Outerwall Inc.

  • Overview

Outerwall (formerly Coinstar) takes its name from the previously underutilized "fourth wall" area between the cash registers and the front door in retail stores. The company began as an operator of coin-counting machines, but underwent a major transformation when it acquired Redbox. Since then, the DVD kiosk business, which generates more than 85% of Outerwall's sales, has eclipsed coin-counting. Redbox operates some 43,700 DVD rental kiosks located at supermarkets, big-box retailers, drug and convenience stores, and restaurants across North America. The fast-growing company changed its name to Outerwall in 2013 to reflect its evolution from coin-counting to an operator of various automated retail businesses.

Geographic Reach

While the US accounts for 98% of Outerwall's sales, its retail kiosks are also found inside and outside stores in Canada, Puerto Rico, the UK, and Ireland.

Operations

Beyond DVD rentals and coin-counting machines, Outerwall's other automated retail concepts (house by its New Ventures segment) include Rubi coffee kiosks (launched in 2012) that feature Seattle's Best Coffee beverages; Redbox Tickets, also launched in 2012, that offer tickets to live events and attractions in the Philadelphia market; and refurbished electronics and photo self-service concepts.

Sales and Marketing

Walgreen and Wal-Mart Stores each account for about 16% of Outerwall's sales, while grocery giant Kroger represents about 11% of sales.

Financial Performance

Outerwall's sales topped $2 billion in 2012, a 19% increase compared with 2011. Net income rose 45% over the same period. The growth driver is clearly Redbox, which posted a 22% increase in annual sales primarily due to $167.5 million from new kiosk installations and increasing sales at existing DVD rental machines. The company's Coinstar coin-counting business posted a modest 3% increase in revenue in 2012 versus 2011, as a result of a larger kiosk base and higher than average coin-to-voucher transactions. The New Ventures segment, which includes automated retail concepts such as Rubi coffee kiosks and ecoATM kiosks, saw revenue increase 80% on kiosk growth.

Indeed, since acquiring Redbox in 2008 the company's sales have more than doubled from about $1.1 billion in 2009 to $2.2 billion in 2012.

Strategy

Since its purchase of Redbox in 2008, the company rapidly evolved from a one-product business -- offering just coin-counting services -- to one that offers a variety of products and services. Indeed, its tiny New Ventures segment is a laboratory of sorts for the development and acquisition of new automated retail concepts. It has grown primarily through acquisitions and is said to be exploring the sale of beauty products. Still, its acquisitions have not been nearly as successful as Redbox, which now accounts for more than 85% of the company's total revenue. 

Focusing on its top-earning divisions, the company has been exiting less profitable enterprises amid tough economic conditions worldwide. In mid-2011 Coinstar sold its money-transfer business, which served the US and Latin America, to California-based financial serves firm Sigue. The deal, valued at about $40 million, strengthens Sigue's coverage as it provides money-transfer services in more than 135 countries and allows Coinstar to concentrate on its automated retail strategy (i.e., coin counting and video rental). Indeed, Coinstar also sold off some 900 DVDXpress kiosks (400 of which were active) in 2010, as well as DVD discs that were in the kiosks, as it had deemed the business as unprofitable.

Ownership

Goldman Sachs Asset Management owns about 10% of Outerwall's shares.

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Outerwall Inc.


1800 114th Ave Se
Bellevue, WA 98004-6946
Phone: 1 (425) 943-8000
Fax: 1 (425) 6449447
www.coinstar.com

STATS


  • Employer Type: Public
  • Stock Symbol: CSTR,
  • Stock Exchange: , NASDAQ
  • CEO: J. Scott Di Valerio
  • CEO: J. Scott Di Valerio
  • President, Redbox: Mark Horak

Major Office Locations

  • Bellevue, WA
  • Bellevue, WA

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