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Outerwall (NASDAQ:OUTR)

Q2 2014 Earnings Call

July 31, 2014 5:30 pm ET

Executives

Angeline McCabe -

J. Scott Di Valerio - Chief Executive Officer and Director

Galen C. Smith - Chief Financial Officer

Analysts

Michael J. Olson - Piper Jaffray Companies, Research Division

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

Darren Aftahi - Northland Capital Markets, Research Division

Eric C. Wold - B. Riley Caris, Research Division

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

Ronald Bookbinder - The Benchmark Company, LLC, Research Division

Paul J. Chung - JP Morgan Chase & Co, Research Division

Operator

Good afternoon, and welcome to the Outerwall 2014 Q2 Conference Call. My name is Takiba, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to the Angie McCabe, Vice President of Investor Relations. Angie, you may begin.

Angeline McCabe

Thank you, Takiba, and thank you all for joining us for a discussion of Outerwall's 2014 second quarter results. Our call today will be hosted by Outerwall's CEO, Scott Di Valerio; and CFO, Galen Smith. Scott and Galen will make introductory remarks, and then we'll open up the call for Q&A. The earnings release and prepared remarks, including supplementary slides, are posted on the Investor Relations section of Outerwall's website at ir.outerwall.com. In addition, our Q2 10-Q is available in the SEC Filings section of our IR website. As a reminder, beginning in 2015, Outerwall will provide annual guidance only. The company believes annual guidance is a more relevant measure of the business given its stage of growth, and full year results capture the varying seasonal patterns of each of its businesses.

During this call, Scott and Galen may reference non-GAAP financial measures. A reconciliation of differences between GAAP and non-GAAP financial measures is provided in Appendix A of both the earnings release and the prepared remarks. Also during this call, various remarks we make about future expectations, plans and prospects for the company constitute forward-looking statements for the purpose of the Safe Harbor provisions of 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 10-Q filings with the SEC.

With that, I will now turn the call over to Scott.

J. Scott Di Valerio

Thanks, Angie. We appreciate everyone joining on the call today. Our results in Q2 was in the guidance range we gave in our call in May, with revenue at the low end of the range, core adjusted EBITDA from continuing operations at the midrange and core diluted earnings per share from continuing operations at the high end. We also produced strong, free cash flow in Q2. However, the weak slate of movies at Redbox significantly impacted rental patterns of our consumers, and the rollout of our ecoATM kiosk was slower than we expected as retailer contract negotiations took longer than we planned.

June represented the lowest monthly theatrical box office in Redbox history. Box office was down 83% this June compared with June last year, with only 4 titles released during the month. The lack of appealing content and the popularity of World Cup soccer stunted the typical seasonal lift we get in June when summer vacation begins and contributed to lower-than-expected rentals in the quarter.

However, consumer engagement continues to grow at Redbox, with our email subscriber list and total app downloads growing by more than 20% year-over-year. During the second quarter, we sent nearly 590 million emails to our email subscribers, with a 30% improvement in the open rate year-over-year. Also, Blu-ray continued to perform well and grew as a percent of Redbox revenue and rentals, which was in line with our guidance.

Turning to our Coinstar business. Coinstar recorded its $1 billion transaction in the second quarter and has now processed more than 38 billion in dollars and coins in its 23-year history. Revenue, segment operating income and operating margin increased year-over-year, primarily due to the price increase we implemented last October.

In our New Ventures segment, we continue to invest to scale ecoATM. Near the end of the quarter, we finalized certain kiosk installation agreements in the mass merchant and grocery channels. We installed approximately 70 net new kiosks in Q2 and more than 150 already in July. We expect to hit our target of approximately 1,000 to 1,100 kiosks by year-end 2014.

Now I'll turn the call over to Galen to discuss our financial results and guidance.

Galen C. Smith

Thanks, Scott. As Scott discussed, we manage the business for profitability and cash flow despite a weak release schedule that impacted Redbox revenue. In Q2, we produced total revenue of $549.2 million, core adjusted EBITDA from continuing operations of $110.3 million and core diluted EPS from continuing operations of $1.42.

As a reminder, in the second quarter of 2013, we implemented a new accounting methodology for amortizing our Redbox content to better align content costs with revenue. It was applied prospectively and impacts many of our year-over-year comparisons. Had this methodology been applied retrospectively, Redbox content costs would have been $29.4 million higher in Q2 2013, and as a result, our core adjusted EBITDA from continuing operations in Q2 2014 would have increased 9.7% from the prior year.

We generated $36.8 million in free cash flow in Q2, up from negative $5.9 million in Q2 2013, bringing the 2014 year-to-date total to $104.4 million. In Q2, we repurchased approximately 712,000 shares for $50 million, bringing the year-to-date total to over 6.7 million shares for $470.8 million. We remain committed to returning 75% to 100% of free cash flow to shareholders.

We continue to optimize our capital structure in Q2 to the successful completion of a $300 million debt offering and the amendment and extension of our credit facility. This allowed us to lock in attractive rates while increasing our debt capacity for future opportunities.

Turning to segment operating results. Q2 was a challenging quarter due to an exceptionally weak content release schedule. Typically, seasonality in June drives higher rentals during the month. But with the lack of new content, we did not experience that benefit this year. As a result, Redbox revenue decreased 6.9% to $445.5 million, based on lower rental activity.

In Q2 2014, Redbox segment operating income was $83.5 million, and segment operating margin was 18.7%. The year-over-year decreases in these metrics were primarily due to the change in the content amortization accounting methodology and lower revenue. Redbox segment operating income and operating margin in Q2 2014 would have increased 7.3% and 2.4%, respectively, had we applied this accounting change retrospectively.

Our Coinstar business continues to perform well. Compared with Q2 2013, Coinstar segment operating income increased 21.1% and segment operating margin increased 450 basis points to 38.6%, reflecting the October 2013 price increase and our continued focus on driving efficiencies.

New Ventures generated revenue of $23.8 million this quarter. For ecoATM, the number of devices collected and the percentage of higher value devices increased compared with the previous quarter, demonstrating that the concept is resonating with the consumers. As the ecoATM business ramps, we expect segment revenue and operating income to continue to grow and turn profitable in early 2015, following this year's installs.

Turning to guidance. There are several assumptions contributing to our outlook. As a reminder, Redbox quarterly performance is affected by seasonality, the timing of the release slate and the attractiveness of titles, as Q2 demonstrated. With regard to our outlook for Q3, we have better visibility into the release schedule, which has changed significantly in the past few months. When we gave guidance in May, we expected box office for Q3 to be 21% higher than what we now anticipate as 6 titles have since shifted to the fourth quarter. Also, the release slate in September changed substantially with 3 fewer titles, equating to a 50% reduction in box office. Furthermore, over 1/3 of September box office will be released on the last day of the quarter, and as a result, most of the rentals from these titles will occur in the fourth quarter. Also impacting Q3 guidance is fewer ecoATM installs in the first half of this year, as Scott mentioned. Interest expense related to the new debt we issued in June will impact Q3 core diluted EPS by approximately $0.10, while Q2 share repurchases will benefit core diluted EPS by approximately $0.05.

For Q3 2014, we expect consolidated revenue of between $535 million and $565 million, core adjusted EBITDA from continuing operations of between $100 million and $115 million and core diluted EPS from continuing operations of between $0.99 and $1.29.

There are several additional factors contributing to our current expectations for the full year 2014, including the lower-than-expected Q2 revenue, a theatrical box office that is down 7% year-to-date and changes in the release schedule, including titles shifting from Q3 to Q4 and from 2014 to 2015.

In addition, the new debt issued in Q2 will result in higher interest expense and have a $0.26 impact on full year core diluted EPS. However, Q2 share repurchases are expected to benefit full year core diluted EPS by approximately $0.17.

For full year 2014 guidance, we now expect the following: consolidated revenue of between $2.25 billion and $2.33 billion; core adjusted EBITDA from continuing operations of between $450 million and $490 million; and core diluted EPS from continuing operations of between $5.78 and $6.28.

In conclusion, we remain focused on delivering value by managing our business for profitability and cash flow. Redbox continues to be a market leader for new release content and will continue to be a key distribution platform for many years to come. Coinstar is a stable business, producing strong cash flow, and we believe ecoATM has significant growth opportunities.

With that, we'll now take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question is going to come from Mike Olson from Piper Jaffray.

Michael J. Olson - Piper Jaffray Companies, Research Division

Just a couple of questions about the slate and the impact on guidance. Can you just talk more about the phenomenon that you described where Q3 revenue is impacted by bad volumes or bad slate in Q2? In other words, I guess said more directly, why is Q3 guidance impacted by a bad Q2 slate? Or are you just saying that Q3 is a bad slate as well? But maybe on that point, isn't the Q3 slate up slightly year-over-year?

Galen C. Smith

Yes. So Mike, a couple of thoughts for you. First, if you think about flow-through from prior quarter titles, it does matter. So if you look at Q1, we had about 18 million rentals that came over from March into Q2, right? So those titles that released in March is a very strong slate. We expect 7 million to 10 million fewer rentals to come from titles released in June. So it's a significant difference in terms of content that's in the box and how it's carrying over to the next quarter. You're right that box office in the aggregate is up slightly in terms of expectations for Q3. But if you take out the releases on September 30, so the last day of the quarter, it's actually down about 4%. And so you're seeing overall lower box office, and you're seeing fewer rentals carrying through from the prior quarter simply because of the lack of releases in June.

Michael J. Olson - Piper Jaffray Companies, Research Division

Okay, got you. As far as the buyback, just definitionally, the 75% to 100% of free cash flow, I just want to kind of reconfirm what I think you said before that, that does not include the tender offer except for the $20 million that was upsized for the tender offer.

Galen C. Smith

That's correct. So we have about $121 million so far towards our 75% to 100% of free cash flow for the year. So we'll continue to buy back throughout the year.

Operator

And then our next question is going to come from Steve Dyer from Craig-Hallum.

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

You talked about doing some price tests, which I know you've kind of always done to different magnitudes. Can you share at all sort of what you're finding there, maybe what next steps may be and potentially when? Any color there would be helpful.

J. Scott Di Valerio

Yes, Steve. We're just starting in the third quarter to put in, in a couple of markets price test across standard def and DVD and testing different prices. We'll continue to do that, test those out through the quarter and probably into the fourth quarter and look at the analysis and make some decisions as we roll in to 2015. So it is early days.

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

Okay. Can you give any commentary on how the kiosks in Canada are performing maybe relative to your expectations going in?

J. Scott Di Valerio

Yes. They're not performing at the levels that we would want them to. Part of that is the density wasn't there. As we've been installing, we've -- over the last couple of quarters, it's really been around making sure that we get the density. So a number of kiosks per number of people so that, that rent return anywhere becomes more of a reality. The other thing that we're working on is to get the right amount of content in the kiosks at the right time in Canada, working with the studios to get the content as well as making sure we understand what the needs are of our Canadian consumers. And the third thing we're doing with a couple of retailers, key retailers up there, is we're working on retail marketing programs with them. We've run a few tests, and it significantly increased the overall rents per kiosk per day. And so we're going to broaden out that work in order to drive the rents out there. So we're continuing to work Canada, making progress. But right now, it's not where we want them to be. But we have a path to get it where it needs to be.

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

Okay. And then hopping over to eco. Can you maybe elaborate a little bit on sort of why the delay in rolling them out? And then your guidance for the back half of the year would suggest a pretty aggressive rollout. Sort of what gives you the confidence that you could hit that, particularly in the production? Have you gone to a new supplier or multiple suppliers? And just elaborate on that a little bit.

J. Scott Di Valerio

Sure. Just in the work of getting contracts in place, whether it be pod contracts or other contracts for a new business like that, it takes some time, even with the existing retailers. And so that really was what the delay was as we moved into -- and through the second quarter. So we did get 70 net new kiosks installed in the second quarter. But we've already put in 150 in July. So we have the capacity to move through and move relatively quickly both from a deployment standpoint but also from a manufacturing standpoint. So we feel confident as we continue to sign retailers, as we continue to work the rollout that we'll be able to hit those numbers and deliver on the 1,000 to 1,100 kiosks. Good thing, even with the delay in the rollout, that's not being where exactly where we want it to be. The business is performing where we expected, and we increased the revenue quarter-to-quarter by over $7 million, which is an indication with pretty much the same number of kiosks then as we started the quarter, which is an indication that the kiosks are ramping and continuing to ramp up well and that consumers are seeing it is a good proposition.

Operator

And then our next question is going to come from Darren Aftahi of Northern (sic) [Northland] Securities.

Darren Aftahi - Northland Capital Markets, Research Division

Just a few. So I think back in the Summer Olympics you kind of saw a phenomenon where your high-frequency renters kind of lag because there's no content a few weeks after the Olympics had concluded. Do you see that same phenomenon in July, kind of month-to-date, with the World Cup or any kind of impact from specifically high-frequency renters you mentioned in your prepared remarks?

J. Scott Di Valerio

Yes. High-frequency renters were less of a percentage of our revenue than they traditionally are, but it's a similar phenomenon that we saw when we had the Olympics. And it's a combination of the fact that they're a high user of content not only in our kiosk but in other forms as well. And so when the content isn't available out there in the kiosk, they will move to a different form, and then they come back to the value that is Redbox as we move forward. And as I think we've looked in working through where our consumer panels and the like is that include our high-frequency renters, that there was a high percentage of those high-frequency renters that view the World Cup and reduced their movie viewing across all the platforms. So it's really a combination of the 2 things, Darren. As we're working through July and working through the rest of the third quarter, we would expect to see the high-frequency renters to come back. We've been working, as we normally do, on making sure we're serving up content to them that's relevant to them. And as we build up the content and the kiosk for the third quarter where we have some good -- some stuff in from the second quarter and then some additionally new content into the third quarter, we expect to see them coming back at a rate that we've seen them in the past, probably not all the way up to the 60% of revenue that we saw traditionally, until we get into the fourth quarter.

Darren Aftahi - Northland Capital Markets, Research Division

Great. And then a couple more. So can you maybe give us an update on the gift card exchange within the Coin segment?

J. Scott Di Valerio

Yes. Gift card exchange continues to perform as we expect -- as we had laid it out and expected to. We're working through that rollout and put installation in at the levels that we expected. It's still early days in that business, and we're testing that out, and we're always tweaking and working through it. But to date, it has done what we expected it to do, and we will continue to work through that over as we move through 2014.

Darren Aftahi - Northland Capital Markets, Research Division

And then last one, on Redbox since it sounds like they're going to contribute another $10 million, $11 million to the balance of the year. What are your thoughts on subscriber progress and your decision that potentially it sounds like there's some wording in the prepared remarks where you may kind of not contribute any more capital to the venture going forward. Just some thoughts around that.

J. Scott Di Valerio

Yes. We're not -- if you look at the both Verizon and ourselves, we're not pleased with where the subscribers are to date. What we do know is that our consumers look to Redbox as a new release platform for transactional new release platform. One of the things that's interesting to our subscriber base at Redbox Instant is the amount of content that's getting viewed from a transactional video-on-demand on the Redbox Instant platform is increasing. So it's further evidence that as we look at -- our consumers do look to Redbox and trust Redbox for new release content regardless of format. So we're continuing to work with Verizon around our Redbox Instant to see if there's proper ways from a funding perspective to increase subscribers and continue to grow out the business. And we'll make the decisions as we move forward, and as it says in the language there in the document, is if we don't hit certain subscriber thresholds, then we have some decisions to make in March.

Operator

Our next question will come from Eric Wold from B. Riley.

Eric C. Wold - B. Riley Caris, Research Division

Follow-up on -- 2 questions. First one, follow-up on the last, on Redbox Instant. Remind us, if you do get to the point where you think thresholds aren't being met and you want to exit the venture, what is the procedure to exit the venture? Can you just -- immediately cut off any future capital contribution and end it or is there going to be a wind-down period?

Galen C. Smith

Yes. I mean, it's at a high level, right? It would be simply us making the decision, and then we go through a process of valuing and putting our stake to the joint venture. And it's too early to tell whether there will be any additional capital we need to put in our not. But it would be -- again, if we're not seeing those thresholds, we may make the decision to put our stake over.

Eric C. Wold - B. Riley Caris, Research Division

Okay. And then second question. Over the next 9 months, all of your studio content agreements have expiration dates. So as you move towards the potential renewals for the studio deals, I guess 2 questions. One, what is the largest content cost increase that you think you'll be able to absorb without having to take a price increase at Redbox? And two, do you still believe that a 28 delay is the longest reasonable delay that you'd accept before considering walking for a workaround?

J. Scott Di Valerio

Yes. I mean, we certainly have been working very closely with our studio partners all through the year, and there are a few that are coming up over, as you said, over the next 9 months. And we'll continue to work with them to make sure we get content pricing in the right spots in order to be able to continue to deliver that value and convenience that we do at Redbox and what the studios value, which is a significant amount of money that we pay into them for the content, which is a high-margin portion of the business for them. So I don't want to get into are there going to be price increases or no price increases, those types of things. But we will work with our studio partners to make sure that the deals that we have are reflective and allow us to continue to drive our business and deliver great product to our consumers. And the second part of your question was?

Eric C. Wold - B. Riley Caris, Research Division

In the past, you said that 28 days was the longest you thought was reasonable. Is that still the case? If they decide to go longer than 28 days, you'd consider walking away for a workaround?

J. Scott Di Valerio

That is still the case, yes.

Operator

Our next question will come from Andy Hargreaves from Pacific Crest.

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

Just wondering on the guidance -- for your guidance. Free cash flow guidance wasn't changed at all. So is there something that's changed with working capital expectations? Or is that just bringing CapEx down?

Galen C. Smith

Yes. Actually, there was a slight change in CapEx write-down, about $4 million at the midpoint. And with EBITDA coming down, what you're really seeing is a change in cash taxes, which is offsetting some of that. So that's why the guidance range was still the same for that.

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

Okay. And then can you give us any sense for what you expect for your Redbox's gross margins to be in the next couple of quarters?

Galen C. Smith

So one of the key things about the Redbox business is continuing to manage it overall. So as you see revenue expectations adjusting, then it's important to also adjust your content buy. So that's clearly one of the things that we're focused on doing. So we think that for the year, we think it will continue to move up on the whole as we work through the rest of 2014.

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

From Q2 levels you mean?

Galen C. Smith

Correct.

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

Okay. And then can you just -- I mean, getting back to the performance in the quarter and in June, can you give us some sense for the transaction linearity month to month versus what a normal quarter would have been?

Galen C. Smith

So I'll try to answer that and then follow up if this is not what you're looking for. April and May performed as we would expect. The content was a bit stronger, and so you saw the rentals there. Where we typically see a seasonality benefit in June from the titles released then, we didn't see that. So we knew there was going to be a challenge with only 4 new releases in the month of June. But we kind of expected that that seasonal lift to happen. When it didn't happen, we obviously saw a decline in June rentals relative to expectations.

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

Okay. No, that's helpful. And then just last on the -- the Coin operating margin was pretty good in the quarter. Is that a level that you guys think is sustainable here?

Galen C. Smith

Well, it will move around quarter-to-quarter, right, obviously, but really what we saw was -- we had a price increase several years ago. And we saw -- the reason -- one of the reasons why we made that change in October of last year is we've seen increases in other lines of the P&L. And so this is really an opportunity for us to help offset some of those increases that we've seen. And so we expect that they will still move around a bit quarter-to-quarter. But obviously, you are seeing the benefit from that price increase flow through.

Operator

And then our next question is going to come from Ronald Bookbinder from Benchmark Company.

Ronald Bookbinder - The Benchmark Company, LLC, Research Division

As you try to reengage the high-frequency renter, will there be an increase in marketing or promotional activity that would impact margins?

J. Scott Di Valerio

Yes. We'll do it at a number of different ways. One, we'll continue to use the information we get through our CRM system to be able to serve up content that's relevant to our consumers in a more frequent basis. But also, we'll do some strike promotions and the like in order to reignite our consumers into the kiosk and then -- and kind of balance getting the rents and the revenues back to where they need to be. And that's something that we began executing on near the end of June but really more in July, as the content began to come in, in July, that was a little bit better content in order to bring consumers back into the kiosk. So we'll do a combination but always balancing, making sure that we're driving not only just rentals but we're driving the right revenue so that we're at the right margin levels.

Ronald Bookbinder - The Benchmark Company, LLC, Research Division

And on Q4 Redbox offerings, how confident are you that more releases might not slip into 2015?

J. Scott Di Valerio

It's always -- we won't know until we get into the buying period in Q4. And again, as you look at what's happening in the theaters, right now, that's -- a lot of that content will be the content that comes in and available to us in the fourth quarter. And that box office isn't performing as well as the studios thought they were going to perform or wanted them to perform. So we're going to keep a close eye on that. And again, depending on a number of factors, the studios make decisions on how they want to put those movies into the market and available for rent and available for sale and the like. So there's still going to be some jostling of the Q4 slate. It always happens. It could be jostling in. It could be jostling out. So we'll keep an eye on that and give an update as we do our third quarter call.

Ronald Bookbinder - The Benchmark Company, LLC, Research Division

And on ecoATM, what percentage, just roughly, is -- are the locations based in malls versus a retailer, mass merchant or grocer? And do you expect the locations at a grocery or a mass merchant to outperform a mall location?

J. Scott Di Valerio

Well, the vast majority of the kiosk right now are in the mall channel because that's where we did the initial rollout. And we just began this year in testing out the mass merchant and the large-format grocery. So it's really heavily centered toward the mall channel at this point. What we are seeing and what we expect to see is that in the mass merchant and the large-format grocery channel, the kiosks will perform slightly lower than they do in the malls because the foot traffic is lower. However, we still expect the kiosks to perform within that $100,000 to $120,000 revenue number. So a little bit lower but very much within the overall model.

Operator

[Operator Instructions] And our next question is going to come from Paul Coster out of JPMorgan.

Paul J. Chung - JP Morgan Chase & Co, Research Division

This is actually Paul Chung for Paul Coster. Thanks for taking my question. So what are your current views on video-on-demand prices trending at around $4.99? And how quickly do you think prices may come down, if they do it all?

J. Scott Di Valerio

On video-on-demand?

Paul J. Chung - JP Morgan Chase & Co, Research Division

Right.

J. Scott Di Valerio

Yes. I mean, I think a couple of key things there is, one, we look at Redbox and what the rental -- the transactional rentals that we do from a physical perspective as still the best value in the market for consumers. And so I think that's something that we always look at and make sure that we're tracking that way to transactional video-on-demand. And it's something that continues to move that way. Where will prices on transactional video-on-demand go, it's hard to say. But one of the things we know is that studios believe their content is worth the high value, and bringing the price point to that value down is not something that they like to do or are looking to do. And they're obviously trying to fill a gap in the physical sell-in with both transactional video-on-demand and EST. So I'm not sure exactly where the pricing is going to go, but it's more likely that it goes up than down. And cable video-on-demand increased last year, and I think we'll have to see if i-Video-on-Demand increases. But that's the trend on i-Video-on-Demand as well.

Paul J. Chung - JP Morgan Chase & Co, Research Division

Right. So that current spread is pretty large relative to your prices. Can you give us like a ballpark idea of any magnitude of possible price increases? I know you mentioned you're going to be doing some testing in August, but?

J. Scott Di Valerio

Yes. It's -- we won't give out that until they actually all get into the market. But again, we're always very sensitive in making sure that the gap -- since you know our average rental is close to 2 nights, so it's not necessarily -- you're not comparing up against the $1.20 or $1.50. You're comparing up against the $2.40 or $3. And so we want to make sure that differential stays good so that the value is there and the new release content at a great value, which is what Redbox represents.

Operator

Thank you. We have no further questions at this time. I would like to turn the call back to CEO, Scott Di Valerio. Please go ahead.

J. Scott Di Valerio

Thank you. I'd like to conclude our call with a few key comments. First, we delivered solid results in the face of external challenges. Second, we're confident in Outerwall's long-term outlook as Redbox continues to be a leader in new release content transactions and continue to see growth in consumer engagement. Coinstar remains a stable business that generates strong free cash flow, and ecoATM kiosks are performing in line with our expectations, and we expect to hit our kiosk rollout plan for the year. Finally, we're leveraging our core competencies in operating and growing automated retail businesses and are committed to providing value to our consumers, our partners and shareholders. Thank you all for joining us today.

Angeline McCabe

Thank you.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

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