鐵山公司 (IRM) 2017 Q2 法說會逐字稿

Good morning, everyone, and welcome to the Iron Mountain Second Quarter 2017 Earnings Conference Call.

(Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Melissa Marsden, Senior Vice President of Investor Relations.

Please go ahead.

Thank you, and welcome, everyone, to our second quarter 2017 earnings conference call.

The user-controlled slides that we will be referring to today in our prepared remarks are available on our Investor Relations website, along with the link to today's webcast.

You can find the presentation at ironmountain.com under About Us/Investors/Events & Presentations.

Alternatively, you can access today's financial highlights press release, the presentation and the full supplemental financial information, together as one PDF file, by going to investors.ironmountain.com under Financial Information.

Additionally, we have filed all the related documents as one 8-K, which is also available through the website.

On this morning's call, we'll hear from Bill Meaney, Iron Mountain President and CEO, who will discuss highlights and progress toward our strategic plan; followed by Stuart Brown, our CFO, who will cover financial results and guidance.

After our prepared remarks, we'll open up the phone lines for Q&A.

Referring now to Page 2 of the presentation.

Today's earnings call, slide presentation and supplemental financial information will contain forward-looking statements, most notably our outlook for 2017 financial and operating performance.

All forward-looking statements are subject to risks and uncertainties.

Please refer to today's press release, earnings call presentation, supplemental financial report, 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 differ from those in our forward-looking statements.

In addition, we use several non-GAAP measures when presenting our financial results, and the reconciliations to these measures, as required by Reg G, are included in our supplemental financial information.

With that, Bill, would you please begin?

Thank you, Melissa, and good morning, everyone.

We are pleased this morning to report strong second quarter results and our first acquisition in the data center space.

We're excited about this transaction and look forward to welcoming the FORTRUST team to the Iron Mountain family.

We achieved financial performance in line with our expectations.

And the durability of our high-margin records management storage business drove solid internal growth and enhanced profitability across the business.

Our second quarter financial and operating results demonstrate solid execution of our strategic plan.

As you know, that plan is focused on extending our durable business model through continued investment in our core developed markets, whilst expanding into faster-growing emerging markets and capturing opportunities to provide new innovative solutions to both our new and existing customers and to tap into new storage-related segments, such as the data center business.

Let me start with highlights on the third slide of the earnings call presentation.

Our second quarter financial results were in line with our expectations and reflect how our rapid integration of Recall and success with our transformation initiative have significantly enhanced the adjusted EBITDA and AFFO that support recent dividend increases and provide a solid foundation for future growth in dividend as well as in excess of inflation.

We continue to make progress on our goal of reducing SG&A as a percentage of revenue, down 80 basis points from the first quarter to 23.4%, whilst our EBITDAR margins improved 230 basis points sequentially to 33.5%.

Prior to onetime items, which Stuart will detail later, the sequential improvement would have been 170 basis points, or 32.9% in terms of margin.

During the quarter, we also achieved internal storage rental revenue growth of 4.8%, which, as noted, included a data center lease termination fee.

Excluding that fee, we posted very strong internal storage rental growth of 4%.

This growth reflects improvement in pricing through revenue management efforts and 1.3% growth in internal global records management volume, or excluding impacts from acquisitions and dispositions.

You'll note in the supplemental report that trailing 12-month volume growth now includes Recall volume in the base, rather than being held out separately as acquisition-related, which is how we have presented Recall volume for the past 4 quarters.

As we have noted in calls over the past year, after lapping the anniversary of the acquisition, folding in Recall's volume into the base increases it by about 20%, which has the impact of making all percentage growth figures a bit lower, even though there is little to no change on an absolute basis.

Slide 4 shows the absolute volume change for total records management storage.

Importantly, new volume from both existing and new customers of 50 million cubic feet over the past 12 months is up from 44 million cubic feet of new volume over the 12-month period prior to the Recall acquisition.

This demonstrates the benefit of the transaction and consistency of customer behavior related to storage of new regulatory and legal documents.

And remember that the 9 million cubic feet of net record growth stays with us for an average of 15 years.

Based on the strength of our core fundamentals, we remain comfortable with our full year revenue, adjusted EBITDA and AFFO guidance for 2017.

Whilst we benefited from some onetime items in the second quarter, our expectations are unchanged.

Stuart will have more on the pluses and minuses shortly.

Slide 5 is a review of progress during the quarter against our 2020 strategic plan.

In developed markets, which includes both North America RIM and our Western European segment, we achieved internal storage revenue growth of 3.4% and 1.8 million cubic feet of net internal volume growth in developed markets on a trailing 12-month basis.

We are pleased with the durability of volume growth and our ability to achieve price gains in the developed markets.

In addition, we continue to identify attractive acquisition opportunities in developed markets, closing on 4 tuck-in deals in North America, including an acquisition of a small shredding business.

In terms of expanding our business model into faster-growing emerging markets, we had just shy of 18% of total revenue on a 2014 constant dollar basis, a major improvement from about 10% just 3 years ago.

Year-over-year progress against this goal was supported by acquisitions closed during the quarter, including those in the remaining markets that were part of the Santa Fe deal, namely Indonesia, India and the Philippines.

We are closed -- we also closed on a transaction in Peru during the second quarter.

In total, we invested 25 -- $27 million in emerging markets in Q2, which includes some real estate assets.

Subsequent to quarter-end, we closed on a 20 -- $29 million acquisition in Cyprus.

We continue to nurture a strong pipeline of M&A opportunities and are maintaining our full year guidance for acquisition investment, independent of the data center acquisition announced this morning, which I'll address in just a minute.

Also during the second quarter, we sold our business in Russia and Ukraine to OSG, a leading records management provider in Russia.

We remain confident in the long-term attractiveness of the market opportunity and growth characteristics of these countries and will continue to participate through a passive 25% minority interest in the combined entity.

We believe that owning a stake in the OSG business, that now includes Iron Mountain customers and operations, is the best value-creating strategy at this time.

Turning to Slide 6. We meaningfully advanced our adjacent business strategy with the signing of an agreement to acquire FORTRUST, a Denver-based data center company, for approximately $128 million, which we announced earlier this morning.

This acquisition adds 9 megawatts of existing capacity and allows for a significant future expansion.

Together with the first phase of our data center campus in Northern Virginia that goes online next month, we will have a total existing capacity of more than 30 megawatts by the end of the year.

Adding the expansion potential from FORTRUST, full build-out of our Northern Virginia campus and construction in progress in our Boyers and Kansas City locations, we have the potential to expand our data center platform to more than 70 megawatts.

FORTRUST is a great fit with our business.

It is highly regarded, private data center operator with the distinction of having 100% critical systems uptime throughout its 15-year history.

And FORTRUST's focus on enhanced security and consistent accessibility for critical applications is very consistent with our brand positioning in targeted verticals.

It has a diversified base of more than 250 customers, with the top 25 representing about 50% of annualized rental revenue.

In addition, Denver is quite attractive as a critical location for customers seeking East-West data center redundancy.

And the market is seeing solid demand driven by the technology solutions, data management, software, education and health care industries.

The acquisition, including the real estate, represents a multiple of approximately 13x stabilized EBITDA and will be funded with a combination of cash and unregistered stock issued to the seller.

Assuming this deal is funded with approximately $73.5 million worth of equity at or near the current stock price, it would be $0.01 to $0.02 per share dilutive to EPS in 2017 and neutral to AFFO.

We expect it to be accretive to EPS in year 2, or 2019.

Our year-end run rate revenue mix following this data center transaction will bring adjacent business to roughly 3% of total revenue relative to be at 5% by 2020.

Combined with the growth in our emerging markets, we are well positioned to meet our goal of 25% of total revenues from our higher-growth portfolio by 2020.

In summary, we had a solid quarter characterized by good operating fundamentals, strong financial performance, improved profitability and excellent progress in all 3 pillars of our strategic plan.

We continued to identify attractive investment opportunities that both strengthen the durability of the core business and drive growth in new businesses.

This progress supports growth in adjusted EBITDA and cash flow that ultimately underpins our ability to grow our dividend per share and to delever over time.

With that, I'd like to turn the call over to Stuart.

Thank you, Bill, and good morning, everyone.

We are pleased to report on another strong quarter of healthy, continuing growth in our core records management business.

This morning, I'll provide some color on the quarter's operational and financial drivers, and then cover our outlook for 2017.

As you see on Slide 7, which shows our key financial metrics, our second quarter total revenues grew 8.4% on a C$ basis and were modestly impacted by delayed closings of acquisitions compared to our original outlook.

As Bill mentioned, we achieved strong internal storage rental revenue growth of 4.8% in the second quarter, or 4% excluding a lease termination fee from a data center customer whose business had been acquired.

Service revenues increased 5.1% in the second quarter on a C$ basis, with internal service revenue down 1.1%, as higher paper prices in our shred business this year were more than offset by cycling over high Recall destruction revenue a year ago in our Other International segment and less tape rotation in our data management business.

As noted last quarter, we will be cycling against last year's paper price increases in the second half, so at current paper pricing, we don't anticipate further upside this year.

With year-to-date internal service revenue growth of minus 0.4%, we continue to be comfortable with our outlook for flattish internal service revenue growth for the full year.

Selling, general and administrative costs as a percentage of total revenues were down 230 basis points year-over-year and decreased 80 basis points from the first quarter, driven by transformation and integration progress, and excluding Recall integration costs.

Our adjusted EBITDA grew about 23% on a C$ basis in the second quarter.

Excluding the additional month of Recall in our 2017 results compared with last year, growth was about 18% due to solid operational execution and acquisition synergies, resulting in margin improvement across all our regions.

In addition, results benefited from almost $6 million of nonrecurring items this quarter, including the data center lease termination fee just mentioned and the reversal of an earn-out provision on a previous acquisition.

I'll speak to our adjusted EBITDA outlook in a few minutes, but at a high level, we expect these favorable items to be largely offset by integration costs associated with acquisition activity in the second half as well as the loss of EBITDA from the sale of our Russian and Ukrainian businesses.

Looking at the adjusted EBITDA margin on a sequential basis, that is to track progress on synergies and transformation, the adjusted EBITDA margin improved 230 basis points from the first quarter, driven by top line growth, gross margin improvement, acquisition synergies, the overhead improvement and, to a lesser extent, the nonrecurring items.

Compared to a year ago, the adjusted EBITDA margin increased 390 basis points to 33.5%, of which about 60 basis points was due to the nonrecurring items.

AFFO was $217 million in the second quarter, an increase of almost $62 million or about 40% on a C$ basis.

This strong growth resulted from growth in adjusted EBITDA, timing of maintenance capital expenditures as well as a swing in the timing of quarterly cash taxes compared to a year ago of about $14 million.

Remember that annually, cash taxes will generally reflect our structural tax rate, but we will have some quarterly volatility.

Year-to-date, cash taxes have been just a little bit lower than our expected annual run rate.

Let's turn to Slide 8 to cover internal growth performance by segment for the quarter.

In the North America Records and Information Management business, internal storage revenue grew by 3.7%.

This growth was largely driven by higher average price as reported internal volume growth was flat.

North America internal service revenue growth of 1.3% resulted from higher revenues from information governance, or digital imaging services, shred activity and paper pricing and other project-based revenue.

The North America RIM adjusted EBITDA margin increased 400 basis points to 43.3%.

As you can see on this slide, the total North America RIM business represents over 50% of total revenues, so strong growth in this segment has a significant impact on overall growth.

The North America Data Management business trends were in line with the first quarter, with internal storage revenue growth of 2.9%.

Internal service revenue declined about $2 million due to the ongoing reduction in tape rotation.

While the internal service revenue decline on a percentage basis is more noticeable in data management compared to other segments, remember that data management service is just 3.4% of total revenues.

Further, new services are just beginning to offset these declines, but we expect it will be some time before the tape handling declines are fully offset.

The adjusted EBITDA margin in North American Data Management declined slightly from a year ago as a result of increased investments in product development.

However, the margins remain a very healthy 53.4%.

The internal storage revenue growth in Western Europe improved 2.5%, up from the first quarter, reflecting good revenue management efforts.

The internal service revenue decline of 1.7%, or less than $1 million, was due mainly to a lower contribution from data management and fewer destruction projects in the U.K.

In the Other International segment, which includes the larger legacy Recall Australian business, we continue to see strong storage internal revenue growth of 7.1% and improving margins.

Service internal growth in this segment was impacted by the high level of Recall destruction projects underway a year ago.

The adjusted EBITDA margin in Other International was 29.2% in the second quarter, continuing to improve year-over-year.

Remember that this segment, representing emerging markets plus Recall's larger Australian and New Zealand business, now account for over 20% of total revenues.

In our corporate and other segment, we recorded the lease termination fee in our data center business that drove a very high internal storage growth on a percentage basis given the small base.

The fine art storage business also had a strong quarter driven by new sales leadership and implementation of enhanced sales management tools as well as a focus on customer retention and operational efficiencies.

Touching on Slide 9 quickly.

This shows the relative size of each segment by product line and the contribution to our results through a storage and service lens.

Storage provides over 80% of adjusted gross profit with the remainder from service.

We continue to innovate on new offerings for our customers, focusing on value-added services which deliver gross profit growth.

Before turning to our outlook for 2017, let me quickly touch on the composition of our global business as well as our balance sheet.

Remember that roughly 70% of adjusted EBITDA in the U.S. is in U.S. dollars, demonstrating the limited impact foreign exchange fluctuations have on our results.

Also we continue to match our foreign-denominated debt to create natural currency hedges to mitigate translation exposure, while also being tax efficient.

At quarter-end, 23% of our debt is in currencies other than the U.S. dollar.

In keeping with this focus, in May, we completed a EUR 300 million senior unsecured note offering.

We had great execution resulting in a transaction that was historically significant, and we believe that at a 3% coupon was the second-lowest coupon ever for a reverse Yankee issuance.

This reflects bondholders' understanding of the health of our business, durability of cash flows and strength of our balance sheet.

We are keeping a close eye on market conditions and may have additional opportunities for refinancing activity later this year.

We maintained liquidity of nearly $1.3 billion at quarter-end.

And our lease adjusted debt ratio remained at 5.8x, which is in line with our expectations.

Let's turn to our guidance for 2017, summarized on Page 10 of the results presentation.

Our core outlook remains unchanged on a constant dollar basis.

However, we are updating underlying assumptions for the acquisition of FORTRUST and increased our internal revenue growth expectations for storage.

With our strong first half internal growth momentum, we now anticipate internal storage rental revenue growth to range from 2.5% to 3% for the year, an increase of 50 basis points, driven by both volume growth and pricing improvement.

Our EBITDA guidance is unchanged.

As noted earlier, we had $6 million of one-time benefits in the second quarter, which we expect to be offset by the timing of acquisition activity and the divestment of our Russian and Ukrainian businesses.

In addition, our shared service implementation costs as well as investments in data technology and consumer storage are weighted to the second half of the year.

Therefore, after a strong sequential increase in adjusted EBITDA, we expect a flatter progression of growth from here to the end of the year.

Regarding AFFO, our range of guidance for the full year is unchanged, with maintenance CapEx and cash taxes increasing in the second half of the year relative to the first half.

With the FORTRUST acquisition expected to close in the third quarter, we haven't adjusted EBITDA or EPS guidance ranges, given that we will have only a partial year contribution of results and will incur integration costs.

We don't intend to exclude these integration costs from our adjusted EBITDA definition in the same manner as we do for Recall costs, as this is more of an ordinary-course acquisition in terms of size.

Also the partial year addition to revenue from this deal would be subsumed within our guidance range.

However, from an investment standpoint, we are assuming an additional $128 million of growth capital, of which $73.5 million funded from the private placement of shares to the seller based on the average price prior to closing.

Therefore, our outlook reflects an increase of about 2 million shares outstanding, or roughly 1 million shares on the 2017 weighted average share count.

Turning to Slide 11.

Our projected cash available for distribution and divestments, or CAD, also remains unchanged other than for FORTRUST.

For 2017, we continue to expect CAD to cover our anticipated full year dividend and required maintenance capital expenditures with approximately $120 million of capital remaining to support core growth racking and other discretionary value-creating investments.

The private placement of shares and borrowings will fund the estimated $345 million needed for growth investments, including FORTRUST and excluding Recall costs.

Slide 12 shows the same information, but in a sources and uses format based on our AFFO guidance for the year.

As you can see, AFFO, which, by definition, adds back noncash items and deducts maintenance CapEx, covers the dividend as well as acquisitions of customer relationships and inducements with the same $120 million of cash remaining.

That $120 million, plus debt and private placement equity as shown, is adequate to address the investment of FORTRUST, our existing data center development, plus acquisitions, real estate investments and innovation.

Overall, we are very pleased with our second quarter performance and remain well positioned to deliver on our final -- financial projections for the year, having maintained strong internal growth momentum.

With that, I'll turn the call over to Bill for closing remarks before we open up for Q&A.

Thanks, Stuart.

Just a couple of high-level comments before we turn it over to Q&A.

First, we have had a very strong quarter in terms of the financials perspective, 4% internal storage revenue growth, year-over-year EBITDA margin expansion of 330 basis points, excluding all the one-time items and strong AFFO growth, which continues to drive dividend growth and to deleverage the business.

Second, incoming trailing 12-month volume growth has gone from 44 million cubic feet to 50 million cubic feet after absorbing Recall, showing the robustness and quality of the business, the physical storage side.

And third, we've made significant progress in building our higher-growth segment aided by M&A, both in the emerging markets and now in the data center space.

With that, I'd like to turn it over to questions.

(Operator Instructions) And the first questioner today will be Andrew Steinerman with JPMorgan.

Sorry about that.

My question is within the internal storage guide, could you give us a sense of how much net pricing benefits?

We -- you can see it in terms -- if you see the difference, Andrew, between the 4% internal revenue growth and you see the increase in volume.

So you can kind of -- we don't do it on a like-for-like basis, as always.

One's on a trailing 12-month and one's quarter-over-quarter.

But you can kind of see that we're getting significantly more price than we have in the past.

Right.

And last question, on the internal guide of 2.5% to 3% for the year, are you counting second quarter as a 4.0% or the higher number?

For -- we're counting the second quarter as a 4.0% because we're stripping out the SimpliVity termination when HP bought them.

And the next questioner today is going to be Karin Ford with MUFG Securities.

Wanted to ask a question on the FORTRUST acquisition.

First, as a clarification, you are buying the real estate as part of this deal?

And then secondly, the 13x pricing on synergized EBITDA, what's included in that synergized EBITDA?

Okay, so we -- so Karin, we are buying the real estate -- we're buying the whole business, including the real estate.

And the 13x synergized is after also building out the additional 7 megawatts of capacity.

Karin, just to clarify, it's really -- so it's the -- if you look at the current run rate of EBITDA with the leases that they have in place, they've got a couple of leases signed that haven't taken occupancy yet.

And the synergized, there's a little bit of synergies, not a lot.

And then the -- a build-out of some of the existing space.

It's not the future development space.

Okay.

Does it include getting the 75% leased portion up to, call it, stabilization?

Yes, because stable -- fully stabilized yield was if you look at sort of a 95% occupancy, you're going to get a yield there of, call it, 12% on the initial purchase and then, obviously, a higher yield on the future development.

Okay.

Great.

Second question is just on the Northern Virginia Data Center.

Can you just talk about leasing progress on that and when you would expect to hit stabilization on that development as well?

Originally, we've guided that it will take us about 3 years to get stabilized on that.

I think it will be a bit faster than that.

But I think in terms of pre-leasing activity, we've had a few small customers already come in, but we've had a lot of people.

In fact, this week, we had a tour of someone looking at both Northern Virginia as well as Denver that's looking for on the order of a couple megawatts at both facilities.

So we feel pretty good in terms of where -- the interest in terms of that facility.

We've had -- we've already had quite a few sales tours looking at that as it comes online, I'd say, in the middle of August.

Great.

Last question is just for Stuart on debt to EBITDA.

I know you said the 5.8x this quarter was in line with your expectations.

Are you still expecting to get debt to EBITDA down to 5.6x at year-end?

Or has that target changed with the incremental acquisitions you made this quarter?

Yes, it will still be around 5.6x.

You've got to remember, we've funded it -- the seller actually wanted to take Iron Mountain stock.

And so we are able to fund that with basically the same leverage ratio as the existing balance sheet.

And the next questioner is going to be Andrew Wittmann with Robert W. Baird & Co.

Great.

I guess, I'd maybe ask a couple of questions here on service to start out with.

I noticed that North American RIM service was plus 1.3%.

That's continuing a trend of relatively positive results.

Are you working on any large projects that are happening here in the last couple of quarters?

Or do you believe this rate of service growth in the North American RIM is sustainable?

Thanks, Andrew.

No, I think it's more than sustainable.

And in fact, although these were more in Western Europe, we had a few projects that have slipped into the third quarter because the timing on these things is never exact.

So we feel pretty good about the pipeline on the service side.

I mean, the -- and as you can see is that North American was naturally our primary focus in terms of getting our service pipeline built up because it's, by far, the largest portion of our service revenue.

Most of it comes from North America.

But we see good progress across the spectrum looking at Europe and also data management in terms of building the pipeline.

The one thing I'll add is that the first half was helped by the higher paper prices that we'll be cycling against when -- it started to increase last year, August, September.

Yes.

Okay, that makes sense.

And then I guess, Stuart, on the financial statement.

I just noticed in the adjust -- in the adjusted EBITDA reconciliation as well as the adjusted EPS reconciliation, there is -- that the other income line actually had a pretty significant number.

I think it was like almost $40 million dollars in EBITDA and $0.07 in EPS.

So I was just wondering if you could give some detail as to what that is.

It's really all boils down to FX and the change in FX in the quarter.

And you can see that impact also in the supplemental, where we go back and adjust FX out of that in the -- what is that -- on page -- trying to look and pull it up real quick.

But you can see it was about a 1% impact on the second quarter in terms of growth rates.

And so that just flows through to the other.

Okay.

Final question here, just on the guidance.

I just want to understand the -- check my understanding on this.

On the FORTRUST acquisition, it sounded like the income statement impact, because it's partial year or whatever, it gets absorbed in the range, but the capital structure impact is, in fact, included in the guidance that you've given today.

Is that right?

That is correct.

That's correct.

So even -- as Karin asked a few minutes ago, even with that, we can keep leverage -- getting the leverage down close to 5.6.

Yes.

And I can't imagine Russia, Ukraine was too much revenue, but what was the annualized revenue from that, if you don't mind us asking?

It was about $12 million.

In the year, the impact was about $12 million.

So that -- so on an annualized basis, call it, $15 million or $16 million of annualized revenue, 18 -- maybe $18 million.

Maybe $18 million then?

$18 million annualized impact on revenue.

And the next questioner today is going to be Shlomo Rosenbaum with Stifel.

Stuart, can you just walk through kind of some of the give and takes in the quarter?

I guess, starting on revenue, you had a one-time benefit from a lease termination.

I think you said there was $6 million.

What was the in-quarter impact negative from disposition of Russia, Ukraine?

Yes.

So the in-quarter impact was pretty small.

The impact for the rest of the year, so it was probably about $0.5 million impact on -- negative impact on EBITDA.

You'll end up seeing a piece of that in the second half actually flow through sort of other income, right, because now we have a 25 -- we maintain a 25% investment, so as a minority.

So it comes out of EBITDA.

But we continue to remain invested in Russia.

So you'll end up picking some of that back up from an EPS and AFFO standpoint.

But of the $6 million, the biggest piece of that was the lease termination fee, and it was about a $2 million impact from the other -- from the accrued earn-out that we ended up not paying.

Okay.

So -- but how much -- I know you said a $0.5 million impact on EBITDA on the quarter from Russia, Ukraine.

How much was the Russia impact?

That was the -- I mean, it's just about -- I mean, that's the biggest piece of it.

Yes, we don't break out EBITDA by country, so...

Okay.

I'm trying to get is that if I'm trying to normalize the revenue for the quarter.

So I would take out $6 million from the termination, plus the accrued earn-out.

I also want to be able to remove any dispositions, so I'm looking on a go-forward basis.

So what should I remove for the dispositions?

Yes.

The dispositions are small.

It's about a half -- like I said, the disposition is about $0.5 million.

And the lease termination was about $4 million of the $6 million.

Those are the 2 adjustments.

Those are the 2 normalizations you should make.

Got it.

And then for currency headwind in the quarter.

What was the aggregate currency headwind during the quarter in the company?

That's on Slide 7 of the supplemental.

It was about 1 -- it was, yes, about 1% impact.

Okay.

And then the termination fee was because the company -- the client got bought out and someone moved the business elsewhere?

Yes.

HP bought SimpliVity here in Boston.

And they moved it into their data center.

They had excess data center space, so they -- and as part of that acquisition, they moved SimpliVity out, but they paid out the contract.

Got it.

Okay.

And then if I go ahead and look at the internal storage volume growth on the pages that -- where you have those bars, it looks like they're below trend a little bit before the Recall acquisition.

So if I go back, it just looks like North America and Other International just seems to be a little bit lower than they were before the 4 large bars with the -- with Recall.

And I wanted to know if there's any commentary on that.

That's just increasing the base.

I mean, it's the -- because now, the base is 20% bigger than it was before with Recall volume in there.

Okay.

So I should divide it by 0.8 to get kind of a more normalized of what I should think about it?

No, not really.

You're -- we would sort of talk about this from a volume basis, right?

Volume has -- is up and you can see that in the charts in the earnings presentation.

But your denominator, right, your base of what you're comparing that growth to, that 9 million cubic feet over the last 4 quarters, is your growth that you're dividing that by a 20% bigger base.

So you can't just take that times 0.8.

Yes, I think -- I mean -- I think the way I would think about modeling it on a go-forward basis is do it around the absolute, right?

In other words, the new absolute.

So we said that over a trailing 12 months, we've gone from 44 million to 50 million of incoming volume.

So I would kind of think about it in terms of the absolute than -- rather than just try to mess around with the percentages.

Okay.

All right.

I'll just probe that more offline.

But just -- if you go to Page 28 of the supplemental, there's this bar chart that looks like volume has been coming down.

And I just wonder if you can give us -- with the top left, like, year-over-year growth in unit storage and records management storage portfolio in cubic feet.

Can you just explain to us what that is it exactly?

It says we're down 2.1%.

Yes, Shlomo, that's utilization.

You got to remember that the divestments are in that as well, so you get impacted by the disposals that we've done related to the Recall transaction.

So those divestments as well as Russia, right, so you go down even in Q1 because of the divestments.

Got it.

So it's all divestment-related.

Yes.

Okay.

That's what I'm getting to.

Okay.

Very good.

Yes.

And I think the divestments is about 14 million impact, cumulative, yes, for the -- yes, 14 million cube was the impact.

Okay.

So then it would've been flat if I put it together just year-over-year?

Yes.

It would've been up a little bit, but...

It's one of the areas that we continue to improve through our real estate consolidation.

So generally, the trend line is moving up, but you have to take out this one-off.

Yes.

All right.

I'll ask you more offline on that.

(Operator Instructions) And our next questioner today is Kevin McVeigh with Deutsche Bank.

Great.

I wondered if you could -- just following up on Andrew's question.

The boost to the storage internal on the pricing side, was that primarily step-up in pricing on Recall?

Or was that across the base business?

Across -- it's across the base business.

We've been -- Kevin, we've been -- as you know that you've been following the story for a while, that we started building up our revenue management expertise probably 3 years ago.

And it takes a while for that to bleed through just the natural tenure of our contracts.

And we're really starting to make -- you're starting to see the progress that we've been working on 3 years now, starting to bleed through into the pricing across the business.

Got it, got it.

And then just on the Slide 11 where you talk about the cash available.

For the FORTRUST, is it the full $130 million?

Or should we adjust it for the private placement of stock?

So maybe it's not $350 million.

It should be the $345 million or so less the price of private placement or -- in terms of incremental capital?

Or is that -- I'm thinking in terms of cash needs.

No, the $345 million is not all cash, right?

As we even talked about at Investor Day, there's different things that we can do to fund our growth.

Obviously, borrowing is a piece of it.

We'd talked -- and if -- you can see it clearly on the next slide.

You've got the private placement of debt.

And we've also even got capital recycling.

So we continue to do some real estate investment as well that you don't really see above the service -- above the surface because we are selling some real estate to acquire real estate in better locations or where we want to grow.

Got it.

So that's all different avenues in terms of funding, is the way to think about that?

Yes.

If you look at the next slide, if you look at Slide 12, you can clearly see sort of the funding sources expectation.

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