Redbox 2006 Annual Report Download - page 8

Consistent and diversified revenue streams and stable operating cash flow. Our revenue and operating
cash flows have increased each year for the last eight years. Our diversified revenue streams, which consist
primarily of coin, entertainment and e-payment revenues, are driven by i) the service fees we charge consumers
for our coin business, ii) the number of entertainment, coin and e-payment machine installations, iii) the
frequency of play of our entertainment machines and iv) the size and number of customer transactions for our
coin and e-payment services. As a large proportion of our direct operating costs are variable, which allows us to
maintain stable operating cash flows while responding to changes in the business, we are able to modulate
expenses as revenue fluctuates.
Growth Strategy
Key elements of our growth strategy include:
Leadership of the 4th Wall. There is an area between the cash registers and the front door of retail
locations that we call the 4th Wall, where many convenient and profitable consumer services are located. We are
a leader in providing retailers 4th Wall products and services, which positions us to continue to drive growth
through the front of the store and differentiates us from other suppliers. Our 4th Wall strategy has been the focus
of our business development and acquisition strategy and will continue to drive our growth as we move forward.
Product and service expansion. In recent years, we have transitioned from a one-product company
offering coin-counting services to a business with a variety of products and services for the 4th Wall. We now
offer coin counting, entertainment services and e-payment services, as well as self-service DVD rentals. Through
our recent acquisition of CMT, we have also broadened our e-payment product line by adding money transfer.
Further, our Coin to Card™ program, where consumers receive stored value cards or e-certificates instead of
vouchers from our coin machines, is an example of how we are leveraging our coin-counting network to drive
incremental transactions. We expect to continue to add products and services to our existing kiosk businesses
through our strategic alliances, product line extensions and acquisitions to drive traffic to the 4th Wall.
Place more units. We expect continued growth by placing more units into new channels as well as
through cross-selling to existing retailers. At December 31, 2006, we had more than 60,000 retail locations
representing a variety of channels including supermarkets, mass merchants, drug stores, convenience stores,
truck stops, and restaurants. In 2006 we introduced a new design of our coin-counting machines specifically
intended for the financial institution market, and we expect to grow this new channel in the coming year. This
channel is a natural extension for our coin-counting business and is another channel for consumers to adopt our
service. With our vast distribution network, we also continue to focus on cross-selling opportunities. We believe
that our combined coin, e-payment and entertainment sales teams and our 4th Wall product portfolio positions us
to see continued results from our cross-selling efforts.
Stronger retailer relationships. We continue strengthening existing and building new relationships with
retailers through our 4th Wall category management program which includes inventory control, management of
card sourcing, display design and merchandising and technology integration for point of sale. We believe our
program and expertise sets us apart from other suppliers at the front end of the store. Our 4th Wall strategy gives
us the ability to work closely with our customer base to consolidate and introduce new services, while increasing
store profits for the retailer. We believe the front end of retail stores has long been under-utilized and believe our
4th Wall strategy is a competitive advantage that will drive our growth in the retail environment for years to
come.
International growth. During 2006, we expanded in Canada with our coin services business and in
Mexico with our entertainment services. We continue to grow in these regions as well as in the United Kingdom,
one of our more established international markets. In addition, our acquisition of CMT, with an agent network in
142 countries, expanded our international presence. In 2007 and beyond, we expect to continue exploring
opportunities in countries where we currently have distribution, as well as other countries where we see
opportunities for growth.
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