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iRobot Reports Third-Quarter Financial Results
9% Revenue Growth Driven by Strong International Performance and Timing of U.S. Shipments

BEDFORD, Mass., Oct. 22, 2019 /PRNewswire/ -- iRobot Corp. (NASDAQ: IRBT), a leader in consumer robots, today announced its financial results for the third quarter ended September 28, 2019.

iRobot logo. (PRNewsfoto/iRobot Corp.)

"We delivered 9% total revenue growth primarily due to 25% international growth and a large shipment to a major U.S. retailer that was previously planned for the fourth quarter," said Colin Angle, chairman and chief executive officer of iRobot. "Higher revenue in combination with favorable gross margins and disciplined spending enabled us to deliver strong quarterly operating income and EPS. During the quarter, we executed our planned international product launches of the Roomba® s9 and Braava® jet m6 mop, made excellent progress with our manufacturing diversification initiative and began undertaking a series of strategic actions aimed at fortifying our robotic vacuum cleaner leadership."

Angle commented, "Despite the severity of U.S. tariffs on robotic vacuum cleaners, and the direct and indirect disruptions they are having on U.S. category growth, we remain committed to delivering exceptional value to consumers and are mobilizing accordingly. Although our third-quarter results were strong, sell-through following our late July price increases was suboptimal. Given this outcome and our belief that the RVC category was at a growth inflection point prior to tariffs, we elected to roll back our pricing to pre-tariff levels on most of our products. We believe this action, in combination with robust investment in R&D and our go-to-market activities, will help us defend our category leadership."

Angle concluded by saying, "Given our results and accomplishments to date, plans going forward and current market conditions, we have narrowed our full-year 2019 expectations. We now expect 2019 revenue between $1.2 to $1.21 billion on 10% to 11% growth, with an operating income between $75 million and $80 million, and EPS in the range of $2.60 to $2.80. We believe that the progress we've made thus far in 2019, combined with the initiatives now underway, will not only help us to bring 2019 to a successful conclusion but will also enhance our ability to drive long-term value creation. We move forward with confidence in our strategic direction and in our ability to capitalize on the many exciting opportunities we see ahead."

Financial Results

  • Revenue for the third quarter of 2019 was $289.4 million, compared with $264.5 million for the third quarter of 2018. Revenue for the first nine months of 2019 was $787.2 million, compared with $707.9 million in the same period last year.
  • Operating income in the third quarter of 2019 was $42.6 million, compared with $37.3 million in the third quarter of 2018. For the first nine months of 2019, operating income was $70.1 million versus $76.0 million in the comparable 2018 period.
  • Quarterly earnings per share were $1.24 for the third quarter of 2019, compared with $1.12 in the third quarter of 2018. Year-to-date earnings per share were $2.27, compared with $2.19 in the first nine months of 2018.

Q319 and Recent Business Highlights

  • Q3 revenue grew 25% internationally, highlighted by 27% growth in EMEA and 40% growth in Japan, more than offsetting a 7% decline in the U.S.
  • International product launches in Q3 included the Roomba® s9 vacuum and Braava jet® m6 mop in Europe and the m6 in Japan.
  • The Terra t7 robot mower beta trial in Germany is nearing completion, with U.S. beta trial now underway.
  • The company made continued progress with its manufacturing diversification initiatives.
    • Ahead of schedule for Malaysia facility, to be production ready in January 2020.
  • Former HP executive Keith Hartsfield joined iRobot in the newly-created position of chief product officer.
  • iRobot recently filed a motion for a preliminary injunction ordering SharkNinja Operating LLC and its related entities to halt its sales and distribution of its Shark IQ Robot™ based on infringement of certain iRobot patents related to the Roomba® i7+ robot vacuum with Clean Base™ Automatic Dirt Disposal.

Financial Expectations

Management provides the following expectations with respect to the fiscal year ending December 28, 2019.

Fiscal Year 2019:

Current

Previous




Revenue

$1.2 - $1.21 billion

$1.2 - $1.25 billion

Operating Income

$75 - $80 million

$75 - $100 million

Earnings Per Share

$2.60 - $2.80

$2.40 - $3.15

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 2019, business outlook, and outlook for fiscal year 2019 financial performance. Pertinent details include:

Date:   

Wednesday, October 23, 2019  

Time:  

8:30 a.m. ET

Call-In Number:

213-358-0894

Passcode:   

9667109

A live, audio broadcast of the conference call will also be available at https://investor.irobot.com/events/event-details/q3-2019-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 30, and can be accessed by dialing 404-537-3406, passcode 9667109.

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® Robot Vacuum in 2002. Today, iRobot is a global enterprise that has sold more than 25 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 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; growth and investment strategy; timing of completion of product trials; timing of our manufacturing diversification initiatives; and anticipated revenue, operating income, operating income margin and earnings per share for the fiscal year ending December 28, 2019. 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; the impact of tariffs on goods imported into the United States; 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.

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,
2019


September 29,
2018


September 28,
2019


September 29,
2018









Revenue

$        289,399


$        264,534


$         787,232


$          707,919

Cost of revenue:








Cost of product revenue

149,463


124,754


403,392


324,967

Amortization of acquired intangible assets

3,095


4,574


9,283


14,035

Total cost of revenue

152,558


129,328


412,675


339,002









Gross profit

136,841


135,206


374,557


368,917









Operating expenses:








Research and development

33,401


35,309


104,320


103,178

Selling and marketing

42,257


39,030


137,502


116,269

General and administrative

18,372


23,329


61,871


72,630

Amortization of acquired intangible assets

256


263


796


805

Total operating expenses

94,286


97,931


304,489


292,882









Operating income

42,555


37,275


70,068


76,035









Other income, net

900


337


3,713


2,363









Income before income taxes

43,455


37,612


73,781


78,398

Income tax expense

7,923


5,683


8,522


15,597

Net income

$           35,532


$            31,929


$           65,259


$            62,801









Net income per share:








Basic

$                1.26


$                1.16


$                2.33


$                2.27

Diluted

$                1.24


$                1.12


$                2.27


$                2.19









Number of shares used in per share calculations:







Basic

28,154


27,493


28,029


27,692

Diluted

28,650


28,506


28,759


28,629

















Stock-based compensation included in above figures:





Cost of revenue

$                 337


$                 347


$              1,120


$              1,035

Research and development

1,703


1,910


6,629


5,393

Selling and marketing

747


544


2,466


2,032

General and administrative

1,497


3,791


8,527


10,509

Total

$              4,284


$              6,592


$            18,742


$            18,969

 

 

iRobot Corporation

Condensed Consolidated Balance Sheets

(unaudited, in thousands)






September 28, 2019


December 29, 2018





Assets








Cash and cash equivalents

$                     70,542


$                  130,373

Short term investments

20,530


31,605

Accounts receivable, net

169,562


162,166

Inventory

248,303


164,633

Other current assets

39,112


25,660

Total current assets

548,049


514,437

Property and equipment, net

75,019


57,026

Operating lease right-of-use assets

48,948


-

Deferred tax assets

37,177


36,979

Goodwill

117,537


118,896

Intangible assets, net

14,931


24,273

Other assets

32,003


15,350

Total assets

$                    873,664


$                  766,961





Liabilities and stockholders' equity








Accounts payable

$                    108,331


$                  136,742

Accrued expenses

70,586


71,259

Deferred revenue and customer advances

4,902


5,756

Total current liabilities

183,819


213,757

Operating lease liabilities

56,341


-

Deferred tax liabilities

1,560


4,005

Other long-term liabilities

9,059


13,877

Total long-term liabilities

66,960


17,882

Total liabilities

250,779


231,639

Stockholders' equity

622,885


535,322

Total liabilities and stockholders' equity

$                    873,664


$                  766,961

 

 

iRobot Corporation

Consolidated Statements of Cash Flows

(unaudited, in thousands)










For the nine months ended


September 28,
2019


September 29,
2018

Cash flows from operating activities:




Net income

$             65,259


$             62,801

Adjustments to reconcile net income to net cash (used in) provided by operating
activities, net of the effects of acquisition:




Depreciation and amortization

27,744


27,000

Stock-based compensation

18,742


18,969

Deferred income taxes, net

(5,873)


(4,296)

Other

4,687


1,032

Changes in operating assets and liabilities — (use) source




Accounts receivable

(10,948)


31,930

Inventory

(83,863)


(54,619)

Other current assets

(8,155)


(18,418)

Accounts payable

(27,256)


(10,512)

Accrued expenses and other liabilities

(11,916)


(13,594)

Net cash (used in) provided by operating activities

(31,579)


40,293





Cash flows from investing activities:




Additions of property and equipment

(27,080)


(25,284)

Change in other assets

(5,336)


(2,263)

Proceeds from sale of equity investment

-


856

Cash paid for business acquisition, net of cash acquired

(2,817)


-

Purchases of investments

-


(6,438)

Sales and maturities of investments

9,380


10,500

Net cash used in investing activities

(25,853)


(22,629)





Cash flows from financing activities:




Proceeds from employee stock plans

4,981


7,948

Income tax withholding payment associated with restricted stock vesting

(7,277)


(3,532)

Stock repurchases

-


(50,000)

Net cash used in financing activities

(2,296)


(45,584)





Effect of exchange rate changes on cash and cash equivalents

(103)


(593)

Net decrease in cash and cash equivalents

(59,831)


(28,513)

Cash and cash equivalents, at beginning of period

130,373


128,635

Cash and cash equivalents, at end of period

$             70,542


$           100,122

 

 

iRobot Corporation

Supplemental Information

(unaudited)


















For the three months ended


For the nine months ended


September 28,
2019


September 29,
2018


September 28,
2019


September 29,
2018

Revenue: *
















Consumer

$           289,399


$           264,534


$           787,232


$           707,919









Domestic

$           117,929


$           127,240


$           356,466


$           345,628

International

$           171,470


$           137,294


$           430,766


$           362,291









Gross margin

47.3 %


51.1 %


47.6 %


52.1 %









Consumer units shipped*

1,131


1,087


3,081


2,855

Vacuum

975


942


2,674


2,473

Mopping

156


145


407


382









Consumer revenue**

$                  289


$                  265


$                  787


$                  708

Vacuum***

$                  257


$                  242


$                  715


$                  647

Mopping***

$                    32


$                    23


$                    72


$                    61









Average gross selling prices for robot units - Consumer

$                  305


$                  276


$                  306


$                  289









Days sales outstanding

53


38


-


-









Days in inventory

149


113


-


-









Headcount

1,132


1,003


-


-

















* in thousands








** in millions








*** includes accessory revenue








 

iRobot Corporation
Explanation of Non-GAAP Measures

In addition to disclosing financial results in accordance with U.S. GAAP, this earnings release contains references to the non-GAAP financial measures described below. We use non-GAAP measures to internally evaluate and analyze financial results. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and enable comparison of our financial results with other public companies, many of which present similar non-GAAP financial measures.

Our non-GAAP financial measures reflect adjustments based on the following items. We also provide a non-GAAP financial measure of Adjusted EBITDA, as described below. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated.

Amortization of acquired intangible assets: Amortization of acquired intangible assets consists of amortization of intangible assets including completed technology, customer relationships, and reacquired distribution rights acquired in connection with business combinations. Amortization charges for our acquisition-related intangible assets are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions. We exclude these charges from our non-GAAP measures to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.

Net Merger, Acquisition and Divestiture (Income) Expense: Net merger, acquisition and divestiture (income) expense primarily consists of transaction fees, professional fees, and transition and integration costs directly associated with mergers, acquisitions and divestitures. The occurrence and amount of these costs will vary depending on the timing and size of these transactions. We exclude these charges from our non-GAAP measures to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.

Stock-Based Compensation: Stock-based compensation is a non-cash charge relating to stock-based awards. We exclude this expense as it is a non-cash expense, and we assess our internal operations excluding this expense and believe it facilitates comparisons to the performance of other companies.

IP Litigation Expense, Net: IP litigation expense, net relates to legal costs incurred to litigate patent, trademark, copyright and false advertising infringements, or to oppose or defend against interparty actions related to intellectual property. Any settlement payment or proceeds resulting from these infringements are included or netted against the costs. We exclude these costs from our non-GAAP measures as we do not believe these costs have a direct correlation to the operations of our business and may vary in size depending on the timing and results of such litigations and settlements.

Gain/Loss on Strategic Investments: Gain/loss on strategic investments includes fair value adjustments, realized gains and losses on the sales of these investments and losses on the impairment of these investments. We exclude these items from our non-GAAP measures because we do not believe they correlate to the performance of our core business and may vary in size based on market conditions and events. We believe that the exclusion of these gains or losses provides investors with a supplemental view of our operational performance.

Income tax adjustments: Income tax adjustments include the tax effect of the non-GAAP adjustments, calculated using the appropriate statutory tax rate for each adjustment. We also exclude certain tax items that are not reflective of income tax expense incurred as a result of current period earnings. These certain tax items include, among other non-recurring tax items, impacts from the Tax Cuts and Jobs Act of 2017 and stock-based compensation windfall benefits. We believe disclosure of the income tax provision before the effect of such tax items is important to permit investors' consistent earnings comparison between periods.

Adjusted EBITDA:  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, net intellectual property litigation expense, and restructuring expense. Management believes this non-GAAP measure is frequently used by securities analysts, investors and other interested parties as a measure of financial performance.

iRobot Corporation

Supplemental Reconciliation of GAAP Net Income to Adjusted EBITDA

(unaudited, in thousands)


















For the three months ended


For the nine months ended


September 28,
2019


September 29,
2018


September 28,
2019


September 29,
2018

GAAP Net Income

$             35,532


$             31,929


$             65,259


$             62,801









Interest income, net

(557)


(201)


(2,087)


(695)

Income tax expense

7,923


5,683


8,522


15,597

Depreciation

6,488


4,557


17,665


12,160

Amortization of acquired intangible assets

3,351


4,837


10,079


14,840









EBITDA

52,737


46,805


99,438


104,703

















Stock-based compensation

4,284


6,592


18,742


18,969

Net merger, acquisition and divestiture (income) expense

32


-


328


23

IP litigation expense, net

(157)


187


(365)


3,517









Adjusted EBITDA

$             56,896


$             53,584


$           118,143


$           127,212

Adjusted EBITDA as a % of revenue

19.7 %


20.3 %


15.0 %


18.0 %

 

iRobot Corporation

Supplemental Reconciliation of GAAP Actuals to Non-GAAP Actuals

(in thousands, except per share amounts)

(unaudited)
















For the three months ended


For the nine months ended


September 28, 2019


September 29, 2018


September 28, 2019


September 29, 2018

GAAP Revenue

$                 289,399


$                  264,534


$                     787,232


$                707,919









GAAP Gross Profit

$                 136,841


$                  135,206


$                     374,557


$                368,917

Amortization of acquired intangible assets

3,095


4,574


9,283


14,035

Stock-based compensation

337


347


1,120


1,035

Non-GAAP Gross Profit

$                 140,273


$                  140,127


$                     384,960


$                383,987









GAAP Operating Income

$                   42,555


$                    37,275


$                       70,068


$                  76,035

Amortization of acquired intangible assets

3,351


4,837


10,079


14,840

Stock-based compensation

4,284


6,592


18,742


18,969

Net merger, acquisition and divestiture (income) expense

32


-


328


23

IP litigation expense, net

(157)


187


(365)


3,517

Non-GAAP Operating Income

$                   50,065


$                    48,891


$                       98,852


$                113,384









GAAP Income Tax Expense

$                     7,923


$                      5,683


$                         8,522


$                  15,597

Tax effect of non-GAAP adjustments

(132)


2,835


3,490


9,005

Other tax adjustments

133


2,667


5,660


939

Non-GAAP Income Tax Expense

$                     7,924


$                    11,185


$                       17,672


$                  25,541









GAAP Net Income

$                   35,532


$                    31,929


$                       65,259


$                  62,801

Amortization of acquired intangible assets

3,351


4,837


10,079


14,840

Stock-based compensation

4,284


6,592


18,742


18,969

Net merger, acquisition and divestiture (income) expense

32


-


328


23

IP litigation expense, net

(157)


187


(365)


3,517

(Gain)/loss on strategic investments

-


26


(572)


(375)

Income tax effect

(1)


(5,502)


(9,150)


(9,944)

Non-GAAP Net Income

$                   43,041


$                    38,069


$                       84,321


$                  89,831









GAAP Net Income Per Diluted Share

$                       1.24


$                        1.12


$                           2.27


$                      2.19

Amortization of acquired intangible assets

0.12


0.17


0.35


0.52

Stock-based compensation

0.15


0.23


0.65


0.66

Net merger, acquisition and divestiture (income) expense

-


-


0.01


-

IP litigation expense, net

(0.01)


0.01


(0.01)


0.12

(Gain)/loss on strategic investments

-


-


(0.02)


-

Income tax effect

-


(0.19)


(0.32)


(0.35)

Non-GAAP Net Income Per Diluted Share

$                       1.50


$                        1.34


$                           2.93


$                      3.14

 

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SOURCE iRobot Corp.

Andrew Kramer, Investor Relations, iRobot Corp., (781) 430-3003, akramer@irobot.com; Matthew Lloyd, Media Relations, iRobot Corp., (781) 430-3720, mlloyd@irobot.com