Good morning, and welcome to the Iron Mountain First Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will an opportunity to ask questions. Please 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, Francesca. Good morning and welcome to our first quarter 2020 earnings conference call. The user controlled slides are available on our Investor Relations website along with a link to today’s webcast and earnings materials. On today's call, we'll hear from Bill Meaney, Iron Mountain's President and CEO, who will discuss Q1 highlights and our response to the COVID-19 pandemic. Barry Hytinen, our CFO will then cover financial results, our leverage and liquidity position and our expectations for the remainder of the year. After our prepared remarks, we'll open up the lines for Q&A. Referring now to slide 2 of the presentation. Today's earnings materials will contain forward looking statements. Most notably, the impact from COVID-19 and our expectations of how that may impact our operations and financial performance in 2020 and expectations from Project Summit. All forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the Safe Harbor language on this slide and our annual report on Form 10-K and future 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 information, and the reconciliations to these measures as required by Reg G are included in the supplemental financial information. With that Bill, would you please begin?

Thank you, Greer, and thank you all for taking time to join us. First and foremost, let me start by saying, I hope you are all healthy and well and our thoughts go out to all those who have been impacted by COVID-19. I also would like to say, thank you to our employees in particular our front line mountaineers, who are on the road and in our facilities every day. As many of our services are considered essential, many of our colleagues have been ensuring our customers' needs are met as seamlessly as possible. Our mountaineers have shown selfless dedication and resilience in these challenging times. As we go through this morning's call, I will focus my remarks on a few key subjects. How we are responding and managing the business in light of COVID-19 pandemic; the new service and storage revenue opportunities we have seized, as we respond in real-time to our customers' changing needs, and the durability and strength of our core storage and data center businesses, which provide valuable recurring revenue during times such as these. First, we continue to closely monitor the COVID-19 situation, which as you are aware continues to evolve at a rapid pace. Our top priority is to ensure the safety and security of our people, their families and our customers. As a global business, we have been assessing the situation and implementing extensive precautionary measures since first learning about the virus in January. We have been constant. First in Asia and now globally in striving to minimize the spread of the virus and its impacts on our people, the communities we operate in and our customers. We have been serving our customers many of which are considered essential businesses in new and innovative ways as they navigate this pandemic. Now let…

Thanks, Bill, and thank you for joining us to discuss our first quarter results. I want to echo Bill's comments. I hope you are all safe and healthy. I would like to say thank you to our Iron Mountain team. I've been truly impressed by the team's commitment, hard work and perseverance during these challenging times. As Bill noted we are confident that we will emerge from this period a stronger company driven by our durable business model and the strength of our balance sheet. I will briefly touch on our first quarter performance before discussing our approach to addressing the pandemic. In the first quarter, we exceeded our expectations. And through the first nine weeks of the quarter, we were on track to exceed our targets even more substantially. Though by mid-March, our service activity began to experience declines compared to planned as more customers instituted mandatory work-from-home policies and restricted visits to their facilities. Despite this, we delivered a strong performance across our key metrics of revenue, adjusted EBITDA, adjusted EPS, and AFFO. Revenue of $1.1 billion increased 1.4% on a reported basis and 3.2% on a constant currency basis compared to the prior year. Total organic revenue grew by 1% in the first quarter. This was primarily driven by organic, storage, rental revenue growth of 3%, which reflected our successful execution of revenue management. Adjusted EBITDA grew 11.9% for the first quarter to $363 million despite the negative impact from lower paper prices in foreign exchange rates. On a constant currency basis, adjusted EBITDA grew almost 14%. Adjusted EBITDA margin expanded 320 basis points year-over-year to 34%. Adjusted EPS was $0.27, up significantly from $0.17 in the first quarter 2019. AFFO grew 20% year-over-year to $231 million, driven by adjusted EBITDA growth. This represents a new quarterly…

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Shiela McGrath with Evercore. Please go ahead.

Hi. Yes, good morning. That was very positive news on your guidance on the savings from Project Summit. I was just wondering, can you explain in a little bit more detail where that upside is coming from? Where you're finding those savings?

Good morning, Sheila. Thanks for the question. So as we got into COVID-19, as I alluded to is that our customers needed to be served a different way. And we already had a Summit teams spun up to look at our cost of sales. And what we found was, if we look specifically at SLAs for instance returning a box in 24 hours -- returning a box in 24 hours in this environment where people are working remotely wasn't going to help. So what we've done is we've actually in the major markets we've already implemented this. So this is United States, Canada, Ireland, the U.K., Australia and New Zealand. As we said, we're taking that to five business days so once a week we will pick up or deliver physical boxes. If they need something quicker then we will actually digitize it and we'll send it to them in a digital secure link through our InSight platform in Image on Demand. So we're actually giving them a better service and at the same time changing from 24 hours to five business days or once a week. You can imagine how significant that impact is on our logistics operations and allows us to really take out quite a bit of cost.

Okay. And then also I was just wondering, if you could comment on the dividend philosophy. As your – many REITs have chosen to revisit their dividend just as a source of liquidity. And just want to understand how you're thinking about the dividend?

Well, I think we're blessed by being kind of an industry one. So we're a specialized REIT and our operations are still running strongly. We – although service has been impacted as Barry said 40% to 50% that's on 20% of our profits or 40% of our sales. So whilst it's impactful it's not a threat to our liquidity. So for our – from our standpoint, there isn't a liquidity reason that we would have to adjust our dividend. And then, as if you look at 2022, where we think we'll be looking at COVID in the back – in the rearview mirror by 2022. So we're assuming that it doesn't happen until then. Then we're actually gliding quite nicely into our original goal in our financial models as we get into the 2022 and 2023 period in terms of getting into the mid-60s to low-70s as payout as a percentage of AFFO. So we feel good about where we are. We'd rather not have COVID-19 because we would have gotten there much faster, but we feel good about the position.

[Operator Instructions] Your next question is from Nate Crossett with Berenberg. Please go ahead.

Hey, good morning. Just a follow-up on Sheila's question about Summit, so how much of that $175 million benefit is coming from that SLA change, and are there any other kind of big drivers in there?

Yes. So thanks Nate for the question. So it is -- that is actually the major driver. Because if you look at our cost of service, which is a combination of labor, fleet in terms of the trucks that we put on the road and our facilities. It is -- we are one -- it is actually the largest cost as a company. And when you then say okay we're going to a five-day or once a week service cycle which allows us to marshal or consolidate volumes much more. And then for more rapid turnaround to give people digital ways of getting that back it's a major change in terms of cost of sales. We always as part of Project Summit we're going to optimize the cost of sales across those three labor trucking and facilities. But actually changing that from a 24-hour rhythm to a once a week rhythm is super impactful.

The next question comes from Andrew Steinerman with JPMorgan. Please go ahead.

Hi. Two questions. I didn't understand if this new rhythm for delivery to once a week from once every day was also positioned for the post-COVID environment meaning it would stay? And my second question Barry is with the stepped-up benefits from Project Summit when you reach those benefits what would be the implied EBITDA margin?

So Andrew on the first one yes this is -- and we communicated that to our customers. This is beyond COVID. And in fact, this probably is something that could have happened before, but it's easier to actually get people to change their mindset in terms of how they want to be served given the current environment. Because if you think about the 24-hour SLAs than something that was historical in the business for decades. And the way people use the information that they retrieve now is very different. And quite frankly, lots of times they'd rather have it electronically. So yes this is -- COVID was -- it allowed us to have the catalyst to have that conversation with the customers, but it's permanent going forward.

Hi. Andrew, thanks for the question. Good morning. While we're not giving guidance for even this year's EBITDA, it's a little bit hard to get into projecting how much of that extra $175 million of benefit from Summit going forward is going to be as it relates to the numerator and denominator of EBITDA and sales. But certainly, if you thought about that $175 million incremental in sort of perpetuity and that's the way you should because it's a ongoing benefit. And put that against either our prior guidance or last year's results, for example, it is a very significant increase in the relative level of profitability and will certainly dramatically assist us in our goal of increasing margin and moving that into the very high 30s, if not potentially beyond going forward. But I think what we'll do is take it one quarter at a time this year and provide you updates as how we're doing. But I will tell you as Bill -- I'll reiterate Bill's point, we feel very good about what we've got going on with respect to Summit and the way the teams are performing. And we look forward to reporting the progress against that with you every quarter.

Thank you.

Your next question is from Marlane Pereiro with Bank of America Securities. Please go ahead.

Hi. Thank you for taking my question. Just a quick one. Just to clarify, under your extreme scenarios, you anticipate not staying within both your maintenance and incurrence covenants, is that correct?

Yes.

Okay. I mean, do you have -- would you be able to provide roughly an idea of how much cushion or headroom that you would have under those scenarios?

So I mean let me frame it this way for you. As we think about leverage for this year based on the -- our current view of trends and the outline of how Bill and I spoke about it earlier, we would expect leverage to be flattish to maybe slightly up year-on-year at year-end this year. Now I will note that it is a positive development I think speaks to the team's progress and the performance we put up in the first quarter that are actually our leverage ticked down a 10th from year-end. But when we stress test the business, it probably slightly above those levels, but we feel very good about in each scenario. I don't want to give and I think you can appreciate why specific leverage points under various stress tests because there are so many models -- so many elements that go into those models. But as we said on the call, we would have sufficient cushion in both the leverage -- on all the tests that you mentioned as well as liquidity. So we feel very good about where we're positioned. And that is thanks to the incremental Summit benefits, we've pulled forward here at the incremental Summit benefits coming from the SLA changes that Bill mentioned, as well as the cost actions we took to align revenues and costs in this period here during the pandemic.

[Operator Instructions] The next question is from Franois – it’s from Kevin McVeigh with Credit Suisse. Okay, excuse me. The next question is from Andrew Steinerman with JPMorgan.

One more. Yes just one more question from me Andrew. Organic revenue growth in storage. Is your working assumption that it stays positive throughout the year?

Yes.

Okay. Thanks very much.

The next question is from Franois Mambo [ph]. The next question is from Kevin McVeigh with Credit Suisse. Please go ahead.

Great. Thank you. Maybe just give a little thought as to the impact on kind of both the storage and the data center business longer term given the shift in service, do you expect any impact on the storage business? And then ultimately data center as well as it relates to maybe incoming volumes things like that if you think about potential structural changes as a result of COVID-19?

On the storage side Kevin post-COVID-19 there – right now our surveys there's many customers that say that there will be no change as there – those that say that will be continuing on their current program. So no, we don't expect a major change in the trends that we're seeing on the storage. On data center, as we said is that we've seen actually continued building of our pipeline through COVID-19 and we expect that to continue to be strong on the other side. We can't tell you right now if our strong pipeline is just because of the momentum we were building into the – in the data center business as we were coming in or specific to COVID-19. But yes, there's nothing that we're hearing from customers that's saying that their demand post COVID-19 is going to be any different on the data center side than what we're seeing in terms of the positive momentum in the basis today.

This concludes our question-and-answer session and today's conference call. The digital replay of the conference will be available approximately one 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 10140258. Please record your name and company while joining. Thank you for attending today's presentation. You may now disconnect.