnering with providers of infrastructure, platforms and
packaged services. The flexibility we offer by being carrier
and vendor neutral allows customers a choice of carriers
and systems integrators, leading to an increase in the
number of unique customers to 1,820 at 30 June 2023 (up
from 1,613 at 30 June 2022).

During the year NEXTDC increased its contracted
utilisation by 47% from 83.0MW at the end of FY22 to
122.2MW at the end of FY23.

NSW/ACT’s contracted utilisation increased by 38.5MW
during FY23 to 80.8MW as at 30 June 2023, with contracted
utilisation accounting for 126% of built capacity (64.0MW).


-----

Our contracted utilisation in Victoria fell slightly by 0.2MW to
33.1MW during the period from 1 July 2022 to 30 June
2023 as our first material order at M1 Melbourne moved from
a wholesale to rack order with contracted utilisation
accounting for 62% of built capacity (53.5MW).

Contracted utilisation for the rest of Australia grew 0.8MW
during FY23 to 8.2MW as at 30 June 2023, with contracted
utilisation accounting for 51% of built capacity (15.9MW).

We are earning revenue from numerous products including
white space, rack ready, project fees and value-added
services. During FY23 interconnection generated 7.1% of
total recurring revenue.

NEXTDC continues to develop its go-to-market strategy
through channel partnerships with major
telecommunications and IT service providers, allowing it to
increase the breadth and depth of its selling capability
without adding to its sales operating cost base.

Continuous innovation

As an organisation in Australia’s rapidly growing IT
infrastructure sector, it is essential that NEXTDC seek the
continuous development and innovation of its systems,
products and services.

All data centres have achieved and continue to be certified
to ISO 27001 Information Security Management System,
ISO 9001 Quality Management System, ISO 14001
Environmental Management System and most recently the
ISO 45001 for WHS Management System. These
certifications confirm that NEXTDC has an integrated
management system that provides a systematic approach
to risk management, protection of company information
and continuous improvement. An exception to this is
NEXTDC’s edge data centre in the Sunshine Coast (SC1)
and the newly established S3 Sydney and M3 Melbourne
facilities who are already operated in line with national
standards. Our intention is to complete this process within
the next 12 months, where this is applicable to the service
we provide.

Ongoing customer demand has seen NEXTDC develop
innovative ways to augment data centre capacity beyond
the original designs, with the addition of higher power
densities and the development of additional data halls.
Even though power consumption is increasing as our
facilities become more populated, their overall energy
efficiency has improved over time through economies of
scale and increased utilisation of existing infrastructure.

NEXTDC has a continuous process of testing and tuning its
data centres to optimise energy efficiency and stability
to ensure that Power Usage Effectiveness (PUE) targets
are achieved. The average PUE throughout the year
across all NEXTDC data centres, is now 1.39, exceeding
our target of 1.40 and comparing very favourably with the
Australian and Global industry average.


Energy efficiency and sustainability remain key areas of
focus for the Group. Our data centre facilities have been
engineered to deliver extremely high energy efficiency,
lowering the carbon footprint for our customers. Our M1
Melbourne and S1 Sydney data centres were the first data
centres in Australia to achieve a National Australian Built
Environment Rating System (NABERS) 5-Star rating for
energy efficiency. In FY23, we included our P1 Perth
facility in the NABERs certification portfolio, achieving a
4.5-star rating. NEXTDC’s second-generation data
centres are already delivering very high levels of energy
efficiency, enabled by next-generation engineering and
continuous tuning, which is aimed at setting new levels of
energy efficiency. Our third-generation data centres, made
operational in FY23, are expected to raise the bar to a
whole new level.

As facilities approach full capacity and incremental cooling
infrastructure is no longer needed, rooftop solar becomes
an option at some of the more mature sites. NEXTDC owns
and operates its own solar array on the roof of its M1
data centre and has also been a Principal Partner to the
Melbourne Renewable Energy Project (MREP) since its
inception in 2014. In FY23, another 300kW of solar panels
went live on our S1 rooftop, and a 17kW solar panel, having
been installed on the SC1 rooftop, went live in August 2023.
Additionally, the installation of solar panels on our M3
(60kW) and P1 (198kW) rooftops is now complete and will
be operational in the next few months.

Business strategies and prospects
for future financial years

The Group continues to develop its strong and growing
pipeline of sales opportunities across each of its operating
markets. Based on the number of positive utilisation
trends such as cloud and mobile computing, growth in
internet traffic and data sovereignty, we expect that
demand for carrier and vendor neutral outsourced data
centre services will continue to grow strongly for the
foreseeable future.

The Company has a number of strategies to benefit from
this growth including but not limited to:

-  Continuing to sell capacity in existing facilities;

-  Growing its presence in existing data centre markets
where its existing facilities are close to being fully
utilised;

-  Expanding its footprint into new data centre markets in
Australia such as Adelaide, Darwin, Port Hedland and
Newman;

-  Expanding its presence into new offshore markets
such as New Zealand and Malaysia; and

-  Launch of new products.

Based on the factors listed above, the Group expects its
revenue to continue growing in the foreseeable future.


-----

Business risks

NEXTDC’s risk management framework is an integral
component of its corporate governance and central to
achieving its strategic and operational objectives.

NEXTDC continues to review its enterprise risks against
the Board endorsed Risk Appetite Statement. We have
implemented systems and processes to identify risks at an
early stage to ensure they are managed accordingly. The
responsibilities, objectives, and processes of risk
management are described in our internal Risk
Management Procedure and guidelines. Further details on
NEXTDC’s Risk Management Framework can be found in
the Company’s most recent Corporate Governance
Statement which can be located at the Company’s website
(www.nextdc.com).

The following key business risks have remained focus
areas, as they can adversely affect the Company’s
financial performance:

**Business Management and Governance**

-  _Fraud, Bribery and Corruption:_ Fraud, bribery or any
other unethical behaviour could significantly impact the
trust and confidence of NEXTDC’s customers,
shareholders and other stakeholders. NEXTDC’s
Board approved Statement of Delegated Authority is
embedded within all levels of NEXTDC’s business
processes. All NEXTDC staff and Directors undergo
Code of Conduct training and pursuant to the
Company’s Whistleblower Policy, employees are
encouraged to come forward and report if they see
any unethical behaviour.

-  _Training and Development: Operating and maintaining_
data centres requires highly trained employees and
lack of sufficient training and development could result
in safety and environmental incidents, efficiencies and
low morale. Along with the broader Company-wide
training and development program, all data centre
operations staff receive on the job training and
refreshers as required.

-  _Technology Advances:_ NEXTDC operates in a
competitive sector. Any failure to keep up with the
latest technology or not having the business systems
that support the scale and pace of business
expansion could result in reputational damage and a
downturn in customer demand. To mitigate this risk,
the Company promotes mutual research and
development projects and strategic alliances with its
suppliers, regularly attends industry conferences and
is a member of the Uptime Institute, an independent
thought leader and certification body in IT and data
centres. NEXTDC’s Business Transformation Program
has been established to support initiatives that ensure
the business evolves to meet the ongoing needs of its
customers.

-  _Employee Engagement: Having an engaged workforce_
is vital to achieving our strategic objectives. It enables
us to attract and retain workers who share the same
purpose, values and goals. NEXTDC is invested in
increasing employee engagement and managing
turnover. Among others, NEXTDC’s ‘The Way We
Work’ program continues to provide ongoing flexibility to
our team, recognising there is no one-size-fits-all
solution to how we work. More details on our social
sustainability initiatives are noted in the FY23
Environmental Social and Governance Report, which
can be located under the Corporate Governance


_Workplace, Health and Safety:_ Employees are
NEXTDC’s most important assets and ensuring they
are healthy and safe is our top priority. We are
committed to providing and maintaining a safe and
healthy working environment for all our employees,
customers, and visitors. We continue to look for new
ways to achieve our Safety-First corporate goal of
ZERO injuries within the workplace. Incident prevention
is of utmost importance and vital to safety and
ultimately, the success of the organisation. All NEXTDC
facilities, with the exception of our SC1 facility in the
Sunshine Coast and the newly established S3 Sydney
and M3 Melbourne facilities, are certified to ISO 45001,
WHS Management System certification.
NEXTDC maintained positive safety results for FY23,
with the Company not recording any lost time injuries
(LTIFR) across its data centre operations.
Active management of WHS issues both in the
operation of data centres and in their development is
mandated and central to creating a culture where it is
safe to speak up and report any hazards or incidents.
NEXTDC has also sought to implement a process of
continual review and improvement through its safety
assurance programs with the team’s performance and
safety initiatives reported to the Board.
This includes the added focus on mental health. Our
strategy for providing a safe workplace also focuses on
protecting people from harm by identifying and
managing workplace risks to mental health; building
capacity to respond and support people experiencing
mental ill-health and promoting positive mental health
and wellbeing. To further evolve our approach to
promoting positive mental health in the workplace and
providing support to team members we have trained
volunteer Mental Health First Aid Officers (MHFAO) at
our facilities who may be able to offer help to someone
experiencing a mental health problem. Our MHFAOs
have successfully completed a Mental Health First Aid
course delivered by an accredited instructor and hold a
current Mental Health First Aid Australia certificate. To
date, we have 33 volunteer MHFAOs across our sites
who are passionate about mental health and supporting
their peers.
As we continue to invest in mental health and team
safety, we engaged health services provider Sonder in
early FY23 to promote organisational wellbeing and
implement additional safety programs.
Sonder provides our people and their families with realtime access to a team of medical, mental health and
safety experts that are ready to assist with their
wellbeing needs, 24 hours a day, 7 days a week.
NEXTDC’s Construction Safety Management System
continues to benchmark its safety performance and
activities during the construction of our new data
facilities. NEXTDC continues to improve the standard
of our new facilities by embracing lessons learned
during the design, construction and operational phases
of all our sites. Our Safety in Design process captures
these lessons, to be reviewed by every project team as
part of our site design process and to ensure they are
addressed with engineering solutions, as far as
possible. This process promotes improved systems
and capabilities that strengthen our safety performance
and culture. Our ultimate goal is zero injuries.


-----

_Energy Usage and Emissions: NEXTDC is dedicated to_
devising and monitoring the best methods of managing
data centres to ensure energy efficiency and minimise
impact on the environment and our natural resources. It is
the nature of our business that, as our customer loads
increase, so will our own energy usage and emission. Our
facilities are designed, engineered, and operated to
optimise their energy efficiency. NEXTDC has invested
significantly in improving energy efficiencies by focussing
on its environmental objectives, operational efficiencies
and best in class data centre designs. NEXTDC is
committed to achieving NABERS certified rating for our
data centres, with each data centre having a target Power
Usage Effectiveness (PUE) rating to be as energy efficient
as possible. In FY23, we achieved a national average PUE
of 1.39, a figure which compares very favourably with the
Australian and Global industry average and below our own
target.

**Maintain 100% Uptime Guarantee**

_Unable to Provide Service:_ A catastrophic failure or
equipment malfunction at a NEXTDC data centre could
result in the Company not being able to provide power
and cooling to support our customers’ equipment, thus
breaching our service level agreements and incurring
contractual liabilities. To address this risk, all of
NEXTDC’s data centres are designed and built with
sufficient redundancy in place (including redundant
paths for power and cooling) to enable components to
go offline and be repaired or maintained without
affecting our customers’ IT equipment. A sound
assurance and maintenance program, periodic recovery
testings, in-house design expertise and third-party peer
review and certification are among the many controls in
place to manage the risks of not being able to meet our
100% uptime guarantee.

**Building New Sites/Data Centres**

_Development: NEXTDC is involved in the development_
of data centres in Australia and overseas and also the
expansion of existing facilities and new Edge and
remote sites. Generally, development projects have a
number of risks including (i) the risk that suitable sites
or required planning consents and regulatory
approvals, including approvals from the local water
authority and the local power distribution grid operator,
are not obtained or, if obtained, are received later than
expected, or are adverse to NEXTDC’s interests, or
are not properly adhered to; (ii) the escalation of
development costs (including the costs of construction
and fit out and any associated delays) beyond those
originally expected; (iii) unforeseen project delays or
supply chain issues, or delays in delivery beyond the
control of NEXTDC including for example the timely
supply of critical data centre infrastructure or
components related to the site’s development or a data
centre build or fit out and commissioning programs; and
(iv) non-performance/breach of contract by a contractor
or sub-contractor in relation to any of the above.
Increases in supply or falls in demand could influence
the acquisition of sites, the timing and value of sales and
carrying value of projects.
To fundamentally manage these risks, NEXTDC has
implemented management processes designed to drive
consistency in the planning, design, engineering,
procurement and project management for each site.



-  _Customer demand: Development of new and existing_
data centres is capital intensive and sometimes
undertaken without pre-sales commitment from
customers. There is a risk that there will not be enough
customer demand to achieve a sufficient return on
investment. NEXTDC’s business model to become the
largest independent, carrier neutral channel ecosystem
in the Asia-Pacific region aims to manage this risk
by developing sites mindful of market demand and
customer needs with the aim of offering a service and
connectivity compelling to our customers. NEXTDC’s
next-generation of data centres are particularly
focussed on more scalable fit-outs. This will allow us
to stay in step with demand whilst lowering our initial
capital outlay as well as being able to more closely align
incremental capital investment with incremental
customer contracts. We are also aiming to increase
sales by providing complementary products and
services.

**Ensuring Financial Health of the Company**

-  _Funding:_ NEXTDC’s business is capital intensive in
nature and our continued growth relies on the
acquisition and development of new and existing data
centres, along with investment in new technologies.
Failure to obtain sufficient capital on favourable terms
may hinder NEXTDC’s ability to expand and pursue
growth opportunities, which may reduce
competitiveness and have an adverse effect on financial
performance. To address this risk, NEXTDC has sought
to obtain funding from various sources in order to not
become over-reliant on any one form of funding as well
as to maintain adequate liquidity to be able to cope with
surges in customer demand as well as to take
advantage of any attractive investment opportunities.

**Security of Data and Information**

-  _Physical Security Breach:_ Physical security is the
foundation of data centre security and security risk
management is an integral part of NEXTDC’s purpose,
governance and operations. A breach could seriously
interfere with NEXTDC’s or its customers operations,
damaging their and our reputation. NEXTDC’s security
risk management program is designed to safeguard our
assets, people, property and information as well as
customer equipment, security and operational
environments. NEXTDC customers rely on our
physical security to prevent unauthorised access to
the space where their equipment resides. NEXTDC
seeks to provide customers with the highest standards
of security. The protection of NEXTDC data centres is
enhanced using successive layers of physical security.
At each level, these limit access to only those with the
appropriate authorisation, be it access to the entrance,
common, storage or staging areas, private cages, data
hall environment or support infrastructure. NEXTDC’s
security and protection measures reflect ongoing
changes in the risk environment and protect the integrity
of customer information in our care.


-----

-  _Privacy & Data Security:_ NEXTDC collects a minimal
amount of Personally Identifiable Information (PII),
limited to activities such as account and contract
management, marketing and to permit entry into its
facilities. NEXTDC does not store, interact with or
manage any data stored on its customers’ equipment.
Customers are responsible for managing their own IT
equipment and data security. All PII is securely
managed in compliance with applicable data protection
laws and regulations covering all aspects of our
operations and information security practices based on
ISO 27001 controls. However, a breach, disclosing
information about NEXTDC operations could damage
its reputation and interfere with its operations. NEXTDC
is certified by the Australian Federal Government’s
Digital Transformation Agency (DTA) as a Certified
Strategic Enclave hosting provider of data centre
services. Certified Strategic status is the highest level of
certification attainable and recognition of our alignment
with the highest certification standards assuring
Federal, State and local government organisations on
security and data sovereignty issues.

-  _Cyber Risk: Cyber resilience is an important element of_
customer data security. NEXTDC’s Security
Operations Centre actively supports and responds to
cyber threats. Our Cybersecurity framework, based on
ISO 27001 enables us to manage cybersecurity-related
risk. We also perform third-party audits to benchmark
relevance and effectiveness.

**Revenue Generation and Customer Growth**

-  _Customer Management: NEXTDC is committed to_
building a culture that values our customers and
provides the best experience for them, from the first to
the last point of contact. This is central to all phases of
the customer lifecycle. Besides measuring ourselves
against key customer metrics, we continue to evolve our
customer resourcing models to ensure we deliver great
service and monitor the outcomes and feedback.

-  _Meeting Customer Requirements:_ Some of our
customers and channel partners are large, wellestablished businesses. Not delivering the appropriate
solution within the required timeframe to meet their
requirements could significantly impact our brand
reputation as well as the ability to win further
opportunities. To minimise this risk, NEXTDC engages
its in-house engineering and project management
teams to ensure customers are provided with the
optimal solution, delivered on time and on budget.
Each customer has an assigned Customer Success
Manager to provide support as they transition from
sales prospects to active users of our products.

-  _Innovating to stay competitive: Innovation is at the heart_
of everything we do. NEXTDC’s on-going strategic
initiatives include a focus on research and development
designed to foster innovation and excellence in data
centre development and operations. A large part of that
is our interactions with customers which are essential in
understanding which solutions and innovations can
drive value for customers, and demand in the relevant
industry sectors and to ensure that NEXTDC continues
to retain its competitive advantage.


Significant changes in the state of
affairs

Other than what has already been mentioned in this report,
there have been no further significant changes in the state
of affairs of the Group during FY23.

Matters subsequent to the end of the
financial period

No matters or circumstances have arisen since 30 June
2023 that have significantly affected the Group’s
operations, results or state of affairs, or may do so in future
years, except as disclosed below:

On 23 August 2023, NEXTDC Limited announced the
Company’s contracted utilisation has increased by
25MW (21%) to 145MW.

Likely developments and expected
results of operations

Likely developments in the operations of the Group that
were not finalised at the date of this report include the
continued fit out of data centre capacity in existing facilities
and the pursuit of further growth opportunities.

Dividends

In considering dividend policy the Board considers the
demand for capital to invest in growth, its level of retained
earnings and the availability of franked earnings.

Although the Company is expanding operating cashflow,
NEXTDC is some way from paying tax and consequently
from generating franking credits. The Company continues
to experience strong demand for its services and
consequently is continuing to make substantial capital
investment into the business. It is unlikely that NEXTDC will
pay any dividend in the next two years.

Dividends were neither paid nor declared during the year.


-----

Environmental regulation

NEXTDC is constantly monitoring and revising the best
way to manage our data centres to minimise the impact to
the environment. Environmental regulation relevant to
NEXTDC’s operations are set out below.
The FY23 Environmental, Social and Governance Report
(located at www.nextdc.com) provides further details on
how NEXTDC addresses matters of environmental and
social sustainability.

**Greenhouse gas and energy data reporting**
**requirements**

NEXTDC monitors its carbon emissions for reporting and
is registered under the National Greenhouse and Energy
Reporting Act (“NGER”). Additionally, corporate operations
are certified 100% carbon neutral under the Australian
Federal Government’s Climate Active program (previously
known as the National Carbon Offset Standard, or NCOS).
We have continued to achieve carbon neutrality by
offsetting emissions associated with our corporate
operations. NEXTDC’s NEXTneutral, a certified carbon
neutral colocation solution offered as an opt-in product to
our customers, allows our customers to voluntarily have
their carbon footprint off-set to be 100% carbon neutral on
the same basis as NEXTDC’s organisational 100% carbon
neutral accreditation.

All NEXTDC data centres are certified to ISO 14001,
Environmental Management System certification. An
exception to this is NEXTDC’s edge data centre in the
Sunshine Coast (SC1) and the newly established S3
Sydney and M3 Melbourne facilities that are already
operated in line with national standards. Our intention is to
complete this process within the next 12 months, where
this is applicable to the service we provide.

**NEXTDC’s Climate Change Journey and Taskforce**
**on Climate related Financial Disclosures (TCFD)**
**implementation**

Refer to page 14 of the Annual Report for further details on
our alignment with the recommendations of TCFD.

Insurance of officers

During the period, NEXTDC Limited paid a premium of
$3,365,500 (FY22: $4,217,414) to insure the Directors
and Officers of the Group.

The liabilities insured include legal costs that may be
incurred in defending civil or criminal proceedings that
may be brought against individuals in their capacity as
officers of entities in the Group and any other liabilities or
amounts sought against them in connection with such
proceedings. This does not include liabilities that arise
from conduct involving a wilful breach of duty by the
officers or the improper use by the officers of their position
or of information to gain advantage for themselves or
someone else or to cause detriment to the Group. The
Directors & Officers Liability insurance also covers security
claims against the Company itself. It is not possible
to apportion the premium between amounts relating to
the insurance against legal costs to defend the officers
and those relating to other liabilities.


Proceedings on behalf of the Company

No person has applied to the Court under section 237 of
the Corporations Act 2001 for leave to bring proceedings
on behalf of the Group, or to intervene in any proceedings
to which the Group is a party, for the purpose of taking
responsibility on behalf of the Group for all or part of those
proceedings.

No proceedings have been brought or intervened in on
behalf of the Group with leave of the Court under section
237 of the Corporations Act 2001.

Rounding of amounts

The Company is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors' Reports) Instrument
2016/191, relating to the ‘rounding off’ of amounts in the
financial statements. Amounts in the financial statements
have been rounded off in accordance with that Class
Order to the nearest thousand dollars, or in certain cases,
to the nearest dollar.


-----

Information on Directors

**DOUGLAS FLYNN**

**Chairman**
**Non-Executive Director (since September 2013)**

EXPERIENCE AND EXPERTISE

Douglas (Doug) was appointed to the Board in September
2013 as an Independent Non-Executive Director and
subsequently was appointed as Chairman in April 2014.

Doug has over 30 years of international experience in the
media and information and communication technology
industries, including holding various senior management
and board positions.

Doug is the current Chairman of IMEXHS Limited, a
medical imaging technology provider.

Previously, Doug was Chief Executive of newspaper
publisher, Davies Brothers Limited, which was acquired
by News Corporation in 1989. In 1995, he was appointed
the Managing Director of News International Plc.

After leaving News International in 1998, Doug joined Aegis
Group Plc and was appointed as CEO in 1999, where he was
instrumental in doubling the size of the company and
established a global market research business Synovate
and internet services business Isobar.

From 2005 to 2008, Doug served as the Chief Executive
of facilities management provider Rentokil Initial Plc.

Doug graduated in Chemical Engineering from the
University of Newcastle, New South Wales and received
a Master of Business Administration with distinction from
the University of Melbourne.

OTHER CURRENT DIRECTORSHIPS

-  IMEXHS Limited (March 2020 – present)

FORMER DIRECTORSHIPS

-  Seven West Media Limited

-  iSentia Group Limited

-  APN Outdoor Group Limited

-  Konekt Limited

SPECIAL RESPONSIBILITIES

-  Chairman of the Board

-  Member of the Remuneration and Nomination
Committee

-  Member of the Investment Committee

INTERESTS IN SHARES AND OPTIONS

Doug holds 180,252 fully paid ordinary shares in NEXTDC
Limited.


**CRAIG SCROGGIE**

**Chief Executive Officer (since June 2012)**
**Managing Director (since November 2010)**

EXPERIENCE AND EXPERTISE

Craig Scroggie is the Chief Executive Officer and Managing
Director of NEXTDC, Australia’s leading Data-Centre-as-aService provider. Prior to becoming CEO in June 2012, Mr
Scroggie served on the Board of Directors since IPO (2010)
as a Non-Executive Director, including as Chairman of the
Audit and Risk Management Committee.

Mr Scroggie has more than 25 years’ experience in the ICT
industry, having held senior positions with Symantec,
Veritas Software, Computer Associates, EMC Corporation
and Fujitsu. Prior to joining NEXTDC, Mr Scroggie was
Symantec’s Vice President & Managing Director for the
Pacific Region.

Mr Scroggie currently serves on the Board of Sovereign
Cloud Holdings (ASX:SOV) and also serves on the
University of Southern Queensland Business School
Advisory Board and is Chairman of the La Trobe University
Business School Advisory Board and holds the position of
Adjunct Professor.

Mr Scroggie is a Graduate of the University of Southern
Queensland and holds an Advanced Certificate in
Information Technology, a Graduate Certificate in

Management, a Postgraduate Diploma in Management, a
Master of Business Administration; and is a Graduate and
Fellow of the Australian Institute of Company Directors.

In 2013 Mr Scroggie was awarded the University of
Southern Queensland Faculty of Business & Law Alumnus
of the Year and in 2015 was inducted into the ARN ICT
Industry Awards Hall of Fame.

OTHER CURRENT DIRECTORSHIPS

-  Sovereign Cloud Holdings Limited ‘AUCloud’

(November 2021 - present)

FORMER DIRECTORSHIPS

-  Nitro Software Limited (September 2021 – April 2023)

SPECIAL RESPONSIBILITIES

-  Member of the Investment Committee

INTERESTS IN SHARES AND OPTIONS

Craig holds 442,691 fully paid ordinary shares and
1,301,523 performance rights.


-----

**DR GREGORY J CLARK AC**

**Non-Executive Director (since April 2014)**

EXPERIENCE AND EXPERTISE

Dr Gregory J Clark AC is a world-renowned technologist,
businessman and scientist, with extensive corporate and
Board experience in Australia, the USA and Europe.

Dr Clark brings to the Board international business experience
and a distinguished career in micro-electronics, computing
and communications. He was previously Principal of Clark
Capital Partners, a US based firm that has advised
internationally on technology and the technology marketplace.

During his career, Dr Clark also held senior executive roles
at IBM, News Corporation and Loral Space and
Communications. At IBM he was a senior scientist in their
Research Division in NY. At News Corporation he was
President of Technology and on the Executive Committee
with responsibility for all technical aspects of digital media
creation and delivery. Dr Clark was responsible for News
Corporation’s transformation of its media assets from an
analogue platform into a digital platform for both program
creation and delivery. In addition, he was responsible for
all technology companies within News Corporation.

He was President and Chief Operating Officer at Loral
Space and Communications, the world’s largest
commercial satellite manufacturer and one of the largest
operators, with responsibility for all development,
manufacturing, marketing and sales.

While at News Corporation and Loral Space and
Communications, Dr Clark was Chairman and/or on the
Board of a number of wholly owned subsidiaries including
NDS, Globalstar, SatMex, Skynet, Loral Space Systems,
Kesmai, Etak and others.

Dr Clark is an Honorary Professor at the Australian National
University and a Fellow of the Australian Academy of
Science, a Fellow of the Academy of Technology and
Engineering and a Fellow of the American Physical
Society.

FORMER DIRECTORSHIPS

Dr Clark served on the Board of the ANZ Banking Group
(also chairing the Board’s Technology Committee) which
he stepped down from in November 2013 after nine years
of service.

SPECIAL RESPONSIBILITIES

-  Member of the Remuneration and Nomination
Committee

-  Member of the Investment Committee

INTERESTS IN SHARES AND OPTIONS

Gregory holds 74,110 fully paid ordinary shares in
NEXTDC Limited.


**STUART DAVIS**


**Non-Executive Director (since September 2013)**

EXPERIENCE AND EXPERTISE

Stuart has over 30 years’ experience as an international
banker with the HSBC Group including roles in Hong Kong,
New York, Taiwan, India and Australia. Most recently he
was CEO India for the Hongkong and Shanghai Banking
Corporation Limited (2009-2012), CEO and Executive
Director for HSBC Bank Australia Limited (2002-2009) and
CEO HSBC Taiwan (1999-2002). He was a member of
the Australian Bankers Association from 2002 to 2009
and Deputy Chairman from 2006 to 2009.

Stuart holds a LLB from Adelaide University and is a
Graduate of the Australian Institute of Company Directors.

OTHER CURRENT DIRECTORSHIPS

-  PayPal Australia Limited (July 2016 – present)

-  BSP Financial Group (September 2017 – present)

-  Appen Limited (March 2022 - present)

FORMER DIRECTORSHIPS

Stuart previously held directorships with subsidiaries of
HSBC Group until 2012, Built Holdings Pty Ltd. and
Moboom Limited.

SPECIAL RESPONSIBILITIES

-  Chairman of the Remuneration and Nomination
Committee

-  Member of the Audit and Risk Management Committee

INTERESTS IN SHARES AND OPTIONS

Stuart holds 42,930 fully paid ordinary shares in NEXTDC
Limited.


-----

**JENNIFER LAMBERT**

**Non-Executive Director (since 1 October 2019)**

EXPERIENCE AND EXPERTISE

Ms Jennifer Lambert has extensive business and
leadership experience at senior executive and board level
with more than 25 years of financial management and
accounting experience.

Currently Ms Lambert is a Non-Executive Director of
BlueScope Steel Limited, REA Group Limited and Investa
Property Group, and Chairs each of their Audit
Committees. Ms Lambert is also a non-executive director
of two not for profit entities.

Ms Lambert was Group Chief Financial Officer of 151
Property (formerly Valad Property Group) for 13 years
where her responsibilities included operational and
strategic finance, tax, treasury, legal and compliance. Prior
to this, Ms Lambert was a director at

PricewaterhouseCoopers specialising in capital raisings,
structuring and due diligence for acquisitions and disposals
across various industries.

Jennifer holds a Bachelor of Business (Accounting and
Finance) from University of Technology Sydney and Master
of Economics from Macquarie University. Her professional
associations include being a member of The Chartered
Accountants Australia New Zealand and a Fellow of the
Australian Institute of Company Directors.

OTHER CURRENT DIRECTORSHIPS

-  BlueScope Steel Limited (September 2017 – present)

-  REA Group Limited (December 2020 – present)

-  Investa Property Group (October 2021 - present)

FORMER DIRECTORSHIPS

-  Mission Australia (retired November 2020)

SPECIAL RESPONSIBILITIES

-  Chair of the Audit and Risk Management Committee

INTERESTS IN SHARES AND OPTIONS

Jennifer holds 28,000 fully paid ordinary shares in
NEXTDC Limited.


**STEPHEN SMITH**


**Non-Executive Director (since 1 July 2019)**

EXPERIENCE AND EXPERTISE

Stephen (Steve) Smith is widely respected amongst the
global ICT community. Steve has a deep background and
expertise in managing market leading technology

businesses, particularly in the data centre industry.

Steve served as CEO and President of Equinix Inc for over
a decade (2007-2018), transforming it into the largest
enterprise data centre platform in the world. Under Steve’s
leadership Equinix grew from 17 data centres operating in
10 markets and a US$2 billion market cap, to
approximately 200 data centres with a US$38 billion
market cap and operations in 24 countries on five
continents.

Steve is currently the CEO of Zayo Group, a leading
provider of fibre infrastructure, with dense, high-quality
networks in every major market in North America and many
in Western Europe. Prior to his time at Zayo Group and
Equinix, Steve held senior leadership positions at Hewlett
Packard (2005-2006) which included serving as its Senior
Vice President - Worldwide HP Services; Lucent
Technologies Inc. (2004-2005), where he was appointed
as Vice President, Global Professional and Managed
Services and Electronic Data Systems Corporation (EDS)
(1987-2004), where he served in a number of capacities
including Chief Sales Officer and President, Asia-Pacific.

Steve also had a successful eight-year career in the U.S.
Army where, among other roles, he was aide de-camp to
the office of the Commander in Chief of the U.S. Armed
Forces in the Pacific.

Steve holds a Bachelor of Science in Engineering from the
U.S. Military Academy at West Point.

CURRENT EXECUTIVE ROLES

-  Zayo Group Holdings, CEO

OTHER CURRENT DIRECTORSHIPS

-  Zayo Group Holdings (October 2020 – present)

FORMER DIRECTORSHIPS

Steve has served on several boards including Flexential
Inc, Volterra Semiconductor Corporation, 3Par Inc, Actian
Corporation, NetApp Inc and F5 Networks Inc.

SPECIAL RESPONSIBILITIES

-  Chairman of the Investment Committee

INTERESTS IN SHARES AND OPTIONS

Nil


-----

**MARIA LEFTAKIS**

**Non-Executive Director (since 24 August 2023)**

EXPERIENCE AND EXPERTISE

Mrs Leftakis is recognised as an industry leader in
shareholder engagement and corporate governance
advisory, having worked with both domestic and
international companies in Australia for over 25 years. She
offers deep commercial and industry expertise having
founded and led a number of successful stakeholder
advisory businesses.

She is currently the Chair of Morrow Sodali, Asia Pacific,
one of the largest global shareholder and governance
advisory firms. In this role, Mrs Leftakis is also responsible
for advising on acquisitions and growth opportunities. Prior
to this, she was the firm’s CEO for Asia Pacific and a
member of the global Executive Committee, responsible for
the groups business performance and growth strategy.

As the Managing Director of a number of shareholder
advisory businesses, including Georgeson Shareholder
Communications (2000 – 2006, acquired by

Computershare Limited) and Global Proxy Solicitation Pty
Ltd (2006 – 2017, acquired by Morrow Sodali), Mrs Leftakis
has become one of the leading advisors in this space, using
her entrepreneurial experience to advise many ASX listed
companies on issues including M&A, demergers, activism
response and capital restructures.

Maria holds a Bachelor of Economics (Finance and
Accounting) from the University of Sydney as well as an
Executive Master of Business Administration from the
Australian Graduate School of Management, University of
New South Wales. Maria is also a member of the Australia
Institute of Company Directors.

OTHER CURRENT DIRECTORSHIPS

-  Morrow Sodali Pty Ltd, Chair - APAC

SPECIAL RESPONSIBILITIES

-  Member of the Audit and Risk Management Committee

-  Member of the Remuneration and Nomination
Committee

INTERESTS IN SHARES AND OPTIONS

Nil


**DR EILEEN DOYLE**


**Non-Executive Director (since August 2020)**

EXPERIENCE AND EXPERTISE

Dr Doyle has had an internationally recognised career with
close to four decades of diverse business experience at
both executive and board level.

Her experience covers a wide range of industries including
logistics, technology and research, property, financial
services, manufacturing, building and construction and
sport.

Dr Doyle has previously served as the Chairman of the
world’s largest export coal loader, PWCS (1998-2009) and
Deputy Chairman of CSIRO to 2016, after 10 years of
service.

Dr Doyle currently serves on the Board of DBI Limited,
Santos Limited and Airservices Australia. She has
significant experience across Audit, Remuneration and
Sustainability Committees. Dr Doyle’s experience also
includes appointments at major government bodies
Austrade, CSIRO, Newcastle Port Corporation, the
National Steering Committee on eHealth and the NSW
Innovation and Productivity Council.

Dr Doyle holds a Ph.D. in Applied Statistics from the
University of Newcastle, was a Fulbright Scholar (Business
Management: Columbia University), is a Fellow of the
Academy of Technology and Engineering and a Fellow of
the Australian Institute of Company Directors (FAICD).

Dr Doyle is also a Foundation Fellow of The Australian
Association of Angel Investors (FAAAI) and the author of
“Call a Business Angel”.

OTHER CURRENT DIRECTORSHIPS

-  DBI Limited (October 2020 – present)

-  Airservices Australia (April 2021 – present)

-  Santos (December 2021 - present)

-  Kinetic Group (May 2022 – present)

FORMER DIRECTORSHIPS

-  Oil Search Limited (February 2016 – December 2021)

-  GPT Group (March 2010 – May 2019)

-  Boral Limited (March 2010 – October 2020)

SPECIAL RESPONSIBILITIES

-  Member of the Audit and Risk Management Committee

INTERESTS IN SHARES AND OPTIONS
Eileen holds 17,250 fully paid ordinary shares in NEXTDC
Limited.


-----

**MICHAEL HELMER**


**Company Secretary and Chief Legal Officer (since**
**February 2015)**

Michael has over 28 years’ experience in the legal sector
and has previously served as Director of Legal Services
(Asia Pacific) for global software maker Symantec. Before
that, Michael was based in London at specialist technology
firm Field Fisher Waterhouse. Michael has held senior legal
roles in Barclays, Coles Myer and was General Counsel at
European on-line shopping site shopsmart.com as well as
Australian anti-malware maker PC Tools.

Michael is a seasoned strategic advisor with deep
knowledge of the legal and compliance environments in
which technology and ecommerce businesses operate. His
work is particularly focussed on their corporate and
operating environments, ecommerce, security and

compliance requirements as well as technology and IP law,
M&A and capital raising.

Michael has obtained a Bachelor of Laws, Bachelor of
Science (Monash) and is admitted as a legal practitioner in
Australia as well as in England and Wales. Michael is a
member of the Association of Corporate Counsel and has
served as their Victorian President (ACLA) as well as a
member of its National Board. Michael holds a Certificate
in Governance Practice and is a Fellow of the Governance
Institute of Australia (FGIA). He is also a member of the
Australian Institute of Company Directors and a graduate
of their Company Directors course (GAICD).

Meetings of Directors

The number of meetings of the Company's Board of Directors and of each board committee held during the year, and the
number of meetings attended by each director is as follows:

**Meetings of Committees**


Full meetings of Audit and Risk
Directors Management

Committee

**A** **B** **A** **B**

Douglas Flynn 6 6 N/A N/A


Remuneration and
Nomination

Committee


Investment
Committee


Craig Scroggie 6 6 N/A N/A N/A N/A 2 2

Stuart Davis 6 6 5 5 2 2 N/A N/A

Dr Gregory J Clark AC 6 6 N/A N/A 2 2 2 2

Stephen Smith 5 6 N/A N/A N/A N/A 2 2

Jennifer Lambert 6 6 5 5 N/A N/A N/A N/A

Dr Eileen Doyle 6 6 5 5 N/A N/A N/A N/A

A = Number of meetings attended
B = Number of meetings held during the time the Director held office or was a member of the committee during the period
N/A = Not applicable. Not a member of the relevant Committee


-----

Remuneration Report – Audited

This report sets out the remuneration arrangements for NEXTDC’s Directors and other Key
Management Personnel (KMP) for the year ended 30 June 2023 (FY23). It is prepared in
accordance with section 300A of the Corporations Act 2001 (Corporations Act) and has been
audited as required by section 308(3C) of the Corporations Act.

This report is divided into the following sections:

|Col1|Page|
|---|---|
|1. Message from the Chair of the Remuneration and Nomination Committee|35|
|2. The Persons covered by this Report|37|
|3. Overview of Remuneration Governance Framework|37|
|3.1. Senior Executive Remuneration (SER) Policy|37|
|3.2. Senior Executive Remuneration Benchmarks|39|
|3.3. Senior Executive Remuneration Mix|39|
|3.4. Senior Executive Remuneration and Performance|40|
|3.5. Variable Remuneration – Short Term Incentive (STI) Plan|41|
|3.6. Variable Remuneration – Long Term Incentive (LTI) Plan|43|
|3.7. Risk Management and Clawback Provisions|45|
|4. STI and LTI Performance outcomes for FY23|46|
|4.1. STI Vesting Outcomes|46|
|4.2. LTI Vesting Outcomes|48|
|5. Employment terms for Directors and Senior Executives|48|
|5.1. Non-Executive Directors|48|
|5.2. Senior Executives|49|
|6. Statutory Remuneration|50|
|6.1. Senior Executive Remuneration|50|
|6.2. Non-Executive Director Remuneration|52|
|6.3. Changes in Securities Held Due to Remuneration|53|
|6.4. Director and Senior Executive Shareholdings|57|
|6.5. Remuneration Received (Non-statutory)|58|


-----

**1.** **MESSAGE FROM THE CHAIR OF THE REMUNERATION AND NOMINATION COMMITTEE**

NEXTDC’s Remuneration Report details how its executive remuneration outcomes are linked to both its corporate and individuals’
performance for the 2023 financial year. The report details our remuneration policy for FY23 and the alignment between executive
remuneration and shareholder outcomes.

In FY23, NEXTDC achieved a number of key performance milestones:


**Total revenue**

###### $362.4M

-  $71.3M (25%)

**Contracted utilisation**

###### 122.2MW

-  39.2MW (47%)


**Underlying EBITDA[1]**

###### $193.7M

-  $24.6M (15%)

**Debt Facility**

###### $2.9B


**Operating cashflow**

###### $126.5M

-  $9.3M (8%)

**Capital expenditure**

###### $690.4M


The Company’s remuneration policies remain under continuous review by the Remuneration and Nomination Committee (the
“Committee”) throughout the year with the aim of ensuring alignment with the Company’s strategic objectives and to ensure
retention of key talent. Noting that shareholder interests and community expectations are key elements of this process, the
Committee is mindful that the Company is a high-performance business focussed on its growth objectives and its broader
environmental and social responsibilities.

The Committee is also aware of broader trends in the executive space, and mindful of competitors and comparator groups in
Australian and international markets, and unlisted competitors.

This year’s Senior Executive remuneration program, which was confirmed by the Committee, set performance targets with
reference to key project milestones and shareholder expectations. Financial performance, key business deliverables and
broader behavioural and health and safety metrics were all incorporated into the program. The Committee is also focussed on
operational efficiencies and driving environmental outcomes as part of its strategic focus.

The Committee continues to reflect on the balance of its disclosures of operational information in the context of executive
performance. It believes there is a clear benefit in providing as much transparency as possible but will, at times, be circumspect
about some of the details if it feels this could erode the Company’s competitive or strategic advantage. For now, the Committee
believes an appropriate balance has been struck, and it will continue to take shareholder feedback on these matters and make
refinements so as to maintain an appropriate balance between these two considerations.

In terms of the overall remuneration structure for FY23 the Committee is of the view that its components, as described in this
Remuneration Report, are strongly aligned with shareholder value.


-----

**Looking forward – Senior Executive remuneration in FY24**

To ensure the remuneration framework remains fit-for-purpose for the next phase of the Company’s strategy and growth, the
Committee undertook a review of the existing Senior Executive remuneration framework in FY23, with input from external
advisors as well as recent remuneration benchmarking at regional management levels in Asia and into privately owned
companies in Australia. The review considered several factors, including prevailing economic conditions, current and future
strategic priorities, retention of key executive talent and the appropriateness of the current framework in meeting industry
opportunities and risks.

Following the review, the Board has determined to make the following remuneration changes for FY24:

-  A 15% increase in fixed remuneration for Senior Executives, including the CEO, effective 1 July 2023. This reflects
their demonstrated contribution towards the Company’s global strategic growth, including a 33% increase in market
capitalisation since the end of FY22 (44% from the start of FY21), benchmarking against the regional management
levels in Asia as well as privately owned peers in Australia, and a 14% increase in the Australian Consumer Price
Index since their previous increase in fixed remuneration in January 2021; and

-  Modifications to the existing long-term incentive (LTI) plan to further generate Senior Executive share ownership and
alignment with long-term shareholder interests, whilst ensuring that we continue to motivate and retain high-performing
and innovative executive talent in a competitive market. With several key regional expansion projects underway and
the high demand for experienced Senior Executives in our industry, this alignment is critical to our ongoing success
and ability to drive long-term shareholder value.

Further details on the fixed remuneration increase can be found below, with full details of the FY24 LTI plan to be disclosed in
the Notice of 2023 AGM and FY24 Remuneration Report.

The Committee and I are looking forward to further engaging with our shareholders and will be listening carefully to your
comments and observations concerning our remuneration policies and practices.

**Stuart Davis**
**Chairman – Remuneration and Nomination Committee**

1FY23 underlying EBITDA excludes costs related to early stage offshore operating expenses, acquisition and funding opportunities, as well
as investment in associates.


-----

**2.** **THE PERSONS COVERED BY THIS REPORT**

Key Management Personnel (“KMP”) include Non-Executive Directors and Senior Executives. The term
“Senior Executives” refers to the CEO and those executives with authority and responsibility for planning,
directing and controlling the activities of the Company and the Group, directly or indirectly.

TABLE 1: KEY MANAGEMENT PERSONNEL

NON-EXECUTIVE DIRECTORS

|Name|Position|
|---|---|
|Douglas Flynn|Non-Executive Chairman since 30 April 2014 Member of the Remuneration and Nomination Committee Member of the Investment Committee|
|Stuart Davis|Non-Executive Director Chair of the Remuneration and Nomination Committee Member of the Audit and Risk Management Committee|
|Dr Gregory J Clark AC|Non-Executive Director Member of the Remuneration and Nomination Committee Member of the Investment Committee|
|Stephen Smith|Non-Executive Director Chair of the Investment Committee|
|Jennifer Lambert|Non-Executive Director Chair of the Audit and Risk Management Committee|
|Dr Eileen Doyle|Non-Executive Director Member of the Audit and Risk Management Committee|



SENIOR EXECUTIVES

|Name|Position|
|---|---|
|Craig Scroggie|Chief Executive Officer, Managing Director|
|Simon Cooper|Chief Operating Officer|
|Oskar Tomaszewski|Chief Financial Officer|
|David Dzienciol|Chief Customer and Commercial Officer|



**3.** **OVERVIEW OF REMUNERATION GOVERNANCE FRAMEWORK**

Our mission is to be the leading customer-centric data centre services company, delivering solutions that power, secure and
connect enterprise. NEXTDC’s remuneration policy is designed to incentivise and reward Senior Executives for achieving its
overarching objectives of building market-leading sales performance, hosting the country’s largest independent ecosystem of
carriers, cloud and IT service providers and enabling customers to source and connect with suppliers and partners in an integrated
hybrid cloud environment.

Our remuneration framework, applicable to the 2023 financial year is outlined and summarised below.

**3.1 Senior Executive Remuneration (SER) Policy**

The Senior Executive Remuneration Policy applies to Senior Executives who are defined as:

-  The Chief Executive Officer who is accountable to the Board for the Company’s performance and long-term planning;

-  Heads of Business Units, or those with key functional roles, or essential expertise, that report directly to the Chief Executive
Officer;

-  Other executive roles classified as KMP under the Corporations Act; and

-  Other roles or individuals nominated by the Board from time to time.


-----

FIGURE 1: REMUNERATION GOVERNANCE FRAMEWORK

**BOARD** **REMUNERATION AND NOMINATION** **MANAGEMENT**

- Approves the overall remuneration **COMMITTEE** - Provides information relevant to
policy and ensures it is competitive, The Remuneration and Nomination remuneration decisions and makes
fair and aligned with the long-term Committee is delegated responsibility by recommendations to the
interests of the Company and the Board to make recommendations on: Remuneration and Nomination
shareholders - The remuneration policies and Committee

- Approves Senior Executives and framework
other key management personnel - Non-Executive Director remuneration
remuneration - Remuneration for Senior Executives

- Assesses Company performance and and other key management
determines STI and LTI outcomes for personnel
Senior Executives - The extent of the Senior Executives’

achievements against performance
targets and the remuneration
outcomes

- Executive incentive arrangements

**CONSULTATION WITH** **REMUNERATION CONSULTANTS AND OTHER EXTERNAL ADVISORS**
**SHAREHOLDERS AND** The Remuneration and Nomination Committee may appoint and engage independent advisors directly in
**OTHER STAKEHOLDERS** relation to Executive remuneration matters. These advisors:

- Review and provide recommendations on the appropriateness of Senior Executive remuneration

- Provide independent information to assist with remuneration decisions
Advice or recommendations provided are used to assist the Board. Remuneration decisions are undertaken
through the Board and Remuneration and Nomination Committee process.

Benchmarking data was provided by Morrow Sodali in FY22 and FY23 to review Senior Executive and NonExecutive remuneration. No remuneration recommendation as defined in Section 9B of the Corporations
Act 2001 was made. The Board is satisfied that any advice provided by Morrow Sodali was made free from
undue influence from any of the KMP.


The SER policy details how executive remuneration is structured, benchmarked and adjusted in response to changes in the
circumstances of the Company. NEXTDC’s Senior Executives Total Remuneration Package (TRP) includes the following
components:

FIGURE 2: TOTAL FY23 REMUNERATION (IF MAXIMUM INCENTIVE PAYMENTS ARE RECEIVED)


-----

**3.2 Senior Executive Remuneration Benchmarks**
When considering executive remuneration, the Committee frequently has reference to domestic and international industry
benchmarks relevant to its market sector, growth and value as well as unlisted competitors, general market conditions and the
individual’s role and performance. Factors specific to the data centre industry are also evaluated to ensure a high degree of
alignment with strategic goals and in order to foster high retention rates in the leadership team and in the business more
broadly. The Committee continues to be mindful of strong and ongoing competitive pressures for top talent in the sector both
internationally and locally. The Committee considerations include the following fundamentals in setting executive remuneration
packages:

-  The individual’s skillsets and contribution to long term revenue and EBITDA growth;

-  Their contribution to the delivery of key strategic goals and milestones;

-  Their contribution to key measures of operational excellence including those relating to running of the business, the
Company’s strategic initiatives, safety and cultural values;

-  Their relevant industry knowledge, experience and connections;

-  Domestic and international comparators with whom NEXTDC must compete for talent; and

-  Prevailing economic conditions.

As outlined in the Chairman’s comments, during FY23, the Committee evaluated Senior Executives’ fixed remuneration and
TRP, in line with movements in the Australian Consumer Price Index, as well as the trajectory of the Company's growth,
strategic objectives and priorities, scarcity of talent, and changes in a roles’ complexity and NEXTDC’s geographical spread.
Following this review, the Board approved a 15% increase in fixed remuneration for Senior Executives (including the CEO) for
FY24, taking into account their demonstrated contribution towards the Company’s growth, reflected by a 33% increase in the
Company’s market capitalisation since the end of FY22 (44% since the start of FY21). The review also considered appropriate
benchmarking against regional management levels in Asia as well as privately owned peers in Australia (recognising that
NEXTDC competes for Senior Executive talent with both listed and unlisted companies).

The Committee’s view is that the nature of the business and its local and international customer base, relationships and
competitors are such that its TRP levels should continue to be assessed against both domestic and international remuneration
benchmarks.

**3.3 Senior Executive Remuneration Mix**

The Senior Executive remuneration mix refers to the proportion of remuneration that executives can receive as fixed versus
any variable “at risk” remuneration component. Assuming performance is at a level at which incentives pay out in full,
approximately 71% of the TRP remuneration received is performance related.

The graph below sets out the remuneration mix if maximum incentive payments are received for the CEO and other Senior
Executive KMP for FY23.

FIGURE 3: FY23 POTENTIAL REMUNERATION MIX

FIXED (29%) AT RISK (71%)

Fixed Remuneration (29%) STI (14%) Deferred STI (14%) LTI – 3 Year (21.5%) LTI – 4 Year (21.5%)


-----

**3.4 Senior Executive Remuneration and Performance**

The Board has determined that significant remuneration opportunities should continue to be contingent on realising the
Company’s ongoing financial and operational objectives. The Committee is disclosing further detail in relation to how incentive
outcomes were determined in FY23 to ensure shareholders gain an appropriate level of insight into the key strategic and project
milestones set for Senior Executives remuneration. The Committee is aiming to set these to ensure NEXTDC’s executive
continue to be focussed on developing and growing its first-class data centre business, customer success and expanding its
national and international network of data centres. These remain the key drivers for shareholder value creation and continue to
be the cornerstones of our incentive program.

Below see Senior Executive remuneration and performance assessed relative to NEXTDC’s performance over the past five
years:


TABLE 2: HISTORICAL COMPANY PERFORMANCE

169.7 200.8 246.1 291.0 **362.4** **▲ 25%** 85.1 104.6 134.5 169.0 **193.7** **▲ 15%**


FY19 FY20 FY21 FY22 FY23


FY19 FY20 FY21 FY22 FY23


FY19 FY20 FY21 FY22 FY23


**Total revenue ($M)** **Underlying EBITDA ($M)** **Net profit/(loss) before tax ($M)**

52.5 70.0 75.5 83.0 **122.2** **▲ 47%** 6.49 9.88 11.86 10.64 **12.58** **▲ 18%** 2,230 4,496 5,403 4,859 **6,474** **▲ 33%**


FY19 FY20 FY21 FY22 FY23


FY19 FY20 FY21 FY22 FY23


FY19 FY20 FY21 FY22 FY23


**Contracted utilisation (MW)** **Share price* ($)** **104.6** **Market capitalisation* ($M)**

*Closing share price as at 30 June


FY23 underlying EBITDA excludes costs related to early stage offshore operating expenses, acquisition and funding
opportunities, as well as investment in associates.


-----

**3.5 Variable remuneration – Short Term Incentive (STI) Plan**

The Committee recognises that NEXTDC is a capital-intensive business that requires significant investment for infrastructure
to be built prior to generating income from customer contracts. With NEXTDC operating in a high-growth industry, the Company
needs to continue to expand its infrastructure investment to keep pace with customer demand. It is on this basis that the Board
and Committee places emphasis on revenue and underlying EBITDA generation as well as delivery of projects and maintaining
strong operational performance when incentivising Senior Executives.

The composition of performance metrics comprising the FY23 STI program are as follows:

FIGURE 4: FY23 STI PERFORMANCE METRICS

**10%** Underlying EBITDA

**15%**

Total Revenue

**40%**

Major Project
Delivery

Operations

**35%**


**FINANCIAL YEAR 2023 STI PLAN**

The purpose of the STI Plan is to provide an incentive for Senior Executives to achieve against the Company’s strategic
objectives by delivering or exceeding on annual business plan requirements to ensure sustainable superior returns for
shareholders. Key terms of the FY23 STI Plan are detailed below.



|Feature|Description|Col3|Col4|
|---|---|---|---|
|Opportunity|Subject to the achievement of the Gateway, participants may achieve up to a stretch (maximum) award of 100% of their Base Salary Package.|||
|Gateway|In order to qualify for any award under the FY23 STI incentive program, underlying EBITDA achieved in FY23 must be at least 95% of the midpoint value of the initial guidance range given for underlying EBITDA performance in that year. In FY23 that gateway was set at $184.3m. A further performance gate for this year was fulfilling the Company’s uptime obligations to its customers. No STI is to be awarded to any individual acting in breach of the Company’s code of conduct.|||
|Measurement period|The Company’s financial year i.e., from 1 July 2022 to 30 June 2023.|||
|Performance metrics|In FY23 the below Company Key Performance Indicators (KPIs) were selected as being the most relevant drivers for improving financial performance and growth in shareholder value.|||
||Metric|Weighting|Reason for selection|
||Underlying EBITDA1|Up to 40%|Indicates the Company’s underlying profitability, a measure best suited to its stage of development: • 50% achieved at bottom end of initial guidance range ($190m) • 100% achieved at top end of initial guidance range ($198m) • A linear progression to be applied between the limits.|
||Total Revenue|Up to 35%|Indicates the Company’s level of incremental growth in new business for the period, an essential criterion in assessing NEXTDC’s financial and operational performance: • 50% achieved at bottom end of initial guidance range ($340m) • 100% achieved at top end of initial guidance range ($355m) • A linear progression to be applied between the limits.|


-----

|Feature|Description|Col3|Col4|
|---|---|---|---|
||Major Project Delivery|Up to 15%|This component is for agreed major projects and clear, definable outcomes that drive future growth in capabilities, revenue, and earnings. Projects are mostly identified at or prior to the beginning of the financial year but may also be added as the financial year progresses. Projects may complete within the year or flow into the following year. In applying measures against performance, the time and cost will be that approved in the original approved project submission. These may be modified as to scope, time and costs in subsequent approved Board submissions. In calculating the award, weighting was to be given to each of the major projects as indicated in Figure 5 below.|
||Operations|Up to 10%|This component is for key operational metrics that affect service level standards expressed in uptime performance, data centre energy efficiency as well as measures relating to the health and safety of our employees and visitors. In calculating the award, weighing was given to each performance component as indicated in Figure 6 below.|
|Delivery of STI|Payments will be in cash unless otherwise determined by the Board and will normally be paid in September following the Measurement Period subject to the deferral of 50% of the final STI payment, which may be delivered in cash or by grant of rights to acquire fully paid ordinary shares. Deferring 50% of the awarded STI for a period of 12 months is intended to promote sustainability of annual performance over the medium term, acts as a retention mechanism and facilitates the exercise of malus provisions should the Board determine to exercise its discretion.|||
|Board discretion|If the Company’s overall performance during the Measurement Period is substantially lower than expectations and has resulted in a significant loss to shareholders’ value, the Board may abandon the STI Plan for the Measurement Period or adjust STI pay outs.|||
|Forfeiture and termination|In the event of cessation of employment due to dismissal for cause, all unvested deferred STI’s are forfeited. In the event of cessation of employment due to resignation, all unvested deferred STI’s are forfeited unless otherwise determined by the Board. In the event of cessation of employment due to death, total and permanent disability or redundancy, unvested deferred STI’s will continue on-foot and be subject to the original terms as though employment had not ceased, unless the Board determines otherwise. In any other circumstances the Board has discretion to determine how the unvested deferred STI’s will be treated upon cessation of employment with the Company.|||
|Malus/ Clawback Provisions|The Board retains the ability to reduce or apply malus/clawback to awards where the participant has acted fraudulently or dishonestly or is in material breach of their obligations to the Company; where the Company becomes aware of material misstatements or omissions in the financial statements of the Company; where the Company is required by or entitled under law or Company policy to reclaim remuneration; or where any circumstances occur that the Board determines to have resulted in an unfair benefit to the recipient.|||


-----

FIGURE 5: FY23 STI POTENTIAL – MAJOR PROJECT DELIVERY

Major Project 1 (20%): S3 - delivery of Phase 2 on time (50%) and
on budget (50%)

**5% [5%]** Major Project 2 (20%): M2 - delivery of Stage 3 MCX tower on time

**20%** (50%) and on budget (50%)

**10%** Major Project 3 (20%): M3 - delivery of key client capacity including

services and rack ready on time (50%) and on budget (50%)
Major Project 4 (10%): SC1 - delivery of rack ready inventory and
infrastructure upgraded to NDC standards

**10%**

Major Project 5 (10%): A1 - completion of detailed design and

**20%** development approvals on time

Major Project 6 (10%): D1 - completion of detailed design and

**10%**

development approvals on time
Major Project 7 (5%): B2 - expansion of Data Hall 1 on time (50%)

**20%** and on budget (50%)

Major Project 8 (5%): KL1 - Malaysia - MDEC status conferred, land
acquired, and development approvals submitted


FIGURE 6: FY23 STI POTENTIAL – OPERATIONS

WH&S: achieve LTIFR <2.7 and >90% of site safety
leadership inspections per executive

**30%**

**40%**

PUE: PUE of <1.4 for all facilities commencing at least
60 days prior to the end of the measurement period

Team training: 95% completion of all team training
programs focussed on diversity, inclusion, safety and

**30%**

social impact


**3.6 Variable remuneration – Long Term Incentive (LTI) Plan**

**FINANCIAL YEAR 2023 LTI PLAN**

The aim of the LTI Plan is to provide an incentive for Senior Executives to help achieve the Company’s strategic objectives
and to deliver performance that is sustainable and aligned with shareholder interests. It also acts as a retention mechanism
to maintain a stable team of high performing executives. The current LTI Plan is the NEXTDC Limited Equity Incentive Plan
(EIP).

The Committee recognises that continual review is required to ensure the program remains in step with the Company’s rapid
growth, and in line with trends, both of ASX market peers and international competitors.

**Feature** **Description**

|Opportunity/ Allocation|Maximum LTI value was set at 150% of Base Salary Packages. The LTI grant of Performance Rights is calculated by applying the following formula: Number of Performance Rights = Base Package x Maximum LTI% ÷ Right Value NB: The Right Value is the volume weighted average share price of Shares over the 10 trading days following the release of the Company’s FY22 results. The “Maximum LTI %” recognises that the stretch level of Rights will be granted when stretch performance is achieved.|
|---|---|


-----

|Feature|Description|Col3|
|---|---|---|
|Measurement period|The measurement period for the LTI award will now be extended to include tranches which vest after the 3rd and 4th years. For FY23, the LTI award comprises: • Tranche 1 (50% of the total LTI award), which will be tested after three years and be eligible to vest at that time; and • Tranche 2 (50% of the total LTI award), which will be tested after four years and be eligible to vest at that time. In all cases performance is measured over a period commencing from the end of the day of the release of the Company’s full year results (for this award it is the release of the FY22 results) to the end of the day of the release of its results for the relevant year (in this case, it is FY25 and FY26). No component will be subject to re-testing.||
|Performance conditions|Vesting of each tranche of the LTI award is subject to two performance conditions: 1. Gateway Hurdle Vesting of the Performance Rights is subject to an initial gateway hurdle of NEXTDC achieving positive total shareholder return (TSR) over the relevant measurement period for that tranche. If the gateway hurdle is not met, the rights under the EIP automatically lapse even if the TSR Hurdle (described below) is achieved. 2. TSR Hurdle In addition to the Gateway Hurdle, vesting under the EIP is subject to a relative TSR performance condition. The TSR Hurdle is determined by ranking NEXTDC’s TSR over the measurement period for the relevant tranche, relative to the TSR of companies in the ASX 100 Accumulation Index (Index). Vesting of the EIP rights will be determined by reference to the following vesting schedule:||
||NEXTDC’s TSR over the Measurement Period|Percentage of Rights that vest|
||Less than TSR of Index|Nil|
||At TSR of Index|25%|
||Between TSR of Index and TSR of Index + 5%|Pro rata vesting from 25% to 100% on a straight-line basis|
||TSR of Index + 5% or greater|100%|
||The scale requires that the Company deliver a TSR to shareholders that is at least as good as the overall market (as indicated by the TSR of the Index over the measurement period) before any vesting may occur. Full vesting does not become available until the TSR of the Company reaches the TSR of the Index over the measurement period plus 5% p.a. This would, in the view of the Board, represent an outstanding outcome for shareholders. The Committee has again reviewed whether the introduction of a second LTI performance measure is appropriate. For now, it remains their and the Board’s view that an additional measure is not appropriate at NEXTDC’s current stage of development. The Committee regards the continued application of a relative TSR performance measure to be the most effective method for aligning long-term executive performance with shareholder wealth outcomes and will review the appropriateness of the single measure LTI program on an annual basis.||


**Reason for selection** TSR was selected as it recognises the total returns (share price movement and dividends
assuming they are reinvested into Company shares) that accrue to shareholders over the
Measurement Period. This measure creates the most direct alignment between shareholder return
and rewards realised by Senior Executives. The measurement period for assessing TSR
performance is aligned with the release of results to ensure that the share price upon which TSR
is determined at the start and end of the measurement period reflects an informed market.

Market adjusted TSR was selected to ensure that participants do not receive windfall gains from
broad market movements unrelated to the performance of the Senior Executives.

The positive TSR gate ensures that Senior Executives cannot benefit from the LTI Plan when
shareholders have lost value over the Measurement Period. Vesting commences upon NEXTDC’s
TSR matching the Index TSR, with full vesting occurring once NEXTDC’s TSR exceeds the Index
TSR by 5% compound annual growth over the measurement period. This hurdle has been
determined with regard for the historic performance of the ASX 100 Accumulation Index whereby
5% compound annual growth or greater represents upper quartile performance.
This would, in the Board’s view, represent an outstanding outcome for the Company.


-----

|Feature|Description|
|---|---|
|Exercise of vested Incentive Rights|Upon vesting the Board will determine the extent to which their value will be delivered in Shares and/or cash. The Board will also determine whether Shares will be issued or acquired for participants via the Employee Share Trust (EST) and if the EST is used, whether new issues or on-market purchases of Shares will be undertaken by the trustee of the EST. No amount is payable by participants to exercise vested Incentive Rights.|
|Forfeiture and termination|In the event of cessation of employment due to dismissal for cause, all unvested Incentive Rights are forfeited. In the event of cessation of employment due to resignation, all unvested Incentive Rights are forfeited unless otherwise determined by the Board. In the event of cessation of employment due to death, total and permanent disability or redundancy, unvested performance rights will continue on-foot and be subject to the original terms as though employment had not ceased, unless the Board determines otherwise. In any other circumstances the Board has discretion to determine how the unvested Performance Rights will be treated upon cessation of employment with the Company.|
|Board discretion|The Board retains discretion to modify vesting outcomes. Incentive Rights that do not vest will lapse. Board discretion to vary vesting will generally only be applied when the vesting that would otherwise apply is considered by the Board to be inappropriate, and when it would not align with shareholder returns.|
|Change of Control|In circumstances where there is a likely change in the control of NEXTDC, the Board has discretion to determine the level of vesting (if any) having regard to the portion of the measurement period elapsed, performance to date against performance conditions and any other factors it considers appropriate. If an actual change in the control of the Company occurs before the Board can exercise this discretion, unless the Board determines otherwise, unvested Performance Rights will vest and become exercisable in proportion to the Company's performance against the TSR Hurdle up to the date of the change of control.|
|Malus/Claw back Provisions|The Board retains the ability to reduce or apply malus/clawback to awards where the participant has acted fraudulently or dishonestly or is in material breach of their obligations to the Company; or where the Company becomes aware of material misstatements or omissions in the financial statements of the Company; or any circumstances occur that the Board determines to have resulted in an unfair benefit to the recipient.|
|Hedging|The Company prohibits the hedging of Incentive Rights and Restricted Shares by Participants.|


**3.7 Risk Management and Clawback Provisions**

A sound risk management culture is important to NEXTDC. The Company’s STI and LTI Plans have been designed to
protect the Company from the risk of unintended or unjustified pay outcomes by allowing risk factors to be taken into
account over long periods and by way of a variety of measures that are considered key to the Company’s success. For
example:

-  Basing the STI on a number of performance measures, including initial gateway hurdles before any STI is able to be
paid (subject also to malus/clawback provisions)

-  Deferring a component (50%) of STI to ensure alignment with shareholder value and compliance with NEXTDC’s codes of
conduct and corporate governance

-  Distributing remuneration components across both long and short-term performance-based mechanisms to
encourage prudent risk taking in line with the overall objectives of the Company.

While formal shareholding requirements are not imposed for Senior Executives, the CEO has a material holding in
NEXTDC, holding shares and vested performance rights valued at approximately 12 times base salary at 30 June 2023.

Board discretion is applied to the vesting of all STIs and LTIs to ensure any proposed awards are aligned with shareholder
returns. As noted, the Board also retains the ability to reduce or clawback awards in the event of serious misconduct or a
material misstatement in the Company’s financial statements.


-----

**4.** **STI AND LTI PERFORMANCE OUTCOMES FOR FY23**

**4.1 STI Vesting Outcomes**

The Executives performance against the FY23 STI performance measures – as previously described in section 3.5 above are
as follows. The Committee continues to be of the view that they were highly relevant to the Company’s financial performance
and to growing shareholder value. The individual components contributed to the overall composition of the STI award as follows:

FIGURE 7: CALCULATION OF STI OUTCOMES


**Gateway Test**

EBITDA greater than

95% of the midpoint

of the initial guidance

range

Fulfilment of uptime

obligations to

customers


**Maximum STI Value**

STI opportunity of up

to 100% of Base


**Performance Measure**

Group EBITDA

Total Revenue

Major Project Delivery

Operations


**Weighting**

40%

35%

15%

10%


**STI Outcome**

STI outcome is

subject to Board

assessment and

discretion


Upon review of the above performance criteria set for the FY23 STI Program, the Committee has determined that 88% of the
FY23 STI opportunity be awarded to the participants. The FY23 STI outcome was determined by the Committee and approved
by the Board. This outcome strictly reflects the performance against the performance criteria set out for this year’s program.
There has been no further discretion applied to these outcomes.

The individual components of this assessment were as follows:


**Type of**
**performance**




|performance measure and weighting at target|KMP Performance measure|FY23 performance|Level of Achievement (% of Stretch)|
|---|---|---|---|
|Financial 75%|Underlying EBITDA (40%): This percentage was awarded out of a maximum of 40% and was arrived at on the basis that the Company achieved underlying EBITDA of $193.7 million against the initial guidance range of $190 million (50%) to $198 million (100%) for this metric set by the Committee. See section 3.5 for more details on its method of calculation including the minimum EBITDA gateway also set for this metric.|$193.7 million|73%|
||Total Revenue (35%): This percentage was out of a maximum award of 35% and was arrived at on the basis that the Company achieved $362.4 million out of the initial guidance range of $340 million (50%) to $355 million (100%) for this metric set by the Committee. See section 3.5 for details on the method of calculation.|$362.4 million|100%|


-----

**Type of**
**performance**




|performance measure and weighting at target|KMP Performan|nce measure|FY23 performance|Level of Achievement (% of Stretch)|
|---|---|---|---|---|
|Non-Financial 25%|Major Project Delivery (15%):|Major Project 1 (20%): S3 – delivery of Phase 2 on time (50%) and on budget (50%)|Achieved|100%|
|||Major Project 2 (20%): M2 – delivery of Stage 3 MCX tower on time (50%) and on budget (50%)|Achieved|100%|
|||Major Project 3 (20%): M3 - delivery of key client capacity including services and rack ready on time (50%) and on budget (50%)|Achieved|100%|
|||Major Project 4 (10%): SC1 - delivery of rack ready inventory and infrastructure upgraded to NDC standards|Achieved|100%|
|||Major Project 5 (10%): A1 – completion of detailed design and development approvals on time|Achieved|100%|
|||Major Project 6 (10%): D1 - completion of detailed design and development approvals on time|Not achieved|0%|
|||Major Project 7 (5%): B2 - expansion of Data Hall 1 on time (50%) and on budget (50%)|Achieved|100%|
|||Major Project 8 (15%): KL1 - Malaysia – MDEC status conferred, land acquired, and development approvals submitted|Achieved|100%|
||Operational Metrics (10%):|WH&S: achieve LTIFR rate <2.7, and achieve >90% of site safety leadership inspections per executive (2 per executive)|Achieved|100%|
|||PUE: PUE of <1.4 for all facilities commencing at least 60 days prior to the end of the measurement period|Achieved|100%|
|||Team Training: 95% completion of all team training programs focused on diversity, inclusion, safety and social impact|Achieved|100%|


-----

**4.2 LTI Vesting Outcomes**

The measurement period for the FY20 LTI was between 29 August 2019 and 29 August 2022. The vesting condition attached
to the FY20 LTI was based on NEXTDC’s TSR over the measurement period, against the relative performance of the S&P /
ASX 200 Accumulation Index (AXJOA), with vesting percentages to be determined by the following scale, as outlined in the 30
June 2020 Annual Report:

|NEXTDC’s TSR over the Measurement Period|Percentage of Rights that Vest|
|---|---|
|Less than TSR of Index|Nil|
|At TSR of Index|25%|
|Between TSR of Index and TSR of Index + 5%|Pro rata vesting from 25% to 100% on a straight-line basis|
|TSR of Index + 5% or greater|100%|



NEXTDC’s performance against the vesting conditions is summarised below:

Market TSR 5.9%

TSR required to achieve stretch hurdle 10.9%

TSR achieved 18.9%


Based on the above assessment, the stretch target was achieved, and the Board determined that 100% of the LTI granted in
FY20 vested, with rights converting to shares following the release of the FY22 Annual Report.

The measurement period for the FY21 LTI is for approximately a three-year period, beginning from the end of trade on the day
of release of the FY20 results, and ending upon the end of the day of release of the annual results for FY23. The vesting
condition attached to the FY21 LTI is based on NEXTDC’s TSR over the measurement period, against the relative performance
of the S&P / ASX 200 Accumulation Index (Index).

Given vesting is not able to be determined until the end of day of release of the FY23 annual results, the Board will determine
vesting following the release of the FY23 Annual Report.

**5.** **EMPLOYMENT TERMS FOR DIRECTORS AND SENIOR EXECUTIVES**

**5.1 Non-Executive Directors**

Once appointed all Non-Executive Directors enter into a service agreement with the Company in the form of a letter of
appointment. The letter summarises the Board policies and terms, including compensation relevant to the office of the Director.

All current Non-Executive Directors carry an initial contract duration of three years (subject to election and re-election by
shareholders). The employment contracts for the Non-Executive Directors do not carry notice period provisions, nor do they
provide for any termination benefits.

All Directors must retire from office at the third annual general meeting after the Director was last elected and will then be
eligible for re-election. Upon cessation of a Director’s appointment, the Director will be paid his or her Director’s fees on a prorata basis, to the extent that they are unpaid.

The Non-Executive Director Remuneration Policy applies to Non-Executive Directors of the Company in their capacity as
Directors and as members of committees, and may be summarised as follows:

-  Remuneration comprises:

– Board fees
– Committee fees
– Superannuation
– Other benefits
– Securities (if appropriate at the time).

-  Remuneration is managed within the aggregate fee limit (AFL) or fee pool of $1,600,000 which was approved by
shareholders at the FY20 AGM in November 2020.

-  The Non-Executive Director Remuneration Policy contains guidelines on when the Board should seek adjustment to the


-----

-  Remuneration should be reviewed annually.

-  Non-Executive Directors are not entitled to termination benefits.

-  The level of Board Fees (being the fees paid for membership of the Board, inclusive of superannuation and exclusive of
committee fees) will be set with reference to the median of comparable ASX listed companies.

-  Committee fees may be used to recognise additional contributions to the work of the Board by members of committees, but
in a manner that, when combined with Board Fees, will not exceed the 75[th] percentile of comparable ASX listed companies.

-  The Company does not currently provide securities as part of Non-Executive Director remuneration.

In accordance with the Non-Executive Director Remuneration Policy, during FY23 the Remuneration and Nomination
Committee conducted an annual review of Non-Executive Director remuneration. The review was informed by an independent
benchmarking exercise with reference to ASX-listed companies of a similar size as well as recent recruitment benchmarking at
regional management levels in Asia and into privately owned companies in Australia. The benchmarking exercise compared
NXT to companies that are directly comparable in terms of market capitalisation, with 10 larger and 10 smaller than NXT within
the ASX100 index only. In conjunction with the benchmarking exercise, the review also considered other factors such as
surrounding market conditions and sentiment, the trajectory of the Company’s growth, strategic objectives, and the
geographical spread of the Company.

As a result of the review, it was determined that an increase in Non-Executive Director remuneration was warranted, effective
from October 2022.

The rates of fees including superannuation contributions in respect of the 2023 financial year are as follows:

TABLE 3: NON-EXECUTIVE DIRECTOR FEE SCHEDULE

**From July 2022** **From October 2022**

Board Chair $330,000 per annum $430,000 per annum

Non-Executive Director $152,000 per annum $170,000 per annum

Audit and Risk Management Committee Chair $35,000 per annum $40,000 per annum

Remuneration and Nomination Committee Chair $35,000 per annum $40,000 per annum

Investment Committee Chair $35,000 per annum $40,000 per annum

Committee Member $15,000 per annum $17,000 per annum

**Recommended Non-Executive Director Shareholding**

Non-Executive Directors are encouraged to accumulate shares on their own behalf, over a three-year period, of equivalent
value to their average annual Directors’ fees.

**5.2 Senior Executives**

Remuneration and other terms of employment for the Chief Executive Officer and other key management personnel are also
formalised in service agreements.

The CEO’s base salary package has remained consistent at $1.32 million since FY19 noting that effective 1 July 2022 his
salary package saw a minor increase of $1,724 as a result of the Company’s commitment to contribute a 0.5% increase in
Super Guarantee Contribution (SGC). Since his appointment to the role in 2012, the CEO has overseen the Company’s
expansion. Over the last four years, NEXTDC has achieved:

NEXTDC is unique among ASX-listed companies due to its high capital-intensity and growth prospects requiring further capital
to be invested ahead of demonstrable revenues and profits. Most comparable peers are US-based, as is the more comparable
executive talent. The Board considered the Company’s long-term strategy and potential and determined that the CEO’s
remuneration remains appropriate in context of the skills and experience necessary to lead NEXTDC.


-----

Other major provisions of the agreements relating to service agreements are set out below.

TABLE 4: SERVICE AGREEMENTS

**Name** **Duration of Contract** **Notice Period[1]** **Termination Payments[2]**

Craig Scroggie No fixed term 18 months 18 months

Simon Cooper No fixed term 12 months 12 months

Oskar Tomaszewski No fixed term 12 months 12 months

David Dzienciol No fixed term 12 months 12 months

1 Effective 1 July 2022, Craig Scroggie’s notice period has increased from 12 months to 18 months until the end of FY24, at which point it will
revert back to 12 months, with notice periods for all other KMP changed from 6 months to 12 months for this same period as a function of a
one-off 25% bonus paid to KMP and senior executives in FY22.

2 Base salary payable if the Company terminates employees with notice, and without cause (for example, reasons other than unsatisfactory
performance).

**6. STATUTORY REMUNERATION**

**6.1 Senior Executive Remuneration**

The following table outlines the remuneration received or due to be received by Senior Executives of the Company during the
2023 and 2022 financial years and has been prepared in accordance with the Corporations Act and the relevant accounting
standards. The figures provided under the LTI are based on accounting values and do not necessarily reflect actual payments
received during the year.


-----

**6. STATUTORY REMUNERATION (CONTINUED)**

TABLE 5: STATUTORY REMUNERATION

**Name** **Year** **Salary** **Super**
**contri-**
**butions**


**Base Salary Package** **STI** **LTI**


**Subtotal** **STI[2]** **% of TRP** **LTI** **Total**

**remuner-**
**ation**

**package**


**Non-**
**monetary**
**benefits**


**Leave**
**benefits[1]**


Craig Scroggie 2023 1,298,306 25,292 3,674 (63,259) 1,264,013 1,161,458 36% 779,914 3,205,385

Simon Cooper 2023 478,306 25,292 1,837 2,453 507,888 441,907 35% 305,469 1,255,264

Oskar Tomaszewski 2023 478,306 25,292 -  6,132 509,730 441,907 35% 301,554 1,253,191

David Dzienciol 2023 478,306 25,292 -  (8,585) 495,013 441,907 36% 301,554 1,238,474

**Total** **2,733,224** **101,168** **5,511** **(63,259)** **2,776,644** **2,487,179** 36% **1,688,491** **6,952,314**

**Base Salary Package** **STI** **LTI**


**STI[2]** **% of TRP** **LTI** **Total**

**remuner-**
**ation**

**package**


**Name** **Year** **Salary** **Super**

**contri-**
**butions**


**Non-**

**monetary**
**benefits**


**Leave**

**benefits[1]**


**Subtotal** **Special**

**bonus**


Craig Scroggie 2022 1,298,306 23,568 3,585 (3,329) 1,322,130 330,900 1,177,486 33% 740,987 3,571,502

Simon Cooper 2022 478,306 23,568 1,770 19,010 522,653 125,900 447,054 30% 385,170 1,480,777

Oskar Tomaszewski 2022 478,306 23,568 -  19,010 520,883 125,900 447,054 30% 373,705 1,467,542

David Dzienciol 2022 478,306 23,568 -  41,085 542,959 125,900 447,054 30% 373,705 1,489,618

**Total** **2,733,223** **94,272** **5,355** **75,775** **2,908,626** **708,598** **2,518,648** **31%** **1,873,567** **8,009,439**

(1) Leave benefits in the basic package includes the net movement of short-term leave benefits such as annual leave and long-term leave benefits such as long service leave.

(2) 50% of the 2022 and 2023 STI are subject to 12-month deferral (excluding the FY22 special bonus payment), with employees being able to elect whether this is delivered in cash or equity.


-----

**6.2 Non-Executive Director Remuneration**

Statutory Remuneration received by Non-Executive Directors in FY23 and FY22 is disclosed below.

TABLE 6: NON-EXECUTIVE DIRECTOR REMUNERATION

**Name** **Financial year** **Board fees** **Superannuation** **Total**

Douglas Flynn FY23 413,139 25,292 438,431

Dr Gregory J Clark AC FY23 179,825 18,882 198,707

Stuart Davis FY23 199,981 20,998 220,979

Stephen Smith FY23 204,250 -  204,250

Jennifer Lambert FY23 204,463 -  204,463

Dr Eileen Doyle FY23 164,878 17,312 182,190

**Total** **FY23** **1,366,536** **82,484** **1,449,020**

Douglas Flynn FY22 336,432 23,568 360,000

Dr Gregory J Clark AC FY22 165,455 16,545 182,000

Stuart Davis FY22 183,636 18,364 202,000

Stephen Smith FY22 186,292 708 187,000

Jennifer Lambert FY22 187,000 -  187,000

Dr Eileen Doyle FY22 151,818 15,182 167,000

**Total** **FY22** **1,210,633** **74,367** **1,285,000**


-----

**6.3 Changes in Securities Held Due to Remuneration**

TABLE 7: CHANGES IN SECURITIES HELD DUE TO REMUNERATION


**Name** **Instrument** **Balance at**
**start of**
**the year**


**Granted** **Exercised** **Lapsed** **Balance at end**
**of the year**


Craig Scroggie Performance Rights 1,104,755 196,768 -  -  1,301,523

Simon Cooper Performance Rights 412,934 74,864 -  -  487,798

Simon Cooper Deferred Rights 57,467 22,153 -  -  79,620

Oskar Tomaszewski Performance Rights 397,801 74,864 -  -  472,665

David Dzienciol Performance Rights 312,901 74,864 -  -  387,765

David Dzienciol Deferred Rights 38,192 22,153 -  -  60,345


-----

Performance Rights

The following table details performance rights that have been provided to key management personnel.

TABLE 8: PERFORMANCE RIGHTS PROVIDED TO KEY MANAGEMENT PERSONNEL


**Name** **Financial**

**Year**
**Granted**


**Number of**

**Performance**

**Rights**


**Vested during**

**the year**


**Exercised**

**during the**

**year**


**Vested and**

**exercisable**
**at the end of**

**the year**


**Unvested at**

**the end of the**

**year**


Craig Scroggie 2017 223,325 -  -  223,325 - 

2018 194,987 -  -  194,987 - 

2019 208,202 -  -  208,202 - 

2020 216,393 216,393 -  216,393 - 

2021 113,989 -  -  -  113,989

2022 147,859 -  -  -  147,859

2023 196,768 -  -  -  196,768

**1,301,523** **216,393** **-** **842,907** **458,616**

Simon Cooper 2017 83,747 -  -  83,747 - 

2018 73,121 -  -  73,121 - 

2019 77,287 -  -  77,287 - 

2020 80,328 80,328 -  80,328 - 

2021 42,314 -  -  -  42,314

2022 56,137 -  -  -  56,137

2023 74,864 -  -  -  74,864

**487,798** **80,328** **-** **314,483** **173,315**

Oskar Tomaszewski 2017 80,025 -  -  80,025 - 

2018 69,871 -  -  69,871 - 

2019 74,132 -  -  74,132 - 

2020 77,049 77,049 -  77,049 - 

2021 40,587 -  -  -  40,587

2022 56,137 -  -  -  56,137

2023 74,864 -  -  -  74,864

**472,665** **77,049** **-** **301,077** **171,588**

David Dzienciol 2018 64,996 -  -  64,996 - 

2019 74,132 -  -  74,132 - 

2020 77,049 77,049 -  77,049 - 

2021 40,587 -  -  -  40,587

2022 56,137 -  -  -  56,137

2023 74,864 -  -  -  74,864

**387,765** **77,049** **-** **216,177** **171,588**


-----

The fair values of each performance right at grant date are as follows:

|Financial year granted|Fair value at grant date|
|---|---|
|2017|$1.63|
|2018|$3.32|
|2019|$3.07|
|2020|$4.61#|
|2021|$6.80#|
|2022|$6.09|
|2023|$4.83|



# Except for Craig Scroggie whose rights were granted at a fair value of $6.02 in 2021 (2020: $3.30)


-----

Deferred Rights

The following table details deferred rights that have been provided to those key management personnel who elected to
receive the deferred component of their STI in shares rather than cash.

TABLE 9: DEFERRED RIGHTS PROVIDED TO KEY MANAGEMENT PERSONNEL


**Name** **Financial**

**Year**
**Granted**


**Vested during**

**the year**


**Number of**

**Deferred Share**

**Rights**


**Exercised**

**during the**

**year**


**Vested and**

**exercisable at**

**the end of the**

**year**


**Unvested at**

**the end of the**

**year**


Simon Cooper 2019 18,347 -  -  18,347 - 

2020 6,899 -  -  6,899 - 

2021 15,867 -  -  15,867 - 

2022 16,354 16,354 -  16,354 - 

2023 22,153 -  -  -  22,153

**79,620** **16,354** **-** **57,467** **22,153**

David Dzienciol 2020 6,618 -  -  6,618 - 

2021 15,220 -  -  15,220 - 

2022 16,354 16,354 -  16,354 - 

2023 22,153 -  -  -  22,153

**60,345** **16,354** **-** **38,192** **22,153**

The fair value of the deferred rights at grant date is as follows:

**Financial year granted** **Fair value at grant date**

|2019|$6.34|
|---|---|
|2020|$6.10|
|2021|$11.58|
|2022|$13.41|
|2023|$10.09|



Deferred rights under the Senior Executive STI Plan are granted following release of the annual results. The shares vest one
year from the grant date. On vesting, each right automatically converts into one ordinary share. Senior Executives do not
receive any dividends and are not entitled to vote in relation to the rights during the vesting period. If a Senior Executive ceases
employment before the rights vest, they have six months from the cessation of employment or the vesting date, whichever is
later, to exercise their deferred rights. Any rights not exercised in this period will automatically lapse.

The fair value of the rights is determined based on the volume weighted average trading price of the Company’s shares over
the 10 trading days following release of the Company’s annual results.


-----

**6.4 Director and Senior Executive Shareholdings**

During FY23, KMP and their related parties held shares in NEXTDC directly, indirectly or beneficially as follows:

TABLE 10: DIRECTOR AND SENIOR EXECUTIVE SHAREHOLDINGS


**Received**
**during the**
**year on the**
**exercise of**
**an option**
**or right**


**Shares**

**held**
**nominally**
**at 30 June**

**2023**


**Received**
**during the**
**year as**
**compensation**


**Other**
**changes**


**Closing**
**balance**


**Opening**
**balance**


**Holder**

**DIRECTORS**


Douglas Flynn 160,223 -  -  20,029 180,252 180,252

Dr Gregory J Clark AC 66,048 -  -  8,062 74,110 74,110

Stuart Davis 38,160 -  -  4,770 42,930 42,930

Stephen Smith -  -  -  -  -  - 

Jennifer Lambert 24,000 -  -  4,000 28,000 28,000

Dr Eileen Doyle 13,800 -  -  3,450 17,250 17,250

**SENIOR EXECUTIVES**

Craig Scroggie 389,191 -  -  53,500 442,691 435,511

Simon Cooper 150,341 -  -  (10,000) 140,341 14,846

Oskar Tomaszewski 75,610 -  -  831 76,441 - 

David Dzienciol 30,968 -  -  7,656 38,624 - 

The Non-Executive Directors of the Company did not receive any shares in NEXTDC on behalf of the Company in respect of
the 2022 and 2023 financial reporting periods.

Loans to Directors and Executives

There were no loans to Directors or other key management personnel at any time during the year.


-----

**6.5 Remuneration Received (Non-statutory)**

**Remuneration received in FY23**

The amounts disclosed below as Senior Executive remuneration for FY23 reflect the actual benefits received by each Senior
Executive during the reporting period. The remuneration values disclosed have been determined as follows:

_Fixed remuneration_
Fixed remuneration includes base salaries received, paid leave, payments made to superannuation funds, and the taxable
value of non-monetary benefits received, and excludes any accruals of annual or long service leave.

_Short-term incentives_
Awarded STI represents bonuses that were awarded to each Senior Executive in relation to FY23 performance, 50% of
which will be paid in FY24. 50% of the STI bonuses awarded are deferred for 12 months, with employees being able to elect
whether the award will be delivered in cash or equity. Deferred STI represents the remaining 50% of the FY23 STI that is
expected to vest in FY24.

_Long term incentives_
The value of vested rights was determined based on the intrinsic value of the rights at the date of vesting, being the difference
between the share price on that date, and the exercise price payable by the Senior Executive. The performance rights that
vested in FY23 were granted in 2020.

TABLE 11: REMUNERATION RECEIVED IN FY23


**Awarded STI**

**(cash)**


**Deferred**

**STI**

**(cash or**

**equity)**


**Name** **Fixed**
**Remuneration**


**Vested**

**LTI**


**Total Value**


Craig Scroggie 1,327,273 580,729 580,729 2,012,455 4,501,186

Simon Cooper 505,435 220,954 220,954 747,050 1,694,393

Oskar Tomaszewski 503,598 220,954 220,954 716,556 1,662,062

David Dzienciol 503,598 220,954 220,954 716,556 1,662,062

**Total** **2,839,904** **1,243,591** **1,243,591** **4,192,617** **9,519,703**

The amounts disclosed above are not the same as the remuneration expensed in relation to each KMP in accordance with
accounting standards. The Directors believe that the remuneration received is more relevant to users for the following reasons:

-  The statutory remuneration expensed is based on historic cost and does not reflect the value of the equity instruments
when they are actually received by the Senior Executives

-  The statutory remuneration shows benefits before they are actually received by the Senior Executives

-  Where rights do not vest because a market-based performance condition is not satisfied (e.g. TSR), the Company must
still recognise the full amount of expenses even though the Senior Executives will never receive any benefits.

-  Share based payment awards are treated differently under the accounting standards depending on whether the
performance conditions are market conditions (no reversal of expense) or non-market conditions (reversal of expense
when shares fail to vest), even though the benefit received by the Senior Executives is the same (nil where equity
instruments fail to vest).

The information in this section has been audited together with the rest of the remuneration report.


-----

Audit and non-audit services

Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers Australia) for audit and non-audit services during
the year are disclosed in Note 24 Remuneration of auditors.

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and/or the group are important.

The board of directors, in accordance with advice provided by the Audit and Risk Management Committee, is satisfied that the
provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor did not compromise the
auditor independence requirements of the Corporations Act 2001 for the following reasons:

-  all non-audit services have been reviewed by the Audit and Risk Management Committee to ensure they do not
impact the impartiality and objectivity of the auditor, and

-  none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants.

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out
on page 60.

Auditor

PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001. This report

is made in accordance with a resolution of the Directors.

**Craig Scroggie**
**Managing Director and Chief Executive Officer**

28 August 2023


-----

Auditor’s Independence Declaration


Auditor’s Independence Declaration

As lead auditor for the audit of NEXTDC Limited for the year ended 30 June 2023, I declare that to the
best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and

(b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of NEXTDC Limited and the entities it controlled during the period.

Michael Shewan Brisbane

Partner 28 August 2023
PricewaterhouseCoopers

PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.


-----

Corporate Governance Statement

NEXTDC has established a strong governance framework that defines the roles and
responsibilities of NEXTDC’s Board, management team, employees and suppliers.

NEXTDC continues to be committed to the highest levels of integrity and ethical standards in all its business
practices, recognising that effective and transparent corporate governance is critical to its success. The framework
continues to evolve as we seek continual improvements in the way we conduct the business.

The Corporate Governance Statement has been approved by the Board and fully supports the intent of the Australian
Securities Exchange (“ASX”) Corporate Governance Council’s new 4th edition of Corporate Governance Principles and
Recommendations (“4th Edition Governance Principles”). NEXTDC meets all the requirements of 4th Edition
Governance Principles.

This Statement describes NEXTDC’s key governance practices and articulates how decision‑making is guided to meet
stakeholder expectations of sound corporate governance, acknowledging the Company’s specific and broader
responsibilities to its shareholders, customers, suppliers, employees, and the communities in which it operates.

At NEXTDC, corporate governance is an essential element of how we operate. It refers to the overarching monitoring
and reporting of the Company’s business operations and is the combination of processes implemented and monitored
by the Board and the Executive team to direct, manage and scrutinise NEXTDC’s activities.

We aim to maintain and build on our relationships with our shareholders, customers, suppliers, team members, and
the broader community to achieve our vision of becoming Australia’s most trusted data centre provider. We are
focused on operating in a socially responsible and ethical manner, and meeting the highest standards of integrity and
cultural sensitivity whilst adhering to clear corporate governance standards.

NEXTDC’s values are anchored in its Corporate Social Responsibility (CSR) policies, which are the guiding principles in
our Corporate Governance Program. This includes:

-  a solid risk management framework, complete with internal controls

-  procedures as well as operational processes such as, for example, our policies relating to team members’ conduct,
training and operational standards and our dealings with shareholders and the ASX

-  a regular reporting cadence to the Board and CXO team to enable them to manage, monitor and report on
NEXTDC’s performance and its risk management; and

-  regular internal audits based on best practice standards to independently verify the effectiveness of corporate
governance, risks management and internal control processes to identify and manage operational gaps.

NEXTDC’s Corporate Governance Framework continues to evolve
as we continue to foster trust, attract investors, inspire employee
confidence and maintain our reputation and value in the market.
Further details on how NEXTDC’s Corporate Governance aligns with
the 4th Edition Governance Principles can be found in the Company’s
FY23 Corporate Governance Statement and Appendix 4G available at
[https://www.nextdc.com/investor-centre/corporate-governance.](http://www.nextdc.com/investor-centre/corporate-governance)


Read the statement


.


-----

Financial Report

**NEXTDC Limited**
ABN 35 143 582 521
**Financial report**
**for the year ended 30 June 2023**


-----

**Financial Report**

These financial statements are the consolidated financial statements of the consolidated entity consisting of
NEXTDC Limited (ABN 35 143 582 521) and its subsidiaries. A list of major subsidiaries is included in note 25.
NEXTDC Limited is a company limited by shares, incorporated and domiciled in Australia. The financial
statements are presented in the Australian currency.

NEXTDC’s registered office is:
20 Wharf St Brisbane QLD 4000

A description of the nature of the consolidated entity's operations and its principal activities is included in the
Directors' Report, which is not part of these financial statements.

The financial statements were authorised for issue by the Directors on 28 August 2023.

The Directors have the power to amend and reissue the financial statements.

Consolidated Statement of Comprehensive Income 64
Consolidated Balance Sheet 65
Consolidated Statement of Changes in Equity 66
Consolidated Statement of Cash Flows 67
Notes to the Consolidated Financial Report 68
Directors' Declaration 114
Independent Auditor's Report to the Members 115
Shareholder information 121
Corporate directory 123


-----

Consolidated Statement of Comprehensive Income
For the year ended 30 June 2023


30 June
2022
$'000


**30 June**
**2023**
**$'000**


Note


**REVENUE FROM CONTINUING OPERATIONS**
Revenue from contracts with customers 4 **362,369** 291,044

**OTHER INCOME**
Other income 4 **11,806** 2,686

**EXPENSES**
Direct costs **(82,998)** (43,520)
Employee benefits expense **(43,484)** (44,407)
Data centre facility costs **(22,099)** (16,890)
Depreciation and amortisation expense **(137,870)** (106,853)
Professional fees **(6,682)** (3,513)
Marketing costs **(1,908)** (1,148)
Office and administrative expenses **(17,324)** (19,988)
Finance costs 5 **(78,988)** (49,269)
Share of loss on investment in associate **(4,262)** (1,879)
Impairment of investment in associate **(1,799)** (7,921)
**Profit/(loss) before income tax** **(23,239)** **(1,658)**

Income tax benefit/(expense) 21 **(2,402)** 10,797
**Profit/(loss) after income tax** **(25,641)** **9,139**

**PROFIT/(LOSS) IS ATTRIBUTABLE TO:**
Owners of NEXTDC Limited **(25,641)** **9,139**

**OTHER COMPREHENSIVE INCOME**
_Items that may be reclassified to profit or loss_ **-** - 

Gain/(loss) on cash flow hedges **16,135** 33,421
Exchange differences on translation of foreign operations **(3,061)** 368
Costs of hedging **(734)** (640)
Hedging gain/(loss) reclassified to profit or loss **(17,625)** 3,235
Income tax relating to these items **759** (10,797)
**Total comprehensive income/(expense)** **(30,167)** **34,726**

Attributable to:
Owners of NEXTDC Limited **(30,167)** **34,726**

**Cents** Cents

**EARNINGS/(LOSS) PER SHARE FOR PROFIT/(LOSS)**
**ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE**
**GROUP:**
Basic earnings/(loss) per share 3 **(5.55)** 2.00
Diluted earnings/(loss) per share 3 **(5.55)** 1.99

The notes following the financial statements form part of the financial report.


-----

Consolidated Balance Sheet
As at 30 June 2023


**30 June**
**2023**
**$'000**


30 June
2022
$'000


Note


**ASSETS**
**CURRENT ASSETS**
Cash and cash equivalents **765,841** 456,562
Trade and other receivables 6 **54,186** 44,335
Derivative financial instruments 14(a) **8,727** 6,449
Other assets 7 **24,500** 20,356
**Total current assets** **853,254** **527,702**

**NON-CURRENT ASSETS**
Property, plant and equipment 9 **2,894,900** 2,359,059
Other assets 7 **18,565** 14,168
Intangible assets 10 **51,979** 38,218
Investment in associates 25(b) **6,271** 8,315
Derivative financial instruments 14(a) **25,030** 29,539
**Total non-current assets** **2,996,745** **2,449,299**

**TOTAL ASSETS** **3,849,999** **2,977,001**

**LIABILITIES**
**CURRENT LIABILITIES**
Trade and other payables 8 **72,537** 81,606
Lease liabilities 11 **6,681** 6,232
Revenue received in advance **12,548** 16,495
**Total current liabilities** **91,766** **104,333**

**NON-CURRENT LIABILITIES**
Provisions **1,384** 1,035
Revenue received in advance **44,839** 43,715
Borrowings 15 **1,365,429** 1,058,762
Lease liabilities 11 **69,963** 70,628
**Total non-current liabilities** **1,481,615** **1,174,140**

**TOTAL LIABILITIES** **1,573,381** **1,278,473**

**NET ASSETS** **2,276,618** **1,698,528**

**EQUITY**
Contributed equity 13 **2,371,154** 1,762,663
Reserves **28,965** 33,725
Accumulated losses **(123,501)** (97,860)

**TOTAL EQUITY** **2,276,618** **1,698,528**

The notes following the financial statements form part of the financial report.


-----

Consolidated Statement of Changes in Equity
For the year ended 30 June 2023


**Contributed**
**equity**
**$'000**


**Reserves**

**$'000**


**Accumulated**
**losses**
**$'000**


**Total**
**equity**
**$'000**


Note


**Balance at 1 July 2021** **1,759,777** **7,693** **(107,012)** **1,660,458**

Profit/(loss) for the year -  -  9,139 9,139
Other comprehensive income -  25,574 13 25,587
Total comprehensive income **-** **25,574** **9,152** **34,726**

**TRANSACTIONS WITH OWNERS IN THEIR**
**CAPACITY AS OWNERS:**
Contributions of equity, net of transaction costs and
tax 13(b) (26) -  -  (26)
Share based payments - conversion of rights to
shares 2,912 (2,912) -  - 
Share based payments - value of employee services -  3,370 -  3,370
**Balance at 30 June 2022** **1,762,663** **33,725** **(97,860) 1,698,528**


**Contributed**
**equity**

Note **$'000**


**Reserves**

**$'000**


**Accumulated**
**losses**
**$'000**


**Total**
**equity**
**$'000**


**Balance at 1 July 2022** **1,762,663** **33,725** **(97,860) 1,698,528**

Profit/(loss) for the year -  -  (25,641) (25,641)
Other comprehensive loss -  (4,526) -  (4,526)
Total comprehensive loss **-** **(4,526)** **(25,641)** **(30,167)**

**TRANSACTIONS WITH OWNERS IN THEIR**
**CAPACITY AS OWNERS:**
Contributions of equity, net of transaction costs and tax 13(b) 604,778 -  -  604,778
Share based payments - conversion of rights to shares 13(b) 3,713 (3,713) -  - 
Share based payments - value of employee services -  3,479 -  3,479
**Balance at 30 June 2023** **2,371,154** **28,965** **(123,501) 2,276,618**

The notes following the financial statements form part of the financial report.


-----

Consolidated Statement of Cash Flows
For the year ended 30 June 2023


**30 June**
**2023**
**$'000**


30 June
2022
$'000


Note


**OPERATING ACTIVITIES**
Receipts from customers (inclusive of GST) **383,895** 314,239
Payments to suppliers and employees (inclusive of GST) **(209,462)** (151,291)
**174,433** 162,948
Interest paid **(57,949)** (42,308)
(Payments for)/proceeds from bank guarantees **(315)** (4,867)
Interest received **10,303** 1,403
**Net cash inflow from operating activities** 23(a) **126,472** **117,176**

**INVESTING ACTIVITIES**
Payments for property, plant and equipment **(683,729)** (564,022)
Payments for intangible assets **(22,270)** (17,819)
Payments for investment in associate **(4,017)** (18,088)
**Net cash (outflow) from investing activities** **(710,016)** **(599,929)**

**FINANCING ACTIVITIES**
Proceeds from borrowings **300,000** 300,000
Transaction costs in relation to loans and borrowings **(8,952)** (12,089)
Proceeds from issues of shares and other equity securities 13(b) **617,942** - 
Transaction costs paid in relation to issue of shares 13(b) **(14,807)** (26)
Principal elements of lease payments **(1,124)** (904)
**Net cash inflow from financing activities** **893,059** **286,981**

**Net increase/(decrease) in cash and cash equivalents** **309,515** (195,772)
Cash and cash equivalents at the beginning of the year **456,562** 652,334
Effects of exchange rate changes on cash and cash equivalents **(236)** - 
**Cash and cash equivalents at the end of the year** **765,841** **456,562**

The notes following the financial statements form part of the financial report.


-----

Notes to the Consolidated Financial Report
30 June 2023

**Contents of the notes to the consolidated financial report**

Page

1 Basis of preparation 69

**BUSINESS PERFORMANCE** 71

2 Segment performance 71

3 Earnings/(loss) per share 73

4 Revenue and other income 74

5 Expenses 76

**OPERATING ASSETS AND LIABILITIES** 77

6 Trade and other receivables 77

7 Other assets 78

8 Trade and other payables 79

9 Property, plant and equipment 80

10 Intangible assets 82

11 Leases 84

**CAPITAL AND FINANCIAL RISK MANAGEMENT** 86

12 Capital risk management 86

13 Contributed equity 86

14 Financial risk management 89

15 Borrowings 95

**ITEMS NOT RECOGNISED** 96

16 Commitments 96

17 Contingencies 96

18 Events occurring after the reporting period 96

**EMPLOYEE REMUNERATION** 97

19 Key management personnel 97

20 Share-based payments 97

**OTHER** 99

21 Income tax 99

22 Deferred tax 101

23 Cash flow information 102

24 Remuneration of auditors 103

25 Interests in other entities 104

26 Parent entity financial information 106

27 Summary of significant accounting policies 107


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**1** **Basis of preparation**

The 2023 financial statements notes have been grouped into the following sections:

-  Section 1 Business performance

-  Section 2 Operating assets and liabilities

-  Section 3 Capital and financial risk management

-  Section 4 Items not recognised

-  Section 5 Employee remuneration

-  Section 6 Other

Each section sets out the accounting policies applied along with details of any key judgements and estimates
made or information required to understand the note.

NEXTDC Limited (the Company) is domiciled in Australia. The registered office is 20 Wharf St, Brisbane QLD
4000.

The nature of the operations and principal activities of the Company and its controlled entities (referred to as ‘the
Group’) are described in the Segment information.

The consolidated general purpose financial statements of the Group for the year ended 30 June 2023 were
authorised for issue in accordance with a resolution of the Directors on 28 August 2023.

The financial statements:

-  Have been prepared in accordance with the requirements of the Corporations Act 2001 (Cth), Australian
Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board
(AASB) and International Financial Reporting Standards as issued by the International Accounting Standards
Board

-  Have been prepared on an historical cost basis, except for derivatives measured at fair value

-  Are presented in Australian dollars and, unless otherwise stated, all values have been rounded to the nearest
thousand dollars ($'000) under the option available under the Australian Securities and Investments Commission
(ASIC) Corporations (Rounding in Financial/Directors' Report) Instrument 2016/191

-  Present reclassified comparative information where required for consistency with the current year’s presentation

-  Adopt all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to
the operations of the Group and effective for reporting periods beginning on or after 1 July 2022

-  Do not early adopt any other Accounting Standards and Interpretations that have been issued or amended but
are not yet effective.

**(a) Principles of consolidation and equity accounting**

_(i)_ _Associates_
Associates are all entities over which the Group has significant influence but not control or joint control. This is
generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting (see (ii) below), after initially being recognised at cost.

_(ii) Equity method_
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to
recognise the Group's share of the post-acquisition profits or losses of the investee in profit or loss, and the
Group's share of movements in other comprehensive income of the investee in other comprehensive income.
Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying
amount of the investment.

Where the Group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity,
including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the other entity.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**(a) Principles of consolidation and equity accounting (continued)**

_(ii) Equity method (continued)_
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the
extent of the Group's interest in these entities. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of equity-accounted investees
have been changed where necessary to ensure consistency with the policies adopted by the Group.

The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy
described in note 27(g).


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**Business performance**

**2** **Segment performance**

**(a) Description of segments**

Management considers the business from a geographic perspective and has identified five reportable segments,
being each geography where the Group operates data centre facilities and the last capturing financial information
from operations that do not naturally fit into any particular geography. As these segments do not exist as a
separate legal entity, information such as income tax expense and segment liabilities are not prepared and
provided to management for review and therefore not presented.

During the year, management reassessed the basis for grouping its operating segments into reportable
segments. As a result of a change in the way chief operating decision makers review information, management
has determined that Queensland (Qld) and Western Australia (WA), along with South Australia and Northern
Territory, should be combined in to one reportable segment (Rest of Australia) effective 1 July 2022. The Other
segment also no longer includes any international operations, as these are now presented as a distinct
International segment. Comparative information has also been combined to reflect this change.

**(b) Segment information provided to management**

The segment information provided to management for the reportable segments is as follows:

**Rest of** **Inter-**
**30 June 2023** **Vic NSW/ACT** **Australia** **national** **Other** **Total**
$'000 $'000 $'000 $'000 $'000 $'000

Revenue from external customers 117,404 182,915 58,644 144 3,262 362,369
Direct and facility costs (26,712) (64,132) (13,581) (68) (604) (105,097)
Employee benefits expense (4,403) (5,003) (3,927) (822) (122) (14,277)
Other expenses (159) (1,049) (242) (1,359) (482) (3,291)
**Segment EBITDA** **86,130** **112,731** **40,894** **(2,105)** **2,054** **239,704**

Segment assets 987,949 1,323,155 492,905 77,470 -  2,881,479
Unallocated assets -  -  -  -  968,520 968,520
**Total segment assets** **987,949 1,323,155** **492,905** **77,470** **968,520 3,849,999**

(1,105,353)(1,506,070) (551,549) (77,614) (971,782)(4,212,368)

**Rest of** **Inter-**
**30 June 2022** **Vic NSW/ACT** **Australia** **national** **Other** **Total**
$'000 $'000 $'000 $'000 $'000 $'000

Revenue from external customers 101,870 135,614 50,890 -  2,670 291,044
Direct and facility costs (16,769) (33,044) (9,210) -  (1,387) (60,410)
Employee benefits expense (3,054) (3,687) (3,555) (313) (323) (10,932)
Other expenses (198) (376) (189) (2,006) (920) (3,689)
**Segment EBITDA** **81,849** **98,507** **37,936** **(2,319)** **40** **216,013**

Segment assets 770,871 1,060,964 405,912 3,964 -  2,241,711
Unallocated assets -  -  -  -  735,290 735,290
**Total segment assets** **770,871 1,060,964** **405,912** **3,964** **735,290 2,977,001**

(852,720)(1,159,471) (443,848) (1,645) (735,330)(3,193,014)

There was no impairment charge or other significant non-cash item recognised in relation to the above segments
in 2023 (2022: nil).


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**2** **Segment performance (continued)**

**(c) Other segment information**

_(i)_ _Profit/(loss) before tax_
Management assesses the performance of the operating segments based on a measure of EBITDA. Interest
income and expenditure are not allocated to segments, as this type of activity is driven by the central treasury
function, which manages the cash position of the Group.


A reconciliation of profit/(loss) before income tax is provided as follows:
**30 June**
**2023**
**$'000**


30 June
2022
$'000


Total segment EBITDA **239,704** 216,013
Employee benefits expense (non-facility staff) **(29,207)** (33,475)
Investment in associate **(6,061)** (9,800)
Other income **11,806** 2,686
Finance costs **(78,988)** (49,269)
Depreciation and amortisation expense **(137,870)** (106,853)
Overheads and other expenses **(22,623)** (20,960)
**Profit/(loss) before tax** **(23,239)** **(1,658)**


A reconciliation of depreciation and amortisation is provided as follows:
**30 June**
**2023**
**$'000**


30 June
2022
$'000


Segment depreciation and amortisation expense **126,113** 95,851
Head office depreciation and amortisation expense **11,757** 11,002
**Total depreciation and amortisation expense** **137,870** **106,853**

_(ii) Segment liabilities_
As noted above, the segment liabilities for each operating segment are not required by executive management
for purposes of their decision making. As such, these are not provided to management and not categorised.

**(d) Segment reporting**

Operating segments are reported in a manner consistent with the internal reporting provided to the executive
management team. The executive management team is responsible for allocating resources and assessing
performance of the operating segments. The executive management team is the chief operating decision making
body and consists of the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and Chief
Customer and Commercial Officer.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**3** **Earnings/(loss) per share**

**(a) Earnings/(loss) per share**


**30 June**
**2023**
**Cents**


30 June
2022
Cents


Total basic EPS attributable to the ordinary equity holders of the Group **(5.55)** 2.00

**(b) Diluted earnings/(loss) per share**

Total diluted EPS attributable to the ordinary equity holders of the Group **(5.55)** 1.99

**(c) Reconciliation of earnings/(loss) used in calculating earnings per share**


**30 June**
**2023**
**$'000**


30 June
2022
$'000


**BASIC EARNINGS/(LOSS) PER SHARE**
Profit/(loss) attributable to equity holders of the Group used in calculating basic
EPS:
**Profit/(loss) used in calculating basic earnings/(loss) per share** **(25,641)** **9,139**

**DILUTED EARNINGS/(LOSS) PER SHARE**
Profit/(loss) from continuing operations attributable to the equity holders of the
Group:
Used in calculating diluted earnings/(loss) per share **(25,641)** **9,139**
**Profit/(loss) attributable to the equity holders of the Group used in**
**calculating diluted EPS** **(25,641)** **9,139**

**(d) Weighted average number of shares used as the denominator**


**2023**
**Number of**
**shares**


2022
Number of
shares


Weighted average number of ordinary shares used as the denominator in
calculation basic earnings/(loss) per share **462,337,135** 456,477,169
Plus potential ordinary shares **-** 2,501,174
Weighted average number of ordinary shares and potential ordinary shares used
as the denominator in calculating diluted earnings/(loss) per share **462,337,135** **458,978,343**

**(e) Information concerning the classification of securities**

_(i)_ _Performance rights and deferred rights_
The number of performance rights and deferred rights included in the diluted earnings per share calculation is
based on the number of shares that would be issuable if the end of the period were the end of the vesting period.
However, they are not included in the calculation where the inclusion would result in a decreased loss per share
or increased earnings per share.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**3** **Earnings/(loss) per share (continued)**
**(f)** **Earnings/(loss) per share**

_(i)_ _Basic earnings/(loss) per share_

-  the profit/(loss) attributable to owners of the Group, excluding any costs of servicing equity other than
ordinary shares

-  by the weighted average number of ordinary shares outstanding during the financial year.

_(ii) Diluted earnings/(loss) per share_
Diluted earnings/(loss) per share adjusts the figures used in the determination of basic earnings per share to take
into account the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.

**4** **Revenue and other income**


**30 June**
**2023**
**$'000**


30 June
2022
$'000


**FROM CONTINUING OPERATIONS**
Data centre services revenue **357,179** 290,000
Rental revenue from landbank properties **5,190** 1,044
**Total revenue from contracts with customers** **362,369** **291,044**

Interest income **10,969** 1,757
Other items included in gains **837** 929
**Total other income** **11,806** 2,686

space

**(a) Revenue recognised in relation to contract liabilities**

The following table shows how much of the revenue recognised in the current reporting period relates to
carried-forward revenue received in advance.
**30 June** 30 June
**2023** 2022
**$'000** $'000

_Revenue recognised that was included in the contract liability balance at the_
_beginning of the year_
Data centre services revenue **9,754** 8,863


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**4** **Revenue and other income (continued)**

**(b) Revenue recognition**

AASB 15 establishes principles for reporting the nature, amount, timing, and uncertainty of revenue and cash
flows arising from an entity’s contracts with customers and requires application of a five-step process to identify
the contract with the customer, identify performance obligations in the contract, determine transaction price,
allocate the transaction price to the performance obligations and recognise revenue when performance
obligations are satisfied.

Revenue is recognised for the major business activities as follows:

_(i)_ _Data centre services_
Data centre services revenue primarily consist of recurring monthly service fees and upfront project fees.

Revenue from the provision of recurring monthly service fees is recognised in the accounting period in which the
services are rendered. Project fees primarily comprise installation services relating to a customer’s initial
deployment. As this is not considered to be a distinct service, revenue is deferred and recognised over the term
of the contract with the customer, taking into account renewal options that are held by the customer.

The Group applies the practical expedient in the revenue standard and does not disclose information about the
transaction price allocated to remaining performance obligations on contracts that are unsatisfied, as the Group
has the right to consideration from its customers in an amount that corresponds directly with the value to the
customer of the Group’s services to date. This is applied to all its data centre services revenue, on the basis that
the upfront project fees are not a significant portion of each contract.

The Group enters into contracts with customers that guarantee certain performance measures such as uptime
and on time delivery of services. If these guarantees of service performance are not achieved, the Group reduces
revenue for any credits or cash payments that may be due to customers under contract. Key areas of estimation
include the amount of the service credits, the likelihood that the service credits will be claimed, and the time
period over which they impact revenue.

Customer incentives provided by way of upfront discounts are contract assets that are amortised via a reduction
in revenue over the expected contract life - refer to note 7(c).

_(ii) Rental revenue from landbank properties_
Rental revenue from landbank properties relates to rental revenue received from short term tenants occupying
properties purchased for future expansion activities.

_(iii) Interest income_
Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial
asset, except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets,
the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss
allowance).


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**5** **Expenses**

**(a) Finance costs**

The Group has identified a number of significant expense items below that impacted financial performance for the
year:
**30 June** 30 June
**2023** 2022
**$'000** $'000

Costs on extinguishment of loans **-** (23,290)
Modification gain **-** 26,481
Interest expense and finance charges **(73,446)** (46,923)
Interest expense on lease liabilities **(5,542)** (5,537)

**Total** **(78,988)** (49,269)

During the year ended 30 June 2022, NEXTDC completed an amendment to its existing Senior Debt Facilities.
The refinance was deemed a modification of the original facility, and a modification gain of $26.5 million was
recognised immediately in profit and loss. Establishment fees of $23.3 million were written off on these facilities in
the prior year.

Refer to note 15 for details on borrowings and note 11 for details on interest expense on lease liabilities for the
year.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**Operating assets and liabilities**

**6** **Trade and other receivables**


**30 June**
**2023**
**$'000**


30 June
2022
$'000


Note


Trade receivables 6(a) **47,073** 31,964
Loss allowance 14(c) **(1,873)** (2,467)
**45,200** **29,497**

Interest receivable 6(b) **1,152** 486
GST receivable **2,223** 3,321
Other receivables **5,611** 11,031
**Total** **54,186** **44,335**

**(a) Trade receivables**

_(i) Classification as trade receivables_

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course
of business. They are generally due for settlement within 30 - 60 days and therefore are all classified as current.
Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain
significant financing components, when they are recognised at fair value. The Group holds the trade receivables
with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised
cost using the effective interest method.

_(ii) Fair values of trade and other receivables_

Due to the short-term nature of the trade and other receivables, their carrying amount is considered to be the
same as their fair value.

_(iii) Impairment and risk exposure_

Information about the Group's impairment policies, calculation of loss allowance and exposure to credit risk,
foreign currency risk and interest rate risk can be found in note 14.

**(b) Interest receivable**

Interest receivable relates to interest accrued on term deposits. Credit risk of this is assessed in the same
manner as cash and cash equivalents which is detailed in note 14.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**7** **Other assets**


30 June
2022
$'000


**30 June**
**2023**
**$'000**


**CURRENT**
Prepayments **6,314** 4,562
Capitalised transaction costs 7(a) **2,430** 732
Security deposits 7(b) **9,665** 10,943
Customer incentives 7(c) **4,260** 2,629
Other current assets **1,100** 869
Contract costs 7(d) **731** 621
**Total other assets - current** **24,500** **20,356**


30 June
2022
$'000


**30 June**
**2023**
**$'000**


**NON-CURRENT**
Customer incentives 7(c) **10,423** 9,040
Capitalised transaction costs 7(a) **7,141** 4,271
Contract costs 7(d) **1,001** 857
**Total other assets - non-current** **18,565** **14,168**

**(a) Capitalised transaction costs**

Fees paid on establishment of loan facilities are recognised as transaction costs of the loan. To the extent that it
is probable that some or all of the facility will be drawn down, the fee is deferred until draw down occurs, at which
point it will be amortised over the remaining term of the facility. To the extent there is no evidence that it is
probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity
services and amortised over the period of the facility to which it relates. Refer to note 15 for further details on the
Group's loan facilities.

**(b) Security deposits**

Included in the security deposits was $9.2 million (2022: $8.8 million) relating to deposits held as security for
bank guarantees.

**(c) Customer incentives**

The customer incentive balance includes amounts where customers are offered incentives in the form of free or
discounted periods. It also includes amounts paid to customers where guarantees of service performance are not
achieved as set out in Note 4(b)(i). In these cases, the dollar value of the incentive or cash payment is recorded
as an asset and amortised on a straight-line basis over the life of the contract as described in Note 4(b)(i).

**(d) Contract costs**

Eligible costs that are expected to be recovered are capitalised as a contract cost and amortised over the
expected customer life.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**8** **Trade and other payables**


30 June
2022
$'000


**30 June**
**2023**
**$'000**


Trade payables **37,742** 18,306
Accrued capital expenditure **16,489** 41,272
Accrued expenses **8,384** 9,694
Other creditors **9,922** 12,334
**Total trade and other payables** **72,537** **81,606**

_(i) Recognition and measurement_

Trade and other payables, including accruals, are recorded when the Group is required to make future payments
as a result of purchases of assets or services provided to the Group prior to the end of financial period. The
amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are
presented as current liabilities unless payment is not due within 12 months from the reporting date. They are
recognised initially at their fair value and subsequently measured at amortised cost using the effective interest
method.

_(ii) Fair values of trade and other payables_

Due to the short-term nature of trade and other payables, their carrying amount is considered to be the same as
their fair value.

_(iii) Risk Exposure_

As the majority of payables are in Australian dollars, management does not believe there are any significant risks
in relation to these financial liabilities. Refer to note 14 for details of the Group’s financial risk management
policies.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**9** **Property, plant and equipment**


**Assets**
**in the**
**course of**
**construction**
**$'000**


**Office**
**furniture**
**and**
**equipment**
**$'000**


**Land and**
**buildings**
**$'000**


**Plant and**
**machinery**
**$'000**


**Computer**
**equipment**
**$'000**


**Right of**
**use assets** **Total**
**$'000** **$'000**


**Movements**


**30 June 2023**
Opening net book
amount 575,631 1,027,727 662,161 21,645 1,472 70,423 2,359,059
Exchange differences (2,825) -  -  -  -  -  (2,825)
Additions 669,552 6 73 306 56 531 670,524
Depreciation charge -  (34,382) (78,376) (10,662) (442) (5,499) (129,361)
Disposal -  -  -  (64) (5) -  (69)
Transfers (1,001,952) 759,466 129,880 31,882 3,130 77,594 - 
Transfers (to)/from
intangibles (1,635) (4) (52) (737) -  -  (2,428)
**Closing net book**
**amount** **238,771** **1,752,813** **713,686** **42,370** **4,211** **143,049** **2,894,900**

Cost 238,771 1,843,409 1,093,414 76,327 6,779 164,260 3,422,960
Accumulated
depreciation -  (90,596) (379,728) (33,957) (2,568) (21,211) (528,060)
**Net book amount** **238,771** **1,752,813** **713,686** **42,370** **4,211** **143,049** **2,894,900**


**Assets**
**in the**
**course of**
**construction**
**$'000**


**Office**
**furniture**
**and**
**equipment**
**$'000**


**Land and**
**buildings**
**$'000**


**Plant and**
**machinery**
**$'000**


**Computer**
**equipment**
**$'000**


**Right of**
**use assets** **Total**
**$'000** **$'000**


**30 June 2022**
Opening net book
amount 211,144 915,769 660,992 16,602 1,759 74,737 1,881,003
Exchange differences (219) -  -  -  -  -  (219)
Additions 576,973 9,218 745 568 9 -  587,513
Depreciation charge -  (18,364) (73,026) (6,804) (365) (4,314) (102,873)
Disposals/ write off (1,678) -  -  (14) (2) -  (1,694)
Transfers (205,918) 121,104 73,450 11,293 71 -  - 
Transfers (to)/from
intangibles (4,671) -  -  -  -  -  (4,671)
**Closing net book**
**amount** **575,631** **1,027,727** **662,161** **21,645** **1,472** **70,423** **2,359,059**

Cost 575,631 1,083,941 963,513 44,940 3,598 86,135 2,757,758
Accumulated
depreciation -  (56,214) (301,352) (23,295) (2,126) (15,712) (398,699)
**Net book amount** **575,631** **1,027,727** **662,161** **21,645** **1,472** **70,423** **2,359,059**


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**9** **Property, plant and equipment (continued)**

**(a) Property, plant and equipment**

Land and buildings are shown at historical cost less any accumulated depreciation and any accumulated
impairment losses.

Property, plant and equipment is stated at historical cost less depreciation. Costs capitalised include external
direct costs of materials and services and employee costs.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset
is derecognised when replaced. All other repairs and maintenance are charged to the Consolidated Statement of
Comprehensive Income during the year in which they are incurred.

Depreciation on other assets is calculated using the straight-line method to allocate their cost, net of their residual
values, over their estimated useful lives as follows:

**Category** **Useful life**
Buildings 40 years
Plant and machinery 2-25 years
Computer equipment 1-15 years
Office furniture and equipment 5-10 years
Right-of-use assets 1-99 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting year, considering key assumptions including changes in technology, physical conditions and potential
climate change implications.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount
is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the Consolidated Statement of Comprehensive Income.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**10 Intangible assets**


30 June
2022
$'000


**30 June**
**2023**
**$'000**


Rights and licences **17** 192
Internally generated software **37,156** 22,176
Software under development **14,806** 15,850
**Total intangible assets** **51,979** **38,218**


**Internally**
**generated**
**software**
**$'000**


**Software**
**under**
**development** **Total**
**$'000** **$'000**


**Rights and**
**licenses**
**$'000**


**Movements**


**30 June 2023**
Opening net book amount at 1 July 2022 192 22,176 15,850 38,218
Additions – externally acquired -  2,074 -  2,074
Additions – internally developed -  -  17,768 17,768
Amortisation (217) (8,292) -  (8,509)
Transfers -  20,447 (20,447) - 
Transfers from property, plant and equipment 42 751 1,635 2,428
**Closing net book amount** **17** **37,156** **14,806** **51,979**

**At 30 June 2023**
Cost 254 60,157 14,806 75,217
Accumulated amortisation (237) (23,001) -  (23,238)
**Net book amount** **17** **37,156** **14,806** **51,979**


**Internally**
**generated**
**software**
**$'000**


**Software**
**under**
**development** **Total**
**$'000** **$'000**


**Rights and**
**licences**
**$'000**


**30 June 2022**
Opening net book amount 13 15,673 5,059 20,745
Additions – externally acquired 6 472 -  478
Additions – internally developed -  -  16,791 16,791
Amortisation (20) (3,960) -  (3,980)
Transfers 193 9,991 (10,184) - 
Transfer from property, plant and equipment -  -  4,671 4,671
Disposals -  -  (487) (487)
**Closing net book amount** **192** **22,176** **15,850** **38,218**

**At 30 June 2022**
Cost 212 36,885 15,850 52,947
Accumulated amortisation (20) (14,709) -  (14,729)
**Net book amount** **192** **22,176** **15,850** **38,218**


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**10 Intangible assets (continued)**

**(a) Intangible assets**

**RIGHTS AND LICENCES**

Certain licences that NEXTDC possesses have an indefinite useful life and are carried at cost less impairment
losses and are subject to impairment review at least annually and whenever there is an indication that it may be
impaired.

Other licences that NEXTDC acquires are carried at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is recognised on a straight-line basis over the estimated useful life which is
generally 25 years. The estimated useful life and amortisation method are reviewed at the end of each annual
reporting period.

**INTERNALLY GENERATED SOFTWARE**

Internally developed software is capitalised at cost less accumulated amortisation. Amortisation is calculated
using the straight-line basis over the asset’s useful economic life which is generally four to seven years. Their
useful lives and potential impairment are reviewed at the end of each financial year.

Costs incurred in configuring or customising SaaS arrangements can only be recognised as intangible assets if
the implementation activities create an intangible asset that the entity controls and the intangible asset meets the
recognition criteria. Those costs that do not result in intangible assets are expensed as incurred, unless they are
paid to the suppliers of the SaaS arrangements to significantly customise the cloud-based software for the Group,
in which case the costs are recorded as a prepayment for services and amortised over the expected renewable
term of the arrangement.

**SOFTWARE UNDER DEVELOPMENT**

Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will
contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to
software and systems. Costs capitalised include external direct costs of services and employee costs.

Assets in the course of construction include only those costs directly attributable to the development phase and
are only recognised following completion of technical feasibility and where the Group has an intention and ability
to use the asset.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**11 Leases**

**(a) Leases**

_(i)_ _Amounts recognised in the Consolidated Balance Sheet_
The Consolidated Balance Sheet includes the following amounts relating to leases:
**30 June**
**2023**
**$'000**


30 June
2022
$'000


**Right-of-use assets ***
Properties **58,642** 61,985
Motor Vehicles **-** 18
Connectivity Links **34,316** 8,420
Land **50,091** - 

**143,049** **70,423**

-  included in the line item ‘Property, plant and equipment’ in the Consolidated Balance Sheet.

**Lease liabilities**
Current **6,681** 6,232
Non-current **69,963** 70,628

**76,644** **76,860**

Additions to the right-of-use assets during the 2023 financial year totalled $78.1 million composed of $50.3 million
to Land, $27.3 million to Connectivity links and additions to Properties of $0.5 million (2022 : nil).

_(ii) Amounts recognised in the Consolidated Statement of Comprehensive Income_
The Consolidated Statement of Comprehensive Income shows the following amounts relating to leases:


30 June
2022
$'000


**30 June**
**2023**
**$'000**


Depreciation charge on Properties **3,863** 3,817
Depreciation charge on Motor Vehicles **18** 76
Depreciation charge on Connectivity Links **1,399** 421
Depreciation charge on Land **219** - 
Interest expense (included in Finance costs) **5,542** 5,537

**11,041** **9,851**

The total cash outflow for leases in 2023 was $6.2 million (2022 : $6.0 million).

_(iii) The Group’s leasing activities and how these are accounted for_
The Group has a number of leases over property, motor vehicles, and connectivity links that have varying terms,
escalation clauses and renewal rights.

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset
is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The
finance cost is charged to the Consolidated Statement of Comprehensive Income over the lease term so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each year. The
right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line
basis.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**11 Leases (continued)**

**(a) Leases (continued)**

_(iii) The Group’s leasing activities and how these are accounted for (continued)_

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:

-  fixed payments (including in-substance fixed payments), less any lease incentives receivable

-  variable lease payments that are based on an index or a rate

-  amounts expected to be payable by the Group under residual value guarantees

-  the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and

-  payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of
the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used.

To determine the incremental borrowing rate, the Group:

-  where possible, uses recent third-party financing received by the individual lessee as a starting point,
adjusted to reflect changes in financing conditions since third party financing was received

-  makes adjustments specific to the lease, eg. term, country, currency and security.

Right-of-use assets are measured at cost comprising the following:

-  the amount of the initial measurement of lease liability

-  any lease payments made at or before the commencement date less any lease incentives received

-  any initial direct costs, and

-  restoration costs.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are
recognised on a straight-line basis as an expense in the Consolidated Statement of Comprehensive Income.
Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment
and small items of office furniture.

_(iv) Extension and termination options_
Extension and termination options are included in a number of property and equipment leases across the Group.
These are used to maximise operational flexibility in terms of managing the assets used in the Group’s
operations. The majority of extension and termination options held are exercisable only by the Group and not by
the respective lessor.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**Capital and financial risk management**

**12 Capital risk management**

The Group's objectives when managing capital are to safeguard its ability to continue as a going concern, so that
it can continue to provide returns to its shareholders and benefits to its stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.

In the future, the Directors may pursue funding options such as debt, sale and leaseback of assets, additional
equity and various other funding mechanisms as appropriate in order to undertake its projects and deliver
optimum shareholders’ return.

The Group intends to maintain a gearing ratio appropriate for a company of its size and growth.


**30 June**
**2023**
**$'000**


30 June
2022
$'000


Total borrowings and lease liabilities **1,442,073** 1,135,622
Less: derivative financial instruments **(33,757)** (35,988)
Less: cash and cash equivalents **(765,841)** (456,562)
**Net debt** **642,475** **643,072**

Total equity **2,276,618** 1,698,528
**Total capital** **2,919,093** **2,341,600**

**Gearing ratio** **22.0%** **27.5%**

The change in the gearing ratio was primarily driven by the equity fundraising activities during the period. Refer to
note 13 for movements in ordinary share capital.

The Group manages its capital structure by regularly reviewing its gearing ratio to ensure it maintains an
appropriate level of gearing within facility covenants. This ratio is calculated as net debt divided by total capital.
Net debt is calculated as total interest bearing financial liabilities, less cash and cash equivalents. Total capital is
calculated as equity, as shown in the Consolidated Balance Sheet, plus net debt.

**13 Contributed equity**

**(a) Share capital**


**30 June**
**2023**
**Number of**
**Shares**


30 June
2022
Number of
Shares


**30 June**
**2023**


30 June
2022


Note


Fully paid ordinary shares 13(c) **514,646,636 2,371,154,000** 456,654,443 1,762,662,999
Treasury shares - LFSP 13(e) **861,813** **1,851,502** 861,813 1,851,502
**Total share capital** **515,508,449 2,373,005,502** **457,516,256 1,764,514,501**


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**13 Contributed equity (continued)**

**(b) Movements in ordinary share capital**

**Number of**
**Date** **Details** **Notes** **shares** **$'000**

Opening balance 456,664,872 1,761,629
15 September 2021 Conversion of rights to shares - deferred STI (d) 42,421 491
15 September 2021 Conversion of rights to shares - LTI (d) 808,963 2,421
Transaction costs -  (26)
**Sub-total** **457,516,256** **1,764,515**

Less shares held by NEXTDC Share Plan Pty Ltd (e) (861,813) (1,852)
**Balance** **456,654,443** **1,762,663**

**Number of**
**Date** **Details** **Note** **shares** **$'000**

Opening balance 457,516,256 1,764,515
16 September 2022 Conversion of rights to shares - deferred STI (d) 45,137 605
21 September 2022 Conversion of rights to shares - LTI (d) 730,203 3,108
23 May 2023 Issue of capital - institutional investors (c) 38,523,092 416,049
7 June 2023 Issue of capital - retail investors (c) 18,693,761 201,893
Transaction costs -  (14,807)
Deferred tax credit/(debit) recognised directly in
equity -  1,643
**Sub-total** **515,508,449** **2,373,006**

Less shares held by NEXTDC Share Plan Pty
Ltd (e) (861,813) (1,852)
**Balance** **514,646,636** **2,371,154**

**(c) Ordinary shares**

In May 2023, the Group issued 38,523,092 ordinary shares to institutional investors at a price of $10.80. In June
2023, the Group issued an additional 18,693,761 ordinary shares to retail investors at a price of $10.80 per share
as part of the same equity raising transaction.

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in
proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary
shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled
to one vote.

Ordinary shares have no par value and the Group does not have a limited amount of authorised capital.

**(d) Performance rights and deferred share rights**

Performance rights and deferred share rights, which subject to satisfaction of a performance hurdle, give rise to
an entitlement to the value of an ordinary share in NEXTDC Limited. The Board has discretion to determine if the
value will be provided in shares, cash or a combination of shares and cash. The Board determined that 100% of
the FY20 LTI and those FY21 deferred STIs that elected to take shares rather than cash, would vest in shares,
with 45,137 and 730,203 ordinary shares issued on 16 and 21 September 2022 respectively.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**13 Contributed equity (continued)**

**(e) Loan funded share plan**

The Group operated a legacy Loan Funded Share Plan remuneration scheme which was designed to attract and
retain key employees. The arrangement involved the issue of shares to NEXTDC Share Plan Pty Ltd, whose sole
purpose was to hold shares as trustee for its beneficiaries (its participants). The participants were required to
meet service requirements before being entitled to access these shares.

The fair value at grant date of the shares was determined using either a Black-Scholes or binomial option pricing
model that took into account the exercise price, the term of the option, the impact of dilution, the share price at
grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free
interest rate for the term of the loan. The assessed fair value was recognised as share-based payments.

**30 June** 30 June
**2023** 2022

Shares held by the Trust but not allocated **861,813** 861,813

**(f)** **Dividend reinvestment plan**

The Group does not have a dividend reinvestment plan in place.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**14 Financial risk management**

The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk and price
risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.

During the financial year, NEXTDC secured an incremental $400 million in senior debt capacity, bringing the
facility to a new aggregate limit of $2.9 billion, as well as favourable amendments to existing financial covenants
and terms.

The Company's $2.9 billion Syndicated Debt Facilities comprise the following tranches:

-  $800 million - Term Loan Facility (fully drawn)

-  $600 million - Capital Expenditure Facility ($400 million undrawn)

-  $800 million - Revolving Credit Facility (multi-currency) (undrawn)

-  $300 million - Term Loan Facility (fully drawn)

-  $100 million - New Term Loan Facility (fully drawn)

-  $300 million - New Revolving Credit Facility (undrawn)

The facilities have a maturity date of 3 December 2026, except for the $300 million Term Loan Facility, which has
a maturity date of 3 December 2028.

NEXTDC is exposed to interest rate volatility due to the variable rate on its Syndicated Debt Facilities. To mitigate
the interest rate risk associated with this floating element, NEXTDC has entered into a series of interest rate
swaps under which, the amounts drawn under the facilities have their base interest fixed until 3 December 2024.

A derivative asset and associated cash flow hedge reserve has been taken up at 30 June 2023 to account for
these transactions.

The Group’s transactions are predominantly conducted in Australian dollars. Overall, management assesses the
Group’s exposure to financial risk as low. However, the Group does have a financial risk management program in
place. The Group does not enter into or trade financial instruments for speculative purposes.


The Group holds the following financial instruments:
**30 June**
**2023**
**$'000**


30 June
2022
$'000


**FINANCIAL ASSETS**
Cash and cash equivalents **765,841** 456,562
Trade and other receivables **54,186** 44,335
Derivative financial instruments **33,757** 35,988
Security deposits **9,665** 10,943
**Total financial assets** **863,449** **547,828**

**FINANCIAL LIABILITIES**
Trade and other payables **72,537** 81,606
Borrowings **1,365,429** 1,058,762
Lease liabilities **76,644** 76,860
**Total financial liabilities** **1,514,610** **1,217,228**

**(a) Derivatives**

_(i)_ _Fair value measurement_
For information about the methods and assumptions used in determining the fair value of derivatives refer to note
27 (j)(ii).


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**14 Financial risk management (continued)**

**(a) Derivatives (continued)**

_(ii) Hedging reserves_
The Group’s hedging reserves relate to the following hedging instruments:


**Cash flow hedge reserve**


**Cost of**
**hedging**
**reserve**
**$'000**


**Cashflow**
**Hedge**
**Reserve**
**$'000**


**Total hedge**
**reserves**
**$'000**


**Opening balance 1 July 2021** **100** **(433)** **(333)**
Add: Change in fair value of hedging instrument recognised in
OCI -  33,421 33,421
Add: Costs of hedging deferred and recognised in OCI (640) -  (640)
Less: reclassified from OCI to profit or loss - included in finance
costs 246 2,989 3,235
Less: Deferred tax -  (10,797) (10,797)
**Closing balance 30 June 2022** **(294)** **25,180** **24,886**

**Opening balance 1 July 2022** **(294)** **25,180** **24,886**
Add: Change in fair value of hedging instrument recognised in
OCI -  16,135 16,135
Add: Costs of hedging deferred and recognised in OCI (734) -  (734)
Less: reclassified from OCI to profit or loss - included in finance
costs 556 (18,181) (17,625)
Less: Deferred tax -  759 759
**Closing balance 30 June 2023** **(472)** **23,893** **23,421**

_Hedge effectiveness_
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective
effectiveness assessments, to ensure that an economic relationship exists between the hedged item and hedging
instrument.

The Group enters into interest rate swaps that have similar critical terms as the hedged item, such as reference
rate, reset dates, payment dates, maturities and notional amount. As all critical terms matched during the year,
there is an economic relationship.

**(b) Market risk**

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices. Market risk for the Group is comprised of foreign exchange risk and interest rate risk.

_(i)_ _Foreign exchange risk_
The Group does not currently have any significant operations outside Australia and its transactions are
predominantly conducted in Australian dollars. Consequently, management has determined that the Group has
little exposure to foreign exchange risk. On this basis, the Group does not have any active risk mitigation
strategies in relation to foreign exchange risk.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**14 Financial risk management (continued)**

**(b) Market risk (continued)**

_(ii) Cash flow and fair value interest rate risk_
The Group’s main interest rate risk arises from its various fixed-rate term deposits and its syndicated debt facility
(refer to note 15(a)). The floating rate loan tranches expose the Group's borrowings to changes in interest rates.
The embedded interest rates for the lease liabilities are fixed, consequently the interest rate risk in relation to
these instruments is limited.

_Instruments used by the group_
The Group has incorporated derivative financial instruments to manage its exposure to interest rates. Under its
interest rate swaps, the Group agrees to exchange the difference between the contracted fixed and floating rate
interest amounts determined on a notional principal amount. Within these interest rate swaps, there is embedded
floor protection at 0%, which is consistent with the terms of the underlying senior debt facility.

The following table details the notional principal amounts and remaining terms of interest rate swap contracts
outstanding at the end of the reporting period:


**Average contracted fixed**
**interest rate**


**Notional principal amount**
**Fair value (AUD)**
**(AUD)**


**Receive floating**
**pay fixed** **2023** 2022 **2023** 2022 **2023** 2022
**%** % **$'000** $'000 **$'000** $'000
Less than 1 year 1.8290% 0.2458% $800,000 $800,000 8,727 6,449
1 to 2 years 3.1546% 1.7431% $1,400,000 $1,100,000 25,030 29,539

_Effects of hedge accounting on the consolidated financial position and performance_


**30 June**
**2023**
**$'000**


30 June
2022
$'000


**_Interest rate swaps_**
Hedge ratio **1:1** 1:1
Change in fair value of outstanding hedging instruments since 1
July **5,714** 38,138
Change in value of hedged item used to determine hedge
effectiveness **5,411** 38,017

**SENSITIVITY**

The table below shows the impact of 100 basis points movement (net of hedging) in the interest rate curve on the
consolidated entity’s profit and equity after tax for both derivatives and non-derivative financial instruments at 30
June 2023, with all other variables held constant.

**Impact on other components of**
**Impact on post-tax profit** **equity**
**2023** 2022 **2023** 2022
**$'000** $'000 **$'000** $'000

Interest rate - increase by 100 basis
points * **-** -  **11,444** 10,746
Interest rate - decrease by 100 basis
points * **-** -  **(11,632)** (10,658)

-  Holding all other variables constant


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**14 Financial risk management (continued)**

**(c) Credit risk**

Credit risk arises from counterparties holding cash and cash equivalents, security deposits, trade and other
receivables, and derivatives.

_(i)_ _Cash and cash equivalents and security deposits_
Deposits are placed with Australian banks or independently rated parties with a minimum rating of ‘A’ class in
both short term and long term. To reduce exposure deposits are placed with a variety of financial institutions.

The credit quality of financial assets can be assessed by reference to external credit ratings (if available) or to
historical information about counterparty default rates:
**30 June** 30 June
**2023** 2022
**$'000** $'000

**CASH AT BANK**
A rated **202,546** 93,826
AA rated **563,295** 362,736
**TOTAL** **765,841** **456,562**

**SECURITY DEPOSITS**
AA Rated **9,155** 8,840
Unrated **510** 2,103
**TOTAL** **9,665** **10,943**

In determining the credit quality of these financial assets, NEXTDC has used the long-term rating from Standard
& Poor’s as of July 2023.

_(ii) Trade and other receivables_
Customer credit risk is managed subject to the Group’s established policy, procedures and control relating to
customer credit risk management. Credit evaluations are performed on all customers. Outstanding customer
receivables are monitored regularly.

The Group aims to minimise concentration of credit risk by undertaking transactions with a large number of
customers. Revenues from data centre services of $168.8m were derived from two customers, contributing
$87.4m (24%) and $81.4m (22%) respectively (2022: $66.7m (23%) and $64.0m (22%) respectively). Revenues
from these two customers were derived across numerous orders at multiple data centre facilities with the
underlying orders having a range of different expiry dates. In addition, receivable balances are monitored on an
ongoing basis with the intention that the Group’s exposure to bad debts is minimised.

The maximum exposure to credit risk at the end of the reporting period is the carrying value of each class of the
financial assets mentioned above and each class of receivable disclosed in Note 6. The Group does not require
collateral in respect of financial assets.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**14 Financial risk management (continued)**

**(c) Credit risk (continued)**

_(ii) Trade and other receivables (continued)_
The Group applies the simplified approach to providing for expected credit losses prescribed by AASB 9, which
permits the use of the lifetime expected loss provision for all trade receivables.

To measure the expected credit loss, receivables have been grouped based on days overdue. The methodology
applied in estimating expected credit losses below is consistent with that applied for the year ended 30 June
2022.

The judgements and associated assumptions have been made within the context of the impact of COVID-19,
higher interest rate environment, and reflect historical experience as well as other factors that are considered to
be relevant, including expectations of future events that are believed to be reasonable under the current
circumstances, such as the duration of the pandemic, economic impact of higher interest rates, the actions of
governments, the responses of businesses and consumers across different industries, and the associated impact
on the global economy. Accordingly, the Group's expected credit loss estimates are inherently uncertain, and as
a result, actual results may differ from these estimates.

The loss allowance provision as at 30 June 2023 is determined as follows:

**1 to 30** **31 to 60** **More than 60**
**30 June 2023** **Current** **days past due** **days past due** **days past due** **Total**
**$'000** **$'000** **$'000** **$'000** **$'000**
Expected loss rate 2% 10% 15% 50% - 
Gross carrying amount 39,968 5,382 932 791 47,073
Loss allowance provision 799 538 140 396 1,873
Net receivables 39,169 4,844 792 395 45,200

**1 to 30** **31 to 60** **More than 60**
**30 June 2022** **Current** **days past due** **days past due** **days past due** **Total**
**$'000** **$'000** **$'000** **$'000** **$'000**
Expected loss rate 2% 10% 15% 50% - 
Gross carrying amount 25,667 2,395 677 3,225 31,964
Loss allowance provision 513 239 102 1,613 2,467
Net receivables 25,154 2,156 575 1,612 29,497

_(iii) Derivatives_
Credit risk for derivative financial instruments arises from the potential failure by counterparties to the derivative
transaction contract to meet their obligations. The credit risk exposure to interest rate swaps is the fair value of
these contracts. All derivative financial instruments are with our major international banking partners, all of which
have a minimum credit rating of ‘A’ in the long-term rating from Standard & Poor’s as of July 2023.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**14 Financial risk management (continued)**

**(d) Liquidity risk**

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the
availability of funding through an adequate amount of committed credit facilities to meet obligations when due.

Management also actively monitors rolling forecasts of the Group’s cash and cash equivalents.

_(i)_ _Maturities of financial liabilities_
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on their
contractual maturities for all financial liabilities.

The amounts disclosed in the table are the contractual undiscounted cash flows.

**Total**

**Between** **contractual**

**Contractual Maturities of Financial Liabilities**
**Within 12** **1 and 5** **Over 5** **cash** **Carrying**
**months** **years** **years** **flows** **amount**

**2023** **$'000** **$'000** **$'000** **$'000** **$'000**

Trade payables **37,742** **-** **-** **37,742** **37,742**
Accrued capital expenditure **16,489** **-** **-** **16,489** **16,489**
Accrued expenses **8,384** **-** **-** **8,384** **8,384**
Lease liabilities **6,681** **24,749** **149,805** **181,235** **76,644**
Borrowings **103,965 1,358,528** **332,912** **1,795,405 1,365,429**
**Total non-derivatives** **173,261 1,383,277** **482,717** **2,039,255 1,504,688**

**2022**
Trade payables 18,306 -  -  18,306 18,306
Accrued capital expenditure 41,272 -  -  41,272 41,272
Accrued expenses 9,694 -  -  9,694 9,694
Lease liabilities 6,231 24,992 155,609 186,832 76,860
Borrowings 35,935 889,285 315,725 1,240,945 1,058,762
**Total non-derivatives** **111,438** **914,277** **471,334** **1,497,049 1,204,894**

**(e) Fair value measurements**

_(i)_ _Trade and other payables_
The fair value of trade and other payables is disclosed in note 8.

_(ii) Borrowings_
The fair value of borrowings is disclosed in note 15(c).


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**15 Borrowings**


30 June
2022
$'000


**30 June**
**2023**
**$'000**


**NON-CURRENT**
Borrowings **1,365,429** 1,058,762

**(a) Bank loan**

The Company's $2.9 billion Syndicated Debt Facilities comprise the following tranches:

-  $800 million - Term Loan Facility (fully drawn)

-  $600 million - Capital Expenditure Facility ($400 million undrawn)

-  $800 million - Revolving Credit Facility (multi-currency) (undrawn)

-  $300 million - Term Loan Facility (fully drawn)

-  $100 million - New Term Loan Facility (fully drawn)

-  $300 million - New Revolving Credit Facility (undrawn)

The $300 million Term Loan Facility has a maturity of 3 December 2028, while the remaining $800 million Term
Loan Facility, $600 million Capital Expenditure Facility and $800 million Revolving Credit Facility have a maturity
date of 3 December 2026.

On 13 January 2023, NEXTDC Limited announced that it had entered into a new Syndicated Facility Agreement
in relation to a new $400 million senior debt facility, of which $100 million was drawn on 15 February 2023 with
$300 million remaining on a Revolving Credit Facility, both of which have a maturity date of 3 December 2026.

NEXTDC is exposed to interest rate volatility due to the variable rate on its Syndicated Debt Facilities. To mitigate
the interest rate risk associated with this floating element, NEXTDC has entered into a series of interest rate
swaps under which, the amounts drawn under the facilities have their base interest rate fixed until 3 December
2024.

A derivative asset and associated cash flow hedge reserve has been taken up at 30 June 2023 to account for
these transactions.

The Syndicated Debt Facilities are secured by the Group's properties.

**(b) Compliance with loan covenants**

The Group has complied with the financial covenants of its borrowing facilities during the 2023 financial year
(2022: complied).

**(c) Fair value**

Material differences are identified for the following borrowings:
**2023** 2022
**Carrying** Carrying
**amount** **Fair value** amount Fair value
**$'000** **$'000** $'000 $'000

Term loan facility **1,365,429** **1,451,905** 1,058,762 1,123,983


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**15 Borrowings (continued)**

**(d) Borrowings**

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in the Consolidated Statement of Comprehensive Income over the period of the borrowings
using the effective interest method. Fees paid on the establishment of loan facilities are recognised as
transaction costs of the loan. To the extent that it is probable that some or all of the facility will be drawn down,
the fee is deferred until the draw down occurs, at which point it will be amortised over the remaining term of the
facility. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the
fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it
relates.

**Items not recognised**

**16 Commitments**

**(a) Capital commitments**

Capital expenditure contracted for at the end of each reporting year but not recognised as liabilities is as follows:


**30 June**
**2023**
**$'000**


30 June
2022
$'000


Property, plant and equipment **172,144** 253,282
**Total capital commitments** **172,144** **253,282**

**17 Contingencies**

**(a) Contingent assets**

The Group did not have any contingent assets during the year or as at the date of this report.

**(b) Contingent liabilities**

The Group did not have any contingent liabilities during the year or as at the date of this report.

**GUARANTEES**

For information about guarantees given by entities within the Group, please refer to Note 7(b).

**18 Events occurring after the reporting period**

Since the end of the reporting period, no matters have arisen which significantly affected or may significantly
affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future
financial years, except as disclosed below:

-  On 23 August 2023, NEXTDC Limited announced the Company’s contracted utilisation has increased by 25MW
(21%) to 145MW


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**Employee remuneration**
**19 Key management personnel**

**(a) Key management personnel compensation**


30 June
2022


**30 June**
**2023**


Short-term employee benefits **6,592,448** 7,176,458
Post-employment benefits **183,654** 168,639
Long-term benefits **(63,259)** 75,775
Share-based payments **1,688,491** 1,873,567
**Total key management personnel compensation** **8,401,334** **9,294,439**

**Comprising**
Senior Executives **6,952,314** 8,009,439
Non-Executive Directors **1,449,020** 1,285,000
**Total** **8,401,334** **9,294,439**

Detailed remuneration disclosures are provided in the Remuneration Report.

**(b) Loans to key management personnel**

There were no loans made to key management personnel during the year (2022: nil).

**(c) Other transactions with key management personnel**

There were no other transactions with key management personnel during the year (2022: nil).

**20 Share-based payments**

**(a) Performance rights**

The performance rights plan was established by the Board of Directors to provide long-term incentives to the
Group’s Senior Executives based on total shareholder returns (TSR) taking into account the Group’s financial
and operational performance. Under the Plan, eligible participants may be granted performance rights on terms
and conditions determined by the Board from time to time. Outstanding performance rights were granted during
the course of FY21, FY22 and FY23. The vesting conditions for the FY21 grant relate to TSR exceeding the ASX
200 Accumulation Index over the measurement period, while the vesting conditions for the FY22 and FY23
grants relate to TSR exceeding the ASX 100 Accumulation Index over the measurement period. Vesting of the
FY21 rights will be tested on or around the day following the release of the annual results for the year ended 30
June 2023. The FY22 and FY23 rights include tranches which vest after the third and fourth years, and will be
tested on or around the day following the release of each of the annual results for 2024, 2025 and 2026
respectively.

Performance rights are granted by the Company for nil consideration. The Board has discretion to determine if
the value will be provided in shares, cash or a combination of shares and cash. Rights granted under the plan
carry no dividend or voting rights.

The fair value of the rights at the date of valuation was determined using the Black-Scholes Option Pricing Model
to be equal to the volume weighted-average price (VWAP) ending on the day before the grant date, less the
dividends expected over the period from the expected grant date to the completion of the measurement period,
adjusted for the expected probability of achieving the vesting conditions.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**20 Share-based payments (continued)**

**(a) Performance rights (continued)**


**30 June**
**2023**
**Number of**
**Rights**


**30 June**
**2023**
**Average Fair**
**Value**


30 June
2022
Number of
Rights


30 June
2022
Average fair
value


Opening balance **1,628,802** **$5.37** 1,966,120 $4.24
Granted during the year **706,467** **$4.83** 501,888 $6.09
Vested during the year **(730,203)** **$4.22** (808,963) $3.07
Forfeited during the year **(14,847)** **$5.69** (30,243) $5.39
**Closing balance** **1,590,219** **$5.65** **1,628,802** **$5.37**

**(b) Deferred shares - executives short-term incentive scheme**

Under the Group’s short-term incentive (STI) scheme for FY22, executives received 50% of the annual STI
achieved in cash, with 50% deferred for 12 months. Executives were able to elect whether the deferred
component would be delivered in cash or equity. The FY22 tranche of deferred rights were granted in September
2022 and will vest on or around September 2023, being 12 months after the date on which they were granted.
They automatically convert into one ordinary share each on vesting at an exercise price of nil. The executives do
not receive any dividends and are not entitled to vote in relation to the deferred shares during the vesting period.
If an executive ceases to be employed by the Group within this period, they will have 6 months from cessation of
employment or the vesting date (whichever is later) to exercise the deferred share right. Any rights not exercised
within this period will automatically lapse.

The number of rights to be granted was determined based on the currency value of the achieved STI divided by
the volume weighted-average price at which the Company’s shares were traded on the Australian Securities
Exchange over the 10 days following the release of the Group's FY22 results, being $10.09.
**2023** 2022

Number of rights to deferred shares granted **61,162** 45,137

**(c) Expenses arising from share-based payment transactions**

Total expenses arising from share-based payment transactions recognised during the year as part of employee
benefit expense were as follows:
**30 June** 30 June
**2023** 2022
**$'000** $'000

Performance rights **2,817** 2,767
Shares issued under employee share scheme **273** 220
**Total expenses arising from share-based payment transactions** **3,090** **2,987**


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**Other**

**21 Income tax**

**(a) Income tax expense**


30 June
2022
$'000


**30 June**
**2023**
**$'000**


_Deferred income tax_
Decrease / (increase) in deferred tax assets less deferred tax credited to equity **3,936** (18,815)
Increase / (decrease) in deferred tax liabilities less deferred tax credited to equity **(1,534)** 8,018
**Sub-total** **2,402** **(10,797)**

Income tax (benefit)/expense is attributable to:
Profit/(loss) from continuing operations **2,402** (10,797)

**2,402** **(10,797)**

**(b) Numerical reconciliation of income tax expense to prima facie tax payable**


**30 June**
**2023**
**$'000**


30 June
2022
$'000


Profit/(loss) from continuing operations before income tax expense **(23,239)** (1,658)
Tax at the Australian tax rate of 30% **(6,972)** (497)

_Tax effect of amounts which are not deductible (taxable)_
_in calculating taxable income:_
Share-based payments **(1,218)** (2,618)
Prior period adjustments **256** (256)
Derecognition of temporary differences on current year tax losses **8,137** - 
Derecognition/(re-recognition) of temporary differences **1,893** (8,181)
Permanent differences (excluding prior period adjustments and share based
payments) **306** 755
**Income tax (benefit)/expense** **2,402** **(10,797)**

**20,837** 12,455

**(c) Amounts recognised directly in equity**


30 June
2022
$'000


**30 June**
**2023**
**$'000**


Aggregate current and deferred tax arising in the reporting period and not
recognised in net profit or loss or other comprehensive income but directly
debited or credited to equity:
Deferred tax credited/(debited) directly to equity **(2,402)** 10,797

**(d) Tax losses**


**30 June**
**2023**
**$'000**


30 June
2022
$'000


Unused tax losses for which no deferred tax asset has been recognised **81,833** 56,909
Potential tax benefit @ 30.0% **24,550** 17,073


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**21 Income tax (continued)**

**(d) Tax losses (continued)**

**Income tax**

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
end of the reporting period in Australia. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax
liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end
of the reporting period and are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and
tax liabilities are offset where the Group has a legally enforceable right to offset and intends either to settle on a
net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in the Consolidated Statement of Comprehensive Income, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in equity, respectively.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**22 Deferred tax**

**(a) Deferred tax assets**


**30 June**
**2023**
**$'000**


30 June
2022
$'000


**The balance comprises temporary differences attributable to:**
Tax losses **24,550** 17,073
Black-hole expenditure deductible in future years **2,959** 2,282
Property, plant and equipment **2,623** 2,104
Lease liabilities **22,993** 23,058
Employee benefits **3,223** 3,952
Investment in associate **4,750** 2,932
Loss allowances **562** 740
Expenses deductible in future years **575** 1,943
Revenue received in advance **17,216** 18,063
R&D offsets **2,046** 2,046
**Total deferred tax assets** **81,497** **74,193**

Set-off of deferred tax liabilities pursuant to set-off provisions (Note 22(b)) **(38,087)** (40,380)
Deferred tax assets not recognised **(43,410)** (33,813)
**Net deferred tax assets** **-** **-**

Deferred tax assets may be a combination of unused tax losses, offsets and timing differences based on
management’s foreseeable forecasts, to the extent that it is probable that taxable profit will be available against
which the losses, offsets and timing differences can be utilised. Significant management judgement is required to
determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of
future taxable profits together with future tax planning strategies.

In FY20 the Group derecognised deferred tax assets in relation to carry-forward tax losses and temporary
differences as it believed they no longer met the requirement to be recognised, stemming from the impact that
the recent growth and expansion activity has had on taxable profits. Despite the derecognition, these
carry-forward tax losses and offsets can be carried forward indefinitely and have no expiry date.

**(b) Deferred tax liabilities**


30 June
2022
$'000


**30 June**
**2023**
**$'000**


**The balance comprises temporary differences attributable to:**
Borrowings **5,443** 7,031
Lease assets **22,517** 22,514
Property, plant and equipment **-** 38
Derivative - Ineffective (P&L) **181** 91
Derivative - FV (Equity) **9,946** 10,706
**Total deferred tax liabilities** **38,087** **40,380**

Set-off of deferred tax liabilities pursuant to set-off provisions (Note 22(a)) **(38,087)** (40,380)
**Net deferred tax liabilities** **-** **-**


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**23 Cash flow information**

**(a) Reconciliation of profit after income tax to net cash inflow from operating activities**

**30 June**
**2023**
**$'000**


30 June
2022
$'000


**Profit/(loss) for the year after income tax** **(25,641)** **9,139**
Depreciation and amortisation **137,870** 106,853
Non-cash employee benefits expense share-based payments **3,479** 2,987
Senior debt modification gain **-** (26,481)
Costs on extinguishment of Notes and loans **-** 23,290
Amortisation of borrowing costs **20,136** 8,437
Net (gain)/loss on derivatives **-** (304)
Income tax expense/(benefit) **2,402** (10,797)
Impairment of investment in associate **1,799** 7,921
Share of loss on investment in associate **4,262** 1,879

**CHANGE IN OPERATING ASSETS AND LIABILITIES**
(Increase) / decrease in trade and other receivables **(9,306)** 4,472
(Increase) / decrease in prepayments and other current assets **(391)** (1,370)
(Increase) / decrease in interest receivable **(666)** (354)
(Increase) / decrease in cash used in bank guarantee **(315)** (4,867)
(Increase) / decrease in GST **1,224** (1,922)
(Increase) / decrease in other assets **(255)** (357)
Decrease / (increase) in customer incentives **(3,014)** (8,783)
Decrease / (increase) in trade and other payables **9,388** 804
Decrease / (increase) in other operating liabilities **(10,344)** 3,574
Decrease / (increase) in employee entitlements **(2,241)** 4,304
Decrease / (increase) in interest payable **909** 1,398
Decrease / (increase) in revenue in advance **(2,824)** (2,647)
**Net cash inflow from operating activities** **126,472** **117,176**

**(b) Net debt reconciliation**


**30 June**
**2023**
**$'000**


30 June
2022
$'000


**Net debt**


Cash and cash equivalents **765,841** 456,562
Borrowings - repayable within one year **2,046** 216
Borrowings - repayable after one year **(1,410,362)** (1,099,850)
**Net debt** **(642,475)** **(643,072)**

Cash and liquid investments **765,841** 456,562
Gross debt - fixed interest rates **(42,887)** (40,872)
Gross debt - variable interest rates **(1,365,429)** (1,058,762)
**Net debt** **(642,475)** **(643,072)**


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**23 Cash flow information (continued)**

**(b) Net debt reconciliation (continued)**

**Other**
**assets** **Liabilities from financing activities**


**Leases**
**due within**
**1 year**
**$'000**


**Leases**
**due after**
**1 year**
**$'000**


**Borrow.**
**due within**
**1 year**
**$'000**


**Borrow.**
**due after 1**
**year** **Total**
**$'000** **$'000**


**Cash**
**$'000**


**Net cash as at 1 July 2021** 652,334 (5,970) (71,325) -  (783,489) (208,450)
Cash flows (195,772) -  -  -  (297,735) (493,507)
Other non-cash movements -  (262) 697 6,449 52,001 58,885
**Net debt as at 30 June 2022** 456,562 (6,232) (70,628) 6,449 (1,029,223) (643,072)

Cash flows 309,279 -  -  -  (297,785) 11,494
Other non-cash movements -  (449) 665 2,278 (13,391) (10,897)
**Net cash as at 30 June 2023** 765,841 (6,681) (69,963) 8,727 (1,340,399) (642,475)

**24 Remuneration of auditors**

During the year the following fees were paid or payable for services provided by PricewaterhouseCoopers
Australia (PwC), the auditor of the parent entity, NEXTDC Limited, by PwC's related network firms and by
non-related audit firms:

**(a) PwC Australia**

**2023** 2022
**$** $

Audit and other assurance services
Audit and review of financial statements **751,655** 615,350
Other assurance services **-** 141,290
**Total remuneration for audit and other assurance services** **751,655** **756,640**

Other services
Other services **15,000** - 
**Total services provided by PwC Australia** **766,655** **756,640**

**(b) Network firms of PwC Australia**

_(i)_ _Audit and other assurance services_

Audit and review of financial statements **32,696** 13,565

Space
**Total remuneration of network firms of PwC Australia** **32,696** **13,565**

**(c) Non-PwC audit firms**

NEXTDC Limited did not engage with any other non-PwC audit firms.

**Total services provided by PwC** **799,351** **770,205**


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**25 Interests in other entities**

**(a) Material subsidiaries**

The Group’s principal subsidiaries at 30 June 2023 are set out below. Unless otherwise stated, they have share
capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership
interests held equals the voting rights held by the Group.


**Place of**
**business/**
**country of** **Ownership interest held** **Principal**
**incorporation** **by the group** **activities**
**2023** 2022


**Name of entity**


Property
Holding

NEXTDC Holdings Trust No. 1 Australia **100** 100 Company

Holding
NEXTDC Holdings No. 1 Pty Ltd Australia **100** 100 Company

Property
Holding

NEXTDC Holdings Trust No. 3 Australia **100** 100 Company

Holding
NEXTDC Holdings No. 3 Pty Ltd Australia **100** 100 Company

Company
NEXTDC Ventures Pty Ltd Australia **100** 100 Investment

Holding
NEXTDC Ventures Holdings No. 1 Pty Ltd Australia **100** 100 Company

Property
Holding

NEXTDC New Zealand Limited New Zealand **100** -  Company

Holding
NEXTDC New Zealand Holdings Limited New Zealand **100** -  Company

Holding
NEXTDC Holdings Trust No. 4 Australia **100** -  Company

Property
Holding

NSC Sub Trust Australia **100** -  Company

Property
Holding

NEXTDC SDN. BHD. Malaysia **100** -  Company

**(b) Interests in associates and joint ventures**

_(i)_ _Significant judgement: existence of significant influence_
On 22 November 2021, NEXTDC Limited acquired a 19.99% interest in an ASX listed entity, Sovereign Cloud
Holdings (ASX: SOV), via an upfront placement of $12.4 million. Following the placement, NEXTDC acquired a
further $4.5 million in shares via a follow-on pro rata entitlement offer to maintain its 19.99%
shareholding.Transaction costs of $1.1 million incurred as part of the acquisition have been capitalised against
the investment.

Following acquisition, NEXTDC Limited was entitled to one seat on the board of Sovereign Cloud Holdings and
now participates in all significant financial and operating decisions.

On 29 June 2023, NEXTDC Limited acquired a further $4.0m in shares via a pro-rata non-renounceable
entitlement offer, increasing its shareholding to 33.61%. With the increased ownership and continued board set,
the Group maintains that it has significant influence over this entity.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**25 Interests in other entities (continued)**

**(b) Interests in associates and joint ventures (continued)**

_(ii) Summarised financial information for associates and joint ventures_
The tables below provide summarised financial information for those associates that are material to the Group.
The information disclosed reflects the amounts presented in the financial statements of the relevant associates
and not NEXTDC Limited’s share of those amounts. They have been amended to reflect adjustments made by
the entity when using the equity method, including fair value adjustments and modifications for differences in
accounting policy.
**Sovereign Cloud**
**Holdings**


30 June
2022
$'000


**30 June**
**2023**
**$'000**


**Summarised balance sheet**


Total current assets **17,241** 30,928
Total non-current assets **16,702** 15,060

< blank header row >
Total current liabilities **5,263** 5,716
Total non-current liabilities **3,776** 2,402
**Net assets** **24,904** **37,870**

< blank header row >

**30 June** 30 June
**2023** 2022
**$'000** $'000
**Reconciliation to carrying amounts:**
**Net assets** **24,904** 37,870
Group’s share in % **33.61%** 19.99%
Group’s share in $ **8,370** 7,570
Goodwill / (impairment) **(2,099)** 745
**Carrying amount** **6,271** 8,315

**30 June** 30 June
**2023** 2022
**Reconciliation of carrying value of investment** **$'000** $'000
Opening balance **8,315** - 
Additions **4,017** 18,115
Share of loss **(4,262)** (1,879)
Impairment charge (iii) **(1,799)** (7,921)
**Carrying amount** **6,271** 8,315


**30 June**
**2023**
**$'000**


30 June
2022
$'000


**Summarised statement of comprehensive income**


Revenue **6,795** 4,242

< blank header row >
**Profit/(loss) from continuing operations** **(21,283)** **(15,522)**

< blank header row >
**Loss for the year** **(21,283)** (15,522)
**Total comprehensive income** **(21,283)** **(15,522)**

< blank header row >


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**25 Interests in other entities (continued)**

**(b) Interests in associates and joint ventures (continued)**

_(iii) Impairment_
NEXTDC's 33.61% stake in Sovereign Cloud Holdings Limited (ASX: SOV) was tested for impairment at the
reporting date. While the strategic merit and underlying business case behind the Company's investment in SOV
remains unchanged an impairment indicator was identified due to SOV shares trading to $0.055 per share at 30
June 2023.

Given the difference between SOV's trading price and the carrying value of SOV shares in NEXTDC's accounts,
the Company has determined an impairment charge of $1.8 million should be taken up for the year ended 30
June 2023.

**26 Parent entity financial information**

The individual financial statements for the parent entity, NEXTDC Limited, show the following aggregate
amounts:


**30 June**
**2023**
**$'000**


30 June
2022
$'000


Current assets **848,466** 522,960
Non-current assets **2,786,529** 2,214,542
**TOTAL ASSETS** **3,634,995** **2,737,502**
Current liabilities **91,559** 104,248
Non-current liabilities **1,481,615** 1,175,617
**TOTAL LIABILITIES** **1,573,174** **1,279,865**
**NET ASSETS** **2,061,821** **1,457,637**

Shareholders' equity
Contributed equity **2,371,154** 1,752,598
Reserves **32,105** 33,805
Retained earnings **(341,438)** (328,766)
**TOTAL EQUITY** **2,061,821** **1,457,637**

Profit/(loss) for the year after tax **(12,672)** 25,615
Total comprehensive income/(loss) for the year **(12,672)** 25,615

**(a) Reserves**

Due to the requirements of accounting standards, the loan provided by NEXTDC Limited (parent entity) to
NEXTDC Share Plan Pty Ltd requires the loan in respect of the loan funded share plan to be recorded as an
issue of treasury shares and a corresponding debit to equity (treasury share reserve).

**(b) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries**

As at 30 June 2023, NEXTDC Limited did not have any guarantees in relation to the debts of subsidiaries.

**(c) Contingent liabilities of NEXTDC Limited (parent entity)**

The parent entity did not have any contingent liabilities as at 30 June 2023 or 30 June 2022.

**(d) Contractual commitments by NEXTDC for the acquisition of property, plant and equipment**

As at 30 June 2023, of the contractual commitments detailed in Note 16, $169.8 million relate to NEXTDC
Limited as parent entity.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**26 Parent entity financial information (continued)**

**(e) Determining the parent entity financial information**

The financial information for the parent entity has been prepared on the same basis as the consolidated financial
statements, except as set out below.

_(i)_ _Tax consolidation legislation_
NEXTDC Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation.

The head entity, NEXTDC Limited, and the controlled entities in the tax consolidated Group account for their own
current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated
Group continues to be a stand-alone taxpayer in its own right.

In addition to its own current and deferred tax amounts, NEXTDC Limited also recognises the current tax
liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed
from controlled entities in the tax consolidated Group.

The entities have also entered into a tax funding agreement under which the wholly-owned entities fully
compensate NEXTDC Limited for any current tax payable assumed and are compensated by NEXTDC Limited
for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are
transferred to NEXTDC Limited under the tax consolidation legislation. The funding amounts are determined by
reference to the amounts recognised in the wholly-owned entities’ financial statements.

The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice
from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity
may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
current amounts receivable from or payable to other entities in the Group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding
agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

_(ii) Investments in subsidiaries, associates and joint venture entities_
Investments in subsidiaries are accounted for at cost in the financial statements of NEXTDC Limited.

**27 Summary of significant accounting policies**

The principal accounting policies adopted in the preparation of these consolidated financial statements are set
out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The
financial statements are for the consolidated entity consisting of NEXTDC Limited and its subsidiaries. NEXTDC
is a public company limited by shares, incorporated and domiciled in Australia.

**(a) Reporting Period and Comparative information**

These financial statements cover the period 1 July 2022 to 30 June 2023. The comparative reporting period is 1
July 2021 to 30 June 2022.

**(b) Basis of preparation**

This general purpose financial report has been prepared in accordance with Australian Accounting Standards
and interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001.
NEXTDC Limited is a for-profit entity for the purpose of preparing the financial statements.

_(i)_ _Compliance with IFRS_
The consolidated financial statements of the NEXTDC Group also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The consolidated financial statements were authorised for issue by the Board of Directors on the date the
Directors' Report is signed. The Directors have the power to amend and reissue the financial statements.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**27 Summary of significant accounting policies (continued)**

**(b) Basis of preparation (continued)**

_(i)_ _Compliance with IFRS (continued)_

_(ii) New and amended standards adopted by the group_

None of the new standards and amendments to standards that are mandatory for the first time for the financial
year beginning 1 July 2022 affected any of the amounts recognised in the current period or any prior period and
are not likely to affect future periods.

_(iii) Historical cost convention_
These financial statements have been prepared under the historical cost convention, except for derivatives
measured at fair value.

_(iv) New standards and interpretations not yet adopted_

There are no standards that are not yet effective that would be expected to have a material impact on the Group
in the current or future reporting periods and on foreseeable future transactions.

**(c) Critical accounting estimates**

Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the entity and that are believed to be
reasonable under the circumstances.

This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of
items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong.

_(i)_ _Deferred taxation_
Deferred tax assets may be a combination of unused tax losses, offsets and timing differences based on
management’s foreseeable forecasts, to the extent that it is probable that taxable profit will be available against
which the losses, offsets and timing differences can be utilised. Significant management judgement is required to
determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of
future taxable profits together with future tax planning strategies.

The Group previously derecognised deferred tax assets in relation to carry-forward tax losses and temporary
differences as it believed they no longer met the requirement to be recognised, stemming from the impact that
the recent growth and expansion activity has had on taxable profits. Despite the derecognition, these
carry-forward tax losses and offsets can be carried forward indefinitely and have no expiry date.

_(ii) Income taxes_
The Group is subject to income taxes in the jurisdictions in which it operates. Judgement is required in
determining the provision for income taxes. There are certain transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is uncertain. The Group estimates its tax
liabilities based on the Group’s understanding of the tax law. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the current and deferred
income tax assets and liabilities in the period in which such determination is made.

_(iii) Leases_
The Group is required to determine the measurement of lease liabilities based on the present value of remaining
lease payments, discounted using the Group’s incremental borrowing rate at commencement date. Judgement is
required in determining an appropriate incremental borrowing rate, and the Group has determined the rate based
on the effective interest rate of its most recent borrowings, adjusted to the specific term of each lease. In
determining the lease term, management considered all relevant facts and circumstances that create an
economic incentive to either exercise an extension option, or not exercise a termination option. Extension options
are only included in the lease term if it is reasonably certain to be extended. The assessment is reviewed if a
significant event or significant change in circumstances occurs which affects this assessment, and that is within
the control of the lessee.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**27 Summary of significant accounting policies (continued)**

**(c) Critical accounting estimates (continued)**

_(iv) Revenue from contracts with customers_
Key judgements in the recognition of revenue from contracts with customers include the identification of
performance obligations within the contracts, allocation of the transaction price within the contract to the identified
performance obligations, treatment of the upfront project fees and treatment of any variable consideration
subsequent to initial commencement. Refer to Note 4 for further details.

_(v) Impairment_
Assessment of indicators of impairment and the determination of CGUs for impairment purposes require
significant management judgment. Indicators of impairment may include changes in the Group's operating and
economic assumptions or possible impacts from emerging risks such as climate change and the transition to a
low carbon economy. Considering the location and nature of our assets as well as our continued focus on
operational resilience and business continuity programs, at this stage, we do not consider the potential impacts of
climate change and the transition to a low carbon economy to be an impairment indicator.

**(d) Employee Share Trust**

The Group has formed two entities to administer the Group's employee share schemes. The trusts are
consolidated, as the substance of the relationships are that the trusts are controlled by the Group. Shares held by
NEXTDC Share Plan Pty Ltd and NEXTDC Employee Share Plan Trust are disclosed as treasury shares and
deducted from contributed equity.

**(e) Share-based payments reserve**

The share-based payments reserve is used to recognise:

-  the grant date fair value of long-term incentives issued to participants

-  the grant date fair value of shares issued to participants

-  the issue of shares held by NEXTDC Share Plan Pty Ltd and NEXTDC Employee Share Plan Trust

**(f)** **Functional and presentation currency**

These consolidated financial statements are presented in Australian dollars, which is the Group’s functional
currency.

**(g) Impairment of assets**

Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other
assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets
or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are
reviewed for possible reversal of the impairment at the end of each reporting period.

Consideration has been given to the potential financial impacts of climate change related risks on the carrying
value of the Group's assets through a qualitative review of the Group's climate change risks and mitigating
actions. This review did not identify any material financial reporting impacts.

**(h) Cash and cash equivalents**

For the purpose of presentation in the Consolidated Statement of Cash Flows, cash and cash equivalents
includes cash on hand, deposits held at call with financial institutions and term deposits with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**27 Summary of significant accounting policies (continued)**

**(i)** **Investments and other financial assets**

_(i)_ _Classification_
The Group classifies its financial assets in the following measurement categories:

-  those to be measured subsequently at fair value (either through OCI or through profit or loss), and

-  those to be measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual
terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For
investments in equity instruments that are not held for trading, this will depend on whether the Group has made
an irrevocable election at the time of initial recognition to account for the equity investment at fair value through
other comprehensive income (FVOCI).

The Group reclassifies debt investments when and only when its business model for managing those assets
changes.

_(ii) Measurement_
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset
not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of
the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

_Debt instruments_
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset
and the cash flow characteristics of the asset. There are three measurement categories into which the Group
classifies its debt instruments:

-  Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortised cost. Interest income from these
financial assets is included in finance income using the effective interest rate method. Any gain or loss arising
on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with
foreign exchange gains and losses. Impairment losses are presented as separate line item in the
consolidated income statement.

-  FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where
the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI.
Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or
losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When
the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified
from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial
assets is included in finance income using the effective interest rate method. Foreign exchange gains and
losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in
the consolidated income statement.

-  FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss
on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net
within other gains/(losses) in the year in which it arises.

_Equity instruments_
The Group subsequently measures all equity investments at fair value. Where the Group’s management has
elected to present fair value gains and losses on equity investments in OCI, there is no subsequent
reclassification of fair value gains and losses to profit or loss following the derecognition of the investment.
Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s
right to receive payments is established.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**27 Summary of significant accounting policies (continued)**

**(i)** **Investments and other financial assets (continued)**

_(ii) Measurement (continued)_
_Equity instruments (continued)_
Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the consolidated
income statement as applicable. Impairment losses (and reversal of impairment losses) on equity investments
measured at FVOCI are not reported separately from other changes in fair value.

_(iii) Impairment_
The group assesses on a forward looking basis the expected credit losses associated with its debt instruments
carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been
a significant increase in credit risk. For trade receivables, the group applies the simplified approach permitted by
AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables, see
note 14 for further details.

**(j)** **Derivatives and hedging activities**

_(i)_ _Classification of derivatives_
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where
derivatives do not meet the hedge accounting criteria, they are classified as ‘held for trading’ for accounting
purposes and are accounted for at fair value through profit or loss. They are presented as current assets or
liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.

The Group designates derivatives as hedges of a particular risk associated with the cash flows of recognised
assets and liabilities and highly probably forecast transactions (cash flow hedge). At inception of the hedge
relationship, the Group documents the economic relationship between hedging instruments and hedged items
including whether changes in the cash flows of the hedging instruments are expected to offset changes in the
cash flows of hedged items. The Group documents its risk management objective and strategy for undertaking its
hedge transactions.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognised in the cash flow hedge reserve within equity. The gain or loss relating to the ineffective
portion is recognised immediately in profit or loss, within other gains/(losses).

The Group designates interest rate swaps as cash flow hedges of highly probable forecast interest. The interest
rate swaps have floor options embedded within; in this case the Group designates only the intrinsic value of the
options as the hedging instrument.

Gains or losses relating to the effective portion of the change in intrinsic value of the options are recognised in
the cash flow hedge reserve within equity. The changes in the fair value of the aligned time value of the option
are recognised in other comprehensive income and accumulated in the cost of hedging reserve. If the hedged
item is transaction-related, the time value is reclassified to profit or loss when the hedged item affects profit or
loss.

If the hedged item is time period related, then the amount accumulated in the cost of hedging reserve is
reclassified to profit or loss on a rational basis. Those reclassified amounts are recognised in profit or loss in the
same line as the hedged item. If the hedged item is a non-financial item, then the amount accumulated in the cost
of hedging reserve is removed directly from equity and included in the initial carrying amount of the recognised
non-financial item. Furthermore, if the Group expects that some or all of the loss accumulated in cost of hedging
reserve will not be recovered in the future, that amount is immediately reclassified to profit or loss.

_(ii) Fair Value measurement_
The fair value of the interest rate swaps which the group has entered into are not traded in an active market (for
example, over-the-counter derivatives), and are determined using valuation techniques which maximise the use
of observable market data and rely as little as possible on entity-specific estimates. Given all significant inputs
required to fair value these interest rate swaps are observable, the instrument is classified as level 2.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**27 Summary of significant accounting policies (continued)**

**(k) Provisions**

Provisions for asset replacement and make good obligations are recognised when the Group has a present legal
or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to
settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future
operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of
an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management's best estimate of the expenditure required to
settle the present obligation at the end of the reporting year. The discount rate used to determine the present
value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

**(l)** **Employee benefits**

_(i) Short-term Obligations_
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within
12 months after the end of each reporting period in which the employees render the related service are
recognised in respect of employees’ services up to the end of the reporting period and are measured at the
amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in
payables.

_(ii) Other long-term employee benefit Obligations_
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the
end of the reporting period in which the employees render the related service is recognised in the provision for
employee benefits and measured as the present value of expected future payments to be made in respect of
services provided by employees up to the end of the reporting period. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service. Expected future payments
are discounted using market yields at the end of the reporting period on national government bonds with terms to
maturity and currency that match, as closely as possible, the estimated future cash outflows.

_(iii) Share-based Payments_
Share-based compensation benefits are provided to participants via the Long Term Incentive Plan.

The fair value of performance rights is recognised as an employee benefits expense with a corresponding
increase in equity. The total amount to be expensed is determined by reference to the fair value granted, which
includes any market performance conditions and the impact of any non-vesting conditions but excludes the
impact of any service and non-market performance vesting conditions.

Non-market vesting conditions are included in the assumptions. The total expense is recognised over the vesting
period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each
period, the Group revises its estimates of the number of rights that are expected to vest based on the non-market
vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Consolidated
Statement of Comprehensive Income, with a corresponding adjustment to equity.

_(iv) Retirement benefit Obligations_
Except for the statutory superannuation guarantee charge, the Group does not have any other retirement benefit
obligations.

**(m) Rounding of amounts**

The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument
2016/191, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial
statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in
certain cases, to the nearest dollar.


-----

Notes to the Consolidated Financial Report
30 June 2023
(continued)

**27 Summary of significant accounting policies (continued)**

**(n) Goods and Services Tax (GST)**

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the
asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the
Consolidated Balance Sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as operating
cash flows.

**(o) Parent entity financial information**

The financial information for the parent entity, NEXTDC Limited, disclosed in note 26 has been prepared on the
same basis as the consolidated financial statements.

**(p) Assets in the course of construction**

Assets in the course of construction are shown at historical cost. Historical cost includes directly attributable
expenditure on data centre facilities which at reporting date, has not yet been finalised and/or ready for use.
Assets in the course of construction are not depreciated.

Assets in the course of construction are transferred to property, plant and equipment upon successful testing and
commissioning.

**(q) Revenue received in advance**

Revenue received in advance primarily relates to the advance consideration received from customers in relation
to project fees and service credits, for which revenue is recognised over time. Refer to Note 4 (b) for details in
relation to the revenue recognition policy for project fees and service credits.


-----

Directors' Declaration
30 June 2023

**In the Directors' opinion:**

(a) the financial statements and notes set out on pages 64 to 113 are in accordance with the Corporations Act
_2001, including:_

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and

(ii) giving a true and fair view of the consolidated entity's financial position as at 30 June 2023 and of
its performance for the financial year ended on that date, and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable, and

(c) at the date of this declaration, there are reasonable grounds to believe that the Group will be able to pay
its debts as and when they become due and payable, and

Note 27 confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.

The Directors have been given the declarations by the chief executive officer and chief financial officer required
by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of Directors.

Craig Scroggie
Managing Director and Chief Executive Officer

28 August 2023


-----

Independent Auditor’s Report

Independent auditor’s report

To the members of NEXTDC Limited

**Report on the audit of the financial report**

**Our opinion**

In our opinion:

The accompanying financial report of NEXTDC Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:

(a) giving a true and fair view of the Group's financial position as at 30 June 2023 and of its
financial performance for the year then ended

(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.

_What we have audited_
The Group financial report comprises:

-  the consolidated balance sheet as at 30 June 2023

-  the consolidated statement of comprehensive income for the year then ended

-  the consolidated statement of changes in equity for the year then ended

-  the consolidated statement of cash flows for the year then ended

-  the notes to the consolidated financial report, which include significant accounting policies and
other explanatory information

-  the directors’ declaration.

**Basis for opinion**

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
_report section of our report._

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.

_Independence_
We are independent of the Group in accordance with the auditor independence requirements of the
_Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical_
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
_Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also_
fulfilled our other ethical responsibilities in accordance with the Code.

PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999

Liability limited by a scheme approved under Professional Standards Legislation.


-----

**Our audit approach**

An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.

We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.

**_Materiality_** **_Audit scope_** **_Key audit matters_**

-  For the purpose of our audit we -  Our audit focused on -  Amongst other relevant
used overall Group materiality of where the Group made topics, we communicated
$4.6 million, which represents subjective judgements; the following key audit
approximately 2.5% of the Group's for example, significant matters to the Audit and
Earnings Before Interest, Tax, accounting estimates Risk Management
Depreciation and Amortisation, after involving assumptions Committee:
adjusting for an impairment charge and inherently uncertain

−Data Centre Services

on the investment in associates future events.

Revenue Recognition

(adjusted EBITDA).

-  NEXTDC has data

−Property, Plant and

-  We applied this threshold, together centres operating in

Equipment.

with qualitative considerations, to capital cities across
determine the scope of our audit Australia. -  These are further described
and the nature, timing and extent of in the Key audit matters
our audit procedures and to section of our report.
evaluate the effect of misstatements
on the financial report as a whole.

-  We chose adjusted EBITDA
because it is a benchmark against
which the performance of the Group
is commonly measured.

-  We utilised a 2.5% threshold based
on our professional judgement,
noting it is within the range of
commonly acceptable thresholds.


-----

**Key audit matters**

Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.

**_Key audit matter_** **_How our audit addressed the key audit matter_**

**Data Centre Services Revenue Recognition**
_Refer to note 4 - Data centre services revenue_
_$357.2m_

The Group applies AASB 15 Revenue from Contracts We performed the following procedures, amongst
with Customers to account for the services it provides others:
to its customers. Accounting for revenue recognition
was a key audit matter due to the:

-  Assessed whether the Group’s accounting
policies were in accordance with the

-  significance of revenue to understanding the requirements of AASB 15 Revenue from
financial results for users of the financial Contracts with Customers;
report; -  Evaluated the judgements made by the

-  complexity involved in applying the Group in applying the accounting policy by
requirements of AASB 15 given the number obtaining an understanding of the revenue
of revenue components and contracts with components and considering the terms and
customers with bespoke terms and conditions of a sample of contracts;
conditions, including in relation to recurring -  For a sample of contracts for each revenue
service fees, upfront project fees and component tested, we:
service credits; -  developed an understanding of the

-  judgements required by the Group in key terms of the arrangement
applying the requirements of AASB 15, such including parties, term dates,
as: performance obligations, fees and

-  identifying the performance payment terms;
obligations under its contracts with -  considered the Group’s
customers; identification of performance

-  determining the transaction price, obligations and allocation of the
considering the terms in the transaction price to the
contracts relating to recurring performance obligations;
service fees, upfront project fees, -  recalculated the amount of revenue
and service credits; and which the Group has recognised,

-  the method of allocating the taking into account the terms of the
transaction price in the contract to contracts for recurring service fees,
the performance obligations. upfront project fees, and service

credits.

-  Evaluated the reasonableness of the
disclosures made in Note 4 in light of the
requirements of Australian Accounting
Standards.


-----

**_Key audit matter_** **_How our audit addressed the key audit matter_**

**Property, Plant and Equipment**
_Refer to note 9 - Property, Plant and Equipment_
_$2,895m_

NEXTDC has continued to invest in new data centres Our audit approach included testing individually large
during the period, and to expand its existing data value additions and transfers, while the residual
centre infrastructure. These growth projects require balance was tested on a sample basis. We performed
significant capital outlay which results in the the following procedures, amongst others:
capitalisation of external and internal costs into
Property, Plant and Equipment.

-  developed an understanding of and
evaluated the Group’s cost capitalisation

During the current year, $670m has been capitalised policy;
as additions to assets in the course of construction,
and $1,002m has been transferred from assets in the

-  assessed the processes implemented by the

course of construction to the appropriate class of

Group for the measurement of capitalised

Property, Plant and Equipment.

costs;

Costs should be capitalised and depreciated in line

-  sample tested capitalised costs to related

with Australian Accounting Standards which outline

documentation, including assessing whether

the criteria required to be met for costs to be

they meet the criteria for capitalisation with

capitalised, and the treatment to be applied in the

reference to Australian Accounting

depreciation of the costs capitalised.

Standards;

This was a key audit matter because of the:

-  assessed the appropriateness of
capitalisation of internal costs, in particular

-  significance of the additions balance to the salaries and wages; and
Consolidated Balance Sheet;

-  for a sample of assets, assessed the

-  potential significance of the additions appropriateness of the timing and method of
balance to the Consolidated Statement of transfers from assets in the course of
Comprehensive Income should the costs not construction to the appropriate property,
meet the criteria required for capitalisation; plant and equipment asset class, and

recalculated the amount of depreciation that

-  judgement involved in assessing whether the Group had recognised.
internal costs meet the criteria for
capitalisation;

-  significance of the depreciation expense to
the Consolidated Statement of
Comprehensive Income; and

-  the judgements applied in determining the
appropriate timing of transfers from assets in
the course of construction to the appropriate
class of Property Plant and Equipment, and
the calculation of the depreciation expense.


-----

**Other information**

The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2023, but does not include the
financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon through our opinion on the financial report. We
have issued a separate opinion on the remuneration report.

In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.

**Responsibilities of the directors for the financial report**

The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.

**Auditor’s responsibilities for the audit of the financial report**

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
auditor's report.


-----

**Report on the remuneration report**

**Our opinion on the remuneration report**

We have audited the remuneration report included in pages 34 to 58 of the directors’ report for the
year ended 30 June 2023.

In our opinion, the remuneration report of NEXTDC Limited for the year ended 30 June 2023 complies
with section 300A of the Corporations Act 2001.

**Responsibilities**

The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.

PricewaterhouseCoopers

Michael Shewan Brisbane

Partner 28 August 2023


-----

Shareholder Information
Shareholder Information
30 June 2023

The following shareholder information was applicable as at 8 August 2023.

**Distribution of equity securities**

**Number of** **Number of**
**Holding** **investors** **securities**

100,001 and over 80 416,533,059
10,001 - 100,000 2,008 41,439,858
5,001 - 10,000 2,902 20,489,224
1,001 - 5,000 12,299 29,516,394
1 - 1000 18,384 6,668,101
**Total** **35,673** **514,646,636**

Unmarketable parcels 623 5,452

**Equity security holders**

The names of the twenty largest holders of quoted equity securities are listed below:

**Name**

**Percentage of**
**Number held** **issued shares**

1. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 153,142,713 29.76
2. J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 112,516,607 21.86
3. CITICORP NOMINEES PTY LIMITED 51,187,452 9.95
4. BNP PARIBAS NOMINEES PTY LTD <AGENCY LENDING DRP A/C> 25,368,732 4.93
5. NATIONAL NOMINEES LIMITED 19,412,986 3.77
6. BNP PARIBAS NOMS PTY LTD <DRP> 9,450,098 1.84
7. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED <NT-COMNWLTH
SUPER CORP A/C> 6,432,530 1.25
8. UBS NOMINEES PTY LTD 3,105,198 0.60
9. BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
<DRP A/C> 2,964,364 0.58
10. PACIFIC CUSTODIANS PTY LIMITED NXT EMP SHARE PLAN TST 2,654,001 0.52
11. BNP PARIBAS NOMS(NZ) LTD <DRP> 2,642,985 0.51
12. NETWEALTH INVESTMENTS LIMITED <WRAP SERVICES A/C> 2,311,225 0.45
13. LATIMORE FAMILY PTY LTD <LATIMORE FAMILY A/C> 2,146,250 0.42
14. CITICORP NOMINEES PTY LIMITED <COLONIAL FIRST STATE INV
A/C> 2,101,586 0.41
15. BNP PARIBAS NOMINEES PTY LTD <PITCHER PARTNERS DRP> 1,677,520 0.33
16. AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED 1,550,000 0.30
17. MUTUAL TRUST PTY LTD 1,131,600 0.22
18. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 1,029,577 0.20
19. SUAVE INVESTMENTS PTY LTD 756,844 0.15
20. NETWEALTH INVESTMENTS LIMITED 663,793 0.13

**402,246,061** **78.18**

**Number** **Number**
**Unquoted equity securities** **on issue** **of holders**

Performance rights - issued in FY21 389,388 24
Performance rights - issued in FY22 494,364 36
Performance rights - issued in FY23 706,467 37
Deferred share rights - issued in FY23 61,162 3


-----

Shareholder Information
30 June 2023
(continued)

**Substantial holders**

Substantial holders in the Company based on ASX lodgements up until 8 August 2023 are set out below:

**Number** **Percentage of**
**Substantial holders** **held** **issued shares**

UniSuper Limited 29,194,768 6.38%
BlackRock Group 29,878,481 6.02%
Vanguard Group 25,882,240 5.02%

**Voting rights**

The voting rights attaching to each class of equity securities are set out below:

_(i)_ _Ordinary shares_
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a
poll each share shall have one vote.

_(ii) Performance rights and deferred share rights_
No voting rights.


-----

Corporate Directory

NEXTDC Limited
Corporate Directory

**Directors** Douglas Flynn
_Chairman_
Craig Scroggie
_Managing Director and Chief Executive Officer_
Stuart Davis
_Non-Executive Director_
Dr Gregory J Clark AC
_Non-Executive Director_
Stephen Smith
_Non-Executive Director_
Jennifer Lambert
_Non-Executive Director_
Dr Eileen Doyle
_Non-Executive Director_
Maria Leftakis (appointed 24 August 2023)
_Non-Executive Director_

**Company secretary** Michael Helmer

**Registered office** 20 Wharf St
Brisbane Qld 4000
Tel: +61 7 3177 4777

**Website address** www.nextdc.com

**Auditor** PricewaterhouseCoopers
480 Queen Street
Brisbane Qld 4000
+61 7 3257 5000

**Solicitors** Clayton Utz
Level 28, Riparian Plaza
71 Eagle Street
Brisbane Qld 4000

Herbert Smith Freehills
ANZ Tower
161 Castlereagh Street
Sydney NSW 2000

**Share register** Link Market Services
Level 21,10 Eagle Street
Brisbane Qld 4000
Tel: 1300 554 474 (in Australia)
Tel: +61 (2) 8280 7111 (overseas)

**Stock exchange listing** NEXTDC Limited shares are listed on the Australian
Securities Exchange (ASX) under ticker code NXT.


-----

1 July 2022 to 30 June 2023 For any queries about NEXTDC’s

NEXTDC Limited Annual Report please contact us at www.nextdc.com/contact


-----

