ALM Business Outlook
Q: How are ALM volumes and component prices impacting 2024 guidance?
A: Iron Mountain expects component prices to strengthen during the year, aligning with industry trends. In 2023, ALM delivered $177 million in revenue. For 2024 guidance at the midpoint, they're assuming $355 million in total ALM revenue, including $115 million from the Regency acquisition, bringing organic ALM revenue to $240 million. At the Q4 run rate, they would exceed $205 million, assuming no improvement in enterprise bookings or component pricing. They've assumed a modest pricing benefit on component pricing as the year progresses.

Data Center Expansion and Returns
Q: What are your targeted yields for data center investments, and can you accelerate leasing?
A: Returns on data center investments are improving, with pricing moving up 100–150 basis points ahead of interest rates. Iron Mountain is achieving higher returns despite higher interest rates. They have a fully funded plan with no shortage of capital and can potentially do more than their current 100-megawatt leasing guidance. The RIM business, with over 70% gross margins, generates substantial cash, providing deeper pockets than pure-play data center players. Their leverage target range and EBITDA growth (over $230 million at the midpoint) give them significant capacity to invest in data center development while maintaining strong guidance.

RIM Revenue Growth and Pricing
Q: How did pricing impact RIM revenue growth, and what's expected for 2024?
A: Global RIM storage rental revenue grew over 8% organically in Q4 and about 8.5% for the full year, driven by positive volume trends, good mix, and revenue management. Revenue management includes value-added services, contributing to strong growth. For 2024, the guidance embeds about 6% growth at the midpoint for Global RIM, with expectations of continued positive trends in services and additional revenue management actions.

Data Center Pipeline and Pricing Trends
Q: What's your outlook for RIM volumes and data center pricing in 2024?
A: Physical volume for RIM is expected to be slightly up for both Q1 and the full year, with growth driven by services and revenue management. Data center mark-to-market trends have been positive over the last five to six quarters, and Iron Mountain continues to expect them to trend upward. Colocation space is experiencing even higher pricing trends.

Dividend Payout Ratio and Potential Increase
Q: Will you raise the dividend now that the payout ratio is below 65%?
A: Iron Mountain maintains a target payout ratio in the low 60% range (60–65%) and is currently trending within that range. While the decision lies with the Board, the company acknowledges that, mathematically, they are approaching another dividend increase in the not-too-distant future.

Matterhorn Sales Cycle and Growth
Q: How is the Matterhorn initiative progressing, and what's the sales cycle like?
A: Sales cycles for Matterhorn are longer due to its solution-oriented nature. However, more services are recurring or multiyear projects, allowing continued momentum and growth. Approximately 30–40% of revenue is now truly recurring or from long multiyear projects. The cross-selling opportunity is substantial, with over 200,000 clients, most with relationships measured in decades. Cross-selling efforts expanded significantly year-on-year, and Iron Mountain is ahead of targets.

Gross Margin Changes
Q: Why did storage gross margins decline while services margins improved?
A: Services margins improved due to favorable mix and productivity gains, with some lower-margin deals shifting into Q1. Storage gross margin includes all storage businesses, and while data center gross margins expanded sequentially and year-on-year, they are lower than records management margins. The growth in data center revenue (up 35% year-on-year in the quarter) affected overall storage gross margin due to mix. Increased data center power costs, as clients draw more power, also impact storage costs.

Regency Acquisition Synergies
Q: What early synergies are you seeing from the Regency acquisition?
A: Iron Mountain is excited about Regency's leadership team and capacity. Regency brings a strong federal and local government customer portfolio and expertise in end-user devices. There is ongoing collaboration to expand services using Iron Mountain's extensive resources. The combination broadens their reach and ability to serve clients quickly, with considerable capacity for processing.

Retention Rates and Volume Growth
Q: What drove the increase in volumes despite retention rates slipping slightly?
A: Retention rates remain in line with historical trends, with minor quarter-to-quarter variances. Iron Mountain is pleased with retention and customer satisfaction scores. Volume growth reflects the commercial team's success in winning new business, contributing to strong storage revenue growth and acceleration.