Q3 2025 Iron Mountain Inc Earnings Call

Speaker #3: Good morning and welcome to the Iron Mountain third Quarter 2020 Earnings Conference Call . All participants will be in listen only mode should you need assistance , please signal a conference specialist by pressing Star .

Speaker #3: Then zero on your telephone keypad . After today's presentation , there will be an opportunity to ask questions , to ask a question , you may press star , then one on your telephone keypad .

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Speaker #3: Please note this event is being recorded . I would now like to turn the conference over to Mark . Senior Vice President of Investor Relations .

Speaker #3: Please go ahead .

Speaker #4: Thanks , Chad . Good morning , everyone , and welcome to our third quarter 2020 earnings conference call . Joining us today are Bill Meaney .

Speaker #4: Our president and Chief Executive Officer . And Barry Hytinen , our executive vice President and chief Financial officer . After our prepared remarks , we'll open the lines for Q&A .

Speaker #4: Today's call will include forward looking statements , which are subject to risks and uncertainties . For a discussion of the major risk factors that could cause our actual results to differ from these statements , please refer to day's earnings materials , including the Safe Harbor language , on slide two of the earnings presentation and our annual and quarterly reports on Form 10-K and 10-q .

Speaker #4: Each of these items , as well as reconciliations of non-GAAP financial measures referenced during this call , can be found on our Investor Relations website .

Speaker #4: With that , I'll turn the call over to Bill .

Speaker #5: Thank you . Mark , and thank you all for joining us to discuss our third quarter results . We are pleased to report that our team has delivered another quarter of record financial performance in double digit growth .

Speaker #5: We achieved an all time high for quarterly revenue . Adjusted EBITDA and AFFO , driven by strength across our business . Revenue increased 13% to $1.8 billion .

Speaker #5: Adjusted EBITDA grew 16% to $660 million , and AFFO increased 18% to $393 million . Our exceptional performance in the third quarter is a result of our team's unwavering focus on meeting our customers needs with innovative solutions and consistent execution of our strategic priorities .

Speaker #5: We are delivering revenue growth in our physical storage business , achieving record revenue in Q3 , driven by consistent volume growth and higher retention rates , as well as revenue management .

Speaker #5: Our digital solutions building business is building momentum . We are winning new contracts with our AI powered digital solutions across industry verticals and drove record revenue and continued double digit growth in the third quarter .

Speaker #5: We are capitalizing on robust data center industry demand with 33% revenue growth in Q3 and a strong outlook that supports more than 25% growth in 2026 .

Speaker #5: Based on our currently signed leases . Additionally , we saw a nice uptick in Q3 leasing and into Q4 , which , together with our pipeline , puts us in a good position to execute against our portfolio of capacity of 1.3GW .

Speaker #5: We are driving substantial growth in our asset lifecycle management business , increasing revenue with existing customers in winning new business through cross-selling , resulting in 65% reported in 36% organic growth in the third quarter .

Speaker #5: And we expanded profitability with adjusted EBITDA increasing 16% in margin , improving 110 basis points as compared to last year . This clearly shows that we have strong momentum behind our commitment to sustain industry , leading revenue and earnings growth .

Speaker #5: Our portfolio of growth businesses , including data center , digital and ARM , drove two thirds of our revenue growth in the quarter , or eight percentage points on a consolidated basis .

Speaker #5: This will remain an important tailwind going forward as the growth portfolio further increases . Its percentage of total revenue expected to be nearly 30% of total revenue exiting 2025 .

Speaker #5: This is on top of the strength in our physical storage business , which is growing at a mid-single digit rate and will contribute approximately five points of consolidated growth in 2025 .

Speaker #5: The momentum across our business has I just highlighted , along with our foundation of established relationships and trust with over 240,000 customers , comprehensive solutions offering reputation for security and a global footprint firmly position us to deliver our growth commitment for the foreseeable future .

Speaker #5: Based on our strong outlook and excellent 2025 results , our Board of Directors authorized an increase of our quarterly dividend by 10% . Let me now share some recent commercial wins that illustrate the strength of our synergistic business model .

Speaker #5: First , in records management in Europe , we were selected as the single vendor for medical record storage for a hospital that has been a customer for more than 15 years , displacing a competitor .

Speaker #5: Additionally , we secured a new customer with a public sector entity that can no longer manage and store its records in-house . Both of these deals were attributed to our strong reputation for secure records management and are proven ability to provide efficient and cost effective services in our digital solutions business .

Speaker #5: We continue to win new business with our ESP platform . In late October , we successfully launched our insight 2.0 platform . The new platform offers enhanced content management and smart document processing in easy to use , secure platform with workflow tools and AI agents .

Speaker #5: This will allow the customer to make faster and more insightful decisions , as well as eliminate obsolete in duplicative data to save costs , and as it relates to our digital Award with the Department of Treasury in September , Iron Mountain was awarded a new long term contract for digitization services .

Speaker #5: This new five year contract , with a value of up to $714 million , expands our current scope of work , subsuming the contract awarded to us in April .

Speaker #5: This is a significant win for Iron Mountain , and we are thrilled to continue supporting the United States government on this efficiency opportunity .

Speaker #5: We are currently executing under the new agreement and collaborating with the Department on next steps while preparing for the high season , seasonal volume expected in the spring of 2026 .

Speaker #5: Let me now turn to our data center business . The data center market remains very strong , and we have seen leasing activity in pipeline pick up as hyperscale resumed their focus on building out inference and cloud capacity .

Speaker #5: We leased 13MW in the quarter , including a couple of larger enterprise deals with financial services firms . And in early Q4 , a key Hyperscaler leased our entire 36 megawatt Chicago site , transferring and expanding the customers previous lease of 25MW in London for a net incremental 11MW leased .

Speaker #5: This is a great outcome for the customer who is looking to transfer to the Chicago market , and for us , given the strong interest we have in the London location , they are vacating , this London site has the power coming online in 2026 .

Speaker #5: We have high confidence in sustaining our data center revenue growth with the levels we have achieved over the past few years . This is underwritten by our Pre-leasing backlog .

Speaker #5: Strong pipeline as well as 450MW , which is available for sale and will be energized over the next 18 to 24 months . These assets coming online within the next two years , have a collective capacity , which is the size of our current operating portfolio .

Speaker #5: The large and expanding pipeline for these assets is from hyperscale customers . Having the highest credit quality . Turning to our asset lifecycle management business .

Speaker #5: As we previously shared , arm represents a major growth opportunity for Iron Mountain . The market is very large and highly fragmented , and we are well positioned to capitalize on growth through expanding business with existing customers , gaining new customers through our cross-selling efforts and strategic acquisitions to expand our capabilities in geographic footprint .

Speaker #5: Our results in Q3 show that we are successfully capitalizing on this meaningful opportunity and consistent with our strategy . In September , we acquired act Logistics , which further strengthens our arm market leadership position in Australia .

Speaker #5: Let me now share some of our recent ALM wins that support our confidence in the long term opportunity . A leading financial services company with more than 200,000 employees globally has selected Iron Mountain has its arm partner for the first time , building on our decades long partnership for records management and digital solutions , our established relationship strong reputation for security and compliance , and global footprint was an important factor in winning this deal and a global company headquartered in Germany has engaged Iron Mountain to support a key decommissioning and remarketing program across six data centers in the US , Europe and the Asia-Pacific region .

Speaker #5: Iron mountain has also provided records management , digital and data center co-location services for this customer over many years . We are pleased to extend our solutions thanks to our ALM teams operational scale and robust sustainability reporting capabilities , which are a critical requirement for this project .

Speaker #5: This relationship demonstrates the power of our synergistic business model , where we successfully cross sold all of our key lines of business to a long term customer .

Speaker #5: In conclusion , I am proud of the exceptional results our dedicated mountaineers have continued to deliver in 2025 , and what that means to our shareholders as we announce another increase in our dividend of 10% .

Speaker #5: As you heard today , our record results are a testament to our strategic focus on customer needs , innovative solutions , and consistent execution .

Speaker #5: Our strong business momentum continues to build in a tremendous growth opportunity , continues to lie ahead of us . We had just scratching the surface of the $165 billion total addressable market for our services .

Speaker #5: With that , I'll turn the call over to Barry . Thanks , Bill , and thank you all for joining us to discuss our results .

Speaker #5: As you've heard this morning .

Speaker #4: Our team .

Speaker #5: Continues to successfully .

Speaker #4: Execute our strategy , driving strong . revenue and earnings growth in the third quarter . We achieved record revenue of $1.75 billion , up $197 million year on year .

Speaker #4: This was an increase of 13% on a reported basis, 12% on a constant currency basis, and 10% on an organic growth basis.

Speaker #4: In the quarter . Total storage revenue was $1.03 billion , up $97 million year on year and up 9% on an organic basis .

Speaker #4: Total service revenue was $721 million , up $100 million from last year and up 10% on an organic basis . Adjusted EBITDA of $660 million was an all time quarterly record , and expanded $92 million , or 16% , year on year .

Speaker #4: This was $10 million ahead of the projection we provided on our last call , driven by operational strength and productivity across the business .

Speaker #4: Adjusted EBITDA margin was 37.6% , up 110 basis points year on year , which primarily reflects improved margins in our data center and arm businesses .

Speaker #4: We continue to be pleased with our team's ability to deliver meaningful operating leverage . Achieving an incremental flow through margin of 47% , consistent with last quarter .

Speaker #4: AFFO was $393 million , up $61 million . This was also an all time quarterly record and represented strong growth of 18% as compared to last year , and on a per share basis was $1.32 , up 17% to last year .

Speaker #4: Now turning to segment performance in our global Rim business . We achieved record quarterly revenue of $1.34 billion , an increase of $78 million .

Speaker #4: Rim reported growth was 6% , including organic growth of 5% year on year . This was driven by revenue management , higher digital revenue and consistent organic volume .

Speaker #4: Stored revenue growth increased 5% on an organic basis and was up 6% absent a decline in clutter revenue . As we discussed last year , Clutter's peak revenue was in the third quarter of 2024 .

Speaker #4: Before we began the actions to improve profitability . Global Rim Organic Service revenue was up 4.7% in the quarter , similar to last quarter , improving retention and consistent levels of destruction pressured revenue growth .

Speaker #4: All other services increased 7% on an organic basis , reflecting strong growth in our digital business as it relates to the multiyear Department of Treasury contract .

Speaker #4: We recognize revenue of approximately $2 million in the third quarter and expect $4 million in the fourth quarter . Prior to building into tax season in the first half of next year , in the third quarter , we began to staff up to ensure we are fully ready to support the significant ramp in this contract .

Speaker #4: Global Rim adjusted EBITDA increased $29 million to $598 million , yielding an adjusted EBITDA margin of 44.7% . Turning to our acquisition , and India , we are very pleased with Crrc's performance with integration ahead of plan in the quarter .

Speaker #4: CRC added $6 million to revenue , including 1.2 million to storage revenue , along with seven point 4,000,000 cubic feet of volume for remodeling purposes .

Speaker #4: It's important to note that while the margin for our storage business in India is similar to our margin in the US and Europe , the price per cube is approximately 20% of our company average .

Speaker #4: As a result , the inclusion of CRC lowered our storage ASP by about 100 basis points in the quarter . Turning to our global data center business .

Speaker #4: Total data center revenue was $204 million in the third quarter , an increase of $51 million , or 33% , year on year .

Speaker #4: Organic storage rental growth increased 32% , driven by lease commencements and positive pricing trends in the third quarter . New commencements were three megawatts .

Speaker #4: We renewed nearly 300 leases for a total of 11MW . Pricing remained strong , with renewal pricing spreads of 14 and 19% on a cash and GAAP basis , respectively .

Speaker #4: Third quarter data center adjusted EBITDA was $107 million , up $41 million year on year . EBITDA margin was 52.6% , up 900 basis points from the third quarter of last year .

Speaker #4: Improved pricing recent commencements and operating leverage were the key drivers Adjusted of the margin expansion in the quarter . In the fourth quarter , we expect data center revenue growth in excess of 30% .

Speaker #4: We have high visibility to this forecast as we are commencing 36MW of new leases . This will also drive meaningful EBITDA growth in the period .

Speaker #4: Despite beginning to lap the significant step up in data center margin , which commenced in the fourth quarter of last year . Turning to asset life cycle management , total revenue was $169 million , an increase of $66 million , or 65% , year over year on an organic basis .

Speaker #4: We delivered 36% growth . The strong performance was driven by our teams operational execution , particularly strong growth in our enterprise volume and component pricing trends .

Speaker #4: Our recent acquisitions are performing well and contributed $30 million to revenue . Regarding our acquisition of Act logistics , I should note this was completed in September and contributed less than $2 million to revenue in the third quarter .

Speaker #4: For modeling purposes , we expect the business will contribute revenue of approximately $7 million to our full year results . From a profitability perspective , our team drove expanded arm margins in the quarter through improved operating performance across the business and acquisition synergies .

Speaker #4: Turning to capital allocation . We remain focused on growing the dividend and investing in high return opportunities that drive double digit growth while maintaining our strong balance sheet .

Speaker #4: In light of our performance in 2025 and outlook for AFFO , our board increased our dividend by 10% , effective with the January payout .

Speaker #4: This will mark the fourth consecutive year in which we increased the dividend and the third consecutive 10% increase . This aligns with our commitment to growing the dividend while maintaining a payout ratio of low 60s .

Speaker #4: As a percentage of AFFO per share . In terms of capital investments , we invested $472 million of growth CapEx and $42 million of recurring CapEx in the third quarter .

Speaker #4: Turning to the balance sheet with strong EBITDA performance , we ended the quarter with net lease adjusted leverage of 5.0 times in line with our expectations for both the quarter and year end , reflecting our strong credit profile .

Speaker #4: Our team successfully raised €1.2 billion in a considerably oversubscribed debt offering , achieving a 4.75% fixed coupon maturing in 2034 . We have preached the continued long term support of our fixed income investors .

Speaker #4: And now turning to our outlook with strong performance in the third quarter , we are well on track for the year and are pleased to reiterate our full year guidance ranges for the fourth quarter .

Speaker #4: We expect revenue of approximately $1.8 billion , an increase of 14% to last year on a reported basis and up over 12% on a constant currency basis .

Speaker #4: Adjusted EBITDA of approximately $690 million , an increase of 14% to last year on a reported basis and up 12% on a constant currency basis .

Speaker #4: AFFO of approximately $415 million , an increase of 13% to last year on a reported basis , and up 10% on a constant currency basis and AFO per share of approximately $1.39 , an increase of 12% to last year .

Speaker #4: On a reported basis and up 9% on a constant currency basis . In conclusion , our team has delivered excellent year to date results , driving industry leading double digit revenue and earnings growth , with record setting performance across our business .

Speaker #4: We have strong momentum and significant long term growth in front of us . I would like to express my thanks to our entire team for their best in class customer stewardship and commitment to Iron Mountain .

Speaker #4: And with that operator, would you please open the line for Q&A?

Speaker #3: Thank you . We will now begin the question and answer session . To ask a question , you may press star . Then one on your telephone keypad .

Speaker #3: If you're using a speakerphone , please pick up your handset before pressing the keys . If at any time your question has been addressed and you would like to withdraw your question , please press star then two .

Speaker #3: We will limit analysts to one question and you can rejoin the queue at this time . We will pause momentarily to assemble our roster .

Speaker #3: And the first question will be from George Tong from Goldman Sachs . Please go ahead .

Speaker #6: Hi . Thanks . Good morning . I wanted to dive into your new 714,000,005 year contract with the US Treasury Department . You mentioned expectations of high seasonal volumes in the spring of 2026 .

Speaker #6: Can you talk more about the planned phasing of revenues , including whether the contract will ramp linearly across five years or whether it will be front end loaded into 2026 ?

Speaker #5: Good morning , George , and thanks for the question . I think first , we're really excited to have the opportunity to work for the federal government on this project for the IRS .

Speaker #5: As you can expect , is that it will be linear with slight growth as you go forward . As you know , as people get added to the taxpayer , roll over that five year contract .

Speaker #5: So it isn't front loaded per se , but there is a seasonality aspect to do with tax season , right ? So which is generally in the spring for most people .

Speaker #5: So we do expect a ramp . And you know , we've already started building the capacity . Obviously up front in terms of putting the people through the necessary clearance process so that they're ready to go when the when the season starts .

Speaker #5: But , you know , I think first and foremost is the thing that we're super excited about . It's another proof point in terms of the technology that we've built with this platform , which is you remember , goes back to when we were the AIML partner of the year seven years ago with Google .

Speaker #5: So to me , it's it's another proof point that what we've built really resonates with customers . And in this particular case , the IRS , which is very sophisticated on these types of things .

Speaker #5: .

Speaker #3: And the next question will come from Eric Luukko from Wells Fargo . Please go ahead .

Speaker #7: Great . I wanted to touch on the ARM business . It looks like you expect about $600 million of revenue . This year .

Speaker #7: I think that's a slight uptick from what you guided last quarter. And I wanted to kind of break down what you're seeing on volume versus price.

Speaker #7: We've seen a pretty significant increase in memory pricing recently . The last couple months . Just wondering if you're starting to see that flow through at all in your results and how that could potentially influence growth rates ?

Speaker #7: As we look forward into 2026 ? Thank you .

Speaker #4: Hi , Eric . Good morning . Thanks for the question . Além . You know , continues to be very strong as as you point out .

Speaker #4: And , you know , I would say you're correct . We're expecting now for the business to deliver approximately 600 million . That is up some from our guidance last quarter .

Speaker #4: If anything , we were probably being a little bit conservative with the numbers last quarter . In light of the growth trajectory , the business has been on .

Speaker #4: But look , 36% organic growth and we're expecting something in that same vicinity again in the fourth quarter . It's a very strong performance coming out of the team , and it is volume led .

Speaker #4: And it's also enterprise volume led . As I mentioned on the call . And I think that's the important part as we build the business , that enterprise businesses , you know , is the higher margin business .

Speaker #4: And that's helping drive the improved profitability that we mentioned on the call . And that you see in our results as well , Eric , you mentioned memory pricing .

Speaker #4: Certainly pricing for some components on the data center decommissioning side has continued to rise . As you know , that can be very subject to change .

Speaker #4: And really component by component . So we've seen some increases on memory . We've seen some increases on hard drives , but not everything is is moving in the same let's say velocity .

Speaker #4: And as we get into next year, we'll be happy to update you on what we're seeing as it relates to commodity prices at that time.

Speaker #4: But we're we're basically using current view of pricing for the fourth quarter , as we traditionally do . Thanks .

Speaker #3: Thank you . And the next question will be from Toby Sommer from Truist . Please go ahead .

Speaker #8: Thank you . I was wondering if you could elaborate a bit on the data center pipeline and demand across both the enterprise and hyperscalers as we turn the page into next year .

Speaker #5: Thanks , Toby , for the question . So first is , as I said in my remarks , is we have seen , in fact , we started seeing it even on the in August .

Speaker #5: As I pointed out in the last call , a shift back to our largest hyperscale customers , back to inference and cloud build out .

Speaker #5: And you can see that in our leasing , both in the quarter . And then as we ended Q4 with the leasing out the the 36MW in the Chicago site , for a customer that was originally taking 25MW in London .

Speaker #5: So we're starting to see definitely an uptick on that . And then more broadly , if I look at the pipeline that we're building for the 450MW that get energized over the next 24 months , again , the the depth of that pipeline and the the , you know , the the number of our customers coming back to that again for cloud build out and inference is is very marked versus the first half of 2025 .

Speaker #3: And the next question will be from Brendan Lynch from Barclays . Please go ahead .

Speaker #9: Great . Thank you for taking my question . I just wanted to follow up on the Treasury contract . If I heard you correctly , it's seven up to 714 million over five years .

Speaker #9: Can you talk about what would get you to the high end versus what might be the low end of what you might be able to capture ?

Speaker #5: Yeah , thanks for the question , Brendan . It's volume , right ? In other words , we have agreed pricing with the Treasury , and it just is dependent on the on the volume .

Speaker #5: And you know , which forms that they actually send to us . But I have to say is that , you know , obviously preparing for tax season .

Speaker #5: So the team has been working very closely with the Treasury and the feedback from the customer in terms of what we're able to do with our models has been very positive .

Speaker #3: Thank you . And our next question is from Shlomo Rosenbaum from Stifel . Please go ahead .

Speaker #10: Hi . Thank you very much for taking my question . Bill . I just wanted to go back to some of the data center leasing .

Speaker #10: It's certainly heartening to see , you know , we're starting to pick up a in terms of , you know , the rate of leasing from the last few quarters to what you saw a little bit of an improvement .

Speaker #10: Now , I was just wondering , can you talk about how much energy capacity is expected to be energized in the next 12 months ?

Speaker #10: That could really spur the near-term leasing activity . I'm trying to , you know , figure out over here . Is are we going to start to go back to those quarters where you had some really large leasing numbers in the near term based on on some of the stuff that's going to be lit up pretty soon ?

Speaker #5: Yeah . Good morning . And thanks for the question . Yeah . So going a little bit maybe granular in the 450MW that I said that gets energized over the next 24 months , because I think that's really , you know , the , the , the capacity that people start to focus on .

Speaker #5: If I even go a little bit deeper on that in the next 18 months , is 250MW , gets energized . And so there's another follow on , 200MW .

Speaker #5: The following six months for the total for 50 . And the reason why I'm parsing it out at 18MW , if you can appreciate , is that most of our customers are these large hyperscale customers , which are almost a build to suit .

Speaker #5: I mean , there's a customization on that . So it's really kind of the 18 month window up to a 24 month window that they look at , because that's that's the time that's required to get the design to their specification .

Speaker #5: And obviously construct . So , so to answer your question , yes , I mean , I think we feel really good over the , you know , as we enter into 26 and we look at the first 18 months , we have 250MW that we can be an active conversations with our customers and deliver , you know , almost in their in their minds immediately .

Speaker #5: And then if you look six months beyond that , we're almost doubling that again , adding another 200MW on on top of that .

Speaker #5: And then if I take a step back , as we say , that 25% revenue growth next year for data centers already in the bag , I mean , this is stuff that we've already contracted for .

Speaker #5: In lease . And then if I look at that 250 over the next 18 months with another 200 to follow , the six months later , the total for 50 is , we feel really good about our ability to be able to maintain that kind of revenue growth as we get into 27 and beyond .

Speaker #4: And I'll just add a couple of more granular points to support . That is the assets that we have coming on that are energizing , are in some fantastic markets .

Speaker #4: If you look at what we've got in London , we have over 20MW energizing soon . We've got Virginia . We have 28MW .

Speaker #4: We've got quite a . Few megawatts energizing . Soon in Madrid , Miami , Amsterdam . So these are really tier one markets .

Speaker #4: And then as you get to the outer time frame that Bill was speaking about , you get into some very large capacity in Richmond , which as you know , is a significantly growing development zone as , as considerable capacity spills over from northern Virginia into that market .

Speaker #4: The the other thing I will just add is , as Bill was referring to the backlog that we have for revenue , even beyond 2027 is like 250 million of revenue .

Speaker #4: That will be coming. That's just on the already pre-leased. So we feel like we've got a very good growth trajectory going forward for leasing.

Speaker #4: Shlomo .

Speaker #3: Thank you . And the next question will be from Andrew Steinmann from JP Morgan . Please go ahead .

Speaker #11: Hi , it's Andrew . Could you comment anything on kind of really forward looking CapEx targets kind of multi-year . You know , obviously you raised your your your dividend here .

Speaker #11: I'm just , you know , really thinking that in the data center industry , there's a real shift towards these more mega projects .

Speaker #11: And just wanted to know the CapEx approach , you know , in 26 and beyond , you might be doing to prepare for those opportunities .

Speaker #5: Good morning , Andrew . Thanks for the question . So let me I'll start and then have Barry comment more . You know , from the detail in terms of what that means for CapEx .

Speaker #5: But I mean , to ask your the driver , I think behind your question is , are we going to participate in these large language model campus build out , you know , the one gigawatt and and you know for sure , we look at large campuses , but our our target focus is for the inference .

Speaker #5: And the cloud build out . Now that's not saying that , you know , on some of our campuses that we're we're looking at say , you know , five north of 500MW , could someone come in and say they want to develop large language models ?

Speaker #5: Yeah , that's a possibility . But we're not chasing that . That market because the nature of our customers and our relationships is really about building out cloud infrastructure and inference .

Speaker #5: .

Speaker #4: And Andrew , I would just add that while we haven't given guidance for next year , a couple of thoughts on capital . Look , as we continue to build out our pre-leased backlog , in , you know , naturally we'll be expending CapEx on that .

Speaker #4: And as we have a very forward , very positive forward look on the pipeline for additional leasing , you should probably anticipate that our data center CapEx will continue to gradually rise .

Speaker #4: Some with with that expectation on additional leasing . So , you know , we the key point , I think is we really are building to pre-leased assets , right ?

Speaker #4: that ,

Speaker #4: We're not speculatively building. So it's capital that's going to very high-return contracts that we've already signed with, and that are very long-term with some of the highest credit quality clients you can have.

Speaker #4: I mean , think about companies that have 500 billion or more market cap .

Speaker #3: Thank you . And the next question will be from Kevin McVeigh with UBS . Please go ahead .

Speaker #12: Great . Thanks for the one example . I think it was a net 11MW leased . I guess

Speaker #12: when a client shifts like that , I guess what drives that decision and , you know , given kind of how diversified you folks are , would you expect more of that going forward ?

Speaker #12: I want to start their possible .

Speaker #5: Morning , Kevin . Thanks for the question . It's not it's not usual , but I have to say that we're always happy to do that because as you notice that , you know , in the Wall Street Journal polling recently , we won the most , you know , customer focused or centric company in the in the publicly listed companies in the US .

Speaker #5: And that's kind of testament , a proof point in terms of the way we work with our customers . Because this particular customer saw their loads shift and Chicago was a more important market for them in the near future than London was .

Speaker #5: So we said , yeah , we can accommodate that for them , and we were able to do that . So we had a very happy customer .

Speaker #5: I will say from our standpoint , it also was was very good . I mean , the Chicago market is a very interesting market , but we took a customer that was going to do 25MW in London and upsold them effectively to 36MW in Chicago , and then the space there vacating in London in the Slough Estate , actually , you know , is a very we have very strong interest in that 25MW and always have and the pricing is actually improved since they've shifted over to Chicago .

Speaker #5: So it's a it's a win win for everyone . But you know , it doesn't happen often . But you know our you know we're very customer centric as a company .

Speaker #5: So if we can help a customer in that way then we do our level best to do that .

Speaker #4: And what I'd add , Kevin , just to make sure we're you're clear on this , is the the client had not commenced in London .

Speaker #4: Right . So we were still we were still in the process of building out that site . And so you wouldn't anticipate seeing this sort of activity on deployments that have already commenced in , in sites .

Speaker #4: And the other thing I'll just note is , in light of the timing , you know , it's a it's it's a very good asset for us to be able to lease at higher prices going forward .

Speaker #3: Thank you . And again , if you have a question , please press star then one , the next question is from Nate Crossett from BNP .

Speaker #3: Please go ahead .

Speaker #13: Hey good morning . Just on the rim . Storage business . Can you comment on what you're expecting for volumes and pricing into four Q and next year ?

Speaker #13: Thank you .

Speaker #4: Hi , Nate from a volume perspective , as you saw our organic volume in physical storage continued to rise , you know , very much in line with our trends of I think it was 30 , 40 basis points in the quarter .

Speaker #4: We continue to have a positive outlook for organic volume , and that includes next year . And frankly , for the foreseeable future , our team continues to find ways to consolidate additional volume from our existing client base .

Speaker #4: Obviously , as you know , we win new clients , particularly in some of the emerging markets . And as , as as we've talked about so often , the volume that we bring in is , is , is very much an annuity stream .

Speaker #4: You know , the average box is staying with us for nearly 15 years , and that has not changed from a revenue standpoint .

Speaker #4: We continue to anticipate revenue management actions in that kind of mid-single digit range . And that would be the case for the fourth quarter as well .

Speaker #4: I'll just note we we are now lapped over the clutter consumer storage headwind . As I mentioned , the prepared remarks , that was the peak volume in the peak revenue in the third quarter of last year .

Speaker #4: The other thing I'll just mention , since it hasn't come up yet , but you asked about the quarters , is we have assumed that FX is a little bit more challenging on a sequential basis , as you've probably seen , the dollar has strengthened recently , so that's embedded in our guidance as well , which I think speaks to the fact that the we've got a very nice outlook in light of projecting 14% revenue growth in the fourth quarter .

Speaker #3: Thank you . And the next question is a follow up from Shlomo Rosenbaum with Stifel . Please go ahead .

Speaker #10: Hey , thank you for taking the follow up , Barry . I just want to get into kind of the mix of revenue , both storage and services , gross margins were down sequentially , and I assume that it's mixed because that's usually what's going on .

Speaker #10: But I wanted to ask if you could confirm that and just give us a little bit more detail on on the sequential movement .

Speaker #4: Thanks , Shlomo . Yes . So if I break it down between the two on storage , it's it's mostly about data center , particularly power , as you know , as our clients draw more power and commence .

Speaker #4: That's a pass through . So we generate revenue but we don't generate incremental profit . So it wasn't for power . It would have been up actually .

Speaker #4: And so then the other thing that meant that I should mention on storage is data center . As I've talked about before , is a lower gross margin for us on storage as a company .

Speaker #4: But as you know , it's a very accretive EBITDA margin . And the team is just doing phenomenally well with with profitability and data centers .

Speaker #4: You saw the margins up to 52% , and that's also with the headwind of power . Just as a reminder , on the EBITDA margin on service , what you saw there in terms of the decline is , as you said , it's much about mix .

Speaker #4: It's all mix , actually . So the arm business continues to perform very strong . As you saw the growth that we've been delivering both year on year and and sequentially , as well as digital .

Speaker #4: And as we talked about before , both of those are generally kind lower margin businesses for us than our average service . And lastly , I'll just point out , you know , with with better retention rates , we we have less permanent withdrawals and terminations .

Speaker #4: And that's , that's a bit of a headwind to rate as well . But obviously that's a very good story for the long term in light of seeing retention continue to rise over the last few quarters .

Speaker #4: Thank you . Shlomo .

Speaker #3: And ladies and gentlemen , this concludes our question and answer session . And the Iron Mountain third quarter 2020 Earnings Conference call . Thank you for attending today's presentation .