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iRobot Reports Second-Quarter Financial Results

7/23/2013
Home Robot business drives 17 percent year-over-year growth

BEDFORD, Mass. iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the second quarter ended June 29, 2013.

“I am very excited to report that we had an excellent quarter following an outstanding Q1. Our Home Robot business delivered strong results both domestically and overseas, and the outlook continues to be good. We announced our second remote presence market initiative, Enterprise Telepresence, in partnership with Cisco, and our Defense & Security business performed as expected,” said Colin Angle, chairman and chief executive officer of iRobot.

“Based on our view of the rest of the year, our expectations for revenue and Adjusted EBITDA remain unchanged, but we are increasing the low end of our EPS range due to a one-time tax benefit received in Q2. We expect to deliver fiscal 2013 revenue of $485 to $495 million, EPS between $0.88 and $1.00 and Adjusted EBITDA of $55 to $61 million. Our strong second-quarter results, driven by our Home Robot business, give us confidence that we will achieve our full-year expectations.”

  • Revenue for the second quarter of 2013 was $130.4 million, compared with $111.4 million for the same quarter one year ago. Revenue for the first half of 2013 was $236.6 million, compared with $209.3 million last year.
  • Net income in the second quarter of 2013 was $8.3 million, compared with $7.4 million in the second quarter of 2012. For the first half, net income was $16.6 million, compared with $8.0 million a year ago.
  • Quarterly earnings per share were $0.28, compared with $0.26 in the second quarter last year. First-half earnings per share were $0.57, compared with $0.28 in 2012. EPS in Q2 and first-half 2013 included a $0.07 one-time tax benefit associated with the prior period sale of government robots to the U.S. military, which were used outside of the U.S.
  • Adjusted EBITDA for the second quarter of 2013 was $17.0 million, compared with $16.2 million in the second quarter of 2012. For the first half, Adjusted EBITDA was $32.3 million, compared with $22.3 million a year ago.

Business Highlights

  • Domestic revenue growth of 26 percent, coupled with international growth of 18 percent, fueled a 20 percent year-over-year increase in Home Robot revenue.
  • Announced contracts from Brazil totaling $7.2 million and a $3.0 million order under a $30.0 million IDIQ from the U.S. Army during the quarter, which gives us confidence that we will achieve our full-year Defense & Security expectations.
  • Announced a joint marketing agreement with Cisco to bring the enterprise-grade Ava 500 video collaboration robot to market, the second initiative of our Remote Presence business.

Financial Expectations

Management provides the following expectations with respect to the third quarter ending September 28, 2013 and fiscal year ending December 28, 2013.

Q3 2013:

                   
Revenue $124 - $128 million
Earnings Per Share $0.20 - $0.25
Adjusted EBITDA $14 - $17 million
 

Fiscal Year 2013:

Current

Prior

Revenue $485 - $495 million $485 - $495 million
Earnings Per Share $0.88 - $1.00 $0.80 - $1.00
Adjusted EBITDA $55 - $61 million $55 - $61 million
 

Full-Year 2013 BU Revenue:

Home Robots $435 - $440 million
Defense & Security Robots $45 - $55 million
 

Second-Quarter Conference Call

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

Date:           Wednesday, July 24, 2013
Time: 8:30 a.m. ET
Call-In Number: 847-619-6818
Passcode: 34160570
 

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=4897483. 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 August 1, and can be accessed by dialing 630-652-3000, passcode 34160570#.

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, operating performance and growth, demand for our robots, anticipated growth and performance of our Home Robots business, anticipated performance of our Defense & Security business, anticipated revenue, earnings per share and Adjusted EBITDA for fiscal year 2013 and the third quarter ending September 28, 2013, and anticipated business unit revenue for the fiscal year 2013. 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 six months ended
June 29, June 30, June 29, June 30,
  2013       2012   2013       2012
Revenue
Product revenue $ 127,966 $ 107,760 $ 229,371 $ 199,502
Contract revenue   2,396       3,685   7,186       9,750
Total   130,362       111,445   236,557       209,252
 
Cost of Revenue
Product revenue 67,873 57,089 125,688 113,322
Contract revenue   884       1,540   2,737       4,562
Total   68,757       58,629   128,425       117,884
 
Gross Margin 61,605 52,816 108,132 91,368
 
Operating Expense
Research & development 15,997 14,182 30,405 28,682
Selling & marketing 22,309 17,976 33,006 30,309
General & administrative   15,395       10,022   27,853       21,064
Total   53,701       42,180   91,264       80,055
 
Operating income 7,904 10,636 16,868 11,313
 
Other income (expense), net   (105 )     60   (201 )     280
 
Income before income taxes 7,799 10,696 16,667 11,593
Income tax expense (benefit)   (495 )     3,321   18       3,565
Net income $ 8,294     $ 7,375 $ 16,649     $ 8,028
 
Net income per common share:
Basic $ 0.29 $ 0.27 $ 0.59 $ 0.29
Diluted $ 0.28 $ 0.26 $ 0.57 $ 0.28
 
Shares used in per common share calculations:
Basic 28,416 27,522 28,173 27,441
Diluted 29,226 28,182 28,972 28,259
 
 
Stock-based compensation included in above figures:
Cost of product revenue $ 128 $ 218 $ 246 $ 426
Cost of contract revenue - - - -
Research & development 793 446 1,294 906
Selling & marketing 118 179 484 416
General & administrative   2,224       2,059   4,168       3,667
Total $ 3,263     $ 2,902 $ 6,192     $ 5,415
 
 
iRobot Corporation
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
     
June 29, December 29,
  2013   2012
 
Assets
 
Cash and equivalents $ 133,857 $ 126,770
Short term investments 19,014 12,430
Accounts receivable, net 51,104 29,413
Unbilled revenues 1,051 1,196
Inventory 41,560 36,965
Deferred tax assets 19,245 19,266
Other current assets   13,598   8,853
Total current assets 279,429 234,893
Property, plant and equipment, net 23,060 24,953
Deferred tax assets 10,438 8,792
Goodwill 48,751 48,951
Intangible assets, net 24,506 28,224
Other assets   10,501   8,500
Total assets $ 396,685 $ 354,313
 
Liabilities and stockholders' equity
 
Accounts payable $ 53,905 $ 42,515
Accrued expenses 14,045 13,642
Accrued compensation 13,113 11,864
Deferred revenue and customer advances   3,274   6,257
Total current liabilities   84,337   74,278
Long term liabilities   4,138   4,218
Stockholders' equity   308,210   275,817
Total liabilities and stockholders' equity $ 396,685 $ 354,313
 
 
iRobot Corporation
Consolidated Statements of Cash Flows
(unaudited, in thousands)
         
 
For the three months ended For the six months ended
June 29, June 30, June 29, June 30,
  2013       2012     2013       2012  
Cash flows from operating activities:
Net income $ 8,294 $ 7,375 $ 16,649 $ 8,028
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization 3,265 2,711 6,549 5,313
Loss on disposal of property and equipment 99 97 281 166
Goodwill and intangible assets impairment 1,988 - 1,988 -
Stock-based compensation 3,263 2,902 6,192 5,415
Deferred income taxes, net (464 ) 2,464 (913 ) (4,230 )
Tax benefit of excess stock based compensation deductions (1,593 ) (330 ) (1,636 ) (1,035 )
Non-cash director deferred compensation 11 20 22 42
Changes in operating assets and liabilities — (use) source
Accounts receivable (23,824 ) (9,620 ) (21,691 ) 3,811
Unbilled revenue 1,201 (833 ) 145 289
Inventory (9,400 ) (2,916 ) (4,595 ) (3,508 )
Other assets (3,787 ) (3,210 ) (4,770 ) (378 )
Accounts payable 24,101 910 11,390 (3,194 )
Accrued expenses 21 (5,255 ) 400 (3,252 )
Accrued compensation 6,116 2,008 1,249 (8,141 )
Deferred revenue and customer advances (355 ) (540 ) (2,983 ) 355
Change in long term liabilities   (895 )     (120 )   (80 )     (186 )
Net cash (used in) provided by operating activities   8,041       (4,337 )   8,197       (505 )
 
Cash flows from investing activities:
Purchase of property and equipment (1,751 ) (1,313 ) (2,828 ) (2,956 )
Change in other assets - - (2,000 ) (6,000 )
Purchases of investments (7,850 ) (5,086 ) (10,397 ) (5,086 )
Sales of investments   2,500       -     3,500       2,500  
Net cash used in investing activities   (7,101 )     (6,399 )   (11,725 )     (11,542 )
 
Cash flows from financing activities:
Proceeds from stock option exercises 8,099 699 9,843 2,022
Income tax withholding payment associated with restricted stock vesting (351 ) (548 ) (864 ) (775 )
Tax benefit of excess stock based compensation deductions   1,593       330     1,636       1,035  
Net cash provided by financing activities   9,341       481     10,615       2,282  
 
Net increase (decrease) in cash and cash equivalents 10,281 (10,255 ) 7,087 (9,765 )
Cash and cash equivalents, at beginning of period   123,576       166,798     126,770       166,308  
Cash and cash equivalents, at end of period $ 133,857     $ 156,543   $ 133,857     $ 156,543  
 
 
iRobot Corporation
Supplemental Information
(unaudited)
         
 
For the three months ended For the six months ended
June 29, June 30, June 29, June 30,
  2013       2012     2013       2012  
 
Revenue: *
 
Home Robots $ 115,528     $ 96,013   $ 208,227     $ 177,596  
 
Domestic $ 39,178 $ 31,126 $ 70,569 $ 52,944
International $ 76,350 $ 64,887 $ 137,658 $ 124,652
 
 
Defense & Security $ 12,470     $ 13,223   $ 23,570     $ 27,385  
 
Domestic $ 11,579 $ 11,013 $ 20,713 $ 21,128
International $ 891 $ 2,210 $ 2,857 $ 6,257
 
Product $ 11,502 $ 10,403 $ 19,537 $ 19,407
Contract $ 968 $ 2,820 $ 4,033 $ 7,978
 
Product Life Cycle $ 3,041 $ 4,524 $ 9,121 $ 9,108
 
 
Gross Margin Percent:
Home Robots 51.5 % 53.0 % 50.0 % 50.3 %
Defense & Security 47.5 % 45.9 % 47.5 % 37.7 %
Total Company 47.3 % 47.4 % 45.7 % 43.7 %
 
 
Units shipped:
Home Robots * 492 426 913 818
Defense & Security 424 42 442 174
 
 
Average gross selling prices for robot units:
Home Robots $ 225 $ 225 $ 233 $ 220
Defense & Security * $ 20 $ 140 $ 24 $ 59
 
 
Defense & Security Funded Product Backlog * $ 19,972 $ 18,300 $ 19,972 $ 18,300
 
 
Days sales outstanding 37 34 37 34
 
Days in inventory 58 54 58 54
 
Headcount 517 604 517 604
 
 
* in thousands
 
 
iRobot Corporation
Adjusted EBITDA Reconciliation to GAAP
(unaudited, in thousands)
         
 
For the three months ended For the six months ended
June 29, June 30, June 29, June 30,
  2013       2012     2013       2012  
 
Net income $ 8,294 $ 7,375 $ 16,649 $ 8,028
 
Interest income, net (153 ) (264 ) (317 ) (526 )
Income tax expense (benefit) (495 ) 3,321 18 3,565
Depreciation 2,221 2,485 4,440 4,879
Amortization   1,044       226     2,109       434  
 
EBITDA 10,911 13,143 22,899 16,380
 
 
Stock-based compensation expense 3,263 2,902 6,192 5,415
Merger and acquisition expense 113 14 393 26
Net intellectual property litigation expense 170 34 203 71
Restructuring expense   2,575       129     2,575       407  
 
Adjusted EBITDA $ 17,032     $ 16,222   $ 32,262     $ 22,299  
 
 
 
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