49 slides from Iron Mountain Incorporated (delaware)'s earnings presentation, Aug 4, 2016
Slide 1: Safe Harbor Statement
Safe Harbor Statement 2 Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws and is subject to the safe-harb
Slide 2: Table of Contents
All figures except per share and facility counts in 000s unless noted All figures in reported dollars unless noted Figures may not foot due to rounding Table of Contents 3 Investor Relations Contacts: Faten Freiha, 617-535-8404 Director, Investor Relations faten.freiha@ironmountain.com Melissa Marsd
Slide 3: Second Quarter 2016 Financial Results Highlights
Iron Mountain Second Quarter 2016 Financial Results Second Quarter Highlights Base Iron Mountain financial and operating performance consistent with first quarter results and aligns with 2020 strategic plan Second quarter profitability reflects legacy Recall scale prior to synergies Storage rental g
Slide 4: Operational Highlights and Performance versus Strategic Plan
Operational Highlights and Performance versus Strategic Plan 5 Pillars Strategic Goals Q2 2016 Operational Performance and Highlights Consistent volume and solid storage rental growth: • NA Records and Information Management (i) internal volume growth of 0.2% (ii) internal revenue growth of 0.7% (ii
Slide 5: Financial Performance versus Strategic Plan
Financial Performance versus Strategic Plan 6 Strategic Goals Q2 2016 Financial Performance C$ Total Revenue Growth of 4% CAGR C$ Total Revenue Growth of 18.6% for the quarter • Half of the growth organic/half to come from acquisitions • Revenue growth in line with 2020 Strategic Plan. Recall acquis
Slide 6: Company Profile
Company Profile Iron Mountain is a global leader in enterprise storage with a high-return, real estate-based business model, yielding over $3.7 billion of revenues annually. The company provides storage and information management services to a high-quality, diversified customer base across numerous
Slide 7: Financial Highlights
Financial Highlights 8 In Q4 2015, we revised the reconciliation of FFO (NAREIT), FFO (Normalized) and AFFO to reconcile these Non-GAAP measures to consolidated net income, rather than net income attributable to Iron Mountain. We have revised the Q2 2015 reconciliation of FFO (NAREIT), FFO (Normaliz
Slide 8: Year-over-Year Revenue Growth
Year-over-Year Revenue Growth 9 Revenue Growth Rates Reported 16.8% 15.6% 16.3% 8.7% 7.7% 8.3% Less: Impact of FX Rate Changes and Adjustments (2.1)% (2.5)% (2.3)% (2.8)% (3.3)% (3.0)% Constant Currency 18.9% 18.1% 18.6% 11.4% 11.0% 11.3% Less: Impact of Acquisitions and Dispositions 16.8% 20.2% 18.
Slide 9: Records Management Volume Growth
Records Management Volume Growth 10 2.0% 1.0% Q1-15A 3.5% Q4-14A 3.6% Q1-16A 3.2% 1.6% Q4-15A 2.3% Q2-16A 27.6% 25.9% Q3-15A 2.7% 1.1% Q2-15A 2.8% Q3-14A 5.5% Destructions New Volume from Existing Customers New Sales Business Acquisitions Outperm/Terms Total Iron Mountain (675 CuFt MM) North America
Slide 10: Records Management Volume Growth
Records Management Volume Growth 11 3.6% Q2-16A 37.8% -2.6% -3.9% 5.5% 4.8% 34.1% Q1-16A 3.0% -2.3% -4.1% 5.0% 4.4% Q4-15A 3.1% -2.1% -4.4% 5.1% 4.5% Q3-15A 3.9%(1) -2.2% -4.6% 5.3% 4.7% 0.7% Q2-15A 3.0% -2.1% -4.6% 5.4% 3.7% 0.7% Q1-15A 5.4% -2.3% -4.5% 5.6% 5.0% 1.6% Q4-14A 5.7% -2.3% -4.2% 5.5% 4
Slide 11: Guidance Summary
Guidance Summary(1) 12 Iron Mountain does not provide a reconciliation of non-GAAP measures that it discusses as part of its annual guidance or long term outlook because certain significant information required for such reconciliation is not available without unreasonable efforts or at all, includin
Slide 12: Quarterly Operating Performance
Quarterly Operating Performance 13 2015 and 2016 results exclude Recall Costs. Variances from Q2 2015 reported results due to reclassification of Norway from the Western European business segment to the Other International business segment. Q2 Results (1) % Growth Q2 2015 Q2 2016 Reported - Impact o
Slide 13: Year-to-Date Operating Performance
14 Year-to-Date Operating Performance 2015 and 2016 results exclude Recall Costs. Variances from YTD 2015 reported results due to reclassification of Norway from the Western European business segment to the Other International business segment. Year to Date Results (1) % Growth YTD 2015 YTD 2016 Rep
Slide 14: Consolidated Balance Sheets
Consolidated Balance Sheets 15 ASSETS 12/31/2015 6/30/2016 Current Assets: Cash and Cash Equivalents $128,381 $236,989 Accounts Receivable, Net 564,401 710,526 Other Current Assets 165,130 341,855 Total Current Assets 857,912 1,289,370 Property, Plant and Equipment: Property, Plant and Equipment at
Slide 15: Consolidated Statements of Operations
Consolidated Statements of Operations 16 Includes $0.3mm of Recall costs in Q2 2016 and YTD 2016. Includes $5.7mm and $50.1mm of Recall Costs in Q2 2015 and Q2 2016, respectively. Also, includes $5.7mm and $68.4mm of Recall Costs in YTD 2015 and YTD 2016, respectively. Q2 2015 Q2 2016 % Change YTD 2
Slide 16: Reconciliation of Operating Income to Adjusted OIBDA
17 Reconciliation of Operating Income to Adjusted OIBDA Net of tax provision of $0.3mm for Q2 2016 and YTD 2016. Includes realized and unrealized FX (gains) losses. Excludes realized and unrealized FX (gains) losses and includes debt extinguishment charges of approximately $9mm. Q2 2015 Q2 2016 % Ch
Slide 17: Reconciliation of Reported EPS to Adjusted EPS
18 Reconciliation of Reported Earnings per Share to Adjusted Earnings per Share The difference between our effective tax rate and our structural tax rate (or adjusted effective tax rate) for the three and six months ended June 30, 2015 and 2016, respectively, is primarily due to (i) the reconciling
Slide 18: Reconciliation of Net Income to FFO & AFFO
19 Reconciliation of Net Income to FFO & AFFO In Q4 2015, we revised the reconciliation of FFO (NAREIT), FFO (Normalized) and AFFO to reconcile these non-GAAP measures to consolidated net income, rather than net income attributable to Iron Mountain. We have revised the Q2 2015 reconciliation of FFO
Slide 19: Reconciliation of Cash Flow from Operations to AFFO
20 Reconciliation of Cash Flow from Operations to AFFO Working capital adjustments in Q2 2016 are driven primarily by changes in tax or other long term receivables, accounts payable, accrued interest and accrued payroll. Includes impact of options where holders elect to receive shares net of tax wit
Slide 20: Quarterly Revenue Growth Bridge
21 Quarterly Revenue Growth Bridge 16% R$ Growth 19% C$ Growth Q2 2016 Revenue - Reported $ $884 REC Revenue Net of Divestitures and IRM Base Business Growth $141 IRM REC Q2 2015 Revenue at Q2 2016 FX Rates $743 FX Impact at Q2 2016 FX Rates $17 Q2 2015 Revenue - Reported $ $760
Slide 21: Quarterly Normalized Adjusted OIBDA Bridge
22 Quarterly Normalized Adjusted OIBDA Bridge 19% C$ Growth $27 Q2 2015 Adj. OIBDA - Reported $ $223 Q2 2016 Adj. OIBDA - Reported $ $261 Gross Synergies $2 IRM Transformation Savings $13 REC and IRM Adj. OIBDA Net of Divestitures and IRM Base Business Growth Normalized Q2 2015 Adj. OIBDA at Q2 2016
Slide 22: Quarterly Normalized Adjusted EPS Bridge
23 Quarterly Normalized Adjusted EPS Bridge $0.02 / 8% Normalized Growth Q2 2016 Adj. EPS - Normalized $0.26 Accelerated Depreciation Associated with Legacy Recall Racking $0.02 Q2 2016 Adj. EPS - Reported $0.24 Increase in Interest Expense and Tax Rate $0.04 Increase in D&A Expense $0.09 IRM Transf
Slide 23: Quarterly FFO (Normalized) Bridge
24 Quarterly FFO (Normalized) Bridge $0.05 / 12% Growth Adjusted for Share Count $0.47 Q2 2016 FFO (Normalized) per Share - Reported $ $0.42 Impact of Higher Share Count $0.05 $0.07 Q2 2015 FFO (Normalized) Per Share - Reported $ Q2 2015 FFO (Normalized) Per Share - Normalizing Share Count Growth $0
Slide 24: Progress on Cost Synergies Associated with Recall
25 Progress on Cost Synergies Associated with Recall Expected Net Synergies Total Full Year Divestitures Total Expected Gross Synergies for 2017 In Year Benefit of Actions to be Taken in 2017 Q2 2015 Adj. EPS - Reported $ >80% of 2017 Gross Synergies Actioned in 2016 2017 Expected Synergies $20 $115
Slide 25: Storage and Service NOI Reconciliation
26 Storage and Service NOI Reconciliation Q2 2015 Q2 2016 % Change YTD 2015 YTD 2016 % Change Total Storage Revenue $461,209 $538,682 16.8% $920,081 $999,893 8.7% Add: Permanent withdrawal fees 6,495 5,848 (10.0%) 12,853 10,471 (18.5%) Adjusted Storage Revenue $467,704 $544,530 16.4% $932,934 $1,010
Slide 26: Storage Net Operating Income (NOI)
27 Storage Net Operating Income (NOI) Includes Data Center, Fine Art Storage, Consumer Storage, Intellectual Property Management, Digital Storage, Fulfillment Services, Document Management Services, Entertainment Services and other ancillary services. Includes Rent Expense, Building Maintenance, Pro
Slide 27: Global Real Estate Portfolio
Global Real Estate Portfolio(1) 28 Includes real estate held in joint ventures. Adjustments to previous periods due to refinements to real estate basis and reclassification of multiple adjoining facilities into single buildings. Includes South Africa. Out of the 335 leased building additions and exp
Slide 28: Revenue from Rental Activities and Storage NOI per Racked Square Foot
Revenue from Rental Activities and Storage NOI per Racked Square Foot 29 Includes loading docks, unracked space, office space, common areas, as well as space in service-related facilities. Excludes Revenue and NOI associated with Intellectual Property Management, Fulfillment Services, Data Center, E
Slide 29: Portfolio Utilization
Portfolio Utilization Records Management Storage Portfolio (CuFt MM) As of 6/30/2016 100 0 700 600 500 400 +28.7% +11.4% +46.2% +286.3% +48.8% Total IRM 688 535 Asia Pacific Latin America Europe North America 430 386 900 800 700 600 500 100 0 Total IRM 810 752 85% 91% Asia Pacific 76 67 84% 95% Lati
Slide 30: Gross Book Value of Real Estate Assets
Gross Book Value of Real Estate Assets 31 Includes warehouse equipment, vehicles, furniture, fixtures, computer hardware and software. Real Estate Assets Storage Operations Land $247,379 Buildings & Building Improvements 1,636,836 Leasehold Improvements 480,178 Racking 1,840,798 Construction In Prog
Slide 31: Service Business Detail
Service Business Detail 32 Includes Fulfillment Services, Document Management Services, Intellectual Property Management, Data Center, Consulting, Entertainment Services, Fine Art Storage, Consumer Storage and other ancillary services. Includes Building Maintenance, Property Taxes, Utilities, Facili
Slide 32: Customer Data
Customer Data 33 No single vertical within ‘Other’ comprises greater than 1% of North America Revenue. Customer acquisition costs include the acquisition of customer relationships and customer inducements such as move costs and permanent withdrawal fees. Federal Healthcare Financial Legal Insurance
Slide 33: Debt Schedule
Debt Schedule 34 Thereafter 2026 $250 2025 2024 $1,000 2023 $600 2022 $536 2021 $654 2020 $1,000 2019 $1,646 2018 2017 2016 $217 Floating Rate Debt at 6/30/16 Fixed Rate Debt at 6/30/16 32% 68% Fixed vs. Floating Rate Debt at 6/30/16 Debt Maturity Schedule ($MM) Floating Rate Debt Fixed Rate Debt (1
Slide 34: Capitalization
Capitalization 35 CAD 6.125% notes due 2021 are rated BB by Standard & Poor’s. Total debt net of cash is calculated as current portion of long-term debt of $113mm plus long-term debt net of current portion of $6,103mm plus $66mm of deferred financing costs less cash and equivalents of $237mm. (1) 6.
Slide 35: Lease Obligations
Lease Obligations(1) Includes capital and operating lease obligations. Weighted Average Remaining Lease Obligations (no exercise of extension options): 5.7 years Weighted Average Remaining Lease Obligations (exercise of all extension options): 12.1 years 8.2% 2026 1.4% 2025 4.0% 2024 4.3% 2023 5.7%
Slide 36: Capital Expenditures and Investments
Capital Expenditures and Investments 37 Includes $29.9mm and $46.5mm for data center in Q2 2016 and YTD 2016, respectively. Includes Land, Buildings, Improvements, and Racking Structures. FFO (Normalized) is adjusted for these items, among others, to arrive at AFFO. Includes Recall integration relat
Slide 37: Investments
Investments(1) 38 Based on 2016 C$ Budgeted FX Rates. Racking Installations exclude consolidation spend in Total Expected Investment, Investment in Current Period and Cumulative Investment to Date of $43.5mm, $4.3mm and $39.1mm, respectively. In USD R$. Q2 2016 has been normalized to reflect the Rec
Slide 38: Components of Value
Components of Value 39 Includes South Africa. May and June annualized. Trailing four quarter prior to rental expense. Includes Cash, Cash Equivalents, Restricted Cash, Accounts Receivable, Other Tangible Current Assets, Deferred Income Taxes and Prepaid Expenses. Calculated as current portion of Lon
Slide 39: Appendix: Non-GAAP Measures
Appendix 40 Non-GAAP Measures Non-GAAP measures are supplemental metrics designed to enhance our disclosure and to provide additional information that we believe to be important for investors to consider when evaluating our financial performance. These non-GAAP measures should be considered in addit
Slide 40: Appendix: Non-GAAP Measures (continued)
Appendix Non-GAAP Measures (continued) Adjusted Operating Income Before Depreciation, Amortization, Intangible Impairments, and REIT Costs, or Adjusted OIBDA (continued) Adjusted OIBDA does not include certain items that we believe are not indicative of our core operating results, specifically: (1)
Slide 41: Appendix: Non-GAAP Measures (continued)
Appendix Non-GAAP Measures (continued) Service Adjusted OIBDAR Service Adjusted OIBDA as defined above, excluding rent expense associated with the service business. This is provided to enable valuation of Service Adjusted OIBDA irrespective of whether the company’s properties are leased or owned. Re
Slide 42: Appendix: Definitions
Appendix Definitions Average Stabilization Period – For racking projects, the stabilization period is 8 to 12 months. For new buildings it is 24 to 36 months, assuming phased racking installations over three years. For business acquisitions it is 12 to 24 months, depending on the size of the transac
Slide 43: Appendix: Definitions (continued)
Appendix Definitions (continued) Corporate and Other – Our Corporate and Other Business segment primarily consists of our data center and fine art storage businesses in the United States, the primary product offerings of our Adjacent Businesses operating segment, as well as costs related to executiv
Slide 44: Appendix: Definitions (continued)
Appendix 45 Definitions (continued) Capital Expenditures and Investments – Our business requires capital expenditures to support our expected storage rental revenue and service revenue growth and ongoing operations, new products and services and increased profitability. The majority of our capital g
Slide 45: Appendix: Definitions (continued)
Appendix 46 Definitions (continued) Capital Expenditures and Investments (continued) Components of Overhead Allocated Overhead – Includes overhead expenses directly associated with storage and service business operations allocated as follows: Field Operation Costs – Allocated to storage and service
Slide 46: Appendix: Definitions (continued)
Appendix 47 Definitions (continued) Internal Revenue Growth – Our internal revenue growth rate, which is a non-GAAP measure, represents the weighted average year-over-year growth rate of our revenues excluding the impacts of business acquisitions, divestitures and foreign currency exchange rate fluc
Slide 47: Appendix: Definitions (continued)
Appendix 48 Definitions (continued) Service Profit and Margin – The Gross Profit and Margin attributable to the worldwide service business. Calculated as follows: Services Adj. OIBDA + Allocated Overhead Expenses + Termination and Permanent Withdrawal Fees = Service Profit ($) / Total Service Revenu
Slide 48: Appendix: Definitions (continued)
Appendix 49 Definitions (continued) Transformation Initiative – During the third quarter of 2015, we implemented a plan that calls for certain organizational realignments to reduce our overhead costs, particularly in our developed markets, in order to optimize our selling, general and administrative
Slide 49: Definitions (continued)
A ronMountan’: epee Definitions (continued) ‘Transformation Initiative ~ During the third quarter of 2015, we implemented a plan that calls for certain organizational realignments to reduce our ‘overhead costs, particularly in our developed markets, in order to optimize our selling, general and admi