Iron Mountain: We Protect What You Value Most - Investor Presentation January 2020
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Iron Mountain: We Protect What You Value Most Investor Presentation January 2020
2 Safe Harbor Language and Reconciliation of Non-GAAP Measures Forward Looking Statements Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This release 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 expected benefits, costs and actions related to Project Summit, 2019 and 2020 guidance, and statements about our investments, dividend policy (including expected increases in dividends), cost savings initiatives, the value added from recent data center deals, 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; (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 or our internal records or IT systems and the impact of such incidents on our reputation and ability to compete; (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 recurring 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; (xvi) other trends in competitive or economic conditions affecting our financial condition or results of operations not presently contemplated; (xvii) our ability to execute on Project Summit and potential impacts of Project Summit on our ability to retain and recruit employees and execute on our strategy; and (xviii) 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) attributable to Iron Mountain Incorporated 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 their definitions are included later in this document (see Table of Contents). 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. Note: Definition of these Non-GAAP and other measures and reconciliations of Non-GAAP to GAAP measures can be found in our Q2 2019 Supplemental Financial Information. All forward looking statements included herein are current as of reporting the Company’s second quarter results on August 1, 2019.
Iron Mountain Investor Presentation 3 1. Overview of the business 2. Project Summit 3. Driving EBITDA growth 4. Prudent capital allocation framework 5. Q3 2019 performance
4 OUR MISSION… TO BE THE TRUSTED GUARDIANS OF THE ASSETS MOST IMPORTANT TO OUR CUSTOMERS, SECURING THEIR PAST, PRESENT AND FUTURE VALUE.
Overview of the Business
Global Leader in Records & Information Management 6
Global Presence Significant Size & Scale
• $9B Equity Market Capitalization
• $18B Total Enterprise Value
• $4.2B2 of Annualized Revenue
• 306 Owned Facilities, 14 Operating Data Centers
• RMZ, FTSE NAREIT and S&P 500 Member
~700m Cu Ft of Records │ 1,450+ facilities │ ~92M SF
Mission Critical Storage to Numerous Industries Unmatched Diversity
Healthcare 16%
Federal 2% • Presence in ~50 countries across 6 continents
Other(1)
50% Legal 8% • Over 225,000 customers
Financial 12% • Serving ~95% of Fortune 1,000 companies
Insurance 6%
• Customers from over 50 different industries
Business Services 2% Life Sciences 3%
Energy 3%
(1) No single vertical within "Other" comprises greater than 1% of North America revenue.
(2) Q3 2019 revenue annualized.
Large Global Real Estate Footprint 7
Top 5 Owned Markets (000’s of Square Feet) at 9/30/19
United States International
Northern New Jersey 2,086 Paris 807
Boston 1,428 Montreal 552
Chicago 1,282 London 474
Los Angeles 1,040 Buenos Aries 470
$2.5B(1) Owned Real Dallas 1,023 Mexico City 452
Estate
Owned
SF
68%
32%
Leased
SF(2)
(1) Based on U.S. real estate valuation completed by Eastdil and IRM management estimates for rest of world as of 9/30/18
(2) 53.3% of Facility Lease Expirations are after 2029; weighted average remaining lease obligation 11.0 years as of 9/30/19
Large, Diversified Business 8
Business Mix Revenue Mix by Product Line
Revenue: $4.2B(2)
Fine Arts Other(1) Service 5%
4%
2% 10% 2%
Revenue
Data Center
6%
37% of total
16%
Shredding
9%
47%
Records
Management
61%
Data 9% Storage
Protection
12% Revenue
9%
6% 2% 63% of total
Records Management Data Management
Adjacent Business Secure Shredding
Data Center Digital Solutions
(1) Other revenues include Information Governance and Digital Solutions, Consulting, Entertainment Services, and other ancillary services
(2) Q3 2019 revenue annualized
Durable Records Management Business 9
• 696 Million+ Cubic Feet of
hardcopy records archived
• 98 Percent Customer
retention rate
• Steady Organic Revenue
Growth supported by
revenue management
• 50%+ of boxes stay in
facilities for 15 years on
average
Business Mix Shift Accelerating Growth 10
Healthy Revenue Growth Trends Robust Margin Expansion
Organic Total Revenue Growth Rolling 3-Yr Avg Total Adjusted EBITDA Margins (2)
2.4% 2.3% 33.7% 33.8%
32.3%
1.7%
31.0%
30.6%
1.2% 29.7%
0.8%
0.2%
(1) (1)
2014 2015 2016 2017 2018 2019E 2014 2015 2016 2017 2018 2019E
Strong Execution of Growth Strategy
• Iron Mountain has made significant progress in shifting its revenue mix to faster growing businesses, including
emerging markets, data center, and adjacent business segments
• Expanded data center footprint globally via Fortrust, I/O, Credit Suisse, and EvoSwitch acquisitions
• Targeting data center business to be 10% of Adjusted EBITDA by the end of 2020(2)
• Shift in business mix driving continued improvement in Adjusted EBITDA margins, up 140 bps YoY in 2018
• Investing in new digital solutions and further strengthening customer relationships
(1) Based on midpoint of 2019 guidance as of 10/31/19
(2) Reflects planned expansion into Chicago and Frankfurt, assumes organic growth
Note: 2018 Adjusted EBITDA margins were impacted by adoption of Revenue Recognition standard; normalized for the change, 2018 Total Adjusted EBITDA margin would have been 33.4%,Project Summit Designed to accelerate execution of strategy and continue growth
Project Summit – Key Messages 12
Simplifying Global Streamlining Managerial Enhancing Customer
Structure Structure for the Future Experience
• Uniting RIM operations under one leader • Consolidating the number of layers and • Aligning global and regional customer-
reporting levels facing resources across RIM product lines
• Rebalancing resources to sharpen focus on
higher growth areas • Reducing the number of positions at the VP • Providing customers with a more integrated
level and above by approximately 45% experience
• Reducing total managerial & administrative • Leveraging technology to modernize
workforce by approximately 700 positions processes for better alignment between
over the next two years new digital solutions and core business
• Creating a more dynamic agile organization
that is better positioned to make faster
decisions and execute its strategy in key
growth areas
Focusing on highest potential opportunities while creating a more efficient organization that can
embrace and execute change faster to become a stronger customer partnerProject Summit – Expected Financial Impact 13
Financial Impact Annual run-rate Adjusted EBITDA benefits of $200M by end of 2022
Total Cost to Implement Approximately $240M over next two years
Q4’19 Restructuring Charge ~$60M, with expected benefit delivered beginning in 2020
Expected 2020 Adjusted Expected 2020 benefit of $80M $50M benefit from 2019 actions +
EBITDA Benefit $30M benefit from 2020 in-year actions1
Program to drive significant Adjusted EBITDA benefits and enable deleveraging
1) Benefits expected to come in the second half of 2020.14 Driving EBITDA Growth
Durable, Long-Term Business Model 15
Deep and long-lasting Durable Records Management
customer relationships with business drives
950 of Fortune 1000 cash generation
Drive significant cross-selling synergies across businesses
Consistently deliver strong organic cash flow; fund future growth
Continue to support and grow strong customer relationships
Deliver targeted ~4%+ organic Adjusted EBITDA growth flowing through to AFFO exiting 2020Durable Global Storage Portfolio 16
710,000
705,000
700,000
695,000
Cubic Feet (000s)
690,000
685,000
680,000
675,000
670,000
665,000
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
Records Management Data Protection Adjacent Businesses Consumer and other Businesses
Note: Business acquisitions volume acquired during the quarter included in Total VolumeDifferentiated Data Center Offering Supports Growth 17
Iron Mountain provides a comprehensive data center solution
to solve our customers’ digital transformation challenges
• Proven track record and existing customer relationships; trusted by the world’s most regulated organizations
• 5 of Top 10 Cloud Providers are Iron Mountain Data Center customers
• Significant Cross-Sell opportunity – ~40% of new enterprise deals in YTD pipeline generated by RIM sales team
• Unmatched flexibility – ability to provide customers with a range of deployment options from one cabinet to an
entire building
• Easy access to numerous carriers, cloud providers and peering exchanges with migration support and IT
services available
• IRM data centers powered by 100% renewable energy – new Green Power Pass enables us to ‘pass’ carbon credits
to customers
• Reduced customer risk with comprehensive compliance support and highly secure colocation facilities
• Unique underground data centers are ideal for backup and disaster recovery
• Best-in-class uptime performance – six-nine’s
Enterprise retail colocation
Access to 100’s of carriers Hybrid IT and Smart hands
with the ability to serve
and cloud providers data center services services available
hyperscale requirementsLarge Data Center Platform with Growth Potential 18
Presence in Top Global Markets
Potential Capacity of ~332MW
• 2018 Full Year Revenue of $229M; Adjusted
NoVA Chicago
EBITDA of $100M
• 14 Operating Data Center facilities spanning the
U.S., Europe and Asia
Amsterdam
• 3.5M+ Gross Square Feet
• 1,300+ Data Center Unique Leases
NJ
• 90.2% Capacity Utilization (stabilized)
Boyers and
• WALE of 3.1 years
Phoenix Other
• Strong leasing momentum in 2019 with 15MW
Frankfurt signed through September
Denver
London
Singapore
~118MW of Leasable Capacity
Note: data as of 9/30/19 unless otherwise statedSignificant Data Center Expansion Opportunity 19
Leaseable Under Held for Total Potential
Market
MW Construction Development Capacity
Amsterdam 12.1 1.0 21.0 34.1
Boyers and Other 14.2 -- 11.2 25.4
Chicago -- -- 36.0 36.0
Denver 11.3 -- 3.1 14.4
Frankfurt -- -- 27.0 27.0
London 5.1 -- 3.8 8.9
New Jersey 14.1 1.5 10.0 25.6
Northern Virginia 7.5 7.0 45.5 60.0
Phoenix 50.7 -- 44.0 94.7
Singapore 2.6 -- 3.0 5.6
Total Data Center Portfolio 117.6 9.5 204.5 331.6
Total portfolio capacity including expansion of 331.6 MW
Note: as of 9/30/19Strong Execution of “Other International” Strategy 20
39 countries $820m+ Revenue(1) Expanding Margins
38%
62%
Storage Service
Strong Storage base –
192m CuFt inventory(2) Margin expansion as
4 regions
Focus on Storage- business scales
480 facilities
attached Services Executing on value
~30,000 customers creating M&A to strengthen
Customer outsourcing in
>15,000 employees early stages market positions
(1) 2018 annual revenue
(2) As of 9/30/19Long-Term Margin Drivers Support Growth 21
Emerging
Markets
• Organic growth provides scale
and efficiency
• Strong market positions support
margin expansion
Emerging Markets
Data Center
• Building development pipeline
• Fastest growth segment with highest margins
Expansion of Records
Continuous Management Margins
Improvement
• Revenue Management
• Continuous ImprovementFaster Growing Adjacent Businesses 22
Fine Art Storage Entertainment Services
• Global leader in fine art storage and logistics; strategic • Trusted by every major music label and movie
network spans North America & Europe studio to protect their most valuable films,
• Unparalleled technical expertise in the handling, recordings and images
installation and storing of art • Industry-leading chain-of custody processes
• Best practices to protect the value and integrity of • On-site full service studio
treasured assetsPrudent Capital Allocation Framework
Estimated Cash Available for Dividends and 24
Discretionary Investments in 2019 in $MM
$ in millions 2019E
Adjusted EBITDA $1,430 $1,450 $335
Non-cash stock compensation/other (including non-cash Incremental
55 Capital Needed $350 Data Center
permanent withdrawal fees)
for Discretionary
$375 Development Capex
Adjusted EBITDA and non-cash expenses $1,485 $1,505 Investments $185
Less:
$490
Cash interest and normalized cash taxes 480
Total recurring capex and non-real estate investment 150
Real Estate Growth
Customer inducements and customer relationships (1) 75
$155
$175 Investments and
Capital Recycling
/Investment
$190+ Innovation2
Cash available for dividends and investments $780 $800
Partnerships
Frankfurt DC Land
Expected common dividend to be declared 703 $50 Purchase
$150
Cash available for core and discretionary investments $77 $97 $100
~$90 $80 Base Acquisitions
Discretionary
Sources(3)
Investments(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: 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.Value Creation Through Capital Recycling 25
Real Estate capital recycling strategy September 2019 sales – $31 million (net)
IRM buys and sells with an ROI focus Case study: Midwest portfolio
Recycles capital to create long-term value for shareholders Sale leaseback of properties in Columbus, Cincinnati,
Indianapolis, Nashville, and Pittsburgh
Liquidity recycled into other real estate and data centers
Capitalized on favorable valuations in industrial asset class in
secondary markets
Capital recycling opportunities Released capital from owned facilities while securing
competitive lease rates
Excess or Better/best use –
inefficient real Sale generates
estate outsized return
Higher-use real estate alternatives
Data center
Building Emerging market
development /
improvements expansion / M&A
expansionBalance Sheet Remains Well Positioned 26
Balance Sheet Highlights as of 9/30/19 Net Lease Adjusted Leverage
5.8x
5.7x
• 80% Fixed Rate Debt
• 4.9% weighted average interest rate
• 6.0 years weighted average maturity
• No significant maturities until 2023
J.P. Morgan Iron Mountain
REIT Composite
Issued $1billion of 10-year bonds at 4.875%
Source: J.P. Morgan REIT Weekly U.S. Real Estate report October 18, 2019 and company reportsKey Takeaways 27 • Leading global information management brand with a durable, growing business • Project Summit expected to yield significant free cash flow benefits starting in 2020 • Increasing exposure to high growth markets with powerful secular tailwinds • Committed to growing the dividend while reducing payout ratio over time • Disciplined capital allocation designed to maximize returns
Strong Sustainability Focus 28
• Green Power Pass solution in Data Center market to help customers manage their carbon footprint
• Part of RE100 Initiative – commitment to using renewable energy sources for 100% of our worldwide
electricity
• Set aggressive science-based targets for carbon reduction by the end of 2019
• 69% of our global electricity use – including 100% of the electricity used to power our Data Center
business – was from renewable sources in 2018
• Awarded the EPA's Green Power Leadership Award in 2017
• Top 10 buyer of Renewable Energy on the EPA's Green Power Partnership Top Tech and Telecom
Green Power UsersQ3 2019 Performance
Q3 Performance 30
Storage rental revenue growth accelerates
• Total organic Storage rental revenue growth accelerated to 3.0%, attributable to revenue management
• Organic Service revenue declined 3.0%, impacted by paper prices (organic Service up 0.2% ex. paper)
• Volume continues to grow well, up 40bps organically TTM in Records Management, similar to Q2
Continue to extend reach beyond core records management storage offering
• Strong Q3 performance in Consumer and Other volume with 17% sequential growth
• Federal team had its best quarter to date, revenue growing double digits
• Good success in Digital Solutions enabling pull-through of other storage and service opportunities
Data Center momentum continues to build
• Over 15MW leased year to date; on track to the high end of 15-20MW guidance
• New turn-key data center capacity brought on-line in key markets around the world
• Strong leasing pipeline driven by an uptick in larger enterprise activityQ3 Financial Performance 31
Constant Organic
In millions, except per-share data Q3-19 Q3-18 Y/Y %
Currency Y/Y% Growth
Revenue $1,062 $1,061 0.1% 1.7% 0.7%
Storage $673 $657 2.5% 4.0% 3.0%
Service $389 $404 -3.7% -2.1% -3.0%
Adjusted Gross Profit(1) $613 $616 -0.5%
Adjusted Gross Profit Margin 57.7% 58.0% -30bps
Adjusted SG&A Expenses(2) $237 $253 -6.5% -5.1%
Income from Continuing Operations $108 $77 40.0%
Adjusted EBITDA(3) $376 $362 3.7% 5.0%
Adjusted EBITDA Margin(3) 35.4% 34.2% 120 bps
Net Income $108 $66 64.7%
AFFO(3) $225 $227 -0.8%
Dividend/Share $0.61 $0.59 4.0%
Fully Diluted Shares Outstanding 288 287 0.2%
(1) Excludes Significant Acquisition Costs of $1.9m and $2.9m in Q3 2019 and Q3 2018, respectively
(2) Excludes Significant Acquisition Costs of $2.0m and $6.4m in Q3 2019 and Q3 2018, respectively
(3) Reconciliation for Adjusted EBITDA and AFFO to their respective GAAP measures can be found in the Supplemental Financial Information on Pages 15 and 17, respectivelyUpdated 2019 Guidance 32
Previous
$ in MM 2019 Guidance
2019 Guidance
Revenue $4,250 - $4,280 $4,250 - $4,325
Adj. EBITDA $1,430 - $1,450 $1,440 - $1,480
Adj. EPS $1.00 - $1.05 $1.00 - $1.10
AFFO $850 - $870 $870 - $900
• Expected organic storage rental revenue growth of ~2.5%; total organic revenue growth of ~1%
• Lease accounting is expected to reduce 2019 Adjusted EBITDA by $10 mm to $15 mm
• Interest expense is expected to be ~$420 mm and normalized cash taxes to be $55 mm to $65 mm
• Expect structural tax rate of 18% to 20%
• Assumes full-year weighted average shares outstanding of ~288 mm
• Real Estate and Non-Real Estate recurring CapEx and Non-Real Estate Growth Investments expected to be $145 to $155 mm
• Real Estate Growth Investment and Innovation of ~$175 mm
• Business acquisitions of ~$80 mm plus acquisitions of customer relationships and inducements of ~$75 mm
• Data Center development capex expected to be ~$350 mm (assumes closing of Frankfurt JV)
• Project Summit expected to result in Q4 restructuring charge of $60 mm, with no benefit to Adjusted EBITDA in 2019
(1) Based on FX rates as of January 4, 2019
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.Investor.Relations@ironmountain.com
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