Download - Iron Mountain 2013 JPM
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JPMorgan 2013 Ultimate Services Conference November 13, 2013
Bill Meaney President & CEO
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Key Messages
• Global market leader with sustainable business drivers
• Strategy extends durability of high-return business
• Business generates significant free cash flow to support long-term dividend growth
• Successful REIT conversion enhances strategy
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Global Market Leader
Diversified global business
• $3B revenues
• >155,000 customers
• Serving 94% of Fortune 1000
• 65MM ft2 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 brand
Majority of revenue from storage rental and related services
• Records management 73% • Data protection 18%
• Shredding 9%
36 Countries
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Continents
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Durable, Expanding Storage Rental Stream
2012
$1,733 24 Consecutive Years of Storage Rental Growth
Storage Rental ($MM) C$ Storage Rental ($MM)
$0
$400
$800
$1,200
$1,600
$2,000
2009 2010 2011 2012 2013F
NA Intl
Expanding Global Platform
Int’l CAGR 8.5%
NA
CAGR 2.2%
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Storage Rental is Sticky and Durable
• Storage rental is key economic driver
• Large & growing
- 58% of revenues ($1.7B)
- Trending at ~4% - 5% constant dollar growth
• GDP correlated & inflation hedged
• Diversified customer base – No customer >2% of total revenues
• Low customer turnover (~2% annually)
- Strong value proposition with related services
- High switching costs
• Long average life of a box in storage (~15 years)
• Highly measurable with modular capacity additions
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Predictable Storage Revenue has Weathered All Storms
Source: Benchmark data provided by Green Street Advisors
*Composite of apartment, industrial, mall, office and strip center REITs
-6%
-4%
-2%
0%
2%
4%
6%
8%
2007 2008 2009 2010 2011 2012 2013
IRM Storage Rental Internal Growth vs. REIT Same Store NOI Growth
(Historical and Estimated)
Industrial average Self-storage average
IRM storage rental internal growth Big 5 composite*
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Substantial un-vended opportunity remains in mature markets
Emerging markets beginning first-time outsourcing wave
Diversified end-user market segments
Large, Diversified Global Market Opportunity Remains
$23B Global Market North America Revenue Mix by Vertical Market Segment
Financial Services
Healthcare
Government
Legal & Business Services
Other Private Sector
Source: Company estimates
Un-Vended
Records Management
Shredding
DP
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Strategy Designed to Provide Platform for Long-Term Revenue and Profit Growth
• Sustaining the durability of our high-return businesses in mature markets
• Building leadership positions in high-quality emerging markets through acquisitions and strong internal growth
• Identifying, incubating and scaling new business opportunities
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Acquisitions Are Key Driver of Business Strategy
Details by Segment Mature Emerging
Number of Acquisitions 3 3
Key Markets USA, France Colombia,
Brazil, Peru
Purchase Price $220MM $100MM
Number of Facilities (Square Feet) 47 (2.2MM) 22 (0.7MM)
Storage Rental Revenue (current run-rate) ~$37MM ~$27MM
Impact on Financial Performance 2013 2014
Total Revenues $30MM – $35MM $105MM – $115MM
Adjusted OIBDA $3MM – $5MM $20MM – $25MM
Capex ~$4MM ~$37MM
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• Emerging markets represent significant opportunity for growth
- Include Lat Am, Asia Pac, Eastern and Central Europe and BRIC
- Annual revenues of ~$300MM
• Strong double-digit storage rental growth augments annuity
• Acquisitions are a key component of strategy to accelerate growth into leadership positions
- 2012: Brazil, Turkey, Switzerland, Hungary
- 2013: Brazil, Colombia (new market), Peru
Emerging Markets Drive Enhanced Performance
Emerging
10%
Developed
90%
2%
20%
3%
Developed Emerging Enterprise
C$ Storage Rental Growth Rates YTD/2013 vs. YTD/2012
% of Global Revenues
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• A growth opportunity that fits well with our business
- Recurring revenues tied to long-term leases
- REIT-compatible
• $10B North American market growing at ~10% per year
• Offering a portfolio of services for organizations seeking a secure, compliant data center environment
• Exploring construction of additional locations in key markets on company-owned land
• Majority of future capital investment will be success based
• 200,000 ft2 of potential development over next 10 years
Leveraging Core Competencies and Customers to Expand Existing Rental Business
IRON MOUNTAIN DATA CENTERSTM
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2014 - 2016 Storage Rental Build (Average Annual Contribution to Growth)
C$
Growth
Rates
2011 -
2013 2014-2016
Revenue
Growth 1% - 3% 1% - 3%+
Storage
Rental 3% - 4% 2% - 5%
Services (2)% - 1% (1)% - 2%
Solid Storage Rental Growth Outlook
$0
$30
$60
$90
$120
NA (Base) Int'l (Base) New Business Total
Low Range High Range
$MM
1.0%-3.0%
5.0%-9.0%
$5MM –
$20MM 2.0%-5.0%
2014 – 2016 Outlook
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Investment Opportunities Yield Attractive ROIC
Increase Network
Utilization
Expand Storage Network
New Sales &
Penetration Acquisitions
Average ROIC for Key Value-Driving Activities
Incremental
Pre-Tax
ROIC 30%+ 10% - 20%
Investments
Sales,
Marketing &
Account
Management
Racking
Building
Acquisition
Capital
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• Committed to returning excess FCF to shareholders
- $1.8B of cash returned to shareholders since 2009
• Current dividend payout is nearly 60% of normalized FCF
• Growth capex generates high, predictable returns
• Robust pipeline of attractive investment opportunities – tuck-in acquisitions & real estate
Strong Cash Flow Supports Capital Allocation Strategy
2014 Potential Cash Available for Investment $MM
Adjusted OIBDA $930 - $960
Add: Other Non-Cash Items & Adjustments $30 - $40
Less: Interest
Cash Taxes
Maintenance Capex
~$260
~$130
~$85
$485 - $525
Acquisition Integration & RE Consolidation $50
Core Growth & Other Capex / CAC ~$135
FCF Before Discretionary Investments $300 - $340
Real Estate(1)
~$50MM Core Acquisitions
Avg $50MM - $150MM
Shareholder Payouts
Current Dividends
$207MM (~60% of FCF) (1) Including data centers
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Successful REIT Conversion Enhances Strategy
• Iron Mountain possesses characteristics of a strong REIT
- Aligned with business & capital allocation strategies
- Iron Mountain is effectively “Enterprise Storage”
• We can fund our business strategy effectively within this structure
• Significant opportunity to drive total returns to shareholders, optimize WACC and create value
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• Committed to returning excess capital to shareholders
• Significant shareholder benefits
- Single level of US tax
- Efficient structure to repatriate foreign storage rental income
- Disciplined mechanism for capital allocation
• The right tool for maximizing total returns to shareholders
- REIT structure drives higher dividends
- Higher distributable income due to lower tax vs. book D&A (~$70MM)
• Strong cash flows support dividend coverage
REIT Approach Aligns with Business & Capital Allocation Strategies
$MM (except per
share data) 2013
FFO $510
FFO/share(2) $2.68
AFFO $625
AFFO/share(2) $3.29
Dividends(3) $400 - $435
Dividends/share(2) $2.08 -
$2.27
Pro Forma REIT Metrics(1)
(For illustrative purposes only)
(1) Excludes $140MM cash portion of the 2012 E&P distribution
(2) Based on 192M shares outstanding
(3) Includes ~$70MM benefit from book / tax difference for D&A
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IRM = Enterprise
Self-storage = Consumer
Similarities:
• High storage Net Operating Income/SF is primary value
driver
• Multiple customers in each facility
• Multimarket presence and quality brands support repeat business
• Low maintenance capex, customer acquisition costs and tenant improvements
• Low economic obsolescence of physical structures
IRM is Effectively “Enterprise Storage”
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Summary
• Iron Mountain is a durable, high-return business that will generate significant excess free cash flow
• Significant opportunities exist to continue to grow cash flow to sustain our business for a very long time
• Successful REIT conversion will enhance returns