IROBOT CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 8, 2017

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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 Results Exceed Expectations
 
Accelerating Overseas Growth and Continued U.S. Momentum Drive Strong 2017 Expectations


BEDFORD, Mass., Feb. 8, 2017 - 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 December 31, 2016.

“2016 was a fantastic year for iRobot. Our Q4 and full year 2016 results exceeded our increased expectations. Record Q4 revenue was driven by very strong sales in the United States despite having the highest number of competitors we’ve ever seen. Higher revenue coupled with continued improvement in gross margin allowed us to increase investment and capitalize on our momentum executing on our business strategy, while returning additional profit to shareholders and setting a strong foundation for 2017 and beyond,” said Colin Angle, chairman and chief executive officer of iRobot.

“In 2017, we are expecting revenue of $770 to $785 million, which is year-over-year growth of 17% to 19%, EPS of $1.35 to $1.65 and operating income of $57 to $70 million. These expectations include the anticipated financial impact of our Japanese distributor acquisition, targeted to close at the beginning of Q2 2017. In November of 2016, we issued a press release, announcing our signed definitive agreement, and stated that for 2017 we expected a positive revenue impact of $20 to $25 million and a one-time negative impact to earnings per share of $0.25 - $0.35.

“We will achieve the 2017 performance by driving revenue growth through deeper household penetration of Roomba® in the U.S., accelerating growth in overseas markets, capitalizing on our first mover advantage in the wet floor care category, particularly in Asia where Braava® and Braava jet™ have been enthusiastically received, expanding gross margin through improved operating efficiencies and scale, and continuing to extend connectivity across more of our products, allowing us to offer more robots with mapping capabilities and cloud connectivity at more accessible price points, growing our role in the emerging Smart Home.

“There is a lot to be excited about. 2016 was a pivotal year for iRobot as we exited non-consumer businesses to focus solely on products for the home. We did so while delivering outstanding financial results for the year. Q4 was a record quarter for us and it was driven from the successful investments we made leading up to and throughout 2016, as we responded well to increasingly competitive market conditions. 2017 will be our first full year as a consumer technology company and we plan to capitalize on the investments we have been making.”






Financial Results

•
Revenue for the fourth quarter of 2016 was $212.5 million, compared with $206.4 million for the fourth quarter of 2015. Revenue for the full year 2016 was $660.6 million, compared with $616.8 million for the full year 2015. Q4 2015 revenue included $31.0 million of defense & security (D&S) revenue. Full-year 2015 and 2016 revenue included $57.0 million and $5.0 million respectively, of D&S and other revenue.
•
Net income for the fourth quarter of 2016 was $13.7 million, compared with $19.3 million for the fourth quarter of 2015. Net income for the full year 2016 was $41.9 million, compared with $44.1 million for full-year 2015.
•
Quarterly earnings per share were $0.49, compared with $0.65 in the fourth quarter last year. Full-year 2016 earnings per share were $1.48, compared with $1.47 last year. Fourth quarter 2016 earnings per share included a $0.03 benefit associated with a change in accounting treatment of an equity investment and a $0.01 contribution from transition services provided to the former D&S business. Fourth quarter 2015 EPS included a $0.23 contribution from the D&S business and a $0.06 gain on sale of investment. Full-year 2016 earnings per share included a negative ($0.10) impact from the divestiture of the D&S business and a $0.03 contribution from the sale of an investment. Full-year 2015 earnings per share benefited from a $0.10 contribution from the D&S business and $0.08 from the sale of an investment.
•
Adjusted EBITDA for the fourth quarter of 2016 was $28.6 million, compared with $35.0 million in the fourth quarter of 2015. Adjusted EBITDA for the full year 2016 was $94.4 million, compared with $92.0 million for full-year 2015.

Business Highlights

•
Consumer revenue grew 21% in Q4 over the prior year and 17% for the full year over 2015, due primarily to significant growth in the United States driven by further investment in ad media and national promotions.
•
Domestic revenue for the quarter grew 47% over Q4 last year and for the full year grew 36% over 2015.
•
Braava and Braava jet revenue grew roughly 75% in 2016 compared with 2015 and comprised approximately 10% of Consumer revenue for full-year 2016.
  
Financial Expectations

Management provides the following expectations with respect to the year ending December 30, 2017. The expectations assume the acquisition is closed at the beginning of the second quarter:

Fiscal Year 2017:
Total Company
Expected Impact of Acquisition*
Revenue
$770 - $785 million
$20 - $25 million
Earnings Per Share
$1.35 - $1.65
($0.25 - $0.35)
Operating Income
$57 - $70 million
($10 - $15 million)

*Assumes a 110 - 115 Yen - Dollar exchange rate.








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 2016, and outlook for the full-year 2017 financial performance. Pertinent details include:
Date:
Thursday, February 9, 2017
Time:
8:30 a.m. ET
Call-In Number:
213-358-0894
Passcode:
15399077

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=5242673.
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 16, and can be accessed by dialing 404-537-3406, passcode 15399077.
 
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. iRobot's portfolio of solutions features proprietary technologies for the connected home and advanced concepts in navigation, mobility 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, revenue growth, the timing of our acquisition of our Japanese distributor on revenue, demand for our robots, our ability to develop robots with mapping capabilities and cloud connectivity, the impact of our past investments, anticipated revenue, earnings per share and operating income for the fiscal year ended December 30, 2017, and the anticipated impact of our acquisition of our Japanese distributor on revenue, earnings per share and operating income for the fiscal year ended December 30, 2017.  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, 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, net merger, acquisition and divestiture expense, net intellectual property litigation (income) 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 twelve months ended
 
December 31,
2016
 
January 2,
2016
 
December 31,
2016
 
January 2,
2016
Revenue
$
212,494

 
$
206,420

 
$
660,604

 
$
616,778

Cost of revenue
105,852

 
111,093

 
341,289

 
327,852

Gross margin
106,642

 
95,327

 
319,315

 
288,926

Operating expenses:
 
 
 
 
 
 
 
  Research and development
21,861

 
20,185

 
79,805

 
76,071

  Selling and marketing
48,153

 
36,876

 
115,125

 
97,772

  General and administrative
17,909

 
15,270

 
66,828

 
54,465

      Total operating expenses
87,923

 
72,331

 
261,758

 
228,308

Operating income
18,719

 
22,996

 
57,557

 
60,618

Other income, net
1,662

 
3,301

 
3,804

 
2,353

Income before income taxes
20,381

 
26,297

 
61,361

 
62,971

Income tax expense
6,700

 
6,966

 
19,422

 
18,841

Net income
$
13,681

 
$
19,331

 
$
41,939

 
$
44,130

 
 
 
 
 
 
 
 
Net income per share
 
 
 
 
 
 
 
   Basic
$
0.50

 
$
0.66

 
$
1.51

 
$
1.49

   Diluted
$
0.49

 
$
0.65

 
$
1.48

 
$
1.47

 
 
 
 
 
 
 
 
Number of shares used in per share calculations
 
 
 
 
 
 
 
   Basic
27,159

 
29,140

 
27,698

 
29,550

   Diluted
27,823

 
29,602

 
28,292

 
30,107

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation included in above figures:
 
 
 
 
 
 
 
        Cost of revenue
$
205

 
$
414

 
$
760

 
$
1,076

        Research and development
1,048

 
519

 
3,646

 
3,256

        Selling and marketing
692

 
368

 
2,008

 
1,457

        General and administrative
2,269

 
2,420

 
9,581

 
8,394

            Total
$
4,214

 
$
3,721

 
$
15,995

 
$
14,183

 
 
 
 
 
 
 
 








 iRobot Corporation
 Condensed Consolidated Balance Sheets
 (unaudited, in thousands)
 
 
 
 
 
December 31,
2016
 
January 2,
2016
 
 
 
 
 Assets
 
 
 
 Cash and cash equivalents
$
214,523

 
$
179,915

 Short term investments
39,930

 
33,124

 Accounts receivable, net
72,909

 
104,679

 Unbilled revenue
139

 
452

 Inventory
50,578

 
61,678

 Other current assets
5,591

 
9,501

   Total current assets
383,670

 
389,349

 Property and equipment, net
27,532

 
26,850

 Deferred tax assets
30,585

 
31,721

 Goodwill
41,041

 
48,751

 Intangible assets, net
12,207

 
15,664

 Other assets
12,877

 
9,408

 Total assets
$
507,912

 
$
521,743

 
 
 
 
 Liabilities and stockholders' equity
 
 
 
 Accounts payable
$
67,281

 
$
61,655

 Accrued expenses
19,854

 
15,954

 Accrued compensation
21,015

 
15,752

 Deferred revenue and customer advances
4,486

 
3,265

   Total current liabilities
112,636

 
96,626

 Long term liabilities
6,320

 
7,706

 Stockholders' equity
388,956

 
417,411

 Total liabilities and stockholders' equity
$
507,912

 
$
521,743

 
 
 
 





 iRobot Corporation
Consolidated Statements of Cash Flows
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
For the twelve months ended
 
December 31, 2016
 
January 2, 2016
Cash flows from operating activities:
 
 
 
Net income
$
41,939

 
$
44,130

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
   Depreciation and amortization
13,606

 
15,090

   Loss on disposal of property and equipment
211

 
214

   Gain on sale of business unit
(433
)
 
—

   Income on equity method investment
(1,376
)
 
—

   Gain on sale of cost method investment
(634
)
 
(3,287
)
   Stock-based compensation
15,995

 
14,183

   Deferred income taxes, net
3,557

 
(985
)
   Tax benefit of excess stock-based compensation deductions
(2,971
)
 
(1,467
)
   Non-cash director deferred compensation
82

 
149

Changes in operating assets and liabilities — (use) source
 
 
 
   Accounts receivable
25,484

 
(33,623
)
   Unbilled revenue
198

 
2,162

   Inventory
(981
)
 
(13,978
)
   Other assets
3,187

 
203

   Accounts payable
6,502

 
3,786

   Accrued expenses
4,222

 
(2,768
)
   Accrued compensation
5,748

 
(483
)
   Deferred revenue and customer advances
2,996

 
(584
)
   Long term liabilities
(908
)
 
3,970

Net cash provided by operating activities
116,424

 
26,712

 
 
 
 
Cash flows from investing activities:
 
 
 
Additions of property and equipment
(10,817
)
 
(9,372
)
Change in other assets
(2,093
)
 
(1,015
)
Proceeds from sale of business unit
23,520

 
—

Proceeds from sale of cost method investment
634

 
5,645

Purchase of investments
(20,056
)
 
(17,755
)
Sales and maturities of investments
13,002

 
20,500

Net cash provided by (used in) investing activities
4,190

 
(1,997
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from stock option exercises
9,344

 
6,464

Income tax withholding payment associated with restricted stock vesting
(1,300
)
 
(1,295
)
Stock repurchases
(97,021
)
 
(37,393
)
Tax benefit of excess stock-based compensation deductions
2,971

 
1,467

Net cash used in financing activities
(86,006
)
 
(30,757
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
34,608

 
(6,042
)
Cash and cash equivalents, at beginning of period
179,915

 
185,957

Cash and cash equivalents, at end of period
$
214,523

 
$
179,915

 
 
 
 




 iRobot Corporation
Supplemental Information
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
For the twelve months ended
 
December 31, 2016
 
January 2, 2016
 
December 31, 2016
 
January 2, 2016
 
 
 
 
 
 
 
 
Revenue: *
 
 
 
 
 
 
 
Consumer
$
212,096

 
$
175,197

 
$
655,850

 
$
559,619

    Domestic
$
123,969

 
$
84,317

 
$
319,078

 
$
234,904

    International
$
88,127

 
$
90,880

 
$
336,772

 
$
324,715

 
 
 
 
 
 
 
 
Defense & Security
$
—

 
$
30,504

 
$
3,075

 
$
55,004

 
 
 
 
 
 
 
 
Gross Margin Percent:
 
 
 
 
 
 
 
    Consumer
52.6
%
 
49.2
%
 
51.9
%
 
50.9
%
    Defense & Security
0.0
%
 
50.7
%
 
16.6
%
 
45.9
%
    Total Company
50.2
%
 
46.2
%
 
48.3
%
 
46.8
%
 
 
 
 
 
 
 
 
Units shipped - Consumer *
940

 
771

 
2,943

 
2,436

 
 
 
 
 
 
 
 
Average gross selling prices for robot units - Consumer
$
268

 
$
262

 
$
249

 
$
251

 
 
 
 
 
 
 
 
Days sales outstanding
31

 
46

 
31

 
46

 
 
 
 
 
 
 
 
Days in inventory
42

 
51

 
42

 
51

 
 
 
 
 
 
 
 
Headcount
607

 
622

 
607

 
622

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* in thousands
 
 
 
 
 
 
 




 iRobot Corporation
 Adjusted EBITDA Reconciliation to GAAP
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
For the twelve months ended
 
December 31, 2016
 
January 2, 2016
 
December 31, 2016
 
January 2, 2016
 
 
 
 
 
 
 
 
 Net income
$
13,681

 
$
19,331

 
$
41,939

 
$
44,130

 
 
 
 
 
 
 
 
 Interest income, net
(247
)
 
(196
)
 
(934
)
 
(678
)
 Income tax expense
6,700

 
6,966

 
19,422

 
18,841

 Depreciation
2,528

 
3,599

 
9,974

 
11,375

 Amortization
907

 
922

 
3,632

 
3,715

 
 
 
 
 
 
 
 
 EBITDA
23,569

 
30,622

 
74,033

 
77,383

 
 
 
 
 
 
 
 
 Stock-based compensation expense
4,214

 
3,721

 
15,995

 
14,183

 Net merger, acquisition and divestiture expense
619

 
567

 
1,848

 
822

 Net intellectual property litigation (income) expense
201

 
99

 
665

 
(394
)
 Restructuring expense
—

 
—

 
1,857

 
—

 
 
 
 
 
 
 
 
 Adjusted EBITDA
$
28,603

 
$
35,009

 
$
94,398

 
$
91,994

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, net merger, acquisition and divestiture expense, net intellectual property litigation (income) 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
Expected Incremental Impact of Japan Acquisition *
(in millions, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fiscal year 2017
 
Three
 
Three
 
Three
 
Three
 
Twelve
 
Months Ending
 
Months Ending
 
Months Ending
 
Months Ending
 
Months Ending
 
April 1
 
July 1
 
September 30
 
December 30
 
December 30
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
—
 
—
 
$10 - $12
 
$10 - $13
 
$20 - $25
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share
—
 
($0.40 - $0.50)
 
$0.00 - $0.05
 
$0.05 - $0.15
 
($0.25 - 0.35)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* expected to close at the beginning of Q2-17.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 









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