IRBT - Earnings call transcript Q2 2020

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Operator

Good day, everyone and welcome to the iRobot Second Quarter 2020 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 Andrew Kramer of iRobot, Investor Relations. Please go ahead.

Andrew Kramer

Thank you, operator, and good morning everybody.

call Vice Chairman Zeiler. President today's Angle; CEO, on Executive and and me are and iRobot Colin Joining CFO, Julie

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

Commission. revise of new can whether will information found our reference the public result in iRobot these these as during obligation a circumstances. our we or Exchange financial with conference undertakes update to forward-looking disclosures financial and Additional to this no non-GAAP on non-GAAP statements, or net profit, income, uncertainties income to expense, performance Related provide be filings information and risks Securities non-GAAP SEC tax measures financial that including non-GAAP income believe potential. and operating transparency non-GAAP results G certain non-GAAP We operating by expenses, per additional non-GAAP net income non-GAAP iRobot's our operating gross underlying as defined share. and help Regulation call,

the quarter on Also end with the www.irobot.com at XXXX unless financial at are provided issued of non-GAAP call Our press the definitions are results provided comparisons of financial the measures quarter is only the stated yesterday, be to financial today’s of on these quarter most website these which available a will conference the XXXX. our and discussed the comparable on release of non-GAAP and second these of measures financial end non-GAAP on second measure in financial tables each is XXXX metrics prepared directly GAAP we remarks. second basis reconciliations of otherwise, at and

share Colin additional call, Julie company's detail we'll agenda final discuss our In conditions quarter quarter call for results, market Colin terms prepared will perspective the the today's forward. second At for current our Then, our for second and turn some the outlook. observations. briefly Colin remarks of point, questions. the insights the his highlights on plans over review results key financial share going will open with will call I'll Angle. about our and to wrap-up this and

Colin Angle

second thanks largely associated the COVID-XX morning challenges, Good thank our us. to quarter team. far, you and major the and We resiliency the successful market on thus with demand strong for global been of We've pandemic. primarily navigating focus joining and entered focused global commitment,

a results result, continued delivered of our advancing we and QX strategy. stronger-than-expected elements key As

we QX of and QX terms target the revenue ahead In quarter. higher of entering reported performance, well million, of X% 'XX than was which our $XXX our

translated into exceeded due which our revenue notable the June a two additional management. update posted QX million, from last a our $XX Our disciplined QX gross weeks This for to expense of improvement quarter. and profit mid of unanticipated operating revenue, margin the in orders higher $X.XX. in EPS benefited We

Japan expectations the decline has home QX top and Revenue growing amazon.com traditional pure-play a by that we maintaining online of during EMEA. related each of the retailers taken adjusted than strengthen, total in much and and quarter, respectively, the e-commerce on estimate April in-store over Overall, we the retail we retail In more prominence campaigns website grew includes go-to-market bright late websites XX% the stay-at-home our and our quarterly represented activity XX% pandemic. for saw geography XX% with strategy XX% continued to U.S in line at QX major With offset and revenue performance, terms our a which emerging clean support our our in e-commerce, traditional promotional of exceeded points our greater March that like revenue. to limiting in mandates, approximately which of partners. and XX% app

thrived are initiatives, aimed ties QX as and only growing business and even buying to building our at nearly implement starting we Our XXX%, just the experience customers. on app, in at direct-to-consumer our with irbot.com stronger enhancing

limit As steps operational our continuing of signals, COVID-XX the has taken our test the global agility to Malaysia on we partners. of created demand in operations detailed all which and last China has quarter's and supply Fluctuating parts pandemic call, business. challenges, and impacted to manufacturing chain spread,

and it improvement in in vast build robot past of for a over underpins QX vacuum resilient been globally saw While array cleaners. which notable We momentum the orders. services, several consumer declined has a has months, goods spending sell-through

quarter, customer's our spots also our During investments of technologies. XX of our strategy experience the demand. growing marketplace, important lifestyles. and thoughtful from $XXX leverage QX a progress supports out top our of illustrate of of Roomba the critical strong made in robots, vision sX priced success XX of to the premium consumer U.S., in In cleaning better up intelligence grew at revenue products best X efficacy the X weave are selling Japan. of impressive on features notch, nearly out reflected iX jet robots particular, premium in reviews, executing understanding and X XX% is of consumers key is this. we Roomba These favorable compelling I computer in and to Europe and Series and in by represented list and support out exceptional home which and will revenue. awards RVC robots resonating the XX% combined in products why and mX, models occupied and that and digital with our Series QX, and XX total with autonomy of guides AI, underscores The and by in Braava adapt namely second a our these performance that an providing aspect development cleaning help our roadmaps In the Differentiating strategy elements our that floor aspects

the offer Moving AI experience. how cleaning looking smart into project new on progressed forward, We're new capabilities our support robots driven teams introduce give substantial the of also we and later innovations forward insights more further our to has This and working clean, status. performance to will home even a the and mission with over and These and digital R&D when year. from launch expect features control advances elevate enhance robot new our majority of where, new and customers Roomba this home. performance schedule

purchase in-app on an customers connected home or our the subscription enhancing approximately optimizing metric, Roomba our building is ended flexibility lives of will focused their opted grew We email how which This encompasses Nurturing it new loyalty continued both, of device digital be opted customers owners front. all another app make potential QX. product likely will of in profit ours. with our or services. is X.X they We’ve messaging communications. robots greater providing the and our from XX% irobot.com customer into consumers further With with next accessories, and We We iRobot have campaigns, and strategic the to enduring with are on like in to that QX who initiative the one to investments also more that this and our customers million in our receive including tightly aimed worldwide. priority. believe relationships at excellent accelerating Roomba in value marketing progress multi-year who embedding increase make this owners lifetime

streams in growth. consumer to that interest efforts to an the can Over profitable potential new XXXX. in us gross help new represent coming launch recurring deliver gauge in our quarters, our to revenue inform margin our important build and element Improving we pilots plan service offerings plan sustainable continues to

exclusion in towards the Section end and gross With QX XXX next April it success exclusion extended. tariffs of receiving the said, month, expire step List exclusion apply the direction. a temporary to related right benefit contributed is the margin. will at in unless Roomba a strong that Our that was from The

any the end point January month extension -- either extension that manufacturing until of XXXX. only soon, remain whether on the focused We expect our be tariffs USTR reduce return we've XX% learn that on we this will at next will exposure To granted XXXX, public the testimony granted to would to leadership of an although indicates recent apply combat help X, diversification. or China that

in noted expansion quarter, has manufacturing Malaysia. As disrupted our last COVID-XX

moving in it takes volume. The reinstatement to new premium contract tariffs the Malaysia XXXX headwind qualify to second as time higher our in Given are these costs to production higher expect optimal we moderately only of versus tariffs because These the a delays, year China manufacturer, lines costs a material incur manufacturing than XXXX. and XX% margin during of ramp XXXX. and with and next are in cost of improved gross Malaysia a

our as As XXXX tariff all similar XX% margin we directly X assumptions Depending volume a U.S diversified to to on point of headwind reminder, from nearly $XX came face in and country, be efficient chain contraction. of that believe supporting supply costs trade end manufacturing scale by reduce thereby from XXXX will will We a million were and tariffs increased next, our us a could costs which growth year through production in that enable gross at our revenue this decoupled China. geographically margin midway in policy. our the XXXX, U.S.-China to and broadly percentage the for the the year Malaysia, gross an

call. a over has with territory. growth accelerated ahead, retail demand geographies As momentum. and various largely growth rate move countries In units double-digit year conference healthy reopening we’ve in to in in Sell-through the year-to-date our sell-through half into due improved growth of U.S., EMEA than and premium our seen sell-through brick second robots. strengthened online double the we has the Robust stores low QX since we each growth our major look into our gradual more for mortar of

are campaign low. has positive levels to inventory same At returned campaign. -- Japan time thanks growth, strong with summer retailers early While to relatively the the sell-through

shared half and their $X.XXX than now As limits said, half about be different full-year With that of as paces, of solid stimulus XXXX's we a manage in there subside, more to the aggressive inventory, we orders. timing second optimistic continue the update. second than world mid recovery remains incrementally to competition to XXXX. of were business expect around slightly we about at our XXXX the carefully proceeds June, when and our We economic magnitude significant revenue to billion flat are growth revenue uncertainty half revenue and result, which prospects second anticipate all relatively during visibility our we was program retailers government demand higher

our is demand ability by half tariff From COVID-XX. exclusion, second Just half improvement a extended as is to not seen additional Clearly profitability of we've our operating Nevertheless, cost the notable, outlook be the a we top will our on a impacted detail into resilience. first will spending our results and exclusion meaningful through profitability up source be the XXXX remains standpoint, just prudent year. materials in operating profitability of the effectively recently line challenged if reflects that second unprecedented will were solid half provide year in our EPS our and components to challenge Julie the raw performance. moment. test chain as shaping our about the supply performance and converting benefit focused while of and

Julie. the additional are fortify to exit will for and leadership, call At long-term profitable will closing their drive well her confidence. some executing offer to this strategy our the We optimistic turn shareholders we Julie? category to positioned over this return over our that increasingly remarks, growth I reward thoughts. point, year on After I'll to

Julie Zeiler

Colin. Thanks,

non-GAAP As outlook my our about be as our basis. as of done will review second well results, financial Andy earlier, mentioned a comments my on quarter

mention quarter unless gross XXXX, comparisons effective stated each the the unless margin, otherwise income second will against per profit, and rate non-GAAP of corresponding are expense, metric. noted. So tax share otherwise, operating net mean operating All of

orders their cleaning growth second U.S was the XXXX better our to in to and million with driven floor performance quarter. at X%. entering a remainder. up in expected X% targets of XX% as Japan strong revenue in models. by revenue financial mX U.S., partially up than up. offset expansion Outside with priced Roomba premium Geographically, decline the softer in XX% robots and represented revenue XX% grew outperformed strong by Braava mild quarter in in our the other Our large the EMEA. mix, Revenue markets was other the regions mostly of XX% offset grew $XXX Braava in revenue. growth all $XXX grew due XX% making Total international substantially by growth XX% by were for part

at expansion into as strong Day orders the growth key and half Mother's second was which QX Amazon, revenue. Amazon revenue behind from up grew related thanks Father's revenue One the needs. in XX%, lead drivers their QX to events of e-commerce to Quarterly represented the robust well as like of support XX% from Day,

well planned activities. write with Our favorable Terra plan, gross to of margin supply product of our of the mix channel XX%, a and ahead lower which than combination is higher due down related X nearly and of with benefit components reflecting versus first of shifts prior quarter. chain associated million timing second was points second the charges revenue, 'XX, $X costs million no tariff year's primarily the margin percentage the Gross costs associated than higher in quarter of quarter $X tariff and in tariff costs QX other

in into of in million Our tariff had margin $XX revenue. QX impacted XXXX. represented refund costs XX% QX of operating expenses X% effect GAAP went our that gross decreased of reflected since by $XX million and P&L tariffs September, the the

In realign completed which campaigns spending second critical us R&D primarily particular, in us relatively certain to of promotions. across enabling costs, into resources helps and expenses During areas our and million while sales success. organization, marketing G&A the reprioritize and shift lower flat, declined long-term costs to due while $X QX, by to year we operating and timing also to actions redirect stayed

Given make quarter. debt our reserves to not accounts of any adjustments the we second our meaningful the bad during did state receivable,

Our income revenue. of QX or $XX XX% operating was million

the pre-tax refunds. nearly tax we and related expected due tax Our tariff was QX to changes XXXX the impact effective a of XX%, in lower primarily which rate than was profits

time timing related a level. year per half was days costs primarily was the the with QX removal days the $X.XX. million of were income the orders The spending or one activity. at quarter. of and QX million million and of $XXX which ended latter $XXX capital inventory net the from capital shipments the changes of reflects our QX with ago, same ending tariff in primarily investments, during XXX quarter. days combination stronger-than-expected year. QX decline $XXX inventory in the and in Our or versus throughout share decline DSOs decline cash $XX We and reflects compared XX demand million of last The XX, XX reflects working

reduce In terms retailer, that entry-level noted, shape our having inventory. excess of overall inventory Colin progress in the quarter ended good we at solid to made

that sell-through our forecast, With continued a cautious earlier, the view to XXXX near-term exclusion. of of receive As that our outlook performance to and whether prospective competitor remained actions, our our consumer Collin noted an are extension has our we factors including number due improve. into about spending recent to control said, tariff activity, trends, we and beyond to difficult sustainability

done to have we financial As explicit able offer a previously. aren't like result, yet we targets

will growth business potentially a manage low range However, our we'd of our revenue update -- and our outlook. low -- view as revenue help revenue, as issued single-digit share our XXXX double that around over now XXXX like we color to Starting relatively billion. possible $X.XXX annual much reiterated to XXXX from with little digit a over ago, expectations we decline. We an that revenue believe expected unchanged, month

revenue our X%. context, half further down For first was

a current stronger the second expectation second in on EMEA. now, the to fourth third half and single-digit quarter currently third mix in U.S growth is modest in current any fourth Our conditions. the a revenue difficult is that given the growth the and a mid assess year, change with said, the challenging given full-year growth We in market solid basis. inherently it half rate revenue quarter. and forecasting than revenue With Geographically, anticipate more implied Japan we in quarters between percentage improvement expect range

denied would Collin a to Section in non-GAAP and tariff an is expectations, said, full half as vast range. in year our hopeful extension XXXX the margin above assumes of Whereas to XX%, extension margin gross while our original whether be gross basis XX% GAAP exclusion on margin was and of know month. our of range. full-year a XX% tariff don't be to expect we gross the XX% been will we This reinstatement terms half far. requests both XXX imply are granted, the XX% In low next the slightly gross the majority thus margin target second That we first have

our gross from be average benefit XXX expect historical we as promotions third than better inventory, our holiday quarter We various subject to half margins practices. Section to execute and with second not tariffs QX consistent

due we invest are and XXXX anticipate drive in consistent QX marketing market top to the overall With expenses we costs growth. Looking compared expenses the our with higher costs, closer will a and conditions. media currently revenue year, in have certain operating trends uplift certain invest that operating historical QX, to levels line change to December half QX in that in the we followed into on We to said, shifted increase based an first working operating from moderately and for subject as costs holidays. of anticipate by be advertising campaigns modest

are XXXX revenue the tariff anticipate mid of Ultimately third the our quarter. our a be We We perspective. fourth operating and from as single higher second half will revenue. full operating from a income unfolds performance quarter percentage reflect margin profit targeting how than operations income in to year a digits in

and As projects targets our to range provide we on to of the out XXXX, beyond. chain, efforts wide a R&D go-to-market, set XXXX other required execute successfully supply and for programs clarity will those and close

the profile more the produce and of million for count actually tax a We year. is both notable modeling at in with improved in other than effective help U.S diluted abroad of shares. assumptions line rate XX our of XXXX, which in terms the profit high-teen, an share the In our start will anticipate plans

above over would cash receive forward, a to that the from tariff like our $XX anticipate we note in started receiving it tariff our relates recently payments government. refunds to cash position with to At As time, associated months to working over stay flexibility coming with I may two U.S We over needs. ensure U.S going same over related demand globally million XX that Accordingly summary, XX% the to Custom. closely a DSOs a understand support quarters. with levels the to to timing to prioritize the inventory the can next within three to elevated discretion the we've quarters. of owe we to mobilize us of quickly continue QX is refunds the and We the of these the refunds at next retailers continue accommodate our I their we momentum In should normalized that levels. more expected potential note over plan We in anticipate past our coming months. in before build in seen shifts DII return peak months. business historical steady

As of enable We on thoughts. EPS move to fragile this confidence solid into global spending revenue cautious second We second now half will the back levels. we a I'll the remain to that half us with committed focused forward converting turn ways for to result, state to a designed improved call profitability relatively prudent business in over operating the stronger we performance. these environment. At meaningfully said, given company. revenue managing remain and Collin the that expansion conditions half With plan our difficult closing stay market our first XXXX grow to macroeconomic and his emerge from as point,

Colin Angle

Thank you, Julie.

of about remain we the long-term business. excited our forward, moves potential iRobot As

helping million a that product than in products shift support are we growing leverage We cleaning X our continued accelerate base differentiate connected seeing mix to our the our our customers. experience premium is toward more as of strategy investments to

look we half XXXX for beyond. processes XXXX strong on advancing to our planning and a we finish second performance, As are

beliefs timely passion fueled bring and our to our the unique my and Finally, company, success close that years iRobot been industry, set best past experiences, a the over I who noting it's of and talented backgrounds. in the brightest with along by has hiring commentary by diverse XX think perspectives, individuals skills, to

future It's extend diversity CEO reflected in the I well last us we to and to we needs our develop within communities. our work our of support together social seamlessly educational new will our global practices, and Pledge month. corporate Last that invent to beyond take responsibility range our personal diversity programming fits website month, efforts root training STEM-based will for diverse to and important programs These to consumer sections advance questions that our signed information production, inclusion efforts our and continued Inclusion details within We with Operator, to a now. Diversity a products, underserved remain resources, global robots our unique, and of That relevant, racial, as students are hiring and base. diversity in ethnic, and updated inclusion philanthropy. global comments. continuing our curriculum the a and Action with about workforce. timely extend Strengthening that efforts workforce concludes we people, gender and along

Operator

you. [Operator comes Instructions] from question Latimore Our first Northland Capital Mike with Thank Markets.

open. Your line is

Mike Latimore

much. very I the X, August an at further just to there's whether -- in Thanks on the it early just Yes, really XXXX you tell? is I topic, that Great. is thought or point, opportunity I guess get too hear tariff will to guess, you no exemption, this guess the get exemption on a

Colin Angle

testified end that of would he There expire in the at granted the explicit Lighthizer quite that was -- exemptions year. would front of be made Congress Secretary where

that given. guidance we that public testimony the is the is and that So have most explicit current been

all of to unfortunately drive continuing base, energy to the our we one So which the COVID-XX. has diversification are push been manufacturing impacts of with of

overcome back and do diversified believe our place the bans the ability get impact track. policy and that trying the where travel substantially we do delay. on into situation does are end a in We not see effectively business anymore. has by there's because created we that XXXX, remediate trade U.S to we'll work of haven't And able people geographically Malaysia, been to we sending which in to But be

it. So working we're

Mike Latimore

it. Got

sold been online normal outlet? sort the or mix great. sales the have products of skew great. high-end obviously similar is Okay, online more to average, the that And retail online Do the the then are than type towards of

Colin Angle

conventional that premium. the e-commerce down it's to wisdom skew interesting, in tends While says

up The in always the at you material toward very a value the that -- go online a look has sales seen and you favorably look can have we're whole, We for shift you there's when products. as iRobot.com skewed general, in seeing. online premium, can but

clear So up of which evidence these that seen has mix, the in QX shift sort online bucks very we've a traditional in been trends.

so with premium And the we're a And very pleased that. seen for that capabilities delivering appreciation our real definitely we're in products. I've

I shift some it think true So that's on even goes against wisdom online what because traditional a can deliver.

So we're very excited about that.

Mike Latimore

Okay. Thanks. quarter. Great

Colin Angle

you. Thank

Operator

with next question John from Our Lynch. comes Babcock America Merrill Bank of

open. line is Your

John Babcock

were Good was taking just thanks questions. drove in I on I premium mix expectations it that quickly -- your mix are mean, for And products -- on to morning mind? the in your during did quarter, to then happened what promotions occurred and how contribute your the my the second to contribute that? half quarter here? the this also, guess, that what that that might

Colin Angle

level premium don't functionality, customers. around of direct a features really products do home products the how idea and -- think the the And and one's they the have that I’m has from -- these out they of the keeping want sort their to thing evac importance the is robots directed augmented want. our a customers room in cleaning driven want with where and given the our than its they better our from and be And I think XXXX since seen they clean, to it's at more. clean robots the autonomous, over robots of more expectations they strongly auto extremely experience, the rolled can premium to the we've to dockings, of the what impatience resonated that robot real robot are with I speaking do skepticism, robots lives features control at home, our just the by they highest our work that have having I valuable people think demand. And what shift we can't at So robots vacuuming how operate go this

of end the bigger the is at of the starting intelligence So, in day, to robot and the differentiation. bigger play

John Babcock

Okay.

premium into that, mix be second the that the basically from there should some for And so can extrapolate I benefit to half products?

Colin Angle

I is the right now challenging. think of world the that predictability

think appreciation features that mix fundamental on I hopeful advanced will these continue. it's So of shift we the as based are

say, we're what year is the going prior that to year the able we increasingly to over So the and year showing the total recovery call, prior as start full over be to show on I confident be to like lean we up going this is forward back to year full were leading of the to as growth half down look to first for a think to year. from slightly half, flat us in

So improved trends important is are mix good and a certainly shift that the the driver of performance.

John Babcock

lower said China. And than are manufacturing ramp cost of XX% in costs be on that helpful. with mean, will about next then you how that's tariffs volume Malaysia, moderately you I Yes, the also thinking the up of there? production then And

might was what able you I if on by to so And you add be mean wondering some moderately? color

Colin Angle

the Malaysia, of lower headed need the of The volumes premium that this -- XX% -- but robots in end China we in get same with volume to get pricing in. We Malaysia last sort end as will jump we XXXX, the as North think in I'll America manufacturing to were up line ramp. little we've is volumes and at Julia ballpark premiums to least never mainly and our XX% getting fully to that enjoyed may move will year. premium ramped to China color to can manufacturer challenge our give that type a then closer is toward level a in products certainly the down We represent the possible Getting or of the over be year. consistent, That's costs. of to that with able one

to to. that's going the get so take Julia? part And to of 'XX better

Julie Zeiler

say I thing obviously guess strategy. And originally is I the that where than would we is our slower other began

We line out are of work ability to partners those engineers constrained as Colin to get manufacturing in noted in transfer. really key that our our and

haven't finished we than result, had through our associated higher 'XX, a will do 'XX, we costs anticipated expect as and so the see volume. premium we there that be planning And that yet, but heading to with through

John Babcock

Okay.

done no what point. you by kind moderately meant So way this really at of there's to quantify

Colin Angle

Unfortunately, problem. and of actually Malaysia building a really it This travel fingers depends one in send speed on month that it's our the ramp not policies August, the up will we now and is because a complexity factories rate. can temporary And these of bump speed we're bump into people right Malaysia. problem in the change production. But crossing scaling

-- But lot It's going the answer and will less that -- activities temporary while to clear, question. of overcome get to many can get thus to can held of out -- volume we're partnerships impactful -- really have challenge plans, will really country to will be doors this I and end satisfying be open. going that this us it's implementation the done to and that take your mean, it us from as scale our wait we're and faster, ready things and beyond -- doing there's to is of we under there's starting year. But be So underway, by do temporary jump in control. a do it's speed as we most But the get work out everything at if the a and next a the be so of it is if we and which but a soon less in to bump to manufacturing to we than get QX. see.

John Babcock

some provide before wondering much color able last And great. question, on are into That’s what but the insight how I hopefully have clarity if can wanted I then just turn Amazon right. what which All it then demand can to quick is you provide say? you was see over. on you also, might And you realizing, just Prime quarter? obviously third there limitations Day there, for to be just

Julie Zeiler

Yes.

So let Collin I'll I'll add jump then and on.

back that think the anchored confidence we've the the color it's I trends improved gives year, of the back us half to provided we’re seeing. what to that really in sell-through

we think in is of year. inventory result our So we've And of better all sell-through as relatively that our we half second seen should across believe meaningful improvement Colin meaningfully the that with in the trends iterated regions. low coupled in revenue

we've to this is kind been of news participation in around of do relates to Prime event, Day invitation timing always public international in year that of very suppliers the while defer Amazon commencement Day, investors and proud prohibits statements Amazon remind supporting Day. the Prime Prime confirming the think it We events to prior event. we inclusion the prior from our Amazon need have to Prime its the and only and an to its to of As Day expansion I reports markets,

John Babcock

again. Thanks understand. Fully Okay.

Colin Angle

John. Thanks,

Operator

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

Your line is open.

Jim Ricchiuti

the charges wondering quarter. Good, impact of you. related Is might maybe also you on for chain the if to that Terra just the that Thank a margins of the morning. gross to a question I'm in there you impact Julie, Malaysia way activities quantify the the timing able good that? of alluded perhaps you. be quantify And to. supply

Julie Zeiler

Sure.

about a had let's related So roughly Terra if call versus I'm impact year, it in from QX point of talking last expenses. we -- about

Jim Ricchiuti

of Okay. there's a And more in if wondering I'm impact disruption was, size mean, you clearly I if, that and Malaysia, what could the just that? been -- of

Julie Zeiler

On the know how quarter do to I results, don't Jim. that,

Let that about and further. talk it about we me maybe can think

Jim Ricchiuti

it offline. also should discuss We Okay.

Julie Zeiler

Yes.

Okay.

Jim Ricchiuti

That's fine.

The I mean, question the see of of business. on margins -- mix, which direct-to-consumer in what quarter. more pursue nearly better a where XX% higher business you as the revenues, just there's And portion might presumably business, to guess part Colin. seeing percent a other I'm wondering a little the -- going bit broadly the more was this wanted of the it's in that is I you're

Colin Angle

We our is major the harvest for company. and customers, action numbers which grow could out about reach taking a started focus started this it. to of strategic we talking to the We Yes, directly.

and and through around recall, sure you the app million at reached us. product, have we That robots we're that at email but year X number If X whose the making substantially counting around of that end it with into to last access continued customers QX. efforts end weren't to both opted but had of have communications connected grown connected, our million also

from able million We quarter. are that this in million to grow X X.X to

identify, if for exciting can them on tremendous about direct top last The a would our probably in be in talked the my saw to the very So say impact business one customer list. [indiscernible], of we're on that numbers important, acceleration reach uniquely a and that's in you out we that's directly. including growth channels, very, that access provided the trend of as today, we aggregation uniquely our COVID-XX which but business. seeing can rapid through online quarter we extremely and And customers the earlier engagement growth on XXX% we

we been prior out I happened systems all growth even And so of that rolling of many our that improvements have in. say investing would that to

it's So a has customers online of our the process for out the this and customers investments of we're we're in well where continuous actually in very digital are better benefit the which And validation and probably of improvement ruled into our balance growth year, getting -- improvements responding intelligence in robot place out performance the in experiential of in making a in operation. robot. COVID, the the getting been sitting we're the interesting reinforce is to reaching the next accelerated that to our of our the year the products, because business and

this idea the in company our it the demonstrated as a directable as that understands success more technology, having by the with my be ongoing Roomba can an robot valuable. that that’s room better, that clean reinforces is home and idea buying your So relationship

think decent self-reinforce this explaining job quarter. all direct Where and we momentum a early I So business of strategy. growing continue seconds, grow. will there's we're few trying of that Well, the our like. in hopefully just in a do hit what will that a around be our maintain part direct-to-consumer on lot days in to a to XX% it we important hope could to Retail see strategy, it and be? can continue look that our but very just of going confidence We

Colin Angle

we would and the -- I our ongoing ended you that believe to efforts underscore is our way strong think we Colin, very we important that part a are how very complimentary of And where that as retail Yes. customers direct-to-consumer strategy. forward just reach our

Jim Ricchiuti

That's it. helpful. Got

-- just wondering the it Just imagination, but more effective decline question. a Braava maybe there how in And more one product? of because that's Braava there were the has down, I my bundling like promotions Roomba. been it it the was units seems I'm that noticed final like were seemed was reflection and with but end lower

Julie Zeiler

Yes.

we I allows mX particularly, link see consumer products, the think base is technology, the -- growing together. the work particularly with in Braava, Roomba more interest which and imprint you our from our and to see strong the what premium

that So important our at looking we view that interesting our as an way we're and products very with way resonate the consumers.

Colin Angle

ability, mX, And with the really well. utilization of the the with the that navigation robot more works way that as drive Braava

the shift broadly end shift included mX lower were from mix seeing So models that the the as a definitely we toward well.

So is fact, I in think saying true. what you're

Jim Ricchiuti

you. on Thank quarter. it. Congrats Got the

Colin Angle

Thank you.

Julie Zeiler

you. Thank

Operator

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

Your open. line is

Ben Rose

some opening the happening like the that or the Is Yes. get Good there morning. drill from on there Could It were factors looks the in driving bit Julie down half Japan. of to performance to confidence your strong -- back of in in more was and/or fact thoughts what that that Europe. to terms year? of stores performance? what's in Japan in happening after now speak, we'd very And a Wanted Colin Europe. your what's little and like you stemming

Colin Angle

Yes.

jump one. So happy on to in this

So let's talk with Japan first.

Ben Rose

Yes.

Colin Angle

products. been perspective of So the our Japan market from premium has strongest traditionally

sX of than the the was bigger be the going in other that in so rollout any of And markets. faster our complimenting to iX the of rollout Japan prior

RVC, benefited than Japan as in was the So grow the retail was definitely And and other tailwind added saw we pandemic driven growth, that a parts which in interest of to growth in that, in interest as that impacted some and one. from definitely world. Two, and well. Japan less

it elsewhere. And benefited say stayed, And definitely economy that. and points than had finally then move it help did I open, stimulus program to program, a government more so from the that will the we a

to that created So travel venue less for other discretionary with a opportunity stimulus and spending growth. program drive

of offset a bunch reduced in were store there clear Japan, the traffic So headwind tailwinds retail. in of that

EMEA country-by-country. in and by generality had most because the is there's brick and EMEA plus performance you lot of was But dependent So stay-at-home heavily put most broadest contrast, most XX% high speak the many was [indiscernible] significant the as get that of and -- mortar region that a and level, I the at orders. there's texture a the impacted region into well QX. I in

in used product buying And top of layer can't on so to then again, mature. we're the and speaking driven of online the broadly least Europe, COVID were the most the maturity to that I headwinds by, or I'm services get that, the where product severe

much So advertising, were from in essential where where that there online backending products QX being were very scheduled preventing us delayed over offering situations e-tailers robots. fulfillment prioritized were

as from online And so meet saw to example, surge go for capability that benefited that there wasn't ready demand was and the in the increased we America. North

we're has have earlier the seeing we there as that some those well. as to of definitely are of started retail, Europe spoke decreased Europe So headwinds And tailwinds market. some and of in -- reopen we a certainly recovery in

Ben Rose

great. Okay,

strategy think the there that in is words, enabling as internet, Colin. from in as it follow-up consumer do in to applicable that, other is U.S? the -- Is you products Sorry, strong just as on in the is quick the direct-to-consumer over directly the a the as you is your it Europe United So appetite purchase States?

Colin Angle

little say we would rapidly believe bit our strategy. And North closing that we're absolutely direct is but in I gap Absolutely. less a global with strategy -- mature a that a Europe, the America.

Ben Rose

Okay.

Thanks much. very Okay.

Colin Angle

You bet.

Operator

Our JPMorgan. next from comes Mark question Strouse with

Your line open. is

Mark Strouse

a to much about partnership -- few reports months morning. you Good ago. with taking a questions. media I was there for wanted Yes. Ecovacs that start was some Thank very announced the

kind what that potentially something something can bit kind opine you're getting return? partnership you of strategic how providing anything it expansion, you're if is geographic I to partnership, as products out curious of is as And what Just important more there be feelers or just could more leads guess, to that is, on that? that, putting it a it, like or in far

Colin Angle

in of sense So having lot other it's that something is with it mean, former. make of to using to them in outside didn't a reciprocal use possible press deal Ecovacs China. the industry working we and conversations a ability interested that some more The One, products makes dimensions. look iRobot about do. of fashion release and of Ecovacs formed that technology was two it's talks looked was in -- at the terms companies potentially a had the in China of certain a about I our at we certainly on with within because of for that

agreement a is I material. be an a So phase. is significant it definitely that that very it still And how whether out question there But is exploratory that plays to will might we're it think a are few to and able fact about open the we that only something ways and it's a we're talk -- is that to. that players work and small communicate there's industry as

Mark Strouse

and that you not makes mentioned some could XXXX talking of about sense. variables, back That levels? really a to to questions full off then mean, to depending about you're you know XXXX, levels? about And Any color further would Okay. XXXX far to Is you. Thanks, earlier we then I I but the come about be asking on margins. just fair year contraction it's Colin. some How to talk Thank be second half very in contraction Julie, gross the as XXXX, that that similar helpful. should about we are And as I think be compared language there interpret want that? XXXX. in

Julie Zeiler

that a at think discussed to -- I make -- sure there's on be how that the we were looking is targets. not we to we the And discussion Sure. XXXX This currently wanted landscape. intended

work plans year. next have in We our for to do overall

to our today products the make and uncertainty for sure quarters, slowdown extension that as been duration speaking of our as However, tariff we timing wanted shift of, to to a the two in discussion. sit look in and the ability we at we last we've where Malaysia, we the the impact began that and

Colin Angle

of intended exactly -- make all you of the I impact over Malaysia to that be to headwind the tariffs/Malaysia tariff analysts But development Malaysia if wanted to very is, way exposure all be the XXXX, slowdown is the interpreted to has clear minimize it's because a meaning precipitated XXXX hoped headwind. need be COVID had think in rapid And just material premium gross the tariff very I that any should if we included, we a been going because that ramping communicate equal, would to would strategy. was margin things of be that like XXXX to the up say, there through more

improving it's So time are important about you things include that over that if do. on this, are you talked had and our Certainly didn't helpful? which there you margin a that model other today, many focused landscape. we've gross Is

Operator

Thank you.

Our Securities. next Charlie Colliers comes Anderson from with question

is Your line open.

Charles Anderson

my congrats taking Thanks two-parter a questions on Yes. for revenue. on a back half great and quarter. I had

like channel the still fairly First, it sounds is lean.

sell-through I'm the curious, assumption about also the is any sort then I script I any back degree? and there didn't got those chance So there different that new new in hear Then in half? match of are And if a product wonder, assumptions will I’ve be there's sell-in, you'll I anything to product. is follow-up. or a wonder -- that

Colin Angle

Sure.

So back robot new there be a the half. in will

you it going today, up. we announced tell So not haven't it. what robot but is I'm coming new exciting to

retailers to be be are -- to conservative think that to As fairly it going on did fairly inventory relates we continue the -- levels, conservative inventory.

inventory leading confidence in not don't it's And and Again, it. half, each going to happening pass, We're again, to unlikely tracking additional right just so that retail that sell-through demand. could now. if surge create that sudden that a you'll other. retailer comes levels sell-in euphoria just back a expecting But see be see we there's roughly to the higher in

Charles Anderson

Okay, great.

the subscription then there'll the the on look have I Thanks. any going if like, terms and trials any be any takes in give color And you're those subscription shape. could I for of wonder services. insight. additional when year you currently, to rest this you if just can on role opportunities? 'XX this any doing what sounds on wonder of you may if speak some potential trials models of like of It question Another is sort

Colin Angle

One in you iRobot Japan where that XXXX the to on was is more [ph] a little add not a -- subscription with. we've program website, bit were want like in felt in successful Again, something than other available Japan leasing very plan. Japan before, to smart things detail iRobot today that. said that a if Sure. what we called two some both like It lot we had get

that’s So now. right ongoing of one the tests

year. I -- say what I successful think that can is very was it last

the offer see of We today other [technical to difficulty]. customers the that call. you is are QX of And financing last happy a thing started iRobot we of updating growing believe website quite year. prominence we increased is we then not by something you on can very prominence again this And the where part that that launched will that see that is to difficulty] highlight [technical as

Charles Anderson

you Thank Great. much. so

Colin Angle

You bet.

Operator

with Merchant Our Citigroup. next question Asiya comes from

Your line open. is

Asiya Merchant

you thank quarter. and on Hi, my congratulations great taking for questions a

Colin Angle

Thank you.

Asiya Merchant

think that would Couple you the for category, One, believe perhaps robotic you gained category, sell-through do of I the share, share? you questions. vacuum POS some total the of lost share. maintain from data systems suggest

Just wanted that. clarify to

Julie Zeiler

now third-party you. at it's And difficulty] fairly Thank data, Yes. still early. [technical right we’re looking as

I months was the have what few market, look where of as by in at the of So we pandemic. overall front is I us think it impacted roughly the first year

it's to I a percentage of in Looking globally, overall roughly It our it's we at were like I tell. very pulling hard roughly difficulty] that year. think think But [technical aggregate, small looks shares.

of half need second year to So the the we as think see and I wait unfolds.

Asiya Merchant

even I Okay. a margin with your one-time quarter expected. impact than in get math sorry, of maybe need in. much see in margins, fourth gross better like on And going can margins first nature one much the do in better That's -- half because clarify Was better should second than -- tariffs on if heavier your XQ what the half would seems there then But degradation factoring the is quarter full XX% just oh, on kind the to this. fair. that, expect and tariffs that any I in

there through this And that as math, margin that was benefits related us So final then through maybe -- you to quarter can just that that would walk follow-up in be or helpful. the question, trends if should the mix, And in that's premium about why -- question we to you. or my quarter from reported again, margin the in expect -- this direct-to-consumer continue? half. back degradation those a Thank

Julie Zeiler

Sure.

on [technical at back of difficulty] So half the you are XX% what providing margins of half look gross the as color the year we’re and first XX%. to XX%, that we

about that second in in reinstatement tariffs And XX%. half assumptions then remainder [technical coming X That's our drop think typically that what the half difficulty] the the can drop. margins roughly X sort of being half at You in that by to the and of color especially first year. happens promotional in point we in activity of see

So our to see. where of that’s revenue what you we more half be [technical can more and our promotional have second and tends difficulty]

Asiya Merchant

half Okay. something direct-to-consumer premium year, to And back as was is mix, the continuing Thank the think then anticipate well as in do trends, you. that there the we you shift this would your drive some and activities as something people start for of in the as brick more and to well that mortar EMEA, in go of sort reopen as promo retailers. into that, U.S., or

Colin Angle

the We QX of But in growth that in percentage a back. and can very difficulty] tremendous of percentage events the volume, are continue. definitely some like same it strength think promotional Friday, reduction a some of and revenue represents drive exciting we trend. -- come which activities it's in Black the XXX% as real Whether is sales, of [technical will assuming ahead that

improve in bit from experience [technical out perspective, to as I online high as that a and QX But see then think [technical reopens, us to as difficulty] move you behind a efforts might rolled online retail of direct see percentages. level the where you difficulty] a from then QX. seen that’s our we’ve little our get

uncertainty as getting the of retreat real preferred the as turned what way little into a of products, only a available from it's driver. So bit -- or online growth the online to as the as

QX, QX, retail online in will XXXX. that difficulty] QX QX, will seeing lower us [technical XXXX So we’re probably and slightly come that that in back or in percentages give --

Asiya Merchant

XXXX, point, in planning not And secular Fair look some robotics automated at you're look or -- that space, Is that the have the mid-teens see at or to for seems shift was just for kind market accelerated there etcetera. -- to you into you of kind of guiding offset know I -- this 'XX, some it 'XX? still balance trends expecting XXXX Colin, of enough. given for we but growing the that rate cleaning, this with domestic seeing XXXX cleaning one of COVID-XX to high-teens it's fiscal but normalizing services, etcetera, are lack with the you impact, a as there, as mid after

Colin Angle

category is think premium our vibrant certainly has going The avoid percentages to I talking that very I rates low. the today and I’m done. that iRobot penetration about We're of are as of still innovation growth. products extremely developer think isn't shown seeing,

a We front continue consumer we are a -- gives stage to we're to robots, real consumer strong us experience. in at a not seeing have commoditization us which to differentiate successfully such response consumer confidence based smarter that premium of because on runway

the And as something that end was lower personally. premium me to products I exciting matured, margin And degree. a leader it think to doing industry the differentiate some shift maintaining from of role has seeing from with that that to area the revitalized products iRobot's because of to this we're being well happen. for low, meaningfully differentiation penetration is the type entry premium higher inevitable and opportunity margin level in is to still been enhanced the we're entry, fact

industry -- increasingly clear the top clear. the and the So is at mainstream this iRobot's becoming is role vacuuming And is at this increasingly robot opportunities point.

Operator

like Thank closing over to remarks. you. turn for the Andrew call session. I would Kramer concludes to back the This question-and-answer now

Andrew Kramer

call. financial to over you. discuss talking Thank fall. weeks to again. you conference call XXXX quarter everybody our for months, We with performance Thanks look second financial plan and and forward later our joining another coming That support. this results QX we'll concludes Thanks Appreciate everybody's us. the

Operator

may disconnect. call. the concludes Participants That now

iRobot (IRBT) 22 Jul 202020 Q2 Earnings call transcript