Outlook: Outerwall to Discontinue 3 New Ventures

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On Tuesday, Outerwall (NASDAQ:OUTR) provided an update to its operating review and capital structure initiatives. In addition, CFO Galen C. Smith presented at Wedbush Securities’ 14th Annual California Dreamin’ Consumer Conference in New York.

Outerwall will discontinue three New Ventures. The wind-down process for Rubi, Crisp Market, and Star Studio is expected to be substantially completed by the end of Q1:14, and they will be reported as discontinued operations beginning in Q4:13. While we had expected a lower number of New Ventures, we were surprised by the closure of Rubi as it had seemed committed to the business.

Outerwall will continue to invest in its ecoATM business. In addition, it will have a more limited investment in SAMPLEit ($1 samples). At the conference, Mr. Smith disclosed that ecoATM kiosks have a $100,000 to $120,000 annual revenue ramp in the first 6 to 8 months, with payback in 18 to 22 months. We expect ecoATM to be accretive to EPS in 2014. New debt to be used primarily for share repurchases. It has taken on $350 million of new debt that allows it to move to its previously announced target net leverage range of 1.75 t0 2.25x net debt to core adjusted EBITDA in Q1:14.