SEC Filing | iRobot Corporation

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 23, 2018

iROBOT CORPORATION

(Exact Name of Registrant as Specified in its Charter)



	Delaware
	(State or other jurisdiction of incorporation or organization)
001-36414		77-0259 335
(Commission File Number)		(I.R.S. Employer Identification No.)

8 Crosby Drive, Bedford, MA		01730
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (781) 430-3000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.02 Results of Operations and Financial Condition.

On October 23, 2018, iRobot Corporation announced its financial results for the fiscal quarter ended September 29, 2018. A copy of the press release is being furnished as Exhibit 99.1 to this Report on Form 8‑K.

The information in this Report on Form 8-K and Exhibit 99.1 attached hereto is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits:



Exhibit No.		Description

99.1		Press Release issued by the registrant on October 23, 2018, furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



Date: October 23, 2018		iRobot Corporation


		By: /s/ Glen D. Weinstein
		Name: Glen D. Weinstein
		Title: Chief Legal Officer and Secretary

Exhibit

EX-99.1



Contacts:
Elise Caffrey				Matthew Lloyd
Investor Relations				Media Relations
iRobot Corp.				iRobot Corp.
(781) 430-3003				(781) 430-3720
ecaffrey@irobot.com				mlloyd@irobot.com

iRobot Reports Third-Quarter Financial Results

Strength in All Major Regions Drives 29% Year-Over-Year Revenue Growth

Increases Full-Year Financial Expectations

BEDFORD, Mass., Oct. 23, 2018 - iRobot Corp. (NASDAQ: IRBT), a leader in consumer robots, today announced its financial results for the third quarter ended September 29, 2018.

“We delivered record third-quarter revenue of $265 million in Q3 2018, with growth across all major regions. In the United States, we saw significant year-over-year growth of 45%, driven by a very successful launch of two new products, the Roomba i7/i7+ and the Roomba e5,” said Colin Angle, chairman and chief executive officer of iRobot.

“Given our Q3 results and our outlook for the holiday season, we are increasing our 2018 full-year financial expectations. We now anticipate full-year 2018 revenue of $1.08 to $1.09 billion, which is year-over-year growth of 22 - 23%, operating income of $92 to $96 million, and EPS of $2.55 to $2.75. Our full-year 2018 operating income expectation includes an anticipated negative tariff impact, of approximately $5.0 million in Q4, which was not previously included in our financial expectations.

“We have delivered very strong results thus far this year. I am very excited about our positioning for the upcoming holiday season and confident in our ability to deliver our increased 2018 financial expectations.”

Financial Results


•	Revenue for the third quarter of 2018 was $264.5 million, compared with $205.4 million for the third quarter of 2017.


•	Operating income in the third quarter of 2018 was $37.3 million, compared with $23.9 million in the third quarter of 2017.


•	Quarterly earnings per share were $1.12 for the third quarter of 2018, compared with $0.76 in the third quarter of 2017.

Business Highlights


•	We successfully launched two new products during the third quarter, the Roomba e5, our latest product offering premium features at a lower price point, and our game-changing premium Roomba i7 and i7+ robots, which helped to drive U.S. year-over-year revenue growth of 45% in the third quarter.


•	We debuted our shared vision of the smart home in Boston with Google at HUBweek, demonstrating how our iRobot/Google collaboration can integrate robotic and smart home technologies that will advance the next-generation smart home.

Financial Expectations

Management provides the following expectations with respect to the fiscal year ending December 29, 2018.



Fiscal Year 2018:	Current	Previous
Revenue	$1.08 - $1.09 billion	$1.06 - $1.08 billion
Operating Income	$92 - $96 million	$90 - $96 million
Earnings Per Share	$2.55 - $2.75	$2.30 - $2.50

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 2018, business outlook, and outlook for fiscal year 2018 financial performance. Pertinent details include:



Date:	Wednesday, October 24, 2018
Time:	8:30 a.m. ET
Call-In Number:	213-358-0894
Passcode:	2997885

A live, audio broadcast of the conference call will also be available at http://investor.irobot.com/events/event-details/q3-2018-irobot-corp-earnings-conference-call. 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 October 31, and can be accessed by dialing 404-537-3406, passcode 2997885.

About iRobot Corp.

iRobot, the leading global consumer robot company, designs and builds robots that empower people to do more both inside and outside of the home. iRobot created the home robot cleaning category with the introduction of its Roomba® Vacuuming Robot in 2002. Today, iRobot is a global enterprise that has sold more than 20 million robots worldwide. iRobot's product line, including the Roomba and the Braava® family of mopping robots, feature proprietary technologies and advanced concepts in cleaning, mapping and navigation. iRobot's engineers are building an ecosystem of robots and technologies to enable the smart home. 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; future operating performance; revenue growth; demand for robots; the impact on our financial results of the imposition of tariffs on goods imported into the United States; and anticipated revenue, operating income and earnings per share for the fiscal year ended December 29, 2018. 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 and adoption of our products; 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, amortization, stock-based compensation expense, net merger, acquisition and divestiture expense, gain on business acquisition, and net intellectual property litigation expense, and restructuring expense. A reconciliation between net income 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 nine months ended
	September 29, 2018		September 30, 2017		September 29, 2018		September 30, 2017
Revenue	$	264,534	$	205,399	$	707,919	$	557,014
Cost of revenue:
Cost of product revenue	124,754		100,800		324,967		272,068
Amortization of intangible assets	4,574		2,216		14,035		5,329
Total cost of revenue	129,328		103,016		339,002		277,397
Gross margin	135,206		102,383		368,917		279,617
Operating expenses:
Research and development	35,309		28,843		103,178		80,518
Selling and marketing	39,030		28,473		116,269		91,171
General and administrative	23,329		21,002		72,630		58,137
Amortization of intangible assets	263		173		805		173
Total operating expenses	97,931		78,491		292,882		229,999
Operating income	37,275		23,892		76,035		49,618
Other income, net	337		2,601		2,363		4,290
Income before income taxes	37,612		26,493		78,398		53,908
Income tax expense	5,683		4,411		15,597		7,565
Net income	$	31,929	$	22,082	$	62,801	$	46,343

Net income per share
Basic	$	1.16	$	0.80	$	2.27	$	1.68
Diluted	$	1.12	$	0.76	$	2.19	$	1.61

Number of shares used in per share calculations
Basic	27,493		27,739		27,692		27,520
Diluted	28,506		28,916		28,629		28,719


Stock-based compensation included in above figures:
Cost of revenue	$	347	$	274	$	1,035	$	751
Research and development	1,910		1,261		5,393		3,508
Selling and marketing	544		728		2,032		1,869
General and administrative	3,791		2,771		10,509		7,941
Total	$	6,592	$	5,034	$	18,969	$	14,069



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

	September 29, 2018		December 30, 2017

Assets
Cash and cash equivalents	$	100,122	$	128,635
Short term investments	34,994		37,225
Accounts receivable, net	109,583		142,829
Inventory	160,752		106,932
Other current assets	33,732		19,105
Total current assets	439,183		434,726
Property and equipment, net	54,198		44,579
Deferred tax assets	31,785		31,531
Goodwill	118,805		121,440
Intangible assets, net	29,385		44,712
Other assets	15,647		14,534
Total assets	$	689,003	$	691,522

Liabilities and stockholders' equity
Accounts payable	$	103,143	$	116,316
Accrued expenses	62,851		73,647
Deferred revenue and customer advances	4,719		7,761
Total current liabilities	170,713		197,724
Deferred tax liabilities	5,720		9,539
Other long-term liabilities	8,992		13,932
Total long-term liabilities	14,712		23,471
Total liabilities	185,425		221,195
Stockholders' equity	503,578		470,327
Total liabilities and stockholders' equity	$	689,003	$	691,522



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


	For the nine months ended
	September 29, 2018			September 30, 2017
Cash flows from operating activities:
Net income	$	62,801		$	46,343
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	27,077			14,523
Gain on business acquisition	—			(2,243		)
Stock-based compensation	18,969			14,069
Deferred income taxes, net	(4,296		)	(3,226		)
Deferred rent	1,171			—
Other	(216		)	(774		)
Changes in operating assets and liabilities — (use) source
Accounts receivable	31,930			(10,957		)
Inventory	(54,619		)	(23,944		)
Other assets	(15,818		)	(11,099		)
Accounts payable	(10,512		)	20,824
Accrued expenses	(12,086		)	7,034
Deferred revenue and customer advances	(1,436		)	(965		)
Long-term liabilities	(2,672		)	1,513
Net cash provided by operating activities	40,293			51,098

Cash flows from investing activities:
Additions of property and equipment	(25,284		)	(16,630		)
Change in other assets	(2,263		)	(1,374		)
Proceeds from sale of equity investment	856			1,056
Cash paid for business acquisition, net of cash acquired	—			(16,524		)
Purchases of investments	(6,438		)	(7,034		)
Sales and maturities of investments	10,500			10,500
Net cash used in investing activities	(22,629		)	(30,006		)

Cash flows from financing activities:
Proceeds from employee stock plans	7,948			8,990
Income tax withholding payment associated with restricted stock vesting	(3,532		)	(2,974		)
Stock repurchases	(50,000		)	—
Net cash (used in) provided by financing activities	(45,584		)	6,016

Effect of exchange rate changes on cash and cash equivalents	(593		)	155
Net (decrease) increase in cash and cash equivalents	(28,513		)	27,263
Cash and cash equivalents, at beginning of period	128,635			214,523
Cash and cash equivalents, at end of period	$	100,122		$	241,786



iRobot Corporation
Supplemental Information
(unaudited)


	For the three months ended						For the nine months ended
	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017

Revenue: *
Consumer	$	264,534		$	205,360		$	707,919		$	556,757

Domestic	$	127,240		$	87,626		$	345,628		$	269,998
International	$	137,294		$	117,734		$	362,291		$	286,758

Gross Margin Percent	51.1		%	49.8		%	52.1		%	50.2		%

Consumer units shipped*	1,087			906			2,855			2,358
Vacuum	942			774			2,473			1,994
Mopping	145			131			382			362

Consumer revenue**	$	265		$	205		$	708		$	557
Vacuum***	$	242		$	186		$	647		$	504
Mopping***	$	23		$	21		$	61		$	55

Average gross selling prices for robot units - Consumer	$	276		$	249		$	289		$	260

Days sales outstanding	38			35			38			35

Days in inventory	113			82			113			82

Headcount	1,003			798			1,003			798


* in thousands
** in millions
*** includes accessory revenue



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


	For the three months ended						For the nine months ended
	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017

Net income	$	31,929		$	22,082		$	62,801		$	46,343

Interest income, net	(221		)	(558		)	(772		)	(1,423		)
Income tax expense	5,683			4,411			15,597			7,565
Depreciation	4,557			3,350			12,160			8,888
Amortization	4,857			2,419			14,917			5,605

EBITDA	46,805			31,704			104,703			66,978

Stock-based compensation expense	6,592			5,034			18,969			14,069
Net merger, acquisition and divestiture expense	—			681			23			2,452
Gain on business acquisition	—			(2,243		)	—			(2,243		)
Net intellectual property litigation expense	187			1,266			3,517			1,910

Adjusted EBITDA	$	53,584		$	36,442		$	127,212		$	83,166
Adjusted EBITDA as a % of revenue	20.3		%	17.7		%	18.0		%	14.9		%


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, amortization, stock-based compensation expense, net merger, acquisition and divestiture (income) expense, gain on business acquisition, net intellectual property litigation expense, and restructuring expense. 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.