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iRobot Reports Second-Quarter Financial Results

7/26/2011
Exceeds Expectations; Increases 2011 Outlook

BEDFORD, Mass., Jul 26, 2011 (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 2, 2011.

  • Revenue for the second quarter of 2011 increased 11 percent to $108.1 million, compared with $97.8 million for the same quarter one year ago. Revenue for the first half of 2011 also increased 11 percent to $214.4 million from $192.7 million last year.
  • Net income in the second quarter of 2011 was $8.0 million, compared with $5.3 million in the second quarter of 2010. For the first half, net income was $15.5 million, up from $11.5 million a year ago.
  • Quarterly earnings per share grew by 45 percent to $0.29, compared with $0.20 in the second quarter last year. First-half earnings per share were $0.56, up from $0.44 in 2010, an increase of 27 percent.
  • Adjusted EBITDA for the second quarter of 2011 was $16.2 million, compared with $12.4 million in the second quarter of 2010. Adjusted EBITDA for the first half of 2011 was $31.3 million, compared with $26.1 million a year ago.

"Our performance in the second quarter and first half was outstanding, particularly given very challenging 2010 comps," said Colin Angle, chairman and chief executive officer of iRobot. "Our second-quarter results exceeded our expectations for both divisions and reflect a positive trend in domestic consumer spending for our home robot products. Following strong performance by both divisions and our expectations for continuing profitable growth, we are increasing our full-year expectations."

Business Highlights

  • Strong demand in both domestic and overseas markets drove a 21 percent year-over-year increase in second-quarter home robot revenue. In Q2, domestic home robot revenue grew 30 percent while international home robot revenue grew 16 percent and comprised 65 percent of total home robot revenue.
  • During the second quarter, the Government and Industrial Robots division received delivery orders totaling $41 million, primarily for delivery of PackBot and SUGV robots.
  • Cash and investments totaled $123 million at the end of the second quarter, up $24 million from Q2 2010. The company increased its revolving credit facility to $75 million, providing additional financial capacity.

Financial Expectations

Management provides the following expectations with respect to the third quarter ending October 1, 2011.

Q3 2011:

Revenue $115 - $120 million
Earnings Per Share $0.22 - $0.26
Adjusted EBITDA $14 - $16 million

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

Fiscal Year 2011:

Current

Prior

Revenue $460 - $470 million $450 - $465 million
Earnings Per Share $1.04 - $1.10 $0.90 - $1.00
Adjusted EBITDA $62 - $64 million $58 - $62 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 and outlook for the third quarter and full year 2011 financial performance. Pertinent details include:

Date: Wednesday, July 27, 2011
Time: 8:30 a.m. ET
Call-In Number: 617-786-2964
Passcode: 20572285

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 3, and can be accessed by dialing 617-801-6888, passcode 35680683.

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 http://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 third 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, 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 2, July 3, July 2, July 3,
2011 2010 2011 2010
Revenue
Product revenue $ 97,396 $ 85,945 $ 194,107 $ 172,056
Contract revenue 10,686 11,859 20,252 20,678
Total 108,082 97,804 214,359 192,734
Cost of Revenue
Product revenue 57,835 55,825 114,025 111,425
Contract revenue 7,711 8,009 14,344 14,622
Total 65,546 63,834 128,369 126,047
Gross Margin 42,536 33,970 85,990 66,687
Operating Expense
Research & development 8,146 5,691 16,875 10,190
Selling & marketing 12,767 10,581 25,748 20,225
General & administrative 10,097 9,313 20,697 17,789
Total 31,010 25,585 63,320 48,204
Operating income 11,526 8,385 22,670 18,483
Other income, net 112 40 350 69
Pre-tax income 11,638 8,425 23,020 18,552
Income tax expense 3,614 3,111 7,519 7,070
Net income $ 8,024 $ 5,314 $ 15,501 $ 11,482
Net income per common share:
Basic $ 0.30 $ 0.21 $ 0.59 $ 0.46
Diluted $ 0.29 $ 0.20 $ 0.56 $ 0.44
Shares used in per common share calculations:
Basic 26,667 25,294 26,388 25,217
Diluted 27,911 26,375 27,733 26,226
Stock-based compensation included in above figures:
Cost of product revenue $ 320 $ 355 $ 571 $ 687
Cost of contract revenue 156 110 250 236
Research & development 239 245 320 277
Selling & marketing 158 289 339 645
General & administrative 1,538 1,202 2,710 2,246
Total $ 2,411 $ 2,201 $ 4,190 $ 4,091
iRobot Corporation
Condensed Consolidated Balance Sheet
(unaudited, in thousands)
July 2, January 1,
2011 2011
Assets
Cash and equivalents $ 108,725 $ 108,383
Short term investments 13,816 13,928
Accounts receivable, net 34,529 34,056
Unbilled revenues 8,034 4,012
Inventory 34,202 27,160
Deferred tax assets 13,223 12,917
Other current assets 10,910 6,137
Total current assets 223,439 206,593
Property, plant and equipment, net 28,128 25,620
Deferred tax assets 8,733 8,338
Other assets 13,563 13,780
Total assets $ 273,863 $ 254,331
Liabilities and stockholders' equity
Accounts payable $ 33,273 $ 38,689
Accrued expenses 13,854 15,790
Accrued compensation 13,094 17,827
Deferred revenue and customer advances 2,040 3,534
Total current liabilities 62,261 75,840
Long term liabilities 3,850 3,584
Stockholders' equity 207,752 174,907
Total liabilities and stockholders' equity $ 273,863 $ 254,331
iRobot Corporation
Consolidated Statement of Cash Flows
(unaudited, in thousands)
For the three months ended For the six months ended
July 2, July 3, July 2, July 3,
2011 2010 2011 2010
Cash flows from operating activities:
Net income $ 8,024 $ 5,314 $ 15,501 $ 11,482
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 2,457 1,917 4,640 3,755
Loss on disposal of property and equipment 3 2 473 47
Stock-based compensation 2,411 2,201 4,190 4,091
Benefit from deferred tax assets (1,167 ) - (1,167 ) -
Non-cash director deferred compensation 44 33 82 66
Changes in operating assets and liabilities -- (use) source
Accounts receivable (6,920 ) (1,054 ) (473 ) 8,038
Unbilled revenue (100 ) 978 (4,022 ) (482 )
Inventory 869 (816 ) (7,042 ) 1,722
Other assets (2,880 ) 44 (4,809 ) 797
Accounts payable (10,971 ) 2,277 (5,416 ) 1,209
Accrued expenses (974 ) (990 ) (1,889 ) (1,031 )
Accrued compensation 4,945 4,850 (4,733 ) (2,372 )
Deferred revenue (1,608 ) (7 ) (1,494 ) (1,939 )
Change in long term liabilities (123 ) (107 ) 266 (215 )
Net cash provided by (used in) operating activities (5,990 ) 14,642 (5,893 ) 25,168
Cash flows from investing activities:
Purchase of property and equipment (2,654 ) (3,629 ) (7,208 ) (5,668 )
Purchases of investments - (7,831 ) (5,000 ) (25,411 )
Sales of investments 2,500 7,500 5,000 7,500
Net cash used in investing activities (154 ) (3,960 ) (7,208 ) (23,579 )
Cash flows from financing activities:
Proceeds from stock option exercises 4,013 1,823 8,597 1,927
Income tax withholding payment associated with restricted stock vesting (356 ) (120 ) (809 ) (279 )
Tax benefit of excess stock based compensation deductions 3,213 568 5,655 717
Net cash provided by financing activities 6,870 2,271 13,443 2,365
Net increase in cash and cash equivalents 726 12,953 342 3,954
Cash and cash equivalents, at beginning of period 107,999 62,857 108,383 71,856
Cash and cash equivalents, at end of period $ 108,725 $ 75,810 $ 108,725 $ 75,810
iRobot Corporation
Supplemental Information
(unaudited)
For the three months ended For the six months ended
July 2, July 3, July 2, July 3,
2011 2010 2011 2010
Revenue: *
Home Robots $ 63,892 $ 52,904 $ 131,774 $ 105,450
Domestic $ 22,395 $ 17,162 $ 40,453 $ 33,258
International $ 41,497 $ 35,742 $ 91,321 $ 72,192
Government & Industrial $ 44,190 $ 44,900 $ 82,585 $ 87,283
Domestic $ 43,378 $ 41,365 $ 73,580 $ 76,605
International $ 812 $ 3,535 $ 9,005 $ 10,678
Product $ 33,504 $ 33,041 $ 62,333 $ 66,605
Contract $ 10,686 $ 11,859 $ 20,252 $ 20,678
Product Life Cycle $ 6,617 $ 9,582 $ 19,320 $ 17,561
Gross Margin Percent:
Home Robots 44.1% 39.2% 44.8% 38.6%
Government & Industrial 32.5% 29.5% 32.6% 29.8%
Total Company 39.4% 34.7% 40.1% 34.6%
Units shipped:
Home Robots * 328 294 677 581
Government & Industrial 192 250 306 516
Average gross selling prices for robot units:
Home Robots $ 195 $ 188 $ 194 $ 189
Government & Industrial * $ 140 $ 94 $ 141 $ 95
Government & Industrial Funded Product Backlog * $ 15,118 $ 12,164 $ 15,118 $ 12,164
Days sales outstanding 36 27 36 27
Days in inventory 54 50 54 50
Headcount 687 613 687 613
* in thousands

iRobot Corporation

Adjusted EBITDA Reconciliation to GAAP
(unaudited, in thousands)
For the three months ended For the six months ended
July 2, July 3, July 2, July 3,
2011 2010 2011 2010
Net income $ 8,024 $ 5,314 $ 15,501 $ 11,482
Interest income, net (331 ) (197 ) (541 ) (367 )
Income tax expense 3,614 3,111 7,519 7,070
Depreciation 2,169 1,778 4,227 3,477
Amortization 288 139 413 278
EBITDA 13,764 10,145 27,119 21,940
Stock-based compensation expense 2,411 2,201 4,190 4,091
Merger and acquisition expense - 61 - 71
Adjusted EBITDA $ 16,175 $ 12,407 $ 31,309 $ 26,102

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