iRobot Reports Strong Third Quarter 2008 Results

BEDFORD, Mass.--(BUSINESS WIRE)--iRobot Corp. (NASDAQ: IRBT) today announced its financial results for the fiscal quarter ended September 27, 2008. Revenue for the third quarter of 2008 grew 44.8 percent to $92.4 million, compared with $63.8 million for the same quarter one year ago. Revenue for the first nine months increased 44.3 percent to $216.9 million from $150.3 million for the first nine months of 2007.

Gross profit for the third quarter increased to $28.9 million (31.3 percent of revenue), compared with $20.1 million (31.5 percent of revenue) in the third quarter of 2007. In the first nine months of 2008 gross profit totaled $60.8 million (28.0 percent of revenue) up from $46.5 million (30.9 percent of revenue) in the first nine months of 2007.

Net income in the third quarter of 2008 was $3.9 million compared with a net loss in the third quarter of 2007 of $1.4 million. Net loss in the first nine months of 2008 was $4.7 million compared with a net loss of $11.7 million for the same period in 2007. Earnings per share for the third quarter of 2008 was $0.15 compared with net loss per share of $0.06 for the third quarter of 2007. For the first nine months of 2008, net loss per share was $0.19 compared with $0.48 for the same period in 2007.

“Given the increasing economic headwinds, I am especially excited to report our 17th consecutive quarter of year-over-year revenue growth. Both businesses have executed well to date, delivering consolidated quarterly results that exceeded expectations. In the Government & Industrial division, we now have 100 percent visibility of our revenue prospects for the full year,” said Colin Angle, chief executive officer of iRobot. “There is continuing uncertainty in the retail sector and our expectations for the rest of 2008 reflect our best view at this time given the current environment. In light of economic uncertainties, continuing focus on improved liquidity and working capital management is critically important to the company,” he added.

Business Highlights:

• In the third quarter, total home robot revenue increased 56 percent year-over-year. International home robot revenue was more than double the level of Q3 2007 and comprised approximately 26 percent of total home robot revenue in the quarter.
• Government & Industrial division delivered a record 319 iRobot PackBots in the third quarter, driving a 31 percent revenue increase over Q3 2007.
• In the third quarter, iRobot received $40 million in orders for robots and spare parts under its current $286 million xBot contract with the U.S. Army Program Executive Office for Simulation, Training, and Instrumentation (PEO STRI).
• iRobot announced its acquisition of Nekton Research, LLC, an unmanned underwater robot and technology company based in Raleigh-Durham, North Carolina.
• On October 6, the company’s portfolio of auction rate security investments was redeemed at par for $16.2 million.

Financial Expectations

Based on financial results for the first nine months of 2008 and the acquisition of Nekton, management today is increasing its outlook for revenue and adjusting its pre-tax expectations for full year to reflect the previously disclosed impact of the acquisition and current market conditions. Management expects revenues for the full year 2008 to be between $310 million and $315 million. Based on an estimated pre-tax loss of approximately $1 million from Nekton, coupled with continuing uncertainty about the retail market, management now expects pre-tax income of $4 - $5 million for the full year. Pre-tax income excluding Nekton remains consistent with the low end of prior guidance, and the high end of the range has been adjusted to reflect market uncertainty. The effective tax rate is expected to be 48.8 percent for the full year. The resulting EPS for the year is expected to be $0.08 - $0.10.

Third Quarter Conference Call

iRobot will host a conference call tomorrow at 8:30 a.m. ET to discuss its financial results for the fiscal quarter ended September 27, 2008, business outlook and outlook for future financial performance. To access the call, investors should dial 719-325-4914 approximately 10 minutes prior to the initiation of the teleconference and reference iRobot. A live, audio broadcast of the conference call also will be available at http://investors.irobot.com/events.cfm. An archived version of the broadcast will be available on the same Web site shortly after the conclusion of the live event. A replay of the telephone conference call will be available through midnight on October 30, and can be accessed by dialing 719-457-0820, access code 8467473.

About iRobot Corp.

iRobot designs and builds robots that make a difference. The company’s home robots help people with smarter ways to clean, and our government and industrial robots protect those in harm’s way. iRobot’s consumer and military robots feature iRobot AWARE™ robot intelligence systems, proprietary technology incorporating advanced concepts in navigation, mobility, manipulation and artificial intelligence. 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 concerning future financial performance, its revenue, pre-tax income and earnings per share for full year 2008, its effective tax rate for full year 2008, and demand for and market acceptance of its products. 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: general economic conditions, our ability to operate in an emerging market, fluctuations in our operating results and the seasonality of our business, our ability to enhance our current consumer robots or develop new consumer robots, our dependence on the U.S. federal government and government contracts, our ability to expand our product offering beyond our current markets, market acceptance of our products, our ability to manage our rapid growth, changes in government policies or spending priorities, 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 Statement of Operations
(in thousands, except per share amounts)
(unaudited)
		For the three months ended							For the nine months ended
		September 27,			September 29,				September 27,				September 29,
		2008			2007				2008				2007
Revenue
Product revenue		$	87,224		$	58,667			$	198,475			$	134,149
Contract revenue			5,191			5,173				18,444				16,192
Total			92,415			63,840				216,919				150,341
Cost of Revenue
Product revenue			58,371			39,186				138,948				89,910
Contract revenue			5,114			4,542				17,213				13,978
Total			63,485			43,728				156,161				103,888
Gross Profit			28,930			20,112				60,758				46,453
Operating Expense
Research & development			4,940			4,739				13,631				13,074
Selling & marketing			10,522			11,115				35,451				30,108
General & administrative			7,578			6,459				21,696				17,538
Total			23,040			22,313				70,778				60,720
Operating (loss) income			5,890			(2,201	)			(10,020	)			(14,267	)
Other income, net			180			845				917				2,663
Pre-tax (loss) income			6,070			(1,356	)			(9,103	)			(11,604	)
Income tax expense (benefit)			2,218			22				(4,437	)			51
Net (loss) income		$	3,852		$	(1,378	)		$	(4,666	)		$	(11,655	)
Net (loss) income per common share:
Basic		$	0.16		$	(0.06	)		$	(0.19	)		$	(0.48	)
Diluted		$	0.15		$	(0.06	)		$	(0.19	)		$	(0.48	)
Shares used in Per Common Share Calculations:
Basic			24,712			24,337				24,614				24,156
Diluted			25,536			24,337				24,614				24,156
Stock-based compensation included in above figures:
Cost of product revenue		$	184		$	162			$	554			$	521
Cost of contract revenue			127			81				300				292
Research & development			131			134				226				252
Selling & marketing			305			226				733				833
General & administrative			1,090			627				2,495				1,517
Total		$	1,837		$	1,230			$	4,308			$	3,415

iRobot Corporation
Condensed Consolidated Balance Sheet
(in thousands)
		September 27,			December 29,
		2008			2007
		(unaudited)			(audited)
Assets
Cash and equivalents		$	10,515		$	26,735
Short term investments			16,197			16,550
Accounts receivable, net			46,321			47,681
Unbilled revenues			2,272			2,244
Inventory, net			42,596			45,222
Deferred tax assets			5,905			5,905
Other current assets			9,228			2,268
Total current assets			133,034			146,605
Property, plant and equipment, net			24,139			15,694
Deferred tax assets			4,293			4,293
Other assets			12,371			2,500
Total assets		$	173,837		$	169,092
Liabilities and stockholders' equity
Accounts payable		$	31,870		$	44,697
Accrued expenses			9,392			7,987
Accrued compensation			8,262			4,603
Deferred revenue			2,733			1,578
Total current liabilities			52,257			58,865
Long term liabilities			10,052			-
Stockholders' equity			111,528			110,227
Total liabilities and stockholders' equity		$	173,837		$	169,092

iRobot Corporation
Consolidated Statement of Cash Flows
(in thousands)
		For the three months ended								For the nine months ended
		September 27,				September 29,				September 27,				September 29,
		2008				2007				2008				2007
		(unaudited)								(unaudited)
Cash flows from operating activities:
Net (loss) income		$	3,852			$	(1,378	)		$	(4,666	)		$	(11,655	)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization			1,844				1,530				5,135				3,989
Loss on disposal of fixed assets			12				13				80				48
Stock-based compensation			1,837				1,230				4,308				3,415
In-process research and development relating to acquisition of Nekton Research LLC			200				-				200				-
Non-cash director deferred compensation			24				28				71				83
Changes in working capital — (use) source
Accounts receivable			(21,598	)			(17,478	)			1,830				(6,647	)
Unbilled revenue			(82	)			(1,268	)			(28	)			(796	)
Inventory			692				(21,703	)			2,626				(22,821	)
Other assets			1,186				(59	)			(6,930	)			824
Accounts payable			7,192				18,842				(13,540	)			18,263
Accrued expenses			1,226				102				1,405				(1,919	)
Accrued compensation			1,481				2,075				3,503				2,361
Deferred revenue			1,755				(774	)			1,127				683
Change in long term liabilities			(107	)			-				4,552				-
Net cash used in operating activities			(486	)			(18,840	)			(327	)			(14,172	)
Cash flows from investing activities:
Purchase of property and equipment			(1,312	)			(2,535	)			(13,589	)			(6,456	)
Purchase of Nekton Research LLC, net of cash received			(9,745	)			-				(9,745	)			-
Purchases of investments			-				(22,750	)			(29,997	)			(44,750	)
Sales of investments			1,300				56,450				30,350				83,250
Net cash provided by (used in) investing activities			(9,757	)			31,165				(22,981	)			32,044
Cash flows from financing activities:
Borrowings under revolving line of credit			5,500				-				5,500				-
Income tax withholding payment associated with stock option exercise			-				-				-				(1,588	)
Proceeds from stock option exercises			176				614				908				1,333
Tax benefit of disqualifying dispositions			322				-				680				-
Net cash provided by (used in) financing activities			5,998				614				7,088				(255	)
Net increase (decrease) in cash and cash equivalents			(4,245	)			12,939				(16,220	)			17,617
Cash and cash equivalents, at beginning of period			14,760				10,261				26,735				5,583
Cash and cash equivalents, at end of period		$	10,515			$	23,200			$	10,515			$	23,200

iRobot Corporation
Supplemental Information
(unaudited)
		For the three months ended								For the nine months ended
		September 27,				September 29,				September 27,				September 29,
		2008				2007				2008				2007
Revenue by business unit (in thousands):
Home Robots
Product		$	53,626			$	34,294			$	125,424			$	70,932
Contract			-				25				55				25
Government & Industrial
Product			33,598				24,373				73,051				63,217
Contract			5,191				5,148				18,389				16,167
		$	92,415			$	63,840			$	216,919			$	150,341
Direct Revenue - Home Robots (in thousands)		$	6,777			$	7,732			$	22,514			$	20,456
Product Lifecycle Revenue - Government & Industrial (in thousands)		$	5,977			$	9,631			$	11,351			$	14,488
International Revenue (in thousands):
Home Robots		$	14,203			$	6,095			$	42,784			$	11,397
Government & Industrial		$	4,360			$	2,997			$	5,570			$	7,866
Average selling prices for robot units:
Home Robots		$	138			$	137			$	150			$	138
Government & Industrial (in thousands)		$	87			$	129			$	96			$	134
Gross Profit by business unit (in thousands):
Home Robots		$	14,867			$	8,700			$	33,695			$	19,969
Government & Industrial			14,063				11,412				27,063				26,484
		$	28,930			$	20,112			$	60,758			$	46,453
Units shipped by business unit:
Home Robots (in thousands)			355				229				761				456
Government & Industrial			319				114				645				363
Government & Industrial Funded Backlog (in thousands)		$	36,621			$	35,770			$	36,621			$	35,770
Days sales outstanding			48				54				48				54
Inventory turnover			5.5				3.6				5.5				3.6
Net cash used in operating activities (in thousands)		$	(486	)		$	(18,840	)		$	(327	)		$	(14,172	)
Headcount			505				418				505				418