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iRobot Reports Record Third-Quarter Financial Results

10/25/2011
Exceeds Expectations; Increases 2011 Outlook

BEDFORD, Mass., Oct 25, 2011 (BUSINESS WIRE) -- iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the third quarter ended October 1, 2011.

  • Revenue for the third quarter of 2011 increased 28 percent to $120.4 million, compared with $94.2 million for the same quarter one year ago. Revenue for the first nine months of 2011 increased 17 percent to $334.7 million from $287.0 million last year.
  • Net income in the third quarter of 2011 was $14.1 million, compared with $7.0 million in the third quarter of 2010. For the first nine months, net income was $29.6 million, up from $18.5 million a year ago. Net income included a one-time tax benefit of $3.5 million in the third-quarter and nine-month periods in 2011. Net income for the third-quarter and nine-month periods in 2010 included a one-time tax benefit of $2.3 million.
  • Quarterly earnings per share grew by 85 percent to $0.50, compared with $0.27 in the third quarter last year. Nine-month earnings per share grew to $1.06, up from $0.70 in 2010. EPS included a one-time tax benefit of $0.12 in 2011 and $0.09 in 2010.
  • Adjusted EBITDA for the third quarter of 2011 was $20.2 million, or 17 percent of revenue, compared with $11.5 million, or 12 percent of revenue, in the third quarter of 2010. Adjusted EBITDA for the first nine months of 2011 was $51.7 million, compared with $37.6 million for the same period a year ago.

"Our third quarter and year-to-date results were excellent across all measures and far exceeded our expectations," said Colin Angle, chairman and chief executive officer of iRobot. "Due to strong performance by both divisions and our expectations for the fourth quarter, we are increasing our full-year 2011 expectations for the second time this year."

Business Highlights

  • International home robot business continued to perform well in long-term markets as it lays the groundwork to enter new markets. In Q3, international home robot revenue grew 56 percent over Q3 2010 and comprised 75 percent of total home robot revenue.
  • During the third quarter, Government and Industrial Robots division revenue grew 21 percent, and it received delivery orders totaling $51 million, primarily for delivery of PackBot and SUGV robots.
  • Operating cash flow was $25 million in Q3 2011, due to record net income and reduced inventory levels, compared with $10 million in the third quarter last year. Cash and investments totaled $145 million, up $38 million from Q3 last year.
  • Research and development expense increased 45 percent in Q3 2011 and 58 percent in the first nine months year over year.
  • Driven by expectations for a reduction in government-funded research in 2012, iRobot implemented a reduction in force in the Government and Industrial Robots division in the fourth quarter.

Financial Expectations

Management provides the following expectations with respect to the fourth quarter ending December 31, 2011.

Q4 2011:

Revenue $130 - $135 million

Earnings Per Share

$0.26 - $0.30

Adjusted EBITDA $16 - $18 million

Management raises its expectations for the full year ending December 31, 2011.

Fiscal Year 2011:

Current

Prior

Revenue $465 - $470 million $460 - $470 million
Earnings Per Share $1.32 - $1.36 $1.04 - $1.10
Adjusted EBITDA $67 - $69 million $62 - $64 million

Third-Quarter Conference Call

iRobot will host a conference call tomorrow at 8:30 a.m. ET to discuss its financial results for the third fiscal quarter and outlook for 2011 financial performance. Pertinent details include:

Date: Wednesday, October 26, 2011
Time: 8:30 a.m. ET
Call-In Number: 617-597-5394
Passcode: 14810709

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 November 2, and can be accessed by dialing 617-801-6888, passcode 71428742.

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 2011 and the fourth quarter of 2011. 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, the timing of government contracts and orders, 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, restructuring expenses, net intellectual property litigation 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 Income
(in thousands, except per share amounts)
(unaudited)
For the three months ended For the nine months ended
October 1, October 2, October 1, October 2,
2011 2010 2011 2010
Revenue
Product revenue $ 109,993 $ 85,051 $ 304,100 $ 257,107
Contract revenue 10,380 9,172 30,632 29,850
Total 120,373 94,223 334,732 286,957
Cost of Revenue
Product revenue 63,670 54,472 177,695 165,897
Contract revenue 6,660 6,494 21,004 21,116
Total 70,330 60,966 198,699 187,013
Gross Margin 50,043 33,257 136,033 99,944
Operating Expense
Research & development 8,948 6,185 25,823 16,375
Selling & marketing 14,553 10,734 40,301 30,959
General & administrative 10,962 8,904 31,659 26,693
Total 34,463 25,823 97,783 74,027
Operating income 15,580 7,434 38,250 25,917
Other income (expense), net (92 ) 299 258 368
Pre-tax income 15,488 7,733 38,508 26,285
Income tax expense 1,436 701 8,955 7,771
Net income $ 14,052 $ 7,032 $ 29,553 $ 18,514
Net income per common share:
Basic $ 0.52 $ 0.28 $ 1.11 $ 0.73
Diluted $ 0.50 $ 0.27 $ 1.06 $ 0.70
Shares used in per common share calculations:
Basic 26,902 25,428 26,568 25,293
Diluted 27,940 26,480 27,823 26,319
Stock-based compensation included in above figures:
Cost of product revenue $ 344 $ 310 $ 915 $ 997
Cost of contract revenue 115 101 365 337
Research & development 162 211 481 488
Selling & marketing 174 240 513 885
General & administrative 1,401 1,079 4,112 3,325
Total $ 2,196 $ 1,941 $ 6,386 $ 6,032
iRobot Corporation
Condensed Consolidated Balance Sheet
(unaudited, in thousands)
October 1, January 1,
2011 2011
Assets
Cash and equivalents $ 131,662 $ 108,383
Short term investments 13,662 13,928
Accounts receivable, net 41,400 34,056
Unbilled revenues 7,899 4,012
Inventory 31,989 27,160
Deferred tax assets 14,013 12,917
Other current assets 12,655 6,137
Total current assets 253,280 206,593
Property, plant and equipment, net 28,886 25,620
Deferred tax assets 6,307 8,338
Other assets 13,453 13,780
Total assets $ 301,926 $ 254,331
Liabilities and stockholders' equity
Accounts payable $ 40,522 $ 38,689
Accrued expenses 15,237 15,790
Accrued compensation 15,045 17,827
Deferred revenue and customer advances 2,358 3,534
Total current liabilities 73,162 75,840
Long term liabilities 3,727 3,584
Stockholders' equity 225,037 174,907
Total liabilities and stockholders' equity $ 301,926 $ 254,331
iRobot Corporation
Consolidated Statement of Cash Flows
(unaudited, in thousands)
For the three months ended For the nine months ended
October 1, October 2, October 1, October 2,
2011 2010 2011 2010
Cash flows from operating activities:
Net income $ 14,052 $ 7,032 $ 29,553 $ 18,514
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,597 1,918 7,237 5,673
Loss on disposal of property and equipment 3 70 476 117
Stock-based compensation 2,196 1,941 6,386 6,032
Deferred income taxes, net 1,614 (3,867 ) 447 (3,867 )
Non-cash director deferred compensation 44 33 126 99
Changes in operating assets and liabilities -- (use) source

 

Accounts receivable (6,871 ) (661 ) (7,344 ) 7,377
Unbilled revenue 135 (221 ) (3,887 ) (703 )
Inventory 2,213 (3,285 ) (4,829 ) (1,563 )
Other assets (1,763 ) 213 (6,572 ) 1,010
Accounts payable 7,249 3,909 1,833 5,118
Accrued expenses 1,359 716 (530 ) (315 )
Accrued compensation 1,951 1,964 (2,782 ) (408 )
Deferred revenue 318 54 (1,176 ) (1,885 )
Change in long term liabilities (123 ) (107 ) 143 (322 )
Net cash provided by operating activities 24,974 9,709 19,081 34,877
Cash flows from investing activities:
Purchase of property and equipment (3,149 ) (1,869 ) (10,357 ) (7,537 )
Purchases of investments - (5,050 ) (5,000 ) (30,461 )
Sales of investments - 11,500 5,000 19,000
Net cash provided by (used in) investing activities (3,149 ) 4,581 (10,357 ) (18,998 )
Cash flows from financing activities:
Proceeds from stock option exercises 801 370 9,398 2,297
Income tax withholding payment associated with restricted stock vesting (36 ) (5 ) (845 ) (284 )
Tax benefit of excess stock based compensation deductions 347 138 6,002 855
Net cash provided by financing activities 1,112 503 14,555 2,868
Net increase in cash and cash equivalents 22,937 14,793 23,279 18,747
Cash and cash equivalents, at beginning of period 108,725 75,810 108,383 71,856
Cash and cash equivalents, at end of period $ 131,662 $ 90,603 $ 131,662 $ 90,603
Supplemental Information
(unaudited)
For the three months ended For the nine months ended
October 1, October 2, October 1, October 2,
2011 2010 2011 2010
Revenue: *
Home Robots $ 72,341 $ 54,650 $ 204,116 $ 160,101
Domestic $ 17,961 $ 19,818 $ 58,415 $ 53,077
International $ 54,380 $ 34,832 $ 145,701 $ 107,024
Government & Industrial $ 48,032 $ 39,573 $ 130,616 $ 126,856
Domestic $ 45,930 $ 36,013 $ 119,509 $ 112,624
International $ 2,102 $ 3,560 $ 11,107 $ 14,232
Product $ 37,652 $ 30,401 $ 99,984 $ 97,006
Contract $ 10,380 $ 9,172 $ 30,632 $ 29,850
Product Life Cycle $ 12,286 $ 9,060 $ 31,606 $ 26,649
Gross Margin Percent:
Home Robots 45.1 % 39.7 % 44.9 % 39.0 %
Government & Industrial 36.2 % 29.2 % 33.9 % 29.6 %
Total Company 41.6 % 35.3 % 40.6 % 34.8 %
Units shipped:
Home Robots * 337 308 1,014 889
Government & Industrial 194 186 500 702
Average gross selling prices for robot units:
Home Robots $ 222 $ 185 $ 203 $ 187
Government & Industrial * $ 131 $ 115 $ 137 $ 100
Government & Industrial Funded Product Backlog * $ 28,036 $ 34,003 $ 28,036 $ 34,003
Days sales outstanding 37 29 37 29
Days in inventory 46 57 46 57
Headcount 689 643 689 643
* in thousands
iRobot Corporation
Adjusted EBITDA Reconciliation to GAAP
(unaudited, in thousands)
For the three months ended For the nine months ended
October 1, October 2, October 1, October 2,
2011 2010 2011 2010
Net income $ 14,052 $ 7,032 $ 29,553 $ 18,514
Interest income, net (214 ) (206 ) (755 ) (572 )
Income tax expense 1,436 701 8,955 7,771
Depreciation 2,388 1,784 6,615 5,261
Amortization 209 134 622 412
EBITDA 17,871 9,445 44,990 31,386
Stock-based compensation expense 2,196 1,941 6,386 6,032
Merger and acquisition expense 30 61 30 132
Net intellectual property litigation expense (11 ) 31 171 71
Restructuring expense 101 - 101 -
Adjusted EBITDA $ 20,187 $ 11,478 $ 51,678 $ 37,621

 

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.

iRobot Corporation
Non-GAAP Net Income and Earnings Per Share Reconciliations to GAAP
(in thousands, except per share amounts)
(unaudited)
For the three months ended For the nine months ended
October 1, October 2, October 1, October 2,
2011 2010 2011 2010
GAAP net income $ 14,052 $ 7,032 $ 29,553 $ 18,514
Less one-time net income tax benefit associated with release of state deferred tax asset valuation allowance - (2,259 ) - (2,259 )
Less one-time net income tax benefit associated with Section 199 deductions and R&D tax credit true-ups (3,455 ) - (3,455 ) -
Non-GAAP net income $ 10,597 $ 4,773 $ 26,098 $ 16,255
GAAP net income per common share:
Basic $ 0.52 $ 0.28 $ 1.11 $ 0.73
Diluted $ 0.50 $ 0.27 $ 1.06 $ 0.70
Less one-time net income tax benefit associated with release of state deferred tax asset valuation allowance
Basic $ - $ (0.09 ) $ - $ (0.09 )
Diluted $ - $ (0.09 ) $ - $ (0.08 )
Less one-time net income tax benefit associated with Section 199 deductions and R&D tax credit true-ups
Basic $ (0.13 ) $ - $ (0.13 ) $ -
Diluted $ (0.12 ) $ - $ (0.12 ) $ -
Non-GAAP net income per common share:
Basic $ 0.39 $ 0.19 $ 0.98 $ 0.64
Diluted $ 0.38 $ 0.18 $ 0.94 $ 0.62
Shares used in Per Common Share Calculations:
Basic 26,902 25,428 26,568 25,293
Diluted 27,940 26,480 27,823 26,319

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
Matt Lloyd
Media Relations
iRobot Corp.
(781) 430-3720
mlloyd@irobot.com