BELLEVUE, Wash., May 7, 2015 /PRNewswire/ -- Outerwall Inc.
(Nasdaq: OUTR) today reported financial results for the first
quarter ended March 31, 2015.
(Logo -
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"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."
|
2015
|
|
2014
|
|
Change
|
|
First
Quarter
|
|
First
Quarter
|
|
%
|
|
GAAP
Results
|
|
|
|
|
|
|
• Consolidated revenue
|
$
|
608.6
|
million
|
|
$
|
597.8
|
million
|
|
1.8
|
%
|
|
• Income from continuing
operations
|
$
|
42.2
|
million
|
|
$
|
27.6
|
million
|
|
52.7
|
%
|
|
• Net income
|
$
|
35.6
|
million
|
|
$
|
23.2
|
million
|
|
53.6
|
%
|
|
• Diluted EPS from continuing operations per
common share*
|
$
|
2.23
|
|
|
$
|
1.09
|
|
|
104.6
|
%
|
|
• Net cash provided by operating
activities
|
$
|
106.1
|
million
|
|
$
|
94.6
|
million
|
|
12.1
|
%
|
|
|
|
|
|
|
|
Core
Results**
|
|
|
|
|
|
|
• Core adjusted EBITDA from continuing
operations
|
$
|
147.9
|
million
|
|
$
|
121.5
|
million
|
|
21.7
|
%
|
|
• Core diluted EPS from continuing
operations*
|
$
|
2.87
|
|
|
$
|
1.42
|
|
|
102.1
|
%
|
|
• Free cash flow
|
$
|
85.4
|
million
|
|
$
|
67.6
|
million
|
|
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:
- Reported consolidated revenue of $608.6
million, the highest quarter in the company's history
- 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
- Increased core diluted earnings per share from continuing
operations 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 in December
2014
- Signed a new two-year content agreement with Warner Bros.
- Continued investing in growth by scaling ecoATM, installing
approximately 250 kiosks in the quarter
- Generated free cash flow of $85.4
million, an increase of 26.2% year-over-year
- 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.
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.
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.
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.
1Refer 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
|
As
of
|
|
Dollars in
millions, except per share data
|
May 7,
2015
|
|
Consolidated
results
|
|
|
Revenue
|
$2,294 —
$2,419
|
|
Core adjusted EBITDA
from continuing operations(1)
|
$472 —
$514
|
|
Core diluted EPS from
continuing operations(1)(2)
|
$7.49 —
$8.49
|
|
Free cash
flow(1)
|
$215 —
$255
|
|
Weighted average
diluted shares outstanding(2)
|
18.0 —
18.1
|
|
Core effective tax
rate
|
36.5% —
38.5%
|
|
Segment
revenue
|
|
|
Redbox
|
$1,850 —
$1,955
|
|
Coinstar
|
$313 —
$318
|
|
ecoATM
|
$131 —
$146
|
|
Capital
expenditures
|
|
|
Redbox
|
$15 — $20
|
|
Coinstar
|
$16 — $20
|
|
ecoATM
|
$31 — $40
|
|
Corporate
|
$31 — $38
|
|
Total
CAPEX
|
$93 — $118
|
|
Net kiosk
installations
|
|
|
Redbox
|
(1,000) —
(1,900)
|
|
Coinstar
|
0 — (100)
|
|
ecoATM
|
600 —
1,000
|
|
|
1Refer to
Appendix A for a discussion of Use of Non-GAAP Financial Measures
and Core and Non-Core Results
|
|
|
2Excludes
the impact of any potential share repurchases for the remainder of
2015
|
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,
- 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.
(Consolidated Financial Statements, Business
Segment Information and Appendix A follow)
|
OUTERWALL
INC.
|
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
|
(in thousands,
except per share data)
|
|
(unaudited)
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2015
|
|
2014
|
|
Revenue
|
$
|
608,636
|
|
|
$
|
597,762
|
|
|
Expenses:
|
|
|
|
|
Direct
operating(1)
|
405,184
|
|
|
419,642
|
|
|
Marketing
|
8,420
|
|
|
6,993
|
|
|
Research and
development
|
2,084
|
|
|
3,474
|
|
|
General and
administrative
|
48,556
|
|
|
52,608
|
|
|
Restructuring and
lease termination costs
|
15,851
|
|
|
557
|
|
|
Depreciation and
other
|
42,686
|
|
|
47,942
|
|
|
Amortization of
intangible assets
|
3,309
|
|
|
3,842
|
|
|
Total
expenses
|
526,090
|
|
|
535,058
|
|
|
Operating
income
|
82,546
|
|
|
62,704
|
|
|
Other expense,
net:
|
|
|
|
|
Loss from equity
method investments, net
|
(132)
|
|
|
(9,368)
|
|
|
Interest expense,
net
|
(12,071)
|
|
|
(9,648)
|
|
|
Other, net
|
(2,346)
|
|
|
(648)
|
|
|
Total other expense,
net
|
(14,549)
|
|
|
(19,664)
|
|
|
Income from
continuing operations before income taxes
|
67,997
|
|
|
43,040
|
|
|
Income tax
expense
|
(25,842)
|
|
|
(15,434)
|
|
|
Income from
continuing operations
|
42,155
|
|
|
27,606
|
|
|
Loss from
discontinued operations, net of tax
|
(6,556)
|
|
|
(4,431)
|
|
|
Net income
|
35,599
|
|
|
23,175
|
|
|
Foreign currency
translation adjustment(2)
|
2,854
|
|
|
875
|
|
|
Comprehensive
income
|
$
|
38,453
|
|
|
$
|
24,050
|
|
|
|
|
|
|
Income from
continuing operations attributable to common shares:
|
|
|
|
|
Basic
|
$
|
40,775
|
|
|
$
|
26,860
|
|
|
Diluted
|
$
|
40,776
|
|
|
$
|
26,879
|
|
|
|
|
|
|
Basic earnings (loss)
per common share:
|
|
|
|
|
Continuing
operations
|
$
|
2.23
|
|
|
$
|
1.12
|
|
|
Discontinued
operations
|
(0.36)
|
|
|
(0.18)
|
|
|
Basic earnings per
common share
|
$
|
1.87
|
|
|
$
|
0.94
|
|
|
|
|
|
|
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.
|
|
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
|
|
|
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)
|
|
|
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.
|
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
|
|
|
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
|
|
APPENDIX A
Non-GAAP Financial Measures
Non-GAAP measures may be provided as a complement to results
provided in accordance with United
States generally accepted accounting principles
("GAAP").
We use the following non-GAAP financial measures to evaluate our
financial results:
- Core adjusted EBITDA from continuing operations;
- Core diluted earnings per share ("EPS") from continuing
operations;
- Free cash flow; and
- Net debt and net leverage ratio.
These measures, the definitions of which are presented below,
are non-GAAP because they exclude certain amounts which are
included in the most directly comparable measure calculated and
presented in accordance with GAAP. Our non-GAAP financial measures
are not meant to be considered in isolation or as a substitute for
our GAAP financial measures and may not be comparable with
similarly titled measures of other companies.
Core and Non-Core Results
We distinguish our core activities, those associated with our
primary operations which we directly control, from non-core
activities. Non-core activities are primarily nonrecurring events
or events we do not directly control. Our non-core adjustments for
the periods presented include 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.
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.
|
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
|
|
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:
|
March 31,
2015
|
|
December 31,
2014
|
|
Dollars in
thousands
|
|
|
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.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/outerwall-inc-announces-2015-first-quarter-results-300079866.html
SOURCE Outerwall Inc.