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Company behind RedBox cuts staff, scraps planned kiosk ventures
Outerwall, the Bellevue-based company behind CoinStar and Redbox, has cut 8.5 percent of its workforce and is scrapping three new kiosk ventures to improve its profitability heading into the first quarter of 2014.
The company announced earlier this month it is discontinuing kiosk ventures for Rubi, Crisp Market and Star Studio, which are coffee, food and photo kiosks respectively, but will continue to invest in rolling out of its ecoATM kiosks for recycling electronics and limited investment in its SAMPLEit concept, which allows consumers to buy $1 samples of products. It scrapped its Orango — used/refurbished electronics — kiosk earlier this year
“By focusing on the new ventures with the greatest opportunity, we expect to move toward breakeven segment operating results more quickly,” said J. Scott Di Valerio, chief executive officer for Outerwall.
It has also cut 251 employees as another measure for reducing costs by $22 million by the beginning of 2014, with savings offset by an expected $5 million through a one-time, non-core pre-tax charge this year through severances and other costs associated with Outerwall’s plan.
Outerwall also plans a $350 million expansion of its existing senior secured credit facility, which it states will allow it to meet its target leverage ratio by the first quarter of 2014.
Outerwall is also seeking out a new Redbox president to take the helm following the resignation of Anne Saunders and until then the executive team will head up leadership responsibilities.
“I am confident in the future of Redbox and the Redbox executive leadership team which will continue its work to drive the business and ensure a smooth transition to the next president,” said Di Valerio.
Outerwall also expects to repurchase $195 million of its common stock by the end of the year, which it states will provide more than 100 percent of its free cash flow — net cash through operating activities after capital expenses. An additional $50 million of Outerwall common stock is planned to be repurchased by Jan. 31.