iRobot Reports Third-Quarter Financial Results

Meets Revenue; Exceeds Earnings Expectations

Oct 20, 2015, 16:01 ET from iRobot Corp.

BEDFORD, Mass., Oct. 20, 2015 /PRNewswire/ -- iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the third quarter ended September 26, 2015.

"Q3 revenue met our expectations due to continued strong growth in the United States and China, partially offset by softness in Japan. Q3 earnings exceeded expectations in part because we decided to curtail the planned Japan investment, as the overall economic climate in the region was dampening its impact. Although we expect continued strong growth in the U.S. and China, we are revising our full-year revenue expectations to $610 to $615 million, due to a slower than expected recovery in Japan and our continued caution in a few other international markets," said Colin Angle, chairman and chief executive officer of iRobot.

"We are increasing our full year expectations for EPS and Adjusted EBITDA as we have reduced our spending plans for Q4 in order to offset the lower revenue. We will also be recording a gain on investment of $0.06 per share, or $3 million pre-tax income, from the sale of an investment we made several years ago that was not previously contemplated in our expectations. We now expect full-year earnings per share of $1.35 to $1.40 and Adjusted EBITDA of $89 to $91 million. These expectations continue to reflect our confidence that domestic Home Robot revenue will grow in the high teens for the full year, and that China and many European markets will also show significant growth.

"While we are experiencing weakness in a few isolated international markets, we expect the macro impact to be temporary. Global spending on robotic vacuum cleaners continues to grow, and we are maintaining our leadership position in the market despite several recent entrants in the category. We remain optimistic about the industry and our growth prospects in the coming years.

"On September 16, we launched the Roomba® 980, our first connected home robot with navigating and mapping capabilities. The reaction we have received has been tremendous, exceeding our expectations. The Roomba 980 is the first iRobot product to incorporate the VSLAM technology we acquired as part of acquisition of Evolution Robotics. This flagship Roomba is our first step into the Internet of Things, enabling new functionality today, such as remote app-control and systematic navigation, as well as paving the way for new products and capabilities in the future. We look forward to discussing our strategies to take advantage of these advances in other forums in coming months."

Financial Results

  • Revenue for the third quarter of 2015 was $143.6 million, compared with $143.5 million for the same quarter one year ago, in line with expectations.
  • Net income in the third quarter of 2015 was $12.8 million, compared with $14.6 million in the third quarter of 2014, ahead of expectations.
  • Quarterly earnings per share were $0.42 for the third quarter of 2015, compared with $0.48 in the third quarter last year. Adjusted EBITDA for the third quarter of 2015 was $25.9 million, compared with $29.7 million in the third quarter of 2014. Both EPS and Adjusted EBITDA were ahead of expectations.
  • Re-purchased $20 million of stock under the stock repurchase plan in the quarter.

Business Highlights

  • Fourth-quarter year-over-year revenue growth of 26 to 29% expected. Full-year expectations imply U.S. revenue growth in high teens, growth in China of more than 70% and substantial growth in many larger EMEA countries.
  • Successfully launched the first connected Roomba, the 980, on the iRobot website and began shipping into U.S. retail and overseas markets for the holidays; U.S. Amazon rated 4.5 out of 5 stars.
  • Collecting insightful Roomba 980 usage information to inform future investments.
  • Received and fulfilled several Defense & Security orders, announced two significant new IDIQ contracts totaling $96 million and ended the quarter with $28 million in backlog.

Financial Expectations

Management provides the following expectations with respect to the fourth quarter and fiscal year ending January 2, 2016.

Q4 2015:

Revenue    

$200 - $205 million

Earnings Per Share     

$0.53 - $0.58           

Adjusted EBITDA         

$32 - $34 million

Fiscal Year 2015:         

Current         

Prior                           

Revenue                        

$610 - $615 million 

$625 - $635 million                 

Earnings Per Share         

$1.35 - $1.40         

$1.25 - $1.35  

Adjusted EBITDA             

$89 - $91 million    

$85 - $90 million                     

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 2015, business outlook, and outlook for fourth-quarter and fiscal year 2015 financial performance. Pertinent details include:

           Date:         

Wednesday, October 21, 2015  

           Time:          

8:30 a.m. ET

           Call-In Number: 

847-619-6396

           Passcode:         

38036803

A live, audio broadcast of the conference call will also be available at http://investor.irobot.com/phoenix.zhtml?c=193096&p=irol-EventDetails&EventId=5168629.  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 28, and can be accessed by dialing 630-652-3042, passcode 38036803#.

About iRobot Corp. iRobot designs and builds robots that empower people to do more. The company's home robots help people find smarter ways to clean, its defense & security robots protect those in harm's way, and its remote presence robots enable virtual presence from anywhere in the world. iRobot's consumer and military robots feature proprietary technologies incorporating advanced concepts in navigation, mobility, manipulation and artificial intelligence. For more information about iRobot, please visit www.irobot.com.

For iRobot Investors Certain statements made in this press release that are not based on historical information are forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This press release contains express or implied forward-looking statements relating to, among other things, iRobot Corp.'s expectations regarding future financial performance, future operating performance and growth, outlook for and future performance of our businesses, sales and marketing spending, demand for our robots, and anticipated revenue, earnings per share and Adjusted EBITDA for fiscal year 2015 and the fourth quarter ending January 2, 2016.  These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things: our ability to operate in an emerging market, the financial strength of our customers and retailers, general economic conditions, market acceptance of our products, our dependence on the U.S. federal government and government contracts, the timing of government contracts and orders, changes in government policies or spending priorities, and competition.  Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. iRobot Corp. undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances or otherwise. For additional disclosure regarding these and other risks faced by iRobot Corp., see the disclosure contained in our public filings with the Securities and Exchange Commission.

This press release includes Adjusted EBITDA, which is a non-GAAP financial measure as defined by SEC Regulation G.  We define Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, merger and acquisition expense, net intellectual property litigation expense, and restructuring expense.  A reconciliation between net income and Adjusted EBITDA is provided in the financial tables at the end of this press release.

 

iRobot Corporation 

Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

 For the three months ended 

 For the nine months ended 

September 26,

 September 27, 

September 26,

 September 27, 

2015

2014

2015

2014

Revenue

143,609

143,497

410,358

397,504

Cost of revenue

73,751

75,608

216,759

215,784

Gross margin

69,858

67,889

193,599

181,720

Operating expenses:

  Research and development

18,122

17,343

55,886

51,522

  Selling and marketing

19,379

15,844

60,896

53,911

  General and administrative

13,701

12,008

39,195

35,938

      Total operating expenses

51,202

45,195

155,977

141,371

Operating income

18,656

22,694

37,622

40,349

Other income (expense), net

(93)

(374)

(948)

(469)

Income before income taxes

18,563

22,320

36,674

39,880

Income tax expense

5,770

7,713

11,875

11,463

Net income

$         12,793

$         14,607

$         24,799

$         28,417

Net income per share

   Basic

$            0.43

$            0.49

$            0.84

$            0.97

   Diluted

$            0.42

$            0.48

$            0.82

$            0.94

Number of shares used in per share calculations

   Basic

29,654

29,595

29,697

29,439

   Diluted

30,117

30,183

30,253

30,169

Stock-based compensation included in above figures:

        Cost of revenue

$             270

$             291

$             662

$             626

        Research and development

963

866

2,737

2,425

        Selling and marketing

474

319

1,089

860

        General and administrative

2,193

2,315

5,974

6,105

            Total

$           3,900

$           3,791

$         10,462

$         10,016

 

 

 

 iRobot Corporation 

 Condensed Consolidated Balance Sheets 

 (unaudited, in thousands) 

September 26,

 December 27, 

2015

2014

 Assets 

 Cash and cash equivalents 

$          176,430

$        185,957

 Short term investments 

35,791

36,166

 Accounts receivable, net 

76,314

71,056

 Unbilled revenue 

580

2,614

 Inventory 

58,665

47,857

 Deferred tax assets 

20,338

21,505

 Other current assets 

8,408

9,704

   Total current assets 

376,526

374,859

 Property and equipment, net 

28,553

31,297

 Deferred tax assets 

7,688

8,409

 Goodwill 

48,751

48,751

 Intangible assets, net 

16,529

19,146

 Other assets 

11,766

10,751

 Total assets 

$          489,813

$        493,213

 Liabilities and stockholders' equity 

 Accounts payable 

$           56,490

$          60,256

 Accrued expenses 

13,752

18,701

 Accrued compensation 

11,153

16,235

 Deferred revenue and customer advances 

2,279

3,849

   Total current liabilities 

83,674

99,041

 Long term liabilities 

3,033

3,736

 Stockholders' equity 

403,106

390,436

 Total liabilities and stockholders' equity 

$          489,813

$        493,213

 

 

 

 iRobot Corporation 

  Consolidated Statements of Cash Flows 

 (unaudited, in thousands) 

 For the nine months ended 

September 26,

 September 27, 

2015

2014

Cash flows from operating activities:

Net income

$          24,799

$          28,417

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

Depreciation and amortization 

10,569

9,578

Loss on disposal of property and equipment

201

27

Stock-based compensation 

10,462

10,016

Deferred income taxes, net

2,289

793

Tax benefit of excess stock-based compensation deductions

(795)

(2,707)

Non-cash director deferred compensation 

112

34

Changes in operating assets and liabilities — (use) source

Accounts receivable 

(5,258)

(28,999)

Unbilled revenue 

2,034

(323)

Inventory 

(10,965)

(8,678)

Other assets 

1,296

(5,407)

Accounts payable 

(1,285)

4,943

Accrued expenses 

(6,127)

2,859

Accrued compensation 

(5,082)

(7,836)

Deferred revenue and customer advances

(1,570)

(2,376)

Long term liabilities

(703)

(467)

Net cash provided by (used in) operating activities 

19,977

(126)

Cash flows from investing activities:

Additions of property and equipment 

(7,557)

(9,168)

Change in other assets

(1,015)

-

Purchase of investments 

(17,755)

(24,214)

Sales of investments 

18,000

7,500

Net cash used in investing activities 

(8,327)

(25,882)

Cash flows from financing activities:

Proceeds from stock option exercises 

3,385

7,853

Income tax withholding payment associated with restricted stock vesting

(1,295)

(1,532)

Stock repurchases

(24,062)

-

Tax benefit of excess stock-based compensation deductions

795

2,707

Net cash provided by (used in) financing activities 

(21,177)

9,028

Net decrease in cash and cash equivalents 

(9,527)

(16,980)

Cash and cash equivalents, at beginning of period 

185,957

165,404

Cash and cash equivalents, at end of period 

$        176,430

$        148,424

 

 

 

 iRobot Corporation 

Supplemental Information

(unaudited)

 For the three months ended 

 For the nine months ended 

September 26,

September 27,

September 26,

September 27,

2015

2014

2015

2014

Revenue: *

Home Robots

$        136,513

$        132,013

$        384,422

$        373,283

    Domestic

$          57,782

$          46,830

$        150,587

$        129,884

    International

$          78,731

$          85,183

$        233,835

$        243,399

Defense & Security

$            6,184

$          10,667

$          24,500

$          21,369

    Domestic

$            4,606

$            4,850

$          10,867

$          10,342

    International

$            1,578

$            5,817

$          13,633

$          11,027

    Product

$            6,061

$          10,258

$          23,896

$          20,947

    Contract

$               123

$               409

$               604

$               422

    Product Life Cycle

$            3,356

$            5,797

$          11,464

$          11,203

Gross Margin Percent:

    Home Robots

52.7%

50.7%

51.7%

49.9%

    Defense & Security

42.9%

53.3%

40.0%

45.1%

    Total Company

48.6%

47.3%

47.2%

45.7%

Units shipped:

    Home Robots *

582

573

1,665

1,603

    Defense & Security

123

52

192

130

Average gross selling prices for robot units:

    Home Robots

$               252

$               244

$               246

$               242

    Defense & Security *

$                 22

$                 86

$                 65

$                 75

Defense & Security Funded Product Backlog *

$          27,559

$          25,170

$          27,559

$          25,170

Days sales outstanding

49

44

49

44

Days in inventory

73

65

73

65

Headcount

606

562

606

562

* in thousands

 

 

 

 iRobot Corporation  

 Adjusted EBITDA Reconciliation to GAAP 

 (unaudited, in thousands) 

 For the three months ended 

 For the nine months ended 

September 26,

September 27,

September 26,

September 27,

2015

2014

2015

2014

 Net income 

$          12,793

$          14,607

$          24,799

$          28,417

 Interest income, net 

(152)

(184)

(482)

(499)

 Income tax expense 

5,770

7,713

11,875

11,463

 Depreciation 

2,626

2,294

7,776

6,676

 Amortization 

932

964

2,793

2,902

 EBITDA 

21,969

25,394

46,761

48,959

 Stock-based compensation expense 

3,900

3,791

10,462

10,016

 Merger and acquisition expense 

-

-

-

-

 Net intellectual property litigation (income) expense 

(13)

496

(493)

1,141

 Restructuring expense 

-

-

-

-

 Adjusted EBITDA 

$          25,856

$          29,681

$          56,730

$          60,116

Use of Non-GAAP Financial Measures

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

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

 

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SOURCE iRobot Corp.



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