Good morning and welcome to the Iron Mountain Fourth Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mark Rupe, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Betsy. Good morning and welcome to our fourth quarter 2024 earnings conference call. On today's call, we will refer to materials available on our Investor Relations website. We're 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. 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 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. 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, Mark, and thank you all for joining us today to discuss our fourth quarter and full year results. 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. For the full year, revenue increased 12% to $6.1 billion. Adjusted EBITDA grew 14% to $2.2 billion and AFFO increased 11% to $1.3 billion. And in the fourth quarter, revenue increased 11%, adjusted EBITDA grew 15% and AFFO increased 12%. 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. 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. I should also point out that a foundational element behind Project Matterhorn was to accelerate growth through embracing a customer-centric culture. 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. 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. We are also performing above our targets for AFFO, which has grown at a 9% CAGR on a reported basis or 11% on…

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. We delivered record fourth quarter and full year results across all of our key financial metrics, and we are entering 2025 with strong momentum. 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. 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%. 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. 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. Reported service revenue growth reflects the inclusion of our recent ALM acquisitions. 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. The performance upside was driven by improved price margin realization and cost productivity across our company. Adjusted EBITDA margin was 38.3%, up 130 basis points year-on-year, which reflects improved margins across all of our businesses. 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. AFFO on a per share basis was $1.24 up $0.13 from last year…

We will now begin the question and answer session. [Operator Instructions] The first question today comes from George Tong with Goldman Sachs. Please go ahead.

Hi. Thanks. Good morning. 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?

Yes, George. Hi, George. This is Barry. Good morning. Thanks for that question. Generally speaking, it was largely volume. It was almost all volume driven, George, because and it, of course, varies based on the channel. 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 margin improvement is substantial in terms of from both what we're doing for clients at being more of a service oriented business as well as, much more consistent in terms of the -- to book a business that continues to build. What we saw in component prices on the data center decommissioning side was generally flattish. Some of the components were down a little bit. Some were up a little bit. But on average, it was basically flattish, and so that was also volume driven. 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 won some new clients on the data center side and, additional project revenue. As you know, that is a project oriented kind of business, 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 won some very big deals there relative to our portfolio. So we expect enterprise to continue to perform throughout the year on a growing basis. 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 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 2025, thanks to our pipeline. Thank you, George.

The next question comes from Nate Crossett with BNP. Please go ahead.

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.

Thanks, Nate, for the question. I think 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 mid-single-digit, mid to upper-single-digit overall revenue growth coming out of our room business. So very consistent with what you've seen in '23 and '24.

Yes. And Nate, it's Barry. I'll just add that we expect volume to be flat to slightly up throughout the year, and that includes the first quarter to your question. Also from a standpoint of timing on revenue management actions, we would expect that to be more consistent in terms of the timing of actions this year, whereas you recall last year, we had a little bit of phasing and so that helps bolster the point Bill was making about mid to upper-single. And with that, I will say, we continue to feel that we differentiate very strongly based on the value we bring to clients 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 Smart Sort, our digitization on demand and our very fast growing digital business. Thanks.

The next question comes from Eric Luebchow with Wells Fargo. Please go ahead.

Great. Thanks for taking the questions. I wanted to touch on the Data Center business. Maybe you could just, Bill, at a high level, talk about any longer-term implications from the DeepSeek announcement a few weeks ago, it kind of did create a lot of noise in the market and people questioning the pacing 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 to get any more color there and what you're seeing in terms of market pricing going forward and forward returns. Thank you.

Okay. Thanks, Eric. Well, let me start with the last part of your question and then talk about DeepSeek. I think on the -- in terms of where we see our pipeline and 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 multiyear guidance. So if you think about overall, we set guidance last year at 100 megawatts, this year 125 megawatts, so 25% year-on-year growth. All that's consistent with the financial plan or the multiyear plan that we laid out in 2022. And you can see that in terms of driving the revenue growth 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 are on the last -- the Q3 call and we were looking at the pipeline we were -- 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 at the end of the year, sometimes customers have an expectation of the discount they're going to get to give you a lease before the year-end. And we just didn't like the pricing on that and especially when we look out at our pipeline and we see all the hyperscale opportunities that we already have in the pipeline. These are 10-year contracts. So we're not going to make short-term decisions just to hit a leasing number, especially when we see the number of contracts that are still in play in our pipeline over the next 12, 18, 24 months. So and I think you know the business well is that you should…

Eric, the only thing I would add is that when you look at the thesis we've been signing on our price per kilowatt as well as what we've commenced, 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 -- you see coming through in the EBITDA margin as we start to commence a better book of business, if you will. And so as Bill mentioned, we're going to 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 in the revenue and margin guide that we shared on the call. Thanks, Eric.

The next question comes from Brendan Lynch with Barclays. Please go ahead.

Great. Thanks for taking my question. Maybe a follow-up on DeepSeek. It did raise some questions about the flow of US hardware and chips into China. If the US were to implement tighter restrictions on exporting IT hardware to China, how do you think that would affect the ALM business?

Thanks, Brendan, for the question. So first of all, think about it, most of our ALM business that gets sold into China is multi-generations previous. So none of these have been touched upon in terms of export restriction. We are continuing 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. So far, anyway, all our components of multi-generation old and don't come trapped on that. The other thing I should say is Barry talked about is that we see very much see our strategy as continuing to build on a mixed basis the enterprise side of the business. And that's, it means that you'll be less project-based, less reliant in terms of selling into China. But the other part of that Enterprise business is some of the work that we're doing with some of the OEMs on reintroducing the components back into their own supply chain. So we really see that's where a lot of the business will be going because as we all know is electronic components generally fail at the beginning of their life, not kind of in the middle of their life. And a lot of our OEM customers are now starting to asking us to actually do that harvesting and help them reintroduce it back into their supply chain.

The next question comes from Kevin McVeigh with UBS. Please go ahead.

Great. Thanks so much. Just following up on the Data Center. Barry, the churn in Q4 was 4.4%. I don't think that was related to the client you passed on, but just any thoughts on what drove that and probably onetime, but just maybe help us understand that a little bit.

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 who have been in the business for a long time like I think 10 plus years predecessors to some of the as we acquired, which were on, like I said, with us for a long time, and they've been moving load to more of a cloud. And so they -- those two churn, absent that, churn was very much in line, in fact, below our normal expectations in the quarter. 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 I usually say something like 1% to 2%, 1.5% to 2% a quarter, which kind of equates to say 5%, 6%, 7%, 8%. 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 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 JPMorgan. Please 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 constant currency basis kind of ex FX? 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 deemphasized at Iron Mountain?

Yes. Thanks, Andrew. I'll try to unpack all that here. So what I was explaining was that FX, first and foremost, was a big headwind to us on that line sequentially because as you probably know the US dollar strengthened significantly in the fourth quarter as compared to the third quarter. And 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. And the dollar obviously strengthened meaningfully. That's on the order of $10 million sequentially of a headwind quarter-to-quarter. 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 business was losing $2 million or $3 million of EBITDA a quarter. And so what we've done there is we've realized that we shouldn't chase 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 its both marketing and 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. So long winded way of saying consumer was also down sequentially. And from a run rate standpoint, that's about nearly 10%. 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 we feel very good about where the Records Management business is trending. And having the consumer business now being a profitable run rate is obviously the place we want to be and we'll continue to expand on that. And that helped, obviously, with the Global RIM adjusted EBITDA margin improvement. Thanks.

The next question comes from Shlomo Rosenbaum with Stifel. Please go ahead.

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 the 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 $1,581 million. If you just rounded 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 unpack that for us?

Yes. Shlomo, obviously, you and Anthony 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. And then the consumer business, we have been very intentional, as I mentioned in the prepared remarks. So 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 pretty much right in line with our expectations. The Wisetek and APCD 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 decent organic growth in the core enterprise pipeline and bookings continuing to grow. 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.

[Operator Instructions] The next question comes from Jon Atkin with RBC Capital Markets. Please go ahead.

Thanks. So a question I had about the guidance for -- or expectations for 2025. Anything around capital recycling in your data center portfolio or other as well as any expectations around cash renewal spreads. And then if I could ask also about the land held for development, there's quite a number of markets there 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 for long lead time items where you might actually start to develop in some of those markets sooner than others. Thanks.

Thanks for the question, Jon. And I'll -- let me start and then Barry might want to fill in some of the details. But let me start with the back of your question in terms of building the 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 land bank ready to lease. If I kind of look at some of the key markets as India, Amsterdam, Madrid, Miami, Chicago, Northern Virginia and also Richmond as we've made, we're on track in terms of our expectations and very consistent with our guide of leasing 125 megawatts this year. So we feel good about the 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 and relative to our multiyear plan in terms of continuing to grow this business in line with how we've been growing in 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. 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 that we've added some more capacity to our design and construction team and we do expect to be able to get more efficiency in terms of our -- how we actually lock up the supply chain for some of the components in our data centers. As we build scale we think that whilst there's always inflation out there is we think that we have 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.

Yes. And Jon on cash renewal spreads, probably no surprise, we expect them to continue to rise. And that's just due to where demand is versus where supply is in the industry I think. I would only add that from a standpoint of what we're expecting for a data center the growth that we're seeing is upwards of high 20s, 30% 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.

This concludes our question-and-answer session and the Iron Mountain Fourth Quarter 2024 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.