iRobot Reports Second-Quarter Financial Results

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Home Robot business drives 17 percent year-over-year growth

BEDFORD, Mass., Jul 23, 2013 (BUSINESS WIRE) --iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the second quarter ended June 29, 2013.

“I am very excited to report that we had an excellent quarter following an outstanding Q1. Our Home Robot business delivered strong results both domestically and overseas, and the outlook continues to be good. We announced our second remote presence market initiative, Enterprise Telepresence, in partnership with Cisco, and our Defense & Security business performed as expected,” said Colin Angle, chairman and chief executive officer of iRobot.

“Based on our view of the rest of the year, our expectations for revenue and Adjusted EBITDA remain unchanged, but we are increasing the low end of our EPS range due to a one-time tax benefit received in Q2. We expect to deliver fiscal 2013 revenue of $485 to $495 million, EPS between $0.88 and $1.00 and Adjusted EBITDA of $55 to $61 million. Our strong second-quarter results, driven by our Home Robot business, give us confidence that we will achieve our full-year expectations.”

Revenue for the second quarter of 2013 was $130.4 million, compared with $111.4 million for the same quarter one year ago. Revenue for the first half of 2013 was $236.6 million, compared with $209.3 million last year.
Net income in the second quarter of 2013 was $8.3 million, compared with $7.4 million in the second quarter of 2012. For the first half, net income was $16.6 million, compared with $8.0 million a year ago.
Quarterly earnings per share were $0.28, compared with $0.26 in the second quarter last year. First-half earnings per share were $0.57, compared with $0.28 in 2012. EPS in Q2 and first-half 2013 included a $0.07 one-time tax benefit associated with the prior period sale of government robots to the U.S. military, which were used outside of the U.S.
Adjusted EBITDA for the second quarter of 2013 was $17.0 million, compared with $16.2 million in the second quarter of 2012. For the first half, Adjusted EBITDA was $32.3 million, compared with $22.3 million a year ago.

Business Highlights

Domestic revenue growth of 26 percent, coupled with international growth of 18 percent, fueled a 20 percent year-over-year increase in Home Robot revenue.
Announced contracts from Brazil totaling $7.2 million and a $3.0 million order under a $30.0 million IDIQ from the U.S. Army during the quarter, which gives us confidence that we will achieve our full-year Defense & Security expectations.
Announced a joint marketing agreement with Cisco to bring the enterprise-grade Ava 500 video collaboration robot to market, the second initiative of our Remote Presence business.

Financial Expectations

Management provides the following expectations with respect to the third quarter ending September 28, 2013 and fiscal year ending December 28, 2013.

Q3 2013:

Revenue

$124 - $128 million

Earnings Per Share

$0.20 - $0.25

Adjusted EBITDA

$14 - $17 million

Fiscal Year 2013:

Current

Prior

Revenue

$485 - $495 million

Earnings Per Share

$0.88 - $1.00

$0.80 - $1.00

Adjusted EBITDA

$55 - $61 million

Full-Year 2013 BU Revenue:

Home Robots

$435 - $440 million

Defense & Security Robots

$45 - $55 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 2013, business outlook, and outlook for third-quarter and fiscal year 2013 financial performance. Pertinent details include:

A live, audio broadcast of the conference call will also be available at http://investor.irobot.com/phoenix.zhtml?c=193096&p=irol-EventDetails&EventId=4897483. 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 630-652-3000, passcode 34160570#.

About iRobot Corp.

iRobot designs and builds robots that make a difference. The company’s home robots help people find smarter ways to clean, its defense & security robots protect those in harm’s way, and its remote presence robots enable virtual presence from anywhere in the world. 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, operating performance and growth, demand for our robots, anticipated growth and performance of our Home Robots business, anticipated performance of our Defense & Security business, anticipated revenue, earnings per share and Adjusted EBITDA for fiscal year 2013 and the third quarter ending September 28, 2013, and anticipated business unit revenue for the fiscal year 2013. 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, market acceptance of our products, our dependence on the U.S. federal government and government contracts, the timing of government contracts and orders, 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 press release includes Adjusted EBITDA, which is 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 (loss) and Adjusted EBITDA is provided in the financial tables at the end of this press release.


iRobot Corporation
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)


	For the three months ended					For the six months ended
	June 29,			June 30,		June 29,			June 30,
		2013			2012		2013			2012
Revenue
Product revenue	$	127,966		$	107,760	$	229,371		$	199,502
Contract revenue		2,396			3,685		7,186			9,750
Total		130,362			111,445		236,557			209,252

Cost of Revenue
Product revenue		67,873			57,089		125,688			113,322
Contract revenue		884			1,540		2,737			4,562
Total		68,757			58,629		128,425			117,884

Gross Margin		61,605			52,816		108,132			91,368

Operating Expense
Research & development		15,997			14,182		30,405			28,682
Selling & marketing		22,309			17,976		33,006			30,309
General & administrative		15,395			10,022		27,853			21,064
Total		53,701			42,180		91,264			80,055

Operating income		7,904			10,636		16,868			11,313

Other income (expense), net		(105	)		60		(201	)		280

Income before income taxes		7,799			10,696		16,667			11,593
Income tax expense (benefit)		(495	)		3,321		18			3,565
Net income	$	8,294		$	7,375	$	16,649		$	8,028

Net income per common share:
Basic	$	0.29		$	0.27	$	0.59		$	0.29
Diluted	$	0.28		$	0.26	$	0.57		$	0.28

Shares used in per common share calculations:
Basic		28,416			27,522		28,173			27,441
Diluted		29,226			28,182		28,972			28,259


Stock-based compensation included in above figures:
Cost of product revenue	$	128		$	218	$	246		$	426
Cost of contract revenue		-			-		-			-
Research & development		793			446		1,294			906
Selling & marketing		118			179		484			416
General & administrative		2,224			2,059		4,168			3,667
Total	$	3,263		$	2,902	$	6,192		$	5,415


iRobot Corporation
Condensed Consolidated Balance Sheets
(unaudited, in thousands)

	June 29,		December 29,
		2013		2012

Assets

Cash and equivalents	$	133,857	$	126,770
Short term investments		19,014		12,430
Accounts receivable, net		51,104		29,413
Unbilled revenues		1,051		1,196
Inventory		41,560		36,965
Deferred tax assets		19,245		19,266
Other current assets		13,598		8,853
Total current assets		279,429		234,893
Property, plant and equipment, net		23,060		24,953
Deferred tax assets		10,438		8,792
Goodwill		48,751		48,951
Intangible assets, net		24,506		28,224
Other assets		10,501		8,500
Total assets	$	396,685	$	354,313

Liabilities and stockholders' equity

Accounts payable	$	53,905	$	42,515
Accrued expenses		14,045		13,642
Accrued compensation		13,113		11,864
Deferred revenue and customer advances		3,274		6,257
Total current liabilities		84,337		74,278
Long term liabilities		4,138		4,218
Stockholders' equity		308,210		275,817
Total liabilities and stockholders' equity	$	396,685	$	354,313


iRobot Corporation
Consolidated Statements of Cash Flows
(unaudited, in thousands)


	For the three months ended						For the six months ended
	June 29,			June 30,			June 29,			June 30,
		2013			2012			2013			2012
Cash flows from operating activities:
Net income	$	8,294		$	7,375		$	16,649		$	8,028
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		3,265			2,711			6,549			5,313
Loss on disposal of property and equipment		99			97			281			166
Goodwill and intangible assets impairment		1,988			-			1,988			-
Stock-based compensation		3,263			2,902			6,192			5,415
Deferred income taxes, net		(464	)		2,464			(913	)		(4,230	)
Tax benefit of excess stock based compensation deductions		(1,593	)		(330	)		(1,636	)		(1,035	)
Non-cash director deferred compensation		11			20			22			42
Changes in operating assets and liabilities — (use) source
Accounts receivable		(23,824	)		(9,620	)		(21,691	)		3,811
Unbilled revenue		1,201			(833	)		145			289
Inventory		(9,400	)		(2,916	)		(4,595	)		(3,508	)
Other assets		(3,787	)		(3,210	)		(4,770	)		(378	)
Accounts payable		24,101			910			11,390			(3,194	)
Accrued expenses		21			(5,255	)		400			(3,252	)
Accrued compensation		6,116			2,008			1,249			(8,141	)
Deferred revenue and customer advances		(355	)		(540	)		(2,983	)		355
Change in long term liabilities		(895	)		(120	)		(80	)		(186	)
Net cash (used in) provided by operating activities		8,041			(4,337	)		8,197			(505	)

Cash flows from investing activities:
Purchase of property and equipment		(1,751	)		(1,313	)		(2,828	)		(2,956	)
Change in other assets		-			-			(2,000	)		(6,000	)
Purchases of investments		(7,850	)		(5,086	)		(10,397	)		(5,086	)
Sales of investments		2,500			-			3,500			2,500
Net cash used in investing activities		(7,101	)		(6,399	)		(11,725	)		(11,542	)

Cash flows from financing activities:
Proceeds from stock option exercises		8,099			699			9,843			2,022
Income tax withholding payment associated with restricted stock vesting		(351	)		(548	)		(864	)		(775	)
Tax benefit of excess stock based compensation deductions		1,593			330			1,636			1,035
Net cash provided by financing activities		9,341			481			10,615			2,282

Net increase (decrease) in cash and cash equivalents		10,281			(10,255	)		7,087			(9,765	)
Cash and cash equivalents, at beginning of period		123,576			166,798			126,770			166,308
Cash and cash equivalents, at end of period	$	133,857		$	156,543		$	133,857		$	156,543


iRobot Corporation
Supplemental Information
(unaudited)


	For the three months ended						For the six months ended
	June 29,			June 30,			June 29,			June 30,
		2013			2012			2013			2012

Revenue: *

Home Robots	$	115,528		$	96,013		$	208,227		$	177,596

Domestic	$	39,178		$	31,126		$	70,569		$	52,944
International	$	76,350		$	64,887		$	137,658		$	124,652


Defense & Security	$	12,470		$	13,223		$	23,570		$	27,385

Domestic	$	11,579		$	11,013		$	20,713		$	21,128
International	$	891		$	2,210		$	2,857		$	6,257

Product	$	11,502		$	10,403		$	19,537		$	19,407
Contract	$	968		$	2,820		$	4,033		$	7,978

Product Life Cycle	$	3,041		$	4,524		$	9,121		$	9,108


Gross Margin Percent:
Home Robots		51.5	%		53.0	%		50.0	%		50.3	%
Defense & Security		47.5	%		45.9	%		47.5	%		37.7	%
Total Company		47.3	%		47.4	%		45.7	%		43.7	%


Units shipped:
Home Robots *		492			426			913			818
Defense & Security		424			42			442			174


Average gross selling prices for robot units:
Home Robots	$	225		$	225		$	233		$	220
Defense & Security *	$	20		$	140		$	24		$	59


Defense & Security Funded Product Backlog *	$	19,972		$	18,300		$	19,972		$	18,300


Days sales outstanding		37			34			37			34

Days in inventory		58			54			58			54

Headcount		517			604			517			604


* in thousands


iRobot Corporation
Adjusted EBITDA Reconciliation to GAAP
(unaudited, in thousands)


	For the three months ended						For the six months ended
	June 29,			June 30,			June 29,			June 30,
		2013			2012			2013			2012

Net income	$	8,294		$	7,375		$	16,649		$	8,028

Interest income, net		(153	)		(264	)		(317	)		(526	)
Income tax expense (benefit)		(495	)		3,321			18			3,565
Depreciation		2,221			2,485			4,440			4,879
Amortization		1,044			226			2,109			434

EBITDA		10,911			13,143			22,899			16,380


Stock-based compensation expense		3,263			2,902			6,192			5,415
Merger and acquisition expense		113			14			393			26
Net intellectual property litigation expense		170			34			203			71
Restructuring expense		2,575			129			2,575			407

Adjusted EBITDA	$	17,032		$	16,222		$	32,262		$	22,299



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.

SOURCE: iRobot Corp.

iRobot Corp.
Elise Caffrey, 781-430-3003
Investor Relations
ecaffrey@irobot.com
or
Matthew Lloyd, 781-430-3720
Media Relations
mlloyd@irobot.com

Wednesday, July 24, 2013

8:30 a.m. ET

Call-In Number: