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iRobot Reports Third-Quarter Financial Results
Provides mid-high teen preliminary revenue growth estimate for 2014

BEDFORD, Mass., Oct 22, 2013 (BUSINESS WIRE) --iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the third quarter ended September 28, 2013.

“I am pleased to report that we delivered Q3 results in line with our expectations. We saw strong growth in our Home Robot business, and are excited to announce a next generation home robot for the fourth quarter. Overseas, strong demand in Asia continued and we are seeing signs of recovery in Europe. We shipped additional RP-VITA robots to InTouch Health, while our Remote Presence unit gained further traction in the video collaboration market. And, our Defense & Security business performed as expected,” said Colin Angle, chairman and chief executive officer of iRobot.

“Our businesses continue to perform in line with the expectations we laid out in Q1. Accordingly we are narrowing our full year 2013 expectation ranges to: revenue of between $485 and $490 million, EPS of $0.90 to $0.95 and Adjusted EBITDA of $58 to $61 million.

“Based on our robust product pipeline and expectations over the next three years, we continue to expect to achieve by 2016:

  • Mid-high teen revenue CAGR;
  • High teen Adjusted EBITDA margin; and,
  • High single digit Operating Cash Flow margin.

For 2014, our preliminary revenue expectations are for mid-high teen growth, consistent with the financial targets.”

Financial Results

  • Revenue for the third quarter of 2013 was $124.5 million, compared with $126.3 million for the same quarter one year ago. Revenue for the first nine months of 2013 was $361.1 million compared with $335.6 million for the first nine months one year ago.
  • Net income in the third quarter of 2013 was $7.8 million, compared with $15.2 million in the third quarter of 2012. For the first nine months, net income was $24.5 million, compared with $23.2 million a year ago.
  • Quarterly earnings per share were $0.26, compared with $0.54 in the third quarter last year. Nine-month earnings per share were $0.84 in 2013, compared with $0.82 for the first nine months of 2012.
  • Adjusted EBITDA for the third quarter of 2013 was $17.2 million, compared with $29.2 million in the third quarter of 2012. For the first nine months of 2013 Adjusted EBITDA was $49.4 million, compared with $51.5 million for the same period a year ago.
  • During the third quarter of 2012, there were a number of items recorded, one of which resulted in a $7.7 million revenue increase. The positive net impact of all these items was $0.10 in earnings per share and $5.2 million in Adjusted EBITDA.

Business Highlights

  • Home Robot revenue increased 16 percent in Q3 2013, over last year, driven by strong growth in Japan.
  • Defense & Security results met our Q3 expectations. While the U.S. government shutdown hampered our efforts in both the domestic and international markets we continue to expect to deliver full year Defense & Security revenue of roughly $50 million.
  • We are in discussions to sign our first Cisco distributor for the AVA 500 video collaboration robot and plan to be in full beta with three external users for the product by early December.

Financial Expectations

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

Q4 2013:

                       
Revenue $124 - $129 million
Earnings Per Share $0.06 - $0.11
Adjusted EBITDA $9 - $12 million
 

Fiscal Year 2013:

Current

Prior

Revenue $485 - $490 million $485 - $495 million
Earnings Per Share $0.90 - $0.95 $0.88 - $1.00
Adjusted EBITDA $58 - $61 million $55 - $61 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 2013, business outlook, and outlook for fourth-quarter and fiscal year 2013 financial performance. Pertinent details include:

          Date:           Wednesday, October 23, 2013
Time: 8:30 a.m. ET
Call-In Number: 847-619-6818
Passcode: 34160574

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=4897484. 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 30, and can be accessed by dialing 630-652-3000, passcode 34160574#.

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, future operating performance and growth, fiscal year 2014 revenue growth, the timing of new product introductions, the timing of our achievement of product development milestones, demand for our robots, anticipated growth and performance of our businesses, Defense & Security revenue for fiscal year 2013, and anticipated revenue, earnings per share and Adjusted EBITDA for fiscal year 2013 and the fourth quarter ending December 28, 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 nine months ended
September 28, September 29, September 28, September 29,
2013   2012 2013   2012
Revenue
Product revenue $ 122,647 $ 121,174 $ 352,018 $ 320,676
Contract revenue   1,854     5,124   9,040       14,874
Total   124,501     126,298   361,058       335,550
 
Cost of Revenue
Product revenue 69,628 65,852 195,316 179,174
Contract revenue   812     1,970   3,549       6,532
Total   70,440     67,822   198,865       185,706
 
Gross Margin 54,061 58,476 162,193 149,844
 
Operating Expense
Research & development 15,212 13,040 45,617 41,722
Selling & marketing 16,317 11,376 49,323 41,685
General & administrative   11,495     11,326   39,348       32,390
Total   43,024     35,742   134,288       115,797
 
Operating income 11,037 22,734 27,905 34,047
 
Other income (expense), net   152     197   (49 )     477
 
Income before income taxes 11,189 22,931 27,856 34,524
Income tax expense   3,385     7,724   3,403       11,289
Net income $ 7,804   $ 15,207 $ 24,453     $ 23,235
 
Net income per common share:
Basic $ 0.27 $ 0.55 $ 0.86 $ 0.84
Diluted $ 0.26 $ 0.54 $ 0.84 $ 0.82
 
Shares used in per common share calculations:
Basic 28,733 27,650 28,359 27,520
Diluted 29,582 28,321 29,207 28,323
 
 
Stock-based compensation included in above figures:
Cost of product revenue $ 250 $ 289 $ 496 $ 715
Cost of contract revenue - - - -
Research & development 669 365 1,963 1,271
Selling & marketing 348 158 832 574
General & administrative   2,210     1,796   6,378       5,463
Total $ 3,477   $ 2,608 $ 9,669     $ 8,023
 
 
iRobot Corporation
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
             
September 28, December 29,
2013 2012
 
Assets
 
Cash and equivalents $ 139,731 $ 126,770
Short term investments 16,948 12,430
Accounts receivable, net 54,027 29,413
Unbilled revenues 1,556 1,196
Inventory 48,853 36,965
Deferred tax assets 19,517 19,266
Other current assets   6,131   8,853
Total current assets 286,763 234,893
Property, plant and equipment, net 24,039 24,953
Deferred tax assets 10,464 8,792
Goodwill 48,751 48,951
Intangible assets, net 23,587 28,224
Other assets   10,501   8,500
Total assets $ 404,105 $ 354,313
 
Liabilities and stockholders' equity
 
Accounts payable $ 46,644 $ 42,515
Accrued expenses 13,409 13,642
Accrued compensation 14,868 11,864
Deferred revenue and customer advances   2,026   6,257
Total current liabilities   76,947   74,278
Long term liabilities   4,556   4,218
Stockholders' equity   322,602   275,817
Total liabilities and stockholders' equity $ 404,105 $ 354,313
 
 
iRobot Corporation
Consolidated Statements of Cash Flows
(unaudited, in thousands)
                 
 
For the three months ended For the nine months ended
September 28, September 29, September 28, September 29,
2013   2012 2013   2012
Cash flows from operating activities:
Net income $ 7,804 $ 15,207 $ 24,453 $ 23,235
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,480 2,868 9,029 8,181
(Gain)/loss on disposal of assets (632 ) 612 (351 ) 778
Goodwill and intangible assets impairment - - 1,988 -
Stock-based compensation 3,477 2,608 9,669 8,023
Deferred income taxes, net 251 1,375 (662 ) (2,855 )
Tax benefit of excess stock based compensation deductions (602 ) (426 ) (2,238 ) (1,461 )
Non-cash director deferred compensation 11 22 33 64
Changes in operating assets and liabilities — (use) source
Accounts receivable (2,923 ) (13,852 ) (24,614 ) (10,041 )
Unbilled revenue (505 ) 380 (360 ) 669
Inventory (7,293 ) 2,005 (11,888 ) (1,503 )
Other assets 7,467 3,644 2,697 3,266
Accounts payable (7,261 ) (6,895 ) 4,129 (10,089 )
Accrued expenses (616 ) 4,848 (216 ) 1,596
Accrued compensation 1,755 (701 ) 3,004 (8,842 )
Deferred revenue and customer advances (1,248 ) 236 (4,231 ) 591
Change in long term liabilities   418       (129 )   338       (315 )
Net cash provided by operating activities   2,583       11,802     10,780       11,297  
 
Cash flows from investing activities:
Purchase of property and equipment (2,481 ) (1,111 ) (5,309 ) (4,067 )
Change in other assets - - (2,000 ) (6,000 )
Purchases of investments (2,500 ) - (12,897 ) (5,086 )
Sales of investments 4,544 - 8,044 2,500
Proceeds from sale of assets   650       -     650       -  
Net cash (used in)/provided by investing activities   213       (1,111 )   (11,512 )     (12,653 )
 
Cash flows from financing activities:
Proceeds from stock option exercises 2,521 2,000 12,364 4,022
Income tax withholding payment associated with restricted stock vesting (45 ) (2 ) (909 ) (777 )
Tax benefit of excess stock based compensation deductions   602       426     2,238       1,461  
Net cash provided by financing activities   3,078       2,424     13,693       4,706  
 
Net increase in cash and cash equivalents 5,874 13,115 12,961 3,350
Cash and cash equivalents, at beginning of period   133,857       156,543     126,770       166,308  
Cash and cash equivalents, at end of period $ 139,731     $ 169,658   $ 139,731     $ 169,658  
 
 
iRobot Corporation
Supplemental Information
(unaudited)
                 
 
For the three months ended For the nine months ended
September 28, September 29, September 28, September 29,
2013   2012 2013   2012
 
Revenue: *
 
Home Robots $ 111,363     $ 96,291   $ 319,590     $ 273,887  
 
Domestic $ 35,700 $ 32,925 $ 106,269 $ 85,869
International $ 75,663 $ 63,366 $ 213,321 $ 188,018
 
 
Defense & Security $ 10,094     $ 27,832   $ 33,664     $ 55,217  
 
Domestic $ 3,467 $ 26,667 $ 24,158 $ 49,957
International $ 6,627 $ 1,165 $ 9,506 $ 5,260
 
Product $ 9,754 $ 23,912 $ 29,291 $ 43,319
Contract $ 340 $ 3,920 $ 4,373 $ 11,898
 
Product Life Cycle $ 5,347 $ 14,910 $ 14,468 $ 24,018
 
 
Gross Margin Percent:
Home Robots 47.6 % 52.2 % 49.2 % 51.0 %
Defense & Security 40.7 % 46.8 % 45.5 % 42.3 %
Total Company 43.4 % 46.3 % 44.9 % 44.7 %
 
 
Units shipped:
Home Robots * 526 416 1,439 1,234
Defense & Security 43 71 485 245
 
 
Average gross selling prices for robot units:
Home Robots $ 225 $ 223 $ 230 $ 221
Defense & Security * $ 103 $ 127 $ 31 $ 79
 
 
Defense & Security Funded Product Backlog * $ 13,318 $ 11,944 $ 13,318 $ 11,944
 
 
Days sales outstanding 41 40 41 40
 
Days in inventory 64 44 64 44
 
Headcount 525 590 525 590
 
 
* in thousands
 
 
iRobot Corporation
Adjusted EBITDA Reconciliation to GAAP
(unaudited, in thousands)
           
 
For the three months ended For the nine months ended
September 28, September 29, September 28, September 29,
2013 2012 2013 2012
 
Net income $ 7,804 $ 15,207 $ 24,453 $ 23,235
 
Interest income, net (212 ) (289 ) (529 ) (815 )
Income tax expense 3,385 7,724 3,403 11,289
Depreciation 1,484 2,601 5,924 7,480
Amortization   996     267     3,105     701  
 
EBITDA 13,457 25,510 36,356 41,890
 
 
Stock-based compensation expense 3,477 2,608 9,669 8,023
Merger and acquisition expense - 661 393 687
Net intellectual property litigation expense 241 58 444 129
Restructuring expense   -     367     2,575     774  
 
Adjusted EBITDA $ 17,175   $ 29,204   $ 49,437   $ 51,503  
 
 
 
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.
Investor Relations
Elise Caffrey, 781-430-3003
ecaffrey@irobot.com
or
iRobot Corp.
Media Relations
Matthew Lloyd, 781-430-3720
mlloyd@irobot.com