iRobot First-Quarter Financial Results Exceed Expectations

Q2 2014:

Revenue                  

$138 - $145 million

Earnings Per Share       

$0.15 - $0.25                          

Adjusted EBITDA          

$13 - $17 million

Fiscal Year 2014: 

Revenue                             

$560 - $570 million                 

Earnings Per Share             

$1.00 - $1.15                          

Adjusted EBITDA                 

$74 - $78 million                     

Date:                           

Wednesday, April 23, 2014  

Time:                          

8:30 a.m. ET

Call-In Number:         

847-619-6396

Passcode:                  

35939102

iRobot Corporation 

Consolidated Statement of Income

(in thousands, except per share amounts)

(unaudited)

 For the three months ended 

 March 29, 

 March 30, 

2014

2013

Revenue

$ 114,204

$ 106,195

Cost of Revenue

62,494

59,668

Gross Margin

51,710

46,527

Operating Expense

  Research & development

16,934

14,408

  Selling & marketing

14,532

10,697

  General & administrative

12,264

12,458

      Total

43,730

37,563

Operating income

7,980

8,964

Other income (expense), net

(187)

(96)

Income before income taxes

7,793

8,868

Income tax expense

2,513

513

Net income

$     5,280

$     8,355

Net income per common share:  

   Basic

$       0.18

$       0.30

   Diluted

$       0.18

$       0.29

Shares used in per common share calculations: 

   Basic

29,189

27,930

   Diluted

30,033

28,558

Stock-based compensation included in above figures:

        Cost of revenue

$        169

$        118

        Research & development

731

501

        Selling & marketing

338

366

        General & administrative

1,840

1,944

            Total

$     3,078

$     2,929

 iRobot Corporation 

 Condensed Consolidated Balance Sheet 

 (unaudited, in thousands) 

 March 29, 

 December 28, 

2014

2013

 Assets 

 Cash and equivalents 

$ 154,824

$   165,404

 Short term investments 

30,540

21,954

 Accounts receivable, net 

36,540

39,348

 Unbilled revenues 

931

856

 Inventory 

41,390

46,107

 Deferred tax assets 

19,950

20,144

 Other current assets 

10,436

6,848

   Total current assets 

294,611

300,661

 Property, plant and equipment, net 

25,119

23,661

 Deferred tax assets 

10,433

10,095

 Goodwill 

48,751

48,751

 Intangible assets, net 

21,764

22,668

 Other assets 

10,501

10,501

 Total assets 

$ 411,179

$   416,337

 Liabilities and stockholders' equity 

 Accounts payable 

$   34,221

$     41,344

 Accrued expenses 

13,563

14,880

 Accrued compensation 

7,744

19,606

 Deferred revenue and customer advances 

4,420

5,085

   Total current liabilities 

59,948

80,915

 Long term liabilities 

4,414

4,733

 Stockholders' equity 

346,817

330,689

 Total liabilities and stockholders' equity 

$ 411,179

$   416,337

 iRobot Corporation 

  Consolidated Statement of Cash Flows 

 (unaudited, in thousands) 

 For the three months ended 

 March 29, 

 March 30, 

2014

2013

Cash flows from operating activities:

Net income

$     5,280

$     8,355

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 

3,142

3,284

Loss on disposal of property and equipment

(10)

182

Stock-based compensation 

3,078

2,929

Deferred income taxes, net

1,912

(449)

Tax benefit of excess stock based compensation deductions

(2,231)

(43)

Non-cash director deferred compensation 

11

11

Changes in operating assets and liabilities — (use) source

Accounts receivable 

2,808

2,133

Unbilled revenue 

(75)

(1,056)

Inventory 

4,080

4,805

Other assets 

(3,588)

(983)

Accounts payable 

(7,924)

(12,711)

Accrued expenses 

(1,399)

379

Accrued compensation 

(11,862)

(4,867)

Deferred revenue and customer advances

(665)

(2,628)

Change in long term liabilities

(319)

815

Net cash provided by (used in) operating activities 

(7,762)

156

Cash flows from investing activities:

Purchase of property and equipment 

(2,177)

(1,077)

Change in other assets

-

(2,000)

Purchases of investments 

(11,211)

(2,547)

Sales of investments 

2,500

1,000

Net cash used in investing activities 

(10,888)

(4,624)

Cash flows from financing activities:

Proceeds from stock option exercises 

6,957

1,744

Income tax withholding payment associated with restricted stock vesting

(1,118)

(513)

Tax benefit of excess stock based compensation deductions

2,231

43

Net cash provided by financing activities 

8,070

1,274

Net decrease in cash and cash equivalents 

(10,580)

(3,194)

Cash and cash equivalents, at beginning of period 

165,404

126,770

Cash and cash equivalents, at end of period 

$ 154,824

$ 123,576

 iRobot Corporation 

Supplemental Information

(unaudited)

 For the three months ended 

 March 29, 

 March 30, 

2014

2013

Revenue: *

Home Robots

$ 108,035

$   92,699

    Domestic

$   41,030

$   31,391

    International

$   67,005

$   61,308

Defense & Security

$     5,602

$   11,100

    Domestic

$     3,191

$     9,112

    International

$     2,411

$     1,988

    Product

$     5,592

$     8,035

    Contract

$          10

$     3,065

    Product Life Cycle

$     3,533

$     6,083

Gross Margin Percent:

    Home Robots

50.4%

48.2%

    Defense & Security

37.2%

47.5%

    Total Company

45.3%

43.8%

Units shipped:

    Home Robots *

465

421

    Defense & Security

38

18

Average gross selling prices for robot units:

    Home Robots

$        243

$        230

    Defense & Security *

$          54

$        108

Defense & Security Funded Product Backlog *

$   12,444

$   30,110

Days sales outstanding

30

25

Days in inventory

61

51

Headcount

539

531

* in thousands

 iRobot Corporation  

 Adjusted EBITDA Reconciliation to GAAP 

 (unaudited, in thousands) 

 For the three months ended 

 March 29, 

 March 30, 

2014

2013

 Net income 

$     5,280

$     8,355

 Interest income, net 

(145)

(164)

 Income tax expense 

2,513

513

 Depreciation 

2,167

2,219

 Amortization 

975

1,065

 EBITDA 

10,790

11,988

 Stock-based compensation expense 

3,078

2,929

 Merger and acquisition expense 

-

280

 Net intellectual property litigation expense 

369

33

 Restructuring expense 

-

-

 Adjusted EBITDA 

$   14,237

$   15,230

In evaluating its business, iRobot considers and uses Adjusted EBITDA as a supplemental measure of its operating performance. The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, merger and acquisition expenses, net intellectual property litigation expenses, restructuring expenses and non-cash stock compensation. The Company also presents Adjusted EBITDA because it believes it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance.

The term Adjusted EBITDA is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. Adjusted EBITDA has limitations as an analytical tool, and when assessing the Company's operating performance, investors should not consider Adjusted EBITDA in isolation, or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, Adjusted EBITDA does not reflect the Company's actual cash expenditures. Other companies may calculate similar measures differently than iRobot, limiting their usefulness as comparative tools. iRobot compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA only supplementally.