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|====High acquisition/integration risk and international exposure====||====High acquisition/integration risk and international exposure====|
|-||100 aacquistions since 1998, exposure to many markets, needs to upsell new services to all these clients.||+||IRM has an extension acquisition history, acquiring over 150 companies since its IPO in 1996 (as of mid-year 2008).<ref>[http://ironmountain.com/company/10years.asp Iron Mountain "10 Years - History"]</ref> These have given the unique global footprint in the records-management industry. However, these many acquisitions are risky, both in terms of the indebtedness they have placed the company in ($3.3B debt on $8.6B Enterprise value, approximately 1.5x equity:debt ratio)<ref>[http://finance.yahoo.com/q/ks?s=IRM Yahoo Finance "IRM" July 23, 2008]<ref>, as well as the integration risk associated with buying up many small companies and making them a part of of the big company's plan. Iron Mountain has stated that it has shifted its strategic focus away from acquisitions towards internal growth, but has not ruled out the possibility for more focused acquisitions.<ref>[http://seekingalpha.com/article/67063-iron-mountain-inc-q4-2007-earnings-call-transcript?page=-1 Seeking Alpha Iron Mountain Q4 FY 2007 Earnings Call Transcript, March 4, 2008]</ref>|
Iron Mountain reports its business in 3 Segments - the North American Physical Business, the International Business, and Worldwide Digital Business. However, for these segments, the activities the company engages in records management, data protection and recovery, and information destruction. The company saves paper and electronic data for storage, and can also help with disaster preparedness for its customers. For example, in the aftermath of the 9/11 Terrorist attacks, the company shipped over one million magnetic data tapes to 94 customers whose businesses were disrupted by the attacks.
IRM's mainstay business is in storing physical paper documents and the materials associated with the storage. However, the company has begun entering the digital archival business as well. Although relatively immature, with much lower margins than the mature paper business, digital archival is an expansion opportunity to upsell more services to IRM's large client base, which includes over 93% of the Fortune 1000.
|Operating Segment Results ($MM)||2005||2006||2007|
|North American Physical||1,529.6||1,671.0||1,890.1|
|N.A. Physical Margin||29%||29%||29%|
|International Physical Margin||26%||22%||20%|
|Worldwide Digital Margin||11%||7%||15%|
The three businesses have grown at a 12%, 16%, and 39% CAGR between 2005 and 2007 respectively. 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.
|Services and Materials||896.6||1,023.2||1,231.0|
The company's revenues are nearly equally split between actual storage charges ($1.5B in 2007) and the associated services and materials charges ($1.2B in 2007) Operating margins have been stable in the 15%-20% band, although they have decreased due to strategic acquisitions in two lower-margin markets: the international and the digital storage markets.
|Revenues by Data type ($MM)||2005||2006||2007|
|Physical Data and Shredding||1,614.9||1,856.9||2,165.8|
|Physical Data and Shredding Contribution||77.7%||79.0%||79.3%|
|Physical Tape Contribution||16.8%||15.0%||14.7%|
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.
|Geographic Share ($MM)||2005||2006||2007|
|North America Share||1,637.2||1,802.1||2,042.4|
|North America Share||78.8%||76.7%||74.8%|
Reflecting the company's origin, almost 3/4s of total revenues were earned in the North American region in 2007. 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.
The nature of records-management leads to shielding from some events in the macroeconomic environment. The storage business is inherently-long term, and has fixed costs for customers, given space requirements of a box of paper filled with records. For each of the three years 2005 through 2007, loss of revenues from customers ending their contracts was less than 2% of total volume. However although shielded, the company is not immune to downturn. During the prior economic slowdown of 2002-2003, non-acquisition growth slowed to approximately 6-9% year-on-year.
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. Such regulation not only gets 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, to $2.7B in 2007, a two-fold increase in 5 years.
IRM has an extension acquisition history, acquiring over 150 companies since its IPO in 1996 (as of mid-year 2008). These have given the unique global footprint in the records-management industry. However, these many acquisitions are risky, both in terms of the indebtedness they have placed the company in ($3.3B debt on $8.6B Enterprise value, approximately 1.5x equity:debt ratio)