iRobot Corporation (IRBT)

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iRobot Corporation (IRBT)

Q1 2011 Earnings Call

April 27, 2011 8:30 am ET


Elise Caffrey – Head of Investor Relations

Colin M. Angle – Chief Executive Officer, Chairman

John Leahy – Chief Financial Officer, Executive Vice President


Jim McIlree – Merriman

Josephine Millward – The Benchmark Company

Jim Ricchiuti – Needham & Company

Paul Kresser – JP Morgan

Brian Ruttenbur – Morgan Keegan

Adam Fleck – Morningstar

Brian Gesuale – Raymond James



Good day everyone and welcome to the iRobot Q1 2011 Financial Results Conference Call. (Operator instructions.) 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 Provision 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 or circumstances. During this conference call we will also discuss non-GAAP financial measures as defined by FCC regulation G including adjusted EBITDA which we define as earnings before interest, taxes, depreciation, amortization, merger and acquisition expense and non-cash stock compensation expense. A reconciliation of GAAP and non-GAAP metrics can be found in the financial tables at the end of the Q1 2011 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 the company’s operations and achievements for Q1 2011 as well as our outlook for the business for the rest of 2011. And John Leahy, Chief Financial Officer, will review our financial results for Q1 and provide our outlook for financial expectations for Q2 ending July 2nd, 2011. Then we’ll open the call for questions.

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

Colin M. Angle Chief Executive Officer, Chairman

Good morning and thank you for joining us. Before I get started with a discussion of our Q1 operations and outlook, I’d like to tell you how proud we are to have sent our robots and people to Japan. We shipped two Packbots and two Warrior Robots to explore reactor buildings in Japan’s crippled Fukushima diaty Nuclear Plant following the devastating tsunami. Six iRobot employees flew to that country to train Japanese personnel to use the robot. The robots equipped with HAZMAT detection sensors have been used to monitor radiation and oxygen levels to determine whether conditions are safe enough to allow human workers to go in to try to bring the nuclear crisis at the plant under control. This kind of humanitarian effort is at the core of who we are at iRobot making a difference in people’s lives.

Turning now to our Q1 performance, we kicked off 2011 with another outstanding quarter. Our financial results are especially impressive given the strength of Q1 last year. Gross margin was 41% for the quarter, up 700 basis points from last year. Driven by margin improvements in Home Robots.

International Home Robot revenue increased 37% largely due to demand from existing customers in established markets. Home Robot revenue in the US increased 12% in Q1 year-over-year. And we received several important contracts in our G&I business that provide us with improved visibility for the rest of the year.

Total revenue in Q1 increased 12% to $106 million. Adjusted EBITDA in Q1 increased to $15.1 million and adjusted EBITDA margin increased to approximately 15% of revenue. EPS of $.27 for the quarter increased by $.03 and exceeded expectations.

Our exceptional results reflect the increasing diversification of the company. We are successfully meeting the challenges of international economic uncertainty, political unrest overseas, devastating national disasters and continuing unresolved US budget issues by delivering multiple products into multi-billion dollar automated home maintenance and remote presence in global markets.

Based on our view of the rest of the year we are reaffirming the financial expectations we shared in February to deliver full-year 2011 revenue of $450 million to $465 million, EPS between $.90 and $1.00, and adjusted EBITDA of $58 million to $62 million.

In Q2 we expect international demand to drive revenue growth in Home Robots. The government contracts we recently announced for Packbot and SUGV robots should begin to generate revenue towards the end of Q2 and it will fuel second half growth in this division. As we discussed earlier this year, in Q2 adjusted EBITDA will be slightly lower sequentially as anticipated and discussed in our Q4 call due to lower revenue caused by the apparent lumpiness of our G&I business. For Q2 we anticipate revenue of $102 million to $106 million, EPS between $.18 and $.22 and adjusted EBITDA of $12 million to $14 million.

Now I’d like to take you through some of the details of Q1 and our expectations for the rest of 2011. In the Home Robot division strong demand overseas, particularly in long-term markets, continued to fuel Home Robot revenue growth. International Home Robot revenue increased 37% year-over-year and we expect overseas demand to continue to be the driving force for Home Robot revenue growth for the remainder of 2011.

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