Iron Mountain Incorporated

Good morning and welcome to the Iron Mountain Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing star 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. To withdraw your question, please press star then two. We will limit analysts to one question and you can rejoin the queue. Please note, today's event is being recorded. I would now like to turn the conference over to Jillian Tiltman, Senior Vice President and Head of Investor Relations. Please go ahead.

Thank you, Rocco. Good morning, and welcome to our second quarter 2024 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 Meany, President and Chief Executive Officer, and Barry Heitman, Executive Vice President and Chief Financial Officer. After prepared remarks, we'll 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 two, and our quarterly report on Form 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. So with that, I'll turn the call over to Bill.

Thank you, Jillian, and thank you all for taking the time to join us today for our discussion of our second quarter results. As you saw in this morning's announcement, this quarter delivered another record financial performance and exceeded our expectations. Reflecting on these results, I am incredibly proud of how our team consistently executes at a high level, putting our customers at the center of everything we do. With our proven growth strategy, we are entering the back half of the year with strong momentum. We continue to see firsthand the power of Project Matterhorn from our commercial teams, who are successfully leveraging our full suite of products and solutions to help position Iron Mountain as an ideal partner to our customers. This customer centricity continues to power our results forward for both customers and our shareholders. Building on our track record of value creation for our shareholders and our strong positive outlook, our board of directors has authorized an increase of our quarterly dividend by 10% to 71.5 cents in line with our AFFO per share growth. I'll now turn to key developments during the quarter and how we executed on our growth strategy, which is aligned to our business segments. As a reminder, our strategic priorities are the following. Driving continued revenue growth in our physical storage records management business. Providing digitally enabled solutions for our 240,000 customers, which allows them to get true competitive advantage out of their physical and digital information. Delivering differentiated data center offerings and offering top tier growth through our global scale and customer trust. and advancing our asset lifecycle management services, which provide security, maximum efficiency, and an environmentally sound lifecycle management approach for our customers' IT assets. To give you some examples of how we have recently applied our services on behalf of our customers, let's begin with our records management business. The first win I wish to highlight shows how our scalable solutions can solve for complex regulatory requirements and address changing customer needs. A European-based pharmaceutical company came to us in need of a global record retention schedule as the company was struggling to manage costs and meet regulatory requirements. As part of our expanding partnership, we are providing a fully managed suite of solutions, including policy center upkeep, advisory services, and a dedicated help desk for queries in a scalable and flexible way that can seamlessly adapt over time as their needs evolve. Continuing with wins in our records management business, I am particularly excited to discuss a couple of digital wins. The first example to highlight is a major contract signed with a large financial institution. The foundation of this win was based upon multiple decades of a trusted relationship with the bank's understanding of our truly differentiated approach to digitally managing and automating workflow. As a result, they selected Iron Mountain to serve as its partner for a long-term transformation of its management of digital and physical documents. On the bank's behalf, Iron Mountain is transforming how it captures both digital and physical documents and their associated metadata across all lines of business, including non-banking internal documents like finance and HR. Our unique offering revolutionizes document processing services for both physical and digital documents. We have achieved this by employing our proprietary leading-edge AI-powered intelligent document processing built into our Insight platform. Continuing with our digital business, in Australia, we have secured a large deal with one of the country's biggest banks to provide our digital mailroom solution, which brings together our operational scale and digital capabilities. Iron Mountain has been a trusted records management partner for over 20 years, and we built on that relationship to develop a comprehensive service offering that will see us manage their physical mailroom sites across Australia and scan around 32 million images a year as we process mortgage documents, checks, vouchers, and other banking documents. Our proven implementation methodology reassured the customer that we could execute a seamless transition of services, and the innovative technology we are deploying will help them to realize significant efficiencies in the years ahead. Moving to our data center business, through the first half of the year, we leased 97 megawatts, which includes 66 megawatts this quarter. Due to our strong pipeline, we feel confident we will exceed our original projection and now expect to lease 130 megawatts for the year. The speed of leasing in the first half of the year is thanks to the momentum that our team has built in our leasing pipeline. We are an attractive partner to customers looking for infrastructure which can support their very dense IT workloads and associated with their AI-enabled services. Here are some examples of wins during the quarter from our US and UK markets. At our Western Pennsylvania location, we welcomed a new hyperscale customer with a seven-year contract. Since signing the contract, the customer is already in discussions about potential expansion to some of our other campuses. A good example of our continued and growing partnerships with some of the largest hyperscalers are recent wins this quarter with a single customer in both the US and UK markets. This customer has placed a 10-year contract with us for almost 25 megawatts of capacity at our London data center campus and a 15-year contract for 36 megawatts at our data center campus in Phoenix, Arizona. Also at our Phoenix campus, we have won a 10-year co-location contract with one of Japan's largest banks. We will be providing 800 kilowatts of capacity to support the complete transformation of this customer's North American IT platform. Turning to our asset lifecycle management business, we continue to see established Iron Mountain customers seek new solutions from our ever-expanding portfolio. A perfect example of this is how we expanded the relationship with an insurance company that has been an Iron Mountain customer since the late 1950s. Having secured a small ALM project with them last year, Our customers' confidence in our capabilities and our delivery record has led them to make us their sole ALM provider. Finally, I'd like to share a last example of a customer that has added our ALM services to the Iron Mountain Solutions, from which they already benefit. This global cloud-based software company has asked us to manage an ALM program to securely destroy, remarket or recycle data center assets at more than 30 locations in North America, EMEA, Latin America, and the Asian Pacific regions. Demonstrating we can provide a full-service global ALM offering is no small task, but our skilled and dedicated teams successfully met the challenge. We are now a proud ALM partner for this customer alongside the records management and digital solutions that we already provide. To conclude, we have thoughtfully and strategically curated a mountain range of best in class solutions and an effective operating model under Project Matterhorn. This quarter's successes are a brief testament to the value our strategy is already delivering and a window into the future we are building at Iron Mountain. As we continue to expand our footprint of storage and services and deliver tailored, innovative solutions for each of our customers, I could not be more grateful for the hard work of our Mountaineers. Our strategy and execution is showing the way in delivering consistently strong revenue growth in the resulting financial model that delivers top-tier growth in both our AFFO and our dividend. We have an energized team of experienced, proven operators who are committed to excellence, and that gives us great confidence in our future. With that, I'll turn the call over to Barry.

Thanks Bill and thank you all for joining us to discuss our results. I'll begin by providing an overview of our second quarter results and then go into more detail on each of our business segments before turning to our outlook for the third quarter, the full year. In the second quarter, our team achieved strong performance across all of our key financial metrics. We achieved record revenue of $1.534 billion, up 13% on a recorded basis, driven by 11% storage growth and 17% service growth. We delivered 10% organic revenue growth. Revenue was ahead of the expectations we shared on our last call by more than $30 million. Total storage revenue was $920 million, up $89 million year on year. Storage growth was driven by revenue management and continued strong commencements in our data center business. Total service revenue was $615 million, up $87 million from last year, driven by strength in our asset lifecycle management and global-run businesses. Adjusted EBITDA was $544 million, a new record, up 14% year-on-year, driven by strong growth in global RIM, as well as data center and asset lifecycle management. Adjusted EBITDA margin was 35.5%, up 50 basis points year-on-year, which reflects improved margins across our business. AFFO was $321 million or $1.08 on a per share basis up $34 million and 10 cents respectively from the second quarter of last year. This represents growth of 12% for AFFO and 10% for AFFO per share. This is ahead of the guidance we provided for the second quarter driven by higher adjusted EBITDA as well as lower than expected cash taxes, which is included in our guidance for the third quarter. The strength of the U.S. dollar continued to be a headwind in the quarter. On a constant currency basis, revenue was up 14% and AFFO was up 13%. Now turning to segment performance. I'll start with our global RIM business, which achieved revenue of $1.25 billion, an increase of $91 million year on year, with strong organic revenue growth of 7.9%. Revenue management and positive volume trends drove organic storage rental growth of 7.7%. Our team delivered organic service revenue up 8.3%. Global rate of adjusted EBITDA was $549 million, an increase of $50 million year on year. Global RIM adjusted EBITDA margin was up 40 basis points sequentially and 90 basis points from last year, driven by storage growth and continued productivity across our operations. Turning to Global Data Center, the team delivered revenue of $153 million and increase of $35 million year-on-year. From a total revenue perspective, we achieved 24% organic growth. Organic storage rental revenue growth was particularly strong at 27% driven by commencements and improved pricing. Gap mark to market in the second quarter was 12.3% and was benefited by a single relatively large renewal. We continue to expect mark to market to be up mid to high single digit in the second half. Data center adjusted EBITDA was $66 million representing 23% growth. Turning to new and expansion leasing, we signed 66 megawatts in the quarter, bringing total bookings for the first half to 97 megawatts. As Bill mentioned, with our strong leasing and favorable outlook, we are increasing our full year projection to 130 megawatts. The data center market continues to develop rapidly, and with our strong and expanding hyperscale relationships, our pipeline continues to grow. I am pleased to report that we have increased our land bank by 57 megawatts. With those additions, our total data center capacity can now be built out to 918 megawatts over time, with 347 megawatts held for development. Turning to asset lifecycle management, total ALM revenue in the quarter was $90 million, an increase of 111% year-on-year, and 30% on an organic basis driven by both improved volume and pricing. ALM continues to be a key beneficiary of cross-selling with over 95% of our bookings this quarter happening as a result of that initiative. The team at Regency Technologies continues to deliver results ahead of our plan with revenue of $35 million in the quarter. we have seen our combination with Regency result in expanded client relationships and improved profitability. Turning to capital allocation, we remain focused on a disciplined approach to fund our growth initiatives and drive meaningful shareholder returns while maintaining a strong balance sheet. Capital expenditures in the second quarter were $399 million with $362 million of growth and $37 million of recurring. Turning to the balance sheet, With strong EBITDA performance, we ended the quarter with net lease adjusted leverage of 5.0 times, which is the lowest level we have achieved since prior to the company's greed conversion in 2014. Turning to our dividend, on a trailing four-quarter basis, our payout ratio is now 60%. Consistent with our target payout range and reflecting our positive outlook, we have increased our dividend 10%. Now, turning to our projections. For the full year, we now expect to deliver results towards the high end of our guidance range on all metrics. For the third quarter, we expect revenue of approximately $1.55 billion, adjusted EBITDA of approximately $560 million, AFFO of approximately $325 million, and AFFO per share of approximately $1.10. In conclusion, our team delivered record results in the first half. We continue to perform ahead of our long-term growth objectives, and our outlook is strong. I'd like to take this opportunity to thank all of our Mountaineers for their continued efforts to deliver on behalf of our customers. And with that, operator, would you please open the line for Q&A?

Absolutely. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. 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'd like to withdraw your question, please press star them too. We will limit analysts to one question and you can rejoin the queue. At this time, we will pause for just a moment to assemble our roster. And today's first question comes from George Tong with Goldman Sachs. Please go ahead.

All right, thanks. Good morning. Your ALM business saw 30% organic revenue growth in the quarter last Can you discuss how much of the growth came from volumes versus pricing and what assumptions for component prices you're baking into your guidance?

Thanks, George, and good morning. Let me handle the first part, and then I'll let Barry talk a little bit more about the pricing trends that we're seeing. So first, we're really pleased with the growth in the organic growth that you highlighted in our ALM business this quarter. And you think about that, about two-thirds of that is driven by just pure volume. And the other third is the price improvement that we've seen from the record lows that were 12, 18 months ago. So we're really pleased with the progress, but I'd say most of the growth is from volume.

And George, from a standpoint of what we're seeing in our view for pricing going forward is, as you'd know, pricing continues to be expected to trend higher. We've been somewhat conservative with respect to our outlook for pricing because we've seen, some variation between the spreads between new gear and secondary gear, particularly so on memory. It's widened some. But frankly, it's narrowed those spreads on other gear like drives. So, you know, look, it's a very positive outlook for our ALM business because the team continues to win a lot of business. The cross-selling activity we have is immense. And we're expecting... you know, if you work through the guidance we just gave for the third quarter and implied for the fourth, you should be expecting our ALM business to be comping organically in the 40s in the back half, if not higher. So we're feeling really good. And I guess I should just call out, since you asked about ALM, our Regency business is doing phenomenal. The team there continues to execute very, very well. We're seeing very strong productivity as a result of leveraging Regency's capabilities and Their utilization is going up thanks to a historic Iron Mountain business that's being processed by Regency. So, thank you, George.

Thank you. And our next question today comes from Kevin McVey at UBS. Please go ahead.

Great. Congratulations on the record results. I don't know if this is for Barry or... you know, can you reconcile kind of the, you know, two quarters of beat relative to the reaffirmed guidance and just, you know, the optimism that it seems like it's scaling on the ALM side, you know, just puts and takes around that.

Yeah. Kevin, good morning. We continue to feel very good as we just noted about our guidance. And we, as you know, we beat in the first quarter and we beat again here in the second quarter, actually a wider beat than the first. And our thought process is that things continue to trend very much in the right direction. That's why we pointed to the higher end of our guidance range for the year. I'll note FX continues to be a headwind, so you'll see the stronger dollar be an impact to our reported results in the third quarter, probably of the order of the same magnitude as the second quarter, if not a little bit more. But, you know, what you're seeing is improving trends as compared to our initial outlook this year across the business. Global rim continues to perform really well in the organic storage rental revenue growth accelerated in the quarter as we as we expected it to. And as we forecasted last quarter and we continue to expect that to be in the seven, eight range in the back half and then. In terms of a data center, as we've talked about before, that's a business that has a tremendous amount of visibility in the near term. And as we've talked about, the outlook for the long term there is very robust in light of the leasing activity we've had. And I just mentioned ALM with George. So appreciate the question.

Thank you. And our next question today comes from Nate Cross at FBNP. Please go ahead.

Hey, good morning. Just wondering what you're expecting in terms of overall rim volumes for 3Q and the balance of the year. And then can you, I guess you already talked about your expectations for pricing growth. So should we assume that the organic revenue growth is 7 to 8 in the back half?

Hi, Nate. It's Barry. Consistent with our outlook for the last many quarters, we continue to expect our volume, physical volume to be uh, flattish to slightly up and it continued that trend obviously in the second quarter. And we have a favorable outlook for it again, to be in that vicinity in the third and, and in the fourth quarter. So we expect our volumes to be continuing to rise. I'll just note, we have never stored more physical volume than we are storing today. Uh, and, and so that is, I think a testament to the team's, uh, know diligence as it relates to serving our customers and frankly the value we're driving for customers as they continue to trust us with their important assets in terms of organic growth in rim on the storage side you've got it right so the volume would be relatively small component of the growth and then the rest would be driven principally by revenue management and i will note that our services business in global rim continues to be benefited both on the traditional side but also and going forward likely to be ramping some on the digital side because the team in our digital solutions group just delivered the best bookings quarter we've ever had in digital. So that is a really nice performance by our commercial and digital teams. Thanks, Nate.

Thank you. And our next question today comes from Andrew Steinerman with J.P. Morgan. Please go ahead.

Hi, this is Alex Hess on for Andrew Steinerman. I hope you're all well today. A quick question on data center CapEx, and then maybe a quick follow-up. On data center CapEx, do the assumptions that you guys made at your investor event in 2022 still hold? Obviously, we're seeing notable pickup in the guided CapEx numbers from the hyperscalers. And then maybe a structural question, Has the pool of hyperscalers, are those still, say, the same firms for you guys as three or four years ago? Or is there opportunity for some of these infrastructure software and, you know, AI startups to also be hyperscalers in your book as well? Thank you.

uh good morning let me i'll start with your second question then uh barry uh will follow up on the on the capex uh relative to our investor day so i think what you what you see for us hyperscalers are always kind of not just the largest cloud providers but the largest staff providers as well so people who need very very large deployments uh in terms of megawatts of data center capacity and usually these are global firms So I'm not saying that we won't see some of those firms, you know, some of the more newer firms that you're highlighting come into that fold. But I would say that the barriers of entry for these really very large hyperscalers, just given the cost of leasing and building data centers, it is a fairly consolidated and tight group. I'm not saying that there couldn't be people that break into it, but I think for the moment, it's a pretty stable group, slightly increasing as some of the SaaS players get bigger in their own right.

Alex, it's Barry. I would say a couple of thoughts about your question on the CapEx views. We are continuing to see our data center business and actually the whole business run ahead of the expectations we shared at that investor day. As we talked about last quarter for the first couple of years, we were well ahead. And if you look at what we're doing here this year, we're actually accelerating that level of beat. So we're generating more revenue, more EBITDA and more cash generation. And certainly we continue to lease more and faster than we were indicating at the time of the investor day. So over time, I think it is possible that we may see a continued ramp in capital for data center, but I'll just note we're constructing to leases with some of the best quality tenants you could imagine in the hyperscalers. And I mean, a couple of statistics, we're 96% leased in our operating portfolio and in our under development construction portfolio, which is about 10% bigger than what we're operating, maybe even 15% bigger than what we're operating. We're 96% leased on that as well on a pre-lease basis. So I will just underscore that when we are putting capital to work to build out our data center platform, it is because we have already signed contracts with clients and we are very pleased with the level of returns that we have been generating on those deals.

Thank you. And our next question today comes from Eric Lubko with Wells Fargo. Please go ahead.

Thanks. Appreciate it. Just to follow up on the data center conversation, I mean, just based on all the opportunity you've had, the outperformance on leasing year to date, maybe you could just talk about, you know, funding sources going forward and Given the fact your stock has been so strong this year, your equity cost of capital is significantly lower than has been in years past. Does issuing equity enter the conversation going forward as you look at funding the data center business? Thank you.

Thanks, Eric. Let me start, and then Barry may want to chime in as well. So first, you know, we feel really good about, as you're highlighting, the growth and momentum that we're building in the data center business and not just in the colo, but more and more in the hyperscale and the majority is coming from hyperscale. But, you know, as Barry said, is. well over 90%, like around 96% is all pre-leased. And it's a fully funded plan as we highlighted in investor day. So we don't see any, we feel really good in terms of the way that we're able to fund the growth. And so we're happy in terms of the trajectory that we have without going out and raising equity. I think we have a plan that works.

Yeah. Eric, I would just add that You look going forward, likely rates are probably coming down over time. So that makes it that much easier for us. And the business is so cash generative from the core. And as you see, the global in-business continues to deliver outstanding results. So I think from a standpoint of your point about the equity has risen a bit, that is true. But I think that's more a function of where it was. And if you look at us on a multiple versus the growth we're putting up, I think that bolsters the point Bill was just making as it relates to equity. Thank you.

Thank you. And our next question today comes from Shlomo Rosenbaum with Steeple. Please go ahead.

Hi, thank you very much. I just wanted to touch on two items, if I may. One, just on ALM, are you seeing the hyperscalers starting to really open up uh the inventory of of gear that they had and really starting to sell it or are you still starting seeing the hesitation in case prices raise rise more you know what i'm trying to understand is are they starting to actually you know dump the stuff that they've been holding on to and then just second just if you can comment barry on the storage gross margin it increased like 20 basis plans sequentially but the moving parts are very interesting we had like all other storage costs up like 10 million but you had a rent to actually go down 2 million sequentially Maybe you could talk about what the movements over there, how did rent go down, and what are those other storage costs that are going up?

Good morning, Salamu. So I'll take the question on the ALM, and then Barry can talk to you a little bit about the ins and takes in terms of storage costs. So on the ALM side, Is the hyperscalers, the reticence that you might have seen last year that I think we commented from the hyperscalers was less to do with the pricing on the components. It was more the availability of new kit that they had to actually refresh their data centers. And I think you've seen all the reporting from some of the largest hyperscalers in the last couple weeks that said, They're all ramping up their refresh of their data centers to bring in the most capable GPUs so that they are AI ready and they can build out some of their AI services. So we do see an uptick, to your point, in the volume that we're getting from the hyperscalers. But it's driven more because they're refreshing their data centers to be more AI enabled, and they're able to get the latest GPUs from the supplier. So they're able to accelerate some of that. So we do see a building volume from the hyperscalers right now in terms of decommissioning, which leads to more ALM volume in our business.

Shlomo, it's Barry. A couple of thoughts about the storage rental growth margin. First of all, we were really pleased with that at 70%. And that being because, Really, if you look at our global RIM business, it was up very nicely year on year. Of course, part of that's revenue management. Part of that is the continued productivity that our operations teams are driving. And so the reason it was slightly down year on year is related to, as I talked about, our as well as data center. As we've talked about sometimes before, data center is a lower gross margin, but it's, of course, accretive to our EBITDA margin. And so as data center continues to ramp at a very fast rate, it has a little bit of a level of a mix, but obviously it's very incremental. And on a sequential basis, you would expect on that all other storage costs, there to be some power inflation as commencements begin to ramp and folks start to draw power. As you know, that that's a direct pass through. So it can actually also affect rates. So to have the, storage gross margin up sequentially in light of that headwind is, we thought very, very favorable about that. On the storage rent expense, it was down some sequentially and that's thanks to our team's continued productivity around warehouse efficiencies. We have, as you would have seen over the last few quarters, reduced some of our warehouses and thereby gotten to a better expense position. And the only other thing I'll mention is taking it up a level. Our gross margin in the quarter for the whole company was almost just under 56%. Now, that's slightly down from last year, but two things to think about. One, we're absorbing the mix issues, including the power that I mentioned in that number. And two, we've added Regency technologies, which is, again, a mixed headwind on gross margin, but By the way, Regency performed extraordinarily well on EBITDA in the quarter. And so we feel really good about where the gross margin is trending, and it's been ahead of our expectations.

Thank you. And our next question today comes from Brendan Lynch with Barclays. Please go ahead.

Great. Thanks for taking my question. It came up a little bit already, but on the pricing front, your organic constant currency growth was 7.7% for storage rentals, up quarter to quarter, but down relative to the 2023 pace. I think you guys have long suggested mid-single digit price growth, which is possible over the next couple of years. But you've been at high single digits for a few years now. Is a transition to mid-single digits occurring now? And how should we think about you guys pushing price as inflation wanes?

Brendan, we were very pleased with the 7.7%. And I think, you know, at that level, you can see the amount of EBITDA the business generates since it's a highly productive portion of our company. And as it relates to trending, you know, we've indicated, we feel like mid to upper single is the right kind of level over the longer term. And so I would say, you know, if, if, Trending in this vicinity would be very positive to the business model going forward.

The only thing I would add is that it isn't so much inflation-based anymore. It's really about the value that we're adding to our customers. If you look at our traditional records management business, is we've over the last few years have added a portfolio of services such as smart sort, smart reveal. I highlighted on the call some of the governance and compliance consulting and systems that we're able to install around their hard records management. And so we're really driving more value for our customers and the customers see value in that. So I think you can continue to expect that our pricing will remain some 300 to 400 basis points ahead of what you would think is normal inflation, but it's really driven by the value that our customers see from our services.

Brandon, the only other thing I'll add is that at the start of the year, we had suggested global RIM might be in the vicinity of 6% total growth for the year. And so year to date, we're running... uh seven and a half on on that business so we continue to see uh outperformance in global rim some of that is driven off of revenue management also uh incremental uh service uptake of the sort that bill just mentioned thank you and once again if you do have a question please press star then one on your telephone keypad today's next question comes from jonathan atkin with rbc please go ahead

Thanks. A couple questions. Can you talk a little bit about ALM and to what extent Regency is sort of fully occupied or do you have the opportunity within that set of assets to see more productivity? And then secondly, on data centers, if there's anything to call out in terms lead times around construction and delivery and conversion of a book to bill. Thank you.

Good morning, John. Let me start with the data centerpiece, and then Barry can talk about Regency and more broadly the ALM business and operating leverage. So on the data center side, you're right to highlight the lead times for a lot of the build components, including the concrete panels or the actual physical construction of the shell. The good news is that we've been able to manage that and keep the lead times consistent. similar to historical norms and what our customers are expecting because as we're building scale in our data center business, we're standardizing across a lot of those components in market, right? So, you know, across companies, Some of those, like Europe versus the United States, you can't standardize as much. But within Europe, you can standardize a lot. And within the United States, you can standardize a lot. India, you can standardize a lot, et cetera. So we are doing that. And what that allows us to do is, as we get scale, is to be much more flexible in terms of having the right equipment for the right customer in the right location. So we feel pretty good in terms of our ability to manage the supply chain and keep our timing intact.

John, this is Barry. As it relates to Regency and the opportunity to continue to utilize and optimize further, it is definitely there. There is a lot of opportunity. We have considerable capacity to expand the business, both in terms of what is already in place, as well as the opportunity to expand the footprint at relatively low CapEx, I might add. So it's a very a positive situation to be having Regency get further utilized, which I expect it to over time. And I will say we have a very highly capable team at Regency that there is no doubt can manage a much larger business and drive a tremendous amount of value for our shareholders.

Thank you. And our next question is from Shlomo Rosenbaum with Steeple. Please go ahead.

Hi, thanks for squeezing me in for one more. This is a little bit more of a technical one. Also, just it looks like the real estate depreciation went up sequentially by like 14 million. Is there a major site that came on board during the quarter?

Well, you should expect the depreciation, of course, to continue to ramp with all of the capex we've been doing on data center, as well as some of our incremental new warehouses that we put in, as well as some of the digital innovation that we've been driving internally for some time now. So that's the primary driver, and it's in that order.

Okay. Thank you. Thank you. And ladies and gentlemen, this concludes our question and answer session and the Iron Mountain Second Quarter 2024 Earnings Conference Call. We thank you for attending today's presentations. You may now disconnect your lines and have a wonderful day.

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