iRobot Reports Third-Quarter 2012 Financial Results

iRobot Reports Third-Quarter 2012 Financial Results

Restructures to invest in high growth business

BEDFORD, Mass.--(BUSINESS WIRE)-- iRobot Corp. (NAS: IRBT) , a leader in delivering robotic technology-based solutions, today announced its financial results for the third quarter ended September 29, 2012.

  • Revenue for the third quarter of 2012 was $126.3 million, compared with $120.4 million for the same quarter one year ago. Revenue for the first nine months of 2012 was $335.6 million compared with $334.7 million last year.

  • Net income in the third quarter of 2012 was $15.2 million, compared with $14.1 million in the third quarter of 2011. For the first nine months, net income was $23.2 million, compared with $29.6 million a year ago. Net income included a one-time tax benefit of $3.5 million in the third-quarter and nine-month periods in 2011.

  • Quarterly earnings per share were $0.54, compared with $0.50 in the third quarter last year. Nine-month earnings per share were $0.82 in 2012, compared with $1.06 in 2011. EPS included a one-time tax benefit of $0.12 in the third-quarter and nine-month periods in 2011.

  • Adjusted EBITDA for the third quarter of 2012 was $29.2 million, compared with $20.2 million in the third quarter of 2011. For the first nine months of 2012 Adjusted EBITDA was $51.5 million, compared with $51.7 million for the same period a year ago.

  • During the third quarter of 2012, there were a number of items recorded, one of which resulted in a $7.7 million revenue increase. The positive net impact of these items was $0.10 in earnings per share and $5.2 million in Adjusted EBITDA.


"During the third-quarter we made several strategic decisions to strengthen the company. We announced our acquisition of Evolution Robotics (ER), hired key senior leaders and began to implement significant actions in our D&S business. Our Home Robot unit has had an outstanding year and we expect continued growth in that business. The 2012 outlook for D&S has deteriorated and we expect further declines in 2013. To right-size the business we have restructured D&S and taken costs out. These moves will result in a fourth quarter 2012 restructuring charge of $4-5 million," said Colin Angle, chairman and chief executive officer of iRobot. "We are taking these actions in order to invest in our high growth Home Robot business as well as our emerging high potential remote presence business, while meeting our commitment to profitable growth," he added.

Business Highlights

  • Home Robot revenue increased 33 percent in the third quarter 2012 fueled by strong growth in both U.S. and international markets.

  • Our Home Robot product return experience has improved as the result of our sustained investment in product quality. In the third quarter we adjusted our accrual rates for Home Robot product returns, resulting in a benefit to revenue and earnings.

  • We hired three seasoned executives, Frank Wilson, Senior Vice President & General Manager of D&S, Youssef Saleh, Vice President of Remote Presence, and Paolo Pirjanian, formerly CEO of Evolution Robotics, as CTO.

  • In Q4 2012, the total negative impact on earnings per share of acquiring Evolution Robotics and restructuring D&S is expected to be between ($0.28) - ($0.32). The negative impact on Adjusted EBITDA is expected to be ($5) - ($6) million. These are reflected in our Q4 and full year 2012 expectations.

Financial Expectations

Management provides the following expectations with respect to the fourth quarter and full year ending December 29, 2012.

Q4 2012*:

Revenue

$98 - $102 million

Loss Per Share

($0.39) - ($0.33)

Adjusted EBITDA loss

($4) - ($2) million

Fiscal Year 2012:

Current*

Prior

Revenue

$434 - $438 million

$465 - $485 million

Earnings Per Share

$0.44 - $0.50

$0.90 - $1.00

Adjusted EBITDA

$47 - $49 million

$59 - $63 million

Full-Year 2012 BU Revenue:

Current

Prior

Home Robots

$355 - $360 million*

$365 - $375 million

Defense & Security Robots

$75 - $80 million

$100 - $110 million

Preliminary 2013 Revenue Expectations

Home Robots

$425 - $435 million*

Defense & Security Robots

$45 - $55 million

*Including Evolution Robotics

Fourth-Quarter Conference Call

iRobot will host a conference call tomorrow at 8:30 a.m. ET to discuss its results for the third fiscal quarter 2012, business outlook, and outlook for 2012 financial performance. Pertinent details include:

Date:

Wednesday, October 24, 2012

Time:

8:30 a.m. ET

Call-In Number:

847-413-3362

Passcode:

33524566

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=4249338. 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 31, and can be accessed by dialing 630-652-3042, passcode 33524566#.

About iRobot Corp.

iRobot designs and builds robots that make a difference. The company's home robots help people find smarter ways to clean, and its defense & security robots protect those in harm's way. iRobot's consumer and military robots feature iRobot Aware® robot intelligence systems, proprietary technology 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 and growth, demand for our robots, operating performance, restructuring charges to be incurred during the fourth quarter ending December 29, 2012, the impact on earnings per share and Adjusted EBITDA for the fourth quarter ending December 29, 2012 of the acquisition of Evolution Robotics, Inc., and Defense & Security restructuring, anticipated mix of revenue for the fourth quarter ending December 29, 2012 and fiscal year 2013, anticipated revenue, earnings per share and Adjusted EBITDA for fiscal year 2012 and the fourth quarter ending December 29, 2012, anticipated business unit revenue for the fiscal year 2012 and fiscal year 2013. 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, our dependence on the U.S. federal government and government contracts, the timing of government contracts and orders, market acceptance of our products, 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, Adjusted net income and Adjusted net income per share, each of which is a non-GAAP financial measure as defined by SEC Regulation G. We define 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. We define Adjusted net income and Adjusted net income per share as net income and net income per share, respectively, excluding the impact of a one-time tax benefit. Reconciliations between net income and Adjusted EBITDA, net income and Adjusted net income, and net income per share and Adjusted net income per share are provided in the financial tables at the end of this press release.

iRobot Corporation

Consolidated Statement of Income

(in thousands, except per share amounts)

(unaudited)

For the three months ended

For the nine months ended

September 29,

October 1,

September 29,

October 1,

2012

2011

2012

2011

Revenue

Product revenue

$

121,174

$

109,993

$

320,676

$

304,100

Contract revenue

5,124

10,380

14,874

30,632

Total

126,298

120,373

335,550

334,732

Cost of Revenue

Product revenue

67,008

63,670

184,078

177,695

Contract revenue

4,388

6,660

13,110

21,004

Total

71,396

70,330

197,188

198,699

Gross Margin

54,902

50,043

138,362

136,033

Operating Expense

Research & development

8,406

8,948

26,797

25,823

Selling & marketing

12,436

14,553

45,128

40,301

General & administrative

11,326

10,962

32,390

31,659

Total

32,168

34,463

104,315

97,783

Operating income

22,734

15,580

34,047

38,250

Other income (expense), net

197

(92

)

477

258

Pre-tax income

22,931

15,488

34,524

38,508

Income tax expense

7,724

1,436

11,289

8,955

Net income

$

15,207

$

14,052

$

23,235

$

29,553

Net income per common share:

Basic

$

0.55

$

0.52

$

0.84

$

1.11

Diluted

$

0.54

$

0.50

$

0.82

$

1.06

Shares used in per common share calculations:

Basic

27,650

26,902

27,520

26,568

Diluted

28,321

27,940

28,323

27,823

Stock-based compensation included in above figures:

Cost of product revenue

$

306

$

344

$

892

$

915

Cost of contract revenue

129

115

320

365

Research & development

219

162

773

481

Selling & marketing

158

174

574

513

General & administrative

1,796

1,401

5,464

4,112

Total

$

2,608

$

2,196

$

8,023

$

6,386

iRobot Corporation

Condensed Consolidated Balance Sheet

(unaudited, in thousands)

September 29,

December 31,

2012

2011

Assets

Cash and equivalents

$

169,658

$

166,308

Short term investments

20,061

17,811

Accounts receivable, net

53,379

43,338

Unbilled revenues

1,693

2,362

Inventory

32,592

31,089

Deferred tax assets

14,882

15,344

Other current assets

4,608

7,928

Total current assets

296,873

284,180

Property, plant and equipment, net

24,838

29,029

Deferred tax assets

10,424

6,127

Other assets

18,599

12,877

Total assets

$

350,734

$

332,213

Liabilities and stockholders' equity

Accounts payable

$

38,317

$

48,406

Accrued expenses

18,713

17,188

Accrued compensation

9,037

17,879

Deferred revenue and customer advances

2,118

1,527

Total current liabilities

68,185

85,000

Long term liabilities

3,940

4,255

Stockholders' equity

278,609

242,958

Total liabilities and stockholders' equity

$

350,734

$

332,213

iRobot Corporation

Consolidated Statement of Cash Flows

(unaudited, in thousands)

For the three months ended

For the nine months ended

September 29,

October 1,

September 29,

October 1,

2012

2011

2012

2011

Cash flows from operating activities:

Net income

$

15,207

$

14,052

$

23,235

$

29,553

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

2,868

2,597

8,181

7,237

Loss on disposal of property and equipment

612

3

778

476

Stock-based compensation

2,608

2,196

8,023

6,386

Deferred income taxes, net

1,375

1,961

(2,855

)

6,449

Tax benefit of excess stock based compensation deductions

(426

)

(347

)

(1,461

)

(6,002

)

Non-cash director deferred compensation

22

44

64

126

Changes in operating assets and liabilities — (use) source

Accounts receivable

(13,852

)

(6,871

)

(10,041

)

(7,344

)

Unbilled revenue

380