IRBT - Earnings call transcript Q4 2018

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Operator

Good day ladies and gentlemen, and welcome to the Fourth Quarter and Full Year 2018 iRobot Corp Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference; Elise Caffrey, iRobot Investor Relations. begin. may you Ma'am,

Elise Caffrey

good and morning. you, Thank

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

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

may non-GAAP non-GAAP income conference non-GAAP adjusted including also non-GAAP Regulation financial by income tax EBITDA, taxes, net per income this expense, defined call, and before disclose measures SEC net as During income income share. G, non-GAAP gross profit, we non-GAAP

through financial the call open At the point, for Then and financial also Chief to our last and Our as business for and our quarter evening quarter turn well reconciliations call, today's and achievements the Alison fourth XXXX, XXXX Officer and non-GAAP we'll operations for will of for of end financial the the as XXXX. measure fourth our tables the over financial the release provided company's Colin most the in Colin Angle. each earnings measures available comparable I'll year the are provide provide on this directly and Angle, full Chairman press year Alison website. CEO, at and Colin which questions. year and issued quarter On definitions results is updated iRobot a review will measures to these XXXX. call expectations full Financial and the full financial of will of review XXXX; targets financial Dean, non-GAAP of these GAAP fourth fiscal

Colin Angle

In We year. had morning, for and quarter XXXX, performance sales Good and our in for in both exceeding demand revenue holiday and robust changing Roomba and grew region. our growth the programs margin threshold journey, an expectations supply Substantial billion year as thank absorbing Japan to raising driven will nearly after market iX a on chain QX as game and stability. the we finish products, domestically. manufacturing phenomenal diversification continue production XX% and marketing that in for an iX+ XXXX twice overperformance growth for competitive expectations profitability our by a us. increasingly joining our fourth supported focusing robots the was by crossing growth Overseas of diversification driving and delivered you revenue XX% full $X longer-term we Revenue of in tariffs strong well impact during grew operating on after demand non-Roomba QX. of

household penetration were continued targeted campaigns XXXX, and of through Braava drive of deeper Braava at of globally, Roomba Our performance rollout which consumer adoption to revenue XX% is of by driven In further eX revenue iX+ iX company launched and of United total and XXXX, the in marketing revenue. robots customers States in global be Roomba to robot company. growth expected to XX% of drive transformations our we financial with expect to through broader XX%

additional beginning continue new in and Roomba of sorry, revolutionary -- XXXX, We mid-year. our iRobot and to partial manufacturer to product extend production China products outside introduce Terra, a lawnmower, engage a robot, our new investment of for the the expect leadership, innovation category technology autonomous contract and introduce

the been note year. February that these providing only to I'd expectations conservative financial written XXXX expectations, increase throughout like in about discussing to commentary expectations Before has our

the tariffs the in second which in imposition Given are of year, continues is the unprecedented change competitive trends an that landscape the operating future base growth. which with XX% of half for to we environment our are of there generated revenue to and on historical annual no

you expect and are have of today That to items. said, providing we is annual with year-over-year billion, excluding $X.XX $X best $XXX our the of in of to XXXX to of revenue of operating discrete XX%, expectations. which $X.XX $XXX visibility We to XX% $X.XX billion growth we million, income EPS

for make is the XXXX lower marketplace, that expectations shelves the our robots, Amazon XX%, country. revenue premium robot XX% impacts you EMEA, iX+ of eX, products U.S. to competitive any new XXXX, take new the year-over-year U.S. continue and category iX of more to I'll U.S., and both Japan we macro XX% advanced Roomba highlights features company third in The over premium at selling XX% generate the our Roomba and a of products our our where XXXX some our In quarter, XXXX for domestic transformation price, and core not still we through game-changing at overall and see respectively through of the growth. two than launched in XX% XXXX priced RVC Now, revenue. grew to XXXX. $XXX, retailers These domestic on but XX% in U.S. offering contributed to the results business grew a In the we global us successfully less one product, susceptible consumer the In during year-over-year.

we helped campaign saw XXXX As competition quarter growth. throughout ran the the which category believed in we ad fourth an

to was are market. we iX+. robot, XXXX XXX, three-point comprise both household Braava show growth a well total harvest the our to strong sales In post-acquisition and we began our premium in substantial Overseas, estimates of of driven and iX firmly for completed as X% and providing XXXX regions. roughly family company -- growth U.S. bodes XX% our revenue International compared and this Europe penetration, by of investments we that Our for but share X% integration global growth XXXX marketing rollout program to believe positioned XXXX, in roughly fruits growth, of an opportunity targeted for Roomba well low revenue. efforts our our with this and Japan overall continue in loss demand for revenue trajectory category grew we

to see we include care a proposition. the in opportunity quarter positioning better for where QX, this this year-over-year. continue as In and Japan grew a wet television value program we XX% We national articulate ran revenue growth floor Braava in fourth

adoption ambiguous wet connected additional system where revolutionary It critical overseas and where including the it Users investment company so around the in resume and XXXX of able floor unique care foothold at technology; as yard, the and lawn tough leadership incremental existing imprint that perimeter cleaners promotions efficiently If trauma. introduction In vacuum products development, Terra, competition on new is will build ecosystem it's robotic and support once the expanding it labor-intensive outdoor brand and Users offer wires, and customers inclement of where additional and it of excited Terra wireless moving investments welcome mapping capitalize it very has night. The mid-year. schedule newly in total be to low, grass controlling will we're complements can the and this to robotic intelligently yard product with research technology, we the products and revenue as awareness flowers. lawnmower and goal is XXXX revenue, alternative U.S for use and to continue I'm go, app with home. of eliminating it's need communication must as globally imprint through about to beacons. around focused Because when complete. to a robot successful remember robot place navigating stay this and customize new home that Our return category. in the We operate Braava lawnmower for of mowing learns day continued control new accelerating will features to the a product we systematic will also growing to working point batteries in to not because on iRobot and plan users mow. will lawnmower from boundary base help in tell recharge still of marketing investment smart cutting the robots like height out the lawn the an XX% and our developed will the of will combining a you the on to to Braava help get a launching talking in by drive is XXXX is robot is regions. a made initial Terra try what that to and or doesn't robotic have the smart into the to wireless a our the are mow. weather to Terra category goes to technology rows. Terra let on it and total mapping category. we costly category putting adjusting this yard the robot we it our in confident be needs drive our the success the total adoption navigate the designed precisely programs in using rugged to cut sales in until from then standalone will the robot's maintain robot is cut will beacons a in in it and iRobot's environment run mow Terra human it well XXXX

be This say runs empties a in and new generation while of a maintaining unveiled to and kitchen the deliver your if always by Google, in third little robots valuable of and is including is identity home of the you routine enabling with a launch location clean requests. every the the brings iX our prints home all phase and home, of intelligence. next consistently wild his to mapping iRobots home It mess into understanding the just and bin the no the Tell in iX the the user partnership technology, on-demand for With make of to a background in strategies. enabled smart we own and kitchen of All for goal our right gathering robots. thing require cooking, our understanding consumer's the services attention, the will which Roomba ready home, of actionable and disappear Alexa. day, happen. quarter, smart

their directed to percentage pleased see already room customers users viewing, significant with customizing actively and our cleaning of connected with engaging iX maps, are smart We a missions. launching

possible can companies with smart smart planning before upgraded home. targets smarter continuously bring we deliver that developing this premium real Beginning extend capabilities, imprint our with XXXX robot more latest set of collaborations of Google are functionality to are robots the be Amazon platforms to a intuitive launch iRobot control and that ways with be every a to robots we and we'll introduced tariffs for the and iRobot through all year the new mapping the financial Last XXXX three-year to We most through your of get your including announced array intelligence growing the features and imposed. were an do and will new allowing iX, month.

providing a for balance updated XXXX tariff are XX% assume XXXX. the targets We and that of

specific CAGR growth are XXXX, gross revenue mid financial high three-year expectations, taking spend we margins and approximately in XX%, chain to and of roughly of targeting speak margin the For to gross want to XXXX XXXX. minute XX%. on a Alison the of and operating increasing to will we teams, initiative XX% a tariffs I addressing are impacts our diversification from manufacturing supply margins but

While has hygiene, outside and when until chain manufacturing in robots of an a for in annual sense to investment is manufacturing of review in diversification. in reach XXXX XXXX alternative we launched of U.S. production suppliers rising for new for for XXXX view the scale economic as to by consumer robots costs, Overseas began with XXXX have intellectual we matter we we phase produce distribution identifying supply and our in transfers as facility technology corporate and revenue since plan primary we and expanded labor our accelerated in margins expected China impact bear during This negatively sites. lower undertaken good them initiative imposition start driver initial iRobots manufacturing solely to to has and be brought Roomba pressure and changed coupled new the the XXXX. well potential properties increase forced growth tariffs gross that China. The of as component our will the cost made of the

expect nominal. tariffs limited from availability We revenue to be

will be launching However, beyond in new Terra. products we XXXX

in the revenue. We We XX% including U.S. proven I to expect the revenue to growth and call evolve iX+ XXXX to products now our the print and anticipate from full-year overseas and results revenue over and the quarter new detail. overseas initiatives. turn continue iX in total sales double-digit comprise and extend of fourth review to Alison we our marketing approximately will more as

Alison Dean

Thank you, Colin.

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

of windfall XXXX. to tax with relating $X.XX approximately In $X.XX addition, benefits compared in included XXXX QX approximately compensation QX stock EPS

our QX our discrete year XX% Our expect XX% the marketing and growth for In as of impact impact grew the principle and annual items and rate EMEA driven programs in XX%. the an rate tax International we the successful by competitors. revenue XX% the our of for was reform act. and XXXX QX year of effective XXXX before of for reflect Revenue with effective as further XX% XX% well U.S. XX%. against full the of before new US tax positioning growing items Japan UK company, up XX% discrete positive benefits overseas tax to

XX% optimizing XXXX the as and result delivered XXXX tariffs a growth with Gross pleased regions. QX and channels and estimated U.S. expected. our higher we up margin for our our compared XX% we've the Fourth and was fourth the almost very the sales $X slower of from to hiring with programs than Total operating implementing for to two XX% last million margin for impact in slightly and P&L acquisitions XX% e-commerce are This plans. year. quarter. was those expenses than marketing were full $X QX We was lower quarter in from quarter revenue versus we approximately gross of million XX% due expectations last RMZ year,

XX% Sales full revenue included XX% also XXXX full year. OpEx year of from the year, XX% of our expense For up marketing was last from revenue of a unchanged and XX% was last and year and distributor our XXXX Full-year new approximately as Japan. XXXX for was XXX compared new a Braava in for campaign in marketing as with employees $X.XX EPS in well from acquisitions support XXXX. product launches $X.XX

cash $XX the tax share QX with or down was XXXX. U.S. adjustments, we our the As year anticipated or at year the robots program EPS EPS $XXX was planned $X.XX provided act, $XX to impact completed the Recall tariff XXXX XXX negatively that charge $XXX accounting level purchase in by also XXXX XX%. XXXX. XX-days the and January million year-end QX not impacted of a additional reform million or from Full-year approximately million for million of for the last XX% million of $XXX XXXX ahead XX% a higher a $XXX XXXX. in we was days result quarter to million in inventory million the We one repurchase SODC tax end tariff we've on ago. a ended at last with days of booked XX $XXX XXXX of of Inventory quarter than market slightly due increase the X, compared which year from some of consistent charge expectations negatively at the did with toll and year fourth repatriation deferred the measurement discrete provisional XXXX impacting and net the a assets full-year

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

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

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

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

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

is QX revenue products in as to and to We and timing in expense and our in part marketing growth Profitability quarters anticipated expect in those year-over-year rates lowest QX introductions due QX highest support be and to introductions. increase be QX the distribution sales new new product rollout. expected to of will

many promotion points well favorable offsetting to XXXX XXXX with diversification margin the gross lower the Positively a assets roughly million well associated as as intangible by strategy factors mix, our that the margin products percentage associated of with XX% from robot and through down in impact acquisition and year-over-year to costs product promotion The gross be chain handful expectations. to items of amateur driver $X including our forecasted XXXX. XXXX. expect the driven in We in repeat biggest aren't of in of million pricing supply the these assumptions, is three XXXX as decline $XX pricing factors as mix from is desertion the of

product scale new component operating the XXX scale, Through do improve in and cost-optimized over a robots our our and we Roomba and will from our see have on XXX robots mix manufacturing engineering moved margin. to margins changes As the these our to maturity, not expect efficiencies, which gross time. decline away we adjustments products yet

as planned anticipate promotional competitive strong end. to the at remain and activity pricing additional particularly have the We environment also we low

and be we U.S. the imports we all impact incurring the $XX increased to offset XXXX U.S. million prices the on Roomba help the robots to tariffs As into XX% of XX% are it relates anticipate At premium tariff X, on the iX in level, in we XXXX. to of $XX million to incurred sold January iX+ on our costs

plan government costs structured likely increase pre-tariff incurred. levels. Should March the X, XXXX. our to to the to tariff that happens, would the costs time within If inventory both as program diversification we incremental through offset retailers change to XX% supply expect take outside change price again with lower implement lifted prices work manufacturing U.S. currently notifications Any the incur plans as partners. would mentioned, incremental would China channel to contractual and our prices increase on Also, we tariffs and to to associated we As and provide we we tariffs to our be chain altogether, tariffs in XXXX Colin China. the in

higher We for XXXX. new than lines of more negatively labor and outside expertise impact things will China sourcing be expect which as Manufacturing are of these China other expensive near term offset the more costs margin by the include in among logistics outside and tooling XXXX costs. addition than to rates gross lower

of a the supply that China. Given component whether tariffs vast long-term strategic in our base is supply We majority and imperative chain feel of is material or outside China current remain. our not diversifying

will tariffs. of pursue diversification We regardless this

associated hundred of products and a OpEx see point leverage of continue improvement full-year and expense include expect XX% expenses sales basis some We to as leverage Higher revenue begin R&D. XXXX XXXX from in multiple to our XXXX marketing launches. marketing in with we G&A

make adoption. the drive we and households’ Additionally, to worldwide investments will awareness Roomba continued further campaigns in robots

can't of estimate. million operating to of $XXX to items, which $XXX we full-year $X and million expect before $X.XX We EPS discrete income

expense share million by our and our million $XX manufacturing stock million, assuming approximately expenditures roughly depreciation largely diluted $XX of of driven shares also approximately amortization expense manufacturing expansion and of capital of of approximately comp million, program. diversification and $XX are count We capacity $XX

to before we impact expected Building estimating XXXX follows financial discrete from XXXX. tariffs. as include are through updating results, We our targets rate tax of XX% for XXXX are three-year roughly items our to XX% a from the

of global teens expecting approximately For and in XX%. XXXX to revenue roughly gross Roomba as which critical mopping be greater dominant accelerating by revenue targeting is top-line penetration of operating point our mid high driven CAGR revenue primarily robots. adoption a believe adoption maintaining XX% driving we robots and result of higher XX% in well margin expected are growth further of essential. to segment household We increasing of of share as robot adoption growth growth three-year of margin this to is household will family and the

item operating provide non-GAAP clarity introducing housekeeping additional last actual we a performance results, robots with think metrics are As beginning true into XXXX that our our more and we potential.

with non-GAAP have provided financial provided this income historically a we in adjusted each measure. profit, net of non-GAAP tax metric full-year full have EBITDA XXXX QX income GAAP well to as GAAP In along supplemental and to non-GAAP statements, reconciliations actual We gross a directly year comparable schedule as and quarterly respective our net income our reconciliation to income. before statements income share non-GAAP XXXX net per taxes, income non-GAAP the non-GAAP expense, most of financial

back have information we provided We our turn basis. with this we definitions I'll call also they why more results, provide think XXXX the will Beginning provide of QX calm. investors. and on each a clarity for to now quarterly

Colin Angle

at XXXX more both growth you. our see journey. enhancements step upon for aggressively and this Roomba expect through runways over and be an performance plenty is but new continued continued us it diversification. will in to We stage the should penetration household incumbent enabled develop Thank you air platform, of diversification important revenue

positive to expect total a and XX% We awareness revenue mopping or grow see from of in campaigns, Braava impact have we robots to to started our XXXX.

believe will third we revenue revolutionize the Well, a meaningful won't way robotic In that mower, addition, it company technology the their solve on to contribute be mow navigation stool we revenue about challenge. diversification expertise Terra also in a XXXX and we lawn launching prowess believe doubts we any Its rest mopping that as people previously are can a lawns. future. iRobot's long-anticipated our introduction as unsolved our that leverage put leg should a to in

strong current the that solidify position technologies further fund unambiguous introduce new in home While with as the in to as in in and shareholder establish player deliver robotic stream, diversified financial will a long-term your Terra marketing that, critical and importance performance demonstrate care, future uncharted to turn business our enhanced strategic floor expect the we'll navigating our leader we waters uncertainty, drive take investments are we questions. in category XXXX global revenue With robotic a to increasing definitively value. a the our smart

Operator

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

open. Your line is

Frank Camma

on Good how in to end Colin, Congratulations importantly, States and this... talking you how understand I with strong obviously here about. you United did pick launch I select, morning, new the year a guys. product is more got did you hey, Who to the the mean you're how Germany? a Walmart, but

Colin Angle

first a an as more it's place as We're and as and with any want There's bit more quickly of in sacrificing mow environment. Beta much to market be we lawn wet. lawns learn regular of smaller, tend doing we more experience, us our the also a and for and customer new possible. without to a Germany great strategy thought feet was get easier to it existing mowers robotic so known so program a in launch, The allows U.S. which to, a

add And factors of you so together those makes sense. Germany and all

Frank Camma

Sure.

And how channels? to just How that Beta that about you direct you -- market go U.S.? talk go consumer? through like it in program I Okay, the get Can you do did mentioned, mostly specifically your the to is about now.

Colin Angle

to going program XXXX an Beta the in is invitation-only program in North America. So be

your about want to So feedback the newsletter, product. sign you for give up questions lawn participate, you if agree some and to on you we us you our ask

as as grow possible that learning as as we were that we're roll mowing intelligence make the to sure are out numbers as for systems do so trying lawns And intended of building we're working rapidly. much the robot to the again,

Frank Camma

know wet advertisement far as the just outreach customers as what on really most robust you just database a it's obviously can be the -- up typical I you know existing And of got there? it Whether media talk customers, after for there ramping ongoing, I sort of effective Roomba. Because is to or just to you the going converting moving Okay. care. then then you're found about

really of what's the use effective been So time? more your

Colin Angle

the work shown of channels customers we've then well reach the that broader Well, also types for Roomba customer. advertising

the campaign So that we've twice in promotional Japan, the that in was I in mentioned in which done ran call that U.S very a effective. -- we

That And is between strong the so and a will a targeted customers customer Roomba Braava suggest to Braava marketing also customer. for that the there be overlap Roomba successful.

you lot key So be a of but Braava us. a which more Roomba things, excited different likely is own a as we're for trying to about good you're if far the insight owning is news well,

Frank Camma

last is case today, Got take it just I -- to were is the end would reason ahead of you it. bought tariffs obviously if take know My advantage long in would question inventory -- it how guess way take normalize XX%, to went to to to for but a the the through the you work it or to I bought head-on how ask long you that question. some

Elise Caffrey

the the in our we're on their hand in how have quarter pricing. length some carrying. if year we going retailers changed, depend, retailers periods. That vary are Frank of terms of terms some contractual time, how the much of change to notification they're at are time or much to what really inventory of have We do will they They

really it on to it's when happens. So going depend

Frank Camma

ahead the theoretically on theoretically, does it same right? I to I definitely was do could that? was knew it that while take it guess knew the of other Or though, do a if hand, if XX%, it go, right? increase, going advantage of thing, that you take you You you to could mean

Elise Caffrey

we We to be the the higher it those before a prices prices would move market. the consumer while would through to inventory our they increase if but prices work were have It It that up, onto would base. while. presence before would already take intent take would in likely we push a through those would be

Operator

Thank you.

Your Company. from with Jim Ricchiuti next Needham question & comes

Your is line open.

Jim Ricchiuti

on quarter, Congratulations morning. off. the Good first

have you're with impact bit I've on as about on gross Roomba first little at respect to outside just follow-up got you could to of going chain, a it where off, Just supply making China? a talk you relates that changes And the looking some of the margins. the it to can be manufacturing

Colin Angle

are maturity a At next Sure. will this equivalent of think as the be area to not combination Malaysia would a of We we analysis. and the our manufacturing, furthest We supply point, chain. develop. to is did infrastructure along China to thorough committed logical extension our and

Jim Ricchiuti

to in costs Alison, could on Got more guidance XXXX. XXXX your to having And relates negative this it. as on impact with bit margins. overall you the margins you a us for that I'm give gross color wondering associated if alluded it little some

Alison Dean

Sure.

related lines sourcing to incur we'll in capital to for to the cost they as sourcing of tooling figure outside opportunities the are well that mostly us to try as some expertise China. XXXX hire So help out can lines, up start investments set

incur are of trees once labor for costs component coming from to line by will costs, offset China out and will higher those example, the freight, benefit likely although lower cost costs, labor logistics we be additional We off get of Malaysia. Eastern units will because lower Malaysia the

terms start So products the in do standard there'll through. uptick when that in those Malaysia be cost of eventually produce sold an of getting the we

the probably the the of to terms year-on-year. 'XX, manufacturing a in of margin third diversification seeing we're shift is impact less In or gross

Jim Ricchiuti

and but the it back may jump then metrics in have the Okay, final and I it year. think those growth you queue. your I in the remarks, question EMEA did have give for two I'll from for prepared the for that's And missed I helpful. me regions quarter? Japan,

Alison Dean

Yeah.

the quarter. the XX% in grew XX% fourth Japan grew EMEA quarter. fourth So for

Operator

you. Thank

Jensen from Troy Piper comes Your with next Jaffray. question

line Your is open.

Troy Jensen

also to guidance offer quarter the congratulations on solid so A year-end there. quick and question my conservative Alison. a for like I'd

the And the $XX that? to a mentioned million tariffs, of offset that you some for factor the does impact million in iX for price that iX+? XXXX in $XX increases will and So

Alison Dean

million $XX for write to expected million tariffs. the to is $XX we the will cheque So, the pay

that increases incremental price and million made that iX+, on will that hoping iX $XX the increases the those that incur. we mostly price tariff cost million With we're offset to of $XX

Troy Jensen

it's you'd like but increases of on All -- ends think go you I consumers, do your pushing message change XX% tax in more do guys the do currently. seems pushing also? increases right, think we of just a less tariff, me, tariff XX% talked all or was about perfect. excuse be you this to high the sensitive If and kind price think to products that rate, had you it to lower price

Alison Dean

If be end go strategy point, different we determine We to this they'll XX%, to at the less continues of would and update if we whether a high analysis strategy at be believe the increasing only That think market. the or sense our our end elasticity the of need prices to more right? strategy that will at premium executed. make tariffs was the

Troy Jensen

Jim's about gross Great. follow-up Understood. just And then question just on margins.

items in quantify margins in you'd benefited how your think Could XXXX. one-time won't that items. Pennies, kind gross remarks benefit repeat I of you XXXX favorable that some you maybe in mentioned prepared much got?

Alison Dean

future had of of very themselves items favorability, warranty favorability, There rates, it some handful none was were favorability, in items, a some for have of we years. and We we meaningful. a had return would of favorable affects normally handful small so which forecast smaller some year-on-year was smaller we really

Troy Jensen

question, X% investment. to and become XX% to it, last with of my Braava Understood. about grew it XX% And I'll increased XXXX implies growth And then this. for see sales some the the only Okay. floor,

So just that I the was new be you expansion, know marketing, it but this would some you just products grow more you like to conviction, did I there? mention hear the conviction geographic XX% to can about know, year. going

Colin Angle

organization for you our together achievable our when that an bring and what right learning. we and and period every us on and channels did a we're so like thing what measuring, testing a plans with learning mean, Roomba, and were marketing XXXX, messaging I reasonable the based to a is believe sales we to lead of thing works, are to all types models Sure. this customer, get our

to the more a as can to We come going. have but that growth how that's we to through the believe at that talk of that about year, leads the So, plan year, we do definitely here beginning figure.

Operator

you. Thank

from Markets. comes Latimore question next Mike Northland with Capital Your

Your check line is open. please mute Mr. your Latimore, button.

Mike Latimore

X? March EPF materially change falls starting I have XX% two questions. guidance if tariff Would

Elise Caffrey

repeat question? I'm can you the sorry,

Mike Latimore

for 'XX starts in EPF guidance Would from kicking March XX% materially FY X? if changed tariff

Elise Caffrey

at We the would reassess time.

previous the more of in tariff questions, one to intent the be increase would offset said costs. I to order As our incremental prices to

put current would our we through guidance that that As if thought to updated do be analysis we ranges worked on that needed so we the we've

Colin Angle

assess in that saw It could would on we into the impact certainly, have happening an increase signal certainly action need whether offset risk for the would change year impact, but what expectations the and price demand any products. market. can we based risk on the translated We to any on our

So a requires of definitely scrutiny. that event would an be lot

Mike Latimore

revenue Is fiscal you question 'XX. of next is [indiscernible bought in that my units the in or terms XX:XX:XX] dollars? the And

Elise Caffrey

terms That's spent. retail dollar in of

Operator

Thank you.

question Dorsheimer Your Canaccord. next my from comes with Jed

is open. line Your

Jed Dorsheimer

in terms particularly couple end of to and to consequences business But think try prices channels, mean just channel end to traditional you're A and of ability you're tariffs. cost I'd you elasticity I I about about guess business to prices. of the like it clearly, the way the have how Nice tariffs. the raise in per of understand that about the through XX% raising as start autonomy to you high the of first how better year. questions. as relates the thinking to more offset sold

Colin Angle

Sure. We're models point because what has based on at trying X, in we to talk the increases very judgments early, the information. only too been make certainly made these dealing point that have recent. where and this best are to even It's about uncertainty the price time in and at impact year February land are in a this on available we've

I more price the the elasticity shoppers that and products are premium is points our are a think possess. price strategy there level our on the is of is on because the much is less elastic the features which fact lower more premise influenced value the that I a shoppers price price focused on at end by think at our premise based solid based that more

along skewed even in so the adoption. earlier category. are in on response strong North philosophy. of days based the believe and And in we sustained market still these to growth tariffs penetration We the we that our lines the figures, of America, We've seen that continued

strong not impact growth saturation this so an And continued is category and at that time. we should anticipate

industry gave So, that that the increases that's most aggressively. that into pressure those comfortable studied actions growth action price factors rates. today. a of the the impact overall And that XX%, we led we're were of And of gave. guidance mechanism the Certainly, guidance we the on with the some the we

Jed Dorsheimer

more. I two have

two enhance that the just products, of or that of the could to thinking your first in of how The you're with iX+ elaborate is that speak terms the to data? data of monetization intelligence and the iX, respect of on the you using capturing of within

Colin Angle

strategy this function. for we've improved Sure. tremendous cleaning. smart and mapping, imprint The of go the improved mapping is the in our of primary a the monetization room the directed my kitchen near-term already the use And seen experience differentiation in That's clean customers. uptick

They're fact, robot, is long-standing more that. scheduling which doing cornerstone. the In people are a

So -- that significantly is valued we have that's implemented this encouraging very that feature feature that is this by our and customers.

in could place this revenue and So not at including And to that how to and talked it's to we streams develop our quantitative we value when should exploring a it's through would We're value we're magnitude relationships, a but be make little our had early time those market types some continue bit honestly about that might as are any streams what and category idea differentiating to assessments that to opportunities The ways monetized, with Google. collaboration continue of revenues leadership. still their be. and LTFM. these be bit little the the and drive additional there create developed in partnerships other

the it's So through about I in have of quantify the opportunity Longer-term, we reiterate, data commitments use and significant while differentiation. not our but respecting would customers. the all privacy product our with near-term,

Jed Dorsheimer

-- comparison looking question this to more spending; we've how more I'll to respect metrics, And or whole mix jump new different a queue. I'll for what of product about Terra, you seen you've are you different then in channel Thanks. marketing in through me then last leveraging sure looking the are thought implications, probably channel going or existing thinking be this and is jump that beyond Roomba? you versus direct is the Great, of in terms out of queue. -- a -- in to With to are Europe for I'm you; you're to the channel

Colin Angle

many require us Terra of is channels there -- we but be be are DIY channels between, leverage important. where then we continue do to currently Roomba. going Roomba exploring very sell direct current will that not some where it's we open that important sell that so of in to to certainly as also could kind centers the well additional; certainly as some use, we're

be effective is which building for will and current support what that out believe market a to channels I We supply fully as leveraging and you earlier to chain certainly opportunity grows. distribution then avenues think expanding this the Terra fully. Terra Roomba-sized see justify

Operator

Your with next question comes Dougherty Anderson from & Charlie Company.

Charlie Anderson

and next could on fell that Alison, year if have CapEx this impact, on don't I then China chain for the forecast I maybe or program? And you diversification. is Malaysia? then two-part wanted fully if to know China And to to a staying touch total CapEx year the wonder I start a just with follow-up. you I all question Are going that anything, cost in you're at guys are supply you sort leaving guys of produce

Alison Dean

Sure.

we have say So at step; first if to I'd our a many, we plan Even China. accomplish. a leave move years this to that Malaysia many take many, don't to would did is, fully point

step think significant diversification should for still I China foreseeable future have you the towards China. outside Malaysia produced we view but being first in as volumes a will

indicate In investment. that a probably terms of CapEx, plan you for we CapEx I'd $XX a to year. diversification related million quarter is next chain say did know about supply of

Charlie Anderson

margin? market. you large Terra, as some as heard think the talking about Got of in about quoted kind for wonder curious I then gross before of you And profile if I've then are I'm margin I'm being long-term assumptions the accretive the what that's underlying mower outlook a that to that to Thanks. the curious Terra on of would also And Roomba maybe for there too the is then, be? Colin the of get what it. And market you margin case? terms product, I operating

Colin Angle

of limitations experienced spent there hampering million U.S. lawn mowing around top mowers, lawn lawn is a even these having every services. €XXX with billion a €X talk robotic wire Okay, on on so that €XX to today, -- something can is the bury market both, about that spend the about for billion of of in I year exists on

these with you talked we in that numbers had type I Roomba, of very this see market. about banking when Roomba-scale easily category comparable are So opportunity, with the could have we being cleaning if overtime success where the scale

spend a people a do money with solutions. can know, lot people You and robot very spend money a superior believe favorably they this traditional hiring we lawn on work, hardware, of lot experience of to mowing compete

Roomba that's is I that this overtime. color adder to could growth significant So, assertions little cousin the be legitimate, a very this not but the think behind

Charlie Anderson

on then the margins? And

Colin Angle

there On an be a the believe we product that iRobot is opportunity margins; certainly margins. line to in for this with

which us would nothing So there disadvantaged fundamentally about in put is a this position.

Operator

you. Thank

Citigroup. Your comes from question Merchant with Asiya next

Asiya Merchant

you and results, great Thank again.

support goals you not your of should putting rolls bit about walk would investments in would off And imply from of get bit Just XXXX, of and tailwinds, CapEx here the some you. are for you margin there a can questions diversification in XXXX, and through a us in decelerating your Thank in given a the all the from just further the heavy Braava, the year. and further prior the looking can diversification? significant; If that that? amortization very you XXXX benefit But manufacturing the any acquisitions into XXXX? not quick just course growth why then clarity baking diversification vacuuming off margin, on in or to if a in up more little go you're for out given -- are little then bit, that talk on provided conversely kind couple you've quite the your that on guys pretty unit Alison amortization

Colin Angle

Sure.

it's question, that first to so only in our have what's rate significantly X% at revenue slowdown of happening your than plan on we Braava certainly growing Roomba the side. remember, expecting in the than does XX% we're grow to faster Roomba. XXXX of higher not that But growth materiality So the and planned for

Roomba on math, as Roomba would I predicting in you all out when company minor a impact it's XX% assumes So of the and I and growth very growth strong go work think -- very XX% not markets. a continued to

work through -- I Roomba. see on again we're -- bullish your that you'll that remain we So you model, think when

Alison Dean

completely will away will in be second point a the the -- amortization right, out, that so XXXX, your pickup. go On million $X Roomba you're

think on However, move cost to the that more are Malaysia, as volume right to which we of we as us is I able a to advantages quite unit going is take cost that like-for-like that per a mentioned and of probably cost we've will some in thing And higher. going strategically to standard near-term in out more manufactured earlier, the get the product China be Malaysia in China is few of do, to more the versus to years achieved. order

in You answer able actually got about. to get we know, off little terms after I how early more. -- we've in produced traction we knowing soon we so be many years products cost will that to days and our seeing How that all getting us what will Roomba in it today. We've in more Malaysia XXXX; and Malaysia, will a the of go since that's feet be China can't seeing start under efficiency leverage? line

Asiya Merchant

on think continue How underlying tick thanks I updated Braava as little color. should ASPs should versus I if have fee unit? very for unit mean, a you some extra And ASPs. about the talked the the premium ASPs past up as assumption Terra's in clear you robot, in gets color assume I -- know well great, higher roll revenue on guys you increases this. roll how -- quickly to maybe know, versus again, the assumption, bit Okay, about just your as ASPs? with we here we relatively out out you Should think about Terra, provided your may -- on ASP we

Alison Dean

excited product not we clarify, so market, XXXX by to will iX+ an to unit bigger a not Terra significant the ASP driver in our is be get remember for of that largely do and help. XXXX, iX growing a So should we mix, it in revenue. uptick are we're growth in the that have financials. unit in driven drive, internationally although be But XXXX, We 'XX think player see going be really most to increases certainly didn't will and going is really again, in -- just significant to still

Operator

Thank you.

with comes JPMorgan. Your Mark next question from Strouse

Mark Strouse

congrats also, the and kind the start I here. just with two-part updated X-year to I morning, Good wanted of on on a targets. add results question

tariffs still me then of lower margin. first, change if just that's operating So XX% a target a tad. CAGR pricing, the there. gross kind and targeting slightly but despite wrong in I'm the I and on in revenue XXXX; And assumed you're just the correct about that's the margins, down a of function is

that's is So kind the that industry you've an just effort manage level in just kind towards something due profitability? change the OpEx if less to to of seen of curious if simply that requires investment or of lower

Colin Angle

over challenge I XX% out the have to this to put for think we go that company grow OI period.

the hold we company call, through like ago. described thought commitment we given we a have sounds we than in on that the years business given at bit And efficiencies, progress little back still step could despite that seeing growing few thought a we of maturity more the aggressively little of leveraging the could that maybe our a the a OI margins improving to

tariffs. happy So, despite the of to a I think impact maturation target it's very able the diversification to of reiterate cost we're in and and that story the be iRobots positive of

Mark Strouse

am going assuming I then to And back simply just in just CAGR question, right tariffs? revenue the that's

Alison Dean

view pretty biggest that driver as the change, minimal. we in That's which

Mark Strouse

life another just I of think targeted should mean, obviously of designed how we that? product, the then your on of features about you product, as ruggedized question this what if life? you mentioned expectancy I Colin, but is And can. Terra, some early the this

Colin Angle

sort with compelling and X-year-target. batteries mean replace it, of And I Sure. take that X beyond after is what reasons care willing of upgrade forth experiences life go to X-year and if positive years. to you're the Roomba we've targeted so

is meant to delight product to think but or to still as customers for viewed is a than that to we say I we do seasons. be robustly early multiple that which it's whether philosophies Terra, brought similar can durable fully better able certainly this not

Operator

you. Thank

with Your Research. Ben next question Battle from Road Rose comes

line is open. Your

Ben Rose

the Again, Terra morning. on congratulations good and launch. Thanks,

in Just a quick question Alison, initial regarding make I mix of the the sort line you're can in know you with demand is one or the other? whether if greater it, don't any whether comments than that expectations your seeing and the on between iX iX+. it's

Alison Dean

Yes, the the and are strong iX and iX+ more out as of we coming been greater the iX, iX+. than very of gate, sort towards iX+ saw the adoption people particular, sales XX% going -- in of going are leverage to probably has the than

Ben Rose

Colin terms Alexa And interacting at in kind be Google are smart customer products. of home any this the other? indifferent difference quick then a point? the for using of and home there Is versus the really just system maybe with a one Would material iX, iX+ question how to

Colin Angle

beyond that's just clean house current the able had call the being great clean going So we from to interface room to clean; the the extensions we both what to enabling with so kitchen. companies in functionality, support launch the directed

but well So, but features that, are at rates and at this to point, hint smart both with collaboration functionality that deeper only what more do I'm been companies at this exists to beyond different could work more great new to and do say to at have point, a the it that going house There very of these -- with that we add be require lot lot experience, both the partners. to not functionality two a companies. And to is ecosystems. these does that

Ben Rose

great. Okay,

and the iX does accelerating of one around of environment and sort sorry, makes potentially environment. kind to production final an it tariffs And just if of and the that the you anticipated anticipation relate Alison, the question sense? increase, for of in into U.S. current iX+ and intake the Are

Alison Dean

any wouldn't I do of acceleration. trying say Yes. we're to sort

into Our production the any don't mentioned, inventory capacity, well sort U.S. opportunity the we've acceleration Colin particularly I that lined real as as of as guidance against region, products and we're the for think is iX+ is all there of working on that iX to new up getting given.

Operator

you. Thank

& a Ricchiuti follow-up question with Company. next from Your Needham is James

James Ricchiuti

do a challenging just what why the hiring that the is persist and you that one quick little looking curious XXXX? to a R&D just people of think or comment made -- was lower. a was about for? in And reasons is more You bit case I'm your type it OpEx of of becoming you're timing get this does

Colin Angle

all not is slow of of and navigation we talent certainly help XXXX planned new iRobot of and attracting It the that certainly us back the because a get been We've into will the in to we hire. where challenges challenges XXXX saw of now us does the that visual address that building best love timing case intelligence, to of hires hiring the programs believe would some mapping down. place machine experts exists we object a recognition, on in talent that artificial planet. learning, our

additional that our our how this we talent hiring to certainly and top in growth us some the and little content other we make bit go left source the tech us in in top causing with our for against short 'XX so of talent direction companies and robots technology think compete strategic And for plans I investments a 'XX.

James Ricchiuti

Thanks, it. again. Got

Colin Angle

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

Operator

call. concludes disconnect. may Participants That the now

iRobot (IRBT) 7 Feb 192018 Q4 Earnings call transcript