Iron Mountain (IRM) Q3 2011 Earnings Call October 27, 2011 8:30 am ET Executives Stephen P. Golden - Vice President of Investor Relations Brian P. McKeon - Chief Financial Officer, Principal Accounting Officer and Executive Vice President C. Richard Reese - Executive Chairman and Chief Executive Officer Analysts Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division Kevin D. McVeigh - Macquarie Research Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division Nathan Brochmann - William Blair & Company L.L.C., Research Division Andrew C. Steinerman - JP Morgan Chase & Co, Research Division Gary E. Bisbee - Barclays Capital, Research Division Presentation Operator
As you know, we use several non-GAAP measures when presenting our financial results. Adjusted OIBDA, adjusted EPS and free cash flow before acquisitions and investments, among others, are metrics we speak to frequently and ones we believe to be important in evaluating our overall financial performance. We provide additional information and the reconciliation of these non-GAAP measures to their appropriate GAAP measures as required by Reg G at the Investor Relations page of our website, as well as in today's press release.With that I'd like to introduce our Chairman and CEO, Richard Reese. C. Richard Reese Thank you, Stephen. Good morning and I thank everyone for joining this morning. I'm going to see if I can move fairly quickly because we've got quite a bit of information to try to cover for you today. In addition to our normal Q3 review, we will talk a little bit about the outlook for next year, as well as I'm going to review our -- some of our elements to our strategic plan and just give you a sense of our progress on some of the major parts of that. And then last, I'll give you a bit of an overview of our outlook for 2012 and of course, Brian will give you much more detail on all of this. As we talk today, we will be missing, multiple times, the impact of foreign exchange and rates, so forth on our reported numbers, our outlooks and our discussion are based upon recent trading ranges and I should tell you that actual mileage may vary, given what seems to be going on with the markets. But we have just used the last couple of weeks as a basis for our forecasting. So let's get to Q3. Performance for the quarter was good and really on target as we expected. Our reported revenue is up 6%, with about 3% really excluding any impacts of FX. Storage rates were solid at 4% on a constant currency basis, and the trends remain consistent. Total services were up 5% on a reported basis but, we continued also to see weakness in our core service, and those trends remained unchanged and that weakness primarily in North America. Adjusted OIBDA was $250 million, was on target, in line of our plans. Overall, it was a solid quarter, consistent trends and performance as we expected and as we forecasted.
We're still not seeing any positive signs from the so-called economic rebound, and I should warn that, that based upon our numbers and that we saw when the economies came down as we lag going down, we would likely lag on any rebound. So the trends in the business remained the same, solid storage, weaker than average services and the organization is performing well and the numbers are flowing through. On a full outlook basis, it's the same message from an operating outlook with the fundamentals in the business remains the same. We're reiterating our internal revenue growth guidance in the 1% to 3% range, and it will be supported by various contingent solid storage growth. As I said before, the business units are performing to plan, and we expect them to continue doing that through the balance of the year. The international margin expansion plan is on track, and I'll speak more about international a little later.So the business is running. I won't say it's ho-hum. People are working pretty hard to make these performers come in. It's a tough economy out there, but the fundamentals of business are sound, the storage keeps coming in, and we continue to react to our customers' needs. Full year results will be impacted by some of the macro factors and decisions we've made, based upon the completion of our international portfolio review, which I'm going to discuss in more detail. And recent changes in the dollar will give us a little less benefit for the balance of the year in FX. We're also taking a $10 million restructuring charges in Q4 in Western Europe to support these margin expansion programs, which I'll give you more detail on. So wrapping up 2011, from an operating outlook perspective, we've got good internal growth given the economic environment we're operating in. I'd remind you, this is a business that the internal growth rates tend to run historically taking 1x to 2x GDP, and where business is running north of 1x to 2x GDP now in an internal growth rate basis, particularly related to our Storage, which is the driver of our business. So the business units are performing well. We wish the economy were better. We wish we had a little more stability in foreign exchange just to take the noise out of the numbers, but those are not either things that we can control. So we're operating the business based upon the things we can control. Read the rest of this transcript for free on seekingalpha.com