Iron Mountain Inc. IRM reported first-quarter 2015 adjusted earnings from continuing operations of 32 cents per share, beating the Zacks Consensus Estimate of 29 cents. However, adjusted earnings per share were lower than the prior-year figure of 35 cents.
Revenue Details
Revenues of $749 million lagged the Zacks Consensus Estimate of $771 million and $770 millionreported in the year-ago quarter.
In the quarter, service revenues of $290.4 million were down 6.7% year over year.Storage rental revenues came in at$458.9 million (flat on a year over year basis).
With the increasing usage of Internet, Iron Mountain’s service revenue growth rate has moderated due to lower activity rates as stored records are becoming less active. In the quarter, internal service revenues in North American Records and Information Management Business (RIM) improved 1.5% year over year.
Margin
Adjusted OIBDA (operating income before depreciation and amortization) was $231.2 millioncompared with $228.5 million in the year-ago quarter.
Operating expenses were down 5.2% year over year to $604.3 million. The decline was primarily due to lower selling, general and administrative expenses (down 8.6% year over year).
Operating income in the quarter increased 9.3% from the year-ago quarter to $144.9 million.
Balance Sheet
Iron Mountain exited the quarter with cash and cash equivalents of $119.6 million compared with $125.9 million as ofMar 31, 2014. Long-term debt was $4.6 billion.
Outlook
For 2015, the company expects adjusted earnings per share in the range of $1.15 – $1.30 while revenues are projected to be in the range of $3,030 million – $3,1501 million.
Our Take
Iron Mountain’s diversified revenue base is a positive. It is noteworthy that more than 95% of the Fortune 1000 companies are on Iron Mountain’s client list. We believe that its strong product portfolio, increasing market share, aggressive acquisition strategy and promising international business are the primary growth catalysts. Moreover, the company’s entry into the data center market could be a growth catalyst.
However, costs related to conversion and fluctuations in recycled paper prices are the near-term headwinds for the company. Moreover, volatile foreign exchange rates and competition from Guidance Software Inc. GUID, Pitney Bowes Inc. PBI and Cintas Corp. CTAS are concerns.
Currently, IRM has a Zacks Rank #2 (Buy).
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