Consumer demand to drive NEXTDC’s future capital raises
- Wed 26 June 2024
- 5 MIN READ
Long-term investor engagement means NEXTDC has support to fund its growth.
Raising capital and NEXTDC’s plans for the future
Listed@ASX: What’s your advice for other businesses raising capital in this market?
Craig Scroggie (CS): It's crucial to maintain clear communication with investors because they want a thorough understanding of the business to make informed decisions about supporting capital requests. Transparent and effective communication ensures investors are well-informed about risks and potential rewards, fostering trust and facilitating stronger business relationships. This transparency helps secure necessary funding and aligns investor expectations with company goals.
It's essential to effectively communicate the growth strategy and use of funds to assure investors that providing additional capital will lead to enhanced value creation. NEXTDC operates within a thriving industry and is experiencing strong customer demand. The capital raised in the past year has been strategically deployed to scale operations and meet this increasing demand both domestically and now internationally across Asia.
By clearly explaining how further investment will be used to capitalise on these market opportunities, we can clearly articulate our confidence in the potential for greater returns, underlining the company's strong position and promising outlook in the digital infrastructure sector.
"The capital raised in the past year has been strategically deployed to scale operations and meet this increasing demand both domestically and now internationally across Asia."
Listed@ASX: When you have been going to market to raise capital, either from existing or new investors, how have you found the spread and depth of investors both in Australia and offshore? How well do they understand your business and growth strategy?
CS: We actively engage with investors to foster a comprehensive understanding of our business. This includes regular communication with institutional investors, participation in investor conferences and conducting tours of NEXTDC facilities across the country. Additionally, we maintain connections with a wide range of equity analysts who provide objective assessments of NEXTDC, ensuring investors have access to diverse viewpoints.
While it is more straightforward to interact with domestic investors through in-person meetings and on-site facility tours, we also ensure that our offshore investors are equally well-informed and engaged. These efforts have been instrumental in maintaining their support, especially during equity-raising events. This dual approach helps to sustain investor confidence and supports our ongoing growth initiatives.
"We actively engage with investors to foster a comprehensive understanding of our business."
Listed@ASX: What are your capital raising plans for the next few years and how will this support your growth strategy?
CS: NEXTDC operates within the capital-intensive data centre industry, strategically raising capital at times which align with customer demand for our services. This ensures we remain proactive in expanding our infrastructure in response to growing customer needs.
NEXTDC is in a robust financial position, which positions us strongly to continue pursuing our strategic growth initiatives in Australia and abroad. While the company is well-capitalised now, the dynamic nature of the technology and data centre markets mean additional capital may be required in the future given we could experience growth driven by cloud computing and AI more than three to five times current levels, just in the next couple of years.
Should this occur, it would be a response to further increases in customer demand, reflecting a very positive catalyst of growth and expansion. Such a scenario, while requiring additional resources, would represent a high-quality problem, indicating strong market demand and the company's continued success in the industry.
This balanced approach to capital management ensures that NEXTDC is prepared to scale operations while maintaining financial health, and maintain disciplined capital investment aligned with customer demand, that is ultimately supporting sustained growth and shareholder value creation.
Building investor confidence
Listed@ASX: How do you engage with investors, and what metrics or indicators do you consider most important to communicate your financial health?
CS: We place a high value on consistency in our reporting to ensure that investors can easily monitor our operational and financial performance. To achieve this, we have committed to presenting the same operational and financial metrics in our regular market communications for many years. This consistent approach allows investors to become familiar with the key drivers of our business and track our performance effectively.
"We place a high value on consistency in our reporting to ensure that investors can easily monitor our operational and financial performance."
This consistency aids in transparency and builds investor confidence, as they know exactly where to find important information in our reporting documents and can reliably compare current data with historical performance. This strategy supports informed investment decisions and underscores our commitment to transparency and accountability in our financial communication.
The AI revolution and managing increasing demand
Listed@ASX: How is the global AI revolution impacting NEXTDC’s growth strategy and how are you positioned to benefit?
CS: The AI revolution is the beginning of the fourth industrial revolution. It is significantly shaping the data centre industry, particularly in environments where AI workloads are managed, whether for training or inference purposes. Although the full impact of AI on the Australian market is still unfolding, the trends observed globally, specifically in the US, combined with our active engagements with global customers, suggest a massive increase in demand for data centre services driven by AI applications.
At NEXTDC, we are uniquely positioned as Australia's leading data centre as a service operator to accommodate substantial AI workloads and to introduce the new liquid cooling technologies required to support them. Based on current trends and customer feedback, we anticipate AI will have a substantial and positive impact on the demand for data centre capacity in Australia and Asia Pacific. This outlook reflects our commitment to supporting the dynamic needs of our customers as they harness the potential of AI, ensuring NEXTDC remains at the forefront of the digital infrastructure industry.
Listed@ASX: What are some recent developments in data centres and how are you staying ahead of the market?
CS: The surge in demand we've witnessed is characterised by larger, hyperscale orders and a more diverse client base turning to local data centre operators for data sovereignty and security. This burgeoning demand has driven a significant expansion in our customer base and necessitated the construction and development of larger data centre facilities to accommodate these growing needs.
In addition to handling these expanding demands, there is an increasing focus on sustainability and minimising environmental impacts, renewable energy, zero waste, carbon neutrality to name a few. This trend aligns perfectly with NEXTDC's operational philosophy, as we operate the most energy-efficient, NABERS-certified, independently audited data centres in the country. Our commitment to sustainability drives customer expectations, reinforcing our position in the market.
Moreover, the concept of AI factories, where data centres are tailored specifically to handle large-scale AI operations, is becoming a significant aspect of our strategic planning. These AI factories are designed to support extensive machine learning and AI data processing workloads, which require significant higher-power density management and liquid cooling systems to function optimally.
NEXTDC's advanced infrastructure is ideally suited to support these high-demand environments, making us a preferred provider for enterprises looking to leverage AI capabilities. We have been designing and deploying advanced liquid cooling solutions for many years. This alignment with technological advancement and sustainability uniquely positions NEXTDC to capitalise on current and future market trends.
From growth capital to investor engagement, the advantages of being publicly listed
Listed@ASX: Overall, what are the benefits of being an ASX listed company?
CS: Being a publicly listed company offers NEXTDC many advantages in terms of access to growth capital, transparency and investor engagement. ASX mandates regular and thorough disclosures of both financial and operational performance every six months. This level of openness ensures that the state of our business is always clear to customers, investors and other stakeholders, leaving no room for ambiguity.
This transparency also enhances investor trust and confidence, which is critical for attracting a diverse range of global investors. The liquidity of NEXTDC’s shares on ASX allows a broad spectrum of institutional investors to engage with our company. This is the most exciting time in the history of technology and the public position’s gives investors the opportunity to continue to gain exposure to the fast growth and dynamic cloud computing and AI revolution.
Our public listing fosters greater corporate transparency and enhances our capability to support continuous growth and navigate financial landscapes effectively, benefiting all stakeholders involved.
To find out more about NEXTDC, click here.
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