Iron Mountain Incorporated (IRM) Earnings

Management highlights

- Overall Company Performance * Delivered record-breaking Q2 2026 results exceeding internal expectations across all metrics, driven by strong execution of growth plans. * 19% YoY consolidated revenue growth, 17% organic YoY growth; adjusted EBITDA grew 16% YoY, AFFO grew 17% YoY. * High-growth segments (data center, ALM, digital) collectively grew over 50% YoY, and now account for 35% of total revenue, up 750 bps YoY. * Core physical storage (part of Global RIM) delivers consistent mid-single-digit annual growth with high recurring, strong cash generation. - Growth Segment Strategic & Operational Updates * Data Center: 39% YoY revenue growth; year-to-date 2026 leasing reached 110 megawatts (including 13 megawatts in Q2 and 75 megawatts in July). 325 megawatts of leasable capacity is expected to come online over the next 24 months, with strong demand driven by AI inference. Recent notable wins include a 25 megawatt full lease for London 3, a 10 megawatt lease in Amsterdam, and a 10-year 51 megawatt lease with a global hyperscaler in Mumbai, with 100 megawatts of additional future development capacity in India. * ALM: 88% YoY revenue growth, positioned as a global industry leader targeting a $35 billion total addressable market. The 75% enterprise channel of the market delivers consistent recurring growth, high profitability, and strong operating leverage, with a projected sustainable 25%+ annual growth. The hyperscale decommissioning channel is a high-growth long-term opportunity driven by rapid data center infrastructure renewal. Multiple large multi-year global customer wins were secured in Q2 across regions, and the business continues to scale via disciplined tuck-in acquisitions to expand geographic coverage. * Digital Solutions: Delivered record quarterly revenue with sustained double-digit organic growth. Recurring revenue now represents over 45% of digital segment revenue. AI-powered DXP platform gained strong market traction and industry recognition, with Forrester ranking Iron Mountain as a top document mining/analytics provider, top-scoring DXP for generative AI functionality, data privacy, and global coverage. Multiple large enterprise DXP managed services wins were secured across North America, Europe, and APAC in Q2. - Strategic & Operational Accolades * Achieved portfolio-wide high trust R2 accreditation (gold-standard data security for regulated industries), ranked #12 in the innovation category for S&P 500 companies on the Wall Street Journal's Best Companies for the Future list, building on prior FedRAMP high authorization and Google Partner of the Year recognition. * Strong government business growth with solid new bookings and expanded existing contract deployments globally, particularly strong performance in Europe. * Capital allocation maintains focus on high-return growth investments, growing the quarterly dividend to 86.4 cents per share (with a 60% trailing four-quarter AFFO payout ratio), and maintaining a strong investment-grade balance sheet (net lease-adjusted leverage of 4.8x, the lowest level since 2014 REIT conversion). A new $1.5 billion 2035 bond was issued with a 6.25% fixed coupon, marking the first ever investment-grade covenant package for the company.

Guidance

- Full year 2026 financial guidance was upgraded from prior levels, driven by strong year-to-date performance and positive business momentum: * Total revenue is projected to be $7.94 billion to $8.01 billion, representing 16% YoY growth at the midpoint. * Adjusted EBITDA is projected to be $2.945 billion to $2.975 billion, representing 15% YoY growth at the midpoint. * AFFO is projected to be $1.76 billion to $1.78 billion, or $5.87 to $5.93 per diluted share, representing 15% and 14% YoY growth at the midpoint, respectively. * ALM full year 2026 revenue is now expected to approach $1 billion, an upward revision from prior projections, with enterprise ALM expected to reach ~$600 million in full year 2026 revenue. - Q3 2026 preliminary guidance: * Revenue of ~$1.98 billion (13% YoY growth), adjusted EBITDA of ~$745 million (13% YoY growth), and AFFO of ~$440 million ($1.47 per share, 12% YoY growth). - The company reaffirmed its long-term expectation of sustained double-digit consolidated revenue and earnings growth well into the future. - Core physical storage volume is expected to continue growing slightly positive, at ~0 to 50 bps annually for the foreseeable future.

Segment performance

1. Global Records and Information Management (RIM): Q2 2026 revenue hit $1.4 billion, growing $110 million (8% YoY reported, 7% organic YoY). It contributes 69% of total consolidated revenue. Storage revenue grew 7% reported / 5% organic YoY, while service revenue grew 11% reported / 9% organic YoY. Adjusted EBITDA increased 6% YoY to $621 million, with a 43% adjusted EBITDA margin. 2. Global Data Center: Q2 2026 revenue reached $263 million, growing $73 million (39% YoY), and contributes 13% of total consolidated revenue. 13 megawatts of new leases were signed, with 25 megawatts of lease commencements and 4 megawatts of renewed leases, with 12% (cash) and 14% (GAAP) renewal pricing spreads. Adjusted EBITDA grew 42% YoY to $137 million, with an adjusted EBITDA margin of 52.2% (up 140 bps YoY), and over 100 bps sequential margin expansion on a like-for-like power basis. 3. Asset Lifecycle Management (ALM): Q2 2026 total revenue was $288 million, growing $135 million (88% YoY, 82% organic YoY), and contributes 14% of total consolidated revenue. Enterprise ALM grew over 60% organic YoY, while hyperscale decommissioning revenue grew more than 100% YoY (including a $30 million timing benefit from accelerated large projects). It drives solid margin improvement from better operating performance and acquisition synergies. Total consolidated Q2 2026 revenue: $2.03 billion, up 19% YoY reported / 18% constant currency / 17% organic YoY.

Risks & headwinds

- Large hyperscale data center leasing activity is inherently lumpy, with variable timing of deal closures that can create quarterly performance volatility. - Memory component pricing for ALM remarketing varies across product types and can shift quarter over quarter, creating potential margin variability. - Foreign exchange rate volatility (specifically recent U.S. dollar strength) creates headwinds for translated consolidated revenue and earnings compared to prior guidance assumptions based on earlier FX rates.

Analyst Q&A

• Q: After already exceeding the original 100 megawatt 2026 full-year data center leasing target with July activity, what is the pipeline outlook for the rest of 2026 and key target markets? /

  A: Management confirmed that the company will meaningfully exceed the original 100 megawatt 2026 leasing target, with a strong current pipeline for the remaining capacity coming online over 24 months. Key high-demand markets include the Richmond campus in Northern Virginia (the world's top data center market), additional European markets, and further expansion in India, where the pipeline has multiple interested tenants for each available asset. Leasing of large hyperscale deals remains lumpy by nature, but the quality of the company's assets and pipeline is very strong.

• Q: Can you share details on the recent GroupATF tuck-in acquisition for ALM, including expected synergies and cross-selling opportunities? /

  A: GroupATF, which closed in early August 2026, generates ~high-teens millions of annual revenue, with a low-20s EBITDA margin. It was acquired at a 5-7x EBITDA multiple, in line with the company's disciplined tuck-in acquisition framework. The acquisition broadens ALM coverage in France and Belgium, two key European ALM markets, and creates both cost synergies and significant revenue cross-selling opportunities with the company's existing 240,000 global records management and digital customers. Management maintains a robust pipeline of similar small tuck-ins to expand ALM geographic coverage.

• Q: Is Iron Mountain's current global ALM scale sufficient to win large multi-national global MSAs, or is the company still building out this capability? /

  A: Iron Mountain already has the leading global ALM platform, with full coverage in North America, Europe, and Australia, and is the only provider able to offer consistent secure end-to-end service across multiple major geographies for large multi-nation. The company is still expanding coverage in India, parts of Asia, and the Middle East. The enterprise ALM business is expected to hit ~$600 million in 2026 revenue, up over 50% YoY, growing from a much smaller base just a few years prior, leaving massive remaining headroom to capture share of the $35+ billion total ALM market.

• Q: How is the core RIM physical storage business performing in terms of volume growth and pricing, and what is the ramp status of the DOT IRS contract? /

  A: Physical storage volume continues to grow as expected, up 2.5 million cubic feet sequentially in Q2, and management expects it to remain slightly positive (~0 to 50 bps annual growth) long-term, with particularly strong growth in emerging markets like India. Revenue management remains disciplined, focused on pricing for value, with stable improving client retention. The IRS DOT digital contract ramped faster than expected in Q2, delivering $15 million in revenue (up from $9 million in Q1), and is tracking ahead of full-year expectations. It is projected to exceed $100 million in annual revenue starting in 2027.