Iron Mountain(IRM) - 2023 Q4 - Annual Report

Financial Performance and Metrics - Adjusted EBITDA for 2023 was $1,961.7 million, compared to$1,827.1 million in 2022[194] - Net income for 2023 was $187.3 million, a decrease from$562.1 million in 2022[194] - Net Income for 2023 was $187.263 million, a decrease from$562.149 million in 2022[203] - FFO (Nareit) for 2023 was $517.200 million, down from$792.940 million in 2022[203] - FFO (Normalized) for 2023 increased to $892.722 million from$857.757 million in 2022[203] - The company's reported EPS for 2023 was $0.63, with an adjusted EPS of$1.82[198] - Net income attributable to Iron Mountain Incorporated in 2023 was $184,234, compared to$556,981 in 2022 and $450,219 in 2021[486] - Total revenues for 2023 were$5,480,289 thousand, a 7.4% increase from 2022, with storage rental revenue growing 11.1% to $3,370,645 thousand[239] - Revenues increased by$376.7 million (7.4%) to $5,480.3 million in 2023 compared to 2022[237] - Operating expenses rose by$504.8 million (12.5%) to $4,558.5 million in 2023[237] - Net income decreased by$374.9 million (66.7%) to $187.3 million in 2023[237] - Adjusted EBITDA increased by$134.6 million (7.4%) to $1,961.7 million in 2023[237][260] - Storage rental revenue grew by$101.9 million (27.4%) to $474.1 million in the Global Data Center Business segment[266] - Service revenue in the Global Data Center Business segment declined by$8.0 million (27.5%) to $21.0 million in 2023[266] - Labor costs increased by$84.1 million (10.4%) to $891.4 million in 2023[242] - Facilities expenses rose by$143.8 million (16.3%) to $1,028.8 million in 2023[242] - Restructuring and other transformation costs increased by$133.3 million to $175.2 million in 2023[249] - Acquisition and integration costs decreased by$21.8 million to $25.9 million in 2023[248] - Selling, general and administrative expenses increased by$95.71 million, or 8.4%, to $1,236.287 million in 2023 compared to 2022[244] - General, Administrative and Other expenses rose by$33.351 million, or 4.0%, to $873.195 million in 2023[244] - Sales, Marketing and Account Management expenses increased by$62.359 million, or 20.7%, to $363.092 million in 2023[244] - Depreciation expense increased by$46.9 million, or 9.8%, in 2023 compared to 2022[246] - General, Administrative and Other expenses as a percentage of consolidated revenues decreased by 0.6% to 15.9% in 2023[244] - Sales, Marketing and Account Management expenses as a percentage of consolidated revenues increased by 0.7% to 6.6% in 2023[244] - Total Selling, general and administrative expenses as a percentage of consolidated revenues increased by 0.2% to 22.6% in 2023[244] - Depreciation and amortization charges are primarily related to storage systems, customer and supplier relationship intangible assets, and data center lease-based intangible assets[245] Revenue Growth and Drivers - Organic storage rental revenue growth is driven by revenue management in the Global RIM Business segment and growth in the Global Data Center Business segment, primarily due to lease commencements[184] - Organic service revenue growth is expected to benefit from new and existing digital offerings and ALM, as well as traditional services in 2024[184] - Total revenue and Adjusted EBITDA growth are expected to continue in 2024 due to new product and service offerings, innovation, customer solutions, and market expansion aligned with Project Matterhorn objectives[184] - Service revenue growth is negatively impacted by declining activity rates as stored records and tapes become less active and more archival[182] Costs and Expenses - Project Matterhorn is expected to incur approximately $150.0 million in costs annually from 2023 through 2025, including restructuring and transformation costs[180] - Labor and facility occupancy costs are the most significant components of cost of sales, excluding depreciation and amortization[183] - Depreciation and amortization expenses for 2023 were$776.2 million, up from $727.6 million in 2022[194] - Restructuring and other transformation costs for 2023 were$175.2 million, significantly higher than $41.9 million in 2022[194] Acquisitions and Investments - Acquired approximately 80$718,126, with potential additional payments for the remaining 20% interest ranging from $200,000 to$531,000 based on performance metrics[497] - Consolidated 100% of ITRenew's revenues and expenses from January 25, 2022, with deferred purchase obligations reflected in accrued expenses and other liabilities[497] - Final investment in Web Werks JV increased company's interest to 63.39%, consolidating its financial results within the Global Data Center Business segment[493] - Acquired 100% of Clutter for $60,600, consolidating its financial results within the Global RIM Business segment, and later sold 15$7,500[495] - Acquired Regency Technologies for an initial purchase price of $200,000, with$125,000 paid at closing and potential performance-based contingent consideration payable in 2027[496] - Acquired XData Properties for €78,900 (approximately $78,200) to expand data center operations in Europe, with additional consideration of up to €10,000 based on power connection milestones[501] - Pro forma financial information for ITRenew shows total revenues of$5,121,548 for 2022 and $4,939,511 for 2021, with income from continuing operations of$571,381 and $391,625, respectively[500] - Operating expenditures of$59,370 incurred to complete the ITRenew Transaction, reflected in pro forma financial information as if incurred on January 1, 2021[499] - Total consideration for acquisitions in 2023 was $293.4 million, with cash paid (gross of cash acquired) amounting to$88.6 million[506] - In 2023, the company recorded goodwill of $90.6 million from acquisitions, with customer and supplier relationship intangible assets valued at$14.3 million[506] - The company deconsolidated OSG Records Management (Europe) Limited in 2022, resulting in a loss of approximately $105.8 million[509] - The Intellectual Property Management (IPM) business was sold in 2021 for$215.4 million, resulting in a gain of $179.0 million[510] - The Clutter Acquisition in 2023 led to a loss of approximately$38,000 due to the remeasurement of the previously held equity interest[512] - In 2021, the company acquired Information Fort, LLC for $90.3 million to expand records management operations in the Middle East and North Africa[502] - The company acquired assets of a Frankfurt data center in 2021 for approximately €77.9 million ($91.3 million) to enhance data center operations in Germany[503] Debt and Financing - As of December 31, 2023, the company had $520.0 million in notional value outstanding on interest rate swap agreements, with maturity dates ranging from October 2025 to February 2026[519] - The company had$509.2 million in notional value outstanding on cross-currency interest rate swaps as of December 31, 2023, with maturity dates ranging from August 2024 to February 2026[520] - The company terminated interest rate swap agreements with notional amounts totaling $350.0 million in April 2023, resulting in unrealized gains of$10.1 million[518] - Derivative assets as of December 31, 2023, include $6,359 in Other assets,$2,496 in accrued expenses and other liabilities, and $3,273 in Other long-term liabilities[522] - Cumulative net gains from interest rate swap agreements as of December 31, 2023, are$2,472, including $2,528 from terminated agreements[522] - Cumulative net gains from cross-currency swap agreements as of December 31, 2023, are$32,459, including $30,197 from the excluded component[522] - Unrealized losses from interest rate swap agreements in 2023 are$(2,454), compared to gains of $20,186 in 2022 and$13,382 in 2021[522] - Unrealized losses from cross-currency swap agreements in 2023 are $(41,382), compared to gains of$28,044 in 2022 and $38,998 in 2021[522] - The Revolving Credit Facility allows borrowing up to$2,250,000, with the Term Loan A of $250,000 borrowed on March 18, 2022, and quarterly payments of$3,125[530] - The Term Loan B due 2026 has a principal amount of $700,000, with quarterly payments of$1,750 and matures on January 2, 2026[530] - The Accounts Receivable Securitization Program's maximum borrowing capacity increased from $325,000 to$360,000 on June 8, 2023, with $358,500 outstanding as of December 31, 2023[548] - The interest rate under the Accounts Receivable Securitization Program was 6.4$7,580, compared to $0 in 2022 and 2021[524] - Total long-term debt increased to$11,913,952 thousand in 2023 from $10,562,719 thousand in 2022, reflecting a growth of approximately 12.8$1,200,000 thousand, issued at 99.25% of par, and matures on January 31, 2031[531] - The fair value of the Term Loan B due 2031 approximates its carrying value, with quarterly installments of $3,000 thousand starting in Q1 2024[531] - The Accounts Receivable Securitization Program increased to$358,500 thousand in 2023 from $314,700 thousand in 2022, reflecting a growth of approximately 13.9$519,907 thousand in 2023 from $425,777 thousand in 2022, reflecting a growth of approximately 22.1$1,452 thousand in 2023 from $1,982 thousand in 2022[526] - The fair value of the GBP Notes decreased to$489,108 thousand in 2023 from $445,206 thousand in 2022, reflecting a decline of approximately 9.9$478,750 thousand in 2023 from $450,000 thousand in 2022, reflecting a decline of approximately 6.4$684,375 thousand in 2023 from $622,500 thousand in 2022, reflecting a decline of approximately 9.9$0, with $2,245,179 available for borrowing[534] - Term Loan A had an outstanding principal of$228,125 with an interest rate of 7.2% as of December 31, 2023[534] - Term Loan B due 2026 had an outstanding principal of $659,750 with an interest rate of 5.2$1,200,000 with an interest rate of 7.6% as of December 31, 2023[534] - Virginia 3 Term Loans had outstanding borrowings of $101,218 with a weighted average interest rate of 6.2$16,338 with a weighted average interest rate of 6.1% as of December 31, 2023[537] - The 7% Notes due 2029 were issued with an aggregate principal amount of $1,000,000, generating net proceeds of approximately$990,000[541] - The AUD Term Loan had outstanding borrowings of 292,422 Australian dollars ($199,195) with an interest rate of 8.0$38,791 thousand as of December 31, 2023, with $4,821 thousand reducing borrowing capacity under the Revolving Credit Facility[552] - Long-term debt maturities for 2024 amount to$120,670 thousand, with total long-term debt (including current portion) at $11,933,170 thousand[555] - Net total lease adjusted leverage ratio as of December 31, 2023 is 5.1, below the maximum allowable of 7.0, and the fixed charge coverage ratio is 2.4, above the minimum allowable of 1.5, indicating compliance with credit agreements[308] Tax and Valuation - Deferred tax assets increased to$154,942 thousand in 2023 from $129,806 thousand in 2022, driven by higher accrued liabilities and net operating loss carryforwards[567] - Net deferred tax liability decreased to$221,341 thousand in 2023 from $244,616 thousand in 2022, reflecting changes in deferred tax assets and liabilities[567] - Federal net operating loss carryforwards of$109,624 thousand are available indefinitely, with $88,728 thousand expected to reduce future taxable income[567] - Foreign net operating losses of$133,536 thousand are subject to a valuation allowance of approximately 73.8%[567] - Effective tax rates for 2023, 2022, and 2021 were 17.6%, 11.0%, and 28.0%, respectively, with variability expected due to income mix and tax law changes[570] - Valuation allowance increased to $103.9 million in 2023, up from$47.5 million in 2022, primarily due to foreign currency exchange rate changes and the implementation of OECD Pillar Two[569] - Net income before taxes decreased to $227.2 million in 2023 from$631.6 million in 2022, with significant declines in the U.S. and Other Foreign segments[569] - The company has federal net operating loss carryforwards of $109.6 million, with$88.7 million expected to reduce future federal taxable income[231] - The company has foreign net operating losses of $133.5 million, subject to a valuation allowance of approximately 73.8$1.39 billion, with growth investment capital expenditures accounting for $1.25 billion, a 52$1.5 billion for 2024, with $1.35 billion allocated to growth investments[280] - Purchase commitments for 2024 totaled$76,443, with future construction costs for the Global Data Center Business estimated at $740,000[556] - Total property, plant, and equipment acquired in 2023 acquisitions was approximately$140.7 million[215] Stock and Equity - The company has 6,204,098 shares available for grant under its various stock incentive plans as of December 31, 2023[468] - RSUs generally have a vesting period of three years from the date of grant, with dividend equivalents paid upon vesting[471] - The fair value of RSUs vested in 2023 was $32,664, compared to$27,078 in 2022 and $29,332 in 2021[472] - The company issued 641,412 PUs in 2023, 435,675 in 2022, and 488,953 in 2021[477] - The fair value of earned PUs that vested in 2023 was$34,896, compared to $20,059 in 2022 and$29,701 in 2021[478] - The company has 870,857 shares available under the ESPP as of December 31, 2023[479] - Declared distributions for the year ended December 31, 2023 were $740,448, with a per-share amount of$2.54[562] - The company declared a dividend of $0.65 per share for stockholders of record as of March 15, 2024, payable on April 4, 2024[561] - Dividends paid in 2023 were classified as 98.2$1,058.4 million (21