UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________ 
FORM 10-Q
 ______________________________________________
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2017April 2, 2022
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM              TO             
COMMISSION FILE NUMBER 001-36414
______________________________________________ 
iROBOT CORPORATION
(Exact name of registrant as specified in its charter)
 ______________________________________________
Delaware77-0259 33577-0259335
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
8 Crosby Drive
Bedford, MA 01730
(Address of principal executive offices)offices, including zip code)


(781) 430-3000
(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueIRBTThe Nasdaq Stock Market LLC
______________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ýx    No  ¨o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ýx    No  ¨o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer☒Accelerated filer☐
Large accelerated filerýAccelerated filer¨
Non-accelerated filer
¨(Do not check if a smaller reporting company)
☐		Smaller reporting company¨☐
Emerging growth company
¨

☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨o


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐    No  ýx
The number of shares outstanding of the Registrant’s Common Stock as of October 30, 2017April 29, 2022 was 27,874,550.

27,115,917.
        

Table of Contents


iROBOT CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2017APRIL 2, 2022
INDEX
Page
PART I: FINANCIAL INFORMATION
Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
3
4
5
6
67
78
2016
2826
2826
PART II: OTHER INFORMATION
2926
2926
30
31
Signatures
32
Exhibit Index
33

2

Table of Contents







iROBOT CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)amounts)
(unaudited)
 
September 30,
2017		 December 31,
2016		April 2, 2022January 1, 2022
ASSETSASSETSASSETS
Current assets:   Current assets:
Cash and cash equivalents$241,786
 $214,523
Cash and cash equivalents$112,038 $201,457 
Short term investments36,442
 39,930
Accounts receivable, net of allowances76,956
 72,909
Unbilled revenue1,668
 139
Short-term investmentsShort-term investments1,461 33,044 
Accounts receivable, netAccounts receivable, net105,573 160,642 
Inventory92,813
 50,578
Inventory331,085 333,296 
Other current assets18,395
 5,591
Other current assets96,749 61,094 
Total current assets468,060
 383,670
 Total current assets646,906 789,533 
Property and equipment, net37,093
 27,532
Property and equipment, net71,877 78,887 
Operating lease right-of-use assetsOperating lease right-of-use assets31,262 37,609 
Deferred tax assets35,088
 30,585
Deferred tax assets50,995 37,945 
Goodwill41,041
 41,041
Goodwill169,964 173,292 
Intangible assets, net15,315
 12,207
Intangible assets, net26,627 28,410 
Other assets14,064
 12,877
Other assets38,834 38,753 
Total assets$610,661
 $507,912
 Total assets$1,036,465 $1,184,429 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:   Current liabilities:
Accounts payable$88,798
 $67,281
Accounts payable$172,908 $251,298 
Accrued expenses28,949
 19,854
Accrued expenses89,382 132,618 
Accrued compensation23,773
 21,015
Deferred revenue and customer advances4,607
 4,486
Deferred revenue and customer advances13,298 11,767 
Total current liabilities146,127
 112,636
 Total current liabilities275,588 395,683 
Long term liabilities8,042
 6,320
Operating lease liabilitiesOperating lease liabilities36,904 43,462 
Deferred tax liabilitiesDeferred tax liabilities3,187 3,250 
Other long-term liabilitiesOther long-term liabilities25,584 25,311 
Total long-term liabilities Total long-term liabilities65,675 72,023 
Total liabilities154,169
 118,956
 Total liabilities341,263 467,706 
Commitments and contingencies (Note 7)

 

Preferred stock, 5,000,000 shares authorized and none outstanding—
 —
Common stock, $0.01 par value, 100,000,000 shares authorized; 27,874,351 and 27,237,870
shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		279
 272
Commitments and contingencies (Note 9)Commitments and contingencies (Note 9)00
Preferred stock, 5,000 shares authorized and none outstandingPreferred stock, 5,000 shares authorized and none outstanding— — 
Common stock, $0.01 par value, 100,000 shares authorized; 27,116 and 27,006 shares issued and outstanding, respectivelyCommon stock, $0.01 par value, 100,000 shares authorized; 27,116 and 27,006 shares issued and outstanding, respectively271 270 
Additional paid-in capital182,786
 161,885
Additional paid-in capital229,133 222,653 
Retained earnings273,368
 226,950
Retained earnings455,304 485,710 
Accumulated other comprehensive income (loss)59
 (151)
Accumulated other comprehensive incomeAccumulated other comprehensive income10,494 8,090 
Total stockholders’ equity456,492
 388,956
 Total stockholders’ equity695,202 716,723 
Total liabilities and stockholders’ equity$610,661
 $507,912
 Total liabilities and stockholders’ equity$1,036,465 $1,184,429 
The accompanying notes are an integral part of the consolidated financial statements.

3

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iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Revenue$205,399
 $168,610
 $557,014
 $448,110
Cost of revenue (1)103,016
 87,550
 277,397
 235,437
Gross margin102,383
 81,060
 279,617
 212,673
Operating expenses:       
Research and development (1)28,843
 19,672
 80,518
 57,944
Selling and marketing (1)28,646
 17,925
 91,344
 66,972
General and administrative (1)21,002
 16,012
 58,137
 48,919
Total operating expenses78,491
 53,609
 229,999
 173,835
Operating income23,892
 27,451
 49,618
 38,838
Other income, net2,601
 523
 4,290
 2,142
Income before income taxes26,493
 27,974
 53,908
 40,980
Income tax expense4,411
 8,462
 7,565
 12,722
Net income$22,082
 $19,512
 $46,343
 $28,258
Net income per share:       
Basic$0.80
 $0.72
 $1.68
 $1.01
Diluted$0.76
 $0.70
 $1.61
 $0.99
Number of weighted average common shares used in calculations per share       
Basic27,739
 27,237
 27,520
 27,878
Diluted28,916
 27,778
 28,719
 28,423
 __________________________
(1)
Total stock-based compensation recorded in the three and nine months ended September 30, 2017 and October 1, 2016 included in the above figures breaks down by expense classification as follows:
Three Months Ended
Three Months Ended Nine Months Ended April 2, 2022April 3, 2021
September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Cost of revenue$274
 $184
 $751
 $555
RevenueRevenue$291,969 $303,261 
Cost of revenue:Cost of revenue:
Cost of product revenueCost of product revenue183,633 180,092 
Amortization of acquired intangible assetsAmortization of acquired intangible assets821 225 
Total cost of revenueTotal cost of revenue184,454 180,317 
Gross profitGross profit107,515 122,944 
Operating expenses:Operating expenses:
Research and development1,261
 1,028
 3,508
 2,598
Research and development42,529 41,920 
Selling and marketing728
 444
 1,869
 1,316
Selling and marketing61,065 50,990 
General and administrative2,771
 2,247
 7,941
 7,312
General and administrative26,698 23,440 
Amortization of acquired intangible assetsAmortization of acquired intangible assets510 205 
Total operating expensesTotal operating expenses130,802 116,555 
Operating (loss) incomeOperating (loss) income(23,287)6,389 
Other expense, netOther expense, net(16,746)(160)
(Loss) income before income taxes(Loss) income before income taxes(40,033)6,229 
Income tax benefitIncome tax benefit(9,627)(1,214)
Net (loss) incomeNet (loss) income$(30,406)$7,443 
Net (loss) income per share:Net (loss) income per share:
BasicBasic$(1.12)$0.26 
DilutedDiluted$(1.12)$0.26 
Number of shares used in per share calculations:Number of shares used in per share calculations:
BasicBasic27,051 28,257 
DilutedDiluted27,051 29,086 
The accompanying notes are an integral part of the consolidated financial statements.

4

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iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
(unaudited)
 
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Net income$22,082
 $19,512
 $46,343
 $28,258
Other comprehensive income:       
Net foreign currency translation adjustments3
 —
 (3) —
Net unrealized gains (losses) on cash flow hedges, net of tax(95) —
 126
 —
Net losses on cash flow hedge reclassified into earnings, net of tax17
 —
 36
 —
Net unrealized gains (losses) on marketable securities, net of tax21
 (66) 51
 216
Total comprehensive income$22,028
 $19,446
 $46,553
 $28,474
 Three Months Ended
 April 2, 2022April 3, 2021
Net (loss) income$(30,406)$7,443 
Other comprehensive income:
Net foreign currency translation adjustments(4,015)(5,883)
Net unrealized gains on cash flow hedges, net of tax7,653 12,967 
Net (gains) losses on cash flow hedge reclassified into earnings, net of tax(1,234)391 
Net unrealized losses on marketable securities, net of tax— (4)
Total comprehensive (loss) income$(28,002)$14,914 
The accompanying notes are an integral part of the consolidated financial statements.

5


iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
Common StockAdditional
Paid-In
Capital		Retained
Earnings		Accumulated Other Comprehensive Income ("AOCI")Stockholders’
Equity
SharesValue
Balance at January 1, 202227,006 $270 $222,653 $485,710 $8,090 $716,723 
Issuance of common stock under employee stock plans23 — 797 797 
Vesting of restricted stock units112 1 (1)— 
Stock-based compensation7,208 7,208 
Stock withheld to cover tax withholdings requirements upon restricted stock vesting(25)— (1,524)(1,524)
Other comprehensive income2,404 2,404 
Net loss(30,406)(30,406)
Balance at April 2, 202227,116 $271 $229,133 $455,304 $10,494 $695,202 
Common StockAdditional
Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss) ("AOCI")		Stockholders’
Equity
SharesValue
Balance at January 2, 202128,184 $282 $205,256 $599,389 $(493)$804,434 
Issuance of common stock under employee stock plans67 1 2,588 2,589 
Vesting of restricted stock units185 2 (2)— 
Stock-based compensation6,782 6,782 
Stock withheld to cover tax withholdings requirements upon restricted stock vesting(41)(1)(4,755)(4,756)
Other comprehensive income7,471 7,471 
Directors' deferred compensation21 21 
Net income7,443 7,443 
Balance at April 3, 202128,395 $284 $209,890 $606,832 $6,978 $823,984 
The accompanying notes are an integral part of the consolidated financial statements.
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6




iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months Ended
 September 30,
2017		 October 1,
2016
Cash flows from operating activities:   
Net income$46,343
 $28,258
Adjustments to reconcile net income to net cash provided by operating activities, net of the effects of acquisitions:   
Depreciation and amortization14,523
 10,171
Loss on disposal of property and equipment46
 205
Loss on equity method investment32
 —
Impairment on cost method investment155
 —
Gain on sale of business unit—
 (433)
Gain on sale of cost method investment(1,056) (634)
Gain on business acquisition(2,243) —
Stock-based compensation14,069
 11,781
Deferred income taxes, net(3,226) 6,314
Tax benefit of excess stock based compensation deductions—
 (1,115)
Non-cash director deferred compensation49
 66
Changes in operating assets and liabilities — (use) source   
Accounts receivable(9,429) 30,781
Unbilled revenue(1,528) 198
Inventory(23,944) (11,472)
Other assets(11,099) (1,579)
Accounts payable20,824
 (2,261)
Accrued expenses6,085
 (2,046)
Accrued compensation949
 1,990
Deferred revenue and customer advances(965) (193)
Long term liabilities1,513
 (2,997)
Net cash provided by operating activities51,098
 67,034
Cash flows from investing activities:   
Additions of property and equipment(16,630) (8,352)
Change in other assets(1,374) (435)
Proceeds from sale of business unit—
 23,520
Cash paid for business acquisition, net of cash acquired(16,524) —
Purchases of investments(7,034) (16,556)
Sales and maturities of investments10,500
 11,502
Proceeds from sale of cost method investment1,056
 634
Net cash provided by (used in) investing activities(30,006) 10,313
Cash flows from financing activities:   
Proceeds from stock option exercises8,990
 4,496
Income tax withholding payment associated with restricted stock vesting(2,974) (1,300)
Stock repurchases—
 (97,021)
Tax benefit of excess stock-based compensation deductions—
 1,115
Net cash provided by (used in) financing activities6,016
 (92,710)
Effect of exchange rate changes on cash and cash equivalents155
 —
Net increase (decrease) in cash and cash equivalents27,263
 (15,363)
Cash and cash equivalents, at beginning of period214,523
 179,915
Cash and cash equivalents, at end of period$241,786
 $164,552
Supplemental disclosure of cash flow information:   
Cash paid for income taxes$18,338
 $11,818
Non-cash investing and financing activities:   
Transfer of inventory to property and equipment$—
 $5
Additions of property and equipment included in accounts payable$2,058
 $694
 Three Months Ended
 April 2, 2022April 3, 2021
Cash flows from operating activities:
Net (loss) income$(30,406)$7,443 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities, net of the effects of acquisition:
Depreciation and amortization11,241 7,501 
Loss on equity investment16,835 — 
Stock-based compensation7,208 6,782 
Deferred income taxes, net(15,571)(95)
Other1,539 1,582 
Changes in operating assets and liabilities — (use) source
Accounts receivable54,299 101,459 
Inventory(1,688)(51,443)
Other assets(26,734)3,425 
Accounts payable(77,006)(15,438)
Accrued expenses and other liabilities(42,032)(32,522)
Net cash (used in) provided by operating activities(102,315)28,694 
Cash flows from investing activities:
Additions of property and equipment(3,113)(11,272)
Purchase of investments(500)(8,664)
Sales and maturities of investments16,213 63,644 
Net cash provided by investing activities12,600 43,708 
Cash flows from financing activities:
Proceeds from employee stock plans797 2,589 
Income tax withholding payment associated with restricted stock vesting(1,524)(4,756)
Net cash used in financing activities(727)(2,167)
Effect of exchange rate changes on cash and cash equivalents1,023 (2,116)
Net (decrease) increase in cash and cash equivalents(89,419)68,119 
Cash and cash equivalents, at beginning of period201,457 432,635 
Cash and cash equivalents, at end of period$112,038 $500,754 
The accompanying notes are an integral part of the consolidated financial statements.

7
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iROBOT CORPORATION
Notes To Consolidated Financial StatementsNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Description of Business
iRobot Corporation ("iRobot" or the "Company") designs, builds and buildssells robots and home innovations that empower people to do more.make life better. The Company develops robotic technologyCompany's portfolio of home robots and applies it to producesmart home devices features proprietary technologies for the connected home and market consumer robots.advanced concepts in cleaning, mapping and navigation, human-robot interaction and physical solutions. iRobot's durable and high-performing robots are designed using the close integration of software, electronics and hardware. The Company’s revenue is primarily generated from product sales.sales through a variety of distribution channels, including chain stores and other national retailers, through the Company's own website and app, dedicated e-commerce websites, the online arms of traditional retailers and through value-added distributors and resellers worldwide.
2. Summary of Significant Accounting Policies
Basis of Presentation and Foreign Currency Translation
The accompanying consolidated financial statements include those of iRobot and its subsidiaries, after elimination of all intercompany accountsbalances and transactions. iRobot has prepared the accompanying unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States (GAAP)of America ("GAAP").
The accompanyingIn the opinion of management, all adjustments necessary to the unaudited interim consolidated financial data asstatements have been made to state fairly the Company's financial position. Interim results are not necessarily indicative of September 30, 2017, andresults for the three and nine months ended September 30, 2017 and October 1, 2016 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certainfull fiscal year or any future periods. The information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The year-end balance sheet data were derived from audited financial statements, but do not include all disclosures required by GAAP. These consolidated financial statementsthis Form 10-Q should be read in conjunction with the Company’sCompany's audited consolidated financial statements and the notes thereto included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2016,January 1, 2022, filed with the SECSecurities and Exchange Commission on February 17, 2017.15, 2022.
In the opinion of management, all adjustments necessary to state fairly the Company's statement of financial position as of September 30, 2017 and results of operations, comprehensive income and cash flows for the periods ended September 30, 2017 and October 1, 2016 have been made. The results of operations, comprehensive income and cash flows for any interim period are not necessarily indicative of the operating results, comprehensive income and cash flows for the full fiscal year or any future periods.
Use of Estimates
The preparation of these financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, management evaluates these estimates and judgments, in particular those related to revenue recognition (specifically sales returns and other allowances); valuation allowances; assumptions used in valuing goodwill and intangible assets; assumptions used in accounting for business combinations; assumptions used in valuing stock-based compensation instruments, evaluating loss contingencies; and valuation allowances for deferred tax assets. Actual results may differ from the Company’s estimates. The Company bases these estimates and judgments on historical experience and various other factors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenue and expenses that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty.
Fiscal Year-End
The Company operates and reports using a 52-53 week fiscal year ending on the Saturday closest to December 31. Accordingly, the Company’s fiscal quarters end on the Saturday that falls closest to the last day of the third month of each quarter.
Recent Accounting Pronouncements

In August 2017, the FinancialRecently Issued Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-12, "Derivatives and Hedging," that was created to better align accounting rules with a company’s risk management activities, better reflect the economic results of hedging in the financial statements, and simplify hedge accounting treatment. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. For cash flow hedges existing at the adoption date, the standard requires adoption on a modified retrospective basis with a cumulative-effect adjustment to the consolidated balance sheet as of the beginning of the

7
iROBOT CORPORATION
Notes to Consolidated Financial Statements - (Continued)

year of adoption. The amendments to presentation guidance and disclosure requirements are required to be adopted prospectively. The Company is currently evaluating the impact of the standard on its consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, "Stock Compensation – Scope of Modification Accounting," that clarifies that all changes to share-based payment awards are not necessarily accounted for as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. This guidance is effective prospectively beginning January 1, 2018, with early adoption permitted. This guidance will apply to any future modifications. The Company does not believe the standard will have a material effect on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other." ASU 2017-04 eliminates step 2 from the goodwill impairment test, instead requiring that an entity recognize an impairment charge for the amount by which the carrying amount of goodwill exceeds the reporting unit's fair value. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted.  The Company does not believe the standard will have a material effect on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations; Clarifying the Definition of a Business." ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating the impact of the standard on its consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory." ASU 2016-16 clarifies the accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted.  The Company is currently evaluating the impact of the standard on its consolidated financial statements.    

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments."  ASU 2016-15 refines how companies classify certain aspects of the cash flow statement in regards to debt prepayment, settlement of debt instruments, contingent consideration payments, proceeds from insurance claims and life insurance policies, distribution from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows.  ASU 2016-15 is effective for annual periods beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018.  Early adoption is permitted.  The Company is currently evaluating the impact of the standard on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting," which simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted ASU 2016-09 effective January 1, 2017. As of the adoption date, this standard did not have a material impact on the Company's consolidated financial statements. Upon the adoption, the Company elected to account for forfeitures of share-based payments as they occur prospectively. For the three and nine months ended September 30, 2017, the Company recorded a tax benefit of $4.7 million and $10.7 million, respectively, related to share-based compensation in accordance with ASU 2016-09.

In February 2016, the FASB issued ASU No. 2016-02, "Leases." ASU 2016-02 requires lessees to recognize the assets and liabilities on their balance sheet for the rights and obligations created by most leases and continue to recognize expenses on their income statements over the lease term.  It will also require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. The guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of the standard on its consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, "Inventory: Simplifying the Measurement of Inventory." ASU 2015-11 applies only to inventory for which cost is determined by methods other than last-in, first-out and the retail inventory method, which includes inventory that is measured using first-in, first-out or average cost. Inventory within the scope of this standard is required to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company

8
iROBOT CORPORATION
Notes to Consolidated Financial Statements - (Continued)

adopted ASU 2015-11 effective January 1, 2017. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers," which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance was originally effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. In July 2015, the FASB voted to defer the effective date of the new accounting guidance related to revenue recognition by one year to December 17, 2017 for annual reporting periods beginning after that date and permitted early adoption of the standard, but not before the original effective date of December 15, 2016. The standard will be effective for the Company beginning in the first quarter of 2018. The Company will adopt the standard using the modified retrospective method.

The Company has and is continuing to conduct a comprehensive analysis of the provisions of the new standard and the impact it will have on the Company's processes, policies, and consolidated financial statements. The Company is currently finalizing its conclusions on the number of its performance obligations. Once the Company has concluded, it will finalize the standalone selling price for each performance obligation and assess the allocation of discounts and variable consideration to each. The new revenue standard is expected to have a minor impact on the timing of revenue recognized in the Company’s consolidated financial statements.

The Company does not expect the provisions of the new standard to impact the manner in which it treats certain costs to fulfill contracts (i.e., shipping and handling costs) and costs to acquire new contracts (i.e., commissions). Under the new standard, the Company will elect the practical expedient on shipping and handling costs and continue to treat these costs as fulfillment costs and expense as incurred. Further, commissions will continue to be expensed as incurred as the impact to the consolidated financial statements is immaterial. The new standard will also result in enhanced revenue related disclosures.

From time to time, new accounting pronouncements are issued by FASBthe Financial Accounting Standards Board that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that recently issued standards, which are not yet effective, will not have a material impact on the Company’s consolidated financial statements upon adoption.
Revenue RecognitionUse of Estimates
The Company primarily derives its revenue from product sales. Until the divestiturepreparation of the defense and security business unit on April 4, 2016 (see Note 11),these financial statements in conformity with GAAP requires the Company also generated minimalto make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue from government and commercial researchexpenses. These estimates and development contracts.judgments, include but are not limited to, revenue recognition, including performance obligations, standalone selling price, variable consideration and other obligations such as sales incentives and product returns; allowance for credit losses; accounting for business combinations; impairment of goodwill and long-lived assets; valuation of non-marketable equity investments; product warranties; loss contingencies; accounting for stock-based compensation including performance-based assessments; and accounting for income taxes and related valuation allowances. The Company sells products directly to customers and indirectly through resellers and distributors. The Company recognizes revenue from sales of robots under the terms of the customer agreement upon transfer of title and risk of loss to the customer, net of estimated returns and allowances, provided that collection is determined to be reasonably assured and no significant obligations remain.
Beginning in the third quarter of 2015, the Company introduced its first connected robot. Each sale of a connected robot represents a multi-element arrangement containing the robot, an app and potential future unspecified software upgrades. Revenue is allocated to the deliverables based on their relative selling prices which have been determined using best estimate of selling price (BESP), as the Company has not been able to establish vendor specific objective evidence (VSOE) or obtain relevant third party evidence (TPE). Revenue allocated to the app and unspecified software upgrades is then deferred and recognized on a straight-line basis over the period in which the Company expects to provide the upgrades which is the estimated life of the robot.
Sales to retailers of consumer robots are typically subject to agreements allowing for limited rights of return, rebates and price protection. The Company also provides limited rights of returns for direct-to-consumer sales generated through its on-line stores and certain international distributors. Accordingly, the Company reduces revenue forbases its estimates of liabilities for these rights of return, rebates, and price protection, as well as discountsassumptions on historical experience, market participant fair value considerations, projected future cash flows, current economic conditions, including impact from COVID-19 pandemic and promotions, at the timeuncertainty imposed by the related sale is recorded. The estimates for rights of return are directly based on specific termsconflict between Russia and conditions included in the customer agreements, historical returns experienceUkraine, and various other assumptionsfactors that the Company believes are reasonable under the circumstances. InActual results and outcomes may differ from the caseCompany’s estimates and assumptions.
Short-Term Investments
The Company's short term investments include marketable equity securities with readily determinable fair value and debt securities. The fair value of new product introductions,investments is determined based on quoted market prices at the estimatesreporting date for returns applied tothose instruments. The change in fair value of the new products are based uponCompany's investments in marketable equity securities is recognized as unrealized gains and losses in other income, net at the estimates for the most similar predecessor products until such time thatend of each reporting period.
As of January 1, 2022, the Company has enough actual returns experience forheld 1.6 million shares of Matterport, Inc. ("Matterport") from the new products, which is typically two holiday return cycles. AtMatterport merger in 2021 with shares received subject to time based contractual sales restrictions that time,expired in January 2022. During the three months ended April 2, 2022, the Company incorporates that data intosold these Matterport shares and received net proceeds of $16.2 million and recognized a loss of $16.8 million during the developmentperiod. In addition, during the three months ended April 2, 2022, the Company received an additional 0.2 million shares of returns estimates forMatterport upon achievement of conditions set forth in the new products. The Company updates its analysismerger agreement and recorded an unrealized gain of returns on a quarterly basis. If actual returns differ significantly from$1.5 million in other income (expense), net during the Company's estimates, or if modifications to individual customer agreements are entered into that impact their rightsperiod. As of returns, such differences could result in an adjustment to previously established reservesApril 2, 2022 and could have a

January 1,
9
8
iROBOT CORPORATION
Notes to Consolidated Financial StatementsNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(continued)

material impact, either favorably or unfavorably, on the Company’s results of operations for the period in which the actual returns become known or the agreement is modified. In 2016, the Company began selling to one domestic distributor under an agreement that provides product return privileges. As a result, the Company recognizes revenue from sales to this distributor when the product is resold by the distributor. The estimates and adjustments for rebates and price protection are based on specific programs, expected usage and historical experience. Actual results could differ from these estimates. As of September 30, 2017,2022, the Company had reserves for product returns of $28.4 million, discounts and promotions of $20.0$1.5 million and price protection$33.0 million, respectively, in short term investments related to these shares. Subsequent to April 2, 2022, the Company sold the remaining Matterport shares and received net proceeds of $3.2 million.$1.2 million and recognized a loss of $0.3 million during the second quarter of fiscal 2022.
Allowance for Credit Losses
The Company maintains an allowance for credit losses for accounts receivable using an expected loss model that requires the use of forward-looking information to calculate credit loss estimate. The expected loss methodology is developed through consideration of factors including, but not limited to, historical collection experience, current customer credit ratings, customer concentrations, current and future economic and market conditions and age of the receivable. As of December 31, 2016,April 2, 2022 and January 1, 2022, the Company had reservesan allowance for product returnscredit losses of $27.7 million, discounts and promotions of $21.9$4.1 million and price protection of $1.5 million.$4.6 million, respectively.
Prior to the Company's divestiture of the defense and security business unit on April 4, 2016 (see Note 11),Tariff Refunds
On March 23, 2022, the Company generated minimal revenuewas granted a temporary exclusion from government contracts. Under cost-plus-fixed-fee (CPFF) type contracts,Section 301 List 3 tariffs by the Company recognized revenue basedUnited States Trade Representative ("USTR"). This exclusion eliminates the 25% tariff on costs incurred plus a pro rata portion of the total fixed fee. Costs incurred included laborRoomba products imported from China beginning on October 12, 2021 and material that were directly associated with individual CPFF contracts plus indirect overhead and general and administrative type costs based upon billing rates submitted bycontinuing until December 31, 2022. This tariff exclusion entitles the Company to the Defense Contract Management Agency (DCMA). Annually, the Company submits final indirect billing rates to DCMA based upon actual costs incurred throughout the year. In the situation where the Company’s final actual billing rates are greater than the estimated rates used, the Company records a cumulative revenue adjustmentrefund of approximately $29.8 million in the periodtariffs comprised of $11.7 million in which the rate differential is collected from the customer. These final billing rates are subject to audit by the Defense Contract Audit Agency (DCAA), which can occur several yearstariffs paid on Roomba robots imported after the final billing rates are submittedOctober 12, 2021 and may result in material adjustments to revenue recognized based on estimated final billing rates. As of September 30, 2017,sold during fiscal years 2015 and 2016 are open2021, $5.9 million for audit by the DCAA. In the situation where the Company’s anticipated actual billing rates will be lower than the provisional rates used, the Company records a cumulative revenue adjustment in the period in which the rate differential is identified. Revenue on firm fixed price (FFP) contracts was recognized using the percentage-of-completion method. For government product FFP contracts, revenue was recognized as the product was shipped or in accordance with the contract terms. Costs and estimated gross margins on contracts were recorded as revenue as work was performed based on the percentage that incurred costs compared to estimated total costs utilizing the most recent estimates of costs and funding. Revenue earned in excess of billings, if any, was recorded as unbilled revenue. Billings in excess of revenue earned, if any, were recorded as deferred revenue.
Stock-Based Compensation
The Company accounts for stock-based compensation through recognition of the fair value of the stock-based compensation as a charge against earnings. Stock-based compensation cost for stock options is estimated at the grant date based on each option's fair value as calculated by the Black-Scholes option-pricing model. Stock-based compensation cost for restricted stock awards, time-based restricted stock units and performance-based restricted stock units is measured based on the closing fair market value of the Company's common stock on the date of grant. For performance-based restricted stock units, the compensation costs will be subsequently adjusted for assumptions of achievementtariffs paid during the period in which the assumption of achievement changes, as applicable. The Company recognizes stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period. The Company has elected to account for forfeitures as they occur, rather than applying an estimated forfeiture rate, following its adoption of ASU 2016-09 in the first quarter of 2017.2022 and $12.2 million for on-hand inventory imported after October 12, 2021. While tariff refund claims are subject to the approval of U.S. Customs, the Company currently expects to recover the entire balance of $29.8 million within the next twelve months. The refund receivable is recorded in other current assets on the consolidated balance sheet.
Inventory
Inventory primarily consists of finished goods and, to a lesser extent, components, which are purchased from contract manufacturers. Inventory is stated at the lower of cost or net realizable value with cost being determined using the standard cost method, which approximates actual costs determined on the first-in, first-out basis. Inventory costs primarily consist of materials, inbound freight, import duties, tariffs, and other handling fees. The Company writes down its inventory for estimated obsolescence or excess inventory based upon assumptions around market conditions and estimates of future demand. Net realizable value is the estimated selling price less estimated costs of completion, disposal and transportation. Adjustments to reduce inventory to net realizable value are recognized in cost of revenue and have not been significant for the periods presented.
Strategic Investments
The Company holds non-marketable equity securities as part of its strategic investments portfolio. The Company classifies the majority of these securities as equity securities without readily determinable fair values and measures these investments at cost, less any impairment, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. These investments are valued using significant unobservable inputs or data in an inactive market and the valuation requires the Company's judgment due to the absence of market prices and inherent lack of liquidity. The Company monitors non-marketable equity investments for impairment indicators, such as deterioration in the investee's financial condition and business forecasts and lower valuations in recent or proposed financings. The estimated fair value is based on quantitative and qualitative factors including, but not limited to, subsequent financing activities by the investee and projected discounted cash flows. Changes in fair value of non-marketable equity investments are recorded in other expense, net on the consolidated statement of operations. At April 2, 2022 and January 1, 2022, the Company's equity securities without readily determinable fair values totaled $15.3 million and $16.3 million, respectively, and are included in other assets on the consolidated balance sheets.
Net (Loss) Income Per Share
Basic income per share is calculated using the Company's weighted-average outstanding shares of common stock. Diluted income per share is calculated using the Company's weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method.
9
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The following table presents the calculation of both basic and diluted net (loss) income per share:share (in thousands, except per share amounts):
 Three Months Ended
 April 2, 2022April 3, 2021
Net (loss) income$(30,406)$7,443 
Basic weighted-average common shares outstanding27,051 28,257 
Dilutive effect of employee stock awards— 829 
Diluted weighted-average common shares outstanding27,051 29,086 
Net (loss) income per share - Basic$(1.12)$0.26 
Net (loss) income per share - Diluted$(1.12)$0.26 
 Three Months Ended Nine Months Ended
 (In thousands, except per share amounts)
 September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Net income$22,082
 $19,512
 $46,343
 $28,258
Basic weighted-average shares outstanding27,739
 27,237
 27,520
 27,878
Dilutive effect of employee stock options and restricted shares1,177
 541
 1,199
 545
Diluted weighted-average shares outstanding28,916
 27,778
 28,719
 28,423
Basic income per share$0.80
 $0.72
 $1.68
 $1.01
Diluted income per share$0.76
 $0.70
 $1.61
 $0.99


10
iROBOT CORPORATION
Notes to Consolidated Financial Statements - (Continued)

RestrictedEmployee stock units and stock optionsawards representing approximately 0.00.6 million and 0.5 millionnil shares of common stock for the three-month periodsthree months ended September 30, 2017April 2, 2022 and October 1, 2016, respectively, and approximately 0.0 million and 0.6 million shares of common stock for the nine-month periods ended September 30, 2017 and October 1, 2016,April 3, 2021, respectively, were excluded from the computation of diluted earnings per share for these periods becauseas their effect would have been antidilutive.
Income
3. Revenue Recognition
The Company primarily derives its revenue from the sale of consumer robots and accessories. The Company sells products directly to consumers through online stores and indirectly through resellers and distributors. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenue is allocated to distinct performance obligations and is recognized net of allowances for returns and other credits and incentives. Revenue is recognized only to the extent that it is probable that a significant reversal of revenue will not occur and when collection is considered probable. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from revenue. Shipping and handling expenses are considered fulfillment activities and are expensed as incurred.

Frequently, the Company’s contracts with customers contain multiple promised goods or services. Such contracts may include any of the following, the consumer robot, downloadable app, cloud services, accessories on demand, potential future unspecified software upgrades, premium customer care and extended warranties. For these contracts, the Company accounts for the promises separately as individual performance obligations if they are distinct. Performance obligations are considered distinct if they are both capable of being distinct and distinct within the context of the contract. In determining whether performance obligations meet the criteria for being distinct, the Company considers a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract. The Company’s consumer robots are highly dependent on, and interrelated with, the embedded software and cannot function without the software. As such, the consumer robots are accounted for as a single performance obligation. The Company has determined that the app, cloud services and potential future unspecified software upgrades represent one performance obligation to the customer to enhance the functionality and interaction with the robot (referred to collectively as "Cloud Services"). Other services and support are considered distinct and therefore are treated as separate performance obligations.
Deferred taxes are determinedThe Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices ("SSPs"). When available, the differenceCompany uses observable prices to determine SSPs. When observable prices are not available, SSPs are established that reflect the Company’s best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. The Company’s process for estimating SSPs without observable prices considers multiple factors that may vary depending upon the facts and circumstances related to each performance obligation including, market data or the estimated cost of providing the products or services. The transaction price allocated to the robot is recognized as revenue at a point in time when control is transferred, generally as title and risk of loss pass, and when collection is considered probable. The transaction price allocated to the Cloud Services is deferred and recognized on a straight-line basis over the estimated term of the Cloud Services. Other services and support are recognized over their service periods. For contracts with a duration of greater than one year, the transaction price allocated to performance obligations that are unsatisfied as of April 2, 2022 and January 1, 2022 was $21.3 million and $20.9 million, respectively.
The Company’s products generally carry a one-year or two-year limited warranty that promises customers that delivered products are as specified. The Company does not consider these assurance-type warranties as a separate performance obligation and therefore, the Company accounts for such warranties under ASC 460, "Guarantees." For contracts with the right to upgrade to a new product after a specified period of time, the Company accounts for this trade-in right as a guarantee obligation under ASC 460. The total transaction price is reduced by the full amount of the trade-in right's fair value and the remaining transaction price is allocated between the financial statementperformance obligations within the contract.
10
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company provides limited rights of returns for direct-to-consumer sales generated through its online stores and tax basis of assetscertain resellers and liabilities using enacted tax rates in effectdistributors. The Company records an allowance for product returns based on specific terms and conditions included in the years incustomer agreements or based on historical experience and the Company's expectation of future returns. In addition, the Company may provide other credits or incentives which the differences are expected to reverse in each jurisdiction. A valuation allowance is provided if, based upon the weight of available evidence, it is more likely than not that the related benefits will not be realized. In determiningaccounted for as variable consideration when estimating the amount of revenue to recognize. Where appropriate, these estimates take into consideration relevant factors such as the valuation allowance,Company’s historical experience, current contractual requirements, specific known market events and forecasted inventory level in the channels. Overall, these reserves reflect the Company’s best estimates, and the actual amounts of consideration ultimately received may differ from the Company’s estimates. Returns and credits are estimated at the time of sale and updated at the end of each quarter,reporting period as additional information becomes available. As of April 2, 2022, the Company considers future reversalshad reserves for product returns of existing taxable temporary differences, estimated future taxable income$44.7 million and taxable incomeother credits and incentives of $63.7 million. As of January 1, 2022, the Company had reserves for product returns of $56.8 million and other credits and incentives of $101.6 million. The Company regularly evaluates the adequacy of its estimates for product returns and other credits and incentives. Future market conditions and product transitions may require the Company to take action to change such programs and related estimates. When the variables used to estimate these reserves change, or if actual results differ significantly from the estimates, the Company would be required to increase or reduce revenue to reflect the impact. During the three months ended April 2, 2022 and April 3, 2021, changes to these estimates related to performance obligations satisfied in prior carryback year(s),periods were not material.
Disaggregation of Revenue
The following table provides information about disaggregated revenue by geographical region (in thousands):
Three Months Ended
April 2, 2022April 3, 2021
United States$153,174 $114,772 
EMEA65,661 116,233 
Japan50,521 40,575 
Other22,613 31,681 
Total revenue$291,969 $303,261 
Contract Balances
The following table provides information about receivables and contract liabilities from contracts with customers (in thousands):
April 2, 2022January 1, 2022
Accounts receivable, net$96,357 $155,659 
Unbilled receivables9,216 8,747 
Contract liabilities24,219 22,996 
The Company invoices customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. Unbilled receivables represent revenue recognized in excess of billings Contract liabilities include deferred revenue associated with the Cloud Services and extended warranty plans as well as feasible tax planning strategiesprepayments received from customers in each jurisdictionadvance of product shipments. During the three months ended April 2, 2022 and April 3, 2021, the Company recognized $4.7 million and $7.3 million, respectively, of the contract liability balance as revenue upon transfer of the products or services to determine if the deferred tax assets are realizable. customers.

4. Leases
The Company's income tax provisionleasing arrangements primarily consist of operating leases for its facilities which include corporate, sales and its assessmentmarketing and research and development offices and equipment under various non-cancelable lease arrangements. The operating leases expire at various dates through 2030.

11
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The components of lease expense were as follows (in thousands):
Three Months Ended
April 2, 2022April 3, 2021
Operating lease cost$851 $1,987 
Variable lease cost918 895 
Total lease cost$1,769 $2,882 
Supplemental cash flow information related to leases was as follows (in thousands):
Three Months Ended
April 2, 2022April 3, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$2,039 $2,279 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$— $— 
At April 2, 2022, the ability to realize its deferred tax assets involve significant judgments and estimates. AsCompany's weighted average discount rate was 3.99%, while the weighted average remaining lease term was 7.30 years.
Maturities of September 30, 2017 and December 31, 2016,operating lease liabilities were as follows as of April 2, 2022 (in thousands):
Remainder of 2022$5,687 
20237,392 
20246,099 
20255,838 
20265,858 
Thereafter18,976 
Total minimum lease payments$49,850 
Less: imputed interest6,900 
Present value of future minimum lease payments$42,950 
Less: current portion of operating lease liabilities (Note 6)6,046 
Long-term lease liabilities$36,904 
During January 2022, the Company did not record a valuation allowance againstamended its deferred tax assets.lease on the corporate headquarters to reduce square footage. The reduction decreased the Company's future right-of-use assets and lease liabilities by $5.6 million.


5. Goodwill and Other Intangible Assets
The Company recorded a tax provisionfollowing table summarizes the activity in the carrying amount of $4.4 milliongoodwill and $8.5 millionintangible assets for the three months ended September 30, 2017 and October 1, 2016, respectively. The $4.4 million provision forApril 2, 2022 (in thousands):
GoodwillIntangible assets
Balance as of January 1, 2022$173,292 $28,410 
Purchase accounting adjustments(1,152)— 
Amortization— (1,331)
Effect of foreign currency translation(2,176)(452)
Balance as of April 2, 2022$169,964 $26,627 
12
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
6. Accrued Expenses
Accrued expenses consisted of the three months ended September 30, 2017 resulted in an effective income tax rate of 16.6%. The $8.5 million provision for the three months ended October 1, 2016 resulted in an effective income tax rate of 30.2%. The difference between the effective income tax rate of 16.6% for the three months ended September 30, 2017 and 30.2% for the three months ended October 1, 2016 was primarily due to a $4.7 million tax benefit related to share-based compensation in accordance with ASU 2016-09, adopted in the first quarter of 2017, and the jurisdictional mix of earnings.following at (in thousands):

April 2, 2022January 1, 2022
Accrued warranty$30,239 $32,019 
Accrued compensation and benefits17,319 19,029 
Accrued manufacturing and logistics cost6,567 23,038 
Current portion of operating lease liabilities6,046 6,220 
Accrued sales and other indirect taxes payable4,922 9,599 
Derivative liability2,198 2,600 
Accrued bonus1,991 11,375 
Accrued income taxes642 1,788 
Accrued other19,458 26,950 
$89,382 $132,618 
The Company recorded a tax provision of $7.6 million and $12.7 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. The $7.6 million provision for the nine months ended September 30, 2017 resulted in an effective income tax rate of 14.0%. The $12.7 million provision for the nine months ended October 1, 2016 resulted in an effective income tax rate of 31.0%. The difference between the effective income tax rate of 14.0% for the nine months ended September 30, 2017 and 31.0% for the nine months ended October 1, 2016 was primarily due to a $10.7 million tax benefit related to share-based compensation in accordance with ASU 2016-09, adopted in the first quarter of 2017, and the jurisdictional mix of earnings.

The statute of limitations for examinations by the Internal Revenue Service is closed for tax years prior to 2014.

Financial7. Derivative Instruments and Hedging Activities

The Company utilizesenters into derivative instruments to hedge specific financial risks including foreign exchange risk. The Company does not engage in speculative hedging activity. In order to account for a derivative instrument as a hedge, specific criteria must be met, including: (i) ensuring at the inception of the hedge that formal documentation exists for both the hedging relationship and the entity’s risk management objective and strategy for undertaking the hedge and (ii) at the inception of the hedge and on an ongoing basis, the hedging relationship is expected to be highly effective in achieving offsetting changes in fair value attributed to the hedged risk during the period that the hedge is designated. Further, an assessment of effectiveness is required whenever financial statements or earnings are reported. Absent meeting these criteria, changes in fair value are recognized in other income, net, in the consolidated statements of income. Once the underlying forecasted transaction is realized, the gain or loss from the derivative designated as a hedge of the transaction is reclassified from accumulated other comprehensive income (loss) to the statement of income, in revenue. Any ineffective portion of the derivatives designated as cash flow hedges is recognized in current earnings.

Fair Value Measurements
The authoritative guidance for fair value establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to developreduce its own assumptions.

11
iROBOT CORPORATION
Notesexposure to Consolidated Financial Statements - (Continued)

The Company’s financial assets and liabilities measured at fair value on a recurring basis at September 30, 2017, were as follows:
 
Fair Value Measurements as of
September 30, 2017
 Level 1 Level 2 (1) Level 3
 (In thousands)
Description     
Assets:     
Cash and cash equivalents     
Money market funds$10,998
 $—
 $—
Short term investments     
Corporate and government bonds—
 36,442
 —
Other current assets     
Derivative instruments (Note 6)—
 849
 —
Total assets measured at fair value$10,998
 $37,291
 $—
      
Liabilities:     
Accrued expenses     
Derivative instruments (Note 6)$—
 $315
 $—
Total liabilities measured at fair value$—
 $315
 $—
      
The Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2016, were as follows:
 Fair Value Measurements as of
December 31, 2016
 Level 1 Level 2 (1) Level 3
 (In thousands)
Description     
Assets:     
Cash and cash equivalents     
Money market funds$156,980
 $—
 $—
Short term investments     
Corporate and government bonds—
 39,930
 —
Other current assets     
Derivative instruments (Note 6)—
 180
 —
Total assets measured at fair value$156,980
 $40,110
 $—
      
Liabilities:     
Accrued expenses     
Derivative instruments (Note 6)$—
 $43
 $—
Total liabilities measured at fair value$—
 $43
 $—

(1)Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.


12
iROBOT CORPORATION
Notes to Consolidated Financial Statements - (Continued)


3. Inventory
Inventory consists of the following:
 September 30, 2017 December 31, 2016
 (In thousands)
Raw materials$2,928
 $4,717
Finished goods89,885
 45,861
 $92,813
 $50,578
4. Stock Option Plans and Stock-Based Compensation
The Company has options outstanding under three stock incentive plans: the 2005 Stock Option and Incentive Plan (the "2005 Plan"), the Evolution Robotics, Inc. 2007 Stock Plan (the "2007 Plan") and the 2015 Stock Option and Incentive Plan (the "2015 Plan" and together with the 2005 Plan and the 2007 Plan, the "Plans"). The Company also has restricted stock units outstanding under the 2005 Plan and the 2015 Plan. The 2015 Plan is the only one of the three plans under which new awards may currently be granted. Under the 2015 Plan, which became effective May 20, 2015, 3,100,000 shares were initially reserved for issuance in the form of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock units, unrestricted stock awards, cash-based awards, performance share awards and dividend equivalent rights. Stock awards returned to the Plans, with the exception of those issued under the 2007 Plan, as a result of their expiration, cancellation or termination are automatically made available for issuance under the 2015 Plan. Eligibility for incentive stock options is limited to those individuals whose employment status would qualify them for the tax treatment associated with incentive stock options in accordance with the Internal Revenue Code of 1986, as amended. The grant of any full value award (e.g., restricted stock units) under the 2015 Plan is counted against the share reserve for future grants under the 2015 Plan as 1.61 shares for every one share actually subject to such award. As of September 30, 2017, there were 895,418 shares available for future grant under the 2015 Plan.
Options granted under the Plans are subject to terms and conditions as determined by the compensation committee of the board of directors, including vesting periods. Options granted under the Plans are exercisable in full at any time subsequent to vesting, generally vest over four years, and expire five or ten years from the date of grant or, if earlier, 60 or 90 days from employee termination. The exercise price of stock options is equal to the closing price on the NASDAQ Global Select Market on the date of grant. Other awards granted under the Plans generally vest over periods from one to four years.
On September 8, 2017, the Company issued 79,300 time-based restricted stock unit grants to certain employees.
5. Accrued Expenses
Accrued expenses consist of the following:
 September 30, 2017 December 31, 2016
 (In thousands)
Accrued warranty$10,279
 $8,464
Accrued sales and other taxes payable5,569
 482
Accrued customer deposits and payables3,016
 4,682
Accrued sales and marketing2,911
 404
Accrued accounting fees1,030
 686
Accrued direct fulfillment costs634
 1,722
Accrued federal and state income taxes476
 1,059
Accrued other5,034
 2,355
 $28,949
 $19,854

13
iROBOT CORPORATION
Notes to Consolidated Financial Statements - (Continued)

Accrued compensation consists of the following:
 September 30, 2017 December 31, 2016
 (In thousands)
Accrued bonus$15,079
 $14,226
Accrued other compensation8,694
 6,789
 $23,773
 $21,015


6. Derivative Instruments
The Company operates internationally and, in the normal course of business, is exposed to fluctuations in foreign currency exchange rates. The foreign currency exposures typically arise from transactions denominatedrisk in currencies other than the functional currency of the Company's operations, primarily the Japanese Yen, Canadian dollar and the Euro. The Company uses derivative instruments that are designated in cash flow hedge relationships to reduce or eliminate the effects of foreign exchange rate changes on purchases and sales. These contracts typically have maturities of ten monthsof three years or less.less. At September 30, 2017April 2, 2022 and December 31, 2016,January 1, 2022, the Company had outstanding cash flow hedges with a total notional value of $17.7$497.6 million and $0.0and $423.3 million, respectively.
The Company also enters into economic hedges that are not designated as hedges from an accounting standpoint to reduce or eliminate the effects of foreign currency exchange rate changes typicallyrisk related to short term trade receivables and payables. These contracts typically have maturities of twotwelve months or less. At September 30, 2017April 2, 2022 and December 31, 2016, weJanuary 1, 2022, the Company had outstanding foreign currency economic hedges with a total notional value of $27.5$249.0 million and $8.1$325.4 million, respectively.
The fair values of derivative instruments arewere as follows:follows (in thousands):
Fair Value
ClassificationApril 2, 2022January 1, 2022
Derivatives not designated as hedging instruments:
Foreign currency forward contractsOther current assets$9,807 $8,362 
Foreign currency forward contractsOther assets994 1,627 
Foreign currency forward contractsAccrued expenses2,198 2,377 
Derivatives designated as cash flow hedges:
Foreign currency forward contractsOther current assets$10,221 $4,110 
Foreign currency forward contractsOther assets11,549 9,610 
Foreign currency forward contractsAccrued expenses— 223 
Foreign currency forward contractsLong-term liabilities74 407 
   Fair Value
 Classification September 30, 2017 December 31, 2016
  (In thousands)
Derivatives not designated as hedging instruments:    
Foreign currency option contractsOther current assets $—
 $180
Foreign currency forward contractsOther current assets 711
 —
Foreign currency forward contractsAccrued expenses 315
 43
Derivatives designated as cash flow hedges:    
Foreign currency forward contractsOther current assets $138
 $—


Gains (losses)Gain (loss) associated with derivative instruments not designated as hedging instruments arewere as follows:follows (in thousands):
Three Months Ended
ClassificationApril 2, 2022April 3, 2021
Gain (loss) recognized in incomeOther expense, net$2,064 $(10,013)

13
   Three Months Ended Nine Months Ended
 Classification September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
   (In thousands)
Gain (loss) recognized in incomeOther income, net $9
 $(18) $(495) $(392)

14
iROBOT CORPORATION
Notes to Consolidated Financial StatementsNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(continued)

The following tables reflect the effect of foreign exchange forward contracts that arederivatives designated as cash flow hedging instruments for the three and nine months ended September 30, 2017 and October 1, 2016 (in thousands): 
Gain recognized in OCI on Derivative (1)
Three Months Ended
April 2, 2022April 3, 2021
Foreign currency forward contracts$10,257 $17,154 
(1)The amount represents the change in fair value of derivative contracts due to changes in spot rates.
Gain (loss) recognized in earnings on cash flow hedging instruments
Three Months Ended
April 2, 2022April 3, 2021
Revenue
Consolidated statements of operations in which the effects of cash flow hedging instruments are recorded$291,969 $303,261 
Gain on cash flow hedging relationships:
Foreign currency forward contracts:
Amount of gain (loss) reclassified from AOCI into earnings$1,639 $(517)

8. Fair Value Measurements
The Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):
 Fair Value Measurements as of
April 2, 2022
Level 1Level 2 (1)Level 3
Assets:
Money market funds$11,606 $— $— 
Marketable equity securities, $0 at cost (2)1,461 — — 
Derivative instruments (Note 7)— 32,571 — 
Total assets measured at fair value$13,067 $32,571 $— 
Liabilities:
Derivative instruments (Note 7)$— $2,272 $— 
Total liabilities measured at fair value$— $2,272 $— 
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
  Effective Portion Ineffective Portion
  Gain (loss) recognized in OCI on Derivative (1) Gain (loss) reclassified from accumulated OCI into income (2) Gain (loss) recognized in income (3)
  Three months ended   Three months ended   Three months ended
  September 30, 2017 October 1, 2016 Classification September 30, 2017 October 1, 2016 Classification September 30, 2017 October 1, 2016
                 
Foreign currency forward contracts $(21) $—
 Revenue $(39) $—
 Other income, net $—
 $—
 Fair Value Measurements as of
January 1, 2022
 Level 1Level 2 (1)Level 3
Assets:
Money market funds$33,003 $— $— 
Marketable equity securities, $23,286 at cost33,044 — — 
Derivative instruments (Note 7)— 23,709 — 
Total assets measured at fair value$66,047 $23,709 $— 
Liabilities:
Derivative instruments (Note 7)$— $3,007 $— 
Total liabilities measured at fair value$— $3,007 $— 
(1)Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
  Effective Portion Ineffective Portion
  Gain (loss) recognized in OCI on Derivative (1) Gain (loss) reclassified from accumulated OCI into income (2) Gain (loss) recognized in income (3)
  Nine months ended   Nine months ended   Nine months ended
  September 30, 2017 October 1, 2016 Classification September 30, 2017 October 1, 2016 Classification September 30, 2017 October 1, 2016
                 
Foreign currency forward contracts $200
 $—
 Revenue $(58) $—
 Other income, net $(5) $—

(1)The amount represents the change(2)The related unrealized gain recorded in fair value of derivative contracts due to changes in spot rates.
(2)The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings.
(3)The amount represents the change in fair value of derivative contracts due to changes in the forward rates. No gains or losses were reclassified as a result of discontinuance of cash flow hedges.

7. Commitments and Contingencies
Lease Obligations
Rental expense, under operating leasesnet was $1.5 million for the three months ended September 30, 2017April 2, 2022. Marketable equity securities are included in short-term investments on the consolidated balance sheet.

9. Commitments and October 1, 2016 were $2.2 millionContingencies
Legal Proceedings
From time to time and $1.6 million, respectively, and for the nine months ended September 30, 2017 and October 1, 2016 were $6.1 million and $4.4 million, respectively. Future minimum rental payments under operating leases were as follows as of September 30, 2017:
 
Operating
Leases
 (In thousands)
Remainder of 2017$1,287
20185,279
20195,146
20205,120
20215,259
Thereafter39,275
Total minimum lease payments$61,366

During the three months ended September 30, 2017, the Company amended its lease for its corporate headquarters and extended the lease term until 2030.

15
iROBOT CORPORATION
Notes to Consolidated Financial Statements - (Continued)

Outstanding Purchase Orders
At September 30, 2017, the Company had outstanding purchase orders aggregating approximately $181.2 million. These purchase orders, the majority of which are with contract manufacturers for the purchase of inventory in the normalordinary course of business, are for manufacturing and non-manufacturing related goods and services, and are generally cancelable without penalty. In circumstances where the Company determines that it hasis subject to various claims, charges and litigation. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, which could materially affect our financial exposure associated with anycondition or results of these commitments, the Company records a liability in the period in which that exposure is identified.operations.
Guarantees and Indemnification Obligations

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses incurred by the indemnified party, generally the Company’s customers, in connection with any patent, copyright, trade secret or other proprietary right infringement claim by any third party. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company hashad no liabilities recorded for these agreements as of September 30, 2017April 2, 2022 and December 31, 2016,January 1, 2022, respectively.
Warranty
The Company provides warranties on most products and has established a reserve for warrantieswarranty obligations based on estimated warranty costs. The reserve is included as part of accrued expenses (Note 5)6) in the accompanying consolidated balance sheets.    
Activity related to the warranty accrual was as follows:follows (in thousands):
 Three Months Ended
 April 2, 2022April 3, 2021
Balance at beginning of period$32,019 $24,392 
Provision6,036 10,185 
Warranty usage(7,816)(10,673)
Balance at end of period$30,239 $23,904 

10. Income Taxes
Ordinarily, the Company’s interim provision for income taxes is determined using an estimate of the annual effective tax rate. The Company records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs, including discrete tax items. However, for the first quarter of 2022, the Company concluded that the estimated
15
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
 (In thousands)
Balance at beginning of period$10,505
 $6,622
 $8,464
 $6,907
Liability assumed (1)—
 —
 2,186
 —
Provision2,433
 2,823
 6,051
 5,619
Warranty usage (2)(2,659) (1,598) (6,422) (4,679)
Balance at end of period$10,279
 $7,847
 $10,279
 $7,847
(1)Warranty assumed as part of the acquisition of the iRobot-related distribution business of Sales On Demand Corporation (see Note 9).
(2)Warranty usage includes costs incurred for warranty obligations and, for the nine month period ended October 1, 2016, the release of warranty liabilities associated with the divestiture of the defense and security business unit.
Sales Taxes

annual effective tax rate method would not provide a reliable estimate of the Company’s overall annual effective tax rate due to the range of potential impacts of the ongoing global COVID-19 pandemic, heightened inflation and reduced consumer confidence stemming from the Russia-Ukraine war may have on its business and results of operations. Accordingly, the Company has computed the tax provision using the actual effective tax rate for the three months ended April 2, 2022.
The Company collectsrecorded an income tax benefit of $9.6 million and remits sales$1.2 million for the three months ended April 2, 2022 and April 3, 2021, respectively. The $9.6 million income tax benefit for the three months ended April 2, 2022 resulted in jurisdictionsan effective income tax rate of  24.0%. The $1.2 million income tax benefit for the three months ended April 3, 2021 resulted in which it hasan effective tax rate of (19.5)%. The change in effective income tax rate was primarily driven by a physical presence or it believes nexus exists, which therefore obligatesdiscrete tax item of excess stock-based compensation windfalls recognized for the Companythree months ended April 3, 2021 compared to collectstock-based compensation shortfalls recognized during the current period.
The Company's 24.0% effective rate of income tax for the three months ended April 2, 2022 was higher than the federal statutory tax rate of 21% primarily because of the recognition of R&D credits and remit sales tax. The Company continually evaluates whether it has established nexus in new jurisdictionsthe benefit associated with respect to sales tax. The Company has recorded a liability for potential exposure in states where there is uncertainty about the point in time at which the Company established a sufficient business connection to create nexus. The Company continues to analyze possible sales tax exposure, but does not currently believe that any individual claim or aggregate claims that might arise will ultimately have a material effect on its consolidated results of operations, financial position or cash flows.Foreign-Derived Intangible Income.

8.11. Industry Segment, Geographic Information and Significant Customers

Prior to completing the sale of the Company's defense and security business (see Note 11), the Company’s reportable segments consisted of the home business unit and the defense and security business unit. Following this divestiture, which was completed on April 4, 2016, theThe Company now operates as one business segment, consumer robots, the results of which are

16
iROBOT CORPORATION
Notes to Consolidated Financial Statements - (Continued)

included in the Company's consolidated statements of income and comprehensive income.1 operating segment. The Company's consumer robots products are offered to consumers through a networkvariety of retail businessesdistribution channels, including chain stores and one distributor throughoutother national retailers, through the United States, to various countries through international distributorsCompany's own website and app, dedicated e-commerce websites, the online arms of traditional retailers, and through the Company's on-line store.
Geographic Information
For the three months ended September 30, 2017value-added distributors and October 1, 2016, sales to non-U.S. customers accounted for 57.3% and 60.9% of total revenue, respectively, and sales to non-U.S. customers for the nine months ended September 30, 2017 and October 1, 2016 accounted for 51.5% and 62.4% of total revenue, respectively.resellers worldwide.
Significant Customers
For the three months ended September 30, 2017,April 2, 2022 and April 3, 2021, the Company generated 14.3% of total revenue from a network of affiliated European distributors (Robopolis SAS)26.6% and 11.0%17.0%, respectively, of total revenue from one of its domestic retailers (Amazon). For the three months ended October 1, 2016, the Company generated 13.3% and 12.0% of total revenue from its distributor in Japan (Sales On Demand Corporation) and a network of affiliated European distributors (Robopolis SAS), respectively. On April 3, 2017, the Company acquired the iRobot-related distribution business of Sales On Demand Corporation (see Note 9). On October 2, 2017, the Company acquired Robopolis SAS (see Note 12).retailers.
For the nine months ended September 30, 2017, the Company generated 13.2% of total revenue from a network of affiliated European distributors (Robopolis SAS) and 11.9% of total revenue from one of its domestic retailers (Amazon). For the nine months ended October 1, 2016, the Company generated 13.5% and 13.1% of total revenue from its distributor in Japan (Sales On Demand Corporation) and a network of affiliated European distributors (Robopolis SAS), respectively. On April 3, 2017, the Company acquired the iRobot-related distribution business of Sales On Demand Corporation (see Note 9). On October 2, 2017, the Company acquired Robopolis SAS (see Note 12).

9. Business Combination

On April 3, 2017, the Company closed its acquisition of the iRobot-related distribution business of Sales On Demand Corporation (SODC) for approximately $16.6 million in cash, equal to the book value of the acquired assets.  The acquisition will better enable the Company to maintain its leadership position and accelerate the growth of its business in Japan through direct control of pre- and post-sales market activities including sales, marketing, branding, channel relationships and customer service. It also expands the Company's presence and customer outreach opportunities in Japan. The acquisition was a stock purchase. The results of operations for this acquisition have been included in the Company's operating results since the acquisition date. The Company has not separately presented revenue or the results of operations for this acquisition, from the date of acquisition, as the impact is neither material nor significant to the consolidated financial results. The Company has also not furnished pro forma financial information related to this acquisition because such information is not material, individually or in the aggregate, to the financial results.
During the three months ended September 30, 2017, the Company finalized the purchase price allocation and made measurement period adjustments to the provisional amounts reported as the estimated fair values of assets acquired. Compared to the provisional value reported as of July 1, 2017, the fair values presented in the table below reflect a decrease to the returns reserve of $7.4 million, a decrease to related inventory of $3.6 million and a decrease to related deferred tax assets of $1.3 million. These adjustments resulted in a $2.2 million non-taxable gain on business acquisition which represents the excess of the fair value of the net assets acquired over the purchase price. The gain on business acquisition was recorded within other income, net in the consolidated statements of income during the three months ended September 30, 2017. The Company believes that the gain on business acquisition was due to the transaction not being subjected to a competitive bidding process and the purchase price being determined based on the net book value of the net assets acquired.

17
iROBOT CORPORATION
Notes to Consolidated Financial Statements - (Continued)

The following table summarizes the final allocation of the purchase price (in thousands):
Cash$125
Accounts receivable, net (1)(5,496)
Inventories18,290
Other assets2,065
Deferred tax assets, net409
Goodwill—
Intangible assets8,640
Total assets acquired24,033
  
Accrued expenses and other current liabilities(4,450)
Other liabilities(691)
Total liabilities assumed(5,141)
Net assets acquired$18,892
Gain on business acquisition(2,243)
Total purchase price$16,649

(1) The accounts receivable balance reflects reserves for product returns, discounts and promotions assumed as part of the acquisition.

The following table reflects the fair value of the acquired identifiable intangible assets and related estimates of useful lives:

  Useful Life Fair Value
    (in thousands)
Customer relationships 13 Years $4,490
Reacquired distribution rights 9 Months 4,150
Total 
 $8,640


10. Goodwill and Other Intangible Assets
Goodwill
The carrying amount of the Company's goodwill was $41.0 million at September 30, 2017 and December 31, 2016.
Other Intangible Assets
Other intangible assets include the value assigned to completed technology and a trade name acquired with the acquisition of Evolution Robotics, and the value assigned to customer relationships and the reacquired distribution rights acquired with the acquisition of the iRobot-related distribution business of SODC. The estimated useful lives for all of these intangible assets are nine months to thirteen years. The intangible assets are being amortized on a straight-line basis, which is consistent with the pattern that the economic benefits of the intangible assets are expected to be utilized.

18
iROBOT CORPORATION
Notes to Consolidated Financial Statements - (Continued)

Intangible assets at September 30, 2017 and December 31, 2016 consisted of the following:
 September 30, 2017 December 31, 2016
 Cost 
Accumulated
Amortization
 Net Cost 
Accumulated
Amortization
 Net
 (In thousands)
Completed technology$26,900
 $17,286
 $9,614
 $26,900
 $14,693
 $12,207
Tradename100
 100
 —
 100
 100
 —
Customer relationships4,490
 173
 4,317
 —
 —
 —
Reacquired distribution rights4,150
 2,766
 1,384
 —
 —
 —
Total$35,640
 $20,325
 $15,315
 $27,000
 $14,793
 $12,207
Amortization expense related to acquired intangible assets was $2.3 million and $0.9 million for the three months ended September 30, 2017 and October 1, 2016, respectively. Amortization expense related to acquired intangible assets was $5.5 million and $2.6 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. The estimated future amortization expense is expected to be as follows (in thousands):
Remainder of 2017$2,334
20183,803
20193,163
20201,245
20211,245
Thereafter3,525
Total$15,315

11. Divestiture

On April 4, 2016, the Company completed the sale of its defense and security business unit to iRobot Defense Holdings, Inc., a portfolio company of Arlington Capital Partners. The final purchase price, including adjustments for working capital and indebtedness, was $24.5 million. The Company recognized a gain of $0.4 million on the sale of assets. The sale of its defense and security business did not meet the criteria for discontinued operations presentation as it did not represent a strategic shift that had a major effect on the Company's operations and financial results.
The Company and iRobot Defense Holdings, Inc. also entered into a Transition Services Agreement (TSA), pursuant to which the Company continued to perform certain functions on iRobot Defense Holdings Inc.’s behalf during a transition period not to exceed 12 months. The TSA provided for the reimbursement of the Company for direct costs incurred in order to provide such functions and was recorded as a component of other income. The transition period was completed during the three months ended April 1, 2017.
12. Subsequent Event

Credit Facility
On October 2, 2017,May 4, 2022, the Company closedentered into a Second Amendment to the previously-announced acquisitionAmended and Restated Credit Agreement (the "Credit Agreement") with Bank of its largest European distributor, Robopolis SAS (Robopolis), throughAmerica N.A. (the "Amendment") with an effective date of March 31, 2022. The Amendment waives the acquisitionquarterly tested leverage and interest coverage covenants in the Credit Agreement for the first, second and third quarters of 2022. The interest coverage ratio calculation for the issued and outstanding capital sharesfourth quarter of Robopolis. At2022 was changed to a trailing nine months. Additionally, a new liquidity covenant was added for all of fiscal 2022. The Amendment also increases the closing,borrowing rate under the facility for 2022 to LIBOR plus 1.5%. With this Amendment, as of April 2, 2022, the Company paid approximately $170.1 millionis in cash offset by acquired cash of approximately $31.6 million held by Robopolis and its subsidiaries at closing, resulting in a net cash outlay of approximately $138.4 million. Pursuant tocompliance with the Share Purchase Agreement, $16.0 million ofcovenants under the purchase price was placed into an escrow account to settle certain claims for indemnification for breaches or inaccuracies in Robopolis’ and its shareholders’ representations and warranties, covenants and agreements, and approximately $2.4 million of the purchase price was deposited in escrow to satisfy, in part, any payments due to iRobot for certain post-closing purchase price adjustments.Credit Agreement.


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Table of Contents



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of iRobot Corporation should be readinformation contained in conjunction with thethis section has been derived from our consolidated financial statements and theshould be read together with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2016,which has been filed with the SEC.10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and are subject to the “safe harbor”"safe harbor" created by those sections. In particular, statements contained in this Quarterly Report on Form 10-Q, and in the documents incorporated by reference into this Quarterly Report on Form 10-Q that are not historical facts, including, but not limited to statements concerning new product sales, product development and offerings, includingability to address consumer needs, the expansion of our Roomba and Braavaaddressable market, factors for differentiation of our products, product integration plans, our consumer robots, our competition, our strategy, our market position, market acceptance of our products, seasonal factors, revenue recognition, (including our expectations related to the impact of adoption of new revenue recognition standards), our profits, growth of our revenues, composition of our revenues, our cost of revenues, units shipped, average selling prices, the impact of promotional activity and tariffs, operating expenses, selling and marketing expenses, general and administrative expenses, research and development expenses, and compensation costs, our projected income tax rate, our credit and letter of credit facilities, our valuations of investments, the impact of our acquisition of Robopolis, valuation and composition of our stock-based awards, efforts to mitigate supply chain challenges, availability of semiconductor chips, and liquidity, constitute forward-looking statements and are made under these safe harbor provisions. Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “should,” “could,” “seek,” “intends,” “plans,” “estimates,” “anticipates,”"believes," "expects," "may," "will," "should," "could," "seek," "intends," "plans," "estimates," "anticipates," or other comparable terms and negative forms of such terms. Forward-looking statements involve inherent risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements, including thosestatements. We urge you to consider the risks and uncertainties describeddiscussed in greater detail under the heading "Risk Factors" in this Quarterly Report on Form 10-Q and in Part 1, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016, as well as elsewhere in this Quarterly Report on Form 10-Q. We urge you to consider the risks and uncertainties discussed in our Annual Report on Form 10-K and in Item 1A contained hereinJanuary 1, 2022 in evaluating our forward-looking statements. We have no plans to update our forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.report. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made.
Overview
iRobot is a leading global consumer robot company that designs and builds robots that empower people to do more both insidemore. With over 30 years of artificial intelligence ("AI") and outsideadvanced robotics experience, we are focused on building thoughtful robots and developing intelligent home innovations that help make life better for millions of people around the home.world. iRobot's portfolio of solutionshome robots and smart home devices features proprietary technologies for the connected home and advanced concepts in cleaning, mapping and navigation. Fornavigation, human-robot interaction and physical solutions. Leveraging this portfolio, we plan to add new capabilities and expand our offerings to help consumers make their homes easier to maintain, more than 25 years, we have been a pioneer in the roboticsefficient, more secure and consumer products industries. We sell our robots through a variety of distribution channels, including chain stores and other national retailers, through our on-line store, and through value-added distributors and resellers worldwide.healthier places to live.
As of September 30, 2017,April 2, 2022, we had 7981,415 full-time employees. WeSince our founding in 1990, we have developed expertise in the disciplinesexpertise necessary to design, build, sell and support durable, high-performance and cost-effective robots through the close integration of software, electronics and hardware. Our core technologies serve as reusable building blocks that we adapt and expand to develop next generation and new products,create next-generation robotic platforms. We believe that this approach accelerates the time to market, while also reducing the costs, time cost and risk ofother risks associated with product development. OurThese capabilities are amplified by our Genius Home Intelligence ("Genius") platform, which leverages our considerable expertise and ongoing investment in AI, home understanding and machine vision technologies to provide consumers with greater control over our products, simple integration with other smart home devices, recommendations that further enhance the cleaning experience and the ability to share and transfer home knowledge across multiple iRobot robots. We believe that the capabilities within Genius will support our ability to build out a larger ecosystem that encompasses a broader range of adjacent robotic and smart home categories. We believe that our significant expertise in robot design, engineering, and engineeringsmart home technologies and targeted focus on understanding and addressing consumer needs, positions us well to expand our total addressable market and capitalize on the anticipated growth in a wider range of robotic and smart home categories.
To continue expanding our business globally and increase our profitability in a highly competitive marketplace, we expect in the market for robot-based consumer products.
On April 3, 2017, we closed the acquisition of the iRobot-related distribution business of Sales On Demand Corporation (SODC). The final purchase price, equalhave continued to the book value of the acquired assets, was $16.6 million. Through direct control of sales, marketing, branding, channel relationships and customer service, we expect to maintain our leadership position in the consumer-robots market and accelerate growthmake progress on each key element of our business in Japan.
On October 2, 2017, we closed the previously-announced acquisition of our largest European distributor, Robopolis SAS (Robopolis). At the closing, we paid approximately $170.1 million in cash offset by acquired cash of approximately $31.6 million held by Robopolisstrategy: innovate, get, keep and its subsidiaries at closing, resulting in a net cash outlay of approximately $138.4 million. We anticipate that the acquisition will enhance our distribution network, ensure global brand consistency and better serve the needs of European consumers. We expect to drive continued growth in the region through a consistent approach to all market activities including sales, marketing, branding, channel relationships and customer service.
Our continued success depends upon our ability to respond togrow. In March 2022, iRobot released Genius 4.0 Home Intelligence, which adds a number of challengesnew pragmatic, convenient new experiences, makes Imprint Smart Mapping available for Roomba i3 and i3+ customers, and increases the range of objects that our Roomba j7 robot can identify and avoid. In addition, we continued to expand our connected customer base, focus on ways to keep customer use of our products and overall satisfaction levels high, and advance key commercial activities aimed at increasing existing customer revenue, especially through our direct-to-consumer channel.
In March 2022, we were granted a temporary exclusion from Section 301 List 3 tariffs by the United States Trade Representative ("USTR"). This exclusion eliminates the 25% tariff on Roomba products imported from China beginning on October 12, 2021 and continuing until December 31, 2022. The tariff exclusion entitles us to a refund of approximately $29.8 million in tariffs comprised of $11.7 million in tariffs paid on Roomba robots imported after October 12, 2021 and sold during fiscal 2021, $5.9 million for tariffs paid during the first quarter of 2022 and $12.2 million for on-hand inventory imported after October 12, 2021.
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In addition to the ongoing impact of the COVID-19 pandemic, we anticipate potential disruptions in the consumer robots market. We believemarketplace, particularly in EMEA, primarily driven by a combination of heightened inflation that threatens to curb consumer spending and reduced consumer confidence stemming from the Russia-Ukraine war. In March 2022, in response to the Russian invasion of Ukraine, we halted all new sales of our products to Russia. Revenue from our Russian distributor in 2021 was not material to our business.

Key Financial Metrics and Non-GAAP Financial Measures
In addition to the measures presented in our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"), we use the following key metrics, including non-GAAP financial measures, to evaluate and analyze our core operating performance and trends, and to develop short-term and long-term operational plans. The most significant of these include increasing competition,directly comparable financial measures to the following non-GAAP metrics calculated under U.S. GAAP are gross profit and our ability to successfully develop and introduce products and product enhancements into both new and existing markets.
operating (loss) income. During the nine month periodthree months ended September 30, 2017,April 2, 2022 and April 3, 2021, we launchedhad gross profit of $107.5 million and $122.9 million, respectively, and operating (loss) income of $(23.3) million and $6.4 million, respectively. A summary of key metrics for the Roomba 890 and 690, bringing Wi-Fi connectivity to our lower price point robots. During the nine month periodthree months ended October 1, 2016, we launched the Braava jet mopping robot. The Braava jet was available on our website and retail locations in the U.S during the second quarter of 2016, and became available in China, Japan and EMEA in the third quarter of 2016.

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During the three- and nine- month periods ended September 30, 2017, strong growth in both the domestic and international markets for consumer products drove increases in our consumer business revenue of 22.3% and 25.5%April 2, 2022, as compared to the three-three months ended April 3, 2021, is as follows:
 Three Months Ended
 April 2, 2022April 3, 2021
(dollars in thousands, except average gross selling prices)
(unaudited)
Total Revenue$291,969 $303,261 
Non-GAAP Gross Profit$100,588 $123,531 
Non-GAAP Gross Margin34.5 %40.7 %
Non-GAAP Operating (Loss) Income$(18,516)$14,954 
Non-GAAP Operating Margin(6.3)%4.9 %
Total robot units shipped (in thousands)974 1,088 
Average gross selling prices for robot units$333 $319 
Our non-GAAP financial measures reflect adjustments based on the following items. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and nine-month periods endedthe financial results calculated in accordance with GAAP and reconciliations from these results, provided below, should be carefully evaluated.
Amortization of acquired intangible assets: Amortization of acquired intangible assets consists of amortization of intangible assets including completed technology, customer relationships, and reacquired distribution rights acquired in connection with business combinations.
Net Merger, Acquisition and Divestiture (Income) Expense: Net merger, acquisition and divestiture (income) expense primarily consists of transaction fees, professional fees, and transition and integration costs directly associated with mergers, acquisitions and divestitures. It also includes business combination adjustments including adjustments after the measurement period has ended.
Stock-Based Compensation: Stock-based compensation is a non-cash charge relating to stock-based awards.
Tariff Refunds: We were granted an exclusion from Section 301 List 3 in March 2022, which temporarily eliminates tariffs on our Roomba products imported from China beginning on October 1, 2016. Domestic consumer revenue increased 33.8% and 38.4%12, 2021 until December 31, 2022. This temporary exclusion entitles us to a refund of all related tariffs previously paid since October 12, 2021. We exclude the refunds for tariff costs expensed during fiscal 2021 from our fiscal 2022 non-GAAP measures because those tariff refunds associated with tariff costs incurred in the three-past have no impact to our current period earnings.
IP Litigation Expense, Net: IP litigation expense, net relates to legal costs incurred to litigate patent, trademark, copyright and nine-month periods ended September 30, 2017 comparedfalse advertising infringements, or to the three- and nine-month periods ended October 1, 2016, resulting primarily from successful marketing programs. International consumer revenue increased 14.9% and 15.3% in the three- and nine-month periods ended September 30, 2017 compared to the three- and nine-month periods ended October 1, 2016, largely driven by the growth in Europe as well as in Japan after the acquisition of SODC, which provides us with more direct control over sales in the region.
During the three-month period ended September 30, 2017, we recorded a net benefit to revenue and income before income taxes of $1.4 millionoppose or defend against interparty actions related to adjustments to our product returns reserves, compared to a net benefit to revenueintellectual property. Any settlement payment or proceeds resulting from these infringements are included or netted against the costs.
Restructuring and income before income taxes of $0.1 million during the three-month period ended October 1, 2016. During the nine-month period ended September 30, 2017, we recorded a net benefit to revenue and income before income taxes of $1.9 millionOther: Restructuring charges are related to one-time actions associated with realigning resources, enhancing operational productivity and efficiency, or improving our cost structure in support of our strategy. Such actions are
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not reflective of ongoing operations and include costs primarily associated with severance costs, certain professional fees, costs associated with consolidation of warehouses, and other non-recurring costs directly associated with resource realignments tied to strategic initiatives or changes in business conditions.
Gain/Loss on Strategic Investments: Gain/loss on strategic investments includes fair value adjustments, to our product returns reserves, compared to a net benefit to revenuerealized gains and income before income taxeslosses on the sales of $2.3 million duringthese investments and losses on the nine-month period ended October 1, 2016. Theimpairment of these investments.
Income tax adjustments: Income tax adjustments include the tax effect of the non-GAAP adjustments, calculated using the appropriate statutory tax rate for each adjustment. We reassess the need for any valuation allowance recorded based on the non-GAAP profitability and have eliminated the effect of the valuation allowance recorded in the three-U.S. jurisdiction. We also exclude certain tax items, including impact from stock-based compensation windfalls/shortfalls, that are not reflective of income tax expense incurred as a result of current period earnings.
We exclude these items from our non-GAAP measures to facilitate an evaluation of our current operating performance and nine-month periodscomparisons to our past operating performance. These items may vary significantly in magnitude or timing and do not necessarily reflect anticipated future operating activities. In addition, we believe that providing these non-GAAP measures affords investors a view of our operating results that may be more easily compared with our peer companies.
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The following table reconciles gross profit, operating (loss) income, net (loss) income and net (loss) income per share on a GAAP and non-GAAP basis for the three months ended September 30, 2017 resulted from lower product returns experience as compared to estimates used to establish reserves in prior periods. The adjustments recorded in the three-April 2, 2022 and nine-month periods ended October 1, 2016 resulted from lower product returns experience as compared to estimates used to establish reserves in prior periods, as well as the transition of a customer to a contractual fixed rate of return.April 3, 2021:
During the three-month period ended September 30, 2017, we recorded a net benefit to revenue and income before income taxes of $0.1 million related to adjustments to estimated price protection based upon quarterly sales activity, historical experience and customer inventory sell-through and $0.2 million related to customer-specific price protection. During the nine-month period ended September 30, 2017, we recorded a net benefit to revenue and income before income taxes of $0.3 million related to adjustments to estimated price protection based upon quarterly sales activity, historical experience and customer inventory sell-through and a net reduction to revenue of $1.9 million related to customer-specific price protection.
Three Months Ended
April 2, 2022April 3, 2021
(in thousands, except per share amounts)
 GAAP Gross Profit$107,515 $122,944 
   Amortization of acquired intangible assets821 225 
   Stock-based compensation441 362 
   Tariff refunds(11,727)— 
   Restructuring and other3,538 — 
 Non-GAAP Gross Profit$100,588 $123,531 
 Non-GAAP Gross Margin34.5 %40.7 %
 GAAP Operating (Loss) Income$(23,287)$6,389 
   Amortization of acquired intangible assets1,331 430 
   Stock-based compensation7,208 6,782 
   Tariff refunds(11,727)— 
   Net merger, acquisition and divestiture expense109 — 
   IP litigation expense, net3,487 1,140 
   Restructuring and other4,363 213 
 Non-GAAP Operating (Loss) Income$(18,516)$14,954 
 Non-GAAP Operating Margin(6.3)%4.9 %
 GAAP Net (Loss) Income$(30,406)$7,443 
   Amortization of acquired intangible assets1,331 430 
   Stock-based compensation7,208 6,782 
   Tariff refunds(11,727)— 
   Net merger, acquisition and divestiture expense109 — 
   IP litigation expense, net3,487 1,140 
   Restructuring and other4,363 213 
   Loss (gain) on strategic investments16,835 (38)
   Income tax effect(9,185)(4,051)
 Non-GAAP Net (Loss) Income$(17,985)$11,919 
 GAAP Net (Loss) Income Per Diluted Share$(1.12)$0.26 
   Dilutive effect of non-GAAP adjustments0.46 0.15 
 Non-GAAP Net (Loss) Income Per Diluted Share$(0.66)$0.41 
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United States requires managementus to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, we evaluate ourrelated disclosures. Our estimates and judgments, in particular those related to revenue recognition (specifically sales returns and other allowances); valuation allowances; assumptions used in valuing goodwill and intangible assets; assumptions used in accounting for business combinations; assumptions used in valuing stock-based compensation instruments; evaluating loss contingencies; and valuation allowances for deferred tax assets. Actual amounts could differ significantly from these estimates. Our management bases its estimates and judgmentsare based on historical experience and various other factors that we believe are believed to be reasonable under the circumstances, thecircumstances. Actual results of which form the basis for making judgments about the carrying values of assets and liabilitiesoutcomes may differ from our estimates and the amounts of revenue and expenses that are not readily apparent from other sources. Additional information about theseassumptions.
The critical accounting policies may be foundaffected most significantly by estimates and assumptions used in the "Management’s Discussion and Analysispreparation of Financial Condition and Resultsour consolidated financial statements are described in Item 7 of Operations" section included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.January 1, 2022, filed with the Securities and Exchange Commission on February 15, 2022. On an ongoing basis, we evaluate the critical accounting policies used to prepare our consolidated financial statements. There have been no material changes in these critical accounting policies and estimates.


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Overview of Results of Operations
The following table sets forth our results of operations as a percentage of revenue for the three and nine month periods ended September 30, 2017 and October 1, 2016:revenue:
 Three Months Ended
 April 2, 2022April 3, 2021
Revenue100.0 %100.0 %
Cost of revenue:
Cost of product revenue62.9 59.4 
Amortization of acquired intangible assets0.3 0.1 
Total cost of revenue63.2 59.5 
Gross profit36.8 40.5 
Operating expenses:
Research and development14.6 13.8 
Selling and marketing20.9 16.8 
General and administrative9.1 7.7 
Amortization of acquired intangible assets0.2 0.1 
Total operating expenses44.8 38.4 
Operating (loss) income(8.0)2.1 
Other expense, net(5.7)— 
(Loss) income before income taxes(13.7)2.1 
Income tax benefit(3.3)(0.4)
Net (loss) income(10.4)%2.5 %
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Revenue100.0% 100.0% 100.0% 100.0%
Cost of revenue50.2
 51.9
 49.8
 52.5
Gross margin49.8
 48.1
 50.2
 47.5
Operating expenses       
Research and development14.0
 11.7
 14.5
 13.0
Selling and marketing14.0
 10.6
 16.4
 14.9
General and administrative10.2
 9.5
 10.4
 10.9
Total operating expenses38.2
 31.8
 41.3
 38.8
Operating income11.6
 16.3
 8.9
 8.7
Other income, net1.3
 0.3
 0.8
 0.4
Income before income taxes12.9
 16.6
 9.7
 9.1
Income tax expense2.1
 5.0
 1.4
 2.8
Net income10.8% 11.6% 8.3% 6.3%
Comparison of Three and Nine Months Ended September 30, 2017April 2, 2022 and October 1, 2016April 3, 2021
Revenue
 Three Months Ended
 April 2, 2022April 3, 2021Dollar
Change		Percent
Change
  (Dollars in thousands) 
Revenue$291,969 $303,261 $(11,292)(3.7)%
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
   (In thousands)     (In thousands)  
Total revenue$205,399 $168,610 $36,789 21.8% $557,014 $448,110 $108,904 24.3%
Total revenueRevenue for the three months ended September 30, 2017 increasedApril 2, 2022 decreased $11.3 million to $205.4$292.0 million, or 21.8%3.7%, compared to $168.6from $303.3 million for the three months ended October 1, 2016. Revenue increased approximately $37.4April 3, 2021. Geographically, in the three months ended April 2, 2022, international revenue decreased $49.7 million, or 22.3%26.4%, which primarily reflected a 43.5% decrease in our consumer business.
EMEA largely due to an exceptionally strong quarter in the EMEA region a year ago. The $37.4decrease was slightly offset by a $9.9 million, or 24.5% increase in Japan, while domestic revenue from our consumer businessincreased $38.4 million, or 33.5%, compared to the three months ended April 3, 2021. The decrease in revenue was also impacted by a 10.5% decrease in total robots shipped offset by a 4.4% increase in gross average selling price for the three months ended September 30, 2017April 2, 2022, compared to the three months ended April 3, 2021. Despite the decrease in total revenue, our direct-to-consumer revenue growth of 16.8% to $40.8 million, or 14.0% of total revenue, reflected continued expansion of this channel as we invested in enhancing the online buying experience and upgrading our digital marketing capabilities.
Cost of Product Revenue
 Three Months Ended
 April 2, 2022April 3, 2021Dollar
Change		Percent
Change
 (Dollars in thousands)
Cost of product revenue$183,633 $180,092 $3,541 2.0 %
As a percentage of revenue62.9 %59.4 %
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Cost of product revenue increased to $183.6 million in the three months ended April 2, 2022, compared to $180.1 million in the three months ended April 3, 2021. The increase in cost was driven by higher supply chain cost continuing from the second half of fiscal 2021 and a 16.3%one-time action associated with the consolidation of warehouses in the U.S. These increases in cost of product revenue are mostly offset by lower product cost driven by a 3.7% decrease in revenue and lower Section 301 tariff expense during the three months ended April 2, 2022. In March 2022, we were granted a temporary exclusion from Section 301 List 3 tariffs which eliminates the 25% tariff on Roomba products imported from China beginning on October 12, 2021 and continuing until December 31, 2022. As a result of this exclusion, we recognized approximately $11.7 million as a benefit to cost of product revenue related to tariffs expensed in fiscal 2021 during the three months ended April 2, 2022, compared to $3.4 million in tariff expense during the three months ended April 3, 2021.
Gross Profit
 Three Months Ended
 April 2, 2022April 3, 2021Dollar
Change		Percent
Change
 (Dollars in thousands)
Gross profit$107,515 $122,944 $(15,429)(12.5)%
Gross margin36.8 %40.5 %
Gross margin decreased to 36.8% in the three months ended April 2, 2022, compared to 40.5% in the three months ended April 3, 2021. Gross margin decreased 3.7% driven by continuing supply chain headwinds with increases in freight and material costs, along with price reductions and higher promotional activities for certain products of varying magnitudes across regions. The decrease is offset by lower warranty expense and tariff cost as we were granted temporary exclusion from Section 301 List 3 which eliminates the 25% tariffs on Roomba products imported from China as previously described. In addition, gross margin was favorably impacted from $11.7 million recognized as a benefit from tariff refunds during the three months ended April 2, 2022 related to tariffs expensed in fiscal 2021. We expect gross margin pressure to continue over the next few quarters, as we anticipate continued elevated costs associated with increased raw materials, oceanic transport and air freight expenses as well as higher component costs associated with limited semiconductor chip availability.
Research and Development
 Three Months Ended
 April 2, 2022April 3, 2021Dollar
Change		Percent
Change
 (Dollars in thousands)
Research and development$42,529 $41,920 $609 1.5 %
As a percentage of revenue14.6 %13.8 %
Research and development expenses increased $0.6 million, or 1.5%, to $42.5 million (14.6% of revenue) in the three months ended April 2, 2022 from $41.9 million (13.8% of revenue) in the three months ended April 3, 2021. This increase was primarily due to a $2.4 million increase in total units shippedpeople-related costs associated with additional headcount, offset by lower short-term incentive compensation cost of $2.0 million.
Selling and Marketing
 Three Months Ended
 April 2, 2022April 3, 2021Dollar
Change		Percent
Change
 (Dollars in thousands)
Selling and marketing$61,065 $50,990 $10,075 19.8 %
As a percentage of revenue20.9 %16.8 %
Selling and marketing expenses increased $10.1 million, or 19.8%, to $61.1 million (20.9% of revenue) in the three months ended April 2, 2022 from $51.0 million (16.8% of revenue) in the three months ended April 3, 2021. This increase was primarily attributable to higher marketing spend of $7.0 million associated with increased use of working media to drive sales growth, $2.0 million increase in people-related costs associated with additional headcount as well as $0.9 million higher technology related cost including cloud service and maintenance and support fees as we continue to invest in our digital marketing and e-commerce capabilities. These increases were offset by lower short-term incentive compensation of $0.8 million.
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General and Administrative
 Three Months Ended
 April 2, 2022April 3, 2021Dollar
Change		Percent
Change
 (Dollars in thousands)
General and administrative$26,698 $23,440 $3,258 13.9 %
As a percentage of revenue9.1 %7.7 %
General and administrative expenses increased $3.3 million, or 13.9%, to $26.7 million (9.1% of revenue) in the three months ended April 2, 2022 from $23.4 million (7.7% of revenue) in the three months ended April 3, 2021. This increase was primarily due to a $1.6 million increase in legal fees driven by higher intellectual property litigation costs and a 8.7%$1.2 million increase in average selling priceenterprise software maintenance, support and services. In addition, during the three months ended April 2, 2022, the allowance for credit loss decreased $0.5 million as compared to a decrease of $2.1 million during the three months ended April 3, 2021. These increases were partially offset by lower vesting expectations related to our performance-based stock-based compensation and lower short-term incentive compensation cost of $1.9 million.
Amortization of Acquired Intangible Assets
 Three Months Ended
 April 2, 2022April 3, 2021Dollar
Change		Percent
Change
 (Dollars in thousands)
Cost of revenue$821 $225 $596 264.9 %
Operating expense510 205 305 148.8 %
Total amortization expense$1,331 $430 $901 209.5 %
As a percentage of revenue0.5 %0.1 %
The increase in amortization of acquired intangible assets in the three months ended April 2, 2022 as compared to the three months ended October 1, 2016. InApril 3, 2021, was primarily related to the acquired intangible assets as part of the acquisition of Aeris Cleantec AG in the fourth quarter of 2021.
Other Expense, Net
 Three Months Ended
 April 2, 2022April 3, 2021Dollar
Change		Percent
Change
 (Dollars in thousands)
Other expense, net$(16,746)$(160)$(16,586)10,366.3 %
As a percentage of revenue(5.7)%— %
During the three months ended September 30, 2017, domestic consumer revenue increased $22.2April 2, 2022, other expense, net primarily consists of a realized loss of $16.8 million or 33.8%, and international consumer revenue increased $15.2 million, or 14.9%, as compared to the three months ended October 1, 2016. Total consumer robots shipped in the three months ended September 30, 2017 were approximately 906,000 units compared to approximately 779,000 units in the three months ended October 1, 2016. The increase in sales of our consumer robots resulted primarily from increased sales of our Roomba 900 and Roomba 600 series robots.
Total revenue for the nine months ended September 30, 2017 increased to $557.0 million, or 24.3%, compared to $448.1 million for the nine months ended October 1, 2016. Revenue increased approximately $113.0 million, or 25.5%, in our consumer business. For the nine months ended September 30, 2017, defense and security business revenue decreased approximately $3.1 million as compared to the nine months ended October 1, 2016 as a result ofassociated with the sale of our defense and security business unit on April 4, 2016.
The $113.0 million increase in revenue from our consumer business for the nine months ended September 30, 2017 was driven by an 17.8% increase in units shipped and an 8.3% increase in average selling price as compared to the nine months ended October 1, 2016. In the nine months ended September 30, 2017, domestic consumer revenue increased $74.9 million, or 38.4%, and international consumer revenue increased $38.1 million, or 15.3%, as compared to the nine months ended October 1, 2016. Total consumer robots shipped in the nine months ended September 30, 2017 were approximately 2,358,000

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units compared to approximately 2,002,000 units in the nine months ended October 1, 2016. The increase in sales of our consumer robots resulted primarily from increased sales of our Roomba 900 series robots.
Cost of Revenue
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 (In thousands) (In thousands)
Total cost of revenue$103,016 $87,550 $15,466 17.7% $277,397 $235,437 $41,960 17.8%
As a percentage of total revenue50.2% 51.9%     49.8% 52.5%    
Total cost of revenue increased to $103.0 million in the three months ended September 30, 2017, compared to $87.6 million in the three months ended October 1, 2016. The increase in cost of revenue for the three months ended September 30, 2017 is primarily due to the increase in revenue compared to the three months ended October 1, 2016,Matterport shares. Other expense, net includes interest income, interest expense, foreign currency gains (losses) as well as the impactgains (losses) from our acquisitionstrategic investments.
Income Tax Benefit
 Three Months Ended
 April 2, 2022April 3, 2021Dollar
Change		Percent
Change
 (Dollars in thousands)
Income tax benefit$(9,627)$(1,214)$(8,413)693.0 %
Effective income tax rate24.0 %(19.5)%
We recorded an income tax benefit of the iRobot-related distribution business of SODC in April 2017 including $1.5 million of amortization expense of acquired intangible assets.
Total cost of revenue increased to $277.4 million in the nine months ended September 30, 2017, compared to $235.4 million in the nine months ended October 1, 2016. Cost of revenue increased $42.6 million, or 19.8%, in our consumer business. The increase in cost of revenue for the nine months ended September 30, 2017 is primarily due to the increase in revenue compared to the nine months ended October 1, 2016, as well as the impact from our acquisition of the iRobot-related distribution business of SODC in April 2017 including $2.9 million of amortization expense of acquired intangible assets. For the nine months ended September 30, 2017, defense and security business cost of revenue decreased approximately $2.6 million as compared to the nine months ended October 1, 2016 as a result of completing the sale of our defense and security business unit on April 4, 2016.
Gross Margin
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 (In thousands) (In thousands)
Total gross margin$102,383 $81,060 $21,323 26.3% $279,617 $212,673 $66,944 31.5%
As a percentage of total revenue49.8% 48.1%     50.2% 47.5%    
Gross margin increased $21.3 million, or 26.3%, to $102.4 million (49.8% of revenue) in the three months ended September 30, 2017 from $81.1 million (48.1% of revenue) in the three months ended October 1, 2016. The increase in gross margin is primarily related to favorable product and region mix, partially offset by an increase in promotional support to our customers for the upcoming holiday seasons.
Gross margin increased $66.9 million, or 31.5%, to $279.6 million (50.2% of revenue) in the nine months ended September 30, 2017 from $212.7 million (47.5% of revenue) in the nine months ended October 1, 2016. The increase in gross margin is primarily related to favorable product mix in the nine months ended September 30, 2017 compared to the nine months ended October 1, 2016.
Research and Development
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 (In thousands) (In thousands)
Total research and development$28,843 $19,672 $9,171 46.6% $80,518 $57,944 $22,574 39.0%
As a percentage of total revenue14.0% 11.7%     14.5% 13.0%    

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Research and development expenses increased $9.2 million, or 46.6%, to $28.8 million (14.0% of revenue) in the three months ended September 30, 2017 from $19.7 million (11.7% of revenue) in the three months ended October 1, 2016. This increase was primarily attributable to higher people-related costs of approximately $5.6 million driven by headcount growth, material and supplies of $1.1$9.6 million and other program spend of approximately $2.0 million.
Research and development expenses increased $22.6 million, or 39.0%, to $80.5 million (14.5% of revenue) in the nine months ended September 30, 2017 from $57.9 million (13.0% of revenue) in the nine months ended October 1, 2016. This increase was primarily attributable to higher people-related costs of approximately $13.6 million driven by headcount growth, material and supplies of $2.3 million and other program spend of approximately $6.0 million.
Selling and Marketing
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 (In thousands) (In thousands)
Total selling and marketing$28,646 $17,925 $10,721 59.8% $91,344 $66,972 $24,372 36.4%
As a percentage of total revenue14.0% 10.6%     16.4% 14.9%    
Selling and marketing expenses increased by $10.7 million, or 59.8%, to $28.6 million (14.0% of revenue) in the three months ended September 30, 2017 from $17.9 million (10.6% of revenue) in the three months ended October 1, 2016. This increase was driven by higher direct marketing spend of $6.1 million, people-related costs of $3.0 million including additional headcount from our SODC acquisition, and customer service costs of $0.5 million.
Selling and marketing expenses increased by $24.4 million, or 36.4%, to $91.3 million (16.4% of revenue) in the nine months ended September 30, 2017 from $67.0 million (14.9% of revenue) in the nine months ended October 1, 2016. This increase was driven by higher direct marketing spend of $16.9 million, people-related costs of $4.6 million including additional headcount from our SODC acquisition, and customer service costs of $1.8 million.
General and Administrative
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 (In thousands) (In thousands)
Total general and administrative$21,002 $16,012 $4,990 31.2% $58,137 $48,919 $9,218 18.8%
As a percentage of total revenue10.2% 9.5%     10.4% 10.9%    
General and administrative expenses increased by $5.0 million, or 31.2%, to $21.0 million (10.2% of revenue) in the three months ended September 30, 2017 from $16.0 million (9.5% of revenue) in the three months ended October 1, 2016. This increase was attributable to higher people-related costs of $2.7 million and legal and consulting costs of $2.0 million mainly driven by litigation expense as we continued to defend and protect our intellectual property.
General and administrative expenses increased by $9.2 million, or 18.8%, to $58.1 million (10.4% of revenue) in the nine months ended September 30, 2017 from $48.9 million (10.9% of revenue) in the nine months ended October 1, 2016. This increase was attributable to higher people-related costs of $4.3 million, legal and consulting costs of $3.5 million mainly driven by acquisition expense and litigation expense where we continued to defend and protect our intellectual property, and software maintenance, support and services of $1.0 million.

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Other Income, Net
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 (In thousands) (In thousands)
Total other income, net$2,601 $523 $2,078 397.3% $4,290 $2,142 $2,148 100.3%
As a percentage of total revenue1.3% 0.3%     0.8% 0.4%    
Other income, net, amounted to $2.6 million and $0.5$1.2 million for the three months ended September 30, 2017April 2, 2022 and October 1, 2016,April 3, 2021, respectively. OtherThe $9.6 million income net, amounted to $4.3 million and $2.1 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. Other income, net, for the three- and nine-month period ended September 30, 2017 included a $2.2 million gain on business acquisition related to our acquisition of SODC, which represents the excess of the fair value of the net assets acquired over the purchase price. Other income, net, for the nine months ended September 30, 2017 also included a $1.1 million earn-out payment received from a sold cost method investment. Other income, net,tax benefit for the three months ended October 1, 2016 consisted primarily of defense and security transition services income of $0.4 million. Other income, net, for the nine months ended October 1, 2016 primarily consisted of transition services income of $0.8 million, a gain on sale of cost method investment of $0.6 million and a gain on the sale of our defense and security business unit of $0.4 million. All periods contain interest income and foreign currency changes which are not material.
Income Tax Expense
 Three Months Ended Nine Months Ended
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 September 30, 2017 October 1, 2016 
Dollar
Change
 
Percent
Change
 (In thousands) (In thousands)
Total income tax expense$4,411 $8,462 $(4,051) (47.9)% $7,565 $12,722 $(5,157) (40.5)%
As a percentage of income before income taxes16.6% 30.2%     14.0% 31.0%    
We recorded a tax provision of $4.4 million and $8.5 million for the three months ended September 30, 2017 and October 1, 2016, respectively. The $4.4 million provision for the three months ended September 30, 2017April 2, 2022 resulted in an effective income tax rate of 16.6%24.0%. The $8.5$1.2 million provisionincome tax benefit for the three months ended October 1, 2016April 3, 2021 resulted in an effective income tax rate of 30.2%(19.5)%. The difference between thechange in effective income tax rate was primarily driven by a discrete tax item of 16.6%excess stock-based
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compensation windfalls recognized for the three months ended September 30, 2017 and 30.2%April 3, 2021 compared to stock-based compensation shortfalls recognized during the current period.
Our 24.0% effective rate of income tax for the three months ended October 1, 2016April 2, 2022 was primarily due to a $4.7 million tax benefit related to share-based compensation in accordance with ASU 2016-09, adopted inhigher than the first quarter of 2017, and the jurisdictional mix of earnings.
We recorded a tax provision of $7.6 million and $12.7 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. The $7.6 million provision for the nine months ended September 30, 2017 resulted in an effective incomefederal statutory tax rate of 14.0%. The $12.7 million provision for21% primarily because of the nine months ended October 1, 2016 resulted in an effective income tax raterecognition of 31.0%. The difference between the effective income tax rate of 14.0% for the nine months ended September 30, 2017 and 31.0% for the nine months ended October 1, 2016 was primarily due to a $10.7 million tax benefit related to share-based compensation in accordance with ASU 2016-09, adopted in the first quarter of 2017,R&D credits and the jurisdictional mix of earnings.benefit associated with Foreign-Derived Intangible Income.
The statute of limitations for examinations by the Internal Revenue Service is closed for tax years prior to 2014.
Liquidity and Capital Resources
At September 30, 2017,April 2, 2022, our principal sources of liquidity were cash and cash equivalents totaling $241.8$112.0 million. Our working capital, which represents our total current assets less total current liabilities, was $371.3 million short-term investmentsas of $36.4April 2, 2022, compared to $393.9 million as of January 1, 2022. Cash and accounts receivablecash equivalents held by our foreign subsidiaries totaled $51.2 million as of $77.0 million.April 2, 2022. We expect the cash held overseas to be permanently reinvested outside of the United States, and our U.S. operation to be funded through its own operating cash flows, cash, and if necessary, through borrowing under our working capital credit facility.
We manufacture and distribute our products through contract manufacturers and third-party logistics providers. We
believe that this approach gives us the advantages of relatively low capital investment and significant flexibility in scheduling production and managing inventory levels. By leasing our office facilities, we also minimize the cash needed for expansion.expansion, and only invest periodically in leasehold improvements a portion of which is often reimbursed by the landlords of these facilities. Accordingly, our capital spending is generally limited to machinery and tooling, leasehold improvements, computers, office furniture, product-specific

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production tooling, internal usebusiness applications software and testcomputer and equipment. InDuring the ninethree months ended September 30, 2017April 2, 2022 and October 1, 2016,April 3, 2021, we spent $16.6$3.1 million and $8.4$11.3 million, respectively, on capital equipment.expenditures.
Our strategy for delivering consumer products to our distributors and retail customers gives us the flexibility to provide container shipments directly from our contract manufacturers in Southern China and Malaysia to retailers from Chinaour customers and, alternatively, allows our distributors and certain retail partnerscustomers to take possession of product in the customer'son a domestic market.basis. Accordingly, our consumer product inventory consists of goods shipped to our third-party logistics providers for the fulfillment of distributor, retail and direct-to-consumer sales. Our contract manufacturers are also responsible for purchasing and stocking the majority of the components required for the production of our products, and they typically invoice us when the finished goods are shipped.
As of September 30, 2017, we held cash, cash equivalents and short-term investments of $278.2 million, primarily the result of our increased profitability, as well as our on-going focus on managing working capital. Cash used in operating activities
Net cash provided by our operationsused in operating activities for the nine month periodthree months ended September 30, 2017,April 2, 2022 was $51.1$102.3 million, of which the principal components were the cash outflow of $93.2 million from change in working capital and our net incomeloss of $46.3 million and non-cash charges of $22.3$30.4 million, partially offset by a net increase in operating assets and liabilitiesnon-cash charges of $17.6$21.3 million. The increasechange in net operating assets and liabilities includes an increase in accounts receivable and unbilled revenue of $11.0 million, an increase in inventory of $23.9 million, an increase in other assets of $11.1 million, partially offsetworking capital was driven by a increasedecreases in accounts payable and accrued expensesliabilities of $27.9 million primarily related to$119.0 million. This was partially offset by a decrease in accounts receivable of $54.3 million.
Cash provided by investing activities
Net cash provided by investing activities for the timing of payments. As of September 30, 2017, we did not have any borrowings outstanding under our working capital line of credit and had $1.0 million in letters of credit outstanding under our revolving letter of credit facility.
three months ended April 2, 2022 was $12.6 million. During the ninethree months ended September 30, 2017,April 2, 2022, we acquired SODCreceived $16.2 million from the sales and maturities of our investments while we paid $0.5 million for $16.5 million, netthe purchases of cash acquired, andinvestments. We invested $16.6$3.1 million in the purchase of property and equipment, including machinery and tooling for new products. We also purchased $7.0 million of marketable securities, while sales and maturities of marketable securities amounted to $10.5
Cash used in financing activities
Net cash used in financing activities for the three months ended April 2, 2022 was $0.7 million. In addition,During the three months ended April 2, 2022, we received an earn-out payment of $1.1$0.8 million from a sold cost method investment.
During the nine months ended September 30, 2017, we received $9.0employee stock plans and paid $1.5 million from the exercise of stock options. Shares issued upon vesting of restricted stock where 25,213 shares were net of 51,229 shares retained by us to cover employee tax withholdings of $3.0 million.withholdings.
Working Capital Facilities
Credit Facility
We currently have ana $150 million unsecured revolving line of credit facility with Bankwhich expires in June 2023. As of America, N.A., whichApril 2, 2022, we had no outstanding borrowings under our revolving credit facility. The revolving line of credit is available to fund working capital and other corporate purposes. As of September 30, 2017, the total amount of our credit facility was $75.0 million and the full amount was available for borrowing. The interest on loans under our credit facility accrues, at our election, at either (1) LIBOR plus a margin, currently equal to 1.0%, based on our ratio of indebtedness to Adjusted EBITDA (the "Eurodollar Rate"), or (2) the lender’s base rate. The lender’s base rate is equal to the highest of (1) the federal funds rate plus 0.5%, (2) the lender’s prime rate and (3) the Eurodollar Rate plus 1.0%. The credit facility will terminate and all amounts outstanding thereunderIn the event USD LIBOR is discontinued as expected in June 2023, we expect the interest rates for our debt following such event will be due and payable in fullbased on December 20, 2018.
As of September 30, 2017,either alternate base rates or agreed upon replacement rates. While we had no outstanding borrowings under our revolving credit facility. This credit facility contains customary terms and conditions for credit facilities of this type, including restrictions ondo not expect a LIBOR discontinuation would affect our ability to incurborrow or guaranty additional indebtedness, create liens, enter into transactions with affiliates, make loans or investments, sell assets, pay dividends or make distributions on, or repurchase, our stock, and consolidate or merge with other entities.
In addition, we are required to meet certain financial covenants customary with this type of agreement, including maintaining a maximum ratio of indebtedness to Adjusted EBITDA and a minimum specifiedmaintain already outstanding borrowings, it could result in higher interest coverage ratio.
This credit facility contains customary events of default, including for payment defaults, breaches of representations, breaches of affirmative or negative covenants, cross defaults to other material indebtedness, bankruptcy and failure to discharge certain judgments. If a default occurs and is not cured within any applicable cure period or is not waived, our obligations under the credit facility may be accelerated.
As of September 30, 2017, we were in compliance with all covenants under the revolving credit facility.
Letter of Credit Facility
We have an unsecured revolving letter of credit facility with Bank of America, N.A. The credit facility is available to fund letters of credit on our behalf up to an aggregate outstanding amount of $5.0 million. We may terminate at any time, subject to proper notice, or from time to time permanently reduce the amount of the credit facility.
We pay a fee on outstanding letters of credit issued under the credit facility of up to 1.5% per annum of the outstanding letters of credit. The maturity date for letters of credit issued under the credit facility must be no later than 365 days following the maturity date of the credit facility.

rates.
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As of September 30, 2017, we had letters of credit outstanding of $1.0 million under our revolving letter of credit facility. The credit facility contains customary terms and conditions for credit facilities of this type, including restrictions on our ability to incur or guarantyguarantee additional indebtedness, create liens, enter into transactions with affiliates, make loans or investments, sell assets, pay dividends or make distributions on, or repurchase, our stock, and consolidate or merge with other entities. In addition, we are required to meet certain financial covenants customary with this type of agreement, including maintaining a maximum ratio of indebtedness to Adjusted EBITDA and a minimum specified interest coverage ratio.

The credit facility also contains customary events of default, including for payment defaults, breaches of representations, breaches of affirmative or negative covenants, cross defaults to other material indebtedness, bankruptcy and failure to discharge certain judgments. If a default occurs and is not cured within any applicable cure period or is not waived, the lender may accelerate theour obligations under the credit facility.
Asfacility may be accelerated. On May 4, 2022, we entered into a Second Amendment to the Amended and Restated Credit Agreement (the "Credit Agreement") with Bank of September 30, 2017,America N.A. (the "Amendment") with an effective date of March 31, 2022. The Amendment waives the quarterly tested leverage and interest coverage covenants in the Credit Agreement for the first, second and third quarters of 2022. The interest coverage ratio calculation for the fourth quarter of 2022 was changed to a trailing nine months. Additionally, a new liquidity covenant was added for the remainder of 2022. The Amendment also increases the borrowing rate under the Credit Agreement for 2022 to LIBOR plus 1.5%. With this Amendment, as of April 2, 2022, we wereare in compliance with allthe covenants under the revolvingCredit Agreement.
Lines of Credit
We have an unsecured letter of credit facility.facility with Bank of America, N.A., available to fund letters of credit up to an aggregate outstanding amount of $5.0 million. As of April 2, 2022, we had letters of credit outstanding of $0.4 million under our letter of credit facility and other lines of credit with Bank of America, N.A.
We have an unsecured guarantee line of credit with Mizuho, Bank Ltd., available to fund import tax payments up to an aggregate outstanding amount of 250.0 million Japanese Yen. As of April 2, 2022, we had no outstanding balance under the guarantee line of credit. 
Working Capital and Capital Expenditure Needs
On October 2, 2017, we closed on the previously-announced acquisition of our largest European distributor, Robopolis SAS, resulting in a net cash outlay of approximately $138.4 million. We currently have no material cash commitments, except for normal recurring trade payables, expense accruals, capital expenditures and operating leases, all of which we anticipate funding through working capital, funds provided by operating activitiesexisting cash and cash equivalents as well as through our existing working capital line of credit.credit facility. We do not currently anticipate significant investment in property, plant and equipment, and we believe that our outsourced approach to manufacturing provides us with flexibility in both managing inventory levels and financing our inventory. We believe our existing cash and cash equivalents, short-term investments, cash provided by operating activities, and funds available through our working capital line of credit facility will be sufficient to meet our working capital and capital expenditure needs over at least the next twelve months. In the event that our revenue plan does not meet our expectations, we may eliminate or curtail expenditures to mitigate the impact on our working capital. Our future capital requirements will depend on many factors, including our rate of revenue growth or decline, the expansion or contraction of our marketing and sales activities, the timing and extent of spending to support product development efforts, the timing of introductions of new products and enhancements to existing products, the acquisition of new capabilities or technologies, and the continuing market acceptance of our products and services.services, the overall macro economic conditions due to heightened inflation and reduced consumer confidence stemming from the Russia-Ukraine war and the ongoing impact of the COVID-19 pandemic on our business. Moreover, to the extent that existing cash and cash equivalents, short-term investments, cash from operations, and cash from short-term borrowing are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. As part of our business strategy, we may consider additional acquisitions of companies, technologies and products, which could also require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us or at all.
Contractual Obligations
We generally do not enter into binding purchase commitments.The disclosure of our contractual obligations and commitments is set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contractual Obligations" in our Annual Report on Form 10-K for the year ended January 1, 2022. Our principal commitments generally consist of obligations under our working capital line of credit facility, leases for office space, inventory related purchase obligations, and minimum contractual obligations for materials.obligations. Other obligations consist primarily consist of software licensing arrangements.subscription services. There have been no material changes in our contractual obligations and commitments since January 1, 2022.
Off-Balance Sheet ArrangementsAt April 2, 2022, we had outstanding purchase orders aggregating approximately $327.4 million. The purchase orders, the majority of which are with our contract manufacturers for the purchase of inventory in the normal course of business, are for manufacturing and non-manufacturing related goods and services, and are cancellable without penalty.
AsRecently Adopted Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements for a discussion of September 30, 2017, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.recently adopted accounting pronouncements.
Recently Issued Accounting Pronouncements
See FootnoteNote 2 to the Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.

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Table of Contents



Item 3. Quantitative and Qualitative Disclosure About Market Risk
Interest Rate Sensitivity
At September 30, 2017, we had unrestricted cash and cash equivalents of $241.8 million and short term investments of $36.4 million. The unrestricted cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes. Some of the securities in which we invest, however, may be subject to market risk. This means that a change in prevailing interest rates may cause the fair market value of the investment to fluctuate. To minimize this risk in the future, we intend to maintain our portfolio of cash equivalents in a variety of securities, commercial paper, money market funds, debt securities and certificates of deposit. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. As of September 30, 2017, all of our cash and cash equivalents were held in demand deposits, money market accounts and corporate and government bonds.
Our exposure to market risk also relates to the increase or decrease in the amount of interest expense we must pay on any outstanding debt instruments, primarily certain borrowings under our working capital line of credit. The advances under the working capital line of credit bear a variable rate of interest determined at the time of the borrowing. At September 30, 2017, we had letters of credit outstanding of $1.0 million under our revolving letter of credit facility.
Exchange Rate Sensitivity
Our international revenue and expenses are denominated in multiple currencies, including Japanese Yen,British Pounds, Canadian Dollars, Chinese Yuan RenmimbiRenminbi, Euros, Japanese Yen and Euros.Swiss Franc. As such, we have exposure to adverse changes in exchange rates associated with the revenue and operating expenses of our foreign operations. Any fluctuations in other currencies will have minimal direct impact on our international revenue.
In addition to international business conducted in foreign currencies, we have a significant amount of international revenue denominated in U.S. Dollars.dollars. As the U.S. dollar strengthens or weakens against other currencies, our international distributors may be impacted, which could affect their profitability and our ability to maintain current pricing levels on our international consumer products.
We regularly monitor the forecast of non-U.S. dollar revenue and expenses and the level of non-U.S. dollar monetary asset and liability balances to determine if any actions, including possibly entering into foreign currency forward contracts or swaps, should be taken to minimize the impact of fluctuating exchange rates on our results of operations. Periodically, we enter into forward exchange contracts to hedge against foreign currency fluctuations. These contracts may or may not be designated as cash flow hedges for accounting purposes. We use cash flow hedges primarily to reduce the effects of foreign exchange rate changes on purchasesales in Euros and sales, primarily in Japanese Yen. These contracts typically have maturities of three years or less. At September 30, 2017April 2, 2022 and December 31, 2016,January 1, 2022, we had outstanding cash flow hedges with a total notional value of $17.7$497.6 million and $0.0$423.3 million, respectively.
We also enter into economic hedges that are not designated as hedges from an accounting standpoint to reduce or eliminate the effects of foreign exchange rate changes typically related to short term trade receivables and payables. These contracts have maturities of twotwelve months or less. At September 30, 2017April 2, 2022 and December 31, 2016,January 1, 2022, we had outstanding economic hedges with a total notional value of $27.5$249.0 million and $8.1$325.4 million, respectively.
A hypothetical changeAt April 2, 2022, assuming all other variables are constant, if the U.S. Dollar weakened or strengthened by 10%, the fair market value of 10% in exchange ratesour foreign currency contracts would not have a material impact on our financial results.increase or decrease by approximately $50.9 million.

Item 4. Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective at a reasonable assurance level in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms; and (ii) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

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There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings

From time to timeThis information is included in Note 9, Commitments and Contingencies, in the ordinary courseaccompanying notes to the unaudited consolidated financial statements and is incorporated herein by reference from Item 1 of business, we are subject to various claims, charges and litigation. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, which could materially affect our financial condition or results of operations.Part I.
Item 1A. Risk Factors

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this report, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016,January 1, 2022, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not presently known to us, which we currently deem immaterial or which are similar to those faced by other companies in our industry or business in general, may also impair our business operations. There are no material changes to the Risk Factors described in our Annual Report on Form 10-K for the year ended January 1, 2022, other than as set forth below:
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Significant developments in U.S. trade policies have had, and we expect will continue to have, a material adverse effect on our business, financial condition and results of operations.
The U.S. government has indicated its intent to alter its approach to international trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements and treaties with foreign countries. Effective September 24, 2018, the U.S. government implemented a 10% tariff on certain goods imported from China, which include the majority of those imported by the Company. These tariffs were increased to 25% on May 10, 2019 and were slated to further increase to 30% in October 2019 until a last-minute interim deal was reached between the United States and China. Although the United States and China signed a new trade agreement in January 2020, most of the previously-implemented tariffs on goods imported from China remain in place (including the tariffs described above), and uncertainty remains as to the short-term and long-term future of economic relations between the United States and China.
From September 2018 until April 2020, our Roomba products were subject to Section 301 tariffs. On April 24, 2020, we were granted a temporary exclusion from Section 301 List 3 tariffs by the United States Trade Representative ("USTR"). This exclusion, as extended in August 2020, eliminated the 25% tariff on Roomba products until December 31, 2016. 2020 and entitled us to a refund of $57.0 million in tariffs paid since the date the Section 301 List 3 tariffs were imposed.

Effective as of January 1, 2021, the 25% Section 301 tariff again applies to our Roomba products imported from China. Although we have begun relocating a meaningful portion of our supply chain from China to Malaysia, we again face compression on our margin on products sold and pricing pressures on our products. The already-implemented, and any additional or increased, tariffs have caused, and may in the future cause, us to further increase prices to our customers which we believe has reduced, and in the future may reduce, demand for our products.
On October 4, 2021, the USTR announced its decision to establish a new process for importers to apply for exclusions from Section 301 tariffs in 549 product categories, including robotic vacuum cleaners. Beginning October 12, 2021, the USTR started accepting comments on whether or not reinstating certain tariff exclusions will impact or result in severe economic harm to companies or other interests of the United States. On March 23, 2022, the USTR announced that it had reinstated a tariff exclusion for both robot vacuums and certain air purifiers, effective from October 12, 2021, through December 31, 2022. We do not currently believe that additional exclusions will be available after December 31, 2022.
These tariffs, and other governmental action relating to international trade agreements or policies, have directly or indirectly adversely impacted demand for our products, our costs, customers, suppliers, distributors, resellers and/or the U.S. economy or certain sectors thereof and, as a result, have adversely impacted, and we expect will continue to adversely impact, our business, financial condition and results of operations. It remains unclear what the U.S. or foreign governments will or will not do with respect to tariffs, international trade agreements and policies on a short-term or long-term basis. We cannot predict future trade policy, whether exclusions will be extended, or the terms of any renegotiated trade agreements and their impacts on our business. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to further adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could further adversely impact our business, financial condition and results of operations.
In response to international trade policy, as well as other risks associated with concentrated manufacturing in China, we have begun relocating a meaningful portion of our supply chain from China to Malaysia. Such relocation activities increase costs and risks associated with establishing new manufacturing facilities.
Global economic conditions and any associated impact on consumer spending could have a material adverse effect on our business, results of operations and financial condition.
Continued economic uncertainty and reductions in consumer spending, particularly in certain international markets such as the European Union, China and Japan, may result in reductions in sales of our consumer robots. Additionally, disruptions in credit markets may materially limit consumer credit availability and restrict credit availability of our retail customers, which would also impact purchases of our consumer robots. Any reduction in sales of our consumer robots, resulting from reductions in consumer spending or continued disruption in the availability of credit to retailers or consumers, could materially and adversely affect our business, results of operations and financial condition.
Moreover, in recent months, inflation has increased significantly in the United States, the European Union and in many of the countries where we conduct business. Inflation impacts consumer spending and increases the costs of many aspects of our business, including the costs of our products sold, transportation and travel costs, and labor costs. If inflation decreases consumer demand or we are unable to increase our prices to sufficiently offset the increased costs of doing business, our results of operations and profitability may be adversely impacted.
Because we are an increasingly global business that in the three month ended April 2, 2022 and April 3, 2021 generated approximately 47.5% and 62.2%, respectively, of our total revenue from sales to customers outside of the United States, we are subject to a number of additional risks including foreign currency fluctuations. These foreign currency fluctuations may make
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our products more expensive to our distributors and end customers, which in turn may impact sales directly or the ability or willingness of our partners to invest in growing product demand.
Our primary exposure to movements in foreign currency exchange rates relates to non-U.S. dollar denominated sales and operating expenses worldwide. Weakening of foreign currencies relative to the U.S. dollar could adversely affect the U.S. dollar value of our foreign currency-denominated sales and earnings, and lead us to raise international pricing, which may reduce demand for our products. In some circumstances, for competitive or other reasons, we may decide not to raise local prices to fully offset the strengthening of the U.S. dollar, or for any other reason, which would adversely affect the U.S. dollar value of our foreign currency denominated sales and earnings. Conversely, a strengthening of foreign currencies relative to the U.S. dollar, while generally beneficial to our foreign currency-denominated sales and earnings, could cause us to reduce international pricing, incur losses on our foreign currency derivative instruments, and incur increased operating expenses, thereby limiting any benefit. Additionally, strengthening of foreign currencies may also increase our cost of product components denominated in those currencies, thus adversely affecting gross margins.
We use derivative instruments, such as foreign currency forward contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any, or only a portion, of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. In addition, our counterparties may be unable to meet the terms of the agreements. We seek to mitigate this risk by limiting counterparties to major financial institutions and by spreading the risk across several major financial institutions.
Business disruptions resulting from international uncertainties could negatively impact our profitability.
We derive, and expect to continue to derive, a significant portion of our revenue from international sales in various European and Asian markets, and Canada. For the three months ended April 2, 2022 and April 3, 2021, sales to non-U.S. customers accounted for 47.5% and 62.2%, respectively. We expect that international revenues will continue to account for a significant percentage of our revenues for the foreseeable future. Our international revenue and operations are subject to a number of material risks, including, but not limited to:
•difficulties in staffing, managing and supporting operations in multiple countries;
•difficulties in enforcing agreements and collecting receivables through foreign legal systems and other relevant legal issues;
•fewer legal protections for intellectual property;
•foreign and U.S. taxation issues, tariffs, and international trade barriers;
•difficulties in obtaining any necessary governmental authorizations for the export of our products to certain foreign jurisdictions;
•potential fluctuations in foreign economies;
•government currency control and restrictions on repatriation of earnings;
•fluctuations in the value of foreign currencies and interest rates;
•general economic and political conditions in the markets in which we operate;
•domestic and international economic or political changes, hostilities and other disruptions in regions where we currently operate or may operate in the future, including the invasion of Ukraine by Russia, the possibility of military action in countries near or adjacent to Ukraine, and the sanctions and other actions taken by the European Union, the United States and other governments around the world in response;
•changes in foreign currency exchange rates;
•different and changing legal and regulatory requirements in the jurisdictions in which we currently operate or may operate in the future; and
•our relationships with international distributors, some of whom may be operating without written contracts.
Negative developments in any of these areas in one or more countries could result in a reduction in demand for our products, the cancellation or delay of orders already placed, threats to our intellectual property, difficulty in collecting receivables, and a higher cost of doing business, any of which could negatively impact our business, financial condition or results of operations. Moreover, our sales to customers outside the United States are primarily denominated in Euro and
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Japanese Yen and fluctuations in the value of foreign currencies relative to the U.S. dollar may make our products more expensive than other products, which could harm our business.
The conflict in the Ukraine has, and we anticipate will continue to have, an adverse impact upon our business operations. In March 2022, in response to the Russian invasion of Ukraine, we halted all new sales of our products to Russia. It is unclear whether we will resume shipments to Russia in 2022. As this conflict continues, we have seen, and believe we will continue to see, an impact to consumer spending in other regions.
The United Kingdom’s exit from the EU, commonly referred to as "Brexit," has caused significant political and economic uncertainty in the United Kingdom, EU, and elsewhere. The impact of Brexit and the resulting turmoil on the political and economic future of the United Kingdom and the EU is uncertain, and we may be adversely affected in ways we cannot currently anticipate. The United Kingdom and the EU have signed a EU-UK Trade and Cooperation Agreement (the "TCA"), which became provisionally applicable on January 1, 2021 and will become formally applicable once ratified by both the United Kingdom and the EU. The ultimate effects of Brexit will depend, in part, on how the terms of the TCA take effect in practice and on any other agreements the United Kingdom may make with the EU. Brexit also may result in significant changes in the British regulatory environment, now that legislation can diverge from EU legislation in many areas, which could increase our compliance costs. We may find it more difficult to conduct business in the United Kingdom and the EU, as Brexit will result in increased regulatory complexity and increased restrictions on the movement of capital, goods and personnel. Any of these effects of Brexit, and other similar referenda that we cannot anticipate, could disrupt our operations and adversely affect our operating results.
Cybersecurity risks could adversely affect our business and disrupt our operations.
The threats to network and data security are increasingly diverse and sophisticated. Despite our efforts and processes to prevent breaches, our devices, as well as our servers, computer systems, and those of third parties that we use in our operations are vulnerable to cybersecurity risks, including cyber attacks such as viruses and worms, phishing attacks, distributed denial-of-service attacks, ransomware, and similar disruptions from unauthorized tampering with our servers and computer systems or those of third parties that we use in our operations, which could lead to interruptions, delays, loss of critical data, and loss of consumer confidence. In addition, we may be the target of email scams that attempt to acquire sensitive information or company assets. Despite our efforts to create security barriers to such threats, we may not be able to entirely mitigate these risks. These threats may be increased due to the work-from-home policies implemented by us and our customers, suppliers and distributors as a result of mitigation measures related to the COVID-19 pandemic. Any cyber attack that attempts to obtain our data and assets, disrupt our service, or otherwise access our systems, or those of third parties we use, if successful, could adversely affect our business, operating results, and financial condition, be expensive to remedy, and damage our reputation. Our cyber insurance may not protect against all of the costs and liabilities arising from a cyber attack.
On February 21, 2022, we were informed by our primary North American third-party logistics (3PL) partner that it had suffered a major cyber incident shutting down a significant portion of its ability to perform 3PL services on our behalf. While iRobot’s systems were not impacted in the incident, we took certain actions to mitigate the lack of 3PL services.
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Item 5. Other Information

10b5-1 Trading Plans
Our policy governing transactions in our securities by our directors, officers, and employees permits our officers, directors, funds affiliated with our directors, and certain other persons to enter into trading plans complying with Rule 10b5-l under the Securities Exchange Act of 1934, as amended.Act. We have been advised that certain of our officers and directorsdirectors (including Colin Angle, CEO, Russell J. Campanello, EVP, Human Resources & Corporate Communications,Chief Executive Officer, and Glen Weinstein, EVP &and Chief Legal Officer)Officer, as well as Mohamad Ali, and Deborah Ellinger, each a director of the Company) have entered into trading plans (each a "Plan" and collectively, the "Plans""Plans") covering periods after the date of this quarterly reportQuarterly Report on Form 10-Q in accordance with Rule 10b5-110b5-l and our policy governing transactions in our securities. Generally, under these trading plans, the individual relinquishes control over the transactions once the trading plan is put into place. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company.

the Company.
We anticipate that, as permitted by Rule 10b5-l10b5-1 and our policy governing transactions in our securities, some or all of our officers, directors and employees may establish trading plans in the future. We intend to disclose the names of our executive officers and directors who establish a trading plan in compliance with Rule 10b5-l10b5-1 and the requirements of our policy governing transactions in our securities in our future quarterly and annual reports on Form 10-Q and 10-K filed with the Securities and Exchange Commission. We however, undertake no obligation to update or revise the information provided herein.

Entry into a Material Definitive Agreement, Termination of a Material Definitive Agreement, and Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On May 4, 2022, iRobot Corporation (the "Company") entered into a Second Amendment to Amended and Restated Credit Agreement (the "Credit Facility Amendment") to its existing unsecured revolving credit facility (the "Credit Facility") with Bank of America, N.A. (the "Lender") dated December 20, 2013, (as amended by that certain First Amendment to Amended and Restated Credit Agreement, dated as of June 29, 2018) and a Second Amendment to Amended and Restated Reimbursement Agreement (the "Reimbursement Agreement Amendment") to its existing reimbursement agreement with the Lender dated December 20, 2013 (as amended by that certain First Amendment to Amended and Restated Credit Agreement, dated as of June 29, 2018). The Credit Facility Amendment provides for the suspension of compliance with certain covenants, inter alia, those related to debt to EBITDA ratios in 2022, and the addition for fiscal year 2022 of a covenant requiring the company to maintain certain minimum cash balances ranging from $40 million to $75 million.

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Item 6. Exhibits
 
EXHIBIT INDEX
Exhibit
Number		Description
Exhibit
Number10.1*#
Description
2.1
Share PurchaseManufacturing Services Agreement dated as of July 25, 2017, by and among the Registrant, iRobot UK Ltd., Robopolis SAS, the shareholders of Robopolis named therein, and the Shareholders’ Representative named therein (filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on July 26, 2017 and incorporated by reference herein)

10.1*Sixth Amendment to Lease between the Registrant and DIV Bedford, LLC,Jabil Circuit, Inc., dated as of July 5, 2017March 18, 2010 (as amended to date)
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*101.SCH*The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 formattedInline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
104*Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these financial statementsExhibits 101.*)
 __________________________
*Filed herewith
**Furnished herewith
#Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the Securities and Exchange Commission.





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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
iROBOT CORPORATION
Date: May 5, 2022iROBOT CORPORATIONBy:/s/ Julie Zeiler
Julie Zeiler
Date: November 3, 2017By:/s/ Alison Dean
Alison Dean
Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal(Principal Financial Officer)

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EXHIBIT INDEX
Exhibit
Number
Description
2.1
Share Purchase Agreement, dated as of July 25, 2017, by and among the Registrant, iRobot UK Ltd., Robopolis SAS, the shareholders of Robopolis named therein, and the Shareholders’ Representative named therein (filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on July 26, 2017 and incorporated by reference herein)

10.1*
Sixth Amendment to Lease between the Registrant and DIV Bedford, LLC, dated as of July 5, 2017
31.1*
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
31.2*
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
32.1**
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*
The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these financial statements
 __________________________
*Filed herewith
**Furnished herewith



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