Insights from Iron Mountain, Envela financial disclosures

[vc_row][vc_column][vc_column_text][/vc_column_text][/vc_column][/vc_row][vc_row css=".vc_custom_1564601317459{margin-top: 0px !important;margin-bottom: 0px !important;padding-top: 0px !important;padding-bottom: 0px !important;}"][vc_column css=".vc_custom_1564601307445{margin-top: 0px !important;margin-bottom: 0px !important;padding-top: 0px !important;padding-bottom: 0px !important;}"][vc_column_text css=".vc_custom_1691615902009{margin-top: 0px !important;margin-bottom: 0px !important;padding-top: 0px !important;padding-bottom: 0px !important;}"] [caption id="attachment_22651" align="aligncenter" width="1200"] Iron Mountain and Envela Corporation recently released second-quarter earnings results, providing insight into electronics reuse and recycling markets. | iQoncept/Shutterstock[/caption] Low prices for electronic components continue to dampen Iron Mountain's data center decommissioning business. Meanwhile, a group of ITAD and e-scrap companies boosted their profit margins even amid a slowdown in business.  Publicly traded companies Iron Mountain and Envela Corporation recently disclosed their second-quarter 2023 financial results, providing insight into the data center decommissioning, ITAD and e-scrap recycling markets. [/vc_column_text][/vc_column][/vc_row][vc_row content_placement="middle" css=".vc_custom_1564601766217{margin-top: 0px !important;margin-bottom: 0px !important;padding-top: 0px !important;padding-bottom: 0px !important;}"][vc_column width="1/2" css=".vc_custom_1564601307445{margin-top: 0px !important;margin-bottom: 0px !important;padding-top: 0px !important;padding-bottom: 0px !important;}"][vc_column_text css=".vc_custom_1691615908555{margin-top: 0px !important;margin-bottom: 0px !important;padding-top: 0px !important;padding-bottom: 0px !important;}"]Iron Mountain's Asset Lifecycle Management business reported that components prices continued to prove a drag on revenues during the second quarter, even as prices for some types of memory are beginning to rise. Meanwhile, the company is working to diversify its used electronics sales away from China.  At the same time, Envela, which owns a family of ITAD, remarketing and e-scrap recycling companies in the Southwest, experienced a drop in revenues and gross profits, although it did manage to expand its profit margin.  The following are details on the companies' financials for the second quarter: [/vc_column_text][/vc_column][vc_column width="1/2" css=".vc_custom_1564615877707{margin-top: 0px !important;margin-bottom: 0px !important;border-top-width: 5px !important;border-bottom-width: 5px !important;padding-top: 0px !important;padding-bottom: 0px !important;border-top-color: #783214 !important;border-top-style: solid !important;border-bottom-color: #783214 !important;border-bottom-style: solid !important;border-radius: 10px !important;}"][vc_single_image image="11588" img_size="full" alignment="center" onclick="custom_link" link="http://www.e-scrapconference.com/" css=".vc_custom_1564615977546{margin-top: 0px !important;margin-bottom: 0px !important;padding-top: 5px !important;padding-bottom: 5px !important;}"][vc_column_text css=".vc_custom_1691615885814{margin-top: 0px !important;margin-bottom: 0px !important;padding-top: 0px !important;padding-bottom: 5px !important;}"]

Learn more in person

Eric Capps, director of compliance for Iron Mountain's Asset Lifecycle Management business, will be presenting at this year's E-Scrap & E-Reuse Conference. He'll be speaking in the "Mastering Data Security in ITAD" session on Tuesday, Sept. 19. The panel is part of an info-packed three day schedule. Register for the event today.[/vc_column_text][/vc_column][/vc_row][vc_row css=".vc_custom_1564601317459{margin-top: 0px !important;margin-bottom: 0px !important;padding-top: 0px !important;padding-bottom: 0px !important;}"][vc_column css=".vc_custom_1564601307445{margin-top: 0px !important;margin-bottom: 0px !important;padding-top: 0px !important;padding-bottom: 0px !important;}"][vc_column_text css=".vc_custom_1691691304530{margin-top: 0px !important;margin-bottom: 0px !important;padding-top: 0px !important;padding-bottom: 0px !important;}"]

'Continue to see muted pricing'

Low prices for used electronics from data centers continues to dent Iron Mountain's ITAD and data center decommissioning business.  Iron Mountain's Asset Lifecycle Management (ALM) business reported $43 million in revenue during the second quarter, down 49% year over year, according to a supplemental financial report.  The company's ALM business is substantially made up of assets acquired when Iron Mountain bought 80% of ITRenew for $718 million in January 2022. Iron Mountain includes its ALM business under the "information destruction" line-item in its "Corporate and Other" segment, which also includes a fine art management business and expenses associated with Iron Mountain's administration.  The company's quarterly report noted that the service revenue in the ALM business declined because "as a result of component price declines, partially offset by increased volume." The report added that it expects prices for used electronics "to improve from current levels."  "Turning to asset lifecycle management, we continue to see muted pricing for the largest part of this business, which relies on reselling used memory, hard drives and CPUs we receive from hyperscalers, " William Meaney, the company's president and CEO, said during an Aug. 3 conference call with investors. "That being said, pricing is stabilized, and we do expect to see an improvement as we head into next year. Moreover, you will recall that our ALM business has three components: hyperscale decommissioning, which is highly dependent on component pricing; enterprise ITAD or IT asset disposition; and original equipment manufacturers or OEMs. In these later categories, we are seeing marked growth and traction." For example, Meaney said, a longtime health care industry customer of Iron Mountain's record management services has contracted with Iron Mountain to also manage the recovery, decommissioning, disposal and/or recycling of IT assets at over 2,000 locations in the U.S.  Barry Hytinen, Iron Mountain's chief financial officer, noted that many of the electronics that Iron Mountain recovers are sold into China. China reimposed virus-related lockdowns late last year, so as the calendar rolls into the second half of this year, the year-over-year comparisons will become more favorable, he said.  Hytinen noted that at the beginning of this year, as China's lockdowns eased, the volume of components Iron Mountain sold into China increased, but "pricing declined to record low levels." That affected the range of components the company sells, including memory and CPUs.  He said industry analysts are predicting secondary market pricing increases by late this year and more significantly in 2024, he said. "To be prudent we have not factored any pricing improvement into our outlook for 2023," he said.  That being said, he noted that the ALM business's revenue increased 4% from the first quarter to the second quarter of 2023. Additionally, as OEMs reduce their production of new components, Iron Mountain is seeing some pricing ticking up, including for certain types of memory.  Meanwhile, during the call, Hytinen talked about the ALM business's work to diversify its sales channels away from China.  "We are making steady progress, but it is slow because, of course, as we've said before, China is the main market for us in that regard," Hytinen said. "But we are looking at and branching into throughout Southeast Asia there are opportunities we think over the intermediate term in India. We certainly have been selling more components into the U.S. and Europe as well, and that's a key focus, as well as the Mid-East." 

Echo's reuse business tallies 67% margin

Envela Corporation, which owns a number of ITAD and e-scrap recycling companies, reported slower sales and profits during the second quarter of 2023, but the company managed to boost its profit margin.  A publicly traded company, Envela Corporation has two distinct segments: a consumer segment that includes retail sales of jewelry and other luxury items, and a commercial segment that involves electronics reuse and recycling.  The commercial segment, which prior to this most recent financial filing was called Echo Consolidated Holdings Group, includes the following companies: e-scrap processor Echo Environmental, ITAD companies Avail Recovery Solutions and ITAD USA, device reseller Teladvance, and mobile phone trade-in firm CExchange. All are based in Carrollton, Texas, except for Avail Recovery Solutions, which is located in Chandler, Ariz. During the second quarter, the commercial segment reported $10.7 million in sales, down 13% year over year. The segment's gross profit was $6.7 million, down 9% year over year. The profit margin was 63%, up from 59% during the second quarter of 2022.  For all of 2022, the commercial segment averaged a 55% profit margin. The latest financial disclosure breaks out the reuse and recycling numbers. The device resale business reported $7.6 million in revenue, down 17% year over year. Its gross profit was $5.1 million, down 9%. Lastly, its overall profit margin was 67%, up from 61% during the same period the year before. To explain the drops in reuse revenue and gross profits, the company pointed to fewer devices bought and sold overall.  The recycling business tallied $3.1 million in revenue, down 3% year over year. The gross profit was $1.6 million, down 6%. Finally, the profit margin was 52%, down from 54%. Again, the company pointed to less material handled as a reason for the lower numbers.  In terms of capital expenditures, Envela said it expects to spend about $2.5 million over the next year.  "These expenditures will be driven by the purchase of additional equipment and potential property purchases by both segments seeking to expand the Company into other markets," the filing notes.

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