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Iron Mountain Reports Second Quarter 2020 Results

Cision
Cision

BOSTON , Aug. 6, 2020 /PRNewswire/ -- Iron Mountain Incorporated (NYSE: IRM), the storage and information management services company, announces financial and operating results for the second quarter of 2020. The conference call / webcast details, earnings call presentation and supplemental financial information, which includes definitions of certain capitalized terms used in this release, are available on Iron Mountain's Investor Relations website. Reconciliations of non-GAAP measures to the appropriate GAAP measures are included herein.

"I am proud of the way our organization quickly adapted to the challenges presented by the COVID-19 pandemic and is navigating the environment ever since," said William L. Meaney , president and CEO of Iron Mountain. "A crisis such as COVID tests us on many levels and we are pleased that from the beginning of this crisis, we have taken decisive, yet thoughtful, action to help keep our Mountaineers, their families, and our customers safe all whilst meeting our customers' business needs around the world. At the same time, we took purposeful steps to further strengthen our financial position and liquidity, enhancing our flexibility to continue to invest in our business for the long term, and reward our shareholders with a sustainable dividend. On a less positive front, we found through reflection after the murder of George Floyd , that whilst we have made progress living up to our stated value around building diverse and inclusive teams, we have fallen well short of our intended - and necessary - objectives. For Iron Mountain, Diversity and Inclusion is about social justice as well as a business imperative. It is only by achieving a truly diverse and inclusive workplace, that we will be assured to have both the best talent as well as the level of creativity to continue to serve our customers in the best possible ways. We have recommitted ourselves to this value and are making the necessary changes to make better and faster progress in this area."

Meaney commented on the second-quarter results, "Although our business faced unprecedented challenges and added complexity as a result of the COVID-19 pandemic, our team performed very well during the second quarter, and our results demonstrated the durability and resiliency of our core Storage business. In our Service business, we experienced improvements in our activity levels in June as compared to April and May, across our various product lines.

The early benefits of Project Summit are evident in our results, with $65 million of Adjusted EBITDA benefits realized in the first half from our transformation initiatives. We delivered constant currency Adjusted EBITDA in line with the year-ago level, despite a $58 million revenue decline, resulting in 200 basis points of margin expansion. Our Global Data Center business continues to perform exceptionally well, with strong commercial successes and a growing pipeline. Whilst a high degree of uncertainty remains as we look to the back half of the year, we are confident that the value of Iron Mountain's new, as well as existing offerings, are even more relevant to our customers today. We remain committed to delivering solutions which address our customers' needs both today and well into the future."

Financial Performance Highlights for the Second Quarter and Year-to-Date 2020

  • Total reported Revenues for the second quarter were $982.2 million , compared with $1.1 billion in the second quarter of 2019, a decline of 7.9%. Excluding the impact of foreign exchange (FX), total reported Revenues declined 5.6% compared to the prior year, driven by a 21.3% decline in Service revenue, partially offset by a 3.7% increase in Storage revenue. Year to date, total reported Revenues decreased 3.3%, or 1.2%, excluding the impact of FX.

  • Loss from Continuing Operations for the second quarter was $7.1 million , compared with Income from Continuing Operations of $92.3 million in the second quarter of 2019. Loss from Continuing Operations in the second quarter of 2020 included Restructuring Charges of $39.3 million associated with Project Summit and a debt extinguishment charge of $17.0 million related to the early extinguishment of the Company's 4 3/8 % Senior Notes due 2021 and the 6% Senior Notes due 2023. Income from Continuing Operations in the second quarter of 2019 included $1.9 million of Significant Acquisition Costs. Year to date, Income from Continuing Operations was $57.8 million , compared with $122.8 million in 2019. Income from Continuing Operations in 2020 included Restructuring Charges of $80.3 million and Income from Continuing Operations in 2019 included Significant Acquisition Costs of $4.6 million .

  • Adjusted EBITDA for the second quarter was $342.9 million , compared with $350.9 million in the second quarter of 2019. On a constant currency basis, Adjusted EBITDA decreased by 0.1%, driven in part by the aforementioned decline in Service revenue, partially offset by the benefits of Project Summit and the flow through from revenue management, leading to 200 basis points of Adjusted EBITDA margin expansion compared to the second quarter of 2019. Year to date, Adjusted EBITDA was $706.0 million , compared with $675.4 million in 2019, and increased 6.6%, excluding the impact of FX.

  • Reported EPS - Fully Diluted from Continuing Operations for the second quarter was $(0.02) , compared with $0.32 in the second quarter of 2019. Year to date, Reported EPS - Fully Diluted from Continuing Operations was $0.20 , compared with $0.42 in 2019.

  • Adjusted EPS for the second quarter was $0.22 , compared with $0.23 in the second quarter of 2019. Year to date, Adjusted EPS was $0.49 , compared with $0.40 in 2019. The structural tax rate was 17.1% in the second quarter of 2020, compared with 17.7% in the second quarter of 2019.

  • Net Loss for the second quarter was $7.1 million compared with Net Income of $92.5 million in the second quarter of 2019. Net Loss in the second quarter of 2020 included the aforementioned Restructuring Charges related to Project Summit and debt extinguishment charge. Year to date, Net Income was $57.8 million compared with $122.9 million in 2019.

  • FFO (Normalized) per share was $0.53 for the second quarter, compared with $0.54 in the second quarter of 2019, or a decrease of 1.9%. Year to date, FFO (Normalized) per share was $1.12 , compared with $1.02 in 2019.

  • AFFO was $249.5 million for the second quarter, compared with $209.6 million in the second quarter of 2019, an increase of 19.0%. As compared to Adjusted EBITDA, the increase in AFFO was primarily driven by a tax refund. Year to date, AFFO was $480.7 million , compared with $403.0 million in 2019.

Dividend

On August 5, 2020 , Iron Mountain's board of directors declared a quarterly cash dividend of $0.6185 per share for the third quarter. The third-quarter 2020 dividend is payable on October 2, 2020 , for shareholders of record on September 15, 2020 .

About Iron Mountain

Iron Mountain Incorporated (NYSE: IRM), founded in 1951, is the global leader for storage and information management services. Trusted by more than 225,000 organizations around the world, and with a real estate network of more than 90 million square feet across more than 1,480 facilities in approximately 50 countries, Iron Mountain stores and protects billions of valued assets, including critical business information, highly sensitive data, and cultural and historical artifacts. Providing solutions that include secure records storage, information management, digital transformation, secure destruction, as well as data centers, cloud services and art storage and logistics, Iron Mountain helps customers lower cost and risk, comply with regulations, recover from disaster, and enable a more digital way of working. Visit www.ironmountain.com for more information.

Investor Relations Contacts:



Greer Aviv


Nathan McCurren

Senior Vice President, Investor Relations


Director, Investor Relations

Greer.Aviv@ironmountain.com


Nathan.McCurren@ironmountain.com

(617) 535-2887


(617) 535-2997

Forward Looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws and is subject to the safe-harbor created by such Act. Forward-looking statements include, but are not, limited to statements concerning our operations, economic performance, financial condition, goals, beliefs, future growth strategies, plans and current expectations, such as statements about: (i) expectations for the remainder of 2020, (ii) the expected impact of COVID-19 on our operations and financial conditions, (iii) new service offerings, (iv) expected benefits, costs and actions related to Project Summit; (v) planned 2020 capital expenditures, M&A and other investments; (vi) stabilization of our data center developments and expectation as to data center leasing activity for 2020; (vii) expectations with respect to change in volume of records stored with us; (viii) expectations related to our revenue management programs and continuous improvement initiatives, (ix) the durability of our core storage business, (x) our expected leverage; (xi) our dividend policy and targeted dividend payments; and (xii) longer term capital allocation, strategy and other goals. When we use words such as "believes," "expects," "anticipates," "estimates" or similar expressions, we are making forward-looking statements. Although we believe that our forward looking statements are based on reasonable assumptions, our expected results may not be achieved, and actual results may differ materially from our expectations.

These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors. Important factors that could cause actual results to differ from expectations include the (i) impact of COVID-19 on our operations, (ii) our ability to remain qualified for taxation as a real estate investment trust for U.S. federal income tax purposes; (iii) the adoption of alternative technologies and shifts by our customers to storage of data through non-paper based technologies; (iv) changes in customer preferences and demand for our storage and information management services; (v) the cost and our ability to comply with laws, regulations and customer demands relating to data security and privacy issues, as well as fire and safety standards; (vi) our ability or inability to execute our strategic growth plan, expand internationally, complete acquisitions on satisfactory terms, and to integrate acquired companies efficiently; (vii) changes in the amount of our growth and recurring capital expenditures and our ability to raise capital and invest according to plan; (viii) the impact of litigation or disputes that may arise in connection with incidents in which we fail to protect our customers' information or our internal records or IT systems and the impact of such incidents on our reputation and ability to compete; (ix) our ability to execute on Project Summit and the potential impacts of Project Summit on our ability to retain and recruit employees and execute on our strategy (x) changes in the price for our storage and information management services relative to the cost of providing such storage and information management services; (xi) changes in the political and economic environments in the countries in which our international subsidiaries operate and changes in the global political climate; (xii) the impact of executing on our growth strategy through joint ventures; (xiii) our ability to comply with our existing debt obligations and restrictions in our debt instruments or to obtain additional financing to meet our working capital needs; (xiv) the impact of service interruptions or equipment damage and the cost of power on our data center operations; (xv) changes in the cost of our debt; (xvi) the impact of alternative, more attractive investments on dividends; (xvii) the cost or potential liabilities associated with real estate necessary for our business; (xviii) the performance of business partners upon whom we depend for technical assistance or management expertise; (xix) other trends in competitive or economic conditions affecting our financial condition or results of operations not presently contemplated; and (xx) other risks described more fully in our filings with the Securities and Exchange Commission, including under the caption "Risk Factors" in our periodic reports or incorporated therein. You should not rely upon forward-looking statements except as statements of our present intentions and of our present expectations, which may or may not occur. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Reconciliation of Non-GAAP Measures:

Throughout this release, Iron Mountain discusses (1) Adjusted EBITDA, (2) Adjusted Earnings per Share ("Adjusted EPS"), (3) Funds from Operations ("FFO Nareit"), (4) FFO (Normalized) and (5) Adjusted Funds from Operations ("AFFO"). These measures do not conform to accounting principles generally accepted in the United States ("GAAP"). These non-GAAP measures are supplemental metrics designed to enhance our disclosure and to provide additional information that we believe to be important for investors to consider in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as operating income, income (loss) from continuing operations, net income (loss) attributable to Iron Mountain Incorporated or cash flows from operating activities from continuing operations (as determined in accordance with GAAP). The reconciliation of these measures to the appropriate GAAP measure, as required by Regulation G under the Securities Exchange Act of 1934, as amended, and their definitions are included later in this release.

Consolidated Balance Sheets


(Unaudited; dollars in thousands)




6/30/2020


12/31/2019

ASSETS





Current Assets:





Cash and Cash Equivalents


$907,180



$193,555


Accounts Receivable, Net


805,901



850,701


Other Current Assets


184,292



192,083


Total Current Assets


$1,897,373



$1,236,339


Property, Plant and Equipment:





Property, Plant and Equipment


$8,074,520



$8,048,906


Less: Accumulated Depreciation


(3,538,792)



(3,425,869)


Property, Plant and Equipment, Net


$4,535,728



$4,623,037


Other Assets, Net:





Goodwill


$4,421,062



$4,485,209


Customer Relationships, Customer Inducements and Data Center Lease-Based Intangibles


1,346,282



1,393,183


Operating Lease Right-of-use Assets


1,947,665



1,869,101


Other


219,443



209,947


Total Other Assets, Net


$7,934,452



$7,957,440


Total Assets


$14,367,553



$13,816,816







LIABILITIES AND EQUITY





Current Liabilities:





Current Portion of Long-term Debt


$880,212



$389,013


Accounts Payable


296,629



324,708


Accrued Expenses and Other Current Liabilities


954,396



961,752


Deferred Revenue


252,034



274,036


Total Current Liabilities


$2,383,271



$1,949,509


Long-term Debt, Net of Current Portion


8,750,116



8,275,566


Long-term Operating Lease Liabilities


1,802,494



1,728,686


Other Long-term Liabilities (1)


407,341



398,828


Total Long-term Liabilities


$10,959,951



$10,403,080


Total Liabilities


$13,343,222



$12,352,589


Equity





Total Stockholders' Equity


$1,024,300



$1,463,962


Noncontrolling Interests


31



265


Total Equity


$1,024,331



$1,464,227


Total Liabilities and Equity


$14,367,553



$13,816,816



(1) Includes redeemable noncontrolling interests of $63.5M and $67.7M as of June 30, 2020 and December 31, 2019, respectively.

 

Consolidated Statements of Operations


(Unaudited; dollars in thousands, except per-share data)



Q2 2020


Q2 2019


% Change



YTD 2020


YTD 2019


% Change

Revenues:













Storage Rental

$676,956


$669,288


1.1

%



$1,360,503


$1,332,262


2.1

%

Service

305,283


397,619


(23.2)

%



690,467


788,508


(12.4)

%

Total Revenues

$982,239


$1,066,907


(7.9)

%



$2,050,970


$2,120,770


(3.3)

%














Operating Expenses:













Cost of Sales (excluding Depreciation and Amortization) (1)

$406,693


$463,809


(12.3)

%



$873,614


$924,455


(5.5)

%

Selling, General and Administrative (2)

241,947


252,156


(4.0)

%



480,680


520,867


(7.7)

%

Depreciation and Amortization

163,850


164,331


(0.3)

%



326,434


326,814


(0.1)

%

Significant Acquisition Costs


1,901


n/a





4,647


n/a


Restructuring Charges

39,298



n/a




80,344



n/a


Intangible Impairments



n/a




23,000



n/a


(Gain) Loss on Disposal/Write-Down of PP&E, Net

(1,275)


(8,405)


(84.8)

%



(2,330)


(7,803)


(70.1)

%

Total Operating Expenses

$850,513


$873,792


(2.7)

%



$1,781,742


$1,768,980


0.7

%














Operating Income (Loss)

$131,726


$193,115


(31.8)

%



$269,228


$351,790


(23.5)

%

Interest Expense, Net

103,456


105,314


(1.8)

%



209,105


207,750


0.7

%

Foreign Currency Transaction Loss / (Gain)

1,471


(19,331)


n/a




(35,928)


(1,634)


n/a


Debt Extinguishment Expense

17,040



n/a




17,040



n/a


Other Expense (Income), Net

7,189


4,139


73.7

%



1,862


1,652


12.7

%

Income (Loss) before Provision (Benefit) for Income Taxes

$2,570


$102,993


(97.5)

%



$77,149


$144,022


(46.4)

%

Provision (Benefit) for Income Taxes

9,683


10,646


(9.0)

%



19,370


21,199


(8.6)

%

(Loss) Income from Continuing Operations

$(7,113)


$92,347


(107.7)

%



$57,779


$122,823


(53.0)

%

(Loss) Income from Discontinued Operations, Net of Tax


128


n/a





104


n/a


Net (Loss) Income

$(7,113)


$92,475


(107.7)

%



$57,779


$122,927


(53.0)

%

Less: Net (Loss) Income Attributable to Noncontrolling Interests

(27)


34


n/a




890


925


(3.7)

%

Net (Loss) Income Attributable to Iron Mountain Incorporated

$(7,086)


$92,441


(107.7)

%



$56,889


$122,002


(53.4)

%














(Losses) Earnings per Share - Basic:













(Loss) Income from Continuing Operations

$(0.02)


$0.32


(106.3)

%



$0.20


$0.43


(53.5)

%

Total Income (Loss) from Discontinued Operations



n/a






n/a


Net (Loss) Income Attributable to Iron Mountain Incorporated

$(0.02)


$0.32


(106.3)

%



$0.20


$0.43


(53.5)

%














(Losses) Earnings per Share - Diluted:













(Loss) Income from Continuing Operations

$(0.02)


$0.32


(106.3)

%



$0.20


$0.42


(52.4)

%

Total Income (Loss) from Discontinued Operations



n/a






n/a


Net (Loss) Income Attributable to Iron Mountain Incorporated

$(0.02)


$0.32


(106.3)

%



$0.20


$0.42


(52.4)

%














Weighted Average Common Shares Outstanding - Basic

288,071


286,925


0.4

%



287,955


286,727


0.4

%

Weighted Average Common Shares Outstanding - Diluted

288,071


287,481


0.2

%



288,301


287,487


0.3

%


(1) Includes $7.6M of direct and incremental costs related to COVID-19 in Q2 and YTD 2020.

(2) Includes $1.6M of direct and incremental costs related to COVID-19 in Q2 and YTD 2020.

 

Reconciliation of Income from Continuing Operations to Adjusted EBITDA


(Dollars in thousands)



Q2 2020


Q2 2019


% Change



YTD 2020


YTD 2019


% Change














(Loss) Income from Continuing Operations

$(7,113)


$92,347


(107.7)

%



$57,779


$122,823


(53.0)

%














Add / (Deduct):













Intangible Impairments



n/a




23,000



n/a


Provision (Benefit) for Income Taxes

9,683


10,646


(9.0)

%