Iron Mountain (IRM) Beats On Q1 Revenues, Maintains Outlook

Iron Mountain Incorporated (NYSE:IRM) reported first-quarter 2018 normalized funds from operations (FFO) of 49 cents per share, missing the Zacks Consensus Estimate of 50 cents. However, the figure increased 2.1% year over year.

Adjusted FFO increased 30% year over year to $222 million, mainly reflecting growth in adjusted EBITDA.

Quarter Details

Revenues of $1.04 billion beat the Zacks Consensus Estimate of nearly $1.03 billion and improved 11% year over year. At constant dollar basis, revenues climbed 8 % from the year-ago quarter. Storage revenues (62.5% of total revenues) came in at $651 million in the quarter and denoted 10.7% increase on a constant dollar basis. Internal growth was 3.7% year over year.

Storage segment generated 43.9% of total revenues from the developed markets (North America Records and Information management, North America Data Management and Western Europe) and 12.6% from Other International markets (emerging markets, Australia and New Zealand).

In developed markets storage, internal revenue growth was 2.9%. In Other International markets storage, internal revenue growth came in at 5.6% year over year. Internal storage rental revenues were up 5.6% in emerging markets.

Service revenues (37.5% of total revenues) amounted to $391 million in the quarter, indicating an increase of 3.7% on a constant dollar basis. Internal growth inched up 1.4% year over year. Service internal revenue growth in developed markets and Other International markets growth came in at 1.0% and 4.4%, respectively.

Adjusted gross profit margin expanded 160 basis points (bps) on a year-over-year basis to 57.0%. Moreover, adjusted EBITDA margin improved 170 bps to 32.9%. Year-over-year growth was driven by the robust performance from North America Records and Information management (RIM), Western Europe and Global Data Center, which surged 150 bps, 380 bps and 2040 bps, respectively.

Guidance

Iron Mountain maintained its guidance for 2018.

On a constant dollar basis, the company expects revenues in the band of $4,160-$4,260 million, denoting increase of 7-9%, and adjusted EBITDA in the range of $1,435-$1,485 million, indicating growth of 12-16%. Moreover, adjusted FFO is anticipated in the range of $805-$865 million, highlighting 5-13% rise.

Internal storage rental revenue growth rate for 2018 is projected at 3-3.5%. Total internal revenue growth is expected in the range of 2-3%.

Our Take

Iron Mountain’s strategic acquisitions, along with diversified revenue base, a strong product portfolio and cost-cutting initiatives, bode well for long-term growth. Further, transformation initiatives and continued strong performance of its storage rental business are positives. However, heavy investments in setting up the company’s data-center business have been weighing on its financials, especially as it already has a highly leveraged balance sheet.

Currently, Iron Mountain has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Alexandria Real Estate Equities, Inc. (NYSE:ARE) , Essex Property Trust Inc. (NYSE:ESS) and Regency Centers Corporation (NYSE:REG) . Alexandria and Regency Centers are scheduled to release results on Apr 30, while Essex Property is slated to report its numbers on May 2.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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