# EDGAR Filing Document

**Accession Number:** 0001020569
**File Stem:** 0001308179-23-000454
**Filing Date:** 2023-3
**Character Count:** 262640
**Document Hash:** 3413a7dbaa7d9c102bc14aae57da406d
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001308179-23-000454.hdr.sgml**: 20230330

**ACCESSION NUMBER**: 0001308179-23-000454

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230330

**DATE AS OF CHANGE**: 20230330

**EFFECTIVENESS DATE**: 20230330

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** IRON MOUNTAIN INC
- **CENTRAL INDEX KEY:** 0001020569
- **STANDARD INDUSTRIAL CLASSIFICATION:** REAL ESTATE INVESTMENT TRUSTS [6798]
- **IRS NUMBER:** 232588479
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-13045
- **FILM NUMBER:** 23780937

**BUSINESS ADDRESS:**
- **STREET 1:** 85 NEW HAMPSHIRE AVENUE, SUITE 150
- **STREET 2:** PEASE INTERNATIONAL TRADEPORT
- **CITY:** PORTSMOUTH
- **STATE:** NH
- **ZIP:** 03801
- **BUSINESS PHONE:** 617-535-4781

**MAIL ADDRESS:**
- **STREET 1:** ONE FEDERAL STREET
- **CITY:** BOSTON
- **STATE:** MA
- **ZIP:** 02110

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** IRON MOUNTAIN INC/PA
- **DATE OF NAME CHANGE:** 20000201

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** PIERCE LEAHY CORP
- **DATE OF NAME CHANGE:** 19960807

### Attached PDF Documents

**Attachment 1:** `irm4151021-ars.pdf`

![img-0.jpeg](img-0.jpeg)

## **2022 Annual Financial Report**

# **UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**

Washington, DC 20549

# **FORM 10-K**

(Mark One)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

**Commission File Number 1-13045**

![img-1.jpeg](img-1.jpeg)

# **IRON MOUNTAIN INCORPORATED**

(Exact name of Registrant as Specified in Its Charter)

**Delaware**

(State or other jurisdiction of incorporation)

**23-2588479**

(I.R.S. Employer Identification No.)

**85 New Hampshire Avenue, Suite 150**

**Portsmouth, New Hampshire**

(Address of principal executive offices)

**03801**

(Zip Code)

**617-535-4766**

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

| Title of Each Class | Trading Symbols(s) | Name of Exchange on Which Registered |
| --- | --- | --- |
| Common Stock, $.01 par value per share | IRM | New York Stock Exchange |

Securities registered pursuant to Section 12(g) of the Act: **None**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

| Large accelerated filer | ☑ | Accelerated filer | ☐ |
| --- | --- | --- | --- |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| Emerging growth company | ☐ |  |  |

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☑ No ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of June 30, 2022, the aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant was approximately $13.9 billion based on the closing price on the New York Stock Exchange on such date.

Number of shares of the registrant's Common Stock at February 17, 2023: 290,896,121

# **DOCUMENTS INCORPORATED BY REFERENCE**

Certain information required in Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K (the "Annual Report") is incorporated by reference from our definitive Proxy Statement for our 2023 Annual Meeting of Stockholders (our "Proxy Statement") to be filed with the Securities and Exchange Commission (the "SEC") within 120 days after the close of the fiscal year ended December 31, 2022.

IRON MOUNTAIN®
IRON MOUNTAIN INCORPORATED
2022 FORM 10-K ANNUAL REPORT

# TABLE OF CONTENTS

| PART I | 01 | ITEM 1. | BUSINESS |
| --- | --- | --- | --- |
|  | 09 | ITEM 1A. | RISK FACTORS |
|  | 20 | ITEM 1B. | UNRESOLVED STAFF COMMENTS |
|  | 20 | ITEM 2. | PROPERTIES |
|  | 24 | ITEM 3. | LEGAL PROCEEDINGS |
|  | 24 | ITEM 4. | MINE SAFETY DISCLOSURES |
| PART II | 26 | ITEM 5. | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
|  | 26 | ITEM 6. | [RESERVED.] |
|  | 26 | ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|  | 58 | ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
|  | 59 | ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
|  | 59 | ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
|  | 60 | ITEM 9A. | CONTROLS AND PROCEDURES |
|  | 62 | ITEM 9B. | OTHER INFORMATION |
|  | 62 | ITEM 9C. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
| PART III | 64 | ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
|  | 64 | ITEM 11. | EXECUTIVE COMPENSATION |
|  | 64 | ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
|  | 64 | ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
|  | 64 | ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
| PART IV | 66 | ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
|  | 141 | ITEM 16. | FORM 10-K SUMMARY |

References in this Annual Report on Form 10-K for the year ended December 31, 2022 (this "Annual Report") to "the Company", "Iron Mountain", "we", "us" or "our" include Iron Mountain Incorporated, a Delaware corporation, and its predecessor, as applicable, and its consolidated subsidiaries, unless the context indicates otherwise.

## CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements in this Annual Report that constitute "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements concern our current expectations regarding our future results from operations, economic performance, financial condition, goals, strategies, investment objectives, plans and achievements. These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors, and you should not rely upon them except as statements of our present intentions and of our present expectations, which may or may not occur. When we use words such as "believes", "expects", "anticipates", "estimates", "plans", "intends", "pursue", "will" or similar expressions, we are making forward-looking statements. Although we believe that our forward-looking statements are based on reasonable assumptions, our expected results may not be achieved, and actual results may differ materially from our expectations. In addition, important factors that could cause actual results to differ from expectations include, among others:

- our ability or inability to execute our strategic growth plan, including our ability to invest according to plan, grow our businesses (including through joint ventures), incorporate alternative technologies into our offerings, achieve satisfactory returns on new product offerings, continue our revenue management, expand and manage our global operations, complete acquisitions on satisfactory terms, integrate acquired companies efficiently and transition to more sustainable sources of energy;
- changes in customer preferences and demand for our storage and information management services, including as a result of the shift from paper and tape storage to alternative technologies that require less physical space;
- the impact of our distribution requirements on our ability to execute our business plan;
- the costs of complying with and our ability to comply with laws, regulations and customer requirements, including those relating to data privacy and cybersecurity issues, as well as fire and safety and environmental standards;
- the impact of attacks on our internal information technology ("IT") systems, including the impact of such incidents on our reputation and ability to compete and any litigation or disputes that may arise in connection with such incidents;
- our ability to fund capital expenditures;
- our ability to remain qualified for taxation as a real estate investment trust for United States federal income tax purposes ("REIT");
- changes in the political and economic environments in the countries in which we operate and changes in the global political climate;
- our ability to raise debt or equity capital and changes in the cost of our debt;
- our ability to comply with our existing debt obligations and restrictions in our debt instruments;
- the impact of service interruptions or equipment damage and the cost of power on our data center operations;
- the cost or potential liabilities associated with real estate necessary for our business;
- unexpected events, including those resulting from climate change or geopolitical events, could disrupt our operations and adversely affect our reputation and results of operations;
- failures to implement and manage new IT systems;
- other trends in competitive or economic conditions affecting our financial condition or results of operations not presently contemplated; and
- the other risks described in our periodic reports filed with the SEC, including under the caption "Risk Factors" in Part I, Item 1A of this Annual Report.

Except as required by law, we undertake no obligation to update any forward-looking statements appearing in this report.

# Part I

ITEM 1. BUSINESS

ITEM 1A. RISK FACTORS

ITEM 1B. UNRESOLVED STAFF COMMENTS

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. MINE SAFETY DISCLOSURES

# PART I

## ITEM 1. BUSINESS.

### BUSINESS OVERVIEW

We help organizations around the world protect their information, reduce storage costs, comply with regulations, facilitate corporate disaster recovery, and better use their information and IT infrastructure for business advantages, regardless of its format, location or life cycle stage. We do this by storing physical records and data backup media, offering information management solutions, and providing data center space for enterprise-class colocation and hyperscale deployments. We offer comprehensive records and information management services and data management services, along with the expertise and experience to address complex storage and information management challenges such as rising storage rental costs, legal and regulatory compliance, and disaster recovery requirements. We provide secure and reliable data center facilities to protect digital information and ensure the continued operation of our customers' IT infrastructure, with reliable and flexible deployment options. Our asset lifecycle management ("ALM") business allows us to provide end-to-end asset lifecycle services for hyperscale, corporate data center and corporate end-user device assets.

Founded in an underground facility near Hudson, New York in 1951, Iron Mountain Incorporated, a Delaware corporation, has more than 225,000 customers in a variety of industries in 60 countries around the world, as of December 31, 2022. We currently serve customers across an array of market verticals - commercial, legal, financial, healthcare, insurance, life sciences, energy, business services, entertainment and government organizations, including approximately 95% of the Fortune 1000. As of December 31, 2022, we employed approximately 26,000 people. We are listed on the New York Stock Exchange (the "NYSE") and are a constituent of the Standard & Poor's 500 Index and the MSCI REIT index. As of December 31, 2022, we were number 652 on the Fortune 1000.

We have been organized and have operated as a REIT beginning with our taxable year ended December 31, 2014.

### BUSINESS STRATEGY

#### OVERVIEW

Our company has been a market leader in the physical ecosystem supporting information storage and retrieval, as most businesses have relied on paper documents or computer tapes to store their valuable information. Over time, customers are increasing their digital information, with the new information storage ecosystem being a hybrid of physical and digital media. We are a different company to the one we have been in our past. The strategic journey we are on is driving this change and our focus remains on the four pillars outlined below to grow our business.

**Continued growth in physical storage through revenue management as well as volume growth achieved in faster growing emerging markets and consumer and complementary business growth in developed markets**

- We are establishing and enhancing leadership positions in higher-growth markets such as central and eastern Europe, Latin America, Asia and Africa, through both organic expansion and acquisitions in countries where GDP growth is faster and outsourcing information management is at an earlier stage.
- We continue to identify, acquire, incubate and scale complementary businesses and products to support our long-term growth objectives and drive solid returns on invested capital. These opportunities include our digital services and our ALM, Entertainment Services, Fine Arts and Consumer Storage (each as defined below) businesses.

**Utilizing our global scale as well as over 70 years of customer trust to deliver differentiated data center offerings**

- We have made significant progress in scaling our Global Data Center Business through acquisitions and organic growth, with 21 operating data centers across 19 global markets, either directly or through unconsolidated joint ventures.
- As of December 31, 2022, approximately 92% of our data center capacity was leased. With total potential capacity of 747 megawatts ("MW") in land and buildings currently owned or operated by us, we are among the largest global data center operators.

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| Developing and offering new products and services that allow our customers to achieve reliable and secure information management solutions in an increasingly hybrid physical and digital world | Our customers are faced with navigating a more complex regulatory environment, and one in which hybrid physical and digital solutions have become the norm. Our strategy is underpinned by our persistent focus on best-in-class customer experience, as we continue to seek innovative solutions to help our customers progress on their journey from physical storage to a digital ecosystem. |
| --- | --- |
| Increased investment in our growth agenda, our business and customer-centric solutions | We have established an investment strategy to fuel our growth. The investments we outlined in our plan for Project Matterhorn (as defined below) have been enabled by the success of Project Summit, which was completed in 2021, and informed by our established leadership position in the physical storage business, our expanding services such as Global Digital Solutions and ALM and our significant progress in the Global Data Center Business. |

## PROJECT MATTERHORN

In September 2022, we announced a global program designed to accelerate the growth of our business ('Project Matterhorn'). Project Matterhorn investments will focus on transforming our operating model to a global operating model. Project Matterhorn will focus on the formation of a solution-based sales approach that is designed to allow us to optimize our shared services and best practices to better serve our customers' needs. We will be investing to accelerate growth and to capture a greater share of the large, global addressable markets in which we operate. We expect to incur approximately $150.0 million in costs annually related to Project Matterhorn from 2023 through 2025. Costs are comprised of (1) restructuring costs, which include (i) site consolidation and other related exit costs, (ii) employee severance costs and (iii) certain professional fees associated with these activities, and (2) other transformation costs, which include professional fees such as project management costs and costs for third party consultants who are assisting in the enablement our growth initiatives. Total costs related to Project Matterhorn during the year ended December 31, 2022 were approximately $41.9 million.

## BUSINESS SEGMENTS

The amount of revenues derived from our business segments and other relevant data, including financial information about geographic areas and product and service lines, for the years ended December 31, 2022, 2021 and 2020, are set forth in Note 11 to Notes to Consolidated Financial Statements included in this Annual Report.

### GLOBAL RIM BUSINESS

The Global Records and Information Management ('Global RIM') Business segment includes several distinct offerings.

*Records Management*, stores physical records and provides healthcare information services, vital records services, courier operations, and the collection, handling and disposal of sensitive documents ('Records Management') for customers in 60 countries around the globe. As of December 31, 2022, we stored approximately 730 million cubic feet of hardcopy records.

*Data Management*, provides storage and rotation of backup computer media as part of corporate disaster recovery plans, including service and courier operations, server and computer backup services and related services offerings ('Data Management').

*Global Digital Solutions*, develops, implements and supports comprehensive storage and information management solutions for the complete lifecycle of our customers' information, including the management of physical records, conversion of documents to digital formats and digital storage of information ('Global Digital Solutions').

*Secure Shredding*, includes the scheduled pick-up of office records that customers accumulate in specially designed secure containers we provide and is a natural extension of our hardcopy records management operations, completing the lifecycle of a record. Through a combination of shredding facilities and mobile shredding units consisting of custom built trucks, we are able to offer secure shredding services to our customers.

*Entertainment Services*, entertainment and media services which help industry clients store, safeguard and deliver physical media of all types, and provides digital content repository systems that house, distribute, and archive key media assets ('Entertainment Services').

*Consumer Storage*, provides on-demand, valet storage for consumers ('Consumer Storage') through a strategic partnership that utilizes data analytics and machine learning to provide effective customer acquisition and a convenient and seamless consumer storage experience.

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## GLOBAL DATA CENTER BUSINESS

The Global Data Center Business segment provides enterprise-class data center facilities and hyperscale-ready capacity to protect mission-critical assets and ensure the continued operation of our customers’ IT infrastructure with secure, reliable and flexible data center options. The world’s most heavily regulated organizations have trusted us with their data centers for over 15 years, and as of December 31, 2022, five of the top 10 global cloud providers were Iron Mountain Data Center customers.

## CORPORATE AND OTHER

Corporate and Other consists primarily of our Fine Arts and ALM businesses and other corporate items ('Corporate and Other').

*Fine Arts*, provides technical expertise in the handling, installation and storing of art ('Fine Arts').

*ALM*, provides hyperscale and corporate IT infrastructure managers with services and solutions that enable the decommissioning, data erasure, processing and disposition or sale of IT hardware and component assets. ALM services are enabled by: secure logistics, chain of custody and complete asset traceability practices, environmentally-responsible asset processing and recycling, and data sanitization and asset refurbishment services that enable value recovery through asset remarketing. Our ALM services focus on protecting and eradicating customer data while maintaining strong, auditable and transparent chain of custody practices.

Corporate and Other also includes costs related to executive and staff functions, including finance, human resources and IT, which benefit the enterprise as a whole.

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# BUSINESS ATTRIBUTES

Our business has the following attributes:

| Large, Diversified, Global Business | The world's most heavily regulated organizations trust us with the storage of their records. Our mission-critical storage offerings and related services generated approximately $5.1 billion in annual revenue in 2022. Our business has a highly diverse customer base of more than 225,000 customers - with no single customer accounting for more than approximately 1% of revenue during the year ended December 31, 2022 - and operates in 60 countries globally. This presents a significant cross-sell opportunity for our expanding solutions, including digital, data center and ALM. |
| --- | --- |
|  | $5.1 billion Annual revenue 225,000+ Customers 60 Countries |
| Recurring, Durable Revenue Stream | We generate a majority of our revenues from contracted storage rental fees, via agreements that generally range from one to five years in length. Historically, in our Records Management business, we have seen strong customer retention (of approximately 98%) and solid physical records retention; more than 50% of physical records that entered our facilities 15 years ago are still with us today. We have also seen strong customer retention in our Global Data Center Business. |
| Comprehensive Information Management Solution | As an S&P 500 REIT with approximately 1,400 locations globally and with offerings spanning physical storage, digitization solutions and digital storage, we are positioned to provide a holistic offering to our customers. We are able to cater to our customers' physical and digital needs and to help guide their digital transformation journey. |
| Significant Owner and Operator of Real Estate | We operate approximately 97 million square feet of real estate worldwide. Our owned real estate footprint spans nearly 23 million square feet. |
| Limited Revenue Cyclicality | Historically, economic downturns have not significantly affected our storage rental business. Due to the durability of our total global physical volumes, the success of our revenue management initiatives, and the growth of our Global Data Center Business, we believe we can continue to grow organic storage rental revenue over time. |
| Shifting Revenue Mix | We have identified a number of areas where we see opportunity for growth as we position ourselves to unlock greater value for our customers. These business lines, including Global Data Center, ALM, Fine Arts, Entertainment Services and Consumer Storage, represent markets with strong secular growth. |

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In addition, our Global Data Center Business has the following attributes:

| Large Data Center Platform with Significant Expansion Opportunity | As of December 31, 2022, we had 192 MW of leasable capacity with an additional 556 MW under construction or held for development. |
| --- | --- |
| Differentiated Compliance and Security | We offer comprehensive compliance support and physical and cyber security. Our Security-in-Depth approach to security includes a combination of technical and human security measures, and experienced senior military and public sector security leaders oversee our security. As of December 31, 2022, our data centers comply with one of the most comprehensive compliance programs in the industry, including enterprise-wide certified ISO 14001 and 50001 environmental and energy management systems. We also report globally on service organizational controls, as well as global ISO 27001 certification, and PCI-DSS compliance, and meet FISMA HIGH and FedRAMP controls in the United States. |
| Efficient Access and Flexibility | We have the ability to provide customers with a range of deployment options from one cabinet to an entire building, leveraging our global portfolio of hyperscale-ready and underground data centers. We also provide access to numerous carriers, cloud providers and peering exchanges with migration support and IT. |
| 100% Green Powered Data Centers | As of December 31, 2022, our Global Data Center platform continues to match 100% of its consumption with renewable electricity procurement and benefits from low power usage effectiveness ('PUE'). We are one of the top 30 buyers of renewable energy among the Fortune 1000 and offer the Green Power Pass, which allows customers to include the power they consume at any Iron Mountain data centers as green power in their CDP, RE100, GRI, or other sustainability reporting. |

## COMPETITION

We compete with thousands of storage and information management services providers around the world as well as storage and information management services managed and operated internally by organizations. We believe that competition for records and information customers is based on price, reputation and reliability, quality and security of storage, quality of service and scope and scale of technology. While the majority of our competitors operate in only one market or region, we believe we provide a differentiated global offering that competes effectively in these areas.

We also compete with numerous data center developers, owners and operators, many of whom own properties similar to ours in some of the same metropolitan areas where our facilities are located. We believe that competition for data center customers is based on availability of power, security considerations, location, connectivity and rental rates, and we generally believe we compete effectively in each of these areas. Additionally, we believe our strong brand, global footprint and excellent commercial relationships enable us to compete successfully and provide significant cross-sell opportunities with our existing customer base.

Similarly, in our ALM business, we compete with both hyperscalers and individual corporate clients who manage their own asset recycling and management, as well as external competitors.

## HUMAN CAPITAL MANAGEMENT

### EMPLOYEES

As of December 31, 2022, we employed approximately 10,000 employees in the United States and approximately 16,000 employees outside of the United States. As of December 31, 2022, approximately 400 employees were represented by unions in North America and approximately 1,200 employees were represented by unions in Latin America. All union employees are currently under renewed labor agreements or operating under an extension agreement.

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## BENEFIT PROGRAMS

We provide our employees with benefits that are designed to support their overall physical, financial, emotional and social well-being. These benefits vary by location but generally include health and welfare benefits, paid time off, and programs to support financial security. Additionally, employees are able to access emotional well-being resources through global employee assistance programs. Certain unionized employees receive benefits through unions and are not eligible to participate in our benefit programs. In addition to base compensation and other usual benefits, a significant portion of full-time employees participate in some form of incentive-based compensation program that provides payments based on revenues, profits or attainment of specific objectives for the unit in which they work.

## COMPANY CULTURE

We recognize that an inspired culture is foundational to how we deliver on our purpose and create sustained growth and value for our shareholders. Iron Mountain's culture is deeply rooted in its enduring values: *Act with Integrity, Own Safety and Security, Build Customer Value, Take Ownership and Promote Inclusion and Teamwork*. While Iron Mountain is a culture of learning, collaboration, diversity and well-being, we know that culture overall comes down to what it feels like to work at Iron Mountain. This is why we celebrate and recognize our employees who consistently demonstrate Iron Mountain's values in measurable ways while inspiring others to do the same. We commit significant resources to sustaining a culture that enables voice and innovation, and facilitates trust, engagement, belonging and performance. We regularly survey our employees on a range of topics to measure our engagement and effectiveness and to obtain their views. In addition, we use data to gain insight to the global distribution of our employees, where they work, how they work and cost to serve. We use all of this information to drive increased employee engagement and success, as well as to refine our approach.

## DIVERSITY, EQUITY AND INCLUSION

At Iron Mountain, we believe that an inclusive environment with diverse teams produces more creative solutions, results in better, more innovative products and services and is crucial to our efforts to attract and retain key talent. As one of our five core company values, *Promoting Inclusion and Teamwork* is a behavior all of our employees are expected to demonstrate every day. We have prioritized diversity, equity and inclusion ('DEI') as part of our corporate-wide strategic goals. Steps we have taken to create and sustain a more diverse, equitable and inclusive environment include: hiring a Global Chief Diversity, Equity & Inclusion Officer with significant DEI experience to lead our cultural transformation, and to lead us on the path to creating an environment of inclusiveness and belonging. Our Global Chief Diversity, Equity & Inclusion Officer works closely with our executive team, Human Resources, Environmental, Social and Governance ('ESG') and the DEI Councils and our Employee Resource Groups, all of whom support our DEI strategy in a variety of capacities. We also have a Global DEI Council which is comprised of the executive team and is chaired by our Chief Executive Officer. The Global DEI Council supports our DEI strategy and initiatives, monitors the progress of DEI initiatives and the enterprise goals, ensures accountability based upon identified measures and goals and communicates DEI progress to stakeholders. In 2021, we established the following goals: by 2025, women will represent at least 40% of global leadership roles and individuals from historically underrepresented groups will represent at least 30% of US leadership roles. The Global DEI Council is not only responsible for providing the resources to help us reach our goals but also acting aggressively to retain our talent. We review and revise our systems, policies and processes to ensure that our organizational structures facilitate inclusiveness and accountability. We ensure that our recruiting efforts reflect our diversity goals and we launch, expand and support Employee Resource Groups, who meet and connect on shared characteristics and life experiences that can prove impactful to our business, our customers and our employees.

## COMMUNITY INVOLVEMENT

We are committed to integrating responsible and sustainable practices throughout our organization to help our operations to have a positive impact on the environment and the communities in which we operate. We aim to give back to the communities where we live and work, and believe that this commitment helps in our efforts to attract and retain employees. We offer philanthropic support to our global community through our Living Legacy Initiative, which is our commitment to help preserve and make accessible cultural and historical information and artifacts. We encourage volunteerism in the communities in which we live and work through our Moving Mountains volunteer program, offering paid time off for employees to help community-based and civic-minded organizations.

## INSURANCE

For strategic risk transfer purposes, we maintain a comprehensive insurance program with insurers that we believe to be reputable and that have adequate capitalization in amounts that we believe to be appropriate. Property insurance is purchased on a comprehensive basis, including flood and earthquake (including excess coverage), subject to certain policy conditions, sublimits and deductibles. Property is insured based upon the replacement cost of real and personal property, including leasehold improvements, business income loss and extra expense. Other types of insurance that we carry, which are also subject to certain policy conditions, sublimits and deductibles, include medical, workers' compensation, general liability, umbrella, automobile, professional, cyber, warehouse legal liability and directors' and officers' liability policies.

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# GOVERNMENT REGULATION

We are required to comply with numerous laws and regulations covering a wide variety of subject matters which may have a material effect on our capital expenditures, earnings and competitive position.

For example, some of our current and formerly owned or leased properties were previously used by entities other than us for industrial or other purposes, or were affected by waste generated from nearby properties, that involved the use, storage, generation and/or disposal of hazardous substances and wastes, including petroleum products. In some instances, this prior use involved the operation of underground storage tanks or the presence of asbestos-containing materials. Where we are aware of environmental conditions that require remediation, we undertake appropriate activity, in accordance with all legal requirements. Although we have from time to time conducted limited environmental investigations and remedial activities at some of our former and current facilities, we have not undertaken environmental reviews of all of our properties. We therefore may be potentially liable for environmental costs and may be unable to sell, rent, mortgage or use contaminated real estate owned or leased by us. Under various federal, state and local environmental laws, we may be liable for environmental compliance and remediation costs to address contamination, if any, located at owned and leased properties as well as damages arising from such contamination, whether or not we know of, or were responsible for, the contamination, or the contamination occurred while we owned or leased the property. Environmental conditions for which we might be liable may also exist at properties that we may acquire in the future. In addition, future regulatory action and environmental laws may impose costs for environmental compliance that do not exist today.

We transfer a portion of our risk of financial loss due to currently undetected environmental matters by purchasing an environmental impairment liability insurance policy, which covers all owned and leased locations. Coverage is provided for both liability and remediation costs.

In addition, we are subject to numerous laws and regulations relating to data privacy and cybersecurity, which are complex, change frequently and have tended to become more stringent over time. We have an established privacy compliance framework and devote substantial resources, and may in the future have to devote significant additional resources, to facilitate compliance with these laws and regulations, and to investigate, defend or remedy actual or alleged violations or breaches. Any failure by us to comply with, or remedy any violations or breaches of, these laws and regulations could negatively impact our operations, result in the imposition of fines and penalties, liability and litigation, significant costs and expenses and reputational harm.

For more information about laws and regulations that could affect our business, see 'Item 1A. Risk Factors' included in this Annual Report.

# SUSTAINABILITY

At Iron Mountain, we are using our influence and expertise to drive innovations that will not only protect and elevate the power of our customers' work, but make a lasting, positive impact on people, planet, and performance. Our four focus areas, where we can deliver uniquely through owned operations and customers' enablement, are safeguarding our customers' information, empowering employees, serving our communities, and protecting the environment.

Iron Mountain is committed to sustainable growth and this is highlighted through initiatives and targets within the company. We have publicly adopted 20 goals to address our environmental footprint, corporate philanthropy and volunteerism and DEI practices. As signatories of The Climate Pledge, we are on a path to reach net zero greenhouse gas emissions by 2040. As an employer, we are committed to the safety and well-being of our employees and strive to cultivate a culture of inclusion that values diverse perspectives across our global workforce. Iron Mountain and its employees also make a social impact in the communities in which we operate through charitable giving and volunteerism.

Our work continues to receive recognition. We are ranked 44th on Newsweek's 2023 list of America's Most Responsible Companies, and are ranked 4th within our industry. We have received a 100% score on the Human Rights Campaign Corporate Equality Index every year since 2018.

Iron Mountain is committed to transparent reporting on sustainability and corporate responsibility efforts in accordance with the guidelines of the Global Reporting Initiative. Our corporate responsibility report highlights our progress against key measures of success for our efforts in the community, our environment, and for our people. We are a member of the FTSE4Good Index, MSCI World ESG Index, MSCI World Climate Change Index and MSCI USA ESG Select Index, each of which include companies that meet globally recognized corporate responsibility standards. A copy of our corporate responsibility report is available on the 'About Us' section of our website, www.ironmountain.com, under the heading 'Corporate Responsibility'. We are not including the information contained on or available through our website as part of, or incorporating such information by reference into, this Annual Report. In addition, we continue to work to further align our reporting with the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures to disclose climate-related financial risks and opportunities, and in 2022 we completed our first climate scenario analysis. The process brought together our most senior leaders from across all business units and functions to explore the potential impacts of climate change related to several different warming scenarios. The analysis resulted in the identification of three strategic areas where Iron Mountain should focus its future discussions regarding climate resilience, which include physical impacts, business strategy and innovation, and reputational and societal risks.

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## STRONG ENVIRONMENTAL FOCUS

- Iron Mountain provides a Green Power Pass solution in the Data Center market to help customers manage their carbon footprint.
- A part of RE100 and EV100 Initiatives - commitment to use renewable energy sources for 100% of our worldwide electricity by 2040 and convert 100% of our company cars and 50% of our vans to electric vehicles by 2030.
- Founding signatory of the 24/7 Carbon Free Energy (CFE) compact. As of end 2022, Iron Mountain has over 100 locations across the United States with the ability to track and match renewable energy usage on an hourly basis.
- 80% of our global electricity use was from renewable sources in 2021.
- Reduced GHG emissions by 60% (since 2016) as part of our Science Based Target and net zero by 2040 commitment.
- Received a 100% on the Human Rights Campaign Corporate Equality Index every year since 2018.

![img-0.jpeg](img-0.jpeg)

TASK FORCE on
CLIMATE-RELATED
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## INTERNET WEBSITE

Our Internet address is www.ironmountain.com, Under the "Investors" section on our website, we make available, free of charge, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") as soon as reasonably practicable after such forms are filed with or furnished to the SEC. We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this Annual Report. Copies of our corporate governance guidelines, code of ethics and the charters of our audit, compensation, finance, nominating and governance, risk and safety, and technology committees are available on the "Investors" section of our website, www.ironmountain.com, under the heading "Corporate Governance".

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# ITEM 1A. RISK FACTORS.

We face many risks. If any of the events or circumstances described below actually occur, we and our businesses, financial condition or results of operations could suffer, and the trading price of our debt or equity securities could decline. Our current and potential investors should consider the following risks and the information contained under the heading 'Cautionary Note Regarding Forward-Looking Statements' before deciding to invest in our securities.

## BUSINESS RISKS

*Failure to execute our strategic growth plan may adversely impact our financial condition and results of operations.*

As part of our strategic growth plan, including Project Matterhorn, we expect to invest in our existing businesses, including records and information management storage and services businesses in our higher-growth markets, data centers, ALM business and other complementary businesses, and in new businesses, business strategies, products, services, technologies and geographies. These initiatives may involve significant risks and uncertainties, including:

- • our inability to maintain relationships with key customers and suppliers or to execute on our plan to incorporate the digitization of our customers' records and new digital information technologies into our offerings;
- • failure to achieve satisfactory returns on new product offerings, acquired companies, joint ventures, growth initiatives, or other investments, particularly in markets where we do not currently operate or have a substantial presence;
- • our inability to identify suitable companies to acquire, invest in or partner with;
- • our inability to complete acquisitions or investments on satisfactory terms;
- • our inability to structure acquisitions or investments in a manner that complies with our debt covenants and is consistent with our leverage ratio goals;
- • challenges in managing costs to offset the impact of inflationary pressure;
- • increased demands on our management, operating systems, internal controls and financial and physical resources and, if necessary, our inability to successfully expand our infrastructure;
- • incurring additional debt necessary to acquire suitable companies or make other growth investments if we are unable to pay the purchase price or make the investment out of working capital or the issuance of our common stock or other equity securities;
- • our inability to manage the budgeting, forecasting and other process control issues presented by future growth, particularly with respect to new lines of business;
- • insufficient revenues to offset expenses and liabilities associated with new investments; and
- • our inability to attract, develop and retain skilled employees to lead and support our strategic growth plan, particularly in new businesses, technologies, products or offerings outside our core competencies.

Our new ventures are inherently risky and we can provide no assurance that such strategies and offerings will be successful in achieving the desired returns within a reasonable timeframe, if at all, and that they will not adversely affect our business, reputation, financial condition, and operating results.

*If stored records and tapes become less active our service revenue growth and profits from related services may decline.*

Our Records Management and Data Management service revenue growth is being negatively impacted by declining activity rates as stored records and tapes are becoming less active and more archival. The amount of information available to customers digitally or in their own information systems has been steadily increasing in recent years, and we believe this trend will continue. As a result, our customers are less likely than they have been in the past to retrieve records and rotate tapes, thereby reducing their activity levels. At the same time, many of our costs related to records and tape related services remain relatively fixed. In addition, our reputation for providing secure information storage is critical to our success, and actions to manage cost structure, such as outsourcing certain transportation, security or other functions, could negatively impact our reputation and adversely affect our business, and, if we are unable to appropriately align our cost structure with decreased levels of service activity, our operating results could be adversely affected.

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*Our customers may shift from paper and tape storage to alternative technologies that may shift our revenue mix away from storage revenue.*

We derive substantial revenues from rental fees for the storage of physical records and computer backup media and from storage related services. Storage volume and/or demand for our traditional storage related services may decline as our customers adopt alternative storage technologies or as retention requirements evolve, which may require significantly less space than traditional physical records and tape storage. While volumes in our Global RIM Business segment were relatively steady in 2022 and we expect them to remain relatively consistent in the near term, we can provide no assurance that our customers will continue to store most or a portion of their records as paper documents or as tapes, or that the paper documents or tapes they do store with us will require our storage related services at the same levels as they have in the past. A significant shift by our customers to storage of data through non-paper or non-tape-based technologies, whether now existing or developed in the future, could adversely affect our businesses. In addition, the digitization of records may shift our revenue mix from the more predictable storage revenue to service revenue, which is inherently more volatile.

*We and our customers are subject to laws and governmental regulations relating to data privacy and cybersecurity and our customers’ demands in this area are increasing. This may cause us to incur significant expenses and non-compliance with such regulations and demands could harm our business.*

We and our customers are subject to numerous laws and regulations relating to data privacy and cybersecurity. These regulations are complex, change frequently and have tended to become more stringent over time. In addition, a growing number of regulatory bodies have adopted data breach notification requirements and increased enforcement of regulations regarding the use, access, accuracy and security of personal information. Finally, as a result of the continued emphasis on information security and instances in which personal information has been compromised, our customers are requesting that we take increasingly sophisticated measures to enhance security and comply with data privacy regulations, and that we assume higher liability under our contracts.

We have an established privacy compliance framework and devote substantial resources, and may in the future have to devote significant additional resources, to facilitate compliance with global laws and regulations, our customers’ data privacy and security demands, and to investigate, defend or remedy actual or alleged violations or breaches. Any failure by us to comply with, or remedy any violations or breaches of, laws and regulations or customer requirements could negatively impact our operations, result in the imposition of fines and penalties, contractual liability and litigation, significant costs and expenses and reputational harm.

*Attacks on our internal IT systems could damage our reputation, cause us to lose revenues, and adversely affect our business, financial condition and results of operations.*

Our reputation for providing secure information storage to customers is critical to the success of our business. Our reputation or brand, and specifically, the trust our customers place in us, could be negatively impacted in the event of perceived or actual failures by us to store information securely. Although we seek to prevent and detect attempts by unauthorized users to gain access to our IT systems, and incur significant costs to do so, our IT and network infrastructure has in the past been and may in the future be vulnerable to attacks by hackers, including state-sponsored organizations with significant financial and technological resources, breaches due to employee error, fraud or malice or other disruptions (including, but not limited to, computer viruses and other malware, denial of service, and ransomware), which may involve a privacy breach requiring us to notify regulators, clients or employees and enlist identity theft protection. Moreover, until we have migrated businesses we acquire onto our IT systems or ensured compliance with our information technology security standards, we have in the past and may in the future face additional risks because of the continued use of predecessor IT systems. We have outsourced, and expect to continue to outsource, certain support services, including cloud storage systems and cloud computing services, to third parties, which has in the past and may in the future subject our IT and other sensitive information to additional risk. In addition, the continuation of remote work arrangements following the COVID-19 pandemic has increased and could further increase our cybersecurity risks. A successful breach of the security of our IT systems could lead to theft or misuse of our customers’ proprietary or confidential information or our employees’ personal information and result in third party claims against us, regulatory penalties, and reputational harm. Although we maintain insurance coverage for various cybersecurity risks, there is no guarantee that all costs or losses incurred will be fully insured. Damage to our reputation could make us less competitive, which could negatively impact our business, financial condition and results of operations.

*Failure to successfully integrate acquired businesses could negatively impact our balance sheet and results of operations.*

Strategic acquisitions are an important element of our growth strategy and the success of any acquisition we make depends in part on our ability to integrate the acquired business and realize anticipated synergies. The process of integrating acquired businesses, particularly in new markets or for new offerings, may involve unforeseen difficulties and may require a disproportionate amount of our management’s attention and our financial and other resources.

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For example, the success of our significant acquisitions depends, in large part, on our ability to realize the anticipated benefits, including cost savings or revenue acceleration from combining the acquired businesses with ours. To realize these anticipated benefits, we must be able to successfully integrate our business and the acquired businesses, and this integration is complex and time-consuming. We may encounter challenges in the integration process including the following:

- challenges and difficulties associated with managing our larger, more complex, company;
- conforming standards, controls, procedures and policies, business cultures and compensation and benefits structures between the two businesses;
- consolidating corporate and administrative infrastructures;
- coordinating geographically dispersed organizations;
- retaining critical acquired talent;
- potential unknown liabilities and unforeseen expenses or delays associated with an acquisition; and
- our ability to deliver on our strategy going forward.

Further, our acquisitions subject us to liabilities (including tax liabilities) that may exist at an acquired company, some of which may be unknown. Although we and our advisors conduct due diligence on the businesses we acquire, there can be no guarantee that we are aware of all liabilities of an acquired company. These liabilities, and any additional risks and uncertainties related to an acquired company not known to us or that we may deem immaterial or unlikely to occur at the time of the acquisition, could negatively impact our future business, financial condition and results of operations.

We can give no assurance that we will ultimately be able to effectively integrate and manage the operations of any acquired business or realize anticipated synergies. The failure to successfully integrate the cultures, operating systems, procedures and information technologies of an acquired business could have a material adverse effect on our financial condition and results of operations.

Our future growth depends in part upon our ability to continue to effectively manage and execute on revenue management.

Over the past several years, our organic revenue growth has been positively impacted by our ability to effectively introduce, expand and monitor revenue management. If we are not able to continue and effectively manage pricing, our results of operations could be adversely affected and we may not be able to execute on our strategic growth plan.

Our customer contracts may not always limit our liability and may sometimes contain terms that could lead to disputes in contract interpretation.

Our customer contracts typically contain standardized provisions limiting our liability regarding the services we perform and the loss or destruction of, or damage to, records, information, or other items stored with us; however, some of our contracts with large customers and some of the contracts assumed in our acquisitions contain no such limits or contain non-standard limits. We can provide no assurance that our limitation of liability provisions will be enforceable in all instances or, if enforceable, that they would otherwise protect us from liability. In the past, we have had relatively few disputes with our customers regarding the terms of their customer contracts, and most disputes to date have not been material, but we can provide no assurance that we will not have material disputes in the future. Moreover, as we expand our operations into new businesses, including digital solutions and the storage of valuable items, and respond to customer demands for higher limitation of liability, our exposure to contracts with higher or no limitations of liability and disputes with customers over contract interpretation may increase. Although we maintain a comprehensive insurance program, we can provide no assurance that we will be able to maintain insurance policies on acceptable terms or with high enough coverage amounts to cover losses to us in connection with customer contract disputes.

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As a global company, we are subject to the unique risks of operating in many countries.

As of December 31, 2022, we operated in 60 countries. The global nature of our business and our growth strategy, which includes continued acquisitions and investments in countries where we do not currently operate, is subject to numerous risks, including:

- fluctuations of currency exchange rates in the markets in which we operate;
- the impact of laws and regulations that apply to us in countries where we operate; in particular, we are subject to sanctions and anti-corruption laws, such as the Foreign Corrupt Practices Act and the United Kingdom Bribery Act, and, although we have implemented internal controls, policies and procedures and training to deter prohibited practices, our employees, partners, contractors or agents may violate or circumvent such policies and the law;
- costs and difficulties associated with managing global operations, including cross border sales;
- the volatility of certain economies in which we operate;
- political uncertainties and changes in the global political climate or other global events, such as trade wars or global pandemics, which may create additional risk in relation to our global operations, which may become more pronounced as we consolidate operations across countries and need to move data across borders;
- the risk that business partners upon whom we depend for technical assistance or management and acquisition expertise in some markets will not perform as expected;
- difficulties attracting and retaining local management and key employees to operate our business in certain countries; and
- cultural differences and differences in business practices and operating standards, as well as risks and challenges in expanding into countries where we have no prior operational experience.

If we fail to meet our commitment to transition to more renewable and sustainable sources of energy, it may negatively impact our ability to attract and retain customers, employees and investors who focus on this commitment. Furthermore, changes to environmental laws and standards may increase the cost to operate some of our businesses. This could impact our results of operations, our competitiveness and the trading value of our stock.

We have made a commitment to prioritize sustainable energy practices, reduce our carbon footprint and transition to more renewable and sustainable sources of energy, particularly in our Global Data Center Business. We have made progress towards reducing our carbon footprint, but if we are not successful in continuing this reduction or if our customers, employees and investors are not satisfied with our sustainability efforts, it may negatively impact our ability to attract and retain customers, employees and investors who focus on this commitment. This could negatively impact our results of operations and the trading of our stock.

Furthermore, changes in environmental laws in any jurisdiction in which we operate could increase compliance costs or impose limitations on our operations. For example, our emergency generators at our data centers are subject to regulations and permit requirements governing air pollutants, and the heating, ventilation and air conditioning and fire suppression systems at some of our data centers and data management locations may include ozone-depleting substances that are subject to regulation. While environmental regulations do not normally impose material costs upon operations at our facilities, unexpected events, equipment malfunctions, human error and changes in law or regulations, among other factors, could result in unexpected costs, which could be material.

Our use of joint ventures could expose us to additional risks and liabilities, including our reliance on joint venture partners who may have economic and business interests that are inconsistent with our business interests, our lack of sole decision-making authority, and disputes between us and our joint venture partners.

As part of our growth strategy, particularly in connection with our international and data center expansion, we currently, and may in the future, co-invest with third parties using joint ventures. These joint ventures can result in our holding non-controlling interests in, or having shared responsibility for managing the affairs of, a property or portfolio of properties, business, partnership, joint venture or other entity. As a result, in connection with our pursuit or entrance into any such joint venture, we may be subject to additional risks, including:

- our ability to sell our interests in the joint venture may be limited by the joint venture agreement;
- we may not have the right to exercise sole decision-making authority regarding the properties, business, partnership, joint venture or other entity;
- if our partners become bankrupt or fail to fund their share of required capital contributions, we may choose or be required to contribute unplanned capital; and
- our partners may have economic, tax or other interests or goals that are inconsistent with our interests or goals, and that could affect our ability to negotiate satisfactory joint venture terms, to operate the property or business or maintain our qualification for taxation as a REIT.

Each of these factors may result in returns on these investments being less than we expect or in losses, and our financial and operating results may be adversely affected.

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Part I

*Significant costs or disruptions at our data centers could adversely affect our business, financial condition and results of operations.*

Our Global Data Center Business depends on providing customers with highly reliable facilities, power infrastructure and operations solutions, and we will need to retain and hire qualified personnel to manage our data centers. Service interruptions or significant equipment damage could result in difficulty maintaining service level commitment obligations that we owe to certain of our customers. Service interruptions or equipment damage may occur at one or more of our data centers because of numerous factors, including: human error; equipment failure; physical, electronic and cyber security breaches; fire, hurricane, flood, earthquake and other natural disasters; water damage; fiber cuts; extreme temperatures; power loss or telecommunications failure; war, terrorism and any related conflicts or similar events worldwide; and sabotage and vandalism.

We purchase significant amounts of electricity and water for cooling from suppliers that are subject to environmental laws, regulations and permit requirements. These environmental requirements are subject to material change, which could result in increases in our suppliers' compliance costs that may be passed through to us or otherwise constrain the availability of such resources. In addition, climate change may increase the likelihood that our data centers are affected by some of these factors.

While these risks could impact our overall business, they could have a more significant impact on our Global Data Center Business, where we have service level commitment obligations to certain of our customers. As a result, service interruptions or significant equipment damage at our data centers could result in difficulty maintaining service level commitments to these customers and potential claims related to such failures. Because our data centers are critical to many of our customers' businesses, service interruptions or significant equipment damage at our data centers could also result in lost profits or other indirect or consequential damages to our customers, which could in turn result in contractual liability to our customers or impair our ability to obtain and retain customers, which would adversely affect both our ability to generate revenue and our results of operations.

We also rely on third party telecommunications carriers to provide internet connectivity to our customers. These carriers may elect not to offer or to restrict their services within our data centers or may elect to discontinue such services. Furthermore, carriers may face business difficulties, which could affect their ability to provide telecommunications services or the quality of such services. If connectivity is interrupted or terminated, our financial condition and results of operations may be adversely affected. Events such as these may also impact our reputation as a data center provider which could adversely affect our results of operations.

Our Global Data Center Business is susceptible to regional costs of power, power shortages, planned or unplanned power outages and limitations on the availability of adequate power resources. We rely on third parties to provide power to our data centers. We are therefore subject to an inherent risk that such third parties may fail to deliver such power in adequate quantities or on a consistent basis. If the power delivered to our data centers is insufficient or interrupted, we would be required to provide power through the operation of our on-site generators, generally at a significantly higher operating cost. Additionally, global fluctuations in the price of power can increase the cost of energy, and we may be limited in our ability to, or may not always choose to, pass these increased costs on to our customers.

*We face additional risks in expanding our Global Data Center Business, including the significant amount of capital required.*

Expanding our Global Data Center Business requires significant capital commitments. In addition, we may be required to commit significant operational and financial resources in connection with the organic growth of our Global Data Center Business, generally 12 to 18 months in advance of securing customer contracts, and we may not have enough customer demand to support these data centers when they are built. We are currently experiencing rising construction costs which reflect the increase in cost of labor and raw materials, as well as supply chain and logistical challenges. Additional or unexpected disruptions to our supply chain or continued inflationary pressures could significantly affect the cost or timing of our planned expansion projects and interfere with our ability to meet commitments to customers who have contracted for space in new data centers under construction.

All construction related data center projects require us to carefully select and rely on the experience of one or more design firms, general contractors, and associated subcontractors during the design and construction process. Should a design firm, general contractor, significant subcontractor, or key supplier experience financial or operational problems during the design or construction process, fail to perform properly or at all, we could experience significant delays, increased costs to complete the project, and other negative impacts to the expected return on our committed capital.

There can be no assurance we will have sufficient customer demand to support the data centers we have acquired, or that we will not be adversely affected by the risks noted above under 'Significant costs or disruptions at our data centers could adversely affect our business, financial condition and results of operations', which could make it difficult for us to realize expected returns on our investments, if any.

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Our ALM business may be subject to additional risks, including those related to its client and geographic concentration, government trade policies, and macroeconomic conditions.

A significant portion of the revenue from our ALM business is derived from a limited number of clients and tied to cyclical projects involving the decommissioning and destruction of IT assets and the disposition of components of such assets to purchasers in concentrated geographies. Though we generally enter into long-term contracts with such clients, the volume of work we perform for specific clients may vary over the life of each contract due to various factors including changes in client behavior or macroeconomic conditions impacting the availability of new IT assets in the marketplace. There can be no assurance that we will be able to retain our current volumes, existing clients or that, if we were to lose one or more of our significant clients, we would be able to replace such clients with clients that generate a comparable amount of revenue. Further, many of the purchasers of the decommissioned IT asset components are geographically concentrated, particularly within mainland China. If governments enact trade policies that restrict the export of IT assets into China or other markets in which we sell decommissioned IT asset components, or increase the enforcement of such policies, then the revenue from the sale of these assets may be negatively impacted. Additionally, uncertain macroeconomic conditions, particularly within mainland China, may reduce our purchasers' demand for the IT asset components that we sell, thereby reducing our revenues and earnings.

Failure to comply with certain regulatory and contractual requirements under our United States Government contracts could adversely affect our revenues, operating results and financial position and reputation.

Having the United States Government as a customer subjects us to certain regulatory and contractual requirements. Failure to comply with these requirements could subject us to investigations, price reductions, up to treble damages, and civil penalties. Noncompliance with certain regulatory and contractual requirements could also result in us being suspended or debarred from future United States Government contracting. We may also face private derivative securities claims because of adverse government actions. Any of these outcomes could have a material adverse effect on our revenues, operating results, financial position and reputation.

We may be subject to certain costs and potential liabilities associated with the real estate required for our business.

As of December 31, 2022, we operated approximately 1,400 facilities worldwide, including approximately 600 in the United States, and face special risks attributable to the real estate we own or lease. Such risks include:

- acquisition and occupancy costs that make it difficult to meet anticipated margins and difficulty locating suitable facilities due to a relatively small number of available buildings having the desired characteristics in some real estate markets;
- increases in rent expense and property taxes as a result of the increasing demand for industrial real estate;
- uninsured losses or damage to our storage facilities due to an inability to obtain full coverage on a cost-effective basis for some casualties, such as fires, hurricanes and earthquakes, or any coverage for certain losses, such as losses from riots or terrorist activities;
- inability to use our real estate holdings effectively and costs associated with vacating or consolidating facilities if the demand for physical storage were to diminish;
- liability under environmental laws for the costs of investigation and cleanup of contaminated real estate owned or leased by us, whether or not (i) we know of, or were responsible for, the contamination, or (ii) the contamination occurred while we owned or leased the property; and
- costs of complying with fire protection and safety standards.

Some of our current and formerly owned or leased properties were previously used by entities other than us for industrial or other purposes, or were affected by waste generated from nearby properties, that involved the use, storage, generation and/or disposal of hazardous substances and wastes, including petroleum products. In some instances this prior use involved the operation of underground storage tanks or the presence of asbestos-containing materials. Where we are aware of environmental conditions that require remediation, we undertake appropriate activity, in accordance with all legal requirements. Although we have from time to time conducted limited environmental investigations and remedial activities at some of our former and current facilities, we have not undertaken an environmental review of all of our properties, including those we have acquired. We therefore may be potentially liable for environmental costs like those discussed above and may be unable to sell, rent, mortgage or use contaminated real estate owned or leased by us. Environmental conditions for which we might be liable may also exist at properties that we may acquire in the future. In addition, future regulatory action and environmental laws may impose costs for environmental compliance that do not exist today.

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# Part II

- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
- ITEM 6. [RESERVED.]
- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- ITEM 9A. CONTROLS AND PROCEDURES
- ITEM 9B. OTHER INFORMATION
- ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

# PART II

## ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock is traded on the NYSE under the symbol 'IRM'. The closing price of our common stock on the NYSE on February 17, 2023 was $52.60. As of February 17, 2023, there were 3,653 holders of record of our common stock. See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for additional information on dividends declared on our common stock.

## UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not sell any unregistered equity securities during the three months ended December 31, 2022, nor did we repurchase any shares of our common stock during the three months ended December 31, 2022.

## ITEM 6. [RESERVED.]

## ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

*The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto and the other financial and operating information included elsewhere in this Annual Report.*

This discussion contains 'forward-looking statements' as that term is defined in the Private Securities Litigation Reform Act of 1995 and in other securities laws. See 'Cautionary Note Regarding Forward-Looking Statements' on page iii of this Annual Report and 'Item 1A. Risk Factors' beginning on page 9 of this Annual Report.

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# OVERVIEW

## PROJECT MATTERHORN

In September 2022, we announced Project Matterhorn, our global program designed to accelerate the growth of our business. Project Matterhorn investments will focus on transforming our operating model to a global operating model. Project Matterhorn will focus on the formation of a solution-based sales approach that is designed to allow us to optimize our shared services and best practices to better serve our customers' needs. We will be investing to accelerate growth and to capture a greater share of the large, global addressable markets in which we operate. We expect to incur approximately $150.0 million in costs annually related to Project Matterhorn from 2023 through 2025. Costs are comprised of (1) restructuring costs, which include (i) site consolidation and other related exit costs, (ii) employee severance costs and (iii) certain professional fees associated with these activities, and (2) other transformation costs, which include professional fees such as project management costs and costs for third party consultants who are assisting in the enablement our growth initiatives. Total costs related to Project Matterhorn during the year ended December 31, 2022 were approximately $41.9 million and are included in Restructuring and other transformation in our Consolidated Statement of Operations. There were no Restructuring and other transformation costs related to Project Matterhorn for the year ended December 31, 2021.

## ACQUISITION OF ITRENEW

On January 25, 2022, in order to expand our ALM operations, we acquired an approximately 80% interest in Intercept Parent, Inc. ('ITRenew'). From January 25, 2022, we consolidate 100% of the revenues and expenses associated with this business. ITRenew is presented in Corporate and Other and primarily operates in the United States. See *Acquisitions* within the Liquidity and Capital Resources section below for additional information.

## PROJECT SUMMIT

In October 2019, we announced Project Summit, our global program designed to better position us for future growth and achievement of our strategic objectives. As of December 31, 2021, we completed Project Summit. As a result of the program, we simplified our global structure, rebalanced resources to focus on higher growth areas, realigned our management structure to create a more dynamic, agile organization, made investments to enhance the customer experience and leveraged new technology solutions that enabled us to modernize our service delivery model and more efficiently utilize our fleet, labor and real estate. Project Summit improved annual Adjusted EBITDA (as defined below) by approximately $375.0 million exiting 2021, of which approximately $50.0 million and $160.0 million were realized in 2022 and 2021, respectively.

The implementation of Project Summit resulted in total restructuring costs of approximately $450.0 million that primarily consisted of: (i) employee severance costs; (ii) internal costs associated with the development and implementation of Project Summit initiatives; (iii) professional fees, primarily related to third party consultants who assisted with the design and execution of various initiatives as well as project management activities and (iv) system implementation and data conversion costs. Total restructuring costs included in Restructuring and other transformation in our Consolidated Statements of Operations for the year ended December 31, 2021 were $206.4 million. As Project Summit was completed as of December 31, 2021, there were no restructuring costs for Project Summit for the year ended December 31, 2022.

## DIVESTMENTS AND DECONSOLIDATIONS

### OSG RECORDS MANAGEMENT (EUROPE) LIMITED DECONSOLIDATION

On March 24, 2022, as a result of our loss of control, we deconsolidated the businesses included in our acquisition of OSG Records Management (Europe) Limited, excluding Ukraine ('OSG Deconsolidation'). We recognized a loss of approximately $105.8 million associated with the deconsolidation to Other (income) expense, net in the first quarter of 2022 representing the difference between the net asset value prior to the deconsolidation and the subsequent remeasurement of the retained investment to a fair value of zero. These businesses represented approximately $44.9 million of total revenues and $7.2 million of total net income for the year ended December 31, 2021.

### INTELLECTUAL PROPERTY MANAGEMENT BUSINESS DIVESTMENT

On June 7, 2021, we sold our Intellectual Property Management ('IPM') business, which we predominantly operated in the United States, for total gross consideration of approximately $215.4 million (the 'IPM Divestment'). As a result of the IPM Divestment, we recorded a gain on sale of approximately $179.0 million to Other (income) expense, net during the year ended December 31, 2021, representing the excess of the fair value of the consideration received over the sum of the carrying value of the IPM business. Our IPM business represented approximately $14.2 million and $6.8 million of total revenues and total net income, respectively, for the year ended December 31, 2021.

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# GENERAL

# RESULTS OF OPERATIONS - KEY TRENDS

- We have experienced steady volume in our Global RIM Business segment, with organic storage rental revenue growth driven primarily by revenue management. We expect organic storage rental revenue growth to benefit from revenue management and volume to be relatively stable in the near term.
- Our organic service revenue growth is primarily due to increases in our service activity. We expect organic service revenue growth in 2023 to benefit from our new and existing digital offerings, as well as our traditional services.
- We expect continued total revenue and Adjusted EBITDA growth in 2023 as a result of our focus on new product and service offerings, innovation, customer solutions and market expansion in line with our Project Matterhorn objectives.
- We expect the impact of a stronger US dollar to create headwinds on reported total revenue and Adjusted EBITDA growth in 2023 against prior periods.

Our revenues consist of storage rental revenues as well as service revenues and are reflected net of sales and value-added taxes. Storage rental revenues, which are considered a key driver of financial performance for the storage and information management services industry, consist primarily of recurring periodic rental charges related to the storage of materials or data (generally on a per unit basis) that are typically retained by customers for many years and revenues associated with our data center operations. Service revenues include charges for related service activities, the most significant of which include: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refiling of removed records, customer termination and permanent withdrawal fees, project revenues and courier operations, consisting primarily of the pickup and delivery of records upon customer request; (2) destruction services, consisting primarily of (i) secure shredding of sensitive documents and the subsequent sale of shredded paper for recycling, the price of which can fluctuate from period to period, and (ii) the decommissioning, data erasure, processing and disposition or sale of IT hardware and component assets; (3) digital solutions, including the scanning, imaging and document conversion services of active and inactive records, and consulting services; and (4) data center services, including set up, monitoring and support of our customers' assets which are protected in our data center facilities, and special project services, including data center fitout. Our Records Management and Data Management service revenue growth is being negatively impacted by declining activity rates as stored records and tapes are becoming less active and more archival. While customers continue to store their records and tapes with us, they are less likely than they have been in the past to retrieve records for research and other purposes, thereby reducing service activity levels.

Cost of sales (excluding depreciation and amortization) consists primarily of labor, including wages and benefits for field personnel, facility occupancy costs (including rent and utilities), transportation expenses (including vehicle leases and fuel), other product cost of sales and other equipment costs and supplies. Of these, labor and facility occupancy costs are the most significant. Selling, general and administrative expenses consist primarily of wages and benefits for management, administrative, IT, sales, account management and marketing personnel, as well as expenses related to communications and data processing, travel, professional fees, bad debts, training, office equipment and supplies.

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Cost of sales (excluding depreciation and amortization) and Selling, general and administrative expenses for the year ended December 31, 2022 consists of the following:

# COST OF SALES

![img-0.jpeg](img-0.jpeg)

# SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

![img-1.jpeg](img-1.jpeg)

Trends in facility occupancy costs are impacted by:

- the total number of facilities we occupy;
- the mix of properties we own versus properties we lease;
- fluctuations in per square foot occupancy costs; and
- the levels of utilization of these properties.

Trends in total wages and benefits in dollars and as a percentage of total revenue are influenced by:

- changes in headcount and compensation levels;
- achievement of incentive compensation targets;
- workforce productivity; and
- variability in costs associated with medical insurance and workers' compensation.

The expansion of our international businesses has impacted the major cost of sales components and selling, general and administrative expenses.

- Our international operations are more labor intensive relative to revenue than our operations in North America and, therefore, labor costs are a higher percentage of international operational revenue.
- The overhead structure of our expanding international operations has generally not achieved the same level of overhead leverage as our North American operations, which may result in an increase in selling, general and administrative expenses as a percentage of revenue as our international operations become a larger percentage of our consolidated results.

Our depreciation and amortization charges result primarily from depreciation related to storage systems, which include racking structures, buildings, building and leasehold improvements and computer systems hardware and software. Amortization relates primarily to customer and supplier relationship intangible assets, contract fulfillment costs and data center lease-based intangible assets. Both depreciation and amortization are impacted by the timing of acquisitions.

Our consolidated revenues and expenses are subject to the net effect of foreign currency translation related to our operations outside the United States. It is difficult to predict the future fluctuations of foreign currency exchange rates and how those fluctuations will impact our Consolidated Statements of Operations. As a result of the relative size of our international operations, these fluctuations may be material on individual balances. Our revenues and expenses from our international operations are generally denominated in the local currency of the country in which they are derived or incurred. Therefore, the impact of currency fluctuations on our operating income and operating margin is partially mitigated. In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we compare the percentage change in the results from one period to another period in this report using constant currency presentation. The constant currency growth rates are calculated by translating the 2021 results at the 2022 average exchange rates. Constant currency growth rates are a non-GAAP measure.

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The following table is a comparison of underlying average exchange rates of the foreign currencies that had the most significant impact on our United States dollar-reported revenues and expenses:

|  | PERCENTAGE OF UNITED STATES DOLLAR- REPORTED REVENUE FOR THE YEAR ENDED DECEMBER 31, |  | AVERAGE EXCHANGE RATES FOR THE YEAR ENDED DECEMBER 31, |  | PERCENTAGE STRENGTHENING / (WEAKENING) OF FOREIGN CURRENCY |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2022 | 2021 |  |
| Australian dollar | 2.8% | 3.3% | $0.695 | $0.751 | (7.5)% |
| Brazilian real | 1.8% | 1.8% | $0.194 | $0.186 | 4.3% |
| British pound sterling | 6.5% | 6.6% | $1.237 | $1.376 | (10.1)% |
| Canadian dollar | 5.3% | 5.6% | $0.769 | $0.798 | (3.6)% |
| Euro | 7.0% | 7.7% | $1.054 | $1.183 | (10.9)% |

The percentage of United States dollar-reported revenues for all other foreign currencies was 12.7% and 14.6% for the years ended December 31, 2022 and 2021, respectively.

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# NON-GAAP MEASURES

## ADJUSTED EBITDA

Adjusted EBITDA is defined as net income (loss) before interest expense, net, provision (benefit) for income taxes, depreciation and amortization (inclusive of our share of Adjusted EBITDA from our unconsolidated joint ventures), and excluding certain items we do not believe to be indicative of our core operating results, specifically:

### EXCLUDED

- Acquisition and Integration Costs (as defined below)
- Restructuring and other transformation
- (Gain) loss on disposal/write-down of property, plant and equipment, net (including real estate)
- Other (income) expense, net
- Stock-based compensation expense

Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by total revenues. We also show Adjusted EBITDA and Adjusted EBITDA Margin for each of our reportable segments under "Results of Operations - Segment Analysis" below.

We use multiples of current or projected Adjusted EBITDA in conjunction with our discounted cash flow models to determine our estimated overall enterprise valuation and to evaluate acquisition targets. We believe Adjusted EBITDA and Adjusted EBITDA Margin provide our current and potential investors with relevant and useful information regarding our ability to generate cash flows to support business investment. These measures are an integral part of the internal reporting system we use to assess and evaluate the operating performance of our business.

Adjusted EBITDA excludes both interest expense, net and the provision (benefit) for income taxes. These expenses are associated with our capitalization and tax structures, which we do not consider when evaluating the operating profitability of our core operations. Adjusted EBITDA also does not include depreciation and amortization expenses, in order to eliminate the impact of capital investments, which we evaluate by comparing capital expenditures to incremental revenue generated and as a percentage of total revenues. Adjusted EBITDA and Adjusted EBITDA Margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of America ("GAAP"), such as operating income, net income (loss) or cash flows from operating activities (as determined in accordance with GAAP).

### RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA (IN THOUSANDS):

|  | YEAR ENDED DECEMBER 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Net Income (Loss) | $562,149 | $452,725 |
| Add/(Deduct): |  |  |
| Interest expense, net | 488,014 | 417,961 |
| Provision (benefit) for income taxes | 69,489 | 176,290 |
| Depreciation and amortization | 727,595 | 680,422 |
| Acquisition and Integration Costs (1) | 47,746 | 12,764 |
| Restructuring and other transformation | 41,933 | 206,426 |
| (Gain) loss on disposal/write-down of property, plant and equipment, net (including real estate) | (93,268) | (172,041) |
| Other (income) expense, net, excluding our share of losses (gains) from our unconsolidated joint ventures (2) | (83,268) | (205,746) |
| Stock-based compensation expense | 56,861 | 61,001 |
| Our share of Adjusted EBITDA reconciling items from our unconsolidated joint ventures | 9,806 | 4,897 |
| Adjusted EBITDA | $1,827,057 | $1,634,699 |

(1) Represent operating expenditures directly associated with the closing and integration activities of our business acquisitions that have closed, or are highly probable of closing, and include (i) advisory, legal and professional fees to complete business acquisitions and (ii) costs to integrate acquired businesses into our existing operations, including move, severance and system integration costs (collectively, "Acquisition and Integration Costs").

(2) Includes foreign currency transaction (gains) losses, net, debt extinguishment expense and other, net. See Note 2.v. to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding the components of Other (income) expense, net.

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## ADJUSTED EPS

Adjusted EPS is defined as reported earnings per share fully diluted from net income (loss) attributable to Iron Mountain Incorporated (inclusive of our share of adjusted losses (gains) from our unconsolidated joint ventures) and excluding certain items, specifically:

### EXCLUDED

- • Acquisition and Integration Costs
- • Restructuring and other transformation
- • Amortization related to the write-off of certain customer relationship intangible assets
- • (Gain) loss on disposal/write-down of property, plant and equipment, net (including real estate)
- • Other (income) expense, net
- • Stock-based compensation expense
- • Non-cash amortization related to derivative instruments
- • Tax impact of reconciling items and discrete tax items

We do not believe these excluded items to be indicative of our ongoing operating results, and they are not considered when we are forecasting our future results. We believe Adjusted EPS is of value to our current and potential investors when comparing our results from past, present and future periods.

### RECONCILIATION OF REPORTED EPS-FULLY DILUTED FROM NET INCOME (LOSS) ATTRIBUTABLE TO IRON MOUNTAIN INCORPORATED TO ADJUSTED EPS-FULLY DILUTED FROM NET INCOME (LOSS) ATTRIBUTABLE TO IRON MOUNTAIN INCORPORATED:

|  | YEAR ENDED DECEMBER 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Reported EPS-Fully Diluted from Net Income (Loss) Attributable to Iron Mountain Incorporated | $1.90 | $1.55 |
| Add/(Deduct): |  |  |
| Acquisition and Integration Costs | 0.16 | 0.04 |
| Restructuring and other transformation | 0.14 | 0.71 |
| Amortization related to the write-off of certain customer relationship intangible assets | 0.02 | - |
| (Gain) loss on disposal/write-down of property, plant and equipment, net (including real estate) | (0.31) | (0.59) |
| Other (income) expense, net, excluding our share of losses (gains) from our unconsolidated joint ventures | (0.28) | (0.71) |
| Stock-based compensation expense | 0.19 | 0.21 |
| Non-cash amortization related to derivative instruments (1) | 0.03 | - |
| Tax impact of reconciling items and discrete tax items (2) | (0.08) | 0.28 |
| Income (loss) Attributable to Noncontrolling Interests | 0.02 | 0.01 |
| Adjusted EPS-Fully Diluted from Net Income (Loss) Attributable to Iron Mountain Incorporated (3) | $1.79 | $1.51 |

$^{(1)}$ Relates to the amortization of the excluded component of our cross-currency swap agreements, which is recognized on a straight-line basis as a component of Interest expense, net in our Consolidated Statements of Operations.

$^{(2)}$ The difference between our effective tax rate and our structural tax rate (or adjusted effective tax rate) for the years ended December 31, 2022 and 2021 is primarily due to (i) the reconciling items above, which impact our reported net income (loss) before provision (benefit) for income taxes but have an insignificant impact on our reported provision (benefit) for income taxes and (ii) other discrete tax items. Our structural tax rate for purposes of the calculation of Adjusted EPS for the years ended December 31, 2022 and 2021 was 15.2% and 17.7%, respectively.

$^{(3)}$ Columns may not foot due to rounding.

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## FFO (NAREIT) AND FFO (NORMALIZED)

Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts as net income (loss) excluding depreciation on real estate assets, losses and gains on sale of real estate, net of tax, and amortization of data center leased-based intangibles ("FFO (Nareit)"). We calculate our FFO measures, including FFO (Nareit), adjusting for our share of reconciling items from our unconsolidated joint ventures. FFO (Nareit) does not give effect to real estate depreciation because these amounts are computed, under GAAP, to allocate the cost of a property over its useful life. Because values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, we believe that FFO (Nareit) provides investors with a clearer view of our operating performance. Our most directly comparable GAAP measure to FFO (Nareit) is net income (loss).

We modify FFO (Nareit), as is common among REITs seeking to provide financial measures that most meaningfully reflect their particular business ("FFO (Normalized)"). Our definition of FFO (Normalized) excludes certain items included in FFO (Nareit) that we believe are not indicative of our core operating results, specifically:

# EXCLUDED

- Acquisition and Integration Costs
- Restructuring and other transformation
- (Gain) loss on disposal/write-down of property, plant and equipment, net (excluding real estate)
- Other (income) expense, net
- Stock-based compensation expense
- Non-cash amortization related to derivative instruments
- Real estate financing lease depreciation
- Tax impact of reconciling items and discrete tax items

# RECONCILIATION OF NET INCOME (LOSS) TO FFO (NAREIT) AND FFO (NORMALIZED) (IN THOUSANDS):

|  | YEAR ENDED DECEMBER 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Net Income (Loss) | $562,149 | $452,725 |
| Add/(Deduct): |  |  |
| Real estate depreciation (1) | 307,895 | 307,717 |
| (Gain) loss on sale of real estate, net of tax (2) | (94,059) | (142,892) |
| Data center lease-based intangible assets amortization (3) | 16,955 | 42,333 |
| FFO (Nareit) | 792,940 | 659,883 |
| Add/(Deduct): |  |  |
| Acquisition and Integration Costs | 47,746 | 12,764 |
| Restructuring and other transformation | 41,933 | 206,426 |
| Loss (gain) on disposal/write-down of property, plant and equipment, net (excluding real estate) | 1,564 | (3,751) |
| Other (income) expense, net, excluding our share of losses (gains) from our unconsolidated joint ventures | (83,268) | (205,746) |
| Stock-based compensation expense | 56,861 | 61,001 |
| Non-cash amortization related to derivative instruments | 9,100 | - |
| Real estate financing lease depreciation | 13,197 | 14,635 |
| Tax impact of reconciling items and discrete tax items (4) | (25,190) | 56,822 |
| Our share of FFO (Normalized) reconciling items from our unconsolidated joint ventures | 2,874 | (38) |
| FFO (Normalized) | $857,757 | $801,996 |

(1) Includes depreciation expense related to owned real estate assets (land improvements, buildings, building improvements, leasehold improvements and racking), excluding depreciation related to real estate financing leases.

(2) Tax expense associated with the gain on sale of real estate for the years ended December 31, 2022 and 2021 was $0.8 million and $25.4 million, respectively.

(3) Includes amortization expense for Data Center In-Place Lease Intangible Assets and Data Center Tenant Relationship Intangible Assets as defined in Note 2.m. to Notes to Consolidated Financial Statements included in this Annual Report.

(4) Represents the tax impact of (i) the reconciling items above, which impacts our reported net income (loss) before provision (benefit) for income taxes but has an insignificant impact on our reported provision (benefit) for income taxes and (ii) other discrete tax items. Discrete tax items resulted in a (benefit) provision for income taxes of $(11.9) million and $19.2 million for the years ended December 31, 2022 and 2021, respectively.

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# CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates. The following should be read in conjunction with Note 2 to Notes to Consolidated Financial Statements included in this Annual Report, which provides a summary of our significant accounting policies. Our critical accounting estimates include the following, which are listed in no particular order:

## REVENUE RECOGNITION

Revenue is recognized when or as control of promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. See Note 2.s. to Notes to Consolidated Financial Statements included in this Annual Report for additional details on our revenue recognition policies. Revenue for all our lines of business, with the exception of storage revenues in our Global Data Center Business (which is subject to leasing guidance), is recognized in accordance with Accounting Standards Codification ('ASC') 606, *Revenue from Contracts with Customers* ('ASC 606'), the application of which requires that we make estimates and judgements that may affect the amount and timing of revenue we recognize.

We have determined that the majority of our contracts contain series performance obligations which qualify to be recognized under a practical expedient available in ASC 606 known as the 'right to invoice'. This determination allows variable consideration in such contracts to be allocated to and recognized in the period to which the consideration relates, which is typically the period in which it is billed, rather than requiring estimation of variable consideration at the inception of the contract. Revenue from product sales, the significant majority of which are shred paper and IT asset sales, is recognized at the point in time at which control transfers to the customer, which is generally upon shipment.

From time to time, we make payments to entities that are also customers under a revenue contract. These payments are primarily comprised of (i) Customer Inducements (as defined in Note 2.m. to Notes to Consolidated Financial Statements included in this Annual Report) and (ii) payments to customers of our ALM business under revenue sharing arrangements for the remarketing of the customer's disposed IT assets. Customer Inducements do not represent payments for a distinct service, and, as such, are treated as a reduction of the transaction price over periods ranging from one to 10 years. Payments for disposed IT assets are for a distinct good and, as such, are expensed as cost of goods sold in the period the revenue share is known or estimable.

Contract Fulfillment Costs (as defined in Note 2.s. to Notes to Consolidated Financial Statements included in this Annual Report) are generally amortized over a three year term, which we have determined is consistent with the transfer of the underlying performance obligations to which the assets relate. Different determinations on term length would result in differences in the amount and timing of amortization expense recognized.

## ACCOUNTING FOR ACQUISITIONS

Part of our growth strategy has been to acquire businesses. The purchase price of each acquisition is determined after due diligence of the target business, market research, strategic planning and the forecasting of expected future results and synergies. Estimated future results and expected synergies are subject to revisions as we integrate each acquisition and attempt to leverage resources.

Accounting for acquisitions of a business has resulted in the capitalization of the cost in excess of the estimated fair value of the net assets acquired in each of these acquisitions as goodwill. We estimate the fair values of the assets acquired in each acquisition as of the date of acquisition and these estimates are subject to adjustment based on the final assessments of the fair value of intangible assets (primarily customer and supplier relationship and data center lease-based intangible assets), property, plant and equipment (primarily building, building improvements, leasehold improvements, data center infrastructure and racking structures), operating leases, contingencies and income taxes (primarily deferred income taxes). See Note 3 to Notes to Consolidated Financial Statements included in this Annual Report for a description of recent acquisitions.

Determining the fair values of the net assets acquired requires management's judgment and often involves the use of assumptions with respect to future cash inflows and outflows, discount rates and market data, among other items. As it relates to our data center acquisitions, the fair values of the net assets acquired requires management's judgment and often involves the use of assumptions with respect to (i) certain economic costs (as described more fully in Note 2.m. to Notes to Consolidated Financial Statements included in this Annual Report) avoided by acquiring a data center operation with active tenants that would have otherwise been incurred if the data center operation was purchased vacant, (ii) market rental rates and (iii) expectations of lease renewals and extensions. Due to the inherent uncertainty of future events, actual values of net assets acquired could be different from our estimated fair values and could have a material impact on our financial statements.

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Of the net assets acquired in our acquisitions, the fair value of owned buildings, including building improvements, customer and supplier relationship and data center lease-based intangible assets, racking structures and operating leases are generally the most common and most significant. For significant acquisitions or acquisitions involving new markets or new products, we generally use third parties to assist us in estimating the fair value of owned buildings, including building improvements, customer and supplier relationship and lease-based intangible assets and market rental rates for acquired operating leases. For acquisitions that are not significant or do not involve new markets or new products, we generally use third parties to assist us in estimating the fair value of acquired owned buildings, including building improvements, and market rental rates for acquired operating leases. When not using third party appraisals of the fair value of acquired net assets, the fair value of acquired customer and supplier relationship intangible assets, above and below market in-place operating leases, and racking structures is determined internally. We use discounted cash flow models to determine the fair value of customer and supplier relationship intangible assets, which requires a significant amount of judgment by management, including estimating expected lives of the relationships, expected future cash flows and discount rates. The fair value of above and below market in-place operating leases is determined internally using a discounted cash flow model, utilizing the difference in cash flows between the contractual lease payments over the remaining lease term and estimated market rental rates on comparable assets at the time of the acquisition. The fair value of acquired racking structures is determined internally by taking current estimated replacement cost at the date of acquisition for the quantity of racking structures acquired, discounted to take into account the quality (e.g. age, material and type) of the racking structures. We determine the fair value of tangible data center assets using an estimated replacement cost at the date of acquisition, then discounting for age, economic and functional obsolescence.

The fair value of the Deferred Purchase Obligation associated with the ITRenew Transaction (each as defined below) was determined utilizing a Monte-Carlo simulation model and takes into account our forecasted projections as it relates to the underlying performance of the business. The Monte-Carlo simulation model incorporates assumptions as to expected gross profits over the applicable achievement period, including adjustments for the volatility of timing and amount of the associated revenue and costs, as well as discount rates that account for the risk of the underlying arrangement and overall market risks.

Our estimates of fair value are based upon assumptions believed to be reasonable at that time but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur, which may affect the accuracy of such assumptions. Total customer and supplier relationship intangible assets acquired in our 2022 acquisitions were approximately $491.3 million.

## IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS

### ASSETS SUBJECT TO DEPRECIATION OR AMORTIZATION

We review long-lived assets and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Examples of events or circumstances that may be indicative of impairment include, but are not limited to:

- A significant decrease in the market price of an asset;
- A significant change in the extent or manner in which a long-lived asset is being used or in its physical condition;
- A significant adverse change in legal factors or in the business climate that could affect the value of the asset;
- An accumulation of costs significantly greater than the amount originally expected for the acquisition or construction of an asset;
- A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset; and
- A current expectation that, more likely than not, an asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

If events indicate the carrying value of such assets may not be recoverable, recoverability of these assets is determined by comparing the sum of the forecasted undiscounted net cash flows of the operation to which the assets relate to their carrying amount. The operations are generally distinguished by the business segment and geographic region in which they operate. If it is determined that we are unable to recover the carrying amount of the assets, the long-lived assets are written down, on a pro rata basis, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.

We did not record impairment charges for any of our long-lived assets or finite-lived intangibles during the years ended December 31, 2022 and 2021.

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## GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS NOT SUBJECT TO AMORTIZATION

Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Other than goodwill, we currently have no intangible assets that have indefinite lives and which are not amortized. See Note 2.I. to Notes to Consolidated Financial Statements included in this Annual Report for additional details on our goodwill and other indefinite-lived intangible assets policies.

We have selected October 1 as our annual goodwill impairment review date. We have performed our annual goodwill impairment review as of October 1, 2022 and 2021. We concluded that as of October 1, 2022 and 2021, goodwill was not impaired.

Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2022 were as follows:

- North American Records and Information Management reporting unit ("North America RIM")
- Europe and South Africa Records and Information Management reporting unit ("ESA RIM")
- Middle East, North Africa and Turkey Records and Information Management reporting unit ("MENAT RIM")
- Latin America Records and Information Management reporting unit ("Latin America RIM")
- Asia, Australia and New Zealand Records and Information Management reporting unit ("APAC RIM")
- Entertainment Services
- Global Data Center
- Fine Arts
- ALM

See Note 2.I. to Notes to Consolidated Financial Statements included in this Annual Report for a description of our reporting units.

Based on our goodwill impairment analysis as of October 1, 2022, all of our reporting units had estimated fair values exceeding their carrying values by greater than 20%. Our Global Data Center and ALM reporting units had an estimated fair value that exceeded their respective carrying values by approximately 20.4% and 28.0%, respectively. The Global Data Center and ALM reporting units represented approximately $995.9 million, or 20.4%, of our consolidated goodwill balance at December 31, 2022. The following is a summary of the Global Data Center and ALM reporting units including the goodwill balance (in thousands), the percentage by which the fair value of the reporting units exceeded their carrying values and certain key assumptions used by us in determining the fair value of the reporting units as of October 1, 2022:

| REPORTING UNIT | GOODWILL BALANCE AT OCTOBER 1, 2022 | PERCENTAGE BY WHICH THE FAIR VALUE OF THE REPORTING UNIT EXCEEDED THE REPORTING UNIT CARRYING VALUE AS OF OCTOBER 1, 2022 | KEY ASSUMPTIONS IN THE FAIR VALUE OF REPORTING UNIT MEASUREMENT AS OF OCTOBER 1, 2022 |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  |  |  | DISCOUNT RATE | AVERAGE ANNUAL ADJUSTED EBITDA MARGIN USED IN DISCOUNTED CASH FLOW | AVERAGE ANNUAL CAPITAL EXPENDITURES AS PERCENTAGE OF REVENUE (1) | TERMINAL GROWTH RATE (2) |
| Global Data Center | $407,787 | 20.4% | 8.5% | 38.7% | 19.2% | 3.5% |
| ALM | 616,897 | 28.0% | 15.5% | 11.2% | 2.0% | 3.5% |

(1) For purposes of our goodwill impairment analysis, the term "capital expenditures" includes both growth investment and recurring capital expenditures. The capital expenditure assumptions in our goodwill impairment analysis for our Global Data Center reporting unit include significant growth investment in the next three years.

(2) Terminal growth rates are applied after year 10 of our discounted cash flow analysis.

The fair values of our reporting units are generally determined using a combined approach based on the present value of future cash flows (the "Discounted Cash Flow Model") and market multiples (the "Market Approach"). There are inherent uncertainties and judgments involved when determining the fair value of the reporting units for purposes of our annual goodwill impairment testing. The following includes supplemental information to the table above for the Global Data Center and ALM reporting units where the estimated fair value exceeded its carrying value by approximately 20.4% and 28.0%, respectively, as of October 1, 2022. The fair value of our Global Data Center reporting unit was determined using a combined Discounted Cash Flow Model and Market Approach, while the fair value of our ALM reporting unit was determined using a Discounted Cash Flow Model approach. The success of these businesses and the achievement of certain key assumptions developed by management and used in the Discounted Cash Flow Model are contingent upon various factors including, but not limited to, (i) achieving growth from existing customers, (ii) sales to new customers, (iii) increased market penetration and (iv) accurately timing the capital investments related to expansions.

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## GLOBAL DATA CENTER

Our Global Data Center Business operates in 21 data centers across 19 global markets, either directly or through unconsolidated joint ventures. We provide enterprise-class data center facilities and hyperscale-ready capacity to protect mission-critical assets and ensure the continued operation of our customers' IT infrastructure with secure, reliable and flexible data center options. Data centers are highly specialized and secure assets that serve as centralized repositories of server, storage and network equipment. They are capital intensive and designed to provide the space, power, cooling and network connectivity necessary to efficiently operate mission-critical IT equipment. The demand for data center infrastructure is being driven by many factors, but most importantly by significant growth in data as well as an increased demand for outsourcing. In order to attract and retain customers, as well as sustain growth in our existing and new markets, we must have the capability to tailor our facilities and invest capital to meet our customers' needs. Our estimate of fair value reflects the expected growth in each of our data center markets along with the corresponding capital investments required to meet demand.

## ALM

Our ALM business provides hyperscale and corporate IT infrastructure managers with services and solutions that enable the decommissioning, data erasure, processing and disposition or sale of IT hardware and component assets. ALM services are enabled by: (i) secure logistics, chain of custody and complete asset traceability practices; (ii) environmentally-responsible asset processing and recycling; and (iii) data sanitization and asset refurbishment services that enable value recovery through asset remarketing. The assumptions we used in determining fair value reflect the ongoing and anticipated expansion of these services, the timing of reopening of supply chains due to closures associated with border restrictions, particularly in mainland China, in connection with the COVID-19 pandemic, the maintenance and further development of the supplier relationships required to expand this business and meet customer demand and decommissioning schedules of our supplier's IT hardware and component assets, as well as associated market pricing and demand for such assets at that time. Our ALM business is substantially comprised of the ITRenew Transaction entered into during the first quarter of 2022; therefore, we would expect, at this time, that the fair value of this reporting unit would closely approximate its carrying value.

## KEY ASSUMPTIONS

Key factors that could reasonably be expected to have a negative impact on the estimated fair value of these reporting units and potentially result in impairment charges include, but are not limited to: (i) a deterioration in general economic conditions, (ii) significant adverse changes in regulatory factors or in the business climate, and (iii) adverse actions or assessment by regulators, all of which could result in adverse changes to the key assumptions used in valuing the reporting units. The inability to meet the assumptions used in the Discounted Cash Flow Model and Market Approach for each of the reporting units, or future adverse market conditions not currently known, could lead to a fair value that is less than the carrying value in any one of our reporting units.

The Discounted Cash Flow Model incorporates significant assumptions including future revenue growth rates, operating margins, discount rates and capital expenditures. The Market Approach requires us to make assumptions related to Adjusted EBITDA multiples. Changes in economic and operating conditions impacting these assumptions or changes in multiples could result in goodwill impairments in future periods. In conjunction with our annual goodwill impairment reviews, we reconcile the sum of the valuations of all of our reporting units to our market capitalization as of such dates.

Although we believe we have sufficient historical and projected information available to us to test for goodwill impairment, it is possible that actual results could differ from the estimates used in our impairment tests. Of the key assumptions that impact the goodwill impairment test, the expected future cash flows and discount rate are among the most sensitive and are considered to be critical assumptions, as changes to these estimates could have an effect on the estimated fair value of each of our reporting units. We have assessed the sensitivity of these assumptions on each of our reporting units as of October 1, 2022.

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| North America RIM, MENAT RIM, ESA RIM, Latin America RIM, APAC RIM, Fine Arts and Entertainment Services | We noted that, based on the estimated fair value of these reporting units determined as of October 1, 2022; a hypothetical decrease of 10% in the expected annual future cash flows of these reporting units, with all other assumptions unchanged, would have decreased the estimated fair value of these reporting units as of October 1, 2022 by a range of approximately 9.8% to 10.4% but would not, however, have resulted in the carrying value of any of these reporting units exceeding their estimated fair value; a hypothetical increase of 100 basis points in the discount rate, with all other assumptions unchanged, would have decreased the estimated fair value of these reporting units as of October 1, 2022 by a range of approximately 3.7% to 10.1% but would not, however, have resulted in the carrying value of any of these reporting units exceeding their estimated fair value. |
| --- | --- |
| Global Data Center | We noted that, as of October 1, 2022, the estimated fair value of the reporting unit: exceeds its carrying value by approximately 20.4%. Accordingly, any significant negative change in either the expected annual future cash flows of the reporting unit or the discount rate may result in the carrying value of the reporting unit exceeding its estimated fair value. |
| ALM | We noted that, as of October 1, 2022, the estimated fair value of the reporting unit: exceeds its carrying value by approximately 28.0%. Accordingly, any significant negative change in either the expected annual future cash flows of the reporting unit or the discount rate may result in the carrying value of the reporting unit exceeding its estimated fair value. |

At December 31, 2022, no factors were identified that would alter the conclusions of our October 1, 2022 goodwill impairment analysis. In making this assessment, we considered a number of factors including operating results, business plans, anticipated future cash flows, transactions and marketplace data. There are inherent uncertainties related to these factors and our judgment in applying them to the analysis of goodwill impairment.

## INCOME TAXES

As a REIT, we are generally permitted to deduct from our federal taxable income the dividends we pay to our stockholders. The income represented by such dividends is not subject to federal taxation at the entity level but is taxed, if at all, at the stockholder level. The income of our domestic TRSs, which hold our domestic operations that may not be REIT-compliant as currently operated and structured, is subject, as applicable, to federal and state corporate income tax. In addition, we and our subsidiaries continue to be subject to foreign income taxes in other jurisdictions in which we have business operations or a taxable presence, regardless of whether assets are held or operations are conducted through subsidiaries disregarded for federal income tax purposes or TRSs. We will also be subject to a separate corporate income tax on any gains recognized on the sale or disposition of any asset previously owned by a C corporation during a five-year period after the date we first owned the asset as a REIT asset that are attributable to 'built-in gains' with respect to that asset on that date. We will also be subject to a built-in gains tax on our depreciation recapture recognized into income as a result of accounting method changes in connection with our acquisition activities. If we fail to remain qualified for taxation as a REIT, we will be subject to federal income tax at regular corporate income tax rates. Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRS operations. In particular, while state income tax regimes often parallel the federal income tax regime for REITs, many states do not completely follow federal rules and some do not follow them at all. See Note 10 to Notes to Consolidated Financial Statements included in this Annual Report for additional details on our tax policies.

Accounting for income taxes requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax and financial reporting bases of assets and liabilities and for loss and credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities as a result of a change in tax rates is recognized in income in the period that the change is enacted. Valuation allowances are provided when recovery of deferred tax assets does not meet the more likely than not standard as defined in GAAP. Valuation allowances would be reversed as a reduction to the provision for income taxes if related deferred tax assets are deemed realizable based on changes in facts and circumstances relevant to the recoverability of the asset.

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At December 31, 2022, we have federal net operating loss carryforwards of $63.5 million, which can be carried forward indefinitely, of which $57.1 million is expected to be realized to reduce future federal taxable income. We have assets for foreign net operating losses of $81.9 million, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 56.0%. If actual results differ unfavorably from certain of our estimates used, we may not be able to realize all or part of our net deferred income tax assets and additional valuation allowances may be required. Although we believe our estimates are reasonable, no assurance can be given that our estimates reflected in the tax provisions and accruals will equal our actual results. These differences could have a material impact on our income tax provision and operating results in the period in which such determination is made.

The evaluation of an uncertain tax position is a two-step process. The first step is a recognition process whereby we determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

We are subject to income taxes in the United States and numerous foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which we have business operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. As of both December 31, 2022 and 2021, we had approximately $27.8 million of reserves related to uncertain tax positions. The reversal of these reserves will be recorded as a reduction of our income tax provision if sustained. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our estimates.

During 2021, as a result of the enactment of a tax law and the closing of various acquisitions, we concluded that it is no longer our intention to reinvest our undistributed earnings of our foreign TRSs indefinitely outside the United States. As a REIT, future repatriation of incremental undistributed earnings of our foreign subsidiaries will not be subject to federal or state income tax, with the exception of foreign withholding taxes. However, such future repatriations may require distributions to our stockholders in accordance with REIT distribution rules, and any such distribution may then be taxable, as appropriate, at the stockholder level. We expect to provide for foreign withholding taxes on the current and future earnings of all of our foreign subsidiaries as the result of such reassessment.

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## RESULTS OF OPERATIONS

The following information summarizes our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021. For a discussion of our results for the year ended December 31, 2021 compared to the year ended December 31, 2020, see 'Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations' included in Exhibit 99.1 of our Current Report on Form 8-K filed with the SEC on August 4, 2022.

### COMPARISON OF YEAR ENDED DECEMBER 31, 2022 TO YEAR ENDED DECEMBER 31, 2021

(IN THOUSANDS):

|  | YEAR ENDED DECEMBER 31, |  | DOLLAR CHANGE | PERCENTAGE CHANGE |
| --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  |  |
| Revenues | $5,103,574 | $4,491,531 | $612,043 | 13.6% |
| Operating Expenses | 4,053,703 | 3,637,359 | 416,344 | 11.4% |
| Operating Income | 1,049,871 | 854,172 | 195,699 | 22.9% |
| Other Expenses, Net | 487,722 | 401,447 | 86,275 | 21.5% |
| Net Income (Loss) | 562,149 | 452,725 | 109,424 | 24.2% |
| Net Income (Loss) Attributable to Noncontrolling Interests | 5,168 | 2,506 | 2,662 | 106.2% |
| Net Income (Loss) Attributable to Iron Mountain Incorporated | $556,981 | $450,219 | $106,762 | 23.7% |
| Adjusted EBITDA (1) | $1,827,057 | $1,634,699 | $192,358 | 11.8% |
| Adjusted EBITDA Margin (1) | 35.8% | 36.4% |  |  |

$^{(1)}$ See 'Non-GAAP Measures-Adjusted EBITDA' in this Annual Report for the definitions of Adjusted EBITDA and Adjusted EBITDA Margin, reconciliation of Adjusted EBITDA to Net Income (Loss) and a discussion of why we believe these non-GAAP measures provide relevant and useful information to our current and potential investors.

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# REVENUES

Total revenues consist of the following (in thousands):

|  | YEAR ENDED DECEMBER 31, |  | DOLLAR CHANGE | PERCENTAGE CHANGE |  | IMPACT OF ACQUISITIONS | ORGANIC GROWTH (2) |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | ACTUAL | CONSTANT CURRENCY (1) |  |  |
| Storage Rental | $3,034,023 | $2,870,119 | $163,904 | 5.7% | 8.8% | (0.1)% | 8.9% |
| Service | 2,069,551 | 1,621,412 | 448,139 | 27.6% | 31.7% | 14.1% | 17.6% |
| Total Revenues | $5,103,574 | $4,491,531 | $612,043 | 13.6% | 17.0% | 4.9% | 12.1% |

$^{(1)}$ Constant currency growth rate, which is a non-GAAP measure, is calculated by translating the 2021 results at the 2022 average exchange rates.

$^{(2)}$ Our organic revenue growth rate, which is a non-GAAP measure, represents the year-over-year growth rate of our revenues excluding the impact of business acquisitions, divestitures and foreign currency exchange rate fluctuations, but including the impact of acquisitions of customer relationships.

## TOTAL REVENUES

For the year ended December 31, 2022, the increase in revenue was driven by organic storage rental revenue growth, organic service revenue growth and our acquisition of ITRenew. Foreign currency exchange rate fluctuations decreased our reported revenue growth rate by 3.4% in the year ended December 31, 2022 compared to the prior year period.

## STORAGE RENTAL REVENUES AND SERVICE REVENUES

Primary factors influencing the change in reported storage rental revenue and reported service revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 include the following:

| STORAGE RENTAL REVENUES | organic storage rental revenue growth driven by increased volume in faster growing markets and our Global Data Center Business segment and revenue management; a 0.4% increase in total global volume excluding deconsolidations (also excluding acquisitions, total global volume increased 0.4%); and a decrease of $81.5 million due to foreign currency exchange rate fluctuations. |
| --- | --- |
| SERVICE REVENUES | organic service revenue growth reflecting increased service activity levels; an increase of $213.1 million due to our acquisition of ITRenew; and a decrease of $49.5 million due to foreign currency exchange rate fluctuations. |

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# OPERATING EXPENSES

## COST OF SALES

Cost of sales (excluding depreciation and amortization) consists of the following expenses (in thousands):

|  | YEAR ENDED DECEMBER 31, |  | DOLLAR CHANGE | PERCENTAGE CHANGE |  | % OF CONSOLIDATED REVENUES |  | PERCENTAGE CHANGE (FAVORABLE)/ UNFAVORABLE |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | ACTUAL | CONSTANT CURRENCY | 2022 | 2021 |  |
| Labor | $807,220 | $769,617 | $37,603 | 4.9% | 8.2% | 15.8% | 17.1% | (1.3)% |
| Facilities | 884,930 | 795,802 | 89,128 | 11.2% | 14.8% | 17.3% | 17.7% | (0.4)% |
| Transportation | 157,298 | 136,792 | 20,506 | 15.0% | 18.5% | 3.1% | 3.0% | 0.1% |
| Product Cost of Sales and Other | 339,672 | 185,018 | 154,654 | 83.6% | 91.0% | 6.7% | 4.1% | 2.6% |
| Total Cost of sales | $2,189,120 | $1,887,229 | $301,891 | 16.0% | 19.8% | 42.9% | 41.9% | 1.0% |

Primary factors influencing the change in reported Cost of sales for the year ended December 31, 2022 compared to the year ended December 31, 2021 include the following:

- an increase in labor costs driven by an increase in service activity and the impact of recent acquisitions, partially offset by benefits from Project Summit;
- an increase in facilities expenses driven by increases in rent expense, reflecting the impact from our sale-leaseback activity during the years ended December 31, 2021 and 2022, as well as increases in utilities and building maintenance costs;
- an increase in product cost of sales and other driven by the acquisition of ITRenew; and
- a decrease of $59.4 million due to foreign currency exchange rate fluctuations.

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## SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses consists of the following expenses (in thousands):

|  | YEAR ENDED DECEMBER 31, |  | DOLLAR CHANGE | PERCENTAGE CHANGE |  | % OF CONSOLIDATED REVENUES |  | PERCENTAGE CHANGE (FAVORABLE)/ UNFAVORABLE |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | ACTUAL | CONSTANT CURRENCY | 2022 | 2021 |  |
| General, Administrative and Other | $839,844 | $760,346 | $79,498 | 10.5% | 13.0% | 16.5% | 16.9% | (0.4)% |
| Sales, Marketing and Account Management | 300,733 | 262,213 | 38,520 | 14.7% | 18.1% | 5.9% | 5.8% | 0.1% |
| Total Selling, general and administrative expenses | $1,140,577 | $1,022,559 | $118,018 | 11.5% | 14.3% | 22.4% | 22.7% | (0.3)% |

Primary factors influencing the change in reported Selling, general and administrative expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021 include the following:

- an increase in general, administrative and other expenses, driven by recent acquisitions, higher wages and benefits, employee related costs, information technology costs and professional fees, partially offset by benefits from Project Summit;
- an increase in sales, marketing and account management expenses, driven by higher compensation expense, primarily reflecting increased wages and benefits and recent acquisitions; and
- a decrease of $24.5 million due to foreign currency exchange rate fluctuations.

## DEPRECIATION AND AMORTIZATION

Our depreciation and amortization charges result primarily from depreciation related to storage systems, which include racking structures, buildings, building and leasehold improvements and computer systems hardware and software. Amortization relates primarily to customer and supplier relationship intangible assets, contract fulfillment costs and data center lease-based intangible assets. Both depreciation and amortization are impacted by the timing of acquisitions.

Depreciation expense increased $13.9 million, or 3.0%, on a reported dollar basis for the year ended December 31, 2022 compared to the year ended December 31, 2021. See Note 2.i. to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding the useful lives over which our property, plant and equipment is depreciated.

Amortization expense increased $33.3 million, or 15.4%, on a reported dollar basis for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily related to the amortization of intangible assets acquired as part of the acquisition of ITRenew.

## ACQUISITION AND INTEGRATION COSTS

Acquisition and Integration Costs for the years ended December 31, 2022 and 2021 was approximately $47.7 million and $12.8 million, respectively.

## RESTRUCTURING AND OTHER TRANSFORMATION

Restructuring and other transformation costs for the years ended December 31, 2022 and 2021 were approximately $41.9 million and $206.4 million, respectively, and related to operating expenses associated with the implementation of Project Matterhorn in 2022 and Project Summit in 2021.

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## GAIN ON DISPOSAL/WRITE-DOWN OF PROPERTY, PLANT AND EQUIPMENT, NET

|  | YEAR ENDED DECEMBER 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Gain on disposal/write-down of property, plant and equipment, net | $93.3 million | $172.0 million |
| The gains primarily consist of: | Gains associated with sale and sale-leaseback transactions of approximately $94.5 million, of which (i) approximately $49.0 million relates to sale and sale-leaseback transactions of 11 facilities and parcels of land in the United States during the second quarter of 2022, (ii) approximately $17.0 million relates to sale-leaseback transactions of two facilities in the United States and one in Canada during the third quarter of 2022 and (iii) approximately $28.5 million relates to sale and sale-leaseback transactions of 12 facilities and one parcel of land in the United States and one facility in the United Kingdom during the fourth quarter of 2022. | Gains associated with sale and sale-leaseback transactions of approximately $164.0 million, of which (i) approximately $127.4 million relates to sale-leaseback transactions of five facilities in the United Kingdom during the second quarter of 2021 and (ii) approximately $36.6 million relates to sale and sale-leaseback transactions of nine facilities in the United States during the fourth quarter of 2021. |

## OTHER EXPENSES, NET

### INTEREST EXPENSE, NET

Interest expense, net increased $70.1 million to $488.0 million for the year ended December 31, 2022 from $418.0 million for the year ended December 31, 2021. The increase is primarily due to higher average debt outstanding during the year ended December 31, 2022 compared to the prior year period as well as an increase in our weighted average interest rate. Our weighted average interest rate, inclusive of the fees associated with our outstanding letters of credit, was 5.1% and 4.7% at December 31, 2022 and 2021, respectively. See Note 7 to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our indebtedness.

### OTHER (INCOME) EXPENSE, NET

Other (income) expense, net consists of the following (in thousands):

| DESCRIPTION | YEAR ENDED DECEMBER 31, |  | DOLLAR CHANGE |
| --- | --- | --- | --- |
|  | 2022 | 2021 |  |
| Foreign currency transaction (gains) losses, net | $(61,684) | $(15,753) | $(45,931) |
| Debt extinguishment expense | 671 | - | 671 |
| Other, net | (8,768) | (177,051) | 168,283 |
| Other (Income) Expense, Net | $(69,781) | $(192,804) | $123,023 |

### FOREIGN CURRENCY TRANSACTION (GAINS) LOSSES, NET

We recorded net foreign currency transaction gains of $61.7 million in the year ended December 31, 2022, based on period-end exchange rates. These gains resulted primarily from the impact of changes in the exchange rate of the Euro and the British pound sterling against the United States dollar compared to December 31, 2021 on our intercompany balances with and between certain of our subsidiaries.

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## OTHER, NET

Other, net for the year ended December 31, 2022 consists primarily of (i) a gain of approximately $93.6 million associated with the remeasurement of the Deferred Purchase Obligation (as defined below) to the present value of our best estimate of fair value and (ii) a gain of approximately $35.8 million associated with the Clutter Transaction (as defined below), partially offset by (iii) a loss of approximately $105.8 million associated with the OSG Deconsolidation (as defined in Note 4) and (iv) losses on our equity method investments. Other, net for the year ended December 31, 2021 consists primarily of (i) a gain of approximately $179.0 million associated with our IPM Divestment and (ii) a gain of approximately $20.3 million associated with the loss of control and related deconsolidation, as of May 18, 2021, of one of our wholly owned Netherlands subsidiaries, for which we had value-added tax liability exposure that was recorded in 2019, partially offset by (iii) losses on our equity method investments.

## PROVISION (BENEFIT) FOR INCOME TAXES

Our effective tax rates for the years ended December 31, 2022 and 2021 were 11.0% and 28.0%, respectively. Our effective tax rate is subject to variability in the future due to, among other items: (i) changes in the mix of income between our QRSs and our TRSs, as well as among the jurisdictions in which we operate; (ii) tax law changes; (iii) volatility in foreign exchange gains and losses; (iv) the timing of the establishment and reversal of tax reserves; (v) our ability to utilize net operating losses that we generate and (vi) the taxability or deductibility of significant transactions.

The primary reconciling items between the federal statutory tax rate of 21.0% and our overall effective tax rate were:

| YEAR ENDED DECEMBER 31, |  |
| --- | --- |
| 2022 | 2021 |
| The benefits derived from the dividends paid deduction of $82.6 million and the differences in the tax rates to which our foreign earnings are subject of $22.2 million. In addition, there were gains and losses recorded in Other (income) expense, net and Gain (loss) on disposal/write-down of property, plant and equipment, net during the period for which there were insignificant tax impacts. | The benefit derived from the dividends paid deduction of $8.2 million which was offset by (i) the impact of differences in the tax rates at which our foreign earnings are subject to, resulting in a tax provision of $9.9 million, and (ii) foreign withholding taxes of $23.7 million, which were either paid during the year or accrued, for the deferred tax liability for the U.S. tax impact of undistributed earnings of foreign TRSs that are no longer intended to be permanently reinvested outside the United States. |

As a REIT, we are entitled to a deduction for dividends paid, resulting in a substantial reduction of federal income tax expense. As a REIT, substantially all of our income tax expense will be incurred based on the earnings generated by our foreign subsidiaries and our domestic TRSs.

We are subject to income taxes in the United States and numerous foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which we have business operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our estimates.

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## NET INCOME (LOSS) AND ADJUSTED EBITDA

The following table reflects the effect of the foregoing factors on our net income (loss) and Adjusted EBITDA (in thousands):

|  | YEAR ENDED DECEMBER 31, |  | DOLLAR CHANGE | PERCENTAGE CHANGE |
| --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  |  |
| Net Income (Loss) | $562,149 | $452,725 | $109,424 | 24.2% |
| Net Income (Loss) as a percentage of Revenue | 11.0% | 10.1% |  |  |
| Adjusted EBITDA | $1,827,057 | $1,634,699 | $192,358 | 11.8% |
| Adjusted EBITDA Margin | 35.8% | 36.4% |  |  |

Adjusted EBITDA Margin for the year ended December 31, 2022 decreased by 60 basis points compared to the prior year, primarily reflecting a 150 basis point decrease from the acquisition of ITRenew, partially offset by improved service revenue trends, benefits from Project Summit, revenue management and ongoing cost containment measures.

↑ INCREASED BY $192.4 MILLION OR 11.8% Adjusted EBITDA

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# SEGMENT ANALYSIS

See the discussion of Business Segments under Item I and Note 11 to Notes to Consolidated Financial Statements, both included in this Annual Report, for a description of our reportable segments.

## GLOBAL RIM BUSINESS (IN THOUSANDS)

|  | YEAR ENDED DECEMBER 31, |  | DOLLAR CHANGE | PERCENTAGE CHANGE |  | IMPACT OF ACQUISITIONS | ORGANIC GROWTH |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | ACTUAL | CONSTANT CURRENCY |  |  |
| Storage Rental | $2,606,721 | $2,517,208 | $89,513 | 3.6% | 6.7% | (0.1)% | 6.8% |
| Service | 1,688,394 | 1,477,780 | 210,614 | 14.3% | 17.7% | - % | 17.7% |
| Segment Revenue | $4,295,115 | $3,994,988 | $300,127 | 7.5% | 10.8% | - % | 10.8% |
| Segment Adjusted EBITDA | $1,887,589 | $1,709,525 | $178,064 |  |  |  |  |
| Segment Adjusted EBITDA Margin | 43.9% | 42.8% |  |  |  |  |  |

### SEGMENT ANALYSIS: GLOBAL RIM BUSINESS (IN MILLIONS)

![img-0.jpeg](img-0.jpeg)

Primary factors influencing the change in revenue and Adjusted EBITDA Margin in our Global RIM Business segment for the year ended December 31, 2022 compared to the year ended December 31, 2021 include the following:

- organic storage rental revenue growth driven by revenue management and volume;
- a 0.4% increase in Global RIM volume excluding deconsolidations (also excluding acquisitions, Global RIM volume increased 0.3%);
- organic service revenue growth mainly driven by increases in our traditional service activity levels and growth in our Global Digital Solutions business;
- a decrease in revenue of $117.1 million due to foreign currency exchange rate fluctuations; and
- a 110 basis point increase in Adjusted EBITDA Margin primarily driven by revenue management, benefits from Project Summit and ongoing cost containment measures.

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# GLOBAL DATA CENTER BUSINESS (IN THOUSANDS)

|  | YEAR ENDED DECEMBER 31, |  | DOLLAR CHANGE | PERCENTAGE CHANGE |  | IMPACT OF ACQUISITIONS | ORGANIC GROWTH |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | ACTUAL | CONSTANT CURRENCY |  |  |
| Storage Rental | $372,208 | $289,592 | $82,616 | 28.5% | 31.5% | 3.6% | 27.9% |
| Service | 28,917 | 37,306 | (8,389) | (22.5)% | (16.5)% | 2.3% | (18.8)% |
| Segment Revenue | $401,125 | $326,898 | $74,227 | 22.7% | 26.2% | 3.6% | 22.6% |
| Segment Adjusted EBITDA | $175,622 | $137,349 | $38,273 |  |  |  |  |
| Segment Adjusted EBITDA Margin | 43.8% | 42.0% |  |  |  |  |  |

# SEGMENT ANALYSIS: GLOBAL DATA CENTER BUSINESS (IN MILLIONS)

![img-1.jpeg](img-1.jpeg)

Primary factors influencing the change in revenue and Adjusted EBITDA Margin in our Global Data Center Business segment for the year ended December 31, 2022 compared to the year ended December 31, 2021 include the following:

- organic storage rental revenue growth from leases that commenced during 2022 and in prior periods and higher pass-through power costs, partially offset by churn of 350 basis points;
- an increase in Adjusted EBITDA primarily driven by organic storage rental revenue growth; and
- a 180 basis point increase in Adjusted EBITDA Margin reflecting ongoing cost management and a decline in lower margin project revenue, partially offset by higher pass-through power costs.

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# CORPORATE AND OTHER (IN THOUSANDS)

|  | YEAR ENDED DECEMBER 31, |  | DOLLAR CHANGE | PERCENTAGE CHANGE |  | IMPACT OF ACQUISITIONS | ORGANIC GROWTH |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | ACTUAL | CONSTANT CURRENCY |  |  |
| Storage Rental | $55,094 | $63,319 | $(8,225) | (13.0)% | (11.9)% | (19.4)% | 7.5% |
| Service | 352,240 | 106,326 | 245,914 | 231.3% | 244.3% | 215.3% | 29.0% |
| Revenue | $407,334 | $169,645 | $237,689 | 140.1% | 147.1% | 125.0% | 22.1% |
| Adjusted EBITDA | $(236,154) | $(212,175) | $(23,979) |  |  |  |  |

Primary factors influencing the change in revenue and Adjusted EBITDA in Corporate and Other for the year ended December 31, 2022 compared to the year ended December 31, 2021 include the following:

- a decrease in reported storage revenue reflecting the IPM Divestment in the second quarter of 2021;
- reported service revenue for the year ended December 31, 2022 includes $213.1 million from the acquisition of ITRenew;
- organic service revenue growth mainly driven by increased service activity levels in our Fine Arts and ALM businesses; and
- a decrease in Adjusted EBITDA driven by higher compensation expense and employee related costs, professional fees and the impact of the IPM Divestment, partially offset by benefits from Project Summit, improved service revenue trends and the impact of the acquisition of ITRenew.

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# LIQUIDITY AND CAPITAL RESOURCES

## GENERAL

We expect to meet our short-term and long-term cash flow requirements through cash generated from operations, cash on hand, borrowings under our Credit Agreement (as defined below) and proceeds from monetizing a small portion of our total industrial real estate assets, as well as other potential financings (such as the issuance of debt). Our cash flow requirements, both in the near and long term, include, but are not limited to, capital expenditures, the repayment of outstanding debt, shareholder dividends, potential business acquisitions and normal business operation needs.

## PROJECT MATTERHORN

As disclosed above, in September 2022, we announced Project Matterhorn. We estimate that the implementation of Project Matterhorn will result in costs of approximately $150.0 million per year from 2023 through 2025. In 2022, we incurred approximately $41.9 million of Restructuring and other transformation costs related to Project Matterhorn which are comprised of (1) restructuring costs, which include (i) site consolidation and other related exit costs, (ii) employee severance costs and (iii) certain professional fees associated with these activities, and (2) other transformation costs, which include professional fees such as project management costs and costs for third party consultants who are assisting in the enablement our growth initiatives.

## CASH FLOWS

The following is a summary of our cash balances and cash flows (in thousands) as of and for the years ended December 31,

|  | 2022 | 2021 |
| --- | --- | --- |
| Cash Flows from Operating Activities | $927,695 | $758,902 |
| Cash Flows from Investing Activities | (1,660,423) | (473,313) |
| Cash Flows from Financing Activities | 639,207 | (220,806) |
| Cash and Cash Equivalents, End of Year | 141,797 | 255,828 |

### A. CASH FLOWS FROM OPERATING ACTIVITIES

For the year ended December 31, 2022, net cash flows provided by operating activities increased by $168.8 million compared to the prior year period primarily due to an increase in net income (excluding non-cash charges) of $289.6 million, partially offset by a decrease in cash from working capital of $120.8 million, primarily related to the timing of accounts receivable collections and timing of accrued expenses.

### B. CASH FLOWS FROM INVESTING ACTIVITIES

Our significant investing activities during the year ended December 31, 2022 are highlighted below:

- We paid cash for capital expenditures of $875.4 million. Additional details of our capital spending are included in the "Capital Expenditures" section below.
- We paid cash for acquisitions (net of cash acquired) of $803.7 million, primarily funded by the issuance of the 5% Notes due 2032 (as defined below).
- We received $170.4 million in proceeds from sales of property, plant and equipment, primarily related to proceeds from sale and sale-leaseback transactions. See the *Gain on disposal/write-down of property, plant and equipment, net* section of *Results of Operations* for further details.

### C. CASH FLOWS FROM FINANCING ACTIVITIES

Our significant financing activities for the year ended December 31, 2022 included:

- Net proceeds of $1,356.3 million primarily associated with borrowings under the Revolving Credit Facility and the Accounts Receivable Securitization Program.
- Payment of dividends in the amount of $724.4 million on our common stock.

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# CAPITAL EXPENDITURES

We present two categories of capital expenditures: (1) Growth Investment Capital Expenditures and (2) Recurring Capital Expenditures with the following sub-categories: (i) Data Center; (ii) Real Estate; (iii) Innovation and Other (for Growth Investment Capital Expenditures only); and (iv) Non-Real Estate (for Recurring Capital Expenditures only).

## GROWTH INVESTMENT CAPITAL EXPENDITURES:

- **Data Center:** Expenditures primarily related to investments in the construction of data center facilities (including the acquisition of land), as well as investments to drive revenue growth, expand capacity or achieve operational or cost efficiencies.
- **Real Estate:** Expenditures primarily related to investments in land, buildings, building improvements, leasehold improvements and racking structures to grow our revenues, extend the useful life of an asset or achieve operational or cost efficiencies.
- **Innovation and Other:** Discretionary capital expenditures for significant new products and services as well as computer hardware and software to support new products and services or to achieve operational or cost efficiencies. Restructuring and other transformation costs, including Project Matterhorn and Project Summit, and integration costs of acquisitions are also included.

## RECURRING CAPITAL EXPENDITURES:

- **Real Estate:** Expenditures primarily related to the replacement of components of real estate assets such as buildings, building improvements, leasehold improvements and racking structures.
- **Non-Real Estate:** Expenditures primarily related to the replacement of containers and shred bins, warehouse equipment, fixtures, computer hardware, or third-party or internally-developed software assets that support the maintenance of existing revenues or avoidance of an increase in costs.
- **Data Center:** Expenditures related to the replacement of equivalent components and overall maintenance of existing data center assets.

The following table presents our capital spend for 2022 and 2021 organized by the type of the spending as described above.

| NATURE OF CAPITAL SPEND (IN THOUSANDS) | 2022 | 2021 |
| --- | --- | --- |
| Growth Investment Capital Expenditures: |  |  |
| Data Center | $592,875 | $308,701 |
| Real Estate | 181,285 | 112,441 |
| Innovation and Other | 45,371 | 37,078 |
| Total Growth Investment Capital Expenditures | 819,531 | 458,220 |
| Recurring Capital Expenditures: |  |  |
| Real Estate | 60,354 | 67,032 |
| Non-Real Estate | 65,134 | 67,822 |
| Data Center | 17,008 | 13,347 |
| Total Recurring Capital Expenditures | 142,496 | 148,201 |
| Total Capital Spend (on accrual basis) | 962,027 | 606,421 |
| Net (decrease) increase in prepaid capital expenditures | (2,270) | 1,343 |
| Net (increase) decrease in accrued capital expenditures | (84,379) | 3,318 |
| Total Capital Spend (on cash basis) | $875,378 | $611,082 |

Excluding capital expenditures associated with potential future acquisitions, we expect total capital expenditures of approximately $1,000.0 million for the year ending December 31, 2023. Of this, we expect our capital expenditures for growth investment to be approximately $855.0 million, and our recurring capital expenditures to approach $145.0 million.

## DIVIDENDS

See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for information on dividends.

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## FINANCIAL INSTRUMENTS AND DEBT

Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds) and accounts receivable. The only significant concentration of liquid investments as of December 31, 2022 is related to cash and cash equivalents held in money market funds. See Note 2.g. to Notes to the Consolidated Financial Statements included in this Annual Report for information on our money market funds.

Long-term debt as of December 31, 2022 is as follows (in thousands):

|  | DECEMBER 31, 2022 |  |  |
| --- | --- | --- | --- |
|  | DEBT (INCLUSIVE OF DISCOUNT) | UNAMORTIZED DEFERRED FINANCING COSTS | CARRYING AMOUNT |
| Revolving Credit Facility | $1,072,200 | $(6,790) | $1,065,410 |
| Term Loan A | 240,625 | - | 240,625 |
| Term Loan B | 666,073 | (3,747) | 662,326 |
| Australian Dollar Term Loan | 202,641 | (633) | 202,008 |
| UK Bilateral Revolving Credit Facility | 169,361 | - | 169,361 |
| 3 7 / 8 % GBP Senior Notes due 2025 (the "GBP Notes") | 483,888 | (2,589) | 481,299 |
| 4 7 / 8 % Senior Notes due 2027 (the "4 7 / 8 % Notes due 2027") | 1,000,000 | (6,754) | 993,246 |
| 5 1 / 4 % Senior Notes due 2028 (the "5 1 / 4 % Notes due 2028") | 825,000 | (6,200) | 818,800 |
| 5% Senior Notes due 2028 (the "5% Notes due 2028") | 500,000 | (4,039) | 495,961 |
| 4 7 / 8 % Senior Notes due 2029 (the "4 7 / 8 % Notes due 2029") | 1,000,000 | (9,764) | 990,236 |
| 5 1 / 4 % Senior Notes due 2030 (the "5 1 / 4 % Notes due 2030") | 1,300,000 | (11,407) | 1,288,593 |
| 4 1 / 2 % Senior Notes due 2031 (the "4 1 / 2 % Notes") | 1,100,000 | (10,161) | 1,089,839 |
| 5% Senior Notes due 2032 (the "5% Notes due 2032") | 750,000 | (12,511) | 737,489 |
| 5 5 / 8 % Senior Notes due 2032 (the "5 5 / 8 % Notes") | 600,000 | (5,566) | 594,434 |
| Real Estate Mortgages, Financing Lease Liabilities and Other | 425,777 | (578) | 425,199 |
| Accounts Receivable Securitization Program | 314,700 | (531) | 314,169 |
| Total Long-term Debt | 10,650,265 | (81,270) | 10,568,995 |
| Less Current Portion | (87,546) | - | (87,546) |
| Long-term Debt, Net of Current Portion | $10,562,719 | $(81,270) | $10,481,449 |

See Note 7 to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our long-term debt.

## CREDIT AGREEMENT

Our credit agreement (the "Credit Agreement") consists of a revolving credit facility (the "Revolving Credit Facility"), a term loan A (the "Term Loan A") and a term loan B (the "Term Loan B"). On March 18, 2022, we entered into an amendment to the Credit Agreement which included the following changes:

- (i) extended the maturity date of the Revolving Credit Facility and the Term Loan A from June 3, 2023 to March 18, 2027;
- (ii) refinanced and increased the borrowing capacity that IMI and certain of its United States and foreign subsidiaries are able to borrow under the Revolving Credit Facility from $1,750.0 million to $2,250.0 million;
- (iii) refinanced the existing Term Loan A with a new $250.0 million Term Loan A; and
- (iv) increased the net total lease adjusted leverage ratio maximum allowable from 6.5x to 7.0x and removed the net secured lease adjusted leverage ratio requirement.

The Revolving Credit Facility enables IMI and certain of its subsidiaries to borrow in United States dollars and (subject to sublimits) Canadian dollars in an aggregate outstanding amount not to exceed $2,250.0 million. Additionally, the Credit Agreement permits us to incur incremental indebtedness thereunder by adding new term loans or revolving loans or by increasing the principal amount of any existing loans thereunder. The Revolving Credit Facility and the Term Loan A are scheduled to mature on March 18, 2027, at which point all obligations become due. On March 18, 2022, we borrowed the full amount of the Term Loan A of $250.0 million. The Term Loan A is to be paid in quarterly installments in an amount equal to $3.1 million per quarter. IMI's wholly owned subsidiary, Iron Mountain Information Management, LLC ("IMIM"), is the borrower under the Term Loan B, which has a principal amount of $700.0 million. The Term Loan B, which matures on January 2, 2026, was issued at 99.75% of par. Principal payments on the Term Loan B are to be paid in quarterly installments of $1.8 million.

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IMI and certain subsidiaries of IMI that represent the substantial majority of our operations in the United States, Canada and the United Kingdom guarantee all obligations under the Credit Agreement. The interest rate on borrowings under the Revolving Credit Facility varies depending on our choice of interest rate benchmark and currency options, plus an applicable margin, which varies based on our consolidated leverage ratio. The Term Loan A bears interest at the Secured Overnight Financing Rate ('SOFR') plus a credit spread adjustment of 0.1% plus 1.75%. The Term Loan B bears interest at the London Inter-Bank Offered Rate ('LIBOR') plus 1.75%. Additionally, the Credit Agreement requires the payment of a commitment fee on the unused portion of the Revolving Credit Facility, which fee ranges from 0.2% to 0.3% based on our consolidated leverage ratio.

As of December 31, 2022, we had $1,072.2 million, $240.6 million and $666.1 million outstanding under the Revolving Credit Facility, the Term Loan A and Term Loan B, respectively. At December 31, 2022, we had various outstanding letters of credit totaling $3.8 million under the Revolving Credit Facility. The remaining amount available for borrowing under the Revolving Credit Facility as of December 31, 2022, which is based on IMI's leverage ratio, the last 12 months' earnings before interest, taxes, depreciation and amortization and rent expense ('EBITDAR'), other adjustments as defined in the Credit Agreement and current external debt, was $1,174.0 million (which amount represents the maximum availability as of such date). Available borrowings under the Revolving Credit Facility are subject to compliance with our indenture covenants as discussed below. The weighted average interest rate in effect under the Revolving Credit Facility as of December 31, 2022 was 6.2%. The interest rates in effect under the Term Loan A and the Term Loan B as of December 31, 2022 were 6.2% and 4.8%, respectively.

## VIRGINIA CREDIT AGREEMENT

On October 31, 2022, Iron Mountain Data Centers Virginia 4/5 Subsidiary, LLC, a wholly owned subsidiary of Iron Mountain Data Centers Virginia 4/5 JV, LP, entered into a credit agreement (the 'Virginia Credit Agreement') in order to finance the construction of two data center facilities in Virginia. The Virginia Credit Agreement consists of a term loan and a letter of credit facility with the first borrowing under the term loan expected to occur in the third quarter of 2023. Borrowings under the Virginia Credit Agreement are guaranteed by Iron Mountain Data Centers Virginia 4/5 JV, LP, a special purpose vehicle, and not by IMI or any other subsidiary of IMI. We have the option to borrow, in the form of term loans, an aggregate outstanding amount not to exceed approximately $205.0 million. At December 31, 2022, we had approximately $6.4 million in outstanding letters of credit under the Virginia Credit Agreement. The Virginia Credit Agreement requires the payment of a commitment fee on any unused commitments at a rate of 0.4875%. We have the option to select between various base rates for any given borrowing under the Virginia Credit Agreement, and the interest rate and applicable margin on such borrowings vary depending on the chosen base rate. The Virginia Credit Agreement is scheduled to mature on October 31, 2025, at which point all obligations will become due. We have two one-year options that allow us to extend the maturity date beyond the October 31, 2025 expiration date, subject to the conditions specified in the Virginia Credit Agreement, including the lender's consent. As of December 31, 2022, we have no outstanding borrowings under the Virginia Credit Agreement.

## AUSTRALIAN DOLLAR TERM LOAN

Iron Mountain Australia Group Pty, Ltd. ('IM Australia'), a wholly owned subsidiary of IMI, has an AUD term loan with an original principal balance of 350.0 million Australian dollars ('AUD Term Loan'). All indebtedness associated with the AUD Term Loan was issued at 99% of par. Principal payments on the AUD Term Loan are to be paid in quarterly installments in an aggregate amount of 7.7 million Australian dollars per year.

On March 18, 2022, IM Australia amended its AUD Term Loan to (i) extend the maturity date from September 22, 2022 to September 30, 2026 and (ii) decrease the interest rate from BBSY (an Australian benchmark variable interest rate) plus 3.875% to BBSY plus 3.625%. The interest rate in effect under the AUD Term Loan was 6.9% as of December 31, 2022.

## UK BILATERAL REVOLVING CREDIT FACILITY

Iron Mountain (UK) PLC ('IM UK') and Iron Mountain (UK) Data Centre Limited (collectively, the 'UK Borrowers') have a 140.0 million British pounds sterling Revolving Credit Facility (the 'UK Bilateral Revolving Credit Facility') with Barclays Bank PLC. The maximum amount permitted to be borrowed under the UK Bilateral Revolving Credit Facility is 140.0 million British pounds sterling, which was fully drawn as of December 31, 2022. We have the option to request additional commitments of up to 125.0 million British pounds sterling, subject to the conditions specified in the UK Bilateral Revolving Credit Facility. The UK Bilateral Revolving Credit Facility is secured by certain properties in the United Kingdom. IMI and subsidiaries of IMI that represent the substantial majority of our operations in the United States and the United Kingdom guarantee all obligations under the UK Revolving Credit Bilateral Facility.

The UK Bilateral Revolving Credit Facility was previously scheduled to mature on September 24, 2023, at which point all obligations were to become due, with the option to extend the maturity date for an additional year, subject to the conditions specified in the UK Bilateral Revolving Credit Facility, including the lender's consent. On September 22, 2022, the UK Borrowers exercised their option to extend the maturity date from September 24, 2023 to September 24, 2024. The interest rate in effect under the UK Bilateral Revolving Credit Facility was 5.5% as of December 31, 2022.

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## ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM

We participate in an accounts receivable securitization program (the 'Accounts Receivable Securitization Program') involving several of our wholly owned subsidiaries and certain financial institutions. Under the Accounts Receivable Securitization Program, certain of our subsidiaries sell substantially all of their United States accounts receivable balances to our wholly owned special purpose entities, Iron Mountain Receivables QRS, LLC and Iron Mountain Receivables TRS, LLC (the 'Accounts Receivable Securitization Special Purpose Subsidiaries'). The Accounts Receivable Securitization Special Purpose Subsidiaries use the accounts receivable balances to collateralize loans obtained from certain financial institutions. The Accounts Receivable Securitization Special Purpose Subsidiaries are consolidated subsidiaries of IMI. IMIM retains the responsibility of servicing the accounts receivable balances pledged as collateral for the Accounts Receivable Securitization Program and IMI provides a performance guaranty. The maximum availability allowed is limited by eligible accounts receivable, as defined under the terms of the Accounts Receivable Securitization Program.

On June 29, 2022, we amended the Accounts Receivable Securitization Program to (i) increase the maximum borrowing capacity from $300.0 million to $325.0 million, with an option to increase the borrowing capacity to $400.0 million, (ii) change the interest rate under Accounts Receivable Securitization Program from LIBOR plus 1.0% to SOFR plus 0.95%, with a credit spread adjustment of 0.10% and (iii) extend the maturity date from July 1, 2023 to July 1, 2025, at which point all obligations become due. As of December 31, 2022, the maximum availability allowed and amount outstanding under the Accounts Receivable Securitization Program were $325.0 million and $314.7 million, respectively. Commitment fees at a rate of 35 basis points are charged on amounts made available but not borrowed under the Accounts Receivable Securitization Program.

## CASH POOLING

Certain of our subsidiaries participate in cash pooling arrangements (the 'Cash Pools') to help manage global liquidity requirements. We utilize the following Cash Pools: (i) two Cash Pools with Bank Mendes Gans, an independently operated wholly owned subsidiary of ING Group, one of which we use to manage global liquidity requirements for our QRSs and the other for our TRSs; (ii) two Cash Pools with JP Morgan Chase Bank, N.A. ('JPM'), one of which we use to manage liquidity requirements for our QRSs in the Asia Pacific region and the other for our TRSs in the Asia Pacific region; and (iii) two Cash Pools with JPM, which we entered into in the third quarter of 2022, one of which we use to manage liquidity requirements for our QRSs in the Europe, Middle East, and Africa regions and the other for our TRSs in the Europe, Middle East, and Africa regions.

Under each of the Cash Pools, cash deposited by participating subsidiaries with certain financial institutions is pledged as security against the debit balances of other participating subsidiaries with legal rights of offset provided to the financial institutions, and, therefore, such amounts are presented in our Consolidated Balance Sheets on a net basis. Each subsidiary receives interest on the cash balances held on deposit or pays interest on its debit balances based on an applicable rate as defined in the Cash Pools.

## LETTERS OF CREDIT

As of December 31, 2022, we had outstanding letters of credit totaling $39.8 million, of which $3.8 million reduce our borrowing capacity under the Revolving Credit Facility (as described above). The letters of credit expire at various dates between January 2023 and March 2025.

## DEBT COVENANTS

The Credit Agreement, our bond indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take other specified corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under the Credit Agreement, our bond indentures or other agreements governing our indebtedness. The Credit Agreement requires that we satisfy a net total lease adjusted leverage ratio and a fixed charge coverage ratio on a quarterly basis and our bond indentures require that, among other things, we satisfy a leverage ratio (not lease adjusted) or a fixed charge coverage ratio (not lease adjusted), as a condition to taking actions such as paying dividends and incurring indebtedness.

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The Credit Agreement uses EBITDAR-based calculations and the bond indentures use earnings before interest, taxes, depreciation and amortization ('EBITDA') based calculations as the primary measures of financial performance for purposes of calculating leverage and fixed charge coverage ratios. The EBITDAR- and EBITDA-based leverage calculations include our consolidated subsidiaries, other than those we have designated as 'Unrestricted Subsidiaries' as defined in the Credit Agreement and bond indentures. Generally, the Credit Agreement and the bond indentures use a trailing four fiscal quarter basis for purposes of the relevant calculations and require certain adjustments and exclusions for purposes of those calculations, which make the calculation of financial performance for purposes of those calculations under the Credit Agreement and bond indentures not directly comparable to Adjusted EBITDA as presented herein. These adjustments can be significant. For example, the calculation of financial performance under the Credit Agreement and certain of our bond indentures includes (subject to specified exceptions and caps) adjustments for non-cash charges and for expected benefits associated with (i) completed acquisitions, (ii) certain executed lease agreements associated with our data center business that have yet to commence and (iii) restructuring and other strategic initiatives. The calculation of financial performance under our other bond indentures includes, for example, adjustments for non-cash charges and for expected benefits associated with (i) completed acquisitions, and (ii) events that are extraordinary, unusual or non-recurring.

Our leverage and fixed charge coverage ratios under the Credit Agreement as of December 31, 2022 are as follows:

|  | DECEMBER 31, 2022 | MAXIMUM/MINIMUM ALLOWABLE |
| --- | --- | --- |
| Net total lease adjusted leverage ratio | 5.1 | Maximum allowable of 7.0 |
| Fixed charge coverage ratio | 2.4 | Minimum allowable of 1.5 |

We are in compliance with our leverage and fixed charge coverage ratios under the Credit Agreement, our bond indentures and other agreements governing our indebtedness as of December 31, 2022. Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our financial condition and liquidity.

Our ability to pay interest on or to refinance our indebtedness depends on our future performance, working capital levels and capital structure, which are subject to general economic, financial, competitive, legislative, regulatory and other factors which may be beyond our control. There can be no assurance that we will generate sufficient cash flow from our operations or that future financings will be available on acceptable terms or in amounts sufficient to enable us to service or refinance our indebtedness or to make necessary capital expenditures.

## DERIVATIVE INSTRUMENTS

### INTEREST RATE SWAP AGREEMENTS

In November 2022, we entered into a forward-starting interest rate swap agreement to limit our exposure to changes in interest rates on future borrowings under our Virginia Credit Agreement. The forward-starting interest rate swap agreement commences in July 2023 and expires in October 2025 (the 'October 2025 Interest Rate Swap Agreement'). The October 2025 Interest Rate Swap Agreement has an initial notional value of $4.8 million, which is contracted to increase in monthly increments beginning in August 2023 to June 2025 to a total notional value of $153.8 million. Under the October 2025 Interest Rate Swap Agreement, we will receive variable rate interest payments based upon SOFR, in exchange for the payment of a fixed interest rate as specified in the October 2025 Interest Rate Swap Agreement.

In March 2018, we entered into interest rate swap agreements to limit our exposure to changes in interest rates on a portion of our floating rate indebtedness. These swap agreements expired in March 2022. In July 2019, we entered into forward-starting interest rate swap agreements to limit our exposure to changes in interest rates on a portion of our floating rate indebtedness. These forward-starting interest rate swap agreements commenced in March 2022. As of December 31, 2022, we have $350.0 million in notional value outstanding on the interest rate swap agreements, which expire in March 2024 (the 'March 2024 Interest Rate Swap Agreements'). Under the March 2024 Interest Rate Swap Agreements, we receive variable rate interest payments associated with the notional amount of each interest rate swap, based upon one-month LIBOR, in exchange for the payment of fixed interest rates as specified in the March 2024 Interest Rate Swap Agreements.

We have designated each of the interest rate swap agreements described above as cash flow hedges.

### CROSS-CURRENCY SWAP AGREEMENTS

We enter into cross-currency swap agreements to hedge the variability of exchange rate impacts between the United States dollar and the Euro. The cross-currency swap agreements are designated as a hedge of net investment against certain of our Euro denominated subsidiaries and require an exchange of the notional amounts at maturity.

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In August 2019, we entered into cross-currency swap agreements whereby we notionally exchanged $110.0 million at an interest rate of 6.0% for approximately 99.1 million Euros at a weighted average interest rate of approximately 3.65%. These cross-currency swap agreements expire in August 2023. In October 2022, one of these cross-currency swap agreements was amended to increase the notional value exchanged from approximately 49.5 million Euros at an interest rate of 3.6% to approximately 55.5 million Euros at an interest rate of (9.5%), resulting in a total notional value exchanged of approximately 105.0 million Euros at a weighted average interest rate of approximately (3.3%).

In September 2020, we entered into cross-currency swap agreements whereby we notionally exchanged approximately $359.2 million at an interest rate of 4.5% for 300.0 million Euros at a weighted average interest rate of approximately 3.4%. These cross-currency swap agreements expire in February 2026. In May 2022, these cross-currency swaps were amended to increase the notional value exchanged to approximately 340.5 million Euros at a weighted average interest rate of approximately 1.2%. In October 2022, these cross-currency swaps were further amended to increase the notional value exchanged to approximately 362.1 million Euros at a weighted average interest rate of approximately 0.2%.

See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report for additional information on our derivative instruments.

## ACQUISITIONS

See Note 3 to Notes to Consolidated Financial Statements included in this Annual Report for information regarding our 2022 acquisitions.

### ITRENEW

On January 25, 2022, in order to expand our ALM operations, we acquired an approximately 80% interest in ITRenew, at an agreed upon purchase price of $725.0 million, subject to certain working capital adjustments at, and subsequent to, the closing (the 'ITRenew Transaction'). At closing, we paid approximately $748.8 million and acquired approximately $30.7 million of cash on hand, for a net purchase price of approximately $718.1 million for the ITRenew Transaction. The acquisition agreement provides us the option to purchase, and provides the shareholders of ITRenew the option to sell, the remaining approximately 20% interest in ITRenew as follows: (i) approximately 16% on or after the second anniversary of the ITRenew Transaction and (ii) approximately 4% on or after the third anniversary of the ITRenew Transaction (collectively, the 'Remaining Interests'). The total payments for the Remaining Interests, based on the achievement of certain targeted performance metrics, will be no less than $200.0 million and no more than $531.0 million (the 'Deferred Purchase Obligation'). From January 25, 2022, we consolidate 100% of the revenues and expenses associated with this business. The Deferred Purchase Obligation is reflected as a long-term liability in our Consolidated Balance Sheet at December 31, 2022, and, accordingly, we have not reflected any non-controlling interests associated with the ITRenew Transaction as the Remaining Interests have non-substantive equity interest rights. Subsequent increases or decreases in the fair value estimate of the Deferred Purchase Obligation are included as a component of Other (income) expense, net in our Consolidated Statements of Operations until the Deferred Purchase Obligation is settled or paid.

### XDATA PROPERTIES

On October 5, 2022, in order to further expand our data center operations in Europe, we completed the acquisition of XData Properties S.L.U., a data center colocation space and solutions provider with a data center in Spain, which we accounted for as an asset acquisition, for (i) cash consideration of 78.9 million Euros (or approximately $78.2 million, based upon the exchange rate between the Euro and the United States dollar on the closing date of this acquisition), subject to adjustments, and (ii) up to 10.0 million Euros (or approximately $9.9 million, based upon the exchange rate between the Euro and the United States dollar on the closing date of this acquisition) of additional consideration, payable based on the achievement of certain power connection milestones through December 2024.

### OTHER 2022 ACQUISITIONS

In addition to the transactions noted above, during the year ended December 31, 2022, in order to enhance our existing operations in Morocco and expand our fine arts operations in China - Hong Kong S.A.R. and North America, we completed the acquisition of a records management company, a fine arts company and the assets of a second fine arts company, for a total combined purchase price of approximately $11.6 million, including deferred purchase obligations, purchase price holdbacks and other deferred payments of approximately $4.6 million.

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## INVESTMENTS

See Note 5 to Notes to Consolidated Financial Statements included in this Annual Report for information regarding our joint ventures.

### CLUTTER JOINT VENTURE

In February 2022, the joint venture formed by MakeSpace Labs, Inc. and us (the 'MakeSpace JV') entered into an agreement with Clutter, Inc. ('Clutter') pursuant to which the equityholders of the MakeSpace JV contributed their ownership interests in the MakeSpace JV and Clutter's shareholders contributed their ownership interests in Clutter to create a newly formed venture (the 'Clutter JV'). In exchange for our 49.99% interest in the MakeSpace JV, we received an approximate 27% interest in the Clutter JV (the 'Clutter Transaction'). As a result of the Clutter Transaction, we recognized a gain related to our contributed interest in the MakeSpace JV of approximately $35.8 million, which was recorded to Other, net, a component of Other expense (income), net during the year ended December 31, 2022.

### WEB WERKS JOINT VENTURE

In April 2021, we closed on an agreement to form a joint venture (the 'Web Werks JV') with the shareholders of Web Werks India Private Limited, a colocation data center provider in India. In connection with the formation of the Web Werks JV, we made an initial investment of approximately 3,750.0 million Indian rupees (or approximately $50.1 million, based upon the exchange rate between the United States dollar and Indian rupee on the closing date of the initial investment) in exchange for a noncontrolling interest in the form of convertible preference shares in the Web Werks JV. In August 2022, we made an additional investment of approximately 3,750.0 million Indian rupees (or approximately $46.1 million, based upon the exchange rate between the United States dollar and Indian rupee on the date of the additional investment) in exchange for an additional interest in the form of convertible preference shares in the Web Werks JV (the 'Second Web Werks JV Investment'). Under the terms of the Web Werks JV shareholder agreement, we are required to make an additional investment of approximately 3,750.0 million Indian rupees by May 2023. Subsequent to the Second Web Werks JV Investment, the shareholders of Web Werks retained control of the financial and operating decisions of the Web Werks JV through their control of Web Werks JV's board of directors. As we do not control the board of directors or the key management decisions of the Web Werks JV, we account for our interest in the Web Werks JV as an equity method investment.

### JOINT VENTURE SUMMARY

The following joint ventures are accounted for as equity method investments and are presented as a component of Other within Other assets, net in our Consolidated Balance Sheet. The carrying values and equity interests in our joint ventures at December 31, 2022 are as follows (in thousands):

|  | DECEMBER 31, 2022 |  |
| --- | --- | --- |
|  | CARRYING VALUE | EQUITY INTEREST |
| Web Werks JV | $98,278 | 53.58% |
| Joint venture with AGC Equity Partners | 37,194 | 20.00% |
| Clutter JV | 54,172 | 26.73% |

### NET OPERATING LOSSES

At December 31, 2022, we have federal net operating loss carryforwards of $63.5 million which can be carried forward indefinitely, of which $57.1 million is expected to be realized to reduce future federal taxable income. We have assets for foreign net operating losses of $81.9 million, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 56.0%.

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# ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

## CREDIT RISK

Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds and time deposits) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2022 related to cash and cash equivalents held in money market funds. As per our risk management investment policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of 1% of the fund's total assets or in any one financial institution to a maximum of $75.0 million. As of December 31, 2022, our cash and cash equivalents balance was $141.8 million.

## INTEREST RATE RISK

Given the recurring nature of our revenues and the long-term nature of our asset base, we have the ability and the preference to use long-term, fixed interest rate debt to finance our business at attractive rates, thereby helping to preserve our long-term returns on invested capital. Occasionally, we may use interest rate swaps as a tool to maintain our targeted level of fixed rate debt.

As of December 31, 2022, we had $2,341.4 million of variable rate debt outstanding with a weighted average variable interest rate of approximately 5.8%, and $8,308.9 million of fixed rate debt outstanding. As of December 31, 2022, approximately 78% of our total debt outstanding was fixed. If the weighted average variable interest rate on our variable rate debt had increased by 1%, our net income for the year ended December 31, 2022 would have been reduced by approximately $17.3 million.

See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report for a discussion on our interest rate swaps and Note 7 to Notes to Consolidated Financial Statements included in this Annual Report for a discussion of our long-term indebtedness, including the fair values of such indebtedness as of December 31, 2022.

## CURRENCY RISK

Our international investments may be subject to risks and uncertainties related to fluctuations in currency valuation. Our reporting currency is the United States dollar. However, our international revenues and expenses are generated in the currencies of the countries in which we operate, primarily the British pound sterling, Euro, Canadian dollar, Brazilian real and the Australian dollar. Declines in the value of the local currencies in which we are paid relative to the United States dollar will cause revenues in United States dollar terms to decrease and dollar-denominated liabilities to increase in local currency. The impact of currency fluctuations on our earnings is mitigated by the fact that most operating and other expenses are also incurred and paid in the local currency. We also have several intercompany obligations with and between certain of our subsidiaries of differing functional currencies, resulting in foreign transaction gains or losses based on period-end exchange rates.

We have adopted and implemented a number of strategies to mitigate the risks associated with fluctuations in foreign currency exchange rates. One strategy is to finance certain of our international subsidiaries with debt that is denominated in local currencies, thereby providing a natural hedge. In determining the amount of any such financing, we take into account local tax considerations, among other factors. Another strategy we utilize is for IMI or IMIM to borrow in foreign currencies to hedge our intercompany financing activities. In addition, on occasion, we enter into currency swaps to temporarily or permanently hedge an overseas investment, such as a major acquisition, to lock in certain transaction economics. IM UK has financed a portion of its capital needs through the issuance of the GBP Notes and through borrowings under the UK Bilateral Revolving Credit Facility, each of which are denominated in British pounds sterling. Our Australian business has financed a portion of its capital needs through direct borrowings in Australian dollars under the AUD Term Loan. This creates a tax efficient natural currency hedge.

We have entered into cross-currency swap agreements to hedge the variability of exchange rate impacts between the United States dollar and the Euro. These cross-currency swap agreements are designated as a hedge of net investment against certain of our Euro denominated subsidiaries and require an exchange of the notional amounts at maturity. These cross-currency swap agreements are marked to market at the end of each reporting period, representing the fair values of the cross-currency swap agreements, and any changes in fair value are recognized as a component of Accumulated other comprehensive items, net. Unrealized gains are recognized as assets, which are recorded as either a component of (i) Prepaid expenses and other or (ii) Other within Other assets, net, while unrecognized losses are recognized as liabilities, which are recorded as either a component of (i) Accrued expenses and other current liabilities or (ii) Other long-term liabilities in our Consolidated Balance Sheets.

See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report for a discussion on our cross-currency swap agreements.

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The impact of devaluation or depreciating currency on an entity depends on the residual effect on the local economy and the ability of an entity to raise prices and/or reduce expenses. Due to our constantly changing currency exposure and the potential substantial volatility of currency exchange rates, we cannot predict the effect of exchange fluctuations on our business. The effect of a change in foreign currency exchange rates on our net investment in foreign subsidiaries is reflected in the 'Accumulated Other Comprehensive Items, net' component of equity. A 10% depreciation in year-end 2022 functional currencies, relative to the United States dollar, would result in a reduction in our equity of approximately $377.4 million.

## ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The information required by this item is included in Item 15(a) of this Annual Report.

## ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

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# ITEM 9A. CONTROLS AND PROCEDURES.

## DISCLOSURE CONTROLS AND PROCEDURES

The term 'disclosure controls and procedures' is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. These rules refer to the controls and other procedures of a company that are designed to ensure that information is recorded, processed, accumulated, summarized, communicated and reported to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding what is required to be disclosed by a company in the reports that it files under the Exchange Act. As of December 31, 2022 (the 'Evaluation Date'), we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, our chief executive officer and chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.

## MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management, with the participation of our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. Due to their inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in *Internal Control-Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2022.

The effectiveness of our internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included in this Annual Report.

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# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Iron Mountain Incorporated

## OPINION ON INTERNAL CONTROL OVER FINANCIAL REPORTING

We have audited the internal control over financial reporting of Iron Mountain Incorporated and subsidiaries (the 'Company') as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework (2013)* issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 23, 2023, expressed an unqualified opinion on those financial statements.

## BASIS FOR OPINION

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying *Management's Report on Internal Control over Financial Reporting*. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

## DEFINITION AND LIMITATIONS OF INTERNAL CONTROL OVER FINANCIAL REPORTING

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts February 23, 2023

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## CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management, with the participation of our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## ITEM 9B. OTHER INFORMATION.

Not Applicable.

## ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not Applicable.

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# Part III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

# PART III

## ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by Item 10 is incorporated by reference to our Proxy Statement.

## ITEM 11. EXECUTIVE COMPENSATION.

The information required by Item 11 is incorporated by reference to our Proxy Statement.

## ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by Item 12 is incorporated by reference to our Proxy Statement.

## ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by Item 13 is incorporated by reference to our Proxy Statement.

## ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by Item 14 is incorporated by reference to our Proxy Statement.

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# Part IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

# PART IV

## ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) *Financial Statements filed as part of this report:*

|  | PAGE |
| --- | --- |
| IRON MOUNTAIN INCORPORATED |  |
| Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) | 67 |
| Consolidated Balance Sheets, December 31, 2022 and 2021 | 70 |
| Consolidated Statements of Operations, Years Ended December 31, 2022, 2021 and 2020 | 71 |
| Consolidated Statements of Comprehensive Income (Loss), Years Ended December 31, 2022, 2021 and 2020 | 72 |
| Consolidated Statements of Equity, Years Ended December 31, 2022, 2021 and 2020 | 73 |
| Consolidated Statements of Cash Flows, Years Ended December 31, 2022, 2021 and 2020 | 74 |
| Notes to Consolidated Financial Statements | 75 |
| Financial Statement Schedule III-Schedule of Real Estate and Accumulated Depreciation | 129 |

(b) *Exhibits filed as part of this report: As listed in the Exhibit Index following the Financial Statement Schedule III-Schedule of Real Estate and Accumulated Depreciation.*

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# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Iron Mountain Incorporated

## OPINION ON THE FINANCIAL STATEMENTS

We have audited the accompanying consolidated balance sheets of Iron Mountain Incorporated and subsidiaries (the 'Company') as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the 'financial statements'). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

## BASIS FOR OPINION

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

## CRITICAL AUDIT MATTERS

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

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# GOODWILL - GLOBAL DATA CENTER AND ASSET LIFECYCLE MANAGEMENT REPORTING UNITS - REFER TO NOTE 2.L. TO THE FINANCIAL STATEMENTS

# CRITICAL AUDIT MATTER DESCRIPTION

The Company's evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company determined the fair value of the Global Data Center reporting unit using a combined approach based on the present value of future cash flows (the "Discounted Cash Flow Model") and market multiples (the "Market Approach"). The Company determined the fair value of the Asset Lifecycle Management reporting unit using the Discounted Cash Flow Model. The determination of the fair value using the Discounted Cash Flow Model requires management to make significant assumptions related to future revenue growth rates, operating margins, discount rates and capital expenditures. The determination of the fair value using the Market Approach requires management to make significant assumptions related to adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") multiples. Changes in economic and operating conditions impacting these assumptions or changes in multiples could result in goodwill impairments in future periods. The goodwill balances allocated to the Global Data Center and Asset Lifecycle Management reporting units were $408 million and $617 million, respectively, as of October 1, 2022 (goodwill impairment testing date). The fair value of both the Global Data Center and Asset Lifecycle Management reporting units exceeded its respective carrying value as of the measurement date and, therefore, no impairment was recognized.

The fair value exceeded the carrying value of the Global Data Center and Asset Lifecycle Management reporting units by less than 30%, accordingly, auditing the assumptions used in the goodwill impairment analysis for this reporting unit involved especially subjective judgment.

# HOW THE CRITICAL AUDIT MATTER WAS ADDRESSED IN THE AUDIT

Our audit procedures related to future revenue growth rates, operating margins and capital expenditures (collectively, the "Projected Cash Flows"), the selection of discount rates, and Adjusted EBITDA multiples for these reporting units included the following, among others:

- We evaluated management's ability to accurately forecast by comparing actual results to management's historical forecasts.
- We evaluated the reasonableness of management's Projected Cash Flows by comparing it to (1) historical results, (2) internal communications to management and the Board of Directors, and (3) forecasted information included in Company press releases and industry reports of the Company and companies in its peer group.
- With the assistance of our fair value specialists, we evaluated the discount rates, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.
- With the assistance of our fair value specialists, we evaluated the Adjusted EBITDA multiples, including testing the underlying source information and mathematical accuracy of the calculations and comparing the multiples selected by management to its guideline companies for the Global Data Center reporting unit.
- We tested the effectiveness of controls over the evaluation of goodwill for impairment, including those over the Projected Cash Flows and discount rates and, additionally, for the Global Data Center reporting unit, the selection of the Adjusted EBITDA multiples.

# ACQUISITIONS - ITRENEW BUSINESS - SUPPLIER RELATIONSHIP INTANGIBLE ASSET - REFER TO NOTE 3 TO THE FINANCIAL STATEMENTS

# CRITICAL AUDIT MATTER DESCRIPTION

The Company completed the acquisition of 80% of the ITRenew business for $725 million on January 25, 2022. The acquisition included a deferred purchase obligation for the Company to acquire the remaining ownership percentage based on achievement of certain performance targets. The Company determined that the fair value of the deferred purchase obligation was $275 million. The Company accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including a supplier relationship intangible asset of $472 million. Management estimated the fair value of the supplier relationship intangible asset using the multi-period excess earnings method, which is a specific discounted cash flow method. The fair value determination of the supplier relationship intangible asset required management to make significant estimates and assumptions related to future cash flows and the selection of the discount rate.

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We identified the supplier relationship intangible asset for ITRenew business as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of the asset. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management's forecasts of future cash flows and the selection of the discount rate for the supplier relationship intangible asset.

#### HOW THE CRITICAL AUDIT MATTER WAS ADDRESSED IN THE AUDIT

Our audit procedures related to the forecasts of future cash flows and the selection of the discount rate for the supplier relationship intangible asset included the following, among others:

- We assessed the reasonableness of management's forecasts of future cash flows by comparing the projections to historical results and certain external market information.
- With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by:
  - Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation.
  - Developing a range of independent estimates and comparing those to the discount rate selected by management.
- We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.
- We tested the effectiveness of controls over the valuation of the supplier relationship intangible asset, including management's controls over forecasts of future cash flows and selection of the discount rate.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 23, 2023

We have served as the Company's auditor since 2002.

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Part IV[{"box_2d": [56, 51, 867, 134], "label": "title", "caption": "## (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)"

|  | DECEMBER 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| ASSETS |  |  |
| Current Assets: |  |  |
| Cash and cash equivalents | $141,797 | $255,828 |
| Accounts receivable (less allowances of $54,143 and $62,009 as of December 31, 2022 and 2021, respectively) | 1,174,915 | 961,419 |
| Prepaid expenses and other | 230,433 | 224,020 |
| Total Current Assets | 1,547,145 | 1,441,267 |
| Property, plant and equipment | 9,025,765 | 8,647,303 |
| Less-Accumulated depreciation | (3,910,321) | (3,979,159) |
| Property, Plant and Equipment, net | 5,115,444 | 4,668,144 |
| Other Assets, Net: |  |  |
| Goodwill | 4,882,734 | 4,463,531 |
| Customer and supplier relationships and other intangible assets | 1,423,145 | 1,181,043 |
| Operating lease right-of-use assets | 2,583,704 | 2,314,422 |
| Other | 588,342 | 381,624 |
| Total Other Assets, Net | 9,477,925 | 8,340,620 |
| Total Assets | $16,140,514 | $14,450,031 |
| LIABILITIES AND EQUITY |  |  |
| Current Liabilities: |  |  |
| Current portion of long-term debt | $87,546 | $309,428 |
| Accounts payable | 469,198 | 369,145 |
| Accrued expenses and other current liabilities (includes current portion of operating lease liabilities) | 1,031,910 | 1,032,537 |
| Deferred revenue | 328,910 | 307,470 |
| Total Current Liabilities | 1,917,564 | 2,018,580 |
| Long-term Debt, net of current portion | 10,481,449 | 8,962,513 |
| Long-term Operating Lease Liabilities, net of current portion | 2,429,167 | 2,171,472 |
| Other Long-term Liabilities | 317,376 | 144,053 |
| Deferred Income Taxes | 263,005 | 223,934 |
| Commitments and Contingencies |  |  |
| Redeemable Noncontrolling Interests | 95,160 | 72,411 |
| Equity: |  |  |
| Iron Mountain Incorporated Stockholders' Equity: |  |  |
| Preferred stock (par value $0.01; authorized 10,000,000 shares; none issued and outstanding) | - | - |
| Common stock (par value $0.01; authorized 400,000,000 shares; issued and outstanding 290,830,296 shares and 289,757,061 shares as of December 31, 2022 and 2021, respectively) | 2,908 | 2,898 |
| Additional paid-in capital | 4,468,035 | 4,412,553 |
| (Distributions in excess of earnings) Earnings in excess of distributions | (3,392,272) | (3,221,152) |
| Accumulated other comprehensive items, net | (442,003) | (338,347) |
| Total Iron Mountain Incorporated Stockholders' Equity | 636,668 | 855,952 |
| Noncontrolling Interests | 125 | 1,116 |
| Total Equity | 636,793 | 857,068 |
| Total Liabilities and Equity | $16,140,514 | $14,450,031 |

The accompanying notes are an integral part of these consolidated financial statements.

70

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Part IV

## CONSOLIDATED STATEMENTS OF OPERATIONS

|  | YEAR ENDED DECEMBER 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Revenues: |  |  |  |
| Storage rental | $3,034,023 | $2,870,119 | $2,754,091 |
| Service | 2,069,551 | 1,621,412 | 1,393,179 |
| Total Revenues | 5,103,574 | 4,491,531 | 4,147,270 |
| Operating Expenses: |  |  |  |
| Cost of sales (excluding depreciation and amortization) | 2,189,120 | 1,887,229 | 1,757,342 |
| Selling, general and administrative | 1,140,577 | 1,022,559 | 949,215 |
| Depreciation and amortization | 727,595 | 680,422 | 652,069 |
| Acquisition and Integration Costs | 47,746 | 12,764 | - |
| Restructuring and other transformation | 41,933 | 206,426 | 194,396 |
| Intangible impairments | - | - | 23,000 |
| (Gain) Loss on disposal/write-down of property, plant and equipment, net | (93,268) | (172,041) | (363,537) |
| Total Operating Expenses | 4,053,703 | 3,637,359 | 3,212,485 |
| Operating Income (Loss) | 1,049,871 | 854,172 | 934,785 |
| Interest Expense, Net (includes Interest Income of $8,276, $7,341 and $8,312 in 2022, 2021 and 2020, respectively) | 488,014 | 417,961 | 418,535 |
| Other (Income) Expense, Net | (69,781) | (192,804) | 143,545 |
| Net Income (Loss) Before Provision (Benefit) for Income Taxes | 631,638 | 629,015 | 372,705 |
| Provision (Benefit) for Income Taxes | 69,489 | 176,290 | 29,609 |
| Net Income (Loss) | 562,149 | 452,725 | 343,096 |
| Less: Net Income (Loss) Attributable to Noncontrolling Interests | 5,168 | 2,506 | 403 |
| Net Income (Loss) Attributable to Iron Mountain Incorporated | $556,981 | $450,219 | $342,693 |
| Earnings (Losses) Per Share Attributable to Iron Mountain Incorporated: |  |  |  |
| Basic | $1.92 | $1.56 | $1.19 |
| Diluted | $1.90 | $1.55 | $1.19 |
| Weighted Average Common Shares Outstanding: |  |  |  |
| Basic | 290,812 | 289,457 | 288,183 |
| Diluted | 292,444 | 290,975 | 288,643 |

The accompanying notes are an integral part of these consolidated financial statements.

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Part IV

## CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (IN THOUSANDS)

|  | YEAR ENDED DECEMBER 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Net Income (Loss) | $562,149 | $452,725 | $343,096 |
| Other Comprehensive (Loss) Income: |  |  |  |
| Foreign Currency Translation Adjustment | (113,966) | (136,410) | 45,779 |
| Change in Fair Value of Derivative Instruments | 9,829 | 52,380 | (39,947) |
| Total Other Comprehensive (Loss) Income | (104,137) | (84,030) | 5,832 |
| Comprehensive Income (Loss) | 458,012 | 368,695 | 348,928 |
| Comprehensive Income (Loss) Attributable to Noncontrolling Interests | 4,687 | 930 | (453) |
| Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated | $453,325 | $367,765 | $349,381 |

The accompanying notes are an integral part of these consolidated financial statements.

72

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Part IV

# IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)

| IRON MOUNTAIN INCORPORATED STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | TOTAL | COMMON STOCK |  | ADDITIONAL PAID-IN CAPITAL | (DISTRIBUTIONS IN EXCESS OF EARNINGS) EARNINGS IN EXCESS OF DISTRIBUTIONS | ACCUMULATED OTHER COMPREHENSIVE ITEMS, NET | NONCONTROLLING INTERESTS | REDEEMABLE NONCONTROLLING INTERESTS |
|  |  | SHARES | AMOUNTS |  |  |  |  |  |
| Balance, December 31, 2019 | $1,464,227 | 287,299,645 | $2,873 | $4,298,566 | $(2,574,896) | $(262,581) | $265 | $67,682 |
| Issuance of shares under employee stock purchase plan and option plans and stock-based compensation | 37,995 | 973,404 | 10 | 37,985 | - | - | - | - |
| Changes in equity related to redeemable noncontrolling interests | 3,527 | - | - | 3,527 | - | - | - | (4,924) |
| Parent cash dividends declared | (718,136) | - | - | - | (718,136) | - | - | - |
| Foreign currency translation adjustment | 46,748 | - | - | - | - | 46,635 | 113 | (969) |
| Change in fair value of derivative instruments | (39,947) | - | - | - | - | (39,947) | - | - |
| Net income (loss) | 342,315 | - | - | - | 342,693 | - | (378) | 781 |
| Noncontrolling interests dividends | - | - | - | - | - | - | - | (2,765) |
| Balance, December 31, 2020 | 1,136,729 | 288,273,049 | 2,883 | 4,340,078 | (2,950,339) | (255,893) | - | 59,805 |
| Issuance of shares under employee stock purchase plan and option plans and stock-based compensation | 84,004 | 1,484,012 | 15 | 83,989 | - | - | - | - |
| Changes in equity related to redeemable noncontrolling interests | (11,514) | - | - | (11,514) | - | - | - | 11,682 |
| Parent cash dividends declared | (721,032) | - | - | - | (721,032) | - | - | - |
| Foreign currency translation adjustment | (135,165) | - | - | - | - | (134,834) | (331) | (1,245) |
| Change in fair value of derivative instruments | 52,380 | - | - | - | - | 52,380 | - | - |
| Net income (loss) | 450,355 | - | - | - | 450,219 | - | 136 | 2,370 |
| Noncontrolling interests equity contributions | - | - | - | - | - | - | - | 2,200 |
| Noncontrolling interests dividends | - | - | - | - | - | - | - | (2,450) |
| Purchase of noncontrolling interests | 1,311 | - | - | - | - | - | 1,311 | 2,567 |
| Redemption of noncontrolling interests | - | - | - | - | - | - | - | (2,518) |
| Balance, December 31, 2021 | 857,068 | 289,757,061 | 2,898 | 4,412,553 | (3,221,152) | (338,347) | 1,116 | 72,411 |
| Issuance and net settlement of shares under employee stock purchase plan and option plans and stock-based compensation | 52,012 | 1,073,235 | 10 | 52,002 | - | - | - | - |
| Changes in equity related to noncontrolling interests | 9,734 | - | - | 6,099 | - | - | 3,635 | (8,264) |
| Parent cash dividends declared | (728,101) | - | - | - | (728,101) | - | - | - |
| Foreign currency translation adjustment | (114,079) | - | - | - | - | (113,485) | (594) | 113 |
| Change in fair value of derivative instruments | 9,829 | - | - | - | - | 9,829 | - | - |
| Net income (loss) | 557,343 | - | - | - | 556,981 | - | 362 | 4,806 |
| Noncontrolling interests equity contributions and related costs | (2,494) | - | - | (2,619) | - | - | 125 | 29,047 |
| Noncontrolling interests dividends | - | - | - | - | - | - | - | (2,953) |
| Redemption of noncontrolling interests | (4,519) | - | - | - | - | - | (4,519) | - |
| Balance, December 31, 2022 | $636,793 | 290,830,296 | $2,908 | $4,468,035 | $(3,392,272) | $(442,003) | $125 | $95,160 |

The accompanying notes are an integral part of these consolidated financial statements.

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Part IV

## CONSOLIDATED STATEMENTS OF CASH FLOWS

|  | YEAR ENDED DECEMBER 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Cash Flows from Operating Activities: |  |  |  |
| Net income (loss) | $562,149 | $452,725 | $343,096 |
| Adjustments to reconcile net income (loss) to cash flows from operating activities: |  |  |  |
| Depreciation | 478,984 | 465,072 | 447,562 |
| Amortization (includes amortization of deferred financing costs and discounts of $18,044, $16,548 and $17,376 in 2022, 2021 and 2020, respectively) | 266,655 | 231,898 | 221,883 |
| Intangible impairments | - | - | 23,000 |
| Revenue reduction associated with amortization of customer inducements and data center above- and below-market leases | 8,119 | 8,852 | 9,878 |
| Stock-based compensation expense | 56,861 | 61,001 | 37,674 |
| (Benefit) provision for deferred income taxes | (55,920) | 28,703 | (12,986) |
| Loss on early extinguishment of debt | 671 | - | 68,300 |
| (Gain) loss on disposal/write-down of property, plant and equipment, net | (93,268) | (172,041) | (363,537) |
| Loss (gain) on divestments and deconsolidations | 105,825 | (178,983) | - |
| Gain associated with the remeasurement of the Deferred Purchase Obligation | (93,600) | - | - |
| Gain associated with Clutter Transaction | (35,821) | - | - |
| Foreign currency transactions and other, net | (20,524) | (6,656) | 78,437 |
| (Increase) decrease in assets | (224,641) | (174,206) | (15,443) |
| (Decrease) increase in liabilities | (27,795) | 42,537 | 149,793 |
| Cash Flows from Operating Activities | 927,695 | 758,902 | 987,657 |
| Cash Flows from Investing Activities: |  |  |  |
| Capital expenditures | (875,378) | (611,082) | (438,263) |
| Cash paid for acquisitions, net of cash acquired | (803,690) | (203,998) | (118,581) |
| Acquisition of customer relationships | (2,143) | (5,892) | (4,346) |
| Customer inducements | (6,062) | (7,402) | (10,644) |
| Contract fulfillment costs | (70,336) | (58,524) | (60,020) |
| Net proceeds from IPM Divestment | - | 213,878 | - |
| Investments in joint ventures and other investments | (73,233) | (78,623) | (18,250) |
| Proceeds from sales of property and equipment and other, net | 170,419 | 278,330 | 564,664 |
| Cash Flows from Investing Activities | (1,660,423) | (473,313) | (85,440) |
| Cash Flows from Financing Activities: |  |  |  |
| Repayment of revolving credit facility, term loan facilities and other debt | (11,593,452) | (5,164,483) | (8,604,394) |
| Proceeds from revolving credit facility, term loan facilities and other debt | 12,949,766 | 4,972,214 | 7,939,458 |
| Early redemption of senior subordinated and senior notes, including call premiums | - | - | (2,942,554) |
| Net proceeds from sales of senior notes | - | 737,812 | 3,465,000 |
| Debt financing and equity contribution from noncontrolling interests | 29,172 | - | - |
| Debt repayment and equity distribution to noncontrolling interests | (2,953) | (2,450) | (2,765) |
| Repurchase of noncontrolling interest | (4,519) | (75,000) | - |
| Parent cash dividends | (724,388) | (718,340) | (716,290) |
| Net (payments) proceeds associated with employee stock-based awards | (4,849) | 25,860 | 321 |
| Other, net | (9,570) | 3,581 | (25,475) |
| Cash Flows from Financing Activities | 639,207 | (220,806) | (886,699) |
| Effect of Exchange Rates on Cash and Cash Equivalents | (20,510) | (14,018) | (4,010) |
| (Decrease) increase in Cash and Cash Equivalents | (114,031) | 50,765 | 11,508 |
| Cash and Cash Equivalents, Beginning of Year | 255,828 | 205,063 | 193,555 |
| Cash and Cash Equivalents, End of Year | $141,797 | $255,828 | $205,063 |
| Supplemental Information: |  |  |  |
| Cash Paid for Interest | $482,673 | $428,111 | $390,332 |
| Cash Paid for Income Taxes, Net | $99,631 | $130,292 | $43,468 |
| Non-Cash Investing and Financing Activities: |  |  |  |
| Financing Leases | $49,836 | $50,552 | $55,782 |
| Accrued Capital Expenditures | $172,589 | $88,210 | $91,528 |
| Deferred Purchase Obligations | $193,033 | $ - | $ - |
| Dividends Payable | $194,272 | $190,559 | $187,867 |

The accompanying notes are an integral part of these consolidated financial statements.

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Part IV

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**DECEMBER 31, 2022**

**(In thousands, except share and per share data)**

### 1. NATURE OF BUSINESS

The accompanying financial statements represent the consolidated accounts of Iron Mountain Incorporated, a Delaware corporation ('IMI'), and its subsidiaries ('we' or 'us').

We help organizations around the world protect their information, reduce storage costs, comply with regulations, facilitate corporate disaster recovery, and better use their information and information technology ('IT') infrastructure for business advantages, regardless of its format, location or life cycle stage. We do this by storing physical records and data backup media, offering information management solutions, and providing data center space for enterprise-class colocation and hyperscale deployments. We offer comprehensive records and information management services and data management services, along with the expertise and experience to address complex storage and information management challenges such as rising storage rental costs, legal and regulatory compliance, and disaster recovery requirements. We provide secure and reliable data center facilities to protect digital information and ensure the continued operation of our customers' IT infrastructure, with reliable and flexible deployment options. Our asset lifecycle management ('ALM') business allows us to provide end-to-end asset lifecycle services for hyperscale, corporate data center and corporate end-user device assets.

In September 2022, we announced a global program designed to accelerate the growth of our business ('Project Matterhorn'). Project Matterhorn will focus on the formation of a solution-based sales approach that is designed to allow us to optimize our shared services and best practices to better serve our customers' needs. We will be investing to accelerate growth and to capture a greater share of the large, global addressable markets in which we operate. See Note 13.

We have been organized and have operated as a real estate investment trust for United States federal income tax purposes ('REIT') beginning with our taxable year ended December 31, 2014.

### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

#### A. PRINCIPLES OF CONSOLIDATION

The accompanying financial statements reflect our financial position, results of operations, comprehensive income (loss), equity and cash flows on a consolidated basis. The accompanying financial statements include the results of those entities over which we have a controlling financial interest and we are deemed to be the primary beneficiary. All intercompany transactions and account balances have been eliminated.

#### B. USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ('GAAP') requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates.

#### C. FOREIGN CURRENCY

Local currencies are the functional currencies for our operations outside the United States, with the exception of certain foreign holding companies, whose functional currency is the United States dollar. In those instances where the local currency is the functional currency, assets and liabilities are translated at period-end exchange rates, and revenues and expenses are translated at average exchange rates for the applicable period. See Note 2.r.

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Part IV

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

**DECEMBER 31, 2022**

**(In thousands, except share and per share data)**

### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

#### D. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand and cash invested in highly liquid short-term securities, which have remaining maturities at the date of purchase of less than 90 days. Cash and cash equivalents are carried at cost, which approximates fair value.

#### E. ALLOWANCE FOR DOUBTFUL ACCOUNTS AND CREDIT MEMO RESERVES

We maintain an allowance for doubtful accounts and a credit memo reserve for estimated losses resulting from the potential inability of our customers to make required payments and potential disputes regarding billing and service issues. We calculate and monitor our allowance considering future potential economic and macroeconomic conditions and reasonable and supportable forecasts for expected future collectability of our outstanding receivables, in addition to considering our past loss experience, current and prior trends in our aged receivables and credit memo activity. Our considerations when calculating our allowance include, but are not limited to, the following: the location of our businesses, the composition of our customer base, our product and service lines, potential future economic unrest, and potential future macroeconomic factors, including natural disasters. Continued adjustments will be made should there be any material change to reasonable and supportable forecasts that may impact our likelihood of collection, as it becomes evident. Our highly diverse global customer base, with no single customer accounting for more than approximately 1% of revenue during the years ended December 31, 2022, 2021 and 2020, limits our exposure to concentration of credit risk. Additionally, we write off uncollectible balances as circumstances warrant, generally no later than one year past due.

The rollforward of the allowance for doubtful accounts and credit memo reserves is as follows:

| YEAR ENDED DECEMBER 31, | BALANCE AT BEGINNING OF THE YEAR | CREDIT MEMOS CHARGED TO REVENUE | ALLOWANCE FOR BAD DEBTS CHARGED TO EXPENSE | DEDUCTIONS AND OTHER (1) | BALANCE AT END OF THE YEAR |
| --- | --- | --- | --- | --- | --- |
| 2022 | $62,009 | $62,891 | $13,666 | $(84,423) | $54,143 |
| 2021 | 56,981 | 47,931 | 26,896 | (69,799) | 62,009 |
| 2020 | 42,856 | 55,118 | 34,411 | (75,404) | 56,981 |

$^{(1)}$ Primarily consists of the issuance of credit memos, the write-off of accounts receivable and the impact associated with currency translation adjustments.

#### F. INVENTORY

Inventory is stated at the lower of cost or net realizable value, based on a first-in, first-out methodology. Our inventory primarily consists of IT-related assets including memory, central processing units, hard drives, adaptors and networking. All of our inventory is considered finished goods. Inventory is included as a component of Prepaid expenses and other in our Consolidated Balance Sheets. At December 31, 2022, we have inventory of approximately $11,726, net of related reserves for obsolete, excess and slow-moving inventory, related to our ALM business. We had no inventory as of December 31, 2021.

#### G. CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds and time deposits) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2022 and 2021 related to cash and cash equivalents held in money market funds. As per our risk management investment policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of 1% of the fund's total assets or in any one financial institution to a maximum of $75,000. See Note 2.p.

76

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Part IV

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

**DECEMBER 31, 2022**

**(In thousands, except share and per share data)**

### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

#### H. PREPAID EXPENSES AND ACCRUED EXPENSES

Prepaid expenses totaled $114,130 and $109,478 as of December 31, 2022 and 2021, respectively. There were no other items greater than 5% of total current assets included within Prepaid expenses and other as of December 31, 2022 and 2021.

Accrued expenses and other current liabilities with items greater than 5% of total current liabilities are shown separately and consist of the following:

| DESCRIPTION | DECEMBER 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Interest | $128,272 | $124,764 |
| Dividends | 194,272 | 190,559 |
| Operating lease liabilities | 288,738 | 259,597 |
| Other | 420,628 | 457,617 |
| Accrued expenses and other current liabilities | $1,031,910 | $1,032,537 |

#### I. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost and depreciated using the straight-line method with the following useful lives (in years):

| DESCRIPTION | RANGE |
| --- | --- |
| Buildings and building improvements | 5 to 40 |
| Leasehold improvements | 5 to 10 or life of the lease (whichever is shorter) |
| Racking | 1 to 20 or life of the lease (whichever is shorter) |
| Warehouse equipment/vehicles | 1 to 10 |
| Furniture and fixtures | 1 to 10 |
| Computer hardware and software | 2 to 5 |

Property, plant and equipment (including financing leases in the respective categories), at cost, consist of the following:

| DESCRIPTION | DECEMBER 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Land | $486,715 | $372,411 |
| Buildings and building improvements | 3,336,778 | 3,391,143 |
| Leasehold improvements | 1,079,419 | 1,054,757 |
| Racking | 2,058,054 | 2,075,473 |
| Warehouse equipment/vehicles | 493,128 | 494,464 |
| Furniture and fixtures | 49,610 | 50,692 |
| Computer hardware and software | 585,792 | 823,649 |
| Construction in progress | 936,269 | 384,714 |
| Property, plant and equipment | $9,025,765 | $8,647,303 |

Minor maintenance costs are expensed as incurred. Major improvements which extend the life, increase the capacity or improve the safety or the efficiency of property owned are capitalized and depreciated. Major improvements to leased buildings are capitalized as leasehold improvements and depreciated.

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77

Part IV

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

**DECEMBER 31, 2022**

**(In thousands, except share and per share data)**

### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

#### CAPITALIZED INTEREST

We capitalize interest expense during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the assets. During the years ended December 31, 2022, 2021 and 2020, capitalized interest is as follows:

|  | YEAR ENDED DECEMBER 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Capitalized interest | $14,078 | $12,673 | $14,321 |

#### INTERNAL USE SOFTWARE

We develop various software applications for internal use. Computer software costs associated with internal use software are expensed as incurred until certain capitalization criteria are met. Third party consulting costs, as well as payroll and related costs for employees directly associated with, and devoting time to, the development of internal use computer software projects (to the extent time is spent directly on the project) are capitalized. Capitalization begins when the design stage of the application has been completed and it is probable that the project will be completed and used to perform the function intended. Capitalization ends when the asset is ready for its intended use. Depreciation begins when the software is placed in service. Computer software costs that are capitalized are periodically evaluated for impairment.

During the years ended December 31, 2022, 2021 and 2020, capitalized costs associated with the development of internal use computer software projects are as follows:

|  | YEAR ENDED DECEMBER 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Capitalized costs associated with the development of internal use computer software projects | $44,152 | $48,557 | $38,329 |

#### ASSET RETIREMENT OBLIGATIONS

Entities are required to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. Asset retirement obligations represent the costs to replace or remove tangible long-lived assets required by law, regulatory rule or contractual agreement. Our asset retirement obligations are primarily the result of requirements under our facility lease agreements which generally have 'return to original condition' clauses which would require us to remove or restore items such as shred pits, vaults, demising walls and office build-outs, among others. The significant assumptions used in estimating our aggregate asset retirement obligations are the timing of removals, the probability of a requirement to perform, estimated cost and associated expected inflation rates that are consistent with historical rates and credit-adjusted risk-free rates that approximate our incremental borrowing rate. Our asset retirement obligations at December 31, 2022 and 2021 were $36,119 and $36,493, respectively, and are included in Other Long-term Liabilities in our Consolidated Balance Sheets.

#### J. LEASES

We lease facilities for certain warehouses, data centers and office space. We also have land leases, including those on which certain facilities are located. The majority of our leased facilities are classified as operating leases that, on average, have initial lease terms of five to 10 years, with one or more lease renewal options to extend the lease term. Our lease renewal option terms generally range from one to five years. The exercise of the lease renewal option is at our sole discretion and may contain fixed rent, fair market value based rent or Consumer Price Index rent escalation clauses. We include option periods in the lease term when our failure to renew the lease would result in an economic disincentive, thereby making it reasonably certain that we will renew the lease. We recognize straight line rental expense over the life of the lease and any fair market value or Consumer Price Index rent escalations are recognized as variable lease expense in the period in which the obligation is incurred. In addition, we lease certain vehicles and equipment. Vehicle and equipment leases typically have lease terms ranging from one to seven years.

78

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Part IV

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

**DECEMBER 31, 2022**

(In thousands, except share and per share data)

### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

We account for all leases, both operating and financing, in accordance with Accounting Standards Codification ('ASC') Topic 842 *Leases*, ('ASC 842'). Our accounting policy provides that leases with an initial term of 12 months or less will not be included within the lease right-of-use assets and lease liabilities recognized on our Consolidated Balance Sheets. We recognize the lease payments for those leases with an initial term of 12 months or less in our Consolidated Statements of Operations on a straight-line basis over the lease term.

The lease right-of-use assets and related lease liabilities are classified as either operating or financing. Lease right-of-use assets are calculated as the net present value of future payments plus any capitalized initial direct costs less any tenant improvements or lease incentives. Lease liabilities are calculated as the net present value of future payments. In calculating the present value of the lease payments, we utilize the rate stated in the lease (in the limited circumstances when such rate is explicitly stated) or, if no rate is explicitly stated, we utilize a rate that reflects our securitized incremental borrowing rate by geography for the lease term. We account for nonlease components (which include common area maintenance, taxes, and insurance) with the related lease component. Any variable nonlease components are not included within the lease right-of-use asset and lease liability on our Consolidated Balance Sheets, and instead, are reflected as an expense in the period incurred.

Operating and financing lease right-of-use assets and lease liabilities as of December 31, 2022 and 2021 are as follows:

| DESCRIPTION | DECEMBER 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Assets: |  |  |
| Operating lease right-of-use assets (1) | $2,583,704 | $2,314,422 |
| Financing lease right-of-use assets, net of accumulated depreciation (2)(3) | 251,690 | 298,049 |
| Liabilities: |  |  |
| Current |  |  |
| Operating lease liabilities | $288,738 | $259,597 |
| Financing lease liabilities (3) | 43,857 | 41,168 |
| Long-term |  |  |
| Operating lease liabilities | $2,429,167 | $2,171,472 |
| Financing lease liabilities (3) | 289,048 | 315,561 |

$^{(1)}$ At December 31, 2022 and 2021, these assets are comprised of approximately 99% real estate related assets (which include land, buildings and racking) and 1% non-real estate related assets (which include warehouse equipment, vehicles, furniture and fixtures and computer hardware and software).

$^{(2)}$ At December 31, 2022, these assets are comprised of approximately 64% real estate related assets and 36% non-real estate related assets. At December 31, 2021, these assets are comprised of approximately 69% real estate related assets and 31% non-real estate related assets.

$^{(3)}$ Financing lease right-of-use assets, current financing lease liabilities and long-term financing lease liabilities are included within Property, Plant and Equipment, Net, Current portion of long-term debt and Long-term Debt, net of current portion, respectively, within our Consolidated Balance Sheets.

The components of the lease expense for the years ended December 31, 2022, 2021 and 2020 are as follows:

| DESCRIPTION | YEAR ENDED DECEMBER 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Operating lease cost (1) | $574,115 | $545,097 | $499,464 |
| Financing lease cost: |  |  |  |
| Depreciation of financing lease right-of-use assets | $42,708 | $50,970 | $51,629 |
| Interest expense for financing lease liabilities | 17,329 | 19,808 | 19,942 |

$^{(1)}$ Operating lease cost, the majority of which is included in Cost of sales, includes variable lease costs of $119,184, $111,949 and $111,501 for the years ended December 31, 2022, 2021 and 2020, respectively.

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Part IV

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

**DECEMBER 31, 2022**

(In thousands, except share and per share data)

### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Weighted average remaining lease terms and discount rates as of December 31, 2022 and 2021 are as follows:

|  | DECEMBER 31, 2022 |  | DECEMBER 31, 2021 |  |
| --- | --- | --- | --- | --- |
|  | OPERATING LEASES | FINANCING LEASES | OPERATING LEASES | FINANCING LEASES |
| Remaining Lease Term | 11.3 years | 10.6 years | 10.9 years | 10.9 years |
| Discount Rate | 6.4% | 5.8% | 6.6% | 5.9% |

The estimated minimum future lease payments (receipts) as of December 31, 2022 are as follows:

| YEAR | OPERATING LEASES (1) | SUBLEASE INCOME | FINANCING LEASES (1) |
| --- | --- | --- | --- |
| 2023 | $435,386 | $(9,499) | $52,340 |
| 2024 | 417,058 | (5,766) | 46,244 |
| 2025 | 392,117 | (3,243) | 119,130 |
| 2026 | 360,684 | (2,528) | 31,232 |
| 2027 | 335,269 | (3,521) | 15,778 |
| Thereafter | 1,962,941 | - | 144,701 |
| Total minimum lease payments (receipts) | 3,903,455 | $(24,557) | 409,425 |
| Less amounts representing interest or imputed interest | 1,185,550 |  | 76,520 |
| Present value of lease obligations | $2,717,905 |  | $332,905 |

$^{(1)}$ Estimated minimum future lease payments exclude variable common area maintenance charges, insurance and taxes.

At December 31, 2022, we have 10 leases which we have signed but which have not yet commenced and are not included in our lease obligation table above. The total undiscounted minimum lease payments for these leases are approximately $270,023 and have lease terms that range from 10 to 15 years. Each of these leases is expected to commence during 2023.

*Other information:* Supplemental cash flow information relating to our leases for the years ended December 31, 2022, 2021 and 2020 is as follows:

| CASH PAID FOR AMOUNTS INCLUDED IN MEASUREMENT OF LEASE LIABILITIES: | YEAR ENDED DECEMBER 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Operating cash flows used in operating leases | $409,163 | $392,987 | $360,088 |
| Operating cash flows used in financing leases (interest) | 17,329 | 19,808 | 19,942 |
| Financing cash flows used in financing leases | 44,869 | 46,118 | 47,829 |
| NON-CASH ITEMS: |  |  |  |
| Operating lease modifications and reassessments | $179,094 | $144,310 | $143,382 |
| New operating leases (including acquisitions and sale-leaseback transactions) | 540,830 | 282,490 | 370,011 |

### K. LONG-LIVED ASSETS

We review long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the sum of the forecasted undiscounted net cash flows of the operation to which the assets relate to their carrying amount. The operations are generally distinguished by the business segment and geographic region in which they operate. If it is determined that we are unable to recover the carrying amount of the assets, the long-lived assets are written down, on a pro rata basis, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets. Long-lived assets, including finite-lived intangible assets, are amortized over their useful lives. Annually, or more frequently if events or circumstances warrant, we assess whether a change in the lives over which long-lived assets, including finite-lived intangible assets, are amortized is necessary.

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Part IV

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

**DECEMBER 31, 2022**

**(In thousands, except share and per share data)**

### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Gain on disposal/write-down of property, plant and equipment, net for the years ended December 31, 2022, 2021 and 2020 is as follows:

|  | YEAR ENDED DECEMBER 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Gain on disposal/write-down of property, plant and equipment, net | $93,268 | $172,041 | $363,537 |
| The gains primarily consist of (1) : | Gains associated with sale and sale-leaseback transactions of approximately $94,500, of which (i) approximately $49,000 relates to sale and sale-leaseback transactions of 11 facilities and parcels of land in the United States during the second quarter of 2022, (ii) approximately $17,000 relates to sale-leaseback transactions of two facilities in the United States and one in Canada during the third quarter of 2022 and (iii) approximately $28,500 relates to sale and sale-leaseback transactions of 12 facilities and one parcel of land in the United States and one facility in the United Kingdom during the fourth quarter of 2022. | Gains associated with sale and sale-leaseback transactions of approximately $164,000, of which (i) approximately $127,400 relates to sale-leaseback transactions of five facilities in the United Kingdom during the second quarter of 2021 and (ii) approximately $36,600 relates to sale and sale-leaseback transactions of nine facilities in the United States during the fourth quarter of 2021. | Gains associated with sale-leaseback transactions of approximately $342,100, of which (i) approximately $265,600 relates to sale-leaseback transactions of 14 facilities in the United States during the fourth quarter of 2020 and (ii) approximately $76,400 relates to sale-leaseback transactions of two facilities in the United States during the third quarter of 2020. Gains of approximately $24,100 associated with the Frankfurt JV Transaction (as defined in Note 5). |

$^{(1)}$ The gains recognized during the years ended December 31, 2022, 2021 and 2020 are the result of our program to monetize a small portion of our industrial assets through sale and sale-leaseback transactions. The terms for these leases are consistent with the terms of our lease portfolio, which are disclosed in Note 2.j.

### L. GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS

Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Other than goodwill, we currently have no intangible assets that have indefinite lives and which are not amortized.

We test goodwill annually on October 1, and more frequently if impairment indicators arise that would require an interim test. The following is a discussion regarding (i) interim goodwill impairment review for our Fine Arts reporting unit during the first quarter of 2020, (ii) the reporting units at which level we tested goodwill for impairment as of October 1, 2021 and the composition of these reporting units at December 31, 2021 (including the amount of goodwill associated with each reporting unit), (iii) interim reporting unit changes and goodwill impairment review during the second quarter of 2022 and (iv) the reporting units at which level we tested goodwill for impairment as of October 1, 2022 and the composition of these reporting units at December 31, 2022 (including the amount of goodwill associated with each reporting unit).

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Part IV

# IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

**DECEMBER 31, 2022**

**(In thousands, except share and per share data)**

## 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

### I. INTERIM GOODWILL IMPAIRMENT REVIEW - FINE ARTS, FIRST QUARTER OF 2020

During the first quarter of 2020, we concluded that we had a triggering event related to our Fine Arts reporting unit, requiring us to perform an interim goodwill impairment test. The primary factor contributing to our conclusion was the expected impact of the COVID-19 pandemic to this particular business and its customers and revenue sources, which caused us to believe it was more likely than not that the carrying value of our Fine Arts reporting unit exceeded its fair value. During the first quarter of 2020, we performed an interim goodwill impairment test for our Fine Arts reporting unit utilizing a discounted cash flow model, with updated assumptions on future revenues, operating expenditures and capital expenditures. We concluded that the fair value of our Fine Arts reporting unit was less than its carrying value, and, therefore, we recorded a $23,000 impairment charge on the goodwill associated with this reporting unit during the first quarter of 2020. Factors that may impact these assumptions include, but are not limited to: (i) our ability to maintain, or grow, storage and retail service revenues in this reporting unit in line with current expectations and (ii) our ability to manage our fixed and variable costs in this reporting unit in line with potential future revenue declines.

### II. REPORTING UNITS AS OF OCTOBER 1, 2021

Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2021 were as follows:

| • North America Records and Information Management ('North America RIM') • Europe Records and Information Management ('Europe RIM') • Latin America Records and Information Management ('Latin America RIM') • Australia and New Zealand Records and Information Management ('ANZ RIM') | • Asia Records and Information Management ('Asia RIM') • Global Data Center • Fine Arts • Entertainment Services |
| --- | --- |

We concluded that the goodwill associated with each of our reporting units was not impaired as of such date. There were no changes to the composition of our reporting units between October 1, 2021 and December 31, 2021.

### GOODWILL BY REPORTING UNIT AS OF DECEMBER 31, 2021

The carrying value of goodwill, net for each of our reporting units described above as of December 31, 2021 is as follows:

| SEGMENT | REPORTING UNIT | CARRYING VALUE AS OF DECEMBER 31, 2021 |
| --- | --- | --- |
| Global RIM (as defined in Note 11) Business | North America RIM | $2,720,049 |
|  | Europe RIM | 624,502 |
|  | Latin America RIM | 107,174 |
|  | ANZ RIM | 284,042 |
|  | Asia RIM | 240,494 |
| Global Data Center Business | Global Data Center | 426,074 |
| Corporate and Other | Fine Arts | 27,905 |
|  | Entertainment Services | 33,291 |
| Total |  | $4,463,531 |

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Part IV

# IRON MOUNTAIN INCORPORATED
## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
## (CONTINUED)

**DECEMBER 31, 2022**

**(In thousands, except share and per share data)**

## 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

### III. 2022 REPORTING UNIT CHANGES

During the second quarter of 2022, as a result of the realignment of our global managerial structure, we reassessed the composition of our reportable segments (see Note 11 for a description and definition of our reportable segments) as well as our reporting units.

We note the following changes to our reporting units as a result of the reassessment described above:

- our former Europe RIM reporting unit is now managed as two separate reporting units: (i) our Middle East, North Africa and Turkey ("MENAT") businesses will comprise our "MENAT RIM" reporting unit and (ii) our other businesses in Europe and South Africa ("ESA") will comprise our "ESA RIM" reporting unit;
- our former ANZ RIM and Asia RIM reporting units are now managed as one "APAC RIM" reporting unit; and
- our ALM business, which includes our legacy secure IT asset disposition business (which was previously primarily included in our North America RIM reporting unit) and the business acquired through our acquisition of Intercept Parent, Inc. ("ITRenew"), will comprise our newly formed "ALM" reporting unit.

There were no changes to our Latin America RIM, Global Data Center and Fine Arts reporting units. We have reassigned goodwill associated with the reporting units impacted by the reorganization on a relative fair value basis, where appropriate. The fair value of each of our new reporting units was determined based on the application of a combined weighted average approach of preliminary fair value multiples of revenue and earnings and discounted cash flow techniques. These fair values represent our best estimate and preliminary assessment of goodwill allocations to each of the new reporting units on a relative fair value basis. We have completed an interim goodwill impairment analysis before and after the reporting unit changes, and we have concluded that the goodwill associated with each of our reporting units was not impaired.

### IV. REPORTING UNITS AS OF OCTOBER 1, 2022

Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2022 were as follows:

| • North America RIM | • Entertainment Services |
| --- | --- |
| • ESA RIM | • Global Data Center |
| • MENAT RIM | • Fine Arts |
| • Latin America RIM | • ALM |
| • APAC RIM |  |

We concluded that the goodwill associated with each of our reporting units was not impaired as of such date. There were no changes to the composition of our reporting units between October 1, 2022 and December 31, 2022.

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Part IV

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

**DECEMBER 31, 2022**

(In thousands, except share and per share data)

### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

#### GOODWILL BY REPORTING UNIT AS OF DECEMBER 31, 2022

The carrying value of goodwill, net for each of our reporting units described above as of December 31, 2022 is as follows:

| SEGMENT | REPORTING UNIT | CARRYING VALUE AS OF DECEMBER 31, 2022 |
| --- | --- | --- |
| Global RIM Business | North America RIM | $2,667,400 |
|  | ESA RIM | 521,949 |
|  | MENAT RIM | 25,007 |
|  | Latin America RIM | 109,069 |
|  | APAC RIM | 497,792 |
|  | Entertainment Services | 31,729 |
| Global Data Center Business | Global Data Center | 418,502 |
| Corporate and Other | Fine Arts | 33,908 |
|  | ALM | 577,378 |
| Total |  | $4,882,734 |

The fair value of our reporting units has generally been determined using a combined approach based on the present value of future cash flows (the 'Discounted Cash Flow Model') and market multiples (the 'Market Approach').

The **Discounted Cash Flow Model** incorporates significant assumptions including future revenue growth rates, operating margins, discount rates and capital expenditures.

The **Market Approach** requires us to make assumptions related to Adjusted EBITDA (as defined in Note 11) multiples.

Changes in economic and operating conditions impacting these assumptions or changes in multiples could result in goodwill impairments in future periods. In conjunction with our annual goodwill impairment reviews, we reconcile the sum of the valuations of all of our reporting units to our market capitalization as of such dates.

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