iRobot Corporation (IRBT)

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iRobot (IRBT)

Q4 2010 Earnings Call

February 10, 20118:30 a.m. ET


Elise Caffrey – Head of Investor Relations

Colin M. Angle – CEO, Chairman

John Leahy – CFO, Executive Vice President


James Ricchiuti- Needham & Company

Mark Strauss -JP Morgan

Alex Hamilton - EarlyBirdCapital

Josephine Millward - The Benchmark Company

Jim McIlree - Merriman

Brian Ruttenbur -Morgan Keegan

Adam Flek-Morningstar



Good day everyone, and welcome to the iRobot fourth quarter and full year 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. These forward-looking statements are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such statements.

Additional information on these risks and uncertainties can be found in our public filings with the Securities and Exchange Commission. 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, including adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, amortization, merger and acquisition expenses, and non-cash stock compensation expense. A detailed reconciliations of GAAP and non-GAAP metrics can be found in the financial tables at the end of the Q4 and full year 2010 earnings press release issued last evening, which is available on our website.

On today’s call iRobot Chairman and CEO Colin Angle will provide a review of our company’s operations to achievements of the fourth quarter and full year 2010, as well as our outlook for the business in 2011, and John Leahy, Chief Financial Officer, will review jour financial results for the fourth quarter and full year 2010 and provide our outlook for financial expectations for the first quarter ending April 2, 2011 and fiscal 2011. 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. 2010 represented a watershed year for iRobot. We delivered record full year financial results after increasing expectations three times during the year and exceeding our increased expectations in every quarter.

Our international home robot revenues grew 70%, and we delivered game-changing technology with our Aware 2 software upgrades to 1,500 iRobot PackBots in the field and we completed several senior-level organizational moves, laying the groundwork for continued success.

2010 revenue increased 34% to $401 million for the full year, while adjusted EBITDA more than doubled to $49 million or 12% of revenue. Earnings per share of $0.96 for the year, which includes an impact of an $0.08 one-time tax benefit in Q3, was more than 7x greater than our 2009 EPS.

Our exceptional results were driven by strong performance in both divisions. We demonstrated our ability to improve profitability while continuing to invest in research and development and our brand, critical to maintaining our industry-leading position.

Our continued focus on strengthening the balance sheet resulted in year-end cash and investments of $122 million, up 59% from $77 million a year ago. In 2010 we generated $49 million in operating cash flow, as a result of significantly improved EBITDA.

During the year, we invested considerable resources in developing common software that can be used across common platforms. Our intellectual property is protected by more than 100 defensible worldwide patents that we will continue to defend should we detect infringement. Likewise, our brands are protected by 18 trademark registrations in the United States and more than 65 trademarks internationally. And we will continue to invest to support our brand.

In 2011, we will continue to widen our competitive moat by delivering robots that make a difference, built on common platforms, using highly integrated iRobot-developed technology that incorporates artificial intelligence with advanced concepts in navigation, autonomy, [inaudible], and manipulation.

Further, by leveraging technology developed by third parties in areas such as VOIP, user interface, voice control, and facial recognition, we will develop high-quality robots for multibillion-dollar automated home maintenance and remote presence markets.

In the spring, we will launch technology-rich products with exciting new capabilities. Our new home robots are the Scooba 230, the world's most compact floor-washing robot, and the Roomba 700 series, featuring persistent pass cleaning, HEPA-type filtration, a high-efficiency cleaning head, and extended battery life.

Our G&I division will offer our first autonomy package for Aware 2-enabled robots. A user-assist payload system will provide self-righting, retrotraverse, cruise control, and other features that will allow soldiers to maximize the robots' [inaudible] effectiveness while minimizing the time necessary to focus on the robot.

During the third quarter, we discussed organizational changes that we've made to capitalize on our long-term opportunities. Joe Dyer, formerly president of our G&I division, was promoted to chief operating officer. Knob Moses, formerly senior vice president of G&I, was promoted to president of the division. Tom Wagner was promoted to chief technology officer from his previous position as division technology officer for G&I. And we hired Russ Campanello, a highly experienced human resources and organizational development executive, as senior vice president of human resources.

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