iRobot(US:IRBT)2020-02-06 18:27Financial Data and Key Metrics Changes - Fourth quarter revenue reached $427 million, an 11% increase year-over-year, driven by strong performance in the U.S. and EMEA [8][9] - Full year 2019 revenue grew 11% to over $1.2 billion, with an operating profit margin of 7% and EPS of $2.97 [9][28] - The operating profit margin would have been 3 percentage points higher without nearly $38 million in Section 301 tariffs [9][10] - Q4 gross margin dropped 9 percentage points to 40%, primarily due to pricing changes and tariff costs of nearly $22 million [25][27] - Full year 2019 gross margin was 45%, a decline of 6 percentage points from the previous year [28] Business Line Data and Key Metrics Changes - International revenue grew 15% in 2019, with Japan showing a 21% increase and EMEA also increasing by 15% [11][28] - U.S. revenue grew 8% for the full year, with a notable 15% growth in Q4 [11][27] - Sales from new products, including the Roomba s9 and Braava jet m6, contributed 17% to total revenue in 2019 [11][12] Market Data and Key Metrics Changes - The U.S. segment maintained its market share despite aggressive competition, while Japan gained meaningful share [12] - EMEA market share declined due to growth at the low end of the category [12] - The company expects competition to remain intense in major markets, with tariffs continuing to impact profitability [15][19] Company Strategy and Development Direction - The company aims to mitigate tariff impacts by increasing production in Malaysia, expecting this to represent up to one-third of U.S. units sold in 2020 [16] - Continued innovation and diversification of the product portfolio are top priorities, with plans to introduce a new Roomba model in 2020 [17] - The company is focused on building a direct-to-consumer sales pipeline and establishing new recurring revenue streams [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing strategic priorities to drive revenue growth and improve profitability despite challenges in 2020 [10][21] - The company anticipates revenue growth of 9% to 11% for 2020, with international growth expected to outpace the U.S. [20][30] - Management acknowledged that high tariffs and aggressive price competition would pressure gross margins and EPS in 2020 [20][31] Other Important Information - A CFO transition was announced, with Julie Zeiler set to succeed Alison Dean in May [22] - The company ended Q4 with $256 million in cash, a year-over-year increase of $94 million [29] Q&A Session Summary Question: Impact of coronavirus on manufacturing and supply chain - Management reported no current impact from the coronavirus, with production ahead of the Chinese New Year [39] Question: Clarification on tariff impact exclusion - Management clarified that tariffs are called out as an item but not excluded from financials [41] Question: Gross margin benefit from moving production to Malaysia - Management indicated that while moving to Malaysia offsets U.S. tariffs, it incurs higher production costs [42] Question: Direct-to-consumer sales strategy - Management noted that direct-to-consumer sales generated over $20 million in Q4, indicating a growing strategy [47] Question: Cash balance and share repurchase plans - Management is assessing share repurchase options and considers M&A as part of future plans [49] Question: U.S. market dynamics and pricing strategy - Management observed strong performance in premium products while facing competition in lower price segments [70]