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iRobot Reports Second-Quarter 2012 Financial Results

7/24/2012
Strong growth in international and U.S. markets fueled 50% growth in Home Robot revenue

BEDFORD, Mass., July 24, 2012-- iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the second quarter ended June 30, 2012.

  • Revenue for the second quarter of 2012 was $111.4 million, compared with $108.1 million for the same quarter one year ago. Revenue for the first half of 2012 was $209.3 million, compared with $214.4 million last year.
  • Net income in the second quarter of 2012 was $7.4 million, compared with $8.0 million in the second quarter of 2011. For the first half, net income was $8.0 million, compared with $15.5 million a year ago.
  • Quarterly earnings per share were $0.26, compared with $0.29 in the second quarter last year. First-half earnings per share were $0.28, compared with $0.56 in 2011.
  • Adjusted EBITDA for the second quarter of 2012 was $16.2 million, compared with $16.3 million in the second quarter of 2011. For the first half, Adjusted EBITDA was $22.3 million, compared with $31.5 million a year ago.

“Our second-quarter performance was very good given the challenging environment. Strong growth in both our international and U.S. markets drove a 50% year-over-year increase in Home Robot revenue. Our steadily increasing Home Robot global reach is enabling us to substantially offset the continuing impact of U.S. government funding on our Defense & Security business and to remain on track to meet our revenue and increase our profit expectations for fiscal year 2012,” said Colin Angle, chairman and chief executive officer of iRobot.

Business Highlights

  • Home Robot domestic revenues grew 40% year-over-year. The positive impact of our Q2 advertising campaign to reach our target customer, the modern professional, is evident in the second-quarter 2012 results. International revenues grew more than 55% in Q2 over last year. Total EMEA revenue grew 42% in the second quarter over last year and Western Europe, which comprised approximately 30% of Home Robot revenue, grew 40%. As a result, we have increased our full-year expectations for this business unit.
  • Our Home Robot product return experience has improved as the result of our sustained investment in product quality. In the second quarter we adjusted our accrual rates for Home Robot product returns, resulting in a benefit to revenue and earnings. Revenue, EPS and Adjusted EBITDA for the company would have been $108.2 million, $0.18, and $12.8 million respectively, without the $3.3 million or $0.08 per share positive adjustment.
  • We were awarded three new contracts totaling approximately $27 million for SUGV and PackBot robots, spares and software upgrades. U.S. government funding and program delays, however, continue to negatively impact our Defense & Security business unit. We have reflected that impact in our lower full-year expectations for this business unit.
  • We announced, with InTouch Health, the unveiling of the RP-VITA™ telemedicine robot. The robot combines InTouch Health's state-of-the-art telemedicine solutions with iRobot's autonomous navigation capabilities, mobility, interactive communication and situational awareness from the Ava program.

Financial Expectations

Management provides the following expectations with respect to the third quarter ending September 29, 2012 and full year ending December 29, 2012.

Q3 2012:

               
Revenue $125 - $130 million
Earnings Per Share $0.30 - $0.36
Adjusted EBITDA $17 - $20 million
 

Fiscal Year 2012:

Current

Prior

Revenue $465 - $485 million $465 - $485 million
Earnings Per Share $0.90 - $1.00 $0.75 - $0.95
Adjusted EBITDA $59 - $63 million $56 - $63 million
 

Full-Year 2012 BU Revenue:

Current

Prior

Home Robots $365 - $375 million $345 - $355 million
Defense & Security Robots $100 - $110 million $120 - $130 million

Second-Quarter Conference Call

iRobot will host a conference call tomorrow at 8:30 a.m. ET to discuss its results for the second fiscal quarter 2012, business outlook, and outlook for 2012 financial performance. Pertinent details include:

                     
Date: Wednesday, July 25, 2012
Time: 8:30 a.m. ET
Call-In Number: 847-413-3235
Passcode: 32828728
 

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 1, and can be accessed by dialing 630-652-3042, passcode 32828728#.

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 defense & security 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 future financial performance and growth, demand for our robots, and operating performance, anticipated mix of revenue for the year ending December 29, 2012 and the third quarter ending September 29, 2012, anticipated revenue, earnings per share and Adjusted EBITDA for the year ending December 29, 2012 and the third quarter ending September 29, 2012, and anticipated business unit revenue for the year ending December 29, 2012. 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, net intellectual property litigation expenses, restructuring expenses, and non-cash stock compensation. A reconciliation between net income and Adjusted EBITDA are 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 six months ended
June 30, July 2, June 30, July 2,
2012     2011 2012 2011
Revenue
Product revenue $ 107,760 $ 97,396 $ 199,502 $ 194,107
Contract revenue   3,685       10,686   9,750       20,252
Total   111,445       108,082   209,252       214,359
 
Cost of Revenue
Product revenue 58,795 57,835 117,070 114,025
Contract revenue   3,203       7,711   8,722       14,344
Total   61,998       65,546   125,792       128,369
 
Gross Margin 49,447 42,536 83,460 85,990
 
Operating Expense
Research & development 9,667 8,146 18,391 16,875
Selling & marketing 19,122 12,767 32,692 25,748
General & administrative   10,022       10,097   21,064       20,697
Total   38,811       31,010   72,147       63,320
 
Operating income 10,636 11,526 11,313 22,670
 
Other income (expense), net   60       112   280       350
 
Pre-tax income 10,696 11,638 11,593 23,020
Income tax expense   3,321       3,614   3,565       7,519
Net income $ 7,375     $ 8,024 $ 8,028     $ 15,501
 
Net income per common share:
Basic $ 0.27 $ 0.30 $ 0.29 $ 0.59
Diluted $ 0.26 $ 0.29 $ 0.28 $ 0.56
 
Shares used in per common share calculations:
Basic 27,522 26,667 27,441 26,388
Diluted 28,182 27,911 28,259 27,733
 
 
Stock-based compensation included in above figures:
Cost of product revenue $ 296 $ 320 $ 586 $ 571
Cost of contract revenue 73 156 191 250
Research & development 295 239 554 320
Selling & marketing 179 158 416 339
General & administrative   2,059       1,538   3,668       2,710
Total $ 2,902     $ 2,411 $ 5,415     $ 4,190
           
iRobot Corporation
Condensed Consolidated Balance Sheet
(unaudited, in thousands)
 
June 30, December 31,
2012 2011
 
Assets
 
Cash and equivalents $ 156,543 $ 166,308
Short term investments 20,181 17,811
Accounts receivable, net 39,527 43,338
Unbilled revenues 2,073 2,362
Inventory 34,597 31,089
Deferred tax assets 15,494 15,344
Other current assets   8,270   7,928
Total current assets 276,685 284,180
Property, plant and equipment, net 26,940 29,029
Deferred tax assets 11,086 6,127
Other assets   18,692   12,877
Total assets $ 333,403 $ 332,213
 
Liabilities and stockholders' equity
 
Accounts payable $ 45,212 $ 48,406
Accrued expenses 13,878 17,188
Accrued compensation 9,738 17,879
Deferred revenue and customer advances   1,882   1,527
Total current liabilities   70,710   85,000
Long term liabilities   4,069   4,255
Stockholders' equity   258,624   242,958
Total liabilities and stockholders' equity $ 333,403 $ 332,213
                   
iRobot Corporation
Consolidated Statement of Cash Flows
(unaudited, in thousands)
 
 
For the three months ended For the six months ended
June 30, July 2, June 30, July 2,
2012     2011 2012     2011
Cash flows from operating activities:
Net income $ 7,375 $ 8,024 $ 8,028 $ 15,501
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 2,711 2,457 5,313 4,640
Loss on disposal of property and equipment 97 3 166 473
Stock-based compensation 2,902 2,411 5,415 4,190
Deferred income taxes, net 2,464 2,046 (4,230 ) 4,488
Tax benefit of excess stock based compensation deductions (330 ) (3,213 ) (1,035 ) (5,655 )
Non-cash director deferred compensation 20 44 42 82
Changes in operating assets and liabilities — (use) source
Accounts receivable (9,620 ) (6,920 ) 3,811 (473 )
Unbilled revenue (833 ) (100 ) 289 (4,022 )
Inventory (2,916 ) 869 (3,508 ) (7,042 )
Other assets (3,210 ) (2,880 ) (378 ) (4,809 )
Accounts payable 910 (10,971 ) (3,194 ) (5,416 )
Accrued expenses (5,255 ) (974 ) (3,252 ) (1,889 )
Accrued compensation 2,008 4,945 (8,141 ) (4,733 )
Deferred revenue (540 ) (1,608 ) 355 (1,494 )
Change in long term liabilities   (120 )       (123 )   (186 )       266  
Net cash used in operating activities   (4,337 )       (5,990 )   (505 )       (5,893 )
 
Cash flows from investing activities:
Purchase of property and equipment (1,313 ) (2,654 ) (2,956 ) (7,208 )
Change in other assets - - (6,000 ) -
Purchases of investments (5,086 ) - (5,086 ) (5,000 )
Sales of investments   -         2,500     2,500         5,000  
Net cash used in investing activities   (6,399 )       (154 )   (11,542 )       (7,208 )
 
Cash flows from financing activities:
Proceeds from stock option exercises 699 4,013 2,022 8,597
Income tax withholding payment associated with restricted stock vesting (548 ) (356 ) (775 ) (809 )
Tax benefit of excess stock based compensation deductions   330         3,213     1,035         5,655  
Net cash provided by financing activities   481         6,870     2,282         13,443  
 
Net increase (decrease) in cash and cash equivalents (10,255 ) 726 (9,765 ) 342
Cash and cash equivalents, at beginning of period   166,798         107,999     166,308         108,383  
Cash and cash equivalents, at end of period $ 156,543       $ 108,725   $ 156,543       $ 108,725  
                   
iRobot Corporation
Supplemental Information
(unaudited)
 
 
For the three months ended For the six months ended
June 30, July 2, June 30, July 2,
2012     2011 2012     2011
 
Revenue: *
 
Home Robots $ 96,013       $ 63,892   $ 177,596       $ 131,774  
 
Domestic $ 31,181 $ 22,395 $ 52,996 $ 40,453
International $ 64,832 $ 41,497 $ 124,600 $ 91,321
 
 
Defense & Security $ 15,432       $ 44,190   $ 31,656       $ 82,585  
 
Domestic $ 13,222 $ 43,378 $ 25,399 $ 73,580
International $ 2,210 $ 812 $ 6,257 $ 9,005
 
Product $ 11,747 $ 33,504 $ 21,906 $ 62,333
Contract $ 3,685 $ 10,686 $ 9,750 $ 20,252
 
Product Life Cycle $ 4,872 $ 6,617 $ 9,762 $ 19,320
 
 
Gross Margin Percent:
Home Robots 51.7 % 44.1 % 48.8 % 44.8 %
Defense & Security -1.5 % 32.5 % -10.0 % 32.6 %
Total Company 44.4 % 39.4 % 39.9 % 40.1 %
 
 
Units shipped:
Home Robots * 426 328 818 677
Defense & Security 49 192 187 306
 
 
Average gross selling prices for robot units:
Home Robots $ 225 $ 195 $ 220 $ 194
Defense & Security * $ 140 $ 140 $ 65 $ 141
 
 
Defense & Security Funded Product Backlog * $ 18,300 $ 15,118 $ 18,300 $ 15,118
 
 
Days sales outstanding 34 36 34 36
 
Days in inventory 54 54 54 54
 
Headcount 604 687 604 687
 
 
* in thousands
                   
iRobot Corporation
Adjusted EBITDA Reconciliation to GAAP
(unaudited, in thousands)
 
 
For the three months ended For the six months ended
June 30, July 2, June 30, July 2,
2012     2011 2012     2011
 
Net income $ 7,375 $ 8,024 $ 8,028 $ 15,501
 
Interest income, net (264 ) (331 ) (526 ) (541 )
Income tax expense 3,321 3,614 3,565 7,519
Depreciation 2,485 2,169 4,879 4,227
Amortization   226         288     434         413  
 
EBITDA 13,143 13,764 16,380 27,119
 
 
Stock-based compensation expense 2,902 2,411 5,415 4,190
Merger and acquisition expense 14 - 26 -
Net intellectual property litigation expense 34 88 71 182
Restructuring expense   129         -     407         -  
 
Adjusted EBITDA $ 16,222       $ 16,263   $ 22,299       $ 31,491  
 
 
 
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