IRobot Hosts JPMorgan TMT Conference - Transcript

iRobot (IRBT)

JPMorgan TMT Conference

May 15, 2012 02:50 PM ET


Colin Angle - Chairman & CEO


Paul Coster - JPMorgan


Paul Coster – JPMorgan

My name is Paul Coster; I am the Senior Analyst covering applied emerging technology at JPMorgan. This is the 40th Annual Technology Meeting and Telecom Conference. It feels like sometimes doesn’t it? Anyway, thank you for joining us and thank you Colin Angle, CEO, Founder of iRobot for joining us making the trip in from Bedford. We appreciate it. So Colin perhaps let’s assume some of the folks in your audience are not familiar with the story, what is that iRobot does?

Colin Angle

Sure iRobot is a 23 year old company focused on practical robotics and over the years we have developed a tremendous technology base, explored a number of markets and are currently 75% of our business comes from selling consumer robots through retail channels globally to vacuum your floors, scrub your floors, clean your gutters clean your pools. We also have a defense and security business which is has put over 4500 robots into service primarily USDOD but also international customers. Those robots are predominantly light weight, ground vehicles that are used in service today for diffusing bombs, addressing the improvise explosive device threat and starting to be fielded by the regular army for a variety of intelligence gathering and situation awareness increasing operations.

Paul Coster – JPMorgan

And the heart of this is aware?

Colin Angle

The heart of this is aware, this is our robot intelligent system; it's a set of software tools and libraries that run on top of Linux that we have developed over the past 15 years that allow our robots to understand their environment. Most notably we are starting to feel robots and demonstrate prototypes of robots that can autonomously map their environments, feedback to the operators, a map of the environment that would resemble a CAD style map and allow the robot to drive around those environments cluttered by object and people but reliably and swiftly so this navigation capability is something that is coming online and is a key feature in some of our upcoming products and technology programs.

Paul Coster – JPMorgan

So the company has been through a number of phases, we were just talking about this and I kind of plus three years or so fabulous growth both for the defense and intelligence or government and industrial sector rather and for the home robotics segment and the company embraced a the EBITDA venture (ph) but pretty serious about profitable growth. We are now entering, it so feels like a hiatus rather than the phase for me because the defense segment just lost a bit of visibility, is that how you see things as well the (inaudible) another phase for iRobot.

Colin Angle

Well I think the company has always been diversified and the government, dimension of the business the driving hypothesis are still completely valid. We started off working on packbot robots for the improvised explosive device threat, Bid 4 (ph) competed one the future combat system program for small ground robots for the infantry, took in over a $100 million to develop the SUGV and successfully I have been delivering on the low rate initial production and then the challenge with government contracting it is lumpy and certainly election year, politics, sequestration, spectur (ph) and continuing resolutions have been pushing things to right and so that I think that you are part, I think that as we think about the next 18 months or so that the military side of the business is not going to be the growth driver, but remember it's only 25% of our business, the growth driver for the company has shifted to what is growing like a weed the home robot business unit has taken over very, very profitably and has really gone mainstream vacuuming robots, this might surprise you in Europe vacuuming robots about one in five vacuum sold in Europe today is a robot with the Spain being one in three vacuum sold being a robot and you say what’s special about Spain, absolutely nothing other than they have a lousy economy and are not viewed typically as technology adopters.

So that it starts to say well that giving has gone main stream, marketing such as what we did in Spain is impactful and in Q1 we saw North America really light up after being a relative slow grower where we worked on that profitability that you talked about actually exited some of our doors because of the unacceptable trade relationships we had while we were up 20% in the first quarter and subsequent to that figure have started a very aggressive marketing program we put $10 million this year into TV advertising that some of you may have seen around the main streaming of Roomba.

Paul Coster – JPMorgan

All right so it's kind of like you are the (inaudible) of the robotics industry this in time because you are not getting any respect for what you are doing on the home robot side, you definitely get penalized for the ongoing slump in the defense side of your business which is out of your control. So let’s try and sort of address this perception as to why it is that the defense segment was until recently anyway valued by investors more highly than the home robotics and I think it something to do with visibility and magnitude of the market and so on.

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