Iron Mountain's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Iron Mountain (IRM)

Q1 2012 Earnings Call

April 26, 2012 8:30 am ET

Executives

Stephen P. Golden - Vice President of Investor Relations

C. Richard Reese - Executive Chairman and Chief Executive Officer

Brian P. McKeon - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

James Samford - Citigroup Inc, Research Division

Kevin D. McVeigh - Macquarie Research

Gary E. Bisbee - Barclays Capital, Research Division

Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Good morning. My name is Anita, and I will be your conference operator today. At this time, I would like to welcome everyone to the Iron Mountain Q1 2012 Earnings Call Webcast. [Operator Instructions] Thank you. Mr. Golden, you may now begin your conference.

Stephen P. Golden

Thank you, and welcome, everyone, to our 2012 First Quarter Earnings Conference Call. Joining me this morning are Richard Reese, our Chairman and CEO; and Brian McKeon, our Chief Financial Officer. After their prepared remarks, we'll open up the phones for your questions. Per our custom, we have a user-controlled slide presentation at the Investor Relations page of our website at www.ironmountain.com.

Referring now to Slide 2. Today's earnings call and slide presentation will contain a number of forward-looking statements, most notably our outlook for our 2012 financial performance. All forward-looking statements are subject to risks and uncertainties. Please refer to today's press release, the Safe Harbor language on this slide and our most recently filed annual report on Form 10-K for a discussion of the major risk factors that could cause our actual results to be materially different from those contemplated in our forward-looking statements.

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 reconciliations of these non-GAAP measures to the 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 would like to introduce our Chairman and CEO, Richard Reese.

C. Richard Reese

Thank you, Stephen, and good morning. And thank you, everyone, for joining us. As you've seen from our press release this morning, our business performance is really pretty clean and as we forecasted, and since we spoke about our business to you only about 2 months ago, maybe with a little luck, this call may be shorter than usual. But we'll get started, and let's see where it takes us.

But before we get started and deep dive into the business, I want to update you on the status of our special committee work. The progress is ongoing, and we will meet our commitment to report the Board's conclusions and rationale for its conclusions no later than June 9. Since we're close to reaching a conclusion, we will not be entertaining any questions on this topic today or in any future meeting until we come forth with the final answers.

So having said that, I realize that may disappoint some of you, but we are getting down to the short strokes, and we're going to have to keep anything close to our best, and I realize many of you will try to ask questions or want to ask questions to try to get some insight to how we're thinking about it, but we're just going to have to be pretty disciplined and basically, we're not going to answer them. So just be prepared for this.

One year ago, I returned as CEO, and we announced the new 3-year plan, which was focused on driving returns on capital and returning capital in excess of that required to operate our strategy to you, our shareholders. We have made excellent progress in all fronts. At the time, I committed to giving you a report card on our progress against our plan, and since we are one year from announcement and nearly halfway through execution, I'll review our progress on this plan and its impact on our business.

But before I do that, let me make a few comments on the quarter. As I said in the beginning, performance showed consistent trends. We operated as planned. Total revenue on a constant dollar basis grew at 1%, and adjusted OIBDA grew at 2%. Without the impact of the declining in recycled paper prices we've been speaking to you about for a couple of quarters, total revenue would have been up 2%, and adjusted OIBDA of up 4%, as paper is a 1% drag on revenue growth and a 2% drag on adjusted OIBDA. FX is a 1% drag on both of those, by the way.

Our team is executing well, and the underlying business trends are consistent with what we've seen over the past several quarters. We continue to focus on sustaining our annuity revenue stream driven by storage over the long-term and believe that we can maintain a low single-digit growth rate in annuity revenues over the long-term even in the face of the secular trends on the activity and use of physical information. Storage growth was up 3% in constant dollar for the quarter. This is 2% coming out of North America. International had a very strong 7% constant dollar storage growth. And as you know, storage is the annuity flywheel. It is the foundation of our business. It is -- out of that is what's all good things are derived because it's the beginning of the relationship and the center of the relationship with our customers and then also drives the majority of our margins.

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