01—Abstract
Summary
Summary of the 10-K filed February 14, 2019. Cited figures are marked; the original filing is the authoritative source.
Iron Mountain Incorporated (NYSE: IRM) reported 2018 total revenues of $4.23 billiona, up from $3.85 billion in 2017, with operating income of $755.5 million and net income attributable to Iron Mountain Incorporated of $363.4 million, compared with $183.8 million in 2017.
Adjusted EBITDA rose to $1.44 billionb from $1.26 billion, and Adjusted EBITDA margin was 34.0%. Growth was driven largely by acquisitions, most notably the $1.35 billion IO Data Centers transaction completed January 10, 2018, and the company's data center business, whose segment revenue grew to $229.0 million from $37.7 million. Internal revenue growth was 3.6% for the year.
The filing also highlights a shift in the mix of the business. Storage rental revenue rose to $2.62 billion and service revenue to $1.60 billionc. Management noted that North American records and data management volumes declined slightly, that archival trends are reducing service activity in data management, and that secure shredding and recycled paper prices helped service growth in 2018.
For 2019, the company expects internal storage rental revenue growth of approximately 1.75% to 2.5% and internal total revenue growth of approximately 2.0% to 2.5%. Balance-sheet leverage increased. Total long-term debt was $8.14 billiond at year-end 2018, compared with $7.04 billion a year earlier, and cash fell to $165.5 million from $925.7 million after the IODC payment.
Management stated the company is currently operating above its long-term targeted leverage ratio and expects leverage to decline over time. Dividends declared were $2.38 per share for 2018, up from $2.27 in 2017, and the company reported a 2018 effective tax rate of 10.1%, reflecting its REIT status.
02—Key points
Key Highlights
- Total revenues increased 9.9% to $4.23 billion in 2018, with internal revenue growth of 3.6%.
- Net income attributable to Iron Mountain Incorporated was $363.4 million, or $1.27 per diluted share, versus $183.8 million in 2017.
- Adjusted EBITDA grew 13.9% to $1.44 billion, with Adjusted EBITDA margin of 34.0%.
- Global Data Center segment revenue reached $229.0 million, up from $37.7 million, following the $1.34 billion IODC acquisition and other data center deals.
- Total long-term debt rose to $8.14 billion at December 31, 2018; the company states it is currently operating above its targeted leverage ratio.
- Declared dividends of $2.38 per share for 2018, and the board approved a $0.611 quarterly dividend payable January 3, 2019.
- Management expects 2019 internal storage rental revenue growth of approximately 1.75% to 2.5% and total internal revenue growth of approximately 2.0% to 2.5%.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 14, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $4.23B$3.85B | +9.9% |
| SG&A Expenses | $1.01B$937.18M | +7.4% |
| Operating Expenses | $3.42B$3.21B | +6.4% |
| Operating Income | $808.27M$634.05M | +27.5% |
| Net Income | $353.93M$170.11M | +108.1% |
| EPS (Basic) | $1.24$0.64 | +93.8% |
| EPS (Diluted) | $1.23$0.64 | +92.2% |
| Shares Outstanding (Basic) | 285.91M265.90M | +7.5% |
| Shares Outstanding (Diluted) | 286.65M266.84M | +7.4% |
05—Questions
Frequently Asked Questions
What drove revenue growth in 2018?
Revenue rose $380.2 million, or 9.9%, to $4.23 billion. Acquisitions contributed 6.6 percentage points, primarily in the Global Data Center segment, and internal revenue growth was 3.6%. Storage rental revenue grew 10.3% and service revenue grew 9.2% on an actual basis.
How much debt does Iron Mountain carry and how is it trending?
Total long-term debt including the current portion was $8.14 billion at December 31, 2018, up from $7.04 billion at December 31, 2017. The weighted average interest rate was 4.9%, and about 74% of total debt was fixed-rate. Management said the company is operating above its long-term leverage target and expects leverage to decline over time.
What is the company's outlook for 2019?
The company expects consolidated internal storage rental revenue growth of approximately 1.75% to 2.5% and internal total revenue growth of approximately 2.0% to 2.5%. It expects 2019 capital expenditures of approximately $250.0 million on its data center business and about $145.0 million to $155.0 million on recurring capital expenditures, excluding acquisitions and integration spending.
What are the main risks to the business highlighted in the filing?
Key risks include customers shifting from paper and tape storage to alternative technologies, declining activity as stored records become more archival, data security and breach liability, data center costs and power or service interruptions, and the requirement to commit capital 12 to 18 months ahead of securing customer contracts. The filing also flags REIT qualification risks and exposure to foreign currency fluctuations.
How is the company's REIT status reflected in its taxes and dividends?
Iron Mountain has been taxed as a REIT since 2014, so it deducts dividends paid, and its 2018 effective tax rate was 10.1%. Dividends are generally treated as nonqualified ordinary dividends, with 83.0% of 2018 distributions classified that way, along with 4.8% qualified ordinary dividends, 5.8% capital gains and 6.4% return of capital.
06—Continue