Iron Mountain Inc. 2026 Q2 Earnings Call

Good morning, everyone, welcome to our second quarter 2026 earnings conference call. Joining us today are William 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 discussions of 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 two 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, 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 three 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 13 megawatts in the second quarter and another 75 megawatts in July, bringing our year-to-date leasing to 110 megawatts. With strong industry demand in 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 lifecycle management business with second quarter growth of 88%.

ALM represents a multi-billion 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 two 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.

We see strong operating leverage over the next several years, which will drive profitability and margins even higher. 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 as a top provider of document mining and analytics platforms, positioning InSight DXP as a top scorer for agentic AI functionality, data privacy, validation rules, globalization, and platform breadth. 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. More recently, Iron Mountain was recognized on The Wall Street Journal's Best Companies for the Future list, capturing the number 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. 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 whilst 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 and 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. Let me highlight some of our data center wins. We signed a 25-megawatt lease in July, fully leasing our London 3 asset. 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 Lifecycle 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 multi-year 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 secure disposition of 100,000 IT assets annually. We won due to our proven scale, security standards, and the strength of our local partnership.

In our ALM decommissioning business in Europe, thanks to our market-leading position and the global reach of our brand and capabilities, we are pleased to be selected by a neocloud customer to decommission and remarket tens of thousands of IT assets and conduct on-site shredding of drives. In Canada, a leading financial institution selected Iron Mountain as 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. 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, 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, 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.