Iron Mountain Incorporated Q1 2023 Earnings Call
Speaker 1: Good morning.
Good morning.
Speaker 2: And welcome to the Iron oun in the first quarter 2023 earnings conference call.
Welcome to the Iron Mountain first quarter 2023 earnings conference call.
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Speaker 2: After today's presentation, there will be an opportunity to ask questions.
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Speaker 1: We will limit analysts to one question and you can rejoin the queue.
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Speaker 2: Please notet: this event is being recorded.
This is being recorded.
Speaker 2: I would now like to turn the conference over to Julian peltman, Senior Vice President and Head of Investor Relations. Please go ahead.
Now like to turn the conference over to you Joanna Tillman Senior Vice President and head I've Investor Relations. Please go ahead.
Speaker 4: Thank you, Sarah. Good morning and welcome to our first quarter 2023 earnings conference call. On today's call, we will refer to materials available on our Investor Relations website. We are joined here today by billmini, President and Chief Executive Officer, and Barry heighten, our Executive Vice President and Chief Financial Officer, after prepared remarks, will open up the lines for QA.
Thank you Sarah good morning, and welcome to our first quarter Twins twenty-three earnings conference call on today's call. We will refer to materials available are investor Relations website.
Here today, if I don't mean, any president and Chief Executive Officer.
[noise] heightening, our executive Vice President and Chief Financial Officer.
[noise] prepared remarks will open up the lines for Q&A today's earnings materials routine forward looking statements.
Speaker 4: 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 and our annual report.
[noise] statements regarding our expectations.
So we're looking statements are subject to risks and uncertainties.
Please refer to today's earnings materials, the Safe Harbor language Unsly too.
Report.
Speaker 5: On 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 reconciliations to these measures in our supplemental financial information.
On four on 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.
We use several non-GAAP measures mind, presenting our financial results.
Including the reconciliations to these measures and our supplemental financial information.
Speaker 4: With that, I'll turn the call over to Bill.
That I'll turn the call over to Bill.
Speaker 6: Thank you jillian, and thank you all for taking the time to join us today. Our team delivered another quarter of record results for the first quarter of 2023, exceeding our expectations. This performance reflects the residents of our expanded product portfolio, our unmatched customer relationships, in the strength of our dedicated teamon a reported basis, in the first quarter we achieved our highest ever quarterly revenue of $1.31 million, yielding seven and a half percent total organic revenue growth in EBITDA of $461 million.
Julian and thank you all for taking the time to join US today, our team delivered another quarter of record results for the first quarter of 2023 exceeding our expectations. These performance reflects the residents ever expanded product portfolio are unmatched customer relationships.
Strength of our dedicated team.
Unreported basis in the first quarter, we achieved our highest ever quarterly revenue of $1.31 billion, yielding 7.5% total organic revenue growth and EBITDA of $461 million.
Speaker 6: We continue to be encouraged by the increased demand for our services across key markets, fueling these results, as well as the success of project matihororn, enabling our commercial teams to offer our customers' access to the widest range of solutions in our company's history.
Continue to be encouraged by the increased demand for our services across key markets fueling these resolved as well as the success of product project Matterhorn, enabling our commercial teams to offer our customers access to the widest range of solutions in our company's history. We.
Speaker 6: We delivered organic storage rental revenue growth of 11% in the first quarter and we drove high teens organic growth in both our data center and digital services businesses, as we introduced last year, introduced last year with project matterhorn. Our steady buildout of new products and services, as well as growth in these underlying markets, continues to accelerate us on our growth trajectory path.
We delivered organic storage rental revenue growth of 11 per cent in the first quarter and we drove high teens organic growth in both our data center and digital services businesses.
We introduced last year with introduced last year's with project Matterhorn are steady build out of new products and services as well as growth in these underlying market continues to accelerate us on our growth trajectory path.
Speaker 6: I would like to take this opportunity to highlight how we have been serving our customers with our solutions-based approach and our offerings across the Mountain range.
I would like to take this opportunity to highlight how we have been serving our customers with our solutions based approach and our offerings across the mountain range.
Speaker 6: Beginning with records management, we won significant new business in the United Kingdom with a major global industrial and aerospace company signing a contract valuue at £4 million sterling. Following more than a year conversations, the team entered into a bespoke 10 -year agreement providing the customer with several hundred thousand cubic feet of secure physical data storage, document digitization and management across multiple secure locations, radio frequency identification tagging for additional security and a dedicated on-site team of experts working to Iron mountains industry leading standards.
Beginning with records management, we one significant new business in the United Kingdom with a major global industrial an aerospace company signing a contract valued at 40 million pounds Sterling.
Following more than a year conversations the team entered into a bespoke 10 year agreement, providing the customer with several hundred thousand cubic feet of secure physical data storage document digitization and management across multiple secure locations radio frequency.
[noise] vacation tagging for additional security and a dedicated onsite team of experts working to Iron mountains industry, leading standards.
Speaker 6: I am pleased we could offer such a comprehensive solution that allows the customer to both digitized their data and protect their business.
I am pleased we could offer such a comprehensive solution that allows the customer to both digitize their data and protect their business we.
Speaker 6: We are now discussing additional opportunities with the same customer and other European countries, North America and Asia. In total, the potential contract value over 10 years is approximated to be £9 million sterling.
We are now discussing additional opportunities with the same customer and other European countries, North America and Asia in total the potential contract value over 10 years is approximated to be 90 million pounds Sterling.
Speaker 6: Another win that highlights our ability to sell the entire Mountain range involves a state historical society which turned to both Iron Mountain and our fine Art storage business croer, for help in preserving the history of its cultural heritage center, which is home to its underground archives and Museum.
Another win that highlights our ability to sell the entire mountain range involves a state historical society, which turned to both Iron Mountain and are fine Arts storage business Crozier for help and preserving the history of its cultural Heritage Center, which is home to it's underground archives a museum.
Speaker 6: With budget as a key consideration for this customer. Our unique solution was focused on reducing costs whilst leveraging our expertise and innovation to challenge the customer to think differently. Our combined our library archives and logistics expertise enabled our team to deliver solution that met the state's needs.
With budget is a key consideration for this customer are unique solution was focused on reducing costs, whilst leveraging our expertise and innovation to challenge the customer to think differently.
Combine our library archives and logistics expertise enabled our team to deliver a solution that met the state's needs.
Speaker 6: Also in the quarter. A financial services company based in Australia, a long-standing customer of Iron Mountain turned to us for help with their compliance issues after being pressed by the information we presented at a policy center webinar back in 2021. our suite of digital enablement solutions and software, including the insight platform, will provide a customer with increased visibility into its archives: digital COP, digital copy of selected records, auto generation of metadata and auto redaction of personal identifiable information.
Also in the quarter, a financial services company based in Australia, a longstanding customer of Iron Mountain turned to us for help with their compliance issues after being pressed by the information we presented Eddie Policy Center webinar back in 2021.
Sweet digital enablement solutions and software, including the inside platform will provide the customer with increased visibility into its archives digital copy D. Did you a copy of selected records auto generation of metadata, an auto redaction of personal identifiable information.
Speaker 6: Success stories such as this highlight the value we provide customers, and not only moving data from physical to digital storage, but also improving the methods and capability to utilize the data.
Success stories, such as this highlight the value we provide customers and not only moving data from physical to digital storage, but also improving the methods and capability to utilize the data.
Speaker 6: Another digital win was with the U's Department of Veterans Affairs. The U's Congress has requested that the VA advanced the production of complete and accurate veteran records in a timely fashion, driving the need for digitization of historical veteran documents, which are often dispersed across multiple storage locations.
Another digital when was with the U S Department of Veterans Affairs. The U S Congress as requested that the V. A advanced the production of complete and accurate veteran records in a timely fashion driving the need for Digitization of historical veteran documents, which are often dispersed across multiple storage locations. The cuss.
Speaker 6: The customer required and experienced digital partner to increase their scanning capacity and also provides facility oversight chain of custody logistics in secure storage.
[noise] required an experienced digital partner to increase their scanning capacity and also provide facility oversight chain of custody logistics insecure of storage.
Speaker 6: The unique aspects provided by our high security boyers Pennsylvania facility, combined with the skill of our staff, were key contributing factors to winning the deal. This is just the beginning of our work to aid in the delivery of medical records to enhance patient care. Veterans.
The unique aspects provided by our high security Boyers, Pennsylvania facility.
And with the skill of our staff were key contributing factors to winning the deal. This is just the beginning of our work to aid in the delivery of medical records to enhance patient care of veterans.
Speaker 6: Also in digital solutions. We had a key win with an existing customer, his majesty's courts and tribunal service, on a digital mailroom solution to automate the indexing and classification elements of the mailroom functionthe service, which will reduce the cost and time of processing court appliccations, will be delivered from our hotestened location where we have a well-established digitization in bpo facility.
Also in digital solutions, we had a key when with an existing customer his Majesty's courts, and tribunals service on a digital mailroom solution to automate the indexing and classification elements of the mailroom function.
The service, which will reduce the cost and time of processing.
Court applications will be delivered from our hottest and location, where we have a well established digitization M. B P O facility.
Speaker 6: Turning to asset life cycle management, or alam, we divide this business into three verticals.
Turning to asset lifecycle management or L. M. We divide this business into three verticals.
Speaker 6: The first of these is the hyperscale decommissioning business that we acquired from it. Renew our volumes grew in excess of 30% in this vertical year-over-year, reflecting our marketleading platform, the strength of our existing customer relationships and our ability to win more new logos.
The first of these is the Hyperscale decommissioning business that we acquired from I T. Renew our volumes grew in excess of 30 per cent in this vertical year over year, reflecting our market leading platform the strength of our existing customer relationships and our ability to win more new logos.
Speaker 6: Revenue is down however, reflecting the record low pricing the market is seen since the end of 2022 on both new and used components.
Revenue is down however, reflecting the record low price in the market has seen since the end of 2022 on both new and used components.
Speaker 6: In our enterprise ipad vertical. We've been gratified to see more synergies with our existing customers. Since we have relationships with over 225 thousand customers across our wider business, the opportunity to cross-sell our enterprise ipad services has never been greater.
And our enterprise iPad vertical we've been gratified to see more synergies with our existing customers. Since we have relationships with over 225000 customers across are wide of business the opportunity to cross sell our enterprise iPad services has never been greater.
Speaker 6: The last of these verticals is the technology manufacturers. Here we are winning business, both in terms of servers as well as end-user devices. We have invested in our sales force and obtain specific expertise in the OEM space, setting us up for success. This indirect relationship to decommission and user products is a huge market opportunity.
The last of these vertical is the technology manufacturers here, we are winning business both in terms of servers as well as end user devices.
We have invested in our sales force and obtain specific expertise in the O E N space.
Up for success.
This indirect relationship to decommission and use their product is a huge market opportunity.
Speaker 6: Examples of recent wins in the ALM business include a contract with an existing global asset management company to perform on-site hard disk and solid state disk eratio and destruction, whilst maximizing value from data center and corporate end-user assets.
Examples of recent wins in the L. M business include a contract with an existing global asset management company to perform onsite hard disk in solid state disc erasure and described destruction, while maximizing value from data center in corporate end user assets contain.
Speaker 6: Continuing with alam, a large global risk management company sought services to decommission two complete and two partial data centers. A combination of our strong existing relationship and performance, including guidance from a dedicated program manager, our remarketing solutions and capabilities in the ease of the use of our alam portal contributed to the win.
Continuing with a L. M. A large global risk management company thought services to decommission to complete and two partial data centers.
Combination of our strong existing relationship and performance, including guidance from a dedicated program manager Ah remarketing solutions and capabilities and the ease of the use of our a O N portal contributed to the win.
Speaker 6: Finally let's turn to our data center business.
Finally, let's turn to our data center business.
Speaker 6: We are pleased to have finished the first quarter of 2023 with 52 megawatts of new leases sign with a single hyperscale customer signing two deals for a total of 44 megawatts.
We are pleased to have finished the first quarter of 20 twenty-three with 52 megawatts of new leases signed with a single hyperscale customer signing to deal for a total of 44 megawatts.
Speaker 6: You will recall that our guidance for the year is 80 -plus megawatts. So to have leasast over half of our target in the first quarter alone is a triumph of our team.
You will recall that our guidance for the year is 80 plus megawatts. So do they have least over half of our target in the first quarter alone is a triumph of our team.
Speaker 6: In terms of the colocation wins this past quarter. 1: one I would like to highlight is with an existing U's federal home loan customer who sought to expand into a new data center market for disaster recovery options and selected our VA two data center of Manassas, Virginia.
In terms of the co location wins this past quarter, one one I would like to highlight is within existing U S. Federal home loan customer who sought to expand into a new data center market for disaster recovery options and selected R. V. Eight two data center in Manassas, Virginia.
Speaker 6: The customer was impressed with the tour of our Virginia campus and the custom solution we developed to meet their needs. With their positive past experience with our data center services, we bundled this expanded solution with a renewal at another of our data center sites.
Customer was impressed with the tour of our Virginia campus and the custom solution, we developed to meet their needs with their positive past experience with our data center services, we'd bundle. This expanded solution with a renewal and another of our data center sites.
Speaker 6: Also in the quarter, our team announced a win with a fleet management company which for years have explored moving their internal on-site data center infrastructure to co-location. Our ability to provide a custom solution in our VA two data center, including direct Internet access, smart hands and cross-connects, resulted in a powerful solution to them in the continuation of an important relationship that has the potential to expand to a disaster recovery solution at our new Jersey data center.
Also in the quarter, our team announced they win with a fleet management company, which for years I've explored moving their internal onsite data center infrastructure to co location, our ability to provide a custom solution an R. V. A two data center, including direct Internet access smart hands and cross connects resulted in a powerful solution for them.
And the continuation of an important relationship.
[noise] potential to expand to a disaster recovery solution at our New Jersey data Center.
Speaker 6: Also noteworthy is a substantial win with an existing major semiconductor chip manufacturer is taking advantage of all the Mountain range has to offer. The customer was seeking a data center partner to host their internal development cloud environment, and our data center and commercial sales teams work closely to deliver a solution at our Arizona site, leveraging the customer' existing relationship.
Also noteworthy as a substantial win with an existing major semiconductor chip manufacturer is taking advantage of all the mountain range has to offer.
The customer was seeking a data centre partner to host their internal development cloud environment and our data center in commercial sales teams work closely to deliver a solution at our Arizona site, leveraging the customer's existing relationship.
Speaker 6: All three of these wins that I have noted are with long-standing customers, demonstrating our ability to source premium colocation deals with customers with whom we have had trusted relationships for decades.
All three of these wins that I have noted are with long standing customers demonstrating our ability to source premium co location deals with customers with whom we have had trusted relationships for decades.
Speaker 6: To conclude, we are more enthusiastic than ever about the growth in our business and our ability to offer our customers expanded in innovative solutions to meet their ever-evolving needs. Project manorhorn is bearing fruit and we continue to make great strides as our team climbs towards the highest peaks of our journey. With that, I'll turn the call over to Barry.
To conclude we are more enthusiastic than ever about the growth in our business and our ability to offer our customers expanded and innovative solutions to meet their ever evolving needs project Matterhorn is bearing fruit and we continue to make great strides as our team climbs towards the highest peaks of our journey.
With that I'll turn the call over to Barry.
Speaker 7: Thanks bil, and thanks you all for joining us to discuss our results. In the first quarter, our team continued to deliver strong performance, exceeding the expectations and provided in our last call. We achieved an all-time record quarterly revenue of $1.31 billion, representing 5% growth on a recorded basis. Organically, revenue grew seven point a 5% revenue was ahead of the expectations we shared on our last call, as global bram and our data center businesses both outperformed.
Thanks, Bill and thank you all for joining us to discuss our results.
In the first quarter, our team continued to deliver strong performance.
Exceeding the expectations, we provide in our last call.
He then all time record quarterly revenue of $1.31 billion, representing five per cent growth on a recorded basis organically revenue grew 7.5%.
Revenue was ahead of the expectations, we shared on our last call as global Ram and our data center businesses bolt outperformed.
Speaker 7: A key highlight in the quarter is our organic storage revenue growth of 11%. This marks an acceleration both sequentially and year-on-year.
Highlight in the quarter is our organic storage revenue growth of 11%. This marks an acceleration bulb sequentially and year on year.
Speaker 7: This reflects strong contributions from revenue management, data center commencements and positive volume tandds.
This reflects strong contributions from revenue management data Center command sense and positive volume friends.
Speaker 7: Total service revenue increased 2% to $504 million, or 4% on a constant currency basis. Consistent with the commentary we shared on our last call, the year-on-year impact from the start of the more intense lockdowns in China impacted our it renewed business.
Total service revenue increased two per cent to $504 million or four per cent on a constant currency basis consistent with the commentary we shared on our last call. The year on your impact from the start of the more intense lockdowns in China impacted our I T renew business.
Speaker 7: Excluding it, renew service revenue was up 11% on an organic constant currency basis.
Excluding I T renew service revenue was up 11% on an organic constant currency basis.
Speaker 7: Adjusted EBITDA was $461 million, a new first quarter record. This represents growth of 7% year-on-year and 9% on a constant currency basis, driven by revenue management and strong contributions from data. centeradjusted EBITDA margin was 35%, an improvement of 60 basis points year-on-year, with revenue management and mix being the key drivers.
Adjusted EBITDA was $461 million, a new first quarter record. This represents growth of 7% year on year and 9% on a constant currency basis, driven by revenue management and strong contributions from data center.
Adjusted EBITDA margin was 35.1% and improvement of 60 basis points, a year on year with revenue management and next being the key drivers.
Speaker 7: aaffo was $284 million, or 97 cents on a per share basis of $2 million and six cents respectively from the first quarter of last year. This was well ahead of the expectations we shared on our last call, partially the result of the timing of some maintenance CapEx items between the first and second quarters.
F. A foe was $284 million or 97 cents on a per share basis up $20 million.06, respectively from the first quarter of last year.
This was well ahead of the expectations, we shared on our last call partially the result of the timing of some maintenance cabinets items between the first and second quarters.
Speaker 7: Now turning to segment performance.
Now turn into segment performance.
Speaker 7: In the first quarter, our global RIM business delivered revenue of $1.13 billion, an increase of $78 million from last year.
In the first quarter or global <unk> business delivered revenue of $1.13 billion, an increase of $78 million from last year.
Speaker 7: On an organic basis, revenue increased 11%.
On an organic basis revenue increased 11%.
Speaker 7: Organic storage rental revenue growth of 9% reflects our focus on revenue management and solid volume trends.
Organic storage rental revenue growth of 9.4% reflects our focus on revenue management and solid volume trends we.
Speaker 7: We reported organic service revenue growth of 14%, with that performance driven by digital solutions and core offerings.
We reported organic service revenue growth of 13.6% with that performance driven by digital solutions and core offerings.
Speaker 7: Global RIM adjusted EBITDA was $478 million and an increase of $29 million year-on-year.
Global Ram adjusted EBITDA was $478 million, an increase of $29 million you're on here.
Speaker 7: Turning to our global data center business, we achieved revenue of $112 million, an increase of $15 million a year-on-year. From a total revenue perspective, we delivered 17% growth on an organic basis.
Turning to our global data center business, we achieved revenue of $112 million, an increase of $15 million a year on year from a total revenue perspective, we delivered 17 per cent growth on an organic basis.
Speaker 7: Organic storage revenue growth was particularly strong at 24%, driven by commencements and improved pricing.
Organic storage revenue growth was particularly strong at 24% driven by commencement and improve pricing.
Speaker 7: As we projected, data center services were down year-on-year, given the fid outwork we were performing in the first half of last year.
As we projected data center services were down year on year, given the fit out work we were performing in the first half of last year.
Speaker 7: Data center adjusted EBITDA was $51 million, representing 21% growth.
Data center, adjusted EBITDA was $51 million, representing 21% growth.
Speaker 7: Turning to new and expansion leasing, we had a very strong quarter with the team signing 52 megawatts. We expanded our relationship with a long-standing customer with a 40 megawat contract. Later in the quarter we extended this relationship further with another four megawatts. Both of these have an initial term of seven years with multiple renewal options.
Turning to new an expansion leasing we had a very strong quarter with the team signing 52 megawatts, we expanded our relationship with a longstanding customer with a 40 megawatt contract later in the quarter. We extended this relationship further with another four megawatts.
Both of these have an initial term of seven years with multiple renewable options.
Speaker 7: We signed new deals across our portfolio, with key wins in Scottsdale Phoenix, Frankfurt and London. In total, we signed 22 new logos within our data center business with strong cross-selling activity.
We signed new deals across our portfolio with he wins in Scottsdale, Phoenix, Frankfurt and London in total we signed twenty-two new logos within our data center business with strong cross selling activity.
Speaker 7: Turning to asset life cycle management, in the first quarter, alam volume was ahead of our expectations, while component pricing was down significantly year-on-year. Importantly, we are now seeing pricing for components stabilizing.
Turning to asset lifecycle management in the first quarter a L. M. Volume was ahead of our expectations, while component pricing was down significantly you're on here.
<unk>, we are now seeing pricing for components Stabilising.
Speaker 7: Given the current environment that Bill described, we are planning for aem revenue to be consistent in the second quarter with the first quarter and with the pipeline activity we are seeing we are well positioned for improving trends in the back half of the year, driven by volume and new bookings.
Given the current environment that Bill described we're planning for a L. M revenue to be consistent in the second quarter with the first quarter and with the pipeline activity. We are seeing we are well positioned for improving trends in the back half of the year driven by volume and new bookings.
Speaker 7: In particular, our OEM business is developing well, with the team growing our pipeline in delivering key new wins. For example, we recently signed a deal with one of the largest technology and user device manufacturers to partner with them in the decommissioning needs of their customers.
In particular are OEM businesses, developing well with the team growing our pipeline and delivering T. New wins. For example, we recently signed a deal with one of the largest technology and user device manufacturers to partner with them in the decommissioning needs of their customers.
Speaker 7: Turning to capital in the first quarter we invested $302 million of which 274 million was growth in 28 million was recurring Turning to the balance sheet with strong EBITDA performance we ended the quarter with net lease adjusted leverage of five point one x reflecting a significant improvement from last year this marks our lowest leverage level since two thousand and seventeen and.
Turning to capital in the first quarter, we invested $302 million of which $274 million was growth in $28 million was recurring.
Turning to the balance sheet with strong EBITDA performance, we ended the quarter with net lease adjusted leverage up 5.1 times, reflecting a significant improvement from last year. This marks our lowest leverage level since 2017.
Speaker 7: We expect to operate within our target leverage range, which is four point half to Five point a half x.
We expect to operate within our target leverage range, which is four and a half to five and a half times.
Speaker 7: Our Board of Directors declared our quarterly dividend of 62 cents per share to be paid in early July . On a trailing four quarter basis, our payout ratio is now 64%, settling into our long-term target range of low to mid 60%. Now turning to our outlook.
Our board of directors declared our quarterly dividend up 62 cents per share to be paid in early July on a trailing forequarter basis or payout ratio is now 64% settling into our long term target range of low to mid sixties per cent now turning to our outlook.
Speaker 7: With strong performance in the quarter. We are well on track for the year and we are pleased to reiterate our full year guidance.
With strong performance in the quarter, we are well on track for the ear and we are pleased to reiterate our full your guidance.
Speaker 7: For the second quarter we expect revenue approximately $1.35 billion, adjusted EBITDA of approximately $475 million, AFFO of apximately $27 million and AFFO per share of approximately 92 cents.
For the second quarter, we expect revenue of approximately $1.35 billion adjusted EBITDA of approximately $475 million a F L. A approximately $270 million.
Oh per share of approximately 92 cents.
Speaker 7: In summary, our team is executing well on our matta horn growth initiatives. We are investing in our business. We remain focused on driving increased levels of cross-selling and exceeding the expectations of our customers. I would like to take this opportunity to thank our entire team for their continued dedication and commitment to Iron Mountain and our customers with that operator.
In summary.
Our team is executing well on our Matterhorn growth initiatives, we are investing in our business. We remain focused on driving increased levels of cross selling and exceeding the expectations of our customers.
I would like to take this opportunity to thank our entire team for their continued dedication and commitment to iron mountain and our customers with that operator would you. Please open the line for Q&A.
Speaker 7: Would you please open the line for QA.
Speaker 2: We will now begin the question and answer.
We will now begin the question and answer session.
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To ask a question you may <unk>, one on your telephone keypad.
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Then too.
Speaker 1: We will limit analysts to one question and you can rejoin.
Have a limit analyst to one question and you can rejoin the Kia.
Speaker 8: Here.
Speaker 2: At this time. We will pause momentarily to assemble our roster.
At this time, we will pause momentarily to assemble our roster.
Speaker 3: Our first question comes from George townong with Golden Ps. Please go ahead.
Alright first question comes from George tongue like Goldman Sachs. Please go ahead.
Speaker 9: High thanks. Good morning, organic revenue growth for the services businesses decelerated to 2% in the quarter. Can you elaborate on the factors behind the deceleration in services organic revenue growth and discuss initiatives or factors that could drive a reacceleration in growth in the coming quarters? Thank you.
Hi, Thanks, good morning.
Organic revenue growth for the services businesses be celebrated its two per cent in the quarter could you elaborate on the factors behind the deceleration and services organic revenue growth and discuss initiatives or factors that could drive reacceleration and growth in the coming quarters.
Speaker 6: Commodity. George, Thanks for the question. So Yeah, I think overall, if you think about it, in the traditional areas, our service revenue growth was was quite strong. If you look at just in the, the in the RIM business is, our global organic RIM services grew at 14%, again on an organic and constant currency basis. So very, very strong growth. If you look on the a?
Yeah. Good morning, George Thanks for the question. So yeah I think overall, if you think about it and like traditional areas are service revenue growth was was quite strong. If you look at you know just in the in the in the <unk> business is our global organic rim services grew at 14 per se.
S again on an organic in constant currency basis, so very very strong growth. If you look on the <unk> side, which is where you see the downdraft is as I said in my comments is volume in this quarter was up some 30% year over year. So we're actually seeing the synergies and the commercials synergies that we have.
Speaker 6: M side, which is where you see the downdraft is, as I send my comments, is volume in this quarter was up some 30% year over year. So we're actually seeing the synergies and the commercial synergies that we have as a company is in. As Barry mentioned, we just signed a new OEM custommer as well. So we see really good traction on the volume sign. But on the pricing side, as you probably seen, the Electronics industry, some of the components- down 70%.
As a company is in is Barry mentioned, we just signed a new Oh, yeah, I'm a customer as well. So we say really good traction on the volume side, but on the pricing side, if you've probably seen the electronics industry and some of the components. It out 70 per cent. So well. So we still have positive gross margins on that business is the revenue is heavily impacted by what.
Speaker 6: So well, we still have positive gross margins on that business. Is the revenues heavily impacted by what we've been seeing across the semiconductor industry in terms of record low pricingso I think that you know it's a really two world So as to say, from even a? M business on a volume basis is shown traction but it is a down with a downdraft in terms of the overall service revenue.
We've been seeing across the semiconductor industry in terms of record low pricing. So I think that you know, it's a really a two world. So as I say from even <unk> business on a volume basis as is shown traction, but it is a downward downdraft in terms of the overall service revenue, but the the traditional areas I would say in terms of Ram.
Speaker 6: But the- the traditional areas, I would say in terms of RIM also, if we look at our digital services, were all also up year over year in the high teens, really good, good progression.
Also if we look at our digital services were all also up year over year in the high teens, you know really good good progression.
Speaker 7: George veryry, Thanks again for the question. The only thing I would- the only couple things I would add- is, I think the team to Bill's point and on our global RIM, doing phenomenally well. I think that's the way. I would point you to look at the services because, of course, the a? L M businesses masking our total growth there in terms of what's happening with respect to the core, and you know that 14% growth rate that Bill spoke about, that is up against some really big comp.
George It's Berry. Thanks again for the question the only thing I would only a couple of things I would add is I think the team to Bill's point in on our global rim doing phenomenally well I think that's the way I would point you to look at the services because of course, the a L. M businesses masking our total growth there in terms of what's happening with respect to.
The core and you know at that 14 per cent growth rate that bill spoke about that is up against some really big cop, So which means and he is very strong performance and it is driven by the point that he made the digital solutions as well as other core offerings, which are all growing for us. The other thing I kinda call out is it's a small factor, but as you know.
Speaker 7: So it's means I mean it's very strong performance and it is driven by the point that he made the digital solutions as well as other core offerings which arere all growing for us. The other thing I kind of call out is it's a small factor but, as you know, we were doing fit out services in data center in the first half of last year. We completed that in the second quarter and so that makes the year on year comp hard, just as we explained it would be.
We were doing fit out services and data center in the first half of last year, we completed that in the second order and so that makes the year on year comp a hard just as we explained it would be so that is another factor that's weighing on that services.
Speaker 7: So that is another factor that's weighing on that services total growth rate that you were pointing to. I think as you move through and get into the see us getting into the back half, you'll see that growth rate accelerating meaningfully as we get beyond the challenges with respect to a? L M and the pipeline that Bill is speaking about really comes to fruition and then we also get beyond that data center services comp in the first two quarters.
Growth rate that you were pointing too I think as you move through and get into the C. S getting into the back half you'll see that growth rate accelerating meaningfully as we get beyond the challenges with respect to a L. M. In the pipeline that Bill is speaking about really comes to fruition and then we also get beyond that data center services cough and the first few quarters.
Speaker 7: Thanks to the question.
Thanks for the question.
Speaker 3: My next question.
Alright next question comes running Kevin Mcnay with added. Please. Please go ahead.
Speaker 2: Comes from Kevin mcgay with C of.
Speaker 2: Please Please, go ahead.
Speaker 10: Great Thanks so much and congratulations on the momentum.
Great. Thanks, so much and congratulations on the momentum.
Speaker 10: A bury. It looks like.
Bury it looks like you know typically and I'm just going off the last two years. So maybe it's not fair you can help me with this but you know the sequential EBIT to lift the last two years have been 24 to 25 million. It looks like the queue to is going to be about 14.
Speaker 10: You know, typically- and I'm just going off the last two years So maybe it's not fair economonly me with this- but you know the sequential ebitdto lift the last two years have been 24 to 25 million. It looks like the Q2 is going to be about fourteen.
Speaker 10: So when we think about puts and takes in the back half of the year, is that more project benefit from matter horn that allows you to reaffirm: butbit, the guidance is a better pricing. Maybe just help us understand the seasonality a little bit if I'm thinking about that right.
So when we think about puts and takes in the back half of the years at more project ma'am benefit from Matterhorn that allows you to reaffirm the EBIT guidance is it better pricing, maybe just help us understand the seasonality a little bit if I'm thinking about that right.
Speaker 7: Yeah Thanks Kevin, appreciate the question. You know we feel very good about where we're trending. In fact the first quarter came in right in line, if not a little bit better than what we're expecting in. Our guidance for the second quarter is similarly, and that is despite the fact that we've adjusted our expectation for a? Am down in the second quarter.
Yeah. Thanks, Kevin appreciate the question, we feel very good about where we're trending in fact, the first quarter came in right in line, if not a little bit better than what we were expecting in our guidance for the second quarter is similarly disc and that is despite the fact that we've adjusted our expectations for a L. M.
Down some in the second quarter and the reason, we're able to achieve the numbers that were putting up in the second that we're projecting for the second quarter and our confidence in the back half is because I have a couple of things you just pointed out we are seeing even better revenue management projections in the business. We have as you seen in our global ran business.
Speaker 7: And the reason we're able to achieve the numbers that we'reput up in the second, that wereprojecting for the second quarter, and our confidence in the half, is because- a couple things you just pointed out- we are seeing even better revenue management projections in the business. We have, as you seeing in our global RIM business we have very strong storage rental growth on organic based- nine and a half percent, which marked in accelerations sequentially.
Speaker 7: And here on year our total organic storage rental growth was over 11%, which was also very strong. And I will tell you that in light of the fact that we are going to see more revenue management activities- we've recently passed some here, even in the second quarter, and will be passing more as we move through the year- together with the fact that data center pricing continues to improve and at the industry phenomenon you will see, together with that, our commencements are very strong in the half.
Speaker 7: So data center will be accelerating as we get into the half and, as you know, there's very strong visibility on that business. So it's it's high confidence point that I'm making there. So we feel very good about where we are in terms of- you mentioned the specifics around second versus the quarter of our second half. I'll just note that in light of the timing of the?
Speaker 7: U's dollar strength, we still have a F? X headwind in the second quarter. You know the first quarter that was almost three million of top line But as we said on the last call, and I'll reiterate that, becomes much more muted, in fact may even be a slight tailwind in the back half. We also get through a few items that are in the first half from an ebita standpoint.
Speaker 7: As you know, we did some sale lease facts last year and we comp over those as we move into the back half and with our credctivity initiatives and additional commercial investments we've made, we get- we get to a more favorable conf in the back half from those as well. So I'll tell you Kevin, we feel very well positioned, accelerating business even with more muted expectations around the am.
Speaker 11: Thanks for the question.
Speaker 2: Our next question comes from John add kin with rvc capital markets. Please go ahead.
Speaker 12: Thanks very much. Towards the beginning you pointed out a number of wins with government agencies and large enterprises and so for, and I with curious to maybe get a little little bit more color on what's kind of the ton of discussion around sales cycle compared to what you're customed to. And then the competitive set that you faced with those deals, to the extent that you faced with these boffs or just kind of the decision to to go with you was more of a bilateral discussion but maybe a littlebit of the competitive D dynamics.
Speaker 6: And sales cycle would be helpful for both government and enterprise thanks.
Speaker 13: Okay thanks John , for the question. So the and I was actually involved in a couple of these CY. I could probably probably give you more color on them. The sales cycles.
Speaker 6: For instance, the aerospace company that we talked about was like over a year, but this is a company that we've been doing it's some work for decades, right. So it's said natural conversation that you know they start talking about. Well, they want to actually do something different and this case a case they actually had an in house vendor for part of it but that company wasn't able to do the full range of services as they said.
Speaker 6: They were looking for someone to really take over full outsourcing and they very sensitive right, because if one of these things goes missing, aircraft around the world get grounded. So they were very, very sensitive about the security in the reliability of the vendor. And then the other side of it. Obviously they had known that's for decades in different areas that are very sensitive to them and we were able to bring a full range of services that were re able to do not just the storage, not just the digitization, but also to give them the tools that they could visualize what was both stored physically and what was digitized.
Speaker 6: And they could do that in a, in a consolidated basis. Other words, they could do that in in see that anywhere in world. So that was a a huge win for them. Now you can say the sales cycle was like over a year. I think I've been visiting with the sales team Act customer for over a year but it's been part of an ongoing conversation and that's the power of having the 225 thousand customers that we've had.
Speaker 6: You know, decades and decades of relationship: the, the government, one which I, which I mentioned, which two of them, one was in the U K, one was in the, the United States government the, the folks that have been following in the company for quite some time. We've been talking about the government sector as being a huge potential for our in Mountain and and was you know the slow going at the beginning, because government contracts is, I M sure where, have very long lead times.
Speaker 6: But both of those been customers that we've actually been working for the last two or three years with. So again we were. You know there was a big investment, I would say, starting 5, six years ago with both of the a and with the British government in certain segments. But that's again now starting to become more of a of a normal course. So you know, one level of the conversation started five years ago, but now is just the regular course of business that know some of these things are is short is three orfour months lead time where they come up with a statement of work and because we're already have a track workcord, were able to do that.
Speaker 2: My next question comes from pluma rosenbar, withves people, Please go ahead.
Speaker 14: Thank you for taking a question a very look at a few times on the call to good revenue management and improving revenue management. Can you talk a little bit about what the pricing lift in the quarter was and what investors should expect for 2023? And you guys had very good revenue management last year- is is the revenue management that's straight out being able to raise prices now, or is there some kind of favorable mix going on?
Speaker 14: Maybe you could just give little more color there.
Speaker 7: Okay good morning, slemo. Thanks for that question. I think our team is doing a phenomenal job with revenue management. It's been a real standout. When you look at global RIM, in terms of the storage rental organic growth, that was almost nine a half percent and, as you know, we saw a good good, solid volume trends. It was up up two a five million on a cube on a trailing 12 -month basis.
Speaker 7: So, as you can gather from that, the vast majority of the growth was driven by revenue management. Now importantly, we feel very well positioned in terms of the whole year and I'll tell you that, in terms of the total storage rental growth rate that we put up 11%, which tost benefited by data center commencements.
Speaker 7: With what we see on data center commencements through the remainder of the year, together with the revenue management activities we've already put in place in additional that we have going into market over the next few months, I feel very confident that we are going to continue to see total company organic storage rental growth of this order, you think nine 10, 11% - and that the the environment for revenue management continues to be strong.
Speaker 7: We will have relatively more revenue management this year's MO than we did last year and that is, you know, a factor of both what we're wrapping from last year as well as the activities we've had in this year. Importantly, you know we continue to see excellent customer attention and I think that just demonstrates that we are bring for very significant value for our clients in these areas.
Speaker 7: In terms of mix, I would say we continue, as we've talked about before, to expand the revenue management program beyond just storage. So you are seeing improving revenue management trends in our services and that's generally across all lines, service in our core offerings, And so we feel like it's.
Speaker 7: On the right trajectory. chlemel, Thanks for the question this morning.
Speaker 2: Our next question comes from ne carfefect with.
Speaker 1: And me pairaba, Please go ahead.
Speaker 15: hag one strong quarter. Maybe you can just remind us the funding plan for development this year. What is the pricing look like for any debt needed?
Speaker 15: Would you do asset or company level financing?
Speaker 15: And then I also moned your updated thoughts on the dividend here. With the payout, the lowest's been in the while.
Speaker 6: Morning appreciate the the question. Let me take your last question on the dividend. Then a let very comment on the funding plan and is you know it's our plan from when we talked about invest. It's a fully funded plan. But I'll let very comment on that. More on the on the dividend you're right to point out is we are re now in that that zone when we said kind of low to mid 60% payout ratio which becomes a natural forcing function for increasing our dividend.
Speaker 6: So you that's you know that's something that we're now starting to settle into that range. So you can expect they it'll just become a a natural course of events as we get to that payout range which, on the guidance rules, just forces a natural increase in the dividends. So you know, I think're we're now in that area. So I think when we start getting into the back half of the year we start drifing down to the low Sixty's and I think you can expect just a natural reggression in the dividend.
Speaker 7: The morning. Thanks for the question. You know, when you work through our guidance, as Bill mentioned, you know, as we, as we discussed at the Investor Day, we have a fully funded plan for this year and going forward and, as you know, we will be routine debt issue and while the market has clearly been moved up in terms of rate over the last, you know, a couple of years with the Fed booves, I would say it's become much more, it's improved market as compared to, or it was over the last couple of quarters.
Speaker 7: And we see, you know, generally a favorable outlook from a standpoint of issuance and, I think, know from standpoint of where we could issue today. That's improved some versus the last couple quarters. And, to your point, there's a lot of interest and asset level financing, whether it be for construction otherwise, And so we're looking at all those options and making sure that we have the best plan for our shareholders.
Speaker 7: You know it's not something that we have to do. As you see, we we have plenty of liquidity, but you should expect us to be an issue on a rout basis. one just kind of continue to see what's out there from a market perspective. Clearly rates are a little bit higher than where they were a coupleof years ago but we still see than being very attractive, partly because pricing and data center has continued to lift and we see continued improvements in fact year on year.
Speaker 7: Net new retail type data center deals we're seeing up like 20% pretty much consistently across our entire portfolio and that's trending more toward, I think, by the end of the year, early next year, of like 30% And so that is a pretty significant move. And then importantly, on hyper sale side, I think the whole industry is generally seeing cash on cash, on levered returns moving up.
Speaker 7: You know, think something like where a lot of folks were writing in, the high seven or mid seven I I've seen a lot stuff that in thea's it's not even higher and so I think that's a good trajectory for the industry. It's healthy and it and it supports the pointing I was making earlier. So we feel really good.
Speaker 2: Our next question comes from andrews steinerman with JP Morgan. Please go ahead.
Speaker 12: Guess hi good morning this is Alex has on for andrews steinerman wanted to ask briefly about the it renew call out you highlighted that services revenue growth would been 11% organic excluding it renew which implies.
Speaker 12: A pretty sharp deterioration quarter-on-quarter and year-on-year in that business, if my math is right. Could you maybe break that out into what degree that was?
Speaker 12: rivenby pricing versus ability to sell through into end markets and any other dynamics. It sort of give you confidence that that will eventually recover.
And grow our halen business and it bolsters, our confidence and just to reiterate this is a huge market a L. M. We we really liked the space, it's very fragmented and we think we're in a very good position to take a tremendous amount of share over time, we're working through what everyone. In the industry is working through right now which is pretty low commode.
Speaker 1: Again I D like to ask a question. Please press Star than one at this time.
Speaker 2: My next question comes from Eric glucole. Wells bargo, Please go ahead.
Speaker 16: Great thanks we taking the question. So why to touch on the data center demand? So you're know, more than 60% towards your leasing goal for the full year, So a really strong start to the year. And if you look, it looks like you're in place and development portfolios are pretty highly leased up. So maybe you can talk about your ability to to accommodate additional demand, whether through future development of your land holdings, additional expansions, and then, if leasing continues to trend you at a high level, you know, could you accelerate some of your data center CapEx this year beyond what you initially guid to dothank.
Great. Thanks for taking my question. So wanted to touch on the data center demand so you're more than 60% towards your least you can go for the full year. So really strong start to the year and if you look it looks like you're in place and development portfolios are pretty hot lately stuff. So maybe you could talk about your ability to do it to accommodate additional.
Speaker 13: Thanks sic. And now I'll ask Barry to talk about. You know how we think about being flexible or responsive on the CapEx side. But I think generally, you know, we've had a really good start, as you point out, the year we reiterated the 80 megawatts plus, So the full year, even though that we cheap more than half of that in the first quarter. Because I think, if you can appreciate, especially with hyperscale, there's a little bit.
Speaker 6: You know, the timing is never fully under your control. So you know, I would say that we, you know some of that- the new leases that we sign in Q1 were're things that we expected in Q2. So you know, I kind of think of it is 2, half for the year rather than, you know, quarter by quarter, just especially when you're talking about hyperscale clients- and we have one hyperscale clients in Q1 that signed up in two different contracts for 44 megawatts- in terms of having enough capacity for for for further expansions.
Speaker 17: You see we're holding like up to 747 megawatts land, which is a big uptick from where we were a year ago. But we are making really good progress. So we're constantly, you know we're not standing still in that regard to mean, and just in the last couple of months I visit both our North nor N Virginia campus with the potential you, with a potential customer, and spent now done two trips with our Indian team since the beginning of the year.
Speaker 6: So you know both of those markets continue to develop and you know we're not standing still and making sure that we have more land and more capacity to meet our growth. But But if you think about just year on year, the uptick that we have in terms of the land bank, that we have in sitting on 747 megawat, that we feel good for the, you know, you know the next number of quarters that we can accommodate, accommodate the demand, but very you might want to talk about how we think about the flexibility around CapEx.
Speaker 7: Thanks Eric, it's good to talk to you this morning. Appreciate those kind words. We obviously the team is doing really well and continue.
Speaker 7: streng strength terms of new signings and and also margin performance in our data center business. So has Tal our team there. In terms of data center capital, as you know, this year we had pencil to deployed five million of growth CapEx and with the vast majority of that going to data center. Year on year we put considerable incremental amount of CapEx into data center in the first quarter.
Speaker 7: I think we do have the benefit of so much being preleased in. The team continue to sell that. It is conceivable to me that we will be over time ramping our CapEx for data center and sort of a bit of a high Class problems, So to speak, is the team continues to sell through our, our pipeline plans. So we have ample capacity to do so. In terms of deploying additional capital, we are- we were always planning to spend, from a timing standpoint, more CapEx, relatively speaking, in the first half this year than we did last year.
Speaker 7: As you recall, last year was a little bit more shape toward the back half in terms data center deployment. We're deploying a consider amount here in the first cap will continue that trend in the second order and you know, I think we get through midyear and see how the additional pipeline looks, which is quite strong, I'll know at this time as, as we see how that is, that mid we we may talk to you about a little bit more.
Speaker 7: But that would be a very positive development in terms of continuing to see really high levels of organic growth rates driven by commencements. As you know, we're very preleased in terms of our under development. I think we're now pressing over 90% in terms of preleed, in terms of what's under construction. So's a good place to youthe only other thing I guess call out is that churn has been relatively low and we continue to expected to be relatively low for the full year.
Speaker 7: So thank you for your questions.
Speaker 2: Our next question comes from Brandon Lynch.
Alright next question.
Speaker 1: Our clims. Please go ahead.
Speaker 18: Good morning and thanks for taking my question. Wanted to discuss a little bit about project matter hor. I understand So still very early days, but you called out some large and multiple vertical wins.
Speaker 18: And I'm wondering how you expect that type of contract to trend in your revenue mix over the long term as project matter horn gains more momentum. Do you expect to see a lot more of these large multi-vertical wins relative to kind of the legacy revenue mix which might have been more of a fragmented customer base?
Speaker 6: Thanks friendren it really is know first and foremost project matter hor is being customer centric So what we tryed to do is make sure we bring full range of Mountain range of services that we have to our customers and if you probably got picked up on a enses there is a big you know service component and some of these wins especially around the visigital side but there's also a big colocation and physical storagewell So it's almost you know if you think about even the aerospace company that I reference a couple times in in the Q a and also my remarks is there everything from physical storage to digitization to visualization of their of their assets So there is a you know it's a Fu breadth of the different types of storage solutions we have But I think you can' expect like in even if you look at our physical you know our our our organic stor rental revenue growth of 11% you know a part of that is we said you know nine and a half percent of that growth rate came from our traditionaliz a phical storagethis is a bit better a big part of that came from ourdat center growth as well So we see kind of a we still see storage is one of the most profitable part of our business we still see that whether it's data center storage or physical documents storage and other types of physical storage driving a big part of the growth of the business But when we actually go talk to a custommer and it's really about helping the customer solve their problem then it's usually a high bread set of solutions was quite frankly differentiates us when on even on a data center deal or a phical storage deal they really see our Mountain is someone that can be a one stock shop or you know a relatively few stopped to actually solve the problem that they're trying to solve ratherthan what we're trying to sell brenand I'll just add you know as we talked about before one of our key initiatives within man orn is cross selling and if you go back to what I mention in prepared remarch our data center team sign 22 new logos within data center in the border and when we said.
Speaker 7: Meant that, on a megawatt basis, 75% of that was cross sell from our existing client base. You know those'stwo hundred 25 thousand clients. So I think that's a good indicator of what we are trying to drive with our MAT ofhor initiatives around cross selling. Thanks, brend.
Speaker 19: Our next question.
Speaker 20: As the follow up from.
Speaker 1: sleammer ro bomb with.
Speaker 21: People Le ve that.
Speaker 22: Head.
Speaker 14: Hi Thank you, Bill. I thought you admissit it if I don't ask you about the underlying volumes and rims. So I'm going to ask you now if you could provide a little bit of a more color on the breakout to like Ram, adjacent businesses, consumer and other. Just how are the underlying factors playing out? To maybe talk a little bit about developed markets versus emerging markets as well?
Speaker 6: Thanks thanks, I appreciate come back on. So no, So it's pretty much the same trend that we've seen. So if you think about on the recorcord, business on that side is in, you know places like North America that are mature, I would say it's flat slightly down in terms of volume, Eastern Europe and some of the emerging markets it's continued positive volume trend and, as you know I've talked about, it's really about the maturing of the the markets.
Speaker 6: But at the same time is you know, every single customer around the world is continue to send us new what I would call documents storage as we come into our facilities. But you know the growth areas our combination is, you know has we discussed before- is whether it's kind of in Eastern Europe , Latin America Asia, Pacific is well has some of the new storage areas that we're doing for our customers.
Speaker 6: So expanding what you know their needs are around physical storage. So the businesses you knowice is that you know continued to to build positive volume, continue to have very high utilization across our industrial real estate footprint. So really hs off to the team is there continuing to provide what is a key platform or key need for our customers around the whole physical storage painpoint that our customers have across industry.
Speaker 6: Even the, the aerospace company that I keep referring to, is a big part of that- was providing secure physical storage, which before we weren't we't doing for them but because we bundled it with a solution of really end to end solution around their information management and digitization of some of the assets and we can do that seamlessly by storing those documents in our facility for them, even at a mature market like the United Kingdom and unlocked new storage opportunities.
Speaker 6: So it really part of now a broader conversation of the Mountain range that we have with our customers and- and you can see the numbers- it continues to kind of move forward. So thanks for the question.
Speaker 2: This concludes our question. And and profession in the Iron Mountain: first quarter 2020 -three and.
This concludes that question and answer session and the Iron Mountain.
2023 at this conference call.
Speaker 23: Conference call.
Speaker 2: Thank you for attending today's presentation. You may now disconnect.
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