Durable Business Drives Cash Flow and Dividend Growth - - PowerPoint PPT Presentation
Durable Business Drives Cash Flow and Dividend Growth February/March 2019 2 Safe Harbor Language and Reconciliation of Non-GAAP Measures Note: Selected metrics are defined in the appendix of our Q4 2018 Supplemental Financial Information.
February/March 2019
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Note: Selected metrics are defined in the appendix of our Q4 2018 Supplemental Financial Information. All forward looking statements included herein are current as of reporting the Company’s fourth quarter results on February 14, 2019.
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Note: Statistics as of 12/31/18 unless otherwise stated (1) Other revenues include Information Governance and Digital Solutions, Consulting, Entertainment Services, Fine Art Storage, Consumer Storage and other ancillary services (2) FY 2018 revenue mix
Global Footprint Business Mix
6 CONTINENTS ~50 COUNTRIES
225,000+
customers
~95%
Fortune 1000 companies
90MM+
SF of real estate
Records Management 63% Shredding 10% Data Protection 12% Other(1) 10%
1,450+
Facilities
Revenue: $4.2B(2)
Data Center 5%
6 $17 BILLION+ Owned real estate globally 690 MILLION+ Cubic feet of hardcopy records archived DIGITAL SOLUTIONS 627 million images scanned annually SECURE SHREDDING ~10% of total global revenue IRON CLOUDTM Data protection, preservation, restoration and recovery 30 MILLION Film and sound elements protected and preserved 98 PERCENT Customer retention rate ~350 MEGAWATTS Existing and potential data center capacity
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Extend Business Model to Fast-Growing Businesses Build on Customer Relationships and Trust to Leverage Brand
Sustainable Growth in Cash Flow and Dividends per Share
Grow Durable High-Margin Business
Sustainable Growth in Cash Flow and Dividends per Share
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75% Developed Portfolio
North America and Western Europe FY18: ~2.8% Organic Revenue Growth
25% Growth Portfolio
Emerging Markets, Data Center and Adj. Businesses FY18: ~6% Organic Revenue Growth
~4.0%+ Average Organic Adj. EBITDA Growth
Q4’18 Revenue Mix ~3.6% Organic Revenue Growth 70% Developed Portfolio
North America and Western Europe ~3% Organic Revenue Growth
30% Growth Portfolio
Emerging Markets, Data Center and Adj. Businesses ~10% Organic Revenue Growth
~5%+ Average Organic Adj. EBITDA Growth
2020 Revenue Mix Target ~5% Organic Revenue Growth
Note: Developed Portfolio also includes Australia and New Zealand; revenue mix as of Q4’18 on a constant dollar basis
+ Margin Expansion + Margin Expansion
62% of Total Revenue
2.4% 2.3% 2.4% 3.0% 2.9% 2014 2015 2016 2017 2018
Organic Storage Revenue Growth Rolling 3-Year Average
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0.2% 0.8% 1.2% 1.7% 2.4% 2.7% 2014 2015 2016 2017 2018 2019E
Organic Total Revenue Growth Rolling 3-Year Average
(1) Based on midpoint of 2019 Organic Total Revenue Growth guidance as of 2/14/19 38% of Total Revenue
(1)
1.5% 2014 2015 2016 2017 2018
Organic Service Revenue Growth Rolling 3-Year Average
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29.7% 30.6% 31.0% 32.8% 34.0% 34.3% 2014 2015 2016 2017 2018 2019E
Total Adjusted EBITDA Margins
17.5% 16.5% 17.5% 19.5% 22.0% 2014 2015 2016 2017 2018
Service Adjusted EBITDA Margins
69.5% 69.7% 69.2% 69.7% 68.7% 2014 2015 2016 2017 2018
Storage Adjusted EBITDA Margins
(1) Based on midpoints of 2019 EBITDA and revenue guidance range as of 2/14/19 Note: 2018 Adjusted EBITDA margins were impacted by adoption of Revenue Recognition standard; normalized for the change, 2018 Total Adjusted EBITDA margin, Storage Adjusted EBITDA margin, and Service Adjusted EBITDA margin would have been 33.4%, 68.9%, 20.8%, respectively.
(1)
80% of Total Gross Profit 20% of Total Gross Profit
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0% 20% 40% 60% 80% 100% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Recall divestiture impact
IRM Retention Rate – North America
~35% of boxes that were stored 22 years ago still remain
Box Age (Years) Source: Iron Mountain Propriety Safekeeper Plus Inventory Management System, as of 8/31/18
51% of boxes that were stored 15 years ago still remain
< 3 4-6 7-9 10-12 13-15 16-18 19-21 >22
Age of Inventory (Years)
2012 2018 (Annualized)
% of inventory destroyed
Destructions by Age as % of Ending Inventory
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2012 TTM Destruction Rate: 4.9% 2018 TTM Destruction Rate: 5.0%
Source: Iron Mountain Propriety Safekeeper Plus Inventory Management System for North America, as of 8/31/18
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(1) Excludes government and SMB (<250 employees), Legal (<100 employees) and others. BCG analysis is as of April 2016. Source: BCG document storage survey; Avention; BCG analysis
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Estimated Un-vended Opportunity(1)
BCG Survey of >700 existing and potential respondents, as well as 70 in-depth interviews with large North America customers across six verticals, excluding government
Total ~1.9 B CuFt
Wholly Un-Vended
Vended
In-House with Vended Customers
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9 10 14 15 15
5 5 7 7 5 2014 2015 2016 2017 2018 STORAGE VOLUME GROWTH
CuFt in MM
Intake Loss/Destructions Net Growth
19% 21% 25% 27% 28%
2014 2015 2016 2017 2018 ADJUSTED EBITDA MARGIN
Emerging Markets defined as Other International excluding Australia and New Zealand
7.1% Organic Storage Rental Revenue Growth in 2018
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(1) Reflects planned expansion into Chicago and Frankfurt, assumes organic growth.
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sector and Highly Regulated industries
deal generation and cross-selling
resonates with customers
U.S., Europe and Asia
350MW total potential capacity
and Frankfurt, a top U.S. and a top Int’l market, respectively
60MW hyperscale ready Phoenix
campus expansion
Phoenix Campus Expansion – AZP-2
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Snapshot as of 12/31/18
Recent Data Center Expansion Timeline
Source: Company financials as of 12/31/18 (1) Phase 1 of Manassas VA data center facility of 10.5MW; Total development capacity of 60MW (2) Based on existing and potential MW capacity (3) Includes Singapore on long term ground lease and facilities with purchase options (4) Source: Eastdil, as of 6/30/18
expected in 2019
Data Center Platform estimated market value of $2.4B4
Phoenix New Jersey Boyers and Other Denver Amsterdam NoVA London Singapore
Geographical Diversification
(by Existing Capacity in MW) Fortrust $130M +16MW
Sep 2017
CS Assets $100M +14MW3
Mar 2018
I/O Data Center $1.3B +139MW
Jan 2018
EvoSwitch $235M +34MW
May 2018
Phase 1 NoVa Facility1,2 $350M +60MW
July 2018
Phoenix Facility Expansion $460M +60MW2
Dec 2018 Feb 2019
Chicago Added Development Capacity +36MW Frankfurt Added Development Capacity +20MW
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(1) Includes Singapore on long term ground lease and facilities with purchase options (2) Based on total expected investment as of 12/31/2018 (3) Based on total 28.9M owned square feet as of 12/31/18
Attractive market locations
Top 5 US Markets
# Market SF owned %3 1 Northern New Jersey 2,086 10.0% 2 Boston 1,428 6.8% 3 Chicago 1,282 6.1% 4 Los Angeles 1,040 4.9% 5 Dallas 1,023 4.9% Top 5 Markets 6,859 32.6% Other US Markets 14,166 67.4% Total US Markets 21,025 100.0%
Top 5 International Markets
Owned Portfolio Overview as of 12/31/18
# Market SF owned %3 1 Paris, France 807 10.2% 2 London, UK 674 8.6% 3 Montreal, Canada 552 7.0% 4 Buenos Aires, Argentina 470 6.0% 5 Mexico City, Mexico 452 5.8% Top 5 International Markets 2,955 37.6% Other International Markets 4,905 62.4% Total International Markets 7,860 100.0%
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and global markets
MSAs4
95K SF
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Square feet3 Data Center Value ($BN)2 Strategy – RIM
Owned real estate
F/X risk efficient structure)
28.9M $2.4B
(100%)
61.0M
real estate
68% 10% 5% 17%
US Rest of the world
Geography1,6 RIM Value1 ($BN)
$2.5B Land & Bldg. + $12.3B Infra.
(75%)
$4.8B
(25%)
(1) Based on U.S. real estate valuation completed by Eastdil and IRM management estimates for rest of world; includes value of racking. See slide 29 in Appendix for methodology. (2) Assumes a 6.3% cap rate on stabilized NOI plus cost of current development + 15% plus land value (3) Based on square feet as of 12/31/18 (4) Top MSAs defined as MSAs with the largest populations according to 2010 Census (5) Includes Singapore on long term ground lease and facilities with purchase options (6) Data center business included in U.S. segment
and fast growing data center markets
IRM global data center portfolio5
support enterprise / cloud Strategy – Data center
UK Canada
58% 8% 6% 28%
US Rest of the world UK Canada
$17.2B $4.8B
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Case study – Disposition (London, UK)
six miles east of city center
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Excess or inefficient real estate Better/best use – Sale generates
Capital recycling opportunities Building improvements Data center development / expansion Emerging market expansion / M&A Target IRR: 15% Target IRR: 15% Target IRR: >15%
Real Estate capital recycling strategy
create long-term value for shareholders
Higher-use real estate alternatives
Iron Mountain Storage Industrial Iron Mountain DC Data Center Tenant Improvements/SF N/A ~$2 - $4 N/A N/A Recurring Capex ~3% 8% ~3% 3% Average Lease Term Large Customers: 3 Yrs Small Customers: 1 Yr ~5 Yrs 3.56 Yrs ~4 Yrs Customer Retention ~98% ~76% 90-95% ~93% Customer Concentration Very Low Low Medium Medium Stabilized Occupancy (Building & Racking Utilization) Building: 80% to 85% Racking: 90% to 95% 97% 90%+ 90% EBITDA Margin 70-75% 73% 50%+ 52%
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Source: Company filings as of 12/31/2018. Note: Peer statistics represent FY 2017 numbers. Industrial peer group includes PLD, DRE, FR, EGP and STAG; Data center peer group includes DLR, EQIX, COR, QTS and CONE. (1) IRM recurring CapEx as a percentage of total revenue. (2) EBITDA Margin for IRM is Storage Gross Margin; (Adjusted) EBITDA Margin for IRM in 2018 was 34.0%. (3) Represents IRM data center margins once stabilized.
(1) (2) (3)
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Source: J.P. Morgan REIT Weekly U.S. Real Estate report February 11, 2019 and company reports, using simple averages of leverage across composite
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$155 $185 $335 $100 $490 $150 Discretionary Investments(3) Sources(3)
(1) Customer inducements and 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 possible future data center acquisitions. Note: Guidance as of 2/14/19. 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.
~$95 $175 $380 $150 $100+ $250
Capital Recycling Base Acquisitions Data Center Development Capex Incremental Capital Needed for Discretionary Investments
in $MM
$ in MM Adjusted EBITDA 1,420 $ 1,530 $ Non-cash stock compensation /
54 54 Adjusted EBITDA and non-cash expenses 1,474 $ 1,584 $ Cash interest and normalized cash taxes 480 500 Total recurring CapEx and non-real estate investment 145 155 Customer inducements, relationships and other (1) 90 95 Cash available for dividends and investments 759 $ 834 $ Common dividend declared 703 703 Cash available for core and discretionary investments 56 $ 131 $ 2019E
Real Estate Investments and Innovation2
Less:
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Leading Global Information Management Brand with a Durable, Growing Business Strong Cash Flow Generation with Increasing Margins Increasing Exposure to High Growth Markets with Powerful Secular Tailwinds Strategic Plan Drives Sustainable Dividend Growth and Future Investments Disciplined Capital Allocation Designed to Maximize Returns
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Growth
(1) Reflects adjusted gross profit, excluding Significant Acquisition Costs; reconciliation can be found in our Q4 2018 Supplemental Financial Information on Page 5 (2) Reconciliation for Adjusted EBITDA and AFFO to their respective GAAP measures can be found in our Q4 2018 Supplemental Financial Information on Pages 15 and 17, respectively
$ and shares in mm Q4-17 Q4-18 Y/Y % Constant Currency Y/Y% Organic Growth Revenue $991 $1,061 7.1% 9.9% 3.5% Storage $614 $659 7.3% 9.9% 1.9% Service $377 $402 6.7% 9.8% 6.1% Adjusted Gross Profit(1) $570 $611 7.2%
Adjusted Gross Profit Margin(1) 57.5% 57.5%
$24 $159 NA Adjusted EBITDA(2) $327 $360 10.1% 12.3%
Adjusted EBITDA Margin(2) 32.9% 33.9% 100 bps
Net Income $21 $159 NA AFFO(2) $154 $194 25.9% Dividend/Share $0.5875 $0.6110 4.0% Fully Diluted Shares Outstanding 271 287 5.7%
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Growth
(1) Reflects adjusted gross profit, excluding Significant Acquisition Costs; reconciliation can be found in our Q4 2018 Supplemental Financial Information on Page 5 (2) Reconciliation for Adjusted EBITDA and AFFO to their respective GAAP measures can be found in our Q4 2018 Supplemental Financial Information on Pages 15 and 17, respectively
$ and shares in mm FY-17 FY-18 Y/Y % Constant Currency Y/Y % Organic Growth Revenue $3,846 $4,226 9.9% 10.2% 3.6% Storage $2,378 $2,622 10.3% 10.6% 2.4% Service $1,468 $1,603 9.2% 9.7% 5.4% Adjusted Gross Profit(1) $2,181 $2,432 11.5%
Adjusted Gross Profit Margin(1) 56.7% 57.5% 80 bps
Income from Continuing Operations $192 $377 96.6% Adjusted EBITDA(2) $1,260 $1,436 13.9% 14.0%
Adjusted EBITDA Margin(2) 32.8% 34.0% 120 bps
Net Income $185 $365 96.6% AFFO(2) $752 $874 16.2% Dividend/Share $2.2380 $2.3735 6.1% Fully Diluted Shares Outstanding 267 287 7.4%
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Storage metric Property locations Customer relationship Building type Building improvements Stability of demand Box units
Self-storage Industrial
Storage units Leased SF Business to business Primarily direct to consumer Business to business General proximity to CBD High visibility and close proximity are critical General proximity to customer locations Industrial / warehouse Industrial / warehouse Industrial / warehouse Significant (racking system, temperature, humidity, security) Moderate Significant (office, loading bay, etc.) High High High
Average lease term 1-3 years (15 year average life) Month to month (9-12 month average stay) 3 - 5 years (75% renewal rate)
Alternative uses Industrial / Storage Parking / warehouse Limited
Tenant improvements N/A Limited Moderate
A Top Industrial and Data Center REIT ~$19 PSF average rent spread between IRM rent PSF vs. industrial rents results in meaningful racking real estate value Majority of real estate value derived from IRM owned assets
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(1) Owned property count includes Singapore on long term ground lease and facilities with purchase options (2) Based on Eastdil valuation of U.S. owned and leased RIM properties and IRM valuation of data centers; includes building value and racking
USD $M US RoW Data Center Total Total # of Buildings1 181 117 12 312 Industrial/Storage $1,700 $800
Data Center Existing stabilized properties
2,310 Development & Land
140 Total Real Estate Value before Infrastructure $1,700 $800 $2,450 $4,950 % of total 34% 16% 49% Infrastructure (Racking) $7,520 $4,750
Total Real Estate Value2 $9,220 $5,550 $2,450 $17,220 % of total 54% 32% 14%
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U.S. RIM Buildings (excluding racking)
estate portfolio
Other RIM Buildings (excluding racking)
markets research Racking
Data Center Properties
Leaseable MW MW Under Construction in Q4 MW Held for Development Total Potential Capacity Boyers and Other 12.9
24.4 Chicago
36.0 Denver 10.6
16.2 New Jersey 12.4 1.4 16.2 30.0 Northern Virginia 7.5
60.0 Phoenix 44.6 4.0 60.9 109.4 Amsterdam 10.8 1.9 21.9 34.5 London 3.2 1.9 3.8 8.9 Singapore 1.0 1.5 3.0 5.5 Frankfurt
20.0 Total Data Center Portfolio 102.8 10.7 231.4 344.9
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Total portfolio capacity including expansion of 344.9 MW
Note: Leaseable MW as of 12/31/18; MW Held for Development as of 2/14/19
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(1) Based on FX rates as of January 4, 2019 Note: Guidance as of February 14, 2019. 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.
$ in MM 2018 Results 2018 Results at 2019 FX(1) 2019 Guidance 2019 Guidance (midpoint) Y/Y Change (vs. midpoint) Constant Currency Y/Y Change Revenue $4,226 $4,162 $4,200 - $4,400 $4,300 1.8% 3.3%
$1,436 $1,417 $1,420 - $1,530 $1,475 2.7% 4.1% EPS $1.10 $1.09 $1.08 - $1.18 $1.13 2.7% 3.7% AFFO $874 $861 $870 - $930 $900 3.0% 4.5%