IROBOT CORP - FORM 8-K - EX-99.1 - EXHIBIT - October 22, 2013

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EX-99.1
Contacts:
 
 
 
 
Elise Caffrey
 
Matthew Lloyd
 
 
Investor Relations
 
Media Relations
 
 
iRobot Corp.
 
iRobot Corp.
 
 
(781) 430-3003
 
(781) 430-3720
 
 
ecaffrey@irobot.com
 
mlloyd@irobot.com
 
 
 
 
 
 
 

iRobot Reports Third-Quarter Financial Results
Provides mid-high teen preliminary revenue growth estimate for 2014

BEDFORD, Mass., October 22, 2013 - iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the third quarter ended September 28, 2013.

“I am pleased to report that we delivered Q3 results in line with our expectations. We saw strong growth in our Home Robot business, and are excited to announce a next generation home robot for the fourth quarter. Overseas, strong demand in Asia continued and we are seeing signs of recovery in Europe. We shipped additional RP-VITA robots to InTouch Health, while our Remote Presence unit gained further traction in the video collaboration market. And, our Defense & Security business performed as expected,” said Colin Angle, chairman and chief executive officer of iRobot.

“Our businesses continue to perform in line with the expectations we laid out in Q1. Accordingly we are narrowing our full year 2013 expectation ranges to: revenue of between $485 and $490 million, EPS of $0.90 to $0.95 and Adjusted EBITDA of $58 to $61 million.

“Based on our robust product pipeline and expectations over the next three years, we continue to expect to achieve by 2016:

•Mid-high teen revenue CAGR;
•High teen Adjusted EBITDA margin; and,
•High single digit Operating Cash Flow margin.

For 2014, our preliminary revenue expectations are for mid-high teen growth, consistent with the financial targets.”

Financial Results

•
Revenue for the third quarter of 2013 was $124.5 million, compared with $126.3 million for the same quarter one year ago. Revenue for the first nine months of 2013 was $361.1 million compared with $335.6 million for the first nine months one year ago.
•
Net income in the third quarter of 2013 was $7.8 million, compared with $15.2 million in the third quarter of 2012. For the first nine months, net income was $24.5 million, compared with $23.2 million a year ago.
•
Quarterly earnings per share were $0.26, compared with $0.54 in the third quarter last year. Nine-month earnings per share were $0.84 in 2013, compared with $0.82 for the first nine months of 2012.




•
Adjusted EBITDA for the third quarter of 2013 was $17.2 million, compared with $29.2 million in the third quarter of 2012. For the first nine months of 2013 Adjusted EBITDA was $49.4 million, compared with $51.5 million for the same period a year ago.
•
During the third quarter of 2012, there were a number of items recorded, one of which resulted in a $7.7 million revenue increase. The positive net impact of all these items was $0.10 in earnings per share and $5.2 million in Adjusted EBITDA.
.
Business Highlights

•
Home Robot revenue increased 16 percent in Q3 2013, over last year, driven by strong growth in Japan.
•
Defense & Security results met our Q3 expectations. While the U.S. government shutdown hampered our efforts in both the domestic and international markets we continue to expect to deliver full year Defense & Security revenue of roughly $50 million.
•
We are in discussions to sign our first Cisco distributor for the AVA 500 video collaboration robot and plan to be in full beta with three external users for the product by early December. 

Financial Expectations

Management provides the following expectations with respect to the fourth quarter and fiscal year ending December 28, 2013.


Q4 2013:
 
 
Revenue
$124 - $129 million
 
Earnings Per Share
$0.06 - $0.11
 
Adjusted EBITDA
$9 - $12 million
 
 
 
 
Fiscal Year 2013:
Current
Prior
Revenue
$485 - $490 million
$485 - $495 million
Earnings Per Share
$0.90 - $0.95
$0.88 - $1.00
Adjusted EBITDA
$58 - $61 million
$55 - $61 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 2013, business outlook, and outlook for fourth-quarter and fiscal year 2013 financial performance. Pertinent details include:


Date:
Wednesday, October 23, 2013
Time:
8:30 a.m. ET
Call-In Number:
847-619-6818
Passcode:
34160570

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=4897484. 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 630-652-3000, passcode 34160574#.
 
About iRobot Corp.
iRobot designs and builds robots that make a difference. 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 iRobot Aware® robot intelligence systems, proprietary technology incorporating advanced concepts in navigation, mobility, manipulation and artificial intelligence. For more information about iRobot, please visit www.irobot.com.
For iRobot Investors

Certain statements made in this press release that are not based on historical information are forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  This press release contains express or implied forward-looking statements relating to, among other things, iRobot Corp.’s expectations regarding future financial performance, future operating performance and growth, fiscal year 2014 revenue growth, the timing of new product introductions, the timing of our achievement of product development milestones, demand for our robots, anticipated growth and performance of our businesses, Defense & Security revenue for fiscal year 2013, and anticipated revenue, earnings per share and Adjusted EBITDA for fiscal year 2013 and the fourth quarter ending December 28, 2013.  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 and amortization, merger and acquisition expenses, net intellectual property litigation expenses, restructuring expenses, and non-cash stock compensation.  A reconciliation between net income (loss) 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 28, 2013
 
September 29, 2012
 
September 28, 2013
 
September 29, 2012
Revenue
 
 
 
 
 
 
 
  Product revenue
$
122,647

 
$
121,174

 
$
352,018

 
$
320,676

  Contract revenue
1,854

 
5,124

 
9,040

 
14,874

      Total
124,501

 
126,298

 
361,058

 
335,550

Cost of Revenue
 
 
 
 
 
 
 
  Product revenue
69,628

 
65,852

 
195,316

 
179,174

  Contract revenue
812

 
1,970

 
3,549

 
6,532

      Total
70,440

 
67,822

 
198,865

 
185,706

Gross Margin
54,061

 
58,476

 
162,193

 
149,844

Operating Expense
 
 
 
 
 
 
 
  Research & development
15,212

 
13,040

 
45,617

 
41,722

  Selling & marketing
16,317

 
11,376

 
49,323

 
41,685

  General & administrative
11,495

 
11,326

 
39,348

 
32,390

      Total
43,024

 
35,742

 
134,288

 
115,797

Operating income
11,037

 
22,734

 
27,905

 
34,047

Other income (expense), net
152

 
197

 
(49
)
 
477

Income before income taxes
11,189

 
22,931

 
27,856

 
34,524

Income tax expense
3,385

 
7,724

 
3,403

 
11,289

Net income
$
7,804

 
$
15,207

 
$
24,453

 
$
23,235

 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
   Basic
$
0.27

 
$
0.55

 
$
0.86

 
$
0.84

   Diluted
$
0.26

 
$
0.54

 
$
0.84

 
$
0.82

 
 
 
 
 
 
 
 
Shares used in per common share calculations:
 
 
 
 
 
 
 
   Basic
28,733

 
27,650

 
28,359

 
27,520

   Diluted
29,582

 
28,321

 
29,207

 
28,323

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation included in above figures:
 
 
 
 
 
 
 
        Cost of product revenue
$
250

 
$
289

 
$
496

 
$
715

        Cost of contract revenue
—

 
—

 
—

 
—

        Research & development
669

 
365

 
1,963

 
1,271

        Selling & marketing
348

 
158

 
832

 
574

        General & administrative
2,210

 
1,796

 
6,378

 
5,463

            Total
$
3,477

 
$
2,608

 
$
9,669

 
$
8,023

 
 
 
 
 
 
 
 








 iRobot Corporation
 Condensed Consolidated Balance Sheets
 (unaudited, in thousands)
 
 
 
 
 
September 28, 2013
 
December 29, 2012
 
 
 
 
 Assets
 
 
 
 Cash and equivalents
$
139,731

 
$
126,770

 Short term investments
16,948

 
12,430

 Accounts receivable, net
54,027

 
29,413

 Unbilled revenues
1,556

 
1,196

 Inventory
48,853

 
36,965

 Deferred tax assets
19,517

 
19,266

 Other current assets
6,131

 
8,853

   Total current assets
286,763

 
234,893

 Property, plant and equipment, net
24,039

 
24,953

 Deferred tax assets
10,464

 
8,792

 Goodwill
48,751

 
48,951

 Intangible assets, net
23,587

 
28,224

 Other assets
10,501

 
8,500

 Total assets
$
404,105

 
$
354,313

 
 
 
 
 Liabilities and stockholders' equity
 
 
 
 Accounts payable
$
46,644

 
$
42,515

 Accrued expenses
13,409

 
13,642

 Accrued compensation
14,868

 
11,864

 Deferred revenue and customer advances
2,026

 
6,257

   Total current liabilities
76,947

 
74,278

 Long term liabilities
4,556

 
4,218

 Stockholders' equity
322,602

 
275,817

 Total liabilities and stockholders' equity
$
404,105

 
$
354,313

 
 
 
 





 iRobot Corporation
  Consolidated Statements of Cash Flows
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
 For the nine months ended
 
September 28, 2013
 
September 29, 2012
 
September 28, 2013
 
September 29, 2012
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income
$
7,804

 
$
15,207

 
$
24,453

 
$
23,235

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
2,480

 
2,868

 
9,029

 
8,181

(Gain)/loss on disposal of property and equipment
(632
)
 
612

 
(351
)
 
778

Goodwill and intangible assets impairment
—

 
—

 
1,988

 
—

Stock-based compensation
3,477

 
2,608

 
9,669

 
8,023

Deferred income taxes, net
251

 
1,375

 
(662
)
 
(2,855
)
Tax benefit of excess stock based compensation deductions
(602
)
 
(426
)
 
(2,238
)
 
(1,461
)
Non-cash director deferred compensation
11

 
22

 
33

 
64

Changes in operating assets and liabilities — (use) source
 
 
 
 
 
 
 
Accounts receivable
(2,923
)
 
(13,852
)
 
(24,614
)
 
(10,041
)
Unbilled revenue
(505
)
 
380

 
(360
)
 
669

Inventory
(7,293
)
 
2,005

 
(11,888
)
 
(1,503
)
Other assets
7,467

 
3,644

 
2,697

 
3,266

Accounts payable
(7,261
)
 
(6,895
)
 
4,129

 
(10,089
)
Accrued expenses
(616
)
 
4,848

 
(216
)
 
1,596

Accrued compensation
1,755

 
(701
)
 
3,004

 
(8,842
)
Deferred revenue and customer advances
(1,248
)
 
236

 
(4,231
)
 
591

Change in long term liabilities
418

 
(129
)
 
338

 
(315
)
Net cash provided by operating activities
2,583

 
11,802

 
10,780

 
11,297

 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
Purchase of property and equipment
(2,481
)
 
(1,111
)
 
(5,309
)
 
(4,067
)
Change in other assets
—

 
—

 
(2,000
)
 
(6,000
)
Purchases of investments
(2,500
)
 
—

 
(12,897
)
 
(5,086
)
Sales of investments
4,544

 
—

 
8,044

 
2,500

Proceeds from sale of assets
650

 
—

 
650

 
—

Net cash (used in)/provided by investing activities
213

 
(1,111
)
 
(11,512
)
 
(12,653
)
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
Proceeds from stock option exercises
2,521

 
2,000

 
12,364

 
4,022

Income tax withholding payment associated with restricted stock vesting
(45
)
 
(2
)
 
(909
)
 
(777
)
Tax benefit of excess stock based compensation deductions
602

 
426

 
2,238

 
1,461

Net cash provided by financing activities
3,078

 
2,424

 
13,693

 
4,706

 
 
 
 
 
 
 
 
Net increase in cash and cash equivalents
5,874

 
13,115

 
12,961

 
3,350

Cash and cash equivalents, at beginning of period
133,857

 
156,543

 
126,770

 
166,308

Cash and cash equivalents, at end of period
$
139,731

 
$
169,658

 
$
139,731

 
$
169,658

 
 
 
 
 
 
 
 




 iRobot Corporation
Supplemental Information
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
 For the nine months ended
 
September 28, 2013
 
September 29, 2012
 
September 28, 2013
 
September 29, 2012
 
 
 
 
 
 
 
 
Revenue: *
 
 
 
 
 
 
 
Home Robots
$
111,363

 
$
96,291

 
$
319,590

 
$
273,887

    Domestic
$
35,700

 
$
32,925

 
$
106,269

 
$
85,869

    International
$
75,663

 
$
63,366

 
$
213,321

 
$
188,018

 
 
 
 
 
 
 
 
Defense & Security
$
10,094

 
$
27,832

 
$
33,664

 
$
55,217

    Domestic
$
3,467

 
$
26,667

 
$
24,158

 
$
49,957

    International
$
6,627

 
$
1,165

 
$
9,506

 
$
5,260

    Product
$
9,754

 
$
23,912

 
$
29,291

 
$
43,319

    Contract
$
340

 
$
3,920

 
$
4,373

 
$
11,898

    Product Life Cycle
$
5,347

 
$
14,910

 
$
14,468

 
$
24,018

 
 
 
 
 
 
 
 
Gross Margin Percent:
 
 
 
 
 
 
 
    Home Robots
47.6
%
 
52.2
%
 
49.2
%
 
51.0
%
    Defense & Security
40.7
%
 
46.8
%
 
45.5
%
 
42.3
%
    Total Company
43.4
%
 
46.3
%
 
44.9
%
 
44.7
%
 
 
 
 
 
 
 
 
Units shipped:
 
 
 
 
 
 
 
    Home Robots *
526

 
416

 
1,439

 
1,234

    Defense & Security
43

 
71

 
485

 
245

 
 
 
 
 
 
 
 
Average gross selling prices for robot units:
 
 
 
 
 
 
 
    Home Robots
$
225

 
$
223

 
$
230

 
$
221

    Defense & Security *
$
103

 
$
127

 
$
31

 
$
79

 
 
 
 
 
 
 
 
Defense & Security Funded Product Backlog *
$
13,318

 
$
11,944

 
$
13,318

 
$
11,944

 
 
 
 
 
 
 
 
Days sales outstanding
41

 
40

 
41

 
40

 
 
 
 
 
 
 
 
Days in inventory
64

 
44

 
64

 
44

 
 
 
 
 
 
 
 
Headcount
525

 
590

 
525

 
590

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* in thousands
 
 
 
 
 
 
 




 iRobot Corporation
 Adjusted EBITDA Reconciliation to GAAP
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
 For the nine months ended
 
September 28, 2013
 
September 29, 2012
 
September 28, 2013
 
September 29, 2012
 
 
 
 
 
 
 
 
 Net income
$
7,804

 
$
15,207

 
$
24,453

 
$
23,235

 
 
 
 
 
 
 
 
 Interest income, net
(212
)
 
(289
)
 
(529
)
 
(815
)
 Income tax expense
3,385

 
7,724

 
3,403

 
11,289

 Depreciation
1,484

 
2,601

 
5,924

 
7,480

 Amortization
996

 
267

 
3,105

 
701

 
 
 
 
 
 
 
 
 EBITDA
13,457

 
25,510

 
36,356

 
41,890

 
 
 
 
 
 
 
 
 Stock-based compensation expense
3,477

 
2,608

 
9,669

 
8,023

 Merger and acquisition expense
—

 
661

 
393

 
687

 Net intellectual property litigation expense
241

 
58

 
444

 
129

 Restructuring expense
—

 
367

 
2,575

 
774

 
 
 
 
 
 
 
 
 Adjusted EBITDA
$
17,175

 
$
29,204

 
$
49,437

 
$
51,503

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 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.



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