iRobot (IRBT) 7 Aug 242024 Q2 Earnings call transcript

Welcome to the iRobot Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] Today's call is being recorded. [Operator Instructions]

I would now like to turn the call over to David Calusdian of the company's Investor Relations from -- firm, Sharon Merrill Advisors. Please go ahead.

good and Jamie, you, morning, everyone. Thank

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

actual results today's today date. A future our any financial uncertainties I cause remind These as in subsequent statements statements At representing like views performance. should SEC. future factors discussion as the statements that reflected under expectations Factors not to are our that discussion detailed filings considered of caption regarding the risk statements. our outset, differ and of risks to in forward-looking and These subject these will views is and the forward-looking from fully with events our as Risk reflect materially include could the only would everyone of to be

development, operating believe non-GAAP loss per Related disclosures to additional that help SEC our margin, results reference and operating and sales non-GAAP call, certain We potential. transparency loss defined we G, research financial net provide conference non-GAAP performance including will financial and this by share. measures non-GAAP iRobot's and underlying gross as non-GAAP expenses, Regulation our non-GAAP marketing, non-GAAP into during operating financial non-GAAP

in available these which financial QX comparable details, of included to website the the XXXX and GAAP in event each reconciliation most our Earnings Call is measure of the these definitions at Our non-GAAP presentation earnings directly non-GAAP measures Conference of financial measures on are www.irobot.com. provided

our be a second comparisons and quarter including financial be on are only, of call, discussed the otherwise, will all the stated will on second our in provided with today's unless financial quarter basis historical that metrics Also, XXXX. non-GAAP metrics conference outlook,

call full briefly questions. and additional Julie results closing the of is then will as company's year. call, cover year the half provide regarding milestones results, the expectations will quarterly we our will insights today's review remarks financial and review company's outline offer for outlook. For second important Gary for strategic before the the Gary the follows. open company's agenda iRobot's

will him his that, earnings new call the to over is iRobot's call what CEO. and as welcome With first I turn Gary, to

and David, today. morning, as first chapter to and very iRobot's here you you in CEO. pleasure new is to speak earnings the legacy us company's innovation. for It excited my a to joining history on call you, a Thank Thank we good as everyone. iRobot's build on I'm of start be

makes the distributors great I've and iRobot, with of have than ever gained and In constituents our company, I midst a key that be of understanding and the my to around far at successful. opportunities. and opportunity am the X months challenges globe. more turnaround, a We're had major will in confident capabilities, teams, learned we I I've about thus retailers, meet our what a this deeper

the results call For begin quarter for then to today's decided I an then to our of outlook. over to second I and opportunities join will our I call, our detail in and a overview turn why position Julie provide will I future. review highlights will of with and provide our more bright discuss iRobot my outline to iRobot. financial to performance background

open call for remarks, the will prepared our Q&A. Following we

build is had iconic and passion opportunity diverse goods. consumer I've the categories My brands, to in building of brands many

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In several in markets. even iRobot continues in leader fact, the be to turnaround,

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and time, the many built that slowed much for had with organizational a same that larger At we too an decision-making. layers structure was company,

high-cost much for Additionally, overhead many the too ideas. countries too R&D model carried noncore in

addresses of plan these all restructuring issues. Our

R&D changes vision have to I've team be our to to new leadership with how we of and reorganized products. made aligned executive several better deliver Since our joined,

Operating am Jeff joined me. to to iRobot and Engel as has I Chief officially fact, President pleased announce Officer, reporting In

with will management this CRO as product for Jeff speaks against he been company's and in targets. and and continue Chief operations months is X has this chain helping supply to iRobot will us in his adviser. He work has faith our time and our willingness instrumental the restructuring Jeff's duties not deliver completed. join at been area to turnaround responsible growth prospects, and our his in as volumes our since and R&D, for iRobot Restructuring be Officer

expected plan Our track delivering demonstrate second quarter our the that restructuring results and results. is on

appropriate to operating made targets. our decisions head achieve reduction expense but planned count We tough have and

was manufacturing We which One driver markets inefficient many in strategy. gaining marketing our of now reduced of product is line, traction new also and in our leader margin-accretive Japan. margins and the the product this contract is our have launch Essentials improved unit spend via

finished continued Furthermore, goods and our narrowed reduce to we despite have our inventory charges. operating onetime losses incurring

lessened operating cash. We use also our of

we to time. will are operating While take we a term, near dynamic making operate that turnarounds in we progress, recognize And environment. continue the in

XXXX will revised our in and outlook reflected QX is shortly. Julie discuss our XXXX outlook. This

iRobot's we As our innovation growth to we headwinds, of long-term advance remain confident navigate our near-term on build ability legacy to in initiatives.

more on is way, consumer increasing strategy our entirely to launched financial centered innovative talent. have to performance, and continuing that profitable products which and market improving To organization operational our and a end, new new we retaining developing best Elevate, focus elevate our an improvements bringing iRobot our in and brand,

benefit everything at for our enhance all the of we do We to performance iRobot evaluating are stakeholders.

the a Dock. and independent intelligence savings about is gross multifunction, our new X-in-X we our growth. be announced more Last big focused on margin Roomba and A our developing restructuring level yet, Elevate to Our and and part flow. will new commercializing Elevate AutoWash cost smartest improving is of robot best-cleaning vacuum Combo and first cash and XX with products. cleaning mop takes month, This Max. robot

and Roomba drives dock It refills automatically XX while The the robot, is and mop and empties price and Max debris by pad, vacuum and across engineered multiple will an washes best recharges mopping self-cleans. to powerfully floor then the Combo the XXXX, product be our product in number an better XXXX another our followed of points. new including good, entire QX launches unprecedented and lineup, new revamp of types,

and iRobot of engineering the our iRobot which talent will and company announcing and time our also and will partners Labs a the securing innovation technological to The is are that creation the internal the harness serve company's selected global software as Labs, of our known reducing strength leadership We focus team the on for. product will around world. is initiative center. market

the We European in demonstrated the for we operate and sizable that potential purpose embarking that the This We're cleaning consumers leader consumer around position our by journey and devices robots company has an in consumer our segment reclaim Overall, a serves is home a the the products multiple on is world. for for innovation backed expansion. are a exciting beyond. market. by value technology global as in global to growth

creator category we products. innovator, plan new and with expansion the value to and As global lead drive the

consumers our enable lives. time products have more to to their Our enjoy free

time, of and the box, working initial are opening aspect first experience We tirelessly robot to our with their consumers every includes cleaning Roomba This app. the for starting the using the delight experience. the

Our user and new our a our for rebuilding and mobile delivering consumers. plans experience include app improved

agile and business. of We work front to have lot a us of become a more reduce unproductive costs in

reduce over will difficult, We but positive and will sight to cash operating line have decisions our losses and achieve ensure time. we the and flow make of flow cash necessary operating continue from operations to income that to

business, is our with goal take energy forward to turnaround sharing and by products energized and I early Turnarounds commitment. to the in launch new plan pleased future are revenue have and it look sheet near-term am our time, again. that updates with us done it you returns plan, potential. growth. to and a do on our to future challenging, Our I I calls. on path set before, the stabilize balance confident improve I

call I'll that, the With Julie. turn over to

everyone. you, Hello, Gary. Thank

noted, be the loss a will operating review of expense, corresponding mention net and and non-GAAP mean share my metric. per gross operating margin loss, done each will Unless noted, David As results of basis. otherwise financial our non-GAAP outlook on margin, operating

reflected foreign currency heightened consumer Gary a our and results As our in QX environment, spending a segment impact. market challenging greater-than-expected mentioned, more competition

in guidance low of totaled Second range quarter million million end with $XXX.X in XXXX. came of XXXX QX compared $XXX.X and revenue at our the

the quarter, U.S., EMEA. XX% in revenue the and declined in in Geographically, XX% in Japan second XX%

reflect dollar. weakness the yen Our continued Japan in against the results

period. the sales XX% year XX% revenue a prior represented impact, Excluding of robot product total foreign QX. perspective, currency products over From X-in-X unfavorable in Japan the decreased mix

robot over XX% total a $XXX XX% the experience of with an year Accessory Combo the X-in-X sales, and $XXX of in compared Roomba of XX% provides total quarter of approximately an robots, the with between and iRobot prior reflecting mid-tier MSRP cleaning price point. the the from revenue XX% at Revenue with premium grew introduction lower year represented Essential, more, ago and revenue. period, the QX in or represented which MSRP $XXX robots

X% revenue. In Japan decline X% offset the a with of quarter, declined currency our EMEA, sales, impact. represented XX% of decline DXC in from or direct-to-consumer, year by quarter revenue total the XX%, growth and a second XX% period, excluding ago North the second America or Our in DXC

product new include purchase in included our entirely commitments. cost the paradigm well write-off to to inventory and due QX road as $XX.X nonrecurring development and on component results XXXX losses as product charge map. This of a the the charge changes to is transition is excess transition the of Our manufacturers million with noncancelable contract for product our manufacturing revenue

percentage result in that significant a obscures which of margin I'll XXXX XX.X continue margin with the compared As and of gross XX.X% we and charge, manufacturing the points, was make gross QX in XX.X% this impacted to product revenue. XX.X% in transition XXXX. made reducing QX of charge progress of QX note by cost

charge cost decrease year-over-year from Operating decline the $XXX.X the of manufacturing which onetime aggressive as is disciplined driven our spending million the plan, plans improvement as QX year are QX the XXXX totaled taken in we reflects impact $XX.X and of better million compared on XXXX, a of This period, charge, with cost well expenses ago in products new existing Excluding transition the by track with gross during with a margin impact XX%. is quarter. our restructuring for representing primarily on which reductions profile a products.

people-related efficiencies organization. a the and plan, our of restructuring an across associated were focus The QX results the restructuring on marketing continued severance for spending more all with disciplined to previously reduced a demand include charge GAAP key costs. drivers spend, primarily $X.X the million approach related reduction to announced functions efforts, related generation across and

the head operating year a and X R&D have of we set with of of provide production expenses, In are progress first respect million We year. by R&D, full in call our million. that where made and out reduced for reducing compared update a on significant want $XX.X by improving quick February full we in months Regarding million. to year $XX.X our structure, expenses including approximately target year, expenses count sales to QX goals on with our this $XX we the cost marketing I

approximately a $XX marketing At the decrease we marketing, working in of in time, and sales included same compared a target of $XX million. marketing million, by full $XX expenses $XX.X reduced working which with including year overall million, million

Lastly, we've XXX reduced XX%. of XX% original This our an compares workforce or by versus year-end XXXX. or target XXX with

operating loss. to Turning

loss narrowed an period. the with we our here. the can number million that operating million an to of progress manufacturing we compared $XX.X $XX.X you million, you loss charge, For transition ago operating made $XX.X operating consider in loss When year the QX, includes see have

expense offset $X.X nonoperating reflecting associated expense by balances. interest cash million, the impact quarter was on was partially This of fair our loan. with accounting value Second and interest term income

Our $X.X was and of loss $X.XX for QX million expense net share which the per manufacturing share included charge. tax per transition $X.XX,

compared of sequential million in aside We $XX.X with loan cash quarters operations million million, in a QX. the this QX decline cash year. of term million XXXX cash a outflow our third ended repayment of of for $X.X inflow XXXX. from with totaled limited QX, from $X.X end the cash to million the million in future subject of rights $XXX.X of $XX.X QX In $XX.X fiscal from and and Restricted and equivalents, with for was cash inventory operations set purchases

As our XXXX from disclosed termination flow the call, onetime in $XX operations benefited the QX from Amazon from net XXXX million of proceeds QX fee. cash

in Amazon operations from improved flow QX, the cash fee $XX sequentially. by termination Excluding million received we

with Second days DSO XX customer to in quarter due compared was primarily year mix. the ago period, XX days

million and on days and the inventory our transition Our balance continued manufacturing charge. of balances $XXX.X the quarter-end focus XX or carefully impact was inventory reflects managing

and in provide S-X on The -- February stock. planning offering filed an QX at-the-market, for enhance capital program, offering liquidity shelf discussed the registration we of includes common to flexibility. our our a As or the ATM discuss sale to call, statement shelf company's

of million. During sold proceeds the million $XX.X second X.X quarter, for net we shares total

of priority, in to capital As levers. continued a of the working our have make -- cash and our we remains progress had our under working $XX.X management QX, Careful million key ATM end of the remaining and efficiency capital managing we working program.

outlook. Turning our to

outlook quarter We full are year. our introducing our third and revising

QX, per the we is be to in range $XX and share to $X.XX to of the expect per and the the range million $X range $XXX share. gross of net revenue of million For $X.XX to in is in in expected income to Operating loss million $XXX margin XX% to range be of million XX%. expected

year X. softness, revenue that we to are consumer the Due on and persistent we foreign updating currency provided headwinds market outlook May full

loss the margin, reported impact gross year full Regarding net nonrecurring $XX.X our the share, revised operating million reflects outlook loss transition primarily of and per manufacturing charge in QX.

million XX% we million operating For now $XXX year our loss to the approximately and X, to for loss on range provided XX%. net or year on of of to to XX% per original first quarter that are we share call May targeting be order full expenses we In in expect full year revenue our and XXXX, revenue. $XXX $XXX million in range the gross operating $XXX goals million the XX% meet to in full margin of of range to

to near-term spending. and further decrease organizational our more year reflects closely optimize along with to XXXX revenue structure discretionary expectations, anticipated efforts cost full minimize previously the primarily announced with align reduce structure, from inefficiencies The actions

anticipate to year margin an of XX%, X% negative We operating negative in full XXXX. the approximately second operating half profit of with

of half continue the from and modest, progress our generate flow in operations during flow expect cash the second cash We to improving positive operations to from make year.

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

shares, issuances our approximately of XX.X under million We anticipate ATM. a count of additional any exclusive share

the year a expect $X.XX. As net full loss $X.XX per share we result, a in of range to

capital minimally capital-intensive, and $X remains year now capitally million. business -- to approximately we Our full expect be spending

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

the revenue Japanese a year based a a poll. XXX expectations X.X euro FX our XXX on of of for yen to remainder the and contemplate exchange rate Additionally, rate Reuters of exchange

turn to August you hope over XX. I Gary, Before us. want Tech Gary? I mention Robotics back to Monday, participating the join call Annual can we will on Virtual be XxX that Industrial Needham's Conference Clean XXth Tech, We in &

Julie. you, Thank

We are to improve product delivering commitments operations. our from flow margins, reduce cash and expenses increase operating

can is gives improvements on confidence and product plan our track. consumer and we innovation, return financial brand is Our us execution management. Elevate improvement, on The new to strategy of talent that Elevate growth. building, focused restructuring operational

opening support and are our dedicated up than Before the working call to our I want and objectives. thank talented acknowledge employees, questions, harder who for to ever ambitious

about and company of are passionate culture. can and that and proud innovative our we employees things. for our I and accomplish Our unique and great our they strong am a know our brand they affinity the have what and mission, do together, people so

In are will and of believe shareholder overall we actions market value. long-term and challenges and ultimately, elevate closing, our mindful ahead, the growth operational iRobot's performance generate and

open please go questions. We ahead. call to will now Operator, the

question Markets. coming Northland first Mike from with Latimore Our Instructions] is [Operator Capital

think, you're part provide channel kind retail of of right. just that I was the partners. add maybe, reinvigorate regard? few you another Can or All the then year Great. on base what and guess would of in think, channel, strategy, an update your thinking this customer retailers on -- I to I kind

sure, Mike. Yes,

whom transition. timing have them of working we resets. the some lot with we're a their actively with left planogram and Amazon of active we're distribution, conversations, have of And and on who points customers, engaged We and during

that line optimistic about, get that and talked the expecting. about launches we us product in So we're the distribution healthy discussions that will we're very

like a what you'll it you would update. some know a color these product you're And be significant enhancements in set? of but Great. new prerelease sort can't fairly portfolio -- Can sounds that around XXXX, you I see things, thinking in us product there? you you just the indicated have give some might

are about gaps point segments. to map. we gaps of and XXXX areas consumer performance, in road in aim is our those excited several there those fill products know with We very have that that We're all the appealing price

we'll product channels So we'll out focusing we line. and the points be roll on as price focusing be on

then last can on what it's maybe but too you of And -- early, iRobot gross the question longer just Great. do margin think term? be

is and nice of from Yes, margin. we We've quarters our about are Mike, this hear you. over Julie, that the to last the expand work doing to talked number gross

are encouraging at the we of Our market to with innovation our as the has partners number in our new existing to results supply continuing working manufacturing been profile and them move products our we've seeing on mature take for a better last products. of to on that more rely a out cost and contract -- the periods, paradigm new we're to cost bringing chains well of new as something been

to of So we've we as we expect we continue see year, gross forward. and our go expand -- that look, that and we will our as the expectations be full a can margins, focus in ours for given to you

additional over And to remarks. floor questions any no for to hand Cohen it we I at appears or closing have back time. the would this further Gary like

the of again a us at looking you Conference the everyone. Have XXth forward day, you coming meeting Needham weeks. on the today. great many for Thank to and in joining I'm

results This call. Thank our financial concludes you. conference

have at a this You wonderful may and time, day. disconnect