Q4 2024 Iron Mountain Inc Earnings Call
Good morning and welcome to the Iron Mountain 4th Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key on your telephone keypad.
After today's presentation, there will be an opportunity to ask questions.
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Please note, this event is being recorded.
Speaker Change: I would now like to turn the conference over to Mark Rupp, Senior Vice President of Investor Relations. Please go ahead.
Mark Rupp: Thank you, Betsy. Good morning and welcome to our fourth quarter of 2024 earnings conference call.
Mark Rupp: On today's call, we will refer to materials available on Investor Relations website.
Speaker Change: We are joined here today by Bill Meaney, President and Chief Executive Officer, and Barry Hytinen, our Executive Vice President and Chief Financial Officer.
After prepared remarks, we'll open the lines for Q&A.
Speaker Change: Today's earnings materials contain forward-looking statements, including statements regarding our expectations.
All forward-looking statements are subject to risks and uncertainties.
Speaker Change: Please refer to today's earnings materials, the safe harbor language, on slide two.
Speaker Change: and our annual and quarterly reports on Form 10-K and 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.
Speaker Change: In addition, we use several non-GAAP measures when presenting our financial results.
Speaker Change: We've included the reconciliations to these measures and our supplemental financial information.
With that, I'll turn the call over to Bill.
Bill Meaney: Thank you, Mark, and thank you all for joining us today to discuss our fourth quarter and full year results.
Bill Meaney: 2024 marked another year of record performance and double-digit growth for Iron Mountain. We achieved all-time highs for revenue, adjusted EBITDA, and AFFO for the year and for the fourth quarter. Our record results were also broad-based across all of our businesses.
Bill Meaney: For the full year, revenue increased 12% to $6.1 billion, the Justice-Debate Group grew 14% to $2.2 billion, and AFSO increased 11% to $1.3 billion.
Bill Meaney: And in the fourth quarter, revenue increased 11%, adjusted EBITDA grew 15%, and AFFO increased 12%.
Bill Meaney: These outstanding results reflect the strength of our highly profitable business model, broad and growing portfolio of solutions, long tenure customer relationships, and the hard work and dedication of Mountaineers across the world.
Bill Meaney: The results also validate that Project Matterhorn has proven to be very beneficial to our business and we are exceeding the growth targets we established at our investor day presentation in 2022.
Bill Meaney: I should also point out that a foundational element behind Project Matterhorn was to accelerate growth through embracing a customer-centric culture.
Bill Meaney: Whilst we are still on a journey in this regard, it was pleasing to be ranked number one for customer satisfaction by the latest Wall Street Journal ranking of the top US listed companies.
For this, I want to thank my fellow Mountaineers.
Bill Meaney: Since 2021, we have grown both revenue and adjusted EBITDA at an 11% CAGR on a reported basis. On a constant currency basis, this growth is 13% annually, delivering a result on both a reported and constant currency basis well above the 10% targets we established.
Bill Meaney: We are also performing above our targets for AFFO, which has grown at a 9% CAGR on a reported basis or 11% on a constant currency basis versus the 8% target.
Bill Meaney: Our success and the momentum we have built over the past three years gives us increased confidence as we look ahead and is reflected in our guidance for 2025.
Bill Meaney: Our portfolio of growth businesses, including Digital Solutions, Data Center, and Asset Lifecycle Management, are collectively growing at a CAGR greater than 20% and becoming an increasingly larger portion of our revenue.
Bill Meaney: If you recall at the beginning of our Matterhorn Climb, our growth portfolio represented 15% of our total revenue. As we enter 2025, the growth portfolio represents 25%, which continues to build the momentum behind our consolidated growth goals.
Bill Meaney: Together with our records management business increasing at mid to high single-digit rate, we naturally expect to deliver consolidated growth in excess of 10% for the foreseeable future.
Our growth is driven by three principal factors.
Bill Meaney: The recurring nature of our revenue streams, both from our traditional as well as our newer business areas.
Bill Meaney: The strong macro factors supporting double-digit demand for our portfolio of growth businesses and the success we continue to demonstrate in cross-selling to our loyal customer base comprising nearly 250,000 customers, which includes 95% of the Fortune 1000.
Bill Meaney: We are already the market leader in multiple businesses and are focused on building our scale, increasing our operating leverage, broadening our solutions offerings,
Bill Meaney: and leveraging our commercial platform to capitalize on Iron Mountain's unique position as a truly end-to-end solutions provider transcending both the physical and digital worlds.
Bill Meaney: Based on our excellent results exceeding our expectations in 2024, and the strong confidence we have in our outlook for 2025, our Board of Directors has authorized an increase of our quarterly dividend by 10%.
Bill Meaney: driving continued revenue growth in our physical storage records management business, delivering differentiated digital solutions which give truly transformative results to our customers in terms of revenue, cost, and cybersecurity.
Bill Meaney: supplying differentiated data center offerings through our global scale and customer trust, and providing asset lifecycle management capabilities which are both economic and environmentally sustainable.
Bill Meaney: Let's begin with our records and information management business, which grew 7% in 2024.
Bill Meaney: Our recent customer wins are a testament to the power of our solutions portfolio and success in cross-selling.
Bill Meaney: In the U.S., we have secured a four-year contract with a Fortune 500 company, which included renewing and expanding the number of locations we serve for records management, as well as adding additional services from across our portfolio, underlying our continued focus on cross-selling.
Bill Meaney: Our records management, asset lifecycle management, and digital solutions will provide comprehensive solutions to enable this customer to streamline internal processes to enhance efficiency.
Bill Meaney: Our team's customer-centric approach successfully demonstrated the value of forging a partnership with one provider to support their broader needs.
Bill Meaney: I am also excited to share recent accomplishments in our Digital Solutions business. Our Digital Solutions business achieved record revenue in 2024, with recurring storage, service, and software growing to more than 30% of digital revenue.
Bill Meaney: We continue to see momentum and adoption of our SaaS-based platform, Insight Digital Experience Platform, or DXP, with emerging use cases that are enabling our customers to improve their ability to access, manage, govern, and monetize their physical and digital information to drive insights and intelligent decisions.
Bill Meaney: On last quarter's call, we highlighted 24 DXP deals booked. In Q4, we signed 39 deals.
Bill Meaney: Our customers are leveraging AI machine learning based capabilities within the DXP platform to automatically extract metadata and deliver business outcomes through process automation.
Bill Meaney: Some of the use cases include consumer lending, compliance, HR and benefits management, and providing a platform which future-proofs the ability to search unstructured data.
Bill Meaney: I'll highlight a couple of our recent wins in digital solutions.
Bill Meaney: In the U.S., we secured a multi-year deal with a long-standing Global Financial Services customer for our Insight DXP solution. Our client was looking for a solution to enhance its operational efficiency by automating metadata extraction.
Bill Meaney: streamline exception processing within an integrated environment, and support long-term scalability. By integrating DXP into its workflow, the customer is able to seamlessly manage process exceptions, reducing manual intervention, and improving accuracy across its treasury operations.
This is another example of a successful cross-sell.
Bill Meaney: Our intelligent business process management solutions also continue to gain traction across regions due to our unique ability to provide unified end-to-end solutions across physical and digital assets with proven capabilities to operate at scale across various environments and industries.
Bill Meaney: In Australia, a government department that has been a customer for more than 25 years has turned to Iron Mountain to improve processes related to records management and data retrieval while ensuring retention compliance.
Bill Meaney: Our end-to-end solution includes document imaging and secure destruction under a five-year plan that will manage risk, drive efficiencies, and enable our customer to deliver best-in-class service in answering inquiries.
Bill Meaney: Our proven track record and ability to deliver a comprehensive suite of services at scale enabled us to secure this important work.
Bill Meaney: Turning to our data center business, industry demand for data center development remains incredibly strong. In 2024, we grew our data center revenue by 25% to a record $620 million.
Bill Meaney: As it relates to leasing, we had a very good year of activity in 2024, our third consecutive year where we leased more than 100 megawatts, including 10 megawatts in the fourth quarter.
Bill Meaney: Given the continued strength and build of our pipeline as we enter 2025 and beyond, we maintained our underwriting returns expectations and decided to pass on a significant opportunity in the fourth quarter.
Bill Meaney: For 2025, we expect another year of strong leasing activity with 125 megawatts projected.
Bill Meaney: Our strong leasing activity shows that we are an attractive partner to customers looking for infrastructure that can support their very dense IT workloads associated with their AI-enabled services.
Bill Meaney: I would also like to highlight the announcement today of our joint venture with Ordu, the publicly listed telecom and data center company which serves Qatar as well as the region broadly. This JV furthers our existing footprint in the Middle East by adding data center services to our portfolio.
Bill Meaney: The Middle East is one of the fastest-growing data center markets globally. We will take a minority stake in the venture. The JV will serve their existing data center portfolio in Qatar, Kuwait, Tunisia, as well as the expansion across multiple markets in the Middle East region.
Bill Meaney: Ordu was looking for a partner with global operating expertise in hyperscale data centers to assist with capitalizing on the significant market opportunity.
Bill Meaney: This partnership is a testament to our operational strength and credibility within the data center market as well as our relationships with the top global hyperscalers.
Bill Meaney: Let me now turn to our Asset Lifecycle Management business, which continues to represent a significant growth opportunity as we expand our capabilities and geographic footprint in this highly fragmented market.
Bill Meaney: In 2024, ALM revenue increased 119%, with nearly 30% organic growth.
Bill Meaney: Regency Technologies had a very strong year and our recent acquisitions of WiseTech and APCD are also performing well.
Bill Meaney: We will provide IT services and workstation deployment for end-user devices, as well as data center infrastructure decommissioning and remarketing services.
Bill Meaney: The combination of our global footprint in logistics infrastructure, operational scalability, and remarketing expertise enabled our team to deliver meaningful synergies to the customer.
Bill Meaney: We have also secured our first significant asset lifecycle management contract in Canada. This is with a large North American insurance company for whom we provide a range of records management and digital services.
Bill Meaney: We are now providing a Canadian subsidiary with ALM services including laptop sanitization.
Bill Meaney: and end-user redeployment, helping to address inefficiencies in workstation management across 60 locations and supporting process automation and other cost optimizations.
Bill Meaney: Our track record of delivery for this customer over many years helped secure this deal, as did our ability to offer a comprehensive, flexible, and streamlined solution that includes automation and security best practices.
Bill Meaney: Staying with the ALM business, we are partnering with the U.S. state government to deliver a fully managed hard drive destruction program across its agencies.
Bill Meaney: This deal builds on the existing records management and digital services we provide to this customer, demonstrating we have the compliance and security credentials and the operational expertise and scale to deliver a comprehensive range of information management solutions for our customers.
Bill Meaney: This is a good illustration of the kind of work we do for governments in general, including the U.S. federal government. Given the recent interest in our federal business, as well as the growth opportunity that we believe DOGE will offer us, let me provide a bit more background.
Bill Meaney: We work for more than 200 agencies of the U.S. federal government, both as a direct provider and subcontractor of services.
Bill Meaney: The physical storage of documents accounts for approximately $10 million in revenue. Correspondingly, this represents about a half a percent of our total physical volume.
Bill Meaney: We also generate $130 million in data center and digitization transformation services. We have been growing in both of these areas with the government over the last few years as we assist certain agencies with process automation and digitization.
Bill Meaney: As the government continues to drive to be more efficient, we see this as a continued opportunity for the company.
Bill Meaney: To conclude, I am very proud of the strong results our dedicated Mountaineers continue to deliver. At the core of our success is how our team meets the needs of and serves our nearly 250,000 customers around the world each and every day.
Bill Meaney: As we look to 2025 and beyond, we continue to have a tremendous opportunity ahead of us and still just scratching the surface of the $150 billion of the total addressable market for our services.
Bill Meaney: We have a very strong and growing foundation and the momentum across each of our growth businesses is clear and tangible.
Bill Meaney: As Barry will share in more detail, our guidance outlook represents another record year of double-digit revenue growth for Iron Mountain in 2025. With that, I'll turn the call over to Barry.
Barry Hytinen: Thanks Bill and thank you all for joining us to discuss our results. As you've heard this morning, our team continues to execute very well against our strategy.
Barry Hytinen: We delivered record fourth quarter and full year results across all of our key financial metrics, and we are entering 2025 with strong momentum.
Barry Hytinen: Turning to our financial results, during the fourth quarter, we achieved record revenue of $1.58 billion, up 11% on a reported basis and 12% on a constant currency basis.
Barry Hytinen: This was driven by 8% storage growth and 17% service growth on a reported basis. We delivered strong organic growth in the quarter of 8%.
Barry Hytinen: Total storage revenue in the quarter was $942 million, up $71 million year-on-year. We drove 9% organic storage growth, half of which was driven by revenue management trends in our global RIM business, and half from our data center business.
Barry Hytinen: Total service revenue was $639 million, up $91 million from last year. Organic service revenue increased 7% year-on-year, driven by our ALM and Global Rim businesses.
Barry Hytinen: Reported service revenue growth reflects the inclusion of our recent ALM acquisitions.
Barry Hytinen: Adjusted EBITDA was $605 million, a new record, and up 15% year-on-year. This was above the $595 million projection we provided on our last call and would have been nearly $610 million on the same FX rates that we used in that projection.
Barry Hytinen: The performance upside was driven by improved price margin realization and cost productivity across our company.
Barry Hytinen: Adjusted EBITDA margin was 38.3% up 130 basis points year-on-year which reflects improved margins across all of our businesses.
Thank you very much.
Barry Hytinen: AFFO was $368 million, up $40 million, which represents growth as compared to last year of 12% on a reported basis and 14% excluding FX.
Barry Hytinen: AFFO on a per share basis was $1.24, up $0.13 from last year, and also ahead of the projection we provided on our last call of $1.21.
Barry Hytinen: Now, let me briefly summarize the full year, which marked our fourth consecutive year of record performance across all key financial metrics.
Barry Hytinen: Revenue of $6.15 billion increased 12% on a reported basis and 13% on a constant currency basis.
Barry Hytinen: Our full year revenue achieved the high end of our guidance range despite the negative effects we incurred throughout the year.
Barry Hytinen: Our commercial team's focus to sell across our entire range of products and services continues to be an important driver of our growth, and we are still in the very early days of capitalizing on this large cross-selling opportunity.
Barry Hytinen: Adjusted EBITDA increased 14% year-on-year to 2.24 billion dollars, an increase of 275 million dollars. With this performance we exceeded the high end of our full year guidance.
Barry Hytinen: AFFO increased over 11% to $1.3 billion or $4.54 on a per share basis and now turning to segment performance.
Barry Hytinen: I'll start with our Global Rim business, which achieved fourth quarter revenue of $1.26 billion, an increase of $66 million year-on-year.
Barry Hytinen: Revenue management continued to be a key driver in the quarter across storage and service leading to adjusted EBITDA margin reaching a new all-time high.
Barry Hytinen: Organic storage was up in excess of 5% driven by revenue management and consistent volume. Sequentially it was down slightly due to the stronger dollar and our focus to drive operating performance in our consumer storage business.
Barry Hytinen: And, I should note, our records management business was up sequentially and year over year in line with our normal trends.
Barry Hytinen: Organic service revenue was up 8% with contributions from digital and core services.
Our digital business had another strong quarter achieving record revenue.
Barry Hytinen: Global Rim Adjusted EBITDA was $579 million, an increase of $45 million year-on-year. Global Rim Adjusted EBITDA margin was up 130 basis points from last year, driven by operating leverage and revenue management.
Barry Hytinen: Turning to our Global Data Center business, the team delivered revenue of $170 million, an increase of $33 million. This was a 24% increase from the fourth quarter of last year, driven by strong organic storage rental growth of 27%.
Barry Hytinen: For the full year, data center revenue grew 25% to $620 million, continuing the multi-year trend of accelerating growth.
Barry Hytinen: Our visibility to revenue growth and our pipeline both continue to be very strong, supporting our outlook for further acceleration in 2025.
Barry Hytinen: I'll also note that 94% of our under construction assets are already leased and as such we have very high visibility to this revenue projection.
Barry Hytinen: Fourth quarter data center adjusted EBITDA was $88 million, up 51%.
Barry Hytinen: adjusted EBITDA margin was up 930 basis points from the fourth quarter of last year and up 820 basis points sequentially. Improved pricing, recent commencements, and operating leverage were the key drivers of the strong margin expansion in the quarter.
Barry Hytinen: We saw a continued positive trend in pricing for new and expansion leases with the full year average price per kilowatt increasing more than 40% as compared to full year 2023
Barry Hytinen: Based on our visibility into commencements, we expect strong adjusted EBITDA margin improvement in 2025, with the full year increasing 400 basis points year over year, as compared to the 45.6% achieved in 2024.
Barry Hytinen: Turning to Asset Life Cycle Management, total ALM revenue in the quarter was $112 million, an increase of $60 million, or 118% year-over-year. On an organic basis, our ALM team delivered double-digit growth, which was driven by expansion in our enterprise business.
Barry Hytinen: Regency Technologies performed very well this quarter with revenue of $34 million and strong profit contribution.
Barry Hytinen: Our recent acquisitions of WiseTech and APCD performed ahead of our expectations in the quarter.
Barry Hytinen: We are especially pleased with the continued improvement in ALM profitability, which is benefiting from regency synergies, as well as improved efficiencies in both the enterprise and data center decommissioning channels.
Barry Hytinen: Turning to capital allocation, we remain committed to our strategy that is balanced between funding our growth initiatives while delivering meaningful returns to our shareholders and maintaining our strong balance sheet.
Barry Hytinen: Capital expenditures in the fourth quarter were $721 million with $685 million of growth and $36 million of recurring. For 2025, we are planning for capital expenditures to be similar to last year with approximately $1.8 billion of growth and approximately $150 million of recurring.
Barry Hytinen: Turning to the balance sheet, with strong EBITDA performance, we ended the year with net lease adjusted leverage of 5.0 times, which remains at the lowest level we have achieved since prior to the company's reconversion in 2014.
Barry Hytinen: For 2025, we expect to end the year at similar levels to year-end 2024.
Barry Hytinen: turning to our dividend. Our target payout ratio is low to mid 60s percent and on a trailing basis we ended the year at 60 percent.
Barry Hytinen: In light of our favorable outlook for AFFO, our board increased the dividend by 10%, affected with the April payout. This marks the third consecutive year where we have increased the dividend.
Now, let me share our projections for April year 2025.
Barry Hytinen: We anticipate another record year of performance across all of our key financial metrics.
Barry Hytinen: For 2025, we expect total revenue to be within the range of $6.65 to $6.8 billion, which represents year-on-year growth of 9% at the midpoint. On constant FX rates, this implies growth of 11% at the midpoint.
Barry Hytinen: This includes 10% organic growth for 2025, which is ahead of the 9% and 7% organic growth we delivered in 2024 and 2023, respectively, and reflects the growth across our portfolio.
Barry Hytinen: We expect adjusted EBITDA to be within the range of $2.475 billion to $2.525 billion, which represents year-on-year growth of 12% at the midpoint.
Barry Hytinen: On constant FX rays, this implies growth of 13% at the midpoint.
Barry Hytinen: We expect AFFO to be within the range of $1.45 billion to $1.48 billion, which represents year-on-year growth of 9% at the midpoint. On constant FX rates, this implies growth of 11% at the midpoint.
Barry Hytinen: And we expect AFFO per share to be $4.85 to $4.95. This represents year-on-year growth of 8% at the midpoint and on constant FX rates this implies growth of 10% at the midpoint.
Barry Hytinen: Turning to the first quarter, we expect revenue of approximately $1.59 billion, adjusted EBITDA of approximately $575 million, AFFO of approximately $342 million, and AFFO per share of approximately $1.15.
A couple last points for modeling.
Barry Hytinen: We expect AFFO growth to accelerate through the year as the phasing of cash taxes will be more first half-weighted than last year. And we expect the FX impact on reported results will be less of a headwind as we move through 2025 based on the timing of the U.S. dollar strengthening last year.
Barry Hytinen: To conclude, we are pleased to have delivered another record year in 2024, and we are entering 2025 with strong momentum. I would like to express my thanks to our entire team for their continued dedication to serving our clients, and with that, Operator, would you please open the line for Q&A?
We will now begin the question and answer session.
Barry Hytinen: To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
Barry Hytinen: If at any time your question has been addressed and you would like to withdraw your question, please press star then two.
Barry Hytinen: We will limit analysts to one question and you can rejoin the queue.
Barry Hytinen: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question today comes from George Tong with Goldman Sachs. Please go ahead.
All right, thanks. Good morning.
George Tong: Can you elaborate on how organic growth in the ALM business in 4Q was split between volumes and component prices and what broader trends you're seeing with both?
Barry Hytinen: Yeah, sure. Hi, George. This is Barry. Good morning. Thanks for that question.
Barry Hytinen: Generally speaking, it was largely volume, it was almost all volume driven, George, because, and it of course varies based on the channel.
Barry Hytinen: But, as you've seen, we're becoming more and more enterprise-driven in the company, which is consistent with the size of the market. And that's where the...
Barry Hytinen: you know margin improvement is substantial in terms of from both what we're doing for clients at being more of a service oriented business.
Barry Hytinen: as well as much more consistent in terms of the book of business that continues to build. What we saw in corona crisis on the data center decommissioning side was generally flattish.
some
Barry Hytinen: of the components were down a little bit, some were up a little bit, but on average it was basically bladdish, and so that was also volume driven.
Bill Meaney: The organic business performed well, and we actually feel very good as we move into 2025 as it relates to both businesses, the data center decommissioning and the enterprise, because we've won some new clients on the data center side and additional project revenue. As you know, that is a project-oriented kind of business. It can be a little bit more quarter-to-quarter project-oriented. And then on the enterprise business, that continues to ramp. And as Bill mentioned, we've won some very big deals there relative to our portfolios.
Bill Meaney: So we expect Enterprise to continue to perform throughout the year on a growing basis.
Bill Meaney: And I will just say that we are not planning for component pricing to be of much change at all to where it ended 2024. And that may be proved conservative, but we'd rather just plan that way and let you know that we see a lot of volume coming in in 2025 thanks to our pipeline.
Thank you, George.
Speaker Change: The next question comes from Nate Crossa with BNP. Please go ahead.
Nate Crossa: Hey, good morning. What's your expectation for RIM volumes in Q1 and maybe the balance of 2025 and what should we be kind of expecting for RIM pricing growth this year? Thank you.
Speaker Change: Thanks, Nate, for the question. I think, you know, you can expect 2025 to be consistent with the last couple of years, flat to slightly up volumetrically, and most of the growth will be revenue management and pricing, so you're kind of, you know, mid-single-digit, you know, mid-to-upper single-digit.
Speaker Change: overall revenue growth coming out of our room business, so very consistent with what you've seen in 20, you know, 23 and 24. Yeah, and Nate, it's very interesting to add that we
Speaker Change: We expect volume to be slightly up throughout the year and that includes the first quarter to your question also from a standpoint of
Speaker Change: timing on revenue management actions, we would expect that to be more consistent in terms of the timing of actions this year, whereas your call last year we had a little bit of phasing.
Bill Meaney: And so that helps bolster the point Bill was making about mid to upper single. And with that, I will say, you know, we continue to feel that we differentiate very strongly based on the value we bring clients.
Bill Meaney: in terms of the ancillary services they can generate by storing with us, which they really can't get from anybody else, such as our SmartSort, our digitization on demand, and our very fast-growing digital business. Thanks.
Speaker Change: The next question comes from Eric Lubechow with Wells Fargo. Please go ahead.
Thank you.
Speaker Change: Great. Thanks for taking the questions. I wanted to touch on the data center business.
unknown: Maybe you could just, Bill, at a high level, talk about...
unknown: any longer-term implications from the deep-seek announcement a few weeks ago. It kind of did create a lot of noise in the market and people questioning the pacing of...
unknown: of AI training CapEx and what impact that could have on the data centers. And I think you also made a comment about how you passed on a large opportunity that didn't meet your underwriting returns. Just curious,
unknown: to get any more color there and, you know, what you're seeing in terms of market pricing, you know, going forward and forward returns. Thank you.
Speaker Change: Thanks, Eric. Well, let me start with the last part of your question and then talk about DeepSea. I think in terms of where we see our pipeline in leasing activity is that we do have a very strong pipeline, and based on that pipeline, where we set our guidance for this year, also our multi-year guidance. So if you think about overall, we set guidance last year at 100 megawatts.
Speaker Change: this year, 125 megawatts, so 25 percent year-on-year growth. All that's consistent with the financial plan or the multi-year plan that we laid out in 2022.
Speaker Change: and you can see that in terms of driving the revenue growth.
Speaker Change: that we're getting as those leases actually commence in the reported revenue and EBITDA line. So we feel really good about that. Specifically, when we were on the Q3 call and we were looking at the pipeline, we did have a very large opportunity in our pipeline that gave us visibility to 130-plus megawatts for the year, and we passed on it at the end because we felt that, you know, the end of the year...
and myself.
are leasing guidance.
So, coming to your deep-seek question,
Speaker Change: There's, you know, we think of the deep sea thing as two halves. One is, we see that it's...
Speaker Change: We expect it to drive some further acceleration in our digitization business, because if there's more competition and thinking about what large language models can do and how to construct those large language models, obviously it's gonna give people different price points.
Speaker Change: for our AI-driven tools that we use in our digitization business to actually pull those things down.
Speaker Change: More broadly, in terms of our data center business, you know, we look at the reporting that came out of a number of our large customers over the last couple of weeks.
Speaker Change: and not a single one of them is reducing their CapEx.
by even a cent.
Speaker Change: DeepSeek, and there was a lot of buzz when it was announced, but we don't see any substantive change in terms of our customer base, in terms of how they're expecting to continue to grow their data center infrastructure.
Speaker Change: Eric, the only thing I would add is that when you look at the
Speaker Change: visas we've been signing on our price per kilowatt as well as what we've commenced.
Speaker Change: What you'll see if you compare that versus prior years is, as I mentioned on the call, it's growing very nicely, right? The average price is
meaningfully higher. And so that's...
Speaker Change: you see coming through in the EBITDA margin as we start to commence this better book of business, if you will. And so, as Bill mentioned, we're gonna continue to stay price disciplined and return oriented. And if you look at the backlog of what we have commencing going forward, that gives us strong confidence.
Speaker Change: in the Revenue and Margin Guide that we share on the call. Thanks, Eric.
Brendan Lynch: The next question comes from Brendan Lynch with Barclays. Please go ahead.
Brendan Lynch: Great, thanks for taking my question. Maybe a follow-up on DeepSeek. It did raise some questions about the flow of U.S. hardware and chips into China. If the U.S. were to implement tighter restrictions on exporting IT hardware to China, how do you think that would affect the ALM business?
Brendan Lynch: Thanks Brendan for the question. So first of all, think about it, most of our ALM business that gets sold into China is, you know, multi-generations.
Brendan Lynch: previous. So none of these have been touched upon in terms of export restriction.
We are continuing.
Brendan Lynch: to, as we've talked about before, driving a diversification strategy to be less reliant on China, where we actually resell components. And I should say that a big part of our resales, which I think we talked about in the last call, has been more and more on hard drives recently than even the CPUs and GPUs, which are more sensitive in terms of technology. So I think we continue to drive the diversification.
and Marlon Thanks for joining us.
Brendan Lynch: asking us to actually do that harvesting and help them reintroduce it back into their supply chain.
Speaker Change: The next question comes from Kevin McVeigh with UBS. Please go ahead.
Kevin Mcveigh: Great. Thanks so much. Hey, just following up on the data center. Barry, the churn in Q4 was 4.4%.
Kevin Mcveigh: I don't think that was related to the client you passed on but just any thoughts on what drove that and it's probably one time but just maybe help us understand that a little bit.
a little bit.
Kevin Mcveigh: Yes, sure Kevin that's something that we've had on the horizon for some time and it's been in our expectations because what happened is at year-end
We had a couple of clients
Kevin Mcveigh: who have been in the business for a long time, like I think 10 plus years, predecessors to some of the businesses we acquired, which were on, you know, like I said, with us for a long time, and they'd been moving load to more of a cloud.
Kevin Mcveigh: And so, those two churned, absent that, churn was very much in line, in fact, below our normal expectations in the quarter.
Kevin Mcveigh: and I don't see other items like that going forward. In fact, I expect our 2025 churn to be below where we've been historically running. So, you know, I usually say something like 1 to 2 percent, 1.5 to 2 percent a quarter, which kind of equates to say, you know, 5, 6, 7, 8 percent. This year, I would think it's going to be 5, maybe even a little bit lower than that as we look at our book of business. Importantly, we've essentially already released that space, which speaks to.
Speaker Change: of the Demand Environment and the fact that we are heavily leased in terms of our operating portfolio, Kevin. And I'll just also underscore that we're very pleased with the price per kilowatt that we're generating across the portfolio, whether that be on the hyperscale side or COLO, which of course is this. So thanks for the question, Kevin.
The next question comes from Andrew Steinerman with J.P. Norgan.
Speaker Change: Go ahead. Hi, Barry. I wanted to dive a little bit further into your prepared remarks about organic storage revenues being down sequentially in the fourth quarter. Was it down sequentially on an organic conster currency basis, you know, kind of XFX, and you said something about normal seasonality of a fourth quarter, maybe dive into that, and then you also said something about the consumer business. Is that direct-to-consumer business now being de-emphasized at Iron Mountain?
Thank you for your attention.
Yeah, thanks Andrew. I'll try to unpack all that here.
Speaker Change: What I was explaining was that FX, first and foremost, was a big headwind to us on that line sequentially.
Speaker Change: because as you probably know, the U.S. dollar strengthened significantly in the fourth quarter as compared to the third quarter.
Speaker Change: In our records business, that's where we are the most diversified from a global footprint, working in 60 plus countries around the world and being exposed to currencies from the Euro to the Brazilian Real to the Canadian.
Speaker Change: and the dollar obviously strengthened meaningfully. That's on the order of $10 million sequentially of a headwind.
quarter-to-quarter.
Speaker Change: Then, on top of that, you're right, we are, we have been, and we have been very focused on improving the profitability of our consumer storage business. You'll recall when we acquired Clutter and put it together with our remaining business, we mentioned that that business was losing two, three million dollars of EBITDA a quarter.
Speaker Change: And so what we've done there is we've realized that we shouldn't chase...
Speaker Change: business that's not profitable. And, as you know, with any storage business, in and out is not where you want to be. You want to be with things that are going to store long-term. So the team has done a lot of analysis and has focused
It's both marketing as well as where we're targeting.
on that business to be a much more profitable segment.
and we've also driven a lot of operating efficiencies there.
Speaker Change: long-winded way of saying consumer was also down sequentially and from a run rate standpoint, you know, that's about nearly ten and so When you take those two and put it up against the organic storage rental revenue that you're asking about in total What falls out is the core records business was up nicely sequentially in line with normal trends and our pricing trends, so
Speaker Change: We feel very good about where the records management business is trending and, you know, having the consumer business now be in a profitable run rate is obviously the place we want to be and we'll continue to expand on that. And that helps, obviously, with the Global Rim Adjusted EBITDA margin improvement. Thanks.
Speaker Change: The next question comes from Shlomo Rosenbaum with Steeple. Please go ahead.
Shlomo Rosenbaum: Hi, good morning and thank you for taking my question. Barry, can you just, maybe this is a follow-up to what you were explaining to Andrew, but could you talk a little bit about
Shlomo Rosenbaum: factors that led to the revenue coming in a little bit lower than you expected in the quarter, right? The guidance was for about 1.6 billion. It was like 1581. If you just round it, it's like 19 lower. Is it that 10 million on FX and 10 million on exiting some stuff in storage, or what are the factors? Anything in ALM in there? Maybe you could just, you know, unpack that for us.
Shlomo Rosenbaum: Yeah, Shlomo, you obviously, you and Andrew have been following the company for a long time, so you're right, it is those two things, it's the FX, and just to be clear, the FX sequentially was even a little bit more than that, because of course it hits us on other lines, I was specifically speaking about the organic storage rental revenue line.
Shlomo Rosenbaum: And then the consumer business, we have been very intentional, as I mentioned in the prepared remarks.
Shlomo Rosenbaum: We are being very focused on driving returns for our shareholders and we're going to continue to do that while growing our business very substantially. We see a tremendous amount of runway there. You mentioned about ALM. ALM performed
Shlomo Rosenbaum: Pretty much right in line with our expectations, the wise tech in ATCB
Shlomo Rosenbaum: business that we recently acquired did a little bit better than what we were expecting. It was a little north of 20 million and so we had you know decent organic growth in the core.
Shlomo Rosenbaum: enterprise pipeline and bookings continuing to grow and and as Bill alluded to we've booked some very nice enterprise ALM deals here already this year so feel good about where we're trending and feel very good about where we are in our core records business. Thank you, Shlomo.
Speaker Change: Again, if you have a question please press star and 1. The next question comes from John Atkins with RBC Capital Markets. Please go ahead.
Thanks. So, a question I had about the
John Atkins: the guidance for or expectations for 2025, anything around capital recycling in your data center portfolio or other, as well as any expectations around
John Atkins: cash renewal spreads. And then if I could ask also about the land held for development, there's quite a number of markets there.
John Atkins: across India, and Amsterdam, and Madrid, and Richmond, Northern Virginia, Chicago, and so forth. And just anything to highlight in terms of permitting milestones, or construction, delivery, or when you know for long lead time items where you might actually start to develop in some of those markets sooner than others. Thanks.
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John Atkins: Thanks for the question, John, and I'll, you know, let me start and then Barry might want to fill in some of the details, but, you know, let me start with the back of your
John Atkins: question in terms of building a land bank, and you know the industry extremely well, is that the permitting and access to power is something that is taking longer than used to. But if you look at the year going forward, we feel really good where we're sitting in terms of how we're making progress on
getting the
John Atkins: the land bank ready to lease. If I kind of look at some of the key markets is India, Amsterdam, Madrid, Miami, Chicago, Northern Virginia, and also Richmond as we've made, you know, we're on track.
John Atkins: in terms of our expectations and very consistent with our guide of leasing 125 megawatts this year. So we feel good about our land bank, where we are in terms of getting the permitting process through. A lot of that is already through permitting that I just rattled off.
John Atkins: and relative to our multi-year plan in terms of continue to grow this business, you know.
John Atkins: in line with how we've been growing the last few years and that's showing up in our guidance for 125 megawatts this year which is a 25% lift on this time last year in terms of where our guide was.
John Atkins: In terms of capital recycling, I think the short answer is we don't have any specific plans around that. One of the things, though, I would like to highlight is
John Atkins: that we've added some more capacity to our design and construction team and we do expect
John Atkins: to be able to get more efficiency in terms of how we actually lock up the supply chain for some of the components in our data centers. We build scale. We think that, well, there's always inflation out there, is we think that we have.
John Atkins: Now, the ability to get more operating leverage in terms of the cost of construction in our data centers this year. And that's reflected in our CapEx guide that Barry went through. Yeah. And, John, on cash renewal spreads, we – probably no surprise – we expect them to continue to rise.
John Atkins: And that's just due to where demand is versus where supply is in the industry, I think. I would only add that...
John Atkins: From the standpoint of what we're expecting for a data center, the growth that we're seeing is upwards of high 20s, 30 percent year-on-year from a revenue perspective with all that margin improvement that we were talking about. So we feel very well positioned with respect to growing that portfolio.
John Atkins: This concludes our question and answer session and the Iron Mountain fourth quarter 2024 earnings conference call.
Speaker Change: This is a production of the Center for Contemporary Art. No part of this recording may be reproduced without the support of the Center for Contemporary Art.