IRobot Corporation Q2 2010 Earnings Call Transcript

iRobot Corporation Q2 2010 Earnings Call Transcript
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iRobot Corporation (IRBT)

Q2 2010 Earnings Call

July 29, 2010; 08:30 am ET


Colin Angle - Chairman & Chief Executive Officer

John Leahy - Chief Financial Officer

Elise Caffrey - Investor Relations


Jim Ricchiuti - Needham & Co.

Alex Hamilton - C.K. Cooper & Co.

Paul Coster - JP Morgan

Adam Fleck - Morningstar

James McIlree - Merriman

Brian Ruttenbur - Morgan Keegan



Good day everyone, and welcome to the iRobot second quarter 2010 financial results conference call. This call is being recorded.

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At this time, for opening remarks and introduction, 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.

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 third quarter ending October 2, 2010, and the fourth quarter ending January 1, 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 and shipment, backlog and demand for our government and industrial robots and related parts and services, timing and order fulfillment, 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 noncash 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 Q2, 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 August 5, 2010 and can be accessed by dialing 617-801-6888, access code 692-65-770.

On today’s call, iRobot’s Chairman and CEO, Colin Angle, will provide a review of the company’s operations and achievements for the second 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 second quarter of 2010 and provide additional detail on our financial expectations for fiscal 2010 to third quarter ending October 2, 2010 and the fourth quarter ending January 1, 2011. 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’m very excited to report that we delivered record results for the second quarter and first half. Revenue of $98 million the quarter exceeded our expectations and was 59% greater than Q2 revenue in 2009. Adjusted EBITDA of $12 million and EPS of $0.20 also far exceeded expectations.

Following truly outstanding performance by both divisions in the second quarter and good visibility on the rest of 2010, we are once again increasing our full-year expectations.

Our revenue and EPS expectations for the second half have increased since our April call. However, we have taken the opportunity to both increase our investment in the business and increase our full-year expectations due to our significant over achievement in the first half.

We expect full-year 2010 revenue of between $385 million and $390 million, an increase of roughly 30% over 2009. We are increasing our expectations for adjusted EBITDA to $36 million to $38 million, an improvement of approximately 75% year-over-year and our EPS range to $0.51 to $0.54, more than quadruple our 2009 EPS.

These increased expectations demonstrate significant progress towards our three-year financial goals of mid-to-high teen revenue CAGR, mid-teen adjusted EBITDA margins and high single-digit operating cash flow margins.

Profitable growth in the quarter was driven by both divisions. Home robot revenue increase was driven by broad-based growth internationally in Europe and Asian markets as well as in the United States. Increasing demand for our products continues to outpace concerns about a softening EU economy and our current manufacturing capacity.

We were conservative in our planning as we brought on a new contract manufacturer, a scalable Tier 1 manufacturing partner. They will be online in Q4 to meet this growing demand in 2011 and beyond. Our government industrial division’s revenue growth resulted from shipments of more PackBot, FasTac robots and spare parts than a year ago as well as the sale of a significant number of small unmanned ground vehicles in Q2.

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