iRobot (IRBT) 27 Feb 242023 Q4 Earnings call transcript

Welcome to the iRobot Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions]. I would now like to turn the call over to Karian Wong, Chief Accounting Officer. Please go ahead.

Thank you, Jamie, and good morning, everybody.

call President Interim and today's and Glen on Vice Executive CFO, me are CEO, iRobot Weinstein; Joining Julie Zeiler.

G, the that results are everyone will our representing any views set like fully future financial we subsequent and future defined by discussion non-GAAP financial to Regulation net caption operating under as I our agenda differ non-GAAP of the statements of call, operating iRobot's our underlying today's financial in subject non-GAAP operating risks Before will expectations should reflect potential. financial gross and during measures non-GAAP the These transparency our I events to the into of results factors as with and remind forward-looking to loss share. that today non-GAAP conference that including performance this not include non-GAAP and believe discussion reflected as actual performance. our reference SEC. Related these forward-looking disclosures be additional today's is certain views call, could statements regarding provide detailed help our for and would materially from risk per statements. uncertainties expense, considered to SEC factors These statements loss cause as filings margin, with in date. We A only

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

Glen strategic for For will quarterly important Then financial about outline today's additional call, longer remarks prospects insight the XXXX briefly milestones Glen. term. the our as our this review and into agenda turn and I'll that, to open closing cover At Julie our we'll company's and conclude results with financial end guidance. over commentary will results, call review the offer expectations will be some for over After questions. the detail XXXX. in our our point, call follows: we'll

we create, of is product who were, customers become. robots this, the incredible we who we Good next for our our that morning, about are is been for our by and us. who our we today are a of chapter. love great. and potential can this organization start At team passionate innovators and our ability I an builders X more than who know I to joining decades. in and reiterating you my thank have iRobot, confidence part I'll of mission and call our because foundation and navigate

innovation terminate build this Our the successfully. confident navigate iRobot of are of in on start Board future XXXX team is we August in and year, given ability had and the company a to Amazon different as decision of or even our this and than stand-alone envisioned legacy to our period management at to transaction. by The our

as the quarter our is us outlook forward. cover I'll near-term as well going from announced what Julie significantly information are Then last of questions. the financials that expect greater improve today, we shared provide progressing will on I'm the aggressive to then operations. our taking XXXX. additional and we restructuring call on to how January also As for can going we'll action for tenets open XX, that detail outline month. work To end, we for the plan you in

Before high I jump a into the restructuring plan, I'll financials our touch level. on at

by competition fourth to share quarter as in of margin Our carefully and well consumer be We sluggish operating per a $XXX an generated of aggressive net of We regions. as managed impacted all spending revenue $X.XX. with million report million a XX%. to $XX our performance loss cost continues gross of loss

net the loss declined million with of loss $X.XX. and XX% an to revenue $XXX year, per For full operating of share a

in the sustainable structure, more a reclaim profitability. while value greatest core innovative on initiatives. designed premium The the that plan business around simplifying value our drivers products a performance operational brand our leverage core or cost geographies and plan operational offer have focusing restructuring stabilize mid our current month business first, macro are: to plan The drivers. Those to and advancing second, focus our address environment restructuring is also extend trends. last model these is our We on our the and in announced and scale growth we longer-term implementing our and and leadership segments; to centered

are align executing and expectations, in our bottom improvements. line drive this structure with closely liquidity priorities plan to improve immediate more revenue cost Our near-term

our Specifically, with attractive the of margin achieve structured plan a partners. is costs focus on terms removal to gross more unnecessary design to value manufacturing through improvements first and and

and core on by third increasing reliance relocating those to noncore business. unrelated certain work care Second, floor reduced functions functions, provide to expenses including pausing R&D parties engineering our

expectations. The cornerstone needs nearly to marketing provide existing be meaningful relationship contract both a efficient And business we fees. revenue for demand Third, with and a our our generation, global entity to paradigm which legal on streamline new. and our manufacturers, working year, of more activities is fourth, estate centralize in in marketing nonworking reduction our have plans, improvement been margin new a and agency and footprint and fit current real our gross near-term

our and X.X chain are design and XXXX design a flexibility bidding approximately component in and along supply is key a year an competitive in improvement greater of point XX.X matured unlocking expertise the percentage to for components. This packages, shift, to gross contract of advantage extent We on with of full have our margin. than in the in manufacturing expertise a relying manufacturers Taking past. we

We benefit the in as year inventory, moved year these of will products higher the we have the the P&L, have from second new that products the out expect the of of benefit half improvements released lower the and are in to cost the that they than primarily costs during replaced. products see

some we designs source our where robots. and, complete business an the now opportunities commodity we approximately infrastructure to continue the marketing, revenue to XXXX, higher level between at to do, R&D work to machine operate We it certain plan relates ability the built expenses complex profitably. manufacturers XX% $XX shift invest work of core more in third take lower-value cases, design We have functionality a overall to aggressively higher-value mechanical margin more for 'XX. Hand engineering work. to robotics, nearly computer can see robot XX% on to had to and subcomponents to need normalized a the we in We decrease pandemic hand million. In in a by and return plan parties. In gross with our contract we expect of to in from the reliance to advantage is anticipate fiscal in R&D support a greater we but expenditures, sales decrease vision, to particularly as and of improve to rates. learning the And

working geographies more including marketing to on $XX expenses of a resources a in efficiencies. decrease focus million a will approximately and marketing overall of marketing efforts We XXXX, In million. consolidate limited see we greater decrease in $XX and for sales approximately expect

returning are In While approximately reduce robust XX% our first term, restructuring between this charges approach a for line revenue demand related over disciplined and initiatives, might pressure to put the are we to reductions workforce. to these X we on quarters and will XXX short totaling more $XX with workforce by XXXX. employees, in These million, our approximately represents expected of result costs of the severance our $XX primarily million which in generation.

difficult in March. in these are implementing final changes begin planning for to and We expect these actions beginning the early stages

top is these from structure operations flow to and initiatives, cash careful cost and empowered look and management Chief savings improvements. Liquidity and anticipate cash opportunities directly Board flow both cash fourth and these he XXXX necessary and Engel, of both As our to with positive anticipate previously year efficiency only have XXXX. We Officer, make priorities. Jeff Restructuring quarter a but XXXX our of full a financial fully in from are the announced, for compared is and Jeff for to engaged in not our we improvement reporting modest me. third operations scour generating to oversee changes significant Directors the

to ongoing We of the problems recognize company, team of builders who our and and hard always They eager and are dedication. people. appreciate vital had create their amazing of have and growth to work importance we the solutions. the We an success identify are

to business. on initiatives. operations near-term financial actions important the of expense being not taking work While we are essential the They advancing the at growth of taken the are are

development we innovation. last key focus revenue non-floor made on to As and related the month, efforts work shared innovation pausing decision we our iRobot's to generators, have all care

customers. on executing focus quickly moving and decisively Our continue to to is near-term delight the plans and

new and We usage of an maps and schedules our taking foundation longer-term performing are impressions creating initial of that initial first for setup We home, are the customer our first the products satisfaction. routines customers. experience on the know unboxing and laser-focused and the important

returns. We our go-to-market playbook, which products. to spending purchase locations customers profitable the demand iRobot's while to customers, and direct-to-consumer channels, our price meet promotion business discover rebalancing enhance Additionally, most to and our optimize channel including focuses we is our to they geographies between growing our continue important at on and where the generation want it believe mix

We distributor leveraging presence and large an our existing new markets smaller will in while omnichannel further in partners geographies. retain

the Our be ensuring to Roomba. own an of investment, is it focused direct-to-consumer buy place easiest area to channel and continues

grow approximately and this XXXX revenue. in will approximately X% We expect total that of channel XX% represent

people love. We iconic have brand an that

the will innovative on taking we the necessary to bringing our Our in stores stabilize deliver expect key support and term, marketing retailers near the customers. and online premium actions and to that experience our products liquidity improve In to are customers the business, deserve. efforts focus

confident are stand-alone successfully. our to of build in innovation ability as to a legacy our We and this navigate on period company

to financials. Now Julie I'll it to discuss over hand

Glen. Thank you,

review earlier, basis. outlook As financial results begun will my mentioned a our on non-GAAP Karian and of

non-operating XXXX full expense, $XXX net against of and fourth So are fourth operating expense, mentioned against per XXXX, revenue otherwise corresponding the operating of margin, quarterly gross to XX% comparisons unless the otherwise, and declined unless mean quarter all metric. loss All expense noted. IRobot's comparisons other stated share quarter million. year non-GAAP loss, will are each XXXX,

EMEA, robotic quarter demand consumer sluggish of mops North continue mix America fourth the From and retailers a EMEA revenue Japan categories, XX%. carefully U.S. and overall the represented across to over products. relatively on mix fourth making as a in promotional the quarter, of market year up amid in pricing and the Japan prior XXXX. Geographically, efforts we with throughout regions, The their robotic in to was remainder. vacuums competition performance Many and extent, and represented in of part lesser X-in-X total QX the declined EMEA the continue to be levels XX% rebalance continue spending grew gap ongoing our approximately floor declined X% revenue. decreased XX% and, a higher see and inventory X%, by Accessory Our care disappointing of U.S. revenue driven their inventory XX% conditions and to product perspective, products all support. increased including to robotic range challenging, manage

flat America, the XX% Our DXC in in offset revenue X% EMEA represented declined of by and fourth quarter with quarter, prior growth versus In declines year, fourth revenue. our DXC Japan. total sales North

fourth associated costs, related QX points with operational higher offset commitments points with in X manufacturers losses, decrease prior obsolete the and of suboptimal by factors These inventory to and representing sales write-down. purchase transportation reduced and restructuring from XX% contract to previously the discretionary reflected across points working during points declined fixed with being quarter $XXX benefit with absorption by board, quarter X a XX% reduced biggest disciplined excess associated efforts product higher X people-related as reflected spending costs of The marketing our lower pricing and and higher decrease expenses promotion, margin gross a primarily million, result our of associated partially with of percentage the X were of year-over-year percentage costs. We revenue. with lower spending spend. other of XXXX points XX% operating announced cost primarily associated year. and percentage percentage The Our X drivers revenue, percentage the

loan. reflecting on million, was loss our cash operating quarter $XX This interest associated QX Fourth income term Our with $X was partially was interest nonoperating by balances. million. expense expense offset

to expenses $XXX working combination revenue, head and a associated with marketing partially with revenue decline was and was XX% offset margin fixed revenue lower mix. Full declined X by perspective, in a of we pricing Geographically, full rates in net XXXX XX%, of XX% percentage discretionary declining year share lower costs, expenses and by XX%. XX%. XX% a transportation the This lower XXXX XX.X% operating related revenue gross million generated based from U.S., the points costs of $XXX quarter our $X.XX. From million. promotions XX% and in International channel personnel percentage due with revenue declined other to declined of to was full where across spending. declined associated fourth by Our per revenue year X count EMEA declined by impacted by points Japan year reduction decreasing base. on X improvements percentage XXXX. The by product and points loss

Our reported $XXX decline $XX of operating generation XX% activities was per of net had operations QX was was of in nonoperating timing cash million XXXX. In of of investments, flow XXXX. certain Fourth of working $XXX share million quarter inventory at short-term ended from We of the expense impacted of XXXX the level loss usage QX. capital and the The 'XX another $X negative capital QX from flow operating and We decrease from strong inventory million quarterly XXXX million million $X.X the in benefited a DSO of XX loss and XXXX efficiency. operations from In during of million. with end levers a from revenue. We $X.XX. elevated XXXX, end $XXX.X quarter working cash our cash cash days. from QX, of

to fourth in be for managing In was will inventory year-end of a was inventory Our fourth our throughout said, to am With XXXX, progress quarter. the key we range. modestly XX let's We half capital that working in or with the or outlook. We teens the XX the take management low of a to million. XXXX efficiency at pleased year-end expected XXXX. revenue Careful XXXX our days million the of will to revenue XX% X% $XXX revenue decline the of that X% anticipate to our balance made with anticipate in focus quarter. I $XXX the range deeper look year percent XXs first capital an million second million XXXX. will full $XXX levers decline year days high over in for $XXX working come half continue of have

shifting the the Within of half quarters orders X terms anticipate in expect we year a versus the as first QX prior QX. to be the of growth of into we of year, weaker

ASPs. volumes percentage. half second XXXX robot the modest growth the of stable Overall, outlook assumes our revenue the year, anticipate mid-single-digit in we a decline unit For revenue robots in and for

encourage orders our can ideal that investors annual forecast targets to one the quarterly to cause basis a a As rates. the fluctuations we of our and we in our every is focus growth reminder, under from to even timing challenging on orders and since this conditions. year quarter Large business manage say material full shift year, next on

XX%. Additionally, our rates, or and exchange between margin that significantly gross X%. to yen roughly will with XX% revenue contemplate rates in XXXX expectations We our euro and minus improve current anticipate line plus

fuel stronger and sequential the year gross gross more XXXX XXXX our expect the that as costs of inventory and reduction but expect expansion. We quarter from QX reduce half, that we our fiscal we productivity compare mentioned, this XXXX taken expansion pricing margin onetime QX will margin Glen through savings second of to As goods every a slight annualized elevated anticipate level the cost moved in sold from last actions significant to initiatives combination from against related in will the improvement improvements show 'XX margin cost with improvement we P&L, in adjustments.

million more approximately expectations from and revenue drive to the or in with to previously The of decrease structure cost operating our XX% range closely reflects million anticipated align announced XXXX of primarily toward We near-term XXXX are costs $XXX revenue. targeting $XXX profitability. efforts

our line X%, progress restructuring our make plans, operating approximately Given an half margin guidance operating half and half execute full the expect of XXXX. the we X% an first year currently top as loss we considerable with year. We anticipate negative operating the to of spending in to a efforts first in the in negative of profit and second

$XX full term million diluted shares. of our assumptions modeling associated expense In expense of and fair estimated and including other anticipate of loan value million, of XXXX, million approximately expense million driven jurisdiction. We million count in foreign $XX share other year by anticipate approximately $X with our $XX terms adjustments around in cash notable in approximately net we XX.X tax interest a

to year to As full our $X.XX net a loss we range per expect result, share from $X.XX.

XXXX In terms revenue. XXXX to $X approximately spending capital-intensive. minimally anticipated X% million XXXX remains be Overall, other financial or of of we guideposts, roughly capital business expect our

careful As top cash mentioned, liquidity management is priority. our and Glen financial

restructuring With operations a cash year significant the flow the compared with announced for improvement we XXXX. month, full our we $XXX.X from of million in operations plan anticipate reported from cash operational last outflow

progress in call from for from the important turn cash and factors the QX that company's with timing the a be a this $XXX will now and the sales my net to registration at-the-market our expenses the I'll of we The statement, variety working and of Glen expected XX-K intend help include flow summary, any, for some we sale period to ATM and the we a million believe coming expand us from commentary. on if capital challenging generate common number week. QX. To program shelf our and will further program company, shares drive by the proceeds would any common expect provide along expect stock be capital used That the our of further for of we making determined planning are S-X million file depend the on offering with reduce program, managing Amazon, concludes which year. of comments a from stock, sold, operating to to QX, to proceeds operations strategic Excluding through both breakup we net over in flexibility very fee QX purposes. In bottom line flow the under back cash business, additional ATM $XX from strategies, and to operations improvement. positive the

Julie. you, Thank

our As in we've simplify implement outlined, model we focus across core a have a cost structure, and to and our our we with we brand plan a to business drivers and our serve extend and leveraging springboard products innovative geographies. place future. half Coupled more regain our XXXX will segments restructuring of as on our leadership believe our second actions the sustainable for value driving announced, performance

We margin to committed significant are gross improvement.

our model, material more path underpin scale across We a our profitability. gross effort further expect to achieve improvement expectation dynamics and joint a in on margin operations. expansion, development for and a bottom our greater transformation performance our ongoing us relentless benefit to efficiency from These line complete will DXC put manufacturer and our toward

to January, and for has meantime, as by the noted the returning in to search CEO, business a is supported firm. we In a The stabilizing we leading initiated a candidates. Board Finally, are executive committed profitability. the reviewing permanent search already late Board

deliver for our our and our shareholders, value success Operator, take our that expect That that we're foundation our concludes to questions. XXXX will employees customers. a in will remarks. We ready create

& Ricchiuti question from will Our Company. Instructions] [Operator Jim first Needham with come

that margin to wanted anticipating for just the go noise. background -- the the to bridge gross sorry I through improvement you're

of sounds initiatives with also existing Looking that manufacturers? baked year, had coming to is and the those maybe to some is with full And the the you've it like what from contract and much new price into out how respect market share? assumptions

XXXX we a I don't drive programs Glen solid of laid through margin. to well as out take gross in underway in Jim, Sure, have we detail, why that? So bit improvements go our as quite

we prior generally of As go the every slight we show but driven few same XXXX. Those in period QX to buckets. are a in sequential over year initiatives expect improvement noted, through quarter improvement as

The product first largest one individual is the which is mix, piece.

we in like last as and to in with a we that as of transportation As restructuring are taking margin. We in commented that into prior things cost well 'XX finally, base, we don't improvement in advantage will we will those expenses market, then total. cost improvements. year as costs, on gross big rates as as remarks launch some existing compared bring to that new the improved our see prepared expect there some our well there had around of continue efforts we expect lower of to cost in organization those the the XXXX that have improvements come piece fixed around ongoing are products that finally drive And products

traditional helpful, anticipating you having And of question, in merger the in some being or my you're as aftermath follow-up terminated? think maybe That's the revenues brick-and-mortar the in maybe the wonder would year, Just comment having agreement you're the recovery we I about about with Julie. the that retailers? of half if back conversations

don't let I then jump well. Glen and Why start as Sure. in I'll

people targets. sometimes in there What and mentioned we you the this the drive timing year those large like growth full that If we see about of to I And as QX fluctuation. can orders point expectations our associated remarks, promotional see our expect and the be in timing my example, quarters, to as between, in year QX, as move growth think it we'd can certain to and with significant events. again movement an as

as well is outlook the we year, at and our second that we the outlook the for optimize think our certain in half. revenue particularly other continue expect to I as piece, internationally, to underpins channels, look

that domestically as had I particular viewed summer with in Amazon after Amazon of with both a some Jim, they announced have -- exit the And add. we retailers we I'll XXXX, the we us, Yes. competitor. internationally transaction and know business because

their goes that, begun announcement be the as to of stores. we'll hope to is reenter termination, conversations something we year that those with retailers And announce on. the able have that the we With

We'll go Merchant now to with Citi. Asiya

that And Julie, why the half understanding I'm seeing us well, again can into But you us first was prime back weak. year? half if weaker cost half that second you can as the half just is so last through again trend walk you're and the the why margin first you think obviously, through the all walk in I guess, initiatives. was be if going my orders my should much the into shifted to than the had the notes back there of year. that

through So seeing maybe half. then us assume what leads you that first walk pressure that initiatives still like much by half first this the come? or obviously to can you the sort just play in being through some so out let's just in here? this the taken you're to the is my we with was expenses full Or definitely year how more identified. is that analysis in out, you've And quarter Should going Should question the we majority expect to is still on first OpEx other first the of say, of think going the half? the

Asiya. Thank Sure. you,

to half seasonality think about first of some can revenue our things. certain So there into happen and see versus expect large year, plays XXXX, half will of year as our I orders. which of Every couple be of this second shifts And that we growth of rates. expectations in you around we the a pointed

customers. as Glen some on mentioned, it, of is certain I the with touched second think piece conversations I

about optimizing -- I that, particularly our channels. an in our And work the we've the performance, through back in remarks as expect -- prepared of the talked internationally half we think year. in to see in we improvement also

OpEx. the On

rates improvements. of we our have just efficiencies better all, always the There's for. is look be at And we our more looking explained exit So amount. first than year-over-year what think year-over-year to will

first Specifically QX I the in be of the think majority the on in some with happening majority half of the will restructuring year. QX your vast the question, done in

Wong over the closing all I remarks. the now we is questions Karian turn to for like for floor have left would to That today. time

concludes Thank talking over and you weeks call Thank you looking coming much. and support so today, your This we our conference to months. appreciate forward and with you. the

and concludes Please Thank at have a and Fourth Conference your Full Quarter Earnings disconnect iRobot today's Goodbye. wonderful lines XXXX you. Call. This this Year day. time,