William Meaney
President and Chief Executive Officer at Iron Mountain
Thank you, Gillian, and thank you all for taking time to join us today for our discussion of our record second quarter results. Our team has once again exceeded expectations with performance reflective of our strong legacy of customer service, our laser focus on execution and our dedication to finding innovative solutions to serve our customers as they evolve their businesses. I'm excited to share that in the second quarter, we achieved our highest ever quarterly revenue of $1.36 billion and record EBITDA of $476 million. This performance is ahead of the expectations we provided last quarter.
The enhanced operating model we created through Project Matterhorn has continued to prove successful as our commercial team is empowered to sell the entire Mountain range of products and solutions across our portfolio. We are pleased with the high-quality and wide range of our offerings today, which positions us to be a nimble partner to serve our customers' needs.
To highlight some of our results in the second quarter, we delivered organic storage rental revenue growth of 11% and drove high-teens organic growth in both our data center and digital services businesses. We are also pleased to announce that our Board of Directors has increased our quarterly dividend per share to $0.65 or $2.60 per share annualized commencing with our third quarter dividend to be paid in October. As we have said before, when our AFFO payout ratio reached the mid to low 60s as a percentage, we would increase the dividend. Our payout ratio at the end of the second quarter was just under 64%.
I would like to begin our broader discussion of some of the customer wins, which led to our record second quarter results. Let me start with records management where our success was derived from both new and existing customers. One significant win we would like to highlight this quarter was with a large not-for-profit hospital system faced with rising lease costs despite a shrinking storage footprint. The customer turned to us for an alternative to storing in their own space.
Our smart storage solution will address their needs over the next three years. It will deliver cost-efficiency and optimize storage space for the customer before they transfer their records to an Iron Mountain facility for secure future management. This win exemplifies our commitment to solving our customers' problems and providing them with tailored solutions. The COVID-19 pandemic has led organizations around the world to reassess their current real estate portfolios in order to accommodate remote and hybrid work.
Our customers are optimizing their real estate to accommodate changing working practices. We are able to offer solutions that demonstrate the breadth of our portfolio and the value of partnering with Iron Mountain across our products and services. One example is a customer who chose our Clean Start solution to remove and relocate records, office equipment and IT assets for more than 60 offices across North America that are being closed or decommissioned over the next two years. Thanks to our asset lifecycle management solutions, we are also helping this customer to decommission IT assets from these offices securely and sustainably.
We continue to see growing momentum for our digital business with customers turning to us for solutions in areas such as public sector, industry focused solutions and end-to-end business process management. For example, we are proud to be supporting the digitization of real estate and mortgage records held by the Hellenic land registry in Greece under a two-year contract worth $35 million.
We demonstrated our understanding of the public sector in Greece and of the European Commission's recovery and resilience facility, which is funding this project through the Greek Government to support European economies as they transform the way they support their citizens. This is a breakthrough deal that will provide further opportunities to support similar digitization projects elsewhere in Europe. Another example of how our digital business is enabling us to develop and deliver transformational solutions for our largest customers is with one of the biggest financial service companies in the United States. This customer is outsourcing its non-core services and has selected Iron Mountain to manage all of its records.
Our end-to-end solution ensures the secure chain of custody regardless of media format for this customer leveraging our image on demand service and InSight platform to integrate seamlessly with their customer success management system. This game-changing deal demonstrates the power of partnering with Iron Mountain to accelerate our customers' digital transformation. Staying with our digital solutions business, our 25-year relationship with a Fortune 500 gas and electric utility company continues to be a powerful example of how our customers turn to Iron Mountain because of the range of solutions we can provide.
To ensure our customer is compliant with all legal and regulatory requirements, we are digitizing around 20 million images from 8,000 boxes stored with Iron Mountain over the next three years. Having provided records management and data management services since 1998, our customer was confident in our digital solutions, secure chain of custody, information governance expertise and ability to scale up quickly to deliver this project.
To conclude with records management, on the 29 June, we acquired a controlling interest in clutter, a tech-enabled on-demand consumer storage company. We were previously a minority investor in clutter and provided storage and operational services through a commercial partnership. This acquisition makes us the industry-leader in valet self-storage services in North America.
Turning to asset lifecycle management. We continue to see muted pricing for the largest part of this business, which relies on reselling used memory hard drives and CPUs we receive from hyperscalers. That being said, pricing has stabilized and we do expect to see an improvement as we head into next year. Moreover, you will recall that our ALM business has three components: hyperscale decommissioning, which is highly dependent on component pricing; Enterprise ITAD or IT asset disposition; and original equipment manufacturers or OEMs.
In these latter two categories, we are seeing marked growth in traction. For example, in the enterprise segment, our focus on cross-selling the Mountain range of products has driven bookings up 175% versus second quarter last year. For the OEM segment, you will recall that we signed our first MSA or master services agreement in this area last quarter and we've added another MSA with a second OEM this quarter.
Turning to specific wins in the ALM area. A good example of our cross-selling appeal comes from the healthcare industry. A customer which has benefited from Iron Mountain's records management solutions for many years has asked us to manage the recovery, decommissioning, disposal and/or recycling of IT assets at over 2,000 locations in the United States. The strength of our relationship and our customers' inherent trust in Iron Mountain has resulted in an ALM contract and renewal of our existing services for the next five years.
Also in ALM, our team secured a contract with a leading software and technology company to help them decommission racks of servers and non-essential IT equipment from their datacenter. Opportunities like this where we are able to extend the value we provide to customers have been significantly enhanced, thanks to the industry knowledge and expertise we have gained through our acquisition and integration of ITRenew. We remain very excited about ALM. Whilst component pricing remains a drag for part of the business, the growth we are achieving in the services side of the business shows how Iron Mountain's brand strength around security and reliability are a differentiator in this fast-growing area.
Moving to our data center business. Through the first half of the year, we leased 55 megawatts, which includes 2.7 megawatts this quarter. As we said in May, the first quarter was particularly strong as we signed some deals earlier than expected. Due to our strong pipeline, we now feel confident we will exceed our original projection of 80 megawatts in 2023. This confidence is thanks to our teams delivering record new sales in the first half as well as the size of our late stage pipeline from some of our largest customers as they add new capacity with the growth of AI. For example, we are well-positioned with nearly 120 megawatts of unleased capacity on our Nova campus with power fully secured. In this very important market, we are pleased to note that pricing is moving up appreciably.
Staying with our datacenter business, I would like to highlight a win that demonstrates the exciting opportunities to expand our solutions and services for customers with a footprint in India and the value of our joint venture with Web Works in the country. As we've discussed before, India is a key focus for our company's growth and our progress there is a major win for our business. In the second quarter, we closed a deal with a multinational media processing company to provide almost 1 megawatt of storage capacity at our Mumbai datacenter with the potential to add a further 5 megawatts at this facility and extra capacity at other locations in India. Our centers team's experience of handling high-density racks, Iron Mountain's wider understanding of the media industry and our expansion plans in Mumbai helped us to convince our customer that we are their best long-term partner as their capacity needs grow.
Finally, I would like to mention an example, the success we are enjoying in our Crozier Fine Arts business as we build-out one of the few globally integrated logistics, storage and top quality services businesses in the art world. Recently, we partnered with a major art gallery in the United Kingdom to support an exhibition by well-known artists. This involved detailed planning and preparations to pack and transports 61 fragile sculptures from the U.S., Mexico and Continental Europe. We are proud of the unique expertise that our Crozier teams provide for our customers and to be associated with important exhibitions like this one.
To conclude, we are proud of the record results we delivered this quarter as this is evidence that our strategy is working. As we continue to leverage the potential of our entire Mountain range, expand our footprint of storage and services and deliver tailored innovative solutions for each of our customers, I could not be more grateful for the hard work of our Mountaineers. Our Matterhorn program is showing the way in delivering consistently strong sales growth while fueling AFFO growth and our dividend. We are more energized than ever to continue reaching new peaks and I am excited for the bright future ahead.
With that, I will turn the call over to Barry.