Iron Mountain Inc

NYSE:IRM

Earnings Call Transcript 2021-Q3

[Operator]

Good morning and welcome to the Iron Mountain, Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. To ask a question you may press [Operator Instructions]. To withdraw your question, please press star and 2. We will limit analysts to one question and you can rejoin the queue. Please note this event is being recorded. I would now like to turn the conference over to Sarah Berry of Investor Relations. Please go ahead.

[Sarah Berry, Investor Relations]

Thank you, Chris. Good morning and welcome to our Third Quarter 2021 Earnings Conference Call. On today's call, we will refer to materials available on our Investor Relations website. We are joined here today by Bill Meaney, President and CEO, and Barry Hytinen, our EVP and CFO. After prepared remarks, we will open up the lines for Q&A. Today's earnings materials contain forward-looking statements, including statements regarding our expectations.

All forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the Safe Harbor language on Slide 2, and our annual report on Form 10-K for discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliations to these measures in our supplemental financial information. With that, I'll turn the call over to Bill.

[Bill Meaney, President and CEO]

Thank you, Sarah, and thank you all for taking time to join us. We are pleased to have delivered strong performance in the third quarter reflecting our broad offerings, deep customer relationships, resilient business model, and the strength of our team. This can be easily highlighted by our 7.4% total organic revenue growth. This strong overall organic revenue growth has been delivered by continued strength in our storage business, as well as double-digit growth in our new and existing digital offerings, including data center inside our digital transformation services, and IT asset disposition or I-Tech.

Throughout the pandemic, including the most recent challenges of the Delta variant, our Mountaineers around the world have truly stepped up. Each and every day to put our customers first with a focus on growth. I'm both proud and humbled by this incredibly talented and dedicated team and what we've been able to accomplish through such a challenging time. Today's results, including our strong organic revenue growth exceeding 7%, is a direct result of their dedication in serving our customers in ways they need to keep their businesses growing. We have a lot to cover today, so I'll start with a brief overview of our results and key business drivers.

During the third quarter, we reported revenue of over $1.1 billion EBITDA of over -- of EBITDA of $418 million, both of which are new record highs. Our results are fueled by increased demand for our services across key markets and continued positive momentum in the business. Our digital services in iPad business continue to build on its prior performance and deliver almost 20% growth in the quarter. Today, we're proud to say that 95% of the Fortune 1000 are among the 225,000 of our loyal customer base. We have a growing footprint of more than 1,460 facilities and with our recent expansion in the Middle East, we are now present in 63 countries. And we are supported by 25,000 Mountaineers across the globe. As we look ahead to future opportunities, there is no doubt the world has changed. But, we're making the improvements to our business today to serve the changed needs of the world tomorrow. That is why we have built, evolved, and expanded our trusted relationships with our customers as not only the leading storage platform of physical assets, but also the business services partner to support data center co-location, information security, data insights, Secure IT Asset Disposition and business process management.

With this focus, we have expanded our total addressable market to more than $80 billion. Together with our strong customer relationships, focus on innovation, and 70-year heritage, we are operating from a unique position of strength. Now let's turn to some of the exciting events during the quarter. You'll hear us talk a lot about customer - centricity here at Iron Mountain. And when we help our customers not only protect their information, but also unlock new revenue opportunities, as well as cost efficiencies. That's a big win for our customers, and ultimately, for us. We were proud to be featured as one of the winners of Google's first-ever Google Cloud Customer Award for Financial Services for our work with a large financial institution. This is a great follow-on award from a couple of years ago when we won their machine learning artificial intelligence partner of the year. But this award, we leveraged our expertise in mortgage document processing to train machine learning models to automate document classification and data extraction and validation, deliver advanced exception management and unlock value for our customers.

In line with our automation first mindset, we utilize Google's document understanding for AI algorithms in Iron Mountain's insight platform to identify, classify, extract and validate loan data to support authenticity, accuracy, and completeness. As a result of our services, the customer has seen efficiency improvements including a 25% post-closing cost reduction, increased scalability, a shortened cycle time, and increased responsiveness to market demand, among other enhancements. We are not only proud of our work with this financial services customer, but are also dedicated to continuing to enrich our customer's ability to protect and preserve their high-value assets in -- and in turn, a system with gaining market share in their businesses through higher end-customer satisfaction. I'm also pleased to report that Iron Mountain received the JP Morgan Chase Strategic Diverse Gold Supplier Award for our commitment to supplier diversity and the contributions of our very own supplier diversity program. Together with our fellow Gold Suppliers, we have collectively agreed to increase spending with diverse owned businesses and have set ambitious goals over the next three years. As part of this, we are on track to achieve our goal of $63 million in supplier diversity spend by the end of 2021. This is not just about our diversity goals, but it is also about helping our customers like JPMorgan Chase and our fellow Gold Suppliers to drive improvements in supplier diversity, which we recognize is important for all communities in which we operate.

By working together, we're having a far greater impact than any one company can achieve alone. I would now like to highlight our recent win working together with General Dynamics. You will recall we have been speaking for some time about the potential for our services inside the U.S. Federal Government. Whilst the transformation of the federal government has taken some time, we have seen over the past year major growth in our business across a number of governmental agencies. This growth is due not only to the residents that our products are having with the government and assisting them on their own transformation paths, but also to the work our government team has done in partnership with the likes of General Dynamics. This partnership is already resulting in a 3-year Iron Mountain contract worth $23 million to help the Department of Veteran's Affairs with their digital transformation in order to serve better our U.S. soldiers. As part of this initial project, we're helping the U.S. Department of Veterans Affairs digitally process an estimated 15 million official military personnel files. Through digital transformation, this agency is taking a proactive approach to provide greater access to personnel files, as well as streamline the overall claims process in order to get veterans the benefits they deserve. In addition to our success with General Dynamics, I would like to highlight another win in our global RIM segment. We've had a long-standing relationship with a major global financial institution for over 20 years, and we have recently expanded our relationship with them, by signing a new 10-year global contract in which they committed to renew and consolidate all global records in data management business with us.

Through this work, along with our global scale, we won an additional two-year contract for data restoration and migration services. We will provide the customer with clear, detailed information from backup tapes spanning 11 years, which will help them make informed decisions around data deletion, retention, and remediation. Ultimately, we will reduce and enhance data management and compliance. Finally, turning to data center, we are well on track to exceeding our bookings target of 30 megawatts this year. In fact, through October, we stand at 24 megawatts in addition to our continued growth in bookings this quarter, we closed on the acquisition of our new data center in Frankfurt. When we purchased the new Frankfurt data center, we inherited over 2 megawatts of existing clients, and we have expansion capacity of 8 megawatts for a total of over 10 megawatts on that site.

Already in this quarter, we have signed 1.6 megawatts of new leases for this site and have a strong pipeline which should absorb the remaining capacity over the next 2 to 3 years. I should also add that our first in purpose-built data center in Frankfurt is up and running and a tenant which leases the entire 27 megawatts is moving in this quarter. With this transaction in Frankfurt, we now have a total potential capacity in Europe of more than a 107 megawatts, which provides access to important interconnection markets for new and existing customers looking for reliable, flexible and secure data center locations across the Frankfurt, Amsterdam, and London markets. Even with our rapid growth, sustainability remains at the core of how we offer data center capacity. Iron Mountain continues to source more than a 100% of its energy used for data centers from renewable energy.

Moreover, as we announced in April, we took a significant step forward in the development of enhanced solutions for purchasing renewable energy by entering into an agreement to track the hourly load. I'm proud to announce that this September, we were able to report on our performance for the first half of the year for our datacenters in Ohio, Pennsylvania, and New Jersey that are benefiting from this agreement. Over the past several months, we have taken definitive steps towards a truly carbon-free energy supply.

Not just by offsetting our carbon footprint by purchasing and reselling renewables, but by matching renewable energy in the very grids in which we operate. We are the first company to join Google to adopt the 24/7 carbon-free energy goal, and we became a founding signatory to the new UN Clean Energy Compact being released at COP26 this week. We can already publish 24/7 carbon-free energy performance at 3 of our campuses, becoming the 1st large co-location data center provider with this capability. We recognize that we are an important component of our clients energy footprint and we will continue to take every opportunity to minimize our environmental impact on their behalf. The awards and successes I outlined today are just a few among the various wins Iron Mountain has achieved this quarter. As we continue to deliver accelerated growth at IRM, in spite of the continued impact of COVID on some of our traditional service areas, I am confident that our resilient business model expanded product portfolio, customer first culture, and strategic transformation will continue to deliver strong sales growth. With that, I will turn the call over to Barry.

[Barry Hytinen, CFO]

Thanks, Bill. And thank you for joining us. The third quarter exceeded our expectations across each of our key financial metrics. Continuing the trend, we have seen over the last few quarters, revenue continued to strengthen with a strong recovery in service revenue, reflecting accelerating rates of growth driven by the new service offerings Bill discussed. Our core physical storage business performed well, and we are seeing continued strength in our growth areas. Turning to our results for the quarter. On a reported basis, revenue of $1.13 billion grew 9%. Total organic revenue increased 7.4% year-over-year.

As an example of the momentum we are building on a 2-year basis, our organic revenue growth continued to accelerate in the quarter. Organic service revenue increased $61 million or 18%. Our team drove strong growth in both Global Digital Solutions business and Secure IT Asset Disposition. Total organic storage rental revenue grew 2.3% with continued benefit from pricing and positive trends in volume. Adjusted EBITDA was $418 million an increase of $42 million from last year. We exceeded the projections we shared on our last call as the team drove improved margin performance, despite the stronger U.S. dollar. AFFO $263 million or $0.90 on a per-share basis, up 47 million dollars and $0.15 respectively from the third quarter of last year. Turning to segment performance.

In the third quarter, our global RIM business delivered revenue of $996 million, an increase of 74 million from last year. On an organic basis, revenue increased 6% The team performed well with constant currency storage rental revenue growth of 2.7% or 1.8% on an organic basis. This performance reflects an acceleration in growth as compared to the last few quarters. Growth was driven by pricing and volume. With positive volume trends in the Mid East deal that Bill mentioned, total physical volume achieved a new all-time record of 744 million cubic feet. We are pleased with the underlying trends, and continue to expect total volume on an organic basis to be flat to modestly up for the full year.

Our traditional services business continue to recover from the pandemic with revenue growing 14% year-over-year, all be at still down 4% from the levels achieved in 2019 reflecting the continued COVID impact. Global RIM adjusted EBITDA was $443 million, an increase of $49 million year-on-year. Adjusted EBITDA margin expanded 180 basis points year-over-year as a result of strong operating leverage and improved service margins. Turning to our global datacenter business, our team booked 9 megawatts in the quarter. And through the end of the third quarter, we have booked at 22 megawatts.

With our strong and building pipeline and the additional contracts we've already signed this quarter, we are confident in our ability to exceed our full-year guidance of 30 megawatts. In terms of revenue as we projected, growth accelerated sharply to 22% year-over-year. In light of our strong performance year-to-date and prior-year bookings, we now expect full-year revenue growth of at least mid-teens percent, exceeding our prior projections. Adjusted EBITDA margin of 40% was consistent with the expectations we shared on our last call and driven by Buildout services at our Frankfurt facility. Turning to Project Summit, this quarter, the team delivered $38 million of the incremental year-on-year adjusted EBITDA benefit. We continue to expect year-on-year benefits from summit of $160 million with another $50 million of year-on-year benefit in 2022. Total capital expenditures were $138 million of which $100 million was growth, and $38 million was recurring. Turning to the balance sheet, we ended the quarter with net lease adjusted leverage of 5.4 times slightly better than our projection. As we have said before, we are committed to our long-term leverage range of 4 and 1/2 to 5 and 1/2 times. For 2021, we expect to exit the year at levels at or below the third quarter.

From a cash cycle perspective, I would like to highlight that our team drove a two-day improvement from last year and specifically call out that our Days Sales Outstanding are at the best level they've been at in several years. With our strong financial position, our Board of Directors declared a quarterly dividend of $0.62 per share to be paid in early January. Turning to our outlook. With the ongoing pandemic and where we are in the year, I feel it will be helpful to provide our view explicitly for this quarter. We expect total revenue growth to be in the high single-digit percentage range year-over-year in the fourth quarter.

For EBITDA, we expect percentage growth to be in the range of low double-digit to low teens year-over-year in the fourth quarter. We expect year over year AFFO growth in excess of 30% in the fourth quarter. As you may remember, last year we had an elevated level of maintenance capex in the fourth quarter as we caught up from pandemic-driven delays. On a more normalized level of capex spend last year, this implies at least 20% growth in AFFO in the fourth quarter of 2021. In summary, our team is executing well, our pipeline is growing, and momentum continues to build across our business. Our addressable market continues to expand and we feel confident in our ability to drive growth. We feel well-positioned and look forward to updating you on our progress following the fourth quarter. And with that, Operator, please open the line for Q&A.

[Operator]

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. We will limit analysts to one question and you can then rejoin the queue. Our first question is from Sheila McGrath of Evercore, please go ahead.

[Sheila McGrath, Evercore]

I guess god morning. Bill and Barry. I've gotten questions from investors. that bottom line, growth, and margin improvement has benefited from Project Summit. And that benefit will be less of a factor going forward. Can you outline what revenue growth opportunities you are positive about for Iron Mountain looking out the next few years? And a related question to that is, can you also outline how you're able to effectively present such a broad offering of products to your customers when it appears there be different context at the -- at the customers for storage versus data centers versus insight.

[Bill Meaney, President and CEO]

Good morning, Sheila. So I'll start with strategically in where the product portfolio is going and then let Barry comment a little bit more on the nuts and bolts in terms of margin. So thanks for the question. I think, first -- I think part of Project Summit, you've seen that show up in the record high EBITDA margin that we have this quarter, so thank you for the call out on that. And I think that that's an ongoing benefit that we'll have. That EBITDA margin may move up and down depending on the product mix and it comes to your product portfolio question. On the product portfolio, a part of Summit that you haven't seen directly, in other words it isn't in the margin, is we've also taken a lot of benefit of Project Summit and reinvested in the business.

So besides actually driving the margin improvement that we printed today, we've also reinvested in the business and that's really what's driven that total addressable market going from $10 billion to $80 billion that we've highlighted the last few quarters. And part of that $80 billion of new total addressable market is the almost 20% growth that we've seen in digital services, which is primarily our insight driven digital platform, together with IT Asset Disposal business.

Those are some of the new areas that I think you're highlighting behind your question. So we actually see -- that business is growing strong double-digits and we can see that continue. You take that on top of the growth and the continued acceleration in growth in our data center businesses so we're well on track to exceed our upgraded guidance last quarter of 30 megawatts of bookings for this year. Then I do -- we do expect to see -- continue with levels of revenue growth like we've seen the last few quarters. Because this growth that we've seen in the topline, whilst we have seen -- luckily, some recovery in terms of our traditional service business. I think it's fair to say that we've seen an acceleration in terms of our revenue growth that's really driven by the new product areas and less from what I would call a rebound from historically low activity due to COVID. I don't know, Barry if you want to comment a little bit around the margin?

[Barry Hytinen, CFO]

Hi, Sheila. Good morning and thanks for the question. I would say when we look outlook and you look at where our margin has been recently, where it's going to continue to go, We have very favorable trends in pricing. I think that you will continue to see at least the level of pricing activity going forward as we've seen here over the last year or so. There's some macro trends there that are both positive for us I think on a pricing benefit. If you look at our data center business of the margin, as we talked about has on a transitory basis been a little bit lower than where we expect it to go over time.

That business is obviously dealing with some fit-out on our Frankfurt facility, which is transitory here in the third and the fourth quarter. And as we move forward, we see that margin expanding. So that's obviously a very nice secular tailwind to the business. And then I would say when you look at ongoing productivity, we continue to see that. So while Summit has been incredibly beneficial to the business and we'll have more Summit benefit year-on-year next year, we certainly see the opportunity for additional productivity. The only other thing I'll say is, as you know, since you follow the company well, we've had couple of relatively large sale leaseback transactions over the last 12 months. And while I expect to continue to do a relative amount of capital recycling, that's been a big headwind on a year-over-year basis. So if that comes down to a more -- a little more normalized level going forward, that's also a benefit.

[Operator]

Thank you, sir. The next question is from George Tong of Goldman Sachs. Please go ahead.

[George Tong, Goldman Sachs]

Hi, thanks. Good morning. As it relates to your overall growth portfolio, can you provide a sense of how quickly it grew and also discuss examples of recent success and traction outside of your Data Centers business?

[Bill Meaney, President and CEO]

Yes. Thanks, George. If you look at the 20% growth that we called out this quarter, or just under 20% growth, that's all non Data Center. So that is the -- what we call ITAD or IT Asset Disposal business and we've won some recent large global contracts for that. Mainly for corporates that are trying to make sure that they both manage the secured destruction of any information that happens to be on their devices or hardware, as well as making sure that they can be managed in an environmentally friendly way. That's one part of it. And the other part of it is just the rapid growth that we've seen in adoption of our InSight platform and overall digitization of people's information.

So that's everything from people taking advantage to say, okay, when they're retrieving documents on a very simple basis, is we want to actually retrieve them electronically through the InSight platform where they can access those from a secure platform in the cloud, to Digital Mailroom, which is beyond the typical mail-room employee arbitrage model, but again allowing people to have not only access to the information that comes through their mail room, but to be able to operate in a hybrid work fashion. In other words, where people can work from home and the office and always have access to their information.

To even some, what I would call larger, more complex deals, I mean, I just returned from the Middle East about a month ago, where we're working with a government there and their National Archives to help them digitize everything about the way the government works. And that's again using the insight platform. But it's not just the insight platform, but auto classification of the documents to create metadata so that they can actually share the information digitally to the right people with the right security level in a way that can be managed for the long term. So it's multifaceted thing, but those are the areas that are really driving a lot of the top line growth that we see today. And as well as our data center business. I mean, obviously the data center business with the types of bookings that we have, will continue to drive increasing levels of growth. I should -- but I should not miss how it is, the underlying growth of the more traditional side of the business, mostly driven by pricing, continues to the chug along nicely.

[Operator]

Thank you sir. The next question is from Shlomo Rosenbaum of Stifel. Please go ahead. Mr. Rosenbaum, your line is open. Just check that you're not muted.

[Shlomo Rosenbaum, Stifel]

Sorry. I was muted. Thank you. I wanted to ask a little bit about the storage business and some of the puts and takes that went through it. It seems like there is some other -- with an acquisition something added about 10 million cubic feet. You guys are getting pricing. There's some organic growth. But when I go to the total revenue from adjusted storage when including the terminations and permanent withdrawal fees, it's really flattish sequentially. And so I was just want to ask you, what are some of the puts and takes that you might have seen on a sequential basis because I think you commented last quarter expecting some volumes to come in that will pent up from COVID-19. And was just wondering how this is translating into revenue as you build through the year.

[Barry Hytinen, CFO]

Hi Shlomo, it's Barry, thanks for the question. I will try to unpack that for you. So you are right. We did close on the transaction in the Mid East, which we think is a great platform for us to continue to grow in that region together with our existing business. Now I will note that that closed very late in the quarter in the second half of September so really had almost no benefit to the quarter in terms of the financials, albeit it is in our cube as you note. So that didn't really help the sequential. On the pricing, you might recall that the beginning of the year and then again on the quarter call, I mentioned that all of the pricing we had planned for was already set as of March or April.

And so the sequential benefit on pricing was not much and we weren't planning for it. And then the other thing I'll call out, as you think about storage sequentially is we did divest the software escrow business in June, second -- first part of June last quarter. And so the sequential move from the second to the third on storage, that was completely storage business. So it's about $6 or $7 million of sequential decline due to that being in the second quarter, but not in the third quarter. So all in, we feel quite good. In fact, I'll be -- I'll tell you that the storage revenue performed better than we were planning on a sequential basis. And as it relates to the point about pent-up demand, you'll recall last quarter we did note that -- and that was in some of the economies, particularly in Asia and I'd say with the -- some of the COVID and Delta variant and various other elements that occurred in some of those markets, we continue to have a pretty good-sized backlog. Bill, anything you want to add?

[Bill Meaney, President and CEO]

No. I think that's -- covers that.

[Operator]

Thank you, sir. Then the next question is from Eric Luebchow of Wells Fargo. Please go ahead.

[Eric Luebchow, Wells Fargo]

Great. Thanks for taking the question. I wanted to touch upon fairly topical area in data centers today. A lot of talk in the industry about cost inflation in terms of development costs along with supply chain challenges and getting new equipment. Maybe you could just give us your perspective on what you're seeing in your footprint. Whether that's -- any development cost, inflation, any development delays in terms of timing. And also the impact of higher power cost, particularly in Europe. And then from a broader pricing perspective, do you think that this environment may be supportive of industry pricing moving upwards in the next couple of years as we work through all these challenges? Thanks.

[Bill Meaney, President and CEO]

Thanks, Eric. I appreciate the question. So 2 or 3 points that I'll cover in your question. I think the first bit is that, I would say that for 2022 in terms of supply chain, we're pretty well covered just because of the lead time. But to your point is, we have seen I would say 10 to 12 weeks increase in supply chain or lead time on some of the MEP and related equipment, and even in Including steel in some markets. I think to your point is, we are seeing a lengthening of the supply chain, but I would say for 2022, we're well covered because that's already been in training committed contracts to actually do that build-out.

And we're -- now we're already looking at 2023 and we're factoring in that extended lead time for some of that equipment in our planning. So the good news -- the bad news is that the lead times have increased. The good news is that we're well covered for 2022, so we've got the time to make sure we incorporate that in our planning for 2023. So that's -- I would say one aspect. And in terms of the increase in the prices -- so we're pretty well hedged for the 2022 commitments that we have because those are contracts that we've already lead. So we are seeing an increase in inflation in some of those raw materials. That being said because this is a business where the cost of construction is well known and quite transparent to our customer base, is we see trends and we expect that to continue. Our pricing will go in line with the cost of build. So I think we're kind of naturally hedged given the transparency of these businesses. In terms of the power cost is that the -- again, we're pretty well covered for this year, but we have seen an uptick in pricing in pretty much all the markets as you -- as everyone's noticed. And I would say that -- first part is, I would say about 60% of our portfolio in 2022 will be pretty much straight power pass-through, so we don't have any exposure in terms of the power costs. The remainder, most of that is still on long-term -- we've contracted for the power long-term. So think of our business has north of 70% naturally hedged, and the part that isn't is is up for renewal during the course of 2022, or a big part of it is. So we don't really see power affecting us in any material way. And in fact, we see continued upward progression in terms of our EBITDA margins as we get into 2022. But thanks for the question.

[Operator]

Thank you, sir. Next question is from Andrew Steinerman of JPMorgan, please go ahead.

[Andrew Steinerman, JPMorgan]

Hi, this is Alex on for Andrew Steinerman. Our question is regarding your guidance. Your guidance for high-single-digit percentage growth in revenue and low double-digit to low teens percentage growth in EBITDA for fourth quarter appears to imply an adjusted EBIDTA margin of about 36.5%. Can you confirm that we're doing the math there right? Maybe speak to some of the drivers behind that? Thank you.

[Barry Hytinen, CFO]

Hi, Alex. It's Barry. Thanks for the question. Why don't I help you with both the revenue and the EBITDA the way we are thinking about it. So in the fourth quarter, you right, we said about high single-digit. So let's say that's 8% or 9% on the revenue side just to give you a couple of the puts and takes. We have a -- the dollar is stronger as we have less than a point of FX benefit year-on-year, and a similar amount from M&A less than a point because just as a reminder, as I mentioned to Shlomo, we divested that software Escrow business in the second quarter. And so as a result, it's not much M&A benefit. So that leaves you with about call it 7% of organic constant currency growth.

And with the strength of the Data Center business, that'll contribute probably 1.5 points alone because that business is performing very well and so you should be working with your model and think like 20 plus percent growth in the fourth quarter from our Data Center business. The balance would be coming from low-single-digit growth in our storage rental revenue. And that'll be with good pricing contribution. Course the remainder is as Bill 's highlighted on the call, the very nice growth we're seeing out of our Digital Solutions and SITAD business. On the EBITDA stand side, we're looking at low double-digit to low -- sorry, mid-teens growth. So let's say that's 13 or so percent just to keep the midpoint there. For the purpose of this discussion, that's about, call it, $48 million of year-on-year increase. FX is a very small contribution, almost nothing, and M&A would be actually a net negative on a year-over-year basis in light of the escrow business was a very high-margin. And so think about data center as having a modest increase in margin sequentially still affected by the fit-out in Frankfurt. So a few million of benefit to EBITDA from data center.

Our Summit is -- our Summit Project is doing phenomenally well and the team is executing very well. You'll probably see $30+ million of year-on-year benefit in the quarter from that. And then of course, pricing will continue to be a very strong contributor. And the services margin, I expect to continue to improve which you've been seeing throughout the year. So naturally, there are some offsets with sale leaseback, as I mentioned earlier, and higher levels of commission in light of the very good trajectory the team is driving on top line. So we're feeling very good about the fourth quarter as we sit here today, and look forward to talking to you about it in 90 days. Thank you. Have a great day.

[Operator]

Thank you, sir. This concludes our question and answer session and the Iron Mountain third quarter 2021 Earnings Conference Call. Thank you for attending today's presentation and you may now disconnect.