Segment Information and Geographic Data

6 Months Ended

Jun. 30, 2022

Segment Information and Geographic Data

Segment Information and Geographic Data

Note 8:    Segment Information and Geographic Data

The Company currently conducts its business through two operating segments: (1) Legacy Business and (2) Digital Business. For all periods presented, the Company did not operate outside the United States and Puerto Rico (collectively the United States). As such, all of the Company’s long-lived assets are located in the United States.

The Company’s Legacy Business operates a network of approximately 36,000 self-service kiosks where consumers can rent or purchase new-release DVDs and Blu-ray Discs^TM (“movies”). The Company’s Legacy Business also produces, acquires, and distributes movies exclusively through its Redbox Entertainment label and generates service revenue by providing installation, merchandising and break-fix services to other kiosks businesses. Our Legacy Business also includes corporate general and administrative expenses, which include technology and public company costs, along with corporate overhead expenses related to our Digital Business.

The Company’s Digital Business provides both transactional and ad-supported digital streaming services, which include 1) Redbox On Demand, a transactional service which provides digital rental or purchase of new release and catalog movies and TV content, 2) Redbox Free On Demand, an ad-supported service providing free movies and TV shows on demand, and 3) Redbox Free Live TV, a free, ad-supported television service giving access to more than 145 linear channels. Furthermore, the Company monetizes digital advertising space in Redbox emails and apps amongst other platforms, which is referred to as Media Network. The Digital Business includes expenses directly attributable to this business.

Adjusted EBITDA is the profitability metric reported to the chief operating decision maker (“CODM”) for purposes of making decisions about allocation of resources to each segment and assessing performance of each segment. The Company believes this measure is most useful in assessing the underlying performance of its business. Adjusted EBITDA is before integration related costs, efficiency initiatives, and other items. Adjusted EBITDA also excludes the effects of financings, income tax and the non-cash accounting effects of depreciation and intangible asset amortization.

As segment assets are not reported to or used by the CODM to measure business performance or allocate resources, total segment assets and capital expenditures are not presented below.

Summarized financial information by segment is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
Dollars in thousands	2022		2021		2022		2021
Net revenue
Legacy Business	$	53,802	$	62,127	$	102,569	$	129,764
Digital Business		12,192		7,263		26,652		16,356
Total	$	65,994	$	69,390	$	129,221	$	146,120
Adjusted EBITDA
Legacy Business	$	(11,400)	$	(4,648)	$	(26,953)	$	(4,314)
Digital Business		(54)		833		1,961		1,801
Total	$	(11,454)	$	(3,815)	$	(24,992)	$	(2,513)

The following is a reconciliation of Adjusted EBITDA to loss before income taxes for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Dollars in thousands	2022		2021		2022		2021
Loss before income taxes	$	(64,912)	$	(46,419)	$	(105,760)	$	(82,893)
Add:
Depreciation and amortization		24,842		26,938		49,932		54,464
Interest and other (income) expense, net		15,077		8,518		7,734		15,765
Business optimization(a)		—		3,508		—		4,058
One-time non-recurring(b)		11,577		604		15,320		968
New business start-up costs(c)		—		282		—		453
Restructuring related(d)		(56)		509		3,956		1,861
Stock-based compensation expense		2,018		150		3,826		716
Transaction cost		—		2,095		—		2,095
Adjusted EBITDA	$	(11,454)	$	(3,815)	$	(24,992)	$	(2,513)

(a) Business optimization costs include employee retention costs, IT costs as well as consulting costs for certain projects.

(b) Includes costs related to project costs and initiatives, as well as bank, legal and other fees in connection with the Company’s debt financing activities. During the three and six months ended June 30, 2022, the Company incurred $7.7 million and $11.0 million, respectively, in one-time legal and advisory expenses as the Company explores strategic alternatives.

(c) Includes costs to support the Company’s On Demand and AVOD offerings, along with costs related to the Company’s service and media network businesses.

(d) Restructuring related costs include such items as employee severance charges. During the six months ended June 30, 2022, the Company incurred severance and related costs of $3.8 million in connection with a reduction in force, which are reflected in general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations.