Q3 2025 Earnings Call Transcript

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 could no longer manage and store its records in-house.

Both of these deals were attributed to our strong reputation for secure records 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, an 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 5-year 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 volume 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 hyperscalers resume 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 for 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 as 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 this 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 records management, digital and data center co-location services for this customer over many years. We are pleased to extend our solutions, thanks to our ALM 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, Clutter's 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 to 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. 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 opportunities 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 offering, 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 2026. Can you talk more about the planned phasing of revenues, including whether the contract will ramp linearly across 5 years or whether it will 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. And 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 contract. So it isn't front-loaded per se.

But there is a seasonality aspect to do with tax season, right, so which is generally in the spring for most people. So we do expect a 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 this DXP platform, which, as you remember, goes back to when we were the AI/ML partner of 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.

Great. 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 could 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 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've turned 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 on the last call, a shift back to our largest hyperscale customers back to inference and cloud build-out. And you could 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're 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 24 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?

Shlomo, 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. And the reason why I'm parsing it out at 18 megawatts, if you can appreciate is that most of our customers are these -- 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 with 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 and leased. And then if I look at that 250 over the next 18 months with another 200 to follow 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 are in some fantastic markets. 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 '26 and beyond you might be doing to prepare for those opportunities.

Andrew, thanks for the question. So let me -- I'll start and then have Barry comment more from the detail in terms of what that means for CapEx. But I 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 and 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, a couple of thoughts on capital. Look, as we continue to build out our pre-leased backlog, naturally, we'll be spending 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 we -- the key point, I think, is we really are building to pre-leased assets, right?

We're not speculatively building. So it's capital that's going to very high-return 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. The one example, I think it was a 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, if 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 customer. I will say from our standpoint, it also was very good. I mean the 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 in the slower state, actually is a very -- we have 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 -- they are 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 in sites. 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?

Nate, from a volume perspective, as you saw, our organic volume in physical storage continued to rise and 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 box is 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 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 want to get into kind of the mix of revenue. Both storage and services gross margins were down sequentially. And I assume that it's mix because that's usually what's going on, but I want 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 if it wasn't for power, it would have been 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 less permanent withdrawals and terminations. And that's a bit of a headwind to rate as well.

But obviously, that's a very good story for the long term in light of seeing retention continue to rise over the last few quarters. Thank you, Shlomo.

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.