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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________ 
FORM 10-Q
 ______________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED July 2, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM              TO             
COMMISSION FILE NUMBER 001-36414
______________________________________________ 
iROBOT CORPORATION
(Exact name of registrant as specified in its charter)
 ______________________________________________
Delaware77-0259335
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
8 Crosby Drive
Bedford, MA 01730
(Address of principal executive offices, including zip code)

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueIRBTThe Nasdaq Stock Market LLC
______________________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
        

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
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. o    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x 
The number of shares outstanding of the Registrant’s Common Stock as of July 29, 2022 was 27,229,605.
        



iROBOT CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JULY 2, 2022
INDEX
 Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
2





iROBOT CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
July 2, 2022January 1, 2022
ASSETS
Current assets:
Cash and cash equivalents$63,409 $201,457 
Short-term investments 33,044 
Accounts receivable, net87,766 160,642 
Inventory397,012 333,296 
Other current assets111,654 61,094 
   Total current assets659,841 789,533 
Property and equipment, net69,294 78,887 
Operating lease right-of-use assets29,875 37,609 
Deferred tax assets62,698 37,945 
Goodwill164,869 173,292 
Intangible assets, net24,072 28,410 
Other assets59,312 38,753 
   Total assets$1,069,961 $1,184,429 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$192,388 $251,298 
Accrued expenses91,084 132,618 
Deferred revenue and customer advances13,645 11,767 
Short-term notes payable35,000  
   Total current liabilities332,117 395,683 
Operating lease liabilities35,066 43,462 
Deferred tax liabilities2,904 3,250 
Other long-term liabilities23,098 25,311 
   Total long-term liabilities61,068 72,023 
   Total liabilities393,185 467,706 
Commitments and contingencies (Note 10)
Preferred stock, 5,000 shares authorized and none outstanding
  
Common stock, $0.01 par value, 100,000 shares authorized; 27,229 and 27,006 shares issued and outstanding, respectively
272 270 
Additional paid-in capital239,369 222,653 
Retained earnings411,883 485,710 
Accumulated other comprehensive income25,252 8,090 
   Total stockholders’ equity676,776 716,723 
   Total liabilities and stockholders’ equity$1,069,961 $1,184,429 
The accompanying notes are an integral part of the consolidated financial statements.
3



iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
 Three Months EndedSix Months Ended
 July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Revenue$255,351 $365,596 $547,320 $668,857 
Cost of revenue:
Cost of product revenue173,531 226,395 357,164 406,487 
Amortization of acquired intangible assets875 225 1,696 450 
Total cost of revenue
174,406 226,620 358,860 406,937 
Gross profit80,945 138,976 188,460 261,920 
Operating expenses:
Research and development41,937 38,677 84,466 80,597 
Selling and marketing76,017 76,677 137,082 127,668 
General and administrative26,380 26,459 53,078 49,899 
Amortization of acquired intangible assets525 205 1,035 409 
Total operating expenses144,859 142,018 275,661 258,573 
Operating (loss) income(63,914)(3,042)(87,201)3,347 
Other expense, net(2,182)(286)(18,928)(446)
(Loss) income before income taxes(66,096)(3,328)(106,129)2,901 
Income tax benefit(22,675)(570)(32,302)(1,784)
Net (loss) income$(43,421)$(2,758)$(73,827)$4,685 
Net (loss) income per share:
Basic$(1.60)$(0.10)$(2.72)$0.17 
Diluted$(1.60)$(0.10)$(2.72)$0.16 
Number of shares used in per share calculations:
Basic27,161 28,100 27,106 28,178 
Diluted27,161 28,100 27,106 28,908 
The accompanying notes are an integral part of the consolidated financial statements.
4



iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
(unaudited)
 
 Three Months EndedSix Months Ended
 July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Net (loss) income$(43,421)$(2,758)$(73,827)$4,685 
Other comprehensive income:
Net foreign currency translation adjustments(7,360)1,114 (11,375)(4,769)
Net unrealized gains (losses) on cash flow hedges, net of tax24,934 (36)32,587 12,932 
Net gains on cash flow hedge reclassified into earnings, net of tax(2,816)(932)(4,050)(542)
Net unrealized gains on marketable securities, net of tax   (4)
Total comprehensive (loss) income$(28,663)$(2,612)$(56,665)$12,302 
The accompanying notes are an integral part of the consolidated financial statements.
5



iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated Other Comprehensive Income ("AOCI")Total Stockholders’
Equity
SharesValue
Balance at April 2, 202227,116 $271 $229,133 $455,304 $10,494 $695,202 
Issuance of common stock under employee stock plans61 1 2,290 2,291 
Vesting of restricted stock units54    
Stock-based compensation8,023 8,023 
Stock withheld to cover tax withholdings requirements upon restricted stock vesting(2) (77)(77)
Other comprehensive income14,758 14,758 
Net loss(43,421)(43,421)
Balance at July 2, 202227,229 $272 $239,369 $411,883 $25,252 $676,776 
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income ("AOCI")
Total Stockholders’
Equity
SharesValue
Balance at January 1, 202227,006 $270 $222,653 $485,710 $8,090 $716,723 
Issuance of common stock under employee stock plans84 1 3,087 3,088 
Vesting of restricted stock units166 1 (1) 
Stock-based compensation15,231 15,231 
Stock withheld to cover tax withholdings requirements upon restricted stock vesting(27) (1,601)(1,601)
Other comprehensive income17,162 17,162 
Net loss(73,827)(73,827)
Balance at July 2, 202227,229 $272 $239,369 $411,883 $25,252 $676,776 
The accompanying notes are an integral part of the consolidated financial statements.

















6



iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income ("AOCI")
Total Stockholders’
Equity
SharesValue
Balance at April 3, 202128,395 $284 $209,890 $606,832 $6,978 $823,984 
Issuance of common stock under employee stock plans54 1 2,541 2,542 
Vesting of restricted stock units48    
Stock-based compensation7,340 7,340 
Stock withheld to cover tax withholdings requirements upon restricted stock vesting  (43)(43)
Other comprehensive income146 146 
Directors' deferred compensation21 21 
Stock repurchases(447)(4)(3,374)$(46,622)(50,000)
Net loss(2,758)(2,758)
Balance at July 3, 202128,050 $281 $216,375 $557,452 $7,124 $781,232 
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss) ("AOCI")
Total Stockholders’ Equity
SharesValue
Balance at January 2, 202128,184 $282 $205,256 $599,389 $(493)$804,434 
Issuance of common stock under employee stock plans121 1 5,130 5,131 
Vesting of restricted stock units233 2 (2) 
Stock-based compensation14,122 14,122 
Stock withheld to cover tax withholdings requirements upon restricted stock vesting(41) (4,799)(4,799)
Other comprehensive income7,617 7,617 
Directors' deferred compensation42 42 
Stock repurchases(447)(4)(3,374)(46,622)(50,000)
Net income4,685 4,685 
Balance at July 3, 202128,050 $281 $216,375 $557,452 $7,124 $781,232 
The accompanying notes are an integral part of the consolidated financial statements.
7



iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Six Months Ended
 July 2, 2022July 3, 2021
Cash flows from operating activities:
Net (loss) income$(73,827)$4,685 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities, net of the effects of acquisition:
Depreciation and amortization19,715 15,635 
Loss on equity investment18,814  
Stock-based compensation15,231 14,122 
Deferred income taxes, net(35,467)210 
Other 2,844 3,286 
Changes in operating assets and liabilities — (use) source
Accounts receivable70,372 94,477 
Inventory(70,400)(94,918)
Other assets(31,657)(7,554)
Accounts payable(58,520)2,071 
Accrued expenses and other liabilities(43,617)(30,215)
Net cash (used in) provided by operating activities(186,512)1,799 
Cash flows from investing activities:
Additions of property and equipment(4,894)(21,924)
Purchase of investments(3,090)(9,606)
Sales and maturities of investments17,383 63,644 
Net cash provided by investing activities9,399 32,114 
Cash flows from financing activities:
Proceeds from employee stock plans3,088 5,131 
Income tax withholding payment associated with restricted stock vesting(1,601)(4,799)
Stock repurchases (50,000)
Proceeds from borrowings35,000  
Net cash provided by (used in) financing activities36,487 (49,668)
Effect of exchange rate changes on cash and cash equivalents2,578 (1,039)
Net decrease in cash and cash equivalents(138,048)(16,794)
Cash and cash equivalents, at beginning of period201,457 432,635 
Cash and cash equivalents, at end of period$63,409 $415,841 
The accompanying notes are an integral part of the consolidated financial statements.
8



iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Description of Business
iRobot Corporation ("iRobot" or the "Company") designs, builds and sells robots and home innovations that make life better. The Company's portfolio of home robots and smart home devices features proprietary technologies for the connected home and advanced concepts in cleaning, mapping and navigation, human-robot interaction and physical solutions. iRobot's durable and high-performing robots are designed using the close integration of software, electronics and hardware. The Company’s revenue is primarily generated from product sales through a variety of distribution channels, including chain stores and other national retailers, through the Company's own website and app, dedicated e-commerce websites, the online arms of traditional retailers and through value-added distributors and resellers worldwide.
Merger Agreement
On August 4, 2022, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") by and among the Company, Amazon.com, Inc., a Delaware corporation ("Parent" or "Amazon") and Martin Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), pursuant to which Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Parent. As a result of the Merger, each share of common stock of the Company, par value $0.01 per share ("Common Stock"), outstanding immediately prior to the effective time of the Merger (the "Effective Time") (subject to certain exceptions, including shares of Common Stock owned by the Company, Merger Sub, Parent or any of their respective direct or indirect wholly owned subsidiaries and shares of Common Stock owned by stockholders of the Company who have validly demanded and not withdrawn appraisal rights in accordance with Section 262 of the General Corporation Law of the State of Delaware) will, at the Effective Time, automatically be cancelled and converted into the right to receive $61.00 in cash, without interest and subject to applicable withholding taxes. If the Merger is consummated, the Company’s Common Stock will be delisted from the Nasdaq Stock Market LLC and deregistered under the Securities Exchange Act of 1934.
2. Summary of Significant Accounting Policies
Basis of Presentation and Foreign Currency Translation
The accompanying consolidated financial statements include those of iRobot and its subsidiaries, after elimination of all intercompany balances and transactions. iRobot has prepared the accompanying unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP").
In the opinion of management, all adjustments necessary to the unaudited interim consolidated financial statements have been made to state fairly the Company's financial position. Interim results are not necessarily indicative of results for the full fiscal year or any future periods. The information included in this Form 10-Q should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the fiscal year ended January 1, 2022, filed with the Securities and Exchange Commission on February 15, 2022.
The Company operates and reports using a 52-53 week fiscal year ending on the Saturday closest to December 31. Accordingly, the Company’s fiscal quarters end on the Saturday that falls closest to the last day of the third month of each quarter.
Recently Issued Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that recently issued standards, which are not yet effective, will not have a material impact on the Company’s consolidated financial statements upon adoption.
Use of Estimates
The preparation of these financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses. These estimates and judgments, include but are not limited to, revenue recognition, including performance obligations, standalone selling price, variable consideration and other obligations such as sales incentives and product returns; allowance for credit losses; accounting for business combinations; impairment of goodwill and long-lived assets; valuation of non-marketable equity investments; product warranties; loss contingencies; accounting for stock-based compensation including performance-based assessments; and accounting for income taxes and related valuation allowances. The Company bases its estimates and assumptions on historical experience, market participant fair value considerations, projected future cash flows, current economic conditions, including impact from COVID-19 pandemic and the uncertainty imposed by the conflict between Russia and Ukraine, and various other
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factors that the Company believes are reasonable under the circumstances. Actual results and outcomes may differ from the Company’s estimates and assumptions.
Short-Term Investments
The Company's short term investments include marketable equity securities with readily determinable fair value and debt securities. The fair value of investments is determined based on quoted market prices at the reporting date for those instruments. The change in fair value of the Company's investments in marketable equity securities is recognized as unrealized gains and losses in other expense, net at the end of each reporting period.
As of January 1, 2022, the Company had $33.0 million in short term investments made up of 1.6 million shares of Matterport, Inc. ("Matterport") from the Matterport merger in 2021 with shares received subject to time based contractual sales restrictions that expired in January 2022. During the first quarter of 2022, the Company sold these Matterport shares and received net proceeds of $16.2 million. In addition, during the first quarter of 2022, the Company received an additional 0.2 million shares of Matterport upon achievement of conditions set forth in the merger agreement. During the three months ended July 2, 2022, the Company sold the remaining Matterport shares and received net proceeds of $1.2 million. During the three and six months ended July 2, 2022, the Company recognized losses of $0.3 million and $17.1 million, respectively, in other expense, net related to the sales of these shares. As of July 2, 2022, the Company did not have any short term investments.
Allowance for Credit Losses
The Company maintains an allowance for credit losses for accounts receivable using an expected loss model that requires the use of forward-looking information to calculate credit loss estimate. The expected loss methodology is developed through consideration of factors including, but not limited to, historical collection experience, current customer credit ratings, customer concentrations, current and future economic and market conditions and age of the receivable. As of July 2, 2022 and January 1, 2022, the Company had an allowance for credit losses of $6.4 million and $4.6 million, respectively.
Tariff Refunds
On March 23, 2022, the Company was granted a temporary exclusion from Section 301 List 3 tariffs by the United States Trade Representative ("USTR"). This exclusion eliminates the 25% tariff on Roomba products imported from China beginning on October 12, 2021 and continuing until December 31, 2022. As of July 2, 2022, this tariff exclusion entitles the Company to a refund of approximately $32.0 million in tariffs paid. During the first quarter of 2022, the Company recognized $11.7 million of refunds as operating income (reduction to cost of product revenue) related to tariffs paid on Roomba robots imported after October 12, 2021 and sold during fiscal 2021. While tariff refund claims are subject to the approval of U.S. Customs, the Company currently expects to recover the entire balance of $32.0 million within the next twelve months. The refund receivable is recorded in other current assets on the consolidated balance sheet.
Inventory
Inventory primarily consists of finished goods and, to a lesser extent, components, which are purchased from contract manufacturers. Inventory is stated at the lower of cost or net realizable value with cost being determined using the standard cost method, which approximates actual costs determined on the first-in, first-out basis. Inventory costs primarily consist of materials, inbound freight, import duties, tariffs, and other handling fees. The Company writes down its inventory for estimated obsolescence or excess inventory based upon assumptions around market conditions and estimates of future demand. Net realizable value is the estimated selling price less estimated costs of completion, disposal and transportation. Adjustments to reduce inventory to net realizable value are recognized in cost of revenue and have not been significant for the periods presented.
Strategic Investments
The Company holds non-marketable equity securities as part of its strategic investments portfolio. The Company classifies the majority of these securities as equity securities without readily determinable fair values and measures these investments at cost, less any impairment, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. These investments are valued using significant unobservable inputs or data in an inactive market and the valuation requires the Company's judgment due to the absence of market prices and inherent lack of liquidity. The Company monitors non-marketable equity investments for impairment indicators, such as deterioration in the investee's financial condition and business forecasts and lower valuations in recent or proposed financings. The estimated fair value is based on quantitative and qualitative factors including, but not limited to, subsequent financing activities by the investee and projected discounted cash flows. Changes in fair value of non-marketable equity investments are recorded in other expense, net on the consolidated statement of operations. At July 2, 2022 and January 1, 2022, the Company's equity securities without readily determinable fair values totaled $16.2 million and $16.3 million, respectively, and are included in other assets on the consolidated balance sheets.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Net (Loss) Income Per Share
Basic income per share is calculated using the Company's weighted-average outstanding shares of common stock. Diluted income per share is calculated using the Company's weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method.
The following table presents the calculation of both basic and diluted net (loss) income per share (in thousands, except per share amounts): 
 Three Months EndedSix Months Ended
 July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Net (loss) income$(43,421)$(2,758)$(73,827)$4,685 
Basic weighted-average common shares outstanding27,161 28,100 27,106 28,178 
Dilutive effect of employee stock awards   730 
Diluted weighted-average common shares outstanding27,161 28,100 27,106 28,908 
Net (loss) income per share - Basic$(1.60)$(0.10)$(2.72)$0.17 
Net (loss) income per share - Diluted$(1.60)$(0.10)$(2.72)$0.16 
Employee stock awards representing approximately 1.3 million and 0.8 million shares of common stock for the three months ended July 2, 2022 and July 3, 2021, and approximately 1.0 million and 0.1 million shares of common stock for the six months ended July 2, 2022 and July 3, 2021, respectively, were excluded from the computation of diluted earnings per share as their effect would have been antidilutive.

3. Revenue Recognition
The Company primarily derives its revenue from the sale of consumer robots and accessories. The Company sells products directly to consumers through online stores and indirectly through resellers and distributors. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenue is allocated to distinct performance obligations and is recognized net of allowances for returns and other credits and incentives. Revenue is recognized only to the extent that it is probable that a significant reversal of revenue will not occur and when collection is considered probable. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from revenue. Shipping and handling expenses are considered fulfillment activities and are expensed as incurred.
Frequently, the Company’s contracts with customers contain multiple promised goods or services. Such contracts may include any of the following, the consumer robot, downloadable app, cloud services, accessories on demand, potential future unspecified software upgrades, premium customer care and extended warranties. For these contracts, the Company accounts for the promises separately as individual performance obligations if they are distinct. Performance obligations are considered distinct if they are both capable of being distinct and distinct within the context of the contract. In determining whether performance obligations meet the criteria for being distinct, the Company considers a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract. The Company’s consumer robots are highly dependent on, and interrelated with, the embedded software and cannot function without the software. As such, the consumer robots are accounted for as a single performance obligation. The Company has determined that the app, cloud services and potential future unspecified software upgrades represent one performance obligation to the customer to enhance the functionality and interaction with the robot (referred to collectively as "Cloud Services"). Other services and support are considered distinct and therefore are treated as separate performance obligations.
The Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices ("SSPs"). When available, the Company uses observable prices to determine SSPs. When observable prices are not available, SSPs are established that reflect the Company’s best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. The Company’s process for estimating SSPs without observable prices considers multiple factors that may vary depending upon the facts and circumstances related to each performance obligation including, market data or the estimated cost of providing the products or services. The transaction price allocated to the robot is recognized as revenue at a point in time when control is transferred, generally as title and risk of loss pass, and when collection is considered probable. The transaction price allocated to the Cloud Services is deferred and recognized on a straight-line basis over the estimated term of the Cloud Services. Other services and support are recognized over their service periods. For contracts with a duration of greater than one year, the transaction price allocated to performance obligations that are unsatisfied as of July 2, 2022 and January 1, 2022 was $21.3 million and $20.9 million, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company’s products generally carry a one-year or two-year limited warranty that promises customers that delivered products are as specified. The Company does not consider these assurance-type warranties as a separate performance obligation and therefore, the Company accounts for such warranties under ASC 460, "Guarantees." For contracts with the right to upgrade to a new product after a specified period of time, the Company accounts for this trade-in right as a guarantee obligation under ASC 460. The total transaction price is reduced by the full amount of the trade-in right's fair value and the remaining transaction price is allocated between the performance obligations within the contract.
The Company provides limited rights of returns for direct-to-consumer sales generated through its online stores and certain resellers and distributors. The Company records an allowance for product returns based on specific terms and conditions included in the customer agreements or based on historical experience and the Company's expectation of future returns. In addition, the Company may provide other credits or incentives which are accounted for as variable consideration when estimating the amount of revenue to recognize. Where appropriate, these estimates take into consideration relevant factors such as the Company’s historical experience, current contractual requirements, specific known market events and forecasted inventory level in the channels. Overall, these reserves reflect the Company’s best estimates, and the actual amounts of consideration ultimately received may differ from the Company’s estimates. Returns and credits are estimated at the time of sale and updated at the end of each reporting period as additional information becomes available. As of July 2, 2022, the Company had reserves for product returns of $42.8 million and other credits and incentives of $64.3 million. As of January 1, 2022, the Company had reserves for product returns of $56.8 million and other credits and incentives of $101.6 million. The Company regularly evaluates the adequacy of its estimates for product returns and other credits and incentives. Future market conditions and product transitions may require the Company to take action to change such programs and related estimates. When the variables used to estimate these reserves change, or if actual results differ significantly from the estimates, the Company increases or reduces revenue to reflect the impact. During the three and six months ended July 2, 2022 and July 3, 2021, changes to these estimates related to performance obligations satisfied in prior periods were not material.
Disaggregation of Revenue
The following table provides information about disaggregated revenue by geographical region (in thousands):
Three Months EndedSix Months Ended
July 2, 2022July 3, 2021July 2, 2022July 3, 2021
United States$139,377 $196,824 $292,551 $311,596 
EMEA55,922 91,559 121,583 207,790 
Japan38,929 47,254 89,450 87,829 
Other21,123 29,959 43,736 61,642 
Total revenue$255,351 $365,596 $547,320 $668,857 
Contract Balances
The following table provides information about receivables and contract liabilities from contracts with customers (in thousands):
July 2, 2022January 1, 2022
Accounts receivable, net$81,318 $155,659 
Unbilled receivables8,799 8,747 
Contract liabilities24,062 22,996 
The Company invoices customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. Unbilled receivables represent revenue and trade-in liability recognized in excess of billings. Contract liabilities include deferred revenue associated with the Cloud Services and extended warranty plans as well as prepayments received from customers in advance of product shipments. During the three months ended July 2, 2022 and July 3, 2021, the Company recognized $5.8 million and $3.4 million, respectively, of the contract liability balance as revenue upon transfer of the products or services to customers. During the six months ended July 2, 2022 and July 3, 2021, the Company recognized $7.6 million and $8.9 million, respectively, of the contract liability balance as revenue upon transfer of the product or services to customers.

4. Leases
The Company's leasing arrangements primarily consist of operating leases for its facilities which include corporate, sales and marketing and research and development offices and equipment under various non-cancelable lease arrangements. The operating leases expire at various dates through 2030.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The components of lease expense were as follows (in thousands):
Three Months EndedSix Months Ended
July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Operating lease cost$2,163 $2,147 $3,014 $4,134 
Variable lease cost1,010 1,033 1,928 1,928 
Total lease cost$3,173 $3,180 $4,942 $6,062 
Supplemental cash flow information related to leases was as follows (in thousands):
Three Months EndedSix Months Ended
July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$1,995 $2,100 $4,034 $4,379 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$ $ $ $ 
At July 2, 2022, the Company's weighted average discount rate was 4.01%, while the weighted average remaining lease term was 7.16 years.
Maturities of operating lease liabilities were as follows as of July 2, 2022 (in thousands):
Remainder of 2022$3,582 
20237,315 
20246,034 
20255,781 
20265,806 
Thereafter18,930 
Total minimum lease payments$47,448 
Less: imputed interest6,291 
Present value of future minimum lease payments$41,157 
Less: current portion of operating lease liabilities (Note 6)$6,091 
Long-term lease liabilities$35,066 

5. Goodwill and Other Intangible Assets
The following table summarizes the activity in the carrying amount of goodwill and intangible assets for the six months ended July 2, 2022 (in thousands):
GoodwillIntangible assets
Balance as of January 1, 2022$173,292 $28,410 
Purchase accounting adjustments(583) 
Amortization— (2,731)
Effect of foreign currency translation(7,840)(1,607)
Balance as of July 2, 2022$164,869 $24,072 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
6. Accrued Expenses
Accrued expenses consisted of the following at (in thousands):
July 2, 2022January 1, 2022
Accrued warranty$26,814 $32,019 
Accrued compensation and benefits20,713 19,029 
Current portion of operating lease liabilities6,091 6,220 
Accrued manufacturing and logistics cost6,083 23,038 
Derivative liability5,593 2,600 
Accrued sales and other indirect taxes payable3,830 9,599 
Accrued bonus3,493 11,375 
Accrued income taxes1,665 1,788 
Accrued other16,802 26,950 
$91,084 $132,618 

7. Working Capital Facility
Credit Facility
The Company has a $150.0 million unsecured revolving line of credit which expires in June 2023. On May 4, 2022, the Company entered into a Second Amendment to the Amended and Restated Credit Agreement (the "Credit Agreement") with Bank of America N.A. (the "Amendment") with an effective date of March 31, 2022. The Amendment waives the quarterly tested leverage and interest coverage covenants in the Credit Agreement for the first, second and third quarters of 2022. The interest coverage ratio calculation for the fourth quarter of 2022 was changed to a trailing nine months. Additionally, a new liquidity covenant was added for all of fiscal 2022. The Amendment also increases the borrowing rate under the facility for 2022 to LIBOR plus 1.5%.
During the three months ended July 2, 2022, the Company had borrowings of $35.0 million under the revolving credit facility, with $115.0 million available for borrowing at July 2, 2022. As of July 2, 2022, the Company was in compliance with the covenants under the Credit Agreement.

8. Derivative Instruments and Hedging Activities
The Company enters into derivative instruments that are designated as cash flow hedges to reduce its exposure to foreign currency exchange risk in sales. These contracts typically have maturities of three years or less. At July 2, 2022 and January 1, 2022, the Company had outstanding cash flow hedges with a total notional value of $509.2 million and $423.3 million, respectively.
The Company also enters into economic hedges that are not designated as hedges from an accounting standpoint to reduce foreign currency exchange risk related to short term trade receivables and payables. These contracts typically have maturities of twelve months or less. At July 2, 2022 and January 1, 2022, the Company had outstanding foreign currency economic hedges with a total notional value of $305.2 million and $325.4 million, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The fair values of derivative instruments were as follows (in thousands):
Fair Value
ClassificationJuly 2, 2022January 1, 2022
Derivatives not designated as hedging instruments:
Foreign currency forward contractsOther current assets$15,306 $8,362 
Foreign currency forward contractsOther assets847 1,627 
Foreign currency forward contractsAccrued expenses5,593 2,377 
Derivatives designated as cash flow hedges:
Foreign currency forward contractsOther current assets$18,211 $4,110 
Foreign currency forward contractsOther assets30,477 9,610 
Foreign currency forward contractsAccrued expenses 223 
Foreign currency forward contractsLong-term liabilities 407 

Gain (loss) associated with derivative instruments not designated as hedging instruments were as follows (in thousands):
Three Months EndedSix Months Ended
ClassificationJuly 2, 2022July 3, 2021July 2, 2022July 3, 2021
Gain (loss) recognized in incomeOther expense, net$4,168 $391 $6,232 $(9,623)

The following tables reflect the effect of derivatives designated as cash flow hedging (in thousands): 
Gain (loss) recognized in OCI on Derivative (1)
Three Months EndedSix Months Ended
July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Foreign currency forward contracts$33,204 $(47)$43,461 $17,107 
(1)The amount represents the change in fair value of derivative contracts due to changes in spot rates.
Gain recognized in earnings on cash flow hedging instruments
Three Months EndedSix Months Ended
July 2, 2022July 3, 2021July 2, 2022July 3, 2021
RevenueRevenue
Consolidated statements of operations in which the effects of cash flow hedging instruments are recorded$255,351 $365,596 $547,320 $668,857 
Gain on cash flow hedging relationships:
Foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings$3,742 $1,231 $5,381 $717 

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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
9. Fair Value Measurements
The Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):
 Fair Value Measurements as of
July 2, 2022
Level 1Level 2 (1)Level 3
Assets:
Money market funds$2,113 $ $ 
Derivative instruments (Note 8) 64,841  
Total assets measured at fair value$2,113 $64,841 $ 
Liabilities:
Derivative instruments (Note 8)$ $5,593 $ 
Total liabilities measured at fair value$ $5,593 $ 
 Fair Value Measurements as of
January 1, 2022
 Level 1Level 2 (1)Level 3
Assets:
Money market funds$33,003 $ $ 
Marketable equity securities, $23,286 at cost
33,044   
Derivative instruments (Note 8) 23,709  
Total assets measured at fair value$66,047 $23,709 $ 
Liabilities:
Derivative instruments (Note 8)$ $3,007 $ 
Total liabilities measured at fair value$ $3,007 $ 
(1)Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

10. Commitments and Contingencies
Legal Proceedings
From time to time and in the ordinary course of business, the Company is subject to various claims, charges and litigation. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, which could materially affect our financial condition or results of operations.
Guarantees and Indemnification Obligations
The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses incurred by the indemnified party, generally the Company’s customers, in connection with any patent, copyright, trade secret or other proprietary right infringement claim by any third party. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company had no liabilities recorded for these agreements as of July 2, 2022 and January 1, 2022, respectively.
Warranty
The Company provides warranties on most products and has established a reserve for warranty obligations based on estimated warranty costs. The reserve is included as part of accrued expenses (Note 6) in the accompanying consolidated balance sheets.    
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Activity related to the warranty accrual was as follows (in thousands):
 Three Months EndedSix Months Ended
 July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Balance at beginning of period$30,239 $23,904 $32,019 $24,392 
Provision4,000 10,236 10,036 20,421 
Warranty usage(7,425)(9,422)(15,241)(20,095)
Balance at end of period$26,814 $24,718 $26,814 $24,718 

11. Income Taxes
Ordinarily, the Company’s interim provision for income taxes is determined using an estimate of the annual effective tax rate. The Company records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs, including discrete tax items. For the first quarter of 2022, the Company concluded that the estimated annual effective tax rate method would not provide a reliable estimate of the Company’s overall annual effective tax rate in light of the wide range of potential impacts on its business and results of operations from the ongoing global COVID-19 pandemic and evolving macroeconomic conditions and geopolitical events around the world, including heightened inflation, rising energy costs, slowing growth, reduced consumer confidence and the Russia-Ukraine war. Accordingly, the Company computed its interim provision for income taxes for the three months ended April 2, 2022 using the actual effective tax rate for the period. For the three months ended July 2, 2022, the Company determined that the ongoing external factors cited above had a less distortive impact on its estimated annual effective tax rate. Accordingly, the Company calculated its interim provision for income taxes for the six-month period ended July 2, 2022 using an estimate of the annual effective tax rate. The Company’s provision for income taxes for the three-month period ended July 2, 2022 reflects the change from using the actual effective rate in the first quarter of 2022 to using the estimated annual effective tax rate in the first half of 2022.
The Company recorded an income tax benefit of $22.7 million and $0.6 million for the three months ended July 2, 2022 and July 3, 2021, respectively. The $22.7 million income tax benefit for the three months ended July 2, 2022 resulted in an effective income tax rate of  34.3%. The $0.6 million income tax benefit for the three months ended July 3, 2021 resulted in an effective tax rate of 17.1%. The increase in the effective income tax rate was primarily driven by the change in the expected mix of geographic earnings and tax attributes during the three months ended July 2, 2022 as well as discrete tax expense recognized in the three months ended July 3, 2021.
The Company's 34.3% effective rate of income tax for the three months ended July 2, 2022 was higher than the federal statutory tax rate of 21% primarily because of the recognition of R&D credits and the benefit associated with Foreign-Derived Intangible Income.
The Company recorded an income tax benefit of $32.3 million and $1.8 million for the six months ended July 2, 2022 and July 3, 2021, respectively. The $32.3 million income tax benefit for the six months ended July 2, 2022 resulted in an effective tax rate of 30.4%. The $1.8 million income tax benefit for the six months ended July 3, 2021 resulted in an effective tax rate of (61.5)%. The change in the effective income tax rate was primarily due to the recognition of discrete tax benefits related to stock-based compensation during the six months ended July 3, 2021 compared to discrete tax expense during the current year.
The Company's effective income tax rate of 30.4% for the six months ended July 2, 2022 differed from the federal statutory tax rate of 21% primarily due to the recognition of R&D credits and the benefit associated with Foreign-Derived Intangible Income.
12. Industry Segment, Geographic Information and Significant Customers
The Company operates as one operating segment. The Company's consumer robots are offered to consumers through a variety of distribution channels, including chain stores and other national retailers, through the Company's own website and app, dedicated e-commerce websites, the online arms of traditional retailers, and through value-added distributors and resellers worldwide.
Significant Customers
For the three months ended July 2, 2022 and July 3, 2021, the Company generated 27.1% and 32.5%, respectively, of total revenue from one of its retailers.
For the six months ended July 2, 2022 and July 3, 2021, the Company generated 26.8% and 25.5%, respectively, of total revenue from one of its retailers.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
13. Stock-Based Compensation
Employee Stock Purchase Plan
In May 2017, the Company’s stockholders approved the 2017 Employee Stock Purchase Plan ("ESPP"). Eligible employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of six-month offering periods beginning November 15 and May 15 of each year. An employee’s payroll deductions under the ESPP are limited to 15% of the employee’s compensation, up to $4,000 each period, for the purchase of common stock not to exceed 1,000 shares per offering period. As of July 2, 2022, there were 452,345 shares reserved for future issuance under the ESPP. The current offering period under the ESPP is scheduled to close on November 15, 2022 unless the closing of the Merger occurs sooner (the "Final Offering"), and under the terms of the Merger Agreement, no additional offering period may be commenced. Each participant’s contributions under the ESPP shall be used to purchase shares of the Company’s common stock in accordance with the terms of the ESPP at the end of the Final Offering, and the Company will terminate the ESPP immediately prior to, but contingent upon the occurrence of, the closing of the Merger.
14. Subsequent Events
On August 3, 2022, the Company began implementing cost-reduction actions to manage its operating expenses and restructure its operations. As part of this restructuring, the Company is accelerating actions to shift certain non-core engineering functions to lower-cost regions and increasingly leverage its joint design manufacturing (JDM) partners; better balancing global and regional commercial and marketing resources to support go-to-market plans while driving efficiencies and achieving economies of scale; realigning other operational areas to best support current needs of the business; and reducing its global facilities footprint. These actions are expected to include an overall reduction of approximately 140 employees, which represents 10% of our workforce as of July 2, 2022. In conjunction with the workforce reduction, we expect to record restructuring charges totaling between $5 million and $6 million over the next two quarters with the majority of the restructuring charges anticipated in the third quarter of 2022.
On August 4, 2022, the Company entered into the Merger Agreement, by and among the Company, Parent and Merger Sub, pursuant to which Merger Sub will merge with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent. As a result of the Merger, each share of the Common Stock, outstanding immediately prior to the Effective Time (subject to certain exceptions, including shares of Common Stock owned by the Company, Merger Sub, Parent or any of their respective direct or indirect wholly owned subsidiaries and shares of Common Stock owned by stockholders of the Company who have validly demanded and not withdrawn appraisal rights in accordance with Section 262 of the General Corporation Law of the State of Delaware) will, at the Effective Time, automatically be cancelled and converted into the right to receive $61.00 in cash, without interest and subject to applicable withholding taxes. If the Merger is consummated, the Company’s Common Stock will be delisted from the Nasdaq Stock Market LLC and deregistered under the Securities Exchange Act of 1934. iRobot expects to incur professional fees and expenses of approximately $30.0 million that are contingent upon consummation of the Merger.
The Merger is conditioned upon, among other things, the approval of the Merger Agreement by the Company’s stockholders, the expiration of the applicable waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, certain other approvals, clearances or expirations of waiting periods under other antitrust laws and foreign investment laws, and other customary closing conditions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information contained in this section has been derived from our consolidated financial statements and should be read together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and are subject to the "safe harbor" created by those sections. In particular, statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including, but not limited to, statements concerning our pending acquisition by Amazon, expectations regarding the timing of the Merger, new product sales, product development and offerings, ability to address consumer needs, the expansion of our addressable market, factors for differentiation of our products, product integration plans, our consumer robots, our competition, our strategy, our market position, market acceptance of our products, seasonal factors, revenue recognition, our profits, growth of our revenues, composition of our revenues, our cost of revenues, units shipped, average selling prices, the impact of promotional activity and tariffs, the ability to recover tariff refund claims, operating expenses, selling and marketing expenses, general and administrative expenses, research and development expenses, and compensation costs, our projected income tax rate, our credit and letter of credit facilities, our valuations of investments, valuation and composition of our stock-based awards, efforts to mitigate supply chain challenges, availability of semiconductor chips, liquidity and the impact of cost-control measures and the amount of restructuring charges related to such activities, constitute forward-looking statements and are made under these safe harbor provisions. Some of the forward-looking statements can be identified by the use of forward-looking terms such as "believes," "expects," "may," "will," "should," "could," "seek," "intends," "plans," "estimates," "anticipates," or other comparable terms and negative forms of such terms. Forward-looking statements involve inherent risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. We urge you to consider the risks and uncertainties discussed in greater detail under the heading "Risk Factors" in this Quarterly Report on Form 10-Q and in Part 1, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended January 1, 2022 in evaluating our forward-looking statements. We have no plans to update our forward-looking statements to reflect events or circumstances after the date of this report. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made.
Overview
iRobot is a leading global consumer robot company that designs and builds robots that empower people to do more. With over 30 years of artificial intelligence ("AI") and advanced robotics experience, we are focused on building thoughtful robots and developing intelligent home innovations that help make life better for millions of people around the world. iRobot's portfolio of home robots and smart home devices features proprietary technologies for the connected home and advanced concepts in cleaning, mapping and navigation, human-robot interaction and physical solutions. Leveraging this portfolio, we plan to add new capabilities and expand our offerings to help consumers make their homes easier to maintain, more efficient, more secure and healthier places to live.
As of July 2, 2022, we had 1,438 full-time employees. Since our founding in 1990, we have developed the expertise necessary to design, build, sell and support durable, high-performance and cost-effective robots through the close integration of software, electronics and hardware. Our core technologies serve as reusable building blocks that we adapt and expand to create next-generation robotic platforms. We believe that this approach accelerates the time to market, while also reducing the costs, time and other risks associated with product development. These capabilities are amplified by iRobot OS, an evolution of our Genius Home Intelligence platform, which leverages our considerable expertise and ongoing investment in AI, home understanding and machine vision technologies to provide consumers with greater control over our products, simple integration with other smart home devices, recommendations that further enhance the cleaning experience and the ability to share and transfer home knowledge across multiple iRobot robots. We believe that the capabilities within iRobot OS will support our ability to build out a larger ecosystem that encompasses a broader range of adjacent robotic and smart home categories. We believe that our significant expertise in robot design, engineering, and smart home technologies and targeted focus on understanding and addressing consumer needs, positions us well to expand our total addressable market and capitalize on the anticipated growth in a wider range of robotic and smart home categories.
To continue expanding our business globally and increase our profitability in a highly competitive marketplace, we have continued to make progress on each key element of our strategy: innovate, get, keep and grow. In May 2022, iRobot introduced iRobot OS, an evolution of our Genius Home Intelligence platform that delivers a new level of customer experience for a cleaner, healthier and smarter home. In addition, we continued to expand our connected customer base, maintained overall high levels of customer satisfaction and product utilization, and advanced key commercial activities aimed at increasing existing customer revenue, especially through our direct-to-consumer channel. During the second quarter of 2022, our connected customers who have opted-in to our digital communications grew to 15.7 million, an increase of 35% from the second quarter of 2021.
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In March 2022, we were granted a temporary exclusion from Section 301 List 3 tariffs by the United States Trade Representative ("USTR"). This exclusion eliminates the 25% tariff on Roomba products imported from China beginning on October 12, 2021 and continuing until December 31, 2022. As of July 2, 2022, this tariff exclusion entitles us to a refund of approximately $32.0 million in tariffs paid. During the first quarter of 2022, we recognized $11.7 million of refunds as operating income (reduction to cost of product revenue) related to tariffs paid on Roomba robots imported after October 12, 2021 and sold during fiscal 2021. While tariff refund claims are subject to the approval of U.S. Customs, we currently expect to recover the entire balance of $32.0 million within the next twelve months.
During the second quarter of 2022, our results were impacted by unanticipated order delays, cancellations and reductions from retailers in both EMEA and North America. Market conditions in these regions have been difficult. In EMEA, consumer confidence further eroded during the second quarter of 2022 as the region faces an economic recession and the Russia-Ukraine war continues. In the U.S., retailers are addressing an uncertain consumer spending environment on the heels of high inflation, rising energy costs and slowing growth. We believe these macroeconomic trends and geopolitical events in these regions are likely to influence near-term orders from retailers and distributors as well as purchasing decisions by consumers. In response, we are in the process of initiating a restructuring of our operations to better align our cost structure with near-term revenue expectations, advance key strategic priorities, increase efficiencies and generate profitable growth in 2023. As part of this restructuring, we are accelerating actions to shift certain non-core engineering functions to lower-cost regions and increasingly leverage our joint design manufacturing (JDM) partners; better balancing global and regional commercial and marketing resources to support go-to-market plans while driving efficiencies and achieving economies of scale; realigning other operational areas to best support current needs of the business; and reducing our global facilities footprint. These actions are expected to include an overall reduction of approximately 140 employees, which represents 10% of our workforce as of July 2, 2022. In conjunction with the workforce reduction, we expect to record restructuring charges totaling between $5 million and $6 million over the next two quarters with the majority of the restructuring charges anticipated in the third quarter of 2022.
Merger Agreement
On August 4, 2022, the Company entered into the Merger Agreement, by and among the Company, Parent and Merger Sub, pursuant to which Merger Sub will merge with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent. As a result of the Merger, each share of the Common Stock, outstanding immediately prior to the Effective Time (subject to certain exceptions, including shares of Common Stock owned by the Company, Merger Sub, Parent or any of their respective direct or indirect wholly owned subsidiaries and shares of Common Stock owned by stockholders of the Company who have validly demanded and not withdrawn appraisal rights in accordance with Section 262 of the General Corporation Law of the State of Delaware) will, at the Effective Time, automatically be cancelled and converted into the right to receive $61.00 in cash, without interest and subject to applicable withholding taxes. If the Merger is consummated, the Company’s Common Stock will be delisted from the Nasdaq Stock Market LLC and deregistered under the Securities Exchange Act of 1934.
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Key Financial Metrics and Non-GAAP Financial Measures
In addition to the measures presented in our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"), we use the following key metrics, including non-GAAP financial measures, to evaluate and analyze our core operating performance and trends, and to develop short-term and long-term operational plans. The most directly comparable financial measures to the following non-GAAP metrics calculated under U.S. GAAP are gross profit and operating (loss) income. During the three months ended July 2, 2022 and July 3, 2021, we had gross profit of $80.9 million and $139.0 million, respectively, and operating loss of $63.9 million and $3.0 million, respectively. During the six months ended July 2, 2022 and July 3, 2021, we had gross profit of $188.5 million and $261.9 million, respectively, and operating (loss) income of $(87.2) million and $3.3 million, respectively. A summary of key metrics for the three and six months ended July 2, 2022, as compared to the three and six months ended July 3, 2021, is as follows:
 Three Months EndedSix Months Ended
 July 2, 2022July 3, 2021July 2, 2022July 3, 2021
(dollars in thousands, except average gross selling prices)
(unaudited)
Total Revenue$255,351 $365,596 $547,320 $668,857 
Non-GAAP Gross Profit$82,888 $139,484 $183,476 $263,016 
Non-GAAP Gross Margin32.5 %38.2 %33.5 %39.3 %
Non-GAAP Operating (Loss) Income$(53,300)$8,951 $(71,816)$23,905 
Non-GAAP Operating Margin(20.9)%2.4 %(13.1)%3.6 %
Total robot units shipped (in thousands)865 1,314 1,839 2,402 
Average gross selling prices for robot units$331 $325 $332