Q4 2023 Iron Mountain Incorporated Earnings Call

Good morning, and welcome to the Iron Mountain first quarter 2023 earnings conference call.

All participants will be in listen only mode.

Should you need assistance please signal.

Conference specialist by pressing the Star key 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.

To withdraw your question. Please press Star then two.

We won't limit analysts to one question and you shouldn't rejoin the queue.

Please note today's event is being recorded.

I would now like to turn the conference over to Julian Tobin Senior Vice President and head of Investor Relations. Please go ahead.

Julian Tobin: Thanks, Rocco good morning, and welcome to our fourth quarter 2023 earnings Conference call.

Julian Tobin: Today's call, we will refer to materials available on our Investor Relations website. We are joined here today by itself.

President and Chief Executive Officer, and Barry heightened executive Vice President and Chief Financial Officer After prepared remarks, well open up the lines for Q&A.

Julian Tobin: Today's earnings release contain forward looking statements, including statements regarding our expectations. All forward looking statements are subject to risks and uncertainties.

Julian Tobin: Please refer to today's earnings materials, the Safe Harbor language on slide two in our annual report on Form 10-K for a discussion of the major risk factors that could cause our actual results differ from those in our forward looking statements.

Julian Tobin: In addition, we use several non-GAAP measures when presenting our financial results.

Have included the reconciliation of these measures in our supplemental financial information.

Julian Tobin: That I will turn the call over to Bill.

Thank you Julian and thank you all for joining US today, we're pleased to report another outstanding year for Iron Mountain, we achieved record revenue and adjusted EBITDA in both the fourth quarter and the full year. Our record results are a testament to the devotion and hard work of our team and our resilient and growing business model.

In the fourth quarter, we achieved revenue of 1.4, 0.1, 0.414 $2 billion, yielding eight 7% total organic revenue growth and record adjusted EBITDA of $525 million up 11% for the full year, we delivered record results across the board revenue of $5.5 billion.

Adjusted EBITDA of $2 billion in <unk> of $1 $2 billion.

Julian Tobin: I'll now discuss some ways in which we had been working with our customers, which has led to this growth.

Let's begin with our records management business a win of note was with one of the largest health systems in the U S. Awarding iron mountain a contract to significantly enhance its management of records across 140 hospitals and 2600 care sites.

<unk> on a strong long term relationship with the customer we are now implementing a rigorous compliance program that will reduce the cost and meet records' retention requirements, leading to a more efficient service. This win is particularly representative of our focus on cross selling through Matterhorn is this customers utilizing a variety of probably about <unk>.

And services across our business lines, including digital services, along with traditional records management and shredding.

Another win showing iron mountain's cross selling power occurred with the Hungarian industrial gas supplier.

We are helping this customer to create space at its facilities by story and then digitizing. Its records. We are also exploring opportunities to deploy our digital mailroom solution is our partnerships develop.

Thereby expanding this relationship across our product suite.

The last win to highlight in our records management business is a new contract with the Swiss Division of a British multinational asset management company to relocate its physical records to one side and digitize them over time. In addition to freeing up physical space. Our solution will ensure our customers records are stored safely and.

Julian Tobin: Client Lee enables more efficient access to the digitized information.

Moving now to some wins in our digital solutions business, we won a contract from a large aerospace customer to deploy our insight platform to manage and translate invoices from 'twenty two languages into English.

The customer chose our solution ahead of competing proposals thanks to insights embedded AI engine, which gives it the ability to not only store, but to automatically classify a range of documents in a highly secure manner.

Another win this quarter was with a Canadian government Agency. This agency, which manages workplace compensation claims it's been a customer of our records management services for more than 15 years.

Julian Tobin: Successful delivery of digital mailroom and imaging on demand solutions. During the Covid pandemic has led to a new Master service agreement for digitizing services worth more than $10 million over the contract length.

Julian Tobin: We will preserve scan around 47000 rolls of microfilm to produce 240 million images on our insight platform, helping the agency to process compensation claims faster than ever and delivering a solid recurring revenue stream to drive our growth.

In Brazil, a major television network that has been a records management kind of customer for almost 25 years has asked us to manage the indexing and digitization of 50000 boxes, a record store and its locations and iron mountain's facilities in the country. Our insight platform is at the heart of our solution, enabling the customer to man.

<unk> requested digitize from all parts of the business in one place effectively and efficiently.

Julian Tobin: Finally, the Hong Kong Division of a major multinational bank has chosen iron mountain to be its partner in a major transformation of its finance operations. This customer manages a large volume of finance documents and it's outsource this work to iron mountain with a goal of streamlining the process of checking and scanning these files we.

See the potential to scale this solution for the bank and other locations, including Singapore, India. The U S. The United Kingdom, and the United Arab Emirates.

Now, let's turn to our data center business, we continue to be pleased with the growth the growth trajectory of our data center business, which has only accelerated with the rapid adoption of AI enabled services. We are pleased to have signed 124 megawatts well ahead of our initial plan for the year, we continue to see tremendous opportunity.

In serving both Hyperscale and Colo co location customers and significant growth potential for our footprint.

An example in the quarter, we signed a seven year agreement to provide capacity at our New Jersey data Center for an automated trading technology company does it stay at that is expanding in the U S. Our reputation for compliance and sustainability were key to winning this business and it was important for our customer to receive 100% traceable embarrassed.

Buyable energy and carbon records in support of their sustainability goals.

Julian Tobin: Also in the U S. We were pleased to win a datacenter deal with a secure cloud storage company. There is growing rapidly across North America, our reliability and close relationship since first doing business with this customer a year ago helped to seal this new deal as did the strategic location of our facility in Northern Virginia.

Moving to India, we continued to see strong demand for capacity, we closed the data center contract with a major bank in the country in the fourth quarter. This customer chose our Mumbai facility, specifically in Iron Mountain more broadly for our ability to provide a secure data center for its large domestic branch platform close to its headquarters.

Julian Tobin: Orders.

Julian Tobin: Turning to our asset lifecycle management business or a L. M. We secured a significant contract with a global financial services company, our ability to integrate our secure a L. M services with the customer's existing business management platform was critical and has enabled them to streamline how they order complete and report on there.

I T asset disposition activities.

Our solution was an excellent demonstration of how deeply we understand the needs of our customers, especially in the highly regulated world of financial services, staying with a L. M business in the quarter. We won a contract with a U S vehicle insurance company that has been an existing customer of ours for many years, having shifted its employees to a remote.

Julian Tobin: Working model, our customer needed to partner with the capacity to retrieve over 37000 devices for more than 240 locations nationwide then process refurbish and returned them for distribution.

Our solution provides our customer with better visibility of its I T assets and enables them to manage this activity more efficiently.

I should also highlight the synergy between our a L M and datacenter business when it comes to data center renewal and decommissioning.

We are now in a position to not only provide co location and cloud migration services, but we can also securely and responsibly dispose of obsolete equipment and.

An example of such an opportunity in this quarter was a major win with one of the world's leading producers of business process management software, we managed to secure decommissioning of over 40 data centers globally sanitize, the I T assets and remarketed them to deliver a significant return and value.

Julian Tobin: Also in the quarter, we were awarded a contract by one of the oldest financial institutions in the U S for a similar data center decommissioning project.

Wins demonstrate that iron mountain is uniquely position to minimize risk and maximize savings as a single source partner for these activities.

Finally, let me take a moment to highlight our acquisition of Regency technologies Regency's team makes a great addition to the leadership of our rapidly growing <unk> business and gives us additional capabilities to serve this fast growing sector at the heart of the circular economy.

Julian Tobin: Furthermore, this acquisition together with the momentum we had been building in a L. M through the strengthening of component pricing and cross selling sets us up well for continued success.

To conclude I would like to thank our team for their resilience hard work and dedication as we continue our matterhorn climb and continue to serve over 225000 customers. We are thrilled to progress ahead of expectations and it is due to the commitment of our mountaineers as we look to 2020.

For N b on the momentum we have built will continue to drive the opportunities ahead with another year of double digit topline growth expected Barry will speak in detail about our financial guidance for the year ahead with that I'll turn the call over to Barry.

Thanks, Bill and thank you all for joining us today to discuss our fourth quarter and full year 2023 results and our outlook for 2024.

Turning to our financials in the fourth quarter. Our team continued the trend of delivering record performance on all of our key financial metrics.

On a reported basis revenue of $1.42 billion grew 11% year on year or 10% on a constant currency basis, reflecting a new quarterly record.

Julian Tobin: On an organic basis total organic revenue grew eight 7% a key highlight in the quarter is our organic storage revenue, which grew 10, 4% as a result of strong performance in both our records management and our data center businesses.

Julian Tobin: Total service revenue increased 8% to $549 million. This was driven by global women at 10% on a reported basis and 9% on an organic basis project matter horns focus on selling our entire range of products and services has driven the strong results and are a testament to our commercial team's efforts.

Adjusted EBITDA was $525 million, a new record up 11% on a reported basis and 10% year on year on a constant currency basis adjusted.

Julian Tobin: Adjusted EBITDA margin was better than we projected at 37% improved 100 basis points sequentially, driven by strong mix and cost productivity across all of our businesses.

As we've stated in our earnings press release effective in the fourth quarter of 2023 R. A F. O definition has been updated to exclude amortization of capitalized commissions in.

Julian Tobin: In light of the growth of our data center business, we conducted a benchmarking analysis of other companies in the industry and as such have aligned our a F O reporting accordingly, which provides investors better insight into the funds available to support the growth of our business.

Julian Tobin: <unk> was $328 million or $1 11 on a per share basis up $29 million and ninth respectively from the fourth quarter of last year to allow for comparison to our guidance and consensus we are reporting our prior methodology as well.

On our previous calculation F O was $317 million or $1 seven on a per share basis. This was $7 million better than our <unk> guidance and <unk> <unk> better than our guidance on a per share basis.

Speaker Change: Now, let me briefly summarize the full year.

Speaker Change: Revenue of $5 $5 billion increased 7% on a reported basis and 8% on a constant currency basis.

Adjusted EBITDA increased 7% year on year to $1 $96 billion, an increase of $135 million.

Speaker Change: <unk> increased over 5% to $1 $2 billion or $4.12 on a per share basis on our previous calculation <unk> was $1 $168 billion or $3.97 on a per share basis.

Speaker Change: And now turning to segment performance for the quarter, our global rim business delivered revenue of $1.19 billion, an increase of $108 million from last year or 10% on a reported basis.

Speaker Change: On an organic constant currency basis revenue increased eight 5%.

Speaker Change: Global Rhame, adjusted EBITDA was $534 million, an increase of $48 million a year on year.

Speaker Change: Global rim adjusted EBITDA margin was 44, 7% up 100 basis points sequentially, driven by strong services and productivity.

Speaker Change: Our data center business continues to grow and deliver strong performance from a total revenue perspective, we delivered 32% year on year growth on a reported basis and 30% year on year growth on a constant currency basis, our data center storage revenue grew 34% year on year or 32% on a constant currency basis, driven by new develop.

Speaker Change: <unk> coming online.

Speaker Change: Data Center EBITDA was up approximately $10 million year on year, and EBITDAR margin was up 80 basis points sequentially.

Speaker Change: Needing to trend up modestly on a sequential basis.

Speaker Change: Similar to data center cross selling activity has been particularly strong in our <unk> business with nearly all deals coming in as a result of it.

Speaker Change: We completed our acquisition of Regency technologies early in January this acquisition strengthens our ability to serve and expanding <unk> customer base and broadens our capability in the category, especially in the enterprise segment.

Speaker Change: <unk> brings robust remarketing and recycling capabilities to better serve our customers and help them achieve their environmental and data security goals. We have long admired the leadership at Regency and are thrilled to welcome their entire organization to our team.

Speaker Change: Turning to capital for the full year 2023, we invested $1.2 billion of growth and $140 million a recurring consistent with the expectations. We shared on our last call for 2024, we're planning for capital expenditure to be approximately $1.35 billion of growth and approaching $150 million.

Speaker Change: A recurring give.

Speaker Change: Given our strong prelease activity the vast majority of our growth capital will be dedicated to data Center development.

Speaker Change: Turning to the balance sheet with strong adjusted EBITDA performance, we ended the quarter with net lease adjusted leverage a 5.1 times and our leverage remains at its lowest level in a decade.

Speaker Change: For 2024, we expect to exit the year at similar levels to your in 2023.

Speaker Change: Our board of directors declared our quarterly dividend of 65 cents per share to be paid in early April and on a trailing four quarter basis or payout ratio is now 62% in line with our longterm target range of low to mid sixties per cent.

Speaker Change: Now, let me provide an update on our progress as to the project Matterhorn growth objectives, we shared at our Investor day in September of 2022.

Speaker Change: You will recall that we introduced hediger targets for growth between the period of 2021 through 2026 of approximately 10% for revenue approximately 10% for adjusted EBITDA and approximately 8% for <unk>.

Speaker Change: Two years into our Matterhorn journey, we are well on track even ahead of those commitments, having achieved 13% annual revenue growth from 2021 to the end of 2023 on a constant currency basis, we have achieved 11% annual adjusted EBITDA growth and inexpensive 10% annual a F F O growth.

Speaker Change: The dollar has been particularly strong over this period and despite this we have been delivering on our commitments on a reported basis as well.

Speaker Change: Now, let me share our projections for the full year 2024.

Speaker Change: We expect total revenue to be within the range of $6 billion to $6.15 billion, which represents year on year growth of 11% at the midpoint.

Speaker Change: We expect adjusted EBITDA to be within the range of $2.175 billion to 222 $5 billion, which represents year on year growth of 12% at the midpoint.

Speaker Change: We expect a F F O to be within the range of 1.3 billion to $1.335 billion, which represents year on year growth of nine per cent at the mid point.

Speaker Change: And we expect a F F O per share for the full year to be $4.39 to $4.51 and this represents year on year growth of 8% at the mid point.

Speaker Change: In terms of foreign exchange, we are using a forecast based on those of several major financial institutions compared to 2000 twenty-three. This results in a full your ethics headwind of $25 million revenue in approximately $10 million to EBITDA any of that though.

Speaker Change: Turning to the first quarter, we expect revenue of approximately $1.45 billion adjusted EBITDA in excess of $510 million and a F. F O of approximately $310 million and a at the phone per share of approximately one dollar and five cents.

Speaker Change: To conclude we are pleased to have delivered a strong year in 2023.

Speaker Change: Am confident that we will build on our momentum and continue to drive strong growth in 2024, we are well on track to achieve our map project Matterhorn goals I'd like to take this opportunity to express my thanks to our entire team for delivering a successful year and their continued dedication to serving our clients and with that operator.

Speaker Change: Would you. Please open the line for two and a.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question.

Speaker Change: And one on your telephone keypad.

Speaker Change: Speaker phone please pick up your handset.

Speaker Change: Anytime your question has been address you would like to withdraw your question. Please.

Speaker Change: Oh, a little bit of analysts to one question.

Speaker Change: Okay.

Speaker Change: At this time.

Speaker Change: Internally through several roster.

Speaker Change: And to those first question comes from Georgetown with Goldman Sachs. Please go ahead.

Georgetown: Alright. Thanks, Good morning, <unk> business, you mentioned component prices trend to order a reporter.

Georgetown: <unk> volumes and component prizes performed on a year over year basis, and a quarter and what assumptions for component persons you're factoring into your 2024 guidance.

Speaker Change: So good morning, George is thanks for the question. The so let me let me kind of answer the kind of the higher level on the strategic where we see the trends going and then Barrington.

Barrington: Go to the next level and give you a little bit more specifics in terms of the numbers, but on the to your macro point in terms of the trends on the component prices. It's very much in line. What you see in terms of the analyst reports right now and you can see that coming through and the and the fourth quarter and building into you want So we expect the component prices to continue to <unk>.

Barrington: <unk> during the course of the year and you can see that broadly in the semiconductor memory business you know for the original manufacturers as well. So we are very much benefiting from the same trends you're seeing in the industry for the oem's as well as for the the reused or the recycled market.

Barrington: In terms of volume actually throughout the year as we were report if we'd been reporting on the last few quarters as we continue to see increased in volume, although when that turned into a revenue. It was muted because of the the low component prices that we started off the year and what kind of work through the rest of the year, but the trends that we saw in queue <unk>. They showed up in Q4.

Barrington: <unk>, we continue to see building in Q1, and we are very much tracking what you're seeing in the broader OEM market for for memory disks and Cpus Gpus.

Speaker Change: <unk>, Yeah, Hey, George Good morning. Thank you for that question I'll give you a little bit more detail on how we're thinking about <unk> in total so in 2023 enlighten those trains that bill was mentioning we delivered $177 million revenue from Atlanta now for the guidance at the midpoint, whereas.

Barrington: Assuming about $355 million a total revenue for <unk> I'll note that regency brings in 150 million right. There. So it's sort of 240 against the 177 I think if you look at what we did in the fourth quarter. What you'll find is just at the fourth quarter right run rate we'd be in excess of 200 205 206 million.

Barrington: And that's assuming no improvement from all the enterprise bookings, we've been doing over the last half as bill is referring to as well as and what will likely be a continued improving environment on component pricing. So whereas last year, we were faced with really significant challenges of component pricing continuing to decline earlier in the year.

Barrington: And then staying at those trough levels.

Barrington: We have assumed a modest amount of pricing benefit on component pricing as we move through the year really we didn't assume much of any change from the fourth quarter to the first quarter that may prove conservative and then we assumed a fairly slow ramp slower than what all the industry prognostications are for component pricing. So when I look at the.

Barrington: Incremental increase we have in the guidance for our organic ale in business George to about 35 million, which you know, we'll see how the year goes but I feel very good about where we're position. Thank you.

Speaker Change: Thank you.

Speaker Change: Question <unk>.

Speaker Change: It was a bomb.

Speaker Change: Please go ahead.

Speaker Change: Hi, Thank you very much could you talk a little bit about the pricing environment and how that contributed to revenue growth in the quarter and how much you're expecting there to be a contribution to guidance in 2024, we're seeing kind of an uptake in and some of the room organic revenue growth and I was wondering.

Speaker Change: How much of that might be directly pricing verses anything else.

Very: Hi, Shlomo. This is very thank you for that question. So what you would see in our results and as you're pointing too and thank you for that is that our global <unk> storage rental revenue was up 8% over eight per cent and a quarter on an organic basis and for the full year. It was about eight and a half so.

Speaker Change: We had a very strong storage rental revenue growth in 2023, and that's with you know.

Speaker Change: Positive volume friends, and a good mix and revenue management, and where do we think about revenue management courses as we talked about before about value our ability to provide our customers with value added services, such as our ability to provide digitization on demand rapidly when whenever they needed smart sore.

Speaker Change: And a host of other value added services. So and then incidentally our service revenue also stepped up nicely in the fourth quarter on global room, as well and so our expectation for the knee are embedded in the guidance.

Speaker Change: Is about you know round numbers call at six ish percent growth for global room at the mid point, which in light of the revenue management actions. We have is our anniversary from last year as well as additional revenue management actions. This year very good trajectory, we think on services inclusive of <unk>.

Speaker Change: Digital services continue to ramp through the year, we feel very good about that rejection I I think you know it it it does imply an opportunity for for us to.

Speaker Change: Certainly achieved the mid point on the global room number at six thanks very much.

Speaker Change: Thank you next question comes from new crossover with BNP. Please go ahead.

BNP: Hey, good morning, maybe one related to that previous question is I know they don't give a formal guide, but what are you expecting in terms of overall <unk> for Q1 and the remainder of this year.

BNP: And then if I can just ask one a data center.

BNP: <unk> how much of that 100 megawatt guide is kind of already in the pipeline.

BNP: And I've been cast Mark to market with five per cent for 2023.

BNP: How do you see that playing out this year. Thank you.

Speaker Change: So made I'll take the pipeline question on the data Center and then.

BNP: Berry Berry Big a question on the pricing the so on the the pipeline as you would expect especially with the Hyperscales you know the market extremely wall is that we have a very strong pipeline going into the year. So yeah. When we when we set our targets yeah. I mean, you can assume that we.

BNP: You have a pretty big pipeline stands behind that and if you look at the way we set our targets is it's very consistent with what we laid out on an investor day.

BNP: Is where you know you think about a couple of years ago. We were in the sixties. So you see that are targets of continuing to show that we are growing the business north of 20 per cent a year and obviously some of these big contracts can either put ya well ahead or you know at the targets that we set but you know we're very we're very comfortable that we're continuing to bill.

BNP: Momentum in the business and we're maintaining these 20 per cent plus growth rates on a <unk> on a very quickly or very rapidly growing base. So so I think you can't assume that yeah like anything else is that we have a pretty good pipeline in fact across most of our our businesses, we maintain a pretty strong pipeline behind our targets.

Speaker Change: <unk>. Thanks for the question is Berry couple of.

Speaker Change: Responses on the physical volume much as we have forecasted the last few years, where we're planning this year the same way, which is for our physical volume to be slightly up for the ear and and also for the first quarter size gas about that so the vast majority of the growth that I mentioned for global realm will be driven off of <unk>.

Speaker Change: Services as well as revenue management of course as it relates to your question about Mark to market on data center clearly trends have been good with respect to mark to market over the last really you know five six quarters and from what we're seeing we continue to expect that to be trending upward.

Speaker Change: And we have high visibility on that and frankly in the Colo space, it's trending up even higher thank you.

Brooklyn lunch: Thank you next question comes from Brooklyn lunch with Barclays'. Please go ahead.

Brooklyn: Okay. Good morning goes thanks for taking my question.

Brooklyn: Maybe on Matterhorn, you highlighted some recent wins, there, but I'd imagine, it's a very long sales cycle for.

Brooklyn lunch: A lot of the engagements that you have maybe you could talk a little bit about where you see yourselves in the overall process with individual customers and how much additional benefit you expect to see stomach from the matterhorn initiatives over the next.

Brooklyn lunch: Four to five years.

Speaker Change: Mm, thanks burned and you're you're right I mean, they're they're typically longer than our traditional sales cycles <unk> or if you think about the services that we were selling you know five six years ago. When our service revenue was down in the forties right and talk honestly 10 times bad today, just on the digital Ah what I'm talking about digital services now that portion of the service.

Speaker Change: Business now it's more than 10 times that size. It is definitely because it's much more of a solution orientation that being said. So you know so we maintain much bigger pipelines to backup that growth, but you know as you say as you can see we're continuing to grow that business and double digit territory, so the but the <unk>.

Speaker Change: Other side the flip side is more and more of the services are recurring or multi year project. So so it has that builds even though the the sales cycle is longer is the also the revenue that comes in is around longer. If you will so you know it's it's it's if we look at it right now it's approaching 30 40 per.

Speaker Change: <unk> of the revenue that were coming in is truly recurring <unk> very long multi year project. So.

Speaker Change: So at what level, yes, it's a longer sales cycle another level. It it allows us to continue to build momentum and drive growth in that business because each year, we're replacing less than we were before.

Speaker Change: The only thing I'd add Brendon, it's Barry is that are cross selling <unk> opportunity is is very large <unk> we have <unk>.

Speaker Change: Well over 200000 clients most of them are measured in decades of duration and we are seeing are cross sampling efforts continue to expand they we increased significantly year on year, but there's a lot more opportunity and when I think about the services that bill just mentioned as well as things like acid lifecycle management really those are services that we can.

Speaker Change: Be offering and nearly all of our customers need and so we think it it.

Speaker Change: Matterhorn, we are as you heard me say, we reiterated our targets today and we're back running ahead. So we feel very good about where we're at.

Speaker Change: Thank you next question today comes from covered.

Speaker Change: Yes. Please go ahead.

Covered: Great. Thanks, so much a it looks like the total volumes increased.

Speaker Change: Storage, but the retention slipped a little bit.

Speaker Change: Which room kind of acceleration there cause it looks like it's been nice outcome.

Speaker Change: Yeah. So so Kevin I would say if you look at our retention rates over the last 15 or so years you would see cause that date is available that it's very much in line and it can wobble you know a few basis points here, they're quarter to quarter, but we we are very pleased with our retention and our.

Covered: Customer satisfaction scores and thank you for the point volume has been quite good.

Speaker Change: Quite impressive.

Speaker Change: <unk> and I include any acceleration so thank you for the question.

Speaker Change: Thank you and our next question comes from Wells Fargo. Please go ahead.

Wells Fargo: Oh, great. Thank you I just wanted to touch on data centers and capital allocation Uhm. So you know you talked about pricing continuing to ramp of the data center ecosystem and we've seen demand outstripping supply. So maybe you could touch on where your targeted development yields are for the 1.3 billion of Capex, the majority, which is data centers and.

Wells Fargo: You know if you <unk> for $286 800 megawatts of leasing even further maybe touch on some other funding sources like joint ventures that could maybe give you additional capital to attack the hyperscale opportunity. Thank you.

Wells Fargo: And thanks for.

Wells Fargo: So the question. So in terms of the returns that we're getting and in Berry touched upon in his script is is you should think about yeah interest rate. So the cost of capital have moved up but our pricing has moved up about 100 150 basis points ahead of that so we're actually getting higher returns even in a higher interest rate environment than we were before so the pricing is.

Wells Fargo: Moved up quite nicely, even more if you look at the non hyperscale portion, but I'm talking more about the hyperscale customers in another themselves and you know that's partly driven by you know the attraction we're getting in the market and then the other part of it is you know the scarcity I mean, especially with the growth in a is you know a I.

Wells Fargo: Actually absorbs a lot of power and that's what we're selling effectively as his capacity or access to power. So so I think we're really happy with the way that the pricing is evolving in the in the business in terms of your your other question in other words, yeah, and it kind of goes to the pipeline yeah, we feel very comfortable about the target for this year, which is you know.

Wells Fargo: More than 20 per cent ahead, and you're close to 25 per cent ahead, what we targeted last year. So it was the continued momentum and growth in the business and the you know could we do more than that yes. We have a fully funded plan. So we don't see any shortage of capital in in remember the one of the advantages that we have not just because of the cross selling of matter.

Wells Fargo: Or that you know, having the full information services sweet, but the other part of it is is that you know our records management business as a 70 per cent plus gross margin business that generates a lot of cash and that gives us deeper pockets than some of the pure play data Center places players in terms of being able to.

Wells Fargo: <unk> deliver our dividend and growth and dividend to our to our shareholders as well as putting capital to work and data center as I said and it just so happens that 225000, plus customer base is a cross selling opportunity for us.

Speaker Change: The only thing I guess I would add there is that just building on those point. There is you know in terms of the growth in EBITDA that we're generating instead over 230 million at the midpoint nearly 240 with our leverage target range, we have a lot of capacity and that together with the cash flow of the business puts us in a position.

Speaker Change: <unk>, where we can issued the strong guidance that we did invest heavily in our data center development and of course, that's the nature.

Speaker Change: Nature of having pre Lee so much of our business. We you know if you look at the amount of construction, we have under domain under underway versus the Preleased fairly I think the high 90, <unk> 95 per cent or so and so we'll continue to ramp or development and data center to keep up with the contracts that we've signed and all the while maintain.

Speaker Change: Winning our leverage year on year at the same level. So we feel very good about where we're at thanks.

Speaker Change: Okay. Our next question comes from John <unk>.

Speaker Change: Homer.

John: So I have.

John: Uhm. Thanks, So I'm just interested in regency any any kind of learning early learnings.

John Homer: You know now that you're a little bit into the into having acquired it thoughts about how to achieve top line synergies and other gross past that you could see in that in that segment more generally.

Speaker Change: Yeah, no. Thanks to answer the question.

Speaker Change: As I said in my script and also Barry is that we're really excited about the the regency acquisition not just because of the footprint that it gives us here it gets a stronger even scale within the United States, but also the the leadership team. So very strong leaders that we're really happy to kind of continue to build out the organizational structure under mark.

Speaker Change: Kid. So <unk> you know cause it's so first of all the leaders that we got with that business. We're very excited about the second thing is they have a lot of customers that both overlap, but they also have a lot of customers that don't so for instance, they have a very good both federal and local government portfolio of businesses and that's a business that we're already.

Speaker Change: And deep collaboration in terms of how we can expand that using iron Mountains. You know muscle with is 26000 mountain ears around the globe, you know and how they can actually tap into that and then they also have some expertise, especially around the end user devices, which you know already we're doing a lot and then use devices are highlighted some of the wisdom on my in my.

Speaker Change: Opening remarks, but the they have even further capabilities, which I think is gonna give us a lot more to do on the back end in terms of the way we serve customers and the efficiency that we can process their equipment.

Speaker Change: John John the only thing I guess I would add is that when we knew this is part of the deal, but just to underscore there's considerable capacity for processing at regency and as Bill mentioned, the add to our capabilities eight facilities around the U S, which really broadens our reach an ability to serve <unk>.

Speaker Change: <unk> quickly and this is a team there that has been building a business very profitably I might add for decades, and so they <unk> to underscore Bill's point, they they really know what they're doing and I think the combination is an excellent one so thanks for that question.

Speaker Change: I don't know there's question as a follow up.

Speaker Change: Well, let's do four please go ahead.

Speaker Change: Hi, if you don't mind I'm going to get a little more into the weeds. Barry just <unk> you saw some interesting gross margin changes like just out of sequential basis. So the services margin.

Barry: <unk> 260 basis points, you know it seems like the costs were contains while the revenue increased.

Barry: Undistorted side, you have no all other storage costs going up I live in a half million pushed the gross margin Delta <unk> sequentially I know these things move around quarter to quarter, but maybe you can give us a little bit of insight as to what's in there all other storage costs that you know moved up 11, and a half million this quarter.

Speaker Change: Yeah sure thing Shlomo I'll take the services 0.1st as I alluded to in the prepared remarks, we had very good next within our services and as you know when we're doing services specially as we're continuing to see larger and larger deals the mix of those can move around and the timing of them and so.

Speaker Change: So we we had anticipated a little lower margin next in the services portfolio. Some of those deals pushed into the first quarter here in terms of when we win them and into the new year, but we then one some deals and we're able to provide service on some higher margin. So that's part of it together with the fact that <unk>.

Speaker Change: Handedly, our team here does a great job driving productivity across our services organization as it relates to the storage gross margin I'm glad you asked that question because there's a item that I want to make sure. We all understand that storage gross margin of course is the combination of all of our stores businesses. So.

Speaker Change: Do you think about the records management physical storage business, that's a very high gross margin business and continued to perform very well, we're very pleased with the margins in that business in light of revenue management et cetera, and the volume friends over the last several years, it's been training really well.

Speaker Change: The factor that can affect the actual rate, though and <unk> also affects your all other storage costs with they'll come to.

Speaker Change: Is data center as you know as you'd you'd see from our peer companies that are public as well as some of the other companies in the data center space. The gross margins on data center generally as an industry are lower than our records management business and so while our data center gross margin actually expanded both sequentially and year on year the mix.

Speaker Change: In fact, because data center grew I think the storage revenue was up 35% or so year on year in the order that has a mix element and so you can have a situation where our gross margins are improving on both businesses yet the contribution creates a <unk> the rate going down slightly as it relates to all other storage.

Speaker Change: Cost that's one.

Speaker Change: One of the big drivers their courses and it goes to data center is the power and so as where you know having more and more client commencement. They start drawing more power in there that I also has an effect on gross margin, but doesn't change our EBITDAR dollars. So good questions and I hope that that clears that up we feel very very good about the gross margin and the company.

Speaker Change: Thank you next question comes from jurors tongue with home and sauce. Please go ahead.

George K. Tong: Hi, Thank the a quick follow up uhm it looks like your dividend payout ratios below the 65 per cent target, which is where you read the dividend earlier when you're talking about your thoughts on <unk> was below the threshold.

Speaker Change: Yeah, no, thanks, George and and you're right. We've we've maintaining as a as a board and is a company that our target payout ratio is kind of in the low sixties. So it was 60 to 65 and we're kind of training that while we are in that range. Now. So it's you know this is a obviously a decision for the board, but I think you could expect the way we are trending in and the guidance we've given you.

Speaker Change: Thank you. This concludes our question and answer session.

Speaker Change: <unk> 20th twenty-three earnings conference call. Thank.

Speaker Change: Thank you for the time in today's presentation.

Speaker Change: Right now I'm, just gonna survive and have a wonderful day.

Speaker Change: [noise].