iRobot Corporation (IRBT)

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iRobot Corporation (IRBT)

Q1 2010 Earnings Conference Call

April 29, 2010 8:30 AM ET


Elise Caffrey – IR

Colin Angle - Chairman and CEO

John Leahy – CFO


Jim Ricchiuti - Needham & Co.

Paul Coster – JP Morgan

Adam Fleck – Morningstar

James McIlree – Merriman & Co.

Josephine Millward – Benchmark

Jim Ricchiuti - Needham & Co.

Matt Bugeren (ph) – Raymond James



Good day, ladies and gentlemen, and welcome to the iRobot first quarter 2010 financial results conference call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Elise Caffrey of iRobot Investor Relations. Please go ahead.

Elise Caffrey

Thank you, and good morning. Before I introduce the iRobot management team, I’d like to note that statements made on today’s call that are not based on historical information are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

This conference call may contain expressed or implied forward-looking statements relating to the company’s financial results, operations and tax rate for fiscal 2010, the second ending July 2nd, 2010, third quarter ending October 2nd, 2010, and the fourth quarter ending January 1st, 2011, demand for the company’s products and services, the timing of funding and contract awards under the FCS Program now referred to as the Brigade Combat Team Modernization program, our plans for expansion and new product development, backlog and demand for our Government and Industrial Robots, and related parts and services, demand for our home robots, mix of product revenue and business 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 the forward-looking statements.

In particular, the risks and uncertainties include those contained in our public filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. iRobot undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or circumstances, or otherwise.

During this conference call, we will also disclose various non-GAAP financial measures as defined by SEC Regulation G, including adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, amortization, merger and acquisition expenses and non-cash stock compensation expense.

A reconciliation between net income, the GAAP measure most directly comparable to adjusted EBITDA, and adjusted EBITDA is provided in the financial tables at the end of the Q1 2010 earnings press release issued last evening, which is available on our website

A live audio broadcast of this conference call is also available on the Investor Relations page of our website and an archived version of the broadcast will be available on the same web page following the call. In addition, a replay of this conference call will be available through May 6, 2010 and can be accessed by dialing 617-801-6888, access code 78238271.

On today’s call, iRobot’s Chairman and CEO Colin Angle will provide a review of the company’s operations and achievements for the first quarter of 2010 as well as our financial expectations and outlook for the business for the rest of 2010; and John Leahy, Chief Financial Officer, will review our financial results for the first quarter of 2010 and provide additional detail on our 2010 financial expectations. Then we’ll open the call for questions.

At this point, I’ll turn the call over to Colin Angle.

Colin Angle

Good morning and thank you for joining us. I am very excited to report that we delivered revenue of $95 million for the first quarter well in excess of our expectations and 67% greater than Q1 revenue in 2009. Adjusted EBITDA and EPS of $14 million and $0.24 respectively also far exceeded expectations.

As a result of outstanding performance by both divisions in the first quarter and good visibility on the rest of 2010, we are increasing our full-year financial expectations substantially. We now expect fully year 2010 revenue of between $375 million and $385 million, an increase of more than 25% over 2009; adjusted EBITDA of $30 million to $34 million, an increase of more than 40% year-over-year and EPS of $0.35 to $0.40, which is more than double our 2009 EPS. The profitable growth was driven by both divisions.

Most of the home robot revenue increase was due to strong sell through in the European markets driving greater demand as well as acceleration of orders from (out quarters) into Q1, an increased contribution from U.S. domestic channels. G&I’s growth resulted from shipments of more FasTacs and spare parts than a year ago as well as the sale of Small Unmanned Ground Vehicles and Seagliders, both new products since Q1 of 2009.

Our Q1 performance coupled with a solid backlog in our government division will result in a stronger Q2 and full year 2010 than we had anticipated in February. Our continued focus on strengthening the balance sheet resulted in quarter end cash and investments of $85 million, up significantly from $55 million a year ago. A critical complement of improving our financial position over the past year has been driving adjusted EBITDA and operating cash flow. Adjusted EBITDA was $14 million or 14% of revenue compared to with a loss in Q1 2009 and we generated $11 million of operating cash flow in the quarter.

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