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Based on preliminary results through the end of August and the Company's outlook for September, Outerwall now expects the following:
For the third quarter 2013*:
Consolidated revenue between $569 and $589 million, compared to prior estimates of $604 to $630 million;
Core adjusted EBITDA between $101 and $109 million, compared to prior estimates of $129 to $139 million; and
Core diluted EPS between $0.82 and $0.94, compared to prior estimates of $1.36 to $1.51.
For the full year 2013*:
Consolidated revenue between $2.274 and $2.339 billion, compared to prior estimates of $2.372 to $2.475 billion;
Core adjusted EBITDA of $451 to $471 million, compared to prior estimates of $507 to $538 million;
Core diluted EPS between $4.72 and $5.12, compared to prior estimates of $5.76 to $6.26; and
Free cash flow of $170 to $188 million, compared to prior estimates of $211 to $227 million, due to lower operating results offset by a reduction in capital expenditures.
*See Appendix A for non-GAAP financial measures.
"Although both rentals and revenue for Redbox increased significantly in July and August over 2012 levels, they were not to our expectations. In addition, heightened promotional discount activity, which added new customers during the quarter, had an adverse impact on the expected average transaction size and we believe drove consumers toward more single night rentals," said
J. Scott Di Valerio, chief executive officer of Outerwall Inc. "We continue to adjust our Redbox promotional strategy, including a lower level of overall promotion, to better align with anticipated consumer trends, and are also reducing our content and direct operating costs."
Di Valerio continued, "We remain focused on driving profitable growth, maximizing free cash flow and allocating capital to the highest return opportunities. To this end, we are accelerating our full review of our New Ventures initiatives, excluding ecoATM, to ensure they provide the appropriate level of risk adjusted returns. In addition, we are committed to returning a significant portion of free cash flow to shareholders and plan to repurchase an additional
$100 million of common stock after the trading window opens in the fourth quarter."
Rentals for July and August grew year over year 13.4% and 15.7% respectively, with July representing Redbox's best rental month in its history, with approximately 74 million rentals. Redbox continues to expect both rentals and revenue per kiosk to increase compared to comparable periods in 2012. In addition, unique credit and debit cards used in July and August increased 11% year over year, while rental frequency improved in July and August compared to the same periods in 2012.