Iron Mountain Inc. IRM reported second-quarter 2015 adjusted earnings from continuing operations of 28 cents per share, lagging the Zacks Consensus Estimate of 32 cents. Earnings were also lower than the prior-year figure of 41 cents.
Revenue Details
Revenues of $760 million lagged the Zacks Consensus Estimate of $775 million and $787 million reported in the year-ago quarter.
In the quarter, service revenues of $298.2 million were down 6.7% year over year. Storage rental revenues came in at $461.2 million, a decrease of 12% on a year-over-year basis.
Internal service revenues from North American Records and Information Management Business (RIM) declined 1.3% year over year and 1.7% in North American Data Management (DM). With the increasing usage of Internet, Iron Mountain’s service revenue growth rate in RIM business has stabilized while that from DM business is being impacted because of lower activity levels.
Margin
Adjusted OIBDA (operating income before depreciation and amortization) was $223.2 million compared with $242 million in the year-ago quarter.
Operating expenses were down 1.5% year over year to $630.2 million. The decline was primarily due to lower cost of sales (down 3.2% year over year).
Operating income in the quarter decreased 31.7% from the year-ago quarter to $61.4 million.
Balance Sheet
Iron Mountain exited the quarter with cash and cash equivalents of $117.1 million compared with $125.9 million as of Mar 31, 2014. Long-term debt was $4.7 billion.
Outlook
For 2015, the company continues to expect 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–$3,150 million.
Our Take
Iron Mountain’s diversified revenue base is a positive. It is noteworthy that more than 92% 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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