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iRobot Reports Record Second-Quarter Revenue and Earnings

7/28/2010
Company Increases 2010 Outlook

BEDFORD, Mass., Jul 28, 2010 (BUSINESS WIRE) -- iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the second quarter ended July 3, 2010.

"Revenue, earnings per share and Adjusted EBITDA significantly exceeded expectations for the quarter," said Colin Angle, chairman and chief executive officer of iRobot. "Adjusted EBITDA was more than $12 million,or 13 percent of revenue, and we generated $15 million of operating cash flow. Cash and investments increased $48 million year-over-year to more than $98 million at quarter end.

"As a result of outstanding performance by both divisions in the second quarter and good visibility for the rest of 2010, we are increasing our full-year financial expectations."

Revenue for the second quarter of 2010 increased 59 percent to $98 million, compared with $61 million for the same quarter one year ago. Revenue for the first half of 2010 increased 63 percent to $193 million, compared with $118 million a year ago. Gross margin for the second quarter increased to 35 percent of revenue, compared with 27 percent of revenue in the second quarter of 2009. For the first half of 2010, gross margin was 35 percent, up from 28 percent for the first half of 2009. Net income in the second quarter of 2010 was $5 million, compared with a net loss of $3 million in the second quarter of 2009. Net income for the first half of 2010 was $11 million, compared with a loss of $4 million for the first half of 2009.

Business Highlights

  • International home robot revenue in Q2 2010 was up more than 80 percent year-over-year to $36 million and comprised 67 percent of total home robot revenue for the quarter. Domestic home robot revenue increased 20 percent to $17 million from $14 million in the second quarter of 2009.
  • Government & Industrial robot revenue increased 65 percent in the second quarter over the second quarter of 2009, driven by shipments of 138 PackBot robots and 100 Small Unmanned Ground Vehicles during the quarter.
  • Year-to-date operating cash flow was $25 million, compared with $12 million in the first half of 2009.

Financial Expectations

Management provides the following expectations with respect to the year ending January 1, 2011 and the third quarter ending October 2, 2010.

Fiscal Year 2010:

Revenue $385 - $390 million
Earnings Per Share $0.51 - $0.54
Adjusted EBITDA $36 - $38 million

Q3 2010:

Revenue $91 - $94 million
Earnings Per Share $0.05 - $0.06
Adjusted EBITDA $5 - $6 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 2010, business outlook, and outlook for future financial performance. Pertinent details include:

Date: Thursday, July 29, 2010
Time: 8:30 a.m. ET
Call-In Number: 617-847-8705
Passcode: 90382275

A live, audio broadcast of the conference call will also be available at http://investor.irobot.com/phoenix.zhtml?c=193096&p=irol-irhome. 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 5 and can be accessed by dialing 617-801-6888, passcode 69265770.

About iRobot Corp.

iRobot designs and builds robots that make a difference. The company's home robots help people find smarter ways to clean, and its government and industrial robots protect those in harm's way. iRobot's consumer and military robots feature iRobot Aware(R) 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 and growth, anticipated revenue, Adjusted EBITDA and earnings per share for fiscal year 2010 and the third quarter of 2010, and demand for and market acceptance of its products. 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, our dependence on the U.S. federal government and government contracts, market acceptance of our products, 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 release includes Adjusted EBITDA, 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, and non-cash stock compensation. A reconciliation between net income and Adjusted EBITDA is provided in the financial tables at the end of this press release.

iRobot Corporation
Consolidated Statement of Operations
(in thousands, except per share amounts)
(unaudited)
For the three months ended For the six months ended
July 3, June 27, July 3, June 27,
2010 2009 2010 2009
Revenue
Product revenue $ 85,945 $ 52,609 $ 172,056 $ 102,300
Contract revenue 11,859 8,731 20,678 15,976
Total 97,804 61,340 192,734 118,276
Cost of Revenue
Product revenue 55,825 37,098 111,425 70,537
Contract revenue 8,009 7,833 14,622 15,124
Total 63,834 44,931 126,047 85,661
Gross Margin 33,970 16,409 66,687 32,615
Operating Expense
Research & development 5,691 3,896 10,190 7,474
Selling & marketing 10,581 8,940 20,225 17,906
General & administrative 9,313 7,365 17,789 14,495
Total 25,585 20,201 48,204 39,875
Operating income (loss) 8,385 (3,792 ) 18,483 (7,260 )
Other income (expense), net 40 91 69 (208 )
Pre-tax income (loss) 8,425 (3,701 ) 18,552 (7,468 )
Income tax expense (benefit) 3,111 (1,092 ) 7,070 (3,072 )
Net income (loss) $ 5,314 $ (2,609 ) $ 11,482 $ (4,396 )
Net income (loss) per common share:
Basic $ 0.21 $ (0.10 ) $ 0.46 $ (0.18 )
Diluted $ 0.20 $ (0.10 ) $ 0.44 $ (0.18 )
Shares used in Per Common Share Calculations:
Basic 25,294 24,967 25,217 24,946
Diluted 26,375 24,967 26,226 24,946
Stock-based compensation included in above figures:
Cost of product revenue $ 355 $ 278 $ 687 $ 491
Cost of contract revenue 110 162 236 325
Research & development 245 101 277 98
Selling & marketing 289 338 645 655
General & administrative 1,202 1,016 2,246 1,928
Total $ 2,201 $ 1,895 $ 4,091 $ 3,497
iRobot Corporation
Condensed Consolidated Balance Sheet
(unaudited, in thousands)
July 3, January 2,
2010 2010
Assets
Cash and equivalents $ 75,810 $ 71,856
Short term investments 22,957 4,959
Accounts receivable, net 27,133 35,171
Unbilled revenues 2,313 1,831
Inventory 30,684 32,406
Deferred tax assets 8,669 8,669
Other current assets 3,290 4,119
Total current assets 170,856 159,011
Property, plant and equipment, net 22,374 20,230
Deferred tax assets 5,623 6,089
Other assets 14,008 14,254
Total assets $ 212,861 $ 199,584
Liabilities and stockholders' equity
Accounts payable $ 31,768 $ 30,559
Accrued expenses 13,363 14,384
Accrued compensation 11,153 13,525
Deferred revenue and customer advances 1,969 3,908
Total current liabilities 58,253 62,376
Long term liabilities 3,799 4,014
Stockholders' equity 150,809 133,194
Total liabilities and stockholders' equity $ 212,861 $ 199,584
iRobot Corporation
Consolidated Statement of Cash Flows
(unaudited, in thousands)
For the three months ended For the six months ended
July 3, June 27, July 3, June 27,
2010 2009 2010 2009
Cash flows from operating activities:
Net income (loss) $ 5,314 $ (2,609 ) $ 11,482 $ (4,396 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 1,917 1,950 3,755 3,864
Loss on disposal of property and equipment 2 87 47 102
Stock-based compensation 2,201 1,895 4,091 3,497
Benefit from deferred tax assets - (511 ) - (511 )
Non-cash director deferred compensation 33 33 66 66
Changes in operating assets and liabilities -- (use) source
Accounts receivable (1,054 ) (8,099 ) 8,038 4,639
Unbilled revenue 978 (326 ) (482 ) (1,445 )
Inventory (816 ) 2,104 1,722 5,922
Other assets 44 (1,001 ) 797 (2,163 )
Accounts payable 2,277 1,981 1,209 1,564
Accrued expenses (990 ) 225 (1,031 ) (33 )
Accrued compensation 4,850 1,656 (2,372 ) 634
Deferred revenue (7 ) 256 (1,939 ) 342
Change in long term liabilities (107 ) (108 ) (215 ) (215 )
Net cash provided by (used in) operating activities 14,642 (2,467 ) 25,168 11,867
Cash flows from investing activities:
Purchase of property and equipment (3,629 ) (1,672 ) (5,668 ) (2,448 )
Purchases of investments (7,831 ) - (25,411 ) -
Sales of investments 7,500 - 7,500 -
Net cash used in investing activities (3,960 ) (1,672 ) (23,579 ) (2,448 )
Cash flows from financing activities:
Proceeds from stock option exercises 1,823 132 1,927 459
Income tax withholding payment associated with restricted stock vesting (120 ) (9 ) (279 ) (9 )
Tax benefit of excess stock based compensation deductions 568 268 717 268
Net cash provided by financing activities 2,271 391 2,365 718
Net increase (decrease) in cash and cash equivalents 12,953 (3,748 ) 3,954 10,137
Cash and cash equivalents, at beginning of period 62,857 54,737 71,856 40,852
Cash and cash equivalents, at end of period $ 75,810 $ 50,989 $ 75,810 $ 50,989
iRobot Corporation
Supplemental Information
(unaudited)
For the three months ended For the six months ended
July 3, June 27, July 3, June 27,
2010 2009 2010 2009
Revenue: *
Home Robots $ 52,904 $ 34,099 $ 105,451 $ 66,922
Domestic $ 17,160 $ 14,358 $ 33,247 $ 29,643
International $ 35,744 $ 19,741 $ 72,204 $ 37,279
Retail $ 47,525 $ 27,263 $ 93,792 $ 54,079
Direct $ 5,379 $ 6,836 $ 11,659 $ 12,843
Government & Industrial $ 44,900 $ 27,241 $ 87,283 $ 51,354
Domestic $ 43,406 $ 25,404 $ 80,473 $ 46,695
International $ 1,494 $ 1,837 $ 6,810 $ 4,659
Product $ 33,041 $ 18,510 $ 66,605 $ 35,378
Contract $ 11,859 $ 8,731 $ 20,678 $ 15,976
Product Life Cycle $ 9,581 $ 4,542 $ 17,561 $ 8,931
Gross Margin Percent:
Home Robots 39.2 % 29.6 % 38.6 % 30.3 %
Government & Industrial 29.5 % 23.1 % 29.8 % 24.1 %
Total Company 34.7 % 26.8 % 34.6 % 27.6 %
Units shipped:
Home Robots * 294 192 581 375
Government & Industrial 250 151 516 301
Average gross selling prices for robot units:
Home Robots $ 188 $ 189 $ 189 $ 185
Government & Industrial * $ 94 $ 93 $ 95 $ 88
Government & Industrial Funded Product Backlog * $ 12,164 $ 17,537 $ 12,164 $ 17,537
Days sales outstanding 27 52 27 52
Days in inventory 50 70 50 70
Headcount 613 508 613 508
* in thousands
iRobot Corporation
Adjusted EBITDA Reconciliation to GAAP
(unaudited, in thousands)
For the three months ended For the six months ended
July 3, June 27, July 3, June 27,
2010 2009 2010 2009
Net income (loss) $ 5,314 $ (2,609 ) $ 11,482 $ (4,396 )
Interest income, net (197 ) (15 ) (367 ) (36 )
Income tax expense (benefit) 3,111 (1,092 ) 7,070 (3,072 )
Depreciation 1,778 1,820 3,477 3,613
Amortization 139 128 278 251
EBITDA 10,145 (1,768 ) 21,940 (3,640 )
Stock-based compensation expense 2,201 1,895 4,091 3,497
Merger and acquisition expense 61 - 71 -
Adjusted EBITDA $ 12,407 $ 127 $ 26,102 $ (143 )
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, 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.

About iRobot Corp.
iRobot designs and builds robots that make a difference. The company’s home robots help people find smarter ways to clean, and its government and industrial robots protect those in harm’s way. 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 concerning management's plans, objectives and strategies. 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. 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 including, without limitation, our most recent Annual Report on Form 10-K.

Contact:

Elise Caffrey
Investor Relations
iRobot Corp.
(781) 430-3003
ecaffrey@irobot.com
Charlie Vaida
Media Relations
iRobot Corp.
(781) 430-3182
cvaida@irobot.com