Iron Mountain(IRM) - 2023 Q4 - Annual Results

Q4 Earnings Press Release Iron Mountain achieved record Q4 and full-year 2023 revenue and Adjusted EBITDA, driven by data center growth and strong 2024 guidance, despite a net income decline and an updated AFFO calculation Q4 2023 Earnings Press Release Iron Mountain reported outstanding performance for Q4 and full year 2023, achieving record revenue and Adjusted EBITDA. The company leased 124 megawatts in data centers for the full year and issued strong 2024 guidance with projected double-digit revenue growth. Net income, however, saw a significant decrease year-over-year due to higher restructuring costs and lower gains on asset recycling. The company also updated its AFFO calculation to exclude amortization of capitalized commissions, making it more comparable to data center peers - Iron Mountain achieved record quarterly and full-year Revenue and Adjusted EBITDA in 2023[6][7] - Data Center business leased 124 megawatts for the full year 2023[6] - Issued strong 2024 guidance with projected Revenue Growth of 10-12%[6] Financial Performance Highlights for Q4 and Full Year 2023 | Metric | Q4 2023 ($M) | Q4 2022 ($M) | Y/Y % Change (Reported) | Full Year 2023 ($M) | Full Year 2022 ($M) | Y/Y % Change (Reported) | | :----------------------- | :----------- | :----------- | :---------------------- | :------------------ | :------------------ | :---------------------- | | Storage Rental Revenue | $871 | $769 | 13% | $3,371 | $3,034 | 11% | | Service Revenue | $549 | $510 | 8% | $2,109 | $2,070 | 2% | | Total Revenue | $1,420 | $1,279 | 11% | $5,480 | $5,104 | 7% | | Net Income | $29 | $126 | (77)% | $187 | $562 | (67)% | | Reported EPS | $0.10 | $0.42 | (76)% | $0.63 | $1.90 | (67)% | | Adjusted EPS | $0.52 | $0.43 | 21% | $1.82 | $1.79 | 2% | | Adjusted EBITDA | $525 | $472 | 11% | $1,962 | $1,827 | 7% | | Adjusted EBITDA Margin | 37.0% | 36.9% | 10 bps | 35.8% | 35.8% | - | | AFFO (Updated) | $328 | $299 | 10% | $1,211 | $1,151 | 5% | | AFFO per share (Updated) | $1.11 | $1.02 | 9% | $4.12 | $3.93 | 5% | - Net Income for Q4 2023 decreased by 77% YoY to $29.2 million, and full-year net income decreased by 67% to $187.3 million, primarily due to higher levels of restructuring and other transformation costs, lower gains on asset recycling, and the negative impact from changes in foreign exchange rates[10] - Iron Mountain's Board of Directors declared a quarterly cash dividend of $0.65 per share for Q1 2024[11] 2024 Guidance | Metric | 2024 Guidance ($M) | Y/Y % Change at Midpoint | | :---------------- | :----------------- | :----------------------- | | Total Revenue | $6,000 - $6,150 | 11% | | Adjusted EBITDA | $2,175 - $2,225 | 12% | | AFFO | $1,300 - $1,335 | 9% | | AFFO Per Share | $4.39 - $4.51 | 8% | - Effective Q4 2023, the AFFO definition was updated to exclude amortization of capitalized commissions, resulting in an $11.0 million increase to AFFO in Q4 and a $43.4 million increase for the full year, making it more comparable to data center industry peers[16] Financial Highlights and Organic Growth This section details Iron Mountain's quarterly financial and operating performance, highlighting consistent revenue and Adjusted EBITDA growth, strong organic revenue, and data center expansion Financial and Operating Highlights This section provides a detailed quarterly breakdown of key financial and operating metrics from Q4 2022 to Q4 2023, including revenue, profitability, EPS, FFO, AFFO, and operational indicators like organic growth, storage volume, and data center performance. It shows consistent growth in total revenues and Adjusted EBITDA, alongside an increase in data center leasable megawatts and utilization Quarterly Financial Highlights (Q4 2023 vs Q4 2022) | Metric | Q4 2023 | Q4 2022 | Y/Y % Change | | :------------------------------------------ | :-------- | :-------- | :----------- | | Storage Rental Revenue ($K) | $871,144 | $769,457 | 13.2% | | Service Revenue ($K) | $548,685 | $509,592 | 7.7% | | Total Revenues ($K) | $1,419,829 | $1,279,049 | 11.0% | | Adjusted EBITDA ($K) | $525,249 | $471,923 | 11.3% | | Adjusted EBITDA Margin | 37.0% | 36.9% | 0.1% | | Net Income (Loss) Attributable to IRM ($K) | $28,482 | $122,437 | (76.7)% | | Reported EPS - Fully Diluted | $0.10 | $0.42 | (76.2)% | | Adjusted EPS | $0.52 | $0.43 | 20.9% | | AFFO (Updated Calculation) ($K) | $327,634 | $298,523 | 9.8% | | AFFO per Share (Updated Calculation) | $1.11 | $1.02 | 8.8% | | Dividend per Share | $0.65 | $0.62 | 4.8% | Quarterly Operating Highlights (Q4 2023 vs Q4 2022) | Metric | Q4 2023 | Q4 2022 | Y/Y % Change | | :-------------------------------- | :-------- | :-------- | :----------- | | Organic Storage Rental Revenue Growth | 10.4% | 11.0% | (0.6)% | | Organic Service Revenue Growth | 6.2% | 11.8% | (5.6)% | | Total Volume - Storage (000s) | 731,541 | 729,284 | 0.3% | | Storage Facility Capacity Utilization | 79.6% | 79.3% | 0.3% | | Records Management Retention Rate | 92.9% | 93.3% | (0.4)% | | Data Center: Leasable Megawatts | 255.4 | 191.6 | 33.3% | | Data Center: Leased % - Total | 93.3% | 91.6% | 1.7% | | Data Center: Kilowatts Leased - New/Expansion | 4,535 | 13,657 | (66.8)% | Organic Revenue Growth Iron Mountain reported strong organic revenue growth for Q4 and full year 2023, with total organic revenue growth at 8.7% for Q4 and 6.9% for the full year on a constant currency basis. Storage rental revenue consistently showed double-digit organic growth, while service revenue organic growth, though positive in Q4, saw a decline compared to the prior year Organic Revenue Growth (Constant Currency, excluding acquisitions/divestitures) | Metric | Q4 2023 Organic Revenue Growth | Full Year 2023 Organic Revenue Growth | | :---------------------- | :----------------------------- | :------------------------------------ | | Storage Rental | 10.4% | 10.5% | | Service | 6.2% | 1.6% | | Total Revenues | 8.7% | 6.9% | - Organic Storage Rental Revenue Growth remained strong at 10.4% in Q4 2023 and 10.5% for the full year 2023[27] - Organic Service Revenue Growth was 6.2% in Q4 2023, a recovery from negative growth in Q2 and Q3 2023, but lower than 11.8% in Q4 2022[27][30] Operational Metrics This section analyzes Iron Mountain's operational performance, detailing global storage volume growth and segment-specific revenue and Adjusted EBITDA trends for both quarterly and full-year periods Global Storage Volume Total storage volume for Iron Mountain continued to grow, reaching 731,541 thousand cubic feet by Q4 2023, a slight increase from previous quarters. The growth was primarily driven by Global RIM and Corporate and Other segments, with some volume added through acquisitions Total Storage Volume (in thousands of cubic feet) | Metric | Q4 2023 | Q3 2023 | Q4 2022 | | :-------------------- | :-------- | :-------- | :-------- | | Global RIM | 726,048 | 725,907 | 724,480 | | Corporate and Other | 5,493 | 5,356 | 4,804 | | Total Volume - Storage | 731,541 | 731,263 | 729,284 | - Total storage volume increased slightly from 729,284 thousand cubic feet in Q4 2022 to 731,541 thousand cubic feet in Q4 2023[35] - Acquisitions contributed 5,020 thousand cubic feet in Q2 2021 and 10,743 thousand cubic feet in Q3 2021, and 143 thousand cubic feet in Q2 2022. The acquisition of Clutter Intermediate, Inc. in Q2 2023 maintained consistent volume[35] Quarterly Operating Performance This section details the quarterly operating performance across Iron Mountain's key business segments: Global RIM, Global Data Center, and Corporate and Other. It highlights strong revenue and Adjusted EBITDA growth in Global Data Center, while Global RIM also showed solid growth. Corporate and Other experienced revenue decline but improved Adjusted EBITDA Q4 2023 Quarterly Operating Performance by Segment (Y/Y % Change) | Segment | Storage Rental Revenue | Service Revenue | Total Revenues | Adjusted EBITDA Margin | | :-------------------- | :--------------------- | :-------------- | :------------- | :--------------------- | | Global RIM Business | 10.1% | 9.7% | 10.0% | 44.7% | | Global Data Center Business | 33.8% | 1.7% | 32.2% | 42.5% | | Corporate and Other | 14.0% | (3.5)% | (0.8)% | N/A | | Total Consolidated | 13.2% | 7.7% | 11.0% | 37.0% | - Global Data Center Business showed significant growth in Q4 2023, with Storage Rental Revenue up 33.8% and Total Revenues up 32.2% YoY[38] - Global RIM Business maintained strong performance with 10.0% YoY total revenue growth and a healthy 44.7% Adjusted EBITDA Margin in Q4 2023[38] - Corporate and Other segment's total revenues decreased by 0.8% YoY in Q4 2023, primarily due to a 3.5% decline in service revenue[38] Full Year Operating Performance For the full year 2023, Iron Mountain's consolidated total revenues grew by 7.4%, with Adjusted EBITDA Margin remaining stable at 35.8%. The Global Data Center Business was a significant growth driver, showing strong double-digit revenue growth, while the Global RIM Business also contributed positively. The Corporate and Other segment experienced a revenue decline Full Year 2023 Operating Performance by Segment (Y/Y % Change) | Segment | Storage Rental Revenue | Service Revenue | Total Revenues | Adjusted EBITDA Margin | | :-------------------- | :--------------------- | :-------------- | :------------- | :--------------------- | | Global RIM Business | 8.7% | 8.2% | 8.5% | 43.5% | | Global Data Center Business | 27.4% | (27.5)% | 23.4% | 43.6% | | Corporate and Other | 12.9% | (25.8)% | (20.6)% | N/A | | Total Consolidated | 11.1% | 1.9% | 7.4% | 35.8% | - Global Data Center Business total revenues increased by 23.4% for the full year 2023, driven by a 27.4% increase in storage rental revenue, despite a 27.5% decrease in service revenue[40] - Global RIM Business achieved 8.5% total revenue growth for the full year 2023, with both storage rental and service revenues showing solid increases[40] - The Corporate and Other segment's total revenues decreased by 20.6% for the full year 2023, primarily due to a 25.8% decline in service revenue[40] Balance Sheets, Statements of Operations and Reconciliations This section presents Iron Mountain's consolidated financial statements, including balance sheets and statements of operations, alongside detailed reconciliations of net income to Adjusted EBITDA, Adjusted EPS, FFO, and AFFO for both quarterly and full-year periods Consolidated Balance Sheets Iron Mountain's consolidated balance sheet as of December 31, 2023, shows an increase in total assets, primarily driven by growth in property, plant, and equipment. Total liabilities also increased, with a notable rise in long-term debt, while total equity decreased significantly year-over-year Consolidated Balance Sheet Highlights (as of Dec 31, 2023 vs Dec 31, 2022) | Metric | 12/31/2023 ($K) | 12/31/2022 ($K) | % Change | | :------------------------------------ | :-------------- | :-------------- | :--------- | | Total Current Assets | $1,735,545 | $1,547,145 | 12.2% | | Property, Plant and Equipment, Net | $6,314,869 | $5,115,444 | 23.4% | | Total Other Assets, Net | $9,423,388 | $9,477,925 | (0.6)% | | Total Assets | $17,473,802 | $16,140,514 | 8.3% | | Total Current Liabilities | $2,236,188 | $1,917,564 | 16.6% | | Long-term Debt, Net of Current Portion | $11,812,500 | $10,481,449 | 12.7% | | Total Liabilities | $17,262,029 | $15,503,721 | 11.3% | | Total Equity | $211,773 | $636,793 | (66.7)% | - Net Property, Plant and Equipment increased by 23.4% YoY, indicating significant capital investments[43] - Long-term debt (net of current portion) increased by 12.7% YoY, contributing to the overall rise in total liabilities[43] - Total Equity decreased substantially by 66.7% from $636.8 million in 2022 to $211.8 million in 2023[43] Quarterly Consolidated Statements of Operations For Q4 2023, Iron Mountain reported an 11.0% increase in total revenues year-over-year, driven by strong storage rental revenue growth. However, net income saw a significant decline of 76.8% due to higher operating expenses, particularly restructuring and other transformation costs, and increased interest expense Q4 2023 Consolidated Statements of Operations Highlights (Y/Y % Change) | Metric | Q4 2023 ($K) | Q4 2022 ($K) | Y/Y % Change | | :------------------------------------------ | :----------- | :----------- | :----------- | | Storage Rental Revenue | $871,144 | $769,457 | 13.2% | | Service Revenue | $548,685 | $509,592 | 7.7% | | Total Revenues | $1,419,829 | $1,279,049 | 11.0% | | Total Operating Expenses | $1,189,072 | $1,030,852 | 15.3% | | Operating Income (Loss) | $230,757 | $248,197 | (7.0)% | | Interest Expense, Net | $151,784 | $136,748 | 11.0% | | Net Income (Loss) | $29,194 | $125,654 | (76.8)% | | Net Income (Loss) Attributable to IRM | $28,482 | $122,437 | (76.7)% | | Diluted EPS | $0.10 | $0.42 | (76.2)% | - Restructuring and Other Transformation costs increased significantly by 39.7% YoY in Q4 2023, reaching $53.8 million[46] - Other Expense (Income), Net shifted from an income of $(31.6) million in Q4 2022 to an expense of $40.8 million in Q4 2023, contributing to the net income decline[46] Full Year Consolidated Statements of Operations For the full year 2023, Iron Mountain's total revenues increased by 7.4% to $5.48 billion. However, net income decreased substantially by 66.7% to $187.3 million, primarily due to a 12.5% increase in total operating expenses, a 20.1% rise in interest expense, and a significant increase in restructuring and other transformation costs Full Year 2023 Consolidated Statements of Operations Highlights (Y/Y % Change) | Metric | Full Year 2023 ($K) | Full Year 2022 ($K) | % Change | | :------------------------------------------ | :------------------ | :------------------ | :--------- | | Storage Rental Revenue | $3,370,645 | $3,034,023 | 11.1% | | Service Revenue | $2,109,644 | $2,069,551 | 1.9% | | Total Revenues | $5,480,289 | $5,103,574 | 7.4% | | Total Operating Expenses | $4,558,511 | $4,053,703 | 12.5% | | Operating Income (Loss) | $921,778 | $1,049,871 | (12.2)% | | Interest Expense, Net | $585,932 | $488,014 | 20.1% | | Net Income (Loss) | $187,263 | $562,149 | (66.7)% | | Net Income (Loss) Attributable to IRM | $184,234 | $556,981 | (66.9)% | | Diluted EPS | $0.63 | $1.90 | (66.8)% | - Restructuring and Other Transformation costs surged to $175.2 million in 2023 from $41.9 million in 2022[50] - Other Expense (Income), Net shifted from an income of $(69.8) million in 2022 to an expense of $108.6 million in 2023[50] Quarterly and Full Year Reconciliation of Net Income (Loss) to Adjusted EBITDA This section reconciles net income to Adjusted EBITDA for both quarterly and full-year periods. Despite a significant decline in net income, Adjusted EBITDA showed healthy growth, reflecting the exclusion of non-operating and non-cash items such as interest, taxes, depreciation, amortization, and restructuring costs Adjusted EBITDA Reconciliation Highlights (Q4 2023 vs Q4 2022) | Metric | Q4 2023 ($K) | Q4 2022 ($K) | Y/Y % Change | | :-------------------------------------------------------------------------------- | :----------- | :----------- | :----------- | | Net Income | $29,194 | $125,654 | (76.8)% | | Add: Interest Expense, Net | $151,784 | $136,748 | 11.0% | | Add: Provision (Benefit) for Income Taxes | $9,018 | $17,392 | (48.1)% | | Add: Depreciation and Amortization | $199,941 | $190,649 | 4.9% | | Add: Acquisition and Integration Costs | $12,860 | $9,653 | 33.2% | | Add: Restructuring and Other Transformation | $53,853 | $38,551 | 39.7% | | Add: Other Expense (Income), Net (Excluding JV) | $40,332 | $(34,455) | N/A | | Adjusted EBITDA | $525,249 | $471,923 | 11.3% | Adjusted EBITDA Reconciliation Highlights (Full Year 2023 vs Full Year 2022) | Metric | Full Year 2023 ($K) | Full Year 2022 ($K) | % Change | | :-------------------------------------------------------------------------------- | :------------------ | :------------------ | :--------- | | Net Income | $187,263 | $562,149 | (66.7)% | | Add: Interest Expense, Net | $585,932 | $488,014 | 20.1% | | Add: Provision (Benefit) for Income Taxes | $39,943 | $69,489 | (42.5)% | | Add: Depreciation and Amortization | $776,159 | $727,595 | 6.7% | | Add: Acquisition and Integration Costs | $25,875 | $47,746 | (45.8)% | | Add: Restructuring and Other Transformation | $175,215 | $41,933 | N/A | | Add: Other Expense (Income), Net (Excluding JV) | $98,891 | $(83,268) | N/A | | Adjusted EBITDA | $1,961,677 | $1,827,057 | 7.4% | - Stock-Based Compensation Expense increased significantly by 88.4% YoY in Q4 2023 and 29.8% for the full year 2023, contributing to the adjustments[53] Quarterly and Full Year Reconciliation of Reported Earnings per Share to Adjusted Earnings per Share This section reconciles reported EPS to Adjusted EPS, highlighting the impact of various non-recurring and non-cash items. Adjusted EPS showed growth for both Q4 and the full year, despite the sharp decline in reported EPS, indicating underlying operational strength when excluding specific adjustments Adjusted EPS Reconciliation Highlights (Q4 2023 vs Q4 2022) | Metric | Q4 2023 | Q4 2022 | Y/Y % Change | | :-------------------------------------------------------------------------------- | :------ | :------ | :----------- | | Reported EPS - Fully Diluted | $0.10 | $0.42 | (76.2)% | | Add: Acquisition and Integration Costs | $0.04 | $0.03 | 33.3% | | Add: Restructuring and Other Transformation | $0.18 | $0.13 | 38.5% | | Add: Loss (Gain) on Disposal/Write-Down of PP&E, Net | $0.02 | $(0.09) | (122.2)% | | Add: Other Expense (Income), Net (Excluding JV) | $0.14 | $(0.12) | N/A | | Add: Stock-Based Compensation Expense | $0.07 | $0.04 | 75.0% | | Adjusted EPS - Fully Diluted | $0.52 | $0.43 | 20.9% | Adjusted EPS Reconciliation Highlights (Full Year 2023 vs Full Year 2022) | Metric | Full Year 2023 | Full Year 2022 | % Change | | :-------------------------------------------------------------------------------- | :------------- | :------------- | :--------- | | Reported EPS - Fully Diluted | $0.63 | $1.90 | (66.8)% | | Add: Acquisition and Integration Costs | $0.09 | $0.16 | (43.8)% | | Add: Restructuring and Other Transformation | $0.60 | $0.14 | N/A | | Add: (Gain) Loss on Disposal/Write-Down of PP&E, Net | $(0.04) | $(0.31) | (87.1)% | | Add: Other Expense (Income), Net (Excluding JV) | $0.34 | $(0.28) | N/A | | Add: Stock-Based Compensation Expense | $0.25 | $0.19 | 31.6% | | Adjusted EPS - Fully Diluted | $1.82 | $1.79 | 1.7% | - The significant increase in Restructuring and Other Transformation costs (from $0.14 to $0.60 per share for the full year) was a major factor in the difference between reported and adjusted EPS[57] Quarterly Reconciliation of Net Income (Loss) to FFO and AFFO This section provides a quarterly reconciliation from Net Income to FFO (Nareit), FFO (Normalized), and AFFO. While Net Income declined significantly, FFO (Normalized) and AFFO showed positive year-over-year growth, reflecting adjustments for non-cash and non-operating items, including the updated AFFO definition Q4 2023 FFO and AFFO Reconciliation Highlights (Y/Y % Change) | Metric | Q4 2023 ($K) | Q4 2022 ($K) | Y/Y % Change | | :-------------------------------------------------------------------------------- | :----------- | :----------- | :----------- | | Net Income | $29,194 | $125,654 | (76.8)% | | FFO (Nareit) | $117,972 | $180,033 | (34.5)% | | FFO (Normalized) | $246,005 | $216,182 | 13.8% | | AFFO | $327,634 | $298,523 | 9.8% | | FFO (Nareit) per Share | $0.40 | $0.61 | (34.4)% | | FFO (Normalized) per Share | $0.83 | $0.74 | 12.2% | | AFFO Per Share | $1.11 | $1.02 | 8.8% | - Real Estate Depreciation increased by 6.4% YoY in Q4 2023, contributing to the FFO (Nareit) calculation[61] - Recurring Capital Expenditures increased by 23.6% YoY in Q4 2023, impacting the AFFO calculation[63] - The updated AFFO definition, effective Q4 2023, excludes amortization of capitalized commissions, which was $11.0 million in Q4 2023[63] Full Year Reconciliation of Net Income (Loss) to FFO and AFFO For the full year 2023, this section reconciles Net Income to FFO (Nareit), FFO (Normalized), and AFFO. Despite a significant drop in Net Income, FFO (Normalized) and AFFO demonstrated positive growth, reflecting the adjustments for non-cash and non-operating items, and the impact of the updated AFFO calculation Full Year 2023 FFO and AFFO Reconciliation Highlights (Y/Y % Change) | Metric | Full Year 2023 ($K) | Full Year 2022 ($K) | % Change | | :-------------------------------------------------------------------------------- | :------------------ | :------------------ | :--------- | | Net Income | $187,263 | $562,149 | (66.7)% | | FFO (Nareit) | $517,200 | $792,940 | (34.8)% | | FFO (Normalized) | $892,722 | $857,757 | 4.1% | | AFFO | $1,211,165 | $1,150,541 | 5.3% | | FFO (Nareit) per Share | $1.76 | $2.71 | (35.1)% | | FFO (Normalized) per Share | $3.04 | $2.93 | 3.8% | | AFFO Per Share | $4.12 | $3.93 | 4.8% | - Restructuring and Other Transformation costs were a significant add-back for FFO (Normalized), increasing substantially year-over-year[68] - Non-Real Estate Depreciation increased by 21.5% for the full year 2023, impacting the AFFO calculation[69] - The updated AFFO definition for the full year 2023 excluded $43.4 million in amortization of capitalized commissions[69] Reconciliation of Net Income (Loss) to FFO and AFFO (Recast to updated calculation) This section presents a detailed quarterly and full-year reconciliation of Net Income to FFO (Nareit), FFO (Normalized), and AFFO, with all figures recast to reflect the updated AFFO calculation methodology. It provides a consistent view of these non-GAAP metrics across periods, highlighting the impact of the change in calculation Full Year 2023 FFO and AFFO (Recast) | Metric | Full Year 2023 (Recast) ($K) | Full Year 2022 ($K) | | :-------------------------------------------------------------------------------- | :--------------------------- | :------------------ | | Net Income | $187,263 | $562,149 | | FFO (Nareit) | $517,200 | $792,940 | | FFO (Normalized) | $892,722 | $857,757 | | AFFO | $1,211,165 | $1,150,541 | | AFFO Per Share | $4.12 | $3.93 | - The recast calculation provides a consistent basis for comparing AFFO across periods, with the updated definition excluding amortization of capitalized commissions[16][63][69] - The table shows the quarterly progression of these metrics for 2023, allowing for detailed trend analysis under the new calculation method[72] Storage and Service Reconciliation This section provides a detailed breakdown of Iron Mountain's storage rental and service business performance, analyzing revenue, costs, and gross profit for both quarterly and full-year periods Quarterly Storage Rental and Service Business Detail This section breaks down the quarterly performance of Iron Mountain's storage rental and service businesses. Storage rental revenue and gross profit showed solid year-over-year growth, though gross margin slightly decreased. Service revenue also grew, and service gross profit saw a significant increase, improving its gross margin Q4 2023 Storage Rental Business Detail (Y/Y % Change) | Metric | Q4 2023 ($K) | Q4 2022 ($K) | Y/Y % Change | | :------------------------------------ | :----------- | :----------- | :----------- | | Total Storage Rental Revenue | $871,144 | $769,457 | 13.2% | | Total Revenue from Adjusted Storage Rental Activities | $880,366 | $778,071 | 13.1% | | Storage Rental Cost of Sales | $266,161 | $222,479 | 19.6% | | Storage Rental Gross Profit | $614,205 | $555,591 | 10.5% | | Storage Rental Gross Margin | 69.8% | 71.4% | (160 bps) | Q4 2023 Service Business Detail (Y/Y % Change) | Metric | Q4 2023 ($K) | Q4 2022 ($K) | Y/Y % Change | | :------------------------------------ | :----------- | :----------- | :----------- | | Total Service Revenue | $548,685 | $509,592 | 7.7% | | Total Revenue from Adjusted Service Activities | $539,463 | $500,978 | 7.7% | | Service Cost of Sales | $335,167 | $317,502 | 5.6% | | Service Gross Profit | $204,296 | $183,476 | 11.3% | | Service Gross Margin | 37.9% | 36.6% | 130 bps | - All Other Storage Costs increased significantly by 33.4% YoY in Q4 2023, contributing to the decline in Storage Rental Gross Margin[74] - Service Rent expenses saw a substantial increase of 129.1% YoY in Q4 2023[74] Full Year Storage and Service Business Detail For the full year 2023, the storage rental business demonstrated strong revenue and gross profit growth, although its gross margin slightly compressed. The service business saw modest revenue growth, but its gross profit declined, leading to a decrease in service gross margin Full Year 2023 Storage Rental Business Detail (Y/Y % Change) | Metric | Full Year 2023 ($K) | Full Year 2022 ($K) | % Change | | :------------------------------------ | :------------------ | :------------------ | :--------- | | Total Storage Rental Revenue | $3,370,645 | $3,034,023 | 11.1% | | Total Revenue from Adjusted Storage Rental Activities | $3,404,086 | $3,068,190 | 10.9% | | Storage Rental Cost of Sales | $1,009,847 | $891,367 | 13.3% | | Storage Rental Gross Profit | $2,394,239 | $2,176,823 | 10.0% | | Storage Rental Gross Margin | 70.3% | 70.9% | (60 bps) | Full Year 2023 Service Business Detail (Y/Y % Change) | Metric | Full Year 2023 ($K) | Full Year 2022 ($K) | % Change | | :------------------------------------ | :------------------ | :------------------ | :--------- | | Total Service Revenue | $2,109,644 | $2,069,551 | 1.9% | | Total Revenue from Adjusted Service Activities | $2,076,203 | $2,035,384 | 2.0% | | Service Cost of Sales | $1,347,953 | $1,297,753 | 3.9% | | Service Gross Profit | $728,250 | $737,631 | (1.3)% | | Service Gross Margin | 35.1% | 36.2% | (110 bps) | - Service Rent expenses increased significantly by 47.9% for the full year 2023[77] Real Estate Metrics This section details Iron Mountain's global real estate portfolio, including owned and leased facilities, data center assets, and the significant upcoming facility lease expirations Global Real Estate Portfolio and Lease Obligations As of December 31, 2023, Iron Mountain's global real estate portfolio comprised 1,377 buildings totaling 98.0 million square feet, with the majority being leased facilities. The portfolio includes 12 owned and 5 leased data center facilities. The weighted-average remaining operating lease obligation is 10.4 years Global Real Estate Portfolio (as of 12/31/2023) | Type | Buildings | Sq. Ft. (000s) | % of Total Sq. Ft. | | :---------------- | :-------- | :-------------- | :----------------- | | Owned Facilities | 232 | 23,281 | 23.8% | | Leased Facilities | 1,145 | 74,732 | 76.2% | | Total | 1,377 | 98,012 | 100.0% | - The portfolio includes 12 owned data center facilities (2.6M Sq. Ft.) and 5 leased data center facilities (0.8M Sq. Ft.)[83] - The weighted-average remaining operating lease obligation is 10.4 years[83] Facility Lease Expirations The facility lease expiration schedule shows that a significant portion of leases, 54.2% of total square feet, are set to expire in 2024, followed by 6.6% in 2025. This indicates a substantial amount of lease renewals or new lease agreements will be required in the near term - 54.2% of total square feet subject to lease are set to expire in 2024[82] - The next largest expiration year is 2025, with 6.6% of total square feet[82] Data Center Customer and Portfolio Metrics This section provides a comprehensive overview of Iron Mountain's data center business, covering customer lease expirations, leasing activity, operating portfolio, total potential capacity, and ongoing expansion and development projects Data Center Customer Lease Expiration and Leasing Activity Summary Iron Mountain's data center portfolio has a Weighted Average Lease Expiry (WALE) of 8.0 years. While a small percentage of total MW (4.5%) expires in 2024, a larger portion of annualized GAAP TCV rent (10.9%) is due. Leasing activity in Q4 2023 included 4,535 kW in new/expansion leases and 7,903 kW in renewed leases, with a churn rate of 1.7% - Weighted Average Lease Expiry (WALE) for data center customers is 8.0 years[86] Data Center Lease Expiration (2024-2028) | Year | Total MW Expiring | Percentage of Total MW | Annualized GAAP TCV Rent Expiring ($K) | Percentage of TCV Annualized Rent | | :--- | :---------------- | :--------------------- | :--------------------------------------- | :-------------------------------- | | 2024 | 19.5 | 4.5% | $65,564 | 10.9% | | 2025 | 36.4 | 8.4% | $86,659 | 14.5% | | 2026 | 23.3 | 5.4% | $52,198 | 8.7% | | 2027 | 9.7 | 2.2% | $24,459 | 4.1% | | 2028 | 58.2 | 13.4% | $74,435 | 12.4% | Q4 2023 Data Center Leasing Activity | Activity | Transaction Count | kW | | :---------------------- | :---------------- | :----- | | New/expansion leases signed | 122 | 4,535 | | Commenced leases | 122 | 30,250 | | Renewed leases | 156 | 7,903 | | Churn | N/A | 1.7% | - Full Year 2023 new/expansion leases signed totaled 124,351 kW across 323 transactions[87] Data Center Operating Portfolio and Total Potential Capacity Iron Mountain's data center operating portfolio reached 255.4 leasable megawatts (MW) in Q4 2023, with a total leased percentage of 93.3%. The company has a substantial total potential capacity of 860.8 MW, including significant capacity under construction and held for development, indicating strong future growth potential Data Center Operating Portfolio (Q4 2023) | Category | Leaseable MW | Leased % by MW | | :-------------------------- | :----------- | :------------- | | Stabilized | 240.8 | 95.4% | | Pre-Stabilized | 14.7 | 59.1% | | Total Data Center Properties | 255.4 | 93.3% | Total Potential Capacity - Megawatts (Q4 2023 vs Q4 2022) | Category | Q4 2023 (MW) | Q4 2022 (MW) | | :----------------------- | :----------- | :----------- | | Leasable | 255.4 | 191.6 | | Under Construction | 229.7 | 172.9 | | Held for Development | 375.7 | 382.6 | | Total Data Center Portfolio | 860.8 | 747.1 | - Several key data center locations, such as AZP-1, AZP-2, AZS-1, VA-1, VA-3, LON-2, FRA-1, FRA-2, and SIN-1, are 100% leased in their stabilized phases[90] Data Center Expansion and Development Activity Iron Mountain is actively expanding its data center footprint with 229.7 MW currently under construction, of which 91.8% is pre-leased. Significant new developments are underway in Northern Virginia, London, and Frankfurt, with substantial investments planned and high pre-lease rates, indicating strong demand and strategic growth Total Data Center Development Activity (Q4 2023) | Category | MW Under Construction | MW Pre-leased | % Pre-Leased | Investment in Q4 2023 ($M) | Cumulative Investment ($M) | Total Expected Investment ($M) | | :-------------------- | :-------------------- | :------------ | :----------- | :------------------------- | :------------------------- | :----------------------------- | | Total Expansion | 19.7 | 8.8 | 44.7% | $19.4 | $67.6 | $114.3 | | Total New Development | 210.0 | 202.0 | 96.2% | $136.3 | $320.5 | $1,183.6 | | Total Development | 229.7 | 210.8 | 91.8% | $155.7 | $388.1 | $1,297.9 | - Key new developments like VA-3 Phase 2 (34.0 MW), VA-4 (32.0 MW), VA-5 (40.0 MW), LON-2 Phase 2 (9.0 MW), LON-2 Phase 3 (9.0 MW), FRA-1 Phase 2 (9.0 MW), and FRA-1 Phase 3 (9.0 MW) are 100% pre-leased[93] - Total expected investment for new development projects is substantial, with Northern Virginia projects (VA-3, VA-4, VA-5, VA-6, VA-7) alone accounting for over $950 million in total expected investment[93] Capitalization and Debt Maturity Profile This section details Iron Mountain's capitalization structure, including market capitalization, enterprise value, leverage ratios, and a comprehensive debt maturity profile highlighting significant upcoming obligations Capitalization Iron Mountain's capitalization structure as of December 31, 2023, shows a total market capitalization of $20.4 billion and a total enterprise value of $32.3 billion. The company maintains a Net Lease-Adjusted Leverage Ratio of 5.1x and an Adjusted EBITDA to Interest Expense ratio of 3.5x. The majority of its debt is fixed rate (80%), with a weighted average interest rate of 5.7% and a weighted average maturity of 6.1 years Capitalization Highlights (as of 12/31/2023) | Metric | Value | | :------------------------------------ | :------------ | | Total Market Capitalization ($K) | $20,444,149 | | Net Debt ($K) | $11,811,833 | | Total Enterprise Value ($K) | $32,255,981 | | Net Debt to Total Enterprise Value | 36.6% | | Net Lease-Adjusted Leverage Ratio | 5.1x | | Adjusted EBITDA to Interest Expense | 3.5x | - 80% of the company's debt is fixed rate, providing stability against interest rate fluctuations[100] - The weighted average interest rate for total long-term debt is 5.7%, with a weighted average maturity of 6.1 years[101] - Credit ratings are BB- (S&P) and Ba3 (Moody's) with a stable outlook[101] Debt Maturity Profile Iron Mountain's debt maturity profile shows significant maturities in 2024 ($2.2 billion) and 2025 ($2.0 billion), followed by a lower amount in 2026 ($0.048 billion) and then increasing again in 2027 ($1.3 billion). The company also has committed asset-level financing for data center construction - The largest debt maturities are in 2024 ($2,216 million) and 2025 ($2,034 million)[103] - The company has approximately $363 million of committed asset-level financing for the construction of three Data Center assets in Northern Virginia, which is excluded from the debt maturity profile[103] Capital Expenditures This section analyzes Iron Mountain's capital expenditures and investments for Q4 and full year 2023, highlighting significant increases in growth investments, particularly in data centers Quarterly and Full Year Capital Expenditures and Investments Iron Mountain significantly increased its capital expenditures in Q4 and for the full year 2023, primarily driven by growth investments in Data Centers. Total growth capital expenditures surged by 43.3% YoY in Q4 and 52.1% for the full year, reflecting the company's strategic focus on expanding its data center and real estate assets. Recurring capital expenditures also increased in Q4 but slightly decreased for the full year Q4 2023 Capital Expenditures (Y/Y % Change) | Category | Q4 2023 ($K) | Q4 2022 ($K) | Y/Y % Change | | :------------------------------------ | :----------- | :----------- | :----------- | | Growth: Data Center | $310,230 | $196,860 | 57.6% | | Growth: Real Estate | $64,862 | $66,911 | (3.1)% | | Growth: Innovation and Other | $23,803 | $14,563 | 63.4% | | Total Growth Capital Expenditures | $398,895 | $278,335 | 43.3% | | Total Recurring Capital Expenditures | $44,916 | $36,340 | 23.6% | | Total Cash Paid for Growth and Recurring Capital Expenditures | $376,929 | $278,577 | 35.3% | Full Year 2023 Capital Expenditures (Y/Y % Change) | Category | Full Year 2023 ($K) | Full Year 2022 ($K) | % Change | | :------------------------------------ | :------------------ | :------------------ | :--------- | | Growth: Data Center | $964,198 | $592,875 | 62.6% | | Growth: Real Estate | $201,036 | $181,285 | 10.9% | | Growth: Innovation and Other | $81,135 | $45,371 | 78.8% | | Total Growth Capital Expenditures | $1,246,369 | $819,531 | 52.1% | | Total Recurring Capital Expenditures | $140,406 | $142,496 | (1.5)% | | Total Cash Paid for Growth and Recurring Capital Expenditures | $1,339,223 | $875,378 | 53.0% | - Data Center growth capital expenditures were the primary driver, increasing by 57.6% in Q4 and 62.6% for the full year[105][106] - TTM Data Center Recurring CapEx as a % of Data Center Revenue increased from 2.3% in Q4 2022 to 3.5% in Q4 2023[108][109] Appendix and Definitions This appendix provides comprehensive definitions for Iron Mountain's non-GAAP financial measures, business segments, capital expenditure categories, and other key financial and operational terms used throughout the report Non-GAAP Measures and Definitions This section provides detailed definitions for various non-GAAP financial measures used by Iron Mountain, including Adjusted EBITDA, Adjusted EPS, FFO (Nareit), FFO (Normalized), and AFFO. It clarifies how these metrics are calculated and their purpose in supplementing GAAP measures for investor analysis, noting the recent update to the AFFO definition - Non-GAAP measures like Adjusted EBITDA, Adjusted EPS, FFO (Nareit), FFO (Normalized), and AFFO are used to enhance disclosure and provide additional information for investors, not as substitutes for GAAP measures[111][114][116][117][120] - The AFFO definition was updated in Q4 2023 to exclude amortization of capitalized commissions, aiming for a more accurate representation of funds available for growth and better comparability with data center peers[118] - FFO (Nareit) excludes real estate depreciation and losses/gains on sale of real estate, providing a clearer view of operating performance for REITs[120] Business Segments Iron Mountain operates through several key business segments: Global Records and Information Management (RIM), Global Data Center Business, and Corporate and Other. Global RIM encompasses Records Management, Data Management, Global Digital Solutions, Secure Shredding, Entertainment Services, and Consumer Storage. The Global Data Center Business provides enterprise-class data center facilities, while Corporate and Other includes Fine Arts and Asset Lifecycle Management (ALM) businesses - Global RIM Business includes Records Management (731.5 million cubic feet of hardcopy records as of Dec 31, 2023), Data Management, Global Digital Solutions, Secure Shredding, Entertainment Services, and Consumer Storage[121][122][123] - Global Data Center Business provides enterprise-class data center facilities and hyperscale-ready capacity[124] - Corporate and Other segment primarily includes Fine Arts and Asset Lifecycle Management (ALM) businesses, which focus on IT asset decommissioning, data erasure, and disposition[125] Capital Expenditures and Investments Definitions This section categorizes capital expenditures into Growth Investment (Data Center, Real Estate, Innovation and Other) and Recurring (Data Center, Real Estate, Non-Real Estate). Growth investments are primarily for expanding capacity and driving revenue, while recurring expenditures are for maintenance and replacement of existing assets - Growth Investment includes Data Center (expenditures for construction, land acquisition, revenue growth), Real Estate (investments in land, buildings, improvements), and Innovation and Other (new products, software, acquisition integration)[127][128] - Recurring expenditures cover Data Center (replacement of components, maintenance), Real Estate (replacement of real estate asset components), and Non-Real Estate (replacement of containers, equipment, software for maintenance)[129][130] Other Definitions This section defines various other financial and operational terms used in the report, such as Constant Currency, Data Center Business Definitions (Leaseable MW, Leased %, MRR, WALE, Churn Rate, TCV), EBITDAR, Credit Facility Fixed Charge Coverage Ratio, Net Lease-Adjusted Leverage Ratio, Organic Revenue Growth, Records Management Retention Rate, Storage Rev/NOI per Sq. Ft., Service Profit and Margin, Storage Net Operating Income (NOI), Storage Profit and Margin, and Tax Rates - Constant Currency adjusts results to normalize foreign exchange impacts across comparable periods[131] - Data Center definitions include Leaseable MW (critical power capacity), Leased % (megawatts under contract divided by leasable megawatts), Monthly Recurring Revenue (MRR), Weighted Average Lease Expiry (WALE), and Rental Churn Rate[132][133] - Organic Revenue Growth represents the year-over-year growth rate of revenues excluding the impact of business acquisitions, divestitures, and foreign currency exchange rate fluctuations[137] - Storage NOI (Net Operating Income) is defined as revenue from rental activities less storage rental costs, commonly used in the REIT industry to understand and value income from real estate[142]