IROBOT CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 24, 2018

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8-K - 8-K - IROBOT CORPq22018earningsrelease.htm


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 Second-Quarter Financial Results
Strength in All Major Regions Drives 24% Year-Over-Year Revenue Growth
Increases Full-Year Financial Expectations

BEDFORD, Mass., July 24, 2018 - iRobot Corp. (NASDAQ: IRBT), a leader in consumer robots, today announced its financial results for the second quarter ended June 30, 2018.

“We delivered strong second-quarter revenue growth of 24% in Q2 2018 over Q2 2017, driven by growth across all major regions. EMEA and Japan saw significant year-over-year growth of 51% and 31%, respectively. EMEA growth was driven in part by the revenue uplift from our acquisition of our largest European distributor, which was closed at the beginning of Q4 2017. Shipments to support Q2 holidays in the United States drove domestic revenue growth of 15% over last year,” said Colin Angle, chairman and chief executive officer of iRobot.

“Given our Q2 results and our outlook for the rest of the year, including our anticipated product launches in the second half of the year, we are updating our 2018 full-year expectations. We now anticipate full-year 2018 revenue of 1.06 to 1.08 billion dollars, which is year-over-year growth of 20 - 22%, full-year 2018 operating income of 90 to 96 million dollars, and full-year 2018 EPS of $2.30 to $2.50.

“We are continuing to execute against the strategy underlying our 2018 expectations and three-year financial targets which we believe is the most effective way to drive sustainable growth and shareholder value.”
 
Financial Results

•
Revenue for the second quarter of 2018 was $226.3 million, compared with $183.1 million for the second quarter of 2017. Revenue for the first half of 2018 was $443.4 million, compared with $351.6 million last year.
•
Operating income in the second quarter of 2018 was $13.4 million, compared with $4.1 million in the second quarter of 2017. For the first half of 2018, operating income was $38.8 million, compared with $25.7 million a year ago.
•
Quarterly earnings per share were $0.37 for the second quarter of 2018, compared with $0.27 in the second quarter of 2017. First-half earnings per share were $1.08, compared with $0.85 in the first half of 2017.

Business Highlights

•
Roomba® was selected for the fourth straight year as a featured product for U.S. Amazon Prime Day. Our robots sold out, doubling the Prime Day sales volume as they have each year since the event began in 2015. Roomba® was also featured on Prime Day in EMEA and Japan this year for the first time, and the results in those regions were great.




•
We announced a favorable initial determination from the International Trade Commission (ITC) regarding our patent infringement claims recommending an exclusion order barring the importation, into the United States, of certain robotic vacuum cleaners.
•
We completed the previously announced stock repurchase program authorizing the purchase of up to $50 million of our common stock.  
•
We announced an increase in our revolving credit facility to $150 million and an extension of the term to 2023, giving the company additional flexibility to execute on the growth strategy.
•
We implemented a U.K. principal company to optimize our global operating structure.

Financial Expectations

Management provides the following expectations with respect to the fiscal year ending December 29, 2018.

Fiscal Year 2018:
Current
Previous
Revenue
$1.06 - $1.08 billion
$1.05 - $1.08 billion
Operating Income
$90 - $96 million
$86 - $96 million
Earnings Per Share
$2.30 - $2.50
$2.15 - $2.40

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 2018, business outlook, and outlook for fiscal year 2018 financial performance. Pertinent details include:
Date:
Wednesday, July 25, 2018
Time:
8:30 a.m. ET
Call-In Number:
213-358-0894
Passcode:
8376338

A live, audio broadcast of the conference call will also be available at http://investor.irobot.com/events/event-details/q2-2018-irobot-corp-earnings-conference-call. 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 1, and can be accessed by dialing 404-537-3406, passcode 8376338.
 
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 20 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 technologies to enable the smart home. For more information about iRobot, please visit www.irobot.com.

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 robotic vacuum cleaners; the introduction of new products and the timing and impact thereof; the impact on our financial results of our U.K. principal company; and anticipated revenue, operating income and earnings per share for the fiscal year ended December 29, 2018. 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; the imposition of tariffs on goods imported into the United States; 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, gain on business acquisition, 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
 
June 30,
2018
 
July 1,
2017
 
June 30,
2018
 
July 1,
2017
Revenue
$
226,317

 
$
183,148

 
$
443,385

 
$
351,615

Cost of revenue:
 
 
 
 
 
 
 
  Cost of product revenue
103,712

 
91,009

 
200,213

 
171,269

  Amortization of intangible assets
4,679

 
2,248

 
9,461

 
3,112

Total cost of revenue
108,391

 
93,257

 
209,674

 
174,381

Gross margin
117,926

 
89,891

 
233,711

 
177,234

Operating expenses:
 
 
 
 
 
 
 
  Research and development
34,924

 
26,167

 
67,869

 
51,675

  Selling and marketing
45,910

 
40,123

 
77,239

 
62,698

  General and administrative
23,468

 
19,513

 
49,301

 
37,135

  Amortization of intangible assets
269

 
—

 
542

 
—

      Total operating expenses
104,571

 
85,803

 
194,951

 
151,508

Operating income
13,355

 
4,088

 
38,760

 
25,726

Other income, net
1,507

 
1,686

 
2,026

 
1,689

Income before income taxes
14,862

 
5,774

 
40,786

 
27,415

Income tax expense (benefit)
4,391

 
(2,129
)
 
9,914

 
3,153

Net income
$
10,471

 
$
7,903

 
$
30,872

 
$
24,262

 
 
 
 
 
 
 
 
Net income per share
 
 
 
 
 
 
 
   Basic
$
0.38

 
$
0.29

 
$
1.11

 
$
0.89

   Diluted
$
0.37

 
$
0.27

 
$
1.08

 
$
0.85

 
 
 
 
 
 
 
 
Number of shares used in per share calculations
 
 
 
 
 
 
 
   Basic
27,615

 
27,516

 
27,802

 
27,410

   Diluted
28,337

 
28,778

 
28,658

 
28,581

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation included in above figures:
 
 
 
 
 
 
 
        Cost of revenue
$
347

 
$
251

 
$
688

 
$
477

        Research and development
1,794

 
1,147

 
3,483

 
2,246

        Selling and marketing
750

 
571

 
1,488

 
1,141

        General and administrative
3,540

 
2,735

 
6,718

 
5,171

            Total
$
6,431

 
$
4,704

 
$
12,377

 
$
9,035

 
 
 
 
 
 
 
 








 iRobot Corporation
 Condensed Consolidated Balance Sheets
 (unaudited, in thousands)
 
 
 
 
 
June 30,
2018
 
December 30,
2017
 
 
 
 
 Assets
 
 
 
 Cash and cash equivalents
$
88,783

 
$
128,635

 Short term investments
38,551

 
37,225

 Accounts receivable, net
75,127

 
142,829

 Inventory
115,377

 
106,932

 Other current assets
30,608

 
19,105

   Total current assets
348,446

 
434,726

 Property and equipment, net
47,252

 
44,579

 Deferred tax assets
33,154

 
31,531

 Goodwill
118,319

 
121,440

 Intangible assets, net
34,079

 
44,712

 Other assets
15,531

 
14,534

 Total assets
$
596,781

 
$
691,522

 
 
 
 
 Liabilities and stockholders' equity
 
 
 
 Accounts payable
$
66,926

 
$
116,316

 Accrued expenses
51,574

 
73,647

 Deferred revenue and customer advances
2,223

 
7,761

   Total current liabilities
120,723

 
197,724

Deferred tax liabilities
7,190

 
9,539

Other long-term liabilities
10,827

 
13,932

Total long-term liabilities
18,017

 
23,471

Total liabilities
138,740

 
221,195

Stockholders' equity
458,041

 
470,327

Total liabilities and stockholders' equity
$
596,781

 
$
691,522

 
 
 
 





 iRobot Corporation
Consolidated Statements of Cash Flows
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
For the six months ended
 
June 30,
2018
 
July 1,
2017
Cash flows from operating activities:
 
 
 
Net income
$
30,872

 
$
24,262

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
17,662

 
8,815

Stock-based compensation
12,377

 
9,035

Deferred income taxes, net
(4,208
)
 
(2,656
)
Deferred Rent
586

 
—

Other
(258
)
 
(806
)
Changes in operating assets and liabilities — (use) source
 
 
 
Accounts receivable
66,085

 
18,489

Inventory
(10,303
)
 
(10,820
)
Other assets
(12,764
)
 
(7,478
)
Accounts payable
(46,519
)
 
(1,953
)
Accrued expenses
(20,266
)
 
(1,945
)
Deferred revenue and customer advances
(3,970
)
 
(1,875
)
Long term liabilities
(2,975
)
 
(278
)
Net cash provided by operating activities
26,319

 
32,790

 
 
 
 
Cash flows from investing activities:
 
 
 
Additions of property and equipment
(14,284
)
 
(13,272
)
Change in other assets
(1,837
)
 
(911
)
Cash paid for business acquisitions, net of cash acquired
—

 
(16,524
)
Purchases of investments
(6,438
)
 
(7,034
)
Sales and maturities of investments
7,000

 
7,000

Proceeds from sale of business unit and cost method investment
629

 
1,056

Net cash used in investing activities
(14,930
)
 
(29,685
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from stock option exercises
2,605

 
5,365

Income tax withholding payment associated with restricted stock vesting
(3,532
)
 
(2,974
)
Stock repurchases
(50,000
)
 
—

Net cash (used in) provided by financing activities
(50,927
)
 
2,391

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(314
)
 
154

Net (decrease) increase in cash and cash equivalents
(39,852
)
 
5,650

Cash and cash equivalents, at beginning of period
128,635

 
214,523

Cash and cash equivalents, at end of period
$
88,783

 
$
220,173

 
 
 
 




 iRobot Corporation
Supplemental Information
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended
 
For the six months ended
 
June 30,
2018
 
July 1,
2017
 
June 30,
2018
 
July 1,
2017
 
 
 
 
 
 
 
 
Revenue: *
 
 
 
 
 
 
 
Consumer
$
226,317

 
$
183,148

 
$
443,343

 
$
351,397

 
 
 
 
 
 
 
 
    Domestic
$
111,526

 
$
97,315

 
$
218,388

 
$
182,104

    International
$
114,791

 
$
85,833

 
$
224,997

 
$
169,293

 
 
 
 
 
 
 
 
Gross Margin Percent
52.1
%
 
49.1
%
 
52.7
%
 
50.4
%
 
 
 
 
 
 
 
 
Consumer units shipped*
953

 
749

 
1,768

 
1,453

Vacuum
819

 
638

 
1,530

 
1,220

Mopping
134

 
110

 
237

 
231

 
 
 
 
 
 
 
 
Consumer revenue**
$
226

 
$
183

 
$
443

 
$
351

Vacuum***
$
204

 
$
165

 
$
405

 
$
318

Mopping***
$
22

 
$
18

 
$
38

 
$
34

 
 
 
 
 
 
 
 
Average gross selling prices for robot units - Consumer
$
285

 
$
275

 
$
296

 
$
267

 
 
 
 
 
 
 
 
Days sales outstanding
30

 
21

 
30

 
21

 
 
 
 
 
 
 
 
Days in inventory
97

 
81

 
97

 
81

 
 
 
 
 
 
 
 
Headcount
982

 
760

 
982

 
760

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* 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
 
June 30,
2018
 
July 1,
2017
 
June 30,
2018
 
July 1,
2017
 
 
 
 
 
 
 
 
 Net income
$
10,471

 
$
7,903

 
$
30,872

 
$
24,262

 
 
 
 
 
 
 
 
 Interest income, net
(221
)
 
(482
)
 
(551
)
 
(865
)
 Income tax expense
4,391

 
(2,129
)
 
9,914

 
3,153

 Depreciation
3,942

 
2,958

 
7,603

 
5,538

 Amortization
4,973

 
2,280

 
10,059

 
3,186

 
 
 
 
 
 
 
 
 EBITDA
23,556

 
10,530

 
57,897

 
35,274

 
 
 
 
 
 
 
 
 Stock-based compensation expense
6,431

 
4,704

 
12,377

 
9,035

 Net merger, acquisition and divestiture (income) expense
164

 
931

 
23

 
1,771

 Net intellectual property litigation expense
759

 
382

 
3,330

 
644

 
 
 
 
 
 
 
 
 Adjusted EBITDA
$
30,910

 
$
16,547

 
$
73,627

 
$
46,724

Adjusted EBITDA as a % of revenue
13.7
%
 
9.0
%
 
16.6
%
 
13.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, gain on business acquisition, 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
Effective Tax Rate
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Fiscal Year 2018
 
Fiscal Year 2017
 
 Three Months Ended
 
 
 
 
 
March 31
 
 June 30
 
 September 29
 
 December 29
 
 FY18
 
 FY17
 
Actual
 
Actual
 
 Expected
 
 Expected
 
 Expected
 
Actual
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate, before discrete items
27%
 
16%
 
24-26%
 
24-26%
 
24-26%
 
34%
 
 
 
 
 
 
 
 
 
 
 
 
Discrete Items
-6%
 
14%
 
Not Forecasted
 
-1%
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate, including discrete items
21%
 
30%
 
Not Forecasted
 
33%



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