Yahoo Finance Iron Mountain Inc (IRM) (Q1 2024) Earnings Call Transcript Highlights: Record Revenues and ...
Quarterly Revenue: $1.48 billion, up 12% year-over-year
Adjusted EBITDA: $519 million, a 13% increase year-over-year
Adjusted EBITDA Margin: 35.1%, consistent year-on-year
AFFO (Adjusted Funds From Operations): $324 million, or $1.10 per share
Global RIM Revenue: $1.21 billion, up 7% year-over-year
Data Center Revenue: $144 million, a 28% increase year-on-year
ALM (Asset Life Cycle Management) Revenue: $84 million, up 103% year-on-year
Total Storage Revenue: $885 million, up $75 million year-on-year
Total Service Revenue: $592 million, up $88 million from last year
Capital Expenditure: $366 million for the quarter, with $337 million for growth and $29 million recurring
Net Lease Adjusted Leverage: 5.1x, the lowest in the past decade
Quarterly Dividend: $0.65 per share
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Iron Mountain Inc (NYSE:IRM) reported its highest ever quarterly revenue of $1.48 billion, a 12% year-over-year increase.
Adjusted EBITDA reached a new record of $519 million, demonstrating a 13% growth from the previous year.
Strong performance in the data center business, with significant leasing activity including a 24-megawatt contract with a global technology company.
Successful integration and performance of the recently acquired Regency Technologies, enhancing asset life cycle management capabilities.
Robust cross-selling activities leading to expanded customer relationships and increased service offerings across various sectors.
Negative Points
Challenges in revenue management timing impacted financial performance, with a shift in revenue management actions affecting quarterly results.
Despite strong leasing activity, the high demand necessitates further expansion, requiring significant capital investment in new data center constructions.
The integration of acquisitions such as Regency Technologies, while successful, involves complex processes that require careful management.
Currency fluctuations pose a risk, with the strengthening U.S. dollar expected to create a headwind of approximately $25 million to revenue and $10 million to adjusted EBITDA.
The competitive environment in government contracting requires long lead times and meticulous relationship management to secure contracts.
Q & A Highlights
Q: Within the storage business, organic revenue growth stepped to 7.5% in the quarter compared to about 10.5% in 4Q. Can you talk a little bit about what you're seeing with your revenue management strategy and your latest traction with price realization in the quarter and expectations for the remainder of the year? A: (William L. Meaney - President, CEO & Director) We're very pleased with our storage, both in terms of records management and the data center side. We've never stored more documents than we do today. In terms of pricing, as we go through the year, that ramps up. Barry, you might want to add a little bit more color to it?(Barry A. Hytinen - Executive VP & CFO) The timing of revenue management actions year-on-year shifted a bit in Q1. Last year, we had more actions in place at the beginning of the year. This year, we're back to our normal cadence. Storage rental revenue growth is ahead of our expectations, and we delivered 7.5% total revenue growth in Global RIM, which is very well positioned.
Q: What is your expectation for RIM volumes for 2Q and the balance of the year? And then data center leasing guidance, is it still 100-megawatt? And maybe you could just talk about the pipeline for data center. A: (William L. Meaney - President, CEO & Director) In terms of volume, we continue to see that to be flat, slightly up. We don't see any change in that trend. The pipeline on data center is extremely strong. We guided 100 megawatts for the full year. We're 30 megawatts in the first quarter, and we have a very strong pipeline across the globe.(Barry A. Hytinen - Executive VP & CFO) We are forecasting for volume to be up second quarter versus the first quarter. And consistent to slightly up for the full year. We have never stored more physical volume than we are storing today.
Q: Maybe we could start just by disaggregating the ALM components between increased volume and improvement pricing? A: (Barry A. Hytinen - Executive VP & CFO) Total ALM revenue was $84 million. Regency Technologies contributed over $32 million of revenue. On an organic basis, ALM was up 25%, which was stronger than expected. Volume and price were both up, and we saw component pricing rising through the quarter with more of the increase late in the quarter.
Q: On data centers for some of your newer expansions where you might end up doing build-to-suits or single tenant. What are the unlevered yields now that you are kind of underwriting to what would be kind of a minimum level that you think the market will bear? A: (William L. Meaney - President, CEO & Director) Think of it as a couple of hundred basis points above the historical cash-on-cash return. So you're kind of looking at the 9 to 10 on hyperscale. The spreads are still positive in terms of the cost of finance, in terms of what we've gotten for cash-on-cash returns on the new leasing that we're doing.
Q: How do you think about your ability to sort of deliver on time, on budget within your data center business and maybe how that's benchmarked against your peer group? A: (William L. Meaney - President, CEO & Director) We're continuing to drive strong deployments across all of our campuses. We don't see any change in terms of our ability to both plan and execute that. Our customers' trust is a key component for them to decide who they're going to go to, is our ability to actually execute on time, on budget, which is managing also the supply chain.
Q: Just to follow back on the data center business. Obviously, you have a high-class problem with most of your footprint pretty leased up. So how should we think about future data center CapEx given the strong leasing in the quarter? A: (William L. Meaney - President, CEO & Director) From a capital standpoint, we're very much within our multiyear plan. In terms of the footprint, we feel very confident that we have in our pipeline to acquire more land that's in excess of the 100 megawatts for instance, that we guided this year. We feel really good about the land bank strategy that we have in terms of what we have in the acquisition pipeline for land over the next -- for the rest of the year that will be ahead of our leasing activity.(Barry A. Hytinen - Executive VP & CFO) We have multiple land parcels that we are in active negotiations with. We were looking at multiple sites. Importantly, that is embedded in our capital spending that we've been planning, to continue to add to the land bank kind of continuously year in and year out.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
