Q3 2010 Earnings Conference Call
October 28, 2010 08:30 am ET
Elise Caffrey – Head of Investor Relations
Colin M. Angle – CEO, Chairman
John Leahy – CFO, Executive Vice President
James Ricchiuti- Needham & Company
James Mcilree- Merriman Curhan Ford & Co.
Brian Ruttenbur -Morgan, Keegan & Company, Inc.
Previous Statements by IRBT
» iRobot Corporation Q2 2010 Earnings Call Transcript
» iRobot Corporation Q1 2010 Earnings Call Transcript
» iRobot Corporation Q4 2009 Earnings Call Transcript
» iROBOT Corporation Q3 2009 Earnings Call Transcript
Thank you and good morning. Before I introduce the iRobot management team I would 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 Act of 1995. This conference call may contain express or implied forward-looking statements relating to the company’s results, operations and tax rates for fiscal 2010 and the fourth quarter ending January 1, 2011. These analyses are long term expectations regarding gross margin, operating expense margin, operating cash flow and adjusted EBITDA, our plans for and demand for our government and industrial robots and related costs of services, orders for our SUGV robot, future levels of product life cycle revenue, timing and order fulfillment, demand for our home robots, including international demand, mix of product revenue, competitive position and market share and market 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 these forward-looking statements. In particular, the links and uncertainties include those contained in our public filing 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 day 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 regulations G including net income excluding the impact of a one-time cash benefit, earnings per share excluding the impact of a one-time cash benefit and adjusted EBITDA which we define as earnings before interest, taxes, depreciation, amortization, merger and acquisition expenses and non-cash stock compensation expense. Reconciliations between net income excluding the impact of a one-time cash benefit and net income, earnings per share excluding the impact of a one-time cash benefit and earnings per share and net income, the GAAP measures must directly comparable to adjusted EBITDA and adjusted EBITDA are provided in the financial table at the end of the Q3, 2010 earnings press release issued last evening which is available on our website at www.iRobot.com.
A live audio broadcast of this conference is also available on the Investor Relations page of our website and an archive version of the broadcast will be available on the same page following the call. In addition, a replay of this conference call will be available through November 4th, 2010 and can be accessed by dialing 617-801-68888 access code 357-24-357.
On today’s call iRobot Chairman and CEO Colin Angle will provide a review of our company’s operations to achievements of the current quarter of 2010 as well as our outlook for business for the rest of 2010. And John Leahy, Chief Financial Officer will review jour financial results for the third quarter of 2010 and provide our outlook for the financial expectations for the fourth quarter ending January 1, 2011 and fiscal 2010, then we’ll open the call for questions.
At this point I’ll turn the call over to Colin Angle.
Colin M. Angle
Good morning and thank you for joining us. Our financial performance in the third quarter was exceptionally strong following our record first half results. Revenue was up 20% from Q3 last year and adjusted EBITDA for the quarter increased 37% to $11 million, far exceeding our expectations. EPS grew 80% to $0.18 excluding the impact of the $2.3 million one-time tax benefit.
During the quarter, we increased our investments in the business especially in the area of research and development while also exceeding our financial expectations. For the full year, we are raising 2010 revenue expectations one again to $395 million to $400 million, representing growth of more than 30% over 2009. We are increasing our expectations for EPS to a range of $0.80 to $0.82, more than two times our 2009 EPS; and adjusted EBITDA to $46 million to $48 million, more than double adjusted EBITDA last year.
Full year earnings per share excluding the one-time tax benefit are expected to be $0.72 to $0.74.
Possible growth in the quarter was driven by both divisions. Home robot revenue increased as a result of continuing strong demand in European and Asian markets. Increasing demand for our products continues to outpace concerns about softening international economy. During the quarter we also had our first land America sales in Chile. Our government and industrial robots divisions’ revenue growth in Q3 was driven by the sale of a significant number of small unmanned ground vehicles and tax off spare parts.
Our continued focus on strengthening the balance sheet resulted in quarter-end cash and investments of $107 million up 71% from $63 million a year ago. A critical component of improving our cash position over the past year has been through driving adjusted EBITDA and operating cash flow. Adjusted EBITDA was $11 million of revenue compared with $8 million in Q3 in 2009 and we generated $10 million of operating cash flow for the quarter. We are having a terrific 2010 on the heels of a strong 2009 and our future looks very exciting. We operate in global markets which are growing and represent multibillion dollar opportunities. Our continuous commitment to investing in our technology has provided us with a strong, defensible, intellectual property portfolio.