Iron Mountain Incorporated

Good morning and welcome to the Iron Mountain Second Quarter 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key, 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. And to withdraw your question, please press star, then two. 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 Mr. Mark Rupp, Senior Vice President of Investor Relations. Please go ahead, sir.

Thanks, Chuck. Good morning, everyone, and welcome to our Second Quarter 2025 earnings conference call. Joining us today are Bill Meany, our President and Chief Executive Officer, and Barry Heitman, our Executive Vice President and Chief Financial Officer. After our prepared remarks, we'll open the lines for Q&A. Today's call will include forward-looking statements, which are subject to risks and uncertainties. For discussion of the major risk factors that could cause our actual results to differ from these statements, please refer to today's earnings materials, including the Safe Harbor language on slide two of the earnings presentation, and our annual and quarterly reports on form 10K and 10Q. Each of these items, as well as reconciliations of non-GAAP financial measures, referenced during this call, can also be found on our Investor Relations website. With that, I'll turn the call over to Bill.

Thank you, Mark, and thank you all for joining us today to discuss our Second Quarter results. As you saw in this morning's release, we delivered another quarter of record financial performance in double-digit growth. We achieved an all-time high for quarterly revenue, adjusted EBITDA, and ASFO. Our financial results exceeded our expectations and were strong across our business. Following on from this strong performance, we are pleased to increase our guidance across all key financial metrics. Revenue increased 12% to $1.7 billion, adjusted EBITDA grew 15% to $628 million, and ASFO increased 15% to $370 million. I am impressed with how our team continues to deliver on our growth strategy. Our double-digit growth reflects continued successful execution of our strategic priorities. We are driving continued revenue growth and our physical storage business achieving record revenue in Q2. We are on pace for our 37th consecutive year of organic storage rental growth. We are delivering AI-powered digital solutions across industry verticals and quickly becoming a key leader recognized by customers, as well as industry analysts, with our Intel Insight Digital Experience Platform, or DXT. We are growing our data center business on a global basis, generating organic storage growth of 26% in the second quarter with a strong pipeline in place to execute against our portfolio capacity of 1.3 gigawatts. And we are accelerating growth in our asset lifecycle management business with our investments in this highly fragmented market beginning to pay off, delivering more than 40% organic growth in the second quarter. Our business has never been stronger and more profitable than it is today. Our growth portfolio, including data center, digital, and asset lifecycle management, will represent nearly 30% of our total revenue exiting 2025 and provide some 6% annual revenue growth on a consolidated basis. And that is on top of the mid single digit growth provided by the strength in our physical records management business. And looking ahead, the strong momentum across our business lines provides a similarly strong outgrowth outlook for revenue in EBITDA going forward beyond 2025. This continued growth is all due to our team's successful execution of our strategy and commitment to delivering value for our customers whilst leveraging our synergistic business model. Our amount is winning as a result of one, our longstanding relationships and proven track record of reliability and trust as reflected by our number one ranking in the customer satisfaction by the Wall Street Journal of the top US listed companies. Two, our strong reputation for security, ability to meet stringent compliance requirements and deliver a secure chain of custody. Three, our comprehensive end to end solutions offering, allowing customers to partner with a single vendor to meet all of their needs, which is a focus of our commercial teams cross selling efforts. And four, our global footprint and operational scale enabling customers to leverage our services across 61 countries and award us larger deals that only we can effectively manage. Let me now describe some recent customer wins to illustrate the momentum supporting our growth. In records management, we continue to see many unvended storage opportunities within our customer base. A great example is a US bank with more than 300 locations that chose Iron Mountain to store 42,000 cubic feet of records after previously managing them in house. The strength of our existing relationship, our expertise in storing records, the security of our facilities and the ability to integrate multiple solutions for the customers were key to winning this business. Additionally, we secured two new long term customer relationships in the healthcare industry, one in the UK and the other in Norway. Both of these wins were captured from competitors and jointly deliver more than 50,000 cubic feet of records. These customers selected Iron Mountain due to our strong reputation for security with our service level commitment and transportation network also cited as important factors. Turning to our digital solutions business where we achieved another record quarter of revenue in Q2, the DXP platform continues to accelerate, securing increasingly strategic partnerships and positioning itself as a differentiating technology solution for enterprises globally. We are excited about the upcoming release of AI agents designed to support intelligent, multi-step decision making across complex workflows which are now being embedded into our industry solutions. And we're proud that leading analyst firms including Gartner and Everest are recognizing Iron Mountain alongside top tier AI software vendors and business process outsourcing providers. Our continued investment in platform intelligence and customer driven development is being recognized and positions us well for sustained digital growth. In addition, I am pleased to announce that we have significantly strengthened our position as a leading player in India. Earlier this morning, we signed a definitive agreement to acquire CRC India, a leading Indian digitization services company. As we've shared in the past, India represents a major growth opportunity for Iron Mountain and this acquisition sets us up well to capitalize on that growth over the coming years as well as expanding our digital product portfolio both for India and globally. I will now highlight a few of our recent wins in digital solutions. A major global SaaS company employing over 75,000 people selected our digital HR solution built on the DXP platform as its enterprise content management or ECM platform for its human resource needs. DXP's modern user friendly interface and solution offers this customer greater control over HR processes whilst achieving greater productivity from the AI embedded in our platform. And as it relates to our digital award with the Department of Treasury, we are actively digitizing documents and leveraging our intelligent digitization solution. More recently, we have submitted our response to the government's request for quotation regarding a larger, longer term engagement which would incorporate the work we are currently doing under the initial award. We look forward to hearing back from the department on this new government efficiency opportunity. Let me now turn to our data center business. For the quarter, we achieved revenue growth of 24% driven by 26% organic storage growth as we further execute on a strong leasing backlog. We commence 23 megawatts primarily in Northern Virginia and renewed leases totaling 25 megawatts with continued strong pricing spreads. As it relates to new leasing activity, we lease two megawatts of enterprise business in the quarter in six megawatts year to date. The data center market remains very strong. Pricing continues to be good and returns are high. Our new lease signings this year have been lighter than planned and we now project new lease signings of 30 to 80 megawatts in 2025. Over the course of the year, we've observed our hyperscale customers have been particularly focused on procuring and developing large deployments to support AI training. More recently, we have seen an increased level of priority for AI inference in cloud infrastructure, which is where our assets are deployed. Correspondingly, we have seen more intense activity and engagement across our pipeline. Looking out beyond this year, we have high confidence in our ability to drive consistent revenue growth in line with the levels we've achieved over the past few years. This outlook is underwritten by both our backlog as well as the high value assets we have to sell in prime markets including Northern Virginia, Richmond, Amsterdam, Madrid, and Chicago. Turning to our asset lifecycle management business, we achieved 70% reported revenue growth, including 42% organic growth with strength across both our enterprise and data center decommissioning channels. Our commercial team continues to cross-sell our portfolio of solutions and win new business including several single vendor consolidations in the quarter. Let me now share some of the ALM wins achieved which support our ability to continue driving strong double-digit organic growth. In the enterprise channel, a globally recognized food company has selected Iron Mountain as its exclusive ALM partner for secure disposition of its assets across 1,500 locations in France. The deal represents a cross-sell building on our longstanding records management relationship with the customer and our reputation for delivering highly secure services. And a global consulting firm with more than 70,000 employees