The stock is down 7.4% in post-market trading after the company behind the Redbox DVD rental kiosks reported so-so results for Q4, with a light projection for 2013. Net income of $22.9M is down 27.4% from the end of 2011, on revenues of $564.1M, +8.4%. The revenue number is short of analysts’ forecasts for $580.2M. But earnings from continuing operations, at 75 cents a share, topped expectations for 73 cents. Coinstar predicts that in the current quarter revenues could go as high as $593M with EPS from continuing operations of as much as 92 cents. Some analysts expected better: for example B. Riley’s Eric Wold expects Q1 revenues of $614.8M with EPS of $1.12. Coinstar says that Redbox accounted for $488.3M in revenues in Q4, +9.6%, with operating income of $41.2M, -11.5%. With initiatives including the new Redbox Instant By Verizon streaming service “we made strategic investments across our business this year that we believe will generate new opportunities for growth as we move through 2013 and beyond,” CEO Paul Davis says.
The stock price is down about 15% after hours for the company behind the Redbox kiosks. It reported net earnings of $36.9M, +37.9% vs last year’s Q2, on revenues of $532.2M, +22.3%. So what’s the problem? Analysts thought that revenues would be closer to $545M. And earnings from continuing operations, at $1.11 a share, were short of the $1.17 forecasts. Redbox accounted for $458M in revenues, +25.9%, with operating income of $61.4M, +31.6%. Redbox had 180M rentals in the quarter, +7.4%. Interestingly, the company says that Disney’s John Carter — one of the studio’s biggest disappointments — “has performed better than our expectations”. But Coinstar notes that there’ll be 27 video releases in Q3, eight fewer than in the period last year. But August will include Lionsgate’s The Hunger Games. The company expects Redbox to generate about $2B in revenues for all of 2012. Coinstar CEO Paul Davis says that Redbox “began its expansion into Canada, extended its lead in physical rentals achieving more than 42% unit market share, and closed the NCR transaction” which provides it with the company’s Blockbuster Express-branded kiosks. Earlier this week the company said that it has named its planned streaming service Redbox Instant By Verizon. Coinstar had a one-time gain of $12M in Q1 from licensing the Redbox name to the joint venture. Its share of the losses from the venture this year is expected to be $18M.
Coinstar shares are up more than 13% in after-hours trading on a big news day for the relatively small parent of Redbox. The twist with the announcement involving Blockbuster Express is that the kiosks you see in supermarkets and drug stores aren’t owned by Dish Network, which last year bought the famous video rental chain. The kiosks are made by NCR, which had licensed the Blockbuster name. But now its chief competitor, Coinstar, says it has agreed to buy the NCR Entertainment business line for up to $100M. Coinstar also says that it will “procure from NCR hardware, software and services” that will provide NCR with $25M over five years. NCR had been looking to get out of the kiosk business, which had also become a thorn in Dish Network’s side. The deal needs to pass muster with anti-trust regulators. If it does, then the companies expect it to close in 3Q. If it doesn’t, then Redbox will have to pay NCR a $10M break-up fee. NCR sent Blockbuster Express customers an email today assuring them that until the sale closes “we will continue to run the business as we have been, focused on bringing you the latest New Release movies with most titles only $2 for the first night.”
UPDATE, 3 PM: CEO Paul Davis says the Redbox price increase to $1.20 a night followed “several months of testing” and was designed to keep prices “as low as possible for consumers” as operating costs rise. The company says that the “vast majority” of transactions at its kiosks involve debit cards affected by the Durbin Amendment, as opposed to credit cards. Customers will still be able to rent for $1 a night through November if they reserve a DVD online and then pick it up at a kiosk. He added that the company plans to unveil a digital streaming plan by year’s end, calling it “a top priority for the company.” Davis says Redbox has seen business increase from consumers who felt “disenfranchised” by Netflix’s 60% price hike for its combo DVD rental and streaming service, but he can’t say how many people defected.
On the studio side, Davis says Paramount just extended its agreement to provide DVDs to Redbox the same day they’re available in stores through 2014. The studio will receive 100,000 shares of restricted stock in Coinstar, and can collect an additional 100,000 shares if it exercises its two options that each would extend the agreement by a year. Redbox’s day-and-date agreement with Sony runs through September 2012, and one with Lionsgate goes through August 2014. It has similar deals with Summit and Anchor Bay.
Coinstar Shares Down Slightly In After-Hours Trading As Revenues For Redbox Owner Miss Analysts’ Target
The leading provider of DVD rental kiosks generated 2Q profits of $26.7M, double what it delivered in the same period last year, on revenues of $435.2M, up 27%. Earnings at continuing operations came in a 98 cents a share, beating the 95 cents that analysts expected. But they also thought that revenues would be slightly higher at $437.7M. That contributed to a 1.6% drop for Coinstar shares in after-market trading even though the company also authorized a $250M stock buyback. “Our solid financial position enables us to prudently invest in our business and opportunistically return capital to our shareholders,” CFO J. Scott Di Valerio says. Redbox said today that it will rent video games at 5,000 additional kiosks beginning Aug. 1 bringing its total to 27,000.