Iron Mountain Incorporated

Good morning and welcome to the Iron Mountain Second Quarter Conference 2021 Earnings Conference Call. Our participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. We will limit analysts to one question, and you can then rejoin the queue. Please note, this event is being recorded. I would now like to turn the conference over to Greer Aviv, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Debbie. Good morning, and welcome to our second quarter 2021 earnings conference call. On today's call, we will refer to materials available on our investor relations website. We are joined here today by Bill Meany, president and CEO, and Barry Heitman, our EVP and CFO. Today, we plan to share a number of key messages to help you better understand our performance, including our Q2 outperformance, the increased momentum in the business, our updated outlook for 2021 financial guidance, the continued growth in our data center business, and the strong performance in our growth areas. After prepared remarks, we'll open up the lines for Q&A. Today's earnings materials contain forward-looking statements, including statements regarding our expectations. All forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the Safe Harbor language on slide two, and our Annie report on Form 10-K for discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we used several non-GAAP measures when presenting our financial results. We have included the reconciliations to these measures in our supplemental financial information. With that, I'll turn the call over to Bill.

Thank you, Greer, and thank you all for taking time to join us. I hope you and your families are safe and well. This second quarter financial results with revenue of more than $1.1 billion and EBITDA of $406 million. This strong performance in both Q2 and the first half of the year reflects the breadth and depth of our products and solutions Our second quarter results especially reflect increased demand for our services across our key markets. It is based upon these strong results and the increased momentum in the business that has caused us to increase the midpoint of our financial guidance as well as increase the expected bookings in our data center business. As we celebrate and honor Iron Mountain's 70th anniversary this month, I am extremely proud of what our team has accomplished in growing our relationships with our large and diverse customer base in spite of the continued challenges due to COVID. Our Mountaineers across the globe have conquered every obstacle with tenacity and an innovative mindset, all with a focus on accelerating growth and services to assist our customers. Before we dive into our record results and the positive momentum in our business, I want to take a moment to reflect on the current situation with the pandemic and new variants still wrecking havoc in many parts of the world. In addition to operational complexities, we're also dealing with the realities of a workplace and a world changed forever by the COVID-19 pandemic. At Iron Mountain, we're thinking how we can move forward instead of getting back to normal, all whilst remaining diligent to ensure the physical and mental health as well as the overall safety of our teams, their families, and our customers. As I mentioned earlier, this year we celebrate 70 years of Iron Mountain. It's a legacy with a rich, inspired past which continues inspiring the future. since that day on 24 august 1951 we have built evolved and expanded our trusted relationship with our customers to include not just the leading storage platform of physical assets but now includes a rapidly increasing range of business services these new services are centered around data center co-location information security data insights IT asset disposition, and business process management. And today, with this broadened portfolio of services and storage capabilities, we have become an innovative and global leader in our field with more than 225,000 customers, including more than 95% of the Fortune 1000, a global footprint of more than 1,450 facilities with a presence in 58 countries, and 24,000 dedicated mountaineers across the globe. In doing all this in an energy sustainable way with 100% of our data centers powered by renewable energy. Many of the things about us have changed in 70 years. What hasn't changed is our core values and commitment to building and delivering on the trust our customers have come to count on. Over the last two quarters, we shared with you that we now have an expanded total addressable market, or TAM, of more than $80 billion. And against that expanded TAM, we've identified the building blocks for growth that will enable future growth and success. And in fact, you can already see evidence of this expansion through our year-on-year digital service revenue growth, together with secure IT asset disposition, or ITAD. In this quarter versus a year ago, these business lines have grown over 37%, resulting in $25 million of incremental growth. I want to highlight a few examples which illustrate our progress in helping our customers through utilizing new technologically-enabled approaches and products to not only protect but unlock value from what matters most to them. The first win I want to highlight is in Singapore with a multinational banking and financial services corporation. We won a $750,000 annual recurring revenue digital mailroom contract over their current service provider. At first, the bank didn't believe that Iron Mountain could solve this need for them as they had only known us to support their storage and scanning requirements. However, the account team pursued the opportunity and highlighted Iron Mountain's strengths utilizing a new technologically-based approach, which allows us to assist in managing the very start of much of the information entering the bank while securely facilitating a hybrid office and home working model. As we are already this customer's partner for business process outsourcing and processing much of the bank's critical information, the mailroom is a key additional service which will yield further security and simplicity for the bank. Turning to another area representing part of our expanded TAM, I want to touch briefly on secure ITAD. Think of this as an area where we apply our highly secure chain of custody with a service that allows our customers to dispose securely in an environmentally responsible way their IT assets which are at end of life. We have continued to see good momentum in our secure ITAD solution following a number of big wins last quarter. We won a deal with one of the world's largest banks to recycle corporate laptops, monitors, and outdated IT equipment across over 400 corporate offices, 4,000 conference rooms, and 5,000 retail offices, which we expect to generate annual run rate revenues greater than $5 million. This is a valuable offering given our expertise in chain of custody and compliance, helping customers securely dispose of their IT equipment. Turning to our data center business, we want to share not only our continued growth in top and bottom line, but some recent exciting developments in the last month, which has led us to increase our guidance for expected 2021 leasing from 25 to 30 megawatts to over 30 megawatts, not including additional leasing expected from the recent acquisitions in Frankfurt in India. Our increased guidance around leasing activity is based upon the momentum we have seen in the business in the first half of the year, as well as the pipeline. Today, we announced not only the 3.6 megawatts of new leases we signed in the second quarter, but also a 6-megawatt lease with a new logo to our platform that was signed post-Q2 in northern Virginia. Taken together, along with our strong results in Q1, we have recorded a total of 19 megawatts of new and expansion leases in the first seven months of the year. This is a great launching off point for the remainder of the year, and we feel confident we will achieve leasing activity above the top end of our original guidance. Turning back to Q2, it should be noted of the 3.6 megawatts we leased in the quarter, the majority was in the retail and enterprise segments. This resulted in attractive pricing for the quarter, which increased 14% sequentially. Our strongest markets in terms of new and expansion leasing were Phoenix, Singapore, and Northern Virginia. Finally, in terms of development, you likely saw from our recent press releases, our data center business is expanding rapidly in Europe. We have a new 27 megawatt Greenfield build in London adjacent to our existing London One facility, as well as the pending acquisition of a multi-tenant co-location data center in Frankfurt. Taken together, this will increase our total potential capacity in Europe to more than 88 megawatts and will provide access to important interconnection markets for new and existing customers looking for a reliable, flexible, and secure data center location. As always, sustainability continues to be a top priority, and as part of our commitments, we will power our new buildings in London and Frankfurt with 100% renewable energy. Before I hand the call over, I also wish to touch upon some new product areas which are leading to more growth in our traditional storage areas. One of these newer product offerings is Clean Start, which is a service that helps customers navigate today's changing workplace requirements from reconfiguring the office for social distancing to office closures or moving to a more digital way of working. Since its inception, the Clean Start product has generated over $19 million in revenue and has uncovered $1.1 million net new cube over a three-year period. In 2020, we decided to expand Clean Start globally with all regions engaged in growing the program. Since taking the business globally, we have seen an acceleration in bookings. Specifically, in the first half of 2021, Clean Start has delivered $5 million of new revenue or some 25% of the total revenue from this program since its inception three years ago. A specific customer example in this quarter includes a $1.8 million deal with a leading global hotel chain over the next five years. Due to challenges from the pandemic, the customer needed solutions to help with compliance and storage of materials. This customer has been with Iron Mountain for years at an individual hotel level, and its corporate team saw the value in our scale, breadth of offerings, compliance expertise, and risk reduction solutions. This prompted a decision to deploy our services across 103 hotels, plus an additional 15 one-off sites as required. We were able to manage much more than just their record storage, also meeting their destruction needs and providing image-on-demand services, all of this being done company-wide at a scale unmatched by any other provider. Another example which showcases our innovative new products which drive records volume and services growth is SmartSort. Our customers want to reduce cost and risk by defensively destroying records as they meet retention requirements, which is difficult to do if records are not stored by the destruction eligibility date. For example, many healthcare accounts store records by patient number or last date of visit and not by retention requirement. With SmartSort, we organize the records by destruction date so the customer knows what they can destroy and when. Our team understood a pervasive customer problem, took a customer-centric approach, and proactively came up with a solution to solve it with SmartSort. Just in the last year, we've had 10 healthcare vertical wins for SmartSort, with our most recent win with Johns Hopkins Medical Center. The agreement is a five-year term, which includes a $1.2 million smart sort move project, bringing in additional 160,000 cubic feet of inventory, representing over 4 million individual patient records. Reflecting some of these successes, total global volume grew to a record 733 million cubic feet this quarter. In spite of organic volume being down 10 basis points in the second quarter versus the first quarter, total global organic volume was up 1.6 million cubic feet in the first half of the year, and we continue to expect organic volume to be flat to slightly up for the full year. This expected organic volume, together with continued strong price increases, sets us up well for continued strength in organic storage revenue growth from our physical business areas. In closing, I want to say thank you to the 24,000 Mountaineers who have done an outstanding job navigating through the pandemic. I'm extremely proud of their relentless dedication to each other and our customers. With a resilient business model, ongoing market share growth, and strategic investments to transform the company, we are excited about the significant opportunities ahead of us, which continue to exceed even our ambitious targets. With that, I'll turn the call over to Barry.