IRBT - Earnings call transcript Q4 2017

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Operator

Good day everyone and welcome to the iRobot Fourth Quarter and Full Year 2017 Financial Results Conference Call. This call is being recorded. At this time for opening remarks and introductions, I would now like to turn the call over to Elise Caffrey of iRobot Investor Relations. Please go ahead.

Elise Caffrey

Thank you and good morning.

forward-looking iRobot made I are of on on information the note like not the introduce to historical statements pursuant Reform that today’s are XXXX. Private I Securities management Harbor Act would team, to based the Litigation Before Safe made of Provisions statements call that from factors cause actual results These forward-looking risks to such could subject or and uncertainties by differ that materially those statements are and expressed implied involve many to statements.

and risks filings a these these on can and be Commission. circumstances. public information Additional whether no result revise our in uncertainties information or update with Exchange as found new forward-looking statements, or Securities the of obligation iRobot undertakes to

defined fourth expectations define non-cash restructuring XXXX, Financial and Company’s through Regulation which Chairman three-year also will the Officer, call over Alison intellectual year a and by provide adjusted EBITDA, During merger, earnings as financial amortization, year targets on full as the achievements including well business Angle. SEC we’ll iRobot A our turn Colin and end compensation our this expense. and the quarter On operations acquisition, financial for the available expenses, disclose the conference tables this the we as XXXX. last on Alison may I’ll the outlook and Dean, for for at G, business for which earnings open Angle Then, and we release and evening, call, results XXXX interest, GAAP quarter expenses, call gain quarter acquisition on questions. of provided call, is our issued and point, will financial reconciliation XXXX. our also to and for net in fourth net Chief taxes, before press Colin stock today’s and Colin XXXX fiscal of divestiture At year depreciation, will XXXX. litigation measures non-GAAP full as CEO, review the the our metrics fourth is property financial and provide XXXX financial expenses for review non-GAAP full website. of business

Colin Angle

thank Good year for iRobot. business, XXXX, fantastic focused a a was full our as for consumer-only first one and morning us. you joining

highly to on in revenue improvement accelerating growth expectations. driven EMEA, to in was exceeded and foundation research was full for by continued consumer-as-our-customer very gross revenue increased XXXX times strong United Our momentum, we’ve capitalize the and additional our States drove grow just revenue even coupled the an begun. those shareholders, to successful our times and and and in sales setting decision beyond. expectations during a as in with revenue We growth. revenue Higher and our strategic focus XXXX and XXXX continued to us increase increased category XXXX allowed returning on profit only that sales the while QX four and XXXX margin, to overall marketing And three year investment Record development, rate. at strong QX

highest, rate? overseas; are continue expand sustained penetration growth. Global earnings it category; offer brand of growth a performance and our for in our mopping and mapping penetration deliver direct of combined at leadership new the strong building XX% low, in for $X.XX XXXX, of vacuum including fueling we XX% cloud marketing we the is listed the revenue gross of on $XX to the deliver confidence us of deeper of of XX%. expect our growth extend our digits. of the revenue; category; landscape second in in the margin and robotic more sentiment. awareness conditions opportunity and more consistency home. our role consumer pipelines, globally; at In control U.S. distributor drive revenue our to acquired single innovation to of due Europe, factors where year. of not growing per leadership. That global year, of we revenue, position we with continued economic to growth world-leading in two on million, the supporting X% products efforts connectivity is with greater operating and change. and points, drive $X.XX maintained product the in to iRobot’s share more law a allowing deliver global distributors us product cleaners box, brand XX%, What we vacuum still capabilities just connectivity robots These Roomba products, the extend roughly initiated product household global of system achievements worldwide growth in iRobot are Japan drive household price across half global continued double-digit and our extremely to giving several our a accessible the with emerging products; our the tremendous leadership and tax from technology acquisitions; to year and for XXXX positive still U.S. more of full XX% resulted smart in in technology awareness; penetration revenue us Strong that growth robotic negative us In is in focus the income impact customers, overall During or investment robots features and unambiguous cleaner relentless provides major category our and through

Roomba, increased have regions we share. customers market have to demonstrated programs in marketing that We have where our about run prospective educate we

recent in as XXXX, countries. to strategic grew than more European awareness. vacuum robot programs at Japan to The Our and marketing XX% invest our cleaning to western us many category expect competitors in category we extend growth acquisitions and drive and we distributor enable continue

in space displays. retailers in embracing national increased United investing high-visibility robot We promoting allocating and category and through featuring advertising seen States cleaners, the have the programs vacuum shelf

in adoption through campaigns we products In tremendous to growth $X.XX targeted growth million addition which to operating for $X.XX. $X.XX $XX drive delivering millions our Braava XXXX, billion of XX% we to at In cross $X the billion drivers Roomba customers. to Roomba, $XX billion these opportunity of year-over-year EPS of XX%, to see revenue, revenue expect threshold, million, of income a and to to is $X.XX of

investment Continued marketing in is and essential to both sales and three-year achieve expectations new and XXXX targets. meet our R&D successfully financial

the Now, XXXX, through I’ll expectations of our and of take some XXXX. for you business highlights

February last we any was the grow XXXX to revenue previous XX%, Our of would initial year. view over the impact excluding XX% that acquisitions,

go for year, planned in and result Each with expectations our initial China. competition, shifting along that mind progressed, exceeded year far was revenue product a the organic bottoms-up landscape The U.S. analysis transitions. we the addressing through revenue year rapidly while the more achieved comprehensive, markets through full EMEA our final and despite became increased outlook As from very while a growth incremental introductions input in retailers any and with acquisitions. we keeping distributors, bullish,

at States. retail at different orders As see for was we July, year. the the intended us consumer category in capture lines opportunities We of provide Prime their top into dynamics expectations and the to planning year-end that an indicators in of times the which important with day has and United years significant the potential Amazon retailers see financial visibility change, develop for provide we the bottom season become and a past range demand. better new metric indicator most two grows in The holiday risks

view the change as can did throughout it Our XXXX. in February year, in

robotic outlook in and confident Following for ever Show, this to are we the year, vacuum performance retailers At cleaner remains overseas Electronics of strong. CES, performance the outlook. January review more delivered exceptional that we than the in U.S. we iRobot and respective the met growth fourth category quarter, distributors their Consumer

for about been heard robotic expanding. have I such cleaners. and years doing vacuum understand enthusiasm this the never category have We They is outright

traffic segment During driver a retailers. the was store the holidays, at major RVC of

currently in the category iRobot national shown campaigns While home our investment campaigns for their also is drive their being helped service. connected commercials Amazon, in the national TV holidays. to Target, brand clearly all Best retailers Walmart and in continued ad internet Roomba featured Verizon’s leading awareness, through major Buy, including, and and Fios TV up growing

end the advertising drive XXs in enable that to vacuum more growth the U.S. more robot will products as competition of cost than us new in Based of The Growth market. shows data growth category invested for the market addition, XX% we the to grow XXXX expect in even States, XXXX. competitors U.S. of United $XXX in market on in In TV low than growth U.S. result, cleaner revenue XXXX. category XX% in compared continue the enter year-over-year the momentum, with to

alike. products what others from because We asked are often our they all look differentiates

is that external our look that the While products design where end. outside, on and it’s copied like their the true Roomba competitors similarities have

smarter are needed debris scheduling cleaning anytime, iRobot HOME high-tech with inside, million of with the job efficiently They and is iAdapt combining are dual leading brushes. AeroForce without the Dirt more than cleaning Roomba extractors with Visual On as an and maintain system making navigation performance Series simpler. devices navigates robots XXX cleaning. of have systematically provides conveniently, sophisticated done. the them entire iRobot’s they enables Localization need a mapping The recharging And self-cleaning by X proprietary it and our Detect home, lines app until anywhere. better the mobile level to code, Roomba’s

once finished development our drive persistent a of lines product our well to that In cleaned of XXXX, continue robot completed pushed map QX cleaning. through the We technology mapping. app we area to to will is out continue as connectivity them of our enables down Roomba through users, functionality see the as

we We’ve rooms enabling work it’s improve is them global the the well adoption. a become the that that that not of critical this only capabilities allowing and persistent believers enormous leadership as cleaning driving but we to. to allow we believe couple Our further user as area help the to and really mapping are hard-won our maps of see the about would vacuuming to opportunity. Roomba supposed is by who working are segment competitors that map not also specific just into improve of autonomy, thus together. the recognize efficiency to the importance efficiency skeptics develop It cleaning to talked cede essential market These will robots our robot,

households. and functionality investments in focusing patents in Robotic into on to the deeply deliver emerging a vacuum continue will that cleaner must it help that of Capitalizing where household is we million most customers’ well on winner, us momentum meet to roughly million the segment most deeply needs, penetration programs on that holiday Likewise, continue more category in invest XXXX, the features into this immediately awareness. were integrate in investing households technologies and the next technology. XX XX reach or U.S. as and targeted and our marketing XX%, addressable U.S. clear them penetrated is protect important market. drive we building the as to products will We

an and grew revenue year-over-year in XX% by driven revenue in our Japan. in grew U.S. XX% substantially at impressive XXXX, While growth XX%, EMEA overseas

Our Europe, in parts our distributor, of of important our us the successful season, exceeded expectations. marketing to U.S. acquisition programs into deliver enabled quarter Robopolis, results at the our and European beginning largest fourth holiday implement of going the that

that have outside levels with after XX% with will low the the efforts our to We exited as our Japan, record over implemented market those its of in and largest Europe across to roughly States. Three we XX% XX% integration grow relationships. XXXX, in in retailer category management In completed itself cleaners forward, growth. inventory and practices EMEA vacuum expect Going awareness the inventory historically on channel focus quarters growing. up XXXX XXXX, robot we consistent distributor acquiring roughly United brand in XX% region fully United improved from The adoption year States, RVC is in channel the XXXX. improving our grew our

materially region consistent RVC We extending China. less remained few total driving revenue in the segment of and targeted revenue don’t finally, And that intense, at double-digit see of than the this in our low programs optimistic premium growth. are the in end Company particularly years. of X% further China XXXX, changing marketing as next represented we about are and competition,

in our brand Company We XXXX, next Braava X% against available primary but strategy, to go-to-market China don’t revenue albeit grew a at a driver model, comprised our as roughly through our total point, level. continue in premium real-time see growth modify In market Shanghai, this family office back With to three of years. XX%, at we execute information the scaled revenue. continue

limited television see first U.S. grew year over reaction full opportunity wet the ever QX to we very value We in care continue a Braava out in program floor our and revenue in roll better and to XXXX. following our television launched its family national positive Braava a market improve as growth the XX% XXXX XXXX, XXXX, we articulate positioning proposition. for its In

the We XXXX as however, demand promoted globe, for U.S., in been investments, this did the in campaigns advertising across have we began the and we where We in have had with very strongest category selling have overseas selectively strong. into we we unevenly product the first U.S. made them Since then, share. has our longest QX of television and recognition markets market brand positive the had Roomba the been and results. expanded

and are to too. that of confident investment this support globally drive We will category adoption putting awareness additional promotions Braava help

As of several XXXX. half launch the we I second mentioned, new to plan in products

that off XX% targets about acquisitions revenue the we any These roughly timing for of will our three-year through products inclusive all set their or to year, for distributor This we strengthening XXXX. set did further we leadership. XXXX of financial other we those kick which say the new XXXX XX% our made expect XXXX RVC will of than in replace launch with As a not acquisitions. include products, through I to provide XXXX XXXX of of additional and new contribution any not details

continued U.S. robot we solely was this critical the home. and products in as developing as the initial outstanding is growing and We in lot for foothold year financial successfully three-year on products in and to success marketing build is year that delivered We roughly adoption focused the be a as must annual also into XX%; vacuum executing full focused excited on period a to XXXX the margin by It product of critical sales R&D growth and get first delivering There iRobot competition a category. of about. year to well in for results we for unambiguous while this of of accelerating XXXX. programs capitalize successful maintain made and control we incremental In XXXX the the of XX%; we brand in global floor products leadership our our revenue. margin XX% half the regions. through XX% expanding that plan to of Over continue revenue category wet overseas original the two in expect in point our acquisition key the XX% at cleaners -- investment the not the care let in in gross operating range on major year. distributors introduction with of second XXXX, the and markets investments our new over extending to the

to revenue sales double-digit continue U.S. as and the in markets. proven we We expect initiatives growth and States, overseas will the United marketing expect year our Alison following to continued to we overseas In and extend evolve quarter our turn our in XXXX. review detail. the now more in percent in strong plus full I and growth call over results XX fourth sales

Alison Dean

Thanks, Colin.

in than Operating and roughly million quarter $X.XX $XX for EPS the repatriation operating last anticipated compared due deferred fourth the from income, revenue QX with $X.XX million XXXX. and for better from was a remeasurement which revenue, reform, income performance EMEA. to XXXX Record quarterly the was totaling XX% toll impact increased year full million. of QX XXXX. $XX QX exceeded million quarter in tax QX U.S. of the assets the year. $XXX for charge EPS our provisional $XX compared impact EPS of before new $X.XX Our and expectations, included included reform a tax tax QX negative and with

compensation new EPS to quarterly $X.XX the tax of standard. approximately included benefit XXXX stock addition, accounting In relating

given time QX our financial reflected we direction the for communicated in tax prior tax future expectations, expectations with periods. items compensation that the to discrete the and difficulty our projecting reminder, a at rate of As impact, size the stock

XX% programs, effective year of XX%, fourth tax QX XX% growing positioning was discrete EMEA XX% beginning before Our our reflects and tax and change the for XXXX, the revenue an XX%. to QX acquisition tax XX% result items positive year, effective up the our quarter with Robopolis rate Japan discrete rate of successful Revenue law and against full In expect the China impacts before of down the the International between items XX%. growth and for for competitors. we XX%. of marketing of XX% in at grew

acquisitions million date. We contribution performance ahead two their pleased $XX our revenue expectations to with are SODC. $XX of million to with and $XX was for $XX and million to very of Robopolis, Incremental from our million expected in line

been full to total. rate growth the acquired Our be provided was margin consolidated QX, impact that. The decline reductions, both QX with acquisition, impact lower driven and Because Robopolis XXXX, of expected Robopolis XX% Robopolis global year XX% operating across higher year favorability call, lower XX% fully companies roughly into QX XXXX from last of revenue partially was the due product the improvements, we business. COGS iRobot, line XXXX in in primarily was and QX full margin quarter-on-quarter from XXX for XXXX. roughly cost have offset XX% warranty higher expectations QX results organic expense that due fourth Gross and from gross and in and year said the XX%. our to to will basis with by by adjustments QX than accounting expected for in be were XX% quarter we down compared revenue. revenue, was On points in expenses the

with was EPS $X.XX, was from $X.XX XXX well of our and XXXX. Braava acquisitions first-time OpEx Full brand range. year, of as with XX% for revenue campaign marketing distributor from and year, compared the new up and employees full as year in revenue, national marketing last included the program. approximately our China year XXXX low of was the the Sales XX% compared last consistent XX% For end XX% with

$X.XX. $XX remeasurement quarter, impacted impact deferred discrete was impacting EPS the year-one we SODC also a for by negatively and QX act, in tax As XXXX. our repatriation a fourth provisional negatively of reform approximately year ear EPS result accounting by of which XXXX full- the and adjustments charge from charge of million the tax assets not a will took the net Full $X.XX toll

million the negative the not This margin year, sales increased also XXXX. of XXXX. in was XXXX inventory in by Japan and however, amortization will million in not Due translate of plus to million In compared quarterly model, minus net our days days on you EMEA. inventory inventory $XXX change for of XXXX, ago, last $XXX to cash expect with million due year average $XXX We the driven acquisitions $XX ended and than direct-to-retail XXXX. or addition, year-on-year down year-end into acquired plan to carry a our rebuild from approximately will XX% in We be end with distributors. more million cash, from by the or improvement, to the XXX $XXX effect with hold need this in million more the XX of acquire cash structural intangibles gross in than position our to DII from days reflecting payments should the business XXXX to Robopolis $XXX into year fluctuations. Robopolis typical or to XX

XXXX you some three-year like I’d and our of assumptions provide full our year the underlying and with financial targets. to for Now, detail expectations additional

a our year XXXX. year-over-year will vary factors number discussed, we basis As full should year growth on due impact of business of greatly from full a viewed revenue perspective. Likewise, the as our quarterly including in we by be to XXXX manage region rates financial made acquisitions have we expectations previously

is of For $X.XX $X.XX billion XXXX, revenue full to growth XX% expect XX%. of to billion, year year-over-year which we

will second expect the expect past more revenue. roughly in year year’s we the XX% heavily years, the we several half As of to of deliver in the revenue weighted when be

second-half to through acquisition will third positively incremental the addition seasonality from of quarter. impacted the revenue be by the business, of In traditional the inclusion XXXX European the

Our in or contemplate X%. rates rates, revenue expectations plus roughly yen current euro and minus with exchange line

retailers to growth in year-over-year XXXX. throughout sequentially a XXXX The QX to double each and U.S. increase following is in We revenue be expect the quarter did as inventory expected as growth replenish for it rate highest QX. year-over-year record digit in

increases from revenue in Profitability benefit to QX marketing QX QX be inclusion and the the to over selling. distributors of two also support quarter. will sales the due first expense We the lowest will as in seasonal our

SODC of to margin which XXXX. acquired which We percentage amortization negative margin We during and XXXX, consistent X acquisition-related countries retailers sold and the expect of us to inventory, to through expected, will Robopolis margin the the a coming lower latter XX% from sold our on XXXX. Robopolis, U.S. Beginning asset X points intangible XXXX margins in be all our the and on into Japan gross acquired to direct-to-retailer we inventory is in recognize included both completely from up XX%, behind with the as products impact basis from in

impact margins positive will on be charges acquisition this These front-end the however, are the higher by continue Robo than intangible disclosed, previously XXXX. loaded be of associated amortization through will partially As which XXXX with will assets offset in XXXX. and

XXX product associated full margin marketing launches. expense as incremental acquisitions, expect sales with integration, higher expenses spend. revenue year well XXXX marketing sales Higher as full and our primarily reinvest expense basis of to with OpEx gross year associated and XX% points into the forward our includes two marketing the we by in We proactively increase as provided XXXX to of

in and Additionally, the continued worldwide Roomba awareness adoption. we investments household continued Braava will to make campaigns drive

for revenue, develop at expected the ensure XX% Roomba R&D innovation maintains while invest to market-leading remain to as future. new its we Our product in continue investment offerings is we to of position

year full EPS $XX $X.XX. expect of million income $X.XX $XX million to to of We operating and

$XX million, expense by expansions acquired leasehold for facility $XX We products, new capital and of amortization the and for million; our shares; a entities. are million; share comp approximately implementations diluted also driven system approximately related $XX roughly newly of approximately expenditures tooling of count largely and assuming XX of depreciation expense million improvements, and stock

is targets margin are by XX%; CAGR; XX% to law. XXXX a XX% discrete in providing of between Global follows: through the XXXX range financial revenue before estimating Building are growing new We and, to revenue driven tax of three-year believe driving penetration from greater of items, back this XX% at XX% XXXX. reflecting operating mopping primarily top margin expected well gross growth higher for tax we and segment household the XX% as results, by point adoption accelerating is as and rate, to our Colin. call in Roomba, and our XXXX, growth to critical robots, maintaining essential. the of I’ll turn our Braava of adoption robots. line as further We dominant be adoption share the household of family now

Colin Angle

We category U.S. due than the that tremendous a vacuum have opportunity driven next in RVC robotic segment the household than of our to marketing XX% and, of drive delivering consistent performance grew three XX% the products. over embracing category penetration cleaner; and revenue and more invest growth to we growth awareness; successful global our XX%; to global have the and retailers single-digit expect we years world-leading competitors in XXXX, drive as promoting continue to programs share more global category;

critical drive in in enhanced financial global XXXX care home business we’ll solidify our strong performance position technologies, smart shareholder to to the our and investments that importance to deliver that leader further fund a and unambiguous player strategic in questions. the long-term in in your increasing With robotic value. expect floor as take future We will turn as marketing,

Operator

with comes Sidoti. Frank our And from Camma first question Instructions] [Operator

Your line now is open.

Frank Camma

morning, first question to has taking Thanks Good the to confirm for do question. guys. My here. just

make with acquired from so, -- said inventory ended Correct? but already, think acquired no you year. I last no acquired to year distributors you this want the You that ended basically sure, you the just with

Alison Dean

right. That’s

Frank Camma

good. Okay,

if through quantitatively, but you from distributor is, your say they the going totally And sort have my I well, of pick product? guess, what I have just through so, have would assumption. sold this, from qualitatively, that just guess how -- is would the margin, what the the up even That would where of gross and amortization margin been I gross how with margin. issue, captured, the pretty negatively question you and understand can’t affects have went much, you don't that kind I'm I

Alison Dean

Yes. That’s right.

Frank Camma

doesn't you it us you I the net if -- doesn't -- too [multiple wonder want I [ph] why you the sizable? But, given guess, if Okay. seem be, long -- kind to the take pretty speakers] you amortization, why of seem that right out of probably now, can qualitatively seem size it show through it's just amortization? acquisitions, you which if that Like, but wouldn't

Alison Dean

Yes.

million we’re amortization intangible. of for So, Robopolis the in $XX XXXX, about still facing

of offsetting the margin that’s certainly from So, expansion you’d acquisitions. expect those natural some

Frank Camma

Okay.

million. was So, think, am million to doesn't sorry, go the $XX an But, a year. I you And for right, XXXX, or that total I gave $XX XXXX of you -- ended XXXX year estimate year-over-year, because was XX full correct? for lot -- of D&A up it it for

Alison Dean

point question. your lost the I’ve of

Sorry.

Frank Camma

I your Because it the there than seem Well, amortization Meaning, says… from am trying didn't like D&A estimates. out figure year-over-year. lot is to delta XXXX a more it in in XXXX there was

Alison Dean

XXXX. in us is SODC The amortization behind

So, only amount gross margin. Robopolis, is small from reflected a amortization OpEx in but There it’s in minimal. and the is XXXX our it’s

Frank Camma

do the economic the growth than still, all does want know that revenue question by the issue, obviously, goes mean, organic where I surprised to of significant where better consumers RVC in your much where this and At about is, strategy with you like -- amortization respect a that I given bit guidance, to that. years point I'll And just question guess it, one it margin only the a little start the that mean I'm start But, And right. it lapse? here, I is is already the question, I returns like wasn't know mean, is player. big like of dominant a on I is in player And -- it’s does think, ago. dominant I clearly I the question, what the picture stay of mind you guess, from and the point what it to, operating going move payoff all product the to you R&D part seems was you're strategy should does I seems -- Colin, expand Okay, where a that. spend. other the to more it -- I guess, to I couple your think, which in is was this. go upon

Colin Angle

in competitive iRobot that made Sure. accelerating I want a first, line we to pressure line. time, to moment And to coming its and double market dry topline with growth. we ensuring its top into in I and this to powder is bottom down that drive the adequate choice growth on had growth the at committed strategy, But, reiterate market, think, showing profitable improving

been winners the And line decade may and impressed that a of moment excited to three rates opportunities have, so next that we This our above growth, position growth the looking where expectation. be and bottom robot while for consumer the years, next true more some determined the we in in time pursuit. base ones of is hopefully, our the have analysts, in front we leadership growth over investor investors are that us are of worthy the for going think industry are with

We are are moment industries not at a consolidating. where

accelerating. that larger of in get out a moment at just vacuum. the the… much there is to market consumer important robotics than the it’s mentioned where world We’re And is I

Frank Camma

Yes.

Colin Angle

Okay.

Frank Camma

robotic spending million would $XXX you’re is wherever where guess, is you, well this or just going vacuum. imply the with beyond I mean, your I that

announce really trying any did that to So, you that given what product But… categories such. I was -- other was or

Colin Angle

color repeat coming any won’t adding but happy are we that but products and to -- several to new in XXXX, I statement, said more statement am We that today. be out with

Operator

Asiya you. with Citigroup. comes next from And Merchant our Thank question

Your open. is now line

Asiya Merchant

the and taking results you the everyone congratulations Good on in for question. morning the thank quarter. outstanding And

Colin Angle

Thank you.

Asiya Merchant

seems Robopolis the Obviously, growth your us XX% doing [ph] was of guess, walk guidance. past just you just prior kind my if delivered to your you organically through math. organic and I question acquisition stellar have can expectations, gone of the

the kind help me beating the XX%, understand fair conservative? helpful. typically guidance full guide As conservatively XXXX, that way a into that rather you a if out you if us can and walk seems just top we which that a it’s prudently Is it? that acquisition would that be through on you XX% I have guess you you to characterize a if completed. from can look characterize guys So, to the just It And bit little know of conservative. sizable benefit of just guidance line? more includes a of three-quarter I history

Colin Angle

mean, by most guidance revenue has the given. Sure. is saying would the I this start aggressive ever I Company

is take we we into a the can When lot reflected guidance. new a uncertainty. think year, about this, optimistic you very go that and in We’re where there is of

Sometimes it it against. goes with us, sometimes goes

what months truly the guidance go. happen, estimate think the we that what as to given billion know. $X And But, again, crossed believe and in we year is going early is so, the to to many it’s our And we is that there threshold. given we best

growth constant by harder on we growing gets try bullish think definitely percentages But, that felt so that we’re very And would that every year. were of is to forward the convey that I at I leaning for other feel guidance giving products still vacuum robot much and this can cleaning in on a market in the like run future. layer we beginnings growth less alone,

Asiya Merchant

to know G&A relative that qualitatively in and can your relative impact your us to the I guidance past you million. probably seems then, you what's have there? remarks. just us your at understand And CapEx XXXX you if mentioned the But, Fair understand will to prepared even I you help going -- think Can forward? help hefty going or just $XX enough.

Alison Dean

Sure.

main over to as tooling, as well. expansions for definitely We’ve increase seen So, years. in acquisitions the what in our recent that facility is improvements and it’s driver we’re The we’ve I some had of leasehold doing an also mentioned. part increase related some the

it the a that expenditure. in I say remain our is to capital expect at in would outer level. rates So, spike wouldn’t years I

Colin Angle

distributors. on that In source G&A back are can a hope of go be basis. the certainly a we up. We lot two leverage would forward XXXX, that integrating of I

Operator

our And Ricchiuti Thank comes you. Company. question from next from Jim & Needham

Your is open. line now

Jim Ricchiuti

your of spend products Hi. planned a am -- spend. Good morning. directly tied prior year; And for a Question XXXX larger what I’ll congrats R&D there good planned is is it’s on quite higher if wondering this meaningfully component meaningfully and quarter add on year versus the Obviously, to my it. for new years? bit to year-over-year. Congrats I R&D the a it's

Colin Angle

particularly into developing meaning our have we’re dollars to well. market we for we R&D products allocation, new the to and So, that core primarily structured to bucket relates very capital going as strategy a Roomba market, where bring then it as

sophistication into have of is product the that going ahead Roomba has not Certainly, it to And the increased. changed. our so, line stays those ensure ratios competition

percentage peers. Company in sure we’re make with from remains to R&D peer our unchanged R&D group, relative line as a Our spend to prior years and of we want and that definitely

path. definitely middle in the of We are

are decade, like in there And opportunities in there well. we to practice out industry, ensuring technologies not going this product given as to in product that us front time, next that [ph] robot to pipeline which And we rapidly as line well that just differentiation the don’t moment of line but is define reducing be R&D. pursue, Roomba of feel are as so to the the we over again, growing the consumer on are the our others critical think

if be we’ve just were than think, important driven there -- quite stool Roomba. driving, taken I on for that would the feedback happy legs everyone revenue more

Company think are and So, excited are peer from percentage as structured perspective by a line importantly excited I more deliver in category, growing making were that within our to and leadership very are investors allocation new the premium with as think, our I at Roomba the the operating we maintaining that going group well to our are categories. opportunity operating very of the in the

Jim Ricchiuti

robotic are fair next some are in you in not competitive that landscape, in vacuum words you it of mouth, that also years, but to like is cleaner market, the suggesting That’s the sounds anticipating helpful. overall your maybe couple say? the of Colin, put over shakeout terms

Colin Angle

Yes.

typically phase, I hyper come three dominant it phase, companies upper controlling the think this harder be are share. that where sort the we that rapid is typically becomes takes growth points of shakeout out mid price the competitive to When to occurs. growth to at two there in and

are because consumer our that the that the as in at of maintain the we winners at and industry, critical this And robot beginning leadership at we the of ensure one so, commoditization we it’s strategy look time the of to moment again in robot not it’s -- we’re in turn and to long get for the success as with not robots, right? waiting their have a opportunities the that but just line cleaning great of in vacuum by consumer robot, marketplace, potential competitors any by type of one We Roomba seen investment has and high-potential -- well.

absolutely maintaining to our the we profitable an are make three-year aggressive this did in focus growth was our targets percentage while OI OI sure so, over time. want increasing that although on targets quite as revenue three-year skewed toward growth, And growth over

Jim Ricchiuti

year. Can helpful. other question, Braava? Braava I this That’s one to Okay. am how ask I about one for wondering question on think

growth was On the somewhat unit hand, one year. last modest the

seem with getting showed and solid you growth. should good marketing, performance results think the are You like should about how and sales we from we good you what but anticipate You But, overall revenue Braava? some XXXX? are in satisfied

Colin Angle

Sure. I mean, a great is question. this

dilutive of we’re As we investing actually lineup new a -- it, negative, start disciplined drive where they to advertising is again, actual to well, OI in growth of the investment And a current they is where Braava. and a we’re how very build we’ve dollars have OI which accretive some the in pleased neutral, Braava amounts iRobot, And disciplined And, put when how world, point new very our and we overall in awareness is approach although jet to are relatively curve. invest mathematical the to goes product we the to because able we are and then adoption. that And has done upside we new, it point of the in marketing level you largely Braava XXXX, gotten same Braava and at not against a take new product, to investing categories, it’s go new percentage dollars putting against. with the we And is -- with nationwide response. OI business. are through require ROI material new then, where the is as investment do what with to but Roomba, we a real U.S. percentage

the that’s States. the I So, United Braava why growth highlighted in XX%

of the that day Braava improved think iRobot you’ll as Roomba. opportunistic instead program think I about Braava at we’ve marketing programs the were driving against we of so program we against against end putting And more XXXX, systematic more while implemented a a that see the

a opposed against driving as a having investment all some Roomba shift so true pointing And to that, of our bit where of a growth dollar we’re portfolio strategy at cost.

the And And there continued I acceleration see U.S. we of see a bit States, So, you’ll in you’ll Braava dollars then United the in think there’s put focus. some performance extent to Braava outside well. that of the against a as change

Operator

And Canaccord with Thank question our next you. Bobby Burleson Genuity. comes from

open. now Your is line

Bobby Burleson

working But, versus if are what So, I Colin, promote players brand different about Europe be et anything works, is the we going that the understand, cetera in more way differences against, or we North you to in was America. just I that you competitive awareness terms guys think up curious, of there of EMEA, the channel thinking the are the landscape should Europe. about? are in terms

Colin Angle

seven brands Sure. last has for competitive the five, EMEA this it. been many consistent in had And more years. typically has

also created in And home Europe it us. for iRobot barriers that foreign qualitative to the other against come and and try battle think against looking the I were products and than There ground being a out. IP companies turf of competitive sheer kind to the a against the compete of less to was area dollars situation became of played because test of United was where invested States. lot go strategy, themselves where distribution was significantly iRobot, our awareness in magnitude

we time and been actions competitiveness EMEA. capture for certainly us. of it’s think part of our years that always initiated our meant up but global that, market there strategy. Robopolis on last IP and Europe And numbers, issued robot generation shore an year our focus lead patents increasing with in acquisition all a ago, that to to is the strategy we is great continued to And our many leading the from strategy IP on in these So, improve and took a long is European actions being

still where but And North earlier in they So, to have than have expect come a America. a we in sure we’ll than Europe. to strong think leadership few into there. robots the we clear competitive North is be be America that it leadership [ph] I as continue region yesterday, will points come It market lower continued

And that certainly all, can So, continue. think Europe taking strengthen continues this battleground cleared different. continue we that’s set but that to is I live ensure so to it, iRobot actions region will if our are to competitive they characterization in

Bobby Burleson

that’s pressure, this Thanks. anything you great. wondering the changes ASP then, saw XXXX? just the seeing, in dynamics, you’re here inflection not Okay, any XXXX in whether U.S., pricing given and versus shifting demand, XXXX at any what And or Thanks. in in

Colin Angle

Sure.

the we optionality try increased embedded we’ve to this end worked given. there of of protect increasing think some played to to giving low price how growing where sort is at. continue to there we’ve I absolutely are We number intends cleaning and aggressively And we the ourselves of address compete traditionally XXX below iRobot the ourselves to points throughout do certainly entrants is competitive the vacuum robot that as and competitive the have segment see against pressure in guidance down that that that pressure market.

are dynamics changing. the So,

the mainstreaming mentioned as of advertising as the a in to the market and in I general, from accelerate well category. retailers competitive seeing robot investment the call, market as the even because of We investments cleaning vacuum are promote and

taken threats. we we revenue guidance to of confidence again gave, in So, respond we are should to to we ourselves XXXX well-equipped growth the And win I as be in amount allowed ability in competitive rates. some away the think our that think from

Operator

from you. comes And Thank Dougherty next & question our Fisher Company. with Jon

now Your is open. line

Jon Fisher

successful Thank you. Good QX. morning, everyone. Very

average some you been from had was that’s average quarters for on and conversation The point. a just curious of sort if price there. Just has very $XXX; the price point I average record price or higher? follow to that’s kind one that historically last quarterly if impressive of questioning of where is

Colin Angle

likely a -- a it’s quarterly I record. don’t have

of the working of types the trade in in we’ve on robots. that features are more have the deliver to of go convenience to really hard cleaning, that been customers invest very the think customers promise that our willing the confidence vacuum up. I they the legitimacy And more is robot

our certainly up to a play opening price had by we but so, our customer at willingness price -- trade And we do is premium that and point. figure driven points, at great

So, great it’s new a story.

Jon Fisher

great Yes. with have that year. And this you success

One price growth selling to more the this in products higher point drivers has been of and year of mix your up category. that the definitely

Just -- wondering, XXX the the have your I XX% market, at the when you think sales the has been running mix XXX, SKUs. been this in and the of of look lower kind SKUs XX%

XXXX, into that giving when up risk out trade there look is you think mix year some back? you of maybe do you’ve hold wondering, do you seen XX-XX max you benefit this Just and next think of that can that or mix -- year,

Colin Angle

that the ensure I it -- I our isn’t the pressure it’s to be -- I them down to level features and and market see hold rolls that mix how we'll price sort we can, to think into so our think the giving have to points can And entrants don’t premium competitive similar. that out. the roll marketplace. We’ve of ensure mean, lower that off the as as take continue modeled we year real it back, we entry these tech aggressively

a we the going customers. strongest R&D our -- actually to be iRobot’s giving category superior year, always prior at in a the was be to are shift differentiation premium, will from up to back there our it toward that mature just it premium deviation if the ensuring Although ASPs; and experience shifts level. make, be might models And premium this that this ties to investments the and up continues if

think a question little for us, bit are that so, -- the from at asked. you actually looking we And inverted I that

Jon Fisher

view when go impacting FX numbers the cash flow two questions. FX, broke kind in iRobot? we distributor Okay, on out since volatility at acquisition. European commentary do FX distributor and made just have Should the then, of revenue acquisition you more And And and some a statement, how basis? good. on and FX, more the On now we you Japanese Alison, you volatility expect forward forward look

Colin Angle

or a contemplates I those. rates, take the think give roughly guidance and our current in revenue X% change

our business, bottom hedging we volatility earnings also as And the much minimizing currency. impact. line do think, in pretty think about programs have covered from have hedge there. we’re the We natural also I So, you targeted

So, covered I in think our well guidance are we ranges.

Jon Fisher

Okay. is innumerate growth figures question organic And growth. those XX% of the the then, in what rates, the you can performance provided acquisitions markets XXXX? in inclusive or organic growth organic not organic if Japan, comments, EMEA, on are XX% final that rates? they in distributor was prepared in growth growth those And organic that the is The you are in

Colin Angle

consolidated growth are rates. those So,

So, include impact do the the of acquisitions. they

Alison Dean

regions. about were the in The organically growth mid rates teens acquired

Operator

JP Thank from you. Mark next Morgan. question our comes with And Strouse

now Your open. line is

Mark Strouse

be you’ve marketing, stay three talk this versa, you period over I that above vice if in The call leverage? revenue just or kind OpEx? constant sales, so would and potentially revenue amount shakeout further? and allow up even dollar some how see could then, sales that fall as a say out to to Would want difficulty] about R&D, years, to years and next and XXXX, able initial potentially you the [technical deliver So, a been competition. up couple the about ramp short strategy expectations of should we of your expectations, reason OpEx flat percentage that of the you the and happens stay of And increases your think

Colin Angle

Sure.

costs to years, drive next over then, believe not years in as product just some the fixed some we some to opportunities be in OpEx, is at some are important are calculus and or at. at the G&A to look and we prudent growth, there and other domain we going to investments if sales potentially in choosing look not categories whether think few they that but I out the other Roomba, marketing that leverage OpEx

next right OI fashion helpful? this that the in the definitely focus [ph] primary being years. in think, around OpEx direction. few be we this evolving with Is So, growth period that critical ramping And will be tend you’re see to you It’s as focused with -- where growth to will is going in keep revenue the up to made over on some the lines. some I see definitely leverage made consistent to profitable going how shifting also shakeout

Mark Strouse

that’s about to the similar Yes, you. the of we to then, a think XXXX? And revenue Thank going or as one think here? lion should region share that marketing in of region there particular how the get that Colin. Should split by about is we is, kind

Colin Angle

haven’t We in the scripts far. on that thus really commented

as also some maintain areas where intend I we which in see the be could Europe certainly variability, spend basis, think, more look to leadership there to regions optimized, marketing of those have investment in Japan you per trending Europe versus think Japan sold We revenue. where it’s largest large the response. that on certainly we the competitive optimized could are North on North dollars less a and America. share the is going and in region higher robot be America, North we money where our most America, and based in spend But, and it’s in

how building and running around Europe, are the And So, how in we North optimize America. and dollars approach more actually opportunities we and there analytic incremental models for tests in OI-percentage-accretive. very in these be are things we spend than constantly Japan accretive are do again likely to

continue. apply So, that this in very-disciplined test and we fashion, scale mechanism measure will

Mark Strouse

ITC market. restricted that longer decision was Decker should can. thanks or something the lastly, The for you of much. just the the we the was Black right, & the term, if didn’t settlement a about “certain period you are with competitors? for if I they versus sometime anything suits, it how of Can just for about XXXX. think announced, talk in remember rationale will litigation. I time” the I that I And from that be going remember other even Okay, Thanks. permanent? remainder And hear so I But, about pending if expecting

Colin Angle

Sure.

the ruling in resolutions on little XXXX -- with far. pre-apologize, the can thus is upcoming very that can I a I I first say we’re say, be March, the So, will the half is can of very The the in year. satisfied there books. off, I back hearing in is say. What is decision which forthcoming

It’s go But, more can’t is the outcomes So, thus I satisfied confidential. far. with iRobot very all into very detail.

Mark Strouse

you, Thank fair Okay, enough. Colin.

Colin Angle

Sorry for being mysterious.

Mark Strouse

Understood.

Colin Angle

Okay.

Operator

Road our Thank with next from question Ben you. comes Research. Rose Battle And

open. now is line Your

Ben Rose

for morning. Colin. Question Good

from take snapshot perhaps If you in percentage connected? give of in your around percentage your XXXX, coming on a internet connected you robots? products, what just perhaps the level of for could of comment features internet of -- entry sales you spirit expectation could would the higher are moving the taking to you of terms some robots that XXXX, down that And be commentary sell end

Colin Angle

XXX, color Okay. the have specific We I new can where give in would you on product XXXX substantially get launches some down some to Roomba XXX, brought to made we the and costs to get that. connected. Roomba mapping customer pay with

As demand about were going above the I long-term our that we a installed And the of X little XXXX anticipate part growth will up, in going million of we as sold XX% vacuuming in it robots than that are with deliver result, functionalities over robots. growth. sold think with rapidly drive that to to pleased grow exited we a we’ve customers is accelerated strategy base of the all Currently, connected very is the continuing robots And our figure in. connected. think and robots are how their around connected of you to believe should iRobot some of additional it year

was prior. recreate increase. focus XXXX same our But started And on percentage the year and huge that from regarding line-up XXXX robots. that we I’m our sure in the definitely, increase a connecting can not continues go in So trend

Ben Rose

one just for final of outlook. me, terms then, year And Okay. in again, the question three

percentage a in You from things? Should the to we over of these to product year of big kind a at thinking XXXX of be the XX% XX%. course like the XXXX products products context kind or new of new years contribution new of is potential three contribution very quantified about

Colin Angle

I’m to systematically roll a It not years are going contribution comfortable upgrade products. perspective. to new on how out our the launch definitely today is next from speculating strategy and exactly three

-- not But, launches of to from number. that’s that’s revenue expected drought. to coming stating in year isn’t great new certainly XX% a products; of that product that I’m think this our going I XX% XXXX new and then speculate beyond

cadence work we We that maintain. to have a

Ben Rose

Thanks great. much. very Okay,

Colin Angle

with concludes you Well, fourth your April QX look Okay. you and support to discuss call. earnings XXXX thank and year That in We full to talking quarter appreciate everyone. our forward again our results.

Operator

participating This and program all thank gentleman, today’s today’s does Everyone, you you and Ladies may disconnect. wonderful in conference. for have day. conclude a

iRobot (IRBT) 8 Feb 182017 Q4 Earnings call transcript