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iRobot Reports Third-Quarter Financial Results

10/27/2010
Increases full-year expectations

BEDFORD, Mass., Oct 27, 2010 (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 2, 2010.

Revenue for the third quarter of 2010 increased 20 percent to $94.2 million, compared with $78.6 million for the same quarter one year ago. Net income in the third quarter of 2010 was $7.0 million, compared with $2.6 million in the third quarter of 2009. Quarterly earnings per share were $0.27, compared with $0.10 in the third quarter last year. The third-quarter results include a $2.3 million one-time tax benefit associated with the release of state deferred tax allowances. Excluding the impact of this one-time benefit, net income in the third quarter of 2010 would have been $4.8 million and earnings per share for the quarter would have been $0.18.

"Our financial performance in the third quarter was exceptionally strong following record first-half results. Adjusted EBITDA of $11 million for the quarter increased by 37 percent to more than 12 percent of revenue, far exceeding our expectations," said Colin Angle, chairman and chief executive officer of iRobot. "Quarterly earnings per share increased by 80 percent year-over-year, excluding the one-time tax benefit. As a result of outstanding performance by both divisions in the third quarter and good visibility for the rest of 2010, we are once again increasing our full-year financial expectations."

Business Highlights

  • Strong demand in overseas markets drove a 58 percent increase in Q3 2010 international home robot revenue year-over-year. In the third quarter, international home robot revenue of $35 million comprised 64 percent of total home robot revenue.
  • Driven by shipments of Small Unmanned Ground Vehicles and spare parts, government & industrial robot revenue grew 15 percent in the third quarter over the third quarter of 2009.
  • Gross margin for the third quarter increased to 35 percent of revenue, compared with 31 percent of revenue in the third quarter of 2009.
  • Year-to-date operating cash flow was $35 million, compared with $25 million in the first nine months of 2009, driving quarter-end cash position to $107 million.

Financial Expectations

Management provides the following expectations with respect to the fourth quarter and year ending January 1, 2011.

Fiscal Year 2010:

Revenue $395 - $400 million
Earnings Per Share $0.80 - $0.82
Adjusted EBITDA $46 - $48 million

Q4 2010:

Revenue $108 - $113 million
Earnings Per Share $0.10 - $0.12
Adjusted EBITDA $8 - $10 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 2010, business outlook, and outlook for future financial performance. Pertinent details include:

Date: Thursday, October 28, 2010
Time: 8:30 a.m. ET
Call-In Number:

617-597-5307

Passcode: 16836933

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 4 and can be accessed by dialing 617-801-6888, passcode 35724357.

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 fourth quarter of 2010. 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 net income excluding the impact of one-time tax benefit, earnings per share excluding the impact of one-time tax benefit and Adjusted EBITDA, each 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. Reconciliations between net income excluding the impact of one-time tax benefit and net income, earnings per share excluding the impact of one-time tax benefit and earnings per share, and net income and Adjusted EBITDA are 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
October 2, September 26, October 2, September 26,
2010 2009 2010 2009
Revenue
Product revenue $ 85,051 $ 69,080

$

257,107

$

171,380
Contract revenue 9,172 9,539 29,850 25,515
Total 94,223 78,619 286,957 196,895
Cost of Revenue
Product revenue 54,472 46,415 165,897 116,952
Contract revenue 6,494 8,009 21,116 23,133
Total 60,966 54,424 187,013 140,085
Gross Margin 33,257 24,195 99,944 56,810
Operating Expense
Research & development 6,185 3,159 16,375 10,633
Selling & marketing 10,734 9,514 30,959 27,420
General & administrative 8,904 7,420 26,693 21,915
Total 25,823 20,093 74,027 59,968
Operating income (loss) 7,434 4,102 25,917 (3,158 )
Other income (expense), net 299 112 368 (96 )
Pre-tax income (loss) 7,733 4,214 26,285 (3,254 )
Income tax expense (benefit) 701 1,620 7,771 (1,452 )
Net income (loss) $ 7,032 $ 2,594 $ 18,514 $ (1,802 )
Net income (loss) per common share:
Basic $ 0.28 $ 0.10 $ 0.73 $ (0.07 )
Diluted $ 0.27 $ 0.10 $ 0.70 $ (0.07 )
Shares used in Per Common Share Calculations:
Basic 25,428 25,025 25,293 24,974
Diluted 26,480 25,670 26,319 24,974
Stock-based compensation included in above figures:
Cost of product revenue $ 310 $ 267

$

997

$

758
Cost of contract revenue 101 139 337 464
Research & development 211 89 488 187
Selling & marketing 240 351 885 1,006
General & administrative 1,079 1,016 3,325 2,944
Total $ 1,941 $ 1,862 $ 6,032 $ 5,359
iRobot Corporation
Condensed Consolidated Balance Sheet
(unaudited, in thousands)
October 2, January 2,
2010 2010
Assets
Cash and equivalents $ 90,603 $ 71,856
Short term investments 16,576 4,959
Accounts receivable, net 27,794 35,171
Unbilled revenues 2,534 1,831
Inventory 33,969 32,406
Deferred tax assets 9,922 8,669
Other current assets 3,062 4,119
Total current assets 184,460 159,011
Property, plant and equipment, net 22,389 20,230
Deferred tax assets 8,183 6,089
Other assets 13,889 14,254
Total assets $ 228,921 $ 199,584
Liabilities and stockholders' equity
Accounts payable $ 35,677 $ 30,559
Accrued expenses 14,061 14,384
Accrued compensation 13,117 13,525
Deferred revenue and customer advances 2,023 3,908
Total current liabilities 64,878 62,376
Long term liabilities 3,692 4,014
Stockholders' equity 160,351 133,194
Total liabilities and stockholders' equity $ 228,921 $ 199,584
iRobot Corporation
Consolidated Statement of Cash Flows
(unaudited, in thousands)
For the three months ended For the nine months ended
October 2, September 26, October 2, September 26,
2010 2009 2010 2009
Cash flows from operating activities:
Net income (loss) $ 7,032 $ 2,594 $ 18,514 $ (1,802 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 1,918 2,289 5,673 6,153
Loss on disposal of property and equipment 70 74 117 176
Stock-based compensation 1,941 1,862 6,032 5,359
Benefit from deferred tax assets (3,867 ) 164 (3,867 ) (347 )
Non-cash director deferred compensation 33 33 99 99
Changes in operating assets and liabilities -- (use) source
Accounts receivable (661 ) (12,643 ) 7,377 (8,004 )
Unbilled revenue (221 ) 922 (703 ) (523 )
Inventory (3,285 ) 3,985 (1,563 ) 9,907
Other assets 213 1,052 1,010 (1,111 )
Accounts payable 3,909 6,679 5,118 8,243
Accrued expenses 716 706 (315 ) 673
Accrued compensation 1,964 3,819 (408 ) 4,453
Deferred revenue 54 1,270 (1,885 ) 1,612
Change in long term liabilities (107 ) (107 ) (322 ) (322 )
Net cash provided by operating activities 9,709 12,699 34,877 24,566
Cash flows from investing activities:
Purchase of property and equipment (1,869 ) (953 ) (7,537 ) (3,401 )
Purchases of investments (5,050 ) - (30,461 ) -
Sales of investments 11,500 - 19,000 -
Net cash provided by (used in) investing activities 4,581 (953 ) (18,998 ) (3,401 )
Cash flows from financing activities:
Proceeds from stock option exercises 370 36 2,297 495
Income tax withholding payment associated with restricted stock vesting (5 ) (67 ) (284 ) (76 )
Tax benefit of excess stock based compensation deductions 138 43 855 311
Net cash provided by financing activities 503 12 2,868 730
Net increase in cash and cash equivalents 14,793 11,758 18,747 21,895
Cash and cash equivalents, at beginning of period 75,810 50,989 $ 71,856 40,852
Cash and cash equivalents, at end of period $ 90,603 $ 62,747 $ 90,603 $ 62,747
iRobot Corporation
Supplemental Information
(unaudited)
For the three months ended For the nine months ended
October 2, September 26, October 2, September 26,
2010 2009 2010 2009
Revenue: *
Home Robots $ 54,650 $ 44,331 $ 160,101 $ 111,253
Domestic $ 19,814 $ 22,314 $ 53,061 $ 51,958
International $ 34,836 $ 22,017 $ 107,040 $ 59,295
Retail $ 48,633 $ 38,151 $ 142,426 $ 92,230
Direct $ 6,017 $ 6,180 $ 17,675 $ 19,023
Government & Industrial $ 39,573 $ 34,288 $ 126,856 $ 85,642
Domestic $ 36,013 $ 29,854 $ 116,486 $ 76,549
International $ 3,560 $ 4,434 $ 10,370 $ 9,093
Product $ 30,401 $ 24,749 $ 97,006 $ 60,127
Contract $ 9,172 $ 9,539 $ 29,850 $ 25,515
Product Life Cycle $ 9,060 $ 5,368 $ 26,621 $ 14,299
Gross Margin Percent:
Home Robots 39.7 % 30.3 % 39.0 % 30.3 %
Government & Industrial 29.2 % 31.3 % 29.6 % 27.0 %
Total Company 35.3 % 30.8 % 34.8 % 28.9 %
Units shipped:
Home Robots * 308 289 889 664
Government & Industrial 186 159 702 460
Average gross selling prices for robot units:
Home Robots $ 185 $ 167 $ 187 $ 177
Government & Industrial * $ 115 $ 122 $ 100 $ 100
Government & Industrial Funded Product Backlog * $ 34,003 $ 71,038 $ 34,003 $ 71,038
Days sales outstanding 29 54 29 54
Days in inventory 57 48 57 48
Headcount 643 514 643 514
* in thousands
iRobot Corporation
Adjusted EBITDA Reconciliation to GAAP
(unaudited, in thousands)
For the three months ended For the nine months ended
October 2, September 26, October 2, September 26,
2010 2009 2010 2009
Net income (loss) $ 7,032 $ 2,594 $ 18,514 $ (1,802 )
Interest income, net (206 ) (5 ) (572 ) (41 )
Income tax expense (benefit) 701 1,620 7,771 (1,452 )
Depreciation 1,784 2,150 5,261 5,763
Amortization 134 139 412 390
EBITDA 9,445 6,498 31,386 2,858
Stock-based compensation expense 1,941 1,862 6,032 5,359
Merger and acquisition expense 61 - 132 -
Adjusted EBITDA $ 11,447 $ 8,360 $ 37,550 $ 8,217

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.

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 2, September 26, October 2, September 26,
2010 2009 2010 2009
GAAP net income (loss) $ 7,032 $ 2,594 $ 18,514 $ (1,802 )
Less one-time net income tax benefit associated with release of state deferred tax asset valuation allowance (2,259 ) - (2,259 ) -
Non-GAAP net income (loss) $ 4,773 $ 2,594 $ 16,255 $ (1,802 )
GAAP net income (loss) per common share:
Basic $ 0.28 $ 0.10 $ 0.73 $ (0.07 )
Diluted $ 0.27 $ 0.10 $ 0.70 $ (0.07 )
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 ) $ -
Non-GAAP net income (loss) per common share:
Basic $ 0.19 $ 0.10 $ 0.64 $ (0.07 )
Diluted $ 0.18 $ 0.10 $ 0.62 $ (0.07 )
Shares used in Per Common Share Calculations:
Basic 25,428 25,025 25,293 24,974
Diluted 26,480 25,670 26,319 24,974

SOURCE: iRobot Corp.

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