IRON MOUNTAIN INC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 marked record performance with revenue, adjusted EBITDA, and AFFO all at all-time highs. Revenue grew 12% to $6.1 billion, adjusted EBITDA 14% to $2.2 billion, and AFFO 11% to $1.3 billion. Fourth quarter saw 11% revenue growth, 15% adjusted EBITDA growth, and 12% AFFO growth.
• Project Matterhorn has been beneficial, with the growth portfolio now representing 25% of revenue (up from 15% in 2022), growing at a CAGR >20%.
• Board authorized a 10% dividend increase. Key customer wins across segments, including a four-year contract with a Fortune 500 company in Records and Information Management, record revenue in Digital Solutions, 25% growth in Data Center revenue, and 119% growth in ALM revenue in 2024.
• Digital Solutions business had record revenue in 2024, with recurring storage, service, and software growing to over 30% of digital revenue. Data Center business grew 25% in 2024, with a total capacity of nearly 1.3 gigawatts when fully built out. ALM business grew 119% in 2024 with nearly 30% organic growth.

Segment Performance

• Global RIM Business: Fourth quarter revenue was $1.26 billion, an increase of $66 million year-on-year. Organic storage was up in excess of 5%, driven by revenue management and consistent volume, while organic service revenue was up 8% with contributions from digital and core services. Global RIM adjusted EBITDA was $579 million, an increase of $45 million year-on-year, with an adjusted EBITDA margin up 130 basis points.
• Global Data Center Business: Fourth quarter revenue was $170 million, an increase of $33 million (24% increase from Q4 2023) driven by strong organic storage rental growth of 27%. Full year Data Center revenue grew 25% to $620 million. 94% of under construction assets are already leased. Fourth quarter adjusted EBITDA was $88 million, up 51%, with adjusted EBITDA margin up 930 basis points from Q4 2023.
• Asset Lifecycle Management (ALM): Fourth quarter total ALM revenue was $112 million, an increase of $60 million or 118% year-on-year. Organic growth was driven by expansion in the Enterprise business. Regency Technologies performed well, and recent acquisitions of Wisetek and APCD performed ahead of expectations.

Guidance

• 2025 total revenue expected to be within $6.65 billion to $6.8 billion, representing 9% year-on-year growth (11% on constant FX).
• Adjusted EBITDA expected to be within $2.475 billion to $2.525 billion, representing 12% year-on-year growth (13% on constant FX).
• AFFO expected to be within $1.45 billion to $1.48 billion, with AFFO per share $4.85 to $4.95.
• First quarter 2025 expected revenue ~$1.59 billion, adjusted EBITDA ~$575 million, AFFO ~$342 million, and AFFO per share ~$1.15.
• Expect AFFO growth to accelerate due to phasing of cash taxes and less FX headwinds in 2025.

Risks

• FX impacts on financial results.
• Potential changes in data center demand due to AI trends, which could affect leasing activity and underwriting returns.
• Implications of tighter US export restrictions on IT hardware to China, which could impact the ALM business given most ALM business in China involves multi-generational previous components.

Question and Answer

Q: 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?

A: Barry Hytinen stated it was largely volume driven, with almost all organic growth in ALM coming from volume, especially in the enterprise-driven business. Component prices on data center decommissioning were generally flattish.

Q: 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?

A: William Meaney expected 2025 to be consistent with recent years, flat to slightly up volumetrically with mid to upper-single-digit revenue growth from RIM. Barry Hytinen added volume expected to be flat to slightly up throughout 2025, with revenue management actions timing more consistent.

Q: Touch on the Data Center business, specifically the impact of DeepSeek announcement and market pricing going forward?

A: William Meaney said they have a strong pipeline and leasing activity consistent with multiyear plans. They passed on a large opportunity not meeting underwriting returns. Barry Hytinen noted price per kilowatt is growing nicely, and they remain price disciplined.

Q: Follow-up on DeepSeek regarding tighter US export restrictions on IT hardware to China and impact on ALM business?

A: William Meaney said most ALM business in China is multi-generational previous and not affected by export restrictions, with a focus on diversification and enterprise business expansion.

Q: Factors leading to revenue coming in lower than expected in the quarter?

A: Barry Hytinen cited FX headwinds and intentional focus on exiting unprofitable consumer storage business segments.