PR Newswire | Jul 21, 2020 04:06PM EDT

07/21 15:05 CDT

iRobot Reports Second-Quarter 2020 Financial ResultsRevenue of $280 Million Reflects Strong Growth in Premium Robots BEDFORD, Mass., July 21, 2020

BEDFORD, Mass., July 21, 2020 /PRNewswire/ -- iRobot Corp. (NASDAQ: IRBT), a leader in consumer robots, today announced its financial results for the second quarter ended June 27, 2020.

Colin Angle, chairman and chief executive officer of iRobot, stated, "Consistent with our business update last month, iRobot delivered a stronger-than-expected second-quarter performance as demand strengthened meaningfully during the quarter. Our top-line results were highlighted by 43% growth in our premium robots. Quarterly revenue in each major geographic region surpassed our initial targets entering the quarter, led by 13% growth in the U.S. and 43% expansion in Japan. Our return to operating profitability reflected the combination of higher revenue, notable improvement in our gross margin and disciplined expense management."

"We are making tangible progress in our strategy to differentiate our robots through their ability to deliver an exceptional cleaning experience as our product mix continued to shift toward our premium robots," Angle noted. "Maintaining a clean home has taken on greater prominence during this pandemic. Consumers are increasingly realizing that our floor cleaning robots, particularly our premium products such as the Roomba i7 Series and s9 Series, along with the Braava jet m6, possess the cleaning efficacy, thoughtful intelligence and home understanding to become trusted cleaning companions. Related to this, our community of connected customers grew 13% sequentially from the end of March to approximately 6.9 million at the end of Q2."

Angle concluded, "We move into the second half of 2020 with relatively low inventory levels at retailers and solid year-to-date sell-through momentum globally. Despite considerable macroeconomic uncertainty and limited visibility into the timing and magnitude of second-half orders, we are incrementally more optimistic about our second-half revenue growth prospects than we were in mid-June. Rather than an expected decline in annual revenue, we now anticipate 2020 revenue will be relatively unchanged to slightly higher than 2019. While our second-quarter profitability reflects the benefit of our tariff exclusion, we do not yet know whether this exclusion will be extended through the second half of the year. Nevertheless, we are focused on converting our second-half top-line results and prudent spending into a solid operating profitability and EPS performance."

Financial Performance Highlights

* Revenue for the second quarter of 2020 was $279.9 million, an increase of 8% from $260.2 million in the second quarter of 2019. The growth primarily reflected a 43% increase in premium robot (list price of $500 or higher) revenue. Revenue for the first half of 2020 was $472.4 million versus $497.8 million in the first half of 2019. * The second-quarter 2020 revenue performance was highlighted by 13% growth in the U.S. and 43% in Japan over the prior year period, which more than offset a 14% decline in EMEA. * Approximately 70% of the second-quarter 2020 revenue was estimated to be generated from e-commerce-related orders that span the company's own website and app, dedicated e-commerce websites and the online arms of traditional retailers. Direct-to-consumer revenue of $33 million grew nearly 160% from the prior year's second quarter.

* Second-quarter 2020 GAAP operating income was $70.3 million, compared with GAAP operating income of $5.3 million in the second quarter of 2019. Second-quarter 2020 non-GAAP operating income of $40.5 million compared with non-GAAP operating income of $15.7 million in the same period one year ago. GAAP operating income for the first six months of 2020 was $50.1 million, compared with GAAP operating income of $27.5 million in the first half of 2019. First-half 2020 non-GAAP operating income was $26.1 million versus non-GAAP operating income of $48.8 million in the same period one year ago. * GAAP net income per share was $2.07 for the second quarter of 2020, compared with GAAP net income per share of $0.25 in the second quarter of 2019. Non-GAAP net income per share was $1.06 for the second quarter of 2020 versus non-GAAP second-quarter 2019 net income per share of $0.48. First-half GAAP 2020 net income per share was $1.42, compared with $1.03 in the first half of 2019. First-half 2020 non-GAAP net income per share was $0.73, compared with $1.43 in the first half of 2019. * As of June 27, 2020, the company's cash, cash equivalents and short-term investments were $242.3 million, compared with $263.5 million as of March 28, 2020 and $256.4 million as of December 28, 2019. The company, which has no debt, also has access to an unsecured revolving line of credit of $150 million, with an additional $75 million accordion feature.

Second-Quarter and Recent Business Highlights

* On April 24, the United States Trade Representative granted iRobot an exclusion for its Roomba(r) robot vacuums from Section 301 tariffs through August 7, 2020. The company does not yet know whether an extension for its exclusion beyond the expiration date will be granted. * Completed all actions associated with the company's April 2020 restructuring, recording a $1.9 million charge primarily associated with severance costs in the second quarter. * Continued progress in expanding the company's community of engaged owners who have opted-in to its digital communications (in-app messaging, email or both) to approximately 6.9 million, up 13% since the end of the first quarter and nearly 110% from the same period one year ago. * Recognition for iRobot and its products continued to grow globally with awards and favorable reviews. iRobot was among the winners of the Robotics Business Review's 2020 RBR50 Robotics Innovation Award while Roomba and Braava received accolades from Reviewed.com, Tom's Guide, Popular Mechanics, Red Dot, Real Homes and LEE.

Second-Quarter 2020 Results Conference CalliRobot will host a conference call tomorrow at 8:30 a.m. ET to review its second-quarter 2020 financial results, and discuss its outlook going forward. Pertinent conference call details include:

Date: Wednesday, July 22

Time: 8:30 a.m. ET

Call-In Number:213-358-0894

Conference ID: 2875976

A live webcast of the conference call, along with the conference call prepared remarks, will be accessible on the event section of the company's website at https://investor.irobot.com/events/event-details/q2-2020-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 July 29, and can be accessed by dialing 404-537-3406, passcode 2875976.

About iRobot Corp.iRobot(r), 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(r) Robot Vacuum in 2002. Today, iRobot is a global enterprise that has sold more than 30 million robots worldwide. iRobot's product line, including the Roomba and the Braava(r) family of mopping robots, feature proprietary technologies and advanced concepts in cleaning, mapping and navigation. iRobot engineers are building an ecosystem of robots and technologies to enable the smart home. For more information about iRobot, please visit www.irobot.com.

For iRobot InvestorsCertain 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: second-half 2020 revenue growth prospects; full-year 2020 revenue expectations ranging from relatively unchanged to slightly higher than 2019 revenue; converting our second-half top-line results and prudent spending into solid operating profitability and EPS performance; the potential extension of our tariff exclusion; and future market conditions. 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: the impact of COVID-19 on our business, the industry and markets in which we operate, and the global economy; our ability to operate in an emerging market; the financial strength of our customers and retailers; the impact of tariffs on goods imported into the United States; 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.

iRobot Corporation

Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

For the three months ended For the six months ended

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Revenue $ 279,883 $ 260,172 $ 472,418 $ 497,833

Cost of revenue:

Cost of product revenue 100,686 138,891 214,981 253,929

Amortization of acquired 1,185 3,111 1,470 6,188intangible assets

Total cost of revenue 101,871 142,002 216,451 260,117

Gross profit 178,012 118,170 255,967 237,716

Operating expenses:

Research and development 36,557 35,650 73,316 70,919

Selling and marketing 49,062 56,409 85,656 95,245

General and 21,856 20,592 46,429 43,499administrative

Amortization of acquired 254 269 508 540intangible assets

Total operating expenses 107,729 112,920 205,909 210,203

Operating income 70,283 5,250 50,058 27,513

Other (expense) income, (384) 1,533 (403) 2,813net

Income before income 69,899 6,783 49,655 30,326taxes

Income tax expense 11,283 (424) 9,174 599(benefit)

Net income $ 58,616 $ 7,207 $ 40,481 $ 29,727

Net income per share:

Basic $ 2.10 $ 0.26 $ 1.44 $ 1.06

Diluted $ 2.07 $ 0.25 $ 1.42 $ 1.03

Number of shares used in per share calculations:

Basic 27,923 28,079 28,110 27,970

Diluted 28,280 28,763 28,414 28,779

Stock-based compensation included in above figures:

Cost of revenue $ 292 $ 405 $ 819 $ 783

Research and development 2,167 2,547 4,645 4,925

Selling and marketing 700 916 1,466 1,719

General and 2,711 3,726 4,131 7,031administrative

Total $ 5,870 $ 7,594 $ 11,061 $ 14,458

iRobot Corporation

Condensed Consolidated Balance Sheets

(unaudited, in thousands)

June 27, 2020 December 28, 2019

Assets

Cash and cash equivalents $ 230,734 $ 239,392

Short term investments 11,560 17,032

Accounts receivable, net 128,334 146,161

Inventory 133,055 157,347

Other current assets 92,555 34,285

Total current assets 596,238 594,217

Property and equipment, net 78,432 75,988

Operating lease right-of-use assets 45,978 47,478

Deferred tax assets 39,237 41,791

Goodwill 119,521 118,732

Intangible assets, net 10,424 12,352

Other assets 30,938 30,195

Total assets $ 920,768 $ 920,753

Liabilities and stockholders' equity

Accounts payable $ 95,522 $ 116,185

Accrued expenses 73,745 81,768

Deferred revenue and customer advances 3,512 4,549

Total current liabilities 172,779 202,502

Operating lease liabilities 52,819 54,928

Deferred tax liabilities 1,042 912

Other long-term liabilities 12,066 10,342

Total long-term liabilities 65,927 66,182

Total liabilities 238,706 268,684

Stockholders' equity 682,062 652,069

Total liabilities and stockholders' equity $ 920,768 $ 920,753

iRobot Corporation

Consolidated Statements of Cash Flows

(unaudited, in thousands)

For the six months ended

June 27, 2020 June 29, 2019

Cash flows from operatingactivities:

Net income $ 40,481 $ 29,727

Adjustments to reconcile netincome to net cash provided byoperating activities, net of theeffectsof acquisition:

Depreciation and amortization 17,784 17,905

Stock-based compensation 11,061 14,458

Deferred income taxes, net 2,579 535

Other 3,162 3,106

Changes in operating assets andliabilities - (use) source

Accounts receivable 17,891 67,808

Inventory 24,137 (27,112)

Other current assets (57,813) (14,246)

Accounts payable (20,576) (52,835)

Accrued expenses and other (10,549) (18,043)liabilities

Net cash provided by operating 28,157 21,303activities

Cash flows from investingactivities:

Additions of property and (18,968) (14,705)equipment

Change in other assets (2,125) (4,541)

Cash paid for business - (2,817)acquisition, net of cash acquired

Sales and maturities of 7,000 5,880investments

Net cash used in investing (14,093) (16,183)activities

Cash flows from financingactivities:

Proceeds from employee stock plans 3,690 4,680

Income tax withholding paymentassociated with restricted stock (1,816) (7,277)vesting

Stock repurchases (25,000) -

Net cash used in financing (23,126) (2,597)activities

Effect of exchange rate changes on 404 (101)cash and cash equivalents

Net (decrease) increase in cash (8,658) 2,422and cash equivalents

Cash and cash equivalents, at 239,392 130,373beginning of period

Cash and cash equivalents, at end $ 230,734 $ 132,795of period

iRobot Corporation

Supplemental Information

(unaudited)

For the three months ended For the six months ended

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Revenue byGeography: *

Domestic $ 140,146 $ 124,472 $ 222,113 $ 238,537

International 139,737 135,700 250,305 259,296

Total $ 279,883 $ 260,172 $ 472,418 $ 497,833

Units Shipped*

Vacuum 930 935 1,553 1,699

Mopping 114 139 210 251

Total 1,044 1,074 1,763 1,950

Revenue byProductCategory **

Vacuum*** $ 251 $ 237 $ 420 $ 458

Mopping*** 29 23 52 40

Total $ 280 $ 260 $ 472 $ 498

Average grossselling $ 307 $ 296 $ 310 $ 307prices forrobot units

Section 301tariff costs $ (6,609) $ 4,982 $ - $ 8,500*

Section 301tariff impacton gross and 2.4 % (1.9)% -% (1.7)%operatingmargin

Headcount 1,120 1,120

* in thousands

** in millions

*** includes accessory revenue

iRobot CorporationExplanation of Non-GAAP Measures

In addition to disclosing financial results in accordance with U.S. GAAP, this earnings release contains references to the non-GAAP financial measures described below. We use non-GAAP measures to internally evaluate and analyze financial results. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and enable comparison of our financial results with other public companies, many of which present similar non-GAAP financial measures.

Our non-GAAP financial measures reflect adjustments based on the following items. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated.

Amortization of acquired intangible assets: Amortization of acquired intangible assets consists of amortization of intangible assets including completed technology, customer relationships, and reacquired distribution rights acquired in connection with business combinations. Amortization charges for our acquisition-related intangible assets are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions. We exclude these charges from our non-GAAP measures to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.

Tariff Refunds:iRobot was granted a Section 301 List 3 Tariff Exclusion in April 2020, which temporarily eliminates tariffs on the Company's products imported from China until August 7, 2020 and entitles the Company to a refund of all related tariffs previously paid since September 2018. We exclude the refunds for tariffs paid in 2018 and 2019 from our 2020 second-quarter and year-to-date non-GAAP measures because those tariff refunds associated with tariff costs incurred in the past have no impact to our current period earnings.

Net Merger, Acquisition and Divestiture (Income) Expense:Net merger, acquisition and divestiture (income) expense primarily consists of transaction fees, professional fees, and transition and integration costs directly associated with mergers, acquisitions and divestitures. It also includes business combination adjustments including adjustments after the measurement period has ended. The occurrence and amount of these costs will vary depending on the timing and size of these transactions. We exclude these charges from our non-GAAP measures to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.

Stock-Based Compensation: Stock-based compensation is a non-cash charge relating to stock-based awards. We exclude this expense as it is a non-cash expense, and we assess our internal operations excluding this expense and believe it facilitates comparisons to the performance of other companies.

IP Litigation Expense, Net: IP litigation expense, net relates to legal costs incurred to litigate patent, trademark, copyright and false advertising infringements, or to oppose or defend against interparty actions related to intellectual property. Any settlement payment or proceeds resulting from these infringements are included or netted against the costs. We exclude these costs from our non-GAAP measures as we do not believe these costs have a direct correlation to the operations of our business and may vary in size depending on the timing and results of such litigations and settlements.

Gain/Loss on Strategic Investments: Gain/loss on strategic investments includes fair value adjustments, realized gains and losses on the sales of these investments and losses on the impairment of these investments. We exclude these items from our non-GAAP measures because we do not believe they correlate to the performance of our core business and may vary in size based on market conditions and events. We believe that the exclusion of these gains or losses provides investors with a supplemental view of our operational performance.

Restructuring and Other: Restructuring charges are related to one-time actions associated with workforce reductions, including severance costs, certain professional fees and other costs directly associated with resource realignments tied to strategic initiatives or changes in business conditions. We exclude this item from our non-GAAP measures when evaluating our recent and prospective business performance as such items vary significantly based on the magnitude of the action and do not reflect anticipated future operating costs. In addition, these charges do not necessarily provide meaningful insight into the fundamentals of current or past operations of our business.

Income tax adjustments: Income tax adjustments include the tax effect of the non-GAAP adjustments, calculated using the appropriate statutory tax rate for each adjustment. We reassess the need for any valuation allowance recorded based on the non-GAAP profitability and have eliminated the effect of the valuation allowance recorded in the U.S. jurisdiction. We also exclude certain tax items that are not reflective of income tax expense incurred as a result of current period earnings. These certain tax items include, among other non-recurring tax items, impacts from the Tax Cuts and Jobs Act of 2017 and stock-based compensation windfalls/shortfalls. We believe disclosure of the income tax provision before the effect of such tax items is important to permit investors' consistent earnings comparison between periods.

iRobot Corporation

Supplemental Reconciliation of GAAP Actuals to Non-GAAP Actuals

(in thousands, except per share amounts)

(unaudited)

For the three months ended For the six months ended

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

GAAP Revenue $ 279,883 $ 260,172 $ 472,418 $ 497,833

GAAP Gross $ 178,012 $ 118,170 $ 255,967 $ 237,716Profit

Amortizationof acquired 1,185 3,111 1,470 6,188intangibleassets

Stock-based 292 405 819 783compensation

Tariff (40,017) - (40,017) -refunds

Non-GAAP $ 139,472 $ 121,686 $ 218,239 $ 244,687Gross Profit

Non-GAAPGross Profit 49.8 % 46.8 % 46.2 % 49.2 %Margin

GAAPOperating $ 107,729 $ 112,920 $ 205,909 $ 210,203Expenses

Amortizationof acquired (254) (269) (508) (540)intangibleassets

Stock-based (5,578) (7,189) (10,242) (13,675)compensation

Net merger,acquisitionand 66 (143) 566 (295)divestitureincome(expense)

IP litigation (1,137) 676 (1,753) 207expense, net

Restructuring (1,863) - (1,863) -and other

Non-GAAPOperating $ 98,963 $ 105,995 $ 192,109 $ 195,900Expenses

Non-GAAPOperatingExpenses as a 35.4 % 40.7 % 40.7 % 39.4 %% of Non-GAAPRevenue

GAAPOperating $ 70,283 $ 5,250 $ 50,058 $ 27,513Income

Amortizationof acquired 1,439 3,380 1,978 6,728intangibleassets

Stock-based 5,870 7,594 11,061 14,458compensation

Tariff (40,017) - (40,017) -refunds

Net merger,acquisitionand (66) 143 (566) 295divestiture(income)expense

IP litigation 1,137 (676) 1,753 (207)expense, net

Restructuring 1,863 - 1,863 -and other

Non-GAAPOperating $ 40,509 $ 15,691 $ 26,130 $ 48,787Income

Non-GAAPOperating 14.5 % 6.0 % 5.5 % 9.8 %Margin

GAAP IncomeTax Expense $ 11,283 $ (424) $ 9,174 $ 599(Benefit)

Tax effect ofnon-GAAP (1,892) 1,797 (3,723) 3,622adjustments

Other tax 206 1,461 (1,178) 5,527adjustments

Non-GAAPIncome Tax $ 9,597 $ 2,834 $ 4,273 $ 9,748Expense

GAAP Net $ 58,616 $ 7,207 $ 40,481 $ 29,727Income

Amortizationof acquired 1,439 3,380 1,978 6,728intangibleassets

Stock-based 5,870 7,594 11,061 14,458compensation

Tariff (40,017) - (40,017) -refunds

Net merger,acquisitionand (741) 143 (1,241) 295divestiture(income)expense

IP litigation 1,137 (676) 1,753 (207)expense, net

Restructuring 1,863 - 1,863 -and other

(Gain) losson strategic - (629) (87) (572)investments

Income tax 1,686 (3,258) 4,901 (9,149)effect

Non-GAAP Net $ 29,853 $ 13,761 $ 20,692 $ 41,280Income

iRobot Corporation

Supplemental Reconciliation of GAAP Actuals to Non-GAAP Actuals - Continued

(in thousands, except per share amounts)

(unaudited)

For the three months ended For the six months ended

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

GAAP NetIncome Per $ 2.07 $ 0.25 $ 1.42 $ 1.03Diluted Share

Amortizationof acquired 0.05 0.12 0.07 0.24intangibleassets

Stock-based 0.21 0.26 0.39 0.50compensation

Tariff (1.41) - (1.41) -refunds

Net merger,acquisitionand (0.03) - (0.04) 0.01divestiture(income)expense

IP litigation 0.04 (0.02) 0.06 (0.01)expense, net

Restructuring 0.07 - 0.07 -and other

(Gain) losson strategic - (0.02) - (0.02)investments

Income tax 0.06 (0.11) 0.17 (0.32)effect

Non-GAAP NetIncome Per $ 1.06 $ 0.48 $ 0.73 $ 1.43Diluted Share

Number ofshares usedin diluted 28,280 28,763 28,414 28,779per sharecalculation

Section 301Tariff Costs

Section 301 $ (6,609) $ 4,982 $ - $ 8,500tariff costs

Impact ofSection 301tariff coststo gross and 2.4 % (1.9)% -% (1.7)%operatingmargin (GAAP& non-GAAP)

Impact ofSection 301tariff coststo net (loss) $ 0.23 $ (0.17) $ - $ (0.30)income perdiluted share(GAAP &non-GAAP)

SupplementalInformation

Days sales 42 32outstanding

Days in 86 127inventory

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SOURCE iRobot Corporation