COINSTAR INC CSTR
May 01, 2013 - 10:48am EST by
Arturo
2013 2014
Price: 51.90 EPS $4.83 $5.10
Shares Out. (in M): 28 P/E 10.7x 10.2x
Market Cap (in $M): 1,453 P/FCF 0.0x 7.5x
Net Debt (in $M): 161 EBIT 256 212
TEV ($): 1,614 TEV/EBIT 6.3x 7.6x

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  • Consumer Goods
  • cost reduction
  • New Product Launch
  • High Short Interest
  • Buybacks
  • Rental & Leasing
  • Debt
 

Description

 

Coinstar (CSTR) is a perennial VIC favorite, having been written up 7 times since 2003.  Since that time, its market cap has increased from $330 million to $1.5 billion, yet its EV/EBITDA remains at less than 4X. Coinstar suffers from poor performance on several key metrics over the past few quarters which seems to confirm critics’ perception that it is in secular decline.

Over the next few quarters several of these metrics should reverse, and Coinstar could move to a substantially higher valuation.  In 2012, Coinstar purchased the Blockbuster movie kiosk rental business from NCR for $100 million.  Over the past year, the company has been replacing these kiosks with Redbox units. This transition has imposed significant costs on Coinstar, including a $6.9 million loss in Q1, and has reduced comparable kiosk sales.  The final NCR kiosk was removed in April. After Q2, Redbox will see no more NCR transition costs.  In addition, new kiosks typically ramp up significantly in the second and third years.  Over 20% of kiosks will move into the comp base over the next year, which should boost the favorite metric of most retail analysts.

Coinstar has made several other moves which hurt reported profitability in the short run, but which could benefit the business in the long run.  Last year Coinstar entered a joint venture with Verizon to provide streaming content.  This project is now in Beta.  Coinstar expects the JV to be self funding in the second half.  I look at this as a relatively low cost option. At March 31, 2013, Coinstar had invested $38.5 million for its 35% share in the JV.  While the joint venture is expected to show a loss of $9 to $11 million in Q2, the company is estimating no additional capital investment in the second quarter, and breakeven in the second half.

Another low cost option is Coinstar’s investment in new kiosk formats.  The most promising new format, Rubi, is a coffee kiosk which dispenses Seattle’s Best Coffee (a Starbucks brand). Rubi currently has 100 units in operation in 6 markets, and is expected to roll out 1,000 to 2,000 kiosks in the remainder of the year.  Coinstar has announced that is disposing of Orango, an electronics recycling kiosk.  At this point, the new venture kiosks are best viewed as R&D projects.  In valuing Coinstar, I don’t expect any return from the new ventures, but I also don’t expect management to squander large sums of money.

 

Business Overview

Coinstar has three business segments – the Coinstar coin counting business, the Redbox movie rental business, and a group of six new kiosk ventures, including the Rubi coffee kiosk as well as a joint venture with Verizon to provide movie streaming. 

The original Coinstar coin counting business is a mature business which generates steady cash flow of around $100 million per year.  Capital expenditures for the coin segment are estimated to be between $27 and $30 million in 2013 ($13 to $15 million is for 800 to 850 new kiosks, the remainder is for maintenance).

                                                                           Coins ($M)

                                                            2009      2010      2011      2012

               Revenue                                 259        276        282        291

               Segment EBITDA                    103          96        101          99

 

The Redbox business has shown strong growth  driven by additional unit growth, and the demise of brick and mortar rental options such as Blockbuster. That growth is now slowing, and Redbox expects to add only 2,000 to 3,000 kiosks in 2013.  In 2012, CSTR purchased NCR’s kiosk business, eliminating its only real competition in the movie kiosk business.

                                                                           Redbox ($M)

                                                            2009      2010      2011      2012

               Revenue                                773       1160      1562      1909

               Segment EBITDA                   102          191       285        387

 

As shown in the table below, the Redbox business has benefitted from strong growth in the number of kiosks, increasing sales per average kiosk and an increasing operating margin.

                                                                         

                                                                                            Redbox ($M)

                                                                              2009      2010      2011      2012

               Ending # Kiosks                                  22,400   30,200   35,400   43,700

               Revenue/ Avg. Kiosk                           43,047   43,571   47,150   48,800

               EBITDA  / Avg. Kiosk                             5,665     7,167     8,575     9,944

               EBITDA Margin                                      13.1%    16.5%   18.2%   20.3%

 

Why is Coinstar cheap?

The value of Coinstar is clearly driven by Redbox. Redbox is viewed by investors as an old technology business that is at risk of being replaced by streaming.

The movie rental business has been a graveyard for many retailers, most notably Blockbuster. Streaming is clearly growing at a rapid pace and taking share from physical discs. Netflix has been transitioning its subscribers from physical disk delivery to streaming for several years. Same store sales for Redbox were down 4.2% in the fourth quarter and 11.8% in the first quarter of 2013.  On a unit sales per kiosk basis, sales were down 17% in the third quarter, 13% in the fourth quarter, and 17% in the first quarter of 2013.  These numbers have not gone unrecognized by the bears.  As of April 15, approximately 13 million shares out of the company’s 28 million outstanding shares were sold short.

Redbox Same Store Sales

     
         
 

Q1

Q2

Q3

Q4

2013

-11.8%

     

2012

28.1%

16.5%

4.2%

-4.0%

2011

15.3%

16.6%

13.0%

27.1%

2010

21.0%

3.5%

17.2%

12.5%

2009

35.0%

33.0%

26.3%

21.0%

         

 

Rentals/Average Kiosk % Change Y/Y

   
       

 

FULL

 

Q1

Q2

Q3

Q4

YEAR

2013

-17%

       

2012

3%

-7%

-17%

-13%

-9%

2011

3%

8%

2%

0%

3%

2010

-2%

-14%

3%

5%

-3%

           

Same store sales were favorably impacted by an increase in standard rental rates from $1.00 to $1.20 which was implemented in October 2011.

Management attributed the drop in same store sales in Q3 to fewer DVD releases and reduced viewing caused by the Olympics and the decline in Q4 to a combination of a change in renters’ habits caused by the Olympics and a weaker theatrical release schedule in Q3, which impacted Redbox’s offerings in Q4.  (Where Redbox has agreements with the studios, movies are generally available on Redbox 28 to 45 days after DVDs are placed on sale. In other cases, Redbox will purchase DVDs to use in its kiosks.) The softness in Q1 was partly due to the strong release schedule in January 2012, when 23 movies were released.  Only 12 new movies were released in January 2013.  Management indicates that rental performance in March was in line with March 2012. 

The acquisition of the NCR kiosks in June of 2012 has also impacted Redbox’s results. Of the 6200 Blockbuster kiosks initially acquired, 3100 were removed and 2800 were replaced with Redbox kiosks as of March 31, 2013.  The remaining 300 kiosks were removed in April. According to Coinstar’s 10-K, the NCR kiosks had revenue of $22 million in 2012, and lost $14.5 million.  If we attribute this revenue solely to the 1900 kiosks that were operating for the full six month period, average annual revenue per NCR kiosk would be around $22,000 which is less than half the $48,800 that the average Redbox kiosk generated in 2012.

Redbox kiosks typically show a significant ramp from year 1 to year 2.  First year sales historically average around $35,000 and move close to $50,000 in year 2 and $55,000 in year 3.  While the converted NCR kiosks may not follow the typical maturity curve of a new Redbox, the poor performance under the Blockbuster brand presents a significant opportunity as these 3,000 kiosks enter the comp base.

 

Valuation

           
     

Est.

     
     

2013

     
     

EBITDA

Multiple

 

Value

             
 

Coin

 

    95.0

4

 

             380.0  

 

Redbox

 

  375.0

6

 

2,250.0

             
 

Streaming

 

(20.0)

   

(100.0)

 

New

 

(50.0)

   

(100.0)

 

Corporate

 

(15.0)

   

(100.0)

     

   385.0

   

2,330.0

             
 

Cash

       

370.8

 

Debt

       

(532.0)

 

Enterprise Value

     

2,168.8

             
 

Shares

       

29.0

             
 

EV/Share

       

 $ 74.79

 

Even at modest multiples, CSTR offers potential for a significant increase from today’s level. I have treated both the Verizon joint venture and the new kiosk initiatives as failures. A success by either of these investments could provide substantial additional upside.

With slower growth, management has shown a willingness to repurchase stock. The company repurchase $46.5 million of stock in Q1 and had $341 million of authority for repurchases remaining. CSTR raised $350 million of debt in Q1, which will enable it to retire its remaining $132 million of convertible de

 

Risks

Declining Redbox comps could be the result of a secular shift away from DVD rentals.

Management could overspend on streaming or new ventures.

 

 

I do not hold a position of employment, directorship, or consultancy with the issuer.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

 

Improved comps due to normalized release schedule, easier comparisons versus last year’s Olymipcs influenced numbers and 8,000 new 2012 kiosks moving into the comp base.

Elimination of the losses from the NCR kiosks.

Reduced expenses for the Verizon streaming JV.

Successful introduction of the Verizon streaming JV or the Rubi coffee kiosk.

 

    sort by   Expand   New

    Description

     

    Coinstar (CSTR) is a perennial VIC favorite, having been written up 7 times since 2003.  Since that time, its market cap has increased from $330 million to $1.5 billion, yet its EV/EBITDA remains at less than 4X. Coinstar suffers from poor performance on several key metrics over the past few quarters which seems to confirm critics’ perception that it is in secular decline.

    Over the next few quarters several of these metrics should reverse, and Coinstar could move to a substantially higher valuation.  In 2012, Coinstar purchased the Blockbuster movie kiosk rental business from NCR for $100 million.  Over the past year, the company has been replacing these kiosks with Redbox units. This transition has imposed significant costs on Coinstar, including a $6.9 million loss in Q1, and has reduced comparable kiosk sales.  The final NCR kiosk was removed in April. After Q2, Redbox will see no more NCR transition costs.  In addition, new kiosks typically ramp up significantly in the second and third years.  Over 20% of kiosks will move into the comp base over the next year, which should boost the favorite metric of most retail analysts.

    Coinstar has made several other moves which hurt reported profitability in the short run, but which could benefit the business in the long run.  Last year Coinstar entered a joint venture with Verizon to provide streaming content.  This project is now in Beta.  Coinstar expects the JV to be self funding in the second half.  I look at this as a relatively low cost option. At March 31, 2013, Coinstar had invested $38.5 million for its 35% share in the JV.  While the joint venture is expected to show a loss of $9 to $11 million in Q2, the company is estimating no additional capital investment in the second quarter, and breakeven in the second half.

    Another low cost option is Coinstar’s investment in new kiosk formats.  The most promising new format, Rubi, is a coffee kiosk which dispenses Seattle’s Best Coffee (a Starbucks brand). Rubi currently has 100 units in operation in 6 markets, and is expected to roll out 1,000 to 2,000 kiosks in the remainder of the year.  Coinstar has announced that is disposing of Orango, an electronics recycling kiosk.  At this point, the new venture kiosks are best viewed as R&D projects.  In valuing Coinstar, I don’t expect any return from the new ventures, but I also don’t expect management to squander large sums of money.

     

    Business Overview

    Coinstar has three business segments – the Coinstar coin counting business, the Redbox movie rental business, and a group of six new kiosk ventures, including the Rubi coffee kiosk as well as a joint venture with Verizon to provide movie streaming. 

    The original Coinstar coin counting business is a mature business which generates steady cash flow of around $100 million per year.  Capital expenditures for the coin segment are estimated to be between $27 and $30 million in 2013 ($13 to $15 million is for 800 to 850 new kiosks, the remainder is for maintenance).

                                                                               Coins ($M)

                                                                2009      2010      2011      2012

                   Revenue                                 259        276        282        291

                   Segment EBITDA                    103          96        101          99

     

    The Redbox business has shown strong growth  driven by additional unit growth, and the demise of brick and mortar rental options such as Blockbuster. That growth is now slowing, and Redbox expects to add only 2,000 to 3,000 kiosks in 2013.  In 2012, CSTR purchased NCR’s kiosk business, eliminating its only real competition in the movie kiosk business.

                                                                               Redbox ($M)

                                                                2009      2010      2011      2012

                   Revenue                                773       1160      1562      1909

                   Segment EBITDA                   102          191       285        387

     

    As shown in the table below, the Redbox business has benefitted from strong growth in the number of kiosks, increasing sales per average kiosk and an increasing operating margin.

                                                                             

                                                                                                Redbox ($M)

                                                                                  2009      2010      2011      2012

                   Ending # Kiosks                                  22,400   30,200   35,400   43,700

                   Revenue/ Avg. Kiosk                           43,047   43,571   47,150   48,800

                   EBITDA  / Avg. Kiosk                             5,665     7,167     8,575     9,944

                   EBITDA Margin                                      13.1%    16.5%   18.2%   20.3%

     

    Why is Coinstar cheap?

    The value of Coinstar is clearly driven by Redbox. Redbox is viewed by investors as an old technology business that is at risk of being replaced by streaming.

    The movie rental business has been a graveyard for many retailers, most notably Blockbuster. Streaming is clearly growing at a rapid pace and taking share from physical discs. Netflix has been transitioning its subscribers from physical disk delivery to streaming for several years. Same store sales for Redbox were down 4.2% in the fourth quarter and 11.8% in the first quarter of 2013.  On a unit sales per kiosk basis, sales were down 17% in the third quarter, 13% in the fourth quarter, and 17% in the first quarter of 2013.  These numbers have not gone unrecognized by the bears.  As of April 15, approximately 13 million shares out of the company’s 28 million outstanding shares were sold short.

    Redbox Same Store Sales

         
             
     

    Q1

    Q2

    Q3

    Q4

    2013

    -11.8%

         

    2012

    28.1%

    16.5%

    4.2%

    -4.0%

    2011

    15.3%

    16.6%

    13.0%

    27.1%

    2010

    21.0%

    3.5%

    17.2%

    12.5%

    2009

    35.0%

    33.0%

    26.3%

    21.0%

             

     

    Rentals/Average Kiosk % Change Y/Y

       
           

     

    FULL

     

    Q1

    Q2

    Q3

    Q4

    YEAR

    2013

    -17%

           

    2012

    3%

    -7%

    -17%

    -13%

    -9%

    2011

    3%

    8%

    2%

    0%

    3%

    2010

    -2%

    -14%

    3%

    5%

    -3%

               

    Same store sales were favorably impacted by an increase in standard rental rates from $1.00 to $1.20 which was implemented in October 2011.

    Management attributed the drop in same store sales in Q3 to fewer DVD releases and reduced viewing caused by the Olympics and the decline in Q4 to a combination of a change in renters’ habits caused by the Olympics and a weaker theatrical release schedule in Q3, which impacted Redbox’s offerings in Q4.  (Where Redbox has agreements with the studios, movies are generally available on Redbox 28 to 45 days after DVDs are placed on sale. In other cases, Redbox will purchase DVDs to use in its kiosks.) The softness in Q1 was partly due to the strong release schedule in January 2012, when 23 movies were released.  Only 12 new movies were released in January 2013.  Management indicates that rental performance in March was in line with March 2012. 

    The acquisition of the NCR kiosks in June of 2012 has also impacted Redbox’s results. Of the 6200 Blockbuster kiosks initially acquired, 3100 were removed and 2800 were replaced with Redbox kiosks as of March 31, 2013.  The remaining 300 kiosks were removed in April. According to Coinstar’s 10-K, the NCR kiosks had revenue of $22 million in 2012, and lost $14.5 million.  If we attribute this revenue solely to the 1900 kiosks that were operating for the full six month period, average annual revenue per NCR kiosk would be around $22,000 which is less than half the $48,800 that the average Redbox kiosk generated in 2012.

    Redbox kiosks typically show a significant ramp from year 1 to year 2.  First year sales historically average around $35,000 and move close to $50,000 in year 2 and $55,000 in year 3.  While the converted NCR kiosks may not follow the typical maturity curve of a new Redbox, the poor performance under the Blockbuster brand presents a significant opportunity as these 3,000 kiosks enter the comp base.

     

    Valuation

               
         

    Est.

         
         

    2013

         
         

    EBITDA

    Multiple

     

    Value

                 
     

    Coin

     

        95.0

    4

     

                 380.0  

     

    Redbox

     

      375.0

    6

     

    2,250.0

                 
     

    Streaming

     

    (20.0)

       

    (100.0)

     

    New

     

    (50.0)

       

    (100.0)

     

    Corporate

     

    (15.0)

       

    (100.0)

         

       385.0

       

    2,330.0

                 
     

    Cash

           

    370.8

     

    Debt

           

    (532.0)

     

    Enterprise Value

         

    2,168.8

                 
     

    Shares

           

    29.0

                 
     

    EV/Share

           

     $ 74.79

     

    Even at modest multiples, CSTR offers potential for a significant increase from today’s level. I have treated both the Verizon joint venture and the new kiosk initiatives as failures. A success by either of these investments could provide substantial additional upside.

    With slower growth, management has shown a willingness to repurchase stock. The company repurchase $46.5 million of stock in Q1 and had $341 million of authority for repurchases remaining. CSTR raised $350 million of debt in Q1, which will enable it to retire its remaining $132 million of convertible de

     

    Risks

    Declining Redbox comps could be the result of a secular shift away from DVD rentals.

    Management could overspend on streaming or new ventures.

     

     

    I do not hold a position of employment, directorship, or consultancy with the issuer.
    I and/or others I advise hold a material investment in the issuer's securities.

    Catalyst

     

    Improved comps due to normalized release schedule, easier comparisons versus last year’s Olymipcs influenced numbers and 8,000 new 2012 kiosks moving into the comp base.

    Elimination of the losses from the NCR kiosks.

    Reduced expenses for the Verizon streaming JV.

    Successful introduction of the Verizon streaming JV or the Rubi coffee kiosk.

     

    Messages


    SubjectMelting Ice Cube… but in Alaska or Arizona?
    Entry05/01/2013 12:32 PM
    MemberMencken

    Hi Arturo, thanks for the write-up. Coinstar is one of those classic “? value ?” plays that seems to come along every 6 months in the TMT space. One need only look through the VIC archives to see numerous examples. The question is whether it’s going to be more like Yellow Pages or more like Centurylink. Usually the difference is that the Centurylinks of the world had some advantage of an embedded customer base whom they could – with some savvy management moves – hold onto as they transitioned to the “New New Thing.” Predicting these ones are always tough. 

    (1) As history has demonstrated, I tend to think of the “retailing of movies” business as a pure commodity – i.e. the low cost distributor always wins. After all, people care about the movie, not the distributor.

    First it was the mom-and-pop shops who pioneered the notion that people prefer renting vs. purchasing VHS tapes because they only have to pay ~25% the full purchase price for something they’re only going to watch once anyways. Then it was the branded retailers like Blockbuster, Hollywood Video, and Movie Gallery who crushed the mom-and-pops with their branch network and scale purchasing power over the movie studios vis a vis the little guys. The most recent era is that of Netflix and Coinstar, who “figured out” that shipping a DVD by mail or paying a grocery store for space to put a 3’x6x12’ vending machine was cheaper than paying for 3,000 commercial leases, armies of store employees, and TV advertising.

    The next stage is clearly shipping via digital bits, so my question is what is your revenue per kiosk “decline curve” expectation for the Redbox business and what “moves” by competitors / suppliers would make you change your mind? As you highlight, Redbox comprises $375m of the total $385m of total EBITDA, so that’s the key. Looking at the time series of Redbox profitability, the flow-through profitability on a per kiosk basis (i.e. incremental EBITDA / incremental Revenue) is incredibly high, which implies severe negative operating leverage when revenue / kiosk starts coming down (83% in 2011-12… bounces around a bit in prior years but the point remains). Intuitively this makes sense since Redbox’s costs are mostly fixed – they’re just box leases and the DVD purchases.

    (2) The proliferation of online avenues for movie distribution is not going to be a bottleneck (Netflix, Amazon, Hulu, Apple, Google, the MSOs / telcos / satellite providers themselves) – it’ll be movie studios figuring out how to charge for the digital streaming in a way that’s net-neutral to their DVD business. What "moves" would make you change your mind that the movie studios are becoming more incentivized to “push” digital distribution vs. DVD sales?

    (3) As you point out, we don’t need Coinstar to magically turn into Coca-Cola or Moody’s overnight in order to make money at 6.0x EBITDA – even flattish / mid single-digit YoY declines in revenue per kiosk would probably give it a bounce. I refuse to play the SSS comps game (mostly because I stink at it), but unlike a retailer where 12-18 months spent fixing the merchandise can get you a nice IRR when the mo-mo’s “retail specialist” investors return, continued double-digit SSS declines for Redbox means that the nail really has gone through the coffin for the business model. Clothing doesn’t have obsolescence risk, but technology-driven distribution sure does. So on that basis, why do you think SSS comps are going to recover from the ~(15)% declines over the last 9 months? I don’t understand why the NCR box conversions would give you any lift – a box is a box, right? My understanding is that the movies carried were basically the same set of recent releases. And do you really believe the Olympics impact? Seems like a "dog-ate-my-homework" explanation if it’s been going on for 4 consecutive quarters.

    Anyway, I have no position but I appreciate the discussion.


    SubjectRE: Melting Ice Cube… but in Alaska or Arizona?
    Entry05/01/2013 05:44 PM
    MemberArturo

    Mencken - thanks for your comments and insights.   I’d say I’m in the Alaska camp. While the growth phase is over for Redbox, I don’t see the business going away any time soon.

     While I agree with your point that the movie retailing business is largely a commodity business, I do think that both format and price matter to many people.  Physical disc rentals work better for some people. According to the FCC, 100 million Americans still don’t have high speed internet access.  While streaming bits may be cheaper than delivering movies to a grocery store, an on-demand movie rental via the cable companies or Amazon is still much more expensive than Redbox. Netflix and Hulu are certainly cheap alternatives for people who watch lots of movies.  I think Redbox fills a niche for occasional movie viewers who aren’t tech savvy. Over 40% of CSTR’s revenue comes from Walmart, Walgreen and Kroger.

    My revenue/decline curve estimates are for $48,000 per kiosk of revenue in 2013, $50,000 in 2014, and for a 5% annual decline thereafter.  The 2013 and 2014 estimates assume that the 5000 2012 new kiosks and the 3100 kiosks converted from NCR/Blockbuster perform more like typical new Redbox kiosks and ramp up toward the $55,000 mature kiosk level.  I assumed an incremental margin of 56%, based on management’s comments about “product margin” in Q1.  Your 83% implied operating leverage number seems high to me given revenue sharing with the studios and landlords, but there is clearly a fair amount of operating leverage. Some of the variation between periods may be due to shifts in Redbox’s sourcing strategy.  Note that I have not assumed any price increases in my model.  I believe management did a study before raising the standard rental from $1 to $1.20 that suggested that approximately half of any price increase would flow through to the company.

    I’m not sure what the studios would have to do to convince me they were pushing digital distribution.  The studios have been dealing with multiple channels since the advent of television. For now they seem to have settled on a market segmentation strategy of staggered releases with the higher priced options released first.  If anything, it looks to me like the battle between Redbox and the studios have settled down. As long as the first sale doctrine remains in place, Redbox has some leverage with the studios.  The studios also have to satisfy the exhibitors, who clearly view digital as a threat, and who have seen attendance drop 20% over the last 10 years. 

    I agree with your “the dog ate my homework” description of management’s use of the Olympics as an excuse for poor sales. In fairness to management, last summer was a particularly bad one for movies. One article I saw described it as the worst summer in 20 years. I don’t expect comps to recoup the losses they had in 2012/Q1 2013. I expect revenue per kiosk to stabilize around $12,000 per quarter for the remainder of this year, and to increase slightly next year. A large part of this is from maturation of the store base (8,000 kiosks moving into the comp base). The other element is a more normal studio release schedule of 10-15 movies per month. (Only 10, 9 and 8 movies were released last July, August, and September.) And while this isn’t fashion retailing, execution still counts. With fewer openings this year, management is making changes that could help the model (more discs per kiosk, selling tickets through the kiosks), but I’m not assuming any lift from these sources.


    Thanks again for the discussion.


    SubjectEcoATM
    Entry07/03/2013 07:40 AM
    Memberafgtt2008
    Thoughts on the acquisition? How is it different than the Orango concept that they discontinued?

    SubjectRE: RE: EcoATM
    Entry07/06/2013 04:32 PM
    MemberWinBrun
    ECO ATM does approx 150k per box in revenue and my understanding is that incremental margins could be more than double Redbox.
     
    I agree purchase price appears high at face value....But consider this math, at 10k kiosks (1/5) of number of RBs at 150k  of revenue thats 1.5bn of revenue and at 40 pct ebitda margin thats 600 mm of EBITDA. The boxes only cost 30k to beat. Putting the IRRS at very high rates.
     
    I think also considering the vast majority of the inventory in these boxes will be sold into overseas markets, I dont think there is any reason why this cant be international as well....
     
     
    spend 270mm to get 600m of EBITDA domestically in a few years...seems like a good deal.
     
     

    SubjectRE: RE: RE: EcoATM
    Entry07/10/2013 05:12 PM
    Memberafgtt2008
    WinBrun, Can you expand upon what thery will be doing with the electronics inventory? On the surface the business looks to have good economics but are the backend logistics more costly?

    SubjectRE: RE: RE: RE: EcoATM
    Entry07/12/2013 05:32 PM
    MemberWinBrun
    they take zero inventory risk. 
     
    They have a reverse auction process where the machines know how much to buy the phone for based on demand from the customer.
     
    The customers are carriers/insurance companies predominantly.
     
    There are no carrier subsidies in overseas markets, so there is a much bigger/larger secondary market there...

    SubjectRE: RE: RE: RE: RE: EcoATM
    Entry07/31/2013 06:25 PM
    Membergary9
    We have heard their ASP is around $40 - they are willing to a accept a lot of low-end/ancient phones that are really just 'scrap value' rather than refurbished for resale.
     
    Can you elaborate on the 40% EBITDA margins? Given the unit economics disclosures in their Q2 presentation, my guess was more like 20-30% range.
     
    Thanks.

    SubjectRE: RE: RE: RE: RE: RE: EcoATM
    Entry09/08/2013 05:57 PM
    MemberWinBrun
    I believe the gross margins on alot of the more "ancient" phones are very high....close to 50 pct...Gamestop I think does 30-35 pct margins on their buiness and have higher fixed costs ( rent, employees,etc.).
     
    Even at a 25-30 pct margin, this could be a very nice sized opportunity.
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