iRobot Reports Third-Quarter Financial Results

Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

 For the nine months ended 

September 29,

September 30,

September 29,

September 30,

2018

2017

2018

2017

Revenue

$        264,534

$        205,399

$        707,919

$        557,014

Cost of revenue:

  Cost of product revenue

124,754

100,800

324,967

272,068

  Amortization of intangible assets

4,574

2,216

14,035

5,329

129,328

103,016

339,002

277,397

Gross margin

135,206

102,383

368,917

279,617

Operating expenses:

  Research and development

35,309

28,843

103,178

80,518

  Selling and marketing

39,030

28,473

116,269

91,171

  General and administrative

23,329

21,002

72,630

58,137

  Amortization of intangible assets

263

173

805

173

      Total operating expenses

97,931

78,491

292,882

229,999

Operating income

37,275

23,892

76,035

49,618

Other income, net

337

2,601

2,363

4,290

Income before income taxes

37,612

26,493

78,398

53,908

Income tax expense

5,683

4,411

15,597

7,565

Net income

$         31,929

$         22,082

$         62,801

$         46,343

Net income per share

   Basic

$             1.16

$             0.80

$             2.27

$             1.68

   Diluted

$             1.12

$             0.76

$             2.19

$             1.61

Number of shares used in per share calculations

   Basic

27,493

27,739

27,692

27,520

   Diluted

28,506

28,916

28,629

28,719

Stock-based compensation included in above figures:

        Cost of revenue

$              347

$              274

$           1,035

$              751

        Research and development

1,910

1,261

5,393

3,508

        Selling and marketing

544

728

2,032

1,869

        General and administrative

3,791

2,771

10,509

7,941

            Total

$           6,592

$           5,034

$         18,969

$         14,069

 iRobot Corporation 

 Condensed Consolidated Balance Sheets 

 (unaudited, in thousands) 

September 29,

 December 30, 

2018

2017

 Assets 

 Cash and cash equivalents 

$          100,122

$        128,635

 Short term investments 

34,994

37,225

 Accounts receivable, net 

109,583

142,829

 Inventory 

160,752

106,932

 Other current assets 

33,732

19,105

   Total current assets 

439,183

434,726

 Property and equipment, net 

54,198

44,579

 Deferred tax assets 

31,785

31,531

 Goodwill 

118,805

121,440

 Intangible assets, net 

29,385

44,712

 Other assets 

15,647

14,534

 Total assets 

$          689,003

$        691,522

 Liabilities and stockholders' equity 

 Accounts payable 

$          103,143

$        116,316

 Accrued expenses 

62,851

73,647

 Deferred revenue and customer advances 

4,719

7,761

   Total current liabilities 

170,713

197,724

 Deferred tax liabilities 

5,720

9,539

 Other long-term liabilities 

8,992

13,932

 Total long-term liabilities 

14,712

23,471

 Total liabilities 

185,425

221,195

 Stockholders' equity 

503,578

470,327

 Total liabilities and stockholders' equity 

$          689,003

$        691,522

 iRobot Corporation 

 Consolidated Statements of Cash Flows 

 (unaudited, in thousands) 

 For the nine months ended 

September 29,

September 30,

2017

Cash flows from operating activities:

Net income

$          62,801

$          46,343

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

Depreciation and amortization 

27,077

14,523

Gain on business acquisition

-

(2,243)

Stock-based compensation 

18,969

14,069

Deferred income taxes, net

(4,296)

(3,226)

Deferred rent

1,171

-

Other

(216)

(774)

Changes in operating assets and liabilities — (use) source

Accounts receivable

31,930

(10,957)

Inventory 

(54,619)

(23,944)

Other assets 

(15,818)

(11,099)

Accounts payable 

(10,512)

20,824

Accrued expenses

(12,086)

7,034

Deferred revenue and customer advances

(1,436)

(965)

Long-term liabilities

(2,672)

1,513

Net cash provided by operating activities 

40,293

51,098

Cash flows from investing activities:

Additions of property and equipment 

(25,284)

(16,630)

Change in other assets

(2,263)

(1,374)

Proceeds from sale of equity investment

856

1,056

Cash paid for business acquisition, net of cash acquired

-

(16,524)

Purchases of investments 

(6,438)

(7,034)

Sales and maturities of investments 

10,500

10,500

Net cash used in investing activities 

(22,629)

(30,006)

Cash flows from financing activities:

Proceeds from employee stock plans

7,948

8,990

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 

(45,584)

6,016

Effect of exchange rate changes on cash and cash equivalents

(593)

155

Net (decrease) increase in cash and cash equivalents 

(28,513)

27,263

Cash and cash equivalents, at beginning of period 

128,635

214,523

Cash and cash equivalents, at end of period 

$        100,122

$        241,786

 iRobot Corporation 

Supplemental Information

(unaudited)

 For the three months ended 

 For the nine months ended 

September 29,

September 30,

September 29,

September 30,

2018

2017

2018

2017

Revenue: *

Consumer

$             264,534

$        205,360

$           707,919

$             556,757

    Domestic

$             127,240

$          87,626

$           345,628

$             269,998

    International

$             137,294

$        117,734

$           362,291

$             286,758

Gross Margin Percent

51.1%

49.8%

52.1%

50.2%

Consumer units shipped*

1,087

906

2,855

2,358

      Vacuum

942

774

2,473

1,994

      Mopping

145

131

382

362

Consumer revenue**

$                   265

$              205

$                 708

$                   557

      Vacuum***

$                   242

$              186

647

$                   504

      Mopping***

$                     23

$                21

$                   61

$                     55

Average gross selling prices for robot units - Consumer

$                   276

$              249

$                 289

$                   260

Days sales outstanding

38

35

38

35

Days in inventory

113

82

113

82

Headcount

1,003

798

1,003

798

* in thousands

** in millions

*** includes accessory revenue

 iRobot Corporation  

 Adjusted EBITDA Reconciliation to GAAP 

 (unaudited, in thousands) 

 For the three months ended 

 For the nine months ended 

September 29,

September 30,

September 29,

September 30,

2018

2017

2018

2017

 Net income 

$          31,929

$          22,082

$          62,801

$          46,343

 Interest income, net 

(558)

(772)

(1,423)

 Income tax expense 

5,683

4,411

15,597

7,565

 Depreciation 

4,557

3,350

12,160

8,888

 Amortization 

4,857

2,419

14,917

5,605

 EBITDA 

46,805

31,704

104,703

66,978

 Stock-based compensation expense 

6,592

5,034

18,969

14,069

 Net merger, acquisition and divestiture expense 

-

681

23

2,452

 Gain on business acquisition 

-

(2,243)

-

(2,243)

 Net intellectual property litigation expense 

187

1,266

3,517

1,910

 Adjusted EBITDA 

$          53,584

$          36,442

$        127,212

$          83,166

 Adjusted EBITDA as a % of revenue 

20.3%

17.7%

18.0%

14.9%

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.