Current Report Filing (8-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) February 5, 2015

OUTERWALL INC.

(Exact name of registrant as specified in its charter)

Delaware

000-22555

94-3156448

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

1800 – 114^th Avenue SE

BELLEVUE, WA 98004

(Address of Principal Executive Offices and Zip Code)

Registrant’s telephone number, including area code: (425) 943-8000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02

Results of Operations and Financial Condition.

On February 5, 2015, Outerwall Inc. (the “Company”) issued an earnings release announcing its financial results for the quarter and full year ended December 31, 2014, and separate prepared remarks from its Interim Chief Executive Officer and Chief Financial Officer. Copies of the earnings release and prepared remarks are attached hereto as Exhibits 99.1 and 99.2.

Item 8.01

Other Events.

On February 5, 2015, the Company issued a press release announcing its new dividend policy, a quarterly cash dividend, and an increased stock repurchase authorization. A copy of the press release is attached hereto as Exhibit 99.3 and incorporated by reference.

Item 9.01

Financial Statements and Exhibits.

(d) Exhibits


Exhibit No.		Description

99.1		Earnings release for the quarter and full year ended December 31, 2014.

99.2		Prepared remarks from the Interim Chief Executive Officer and Chief Financial Officer.

99.3		Press release dated February 5, 2015.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	OUTERWALL INC.

	By:	/s/ Galen C. Smith
Date: February 5, 2015		Galen C. Smith
		Chief Financial Officer

Exhibit 99.1

OUTERWALL INC. ANNOUNCES 2014 FOURTH QUARTER AND FULL-YEAR RESULTS

Reports Strong Profitability and Cash Flow for Fourth Quarter and Full-Year 2014

Board of Directors Declares First-Ever Quarterly Cash Dividend of $0.30 Per Share

Board Increases Share Repurchase Authorization by $250 Million

Company Issues Full-Year 2015 Guidance

BELLEVUE, Wash.—February 5, 2015—Outerwall Inc. (Nasdaq: OUTR) today reported financial results for the fourth quarter and full year ended December 31, 2014.

“We are pleased with our strong performance in the fourth quarter of 2014,” said Nora M. Denzel, Outerwall’s interim chief executive officer. “As our results demonstrate, we remain focused on executing our strategy of optimizing our core businesses, scaling ecoATM and leveraging our existing platforms to gain operational efficiencies across the company. As we look forward in 2015, we will continue to build on our leading brands, consumer engagement, strong relationships with our retail and studio partners and solid financial foundation.”


	Three Months Ended December 31,				Change			Year Ended December 31,				Change
Dollars in millions, except per share data	2014		2013		%			2014		2013		%
GAAP Results
• Consolidated revenue	$	600.6	$	593.7		1.2	%	$	2,303.0	$	2,306.6		(0.2	)%
• Income from continuing operations	$	43.8	$	42.9		2.2	%	$	107.4	$	208.1		(48.4	)%
• Net income	$	43.8	$	22.7		93.2	%	$	106.6	$	174.8		(39.0	)%
• Diluted EPS from continuing operations	$	2.35	$	1.55		51.6	%	$	5.19	$	7.33		(29.2	)%
• Net cash provided by operating activities	$	131.3	$	180.7		(27.3	)%	$	338.4	$	327.8		3.2	%

Core Results*
• Core adjusted EBITDA from continuing operations	$	141.0	$	137.3		2.7	%	$	480.5	$	491.7		(2.3	)%
• Core diluted EPS from continuing operations	$	2.44	$	1.68		45.2	%	$	6.43	$	5.92		8.6	%
• Free cash flow	$	105.7	$	142.6		(25.9	)%	$	240.4	$	166.4		44.5	%

*	Refer to Appendix A for a discussion of Use of Non-GAAP Financial Measures and Core and Non-Core Results.

Highlights from the full-year 2014 include:

•

Managed the business for profitability while making investments for the future as demonstrated by solid core adjusted EBITDA from continuing operations of $480.5 million despite a decline in revenue at Redbox due to a challenging release schedule for much of 2014

•

Redbox achieved its 4 billionth cumulative rental in November 2014

•

Extended existing content agreements with Sony, Paramount and Universal and signed a new agreement with Lionsgate

•

Installed more than 1,000 ecoATM^® kiosks, bringing total ecoATM kiosks to 1,890 at December 31, 2014

•

Consolidated general and administrative (G&A) expense improved 13.6% year-over-year primarily as a result of the company’s ongoing focus on expense management

•

Core diluted EPS from continuing operations increased 8.6% year-over-year

•

Generated $240.4 million in free cash flow for the full-year 2014, an increase from $166.4 million in 2013

•

Repurchased 7.9 million shares of common stock at an average price of $68.31 per share for $541.4 million

Highlights from the fourth quarter 2014 include:

•

Successfully implemented Redbox price increases in December 2014 for movies and early January 2015 for video games

•

Week of December 29, 2014, marked the highest rental week in Redbox history, led by strong new release titles

•

Installed approximately 380 net new ecoATM kiosks

•

Consolidated revenue increased 1.2% compared with the fourth quarter of 2013, primarily reflecting an increase in New Ventures segment revenue as the company continued to scale ecoATM

•

Consolidated G&A expense improved 20.9% compared with the fourth quarter of 2013, primarily as a result of the company’s ongoing focus on expense management

•

Core adjusted EBITDA from continuing operations increased 2.7% compared with the fourth quarter of 2013, primarily due to an improvement in G&A expense

•

Core diluted EPS from continuing operations increased 45.2% compared with the fourth quarter of 2013, primarily reflecting share repurchases throughout the year

“Our financial results for the fourth quarter and full-year 2014 reflect our ongoing efforts to manage the business for profitability and free cash flow while we make the appropriate investments for our future,” said Galen C. Smith, chief financial officer of Outerwall.

“We continue to maintain a disciplined approach to our capital allocation strategy and remain committed to our current policy of returning 75-to-100 percent of annual free cash flow to shareholders,” continued Smith. “Demonstrating confidence in Outerwall’s long-term prospects and future cash flows, our board of directors declared our first-ever cash dividend payment of $0.30 per share and approved an additional authorization of $250.0 million to our share repurchase program.”

Outerwall also announced today that it is shutting down its Redbox operations in Canada as the business is not meeting the company’s performance expectations. As a result, the company recognized an after-tax expense of $1.5 million in the fourth quarter of 2014 related to the accelerated recognition of content library and capitalized install costs on property and equipment. The remaining value of the content library and capitalized install costs will be amortized over an expected three-month wind-down period. Following the final shutdown of the operations in Canada, the company expects to report Redbox Canada results as a discontinued operation.

“Our 2015 annual guidance reflects our ongoing focus on managing the business for profitability while continuing to make disciplined growth investments, including scaling ecoATM,” said Smith. “The recently implemented Redbox price increase will support further investments in several initiatives to enhance customer experience and drive engagement. We expect these initiatives will help offset the secular decline in the physical rental market and that our actions to improve operational efficiencies and network optimization will help drive earnings growth.”

CONSOLIDATED RESULTS

Consolidated revenue for the fourth quarter of 2014 increased $6.9 million, or 1.2%, to $600.6 million compared with $593.7 million for the fourth quarter of 2013. The year-over-year increase in consolidated revenue was primarily due to an increase in New Ventures revenue. For the full-year 2014, consolidated revenue of $2.30 billion was essentially flat compared with full-year 2013 revenue, reflecting increases in revenue in the New Ventures and Coinstar segments and a decline in revenue in the Redbox segment.

Consolidated G&A expenses were $41.9 million in the fourth quarter of 2014, a 20.9% decrease from $53.0 million in the fourth quarter of 2013. For the full-year 2014, G&A expenses of $191.7 million improved 13.6% from $221.8 million in 2013. The improvement in G&A expenses in both periods primarily reflects the company’s ongoing focus on expense management in each of its lines of business and across its shared services organization.

Operating income for the fourth quarter of 2014 was $85.2 million and operating margin was 14.2% compared with operating income of $73.0 million and operating margin of 12.3% in the fourth quarter of 2013. The year-over-year increase in operating margin primarily reflects the improvement in G&A and direct operating expenses that includes a one-time $5.6 million benefit as a result of a reduction of the estimated liability for Redbox personal property taxes. For the full-year 2014, operating income was $248.4 million compared with $261.0 million in 2013, primarily reflecting an increase in the operating loss in the New Ventures segment as the company continued to scale its ecoATM business during the year.

Income from continuing operations for the fourth quarter of 2014 was $43.8 million, or $2.35 per diluted share, compared with $42.9 million, or $1.55 per diluted share, in the fourth quarter of 2013. For the full-year 2014, income from continuing operations was $107.4 million, or $5.19 per diluted share, compared with $208.1 million, or $7.33 per diluted share, for the full-year 2013.

Core adjusted EBITDA from continuing operations for the fourth quarter of 2014 was $141.0 million compared with $137.3 million in the fourth quarter of 2013. The year-over-year increase was primarily due to higher segment operating income in the Redbox and Coinstar segments. For the full-year 2014, core adjusted EBITDA from continuing operations was $480.5 million compared with $491.7 million for the full-year 2013. The year-over-year decrease in core adjusted EBITDA from continuing operations was primarily due to lower segment operating income in the Redbox segment and a higher segment operating loss in the New Ventures segment.

Core diluted earnings per share from continuing operations in the fourth quarter of 2014 were $2.44 compared with $1.68 per diluted share in the fourth quarter of 2013. For the full-year 2014, core diluted earnings per share from continuing operations were $6.43 compared with $5.92 per diluted share for 2013.

Net cash provided by operating activities in the fourth quarter of 2014 was $131.3 million compared with $180.7 million in the fourth quarter of 2013. The decrease was primarily due to higher non-cash expenses in the fourth quarter of 2013, including an impairment of $27.2 million related to discontinued operations and a $21.4 million loss from equity method investments in the fourth quarter of 2013 and a decrease of $12.3 million in net cash inflows from changes in working capital. Net cash provided by operating activities for the year increased by $10.5 million compared with 2013, primarily due to a decrease in net cash outflows from changes in working capital of $76.9 million partially offset by a decrease in net income for the year.

Capital expenditures for the fourth quarter of 2014 were $25.6 million on a cash basis compared with $38.1 million in the fourth quarter of 2013. For the year, cash capital expenditures were $97.9 million in 2014 compared with $161.4 million in 2013. The decrease in capital expenditures in 2014 compared with 2013 was primarily due to lower capital expenditures related to Redbox kiosks.

Free cash flow for the fourth quarter of 2014 was $105.7 million compared with $142.6 million in the fourth quarter of 2013. Free cash flow for the full-year 2014 was $240.4 million compared with $166.4 million for 2013.

SEGMENT RESULTS

Redbox

Effective December 2, 2014, the daily rental rate for DVDs was increased from $1.20 to $1.50, and the daily rental rate for a Blu-ray^® Disc was increased from $1.50 to $2.00. The daily rental rate for video games increased from $2.00 to $3.00, effective January 6, 2015. The benefit from the price increases to revenue in December 2014 was greater than the company expected due to the robust content slate and holiday seasonality that attracted customers and lessened the impact of increased prices on rental demand, helping to offset weaker performance from September and October releases and secular decline in the physical rental market.

Redbox segment revenue in the fourth quarter of 2014 was relatively flat at $494.0 million compared with $496.4 million in the fourth quarter of 2013, despite lower rentals in the fourth quarter of 2014 compared with the fourth quarter of 2013. Rentals declined 10.7 million to approximately 181.3 million in the fourth quarter of 2014 compared with 192.0 million in the fourth quarter of 2013. Same store sales decreased 1.3% in the fourth quarter of 2014 compared with an increase of 0.9% in the fourth quarter of 2013.

Net revenue per rental increased $0.14, or 5.4% to $2.72 in the fourth quarter of 2014 from $2.58 in the fourth quarter of 2013. The increase was primarily the result of the impact of the price increases and the continued shift to Blu-ray in the fourth quarter of 2014, both of which helped to minimize the impact of lower rentals in the fourth quarter of 2014 compared with the prior year.

Redbox segment operating income in the fourth quarter of 2014 was $121.3 million compared with $111.3 million in the fourth quarter of 2013. Segment operating margin was 24.6% in the fourth quarter of 2014 compared with 22.4% in the fourth quarter of 2013, reflecting the company’s focus on managing its costs.

Coinstar

Coinstar segment revenue was $81.9 million, an increase of 1.5%, compared with $80.7 million in the fourth quarter of 2013, primarily due to growth in the number of installed Coinstar Exchange kiosks, a price increase in the U.K., and higher volume in the U.K. as a result of an increased U.K. kiosk base. Same store sales grew 3.3% in the fourth quarter of 2014 compared with 5.9% in the fourth quarter of 2013. The average transaction size in the fourth quarter of 2014 increased $0.63 to $44.45 from the fourth quarter of 2013.

Effective August 1, 2014, the company implemented a price increase for all U.K. grocery retail locations for the coin voucher product, increasing the fee from 8.9% to 9.9%.

Coinstar segment operating income was $33.6 million in the fourth quarter of 2014, an increase of 8.9% compared with the fourth quarter of 2013, and Coinstar segment operating margin was 41.0% in the fourth quarter of 2014, an increase of 280 basis points compared with 38.2% in the fourth quarter of 2013. The increases reflect the higher revenue and continued efforts to manage costs and increase productivity in the business.

New Ventures

New Ventures segment operating results primarily reflect the operations and performance of ecoATM. Beginning in the first quarter of 2015, the company expects to report ecoATM results as a separate segment.

New Ventures segment revenue was $24.7 million compared with $16.6 million in the fourth quarter of 2013, primarily due to the increase in the number of ecoATM kiosks and continued ramping of kiosks deployed in 2014. The company installed approximately 380 net new ecoATM kiosks during the fourth quarter of 2014, primarily in the grocery channel, and ended 2014 with a total of approximately 1,890 ecoATM kiosks. As of December 31, 2014, there were approximately 1,980 New Ventures kiosks installed.

New Ventures direct operating expense was $28.9 million in the fourth quarter of 2014 compared with $16.6 million in the fourth quarter of 2013. This year-over-year increase primarily reflects the necessary investments to support and grow ecoATM and the company’s investment in SAMPLEit. Expenses include acquiring, transporting and processing mobile devices at ecoATM, servicing kiosks and payments to retailers.

In the fourth quarter of 2014, New Ventures segment revenue decreased sequentially from $29.7 million in the third quarter of 2014 primarily due to seasonality, a lower mix of high value devices, and a lower average selling price in the secondary market resulting from an increased supply of devices following the iPhone 6 release in September 2014. New Ventures direct operating expense increased from $27.0 million in the third quarter of 2014 primarily due to lower than expected revenue in the fourth quarter of 2014 that did not cover the fixed costs per kiosk associated with additional installations and continued investments necessary to scale and grow the business.

CAPITAL ALLOCATION

On February 3, 2015, the company’s board of directors declared a quarterly cash dividend of $0.30 per share to be paid on March 18, 2015, to all stockholders of record as of the close of business on March 3, 2015. Future quarterly dividend payments will be subject to approval by the board of directors.

During 2014, the company repurchased 7.9 million shares of common stock at an average price of $68.31 per share for approximately $541.4 million.

As of December 31, 2014, there was approximately $163.7 million remaining under the company’s stock repurchase authorization. On February 3, 2015, the company’s board of directors approved an additional stock repurchase authorization of up to $250.0 million of its common stock plus the cash proceeds received from the exercise of stock options by the company’s directors and employees, bringing the total available for repurchases to approximately $413.7 million.

The company’s net leverage ratio¹ was 1.88x at December 31, 2014. The company continues to target a net leverage ratio in the range of 1.75x to 2.25x in 2015.

¹	Refer to Appendix A for a discussion of Use of Non-GAAP Financial Measures and Core and Non-Core Results.

2015 ANNUAL GUIDANCE

Beginning this year, the company is providing annual guidance only and expects to update its annual guidance as appropriate after reporting its financial results each quarter during the year.

There are several factors that influence the company’s 2015 expectations, including the impact of pricing, the timing and number of net kiosk installations, the new release schedule and strength of content, and the company’s ability to further align costs with revenue.

Outerwall’s 2015 annual guidance reflects:

•

the anticipated benefit of the Redbox price increase that is expected to be partially offset by secular decline;

•

a decrease in box office for titles releasing at Redbox compared with 2014;

•

the continued growth and scaling of ecoATM and further testing of the company’s SAMPLEit business; and

•

ongoing investment in Coinstar Exchange as the business proves out.

As a reminder, Outerwall’s guidance for weighted-average diluted shares outstanding does not include the impact from any potential share repurchases in 2015.

The following table presents the company’s full-year 2015 guidance:


2015 FULL-YEAR GUIDANCE		As of February 5, 2015
Dollars in millions, except per share data
Consolidated results
Revenue		$2,314 — $2,464
Core adjusted EBITDA from continuing operations⁽¹⁾		$467 — $512
Core diluted EPS from continuing operations⁽¹⁾⁽²⁾		$6.71 — $7.71
Free cash flow⁽¹⁾		$205 — $245
Weighted average diluted shares outstanding⁽²⁾		18.6 — 18.9
Effective tax rate		36% — 38%
Segment revenue
Redbox		$1,835 — $1,965
Coinstar		$313 — $318
New Ventures		$166 — $181
Capital expenditures
Redbox		$17 — $22
Coinstar		$16 — $20
New Ventures		$39 — $48
Corporate		$28 — $35

Total CAPEX		$100 — $125

Net kiosk installations
Redbox (U.S.)⁽³⁾		(1,000) — (1,900)
Coinstar		0 — (100)
New Ventures		600 — 1,200

¹	Refer to Appendix A for a discussion of Use of Non-GAAP Financial Measures and Core and Non-Core Results

²	Excludes the impact of any potential share repurchases in 2015

³	Does not include kiosks in Canada as the company is shutting down its Redbox Canada operations in 2015

ADDITIONAL INFORMATION

Additional information regarding the company’s 2014 fourth quarter and full-year operating and financial results and guidance are included in the company’s prepared remarks. These items, as well as this press release, are posted on the Investor Relations section of the corporate website at ir.outerwall.com. The Segment Supplement, which provides historical data in Excel format, is also posted on the website.

CONFERENCE CALL

The company will host a conference call today at 2:30 p.m. PST (5:30 p.m. EST) to discuss fourth quarter and full-year 2014 earnings results and 2015 annual guidance. The conference call will be webcast live and archived on the Investor Relations section of Outerwall’s website at ir.outerwall.com. A recording of the call will be available approximately two hours after the call ends through February 19, 2015, at 1-855-859-2056 or 1-404-537-3406, using conference ID 58385972.

ABOUT OUTERWALL

Outerwall Inc. (Nasdaq: OUTR) has more than 20 years of experience creating some of the most profitable spaces for their retail partners. The company delivers breakthrough kiosk experiences that delight consumers and generate revenue for retailers. As the company that brought consumers Redbox^® entertainment, Coinstar^® money services, and ecoATM^® electronics recycling kiosks, Outerwall is leading the next generation of automated retail and paving the way for inventive, scalable businesses. Outerwall™ kiosks are in neighborhood grocery stores, drug stores, mass merchants, malls, and other retail locations in the United States, Canada, Puerto Rico, the United Kingdom, and Ireland. Learn more at www.outerwall.com.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

Certain statements in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “estimate,” “expect,” “intend,” “will,” “anticipate,” “goals,” variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. The forward-looking statements in this release include statements regarding Outerwall Inc.’s anticipated growth and future operating results, including 2015 full year results. Forward-looking statements are not guarantees of future performance and actual results may vary materially from the results expressed or implied in such statements. Differences may result from actions taken by Outerwall Inc. or its subsidiaries, as well as from risks and uncertainties beyond Outerwall Inc.’s control. Such risks and uncertainties include, but are not limited to,

•

competition from other entertainment providers,

•

the ability to achieve the strategic and financial objectives for our entry into new businesses, including ecoATM and SAMPLEit,

•

our ability to repurchase stock and the availability of an open trading window,

•

our declaration and payment of dividends, including our board’s discretion to change the dividend policy,

•

the termination, non-renewal or renegotiation on materially adverse terms of our contracts with our significant retailers and suppliers,

•

payment of increased fees to retailers, suppliers and other third-party providers, including financial service providers,

•

the timing of new DVD releases and the inability to receive delivery of DVDs on the date of their initial release to the general public, or shortly thereafter, or in sufficient quantity, for home entertainment viewing,

•

the effective management of our content library,

•

the timing of the release slate and the relative attractiveness of titles in a particular quarter or year,

•

the ability to attract new retailers, penetrate new markets and distribution channels and react to changing consumer demands,

•

the ability to generate sufficient cash flow to timely and fully service indebtedness and adhere to certain covenants and restrictions,

•

the ability to adequately protect our intellectual property, and

•

the application of substantial federal, state, local and foreign laws and regulations specific to our business.

The foregoing list of risks and uncertainties is illustrative, but by no means exhaustive. For more information on factors that may affect future performance, please review “Risk Factors” described in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission. These forward-looking statements reflect Outerwall Inc.’s expectations as of the date of this press release. Outerwall Inc. undertakes no obligation to update the information provided herein.

###

(Financial Statements Follow)

OUTERWALL INC.

EARNINGS RELEASE SCHEDULES

Three Months and Year Ended December 31, 2014


• Consolidated Statements of Comprehensive Income			10

• Consolidated Balance Sheets			11

• Consolidated Statements of Cash Flows			12

• Business Segment and Enterprisewide Information			14

• APPENDIX A

* Non-GAAP Financial Measures			16

* Core and Non-Core Results			16

* Core Adjusted EBITDA From Continuing Operations			17

* Core Diluted EPS From Continuing Operations			18

* Free Cash Flow			18

* Net Debt and Net Leverage Ratio			19

OUTERWALL INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)


	Three Months Ended December 31,						Year Ended December 31,
	2014			2013			2014			2013
Revenue	$	600,600		$	593,705		$	2,303,003		$	2,306,601
Expenses:
Direct operating⁽¹⁾		406,933			400,459			1,601,748			1,575,277
Marketing		11,098			9,499			38,240			32,402
Research and development		3,162			4,913			13,047			13,084
General and administrative		41,892			52,990			191,721			221,776
Depreciation and other		49,007			49,005			195,178			192,161
Amortization of intangible assets		3,326			3,848			14,692			10,933

Total expenses		515,418			520,714			2,054,626			2,045,633

Operating income		85,182			72,991			248,377			260,968
Other income (expense), net:
Income (loss) from equity method investments, net		2,527			(21,352	)		(28,734	)		19,928
Interest expense, net		(12,599	)		(6,848	)		(47,636	)		(32,801	)
Other, net		(3,016	)		(2,204	)		(4,873	)		(5,527	)

Total other income (expense), net		(13,088	)		(30,404	)		(81,243	)		(18,400	)

Income from continuing operations before income taxes		72,094			42,587			167,134			242,568
Income tax expense		(28,294	)		289			(59,748	)		(34,477	)

Income from continuing operations		43,800			42,876			107,386			208,091
Loss from discontinued operations, net of tax		—			(20,201	)		(768	)		(33,299	)

Net income		43,800			22,675			106,618			174,792
Foreign currency translation adjustment⁽²⁾		613			1,160			457			856

Comprehensive income	$	44,413		$	23,835		$	107,075		$	175,648

Basic earnings (loss) per share:
Continuing operations	$	2.38		$	1.61		$	5.32		$	7.65
Discontinued operations		—			(0.76	)		(0.04	)		(1.23	)

Basic earnings per share	$	2.38		$	0.85		$	5.28		$	6.42

Diluted earnings (loss) per share:
Continuing operations	$	2.35		$	1.55		$	5.19		$	7.33
Discontinued operations		—			(0.73	)		(0.04	)		(1.17	)

Diluted earnings per share	$	2.35		$	0.82		$	5.15		$	6.16

Weighted average shares used in basic per share calculations		18,412			26,696			20,192			27,216
Weighted average shares used in diluted per share calculations		18,660			27,598			20,699			28,381

(1)	“Direct operating” excludes depreciation and other of $32.3 million and $128.8 million for the three months and year ended December 31, 2014, respectively, and $33.0 million and $130.3 million for the three months and year ended December 31, 2013, respectively.

(2)	Foreign currency translation adjustment had no tax effect in 2014 and 2013.

OUTERWALL INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	December 31,
	2014			2013
Assets
Current Assets:
Cash and cash equivalents	$	242,696		$	371,437
Accounts receivable, net of allowances of $2,223 and $1,826		48,590			50,296
Content library		180,121			199,868
Prepaid expenses and other current assets		39,837			84,709

Total current assets		511,244			706,310
Property and equipment, net		428,468			520,865
Deferred income taxes		11,378			6,443
Goodwill and other intangible assets, net		623,998			638,690
Other long-term assets		8,231			19,075

Total assets	$	1,583,319		$	1,891,383

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	168,633		$	236,018
Accrued payable to retailers		126,290			134,140
Other accrued liabilities		137,126			134,127
Current portion of long-term debt and other long-term liabilities		20,416			103,889
Deferred income taxes		21,432			23,143

Total current liabilities		473,897			631,317
Long-term debt and other long-term liabilities		973,669			681,403
Deferred income taxes		38,375			58,528

Total liabilities		1,485,941			1,371,248
Commitments and contingencies
Debt conversion feature		—			1,446
Stockholders’ Equity:
Preferred stock, $0.001 par value - 5,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, $0.001 par value - 60,000,000 authorized;
36,600,166 and 36,356,357 shares issued;
18,926,242 and 26,150,900 shares outstanding;		473,592			482,481
Treasury stock		(996,293	)		(476,796	)
Retained earnings		620,389			513,771
Accumulated other comprehensive loss		(310	)		(767	)

Total stockholders’ equity		97,378			518,689

Total liabilities and stockholders’ equity	$	1,583,319		$	1,891,383

OUTERWALL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Three Months Ended December 31,						Year Ended December 31,
	2014			2013			2014			2013
Operating Activities:
Net income	$	43,800		$	22,675		$	106,618		$	174,792
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and other		49,006			49,527			195,162			193,700
Amortization of intangible assets		3,326			3,848			14,692			10,933
Share-based payments expense		3,291			5,377			13,384			16,831
Windfall excess tax benefits related to share-based payments		24			(351	)		(1,964	)		(3,698	)
Deferred income taxes		(5,203	)		1,165			(22,611	)		(10,933	)
Impairment expense		—			27,470			—			32,732
(Income) loss from equity method investments, net		(2,527	)		21,352			28,734			(19,928	)
Amortization of deferred financing fees and debt discount		693			1,189			4,116			6,394
Loss from early extinguishment of debt		—			63			2,018			6,013
Other		(273	)		(3,059	)		(1,750	)		(2,039	)
Cash flows from changes in operating assets and liabilities:
Accounts receivable, net		(8,793	)		8,284			8,671			7,978
Content library		(29,053	)		(31,905	)		19,747			(22,459	)
Prepaid expenses and other current assets		21,235			(19,086	)		44,282			(50,542	)
Other assets		55			(39	)		1,702			230
Accounts payable		28,094			71,671			(68,912	)		1,491
Accrued payable to retailers		20,975			5,553			(6,847	)		(4,088	)
Other accrued liabilities		6,654			16,979			1,309			(9,573	)

Net cash flows from operating activities⁽¹⁾		131,304			180,713			338,351			327,834
Investing Activities:
Purchases of property and equipment		(25,613	)		(38,066	)		(97,924	)		(161,412	)
Proceeds from sale of property and equipment		142			456			1,977			13,344
Acquisition of ecoATM, net of cash acquired		—			—			—			(244,036	)
Receipt of note receivable principal		—			22,818			—			22,913
Cash paid for equity investments		—			—			(24,500	)		(28,000	)
Extinguishment payment received from equity investment		5,000			—			5,000			—

Net cash flows used in investing activities⁽¹⁾		(20,471	)		(14,792	)		(115,447	)		(397,191	)
Financing Activities:
Proceeds from issuance of senior unsecured notes		—			—			295,500			343,769
Proceeds from new borrowing on Credit Facility		7,000			250,000			642,000			400,000
Principal payments on Credit Facility		(58,875	)		(154,375	)		(680,125	)		(215,313	)
Financing costs associated with Credit Facility and senior unsecured notes⁽²⁾		(5	)		(1,759	)		(2,911	)		(2,203	)
Settlement and conversion of convertible debt		—			(2,547	)		(51,149	)		(172,211	)
Repurchases of common stock⁽³⁾		(13	)		(100,000	)		(545,091	)		(195,004	)
Principal payments on capital lease obligations and other debt		(3,399	)		(4,010	)		(13,996	)		(14,834	)
Windfall excess tax benefits related to share-based payments		(24	)		351			1,964			3,698
Withholding tax paid on vesting of restricted stock net of proceeds from exercise of stock options		564			697			(520	)		8,460

Net cash flows from (used in) financing activities⁽¹⁾	$	(54,752	)	$	(11,643	)	$	(354,328	)	$	156,362


	Three Months Ended December 31,				Year Ended December 31,
	2014		2013		2014			2013
Effect of exchange rate changes on cash	$	1,714	$	1,929	$	2,683		$	1,538

Increase (decrease) in cash and cash equivalents		57,795		156,207		(128,741	)		88,543
Cash and cash equivalents:
Beginning of period		184,901		215,230		371,437			282,894

End of period	$	242,696	$	371,437	$	242,696		$	371,437

(1)

During 2013, we discontinued four ventures previously included in our New Ventures operating segment: Orango, Rubi, Crisp Market, and Star Studio. Cash flows from these discontinued operations are not segregated from cash flows from continuing operations in all periods presented because they were not material.

(2)

Total financing costs associated with the Credit Facility and senior unsecured notes issued in the second quarter of 2014 were $8.2 million composed of non-cash debt issue costs of $4.5 million recorded as debt discount associated with our issuance of $300.0 million senior unsecured notes due 2021, $1.5 million in deferred financing fees associated with the senior unsecured notes, and $2.2 million in deferred financing fees associated with the refinancing of our credit facility. The cash payments for financing costs associated with the Credit Facility and senior unsecured notes in 2014 were $2.9 million. The remaining accrued balance of the total financing cost as of December 31, 2014 was $0.8 million.

(3)

The total cost of repurchases of common stock in 2014 was $545.1 million, which includes $3.7 million in fees and expenses relating to the tender offer recorded as part of the cost of treasury stock in our Consolidated Balance Sheets. The cash payments for the tender offer fees in 2014 were $3.7 million.

OUTERWALL INC.

BUSINESS SEGMENTS AND ENTERPRISEWIDE INFORMATION

(unaudited)

The analysis and reconciliation of the company’s segment information to the consolidated financial statements that follows covers the company’s results of operations, which consists of the Redbox, Coinstar and New Ventures segments. Unallocated general and administrative expenses relate to share-based compensation and expense related to the rights to receive cash issued in connection with our acquisition of ecoATM.


Dollars in thousands

Three Months Ended December 31, 2014	Redbox			Coinstar			New Ventures			Corporate Unallocated			Total
Revenue	$	493,950		$	81,921		$	24,729		$	—		$	600,600
Expenses:
Direct operating		335,849			40,860			28,853			1,371			406,933
Marketing		6,634			1,949			1,597			918			11,098
Research and development		79			45			1,975			1,063			3,162
General and administrative		30,098			5,510			4,473			1,811			41,892

Segment operating income (loss)		121,290			33,557			(12,169	)		(5,163	)		137,515
Less: depreciation and amortization		(37,700	)		(8,998	)		(5,635	)		—			(52,333	)

Operating income (loss)		83,590			24,559			(17,804	)		(5,163	)		85,182
Income from equity method investments, net		—			—			—			2,527			2,527
Interest expense, net		—			—			—			(12,599	)		(12,599	)
Other, net		—			—			—			(3,016	)		(3,016	)

Income (loss) before income taxes	$	83,590		$	24,559		$	(17,804	)	$	(18,251	)	$	72,094


Dollars in thousands

Three Months Ended December 31, 2013	Redbox			Coinstar			New Ventures			Corporate Unallocated			Total
Revenue	$	496,399		$	80,698		$	16,608		$	—		$	593,705
Expenses:
Direct operating		342,940			39,272			16,585			1,662			400,459
Marketing		4,953			2,887			993			666			9,499
Research and development		5			1,855			2,514			539			4,913
General and administrative		37,154			5,867			3,940			6,029			52,990

Segment operating income (loss)		111,347			30,817			(7,424	)		(8,896	)		125,844
Less: depreciation and amortization		(40,418	)		(8,428	)		(4,007	)		—			(52,853	)

Operating income (loss)		70,929			22,389			(11,431	)		(8,896	)		72,991
Loss from equity method investments, net		—			—			—			(21,352	)		(21,352	)
Interest expense, net		—			—			—			(6,848	)		(6,848	)
Other, net		—			—			—			(2,204	)		(2,204	)

Income (loss) before income taxes	$	70,929		$	22,389		$	(11,431	)	$	(39,300	)	$	42,587

OUTERWALL INC.

BUSINESS SEGMENTS AND ENTERPRISEWIDE INFORMATION

(unaudited)


Dollars in thousands

Year Ended December 31, 2014	Redbox			Coinstar			New Ventures			Corporate Unallocated			Total
Revenue	$	1,893,135		$	315,628		$	94,240		$	—		$	2,303,003
Expenses:
Direct operating		1,338,946			161,214			95,003			6,585			1,601,748
Marketing		23,916			6,346			4,785			3,193			38,240
Research and development		120			531			8,545			3,851			13,047
General and administrative		136,756			27,012			16,295			11,658			191,721

Segment operating income (loss)		393,397			120,525			(30,388	)		(25,287	)		458,247
Less: depreciation and amortization		(156,628	)		(35,471	)		(17,771	)		—			(209,870	)

Operating income (loss)		236,769			85,054			(48,159	)		(25,287	)		248,377
Loss from equity method investments, net		—			—			—			(28,734	)		(28,734	)
Interest expense, net		—			—			—			(47,636	)		(47,636	)
Other, net		—			—			—			(4,873	)		(4,873	)

Income (loss) before income taxes	$	236,769		$	85,054		$	(48,159	)	$	(106,530	)	$	167,134


Dollars in thousands

Year Ended December 31, 2013	Redbox			Coinstar			New Ventures			Corporate Unallocated			Total
Revenue	$	1,974,531		$	300,218		$	31,852		$	—		$	2,306,601
Expenses:
Direct operating		1,383,646			158,562			29,433			3,636			1,575,277
Marketing		23,010			6,244			1,589			1,559			32,402
Research and development		78			6,962			4,669			1,375			13,084
General and administrative		166,117			25,944			15,551			14,164			221,776

Segment operating income (loss)		401,680			102,506			(19,390	)		(20,734	)		464,062
Less: depreciation and amortization		(162,637	)		(33,921	)		(6,536	)		—			(203,094	)

Operating income (loss)		239,043			68,585			(25,926	)		(20,734	)		260,968
Income from equity method investments, net		—			—			—			19,928			19,928
Interest expense, net		—			—			—			(32,801	)		(32,801	)
Other, net		—			—			—			(5,527	)		(5,527	)

Income (loss) before income taxes	$	239,043		$	68,585		$	(25,926	)	$	(39,134	)	$	242,568

APPENDIX A

Non-GAAP Financial Measures

Non-GAAP measures may be provided as a complement to results provided in accordance with United States generally accepted accounting principles (“GAAP”).

We use the following non-GAAP financial measures to evaluate our financial results:

•

Core adjusted EBITDA from continuing operations;

•

Core diluted earnings per share (“EPS”) from continuing operations;

•

Free cash flow; and

•

Net debt and net leverage ratio.

These measures, the definitions of which are presented below, are non-GAAP because they exclude certain amounts which are included in the most directly comparable measure calculated and presented in accordance with GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for our GAAP financial measures and may not be comparable with similarly titled measures of other companies.

Core and Non-Core Results

We distinguish our core activities, those associated with our primary operations which we directly control, from non-core activities. Non-core activities are primarily nonrecurring events or events we do not directly control. Our non-core adjustments for the periods presented include, but not limited to, i) restructuring costs associated with actions to reduce costs in our continuing operations primarily through workforce reductions across the Company, ii) acquisition costs primarily related to the acquisition of ecoATM, iii) compensation expense for rights to receive cash issued in conjunction with our acquisition of ecoATM and attributable to post-combination services as they are fixed amount acquisition related awards and not indicative of the directly controllable future business results, iv) income or loss from equity method investments, which represents our share of income or loss from entities we do not consolidate or control and includes the impacts of the gain on re-measurement of our previously held equity interest in ecoATM upon acquisition, v) benefits from release of indemnification reserves upon settlement of the Sigue Note and vi) tax benefits related to a net operating loss adjustment and the recognition of a worthless stock deduction in a corporate subsidiary (“Non-Core Adjustments”).

We believe investors should consider our core results because they are more indicative of our ongoing performance and trends, are more consistent with how management evaluates our operational results and trends, provide meaningful supplemental information to investors through the exclusion of certain expenses which are either nonrecurring or may not be indicative of our directly controllable business operating results, allow for greater transparency in assessing our performance, help investors better analyze the results of our business and assist in forecasting future periods.

Core Adjusted EBITDA from continuing operations

Our non-GAAP financial measure core adjusted EBITDA from continuing operations is defined as earnings from continuing operations before depreciation, amortization and other; interest expense, net; income taxes; share-based payments expense; and Non-Core Adjustments.

A reconciliation of core adjusted EBITDA from continuing operations to net income from continuing operations, the most comparable GAAP financial measure, is presented in the following table:


	Three Months Ended						Year Ended
	December 31,						December 31,
Dollars in thousands	2014			2013			2014		2013
Net income from continuing operations	$	43,800		$	42,876		$	107,386	$	208,091
Depreciation, amortization and other		52,333			52,853			209,870		203,094
Interest expense, net		12,599			6,848			47,636		32,801
Income tax expense (benefit)		28,294			(289	)		59,748		34,477
Share-based payments expense⁽¹⁾		3,291			5,377			13,384		16,831

Adjusted EBITDA from continuing operations		140,317			107,665			438,024		495,294
Non-Core Adjustments:
Restructuring costs		—			4,495			469		4,495
Acquisition costs		—			—			—		5,669
Rights to receive cash issued in connection with the acquisition of ecoATM		3,237			6,364			13,270		8,664
(Income) loss from equity method investments, net		(2,527	)		21,352			28,734		48,448
Sigue indemnification reserve releases		—			(2,542	)		—		(2,542	)
Gain on previously held equity interest in ecoATM		—			—			—		(68,376	)

Core adjusted EBITDA from continuing operations	$	141,027		$	137,334		$	480,497	$	491,652

(1)	Includes both non-cash share-based compensation for executives, non-employee directors and employees as well as share-based payments for content arrangements.

Core Diluted EPS from continuing operations

Our non-GAAP financial measure core diluted EPS from continuing operations is defined as diluted earnings per share from continuing operations excluding Non-Core Adjustments, net of applicable taxes.

A reconciliation of core diluted EPS from continuing operations to diluted EPS from continuing operations, the most comparable GAAP financial measure, is presented in the following table:


	Three Months Ended						Year Ended
	December 31,						December 31,
	2014			2013			2014			2013
Diluted EPS from continuing operations	$	2.35		$	1.55		$	5.19		$	7.33
Non-Core Adjustments, net of tax:⁽¹⁾
Restructuring costs		—			0.10			0.01			0.10
Acquisition costs		—			0.02			—			0.17
Rights to receive cash issued in connection with the acquisition of ecoATM		0.17			0.20			0.53			0.25
(Income) loss from equity method investments, net		(0.08	)		0.47			0.85			1.04
Sigue indemnification reserve releases		—			(0.06	)		—			(0.05	)
Gain on previously held equity interest on ecoATM		—			—			—			(2.33	)
Tax benefit from net operating loss adjustment		—			—			(0.05	)		—
Tax benefit of worthless stock deduction		—			(0.60	)		(0.10	)		(0.59	)

Core diluted EPS from continuing operations	$	2.44		$	1.68		$	6.43		$	5.92

(1)	Non-Core Adjustments are presented after-tax using the applicable effective tax rate for the respective periods.

Free Cash Flow

Our non-GAAP financial measure free cash flow is defined as net cash provided by operating activities after capital expenditures. We believe free cash flow is an important non-GAAP measure as it provides additional information to users of the financial statements regarding our ability to service, incur or pay down indebtedness and repurchase our securities. A reconciliation of free cash flow to net cash provided by operating activities, the most comparable GAAP financial measure, is presented in the following table:


	Three Months Ended						Year Ended
	December 31,						December 31,
Dollars in thousands	2014			2013			2014			2013
Net cash provided by operating activities	$	131,304		$	180,713		$	338,351		$	327,834
Purchase of property and equipment		(25,613	)		(38,066	)		(97,924	)		(161,412	)

Free cash flow	$	105,691		$	142,647		$	240,427		$	166,422

Net Debt and Net Leverage Ratio

Our non-GAAP financial measure net debt is defined as the total face value of outstanding debt, including capital leases, less cash and cash equivalents held in financial institutions domestically. Our non-GAAP financial measure net leverage ratio is defined as net debt divided by core adjusted EBITDA from continuing operations for the last twelve months (LTM). We believe net debt and net leverage ratio are important non-GAAP measures because they:

•

are used to assess the degree of leverage by management;

•

provide additional information to users of the financial statements regarding our ability to service, incur or pay down indebtedness and repurchase our securities as well as additional information about our capital structure; and

•

are reported quarterly to support covenant compliance under our credit agreement.

A reconciliation of net debt to total outstanding debt including capital leases, the most comparable GAAP financial measure, is presented in the following table:


	December 31,
Dollars in thousands	2014			2013
Senior unsecured notes⁽¹⁾	$	650,000		$	350,000
Term loans⁽¹⁾		146,250			344,375
Revolving line of credit		160,000			—
Convertible debt⁽²⁾		—			51,148
Capital leases		15,391			21,361

Total principal value of outstanding debt including capital leases		971,641			766,884
Less domestic cash and cash equivalents held in financial institutions		(66,546	)		(199,027	)

Net debt		905,095			567,857
LTM Core adjusted EBITDA from continuing operations	$	480,497		$	491,652

Net leverage ratio		1.88			1.15

(1)

The senior unsecured notes on our Consolidated Balance Sheets as of December 31, 2014 and December 31, 2013 included $8.4 million and $5.3 million in associated debt discount, respectively. The Term loan on our Consolidated Balance Sheets as of December 31, 2014 included $0.3 million in associated debt discount. There was no associated debt discount with the Term loans as of December 31, 2013.

(2)	The convertible debt balance on our Consolidated Balance Sheet as of December 31, 2013 included $1.4 million in associated debt discount.

Investor Contacts:

Angie McCabe

Vice President, Investor Relations

425-943-8754

angie.mccabe@outerwall.com

Rosemary Moothart

Director, Investor Relations

425-943-8140

rosemary.moothart@outerwall.com

Media Contact:

Debby Wilson

Vice President, Corporate & Public Affairs

425-943-8314

debby.wilson@outerwall.com

Exhibit 99.2

LOGO

Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

Prepared Remarks

February 5, 2015

Today, February 5, 2015, Outerwall Inc. issued a press release announcing financial results for the 2014 fourth quarter and full year. The following prepared remarks provide additional information related to the company’s operating and financial performance as well as full year 2015 guidance. The prepared remarks also include supplementary slides.

The company will host a conference call today at 2:30 p.m. PST to discuss 2014 fourth quarter and full year results and full year 2015 guidance.

The 2014 fourth quarter earnings press release, prepared remarks and conference call webcast are available on the Investor Relations section of Outerwall’s website at ir.outerwall.com.

Safe Harbor for Forward-Looking Statements

•

competition from other entertainment providers,

•

the ability to achieve the strategic and financial objectives for our entry into new businesses, including ecoATM and SAMPLEit,

•

our ability to repurchase stock and the availability of an open trading window,

•

our declaration and payment of dividends, including our board’s discretion to change the dividend policy,

•

the termination, non-renewal or renegotiation on materially adverse terms of our contracts with our significant retailers and suppliers,

•

payment of increased fees to retailers, suppliers and other third-party providers, including financial service providers,

•

the effective management of our content library,

•

the timing of the release slate and the relative attractiveness of titles in a particular quarter or year,

•

the ability to attract new retailers, penetrate new markets and distribution channels and react to changing consumer demands,

•

the ability to generate sufficient cash flow to timely and fully service indebtedness and adhere to certain covenants and restrictions,

•

the ability to adequately protect our intellectual property, and

•

the application of substantial federal, state, local and foreign laws and regulations specific to our business.

Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

Prepared Remarks

February 5, 2015

Non-GAAP Financial Measures

Non-GAAP measures may be provided as a complement to results provided in accordance with United States generally accepted accounting principles (“GAAP”).

We use the following non-GAAP financial measures to evaluate our financial results:

•

Core adjusted EBITDA from continuing operations;

•

Core diluted earnings per share (“EPS”) from continuing operations;

•

Free cash flow; and

•

Net debt and net leverage ratio.

These measures, the definitions of which are presented in Appendix A, are non-GAAP because they exclude certain amounts which are included in the most directly comparable measure calculated and presented in accordance with GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for our GAAP financial measures and may not be comparable with similarly titled measures of other companies.

Core and Non-Core Results

Page 2

Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

Prepared Remarks

February 5, 2015

Overview

Our Q4 and full-year 2014 financial results demonstrate our execution of our strategy to optimize our core businesses, scale ecoATM and leverage our existing platforms to achieve operational efficiencies across the company.

On January 20, 2015, our board of directors named Nora Denzel interim chief executive officer. Even with this change in leadership, our commitment to executing our strategy to drive profitability and cash flow and returning capital to shareholders has not changed.

Further demonstrating our commitment to delivering returns to shareholders and our confidence in our long-term outlook, today we announced that our board declared our first-ever quarterly dividend of $0.30 per share and authorized an additional $250.0 million in share repurchases, bringing the total available for repurchases to approximately $413.7 million.

2014 Consolidated Results

The year-over-year comparisons we make in these prepared remarks will be 2014 versus 2013 and the quarter-over-quarter comparisons will be Q4 2014 versus Q4 2013 unless otherwise noted.

Outerwall’s consolidated results for the year ended December 31, 2014:


	Year Ended December 31,				Change
(In millions, except per share data)	2014		2013		%
GAAP Results
Consolidated revenue	$	2,303.0	$	2,306.6		(0.2	)%
Income from continuing operations	$	107.4	$	208.1		(48.4	)%
Net income	$	106.6	$	174.8		(39.0	)%
Diluted EPS from continuing operations	$	5.19	$	7.33		(29.2	)%
Net cash provided by operating activities	$	338.4	$	327.8		3.2	%
Core Results¹
Core adjusted EBITDA from continuing operations	$	480.5	$	491.7		(2.3	)%
Core diluted EPS from continuing operations	$	6.43	$	5.92		8.6	%
Free cash flow	$	240.4	$	166.4		44.5	%

Highlights from full-year 2014 include:

•

Managed the business for profitability while making investments in our future as demonstrated by solid core adjusted EBITDA from continuing operations of $480.5 million despite a decline in revenue at Redbox due to a challenging release schedule for much of 2014

•

Redbox achieved its 4 billionth cumulative rental in November 2014

•

Extended existing content agreements with Sony, Paramount and Universal and signed a new agreement with Lionsgate

•

Installed more than 1,000 ecoATM kiosks during the year, bringing total ecoATM kiosks to 1,890 at December 31, 2014

¹	Additional information on core and non-core results and reconciliations of non-GAAP financial measures are included in Appendix A

Page 3

Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

Prepared Remarks

February 5, 2015

•

Consolidated general and administrative (G&A) expense improved 13.6% year-over-year primarily as a result of our ongoing focus on expense management

•

Core diluted EPS from continuing operations increased 8.6% year-over-year

•

Generated $240.4 million in free cash flow during 2014 up from $166.4 million in 2013

•

Repurchased 7.9 million shares of our common stock at an average price of $68.31 per share for $541.4 million

For comparison purposes, Q4 2013 included a one-time tax benefit of $16.7 million associated with a worthless stock deduction.

Q4 Consolidated Results

Outerwall’s year-over-year comparisons of Q4 2014 results:


	Three Months Ended December 31,				Change
(In millions, except per share data)	2014		2013		%
GAAP Results
Consolidated revenue	$	600.6	$	593.7		1.2	%
Income from continuing operations	$	43.8	$	42.9		2.2	%
Net income	$	43.8	$	22.7		93.2	%
Diluted EPS from continuing operations	$	2.35	$	1.55		51.6	%
Net cash provided by operating activities	$	131.3	$	180.7		(27.3	)%
Core Results²
Core adjusted EBITDA from continuing operations	$	141.0	$	137.3		2.7	%
Core diluted EPS from continuing operations	$	2.44	$	1.68		45.2	%
Free cash flow	$	105.7	$	142.6		(25.9	)%

Highlights from Q4 2014 include:

•

Successfully implemented Redbox price increases in December 2014 for movies and early January 2015 for video games

•

Week of December 29, 2014, marked the highest rental week in Redbox history, led by strong new release titles

•

Installed approximately 380 net new ecoATM kiosks in the quarter

•

Consolidated revenue increased 1.2% compared with Q4 2013 primarily reflecting an increase in New Ventures segment revenue as we continued to scale ecoATM

•

Consolidated G&A expense improved 20.9% compared with Q4 2013, primarily as a result of our ongoing focus on expense management

•

Core adjusted EBITDA from continuing operations increased 2.7% compared with Q4 2013 primarily due to an improvement in G&A expense

•

Core diluted EPS from continuing operations increased 45.2% compared with Q4 2013, primarily reflecting share repurchases throughout the year

²	Additional information on core and non-core results and reconciliations of non-GAAP financial measures are included in Appendix A

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Additional Q4 2014 Consolidated Metrics


Metric	Amount	Comment
Total net interest expense	$12.6MM	Includes $0.7MM in noncash interest expense
Core effective tax rate	37.6%
Cash and cash equivalents	$242.7MM	Includes $81.7MM payable to retailer partners; additionally, $66.5MM of total cash was held in financial institutions domestically
Total principal value of outstanding debt, including capital leases	$971.6MM
Net leverage ratio*	1.88x	Target range of 1.75x - 2.25x

*	Our non-GAAP financial measure net leverage ratio is defined as net debt divided by core adjusted EBITDA from continuing operations for the last twelve months. Additional information and reconciliations of non-GAAP financial measures are included in Appendix A

Capital Allocation

We remain committed to returning 75% to 100% of annual free cash flow to shareholders.

During 2014, we repurchased 2.6 million shares of our common stock at an average price of $64.77 per share for $170.6 million, in addition to the 5.3 million shares purchased at a price of $70.07 per share for $370.8 million through a tender offer in the first quarter of 2014.

As of December 31, 2014, there was approximately $163.7 million in authority remaining under our stock repurchase program. On February 3, 2015, our board of directors authorized an additional $250.0 million in share repurchases, bringing the total available for repurchases to approximately $413.7 million.

On February 3, 2015, our board of directors initiated a new quarterly dividend policy and declared a quarterly cash dividend of $0.30 per share to be paid on March 18, 2015, to all stockholders of record as of the close of business on March 3, 2015. This is the first cash dividend paid to stockholders in the company’s history. Future quarterly dividend payments will be subject to approval by our board of directors.

These decisions further underscore our confidence in our business and future cash flows. We remain focused on deploying capital to those activities that we believe will produce the highest returns, including disciplined investments in the business.

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Capital Expenditures

We discuss our capital expenditures (CAPEX) on an accrual basis as we believe this methodology better aligns the reported CAPEX to activities during the quarter driving the expenditures. In Q4, our total investment in CAPEX was $28.0 million, bringing the total for the year to $99.5 million. The following is a breakdown of CAPEX by category for Q4:


(In-millions)	New		Maintenance		Other		TOTAL
Redbox	$	0.5	$	1.6	$	0.3	$	2.4
Coinstar		2.6		0.8		—		3.4
New Ventures		18.6		—		—		18.6
Corporate		—		—		3.6		3.6
TOTAL	$	21.7	$	2.4	$	3.9	$	28.0

CAPEX in Q4 reflects investments in ecoATM kiosks to scale the business and corporate investments in technology and equipment.

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February 5, 2015

Q4 2014 SEGMENT OPERATING RESULTS

Redbox

Q4 Key Metrics


Category	Q4 2014			Q4 2013
Revenue	$	494.0	MM	$	496.4	MM
Rentals		181.3	MM		192.0	MM
Net revenue per rental	$	2.72		$	2.58
Same store sales growth (decline)		(1.3	)%		0.9	%
Gross margin		57.5	%		58.5	%
Segment operating income	$	121.3	MM	$	111.	3MM
Segment operating margin		24.6	%		22.4	%
Unique credit cards renting in quarter		39.1	MM		40.3	MM
Total kiosks (at quarter end)		43,680			44,000
U.S. kiosks		42,280			42,900
Canada kiosks		1,400			1,100
Total locations (at quarter end)		36,140			36,400
U.S. locations		34,740			35,300
Canada locations		1,400			1,100
Blu-ray
Blu-ray as percentage of rentals		15.3	%		14.2	%
Blu-ray as percentage of Redbox revenue		18.4	%		16.3	%

Price Increase Implemented in Q4 2014

Following several months of testing three pricing structures across multiple markets, on December 2, 2014, we increased prices for daily DVD and Blu-ray rentals in the U.S. to $1.50 and $2.00, respectively. Price test results indicated that these price points would yield the greatest positive revenue impact and provide the highest overall margin benefit despite a resulting decrease in demand, particularly from the most price-sensitive customers. The new pricing maintains our consumer promise of providing the best value in the marketplace for new release content and will help offset the secular decline in the physical rental market.

The benefit from the price increase to revenue in December 2014 was greater than we expected due to the robust content slate and holiday seasonality that attracted customers and lessened the impact of increased price on rental demand. In fact, the week of December 29 marked the highest rental week in Redbox history, led by strong new release titles The Equalizer and Dawn of the Planet of the Apes.

We expect the impact of the price increase to vary as demand changes during periods of stronger and weaker release schedules and seasonality. Also, our more price-sensitive customers may change their rental habits over time in response to the new prices, which could have an impact on total rentals or nights out.

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Segment Operating Results

The benefit of the price increase in December helped offset lower demand from weaker content in September and early October that negatively impacted rentals at the beginning of Q4 2014.

While Q4 2014 rentals decreased 5.6% to 181.3 million compared with 192.0 million in Q4 2013, Redbox revenue of $494.0 million in Q4 2014 was relatively flat compared with Q4 2013. The year-over-year decline in rentals in Q4 2014 was primarily due to the underperformance of certain movie and video game titles earlier in the quarter, moderately lower demand from price-sensitive customers following the December price increase, and an impact from secular decline.

The top performing titles in Q4 2014 included the comedies 22 Jump Street and Neighbors. While Q4 box office was 23% greater than box office in Q4 2013, weaker content in September and early October offset the stronger content in November and December. September box office was 46% below the prior year and resulted in 13% fewer rentals of September titles during Q4 2014 compared with Q4 2013.

Unique credit cards renting in Q4 2014 were 39.1 million, a decrease of 3.0% year-over-year. However, unique credit cards renting increased 1% sequentially from Q3 2014. Similarly, high frequency renters, customers that rent four or more titles per quarter, represented 54.0% of revenue in Q4 2014, a decline from 57.2% in Q4 2013, but an increase sequentially compared with 52.1% in Q3 2014.

In November 2014, we launched Redbox Play Pass, our new loyalty program, which quickly scaled to 1.5 million members by year-end. During Q4, members who participated in Redbox Play Pass exhibited an increase in rentals and frequency. We expect Redbox Play Pass to drive continued improvement in customer engagement and rental frequency based on a year-long, in-market test. In addition, we continue to expand the Redbox digital network of consumer touch points with substantial year-over-year growth across all categories in Q4, including 39 million email subscribers, 22% growth; 6 million text club members, 49% growth; and 27.7 million apps downloaded, 16% growth.

Average check of $2.72 increased 5.4% compared with Q4 2013 and 7.1% sequentially compared with Q3 2014, primarily as a result of the price increase and the continued shift to Blu-ray in Q4. Blu-ray represented 15.3% of rentals and 18.4% of revenue in Q4, increasing from 14.2% of rentals and 16.3% of revenue in Q4 2013 due to larger quantities of Blu-ray titles in the kiosks, targeted marketing, and Blu-ray upsell online and at the kiosk. The top performing Blu-ray titles in Q4 were Transformers: Age of Extinction and 22 Jump Street.

Single-night rentals represented 58.1% of total rentals, an increase of only 20 basis points year-over-year as our more targeted and efficient promotional activity helped offset the impact of the December movie price increase.

In Q4 2014, Redbox segment operating income increased 8.9% year-over-year to $121.3 million and segment operating margin increased 220 basis points to 24.6%, primarily reflecting a decrease in direct operating and G&A expenses. Direct operating expenses in Q4 2014 included a one-time adjustment of $5.6 million related to personal property taxes due to a reduction of the estimated liability. Gross margin in Q4 decreased 100 basis points year-over-year to 57.5%, mainly due to product and studio mix, but improved 70 basis points sequentially compared with Q3 2014.

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Video Games Rentals and Revenue


Video Games Performance	Q4 2014			Q4 2013
Percentage of rentals		2.6	%		2.7	%
Percentage of Redbox revenue		5.7	%		6.1	%

In Q4 2014, video games rentals and revenue declined compared with Q4 2013 as we purchased less game content due to an anticipated decline in Wii platform rentals and consumer transition to new generation platforms. In addition, certain key titles that underperformed at sell-through also underperformed as rentals. We continue to test video game rentals for new generation platforms, including Xbox One and Playstation 4, in 5,000 kiosks. Also, we plan to expand new generation titles more broadly in 2015 as demand from our consumers for the new platforms increases.

Kiosk Optimization

We continue to optimize our network as we collaborate with our retail partners to improve kiosk productivity at existing locations and remove unproductive kiosks that underperform our revenue expectations for kiosks in their respective channels. Our goal is to recapture rentals from removed kiosks in the remaining network through targeted marketing that keeps customers engaged, while lowering content and servicing costs due to a smaller installed base.

Canada

In January 2015, we made the decision to shut down our Redbox operations in Canada due to its continued negative impact on Redbox’s financial results. While the offering built good momentum throughout 2014 with the support of our retail partners, it did not reach our targeted level of performance. As a result, we recognized additional expense, net of tax, of $1.5 million in Q4 2014 related to accelerated recognition of content library and capitalized install costs on property and equipment. The remaining value of the content library and capitalized install costs will be amortized over an expected three month wind-down period. We anticipate using the Canadian kiosks in the U.S. as replacement kiosks as needed. Following the final shutdown of the operations in Canada, we expect Redbox Canada results will be reported as a discontinued operation.

Studio Agreements

As previously announced, during Q4 2014, we extended our agreement with Paramount under the existing terms and signed a new agreement with Lionsgate that created value for both parties. We are in active discussions with Warner Brothers and working to find an agreement that reflects our mutual interests in satisfying consumers and adding value to the home entertainment category. Our studio partnership strategy includes establishing shorter-term contracts that provide greater flexibility to meet the future needs of the industry and the business, including capitalizing on the large-scale consumer demand for quality new release content from Redbox.

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Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

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Coinstar

Q4 Key Metrics


Category	Q4 2014			Q4 2013
Revenue	$	81.9	MM	$	80.7	MM
Average transaction	$	44.45		$	43.82
Transactions	$	17.9	MM	$	18.5	MM
Same store sales (SSS) growth		3.3	%		5.9	%
Segment operating income	$	33.6	MM	$	30.8	MM
Segment operating margin		41.0	%		38.2	%
Kiosks (at quarter end)		21,340			20,900
Locations (at quarter end)		20,250			20,600

Coinstar Segment Operating Results

Coinstar revenue increased $1.2 million, or 1.5%, compared with Q4 2013 primarily due to growth in the number of installed Coinstar Exchange kiosks, a price increase implemented across all grocery retail locations in the U.K. effective August 1, 2014³, and higher volume in the U.K. due to an increase in the U.K. kiosk base.

Average transaction size continued to increase in Q4, while the number of transactions declined. The decline in transactions is the result of larger pours and less frequent visits, and a decrease in the U.S. kiosk base as a result of our optimization efforts that include removing or relocating underperforming kiosks, achieving optimal market density, and leveraging efficiencies in coin handling and field operations.

Coinstar segment operating income increased $2.7 million, or 8.9%, compared with Q4 2013, and segment operating margin was 41.0%, an increase of 280 basis points year-over-year. The increases in segment operating income and margin reflect an increase in revenue and our continued focus on managing costs and increasing productivity in the business.

³	On August 1, 2014, the coin voucher product transaction fee was raised to 9.9% from 8.9% for all U.K. grocery retail locations

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Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

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New Ventures

Q4 2014 Key Metrics


Category	Q4 2014			Q4 2013
Revenue	$	24.7	MM	$	16.6	MM
Segment operating loss	$	12.2	MM	$	7.4	MM
Total kiosks		1,980			900
ecoATM kiosks		1,890			880

New Ventures Segment Operating Results

New Ventures segment operating results primarily reflect the operations and performance of ecoATM. Beginning in Q1 2015, we expect to report ecoATM results as a separate segment.

We installed approximately 430 kiosks in Q4 2014, bringing the total number of New Ventures kiosks, including ecoATM and SAMPLEit, to 1,980 at December 31, 2014. We installed approximately 380 net new ecoATM kiosks during the quarter, primarily in the grocery channel, ending the year with 1,890 ecoATM kiosks. Relative to our mall and mass merchant channels, sites in the grocery channel typically are smaller in overall square footage and have less foot traffic. As a result, we expect ecoATM kiosks in the grocery channel to ramp slower than our mall and mass merchant kiosks.

New Ventures segment revenue in Q4 2014 grew 48.9% compared with Q4 2013 primarily due to the increased number of installed ecoATM kiosks and continued ramping of kiosks that were deployed in 2014. New Ventures segment revenue decreased sequentially from $29.7 million in Q3 2014 primarily due to seasonality, a lower mix of high value devices and a lower average selling price in the secondary market. Additionally, the highly successful launch of the iPhone 6/6+ in September 2014 caused a significant increase in device trade-ins that lowered resale values in the secondary market to below historical levels.

In 2013 and 2014, Q3 was our best quarter from a seasonality perspective. During Q4 2014, there was a substantial increase in carrier promotions that resulted in lower device collections and a decrease in the average selling price of devices in the secondary market. Similar to what we saw in Q4 2014, as we move into Q1 2015, we expect less promotional advertising by the carriers and our average selling price to start to trend upward.

New Ventures direct operating expense was $28.9 million in Q4 2014 compared with $16.6 million in Q4 2013. This year-over-year increase primarily reflects the necessary investments to support and grow ecoATM and our investment in SAMPLEit. Expenses include acquiring, transporting and processing mobile devices at ecoATM, servicing kiosks and payments to retailers.

Sequentially, New Ventures direct operating expense increased from $27.0 million in Q3 2014 primarily due to the fixed costs per kiosk associated with additional ecoATM installations, continued investments necessary to scale and grow ecoATM, and our ongoing investment in SAMPLEit. As a percentage of revenue, in Q4 direct operating expense was higher than Q3 2014 due to lower than expected Q4 revenue.

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Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

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February 5, 2015

In 2015, our marketing focus will be on increasing the performance of our existing kiosks by better understanding our core customer. We will use this insight to drive higher collections of devices through in-store promotions and continuous marketing to customers in our key demographic segments. We also plan on accelerating the ramp time of new installs in our mass merchant channel with our kiosk jumpstart program that uses regular marketing support to build awareness.

Non-Core Results

In Q4 2014, total pretax non-core expenses were $710,000 including $3.2 million in expense in rights to receive cash issued in connection with the acquisition of ecoATM offset by $2.5 million in income from equity method investments related to our withdrawal from the Redbox Instant™ by Verizon joint venture during Q4.

Guidance

As previously communicated, beginning this year, we are providing annual guidance only and expect to update our annual guidance as appropriate when we report financial results each quarter.

There are several factors that influence our 2015 expectations, including the impact of pricing, the timing and number of net kiosk installations, the new release schedule and strength of content, and our ability to further align costs with revenue.

For the full-year 2015, we expect:

•

consolidated revenue in the range of $2.314 billion to $2.464 billion,

•

core adjusted EBITDA from continuing operations of between $467 million and $512 million, and

•

core diluted earnings per share between $6.71 and $7.71 for the full-year 2015, which does not reflect any share repurchases we may complete during the year.

In 2015, there are several factors influencing Redbox revenue that we expect will help partially offset the secular decline in the physical rental market and the underlying risk in the content slate, including the recently implemented price increase, continued product mix shift to Blu-ray and games, and benefits resulting from investments in customer experience and marketing programs. We also expect that revenue will be impacted by a lower box office for titles releasing at Redbox in 2015 compared with 2014.

Our 2015 guidance also incorporates anticipated lower rental demand and shorter average rental duration as a result of the price increase that partially offset the increase in consumer price per night. We will continue to monitor the impact of the price increases on consumer rental behavior and revenue through varying product strength and seasonality throughout the year.

Redbox continues to offer the best value in home entertainment, and we continue to build stronger, more personalized relationships with our consumers via web, email and mobile marketing tools. The price increase will support investments in several initiatives to enhance customer experience and drive engagement, including enhanced merchandising tools that offer title recommendations, more personalized interfaces at the kiosk and on digital platforms, and enhancements to our Redbox Play Pass loyalty program.

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Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

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Rental demand in 2015 is estimated to decline compared with 2014 primarily due to the price increase, lower box office and secular decline, but is expected to be partially offset by new marketing initiatives and investments in customer experience as described above.

Our 2015 guidance is based on our expectation that the box office of titles releasing at Redbox in 2015 will decrease from 2014 with fewer titles driven by the 16% decline in theatrical box office in the second half of 2014 compared with 2013. Q1 2015 box office for Redbox releases is expected to be 31% below Q1 2014 with eight fewer theatrical titles releasing during the quarter, offsetting the benefit of the price increase. We expect content strength to improve in Q2 2015 as the 2014 slate was particularly weak, bringing the first half of 2015 box office down low double-digits compared with 2014.

While it is hard to predict how theatrical releases will perform and studio slates will evolve throughout the course of the year, our assumptions include a box office estimate for the second half of 2015 that is flat to slightly down compared with 2014. Consistent with historical patterns, we expect stronger seasonality in the first and fourth quarters of 2015.

We also expect that our continued focus on operational efficiencies and network optimization will drive additional profit growth for Redbox in 2015. We continue to collaborate with our retail partners to improve kiosk productivity at existing locations and remove unproductive kiosks. We expect to remove 1,000 to 1,900 U.S. kiosks in 2015, helping to improve revenue per kiosk growth, while lowering content and servicing costs due to a smaller installed base.

Our revenue guidance excludes revenue for Redbox Canada as we expect that once it is shut down, its results will be reported as a discontinued operation reducing the negative impact in 2015 and prior periods.

In our Coinstar segment, we expect revenue to be flat compared with 2014. Note that 2014 revenue in the Coinstar segment benefited from a U.S. price increase that was implemented in October 2013.

In 2015, we will continue to invest in growing and scaling ecoATM. We expect New Ventures segment revenue to be in the range of between $166 million to $181 million and an increase of 600 to 1,200 net new kiosks in 2015. The lower installs in 2015 compared with 2014 is partially driven by our focus on the ecoATM business moving to segment operating breakeven in the first half of the year based on the current timing of expected installs. Beginning in Q1 2015, we expect to report ecoATM as a separate segment.

We expect free cash flow in 2015 to be in the range of between $205 million and $245 million, due to slightly higher CAPEX, an increase in cash taxes, and working capital. The company remains committed to our current policy of returning 75% to 100% of annual FCF to shareholders, which includes share repurchases and quarterly cash dividend payments.

Other factors impacting our 2015 annual guidance include:

•

higher incentive compensation expense in 2015 compared with reduced incentive compensation for 2014, and

•

$5.6 million related to a Redbox personal property tax accrual that was reversed in 2014 and will not recur in 2015.

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Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

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Summary

We accomplished much in 2014 despite challenging market dynamics, and our actions pave the way for 2015 and beyond. In 2014, we successfully implemented a Redbox price increase and extended existing and signed new content agreements with our studio partners. We signed several new ecoATM retail partner agreements as we continued to ramp and scale the business. Also, as part of our strategy, G&A improved as we continued to leverage our existing platforms to achieve operational efficiencies across the company and align costs with revenue. Finally, we delivered on our commitment to return capital to shareholders through share repurchases.

Our position as a leader in automated retail will allow us to continue to provide consumers with compelling products and services that create value for our partners and shareholders alike to ensure we deliver sustainable, long-term growth for the company.

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Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

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Appendix A

Non-GAAP Financial Measures

Non-GAAP measures may be provided as a complement to results provided in accordance with United States generally accepted accounting principles (“GAAP”).

We use the following non-GAAP financial measures to evaluate our financial results:

•

Core adjusted EBITDA from continuing operations;

•

Core diluted earnings per share (“EPS”) from continuing operations;

•

Free cash flow; and

•

Net debt and net leverage ratio.

Core and Non-Core Results

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Core Adjusted EBITDA from continuing operations

A reconciliation of core adjusted EBITDA from continuing operations to net income from continuing operations, the most comparable GAAP financial measure, is presented in the following table:


	Three Months Ended						Year Ended
	December 31,						December 31,
Dollars in thousands	2014			2013			2014		2013
Net income from continuing operations	$	43,800		$	42,876		$	107,386	$	208,091
Depreciation, amortization and other		52,333			52,853			209,870		203,094
Interest expense, net		12,599			6,848			47,636		32,801
Income tax expense (benefit)		28,294			(289	)		59,748		34,477
Share-based payments expense⁽¹⁾		3,291			5,377			13,384		16,831

Adjusted EBITDA from continuing operations		140,317			107,665			438,024		495,294
Non-Core Adjustments:
Restructuring costs		—			4,495			469		4,495
Acquisition costs		—			—			—		5,669
Rights to receive cash issued in connection with the acquisition of ecoATM		3,237			6,364			13,270		8,664
(Income) loss from equity method investments, net		(2,527	)		21,352			28,734		48,448
Sigue indemnification reserve releases		—			(2,542	)		—		(2,542	)
Gain on previously held equity interest in ecoATM		—			—			—		(68,376	)

Core adjusted EBITDA from continuing operations	$	141,027		$	137,334		$	480,497	$	491,652

(1)	Includes both non-cash share-based compensation for executives, non-employee directors and employees as well as share-based payments for content arrangements.

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Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

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Core Diluted EPS from continuing operations

Our non-GAAP financial measure core diluted EPS from continuing operations is defined as diluted earnings per share from continuing operations excluding Non-Core Adjustments, net of applicable taxes.

A reconciliation of core diluted EPS from continuing operations to diluted EPS from continuing operations, the most comparable GAAP financial measure, is presented in the following table:


	Three Months Ended						Year Ended
	December 31,						December 31,
	2014			2013			2014			2013
Diluted EPS from continuing operations	$	2.35		$	1.55		$	5.19		$	7.33
Non-Core Adjustments, net of tax:⁽¹⁾
Restructuring costs		—			0.10			0.01			0.10
Acquisition costs		—			0.02			—			0.17
Rights to receive cash issued in connection with the acquisition of ecoATM		0.17			0.20			0.53			0.25
(Income) loss from equity method investments, net		(0.08	)		0.47			0.85			1.04
Sigue indemnification reserve releases		—			(0.06	)		—			(0.05	)
Gain on previously held equity interest on ecoATM		—			—			—			(2.33	)
Tax benefit from net operating loss adjustment		—			—			(0.05	)		—
Tax benefit of worthless stock deduction		—			(0.60	)		(0.10	)		(0.59	)

Core diluted EPS from continuing operations	$	2.44		$	1.68		$	6.43		$	5.92

(1)	Non-Core Adjustments are presented after-tax using the applicable effective tax rate for the respective periods.

Free Cash Flow


	Three Months Ended						Year Ended
	December 31,						December 31,
Dollars in thousands	2014			2013			2014			2013
Net cash provided by operating activities	$	131,304		$	180,713		$	338,351		$	327,834
Purchase of property and equipment		(25,613	)		(38,066	)		(97,924	)		(161,412	)

Free cash flow	$	105,691		$	142,647		$	240,427		$	166,422

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Outerwall Inc. 2014 Fourth Quarter and Full Year Earnings

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February 5, 2015

Net Debt and Net Leverage Ratio

•

are used to assess the degree of leverage by management;

•

are reported quarterly to support covenant compliance under our credit agreement.

A reconciliation of net debt to total outstanding debt including capital leases, the most comparable GAAP financial measure, is presented in the following table:


	December 31,
Dollars in thousands	2014			2013
Senior unsecured notes⁽¹⁾	$	650,000		$	350,000
Term loans⁽¹⁾		146,250			344,375
Revolving line of credit		160,000			—
Convertible debt⁽²⁾		—			51,148
Capital leases		15,391			21,361

Total principal value of outstanding debt including capital leases		971,641			766,884
Less domestic cash and cash equivalents held in financial institutions		(66,546	)		(199,027	)

Net debt		905,095			567,857
LTM Core adjusted EBITDA from continuing operations	$	480,497		$	491,652

Net leverage ratio		1.88			1.15

(1)

(2)	The convertible debt balance on our Consolidated Balance Sheet as of December 31, 2013 included $1.4 million in associated debt discount.

Page 18

Supplementary Slides

2014 Q4 Prepared Remarks

February 5, 2015

NASDAQ:OUTR

S –

2014 Q4 EPS Bridge

Actual

results

versus

guidance

October

30,

2014

(1)

$2.15

$0.32

$0.05

$0.12

$(0.12)

$0.06

$(0.03)

$2.44

$(0.09)

$2.35

$(0.09)

$(0.02)

(1)

On January 20, 2015, the company narrowed its guidance for core diluted EPS from continuing operations for the fourth quarter of 2014 to between $2.40 and $2.52

(2)

Refer to Appendix A for a discussion of Non-GAAP Financial Measures and Core and Non-Core Results

S –

2015 Q1 Redbox Release Schedule

1 Q1 2015 data estimated

2 Includes titles with total North American box office greater than $5MM

Q1 2015

Q1 2014

Box Office

Titles

Box Office

Titles

Total

$2.50Bn

$3.64Bn

January

$401.0MM

$1.48Bn

February

$834.1MM

$450.7MM

March

$1.26Bn

$1.71Bn

As of February 5, 2015

Box Office²

(MM)

# of new releases =

S –

2015 Full-Year Guidance

As of February 5, 2015

Revenue by Segment

($MM)

Redbox

$1,835

–

$1,965

Coinstar

$313

–

$318

New Ventures

$166

–

$181

TOTAL

$2,314

–

$2,464

Consolidated –

Other

Core adjusted EBITDA from continuing operations

($MM)

$467

–

$512

Core diluted EPS from continuing operations

1,2

$6.71

–

$7.71

Average diluted shares outstanding

(MM)

18.6

–

18.9

Estimated effective tax rate

36% –

38%

Free cash flow

($MM)

$205

–

$245

Capital Expenditures

($MM)

Redbox

$17

–

$22

Coinstar

$16

–

$20

New Ventures

$39

–

$48

Corporate

$28

–

$35

TOTAL

$100

–

$125

Net Kiosk Installations by Segment

Redbox (U.S.)

(1,000) –

(1,900)

Coinstar

–

(100)

New Ventures

600

–

1,200

Excludes the impact of potential share repurchases in 2015

Does not include kiosks in Canada as the company is shutting down its Redbox Canada operations in 2015

See Appendix A for a discussion of Non-GAAP Financial Measures and Core and Non-Core Results

Exhibit 99.3

Outerwall Inc. Announces New Dividend Policy and Declares First-Ever Quarterly Dividend;

Board Approves Additional $250 Million Share Repurchase Authorization

BELLEVUE, Wash. – February 5, 2015 – Outerwall Inc. (Nasdaq: OUTR) today announced that on February 3, 2015, its board of directors initiated a new quarterly dividend policy and declared a quarterly dividend of $0.30 per share of common stock. The dividend is expected to be paid on March 18, 2015, to stockholders of record at the close of business on March 3, 2015. This marks the first cash dividend paid to stockholders in the company’s history. The declaration and payment of future dividends will be subject to the board’s approval.

Also on February 3, 2015, the board of directors approved an additional share repurchase authorization of up to $250 million of its common stock, bringing the total available for repurchases to $413.7 million.

“The board’s decisions to initiate a quarterly dividend policy and increase the share repurchase authorization reflect confidence in Outerwall’s financial strength and long-term prospects and our commitment to return 75- to-100 percent of annual free cash flow to stockholders,” said Nora M. Denzel, Outerwall’s interim chief executive officer. “Quarterly dividends and share repurchases are key elements of our capital allocation strategy that also includes disciplined investments in the business.”

About Outerwall Inc.

Outerwall Inc. (Nasdaq: OUTR) has more than 20 years of experience creating some of the most profitable spaces for their retail partners. Outerwall delivers breakthrough kiosk experiences that delight consumers and generate revenue for retailers. As the company that brought consumers Redbox^® entertainment, Coinstar^® money services, and ecoATM^® electronics recycling kiosks, Outerwall is leading the next generation of automated retail and paving the way for inventive, scalable businesses. Outerwall™ kiosks are in neighborhood grocery stores, drug stores, mass merchants, malls, and other retail locations in the United States, Canada, Puerto Rico, the United Kingdom, and Ireland. Learn more at www.outerwall.com.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

Certain statements in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “estimate,” “expect,” “intend,” “will,” “anticipate,” “goals,” variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. The forward-looking statements in this release include statements regarding future dividends and share repurchases. Forward-looking statements are not guarantees of future performance and actual results may vary materially from the results expressed or implied in such statements. Differences may result from actions taken by Outerwall Inc. or its subsidiaries, as well as from risks and uncertainties beyond Outerwall Inc.’s control. Such risks and uncertainties include, but are not limited to,

•

competition from other entertainment providers,

•

the ability to achieve the strategic and financial objectives for our entry into new businesses, including ecoATM and SAMPLEit,

•

our ability to repurchase stock and the availability of an open trading window,

•

our declaration and payment of dividends, including our board’s discretion to change the dividend policy,

•

the termination, non-renewal or renegotiation on materially adverse terms of our contracts with our significant retailers and suppliers,

•

payment of increased fees to retailers, suppliers and other third-party providers, including financial service providers,

•

the effective management of our content library,

•

the timing of the release slate and the relative attractiveness of titles in a particular quarter or year,

•

the ability to attract new retailers, penetrate new markets and distribution channels and react to changing consumer demands,

•

the ability to generate sufficient cash flow to timely and fully service indebtedness and adhere to certain covenants and restrictions,

•

the ability to adequately protect our intellectual property, and

•

the application of substantial federal, state, local and foreign laws and regulations specific to our business.

###

Investor Contact:

Rosemary Moothart

Director of Investor Relations

425-943-8140

rosemary.moothart@outerwall.com

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