Good morning, and welcome to the Iron Mountain Second Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please also note 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, Rocco. Good morning and welcome to our second quarter 2020 earnings conference call. We have provided the user-controlled slides on our Investor Relations website. We will also be providing a 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 are successfully navigating the COVID-19 environment, how we have continued to see durability in our core Storage business, how we have continued to see strength in our Data Center business, how we are progressing on our Transformation Program with Project Summit, and how we as an organization are reflecting and acting on the recent events, highlighting continued social injustice with regards to diversity broadly and of the black population specifically. After our prepared remarks, we’ll open up the lines for Q&A. Today’s earnings materials will contain forward-looking statements. We have noted the impacts of COVID-19 and our expectations of how that may impact our operations and financial performance in 2020. We have also noted our expectations for Project Summit. 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 and other periodic SEC filings 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 time to join us. Let me start by saying I hope you’re all continuing to stay safe and healthy in these trying times. Before we get into a discussion of our second quarter performance, I’d like to take some time to touch on two topics that are top of mind for many of us in the current environment. First, the killings of George Floyd and countless others have left me and my colleagues upset, angry and heartbroken. I want to reiterate that racism, discrimination and hate have no place at Iron Mountain. Our commitment, which has been stated as one of our core five values for many years, to equality, inclusivity and diversity is part of our belief that our people are our greatest assets. Given this fact, we must continually attract, listen to, and develop a broad talent pool reflecting our global demographics in order to deliver for our customers and protect our future. These tragic events have sparked difficult but important self-reflection and conversations within our organization about how well we are living up to our stated values and how we commit ourselves to do much better. It is up to us to work together, educate ourselves and encourage open dialogue to promote proactive measures to help eliminate incorrect biases and spread awareness, not just because it is the right thing to do, but also because we will only be successful in serving our customers if we attract and retain the best talent. Having the best talent can only happen if we are recruiting and developing people from diverse backgrounds across the broader demographics we operate in. We remain strongly committed to taking decisive and strategic action to create a truly inclusive Iron Mountain. We’re committed to listening, learning, and taking the necessary actions to support long-term positive change for the black community specifically, and people from all backgrounds in general. While we cannot change the past, we have an opportunity as an organization and as individuals to positively impact the future and help fix the racial inequality prevalent in our society. Now, I’d like to update you on the impact we are seeing with respect to COVID-19. As you all know, the virus is unfortunately still spreading across the globe. My thoughts and prayers go out to all those who have been affected by the virus, including those who have fallen ill and their loved ones and caregivers. As always, our top priority remains the health and safety of our Mountaineers, their families and our customers. I want to acknowledge and thank the mighty Mountaineers around the world, who despite extraordinary challenges, have kept their focus on ensuring that Iron Mountain continues to move forward during these uncertain times, and doing so with a view towards safety. This is all brought home to me again last week during a visit I made to Northern New Jersey, so I could thank our frontline teams personally. One of our couriers relayed how he has been serving a large metro New York health system every day through the crisis and how thankful the customer is for our continued service. This particular customer went so far as to send one of their doctors to our facility to assist in the protocols and training to protect our staff. For me, this is what it means to be in true partnership with our customers. While we continue to serve many customers during this crisis, as you would expect, our second quarter results were impacted by disruptions due to office closures and other restrictions put in place as a result of COVID-19. Fortunately, 100% of our records management facilities are now open and operating across the globe. However, many of our global customers continue to operate at significantly lower capacities due to existing restrictions depending on geography. As a result, global demand for many of our core service offerings declined during the quarter. Looking back, no one could have anticipated the magnitude of the impact from this pandemic on the global economy and our own business. However, our team moved quickly to assess the risks, understand the consequences, and take decisive action to ensure the safety of our employees, customers and communities. As I mentioned, these various decisions have not been made lightly, and we are aware of their consequences, especially for our Mountaineers that have been impacted by furloughs and other temporary, and in some cases, permanent actions. We told you in May that approximately a third of our global workforce has been impacted by these actions in an effort to keep our labor costs in line with levels of service activity. Fortunately, we have been able to bring a number of our Mountaineers back to work, so at this time, this number has decreased to approximately 20% of our global workforce. Furthermore, the mix has shifted over the past few months, with fewer of the impacted employees on full furlough, and a higher percentage working reduced hours, or using vacation or sick time. At this time, we have also reopened all our corporate offices with the exception of London, which we plan to open at the beginning of September. We are practicing strict protocols around social distancing, and as such, the majority of our salaried workforce is continuing to work remotely. We should note we have seen strong productivity rates with working from home. That being said, given some of the increased stresses of working remotely, we continue to monitor and care for our Mountaineers’ mental health and resiliency as part of our overall focus on wellness. Turning to our financial performance, our continued navigation of this challenging and uncertain environment has delivered a second quarter performance that further demonstrates the durability and resilience of our people, and ultimately, our business model. I’ll touch on a few highlights here. Q2 constant currency revenue declined $58 million or 5.6% year-over-year, driven entirely by a 21% decline in our service revenue. This was partly offset by strong storage revenue growth, which increased 3.7%. The early benefits of Project Summit are evident as we delivered a constant currency adjusted EBITDA line, in line with the year-ago level despite the revenue decline, leading to a 200 basis point margin expansion. Barry will review the rest of the Q2 financials in more detail.

Thanks, Bill, and thank you for joining us to discuss our second quarter results. I want to echo Bill’s comments. I hope you all continue to be safe and healthy. We are pleased with our results for the second quarter. In a challenging macro environment, our team delivered solid performance across each of our key financial metrics, revenue, adjusted EBITDA, adjusted EPS and AFFO. Before I go into the detail of our results, let me touch on the impact COVID-19 has had on our service trends. As we noted on our last conference call, for the second quarter, we were planning for service declines consistent with what we experienced in April. This proved to be slightly conservative. While May was consistent with April, we saw an improving trend across most of our service lines in June. To provide investors with as much visibility as possible, I want to share more information than we typically do, including the monthly progression of service activity. As compared to last year, our global service activities declined 37% in April, 38% in May, and 21% in June. This resulted in an average decline for the second quarter of 32%. While trends have naturally varied some by market, these are generally representative of what we’ve experienced around the globe. A notable callout is Latin America, where consistent with macro headlines, the business has generally lagged the recovery elsewhere. To put that in context, this region represents approximately 5% of our revenue. In North America, we saw a year-on-year decline of 36% in April, 37% in May, and 22% in June. Our core storage business, which accounts for nearly two-thirds of our total revenue and a larger portion of our profitability, has demonstrated its durability as we continue to grow organic storage rental revenue during the pandemic. As a reminder, the stability of this business is built on the fact that over 97% of our annual storage revenue is generated by boxes that entered our facilities in prior years. And now turning to enterprise results for the second quarter, revenue of $982 million decreased 7.9% on a reported basis year-on-year, reflecting service declines as well as the stronger dollar. On a constant currency basis, revenue declined 5.6%. Total organic revenue declined 7.2%. Organic service revenue declined 23.1% reflecting the COVID impact. Despite the macro headwinds, total organic storage rental revenue grew 2.3% supported by revenue management. Adjusted EBITDA declined 2.3% to $343 million. Excluding the impact of foreign exchange rates, adjusted EBITDA was in line with last year, despite a $58 million revenue decline. During the second quarter, we incurred $9 million of costs as a result of COVID-19 for items such as PPE and specialized cleaning of our facilities, which have been excluded from our non-GAAP measures. Adjusted EBITDA margin expanded 200 basis points year-over-year to 34.9%. The improvement reflects progress on our Summit transformation, revenue management and favorable mix.

The only thing I would add is that when we transitioned to the new service delivery model, we’ve already seen early benefits of denser routes and less frequent pickups and deliveries. Our Image on Demand service has seen an increase in activity as more customers look for solutions which include the use of digital solutions, as it helps them integrate more contactless processes to reduce infection risk at their businesses. A recent survey indicated that more of our customers are interested in converting to digital versus physical delivery. In particular, our customers tell us they value speed of delivery, ease of use, and security as the most important considerations when evaluating the use of Image on Demand. To summarize, there is no doubt that the COVID-19 pandemic has been a challenge to our business. However, this challenge provided confirmation that the changes we have made to our organization and the investments we have made in the recent past were the right ones. COVID-19 accelerated many workplace trends, and we have demonstrated that we can provide the necessary solutions to help our customers adapt to their new unexpected work environment. Despite the unprecedented volatility of COVID-19, we remain focused on long-term growth and doing what’s right for the health of our employees, our customers, and our business. Importantly, we have also recommitted ourselves in our fight against racial injustice prevalent in our societies around the globe, and in creating an inclusive and diverse workforce. We are fortunate to have a strong balance sheet and a durable business model, which are helping us successfully navigate this challenging period, while providing us with the flexibility to continue investing in our long-term growth plans, which go beyond Project Summit.

We are confident in our balance sheet strength and liquidity position. In the second quarter, our team did a nice job driving cash cycle improvement of nearly 4 days year-on-year, with benefits coming from both payables’ days and days sales outstanding. We continue to see the opportunity for further cash cycle improvement over the long term. With the COVID backdrop, I think the team’s performance, particularly on cash collections was very strong. Despite a decline in revenue, our cash collections were up year-on-year in June. I will note that given the pandemic's impact on the macro-economy, we took a prudent view regarding receivables and increased our bad debt expense in the quarter.

I'd like to briefly expand on the recent bond offering that Barry mentioned. We appreciate the investment community's strong support which resulted in our ability to upsize the transaction in June to $2.4 billion. This leverage neutral offering increased our weighted average maturity by almost 2 years while only modestly increasing our cost of debt.

We will now start the question-and-answer session. Today's first question comes from Eric Luebchow with Wells Fargo. Please go ahead.

Right. Thanks for taking the question. Bill, you mentioned that you had launched some new solutions for your customers in the quarter that helped recover some of your sales losses. So I’m wondering if you could maybe provide a little more color on what type of solutions you’re offering and any impact you think that could have? And then, I guess, just one follow-up, on the data center build out, you have mentioned that you were looking at third-party capital options. I’m wondering if that facility is related to the Frankfurt lease or if there are potentially other assets that you could look to potentially a joint venture. Thanks.

Okay. I’ll let Barry answer the last one in more detail. I think the answer to – the short answer to your question is, yeah, we continue to like the idea of third-party capital for stabilized assets. But I’ll let Barry give you a full answer on that. On the first one, in terms – so thanks for the question, Eric, on innovation and the importance of that, not just in a post-COVID world, but absolutely in the current environment. We continue to see traction on some of the things I highlighted last time in terms of what I call remote collaboration and collaborating remotely. Like I gave the example last time, I think on unemployment benefits, where we’re actually facilitating folks to be able to be working away from home and both receive the application for unemployment and approve it, and then, also some of the areas around mailroom which, again, I think I highlighted last time. One area I would add in addition to that, so we continue to see more and more traction for those kinds of solutions. One area too that we’ve seen a good uptick in the recent past is what we call our Clean Start program. And the Clean Start program is something that we launched a year ago, which is really helping people to reimagine their needs to their office space, and get information flows to be more seamless when they’re at work, and then, also to get things off site for things that they don’t need around the office and it allows them to work in a much more flexible way. When we came into COVID that actually got – the brakes got put on that, because part of the Clean Start was, we would go into offices and do surveys and help – working with their real estate people to help them reimagine and rebuild their work processes. And some of that, the exhaust of that process, obviously, is storage, but also some of the other services that we provide is Iron Mountain. When we got into the crisis, our real estate team, product management, sales and marketing team collaborated and they created a Clean Start kit in a box, if you will. So what we’ve done is we’ve been able to put that together in a kit that allows us to deliver the same type of assessment in survey virtually without actually going into their offices. And we just recently, for instance, had a very large win with a global insurance company that was selling part of its insurance portfolio to a life insurance company, where we not only facilitated moving sensitive records, many containing Personally Identifiable Information across to that new owner of those policies and that information, but we also transferred a number of their employees across and at the same time helped them repurpose the real estate footprint that they were left with.

And, Eric, hey, it’s Barry. Thanks for the question. Just to add a little bit on to Bill’s comments there, earlier in the year, we noted that we were going to pause our third-party capital. Look, as we were working through the pre-leasing activity, we noted that the pipeline was very attractive, specifically on Frankfurt. Obviously, the team did a phenomenal job in the quarter with that and as well as the broader data center business. So we are looking at third-party capital, Frankfurt in particular. But I would never say never as it relates to other stabilized assets. We think it’s an attractive way to improve returns for the company and we see a lot of opportunity there. I would say that implied in your question was the comment around JV. We do think that that’s an attractive structure. You’ve seen that done in the industry before, I know. And I think at this point, what we’ll say is we will come back to you quarter by quarter and give you an update as to how we’re progressing there. Thanks for the question.

Hey, this is Adam on for Shlomo. On the Services business looks like the revenue decline wasn’t near as high as at least we were thinking. One, what percentage of the client facilities are accessible to the company’s services business? And two, how much did the increased paper prices offset the volume decline in the shredding business in the quarter?

Oh, okay. Hey, Adam. Thanks for the question. A couple of points there, I would say, look, our service business performed better in the quarter than we had anticipated. As you know, on the last call, we noted that we thought we’d use April as a proxy going forward for the entire second quarter. April and May, generally speaking, really across the world and across our various service activity lines were very consistent. Shred was down kind of high 20%s in April, about 30% in May. It also recovered just like directionally the rest of the business was down in the vicinity of 10% on an activity basis in June and kind of stayed at that level in July. I would say that, that trajectory of improvement in June, as I noted, was really pervasive across all of our activities. As it relates to paper price, in particular, the way I would think about this, Adam, is on our last call, we were – well, in the first quarter, we had a $10 million hit to EBITDA from paper prices, as you recall. On our last call, we thought that we would have kind of low- to mid-single-digit dollar decline as a result of paper price for each of the next couple of quarters. We actually had a $2 million positive to EBITDA as I mentioned on the call. Now, I will say that paper prices have been very volatile and have been declining quite significantly over the last couple of months, you’ve probably seen that in the industry data, I know you follow that. And so our view for the back half is that it will be basically neutral year-on-year as it relates to EBITDA.

Yes. Good morning. I was wondering if you could comment on what percentage of the new data center leasing is from existing Iron Mountain customers? Just more details on synergies there. And if you can comment on how the global sales relationship strategy might be going?

Okay. Good morning, Sheila. Thanks for the question. So, first of all, as we look at this quarter, most of the sales were from either new logos or hyperscalers that were the first time deploying in a hyperscale way. In other words, we – most of the hyperscalers, we were serving in some aspects, but not necessarily in large hyperscale deployment. I think overall, though, if you look at our pipeline, I would say that whilst it’s right to say on – in terms of volume, that we would sell this, that one hyperscaler, you can kind of skew what that looks like is we’re still seeing a good mix. So I think last quarter, we were approaching back up to about 50% from existing Iron Mountain or existing data center customers. This quarter, it was a little bit lower, especially if you use the filter I’m saying, breaking the hyperscalers into two buckets. But overall, I think we still continue to see the pipeline. Some of the new logos that I highlighted, that we brought in this time were because of existing Iron Mountain relationships and say our data management business and the type of cross selling that you would see. But if you look at specifically this quarter, what we’re most excited about this quarter is that we think, we’re beginning to be established in the deal flow for hyperscale deployment. In other words, hyperscalers know that we’re out there, and we’re seeing the RFIs, just like everybody else, so we’re pretty excited. So this quarter was skewed towards kind of new customers. But overall, the pipeline is still kind of in that 50% level.

Hey, good morning, guys. A couple of questions. For the organic storage revenue, it was up 2.3%. Kind of wondering if you could speak to that a bit. How much of that growth is coming from data centers now? How much is coming from the rest? And have you had any pushback on pricing increases during COVID? And then on the DCs, I’m just wondering, do you worry that if you start doing JVs for the DCs that you’re going to get less credit for this growing business?

Hey, Nate. This is Barry. Thanks for your both questions. So data center contributed 40 basis points to that number. So, it really speaks to the fact that it’s a nice contributor, and we expect obviously that to ramp over time as that is, as you know, a big focus for the company. We see a long-term trajectory for continued growth there. And, as I said earlier, the team is just doing really well. And that also speaks to the fact that our records management business continues to see nice growth and revenue management really contributing very, very well. As it relates to credit, as it relates to structure, I think it’s a little premature to talk too much about what we do there. As it relates to third-party capital, we know that we’re just evaluating but as it relates to stabilized assets, we do think that where various rates are in terms of certain folks that are willing to invest in this kind of market, it makes for very enhanced returns.

The only thing, Nate, I would add on the pricing side, because I think your question requires a little bit more focus. In this environment, do you still see the same stickiness? The thing that – we knew that we were an essential business based on government authorities. As I said, even at the peak, we were 96% of our facilities were open around the globe. Now it’s 100%. But the one thing that we’ve seen is that we’ve been able to continue to get the price increases that we expected. Our customers really see us as essential as well. And that was further reinforced. I think, Barry highlighted in his introductory remarks that in the month of June, not only did DSOs go down year-on-year, but in June, with lower sales, we collected more cash than we did in June last year. So, in other words, people really do see that our services are essential to keep their businesses up and running. So we haven’t seen any really noise around the price increases that we were able to achieve last year in the current environment.

Thank you. I’ve got a couple of questions on the data center side, if you could maybe comment on Amsterdam and then Singapore, each of which have seen some non-COVID-related pauses or freezes in terms of new permitting, and may or may not affect you equally in both markets, but just it has had some impact on your competitors. And is there kind of any sort of an update as to the lifting of these pauses in each of those metros? Thanks.

Thanks, Jon. It’s good to hear from you this morning. So I think first of all, the market in both of those locations is really strong. So first on Singapore, we’re continuing to keep an eye on it, because, as you probably realize, we’re tracking on a track that we’re going to be sold out in Singapore pretty soon. So you’re right that the government has put a pause on it. We have heard the – it just so happens that our head of Asia data centers is a Singaporean based in Singapore. So he stays pretty close to the government. We are seeing that the government seems to be making noises to relax that a little bit sooner than they initially guided, say, a year ago. So we’re optimistic. And obviously, we’re starting to or have been for a number of months now looking at how we could actually expand our footprint in Singapore. As I said, we’re well on track to fill out the old Credit Suisse data center fairly soon. On Amsterdam, interestingly, we have actually quite a bit of land permitted. So we’ve been less engaged with the government trying to relax that. On the other side, it’s exactly as you said, we’ve seen a number of people who have their own data centers in the Amsterdam market, for instance, coming in and starting to look to add capacity in our facilities because of the permitting issues that you’ve described. And obviously, Amsterdam is a highly connected market with a high level of connectivity within it. So it’s actually playing through our strength, because we have the capacity, but the rest of the market is constrained.

Yes. I was wondering if you could give us a little more detail on Project Summit, how it’s going versus your expectations. And for the $65 million benefit realized thus far, where are those savings coming from? And what are some of the sources of the future savings? And one last one for Barry. What was the tax refund related to just more detail on that?

Okay, Sheila. Good morning and thanks for those questions. First off, we feel great about how Summit is doing. I think the team is very aligned and they’re very focused on delivering. I think the total company is energized by the fact that this is really an opportunity to transform the company and support our customers that much better. In terms of how it’s stacking up, the second quarter of $40 million benefit year-on-year was right in line, if not a little bit ahead of what we were expecting. So we’re at $65 million year-to-date, obviously, those are elevated levels as compared to what we were expecting earlier as we increase the benefit this year last quarter. So we’re well on track to deliver $150 million of benefit this year. My guess is that next year, we will have another $150 million to $200 million of incremental benefit. And we’ll exit next year at a run rate that has all of the benefits the entire $375 million by 2022. So a little small amount of incremental benefit there in 2022 to plan for your models. As for where it’s coming from, it’s generally been thus far, probably in the vicinity of 70%, 75% from SG&A and the balance from cost of sales. You’ll notice you’re looking at our performance this quarter, our cost of sales is obviously down a lot more, and that reflects the fact that we made those temporary cost cuts that we talked about in the form of furloughs and etc. Moving forward, I think you’ll see even more of Summit coming from a more balanced approach across the income statement. As initially, as Bill has commented before, the first rounds of the Summit were really in the SG&A area. There will be more going forward. But I think as a relative basis, sort of last quarter, we talked some about the SLA changes, which by the way, are going very, very well. Those will continue to stack incremental benefits going forward. And some of that, obviously, will be in the cost of sales line. As it relates to the tax refund, I think that was the last question. We did have about $27 million of cash refunds in the quarter as compared to prior year. Last year, we actually paid more on a cash basis. So if you’re looking at AFFO, it’s almost a $35 million swing year-on-year. That’s one time. And we – those are for prior-year refunds that we received during the quarter.

Yeah, thank you for the question, guys. Good morning.

Good morning.

A couple if I could, can you comment some more on the churn that you’re seeing? Any kind of update on the monthly progression for customer churn?

Yeah, I didn’t quite get the question, Michael. It was a customer churn on data center or customer churn in the records business?

Yeah, sorry about that, on the records business, please.

On the records business, yeah. So, look, the customer churn is actually we think a little bit lower than normal than we would see. So that’s when I made the comment in my introductory remarks that when we normalize in a post-COVID world on one side, we would expect, you know, a pause. In other words, we don’t expect the same drag on incoming volume, but on permanent withdrawals as we saw a downtick in this quarter, because people are not in the office or making active decisions to actually withdraw. So we expect it to revert back to the normal levels. But if you kind of look at overall volume, I think the question behind your question is, what do we think is going to happen to volume when we get out of COVID. So on one side, we would expect permanent withdrawals to go up, back to normalized levels.

Thank you. This concludes today’s question-and-answer session and today’s conference call. The digital replay of the conference will be available in approximately 1 hour after the conclusion of this call. You may access the digital replay by dialing 877-344-7529 in the U.S., and +1-412-317-0088 internationally. You’ll be prompted to enter the replay access code, which will be 10145480. Please record your name and company when joining. Thank you for attending today’s presentation. You may now disconnect.