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Iron Mountain (IRM)
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====Need for data storage and information management partially mandated by regulation==== ====Need for data storage and information management partially mandated by regulation====
- +Regulation like Sarbanes-Oxley is a tremendous boon to IRM's business, as it requires businesses to more fully document and store records of their business, which introduces an opportunity for records-managers. The company has authored a series of White-Papers on the implications of Sarbanes-Oxley for public businesses, furthur suggesting that it has benefited.<ref>[http://whitepapers.silicon.com/0,39024759,60113293p,00.htm Silicon.com White Papers. "Email-Related Sarbanes-Oxley Compliance" April 2004]</ref> Such regulation not only wins the company new customers, but also helps it up-sell more services, such as email archival. Since Sarbanes Oxley, the company has grown from about $1.3B in revenues in 2002<ref>[http://media.corporate-ir.net/media_files/NYS/IRM/reports/ar2002.pdf Iron Mountain 2002 Annual Report]</ref>, to $2.7B in 2007, a two-fold increase in 5 years.
==Competition== ==Competition==

Revision as of 20:49, July 22, 2008

Founded in 1951, Iron Mountain Incorporated (IRM) is a leading provider of information protection and storage services in North America, Latin America, Europe, and the Pacific Rim. The company offers its diversified customer base of commercial, legal, financial services, healthcare, entertainment, and government organizations an array of records management, data protection, secure shredding, digital archiving, and other related services. These services help reduce costs and risks (such as litigation, regulatory compliance, and disaster recovery) associated with information protection and storage. Iron Mountain's core businesses are records management and data protection services, where the company provides solutions for vital businesses such as healthcare records storage. The company also provides off-site data protection services, including backup and recovery services for vital computerized data. In addition, the company offers its customers secure shredding solutions for the destruction of sensitive documents as well as materials and archiving solutions for digital images and other electronic records. The company also sells storage materials, including cardboard boxes and magnetic media, and provides consulting, facilities management, fulfillment, and other outsourcing services. Based in Boston, Massachusetts, Iron Mountain has a client base of over 90,000 corporate clients. During 2006, storage and core service revenues represented approximately 87% of total consolidated revenues. Approximately 30% of total revenues were from outside the U.S. for the year ended December 31, 2006.

Contents

Business Overview

Iron Mountain reports its business in 3 Segments - the North American Physical Business, the International Business, and Worldwide Digital Business.[1] However, for these segments, the activities the company engages in records management, data protection and recovery, and information destruction. The company saves paper and electronic data for storage, and can also help with disaster preparedness for its customers. For example, in the aftermath of the 9/11 Terrorist attacks, the company shipped over one million magnetic data tapes to 94 customers whose businesses were disrupted by the attacks.[2]

IRM's mainstay business is in storing physical paper documents and the materials associated with the storage. However, the company has begun entering the digital archival business as well. Although relatively immature, with much lower margins than the mature paper business, digital archival is an expansion opportunity to upsell more services to IRM's large client base, which includes over 3/4s of the Fortune 500.[3]

The Physical business has better margins than the digital business, and the American business is more mature
The Physical business has better margins than the digital business, and the American business is more mature[4]
Operating Segment Results ($MM) 2005 2006 2007
North American Physical[5] 1,529.61,671.01,890.1
International Physical[6] 435.1539.3676.7
Worldwide Digital[7] 113.4140.0163.2
N.A. Physical Margin29%29%29%
International Physical Margin26%22%20%
Worldwide Digital Margin11%7%15%

The three businesses have grown at a 12%, 16%, and 39% CAGR between 2005 and 2007 respectively.[8] It is not a coincidence that this is inversely related to the margins achieved in each business, with the North American business with the best margins and the lowest growth. This is because of reasons of market saturation and maturity. However, regulatory requirements in the U.S. will likely preserve the physical business as a mainstay of the company's revenues.


Financial Analysis

The overall business' revenue is growing slowly but steadily
The overall business' revenue is growing slowly but steadily[9]
($MM)[10] 2005 2006 2007
Storage1,181.61,327.21,499.1
Services and Materials896.61,023.21,231.0
Total Revenues2,078.22,350.32,730.0
Operating Income386.8407.2454.7
Operating Margin18.6%17.3%16.7%
Revenue Growth-13.1%16.2%

The company's revenues are nearly equally split between actual storage charges ($1.5B in 2007) and the associated services and materials charges ($1.2B in 2007)[11] Operating margins have been stable in the 15%-20% band, although they have decreased due to strategic acquisitions in two lower-margin markets: the international and the digital storage markets.[12]

Most of the company's revenues are earned in the original physical paper management business, but the other shares are growing
Most of the company's revenues are earned in the original physical paper management business, but the other shares are growing [13]
Revenues by Data type ($MM)[14] 2005 2006 2007
Physical Data and Shredding1,614.91,856.92,165.8
Physical Tape349.8353.5401.0
Digital113.4140.0163.2
Physical Data and Shredding Contribution77.7%79.0%79.3%
Physical Tape Contribution16.8%15.0%14.7%
Digital Contribution5.5%6.0%6.0%

As reflected in the Operating Segment information, most of the company's business is still physically oriented - the company ships boxes filled with paper and magnetic tape off-site to their secure locations for long-term safekeeping.

The company is primarily American-based, but is exploring international expansion
The company is primarily American-based, but is exploring international expansion[15]
Geographic Share ($MM)[16] 2005 2006 2007
North America Share1,637.21,802.12,042.4
U.K275.4312.4368.0
Other165.5235.9319.6
North America Share78.8%76.7%74.8%
U.K. Share13.3%13.3%13.5%
Other Share8.0%10.0%11.7%

Reflecting the company's origin, almost 3/4s of total revenues were earned in the North American region in 2007.[17] The company has only limited foreign exposure, primarily in the U.K., which also outnumbers the share of all other foreign revenues 13.5% to 11.7%.ref>Iron Mountain FY 2007 10-K "Selected Financial Data" pg. 24</ref> This reflects the company's bias towards large companies needing data storage - many of which are HQ'd in North America and would thus like to keep their storage backups on hand in North America.

Trends/Forces

Business largely non-cyclical and somewhat recession-proof

recurring revenues, earnings growth

Need for data storage and information management partially mandated by regulation

Regulation like Sarbanes-Oxley is a tremendous boon to IRM's business, as it requires businesses to more fully document and store records of their business, which introduces an opportunity for records-managers. The company has authored a series of White-Papers on the implications of Sarbanes-Oxley for public businesses, furthur suggesting that it has benefited.[18] Such regulation not only wins the company new customers, but also helps it up-sell more services, such as email archival. Since Sarbanes Oxley, the company has grown from about $1.3B in revenues in 2002[19], to $2.7B in 2007, a two-fold increase in 5 years.

Competition

Market Share

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References

  1. ↑ Iron Mountain FY 2007 10-K "Segment Analysis" pg. 44
  2. ↑ Wall Street Journal (3 Star, Eastern (Princeton, NJ) Edition) "Iron Mountain Is at the Peak of Records-Storage Industry" September 18, 2001
  3. ↑ New York Times "Whoops! We Seem to Have Misplaced Your Identity" May 8, 2005
  4. ↑ Iron Mountain FY 2007 10-K "Segment Analysis" pg. 44-46
  5. ↑ Iron Mountain FY 2007 10-K "Segment Analysis" pg. 44
  6. ↑ Iron Mountain FY 2007 10-K "Segment Analysis" pg. 45
  7. ↑ Iron Mountain FY 2007 10-K "Segment Analysis" pg. 46
  8. ↑ Iron Mountain FY 2007 10-K "Segment Analysis" pg. 44-46
  9. ↑ Iron Mountain FY 2007 10-K "Selected Financial Data" pg. 24
  10. ↑ Iron Mountain FY 2007 10-K "Selected Financial Data" pg. 24
  11. ↑ Iron Mountain FY 2007 10-K "Selected Financial Data" pg. 24
  12. ↑ SeekingAlpha Iron Mountain Q4 FY 2007 Earnings Call Transcript March 4, 2008
  13. ↑ Iron Mountain FY 2007 10-K "Segment Information" pg. 104
  14. ↑ Iron Mountain FY 2007 10-K "Selected Financial Data" pg. 24
  15. ↑ Iron Mountain FY 2007 10-K "Selected Financial Data" pg. 24
  16. ↑ Iron Mountain FY 2007 10-K "Selected Financial Data" pg. 24
  17. ↑ Iron Mountain FY 2007 10-K "Selected Financial Data" pg. 24
  18. ↑ Silicon.com White Papers. "Email-Related Sarbanes-Oxley Compliance" April 2004
  19. ↑ Iron Mountain 2002 Annual Report
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