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 The Robot Company
OUR MISSION: OUR VISION: 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.
5/7/2014 6 Global Growth
Cumulative
• $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 Scaling Robot Vacuuming
5/7/2014 Availability
Creation Creation Stage Genesis Roomba
Brand/Offer
-
beginning of the explosionthe of beginning stage 2014 Mass Product
Explosion Stage Explosion
Supply Scale
Product Differentiation Commoditization Commoditization Stage 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 Telemedicine Ava 500 RP-VITA
Investing in long-term growth
5/7/2014 10 Unlocking the Potential
Higher value More autonomous More accessible Autonomous Patrol
Continuous Home Maintenance
Teleporting Remote Presence Value Floor Care TeleOp Presence Manufacturing
+ Stationary + Mobile + Navigating + Manipulating Cloud 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: 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
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
Sword Shield Encourage or force competitors to Ensure freedom to operate design products that avoid iRobot’s technology and brand identity
Openness Enforcement Embrace open source and Stress test patent assets while interoperability where pursuing business goals appropriate
5/7/2014 22 Patent Portfolio 600 525 558 500
400 308 344 293 300 213 180 200 116 232 250 100 164 97 0 2011 2012 2013 2014 YTD Issued Patents U.S. Int'l
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
98 U.S. Patents 188 International Patents Covering Roomba Technology Covering Roomba Technology
Reliability & UX, 7 Tier 1 58
Platforms & Cleaning, 18 Tier 2 61
Navigation, Tier 3 29 68 Other, 5
Tier 4 28
5/7/2014 24 Patent Portfolio – SLAM Navigation
iRobot’s portfolio includes the earliest filed patents on visual SLAM (“vSLAM”), especially single vSLAM camera SLAM.
15 Cases descended from these early matters are still being processed, and iRobot continues to observe the industry and tailor new “sword” Non-Contact Features & and “shield” patents based on the market. ODOA Landmarks Additional patents and patent applications 8 6 cover improvements and innovations through the intervening years to the present day. SIFT6 1 We are of course adding new patents and patent applications based on the state of the art as it is developed.
5/7/2014 25 Patent Enforcement Considerations
• Median litigation costs for a moderate-sized U.S. patent infringement suit Cost is $2.5 million; median cost for a large suit is $5.0 million • Source: AIPLA Report of the Economic Survey 2011
• Depositions, document searches, etc. Distraction • Median time to trial was 2.5 years in 2012 • Source: PWC 2013 Patent Litigation Study
• Overall success rates for practicing entities is 34% ; overall consumer Litigation Success Rate product success rate is 35% (Strength of Case) • Source: PWC 2013 Patent Litigation Study (data from 1995-2012)
• Can defendant add a counterclaim for infringement of its own patent? Counterclaims • Might defendant be able to otherwise disrupt our business?
Achievable Business • Injunction? Damages/Royalties? Halo effect of strengthened portfolio? Goals Initiation of business discussion? Force design change?
5/7/2014 26 Patent Enforcement: 2013
Speed Cost • Brought two patent enforcement actions in Germany in the second half of 2013. • Infringement of 5 patents against a reseller of Chinese goods. Availability of Expertise Injunctions • Infringement of 4 patents against manufacturer of imported robots.
Injunctions & • Received a preliminary injunction against Damages Influence of Chinese manufacturer in August 2013 on Available in the Decisions all four patents from court in Dusseldorf, Same Court Germany.
No Stay of Ruling Cost Recovery • Additional Customs enforcement in Pending Validity (Loser Pays) Germany, Netherlands & Spain. Determination
Source: Managing Intellectual Property (Sept. 2010) 27 5/7/2014 Q&A
Home Business Unit Christian Cerda SVP & GM Home Business Unit HBU Strategy
Portfolio Expansion BrandBrand Strength Preference • THE Robot Company • Premium position • 360 to consumer
RobotProduct Performance Leadership • Core performance • Automation of task • User experience & connectivity • Quality
Supported by a winning team and effective go-to-market strategy
5/7/2014 30 Home Business Unit Growth & Profitability
HBU Sales in millions, 22% CAGR Other Key Metrics
$M 2010 2011 2012 2013 2014 Est* $600 19% GM% 40% 45% 49% 49% 49% 20% 507.5 $500 28% ASP 189 207 222 231 245 21% 427.9 $400 356.8 CAGR 326.9 278.5 Total 22% $300 273.7 229.3 Int'l 21% 239.2 $200 Domestic 23% 195.7 151.5 $100 154.1 180.6 117.6 77.9 82.8 $0 2010 2011 2012 2013 2014 Est* Domestic International
* 2014 expectations provided February 5, 2014
Delivering continuous profitable growth
5/7/2014 31 HBU Product Introductions
2011 2012 2013 2014
Roomba 700 Series Roomba Roomba 600 Series 800 Series Mint 4200/5200
Scooba 450
Looj 330 Scooba 230 Braava 300 series Scooba 390
Mirra 530
5/7/2014 32 Roomba 800 Launch Success
. 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 “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.” 33 5/7/2014 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
North America - $2.2 billion EMEA - $2.5 billion 14% 14% 4% iRobot 6% iRobot
Other Robots 82% 80% Other Robots
APAC - $2.2 billion 12% 4% iRobot
84% Other Robots
$7 billion annual market opportunity
Source: Vacuum Cleaners >$200 USD, 2013 retail prices (based on NPD, GfK, Euromonitor, iRobot internal data)
5/7/2014 35 Robotic Vacuum Market
Robotic Vacuum $ Spent* Robotic Vacuum $ as % of $1,400 total $ Vacuum Market** 100% $1,200 90%
$1,000 80% 70%
$800 60%
50% Millions $600 40%
$400 30%
20% $200 10% 14.6% 15.7% 18.1% $- 0% 2011 2012 2013 2011 2012 2013 Strong growth continues in robotic vacuum cleaning market
Source: *GfK, NPD, iRobot data –2013 **Vacuum cleaners >$200/robotic vacuum revenues 5/7/2014 36 Robotic Vacuum Global $ Market Share
North America EMEA
iRobot iRobot 6% 2% 13% 12% Neato Samsung Others 8% LG Neato Others 16% 62% 83%
APAC 1% 1% 4% iRobot 7% 5% Sharp Ecovacs Toshiba 15% LG 67% Philips Others
Source: 2013 NPD, GfK, iRobot internal data, Robotic Vacuum Cleaners >$200 retail prices
5/7/2014 37 Competitors with Steady Cadence of Launches
2011 2012 2013 2014
Roomba 700 Series Roomba Samsung Navibot S 800 Series LG Home-Bot Square
Neato Signature Pro
Sharp Cocorobo V90
Ecovacs Deepoo 900 (not yet shipping) 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 iRobot’s largest non-U.S. market
Controlled growth strategy in large and growing market
* GfK 2013
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 Financial Growth Continued Cash Generation
2013 2014* $M (except EPS) Revenue $487 $565 • Strong OCF; cash near record high levels YoY Growth % 11.7% 15.9% GM% 45.4% 45.0% • Robotics ecosystem expansion Opex % 38.7% 36.0% • Investment/acquisition opportunities increase Adjusted EBITDA Margin 12.8% 13.5% EPS $0.94 $1.08 • Renewed/doubled share repurchase program
* Midpoint of expectations provided April 22, 2014
Business Momentum Recognized Technology Leader • The Economist – Robots offer a unique insight into what • Braava introduced to international markets people want from technology
• Successfully executed 2 major product transitions • Fast Company – iRobot #1 most innovative in robotics
• Significant technology advancements • Bloomberg Brink – Forefront of Robotics – iRobot’s grand patriarch of robotics scene
• New RPBU platform – AVA 500 – B2B sales model • CNN – Make, create, innovate series – iRobot as a pioneer in the field
5/7/2014 42 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 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
5/7/2014 44 A Selection of iRobot Defined Peers
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
5/7/2014 45 Investment Framework
Strategic Alignment Market Attractiveness
Does the opportunity support or advance Size of addressable market our strategic vision? Estimated growth of market How similar is this business to our existing businesses? Profitability of market
Can we leverage our current resources or Barriers to entry technologies? Competitive Strength Investment Timing
Expertise in relevant technologies Is the opportunity near or long term?
Brand strength in addressable market Significant one-time investment or multiple years of sustained investments? Familiarity with customer / channels Timing of cash outflows and inflows Manufacturing / Operational efficiencies?
Invest to pursue defined strategy
5/7/2014 46 Internal R&D Prioritization Framework
iRobot R&D Technologies – 20-25% Products – 75-80%
Navigation Manipulation Core Emerging Future
Cloud Roomba AVA 500 ?
PackBot RP-VITA
Braava Other
FirstLook
Scooba
Focused investment
5/7/2014 47 2014 Results and Expectations
$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
Q1 exceeded expectations; Reaffirmed 2014 expectations
* Expectations provided April 22, 2014
5/7/2014 48 Financial Targets - 2016
13.5% 12.8%
565 487
$M 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
* Expectations provided April 22, 2014
5/7/2014 49 Takeaways
• 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.
5/7/2014 50 Q&A
Thank You