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iRobot Reports Strong Third-Quarter 2009 Results

10/21/2009
Company Increases Full-Year Profit Expectations

BEDFORD, Mass.-- (BUSINESS WIRE) -- Oct. 21, 2009 -- iRobot Corp. (NASDAQ: IRBT) today announced its financial results for the fiscal quarter ended September 26, 2009.

“We delivered third-quarter revenue near the top end of our expectations, and earnings per share and Adjusted EBITDA that significantly exceeded our expectations,” said Colin Angle, chairman and chief executive officer of iRobot. “Operating cash flow improved by more than $13 million in the third quarter from a year ago. Year-to-date, we have generated $25 million in operating cash flow and improved our cash position year-over-year by $36 million to nearly $63 million at the end of the third quarter.

“Based on our performance through the first nine months, we are reaffirming our expectations for full-year revenue and increasing our expectations for earnings per share and Adjusted EBITDA,” Angle concluded.

Revenue for the third quarter of 2009 decreased 14.9 percent to $78.6 million, compared with $92.4 million for the same quarter one year ago. Revenue for the first nine months of 2009 decreased 9.2 percent to $196.9 million from $216.9 million for the first nine months of 2008.

Gross margin for the third quarter decreased to 30.8 percent of revenue, compared with 31.3 percent of revenue in the third quarter of 2008. In the first nine months of 2009, gross margin increased to 28.9 percent of revenue, up from 28.0 percent of revenue in the first nine months of 2008.

Earnings per share for the third quarter of 2009 were $0.10, compared with $0.15 for the same period a year ago. For the first nine months of 2009, loss per share improved to $0.07, compared with $0.19 for the same period in 2008.

Adjusted EBITDA was $8.4 million for the third quarter of 2009, compared with $9.5 million in the third quarter of 2008. For the first nine months of 2009, Adjusted EBITDA improved to $8.2 million from a loss of $0.7 million in the first nine months of 2008.

Business Highlights

  • International home robot revenue in the third quarter of 2009 increased 55 percent from the third quarter of 2008 and comprised half of total home robot revenue in the quarter.
  • Government & Industrial Robots division received more than $55 million in orders from the U.S. Government during the quarter and has 100 percent visibility on its full-year revenue expectations.
  • In the first nine months of 2009, operating cash flow was $24.6 million, compared with cash used in operations of $0.3 million in the first nine months of 2008, as continued aggressive management led to a $17.9 million reduction of inventory at quarter end versus last year.

Financial Expectations

Management provides the following expectations with respect to the fiscal year and fourth quarter ending January 2, 2010.

Fiscal Year 2009:

Revenue $295 – $305 million
Adjusted EBITDA $15 – $18 million
Earnings Per Share

$0.02 – $0.06

Q4 2009:

Revenue $98 – $108 million
Adjusted EBITDA $7 – $10 million
Earnings Per Share

$0.09 – $0.13

Third-Quarter Conference Call

iRobot will host a conference call tomorrow at 8:30 a.m. ET to discuss its financial results for the fiscal quarter ended September 26, 2009, business outlook, and outlook for future financial performance. Pertinent details include:

Date: Thursday, October 22, 2009
Time: 8:30 a.m. ET
Call-In Number: 719-325-4776

A live, audio broadcast of the conference call also will be available at http://investors.irobot.com/events.cfm. An archived version of the broadcast will be available on the same Web site shortly after the conclusion of the live event. A replay of the telephone conference call will be available and can be accessed by dialing 719-457-0820, access code 7344142.

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 regarding anticipated revenue, Adjusted EBITDA and earnings per share for fiscal year 2009, operations for the fourth quarter of 2009, 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 (loss) 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 nine months ended
September 26, September 27, September 26, September 27,
2009 2008 2009 2008
Revenue
Product revenue $ 69,080 $ 87,224 $ 171,380 $ 198,475
Contract revenue 9,539 5,191 25,515 18,444
Total 78,619 92,415 196,895 216,919
Cost of Revenue
Product revenue 46,415 58,371 116,952 138,948
Contract revenue 8,009 5,114 23,133 17,213
Total 54,424 63,485 140,085 156,161
Gross Margin 24,195 28,930 56,810 60,758
Operating Expense
Research & development 3,159 4,940 10,633 13,631
Selling & marketing 9,514 10,522 27,420 35,451
General & administrative 7,420 7,578 21,915 21,696
Total 20,093 23,040 59,968 70,778
Operating income (loss) 4,102 5,890 (3,158 ) (10,020 )
Other income (expense), net 112 180 (96 ) 917
Pre-tax income (loss) 4,214 6,070 (3,254 ) (9,103 )
Income tax expense (benefit) 1,620 2,218 (1,452 ) (4,437 )
Net income (loss) $ 2,594 $ 3,852 $ (1,802 ) $ (4,666 )
Net income (loss) per common share:
Basic $ 0.10 $ 0.16 $ (0.07 ) $ (0.19 )
Diluted $ 0.10 $ 0.15 $ (0.07 ) $ (0.19 )
Shares used in Per Common Share Calculations:
Basic 25,025 24,712 24,974 24,614
Diluted 25,670 25,536 24,974 24,614
Stock-based compensation included in above figures:
Cost of product revenue $ 267 $ 184 $ 758 $ 554
Cost of contract revenue 139 127 464 300
Research & development 89 131 187 226
Selling & marketing 351 305 1,006 733
General & administrative 1,016 1,090 2,944 2,495
Total $ 1,862 $ 1,837 $ 5,359 $ 4,308
iRobot Corporation
Condensed Consolidated Balance Sheet
(unaudited, in thousands)
September 26, December 27,
2009 2008
Assets
Cash and equivalents $ 62,747 $ 40,852
Accounts receivable, net 43,934 35,930
Unbilled revenues 2,537 2,014
Inventory 24,653 34,560
Deferred tax assets 7,295 7,299
Other current assets 4,430 3,340
Total current assets 145,596 123,995
Property, plant and equipment, net 20,401 22,929
Deferred tax assets 4,508 4,508
Other assets 11,877 12,246
Total assets $ 182,382 $ 163,678
Liabilities and stockholders' equity
Accounts payable $ 27,787 $ 19,544
Accrued expenses 11,672 10,989
Accrued compensation 10,846 6,393
Deferred revenue and customer advances 4,244 2,632
Total current liabilities 54,549 39,558
Long term liabilities 4,122 4,444
Stockholders' equity 123,711 119,676
Total liabilities and stockholders' equity $ 182,382 $ 163,678
iRobot Corporation
Consolidated Statement of Cash Flows
(unaudited, in thousands)
For the three months ended For the nine months ended
September 26, September 27, September 26, September 27,
2009 2008 2009 2008
Cash flows from operating activities:
Net income (loss) $ 2,594 $ 3,852 $ (1,802 ) $ (4,666 )

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

Depreciation and amortization 2,289 1,844 6,153 5,135
Loss on disposal of property and equipment 74 12 176 80
Stock-based compensation 1,862 1,837 5,359 4,308
In-process research and development relating to acquisition of Nekton Research LLC - 200 - 200
Benefit from deferred tax assets 164 - (347 ) -
Non-cash director deferred compensation 33 24 99 71
Changes in operating assets and liabilities — (use) source
Accounts receivable (12,643 ) (21,598 ) (8,004 ) 1,830
Unbilled revenue 922 (82 ) (523 ) (28 )
Inventory 3,985 692 9,907 2,626
Other assets 1,052 1,186 (1,111 ) (6,930 )
Accounts payable 6,679 7,192 8,243 (13,540 )
Accrued expenses 706 1,226 673 1,405
Accrued compensation 3,819 1,481 4,453 3,503
Deferred revenue 1,270 1,755 1,612 1,127
Change in long term liabilities (107 ) (107 ) (322 ) 4,552
Net cash provided by (used in) operating activities 12,699 (486 ) 24,566 (327 )
Cash flows from investing activities:
Purchase of property and equipment (953 ) (1,312 ) (3,401 ) (13,589 )
Purchase of Nekton Research LLC, net of cash received - (9,745 ) - (9,745 )
Purchases of investments - - - (29,997 )
Sales of investments - 1,300 - 30,350
Net cash used in investing activities (953 ) (9,757 ) (3,401 ) (22,981 )
Cash flows from financing activities:
Proceeds from stock option exercises 36 176 495 908
Income tax withholding payment associated with restricted stock vesting (67 ) - (76 ) -
Borrowings under revolving line of credit - 5,500 - 5,500
Tax benefit of excess stock based compensation deductions 43 322 311 680
Net cash provided by financing activities 12 5,998 730 7,088
Net increase (decrease) in cash and cash equivalents 11,758 (4,245 ) 21,895 (16,220 )
Cash and cash equivalents, at beginning of period 50,989 14,760 40,852 26,735
Cash and cash equivalents, at end of period $ 62,747 $ 10,515 $ 62,747 $ 10,515
iRobot Corporation
Supplemental Information
(unaudited)
For the three months ended For the nine months ended
September 26, September 27, September 26, September 27,
2009 2008 2009 2008
Revenue by business unit (in thousands):
Home Robots
Product $ 44,331 $ 53,626 $ 111,253 $ 125,424
Contract - - - 55
Government & Industrial
Product 24,749 33,598 60,127 73,051
Contract 9,539 5,191 25,515 18,389
$ 78,619 $ 92,415 $ 196,895 $ 216,919
Direct Revenue - Home Robots (in thousands) $ 5,489 $ 6,777 $ 17,178 $ 22,514
Product Lifecycle Revenue - Government & Industrial (in thousands) $ 5,368 $ 5,977 $ 14,299 $ 11,351
International Revenue (in thousands):
Home Robots $ 22,017 $ 14,203 $ 59,296 $ 42,784
Government & Industrial $ 4,435 $ 4,360 $ 8,907 $ 5,570
Average selling prices for robot units:
Home Robots $ 143 $ 138 $ 153 $ 150
Government & Industrial (in thousands) $ 122 $ 87 $ 100 $ 96
Gross Margin by business unit (in thousands):
Home Robots $ 13,450 $ 14,867 $ 33,711 $ 33,695
Government & Industrial 10,745 14,063 23,099 27,063
$ 24,195 $ 28,930 $ 56,810 $ 60,758
Units shipped by business unit:
Home Robots (in thousands) 289 355 664 761
Government & Industrial 159 319 460 645
Government & Industrial Funded Backlog (in thousands) $ 71,038 $ 36,621 $ 71,038 $ 36,621
Days sales outstanding 54 48 54 48
Inventory turnover 7.5 5.5 7.5 5.5
Net cash provided by (used in) operating activities (in thousands) $ 12,699 $ (486 ) $ 24,566 $ (327 )
Headcount 514 505 514 505
iRobot Corporation
Adjusted EBITDA Reconciliation to GAAP
(unaudited, in thousands)
For the three months ended For the nine months ended
September 26, September 27, September 26, September 27,
2009 2008 2009 2008
Net income (loss) $ 2,594 $ 3,852 $ (1,802 ) $ (4,666 )
Interest income, net (5 ) (205 ) (41 ) (1,034 )
Income tax expense (benefit) 1,620 2,218 (1,452 ) (4,437 )
Depreciation 2,150 1,803 5,763 5,094
Amortization 139 41 390 41
EBITDA 6,498 7,709 2,858 (5,002 )
Stock-based compensation expense 1,862 1,837 5,359 4,308
Adjusted EBITDA $ 8,360 $ 9,546 $ 8,217 $ (694 )
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.

Contact:

Elise Caffrey
Investor Relations
iRobot Corp.
(781) 430-3003
ecaffrey@irobot.com
Nancy Smith
Media Relations
iRobot Corp.
(781) 430-3323
nsmith@irobot.com