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iRobot Analyst Day May 7, 2014
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 new information, 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
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
5/7/2014 3
iRobot Strategic Initiatives Colin Angle
Chairman & CEO
The Robot Company
24 Years of Empowering People To Do More
5/7/2014 5
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:
5/7/2014 6
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)
5/7/2014 7
Cumulative
Ava
ilab
ility
Supply
Creation Stage
Genesis
Commoditization Stage
Scale
Explosion Stage
Brand/Offer
Product Differentiation
Mass Product
Scaling Robot Vacuuming
Roomba - beginning of the explosion stage
2014
5/7/2014 8
Defense & Security
Expanding markets and opportunities in public safety and industry International revenue more than doubled from 2012 to 2013
5/7/2014 9
Remote Presence
Navigate & Interact In Complex Real World Environments
Video Collaboration Ava 500
Telemedicine RP-VITA
Investing in long-term growth
5/7/2014 10
Unlocking the Potential
+ Stationary + Mobile + Navigating + Manipulating
Manufacturing
TeleOp Presence
Val
ue
Floor Care
Higher value More autonomous
More accessible
Cloud
Autonomous Patrol Continuous Home Maintenance Teleporting Remote Presence
Productizing Robot Capabilities
5/7/2014 11
Technology Strategy Paolo Pirjanian, PhD
EVP & Chief Technology Officer
Technology Strategy
Navigation near term focus
5/7/2014 13
Simultaneous Localization & Mapping (SLAM)
State of the art, high-end navigation today
5/7/2014 14
Visual SLAM (vSLAM)
Next Generation Navigation: Camera-based mapping yields both 3D key-points and environmental layout
Enables autonomous navigation: Uses
efficient algorithms for path planning, self-docking, way-point navigation and efficient coverage algorithms
Consumer-grade pricing: Worlds 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
5/7/2014 15
Visual SLAM
5/7/2014 16
From 2D Maps
Connecting maps, users, and the Internet of Things
5/7/2014 17
Using Our Strengths in Navigation and Vision
5/7/2014 18
Combined with Low-cost Depth Sensors
5/7/2014 19
To Produce High Definition, 3D Maps
5/7/2014 20
IP Strategy and Patent Portfolio Glen Weinstein
EVP & Chief Legal Officer
IP Strategy
5/7/2014 22
Sword Encourage or force competitors to design products that avoid iRobots technology and brand identity
Shield Ensure freedom to operate
Openness Embrace open source and interoperability where appropriate
Enforcement Stress test patent assets while
pursuing business goals
97 164
232 250 116
180
293 308
0
100
200
300
400
500
600
2011 2012 2013 2014 YTD
U.S. Int'lIssued Patents
213
344
558
Patent Portfolio
525
iRobot ranked 5th overall by the Patent Board for having one of the strongest patent portfolios in electronics and instruments industry
5/7/2014 23
Patent Portfolio Roomba
Reliability & UX, 7
Platforms & Cleaning, 18
Other, 5 Navigation,
68
Tier 4
Tier 1
Tier 2
98 U.S. Patents Covering Roomba Technology
188 International Patents Covering Roomba Technology
Tier 3
58
29
28
61
5/7/2014 24
iRobots 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-Contact ODOA
8
SIFT 1
5/7/2014 25
Median litigation costs for a moderate-sized U.S. patent infringement suit is $2.5 million; median cost for a large suit is $5.0 million
Source: AIPLA Report of the Economic Survey 2011 Cost
Depositions, document searches, etc.
Median time to trial was 2.5 years in 2012 Source: PWC 2013 Patent Litigation Study
Distraction
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 Business Goals
Patent Enforcement Considerations
5/7/2014 26
Patent Enforcement: 2013
Speed Cost
Expertise Availability of
Injunctions
Injunctions & Damages
Available in the Same Court
Influence of Decisions
No Stay of Ruling Pending Validity Determination
Cost Recovery (Loser Pays)
Source: Managing Intellectual Property (Sept. 2010)
Brought two patent enforcement actions in 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.
5/7/2014 27
Q&A
Christian Cerda SVP & GM Home Business Unit
Home Business Unit
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
5/7/2014 30
77.9 82.8 117.6
154.1 180.6
151.5 195.7
239.2
273.7
326.9
229.3
278.5
356.8
427.9
507.5
$0
$100
$200
$300
$400
$500
$600
2010 2011 2012 2013 2014 Est*
$M
Domestic International
Home Business Unit Growth & Profitability
HBU Sales in millions, 22% CAGR Other Key Metrics
21%
28%
20%
19%
* 2014 expectations provided February 5, 2014
CAGR
Total 22%
Int'l 21%
Domestic 23%
2010 2011 2012 2013 2014 Est*
GM% 40% 45% 49% 49% 49%
ASP 189 207 222 231 245
Delivering continuous profitable growth
5/7/2014 31
32
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
5/7/2014
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 been the biggest difference. Our old vacuum had the
bristled roller on the bottom and wouldn't even
rotate it was so tangled in hair. Now, hair isn't a
problem.
I had a Roomba many years ago when they first came out. That Roomba was a novelty. This
Roomba is a masterpiece.
5/7/2014
33
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
5/7/2014 34
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
5/7/2014 35
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
Mill
ion
s
Robotic Vacuum $ Spent*
Source: *GfK, NPD, iRobot data 2013 **Vacuum cleaners >$200/robotic vacuum revenues
Strong growth continues in robotic vacuum cleaning market
5/7/2014 36
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
5/7/2014 37
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
5/7/2014 38
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 iRobots largest non-U.S. market
* GfK 2013
Controlled growth strategy in large and growing market
5/7/2014 39
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
5/7/2014 40
CFO Perspective Alison Dean
EVP & Chief Financial Officer
A year of significant progress Continued Cash Generation Financial 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
5/7/2014 42
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 iRobots grand patriarch of robotics scene
CNN Make, create, innovate series iRobot as a pioneer in the 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 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.
5/7/2014 43
iRobots 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
5/7/2014 44
A Selection of iRobot Defined Peers
5/7/2014 45
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
Strategic Alignment Does the opportunity support or advance
our 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
5/7/2014 46
Cloud
Products 75-80%
Roomba
Braava
AVA 500 ?
Technologies 20-25%
Core Emerging Future Navigation Manipulation
Internal R&D Prioritization Framework
RP-VITA PackBot
FirstLook
Scooba
Other
5/7/2014 47
iRobot R&D
Focused investment
Q1 exceeded expectations; Reaffirmed 2014 expectations
2014 Results and Expectations
* Expectations provided April 22, 2014
5/7/2014 48
$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
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
5/7/2014 49
$M
* Expectations provided April 22, 2014
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
5/7/2014 50
Q&A
Thank You