iRobot Reports Third-Quarter 2020 Financial Results
BEDFORD, Mass., Oct. 20, 2020 /PRNewswire/ -- iRobot Corp. (NASDAQ: IRBT), a leader in consumer robots, today announced its financial results for the third quarter ended September 26, 2020.
Colin Angle, chairman and chief executive officer of iRobot, stated, "We delivered an extraordinarily strong financial performance while executing well across our global organization to achieve a number of important strategic milestones. Our third-quarter 2020 revenue growth of 43% over the prior year's quarter reflects another quarter of substantially stronger-than-expected orders from retailers tied to favorable sell-through trends, anticipated demand for the upcoming holiday season and incremental orders to support certain customer events, as well as robust direct-to-consumer sales growth. We saw revenue in each geography exceed our original plans with notable strength in U.S. order levels. The higher-than-expected revenue, combined with a solid gross margin performance and prudent spending, helped drive substantial growth in operating income and EPS."
"The pandemic continues to shine a light on how our robots can help individuals and families keep their floors clean while freeing them to spend their time doing the other things in their lives that they need or want to do," observed Angle. "Consumer demand for our premium Roomba and Braava robots remained robust during the third quarter. We made tangible progress to further differentiate our product offerings and extend high-value innovation across our product portfolio with the launch of the Genius(TM) Home Intelligence platform and the new Roomba i3 and i3+ during the third quarter. Customer response to our Genius platform and the i3 Series has been excellent thus far."
Angle concluded, "Our team continues to rise to the occasion, addressing a multitude of challenges tied to the global pandemic with commitment, focus and resiliency. As a result of our excellent third-quarter 2020 performance, sustained sell-through trends, the extension of our tariff exclusion until year-end and a range of exciting opportunities ahead, we now expect to deliver strong full-year 2020 results with annual revenue, gross margin, operating profitability and EPS all on course to exceed our original 2020 targets."
Financial Performance Highlights
-- Revenue for the third quarter of 2020 was $413.1 million, an increase of
43% from $289.4 million in the third quarter of 2019. The growth
primarily reflected an 86% increase in premium robot (list price of $500
or higher) revenue, as well as 36% overall unit growth. Revenue for the
first nine months of 2020 was $885.6 million, an increase of 12% over
$787.2 million in the comparable period of 2019.
-- The third-quarter 2020 revenue performance was highlighted by 75%
growth in the U.S., 22% growth in EMEA and 12% growth in Japan over
the prior year period.
-- We estimate that online orders, which span the company's own website
and app, dedicated e-commerce websites and the online arms of
traditional retailers, grew by approximately 70% and represented
approximately 60% of the third-quarter 2020 revenue.
Direct-to-consumer revenue of $35 million grew approximately 155%
from the prior year's third quarter.
-- Third-quarter 2020 GAAP operating income was $81.0 million, compared
with GAAP operating income of $42.6 million in the third quarter of
2019. Third-quarter 2020 non-GAAP operating income was $93.1 million,
compared with non-GAAP operating income of $50.1 million in the same
period one year ago. GAAP operating income for the first nine months of
2020 was $131.1 million, compared with GAAP operating income of $70.1
million in same period of 2019. Non-GAAP operating income for the first
nine months of 2020 was $119.3 million versus non-GAAP operating income
of $98.9 million in the same period one year ago.
-- GAAP net income per share was $3.27 for the third quarter of 2020,
compared with GAAP net income per share of $1.24 in the third quarter of
2019. Non-GAAP net income per share was $2.58 for the third quarter of
2020 versus third-quarter 2019 non-GAAP net income per share of $1.50.
GAAP net income per share for the first nine months of 2020 was $4.69,
compared with $2.27 in the same period of 2019. Non-GAAP net income per
share for the first nine months of 2020 was $3.31, compared with $2.93
in the first nine months of 2019.
-- As of September 26, 2020, the company's cash, cash equivalents and
short-term investments were $357.3 million, compared with $242.3 million
as of June 27, 2020 and $256.4 million as of December 28, 2019. The
increase reflects the company's strong fundamental performance along
with receiving approximately $35 million in tariff-related refunds and
approximately $52 million in Teladoc Health stock that the company
received in the third quarter when Teladoc Health acquired the company's
stake in InTouch Health. iRobot's Teladoc Health stock is subject to
sale restrictions until early 2021. iRobot, which has no debt, also has
access to an unsecured revolving line of credit of $150 million, with an
additional $75 million accordion feature.
Third-Quarter and Recent Business Highlights
-- The United States Trade Representative extended iRobot's Section 301
tariff exclusion for its Roomba® robot vacuums until the end of 2020.
-- On August 25, 2020, iRobot unveiled personalized cleaning experiences
powered by its new iRobot Genius(TM) Home Intelligence platform that
gives users greater control of where, when and how their robots clean.
iRobot's Home App was redesigned to maximize the benefits available with
the iRobot Genius platform.
-- On September 17, 2020, iRobot introduced the Roomba i3+, a stylish new
Roomba vacuum that offers intelligent navigation, self-emptying
capability with Clean Base® Automatic Dirt Disposal, and an expanded
range of personalized cleaning features powered by the recently launched
iRobot Genius(TM) Home Intelligence.
-- On July 29, 2020, iRobot introduced the Root rt0 Coding Robot, an
easy-to-use and customizable coding robot that brings classroom learning
into the home.
-- For the sixth consecutive year, Roomba was a featured product in
Amazon's Prime Day event.
-- The company's community of engaged, connected owners who have opted-in
to its digital communications (in-app messaging, email or both) grew to
approximately 7.8 million, up approximately 45% since the start of 2020.
-- In August 2020, Kiran Smith joined the company as chief marketing
officer to lead its consumer marketing strategy in the U.S. and
overseas. Before joining iRobot, Kiran served as CEO of Arnold
Worldwide, a leading global creative advertising agency. Prior to that
role, she held brand marketing leadership roles at Brookstone, Stride
Rite, and two of the largest supermarket chains in the U.S.
Financial Expectations
iRobot is providing GAAP and non-GAAP financial expectations for the fiscal year ending January 2, 2021. A detailed reconciliation between the company's GAAP and non-GAAP expectations is included in the attached financial tables.
Fiscal Year 2020:
Metric
GAAP
Adjustments
Non-GAAP
---
Revenue
$1.365 billion to $1.375 billion
$1.365 billion to $1.375 billion
Gross
Profit
$649 million - $657 million
~($36 million)
$613 million - $621 million
Operating
Income
$127 million - $132 million
~($2 million)
$125 million - $130 million
Earnings
Per Share
$4.52 - $4.62
~($1.09)
$3.43 - $3.53
Third-Quarter 2020 Results Conference Call
iRobot will host a conference call tomorrow at 8:30 a.m. ET to review its third-quarter 2020 financial results, and discuss its outlook going forward. Pertinent conference call details include:
Date:
Wednesday, October 21
Time:
8:30 a.m. ET
Call-In Number:
213-358-0894
Conference ID: 7389646
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/q3-2020-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 October 28, and can be accessed by dialing 404-537-3406, passcode 7389646.
About iRobot Corp.
iRobot®, 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® 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® 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 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 a substantially better FY20 financial performance with annual revenue, gross margin, operating profitability and EPS all on course to exceed our original 2020 growth targets; and the company's expectations for 2020 revenue, gross margin, operating profit and EPS. 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 nine months ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
---
Revenue $413,145 $289,399 $885,563 $787,232
Cost of revenue:
Cost of product
revenue 214,079 149,463 429,060 403,392
Amortization of
acquired intangible
assets 225 3,095 1,695 9,283
Total cost of
revenue 214,304 152,558 430,755 412,675
Gross profit 198,841 136,841 454,808 374,557
Operating expenses:
Research and
development 38,613 33,401 111,929 104,320
Selling and
marketing 50,488 42,257 136,144 137,502
General and
administrative 28,490 18,372 74,919 61,871
Amortization of
acquired intangible
assets 256 256 764 796
Total operating
expenses 117,847 94,286 323,756 304,489
Operating income 80,994 42,555 131,052 70,068
Other income, net 42,240 900 41,837 3,713
Income before income
taxes 123,234 43,455 172,889 73,781
Income tax expense 29,982 7,923 39,156 8,522
Net income $93,252 $35,532 $133,733 $65,259
===
Net income per share:
Basic $3.33 $1.26 $4.76 $2.33
Diluted $3.27 $1.24 $4.69 $2.27
Number of shares used in per share calculations:
Basic 28,031 28,154 28,084 28,029
Diluted 28,539 28,650 28,502 28,759
Stock-based compensation included in above figures:
Cost of revenue $331 $337 $1,150 $1,120
Research and
development 2,856 1,703 7,501 6,629
Selling and
marketing 1,132 747 2,598 2,466
General and
administrative 5,524 1,497 9,655 8,527
Total $9,843 $4,284 $20,904 $18,742
===
iRobot Corporation
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
September 26, 2020
December 28, 2019
---
Assets
Cash and cash equivalents $297,206 $239,392
Short term investments 60,130 17,032
Accounts receivable, net 179,709 146,161
Inventory 218,134 157,347
Other current assets 52,525 34,285
Total current assets 807,704 594,217
Property and equipment, net 78,296 75,988
Operating lease right-of-use
assets 45,186 47,478
Deferred tax assets 33,834 41,791
Goodwill 122,575 118,732
Intangible assets, net 10,146 12,352
Other assets 19,079 30,195
Total assets $1,116,820 $920,753
===
Liabilities and stockholders' equity
Accounts payable $162,346 $116,185
Accrued expenses 94,769 81,768
Deferred revenue and customer
advances 7,858 4,549
Total current liabilities 264,973 202,502
Operating lease liabilities 51,897 54,928
Deferred tax liabilities 986 912
Other long-term liabilities 17,050 10,342
Total long-term liabilities 69,933 66,182
Total liabilities 334,906 268,684
Stockholders' equity 781,914 652,069
Total liabilities and
stockholders' equity $1,116,820 $920,753
===
iRobot Corporation
Consolidated Statements of Cash Flows
(unaudited, in thousands)
For the nine months ended
September 26, 2020
September 28, 2019
---
Cash flows from operating activities:
Net income $133,733 $65,259
Adjustments to reconcile net income to net cash provided by (used in)
operating activities, net of the effects of acquisition:
Depreciation and
amortization 25,705 27,744
Gain on equity
investment (43,480) -
Stock-based
compensation 20,904 18,742
Deferred income taxes,
net 10,939 (5,873)
Other 4,785 4,687
Changes in operating assets and liabilities - (use) source
Accounts receivable (32,572) (10,948)
Inventory (61,006) (83,863)
Other assets (20,718) (8,155)
Accounts payable 46,098 (27,256)
Accrued expenses and
other liabilities 12,358 (11,916)
Net cash provided by
(used in) operating
activities 96,746 (31,579)
Cash flows from investing activities:
Additions of property
and equipment (25,031) (27,080)
Change in other assets (3,729) (5,336)
Cash paid for business
acquisition, net of
cash acquired - (2,817)
Sales and maturities
of investments 10,500 9,380
Net cash used in
investing activities (18,260) (25,853)
Cash flows from financing activities:
Proceeds from employee
stock plans 4,048 4,981
Income tax withholding
payment associated
with restricted stock
vesting (1,845) (7,277)
Stock repurchases (25,000) -
Net cash used in
financing activities (22,797) (2,296)
Effect of exchange
rate changes on cash
and cash equivalents 2,125 (103)
Net increase
(decrease) in cash
and cash equivalents 57,814 (59,831)
Cash and cash
equivalents, at
beginning of period 239,392 130,373
Cash and cash
equivalents, at end
of period $297,206 $70,542
===
iRobot Corporation
Supplemental Information
(unaudited)
For the three months ended
For the nine months ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
---
Revenue by Geography: *
Domestic $206,276 $117,929 $428,389 $356,466
International 206,869 171,470 457,174 430,766
Total $413,145 $289,399 $885,563 $787,232
===
Units Shipped *
Vacuum 1,354 975 2,907 2,674
Mopping 184 156 394 407
Total 1,538 1,131 3,301 3,081
Revenue by Product Category **
Vacuum*** $369 $257 $791 $715
Mopping*** 44 32 95 72
Total $413 $289 $886 $787
===
Average gross
selling prices
for robot units $312 $305 $311 $306
Section 301
tariff costs *
$ - $7,466
$ - $15,966
Section 301
tariff impact on
gross and
operating margin - % (2.6)% - % (2.0)%
Headcount 1,159 1,132
* in thousands
** in millions
*** includes accessory
revenue
Certain numbers may not
total due to rounding
iRobot Corporation
Explanation 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 December 31, 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 nine months ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
---
GAAP Revenue $413,145 $289,399 $885,563 $787,232
GAAP Gross Profit $198,841 $136,841 $454,808 $374,557
Amortization of
acquired intangible
assets 225 3,095 1,695 9,283
Stock-based
compensation 331 337 1,150 1,120
Tariff refunds - (40,017)
---
Non-GAAP Gross Profit $199,397 $140,273 $417,636 $384,960
===
Non-GAAP Gross Profit
Margin 48.3 % 48.5 % 47.2 % 48.9 %
GAAP Operating Expenses $117,847 $94,286 $323,756 $304,489
Amortization of
acquired intangible
assets (256) (256) (764) (796)
Stock-based
compensation (9,512) (3,947) (19,754) (17,622)
Net merger, acquisition
and divestiture
(expense) income - (32) 566 (328)
IP litigation expense,
net (1,607) 157 (3,360) 365
Restructuring and other (200) (2,063) -
Non-GAAP Operating
Expenses $106,272 $90,208 $298,381 $286,108
===
Non-GAAP Operating
Expenses as a % of
Non-GAAP Revenue 25.7 % 31.2 % 33.7 % 36.3 %
GAAP Operating Income $80,994 $42,555 $131,052 $70,068
Amortization of
acquired intangible
assets 481 3,351 2,459 10,079
Stock-based
compensation 9,843 4,284 20,904 18,742
Tariff refunds - (40,017)
Net merger, acquisition
and divestiture
expense (income) - 32 (566) 328
IP litigation expense,
net 1,607 (157) 3,360 (365)
Restructuring and other 200 2,063 -
Non-GAAP Operating
Income $93,125 $50,065 $119,255 $98,852
===
Non-GAAP Operating
Margin 22.5 % 17.3 % 13.5 % 12.6 %
GAAP Income Tax Expense $29,982 $7,923 $39,156 $8,522
Tax effect of non-GAAP
adjustments (12,119) (132) (15,842) 3,490
Other tax adjustments 290 133 (888) 5,660
Non-GAAP Income Tax
Expense $18,153 $7,924 $22,426 $17,672
===
GAAP Net Income $93,252 $35,532 $133,733 $65,259
Amortization of
acquired intangible
assets 481 3,351 2,459 10,079
Stock-based
compensation 9,843 4,284 20,904 18,742
Tariff refunds - (40,017)
Net merger, acquisition
and divestiture
expense (income) - 32 (1,241) 328
IP litigation expense,
net 1,607 (157) 3,360 (365)
Restructuring and other 200 2,063 -
Gain on strategic
investments (43,480) (43,567) (572)
Income tax effect 11,829 (1) 16,730 (9,150)
Non-GAAP Net Income $73,732 $43,041 $94,424 $84,321
===
GAAP Net Income Per
Diluted Share $3.27 $1.24 $4.69 $2.27
Amortization of
acquired intangible
assets 0.02 0.12 0.08 0.35
Stock-based
compensation 0.34 0.15 0.73 0.65
Tariff refunds - (1.40)
Net merger, acquisition
and divestiture
expense (income) - (0.04) 0.01
IP litigation expense,
net 0.06 (0.01) 0.12 (0.01)
Restructuring and other - 0.07
Gain on strategic
investments (1.52) (1.53) (0.02)
Income tax effect 0.41 0.59 (0.32)
Non-GAAP Net Income
Per Diluted Share $2.58 $1.50 $3.31 $2.93
===
Number of shares used
in diluted per share
calculation 28,539 28,650 28,502 28,759
Section 301 Tariff Costs
Section 301 tariff
costs
$ - $7,466
$ - $15,966
Impact of Section 301
tariff costs to gross
and operating margin
(GAAP & non-GAAP) - % (2.6)% - % (2.0)%
Impact of Section 301
tariff costs to net
(loss) income per
diluted share (GAAP &
non-GAAP)
$ - $(0.26)
$ - $(0.56)
Supplemental Information
Days sales outstanding 40 53
Days in inventory 93 152
iRobot Corporation
Supplemental Reconciliation of Fiscal Year 2020 GAAP to Non-
GAAP Guidance
(unaudited)
FY-20
GAAP Gross Profit
$649 - $657 million
Amortization of
acquired
intangible assets
~$2 million
Stock-based
compensation
~$2 million
Tariff refunds
~($40 million)
Total adjustments
~($36 million)
Non-GAAP Gross
Profit
$613 - $621 million
FY-20
GAAP Operating
Income
$127 - $132 million
Amortization of
acquired
intangible assets
~$3 million
Stock-based
compensation
~$28 million
Tariff refunds
~($40 million)
Net merger,
acquisition and
divestiture
expense (income)
~($1 million)
IP litigation
expense, net
~$6 million
Restructuring and
other
~$2 million
Total adjustments
~($2 million)
Non-GAAP
Operating Income
$125 - $130 million
FY-20
GAAP Net Income
Per Diluted Share
$4.52 - $4.62
Amortization of
acquired
intangible assets
~$0.10
Stock-based
compensation
~$0.98
Tariff refunds
~($1.40)
Net merger,
acquisition and
divestiture
expense (income)
~($0.04)
IP litigation
expense, net
~$0.21
Restructuring and
other
~$0.07
Gain on strategic
investments
~($1.52)
Income tax effect
~$0.51
Total adjustments
~($1.09)
Non-GAAP Net
Income Per
Diluted Share
$3.43 - $3.53
Number of shares
used in diluted
per share
calculations
~28.6 million
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SOURCE iRobot Corporation
