Coinstar Expects Record Third Quarter Results But Below Analyst Expectations.

BELLEVUE, Wash.--(BUSINESS WIRE)--Sept. 15, 1999--

Coinstar Inc., (Nasdaq:CSTR) a retail-based coin counting and e-services company, today announced preliminary results for the third quarter which ends on September 30, 1999.

For the third quarter of 1999, the company estimates that it will continue its record pace of installations and post record revenues and EBITDA. However, despite the estimated record quarter, revenue and EBITDA will be below analysts' consensus estimates. Coinstar estimates revenue to be in the range of $20 to $22 million, compared with $13.6 million for the same period last year. EBITDA is estimated to be in the range of $3 to $4 million compared with the $1.1 million reported for the third quarter of last year.

The Company estimates that third quarter revenue will increase approximately 50 to 60% compared with the same period last year and be 15 to 20% above previous record revenue results, set in the second quarter of this year. Per unit volumes also continue to increase as the units age.

"We expect that this will be our best quarter ever, with record installations, revenue and EBITDA. However, due to some unexpected external factors and strategic decisions, certain results will be below what analysts had expected," said Jens Molbak, CEO of Coinstar Inc.

"During July and August, there was a national shortage of coins in the banking system, particularly pennies. Consequently, many retailers purchased loose coins directly from consumers, creating temporary competition for our service. In addition, some commercial banks were offering consumers a 10% premium for pennies to deal with the shortage," Molbak continued. "We also believe the introduction of the new state quarters has renewed consumer interest in coin collecting, thereby increasing the amount of hoarding. Beyond these new marketplace factors, we decided to purchase less costly radio advertising during the third quarter in the face of escalating advertising rates. Radio yielded results that were not as effective as the TV advertising we ran in the same period last year. Finally, the fee increase introduced in the fourth quarter of last year may have dampened the rate of growth of our per unit volumes."

"Installation of new Coinstar units is continuing to proceed at a record pace. This quarter we have already opened up eight new regions and we expect installations in excess of 600 units for the quarter, making this the second consecutive quarter for record installations," said Mr. Molbak. "Retailer demand for our service is very strong and we estimate that we will install more machines in the first nine months of this year than we installed during all of 1998."

Direct contribution continues to grow strongly and revenues per unit are expected to increase on a per unit basis compared to the same period last year. Mr. Molbak stated, "We continue to operate the network efficiently and the fee increase, while somewhat affecting the rate of growth on volumes, continues to positively boost direct contribution."

EBITDA levels will be lower than estimates due to lower total revenue and accelerated investment spending. "To take advantage of certain market opportunities in the Internet space that leverage our existing network, we have accelerated spending in our e-services division for the development of the Coinstar Shopper (TM) service and it's related web site," continued Mr. Molbak. "We expect to report e-services expenses between $1.5 million and $2.0 million in the third quarter and we are on track to launch our e-services initiatives in the fourth quarter. In addition, we accelerated the completion of the NT operating system network rollout, spending between $500,000- $700,000 to complete over 50% of the unit conversions in this quarter alone. We believe that both of these investment decisions were the appropriate long-term strategic moves for our company."

"The recent addition of Rich Stillman as Vice President of Marketing enables us to focus resources on developing an aggressive ongoing marketing program to increase customer usage and take advantage of the large market opportunity for coin recycling," continued Molbak. "Our recently upgraded operating system enables us to leverage the power of our 6,300 unit network to focus on the customer with other value added offerings, capture customer feedback, and improve our core product."

The estimates included in this release are preliminary and subject to change. They are based on preliminary information and management assumptions. The company will report completed results for the third quarter on October 26, 1999.

Coinstar and its subsidiaries provide consumers and retailers with value-added services that increase customer loyalty and retailer profitability. The Coinstar network currently delivers the company's self-service coin counting product to consumers in more than 6,300 leading supermarkets in 38 states, the District of Columbia, the United Kingdom and Canada. Consumers can call 1-800-928-CASH, or visit http://www.findcoinstar.com for the location of the nearest Coinstar machine.

This press release regarding preliminary quarterly financial results contains forward looking statements. Final accounting adjustments made in the course of closing the quarter could cause material results to differ. There are also certain other important factors that could cause actual results to differ materially from those anticipated by some of the statements made above. Factors that could cause or contribute to such differences include, but are not limited to, success in the timely deployment of a substantial number of additional Coinstar units, consumer awareness and demand for the Company's coin processing service, success in expanding its network and managing its growth and the Company's ability to protect its patents and proprietary rights as well as other risks. Additional information concerning these and other risks is described in the section entitled "Risk Factors" included in the Company's Registration Statement, as amended, on Form S-3 (NO.333-79073), the Company's Annual Report on Form 10-K and the Company's other reports filed with the Securities and Exchange Commission.