The Life of a Vending Machine

The Motley Fool is on the road in Seattle! Recently we visited Coinstar -- now officially renamed Outerwall  (NASDAQ: OUTR  ) -- to speak with CFO-turned-CEO Scott Di Valerio about the 22-year-old company's well-known coin-cashing machines, as well as its more recent acquisition of Redbox, and future initiatives to expand into other aspects of the automated retail market.

In this video segment Scott shares the life cycle of the sturdy, built-to-last Redbox and Coinstar machines: cost to build, useful life, cash flow, uptimes, etc. The full version of the interview can be watched here.

A full transcript follows the video.

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Austin Smith: I'm wondering if you could discuss the economics of your different kiosks, maybe useful life, the revenue generation that you see out of them, if you could, maybe across your big ones -- Coinstar, Redbox, Rubi.

Scott Di Valerio: You bet. The Redbox kiosk is a kiosk that costs us about $15,000 to manufacture and put into the market. It pays back for itself in about 18 to 24 months. It begins positive cash flow in about eight to 12 months, so it's a very nice machine.

They start off, from a ramp perspective, $35,000 in year one in revenue, $50[,000] in year two and $55[,000] in year three, so it's a nice ramp-up business that returns on itself quite nicely, and continues to go out from that perspective.

The useful life of the machines, we have Redbox machines that have been in market since the start. We certainly bring machines in and refurbish them and do those types of things over time, but they're very stable, very long-lasting machines, and have been built quite well from that perspective.

Uptimes are extremely high on both the coin and the Redbox machines. In fact, on the Redbox machines about 85%-90% of any issues we have with the machines are resolved remotely, from our network operating center. There's very few break-fix services that go out on the machines.

The same is true with the Coinstar machine. Again, very high uptime on those. All the machines are connected wirelessly, so we communicate with the machines routinely during the day. We can fix issues on the machines routinely.

Again, it's a quite nice business. The coin machines are in the $11[,000]-$12,000-kiosk range.

Austin: That's cost to build?

Di Valerio: Cost to build. They pay back in a little bit longer time than the Redbox machine because it's got fewer transactions going through, but again we've had coin machines in the marketplace... 22 years that we've been in the business, we've had machines that are in the marketplace 15 years. They're very solid.

We're always having to replace monitors and upgrades, and do those kinds of things on a refurb basis, but they're very strong, long-lasting machines with high uptime.


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