Iron Mountain (IRM) Tops Q2 EPS by 9c, Revenues Beat

Iron Mountain (NYSE: IRM) reported Q2 EPS of $0.22, $0.09 better than the analyst estimate of $0.13. Revenue for the quarter came in at $982.2 million versus the consensus estimate of $933.06 million.

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 43/8% 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.

"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."

For earnings history and earnings-related data on Iron Mountain (IRM) click here.

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