Iron Mountain Incorporated (NYSE: IRM) helps customers manage records, protect data, archive digital files, and discard documents securely. The lion's share of Iron Mountain's business is in storing and discarding physical paper documents. In effect, this means driving a van to the customer's location, filling it with documents in boxes that Iron Mountain has sold to its customers, driving them to a secure location for safekeeping and retrieval when the customer needs them. Companies need Iron Mountain's services because of compliance regulations - they need to keep information on file for a certain amount of time to protect against lawsuits, and proprietary information must be discarded securely when it is no longer needed. The company earned $3.01 billion in revenues and $222 million in net income in 2009.
The company has a diversified client base - it serves 97% of the Fortune 1000, and more than 93% of the FTSE 100 in some fashion. But while its client list is impressive, the company's clients keep many of their data management functions in-house, so Iron Mountain only controls 33% of the overall market. The company's digital segment represents less than 10% of it's revenues, but it is a key to the company's growth strategy as it looks to become a fully-integrated data services provider. This segment presents opportunities in cross-selling and up-selling to existing clients and earning more high margin, high-tech business in addition to the physical storage business.
Record keeping and data storage are long-term needs for a company, and most firms are unlikely to bring this service back in-house after out-sourcing it. Thus the nature of Iron Mountain's client base and "stickiness" is long-term, partially shielding the company from the ebbs and flows of the economy at large. In 2009, the company's revenue (on constant currency) increased by 3%.
Iron Mountain reports its business in three segments - records management services, data protection & recovery services, and information destruction services. The company offers both physical and digital services in each segment.
The nature of records-management leads to stability outside of macroeconomic trends. The storage business is inherently-long term since records are kept for the long term and are mission critical to IRM's clients. This has fixed costs for customers, given space requirements of a box of paper filled with records. Loss of revenues from customers ending their contracts is less than 2% of total volume, so the impact of contract losses has been slight. Despite being in a sluggish economy, the company's net revenue increased by 3% on a constant currency basis and net income more than doubled in 2009.
Regulation like Sarbanes-Oxley Act is a tremendous boon to Iron Mountain's business, as it requires businesses to more fully document and store records of their business, which introduces an opportunity for records-managers. Sarbanes-Oxley in particular is concerned with financial reporting, and requires companies to keep better records of their transactions and other obligations that hadn't been required before. This in turn gives opportunities to Iron Mountain. The company has authored a series of White-Papers on the implications of Sarbanes-Oxley for public businesses to help customers transition. Such regulation not only gets the company new customers, but also helps it up-sell more services, such as email archival, since these services are also necessary in the face of regulatory oversight, such as email subpoenas.
Iron Mountain is in a fair unique position of having no significant public competitors in its particular space, either in the United States or abroad. It acquired the major ones of note. However, for much of the potential market, clients choose to use in-house storage, lowering Iron Mountain's market share despite a high market penetration. Anacomp is a private competitor, but its scale is much smaller than IRM's.
However, as the company expands its digital offerings, it is beginning to step on the technology-services giants, such as International Business Machines (IBM) and EMC (EMC), who have large diversified operations that include digital data archival options for their clients.