Barry Hytinen: Yes. Jon, the only thing I guess I would add is that, when we knew this as part of the deal, but just to underscore it, there’s considerable capacity for processing at Regency. And as Bill mentioned, they add to our capabilities, they have got eight facilities around the U.S, which really broadens our reach and ability to serve clients quickly. And this is a team there that has been building a business very profitably, I might add, for decades. And so they — to underscore Bill’s point, they really know what they’re doing, and I think the combination is an excellent one. So thanks for that question.
Operator: Thank you. And our next question is a follow-up from Shlomo Rosenbaum with Stifel. Please go ahead.
Shlomo Rosenbaum: Hi. If you don’t mind, I’m going to get a little more into the weeds. Barry, just on — we saw some interesting gross margin changes like just on a sequential basis. We saw the services margin go up from 260 basis points. It seems like the costs were contained while the revenue increased. But on the storage side, you have all other storage costs going up by $11.5 million, pushed the gross margin down by about 80 basis points sequentially. I know these things move around quarter-to-quarter, but maybe you can give us a little bit of insight as to what’s in that all other storage costs that moved up $11.5 million this quarter.
Barry Hytinen: Yes, sure thing, Shlomo. I’ll take the services point first. As I alluded to in the prepared remarks, we had very good mix within our services. And as you know, when we’re doing services especially as we’re continuing to see larger and larger deals, the mix of those can move around and the timing of them. And so we had anticipated a little lower margin mix in the services portfolio. Some of those deals pushed into the first quarter here in terms of when we win them and into the New Year. But we then won some deals and we’re able to provide service on some higher margins. So that’s part of it. And together with the fact that candidly our team here does a great job driving productivity across our services organization.
As it relates to the storage gross margin, I’m glad you asked that question, because there’s an item that I want to make sure we all understand. That storage gross margin, of course, is the combination of all of our storage businesses. So when you think about the Records Management Physical Storage Business, that’s a very high gross margin business and continued to perform very well. We’re very pleased with the margins in that business in light of revenue management, et cetera and the volume trends over the last several years. It’s been trending really well. The factor that can affect the actual rate though and also affects your all other storage costs, which I’ll come to, is data center. As you know, as you’d see from our peer companies that are public as well as some of the other companies in the data center space, the gross margins on data center generally as an industry are lower than our records management business.
And so while our data center gross margin actually expanded both sequentially and year-on-year, the mix in fact because data center grew, I think the storage revenue was up 35% or so year-on-year in the quarter that has a mix element. And so, you can have a situation where our gross margins are improving on both businesses, yet the contribution creates the rate going down slightly. As it relates to all other storage costs, that’s — one of the big drivers there, of course, is and it goes to data center is the power. And so, as we’re having more and more client commencements, they start drawing more power in there that also has an effect on gross margin, but doesn’t change our EBITDA dollars. So good questions and I hope that clears that up.
We feel very, very good about the gross margins in the company.
Operator: Thank you. And our next question comes from George Tong with Goldman Sachs. Please go ahead.
George Tong: Hi. Thanks. A quick follow-up. It looks like your dividend payout ratio has dipped below the 65% LTM target, which is where you raised the dividend earlier. Can you talk about your thoughts on raising the dividend again now that the payout ratio is below the threshold?
William Meaney: Yes. No, thanks George. And you’re right. We’re maintaining as a Board and as a company that our target payout ratio is kind of in the low 60s, 60% to 65% and we are kind of trending [indiscernible] we are in that range now. So this is, obviously, a decision for the Board, but I think you could expect the way we’re trending in the guidance we’ve given you for the year, it’s a natural forcing function that the board will be considering and. I think it’s — as you can just kind of see the mathematics of it, it looks like we’re running into another increase in the near future and not too distant future, I should say.
Operator: Thank you. This concludes our question-and-answer session and the Iron Mountain fourth quarter 2023 earnings conference call. Thank you for attending today’s presentation. You may now disconnect your lines, and have a wonderful day.
