Iron Mountain Incorporated (NYSE:IRM) Goldman Sachs Communacopia + Technology Conference September 10, 2024 11:50 AM ET
Company Participants
Barry Hytinen – CFO
Conference Call Participants
George Tong – Goldman Sachs
Santiago Suinaga – Infrastructure Masons
George Tong
Let’s go ahead and get started. Good morning, everyone, and welcome. I’m George Tong, I’m the Business Services Analyst at Goldman. And I’m really pleased to be joined by Barry Hytinen, CFO of Iron Mountain. Barry, thank you for joining us.
Barry Hytinen
Thanks, George. It’s great to be here.
Question-and-Answer Session
Q – George Tong
So let’s start with strategy. Over the years, Iron Mountain has transformed its business to build out several high-growth businesses like data centers, asset lifecycle management solutions, digital solutions. Can you talk a little bit more about this strategy and why these businesses are synergistic with Iron Mountain’s legacy records information management business?
Barry Hytinen
Yeah. It’s a very core part of our strategy. So it’s right to highlight it right up-front. So Iron Mountain is a company that has about 248,000 client relationships, and most of them are measured over many years, if not decades of duration.
And so the team a few years ago, say, about seven, eight, nine years ago, Bill and the team started investing in specific areas that they felt could secularly grow and that would be leveraging of our existing client base, how do we get more share of wallet from the existing clients? And so those were — now there are three, I think, very prominent businesses inside our company that are growing at rates materially faster than the total company. And those are digital solutions and digital has been growing at like a 20% to 25% compound rate for the last many years. And that one cross-sells off of the core very easily because it usually starts with some level of digitization and then, over time, flows into a much more substantive relationship with clients.
So we — we are doing — we now have, in fact, we just recently introduced a new digital platform, which we call DXP, in which we have very strong client uptake. And as we mentioned on the most recent call, we have the best bookings quarter we’ve ever had in digital solutions last quarter. And that business now is around numbers $0.5 billion and growing. Our Asset Lifecycle Management business, that’s where we work with both hyperscalers in terms of decommissioning data centers as they retrofit gear and they do that about every five years on average. That’s a revenue-share model, which is likely to continue to grow at a very high rate over the next few years because if you think about what we’re doing, we’re working with those top hyperscalers, who have been consistently growing their data center infrastructure over the last decade.
And so what we’re decommissioning this year was put in service five years ago, what we decommissioned next year will be what was put in service four years ago. And of course, that book of business keeps growing very, very rapidly as you’ve heard from other industry players even yesterday when there’s very notable comments about how data center infrastructure has continued to grow at a very high rate.
In addition, we have in that business, which is Asset Lifecycle Management, enterprise IT Asset Disposition business, where we are recycling, reusing a very good ESG story, but also a very important story for corporates, whereby we work with large clients on end-of-life with lots of different IT gears, laptops, computers, screens, printers, you name it, CIOs and CSOs and even CEOs now are very concerned about the chain of custody on those sorts of assets because anything that’s been written to is likely to have some level of information that they’re concerned about falling into the wrong hands.
George Tong
Yes.
Barry Hytinen
So where we come in is we will help them with all of that. So that means securely destroying or recycling, reusing, wiping, what have you. And that’s a business that also cross-sells extremely well, because, if you think about it, it is based on very similar buying reasons that clients have standardized with us on the record side. You trust chain of custody, consistent process and ability to follow them anywhere they are around the world. So that business is probably going to exit this year on a run rate of, let’s say, $400 plus million kind of on an annualized basis and growing very fast in total.
George Tong
Yes.
Barry Hytinen
And then the last one that I would highlight is our data center business.
George Tong
Yes.
Barry Hytinen
And the company started generally as a colo data center operator. And at this point, we are one of the key trusted partners with the largest hyperscalers in the market. You don’t have to go back too many years where we were signing like, say 9 megawatts a year. Last year, I believe, we signed 124 megawatts. We did almost 100 megawatts through the first half of this year and we increased our guidance. And the way we’re doing that is both continuing to grow our colo business, but the big growth rate is on the hyperscale side, where we become a trusted partner, as I mentioned, and we’re seeing one deal leads to another deal leads to another deal.
And we are interesting because if you look at our data center business in total, we have the ability to grow very substantially just with what we already have under our control in terms of land and power. And while we’re operating 265 megawatts of data center capacity today, George, and we’re very heavily leased like 96%, 97% leased, we are under construction on another 305 megawatts, which will be complete in phases over the next, let’s say, few quarters to a couple of — two to three years. And the thing that’s interesting about that is, we’re 96% pre-leased on everything we’re under construction on with some of the largest cloud hyperscalers than you could think of and these are the best credit quality tenants with leases that are 10 years to 15 years in duration. So we like many, see a lot of growth in data center. That’s a business for us that’s been growing 25%, 30% plus compounded. And with respect to our ability to more than double the megawatts we already have under that we’re operating today over the next two or three years just by finishing the construction on what we’re working on. So it’s a — it’s another very important business. That business is kind of a run rate around $600 billion. So when you put those three big growth drivers in our business, that’s about 25%, almost 30% of our company’s revenue and growing — all of those are growing in excess of 20% plus.
George Tong
Right.
Barry Hytinen
So it’s one of the things that now they collectively are really starting to show the power that they can do to drive the total company’s growth.
George Tong
Yes. And we’ll certainly dive in more into the data center business a bit in the discussion. Let’s talk a little bit about M&A. You recently acquired Regency Technologies to expand upon your Asset Lifecycle Management business. But you’ve also stated that transformative M&A is not likely in the data center business as you’ve done so much already, which parts of the business do you see room for transformative M&A at this point?
Barry Hytinen
Yes. So I think the primary place that you should expect M&A should we have some is in Asset Lifecycle Management. And that’s an interesting market for many reasons. One, it’s a really large addressable market. So the served addressable market is somewhere in excess of $15 billion a year and we think a lot of clients do it themselves. So the addressable market over time is something like $30 billion-plus, and growing like the double-digit range. What’s also interesting about that space is, George, we’re already, I think, the largest player in this space and we’re only the few hundred million that I mentioned.
George Tong
Right.
Barry Hytinen
So there’s a lot of small players out there. And you mentioned Regency Technologies.
George Tong
Yes.
Barry Hytinen
Regency, I think unbiased, of course, but we spent a couple of years working with them on and off about doing a deal. I think they’re the best operator in the United States, maybe the best operator of enterprise ALM in the world. And that gave us a footprint that covers nearly all of the United States.
What’s interesting about that is, the Regency team, not only are they best-in-class operators, they had a lot of additional capacity that they can utilize. And so, historically, we were working with clients picking up the gear and then generally handing it off to somebody else to do the work, even we didn’t have that capability in-house. Now we do. So we’re handing it off to Regency.
So Regency has been growing really nicely ahead of our plan, and we’ve been getting a lot of synergy off moving our enterprise gear over to Regency. That is the sort of deal we’d like to see more of. And our team M&A reports to me and we’re actively looking at a variety of transactions. But you know, I never prognosticate M&A because you got to have a willing buyer and seller, so to speak.
The thing I will point out is, most of those businesses are, I think, like 20% to 30% EBITDA margin kind of businesses. They’re generally — and it’s very fragmented less than $100 million of revenue. And generally speaking, in the marketplace, we’re seeing deals at, like mid- to high-single-digit multiples of EBITDA. And then with synergy, we can get those multiples down meaningfully quickly. So it’s a place that we will likely continue to allocate some amount of capital for growing our footprint and which we’ll do both organically and inorganically.
You mentioned a data center. So we’ll continue to buy more land and powered land. That’s how we’re going to build out our data center business. We operate today the 265 megawatts I mentioned. If we didn’t buy any additional land and power just built out what we already have, that would get us to 920 megawatts. But if I was talking to you last year about this time, that would have been, say, 750 megawatts. So we’ve continued to grow our platform and that’s largely because we continue to lease so much.
George Tong
Right.
Barry Hytinen
And so, you will see us continue to aggregate more land, but we don’t anticipate buying any data centers. We have no interest in buying stabilized data centers, for example, because we see our ability where we make value is we have this great client base in the hyperscalers.
George Tong
Yes.
Barry Hytinen
And as we get more land and work with them on what their needs are, that allows us to grow and get a development return. And I’ll say data center returns have been continuing to rise over the last couple of years. We’re very pleased with the cash-on-cash return we’re getting there. But so, ALM would be the principal place if you were expecting M&A for us to do something.
George Tong
Right. Now Iron Mountain is a REIT. And as a REIT, it does come with minimum dividend payout requirements. How do you manage balancing dividend payment requirements with required investments for growth as well as managing the financial leverage on the balance sheet?
Barry Hytinen
Yes. Sure. So we’ve got a capital allocation model that looks something like this. One, we are plowing a lot of money into data centers in excess of $1 billion-plus on growth capital alone to data center. But again, we’re building to contracts, right? So this isn’t speculative builds. We’re building to deals that we already have signed.
George Tong
Yes.
Barry Hytinen
And you should expect that number to continue to rise because we’ve been booking more. And when we look at the strength of our core business, it is very cash-generative, the records business. The Asset Lifecycle Management is very cash-generative business. And they require — both of those businesses require very limited CapEx to grow.
George Tong
Right.
Barry Hytinen
So we have a good amount of retained cash flow, if you will, in the business. And our capital allocation model says the following. One, we’re going to continue to grow out and organically support our growth. Two is we’re going to pay our dividend and we target our dividend at a low-to mid-60% of AFFO.
Now, I’ve been with the company almost five years. When I joined, we were in the 80s on that metric. And we’ve come down through growth of earnings and most — last year, we raised the dividend for the first time in several years and we just raised it again by 10% on the most recent call because we were at the low-end of our target range. We aim six — that low-60%’s to mid-60%’s because that sort of approximates our REIT minimum, George, generally speaking.
George Tong
Yes.
Barry Hytinen
And then we — to complete our capital allocation model, we assume 4.5 to 5.5 times leverage. Now again, when I joined about five years ago, we were around 6 times. We’ve come down. We were at 5 times in the most recent report at the lowest level we’ve been in well over 10 years, and since we’ve been a REIT, and we aim to kind of operate in that range. And with those fundamental principles within our capital allocation, we can both organically grow the business, supplement occasionally with some M&A, and pay a nice dividend while supporting growth and being mindful of keeping our leverage in that range.
George Tong
Makes sense. Let’s talk a little bit more about the records management business. I think most people would be surprised to hear that Global RIM volumes are flat to slightly up. Can you talk a little bit about what’s driving that slight growth in organic storage volumes? And how long do you believe storage volumes can sustain positive growth?
Barry Hytinen
Yes. So I’ll do that last one first. Our view is — I don’t have a crystal ball, but for the foreseeable future, we expect to be flattish to slightly up. And that’s what we’ve been seeing for the last four, five years. And if you look at our results over the last two, three, four years, years, we’ve been very consistent in that regard.
George Tong
Yes.
Barry Hytinen
Where are we winning volume? Well, one, we get new volume from all of our clients almost every week.
George Tong
Right.
Barry Hytinen
So in many cases, we continue to find clients that have a book of business that we may not have maybe in a given market or they may have a bulk of their own in a market where we do serve them and we can consolidate those into more volume for us as we work with the clients to do that and let them get more efficiency and scale.
Additionally, there are some markets, the most notable one would be India, where the outsourcing wave for storage is really only beginning. In the United States, if you went back 40, 50 years ago, almost every large corporate had a global — had a records management department. But, of course, that — those have generally been phased out over the years as those clients outsourced to third-parties like us.
And in India and several other major markets, we haven’t seen that trend happen to really only start recently, relatively speaking. Now in India, we’re one of three significant players in records management, but we’re growing pretty rapidly there. We have that same capability in several other major markets, where we incrementally generate a lot of volume.
Now some people usually ask me next like, well, what’s the pricing look like? And while the relative pricing is lower in India than it is in US, the important thing to note is that our margins are very good. They are consistent around the world, generally speaking, market-to-market because our cost-to-serve is generally lower in those markets where the average price is a little bit lower.
George Tong
Right.
Barry Hytinen
So it turns out that we anticipate continuing to grow the volume and we’ve been doing that consistently.
George Tong
Right. You talked a little bit about pricing. Let’s talk about your revenue management strategy. Through your revenue management strategy, you’ve been able to achieve elevated pricing last quarter. Pricing gains in the legacy business was 7% to 8%. Can you talk a little bit more about what is revenue management and what has been customer receptivity to it?
Barry Hytinen
Yes. Sure. So if you go back seven, eight years ago, the company didn’t really have a revenue management program at all. And I would say there were years where we were clearly not even keeping up with inflation in those years, but the business was growing very substantially on an organic and inorganic basis within records as it was consolidating.
Over the years, we have tested revenue management. The interesting — one of the parts that’s very interesting about our records business is, all of our clients have been sending us volume for a long period of time. So we can see how much volume they send us week-by-week in terms of new boxes and that enables us to see what is the relative elasticity when we do pricing actions because we can set up cohorts and AV testing and that sort of thing.
George Tong
Yes.
Barry Hytinen
And candidly, George, what we’re trying to do with our revenue management program is charge the right thing — right price for the value we’re delivering. We are clearly giving our clients a lot of value. We see that in the fact that we retain clients, we have very low churn and the retention rates have consistently been very, very high. We don’t see a lot of elasticity. When some people sometimes then ask me, well, if you haven’t seen elasticity, why not price for even more?
And then I would come back to your first question. Some years ago, Bill and the team were very strategic and started planting seeds for future growth areas where we could again cross-sell more. And so, our view is the most value-enhancing portion of our business that we can drive is to continue to have a revenue management program, but also cross-sell. And so, we never want to get to a situation where any client would be feeling like we were doing something that wasn’t consistent with the value. And in that way, we have much more of a warm lead in terms of the cross-sell of digitization Asset Lifecycle Management, what have you.
Our long-term expectation for revenue management is something in the mid-to-upper single-digit kind of rate kind of consistently year-by-year. We were a little bit higher than that last year and we’ve been a little bit higher than our targets for the last, I don’t know, seven, eight quarters. And that, I think has a little bit more to do with the fact that we hadn’t historically been pricing to the value that we deliver.
George Tong
Got it. That’s helpful. I think the mid-to-high single-digit medium-term pricing outlook is pretty constructive.
Barry Hytinen
Yes. Well, we had an Investor Day a couple of years ago. And in that, we said that we grow top line 10%, and EBITDA 10% on a CAGR basis from ’21 to ’26. And embedded in that model, we said our Global RIM segment would grow at 5%. And I recall saying that was probably the most conservative number on the page because revenue management ought to deliver us more than that alone.
George Tong
Right. Right. Let’s talk a little bit about your traditional services business, which is typically driven by retrieval activity, filing activity. Can you talk about what you’re seeing there with service activity levels, especially, post-COVID with people working from home mode?
Barry Hytinen
Yes. So right at the start of COVID when everybody was going to home in that March time frame. We saw all of our services get really significantly impacted. But by June, as we all had figured out how to start working from home, we saw our services business start to grow month-by-month, month-over-month, and — sequentially that is.
And by the end of that year, we were back to nearly flattish year-on-year. At this point, we’re pretty stable in all of those service lines with one exception, I see, no distance between how they were operating pre-COVID versus today. The one that’s notable though is our — we have a relatively small shredding business in the company and that shredding business is made up of a few different sources, so to speak. So there’s end-of-life of boxes that we store for clients, but there’s also shred bins at client location. And frankly, those shred bins are less utilized today because as you — as we all know, there are fewer people in office. So — but that’s already in our numbers, so to speak. And actually, we’ve seen the shredding volume start to rise. So how does total services play out on global records? For the most part, it kind of flows with volume. We do get revenue management actions on the services line. That’s one of the reasons why services have been growing nicely and was actually growing faster in the most recent quarter.
And the other thing that’s maybe underappreciated in that Global RIM is our digital solutions. That services business is reported inside Global RIM and that’s the business I mentioned earlier that’s been growing at a 20% 25% compound rate. And our team there is endeavoring to grow a lot faster. We’re building out a lot of solutions in digital. We’re seeing very strong customer uptake and the cross-sell opportunity there, I think is quite immense.
George Tong
Yes, makes sense. Let’s switch gears and talk a little bit more about the data center business. Your data center business makes up about 10% of revenues. Can you talk a little bit more about your data center portfolio? Where do you have a presence geographically and how much megawatt capacity do you currently have?
Barry Hytinen
Sure. So we’ve been growing really fast there. And go back a few years ago, we were only 6% of revenue. Today, you’re right, it’s a little over 10% — it’s right about 10%, and it’s more as a percent of our EBITDA because it’s EBITDA accretive to the total company. I’ll just note that. In terms of where we’re present, our most substantial market is Northern Virginia, after that will be Phoenix. We also have good strong presence in London, in Frankfurt, in Amsterdam. We have a small data center that is 100% leased in Singapore. We’ve got New Jersey, a variety of other markets in the US. We have some land and a small operating site in Madrid, and then we’ve got five or six operating sites around India.
In terms of the capacity opportunity over time, as I mentioned, if we didn’t buy any more land and power, we could build out to 920 megawatts over time, but again the 265 megawatts we’re currently operating. But as I mentioned, we’re continuing to add to that portfolio. So what we’re seeing is that our large hyperscale clients have demand basically everywhere.
George Tong
Yes.
Barry Hytinen
And so, we are in constant communication with them about needs and where we could help them in given markets. It’s a very strong and healthy data center market out there, George.
George Tong
Yes. Now in the second quarter, your data center revenues grew 24% year-over-year. How much of that growth came from generative AI?
Barry Hytinen
I would say on the revenue line, very little.
George Tong
Okay.
Barry Hytinen
Because the revenue growth is really a factor of what did we sign a year or two years ago since we basically been consistently constrained as it relates to how much capacity we have, right? So anything that we’ve been opening and driving revenue growth on are things that we generally have signed a couple of years ago. And that is, of course, has been an accelerating thing.
As it relates to our new bookings and we booked 97 megawatts through the first half. There’s definitely some AI deployments in there, but I’d say AI continues to ramp as we see in our pipeline, and that results in larger deals and more deals.
George Tong
Right. Makes sense. You raised your guidance for expected megawatts leased for this year from 100 megawatts to 130 megawatts. What drove the upside surprise and where do you see that going forward?
Barry Hytinen
Yes. So when we set our original guidance at 100 megawatts for the year, we certainly look at our pipeline and we are saying, okay, there are some really large deals in here that could come. And we don’t generally forecast that in our forward guidance, because it’s a sort of a situation where if it lands on a given day in the year, it might push out a month or two, we didn’t want to get into a situation where we’re that dependent on some specific deal.
George Tong
Right.
Barry Hytinen
So in the first half, we signed some — our team is very successful and signed some deals that we had kind of originally thought might sign in the first — in the second half. And frankly, our pipeline has been continuing to build. So our confidence in increasing the guidance to 130 megawatts was born out of, one, the fact that we had already signed 97 megawatts; and two, the fact that we’ve got — we’re in advanced dialogue with clients about a whole bunch of other deals. So I don’t see any — I don’t see anything but growth in the data center outlook.
George Tong
Right. Now if your data center revenues are growing in the mid-20s, does it stand the reason that megawatts leased should also grow in the mid-20s? Or are there other considerations at play that could be deployed?
Barry Hytinen
So frankly, bookings have been growing faster. So — and if you look at it, you don’t have to go back many years where we were signing 10 megawatts, whereas last year we signed 124 megawatts with a couple of very large deals in there.
I think what you’re going to see from us going forward, George, is we’ll continue to sign a large number of megawatts. Our team is chasing some very large opportunities and it really comes down to when can we deliver the power and the infrastructure to the client versus when they need it. And I will tell you this, we are actively looking for more land just to keep up with the fact that we’ve been signing so many megawatts here recently.
George Tong
Right. Makes sense. Let’s talk a little bit more about your ALM business. Last quarter, the ALM business grew 30% organically, and two-thirds of that growth came from volumes. Can you talk a little bit more about what’s driving the volume growth in Asset Lifecycle Management?
Barry Hytinen
Yes. It’s principally two things. One, it’s that we continue to win a lot of new business on the enterprise side, which is cross-sell. I would say 99% of what we booked in the most recent quarter in Asset Lifecycle Management was direct cross-sell off of our storage business. And that is a business that is generally a service-oriented and it’s flow. So we sign a deal with a client and then we start inbounding their gear and then it just kind of continues to flow. It’s a lot in some ways like records in that regard. And I think in light of what we’ve been seeing, we’ve mentioned a few times on the last few calls that business continues to accelerate, that it is a good sign in that business.
The other thing that’s driving growth there is on our data center decommissioning business, there’s two things. One, we’ve won more business with the largest hyperscalers. Two, their book of business is larger each year. So our opportunity set is bigger. And then three, we’ve won some new client deals. You asked about volume, but just on the pricing side, it’s also been recovering and that’s helped to aid that 30% organic number.
George Tong
Right. So on the semiconductor component pricing front, what have you seen so far year-to-date? And what are your expectations for component price recovery over the remainder of this year? Are you looking for further acceleration? Are your assumptions more conservative that prices will stay stable?
Barry Hytinen
So in the first quarter, pricing was, on a blended basis was, up kind of about mid-single, and in the second quarter, was up a few points more than that. I will tell you that there is some spread between depending upon what type of gear you’re talking about, like memory, we hadn’t seen much of an increase, but on some other elements, we saw significant increases. So it kind of blends to those numbers that I mentioned.
And going forward, our expectation is for a continued gradual recovery in pricing. But I will say, as I’ve noted on a couple of calls before, we are not baking into our model anything like what some of the industry prognostications have been looking for very significant increases in pricing in the back half.
George Tong
Got it. And let’s talk a little bit more about Regency. The integration, it sounds like it’s progressing well. Can you give us an update there? And what you’re currently seeing in terms of strategic benefits of having Regency within IRM?
Barry Hytinen
Yes. So the integration is ahead of schedule and doing extraordinarily well. I think our — the team that we brought over with Regency is extremely productive, very strong operators and actually it’s been helping us get more effective in ways that we didn’t anticipate.
So margins are improving there because we are capturing more of the value chain. Now when we, historically, maybe outsourced it to another party, now we’re insourcing it into Regency. That helped Iron Mountain’s margin and Asset Lifecycle Management that’s improved our Regency utilization rates and we see more opportunity to scale in that regard going forward.
And then I will also say we’ve been winning more business collectively the two businesses put together. And that’s I think, a product of Iron Mountain’s long-term customer relationship together with Regency, really strength in Asset Lifecycle Management.
George Tong
Let’s talk a little bit about Project Matterhorn, which are your 2026 financial targets. You’re targeting 10% revenue growth, 10% EBITDA growth, 8% AFFO growth. So the similar growth between revenue and EBITDA, does that imply margin should stay relatively flat at current levels of around 36% all the way through 2026?
Barry Hytinen
Yes. So mathematically, yes. And the reason for that is mix, principally, because when you look at it — look, our data center business in that model was prognosticated grow at like so low-20s growth rate. And that’s a higher-margin business, think like 40s EBITDA.
And our Global RIM business, we had assumed 5% and on a blended basis, that’s a mid-40s EBITDA margin business as well. Asset Lifecycle Management is varying depending upon which book of business we’re talking about. On the data center decommissioning side, that’s a business that has historically at different — better pricing has been like mid-to-high teens to 20%, whereas the enterprise side is more of a service offering, so you’d be thinking like 25% to low-30%.
And so, as that business has the ability to grow very significantly over the next few years, and over the long-term, that gives us a little bit of margin mix as it relates to the total company EBITDA. But I will tell you that’s very incremental business and it’s — and it requires very little capital to grow.
So, with the margin is going to be, we’re going to deliver as good a margin as we possibly can, George. We’ve been running ahead of our Matterhorn numbers for some time. As I mentioned on our call in January or February, we were fully — I think, 200 basis points ahead of that CAGR rate on the top line and 300 basis points ahead on the EBITDA line, so — and ahead also on the AFFO line. So we feel very good and look at our numbers this year, they’ve also been running ahead.
George Tong
Right. Iron Mountain is spending about $1.5 billion on CapEx each year with the vast majority going to data centers. How fast do you expect CapEx to grow going forward?
Barry Hytinen
Yes. It’s somewhat a function of how much more we lease on the data center side, because to your point, about $1.1 billion, $1.2 billion of that is going directly into data center growth capital to build out the infrastructure. And I made the point earlier, I’ll just reiterate it. That’s for data centers we’ve already signed. We have long-term contracts for.
So since we’re not building to spec, it’s sort of one of those situations where if you see us continue to book more business, you’re going to see us continue to apply more capital into data center growth because that’s kind of like the model, so to speak. Importantly, the returns have been continuing to rise. I would say, George, that usually we ought to expect our data center growth capital continue to rise over the next few years as we build into the infrastructure we’ve already signed up.
George Tong
Yes. Makes sense. And I’ll pause here to see if there are any questions from the audience. We have a question there if we can wait for the mic.
Santiago Suinaga
Hi. How are you? My name is Santiago Suinaga and I come from Infrastructure Masons. I will be keen to listen about your current mix between hyperscale and non-hyperscale business, and how are you looking forward at those numbers could potentially be based on your pipeline. Yeah.
Barry Hytinen
Yes. So it’s a very good question because if you go back not that many years ago, we were principally a colo business. In fact, what we’re operating is more colo than we’ll be on a relative basis going forward because as most of you probably are aware, when I talk about the pre-leases, that’s almost all the large cloud hyperscalers. So you don’t see pre-leasing from colo tenants.
As a result, if you look at our book of business that we signed last year, 124 megawatts or so, that was about 80%-plus hyperscale. So we’re still growing our colocation business with — in-line with industry together with pricing. So volumes growing as well as pricing on the colo side. The vast majority of the growth because of the size of the deals is coming from the hyperscale folks. And that’s my expectation going forward for that trend to continue because we’ve become a really key trusted partner with a handful of the top-10 cloud players, if not more than a handful actually.
And we continue to see their relative size grow in our pipeline meaningfully. So you would expect going forward, well, if you think about that 305 megawatts that we have under construction, that’s essentially all going to be hyperscale. And so, the company will continue to be more hyperscale going forward. Another callout on the difference between colo and hyperscale is the hyperscale client duration of the leases tend to be more like 10, 15 years or more with multiple renewal options, whereas colo tends to be a year-to-year kind of contract.
George Tong
Okay. Well, we’re just about out of time. Barry, thank you for the great discussion.
Barry Hytinen
Thanks, George. It’s always great to be here. Appreciate it.
George Tong
Thank you. Please join me in thanking Barry.
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