Good morning and welcome to the Iron Mountain, Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. To ask a question you may press [Operator Instructions]. To withdraw your question, please press star and 2. We will limit analysts to one question and you can rejoin the queue. Please note this event is being recorded. I would now like to turn the conference over to Sarah Berry of Investor Relations. Please go ahead.

Thank you, Chris. Good morning and welcome to our Third Quarter 2021 Earnings Conference Call. On today's call, we will refer to materials available on our Investor Relations website. We are joined here today by Bill Meaney, President and CEO, and Barry Hytinen, our EVP and CFO. After prepared remarks, we will open up the lines for Q&A. Today's earnings materials contain forward-looking statements, including statements regarding our expectations. All forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the Safe Harbor language on Slide 2, and our annual report on Form 10-K for discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliations to these measures in our supplemental financial information. With that, I'll turn the call over to Bill.

Thank you, Sarah, and thank you all for taking time to join us. We are pleased to have delivered strong performance in the third quarter reflecting our broad offerings, deep customer relationships, resilient business model, and the strength of our team. This can be easily highlighted by our 7.4% total organic revenue growth. This strong overall organic revenue growth has been delivered by continued strength in our storage business, as well as double-digit growth in our new and existing digital offerings, including data center inside our digital transformation services, and IT asset disposition or I-Tech. Throughout the pandemic, including the most recent challenges of the Delta variant, our Mountaineers around the world have truly stepped up. Each and every day to put our customers first with a focus on growth. I'm both proud and humbled by this incredibly talented and dedicated team and what we've been able to accomplish through such a challenging time. Today's results, including our strong organic revenue growth exceeding 7%, is a direct result of their dedication in serving our customers in ways they need to keep their businesses growing. We have a lot to cover today, so I'll start with a brief overview of our results and key business drivers. During the third quarter, we reported revenue of over $1.1 billion EBITDA of over -- of EBITDA of $418 million, both of which are new record highs. Our results are fueled by increased demand for our services across key markets and continued positive momentum in the business. Our digital services in iPad business continue to build on its prior performance and deliver almost 20% growth in the quarter. Today, we're proud to say that 95% of the Fortune 1000 are among the 225,000 of our loyal customer base. We have a growing footprint of more…

Thanks, Bill. And thank you for joining us. The third quarter exceeded our expectations across each of our key financial metrics. Continuing the trend, we have seen over the last few quarters, revenue continued to strengthen with a strong recovery in service revenue, reflecting accelerating rates of growth driven by the new service offerings Bill discussed. Our core physical storage business performed well, and we are seeing continued strength in our growth areas. Turning to our results for the quarter. On a reported basis, revenue of $1.13 billion grew 9%. Total organic revenue increased 7.4% year-over-year. As an example of the momentum we are building on a 2-year basis, our organic revenue growth continued to accelerate in the quarter. Organic service revenue increased $61 million or 18%. Our team drove strong growth in both Global Digital Solutions business and Secure IT Asset Disposition. Total organic storage rental revenue grew 2.3% with continued benefit from pricing and positive trends in volume. Adjusted EBITDA was $418 million an increase of $42 million from last year. We exceeded the projections we shared on our last call as the team drove improved margin performance, despite the stronger U.S. dollar. AFFO $263 million or $0.90 on a per-share basis, up 47 million dollars and $0.15 respectively from the third quarter of last year. Turning to segment performance. In the third quarter, our global RIM business delivered revenue of $996 million, an increase of 74 million from last year. On an organic basis, revenue increased 6% The team performed well with constant currency storage rental revenue growth of 2.7% or 1.8% on an organic basis. This performance reflects an acceleration in growth as compared to the last few quarters. Growth was driven by pricing and volume. With positive volume trends in the Mid East deal that…

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. We will limit analysts to one question and you can then rejoin the queue. Our first question is from Sheila McGrath of Evercore, please go ahead.

I guess god morning. Bill and Barry. I've gotten questions from investors. that bottom line, growth, and margin improvement has benefited from Project Summit. And that benefit will be less of a factor going forward. Can you outline what revenue growth opportunities you are positive about for Iron Mountain looking out the next few years? And a related question to that is, can you also outline how you're able to effectively present such a broad offering of products to your customers when it appears there be different context at the -- at the customers for storage versus data centers versus insight.

Good morning, Sheila. So I'll start with strategically in where the product portfolio is going and then let Barry comment a little bit more on the nuts and bolts in terms of margin. So thanks for the question. I think, first -- I think part of Project Summit, you've seen that show up in the record high EBITDA margin that we have this quarter, so thank you for the call out on that. And I think that that's an ongoing benefit that we'll have. That EBITDA margin may move up and down depending on the product mix and it comes to your product portfolio question. On the product portfolio, a part of Summit that you haven't seen directly, in other words it isn't in the margin, is we've also taken a lot of benefit of Project Summit and reinvested in the business. So besides actually driving the margin improvement that we printed today, we've also reinvested in the business and that's really what's driven that total addressable market going from $10 billion to $80 billion that we've highlighted the last few quarters. And part of that $80 billion of new total addressable market is the almost 20% growth that we've seen in digital services, which is primarily our insight driven digital platform, together with IT Asset Disposal business. Those are some of the new areas that I think you're highlighting behind your question. So we actually see -- that business is growing strong double-digits and we can see that continue. You take that on top of the growth and the continued acceleration in growth in our data center businesses so we're well on track to exceed our upgraded guidance last quarter of 30 megawatts of bookings for this year. Then I do -- we do expect to see -- continue with levels of revenue growth like we've seen the last few quarters. Because this growth that we've seen in the topline, whilst we have seen -- luckily, some recovery in terms of our traditional service business. I think it's fair to say that we've seen an acceleration in terms of our revenue growth that's really driven by the new product areas and less from what I would call a rebound from historically low activity due to COVID. I don't know, Barry if you want to comment a little bit around the margin?

Hi, Sheila. Good morning and thanks for the question. I would say when we look outlook and you look at where our margin has been recently, where it's going to continue to go, We have very favorable trends in pricing. I think that you will continue to see at least the level of pricing activity going forward as we've seen here over the last year or so. There's some macro trends there that are both positive for us I think on a pricing benefit. If you look at our data center business of the margin, as we talked about has on a transitory basis been a little bit lower than where we expect it to go over time. That business is obviously dealing with some fit-out on our Frankfurt facility, which is transitory here in the third and the fourth quarter. And as we move forward, we see that margin expanding. So that's obviously a very nice secular tailwind to the business. And then I would say when you look at ongoing productivity, we continue to see that. So while Summit has been incredibly beneficial to the business and we'll have more Summit benefit year-on-year next year, we certainly see the opportunity for additional productivity. The only other thing I'll say is, as you know, since you follow the company well, we've had couple of relatively large sale leaseback transactions over the last 12 months. And while I expect to continue to do a relative amount of capital recycling, that's been a big headwind on a year-over-year basis. So if that comes down to a more -- a little more normalized level going forward, that's also a benefit.

Thank you, sir. The next question is from George Tong of Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. As it relates to your overall growth portfolio, can you provide a sense of how quickly it grew and also discuss examples of recent success and traction outside of your Data Centers business?

Yes. Thanks, George. If you look at the 20% growth that we called out this quarter, or just under 20% growth, that's all non Data Center. So that is the -- what we call ITAD or IT Asset Disposal business and we've won some recent large global contracts for that. Mainly for corporates that are trying to make sure that they both manage the secured destruction of any information that happens to be on their devices or hardware, as well as making sure that they can be managed in an environmentally friendly way. That's one part of it. And the other part of it is just the rapid growth that we've seen in adoption of our InSight platform and overall digitization of people's information. So that's everything from people taking advantage to say, okay, when they're retrieving documents on a very simple basis, is we want to actually retrieve them electronically through the InSight platform where they can access those from a secure platform in the cloud, to Digital Mailroom, which is beyond the typical mail-room employee arbitrage model, but again allowing people to have not only access to the information that comes through their mail room, but to be able to operate in a hybrid work fashion. In other words, where people can work from home and the office and always have access to their information. To even some, what I would call larger, more complex deals, I mean, I just returned from the Middle East about a month ago, where we're working with a government there and their National Archives to help them digitize everything about the way the government works. And that's again using the insight platform. But it's not just the insight platform, but auto classification of the documents to create metadata so that they can actually share the information digitally to the right people with the right security level in a way that can be managed for the long term. So it's multifaceted thing, but those are the areas that are really driving a lot of the top line growth that we see today. And as well as our data center business. I mean, obviously the data center business with the types of bookings that we have, will continue to drive increasing levels of growth. I should -- but I should not miss how it is, the underlying growth of the more traditional side of the business, mostly driven by pricing, continues to the chug along nicely.

Thank you sir. The next question is from Shlomo Rosenbaum of Stifel. Please go ahead. Mr. Rosenbaum, your line is open. Just check that you're not muted.

Sorry. I was muted. Thank you. I wanted to ask a little bit about the storage business and some of the puts and takes that went through it. It seems like there is some other -- with an acquisition something added about 10 million cubic feet. You guys are getting pricing. There's some organic growth. But when I go to the total revenue from adjusted storage when including the terminations and permanent withdrawal fees, it's really flattish sequentially. And so I was just want to ask you, what are some of the puts and takes that you might have seen on a sequential basis because I think you commented last quarter expecting some volumes to come in that will pent up from COVID-19. And was just wondering how this is translating into revenue as you build through the year.

Hi Shlomo, it's Barry, thanks for the question. I will try to unpack that for you. So you are right. We did close on the transaction in the Mid East, which we think is a great platform for us to continue to grow in that region together with our existing business. Now I will note that that closed very late in the quarter in the second half of September so really had almost no benefit to the quarter in terms of the financials, albeit it is in our cube as you note. So that didn't really help the sequential. On the pricing, you might recall that the beginning of the year and then again on the quarter call, I mentioned that all of the pricing we had planned for was already set as of March or April. And so the sequential benefit on pricing was not much and we weren't planning for it. And then the other thing I'll call out, as you think about storage sequentially is we did divest the software escrow business in June, second -- first part of June last quarter. And so the sequential move from the second to the third on storage, that was completely storage business. So it's about $6 or $7 million of sequential decline due to that being in the second quarter, but not in the third quarter. So all in, we feel quite good. In fact, I'll be -- I'll tell you that the storage revenue performed better than we were planning on a sequential basis. And as it relates to the point about pent-up demand, you'll recall last quarter we did note that -- and that was in some of the economies, particularly in Asia and I'd say with the -- some of the COVID and Delta variant and various other elements that occurred in some of those markets, we continue to have a pretty good-sized backlog. Bill, anything you want to add?

No. I think that's -- covers that.

Thank you, sir. Then the next question is from Eric Luebchow of Wells Fargo. Please go ahead.

Great. Thanks for taking the question. I wanted to touch upon fairly topical area in data centers today. A lot of talk in the industry about cost inflation in terms of development costs along with supply chain challenges and getting new equipment. Maybe you could just give us your perspective on what you're seeing in your footprint. Whether that's -- any development cost, inflation, any development delays in terms of timing. And also the impact of higher power cost, particularly in Europe. And then from a broader pricing perspective, do you think that this environment may be supportive of industry pricing moving upwards in the next couple of years as we work through all these challenges? Thanks.

Thanks, Eric. I appreciate the question. So 2 or 3 points that I'll cover in your question. I think the first bit is that, I would say that for 2022 in terms of supply chain, we're pretty well covered just because of the lead time. But to your point is, we have seen I would say 10 to 12 weeks increase in supply chain or lead time on some of the MEP and related equipment, and even in Including steel in some markets. I think to your point is, we are seeing a lengthening of the supply chain, but I would say for 2022, we're well covered because that's already been in training committed contracts to actually do that build-out. And we're -- now we're already looking at 2023 and we're factoring in that extended lead time for some of that equipment in our planning. So the good news -- the bad news is that the lead times have increased. The good news is that we're well covered for 2022, so we've got the time to make sure we incorporate that in our planning for 2023. So that's -- I would say one aspect. And in terms of the increase in the prices -- so we're pretty well hedged for the 2022 commitments that we have because those are contracts that we've already lead. So we are seeing an increase in inflation in some of those raw materials. That being said because this is a business where the cost of construction is well known and quite transparent to our customer base, is we see trends and we expect that to continue. Our pricing will go in line with the cost of build. So I think we're kind of naturally hedged given the transparency of these businesses. In terms of the power cost is that the -- again, we're pretty well covered for this year, but we have seen an uptick in pricing in pretty much all the markets as you -- as everyone's noticed. And I would say that -- first part is, I would say about 60% of our portfolio in 2022 will be pretty much straight power pass-through, so we don't have any exposure in terms of the power costs. The remainder, most of that is still on long-term -- we've contracted for the power long-term. So think of our business has north of 70% naturally hedged, and the part that isn't is is up for renewal during the course of 2022, or a big part of it is. So we don't really see power affecting us in any material way. And in fact, we see continued upward progression in terms of our EBITDA margins as we get into 2022. But thanks for the question.

Thank you, sir. Next question is from Andrew Steinerman of JPMorgan, please go ahead.

Hi, this is Alex on for Andrew Steinerman. Our question is regarding your guidance. Your guidance for high-single-digit percentage growth in revenue and low double-digit to low teens percentage growth in EBITDA for fourth quarter appears to imply an adjusted EBIDTA margin of about 36.5%. Can you confirm that we're doing the math there right? Maybe speak to some of the drivers behind that? Thank you.

Hi, Alex. It's Barry. Thanks for the question. Why don't I help you with both the revenue and the EBITDA the way we are thinking about it. So in the fourth quarter, you right, we said about high single-digit. So let's say that's 8% or 9% on the revenue side just to give you a couple of the puts and takes. We have a -- the dollar is stronger as we have less than a point of FX benefit year-on-year, and a similar amount from M&A less than a point because just as a reminder, as I mentioned to Shlomo, we divested that software Escrow business in the second quarter. And so as a result, it's not much M&A benefit. So that leaves you with about call it 7% of organic constant currency growth. And with the strength of the Data Center business, that'll contribute probably 1.5 points alone because that business is performing very well and so you should be working with your model and think like 20 plus percent growth in the fourth quarter from our Data Center business. The balance would be coming from low-single-digit growth in our storage rental revenue. And that'll be with good pricing contribution. Course the remainder is as Bill 's highlighted on the call, the very nice growth we're seeing out of our Digital Solutions and SITAD business. On the EBITDA stand side, we're looking at low double-digit to low -- sorry, mid-teens growth. So let's say that's 13 or so percent just to keep the midpoint there. For the purpose of this discussion, that's about, call it, $48 million of year-on-year increase. FX is a very small contribution, almost nothing, and M&A would be actually a net negative on a year-over-year basis in light of the escrow business was a very high-margin. And so think about data center as having a modest increase in margin sequentially still affected by the fit-out in Frankfurt. So a few million of benefit to EBITDA from data center. Our Summit is -- our Summit Project is doing phenomenally well and the team is executing very well. You'll probably see $30+ million of year-on-year benefit in the quarter from that. And then of course, pricing will continue to be a very strong contributor. And the services margin, I expect to continue to improve which you've been seeing throughout the year. So naturally, there are some offsets with sale leaseback, as I mentioned earlier, and higher levels of commission in light of the very good trajectory the team is driving on top line. So we're feeling very good about the fourth quarter as we sit here today, and look forward to talking to you about it in 90 days. Thank you. Have a great day.

Thank you, sir. This concludes our question and answer session and the Iron Mountain third quarter 2021 Earnings Conference Call. Thank you for attending today's presentation and you may now disconnect.