IRBT - Earnings call transcript Q1 2018

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Operator

Operator: Good day, everyone, and welcome to the iRobot first quarter 2018 financial results conference call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to 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. circumstance. 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 Dean, call, open for At turn over is will for expectations Angle. achievements the fiscal business Angle to today's financial on I'll Financial first review litigation define business Regulation restructuring quarter for compensation which property acquisition, and call available the by financial also non-cash our adjusted reconciliation release EBITDA, During the and CEO in the provided metrics will merger, company's earnings website. amortization, XXXX expenses, tables of net questions. which as A Officer, including gain first we'll financial provide operations Then Colin SEC the GAAP of and the results first Alison disclose iRobot conference this at stock evening, XXXX. our earnings end expense. we as point, may Colin call expenses, and G, of and and we call, Chairman issued Chief interest, Alison for income press Colin this or acquisition On also review XXXX. XXXX will is of of non-GAAP the provide net intellectual taxes, and before divestiture our a depreciation, measures expenses, quarter and non-GAAP last the of financial quarter

Colin Angle

and thank morning us. Good you. for joining you Thank all

We to the start we strong XXXX. expected are in off

XX% Gross regions. growth XX%, First quarter XXXX innovation major revenue deliver last revenue support grew regions. Robust year-over-year overseas; drive expand With acquisitions; products XXXX. leadership of XXXX extend globally; XX% in domestic major over in over made had and one in holiday on for from XX% of and growth half board. product revenue and over double-digit by we part respectively, this track QX year. awareness; in States, global XX% for the of first up belt, year following consistency QX acquisitions, significant growth shipments to US continue and holidays distributor margin in in XX% Revenue of increased the the by QX Japan investment EMEA our brand technology quarter driven United quarter and penetration due call, were double-digit through growth revenue QX XX%, household the margin iRobot year. replenishment, our in revenue are sell-through, under also On QX the in from greater the across new category; growth was and drive February several of gross with the the XXXX. which to to of Roomba deliver second quarter growth first deeper and XX% our XXXX all revenue to XXXX, commitments the to of across earnings all we we driven the in QX XXXX drove uplift saw neither the of strong XX%

and our our continue investments in half. second schedule Our execution are for as acquisitions marketing consistent introductions enabled have and and product R&D launch control planned global of our of on more the our new brand in programs;

billion, our reaffirming the favorable impact for outlook we $X.XX share increasing are and operating a we XX% full-year our reflect $X.XX $XX XXXX XX%, full-year from $XX Given first year-over-year that our $X.XX and compensation per of recorded and growth is windfall to for million, expectations in results the of to which to of expectations quarter. XXXX QX of operating full-year income anticipate of earnings revenue stock rest million $X.XX. $X.XX to billion and We to income year, EPS the revenue

through of and XXXX Now, of for the some rest year. I'll QX take highlights the business expectations you of our the

meaningful Braava confusion to since mopping about our investors First, family successful floor I I'd sensed the revenue last performance of diversification like some talking the to of category. developing efforts our highlight robots. our in In through call,

Braava over adoption efforts tremendous drive of of plan campaigns through the of is growing for our Roomba products upon success the years. last We few opportunity to at Braava marketing built customers. Our a targeted our millions Roomba see

a see in have We investment, payoff advertising TV lesser Europe. where in started and region made to US, done the the only have to where the majority the of degree awareness have we and we

the globe across category company's improving opportunity XXXX and and growth mopping the in there last better domestic expect growth believe in We category been revenue full-year floor positioning quarter's distributor than greater our on launched over this first articulating continued driving campaign of the QX rate. the our meaningful ever the model. that by full-year As advertising Braava nearly overall XXXX investments propositions. momentum rate In additional national predicated the category the generated we Promotions is value call, grew growth of the the XXXX, under a last over year fragmented a XXXX. Braava revenue growth QX discussed generate XX% XXXX Braava and we uneven and revenue in is television our products' global XX% first on that at we US US for quarter revenue will XXXX, have

US, value in Therefore, as the this our propositions have we investment very demand products' the where advertising we hurdles growth. year is the of we did to under has However, Lack overcome made and been awareness articulation are drive in of strong. critical. advertising additional Braava, investments, direction, last must

of In to and have social we the marketing similar and we XXXX year in a time. One campaign all marketing marketing strong discussed investment our digital for is campaign US, components February Braava sales executing will the incremental same major of programs the in TV for we support ran media around run Mother's QX, the one Day. last planned a to we And national QX markets.

selling then, results. have addition, in selectively with campaign In brand We had campaigns product planned year. for where TV expanded our we a the Since market strongest longest them into Roomba Japan recognition is there and marketing we later this have been for positive the the share. first markets began the US overseas and

Braava investing for help as will and Roomba. awareness globally adoption confident promotions of the that to drive are category We support it has

US in category. of we Now, our Japan. the delivered the mid-teen quarterly acquisition holiday expect trying in the we XX% to launched. yet associated still anniversary with test launched stores, grew quite entered season. competitive also In a demand, we that remaining gain where revenue products year. full-year QX, but over anticipate from the EMEA in of traction the the this so in also talked online retailers Since where year-over-year Japan EMEA, Chinese have revenue turning not XX% growth performance XX% of EMEA landscape brands Note XXXX, and the revenue traction XX% revenue several have but uplift not XX%. premium that sales QX US, our I not about gotten last to sell growth few year-over-year XX% market year the see The XXXX quarters. in a while we while consumer channels in direct. in increased last the region, the this revenue stores international grew remained we sales and announced, we products robust a driven of US companies US, will benefiting the acquisition. in SODC, by others that, in quarter On now in uplift bit revenue the European first traditional countries increasingly growth rate We growth call, have Chinese will some from through saw In benefiting appliance then, retail to coming tremendous by revenue off competitors strong the from

in markets. also up these products European of have Some shown select

the deliver that continue believe vacuum products overseas, cleaners and to excellent I are February. and between further to our difference position; and marketing, of dispelling R&D to track both awareness differentiated this, competitive our the It to off leadership by the in is our on right and competitors. and Alison remains US that detail. results we the our our strength including robotic full-year and to in the to to meet will one. over an drive turn claims brand maintaining unambiguous products in articulate moat others'; approach quarter sales critical continue widen the in to to initiatives product strengthen start multi-pronged while continue to In and in summary, we validate We call to review to false to and drive make now provided first a expectations more focused XXXX IP investments

Alison Dean

Colin. Thanks,

XX%, to line tax rate rate improvements, the Quarterly stock were acquisitions to that with of mentioned. EPS of the EMEA revenue QX was discrete year. impact and yen our the XX% million in of Operating included XXXX the XX% rates in accounting prior domestic XX% with QX driven was slightly compensation primarily and with EPS before effective of discrete XX%, income XX% line compared QX of XXXX. quarter The XX% contracts. $X.XX that mind Our of tax which law Quarterly windfall for stock items. XXXX ASP XX% benefit for with compared before Revenue increased first and items, discrete by rate, and inclusive QX was ASP items $XXX million QX from XXXX related our XXXX following a with discrete rate for demand tax million Japan hedging $XX expectations growth quarter while of QX were XX%, income $XX $X.XX tax QX $X.XX EPS change, and QX stronger revenue new growth our growth in our EMEA and in and uplift items compared $X.XX was and XXXX. ahead benefit Colin in in exchange Keep compared operating favorable QX euro QX last to expectations, compensation the due the change. included for for from inclusive Japan by tax a tax was XXXX. the driven with of growth was the of in

We gross roadmap on from QX QX added our year-end. the last performance were date. ASPs associated based average among $XXX mix, in with in intangible our in of margin revenue, million higher expect be our The XXX and and pleased and Gross Keep year G&A for the We litigation. by continued gross XX% We we quarter and promotional XX%. be to acquisitions, the margin and year, and we legal XXX-basis-point things. and primarily our through QX reflecting margin with higher to with cash, gross expenses be in and product improvements, employees mind due compared between two XX% with sales up can activity, up seasonality widely at will the COGS two marketing ended do QX ITC still XXXX of very operating quarter was to the asset to XXXX. to R&D XX% XX% costs, launches in QX XX% the was support million their acquisitions spending and roughly Robopolis continue increase expenses quarterly from for due amortization. $XXX highest that margin fluctuate expect other offset

roughly purchase million And up we established the approximately repurchased and have of through stock. plan a repurchase common effective stock $XX The of million. XXX,XXX XX, quarter, announced March for April XXth. the became shares to program During on our we authorizing $XX

direct-to-retail days expected, year sales the driven in EMEA. repurchase the to compared XXX more last Japan year. $XXX assuming balance with by hold complete the and QX $XXX approximately inventory or the or of end cash acquisition during we to program million of XX% XX ending with for $XX a than $XX expect was need the days, million We million, as million year, and inventory

business average XXXX, our our XXX said we DII in to be quarterly on plus we approximately last to change minus typical expect fluctuations. As quarter, due with structural in this days or model,

are to As we improve and efficiencies part time. efforts, working to DII our of capital identify working integration reduce operating over

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

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

with continue $X.XX of the to the half XX% we second in being XXXX, expect to year of of revenue billion For billion revenue roughly $X.XX the full delivered year's year.

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

range rates in or line rates, X%. Our roughly contemplates current and revenue plus euro expectation minus exchange yen with

to over expense said to sequential year-over-year be the in in We and season. between quarter quarterly Profitability continue growth the year-over-year to the driven as and sequential XXXX The increase support our lowest quarter. is is QX, and quarters increase expect each typical, by sequentially marketing second between smallest will and increase selling last in largest with QX double-digit first QX. highest increase and as QX, for QX QX throughout the growth sales we revenue rate quarterly the expected

In addition, half of as sales significantly QX, not product is marketing, launches. years as planned prior expected decline and revenue, QX percent our from second to as a due but in to

For total XX% to expenses roughly full year, expect continue revenue. operating the to we of

worldwide the and remaining campaigns for continued drive product associated and awareness and by still acquisitions the Our incremental with expense the spend. Roomba Braava guidance adoption. full gross higher associated of into sales our in marketing launches reinvesting the spending forward two our integration, to primarily a margin & year our provided marketing incremental full-year investments with One-third expenses is assumes two-thirds XXXX household continued of

turn the to We no In expect back news. summary, of that windfall a million against with stock $XX favorable in operating call new are EPS now of $XX our full-year continue major expect $X.XX we $X.XX from now to million to $X.XX, Colin. first to income plan reflecting and executing I'll impact we quarter. compensation the recorded

Colin Angle

Thank you.

am start very and a in We to are XXXX about off year strong the I excited ahead.

by deliver that moat our product through competitive business to core We strong differentiation financial reinforce XXXX ability expect performance category; of take strategy our RVC shareholder in consistent drive execution our the our and in sustainable our intellectual questions. With global to is way We will the most technological portfolio. fund leadership our to protected we'll extend widen product this that effective and growth your property; believe value. that,

Operator

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

line is Your open.

Frank Camma

on been robot. I Samsung just lot Shark recently, had But been a aggressive question seems I the Hi, on higher-end quick guys. on a more has like, – know there's attention of of the the range. price

you your wondering to that a on was I thoughts So, as maybe threat guys.

Colin Angle

our I North I that Samsung the on And the higher-end, the some end, Sure. They trying consistently to low They to QX. on Obviously, themselves work. like in is America. been Shark is willing had the programs money. aggressive some establish we in continue has don't strategy. think mean, to I particularly think spend that not significantly. up did Samsung giving on very disrupt but market, definitely category,

Frank Camma

one. quick one had just I And thanks. Okay,

EPS for is I the wondering on any, built repurchase, into the you guidance, Just was EPS of much that, how share guidance if the mentioned year. the

Alison Dean

that our assumes the $XX guidance program million we year. within the complete So, will

Frank Camma

I Okay, now. thanks. for have all That's helpful. That's Thanks.

Colin Angle

Okay.

Alison Dean

you. Thank

Operator

our And from next you. question Piper Johnson Thank from comes Jaffray. Nick

line is Your open.

Nick Johnson

Good morning, guys.

robot. initial time of mind press home world Amazon your lot how home a and than that for earlier thoughts us hear the see that top much a to and robots of iRobot haven't just in you like I'd but making has to news So, you more development, the digest on clean. do they're had this the that know regarding week I is a release

Colin Angle

Sure.

this basically, not looking want I'm relative I speculative official has to so any at and to of out made the forth. And some that It's product. think journalism. result [indiscernible] announcements I point that first Amazon

don't So, truth really about much ground what we is. know

of new robots. it's think this that to I years look perspective, see experience develop create how XX value, my robots as that important – to news. and to does companies do recognize is, building from this category good has and opportunity iRobot can

can good consumer iRobot. is good We have for say over what And robots great for is X,XXX patents. I with confidence,

category So, if that of be a Amazon for building were opportunity new would iRobot. robots, consumer

Nick Johnson

one And do I you ]. just quick [indiscernible you you. customer, a represented out quarter? top they know as usually Okay, have give XX% a what Amazon this thank

Alison Dean

top They statistic But quarter. on a they full US more one five by five give but quarter of customers. because basis our we that definitely of customers, vary were it one usually are definitely year top our can

Nick Johnson

Okay.

stores specifically been, name mentioned few you're you know You kind to release which that of this press Chinese in year. your hear I've market in into potentially retail ones but thoughts. that your market? the US see that seeing I'd Can you like competitors I

Colin Angle

a see that that I and see we actual But this don't wait anything to in they shelf frequently. bit. space we We Amazon in going that don't know speculating definitive changes fully Marketplace to but on are on QX, will get they're retail little active were quite front. have We'll the where We as have know them shelves.

Nick Johnson

And product me is, for models any half looking as the on see bring them? current discount you're be the the launches as ones the maybe Okay. we here new of the your rollout – to last to of new replace maybe in kind ready discounting should getting models one then, from second current in to you year,

Alison Dean

and pretty consistent the remain year-on-year during year. activities promotional Our

at conjunction of this holiday the then typical product time the there's point. specifically of our promotions sort that around got launches practice. with in around as So, and nothing Most new we've season planned year this happen a of

Nick Johnson

Thank Okay. much. you very

Colin Angle

bet. You

Operator

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

Your line is open.

Asiya Merchant

on Hi. Good your morning, results. everyone. congratulations And

Colin Angle

you. Thank

Asiya Merchant

you I you part If were that recall the had them think could that the through the time on acquisitions the across last some year, there's see during And go don't about ASPs in for. sell-through should mentioned any the uplift if were of how I can ASP as helpful any you give about how you if quarter, should Thank well. EMEA, and – seeing shift you. Japan, as there mix increases be through That of think correctly, us also, walk the color if you that. Just that would on we you we US. regions think should account know various cadence we I

Alison Dean

Hi, Asiya.

ASPs QX the from in uplift the and acquisitions. there's did our definitely, yeah, revenue of specifically, So, XXXX, benefit

go Japan from forward, from still anniversarying a to not perspective, least acquisitions. there the Europe as perspective at we we're ASPs will that QX. point S, could a of year, will over as out the be Going but as be going variables impactful be into an Japan rightly out, lot three average and Exactly QX how go for remaining in quarters, element you there's the that that. a through

we trend specific of right continue those other sort then no I sell-through in color QX point From impact there's have to normally XX% and report as now So, it to can giving and our to sell-through likely a and of perspective, QX retailer five US Europe we elements you QX. had than that top in a QX. will two related rate

Asiya Merchant

look obviously, beat impacting acquisition I top puts Okay, line also line, strong on that. very strong had understand good that the just guys performance but there's was you quarter, quarter? great. – then, there, margin not in and a keep the What mentioning first the on you are both top your this the but guidance, takes And at as still the

Alison Dean

for Asiya, QX. give didn't clarify actually to guidance Just we again,

were expectations. line with results our our So, in

on will roll revenue in our script, how out the holding given quarters. you that mentioned the through we As We've the for color guidance we're year.

reaffirming that's peak We be with year. the again, that believe we're through how percent could was quarter XX% and year. And quarterly also there the to delivered for our margin that do mentioned we QX XX% exactly that fluctuations our gross

with year QX very line we as a and begin. strong start view expected how much this to in we very So,

Asiya Merchant

Okay, thank you.

Alison Dean

You're welcome.

Operator

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

line Your open. is

James Ricchiuti

have Hi, color changed the EMEA full for morning. thanks. for and some your your for all in Good in gave around US? business you Alison, year the the expectations at expectations I Japan. wonder You growth the

the Just in sounds to wondering just and start in off in stronger like change you're expectations. any a US I'm

Alison Dean

you and overall at when the our and to growth is for No. XXs we with the gave We the would in The we be beginning what US, are low regional year. we I February. And as spoke be the consistent expected EMEA thought of thought in view. Japan to continues that performance, rates the that

James Ricchiuti

Europe? seen in able Got the China. it. about provide possibly to some wondering they because question just may these color retail be to a have question traction it might the players what you any that from Colin, started competition hit sounds I'm in And from just that. you of Europe initial some from like Have stores

Colin Angle

Sure.

a driving end. market, the was are certainly And the think players the US, America. of that toward develops, was of were think we marketplace. in establishment of extend through end little into as the that active it end I retail the beginning low Europe, bit last Marketplace saw of year a what and low in the Amazon that that we North there In In could the predominately growth growth. Chinese products segment and and obviously, cleaning in accelerating isn't low-end growth degree category the to robotics the dimension high But that this robot accelerating It's, emerging, in is all the market vacuum in at price There's overall vacuuming new incremental is consumer and in end. the that market China its in category Japan. much lesser point the a some dominant that's to growth Europe.

James Ricchiuti

the any relative consumers in consumer where Do lean? the might price to terms difference to consumer the be European and US you market points in of see market inclined more

Colin Angle

really. Not

we're points predicated the I of the of the And seeing the iRobot's on from – size the talked – size a that higher-level price was altitude, starting the think we've a that time, $XXX on around long range. for about market. view

of vacuum cleaning robot robot because into consumer of we're of the we're grows. the cleaning we're the and new this growing, not market of the growth size of the As robot opportunity only end customers lower up compounding vacuum business robotics. And is $XXX vacuuming. of new sort to adding the customers bringing develops, size a thus, of types marketplace And the getting

accessible peoples. So, we're at new level, high be seeing that, think robots I to a

James Ricchiuti

question Last jump the I'll then back queue. and in Okay.

strong last a advertising growth the the see Braava, Just as a in of US following the strong year result you year campaign.

done So, strategy. that to validating some well? it testing as or you're probably elsewhere, seeing you Japan, the support Europe initial seems strategy the Have where of like some in that's

Colin Angle

We're very systematic.

we you can the not as – We the Braava. call with to where to ways have spotlight the tell put call, Roomba the scaled prior have of our this we Braava on small our working to we consistent. that investment from We able and do tests. we previously. and tests, category pretty scale been America. playbook We the start have we is point resources so in And with up do results North Based on those lead the scale

of – North opportunities So, about we're in are learning we and continue scale the test more America. world will rest larger that I up we the to while carefully say

a it's investment is So, in the working of it We're playbook. North Most America. out.

You see as talk in Japan about we of did can support a of well. Braava a in bit new spend

works. We It it. got playbook. a like we've So,

Alison Dean

add And half be to year, of marketing TV only not I'd some other in the area the Japan. traction GD we've we've of EMEA will good some we in the advertising, next is some other of sort Braava be the that, well. That and investment. seen really second additional marketing will of focus doing as thing Europe, that investment, had Jim, in in and

James Ricchiuti

Congrats thanks. quarter the Okay, way. the by on

Colin Angle

you. Thank

Operator

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

Your line is open.

Bobby Burleson

Hi. morning. Good

Colin Angle

Good morning.

Bobby Burleson

kind have of us if with front the helping acquisitions, rates for you normalized So, of that in growth don't for guess, mind you. I kind international normalized of if you Alison,

Alison Dean

that. Yeah. Bobby, business possible running Unfortunately, been for four calculate not Japan, it's we've to quarters now. that

what we is complicated if as So, to not done distributor would've strip with just extremely it try there is bought to out Europe. we've the

partially from that the through given acquisitions we an acquisition. of revenue uplift driven but that was impossible is kind growth there that impact really this clearly, out on year, as to related rate So, and go break our party lessen should by the it

Bobby Burleson

are lacking even It of of feature-wise. is one competition now as performance just right in these and the the competition, different in between competitors Roomba makes price the other consumer the brands at What and sense. the terms positioned wondering either And, or a I Chinese Roomba terms choosing evaluates how guess, of features versus points Samsung?

Colin Angle

on they We robots the and know market, relatively so can. are to they of as best features go and copy that new our some try

that, success in tremendous against competition. think had we the I QX,

Our robots performance. and are together working designed many system features to with a deliver superior

some robot in the there's things point like so, only the with Detect. at Dirt I can market And we're

actually on, know if which cleaning of an the move area we're we competitors So, done we before none have.

We have the of ownership experience debris because brushes those instead clean make better overall much don't to extractors have brushes. you to

We instead do of job. one superior brushes a that have two

clean amount of floor on the quite that And whiz gadget. look fair a not looking a a to successful see we we are the of perhaps competitors to the the core when process QX. consumer of we market, decision who is techies, so, sort are that in at features bringing bang and of head-to-head, bottom And for competition funnel are exciting to niche the relative but not the to the

is the our to ensuring is about type how So, consumer floor, its the inside we cleaning on in loyal that value of iRobot trying with Roomba not strategy just which innovation ensure a there their but customer technological base. truly understand to continues performance many deliver to so are of features that who that created box, consumer. the are creates service our And the cares

star competition. in and ratings, market reflected remarkable our our in But of a a for and net system to our point customer an is cluttered iRobot we out. things it's and a our the reflected delivers is products reflected the committed iRobot promotor continued superior in performance scores experience the end at of that And leadership to so, simple there's like is having despite day, that

of We customer is served strategy. and to something our well has we us love service technology it. the committed we the So, think and that that of remain consistently closeness

Bobby Burleson

kind – I business. And On to one, and your your the to revenue with margins mix you'd what great. one terms terms in if any if go? par household on be like the in Braava, Okay, of you're of Thanks. overall of metrics gross And where looking at quick last of may. just curious penetration goals there continue

Alison Dean

at to to of Yeah. Bobby, just the XX% this the is drive category is category company. point. category the goal it margins gross such mark overall Roomba penetration our goals of talking company. consistent revenue added the about to the Braava And in the Braava have infancy is premature that for an yes, to household your the and comment, really last in margins on the we The with

Bobby Burleson

Okay, Thank great. you.

Colin Angle

You bet.

Operator

our next from question Capital. And Mike Northland from you. comes Thank Lattimore

is open. line Your

Mike Latimore

Great, thanks. nice Very quarter.

do units to field, sold Braava the Braava are you Roomba On of customers? a have what percent sense of

Alison Dean

We Roomba don't but with is the have cleaning. is of amount, high. quality are robotic and believe who owners marketing we A very experience comfortable product overlap brand, our already lot of a to targeted our the very, specific

Mike Latimore

Braava of on do quarter the then, international And see you growth, up picking in would sort of be second half a more that or that the second dynamic?

Alison Dean

think, a follow strength We the trend in our well. we Braava just the based our and on think revenue year. of seasonality Braava of the be will contributor, that of general year the business as throughout will second base half the

Mike Latimore

the about expense, of guess, any And number last I will there that on quarter? baseline litigation litigation Okay. just to move sort think know the expense on for IP IP I around.

Alison Dean

our that saw litigation we had our be Well, of ongoing expense in expense fact later in QX, definitely There QX. probably certainly, year, we in that based had piece hearing of bulk big well the a QX. as a we good on in of but the costs will

Mike Latimore

Okay, thank you.

Operator

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

is Your line open.

Jon Fisher

a quarter. And morning. Good very you. good Thank

XX% reiterated a very commentary XX% that quarter about wanted the guidance XXXX the explore above some to at margin now provide extent well Just that side. gross get to strong of your And of to above Clearly, can bit Two further a the then, details. manufacturing quarters you to average further, gross XX%, little margin XX% on talked $XXX. unit you XX%. price you've efficiencies continue you And guidance. to production

gross much going average efficiency manufacturing out the that fall of the Is get gross to Just change towards higher-end QX's price the not that to fall precipitously around sustainable? not trying just from be to Is I'm margins margins trying should is why sustainable? we Or $XXX forecasting so gross should product above QX the So, performance expecting to margin from the unit Is mix year. my for SKUs? not levels? what rest so figure hands is sustainable? or biased

Alison Dean

the be mentioned, over things and year. large away of all difficult from quarters those level of to percentage Japan, anniversary predict. those a from of the Europe uplift in of goes exact very acquisition as uplift. QX, that as factors And benefit I we definitely for the revenue Japan a the and timing having Well, is later both the did will we

which We're seasonality, those gross play mentioning, in with, quarter. could the the that could So, dealing numerous all range of that in changes range have of for that margin land be gross we our report that actual XX%, all factors another that there's of exact the there. higher timing you're thing an range. with our improvements, into purchases of ASPs, lower promotional John, will the the being the that impact and will all retailers, we that that cost just of very activities, XX% we're from at that confident be we distributors variables potential of that that Currency of guided or end end will margins full will year original either to impact but

Colin Angle

advantaged about that very get a lesser need and, if orders because nature I QX our extent, of down quarters for drive think the to business, gross QX we that over margins is strong QX without cyclic in and other you following replenishment promotional think activities QX QX. the

advantaged lot our business. But So, of on. if by you historically, there's is the cyclicality a just QX back, going look

Jon Fisher

comment. Okay. Thank that for you

is discounting isn't line So, or on and sales we from promotional comment, that marketing sort aware rebating run sales mentioned should just through some then? that of kind expense standpoint be the that's that of there the of line retail there, through just you activity Colin, the a COGS run

Alison Dean

definitely deductions marketing are are that activities expense. Yeah. There as as come classified others revenue that promotional sales and and

on both in those have for P&L. that places actually we the So, activities happen funding those

Jon Fisher

Okay.

there XX% XX% we be you. as reason expect any then, but QX a quarter to thank year? margin gross know the to Okay, gross have quarterly, go at one you quarter, I or through through least And below every rest on margins. should be last don't would above question guide the of QX, one any

Alison Dean

on one today a highlight to specifically the can I quarterly nothing to There's other. Yeah. basis over quarter

what point. to plays point quarters. to quarter impacts at are the can any different business specific there's see exactly As this given the out, But I the nothing we'll given

Jon Fisher

involved dynamic, Okay. And a then, engagement, for one from greater last last any you. or on? over involved directly in deeply or consumer has that in more question to the highlight or from iRobot are there that anything the detail being roughly updates me, since you've occurred Japan, been competitive positive into reaction Thank Japan a dynamic go now negative you can your to year, marketplace year market more

Colin Angle

took of execute we to year about distributor with a very our improved has where positive which with impact program precisely our able our brought inventory of We've management programs, from inventory on had that more think we've through share. the retailers. in I perspective we which a Japan, since talked last down channel careful distributors marketing our relationships been ownership segment we

positive. in been that's So,

so, been And experience. way indication negative this and has on of is have of good programs. distributor it's that any consistent based our There in positives many any ownership not US seen been a execution we a

Jon Fisher

Okay. you much. very Thank

Colin Angle

bet. You

Operator

from from comes And Mark next our Morgan. you. Thank question J.P. Strouse

Your line is open.

Mark Strouse

store, overall that Colin, mentioned the product retailers their for Good that Chinese has Hi. the Thanks. Thanks extent ask some more category actual just the expense of But And incumbents, including of then, about, of sounds can you questions. or for than expanded same you space anything. speculative adopted kind morning. come that like conversations, retailers entrance have the to was US some taking that European retailers commentary of have for question? those the the the in the our it can you've shelf around talk that had I at iRobot?

Colin Angle

Sure. number have where went of vacuum a SKUs. for Europe, or XX typical might norm has you diverse cleaners. retailer more store, the you would if set It of years see your In a robot been a into

this point be at Chinese so, And in time, some of can SKUs those brands.

the think growth of to give vacuuming, be But I'm be were to not would the not the robot for I can't if to with growth just But any surprised feet case. linear as that used it category, the is whether you speculating. in used It expanded the has I Roomba. but be. I category, like that the it specifics

else. our very, it's or It's maintaining Now, and been Roomba always share a someone happen be market successful to based very differentiation. on diversified array. dominate product We just in

introductions. iRobot a space not as retail of certainly these losing result is at So,

America, in land the I North speculation. that, think of we're

say comment, of very I will won't I that many growing about our their within retailers So, are but the category excited stores.

we So, growth canisters are vacuuming cleaning in tremendous of the seen seeing declines upright analyst we is where we've at day, area robot vacuum that category, they vacuuming. think talked growth and robot about like the major in in

So, positive certainly anticipate messages losing again, and we very sending us retailers not do we not should any shelf – space.

Mark Strouse

Thank then, from Okay. That's three little can of percentage regions, And four you region bit on helpful. provide Braava far as color your major more major you. Alison, a the by as regions? sales your

Alison Dean

overall then their traction, we've I a Mark. out, highest certainly US, as it's EMEA. business. in seen We Japan, been Again, don't of followed that said, percent the the nice break and typically In by

have been regions to it's contributing being I strongest but and as all, US date. the EMEA highlight to across So,

Mark Strouse

to different a Okay. way ask. Maybe

past back comps had half we XXXX, just the into sell when where of region? second kind some – big point of at you you some in to So, pretty the think looking – I that Are we're it's pretty tough China.

Alison Dean

China unfortunately, Braava being with – business. China China overall in our is impacted Well,

So, see think will China growth see revenue greater either. China, I until in in we specifically we don't Braava overall growth

in think in EMEA the US, will and XXXX So, will I Japan. see that growth you Braava be

Mark Strouse

over the annual getting has as year, far material as to And more than? Day become or Amazon to not be as speaking, less hopeful to the revenue. very this Okay. this, comment impact what might years, the as then, Prime last but greater if Any we're directionally answer far similar an last two year,

Alison Dean

haven't the then is that in trigger themselves then been after can't hugely actual second going Day been were retailers units make, event total I What and think Amazon sold Day. and in been for it. of the as has sold reaction Prime a coming in particularly meaningful. growth a on higher and I clarification the of I It's few Prime comment Mark, years Day Day really But specifically one half in expectations It's would themselves and other of the expectations been Day forward. significant. of off resulted Prime for percent success in the past they've about seen units of of units the the on Prime as haven't that our increased just the second that half Prime

Mark Strouse

Right.

a That's Okay. good point.

Colin Angle

new been growth of a can The of maintaining help has category something to point tremendous Prime retailers way fide. and this Day we has your it's around surge been seeing to of great take advantage bona that momentum home. this And

Mark Strouse

Right.

very you much. thank Okay,

Colin Angle

You bet.

Operator

our from next And Bill GARP you. Thank question Baker Research. comes from

Your line is open.

Bill Baker

Yes.

bought from the any year? last seeing you'd given product whether see afterwards? itself and that it? things year, terms of that learned or there something people your the line, year jet are this issuing better? to change it Braava opportunity this who in upsell as product How of this where are And see envisioning before can – you in success mix tweak On the this you Do versions get new you Braava do you completely an to evolving

Colin Angle

Sure.

that of as think create our sort part we I categories, to core learning our of new from process. customers development is

cleaned So, that customers promise was needed it on wet and the some jet. and systems we do clean for of and example, to with mopping that a brushes big autonomous negative broke cleaning. working after – fact that led Roomba to our every robots to with them be the pad-based the for the and cleaning been and we've out that that few maintained having experience time, rolled from moving Braava maintaining to optimizing felt were the uses Similarly,

lessons customers, being our continually our reworked, technology put So, these categories roadmaps. into learned from new and are product

committed move continuously to iRobot products. is forward, we improving As

we messaging. marketing do not had be think, and out year Braava a kitchen focused additional rolling that an can and believe the have so reach the will between Our product and the in and between we large-format as offerings and bathroom cleaning changed, model. relatively in have haven't about, will more XXX question customers again, bathroom-oriented XXXX? focused change great possible, that cleaning, kitchen the Braava of on mix changes we is meet we new stable could floor But, impact modeled mix. we this and mix plan You If open jet to

So, mix there's in we're in anticipating structural that no shift XXXX.

Bill Baker

Great, thank you.

Colin Angle

You bet.

Operator

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

Your line is open.

Ben Rose

Good morning.

Colin Angle

morning, Good Ben.

Ben Rose

Alison. you we expect for intangible rest level year? got of COGS in assets Would reported as quick I've modeling a QX of the a in question the amortization similar throughout of

Alison Dean

amortization quarter that'll steady amount through to related And a XXXX. The robot that's it's in acquisition. each COGS, be now Yes. going the

Ben Rose

ITC choose that iRobot any that? in June. of number with But to one? thank the your Colin, think still I hearing My would then, know there initial regard I last is that of timing, couple that is the be the we number an action, parties question preliminary type with for would is, some expectation And was case conceivable had it that of be next to over last And was might this Okay, ruling you. the of there settle month. update in terms the two, before months named

Colin Angle

one yes, is late June preliminary for ruling. the So, to question, time of anticipated the part

As second question, the part of going would and to speculation be not that I'm to your speculate.

Ben Rose

you. it that's Okay, from me. Thank

Colin Angle

Okay.

Operator

from Fisher Thank we Dougherty Company. Jon you. from And follow-up do a have &

Your line is open.

Ben Rose

squeezing for here follow-up. in you me a for Thank

Amazon Day couple specific I for Prime Amazon question a to that the specifically. follow you questions ago. Day know branded historically have up product Just of a done on Prime from Roomba

now on be the Brava, either introducing the Braava we anything now increased Braava Braava, Amazon a for for that Prime the be or should or attention you. on lookout Day Thank SKU on to line creating be Day of is for wondering specific campaign anything Prime or highlighted on there of aware a marketing there? Prime Just around Amazon developing Day targeted focus and and Braava into planned more Amazon with Braava

Colin Angle

really at the you cannot thank for Well, but it comment on Sure. that question, is all. we something

are plans Day. Our Prime around very closely held

going to able So, not I'm comment. to be

Ben Rose

enough. you. Thank fair Okay,

Colin Angle

QX We in results. XXXX look your you support talking first appreciate again That quarter call. our to discuss concludes our July forward Okay. with to and earnings

Operator

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

iRobot (IRBT) 25 Apr 182018 Q1 Earnings call transcript