IROBOT CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 10, 2016

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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 Fourth-Quarter and Full-Year Financial Results

Q4 and Full-Year Revenue and EPS Exceed Expectations; Record 4th Quarter Revenue

Plans Incremental 2016 Investment to Drive Longer-Term Growth


BEDFORD, Mass., Feb. 10, 2016 - iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the fourth quarter and full year ended January 2, 2016.

“2015 was another great year for iRobot. Throughout the year, we made strategic investments in our business that drove record quarterly revenue and resulted in revenue and EPS that exceeded our expectations,” said Colin Angle, chairman and chief executive officer of iRobot. “The divestiture of the Defense & Security business announced on February 4, 2016 will allow us to focus on the home and deliver accelerated revenue growth in 2016 and beyond.

“Revenue, excluding D&S, is expected to grow 11 - 13% in 2016 as we expand worldwide distribution of Roomba 980, tap further into a large and growing market in China and build our wet floor care business. Our Roomba marketing programs were highly successful in the United States, where Q4 sell through at our top 5 retailers was up more than 70% year-on-year, resulting in a significant return on our investment. We are highly confident that we have the right marketing mix to export overseas to accelerate growth in those markets, and we expect revenue in all three geographic regions to grow in the low to mid-teens in 2016.

“Looking over a 3-year horizon, it is critical that we make strategic investments today to drive diversification of Home revenue for the future. This will include product diversification through more significant contributions from wet floor care as well as future revenue opportunities from connected, mapping products. This will also include more significant regional diversification as China continues to ramp and Japan returns to growth. The capital allocation and investment decisions we are making today will pave the road for higher revenue acceleration in 2017 and 2018.

“For 2016, we expect revenue of $630 to $642 million, EPS of between $1.20 and $1.40, and Adjusted EBITDA of $80 to $90 million. Expectations include a stub period of one quarter of Defense & Security results as well as the impact of one-time divestiture costs, most of which we expect to incur during Q1 2016.”












Financial Results

•
Revenue for the fourth quarter of 2015 was $206.4 million, compared with $159.3 million for the fourth quarter of 2014. Revenue for the full year 2015 was $616.8 million, compared with $556.8 million for the full year 2014.
•
Net income for the fourth quarter of 2015 was $19.3 million, compared with $9.4 million for the fourth quarter of 2014. Net income for the full year 2015 was $44.1 million, compared with $37.8 million for full-year 2014.
•
Quarterly earnings per share were $0.65, compared with $0.31 in the fourth quarter last year. Full-year earnings per share were $1.47, compared with $1.25 last year. The enactment of the 2015 R&D credit in December 2015 positively impacted fourth-quarter and full-year 2015 EPS by $0.05. In 2014, there was a positive $0.04 impact on fourth-quarter and full-year EPS from the R&D credit enacted in December 2014.
•
Adjusted EBITDA for the fourth quarter of 2015 was $35.0 million, compared with $19.7 million in the fourth quarter of 2014. Adjusted EBITDA for the full year 2015 was $92.0 million, compared with $79.8 million for full-year 2014.

Business Highlights

•
Domestic Home Robot business grew 46% in Q4 and 25% for the full year over 2014, due primarily to investment in ad media, national promotions, and the launch of Roomba 980.
•
Growth in China was more than 70% year-over-year in 2015 driven by successful execution of our e-commerce strategy, particularly on the 11/11 and 12/12 holidays.
•
Our Defense & Security business delivered full-year results consistent with our expectations. On February 2, 2016, we signed a definitive agreement to sell the business.
•
Announced a $65 million addition to the 2016 share repurchase program, bringing the total 2016 program to over $100 million.

Financial Expectations

Management provides the following expectations with respect to the year ending December 31, 2016 and first quarter ending April 2, 2016. The expectations assume the divestiture is closed during the first quarter, but the exact timing is uncertain, resulting in the following ranges for guidance:

Fiscal Year 2016:
 
 
Revenue
$630 - $642 million
 
Earnings Per Share*
$1.20 - $1.40
 
Adjusted EBITDA
$80 - $90 million
 
 
 
 
Full-Year 2016 BU Revenue:
 
 
Home
$625 - $635 million
 
Other
$2 - $7 million
 
 
 
 
Q1 2016:
 
 
Revenue
$125 - $135 million
 
(Loss)/Earnings Per Share*
($0.03) - $0.04
 
Adjusted EBITDA
$8 - $11 million
 





* Includes approximately $0.05 of one-time divestiture costs as well as $0.05-$0.07 of D&S stub period loss for Q1.

Fourth-Quarter and Full-Year Conference Call
iRobot will host a conference call tomorrow at 8:30 a.m. ET to discuss its financial results for the fourth fiscal quarter and full year 2015, and outlook for the first fiscal quarter and full year 2016 financial performance. Pertinent details include:
 
Date:
Thursday, February 11, 2016
Time:
8:30 a.m. ET
Call-In Number:
847-619-6397
Passcode:
40924296

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=5206137. 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 February 18, and can be accessed by dialing 630-652-3042, passcode 40924296#.
 
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 and accomplish more in their daily lives. Its remote presence robots enable virtual presence from anywhere in the world. iRobot’s portfolio of solutions feature proprietary technologies for the connected home and 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, the rate of revenue growth, demand for our robots, strategic investments to diversify Home revenue, the impact of the divestiture of our Defense & Security business, and anticipated revenue, earnings per share and Adjusted EBITDA for fiscal year 2016 and the first quarter ending April 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, 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 and revenue and net income per share excluding Defense & Security revenue, which are non-GAAP financial measures as defined by SEC Regulation G. We define Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, merger, acquisition and divestiture expense, net intellectual property litigation expense, and restructuring expense. Reconciliations between net income and Adjusted EBITDA, between revenue and revenue excluding Defense & Security revenue, and between net income per share and net income per share excluding Defense & Security net income per share, are 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 twelve months ended
 
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Revenue
$
206,420

 
$
159,342

 
616,778

 
556,846

Cost of revenue
111,093

 
83,007

 
327,852

 
298,791

Gross margin
95,327

 
76,335

 
288,926

 
258,055

Operating expenses:
 
 
 
 
 
 
 
  Research and development
20,185

 
17,886

 
76,071

 
69,408

  Selling and marketing
36,876

 
32,180

 
97,772

 
86,091

  General and administrative
15,270

 
13,501

 
54,465

 
49,439

      Total operating expenses
72,331

 
63,567

 
228,308

 
204,938

Operating income
22,996

 
12,768

 
60,618

 
53,117

Other income (expense), net
3,301

 
(239
)
 
2,353

 
(708
)
Income before income taxes
26,297

 
12,529

 
62,971

 
52,409

Income tax expense
6,966

 
3,143

 
18,841

 
14,606

Net income
$
19,331

 
$
9,386

 
$
44,130

 
$
37,803

 
 
 
 
 
 
 
 
Net income per share
 
 
 
 
 
 
 
   Basic
$
0.66

 
$
0.32

 
$
1.49

 
$
1.28

   Diluted
$
0.65

 
$
0.31

 
$
1.47

 
$
1.25

 
 
 
 
 
 
 
 
Number of shares used in per share calculations
 
 
 
 
 
 
 
   Basic
29,140

 
29,626

 
29,550

 
29,485

   Diluted
29,602

 
30,240

 
30,107

 
30,210

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation included in above figures:
 
 
 
 
 
 
 
        Cost of revenue
$
414

 
$
239

 
$
1,076

 
$
865

        Research and development
519

 
934

 
3,256

 
3,359

        Selling and marketing
368

 
436

 
1,457

 
1,296

        General and administrative
2,420

 
2,153

 
8,394

 
8,258

            Total
$
3,721

 
$
3,762

 
$
14,183

 
$
13,778

 
 
 
 
 
 
 
 








 iRobot Corporation
 Condensed Consolidated Balance Sheets
 (unaudited, in thousands)
 
 
 
 
 
January 2, 2016
 
December 27, 2014
 
 
 
 
 Assets
 
 
 
 Cash and cash equivalents
$
179,915

 
$
185,957

 Short term investments
33,124

 
36,166

 Accounts receivable, net
104,679

 
71,056

 Unbilled revenue
452

 
2,614

 Inventory
61,678

 
47,857

 Deferred tax assets
—

 
21,505

 Other current assets
9,501

 
9,704

   Total current assets
389,349

 
374,859

 Property and equipment, net
26,850

 
31,297

 Deferred tax assets
31,721

 
8,409

 Goodwill
48,751

 
48,751

 Intangible assets, net
15,664

 
19,146

 Other assets
9,408

 
10,751

 Total assets
$
521,743

 
$
493,213

 
 
 
 
 Liabilities and stockholders' equity
 
 
 
 Accounts payable
$
61,655

 
$
60,256

 Accrued expenses
15,954

 
18,701

 Accrued compensation
15,752

 
16,235

 Deferred revenue and customer advances
3,265

 
3,849

   Total current liabilities
96,626

 
99,041

 Long term liabilities
7,706

 
3,736

 Stockholders' equity
417,411

 
390,436

 Total liabilities and stockholders' equity
$
521,743

 
$
493,213

 
 
 
 





 iRobot Corporation
Consolidated Statements of Cash Flows
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 For the twelve months ended
 
January 2, 2016
 
December 27, 2014
Cash flows from operating activities:
 
 
 
Net income
$
44,130

 
$
37,803

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
   Depreciation and amortization
15,090

 
13,049

   Loss on disposal of property and equipment
214

 
246

   Gain on sale of investment
(3,287
)
 
—

   Stock-based compensation
14,183

 
13,778

   Deferred income taxes, net
(985
)
 
3,101

   Tax benefit of excess stock-based compensation deductions
(1,467
)
 
(3,051
)
   Non-cash director deferred compensation
149

 
49

Changes in operating assets and liabilities — (use) source
 
 
 
   Accounts receivable
(33,623
)
 
(31,708
)
   Unbilled revenue
2,162

 
(1,758
)
   Inventory
(13,978
)
 
(2,387
)
   Other assets
203

 
(2,856
)
   Accounts payable
3,786

 
16,249

   Accrued expenses
(2,768
)
 
3,695

   Accrued compensation
(483
)
 
(3,371
)
   Deferred revenue and customer advances
(584
)
 
(1,236
)
   Long term liabilities
3,970

 
(997
)
Net cash provided by operating activities
26,712

 
40,606

 
 
 
 
Cash flows from investing activities:
 
 
 
Additions of property and equipment
(9,372
)
 
(13,774
)
Change in other assets
(1,015
)
 
(250
)
Proceeds from sale of cost method investment
5,645

 
—

Purchase of investments
(17,755
)
 
(31,219
)
Sales of investments
20,500

 
16,500

Net cash used in investing activities
(1,997
)
 
(28,743
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Income tax withholding payment associated with restricted stock vesting
(1,295
)
 
(1,626
)
Proceeds from stock option exercises
6,464

 
8,943

Stock repurchases
(37,393
)
 
(1,678
)
Tax benefit of excess stock-based compensation deductions
1,467

 
3,051

Net cash provided by (used in) financing activities
(30,757
)
 
8,690

 
 
 
 
Net increase (decrease) in cash and cash equivalents
(6,042
)
 
20,553

Cash and cash equivalents, at beginning of period
185,957

 
165,404

Cash and cash equivalents, at end of period
$
179,915

 
$
185,957

 
 
 
 




 iRobot Corporation
Supplemental Information
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
 For the twelve months ended
 
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
 
 
 
 
 
 
 
 
Revenue: *
 
 
 
 
 
 
 
Home Robots
$
175,197

 
$
134,131

 
$
559,619

 
$
507,414

    Domestic
$
84,317

 
$
57,759

 
$
234,904

 
$
187,643

    International
$
90,880

 
$
76,372

 
$
324,715

 
$
319,771

 
 
 
 
 
 
 
 
Defense & Security
$
30,504

 
$
24,133

 
$
55,004

 
$
45,502

    Domestic
$
23,437

 
$
16,483

 
$
34,304

 
$
26,825

    International
$
7,067

 
$
7,650

 
$
20,700

 
$
18,677

 
 
 
 
 
 
 
 
    Product
$
30,184

 
$
21,367

 
$
54,080

 
$
42,314

    Contract
$
320

 
$
2,766

 
$
924

 
$
3,188

 
 
 
 
 
 
 
 
    Product Life Cycle
$
20,097

 
$
16,290

 
$
31,561

 
$
27,493

 
 
 
 
 
 
 
 
Gross Margin Percent:
 
 
 
 
 
 
 
    Home Robots
49.2
%
 
52.2
%
 
50.9
%
 
50.5
%
    Defense & Security
50.7
%
 
47.4
%
 
45.9
%
 
46.4
%
    Total Company
46.2
%
 
47.9
%
 
46.8
%
 
46.3
%
 
 
 
 
 
 
 
 
Units shipped:
 
 
 
 
 
 
 
    Home Robots *
771

 
571

 
2,436

 
2,174

    Defense & Security
102

 
135

 
294

 
265

 
 
 
 
 
 
 
 
Average gross selling prices for robot units:
 
 
 
 
 
 
 
    Home Robots
$
262

 
$
255

 
$
251

 
$
245

    Defense & Security *
$
99

 
$
37

 
$
77

 
$
56

 
 
 
 
 
 
 
 
Defense & Security Funded Product Backlog *
$
10,464

 
$
18,188

 
$
10,464

 
$
18,188

 
 
 
 
 
 
 
 
Days sales outstanding
46

 
42

 
46

 
42

 
 
 
 
 
 
 
 
Days in inventory
51

 
53

 
51

 
53

 
 
 
 
 
 
 
 
Headcount
622

 
572

 
622

 
572

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* in thousands
 
 
 
 
 
 
 




 iRobot Corporation
 Adjusted EBITDA Reconciliation to GAAP
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
 For the twelve months ended
 
January 2,
2016
 
December 27, 2014
 
January 2,
2016
 
December 27, 2014
 
 
 
 
 
 
 
 
 Net income
$
19,331

 
$
9,386

 
$
44,130

 
$
37,803

 
 
 
 
 
 
 
 
 Interest income, net
(196
)
 
(174
)
 
(678
)
 
(673
)
 Income tax expense
6,966

 
3,143

 
18,841

 
14,606

 Depreciation
3,599

 
2,516

 
11,375

 
9,192

 Amortization
922

 
955

 
3,715

 
3,857

 
 
 
 
 
 
 
 
 EBITDA
30,622

 
15,826

 
77,383

 
64,785

 
 
 
 
 
 
 
 
 Stock-based compensation expense
3,721

 
3,762

 
14,183

 
13,778

 Merger, acquisition and divestiture expense*
567

 
—

 
822

 
—

 Net intellectual property litigation (income) expense
99

 
73

 
(394
)
 
1,214

 Restructuring expense
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 Adjusted EBITDA
$
35,009

 
$
19,661

 
$
91,994

 
$
79,777

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* This definition was modified in the fourth quarter of fiscal 2015 to incorporate divestiture related costs. The $822,000 for the twelve month period ended January 2, 2016 includes $255,000 of costs not previously reported that were incurred in fiscal 2015 prior to the fourth quarter of 2015.
 
 
 
 
 
 
 
 
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, acquisition and divestiture 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.





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





 iRobot Corporation
Impact of Anticipated Defense and Security (D&S) Divestiture
(in millions, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the fiscal year ended January 2, 2016
 
 
 
Gross margin
 
Operating expenses
 
Operating income
 
Net income
 
Revenue
 
$
%
 
$
%
 
$
 
%
 
per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported (GAAP) *
$
617

 
$
289

46.8
%
 
$
228

37.0
%
 
$
61

 
9.9
%
 
$1.47
 
 
 
 
 
 
 
 
 
 
 
 
 
 
D&S related **
55

 
24

43.6
%
 
20

36.4
%
 
4

 
7.3
%
 
$0.10
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Excluding D&S (Non-GAAP) *
$
562

 
$
265

47.2
%
 
$
208

37.0
%
 
$
57

 
10.1
%
 
$1.37
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 


 

 
Financial expectations for the fiscal year ending December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
Revenue
 
Gross margin %
 
Operating expense %
 
Operating income %
 
per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected (GAAP) *
$630 - $642
 
47% - 48%
 
38% - 39%
 
8% - 9%
 
$1.20 - $1.40
 
 
 
 
 
 
 
 
 
 
 
 
 
 
D&S related **
$2 - $7
 
37% - 38%
 
120% - 150%
 
(100% - 110%)
 
($0.10 - $0.12)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Excluding D&S (Non-GAAP) *
$625 - $635

 
47% - 48%
 
38% - 39%
 
9% - 10%
 
$1.30 - $1.50
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* GAAP refers to U.S. generally accepted accounting principles.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
** Includes divestiture related costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 






















 iRobot Corporation
Impact of Anticipated Defense and Security (D&S) Divestiture on Revenue
(unaudited, in millions)
 
 
 
 
 
 
 
 
 
Fiscal year ended January 2, 2016
 
Fiscal year ending December 31, 2016
 
 
 
 
Consolidated revenue including D&S
$617
 
$630 - $642
  Year-over-year growth %
11%
 
2% - 4%
 
 
 
 
Full year D&S revenue
$55
 
$2 - $7 *
 
 
 
 
Consolidated revenue excluding D&S
$562
 
$625 - $635
  Year-over-year growth %
10%
 
11% - 13%
 
 
 
 
 
 
 
 
* Assumes the D&S divestiture is closed during the first quarter.
 
 
 
 
 
 
 
 
 
 
 
 



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