Good morning and welcome to the Iron Mountain Fourth Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Greer Aviv, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Andrew. Good morning and welcome to our fourth quarter 2020 earnings conference call. We have provided the user-controlled slides on our Investor Relations website. We will also be providing the link to today's webcast and earnings materials. We are joined here today by Bill Meaney, President and CEO, and Barry Hytinen, our EVP and CFO. Today we plan to share a number of key messages to help you better understand our performance including how we had successfully navigated the COVID-19 pandemic, how we continue to execute on Project Summit and the resulting transformation across the organization, how we have accelerated momentum in our data center business, and how we are increasing our commitment to diversity and inclusion and other sustainability initiatives. After our prepared remarks will open up the lines for Q&A. Today's earnings materials will contain forward-looking statements, including statements about our 2021 and longer-term expectations. As you know, all forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the Safe Harbor language on Slide 2 and our Annual Report on Form 10-K for a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliations to these measures as required by Reg G in our supplemental financial information. With that Bill, would you please, begin?

Thank you, Greer, and thank you all for taking the time to join us. Let me start by saying I hope you and your families are safe and well. As we close out a year, which has been marked by first quarter delivering near record growth to our remaining year where we had to manage headwinds from COVID, I want to take a few minutes to reflect on where we've been and where we're going. First, I want to pause and acknowledge that we continue to fight COVID-19 and we maintain making the safety of our employees, their families and our customers our first priority. Whilst we are optimistic of the positive impact the roll out of vaccines will have, we continue to believe that 2021 will look similar to 2020, albeit in reverse in terms of the macro economic landscape. However, 2020 was also a year where there was much to celebrate, which came out of the creativity and resiliency demonstrated by our teams. I couldn't be more proud of my fellow mountaineers around the world in terms of the way we responded to the COVID-19 pandemic. In a phrase, we managed the crisis, the crisis didn't manage us. We continue to serve our customers where throughout the depths of the crisis, more than 96% of our facilities remained open. We maintained our focus on Project Summit, where we increased our targeted sustained annual cost savings from $200 million to $375 million and have already achieved over $200 million on an annual run rate by the end of 2020. We accelerated our growth in data center, with 58.5 megawatts of new leases announced in 2020 versus 16.9 megawatts in 2019. We continued our investment in new products and innovation with a focus on supporting our customers' remote workforces. These…

Thanks Bill. And thank you for joining us to discuss our full year and fourth quarter results. In a challenging macro environment, our team delivered solid performance across each of our key financial metrics. For the full year, revenue of $4.1 billion declined 2.7% on a reported basis, which includes a 100 basis point impact from foreign exchange. Total organic revenue declined 3.3%. Organic service revenue declined 12.8% reflecting the continued COVID impact on our activity levels. Despite the macro headwinds, total organic storage rental revenue grew 2.4% driven by more than 2 points of revenue management. On a constant currency basis, adjusted EBITDA increased 1.3% year-on-year to $1.48 billion. Reflecting the team's strong progress with Project Summit and revenue management, EBITDA margin expanded 110 basis points or 35.6% representing the best margin performance in the company's history. Importantly, we see opportunity for profitability to continue to expand overtime. AFFO increased 2.4% to $888 million or $3.07 on a per share basis. Before I go into more detail, let me draw your attention to Slide 13 of our earnings presentation. We have made some refinements to our non-GAAP measures spurred by feedback from the investment community that some of our non-GAAP measures are difficult to compare appears. This includes changes to how we account for unconsolidated ventures, stock-based compensation and a portion of growth capital. To ensure comparability and transparency, we have provided our results on both the former and new methodology of course, the prior method will be comparable to current consensus estimates. For example, under our former methodology, full year 2020 adjusted EBITDA was $1.45 billion which compares to the current consensus of $1.446 billion. More detail is available in our earnings slides and on our Investor Relations website. Now, turning to our results for the quarter which…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from George Tong of Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. You highlighted growth opportunities from data centers, fine art, consumer storage, secure IT asset disposition and other services. Can you describe your go-to market strategy to penetrate these growth markets and what proportion of revenue you expect this growth portfolio to evolve to over the next three to five years?

Hi, George. No, thanks for the question. I think this year most of the growth will be around the digital services, which I highlighted. So, I said last year we did 8%, then we see a further acceleration in that growth rate going into this year. And on SITAD, you'll continue to see its relatively small portion of the business. But as I said, to give you some idea of the scale, those two global contracts that we've signed early in this year to serve financial service institutions, those two combined are probably in the order of about 15% year-on-year growth. So, it's pretty high levels of growth on what it traditionally was smaller parts of our business. But over time, over the next year, what you can expect is over the next year or two, we'll start guiding more and more to those individual pieces of business. But if you think about it, what this all means is more on a consolidated basis. It gives us the confidence on guiding say that, we said that 2% to 6% growth in terms of top line range. And if you take the midpoint that's 4%. It just gives us much more confidence as we go forward that we can really start driving bottom line growth, not just through margin expansion, but through top line growth, because of the resiliency and the attractiveness of these new segments.

Got it. Very helpful. Thank you.

The next question comes from Shlomo Rosenbaum of Stifel. Please go ahead.

Hi. Thank you. Hey, Barry, maybe you could help me parse just the 2% to 6% organic revenue growth? When I look at it, the adjacent businesses versus the core business if they're growing roughly 13% in line with the end markets, that seems to be would be a little bit above 3% growth. What is the embedded assumption for the balance, in other words, the core business in the storage? Is that assuming you're going to get consistent 2% to 3% pricing, and is there any FX that's involved in that as well?

Sure, Shlomo, thanks for the question. If I take the total revenue guide, which is 4% to 8%, that's a little over $250 million at the midpoint or slightly over 6%. We're expecting data center, as I mentioned, in the prepared remarks to be up, kind of double-digits so we're approaching mid-teens. So, let's call it $40 million of pure revenue growth be a small amount of FX on that number, since you asked about that. And then turning to the global RIM business, we're projecting in a 200 plus million of total growth. Now, that's assuming revenue management of the normal levels that we've been experiencing 2% to 3%, maybe even a little bit closer to the high end as we continue to roll that out. And as I mentioned in the prepared remarks, certainly the vast majority of those actions will be in place by the end of the quarter. We're certainly expecting with COVID for planning to flat to slightly up volume. And Bill mentioned the digital solutions, which would be probably in the vicinity as much as $50 million of year-over-year benefit. And that results in a very slight service activity recovery for the balance of our services. On adjacent businesses, we're continuing to see the business improve. But I'd say we're being a little bit conservative and prudent with respect to the COVID impact as we continue to see those underlying markets recover. I will note that, we did see for the second quarter in a row, very nice volume out of our adjacent businesses. And that's the entertainment services business continuing to see improving trends. Bill, anything you'd like to add there?

I think, that covered it well.

The only other element Shlomo, I would add is from an FX perspective, it'll be about call it 1.5 in total of the 4 to 8, something of that order in light of where FX rates are in terms of forward projection on banks - bank views, so thanks for the question.

The next question comes from Nate Crossett with Berenberg. Please go ahead.

Hey, good morning. Two quick questions, if I could. I was curious on the specs of the new JV, how much will you guys own? How did it come about and is this the kind of platform where there'll be opportunities over time? And then also just a question on capital recycling? I think you mentioned $125 million. I'm just curious, how much of your industrial portfolio would you be willing to recycle long-term?

So, thanks for the questions Nate. So, coming on the Web Werks JV that we announced this morning. Great question. So, we're super excited about India. I mean, personally, I've been to India, I don't know how many times over the last three years specifically looking for a data center, the right data center entry, because it's been on our radar screen for quite some time. And with Web Werks, we found a very good partner that already has presence in Mumbai, Pune, and Delhi, which three of the key regions, and they have a roadmap to expand that to Bangalore, Hyderabad and Chennai. So, which we really think gives us a very good platform, because Delhi is not a single location. In terms of the way, why we chose Web Werks is that, first of all the team, its entrepreneurial brothers that actually built the company, and they have always had a very strong focus on telecommunications interconnects. In fact, that's how they started their business. So, we think that actually they built a good ecosystem around the locations that they already have. They understand the market and the business extremely well. So, we're also buying into effectively a management team. And as we alluded to, in our press release is that the way the JV is structured is we start in a minority and they have about 4 megawatts that are actually running as we sit here today in those three locations, but they have both Brownfield expansion capacity as well as land for further greenfield expansion. And $150 million that we announced will be put in overtime on a cost basis as we build out that expansion. So, you can think of it as a way that we paid slight premium for our entry, to get the additional 4 megawatts and the management team. And then that $150 million that goes in over the next two or three years will lead to us to have a majority ownership. And that will be on a cost basis, that money put in. So, we'll effectively slide down towards a cost that is approaching, the actual cost to build the facility. So, we're really excited about the market. It is the second largest telecommunications market in the world, it has probably about 10% of the data center running in India and Northern Virginia. So and it's just a very fast-growing market. We've got a great management team that comes along as part of the deal. And we have a clear roadmap to expand and build a truly Indian footprint.

And Nate, thanks for the question. This is Barry. On the recycling point, we as you know, see recycling of industrial assets is highly attractive as we see the valuations as really good at these levels. And together with our development pipeline and data center, among others, it's a really good move for us to invest in faster growing opportunities. The way I think about it is industrial assets continue to increase in terms of valuation. So the level of recycling that we've assumed in the plan this year would kind of be a mid-single digit percent of purely the industrial asset base. So, we've got a - and that is obviously a base that continues to expand in terms of value in light of what's going on in asset prices out there. So over time, I think planning for something in this level, annually, is not a bad place to plan if I were you. And I would also note that, if we continue to see opportunities on both sides on the industrial side, as well as incremental opportunities in the development pipeline, we would not be afraid to continue to recycle even at a little bit higher level, but for the year, we're planning 125. Thanks for the question.

The next question comes from Michael Funk with Bank of America. Please go ahead.

Yeah. Hi, good morning. Thank you for the question. A couple if I could. So, first thinking about the potential impact of wage inflation on the business with the $15 minimum wage, being pushed through. Wondering how that might impact your proposed cost savings?

Thanks for the question, Michael. I think it's an important topic and wage inflation just across even absent of the $15 minimum wage, in terms of our frontline staff, especially our carriers, right, we've been in that, I would say a highly competitive environment, for the last four or five years at least with a boom of e-commerce. So, for us, the $15 minimum wage is less than an issue. Most if not all of our workers are kind of north of that. The bigger issue for us is, quite frankly, the pressure on e-commerce for similar types of jobs. That being said, we've been able to manage our churn pretty well. And the one thing I've spent personally a fair amount of time traveling around the country as well as in Europe and in Mexico, speaking to our frontline staff, many of whom we had to furlough during the depths of the crisis, just to take the temperature and their connection to the company, their loyalty, the gratitude in terms of the way our leadership teams have managed the crisis and also tried to support them and their families both mentally, health wise and monetarily has been highly appreciated. So, I think, I still remain very confident that mountaineers are really mountaineers, we look after each other. But the inflation that you're referring to is less for us driven by the minimum wage and it's more driven by just the boom in e-commerce, but it's a good point.

[Operator Instructions] The next question comes from Sheila McGrath of Evercore. Please go ahead.

Yes. Good morning. We do sometimes get questions how Iron Mountain competes in the data center business versus pure play players. I was wondering if you can provide more insights on how you answer that question. Any details behind the benefits of Iron Mountain and cross-selling? And just what makes you more competitive? And was there much competition on that India joint venture?

Okay, thanks Sheila for both questions. So first, I guess my flippant answer to your first question is, I think 58.5 megawatts this year says that we're pretty competitive. So, I tell my congrats to our team who have really dug in. I think the other thing what I would say is just another proof point. Then I'll say how we're compete, is that if you look at our, especially on the sales side, but also in the operation side of our data centers, most if not all of these folks come from leading what I would call pure play data center companies. And so, you can almost say and to me it's not - you measure the success of your offering in two dimensions. One is, do customers buy it, right, which is the 58.5 megawatts this year of leasing activity our new leases signed, I think is a pretty good proof point. On the other side is, are people willing to bet their career and their livelihood by coming to join you who are specialists in the field and I have to say that market who leads that business has done a remarkable job in terms of attracting really, I would say, top tier focused data center talent. Now, in terms of the synergies between the business, which goes into the secret sauce, which you alluded to, is still about 40% of our whole own leads come from our traditional records management sales force. And that's you're seeing that even more and more now that we set up strategic accounts. So, I don't go to a strategic account meeting where they pulled out a strategic account executive for me along where we're not speaking about data center opportunities. I mean, just last week, Barry and I were with the number two executive of a global bank and he brought up data center even before we could, Barry and I with one of our strategic account executives. So it's a - people definitely see the connection, the decades, this is our 70th year, the decades of trust that we've had with financial service institutions. And it's the reason why the likes of Goldman Sachs and Credit Suisse have trusted us with their colocation installs. So, definitely the trust is a big factor. And the team seems to be really getting great traction in the market.

The next question comes from Kevin McVeigh of Credit Suisse. Please go ahead.

Great, thanks so much. Barry, can you help us just understand how much the EBITDA methodology changes in fact the 2021 EBITDA if at all, just based on the recapture the air back at stock-based comp and growth capital and then the JVs?

Sure, thanks, Kevin. There's a lot of material in our slide deck, but let me go through a couple of things. From an EBITDA standpoint, the stock comp, year-to-year is very similar. I will note, like most companies, we have a performance element in our grant. So, it's conceivable that depending upon where performance is those grants could go higher or lower. So, I would be planning for that to be very modestly up year-on-year. On the [Indiscernible] ventures, as it relates to how that impacts EBITDA, there's two things there as you know, our consumer joint venture where we have a higher ownership, but while the business is performing better year-on-year as our plan, it still is in a loss position. So that'll be a little bit more of a headwind. And then we'll add on the Frankfurt joint venture where we own 20%, as you know. And that starts up as we mentioned before, the lease commences at about midyear and ramps over time as the client gets into the lease. So that, I would say the unconsolidated ventures portion is fairly similar year-on-year, slight improvement. So, net-to-EBITDA, very similar to the 2020 level of the add back that you see in the documents. EPS and FFO would flow similarly to EBITDA. And then from an AFFO standpoint, you'll note that there's less impact there than EBITDA since we were already adding back stock comp. So that has no change to AFFO. And the portion of growth capital is essentially at the same level. And I already mentioned the unconsolidated joint venture. So, an add back of kind of a high single digit million-dollar benefit to AFFO year-on-year, not unlike what we had again in 2022. Good question. Thanks for the question.

The next question, comes from Eric Luebchow of Wells Fargo. Please go ahead.

Hey, thanks for taking the questions. Bill, I think said that, post COVID you expected organic physical volume storage volume growth would be about 50 basis points or so and seems like you'll be pretty close to that range this year. So, is that still the right way to think about the business once we get beyond COVID? And then related to that, have you seen any impact this year from the decline in incoming boxes that you talked about last year as a result of the pandemic and have those declines kind of more or less normalized to this point? Or is there still some impact to the business? Thanks.

Yeah, I think to your first question I would say, yes. And in part of that, that recovery is based on the success that we've had in consumer is I mentioned in my remarks is that, we went from 2 million cubic feet to 7 million cubic feet last year, I'd say in 2020. In terms of the incoming volume, we still see the similar trends as we saw pre-COVID. At this point, we haven't seen a - we have and you can almost you can see that no supplemental, we haven't seen an acceleration in that headwind that we're getting. But we're still for sure going through what I think I described on a few calls previously, maybe was a year ago, what I call the second derivative action. In other words, virtually all our customers are continuing to send us new boxes. But some of our historically, fastest growing and largest verticals are sending them in at slower rates. So, we continue to see that what I call the second derivative drag on volume coming in slower than boxes aging out at their normal kind of 15-year lifespan. So, we expect to continue to have what I would call the same pre-COVID headwinds on the traditional document side of the business more than offset by the growth in consumer.

The next question comes from Stephanie Yee with JPMorgan. Please go ahead.

Hi, thank you. I also had a question about incoming boxes, just as people returned to work maybe later in the year, would you expect the incoming boxes to kind of pick up to pre-COVID levels? And kind of along with that, as incoming boxes pick up would constructions also pick up when people are back in the office more?

Hi, Stephanie, and thanks for the question. That would be our expectation, right. But I think it's - I don't think it's going to be a sharp change, because I think the people's transition back into the office will be more gradual than that. But I would expect that, but again, when you net those two things out, we don't expect a marked change in the trend. I mean, if you think about it, during the course of last year, is I think that our - it is basically a flat storage story. And then you add pricing on top of that is actually not a bad story at all. So, we don't see either an acceleration in either direction of that trend. But I think, what you described is would be, I think, a reasonable expectation, but I think they probably will, fairly closely net each other out.

The next question comes from John Atkins of RBC. Please go ahead.

Thanks very much. On the data center side, I guess I just wanted to get a sense on what competition you're seeing when entering new markets versus data center peers, financial sponsors, thoughts on just - a few thoughts on preferred path for joint ventures versus outright acquisitions? And then when it comes to, I guess on a related question, do you have any kind of general thoughts on build to suit versus sale leasebacks?

Okay, thanks, John, for the question is quite a bit in there. So, let me kind of start about how we think about the JVs or we use India as an example. So, India is a country that we're pretty comfortable in. That's why, specifically, it's actually been more than three years, actually I think, five years. I go to India, at least a couple times a year. But I would say five years ago, I started going there with a focus on finding the right data center entry. Even though we have a little less than 2,000 people working on the records management side in India. So, it's a market we know is for us, it was important to find the right not just physical opportunity for entry, the right footprint, but also the right team that we could build on. And with Web Werks, we found that I think from a Web Werks standpoint, they also appreciate it is that we are not a financial sponsor, or we're not a newbie in the Indian market. So, that they see how we operate in India already today. Culturally, we're tuned to the challenges that they have in a very supportive of their journey. And so that, in this case, Deutsche Bank ran the process. But I think one of the reasons why we won was the relationship we were able to build with the entrepreneurs and the way we the way we operate. So that to me is part of our secret sauce is that, we are a company that is in 56 countries around the world, over 20,000 mountaineers around the world so that we can make those connections. And then also it's not lost on these entrepreneurs in this particular case, that we were actually refusing data…

This concludes our question-and-answer session and the Iron Mountain fourth quarter 2020 earnings conference call. Thank you for attending today's presentation. You may now disconnect.