Iron Mountain Incorporated (delaware) · NYSE:IRM
Iron Mountain Incorporated (delaware) — Iron Mountain — Investor Presentation (July 2014)
44 slides from Iron Mountain Incorporated (delaware)'s investor presentation, Jul 15, 2014
Slide 1: REIT Conversion to Enhance Stockholder Returns
REIT Conversion to Enhance Stockholder Returns July 15, 2014
Slide 2: Safe Harbor Language and Reconciliation of Non-GAAP Measures
Safe Harbor Language and Reconciliation of Non-GAAP Measures 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
Slide 3: Investment Highlights
Investment Highlights Durable business with stable growth and upside potential REIT enhances stockholder benefits and drives returns Normalized FCF covers dividend and supports growth investments Opportunity to increase real estate ownership Attractive relative valuation
Slide 4: Diversified Global Business
Diversified Global Business $3B annual revenues >155,000 customers Serving 95% of Fortune 1000 67MM SF of real estate in >1,000 facilities Compelling Customer Value Proposition Reduce costs and risks of storing and protecting information assets Broadest range of footprint and services Most trusted b
Slide 5: Storage Rental Stream is Key Economic Driver
Large & growing 59% of revenues ($1.8B) 4% constant dollar growth GDP correlated & inflation hedged Diversified customer base No customer >2% of total revenues Low customer turnover (<2% per annum) Strong value proposition with related services Long average life of a box in storage (~15 yrs)1 Storag
Slide 6: Strategy to Extend Durability of Business
Strategy to Extend Durability of Business Speed and Agility Simplification, Process Automation and Efficiency Developed Markets Drive Profitable Revenue Growth; Grow Tape and Cube Volume Strategic Plan Emerging Markets Expand and Leverage Emerging Businesses Identify, Incubate, Scale or Scrap Organi
Slide 7: Low-volatility, Moderate Growth with Attractive Yield
Low-volatility, Moderate Growth with Attractive Yield 2013 excludes restructuring charges ROIC 9.7% 10% - 11% Avg. Inv. Capital ~$5.5B ~$6.3B ($MM) +4% CAGR
Slide 8: REIT Enhances Stockholder Benefits and Drives Returns
REIT Enhances Stockholder Benefits and Drives Returns Began operating in manner consistent with REIT effective 1/1/2014 REIT structure aligns with operating strategy Capital allocation as a REIT to include real estate acquisitions Significant stockholder benefits from REIT structure Next Steps as a
Slide 9: REIT Structure Aligns with Operating Strategy
Able to execute strategy within REIT framework Significant global real estate footprint – over 1,000 facilities in 67MM square feet worldwide Successfully structured the business to deliver services and aligned international businesses within structure REIT Structure Aligns with Operating Strategy
Slide 10: Storage Rental Revenue is Stable Throughout Cycles
Storage Rental Revenue is Stable Throughout Cycles Source: Benchmark data provided by Green Street Advisors IRM average internal storage rental revenue growth
Slide 11: "Enterprise Storage" Compares Favorably
“Enterprise Storage” Compares Favorably Iron Mountain Self-storage Industrial North America annual rental revenue/SF $27.00 $13.80 $5.50 Tenant Improvements/SF N/A N/A $1.96 CapEx(1) ~7% 5.3% 12% Average lease term Large customers: 3 Yrs. Small customers: 1 Yr. Month-to-Month ~4-6 yrs. Customer rete
Slide 12: High-Return Storage Rental Business Creates Significant Value
Illustrative North America RM Storage Annual Economics(1) (per square foot, except for ROIC) Investment Customer acquisition $ 42 Building and outfitting 54 Racking structures 54 Total investment $ 150 Storage Rental Income Storage rental revenue $ 27 Direct operating costs (3) Allocated field overh
Slide 13: 2014 Capital Allocation Impacted by Several REIT Conversion-related Items
~$2.4B of cash returned to shareholders 2010 - 2014 Borrowing on revolving credit facility related to: Cash portion of $650MM Special Distribution ($130MM cash) Tax recapture payments in 2014 Incremental borrowing and/or potential equity proceeds to support pipeline of attractive, accretive investme
Slide 14: Normalized, Growing Cash Flows Support Capital Allocation Strategy
Ordinary dividend and core real estate investment covered by Free Cash Flow Data Center business, opportunistic Real Estate purchases and acquisitions funded by incremental borrowing at targeted leverage ratio and/or potential equity proceeds Growth in OIBDA and Free Cash Flow may allow for some de-
Slide 15: Real Estate Acquisition a Potential Use of Capital
Acquisition opportunity of $700MM to $1B over 10-year timeframe Solid investment return potential Reduces borrowing costs over time Supports REIT Asset Test Higher real estate residual value Real Estate Acquisition a Potential Use of Capital Potential $2.5B - $3.0B Purchase Universe
Slide 16: Global Real Estate Portfolio
Global Real Estate Portfolio Note: numbers may not foot due to rounding As of 3/31/14 Buildings Sq. Ft. Buildings Sq. Ft. Buildings Sq. Ft. North America 182 19,395 504 30,970 686 50,365 Europe 49 2,412 208 7,427 257 9,839 Latin America 39 1,915 51 2,855 90 4,770 Asia Pacific 2 51 69 2,199 71 2,250
Slide 17: REIT Provides Significant Stockholder Benefits
Higher dividends over time supported by: US federal and state income tax savings Higher distributable income due to lower tax vs. book D&A Both US and international storage rental (QRS) income Potential to create value and reduce financing costs through acquisition of select leased facilities Potent
Slide 18: Mid-year Conversion Results in Catch-up Distribution
Distributions paid in Jan, April, July, and October 2014 should be reported as ordinary dividends in 2014 $400mm - $420mm expected dividends paid in 2014 Jan 2015 distribution (if declared in 2014) will also be included and reported in part, and perhaps in whole, as a 2014 distribution for both IRM
Slide 19: Stockholder Payouts, REIT Costs & Distributions Have Temporarily Increased Leverage
Target Range Stockholder Payouts, REIT Costs & Distributions Have Temporarily Increased Leverage $MM 2010 - 11 2012 2013 2014 E Total Share Repurchases $1,097 $38 — — $1,135 Quarterly Dividends(3) $211 $179 $207 $400 - $420 $997 - $1,017 Special Div./Dist. — $140 — $120 - $140 $260 - $280 Total Cash
Slide 20: What's Next with the REIT?
Required PLRs and unanimous board approval received Will elect REIT status for 2014 Will file registration statement and hold special meeting for stockholder approval of typical REIT ownership limitations Regular distribution of $400MM - $420MM Remaining Special Distribution of ~$600MM - $700MM to b
Slide 21: Appendix
Appendix A ron MouNTAIN
Slide 22: 2014 – Adjustments to Guidance for REIT
2014 – Adjustments to Guidance for REIT ($MM)) Initial Guidance C$ Growth Adjusted Guidance(1) C$ Growth Operating Performance Revenues $3,090 - $3,170 2% - 4%(2) $3,090 - $3,170 2% - 4%(2) Adjusted OIBDA(3) $930 - $960 2% - 5% $915- $945 0% - 3% Adjusted EPS(3) – FD $1.03 - $1.14 $1.37 – $1.52(4) C
Slide 23: REIT Supported By Strong Cash Flow
REIT Supported By Strong Cash Flow FFO 2014 Pro forma Estimate* Net income attributable to Iron Mountain (pro forma) $ 250 Real estate depreciation 180 (Gain) Loss on disposal/write-down of PP&E ---- FFO (NAREIT) $ 430 REIT Costs 30 Normalized FFO (Iron Mountain) $ 460 AFFO 2014 Pro forma Estimate*
Slide 24: REIT Conversion Costs In Line with Expectations
REIT Conversion Costs In Line with Expectations $MM FY 2012 FY 2013 Q1 2013 Q1 2014 Remainder of 2014 Outlook Total Operating Expense $34 $83 $25 $8 $20 -- $30 $145 - $155 Capital Expense $13 $23 $6 $2 $2 -- $7 $40 - $45 Total $47 $106 $31 $10 $22 -- $37 $185 - $200 Tax Payment Related to D&A Recapt
Slide 25: Iron Mountain valuation and REIT comparables
Iron Mountain valuation and REIT comparables Price/2014E FFO Normalized Price/2015E FFO Normalized Price/2014E AFFO Price/2015E AFFO 9.0x 11.3x Industrial Self Storage Non-Traditional Industrial Self Storage Non-Traditional Industrial Self Storage Non-Traditional Industrial Self Storage Non-Traditio
Slide 26: Q1 2014 Results and Definitions
Q1 2014 Results and Definitions
Slide 27: Financial Highlights
Financial Highlights Q1 2013 Q1 2014 % Change YTD 2013 YTD 2014 % Change Storage Rental $442,469 $458,889 3.7% $442,469 $458,889 3.7% Service Revenue 304,562 311,237 2.2% 304,562 311,237 2.2% Total Revenue 747,031 770,126 3.1% 747,031 770,126 3.1% Gross Margin $425,955 $434,981 2.1% $425,955 $434,98
Slide 28: Components of Year-over-Year Revenue Growth
Components of Year-over-Year Revenue Growth Revenue Growth Rates Reported 3.7% 2.2% 3.1% 3.7% 2.2% 3.1% Impact of FX Rate Changes and Adjustments (1.6)% (1.6)% (1.6)% (1.6)% (1.6)% (1.6)% Constant Currency 5.3% 3.8% 4.7% 5.3% 3.8% 4.7% Impact of Acquisitions and Dispositions 4.0% 4.5% 4.2% 4.0% 4.5%
Slide 29: Operating Performance Q1 Results
Operating Performance Q1 Results 3 % Growth Q1 2013 Q1 2014 Reported Impact of FX Rate Changes and Adjustments Constant Currency Impact of Acquisitions and Dispositions Internal Growth NA Records and Information Management Storage Revenue $263,999 $268,523 1.7% (1.3)% 3.0% (3.3)% (0.3)% Service Reve
Slide 30: Balance Sheet
Balance Sheet ASSETS 12/31/2013 3/31/2014 Current Assets: Cash and Cash Equivalents 120,526 169,906 Restricted Cash 33,860 33,860 Accounts Receivable, Net 616,797 626,116 Other Current Assets 162,424 157,747 Total Current Assets 933,607 987,629 Property, Plant and Equipment: Property, Plant and Equi
Slide 31: Reconciliation of Net Income Attributable to IRM to Adjusted OIBDA
Reconciliation of Net Income Attributable to IRM to Adjusted OIBDA 1 Includes Realized and Unrealized FX (Gains) Losses 2 Excludes Realized and Unrealized FX (Gains) Losses Q1 2013 Q1 2014 % Change YTD 2013 YTD 2014 % Change Net Income Attributable to Iron Mountain $19,386 $41,667 114.9% $19,386 $41
Slide 32: Reconciliation of Net Income Attributable to IRM to FFO & AFFO
Reconciliation of Net Income Attributable to IRM to FFO & AFFO Q1 2013 Q1 2014 % Change YTD 2013 YTD 2014 % Change Net Income Attributable to Iron Mountain $19,386 $41,667 114.9% $19,386 $41,667 114.9% Add: Real Estate Depreciation 42,851 46,264 8.0% 42,851 46,264 8.0% (Gain) Loss on Disposal/Write-
Slide 33: Portfolio Utilization
Portfolio Utilization 1 Iron Mountain operates their storage operations to achieve a maximum utilization of between 94 – 98% to achieve maximum operating efficiency
Slide 34: Service Business Detail
Service Business Detail Q1 2013 Q1 2014 % Change YTD 2013 YTD 2014 % Change Service Operations by Product Line Records Management 151,851 158,314 4.3% 151,851 158,314 4.3% Data Protection 53,282 50,503 (5.2)% 53,282 50,503 (5.2)% Shredding 64,789 63,773 (1.6)% 64,789 63,773 (1.6)% Other 1 34,640 38,
Slide 35: Customer Data
Customer Data YTD 2014 FY 2013 FY 2012 FY 2011 Customer Quality Metrics Volume Retention Rate (RM Global) 92.6% 92.6% 92.7% 92.6% Bad Debt Expense as a % of Consolidated Revenues 0.6% 0.4% 0.3% 0.3% Turnover Expenditures (Storage Only) Q1 2014 YTD 2014 Sales, Marketing & Account Management 32,506 32
Slide 36: Debt Schedule
Debt Schedule1 Debt, Net of Cash $4,173,783 Weighted Average Interest Rate 5.8% Weighted Average Maturity 6.5 years As of 3/31/14 1 Excludes mortgages
Slide 37: Capitalization
Capitalization Senior and Senior Subordinated Notes Issuance Date 1/15/07 9/20/11 8/13/13 8/10/09 8/13/13 8/7/12 Denomination EUR USD CAD USD USD USD Exchange Rate (end of Quarter) 1.3768 1.0000 0.9051 1.0000 1.0000 1.0000 Original Principal Amount € 255,000 $400,000 CAD 200,000 $550,000 $600,000 $1
Slide 38: Lease Obligations
Lease Obligations1 Weighted Average Remaining Lease Obligations (ex. Options) 5.8 years Weighted Average Remaining Lease Obligations (inc. Options) 13.3 years 1 Includes capital and operating lease obligations
Slide 39: Appendix Non-GAAP Measures
Appendix Non-GAAP Measures Non-GAAP measures are supplemental metrics designed to enhance our disclosure and to provide additional information that we believe to be important for investors to consider when evaluating our financial performance. These non-GAAP measures should be considered in addition
Slide 40: Appendix Non-GAAP Measures (continued)
Appendix Non-GAAP Measures (continued) Adjusted Funds From Operations, or AFFO AFFO is defined as FFO (Normalized) excluding non-cash rent expense or income, plus depreciation on non-real estate assets, amortization expense (including amortization of deferred financing costs) and non-cash equity com
Slide 41: Appendix Definitions
Appendix Definitions Business Segments North American Records and Information Management Business (“RIM’)—storage and information management services throughout the United States and Canada, including the storage of paper documents, as well as other media such as microfilm and microfiche, master aud
Slide 42: Appendix Definitions (continued)
Appendix Definitions (continued) Capacity Measures Building Capacity – The maximum number of cubic feet of records or standard DPUs that can be stored in a given facility. Building Capacity Utilization – The number of cubic feet of records or standard DPUs in storage divided by the Building Capacity
Slide 43: Appendix Definitions (continued)
Appendix Definitions (continued) Constant Dollar Growth (C$) – The year-over-year growth rate excluding the impact of changes to foreign currency exchange rates. Customer Volume Retention Rate – One minus the result of dividing the total number of cubic feet of records removed from inventory due to
Slide 44: Appendix Definitions (continued)
Appendix Definitions (continued) ROIC – Defined as net operating profit after tax (NOPAT) plus depreciation & amortization less non-growth CapEx divided by Average Invested Capital. NOPAT is defined as Adjusted OIBDA less depreciation & amortization, at the structural tax rate of approximately 40% f