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iRobot Reports Fourth-Quarter and Full-Year Financial Results

2/5/2014
Home Robot Business Grew 20 Percent in 2013, Expected to Drive Continued Growth in 2014

BEDFORD, Mass., Feb. 5, 2014 -- iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the fourth quarter and full year ended December 28, 2013.

"2013 was a great year for iRobot. Our Home Robot business increased 20 percent over 2012, driven by growth in both domestic and overseas markets," said Colin Angle, chairman and chief executive officer of iRobot. "All three of our businesses met our expectations and made significant progress against their strategic plans, setting us up well for 2014.

"In 2014, our financial performance will continue to be driven by our Home Robot business. Home Robot revenue is expected to grow in the mid-to-high teens in 2014 and comprise 90 percent of total company revenue. Our Defense & Security business is expected to perform at 2013 levels, and our Remote Presence business will be shipping product into two markets.

"For 2014, we expect revenue of $560 to $570 million, EPS of between $1.00 and $1.15 and Adjusted EBITDA of $74 to $78 million, or roughly 14 percent of revenue. These expectations are a strong next step in progressing towards our three-year targets of:

  • Mid-high teen revenue CAGR,
  • High teen Adjusted EBITDA margin and,
  • High single digit Operating Cash Flow margin"

Financial Results

  • Revenue for the fourth quarter of 2013 was $126.3 million, compared with $100.7 million for the fourth quarter of 2012. Revenue for the full year 2013 was $487.4 million, compared with $436.2 million for the full year 2012.
  • Net income for the fourth quarter of 2013 was $3.2 million, compared with a net loss of ($5.9) million for the fourth quarter of 2012. Net income for the full year 2013 was $27.6 million, compared with $17.3 million for full-year 2012.
  • Quarterly earnings per share were $0.11, compared with a quarterly loss per share of ($0.21) in the fourth quarter last year. Full-year earnings per share were $0.94, compared with $0.61 last year.
  • Adjusted EBITDA for the fourth quarter of 2013 was $12.8 million, compared with $1.0 million in the fourth quarter of 2012. Adjusted EBITDA for the full year 2013 was $62.2 million, compared with $52.5 million for full-year 2012.

Business Highlights

  • Full-year domestic Home Robot revenue growth of more than 30 percent, coupled with international Home Robot revenue growth of 14 percent, drove a 20 percent year-over-year increase in full-year Home Robot revenue. We continued to increase our investment in marketing programs in our Home Robot business, which resulted in greater brand awareness and revenue growth in that business.
  • We introduced and began shipping the Roomba 800 Series in late 2013. This next-generation floor vacuuming robot incorporates new dirt extractor technology which amplifies suction for superior performance over traditional bristle brushes. The Scooba 450, our newest wet floor scrubbing robot, was introduced and began shipping in January 2014.
  • Our Defense & Security business delivered results consistent with our expectations while continuing to reduce reliance on the U.S. Department of Defense.
  • We began shipping RP-VITA through InTouch Health into the healthcare market and announced the Ava 500 Video Collaboration Robot which blends together our autonomous navigation capabilities with Cisco's TelePresence. The Ava 500 is targeted for availability from certified Cisco partners in the first half of 2014.

Financial Expectations

Management provides the following expectations with respect to the year ending December 27, 2014 and first quarter ending March 29, 2014.

Fiscal Year 2014:


Revenue

$560 - $570 million

Earnings Per Share

$1.00 - $1.15

Adjusted EBITDA

$74 - $78 million



Full-Year 2014 BU Revenue:


Home

$500 - $515 million

Defense & Security

$50 million

Remote Presence

$5 million



Q1 2014:


Revenue

$110 - $113 million

Earnings Per Share

$0.13 - $0.17

Adjusted EBITDA

$13 - $15 million



Fourth-Quarter and Full-Year Conference Call

iRobot will host a conference call tomorrow at 8:30 a.m. ET to discuss its financial results for the fourth fiscal quarter and full year 2013, business outlook, and outlook for 2014 financial performance. Pertinent details include:

Date: Thursday, February 6, 2014

Time: 8:30 a.m. ET

Call-In Number: 847-619-6396

Passcode: 35939059

A live, audio broadcast of the conference call will also be available at http://investor.irobot.com/phoenix.zhtml?c=193096&p=irol-EventDetails&EventId=5041606. An archived version of the broadcast will be available on the same website shortly after the conclusion of the live event. A replay of the telephone conference call will be available through February 13, and can be accessed by dialing 630-652-3042, passcode 35939059#.

About iRobot Corp.
iRobot designs and builds robots that make a difference. The company's home robots help people find smarter ways to clean, its defense & security robots protect those in harm's way, and its remote presence robots enable virtual presence from anywhere in the world. iRobot's consumer and military robots feature iRobot Aware® robot intelligence systems, proprietary technology incorporating advanced concepts in navigation, mobility, manipulation and artificial intelligence. For more information about iRobot, please visit www.irobot.com.

For iRobot Investors

Certain statements made in this press release that are not based on historical information are forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This press release contains express or implied forward-looking statements relating to, among other things, iRobot Corp.'s expectations regarding future financial performance, future operating performance and growth, anticipated growth and performance of our businesses, demand for our robots, Home Robot revenue for fiscal year 2014, the timing of new product introductions, the timing of entry into new product markets, the availability of new products, and anticipated revenue, earnings per share and Adjusted EBITDA for fiscal year 2014 and the first quarter ending March 29, 2014. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things: our ability to operate in an emerging market, the financial strength of our customers and retailers, general economic conditions, market acceptance of our products, our dependence on the U.S. federal government and government contracts, the timing of government contracts and orders, changes in government policies or spending priorities, and competition. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. iRobot Corp. undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances or otherwise. For additional disclosure regarding these and other risks faced by iRobot Corp., see the disclosure contained in our public filings with the Securities and Exchange Commission.

This press release includes Adjusted EBITDA, which is a non-GAAP financial measure as defined by SEC Regulation G. We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, merger and acquisition expenses, net intellectual property litigation expenses, restructuring expenses, and non-cash stock compensation. A reconciliation between net income (loss) and Adjusted EBITDA is provided in the financial tables at the end of this press release.


iRobot Corporation

Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)














For the three months ended


For the twelve months ended


December 28,

December 29,


December 28,

December 29,


2013

2012


2013

2012







Product revenue

$ 125,426

$ 97,874


$ 477,444

$ 418,550

Contract revenue

917

2,820


9,957

17,694

Revenue

126,343

100,694


487,401

436,244







Product revenue

66,939

54,928


262,224

234,102

Contract revenue

474

1,262


4,023

7,794

Cost of Revenue

67,413

56,190


266,247

241,896







Gross Margin

58,930

44,504


221,154

194,348







Operating Expense






Research & development

18,008

15,344


63,649

57,066

Selling & marketing

22,199

24,727


71,529

66,412

General & administrative

14,010

13,308


53,358

45,698

Total

54,217

53,379


188,536

169,176







Operating income (loss)

4,713

(8,875)


32,618

25,172







Other income (expense), net

(154)

(42)


(203)

435







Income (loss) before income taxes

4,559

(8,917)


32,415

25,607

Income tax expense (benefit)

1,371

(2,979)


4,774

8,310

Net income (loss)

$ 3,188

$ (5,938)


$ 27,641

$ 17,297







Net income (loss) per common share:






Basic

$ 0.11

$ (0.21)


$ 0.97

$ 0.63

Diluted

$ 0.11

$ (0.21)


$ 0.94

$ 0.61







Shares used in per common share calculations:






Basic

28,902

27,802


28,495

27,577

Diluted

29,712

27,802


29,354

28,301













Stock-based compensation included in above figures:






Cost of product revenue

$ 204

$ 174


$ 700

$ 889

Research & development

737

633


2,700

1,904

Selling & marketing

414

234


1,246

808

General & administrative

2,385

1,919


8,763

7,382

Total

$ 3,740

$ 2,960


$ 13,409

$ 10,983








iRobot Corporation

Condensed Consolidated Balance Sheets

(unaudited, in thousands)






December 28,


December 29,


2013


2012





Assets








Cash and equivalents

$ 165,404


$ 126,770

Short term investments

21,954


12,430

Accounts receivable, net

39,348


29,413

Unbilled revenues

856


1,196

Inventory

46,107


36,965

Deferred tax assets

20,144


19,266

Other current assets

6,848


8,853

Total current assets

300,661


234,893

Property, plant and equipment, net

23,661


24,953

Deferred tax assets

10,095


8,792

Goodwill

48,751


48,951

Intangible assets, net

22,668


28,224

Other assets

10,501


8,500

Total assets

$ 416,337


$ 354,313





Liabilities and stockholders' equity








Accounts payable

$ 41,344


$ 42,515

Accrued expenses

14,880


13,642

Accrued compensation

19,606


11,864

Deferred revenue and customer advances

5,085


6,257

Total current liabilities

80,915


74,278

Long term liabilities

4,733


4,218

Stockholders' equity

330,689


275,817

Total liabilities and stockholders' equity

$ 416,337


$ 354,313







iRobot Corporation

Consolidated Statements of Cash Flows

(unaudited, in thousands)














For the three months ended


For the twelve months ended


December 28,

December 29,


December 28,

December 29,


2013

2012


2013

2012

Cash flows from operating activities:






Net income (loss)

$ 3,188

$ (5,938)


$ 27,641

$ 17,297

Adjustments to reconcile net income (loss) to net cash provided by operating activities:






Depreciation and amortization

3,140

3,491


12,169

11,672

Loss on disposal of assets

540

554


189

1,332

Goodwill and intangible assets impairment

-

-


1,988

-

Stock-based compensation

3,740

2,960


13,409

10,983

Deferred income taxes, net

(106)

(908)


(768)

(3,763)

Tax benefit of excess stock based compensation deductions

(168)

16


(2,406)

(1,445)

Non-cash director deferred compensation

11

23


44

87

Changes in operating assets and liabilities — (use) source






Accounts receivable

14,679

25,601


(9,935)

15,560

Unbilled revenue

700

497


340

1,166

Inventory

2,708

696


(9,365)

(807)

Other assets

(717)

(6,158)


1,980

(2,892)

Accounts payable

(5,872)

1,405


(1,743)

(8,684)

Accrued expenses

1,471

(2,252)


1,255

(656)

Accrued compensation

4,747

2,736


7,751

(6,106)

Deferred revenue and customer advances

3,059

4,139


(1,172)

4,730

Change in long term liabilities

177

(298)


515

(613)

Net cash provided by operating activities

31,297

26,564


41,892

37,861







Cash flows from investing activities:






Purchase of property and equipment

(1,705)

(2,703)


(6,829)

(6,770)

Change in other assets

-

-


(2,000)

(6,000)

Purchase of Evolution net of cash received

-

(74,530)


-

(74,530)

Purchases of investments

(5,049)

-


(17,946)

(5,086)

Sales of investments

-

7,500


8,044

10,000

Proceeds from sale of assets

-

-


650

-

Net cash used in investing activities

(6,754)

(69,733)


(18,081)

(82,386)







Cash flows from financing activities:






Proceeds from stock option exercises

1,265

304


13,629

4,326

Income tax withholding payment associated with restricted stock vesting

(303)

(7)


(1,212)

(784)

Tax benefit of excess stock based compensation deductions

168

(16)


2,406

1,445

Net cash provided by financing activities

1,130

281


14,823

4,987







Net increase (decrease) in cash and cash equivalents

25,673

(42,888)


38,634

(39,538)

Cash and cash equivalents, at beginning of period

139,731

169,658


126,770

166,308

Cash and cash equivalents, at end of period

$ 165,404

$ 126,770


$ 165,404

$ 126,770







iRobot Corporation

Supplemental Information

(unaudited)














For the three months ended


For the twelve months ended


December 28,

December 29,


December 28,

December 29,


2013

2012


2013

2012







Revenue: *












Home Robots

$ 108,263

$ 82,918


$ 427,853

$ 356,805







Domestic

$ 47,843

$ 31,821


$ 154,112

$ 117,690

International

$ 60,420

$ 51,097


$ 273,741

$ 239,115













Defense & Security

$ 16,339

$ 15,731


$ 50,003

$ 70,948







Domestic

$ 10,035

$ 14,389


$ 34,193

$ 64,346

International

$ 6,304

$ 1,342


$ 15,810

$ 6,602







Product

$ 16,321

$ 13,773


$ 45,612

$ 57,092

Contract

$ 18

$ 1,958


$ 4,391

$ 13,856







Product Life Cycle

$ 11,625

$ 12,254


$ 26,097

$ 36,272













Gross Margin Percent:






Home Robots

49.6%

51.2%


49.3%

51.0%

Defense & Security

59.4%

45.3%


50.1%

43.0%

Total Company

46.6%

44.2%


45.4%

44.6%













Units shipped:






Home Robots *

494

387


1,933

1,621

Defense & Security

49

29


534

274













Average gross selling prices for robot units:






Home Robots

$ 233

$ 227


$ 231

$ 222

Defense & Security *

$ 96

$ 52


$ 36

$ 76













Defense & Security Funded Product Backlog *

$ 8,765

$ 11,356


$ 8,765

$ 11,356













Days sales outstanding

29

28


29

28







Days in inventory

63

61


63

61







Headcount

528

534


528

534













* in thousands












iRobot Corporation

Adjusted EBITDA Reconciliation to GAAP

(unaudited, in thousands)














For the three months ended


For the twelve months ended


December 28,

December 29,


December 28,

December 29,


2013

2012


2013

2012







Net income (loss)

$ 3,188

$ (5,938)


$ 27,641

$ 17,297







Interest income, net

(131)

(201)


(660)

(1,016)

Income tax expense (benefit)

1,371

(2,979)


4,774

8,310

Depreciation

2,153

2,418


8,077

9,898

Amortization

987

1,073


4,092

1,774







EBITDA

7,568

(5,627)


43,924

36,263













Stock-based compensation expense

3,740

2,960


13,409

10,983

Merger and acquisition expense

7

717


400

1,404

Net intellectual property litigation expense

758

26


1,202

155

Restructuring expense

721

2,905


3,296

3,679







Adjusted EBITDA

$ 12,794

$ 981


$ 62,231

$ 52,484







Use of Non-GAAP Financial Measures

In evaluating its business, iRobot considers and uses Adjusted EBITDA as a supplemental measure of its operating performance. The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, merger and acquisition expenses, net intellectual property litigation expenses, restructuring expenses and non-cash stock compensation. The Company also presents Adjusted EBITDA because it believes it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance.

The term Adjusted EBITDA is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. Adjusted EBITDA has limitations as an analytical tool, and when assessing the Company's operating performance, investors should not consider Adjusted EBITDA in isolation, or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, Adjusted EBITDA does not reflect the Company's actual cash expenditures. Other companies may calculate similar measures differently than iRobot, limiting their usefulness as comparative tools. iRobot compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA only supplementally.



Contact:

Elise Caffrey
Investor Relations
iRobot Corp.
(781) 430-3003
ecaffrey@irobot.com
Matt Lloyd
Media Relations
iRobot Corp.
(781) 430-3720
mlloyd@irobot.com