[PART I: FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) This section covers iRobot's unaudited financial statements, notes, and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section provides iRobot Corporation's unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed accounting notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section presents the consolidated balance sheets of iRobot Corporation as of April 3, 2021, and January 2, 2021 | ASSETS (in thousands) | April 3, 2021 | January 2, 2021 | | :-------------------- | :------------ | :-------------- | | Cash and cash equivalents | $500,754 | $432,635 | | Accounts receivable, net | $67,918 | $170,526 | | Inventory | $233,113 | $181,756 | | Total current assets | $843,154 | $881,221 | | Total assets | $1,157,891 | $1,189,728 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | April 3, 2021 | January 2, 2021 | | Accounts payable | $150,769 | $165,779 | | Accrued expenses | $105,810 | $131,388 | | Total current liabilities | $263,873 | $307,567 | | Total liabilities | $333,907 | $385,294 | | Total stockholders' equity | $823,984 | $804,434 | | Total liabilities and stockholders' equity | $1,157,891 | $1,189,728 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section details iRobot Corporation's consolidated statements of operations for the three months ended April 3, 2021, and March 28, 2020 | (in thousands, except per share amounts) | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | | :--------------------------------------- | :------------------------------- | :-------------------------------- | | Revenue | $303,261 | $192,535 | | Cost of revenue | $180,317 | $114,580 | | Gross profit | $122,944 | $77,955 | | Operating expenses | $116,555 | $98,180 | | Operating income (loss) | $6,389 | $(20,225) | | Income (loss) before income taxes | $6,229 | $(20,244) | | Net income (loss) | $7,443 | $(18,135) | | Net income (loss) per share: | | | | Basic | $0.26 | $(0.64) | | Diluted | $0.26 | $(0.64) | [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section presents iRobot Corporation's consolidated statements of comprehensive income (loss) for the three months ended April 3, 2021, and March 28, 2020 | (in thousands) | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | | :------------- | :------------------------------- | :-------------------------------- | | Net income (loss) | $7,443 | $(18,135) | | Other comprehensive income (loss): | | | | Net foreign currency translation adjustments | $(5,883) | $(914) | | Net unrealized gains on cash flow hedges, net of tax | $12,967 | $5,674 | | Net losses (gains) on cash flow hedge reclassified into earnings, net of tax | $391 | $(1,468) | | Net unrealized losses on marketable securities, net of tax | $(4) | $(17) | | Total comprehensive income (loss) | $14,914 | $(14,860) | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines iRobot Corporation's consolidated statements of stockholders' equity, detailing changes for the period ended April 3, 2021 | (in thousands) | Common Shares | Common Stock Value | Additional Paid-In Capital | Retained Earnings | Other Comprehensive Income (Loss) ("AOCI") | Stockholders' Equity | | :------------- | :------------ | :----------------- | :------------------------- | :---------------- | :----------------------------------------- | :------------------- | | Balance at January 2, 2021 | 28,184 | $282 | $205,256 | $599,389 | $(493) | $804,434 |\n| Issuance of common stock under employee stock plans | 67 | $1 | $2,588 | | | $2,589 |\n| Stock-based compensation | | | $6,782 | | | $6,782 |\n| Net income | | | | $7,443 | | $7,443 |\n| Balance at April 3, 2021 | 28,395 | $284 | $209,890 | $606,832 | $6,978 | $823,984 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section provides iRobot Corporation's consolidated statements of cash flows for the three months ended April 3, 2021, and March 28, 2020 | (in thousands) | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | | :------------- | :------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $28,694 | $40,734 | | Net cash provided by (used in) investing activities | $43,708 | $(5,370) | | Net cash used in financing activities | $(2,167) | $(25,882) | | Net increase in cash and cash equivalents | $68,119 | $9,376 | | Cash and cash equivalents, at end of period | $500,754 | $248,768 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the significant accounting policies and financial disclosures supporting the consolidated financial statements [1. Description of Business](index=9&type=section&id=1.%20Description%20of%20Business) iRobot Corporation designs and builds consumer robots, primarily floor cleaning robots, leveraging proprietary technologies for connected homes, including advanced cleaning, mapping, navigation, and human-robot interaction. The company generates revenue mainly from product sales through various global distribution channels - iRobot Corporation designs and builds consumer robots, primarily floor cleaning robots, utilizing proprietary technologies for connected homes, including advanced concepts in cleaning, mapping and navigation, human-robot interaction and physical solutions[22](index=22&type=chunk) - Revenue is primarily generated from product sales through a variety of distribution channels, including chain stores, national retailers, the Company's website and app, e-commerce sites, and value-added distributors and resellers worldwide[22](index=22&type=chunk) [2. Summary of Significant Accounting Policies](index=9&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines iRobot's accounting policies, including the basis of presentation, foreign currency translation, recently adopted and issued accounting standards, and the use of estimates. It also details policies for credit losses, inventory valuation, strategic investments, and net income per share calculation, noting the increased judgment required for estimates due to the COVID-19 pandemic - The Company adopted ASU No. 2019-12, "Income Taxes - Simplifying the Accounting for Income Taxes," in **Q1 2021**, with no material impact on consolidated financial statements[24](index=24&type=chunk) - The impact of the COVID-19 pandemic remains dynamic, requiring increased judgment and carrying a higher degree of variability and volatility for certain estimates and assumptions, such as allowance for credit losses and valuation of non-marketable equity securities[26](index=26&type=chunk)[27](index=27&type=chunk) Allowance for Credit Losses (in thousands) | Metric | April 3, 2021 | January 2, 2021 | | :----- | :------------ | :-------------- | | Allowance for credit losses | $2.7 million | $4.8 million | | Decrease in reserve and bad debt expense (Q1 2021) | $2.1 million | N/A | - During the three months ended April 3, 2021, the Company received net proceeds of **$51.5 million** from the sale of Teladoc shares, which were acquired in exchange for non-marketable equity securities of InTouch Health[30](index=30&type=chunk) Net Income (Loss) Per Share Calculation (in thousands, except per share amounts) | (in thousands, except per share amounts) | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | | :--------------------------------------- | :------------------------------- | :-------------------------------- | | Net income (loss) | $7,443 | $(18,135) | | Basic weighted-average common shares outstanding | 28,257 | 28,297 | | Dilutive effect of employee stock awards | 829 | — | | Diluted weighted-average common shares outstanding | 29,086 | 28,297 | | Net income (loss) per share - Basic | $0.26 | $(0.64) | | Net income (loss) per share - Diluted | $0.26 | $(0.64) | [3. Revenue Recognition](index=11&type=section&id=3.%20Revenue%20Recognition) Revenue is primarily derived from the sale of consumer robots and accessories, recognized when control is transferred. For connected robots, revenue is allocated between the robot (point-in-time) and Cloud Services (deferred and recognized straight-line). The company also offers extended warranties and manages product returns and incentives through reserves - Revenue is recognized upon transfer of control of products or services, generally at the point of sale for robots and deferred over the estimated term for Cloud Services and extended warranty plans[35](index=35&type=chunk) Disaggregated Revenue by Geographical Region (in thousands) | Geographical Region | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | | :------------------ | :------------------------------- | :-------------------------------- | | United States | $114,772 | $81,967 | | EMEA | $116,233 | $66,659 | | Japan | $40,575 | $26,464 | | Other | $31,681 | $17,445 | | Total revenue | $303,261 | $192,535 | Contract Balances (in thousands) | Metric | April 3, 2021 | January 2, 2021 | | :----- | :------------ | :-------------- | | Accounts receivable, net | $67,918 | $170,526 | | Contract liabilities | $14,986 | $17,700 | - As of April 3, 2021, the Company had reserves for product returns of **$51.8 million** and other credits and incentives of **$78.3 million**[36](index=36&type=chunk) [4. Leases](index=12&type=section&id=4.%20Leases) The Company's leasing arrangements primarily consist of operating leases for facilities. Lease expense is recognized on a straight-line basis, and right-of-use assets and lease obligations are recorded for terms greater than 12 months. The weighted average discount rate is 3.57% with a remaining lease term of 8.14 years as of April 3, 2021 - As of April 3, 2021, the Company's weighted average discount rate for leases was **3.57%**, and the weighted average remaining lease term was **8.14 years**[41](index=41&type=chunk) Components of Lease Expense (in thousands) | Lease Component | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | | :-------------- | :------------------------------- | :-------------------------------- | | Operating lease cost | $1,987 | $2,355 | | Variable lease cost | $895 | $1,122 | | Total lease cost | $2,882 | $3,477 | Maturities of Operating Lease Liabilities as of April 3, 2021 (in thousands) | Period | Amount | | :----- | :----- | | Remainder of 2021 | $5,896 | | 2022 | $8,590 | | 2023 | $7,651 | | 2024 | $6,595 | | 2025 | $6,621 | | Thereafter | $28,562 | | Total minimum lease payments | $63,915 | | Less: imputed interest | $8,955 | | Present value of future minimum lease payments | $54,960 | | Less: current portion of operating lease liabilities | $6,222 | | Long-term lease liabilities | $48,738 | [5. Goodwill and Other Intangible Assets](index=13&type=section&id=5.%20Goodwill%20and%20Other%20Intangible%20Assets) This section summarizes the changes in the carrying amount of goodwill and intangible assets for the three months ended April 3, 2021, showing decreases primarily due to amortization and foreign currency translation effects Activity in Goodwill and Intangible Assets (in thousands) | Metric | Goodwill (April 3, 2021) | Intangible assets (April 3, 2021) | | :----- | :----------------------- | :-------------------------------- | | Balance as of January 2, 2021 | $125,872 | $9,902 | | Amortization | — | $(430) | | Effect of foreign currency translation | $(2,599) | $(160) | | Balance as of April 3, 2021 | $123,273 | $9,312 | [6. Accrued Expenses](index=14&type=section&id=6.%20Accrued%20Expenses) This note provides a detailed breakdown of accrued expenses, including warranty, manufacturing and logistics costs, compensation and benefits, bonus, operating lease liabilities, income taxes, sales and other indirect taxes, and other accrued amounts, comparing balances as of April 3, 2021, and January 2, 2021 Accrued Expenses (in thousands) | Accrued Expense Category | April 3, 2021 | January 2, 2021 | | :----------------------- | :------------ | :-------------- | | Accrued warranty | $23,904 | $24,392 | | Accrued manufacturing and logistics cost | $19,374 | $20,093 | | Accrued compensation and benefits | $17,452 | $17,635 | | Accrued bonus | $6,817 | $31,523 | | Current portion of operating lease liabilities | $6,222 | $6,315 | | Accrued income taxes | $6,136 | $3,806 | | Accrued sales and other indirect taxes payable | $5,631 | $15,480 | | Accrued other | $20,274 | $12,144 | | Total | $105,810 | $131,388 | [7. Derivative Instruments and Hedging Activities](index=14&type=section&id=7.%20Derivative%20Instruments%20and%20Hedging%20Activities) iRobot uses derivative instruments, including cash flow hedges and economic hedges, to manage foreign currency exchange rate fluctuations. The notional value of outstanding cash flow hedges was $397.8 million and economic hedges was $140.5 million as of April 3, 2021. The section also details the fair values and associated gains/losses of these instruments - As of April 3, 2021, the Company had outstanding cash flow hedges with a total notional value of **$397.8 million** and outstanding foreign currency economic hedges with a total notional value of **$140.5 million**[51](index=51&type=chunk) Fair Values of Derivative Instruments (in thousands) | Derivative Type | Classification | April 3, 2021 | January 2, 2021 | | :-------------- | :------------- | :------------ | :-------------- | | **Derivatives not designated as hedging instruments:** | | | | | Foreign currency forward contracts | Other current assets | $1,258 | $261 | | Foreign currency forward contracts | Accrued expenses | $764 | $2,176 | | Forward sale contract | Accrued expenses | — | $3,904 | | **Derivatives designated as cash flow hedges:** | | | | | Foreign currency forward contracts | Other current assets | $6,073 | $362 | | Foreign currency forward contracts | Other assets | $5,750 | $679 | | Foreign currency forward contracts | Accrued expenses | $1,124 | $2,092 | | Foreign currency forward contracts | Long-term liabilities | $2,633 | $8,554 | Gains (Losses) Associated with Derivative Instruments (in thousands) | Type of Gain (Loss) | Classification | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | | :------------------ | :------------- | :------------------------------- | :-------------------------------- | | Loss recognized in income (not designated as hedging) | Other expense, net | $(10,013) | $(545) | | Gain (loss) recognized in OCI on Derivative (cash flow hedging) | | $17,154 | $7,566 | | Amount of (loss) gain reclassified from AOCI into earnings (cash flow hedging) | | $(517) | $1,957 | [8. Fair Value Measurements](index=15&type=section&id=8.%20Fair%20Value%20Measurements) This section details the fair value measurements of the Company's financial assets and liabilities on a recurring basis, categorized into Level 1 and Level 2 based on the observability of inputs. Money market funds are classified as Level 1, while derivative instruments and corporate/government bonds are Level 2 Fair Value Measurements as of April 3, 2021 (in thousands) | Category | Level 1 | Level 2 | Level 3 | | :------- | :------ | :------ | :------ | | **Assets:** | | | | | Money market funds | $338,868 | — | — | | Derivative instruments | — | $13,081 | — | | Total assets measured at fair value | $338,868 | $13,081 | — | | **Liabilities:** | | | | | Derivative instruments | — | $4,521 | — | | Total liabilities measured at fair value | — | $4,521 | — | Fair Value Measurements as of January 2, 2021 (in thousands) | Category | Level 1 | Level 2 | Level 3 | | :------- | :------ | :------ | :------ | | **Assets:** | | | | | Money market funds | $47,529 | — | — | | Marketable equity securities | $47,576 | — | — | | Corporate and government bonds | — | $3,505 | — | | Derivative instruments | — | $5,206 | — | | Total assets measured at fair value | $95,105 | $8,711 | — | | **Liabilities:** | | | | | Derivative instruments | — | $12,822 | — | | Total liabilities measured at fair value | — | $12,822 | — | [9. Stockholders' Equity](index=16&type=section&id=9.%20Stockholders'%20Equity) This section details the Company's share repurchase activity. The Board of Directors approved a $200.0 million stock repurchase program, with $50.0 million repurchased in Q2 2021 under a Rule 10b5-1 plan, leaving $125.0 million available as of May 6, 2021 - The Company's Board of Directors approved a stock repurchase program authorizing up to **$200.0 million** in share repurchases until September 5, 2021[61](index=61&type=chunk) - During the second quarter of 2021, the Company repurchased **446,954 shares** of its common stock at an average price of **$111.85**, totaling **$50.0 million**, under a Rule 10b5-1 plan[61](index=61&type=chunk) - As of May 6, 2021, **$125.0 million** remained available for future repurchases under the program[61](index=61&type=chunk) [10. Commitments and Contingencies](index=16&type=section&id=10.%20Commitments%20and%20Contingencies) This note addresses legal proceedings, guarantees, indemnification obligations, and warranty accruals. The Securities Class Action was dismissed, and derivative litigations are seeking dismissal. The Company provides product warranties and maintains a reserve for these obligations - The U.S. District Court for the District of Massachusetts granted the Company's motion to dismiss the Securities Class Action on **March 15, 2021**[62](index=62&type=chunk) - On May 4, 2021, parties in the consolidated derivative litigations (In re iRobot Corporation Derivative litigation) filed a joint stipulation seeking dismissal of the case[64](index=64&type=chunk) Warranty Accrual Activity (in thousands) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | | :----- | :------------------------------- | :-------------------------------- | | Balance at beginning of period | $24,392 | $13,856 | | Provision | $10,185 | $4,475 | | Warranty usage | $(10,673) | $(4,333) | | Balance at end of period | $23,904 | $13,998 | [11. Income Taxes](index=17&type=section&id=11.%20Income%20Taxes) The Company recorded an income tax benefit for the three months ended April 3, 2021, with an effective income tax rate of (19.5)%, primarily due to a discrete tax benefit related to stock-based compensation - The effective income tax rate for the three months ended April 3, 2021, was **(19.5)%**, compared to **10.4%** for the three months ended March 28, 2020[68](index=68&type=chunk) - The change in the effective income tax rate was primarily due to the recognition of a discrete tax benefit related to stock-based compensation during the period[68](index=68&type=chunk) [12. Industry Segment, Geographic Information and Significant Customers](index=17&type=section&id=12.%20Industry%20Segment%2C%20Geographic%20Information%20and%20Significant%20Customers) iRobot operates as a single operating segment, focusing on consumer robot products distributed globally. The company notes a significant customer concentration, with one retailer accounting for a notable portion of total revenue - The Company operates as one operating segment, offering consumer robot products through various distribution channels worldwide[69](index=69&type=chunk) - For the three months ended April 3, 2021, one retailer generated **17.0%** of total revenue, up from **13.4%** in the prior year period[70](index=70&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on iRobot's financial performance and condition, including an overview of the business, key metrics, non-GAAP financial measures, critical accounting policies, and a detailed comparison of results of operations for the three months ended April 3, 2021, versus March 28, 2020. It also discusses liquidity, capital resources, and forward-looking statements [Overview](index=18&type=section&id=Overview) iRobot is a global leader in consumer robotics, focusing on smart home floor cleaning robots with AI, mapping, and navigation technologies. The company is diversifying manufacturing to Malaysia to offset Section 301 tariffs and is executing a strategy to differentiate its experience, build customer relationships, and nurture lifetime value through innovation, digital marketing, and new services like iRobot Select - iRobot is a leading global consumer robot company, pioneering in consumer robotics, robotic floor care, and robotic artificial intelligence for over **30 years**[72](index=72&type=chunk) - The company is focused on scaling manufacturing in Malaysia by the end of **2021** to diversify its supply chain and offset the **25% Section 301 tariff** on Roomba products imported from China, which was reinstated on **January 1, 2021**[72](index=72&type=chunk) - Key strategic elements include differentiating the iRobot experience through innovation (e.g., iRobot Genius Home Intelligence Platform, Roomba i3 Series), building strong consumer relationships (e.g., **10.7 million** connected customers, up **74% YoY**), and nurturing lifetime value (e.g., iRobot H1 handheld vacuum, extended warranty plans, iRobot Select membership program)[72](index=72&type=chunk)[73](index=73&type=chunk) - Direct-to-consumer sales grew **146%** in the first quarter of 2021, generating **12%** of total revenue[73](index=73&type=chunk) [Key Metrics](index=19&type=section&id=Key%20Metrics) This section presents key financial and operational metrics for the three months ended April 3, 2021, compared to March 28, 2020, highlighting significant increases in total revenue, non-GAAP gross profit, and total robot units shipped, alongside an improvement in non-GAAP operating income Key Metrics (in thousands, except average gross selling prices) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | | :----- | :------------------------------- | :-------------------------------- | | Total Revenue | $303,261 | $192,535 | | Non-GAAP Gross Profit | $123,531 | $78,767 | | Non-GAAP Gross Margin | 40.7% | 40.9% | | Non-GAAP Operating Income (Loss) | $14,954 | $(14,380) | | Non-GAAP Operating Margin | 4.9% | (7.5)% | | Total robot units shipped | 1,088 | 721 | | Average gross selling prices for robot units | $319 | $315 | [Use of Non-GAAP Financial Measures](index=19&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) iRobot uses non-GAAP financial measures to evaluate operating performance, excluding items like amortization of acquired intangibles, tariff refunds, M&A expenses, stock-based compensation, IP litigation, strategic investment gains/losses, restructuring, and certain income tax adjustments. These adjustments aim to provide a clearer view of core operating results and facilitate peer comparisons - Non-GAAP financial measures exclude items such as amortization of acquired intangible assets, tariff refunds, net merger, acquisition and divestiture (income) expense, stock-based compensation, IP litigation expense, gain/loss on strategic investments, restructuring and other charges, and certain income tax adjustments[76](index=76&type=chunk)[77](index=77&type=chunk) GAAP to Non-GAAP Reconciliation (in thousands, except per share amounts) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | | :----- | :------------------------------- | :-------------------------------- | | GAAP Gross Profit | $122,944 | $77,955 | | Non-GAAP Gross Profit | $123,531 | $78,767 | | GAAP Operating Income (Loss) | $6,389 | $(20,225) | | Non-GAAP Operating Income (Loss) | $14,954 | $(14,380) | | GAAP Net Income (Loss) | $7,443 | $(18,135) | | Non-GAAP Net Income (Loss) | $11,919 | $(9,162) | | GAAP Net Income (Loss) Per Diluted Share | $0.26 | $(0.64) | | Non-GAAP Net Income (Loss) Per Diluted Share | $0.41 | $(0.32) | [Critical Accounting Policies and Estimates](index=21&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The preparation of financial statements requires management to make significant estimates and assumptions, including those related to revenue recognition, credit losses, product warranties, valuation of goodwill and intangibles, non-marketable equity investments, loss contingencies, stock-based compensation, and income taxes. These estimates are based on historical experience and various factors, with actual results potentially differing - Critical accounting policies and estimates include revenue recognition (performance obligations, variable consideration, product returns/incentives), allowance for credit losses, product warranties, valuation of goodwill and acquired intangible assets, valuation of non-marketable equity investments, evaluating loss contingencies, accounting for stock-based compensation, and accounting for income taxes and related valuation allowances[80](index=80&type=chunk) [Overview of Results of Operations](index=22&type=section&id=Overview%20of%20Results%20of%20Operations) This section provides a detailed analysis of iRobot's financial performance, comparing results for the three months ended April 3, 2021, and March 28, 2020 [Revenue](index=22&type=section&id=Revenue) Revenue for the three months ended April 3, 2021, increased significantly by 57.5% to $303.3 million, driven primarily by a 50.9% increase in units shipped and strong international growth, particularly in EMEA (74.4%) and Japan (53.3%) Revenue Performance (in thousands) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | Dollar Change | Percent Change | | :----- | :------------------------------- | :-------------------------------- | :------------ | :------------- | | Revenue | $303,261 | $192,535 | $110,726 | 57.5% | - The increase was primarily attributable to a **50.9%** increase in units shipped and strong international revenue growth of **70.5%**, with EMEA growing **74.4%** and Japan increasing **53.3%**[82](index=82&type=chunk) [Cost of Product Revenue](index=22&type=section&id=Cost%20of%20Product%20Revenue) Cost of product revenue increased by 57.6% to $180.1 million for the three months ended April 3, 2021, mirroring the 57.5% increase in total revenue, maintaining a consistent percentage of revenue at 59.4% Cost of Product Revenue (in thousands) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | Dollar Change | Percent Change | | :----- | :------------------------------- | :-------------------------------- | :------------ | :------------- | | Cost of product revenue | $180,092 | $114,295 | $65,797 | 57.6% | | As a percentage of revenue | 59.4% | 59.4% | | | [Gross Profit](index=23&type=section&id=Gross%20Profit) Gross profit increased by 57.7% to $122.9 million, with gross margin remaining consistent at 40.5% for the three months ended April 3, 2021. This consistency was due to higher sales leverage, lower tariff costs, and favorable channel mix offsetting increased air freight, component costs, and pricing/promotion changes. Future gross margin pressure is anticipated from rising raw material, freight, and component costs Gross Profit Performance (in thousands) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | Dollar Change | Percent Change | | :----- | :------------------------------- | :-------------------------------- | :------------ | :------------- | | Gross profit | $122,944 | $77,955 | $44,989 | 57.7% | | Gross margin | 40.5% | 40.5% | | | - Gross margin remained consistent at **40.5%**, with higher sales leverage, lower tariff costs, and favorable channel mix offsetting increased air freight fees and higher component costs[85](index=85&type=chunk) - The Company expects gross margin pressure in the coming quarters due to anticipated increases in raw materials, freight, transportation, and component costs (e.g., semiconductor chip availability)[85](index=85&type=chunk) [Research and Development](index=23&type=section&id=Research%20and%20Development) Research and development expenses increased by 14.0% to $41.9 million for the three months ended April 3, 2021, primarily due to higher people-related and program-related costs, though as a percentage of revenue, it decreased from 19.1% to 13.8% Research and Development Expenses (in thousands) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | Dollar Change | Percent Change | | :----- | :------------------------------- | :-------------------------------- | :------------ | :------------- | | Research and development | $41,920 | $36,759 | $5,161 | 14.0% | | As a percentage of revenue | 13.8% | 19.1% | | | - The increase was primarily due to a **$3.3 million** increase in people-related costs and a **$1.8 million** increase in program-related costs[86](index=86&type=chunk) [Selling and Marketing](index=23&type=section&id=Selling%20and%20Marketing) Selling and marketing expenses rose by 39.3% to $51.0 million for the three months ended April 3, 2021, mainly driven by an $11.1 million increase in marketing spend to boost sales growth and support the direct-to-consumer channel, alongside a $3.2 million increase in people-related costs Selling and Marketing Expenses (in thousands) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | Dollar Change | Percent Change | | :----- | :------------------------------- | :-------------------------------- | :------------ | :------------- | | Selling and marketing | $50,990 | $36,594 | $14,396 | 39.3% | | As a percentage of revenue | 16.8% | 19.0% | | | - The increase was primarily attributable to an **$11.1 million** increase in marketing spend for sales growth and direct-to-consumer channel support, and a **$3.2 million** increase in people-related costs[87](index=87&type=chunk) [General and Administrative](index=23&type=section&id=General%20and%20Administrative) General and administrative expenses decreased by 4.6% to $23.4 million for the three months ended April 3, 2021. This decrease was primarily due to a $2.1 million reduction in the allowance for credit loss, partially offset by higher people-related costs ($4.3 million) and increased legal fees ($1.2 million) General and Administrative Expenses (in thousands) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | Dollar Change | Percent Change | | :----- | :------------------------------- | :-------------------------------- | :------------ | :------------- | | General and administrative | $23,440 | $24,573 | $(1,133) | (4.6)% | | As a percentage of revenue | 7.7% | 12.8% | | | - The decrease was primarily due to a **$2.1 million** decrease in the allowance for credit loss, offset by higher people-related costs (**$4.3 million**) and increased legal fees (**$1.2 million**)[88](index=88&type=chunk)[89](index=89&type=chunk) [Amortization of Acquired Intangible Assets](index=24&type=section&id=Amortization%20of%20Acquired%20Intangible%20Assets) Total amortization expense for acquired intangible assets decreased by 20.2% to $0.43 million for the three months ended April 3, 2021, and was immaterial as a percentage of revenue Amortization of Acquired Intangible Assets (in thousands) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | Dollar Change | Percent Change | | :----- | :------------------------------- | :-------------------------------- | :------------ | :------------- | | Cost of revenue | $225 | $285 | $(60) | (21.1)% | | Operating expense | $205 | $254 | $(49) | (19.3)% | | Total amortization expense | $430 | $539 | $(109) | (20.2)% | | As a percentage of revenue | 0.1% | 0.3% | | | [Other Expense, Net](index=24&type=section&id=Other%20Expense%2C%20Net) Other expense, net, increased significantly to $0.2 million for the three months ended April 3, 2021, compared to a negligible amount in the prior year, encompassing interest income/expense, foreign currency gains/losses, and strategic investment gains/losses Other Expense, Net (in thousands) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | Dollar Change | Percent Change | | :----- | :------------------------------- | :-------------------------------- | :------------ | :------------- | | Other expense, net | $(160) | $(19) | $(141) | 742.1% | - Other expense, net, includes interest income, interest expense, foreign currency gains (losses), and gains (losses) from strategic investments[91](index=91&type=chunk) [Income Tax Benefit](index=24&type=section&id=Income%20Tax%20Benefit) The Company recorded an income tax benefit of $1.2 million for the three months ended April 3, 2021, resulting in an effective income tax rate of (19.5)%. This change from the prior year's $2.1 million benefit (10.4% rate) was primarily due to a discrete tax benefit related to stock-based compensation Income Tax Benefit (in thousands) | Metric | Three Months Ended April 3, 2021 | Three Months Ended March 28, 2020 | Dollar Change | Percent Change | | :----- | :------------------------------- | :-------------------------------- | :------------ | :------------- | | Income tax benefit | $(1,214) | $(2,109) | $895 | (42.4)% | | Effective income tax rate | (19.5)% | 10.4% | | | - The change in the effective income tax rate was primarily due to the recognition of a discrete tax benefit related to stock-based compensation during the period[92](index=92&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) As of April 3, 2021, iRobot's principal liquidity sources included $500.8 million in cash and cash equivalents, with working capital at $579.3 million. The company's outsourced manufacturing model provides flexibility, and capital expenditures were $11.3 million. Operating activities provided $28.7 million in cash, investing activities provided $43.7 million, and financing activities used $2.2 million. The company maintains a $150.0 million unsecured revolving line of credit with no outstanding borrowings and a $200.0 million share repurchase program, with $125.0 million remaining - As of April 3, 2021, principal sources of liquidity were cash and cash equivalents totaling **$500.8 million**, with working capital at **$579.3 million**[94](index=94&type=chunk) - Capital expenditures for the three months ended April 3, 2021, were **$11.3 million**, primarily for machinery, tooling, and manufacturing expansion in Malaysia[94](index=94&type=chunk)[96](index=96&type=chunk) - Net cash provided by operating activities was **$28.7 million**, provided by investing activities was **$43.7 million**, and used in financing activities was **$2.2 million** for the three months ended April 3, 2021[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) - The Company has a **$150.0 million** unsecured revolving line of credit, with no outstanding borrowings as of April 3, 2021, and a **$5.0 million** unsecured letter of credit facility[98](index=98&type=chunk)[100](index=100&type=chunk) - As of May 6, 2021, **$125.0 million** remained available under the **$200.0 million** share repurchase program[102](index=102&type=chunk) - Outstanding purchase orders aggregated approximately **$545.1 million** as of April 3, 2021, primarily for inventory with contract manufacturers[103](index=103&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) iRobot is exposed to foreign currency exchange rate fluctuations due to international revenue and expenses denominated in multiple currencies. The company uses cash flow hedges and economic hedges to mitigate these risks. As of April 3, 2021, a 10% fluctuation in the U.S. Dollar would impact the fair market value of foreign currency contracts by approximately $39.1 million - The Company is exposed to fluctuations in foreign currency exchange rates, primarily from transactions denominated in British Pounds, Canadian Dollars, Euros, and Japanese Yen[105](index=105&type=chunk) - iRobot uses derivative instruments, including cash flow hedges (notional value of **$397.8 million** as of April 3, 2021) and economic hedges (notional value of **$140.5 million** as of April 3, 2021), to reduce the effects of foreign exchange rate changes[105](index=105&type=chunk) - As of April 3, 2021, a **10%** weakening or strengthening of the U.S. Dollar would increase or decrease the fair market value of foreign currency contracts by approximately **$39.1 million**[105](index=105&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that iRobot's disclosure controls and procedures were effective at a reasonable assurance level as of April 3, 2021. There were no material changes in internal control over financial reporting during the period - Management, with the participation of the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of **April 3, 2021**[106](index=106&type=chunk) - There was no material change in internal control over financial reporting during the period covered by this report[106](index=106&type=chunk) [PART II: OTHER INFORMATION](index=27&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) This section provides additional information, including legal proceedings, risk factors, other disclosures, and exhibits [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the information on legal proceedings from Note 10, Commitments and Contingencies, in the consolidated financial statements - Information on legal proceedings is included in Note 10, Commitments and Contingencies, in the accompanying notes to the unaudited consolidated financial statements[107](index=107&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) This section highlights updates to the Company's risk factors, emphasizing the dependence on a limited number of manufacturers and suppliers, particularly for components like semiconductor chips. It details the risks associated with potential manufacturing disruptions, supply chain challenges, and international commerce, including tariffs and intellectual property protection - The Company depends on a limited number of manufacturers and suppliers for materials and components, with the majority of contract manufacturing in China and increasing capacity in Malaysia[109](index=109&type=chunk) - Global supply chain challenges, including limits on various semiconductor devices, have adversely impacted and are anticipated to continue impacting the Company's ability to meet product demand, potentially leading to additional costs and customer dissatisfaction[109](index=109&type=chunk) - Reliance on contract manufacturers involves risks such as lack of direct control over production, quality, and costs; risk of inventory loss in transit; and risks associated with international commerce, including changes in tariffs and trade policies[109](index=109&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information) This section discloses that certain officers and directors have entered into Rule 10b5-1 trading plans, which allow for pre-scheduled transactions in company securities. The company anticipates future trading plans by other personnel and intends to disclose names of executive officers and directors establishing such plans in future reports - Certain officers and directors (including Colin Angle, Glen Weinstein, Mohamad Ali, Deborah Ellinger, Elisha Finney, and Rueybin Kao) have entered into Rule 10b5-1 trading plans[111](index=111&type=chunk) - These plans allow individuals to relinquish control over transactions once the plan is in place, with sales potentially occurring at any time[111](index=111&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including certifications, XBRL taxonomy documents, and the cover page interactive data file - Exhibits include Certifications Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (31.1, 31.2), Certification Pursuant to 18 U.S.C. Section 1350 (32.1), and various Inline XBRL Taxonomy Extension Documents (101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[113](index=113&type=chunk) [Signatures](index=31&type=section&id=Signatures) The report is duly signed on behalf of iRobot Corporation by Julie Zeiler, Executive Vice President and Chief Financial Officer, on May 6, 2021 - The report was signed on **May 6, 2021**, by Julie Zeiler, Executive Vice President and Chief Financial Officer (Principal Financial Officer) of iRobot Corporation[115](index=115&type=chunk)

Financial Data and Key Metrics Changes - Q1 2021 revenue reached $303 million, a 58% increase compared to Q1 2020, with an operating income of $15 million and an operating profit margin of 5% [7][20] - Gross margin for Q1 2021 was 40.7%, largely unchanged from the prior year, with operating expenses increasing by 17% to $109 million, representing 36% of revenue [21][22] - Net income per share for Q1 2021 was $0.41, with cash and short-term investments totaling $501 million, an increase of $17 million from year-end [23] Business Line Data and Key Metrics Changes - Roomba robots and accessories accounted for 89% of Q1 revenue, with strong growth in direct-to-consumer sales, which increased by 146% and represented 12% of Q1 revenue [20][15] - The introduction of the iRobot H1 handheld vacuum complemented existing products and aimed to enhance customer revenue [13][69] Market Data and Key Metrics Changes - Revenue growth was driven by a 40% increase in the U.S. and a 70% increase internationally, with EMEA showing a 74% growth and Japan a 53% increase [20] - Approximately 56% of total Q1 revenue came from e-commerce channels, reflecting a significant shift in consumer purchasing behavior [20] Company Strategy and Development Direction - The company focuses on enhancing customer engagement through AI and machine vision technologies, aiming to integrate cleaning robots into customers' lifestyles [9][10] - iRobot is committed to nurturing lifetime customer relationships and expanding existing customer revenue through new services and purchasing options [12][14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from the semiconductor chip shortage and rising costs for raw materials and transportation, but remains optimistic about growth potential [17][18] - The full-year revenue outlook has been raised to a range of $1.67 billion to $1.71 billion, with expectations for continued strong demand [17][24] Other Important Information - The company plans to optimize its iRobot Select Robot-as-a-service membership program and is testing a premium care-as-a-service offering [14] - The company has a strong balance sheet, which will help secure longer lead times for components amid supply chain challenges [25] Q&A Session Summary Question: Clarification on U.S. inventory dynamics and future promotional activities - Management indicated that inventory levels are healthy and there are no unusual risks with channel viability, with expectations for strong sequential growth in Q2 [33][36] Question: Impact of component shortages on revenue guidance - Management confirmed that component shortages influence both revenue and margin guidance, but demand remains strong [50] Question: Trends driving growth in EMEA - Management noted that robot vacuuming is becoming the preferred method for floor care, with low household penetration providing growth opportunities [46] Question: Expectations for new product launches - Management confirmed that two new robots are planned for launch this year, unaffected by supply chain challenges [76] Question: Updates on litigation with Shark - No updates were provided on the litigation status [79]

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $545 million, a 28% year-over-year increase, with full-year revenue at $1.43 billion, an 18% increase [8][25] - Operating income margin for Q4 was 6%, with full-year operating profit margin at 10% [8][25] - EPS for Q4 was $0.84, and for the full year, it was $4.14, up from $3.62 in 2019 [8][26] Business Line Data and Key Metrics Changes - Roomba accounted for 89% of Q4 revenue, with Braava revenue growing by 56% due to strong demand for the m6 model [23] - Premium robot sales grew nearly 50% in 2020, representing 60% of total robot sales [12] - Direct-to-consumer sales more than doubled in Q4, contributing 11% of total 2020 revenue, up from 6% in 2019 [16] Market Data and Key Metrics Changes - U.S. revenue grew by 23%, while international revenue increased by 12%, with Japan showing a 20% growth and EMEA up by 8% [25] - Q4 revenue growth was 28% in the U.S. and 27% internationally, driven by strong demand across all major regions [23] Company Strategy and Development Direction - The company focuses on enhancing customer engagement and differentiating the cleaning experience through software investments in AI and machine vision technologies [9][10] - Plans to introduce new Roomba models and expand digital features through the Genius platform in 2021 [11] - Aims to increase direct-to-consumer sales to at least 15% of total revenue in 2021 and over 20% by the end of 2023 [16] Management's Comments on Operating Environment and Future Outlook - The company anticipates 2021 revenue growth of 14% to 17%, with a target operating profit margin of approximately 7% [19][20] - Management expects gross margin to decline to the low 40% range due to tariffs and initial costs from expanding production in Malaysia [29] - Optimism about long-term prospects, with expectations for stronger performance in 2022 driven by operational improvements and market growth [20][21] Other Important Information - The company ended 2020 with $484 million in cash and short-term investments, reflecting strong cash flow from operations [26] - The company is actively defending its intellectual property, having filed a new patent infringement action against SharkNinja [11] Q&A Session Summary Question: Insights on revenue growth expectations for 2022 - Management highlighted that 2021 investments are expected to lead to revenue growth in 2022, with a focus on under-penetrated markets [41][44] Question: Breakdown of gross margin decline for 2021 - Management indicated that tariffs are a significant factor, along with costs associated with ramping up production in Malaysia and pricing activities [45][46] Question: Supply chain health and confidence - Management expressed pride in their supply chain's performance but acknowledged challenges such as rising freight costs and material shortages [48][49] Question: Long-term vision for Roomba - The company aims to expand Roomba's functionalities beyond cleaning, leveraging AI for enhanced home understanding [50][52] Question: Direct-to-consumer sales growth drivers - Management noted increased customer engagement and improved online capabilities as key factors driving direct sales growth [74][75]

iRobot Corp. (NASDAQ:IRBT) Q3 2020 Results Conference Call October 21, 2020 8:30 AM ET Company Participants Andrew Kramer - IR Colin Angle - Chairman and CEO Julie Zeiler - EVP and CFO Conference Call Participants Charlie Anderson - Collier Securities Jim Ricchiuti - Needham & Company Ben Rose - Battle Road Asiya Merchant - Citigroup John Babcock - Bank of America Mark Strouse - J.P. Morgan Mike Latimore - Northland Capital Markets Jeff Feinberg - Feinberg Investment Operator Good day, everyone. And welcome ...

iRobot Corporation (NASDAQ:IRBT) Q2 2020 Earnings Conference Call July 22, 2020 8:30 AM ET Company Participants Andrew Kramer - Investor Relations Colin Angle - Chairman & Chief Executive Officer Julie Zeiler - Executive Vice President & Chief Financial Officer Conference Call Participants Mike Latimore - Northland Capital Markets John Babcock - Bank of America Merrill Lynch Jim Ricchiuti - Needham & Company Ben Rose - Battle Road Research Mark Strouse - JPMorgan Charles Anderson - Colliers Securities Asiya ...

Financial Data and Key Metrics Changes - First quarter revenue was $193 million, a decline of 19% from the prior year [10][24] - Operating loss for Q1 was $14.4 million, with a net loss per share of $0.32 [10][26] - Gross margin was 41%, down 10.9 percentage points from the previous year, primarily due to lower pricing and higher promotional expenses [25][24] - Cash and investments at the end of Q1 totaled $264 million, with healthy cash flow from operations of $41 million [27][33] Business Line Data and Key Metrics Changes - Roomba accounted for approximately 88% of revenue, with most revenue generated from robots priced at $500 and above [24] - Revenue declined by 28% in the U.S., 11% in EMEA, and 14% in Japan [11][24] Market Data and Key Metrics Changes - U.S. sell-through accelerated in February but was disrupted in March due to COVID-19 [10][11] - The pandemic has led to increased consumer interest in cleaning products, although economic uncertainty may affect purchasing behavior [12][20] Company Strategy and Development Direction - The company is focusing on differentiating its offerings, building direct relationships with customers, and nurturing customer lifetime value [13][15][16] - Cost-reduction actions are being implemented, including a targeted headcount reduction of approximately 5% and a $30 million reduction in spending for 2020 [17][32] - The launch of the Terra robot mower has been suspended due to COVID-19 uncertainties, while other product developments remain on track [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for revenue recovery in the second half of the year, despite anticipating a soft second quarter [20][23] - The uncertainty surrounding COVID-19 has impaired visibility into order activity and financial targets for the year [20][28] Other Important Information - The company received a tariff exclusion that will eliminate a 25% tariff on Roomba imports and provide refunds on previously paid tariffs [19][30] - The company ended Q1 with a healthy inventory level and is managing its supply chain to adapt to changing market conditions [27][71] Q&A Session Summary Question: What are the sales through your direct-to-consumer website? - Direct-to-consumer sales grew 45% year-over-year in 2019, with strong performance in leasing-style purchasing [41][42] Question: Are you anticipating using some of the gross margin benefit from tariff exclusion to be more competitive? - The company will assess how to deploy the tariff exclusion benefits against initiatives versus improving the bottom line [45][46] Question: What allows for R&D changes and cuts? - The focus has shifted towards software differentiation, reducing the need for hardware engineering resources [49][50] Question: How has the current inventory in the channel evolved? - The inventory levels are good, with progress made against sell-through in Q1 [71] Question: What is the rationale for shelving the Terra robot mower? - The decision was based on prioritizing resources and investments in strategic areas amid COVID-19 uncertainties [58][60]

Part I [Business](index=4&type=section&id=Item%201.%20Business) iRobot is a global consumer robot company, primarily known for Roomba RVCs and Braava mops, which achieved over $1.2 billion in 2019 revenue while focusing on global penetration, product diversification, and profitability - The company has sold over **30 million consumer robots worldwide** since the first Roomba launch in 2002[7](index=7&type=chunk) - Strategic priorities for 2020 include expanding Roomba's global penetration, diversifying with Braava and Terra products, and improving long-term profitability by mitigating tariff impacts and optimizing costs[8](index=8&type=chunk) - To mitigate exposure to China tariffs, the company commenced production at a new manufacturing facility in Malaysia in 2019 and plans to ramp up volumes there in 2020[8](index=8&type=chunk)[23](index=23&type=chunk) 2019 Financial Highlights | Metric | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,214.0 million | $1,092.6 million | 11.1% | | Domestic Revenue Growth | - | - | 7.6% | | International Revenue Growth | - | - | 14.8% | [Products](index=6&type=section&id=Products) iRobot's product portfolio centers on home cleaning robots, including Roomba vacuums and Braava mops, with ongoing development in robotic lawn mowers and STEM education robots - The Roomba product family ranges in price from approximately **$250 to $1,099**, with the s9 Series offering **40 times more suction power** than the 600 Series[12](index=12&type=chunk) - The Braava jet m Series can automatically clean in sequence with Roomba 900, i7, and s9 robots, vacuuming first and then mopping[15](index=15&type=chunk) - The company is developing the Terra t7 robotic lawn mower, which uses advanced mapping and navigation instead of boundary wires, and acquired Root Robotics in April 2019 to enter the STEM education market[16](index=16&type=chunk)[17](index=17&type=chunk) [Sales, Marketing, and Manufacturing](index=7&type=section&id=Sales,%20Marketing,%20and%20Manufacturing) iRobot utilizes a global sales network, including significant online retail partnerships like Amazon, with manufacturing outsourced primarily to China and Malaysia to support international sales and mitigate tariff risks - Sales to non-U.S. customers accounted for **50.3% of total revenue in 2019**[19](index=19&type=chunk) - Amazon is a key retailer, representing **21.3% of total revenue in 2019**, up from 17.3% in 2018 and 13.5% in 2017[19](index=19&type=chunk) - Manufacturing is outsourced to four contract manufacturers in Southern China, with additional capacity added in Malaysia in late 2019[23](index=23&type=chunk) Sales & Marketing Expense as a Percentage of Revenue | Year | % of Revenue | | :--- | :--- | | 2019 | 19.1% | | 2018 | 19.3% | | 2017 | 18.3% | [Research and Development](index=9&type=section&id=Research%20and%20Development) Ongoing R&D is crucial for iRobot's future success, with $141.6 million invested in 2019, representing 11.7% of revenue, to develop new products and enhance existing ones R&D Expenses | Year | Amount | % of Revenue | | :--- | :--- | :--- | | 2019 | $141.6 million | 11.7% | | 2018 | $140.6 million | 12.9% | | 2017 | $113.1 million | 12.8% | [Intellectual Property](index=9&type=section&id=Intellectual%20Property) iRobot heavily relies on its intellectual property, holding over 1,500 patents globally and actively defending its rights through litigation, despite upcoming U.S. patent expirations - As of December 28, 2019, the company held **501 U.S. patents**, over **1,000 foreign patents**, and had more than **1,500 patent applications pending worldwide**[26](index=26&type=chunk) - In October 2019, iRobot initiated a patent infringement lawsuit against SharkNinja Operating LLC for infringement of 5 patents related to robotic vacuum cleaners[27](index=27&type=chunk) [Risk Factors](index=11&type=page&id=Item%201A.%20Risk%20Factors) The company faces significant risks including market dependence on consumer robots, intense competition, reliance on limited manufacturers in China, adverse impacts from tariffs, cybersecurity threats, data privacy regulations, and intellectual property protection challenges - The business depends solely on consumer robots, and its success hinges on enhancing current products and developing new ones in a competitive market[37](index=37&type=chunk) - The company faces intense competition from diversified technology providers (e.g., Samsung, LG), floor care brands (e.g., Dyson, Shark), and robotics-focused firms (e.g., Ecovacs, Roborock)[38](index=38&type=chunk) - Reliance on a limited number of manufacturers, with a majority of production in China, exposes the company to risks of disruption, quality control issues, and political/economic instability[41](index=41&type=chunk) - U.S. trade policies, particularly tariffs on goods from China (which increased to **25% in May 2019**), have had and are expected to continue to have a material adverse effect on business, financial condition, and results of operations[59](index=59&type=chunk) - The company is subject to complex data privacy laws like GDPR and the California Consumer Privacy Act (CCPA), and any failure to comply could result in significant expense and harm to the business[49](index=49&type=chunk) [Unresolved Staff Comments](index=24&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments - No unresolved staff comments were reported[82](index=82&type=chunk) [Properties](index=24&type=section&id=Item%202.%20Properties) The company's corporate headquarters are in a leased 270,000 square foot facility in Bedford, Massachusetts, with additional global leased facilities deemed adequate for future needs - Corporate headquarters are in a leased facility of approximately **270,000 square feet** in Bedford, Massachusetts[83](index=83&type=chunk) [Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings) The company faces multiple class action and shareholder lawsuits alleging violations of the Securities Exchange Act and breaches of fiduciary duty related to past acquisitions and financial performance - Multiple shareholder lawsuits were filed against the company and certain directors and officers in late 2019 and early 2020[84](index=84&type=chunk)[86](index=86&type=chunk) - The allegations primarily concern allegedly false and misleading statements regarding the acquisitions of SODC and Robopolis and the company's subsequent financial performance[84](index=84&type=chunk) [Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[87](index=87&type=chunk) Part II [Selected Financial Data](index=27&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of consolidated financial data, highlighting consistent revenue growth from $616.8 million in 2016 to $1,214.0 million in 2019, alongside increases in operating income, net income, and total assets Selected Consolidated Financial Data (In thousands, except per share data) | | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Total revenue** | $1,214,010 | $1,092,584 | $883,911 | | **Gross profit** | $543,927 | $555,428 | $433,159 | | **Operating income** | $86,618 | $105,822 | $72,690 | | **Net income** | $85,300 | $87,992 | $50,964 | | **Diluted Net Income Per Share** | $2.97 | $3.07 | $1.77 | | **Total assets** | $920,753 | $766,961 | $691,522 | | **Total stockholders' equity** | $652,069 | $535,322 | $470,327 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2019 revenue grew 11.1% to $1.21 billion, driven by new products, though gross margin declined to 44.8% due to tariffs and promotions, resulting in lower operating income, while liquidity remains strong with $239.4 million in cash [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Fiscal 2019 revenue increased 11.1% to $1.214 billion, driven by new products and international growth, despite a significant gross margin decline to 44.8% due to tariffs and promotions, leading to a decrease in operating income - The decrease in gross margin was primarily due to increased promotional activity, pricing reductions, and the impact of increased tariffs on Roomba products imported to the U.S. from China[120](index=120&type=chunk) - General and administrative expenses decreased by **$14.4 million (14.8%)** in 2019, mainly due to lower incentive compensation costs and a decrease in legal costs after a favorable litigation outcome in late 2018[131](index=131&type=chunk) Revenue Comparison (2019 vs. 2018) | Metric | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,214.0M | $1,092.6M | +11.1% | | Gross Profit | $543.9M | $555.4M | -2.1% | | Gross Margin | 44.8% | 50.8% | -6.0 p.p. | | Operating Income | $86.6M | $105.8M | -18.1% | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 28, 2019, iRobot maintained strong liquidity with $239.4 million in cash and a $150.0 million revolving credit line, supported by $130.1 million in operating cash flow, sufficient for future needs - The company has a **$150.0 million unsecured revolving line of credit**, with no outstanding borrowings as of year-end 2019[144](index=144&type=chunk) Key Liquidity and Cash Flow Data (FY 2019) | Metric | Amount | | :--- | :--- | | Cash and cash equivalents (End of Period) | $239.4 million | | Working Capital (End of Period) | $391.7 million | | Net cash provided by operating activities | $130.1 million | | Net cash used in investing activities | $20.9 million | | Capital Expenditures | $35.3 million | [Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks, primarily foreign currency fluctuations through derivative instruments like forward exchange contracts with a notional value of $424.6 million, while interest rate risk is considered minimal - The company uses foreign currency forward contracts to hedge against fluctuations in currencies like the Euro and Japanese Yen[151](index=151&type=chunk) - At year-end 2019, the company had outstanding cash flow hedges with a total notional value of **$424.6 million** and economic hedges with a notional value of **$58.4 million**[151](index=151&type=chunk) - A hypothetical **10% change** in the U.S. Dollar exchange rate would change the fair market value of the company's foreign currency contracts by approximately **$48.4 million**[151](index=151&type=chunk) [Financial Statements and Supplementary Data](index=41&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal year 2019, including balance sheets, income statements, and cash flow statements, along with detailed notes on accounting policies and financial details - The independent auditor's report, issued by PricewaterhouseCoopers LLP, provides an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting[156](index=156&type=chunk) - A critical audit matter identified was the allowance for product returns, which involved significant management judgment regarding historical experience and future expectations[165](index=165&type=chunk)[166](index=166&type=chunk) [Notes to Consolidated Financial Statements](index=49&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies and financial figures, covering revenue recognition for connected robots, adoption of ASC 842 for leases, purchase price allocation for acquisitions, goodwill, stock-based compensation, legal contingencies, and income taxes - Revenue from connected robots launched since Q3 2018 (e.g., Roomba i7) is allocated between the physical robot (recognized at transfer) and 'Cloud Services' (deferred and recognized over the service period)[213](index=213&type=chunk) - The company adopted the new lease accounting standard ASC 842 in 2019, resulting in the recognition of **$52.8 million** in right-of-use assets and **$67.3 million** in lease liabilities on the balance sheet[209](index=209&type=chunk)[224](index=224&type=chunk) - As of year-end 2019, total unrecognized tax benefits were **$7.1 million** The company is currently under IRS examination for the 2014 and 2015 tax years[286](index=286&type=chunk) [Controls and Procedures](index=78&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of December 28, 2019, with no material changes reported - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the fiscal year[293](index=293&type=chunk) - Management concluded that the company maintained effective internal control over financial reporting as of December 28, 2019[294](index=294&type=chunk) [Other Information](index=79&type=section&id=Item%209B.%20Other%20Information) This section discloses that certain officers and directors, including the CEO, have entered into Rule 10b5-1 trading plans for company stock sales - Certain officers and directors have entered into trading plans compliant with Rule 10b5-1 of the Exchange Act[297](index=297&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters](index=79&type=section&id=Items%2010-14) Information for Items 10 through 14, covering directors, executive officers, corporate governance, executive compensation, and related matters, is incorporated by reference from the company's definitive proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement, which will be filed at a later date[298](index=298&type=chunk)[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=80&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including key corporate documents and required certifications - This section lists all exhibits filed with the 10-K, including governance documents, material agreements, and required certifications[303](index=303&type=chunk)[304](index=304&type=chunk) [Form 10-K Summary](index=83&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - This item is not applicable[307](index=307&type=chunk)