Iron Mountain Incorporated (NYSE: IRM), the storage and
information management services company, announces financial and
operating results for the fourth quarter and full year 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.
“We couldn’t be more pleased with the way our Mountaineers
navigated the challenging environment in 2020, brought on by
COVID-19,” said William L. Meaney, president and CEO of Iron
Mountain. “Throughout the pandemic, we were laser focused on
execution and controlling those factors that we could, leading to
outperformance against our own internal expectations through the
last three quarters of 2020. This resulted in continued strength in
total storage rental revenue, which grew nearly 4% on a
constant-currency basis and 2.4% organically in 2020. Service
revenue declines continued to offset the strong storage
performance. Importantly, we grew Adjusted EBITDA 1.3% when
adjusting for currency, whilst our margin expanded 110 basis
points. This all in spite of total revenue being down $115 million
due to service activity declines. I want to especially thank our
teams across the globe who stayed focused in the face of so many
obvious distractions. Our success is a reflection of our
Mountaineers’ dedication, and most importantly I have been inspired
by the way our teams looked after both the physical and mental
health of each other as they navigated the threats from COVID, both
at work and at home.”
Meaney continued, “Finally, as we look to 2021 and beyond, I’ve
never been more optimistic about our opportunities for growth at
any other time in our history, even with the anticipated continued
headwinds due to COVID-19 impacting the revenue from our
traditional service areas. This is in large part due to our
decision not to dial back on our investment in innovation and new
product development, so that we could provide more solutions to our
customers, not just in the COVID crisis, but post-crisis."
Financial
Performance Highlights for the Fourth Quarter and Full Year
2020
($ in millions, except per share data)
Three Months Ended
Full-Year Ended
12/31/20
12/31/19
Y/Y % Change
12/31/20
12/31/19
Y/Y % Change
Storage Rental Revenue
$697
$676
3%
$2,754
$2,681
3%
Service Revenue
$362
$404
(10)%
$1,393
$1,581
(12)%
Total Revenue
$1,060
$1,080
(2)%
$4,147
$4,263
(3)%
Income From Continuing Operations
$247
$37
565%
$343
$268
28%
Adjusted EBITDA
$374
$393
(5)%
$1,476
$1,469
0%
Net Income
$247
$37
565%
$343
$268
28%
Reported EPS - Fully Diluted from
Continuing Operations
$0.86
$0.13
562%
$1.19
$0.93
28%
AFFO
$191
$233
(18)%
$888
$867
2%
AFFO per share
$0.66
$0.81
(18)%
$3.07
$3.01
2%
- Total reported Revenues for the fourth quarter were $1.06
billion, compared with $1.08 billion in the fourth quarter of 2019,
a decrease of 1.8%. Excluding the impact of foreign currency
exchange (FX), total reported Revenues declined 2.2% compared to
the prior year, driven by a 10.8% decline in Service revenue,
partially offset by a 2.9% increase in Storage revenue. For the
full year, total reported Revenues decreased 2.7%, or 1.7%,
excluding the impact of FX.
- Income from Continuing Operations for the fourth quarter was
$246.8 million, compared with $37.1 million in the fourth quarter
of 2019. The following items were included in the fourth quarters
of 2020 and 2019, respectively:
- Restructuring Charges of $65.7 million associated with the
implementation of Project Summit compared to $48.6 million.
- Significant Acquisition Costs of $4.7 million in the fourth
quarter of 2019.
- Gain on Disposal/Write-Down of PP&E, Net of $285.4 million
compared to $46.7 million, primarily related to the company's
capital recycling program.
For the full year, Income from Continuing Operations was $343.1
million, compared with $268.2 million in 2019. The following items
were included in the full year ended 2020 and 2019,
respectively:
- Restructuring Charges of $194.4 million
compared to $48.6 million.
- Significant Acquisition Costs of $13.3 million
in 2019.
- Gain on Disposal/Write-Down of PP&E, Net
of $363.5 million compared to $63.8 million, primarily related to
the company's capital recycling program.
- Intangible Impairment charge of $23.0 million
related to the writedown of goodwill associated with the Fine Arts
business in 2020.
- Debt extinguishment charge of $68.3 million
related to the early extinguishment of several of the company's
Notes in 2020.
- Adjusted EBITDA for the fourth quarter was $374.2 million,
compared with $393.1 million in the fourth quarter of 2019, a
decrease of 4.8%. On a constant currency basis, Adjusted EBITDA
decreased by 5.3%, 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. For the full year,
Adjusted EBITDA was $1.48 billion, compared with $1.47 billion in
2019, an increase of 0.5%, and excludes $9.3 million of direct and
incremental costs related to COVID-19 incurred in the second
quarter, as previously disclosed. Excluding the impact of FX,
Adjusted EBITDA increased 1.3% for the full year.
- Reported EPS - Fully Diluted from Continuing Operations for the
fourth quarter was $0.86, compared with $0.13 in the fourth quarter
of 2019. For the full year, Reported EPS - Fully Diluted from
Continuing Operations was $1.19, compared with $0.93 in 2019.
- Adjusted EPS for the fourth quarter was $0.29, compared with
$0.33 in the fourth quarter of 2019. For the full year, Adjusted
EPS was $1.19, compared with $1.11 in 2019. Adjusted EPS reflects a
structural tax rate of 15.1% in 2020 and 17.6% in 2019.
- Net Income for the fourth quarter was $246.8 million compared
with $37.1 million in the fourth quarter of 2019. For the full
year, Net Income was $343.1 million compared with $268.3 million in
2019. Net Income in the fourth quarters and full years of 2020 and
2019 included the aforementioned items that impacted Income from
Continuing Operations.
- FFO (Normalized) per share was $0.60 for the fourth quarter,
compared with $0.67 in the fourth quarter of 2019, or a decrease of
10.4%. For the full year, FFO (Normalized) per share was $2.42,
compared with $2.38 in 2019, an increase of 1.5%.
- AFFO was $190.8 million for the fourth quarter, compared with
$233.1 million in the fourth quarter of 2019, a decrease of 18.2%.
For the full year, AFFO was $887.5 million, compared with $867.0
million in 2019, an increase of 2.4%.
- AFFO per share was $0.66 for the fourth quarter, compared with
$0.81 in the fourth quarter of 2019, or a decrease of 18.5%. For
the full year, AFFO per share was $3.07, compared with $3.01 in
2019, an increase of 2.0%.
Project Summit Update
Iron Mountain generated Adjusted EBITDA benefits of $165 million
in 2020, consistent with its most recent expectations, and
significantly ahead of initial estimates of $80 million, reflecting
strong execution and swift and decisive actions on early
initiatives. Iron Mountain continues to expect Project Summit to
generate $375 million of Adjusted EBITDA benefits exiting 2021,
with a total cost to implement these benefits of approximately $450
million.
Non-GAAP Metrics Definition
Update
After a comprehensive review of its non-GAAP metrics and
definitions, Iron Mountain has implemented a number of changes to
the definitions and methodology it uses for calculating non-GAAP
results. These changes were implemented to align Iron Mountain's
definitions more closely with its peers. The updates include
changes to how the company reflects unconsolidated joint ventures,
stock based compensation expense, and growth capital expenditures
in its non-GAAP measures.
All prior periods have been restated to conform to these
presentation changes.
For 2020 the net impact for key metrics resulted in increases of
$26 million for Adjusted EBITDA, $0.08 for Adjusted EPS, and $7
million for AFFO. All of the changes are effective with fourth
quarter reporting and a full reconciliation can be seen in the
fourth quarter earnings presentation and on the Investor Relations
website under Quarterly Earnings.
Guidance
Iron Mountain issued full-year 2021 guidance; details are
summarized in the table below. Additional guidance details and
assumptions are available on Page 9 of the Q4 2020 supplemental
financial information.
2021 Guidance
($ in millions, except per share data)
2020 Results
2021 Guidance
Y/Y % Change
Total Revenue
$4,147
$4,325 - $4,475
4% - 8%
Adjusted EBITDA
$1,476
$1,575 - $1,625
7% - 10%
AFFO
$888
$945 - $995
7% - 12%
AFFO Per Share
$3.07
$3.25 - $3.42
6% - 11%
Dividend
On February 24, 2021, Iron Mountain's board of directors
declared a quarterly cash dividend of $0.6185 per share for the
first quarter. The first-quarter 2021 dividend is payable on April
6, 2021, for shareholders of record on March 15, 2021.
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 nearly 93 million square feet across
approximately 1,450 facilities in 56 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.
Forward Looking
Statements
We have made statements in this press release that constitute
"forward-looking statements" as that term is defined in the Private
Securities Litigation Reform Act of 1995 and other securities laws.
These forward-looking statements concern our operations, economic
performance, financial condition, goals, beliefs, future growth
strategies, investment objectives, plans and current expectations,
such as our (1) 2021 guidance as well as our expectations for
growth, including growth opportunities and growth rates for revenue
by segment, organic revenue, organic volume and other metrics, (2)
expectations and assumptions regarding the impact from the COVID-19
pandemic on us and our customers, including on our businesses,
financial position, results of operations and cash flows, (3)
expected benefits, costs and actions related to, and timing of,
Project Summit, (4) expectations as to our capital allocation
strategy, including our future investments, leverage ratio,
dividend payments and possible funding sources (including real
estate monetization) and capital expenditures, (5) expectations
regarding the closing of pending acquisitions and investments, and
(6) other forward-looking statements related to our business,
results of operations and financial condition.
These forward-looking statements are subject to various known
and unknown risks, uncertainties and other factors, and you should
not rely upon them except as statements of our present intentions
and of our present expectations, which may or may not occur. When
we use words such as "believes," "expects," "anticipates,"
"estimates," “plans” 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. In addition, important factors
that could cause actual results to differ from expectations
include, among others: (i) the severity and duration of the
COVID-19 pandemic and its effects on the global economy, including
its effects on us, the markets we serve and our customers and the
third parties with whom we do business within those markets; (ii)
our ability to execute on Project Summit and the potential impacts
of Project Summit on our ability to retain and recruit employees;
(iii) our ability to remain qualified for taxation as a real estate
investment trust for United States federal income tax purposes;
(iv) changes in customer preferences and demand for our storage and
information management services, including as a result of the shift
from paper and tape storage to alternative technologies that
require less physical space; (v) our ability or inability to
execute our strategic growth plan, including our ability to invest
according to plan, incorporate new digital information technologies
into our offerings, achieve satisfactory returns on new product
offerings, continue our revenue management, expand internationally,
complete acquisitions on satisfactory terms, integrate acquired
companies efficiently and grow our business through joint ventures;
(vi) changes in the amount of our capital expenditures; (vii) our
ability to raise debt or equity capital and changes in the cost of
our debt; (viii) the cost and our ability to comply with laws,
regulations and customer demands, including those relating to data
security and privacy issues, as well as fire and safety and
environmental standards; (ix) 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
information technology systems and the impact of such incidents on
our reputation and ability to compete; (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, particularly as we
consolidate operations and move records and data across borders;
(xii) our ability to comply with our existing debt obligations and
restrictions in our debt instruments; (xiii) the impact of service
interruptions or equipment damage and the cost of power on our data
center operations; (xiv) the cost or potential liabilities
associated with real estate necessary for our business; (xv)
failures in our adoption of new IT systems; (xvi) other trends in
competitive or economic conditions affecting our financial
condition or results of operations not presently contemplated; and
(xvii) the other risks described in our periodic reports filed with
the SEC, including under the caption “Risk Factors” in Part I, Item
1A of our Annual Report. Except as required by law, we undertake no
obligation to update any forward-looking statements appearing in
this report.
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)
12/31/2020
12/31/2019
ASSETS
Current Assets:
Cash and Cash Equivalents
$205,063
$193,555
Accounts Receivable, Net
859,344
850,701
Other Current Assets
205,380
192,083
Total Current Assets
$1,269,787
$1,236,339
Property, Plant and Equipment:
Property, Plant and Equipment
$8,246,337
$8,048,906
Less: Accumulated Depreciation
(3,743,894)
(3,425,869)
Property, Plant and Equipment, Net
$4,502,443
$4,623,037
Other Assets, Net:
Goodwill
$4,557,609
$4,485,209
Customer Relationships, Customer
Inducements and Data Center Lease-Based Intangibles
1,326,977
1,393,183
Operating Lease Right-of-use Assets
2,196,502
1,869,101
Other
295,949
209,947
Total Other Assets, Net
$8,377,037
$7,957,440
Total Assets
$14,149,267
$13,816,816
LIABILITIES AND EQUITY
Current Liabilities:
Current Portion of Long-term Debt
$193,759
$389,013
Accounts Payable
359,863
324,708
Accrued Expenses and Other Current
Liabilities
1,146,288
961,752
Deferred Revenue
295,785
274,036
Total Current Liabilities
$1,995,695
$1,949,509
Long-term Debt, Net of Current Portion
8,509,555
8,275,566
Long-term Operating Lease Liabilities, Net
of Current Portion
2,044,598
1,728,686
Other Long-term Liabilities (1)
462,690
398,828
Total Long-term Liabilities
$11,016,843
$10,403,080
Total Liabilities
$13,012,538
$12,352,589
Equity
Total Stockholders' Equity
$1,136,729
$1,463,962
Noncontrolling Interests
—
265
Total Equity
$1,136,729
$1,464,227
Total Liabilities and Equity
$14,149,267
$13,816,816
(1) Includes redeemable noncontrolling
interests of $59.8M and $67.7M as of December 31, 2020 and December
31, 2019, respectively.
Quarterly
Consolidated Statements of Operations
(Unaudited; dollars in thousands, except
per-share data)
Q4 2020
Q3 2020
Q/Q % Change
Q4 2019
Y/Y % Change
Revenues:
Storage Rental
$697,294
$696,294
0.1
%
$675,507
3.2
%
Service
362,359
340,353
6.5
%
404,083
(10.3)
%
Total Revenues
$1,059,653
$1,036,647
2.2
%
$1,079,590
(1.8)
%
Operating Expenses:
Cost of Sales (excluding Depreciation and
Amortization)
449,224
434,505
3.4
%
459,488
(2.2)
%
Selling, General and Administrative
236,438
232,095
1.9
%
233,647
1.2
%
Depreciation and Amortization
168,383
157,252
7.1
%
173,825
(3.1)
%
Significant Acquisition Costs
—
—
—
4,696
n/a
Restructuring Charges
65,681
48,371
35.8
%
48,597
35.2
%
(Gain) Loss on Disposal/Write-Down of
PP&E, Net
(285,366)
(75,840)
276.3
%
(46,737)
510.6
%
Total Operating Expenses
634,359
796,383
(20.3)
%
873,515
(27.4)
%
Operating Income (Loss)
425,294
240,264
77.0
%
206,075
106.4
%
Interest Expense, Net
105,127
104,303
0.8
%
104,871
0.2
%
Other Expense (Income), Net
77,108
83,465
(7.6)
%
47,295
63.0
%
Income (Loss) before Provision
(Benefit) for Income Taxes
243,060
52,496
363.0
%
53,910
350.9
%
(Benefit) Provision for Income Taxes
(3,695)
13,934
(126.5)
%
16,805
(122.0)
%
Income (Loss) from Continuing
Operations
246,755
38,562
539.9
%
37,104
565.0
%
Income (Loss) from Discontinued
Operations, Net of Tax
—
—
—
—
—
Net Income (Loss)
$246,755
$38,562
539.9
%
$37,104
565.0
%
Less: Net (Loss) Income Attributable to
Noncontrolling Interests
(656)
168
(489.7)
%
(596)
10.0
%
Net Income (Loss) Attributable to Iron
Mountain Incorporated
$247,411
$38,394
544.4
%
$37,700
556.3
%
Earnings (Losses) per Share -
Basic:
Income (Loss) from Continuing
Operations
$0.86
$0.13
561.5
%
$0.13
561.5
%
Total Income (Loss) from Discontinued
Operations
—
—
—
—
—
Net Income (Loss) Attributable to Iron
Mountain Incorporated
$0.86
$0.13
561.5
%
$0.13
561.5
%
Earnings (Losses) per Share -
Diluted:
Income (Loss) from Continuing
Operations
$0.86
$0.13
561.5
%
$0.13
561.5
%
Total Income (Loss) from Discontinued
Operations
—
—
—
—
—
Net Income (Loss) Attributable to Iron
Mountain Incorporated
$0.86
$0.13
561.5
%
$0.13
561.5
%
Weighted Average Common Shares Outstanding
- Basic
288,419
288,403
0.0
%
287,277
0.4
%
Weighted Average Common Shares Outstanding
- Diluted
289,161
288,811
0.1
%
288,082
0.4
%
Full-Year
Consolidated Statements of Operations
(Unaudited; dollars in thousands, except
per-share data)
Full Year 2020
Full Year 2019
% Change
Revenues:
Storage Rental
$2,754,091
$2,681,087
2.7
%
Service
1,393,179
1,581,497
(11.9)
%
Total Revenues
$4,147,270
$4,262,584
(2.7)
%
Operating Expenses:
Cost of Sales (excluding Depreciation and
Amortization)(1)
1,757,342
1,833,315
(4.1)
%
Selling, General and Administrative(2)
949,215
991,664
(4.3)
%
Depreciation and Amortization
652,069
658,201
(0.9)
%
Significant Acquisition Costs
—
13,293
n/a
Restructuring Charges
194,396
48,597
300.0
%
Intangible Impairments
23,000
—
—
(Gain) Loss on Disposal/Write-Down of
PP&E, Net
(363,537)
(63,824)
469.6
%
Total Operating Expenses
3,212,485
3,481,246
(7.7)
%
Operating Income (Loss)
934,785
781,338
19.6
%
Interest Expense, Net
418,535
419,298
(0.2)
%
Other Expense (Income), Net
143,545
33,898
323.5
%
Income (Loss) before Provision
(Benefit) for Income Taxes
372,705
328,142
13.6
%
(Benefit) Provision for Income Taxes
29,609
59,931
(50.6)
%
Income (Loss) from Continuing
Operations
343,096
268,211
27.9
%
Income (Loss) from Discontinued
Operations, Net of Tax
—
104
n/a
Net Income (Loss)
$343,096
$268,315
27.9
%
Less: Net (Loss) Income Attributable to
Noncontrolling Interests
403
938
(57.0)
%
Net Income (Loss) Attributable to Iron
Mountain Incorporated
$342,693
$267,377
28.2
%
Earnings (Losses) per Share -
Basic:
Income (Loss) from Continuing
Operations
$1.19
$0.93
28.0
%
Total Income (Loss) from Discontinued
Operations
—
—
—
Net Income (Loss) Attributable to Iron
Mountain Incorporated
$1.19
$0.93
28.0
%
Earnings (Losses) per Share -
Diluted:
Income (Loss) from Continuing
Operations
$1.19
$0.93
28.0
%
Total Income (Loss) from Discontinued
Operations
—
—
—
Net Income (Loss) Attributable to Iron
Mountain Incorporated
$1.19
$0.93
28.0
%
Weighted Average Common Shares Outstanding
- Basic
288,183
286,971
0.4
%
Weighted Average Common Shares Outstanding
- Diluted
288,643
287,687
0.3
%
(1) Includes $7.6M of direct and
incremental costs related to COVID-19 in 2020.
(2) Includes $1.6M of direct and
incremental costs related to COVID-19 in 2020.
Quarterly
Reconciliation of Income from Continuing Operations to Adjusted
EBITDA
(Dollars in thousands)
Q4 2020
Q3 2020
Q/Q % Change
Q4 2019
Y/Y % Change
Income (Loss) from Continuing
Operations
$246,755
$38,562
539.9
%
$37,104
565.0
%
Add / (Deduct):
Interest Expense, Net
105,127
104,303
0.8
%
104,871
0.2
%
(Benefit) Provision for Income Taxes
(3,695)
13,934
(126.5)
%
16,805
(122.0)
%
Depreciation and Amortization
168,383
157,252
7.1
%
173,825
(3.1)
%
Significant Acquisition Costs
—
—
—
4,696
n/a
Restructuring Charges
65,681
48,371
35.8
%
48,597
35.2
%
(Gain) Loss on Disposal/Write-Down of
PP&E, Net (Including Real Estate)
(285,366)
(75,840)
276.3
%
(46,737)
510.6
%
Other Expense (Income), Net, Excluding our
Share of Losses (Gains) from our Unconsolidated Joint Ventures
74,212
81,190
(8.6)
%
45,193
64.2
%
Stock-Based Compensation Expense
2,216
8,065
(72.5)
%
8,059
(72.5)
%
Our Share of Adjusted EBITDA Reconciling
Items from our Unconsolidated Joint Ventures
935
175
434.6
%
712
31.3
%
Adjusted EBITDA
$374,247
$376,012
(0.5)
%
$393,125
(4.8)
%
Adjusted EBITDA
During the fourth quarter of 2020, we changed our definition of
Adjusted EBITDA to (a) exclude stock-based compensation expense and
(b) include our share of Adjusted EBITDA from our unconsolidated
joint ventures. All prior periods have been recast to conform to
these changes. We now define Adjusted EBITDA as income (loss) from
continuing operations before interest expense, net, provision
(benefit) for income taxes, depreciation and amortization
(inclusive of our share of Adjusted EBITDA from our unconsolidated
joint ventures), and excluding certain items we do not believe to
be indicative of our core operating results, specifically: (i)
Significant Acquisition Costs; (ii) Restructuring Charges; (iii)
Intangible impairments; (iv) (Gain) loss on disposal/write-down of
property, plant and equipment, net (including real estate); (v)
Other expense (income), net; (vi) Stock-based compensation expense;
and (vii) COVID-19 Costs. Adjusted EBITDA Margin is calculated by
dividing Adjusted EBITDA by total revenues. We use multiples of
current or projected Adjusted EBITDA in conjunction with our
discounted cash flow models to determine our estimated overall
enterprise valuation and to evaluate acquisition targets. We
believe Adjusted EBITDA and Adjusted EBITDA Margin provide our
current and potential investors with relevant and useful
information regarding our ability to generate cash flows to support
business investment. These measures are an integral part of the
internal reporting system we use to assess and evaluate the
operating performance of our business.
Adjusted EBITDA excludes both interest expense, net and the
provision (benefit) for income taxes. These expenses are associated
with our capitalization and tax structures, which we do not
consider when evaluating the operating profitability of our core
operations. Adjusted EBITDA also does not include depreciation and
amortization expenses, in order to eliminate the impact of capital
investments, which we evaluate by comparing capital expenditures to
incremental revenue generated and as a percentage of total
revenues. Adjusted EBITDA and Adjusted EBITDA Margin should be
considered in addition to, but not as a substitute for, other
measures of financial performance reported in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”), such as operating income, income (loss) from
continuing operations, net income (loss) or cash flows from
operating activities from continuing operations (as determined in
accordance with GAAP).
Full-Year
Reconciliation of Income from Continuing Operations to Adjusted
EBITDA
(Dollars in thousands)
Full Year 2020
Full Year 2019
% Change
Income (Loss) from Continuing
Operations
$343,096
$268,211
27.9
%
Add / (Deduct):
Interest Expense, Net
418,535
419,298
(0.2)
%
Provision (Benefit) for Income Taxes
29,609
59,931
(50.6)
%
Depreciation and Amortization
652,069
658,201
(0.9)
%
Significant Acquisition Costs
—
13,293
n/a
Restructuring Charges
194,396
48,597
300.0
%
Intangible Impairments
23,000
—
—
(Gain) Loss on Disposal/Write-Down of
PP&E, Net (Including Real Estate)
(363,537)
(63,824)
469.6
%
Other Expense (Income), Net, Excluding our
Share of Losses (Gains) from our Unconsolidated Joint Ventures
133,611
25,720
419.5
%
Stock-Based Compensation Expense
34,272
36,194
(5.3)
%
COVID-19 Costs
9,285
—
—
Our Share of Adjusted EBITDA Reconciling
Items from our Unconsolidated Joint Ventures
1,385
3,388
(59.1)
%
Adjusted EBITDA
$1,475,721
$1,469,009
0.5
%
Quarterly
Reconciliation of Reported Earnings per Share to Adjusted Earnings
per Share
Q4 2020
Q3 2020
Q/Q % Change
Q4 2019
Y/Y % Change
Reported EPS - Fully Diluted from
Continuing Operations
$0.86
$0.13
561.5
%
$0.13
561.5
%
Add / (Deduct):
Significant Acquisition Costs
—
—
—
0.02
n/a
Restructuring Charges
0.23
0.17
35.3
%
0.17
35.3
%
(Gain) Loss on Disposal/Write-Down of
PP&E, Net
(0.99)
(0.26)
280.8
%
(0.16)
518.8
%
Other Expense (Income), Net, Excluding
Gains (Losses) from our Unconsolidated Joint Ventures
0.26
0.28
(7.1)
%
0.16
62.5
%
Stock-Based Compensation Expense
0.01
0.03
(66.7)
%
0.03
(66.7)
%
Tax Impact of Reconciling Items and
Discrete Tax Items (1)
(0.06)
(0.02)
200.0
%
(0.01)
500.0
%
Adjusted EPS - Fully Diluted from
Continuing Operations
$0.29
$0.33
(12.1)
%
$0.33
(12.1)
%
(1) The difference between our effective
tax rates and our structural tax rate (or adjusted effective tax
rates) for the years ended December 31, 2020 and 2019, is primarily
due to (i) the reconciling items above, which impact our reported
income (loss) from continuing operations before provision (benefit)
for income taxes but have an insignificant impact on our reported
provision (benefit) for income taxes and (ii) other discrete tax
items. Our structural tax rate for purposes of the calculation of
Adjusted EPS for the quarter ended September 31, 2020 and the
quarters and years ended December 31, 2020 and 2019 was 16.3%,
15.1% and 17.6%, respectively. The Tax Impact of Reconciling Items
and Discrete Tax Items is calculated using the current quarter’s
estimate of the annual structural tax rate for the full year. This
may result in the current period adjustment plus prior reported
quarterly adjustments not summing to the full year adjustment.
Adjusted Earnings Per Share, or Adjusted EPS
During the fourth quarter of 2020, we changed our definition of
Adjusted EPS to (a) exclude stock-based compensation expense and
(b) include our share of adjusted losses (gains) from our
unconsolidated joint ventures. All prior periods have been recast
to conform to these changes. We now define Adjusted EPS as reported
earnings per share fully diluted from continuing operations
(inclusive of our share of adjusted losses (gains) from our
unconsolidated joint ventures) and excluding certain items,
specifically: (i) Significant Acquisition Costs; (ii) Restructuring
Charges; (iii) Intangible impairments; (iv) (Gain) loss on
disposal/write-down of property, plant and equipment, net
(including real estate); (v) Other expense (income), net; (vi)
Stock-based compensation expense; (vii) COVID-19 Costs, and (viii)
Tax impact of reconciling items and discrete tax items. We do not
believe these excluded items to be indicative of our ongoing
operating results, and they are not considered when we are
forecasting our future results. We believe Adjusted EPS is of value
to our current and potential investors when comparing our results
from past, present and future periods.
Full-Year
Reconciliation of Reported Earnings per Share to Adjusted Earnings
per Share
Full Year 2020
Full Year 2019
% Change
Reported EPS - Fully Diluted from
Continuing Operations
$1.19
$0.93
28.0
%
Add / (Deduct):
Significant Acquisition Costs
—
0.05
n/a
Restructuring Charges
0.67
0.17
294.1
%
Intangible Impairments
0.08
—
—
(Gain) Loss on Disposal/Write-Down of
PP&E, Net
(1.26)
(0.22)
472.7
%
Other Expense (Income), Net, Excluding
Gains (Losses) from our Unconsolidated Joint Ventures
0.46
0.09
411.1
%
Stock-Based Compensation Expense
0.12
0.13
(7.7)
%
COVID-19 Costs
0.03
—
—
Tax Impact of Reconciling Items and
Discrete Tax Items (1)
(0.11)
(0.03)
266.7
%
Adjusted EPS - Fully Diluted from
Continuing Operations
$1.19
$1.11
7.2
%
(1) The difference between our effective
tax rate and our structural tax rate (or adjusted effective tax
rate) for the years ended December 31, 2020 and 2019 is primarily
due to (i) the reconciling items above, which impact our reported
income (loss) from continuing operations before provision (benefit)
for income taxes but have an insignificant impact on our reported
provision (benefit) for income taxes and (ii) other discrete tax
items. Our structural tax rate for purposes of the calculation of
Adjusted EPS for the years ended December 31, 2020 and 2019 was
15.1% and 17.6%, respectively. The Tax Impact of Reconciling Items
and Discrete Tax Items is calculated using the current quarter’s
estimate of the annual structural tax rate for the full year. This
may result in the current period adjustment plus prior reported
quarterly adjustments to not sum to the full year adjustment.
Quarterly
Reconciliation of Net Income Attributable to IRM to FFO and
AFFO
(Dollars in thousands, except per-share
data)
Q4 2020
Q3 2020
Q/Q % Change
Q4 2019
Y/Y % Change
Net Income
$246,755
$38,562
539.9
%
$37,104
565.0
%
Add / (Deduct):
Real Estate Depreciation (1)
74,618
72,019
3.6
%
83,237
(10.4)
%
Gain on Sale of Real Estate, Net of
Tax
(288,248)
(75,880)
279.9
%
(58,942)
389.0
%
Data Center Lease-Based Intangible Asset
Amortization (2)
10,464
10,441
0.2
%
11,359
(7.9)
%
Our Share of FFO (Nareit) Reconciling
Items from our Unconsolidated Joint Ventures
—
—
—
321
n/a
FFO (Nareit)
$43,589
$45,142
(3.4)
%
$73,079
(40.4)
%
Add / (Deduct):
Significant Acquisition Costs
—
—
—
4,696
n/a
Restructuring Charges
65,681
48,371
35.8
%
48,597
35.2
%
Loss (Gain) on Disposal/Write-Down of
PP&E, Net (Excluding Real Estate)
2,881
40
7028.0
%
12,205
(76.4)
%
Other Expense (Income), Net, Excluding our
Share of Losses (Gains) from our Unconsolidated Joint Ventures
74,212
81,190
(8.6)
%
45,193
64.2
%
Stock-Based Compensation Expense
2,216
8,065
(72.5)
%
8,059
(72.5)
%
Real Estate Financing Lease
Depreciation
3,706
3,501
5.9
%
3,632
2.0
%
Tax Impact of Reconciling Items and
Discrete Tax Items (3)
(18,795)
(4,648)
304.4
%
(2,451)
666.9
%
Our Share of FFO (Normalized) Reconciling
Items from our Unconsolidated Joint Ventures
(7)
(1)
976.6
%
(133)
(94.9)
%
FFO (Normalized)
$173,483
$181,660
(4.5)
%
$192,879
(10.1)
%
Per Share Amounts (Fully Diluted
Shares)
FFO (Nareit)
$0.15
$0.16
(6.3)
%
$0.25
(40.0)
%
FFO (Normalized)
$0.60
$0.63
(4.6)
%
$0.67
(10.4)
%
Weighted Average Common Shares Outstanding
- Basic
288,419
288,403
0.0
%
287,277
0.4
%
Weighted Average Common Shares Outstanding
- Diluted
289,161
288,811
0.1
%
288,082
0.4
%
(1) Includes depreciation expense related
to owned real estate assets (land improvements, buildings, building
improvements, leasehold improvements and racking), excluding
depreciation related to financing leases.
(2) Includes amortization expense for Data
Center In-Place Lease Intangible Assets and Data Center Tenant
Relationship Intangible Assets.
(3) Represents the tax impact of (i) the
reconciling items above, which impact our reported income (loss)
from continuing operations before provision (benefit) for income
taxes but have an insignificant impact on our reported provision
(benefit) from income taxes and (ii) other discrete tax items.
Funds From Operations, or FFO (Nareit), and FFO
(Normalized)
Funds from operations ("FFO") is defined by the National
Association of Real Estate Investment Trusts (“Nareit”) as net
income (loss) excluding depreciation on real estate assets, gains
on sale of real estate, net of tax, and amortization of data center
leased-based intangibles. Consistent with Nareit's definition of
FFO, during the fourth quarter of 2020, we began adjusting for our
share of reconciling items from our unconsolidated joint ventures
from FFO ("FFO (Nareit)"). All prior periods have been recast to
conform to these changes. FFO (Nareit) does not give effect to real
estate depreciation because these amounts are computed, under GAAP,
to allocate the cost of a property over its useful life. Because
values for well-maintained real estate assets have historically
increased or decreased based upon prevailing market conditions, we
believe that FFO (Nareit) provides investors with a clearer view of
our operating performance. Our most directly comparable GAAP
measure to FFO (Nareit) is net income (loss).
Although Nareit has published a definition of FFO, we modify FFO
(Nareit), as is common among REITs seeking to provide financial
measures that most meaningfully reflect their particular business
("FFO (Normalized)"). During the fourth quarter of 2020, we changed
our definition of FFO (Normalized) to exclude stock-based
compensation expense and adjust for our share of FFO (Normalized)
reconciling items from our unconsolidated joint ventures. All prior
periods have been recast to conform to these changes. Our
definition of FFO (Normalized) excludes certain items included in
FFO (Nareit) that we believe are not indicative of our core
operating results, specifically: (i) Significant Acquisition Costs;
(ii) Restructuring Charges; (iii) Intangible impairments; (iv) Loss
(gain) on disposal/write-down of property, plant and equipment, net
(excluding real estate); (v) Other expense (income), net, excluding
our share of (losses) gains from our unconsolidated joint ventures;
(vi) Stock-based compensation expense; (vii) COVID-19 Costs, (viii)
Real estate financing lease depreciation; (ix) Tax impact of
reconciling items and discrete tax items; and (x) (Income) loss
from discontinued operations, net of tax.
FFO (Normalized) per share
FFO (Normalized) divided by weighted average fully-diluted
shares outstanding.
Quarterly
Reconciliation of Net Income Attributable to IRM to FFO and AFFO
(continued)
(Dollars in thousands)
Q4 2020
Q3 2020
Q/Q % Change
Q4 2019
Y/Y % Change
FFO (Normalized)
$173,483
$181,660
(4.5)
%
$192,879
(10.1)
%
Add / (Deduct):
Non-Real Estate Depreciation
34,461
32,629
5.6
%
32,969
4.5
%
Amortization Expense (1)
38,114
33,271
14.6
%
37,624
1.3
%
Amortization of Deferred Financing
Costs
4,226
4,149
1.8
%
4,454
(5.1)
%
Revenue Reduction Associated with
Amortization of Permanent Withdrawal Fees and Above - and
Below-Market Leases
2,267
2,363
(4.1)
%
3,288
(31.1)
%
Non-Cash Rent Expense (Income)
1,896
2,779
(31.8)
%
1,408
34.7
%
Reconciliation to Normalized Cash
Taxes
(938)
(5,107)
18.4
%
12,803
(107.3)
%
Our Share of AFFO Reconciling Items from
our Unconsolidated Joint Ventures
830
83
899.8
%
155
436.0
%
Less:
Recurring Capital Expenditures
63,567
35,407
79.5
%
52,460
21.2
%
AFFO
$190,771
$216,420
(11.9)
%
$233,120
(18.2)
%
Per Share Amounts (Fully Diluted
Shares)
AFFO Per Share
$0.66
$0.75
(12.0)
%
$0.81
(18.5)
%
Weighted Average Common Shares Outstanding
- Basic
288,419
288,403
0.0
%
287,277
0.4
%
Weighted Average Common Shares Outstanding
- Diluted
289,161
288,811
0.1
%
288,082
0.4
%
(1) Includes Customer Relationship Value,
intake costs, acquisition of customer relationships, and other
intangibles. Excludes amortization of capitalized commissions of
$7.0M, $5.4M, and $5.0M in Q4 2020, Q3 2020, and Q4 2019,
respectively.
Adjusted Funds From Operations, or AFFO
During the fourth quarter of 2020, we changed our definition of
adjusted funds from operations (“AFFO”) to exclude our share of
reconciling items from our unconsolidated joint ventures. All prior
periods have been recast to conform to these changes. AFFO is
defined as FFO (Normalized) (1) excluding (i) non-cash rent expense
(income), (ii) depreciation on non-real estate assets, (iii)
amortization expense associated with (a) customer relationship
value (CRV), intake costs, acquisitions of customer relationships
and other intangibles, and (b) capitalized internal commissions,
(iv) amortization of deferred financing costs [and debt
discount/premium], (v) revenue reduction associated with
amortization of permanent withdrawal fees and above-and
below-market data center leases, and (vi) the impact of reconciling
to normalized cash taxes, and (2) including recurring capital
expenditures [excluding Significant Acquisition Capital
Expenditures]. We also adjust for these items to the extent
attributable to our portion of unconsolidated ventures. We believe
that AFFO, as a widely recognized measure of operations of REITs,
is helpful to investors as a meaningful supplemental comparative
performance measure to other REITs, including on a per share basis.
AFFO should be considered 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) or cash flows from operating
activities from continuing operations (as determined in accordance
with GAAP).
AFFO per share
AFFO divided by weighted average fully-diluted shares
outstanding.
Full-Year
Reconciliation of Net Income Attributable to IRM to FFO and
AFFO
(Dollars in thousands, except per-share
data)
Full Year 2020
Full Year 2019
% Change
Net Income
$343,096
$268,315
27.9
%
Add / (Deduct):
Real Estate Depreciation (1)
298,943
303,415
(1.5)
%
Gain on Sale of Real Estate, Net of
Tax
(365,709)
(99,194)
268.7
%
Data Center Lease-Based Intangible Asset
Amortization (2)
42,637
46,696
(8.7)
%
Our Share of FFO (Nareit) Reconciling
Items from our Unconsolidated Joint Ventures
—
1,284
n/a
FFO (Nareit)
$318,967
$520,516
(38.7)
%
Add / (Deduct):
Significant Acquisition Costs
—
13,293
n/a
Restructuring Charges
194,396
48,597
300.0
%
Intangible Impairments
23,000
—
—
Loss (Gain) on Disposal/Write-Down of
PP&E, Net (Excluding Real Estate)
2,523
40,763
(93.8)
%
Other Expense (Income), Net, Excluding our
Share of Losses (Gains) from our Unconsolidated Joint Ventures
133,611
25,720
419.5
%
Stock-Based Compensation Expense
34,272
36,194
(5.3)
%
COVID-19 Costs
9,285
—
—
Real Estate Financing Lease
Depreciation
13,801
13,364
3.3
%
Tax Impact of Reconciling Items and
Discrete Tax Items (3)
(31,825)
(13,095)
143.0
%
(Income) Loss from Discontinued
Operations, Net of Tax
—
(104)
n/a
Our Share of FFO (Normalized) Reconciling
Items from our Unconsolidated Joint Ventures
(38)
148
(125.5)
%
FFO (Normalized)
$697,992
$685,396
1.8
%
Per Share Amounts (Fully Diluted
Shares)
FFO (Nareit)
$1.11
$1.81
(38.7)
%
FFO (Normalized)
$2.42
$2.38
1.5
%
Weighted Average Common Shares Outstanding
- Basic
288,183
286,971
0.4
%
Weighted Average Common Shares Outstanding
- Diluted
288,643
287,687
0.3
%
(1) Includes depreciation expense related
to owned real estate assets (land improvements, buildings, building
improvements, leasehold improvements and racking), excluding
depreciation related to financing leases.
(2) Includes amortization expense for Data
Center In-Place Lease Intangible Assets and Data Center Tenant
Relationship Intangible Assets.
(3) Represents the tax impact of (i) the
reconciling items above, which impact our reported income (loss)
from continuing operations before provision (benefit) for income
taxes but have an insignificant impact on our reported provision
(benefit) from income taxes and (ii) other discrete tax items.
Full-Year
Reconciliation of Net Income Attributable to IRM to FFO and AFFO
(continued)
(Dollars in thousands)
Full Year 2020
Full Year 2019
% Change
FFO (Normalized)
$697,992
$685,396
1.8
%
Add / (Deduct):
Non-Real Estate Depreciation
134,819
139,543
(3.4)
%
Amortization Expense (1)
137,817
136,074
1.3
%
Amortization of Deferred Financing
Costs
17,376
16,740
3.8
%
Revenue Reduction Associated with
Amortization of Permanent Withdrawal Fees and Above - and
Below-Market Leases
9,878
13,703
(27.9)
%
Non-Cash Rent Expense (Income)
10,172
4,802
111.8
%
Reconciliation to Normalized Cash
Taxes
21,508
8,363
157.2
%
Our Share of AFFO Reconciling Items from
our Unconsolidated Joint Ventures
1,064
527
102.1
%
Less:
Recurring Capital Expenditures
143,092
138,125
3.6
%
AFFO
$887,534
$867,024
2.4
%
Per Share Amounts (Fully Diluted
Shares)
AFFO Per Share
$3.07
$3.01
2.0
%
Weighted Average Common Shares Outstanding
- Basic
288,183
286,971
0.4
%
Weighted Average Common Shares Outstanding
- Diluted
288,643
287,687
0.3
%
(1) Includes Customer Relationship Value,
intake costs, acquisition of customer relationships, and other
intangibles. Excludes amortization of capitalized commissions of
$24.1M and $19.1M in Full Year 2020 and Full Year 2019,
respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210224005262/en/
Investor Relations Contacts: Greer Aviv Senior Vice
President, Investor Relations Greer.Aviv@ironmountain.com (617)
535-2887
Nathan McCurren Director, Investor Relations
Nathan.McCurren@ironmountain.com (617) 535-2997
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