Outerwall Q3 Income Climbs 108%, Redbox Rentals Continue To Decline

BELLEVUE, WA – During the third quarter ended Sept. 30, Outerwall Inc.’s net income jumped by 108% to $37.3 million from $17.9 million a year earlier. Quarterly revenue fell 6.9% to $512.1 million from $549.9 million in the third quarter of 2014.

The revenue decrease was due primarily to a $39.7 million loss from Redbox movie rental kiosks. Rental nights per average Redbox kiosk have decelerated for six consecutive quarters and reached an all-time low in the September quarter, falling 26% compared with last year’s third quarter. The DVD rental business is declining as more consumers shift to at-home pay-per-view options and streaming services like Netflix and Amazon Prime Video.

Outerwall’s legacy coin-redemption business Coinstar accounted for 16.7% of third-quarter revenue, rising nearly 1% to $85.7 million. The remainder of the company’s sales mostly came from its ecoATM business, which runs kiosks that buy used smartphones and other portable electronics.

“Our performance in the third quarter underscores our ability to drive the bottom-line,” said Outerwall chief executive Erik E. Prusch. “Redbox was challenged by the lowest theatrical box office in four years for Redbox titles and revenue was lower than we expected. However, we continued to control costs and create efficiencies as our Redbox and Coinstar businesses generated solid margins and cash flow.”

A major focus moving ahead according to Prusch will be on restoring ecoATM to profitability. The ecoATM segment operating loss increased to $3.1 million in the recent, compared with $2 million in the third quarter of 2014, due to an increase in direct operating expenses related to costs associated with the increased installed ecoATM kiosk base.

EcoATM installed 2,210 electronic device trade-in kiosks in the third quarter of 2015, which is 700 more than it deployed in same period last year. The company removed approximately 250 underperforming kiosks, primarily from the grocery channel, and redeployed about 180 kiosks into retailer locations, with the majority in the mall and mass merchant channels, for a net reduction of 50 kiosks from the second quarter.

Outerwall announced a deal worth $18 million to acquire Gazelle, a website that buys and sells used mobile phones, computers and tablets.