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Redbox Q2 Profit Up, Rentals Down

30 Jul, 2015 By: Erik Gruenwedel

Corporate parent Outerwall hires new CEO

Quality, not quantity, ruled the second-quarter (ended June 30) bottom line for Redbox. The packaged-media kiosk vendor reported operating income of nearly $99 million, which was up nearly 15% from operating income of $86 million during the prior-year period.

Revenue dipped 0.9% to $439 million, compared with nearly $442 million a year ago. Rental transactions dropped 13% to 146 million, from 168 million a year ago — primarily driven by a decline in video game rentals from a consumer transition to new-generation platforms, lower demand from price-sensitive customers following last year’s price increases, the expected secular decline in the physical market, and the removal of underperforming kiosks.

Redbox said disc rentals were further impacted by weaker content and the timing of the release slate, as well as an increase in competition for viewing time from several significant theatrical releases during the second quarter of 2015 — notably Universal Pictures’ Jurassic World and Walt Disney Studios’ Avengers: Age of Ultron.

Net revenue per rental was $3, an increase of 37 cents or 14%, from $2.63 in the second quarter of 2014. The increase in net revenue per rental was primarily the result of the price increases, partially offset by an expected increase in single night rental activity as a result of the price increases.

For bean counters, Redbox’s operating margin increased 300 basis points to 22.5%, compared to operating margin of 19.5% a year ago, primarily due to a decrease in direct operating expenses, driven by gross margin improvement. Direct operating and marketing expenses also improved as Redbox continued to drive operating efficiencies in the business to align the cost structure with an anticipated gradual decline in physical rental demand.

Indeed, Redbox in the first quarter shuttered its Canadian operations.

Finally, corporate parent Outerwall announced that its board of directors had appointed Erik Prusch as CEO, effective July 31. Prusch succeeds Nora Denzel, interim CEO. Denzel will remain on the board.

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