Outerwall Inc (OUTR), Verizon Communications Inc. (VZ): Get Ready for Rubi

Why we think Rubi will be a big success is because it has always performed from a cups-per-day perspective. What we’re focused on is getting the kiosks operating at a high level of uptime, like we have with our Redbox and coin machines, so that it’s delivering a consistent cup of coffee at the right time points, and those types of things, as we move forward.

We feel very good about that, and that’s what we’re focused on. The business model works; it’s getting the kiosks to be at the right uptimes. Once we do that — we’ll have about 2000 in at the end of this year — we’ll go on to multiple thousands as we roll into ’14 and ’15.

Eric: Just for some context for people out there, you talk about the business model being great. You went into some detail with Austin about the Redbox machines and Coinstar. What kind of volume are we talking about?

I think you had mentioned 12 cups a day, and you’re happy with that level, per machine. Is that about what we’re looking at? What kind of level, as you’re rolling this out?

Di Valerio: I believe from our analysts, that’s what they were saying they’ve been getting. I think in some places we have quite a bit higher than that, and think it can actually get higher as people understand it’s a great cup of coffee at a great value, so that model will move up.

What we’re seeing is, again, machines cost less than the Coinstar machines, which is good. We’re expecting EBITDA margins that are in the Redbox range of EBITDA margins, and an IRR that’s in the 40-60% range, which is where the Redbox and coin machines are today.

Eric: Great. I think some people would look at that and think about Starbucks Corporation (NASDAQ:SBUX) rolling through; you don’t need that kind of model for it to work.

Di Valerio: Yeah.

The article Get Ready for Rubi originally appeared on Fool.com is written by Eric Bleeker, CFA.

Eric Bleeker, CFA has no position in any stocks mentioned. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks.

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