Grade: F — Major Red Flags (Highest Leverage in Batch)
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 10-K (Filed 2026-02-12, FY ended December 31, 2025) + Yahoo Finance
Auditor: Deloitte & Touche LLP — Unqualified opinion
CIK: 0001020569
One-line verdict: Iron Mountain's F grade is the most severe in this batch with four red flags: cash of $166M covers 1% of $19.1B debt (C4), FCF has been below 50% of net income for 3 consecutive years (C2), Debt/EBITDA of 9.0x with interest coverage of only 1.7x (D2), and FCF after acquisitions has been negative for 3 straight years (E1). The storage and data center REIT grew revenue 12.2% to $6.9B, split between Storage ($4.1B, +10.1%) and Service ($2.8B, +15.5%). CFFO/NI of 9.27 looks strong but masks that net income was only $145M — a 2.1% net margin on $6.9B revenue. The M-Score of -2.66 is clean, but the financial structure demands serious scrutiny. Negative equity (goodwill of $6.6B against -$987M stockholders' equity) means the company has returned more to shareholders than it has retained.
| Metric | Result |
|---|---|
| Red Flags | **4** (Cash-to-debt 1%, FCF <50% NI 3 years, Debt/EBITDA 9.0x + 1.7x interest coverage, FCF after acquisitions negative 3 years) |
| Watch Items | **1** (CapEx growth 26.6% vs revenue 12.2%) |
| Checks Completed | **17/18** (1 N/A) |
| Beneish M-Score | **-2.66** (clean) |
| Auditor | Deloitte & Touche LLP — Unqualified opinion |
Revenue: Storage + Data Centers
Per the 10-K (in thousands):
| Segment | FY2024 | FY2025 | Growth | Organic Growth |
|---|---|---|---|---|
| Storage | $3,681,431 | $4,052,510 | +10.1% | +9.6% |
| Service | $2,467,650 | $2,849,227 | +15.5% | +11.2% |
| **Total** | **$6,149,909** | **$6,901,737** | **+12.2%** | **+10.2%** |
Constant currency growth of 11.9% and organic growth of 10.2% are strong. Iron Mountain is successfully pivoting from physical records storage (a secular decliner) to data centers (a secular grower). The data center business is driving the CapEx surge.
Net income of $145M is anemic relative to revenue — 2.1% net margin. This is consumed by interest expense ($19.1B debt generates substantial interest burden), depreciation on massive physical assets, and ongoing data center construction costs.
The Leverage Problem
The filing warns: "Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our financial condition and liquidity." Interest coverage of 1.7x means Iron Mountain spends $0.59 of every operating dollar on interest. Any revenue decline or rate increase tightens an already constrained situation.
Negative equity (-$987M) means IRM has historically returned more capital than it has earned — typical for a REIT that distributes 90%+ of taxable income, but the magnitude is notable. The goodwill of $6.6B is expressed as -668% of equity, which is technically meaningless — the relevant metric is goodwill-to-assets, which is manageable.
CFFO of $1.3B is strong in absolute terms, but CapEx consumes most of it, leaving negative FCF after acquisitions for three consecutive years. Iron Mountain is financing its data center buildout with debt, not internally generated cash.
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1-A2 | Revenue Quality | ✅ | DSO 76 days, AR tracking revenue |
| A3 | Revenue vs CFFO | ✅ | Revenue +12.2%, CFFO +12.0% |
| B1-B3 | Expense Quality | ✅ | 55.4% gross margin, 36.5% SG&A |
| B2 | CapEx | ⚠️ | CapEx +26.6% vs revenue +12.2% |
| B4 | Gross Margin | ✅ | Stable |
| C1 | CFFO vs NI | ✅ | CFFO/NI = 9.27 |
| C2 | FCF | ❌ | FCF <50% NI for 3 years |
| C3 | Accruals | ✅ | -5.7%, low |
| C4 | Cash vs Debt | ❌ | Cash $166M = 1% of $19.1B |
| D1 | Goodwill | ✅ | Manageable relative to assets |
| D2 | Leverage | ❌ | Debt/EBITDA 9.0x, interest coverage 1.7x |
| E1 | Serial Acquirer | ❌ | FCF after acquisitions negative 3 years |
| E2 | Goodwill | ✅ | G&I stable +3% |
| F1 | M-Score | ✅ | -2.66 (clean) |
Summary
Grade: F with four red flags — the most in this batch. Iron Mountain is not manipulating earnings (M-Score clean), but it is financing a massive data center buildout with debt while generating only 2.1% net margins on $6.9B revenue. The 9.0x Debt/EBITDA and 1.7x interest coverage leave almost no margin for error. The bull case is that data center revenue growth will eventually generate sufficient cash to self-fund expansion and reduce leverage. The bear case is that interest rate increases or construction delays could stress a balance sheet with $19.1B in debt, negative equity, and 1.7x interest coverage. This is the highest-risk name in the batch.
**Disclaimer**: This report is based on Iron Mountain's FY2025 10-K filed with SEC EDGAR on February 12, 2026. This is NOT investment advice.
Data: SEC EDGAR 10-K + Yahoo Finance
Auditor: Deloitte & Touche LLP (Unqualified opinion)
Fiscal year ended: December 31, 2025