IRBT

iRobot Corporation (IRBT)

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iRobot Corp. (IRBT)

Q4 2011 Earnings Call

February 09, 2012 08:30 AM ET

Executives

Elise Caffrey – IR

Colin Angle – Chairman and CEO

John Leahy – CFO

Analysts

Jim Ricchiuti – Needham & Company

Paul Coster – JPMorgan

Adam Fleck – Morningstar

Barbara Coffey – Brigantine

Brian Ruttenbur – Morgan, Keegan

Presentation

Operator

Good day everyone and welcome to the iRobot Fourth Quarter and Full Year 2011 Earnings 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 whether as a result of 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, restructuring expenses, net intellectual property litigation expenses, 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 Q4 and full-year 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 the fourth quarter and full-year 2011, as well as our outlook on the business for 2012. And John Leahy, Chief Financial Officer, will review our financial results for the fourth quarter and full year 2011 and, Colin and John will also provide our outlook for the financial expectations for the first quarter ending March 31, 2012 and fiscal 2012. 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. 2011 was another outstanding year for iRobot. We delivered record setting results. We launched two new consumer robots, the Roomba 700 series and the Scooba 230 and a new military robot, FirstLook. We introduced our first human interface robot, Ava, and signed a joint development and licensing agreement with InTouch Health, to explore potential opportunities for healthcare applications on iRobot platforms. We further expanded that relationship through a financial investment in early 2012. And we met our three year financial targets a year ahead of expectations. Based on our confidence in continuing to expand margins through increased product software content and operating expense leverage, I am excited to increase the profit target in our new three year goals.

In 2011 our Home Robot division had another great year. We began to see the positive impact of our increased marketing investments in Home Robots, as domestic revenues increased 6% year-over-year. Throughout 2010 and 2011, we strategically exited certain lower margin products, channels and retailers making this growth even more significant. Our international Home Robot revenues grew nearly 30%, driven by the Far East market which was up more than 50% in 2011 year over year.

EMEA also showed strong growth, up more than 20% for the year. In 2012, we expected continued growth in both the US and overseas markets from expanded distribution of new products, improvement in the domestic economy and further expansion into Latin America and China.

Our government business grew nearly 10% in 2011 in a difficult and ever-changing environment that included a continuing resolution, program cancellations, a new secretary of defense, significant troop withdrawals and ongoing budget reductions. We responded quickly to meet the soldiers’ needs for a light weight reconnaissance robot with FirstLook, demonstrating the adaptability of our technology, relevance of our products and our close working relationship with the soldiers in the field.

In 2011, we made our first foray into the healthcare market with considerable IR&D investment and work done under a joint development and licensing agreement with InTouch Health. As many of you know, I have been passionate about finding a way to help solve the challenges of our aging thesis to serve these applications in hospitals and ultimately in the home are enormous. Since 2002, iRobot’s revenue has been generated primarily by the sale of Roomba, PackBot and SUGV robots. In 2011, we introduced our prototype Ava robot and demonstrated how our Aware software supports autonomy, navigation, and motor control, and provides interfaces with third party developed technology. Our Ava robot will change the way the world thinks about robots.

Turning now to our financial results, we delivered EPS and EBITDA far exceeding our fourth quarter and full year expectations, on revenue in line with our expectations. Full year 2011 revenue of $465 million grew 16% year-over-year, while earnings per share of $1.44 and EBITDA of 73 million increased approximately 50% over last year. Our exceptional results were driven by strong performance in our Home Robot business. We demonstrated our ability to improve profitability, while continuing to invest in research & development and marketing, critical to maintaining our industry-leading position.

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