irobot 2014 analyst day presentatio
TRANSCRIPT
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Forward Looking Statements
Certain statements made in this presentation that are not based on historical information
are forward-looking statements which are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. These statements are neither promises nor guarantees, but are subject to a variety of risks
and uncertainties, many of which are beyond our control, which could cause actual results
to differ materially from those contemplated in these forward-looking statements.
Investors are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. iRobot Corporation undertakes no obligation to
update or revise the information contained in this presentation, whether as a result of newinformation, future events or circumstances or otherwise.
This presentation contains various non-GAAP financial measures as defined by SEC
Regulation G, including Adjusted EBITDA, which we define as Earnings Before Interest, Taxes,
Depreciation, Amortization, merger and acquisition expenses, restructuring expenses, net
intellectual property litigation expenses and non-cash stock compensation expense. The
most directly comparable GAAP financial measures and a reconciliation of the differences
between the GAAP financial measures and the non-GAAP financial measures are posted on
the investor relations page of our web site at www.irobot.com.
For additional disclosure regarding these and other risks faced by iRobot Corporation, see
the disclosure contained in our public filings with the Securities
and Exchange Commission.5/7/2014 2
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Agenda• 9:30 – 10:00 Continental Breakfast
• 10:00 – 10:05 Welcome
• 10:05 – 10:20 Colin Angle, Chairman & CEO – iRobot Strategic Initiatives/ Business Unit Reviews
• 10:20 – 10:40 Paolo Pirjanian, PhD, Chief Technology Officer – Technology Strategy
• 10:40 – 10:55 Glen Weinstein, Chief Legal Officer – Intellectual Property
• 10:55 – 11:10 Q&A
• 11:10 – 11:20 Break
• 11:20 – 11:35 Christian Cerda, SVP & General Manager, Home Business Unit
•11:35 – 11:45 Alison Dean, EVP & Chief Financial Officer
• 11:45 – 12:00 Q&A
• 12:00 – 12:15 AVA 500 Demonstration – Youssef Saleh; Home Products – Matt Lloyd
• 12:15 – 2:00 Lunch
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iRobot Strategic InitiativesColin Angle
Chairman & CEO
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The Robot Company
24 Years of Empowering People To Do More
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1. Provide meaningful solutions to
important human needs.
2. Pioneer robotic technology delivering
greater ease and efficiency.
3. Be seen as a positive force for change
in the world.
The Robot Company
OUR MISSION: OUR VISION:
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Global Growth
• $7 billion annual market opportunity for vacuum cleaners, globally•(2013: NPD, GfK, Euromonitor)
• $14 billion annual market opportunity for global home maintenance
•(2013: NPD, GfK, Euromonitor)
• Top selling vacuum in Spain is a Roomba – above $200
•(2013: GfK and internal sales data)
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Cumulative
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A v a i l a b i l i t y
Supply
Creation Stage
Genesis
Commoditization StageScale
Explosion Stage
Brand/Offer
Product Differentiation
Mass Product
Scaling Robot Vacuuming
Roomba - beginning of the explosion stage
2014
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Defense & Security
• Expanding markets and opportunities in public safety and industry
• International revenue more than doubled from 2012 to 2013
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Remote Presence
Navigate & Interact In Complex Real World Environments
Video CollaborationAva 500
TelemedicineRP-VITA
Investing in long-term growth
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Unlocking the Potential
+ Stationary + Mobile + Navigating + Manipulating
Manufacturing
TeleOp Presence
V a l u e
Floor Care
Higher valueMore autonomous
More accessible
Cloud
Autonomous Patrol
Continuous Home Maintenance
Teleporting Remote Presence
Productizing Robot Capabilities
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Technology StrategyPaolo Pirjanian, PhD
EVP & Chief Technology Officer
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Technology Strategy
Navigation – near term focus
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Simultaneous Localization & Mapping (SLAM)
State of the art, high-end navigation today
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Visual SLAM (vSLAM)
• Next Generation Navigation: Camera-basedmapping yields both 3D key-points and
environmental layout
• Enables autonomous navigation: Uses
efficient algorithms for path planning, self-
docking, way-point navigation and efficientcoverage algorithms
• Consumer-grade pricing: World’s lowest cost
implementation use QVGA cameras, running
on an low-end video processor
• Scalable solution: Can scale to 3D dense
maps, large environments, outdoor areas and
more
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Visual SLAM
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From 2D Maps…
Connecting maps, users, and the Internet of Things
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Using Our Strengths in Navigation and Vision
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Combined with Low-cost Depth Sensors
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To Produce High Definition, 3D Maps
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IP Strategy and Patent PortfolioGlen Weinstein
EVP & Chief Legal Officer
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IP Strategy
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Sword
Encourage or force competitors todesign products that avoid
iRobot’s technology
and brand identity
Shield
Ensure freedom to operate
Openness
Embrace open source andinteroperability where
appropriate
Enforcement
Stress test patent assets whilepursuing business goals
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Patent Portfolio — Roomba
Reliability
& UX, 7
Platforms &
Cleaning, 18
Other, 5Navigation,
68
Tier 4
Tier 1
Tier 2
98 U.S. PatentsCovering Roomba Technology
188 International PatentsCovering Roomba Technology
Tier 3
58
29
28
61
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iRobot’s portfolio includes the
earliest filed patents on visual
SLAM (“vSLAM”), especially single
camera SLAM.
Cases descended from these early
matters are still being processed,
and iRobot continues to observe
the industry and tailor new “sword” and “shield” patents based on the market.
Additional patents and patent applications
cover improvements and innovations through
the intervening years to the present day.
We are of course adding new patents
and patent applications based on the
state of the art as it is developed.
Patent Portfolio – SLAM Navigation
6
vSLAM
15
Features &Landmarks
6
Non-ContactODOA
8
SIFT1
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f id i
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• Median litigation costs for a moderate-sized U.S. patent infringement suitis $2.5 million; median cost for a large suit is $5.0 million
• Source: AIPLA Report of the Economic Survey 2011Cost
• Depositions, document searches, etc.
• Median time to trial was 2.5 years in 2012
• Source: PWC 2013 Patent Litigation StudyDistraction
• Overall success rates for practicing entities is 34% ; overall consumer
product success rate is 35%• Source: PWC 2013 Patent Litigation Study (data from 1995-2012)Litigation Success Rate(Strength of Case)
• Can defendant add a counterclaim for infringement of its own patent?
• Might defendant be able to otherwise disrupt our business?Counterclaims
• Injunction? Damages/Royalties? Halo effect of strengthened portfolio?Initiation of business discussion? Force design change?
Achievable BusinessGoals
Patent Enforcement Considerations
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Patent Enforcement: 2013
Speed Cost
ExpertiseAvailability of
Injunctions
Injunctions &Damages
Available in theSame Court
Influence ofDecisions
No Stay of Ruling
Pending ValidityDetermination
Cost Recovery
(Loser Pays)
Source: Managing Intellectual Property (Sept. 2010)
• Brought two patent enforcement actionsin Germany in the second half of 2013.
• Infringement of 5 patents against a
reseller of Chinese goods.
• Infringement of 4 patents against
manufacturer of imported robots.
• Received a preliminary injunction against
Chinese manufacturer in August 2013 on
all four patents from court in Dusseldorf,
Germany.
• Additional Customs enforcement in
Germany, Netherlands & Spain.
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Q&A
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Christian Cerda SVP & GM Home Business Unit
Home Business Unit
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HBU Strategy
Robot Performance
Brand Strength
• THE Robot Company
• Premium position
• 360 to consumer
• Core performance• Automation of task
• User experience & connectivity
• Quality
Brand Preference
Product Leadership
Portfolio
Expansion
Supported by a winning team and effective go-to-market strategy
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HBU Product Introductions
2011 2012 2013 2014
Roomba
700 Series
Roomba
800 Series
Roomba
600 Series
Mirra 530
Scooba 450
Looj 330
Braava 300 series
Scooba 390
Mint 4200/5200
Scooba 230
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Aeroforce extractors improve cleaning by
up to 50% with virtually no maintenance
needed
Exceeding expectations on those selected
retail outlets where launched
R880 top selling SKU in its category on
Amazon NA with~ 5 star rating
#1 SKU – iRobot eCommerce, since launch
Rolling out progressively at retail in NA,
EMEA, Japan
Roomba 800 Launch Success
“The rubber rollers on the bottom have beenthe biggest difference. Our old vacuum had thebristled roller on the bottom and wouldn't even
rotate it was so tangled in hair. Now, hair isn't aproblem.”
“I had a Roomba many years ago when they firstcame out. That Roomba was a novelty. ThisRoomba is a masterpiece.”
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Scooba 450 Launch Success
New 3 cycle cleaning process removes up to
99.3% of common household bacteria
Much improved product robustness, quality and
usability
Scooba available on e-commerce sites as well as
being rolled-out on select retailers across NA
and EMEA
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Huge Addressable Markets
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Huge Addressable Markets
Source: Vacuum Cleaners >$200 USD, 2013 retail prices (based on NPD, GfK, Euromonitor, iRobot internal data)
14% 6%
80%
EMEA - $2.5 billion
iRobot
Other Robots
12%
4%
84%
APAC - $2.2 billion
iRobot
Other Robots
14%
4%
82%
North America - $2.2 billion
iRobot
Other Robots
$7 billion annual market opportunity
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14.6%15.7% 18.1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013
Robotic Vacuum $ as % of
total $ Vacuum Market**
Robotic Vacuum Market
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
2011 2012 2013
M i l l i o n s
Robotic Vacuum $ Spent*
Source: *GfK, NPD, iRobot data –2013
**Vacuum cleaners >$200/robotic vacuum revenues
Strong growth continues in robotic vacuum cleaning market
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Robotic Vacuum Global $ Market Share
Source: 2013 NPD, GfK, iRobot internal data, Robotic Vacuum Cleaners >$200 retail prices
83%
12%
6%
North America
iRobot
Neato
Others
62%16%
8%
2% 13%
EMEA
iRobot
Samsung
LG
Neato
Others
67%
15%
5%
4%
1% 1%
7%
APAC
iRobot
Sharp
Ecovacs
Toshiba
LG
Philips
Others
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Competitors with Steady Cadence of Launches
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Competitors with Steady Cadence of Launches
2011 2012 2013 2014
Samsung Navibot S
LG Home-Bot Square
Neato Signature Pro
Sharp Cocorobo V90
Roomba
700 Series
Ecovacs Deepoo 900 (not yet shipping)
Roomba
800 Series
Maintaining global market leadership position
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China Go-To-Market Strategy
• Entered Chinese market in 2011; will exit 2014 with 500 POS
• Only market where robotic vacuum cleaners were being sold pre-iRobot; category
familiarization
• 2013 revenues < $10 million; expected to grow materially in 2014
• Annual robotic vacuum cleaner market in China grew 33% in 2013 to ~ $100
million*
• China could become iRobot’s largest non-U.S. market
* GfK 2013
Controlled growth strategy in large and growing market
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Takeaways
• Robust product pipeline will support market-leading position in the face of
increasing global competition
• Successfully integrating consumer-driven technology innovation around
cleaning efficacy and ease of use; premium branded products
• Focused on profitable growth through new products, controlled retail
expansion, and prudent investment in the brand and consumer touch
points
• Optimistic about capturing our slice of the growing global robotic vacuum
cleaner market
Home Robots will drive iRobot growth and profitability – next couple of years
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CFO PerspectiveAlison Dean
EVP & Chief Financial Officer
A year of significant progress
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A year of significant progressContinued Cash GenerationFinancial Growth
Business Momentum Recognized Technology Leader
* Midpoint of expectations provided April 22, 2014
• Strong OCF; cash near record high levels
• Robotics ecosystem expansion
• Investment/acquisition opportunities increase
• Renewed/doubled share repurchase program
• Braava introduced to international markets
• Successfully executed 2 major product transitions
• Significant technology advancements
• New RPBU platform – AVA 500 – B2B sales model
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• The Economist – Robots offer a unique insight into what people want from technology
• Fast Company– iRobot #1 most innovative in robotics
• Bloomberg Brink – Forefront of Robotics – iRobot’s grand patriarch of robotics scene
• CNN – Make, create, innovate series – iRobot as a pioneer inthe field
$M (except EPS)2013 2014*
Revenue $487 $565
YoY Growth % 11.7% 15.9%
GM% 45.4% 45.0%
Opex % 38.7% 36.0%
Adjusted EBITDA Margin 12.8% 13.5%
EPS $0.94 $1.08
Technology Leaders Peers
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Technology Leaders - Peers• No direct public peers
• Why are peers important?
1. Externally – informs others about iRobot• Investors / Analysts
• Industry Classification Agencies
• Employees
2. Internally – informs us about• Valuation
• Compensation
• Financial Targets
Peer group analysis is important; identifying peers is challenging.
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iRobot’s View of Relevant Peer Characteristics
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iRobot s View of Relevant Peer Characteristics
• Disruptive technologies
• Products with high IP content / wide moat
• Hardware and software solutions
• Global brand
• Market leader• > $250M - $3B in revenue and revenue growth rate of 10 – 25%
• GM: 40 – 50%
Constantly evolving – An art not a science
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A Selection of iRobot Defined Peers
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A Selection of iRobot Defined Peers
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Trimble Navigation Designs and distributes positioning products and applications enabled by GPS tech
3D Systems Corp Manufactures and markets 3D printers and print materials for professionals and consumers
Garmin Portable GPS enables navigation devices for automotive, outdoor, fitness, marine, aviation markets
Polycom Video, voice and content management/sharing
Synaptics Develops human interface touch based solutions for consumer electronics (smartphones, tablets, touchscreen apps, and GPS)
AeroVironment Design and production of unmanned aircraft systems
Stratasys Designs desktop 3D printers for idea and design development
Dolby Labs Content creation and playback technologies for entertainment industry
Hologic Diagnostic, medical imaging systems and surgical products for women
FLIR Systems Designs and manufactures thermal imaging systems for variety of applications worldwide
Investment Framework
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Strategic Alignment
Does the opportunity support or advanceour strategic vision?
How similar is this business to our existing
businesses?
Can we leverage our current resources or
technologies?
Market Attractiveness
Size of addressable market
Estimated growth of market
Profitability of market
Barriers to entry
Competitive Strength
Expertise in relevant technologies
Brand strength in addressable market
Familiarity with customer / channels
Manufacturing / Operational efficiencies?
Investment Timing
Is the opportunity near or long term?
Significant one-time investment or multiple
years of sustained investments?
Timing of cash outflows and inflows
Invest to pursue defined strategy
Investment Framework
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Internal R&D Prioritization Framework
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Cloud
Products – 75-80%
Roomba
Braava
AVA 500 ?
Technologies – 20-25%
Core Emerging FutureNavigation Manipulation
Internal R&D Prioritization Framework
RP-VITAPackBot
FirstLook
Scooba
Other
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iRobot
R&D
Focused investment
2014 Results and Expectations
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Q1 exceeded expectations; Reaffirmed 2014 expectations
2014 Results and Expectations
* Expectations provided April 22, 2014
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$M (except EPS) Q1-14 Q2-14* FY 2014*
Revenue 114 138 - 145 560 - 570
YoY Growth % 8% 6% - 11% 15% - 17%
EPS 0.18 0.15 - 0.25 1.00 - 1.15
Adjusted EBITDA 14 13 - 17 74 - 78
Financial Targets - 2016
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487
565
12.8%13.5%
FY'13 FY'14* FY'15 FY'16
Revenue Revenue CAGR (Mid-High Teens) Adjusted EBITDA Margin (%) (High Teens)
2014 expectations: Strong next step in progressing toward targets
Financial Targets - 2016
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$M
* Expectations provided April 22, 2014
Takeaways
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• Strong financial performance – revenue growth and profitability
• Home Robots key driver
•Strong balance sheet allows for acquisitions and stock repurchase
• Focused investment drive strategy
• Tracking well to long term (2016) targets.
Takeaways
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Q&A
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Thank You