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| 8-K/A - 8-K/A - IRON MOUNTAIN INC | amendment-irm8xkq12018earn.htm |
Q1 2018
Quarterly Results
Conference Call
April 26, 2018
Safe Harbor Language and
Reconciliation of Non-GAAP Measures
2
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-
harbor created by such Act. Forward-looking statements include, but are not limited to, our financial performance outlook and statements concerning our operations, economic performance,
financial condition, goals, beliefs, future growth strategies, investment objectives, plans and current expectations such as 2018 guidance, and statements about our investment and other goals.
These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors. When we use words such as "believes," "expects," "anticipates,"
"estimates" 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: (i) our ability to remain qualified for taxation as a real estate investment trust for U.S. federal income tax purposes ("REIT"); (ii) the adoption of alternative technologies and shifts
by our customers to storage of data through non-paper based technologies; (iii) changes in customer preferences, and demand for our storage and information management services; (iv) the
cost to comply with current and future laws, regulations and customer demands relating to data security and privacy issues, as well as fire and safety standards; (v) the impact of litigation or
disputes that may arise in connection with incidents in which we fail to protect our customers' information; (vi) changes in the price for our storage and information management services
relative to the cost of providing such storage and information management services; (vii) changes in the political and economic environments in the countries in which our international
subsidiaries operate and changes in the global political climate; (viii) our ability or inability to manage growth, expand internationally, complete acquisitions on satisfactory terms, to close
pending acquisitions and to integrate acquired companies efficiently; (ix) changes in the amount of our growth and maintenance capital expenditures and our ability to invest according to plan;
(x) our ability to comply with our existing debt obligations and restrictions in our debt instruments or to obtain additional financing to meet our working capital needs; (xi) the impact of service
interruptions or equipment damage and the cost of power on our data center operations; (xii) changes in the cost of our debt; (xiii) the impact of alternative, more attractive investments on
dividends; (xiv) the cost or potential liabilities associated with real estate necessary for our business; (xv) the performance of business partners upon whom we depend for technical assistance
or management expertise outside the United States; (xvi) other trends in competitive or economic conditions affecting our financial condition or results of operations not presently
contemplated; and (xvii) other risks described more fully in our filings with the Securities and Exchange Commission, including under the caption “Risk Factors” in our periodic reports, or
incorporated therein. You should not rely upon forward-looking statements except as statements of our present intentions and of our present expectations, which may or may not occur. Except
as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
Reconciliation of Non-GAAP Measures:
Throughout this presentation, Iron Mountain will discuss (1) Adjusted EBITDA, (2) Adjusted Earnings per Share (“Adjusted EPS”), (3) Funds from Operations (“FFO Nareit”), (4) FFO
(Normalized) and (5) Adjusted Funds from Operations (“AFFO”). These measures do not conform to accounting principles generally accepted in the United States (“GAAP”). These 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 in addition to, but
not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as operating income, income (loss) from continuing operations, net income (loss) or
cash flows from operating activities from continuing operations (as determined in accordance with GAAP). The reconciliation of these measures to the appropriate GAAP measure, as required
by Regulation G under the Securities Exchange Act of 1934, as amended, and the definitions are included in Supplemental Financial Information. 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, including, most notably, the impact of exchange rates on Iron Mountain’s transactions, loss or gain related to the disposition property, plant and
equipment (including of real estate) and other income or expense. Without this information, Iron Mountain does not believe that a reconciliation would be meaningful.
Selected metrics definitions are available in the Appendix.
2018 Off to a Solid Start
3
Strong Q1 ‘18 performance supported by storage rental durability and margin expansion
• Revenue up 11%, Adjusted EBITDA up 17% and AFFO up 30% with 170 bps expansion of Adjusted EBITDA margin
• AFFO growth of 20% including increase in share count, supports targeted dividend per share growth of ~7% for 2018
• Completed IO and Credit Suisse data center acquisitions, and integration well on track
Core business continues to perform well
• Continued worldwide positive internal volume growth
• Improved revenue management continues to more than offset moderating internal volume growth in developed markets
• Continuing to see solid internal revenue growth and attractive acquisition opportunities in Emerging Markets
Healthy growth in key operating metrics
• Strong 3.7% internal storage revenue growth exceeds 3% - 3.5% target for full year
• Internal service revenue growth of 1.4% reflects growth in shredding, imaging and special projects
• Total internal revenue growth of 2.8% represents highest level reported in more than three years
Note: Definition of Non-GAAP and other measures and reconciliations of Non-GAAP to GAAP measures can be found in the Supplemental Financial Information
Data Center Growth Enhances 2020
Plan and Accelerates Long-term Growth
4
80%
Developed Portfolio
North America
and Western Europe
Q1’18: ~2% Internal
Revenue Growth
20%
Growth Portfolio
Emerging Markets, Data
Center and Adj. Businesses
Q1’18: 8% Internal
Revenue Growth
2% 10%
3.5%+ Average Internal Adj. EBITDA Growth
Q1 ’18 Revenue Mix
Adjusted EBITDA Growth
70%
Developed Portfolio
North America
And Western Europe
30%
Growth Portfolio
Emerging Markets, Data
Center and Adj. Businesses
3% 10%
5%+ Average Internal Adj. EBITDA Growth
2020 Revenue Mix
Adjusted EBITDA Growth
Note: Emerging Markets is Other International, excluding Australia and New Zealand
5
Continued Execution of Strategic Plan
Driving Growth and Margins in Developed Markets
• Achieved 2.9% internal storage revenue growth despite net internal volume decrease of (0.5%),
consistent with annual guidance provided on Q4’17 call
• Making further inroads in U.S. Federal business
Invested in Faster-growing Businesses: Data Centers and ABOs
• Q1 data center investment includes IO and Credit Suisse acquisitions and build out of data halls in
Phoenix, Denver and New Jersey with good pre-leasing
• Pending Artex (fine art) acquisition continues industry roll-up strategy adding museum services
Continued Strong Internal Growth in Emerging Markets(1)
• Achieved 5.6% internal storage rental revenue growth in Q1
• Expanded presence and leadership through acquisitions in existing markets
(1) Emerging Markets is Other International, excluding Australia and New Zealand.
2018 Guidance
Disciplined Capital Allocation Designed to
Maximize Returns
Lease Adjusted Net Debt to EBITDAR(1)
6
Dividend as % of AFFO(3)
6.0X 4.0X
4.5X
5.0X
85% 65%
70%75%
Optimal Range(2)
Sources of capital:
• Growth in operating cash flow
• Secured and unsecured borrowings
• Real estate capital recycling
• ATM program or other equity
ROIC hurdle rate above WACC
5.0X
Optimal Range
4.5X
(1) See definition in the appendix of the Supplemental Financial Information
(2) Most restrictive Credit Facility covenant is lease adjusted net debt/EBITDAR of 6.5x.
(3) Targeted dividend increase of 4% annually through 2020
2020 Target
~73%
5.5X
81%
Solid Worldwide Financial Performance
7
Growth
(1) Reflects adjusted gross profit, excluding Significant Transaction Costs; reconciliation can be found in the Supplemental Financial Information on Page 5
(2) Reconciliation for Adjusted EBITDA and AFFO to their respective GAAP measures can be found in the Supplemental Financial Information on Pages 13 and 15, respectively
$ and shares in mm Q1-17 Q1-18 R$ C$ Internal
Growth
Revenue $939 $1,042 11.0% 8.0% 2.8%
Storage $572 $651 13.8% 10.7% 3.7%
Service $367 $391 6.7% 3.7% 1.4%
Adjusted Gross Profit(1) $520 $594 14.2%
Gross Profit Margin(1) 55.4% 57.0% 160 bps
Income from Continuing Operations $59 $46 (22.5%)
Adjusted EBITDA(2) $293 $343 17.2% 13.9%
Adjusted EBITDA Margin 31.2% 32.9% 170 bps
Net Income $59 $45 (22.8%)
AFFO(2) $171 $222 29.6%
Dividend/Share $0.550 $0.588 6.9%
Fully Diluted Shares Outstanding 265 286 8.0%
Strong Internal Revenue Growth in Q1
Developed
Markets(1)
Other
International(2) Total
Internal Revenue Growth
Storage 2.9% 5.6% 3.7%
Service 1.0% 4.4% 1.4%
Total 2.1% 5.1% 2.8%
% of Total Revenue by Segment
Storage 43.9% 12.6% 62.5%
Service 29.3% 7.3% 37.5%
8
(1) Represents North America Records and Information Management, North America Data Management and Western Europe reporting segments
(2) Other International represents emerging markets, Australia and New Zealand
Quarterly segment operating performance can be found on Page 10 of the Supplemental Financial Information
Solid Adjusted EBITDA Margin
Performance Across Segments
9
Adjusted EBITDA Q1 2017 Q1 2018 Change in bps
North America RIM 41.3% 42.8% 150
North America DM 54.8% 53.9% (90)
Western Europe 28.4% 32.2% 380
Other International 29.2% 29.2% 0
Global Data Center 24.2% 44.6% 2040
Total 31.2% 32.9% 170
Reconciliation for Total Adjusted EBITDA to its respective GAAP measure can be found in the Supplemental Financial Information on Page 13
Competitive Capital Structure
10
Source: J.P. Morgan REIT Weekly U.S. Real Estate report April 9, 2018 and company reports
Net Leverage Across REIT Sectors IRM vs. Industry
2020 Plan(1): Profitable, Sustainable Growth
11
(1) Updated to reflect 2017 actuals and 2018 Guidance, including adoption of revenue recognition standards and expansion of data center business. 2020 ranges at 2018 C$ rates.
(2) Assumes Real Estate and Non-Real Estate Maintenance CapEx and Non-Real Estate Investment of 4% of Total Revenue for 2020.
(3) Assumes 287 million shares outstanding for 2018 increasing to 295 to 300 million shares outstanding in 2020, reflecting long-term incentive comp and potential issuances under existing ATM program.
Lease Adjusted Leverage Ratio – Year-End
5.5x
~5.0x
2018E 2020E
$1,260
$1,680 –
$1,760
2017 Actual 2020E
$3,846
$4,600 –
$4,750
2017 Actual 2020E
Worldwide Revenue ($ in MM)
Adjusted EBITDA ($ in MM)
$2.35
$2.54
2018E 2020E
Projected Minimum Dividend per Share(3)
$752
$1,000 -
$1,070
2017 Actual 2020E
AFFO Growth(2) ($ in MM)
Key Takeaways
12
Quarter punctuated by strong total revenue growth and 3.7% internal storage rental revenue growth
Driving continued improvement in Adjusted EBITDA margins
Continuing to execute against our strategic plan to shift revenue mix to faster growing businesses
On track with deleveraging and dividend payout ratio goals, while growing our dividend per share
Accelerating growth in Data Center enhances 2020 plan and creates long-term growth platform
Prudent capital management to drive further shareholder returns
Appendix
2018 Guidance
14
• Expected internal storage rental revenue growth of 3% - 3.5% and total internal revenue growth of 2% - 3%
• Revenue recognition standards: expect to benefit Revenue by $7 mm and Adjusted EBITDA by approximately $15mm. No benefit is
expected for Adjusted EPS or AFFO.
• D&A is expected to be $640 - $660 million; Interest expense is expected to be $415 mm to $425 mm and cash taxes $65 mm to $75 mm
• Expect structural tax rate in the range of 18% - 20%
• Assumes full-year weighted average shares outstanding of 287 mm
• Real Estate and Non-Real Estate maintenance CapEx and Non-Real Estate Investments expected to be $155 to $165 mm
• Real Estate Investment and Innovation of $150 mm to $160 mm
• Optimizing real estate portfolio through capital recycling opportunities
• Base business acquisitions (~$150 mm) plus acquisitions of customer relationships and inducements (~$60 mm), excl. data center
acquisitions
• Data Center growth investment expected to be ~$185 mm excluding future acquisitions
$ in MM except Earnings per Share
2018
C$ Guidance
2018
C$ Growth
Revenue $4,160 - $4,260 7% - 9%
Adjusted EBITDA $1,435 - $1,485 12% - 16%
Adjusted EPS Fully Diluted $1.00 - $1.20 (15)% - 2%
AFFO $805 - $865 5% - 13%
Note: 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, including, most notably, the impact of exchange rates on Iron Mountain’s transactions, loss or gain related to the disposition of real estate and
other income or expense. Without this information, Iron Mountain does not believe that a reconciliation would be meaningful.
Increasing Cash Available for Dividends
and Discretionary Investments
15
$155
$185
$100
$100
$490
$150
Real Estate
Investment and
Innovation(2)
Data Center
Growth
Credit Suisse
Incremental
Capital
for
Discretionary
Investments
from
borrowing,
ATM and
capital
recycling
Growth
Investments(3)
Sources(3)
(1) Customer inducements and acquisitions of customer relationships are not deducted from AFFO as they represent discretionary growth investment
(2) Includes core growth racking and excludes Northern Virginia Data Center development under capital lease
(3) Excludes the capital associated with IO Data Centers acquisition, which closed on January 10, and future data center acquisitions. Represents midpoint of ranges.
Note: 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, including, most notably, the impact of exchange rates on Iron Mountain’s transactions, loss or gain related to the
disposition of real estate and other income or expense. Without this information, Iron Mountain does not believe that a reconciliation would be meaningful.
Base Acquisitions
$ in MM
Adjusted EBITDA 1,435$ 1,485$
Non-cash stock compensation /
other (including non-cash permanent withdrawal fees)
45 45
Adjusted EBITDA and non-cash expenses 1,480$ 1,530$
Less: Amortization of capitalized sales commissions 20 20
Cash interest and normalized cash taxes 500 480
Total maintena ce CapEx and non-real estate investment 165 155
Customer inducements and acquisition of customer relationships (1) 60 60
Cash available for dividends and investments 735$ 815$
Expected common dividend to be declared 675 675
Cash available for core and discretionary investments 60$ 140$
2018E
Storage Continues to Drive Growth
16
10.5%
49.1%
18.7%
Records Management
Secure Shredding
Adjacent Businesses
Data Management
Data Center
Digital Solutions
Q1’18
Service Revenue
38% of total revenues
28% gross profit margin
Q1’18
Storage Revenue
62% of total revenues
74% gross profit margin
19%
of adjusted
gross profit
81%
of adjusted
gross profit
47.0%
9.1%
0.5%
1.5%
4.4%
9.7%
18.3%
0.8%
4.3%
0.1%
4.4%
Developed and Other International
RM Volume
Developed Markets
17
Other International
(1) Q2-17 cube growth has been adjusted to reflect required regulatory divestments in IRM’s legacy Australian business.
(2) Represents CuFt acquired at close. CuFt activity post close flows through new sales, new volume from existing customers, destructions, outperms / terms as appropriate.
Acquisitions/ dispositions reflects business acquisition volume net of dispositions required by Recall transaction and sale of Russia / Ukraine business.
(3) Acquisitions of customer relationships are included in new sales as the nature of these transactions is similar to new customer wins.
(2) (3)
9.9%
-4.3%
11.2%
-3.7%
10.5%
Q2-16
5.2%
-4.6%
86.9%
-4.5%
-4.4%
Q3-16
67.5%
5.9%
11.4%
54.6%
-5.3%
7.3%
Q1-17
1.8%
-5.3%
3.3%
7.6%
3.0%
-2.8%
-3.6%
Q2-17
-0.2%
7.8%
-3.5%
Q3-17
7.6%
-2.8%
Q4-17
1.8%
-2.8%
-3.0%
Q1-18
87.0%
5.4%
61.7%
3.0% 4.3%
6.0% 5.7%
-1.4%
-3.2%
-2.7%
2.6%
80.4%
Q4-16
-4.2%
80.2%
4.8%
2.4%
75.1%
5.2%
-1.7%
Q1-18
2.0%
-1.6%
16.0%
1.7%
Q2-16
-4.4%
16.3%
5.3%
15.3%
-5.0%
-1.7%
4.0%
-5.2%
15.6%
2.1%
-5.2%
5.2%
-1.7%
-4.3%
Q4-16
15.7%
1.8%
2.4%
2.1%
4.4%
-4.5%
-1.6%
Q2-17
-1.7%
0.3% 0.3%
2.0%
-4.3%
-1.7%
Q4-17
0.1%
2.2%
0.5%
2.2%
0.3%
-0.4%
Q3-17
-1.7%
5.2%
17.1%
-4.9%
4.1%
16.5%
Q3-16
14.6%
Q1-17
2.2%
3.9%
(1)
-0.4%