Redbox Entertainment, which completed its SPAC IPO in late October, has already hit the hard times.
The Oakbrook Terrace, Illinois-based company filed an 8-K report with the SEC earlier this month, detailing the troubles that have seen its stock price tumble from a high of $17.93 a share on Nov. 4 to just $2.20 as of midday trading on the Nasdaq Tuesday.
According to the filing, Redbox borrowed the remainder of a revolving credit facility on Jan. 28.
In the filing, Redbox said its overall business was "negatively impacted" by the effects of the COVID-19 pandemic. Although the company is trying to transition its revenue base to ad-supported streaming, it's still heavily reliant on the more than 40,000 DVD and Blu-ray rental kiosks spread across the U.S.
But with theatrical film releases continuing to be suppressed by the pandemic in the fourth quarter, fewer new-release titles were available at Redbox kiosks.
"During the fourth quarter of 2021, Redbox had 24 theatrical releases, which was lower than expected," Redbox said in its 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."
Redbox also said its bottom line has been impacted by "increased marketing and on-demand expenditures," as well as a ramped up content volume.
"During that period, increased costs have not been offset by an increase in revenues," Redbox said.
And that's still not all -- the company also cited "an increase in competition from new and existing competitors."
With the overall U.S. disc rental business cratering nearly 21% last year, according to the Digital Entertainment Group, Redbox's contention about the DVD market makes a lot of sense.
But its latter assertion about "increased competition" might strike some investors as puzzling, given that Redbox advocated its transition into a publicly traded "multi-faceted" media-tech company by describing a somewhat cornered market of underserved "late-adopter" consumers -- folks who still regularly rent titles from its kiosks, but who have yet to join the streaming revolution.
"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.” ■
