News Release

iRobot Reports Fourth-Quarter and Full-Year Financial Results

Q4 and Full-Year Results Exceed Expectations

Accelerating Overseas Growth and Continued U.S. Momentum Drive Strong 2017 Expectations

BEDFORD, Mass., Feb. 8, 2017 /PRNewswire/ -- iRobot Corp. (NASDAQ: IRBT ), a leader in delivering robotic technology-based solutions, today announced its financial results for the fourth quarter and full year ended December 31, 2016.

"2016 was a fantastic year for iRobot. Our Q4 and full year 2016 results exceeded our increased expectations. Record Q4 revenue was driven by very strong sales in the United States despite having the highest number of competitors we've ever seen. Higher revenue coupled with continued improvement in gross margin allowed us to increase investment and capitalize on our momentum executing on our business strategy, while returning additional profit to shareholders and setting a strong foundation for 2017 and beyond," said Colin Angle, chairman and chief executive officer of iRobot.

"In 2017, we are expecting revenue of $770 to $785 million, which is year-over-year growth of 17% to 19%, EPS of $1.35 to $1.65 and operating income of $57 to $70 million. These expectations include the anticipated financial impact of our Japanese distributor acquisition, targeted to close at the beginning of Q2 2017. In November of 2016, we issued a press release, announcing our signed definitive agreement, and stated that for 2017 we expected a positive revenue impact of $20 to $25 million and a one-time negative impact to earnings per share of $0.25 - $0.35.

"We will achieve the 2017 performance by driving revenue growth through deeper household penetration of Roomba® in the U.S., accelerating growth in overseas markets, capitalizing on our first mover advantage in the wet floor care category, particularly in Asia where Braava® and Braava jet™ have been enthusiastically received, expanding gross margin through improved operating efficiencies and scale, and continuing to extend connectivity across more of our products, allowing us to offer more robots with mapping capabilities and cloud connectivity at more accessible price points, growing our role in the emerging Smart Home.

"There is a lot to be excited about. 2016 was a pivotal year for iRobot as we exited non-consumer businesses to focus solely on products for the home. We did so while delivering outstanding financial results for the year. Q4 was a record quarter for us and it was driven from the successful investments we made leading up to and throughout 2016, as we responded well to increasingly competitive market conditions. 2017 will be our first full year as a consumer technology company and we plan to capitalize on the investments we have been making."

Financial Results

  • Revenue for the fourth quarter of 2016 was $212.5 million, compared with $206.4 million for the fourth quarter of 2015. Revenue for the full year 2016 was $660.6 million, compared with $616.8 million for the full year 2015. Q4 2015 revenue included $31.0 million of defense & security (D&S) revenue. Full-year 2015 and 2016 revenue included $57.0 million and $5.0 million respectively, of D&S and other revenue.
  • Net income for the fourth quarter of 2016 was $13.7 million, compared with $19.3 million for the fourth quarter of 2015. Net income for the full year 2016 was $41.9 million, compared with $44.1 million for full-year 2015.
  • Quarterly earnings per share were $0.49, compared with $0.65 in the fourth quarter last year. Full-year 2016 earnings per share were $1.48, compared with $1.47 last year. Fourth quarter 2016 earnings per share included a $0.03 benefit associated with a change in accounting treatment of an equity investment and a $0.01 contribution from transition services provided to the former D&S business. Fourth quarter 2015 EPS included a $0.23 contribution from the D&S business and a $0.06 gain on sale of investment. Full-year 2016 earnings per share included a negative ($0.10) impact from the divestiture of the D&S business and a $0.03 contribution from the sale of an investment. Full-year 2015 earnings per share benefited from a $0.10 contribution from the D&S business and $0.08 from the sale of an investment.
  • Adjusted EBITDA for the fourth quarter of 2016 was $28.6 million, compared with $35.0 million in the fourth quarter of 2015. Adjusted EBITDA for the full year 2016 was $94.4 million, compared with $92.0 million for full-year 2015.

Business Highlights

  • Consumer revenue grew 21% in Q4 over the prior year and 17% for the full year over 2015, due primarily to significant growth in the United States driven by further investment in ad media and national promotions.
  • Domestic revenue for the quarter grew 47% over Q4 last year and for the full year grew 36% over 2015.
  • Braava and Braava jet revenue grew roughly 75% in 2016 compared with 2015 and comprised approximately 10% of Consumer revenue for full-year 2016.

Financial Expectations

Management provides the following expectations with respect to the year ending December 30, 2017. The expectations assume the acquisition is closed at the beginning of the second quarter:

Fiscal Year 2017:

Total Company

Expected Impact of Acquisition*

Revenue

$770 - $785 million

$20 - $25 million

Earnings Per Share

$1.35 - $1.65

($0.25 - $0.35)

Operating Income

$57 - $70 million

($10 - $15 million)

* Assumes a 110 - 115 Yen – Dollar exchange rate.

Fourth-Quarter and Full-Year Conference Call iRobot will host a conference call tomorrow at 8:30 a.m. ET to discuss its financial results for the fourth fiscal quarter and full year 2016, and outlook for the full-year 2017 financial performance. Pertinent details include:

Date: Thursday, February 9, 2017 Time: 8:30 a.m. ET Call-In Number: 213-358-0894 Passcode: 15399077

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=5242673 . 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 February 16, and can be accessed by dialing 404-537-3406, passcode 15399077.

About iRobot Corp. iRobot designs and builds robots that empower people to do more. The company's home robots help people find smarter ways to clean and accomplish more in their daily lives. iRobot's portfolio of solutions features proprietary technologies for the connected home and advanced concepts in navigation, mobility 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, revenue growth, the timing of our acquisition of our Japanese distributor on revenue, demand for our robots, our ability to develop robots with mapping capabilities and cloud connectivity, the impact of our past investments, anticipated revenue, earnings per share and operating income for the fiscal year ended December 30, 2017, and the anticipated impact of our acquisition of our Japanese distributor on revenue, earnings per share and operating income for the fiscal year ended December 30, 2017. 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, 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, net intellectual property litigation (income) 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 twelve months ended

December 31,

January 2,

December 31,

January 2,

2016

2016

2016

2016

Revenue

$ 212,494

$ 206,420

$ 660,604

$ 616,778

Cost of revenue

105,852

111,093

341,289

327,852

Gross margin

106,642

95,327

319,315

288,926

Operating expenses:

Research and development

21,861

20,185

79,805

76,071

Selling and marketing

48,153

36,876

115,125

97,772

General and administrative

17,909

15,270

66,828

54,465

Total operating expenses

87,923

72,331

261,758

228,308

Operating income

18,719

22,996

57,557

60,618

Other income, net

1,662

3,301

3,804

2,353

Income before income taxes

20,381

26,297

61,361

62,971

Income tax expense

6,700

6,966

19,422

18,841

Net income

$ 13,681

$ 19,331

$ 41,939

$ 44,130

Net income per share

Basic

$ 0.50

$ 0.66

$ 1.51

$ 1.49

Diluted

$ 0.49

$ 0.65

$ 1.48

$ 1.47

Number of shares used in per share calculations

Basic

27,159

29,140

27,698

29,550

Diluted

27,823

29,602

28,292

30,107

Stock-based compensation included in above figures:

Cost of revenue

$ 205

$ 414

$ 760

$ 1,076

Research and development

1,048

519

3,646

3,256

Selling and marketing

692

368

2,008

1,457

General and administrative

2,269

2,420

9,581

8,394

Total

$ 4,214

$ 3,721

$ 15,995

$ 14,183

iRobot Corporation

Condensed Consolidated Balance Sheets

(unaudited, in thousands)

December 31,

January 2,

2016

2016

Assets

Cash and cash equivalents

$ 214,523

$ 179,915

Short term investments

39,930

33,124

Accounts receivable, net

72,909

104,679

Unbilled revenue

139

452

Inventory

50,578

61,678

Other current assets

5,591

9,501

Total current assets

383,670

389,349

Property and equipment, net

27,532

26,850

Deferred tax assets

30,585

31,721

Goodwill

41,041

48,751

Intangible assets, net

12,207

15,664

Other assets

12,877

9,408

Total assets

$ 507,912

$ 521,743

Liabilities and stockholders' equity

Accounts payable

$ 67,281

$ 61,655

Accrued expenses

19,854

15,954

Accrued compensation

21,015

15,752

Deferred revenue and customer advances

4,486

3,265

Total current liabilities

112,636

96,626

Long term liabilities

6,320

7,706

Stockholders' equity

388,956

417,411

Total liabilities and stockholders' equity

$ 507,912

$ 521,743

iRobot Corporation

Consolidated Statements of Cash Flows

(unaudited, in thousands)

For the twelve months ended

December 31,

January 2,

2016

2016

Cash flows from operating activities:

Net income

$ 41,939

$ 44,130

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

13,606

15,090

Loss on disposal of property and equipment

211

214

Gain on sale of business unit

(433)

-

Income on equity method investment

(1,376)

-

Gain on sale of cost method investment

(634)

(3,287)

Stock-based compensation

15,995

14,183

Deferred income taxes, net

3,557

(985)

Tax benefit of excess stock-based compensation deductions

(2,971)

(1,467)

Non-cash director deferred compensation

82

149

Changes in operating assets and liabilities — (use) source

Accounts receivable

25,484

(33,623)

Unbilled revenue

198

2,162

Inventory

(981)

(13,978)

Other assets

3,187

203

Accounts payable

6,502

3,786

Accrued expenses

4,222

(2,768)

Accrued compensation

5,748

(483)

Deferred revenue and customer advances

2,996

(584)

Long term liabilities

(908)

3,970

Net cash provided by operating activities

116,424

26,712

Cash flows from investing activities:

Additions of property and equipment

(10,817)

(9,372)

Change in other assets

(2,093)

(1,015)

Proceeds from sale of business unit

23,520

-

Proceeds from sale of cost method investment

634

5,645

Purchase of investments

(20,056)

(17,755)

Sales and maturities of investments

13,002

20,500

Net cash provided by (used in) investing activities

4,190

(1,997)

Cash flows from financing activities:

Proceeds from stock option exercises

9,344

6,464

Income tax withholding payment associated with restricted stock vesting

(1,300)

(1,295)

Stock repurchases

(97,021)

(37,393)

Tax benefit of excess stock-based compensation deductions

2,971

1,467

Net cash used in financing activities

(86,006)

(30,757)

Net increase (decrease) in cash and cash equivalents

34,608

(6,042)

Cash and cash equivalents, at beginning of period

179,915

185,957

Cash and cash equivalents, at end of period

$ 214,523

$ 179,915

iRobot Corporation

Supplemental Information

(unaudited)

For the three months ended

For the twelve months ended

December 31,

January 2,

December 31,

January 2,

2016

2016

2016

2016

Revenue: *

Consumer

$ 212,096

$ 175,197

$ 655,850

$ 559,619

Domestic

$ 123,969

$ 84,317

$ 319,078

$ 234,904

International

$ 88,127

$ 90,880

$ 336,772

$ 324,715

Defense & Security

$ -

$ 30,504

$ 3,075

$ 55,004

Gross Margin Percent:

Consumer

52.6%

49.2%

51.9%

50.9%

Defense & Security

0.0%

50.7%

16.6%

45.9%

Total Company

50.2%

46.2%

48.3%

46.8%

Units shipped - Consumer *

940

771

2,943

2,436

Average gross selling prices for robot units - Consumer

$ 268

$ 262

$ 249

$ 251

Days sales outstanding

31

46

31

46

Days in inventory

42

51

42

51

Headcount

607

622

607

622

* in thousands

iRobot Corporation

Adjusted EBITDA Reconciliation to GAAP

(unaudited, in thousands)

For the three months ended

For the twelve months ended

December 31,

January 2,

December 31,

January 2,

2016

2016

2016

2016

Net income

$ 13,681

$ 19,331

$ 41,939

$ 44,130

Interest income, net

(247)

(196)

(934)

(678)

Income tax expense

6,700

6,966

19,422

18,841

Depreciation

2,528

3,599

9,974

11,375

Amortization

907

922

3,632

3,715

EBITDA

23,569

30,622

74,033

77,383

Stock-based compensation expense

4,214

3,721

15,995

14,183

Net merger, acquisition and divestiture expense

619

567

1,848

822

Net intellectual property litigation (income) expense

201

99

665

(394)

Restructuring expense

-

-

1,857

-

Adjusted EBITDA

$ 28,603

$ 35,009

$ 94,398

$ 91,994

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 expense, net intellectual property litigation (income) 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.

iRobot Corporation

Expected Incremental Impact of Japan Acquisition *

(in millions, except per share amounts)

(unaudited)

Fiscal year 2017

Three

Three

Three

Three

Twelve

Months Ending

Months Ending

Months Ending

Months Ending

Months Ending

April 1

July 1

September 30

December 30

December 30

Revenue

-

-

$10 - $12

$10 - $13

$20 - $25

Net income (loss) per share

-

($0.40 - $0.50)

$0.00 - $0.05

$0.05 - $0.15

($0.25 - 0.35)

* expected to close at the beginning of Q2-17.

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SOURCE iRobot Corp.