Iron Mountain Aktie

Jon Atkin, RBC Capital Markets, I cover the communications infrastructure sector. And pleased to have Iron Mountain, CEO and CFO with us. So Bill Meaney and Barry Hytinen, welcome.

Thanks.

Thank you, Jon.

So we're going to hit on data center, ALM and some corporate topics, capital allocation. Maybe starting with data centers. The energization pipeline declined from roughly 450 megawatts to 325 over the past year, as you leased capacity. And at the current leasing pace, the pipeline could substantially shrink within the next 12 to 18 months. So how are you thinking about the cadence and scale of land and power replenishment needed to sustain a 100-plus megawatts of annual leasing beyond next year?

Okay. Well, thanks, Jon. Maybe I'll start with that one. So I think -- so first, we're really happy with the leasing momentum that the business has built since January this year. As you noted that when we got on the Q2 call at the beginning of August, we had actually leased already something in the third quarter, 50 megawatts in Mumbai, which brings that land bank down to the 325 that gets energized over in the next 18 to 24 months that's not leased yet or is leasable.

So first of all, we feel really good about that, right, over the next 18 to 24 months to have that much energized and permitted -- fully permitted land available to talk to our customers about. The pipeline that we see across those assets is both wide and deep. So we feel really good about the momentum that the business is building over the next period.

Then, your question was really what's beyond that? Well, beyond that is if we think about it as a company, we think about maintaining that kind of free board, if you remember, kind of the 300-plus megawatts over an 18- to 24-month rolling basis. And if we go to the next period out, we have another 300 megawatts plus on additional land that is permitted and is committed to be energized by the utilities after that, 200 of which, I should say, is additional capacity coming online in Manassas. So if I look forward the next 36 to 48 months, we feel really good. And that's not to say that we are continuing to build to our land bank.

And in terms of regions or markets, what's your sense of utility delivering pipelines, lengthening, shrinking? Is it any unexpected developments that you're sensing?

Well, I would say, both in North America and in Europe, they're definitely lengthening. But that being said, the land that we talked about when we talked about energized, that's where we already have the power that's committed. But that's why we're going out even further when we're actually acquiring land for the next 24 months after that. And I think those places have become constrained in terms of the amount of capacity in the United States. Quite frankly, for decades, we relied on efficiency to take care of economic growth, and we didn't really build a lot of transmission or generating capacity. And now we see that there we're making up for kind of last time or kind of lost time or kind of past sins.

Europe has a similar dynamic. It's also a little bit more complicated in Europe because of trying to balance the renewables. We have a data center campus, obviously, in Madrid. I'm happy to say that function perfectly during the brownout in the last summer, but that was really trying to balance the increase of renewables into the grid.

But then we go to India, and where we just leased over 50 megawatts is I can't have a meeting with a Chief Minister or one of their deputies in one of the states in India where they say, how much power do you need? How much land do you need? We want our state to be the largest data center market in India. So in India, we get a lot of support at every level to grow the business.

And then just kind of the pie chart of demand, and that can fluctuate between enterprise, hyperscale, social networking, AI start-ups. But what are you sort of seeing and expecting over the next several quarters? And then what's your calculus around underwriting deals with AI start-ups essentially?

Maybe I'll start with the first bit, and I'll let Barry talk about how we think about credit risk in terms of people that we lease to. I think in terms of where we see the demand is that -- and I think we talked about this last year when we were here is that Iron Mountain at least to date, has not played in the large language model campuses. So our capacity -- historically, it continues to be focused on what I would call cloud build-out and now inference, right, where they're actually going to run the models. And we still see that the top hyperscalers are, by far, our primary customers for our leasing, over 90% of our leasing activity is to the usual suspects that you think are the largest and the most secure credit risk of the cloud providers and AI providers into the infrastructure across the globe. And those are typically 10- to 15-year leases.

But Barry, you might want to talk about some of the neoclouds and some of the other customers.

Yes. So Jon, and thanks again for having us here. I would say that the pipeline is very robust, as Bill is mentioning. And we have done a lot of repeat business, as you know, with the major cloud hyperscalers and I expect that the vast majority of our business going forward will be continuing with those very high investment-grade type clients that we've become a clear partner to over many years now.

As it relates to smaller clients or new upstarts, et cetera, we like all of our customers, of course. But I would say that it comes down to economics. And we really like the long-duration leases with the major high-profile cloud hyperscalers, the 10, 15 years or longer that Bill was just alluding to. And we've been writing deals for the last few years in at cash-on-cash unlevered returns of like 10%, 11%, 12%, something of that nature.

And we certainly get inquiries from other customers like neoclouds and others. And to date, our business with those -- that portfolio of clients has been quite small. It's 5% or so of our portfolio. And that's partly because if you look at what we've had available, we've generally been leasing it to the largest players in the industry, Jon. And so it hasn't -- you even mentioned enterprise.

Look, a few years ago, 5, 6 years ago, Bill and I had a plan with Mark, our Head of Data Center around, okay, this asset is going to be a colo site for enterprise, that one as well, that one as well. And none of those 3 assets I was just referring to ended up that way because we had the opportunity to fully lease them to single tenants for a much longer duration. So that's kind of the continued plan. And in light of with the pipeline, that's what I expect it to continue to look like, Jon.

So we had a hyperscale on one of the earlier panels talked about their topology and kind of the rigid AZ architecture is morphing into something that can be a bit less stringent, still need to be relatively close to GDP centers, but doesn't have to be quite where it used. And then there's remote locations. So as you think about your growth into new markets, whether it's domestically or internationally, greenfield JVs like with Web Werks or M&A, what does the landscape look like and your appetite to allocate capital there versus, say, ALM or other segments?

Maybe I'll start kind of where we're looking and then maybe Barry can talk about how we think about the capital allocation across the portfolio, which might be a good segue to talk about ALM a little bit.

But I think that, to your point, is either lucky or we're clever, is that if you think about we were the first to move to Manassas, where people are saying, "Well, that's not Ashburn." And now Manassas is very much or Prince William County is very much -- considered people thought it was in the U.K., we went to Prince William County, but now they realized that it's is just down the road from Ashburn. And then Richmond, almost the same thing. We built conviction around Richmond, about 3 or 4 years ago, we started looking at maybe 5 years ago. And that's turned out to be a very good asset, where people are starting to embrace some of those areas. And I think given the scarcity of powered and permitted land, I think people are opening the aperture.

That being said, is the key markets are the key markets. So we still look when we kind of, I would say, go out of one of those areas where we have line of sight that it can be kind of a Tier 1 or close to Tier 1 data center market because that's where our customers first want to go, especially for cloud and inference build-out, which is where our focus is. And then more broadly internationally, so we like India a lot, right? We like a number of the key -- I would say, the FLAP markets plus Madrid in Europe a lot. I think those will continue to be there. And there is strong demand, both from corporates, from cloud providers as well as the government in the EU on trying to build more data center capacity to catch up on what they feel is they're behind on AI.

So I think across the market in terms of joint ventures, as you said, we started off in India with a joint venture, but that was really because we wanted a partner that we felt comfortable with that could help us navigate the Indian market, especially when it was acquiring land. And we actually had a path to take that to majority, which we did quite quickly by just putting in all the capital for the growth. And then eventually, we bought them out.

And then in the Middle East, we had a different approach is that the Middle East is more than one country. So we looked for an operator that could really work with us across the region and it's someone that kind of understood foreign capital like ourselves. And so Ooredoo, which is the telecom operator, which is controlled by QIA. I mean, QIA is a very sophisticated global investor. They understand how people like us think and they understand how to have a partnership. And I was speaking to the CEO of Ooredoo just last week, and that partnership is working really well. He's getting a lot of value that we're building a minority, but a footprint across the Middle East, which made a lot of sense for us.

Yes. And Jon, from a capital allocation standpoint, the first thing to note is, other than data center, the vast majority of our business grows with very limited CapEx. And our core physical storage business, which continues to grow both on an organic volume basis as well as dollar value, and we've never stored more physical volume than we're storing right now, Jon, for clients is it just generates a tremendous amount of cash flow. And we are utilizing that cash flow together with what I think is a pretty conservative or prudent level of leverage, which is just under 5 turns currently. To put that in perspective, 7 years ago, we were cresting 6x and we're now at about 4.8.

And so with 5 turns of leverage on the incremental EBITDA we've been generating each year together with the cash generation from the business because we have actual retained cash flow from our core business, we can fully fund our build-out. And so generally speaking, we've got a digital business that's growing teens to 20%, and it is not particularly capital intense. We've got our data center business, which obviously is capital intensive, somewhere between, let's say, $9 million to $12 million or $13 million a megawatt to build out, but with very good returns, and very good cash generation with excellent clients.

And then we have our ALM business that you mentioned. And in the ALM business, the asset life cycle management, for those people that are not as familiar with that part of our business, this is where we are helping clients with IT gear as it either reaches obsolescence or it's time to refresh or renew it. And so in that business, we are addressing a massive total addressable market. It is a $35 billion annual TAM. And of that, 75% of it is in what we call the enterprise side. So think corporate clients, Fortune 100, Fortune 1000, that sort of thing, whereby they have gear that is consistently going obsolete or time to refresh every year, every quarter, year in, year out.

And so what we do in that case is it's largely a fee-for-service, whereby we are building a worldwide capability to serve clients in a way that they haven't historically been served. Today, that market is extraordinarily fragmented with very significant large number of small mom-and-pop kind of founder-led IT asset disposition vendors that service very large corporates and on a regional basis. And the market is -- that's just how the market looks.

Today, what we're doing is we're building a worldwide capability to service a client. And when you talk to really large corporates, they are very focused on wanting to have this service provided based on chain of custody, consistent process, trust, privacy, security. They recognize and increasingly so that anything that's been written to can turn into a liability, because you don't want a hard drive with confidential information or personally identifiable information just getting out there. And so having a company of wherewithal of Iron Mountain, I think is an extremely compelling proposition. So that's a business, just to give you a framework of growth.

In 2021, we did about $30 million of business in enterprise asset life cycle management. This year, we'll do $600 million. And that business is growing both organically and inorganically at a very high rate, and we think we're just getting started there. The cross-sell is very well off of our core, where we have 245,000 clients. Most of them standardized with us on our records business decades ago literally. And so we're working to cross-sell ALM services to them.

The other part of our asset life cycle management business is in hyperscale data center decommissioning. And here, what we're doing is helping the largest cloud hyperscalers, many of whom are tenants of ours in our data center leasing business with the decommissioning of servers inside their and third-party data centers. And so on average, we find that cloud hyperscalers are refreshing that gear about every 5 years, plus or minus a little bit. And they're refreshing for different reasons than on the corporate side. They're doing it because they can get better compute or better power efficiency with new generations of technology that have come along since they installed those old servers.

So those servers that come out, they have residual value left in there. And so what we and a few other players do for them is we'll take that gear in, we'll wipe it and give them a clear certification that we've sanitized anything that's been written to. And then we'll physically disassemble the server and sell the gear off in a revenue share model, which we can talk about further. But this part of the business is also growing quite rapidly, because you think about what are we doing, we're working with clients that are refreshing data center infrastructure. And as we all know, data centers have been growing quite rapidly over the last, let's say, decade. And as that continues to refresh, there's more and more gear.

To give you a sense, the addressable market for hyperscale data center, we estimate is about $3.5 billion based on last year's number. And just based on the growth of data centers and what will refresh over the next few years, we estimate that the TAM for that piece of the business will double to $7 billion in the next 4 years. So it's a huge growth area. And while we've been acquiring on the enterprise side, we're generally allocating a relatively small amount of capital to that part of the business, Jon, because it's not a particularly capital intense. As we find new deals, we will acquire, but we've been generally buying in between 5 and 7.5x trailing EBITDA, synergizing those down very rapidly.

We've done, I think, 7 deals in the last 3 years, and all of them have been very significant successes. And as we find more targets to acquire, we are happy to do that. And in every case, it's been founder-led businesses that we've acquired. We've convinced the founders to come over and work for us part of an earn-out process and all of them are still working for us. So it's just a super interesting part of our business that is growing rapidly alongside a rapidly growing data center and digital business.

I've got one more question, maybe kind of putting it all in the mix here. You've got ALM, data centers, digital solutions, obviously, the core business. And as the mix maybe approaches more 50-50 for your growth businesses, I don't want to say the core business isn't growing, but as that profile emerges, they have different margin profiles. So how would you kind of help us think about the next several years? And what are the puts and takes around margins given that each of your segments has a different profile?

So first, if you take a step back, is Barry and I have been consistent both 5 years ago and today that when we embarked on this -- the growth strategy, we said that we could actually deliver roughly 10% plus AFFO per share growth. And we've done that. And we said that -- and my contacts are pretty good, so I can see pretty far ahead is that we continue to see 10% plus AFFO per share growth. And of course, last quarter, so far this year, we've done a lot better than that. But from an underwriting standpoint, we see that capability.

So we start there, right? And because we think we're a total TAM for all our products and services of $175 billion, shame on us if we don't continue approaching $8 billion in sales today, but we will continue to drive growth with that in mind. So when we look at capital allocation across the businesses, and you're right to point out they have different margins. They also have different investment profiles in terms of how much capital it takes or fuel that you need to put in it. So some things you can grow much faster with very little fuel and other things to drive the growth, you have to put more fuel into it. We look at it through the capital allocation because we start with what we've underwritten to the community and what we're going to deliver as a team. So the 10%, so people should take away is that as we do that, that's kind of in the back of our mind.

So as we go, it gets easier. So what do I mean by it? It usually, when you have a story as you're compounding on a bigger base, it gets more difficult. In our case, when we started this, we had 15% of our sales in those growth portfolio, ALM, data center and digital. Today, it's 35%. And as you point out, it will be 50%. So at 35%, we're delivering 700 basis points of consolidated growth, and that will just build. So the tailwinds of the business become stronger.

So the last thing I would just kind of leave you with is that if you think about the story that we're underwriting, if I said to you, there's a company out there that has consistently driven 10% AFFO per share growth that drives 10% dividend -- annual dividend growth and maintains leverage flat to slightly down, what would you say the dividend yield of that stock should be today? And I think it's probably more like 1% or 2%. And today, we're at 3%.

So Barry and I feel that we have a financial model that allows us to do that without using equity, and we're generating the cash and the track record will speak to itself and that we'll continue to drive those kind of shareholder returns.

Thanks very much for your time.

Thanks for having us, Jon.

Thanks.

Okay. Let's go ahead and get started. Good morning, everyone, and welcome. I am George Tong. I cover Business and Information Services here at Goldman. I'm very pleased to be joined by Barry Hytinen, CFO of Iron Mountain. Barry, thank you for joining us here at the 2026 Communacopia and Technology Conference.

Thank you, George. It's great to be here.

Okay, Barry. So let's start at a high level. Iron Mountain has evolved over the years from a legacy traditional physical storage company into a broader platform that encompasses data centers, asset lifecycle management, digital solutions. Can you talk about how these businesses reinforce one another and where you're seeing the most cross-selling opportunity today?

Yes. So thanks for that, George. We are an interesting company for several reasons, and 1 of them is our client base. We have 245,000 business-to-business clients. And we operate with 95% or more of the Fortune 1000 as clients. And most of those have standardized with us in record management decades ago. And over the years, Bill, our CEO and the team, they started looking around for where they could put investment dollars behind things that would be natural cross-sell opportunities of that large client base to continue to expand our share of wallet with those clients.

And if you talk about like if you look at our asset lifecycle management business, which is really 2 distinct businesses in there. We kind of even run them separately. There's the hyperscale data center decommissioning business. And then there's the enterprise business, which is sort of like corporate clients where they might -- they would be having a continuous flow of laptops that need to be refreshed or go obsolete or printers, screens, what have you. That client base cross-sells very well off the core records client base because the vast majority of our largest clients on the record side are big corporates, Fortune 1000.

And similarly, those clients have a very distinct need that they're currently having to fulfill through many different small vendor relationships on the IT asset disposition side. And we're building out a global offering that they can't get from anybody else. And we think that, that -- when we talk to clients, we know that the reasons that they choose a vendor in that area are related to chain of custody, consistency of process, being able to be -- trust is a huge point, privacy, ability to securely wipe data off of gear.

And when you think about some of the reasons why they standardized with us on records, it's about chain of custody, it's about trust, it's about consistency of process and ability to serve on a continuous basis. So we think there's a huge cross-sell opportunity there. And it tends to be a land-and-expand model. So we might get a given flow on the ALM side with a corporate client and then expand over time into more and more regions or business lines, what have you in the various customers. So that's a huge reinforcing one.

In our Digital Solutions business, which is another fast-growing part of the company, it cross-sells off of our core very, very effectively as well because many times, those projects start with a digitization concept. And that digitization is something that traditionally we might be digitizing something for them that we're actually storing.

And then we can work that into our DXP platform, which is a huge grower for us right now, George. And it's -- the digital business is becoming more recurring revenue and more Software-as-a-Service with each passing year. In the most recent quarter, we grew -- the team grew 20% there. And we have some very distinct interesting government wins that have happened in that business as well, again, reinforcing for existing clients.

And then in our data center business, where we've been growing most significantly over the last few years is on hyperscale data center clients, where we are a core partner to, call it, a handful of the largest hyperscalers out there. And that reinforces and cross-sells very well with the hyperscale ALM decommissioning business. It's really the same client base, a lot of overlap there. And we think over time, as being the -- we can become the only partner to hyperscale data center operators that we develop, build, operate and can decommission for a hyperscale client, whatever they need, where they need it around the world. So it's a -- they may not all look like they go together, but they do all very effectively go together.

Now your data center ALM and digital solutions business, all those combined now represent about 35% of revenues, most recently grew more than 50% year-over-year. What would you say is the sustainable long-term organic growth potential for this growth portfolio and for Iron Mountain overall?

Yes. So for the growth portfolio, we've said for quite a few years that we expect that growth portfolio to grow north of 20% combined. And we continue to see that happening. And if I break that down into the parts, when you look at our data center business, our team has built a really nice data center business that's still got a ton of runway for growth. This year, we'll do a little over $1 billion of revenue in data center. And the team has already signed contracts for data centers that we need to build and energize, which would grow the business another, call it, 40% just with what we've already sold.

And then we've got a very significant amount of additional land that will energize over the next few years, George, to continue to grow the data center business. So there's a lot of growth in our data center. In the ALM business, which is a business that in 2021, I think we did $30 million of revenue. This year, we projected we do approximately $1 billion. And that business has been growing rapidly. And the TAM, the total addressable market for ALM is very large. It's $35 billion estimated.

Now of that, 75% is the corporate clients that I mentioned earlier. And that's an area where we're roughly $600 million of revenue today this year. And there's a huge runway there for additional cross-selling and growth, and we think that business will ultimately be measured in billions of dollars of revenue.

On the hyperscale side, specifically hyperscale data center decommissioning, the TAM last year was estimated to be $3.5 billion of that $35 billion is for hyperscale data center decommissioning. And if you look at the embedded platform of data centers that are out there that need to be continuously retrofit over with their gear changed out over the next few years, the estimate is for that TAM to double. That $3.5 billion will go to like $7 billion. And that is a tremendous amount of incremental opportunity for us to get market share and just growth just with the market.

And then if you look at our digital business, George, it's been growing high teens, most recent quarter, 20%. We have, I think, really tapped into and are benefiting from how important data is in the broader economy, especially with AI being an unlock to that data and being able to help clients monetize and become more efficient and more analytical as it relates to all the various content that we can help them manage through our digital solutions team.

Let's dive further into data centers. You have leased 110 megawatts year-to-date in your data center business. And you indicated that full year the leasing should well exceed the initial target of $100 million (sic) [ 100 megawatts ] plus. How would you characterize the pipeline today? And what are customers prioritizing in terms of current leasing discussions?

Okay. So we initially projected that we do 100 megawatts or more. And as you know, through July, we're already beyond that target. And we did say we expect to be meaningfully beyond it. So why do we see that happening? Well, a couple of things. One, we've got a lot of megawatts that are energizing over the next 18 to 24 months that is not yet leased.

So through July -- post July, we had 325 megawatts that will energize over the next 18 to 24 months that we can lease. So those are almost exclusively in Tier 1 markets, things like Virginia and parts of Europe and India where we leased a lot of megawatts in July, 51-megawatt lease in Mumbai. So there's -- we have very good assets to lease in locations that are very important to the major hyperscalers who have been our -- historically, our key clients.

And we've got a track record of producing and being able to build on time, on budget for those clients and then service them very, very well. And when we look at the actual pipeline, it is very strong, as we mentioned on the last call. We have got a deeper pipeline than we've historically had, and we have multiple parties interested in each one of those buildings that I was just -- would be buildings that I was just alluding to.

So I would say, George, we feel very good about our ability to lease over the next few periods. I would note that hyperscale leasing, as we've said before, it can be kind of lumpy in nature because it's a full building, for example. And in some cases, we are talking to clients about a portion of a campus, and then we have other clients who are looking at an entirety of a campus. So we've got -- we've got a lot of pipeline there at very good returns, and we expect to lease a lot of megawatts over the next few quarters.

On the topic of megawatts that are going to be energized, we got 325 coming over the next 24 months, 18 to 24 months. How much of that capacity is already leased or in advanced discussions? And what would you say is the typical time line from energization to actual revenue commencement?

Okay. So all of that 325 you were just referencing is not yet leased. None of it is leased. So all of that is incremental to our P&L, so to speak, going forward. Hence, my point that we're going to lease a lot of megawatts over the next year or 2. The thing to know about conversion to revenue is generally speaking, we're not a speculative biller. So we're going to commence the construction once we've got a pre-lease for those assets.

And the average pre-lease with a large hyperscale tenant is running 10, 15 years of duration with good cash-on-cash unlevered returns. And we can -- we're generally seeing our clients lease 12 to 18 months before delivery. The nice thing about that, George, is that we can, generally speaking, build a data center in 9 to 10 months in most of the geographies.

And we have long lead time equipment already on order to be able to do that, such that once we get the pre-lease, we will generally be able to construct the asset in advance of the energization and marry that up right so that we're delivering it when the energy is there and you don't have any sort of situation where you're carrying an asset that's not performing. So the conversion to revenue income is quite rapid.

Got it. If you look at recent leases in key markets like London, Amsterdam, Mumbai, a lot of it was driven by AI inference demand. What does an inference-oriented deployment require from a data center operator?

Yes. So in our situation in almost all of our leases, they're either for core cloud or inference, as you mentioned. And more and more of the pipeline is becoming AI-oriented inference. And so what -- the general difference is they want more density, and they want traditionally the availability to do more liquid cooling. And so that does increase the price per megawatt to build, but that also increases the relative price that we're getting in terms of -- for the lease. So we're -- it's a format that we built repeatedly and continue to see growth of significance.

Yes, yes. Power is still today one of the main principal constraints of data center development. How confident are you in the power delivery schedule that's supporting this 325 energization schedule? And where do you see the greatest execution risk?

Yes. So we feel very good about our energization schedule. And our teams deal with the various utilities that we're working with on a regular basis, like every week. And frankly, if you look at just what we have energizing over the next 18, 24, even -- say, 18, 24 months in the next couple of years beyond that, it's with utilities that we really know very well because we've been operating, for example, in Virginia with Dominion for years and years now.

And they are the key utility for both the Richmond and the Manassas market. And we've previously been under deposit with them for certain long lead time elements that they need to build out the grid to support our future data center sites. And so we feel very good about how that's progressing. We are in communication with them as it relates to their lead times and their timetables in terms of the scheduling.

Similarly, we see -- we have relationships in Mumbai, for example, where we're building there as well and in places like Madrid. So we are in -- we're not having to spread ourselves too thin, George, because when you look at where we're going to -- where we have megawatts to sell and energize over the next few quarters, it's in very specific markets where we know the utilities well. I feel highly confident in our ability to energize.

In terms of other elements, look, there -- you said it a moment ago that power is the biggest governor. I would agree with that as an industry. But there's also a lot of long lead time equipment that one needs when building out a data center. So thinking about generators and backup generator, you could be talking 2, 3 year or beyond lead times, cooling technologies and things of that nature. Luckily, as being a major operator and one that's kind of looked out, we've got all of that on schedule, and we are in a very routine contact with our key suppliers. And as a business that's growing quite rapidly, we've developed, I'd say, very, very good relationships with those key vendors for the long lead time stuff.

So data center renewal spreads reached 12% on a cash basis in the second quarter. How sustainable would you say the current pricing environment is? And particularly as you look at customers that are pursuing these larger AI-related deployments and given all the significant power development, how do you see the overall return and pricing environment evolving?

Okay. So I'm going to break that apart because in our business, the renewal spreads is really as it relates to our enterprise colo book, which is ballpark 1/3 of what we're operating these days. And that -- the mark-to-market and renewal spreads on that part of the business has been very strong for quite a few years now. I think like double-digit to even 20% compounded for like the last 3 or so years. But that's really just a factor of what's going on in the given markets where we have space, George, because if you look at our relative churn, it's quite low.

It's been running, I think last year, we were at sub-3% and kind of like 2% or so through the first 9 months, 2.5%, quite low. And so that speaks to the fact that it's not like we're pricing beyond what's in market. The alternative for our colo clients, which renew about every year on average is what else is out there. And frankly, that's the market. As it relates to renewals on our larger format leases, the fact is we're still a very young operator.

If you look at our -- we didn't get our first large single-tenant lease on the hyperscale side until about 2020, 2021, and that lease didn't even commence until 2023. And it was a decade of duration. So if you look at our lease expiration table, what you'd find is we've got a tremendous amount of megawatts that don't renew for in excess of 5, 6 years. In fact, our weighted average lease expiration across the entire portfolio is north of 10 years, and that includes the colo book, which renews every year with that low churn.

So I think in the future, to project out some, all of those client contracts that I was just referring to on the hyperscale side have renewal options for them. And my guess is in light of the fact that energy continues to constrain and will likely continue to be a constraint for quite a long time, it's going to be very advantageous for those clients to renew in the future. But you're talking about 5 to 10 years from now or longer.

Right. Okay. Let's switch gears and talk a little bit about the ALM business. So in the second quarter, the asset lifecycle management business grew nearly 90% year-over-year. You mentioned revenue scaling to basically $1 billion for the year. How much of the recent growth acceleration would you say is being driven by customer adoption compared to, say, memory prices or project timing?

Okay. So again, breaking the business into the 2 parts, the way we manage it, you've got our enterprise or corporate side and then you've got the ALM data center, hyperscale data center decommissioning. That's where in that side and the hyperscale decommissioning side is where you've got a lot more exposure to memory. And in any given period, memory might be 50% or more of what we're decommissioning in terms of the value of the gear.

And to be sure, memory pricing has been up year-on-year. And depending upon the grade of memory because there's many different, if you will, SKUs of memory based on the manufacture of the memory or the relative size, speed, et cetera, pricing has been rising. Some prices have been, as I mentioned on the last call, depending upon SKU to SKU, you've got some that have been up as much as 30% in recent periods. You've got others that have been down some.

But what comes -- what really also needs to be in the calculus is the relative mix because as I mentioned on the last call, in the second quarter, I think some investors had expected pricing to be a really big benefit to us. And it was on some SKUs. But in total, we had relatively more DDR3 in the second quarter than we did in the first quarter when we had more DDR4. And DDR4 is at a relatively much higher price than DDR3 because it's a newer generation.

And so there is an element of like mix involved here. But look, I projected out going forward for this year that memory pricing would be basically pretty stable for the remainder of the year from where we exited the second quarter. And it's been probably stable to even slightly up since that period of time. But again, the mix is a big factor. On -- I will note that on the hyperscale data center decommissioning, that's generally a lower-margin business for us versus the enterprise side.

On the hyperscale side, you're talking a revenue share model where we might get 20% of whatever we sell the gear for and the rest goes back to the client. And so that's meant to cover our cost of decommissioning, fulfillment, shipping, et cetera. So that -- the margin structure on that business is more like low double digit to high teens, that kind of thing.

And -- but on the enterprise side, where it's much more fee-for-service, and we're dealing with older gear that clients generally, if you will, sweat the assets longer, it's more of a fee-for-service and the margins in there can be more like mid-20s to 30s. And that is the part of the business that we think inherently has -- will be the larger and longer period of growth in the ALM business for us over time. Not to say that the hyperscale business isn't growing rapidly, as you point out, it certainly is and can continue to in light of the TAM growth.

Yes. Okay. Let's talk a little bit about the records management business, both the physical and the digital solutions part. So the physical part has seen volumes be relatively stable for a long time now, flat to up. And you're seeing customer consolidation, you're seeing outsourcing opportunities. How durable would you say that volume growth profile is in that legacy physical records management business? And what could cause the growth to move above or below the current range, which is somewhere between 0 to 50 bps of growth?

Yes. So for people who have heard me over the years, I've been with the company now almost 7 years. I kind of keep saying the same thing about that part of the business, George. We love that business because it's very cash generative and it's super durable. We have been growing the volume, the physical volume in that business on an organic basis for many, many quarters now in a row. And really, it's years at this point, together with strong pricing.

So the last -- this year, last year, we were actualizing around 6% pricing benefit. And the volume is growing, albeit very slowly, like we've always said, we expect it to be slightly up, think like 20, 30, 40 basis points a year. And with that model, that business generates a tremendous amount of cash. And it speaks to the fact that how we're doing all that, how we're doing the pricing, the revenue management actions together with incremental volume is because we're giving our clients a really good value.

We continue to bring out services that they can't get from any other vendor in this place. There's plenty of competition. But we offer a worldwide solution for large corporates, and we've got a very consistent track record of doing this in a highly secure and effective way. And we make it very easy for them to do business with us. And so we expect that business to continue to be stable to slightly up on a volume basis for the foreseeable future, together with strong pricing. And as you know, there are some markets.

India is the one I talk about the most frequently because it is the largest opportunity for us where outsourcing is just really starting as it relates to records management. There's a huge opportunity for additional growth there. And the margins in India are very good as they are around our records business across the globe. So we think that can continue to grow at a mid-single-digit plus clip rate for a long period of time.

And then you started to ask a little bit about the digital solutions business. That's a business that is actualizing on an annual basis today at north of $600 million of revenue. You don't have to go back many years where it was like sub-$200 million. Back 5 or 6 years ago, it was principally a scanning business and very project-oriented, meaning we had to win business each year to keep going.

But now the team has successfully been winning more and more business that's recurring and that is multiyear in nature. So we start each year with a larger base of revenue generation. And we're getting into many more Software-as-a-Service deployments utilizing our DXP technology, which enables us to help clients with content that they have historically not been able to use essentially dark data. And so with various new AI tools together with our DXP platform, we think our digital business has got a lot of opportunity for additional growth, George.

Sticking with digital, how much opportunity do you think the new contract with the Treasury Department will contribute to revenues this year and next year? And how much of the growth will be driven by that versus traditional DXP deployments?

Yes. So that's a good size contract. And as many people have probably heard me talk about in the past, it was a complicated procurement situation over the prior year. But this year, now that we're kind of doing the work for the government, we expected to do -- at the beginning of the year, I said we'd probably do about $45 million of revenue. We were a touch ahead of our expectations in the first quarter on revenue, and we were a couple of $2 million, $3 million ahead in the second quarter.

And so we will probably exceed that level that was initially expecting. And we have noted multiple times that next year and for the years beyond, we expect to do at least $100 million of revenue on that business. Now the government did award the contract to 4 potential partners for that. We were the largest player, and I think we're doing much more business than any of the other players. As our service level agreements that we have with the government, we are doing in a very diligent way and meeting all of the requirements and then some that are under that contract because as you would imagine, the government is very sensitive to the confidentiality of that sort of work and the chain of custody and frankly, speed and quality and efficacy of the work. And our teams are doing a great job there.

If we got 100% of the theoretical volume that the government put out to bid, we would probably generate about $150 million of revenue in any given year, George. But our expectation was in light of just having multiple vendors, et cetera, we think we'll get the majority of the market share.

The -- one of the things that is a factor is, of course, both how many returns are coming in, how much correspondence there are with taxpayers, but of course, also how quickly the government outsources the business. And so that's one of the reasons why this year we anticipated like $45 million, as I mentioned, we're running a little ahead of that. And then ramping over the next year plus, as the government continues to essentially learn how to outsource what is something that they've always done internally.

Yes. Makes sense. I've got a couple of more questions, but I'm going to pause here to see if there are any questions from the group here. No. Okay. Let's move on to margins and cash flows. So the ALM business is a bit margin dilutive to overall company EBITDA margins. Can you talk a little bit about what your outlook is for consolidated margins over the next couple of years? And what factors could drive reported margins to expand?

Yes. So -- the way I usually explain this is a couple of things. If you look at our business, we have 5 or 6 distinct businesses that are -- that make up Iron Mountain. So there's the record management box business, which is our highest margin business, and it's doing very well. Then you've got Box services that those are professional services that go along with the box. You've got our digital business we were just talking about, our data center business and the 2 different ALM businesses, the hyperscale and the enterprise.

The enterprise margin, therefore, is the amalgamation of all of those together. And if -- as you pointed out earlier, the ALM business is lower margin. The enterprise business, as I mentioned earlier, is more like 20 to 30s, whereas the hyperscale is lower than that. If those businesses are growing faster than the rest, then naturally, that's just an obvious headwind to the actual enterprise margin. But the thing that's really important to note is in each one of those businesses I just highlighted, they are all increasing their margin within their businesses. And they have the opportunity, and we see the ability over the next few years to continue to increase the margin across each one of those businesses. So then it just is a relative growth rate.

And when I think about our 2 biggest growth businesses in the growth portfolio you mentioned earlier, in one case, you got data center and you have the other, which is ALM. And they're both this year going to be a little -- right around $1 billion of revenue. They've both got huge opportunities for growth. And data center is an accretive margin for us. So we're doing like low 50s EBITDA margins in data center today. So as that continues to grow and lift its margin and as ALM grows and we lift the margin within ALM, there's a lot of opportunity here, George.

And the other thing is, while you point out ALM is kind of a dilutive margin to the total, I'll just say it's all incremental to the company. It's not like it's taking from any other part of the business. That is a truly incremental business for us, and it's a franchise, which we think can be measured, as I said earlier, in billions with an increasing margin. And so we're feeling really good. And furthermore, the ROIC on that business is actually quite high, relative because there's just not a lot of capital required to grow it.

On the topic of capital requirements, a lot of the CapEx spend today is being deployed to data centers. As you think about future growth investments, including data centers and other areas of the business, how -- what are your expectations for cash flow generation, cash flow conversion? How should that evolve from where it is today?

Yes. So we -- we're kind of an operating company inside of a REIT structure, as you know. And unlike a lot of REITs, we generate a tremendous amount of cash off of our core businesses, which we then can use to fund a portion of our growth. So if you look at it, George, I would say our cash after discretionary -- cash available for discretionary items is growing appreciably. I think like hundreds of millions each year over the next few. And so that means that we can continue to build out our data center portfolio with relatively less debt each year.

We have a dividend and our framework for our dividend is that we're going to pay out at a low 60s percent of AFFO. And if you look at that as a result of how fast we've been growing AFFO over the last few years, we've grown the dividend, call it, 10% each of the last few years. And with continued very positive outlooks for AFFO, you should anticipate the dividend will continue to rise. But that works very well with the growth of the free cash flow off the core, together with the fact that while we've got a lot of megawatts to build out, as I said, we're not a speculative builder. So we're going to build those as they energize with -- hopefully with pre-leased contracts.

And as a result, the incremental call on the capital is pretty consistent in here as it relates to how much we're spending on data centers over the next couple of years, subject to additional land purchases. So we think we can continue to run the business at leverage levels right in here, say, we're a little below 5x, which is our target midpoint of our range and generate increasing levels of free cash flow to invest in the growth.

Wonderful. We're just about out of time. Barry, thank you for the great discussion.

Thanks, George.

Good morning, and welcome to the Iron Mountain Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mark Rupe, Senior Vice President of Investor Relations. Please go ahead.

Thanks, Bailey. Good morning, everyone, and welcome to our second quarter 2026 earnings conference call. Joining us today are Bill Meaney, our President and Chief Executive Officer; and Barry Hytinen, our Executive Vice President and Chief Financial Officer. .

After our prepared remarks, we'll open the line for Q&A. Today's call will include forward-looking statements, which are subject to risks and uncertainties. For a discussion of the major risk factors that could cause our actual results to differ from these statements, please refer to today's earnings materials, including the safe harbor language on Slide 2 of the earnings presentation and our annual and quarterly reports on Form 10-K and 10-Q. Each of these items as well as reconciliations of non-GAAP financial measures referenced during this call can be found on our Investor Relations website.

With that, I'll turn the call over to Bill.

Thank you, Mark, and thank you all for joining us today to discuss our second quarter results. As you saw in this morning's release, our team delivered another outstanding performance with record-breaking second quarter results exceeding our expectations across all metrics, driven by strong execution of our growth plans.

Revenue increased 19% year-over-year, including organic growth of 17% and adjusted EBITDA and AFFO grew 16% and 17%, respectively. The foundation of our ongoing success continues to be driven by exceptional customer stewardship, combined with the strength in our traditional records business and the expanding portfolio of growth businesses.

Our data center, ALM and digital businesses collectively grew more than 50% in the quarter or 14 percentage points on a consolidated basis. These 3 growth businesses accounted for 35% of our second quarter revenue, an increase of 750 basis points as compared to last year. This impressive growth is further strengthened by the consistent mid-single-digit growth that our highly recurring cash-generative physical storage business continues to deliver.

Let me now share some of the highlights from the quarter and the confidence this provides as we expect to compound double-digit revenue and earnings growth well into the future. Our data center business continues to deliver strong growth, up 39% in the quarter with an equally promising outlook. We leased [ 30 ] megawatts in the second quarter and another 75 megawatts in July, bringing our year-to-date leasing to 110 megawatts. With strong industry demand and pipeline, we are well positioned with approximately 325 megawatts of leasable capacity expected to energize over the next 24 months.

We delivered another outstanding performance in our asset life cycle management business with second quarter growth of 88%. The ALM represents a multibillion-dollar opportunity for Iron Mountain. And as an industry leader, we are uniquely positioned to capture it on a global basis. By providing a compelling and differentiated value proposition, we continue to drive new customer wins and expand penetration within our existing base.

Let me provide a framework for our ALM strategy, which consists of 2 principal channels, enterprise and hyperscale decommissioning. The enterprise channel offers the most consistent and strong growth potential. It benefits from a large, highly fragmented addressable market, representing 75% of the $35 billion ALM market. Much like our Records Management business, we are well positioned to serve a global customer base, capitalizing on our established brand, deep client relationships and logistics infrastructure aimed at this rapidly growing market.

The enterprise channel also has several structural advantages, including client activity tends to be consistent and recurring in nature. It drives the vast majority of our ALM profitability and we see strong operating leverage over the next several years, which will drive profitability and margins even higher and through our strong cross-sell opportunity into our 240,000 customers, we see sustainable growth of 25% or more annually for the foreseeable future.

Turning to the hyperscale decommissioning channel. This also represents a significant long-term growth opportunity supported by the rapid growth in renewal of data centers. In this hyperscale channel, we offer a complete solution, including decommissioning, remarketing and securely disposing equipment through our comprehensive global platform.

Our Digital Solutions business maintained its strong momentum, achieving record quarterly revenue in line with our expectations of continued double-digit organic growth. I am especially pleased with the traction we are seeing in DXP, our AI-powered agentic solutions platform. As this platform expands, the recurring nature of our digital business is now more than 45% of our revenue. This naturally helps underpin the long-term growth momentum of the business.

I am also proud that we continue to gain recognition by leading analyst firms. In Q2, Forrester recognized Iron Mountain is a top provider of document mining and analytics platforms positioning [ Incyte ] DXP as a top score for a genic AI functionality, data privacy, validation rules, globalization and platform breadth.

And lastly, from an operational perspective, we continue to execute very well, driving overall enterprise adjusted EBITDA growth of 16% in the quarter, which was ahead of our expectation. Based on this strong performance and continued momentum in our business, we are pleased to increase our full year financial outlook.

I now want to highlight a couple of notable recent recognitions that reinforce our strategic efforts. In June, we achieved portfolio-wide high trust R2 accreditation, which serves as the gold standard data security credential within heavily regulated industries. And more recently, Iron Mountain was recognized on the Wall Street Journal's Best Companies for the future list, capturing the #12 spot in the innovation category for S&P 500 companies. These accolades build directly upon our momentum from last quarter where we highlighted our FedRAMP high authorization in Google Partner of the Year recognition.

Now let me share some of the wins from the quarter that illustrate the strength of our synergistic business model and commercial success. In Records Management, in the U.S., we won a contract to deploy our smart sort solution to process 10 million files as part of a building relocation for a leading global financial institution. In Digital Solutions, we continue to build momentum as evidenced by the number and types of DXP deployments we are winning.

In the U.K., we secured a 3-year global managed services agreement with a leading fintech company to deliver intelligent intake management across 45 countries. DXP will digitize and process 500,000 inbound items annually using AI agents to classify content, enrich metadata and apply the appropriate governance rules.

Our real-time dashboards will provide greater operational visibility while strengthening compliance and controls across markets. In Australia, a long-standing financial services customer chose Iron Mountain to digitize 40 million images into DXP leveraging our policy center solution to automate records retention in destruction whilst ensuring robust governance through a paperless environment integrated into their technology ecosystem.

I'm also very pleased with the continued momentum in our government business with considerable new wins in this quarter and expanding deployments in our existing contracts, both in the U.S. and on a global basis. We had particularly strong bookings performance in Europe this quarter.

Now let me highlight some of our data center wins. We signed a 25-megawatt lease in July, fully leasing our London 3 assets. This came on the heels of the 10-megawatt lease we signed in Amsterdam. Both of these leases are a direct result of the large and expanding pipeline we have around AI inference.

Also in July, a major global hyperscaler leased 51 megawatts in Mumbai as part of a 10-year contract. India is quickly becoming a major hyperscale data center market and we are well positioned with another 100 megawatts of future development capacity.

Turning to our asset life cycle management business, we continue to successfully scale our global capabilities, broaden our customer base through cross-selling initiatives and deepen our penetration among existing customers. In the second quarter, we secured a multiyear global ALM program with a long-standing business services customer to manage their IT assets annually across North America, EMEA and APAC.

This is another example of a customer standardizing with Iron Mountain across the world and builds on other recent single vendor consolidation wins.

In Australia, we were awarded a 3-year agreement by a government department for the secured disposition of 100,000 IT assets annually. We won due to our proven scale, security standards and the strength of our local partnership. And in our ALM decommissioning business in Europe, thanks to our market-leading position and the global reach of our brand and capabilities, we were pleased to be selected by [indiscernible] Cloud customer to decommission and remarket tens of thousands of IT assets and conduct on-site shredding of drives. And in Canada, a leading financial institution selected Iron Mountain has their decommissioning partner across the country building on our existing exclusive partnership in the U.S.

In conclusion, as you heard today, our team is delivering very strong results across the business. And notwithstanding our success, we are still in the early phases of our long-term growth trajectory. This growth trajectory is underpinned by an ever-expanding revenue share from our rapidly expanding portfolio of growth businesses. This portfolio is already more than 30% of the consolidated revenue, supporting our ability to drive sustained double-digit top and bottom line consolidated growth well into the future.

I want to extend my sincere thanks to mountaineers across the world for their steadfast dedication to serving our more than 240,000 customers. I also especially wish to express my gratitude to our customers for allowing Iron Mountain to serve as the trusted guardian of your most important assets, helping you unlock value and enhance efficiency.

With that, I'll turn the call over to Barry.

Thanks, Bill, and thank you all for joining us to discuss our results. Our second quarter performance reflects another outstanding team effort. We delivered record results across the business, driven by the successful execution of our growth plans. Revenue of $2.03 billion was up $317 million year-on-year. This was approximately $65 million ahead of the projection we provided on our last call, driven principally by upside in our ALM hyperscale decommissioning business. .

As compared to last year, revenue increased 19% on a reported basis, 18% on a constant currency basis and 17% on an organic basis. While the change in FX rates contributed approximately $14 million in revenue year-on-year, I would like to note that this was slightly below what we had assumed in our outlook as the dollar strengthened following our last call.

Adjusted EBITDA of $727 million was a new record and increased $99 million or 16% year-on-year. This was above the $715 million projection we provided on our last call. This strong performance was driven by better-than-expected revenue growth and continued cost discipline across the business.

Our margin performance in the quarter reflects the team's outstanding growth in services revenue, which naturally drives a mix headwind. AFFO was $433 million, up $63 million. This represented an increase of 17% as compared to last year and AFFO on a per share basis was $1.44, up 16% to last year and was $0.04 ahead of the projection we provided on our last call.

Now turning to segment performance. In our Global RIM business, second quarter revenue of $1.4 billion was a quarterly record and grew $110 million as compared to last year. This marks the third quarter in a row during which our Global RIM business has delivered more than $100 million of year-on-year revenue growth. Segment growth was 8% on a reported basis and 7% on an organic basis. The consistent growth we continue to deliver is the result of strong performances in both our storage and services businesses.

Storage revenue growth was up 7% on a reported basis and up 5% on an organic basis. Global RIM service revenue grew 11% and was up 9% on an organic basis. This was driven by our Digital business, which grew more than 25% and continued strength in core services.

From a profitability perspective, Global RIM adjusted EBITDA increased $34 million to $621 million. This was an increase of 6% year-on-year with an adjusted EBITDA margin of 43%.

Turning to our Global Data Center business. We achieved revenue of $263 million in the second quarter, an increase of $73 million or 39% year-on-year, driven by lease commencements and positive pricing trends. In the second quarter, we signed 13 megawatts of new leases, including a 10-megawatt lease in Amsterdam and 3 megawatts in our Enterprise segment. We also commenced 25 megawatts and renewed 189 leases totaling 4 megawatts.

Renewal pricing was strong with spreads of 12% and 14% on a cash and GAAP basis, respectively. Second quarter Data Center adjusted EBITDA was $137 million, up $41 million year-on-year resulting in an adjusted EBITDA margin of 52.2%, up 140 basis points to last year. And on like-for-like power, our Data Center margin was up over 100 basis points sequentially from the first quarter.

Turning to Asset Life Cycle Management. Total ALM revenue was $288 million, an increase of $135 million or 88% year-on-year. On an organic basis, our team grew revenue by more than $127 million or 82%. This strong performance exceeded our projection by more than $45 million, driven by both our enterprise and hyperscale decommissioning channels.

Enterprise continued its strong trajectory, growing more than 60% organically through increased penetration of existing customers and the addition of new wins. Data center decommissioning revenue increased more than 100% year-on-year. This was driven partially by $30 million of timing benefit related to a couple of large projects that hyperscalers accelerated into the quarter versus their initial schedule.

From a profitability perspective, we drove solid improvement in margins, reflecting improved operating performance across the business as well as acquisition synergies. Let me now provide additional color on the price environment for memory and our updated outlook for ALM.

Memory prices continue to remain elevated as compared to last year. Relative to the first quarter, mix and pricing varied across memory components with some up and some down. In terms of our outlook, we are pleased to once again raise our ALM projection, and we now expect full year revenue to approach $1 billion. This outlook assumes strong growth on the enterprise side to continue in the second half of the year.

Consistent with our strategy to offer our clients a complete ALM solution across the world, we recently acquired Group ATF, which expands our capabilities and ALM offering in France and in Belgium. Now turning to cash flow on a consolidated basis. Year-to-date operating cash flow was $888 million, up $315 million from last year. This marks the best first half operating cash flow the company has ever achieved.

Free cash flow improved $441 million in the first half of 2026 as compared to the first half of 2025. This significant increase was driven principally by growth in our business, improved cash cycle and the conclusion of our [indiscernible] restructuring in 2025, which was $100 million in the first half of 2025 and 0 this year.

Turning to capital allocation. Our focus remains on investing in high-return opportunities that drive double-digit growth and growing our dividend while maintaining our strong balance sheet. Our Board of Directors declared our quarterly dividend of $0.864 per share to be paid in early October. On a trailing 4-quarter basis, our AFFO payout ratio is now 60%.

In terms of capital investments, in the second quarter, we invested $553 million of growth CapEx and $38 million of recurring CapEx.

Turning to the balance sheet. With strong EBITDA performance, we ended the quarter with net lease adjusted leverage of 4.8x remaining at the lowest level we've had on this metric since prior to the company's REIT conversion in 2014. During the quarter and aligned with our strategy, our team successfully issued a new $1.5 billion bond achieving a 6.25% fixed coupon maturing in 2035.

We are very pleased to have achieved a new milestone with this offering. It includes our first-ever investment-grade covenant package. We are gratified that debt investors continue to appreciate the strength of Iron Mountain's credit profile. I would like to thank our bondholders for their support of our growth initiatives.

And now turning to our outlook for the full year 2026. Based on our strong second quarter performance and positive outlook, we are increasing our financial guidance for the year. The updated guidance can be found on Slides 14 and 15 in our second quarter earnings presentation, which is available on our Investor Relations website.

We now expect total revenue to be within the range of $7.94 billion to $8.01 billion, which represents year-on-year growth of 16% at the midpoint. We now expect adjusted EBITDA to be within the range of $2.945 billion to $2.975 billion, which represents year-on-year growth of 15% at the midpoint. We expect AFFO to be within the range of $1.76 billion to $1.78 billion or $5.87 to $5.93 on a per share basis. At the midpoint, this represents 15% and 14% growth, respectively.

Now turning to the third quarter. We expect revenue of approximately $1.98 billion and adjusted EBITDA of approximately $745 million, both an increase of 13% to the third quarter of last year. We expect AFFO of approximately $440 million, an increase of 12% to last year or $1.47 per share. In light of the strength of the U.S. dollar since our last earnings call, let me provide some context on our updated outlook.

On the same FX rates as used at the time of our last guidance, our full year outlook at the midpoint represents an increase of $125 million for revenue with a $60 million increase in the second half, an increase of $25 million for adjusted EBITDA with a $12 million increase in the second half, an increase of $35 million for AFFO with a $20 million increase in the second half, an increase of $0.10 per AFFO per share with a $0.06 increase in the second half.

In conclusion, our team has delivered outstanding year-to-date results and our long-term growth opportunity remains very substantial. I want to express my thanks to our entire team for their focus and dedication to serving our customers and their deep commitment to Iron Mountain. And with that, operator, would you please open the line for Q&A.

[Operator Instructions] Our first question comes from Eric Luebchow with Wells Fargo.

Great to see some of the data center leasing come through in July in India and London. Maybe you can talk a little bit about what the pipeline looks like beyond July for the rest of the year. You've already exceeded the 100-megawatt target that you laid out since the beginning of the year. What are some of the top-of-mind campuses, whether it be Richmond or other places in Virginia, where you're seeing demand?

Thanks for the question. Yes, we're really pleased with the momentum that we're building in the data center leasing side as we kind of predicted with -- on the last call, we had 400 megawatts that was being energized over the next 24 months. As we sit here today, after the strong leasing that we've had in the first half of the year will include in July, we have 325 megawatts that remain will be energized in the next 24 months.

Obviously, we have a lot coming after that. But we feel really good about the pipeline that we have, which includes the Richmond campus, as you highlighted, but beyond Richmond, also including Europe and more in India. So really we feel really good about the momentum we're building. I mean obviously, the leasing at these -- for these large hyperscale deals is a little bit lumpy, but it's the assets we have are compelling and the pipeline that we have against those assets is super strong.

Our next question comes from George Tong with Goldman Sachs.

Sticking with the data center piece, acknowledging signings and leasings can be lumpy. Can you talk about the pipeline and how discussions with hyperscalers are currently progressing and what your latest leasing target is for full year 2026?

George. As we said in the last call, in terms of what we expect to happen in 2026 on the leasing side is we still say that we think we will meaningfully exceed obviously, our original guidance of 100 megawatts, which were already beyond. So I would say that we still feel very good that we'll meaningfully exceed that number.

I think that's really based on, to your point, on the pipeline that we have against the 325 megawatts, the amount of capacity that will be energized over the next 24 months. And a lot of that is -- I think I made a comment in my remarks, a lot of it is to do with building out of inference capacity for the hyperscale community and then also the expansion of not just hyperscale, but I would say a number of data center providers in India.

So the pipeline is strong and multiple against each of those assets, and I would expect that we will meaningfully exceed where we are sitting today by the end of the year. But these are large leases and tend to be lumpy in nature.

Yes. And George, I would just add that as we talked about publicly a few times, it is our intention to be more consistent with the rest of the industry and not necessarily be guiding to leasing on a given year. That's part of the reason why we've been sharing with the investment community our energization schedule because that, I think, to Bill's point about it being lumpy is a better indication of what the potential is, and frankly, the likelihood over that period of time because all of those megawatts that we have energizing over the next couple of years are in great markets. We have robust pipeline against that. .

In fact, we're even starting to build pipeline against the megawatts we have that energized after that period of time and having some very good conversations about that as you would expect, since a good amount of that additional megawatts is in Northern Virginia, which is, as you know, the #1 market in the world. So we feel really, really good about where we are, and I just echo Bill's point, like we're going to -- we're obviously going to meaningfully exceed our original target for the year. Thanks, George.

Our next question comes from Brendan Lynch with Barclays.

I wanted to follow up on Group ATS. Can you give us some details on the size of the acquisition, the operating synergies you anticipate with your existing European exposure and the opportunity to cross-sell your respective customer base.

Thanks, Brendan. Let me take the cross-sell and the commercial, and then I'll ask Barry to comment on ATF more in terms of the acquisition. So yes, I mean, it is consistent with our strategy to add to our platform. So we have, as you know, a very strong ALM platform in Europe as we do in most major geographies where we operate. But this particular acquisition will actually broaden and deepen our platform in basically key markets of Belgium and France. So we feel really good about that.

Obviously, there's a lot of synergies on that, and it gives us the ability to have more conversations with our customers. So -- and we're already starting to see the fruits of that in terms of customers that we've known for a long time in one part of our business, say, in Records Management or in the Digital business, is we're now able to have a broader conversation with them, including ALM. And you can see that in our ALM print this quarter, we are up 88% year-on-year in terms of ALM sales.

Brendan, a couple of more details on the group ATF deal. So we just closed it. It closed right at the end of July, I think technically August 1. And it's not a huge deal. I mean I think like high teens millions of revenue annually. So I think in the back half, you ought to be expecting something like $7 million of contribution in light of the timing of when we closed it and just the normal cadence of the business.

It's like a lot of these enterprise opportunities that we see out there. It's kind of a low 20% -- kind of low 20s EBITDA margin. and it is very consistent with our, if you will, algorithm for tuck-in acquisitions, kind of thinking that we paid in the 5 to 7x multiple, and we expect it to synergize well below 5x because as your question, no, there's a lot of synergy. And there's synergy both on the cost side as well as on the revenue side in terms of the additional cross-selling that Bill mentioned.

And just to give you a sense, so Group ATF, as I mentioned, it is quite well established in France and in Belgium. And as you probably know, France is 1 of the top ALM markets, both in the world as 1 of the very top markets in Europe. So we are very pleased to be able to support our clients in a more robust way and continue to tuck-in acquisitions on the enterprise side.

As we've seen before with other tuck-in acquisitions, we've been able to drive considerable growth of top line as well as a considerable improvement in margin. And so we expect that to occur here. And I'll just note that our corporate development team and our ALM team are doing a great job with continuing to develop a robust pipeline of tuck-in acquisitions of this [indiscernible].

We're going to obviously continue to be very financially disciplined using our 5 to 7 turns of multiple of EBITDA as our kind of basis for what we paid versus a build versus buy type of situation. And I'll just acknowledge again that the enterprise business is growing very, very fast. So we're very pleased with the opportunity in that channel. As Bill highlighted, it's a much higher margin business for us within ALM. And as that grows, we think we're going to develop a multibillion-dollar ALM business. Thanks, Brendan.

Our next question comes from Tobey Sommer with Truist.

I wanted to pull on that, Fred, with ALM, is your global scale now sufficient so as to unlock [indiscernible] with the largest global multinationals and you'd be able to service them truly globally. The growth has been very impressive, but I'm wondering whether we're at the cusp of that or it's already occurred where you're unlocking large global footprints on a regular basis?

Thank you, Tobey, for the question. I would say that it's approaching that. In other words, by far, we have the best platform. It's still a fragmented market, but we have the best platform. So in places like Europe and North America, yes, we have that. We're still working and building it out in places like India in Asia. Australia, we have the platform. But to your point, if you note the win that I mentioned in terms of a long-standing business services customer, where we just won a contract that's across multiple of those geographies. It was exactly to your point as we were the only one that could give them the MSA, but more important, given the certainty that we could execute that in a -- both an economic but also in a very secure way because the security around these IT assets really plays into our brand and our strength.

And I would like to maintain a level of humility on it. But just objectively, if you look at us versus any of the other alternatives for companies that are looking to operate on multiple geographies where they're sensitive to the security of these assets is we really do -- are the only ones that have the platform that can play in those key geographies. That being said, there's still -- as we talked about just the recent acquisition in France is we can continue to build on that, which gives us further growth opportunities. And there are certain areas in Asia Pacific, and I would say the Middle East that we're still building up the platforms.

And Tobey, I would just add that, to put it in perspective on that opportunity, look, this year, our enterprise ALM business is going to be up north of 50% versus last year, call it, a little over $600 million of revenue for the full year. And you're talking about ALM -- you're talking about the segment of ALM that is very large. I mean this TAM for ALM is $35-plus billion and growing. The enterprise business is 75 or more percent and we're only like $600 million.

So we are really just getting started in the business, and it's -- but we've grown a lot. That enterprise business has grown about 15 or 20 fold in the last 5 or 6 years. So very strong growth, a lot of growth ahead of us. And I'll just also mention that the other piece of the pie on ALM hyperscale data center decommissioning and broader data center decommissioning with corporate clients, that slug is a very meaningful target for us as well. And in fact, the hyperscale data center decommissioning segment is expected to double over the next 4 or 5 years in terms of the TAM from $3 billion to about $6 billion of TAM, and that is driven by, of course, the massive growth of data centers over the last few years and the continuous renewal of those that gear inside those data centers. So we feel really well positioned in ALM.

Our next question comes from Andrew Steinerman with JPMorgan.

This is Alex Hess on for Andrew Steinerman. Just wanted to maybe think strategically for a segment with you guys about obviously, the TAM estimates that you guys gave in 2022 especially around data center and ALM now perhaps a touch conservative. How do you think about further cross-selling, further service penetration, mining the seams as the number of really scaled companies, huge capital commitments expands throughout the data center ecosystem. Just it feels like there might be more roles for you guys to play there. How are you thinking about that holistically attacking and monetizing the [indiscernible] TAM?

Thanks, Alex, for the question, and I'll ask Barry to also add on because I think you're pulling on really an important thread. I mean it was the whole thesis behind when we launched Matterhorn and reorganized our go-to-market and our commercial strategy which is really about -- if you think about Iron Mountain today, it's multiple mountain ranges, if you will, and we need to sell the whole range with our commercial engine. But specifically, if you kind of drill down on your kind of -- you're also following on, on the hyperscale decommissioning segment of the ALM market and the data center ecosystem. We just kind of focus on that is we are building muscle and approaches to better and further penetrate that.

I mean we're already having large success. Barry mentioned that the hyperscale decommissioning side of the business is going to double in the next, say, 4 or 5 years. There's also some decommissioning in some of our enterprise customers that either refreshing their data centers, in some cases, closing down their data centers and going to colo, which obviously gives us an opportunity to pick up some colo customers on the enterprise side, in the data center side. And so whether it's the hyperscale customer relationships that we have, which started with selling data center leasing to them, which is now much more kind of cradle to grave, including helping the dispose of some of their IT assets when they're going through refresh cycles is we're finding that the synergy between the data center business and the hyperscale enterprise decommissioning business is really meaningful. And we are, in fact, having those conversations, and you're starting to see that reflecting the 88% year-over-year growth that we've seen in the segment. But Barry, you might want to comment further.

I guess I'll pick up on that, Alex, thanks for the question. I will say I think it's pretty clear we're the only provider of a complete end-to-end life cycle solution for the hyperscale marketplace. As we develop, we operate and we decommission data centers, we can do it all for them. And I think that's one of the reasons why we're seeing continued strength in both businesses.

Bill mentioned on the prepared remarks, a new element of data center that's coming in as an incremental leg for us on hyperscale decommissioning, that's neo cloud. You think about all the neo clouds that have been developing over the last few quarters, a couple of few years, they also will have a lot of refreshing to do over time. And as you think about what's coming in the future to be refreshed, it will be more GPU-based i.e., higher priced gear with likely even more demand in the secondary market.

So we feel very good about that. And of course, the bigger TAM is the enterprise side where we're building that very complete global solution that is akin to what the company did in records, whereby we have offered clients a solution to a series of challenges they have, and we can do it and they standardize with us, and we want to do a very similar type of exercise for our clients on the ALM side. Thank you.

Our next question comes from Nate Crossett with BNP.

Just on the core storage business, I was wondering if you could just give an update on your outlook for global room volume and pricing. And then separately, if there's anything to know on just the ramping of the DOT contract.

Nate, thanks for those. So our physical volume continues to grow very nicely. You can see in the supplemental report, it was up, I think, 2.5 million cubic feet on a sequential basis. As I've said before, I'll say it again, we have never stored more physical volume on behalf of clients than we are storing right now. So it continues to be a very strong performance for us. We always -- I always have been saying like we expect our physical volume to grow very slowly in a positive way, something like slightly up to maybe 50 basis points or so a year. And we've been consistently performing.

Our team continues to find ways to help clients and consolidate incremental volume. We are leveraged to markets where there's of continued outsourcing of volume ongoing, such as India, where our team is doing great things and our Indian business incidentally is doing exceptionally well, not just on the volume side, I might add on the physical side, but the big lease that we just signed in Mumbai does speak to how we are approaching India in a very comprehensive way.

We think that's a huge growth opportunity for us over the next few years. So physical volume, I expect it to continue to be slightly up for the foreseeable future. As it relates to revenue management, I'll just say what we endeavor to do, as you know, Nate, because you've covered it for a long time, is we look to charge for value. And our revenue management initiatives are based on the fact that we can support those through offerings to clients that they can't get from anybody else. So whether it be our Smart Sort, our Smart redeal, digital on-demand, cross-selling of ALM services together. We really feel that the way we generate the ability to drive revenue management is through generating significant value for clients. And we want to continue to have very satisfied clients and I'm pleased to say, by the way, that our retention rate continued to increase over the last several quarters, including this quarter.

And then lastly, as it relates to the IRS deal, Yes. It's -- Bill and I both mentioned that our digital business continued to grow had a record quarter. And I'll say that the IRS deal was a few million dollars -- a couple of million dollars ahead of our expectations in the second quarter, ramped even faster I think we did about $15-plus million, that's up from the $9 million that we did in the first quarter. So we're probably running a little bit ahead of our expectations for the full year, and I'll just reiterate that we continue to expect in 2027 that business to be in excess of $100 million and to carry on in that way for years to come. Thank you, Nate.

[Operator Instructions] Our next question comes from Jon Atkin with RBC Capital Markets.

A couple of cats and dogs, if I could just put these in. One is, can you comment on the role of indirect channel in driving sales now or maybe going forward in any of your segments, I suppose? And then operating efficiencies, a lot of your margin expansion is sort of things like revenue management and sweating the assets more effectively. But in terms of things that require like code to cash or sales force efficiency and so forth. Anything on the operations side that we should be thinking about as a source of margin expansion?

And then thirdly, I think [indiscernible] had a bare metal computer hosting unit. And I just wondered whether that is a line of business that you see some potential in to maybe expand?

Okay. Thanks, Jon. I think let me kind of start and I'll ask Barry, especially on the transformation side because that rolls up to him. And I should just kind of caveat is, for us, transformation is a lifestyle, not a [ diet ]. So it's part of the ongoing -- and AI is part of the story, but not all of the story, but it is about how do we actually make sure that we're doing things the right way, the most efficient. And it's also part -- if you think about every 3 years, the size of the company at these growth rates is 50% bigger than it is today. That's been the story over the last 4 or 5 years, and we continue to expect that to be the story over the next many, many years to come. .

So the transformation and the efficiency isn't just about margin, it's making sure that we're fit and we're building capacity that can manage that growth in the best way going forward. So I'll ask Barry to talk a little bit -- to give you a little bit more flavor. But we think we're really excited about what our transformation office has been able to do with our leaders.

Coming to your point on the channels, I think it's a really good question is that we are using channels more and more, mostly, it's on the digital side. You can imagine, you have a lot of the big systems integrators that have been serving customers on business process outsourcing or BPM-type work. And they're coming to us more and more saying, "Can they partner with us because of the unique capabilities that we built when we were -- the first time we won AI partner of the year with Google, which was, I guess, 7 or 8 years ago, and we've been building on that capacity. We own the IP, and we're building on that capacity, which allows companies really to seize what I call the holy grail of straight-through processing in their back office on a number of solutions. And so we are finding more and more -- and not just systems integrators, but that's one of the channels that we're using.

We're also across the marketplaces of the Azure, the GCP or the Google platform as well as the AWS platform. So we're able to seamlessly work with those 3 cloud providers through their marketplaces and allow customers to use their credits or commits with those 3 cloud providers to buy Iron Mountain services, and that is becoming a bigger and bigger part of the service.

In terms of bare metals, no, I mean, we are very focused on digital infrastructure and infrastructure as a service for our customers. We think that is -- it keeps us out of conflicts. And we think that adding to that, what we think makes the most sense for Iron Mountain is the synergies that we see with our data center infrastructure, not in doing bare metal as a service but rather helping them with their IT assets when they go through decommissioning cycles, which has been a huge part of our growth.

And Jon, on the transformation, I'll add a little bit of color here. First of all, you should -- just in the short term, you should be expecting our margin to continue to improve as implied in the guidance of half-to-half and quarter-to-quarter because that's both our seasonal pattern as well as just how the mix will play out, I think, over the next few quarters, be improving mix.

In terms of transformation, in particular, we have a very broad program ongoing, which will drive considerable EBITDA and the opportunity to further invest in our growth initiatives. And so those are efficiency-driven, productivity driven. I could give you a whole laundry list, I'll hit a few other high points. In our core physical services, the team continues to drive incredible margin opportunity. It is strength to strength from that team continuing to do it. And you might say, how is that possible after all these years of improving trends there. And the team is very innovative and continues to adapt. So for example, they partner with our real estate team. And as you know, we've got a multi-decade real estate program here where we are slowly but surely improving our footprint, which enables us to unlock transportation savings. It enables us to be more efficient inside the warehouses, that is a big factor for us now and going forward.

Another one is our -- we have significantly improved the capabilities in our procurement organization, and they are driving considerable savings now and in the future. And even more important, they are -- we're really starting to more strategically source. So that is a huge transformation area. Our customer care organization is getting much more efficient and productive. And as Bill mentioned, as you think about the business doubling over the last 5 years and with a huge growth agenda going forward being that much more efficient in the way we go to work for our customers, and that can be in leveraging AI that can just be more effective all-time response that drives incremental margin as well.

And I'll -- I guess I'll end with AI. So when we think about AI, Jon, there's a whole lot of leverage that we can drive on our operations in terms of both being more efficient, more effective. And it's really across the organization from our support functions of finance, legal, HR, but also in the commercial area and being that much more effective in terms of how we respond to RFPs, how we are developing pipeline. And lastly, just to sum it up, our transformation program is really built around customer focused growth, so think revenue, operational excellence, continued modernization and AI transformation. So thanks, Jon.

This concludes our question-and-answer session and the Iron Mountain Second Quarter 2026 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Iron Mountain First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mark Rupe, Senior Vice President of Investor Relations. Please go ahead.

Thanks, Rocco. Good morning, everyone, and welcome to our first quarter 2026 earnings conference call. Joining us today are Bill Meaney, our President and Chief Executive Officer; and Barry Hytinen, our Executive Vice President and Chief Financial Officer. After our prepared remarks, we'll open the lines for Q&A.

Today's call will include forward-looking statements, which are subject to risks and uncertainties. For a discussion of the major risk factors that could cause our actual results to differ from these statements, please refer to today's earnings materials, including the safe harbor language on Slide 2 of the earnings presentation and our annual and quarterly reports on Form 10-K and 10-Q. Each of these items as well as reconciliations of non-GAAP financial measures referenced during this call can be found on our Investor Relations website.

With that, I'll turn the call over to Bill.

Thank you, Mark, and thank you all for joining us today to discuss our first quarter results. As you saw in this morning's release, we are off to an incredibly strong start to 2026. Our first quarter results were exceptional, above our expectations with 22% year-over-year growth for revenue, adjusted EBITDA and AFFO. Our team's execution of our growth plans and consistent delivery of value to our customers continues to drive the record performance across our business.

First quarter organic growth of 17% is the highest rate we've achieved in more than 25 years. The outstanding results were driven by our growth business of data, data center, ALM and digital, which grew more than 50% in the quarter and now exceed more than 30% of our total revenue. Moreover, our highly recurring physical records storage business delivered its best quarterly growth in years and is well on track to deliver its 38th consecutive year of organic storage rental growth.

I'm also impressed with our commercial team's progress in accelerating cross-selling efforts in ALM and digital. We had a very strong quarter of bookings across the business, which sets us up well for the balance of the year. Following this strong performance and continuing the momentum into the second quarter, we are pleased to increase our full year financial outlook.

Let me now share some of the highlights from the quarter and the confidence this provides as we look to sustain industry-leading revenue and earnings growth in 2026 and beyond. Data center revenue increased 47% in the first quarter. Industry demand remains very strong with hyperscalers continue to build out inference and cloud capacity. This has led to significant customer engagement across our portfolio given our 400 megawatts of available to lease capacity energized over the next 24 months. We leased approximately 22 megawatts in the first quarter and another 10 megawatts in April, positioning us at 32 megawatts leased year-to-date.

We drove substantial growth in our asset lifecycle management business in the first quarter with a 92% increase in revenue. This was fueled by a strong showing in both our enterprise and decommissioning businesses the latter of which was mainly pricing. Beyond the favorable component price environment, the underlying strength of our business is being driven by our compelling and differentiated customer value proposition, which continues to yield new customer wins and deeper expansion within our existing base.

Our digital solutions business achieved record first quarter revenue, growing greater than 20% year-over-year. We continue to win traditional projects and new contracts across industry verticals for DXP, our AI-powered digital solutions platform. Additionally, we won another Google Partner of the Year this month for media and entertainment, adding to the 2018 Google Partner of the Year Award for AI and machine learning. And we also executed very well operationally. We drove expanded profitability across the business with adjusted EBITDA increasing 22%.

We are still in the early phases of our long-term growth journey, and our opportunity has never been more clear and tangible. We operate in large and growing markets with a $170 billion total addressable market, and we continue to invest and execute growth strategies to fully capitalize on our opportunity.

Now let me share some recent wins that illustrate the strength of our synergistic business model and commercial momentum. I want to start with providing an update on our government business. From the outset, we firmly believe that Iron Mountain was positioned to be a major beneficiary of efficiency and productivity efforts for governments across the world. Building on last year's important award from the Department of Treasury, I am pleased to share that first quarter bookings in the public sector were our second best in our company's history. We are significantly expanding our government business across the world and especially here in the U.S.

Let me highlight two of these wins. For 1 agency, we will provide advanced digitization solutions to process millions of records, and we will also securely manage over 29,000 cubic feet of physical documents. And for another agency, we are providing services for pathology operations, including storage and tracking claims folders. We are just getting started and the outlook for additional government wins is promising. Our positive trajectory is supported by the federal certification for our digital services suite through the achievement of FedRAMP high authorization for InSight. This will fundamentally shift our competitive stance for digital services within the U.S. public sector, allowing us to pursue high-value, mission-critical workloads across the federal landscape. To be sure, our commercial momentum in recent wins extend far beyond the government sector.

Let me share some other wins across our business. In records management, our insurance team signed a new deal with a Canadian insurance company to deploy our Smart Reveal solution where we will process more than 1 million files currently stored with us. We also signed a new multiyear agreement with a global law firm to deploy our Smart Sort solution across 6 U.S. locations. We will process more than 2 million files and onboard an additional 60,000 cubic feet of physical storage, ensuring the customer effectively manages its complex compliance and fiduciary requirements.

In digital solutions, we won an important new multiyear agreement with a leading Brazilian clinical diagnostics firm. Iron Mountain's DXP platform, leveraging AI capabilities will process over 20 million medical records. DXP will be fully integrated with the customer systems to reduce manual efforts, eliminate errors and ensure compliance for time-sensitive clinical results. And we won a new contract with a U.S. health care center to improve patient data visibility. The win cuts across multiple lines of our services, including Smart Sort, for more than 600,000 medical records in digital solutions for nearly 12 million images.

In our data center business, we cross sold to an existing ALM decommissioning customer and lease to them our entire 16-megawatt Miami site as part of a 10-year contract to support expansion of its cloud platform. We also leased approximately 6 megawatts to enterprise customers in Q1. And in April, we are pleased to have leased 10 megawatts in Amsterdam to a major global cloud player, who is new to our portfolio and with whom we are having encouraging discussions regarding interest across our data center footprint.

Turning to asset lifecycle management business. We are uniquely positioned as the industry leader with strong competitive advantages, including our full-service capabilities, unmatched global scale, reputation for security and ability to deliver exceptional value to our customers. This is translating into growth in the number and size of deals we are winning across our enterprise and our data center decommissioning business.

Let me highlight some of our wins. A new multiyear agreement with a global advertising company that consolidated its highly fragmented vendor base and selected Iron Mountain as its sole enterprise-wide ALM services partner. As part of the deal, we will manage and secure decommissioning and remarketing of IT assets across more than 30 countries. We cross-sold to 1 of our existing data center customers working to recycle and reuse 75,000 IT hardware items across the U.S., Europe and APAC. And we signed a multiyear agreement with a global technology leader to securely decommission, sanitize and remarket 60,000 drives.

In conclusion, our team is delivering exceptional results. We are still in the early phases of our tremendous long-term growth opportunity. Our set of services delivering differentiated value to our customers gives us high confidence in continued double-digit consolidated top and bottom line growth across cycles.

I would like to express my gratitude to my global colleagues for their unwavering commitment to our customers. I especially want to thank our colleagues in the Middle East, who demonstrate the best of the Mountaineer culture as they navigate a challenging time in keeping themselves and families safe whilst continuing to serve our customers in the region. The exceptional stewardship provided by our Mountaineers to more than 240,000 customers remains a cornerstone of our ongoing success.

With that, I'll turn the call over to Barry.

Thanks, Bill, and thank you all for joining us to discuss our results. As you've heard this morning, we are off to a strong start to the year. Our team delivered record first quarter performance across all of our key financial metrics, underscoring the significant momentum we have in the business.

In terms of the first quarter, revenue of $1.94 billion was up $344 million year-on-year. This was well ahead of the projection we provided on our last call, driven by continued strength across our business. As compared to last year, revenue increased 22% on a reported basis, 19% on a constant currency basis and 17% on an organic basis. While the change in FX rates contributed approximately $40 million in revenue year-on-year, I would like to note that this was slightly below what we had assumed in our outlook as the dollar strengthened following our last call.

Looking at the $80 million revenue upside in the quarter, this was driven by outperformance in our ALM, records management and data center businesses. Total storage revenue was $1.1 billion, up $146 million or 15% year-on-year. Total service revenue was $841 million, up $197 million or 31% from last year.

Adjusted EBITDA of $708 million increased $128 million or 22% year-over-year. This exceeded the projection we provided on our last call by $23 million driven by the revenue upside and operational efficiency across the business. Adjusted EBITDA margin was 36.6%, an increase of 20 basis points from last year. Our margin performance was particularly impressive, especially when considering the substantial growth in our services revenue, which naturally drives a mix headwind. AFFO was $426 million, up $78 million, this represented an increase of 22% as compared to last year. And AFFO on a per share basis was $1.43 and up 22% to last year and was $0.04 ahead of the projection we provided on our last call.

Now turning to segment performance. In our Global RIM business, first quarter revenue of $1.4 billion was a quarterly record and grew $148 million as compared to last year. Reported growth of 12% year-on-year was supported by 8% organic growth. This success was driven by strong performances in both our storage and services businesses. Sequential growth in Global RIM revenue was in excess of $30 million as compared to the fourth quarter. Performance was driven by revenue management, consistent positive volume trends and sustained strength in our service business, where the team successfully completed some project work that carried over from late last year. Storage revenue growth was up 9% on a reported basis and up 6% on an organic basis. Global RIM service revenue grew over 16%, and the team delivered a strong organic growth in excess of 12%. This was driven by the continued strength of our core services and our fast-growing digital business.

And as you heard from Bill, we are significantly expanding our government business across the world and especially here in the U.S. As it relates to the multiyear Department of Treasury contract, we recognized approximately $9 million of revenue in the first quarter. We continue to expect $45 million revenue in 2026 and in excess of $100 million annually in 2027 and beyond.

From a profitability perspective, Global RIM adjusted EBITDA increased $61 million to $618 million. This was an increase of 11% year-on-year with an adjusted EBITDA margin of 44%.

Turning to our Global Data Center business. We achieved revenue of $255 million in the first quarter, an increase of $82 million or 47% year-on-year. Growth was driven by lease commencements, positive pricing trends and customers ramping power faster than we expected. In the first quarter, we signed 22 megawatts of new leases, commenced 24 megawatts and renewed 193 leases totaling 7 megawatts. I am also pleased to note that we have increased our future development capacity in Northern Virginia by 20% to 195 megawatts. Pricing remains strong with renewal pricing spreads of 12% and 14% on a cash and GAAP basis, respectively. First quarter data center adjusted EBITDA was $133 million, up $42 million year-on-year, resulting in adjusted EBITDA margin of 52.1%, 30 basis points below last year.

As our clients continue to experience very strong growth in cloud and AI deployments, we are seeing their usage ramp faster. As we've discussed before, Power is a pass-through item, and correcting for that, our data center margin was up 120 basis points year-over-year.

Turning to asset lifecycle management. Total ALM revenue was $232 million, an increase of $111 million or 92% year-over-year. On an organic basis, our team grew revenue $93 million or 77%, this was driven by greater than 100% organic growth in our data center decommissioning business and more than 45% organic growth in the enterprise channel. As it relates to our recent acquisitions, Premier Surplus and ACT Logistics continue to perform well, contributing $17 million of revenue in the quarter. And from a profitability perspective, our team's execution led to significant ALM margin improvement year-over-year.

I know there is a lot of interest in the price environment for memory, so I want to provide some context. As we've discussed on prior calls, memory prices continued to trend higher in the quarter. In late March and early April, we saw prices moderate, and over the last few weeks, they have stabilized. At current levels, pricing is in line with our original guidance and meaningfully above last year.

With that said, we are increasing our full year outlook for ALM revenue to $950 million. This is $100 million higher than our prior expectation with $40 million of ALM revenue upside delivered in the first quarter. The additional $60 million will be driven over the balance of the year by volume and data center decommissioning and growth in enterprise. I will note that the majority of that is reflected in our guidance for the second quarter.

Now turning to cash flow on a consolidated basis. First quarter operating cash flow was $339 million, up $141 million from last year. This marks the best first quarter operating cash flow the company has ever achieved. As we have discussed before, we expect retained cash flow to continue to expand meaningfully over the next several years. And with our strong start to the year, we are raising our projection for retained cash flow to be at least $300 million ahead of last year.

Turning to capital allocation. Our focus remains on growing our dividend and investing in high-return opportunities that drive double-digit growth while maintaining our strong balance sheet. Our Board of Directors declared our quarterly dividend of $0.864 per share to be paid in early July. On a trailing 4-quarter basis, our payout ratio is now 61%, in line with our target ratio of low 60s percent.

In terms of capital investments, in the first quarter, we invested $492 million of growth CapEx and $35 million of recurring CapEx. We continue to plan for full year CapEx to be slightly down from last year.

Turning to the balance sheet. With strong EBITDA performance, we ended the quarter with net lease adjusted leverage down slightly from last quarter to 4.8x. This is the best performance we've had on this metric since prior to the company's REIT conversion in 2014.

Now turning to our outlook for full year 2026. With the trajectory we are on, we have increased our financial guidance for the year. We now expect total revenue to be within the range of $7.825 billion to $7.925 billion, which represents year-on-year growth of 14% at the midpoint. Relative to our prior guidance, we are raising revenue by $175 million at the midpoint with $80 million of the beat in the first quarter and $95 million driven by the improved outlook across our business for the balance of the year.

I'd like to provide a little more context for the revenue increase. As I noted a moment ago, $100 million of that is driven by our ALM business. The remaining $75 million is driven by upside in records management, digital solutions and data center, of which $40 million occurred in the first quarter. And to be clear, we are using the same FX rates as we had in our prior guidance. So none of this increase is FX driven.

We now expect adjusted EBITDA to be within the range of $2.925 billion to $2.965 billion, which represents year-on-year growth of 14% at the midpoint. Relative to our prior guidance, this is an increase of $45 million at the midpoint. We expect AFFO to be within the range of $1.735 billion to $1.755 billion or $5.79 to $5.86 on a per share basis. At the midpoint, this represents 13% growth and is an increase of $25 million for AFFO and $0.09 per AFFO per share relative to our prior guidance.

And now turning to the second quarter, we expect revenue of approximately $1.965 billion, an increase of 15% to last year, adjusted EBITDA of approximately $715 million, an increase of 14% last year. We expect AFFO of approximately $418 million or $1.40 and per share. This represents an increase of 13% to last year.

With that, I would like to thank all of our Mountaineers for delivering another quarter of outstanding performance. Our growth opportunity remains substantial and our ability to capitalize on it is becoming more and more evident with each passing quarter.

And with that, operator, would you please open the line for Q&A.

[Operator Instructions] And today's first question comes from Andrew Steinerman at JPMorgan.

If you could just go over if there's any change of where you're spending your CapEx for the year? And do you feel like your data center growth in any way is constrained in terms of your current CapEx plan?

Andrew, let me start with the growth on the data center side, and then I'll let Barry talk about what the implications are for CapEx. But I would say that we don't have any constraint on capital in terms of the growth of the data center side. First, we're really pleased that as we're now coming into that window with 400 megawatts being energized, the data center capacity, in the next 2 years is that we're really starting to see an uptick in leasing activity, but also the advanced discussions that we're having with a number of customers across our portfolio. So you would have seen the 32 megawatts year-to-date now at the end of April.

But if I add that to the advanced discussions that we're having with a number of customers across that 400 megawatts portfolio, is we expect to be meaningfully above the 100-megawatt guidance that we gave for the year. But I'll let Barry talk about it from a capital -- but again, it was kind of part of our plan. So we don't see any major pitch there.

Andrew, Bill kind of has covered it. I'll just reiterate that, the CapEx expectation we're using continues to be slightly down from last year, and that's just -- as you know, we're really not a speculative builder. The vast majority of what we're constructing is already pre-leased to fantastic high credit quality tenants with long-duration leases. And our -- I'll reiterate something else I said last time, which is that the guidance we have for total capital is -- would predicate on leasing more than we guided to for the full year in terms of new leases. And with the amount of runway we have with respect to megawatts energizing over the next couple of years, we feel really, really well positioned as it relates to data center leasing going forward.

And our next question today comes from Eric Luebchow with Wells Fargo.

I'm curious, Bill, on your comments around the new federal opportunities in your pipeline, you seem to really highlight this quarter. Maybe you could give some quantification about how these new awards could impact either near-term or longer-term outlook, whether it's in digital solutions or in your records business?

And secondarily, maybe just provide an update on the treasury contract. I think, I know you're in ramp mode this year. I just wanted to confirm you're still expecting, I believe, $45 million this year and ramping into next year.

Okay. Eric, I appreciate the question. Yes. So as I said, we're really pleased. It's the second highest bookings that we've had in the quarter with the -- on the government segment since I've been in the company, and we've been seeing this as a big opportunity. As you can expect, the nature of that business, not just this quarter, but in general, and I think I highlighted that in the couple of wins that we have, it's usually a blend, but more and more because it's efficiency driven, it's led with digital. So it really is about transforming government operations.

And there is some exhaust sometimes, and I highlighted that in one of the wins is that we picked up some storage, which is also great. But the fundamental thrust or movement, if you will, is to actually drive more efficiency in government services and better service to their citizens. So it's really much more of a digitally led. And that's why we're really happy to have the FedRAMP high classification, because it opens up the possibilities of where we can transform the government across the board.

I think in terms of the -- Barry said it in his remarks, but in terms of the IRS is $9 million in this quarter, which was in line with a little bit higher than what our expectation is. And we still see that $100 million next year, $45 million for this year. And the ramp is partly driven by also onboarding people because we have to kind of go through that with the IRS. And it's a very measured and I would say, well-structured program in terms of ramping the movement of some of this processing from the IRS into Iron Mountain and of course, driving efficiency along the way.

And our next question today comes from Tobey Sommer at Truist.

I was wondering if you could give some perspective on ALM and your footprint. Have you reached sufficient scale and breadth such that we're at a tipping point for you to be able to capture more significant wallet share?

So Tobey, I'll start with kind of the footprint. And then maybe, Barry, you can talk about a little bit the wallet share that we're seeing across some of our customers because as I noted in my remarks, we are seeing both broader and deeper on that aspect. I think we -- look, we're always trying to make sure that we can cover the globe with our 61 countries because we have customers in those 61 countries. And we are continuing to build that out very nicely. I mean there's still a few countries that we can't serve.

But the win that I talked about, the advertising company, where they were highly fragmented across the globe. And we won that partly because we could serve them in 30 countries for all their enterprise devices, and with one person with a counterpart that they actually trusted to do it in both a proper and efficient way. So we are seeing that the footprint that we have is driving considerable business now, but we're not in 61 countries. So there's still a little bit more.

But Barry, you might want to talk about the depth that we're seeing in terms of some of the customers once we bring them into the portfolio.

Yes, Tobey, as we've discussed before, the enterprise business, we think, is a business that can build on itself for literally years. And we are seeing that continue to happen. Part of the guide up is that we've won some additional business, and we're seeing continued ramping in the existing client base. And I think we added something about, let's call it, 2 dozen Fortune 1000 clients to our list in the ALM category as we continue to cross-sell and penetrate new accounts and new accounts on the ALM side that are cross-sold from the records business.

And we got a long trajectory on that. I will tell you, we're still very, very underpenetrated with all of our clients. So we tend to get a region or a specific flow in country from a client and then start building from there. And that, I think, is a really, really powerful way for the business to continue to develop over time because it's growth to growth to growth and strength to strength. So we are feeling quite good about the enterprise business and see it as a really long-term opportunity.

And our next question today comes from Brendan Lynch with Barclays.

In terms of your price increases that you typically roll out at the beginning of the year, can you just give us some color on how that process went this year, especially given in February and March, it was a time of kind of higher inflation expectations and if that rolled through into the increases that you pushed out?

Brendan, first, I guess I would say is that, we focus our revenue management based on value, not what's going on in like CPI or PPI or anything of that sort. And as we continue to deliver increasing levels of value to customer, we think they -- that's how we manage the revenue management program. So we've clearly been offering them services that they can't get from any competitor, whether it be our Smart Reveal, Smart Sort, the sorts of the Clean Start, the various programs we have and together with cross-selling ALM. We can bring a solution to the clients that I think their vote is kind of what it is that they are continuing to choose us.

And so -- and we got to continue to win business every day and continue to satisfy our customers and delight them to justify revenue management, but we're doing that. And we see a long runway for additional revenue management actions over time of the mid-single plus kind of level that we've been talking about for some time.

In the first quarter, we did implement revenue management actions kind of in the late January time frame. So the vast majority of them were in place for the first quarter. I will note, and you'll recall that last year, our revenue management actions were a little bit more shifted such that the full benefit was in the second quarter. So when you think about the comps year-to-year, there's a little bit of a harder comp in the second quarter for us on revenue management specifically. But we also have likely some revenue management cohort actions, not a huge amount, but some that will be coming in the second half, which will give us another incremental modest lift.

So we generally focus on the full year in terms of revenue management targets, and you should be fully expecting it to be of the same order that we were achieving last year. I will also note that we -- in light of some of the service offerings we've had and just the cadence of historic revenue management actions and the value we're delivering, we've leaned into a little bit more revenue management actions on some of the service lines, which is obviously helping the growth and likely will be an incremental leg for us on the service side for some time.

And our next question today comes from George Tong at Goldman Sachs.

In your data center business, you're targeting at least 100 megawatts of leasing in 2026. What portion of that is in active late-stage negotiations today? And what's a reasonable quarterly cadence?

George, thanks for the question. I think the -- as I said, we do expect, based on the advanced discussions we're having with folks on top of the 32 megawatts we've done year-to-date to be meaningfully ahead of our original guide for 100 megawatts. As you can imagine that these are hyperscale customers, which are lumpy. So trying to predict where it's going to land in a specific quarter. If you say to me for the rest of the year, I feel really good to be meaningful above the 100.

But to give you kind of a quarterly guide or cadence, these typically are larger contracts. But based on the discussions we're having, and it's not in one site. As you can imagine, it's really across the globe from India all the way to Virginia, we're engaged in fairly advanced conversations. And you can imagine also that given these are large contracts, if you -- these things go on for months, so advanced conversations as we're getting pretty close.

George, the only thing I would add is that we continue to see pricing in all those markets be very strong and returns are looking quite good on those contracts that Bill is speaking to. And if you look at the price that we just generated on new leases as compared to, I think, the last couple of quarters, it's up nicely, I think like double digits. So we're pleased with the mix as well as the pricing.

And our next question today comes from Jonathan Atkin at RBC Capital Markets.

I was wondering if there is any kind of an update on India and Web Werks and how that's kind of going. And then I wanted to also ask about just the growth path. You hit on that in the earlier Q&A, but in terms of further inorganic opportunities as well as opportunities for ALM in, say, the large enterprise or even hyperscale category going forward?

Jon, thanks for the question. I'll start with the Indian piece, and then maybe Barry can talk a little bit about the ALM, including how that's rolling out and also M&A on that. But the -- on the India side, the Web Werks, it's fully integrated. As you know, that we actually now own 100% of it. We are really pleased with the team that we now have in place that we hired from a competitor in the Indian market. So -- and then if you look at the portfolio that we have, I think you follow that market pretty closely. You can imagine that that's a market that we are in advanced discussions on a number of our assets in India.

So we feel really well, really good about how we're positioned in the Indian market. And we're really pleased with how that acquisition has turned out now that it's fully under the umbrella of Iron Mountain now for just over a year now. It's about 13 months that we've owned 100% of that. And with the new team that we've brought in place, who came with a lot of connections into the market and understanding of how to operate in India, I think we're feeling pretty good about it.

Jon, I'll add that from an inorganic standpoint, we are continuing to certainly look. And as we've said before, the ALM market is a very large TAM, and it is highly fragmented, and we're continuing to evaluate opportunities that could further our capabilities and increase our geographic reach. We are looking for tuck-ins here and there, and I expect that we will have some, but we never forecast deals as I think is the prudent way to handle things.

We got a long list in the pipeline. We are working with quite a few very good operators as it relates to potential deals over time. And sometimes those take a little while, but we've managed to find some fantastic deals and partner up with some great teams that are helping us propel this kind of growth. And I highlighted a couple of those on today's prepared remarks.

I'll also note that we continue to see pricing for deals in the mid- to upper single multiples of EBITDA. That's pre-synergy and all of the deals we've done over the last couple of years have synergized down rapidly to like sub 5x. We feel very good about the platform and the opportunity to continue to build.

And I would say you asked about how hyperscale might continue to flow. Look, obviously, the hyperscale business grew even faster than the enterprise business, which, I mean, the enterprise business, just to reiterate, grew 45% on an organic basis. So very strong growth coming out of both sides of the business. We do expect the hyperscale business to be a little bit higher as a percentage of the total ALM business this year just in light of the trajectory we're seeing.

And I think we've been prudent about how we're forecasting the pricing in light of what's been going on, specifically in memory. I'll just note, we also do -- tend to do some project-oriented work, as I've said before, in the ALM hyperscale side, and that can be somewhat lumpy. We did some of that work a couple of the quarters last year, including in the first quarter, there was a good-sized project-oriented business, piece of business. This year, we really haven't had a large project item, and I'm not forecasting any, but there are clients that are looking for things with a quick turn, and we have the ability to do that. So the business is flowing really well, and we feel very good about the long-term opportunity at ALM, Jon.

And our next question comes from Shlomo Rosenbaum with Stifel.

This is Adam on for Shlomo. Meta recently announced they'll be extending the use of life of non-AI servers in some cases to 7 years due to server supply availability. How would a move like that in the industry impact the ALM business in your view?

Thanks for the question. I'll start, and I'll also ask Barry to add further color on it. But the -- I think -- first of all, we've seen this trend with not just Meta, but a number of customers pushing out their renewal cycles over the last couple of quarters as the shortage of memory, which we've all witnessed and we've seen that reflected in our results has come through. So it's not so much about any other reason other than just the supply chain in terms of getting equipment.

I would say, though, that, that has also seen a benefit for us is because we've seen more and more OEMs now asking for us to sell used memory that we're harvesting from other customers, which they're reintroducing into their new product supply chain as long as it has the right specification, the right performance because as we all know, electronics typically fails at the beginning of its life, not in the middle of its life. So we're really pleased by that trend that we're seeing more and more of our -- the products that we're harvesting or helping recycle is getting reintroduced in the new supply chain through the OEMs.

The other thing I would say is we also have seen an uptick in some of the servicing, Barry alluded to kind of some of the projects we do. Well, some of the projects we do, you can call it a project as we have customers who say, for help us to harvest some of the components out of their old servers and return those to them so that they can actually build out their new servers and new cloud infrastructure.

So it's a trend that we've seen over the last couple of quarters. I think we'll continue to see that trend stay pretty steady as the shortage of memory is expected to last a couple of years. But it's turning out to be giving us some opportunities for our other service lines and also where we sell our recycled products.

I don't know, Barry, if you have anything you want to add?

I guess the only thing I would add is that if you look at the amount of infrastructure that the key clients in that part of our business have been deploying over the last 5 to 10 years and the ramp that you've seen in growth of data center, the infrastructure and higher-value gear. There's a tremendous amount of growth year-to-year over the next several. And I think modest changes with respect to use of life. We've seen that flex up and down over the last several years as we've been operating this business for quite some time now. And I don't think that, that kind of change is likely to slow down the growth. There's a lot of infrastructure over the next few years that needs to continue to be refreshed. And the clients that we operate with, they got a lot of year coming as well in terms of new. So we're feeling very good about the hyperscale side of the business.

Thank you. That concludes our question-and-answer session and the Iron Mountain First Quarter 2026 Earnings Conference Call. We thank you for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Good morning, everyone. Curt Nagle. I'm the Senior Business and information service analyst here at BofA. This session is with Iron Mountain. Very pleased to welcome CFO, Barry Hytinen. We're going to structure this as a fireside. If there's time at the end, we'll certainly field questions. Barry and I go way back when I used to cover TPX and he was the CEO. So from a personal perspective, it's a real pleasure to have you back on stage, Barry, and welcome, and thank you.

Good to see you again, Curt.

Good to see you, too. Okay. So starting from the top, records management business, building on that, adding digital solutions, life cycle management, data centers. In terms of, I guess, just again, sort of at the high level, revenue growth double digit, visibility on that confidence in that continuing, competitive edges. Could you frame that? Yes. First question.

Well, Curt, we've got a really interesting business in that it's one that has been public for quite a while. But if people haven't kind of kept up with the story, it's a reasonably fast-growing company at this point. And that is thanks to the fact that the team here started investing in areas some years ago that would more easily cross-sell off of our core.

We operate a company that has 240,000 client relationships around the world, and most of those have been doing business with us for literally decades, 95% of the Fortune 1000. And they standardized with us and have continued to work with us for years and years because our retention rates are like very, very high because we offer a very good value. We -- chain of custody, privacy, security is what they value in terms of our core service offering. And over the last few years, we have been expanding quite rapidly in 3 distinct growth areas that you just touched on.

So if I start with our core business, that today represents about 70% of the company's revenue. If you go back about 5, 6 years ago, I joined 6.5 years ago, at that time, the core business was round numbers like 90% of the business. Now today, the business is much bigger. Like that core business is over $1 billion of revenue bigger and much better margins and yet it's only 70% of the company. And that's because the growth areas have been growing and likely will continue to grow for a long period of time at very high rates.

In data center, it wasn't that many years ago, we were a $200 million revenue data center business. Last year, we did $800 million in revenue, low 50s EBITDA margin. That's up over 1,000 basis points over the last few years. It's still got more opportunity to expand because we are far from, if you will, stabilized. We're operating a portfolio of about 490 megawatts, 98% leased, and we've got enough megawatts that are either under construction or held for development that we could more than double the business, if not triple. And so -- and data center is a secularly growing part of the economy. We are seeing very good returns on the deals we write, and we've become a trusted vendor to several of the largest cloud hyperscalers, and that's where we've done more and more repeat business. That business is going to go from strength to strength.

In fact, just to give you a sense, we could build out to $1.35 billion of annual revenue without even leasing anything else at this point. That's what we've already contracted for. So we'll do over $1 billion of revenue this year with an EBITDA margin that is up in that segment every quarter year-on-year. Our ALM business, it's a story that I think the investment community is only starting to appreciate because it's a newer story. In 2021, I think we did $38 million of revenue in our ALM business, Curt. And last year, we did $633 million.

Sorry, $40 million.

$38 million. Yes, in 2021. We did $633 million last year. We guided to $850 million this year. I think in time, it will be our biggest business on a revenue basis. And I'm sure we'll talk more about that business. But it's a huge TAM. I think the TAM is something like 3x what we address in records. So it's much more revenue opportunity per client than what we have in records. And it's a very, very fragmented industry. And it cross-sells quite well off of our core client base because all of our core clients have a need for the same service, and they can't have it serviced by a single partner like they do with us in records today because that offering doesn't exist. We're already the largest player in that market. I think we've got a tremendous amount of growth coming in front of us on ALM.

And then our digital solutions business, it is also growing very, very well. It wasn't that many years ago, we were doing $150 million at that time, it was principally scanning. Today, last year, we exited the year on a quarterly run rate of doing $600 million annualized, and it was growing high teens to 20%, continues to grow strength to strength. We just won a very large contract with the United States government. That adds nearly 10 points of growth to that business this year and another nearly 10 points of growth to next year on top of the secularly growing business we have in digital solutions. We built our team built a platform called what we call DXP. It really helps clients significantly lower cost. And in terms of a whole variety of use cases, we see incremental traction. That business is becoming more recurring in nature. And so there's just -- there's a lot of growth in our business, and we -- it's all about execution.

You in defense, the only verticals that's growing in government, at this point.

Well, the thing about it is government efficiency, that's a tailwind to our business. Because if you look at our business, we don't do a tremendous amount with the government because a lot of processes are internalized at the government. And having the opportunity to outsource and do things in a more efficient kind of done through process and software is a means to significantly lower cost for the government. The IRS example that I was just speaking to is just one where that opportunity saves the government a tremendous amount of money, I think hundreds of millions of dollars. And there's more use cases for that.

And another example, the government stores a lot of physical records. We don't store much for them because they have it all internalized. So we're working with the U.S. government as well as governments around the world to help them become more efficient. And I think that efficiency effort is a tailwind to us for the next several years.

Maybe just a quick follow-up on that, just interesting points on the government. IRS is the tip of the spear maybe?

It's a big opportunity. It's obviously a big win. It's probably one of the largest opportunities we've got with the government. And obviously, we already won it. It's a multiyear contract and with renewal options. And we feel super good about where we are. It also is sort of a means to, yes, get into more opportunities because as a result of that deal, we've recently -- we announced we're now FedRAMP high, which is one of the key standards for being able to do more work with the government. And so yes, there's more opportunities. Our team is in Washington and dealing with other governmental agencies routinely as we pitch more opportunities. But I mean, the IRS one, just to be fair, is a very big one. It's a large one.

Yes, a large one. Understood. Switching gears a little bit and then we'll go back into some of your business segments. So a big theme of this conference is AI. So a huge topic within Info and Business Services. How are you capitalizing AI risk exposure to the business on the other side?

AI is a huge tailwind to the company. I mean -- and you may not hear that from every participant here today, but I'll tell you in our business, it is a tailwind.

All will tell you it's a tailwind.

Is that right? Well, let me tell you how it's already a tailwind for us, both on the revenue side and on the profit side. So AI intersects with our business across of it. So on our digital solutions business, AI is enabling us to help unlock dark data for clients where they can now start doing analysis on information that they didn't previously have the ability to. And our DXP platform allows us to do that. So we -- it starts with digitization. We can combine both physical and digital data, which we do for clients. That is a very growing portion of our business. And what we're doing is we're then meta-tagging the information.

Our DXP platform has Agentic technology built into it, and it enables us to save clients a tremendous amount of cost and reduce labor in what are fairly manually intensive applications, think like mortgage processing. Well, the IRS example, that's all about manually processed paper tax returns, which people might be -- it's a nightmare. And there's a huge savings opportunity there. There's more and more digital projects of that sort, and AI is driving our own ability to serve our clients and save them money. In data center, look, we're all -- we're principally playing in all Tier 1 cloud hyperscale locations. While major hyperscalers are building out very large gigawatt campuses to do training of their models, where are they going to monetize it? They're going to do the inference in cloud locations where latency matters, and that is strength to strength for us. It is another significant use case.

In our ALM business, AI is making us more efficient in terms of how we work with the gear that we're bringing in, monetizing it. It's also making us much more opportunity on the volume side because AI, new gear is creating, in some cases, refresh cycle speeding up, which helps us because we're on the other end of that. We help them with decommissioning the gear. And also the gear that we'll be decommissioning over the next few years is higher priced generally than what we've been decommissioning. So it's more volume and more price. So AI is -- it's a big opportunity for us, and we're monetizing it. And then on the cost side, we have a lot of opportunity that we're executing against. We're in the very early stage of harvesting the benefits.

So for example, we because we have a large client base in our core business, we have something on the order of 10 million customer contacts a year. Most of those are voice, and there's still e-mail and chat as well. And like most every company that has that kind of customer interaction, we did the labor arbitrage on call centers a long time ago. But what AI allows us to do is be much more effective for the client. So like in any call center, you have attrition, you get 15% to 20%. AI makes us get the new representatives up to speed much faster because it can listen to the call. It can read the e-mail in advance and suggest to the human what the response is.

We're starting to test things like responding more directly to the client vis-a-vis AI. It makes us more effective in ways like on our procurement side, we're starting to run more and more of our commodity through RFPs that are AI-driven. In -- with 245,000 client relationships, our commercial team responds to a lot of RFPs. It used to be a terrible manual process with many, many humans involved. AI is enabling us to respond to more RFPs faster and more accurately. In our HR area, it helps us do a lot of training and recruitment much more efficiently. And when we're bringing on the sorts of growth rates that we have, we're hiring a lot of people. And so AI is a big help to us.

Okay. Very clear. Turning to the -- go back to the core business, records, strong recurring revenue base, cash hub of the business, right? So in terms of -- I think one debate is pushing back on just it's kind of a legacy business, right, very simply less use of paper. So in terms of Barry, how you think about the sustainability of volume and then pricing, right, in that context, digitization, how would you answer that?

Yes. So the business is a phenomenal business, okay? Number one, we've never stored more physical volume than we're storing today. Sometimes people have a hard time imagining that because, as you said, most everybody thinks, well, there's less paper in the economy.

Yes. So let's talk about that some. The stuff we're storing really matters to clients, and they've been sending us boxes for literally decades on average. And we're not looking for the volume to grow substantially, Curt. I've been saying since I've been here, like our expectation is for the volume to be flattish to slightly up. I think like 30 to 40 basis points. And that's what we've been doing for the last several years. We've been growing organically year-to-year, quarter-to-quarter. And we know that our inventory that we store for clients, it has a natural life cycle. It averages about 15 years, and it's been at 15 years for a long time. So we start every year knowing we got to destroy about 5% of the volume. And our commercial team goes out there and wins new business. We consolidate business with existing clients. There's some markets that are still in the early stages of outsourcing. And then we get new volume incoming from clients. And that's kind of how it works. But let me point out one thing about less paper in the economy.

Curt, when you and I were doing conferences like these like 15-plus, 20 years ago, there were been stacks of analyst notes all around and conference books, tons of paper. That -- let's look out there. There's none of it. But none of that was coming to us. Clients didn't send us that kind of paper because they didn't need it in the future. No offense to the sell-side community. Today, it's all electronic. It's all on the iPad. So we don't get that paper, but we never got that paper. The stuff we get from clients are things that they absolutely need to store because they might need in the future. And those use cases, they aren't changing. There's been levels of digital transformation in the economy for years. We absorbed that like years ago, and we continue to absorb it, and we continue to grow. And the pricing capability we have on the business has been proven to be very strong because we offer clients a very, very high value.

The offering that we have, which they chose to standardize on years and years ago, is a high one. If you're Bank of America, you're probably sending us boxes from Charlotte and Boston, New York, all over the place. And if you -- not that they do this at this stage, but if they wanted to kind of create that sort of relationship with someone else, you'd be talking about string together literally dozens of vendors because we're the only global player at all. And we're not looking to certainly overprice, we price to value. The value we offer is super compelling, and we have a lot of additional products and services we can sell to clients like BofA. So do we see some elasticity? I always say we absolutely see elasticity. It skews generally to our smallest clients.

And generally speaking, that's where we would add the least value because if you're a 2-person firm here in Manhattan, you might be sending us 1 box a month, you don't care that we can service you in Germany or in Florida. You don't do business there. But for the vast majority of our larger clients, they can't replicate what we have, and they don't want to because they standardized with us for a reason. We give them great service. By the way, the Wall Street Journal had a customer satisfaction survey in the last year or so, which they looked at B2B companies and customer sat, and they ranked us #1.

Okay. There you go. Maybe just going back to that point before we pick up on another on the dark data, how that fits into record storage and maybe a new vertical?

Yes. Dark data is an interesting one. It's part of the AI tailwind I mentioned that we have, which is clients now through advanced digitization, meta tagging, our DXP platform enables us to help them by creating data information that they can then analyze that historically they didn't have the opportunity to. And while clients are it's still expensive to do that, relatively speaking, there are many use cases and increasingly so as costs come down, where we're seeing more and more of that sort of information flow. And so we see a fair number of digital projects every year, a growing number, which is on information that clients are asking us to convert to meta-tagged data that we weren't even storing.

So a lot of our digital businesses is essentially either new paper coming into us that may or may not be stored in the future as opposed to significant amounts of digitization of the inventory we have on the shelf. But we do some deployments of specific project-oriented work of digitization that's on the shelf. And the vast majority of the time that goes right back on the shelf, by the way.

Okay. Fair enough. Pricing, I want to go back to that, as you talked about, an important driver, I think, across a number of your segments. What are you assuming for this year? What's the sustainable rate of growth? And then again, just general elasticity. It sounds like it's fairly concentrated.

Yes. I mean our view on the record side on the core business is you look back about 6 years ago, we said, okay, we expect the core business to grow at about a 5% rate. We all said that's probably pretty conservative. And we've been growing about double that. the last 5 years.

And last year, we did about 6% round numbers on average pricing and our core business grew a little bit faster. And we've been saying for several years like, hey, mid-single plus is probably the right place to be. That's kind of what we guided to this year. I think it's -- that's a healthy place for us to be because that business requires very little capital to grow. And as a result, as you described, it generates earlier, it generates a tremendous amount of cash. And we use that to go deploy into other parts of the business, principally data center.

Pricing in our other areas of our business, on digital, I'd say we do compete with a variety of competitors on that space. So that's the pricing is slightly up, but not as strong as in the core business. In the data center side of the equation, we have a colo business and we have a hyperscale business. Our colo business is sort of in place, and we renew, call it, 1,500 leases every year. We have low churn, I think like 2%, 3%, 4% and mark-to-market has been like double digit for years now for several years. So it's very good. Double digit. And then on the hyperscale side, pricing has been rising some over the last few years. Frankly, costs have too. So the cash-on-cash unlevered return is how we kind of think about that business on hyperscale deployments. And that's been running the [ 10, 11. ]

Sometimes you see a return that's a little bit higher than that. But we love that business because it's a the hyperscale businesses, you're talking about investment-grade clients. You're talking about leases that are 10 to 15 years in duration. And it's a pre-lease business for us. We don't generally speculatively build. So we generally are looking at signing a contract with a hyperscaler for, let's say, 10, 15 years before we principally put the shovel in the ground. And that is a really effective capital deployment strategy for us. In the ALM business, it's -- on the commodity side, it's what it is. Yes, as the market.

You're not wildcatting for data centers.

No. Fair enough.

Okay. So yes, I guess sticking on the records business, digital solutions. Maybe just talk a little bit more again about the synergies between the 2. And then again, just how big that business is and kind of where you expect rates of growth?

In digital. Yes. Yes. So the digital businesses last year, as I mentioned earlier, exited the year at a $600 million annualized rate in the fourth quarter. That business has been growing high teens to 20s for quite a while now. The cross-sell is quite good because nearly all of our clients of size have some level of digitization opportunity. And frankly, there's lots of other use cases beyond digitization that we're doing, and that's a smaller portion of our business now. We're doing automated processes where we're saving clients tremendous amounts by taking what is largely a manual process and doing it in a much more efficient means with high accuracy and big scale.

And we're seeing that continue to be a larger and larger piece of our recurring business. We have a Software-as-a-Service model inside our digital business. That's our DXP deployments are growing. We did a record number of DXP new wins and logos in the fourth quarter. We think that business is going to continue to grow at a high rate for a long period of time, and that's even before talking about that IRS deal I mentioned.

So this year, we guided to what I think is a conservative posture of $45 million of revenue from the IRS deal in 2026, and we only did $6 million or $7 million on that business last year, $6 million in the quarter. We expect to do over $100 million in that business line next year. So yes, there's a lot of growth in our digital business, Curt, and it's very synergistic with the core.

Okay. Fair enough. The ALM, the life cycle management business, touched on it a little bit. Again, very, very robust outlook. I think you said largest business or could be. Again, just maybe reiterate kind of why you think it's going to be bigger and larger than your core records business. And then thinking about just the algo, right, between logo expansion, growing wallet with existing customers, M&A, if that's a factor?

Yes. So we and others scope the ALM market as being a $35 billion TAM. So it's a big market, and it's also growing. Why is it growing? There's more IT gear. And frankly, if you look at the market, it segments 2 ways. One is you got enterprise clients like a BofA or a whole host of major -- all the Fortune 1000 would be very good targets for us. And then you've got the hyperscale business. And directionally, it's like 2/3 to 3/4 enterprise and the balance is hyperscale.

Now the hyperscale side of the business is more of a revenue share model where we're helping hyperscale clients, the same clients we sell to on the data center side, I might add. But we're helping them with the decommissioning of servers that are inside their physical data centers. And the quantum of those servers keeps expanding because the refresh rate is about 5 years. So that -- and as you know, the amount of capital that's been going into data centers has been increasing for quite a while. And now that part of the business is a little thinner margin. It's kind of like teens to 20% because it's a revenue share model. So when we decommission servers for the hyperscalers, the first thing we do is wipe anything that's been written to. And that's incredibly important to the hyperscale clients because that's all about their brand.

And so that's a key element of the security and trust part of that relationship. And then we're physically disassembling them and selling off the components into the secondary markets. And it's kind of on average, like an 80-20 split where the hyperscaler gets 80% of whatever we're selling and we get 20%. We do gross up the revenue for the wholesale, so the actual margin is relatively low here, but it's very incremental business for us. And we're doing it increasingly in a more and more profitable way because we're getting cost efficiencies.

That business, I think, has got a very clear significant amount of volumetric growth over the next few years as clients continue to decommission. And you kind of know the volumes coming because it's all about supply chain. They're not going to decommission something where they don't have the new gear to put right in. And so it's very much a planful kind of area of our business with the clients where it's more concentrated also to be clear. On the enterprise side, which is the bigger TAM, we're cross-selling increasingly so from our existing client base.

Now for us, of the $630 million we did in revenue last year in ALM, 60% of it was enterprise and 40% of it was hyperscale. We punch a little bit higher on the hyperscale than the market just because of the more concentrated nature of those clients. On the enterprise side, though, Curt, we are in, I think, probably like the first inning, maybe just getting up the bat on the opportunity for cross-sell. I'll give it to you like this. We have 95% of the Fortune 1000 as a customer. When we started last year, we had about 270 of them using us for some bit of ALM. We exited the year at like 360. So we picked up 90 new logos, but we're not penetrated anywhere close to full penetration with any of them. I mean we're very early stage. And it's very much a land and expand type of situation because we're offering them something that is a replacement of a whole string of vendors across their network because it's all -- it's very -- as I said earlier, it's a really fragmented market. And so you've got major corporates and even financial institutions that are sending IT gear that has PII, confidential information, et cetera, to lots of small little mom-and-pop vendors around there. Why do they do that today?

Because that's the only thing they've had to be able to send it to. So our view is we're going to stitch together a global model like we did on records. And we're going to offer major corporates something that is super valuable to them, which is all about chain of custody, security, privacy, compliance. And this is a secularly growing part of the economy, and it is a secularly more important part of the economy to like CIOs and CISOs, et cetera, in the future because as we all know, PII confidential information, you probably want a compliance certificate from somebody like an Iron Mountain as opposed to a $30 million or $40 million vendor. In addition, we augment our organic growth through tucking in some small acquisitions. They're small because I said, all the players that we're competing with for the most part, are very tiny players. But it tucks in really well.

We're buying those businesses at a 5 to 8x trailing EBITDA, synergized down below 4 fast. And it means it's a means to both extend our capability, but also get in the door with certain clients to start doing that expansion. It's a great business. The margins are like 20s to 30s. So it's not as strong a margin as our records business, but the quantum of the opportunity is much larger. The TAM for this business is much, much bigger.

Yes. And corollary a similar playbook to your point.

Definitely. It's very similar to the way the team here rolled up the records business over the years. If you go back 30 years ago, our records business 40 years ago, was like a $3 million, $5 million revenue business annually. And over time, the team grew it and grew it and grew it and created an offering that was super compelling to corporate clients, and that's what we're aiming to do in ALM, Curt.

Okay. Fair enough. And then maybe just going back to the hyperscaler business. exposure in terms of component pricing, memory. I guess, what is the exposure, market dynamics? How to think about for this year? And then again, just thinking about the longer term.

I'm going to give a little bit of context and then come right to your question. So when we are decommissioning for the hyperscalers, as I said, the first thing we generally do is wipe anything that's been written to. In some cases, we wipe it twice. And then we're disassembling. So we're selling CPUs, drives, memory, et cetera. Memory -- and again, this is 40% of our ALM business.

Memory, quarter-to-quarter, it can move around a little bit, but it's about 40% to 50% of that revenue that we do. So it's the lion's share of what we're doing. After that, it's like the drives and the CPUs, et cetera. And of course, this is all used gear, just to be clear. And so we have varying generations of what we're decommissioning based on what the client is sending us. Memory pricing, as it feels like everybody knows, has been pretty inflationary. Part of that is driven by there is a supply-demand imbalance for new. And there's also less capacity for certain generations of memory that's still very much needed like DDR4.

And so as I said in December at a financial conference and then as we reported on our most recent call, look, memory prices moved up pretty appreciably on the used side in the later part of the year. It was tight on new throughout the year, but really kind of get into used more later in the year. And secondary prices continue to be high. And so we share in that through the revenue share model that I mentioned to you earlier. And in the fourth quarter, look, as compared to when we gave guidance at the very beginning of November to the end of the quarter, we picked up about $15 million, $16 million of additional business because of memory pricing. And the thing to be aware of is pricing has continued to be high. I don't tend to try to prognosticate pricing because it can move around. But the folks that do suggest that there's going to be a supply-demand imbalance for at least this year, if not throughout all of next year.

So I think pricing is probably going to continue to be pretty good. We were -- and I hope will prove to be conservative with respect to how we guided because we just basically rolled the current price at that time that we saw. But the other thing to watch out, and I mentioned this in December, too, so I'll reiterate it is the hyperscaler is only going to decommission if they have the new gear already here, right? And they have line of sight for any other gear that they need. And so as I said in December, we saw some clients that were delaying a little bit on decom because they wanted to make sure they had line of sight for the new supply chain. And we've seen them do that before in other well in the supply chain crisis. And I feel very good about that business, just to be clear. I think it's biased for upside if you're going to ask me one way or the other. And that's because of both the pricing as well as our organic volume.

Got it. Okay. Maybe just touching on data centers again. On -- so you touched on a little bit, but in terms of what you're guiding in terms of megawatt capacity or usage, I suppose, just how you're feeling about the overall pipeline, and you touched on this a little bit ago, market moving or shifting to inference. What does that mean for Iron Mountain?

Yes. So we generally are making our data center platform in all Tier 1 kind of markets for cloud and therefore, inference in the future and now and in the future. And so if you look at our business, Curt, we're -- we've signed about, on average, 100 megawatts of new leasing each of the last 4 years. It's averaged that. Last year it was a little bit lower. It was in the low 60s. We did 40-something megawatts in the fourth quarter. Part of the reason we were lower last year is we had sold so much in the prior 3 years that we were constructing that we didn't have near in power coming to market that we could sell. The reason why we guided to at least 100 megawatts of new leases this year and that is bolstered based on the fact that our pipeline activity has meaningfully increased. As compared to this time last year, it's up a lot.

Now it kind of should be because if you look at it, we're lucky enough to have a portfolio of energizing land that's coming. And in the next 18 months or so, we will energize 200 megawatts that is currently unsold. And then in the next 24 months, we'll do like 400 megawatts. And beyond that, we have another nearly 300 megawatts to energize out beyond that time frame. So we've got a lot of very, very good available capacity coming to sell. And generally speaking, we see the hyperscalers kind of leasing like 12 to 18 months before the energization process, which works really well with our model because we can get the pre-lease from one of these investment-grade clients before we really have to do any significant construction.

You got line of sight.

Line of sight and at good returns.

Okay. Terrific. We're running tight on time here. So maybe just capital allocation, a favorite of yours, I think. So in terms of just outlook for this year and cash flow priorities, how should we think about leverage and then just deployment, dividend growth, stuff like that?

Yes. There's a bunch in there, so I'll try to go fast. Our operating cash flow, this is another big tailwind in our business, is increasing at quantums that are substantial this year and going forward. Like last year, we had nearly $200 million of cash restructuring charges, and they're gone. That's over. So that right there is a big step-up, plus obviously, the EBITDA of the business is growing really fast and much of that is coming out of businesses that are very capital light. So we'll probably do somewhere between like $1.5 billion and $2 billion of operating cash flow this year, Curt. And we still have a lot of working capital opportunity going forward together with growth.

To give you a sense at the midpoint of that, that would be up like $400-plus million year-on-year on the operating cash flow side. Unlike a lot of data centers, we have retained cash flow from our core business. And that we will plow into covering incremental data center development. So couple of other parts of the capital allocation story. We target a low 60s percent of AFFO for our dividend. And so the last 4 years, we've grown the dividend about 10% each of those years, and we have guided to AFFO being growing another double digits. So in light of the fact that we have no intention to move off that payout range, you should expect the dividend to continue to grow. And we're using what I think is a prudent, probably prudent, if not low leverage level of 5x as a REIT.

And principally, a few years ago, we were closer to 6x. We brought it down. Last year, we ended at 4.9x. We haven't been that low in well over a decade. And we aim to kind of be right there. And with that, with the retained cash flow and the growth of EBITDA, we have plenty of capital to deploy to build out those data centers.

Great. Good way to end.

Good to see you, Curt. Thank you. Appreciate it.

All right. Good morning, everybody. Let's start. My name is Calvin Lam. I'm a Managing Director in the Investment Banking division at Morgan Stanley, amongst 1 of my responsibilities is running the digital infrastructure banking practice. I'm joined this morning by Barry Hytinen, the CFO of Iron Mountain. Welcome back to San Francisco, Barry.

Thanks, Calvin. It's always good to be here.

Great. So let me read this very quickly. So for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com research disclosures. If you have any questions, please reach out to your sales rep.

All right. So maybe to begin, I'd like to start with an observation. I think Iron Mountain has definitely evolved past being a physical storage company into a technology-enabled infrastructure company. And I want to help investors better understand that evolution because I think a lot of the trends and demand drivers that you're capitalizing on should be very familiar to investors at this conference, namely AI, data center infrastructure. And so Barry, for investors who still think of Iron Mountain as a boxes and paper storage company. Maybe you could describe what is Iron Mountain today?

Yes. Thanks for that. That certainly is still our heritage in our core, the box storage, and that represents about 70% of the revenue of the company. But to put that in perspective, about 5 years ago, it was 90% of the revenue, and it's a lot bigger than it was at that time. So that part of the business continues to grow at a mid- to high single digit growth rate. But what we are today is, as you said, a technology-enabled infrastructure company that enables massive amounts of data and information to be analyzed and used by our clients.

And so we do that through 3 distinct growth businesses. We have a Asset Lifecycle Management business, which helps clients both enterprise and hyperscale data center clients to deal with their end of life of IT gear, which is a secularly growing portion of the economy.

It's a massive TAM, and it's very fragmented. It's a market that we think we can grow very, very significantly in, and I'm sure we'll talk about it more. We are operating in data center, where we are an operator and developer of third-party data centers the vast majority of our leasing is to very large hyper CL clients. So very synergistic with that ALM business I was just mentioning, and a very good return business. To put it in perspective, that business -- last year, we did a little over $800 million of revenue with a low 50s EBITDA margin.

This year, without even any additional leasing, just what we've already signed, will be well over $1 billion. And if we didn't sign any more leases and we just ran out what we've already sold in our backlog, we'd be well over $1.3 billion of revenue and a probably mid-50s EBITDA, and we've got a lot of leasing opportunity, which we'll probably talk about.

And then on our digital business unit is continue to grow strength to strength, a few years ago, it was like $150 million business. Last year, it exited the year on a run rate of $600 million annually, and it's got some very distinct growth areas.

And what we're doing there is helping clients be able to unlock the power of a lot of dark data, information that they have historically been able to get access to and through the benefit of AI as well as a variety of other technologies that we built into our DXP platform, I think we're really needing customers where they need a lot of help with respect to that sort of analysis process improvement.

So we're not the Iron Mountain that a lot of people used to think about. And we're now -- we've guided this year to be $7.7 billion of revenue, nearly $3 billion round-off of EBITDA, and we've been growing at a double-digit rate for several years now. And in light of the growth businesses that I just mentioned, we expect to continue to be growing at a double-digit rate, top and bottom line for a very long time.

Great. So maybe we can talk about that. You've got an ALM business a data center business in this digital solutions business, what's the kind of the unifying theme that ties together this collection of very unique assets?

Yes. So the company, I think -- so I've been with the company about 6.5 years now. But about 10 years ago, Bill, our CEO and the team, I think they were really prescient, and they were intentional about looking for opportunities where we could invest in additional markets that we could cross-sell off of our core.

One of the huge strengths of our business is we have a very large B2B client base, 245,000 clients, the vast majority of whom who have been working with us literally for decades. They standardized with us on records. And we have the ability now with those 3 distinct offerings I just mentioned to cross-sell into those enterprise to essentially get more share of wallet and introduce a broader and broader set of services to those clients who already have been working with us, trust us, and we've got a great rapport with and thereby expand our opportunity set meaningfully.

That's great. That makes sense. So let's then drill down into each of those businesses. And I'd actually like to start with the ALM or Asset Lifecycle Management business first, not only because I think the growth and the scope has surprised investors. But I think you mentioned that you think it could actually be 1 of the largest business, if not the largest business at Iron Mountain in the future.

So maybe just start what is the ALM opportunity what are you doing for these enterprise customers? And I think it would be helpful also to talk about what you're doing for the enterprises and then what you're doing for the hyperscalers because they're such a big part of this AI infrastructure ecosystem.

Yes. It's an immense opportunity. And we've been talking about it for some time, but now we're really starting, I think, to demonstrate how significant the growth trajectory is in that business. A couple of market-oriented points first. ALM as a category is about a $35 billion TAM. So it is a massive, massive market. And interestingly, it's very fragmented. We're the largest player already in that marketplace.

It's got 2 distinct portions of the business, as Calvin just talked about there, is the enterprise component of the business, and then there's hyperscale decommissioning. I'll talk about both of them.

But from a TAM perspective, the enterprise business is about, let's call it, 70% of the TAM, and the hyperscale is about 30% round numbers. And the market itself is growing at kind of a mid- to upper single digit growth rate and expected to do that for a long time. Think about it like this, like IT gear it continues to become obsoleted, or it continues to be refreshed.

And clients have a distinct need because if you think about all of the IT gear that a corporate client would use, laptops, iPads, screens, printers, servers, what have you, the commonality is, they all go obsolete eventually. And the vast majority of them have confidential information that is stored on them. Even printers have confidential information at this point. So clients are increasingly understanding that there is inherent risk in all of that old IT gear that they need to be very responsible about as it relates to the end of life cycle and/or recycle reuse.

That's where we think we can really bring a massive value to our corporate clients, and this is a huge cross-sell opportunity. All of the clients in our -- we deal with 95% of the Fortune 1000, we've been working with them literally for decades, all of them have the same use case that they need this. And today, those clients are using a network of many think like dozens of small little IT asset disposition vendors. On average, they might be $50 million or $60 million of revenue, literally a mom-and-pop industry.

And there -- it's very spread out. Why is that? It's because there is no partner that is available to clients to do the same service for them all around the world, and that's what we're building. And so if you look at our business, Bill and the team started investing in Asset Lifecycle Management in 2017, by 2021, we had $38 million of revenue in this business, only $38 million. Last year, we did $633 million. And this year, we guided to doing $850 million. And the business has got inherent considerable amount of growth because as we continue to cross-sell into clients, it's sort of a land-and-expand strategy.

It's a little -- it is a sticky business. And 1 of the challenges is, that if you were working with 50 different partners in this kind of area, kind of getting all that business back in one fell swoop is very hard.

But landing, winning a specific market or a function or a portion of a business is what we're trying to do and then expanding. And to give you a sense, last year, we ended the year with about 350 of the Fortune 1000 as ALM clients, that was up 90% from the prior year.

But in every single 1 of those cases, our presence is very small. So there's a huge opportunity just with the existing clients already to expand as well as obviously getting all of the Fortune 1000 over time. That business is a service-oriented model because most clients take the gear close to end of life. And so we make a decent margin on it, like 20s to 30s percent margins on the enterprise side. I expect that business is going to continue to grow on a secular basis for a long time, and we are tucking in selectively small acquisitions, think like, $50 million revenue companies that give us additional presence, give us capability in some markets.

We're buying these on average between 5 and 7.5x trailing EBITDA and they synergize down well below 5 rapidly. So it's a very good incremental means to grow the business. On the hyperscale side, and this is 40% of our business. Last year, we were 60% enterprise, 40% hyperscale.

On the hyperscale side, it's much more concentrated. It's -- think about like the top 10 cloud hyperscalers. They have very large fleets of data centers, as you all know. And 1 of the commonalities is while the infrastructure they built, the physical is going to be there for decades, they change out the gear inside there on average about every 5 years.

And generally speaking, those servers still have considerable value left in them because they're retrofitting the gear for reasons of wanting to get better compute or better power efficiency. There's still inherent value in there. That's where we come in. And what we do is we take the servers from them, we wipe anything that's been written to. And as you would imagine, with these sorts of clients, privacy, security is extremely important. So they want to work with a relatively few vendors because they are very, very interested in ensuring that anything that's been written to is completely dealt with.

And then we physically disassemble the servers and then resell the component. So CPUs, drives, memory, et cetera. And that is a revenue share model, whereby if the client gives us a certain number of servers and let's say, we harvest out the CPUs and maybe we're selling those for, I'm making the number up, $100 it's a revenue share model where we might get $20 of those dollars and the client gets $80. And we're selling that into the used channel.

That part of the business does have some level of, as I mentioned earlier, concentration as well as there's inherently a little bit more volatility in terms of it's like site-by-site in terms of data center decomms or what you're decommissioning relative to what's in the market from a pricing standpoint, pricing on memory, as we've talked about, has been up appreciably for used memory. And I expect in light of the supply/demand economics going on in that market will probably continue to be up for the foreseeable future.

And so that's a nice kind of incremental tailwind, the ALM opportunity Calvin is a huge one. And if -- while the margins are thinner, I should note this on the hyperscale side because it's a revenue share model, the total opportunity for us in ALM is really large. And I expect it will be our largest revenue business relatively soon, let's say, in the next few years because we're on a trajectory here whereby we can grow that business for a very long time at a very high rate.

Yes. So actually, just to unpack that a bit. On the hyperscale decommissioning side, when you hear about all these hyperscalers spending record amounts of CapEx and putting all the gear into their data centers. Are you benefiting from that current market dynamic now? Is it something in the future we should watch for?

That inherently is 1 of the reasons why we love the hyperscale decommissioning part of the business is because it's got a very clear horizon for incremental growth going forward because while they're continuing to build their fleets out and putting in training and doing more cloud and developing inference locations, all that gear is going to be recycled and reused in maybe 5 years, in some cases, it might be even shorter than that based on life cycles.

And so that is inherent, if you will, forward volume that's going to be coming out in -- coming to folks like us. In addition, if you think about what we're decommissioning this year. It was generally gear that was put into service in new data centers 5 years ago and anything that was retrofitted 5 years ago. So inherently, the fleets are getting much, much larger and a bigger opportunity.

Furthermore, as IT gear gets relatively more expensive, this on the new side, it generally probably bodes quite well for the price of used in the future because the best indicator of what a used gear is that comes out is what it go in for originally. And so we think there's a tremendous amount of volume and relative mix benefit going forward. And yes, so it's a good business.

And then that's on the organic side, and you touched on this a little bit in your comments on the inorganic side for ALM. I know you've done a couple of deals in terms of acquisitions. Maybe talk about how those have tracked? What gives you confidence that there's more targets out there? And how the M&A playbook will factor in here?

Yes. So generally, where we've been acquisitive over the last few years has been on the enterprise side. We have pretty much all the capacity we need on the hyperscale side, and we can move that up internally pretty well as we -- we've got a really good process there. We made an acquisition in that business several years ago.

On the enterprise side, there's immense amount of targets. Our corporate development team that works for me is probably literally has a pipeline of like 300 deals. And we're constantly talking because we're very choosy. And also, as you know, it takes a willing buyer and seller and everything. And we are, no offense, we're kind of cheap in terms of what we're willing to pay.

And because our alternative is to just build it ourselves. So we're paying between 5 and 7.5x EBITDA, as I mentioned earlier. And I'll tell you, we have been lucky. Our teams have found some incredibly great small businesses to acquire over the last few years. That has brought us incremental capability. It has brought us excellent management and very dedicated teams. It's funny, this industry is made up of lots of small companies that have been around for like 10, 20, 30 years.

And generally, they're owner operators. And so in most of the deals we've done, in fact, as I think about every single 1, it's been an owner operator where we've acquired from. And we've been able to work on the economics of the transaction to incentivize the team to stay, work with us and build what is a really big and fast-growing business. So the synergies and the relative profitability we've been getting from the acquired businesses has outpaced our models in every single case on the enterprise side.

And I think you should expect that we will continue to tuck in. But again, these are relatively small deals. I think $50 million revenue, 25% EBITDA margin. It's not a huge capital call, but it definitely helps supplement our growth. And importantly, Almost all of these small players have got like 1 or 2, I'll call them anchor clients that might be 40% or 50% of the business, where they've got a large corporate client or 2. And what that helps us with is, we can go in with that client and expand because we've got a better relationship at a C level with those types of clients, and it helps us that much more on the organic side. So lot of organic growth, a lot of inorganic opportunity.

Yes. That's really exciting. So maybe we can pivot then to another business of yours, that's probably the most direct beneficiary of all the AI infrastructure spending, your data center business. We've had some other operators come in at this conference and share their thoughts on what's going on, I would love to hear from your perspective, how does your data center business look in 2026, maybe you can comment on your pipeline, how you see demand trends being impacted by whether it's AI training or inferencing or -- and any other sort of geographies or sites that you're particularly focused on?

Yes. So first, I'll give a little bit of a thumbnail on our data center business in total. So as I mentioned earlier, last year, we did about $800 million in revenue, low 50s EBITDA margin. This year, we're going to do well over $1 billion of revenue, low 50s EBITDA margin. We expect our margins will be up year-on-year in every quarter this year. And I expect the margin continues to enhance because the deals we've been writing over the last few years, which will commence going forward are high-return opportunities.

As it relates to what we're operating, today, we operate 488 megawatts across the globe, and we're about 98% leased on that. So we have almost no vacancy. And we are under construction on 190 megawatts of which we're like 70% pre-leased. And the pre-leasing is to the major cloud hyperscalers, investment-grade type companies with 10- to 15-year leases on average, and at 10% to 11% cash-on-cash unlevered returns or what those deals are written to.

So we are not -- we don't consider ourselves like a speculative builder we are looking to pre-lease the asset before generally, we put the shovel in the ground. And then we have in addition to the 490 or so that we're operating the 190 that's under construction, we have a held-for-development land portfolio, that's about another 660 megawatts. And so we've got a lot of track record here in terms of what we've been able to do as well as a big trajectory for growth.

If you look at our pipeline that you asked about, the first thing I usually emphasize to folks is that, over the next 2 years, we have 400 megawatts that will energize that we have not yet leased. And of that, about 200 megawatts of that will be energizing in the next 18 months. And these are all in what I would describe are great locations for cloud inference. And that's what we generally are selling and leasing to our cloud hyperscale clients.

And so think about we've got 175 megawatts or so that will energize over the next few years in Northern Virginia and Manassas on our campus there. We've got 200 megawatts in Richmond. We've got 100-plus megawatts in India, 80 megawatts in Madrid. We've got access to power coming available for -- megawatts to sell in London, in Amsterdam, highly attractive markets for cloud players.

Last year, we leased a little over 60 megawatts. Over the last 4 years, we've averaged leasing over 100 megawatts a year. And so one of the challenges we had last year was we just didn't have a lot that was energizing soon. But over the last 12 months or so, we've gotten that much closer to that energization. And generally, we are finding that hyperscale clients are interested in leasing somewhere between, let's say, 12 and 18, 20 months in advance of the energization. That's a really good time frame for us because we can build the data center in that time frame and even in 11 months, 10 months, that sort of thing. And so it enables us to be, I think, very efficient with our capital deployment build the sites that clients need.

On average, we're doing like a 30 to 40 megawatt single-tenant lease at that kind of 10- to 15-year duration, very good returns. And I think, Calvin, as we said on our earnings call recently, our pipeline has grown considerably. It is robust and we have a lot of kind of 30-, 40-ish megawatt deals. We have clients talking to us about much larger opportunities as well.

Look, we guided to doing 100 megawatts of leasing this year, but I think the opportunity is over the next, let's say, 24 months is very big because we have so much power energizing and frankly, power is in limited supply out there. So we feel quite good about the opportunity we have and the conversations we're having. It's a lumpy business, as you know, because we're taking down good-sized deals one at a time. But yes, I feel very good about our data center business.

And we definitely heard the theme on power being scarce and the fact that you have so much -- so many megawatts energizing, I think, is helpful. So maybe how does that impact or translate into pricing or returns or yields on these investments that you're making?

Yes. So we're very pleased with where our target return is as we're writing these deals of the 10% to 11% cash-on-cash unlevered kind of sort, occasionally see a deal that might be a little bit beyond that. Generally, we're not doing anything below like a 10% because as you point out, the power is quite constrained out there. And we have power coming available in, what I would say, our Tier 1 locations for cloud inference and there's just more activity.

And frankly, all those large language models that they've been training in very big gigawatt locations, they monetize them through inference going forward. So there's just a -- I think there's a really big market opportunity there, and yes.

So maybe we can pivot to the third business that you have, and I'll bucket this as the records business. And maybe I'll ask 2 questions and then you can answer them in the order you see fit. The first is you talked about your digital solutions business. I would love to understand how that is impacting your records business, what's the growth curve there and what's driving it?

And then second, on the records business itself, despite all these trends that we've been talking about, that business has been super steady, durable cash flow generative, why is that business so resilient? What drives that? And maybe you can talk about some of the drivers there.

Yes. So I'll start with the digital based on your questions. The digital business for us is one that has grown immensely over the last few years. It wasn't that many years ago, it was a $150 million business. We exited last year on that level on a quarterly basis. So we exited last year at $600 million of revenue run rate.

And so that business is all about helping clients with digitization, monetizing information that they didn't previously have access to metatagging and being able to do analysis on what has essentially been dark data for them. And there are immense use cases and frankly, AI is just a tailwind here because it's enabling us to do things for clients that historically wasn't cost effective to do.

And that creates many additional use cases. Our guidance for that business is to grow 20-plus percent, but frankly, we won some really large deals. The IRS is one that we talked about publicly. And so the United States government spends an immense amount, hundreds of millions processing paper tax returns. Most people think, how could there be a paper tax return, there are still a whole lot of them.

And so we and 3 other tiny vendors on a large contract. It's 5 years in nature. And if we got all of the business, we -- revenue about $150 million, let's call it, $150 million of annual revenue. Now we probably won't get 100% share, but we expect to get the vast majority of the business over time.

This year, we guided to that business being $45 million of revenue, last year, it was only $6 million. And then we looked out to 2027 on our most recent call and said that business will probably be north of $100 million, potentially much more than $100 million.

And so when you think about the inherent growth that we already have in our core business for digital, those businesses, those client relationships that we've already won. And that business, by the way, is increasingly recurring. So it's a much more durable and stable business as we get more recurring business into it.

It will just inherently grow faster over the next couple of years because we've got the IRS tailwind. Importantly, I'll tell you, things like DOGE and government efficiencies, those are a tailwind to our business because they are creating incremental opportunities for us to help clients like the internal revenue service with that sort of digitization and metatagging type of work that's inherent in our proprietary software system that we've developed, which we call DXP.

There's tremendous numbers of use cases for that across our corporate clients as well as across government. So we're in the process of talking to governments in the U.K. and throughout Europe, about similar types of deployments as well as on the corporate side. We already do a tremendous amount of like back-office mortgage processing in the United States and in India, among other markets, do auto loans, anything that has a physical and digital component with manual, generally, we can help simplify significantly drive a considerable value for the client and build our business, which is very sticky.

And then on the records business, we don't have a lot of time, but I'm very passionate about this business because it's -- the investment community has historically not, I'd say, given it much respect but it is an incredibly strong business, very durable. We have grown -- the company has grown organic storage records revenue for like 4 years in a row, Calvin, organically.

And our volume, the paper records that we store, we have never stored more than we are storing today. We said, we're over 740 million cubic feet, which is a number that's kind of very hard to get your mind around. It's a massive amount. And our clients send us new boxes on a routine basis. In some cases, it's every week in other cases, it's every month. And why do they send us these things? It's because they need them in the future. They may need them and they want -- chain of custody is important to them, security, privacy, and they standardize with us in most cases, decades ago.

And it has -- inherently, we are offering them a very significant value. And while we have the ability to generate revenue management actions year-by-year, we're not looking to find elasticity in the model because the record business leads to all the cross-sell that we've just been talking about. All of our records business or at least, let's say, the top half of all those client relationships could easily be ALM clients or digital solutions clients.

In some cases, they're already colo clients in our data center business. So it's a business that inherently we think can continue to grow at kind of that mid-single-digit plus rate, it generates tremendous cash flow. It requires almost no capital to continue to grow. Our team is executing quite well. Our operations team did a phenomenal job last year, continuing to improve margins. We expect to continue to move margins in that business again this year.

And it is kind of the secret to the success because unlike other data center companies, we have retained cash flow coming out of our core businesses. Our core businesses -- and I would add ALM and digital to this, they don't require a lot of capital to grow. And while data center is a very capital-intense business, we start each year with like now going forward, probably $400 million or $500 million of retained cash flow.

We're going to generate $1.5 billion to $2 billion of operating cash flow this year. Our maintenance CapEx is about $150 million, and you got our dividend. So right there, you've got like $400 million, $500 million that we can then put into growth, which is principally data center. And then we have, I'd say, a balanced view on capital allocation. We target leverage at 4.5 -- 5.5x. We just achieved 4.9x on that -- at the end of the year. That's the lowest we've been in like, I don't know, 20 years, and we aim to be kind of right here at the 5x level.

And with growth of EBITDA, with that target leverage together with the retained cash flow, we can more than fund our data center build out. So it's a very virtuous cycle in our businesses.

That makes a lot of sense. You touched on the capital allocation and capital return policy. I mean you've increased your dividend now 4x in the last 4 years. How do you think about that portion of it versus investing?

Yes. For years now, we've been saying as a company that we're targeting like low 60s percent of AFFO for the dividend. And there were some years ago, when I first joined the company, we were much higher on that percentage. We didn't raise the dividend for several years because we said we're going to get it down into that target ratio. That ratio, by the way, kind of approximates our REIT minimum, generally speaking.

And so our AFFO is growing double digit. Therefore, our dividend grows double digits because we're going to stay in that target range. And it's not a huge like incremental capital use when we think about deployment. And so what investors should be expecting is as we continue to grow AFFO at a double-digit rate, the dividend will as well.

That makes sense. That makes sense. So maybe I'll ask 1 last question then as it relates to capital strategy and financial solutions, as you continue to invest, what are the metrics or milestones that you're focused on ensuring that the growth profitable and sustainable.

Yes. So it's situational business by business, of course. And on the data center side, we're just very returns focused in terms of what we're writing. So we're trying to be very disciplined that it needs to be 10% or better cash-on-cash unlevered return. There's no reason to go lower than that because it's -- there's a supply/demand imbalance. And frankly, that's the right -- we feel like the right return level because it's very capital intensive.

And then from -- on the digital solutions business, it's about continuing to drive operating scale, efficiency and write contracts that are recurring, where we can continue to do what we've done on our record business for years, which is drive incremental profitability in those businesses, hone the processes we're doing for clients and generate incremental profit as we move forward.

On the ALM side, I talked a lot about the hyperscale side. But on the enterprise side, that business has inherently margin opportunity as we drive incremental operating scale and we become a larger and larger player in that market. I mean we're dealing with the business last year that was a little over $600 million. It's going to be I think, in the billions in the next few years.

And so there's a lot of inherent margin opportunity in there. And then in the core business, I mean, that's kind of what we've -- that's what we've been doing for years -- the team has driven over the last decade in excess of 1,000 basis points of margin improvement in that part of the business. And we're not done.

Okay. Well, that's great. Maybe we'll end there. Thank you for your thoughts today, and have a good rest of the conference.

Thank you, Calvin. Appreciate it.

Good morning, and welcome to the Iron Mountain Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Mark Rupe, Senior Vice President of Investor Relations. Please go ahead.

Thanks, Poly. Good morning, everyone, and welcome to our fourth quarter 2025 earnings conference call. Joining us today are Bill Meaney, our President and Chief Executive Officer; and Barry Hytinen, our Executive Vice President and Chief Financial Officer. After our prepared remarks, we'll open the lines for Q&A.

Today's call will include forward-looking statements, which are subject to risks and uncertainties. For a discussion of the major risk factors that could cause our actual results to differ from these statements, please refer to today's earnings materials, including the safe harbor language on Slide 2 of the earnings presentation and our annual and quarterly reports on Form 10-K and 10-Q. Each of these items as well as reconciliations of non-GAAP financial measures referenced during this call can be found on our Investor Relations website.

With that, I'll turn the call over to Bill.

Thank you, Mark, and thank you all for joining us today to discuss our fourth quarter and full year results. We are pleased to report another record performance in the fourth quarter above our expectations, delivering all-time highs and 17% year-over-year growth for revenue, adjusted EBITDA and AFFO.

Organic revenue increased 14% in the quarter, driven by broad-based strength and record results across our business segments. The very strong performance concluded an exceptional year for Iron Mountain in 2025, marking our fifth consecutive year of record results and double-digit growth. For the full year, revenue increased 12% to $6.9 billion. Adjusted EBITDA grew 15% to $2.6 billion and AFFO increased 15% to $1.5 billion. These outstanding results reflect our team's steadfast commitment to delivering innovative solutions for our customers and the strong returns we are generating from our growth investments across the business.

Let me share some of the highlights from this record year and the momentum this provides underwriting our expectations to sustain industry-leading revenue and earnings growth into 2026 and beyond. We continue to capitalize on robust data center industry demand. Data center revenue increased 30% in 2025, including 39% in the fourth quarter. We expect the data center market will remain very strong in the coming years as hyperscale is build out inference and cloud capacity. With 43 megawatts leased in the fourth quarter, we entered 2026 with strong momentum in leasing and have great assets in prime markets. Our confidence in sustaining strong data center growth is supported by our current backlog, which we expect to drive more than 25% revenue growth in 2026. And on top of this, we expect another year of 20%-plus growth in 2027.

Moreover, we anticipate a year we will release over 100 megawatts in 2026, further adding to our backlog. This confidence is driven by the conversations we are having with our customers around our land bank, which includes 400 megawatts of available capacity that is expected to energize over the next 24 months, half of which is expected to energize in the next 18 months. And we are driving substantial growth in our asset life cycle management business. ALM revenue increased 63% in total in 2025, including 40% on an organic basis. And we ended the year on a high note with 56% organic growth in the fourth quarter, driven in part by higher component remarketing revenue. In 2025, we increased the number of Fortune 1000 customers utilizing our ALM services to 360. This is up from 270 in the prior year. And importantly, we have significant room to grow within these existing customers.

Looking ahead, we are focused on capitalizing on the large opportunities in the ALM market and we expect this to be a multibillion-dollar business for Iron Mountain in the future. Furthermore, we are off to a strong start in 2026, benefiting from recent commercial wins, increased customer penetration and higher component remarket revenue. And our digital solutions business continues to build momentum. We achieved an all-time high for digital revenue in 2025, eclipsing $500 million, driven by another year of double-digit growth. We are seeing solid demand for traditional projects and are winning new contracts across industry verticals for DXP, our AI-powered digital solutions platform. The number of DXP deals secured in the fourth quarter was an all-time high, and we're at an average deal value more than double the prior year. The outlook is equally as promising as the DXP pipeline continues to grow.

In 2026, we expect to maintain strong digital growth supported by our new project wins and growth in our underlying recurring business, which is now more than 40% of our digital revenue. Collectively, these 3 growth businesses of data center, ALM and digital grew more than 30% in 2025 to nearly $2 billion in revenue. They accounted for 2/3 of our growth or 8 percentage points of growth on a consolidated basis. This growth portfolio provides an important tailwind in supporting our plan for double-digit top and bottom line growth well into the future, which will only build as the growth portfolio continues to become a larger mix of the overall enterprise.

I also want to highlight the strength and importance of our highly recurring legacy physical storage business. This high margin nearly $5 billion business serves as a strong foundation for Iron Mountain. It drives substantial cash flow and funds growth investments across the business. It is also central to our cross-selling opportunity as this is where we originally built our more than 240,000 customer relationships, including 950 of the 1,000 largest global companies. In 2025, the physical storage business achieved record revenue growing at a mid-single-digit rate, consistent with our long-term expectations. This year's performance marked our 37th consecutive year of organic storage rental revenue growth.

And looking ahead, we remain totally committed to growing this business through our innovation around how we help our customers get more value from the information we store on their behalf as well as our revenue management strategy. This continues to prove a winning strategy by yielding consistent volume growth, coupled with an increase in our value-add driven by our approach to this important service line. We have great confidence in delivering on this in 2026 and we have already set into motion many of our key initiatives.

In addition to our growth achievements, we also executed very well operationally. We drove expanded profitability across the business with adjusted EBITDA increasing 15% and margin improving 90 basis points at the enterprise level as compared to last year. So as you can see, I am very proud of our team's performance in 2025, and we are entering 2026, our 75th anniversary with incredibly strong momentum. And yet, despite all of our recent success, what is even more compelling is that we are still in the early phases of our longer-term growth journey. We are just still scratching the surface of the $170 billion total addressable market for our services. We look forward to 2026 being another record year for Iron Mountain, and this is within our guidance outlook.

Now let me share some recent commercial wins that illustrate the strength of our synergistic business model and support our conviction on sustaining double-digit revenue growth. First, in records management. In North America, we secured a significant multiyear extension with a leading global health care provider, operating more than 2,000 locations. We will pick up an additional 550,000 cubic feet of records as well as deliver a comprehensive suite of information [indiscernible] solutions. Our long-standing relationship, in proven track record, global footprint, deep compliance expertise and ability to deliver meaningful value to the customer were key factors in securing this deal.

In Europe, we secured a multiyear agreement with a major U.K. government department to provide record management solutions. Iron Mountain was selected based on the strength of our established relationship, proven reliability, deep understanding of regulatory requirements and ability to drive measurable operational efficiency for the customer. I would also like to highlight a very important win in our media and archival services business, a leading global media and entertainment company and partner of ours for more than 15 years, engaged us to securely store and preserve more than 1,600 high-value media assets across multiple geographies. Iron Mountain's unmatched global reach, technical expertise and proven track record in managing complex media archives were key advantages in winning this large and competitively bid deal.

In our Digital Solutions business, a leading Asia financial services company with more than 1,000 locations selected Iron Mountain to support its digital modernization efforts through a multiyear agreement, building on an existing 10-year records management relationship. This transformative software-only deal launches in 4 key markets, with plans to expand across 16 additional markets replacing the customer's legacy enterprise data management platform with DXP. The solution incorporates DXP's AI capabilities to extract metadata from over 500 million images and digital files to improve the quality and accuracy of the customer's database as well as provide secured digital storage in advanced backup services. Our leading AI technology that allows our customers to treat unstructured data in a structured manner, robust security standards, deep regulatory expertise and ability to deliver a scalable solution aligns with the customers' strategic priorities. These were instrumental in securing this award and displacing incumbent providers.

And as it relates to our work with the Department of Treasury, we continue to execute under this new agreement. We expect 2026 will be a ramp-up year. We have already established ourselves as the leading partner to the treasury for these services. As the department manages through complexity of this significant project, we have included $45 million of revenue related to this program in our 2026 outlook.

Now let me turn to our data center business. Our strong partnerships with many of the largest hyperscalers drove new leasing in the fourth quarter, and they remain actively interested in all of our key data center developments. At our Northern Virginia campus, we won a 15-year contract for 28 megawatts of capacity from a major hyperscaler supporting the continued expansion of its cloud platform. In addition, as we discussed in November, an existing hyperscale customer leased our entire 36-megawatt Chicago site as part of a 10-year contract, transferring and expanding the customer's previous lease in London. Also this quarter, another major hyperscaler at least 2 megawatts in our Phoenix campus as well as 600 kilowatts in our Madrid campus.

Turning to our Asset Lifecycle Management business. In the U.S., a large financial institution selected Iron Mountain to provide secure IT asset disposition services for end-of-life network equipment in telephones across over 2,000 branch locations. The deal represents a cross-sell, building on our long-standing partnership for records management and digital solutions. Our established track record of providing customer value along with our reputation for security, compliance and ability to operate at scale across the U.S. were important factors in winning this business. Successful cross-selling was also key to winning a deal with a Fortune 100 health care technology company to manage the secure recovery, audit and compliant disposition of more than 11,000 employee devices. Our unique capability to rapidly deploy comprehensive end-to-end ITAD logistics while mitigating operational risk and compliance exposure, we're determining factors in the customer's decision. We are optimistic that this newly expanded relationship will deliver significantly more opportunities in the future.

And a global IT infrastructure services provider has engaged Iron Mountain to support its data center decommissioning and asset remarketing initiatives for more than 30,000 deployed IT assets across North America. This multiyear deal builds on our established records management and digital solutions relationship. Our ability to deliver scalable, compliant and cost-effective solutions with a key differentiator in displacing incumbent providers.

In conclusion, I want to thank my fellow Mountaineers across the world for their continued dedication in serving our customers. Our Mountaineer's best-in-class stewardship of our more than 240,000 customers continues to be a key factor in our success. As you heard today, we are delivering exceptional results, have incredibly strong momentum across the business and remain in the early phases of executing against our tremendous long-term growth opportunity.

With that, I'll turn the call over to Barry.

Thanks, Bill, and thank you all for joining us to discuss our results. As you've heard this morning, we delivered exceptional performance across the business in 2025 and enter 2026 with strong momentum.

In terms of the fourth quarter, we achieved record quarterly results across all key financial metrics. Revenue of $1.84 billion was up $262 million year-on-year. This was well ahead of the projection we provided on our last call, driven by strength across our business and particularly in our ALM business. As compared to last year, revenue increased 17% on a reported basis, 15% on a constant currency basis and 14% on an organic growth basis in the quarter. Total storage revenue was $1.06 billion, up $119 million or 13% year-on-year. Total service revenue was $782 million, up $143 million or 22% from last year. With the strong services growth, gross margin in the quarter was modestly down from last year, entirely the result of mix. As we have talked about before, our services revenue has lower gross margin and services increased in penetration by 200 basis points as compared to last year.

I will also note that our services gross margin expanded over 100 basis points year-over-year and was up 350 basis points from the third quarter. This is an excellent accomplishment and resulted from strong execution by our operations team. And from an expense perspective, we achieved great operating leverage, delivering our lowest SG&A expense ratio in many, many years. Adjusted EBITDA of $705 million expanded $100 million or 17% year-on-year. This was $15 million ahead of the projection we provided on our last call, driven by higher revenue and operational efficiency across the business. Adjusted EBITDA margin was 38.3%, which is the highest level we have ever reported for this metric so far, and as you will see in our guidance, we are projecting further EBITDA margin expansion in 2026. AFFO was $430 million, up $62 million. This represented an increase of 17% as compared to last year. And AFFO on a per share basis was $1.44, up 16% to last year and was $0.05 ahead of the projection we gave on our last call.

Now let me summarize briefly the full year, which marked our fifth consecutive year of record results across all key financial metrics. Stepping back when compared to our initial outlook for the year, we exceeded the high end of our guidance for revenue and adjusted EBITDA by approximately $100 million and $50 million, respectively. Revenue of $6.9 billion increased 12% on both a reported and constant currency basis. Adjusted EBITDA increased 15% year-on-year to $2.57 billion, an increase of $338 million. AFFO increased over 15% to $1.54 billion or $5.17 on a per share basis.

Now turning to segment performance. In our global RIM business in the fourth quarter, we achieved record quarterly revenue of $1.37 billion, an increase of $115 million. Reported growth was 9%, including organic growth of 7% year-on-year. Storage revenue growth increased 7% on a reported basis and up 5% on an organic basis. We were very pleased with our core physical performance, which, as you know, includes our box and consumer storage businesses. It was up 8% year-on-year and upward quarter. Now I will call out that you will see that our total RIM storage revenue was down very slightly from the third quarter. This was attributable to 2 items. The U.S. dollar was stronger quarter-over-quarter. And secondly, we recognized lower data management revenue following a particularly strong performance in the third quarter. Global RIM service revenue grew 12% with organic growth of 10% in the quarter. This strong growth was driven primarily by our digital business and core record management services.

Turning to the treasury contract that Bill mentioned, we recognized $6 million of revenue in the fourth quarter, modestly ahead of the expectation we shared on our last earnings call. For 2026, we are using a conservative outlook as we are in the first year of this multiyear contract and have included $45 million of revenue in our guidance. Looking out to 2027 and beyond, we expect to generate in excess of $100 million in revenue annually. Global RIM adjusted EBITDA increased $43 million to $622 million, yielding an adjusted EBITDA margin of 45.3%.

Turning to our global data center business. We achieved revenue of $237 million in the fourth quarter, an increase of $67 million or 39% year-on-year, driven by lease commencements and positive pricing trends. In the fourth quarter, we signed 43 megawatts of new leases, immense 41 megawatts of leases, and we renewed 176 leases totaling 4 megawatts. Pricing remains strong with renewal pricing spreads of 9% and 12% on a cash and GAAP basis, respectively. Fourth quarter data center adjusted EBITDA was $122 million, up $34 million year-on-year resulting in an adjusted EBITDA margin of 51.5%. For 2026, we expect more than $1 billion in data center revenue, which represents an increase of more than 25% year-on-year, together with segment EBITDA margin up year-on-year in every quarter.

Turning to Asset Lifecycle Management. total ALM revenue was $190 million, an increase of $78 million or 70% year-over-year. This exceeded the projection we provided on our last call by $30 million, driven equally by hyperscale and enterprise businesses. On an organic basis, our team grew revenue $64 million or 56% growth. This was achieved through broad strength across the ALM business. Within enterprise, we continue to win new logos and increase penetration with our existing customers. Our recent acquisitions of Premier Surplus and ACT Logistics are performing well, contributing $14 million to revenue in the quarter. And from a profitability perspective, we are pleased with the team's execution in driving continued improvement, expanding margins. For 2026 we expect $850 million in ALM revenue, which represents about 35% year-on-year growth, together with expanding margins.

Turning to capital allocation. We remain focused on growing our dividend and investing in high-return opportunities that drive double-digit growth while maintaining our strong balance sheet. Our Board of Directors declared our quarterly dividend of $0.864 per share to be paid in early April. Now as a reminder, this is 10% higher than the comparable quarterly dividend last year. Our commitment is to continue growing our dividend, building on 4 consecutive years of increases, while we maintain a target payout ratio in the low 60s as a percentage of AFFO per share. In terms of capital investments, we invested $525 million of growth CapEx and $43 million of recurring CapEx in the fourth quarter. For 2026, we are planning for capital expenditures to be slightly down from last year with $2.0 billion in growth capital and $150 million in recurring CapEx. Now as investors know, our data center strategy is focused on pre-leasing before commencing meaningful instruction.

Turning to the balance sheet. With strong EBITDA performance, we ended the quarter with net lease adjusted leverage of 4.9x, slightly better than our expectation. This represents our lowest leverage level achieved since prior to the company's REIT conversion in 2014. For 2026, we expect to end the year at similar levels to year-end 2025.

And now turning to our outlook for the full year 2026. As you've heard from us today, we are very pleased with the momentum. We built in the business and have line of sight to another year of double-digit growth. For 2026, we expect total revenue to be within the range of $7.625 billion to $7.77 billion, which represents year-on-year growth of 12% at the midpoint. On an organic constant currency basis, this represents growth of 10%. We expect adjusted EBITDA to be within the range of $2.875 billion to $2.925 billion, which represents year-on-year growth of 13% at the midpoint. We expect AFFO to be within the range of $1.705 billion to $1.735 billion, which represents year-on-year growth of 12% at the midpoint and we expect AFFO per share to be $5.69 to $5.79. This represents year-on-year growth of 11% at the midpoint.

I want to provide a couple of points for modeling. We expect FX to be a benefit to full year revenue by approximately $75 million and last year's acquisitions to contribute revenue of approximately $45 million. And turning to the first quarter, we expect revenue of approximately $1.855 billion, an increase of 16% to last year. On an organic constant currency basis, excluding FX and last year's acquisitions, this equates to 12% growth the last year. Adjusted EBITDA of approximately $685 million and an increase of 18% to last year, we expect AFFO of approximately $415 million, an increase of 19% to last year. And AFFO per share of approximately $1.39, an increase of 19% to last year.

Before concluding, I would like to provide an update as compared to our long-term targets. As you will remember, in late 2022, we set 2026 financial targets for revenue and EBITDA of $7.3 billion and $2.5 billion, respectively. On like-for-like FX rates used to establish these targets, our 2026 guidance for revenue and adjusted EBITDA is approximately $8.1 billion and $3.0 billion, respectively. This represents 5-year CAGRs in excess of 12% for revenue and 13% for EBITDA. With the large and highly fragmented markets we address, together with only 5% of our customers currently buying for more than one of our business units, we expect to grow revenue at a double-digit rate for the foreseeable future. I would like to express my thanks to our entire team for their focus and dedication to serving our customers and their commitment to Iron Mountain.

And with that, operator, would you please open the line for Q&A?

[Operator Instructions] The first question today comes from Eric Luebchow with Wells Fargo.

Great. Can we maybe touch a little bit on the data center pipeline. Obviously, it's encouraging to hear you talk about a 100-megawatt-plus opportunity ahead of you. Maybe you could talk about some of the markets where you're tracking larger deals. And your degree of confidence in some of the activity and leasing conversations you've had? It would be great to hear about that.

Eric, thanks for the question. Yes, I mean the -- first of all, we feel like we're going really into the year with very strong momentum based on the over 40 megawatts of leasing we did in the fourth quarter. And you can imagine, leasing 40 megawatts in the fourth quarter is you're having a number of conversations about a number of sites with your key customers. And the sites are not surprising to you. If you look at the 400 megawatts that we have energizing over the next 2 years, the sites that are attracting a lot of interest are continued Northern Virginia because we still have some capacity that will be coming online there.

Richmond, which we have over 225 megawatts of capacity coming online before the end of '27. Madrid, obviously, is a hot market in Europe. Our London campus, which we did that slot, where a customer wanted to swap out of London for going in and taking all of Chicago. The London -- we put that back on the market. And of course, that's very attractive, both to hyperscalers, but also the retail market in London is extremely strong and obviously has very high yields. So we have a number of conversations both around retail and wholesale there. And then India, right? So the Indian market is getting more and more momentum. So -- and we have a lot of capacity coming online again there in the next 2 years. So across the board, the conversations really started picking up in fourth quarter, which you can see in the leasing activity we did in the fourth quarter. We feel really good. The fact that we have 400 megawatts being energized in just 24 months. And we see a lot of the folks that were focused on large language models in the last year are now going back to making sure they have a capacity for their cloud build-out and inference.

The next question comes from Tobey Sommer with Truist.

I'd like to ask you a question about ALM. Could you give us some more color about the momentum you're seeing in that business for organic growth this year and then the opportunity for you to really maybe broaden your footprint through acquisitions as this turns into a truly global business.

Yes. Thanks for the question, Tobey. Let me kind of start off in terms of the conversations we're having with the customers and the cross-selling capability. And then Barry can give you a little bit more color in terms of how that's showing up in the financials. But if you noticed in the Fortune 1000, effectively, the 950, is we are really pleased with the number of logos that we added this year. I mean it's over a 20% increase in the number of logos. But the thing that's important, we're well excess of over 300 of our largest customers that are now buying our services. But even those, we're just scratching the surface.

So if you think about it, we're really growing the business amongst the largest, most complex, most regulated companies in the world in 2 dimensions. One is we're now building and displacing their previous suppliers, in many cases, and then -- and there's more growth just within those customers. But then, of course, we're continuing to build momentum in the customers that we're not serving that we already are serving in other business lines. So the momentum and the growth, both in terms of expanding in existing customers, but as well as adding new logos is continuing to build.

Yes. Tobey, I'll just add that, first of all, we feel great about the ALM business. We're operating in a very large fragmented market, and we're clearly driving growth.

And I will say, if you look at this year, the $850 million of revenue that we just guided to, that includes just about $20 million of inorganic, and it has -- if you work through the math, you'd find that our enterprise business, we're forecasting to be upwards of 20% organic growth. So -- and the balance being in our hyperscale business where, as we talked about before, that is -- tends to be more of a project-based business. And of course, as I mentioned in some of the remarks in December at an investor conference, pricing in that part of the market has been beneficial. And we're kind of using current market trends as it relates to the dynamics of hyperscale decommissioning in this forecast. So I would say there's a tremendous amount of opportunity for us in ALM, both in hyperscale and in enterprise. And so we appreciate the question.

The next question comes from George Tong with Goldman Sachs.

In your ALM business, revenue grew 56% organically in the fourth quarter. Can you talk about how much of that growth came from volume versus pricing? And what you're assuming for pricing contributions in your 2026 ALM outlook?

Yes. George, I'll take that one. So if you recall in December, I was speaking at an investor conference, I mentioned that memory pricing, in particular, and I think that's what you're specifically speaking about because that's where the industry has seen some pricing trends. That pricing in memory was running $15-plus million ahead of what we had provided for our fourth quarter guidance at that point in the middle of December. And we did a little bit better than that, probably $15 million to $20 million versus our original guide for the fourth quarter on pricing related to memory.

As you know, hyperscale represents generally about 40% of our ALM business. It was a little bit higher than that in the fourth quarter, but for the full year, it was at 40%. And memory tends to be between 40% and 50% of the revenue and that we're kind of at the higher end of that kind of percentage in light of where pricing has been. I'll tell you, pricing has continued to be strong here in the early part of the year. And what we're doing with our current forecast is we're assuming that kind of -- we're kind of continuing to use current market conditions as it relates to pricing and volume going forward.

The other thing I'll give you is that, in total, you heard us right, 57-plus percent organic growth in the quarter. Our enterprise business was very strong as well. So it was a very balanced mix across the business. The outperformance, as I mentioned in the prepared remarks, George, was equally split between hyperscale and enterprise. So we're feeling quite good about where we are.

The next question comes from Shlomo Rosenbaum with Stifel.

This is [indiscernible] on for Shlomo. Could you just dive a little bit deeper into the gross margin trends in the services business? I mean, you mentioned some of the puts and takes of what that was. But maybe just provide a little more detail would be helpful.

Okay. Ben, thanks for that one. As I talked about before, our total gross margin is naturally affected by mix, right? Because our storage business, a higher gross margin, as investors know and our services margin is more services oriented in that way.

And so the important thing to note about our services gross margin in the quarter, it was up over 100 basis points and on a sequential basis, up 350. And the thing I'll point out there, Ben, is that our services margins are improving across the company. And so our services margins within Global RIM improved year-on-year meaningfully. They improved meaningfully within ALM and on -- and the data center doesn't have a lot of services, but it was also very strong. And so our view is that our teams are executing quite well, and that's a function of both strong execution, operating leverage and a little bit of pricing on the services lines as well. And we think that, that trend can continue with respect to our services gross margin.

The other thing I'll note is while our gross margin on storage, I mentioned in the prepared remarks, was down slightly. That was all due to mix because even within the global RIM business, the storage gross margin was up year-on-year. And so what's happening there is, as I've talked about before, as data center becomes a larger and larger portion of our business, it's got a slightly dilutive gross margin to our storage average. But of course, it's got a very accretive EBITDA margin to our goal company. So we were very pleased with the margin performance across the company, both within storage and service.

The next question comes from Jonathan Atkin with RBC Capital Markets.

Yes. I wonder if you could maybe just talk about M&A landscape, as it pertains to, I suppose, both ALM as well as data centers.

I'll start, John. Thanks for the question, and Barry may want to add something. But the -- I think, first of all, let me deal with on the data center side. And I think you and I have talked about this before, is we don't really see ourselves active in the M&A market for data center. And we have done some -- we did the IO data center. We did the EVO in the U.S. We did EvoSwitch in the in Europe, and we did the Web Werks acquisition in India. But you can -- but all of those were brownfield, what I call brownfield acquisitions. And it was when we were in the early days entering those geographies. And it was really buying a platform and platform not just in terms of an asset with capacity to lease, but also a team that understood those markets. So I wouldn't expect us to be a big acquirer or M&A in the data center assets.

We feel pretty good about the teams that we have. We feel pretty good about the platforms we have in those geographies. And with 400 megawatts coming or ready to be energized over the next 24 months, we feel really good about being able to grow that business on a purely organic basis.

On the ALM side, in this area where I'll also ask Barry to comment further is we continue to see that as an attractive market. We're already in 40 markets. Some of those markets, we actually use partners, which is a way of actually understanding the opportunity to do further acquisitions to build out our footprint in those markets. And -- but we operate in 61 countries, right? And our customers -- one of the big differentiators when we're winning new business from a new business -- or I would say, adding an existing logo, the ALM services to that logo like I commented on the 90 additional customers we picked up this year in the Fortune 1000, is one of the things is our global footprint. So you can imagine that we want to be able to service our customers in all 61 countries around the globe. And a big part of that is our M&A engine.

But Barry, you may want to comment further.

Yes. So John, I would say, first and foremost, I just want to underscore the business is growing on an organic basis tremendously. And we've got a long runway there as we continue to penetrate our client base. And as we land at clients, when your logos expand considerably. So that's a long-term trend that I think is very much a tailwind to growth in the company.

On M&A, in particular, just to supplement some of Bill's comments, I'll just -- our corporate development team and our ALM teams consistently and kind of constantly looking at opportunities as one of the largest players, if not the undisputed largest player really in the space, we generally get a chance to see kind of any asset that's out there that might have a willingness to sell as we talked about before, we don't tend to predict when we might make a next acquisition in light of the -- just the dynamics of how M&A works. But I'll reiterate that in this market, we kind of see mid- to high single digits as a multiple of EBITDA. And with our ability to synergize those down, that quickly gets to below 5x. And so it's a very positive way to -- for us to continue to grow and supplement the organic growth that the team is delivering.

The next question comes from Andrew Steinerman with JPMorgan.

As we're building out our '26 cash flow waterfall as we do every year, could you tell us if there's any meaningful restructuring charges to consider for '26. And then also you noted that CapEx is down year-over-year, maybe a little more color on that. And refresh us how that splits between growth and maintenance CapEx? And any other kind of callouts that would be helpful in your cash flow assumptions for '26?

Okay. Sure thing, Andrew. So on restructuring charges, let me be very clear about this. We won't have any matter on restructuring. We have no restructuring charges in our plan at all. So from -- just as a reminder, our Matterhorn plan for restructuring ended last year. And so that generates a considerable amount of incremental cash flow for investments/less debt required to do our funding plans, Andrew. And it's, I think, a key point and our business is going to generate operating cash flow of between, let's say, $1.5 billion and $2 billion and we feel really good about where we're positioned.

As it relates to CapEx, of the estimate I gave, call it, the 2.2, it is [ 150 ] or so of recurring. And the balance is obviously growth with the vast majority of that upwards of -- in excess of -- in the vicinity of 1.8 of that will be data center, specifically, if not more. And when I mentioned that it'll be slightly down and I also alluded to the fact that we're very focused on pre-leasing, I'll just note that the situation is such that we provided for in our guidance for our ability to commenced construction on assets in excess of the level of what we're -- what our guidance is. And what I specifically mean by that is I would imagine we would not necessarily spend to this level unless we were actually pre-leasing more than we just projected.

We said we'd do at least 100, if not more megawatts. And so we're very focused on pre-leasing and just to reiterate that. And this allocation of capital deployment more than accommodates that level. And then as it relates to any other bits, the other thing I would give you on cash flow is for AFFO purposes, from a cash interest standpoint, I'd be planning for somewhere in the vicinity like $905 million for the full year, and that's just sort of the mechanics of taking the fourth quarter run rate. We had $207 million on that line. Annualizing that and then adding some incremental borrowings in the fourth quarter as well as borrowings across the year, and you pretty much get right to that number. And then cash taxes, I am assuming that will be up some let's call it, up about probably in the vicinity of $20 million year-on-year. That may be conservative. But in light of the really phenomenal growth we're seeing in services, particularly in ALM, I thought it was prudent to plan for a little bit more.

So in both of those cases, they're at a point where it works into our AFFO guidance such that I feel very confident in the way we've guided for AFFO, Andrew.

[Operator Instructions] The next question comes from Brendan Lynch with Barclays.

I wanted to follow up on RIM organic storage growth of about 5.2%. I think, Barry, you mentioned that there was some impact from lower data management revenue and maybe some consumer storage effects. Can you just kind of unpack that a little bit more and maybe tell us what is factored into your expectation for 2026?

Okay. So I'll start with the first part. There was -- the consumer business was right in line with what we expected, Brendan, just to mention that, first and foremost. So that wasn't a factor in the quarter. What was the factor in the quarter on a sequential basis was, first of all, the dollar was stronger. So that cut into our growth rate some -- if you look at third quarter versus fourth quarter. Data management, though, another point. And I know you cover us closely, and -- but for others, I'll just point out, in our 10-Ks and our 10-Qs, we have a table that shows our record innovation management business. It shows our data management, information it shows ALM, et cetera.

And so for those who are tracking it at a detailed level, they would have noticed that in the third quarter, we had a particularly strong comp in data management. When that business tends to be fairly steady, but it can oscillate quarter-to-quarter some and you've seen that over the many quarters of disclosure that we have out there on data management. So when you look at our total growth results, which is what you're looking at when you're asking that question, it's the combination of the physical business, the box consumer of the business as well as data management. So why do I tell you all that? Well, I think most times when investors are talking to me about our physical business, they're talking about our traditional box business and how that's going. And that business is very healthy. I mean it was up 8% in total. Our total physical business was up 8% year-on-year. It was up in excess of about 1% on a sequential basis despite the FX and volumes have continued to trend very well.

So as it relates to what we're forecasting for the business, we are expecting it to be up in that same mid-single-digit rate that we've expected for some time. A couple other tidbits for you. All of the revenue management actions that we anticipated taking are now fully in the marketplace. Sometimes that, as you know, moves around month-to-month, year-on-year. So everything -- we got all of those actions essentially in, in January. So that will -- from a timing perspective, that will help the first quarter a little bit because it's a little bit earlier than last year's revenue management play out over the first half as it relates to year-on-year. And we -- since people often ask me, I'll just say, we are very much expecting another year of modest growth in terms of organic physical volume.

The next question comes from Nate Crossett with BNP.

I think you might have said it in the prepared remarks, but can you just go over again how much you're expecting from the DOT contract this year and how that ramps over time? And then also, I don't think you guys give G&A guidance. So is there anything you can know on that for us in 2026?

So I'll start with the Department of Treasury. And Barry, you may chime in if you want to add more color. So we expect this year for it to be about at least $45 million as the Department of Treasury starts ramping up. As you can imagine, they're in a process of outsourcing from doing everything in-house to outsourcing.

The one thing is we feel really good about that number and that number will build. And as Barry said, we expect it to next year be around $100 million, which would be more kind of consistent with the annual run rate that we would expect from that contract and the feedback we're getting from the Department of Treasury. We're getting very, very positive feedback on our ability to execute on their behalf. We already have a FedRAMP certification on moderate, but we are also in the final approvals for FedRAMP high. And we're the only vendor that's at that stage in terms of FedRAMP certification. Just so you know, FedRAMP certification is an important certification when you're providing services to the federal government in terms of your SaaS platform. So this is based on our InSight SaaS platform, which is a part of our DXP platform. So we feel really good both in terms of our technology clearing these important hurdles to serve the federal government as well as the feedback we're getting from the customer.

And as we always expected, is 2026 will be a bit of ramp as there as they're beginning their outsourcing curve because, as you know, these things, they don't generally just flip a switch. It takes a little bit time to move people across.

Nate, I'll add just a couple of points on treasury and then come to your other question. I think we positioned ourselves in a very prudent way as it relates to this contract in our guidance. In the fourth quarter, we delivered about $6 million of revenue. In the first quarter, I would expect that to ramp up some. And then from a have standpoint, I would expect the 45 to kind of be generally split kind of evenly. Now I'll tell you that is purely -- the 45 level is purely being conservative and prudent based on the things that Bill was just speaking to in terms of the ramp-up and how they outsource.

We fully expect the business to be generating in excess of $100 million in 2027 and beyond, and it may be well beyond $100 million as we continue to demonstrate our capabilities to the government. So we're feeling quite good about the contract. And I'll just note, we continue to work with the federal -- various federal agencies about additional opportunities to support government efficiency. So we feel very good about what we're doing in -- with our digital solutions.

And I'll just add on to your second question. From an SG&A standpoint, first thing I would point out is, in our guidance, you should see that at the midpoint, we're forecasting for 40 basis points of additional EBITDA margin expansion. That will be benefited by SG&A leverage. And our teams here across the company and across the businesses are working to continue to transform the business. And we are adopting some AI tools to improve efficiency, to get more operating leverage. And frankly, I think we're just in the very early stages of that. So there is a multiyear opportunity to drive SG&A leverage and operating leverage across the company, and I look forward to reporting that to you over the next few years. Thank you.

This concludes our question-and-answer session in the Iron Mountain Fourth Quarter 2025 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.

Good morning, everyone, and thank you for joining us. My name is Brendan Lynch. I cover REITs here at Barclays. Very pleased to be here with Iron Mountain's Chief Financial Officer, Barry Hytinen. Barry, thank you for joining us.

Thanks, Brendan. It's great to be here.

Great. Maybe just to kick things off, you're coming up on the end of the Matterhorn strategy that has kind of contributed to the double-digit growth that Iron Mountain has been generating over the past couple of years. Maybe just give us a review of what that strategy accomplished and how we should think about your longer-term growth algorithm going forward?

Yes. So Matterhorn was all about being very focused on sustainably driving double-digit growth for the company and exploiting what is a very large addressable market in several of our core growth engines and cross-selling off of our core business and where we have 245,000 client relationships built on trust and decades of experience working with those clients. And over the years, we have invested in distinct other growth engines, which I know we're going to get into in terms of the growth businesses that can power double-digit growth.

And so Matterhorn has been very, very successful for the company as we've been on a trajectory now for several years of growing the business, 11-plus percent, something of that order. This year, we're going to do over 12% growth for the full year. We're exiting the year at about a 14% growth rate, if not faster. And we're generating considerable incremental EBITDA. So Matterhorn for us was about growing the business, continuing to power a business that can grow at that level for a sustainable future. And when we guide in early 2026, I fully expect we will be guiding to another record year of double-digit growth, Brendan.

Great. Matterhorn was the second of 2 restructuring programs. We're coming up on the end of it now. Should we anticipate any additional restructuring going forward?

No. Matterhorn -- this is the last quarter of Matterhorn restructuring, and we don't have any additional like restructuring dollars. And just to kind of answer a question that might be out there, those were onetime in nature. So you should not be anticipating additional of that sort going forward. And in fact, what you should be expecting to see is significantly incremental free cash flow, which we will use to further grow our business and/or need relatively less debt for the same line of growth.

Great. Maybe just one more on the restructuring charges. That had been kind of discussed in a recent report. I just want to give you the opportunity to kind of discuss that consideration and maybe any other accounting policies that -- have been topical recently.

Yes. So look, that report is highly inaccurate. I know there's been some questions. Let me just say it very clearly, there's no investigations of any sort going on. And of course, we shared the full report with our Board, and they agreed with us that it lacks any merit to even publicly comment on. So that's why we haven't addressed it in a public forum prior to this. And I think about our performance, Brendan, as our team has been delivering outstanding results for several years now. And I'd rather let our performance, both our past and our future performance speak for itself.

And as it relates to accounting, specifically, our accounting and our disclosures are all very consistent, accurate, in line with all reporting standards. And what they particularly focused on was our non-GAAP, and in that case, all of the things that we add back are fully disclosed and frankly, are very much in line with all of our REIT and data center peers. So I consider that matter behind us, and we will let our performance speak for itself going forward.

Great. Very clear. Let's dig in on some of those growth drivers going forward. Maybe first on data centers. It's been an interesting year with -- we see emergence of new cloud players, still some ongoing power constraints, large training sites versus cloud and inferencing demand. Where do you -- where does Iron Mountain's position in the data center realm sit? And how should we anticipate growth going forward?

Yes. So we are an operator of third-party data centers. We're operating today about 450 megawatts, which is 98% leased. So we don't have much in the form of capacity to sell. And probably about 1/3 of that is colo and 2/3 of that is hyperscale. And as we move forward over the next few years, we will generate incremental revenue and profit on the data center business just as we finish construction of the leases, we've already pre-leased with major hyperscalers.

So we're generally in the cloud and inference area in Tier 1 markets. We've got a lot of capacity to energize and sell in Northern Virginia, in Richmond, in London, some more in Madrid and Amsterdam, Mumbai. And these are all very high-quality markets where we will be energizing over the next few years.

And if you look at what we're under construction on, Brendan, we're under construction on about 200 megawatts, of which about 2/3 of that is pre-leased at this point. And we would anticipate continuing to pre-lease before we build. We're not a speculative builder in that sense.

And so what I'll say about this year is certainly, the leasing window that hyperscalers were looking at between when they lease and when it energized, I would say, has shrunk over the course of the last couple of years. We're seeing some indications now where that might be actually getting a little wider again, which would be positive.

But having said that, we have 250 megawatts that will energize in the next 18 months that is available to sell. And then we have another 200 on top of that, that will energize about 19 to 24 months from now. And so all of that is capacity that will be very attractive to hyperscalers. And we gave guidance earlier this year to do between 30 and 80 megawatts.

I can tell you, as we sit here today, we're -- as we discussed on our last call, we had leased an additional asset in early in the fourth quarter, and that was a net of an additional 11 megawatts for us that was leasing our entire Chicago asset offset against London.

And as I look out today, when we report the fourth quarter, I expect that we will be at 60-plus megawatts for the year. And I expect next year in light of our pipeline strengthening, we feel really good about the conversations we're having with hyperscalers, and you look at the blocks of inventory we have to energize and sell over the next 12 to 18 months, I expect 2026 will be another year of over 100 megawatts of leasing for us. And frankly, it could be a lot more than that because we've got a lot of megawatts energizing.

Great. Terrific. That's -- I think it's underappreciated by a lot of investors just how volatile leasing can be quarter-to-quarter. But if you look back over Iron Mountain's history over the past couple of years, clearly has had a very significant ramp in bringing megawatts online and getting them leased.

Yes. The 3 years prior to this one, we leased over 100 megawatts each year and kind of average about 120 megawatts. And the thing about it, Brendan, is we're leasing in kind of like 25 to 30-megawatt blocks. And so it can be kind of lumpy in that way in terms of when exactly a signature comes in.

So some people have asked me, why 30 to 80, that felt a little wide to folks. Well, if we get 2 deals done, we'll be at the higher end of that, if not even beyond. If we get 1 deal done, we'd be kind of at the midpoint, that sort of thing. So it can be a little bit timing one quarter to another, but we feel really good about where we are here in the fourth quarter, and we feel great about next year.

Great. How should we think about delays in accessing power? Is that getting any better? Is it getting any worse?

I can't speak for the broader industry, but I'll just say in our energization, all of our energization schedules are pretty much on track. The vast majority of them are, as I mentioned, energizing over the next 18 months and then some more to 6 months after that.

I would say, certainly, energy is the long lead time item. And I'm pleased that our team has very good relationships with the energy companies in the various markets we do business in, principally because we've been operating in those markets now for years. We've been dealing with the same power companies and GCs that help us construct, and electricians and also, we know the local municipalities in the markets that we're operating in. So we feel really good about our ability to deliver over the next year or 2 years.

Great. How should we think about your exposure to hyperscalers, which you've had contracts with a number of the largest operators in the world versus maybe some of the neoclouds that have come up, maybe a little bit lower credit quality? How should we think about your mix and your approach to that type of customer?

Yes. When I talk about hyperscale, that is disproportionately in the largest cloud hyperscalers out there. I can't name them, as you know, for confidentiality reasons, but they're all the household names that we know. And those are the customers that we've been consistently doing repeat business with and that we expect to continue to do repeat business with. As it relates to neocloud, Brendan, at this point, we don't have any exposure to neoclouds.

Okay. Great. Let's pivot to the ALM business, asset life cycle management for those who aren't as familiar with the company. This is a business that you've gotten into over the past couple of years. It's ramping very significantly. Why don't just walk through your rationale for getting into this business and the growth that you see?

Yes. So I've been with the company 6 years now. But back in 2017, 2018, the company really started investing in a small way, test and learn kind of format on the enterprise IT asset disposition side of the equation, Brendan, where it was a cross-sell offering where we were already going to client sites to get physical records and/or bring them back. And we could pick up and help them -- help those clients dispose of obsolete gear, like think laptops, computers, printers, things of that nature.

And over the next few years, it grew. But by 2021, it was only a $38 million revenue business. Now earlier this quarter, we gave guidance for our ALM business, and we've been kind of notching it up quarter-by-quarter through the year because it's been strength to strength. And we indicated we thought the ALM business would do $600 million of revenue this year.

And that is a business that is organically growing the last couple of quarters in the 30s percent year-on-year, and the total growth has been much higher than that because we've been tucking in some acquisitions. We like the market in -- for ALM, Brendan, because it is a very large market, call it, a $30 billion TAM. About 3/4 of that TAM is on the enterprise side, which are large -- most of that is medium to larger-sized clients who we do business with already on the enterprise side of our physical business. And then the other 25% is very fast-growing hyperscale decommissioning.

Now we have businesses that serve both ends of the market there. And today, on that $600 million of revenue for this year, we indicated it would probably mix to about 60% enterprise and 40% hyperscale. Enterprise as a market is growing kind of like mid-single digit, and hyperscale is growing faster than that because of the nature of what happens, because on the hyperscale side, you've got embedded fleets of deployments that hyperscalers have made and they refresh the gear about every 5. And there's underlying value in that gear, which we help them by wiping the gear. In some cases, we destroy something that's been written to. And in all the other cases, we end up disassembling those servers and then selling the components into the secondary markets in which we get a revenue share, think like 20% of whatever we sell it for.

On the enterprise side, it is a fee-for-service, whereby we are helping corporates with what is an ever-growing concern around privacy, chain of custody, security of assets that have had private confidential information written to. And we are stitching together a -- our ambition is to stitch together a global offering whereby we can service the client's needs on enterprise IT gear anywhere in the world.

And historically, up until we started doing this, there had it's not been a supplier that could do that for corporates. In fact, if you look at most large corporates, they're dealing with dozens of really small IT asset disposition vendors because there's no large player. We're already the largest player.

So we've been growing that business organically around the world as well as tucking in small acquisitions that are very accretive and improving our margins in that business. And we think there's a tremendous amount of growth ahead of us in our asset life cycle management business, and we are really pleased about how the business is trending.

In terms of the acquisition opportunities going forward, you've already organically grown and combine that with some tuck-in acquisitions to become one of the largest players or the largest player in the world. Are there still a lot of opportunities out there to acquire either on a geographic basis or for additional capabilities in this realm?

The short answer is yes. And there's -- we have a target list of -- that my corporate development team is looking at and talking to potential acquisition targets all the time. I mean, it's hundreds of companies long spread out across the world.

I always tell people you need a willing buyer and a willing seller. So when the next deal shows up is always sort of -- we'll let you know when we have a deal. But if you look at the last couple of years, we've tucked in 2 or 3 deals kind of per year. And these deals are pretty small, just to put it in perspective.

I think our average if you look across the last few deals we've done, it's about a $50 million revenue kind of business. But we're paying somewhere in the 5 to 7.5x EBITDA on a trailing basis, and we end up synergizing that down quite rapidly.

And importantly, this is a part of the business whereas we continue to do that, it gives us more presence. It gives us more capability, as you were describing, to be able to bring what we think will be a very sticky offering to our clients, whereby they want this, right? Our clients are telling us that they would like to have a consistent process, a consistent chain of custody and a certification that things have been appropriately wiped if it's something that has data as well as appropriately and sustainably recycled or renewed.

And so there's a lot of secular megatrends in asset life cycle management that makes it a great market for us.

Maybe one of those secular megatrends would just be the absolute growth in data centers. All of those data centers have servers in them that need to be recycled. Where do you sit today in terms of recycling some of the GPUs that are getting so much attention versus maybe that opportunity over the longer term?

Yes. That is certainly the fastest-growing portion of the general market. And as you would imagine, it's more concentrated because there's, call it, 5 to 10 large cloud players that have the vast majority of those servers. But it has continued -- those fleets of data centers have been growing very rapidly over the last 5 or 10 years. And the refresh model, as I said earlier, is about, on average, once every 5 years. And so each year, the volume that needs to be decommissioned is considerably larger than the prior year. It's kind of building on itself.

And we have good relationships with quite a few of the large cloud players. We're really doing business with essentially all of them. Some of it can be on a project basis scenario. In other cases, it's a kind of continuous flow as they're decommissioning sites. You asked about the component specifically. We don't see a lot of GPUs at this stage because, as you would imagine, in light of what we're refreshing for them, it's a stuff that was put in service, say, 5 years ago. And so there weren't that many GPUs. We do a few GPUs, but -- and the pricing is very good in those -- on those, but it's a small portion of the volume today. It's more of an opportunity as we go forward as the business continues to grow.

But generally speaking, the way that market works for us, Brendan, and what we're decommissioning, if you think about the servers that are coming out today, we're wiping them, as I mentioned, then we will physically disassemble them. We'll sell off CPUs, we'll sell off drives, we'll sell off memory. And to contextualize this for you, as I mentioned on our last call, our total ALM business this year at that time, I was projecting to be about $600 million. 40% of that was the hyperscale business that we're talking about right now. Within that piece, about 40% to 50%, give or take, quarter-to-quarter is from memory.

And a lot of folks have been asking and noticing that memory prices have been rising. And I'm happy to tell you that it has been -- that is the case, and it continues to be strength to strength. In fact, I would say that memory prices on average are probably in the vicinity of 50% higher than when I gave the guidance. And if I play it through, that would -- if you just work through that math, I was giving you in terms of the addressable piece of the revenue, that's probably, call it, $15 million, maybe more million additional revenue in the quarter that we would expect to generate.

So I think the one -- I think we guided to just under $160 million. I expect we'll probably do north of right in the vicinity of $175 million or more in ALM revenue in the quarter. And frankly, I'll tell you, the larger cloud folks, they know that the prices have been rising. So some of them are even like holding back a little bit because the expectation and the trend on forward pricing is for those to continue to move higher. And that's just in light of the supply-demand situation for memory. So it's a good market. It's a good trend. It can be volatile. And I think if pricing were to stay where it is at this point, when we look into next year, that's naturally going to be an incremental tailwind to our ALM growth in our total business.

Great. Maybe we could just -- one more question on ALM, thinking about the margin profile of the enterprise business versus the hyperscale and how that fits in with the greater Iron Mountain margin profile?

Yes. So -- and that's one of the reasons why we also talk about the 2 businesses because on the enterprise side, which is more fee-for-service, that's margins that will be in the 20s to 30s. And we think -- and we're absolutely seeing them rising. And then on the hyperscale side, it is a revenue share model, as I mentioned.

So we're taking, depending upon the contract, let's say, teens to 20% of whatever we sell. And so therefore, the margins on that are more like low double digit upwards of as much as 20%, that sort of thing. So it mixes to a margin depending upon whatever percent of the business you expect to come out of hyperscale versus enterprise.

Importantly, both of those businesses have the ability to continue to improve their margins with our business. And frankly, that's the same for our digital business, which has seen improving margin trends and of course, our physical business. And data center has been, as you know, very strong. We're probably on track to do low 50s EBITDA margin this year and again next year.

So we -- our total blended EBITDA margin will be basically a function of how fast we grow the various elements of the business. But we've got very good momentum in our data center business and in our ALM business. And of course, our digital business, which we haven't talked about yet, has got the big opportunity with the IRS contract.

Great. Let's go there next. In terms of the Global RIM business, there is a perception that volume is in decline. Maybe you could just address that?

Yes. So it is not in decline. So as you can see from our disclosures, our organic volume, and this is on an organic basis and in total has been slightly up for the last several years, and that's kind of like quarter-by-quarter. And the way that is, sometimes people are confounded by that concept, it's a function of the fact that we are the world's leader in this segment.

We have been doing business with clients for literally decades. We service them very, very well. And each year, our team is working to aggregate more volume from those clients because even clients that we've been doing business with for as long as we've been a company, there are still pockets of inventory out there that they might be managing themselves or may have with a competitor and we win a little bit more volume. We are also exposed to some markets.

An example would be India, which is still in the early stages of outsourcing physical document storage. And whereas in larger markets like the U.S., U.K., Australia, they outsourced largely 30, 40 years ago. India, the most noteworthy largest business for us that is still in that early stage. So we get a little bit of incremental volume, but to -- sometimes people say, well, it must be all coming from India. Well, India is not even 1% of our revenue. So while I talk to you about that it's growing fast, it's just a nice little adder. So in total, our physical volume has -- that we're storing has never been larger than it is today. And that business is what I would call very healthy.

Great. On the pricing front, you've been able to push kind of mid-single-digit price increases over the last several years. How sustainable should we think about that going forward?

Yes. We always approach it from a standpoint of adding value for our clients, Brendan. So when we look at the offering that we're giving to clients, certainly, they save money using us versus, say, trying to do it themselves or using some sort of network of a whole bunch of other smaller suppliers. And for larger -- medium to larger-sized clients that might be doing business in multiple geographies or many countries, we're really the best option by far because we're the only player that has broad reach in the market.

And so -- but it's not just that. It's also things like we've got a long track record of consistent process and chain of custody and safety and security. In addition, we continue to add new offerings like our Smart Sort or our various other offerings such as our DXP platform and asset life cycle management. So we can continue to drive more value for clients.

When we look at elasticity, as I've said for many years, it does tend to skew to our smallest clients. That's where we would see a little bit of pressure, but our customer retention rates are like in the very upper 90s, like 99%. And we expect to be able to continue to by enhancing the value proposition of what we offer to clients, continue to see revenue management adding something like the mid-single digit for the foreseeable future as we've been doing, which is what we're getting again this year.

Great. Maybe let's talk a little bit about the digital business that kind of falls within RIM. Maybe just a high level, what are you doing for customers? I think there's a scanning component; there's a software component. Maybe just kind of walk through some of those nuances.

Yes. So years ago, our digital business kind of started as scanning. But at this point, and there's still a level of scanning involved, but really what it is, is we're helping client's structure unstructured data. Something on the vicinity of 80% to 90% of all new data is still unstructured.

So clients have a distinct need as they want to do analysis when they are looking at data, they want to get it into a point where they can be metatag and then use AI to do a variety of analysis and machine learning. We have a proprietary platform, which we call DXP, which helps clients in a variety of ways, and it's very modular in that it can be used in quite a few different applications, and we continue to expand those applications.

So for example, we have cut out a tremendous amount of cost for major mortgage processors, whereby we use our DXP solution to streamline the process, physical and digital data going into our DXP and automating processes such that they save a considerable amount on labor.

Going forward, another example of that is with the United States government. As we talked about publicly before, we're doing a multiyear engagement with the Department of Veterans Affairs, where we are helping them do a metatag and do analysis on historic medical records of veterans.

And then we've recently announced that we were awarded under the Department of Treasury's outsourcing of paper tax returns. And that will be another example where our team has built the large language models to ingest the various forms that come in, in paper form, structure that data in an at-scale, rapid way with very limited issues around quality. Naturally, there's high expectations for the service level agreements on processing, things of that nature. And we've got the track record and the ability to do it.

And so our digital business, Brendan, a few years ago, it was like $100 million business. Today, this year, probably be closer to $550 million, and that's before really any of the big IRS deal comes in. And frankly, we think the IRS deal is going to be a great case study for us to go around to other clients as well as government agencies to demonstrate for them the massive value proposition we can offer them and return on investment in terms of outsourcing that sort of processing to us. So we have felt like the whole government efficiency effort is a great thing, both for the country, but also in a way that Iron Mountain can help our country get more efficient.

Great. Maybe just one last question in regards to capital allocation. How should we think about capital investments, leverage and the dividend going forward?

Yes. So on -- I'll do leverage first. So if you go back 5 or 6 years ago, our leverage was cresting close to 6x. The last couple of years -- we said at that time we were going to bring it down that our target range was 4.5 to 5.5x. A couple of years ago, we got it down to 5.0x, and we've been at that level steady quarter-after-quarter ever since. We expect to kind of operate right in that level.

We have a dividend payout ratio target of low 60s percent of AFFO. Similarly, some years ago, we were higher than that target, and we didn't raise the dividend for several years as we were saying we were going to intentionally get into that range. And we've done that, obviously. And for the last 3 or 4 years now, we've raised the dividend. I think we've done it 3 times in a row at 10%.

And that's just kind of -- you should anticipate that's going to continue to happen, Brendan, because we're not going to fall out of our payout ratio range, and we're growing AFFO at kind of high single to low double kind of consistently.

So as it relates to capital deployment, the vast majority of our growth capital is spent building out those pre-leased data centers. And the nice thing about that is we're essentially writing 10- to 15-year leases with multiple renewal options with some of the best credit quality tenants you could have. And we write that lease before we basically put the shovel in the ground.

So we're deploying capital at what I think are very good returns, think like 10% to 11% cash-on-cash unlevered returns. And that's one of the reasons why you've been seeing our margin lift in data center as we commence more and more of those projects that have really high returns.

So going forward, you should probably anticipate that our capital deployment into data center will be pretty consistent, maybe slightly up from where we've been here this year because we've got all those pre-leases that we're building, which will generate considerable revenue.

Just to put that in perspective, this year, our data center business will deliver just under $800 million of revenue at a low 50s EBITDA. We said in light of the backlog we have as we commence and complete construction, we'll be over $1 billion of revenue next year with no additional leasing.

And then over the ensuing next couple of years, we have another $250 million of already prebooked revenue that will commence as we finish construction. So incremental leasing on top of that will generate that much more growth. So we feel really good about the way we're trending.

Great. We're just about out of time. Barry, thank you very much for doing this with us.

Thank you, Brendan. Appreciate it.

Good afternoon, everyone. I'm Alex Hess, a Vice President on Andrew Steinerman's Business and Information Services Equity Research team here at JPMorgan. We're really excited to have with us today, Barry Hytinen from Iron Mountain. Many of you know Barry very well. He's been the EVP and CFO of Iron Mountain for about 6 years now.

Barry, it's always great to have you, and we're really excited that you're back with us at Ultimate Services today.

Thank you, Alex. It is a pleasure to be here.

Great. So I want to start with the growth portfolio or the growth businesses. Back in 2021, those are about 15% of revenues. Now they're tracking towards 28% of full year revenues. The exit rate might be 29%, 30%, what have you, it will be a little higher. Walk investors through the history of how you found these growth vectors. Those are digital solutions, data center, Asset Lifecycle Management as areas where you thought were the right places for Iron Mountain to be participating?

Yes. I appreciate that question, Alex, because our growth portfolio is, I think, a very underappreciated element of our story in that we have been growing it quickly, collectively north of 20% for quite a few number of years, and we see that trend continuing for a long time in light of the segments we're operating in. The team started investing in most of those areas over a decade ago. And the concept was having really consolidated records management and developed a massive client list. We operate with over 245,000 clients around the world. The team was looking for natural adjacencies whereby we could serve our clients and in a high-quality way in compelling areas where we could drive value for clients.

And so Bill and the team, long before I joined the company, started looking at a variety of areas. Digital solutions was one that kind of came quite naturally because it cross-sells off of our core very easily in light of the fact that much of what we initially started doing was scanning of content that we had on behalf of clients because perhaps they wanted to do a level of analysis on a piece of the inventory, that sort of thing. Where that has naturally now grown to is our digital business unit team members have created a platform initially built off of some Google technology. Some years ago, we were the AI/ML Partner of the Year with Google.

And since that time, our internal team has built out the application to be a true Software-as-a-Service platform, which we call DXP. And DXP is a platform that allows us to significantly save customers' cost, drive considerable efficiencies for clients, particularly in areas where there's physical and digital information that needs to go from an unstructured format to a structured format. I'm sure we'll talk about that more. But that was a very logical adjacency and one which we feel has a tremendous amount of incremental growth as we're continuing to find increasingly new applications for DXP, whether it be in our government clients or in our corporate clients.

In our data center business, that was really one that started in a very small respect years and years ago, Alex, in the fact that we had clients that were looking for very secure locations where they could have some level of colo. And so we started putting servers in our mines, for example, in our Western Pennsylvania mine, we have a data center now, and we've had one there for some time in which it was specific to client needs where they were looking to Iron Mountain to help them solve problems that they had in their own infrastructure. And over time, as we continue to test and learn as it relates to enterprise colo, we found more and more of our clients, particularly on our data management business, we were shifting load to the cloud and then they had an on-site data center, for example, that was naturally becoming less efficient because it was getting less load, and that was an opportunity for us to come in and help solve another client problem whereby they could colo with us in sites. And over time, that's just been a growing and growing area of our business, which I'm sure we will spend more time on, so I won't belabor further.

And then lastly is the Asset Lifecycle Management business. And Bill and the team started investing in that area in 2017, again, as another way of helping our clients. As you know, we go out to see clients and pick up boxes, do other work for them on their sites. And what we found is many clients were looking for a solution to help with obsolete or end-of-life IT gear. So we started helping them by picking that up and having third parties process it. And what that has grown into is a really compelling market opportunity for us. In 2021, our ALM business was $38 million of revenue. And this year, we'll do about $600 million of revenue. And we're continuing to consolidate what is a very large space.

And so I would say, Alex, it comes down to the team has been looking for ways to serve our clients. We're very customer-centric, and we are continuing to explore additional adjacencies and vectors for growth that we'll talk to you about at future days.

Great. Yes. So I very fondly remember when the Iron Mountain ALM business was SITAD, and we were shifting the name because you guys had just bought ITRenew and so you have to keep track of all these different names. Now it's just ALM, which is very easy. So on this industry, on ALM, we'll start there. You sized this market, $30 billion. You're clear #1 here. I don't think it's close. I don't think it's 3 or 4x larger than the #2 perhaps. But it's $600 million out of a $30 billion, excuse me, TAM. How do you size this market?

Yes. So we looked at a variety of different ways, and we've also utilized third parties that have done primary level research as well as secondary research on the sizing of it. And what we find is that the total market is, as you say, $30 billion, let's call it, 3/4 of that is what I would consider as enterprise ALM segment, Alex, and 25% is hyperscale. And when I talk about enterprise, what I mean there is our classic corporate clients who have that IT gear that they need to deal with as they generally are kind of consistently having a flow of IT gear that obsoletes, whether that be laptops, on-site data center servers, screens, printers, what have you, all sorts of IT gear.

And that is a business -- and that is a market, I should say, that is a market that is growing kind of mid- to high single digits on a consistent basis. And one of the compelling needs there, if you talk to clients is that they are naturally concerned about confidential information, PII, other things that have been written to devices and making sure that they are very securely wiped and disposed of appropriately in a sustainable way. And that is an area where there is a distinct need for more consolidation. The market in enterprise ALM is highly fragmented. As you know, we're already the largest player in that portion of our ALM business, about 60% of the revenue of the $600 million will do in ALM this year, so call it, $360-ish million. And I estimate that puts us at 2 or 3x the next largest player. And we're continuing to grow on an organic and inorganic basis because there's a real compelling need.

And what we find is that large -- medium to large businesses that have operations in multiple regions, multiple states, multiple countries, they have to string together a network of many small IT asset disposal companies to service themselves. And that's really because there's nobody that has brought together the power of a consolidated go-to-market approach where a consistent chain of custody, very secure and very capable of dealing with privacy and other safeguards that need to be done in that area as well as, of course, sustainably dealing with the material.

And that is what we aim to do, Alex, in the enterprise side. We are in the early innings of consolidating that market -- and if it sounds familiar, you know our story very well, it's a strategy that we did really in the record side earlier on. If you go back 30 or 40 years ago, records management was a very fragmented market without a single player that could provide the service around the world to clients. And over time, the team here consolidated that market and brought together what is a really compelling offering, especially for multinationals, and we think we can do the same thing on the enterprise side.

In the hyperscale section of the market, that's, call it, 25% of that $30 billion total TAM. That is a more concentrated space from a customer standpoint. Think about the major cloud hyperscalers because what we're doing there and other participants in that part of the market are doing is helping clients with retrofitting their data centers with gear. So as they -- as a major hyperscaler may have a fleet of data centers that they've opened and continue to open over the last many years, they tend to retrofit the servers in there about every 5 years on average. So they're not taking the gear to obsolescence. They're renewing and refreshing the gear for reasons related to getting better compute, maybe better power efficiency, et cetera.

And so that gear still has a considerable amount of value inherent in it, unlike on the enterprise side where gear tends to be taken more to obsolescence. So that's -- on the enterprise side, it tends to be a service-oriented revenue model. And in the hyperscale side, it tends to be more of a revenue share model where we are sharing what we can garner for the assets. So what happens is we take the servers out of their sites, we wipe them. And in some cases, we destroy elements that have been written to. And then we will physically disassemble the servers and sell off the components, CPUs, DRAM, what have you, whereby we will take a 20% on average take of whatever we're selling that gear for. That part of the market is growing high single, low double-digit growth from a market standpoint, Alex, because as you would appreciate, there's so much more data center capacity each and every year.

And what we're really doing as an industry is retrofitting on that 5-year kind of horizon that I mentioned. And so it just tends to be a market that has a tremendous amount of volume. It is subject to a little bit more component pricing volatility on that side of the business. And it tends to be a little thinner margin than the enterprise side. But I will tell you that we love the ALM business. We think the market is going to grow for a long period of time. It's an underserved market, as I was describing earlier, and it's one that I think plays very well to our strengths.

Yes. We'll have to check in with you in 5 years when we find out what all these Blackwell and Hopper chips resell for. I think that will be -- if you could answer that now, you can all go home today.

Well, I won't do my [ karmic ] impression today. But I will say that it does appear that it would generally bode well for the ALM market, what you're pointing to, because I think there is a fairly significant correlation in terms of the value of the gear going into the data center is fairly correlated with the value coming out, obviously, with a depreciation schedule.

So while none of us necessarily know what that's going to look like in the future, I think indications would be that since that gear is relatively more expensive on the way in, it will probably be at a better value on the way out. And therefore, with a revenue share, we're likely to see some, if you will, mix benefit to headline revenue in the future from that. But you're right, that's a few years off.

Yes. So just staying maybe in the data center world, right? And we're going to talk about all the assets you have to energize. But a point that you've made repeatedly over the last years is that Iron Mountain don't build on spec. But you do have right now a notably high percentage of construction in progress that isn't pre-leased. Now maybe not notably high relative to the industry, notably high relative to your history.

How should investors think about that unleased construction in progress? Are you building to indications of demand based on the stated needs of your recurring tenants? Like how do you decide, hey, look, we don't have a person yet leasing this facility, but like this is not a spec project?

Yes. So -- and it's a good question because our strategy, generally, Alex, as you know, is to not build on spec. We -- one of the things that we really like about our hyperscale data center business is we're dealing with very large AAA kind of credit counterparties in which we're signing leases of 10-, 15-year duration with multiple renewal options and at a very good return, I think 10% to 11% cash-on-cash unlevered returns. And in light of the build schedule and the pre-leasing elements of that, frequently, we can sign a lease before we put the shovel in the ground to start the construction.

In the case that you're pointing out right now where we have a slightly elevated level of not yet leased construction-oriented development, I would say there's a couple of very specific things going on there. if -- as you know, we signed our Chicago asset, we totally leased that building post the last quarter end. So it's not in our current schedule as [indiscernible]. And that's with a shift from London, as we talked about on the call. So it's a net additional 11 megawatts for the year. However, we have been working with the client on that potential move for some time. So as you saw, we have been doing construction in that asset, and there's a considerable amount of spend against it as we're prepping because that's going to go -- a portion of that will go live for the client even next year. And so there's that element.

But then there's a couple of other assets in there that are under development that are clearly very, very highly sought-after locations. When you look at the assets that we have energizing over, say, the next 12 to 18 months, Alex, you -- we've got 28 megawatts in Northern Virginia. We've got megawatts in Madrid and Amsterdam. All 3 of those would clearly be significant hyperscale locations for. And then we have 25 megawatts in London. And I would tell you that if you look at the energization schedule there, those should be very, very good leases for us as we get closer to energy.

So -- but I do want to just step back on this for one second, which is -- you clearly don't build this spec. You clearly build with some sense of tenants in mind, but you're also selective. You don't -- you work with a very select number of tenants and you build and you develop conservatively. So when investors understand those 2 facts, the stylistic third factor that falls out is, hey, when we decide to go and start building something before it's pre-leased, we have a reasonable indication of a small handful of tenants that will probably be interested. Is that a fair characterization?

I think that's generally fair, Alex. I mean the market for the type of leasing that we're doing on the hyperscale side is you're talking about the top 10 hyperscalers. Really, there's probably 4 or 5 for us that are really meaningful as it relates to our client base in that sector of our business. And when we talk about like Northern Virginia, London, Amsterdam, we have a very active pipeline of discussion there. And while the deals tend to be a little bit lumpy in the sense of it's hard to predict precisely which week or which month a deal is going to sign because there's always elements of technical due diligence and the design can change slightly, which naturally affects the underwriting and the contract terms.

And as you would appreciate, there's a lot that goes into those sorts of deals because you're talking about a 15-year initial lease with perhaps the likelihood of with renewal options to go 30, 40 years. And so the details matter. And so when we get into a detailed discussion with clients and something changes, we need a little bit more time to get the contract done. But I will tell you that when I look at the Tier 1 assets that we have, I feel -- and I know our team feels extraordinarily good about the ability to lease over the next 18-plus months as we look at the assets we have coming for energization.

Perfect. I want to turn to the treasury contract that you guys just signed. This is in Global RIM, but it is part of the growth portfolio as well. It's a digital service that you're providing them. As we understand it, you're going to help the treasury reduce their reliance on tax-based paper-based tax filings. There's sort of a long-running digitization revenue stream. It appears based on what's sort of in the public domain to have a revenue stream that coincides with tax season.

Can you elaborate a bit more on sort of the scope of the contract, like specifically, what are you doing? And like how -- what's going to govern volumes in that business and what the revenue mechanism is?

Sure thing. So it may be counterintuitive, but to most folks who might be using electronic means to file their tax returns, but the U.S. government is still processing a tremendous amount of inbound paper tax returns and various other tax correspondents, Alex. And historically, up until present day, the government has generally been processing that largely through a labor-based solution of personnel at the Internal Revenue Service. And what we are offering the Department of Treasury is a digital transformation effort, whereby we showed them a proof of concept of where we had built large language models to process the various tax forms and correspondences in a highly -- high-quality, consistent and rapid way such that we would meet the naturally exacting standards they have. And naturally, as you would imagine, the government does not want a lot of errors in processing of tax reform and tax forms.

And so when we pitched this opportunity, and it's been in the public ether now for several quarters, but what has manifested itself here recently in this win is a 5-year contract in which the Department of Treasury has awarded us a $714 million contract for the estimated value over the next 5 years. They did award to 3 other, what I think is fair to say, much smaller players than us in this area. And while we are not exactly certain yet, but there are mechanisms by which the government will use to disperse the volume, we're the only one processing forms at this time. It's not a huge amount of revenue. As I mentioned on the most recent call, I expect we'll do probably $4 million of revenue in the fourth quarter with the IRS. But you are right, we expect it to ramp into tax season.

And in light of our ability to process, our ability to be ready to process the inbound rapidly and across a variety of forms and the fact that we've already become FedRAMP and we have a tremendous number of people that are now cleared, as you can imagine, there are quite a lot of hurdles to get over to doing this kind of processing. And I think we're in a very, very advantaged position vis-a-vis that.

And so if you want to think about it from a standpoint of if we got 100% of the volume, and I'm not saying we would, but just to kind of frame the opportunity, we estimate it would be about $140 million a year, Alex, based on the volume that the government is currently seeing. And the way that was brought together was that the government put out a bid form that said this number of 1040s, for example, this number of other forms and various correspondences and then had anyone that wanted to bid that was a qualified bidder come in and say what they would process each form on a per form basis. And naturally, more complex is more expensive, less complex, less expensive.

And then when you mix effect that under our bidding, it came out to about $140 million a year. And the opportunity here is, I think, quite immense because if you kind of factor that against the size of our existing digital business, our digital business unit is now at a run rate of about $550 million of revenue on an annualized basis. And so even if we got the majority of this, this is a big move in terms of our -- for our digital team. And furthermore, I think it becomes a huge case study for us to go and talk to both corporate clients as well as other government agencies as we show the massive value creation we're going to have for the U.S. government because published reports would suggest, in fact, some from the government suggest that the United States spends, I think, in the vicinity of $600-plus million a year doing paper processing of tax returns.

And so when you think about it, our cost to do that to the government of $140 million is a huge savings. And I think speaks to the opportunity for digital transformation and what our team has built in DXP. And this isn't the first large contract we've won using DXP, Alex. We've been doing mortgage processing for a couple of major financial institutions. We're doing a variety of other similar exercises, but this is a very meaningful one and I think can be a great case study for demonstrating value.

Excellent. Well, that's the growth portfolio. Now we are 24 minutes in, we still haven't talked about box volumes. So my view...

I thought you'd get there.

Might be a record for you guys. So just again, let's just go through box volumes. And specifically, you've had an uptick -- I'm not talking sea change, but a modest uptick in retention rates for the core global room storage rental business. And that's been despite continued mid-single-digit price increases. driving that increased retention? And what might it suggest about your customers' elasticity of demand going forward?

Yes. I will say this, Alex, it's really a wobble. It's an improvement. I'm just trying to be balanced. Even when the retention rate was coming -- wobbling down slightly coming out of COVID and through a couple of projects that we were doing for very specific small pieces of inventory, but it can move the retention 1/10 or so. I told people a year or so ago and, hey, in about a year, it's going to start moving back up because we'll get through that project. And fundamentally, the underlying health of our client base is really good. Our customer retention rates are extremely high.

And most of the clients who we do business with in the record side, they've been doing business with us literally for decades all around the world. In most cases, they've nearly standardized with us if they haven't totally standardized with us for this as we deliver tremendous value to those clients that need a partner in this area across their enterprise. And so look, the retention rate will kind of continue to be in this vicinity, I believe, it kind of also factors into the concept that the average box stays with us for about 14.5 years, and that's been kind of steady for a long time. There are some boxes that end of life much sooner than that. There are some that stay much longer, but the underlying health of our records business is strong.

That's great. And I appreciate the -- you flagging a positive changes in the wobbles, it's good to be balanced on that side. I want to just touch briefly on capital allocation from here. You've got all these businesses, some of which have -- I'd say most of which actually have very impressive incremental margin profiles you're not throwing losses after this revenue growth, it all comes with incremental EBITDA dollars, which is lovely. But you have taken on more capital as you've grown your top line, you've grown your capital base.

In a juncture where, let's say, we go into a recession or there's a slowdown or one of your businesses wobbles more significantly for a year, like which of these metrics are you going to allow to downshift first? Would you take down your CapEx? Would you moderate the pace of dividend growth? Just trying to think how -- it's a balancing act. So there's a lot of work that goes into this, right?

Yes, for sure. There is. It's -- our team gets up every day and creating value for our clients, and it's hard work. I would tell you this, Alex, if you look at the increase in capital that we've been deploying, it's been disproportionately to data center over the last 5 years. I think my first year with the company, we might have spent $300 million on data center. This year, we'll do closer to $2 billion.

And why is that? And coming back to your earlier point, it's to support the pre-leases we've already signed. And so if you look at our data center business, this year, we're going to do just under $800 million of revenue, call it, a low 50s EBITDA margin, super strong business, writing very strong returns on deals. And if you look out to next year, I've kind of said a few times that in light of the backlog of deals that we are constructing and that will commence between now and earlier this year and anniversary next year and through next year, we will be over $1 billion of revenue with no additional leasing and obviously, run a lease. And then we -- on top of that, we have another $250 million of revenue that will come out of backlog over the next few years after next year. And that's all booked business with clients that are AAA-type credit and with very long lease terms.

So in your hypothetical, I will say this, we're a very cost-conscious company. We are very focused on driving margins in each one of our business, and you didn't ask, but I'll just tell you, I think that there's opportunity for incremental margin in each of our businesses. Now the total enterprise margin will depend on where you grow your revenue. But there's self-help, so to speak, an opportunity, and our team is working hard on driving profitability in every single one of our businesses. And -- but we'd be very focused on driving capital returns in such a scenario. I'll tell you this, you mentioned the dividend.

For us, the dividend is almost formulaic. We have a payout ratio target of low 60s percent as a percentage of AFFO. And some years back, we were well higher than that. So we said, look, we're going to pause. We're not going to raise the dividend until we get down into the payout ratio. At the same time, our leverage was a little bit higher than we wanted. It was around 6, and we said we want to get it down into our target range of 4.5 to 5.5x. What's happened during the next 5-plus years since then? We got the leverage down to 5x right at the center of our target range. We've been there for quite a while now. And we got the dividend payout ratio into -- we got the dividend into the right payout ratio range. And we just raised the dividend 10% for the third time in a row -- third year in a row.

And why 10%? Well, that's in line with our AFFO growth. And so what you should anticipate is that the dividend will continue to rise in line with AFFO because we expect to continue to maintain that payout ratio. I'll say this, Alex, in a -- if the macro -- and you're hypothetical, if the macro is a little more challenged, there's always opportunity for us to kind of belt tighten, but it won't be on pre-leased data center because we have clients waiting for us to open up those and those will then convert to revenue.

No, that makes a lot of sense. That makes a lot of sense. We've got about 10 seconds left. So maybe a little word association. What's something that's not on investors' radar that you think they should be paying attention to with respect to the Iron Mountain stock?

Yes. I guess I'd point out 2 things. And it's not that they're not on the radar, but I'd just underscore. Our core business is really durable, Alex. I mean we've been doing a level of revenue management year in and year out. Our volume on an organic basis has been flat to slightly up, I think 30 basis points, and we've driven a lot of margin in there. And that business is very capital light. It can continue to grow in a way that requires relatively very little capital to grow. And that is one of the secrets of our success because unlike a lot of other data centers, we've got inherent free cash flow coming out of that business, which we can then drive into growth in data center.

And then the other one I would point out is, look, I mentioned it earlier, our ALM business is growing strength to strength, right? 36% organic growth last quarter. That was 70%, I believe, total growth. Margins are expanding in that business. And it is a secularly growing portion of the economy and one that we think is ripe for consolidation. And frankly, we're going to ultimately build a business that serves clients in a way that they want to be served, which is that we offer the same consistent process, chain of custody, privacy and value all the way around the world, which is something clients are looking for.

Thank you so much for your time today, Barry.

Thanks, Alex.

Really appreciate it.

Appreciate it.

Good morning, and welcome to the Iron Mountain Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mark Rupe, Senior Vice President of Investor Relations. Please go ahead.

Thanks, Chad. Good morning, everyone, and welcome to our third quarter 2025 earnings conference call. Joining us today are Bill Meaney, our President and Chief Executive Officer; and Barry Hytinen, our Executive Vice President and Chief Financial Officer. After our prepared remarks, we'll open the lines for Q&A.

Today's call will include forward-looking statements, which are subject to risks and uncertainties. For a discussion of the major risk factors that could cause our actual results to differ from these statements, please refer to today's earnings materials, including the safe harbor language on Slide 2 of the earnings presentation and our annual and quarterly reports on Form 10-K and 10-Q.

Each of these items as well as reconciliations of non-GAAP financial measures referenced during this call can be found on our Investor Relations website. With that, I'll turn the call over to Bill.

Thank you, Mark, and thank you all for joining us to discuss our third quarter results. We are pleased to report that our team has delivered another quarter of record financial performance and double-digit growth. We achieved an all-time high for quarterly revenue, adjusted EBITDA and AFFO, driven by strength across our business.

Revenue increased 13% to $1.8 billion. Adjusted EBITDA grew 16% to $660 million and AFFO increased 18% to $393 million. Our exceptional performance in the third quarter is a result of our team's unwavering focus on meeting our customers' needs with innovative solutions and consistent execution of our strategic priorities.

We are delivering revenue growth in our physical storage business, achieving record revenue in Q3, driven by consistent volume growth and higher retention rates as well as revenue management. Our digital solutions building business is building momentum. We are winning new contracts with our AI-powered digital solutions across industry verticals and drove record revenue and continued double-digit growth in the third quarter.

We are capitalizing on robust data center industry demand with 33% revenue growth in Q3 and a strong outlook that supports more than 25% growth in 2026 based on our currently signed leases. Additionally, we saw a nice uptick in Q3 leasing and into Q4, which together with our pipeline, puts us in a good position to execute against our portfolio capacity of 1.3 gigawatts.

We are driving substantial growth in our asset life cycle management business, increasing revenue with existing customers and winning new business through cross-selling, resulting in 65% reported and 36% organic growth in the third quarter. And we expanded profitability with adjusted EBITDA increasing 16% and margin improving 110 basis points as compared to last year.

This clearly shows that we have strong momentum behind our commitment to sustain industry-leading revenue and earnings growth. Our portfolio of growth businesses, including data center, digital and ALM drove 2/3 of our revenue growth in the quarter or 8 percentage points on a consolidated basis. This will remain an important tailwind going forward as the growth portfolio further increases as a percentage of total revenue, expected to be nearly 30% of total revenue exiting 2025.

This is on top of the strength in our physical storage business, which is growing at a mid-single-digit rate and will contribute approximately 5 points of consolidated growth in 2025. The momentum across our business, as I just highlighted, along with our foundation of established relationships and trust with over 240,000 customers, comprehensive solutions offering, reputation for security and a global footprint firmly position us to deliver our growth commitment for the foreseeable future.

Based on our strong outlook and excellent 2025 results, our Board of Directors authorized an increase of our quarterly dividend by 10%. Let me now share some recent commercial wins that illustrate the strength of our synergistic business model. First, in records management in Europe, we were selected as the single vendor for medical record storage for a hospital that has been a customer for more than 15 years, displacing a competitor.

Additionally, we secured a new customer with a public sector entity that can no longer manage and store its records in-house. Both of these deals were attributed to our strong reputation for secure risk management and our proven ability to provide efficient and cost-effective services. In our Digital Solutions business, we continue to win new business with our DXP platform.

In late October, we successfully launched our Insight DXP 2.0 platform. The new platform offers enhanced content management and smart document processing and easy-to-use secure platform with workflow tools and AI agents. This will allow the customer to make faster and more insightful decisions as well as eliminate obsolete and duplicative data to save costs.

And as it relates to our digital award with the Department of Treasury, in September, Iron Mountain was awarded a new long-term contract for digitization services. This new contract with a value of up to $714 million, expands our current scope of work, subsuming the contract awarded to us in April. This is a significant win for Iron Mountain and we are thrilled to continue supporting the United States government on this efficiency opportunity.

We are currently executing under the new agreement and collaborating with the department on next steps whilst preparing for the high seasonal expected in the spring of 2026. Let me now turn to our data center business. The data center market remains very strong, and we have seen leasing activity and pipeline pick up as hyperscale has resumed their focus on building out inference and cloud capacity.

We leased 13 megawatts in the quarter, including a couple of larger enterprise deals with financial services firms. And in early Q4, a key hyperscaler leased our entire 36-megawatt Chicago site transferring and expanding the customer's previous lease of 25 megawatts in London for a net incremental 11 megawatts leased. This is a great outcome for the customer who is looking to transfer to the Chicago market and for us, given the strong interest we have in the London location they are vacating.

This London site has the power coming online in 2026. We have high confidence in sustaining our data center revenue growth with the levels we have achieved over the past few years. This is underwritten by our pre-leasing backlog strong pipeline as well as 450 megawatts, which is available for sale and will be energized over the next 18 to 24 months. These assets coming online within the next 2 years have a collective capacity, which is the size of our current operating portfolio.

The large and expanding pipeline of these assets is from hyperscale customers having the highest credit quality. Turning to our asset life cycle management business. As we previously shared, ALM represents a major growth opportunity for Iron Mountain. The market is very large and highly fragmented, and we are well positioned to capitalize on growth through expanding business with existing customers, gaining new customers through our cross-selling efforts and strategic acquisitions to expand our capabilities and geographic footprint.

Our results in Q3 show that we are successfully capitalizing on this meaningful opportunity. and consistent with our strategy. In September, we acquired ACT Logistics, which further strengthens our ALM market leadership position in Australia. Let me now share some of our recent ALM wins that support our confidence in the long-term opportunity.

A leading financial services company with more than 200,000 employees globally has selected Iron Mountain has its ALM partner for the first time, building on our decades-long partnership for records management and digital solutions. Our established relationship, strong reputation for security and compliance and global footprint was an important factor in winning the deal and a global company headquartered in Germany has engaged Iron Mountain to support a key decommissioning and remarketing program across 6 data centers in the U.S., Europe and the Asia Pacific region.

Iron Mountain has also provided record management, digital and data center co-location services for this customer over many years. We are pleased to extend our solutions thanks to our ALMs team's operational scale and robust sustainability reporting capabilities, which are a critical requirement for this project. This relationship demonstrates the power of our synergistic business model where we successfully cross-sold all of our key lines of business to a long-term customer.

In conclusion, I am proud of the exceptional results our dedicated mountaineers have continued to deliver in 2025 and what that means to our shareholders as we announced another increase in our dividend of 10%. As you heard today, our record results are a testament to our strategic focus on customer needs, innovative solutions and consistent execution.

Our strong business momentum continues to build and a tremendous growth opportunity continues to lie ahead of us. We are just scratching the surface of the $165 billion total addressable market for our services.

With that, I'll turn the call over to Barry.

Thanks, Bill, and thank you all for joining us to discuss our results. As you've heard this morning, our team continues to successfully execute our strategy, driving strong revenue and earnings growth in the third quarter. We achieved record revenue of $1.75 billion, up $197 million year-on-year. This was an increase of 13% on a reported basis, 12% on a constant currency basis and 10% on an organic growth basis in the quarter.

Total storage revenue was $1.03 billion, up $97 million year-on-year and up 9% on an organic basis. Total service revenue was $721 million, up $100 million from last year and up 10% on an organic basis. Adjusted EBITDA of $660 million was an all-time quarterly record and expanded $92 million or 16% year-on-year. This was $10 million ahead of the projection we provided on our last call, driven by operational strength and productivity across the business.

Adjusted EBITDA margin was 37.6%, up 110 basis points year-on-year, which primarily reflects improved margins in our data center and ALM businesses. We continue to be pleased with our team's ability to deliver meaningful operating leverage, achieving an incremental flow-through margin of 47%, consistent with last quarter. AFFO was $393 million, up $61 million. This was also an all-time quarterly record and represented strong growth of 18% as compared to last year.

And AFFO on a per share basis was $1.32, up 17% to last year. Now turning to segment performance. In our global RIM business, we achieved record quarterly revenue of $1.34 billion, an increase of $78 million. RIM reported growth was 6%, including organic growth of 5% year-on-year. This was driven by revenue management, higher digital revenue and consistent organic volume. Storage revenue growth increased 5% on an organic basis and was up 6%, absent a decline in clutter revenue.

As we discussed last year, clutters peak revenue was in the third quarter of 2024 before we began the actions to improve profitability. Global RIM organic service revenue was up 4.7% in the quarter, similar to last quarter, improving retention and consistent levels of destruction pressured revenue growth. All other services increased 7% on an organic basis, reflecting strong growth in our digital business.

As it relates to the multiyear Department of Treasury contract, we recognized revenue of approximately $2 million in the third quarter and expect $4 million in the fourth quarter prior to building into tax season in the first half of next year. In the third quarter, we began to staff up to ensure we are fully ready to support the significant ramp in this contract.

Global RIM adjusted EBITDA increased $29 million to $598 million, yielding an adjusted EBITDA margin of 44.7%. Turning to our acquisition in India, we are very pleased with CRC's performance with integration ahead of plan. In the quarter, CRC added $6 million of revenue, including $1.2 million to storage revenue, along with 7.4 million cubic feet of volume.

For modeling purposes, it's important to note that while the margin for our storage business in India is similar to our margin in the U.S. and Europe, the price per cube is approximately 20% of our company average. As a result, the inclusion of CRC lowered our storage ASP by about 100 basis points in the quarter.

Turning to our global data center business. Total data center revenue was $204 million in the third quarter, an increase of $51 million or 33% year-on-year. Organic storage rental growth increased 32%, driven by lease commencements and positive pricing trends. In the third quarter, new commencements were 3 megawatts.

We renewed nearly 300 leases for a total of 11 megawatts and Pricing remained strong with renewal pricing spreads of 14% and 19% on a cash and GAAP basis, respectively. Third quarter data center adjusted EBITDA was $107 million, up $41 million year-on-year. Adjusted EBITDA margin was 52.6%, up 900 basis points from the third quarter of last year.

Improved pricing, recent commencements and operating leverage were the key drivers of the margin expansion in the quarter. In the fourth quarter, we expect data center revenue growth in excess of 30%. We have high visibility to this forecast as we are commencing 36 megawatts of new leases. This will also drive meaningful EBITDA growth in the period despite beginning to lap the significant step-up in data center margin, which commenced in the fourth quarter of last year.

Turning to asset life cycle management, total ALM revenue was $169 million, an increase of $66 million or 65% year-over-year. On an organic basis, we delivered 36% growth. The strong performance was driven by our team's operational execution, particularly strong growth in our enterprise volume and component pricing trends. Our recent acquisitions are performing well and contributed $30 million to revenue.

Regarding our acquisition of ACT Logistics, I should note this was completed in September and contributed less than $2 million to revenue in the third quarter. For modeling purposes, we expect the business will contribute revenue of approximately $7 million to our full year results.

From a profitability perspective, our team drove expanded ALM margins in the quarter through improved operating performance across the business and acquisition synergies. Turning to capital allocation. We remain focused on growing the dividend and investing in high-return opts that drive double-digit growth while maintaining our strong balance sheet.

In light of our performance in 2025 and outlook for AFFO, our Board increased our dividend by 10% effective with the January payout. This will mark the fourth consecutive year in which we increased the dividend and the third consecutive 10% increase. This aligns with our commitment to growing the dividend while maintaining a payout ratio of low 60s as a percentage of AFFO per share.

In terms of capital investments, we invested $472 million of growth CapEx and $42 million of recurring CapEx in the third quarter. Turning to the balance sheet with strong EBITDA performance. We ended the quarter with net lease adjusted leverage of 5.0x, in line with our expectations for both the quarter and year-end. Reflecting our strong credit profile, our team successfully raised EUR 1.2 billion in a considerably oversubscribed debt [indiscernible] achieving a 4.75% fixed coupon maturing in 2034.

We appreciate the continued long-term support of our fixed income investors. And now turning to our outlook. With strong performance in the third quarter, we are well on track for the year and are pleased to reiterate our full year guidance ranges. For the fourth quarter, we expect revenue of approximately $1.8 billion, an increase of 14% to last year on a reported basis and up over 12% on a constant currency basis.

Adjusted EBITDA of approximately $690 million, an increase of 14% to last year on a reported basis and up 12% on a constant currency basis. AFFO of approximately $415 million an increase of 13% to last year on a reported basis and up 10% on a constant currency basis and AFFO per share of approximately $1.39, an increase of 12% to last year on a reported basis and up 9% on a constant currency basis.

In conclusion, our team has delivered excellent year-to-date results, driving industry-leading double-digit revenue and earnings growth with record-setting performance across our business. We have strong momentum and significant long-term growth in front of us. I would like to express my thanks to our entire team for their best-in-class customer stewardship and commitment to Iron Mountain.

And with that, operator, would you please open the line for Q&A.

[Operator Instructions] And the first question will be from George Tong from Goldman Sachs.

I wanted to dive into your new $714 million 5-year contract with the U.S. Treasury Department you mentioned expectations of high seasonal volumes in the spring of 2020 fix.

Can you talk more about the planned phasing of revenues, including whether the contract will ramp linearly across 5 years or whether it be front-end loaded into 2026.

George, thanks for the question. Yes, I think, first, we're really excited to have the opportunity to work for the federal government on this project for the IRS as you can expect is that it will be linear with slight growth as you go forward as people get added to the taxpayer role over that 5-year contracts. So it isn't front loaded per se.

But there is a seasonality aspect to do with taxes, right, so which is generally in the spring for most people. So we do expect ramp. And we've already started building the capacity, obviously, upfront in terms of putting the people through the necessary clearance process so that they are ready to go when the season starts.

But I think first and foremost is the thing that we're super excited about, it's another proof point in terms of the technology that we've built with the CXP platform, which as you remember, goes back to when we were the AI ML partner the year 7 years ago with Google. So to me, it's another proof point that what we've built really resonates with customers. And in this particular case, the IRS, which is very sophisticated on these types of things.

And the next question will come from Eric Luebchow from Wells Fargo.

I wanted to touch on the ALM business. It looks like you expect about $600 million of revenue this year. I think that's a slight uptick from what you guided last quarter. And I wanted to kind of break down what you're seeing on volume versus price. We've seen a pretty significant increase in memory pricing recently in the last couple of months.

Just wondering if you're starting to see that flow through at all in your results and how that potentially influence growth rates as we look forward into 2026.

Eric, thanks for the question. ALM continues to be very strong, as you point out. And I would say you're correct, we're expecting now for the business to deliver approximately $600 million. That is up some from our guidance last quarter. If anything, we were probably being a little bit conservative with the numbers last quarter in light of the growth trajectory of the business has been on.

But look, 36% organic growth, and we're expecting something in that same vicinity again in the fourth quarter. So very strong performance coming out of the team. And it is volume led, and it's also enterprise volume led, as I mentioned on the call. And I think that's the important part as we build the business that enterprise business, as you know, is the higher-margin business, and that's helping drive the improved profitability that we mentioned on the call and that you see in our results as well, Eric.

You mentioned memory pricing. Certainly, pricing for some components on the data center decommissioning side has continued to rise -- as you know, that can be very subject to change and really component by component. So we've seen some increases on memory. We've seen some increases on hard drives, but not everything is moving in the same, let's say, velocity.

And as we get into next year, we'll be happy to update you on what we're seeing as it relates to commodity prices at that time, but we're basically using a current view of pricing for the fourth quarter, as we traditionally do.

And the next question will be from Tobey Sommer from Truist.

I was wondering if you could elaborate a bit on the data center pipeline and demand across both enterprise and hyperscalers as we turn the page into next year?

Thanks, Tobey, for the question. So first, as I said in my remarks, is we have seen -- in fact, we started seeing it even on the -- in August, as I pointed out in the last call, a shift back to our largest hyperscale customers back to inference and cloud build-out. And you can see that in our leasing both in the quarter and then as we ended Q4 with the leasing out the 36 megawatts in the Chicago site for a customer that was originally taking 25 megawatts in London.

So we are starting to see definitely an uptick on that. And then more broadly, if I look at the pipeline that we're building for the 450 megawatts that get energized over the next 4 months, again, the depth of that pipeline and the number of our customers coming back to that, again, for cloud build-out and inference, is very marked versus the first half of 2025.

And the next question will be from Brendan Lynch from Barclays.

I just wanted to follow up on the treasury contract. If I heard you correctly, it's up to $714 million over 5 years. Can you talk about what would get you to the high end versus what might be the low end of what you might be able to capture?

Thanks for the question, Brendan. It's volume, right? In other words, we have agreed pricing with the treasury and it just is dependent on the volume and which forms that they actually send to us. But I have to say is that we're obviously preparing for tax season. So the team has been working very closely with the treasury. And the feedback from the customer in terms of what we're able to do with our models has been very positive.

And our next question is from Shlomo Rosenbaum from Stifel.

Bill, I just want to go back to some of the data center leasing. It's certainly heartening to see -- we're starting to pick up in terms of the rate of leasing from the last few quarters to what you saw a little bit of an improvement now I was just wondering, can you talk about how much energy capacity is expected to be energized in the next 12 months that could really spur like the near-term leasing activity.

I'm trying to figure out over here is are we going to start to go back to those quarters where you had some really large leasing numbers in the near term based on some of the stuff that's going to be lit up pretty soon?

And thanks for the question. Yes. So I'm going a little bit maybe granular in the 450 megawatts that I said that gets energized over the next 24 months because I think that's really the capacity that people start focus on. If I even go a little bit deeper on that, in the next 18 months is 250 megawatts gets energized and so there's another follow-on 200 megawatts the following 6 months for the total $450 million.

And the reason why I'm parsing it out at 18 megawatts, if you can appreciate is that most of our customers are the large hyperscale customers, which are almost a build-to-suit. I mean there's a customization on that. So it's really kind of the 18-month window up to a 24-month window that they look at because that's the time that's required to get the design to their specification and obviously construct.

So to answer your question, yes. I mean I think we feel really good over the -- as we enter into '26 and we look at the first 18 months, we have 250 megawatts that we can be in active conversations with our customers and deliver almost in their minds immediately. And then if you look 6 months beyond that, we're almost doubling that again we're adding another 200 megawatts on top of that.

And then if I take a step back, as we say, the 25% revenue growth next year for data center is already in the bag. I mean, this is stuff that we've already contracted for in lease. And then if I look at that 250 the next 18 months with another 200 to follow of the 6 months later, the total $450 is we feel really good about our ability to be able to maintain that kind of revenue growth as we get into '27 and beyond.

And Shlomo, I'll just add a couple of more granular points to support that is the assets that we have coming on that are energizing our fantastic markets. And if you look at what we've got in London, we have over 20 megawatts energizing soon. We've got Virginia. We have 28 megawatts -- we've got quite a few megawatts energizing soon in Madrid, Miami, Amsterdam.

So these are really Tier 1 markets. And then as you get to the outer time frame that Bill was speaking about, you get into some very large capacity in Richmond, which, as you know, is a significantly growing development zone as considerable capacity spills over from Northern Virginia into that market. The other thing I will just add is, as Bill was referring to the backlog that we have for revenue even beyond 2027 is like $250 million of revenue that will be coming.

That's just on the already pre-leased. So we feel like we've got a very good growth trajectory going forward for leasing, Shlomo.

And the next question will be from Andrew Steinerman from JPMorgan.

It's Andrew. Could you comment anything on kind of really forward-looking CapEx targets kind of multiyear. Obviously, you raised your dividend here. I'm just really thinking that in the data center industry, there's a real shift towards these more mega projects and just wanted to know the CapEx approach in 2016 and beyond, you might be doing to prepare for those opportunities?

Thanks for the question. I'll start and then have Barry comment more from the detail in terms of what that means for CapEx. But mean to ask your -- the driver, I think behind your question is, are we going to participate in these large language model campus build out the 1 gigawatt. And for sure, we look at large campuses, but our target focus is for the inference in the cloud build-out.

Now that's not saying that on some of our campuses that we're looking at, say, north of 500 megawatts could someone come in and say they want to develop large language models, yes, that's a possibility. But we're not chasing that market because the nature of our customers and our relationships is really about building out cloud infrastructure and inference.

And Andrew, I would just add that while we haven't given guidance for next year, couple of thoughts on capital. Look, as we continue to build out our pre-leased backlog naturally, we'll be expending CapEx on that. And as we have a very forward very positive forward look on the pipeline for additional leasing.

You should probably anticipate that our data center CapEx will continue to gradually rise some with that expectation on additional leasing. So the key point, I think, is we really are building to pre-lease assets, right? We're not speculatively building. So it's capital that's going to very high return of contracts that we've already signed with that are very long term with some of the highest credit quality clients you can have. I mean, think about companies that have $500 billion or more market cap.

And the next question will be from Kevin McVeigh with UBS.

Great. For the one example where I think it was net 11 megawatts leased, I guess, when a client shifts like that, I guess, what drives that decision? And given kind of how diversified you folks are, would you expect more of that going forward? I wanted to start there possible.

Kevin, thanks for the question. It's not usual, but I have to say that we're always happy to do that because as you noticed that in the Wall Street Journal polling recently, we won the most customer-focused or centric company in the publicly listed companies in the U.S. And that's kind of a testament. This is a proof point in terms of the way we work with our customers because this particular customer saw their loads shift and Chicago was a more important market for them in the near future than London was -- so we said, yes, we can accommodate that for them, and we were able to do that.

So we had a very happy comer. I will say from our standpoint, it also was very good. I mean Chicago market is a very interesting market, but we took a customer that was going to do 25 megawatts in London and upsold them effectively to 36 megawatts in Chicago.

And then the space they're vacating in London and the slow state actually is a -- we have a very strong interest in that 25 megawatts and always have, and the pricing has actually improved since they've shifted over to Chicago. So it's a win-win for everyone, but it doesn't happen often. But our -- we're very customer-centric as a company. So if we can help a customer in that way, then we do our level best to do that.

And what I'd add, Kevin, just to make sure we're -- you're clear on this is the client had not commenced in London, right? So we were still -- we're still in the process of building out that site. And so you wouldn't anticipate seeing this sort of activity on deployments that have already commenced insights.

And the other thing I'll just note is in light of the timing, it's a very good asset for us to be able to lease at higher prices going forward.

[Operator Instructions] The next question is from Nate Crossett from BNP.

Just on the RIM storage business, can you comment on what you're expecting for volumes and pricing into 4Q and next year?

Hi, Nate. From a volume perspective, as you saw, our organic volume in physical storage continued to rise very much in line with our trends of, I think it was 30, 40 basis points in the quarter. We continue to have a positive outlook for organic volume and that includes next year and frankly, for the foreseeable future.

Our team continues to find ways to consolidate additional volume from our existing client base. Obviously, as you know, we win new clients, particularly in some of the emerging markets. And as we talked about so often, the volume that we bring in is very much an annuity stream. The average boxes staying with us for nearly 15 years, and that has not changed.

From a revenue standpoint, we continue to anticipate revenue management actions in that kind of mid-single-digit range. And that would be the case for the fourth quarter as well. I'll just note, we are now lapped over the clutter consumer storage headwind. As I mentioned in the prepared remarks, that was the peak volume in the peak revenue in the third quarter of last year.

The other thing I'll just mention since it hasn't come up yet, but you asked about the quarters is we have assumed that FX is a little bit more challenging on a sequential basis as you've probably seen the dollar has strengthened recently. So that's embedded in our guidance as well, which I think speaks to the fact that the we've got a very nice outlook in light of projecting 14% revenue growth in the fourth quarter.

And the next question is a follow-up from Shlomo Rosenbaum with Stifel.

Barry, I just wanted to get into kind of the MIB revenue. Both storage and services margins were down sequentially and I assume that it's mixed because that's usually what's going on. But I wanted to ask if you can confirm that and just give us a little bit more detail on the sequential movement.

Thanks, Shlomo. Yes. So if I break it down between the 2 on storage, it's mostly about data center, particularly power. As you know, as our clients draw more power and commence that's a pass-through. So we generate revenue, but we don't generate incremental profit.

So it wasn't for power, it would then up actually. And so then the other thing that I should mention on storage is data center, as I've talked about before, is a lower gross margin for us on storage as a company. But as you know, it's a very accretive EBITDA margin, and the team is just doing phenomenally well with profitability in data centers. You saw the margins up to 52-plus percent, and that's also with the headwind of power, just as a reminder on the EBITDA margin.

On service, what you saw there in terms of the decline is, as you said, it's much about mix. It's all mix actually. So the ALM business continues to perform very strong as you saw the growth that we've been delivering both year-on-year and sequentially as well as digital. And as we talked about before, both of those are generally kind of lower margin businesses for us than our average service.

And lastly, I'll just point out with better retention rates, we have permanent withdrawals and terminations, and that's a bit of a headwind to rate as well. But that obviously, that's a very good story for the long term in light of seeing retention continue to rise over the last few quarters.

And ladies and gentlemen, this concludes our question-and-answer session and the Iron Mountain Third Quarter 2025 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.

Welcome, everybody. I'm Jon Atkin with RBC and pleased to be spending the next 20 minutes with the CEO of Iron Mountain, Bill Meaney; and the Chief Financial Officer, Barry Hytinen.

Welcome.

Thanks, Jon.

I'm going to ask some questions about kind of core RIM business, document storage and then pivot to data centers and then pivot to asset life cycle management. If there are questions at the end, we'll have time for maybe 1 or 2. But focusing on kind of the core business, maybe update us on how you've been able to maintain the very strong pricing economics within RIM and maybe unpack different sectors or different geographies where you see storage volumes shifting in any notably different way?

Well, maybe -- thanks, Jon, and thanks for having us, and thanks for attending. I think maybe I'll start at a high level in terms of what we see in terms of the records management in terms of pricing and volume growth, and then Barry can give you a little bit more detail in terms of how we execute around that.

So I think one great thing about how we've been building the company over time, if you think about it, is that still 70-plus percent of the business is that records management business. But during that same period of time when we started this journey, it was 100%. So what's happened with the other 30%, which is the growth portfolio, which is ALM, data center and the digital business. And those 3 businesses combined grow north of 20% or deliver now approximately 6% consolidated growth in terms of top line growth for the company and similar levels of bottom line growth. But that 70% has become more valuable, not less valuable during that period of time and continues to grow.

And so why that's more valuable is because of those other services, especially around the digitization services and the asset life cycle management because people see that if you store documents with Iron Mountain, you have an automatic option that you can generate by a flick of a switch or a phone call or an e-mail or a web order to actually execute around those other areas. So we've been really encouraged that we continue to have mid- to upper single-digit revenue management or pricing action in those -- in that business because of what we're able to give. And then volumetrically is it's not a fast-growing business, but it's growing anywhere between, let's say, 20 and 100 basis points depending on the quarter. And part of that is also driven by higher growth markets like India, whilst it may be lower pricing, it has a similar margin associated with them.

I don't know, Barry?

Yes. Well said. And then maybe at a very high level, I think at the corporate level, you talked about a 47% flow-through rate in terms of incremental EBITDA over incremental revenue. And maybe talk about what sort of sustainable level we could see in terms of flow-through margins going forward?

Jon, thanks for that. The -- our global RIM business is -- if you think about the core business that Bill was just speaking about, has very high incremental margins. So I think like 70%, 80-plus percent. But there's also 1/3 of that business is services where the margins are more like in the 30s. So for us, our flow-through really is based on the relative mix of where our growth is coming from. To round that out, on our data center business, obviously, that's a business that's been going from strength to strength, and we've been highlighting for some time that we would be seeing margins improve in that. And we've recently been hitting 50-plus percent EBITDA margins up about 700 basis points over the last couple of quarters year-on-year. And I think that's a reasonable place to continue to plan.

And then in our Digital Solutions business, that would be more like 20% to 30%. And in our Asset Life Cycle management business, the margins are anywhere from teens to 20% on our data center decommissioning business, which is currently about 40% of that business. And in the other 60%, the enterprise component, that would be more like in the 20s to 30s and going higher through our ability to continue to process more and more gear ourselves and capture the full value chain.

Now you put that all through the blender and where does it get? It gets probably into the 40s to high 40s kind of blended because we've got really consistent growth coming out of our growth portfolio, that being data center, digital and ALM. Those are collectively growing in excess of 20%, and we expect that to continue to do so for quite a while. And then in our core physical business, it's, as Bill just mentioned, got a very strong track record of consistent growth in that mid- to upper single-digit range. So something in this vicinity makes a lot of sense, recognizing that there are some mix elements.

So you hit on data centers and ALM. So let's kind of dive into data centers a bit. And I think you've mentioned in the fairly recent past the discussions in the first half of the year, broadly speaking, we're heavily focused on large campuses supporting AI and large language models. That's clearly not kind of your sweet spot, so to speak. Maybe elaborate a bit about how this shift has affected your pace of leasing and current build-outs and what gives you confidence around the leasing pickup going forward?

Okay. Well, thanks for the question. I think it's fair to say, like I would say, over the first half of the year, and I would say even the previous year, the last half, is we definitely, through the conversations we had with our customers, saw a shift to focusing more and more of their CapEx on the large language model campuses, which we made an active decision not to participate. And I understand that because if you think for the larger hyperscaler, it's an arms race in terms of making sure that they had a presence in the large language model space and the amount of CapEx that you have to go into both to secure the GPUs, but also secure the power. These are like anywhere from 200 to 500-megawatt campuses is that's where their attention and their capital is definitely flowing.

What we've seen, I would say, in the last few months is a change in focus. And I think you probably saw that in the Oracle announcement the other day, they also made reference to their looking at building -- continue to build out their inference capacity, which is where we play. Inference is usually sitting where they're building out their cloud capacity. And if I look at the pipeline we've been building over the last few months, we feel pretty good about that shift now back to the future, so to speak, in terms of where they actually run their IT loads on behalf of their customers.

So if you think specifically for Iron Mountain, with over the next 12 to 36 months having 175 megawatts coming online in Northern Virginia, another 200 megawatts in Richmond, 36 here in this market, 30 megawatts in Amsterdam, which is a really tight market that we've just got the power secured and then 75 megawatts for Madrid. We feel really good looking at that portfolio of -- there's almost 450 megawatts just in that portfolio that I said over the next 12 to 36 months.

And as we're sitting here today, we have 400 megawatts leased and running. So that's more than doubling what we're sitting with today, not counting on what's in development that is already in the can for 25% growth next year in terms of top line growth for the data center business. So we feel we're well positioned. We definitely, through the conversations that we're having with our customers now is they're back focused on the part of the market that we play with, and we're encouraged by the pipeline we're building around those assets.

In terms of the velocity, so a lot of discussions. Are you finding at this point in 2025 versus, say, a year ago at this conference, decision cycles around large commitments on the data center side, lengthening, shortening? What's the level of urgency? How would you characterize that amongst your customers?

I wouldn't say the decision cycle is lengthening. I would say it's still pretty much the same, except that I think it's fair to say 1 year, 1.5 years ago, we were sitting here and we had some customers that were signing leases 3 to 5 years out. We don't see the 3 to 5 years out as much anymore.

In a practical standpoint, of course, we like to sign things 3 to 5 years out. But from a practical standpoint, it doesn't make a big difference in our business model because, again, the markets that we play in are what I call low-risk waterfront property. So what do you gain by people going out 3 to 5 years? It gives you more certainty in terms of risk. But these are not risky sites. These are in the availability zone. So from a cash flow standpoint, it's not -- I wouldn't say it's the most material. And -- but we do see that there's fewer customers that are securing leases 3 to 5 years out than they were, say, 1 year, 1.5 years ago.

So leasing aside, you have a lot of book not build. Barry, can you maybe talk us through the earnings growth dynamic in terms of the -- as you deliver and customers move in, how much of AFFO growth might be driven by that sort of dynamic on the data center side versus RIM versus ALM?

Yes. So on the data center side, we recently on last quarter, gave some visibility into our backlog in terms of that pre-leased volume that Bill was just speaking about. And over the remainder of this year, we'll commence and we're seeing nice growth such that our data center business will approach, call it, $800 million, $790-some million of revenue this year in 2025. Next year, just based on what we've already leased and what we're under construction on, we will be in excess of $1 billion. So we'll grow our data center business 25% next year without any additional leasing this year, Jon.

And then beyond 2026 from what we've already leased, we have about another $200 million of revenue growth coming in 2027 and the ensuing years after that. And on top of that would be any additional leasing that we'd make going forward. The thing that I don't think is fully appreciated about our story, you asked about book, not build sort of for the rest of the business. In our physical volume business, it is a very sticky business, right? The average box stays with us for 15 years, and our volume has been consistently slightly growing for quite a while now. And so that business is very much an annuity stream. And so we start the year with a very substantial cash flow coming out of that physical volume business.

In the ALM business -- the data center decommissioning business, it tends to be more of a project-based; however, the volume that we can see for the industry is growing very fast because if you think about it, we're decommissioning gear that's been put into data centers over the last many years. Most of the hyperscalers retrofit their gear about every 5 years. And so as those data center platforms have been growing over the last decade, you see more and more volume coming each and every year going forward.

And then on the enterprise side, which is the larger book of the business in ALM, it's very much a booked business where we tend to cross-sell into our existing client base, cross-sells very well. We have a lot of opportunity because we're only about single-digit percentage crossover between our core enterprise storage business to our ALM enterprise business today, and that's a big focus area. And we tend to win a, let's say, a specific location with a client and then land and expand because almost all of our clients have got multiple small vendors doing that business for them. And then on the digital business, the digital business continues to expand from us on a recurring basis because more and more of our business is Software-as-a-Service and multiyear contract relationships, which give us that much more visibility. So it's a business where we have a fair amount of visibility each year, John.

So we'll do a little bit of a side bar then on ALM, and then we'll pivot back to data centers. But maybe combining the 2, you've got hyperscale decommissioning, and we haven't yet seen kind of the AI refresh cycle for GPUs in any meaningful way. Is your ALM segment mature enough to have a view as to -- does it make a difference whether you're taking stuff out of somebody else's data centers or your own data centers? Is there sort of a home field advantage to think about or too soon to say?

Well, the vast majority of the business we're doing, like, call it, 99% would be stuff coming out of other people's data centers because that's where the vast majority of the volume is. You think about like the 300-megawatt, 500-megawatt campuses that retrofit their gear. And having said that, going forward, as we move -- as we become a larger and larger player, I think there's definitely cross-sell and synergy between our existing data center development business and our ALM decommissioning. We see that in almost all of our client relationships, Jon.

On the earnings growth, you talked about a lot of the factors that drive that. One thing I don't think I heard you say was renewal spreads. So pricing 10 years ago on wholesale hyperscale leases was going down year-on-year. And now we're kind of at the stage where pricing has been going up pretty much since 2021. So how much of the earnings calculus do you attribute or the earnings growth to maybe renewal spreads being favorable?

So in our data center business, our colocation business is now the smaller portion of our business. The vast majority of our growth over the last several years and the growth that I was just speaking about is our pre-leased assets to major hyperscalers. Think about the top 10 cloud players. We've got relationships with many of those. And having said that, in our colo book of business, we've been seeing strength to strength on mark-to-market for years now. I mean our vacancies are very low and renewal spreads have been teens to 20. In fact, in the most recent quarter, it was in that level against a similar number the prior year. And so we continue to see very nice improvement. But I'll just say, even on our hyperscale relationships, Jon, the returns over the last several years, including things that we're looking at now would be of the order of 10% plus, 10%, 11% cash-on-cash unlevered returns. So it's a good business.

Power delivery. So you've talked about Madrid, Amsterdam, Richmond, Northern Virginia, Chicago and each jurisdiction is different. But secured power, what are the power -- what are the challenges around getting more power in those and other of what you see as your key growth markets?

So those markets, we have secured the power. But you're right. I mean, power is the operative word these days. So we feel really good that we were able to secure it around those campuses. But it is a major constraint. Yesterday, I was at the White House, the EPA administrator hosted a small group of data center customers and one cloud customer as well. And the theme that they came away with, it's all of us say, we need to do more about power to remain competitive. But we're finding it, but it's not as easy as it was 5 years ago.

Last question for me, and we might have 1 or 2 -- time for one or two from the audience, but just kind of capital intensity, a lot of it is dedicated towards meeting data center demand. How can you maintain the existing or even potentially higher levels of CapEx? What's kind of your funding strategy around that?

So John, we -- unlike a lot of data center companies, we have the benefit of our core business, which is very capital light. It requires very limited capital to grow. And so we start each year with a few hundred million dollars of cash flow in excess of after we paid for our dividend and paid for our maintenance CapEx. That, together with our growth in EBITDA using a leverage at about 5x fully funds our plan. So I'd like to say we have a fully funded plan that enables us to maintain leverage in this vicinity, and it's part of the secret of our success, and we continue to expect that.

Now there's some ancillary additional ways that we can fund. Over the years, we've done some level of sale leasebacks. We've also done some asset level financing on some of the hyperscale tenant long-duration contracts that we've done. But that's the model.

Actually, so one more on the government contract around treasury. What is or is not in your guide assumptions for future growth in terms of that contract?

Okay. So -- and I'll give a little bit of context because not everybody probably is aware of what you're referring to. We have several quarters ago -- a couple of quarters ago, we mentioned that we had been awarded an award from the Department of Treasury, and it was for digitization of tax returns. And at that time, it was a sole-source relationship that was for 1 year, and we had mentioned it was about $140 million contract. As is the case with many sole source, we -- they actually had issued 2 awards. We had the $140 million, and there was a much smaller award to another player. As is customary in sole source, procurement in the government, there were contests related to that, others challenging that. And so the government converted that contract to a month-to-month contract for us, which we've been executing under. We're the only player supporting the government with that digitization work at this time. And we're pleased to have just gone through the rebidding of that. And importantly, we won a award from the U.S. federal government. It is a 5-year contract.

Now the volume will be dependent upon how much comes in from U.S. taxpayers in paper format over time as well as they have awarded to 3 other smaller players, and there will be a determinant around the service level agreements and how the processing of those returns work. I will note that as everyone would probably imagine, it tends to be a seasonal business in our first half when more of the activity flows into the government from a tax return standpoint. But we are super excited, and I think it's very validating of the digital work that we've already been doing with the government and the fact that we're already processing under that contract, and we will continue to. So we expect it to ramp.

Now coming directly to your question, we didn't put anything in our guidance for this year related to this contract. And certainly, as we get into 2026 and give guidance for it, we will be that much closer to the more peak volumes, and we'll give views as it relates to how that is processing. But I'll tell you, Jon, we're thrilled to have been awarded the deal. We expect it to win again since we had already been awarded it originally twice, and we're looking forward to supporting the government with its efficiency efforts.

Fantastic. We are out of time. I want to thank both of you for the Q&A session.

Okay. Good morning, and welcome. I'm very pleased to be joined by Barry Hytinen, CFO of Iron Mountain. Barry, thank you for being here with us.

Thanks for having us, George.

Of course. So Iron Mountain has transformed its business over the years to build out several high-growth businesses, including data centers, asset life cycle management, digital solutions. Can you talk about the strategy more broadly and how these businesses are synergistic with your legacy Records Information Management services?

Yes. Thanks for that. So fundamentally, we -- as you alluded to at the end of the question, we have a client base that's 240,000 clients, and most of them have been doing business with us for years, if not decades. And our customer retention rate is very, very high, I think, like 99-plus percent.

And so years ago, the team started investing in areas where we could plant seeds for future growth. And those were all the things you just mentioned and a few others, that the concept was how do we cross-sell from that large client base where we've got a consistent revenue and cash generating business that's based on trust and continuous strong service and a variety of other dimensions that clients have come to rely on us and how do we logically extend ourselves. And so whether it be in the form of digital solutions, that's the nearest in, I would say, in terms of the cross-sell. Because we have literally millions and millions of boxes of material that clients would like to have access to and be able to do a level of analysis on. But in most cases, it's, today, dark data for them. It's just sitting on a shelf. And for them to have the ability to do a level of analysis on it requires a consistent process.

And that's where our digital solutions business comes in, and it frequently starts with a level of digitization and then can -- now is frequently leading to use cases around our DXP platform, which is a proprietary software-as-a-service offering that we've created to help clients both manage their inventory, do the sorts of analysis that I'm describing. We can meta tag and use AI agents to help clients do a whole variety of use cases. Some of those are in the financial services area, some of those are in health care, et cetera. But digitization for us -- and our digital solutions business is now at a run rate of over 500 -- nearly $550 million annually. It's a business that has been growing at 20% CAGR over many years, and it cross-sells very easily off of our core.

In asset life cycle management, that is also a business that's growing very rapidly for us, to dimensionalize that. In 2021, I believe we did $38 million worth of revenue in asset life cycle management. This year, we're on a run rate to do something like $575 million or more. And we've been growing both organically and inorganically in that business. Last quarter, we grew 40% organic, 70% total growth.

And it also cross-sells very well because we are going out to clients and on the enterprise side, and we're saying to them, look, what do you do with your end-of-life used IT gear where there can be confidential information on it, there can be concerns around sustainability, how things are properly recycled or reused. And we offer a service offering whereby we can come to their facilities on a routine basis and pick up that year, not unlike we do with their physical inventory that they're having a store. And then we have the processing capability that we continue to build out around the world where the chain of custody of that gear never leaves our facilities. And we properly wipe it, then we might, in some cases, recycle it or reuse it. In other cases, it would be appropriately end of lifing the gear.

And that's a portion of the economy that is secularly growing. It is a very, very large TAM. It cross-sells, we think, very, very well off of our core because we already have relationships with all the clients that actually need this. And for -- currently, the market for it is very, very fragmented. So there's a tremendous number of small vendors that are doing this work for very large corporates. And we think the market is ripe for consolidation, and that's what we're attempting to do. We're already the largest player in that space.

And that's the majority of the TAM there, George. But the other part of that business cross-sells quite well with our data center business, which is where we do data center hyperscale decommissioning. So think about the largest cloud hyperscalers, they've been building out their fleets of data centers for decades now -- for a couple of decades now. And generally speaking, most players in that space refresh the gear inside the data center on about an every 5-year basis.

And so they need a partner, and we're one of a few that can handle that gear that comes and takes the gear out of the data center while they put in new servers, and they're making that change at that time generally for better compute and/or better energy efficiency, better power draw. And as a result, the gear that's coming out, the servers that are coming out still has value. They're not taking it to obsolescence, like is what's common on the other part of the market I was mentioning.

And so we have relationships through our data center business, which I'll talk about in a moment, whereby there's a great degree of cross-selling and consistent collaboration with those clients on doing their decommissioning as well. That is more of a revenue share model. It's a highly technical portion of our business where we are wiping the servers. In some cases, depending upon the client, anything that's been written to, we would destroy after wiping. In other cases, we disassemble the servers and then sell off the various components, the CPUs, the drives, what have you, and in that way, share that revenue. So that cross-sells very well with our data center business.

Our data center business this year will be approaching $800 million in revenue. We've been seeing very significant margin improvements as we've been commencing more and more of our more recent lease signings over the last few years. And the vast majority of our growth in data center over the last several years has been coming from major hyperscale clients. And like those that I was just speaking about on the decommissioning side. And we think when you look at what we're operating in data center, we have 450 megawatts of capacity that we're currently operating in our portfolio. That's up materially over the last 4 or 5 years. And we're about 98% leased in that portfolio. We're under construction of about 200 additional megawatts, of which where the majority of that is already pre-leased. So all we have to do is finish the construction, and we'll start leasing.

And then we have a portfolio of about another 700 megawatts, round numbers, that we have not begun construction on that we can construct and sell over time. Obviously, we continue to look for additional land. So data center for us is another one like digital and like ALM which we think can secularly grow as a market for a long period of time at a relatively high rate and we can take share. And that's what we've generally been doing.

That's a great overview. Thank you for that, Barry. If you look at all of those growth businesses, so data centers and digital solutions and asset life cycle management collectively, how big is this growth portfolio and how much -- how fast is it growing altogether?

Yes. So it's currently this year going to be 25%, maybe even 28% of our total revenue, let's say, high 20s percent of revenue. And to put that in perspective, 6 or so years ago, it was about 8% or 9% of the company's revenue. What's important about that is the other part that is our core, the physical business has continued to grow at like a mid- to high single-digit percentage over that entire period of time.

So we've gone from being -- pre-COVID, we were about a $4 billion revenue business. We're rounding home to nearly $7 billion this year. And the growth portfolio continues to grow. Collectively, those 3 businesses are growing north of 20%, and we expect that to continue. In fact, we gave some forward guidance on our last call that for our data center business, in particular, we would expect it to grow, round numbers, 25% next year on a revenue basis without even any additional lease signings, that's just based on what we already have in the backlog. And then we have another couple of hundred million round numbers of additional backlog that will turn into revenue generation in 2027 and beyond.

The ALM business also has some structural benefit of -- it's kind of a booked business. You win the business, and then you continue to expand with the clients. That's one of the reasons why our organic growth has been so strong in the last several quarters. The digital business, I think, is a business that is strength to strength as we continue to educate clients on what we can do for them by helping them take dark data and make it something that they can do analysis on, it creates that much more value add.

Makes sense. You had previously put out medium-term targets, revenue CAGR and EBITDA CAGR of 10% spanning 2021 through 2026. You're now surpassing that target for both revenue and EBITDA. So when you think about the drivers of what caused that outperformance, how much of that upside is coming from the growth portfolio versus the traditional legacy Records Information Management business?

Yes. And I'll just give a little bit more context there. So we said -- at our prior Investor Day, we said, measure us from '21 to '26, 10% CAGR revenue, 10% CAGR EBITDA. And I gave kind of a scenario analysis on where -- how that would unfold. We suggested that our core business might grow mid-single and data center would grow a little north of 20, et cetera.

Look, we've been running ahead of that for -- and by the way, those were all based on then FX rates. So the kind of revenue growth that we've been putting up in despite the fact that the dollar has been stronger over that period of time is just a little bit there on the fact that we've been outperforming these numbers. I'm going to give you even more. But we've been outperforming those numbers by about 300 basis points for the last several years. This year, we have recently guided the midpoint to be 12% on revenue, 14%, I believe, is the number on EBITDA. And so we've been seeing margin expansion.

The outperformance has really been coming, generally speaking, George, across the portfolio. Our classic core business on the physical side has been growing more like high single -- mid- to high singles, not 5% like we had originally suggested. And I see the ability for us to continue to drive revenue management and pricing activity together with kind of consistent volume, and that's an algorithm that's working very well for us in that core business.

Our digital business has obviously been strength to strength, as I was just speaking to and growing faster than what we had originally projected. Data center has been accelerating over the last few years and outperforming, particularly so also on the margin side. And our data center EBITDA margins are up around 700-plus basis points in the last few quarters and kind of at a new level now. And then our ALM business, which had some pricing issues in component pricing during the second half, if you will, of the supply chain, the supply chain crisis kind of unwinding, we're now growing very fast, much faster than what we were originally anticipating. And so we're catching up there. So it's really outperformance across the portfolio, George.

Makes sense. Let's touch on the legacy RIM business for a moment. Storage volumes have been relatively stable, in fact, growing positively fractionally on an organic basis for years now. What would you say is driving this slight positive organic growth in the legacy storage business?

Yes. It's just inherently a really sticky business. The average box that we bring in from our clients stays with us for 15 years. And it's kind of been of that order for a long time, like decades. That's not to suggest there isn't a level of dispersion across that. It averages 15. So we have some, like the boxes that come in, it's a smaller pool of our inventory that's regulatory oriented. They skew to being destroyed much faster, like 3 or 4 years. And then we have some stuff that comes into us that never gets destroyed. But the average life cycle of a box is 15 years.

The way we've been growing is a few things. One, we've continued to consolidate share with our existing client base. Nearly all of our clients still store some portion of their physical inventory themselves. And we can help them as they continue to work through their commercial office real estate and other changes. In light of what's going on in the economic cycle, we can ingest that volume for them and bring that in. So that helps.

Number two is we're generally growing in markets where we have long-term secular opportunity to continue to grow. Like take a market like India. It's one of the largest ones. It's probably the largest of the form that I'm about to describe, which is that market is only relatively recently beginning to outsource physical storage. And so we and several other players that have a level of scale there are growing faster in terms of volume in India, and that's probably going to continue to occur for years to come. There are several other markets that have similar dynamics, they're just smaller in nature than India.

And then thirdly is we continue to actively go after new business. We still win new accounts. Despite the fact that we do business with 95% of the Fortune 1000, there's still more accounts out there to win. The other thing is all of our clients have generally gone through some level of digital transformation, George. And when that happens, if they're using relatively less paper, we go up against some comps based on what did they send us 15 years ago. But many of the industries we've worked through have gone through a level of digital transformation multiple times, and we've kind of anniversaried that. So now we're growing with the broader business cycle.

So what does that all spell? We expect our physical volume to continue to be, as you described, slightly up year-to-year. By slightly up, I mean something like 20, 30, 40 basis points. And that's a model that works really well for powering a tremendous amount of cash flow because not only are we getting the revenue management or pricing elements that I mentioned, with every bit of little incremental volume, it gets us a little bit more utilization. We continue to drive productivity. And that portion of our business that you're asking about requires very limited capital to grow. So it's a very strong cash-generating machine.

So let's talk a little bit more about the revenue management program that you just mentioned. That's been put in place now several years. We've seen mid- to high single-digit growth from pricing increases because of this revenue management program, and almost all of the growth that we're seeing in legacy storage revenues are coming from pricing because volumes are up 20 to 40 bps. So how sustainable would you say mid- to high single-digit growth in pricing is? And what has customer feedback been like to this revenue management program?

Yes. So a little bit of context. It's been about 9 years now that the company has been really, in earnest, begun the revenue management program. And for the first few years, there was kind of like tipping the -- putting the foot in the pool kind of thing and just testing it out and doing a lot of research. Because there for -- quite a while there, the company really wasn't even keeping up with inflation, George, on revenue management. They're getting a lot of incremental volume, and they kind of -- it was very much an operationally focused kind of portion of the business.

And as the company tested revenue management, what they found is, candidly, we were way underpriced for value. And over the next few years, we proliferated our revenue management program across our business both from a standpoint of client-type verticals as well as markets. And at this point, we have the revenue management program firmly in place basically across the entire business for the last several years, and we're comping obviously quite positively, to your point, something like mid- to high single-digit kind of percentages, and we think that's quite sustainable.

How do we test? Well, the interesting thing about our business, I've been involved in a couple of other companies where pricing was really important. In this business, you get to see, I think, enough data where you have a very good line of sight to elasticity because all of our clients are continuing to send us new physical boxes on a very regular basis. That might be weekly, in some cases, that might be monthly, et cetera. And so we have the ability to see, based on when we take a pricing action, what was the incoming volume from the client 3 months before, 6 months before, a year before, 2 years before. And what is it 3 months later, 6 months later, 12 months later.

Generally speaking, we don't see much in the way of elasticity. And it's important, sometimes investors ask me, well, aren't they required to send you volume or something? Actually, no. None of our contracts require any client to send us volume. So if they don't like our service, if we've -- occasionally, we make a mistake in customer satisfaction or if they don't like the terms that we're doing business, if they don't like the pricing action, they can just stop.

And so it's a relatively straightforward answer is we've got to continue to deliver enough value to justify the pricing. And what I think what you find is the offering that we have, especially from medium to larger-sized clients, George, is so strong that we're delivering plenty of value for them. We continue to offer them new services that make our business that much stickier.

And why do I point out medium- to larger-sized companies in particular? It's because we are really one of the only providers -- we're really the only provider that can carry a client across the globe. We do business in over 60 countries around the world. There's no other player in this space that does anything more than like 1 or 2 markets. And in many cases, if you think about it as a large corporate, this is all about consistency, chain of custody, making sure that the box is there when you need it in the future. And we've got a track record of being able to do that. In that way, they standardize with us. And they know we have a consistent way of doing things in every one of our markets. We operate 1,500 -- nearly 1,500 warehouses around the world. And they're going to get that consistent view. Also with us, they can get the digitization on demand. They can get the digital solutions offerings I mentioned, they can get the asset life cycle management.

So I think we've built a fairly sticky business. Naturally, we do see some level of elasticity that generally skews to the smallest clients with us. And I think that's where we generally -- the offering is -- there's less value added, if you're dealing in just 1 location, for example, as opposed to a multisite client. And so we're going to continue to test and learn and see where we are. But in terms of looking at our revenue management program, I think you should be continuing to expect it to be delivering at the levels it's been delivering at.

Makes sense. Let's dive more into the data center business. So in 2Q, the data center business grew 26% organically, and you're guiding to nearly 30% organic growth in the second half of the year. You mentioned 25% plus growth in 2026. What gives you that visibility? You mentioned you don't need any more lease signings. It's all based on prior signings, so you can get there with high visibility. So can you talk a little bit more about that? What's already baked? And how long can your backlog run you through if you don't have any more signings?

Yes. So it's -- data center is a phenomenal business, and it is one that is very much -- for us a -- we book a deal generally, and then we're going to be in the process of constructing it and getting the power in. And then once we complete the construction, we can commence. And so the visibility -- for years now, I've been saying, hey, look, our visibility on revenue generation and profit generation on data center is very, very high because we have signed so many leases over the last 3 years. The last 3 years, we've averaged about 125 megawatts a year of additional new leases that we would take between 12 to 24, in some cases, 36 months to deliver for the client.

So when we look at what we're generating revenue on incrementally this year in the back half, the vast majority of that is stuff that we booked a year, 2, 3 years ago, and we've been in the process of constructing. And that's kind of the formula, George. And so as we move into next year, the reason I could say we see a couple of hundred million of additional revenue generation, 25% growth, to use your number, for next year is because we know what we're in process constructing. We know when it's going to turn on. And that level of growth requires no additional leasing.

Now there are other elements that naturally go into the P&L model like things like we have a colo business that generally renews about annually, and we -- every quarter, we renew leases. And the churn there has been very, very low. I think we're running at like sub 1% for the first half, total churn. And pricing, mark-to-market pricing on our colo book, for example, has been running in the teens to 20% for quite a while now. So we're getting incremental revenue growth as well as profit growth from that pool.

And yes, it's a fundamentally a very strong business. And as it relates to you asked what about beyond next year. So first of all, we have leasing guidance out there for this year. So it's -- the scenario I was describing a moment ago where we can grow $200 million next year without any additional leasing, that's not the plan, right? We still expect to lease incremental. And while I'm not going to roll forward our comments from the last call, we'll give you updates on the next two calls as it relates to how we did. That has relatively limited impact on revenue generation next year, but it really turns into some revenue next year as well as into '27 and '28 and beyond.

And so just in terms of what we've already booked, we can generate another $200 million of revenue in '27 and beyond, '27, '28, et cetera. And so high, high visibility business, one that can grow for a considerable amount of time. And structurally, as we have more and more capacity for power generation coming online over the next 6, 12, 18 months, it just gives us that much more leasing capability, which will power incremental revenue growth for the -- all the successive years.

Right. So commencements have been very strong. But signings and leases have been a little bit softer, and you reduced the guide for data center signings this year. Can you talk about what's happening? What's causing that pullback? And it sounds like you're expecting a little bit of a turnaround in the second half of the year as demand for data center switches more towards inference compared to model training?

Yes. So I think -- and that -- therein lies, I think, a key portion of this is we have not historically made our market in the AI training, a really large deployment, I think, like 0.5 gigawatt type of deployment. And many of the hyperscalers over the last -- ballparking a year -- have been very focused on getting that kind of capacity, doing those sorts of deployments. And while there's still plenty of demand for cloud and inference deployments, particularly in Tier 1 markets of the sort that we're exposed to, to get the hyperscalers', if you will, attention has been on a leasing window that might be in the 12- to 18-month horizon.

And if you look back at what we've leased over the last few years, it's kind of like a high-class problem. We've leased everything that we had that we could -- much of what we had that could be lit up in that kind of leasing window. And so as we've worked through this year, we have -- we are getting that much closer to being able to go into a lease with a hyperscaler that would initiated in 12 to 18 months.

And so as we said on the last call, we have seen a considerable uptick in our activity in our pipeline. We have seen things move through our pipeline into stages like technical due diligence, which is generally one of the last stages prior to contract signature. And while I'll keep my comments to what we said on our last call, I'll just note that our confidence on the leasing guidance we gave was high.

And in terms of why we reduced, it's really just because, frankly, it's a little bit of a lumpy business and just looking at what we could convert in terms of high confidence within the back half, it was of that order. But if you look into next year, I think we're going to be having another very good year for leasing as we look at what we have coming available because we've got incremental capacity to sell in places like Northern Virginia, in Richmond, in Madrid, in Chicago and in Amsterdam, just to name a few. And all of those markets are places where we know major hyperscalers who are already our clients have need for cloud and inference deployments.

Right. Makes sense. Let's talk a little bit more about the ALM asset life cycle management business. So in the second quarter, the revenue growth was very significant, up 42% year-over-year organically. Can you talk about how much of that's coming from volumes versus prices? And what you're seeing with semiconductor component prices, do you expect that to be a tailwind and how you expect the volume price/mix to evolve going forward?

Yes. So it was 42% organic and 70% plus in total. And about round numbers, 3/4 of that was volume-driven, George, maybe even a little bit more than that. Pricing has been up some on -- in total. However, more so in memory than in other elements of the components. I would say my guidance has been for pricing to be pretty consistent going forward. And if anything, I would say that is -- what we've been seeing recently is kind of consistent with, if not a little bit better than that. Of course, as always, a function of what's your mix in a given quarter, how much memory are we doing, which is traditionally around half of what we do, but it can fluctuate anywhere from 60% to 40%, something of that order. So depending upon mix adjusted, the pricing has been something like mid- to high single digits up, something of that order. And I think that's not a bad place to be planning it going forward.

We think that in light of some of what's going on in the new gear space where certain models have been -- original manufacturers have said they're not going to continue to produce, that creates incremental demand for the secondary because clients that have a need for that gear, they want to make sure that they have access to it, and the place that they can most readily get it is in the secondary market, which is generally what we're exclusively selling. So I think secularly, there's a lot of volume in ALM continuing to build. We are winning share, we are winning clients, and we're a beneficiary of pricing. Yes.

Makes sense. On the digital solutions side, you're waiting to hear back from the U.S. Treasury department on a 5-year contract. Can you give us an update on where that sits?

So really not too much more to say on that one versus what we said on our last call. We -- I'll just reiterate that we did submit our bid for the 5-year award that you mentioned. The government has not yet declared what they're going to do with that. They haven't announced an award at this stage. We are operating on kind of a month-to-month agreement on that, and we continue to do that, that kind of -- those at the -- around the 24th of each month.

And so we're doing the work. We feel very confident, and our team continues to execute extremely well against the work, albeit that is a fairly seasonal book of business. So the business that we're doing today is relatively quite small compared to what would be in like our fiscal first and second quarter, just in light of the seasonality of that business. And we're hopeful to continue to do the business. Our team has obviously spent a lot of time developing language models and training our models as it relates to being able to ingest and digitize that content. And we think we're well positioned, but we'll await the government's decision on that.

Makes sense.

The other thing I'll just add, though, to that, George, is while that's a very large opportunity, there are many other smaller opportunities that we continue to go into the government and pitch and seek the opportunity to help save the government money through digitization and digital solutions. And so that's an element that I think is largely a tailwind to our business over the next few years as things like DOGE and other government efficiency efforts provide opportunities.

Makes sense. And then lastly, you're spending around $2 billion in CapEx this year, and the vast majority of that CapEx is being used to support your data center growth initiatives. How do you expect your CapEx trends to evolve over time? Is it going to continue to scale with data centers? Is it going to stabilize and plateau around current levels? How do you see that playing out?

Yes. If you look at how we got here, we have ramped our growth capital quite appreciably over the last 5 years. I remember the first year I was here, I think we were only doing a few hundred million dollars worth of data center growth capital. But -- and the reason that's ramped so much is because of all the leasing we've done. And we've been writing really very good return projects, I think like 10% plus cash-on-cash unlevered returns with very high-quality tenants on leases that are 10 to 15 years in duration. And so we have had to increase our capital deployment to fund the construction of those sites on behalf of those client contracts. And if you look at the last 3 years, as I mentioned earlier, we've done about an average of 125 megawatts a year. You go back 5 years ago, we were doing like 10 megawatts a year. And so there's been a huge ramp there.

Now if you look at what we have to be able to lease and deliver over the next few years against what we're already commencing, I think something kind of of this order to slightly up is probably the way to be planning as we continue to lease. And then could it ramp higher? Well, we'd have to lease more to do that because we generally are not a speculative builder. What we're generally doing is we're getting contracts and then building the sites to the contract with the high-quality clients.

Yes. Makes sense. Well, thank you, Barry, for the great discussion. Please join me in thanking Barry.