DEFA14A


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,  D.C. 20549
SCHEDULE 14A
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 iRobot Corporation
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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 First-Quarter Financial Results
Domestic Revenue Grew More Than 50% Year over Year; Reaffirms Full Year Expectations

BEDFORD, Mass., Apr. 26, 2016 - iRobot Corp. (NASDAQ: IRBT), a leader in delivering robotic technology-based solutions, today announced its financial results for the first quarter ended April 2, 2016.

“Our first quarter results were outstanding. Home Robot revenue grew 15% over Q1 2015, driven by significant growth in the United States following a record Q4 2015,” said Colin Angle, chairman and chief executive officer of iRobot.

“We also achieved a major milestone in shifting our strategic focus to the Home with the completion of the sale of the D&S business. Based on our Q1 results and our outlook for the rest of 2016, we are reaffirming our full year expectations. We continue to expect 2016 revenue of $630 to $642 million, EPS of between $1.20 and $1.40 and adjusted EBITDA of $80 to $90 million or roughly 13-14% of revenue.

“These expectations reflect our continued confidence that Home Robot revenue will grow 12-13% driven by strong growth in the U.S. and China. The success of the marketing programs we ran during the Q4 2015 holiday season, resulting in year-over-year sell-through of more than 70%, caused U.S. retailers to re-stock their shelves in Q1, ahead of our expectations. We anticipate this momentum to continue throughout 2016 as heavy promotional activities begin again in the second quarter for Mother’s Day and Father’s Day. As we discussed last quarter, our 2016 expectations include strategic incremental investments, critical to achieving our 3-year financial targets. The investments will impact earnings in 2016 versus last year, as expected, to position the company for accelerated growth and improved profitability in 2017 and 2018. In addition, the remaining expenses associated with the D&S divestiture and our proxy contest are an additional one-time cost that will affect Q2, but our strong Q1 results enable us to reaffirm our earnings and Adjusted EBITDA expectations for the full year.
 
“We are off to a great start in 2016 and tracking well to our plan.”

Financial Results


•
Revenue for the first quarter of 2016 was $130.8 million, compared with $118.0 million for the first quarter of 2015.
•
Net income for the first quarter of 2016 was $3.9 million, compared with net income of $4.8 million for the first quarter of 2015.
•
Quarterly earnings per share were $0.13, compared with earnings per share of $0.16 in the first quarter of 2015.
•
Adjusted EBITDA for the first quarter of 2016 was $14.1 million, compared with $13.1 million in the first quarter of 2015.





Business Highlights

•
We delivered year-over-year Home Robot quarterly revenue growth in the United States of more than 50% following record sell through during last year’s holiday season.
•
The overwhelmingly positive response to the introduction of our newest product, Braava jet™, resulted in the highest Day-1 unit sales in the company’s history.
•
Shortly after the end of the quarter, we closed the previously announced sale of our Defense & Security business, ending a proud chapter in iRobot’s history and enabling our intense focus on our home business.
•
We executed an $85 million accelerated stock repurchase transaction shortly after the end of the quarter, funded in part by the proceeds from the sale, consistent with our balanced approach to capital allocation. With this latest transaction, we will have returned almost $100 million of excess capital to shareholders during 2016, while investing to grow the business in order to create shareholder value.
•
We reaffirm full-year financial expectations.


Financial Expectations

Management provides the following expectations with respect to the second quarter ending July 2, 2016 and fiscal year ending December 31, 2016.

Q2 2016:
 
 
Revenue
$145 - $150 million
 
Earnings Per Share
$0.06 - $0.14
 
Adjusted EBITDA
$9 - $12 million
 
 
 
 
Fiscal Year 2016:
 
 
Revenue
$630 - $642 million
 
Earnings Per Share
$1.20 - $1.40
 
Adjusted EBITDA
$80 - $90 million
 

First-Quarter Conference Call
iRobot will host a conference call tomorrow at 8:30 a.m. ET to discuss its financial results for the first fiscal quarter 2016, business outlook, and outlook for second fiscal quarter and fiscal year 2016 financial performance. Pertinent details include:
 
Date:
Wednesday, April 27, 2016
Time:
8:30 a.m. ET
Call-In Number:
847-619-6396
Passcode:
40924297

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=5206139. 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 May 4, and can be accessed by dialing 630-652-3042, passcode 40924297#.
 

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 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
Forward-Looking Statements and Non-GAAP Financial Measures
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 Home Robot revenue growth, demand for our robots, and anticipated revenue, earnings per share and Adjusted EBITDA for fiscal year 2016 and the second quarter ending July 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, 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, 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.

Important Stockholder Information
iRobot Corp. will hold its 2016 Annual Meeting of Stockholders on May 25, 2016. We have filed with the Securities and Exchange Commission (the “SEC”) and mailed to our stockholders a definitive proxy statement and form of WHITE proxy card in connection with the 2016 Annual Meeting. The definitive proxy statement contains important information about iRobot Corp., the 2016 Annual Meeting and related matters.

IROBOT CORP. STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ THE DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT SOLICITATION MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THESE DOCUMENTS CONTAIN IMPORTANT INFORMATION.

iRobot Corp. and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of iRobot Corp. in connection with the matters to be
considered at the 2016 Annual Meeting. Information regarding iRobot Corp.’s directors and executive officers is contained in the Company’s annual report on Form 10-K filed with the SEC on February 19, 2016, and definitive proxy statement filed with the SEC on March 29, 2016.

The proxy statement and other relevant solicitation materials (when they become available), and any and all documents filed by iRobot Corp. with the SEC, may be obtained by investors and security holders free of charge at the SEC’s web site at www.sec.gov. In addition, iRobot Corp.’s filings with the SEC, including the proxy statement and other relevant solicitation materials (when they become available), may be obtained, without charge, from iRobot Corp. by directing a request to iRobot Corp. at 8 Crosby Drive, Bedford, MA 01730, Attention: Investor Relations. Such materials are also available at www.irobot.com.















iRobot Corporation
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 
 For the three months ended
 
April 2, 2016
 
March 28, 2015
Revenue
$
130,804

 
$
117,961

Cost of revenue
68,843

 
64,253

Gross margin
61,961

 
53,708

Operating expenses:
 
 
 
  Research and development
19,728

 
19,032

  Selling and marketing
19,940

 
14,188

  General and administrative
16,764

 
12,589

      Total operating expenses
56,432

 
45,809

Operating income
5,529

 
7,899

Other income (expense), net
200

 
(794
)
Income before income taxes
5,729

 
7,105

Income tax expense
1,797

 
2,351

Net income
$
3,932

 
$
4,754

 
 
 
 
Net income per share
 
 
 
   Basic
$
0.14

 
$
0.16

   Diluted
$
0.13

 
$
0.16

 
 
 
 
Number of shares used in per share calculations
 
 
 
   Basic
29,004

 
29,653

   Diluted
29,474

 
30,230

 
 
 
 
 
 
 
 
Stock-based compensation included in above figures:
 
 
 
        Cost of revenue
$
221

 
$
215

        Research and development
829

 
832

        Selling and marketing
485

 
309

        General and administrative
2,357

 
1,751

            Total
$
3,892

 
$
3,107

 
 
 
 








 iRobot Corporation
 Condensed Consolidated Balance Sheets
 (unaudited, in thousands)
 
 
 
 
 
April 2, 2016
 
January 2, 2016
 
 
 
 
 Assets
 
 
 
 Cash and cash equivalents
$
215,990

 
$
179,915

 Short term investments
30,746

 
33,124

 Accounts receivable, net
28,497

 
104,679

 Unbilled revenue
139

 
452

 Inventory
52,764

 
61,678

 Assets held for sale
19,966

 
—

 Other current assets
11,770

 
9,501

   Total current assets
359,872

 
389,349

 Property and equipment, net
25,600

 
26,850

 Deferred tax assets
31,849

 
31,721

 Goodwill
48,751

 
48,751

 Intangible assets, net
14,800

 
15,664

 Other assets
9,931

 
9,408

 Total assets
$
490,803

 
$
521,743

 
 
 
 
 Liabilities and stockholders' equity
 
 
 
 Accounts payable
$
39,015

 
$
61,655

 Accrued expenses
12,910

 
15,954

 Accrued compensation
11,220

 
15,752

 Deferred revenue and customer advances
2,634

 
3,265

 Liabilities held for sale
4,609

 
—

   Total current liabilities
70,388

 
96,626

 Long term liabilities
7,231

 
7,706

 Stockholders' equity
413,184

 
417,411

 Total liabilities and stockholders' equity
$
490,803

 
$
521,743

 
 
 
 





 iRobot Corporation
Consolidated Statements of Cash Flows
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 For the three months ended
 
April 2, 2016
 
March 28, 2015
Cash flows from operating activities:
 
 
 
Net income
$
3,932

 
$
4,754

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
   Depreciation and amortization
3,375

 
3,561

   Loss on disposal of property and equipment
—

 
22

   Stock-based compensation
3,892

 
3,107

   Deferred income taxes, net
(47
)
 
(102
)
   Tax benefit of excess stock-based compensation deductions
(267
)
 
(560
)
   Non-cash director deferred compensation
33

 
38

Changes in operating assets and liabilities — (use) source
 
 
 
   Accounts receivable
69,879

 
33,351

   Unbilled revenue
185

 
1,981

   Inventory
(3,167
)
 
(1,998
)
   Other assets
(2,985
)
 
203

   Accounts payable
(20,626
)
 
(21,835
)
   Accrued expenses
(2,673
)
 
(4,374
)
   Accrued compensation
(4,055
)
 
(8,430
)
   Deferred revenue and customer advances
1,144

 
(2,080
)
   Long term liabilities
3

 
83

Net cash provided by operating activities
48,623

 
7,721

 
 
 
 
Cash flows from investing activities:
 
 
 
Additions of property and equipment
(2,390
)
 
(4,445
)
Change in other assets
(523
)
 
(515
)
Purchase of investments
—

 
(3,541
)
Sales of investments
2,500

 
2,500

Net cash used in investing activities
(413
)
 
(6,001
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from stock option exercises
837

 
1,466

Income tax withholding payment associated with restricted stock vesting
(1,218
)
 
(1,118
)
Stock repurchases
(12,021
)
 
(4,924
)
Tax benefit of excess stock-based compensation deductions
267

 
560

Net cash used in financing activities
(12,135
)
 
(4,016
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
36,075

 
(2,296
)
Cash and cash equivalents, at beginning of period
179,915

 
185,957

Cash and cash equivalents, at end of period
$
215,990

 
$
183,661

 
 
 
 




 iRobot Corporation
Supplemental Information
(unaudited)
 
 
 
 
 
 
 
 
 
 For the three months ended
 
April 2, 2016
 
March 28, 2015
 
 
 
 
Revenue: *
 
 
 
Home Robots
$
127,687

 
$
111,085

    Domestic
$
63,158

 
$
40,627

    International
$
64,529

 
$
70,458

 
 
 
 
Defense & Security
$
3,075

 
$
6,526

    Domestic
$
2,092

 
$
3,853

    International
$
983

 
$
2,673

 
 
 
 
    Product
$
3,057

 
$
6,372

    Contract
$
18

 
$
154

 
 
 
 
    Product Life Cycle
$
2,002

 
$
4,728

 
 
 
 
Gross Margin Percent:
 
 
 
    Home Robots
52.5
%
 
51.1
%
    Defense & Security
16.6
%
 
33.2
%
    Total Company
47.4
%
 
45.5
%
 
 
 
 
Units shipped:
 
 
 
    Home Robots *
550

 
491

    Defense & Security
11

 
28

 
 
 
 
Average gross selling prices for robot units:
 
 
 
    Home Robots
$
257

 
$
238

    Defense & Security *
$
96

 
$
59

 
 
 
 
Days sales outstanding
24

 
30

 
 
 
 
Days in inventory
86

 
71

 
 
 
 
Headcount
633

 
589

 
 
 
 
 
 
 
 
* in thousands
 
 
 




 iRobot Corporation
 Adjusted EBITDA Reconciliation to GAAP
 (unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 For the three months ended
 
April 2, 2016
 
March 28, 2015
 
 
 
 
 Net income
$
3,932

 
$
4,754

 
 
 
 
 Interest income, net
(272
)
 
(154
)
 Income tax expense
1,797

 
2,351

 Depreciation
2,467

 
2,621

 Amortization
908

 
940

 
 
 
 
 EBITDA
8,832

 
10,512

 
 
 
 
 Stock-based compensation expense
3,892

 
3,107

 Merger, acquisition and divestiture expense
1,358

 
—

 Net intellectual property litigation (income) expense
56

 
(510
)
 Restructuring expense
—

 
—

 
 
 
 
 Adjusted EBITDA
$
14,138

 
$
13,109

 
 
 
 
 
 
 
 
 
 
 
 
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 (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
Impact of Defense and Security (D&S) Divestiture
(in millions, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the three months ended April 2, 2016
 
 
 
Gross margin
 
Operating expenses
 
Operating income
 
Net income
 
Revenue
 
$
%
 
$
%
 
$
 
%
 
per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported (GAAP) *
$131
 
$62
47.4%
 
$56
43.2%
 
$6
 
4.2%
 
$0.13
 
 
 
 
 
 
 
 
 
 
 
 
 
 
D&S related **
$3
 
$0
0.0%
 
$5
166.7%
 
($5)
 
(166.7%)
 
($0.12)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Excluding D&S (Non-GAAP) *
$128
 
$62
48.4%
 
$51
39.8%
 
$11
 
8.6%
 
$0.25
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 **
$3
 
0%
 
185% - 195%
 
(190% - 200%)
 
($0.10 - $0.11)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Excluding D&S (Non-GAAP) *
$627 - $639
 
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
Defense and Security 2015 Financial Results (Non-GAAP) *
(in millions, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the three months ended
 
For the twelve months ended
 
March 28, 2015
 
June 27, 2015
 
September 26, 2015
 
January 2, 2016
 
January 2,
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$6
 
$12
 
$6
 
$31
 
$55
 
 
 
 
 
 
 
 
 
 
Operating income
($3)
 
$0
 
($2)
 
$9
 
$4
 
 
 
 
 
 
 
 
 
 
Net income per share
($0.06)
 
($0.01)
 
($0.06)
 
$0.23
 
$0.10
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* GAAP refers to U.S. generally accepted accounting principles.
 
 
 
 
 
 
 
 
 
 
 
 
 
 





























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