Redbox Hits Fiscal Home Run7 May, 2015 By: Erik Gruenwedel
Record revenue helps drive up profit 17.5%
Worries over a rental price hike initiated last year actually proved unfounded as Redbox May 7 reported record first-quarter (ended March 31) revenue of $519.5 million, up 1.3% ($6.5 million) from revenue of $513 million during the previous-year period.
The Oakbrook Terrace, Ill.-based kiosk vendor saw operating profit increase 37.5% to $91.2 million, from $66.3 million during the first quarter of 2014.
Redbox generated approximately 173 million rentals in the first quarter, compared with 198.8 million rentals a year ago, as rentals were negatively impacted by a weaker content slate, lower demand from price-sensitive customers and ongoing secular decline in the disc rental market.
Net revenue per rental was $3, 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.
Segment operating margin was 17.5%, despite the impact of $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.
"We continue to make small strategic investments back into the business to mitigate the impact of secular declines, such as investing in our loyalty program," Galen Smith, CFO of parent Outerwall, said on the call.
Indeed, Redbox has shuttered upwards of 1,900 kiosks through May 7, the bulk come from the shutdown of Redbox Canada during the first quarter. The company previously relocated content and title marketing teams to Los Angeles to advance Redbox's partnerships with studios and publishers.
Smith said while the price increase and 30% lower box office affected rental turns, the jury is still out on the impact of seasonality among new releases. For example, seasonality was a bigger factor in Q1 than it is in the current second quarter.
“As you move into another quarter that is weaker, will we see a bigger pronounced impact from the price increase? That’s what we’ll be monitoring as we go forward,” Smith said.