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iRobot Reports Strong Third Quarter 2008 Results

45 Percent Revenue Growth Driven By Strong Performance in Both Divisions
Management Adjusts Full Year Financial Expectations to Reflect Acquisition

BEDFORD, Mass., Oct 22, 2008 – iRobot Corp. (NASDAQ: IRBT) today announced its financial results for the fiscal quarter ended September 27, 2008. Revenue for the third quarter of 2008 grew 44.8 percent to $92.4 million, compared with $63.8 million for the same quarter one year ago. Revenue for the first nine months increased 44.3 percent to $216.9 million from $150.3 million for the first nine months of 2007.

Gross profit for the third quarter increased to $28.9 million (31.3 percent of revenue), compared with $20.1 million (31.5 percent of revenue) in the third quarter of 2007. In the first nine months of 2008 gross profit totaled $60.8 million (28.0 percent of revenue) up from $46.5 million (30.9 percent of revenue) in the first nine month of 2007.

Net income in the third quarter of 2008 was $3.9 million compared with a net loss in the third quarter of 2007 of $1.4 million. Net loss in the first nine months of 2008 was $4.7 million compared with a net loss of $11.7 million for the same period in 2007. Earnings per share for the third quarter of 2008 was $0.15 compared with net loss per share of $0.06 for the third quarter of 2007. For the first nine months of 2008, net loss per share was $0.19 compared with $0.48 for the same period in 2007.

“Given the increasing economic headwinds, I am especially excited to report our 17th consecutive quarter of year over year revenue growth. Both businesses have executed well to date, delivering consolidated quarterly results that exceeded expectations. In the Government & Industrial division, we now have 100% visibility of our revenue prospects for the full year,” said Colin Angle, chief executive officer of iRobot. “There is continuing uncertainty in the retail sector and our expectations for the rest of 2008 reflect our best view at this time given the current environment. In light of economic uncertainties, continuing focus on improved liquidity and working capital management is critically important to the company,” he added.“

Business Highlights:

  • In the third quarter, total home robot revenue increased 56 percent year-over-year. International home robot revenue was more than double the level of Q3 2007 and comprised approximately 26 percent of total home robot revenue in the quarter.

  • Government & Industrial division delivered a record 319 iRobot PackBots in the third quarter driving a 31 percent revenue increase over Q3 2007.

  • In the third quarter, iRobot received $40 million in orders for robots and spare parts under its current $286 million xBot contract with the U.S. Army Program Executive Office for Simulation, Training, and Instrumentation (PEO STRI).

  • iRobot announced its acquisition of Nekton Research, LLC, an unmanned underwater robot and technology company based in Raleigh-Durham, North Carolina.

  • On October 6, the company’s portfolio of auction rate security investments, was redeemed at par for $16.2 million.

Financial Expectations

Based on financial results for the first nine months of 2008 and the acquisition of Nekton, management today is increasing its outlook for revenue and adjusting its pre-tax expectations for full year to reflect the previously disclosed impact of the acquisition and current market conditions.    Management expects revenues for the full year 2008 to be between $310 million and $315 million. Based on an estimated pre-tax loss of approximately $1 million from Nekton, coupled with continuing uncertainty about the retail market, management now expects pre-tax income of $4 - $5 million for the full year.  Pre-tax income excluding Nekton remains consistent with the low end of prior guidance, and the high end of the range has been adjusted to reflect market uncertainty. The effective tax rate is expected to be 48.8% for the full year. The resulting EPS for the year is expected to be $0.08 - $0.10.

Third-Quarter Conference Call
iRobot will host a conference call tomorrow at 8:30 a.m. ET to discuss its financial results for the fiscal quarter ended September 27, 2008, business outlook and outlook for future financial performance. To access the call, investors should dial 719-325-4914 approximately 10 minutes prior to the initiation of the teleconference and reference iRobot. A live, audio broadcast of the conference call also will be available at http://investors.irobot.com/events.cfm. An archived version of the broadcast will be available on the same Web site shortly after the conclusion of the live event. A replay of the telephone conference call will be available through midnight on October 30, and can be accessed by dialing 719-457-0820, access code 8467473.

About iRobot Corp.
iRobot designs and builds robots that make a difference. The company’s home robots help people with smarter ways to clean, and our 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 future financial performance, its revenue, pre-tax income and earnings per share for full year 2008, its effective tax rate for full year 2008, and demand for and market acceptance of its products. 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: general economic conditions, our ability to operate in an emerging market, fluctuations in our operating results and the seasonality of our business, our ability to enhance our current consumer robots or develop new consumer robots, our dependence on the U.S. federal government and government contracts, our ability to expand our product offering beyond our current markets, market acceptance of our products, our ability to manage our rapid growth, 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.

 

iRobot Corporation
Consolidated Statement of Operations
(in thousands, except per share amounts)
(unaudited)
               
 
For the three months ended
 
For the nine months ended
 
September 27, 2008
September 29, 2007
 
September 27, 2008
September 29, 2007
Revenue  
   
  Product revenue
$ 87,224
$ 58,667
 
$ 198,475
$ 134,149
  Contract revenue
5,191
5,173
 
18,444
16,192
      Total
92,415
63,840
 
216,919
150,341
 
 
Cost of Revenue
 
  Product revenue
58,371
39,186
 
138,948
89,910
  Contract revenue
5,114
4,542
 
17,213
13,978
      Total
63,485
43,728
 
156,161
103,888
 
 
Gross Profit
28,930
20,112
 
60,758
46,453
 
 
Operating Expense
 
  Research & development
4,940
4,739
 
13,631
13,074
  Selling & marketing
10,522
11,115
 
35,451
30,108
  General & administrative
7,578
6,459
 
21,696
17,538
      Total
23,040
22,313
 
70,778
60,720
 
 
Operating (loss) income
5,890
(2,201)
 
(10,020)
(14,267)
 
 
Other income, net
180
845
 
917
2,663
 
 
Pre-tax (loss) income
6,070
(1,356)
 
(9,103)
(11,604)
Income tax expense (benefit)
2,218
22
 
(4,437)
51
Net (loss) income
$ 3,852
$ (1,378)
 
$ (4,666)
$ (11,655)
 
 
 
 
 
 
 
 
 
 
Net (loss) income per common share:
 
  Basic
$ 0.16
$ (0.06)
 
$ (0.19)
$ (0.48)
  Diluted
$ 0.15
$ (0.06)
 
$ (0.19)
$ (0.48)
 
 
Shares used in Per Common Share Calculations:
 
  Basic
24,712
24,337
 
24,614
24,156
  Diluted
25,536
24,337
 
24,614
24,156
 
 
 
 
Stock-based compensation included in above figures:
 
      Cost of product revenue
$ 184
$ 162
 
$ 554
$ 521
      Cost of contract revenue
127
81
 
300
292
      Research & development
131
134
 
226
252
      Selling & marketing
305
226
 
733
833
      General & administrative
1,090
627
 
2,495
1,517
         Total
$ 1,837
$ 1,230
 
$ 4,308
$ 3,415
 
 
 
 
 
 
           
 
           

 

iRobot Corporation
Condensed Consolidated Balance Sheet
(in thousands)
           
 
September 27, 2008
(unaudited)
 
December 29, 2007
(audited)
Assets      
       
Cash and equivalents
$ 10,515
 
$ 26,735
Short term investments
16,197
 
16,550
Accounts receivable, net
46,321
 
47,681
Unbilled revenues
2,272
 
2,244
Inventory, net
42,596
 
45,222
Deferred tax assets
5,905
 
5,905
Other current assets
9,228
 
2,268
  Total current assets
133,034
 
146,605
Property, plant and equipment, net
24,139
 
15,694
Deferred tax assets
4,293
 
4,293
Other assets
12,371
 
2,500
Total assets
$ 173,837
 
$ 169,092
 
 
 
Liabilities and stockholders' equity
 
 
 
Accounts payable
$31,870
 
$ 44,697
Accrued expenses
9,392
 
7,987
Accrued compensation
8,262
 
4,603
Deferred revenue
2,733
 
1,578
  Total current liabilities
52,257
 
58,865
Long term liabilities
10,052
 
-
Stockholders' equity
111,528
 
110,227
Total liabilities and stockholders' equity
$ 173,837
 
$ 169,092
       

 

iRobot Corporation
Consolidated Statement of Cash Flows
(in thousands)
           
 
For the three months ended
 
For the nine months ended
 
September 27, 2008
September 29, 2007
 
September 27, 2008
September 29, 2007
 
(unaudited)
 
(unaudited)
   
     
Cash flows from operating activities:  
     
Net (loss) income
$ 3,852
$ (1,378)
 
$ (4,666)
$ (11,655)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
     
     Depreciation and amortization
1,844
1,530
 
5,135
3,989
     Loss on disposal of fixed assets
12
13
 
80
48
     Stock-based compensation
1,837
1,230
 
4,308
3,415
     In-process research and development relating to
     acquisition of Nekton Research LLC
200
-
 
200
-
     Non-cash director deferred compensation
24
28
 
71
83
Changes in working capital - (use) source
     
     Accounts receivable
(21,598)
(17,478)
 
1,830
(6,647)
     Unbilled revenue
(82)
(1,268)
 
(28)
(796)
     Inventory
692
(21,703)
 
2,626
(22,821)
     Other assets
1,186
(59)
 
(6,930)
824
     Accounts payable
7,192
18,842
 
(13,540)
18,263
     Accrued expenses
1,226
102
 
1,405
(1,919)
     Accrued compensation
1,481
2,075
 
3,503
2,361
     Deferred revenue
1,755
(774)
 
1,127
683
     Change in long term liabilities
(107)
-
 
4,552
-
Net cash used in operating activities
(486)
(18,840)
 
(327)
(14,172)
 
     
Cash flows from investing activities:
     
Purchase of property and equipment
(1,312)
(2,535)
 
(13,589)
(6,456)
Purchase of Nekton Research LLC, net of cash received
(9,745)
-
 
(9,745)
-
Purchases of investments
-
(22,750)
 
(29,997)
(44,750)
Sales of investments
1,300
56,450
 
30,350
83,250
Net cash provided by (used in) investing activities
(9,757)
31,165
 
(22,9801)
32,044
 
     
Cash flows from financing activities:
     
Borrowings under revolving line of credit
5,500
-
 
5,500
-
Income tax withholding payment associated with stock option exercise
-
-
 
-
(1,588)
Proceeds from stock option exercises
176
614
 
908
1,333
Tax benefit of disqualifying dispositions
322
-
 
680
-
Net cash provided by (used in) financing activities
5,998
614
 
7,088
(255)
 
     
Net increase (decrease) in cash and cash equivalents
(4,425)
12,939
 
(16,220)
17,617
Cash and cash equivalents, at beginning of period
14,760
10,261
 
26,735
5,583
Cash and cash equivalents, at end of period
10,515
23,200
 
10,515
23,200

 

 

iRobot Corporation
Supplemental Information
(unaudited)
           
 
For the three months ended
 
For the nine months ended
 
September 27,
2008
September 29, 2007
 
September 27,
2008
September 29,
2007
         
Revenues by business unit (in thousands):          
Home Robots
 
  Product
$ 53, 626
$ 34, 294
 
$ 125,424
$ 70,932
  Contract
-
25
 
55
25
Government & Industrial
 
  Product
33,598
24,373
 
73,051
63,217
  Contract
5,191
5,148
 
18,389
16,167
 
$ 92,415
$ 63,840
 
$ 216,919
$ 150,341
 
 
 
 
 
 
Direct Revenue - Home Robots (in thousands)
$ 6,777
$ 7,732
$ 22,514
$ 20,456
Product Lifecycle Revenue - Government & Industrial (in thousands)
$ 5,977
$ 9,631
$ 11,351
$ 14,488
 
 
International Revenue (in thousands):
  Home Robots
$14,203
$ 6,095
$ 42,784
$ 11,397
  Government & Industrial
$ 4,360
$ 2,997
$ 5,570
$ 7,866
 
Average selling prices for robot units:
  Home Robots
$138
$ 137
$ 150
$ 138
  Government & Industrial (in thousands)
$ 87
$129
$ 96
$ 134
 
Gross Profit by business unit (in thousands):
  Home Robots
$ 14,867
$ 8,700
$ 33,695
$ 19,969
  Government & Industrial
$ 14,063
$ 11,412
$ 27,063
$ 26,484
 
$ 28,930
$ 20,112
$ 60,758
$ 46,453
 
Units shipped by business unit:
  Home Robots (in thousands)
355
229
761
456
  Government & Industrial
319
114
 
645
363
 
 
Government & Industrial Funded Backlog (in thousands)
$ 36,621
$ 35,770
 
$ 36,621
$ 35,770
 
 
Days sales outstanding
48
54
 
48
54
Inventory turnover
5.5
3.6
 
5.5
3.6
Net cash used in operating activities (in thousands)
$ (486)
$ (18,840)
 
$ (327)
$ (14,172)
Headcount
505
418
 
505
418

 

Contact:
Elise Caffrey
Investor Relations
iRobot Corp.
(781) 430-3003
ecaffrey@irobot.com
Nancy Smith
Media Relations
iRobot Corp.
(781) 430-3323
nsmith@irobot.com