Coinstar Management Discusses Q2 2012 Results - Earnings Call Transcript

Coinstar (CSTR)

Q2 2012 Earnings Call

July 26, 2012 5:00 pm ET

Executives

Rosemary Moothart - Director of Investor Relations

Paul D. Davis - Chief Executive Officer, President, Chief Operating Officer and Director

J. Scott Di Valerio - Chief Financial Officer and Interim President of Redbox Automated Retail, Llc

Analysts

Michael J. Olson - Piper Jaffray Companies, Research Division

John Kraft - D.A. Davidson & Co., Research Division

Paul Coster - JP Morgan Chase & Co, Research Division

Darren Aftahi - Northland Capital Markets, Research Division

Andy Hargreaves - Pacific Crest Securities, Inc., Research Division

Ronald Bookbinder - The Benchmark Company, LLC, Research Division

Steven L. Dyer - Craig-Hallum Capital Group LLC, Research Division

Eric Wold - B. Riley & Co., LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen, my name is Kim and I will be your conference coordinator for today. Thank you for joining the Second Quarter 2012 Coinstar Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the call over to Ms. Moothart, your Director of Investor Relations. Please proceed.

Rosemary Moothart

Thank you, Kim. Good afternoon and welcome back to Coinstar's 2012 Second Quarter Earnings Call. Our call today will be hosted by CEO, Paul Davis; and CFO, Scott Di Valerio. We will follow the same format as last quarter. Paul and Scott will make brief introductory remarks, and the majority of our time will be allotted to Q&A.

In our earnings press release, we noted that we have provided prepared remarks from Paul and Scott that include additional information related to Q2 results and 2012 Q3 and full year guidance. The prepared remarks are posted on the Investor Relations section of Coinstar's website at www.coinstarinc.com. We also have posted this segment's supplement, which provides historical data in Excel format and replaces the investor update. And finally, the 10-Q has been filed.

During this call, Paul and Scott may reference non-GAAP financial measures. A reconciliation of differences between GAAP and non-GAAP financial measures is provided in the appendix of the earnings release, which is posted on the Investor Relations website. Also, during this call, various remarks we make about future expectations, plans and prospects for the company constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from expectations, plans and prospects contemplated in these forward-looking statements as a result of various factors, including those discussed in our latest 10-K and subsequent 10-Q filings with the SEC.

And now I'll turn the call over to Paul.

Paul D. Davis

Thanks, Rosemary, and I'd like to thank each of you for joining us today. We're pleased with our performance in Q2. We had revenue growth of 22%, 26% growth from Redbox. With Redbox, we had nearly 180 million rentals and we now have 38,500 Redbox kiosks in over 31,100 locations. We're particularly excited about the growth that we experienced at the market share. We -- for the quarter, we are on a unit basis at 42.5%, which is up a full 8 percentage points year-over-year. We lead our online by mail [ph] competitor now by over 15 percentage points.

We had 38 million unique credit cards used in the quarter, which was up 13% from Q2 of last year, and we track email addresses into the quarter at 43.5 million unique email addresses, which was up 3.5 million in the quarter and up 42% from a year ago.

We're in a great position to increase our Redbox footprint and gain additional share with the closing of the NCR transaction. We're particularly excited about the new retailers that we are now working with, including Publix and Safeway, allowing us to fill out markets that where we didn't have presence before and allow us to bring Redbox value and convenience to additional consumers.

We're also about the expansion of the dollar channel as we continue to progress down that path. We're excited about progress on key initiatives for this year. We launched the Rubi and announced an agreement to feature Seattle's Best Coffee. We are at about 50 -- 50-plus kiosks as we speak, and we're projected to be around 500 by the end of the year. We're making a great progress with our other new self-service retail concepts. For this year, we expect to increase our kiosks counts for the new ventures for the year right at about tenfold. We expect similar growth in kiosk from our equity investments. So net-net, we are very, very pleased with the momentum we're seeing with our new ventures group.

As we talked last quarter, we're expanding into Canada, with both our Coin business, which is over 4 [ph], but in particular, our Redbox business. They've initially, in the last quarter, replaced 60 Redbox kiosks in Toronto, Vancouver, and we're projected to be between 700 and 900 by year end. We've made great progress with the leading retailers across multiple channels. We've been expanding with Wal-mart Canada. We have agreements with Loblaws, which is, for those of you who know the Canadian market, the largest supermarket retailer, and also an agreement with Shoppers Drug Mart, which is the largest pharmacy chain in Canada, and it will begin out rollout with Safeway Canada beginning Q3.

Earlier this week, we announced our -- the leadership team for the joint venture with Verizon, CEO being Shawn Strickland, and also a brand name, Redbox Instant by Verizon, which really leverages to wonderful businesses and leveraging all the equity building those 2 companies.

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