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) May 5, 2015
OUTERWALL INC.
(Exact
name of registrant as specified in its charter)
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| Delaware |
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000-22555 |
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94-3156448 |
| (State or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(I.R.S. Employer
Identification No.) |
1800 – 114th 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:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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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 May 7, 2015, Outerwall Inc. (the “Company”) issued an earnings release announcing its financial results for the quarter ended
March 31, 2015, 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 and incorporated by reference.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
On May 5, 2015, Maria Stipp, President of ecoATM, Inc., a wholly-owned subsidiary of the Company, resigned
effective May 29, 2015.
Item 8.01 Other Events.
On May 7, 2015, the Company issued a press release announcing a quarterly cash dividend. 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
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| Exhibit No. |
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Description |
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| 99.1 |
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Earnings release for the quarter ended March 31, 2015. |
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| 99.2 |
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Prepared remarks from the Interim Chief Executive Officer and Chief Financial Officer. |
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| 99.3 |
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Press release dated May 7, 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.
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OUTERWALL INC. |
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By: |
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/s/ Galen C. Smith |
| Date: May 7, 2015 |
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Galen C. Smith |
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Chief Financial Officer |
3
Exhibit 99.1
OUTERWALL INC. ANNOUNCES 2015 FIRST QUARTER RESULTS
Delivers Highest Ever Quarterly Consolidated Revenue of $608.6 Million;
Solid Execution Drives Growth in Profitability and Cash Flow;
Board of Directors Declares Quarterly Cash Dividend of $0.30 Per Share
BELLEVUE, Wash.—May 7, 2015—Outerwall Inc. (Nasdaq: OUTR) today reported financial results for the first quarter ended March 31, 2015.
“Outerwall’s strong performance this quarter was the result of continued execution of our strategy of optimizing our core Redbox and Coinstar
businesses, scaling ecoATM and improving operational efficiencies across the company,” said Nora M. Denzel, Outerwall’s interim chief executive officer. “We are leveraging our market-leading brands to drive profitability and deliver
value for shareholders, partners and customers.”
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2015 |
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2014 |
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Change |
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First Quarter |
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First Quarter |
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% |
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| GAAP Results |
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| • Consolidated revenue |
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$ |
608.6 million |
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$ |
597.8 million |
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1.8 |
% |
| • Income from continuing operations |
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$ |
42.2 million |
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$ |
27.6 million |
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52.7 |
% |
| • Net income |
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$ |
35.6 million |
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$ |
23.2 million |
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53.6 |
% |
| • Diluted EPS from continuing operations per common share* |
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$ |
2.23 |
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$ |
1.09 |
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104.6 |
% |
| • Net cash provided by operating activities |
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$ |
106.1 million |
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$ |
94.6 million |
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12.1 |
% |
| Core Results** |
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| • Core adjusted EBITDA from continuing operations |
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$ |
147.9 million |
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$ |
121.5 million |
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21.7 |
% |
| • Core diluted EPS from continuing operations* |
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$ |
2.87 |
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$ |
1.42 |
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102.1 |
% |
| • Free cash flow |
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$ |
85.4 million |
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$ |
67.6 million |
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26.2 |
% |
| * |
Beginning in the first quarter of 2015, the company applied the two-class method of calculating earnings per share for its GAAP results because the impact of unvested restricted shares as a percentage of total common
shares outstanding became more dilutive given the level of stock repurchases over the prior year. Core diluted EPS from continuing operations continues to be reported under the treasury stock method. |
| ** |
Refer to Appendix A for a discussion of Use of Non-GAAP Financial Measures and Core and Non-Core Results. |
Highlights from the first quarter 2015 include:
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Reported consolidated revenue of $608.6 million, the highest quarter in the company’s history |
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Delivered 21.7% growth in core adjusted EBITDA from continuing operations to $147.9 million, reflecting continued expense management across the company, including 3.4% lower direct operating expense and 7.7% lower
G&A expense |
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Increased core diluted earnings per share from continuing operations 102.1% to $2.87 |
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Redbox generated its highest quarterly revenue in company history and delivered solid margin expansion, primarily driven by the price increase in December 2014 |
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Signed a new two-year content agreement with Warner Bros. |
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Continued investing in growth by scaling ecoATM, installing approximately 250 kiosks in the quarter |
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Generated free cash flow of $85.4 million, an increase of 26.2% year-over-year |
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Repurchased 617,195 shares for $40.7 million and paid the company’s first quarterly dividend of $0.30 per share |
“Our strong financial results demonstrate continued solid execution and operational excellence across the company,” said Galen C. Smith, chief
financial officer of Outerwall. “Our performance reaffirms our ability to generate strong profitability and free cash flow while simultaneously investing in the future of our business.
“We have maintained a disciplined approach to capital allocation and remain focused on returning capital to shareholders,” said Smith. “Our
board of directors has declared the company’s second cash dividend payment of $0.30 per share. Also during the quarter, the board increased our share repurchase authorization by $250 million and we repurchased approximately $41 million of
our common shares, leaving us with more than $373 million remaining under our current authorization, demonstrating our continued confidence in Outerwall’s long-term prospects and future cash flow.”
Outerwall also announced that Maria Stipp resigned as the president of ecoATM effective as of May 29, 2015, to take a chief executive officer role at
another consumer company. The company expects to name an interim leader in the near future.
CHANGES IN REPORTING IN THE FIRST QUARTER OF 2015
During the first quarter of 2015, the company added ecoATM, its electronic device recycling business, as a separate reportable segment. Previously, the results
of ecoATM along with those of other self-service concepts were included in the New Ventures segment. The combined results of the other self-service concepts are now included in the All Other category but are not presented as a separate reportable
segment.
The results of the company’s Redbox Canada operations, which were discontinued during the first quarter of 2015, are presented as
discontinued operations in the company’s consolidated financial statements and are no longer included in Redbox segment operating results. All prior periods have been recast to exclude Redbox Canada.
CONSOLIDATED RESULTS
Consolidated revenue for the first
quarter of 2015 was a record for the company, increasing $10.9 million, or 1.8%, to $608.6 million compared with $597.8 million for the first quarter of 2014. The year-over-year revenue growth was primarily due to higher revenue from Redbox driven
primarily by the price increase in December 2014, and an increase in revenue from ecoATM.
Operating income for the first quarter of 2015 was $82.5
million and the operating margin was 13.6% compared with operating income of $62.7 million and operating margin of 10.5% in the first quarter of 2014. The year-over-year increase in operating margin primarily reflects the higher consolidated
revenue and lower direct operating expense resulting from lower product costs in the Redbox segment and a decrease in general and administrative expenses driven by ongoing cost reduction initiatives across the company. Both operating income and
operating margin in the first quarter of 2015 were negatively impacted by $15.9 million in restructuring and lease termination costs from the early termination of operating leases for certain floors at Redbox headquarters and severance expense.
2
Income from continuing operations for the first quarter of 2015 was $42.2 million, or $2.23 of diluted earnings
from continuing operations per common share, compared with $27.6 million, or $1.09 of diluted earnings from continuing operations per common share, in the first quarter of 2014.
Core adjusted EBITDA from continuing operations for the first quarter of 2015 was $147.9 million, compared with $121.5 million in the first quarter of 2014.
The year-over-year increase was primarily due to higher Redbox segment operating income and lower losses from equity method investments as a result of Redbox’s withdrawal from the Redbox Instant by Verizon joint venture during the fourth
quarter of 2014.
Core diluted earnings per share from continuing operations for the first quarter of 2015 were $2.87, an increase of 102.1% compared with
$1.42 per diluted share in the first quarter of 2014. The increase was primarily attributable to the results of operations described above, a 25.4% reduction in the number of weighted average shares used in the diluted per share calculations due
primarily to stock repurchases, and $0.59 of non-core adjustments, net of tax, in the first quarter of 2015 compared with $0.31 in the first quarter of 2014.
Net cash provided by operating activities in the first quarter of 2015 was $106.1 million, compared with $94.6 million in the first quarter of 2014. The $11.5
million increase was primarily due to the increase in operating income.
Cash capital expenditures for the first quarter of 2015 were $20.7 million
compared with $26.9 million in the first quarter of 2014, with the decrease primarily related to lower capital expenditures in the company’s Redbox and Coinstar segments.
Free cash flow for the first quarter of 2015 was $85.4 million, compared with $67.6 million in the first quarter of 2014, primarily driven by higher net
operating cash flow and lower capital expenditures.
SEGMENT RESULTS
Redbox
The results of the company’s Redbox
Canada operations, which were discontinued during the first quarter of 2015, are presented as discontinued operations in the company’s consolidated financial statements and are no longer included in Redbox segment operating results. All prior
periods have been recast to exclude Redbox Canada from Redbox segment results.
Redbox segment revenue increased $6.5 million, or 1.3%, to $519.5 million
in the first quarter of 2015, a new quarterly record, from $513.0 million in the first quarter of 2014, primarily due to the price increase in December 2014 and strong seasonality in the first quarter of 2015.
Redbox generated approximately 173.0 million rentals in the first quarter of 2015, compared with 198.8 million rentals in the first quarter of 2014,
as rentals were negatively impacted by a weaker content slate, lower demand from price-sensitive customers and ongoing secular decline in the physical rental market.
Net revenue per rental was $3.00, an increase of $0.42, or 16.3%, from the first quarter of 2014. The increase in net revenue per rental was primarily the
result of the price increase partially offset by the expected increase in single night rental activity as a result of the price increase.
3
Redbox segment operating income in the first quarter of 2015 was $122.9 million, an increase of 16.2% compared
with the first quarter of 2014. Segment operating margin was 23.6%, an increase of 300 basis points from the first quarter of 2014, despite the impact of the $15.2 million in restructuring and lease termination costs recognized in the first quarter
of 2015, primarily due to lower direct operating expenses related to lower content costs and a decline in general and administrative expenses as a result of ongoing cost reduction initiatives.
Coinstar
Coinstar segment revenue was $69.3
million, an increase of $0.6 million, or 0.8%, compared with $68.8 million in the first quarter of 2014, primarily due to growth in the number of Coinstar Exchange kiosks and transactions partially offset by a decrease in Coinstar revenue in the
U.S. due to a reduction in coin volume.
The impact of the increased coin voucher product transaction fee from 8.9% to 9.9% implemented in the U.K. in
August 2014 was largely offset by the unfavorable exchange rate impact on U.K. revenue due to the recent strengthening of the U.S. dollar versus the British pound.
The average Coinstar transaction size continued to increase while the number of transactions has declined. The decline in transactions is the result of larger
pours and less frequent visits and a slight decrease in the U.S. kiosk base year-over-year as a result of continued optimization efforts.
Coinstar
segment operating income was $22.5 million compared with $22.7 million in the first quarter of 2014, and Coinstar segment operating margin was 32.5% compared with 33.1% in the first quarter of 2014.
ecoATM
During the first quarter of 2015, the
company added ecoATM as a separate reportable segment. All goodwill previously allocated to the New Ventures segment has been allocated to the ecoATM segment.
ecoATM segment revenue was $19.7 million in the first quarter of 2015, an increase of $3.8 million compared with the first quarter of 2014 primarily due to
the increase in the installed kiosk base and continued ramping of kiosks deployed in 2014. The company installed approximately 250 kiosks in the quarter and ended the quarter with approximately 2,140 kiosks installed.
The key revenue drivers for the segment are identified as devices collected per kiosk per day, the percentage of those devices that are value devices and the
average selling price the business receives when reselling the devices. The collection of value devices on a per kiosk basis in the first quarter of 2015 was lower than in the first quarter of 2014 as a result of lower transactions at the kiosks due
to a decline in retail foot traffic at ecoATM locations and expanded alternative recycling options such as carrier promotions. These factors also impacted the mix of value devices collected and was the primary reason for the decline in the average
selling price of value devices in the first quarter of 2015 compared with the first quarter of 2014.
The segment operating loss in the first quarter of
2015 was $8.3 million compared with $5.3 million in the first quarter of 2014, due to an increase in direct operating expenses, including the costs associated with the acquisition, transportation and processing of electronic devices, as well as
the costs of servicing the kiosks and payments to the retailers for use of their space. As ecoATM continues to expand its installed base and previously installed kiosks continue to ramp, ecoATM expects its direct operating expenses to increase in
total but to decline as a percentage of revenue.
4
CAPITAL ALLOCATION
On May 5, the company’s board of directors declared a quarterly cash dividend of $0.30 per share expected to be paid on June 23, 2015, to all
stockholders of record as of the close of business on June 9, 2015.
On February 3, 2015, the 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. During the first quarter of 2015, the company repurchased
617,195 shares of common stock at an average price of $65.96 per share for approximately $40.7 million. As of March 31, 2015, there was approximately $373.3 million remaining under the company’s stock repurchase authorization.
The company’s net leverage ratio1 was 1.62x at March 31, 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
Outerwall’s 2015 annual
guidance reflects the company’s first quarter results and current outlook on the remainder of the year. The following table presents the company’s updated full-year 2015 guidance:
2015 FULL-YEAR GUIDANCE
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As of |
| Dollars in millions, except per share data |
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May 7, 2015 |
| Consolidated results |
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| Revenue |
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$2,294 — $2,419 |
| Core adjusted EBITDA from continuing operations(1) |
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$472 — $514 |
| Core diluted EPS from continuing operations(1)(2) |
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$7.49 — $8.49 |
| Free cash flow(1) |
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$215 — $255 |
| Weighted average diluted shares outstanding(2) |
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18.0 — 18.1 |
| Core effective tax rate |
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36.5% — 38.5% |
| Segment revenue |
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| Redbox |
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$1,850 — $1,955 |
| Coinstar |
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$313 — $318 |
| ecoATM |
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$131 — $146 |
| Capital expenditures |
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| Redbox |
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$15 — $20 |
| Coinstar |
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$16 — $20 |
| ecoATM |
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$31 — $40 |
| Corporate |
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$31 — $38 |
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| Total CAPEX |
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$93 — $118 |
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| Net kiosk installations |
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| Redbox |
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(1,000) — (1,900) |
| Coinstar |
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0 — (100) |
| ecoATM |
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600 — 1,000 |
| 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 for the remainder of 2015 |
5
ADDITIONAL INFORMATION
Additional information regarding the company’s 2015 first quarter 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.
CONFERENCE CALL
The company will host a conference call
today at 2:30 p.m. PDT (5:30 p.m. EDT) to discuss first quarter 2015 earnings results and an update to 2015 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 May 21, 2015, at 1-855-859-2056 or 1-404-537-3406, conference ID 16684484.
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. 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,
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competition from other entertainment providers, |
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the ability to achieve the strategic and financial objectives for our entry into new businesses, including ecoATM and SAMPLEit, |
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• |
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our ability to repurchase stock and the availability of an open trading window, |
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our declaration and payment of dividends, including our board’s discretion to change the dividend policy, |
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the termination, non-renewal or renegotiation on materially adverse terms of our contracts with our significant retailers and suppliers, |
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payment of increased fees to retailers, suppliers and other third-party providers, including financial service providers, |
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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, |
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the effective management of our content library, |
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the timing of the release slate and the relative attractiveness of titles in a particular quarter or year, |
6
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the ability to attract new retailers, penetrate new markets and distribution channels and react to changing consumer demands, |
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the ability to generate sufficient cash flow to timely and fully service indebtedness and adhere to certain covenants and restrictions, |
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the ability to adequately protect our intellectual property, and |
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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.
# # #
(Consolidated
Financial Statements, Business Segment Information and Appendix A follow)
Investor Contact:
Rosemary Moothart
Director of Investor Relations
425-943-8140
rosemary.moothart@outerwall.com
Media Contact:
Art Pettigrue
Senior Director, Communications
425-943-8576
art.pettigrue@outerwall.com
7
OUTERWALL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited)
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Three Months Ended
March 31, |
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2015 |
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2014 |
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| Revenue |
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$ |
608,636 |
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$ |
597,762 |
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| Expenses: |
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| Direct operating(1) |
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405,184 |
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419,642 |
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| Marketing |
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8,420 |
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6,993 |
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| Research and development |
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2,084 |
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3,474 |
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| General and administrative |
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48,556 |
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52,608 |
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| Restructuring and lease termination costs |
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15,851 |
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557 |
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| Depreciation and other |
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42,686 |
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47,942 |
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| Amortization of intangible assets |
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3,309 |
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3,842 |
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| Total expenses |
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526,090 |
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535,058 |
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| Operating income |
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82,546 |
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62,704 |
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| Other expense, net: |
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| Loss from equity method investments, net |
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(132 |
) |
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(9,368 |
) |
| Interest expense, net |
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(12,071 |
) |
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(9,648 |
) |
| Other, net |
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(2,346 |
) |
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(648 |
) |
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| Total other expense, net |
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(14,549 |
) |
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(19,664 |
) |
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| Income from continuing operations before income taxes |
|
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67,997 |
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|
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43,040 |
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| Income tax expense |
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(25,842 |
) |
|
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(15,434 |
) |
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|
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|
|
|
|
|
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| Income from continuing operations |
|
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42,155 |
|
|
|
27,606 |
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| Loss from discontinued operations, net of tax |
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(6,556 |
) |
|
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(4,431 |
) |
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|
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|
|
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| Net income |
|
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35,599 |
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|
|
23,175 |
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| Foreign currency translation adjustment(2) |
|
|
2,854 |
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|
|
875 |
|
|
|
|
|
|
|
|
|
|
| Comprehensive income |
|
$ |
38,453 |
|
|
$ |
24,050 |
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|
|
|
|
|
|
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|
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| Income from continuing operations attributable to common shares: |
|
|
|
|
|
|
|
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| Basic |
|
$ |
40,775 |
|
|
$ |
26,860 |
|
| Diluted |
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$ |
40,776 |
|
|
$ |
26,879 |
|
| Basic earnings (loss) per common share: |
|
|
|
|
|
|
|
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| Continuing operations |
|
$ |
2.23 |
|
|
$ |
1.12 |
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| Discontinued operations |
|
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(0.36 |
) |
|
|
(0.18 |
) |
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|
|
|
|
|
|
|
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| Basic earnings per common share |
|
$ |
1.87 |
|
|
$ |
0.94 |
|
|
|
|
|
|
|
|
|
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| Diluted earnings (loss) per common share: |
|
|
|
|
|
|
|
|
| Continuing operations |
|
$ |
2.23 |
|
|
$ |
1.09 |
|
| Discontinued operations |
|
|
(0.36 |
) |
|
|
(0.18 |
) |
|
|
|
|
|
|
|
|
|
| Diluted earnings per common share |
|
$ |
1.87 |
|
|
$ |
0.91 |
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares used in basic and diluted per share calculations: |
|
|
|
|
|
|
|
|
| Basic |
|
|
18,269 |
|
|
|
23,944 |
|
| Diluted |
|
|
18,286 |
|
|
|
24,575 |
|
| Dividends declared per common share |
|
$ |
0.30 |
|
|
$ |
— |
|
| (1) |
“Direct operating” excludes depreciation and other of $30.2 million and $31.7 million for the three months ended March 31, 2015 and 2014, respectively. |
| (2) |
Foreign currency translation adjustment had no tax effect for the three months ended March 31, 2015 and 2014, respectively. |
8
OUTERWALL INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
|
|
|
|
|
|
|
|
|
| |
|
March 31,
2015 |
|
|
December 31,
2014 |
|
| Assets |
|
|
|
|
|
|
|
|
| Current Assets: |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
197,934 |
|
|
$ |
242,696 |
|
| Accounts receivable, net of allowances of $1,128 and $2,223 |
|
|
36,644 |
|
|
|
48,590 |
|
| Content library |
|
|
172,500 |
|
|
|
180,121 |
|
| Prepaid expenses and other current assets |
|
|
42,908 |
|
|
|
39,837 |
|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
|
449,986 |
|
|
|
511,244 |
|
| Property and equipment, net |
|
|
385,548 |
|
|
|
428,468 |
|
| Deferred income taxes |
|
|
2,231 |
|
|
|
11,378 |
|
| Goodwill and other intangible assets, net |
|
|
620,645 |
|
|
|
623,998 |
|
| Other long-term assets |
|
|
7,651 |
|
|
|
8,231 |
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
1,466,061 |
|
|
$ |
1,583,319 |
|
|
|
|
|
|
|
|
|
|
| Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
| Current Liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable |
|
$ |
165,336 |
|
|
$ |
168,633 |
|
| Accrued payable to retailers |
|
|
107,082 |
|
|
|
126,290 |
|
| Other accrued liabilities |
|
|
146,921 |
|
|
|
137,126 |
|
| Current portion of long-term debt and other long-term liabilities |
|
|
19,544 |
|
|
|
20,416 |
|
| Deferred income taxes |
|
|
20,926 |
|
|
|
21,432 |
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
459,809 |
|
|
|
473,897 |
|
| Long-term debt and other long-term liabilities |
|
|
887,089 |
|
|
|
973,669 |
|
| Deferred income taxes |
|
|
26,432 |
|
|
|
38,375 |
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
1,373,330 |
|
|
|
1,485,941 |
|
| Commitments and contingencies |
|
|
|
|
|
|
|
|
| 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; |
|
|
|
|
|
|
|
|
| 36,740,097 and 36,600,166 shares issued; |
|
|
|
|
|
|
|
|
| 18,498,978 and 18,926,242 shares outstanding; |
|
|
473,225 |
|
|
|
473,592 |
|
| Treasury stock |
|
|
(1,033,424 |
) |
|
|
(996,293 |
) |
| Retained earnings |
|
|
650,386 |
|
|
|
620,389 |
|
| Accumulated other comprehensive income (loss) |
|
|
2,544 |
|
|
|
(310 |
) |
|
|
|
|
|
|
|
|
|
| Total stockholders’ equity |
|
|
92,731 |
|
|
|
97,378 |
|
|
|
|
|
|
|
|
|
|
| Total liabilities and stockholders’ equity |
|
$ |
1,466,061 |
|
|
$ |
1,583,319 |
|
|
|
|
|
|
|
|
|
|
9
OUTERWALL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Operating Activities: |
|
|
|
|
|
|
|
|
| Net income |
|
$ |
35,599 |
|
|
$ |
23,175 |
|
| Adjustments to reconcile net income to net cash flows from operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and other |
|
|
48,543 |
|
|
|
49,104 |
|
| Amortization of intangible assets |
|
|
3,353 |
|
|
|
3,848 |
|
| Share-based payments expense |
|
|
3,903 |
|
|
|
3,765 |
|
| Windfall excess tax benefits related to share-based payments |
|
|
(526 |
) |
|
|
(1,710 |
) |
| Deferred income taxes |
|
|
(2,547 |
) |
|
|
(9,564 |
) |
| Restructuring and lease termination costs(2) |
|
|
1,680 |
|
|
|
— |
|
| Loss from equity method investments, net |
|
|
132 |
|
|
|
9,368 |
|
| Amortization of deferred financing fees and debt discount |
|
|
693 |
|
|
|
1,306 |
|
| Other |
|
|
(1,198 |
) |
|
|
(124 |
) |
| Cash flows from changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable, net |
|
|
11,823 |
|
|
|
(5,952 |
) |
| Content library |
|
|
9,956 |
|
|
|
19,981 |
|
| Prepaid expenses and other current assets |
|
|
(3,106 |
) |
|
|
46,955 |
|
| Other assets |
|
|
168 |
|
|
|
437 |
|
| Accounts payable |
|
|
2,920 |
|
|
|
(27,390 |
) |
| Accrued payable to retailers |
|
|
(18,441 |
) |
|
|
(15,485 |
) |
| Other accrued liabilities |
|
|
13,120 |
|
|
|
(3,127 |
) |
|
|
|
|
|
|
|
|
|
| Net cash flows from operating activities(1) |
|
|
106,072 |
|
|
|
94,587 |
|
| Investing Activities: |
|
|
|
|
|
|
|
|
| Purchases of property and equipment |
|
|
(20,709 |
) |
|
|
(26,940 |
) |
| Proceeds from sale of property and equipment |
|
|
123 |
|
|
|
831 |
|
| Cash paid for equity investments |
|
|
— |
|
|
|
(10,500 |
) |
|
|
|
|
|
|
|
|
|
| Net cash flows used in investing activities(1) |
|
|
(20,586 |
) |
|
|
(36,609 |
) |
| Financing Activities: |
|
|
|
|
|
|
|
|
| Proceeds from new borrowing on Credit Facility |
|
|
35,000 |
|
|
|
275,000 |
|
| Principal payments on Credit Facility |
|
|
(116,875 |
) |
|
|
(29,375 |
) |
| Settlement and conversion of convertible debt |
|
|
— |
|
|
|
(4 |
) |
| Repurchases of common stock |
|
|
(40,708 |
) |
|
|
(421,067 |
) |
| Dividends paid |
|
|
(5,602 |
) |
|
|
— |
|
| Principal payments on capital lease obligations and other debt |
|
|
(3,245 |
) |
|
|
(3,697 |
) |
| Windfall excess tax benefits related to share-based payments |
|
|
526 |
|
|
|
1,710 |
|
| Withholding tax paid on vesting of restricted stock net of proceeds from exercise of stock options |
|
|
(3,088 |
) |
|
|
(1,588 |
) |
|
|
|
|
|
|
|
|
|
| Net cash flows used in financing activities(1) |
|
|
(133,992 |
) |
|
|
(179,021 |
) |
10
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Effect of exchange rate changes on cash |
|
|
3,744 |
|
|
|
1,152 |
|
|
|
|
|
|
|
|
|
|
| Decrease in cash and cash equivalents |
|
|
(44,762 |
) |
|
|
(119,891 |
) |
| Cash and cash equivalents: |
|
|
|
|
|
|
|
|
| Beginning of period |
|
|
242,696 |
|
|
|
371,437 |
|
|
|
|
|
|
|
|
|
|
| End of period |
|
$ |
197,934 |
|
|
$ |
251,546 |
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
| Cash paid during the period for interest |
|
$ |
11,913 |
|
|
$ |
14,013 |
|
| Cash paid during the period for income taxes, net |
|
$ |
12,991 |
|
|
$ |
23,664 |
|
| Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
| Purchases of property and equipment financed by capital lease obligations |
|
$ |
720 |
|
|
$ |
3,046 |
|
| Purchases of property and equipment included in ending accounts payable |
|
$ |
2,025 |
|
|
$ |
7,240 |
|
| (1) |
During the first quarter of 2015, we discontinued our Redbox operations in Canada. The first quarter of 2014 also includes the wind-down process of certain new ventures that were discontinued during 2013. Cash flows
from these discontinued operations are not segregated from cash flows from continuing operations in all periods presented. |
| (2) |
The non-cash restructuring and lease termination costs in the first quarter of 2015 of $1.7 million is composed of $6.9 million in impairments of lease related assets partially offset by a $5.2 million benefit resulting
from the lease termination. |
11
OUTERWALL INC.
BUSINESS SEGMENT AND ENTERPRISEWIDE INFORMATION
(unaudited)
Changes in the
Organizational Structure
During the first quarter of 2015, we added ecoATM, our electronic device recycling business, as a separate reportable
segment. Previously, the results of ecoATM along with those of other self-service concepts were included in our New Ventures segment. The combined results of the other self-service concepts, which include product sampling kiosk concept SAMPLEit, are
now included in the All Other category in the reconciliation below as they do not meet quantitative thresholds to be reported as a separate segment. All goodwill previously allocated to the New Ventures segment has been allocated to the ecoATM
segment.
Comparability of Segment Results
We have
recast prior period results for the following:
| |
• |
|
Discontinued operations, consisting of our Redbox operations in Canada which we shut down during the first quarter of 2015; and |
| |
• |
|
The addition of our ecoATM segment which we added during the first quarter of 2015. |
Our analysis and
reconciliation of our segment information to the consolidated financial statements that follows covers our results of operations, which consists of our Redbox, Coinstar and ecoATM segments, Corporate Unallocated expenses and All Other. All Other
includes the results of other self-service concepts which we regularly assess to determine whether continued funding or other alternatives are appropriate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dollars in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, 2015 |
|
Redbox |
|
|
Coinstar |
|
|
ecoATM |
|
|
All Other |
|
|
Corporate
Unallocated |
|
|
Total |
|
| Revenue |
|
$ |
519,533 |
|
|
$ |
69,330 |
|
|
$ |
19,749 |
|
|
$ |
24 |
|
|
$ |
— |
|
|
$ |
608,636 |
|
| Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Direct operating |
|
|
342,935 |
|
|
|
37,263 |
|
|
|
22,806 |
|
|
|
1,191 |
|
|
|
989 |
|
|
|
405,184 |
|
| Marketing |
|
|
4,825 |
|
|
|
1,178 |
|
|
|
1,730 |
|
|
|
320 |
|
|
|
367 |
|
|
|
8,420 |
|
| Research and development |
|
|
— |
|
|
|
— |
|
|
|
1,456 |
|
|
|
(85 |
) |
|
|
713 |
|
|
|
2,084 |
|
| General and administrative |
|
|
33,735 |
|
|
|
7,795 |
|
|
|
1,968 |
|
|
|
2,507 |
|
|
|
2,551 |
|
|
|
48,556 |
|
| Restructuring and lease termination costs |
|
|
15,174 |
|
|
|
550 |
|
|
|
127 |
|
|
|
— |
|
|
|
— |
|
|
|
15,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Segment operating income (loss) |
|
|
122,864 |
|
|
|
22,544 |
|
|
|
(8,338 |
) |
|
|
(3,909 |
) |
|
|
(4,620 |
) |
|
|
128,541 |
|
| Less: depreciation, amortization and other |
|
|
(31,607 |
) |
|
|
(7,818 |
) |
|
|
(5,902 |
) |
|
|
(668 |
) |
|
|
— |
|
|
|
(45,995 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income (loss) |
|
|
91,257 |
|
|
|
14,726 |
|
|
|
(14,240 |
) |
|
|
(4,577 |
) |
|
|
(4,620 |
) |
|
|
82,546 |
|
| Loss from equity method investments, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(132 |
) |
|
|
(132 |
) |
| Interest expense, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12,071 |
) |
|
|
(12,071 |
) |
| Other, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,346 |
) |
|
|
(2,346 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) from continuing operations before income taxes |
|
$ |
91,257 |
|
|
$ |
14,726 |
|
|
$ |
(14,240 |
) |
|
$ |
(4,577 |
) |
|
$ |
(19,169 |
) |
|
$ |
67,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dollars in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, 2014 |
|
Redbox |
|
|
Coinstar |
|
|
ecoATM |
|
|
All Other |
|
|
Corporate
Unallocated |
|
|
Total |
|
| Revenue |
|
$ |
513,049 |
|
|
$ |
68,753 |
|
|
$ |
15,946 |
|
|
$ |
14 |
|
|
$ |
— |
|
|
$ |
597,762 |
|
| Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Direct operating |
|
|
363,601 |
|
|
|
37,723 |
|
|
|
15,931 |
|
|
|
408 |
|
|
|
1,979 |
|
|
|
419,642 |
|
| Marketing |
|
|
4,460 |
|
|
|
1,006 |
|
|
|
668 |
|
|
|
161 |
|
|
|
698 |
|
|
|
6,993 |
|
| Research and development |
|
|
8 |
|
|
|
269 |
|
|
|
1,784 |
|
|
|
632 |
|
|
|
781 |
|
|
|
3,474 |
|
| General and administrative |
|
|
38,701 |
|
|
|
6,997 |
|
|
|
2,879 |
|
|
|
921 |
|
|
|
3,110 |
|
|
|
52,608 |
|
| Restructuring and lease termination costs |
|
|
534 |
|
|
|
23 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Segment operating income (loss) |
|
|
105,745 |
|
|
|
22,735 |
|
|
|
(5,316 |
) |
|
|
(2,108 |
) |
|
|
(6,568 |
) |
|
|
114,488 |
|
| Less: depreciation, amortization and other |
|
|
(39,404 |
) |
|
|
(8,563 |
) |
|
|
(3,712 |
) |
|
|
(105 |
) |
|
|
— |
|
|
|
(51,784 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income (loss) |
|
|
66,341 |
|
|
|
14,172 |
|
|
|
(9,028 |
) |
|
|
(2,213 |
) |
|
|
(6,568 |
) |
|
|
62,704 |
|
| Loss from equity method investments, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,368 |
) |
|
|
(9,368 |
) |
| Interest expense, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,648 |
) |
|
|
(9,648 |
) |
| Other, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(648 |
) |
|
|
(648 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) from continuing operations before income taxes |
|
$ |
66,341 |
|
|
$ |
14,172 |
|
|
$ |
(9,028 |
) |
|
$ |
(2,213 |
) |
|
$ |
(26,232 |
) |
|
$ |
43,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
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; |
| |
• |
|
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 i) restructuring costs (including severance and early lease termination costs and related impairment of assets) associated
with actions to reduce costs in our continuing operations across the Company, ii) 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, iii) income or loss from equity method investments, which represents our share of income or loss from entities we do not consolidate or
control and iv) tax benefits related to a net operating loss adjustment (“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.
14
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
March 31, |
|
| Dollars in thousands |
|
2015 |
|
|
2014 |
|
| Net income from continuing operations |
|
$ |
42,155 |
|
|
$ |
27,606 |
|
| Depreciation, amortization and other |
|
|
45,995 |
|
|
|
51,784 |
|
| Interest expense, net |
|
|
12,071 |
|
|
|
9,648 |
|
| Income taxes |
|
|
25,842 |
|
|
|
15,434 |
|
| Share-based payments expense(1) |
|
|
3,941 |
|
|
|
3,765 |
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA from continuing operations |
|
|
130,004 |
|
|
|
108,237 |
|
| Non-Core Adjustments: |
|
|
|
|
|
|
|
|
| Restructuring costs |
|
|
15,851 |
|
|
|
469 |
|
| Rights to receive cash issued in connection with the acquisition of ecoATM |
|
|
1,920 |
|
|
|
3,421 |
|
| Loss from equity method investments |
|
|
132 |
|
|
|
9,368 |
|
|
|
|
|
|
|
|
|
|
| Core adjusted EBITDA from continuing operations |
|
$ |
147,907 |
|
|
$ |
121,495 |
|
|
|
|
|
|
|
|
|
|
| (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 utilizing the treasury stock method 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
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Diluted EPS from continuing operations per common share (two-class method) |
|
$ |
2.23 |
|
|
$ |
1.09 |
|
| Adjustment from participating securities allocation and share differential to treasury stock method(1) |
|
|
0.05 |
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
| Diluted EPS from continuing operations (treasury stock method) |
|
|
2.28 |
|
|
|
1.11 |
|
| Non-Core Adjustments, net of tax:(1) |
|
|
|
|
|
|
|
|
| Restructuring costs |
|
|
0.52 |
|
|
|
0.01 |
|
| Rights to receive cash issued in connection with the acquisition of ecoATM |
|
|
0.07 |
|
|
|
0.11 |
|
| Loss from equity method investments |
|
|
— |
|
|
|
0.23 |
|
| Tax benefit from net operating loss adjustment |
|
|
— |
|
|
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
| Core diluted EPS from continuing operations |
|
$ |
2.87 |
|
|
$ |
1.42 |
|
|
|
|
|
|
|
|
|
|
| (1) |
Non-Core Adjustments are presented after-tax using the applicable effective tax rate for the respective periods. |
15
A reconciliation of amounts used in core diluted EPS from continuing operations table above is presented in the
following table:
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
March 31, |
|
| In thousands |
|
2015 |
|
|
2014 |
|
| Income from continuing operations attributable to common shares |
|
$ |
40,776 |
|
|
$ |
26,879 |
|
| Add: income from continuing operations allocated to participating securities |
|
|
1,379 |
|
|
|
727 |
|
|
|
|
|
|
|
|
|
|
| Income from continuing operations |
|
$ |
42,155 |
|
|
$ |
27,606 |
|
|
|
|
|
|
|
|
|
|
| Weighted average diluted common shares |
|
|
18,286 |
|
|
|
24,575 |
|
| Add: diluted common equivalent shares of participating securities |
|
|
184 |
|
|
|
200 |
|
|
|
|
|
|
|
|
|
|
| Weighted average diluted shares |
|
|
18,470 |
|
|
|
24,775 |
|
|
|
|
|
|
|
|
|
|
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
March 31, |
|
| Dollars in thousands |
|
2015 |
|
|
2014 |
|
| Net cash provided by operating activities |
|
$ |
106,072 |
|
|
$ |
94,587 |
|
| Purchase of property and equipment |
|
|
(20,709 |
) |
|
|
(26,940 |
) |
|
|
|
|
|
|
|
|
|
| Free cash flow |
|
$ |
85,363 |
|
|
$ |
67,647 |
|
|
|
|
|
|
|
|
|
|
16
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:
|
|
|
|
|
|
|
|
|
| Dollars in thousands |
|
March 31,
2015 |
|
|
December 31,
2014 |
|
| Senior unsecured notes(1) |
|
$ |
650,000 |
|
|
$ |
650,000 |
|
| Term loans(1) |
|
|
144,375 |
|
|
|
146,250 |
|
| Revolving line of credit |
|
|
80,000 |
|
|
|
160,000 |
|
| Capital leases |
|
|
12,652 |
|
|
|
15,391 |
|
|
|
|
|
|
|
|
|
|
| Total principal value of outstanding debt including capital leases |
|
|
887,027 |
|
|
|
971,641 |
|
| Less domestic cash and cash equivalents held in financial institutions |
|
|
(37,772 |
) |
|
|
(66,546 |
) |
|
|
|
|
|
|
|
|
|
| Net debt |
|
|
849,255 |
|
|
|
905,095 |
|
| LTM Core adjusted EBITDA from continuing operations(2) |
|
$ |
523,232 |
|
|
$ |
496,820 |
|
|
|
|
|
|
|
|
|
|
| Net leverage ratio |
|
|
1.62 |
|
|
|
1.82 |
|
| (1) |
The senior unsecured notes on our Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014 included $8.0 million and $8.4 million in associated debt discount, respectively. The Term loan on our
Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014 included $0.3 million and $0.3 million in associated debt discount, respectively. |
| (2) |
LTM Core Adjusted EBITDA from continuing operations for the twelve months ended March 31, 2015 and December 31, 2014 was determined as follows: |
|
|
|
|
|
| Dollars in thousands |
|
|
|
| Core adjusted EBITDA from continuing operations for the three months ended March 31, 2015 |
|
$ |
147,907 |
|
| Add: Core adjusted EBITDA from continuing operations for the twelve months ended December 31, 2014: |
|
|
|
|
| Core adjusted EBITDA from continuing operations for the twelve months ended December 31, 2014 as reported in our Annual Report on
Form 10-K for the period ended December 31, 2014(1) |
|
|
480,497 |
|
| Add: Core adjusted EBITDA loss from Redbox Canada operations for the twelve months ended December 31, 2014 |
|
|
16,323 |
|
|
|
|
|
|
| Core adjusted EBITDA from continuing operations for the twelve months ended December 31, 2014 as adjusted for discontinued
operations |
|
|
496,820 |
|
| Less: Core adjusted EBITDA from continuing operations for the three months ended March 31, 2014 |
|
|
(121,495 |
) |
|
|
|
|
|
| LTM Core adjusted EBITDA from continuing operations for the twelve months ended March 31, 2015 |
|
$ |
523,232 |
|
|
|
|
|
|
| (1) |
Core adjusted EBITDA from continuing operations for the twelve months ended December 31, 2014 is obtained from our Form 10-K for the period ended December 31, 2014, where it is reconciled to net income from
continuing operations, the most comparable GAAP financial measure, and represents the LTM core adjusted EBITDA from continuing operations we use in our calculation of net leverage ratio as of December 31, 2014. |
17
Exhibit 99.2
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
Today, May 7, 2015, Outerwall Inc. issued a press release announcing financial results for the 2015 first quarter. The following prepared
remarks provide additional information related to the company’s operating and financial performance and 2015 full year guidance.
The company
will host a conference call today at 2:30 p.m. PDT to discuss 2015 first quarter results and 2015 full year guidance.
The 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
Certain
statements in these prepared remarks 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 these prepared remarks. Outerwall Inc. undertakes no obligation to update the information provided herein.
©2015 Outerwall Inc. All
Rights Reserved. These materials may not be reproduced, altered or distributed without the express written consent of Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 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; |
| |
• |
|
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
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
i) restructuring costs (including severance and early lease termination costs and related impairment of assets) associated with actions to reduce costs in our continuing operations across the Company, ii) 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, iii) income or loss
from equity method investments, which represents our share of income or loss from entities we do not consolidate or control and iv) tax benefits related to a net operating loss adjustment (“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.
Page 2
©2015 Outerwall Inc. All Rights Reserved. These materials may not be reproduced, altered or distributed without the express written consent of
Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
Overview
Through solid execution, Outerwall delivered strong results in Q1 2015, including our highest consolidated revenue in a quarter and substantial
bottom-line growth. Core adjusted EBITDA from continuing operations grew 21.7% and core diluted EPS from continuing operations more than doubled, increasing by 102.1% year-over-year. We also generated significant free cash flow of $85.4 million in
the quarter, repurchased approximately $41 million of our common shares and paid our first quarterly dividend. Our results underscore our commitment to manage expenses and allocate capital to activities that we believe will produce the highest
returns, including disciplined investments in the business and returning capital to shareholders.
Q1 Consolidated Results
The year-over-year comparisons we make in these
prepared remarks will be Q1 2015 versus Q1 2014 unless otherwise noted.
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
March 31, |
|
|
Change |
| (In millions, except per share data) |
|
2015 |
|
|
2014 |
|
|
% |
| GAAP Results |
|
|
|
|
|
|
|
|
|
|
| Consolidated revenue |
|
$ |
608.6 |
|
|
$ |
597.8 |
|
|
1.8 % |
| Income from continuing operations |
|
$ |
42.2 |
|
|
$ |
27.6 |
|
|
52.7 % |
| Net income |
|
$ |
35.6 |
|
|
$ |
23.2 |
|
|
53.6 % |
| Diluted EPS from continuing operations per common share* |
|
$ |
2.23 |
|
|
$ |
1.09 |
|
|
104.6 % |
| Net cash provided by operating activities |
|
$ |
106.1 |
|
|
$ |
94.6 |
|
|
12.1 % |
| |
|
|
|
|
|
|
|
|
|
|
| Core Results** |
|
|
|
|
|
|
|
|
|
|
| Core adjusted EBITDA from continuing operations |
|
$ |
147.9 |
|
|
$ |
121.5 |
|
|
21.7 % |
| Core diluted EPS from continuing operations* |
|
$ |
2.87 |
|
|
$ |
1.42 |
|
|
102.1 % |
| Free cash flow |
|
$ |
85.4 |
|
|
$ |
67.6 |
|
|
26.2 % |
* Beginning in Q1 2015, we applied the two-class method of calculating earnings per share for
our GAAP results because the impact of unvested restricted shares as a percentage of total common shares outstanding became more dilutive given the level of stock repurchases over the past year. Core diluted EPS from continuing operations continues
to be reported under the treasury stock method
** Refer to Appendix A for a discussion of Use of Non-GAAP Financial Measures and
Core and Non-Core Results
Our Q1 highlights include:
| |
• |
|
We reported consolidated revenue of $608.6 million, the highest quarter in the company’s history |
| |
• |
|
We delivered 21.7% growth in core adjusted EBITDA from continuing operations to $147.9 million, reflecting continued expense management across the
company, including 3.4% lower direct operating expense and 7.7% lower G&A expense |
| |
• |
|
Our core diluted earnings per share from continuing operations increased 102.1% to $2.87 |
| |
• |
|
Redbox generated its highest quarterly revenue in company history and delivered solid margin expansion, primarily driven by the price increase last December
|
| |
• |
|
We signed a new two-year content agreement with Warner Bros. |
Page 3
©2015 Outerwall Inc. All Rights Reserved. These materials may not be reproduced, altered or distributed without the express written consent of
Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
| |
• |
|
We continued investing in growth by scaling ecoATM, installing approximately 250 kiosks in the quarter |
| |
• |
|
We generated free cash flow of $85.4 million, an increase of 26.2% year-over-year |
| |
• |
|
We repurchased 617,195 shares for $40.7 million and paid our first quarterly dividend of $0.30 per share |
Previously we reported the results of ecoATM and other self-service concepts, including SAMPLEit, in our New Ventures segment. Beginning with Q1, ecoATM
is a separate reportable segment and results for our other concepts are included within an “All Other” category but are not presented as a separate reportable segment.
In line with our focus on driving profitability to enhance shareholder value and ongoing assessment to ensure we are allocating capital to activities
that we believe will produce the highest returns, we completed the shutdown and disposal of Redbox Canada operations on March 31, 2015, due to its continued negative impact on Redbox’s financial results. Redbox Canada results have been
excluded from the Redbox segment and have been re-classified as discontinued operations in Q1 and prior periods.
We also completed certain
restructuring activities not associated with Redbox Canada that generated pre-tax expense of $15.9 million during Q1, in line with our continued cost savings initiatives and the shift during Q1 of additional
Redbox functions to our Los Angeles, California office to be closer to our studio partners. This included early termination of leases for certain floors of our Redbox facilities in Oakbrook Terrace, Illinois, in order to optimize facilities space
and drive operational savings. As a result of the early termination, we recorded a one-time pre-tax charge of $11.0 million, which included $6.6 million in leasehold asset impairment for our Oakbrook Terrace facilities. We also recorded pre-tax
severance expense of $4.3 million during Q1 and $0.5 million in lease termination costs for a floor within a shared service facility that we subleased.
Capital Allocation
In Q1 we continued to execute on our
commitment to return 75% to 100% of annual free cash flow to shareholders as we repurchased shares and implemented a quarterly dividend policy.
During Q1, we repurchased 617,195 shares of our common stock at an average price of $65.96 per share for $40.7 million. As of March 31, 2015, there
was approximately $373.3 million in authority remaining under our stock repurchase program.
On May 5, 2015, our board declared a quarterly
cash dividend of $0.30 per share expected to be paid on June 23, 2015, to all stockholders of record as of the close of business on June 9, 2015.
Page 4
©2015 Outerwall Inc. All Rights Reserved. These materials may not be reproduced, altered or distributed without the express written consent of
Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
Additional Q1 Consolidated Metrics
|
|
|
|
|
|
|
|
|
| Metric |
|
Amount |
|
Comment |
| Total net interest expense |
|
$ |
12.1 |
|
|
MM |
|
|
| Core effective tax rate |
|
|
38.2 |
|
|
% |
|
|
| Cash and cash equivalents |
|
$ |
197.9 |
|
|
MM |
|
Includes $68.7MM payable to retailer partners; additionally, $37.8MM of total cash was held in financial institutions domestically |
| Total principal value of outstanding debt, including capital leases |
|
$ |
887.0 |
|
|
MM |
|
|
| Net leverage ratio* |
|
|
1.62 |
|
|
x |
|
|
* Refer to Appendix A for a discussion of Use of Non-GAAP Financial Measures and Core and Non-Core Results
Capital Expenditures
We discuss our capital expenditures
(CAPEX) on an accrual basis. In Q1 our total investment in CAPEX was $14.5 million, primarily reflecting investment in ecoATM kiosks to scale the business and maintenance to support the Redbox and Coinstar kiosk networks. The following is a
breakdown of CAPEX by category for Q1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Q1 2015 CAPEX (Accrual Basis) |
|
| (In millions) |
|
New |
|
|
Maintenance |
|
|
Other |
|
|
TOTAL |
|
| Redbox |
|
$ |
0.7 |
|
|
$ |
1.6 |
|
|
$ |
0.7 |
|
|
$ |
3.0 |
|
| Coinstar |
|
|
0.5 |
|
|
|
0.9 |
|
|
|
— |
|
|
|
1.4 |
|
| ecoATM |
|
|
8.7 |
|
|
|
— |
|
|
|
— |
|
|
|
8.7 |
|
| All Other |
|
|
0.7 |
|
|
|
— |
|
|
|
— |
|
|
|
0.7 |
|
| Corporate |
|
|
— |
|
|
|
— |
|
|
|
0.7 |
|
|
|
0.7 |
|
| TOTAL |
|
$ |
10.6 |
|
|
$ |
2.5 |
|
|
$ |
1.4 |
|
|
$ |
14.5 |
|
Non-Core Results
In Q1 2015, total pretax non-core expenses were $17.9 million primarily driven by $15.9 million in restructuring costs, including severance and early
lease termination costs and related impairment of assets and $1.9 million in expense in rights to receive cash issued in connection with the acquisition of ecoATM.
Management Update
Outerwall announced that Maria Stipp
resigned as the president of ecoATM effective as of May 29, 2015, to take a CEO role at another consumer company. The company expects to name an interim leader in the near future.
Page 5
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Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
Q1 Segment Operating Results – Redbox
Key Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
| Category |
|
Q1 2015 |
|
Q1 2014 |
| Revenue |
|
$ |
519.5 |
|
|
MM |
|
$ |
513.0 |
|
|
MM |
| Rentals |
|
|
173.0 |
|
|
MM |
|
|
198.8 |
|
|
MM |
| Net revenue per rental |
|
$ |
3.00 |
|
|
|
|
$ |
2.58 |
|
|
|
| Same store sales growth (decline) |
|
|
0.7 |
|
|
% |
|
|
0.9 |
|
|
% |
| Gross margin |
|
|
59.5 |
|
|
% |
|
|
56.3 |
|
|
% |
| Segment operating income |
|
$ |
122.9 |
|
|
MM |
|
$ |
105.7 |
|
|
MM |
| Segment operating margin |
|
|
23.6 |
|
|
% |
|
|
20.6 |
|
|
% |
| Unique credit cards renting in quarter |
|
|
37.3 |
|
|
MM |
|
|
41.8 |
|
|
MM |
| Total kiosks (at quarter end) |
|
|
41,960 |
|
|
|
|
|
42,800 |
|
|
|
| Total locations (at quarter end) |
|
|
34,430 |
|
|
|
|
|
35,100 |
|
|
|
| Blu-ray |
|
|
|
|
|
|
|
|
|
|
|
|
| Blu-ray as percentage of rentals |
|
|
14.5 |
|
|
% |
|
|
15.2 |
|
|
% |
| Blu-ray as percentage of Redbox revenue |
|
|
18.2 |
|
|
% |
|
|
17.7 |
|
|
% |
In January we made the decision to shut down our
Redbox operations in Canada due to its continued negative impact on Redbox’s financial results. As a result, starting with Q1 2015, Redbox Canada results are included in discontinued operations. All prior periods have been recast to exclude
Redbox Canada from Redbox segment results.
In Q1, Redbox revenue increased 1.3% year-over-year to $519.5 million, the highest quarterly segment
revenue in company history, primarily driven by the price increase taken in December 2014 and strong seasonality in Q1, which offset the impact of a softer content slate compared with 2014. Consumers generally responded better to the price increase
in weeks when content was stronger.
While Q1 revenue was supported by strong seasonality, content strength was soft relative to Q1 2014.
Q1 2015 box office for Redbox releases was down 29.3% from Q1 2014 with eight fewer theatrical titles releasing during the quarter. Fury and The Equalizer, which released in December 2014, were top performing titles in Q1 in both
DVD and Blu-ray formats. Rentals decreased 12.9% to 173.0 million compared with 198.8 million in Q1 2014 primarily due to weaker content coupled with lower demand from price-sensitive customers as well as the ongoing secular decline in the
physical rental market.
We expect the impact of the price increase to vary as demand changes during periods of strong and weak release schedules,
promotional activity, and seasonality. Our more price sensitive customers may change their rental habits over time in response to the new prices, which would impact total rentals or nights out. We will continue to closely monitor the impact of the
price increase relative to control markets throughout 2015 to evaluate consumer behavior.
Page 6
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Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
Q1 average check increased 16.3% year-over-year to $3.00 and 9.9% sequentially compared with
Q4 2014, driven primarily by the price increase for movies and video games. The higher price points offset an expected increase in single-night rentals. Single-night rentals represented 59.6% of total rentals, an increase of 150 basis points
sequentially from Q4 2014 and an increase of 210 basis points year-over-year. We invested in higher promotional spend per rental year-over-year through customer-specific promotional offerings, which drove incremental revenue and lessened the impact
of the demand decline from the price increase.
Blu-ray represented 18.2% of revenue and 14.5% of rentals in Q1 2015 compared with 17.7% of revenue
and 15.2% of rentals in Q1 2014. As a percentage of rentals, Blu-ray was impacted by the price increase as well as six fewer theatrical titles on Blu-ray than Q1 2014. However, the higher price point for Blu-ray helped increase the mix of revenue
generated by Blu-ray rentals in the quarter. The number of customers renting Blu-ray increased slightly compared with Q1 2014.
Unique credit cards
renting in Q1 2015 were 37.3 million, a decrease of 10.8% year-over-year. The Target credit card security breach that occurred in late 2013 resulted in a significant number of new credit cards issued to consumers that we believe increased the
number of our new unique credit cards in Q1 2014. Sequentially, unique credit cards renting decreased 4.7% from Q4 2014 in line with the lower rental demand driven by weaker content and the price increase. Similarly, high frequency renters,
customers that rent four or more titles per quarter, represented 54.3% of revenue in Q1 2015, a decline from 56.3% in Q1 2014, but an increase sequentially compared with 54.0% in Q4 2014.
Redbox continues to offer the best value in home entertainment, and customer engagement remains strong as we continue to build stronger, more
personalized relationships with our consumers via web, email and mobile marketing tools. Enrollment in Redbox Play Pass, our loyalty program, increased 22.5% sequentially over Q4 to 1.8 million members by the end of Q1. During Q1, members
who participated in Redbox Play Pass rented more than twice as frequently as non-members. In addition, we continue to expand the Redbox digital network of consumer touch points with substantial year-over-year growth across all categories, including
40.8 million email subscribers, 20.7% growth; 6.6 million text club members, 42.3% growth; and 29.0 million apps downloaded, 15.1% growth.
In Q1 2015, Redbox segment operating income increased 16.2% year-over-year to $122.9 million and segment operating margin increased 300 basis points to
23.6%. Operating margin improvement reflects a decrease in direct operating expenses, driven primarily by gross margin improvement, which increased 320 basis points year-over-year to 59.5% and improved 120 basis points sequentially compared
with Q4 2014. The improvement in gross margin was driven by higher revenue per rental from the price increase as well as a lower average cost per disc due to the mix of content released in the quarter. In addition to gross margin benefits, we
saw improvements in both direct operating and G&A expense as we continued to drive operating efficiencies in the business. Operating income also includes $15.2 million in restructuring charges related to the reduction of office space in our
Chicago location and severance expense.
Page 7
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Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
Video Games Rentals and Revenue
|
|
|
|
|
|
|
|
|
| Video Games Performance |
|
Q1 2015 |
|
|
Q1 2014 |
|
| Percentage of rentals |
|
|
1.1 % |
|
|
|
1.4 % |
|
| Percentage of Redbox revenue |
|
|
2.9 % |
|
|
|
3.4 % |
|
In Q1 2015, video games rentals and revenue declined compared with Q1 2014 as the revenue benefit from the price
increase was offset by continued underperformance of Q4 titles, decline in Wii platform rentals and consumer transition to new generation platforms. New generation titles made up 12.6% of our game rentals in Q1 2015, with interest in new generation
rentals growing throughout the quarter. We plan to continue to grow the mix of new generation titles as we move through 2015.
Kiosk Optimization
Through our optimization efforts, we continue to collaborate with our retail partners to improve kiosk productivity at existing locations and remove
kiosks that underperform our revenue expectations for kiosks in their respective channels. During the quarter, we removed approximately 270 underperforming kiosks. 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.
Studio Agreements
We are pleased to have signed an agreement with Warner Bros. that allows us to continue to add value to our customers and content creators. Redbox
remains committed to driving substantial industry revenue and providing consumers with affordable access to new-release movies.
Q1 Segment Operating Results – Coinstar
Key Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
| Category |
|
Q1 2015 |
|
Q1 2014 |
| Revenue |
|
$ |
69.3 |
|
|
MM |
|
$ |
68.8 |
|
|
MM |
| Average transaction |
|
$ |
42.49 |
|
|
|
|
$ |
40.76 |
|
|
|
| Transactions |
|
|
15.9 |
|
|
MM |
|
|
16.6 |
|
|
MM |
| Same store sales (SSS) growth |
|
|
0.8 |
|
|
% |
|
|
3.1 |
|
|
% |
| Segment operating income |
|
$ |
22.5 |
|
|
MM |
|
$ |
22.7 |
|
|
MM |
| Segment operating margin |
|
|
32.5 |
|
|
% |
|
|
33.1 |
|
|
% |
| Kiosks (at quarter end) |
|
|
21,220 |
|
|
|
|
|
21,000 |
|
|
|
| Locations (at quarter end) |
|
|
20,010 |
|
|
|
|
|
20,300 |
|
|
|
Coinstar segment revenue increased $0.6 million, or 0.8%, compared with Q1 2014 primarily due to growth in the number of
Coinstar Exchange kiosks and transactions partially offset by lower Coinstar U.S. coin volume. The impact of the increased coin voucher product transaction fee from 8.9% to 9.9% implemented in the U.K. in August 2014 was primarily offset by the
unfavorable exchange rate impact on U.K. revenue due to the recent strengthening of the U.S. dollar versus the British pound. Same store sales growth was primarily flat as a result of these factors.
Page 8
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Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
The average transaction size continued to increase while the number of transactions have declined. The
decline in transactions is the result of larger pours and less frequent visits and a slight decrease in the U.S. kiosk base year-over-year as a result of continued kiosk optimization efforts.
Coinstar segment operating income decreased slightly year-over-year and segment operating margin was down 60 basis points from Q1 2014 primarily due to
restructuring expenses and higher G&A expense.
Q1 Segment Operating Results – ecoATM
Key Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
| Category |
|
Q1 2015 |
|
Q1 2014 |
| Revenue |
|
$ |
19.7 |
|
|
MM |
|
$ |
15.9 |
|
|
MM |
| Segment operating loss |
|
$ |
8.3 |
|
|
MM |
|
$ |
5.3 |
|
|
MM |
| ASP of value devices sold |
|
$ |
60.28 |
|
|
|
|
$ |
94.31 |
|
|
|
| Number of value devices sold |
|
|
317,134 |
|
|
|
|
|
166,940 |
|
|
|
| Number of overall devices sold |
|
|
518,633 |
|
|
|
|
|
240,999 |
|
|
|
| Kiosks (at quarter end) |
|
|
2,140 |
|
|
|
|
|
910 |
|
|
|
| Locations (at quarter end) |
|
|
1,900 |
|
|
|
|
|
680 |
|
|
|
Historically, ecoATM was part of the New Ventures segment. Q1 2015 marks the first quarter that we are reporting ecoATM
results as a separate segment, with previous periods adjusted to include only ecoATM results. In key metrics, we include average selling price of value devices sold (ASP), which we define as the average price we receive when we resell value devices
to our buyers.
During Q1 we installed approximately 250 net new kiosks, bringing the total installed base to 2,140 at quarter end. In 2014, 90% of
the new installations were completed in the second half of the year, and those kiosks are still ramping. In addition, the majority of the 2014 installations were in the grocery channel, where we have seen slower ramp curves than the mall and mass
merchant channels. Typically, grocery channel sites are smaller in overall square footage and have less traffic. As a result, we expect these kiosks to have lower collections relative to the mall and mass merchant channels.
During the quarter, the decrease in retail foot traffic at our kiosk locations, in addition to competition from carriers, affected collection rates,
particularly for value devices. This shifted the mix of value devices and was the primary reason for the year-over-year decline in our ASP. Entering 2015, collections per kiosk for value devices dropped below Q1 2014. However, in March collections
per kiosk began to improve. ASP for value devices also improved during the quarter, recovering significantly from depressed levels coming out of Q4.
In Q1, ecoATM segment revenue increased 23.8% compared with Q1 2014, which was less than we expected primarily due to the decline in collections per
kiosk and lower ASP.
Page 9
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Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
We are starting to see increased traffic and collections at the kiosks, and expect those to return to
historical levels over time. As we expand our installed kiosk base, we expect our revenue to grow from additional installed kiosks, as well as the continued ramping of kiosks installed over the past few quarters.
Direct operating expense reflects the ongoing investments to support scaling the ecoATM business. Due to the fixed nature of several of our kiosk
servicing costs and the decrease in retail foot traffic at our kiosk locations impacting our collections and revenue in the quarter, we were unable to significantly leverage our overall costs as a percentage of revenue. As we install additional
ecoATM kiosks and our existing kiosks continue to ramp, we expect to leverage the fixed cost components of our direct operating expenses.
During Q1
we kicked off consumer marketing to drive awareness of our instant cash value proposition through targeted in-store and point of sale advertising, as well as digital ad placement focusing on higher value device owners. As we continue to build
critical mass of our installed kiosk base by expanding to additional mall and mass locations this year, we expect these marketing efforts to further enhance kiosk performance.
Guidance
We are updating our 2015 annual guidance to reflect changes in our expectations based on Q1 results and our outlook for the year. (Exhibit 1) The
changes for the full year include narrowing the revenue range for Redbox and reducing the expected revenue range for ecoATM based on Q1 actuals and the expected timing of ramping kiosks for the remainder of the year. Guidance has also been updated
for the discontinuation of Redbox Canada and shares repurchased in Q1 2015.
For the full-year 2015, we expect:
| |
• |
|
consolidated revenue in the range of $2.294 billion to $2.419 billion, |
| |
• |
|
core adjusted EBITDA from continuing operations between $472 million and $514 million, and |
| |
• |
|
core diluted earnings per share between $7.49 and $8.49, which does not reflect any additional share repurchases we may complete during the year.
|
We expect Redbox revenue in the range of $1.850 billion to $1.955 billion. In 2015, we continue to expect the price increase and
benefits resulting from investments in customer experience and marketing programs to help offset the secular decline in the physical rental market and the underlying risk in the content slate. Our guidance also incorporates anticipated lower rental
demand and shorter average rental duration as a result of the price increase that partially offsets the increase in the per night rental price.
We experience
higher seasonality in Q1 and Q4 and therefore Q1 performance should not be extrapolated to Q2 and Q3.
We expect content strength to improve in Q2
2015 compared with 2014 when the slate was particularly weak. The Q2 box office is expected to be 61.7% above Q2 2014 with five more theatrical titles releasing during the quarter. (Exhibit 2) Sequentially, Q2 box office is down approximately 14.4%.
In addition, we typically see an 8%-12% average reduction in rentals from Q1 to Q2 after adjusting for changes in content.
Page 10
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Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
Since we first provided 2015 guidance in February, estimated 2015 box office has decreased slightly and
certain titles have shifted from Q3 to Q4. By quarter, Q2 box office increased 19.1%, Q3 declined 22.9% and Q4 increased 2.7%. We continue to expect Q4 will be the strongest box office quarter for the year followed by Q1, Q2, and Q3. We expect the
release schedule will continue to evolve throughout the course of the year.
We expect ecoATM revenue in the range of $131 million to $146 million
reflecting Q1 results and our expectations for the timing of new installs in 2015 and the continued ramping of kiosks installed in 2014.
We have
increased our expected range for free cash flow to between $215 million and $255 million based on the increase in expected EBITDA and the decrease in expected capital expenditures.
Summary
Our strong performance in Q1 underscores solid execution of our strategy to optimize our core Redbox and Coinstar businesses, scale ecoATM and increase
operational efficiencies across the company. Our consolidated revenue in the quarter was the highest in the company’s history, with Redbox generating its highest quarterly revenue. We delivered significant growth in core adjusted EBITDA from
continuing operations, as our core businesses continued to manage expenses and reduce operating costs. We continued to scale ecoATM, installing 250 kiosks in the quarter. These achievements highlight the solid execution and operational excellence
that generate growth in profitability and free cash flow and allow us to also invest in the future of our business. We also continued to repurchase our common stock and paid our first dividend in the quarter, demonstrating further our disciplined
approach to capital allocation.
We remain confident in Outerwall’s long-term prospects as we leverage our market-leading brands to drive
profitability and deliver value for shareholders, partners and customers.
Page 11
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Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
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; |
| |
• |
|
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
i) restructuring costs (including severance and early lease termination costs and related impairment of assets) associated with actions to reduce costs in our continuing operations across the Company, ii) 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, iii) income or loss
from equity method investments, which represents our share of income or loss from entities we do not consolidate or control and iv) tax benefits related to a net operating loss adjustment (“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.
Page 12
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Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
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 |
|
| |
|
March 31, |
|
| Dollars in thousands |
|
2015 |
|
|
2014 |
|
| Net income from continuing operations |
|
$ |
42,155 |
|
|
$ |
27,606 |
|
| Depreciation, amortization and other |
|
|
45,995 |
|
|
|
51,784 |
|
| Interest expense, net |
|
|
12,071 |
|
|
|
9,648 |
|
| Income taxes |
|
|
25,842 |
|
|
|
15,434 |
|
| Share-based payments expense(1) |
|
|
3,941 |
|
|
|
3,765 |
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA from continuing operations |
|
|
130,004 |
|
|
|
108,237 |
|
| Non-Core Adjustments: |
|
|
|
|
|
|
|
|
| Restructuring costs |
|
|
15,851 |
|
|
|
469 |
|
| Rights to receive cash issued in connection with the acquisition of ecoATM |
|
|
1,920 |
|
|
|
3,421 |
|
| Loss from equity method investments |
|
|
132 |
|
|
|
9,368 |
|
|
|
|
|
|
|
|
|
|
| Core adjusted EBITDA from continuing operations |
|
$ |
147,907 |
|
|
$ |
121,495 |
|
|
|
|
|
|
|
|
|
|
| (1) |
Includes both non-cash share-based compensation for executives, non-employee directors and employees as well as share-based payments for content arrangements.
|
Page 13
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Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
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 utilizing
the treasury stock method 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
March 31, |
|
| |
| |
|
2015 |
|
|
2014 |
|
| Diluted EPS from continuing operations per common share (two-class method) |
|
$ |
2.23 |
|
|
$ |
1.09 |
|
| Adjustment from participating securities allocation and share differential to treasury stock
method(1) |
|
|
0.05 |
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
| Diluted EPS from continuing operations (treasury stock method) |
|
|
2.28 |
|
|
|
1.11 |
|
| Non-Core Adjustments, net of tax:(1) |
|
|
|
|
|
|
|
|
| Restructuring costs |
|
|
0.52 |
|
|
|
0.01 |
|
| Rights to receive cash issued in connection with the acquisition of ecoATM |
|
|
0.07 |
|
|
|
0.11 |
|
| Loss from equity method investments |
|
|
— |
|
|
|
0.23 |
|
| Tax benefit from net operating loss adjustment |
|
|
— |
|
|
|
(0.04) |
|
|
|
|
|
|
|
|
|
|
| Core diluted EPS from continuing operations |
|
$ |
2.87 |
|
|
$ |
1.42 |
|
|
|
|
|
|
|
|
|
|
| (1) |
Non-Core Adjustments are presented after-tax using the applicable effective tax rate for the respective periods. |
A reconciliation of amounts used in core diluted EPS from continuing operations table above is presented in the following table:
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
| |
March 31, |
|
| In thousands |
|
2015 |
|
|
2014 |
|
| Income from continuing operations attributable to common shares |
|
$ |
40,776 |
|
|
$ |
26,879 |
|
| Add: income from continuing operations allocated to participating securities |
|
|
1,379 |
|
|
|
727 |
|
|
|
|
|
|
|
|
|
|
| Income from continuing operations |
|
$ |
42,155 |
|
|
$ |
27,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average diluted common shares |
|
|
18,286 |
|
|
|
24,575 |
|
| Add: diluted common equivalent shares of participating securities |
|
|
184 |
|
|
|
200 |
|
|
|
|
|
|
|
|
|
|
| Weighted average diluted shares |
|
|
18,470 |
|
|
|
24,775 |
|
|
|
|
|
|
|
|
|
|
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 |
|
| |
|
March 31, |
|
| Dollars in thousands |
|
2015 |
|
|
2014 |
|
| Net cash provided by operating activities |
|
$ |
106,072 |
|
|
$ |
94,587 |
|
| Purchase of property and equipment |
|
|
(20,709) |
|
|
|
(26,940) |
|
|
|
|
|
|
|
|
|
|
| Free cash flow |
|
$ |
85,363 |
|
|
$ |
67,647 |
|
|
|
|
|
|
|
|
|
|
Page 14
©2015 Outerwall Inc. All Rights Reserved. These materials may not be reproduced, altered or distributed without the express written consent of
Outerwall Inc.
Outerwall Inc. 2015 First Quarter Earnings
Prepared Remarks
May 7, 2015
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:
|
|
|
|
|
|
|
|
|
| Dollars in thousands |
|
March 31,
2015 |
|
|
December 31,
2014 |
|
| Senior unsecured notes(1) |
|
$ |
650,000 |
|
|
$ |
650,000 |
|
| Term loans(1) |
|
|
144,375 |
|
|
|
146,250 |
|
| Revolving line of credit |
|
|
80,000 |
|
|
|
160,000 |
|
| Capital leases |
|
|
12,652 |
|
|
|
15,391 |
|
|
|
|
|
|
|
|
|
|
| Total principal value of outstanding debt including capital leases |
|
|
887,027 |
|
|
|
971,641 |
|
| Less domestic cash and cash equivalents held in financial institutions |
|
|
(37,772) |
|
|
|
(66,546) |
|
|
|
|
|
|
|
|
|
|
| Net debt |
|
|
849,255 |
|
|
|
905,095 |
|
| LTM Core adjusted EBITDA from continuing operations(2) |
|
$ |
523,232 |
|
|
$ |
496,820 |
|
|
|
|
|
|
|
|
|
|
| Net leverage ratio |
|
|
1.62 |
|
|
|
1.82 |
|
| (1) |
The senior unsecured notes on our Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014 included $8.0 million and $8.4 million in
associated debt discount, respectively. The Term loan on our Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014 included $0.3 million and $0.3 million in associated debt discount, respectively. |
| (2) |
LTM Core Adjusted EBITDA from continuing operations for the twelve months ended March 31, 2015 and December 31, 2014 was determined as follows:
|
|
|
|
|
|
| Dollars in thousands |
|
|
|
| Core adjusted EBITDA from continuing operations for the three months ended March 31, 2015 |
|
$ |
147,907 |
|
| Add: Core adjusted EBITDA from continuing operations for the twelve months ended December 31, 2014: |
|
|
|
|
| Core adjusted EBITDA from continuing operations for the twelve months ended December 31, 2014 as reported in our Annual Report on Form 10-K for the period ended
December 31, 2014(1) |
|
|
480,497 |
|
| Add: Core adjusted EBITDA loss from Redbox Canada operations for the twelve months ended December 31, 2014 |
|
|
16,323 |
|
|
|
|
|
|
| Core adjusted EBITDA from continuing operations for the twelve months ended December 31, 2014 as adjusted for discontinued operations |
|
|
496,820 |
|
| Less: Core adjusted EBITDA from continuing operations for the three months ended March 31, 2014 |
|
|
(121,495) |
|
|
|
|
|
|
| LTM Core adjusted EBITDA from continuing operations for the twelve months ended March 31, 2015 |
|
$ |
523,232 |
|
|
|
|
|
|
| |
(1) |
Core adjusted EBITDA from continuing operations for the twelve months ended December 31, 2014 is obtained from our Form 10-K for the period ended
December 31, 2014, where it is reconciled to net income from continuing operations, the most comparable GAAP financial measure, and represents the LTM core adjusted EBITDA from continuing operations we use in our calculation of net leverage
ratio as of December 31, 2014. |
Page 15
©2015 Outerwall Inc. All Rights Reserved. These materials may not be reproduced, altered or distributed without the express written consent of
Outerwall Inc.
|
|
|
NASDAQ:OUTR
Exhibits
2015 Q1 Prepared Remarks
May 7, 2015
Exhibit 99.2b |
|
|
| ©
2015 Outerwall Inc. All Rights Reserved. These materials may not be reproduced, altered, or
distributed without the express written consent of Outerwall Inc. Exhibit 1: 2015
Full-Year Guidance Revenue by Segment ($MM)
Redbox
$1,850 – $1,955
Coinstar
$313 – $318
ecoATM
$131 – $146
TOTAL
$2,294 – $2,419
Consolidated – Other
Core adjusted EBITDA from continuing operations ($MM)
$472 – $514
Core diluted EPS from continuing operations
$7.49 – $8.49
Average diluted shares outstanding (MM)
18.0 – 18.1
Estimated effective tax rate
36.5% – 38.5%
Free cash flow
($MM)
$215 – $255
Capital Expenditures ($MM)
Redbox
$15 – $20
Coinstar
$16 – $20
ecoATM
$31 – $40
Corporate
$31 – $38
TOTAL
$93 – $118
Net Kiosk Installations by Segment
Redbox (U.S.)
(1,000) – (1,900)
Coinstar
0 – (100)
ecoATM
600 – 1,000
1
See Appendix A for a discussion of Non-GAAP Financial Measures and Core and Non-Core
Results 2
Excludes the impact of potential share repurchases for the remainder of 2015
3
Does not include kiosks removed as a result of the shutdown of Redbox Canada operations as of
March 31, 2015 As of May 7, 2015
1,2
1
2
1
3 |
|
|
| ©
2015 Outerwall Inc. All Rights Reserved. These materials may not be reproduced, altered, or
distributed without the express written consent of Outerwall Inc. Exhibit 2: 2015 Q2
Redbox Release Schedule 1 Q2 2015 data estimated
2 Includes titles with total North American box office greater than $5MM
Q2 2015
1
Q2 2014
Box Office
2
Titles
Box Office
2
Titles
Total
$2.21Bn
36
$1.36Bn
31
April
$870.6MM
12
$487.7MM
14
May
$266.3MM
9
$746.4MM
13
June
$1.07Bn
15
$129.9MM
4
As of May 7, 2015 |
Exhibit 99.3
OUTERWALL INC. DECLARES QUARTERLY DIVIDEND
BELLEVUE, Wash. – May 7, 2015 – Outerwall Inc. (Nasdaq: OUTR) today announced that on May 5, 2015, its board of directors
declared a quarterly dividend of $0.30 per share of common stock. The dividend is expected to be paid on June 23, 2015, to stockholders of record at the close of business on June 9, 2015. The declaration and payment of future dividends
will be subject to the board’s approval.
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. 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.
###
Investor Contact:
Rosemary Moothart
Director of Investor Relations
425-943-8140
rosemary.moothart@outerwall.com
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