Nate Crossett

Nate Crossett asked for an update on the expected revenue from the U.S. Department of Treasury contract for 2026 and its ramp-up over time, and also inquired about any guidance for G&A expenses in 2026.

Answer

Bill Meaney and Barry Hytinen stated that the Treasury contract is expected to generate at least $45 million in 2026 as a ramp-up year, with expectations to exceed $100 million annually from 2027 onwards. They highlighted positive feedback and progress towards FedRAMP High certification for their InSight SaaS platform. Barry Hytinen added that the 2026 guidance includes 40 basis points of EBITDA margin expansion, partly driven by SG&A leverage from efficiency improvements and AI tool adoption, indicating a multi-year opportunity for operating leverage.

Nate Crossett inquired about the expected revenue from the U.S. Department of Treasury (DOT) contract for 2026 and its projected ramp-up over time, as well as any guidance on G&A expenses for 2026.

Answer

President and CEO Bill Meaney stated that the DOT contract is expected to generate at least $45 million in 2026, serving as a ramp-up year, with projections to build to an annual run rate of around $100 million or more in 2027 and beyond. He highlighted positive feedback on execution and the company's FedRAMP Moderate certification, with final approvals for FedRAMP High underway. Executive Vice President and CFO Barry Hytinen added that the $45 million forecast is prudent and that the company expects 40 basis points of additional EBITDA margin expansion in 2026, benefiting from SG&A leverage driven by ongoing business transformation and the adoption of AI tools for efficiency.

Nate Crossett asked for expectations regarding volumes and pricing for the RIM storage business into Q4 and next year.

Answer

EVP and CFO Barry Hytinen stated that organic volume in physical storage continues to rise (30-40 basis points in Q3), with a positive outlook for next year and beyond, as volume is an annuity stream. He expects revenue management actions to be in the mid-single-digit range for Q4 and noted that the Clutter consumer storage headwind has now been lapped. He also mentioned an assumption of more challenging FX sequentially.

Nate Crossett asked for expectations regarding volumes and pricing in the RIM (Records and Information Management) storage business for Q4 and the next year.

Answer

EVP and CFO Barry Hytinen stated that organic volume in physical storage continued to rise (30-40 basis points in Q3) with a positive outlook for next year, driven by consolidation and new clients. He expects revenue management actions to be in the mid-single-digit range for Q4 and noted that the Clutter consumer storage headwind has been lapped. He also mentioned an assumed challenging FX environment for Q4.

Asked about the details of the $70 million in properties under LOI, the rationale behind the updated share buyback program, and any potential tenant issues on the watchlist.

Answer

The $70M in LOIs are for properties at the higher end of their 6-7.5% cap rate range with long lease terms. The share buyback is a tool to be used when there's a significant dislocation between share price and NAV, but the primary focus is on growth via acquisitions. The only notable tenant situation is Landmark Hospitals, which is in bankruptcy but current on rent and expected to emerge soon.

Nate Crossett of BNP Paribas inquired about the specifics of the $70 million in properties under LOI, including asset types and pricing. He also asked about the acquisition outlook for the second half of the year, the rationale for the updated three-year share repurchase program, and if there were any tenant issues on the company's watchlist.

Answer

President and CEO Michael Seton explained that the properties under LOI are consistent with Sila's current portfolio, with cap rates in the upper end of their previously guided 6% to mid-7% range and long lease durations. Regarding the buyback program, he stated it's a 'tool in the toolbox' used when there's a significant dislocation between share price and private market values, noting the recent repurchases occurred at a level over 150 basis points below their view of intrinsic value. For the watchlist, he mentioned Landmark Hospitals is in bankruptcy but remains current on rent, with an expected emergence in about 60 days.

Nate Crossett of BNP Paribas inquired about the asset types and pricing for the $70 million of properties under LOI, the rationale for the updated share buyback program, and any tenants on the watchlist.

Answer

President and CEO Michael Seton clarified the LOI is for over $70 million in properties consistent with their current portfolio, with cap rates in the upper end of their low-6s to mid-7s range. He explained the new three-year, $75 million share repurchase program is a tool to capture value when a significant dislocation exists between the share price and private market values, though the company's bias remains toward growth via acquisitions. Regarding the watchlist, Seton noted that Landmark Hospitals is in bankruptcy but remains current on rent, and he anticipates a positive resolution within approximately 60 days.

Nate Crossett of BNP Paribas inquired about the specifics of the $70 million in properties under LOI, including asset types and pricing. He also asked about the updated share repurchase program and whether there were any tenant issues on the company's watchlist.

Answer

President and CEO Michael Seton clarified that the properties under LOI are consistent with Sila's current portfolio and fall in the upper end of their 6.5% to 7.5% cap rate guidance, with long lease durations. He explained that share repurchases are a tool used when there is a significant dislocation between the share price and private market values, noting the recent buybacks occurred at a differential of over 150 basis points. Regarding the watchlist, he mentioned the Stoughton asset strategy and the Landmark Hospitals bankruptcy, confirming the tenant remains current on all rent obligations.