Redbox Entertainment said in an 8-K filing to the SEC that is laying off 10% of its 1,467 employees, with the lingering economic effects of COVID-19 badly impacting its business.
Oakbrook Terrace, Illinois-based Redbox said the job cuts will reduce its annual overhead by $13.1 million, while incurring a one-time charge of $3.8 million to cut ties with its workers.
Redbox went public in October via a special purpose acquisition company (SPAC), but revealed financial troubles in an earlier 8-K filing back in early January. At that time, Redbox said it was cashing out the remaining funds on a $15 million revolving credit facility it had established earlier. The cited cause of its troubles: The surge of the omicron variant further impacted the big-release theatrical movies available for rent at Redbox's more than 40,000 disc rental kiosks nationwide.
“During the fourth quarter of 2021, Redbox had 24 theatrical releases, which was lower than expected,” Redbox said in its January SEC filing. “In addition, the significant increase in impacts from the omicron variant caused disruption to the business. As such, Redbox rentals have not recovered to the extent expected and, notwithstanding the year-over-year increase in new releases, were lower than the fourth quarter of 2020. Historically, rentals have been correlated with the number and quality of new theatrical titles released in a quarter.”
The slowdown to its core business came at a particularly exposed time for Redbox, which is investing heavily in ad-supported video streaming, as well as its own movie production operation.
We don't know how bad Redbox’s fiscal fourth quarter was because the company asked the SEC for grace on its annual 10-K filing, citing the expense and effort it would require to put the document together.
But for Q3, Redbox lost $92.9 million, up over the $39.1 million it bled out in the pandemic-affected third quarter of 2020.
After peaking at nearly $18 a share in January, Redbox shares are down below $2.25 on the NASDAQ as of late Monday morning trading.
It‘s an extraordinarily quick crash for Redbox, considering that it was only in late September that company CEO Galen Smith outlined an audacious plan to transition a email list of more than 40 million loyal disc renters into the streaming age.
“If you think about Redbox being an almost 20-year-old business, that becomes really, really powerful, because we’re not necessarily competing for the same customers that everyone else is,” Redbox CEO Galen Smith told Next TV in September. “We’ve got this unique defined customer base that loves us and is loyal to us. And what we want to do is continue to expand the way that we serve their needs.” ■
