Iron Mountain Incorporated (IRM)

IRM 
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0.35
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Exchange: NYSE
Industry: Consumer Services
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Iron Mountain (IRM)

Q2 2013 Earnings Call

August 01, 2013 8:30 am ET

Executives

Melissa Marsden

William L. Meaney - Chief Executive Officer, President and Director

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

Analysts

George K. Tong - Piper Jaffray Companies, Research Division

Kevin D. McVeigh - Macquarie Research

Steven Shui - Stifel, Nicolaus & Co., Inc., Research Division

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

Justin P. Hauke - Robert W. Baird & Co. Incorporated, Research Division

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

Andrew Berg - Post Advisory Group, LLC

Presentation

Operator

Good morning. My name is Lashanda, and I will be your conference operator today. At this time, I would like to welcome everyone to the Iron Mountain Q2 2013 Earnings Webcast. [Operator Instructions] Thank you. I would now like to turn today's call over to Ms. Melissa Marsden. Ms. Marsden, you may begin your conference.

Melissa Marsden

Thank you, and welcome, everyone, to our second quarter 2013 earnings conference call. I'm Melissa Marsden, Senior Vice President, Investor Relations. And this morning, we'll hear from Bill Meaney, our CEO, who will discuss highlights and strategic initiatives; followed by Brian McKeon, our CFO, who will cover financial results and guidance. Stephen Golden, VP, IR, is also with us today. After prepared remarks, we'll open up the phones for Q&A. Per our custom, we have a user-controlled slide presentation available 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 2013 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 and 10-Q 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. The reconciliations of these non-GAAP measures, as required by Reg G, can be found at the Investor Relations page of our website, as well as in today's press release. With that, I'd like to turn it over to Bill Meaney.

William L. Meaney

Thank you, Melissa, and many -- and my thanks to everyone joining us today, and good morning. Our second quarter results reflect our focus on sustaining the durability of the business in supporting our future growth. Total revenues were $755 million, adjusted OIBDA was $233 million and adjusted earnings per share was $0.29 per share. These amounts include a $5 million legal accrual noted in our press release.

Prior to this accrual, our financial performance was in line with our expectations for both the quarter and the year-to-date. Operating performance is also tracking in line with our expectations, with consistent storage rental constant dollar growth of 3% and storage rental internal growth of 2.3% for the quarter. As we've indicated in recent quarters, the trend towards lower levels of retrieval and refile activity and related transportation services in developed markets continues. But also as expected, service declines moderated somewhat during the second quarter, and our solid storage rental revenue growth continued to offset service declines and support our consistent profit results.

Overall, our full year outlook for operating performance remains the same, aside from the impact of foreign currency exchange rates.

Before Brian reviews our financial performance, I'd like to discuss our initiatives to continue to support the durability of our core business and the growth opportunities we're seeing in both our developed and emerging markets and progress on our plans to convert to a REIT.

As a reminder, when I refer to developed markets of Iron Mountain, that includes not only our North American markets of Canada and the United States, but Australia and the U.K. as well. It also includes Western Europe, where our team continues to deliver solid results, with good volume growth and improved profitability. This is despite a lackluster macroeconomic environment across Europe.

As I mentioned last quarter, our strategy to sustain the durability of the business in our developed markets includes 3 elements. One, tailoring our sales and marketing efforts to focus on vertical markets and add value for customers through industry-specific solutions.

Two is differentiating our core storage and service offerings with innovative tools that drive incremental storage from existing customers, as well as attracting new customers.

And three, acquisition opportunities driven by ongoing consolidation in our industry.

With respect to the first of these elements, we've worked through the realignment of our sales and marketing organizations to focus on verticals. This transition has taken some time to implement, but we're beginning to see results. For example, our focus on the health care market in North America is driving storage rental in this vertical, offsetting declines in query-driven service activities. We continue to see this dynamic in the second quarter, with health care storage rental up roughly 3% year-to-date versus last year. Being aligned along vertical markets also is permitting us to extend our reach into related segments such as life sciences. While our foray into this segment is more recent, we are seeing good interest from both new and existing customers, driving increases in project-related complementary services, as well as about a 3.5% increase in storage rental year-to-date.

We also have seen a nice pickup in new business bookings in this vertical segment, although the related volume will not be reflected in this year's results.

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