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Coinstar Q3 income up 83%, revenue down slightly over Q2

The retail self-service leader continues its landmark year, thanks in part to the success of the redbox DVD-rental brand.

November 5, 2009

Coinstar Inc., provider of coin-counting kiosks and parent company of the redbox DVD-rental kiosk brand, has announced financial results for the third quarter ended Sept. 30.

The company reported revenue of $296 million, down 6 percent from its $314 million in revenue in the second quarter but up 46 percent from its Q3 revenue in 2008. Net income for the quarter was $41.4 million, up 83 percent from the $7 million in net income reported in Q2, and up 89 percent from Q3 2008. Coinstar's income rose drastically during the quarter in part because it sold its entertainment services business, which resulted in $31.7 million in income.

In its earnings conference call last quarter, Coinstar's comments foreshadowed the sale of its entertainment services division, as well as a stronger focus on retail self-service. CEO Paul Davis says Q3's impressive numbers come as a result of that focus.

"In the third quarter, our core DVD-rental and coin-counting businesses continued to produce solid results at both the top and bottom line," Davis said. "Our performance reflects Coinstar's strength in self-service automated retail and our consistent ability to deliver value and convenience to our customers and retailers."

Reflecting its continued dominance in the DVD-rental kiosk market, Coinstar says revenue from its redbox DVD operations was $198 million for the quarter, up 90 percent from Q3 2008. The company installed an additional 2,700 redbox kiosks in Q3 alone, bringing its total footprint to 20,600. Among other DVD-rental highlights, Davis says redbox rented an average of 31.6 million DVDs per month in Q3.

"That breaks down to more than one per hour for the quarter, a record pace for our incredible operations and sales teams," he said."Recently, we set a new two-day rental record by renting nearly 3.2 million DVDs on a Friday (and) Saturday, which was over 1,100 DVDs rented every minute for 48 hours straight."

Davis also says the company has achieved a 14.6 percent market share in the DVD-rental space, underscoring a high level of brand awareness among consumers.

"As you would suspect, we have some markets where we've exceeded 30 percent market share, whereas other major metro markets where we've only just begun," he said. "Given our projected year-end footprint, nearly 200 million consumers will be walking by one of our kiosks every week, a powerful brand building opportunity not only for redbox, but for studios who decide to partner with us to drive sales of their new movie releases."

Davis also highlighted redbox's recent distribution agreements with Summit Entertainment and NCircle Entertainment, as well as other deals during Q3 with Sony, Lionsgate and Paramount movie studios. He also mentioned the company's troubles with other Hollywood studios, such as 20th Century Fox and Warner Bros.

"Although we have been able to provide our consumers with titles from each of these studios in the same week that movies are available through other channels, we oftentimes have difficulty in obtaining the quantity of each title that we believe fully satisfies consumer demand," he said. "Our goal however, remains the same — to provide our consumers with timely access to affordable new-release titles. We simply want to be treated like all other retailers by having access to new releases on the same date as they are afforded."