Faten Freiha - Director-Investor Relations William Leo Meaney - President, Chief Executive Officer & Director Roderick Day - Chief Financial Officer & Executive Vice President.

Andrew John Wittmann - Robert W. Baird & Co., Inc. (Broker) Kevin McVeigh - Macquarie Capital (USA), Inc. Adrian S. Paz - Piper Jaffray & Co (Broker) Andrew Charles Steinerman - JPMorgan Securities LLC Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc..

Good morning. And welcome to the Iron Mountain Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I will now turn the conference over to Faten Freiha, Director of Investor Relations..

Thank you, Hula, and welcome, everyone, to our third quarter 2015 earnings conference call. This morning, I'll be filling in for Melissa Marsden, who couldn't be here with us today, due to a family matter.

We'll begin the call with Bill Meaney, our CEO, who'll discuss highlights for the quarter and progress toward our strategic initiatives, followed by Rod Day, CFO, who will cover financial results. After our prepared remarks, we'll open up the phones for Q&A.

As we've done for the last few quarters, we've posted our earnings commentary and supplemental disclosure package on the Investor Relations page of our website at www.ironmountain.com under Investor Relations/Financial Information.

Referring now to page two of the supplemental, today's earnings call and slide presentation will contain a number of forward-looking statements, most notably, our outlook for 2015 and 2016 financial performance. All forward-looking statements are subject to risks and uncertainties.

Please refer to today's press release, earnings commentary, 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. The reconciliations to these measures, as required by Reg G, are included in the supplemental reporting package.

With that, Bill, would you please begin?.

Thank you, Faten, and good morning, everyone. We're pleased to be report a solid third quarter results that were at the upper end of our profit expectations and underscore the durability of our core business.

It's based upon this continued demonstration of the growth and durability of our business that our Board of Directors has resumed our growth in dividends and has pull forward the dividend increase by declaring a quarterly cash dividend of $0.485 per share.

I suspect most of you on the call today, either attended in person or listened to the webcast of our Investor Day about two weeks ago. Therefore, I won't go into a long discussion of our strategy, goals or longer-term expectations, as I believe time would be better spent on Q&A.

That's said, I would like to briefly reiterate a few main points from our event and relate how our Q3 results fit within that framework.

For those, who haven't heard the live event or listened to the replay, we laid out our vision for the year 2020, given that we are rapidly approaching the end of the three-year strategic plan that we introduced at our Investor Day in the beginning of 2014.

More specifically, we described our past performance and go-forward vision for our three strategic pillars, developed markets, emerging markets and adjacent businesses.

In developed markets, our strategic plan over the last two years has turned around these relatively flat internal growth markets and driven more than 7 million cubic feet of net new records, all prior to acquisition.

In emerging markets, our sales expanded from representing 10% of total revenue in 2013 to 14.3% of total revenue by the end of Q3 on a constant dollar basis. These markets are growing 10% to 15% per year before acquisitions and our goal to reach 20% of total volume from these markets by 2020 is within our grasp.

Roughly 18% of the 20% goal will be reached by internal growth alone. In adjacent businesses, we expect revenue to represent 5% of our total worldwide revenue in 2020, up from just 2% today.

Currently, our adjacent businesses are comprised of our datacenter business and our recently announced acquisition of Crozier Fine Arts Storage, the leading arts storage business in the U.S. This is a natural extension of our film and sound business.

Crozier comes with about a 0.5 million square feet of owned real estate and achieves about 10% sales growth per year before acquisitions. We anticipate closing this deal in December. This all adds up to a shift in mix with 25% of our revenue coming from faster growth markets and businesses by 2020.

That's up from 15% today with a majority of increase coming from internal growth. The expected impact from this shift is that by 2020 annual internal profit will grow by roughly 5% or 7% with acquisitions versus 2% and 4%, respectively, today.

We also enhanced our Transformation program to deliver a total of $125 million of overhead savings, up from the $100 million we announced this summer. You can see from the bridging schedules in the supplemental that we recorded $9 million of charges in Q3 related to this program.

We expect to realize partial year benefit of the first $50 million in savings in the fourth quarter, offsetting this charge. The full $50 million annualized benefit will flow through in 2016 and beyond. And our next set of actions to be taken in early 2016 will represent another $50 million of annualized savings in 2017.

So we're getting more from our efforts in this program and we're getting it faster than originally anticipated. We outlined our plans to continue to increase the percentage of owned real estate over time through our programs, which deliver improved operating economics with the consolidation of facilities.

Lastly, we demonstrated future cash generation on a run rate basis to support growth in dividends and investment, both on a standalone basis and including Recall.

On a standalone basis, the continued strong and durable cash of the base business, coupled with the Transformation Program, will at a minimum allow us to increase the dividend per share by 15% between 2015 and 2018, whilst reducing leverage by 0.4 of a turn.

Including Recall, our minimum dividend per share delivers 24% growth between 2015 and 2018 and reduces leverage by 0.7 turns. This is all without issuing equity beyond the shares issued to purchase Recall.

Now, turning to Q3 financial and operating highlights, total revenue for the quarter grew by 2% on a constant dollar basis, reflecting continued solid storage rental gains of 4.2%.

The impact from foreign currency on total revenues was roughly 7%, reflecting the continued strong appreciation of the dollar against several of our major functional currencies.

Moreover, we should note that we did not have any meaningful acquisition activity this quarter, as we deferred transactions to assess how they may be affected by the Recall acquisition. Having now fully assessed the benefit of the Recall acquisition, we have resumed M&A activity with an appropriately adjusted focus to account for Recall's footprint.

This quarter, we continued to see good internal growth with storage rental up 2.8% for both the quarter and year-to-date, reflecting continued strong growth from Data Management, Other International and Western Europe.

As we look at the remainder of the year, we are seeing consistent trends and are maintaining our view for internal storage rental revenue growth in the mid-2% range. Looking at volume in Records Management, we added roughly 14 million cubic feet of net storage volume worldwide on a trailing 12-month basis, representing 2.7% net growth.

Globally, we retained 98% of all customers. This is in line with our second quarter and a 20% improvement from the customer turnover we experienced just two years ago.

We continue to see the same number of boxes being inbounded, some 30 million cubic feet from our existing customers year after year, demonstrating the durability of the storage rental business. The durability of our business is demonstrated by solid growth in bookings we are seeing across major verticals.

In addition, we encouraged by year-to-date low double-digit increase in the midmarket customer bookings, as we continue to increase our focus on these small to midsize enterprises where our market share of the total market is roughly 10%. We are pleased to report solid improvement in our service gross margins as a result of numerous initiatives.

Q3 total service gross margin was 28.5%. However, when normalizing for the reclassification between storage and service, Q3 total service gross margins were approximately 26.8% and we are well on track to achieve our expected end-of-year run rate of between 27% and 27.5%. Now, let's turn to the Recall transaction.

This deal is extremely compelling in terms of strategic fit and is supported by meaningful synergies that drive significant accretion.

With the benefit from a number of months of detailed and joint integration planning with our Recall counterparts, we remain comfortable with the estimated total net synergies of $155 million, with $110 million of that to be achieved in 2017.

As we've noted in the past, there is potential upside to these figures as we work through real estate consolidation opportunities. We remain on track from a regulatory standpoint and we continue to target a close in early 2016.

As I've said previously, our business is underpinned by roughly $1.5 billion of net operating income, which is comparable to that generated by leaders in both the industrial and self storage sectors.

What distinguishes our business is its inherent durability and it is this durability that delivers consistent levels of operating performance even in the most volatile times. With that, I'd like to turn the call over now to Rod..

Thanks, Bill. We're pleased with this quarter's strong operating performance and the momentum we continue to see in our business. Our results continue to underscore the strength and durability of our storage rental business and the incremental returns we're generating from our investments. Similar to Bill, my remarks this morning will be brief.

I'll begin with an overview of our quarterly and year-to-date performance, including a review of results by segments, and an update on cost related to the potential Recall transaction. Finally, I will touch briefly on our outlook for 2015 and 2016. Let's turn to our worldwide financial results.

Referring to pages eight and nine of our supplemental, total reported revenues for the quarter was $747 million compared with $783 million in the prior year. This decline reflects the continued strengthening of the U.S. dollar, which impacted total revenues by approximately 6.6% or $50 million year-over-year.

Excluding FX, on a constant dollar basis, revenues grew by 2%. Year-to-date reported revenues were $2.26 billion compared with $2.34 billion in 2014. And again, excluding FX, also grew by 2% on a constant dollar basis. Total revenues were driven by solid constant dollar storage rental revenue growth of more than 4% for the quarter and year-to-date.

This was offset by modest service revenue declines of roughly 1.3% for the quarter and 1.1% year-to-date. The decline in our constant dollar service revenue is partially driven by the disposition of our shredding businesses in the UK and Australia.

Consistent with prior quarters, we're providing bridging schedules for total revenue, adjusted OIBDA and adjusted earnings per share, which explain key variances in year-on-year performance. These schedules are on pages 20 through 22 of the supplemental.

In addition, this quarter, we're providing a bridging schedule on page 23 to explain the change at our total service gross margin. In this schedule, we have normalized for the accounting adjustment that Bill referenced. And our projected year-end run rate of 27% to 27.5% is consistent with that normalized basis.

Total adjusted OIBDA for the quarter was $228 million compared to $235 million in 2014. Excluding FX, adjusted OIBDA was up 2.3%. Our adjusted OIBDA for Q3 2015 included $9 million of charges related to our Transformation program. Excluding these costs, adjusted OIBDA would have been $237 million or grown 6.5% on a normalized constant dollar basis.

Year-to-date, adjusted OIBDA grew by 1.5% on a constant dollar basis. For the fourth quarter, we expect to incur very little in charges related to the Transformation product initiative. Please note that our savings outlook for Transformation remain consistent with what we laid out on our Investor Day.

Adjusted EPS for the quarter was $0.31 per diluted share compared with $0.35 in the third quarter of 2014. The decline in adjusted EPS year-on-year is driven by a 9% increase in share count related to the special distribution we made in Q4 2014, as well as the restructuring charges related to Transformation.

Excluding the increase in share count and the Transformation costs, normalized adjusted EPS grew by 8.7% for the quarter. Our structural tax rate for this quarter came out to 16.5% compared with 16.3% for the prior quarter and 13.9% in Q2.

The sequential increase in our structural tax rate was driven by the expenses related to the Recall acquisition and debt refinancing costs, which lowered our QRS pre-tax income. We continue to believe that our tax rate will be approximately 15% to 16% in the short-term.

Our blended rate, following the close of the potential Recall acquisition, will be closer to 20%, as we noted when we announced the deal. Normalized funds from operations, or FFO, per share was $0.55 for the quarter and $1.53 year-to-date, while adjusted funds from operations, or AFFO, was $137 million for the quarter and $395 million year-to-date.

Let's turn to our financial performance by segments. In North American Records and Information Management, or RIM, internal storage rental revenue showed a decline of 0.3% for the third quarter and is flat year-to-date.

North American RIM internal storage rental growth can vary on a quarterly basis and is often impacted by the timing of large contract renegotiations. For the last eight quarters, it has varied from 0.9% to minus 0.4%.

North American RIM internal service revenue declined this quarter due to continued decrease in retrieve/refile activity levels and the timing of non-recurring imaging projects that were in the year-ago period. Adjusted OIBDA margins in RIM remained solid at 40% for the quarter and year-to-date.

North American Data Management, or DM, delivered storage rental internal growth of more than 5% in both the third quarter and year-to-date. However, internal service declined by 4.9% for the quarter and 4.1% year-to-date, as we continue to see declines in tape rotation and related transportation activity in the business.

During the third quarter, DM adjusted OIBDA margins remained stronger at 51.6% compared with 50.8% in Q2. The Western Europe segment generated solid results with 1.4% storage rental internal growth for the quarter and 2.8% year-to-date.

Looking at internal service revenue, declines in activity were partially offset by increases in non-recurring imaging and other projects. Adjusted OIBDA margins remained strong in Western Europe at 31.2%.

The Other International segment, which is made up primarily of emerging markets and Australia, had strong growth in both storage and service revenues. Storage rental internal growth was 11.5% for the quarter and 11.4% year-to-date. Service internal growth was 12.3% for the quarter and 10.9% year-to-date.

We continue to expect adjusted OIBDA for this segment to deliver profitability on a portfolio basis in the high teens and low 20%s range in the short-term, as we expand our exposure in these fast-growing markets. Let's touch on the Recall acquisition briefly.

As we mentioned at our Investor Day, we're making good progress with the regulatory process and we anticipate closing the deal early in 2016. To prepare for closing, this quarter, we incurred approximately $15 million of professional and advisory fees, including cost to prepare for Recall's REIT reconversion.

We expect about $25 million to $30 million of additional Recall cost in the fourth quarter. Please note that these expenses are excluded from our adjusted OIBDA calculations, as they are one-time in nature. Importantly, these costs were included in our guidance related to the Recall acquisition when we announced the deal.

As I mentioned at the outset, our outlook for 2015 and 2016 remains consistent with the guidance we provided earlier this month at our Investor Day.

But one exception to that is that we tightened our expected real estate investment range and lowered it by roughly $30 million at the midpoint relative to the projections provided at our Investor Day due to the focus on in timing of our real estate consolidation program.

Given FX fluctuations and to provide better visibility of the underlying performance of our business, we're providing constant dollar guidance figures for 2016 and our plan is to continue that practice. Please note that our current 2016 guidance is based on 2015 constant dollar budget rates, which was set in January 2015.

When we'll report full year 2015 results in February, we will provide an updated 2016 guidance based on 2016 constant dollar budget rates, which will be set in early January 2016. We've got the question from some of you on R$ guidance for 2016.

Assuming constant September 30 FX rates, our exit FX impact for the quarter on total revenue, where approximately 40% of it denominated in non-U.S. dollars, is roughly 3.5%. Again, holding that constant for 2016, it implies a 3.5% FX impact on revenues, which translates into roughly $120 million impact for the full year.

Beyond the dividend increase that Bill mentioned for the upcoming quarter, we laid out at our Investor Day minimum projected dividends per share guidance through 2018 on a standalone basis and the combined basis with Recall. Please refer to the presentation and webcast for more details.

Late in September, we raised $1 billion of debt at 6%, enabling us to pay off some of our very high interest legacy debt and lowering our average interest costs. At the quarter end, we had liquidity of approximately $1.7 billion. Note that this figure is prior to the October 2015 redemption of our outstanding 6.75% euro notes and 7.75% U.S.

notes and 8.375% U.S. notes. Following the redemption, liquidity will be approximately $900 million. Lastly, our lease adjusted debt ratio was 5.7 times as expected.

Turning now to page 34 for supplemental where we highlight our investments for racking projects in process, building development and building acquisitions by major geographic region, the total expected investment and anticipated NOI and returns.

Please note that these investments represent growth-related investments and exclude consolidated-related spend. As you can see on this page, we achieved high returns on our growth racking and building development projects.

So far this year, our investment in M&A and real estate investment activity has been lower than typical as we prepare for the potential Recall acquisition. We are focusing future plans on the synergy potential fuelled by our real estate consolidation between the companies.

Overall, we believe this was a solid quarter and we're pleased with the progress we have made so far in advancing our Transformation program and stabilizing service gross margins. We remain on track to deliver our guidance for 2015 as well as our long-term objectives.

Looking ahead, we will continue to focus on enhancing shareholder value by extending the durability of our storage rental business, which drives our cash available to fund dividends and core growth investments. And with that, operator, we will now take questions..

The first question comes from Andy Wittmann of Robert W. Baird..

Great. Good morning..

Good morning, Andy..

Thank you for the details. I wanted to ask about the relationship between some of the organic volumes and the organic revenue growth rates in your two mature markets. It looks like in North American RIM organic revenue was minus 1.2%.

The volumes were about flat; kind of a similar relationship in Western Europe where revenue was down 3.3%, but – I'm sorry, organic volumes were up over 3%, but total revenue was just on the positive side of flat.

So, is there a pricing dynamic that's in there or is there something else going on? If you can give us some color around that relationship it would be helpful..

I think the – Andy, I think there's two aspects. One is the – one set of data, if we look at the price changes measured in revenue in terms of constant dollar storage, it's quarter-on-quarter. And when we look at volume, it's trailing 12 months. So, you can't quite put the two of them together.

But if you kind of look at North America, North America is achieving similar types net volume growth organically, or before acquisitions, as we were last year. So, it's actually up in terms of volume. We've had some pricing adjustments this quarter due to some renewals, which I think we talked about a little bit on Investor Day.

It's not unusual during certain times of the year. And if you go back over, say, the last two to three years, you'll see that we have maybe two, three, four quarters of positive internal storage revenue growth in North America and then it's punctuated by one or two quarters generally of negative, which is usually associated when we're doing renewals.

But you can't – because one set of data, in terms if we look at the revenue side, is quarter-by-quarter, you can't link that to volume, which is just on trailing 12 months. I don't know, Rod, if you want to add anything to that..

No, I think that's right. It's difficult to do the comparisons on a true like-for-like basis, as you said..

Okay. That makes total sense..

The only thing I would add, Andy, from a modeling standpoint, it's still what we've been saying consistently is that, so the volume – you can back out the volume increases that we're getting both in North America and in Europe. So that's easy.

And then, in terms of the revenue increase, we still are achieving somewhere between 0.5% to 1% annual price increase in those markets.

So, we're a little bit – we're starting to move a little bit more towards the upper part in that range through some of the technology we've added, but it's basically in that 0.5% to 1% on top of the volume growth that we're getting..

Okay. Thank you. That's helpful. And then, Rod, with – after doing the October notes refi on to the line, the coordinates are a little bit tighter.

Are you looking at tapping the unsecured market to term some of that debt out or is there complications with the pending Recall deal that we have to factor into your calculus here? Some of your thoughts on the capital structure would be helpful, I think..

No. I think we're happy with the capital structure that we have at the moment, particularly having paid off the very high interest notes that we had.

Effectively, what we'd like to do is hold what we have, see what happens through the Recall deal, which is to say we anticipate it to close in early Q1, but we're still working through the regulatory process there. It gives us some capital to assist with that on closure, if you like.

But – so we're going to kind of hold what we've got and see how we get on with Recall..

Okay. I'll leave it there. Thank you..

Thanks..

The next question comes from Kevin McVeigh of Macquarie..

Great. Thanks. Hey, nice job. Asking about Recall, but just one more time, because it'd probably be the last time before it closes.

Bill, I know you're working through the regulatory, is it – are there any kind of goal post or anything that we should look out or is it just something you'll update once you're through the regulatory process? Because obviously something came out of the UK last week from the authorities, it looks like relatively benign.

But is there any kind of disclosures you just think we should focus on as we get closer to the close process?.

Hi, Kevin. I appreciate the question. I think if you can imagine that the regulators like these discussions to be kept confidential as we go through them.

I think the – but I mean just to give you guidance, I think it's pretty much what we said at Investor Day is, we're engaged with the four regulatory authorities that have shown interest in the transaction, which is the U.S., Canada, the UK, as you mentioned, and Australia.

We feel that we're well engaged with those authorities, so on track for a Q1 close and the discussions are ongoing. But where we sit today, we feel good that it's in line with our expectations when we set out on the course. So, nothing has changed.

I mean, generally, these things take six months to 12 months, when you go through a regulatory process in the United States, for instance, but we continue to guide at the lower end of that range because we feel good where we stand..

Great. And then, as you think about the progression, kind of the volume growth, I've always thought that you'd start to see destructions and permanent removal start to kind of trail off, and then new volume growth, I mean, just the customers kicks up.

Does that kind of ratio still hold through as we're coming out of this kind of cycle in terms of things we look forward, as a volume growth starts to reaccelerate here?.

Yeah, look, you're right. I mean you've watched this for a long time. There's ebbs and flows. I'm not sure you can always do the cause and effect between perm-outs (29:07) and destructions, but – and customer withdrawals, but I think the – there is ebb and flow between the two.

And the other thing I should point out is the new sales growth is, it's part art and part science, because some of that new sales growth comes from existing customers. And that split between new sales growth and what comes from "existing customers" is much to do in terms of the way we compensate our sales force.

In other words, if they get something – if they get some growth out of an existing customer, but we deemed it as a new area or new location or new department, then we call that a new sale. So I think there is some ebb and flow between the two.

And as you know, if we look at the heavily regulated industries, which we have a – which is a big part of our business, is a lot of that's affected by different litigation that's going on around the world. So I think there is some cause and effects, but I wouldn't overplay it. There's a certain amount of randomness to it..

Cool. Thank you..

The next question is from George Tong of Piper Jaffray..

Hi. This is Adrian Paz on for George Tong. Just looking at your updated guidance, it seems like there's a slightly better OIBDA margins at the midpoint versus last quarter.

Can you discuss what is making you incrementally more positive on margins?.

Okay. I'll let Rod answer that. I think just on a high level, there's a couple things. I think one is if you even look over time, we're pretty good at driving productivity out of the business.

Because when you start off, what I was saying earlier is that, we get – currently, in this low inflation environment, we get somewhere between 0.5% to 1% increase in price. Obviously, our labor cost in certain markets goes up faster than that. So, we continually drive productivity through the business. And that's what really drives our OIBDA growth.

And then, I think you can expect also when some of the transformation gets fully realized, now that we're through most of the restructuring cost in this quarter, you could expect that that will even pick up a little bit more. But, Rod, you may want to comment further..

Yeah, maybe just to build on what you're saying, you're absolutely right in terms of the point that was made.

If you look at our guidance – take the C$ guidance that we updated at Investor Day, in effect what we're saying is that from a revenue point of view, we see ourselves at the middle of the range, and contribution, we see ourselves more towards the higher point of the range. And obviously, therefore the OIBDA margin goes up.

Really, what's behind that is the work that we've been doing on efficiencies around service margin and also around the Transformation efforts that we've referenced. Some of that has come through in 2015 faster than we originally anticipated when we set the guidance back in January. And really, that's what's behind the improvement we're seeing..

Got it. Thanks.

And then, can you just discuss which emerging markets are showing the strongest growth and if that growth reflects expansion in those markets or it's increasing volumes?.

I think on the emerging markets, we're seeing it pretty much across the board, but it depends on the size of the base. So, for instance, I just came back from Eastern Europe and took couple of members of the board along with me so they could see up close what we're doing out there and also see some of the talent we've got.

So, Eastern Europe is growing – continues to grow extremely well so does in Latin America. I mean, the challenge in Latin America, Brazil, which is our largest operation, for instance, is in terms of growth. And if you measure it in Brazilian real, it is strongly double-digit and continues to do well.

I mean, the issue, of course, in places like Brazil is the translation of that because the real's been under pressure. And then Asia, which is a smaller portion of our portfolio, but again has very strong growth rates, whether you look at India, or you look at places like Hong Kong, Singapore and China.

The one thing I would point out, though, is that in markets – even in markets like Brazil, where we've been under pressure from a real standpoint, so when you translate that in U.S.

dollars, the growth may be muted slightly, is we've also been able – in some of these cases like Brazil, been able to borrow locally in real, which has helped to hedge some of that translation. But I would say pretty much across the board.

We haven't seen any slowdown in the emerging markets and all the countries typically run in that low double-digit of internal growth before acquisitions..

Great. Thank you..

Our next question is from Andrew Steinerman of JPMorgan..

Hi, there.

I know there's a couple of questions already on FX, but if it's possible, Rod, could you just give us the mix of currencies, so we could those calculations ourselves, the mix of currencies?.

Well, really, obviously, we deal in quite a number of currencies in terms of what's impacting our numbers. And I think in terms of the short-term impact, the – where we've seen the hit is being Canadian dollar, Russian ruble, Aussie dollar, the Brazilian real and Colombian peso. So they've been hitting us during Q3.

If you were to take a longer term view, so more looking year-on-year, there sort of wider effects coming in from sterling in particular, where obviously also we have quite a significant business..

Okay..

The only thing I'd like to add to that, Andrew, is that, whilst you've seen the FX headwinds in revenue, you'll note that it gets muted pretty quickly as we start going through the OIBDA and the EPS line. And the – where we are at a stage is, in some sense the timing is not bad for us because we are using strong U.S.

dollars to invest and build out this portfolio, which is still a relatively small portion in terms of the countries where the currency is mostly impacted, which is in the emerging markets. I'm not saying that the other markets aren't a factor.

So, if you say 40% of our sales are in foreign currency, but the currencies that are impacted typically are in that, a little less than 15% emerging market area. And those are areas where our OIBDA margins at this point are lower because we're building scale in those markets. So we're taking strong U.S. dollars to build out these markets right now.

And their impact – even with the negative FX impact, the impact on OIBDA in earnings is muted. It's obviously fully affected at the revenue line, but when you see what happens to earnings, it's muted.

So, I agree you need to model it out, but the earnings is not as sensitive as you might think to the FX, whereas you do see the full sensitivity on the revenue line.

That's why we feel comfortable about already starting to increase our dividend because we feel that we've got enough momentum in the business that we can continue and start back on our growth trend in terms of dividends..

That sounds natural (36:27). I'm hoping I could ask a second question.

Could you, Rod, talk a little bit more about the OIBDA margin of 30.5% in the third quarter? Were there any one-off helps to that margin? And what puts and takes should we keep in mind as we compare the third quarter OIBDA margins to the implied fourth quarter margin in the guide?.

No, nothing particularly unusual in Q3. Obviously, other than the fact, we actually booked the $9 million restructuring charge, which actually lowered the margin slightly. I think as we look to Q4, again, sitting here today, I'm not seeing anything particularly unusual that should come through.

Obviously, we won't have a repeat of the $9 million charge and there would be some benefit from that actually hitting us in Q4 as a result of the slightly lower cost base. But other than that, I think it's pretty much steady as she goes..

Okay. Thank you so much..

The next question is from Shlomo Rosenbaum of Stifel..

Hi. Good morning. Thank you for taking my questions. I'm just trying to compare the storage revenue that was in North American RIM that was slightly negative versus the trends that we're seeing in the charts where you have positive volume growth.

And the positive volume growth, if you exclude the acquisitions, has been kind of modestly creeping downwards, but you still got positive growth, but we're seeing kind of negative revenue on an organic basis.

Can you kind of just explain that?.

Sure. Shlomo, let me start off and then Rod can add any color that he thinks that I missed out. So I think, first, let's look at the revenue growth.

So if you go back, say, to Q4 2013, right, and you just look at the number of quarters, you'll see that North American storage rental revenue growth has gone negative 0.4%, negative 0.3%, plus 0.3%, plus 0.4%, plus 0.9%, plus 0.5%, and then in the last two quarters a negative 0.1% and negative 0.3%.

So you'll see, first of all, which I was referring to earlier, you'll see that moving around and you can kind of get that – you can back into that through the supplemental.

And so, on the revenue side, because as you can appreciate when we renegotiate large enterprise deals that you do get – in any given quarter, you can get a significant impact in terms of the revenue associated per cube. So there's a disconnect between that volume growth.

Over a long period of time, though – if you look at the trend over a long period of time, we still see, if you take the revenue growth and if you look on an annualized basis, we're getting between 0.5% and 1% in terms of price per cube growth, then you get those two bits combined and that will give you a good guide in terms of what the internal storage revenue growth is for a particular market.

So, the – you're right to point out that we continue to drive significant – I'd say on a percentage basis relatively small percentage growth in North America, but in terms of volume, because of the size of the North American business, as you know, the law of large numbers, we continue to deliver a significant amount of organic cube volume growth in North America.

And over a 12-month period, you should think about 0.5% to 1% price growth on top of that cube growth.

But any given quarter, depending on where we are in renewal cycle, especially for the large contracts, if you go back over the last, I don't know, eight quarters, nine quarters, 10 quarters, you'll see that movement around where we'll have one or two quarters where it'll be negative, two quarters or three quarters will be positive and it just kind of moves around..

So just when I look at the trends on the volume growth, so if you take the total company and then North America, which probably is having the largest impact, you're seeing just kind of a modest organic trend down over the last four quarters, if you – I'm excluding acquired volume, because I think that that's appropriate for this.

But if you look at it, you're seeing the organic, say, going from 0.6% – in North America, 0.6%, 0.5%, 0.4% and 0.1% and on total you're going 2%, 1.9%, 1.8%, 1.7%, is there – we had seen kind of a run up, that whole organic number had been going – trending up from the middle of 2013 through basically 3Q 2014 and then we're starting to see that coming down.

Is there any color you can give to that, those numbers moving in that direction?.

Yeah. Well, look, I think that it's a little bit is what I think Kevin asked earlier in terms of kind of tos-and-fros between customer cycles, there's a bit of that. I think, also, it's fair to say on a percentage basis, it is coming down slightly because, I mean, partly driven by customer activity, but a big part of it is just the large number.

So if you look at the constant – if you look at the volume of cubes coming in, we're still seeing very consistently across the board 30 million cubes coming in on a growth level and, say, 40 million cubes net coming in.

I think the one of the things that we do where you'll see us try to even tap into another market, which we think is quite large, is what we're doing in the mid-market.

So I think if you look at where we are on the mid-market side, I think I actually misquoted is we're in kind of low double-digit growth, if we look at year-on-year bookings for new sales across the board. But in the mid-market, year-to-date, we're up over 60% in terms of bookings in the mid-market where we only have 10% market share.

So I think there's some things where we can tap into "another large market", but I think it is fair to say that if you look at our core, our normal hunting ground, if you will, it's the law of large numbers and there is a limit in terms of how much more we can get from those customers..

Okay, that's fair.

And can you – Rod, can you just explain that reallocation of margin between the services and the storage business, what is that all about?.

It was actually to do with our – predominantly to do with our data center business where we had some costs that were in the service line that we really analyze where (42:53) we thought they should be in the storage line. So that sort of artificially enhanced the service margin in Q3.

So we didn't want to give the impression that we were – the true underlying run rate was 28.5%, which is what we recorded, that is more like 26%, 26.8%. So that – it was just a reallocation of cost following a more detailed reviewing..

Does that support the REIT structure when those were reallocated like that?.

In that case, it has a very, very minor impact, but – so it doesn't affect our assets as such (43:31) in any meaningful way..

Okay. If I could just squeeze in one more, there's a pretty large range at the end of the year right now, $0.15 on EPS.

Is there any reason why it's so large or is there something that you're anticipating some investments that you're still contemplating at this point in time that can move it around?.

No. And obviously, we are subject to FX volatility, which during Q3 moved against us. Actually, if you look during the first few weeks of October, it's moved slightly back in our favor. So that can swing the numbers around. But in terms of the fundamentals of the business, it's relatively stable..

Okay. Thank you so much..

There are no questions in queue..

Okay. Thank you, operator. Well, thank you, everyone, for joining us. I know it's a busy time for everyone, but just to sum up. We're very pleased the way the quarter came out. It was a very good quarter driven by the strong – or continued strong operating performance I should say and has delivered profit that set the upper end of our expectations.

So we feel really good about the quarter and hence the recommencing of our dividend increases that we declared this morning. So, thank you, everyone, and have a good day..

Thank you. This concludes call. You may now disconnect..