Outerwall (OUTR, Financial) has more than 20 years of experience creating some of the most profitable spaces for its retail partners. Outerwall 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 U.S., Canada, Puerto Rico, the U.K. and Ireland.
The company reported strong fourth-quarter results and is poised to grow. It delivered solid 2015 results with strong free cash flow and core diluted EPS from continuing operations, despite challenging headwinds that continued to impact Redbox.
The overall performance of 2015 reflects its ability to manage businesses for profitability and drive year-over-year growth in core adjusted EPS and free cash flow through expense management.
Fourth Quarter and Full Year Results
The company delivered $485.3 million during the year 2015, in core adjusted EBITDA from continuing operations (which decreased by $11.5 million from the prior-year period) despite $98.4 million less in revenue.
Consolidated results
For the fourth quarter of 2015, consolidated revenue was $527.2 million (a decrease of 11.8%, from $597.4 million in the prior-year quarter). Consolidated revenue was $2.2 billion for the full-year 2015 (a decrease of 4.3% from the prior-year period).
Income from continuing operations for the fourth quarter of 2015 was $17.1 million, or $1 of diluted earnings from continuing operations per common share (which was $51.1 million, or $2.68 of diluted earnings, during the prior-year quarter). For the full year 2015, income from continuing operations was $49.4 million, or $2.75 of diluted earnings from continuing operations per common share ($124.7 million and $5.89 during the prior-year period).
Net cash provided by operating activities was $59.3 million in the fourth quarter of 2015 (a decline of 54.8% from $131.3 million in the prior-year quarter). For the full year 2015, net cash provided by operating activities was $326.1 million ($338.4 million during the prior-year period).
Cash capital expenditures for the fourth quarter of 2015 decreased 32.0% and were $17.4 million ($25.6 million in the prior-year quarter). For the full year 2015, cash capital expenditures decreased 20.8% and were $77.6 million ($97.9 million during the prior-year period).
Core results
Core adjusted EBITDA from continuing operations for the fourth quarter of 2015 was $95.8 million ($147.7 million during the prior-year quarter). For the full-year 2015, core adjusted EBITDA from continuing operations was $485.3 million (an $11.5 million, or 2.3%, decrease from $496.8 million during the prior-year period).
Core diluted EPS from continuing operations for the fourth quarter of 2015 was $1.43 (a decrease from $2.83 during the prior-year quarter). For the full year 2015, core diluted EPS from continuing operations were $8.77 ($7.26 per diluted share during the prior-year period).
Free cash flow for the fourth quarter of 2015 was $41.9 million (a decrease of $63.8 million from $105.7 million in the prior-year quarter). For the full-year 2015, free cash flow increased $8.1 million and was $248.5 million ($240.4 million during the prior-year period).
Share repurchases and dividends
Outerwall continued to return capital to shareholders, repurchasing 2.5 million shares and paying $21 million in quarterly dividends. In addition in December, it repurchased $41 million of outstanding senior notes for $35 million in cash.
(Source: Company’s website)
Expectations for 2016
The company expects the following:
- Core adjusted EBITDA from continuing operations to be in the range of $340 to $380.
- Core diluted EPS from continuing operations to be in the range of $5 to $6.30.
- Free cash flow to be around $140 to $190.
- Weighted average diluted shares outstanding to be in the range of 16.29 to 16.35.
- Core effective tax rate to be around 34.5% to 35.5%.
Focus
- Network optimization.
- Operational efficiencies.
- Expense management.
- Align costs with revenue.
- Optimize kiosk networks.
On a concluding note
The company’s performance in the quarter demonstrates its ability to continue delivering strong financial results. It is out to deliver strong financial performance, manage expenses and improve profitability to both reinvest in the business and enhance the bottom line. It is planning to return 75% to 100% of annual free cash flow to investors through share repurchases, dividends and senior note repurchases.
The company has always looked for ways to provide value, convenience and simplicity to consumers and retailers with its kiosk brands. The company is focused on strengthening businesses while continuing to return significant free cash flow to investors.
Disclosure: I do not hold any position in the company.
