IRBT - Earnings call transcript Q4 2020

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Operator

Good day, everyone, and welcome to the iRobot Fourth Quarter and Full Year 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, Sarah, and good morning, everybody.

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

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

Colin agenda results, company’s the the questions. discuss Colin fourth share and for financial major and of After review into full closing conclude beyond. detail today’s on about his additional our share call, year, and results turn terms some Julie the this call will our At accomplishments briefly over the to will In for for open I’ll financial expectations insights XXXX and quarter will commentary outlook that, going remarks. Colin with our point, we’ll call forward. the our Angle. perspective

Colin Angle

among out EPS marketing year-over-year thank and in end worldwide. and execution expectations Good of morning, the grew revenue performance. sales, More revenue outstanding fourth us. on surpassed collaboration revenue, supply a million with $XXX October. of operating very quarter with our that chain We our major XXXX note all underpinned and excellent broader you at XX% strong income growth an significant specifically, for joining operations and regions demand teams, shared we Strong and closed with combined

expansion X% $X.XX. of operating of margin Our top EPS in line resulted and income an

profit start surpassed our margin the of which targets an of we of of year, billion, and the For revenue full XXXX. $X.XX EPS all reported operating XX% $X.XX, original of at

us. is products, our to mind, on customer’s that iRobot opportunities we directly focused a briefly exciting we’ve engagement are transact for a coming progress creation on we customers value during a which took strategy, our the made review Just the I’d substantial putting to With on path in XXXX over years. steps notable to like with the of broader as believe our important, at to creating with level the thereby execute range increasing high very drive

EMEA to The are XXXX is our home and of been where Roomba across very cleaning pleased Genius choices area. AI, first understanding unprecedented of when we how with launched prioritized investment In lineup when our in Roomba vacuum new and last September experience the our intelligent, the into cleaners iRobot across in we and XXXX that would robot product, X.X we thoughtfulness, robots, that August, tightly customers. are this and introduced expanded control and portfolio Intelligence. We’ve of features in in and of The was is can our this self-emptying software are and on a and levels robot machine our and of resulting new Genius the extensible support. how entire control month. We greater be vision proud robots where, platform, Series clean. of robots functionality unlocking AI customer’s of in give ensure We tough Home demand These component the technologies in that to integrated WiFi-connected accomplishments delighting about lifestyle introduced over version make iX our invest. focused capabilities pandemic state-of-the-art users features we Braava deliver differentiating strategy of our U.S. reliability, investments which forced already for customer us range

markets floor product Combo, that functionality. with in The introduced help first During for consolidates the floor solution to available everyday a appeals Europe the this our robot X-in-X needs. now we vacuuming value-seeking is fourth certain their capability in and looking convenient customer care where to quarter, mopping cleaning Roomba

move innovation into our slowing. we XXXX, shows no engine sign of As

range of with versions Genius We of expect upgraded platform. to our introduce exciting digital two new this along new wide Roomba robots year through features a

IP defend patent infringement our a against steps SharkNinja. also We we new action to as recently aggressively took filed

continued the nearly for robot premium represented has price has cleaning of while the experience XX% us trend average gross sales total to success Revenue in differentiating upward. and to past premium grew our in Our over expand several XXXX by XX% our robots selling robot years. enabled sales

accelerated, when category. vacuum position leadership RVC Just of the global our as we a year in notable, overall maintained cleaners in robotic adoption

For in in of XX EMEA of the finished the top Japan. we top seven of XX RVCs full the U.S., in the XXs and with top eight year, best-selling six the

focused to with who second The the relationships of XXXX nearly our connected a customers our our ended opted-in XXXX. with substantial have strategy is digital communications, customer. We stronger, XX% value base customer digital platform value on building million more range floor Having receive The tangible is connected portion features by elect more from element ensure and helping of of customers XX over our great products. our enduring within robots. volumes up our the notifications that ever-expanding to to speaks emails get inapp about cleaning provided Genius than

creating favorite are of customers by cleaning around levels new we high directed consistently cleaning our a engagement and example, For robust seeing room like connected utilization each and routine. month capabilities

purchasing strategic this deals upsell lead and nurturing the new oriented profitability. believe and third adding of strategy higher and pillar the to that revenue The lifetime We will our cycle, value revenue promoting by will ultimately greater support cross-sale is our recurring improve that customer executing around relationships on replacement options accelerating growth, predictability margins. and and

it quarters. the this made progress in still several considerable While early we past area over is days,

customers. website have and destination We our current desired to making a invest prospected continued in for

season busiest example, our increase experience agility the added Roomba-Braava option successfully drive and during shopping and financing of an holiday gained the bundle, with we in a strong online conversion. support exclusive for days customers, traffic scaled For moving enjoyed of creativity and fourth the valuable European sales quarter, to to

view retail XXXX. As doubled just We a revenue, XXXX than direct-to-consumer as X% powerful XX% from in our and result, more partners. generated fourth quarter strong sales a complement channel our our up the in total to of direct-to-consumer

expect total end higher-margin We channel we XXXX retail revenue will that by the exceed that optimistic of to growth total even XX% are XXXX as of grow to of in at partners. and will continue enjoy XX% revenue with revenue direct-to-consumer our this least

number there of and forward, customer connected As increase of opportunities customer the we attractive existing that amplify we revenue believe our to move growing a benefits base. are

the conducting we maintenance that care are building commercializing revenue and span far digital existing properties began to revenue, revenue accelerate plan marketing program, over warranties, increase a services to We begin membership and optimistic XXXX. grow thus have customer investments that other During test been will on customer our effectively new course quarter, can recurring fourth services robot-as-a-service efficiently offerings tests stream. of that extended and premium our contribute and promising existing the of to To Results offering. plan further in digital experience XXXX we that and high-margin, a buying these further and upgrade the enhance we capabilities.

will have power the maximize these IT our and the tools platforms. talent necessary partner and and marketing implementation continue to We selected to of onboard

transactional conversion velocity. investments believe we’ve are critical for previously, and we As driving rates these increasing discussed traffic, improving that

home consumer’s in We combination also trusted to revenue customer our will expand us position the instruments existing further these opportunities. with enable believe inside that

above remains that well household sell-through life value year accelerated relatively XXXX While often continues differentiation. of pace the fluid, prior product day-to-day frenetic proposition levels, of our overall to low. elevate and believe RVCs We penetration

benefits hub on from of life. capitalizing As arising central to the growth for remains marketplace. everyday plan our robotic more widely opportunities the the floor home a care appreciated and of the continue become We many continued

as anticipate outlook, release, press XXXX XX%. to of terms In we in growth from the XX% outlined XXXX revenue our ranging

million costs also incremental solid the our higher help We our inventory to in approximately tariffs believe profitability. $XX we the XXXX especially success incremental we we top-line production XXXX reinstatement expand More while to position. in areas growth that retail the as Malaysia. will of year, mitigate will ended costs revenue very us fund expect we specifically, higher in continuing and healthy investments XXXX of million key strong also costs our $XX with in of expansion a to absorb impact drive that business initial on will anticipated start since We into add in expect

and as bring the out it. and additional incremental infrastructure operate sales increase will needed on $XX-plus spend our Additionally, our million by we to an direct-to-consumer headcount marketing build

the targeting a approximately profit X% operating EPS of margin we in an As range are result, $X of to $X.XX. with

we set ahead, our performance We longer-term in plans optimistic on stronger our prospects. progress, with the for stage will that in increasingly executing our Looking substantially combined are believe XXXX. XXXX about XXXX,

XXXX well-positioned the in the top XXXX to We we minimize headwinds as line time, in enable achieve on chain that growing fulfillment growth. teen us we into supply in we tariff scale will mid-to-high XXXX tailwinds At is turn Malaysia, expect into XXXX and sales, to gross our exposure, our and the DTC move make sustain to execute higher a that margins defensible margin believe efficiency. progress same continue increase with business that more plans will of

return further operating At Julie. to point, this offer calibrate to I’ll yield profit we will leverage, margin we Julie? to a to over in spending closing XXXX EPS the would drive additional turn levels, above expect performance. her operating thoughts. some turn our which drive stronger As XXXX remarks, substantially After I call

Julie Zeiler

you, Thank Colin.

over are XXXX and review and margin, per of mention will and mentioned XX% noted. revenue expense, share from and retailers up our increase Roomba international growth to a up bundles All in metric. XX%, XX% income the rate our all the revenue From the Andy on results in of will to so the XX% basis, unless delivered revenue mX. earlier, with due perspective, of Roomba-Braava Japan revenue growth As performed again orders against of due full-year remainder. product by a mean making in growth otherwise, primarily operating operating sales. our grew corresponding direct-to-consumer my grew net mix operating quarter the million unless Braava quarterly with income EMEA. QX XX% gross XXXX We financial that outstanding non-GAAP quarterly outlook Braava due Geographically, QX in robust each be against margin, otherwise and represented the well performance revenue $XXX in Total very XX% XX% profit holidays. non-GAAP stronger-than-expected U.S. are effective exceptionally tax our fourth stated strong to the grew a exceeded comparisons a plans. to and comparisons done

was mix changes spending Fourth-quarter compensation. year. short-term expense. in and $XXX essentially XXXX prior The lesser media and increased of offset to with by working favorable headcount of well in DTC represented incentive increase as a QX was and unchanged Our gross operating warranty higher reflects tariff investments, of the XX% higher revenue. as of margin XX% expense primarily expenses extent, lack costs promotion, million The to pricing and tied by and personnel and channel primarily higher XX.X%

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

QX was tax plans. rate line effective was in Our with our XXXX XX%, which

by $XXX in the growth, our expense XXXX stellar was with driven Our – share revenue we leverage $X.XX in and channel U.S., full-year activity of Full-year XX% lower favorable EMEA XX% influencing exclusion, grew offset investment spending, income tariff of of margin net income programs of increased costs, factors U.S., XX%. slightly margin our our of and and $X.XX. and by another our grew of revenue XX% in namely a fourth-quarter personnel million by primarily $XXX warranty by benefit grew the XX%. by per operating projects operating as than revenue higher XX.X% grew DTC revenue perspective, and mostly by which Japan from working the million media year increased XXXX the same expenses was mix promotional Operating the was Outside higher in price XX% including From billion. increase was key XX% XXXX the of prior shifts. XXXX was international impact generated of Geographically, the gross X%. while reductions, having year to initiatives.

Our were effective XXXX. the was from $XXX of good $XXX was from was XX%, XXXX XXXX full cash $XXX time at Fourth-quarter XX tax increase September. in of days, QX ago. the end operations. period investments, the one days, ended or same unchanged The in increase a prior versus quarter million against XX with and compared rate $X.XX reflects EPS days, million year from short-term inventory XXXX an unchanged same or XX primarily of essentially with year. ending flow million, the We year last $X.XX cash year. million, $XXX DSOs

to our XXXX. for turn outlook Let’s

pandemic. time, XXXX in category momentum the with than uncertain less remains same global positions. channel favorable due part optimal, of good into the to is inventory and the the generally we macroeconomic move large the visibility in landscape At Although fluidity

generated recent in we $X.XXX As of our to revenue second range billion In second anticipate the of XX% XX% the revenue years, over half in came $X.XXX of XXXX XXXX. growth equates the approximately half. Colin year, revenue in XX% is noted, to billion, to XX% the of XXXX although which

to We XXXX norms. historical mix large growth orders expect investors move the on to cause our challenging forecast to annual and rates. timing halves the With said, targets a a that and basis the since one under of shift between revenue to full-year that next our to encourage material closer can focus quarter the is quarterly even our and on first manage bit we orders ideal from in business conditions second fluctuations

exchange the As minus XXXX revenue rates We contemplate expectations decline gross with margin current reminder, XX% plus our and in roughly Euro a rates, Yen line to range. X%. or low our anticipate that will

million a As was the start XXXX $XX at incremental full imported between costs. you know, this $XX anticipate reinstated will tariff we in that and of year on Roombas to add million XX% from China

Malaysia favorable that In margin expected certain also one-time channel XXXX. in our in our along partially are manufacturing higher to that by and addition by with not tariff offset XXXX anticipated recent to lesser we will anticipated factors expect costs pricing shifts activity. be recur mix with to items XXXX expense, impacted believe those gross promotional be associated a extent We will and and initial

course volume American place we majority production that is vast of will over plan year. Malaysia qualify additional estimate manufacturers facilitate of our provide By three to we to and XXXX this have will end in Our add requirements. Malaysia substantially sufficient plan of in benefits. new our this, the capacity support North important increase lines. contract the XXXX, To manufacturing This the to

First, reduce tariff our expense it will XXXX. in substantially

with structure much our bring us it to Second, will parity China. Malaysian closer to enable cost

management geographically scale a Third, simply from managing a at perspective. footprint is diverse risk manufacturing prudent

Malaysia. additional into assumptions us more restrictions it expense. Should further, Our those gross restrictions into shift incur margins to current and travel and require volume tighten China may also within reflect current tariff

a In addition our to range chain manufacturing and components. material supply continue with challenges to other initiative, to rising key teams from our availability operating tighter Malaysia freight of of diligently grapple raw costs

although supply any variables these require may takes in improvement outlook assumptions. deterioration to revisit or these us account, Our into chain substantial the

sales. of million, targeting operating XX% $XXX costs or of XXXX the are We approximately to $XXX in range million

bit revenue. and channel, marketing $XX as our continued revenue, of R&D well that support we as percentage million direct-to-consumer is will and trend be G&A XX% to of historical This primarily reflects growth While levels of currently anticipate sales total spending over incremental a working expected a around as higher to investment. of below media

Given and spending expect margin guidance our X%. of we top-line an approximately plans, currently operating profit

QX with our the we tariff to costs revenue ballpark with of the some margin a terms expect QX line with In in or million. color, growth XX% year QX in QX annual of currently start of $X more. additional expect target We gross strong

We the sales and largely investment. XX% to XX%s by of high the range expect from total driven operating sales costs to marketing accelerated

we result, expect a a end the low profitability As X% to operating breakeven up range profit from at the essentially at operating to end. high

the over course in half year. the second profitability our expect of will grows revenue As improve the the we especially year,

terms million for we $X anticipate jurisdictional rate primarily anticipate from of the diluted profits pre-tax other due effective count and with approximately other effect In XX%, XXXX, of ranging income. to of worldwide a notable million anticipated $X shares. XX an lower between mix to expense combined modeling of assumptions tax We share to the XX%

expect range to from $X.XX. full-year result, EPS our $X to a As we

intensive. of XXXX or as capital. spending terms range, in that $XX XXXX well revenue, healthy product declines part to in We good flexibility historical our certain cash business reflects XXXX flow expect the XXXX Overall, generally tooling in it capital investments with to other levels given in we remain anticipated increase anticipate this shifting of our production In levels is expected The consistent to it new be which continues is We relates XXXX X% year trends. million as will our guideposts, increase with low spending fundamental the from to be approximately in into performance. of capital operations last even that forward to move support minimally of Malaysia as fiscal introductions. over as from year, new expected from use

plan intact Our previously as in largely quarter. remains $XX buybacks limited authorized repurchase of the were stock million $XXX stock million repurchasing first our year’s to last

any of evaluate not expectations stock, relates repurchase deploying We programs. our equity it to merits With our the will to the neutralizing particularly assume XXXX said, activity. that to continue cash dilutive effect of repurchase as do

we will the front, inventory remain levels in the quarter thereafter and to of in year. increase the normalized DII, they at first and On elevated inventory, dollars expect absolute that both the terms end until of return

While and believe necessary expected to actions our take that we profitability in to are XXXX. sustain top-line growth step XXXX, the are EPS our a in taking rate back we

an profit Just as XXXX. efficiency XXXX to meaningful higher-margin and with to arising in results margin initiatives growth our strong end the sales above and in believe were enable other summary, tailwinds all expansion productivity very will from income year. XXXX the a of way that satisfying will underpin to operating we direct important, EPS operating In deliver levels, fourth-quarter which our increase us Malaysia a our improvement manufacturing,

That I’ll While excited expanding XXXX bring our will process. we continue long-term back creation the drive additional call coming and we incredibly know in of the the prospects turn its some are concludes to to my fair value on for year. Colin commentary. share now our color about business challenges,

Colin Angle

XX days But ourselves. ago for RVC years believe iRobot our my set ever ahead team helped record thanks We to targets it led by close we since. us. and The colleagues an results best deliver and globe. commitment my be work, hard of to iRobot. are the created have of to to sincere the the our at like and industry I’d we Julie. is time you, exciting Thank exceed around extending ambitious resilience It

of have million nearly want connected to expansive, We installed an growing with XX customers who engage base us.

homes maintain us for that replace keep especially and We’re the help our forward, our opportunity robots complement we’ve look flow outlook from XXXX. trust new EPS products in optimistic them for On to products our potentially opportunity in growth and have them but cash robots, and directly profitability not new only faster services into current that their placed the strong role today’s other expansion us XXXX robots, their to in helping clean. call, purchase and add customers unlock that as going higher our more shared free to they will us convert

us relationship investors capitalize As to we current and committed with grow now. will opportunities consumer better and help see, will business. remain analysts our we businesses Operator, and deepens, our our will and metrics the reflect on evolve, for and the questions strategies the our that prospective KPIs initiatives That and best helping comments. we appreciate them as the take concludes create success our that value will and and

Operator

from Thank JPMorgan. Instructions] question first Our Strouse of you. comes [Operator the Mark line with

is line Your now open.

Mark Strouse

taking Can much the questions calculating about very morning. accelerate half digits too you and the maybe more the in strong what good dig expectation bit much a that gives that Yes, growth. but XXXX, you into the color I for of congrats here, of about XXXX. maybe between here. revenue wanted second quarter give maybe into Thank saying I’m to you our commentary to can digits kind kind just in high lines just you’re revenue on what reading of XXXX? low-double the single

Julie Zeiler

that. start I’ll Mark. Sure,

would everybody we the our year full about can growth of full we guide I and business for that growth we targets year point because of – XXXX seasonality to shifts rates. impact in and again, As talk quarterly our how think about fact the materially

forward continued as the to of that in still good XXXX that And into very in momentum we under-penetrated growth very being are forward a strong beyond see So we we that and we market, at looking we largely believe growth. recognizing are XXXX. have and with projected look the that year look XXXX

Colin Angle

relatively some revenue growing the more scale things that, become XXXX. efforts XXXX, commercial of test a that immaterial to still things move was into significant customer materiality DXC from like some initial as talked the things other about we add to in commitments XXXX, we the robots-as-a-service, Company, color like but in of existing I’ll scaling warranty what and Mark, forms and

not revenue tailwinds accelerating profitability be number so you’ve a driving got And will tailwind but you have growth that just some as well.

in investments guidance that of number on to in and strong relative XXXX what QX comp. XXXX that a reasons, performance, for was a XXXX pretty what us weak so in a is I is And Certainly would a XXXX the so easy seeing. to we’re giving quarter against growth for – QX we’re leading say

Mark Strouse

the Okay, that’s that. just you’ve basis helpful. quantified you. And Julie. gross that Thank basis I Thank points, delta a better that example XXX then expecting, something down for costs a kind the year-over-year you. is XXXX ramp at like dissect bit bit was further what be it The XXX you Malaysia? of of helpful. promotions? looking Is more than guidance margins Just associated – that from kind can to the points, do the Can remainder impact with break from tariffs, would you Is of roughly anything decline XXXX? very for

Julie Zeiler

are number of tariffs right, move material of from other gross negatively XXXX play extent. positively factors a XXXX. you’re both And There to and a lesser part margin sure. of Yes, to our are that

Those well costs there the pricing as are by channel and the shifts a as scaling Malaysia expected negative go of the on non-recurring things extent as certain promotional to as year, or as XXXX. So anticipated side, through offset from well is we mix favorable activity.

Mark Strouse

helpful. you. Okay, very Thank

Operator

Thank you.

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

Your open. now line is

Ben Rose

there. first in could bit out ability excuse and question you constraints confidence supply on the throughout in elaborate a Julie, are some to Could year? supply you terms chain what seeing your A perhaps you maybe everybody. chain of potential give me, the had that health for to, us of de-lever your the of their you’re good – alluded Yes, morning

Julie Zeiler

Sure.

of incredibly able changing supply situation. chain to do are manage been to through throughout work we our proud the very a they’ve and that So XXXX

that year. we as look about raw shortage, other and factors, well carefully as things like resins are to are rising a I of as look costs, chip materials a things we think, number we’re through managing that of whether go as we freight globally, there forward, this there cost we As are talking

Ben Rose

Okay. And a Colin. question for,

share you or with the could home the into built see vision cleaning could we Roomba out term the look some Do specifically it Roomba today. think for you perhaps longer the you we continue of to on couple as years. see over If will your us exclusively focus be additional primary functionalities next as

Colin Angle

and the type and the beyond in also necessary increase right plays role do of as vacuuming platform with while limited gain sophistication home, home today to serving the able the what the then Roomba Certainly, Company’s us a Floorcare that the the now the mopping understanding extends to of for ambition is home. in Braava to to we’re

As we’ve talked going growth before, important growth in the home. is what of in awareness the AI is in on

can really of context So succeed cutting that have is the required at to AI the edge technology.

were And as kids. up long so we promised we are that on a journey robots to the growing build

home to place of to exciting be very home. the sophisticated really think work what long-term where doing we’re commitment in AI Home the a starting Genius able to And doing. very the ambitious very capable understand Intelligence to extend context we’re of at we’re a capable is a I iRobot building

at the beginning still just industry. we’re – a the it’s of So

have being of home play. home, the the role evolve a you challenges the the the required is we at still to play be asked want have smart the role physical what and complex will your a of to the will into address very in also excited home We’re the work, about delivering beginning but context is both in to iRobot the of enabling to partner as not your happen increasingly home you home that strong understands things, robot just type delivering

Ben Rose

very thanks helpful. Okay, much. very It’s

Colin Angle

welcome. You’re

Operator

Thank you.

Asiya line from with Merchant Citigroup. comes the Our next of question

line open. is Your now

Asiya Merchant

unit higher bit the to around very more unit ASPs. of service, talk that just you then to that as warranties comment And versus results you sale sell supply about about that congratulations about And of become can little to a a help how as and of that think Great, thank bit that Julie about together, maybe you challenges Colin, bit into the if that came the strong last with you little XXXX would a all a tailwind. you so talked a incremental you unlikely Julie are look the bunch you from talked you and drive expanding back and as it peel Roomba each just as help think think us and – and Colin can ramp little and you something you you that very fiscal Roomba this on modeling. of that occur that can much just mentioned is very, about, we you one-time for team a about, weathering chain. ASPs or costs, leased that

So us bit repeat that if investing Thank is kind of unlikely you itself million have the to you that DXC incremental you. XXXX a OI. talk things little expansion $XX that’s the the million in in and for why already can about what $XX you that on channel to

Julie Zeiler

Sure.

Asiya let I’ll So then in on and maybe Colin start I’ll with units your jump versus question ASPs.

the think results that that we’re are I about some excited early in our we pilots. seeing services of

to that a a it those are I during optimistically part of will become to also think it’s while remember before material commercializing while number. XXXX, we take important looking those our

category, shift our would during in, forward ASP call end a XXXX, about think well premium and up net increase nice with – in our what towards unit, in as seen certainly price our of I looking I we’ve As ex-shifts channel. as

that and our penetration good to And pointing that think will pricing we strength low relatively growth. a we’ll beyond, products We the to also unit continued to – – forward And as we that nice related have continue I into again of again globally. unit small amount the look I seen growth expect have XXXX mix. see

Colin Angle

about call get – shift is strategy less really the we the model Asiya, the the to momentum the the thing in of of the we talked in financial think I only shift of auto success evac increased about I is as technologies introduced. would differentiation add, our that some about embracing as around more the And which is premium intelligence a well robot

get place spend call that see them and And where it like so these being bringing features exciting the seeing our I anti-commoditization market to driving to as we're it differentiating that features. customers we're and important to onto the are embraced by up an almost

of and So there us, again, differentiate which – news because healthy where we're is I with I'll market stop think investing to it's great new that's there. our opportunities continued where features, a for all new very the technology illustrative

Asiya Merchant

Okay.

Julie Zeiler

what a across of to, asking capability the around incremental areas we've million making the DTC and focus investment And building required the what talent $XX it as capability during on we XXXX. relates to of That's were a an really run that one. experience terms in of as then to as which highlighted got both you buying range Making will question our sure customers a that to marketing is forward. portion go the and another There website insights how that which build of continue on And relationship. understand need and app easy is to portion, there's that, we've that, one-time.

However, grow will would that that get we that to slowly. scale, we expect if business leverage expect as we more our on would

Asiya Merchant

Okay.

guys trying as kind run kind from because rate level. seeing as well. look XXXX from that's are to I margin. was of it as to benefits peel I a we at into right quite of trending like will higher way? are And out a The about we back percentage that ramp meaningfully talking revenue OpEx up is the that little of margins Is R&D, of are what you percentage XX% as drop revenue op and get down a these So guys to where bit those G&A XXXX, you dealing

XXXX be really in a of as to XXXX and trying back so run you're OpEx marketing to, and and that initiatives should rate And what incremental OpEx in revenue. scaling that's I'm that selling doing get

Okay.

Julie Zeiler

Right.

above More coupled and XXXX us months. and into levels. more provide we're we've facing to our specifically, more we're and I of be move that specifically turn range – coming to think financial as work that the continuing targets the in XXXX, to gross so as our believe operating tailwind, margin some thinking in to have with as tried – talked, in to P&L, headwinds entire spending look today And as XXXX getting at calibrating diligently we we XXXX, hope on operating sorry, we're we into we plans, articulate tailwinds, today and facing those longer should turn provide through about able I'm leverage XXXX color it's in allow longer-term margin we're into

Asiya Merchant

you. Thank great. Okay,

Operator

Our of line Instructions] [Operator from the America. next you. Babcock Thank with question comes of Bank John

open. Your is now line

John Babcock

questions. for Thanks morning. my taking Good

Just sell-in questions, for just what could if quickly unit growth on of was some you're tagging you these modeling about in unit sell-through I along assuming wondering talk growth versus XXXX the guide.

Julie Zeiler

we you sell-in never are partners. would the to perfect that a on and well equate So good looking for unit sell-in to based needs continued work growth retail our of as momentum. sell-through. John, But as we It's know, sell-through science good as balance

John Babcock

next bit working that Could so a challenges out? with be share about with far about talked the how left still the then And question, you thanks. robot worked as service has what's well the to and program. are gone a testing Okay, little more you

Colin Angle

No, for this is constant us. challenge a optimization

have more I been think work but optimize do. that experience, results the able and to we've had already there's to very encouraging

commercial test You're definitely, this I program we'll to to see said, we'll scale move as begin a this a and up. from year

you're about. going hear to So more something

think a on income, little also revenue the than unfolds. But up year materiality profitability bit the increasing I service year. in lag And earlier, talk showing of a again, for certainly will minimal a remember and a which the mentioned deferred be of about as program I as we'll that our create portion to that As significant revenue account and be something to have throughout will the of the in we'll but more XXXX, with also robots happy numbers. a

John Babcock

products next the products portfolio? Okay. and in for with how Thanks. I was launch, fit you have new then us generation about of also rest think two how these will And on might of that your the wondering

Colin Angle

of the that enlightened control robot have can that, what customer doing of on intelligence and company between in I to and that the the think and customer partnership robot feel trusted robot. how the between really themselves. iRobot the robot is like We're and that focused partnership the the we an they focused we're the extend on make sure feels

as we be the in we of we that sort Without so an that And industry continue undershoot that to we overall what are leading. to guiding control, rollout our are the potential will accomplish. will that trust, trying principle products, without of

John Babcock

And turn the iRobot any for timeline provide I could of you it Trade before litigation then is Commission. you pursuing then just International action U.S. over, be Okay. last the also helpful. this us infringement a how prior just question color supplement the on at And would sense patent can provide

Colin Angle

things only aggressive from the a is limited moving of through action So set fast legal which the the organization. very and and perspective very recent I say can ITC, is a

We by of to at be this trial expect the end year.

John Babcock

Okay. Thanks, Colin.

Colin Angle

Yes.

Operator

Thank you.

comes Derek with the Our next Soderberg question from with line Colliers. of

Your now is line open.

Derek Soderberg

confidence direct the there? reasoning wanted questions. Yes. driving taking Good start morning, success behind of you to a XX% everyone, goal and with longer-term, in are and longer-term? I'm margin curious in I guess targeting? services you And much direct services' that sales how and elaborate sales. the on your some I What's thanks Can of XXXX for can sort gross what for my contribution growth of the be

Colin Angle

Sure. We that. answer some of can

to should curiosity, adjusted, Back about willing what that to all in It I or to to that customers to into product. I a focusing that the were there's capture go-to-market transaction our wasn't is learn XXXX, a robot be on translate considered ability pedestrian website and and really which iRobot’s believe XXXX we Roomba research why very where drive tends think The uninspired. interest was a relatively real model, the customer energies. this go do works, Roomba a to purchase.

we better we were nurture, to think more along we as the rollout a customers effective to but direct-to-consumer. certainly with we were sales better good, interest expressions journey, capture the tools from far be I will of world-class

connected is this our customer for end well connected XX% are in to to of million customer of the – really a customers to customers ability XX opting the and transact the XXXX using is these skyrocketing growth that of our growth are profound go in base. a our features, features and other growth a interest the for in thing as The profound customers in over communications engagement our since asking online connected our in with

the today many I of word I was, our these point And partner maybe in give of so script think done. confidence, our and think that all one that subtle is in used the we're things the identified of gave the I which suggests we things that not we a direct-to-consumer, improvements for implementation

this, our tool online. are talent in improve capabilities major to should investments continued around effectiveness We in set which and XXXX pay and making our our the dividends

to that I implement but momentum the should think XXXX working showed continue in we're progress, So XXXX tremendous what continuing and strong forward. on

Julie Zeiler

our we would this retail is very thing I direct-to-consumer add a the partners. powerful channel to last as complement really just strong And view

that growth transact you're you we of you and part and iRobot, with your as being find to once want So our with this going way nurture we look to – that the a buy that next you're to family, to directly to way your make ready relationship product when you're sure us.

Colin Angle

absolutely. Yes,

Derek Soderberg

adequate helpful sales. directs I'm by direct to can the making goal level my will Got It's XX% of like some as it, about to be wondering you're yes. follow-up, be sales of And what supported investments that. think it support of that XXXX

Colin Angle

tools, well XXXX our goals. beyond best-in-class scale which implementing are can We even

undershooting real somehow bet be we're this definitely to in. not that we're important that is long-term a concern, of a a is we're our making what that investing that So that dimension going so business,

Derek Soderberg

you. Thank it. Got

Operator

Thank you. call to Kramer to There now are the would turn I no further closing like Andrew for comments. questions. back

Andrew Kramer

Thank weeks the quarter Thanks, you you appreciate support with so to and results much. all again. fourth financial XXXX look We your over months. forward call. That concludes our we talking and coming

Operator

gentlemen, today's call. for this concludes and Thank Ladies conference your you participation.

disconnect. You may now

iRobot (IRBT) 11 Feb 212020 Q4 Earnings call transcript