ritrading Posted December 2, 2015 Author Share Posted December 2, 2015 Ritrading, End of the 10q, page 65 Of the 940k bought back in q3 863k were done in the middle month. Oh ok I see it, thanks. I was more than happy to see that they didn't spend it all in July at the more expensive price. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted December 2, 2015 Share Posted December 2, 2015 Who knows when they conducted the buyback - there was a small price surge and now we've seen 3 straight days of selling. That doesn't mean the company repurchased all 1-1.5M shares that we're expecting in those days. Even if they did, the average price is still likely to be lower than it was last quarter. All in all, at this point in the game, I'm happy to see the stock down 10% over the last 3 days. The lower it goes, the higher the chance of having exceptional residual value per share from coinstar. Id' be ecstatic if this thing went back into the 50s while they're repurchasing 10-20% per year. Link to comment Share on other sites More sharing options...
AzCactus Posted December 2, 2015 Share Posted December 2, 2015 Who knows when they conducted the buyback - there was a small price surge and now we've seen 3 straight days of selling. That doesn't mean the company repurchased all 1-1.5M shares that we're expecting in those days. Even if they did, the average price is still likely to be lower than it was last quarter. All in all, at this point in the game, I'm happy to see the stock down 10% over the last 3 days. The lower it goes, the higher the chance of having exceptional residual value per share from coinstar. Id' be ecstatic if this thing went back into the 50s while they're repurchasing 10-20% per year. Twocities, the quarter and year are drawing to an end. So while I don't have any idea when they made their buybacks I wouldn't just assume that they can buy back 10-20% if it dropped to the low-mid 50's---but I understand and agree with the premise of what you are saying. Last quarter their average price was in the low 60's correct? Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted December 2, 2015 Share Posted December 2, 2015 Who knows when they conducted the buyback - there was a small price surge and now we've seen 3 straight days of selling. That doesn't mean the company repurchased all 1-1.5M shares that we're expecting in those days. Even if they did, the average price is still likely to be lower than it was last quarter. All in all, at this point in the game, I'm happy to see the stock down 10% over the last 3 days. The lower it goes, the higher the chance of having exceptional residual value per share from coinstar. Id' be ecstatic if this thing went back into the 50s while they're repurchasing 10-20% per year. Twocities, the quarter and year are drawing to an end. So while I don't have any idea when they made their buybacks I wouldn't just assume that they can buy back 10-20% if it dropped to the low-mid 50's---but I understand and agree with the premise of what you are saying. Last quarter their average price was in the low 60's correct? I don't assume that they can just repurchase 20% at a single moment in time if the price were to drop, but they're using cash flow from operations to fund these repurchases so yes, I do assume that a sustained drop to the 50s would result in another 10-20% of the company being repurchased from operating cash flows. Also, I believe it was around $63-$64 as the average price for last quarter. Prices have been below that the entire quarter with the exception of the last two weeks. Link to comment Share on other sites More sharing options...
JayGatsby Posted December 3, 2015 Share Posted December 3, 2015 Any thoughts on why they don't have kids christmas movies (Charlie Brown Christmas, etc)? Amazon is pushing those pretty hard. I would have thought these would be easy holiday money. Wondering if that's a reflection on the underlying business model or just the inventory team? It's frustrating to me as a shareholder when I get on their website and can't find anything I want to watch. Blockbuster used to do a pretty good job it seemed of recycling old movies. I'd rather rewatch the old Jurassic Park than watch the new Jurassic World, but maybe that's not me. Link to comment Share on other sites More sharing options...
AzCactus Posted December 3, 2015 Share Posted December 3, 2015 I wonder if management feels that this would somehow dilute or otherwise effect the brand image. In any case I feel like the success of this investment is much more dependent on capital allocation than adding older dvd's for a couple months. Link to comment Share on other sites More sharing options...
Txvestor Posted December 3, 2015 Share Posted December 3, 2015 What do you all make of the CEO and CFO leaving in relatively quick succession. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted December 3, 2015 Share Posted December 3, 2015 Does anyone else think it's mind-boggling that 45% of the OUTR shares are short? I see 7.76 million shares short and 17.25 million shares outstanding. And this company is hugely cash flow positive right now. What's even more mind boggling is that there are that money short as the company is reducing the float by 2-5% every quarter. The short positions, as a percentage of float, grows with the massive share repurchases and increases the likelihood of a meaningful short-squeeze. Can you imagine what good results in Q4 or Q1 would do if 50% of the float was sold short? http://www.financialmagazin.com/outerwall-incorporated-nasdaqoutr-short-interest-increased-by-5-35/ Short interest increases to 8.18M shares - 18 days to cover on typical volume and is representative of 47% of the last reported amount of shares outstanding. If we include the shares held by Lombardia and Arlington as being unavailable due to the expected long-term holding period, that adds about 5% to the short interest. If Outerwall repurchases 1-2M shares this quarter, then it adds another 3-6%. Worst case scenario: 47% of the company is currently held short. Best case scenario: 58% of the company is currently held short. I'm not hoping for a short-squeeze because that has the potential to jeoparcize the longer term prospects, but if we see a $20 per share rally in short order, then I think we know what caused it. If this downward pressure continues, Outerwall will be able to repurchase 4-5M shares next year. That will be 25-30% of the outstanding shares and you'll be left with $10-12 per share in FCF just from Coinstar. Redbox residual and ecoATM/Gazelle are just icing on the cake at that point. Obviously, there would still be the debt so it's not clear that would be an absolute homerun. It just depends on how well Redbox does over the next year, but there is the potential for some really good returns here if Redbox has another stellar year or two left in it. Link to comment Share on other sites More sharing options...
Libs Posted December 3, 2015 Share Posted December 3, 2015 <you'll be left with $10-12 per share in FCF just from Coinstar. > Maybe my math is off - but I thought Coinstar delivered $75MM in FCF. So if share count drops by 5MM, it would go from 16.2 YE 2015, to say 11MM YE 2016. $75MM/11MM = $6.81 FCF / share from Coinstar. No? Link to comment Share on other sites More sharing options...
thefatbaboon Posted December 3, 2015 Share Posted December 3, 2015 Two, Just a minor point. You shouldn't assume long term holders don't make their shares available to short sellers. Wherever the borrow pays decently you should assume most astute long term holders are lending. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted December 3, 2015 Share Posted December 3, 2015 Two, Just a minor point. You shouldn't assume long term holders don't make their shares available to short sellers. Wherever the borrow pays decently you should assume most astute long term holders are lending. It's not the lending that is the problem for short sellers. It's having to repurchase them. I imagine with 50% of shares short, the borrow is probably already a decent sum and the funds have probably already lent their shares so they're not their to lend again. The only reason I don't count them is because I'm not expecting them to sell into any short-squeeze driven rally meaning that shorts can't count on those shares to cover which means that the % of the float sold short could be higher than reported. That's all... Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted December 3, 2015 Share Posted December 3, 2015 <you'll be left with $10-12 per share in FCF just from Coinstar. > Maybe my math is off - but I thought Coinstar delivered $75MM in FCF. So if share count drops by 5MM, it would go from 16.2 YE 2015, to say 11MM YE 2016. $75MM/11MM = $6.81 FCF / share from Coinstar. No? Coinstar had roughly 34.5MM of operating cash flow in Q3 with an estimated CapEx of 12-14M for the entire year. Annualize that 34.5MM and it puts you at $138MM and then reduce that by $14MM to get $124MM. That's about $11.25 per share. That leaves any incremental FCF from Redbox/ecoATM/gazelle to cover taxes (or for their losses to reduce them) and debt service. Link to comment Share on other sites More sharing options...
Libs Posted December 3, 2015 Share Posted December 3, 2015 <you'll be left with $10-12 per share in FCF just from Coinstar. > Maybe my math is off - but I thought Coinstar delivered $75MM in FCF. So if share count drops by 5MM, it would go from 16.2 YE 2015, to say 11MM YE 2016. $75MM/11MM = $6.81 FCF / share from Coinstar. No? Coinstar had roughly 34.5MM of operating cash flow in Q3 with an estimated CapEx of 12-14M for the entire year. Annualize that 34.5MM and it puts you at $138MM and then reduce that by $14MM to get $124MM. That's about $11.25 per share. That leaves any incremental FCF from Redbox/ecoATM/gazelle to cover taxes (or for their losses to reduce them) and debt service. I see. Thanks. Here's my problem. If we use the same approach for Redbox, I get a number for both that seems too high- Redbox Q3: 90MM operating income X 4 = 360MM annual - cap ex (50MM? I don't know) =310MM So Redbox 310MM + Coin 124MM = 434 MM. That's way higher than anything I've seen. Meacham has 300MM FCF, for instance, as follows: Redbox 275 Coin 75 Venture cap ex (50) = 300MM. And management seems to be guiding under $300MM. What am I missing? Thanks for your input. Link to comment Share on other sites More sharing options...
KJP Posted December 3, 2015 Share Posted December 3, 2015 <you'll be left with $10-12 per share in FCF just from Coinstar. > Maybe my math is off - but I thought Coinstar delivered $75MM in FCF. So if share count drops by 5MM, it would go from 16.2 YE 2015, to say 11MM YE 2016. $75MM/11MM = $6.81 FCF / share from Coinstar. No? Coinstar had roughly 34.5MM of operating cash flow in Q3 with an estimated CapEx of 12-14M for the entire year. Annualize that 34.5MM and it puts you at $138MM and then reduce that by $14MM to get $124MM. That's about $11.25 per share. That leaves any incremental FCF from Redbox/ecoATM/gazelle to cover taxes (or for their losses to reduce them) and debt service. I see. Thanks. Here's my problem. If we use the same approach for Redbox, I get a number for both that seems too high- Redbox Q3: 90MM operating income X 4 = 360MM annual - cap ex (50MM? I don't know) =310MM So Redbox 310MM + Coin 124MM = 434 MM. That's way higher than anything I've seen. Meacham has 300MM FCF, for instance, as follows: Redbox 275 Coin 75 Venture cap ex (50) = 300MM. And management seems to be guiding under $300MM. What am I missing? Thanks for your input. Looking at each segment individually leaves out corporate and taxes. Link to comment Share on other sites More sharing options...
Libs Posted December 3, 2015 Share Posted December 3, 2015 KJP: Thanks. I'm getting $250-$280MM now. I agree with the bulls here. It almost feels too good to be true. Speaking of which, some say the truly good investments make your stomach churn a bit when you make them. But I've never had that, not once. The stuff that has hit my over the head has always instilled me with 100% greed, and no queasiness whatsoever. I admit to some queasiness here, because of the melting cube aspect. But it's not stopping me. FWIW. Link to comment Share on other sites More sharing options...
cmlber Posted December 5, 2015 Share Posted December 5, 2015 Does anybody know what the incremental costs per rental are for Redbox? Also, the rate of decline in demand for physical DVD rentals is very likely to support a much higher stock price then this, but is anybody here concerned about the risk that studios one day just decide to stop making DVDs despite the demand? At some point it will make sense if the loss of DVD revenue is more than offset by the digital gains, which may happen sometime five to ten years from now, in which case the stock isn't worth much more than this price when you account for the debt. Link to comment Share on other sites More sharing options...
JayGatsby Posted December 5, 2015 Share Posted December 5, 2015 Also, the rate of decline in demand for physical DVD rentals is very likely to support a much higher stock price then this, but is anybody here concerned about the risk that studios one day just decide to stop making DVDs despite the demand? At some point it will make sense if the loss of DVD revenue is more than offset by the digital gains, which may happen sometime five to ten years from now, in which case the stock isn't worth much more than this price when you account for the debt. Most (all?) of the major studios have Redbox on a 28 day window, meaning Redbox doesn't get the movie until 28 days after it's released to iTunes/etc. Based on that, Redbox seems to fit pretty well in the studios value chain so I'd be surprised if Redbox stopped receiving support from the studios. First a movie comes out in theatres where they charge customers $10-$15 per seat. Then the movie comes out on itunes where they charge ~$6 a day. Then it comes out on Redbox where it costs $1.50 a day. Last it comes out on Netflix/HBO where it's free with subscription. Redbox is basically the last step in the process for the studios to capture transactional revenue. Link to comment Share on other sites More sharing options...
thefatbaboon Posted December 7, 2015 Share Posted December 7, 2015 Hmmmm. Not great http://ir.outerwall.com/m/#/Press_Releases/075be9db-fadd-4402-9553-2b97390f34a1 Link to comment Share on other sites More sharing options...
thefatbaboon Posted December 7, 2015 Share Posted December 7, 2015 Big reduction in q4 fcf expectations. From 45-75m down to 25-45. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted December 7, 2015 Share Posted December 7, 2015 Hmmmm. Not great http://ir.outerwall.com/m/#/Press_Releases/075be9db-fadd-4402-9553-2b97390f34a1 :/ It's not the worst news in the world, but certainly puts a damper on my forward looking estimates for Redbox revenue At least the stock will likely stay in the $50-$60 range while they pick up more shares which could help offset some of the disappointment from lower revenue. Link to comment Share on other sites More sharing options...
thefatbaboon Posted December 7, 2015 Share Posted December 7, 2015 I'm not sure I'll be making any more presumptuous comments about short sellers! Link to comment Share on other sites More sharing options...
Picasso Posted December 7, 2015 Share Posted December 7, 2015 I think you'll be looking at much lower averages than $50-60. This is going down to the $20's. The outcome here could have been very different without ecoATM or more cash dividends versus buybacks. Link to comment Share on other sites More sharing options...
Guest Grey512 Posted December 7, 2015 Share Posted December 7, 2015 This business is like a newspaper except it will die faster. Link to comment Share on other sites More sharing options...
ritrading Posted December 7, 2015 Author Share Posted December 7, 2015 Anyone buying more? Link to comment Share on other sites More sharing options...
100 Shares Posted December 7, 2015 Share Posted December 7, 2015 Anyone buying more? I bought more. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now