iRobot Reports Fourth-Quarter and Full-Year Financial Results

Fiscal Year 2016:

Revenue                                 

$630 - $642 million

Earnings Per Share*                

$1.20 - $1.40

Adjusted EBITDA                    

$80 - $90 million

Full-Year 2016 BU Revenue: 

Home                                     

$625 - $635 million          

Other                                      

$2 - $7 million

Q1 2016:

Revenue                                  

$125 - $135 million

(Loss)/Earnings Per Share*      

($0.03) – $0.04                                   

Adjusted EBITDA                    

$8 - $11 million

* Includes approximately $0.05 of one-time divestiture costs as well as $0.05-$0.07 of D&S stub period loss for Q1.

iRobot Corporation

Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

 For the three months ended

 For the twelve months ended

January 2,

December 27,

 January 2,

 December 27,

2016

2014

2016

2014

Revenue

206,420

159,342

616,778

556,846

Cost of revenue

111,093

83,007

327,852

298,791

Gross margin

95,327

76,335

288,926

258,055

Operating expenses:

  Research and development

20,185

17,886

76,071

69,408

  Selling and marketing

36,876

32,180

97,772

86,091

  General and administrative

15,270

13,501

54,465

49,439

      Total operating expenses

72,331

63,567

228,308

204,938

Operating income

22,996

12,768

60,618

53,117

Other income (expense), net

3,301

(239)

2,353

(708)

Income before income taxes

26,297

12,529

62,971

52,409

Income tax expense

6,966

3,143

18,841

14,606

Net income

$   19,331

$    9,386

$   44,130

$    37,803

Net income per share

   Basic

$       0.66

$      0.32

$       1.49

$        1.28

   Diluted

$       0.65

$      0.31

$       1.47

$        1.25

Number of shares used in per share calculations

   Basic

29,140

29,626

29,550

29,485

   Diluted

29,602

30,240

30,107

30,210

Stock-based compensation included in above figures:

        Cost of revenue

$        414

$       239

$      1,076

$         865

        Research and development

519

934

3,256

3,359

        Selling and marketing

368

436

1,457

1,296

        General and administrative

2,420

2,153

8,394

8,258

            Total

$     3,721

$    3,762

$    14,183

$     13,778

iRobot Corporation

 Condensed Consolidated Balance Sheets

 (unaudited, in thousands)

January 2,

 December 27,

2016

2014

 Assets

 Cash and cash equivalents

$          179,915

$        185,957

 Short term investments

33,124

36,166

 Accounts receivable, net

104,679

71,056

 Unbilled revenue

452

2,614

 Inventory

61,678

47,857

 Deferred tax assets

-

21,505

 Other current assets

9,501

9,704

   Total current assets

389,349

374,859

 Property and equipment, net

26,850

31,297

 Deferred tax assets

31,721

8,409

 Goodwill

48,751

48,751

 Intangible assets, net

15,664

19,146

 Other assets

9,408

10,751

 Total assets

$          521,743

$        493,213

 Liabilities and stockholders' equity

 Accounts payable

$           61,655

$          60,256

 Accrued expenses

15,954

18,701

 Accrued compensation

15,752

16,235

 Deferred revenue and customer advances

3,265

3,849

   Total current liabilities

96,626

99,041

 Long term liabilities

7,706

3,736

 Stockholders' equity

417,411

390,436

 Total liabilities and stockholders' equity

$          521,743

$        493,213

iRobot Corporation

  Consolidated Statements of Cash Flows

 (unaudited, in thousands)

 For the twelve months ended

January 2,

 December 27,

2016

2014

Cash flows from operating activities:

Net income

$      44,130

$      37,803

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

Depreciation and amortization

15,090

13,049

Loss on disposal of property and equipment

214

246

Gain on sale of investment

(3,287)

-

Stock-based compensation

14,183

13,778

Deferred income taxes, net

(985)

3,101

Tax benefit of excess stock-based compensation deductions

(1,467)

(3,051)

Non-cash director deferred compensation

149

49

Changes in operating assets and liabilities — (use) source

Accounts receivable

(33,623)

(31,708)

Unbilled revenue

2,162

(1,758)

Inventory

(13,978)

(2,387)

Other assets

203

(2,856)

Accounts payable

3,786

16,249

Accrued expenses

(2,768)

3,695

Accrued compensation

(483)

(3,371)

Deferred revenue and customer advances

(584)

(1,236)

Long term liabilities

3,970

(997)

Net cash provided by operating activities

26,712

40,606

Cash flows from investing activities:

Additions of property and equipment

(9,372)

(13,774)

Change in other assets

(1,015)

(250)

Proceeds from sale of cost method investment

5,645

-

Purchase of investments

(17,755)

(31,219)

Sales of investments

20,500

16,500

Net cash used in investing activities

(1,997)

(28,743)

Cash flows from financing activities:

Income tax withholding payment associated with restricted stock vesting

(1,295)

(1,626)

Proceeds from stock option exercises

6,464

8,943

Stock repurchases

(37,393)

(1,678)

Tax benefit of excess stock-based compensation deductions

1,467

3,051

Net cash provided by (used in) financing activities

(30,757)

8,690

Net increase (decrease) in cash and cash equivalents

(6,042)

20,553

Cash and cash equivalents, at beginning of period

185,957

165,404

Cash and cash equivalents, at end of period

$    179,915

$    185,957

iRobot Corporation

Supplemental Information

(unaudited)

 For the three months ended

 For the twelve months ended

January 2,

December 27,

January 2,

December 27,

2016

2014

2016

2014

Revenue: *

Home Robots

$        175,197

$        134,131

$        559,619

$        507,414

    Domestic

$          84,317

$          57,759

$        234,904

$        187,643

    International

$          90,880

$          76,372

$        324,715

$        319,771

Defense & Security

$          30,504

$          24,133

$          55,004

$          45,502

    Domestic

$          23,437

$          16,483

$          34,304

$          26,825

    International

$            7,067

$            7,650

$          20,700

$          18,677

    Product

$          30,184

$          21,367

$          54,080

$          42,314

    Contract

$               320

$            2,766

$               924

$            3,188

    Product Life Cycle

$          20,097

$          16,290

$          31,561

$          27,493

Gross Margin Percent:

    Home Robots

49.2%

52.2%

50.9%

50.5%

    Defense & Security

50.7%

47.4%

45.9%

46.4%

    Total Company

46.2%

47.9%

46.8%

46.3%

Units shipped:

    Home Robots *

771

571

2,436

2,174

    Defense & Security

102

135

294

265

Average gross selling prices for robot units:

    Home Robots

$              262

$              255

$              251

$              245

    Defense & Security *

$                99

$                37

$                77

$                56

Defense & Security Funded Product Backlog *

$         10,464

$         18,188

$         10,464

$         18,188

Days sales outstanding

46

42

46

42

Days in inventory

51

53

51

53

Headcount

622

572

622

572

* in thousands

iRobot Corporation 

 Adjusted EBITDA Reconciliation to GAAP

 (unaudited, in thousands)

 For the three months ended

 For the twelve months ended

January 2,

December 27,

January 2,

December 27,

2016

2014

2016

2014

 Net income

$      19,331

$        9,386

$      44,130

$      37,803

 Interest income, net

(196)

(174)

(678)

(673)

 Income tax expense

6,966

3,143

18,841

14,606

 Depreciation

3,599

2,516

11,375

9,192

 Amortization

922

955

3,715

3,857

 EBITDA

30,622

15,826

77,383

64,785

 Stock-based compensation expense

3,721

3,762

14,183

13,778

 Merger, acquisition and divestiture expense*

567

-

822

-

 Net intellectual property litigation (income) expense

99

73

(394)

1,214

 Restructuring expense

-

-

-

-

 Adjusted EBITDA

$      35,009

$      19,661

$      91,994

$      79,777

* This definition was modified in the fourth quarter of fiscal 2015 to incorporate divestiture related costs. The $822,000 for the twelve month period ended January 2, 2016 includes $255,000 of costs not previously reported that were incurred in fiscal 2015 prior to the fourth quarter of 2015.

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 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 Anticipated Defense and Security (D&S) Divestiture 

 (in millions, except per share amounts)

 (unaudited)

 For the fiscal year ended January 2, 2016

 Gross margin

 Operating expenses

 Operating income

 Net income

 Revenue

$

%

$

%

$

%

 per share

 As reported (GAAP) *

$          617

$          289

46.8%

$          228

37.0%

$            61

9.9%

$1.47

 D&S related **

55

24

43.6%

20

36.4%

4

7.3%

$0.10

 Excluding D&S (Non-GAAP) *

$          562

$          265

47.2%

$          208

37.0%

$            57

10.1%

$1.37

 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 **

 $2 - $7

 37% - 38%

 120% - 150%

 (100% - 110%)

 ($0.10 - $0.12)

 Excluding D&S (Non-GAAP) *

 $625 - $635

 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 

 Impact of Anticipated Defense and Security (D&S) Divestiture on Revenue

 (unaudited, in millions)

 Fiscal year ended
January 2, 2016

 Fiscal year ending
December 31, 2016

 Consolidated revenue including D&S

$617

 $630 - $642

   Year-over-year growth %

11%

 2% - 4%

 Full year D&S revenue 

$55

 $2 -$7 *

 Consolidated revenue excluding D&S

$562

 $625 - $635

   Year-over-year growth %

10%

 11% - 13%

 * Assumes the D&S divestiture is closed during the first quarter.