IROBOT CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 25, 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 Strong Second-Quarter Financial Results
Increases Full-Year 2017 Financial Expectations; U.S. Q2 Revenue Up More Than 45%

BEDFORD, Mass., July 25, 2017 - iRobot Corp. (NASDAQ: IRBT), a leader in consumer robots, today announced its financial results for the second quarter ended July 1, 2017.

“Our outstanding second-quarter results exceeded our expectations. Based on our Q2 results, and our outlook for the rest of 2017, fueled by positive momentum in the United States and EMEA, we are increasing our full-year 2017 financial expectations. We now expect 2017 revenue of $815 to $825 million, a 24 - 26% increase over 2016 consumer revenue, operating income of between $67 and $75 million, and EPS of between $1.80 and $2.00, none of which reflects any impact of our announced acquisition of our largest European distributor,” said Colin Angle, chairman and chief executive officer of iRobot.

“Our increased expectations reflect our increased confidence that U.S. and EMEA momentum will continue and that full-year revenue in those regions will grow roughly 30% and high-teens percent respectively.

“With our increased expectations for full-year revenue, we plan to reinvest a portion of the incremental profitability to capitalize on the strong U.S. and EMEA momentum and ensure our continued product leadership in a rapidly growing, competitive marketplace. We will make incremental S&M investments to further promote our Braava family of robots, building on the momentum we have seen over the past couple of quarters. In addition, we will make additional investments in R&D to accelerate our product roadmap in anticipation of new product launches in 2018.”


Financial Results

•
Note: 2016 first-half results include Defense & Security revenue of $3 million versus $0 in the first half of 2017. Divestiture of the Defense & Security business negatively impacted first-half 2016 operating income by $5.6 million and EPS by ($0.11).
•
Revenue for the second quarter of 2017 was $183.1 million, compared with $148.7 million for the second quarter of 2016. Revenue for the first half of 2017 was $351.6 million, compared with $279.5 million last year.
•
Operating income in the second quarter of 2017 was $4.1 million, compared with $5.9 million in the second quarter of 2016. For the first half of 2017, operating income was $25.7 million, compared with $11.4 million a year ago.
•
Quarterly earnings per share were $0.27 for the second quarter of 2017, compared with $0.17 in the second quarter of 2016. First-half earnings per share were $0.85, compared with $0.30 in the first half of 2016. Second-quarter and first-half 2017 EPS included discrete tax benefits of $0.15 and $0.21, respectively, due to the new accounting standard related to stock compensation expense that we adopted in Q1 2017.





Business Highlights

•
In the U.S., consumer revenue grew more than 45% year over year. On July 11, 2017, Amazon Prime Day and the biggest selling day in Amazon’s history, we sold more than twice the volume sold on Prime Day in 2016, which was twice what the volume sold in 2015. The Roomba 652 was ranked #1 in robotic vacuum cleaners, #1 in all floor care and #2 in all home & kitchen for 2017 Prime Day.
•
We introduced the Roomba 890 and Roomba 690 Wi-Fi connected vacuuming robots in the U.S., EMEA and China, extending the benefits of cloud-connected cleaning at lower price points. In addition, we launched the Roomba 900 series robots in China.
•
In a separate release, we announced our planned acquisition of Robopolis, our largest European distributor, which is expected to close at the beginning of Q4 2017.
 
Financial Expectations

Management provides the following expectations with respect to the fiscal year ending December 30, 2017.

(In $millions except Earnings Per Share)

Fiscal Year 2017:
Previous
Updated (excl effect of acquisition)
Anticipated effect of acquisition*
Updated (incl effect of acquisition)
Revenue
$780 - $790
$815 - $825
$25 - $35
$840 - $860
Operating Income
$60 - $70
$67 - $75
($18) - ($12)
$50 - $60
Earnings Per Share
$1.45 - $1.70
$1.80 - $2.00
($0.45) - ($0.30)
$1.35 - $1.70

*See detailed schedule at end of earnings release

Second-Quarter Conference Call
iRobot will host a conference call tomorrow at 8:30 a.m. ET to discuss its financial results for the second fiscal quarter 2017 and outlook for fiscal year 2017 financial performance.

Pertinent details include:

Date:
Wednesday, July 26
Time:
8:30 a.m. ET
Call-In Number:
213-358-0894
Passcode:
15405594

A live, audio broadcast of the conference call also will be available at:
http://investor.irobot.com/phoenix.zhtml?c=193096&p=irol-eventDetails&EventId=5242676.
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 August 2, and can be accessed by dialing 404-537-3406, passcode 15405594.







About iRobot Corp.
iRobot, the leading global consumer robot company, designs and builds robots that empower people to do more both inside and outside of the home. iRobot created the home robot cleaning category with the introduction of its Roomba® Vacuuming Robot in 2002. Today, iRobot is a global enterprise that has sold more than 15 million robots worldwide. iRobot's product line, including the Roomba and the Braava™ family of mopping robots, feature proprietary technologies and advanced concepts in cleaning, mapping and navigation. iRobot's engineers are building an ecosystem of robots and data to enable the smart home. 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; revenue growth; demand for our robots; the timing, and the impact on financial results, of the announced acquisition of our European distributor; the intent to make, and the impact on financial results of, strategic investments, including incremental investments in sales and marketing and additional investments in research and development; the introduction of new products, including the timing thereof; and anticipated revenue, operating income and earnings per share 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 and adoption 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 (income) 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 six months ended
 
July 1,
2017
 
July 2,
2016
 
July 1,
2017
 
July 2,
2016
Revenue
$
183,148

 
$
148,696

 
$
351,615

 
$
279,500

Cost of revenue
93,257

 
79,044

 
174,381

 
147,887

Gross margin
89,891

 
69,652

 
177,234

 
131,613

Operating expenses:
 
 
 
 
 
 
 
  Research and development
26,167

 
18,544

 
51,675

 
38,272

  Selling and marketing
40,123

 
29,107

 
62,698

 
49,047

  General and administrative
19,513

 
16,143

 
37,135

 
32,907

      Total operating expenses
85,803

 
63,794

 
151,508

 
120,226

Operating income
4,088

 
5,858

 
25,726

 
11,387

Other income, net
1,686

 
1,419

 
1,689

 
1,619

Income before income taxes
5,774

 
7,277

 
27,415

 
13,006

Income tax (benefit) expense
(2,129
)
 
2,463

 
3,153

 
4,260

Net income
$
7,903

 
$
4,814

 
$
24,262

 
$
8,746

 
 
 
 
 
 
 
 
Net income per share
 
 
 
 
 
 
 
   Basic
$
0.29

 
$
0.18

 
$
0.89

 
$
0.31

   Diluted
$
0.27

 
$
0.17

 
$
0.85

 
$
0.30

 
 
 
 
 
 
 
 
Number of shares used in per share calculations
 
 
 
 
 
 
 
   Basic
27,516

 
27,360

 
27,410

 
28,198

   Diluted
28,778

 
27,836

 
28,581

 
28,717

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation included in above figures:
 
 
 
 
 
 
 
        Cost of revenue
$
251

 
$
150

 
$
477

 
$
371

        Research and development
1,147

 
741

 
2,246

 
1,570

        Selling and marketing
571

 
387

 
1,141

 
872

        General and administrative
2,735

 
2,708

 
5,171

 
5,065

            Total
$
4,704

 
$
3,986

 
$
9,035

 
$
7,878

 
 
 
 
 
 
 
 








 iRobot Corporation
 Condensed Consolidated Balance Sheets
 (unaudited, in thousands)
 
 
 
 
 
July 1,
2017
 
December 31,
2016
 
 
 
 
 Assets
 
 
 
 Cash and cash equivalents
$
220,173

 
$
214,523

 Short term investments
39,939

 
39,930

 Accounts receivable, net
37,510

 
72,909

 Unbilled revenue
4,162

 
139

 Inventory
83,247

 
50,578

 Other current assets
14,211

 
5,591

   Total current assets
399,242

 
383,670

 Property and equipment, net
37,108

 
27,532

 Deferred tax assets
35,853

 
30,585

 Goodwill
41,332

 
41,041

 Intangible assets, net
17,645

 
12,207

 Other assets
13,611

 
12,877

 Total assets
$
544,791

 
$
507,912

 
 
 
 
 Liabilities and stockholders' equity
 
 
 
 Accounts payable
$
66,167

 
$
67,281

 Accrued expenses
28,167

 
19,854

 Accrued compensation
15,309

 
21,015

 Deferred revenue and customer advances
3,069

 
4,486

   Total current liabilities
112,712

 
112,636

 Long term liabilities
6,282

 
6,320

 Stockholders' equity
425,797

 
388,956

 Total liabilities and stockholders' equity
$
544,791

 
$
507,912

 
 
 
 





 iRobot Corporation
Consolidated Statements of Cash Flows
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
For the six months ended
 
July 1,
2017
 
July 2,
2016
Cash flows from operating activities:
 
 
 
Net income
$
24,262

 
$
8,746

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
   Depreciation and amortization
8,815

 
6,729

   Loss on disposal of property and equipment
42

 
182

   Loss on equity method investment
21

 
—

   Impairment on cost method investment
155

 
—

Gain on sale of business unit
—

 
(433
)
Gain on sale of cost method investment
(1,056
)
 
(634
)
   Stock-based compensation
9,035

 
7,878

   Deferred income taxes, net
(2,656
)
 
1,602

   Tax benefit of excess stock-based compensation deductions
—

 
(776
)
   Non-cash director deferred compensation
32

 
50

Changes in operating assets and liabilities — (use) source
 
 
 
   Accounts receivable
22,513

 
39,202

   Unbilled revenue
(4,024
)
 
198

   Inventory
(10,820
)
 
2,698

   Other assets
(7,478
)
 
(7,432
)
   Accounts payable
(1,953
)
 
(16,496
)
   Accrued expenses
5,661

 
(3,126
)
   Accrued compensation
(7,606
)
 
(2,717
)
   Deferred revenue and customer advances
(1,875
)
 
(211
)
   Long term liabilities
(278
)
 
164

Net cash provided by operating activities
32,790

 
35,624

 
 
 
 
Cash flows from investing activities:
 
 
 
Additions of property and equipment
(13,272
)
 
(4,881
)
Change in other assets
(911
)
 
(428
)
Proceeds from sale of business unit
—

 
23,520

Cash paid for business acquisition, net of cash acquired
(16,524
)
 
—

Purchase of investments
(7,034
)
 
(9,552
)
Sales and maturities of investments
7,000

 
8,000

Proceeds from sale of cost method investment
1,056

 
634

Net cash provided by (used in) investing activities
(29,685
)
 
17,293

 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from stock option exercises
5,365

 
3,143

Income tax withholding payment associated with restricted stock vesting
(2,974
)
 
(1,264
)
Stock repurchases
—

 
(97,021
)
Tax benefit of excess stock-based compensation deductions
—

 
776

Net cash provided by (used in) financing activities
2,391

 
(94,366
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
154

 
—

Net increase (decrease) in cash and cash equivalents
5,650

 
(41,449
)
Cash and cash equivalents, at beginning of period
214,523

 
179,915

Cash and cash equivalents, at end of period
$
220,173

 
$
138,466

 
 
 
 




 iRobot Corporation
Supplemental Information
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
For the six months ended
 
July 1,
2017
 
July 2,
2016
 
July 1,
2017
 
July 2,
2016
 
 
 
 
 
 
 
 
Revenue: *
 
 
 
 
 
 
 
Consumer
$
183,148

 
$
148,104

 
$
351,397

 
$
275,792

    Domestic
$
97,315

 
$
66,483

 
$
182,104

 
$
129,643

    International
$
85,833

 
$
81,621

 
$
169,293

 
$
146,149

 
 
 
 
 
 
 
 
Defense & Security
$
—

 
$
—

 
$
—

 
$
3,075

 
 
 
 
 
 
 
 
Gross Margin Percent
49.1
%
 
46.8
%
 
50.4
%
 
47.1
%
 
 
 
 
 
 
 
 
Consumer units shipped*
749

 
674

 
1,453

 
1,224

Vacuum
638

 
599

 
1,220

 
1,077

Mopping
110

 
70

 
231

 
137

 
 
 
 
 
 
 
 
Consumer revenue**
183

 
148

 
351

 
276

Vacuum***
167

 
139

 
318

 
258

Mopping***
18

 
10

 
34

 
19

 
 
 
 
 
 
 
 
Average gross selling prices for robot units - Consumer
$
275

 
$
240

 
$
267

 
$
248

 
 
 
 
 
 
 
 
Days sales outstanding
21

 
36

 
21

 
36

 
 
 
 
 
 
 
 
Days in inventory
81

 
54

 
81

 
54

 
 
 
 
 
 
 
 
Headcount
760

 
554

 
760

 
554

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* in thousands
 
 
 
 
 
 
 
** in millions
 
 
 
 
 
 
 
*** includes accessory revenue
 
 
 
 
 
 
 




 iRobot Corporation
 Adjusted EBITDA Reconciliation to GAAP
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
For the six months ended
 
July 1,
2017
 
July 2,
2016
 
July 1,
2017
 
July 2,
2016
 
 
 
 
 
 
 
 
 Net income
$
7,903

 
$
4,814

 
$
24,262

 
$
8,746

 
 
 
 
 
 
 
 
 Interest income, net
(482
)
 
(198
)
 
(865
)
 
(470
)
 Income tax (benefit) expense
(2,129
)
 
2,463

 
3,153

 
4,260

 Depreciation
2,958

 
2,446

 
5,538

 
4,913

 Amortization
2,280

 
908

 
3,186

 
1,816

 
 
 
 
 
 
 
 
 EBITDA
10,530

 
10,433

 
35,274

 
19,265

 
 
 
 
 
 
 
 
 Stock-based compensation expense
4,704

 
3,986

 
9,035

 
7,878

 Net merger, acquisition and divestiture (income) expense
931

 
(505
)
 
1,771

 
853

 Net intellectual property litigation expense
382

 
305

 
644

 
361

 Restructuring expense
—

 
1,702

 
—

 
1,702

 
 
 
 
 
 
 
 
 Adjusted EBITDA
$
16,547

 
$
15,921

 
$
46,724

 
$
30,059

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 (income) 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
 Expected Incremental Impact of Robopolis Acquisition
(in millions, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fiscal Year 2017
 
 Actual
 
 Actual
 
 Expected
 
 Expected
 
 Expected
 
 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
—
 
—
 
—
 
$25 - $35
 
$25 - $35
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share
($0.01)
 
($0.02)
 
($0.07 - 0.04)
 
($0.35 - 0.23)
 
($0.45 - 0.30)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 









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