Q1 2022 Iron Mountain Inc Earnings Call
Good morning, and welcome to the Iron Mountain Basketball CAD 2022 earnings Conference call.
All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.
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We will limit analysts to one question and you can rejoin the queue. Please note. This event is being recorded I would now like to turn the conference over to.
Gideon Tillman senior Vice President and head of Investor relation shy Janine. Please go ahead.
Thank you Bree good good morning, and welcome to our first quarter 2022 earnings conference call on today's call. We will refer to materials available on our Investor Relations website. We are joined today by Bill Meaney, President and Chief Executive Officer, and Barry Heightening, Our executive Vice President and Chief Financial Officer after prepared remarks.
Opening up the lines for Q&A today's earnings materials contain forward looking statements, including statements regarding our expectations. All forward looking statements are subject to risks and uncertainties.
Please refer to today's earnings materials, the Safe Harbor language on slide two in our quarterly report on Form 10-Q for a discussion of the major risk factors that could cause our actual results to differ from those in our forward looking statements. In addition, we use several non-GAAP measures when presenting our financial results. We have included the rec.
Conciliations do these measures in our supplemental financial information with that I'll turn the call over to Bill.
Thank you Julian and thank you all for taking the time to join US today, our team delivered exceptional results for the first quarter of 2020 to exceeding the expectations. We provided on our last call. This record performance is reflective of our broad offerings deep customer relationships resilient business model and dedicated team whilst we are thrilled to report that.
Results, it's important to take a moment to acknowledge the events happening in Ukraine impacting the world at large.
As we navigate this devastating conflict, we continue to prioritize our mountaineers and their families to that end I am comforted to share that all 65 of our colleagues from Ukraine continued to check in with our global risk safety and security team on a daily basis in all our save some families have made the difficult.
And to migrate to other countries and I am proud of how our fellow mountaineers in the region have offered assistance and providing comfort and resettlement.
I continue to be both inspired by and grateful to all the teams in Ukraine and the surrounding countries, who have United to support each other in this crisis I visited the region twice recently and I remain humbled by the strength of our colleagues and we remain committed to supporting our affected Mountaineers and continue to hope and pray for a rapid.
Resolution of this war.
Now if I may let me begin our discussion of our first quarter results a record for the company, we achieved our highest ever quarterly revenue of one point to $5 billion exceeding our expectations of 1.2 billion, yielding 10% or total organic revenue growth and an all time record EBITDA of 400.
Third and $31 million.
We continue to be encouraged by the increased demand of our services across key markets fueling these results.
Has pricing and positive volume trends continue to benefit us we delivered organic storage rental revenue growth of six 8% in the first quarter, we drove double digit growth in digital offerings, including data Center G. D. S digital transformation services, and a L M or asset lifecycle management.
As you know we've been growing quickly and over the past two years, we have been growing faster than even our expectations I have shared with you previously how our continued build out of new products and services as well as growth in these underlying markets is now taken our total addressable market to over $120 billion accelerating us on our growth trajectory.
<unk> path.
Turning to our a L. M business, we achieved several solid wins that span industries, many of which were made possible through the strong combination of iron mountain in the recently acquired I T renewable which has been performing even better than we had anticipated. An example of the power of this combination can be seen in our expansion on a customer win.
With a large financial institution that we were originally awarded in early 2021 with.
With the additional expertise we acquired with I T. Renew we expanded our offerings to include market, leading recycling expertise. It's the whole world is focused on how to better embraced the concepts around a more circular economy and reduce our impact on the environment.
Along with this added expertise, we now have a full set of capabilities, which are truly differentiating in the eyes of not only this customer but also most of our global customers.
Another L. M win this quarter was for a task order for Iron Mountain to provide onsite media destruction and a L. M services to 18 U S locations, including data centers and office locations in which all I T asset types will be included has in scope.
Several key factors and awarding us the RFP included secure logistics global footprint partner network and existing trusted relationships for this customer we expect to expand services to multiple regions, including the United Kingdom, Brazil, India and Canada.
These are just some of the wins this quarter, which demonstrate the strength of our expanded L. M platform, which will directly benefit from I R. A I R. M 225000 loyal customer base, which includes 95% of the fortune 1000.
Our continued drive in building, an extraordinary set of synergistic and customer centric solutions combined with our global reach and footprint propels our growth forward.
Now let me share a few examples of how we've been in powering our customers' success and growth through our diverse digital transformation solutions or G. D. S offerings, coupled with our customer focus.
In the first quarter, we received fully executed service orders for two large deals in the energy vertical, but one of the world's largest oil and gas companies.
Both projects will allow our customer to identify and access dark data to provide quicker decisions and to better manage their assets.
The total value of these two deals represents more than $12 million. We are looking forward to replicating this success with other energy customers.
Turning to the Asia Pacific region, I would like to highlight a large win with an Asian full service Universal Bank that I had the honor to visit in March Iron Mountain will provide Digitization service services to assist our customers local compliance requirements of Digi curve, which are anti money laundering related requirements for a total contra.
Correct value of $4 million we.
We are also thrilled to report a customer win that has resulted in a five year $8 million digital mailroom deal leveraging our content services platform our insights.
This fortune 500 mutual insurance customer after handling their own mail in house for more than 100 years came to us with this opportunity, which was both complex and emotional for the customer.
Our success here is a direct result of our long standing strategic partnership.
We also continued to grow our business with immigration refugees in citizenship, Canada or I R. C C, which facilitates the arrival of immigrants provides protection to refugees and offers programming to help newcomers settled in Canada.
In 2020 Iron Mountain began supporting I R. C C with imaging a variety of application forms there was an immediate need to process a backlog of applications with their staff working from home as a result of the pandemic.
To date, we have processed approximately 115000 applications representing over $14 7 million images building from this initial work in Toronto, We grew the project by securing additional contract worth $2.9 million. In addition, we recently awarded a 1.3 million R. F P to expand it.
This image initiatives to Atlantic and Western Canada. This would not have been possible without our work in supporting this customer from day, one positioning Iron Mountain is a critical business partner.
And our Crozier business, we are pleased to highlight our installation of a piece of art entitled Just what is your position by a distinguished L. A artist at the new terminal at L. A X.
This installation highlights our team's expertise in precision with regard to complicated installation that will now be on display for millions of travelers.
Last but surely not least turning to our data center business you will recall that we initially expected to lease 50 megawatts. This year.
By the end of Q1, However, we had already signed a total of 35 megawatts, including a single tenant or 27 megawatts for our London two location.
We are excited about the continued demand we see across Europe as we bring on added capacity to the market in the coming months.
Since March we have sold an additional 72 megawatt lease on our Northern Virginia campus. This is a near build to suit type of agreement, where we are responsible for leasing on a long term basis. The land the shell and a large portion of the installed MEP mechanical electrical plant.
Iron Mountain's data center solution met the security scalability and interconnection requirements of the customer in this critical global data center market the leases expected to commence and begin ramping mid year 'twenty 'twenty four and the <unk> and has a term of 15 years.
Finally, I would like to share with you a joint ESG and data center win as we have said before ESG continues to be an important focus for us shone through many years of producing annual corporate sustainability reports outlining our commitments and progress for nearly a decade, we recently announced a.
<unk> certification of our Phoenix, Arizona as Ed Pete two data center. The first data center in North America to receive Green certification.
We are taking the lead on demonstrating the steps facility owners can take to ensure that their data centers are both efficient and resilient designed for this facility has been certified under the brenes, New construction standard a global recognized Green building certification for new developments and achieved the Brean excellent rating.
This continued focus on building standards together with already having long term renewable power purchasing agreements with drops at more than 100% of our data Center energy requirements places us firmly on the path to reach our 2040 commitments to use 100% renewable energy 100% of the time.
To conclude we continue to build on our growth momentum and expand our portfolio to exceed our customers' evolving needs as evidenced by our outstanding results. This morning, including our highest ever revenue and all time record EBITDA.
With our strong footprint powerful portfolio and deep customer relationships. We are confident that we will continue this momentum the future is bright and I can't wait to see all we can accomplish with that I'll turn the call over to Barry.
Thanks, Bill and thank you all for joining us to discuss our results in.
In the first quarter, our team delivered strong performance exceeding the expectations, we provided on our last call on.
On a reported basis revenue of one point to $5 billion grew 15% year on year with total organic revenue up 10% rare.
Revenue was over $20 million ahead of the expectations, we shared on our last call.
To me a key highlight in the quarter is our ongoing organic storage revenue, which grew six 8% in the quarter, reflecting our strong pricing and data center commencements.
Total service revenue increased 33% to $497 million driven equally by the I T renew acquisition and our core service offerings.
In fact organic service revenue increased $59 million or 16% driven by strong growth across our service lines, including digital solutions.
As revenue associated with our traditional transportation services was still down 10% from pre pandemic levels. We are even more pleased with this performance.
Adjusted EBITDA was $431 million up 13% on a reported basis and up 15% year on year on a constant currency basis.
We had strong contributions from revenue growth driven by pricing and data center storage, along with ongoing productivity improvements, resulting in EBITA growth of $50 million.
The higher level of EBITDA was despite the impact of the stronger U S dollar and the disposition of the software escrow business last June .
Combined those two items are about $14 million a year on year headwind.
Partially offsetting those is the recent renewable acquisition.
With solid flow through first quarter EBITDA exceeded the expectations, we shared on our last call by $6 million.
Adjusted EBITDA margin was better than we projected and while it was lower year on year driven by the inclusion of the I T. Renew our core Iron Mountain business continued to deliver improved profitability year on year, even with investments to fund further growth.
<unk> was $264 million or <unk> 91 cents on a per share basis up $29 million.10, respectively from the first quarter of last year.
In both cases, we exceeded our expectations.
Now, let me spend a moment discussing the impact of the war in Ukraine.
In late March we determined it was appropriate to deconsolidation. The majority of the O S. G Records business, which is principally doing business in Russia.
As a result, we wrote down our investment to a fair value of zero and accordingly recognize the charge through the other expense line.
Going forward, we will no longer be including these entities in our financial statements.
Also in our other expense line this quarter, we had a gain on the make space clutter merger as I mentioned on our last call.
The deconsolidation does not impact our business in Ukraine, which continues to be included in our results.
With reduced revenue and a conservative position on accounts receivable, we recognized a loss in our Ukrainian business during the first quarter.
I want to Echo Bill's comments, we continue to keep all of our mountaineers and their families and our thoughts during this ongoing human tragedy.
Now turning to segment performance.
In the first quarter, our global rim business delivered revenue of $1.04 billion, an increase of $76 million from last year or 8% on a reported basis.
On a constant currency basis revenue increased 10%.
Currency storage rental revenue growth of six 4% or four 6% on an organic basis reflects our focus on revenue management and solid volume trends, which exceeded our expectations for the quarter.
I will note that in our supplemental financial information, we have shared a reconciliation of our volume with and without the deconsolidation of entities to allow for comparability going forward.
Global rim, adjusted EBITDA was $451 million, an increase of $43 million a year on year adjusted.
Adjusted EBITDA margin was up 100 basis points year on year, reflecting continued pricing strength and productivity.
Turning to our global data Center business, we are very pleased with our results on a revenue basis, we delivered 36% year on year growth or 33% organic growth.
A particular highlight for me is the 26% organic storage revenue growth, we delivered in the quarter.
As Bill discussed the team has done exceptionally well with new bookings and with that we are raising our full year outlook on new and expansion leasing to 130 megawatts up from our prior expectation of 50 megawatts.
Now to provide some historical context to that we leased 10 megawatts in 2018 17 megawatts in 2000 1931 megawatts in 2020, excluding our joint venture in Frankfurt and 49 megawatts last year.
With the strength of our performance in the first quarter. We now project full year datacenter revenue growth of at least 20% year on year with even higher rates of growth for storage.
With our strong prior year bookings and recent commitment commencement, we have very good visibility to revenue.
Turning to our corporate and other business revenue increased 146% year on year, driven by the I T renew acquisition and organic growth in our closure business.
For modeling purposes. Please note that our legacy I T asset disposal business continues to be presented in the global rim segment.
Total capital expenditures were $150 million of which $115 million was growth and $35 million was recurring.
In 2022, we now expect total capital expenditures to be approximately $950 million up $100 million from our prior expectations.
This reflects an increase to our data center development Capex plans, given our strong leasing year to date and our very positive outlook.
Turning to the balance sheet with strong EBITDA performance, we ended the quarter with net lease adjusted leverage of 5.4 times.
This is an improvement from last year and better than the projections, we shared on our last call.
As we have said before we are committed to our long term range of four and a half to five five times, we continue to expect to exit the year at levels within our target range.
As you may have seen in March aligned with our growth plans our team successfully refinanced our credit agreement, which includes a 2.25 billion revolving credit facility and a $250 million term loan a facility.
The amendment provides for nearly $550 million of additional borrowing includes favorable terms and extends the maturity to March 2027, we want to thank our commercial lending group for their continued support.
And with our strong financial position our board of directors declared a quarterly dividend of 62 cents per share to be paid in early July .
On a trailing four quarter basis, our payout ratio is now 69% approaching our long term target range of low to mid 60%.
And now turning to our outlook.
We are pleased to reiterate our full year 2022 guidance I should note that this is despite the impact of the deconsolidation and the stronger U S dollar.
With the closing of the I T renew transaction I thought it would be helpful to share our preliminary view on purchase accounting.
We currently anticipate amortization of intangibles to be approximately $60 million annually and with only two months of results in the first quarter, we amortized $10 million naturally. These charges are included in our adjusted EPS and <unk>.
Now, let me share our expectations for the second quarter.
We expect total revenue to be approximately $1 $3 billion, we estimate organic growth to be high single digit to approaching 10% in the second quarter.
We expect adjusted EBITDA to be approximately $450 million and we expect a F O to be approximately $260 million.
The war in Ukraine, and the deconsolidation is nearly $5 million headwind versus the second quarter of 2021 and sequentially versus the first quarter of 2022.
In summary, our investments are accelerating our growth trajectory our customer relationships are strong our core is performing well and we continue to realize incremental pricing opportunities across our business.
Our focus on higher growth segments, including data center asset lifecycle management and digital solutions are positioning us for continued success I would like to thank our entire team for their strong contributions. We look forward to updating you on our progress following the second quarter and with that operator. Please open the line for Q&A.
Thank you we will now begin the question and answer session.
Asked a question you May press Star then one on your telephone keypad.
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The first question we have on the phone line comes from.
She doesn't Mcgrath of Evercore ISI. Please go ahead your line.
I guess good morning, you mentioned the addressable market for Iron Mountain is expanding I just wonder if you continue to look at M&A opportunities like I T renewable and how would you look at financing those type of acquisitions would it be sale leaseback or noncore.
Physicians or would you consider common equity is making sense given that share price gains.
Good morning, Sheila. Thank you for the question. So I think the first isn't we feel really good about the platform not only the $120 billion total addressable market that we have but the platform that we have in each of the parts of the portfolio that attack that if you will or address that so we don't see a need to do any.
You know large M&A type deals like the I T renew because I think we now have market leading platform is pretty much in each of those those areas are.
That where we are addressing so we don't really we don't really see that and we still think that we have a long ways to run in our share price.
Yeah.
Yeah.
Thank you.
Thank you.
The next question comes from.
Kevin Mcveigh.
Credit Suisse. Your line is open.
Yeah.
Great. Thanks, so much and congratulations on the results.
The storage growth was really really impressive the organic can you maybe unpack that a little bit in terms of what's kind of the pricing. The volume and then how are you thinking about that I guess organically for the balance of the year.
Thanks, Kevin are we are you know we appreciate their comments and we feel really we feel really good about how things have been trending and if you look at our global rim storage rental revenue growth of 4.6% organic the vast majority of that is.
Price is as you can see our organic volume is is.
Right in line with what we've been expecting and so you know it's been very good performance on pricing and importantly, we continue to see more opportunity for pricing and that's the on that expectation I would advise you to think about pricing continued to be at this level or better for the remainder of the year. The other thing that really helped that.
Total company storage growth is our data center you would note that our data center storage revenue was up considerably in the quarter and near to in light of both the team's phenomenal performance in terms of a historic leasing as well as recent deals and Commencements, we expect to see considerable growth on that data center storage line.
And the entire year as we were talking about last quarter. So we feel very well positioned Kevin and I appreciate the question.
Okay.
Sure and then just very real quick it looks like you took up the capex guidance.
What was the free cash flow in the first quarter and how should we think about that for the full year.
Yeah, Kevin I would tell you that yeah. Thanks for the question on the Capex It I'll draw People's attention to the fact that we did increase the capex guidance by about 100 million versus our prior expectation that reflects the fact that our data center development Capex is up about 100 billion. So I'm currently planning for $625 million.
So data center development Capex for the full year and that's reflecting the fact that the the new leases that we've signed together with continuing to be opportunistic about building the platform and as you've seen we've had a phenomenal new leasing and so it's sort of a a great situation to be.
To continue to invest in that business, where we're seeing very nice returns. When you think about the model Yeah, I would say that you shouldn't be seeing a very considerable amount of free cash flow before discretionary in our when you work through our CAD and we feel very good about how the how the business is performing.
Yeah.
Great and just very it was 525 before going up to 625 on the data center right.
That's correct Kevin.
Thank you.
Thank you.
We now have the next question from Shlomo Rosenbaum from Stifel. Please go ahead, when you're ready.
Hi, Good morning. Thank you for taking my question, Hey, Bill you'd Miss me, if I didn't ask you this but the real sequential volumes.
Volumes seem to have gone down about $1 7 million from <unk> to <unk>.
Last quarter, when I asked about it there seem to be in a certain seasonality in terms of destructions in things like they have some <unk> to <unk>.
Wondering if you could give us some more color on the <unk> I understand that the company has got very strong pricing and being able to offset that in that way, but oh, you know what the expectation was for the year to end the year, you know flat to potentially up on on the volumes and wanted to get some more color on you know.
The reason for kind of the sequential decline and whether you still expect volumes to be flat to up.
Yeah no. Thanks, Thanks Shlomo good morning, so at least I know that you're on no and well first of all the in terms of physical volume. We said, it's flat to slightly up for the year, but that's looking at our across our portfolio of everything that we put in our warehouses around the globe right. So in terms of managing the organic due to the.
One of our facilities based on organic visible volume growth, we still expect that to be flat to slightly up in you know in this quarter. It was it was up as U S. D. C. So looking within records management, we always kind of consider that to be more flat to slightly down and if you look at the trend even between Q4 and Q1 and as you you.
Watch the business for a long time, you know that both Q4 and Q1, usually have a little bit of noise in them because people tend to do their destruction programs either at the end of the year and some of that goes into the beginning of the year. So you'll always see a little bit noise, but I think if you look at the last say four quarters, you'll see a very consistent trend on <unk>.
What's happening to our physical volume around the records management. So we feel really good where it's at you know, it's it's kind of staying in that kind of flat to slightly down records management or other areas in terms of physical volume storage is is growing quite nicely. So overall, we still remain kind of flat to up for the year and physical.
Volume and then of course pricing takes that up.
Really well I mean, you know we do have very strong pricing power and as we've always said that you know inflation you know whilst we feel four for folks I mean inflation is really hurting all of us in many different ways for the business. It's actually a net positive because we're able to price ahead of inflation and we have a high growth.
Margin business. So it naturally expands the margins of the business.
Yeah.
Okay.
Thank you.
We now have a question from Andrew <unk> of Jpmorgan. Please go ahead, when you're ready.
Hi, Barry I, just wanted to check on how you think about implied EBITDA margin in the 22. Our guide. So you know if I look at page eight and I divide the low end of EBITDA divided by the low end of revenues in the low and the high end of EBITDA at the high end of revenues I got 35 one.
About 35 per Shack, and then you know.
We just did 35 34, five and the implied.
Same approach for the second quarter would be 34, six and so if you're looking for 35, one for the year enough question I'm going to ask you is that the right way to think about it you're talking about a much higher than 35% EBITDA margins in the second half of the year to make 35, one for the full year and so you can imagine I'm going to ask you you know why.
The second half margins be notably higher than the first half this year.
Thanks, Andrew you are you are thinking about that correctly, a couple of things to think about as we move through the year, we have improved.
Improved mix coming through the business. We are we do naturally have as you traditionally have seen in our business. Since you followed us for so long a level of upfront first kind of quarter cost, which are easily have a level of improved mix going forward and get more price as we move through the year.
Year.
We also see very good flow through coming on the data center business as I mentioned earlier last quarter. We expect the data center margin to be slightly up year on year, and we see good flow through coming through in the back half there as well and then generally speaking we are we will continue to comp.
With positive benefit from project summit, another ongoing productivity initiatives.
I would say first off I should remind folks that in the first quarter, we did better on our margin.
Basis than we anticipated that's because the core iron mountain business performed.
Very well in terms of productivity and pricing and we see that trajectory continuing through the year or so sitting here after one quarter I feel quite good about where we are and the margin trajectory Andrew.
Thank you.
We now have a question on the line from Nate Crossett of <unk>. Please go ahead when you're ready.
Okay.
Yeah.
Yeah.
Yeah.
Yeah.
Operator, maybe we can go to the.
Next question.
The next question we have comes from.
Eric.
The Chow from Wells Fargo. Please go ahead, when you're ready.
Hi, good morning, everyone. So I was interested.
Rested in the 72 megawatt data center.
Shell and land and MEP recently, you mentioned I imagine, that's a pretty capital efficient restructure given its size, but maybe you could kind of give us some color on the returns you would underwrite to under that type of structure. The capital intensity and then whether you're seeing more of the shell type deals versus a typical turnkey lease that you could do here in the future.
Hi, Nate so so no. Thanks for the question Yeah. As you say we were very pleased to design. This this.
Deal for our.
Data Center campus in Northern Virginia is a couple of bits will go into more detail on the second quarter call. Because you can imagine that we just signed this agreement as would come in but as I said it is a near a build to suit I mean, we don't we're not providing all the MEP and will actually go into a little bit more details in terms of how the pieces come together, but besides the 70.
Two megawatts. The other thing that we were very excited about it and it allowed us to build further infrastructure on that side, bringing on a substation onto the campus, which is going to drive benefits. Both in terms of upscaling the capacity, but also the the cost to deliver on that on that campus. So theres a number of different pieces that are that make this deal very.
Tractive, but we'll we'll give you more information on the second quarter call, but yeah, youre right to say that it's a very capital efficient structure and with a with a great tenant on the on the back side for 15 years. So it allows us to finance it in a very efficient way.
Okay, Great. That's helpful. And then one more for me Barry You mentioned service revenue associated with the kind of the legacy transport business was down about 10% from the pre pandemic level. So I mean have you seen any improvement in that over the last few quarters and do you expect that to recover back to pre pandemic levels at <unk>.
Some point and if it does kind of what will it take to get there or is it more return to office or any other kind of macro related.
Metrics, we should be looking at.
Thanks for the question Eric and appreciate the continued interest of course, we have seen that line continuing to perform better over the last several quarters and kind of consistently that's been trending better than we do I will say you know if you look at our service activities since the early days of the Pan.
Damn it we obviously were down a lot in the early days and then moved appreciably better sequentially quarter by quarter. We are far far in advance of returned to office and I would say we continue to outpace return to office. The way I'd think about it is you know it it likely has a continued tailwind going forward I don't think.
Probably any of US expect office to be at the same level of occupancy going forward as it was pre pandemic, but even still as it as the levels continue to rise over the coming quarters, I think that becomes a little bit of a tailwind for our service. The other thing I'll just point out is the new service offerings that we've been delivering to our.
<unk> like in I T asset disposal and digital solutions, they have been doing phenomenally well as bill highlighted in his prepared remarks, and we see that trend continuing I mean really strength to strength in that line, Eric and those are very good profitability for us as well so we feel quite well positioned on the service line and then are you will you will see additional.
Service, obviously coming through with our recent it renew acquisition as that business continues to build.
Okay.
Thank you we now have the next question on the line from.
Sure law from Stifel. Please go ahead.
Hi, Thank you for putting me back in just on the storage business. The storage rental gross profit section has facilities costs going up about.
Seven.
<unk> 17 million or so sequentially I don't know if there was a build and put in place that that went in over there is there can you give us a little bit more color on that because storage gross rental margin went down 110 basis points is just want to see if that's what's driving that.
Yeah. Thanks, Shlomo, it's it's a good question and I appreciate that one so the way to think about it is we have both for service growth storage rental gross margin. There is a factor of both the sale leaseback, but you were specifically asking about other facility costs and on that line, that's also where our <unk>.
Our four data center pass through those through and so that was actually naturally up both sequentially and year on year Incidentally just to give you a frame if you are in.
Normalized the for a sale leaseback and excluded the power.
We basically had storage rental gross margin up in both us sequentially as well as year on year by about 40 50 basis points. So we feel quite good about the way the business is trending and the other thing I'll say is our guidance naturally assumes a healthy as I mentioned last quarter, a healthy amount of inflation and we continue to track at level.
<unk> that are below what we were projecting earlier in the year and of course, the pricing is doing better. So that's part of the reason why the profitability in the core business continues to outperform.
Okay.
Okay.
Again, if you have a question. Please press Star then one and please limit to one question. Each time, we now have George Tong with Goldman Sachs. Please go ahead.
Hi, Thanks, good morning.
<unk> talked about favorable traction in your a L. M business can you elaborate on how I T renew performed in the quarter on revenue and EBITDA relative to your initial expectations.
Yeah. Thanks, Thanks, George It's Barry It performed right in line with our expectations, maybe even a little a touch better than the expectations. We shared on the last call. Obviously, that's just for the first two months of the of the acquisition and as we see it and that's both on a revenue and an EBITDA basis as we see it playing out for.
The year I continue to project in the in our guidance the same level call it around $450 million in that.
Same profitability level that I mentioned and as we as we see the business being a growing considerably over time I will tell you that one of the nice things that we see in that business as the building level of backlog as many of our upstream clients are.
Building their backlog for decommissioning as we move into the later part of the year in light of the fact that there's been some level of supply chain disruption for our new gear. We we do see their backlogs building. So that is a I think a favorable view for us going forward.
Okay.
Thank you.
We now have a question from.
Sheila Mcgrath with Evercore. Please go ahead.
No.
Thank you I was wondering if you could talk about rising interest rates and near term impact to Iron Mountain, where do you think you could.
Raise debt capital for a 10 year bond.
Now versus maybe fourth quarter.
You know Sheila Hi, it's Barry you know the good news about our model in light of the fact that as you saw on my in my guidance, we expect the leverage to be kind of inside our range essentially flattish to maybe even slightly down by the end of the year from where we are now we are we were in the fact that we.
No near term maturities I really don't need any long term at this point as you know we did the bond in December for the renewed transaction. So I'm I'm pleased with the timing of that in light of where we were able to price. It I I feel very good about where we are with respect to the capital markets for for data and don't have any.
Any need at this point or for the next few years really.
Yeah.
Thank you you have nice I had the questions registered as a reminder, star then.
If you'd like to ask a question.
Yeah.
Okay.
Yeah.
Yes.
We have had many questions registered so I'd like to hand, it back to the management team.
Yeah.
Thank you for joining us today and you can all disconnect.
Okay.
You have been removed from the comp.
Goodbye.
This does conclude todays crude thank you again for joining you may now disconnect your line.
Thank you for attending today's presentation.
Okay.
Yeah.
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Okay.
[music].
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Yes.
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[music].
Okay.
[music].
Yeah.
Yeah.
Yeah.
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Yes.
Yes.
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Thanks.
Yeah.
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Yes.
Yes.
Yeah.
Yeah.