iRobot Q419, FY19 User Manual
Q4 & FY19 Results Conference Call Prepared Remarks
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iRobot Q419 and FY19 Financial Results Conference Call
Prepared Remarks
February 6, 2020
Q4 & FY19 Results Conference Call Prepared Remarks
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iRobot Fourth-Quarter and Full-Year 2019 Conference Call
Operator:
Good day everyone and welcome to the iRobot fourth-quarter and full-year 2019 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 Andrew Kramer of iRobot Investor
Relations. Please go ahead.
Andrew:
Thank you operator, and good morning everybody. Joining me on today’s are iRobot
Chairman & CEO Colin Angle; Executive Vice President and CFO Alison Dean; and
Julie Zeiler, Vice President of Finance, who has been named to succeed Alison as CFO
later this spring.
Before I set the agenda for today’s call, I would 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.
This conference call may contain express or implied forward-looking statements relating to
the company’s financial results, operations and performance for the full fiscal year 2020
and the reporting periods therein; the growth, performance, revenue impact and prospects
of our business, including in the United States and internationally; our expectations
regarding profitability; our expectations regarding revenue (and the components thereof),
the rate of revenue growth, gross margins, non-GAAP gross margins, operating income,
non-GAAP operating income, operating expenses, non-GAAP operating expenses,
operating margin, non-GAAP operating margin, sales & marketing expenses, research and
development expenses, general and administrative expenses, restructuring charges, stock
compensation expenses, depreciation and amortization expenses, capital spending,
inventory, DII, other income, tax rate, non-GAAP tax rate, earnings and loss per share, non-
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GAAP earnings and loss per share, tariff expenses, cash and cash flow; the seasonality
and predictability of our business; the RVC category generally; our expectations regarding
currency exchange rates; our expectations regarding the impact on us, our expectations
for, an our plans relating to, tariffs on goods imported into the United States from China, as
well as our efforts to pursue an exemption from those tariffs and the potential impact
thereof; our expectations regarding our ability to penetrate further the robotic vacuum
cleaner and wet floor care markets; the impact of our continued investments in R&D,
technology and innovation; the impact of our efforts to manage costs; domestic and
international demand for robotic vacuum cleaners (RVC) and our RVC products;
competition and the impact thereof; demand for and revenue growth opportunities
associated with our Braava family of floor mopping robots; new product features; customer
engagement with digital communications; our expectations regarding our 2020 strategic
priorities; our ability to improve financial performance in 2021 and beyond, our intent and
timing expectations regarding the introduction and delivery of new products (such as Terra
lawn mowing and Roomba robots), applications and product capabilities and functionality,
and the timing and impact thereof; our intent to diversify our supply chain and
manufacturing capabilities, and the timing of our manufacturing diversification efforts and
impacts thereof; our market share and opportunity; 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 may also disclose non-GAAP financial measures as
defined by SEC Regulation G, including Adjusted EBITDA, non-GAAP gross profit and
non-GAAP gross profit margin, non-GAAP operating expenses, non-GAAP operating
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income and non-GAAP operating income margin, non-GAAP income tax expense, and
non-GAAP earnings per share. Our definitions of these non-GAAP financial measures,
and reconciliations of each of these non-GAAP financial measures to the most directly
comparable GAAP measure along with a reconciliation between our non-GAAP and
GAAP guidance, are provided in the financial tables at the end of the fourth-quarter and
full-year 2019 results press release that we issued last evening, which is available on our
website: https://investor.irobot.com/news-releases.
Related to our financial disclosures, we have continued to take steps to expand our
financial reporting to provide additional transparency into iRobot’s underlying operating
performance and potential. That process began a year ago when we started to provide
non-GAAP financial metrics and we have augmented those disclosures in today’s press
release by providing the specific quarterly Section 301 tariff costs. In addition, we have
expanded our outlook to include both GAAP and non-GAAP metrics, and reconciliations
of these metrics for full-year 2020 and the first quarter of 2020 are available at the end of
these prepared remarks.
Given the impact of non-cash items like stock-based compensation and one-time
exceptional items such as litigation costs have on our GAAP performance, Alison’s review
of our 2020 outlook will focus primarily on our non-GAAP outlook. Related to our non-GAAP
reporting, although we are now providing the specific dollar value of Section 301 tariff costs,
we do not plan to adjust our non-GAAP gross and operating profit margins for this item. To
facilitate this transition in our reporting conventions, the last eight quarters of GAAP to nonGAAP reconciliations included in today’s press release can be downloaded as an excel file
directly from our IR website. Finally, since we have exclusively relied on GAAP reporting
conventions throughout 2019, comments by both Colin and Alison about our fourth-quarter
and full-year 2019 results will focus on our GAAP performance.
As a reminder, 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 the telephone
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conference call will be available for one week through February 13, and can be accessed
by dialing 404-537-3406, passcode 1873658.
In terms of the agenda for today’s call, Colin will briefly review the company’s performance
and achievements for the fourth quarter and full fiscal year 2019, review our top strategic
priorities, discuss our outlook for 2020 and address the CFO transition announcement
that we also issued yesterday. Alison will detail our financial results for the fourth quarter
and full year 2019, and share some further color on 2020. Colin will wrap up our prepared
remarks with some final observations about 2020. Then we’ll open the call for questions.
At this point, I’ll turn the call over to Colin Angle.
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Colin:
Good morning and thank you for joining us.
We closed 2019 on a positive note with fourth-quarter revenue, operating income and
EPS that exceeded our October targets. Fourth-quarter revenue of $427 million grew
11% due to a strong showing in the U.S. and a solid performance in EMEA. The
combination of higher revenue and disciplined spending resulted in better-thanexpected operating profit margin and EPS. For full year 2019, we reported revenue
growth of 11% to over $1.2 billion, operating profit margin of 7% and EPS of $2.97. It’s
worth noting that our operating profit margin would have been 3 percentage points
higher and EPS would have benefited by $1.32 before taxes had we not paid nearly $38
million in Section 301 tariffs in 2019.
During 2019, we executed well on all major elements of our strategy while navigating
challenging market conditions in the U.S. and intense price competition in EMEA. As a
result, we maintained our Roomba leadership, took important steps to broaden our
product portfolio, and advanced our efforts to build out our Smart Home ecosystem. We
were also pleased with our progress to grow our connected user base and diversify our
supply chain. Although high tariffs in the U.S. and aggressive price competition are
expected to persist, we are confident that by executing on our strategic priorities, we will
emerge from 2020 well positioned to drive accelerated revenue growth, improve our
operating profit margin and generate stronger operating cash flow in 2021 and beyond.
Q419 and FY19 Highlights
Let’s take a closer look at our performance and accomplishments in 2019:
• Geographic Growth: In terms of our geographic revenue performance, we grew
our business in each major region. International revenue grew 15% in 2019 due
to outstanding performance in Japan and solid expansion in EMEA. In the U.S.,
revenue grew 8%, driven in part by excellent Q4 growth of 15%.
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