IROBOT CORP - FORM 8-K - EX-99.1 - EXHIBIT - October 21, 2014

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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
Results Exceeded Expectations; Driven by Growth in Home Robots

BEDFORD, Mass., October 21, 2014 - iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the third quarter ended September 27, 2014.

“I am pleased to report an outstanding third quarter, with results that exceeded our expectations, as a number of orders, in both Home and D&S, originally expected in Q4 were received and delivered in Q3,” said Colin Angle, chairman and chief executive officer of iRobot. “Home Robot growth of 19 percent year-over-year drove total company revenue growth of 15 percent in Q3. Revenue in our Defense & Security business exceeded our expectations for the third quarter, and we exited Q3 with $25 million in backlog.

“Based on our visibility into the fourth quarter, we are maintaining our full-year revenue expectations and increasing our EPS and Adjusted EBITDA expectations. We continue to expect revenue to be $555 to $565 million. We now expect EPS of between $1.20 and $1.25 and Adjusted EBITDA of $77 to $80 million, or roughly 14 percent of revenue.”

Financial Results

•
Revenue for the third quarter of 2014 was $143.5 million, compared with $124.5 million for the same quarter one year ago.
•
Net income in the third quarter of 2014 was $14.6 million, compared with $7.8 million in the third quarter of 2013.
•
Quarterly earnings per share were $0.48 for the third quarter of 2014, compared with $0.26 in the third quarter last year.
•
Adjusted EBITDA for the third quarter of 2014 was $29.7 million, compared with $17.2 million in the third quarter of 2013.

Business Highlights

•
Domestic growth of 31 percent, coupled with International revenue growth of 13 percent, fueled a 19 percent year-over-year increase in Home Robot revenue.
•
Defense & Security revenue was up six percent, and backlog was $25 million at the end of Q3 2014, providing us with increased confidence in delivering our full-year Defense & Security expectations.
•
Remote Presence sold eight Ava 500 robots to customers including AT&T, while additional robot trials are being conducted with a multinational law firm, manufacturing, pharmaceutical and financial services companies to enable remote collaboration, customer service and executive management.






Financial Expectations

Management provides the following expectations with respect to the fourth quarter and the fiscal year ending December 27, 2014.

Q4 2014:
 
 
Revenue
$158 - $167 million
 
Earnings Per Share
$0.26 - $0.31
 
Adjusted EBITDA
$17 - $20 million
 
 
 
 
Fiscal Year 2014:
Current
Prior
Revenue
$555 - $565 million
$555 - $565 million
Earnings Per Share
$1.20 - $1.25
$1.10 - $1.20
Adjusted EBITDA
$77 - $80 million
$74 - $78 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 2014, business outlook, and outlook for fourth-quarter and fiscal year 2014 financial performance. Pertinent details include:
 
Date:
Wednesday, October 22, 2014
Time:
8:30 a.m. ET
Call-In Number:
847-619-6396
Passcode:
35967590

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=5041609. 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 29, and can be accessed by dialing 630-652-3042, passcode 35967590#.
 
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 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 performance of our businesses, demand for our robots, and




anticipated revenue, earnings per share and Adjusted EBITDA for fiscal year 2014 and the fourth quarter ending December 27, 2014. 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 27, 2014
 
September 28, 2013
 
September 27, 2014
 
September 28, 2013
Revenue
$
143,497

 
$
124,501

 
397,504

 
361,058

Cost of Revenue
75,608

 
70,440

 
215,784

 
198,865

Gross Margin
67,889

 
54,061

 
181,720

 
162,193

Operating Expense
 
 
 
 
 
 
 
  Research & development
17,343

 
15,212

 
51,522

 
45,617

  Selling & marketing
15,844

 
16,317

 
53,911

 
49,323

  General & administrative
12,008

 
11,495

 
35,938

 
39,348

      Total
45,195

 
43,024

 
141,371

 
134,288

Operating income
22,694

 
11,037

 
40,349

 
27,905

Other income (expense), net
(374
)
 
152

 
(469
)
 
(49
)
Income before income taxes
22,320

 
11,189

 
39,880

 
27,856

Income tax expense
7,713

 
3,385

 
11,463

 
3,403

Net income
$
14,607

 
$
7,804

 
$
28,417

 
$
24,453

 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
   Basic
$
0.49

 
$
0.27

 
$
0.97

 
$
0.86

   Diluted
$
0.48

 
$
0.26

 
$
0.94

 
$
0.84

 
 
 
 
 
 
 
 
Shares used in per common share calculations:
 
 
 
 
 
 
 
   Basic
29,595

 
28,733

 
29,439

 
28,359

   Diluted
30,183

 
29,582

 
30,169

 
29,207

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation included in above figures:
 
 
 
 
 
 
 
        Cost of revenue
$
291

 
$
250

 
$
626

 
$
496

        Research & development
866

 
669

 
2,425

 
1,963

        Selling & marketing
319

 
348

 
860

 
832

        General & administrative
2,315

 
2,210

 
6,105

 
6,378

            Total
$
3,791

 
$
3,477

 
$
10,016

 
$
9,669

 
 
 
 
 
 
 
 








 iRobot Corporation
 Condensed Consolidated Balance Sheets
 (unaudited, in thousands)
 
 
 
 
 
September 27, 2014
 
December 28, 2013
 
 
 
 
 Assets
 
 
 
 Cash and equivalents
$
148,424

 
$
165,404

 Short term investments
38,336

 
21,954

 Accounts receivable, net
68,347

 
39,348

 Unbilled revenues
1,179

 
856

 Inventory
54,148

 
46,107

 Deferred tax assets
20,962

 
20,144

 Other current assets
12,255

 
6,848

   Total current assets
343,651

 
300,661

 Property, plant and equipment, net
26,862

 
23,661

 Deferred tax assets
10,948

 
10,095

 Goodwill
48,751

 
48,751

 Intangible assets, net
20,019

 
22,668

 Other assets
10,501

 
10,501

 Total assets
$
460,732

 
$
416,337

 
 
 
 
 Liabilities and stockholders' equity
 
 
 
 Accounts payable
$
46,386

 
$
41,344

 Accrued expenses
17,831

 
14,880

 Accrued compensation
11,770

 
19,606

 Deferred revenue and customer advances
2,709

 
5,085

   Total current liabilities
78,696

 
80,915

 Long term liabilities
4,266

 
4,733

 Stockholders' equity
377,770

 
330,689

 Total liabilities and stockholders' equity
$
460,732

 
$
416,337

 
 
 
 





 iRobot Corporation
Consolidated Statements of Cash Flows
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 For the nine months ended
 
September 27, 2014
 
September 28, 2013
Cash flows from operating activities:
 
 
 
Net income
$
28,417

 
$
24,453

Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 
 
 
   Depreciation and amortization
9,578

 
9,029

   (Gain)/Loss on disposal of property and equipment
27

 
(351
)
   Goodwill and intangible assets impairment
—

 
1,988

   Stock-based compensation
10,016

 
9,669

   Deferred income taxes, net
793

 
(662
)
   Tax benefit of excess stock based compensation deductions
(2,707
)
 
(2,238
)
   Non-cash director deferred compensation
34

 
33

Changes in operating assets and liabilities — (use) source
 
 
 
   Accounts receivable
(28,999
)
 
(24,614
)
   Unbilled revenue
(323
)
 
(360
)
   Inventory
(8,678
)
 
(11,888
)
   Other assets
(5,407
)
 
2,697

   Accounts payable
4,943

 
4,129

   Accrued expenses
2,859

 
(216
)
   Accrued compensation
(7,836
)
 
3,004

   Deferred revenue and customer advances
(2,376
)
 
(4,231
)
   Change in long term liabilities
(467
)
 
338

Net cash (used in) provided by operating activities
(126
)
 
10,780

 
 
 
 
Cash flows from investing activities:
 
 
 
   Purchase of property and equipment
(9,168
)
 
(5,309
)
   Change in other assets
—

 
(2,000
)
   Purchases of investments
(24,214
)
 
(12,897
)
   Sales of investments
7,500

 
8,044

   Proceeds from sale of assets
—

 
650

Net cash used in investing activities
(25,882
)
 
(11,512
)
 
 
 
 
Cash flows from financing activities:
 
 
 
   Proceeds from stock option exercises
7,853

 
12,364

   Income tax withholding payment associated with restricted stock vesting
(1,532
)
 
(909
)
   Tax benefit of excess stock based compensation deductions
2,707

 
2,238

Net cash provided by financing activities
9,028

 
13,693

 
 
 
 
Net increase (decrease) in cash and cash equivalents
(16,980
)
 
12,961

Cash and cash equivalents, at beginning of period
165,404

 
126,770

Cash and cash equivalents, at end of period
$
148,424

 
$
139,731

 
 
 
 




 iRobot Corporation
Supplemental Information
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
 For the nine months ended
 
September 27, 2014
 
September 28, 2013
 
September 27, 2014
 
September 28, 2013
 
 
 
 
 
 
 
 
Revenue: *
 
 
 
 
 
 
 
Home Robots
$
132,013

 
$
111,363

 
$
373,283

 
$
319,590

    Domestic
$
46,830

 
$
35,700

 
$
129,889

 
$
106,269

    International
$
85,183

 
$
75,663

 
$
243,394

 
$
213,321

 
 
 
 
 
 
 
 
Defense & Security
$
10,667

 
$
10,094

 
$
21,369

 
$
33,664

    Domestic
$
4,850

 
$
3,467

 
$
9,379

 
$
24,158

    International
$
5,817

 
$
6,627

 
$
11,990

 
$
9,506

 
 
 
 
 
 
 
 
    Product
$
10,258

 
$
9,754

 
$
20,947

 
$
29,291

    Contract
$
409

 
$
340

 
$
422

 
$
4,373

 
 
 
 
 
 
 
 
    Product Life Cycle
$
5,797

 
$
5,347

 
$
11,203

 
$
14,468

 
 
 
 
 
 
 
 
Gross Margin Percent:
 
 
 
 
 
 
 
    Home Robots
50.7
%
 
47.6
%
 
49.9
%
 
49.2
%
    Defense & Security
53.3
%
 
40.7
%
 
45.1
%
 
45.5
%
    Total Company
47.3
%
 
43.4
%
 
45.7
%
 
44.9
%
 
 
 
 
 
 
 
 
Units shipped:
 
 
 
 
 
 
 
    Home Robots *
573

 
526

 
1,603

 
1,439

    Defense & Security
52

 
43

 
130

 
485

 
 
 
 
 
 
 
 
Average gross selling prices for robot units:
 
 
 
 
 
 
 
    Home Robots
$
244

 
$
225

 
$
242

 
$
230

    Defense & Security *
$
86

 
$
103

 
$
75

 
$
31

 
 
 
 
 
 
 
 
Defense & Security Funded Product Backlog *
$
25,170

 
$
13,318

 
$
25,170

 
$
13,318

 
 
 
 
 
 
 
 
Days sales outstanding
44

 
41

 
44

 
41

 
 
 
 
 
 
 
 
Days in inventory
65

 
64

 
65

 
64

 
 
 
 
 
 
 
 
Headcount
562

 
525

 
562

 
525

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* in thousands
 
 
 
 
 
 
 




 iRobot Corporation
 Adjusted EBITDA Reconciliation to GAAP
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
 For the nine months ended
 
September 27, 2014
 
September 28, 2013
 
September 27, 2014
 
September 28, 2013
 
 
 
 
 
 
 
 
 Net income
$
14,607

 
$
7,804

 
$
28,417

 
$
24,453

 
 
 
 
 
 
 
 
 Interest income, net
(184
)
 
(212
)
 
(499
)
 
(529
)
 Income tax expense
7,713

 
3,385

 
11,463

 
3,403

 Depreciation
2,294

 
1,484

 
6,676

 
5,924

 Amortization
964

 
996

 
2,902

 
3,105

 
 
 
 
 
 
 
 
 EBITDA
25,394

 
13,457

 
48,959

 
36,356

 
 
 
 
 
 
 
 
 Stock-based compensation expense
3,791

 
3,477

 
10,016

 
9,669

 Merger and acquisition expense
—

 
—

 
—

 
393

 Net intellectual property litigation expense
496

 
241

 
1,141

 
444

 Restructuring expense
—

 
—

 
—

 
2,575

 
 
 
 
 
 
 
 
 Adjusted EBITDA
$
29,681

 
$
17,175

 
$
60,116

 
$
49,437

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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.






iRobot Corporation
8 Crosby Drive, Bedford, MA 01730-1402 Ù 781.430.3000 Ù Fax 781.430.3001 Ù www.irobot.com


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