iRobot Corporation

Welcome to the iRobot Second Quarter 2024 Financial Results Conference Call. At this time, all participants have been placed in a listen-only mode. A question and answer session will follow the company's prepared remarks. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. For the best sound quality, we ask that you pick up your handset. Today's call is being recorded. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to David Kaluzian of the company's investor relations firm, Sharon Merrill Advisors. Please go ahead.

Thank you, Jamie, and good morning, everyone. Joining me on today's call are Gary Cohen, iRobot CEO, and Julius Eiler, Executive Vice President and CFO. At the outset, I would like to remind everyone that today's discussion will include forward-looking statements regarding future events and our future financial performance. These statements reflect our views as of today only and should not be considered as representing our views as of any subsequent date. These statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations reflected in the forward-looking statements. A discussion of these risk factors is fully detailed under the caption, Risk Factors in our Filings with the SEC. Related to our financial disclosures during this conference call, we will reference certain non-GAAP financial measures as defined by SEC Regulation G, including non-GAAP gross margin, non-GAAP operating expenses, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP operating loss, and non-GAAP net loss per share. We believe that our non-GAAP financial results help provide additional transparency into iRobot's underlying operating performance and potential. Our definitions of these non-GAAP financial measures and reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP measure are provided in the earnings presentation included in the Q2 2024 Earnings Conference Call event details, which is available on our website at www.iRobot.com. Also, unless stated otherwise, our second quarter financial metrics that will be discussed on today's conference call, including the financial metrics provided in our outlook, will be on a non-GAAP basis only, and all historical comparisons are with the second quarter of 2023. For today's call, our agenda is as follows. Gary will briefly cover the company's quarterly results, review important strategic milestones, and outline the company's expectations for the second half of the year. Julie will review iRobot's financial results and offer additional insights regarding the company's full-year outlook. Gary will then provide closing remarks before we open the call for questions. With that, I will turn the call over to Gary and welcome him to what is his first earnings call as iRobot's new CEO.

Thank you, David, and good morning, everyone. Thank you for joining us today. It is a pleasure to speak to you on my first earnings call as iRobot's CEO. I'm very excited to be here as we start a new chapter in iRobot's history and build on the company's legacy of innovation. In my three months thus far at iRobot, I have had the opportunity to meet with our teams, major retailers, distributors, and key constituents around the globe. I've learned about what makes this a great company, and I've gained a deeper understanding of our capabilities, challenges, and opportunities. We're in the midst of a turnaround, and I am more confident than ever that we will be successful. For today's call, I will begin with an overview of my background and discuss why I decided to join iRobot. I will then provide highlights of our second quarter performance and outline our opportunities to position iRobot for a bright future. I will then turn the call over to Julie to review our financial results in more detail and to provide our outlook. Following our prepared remarks, we will open the call for Q&A. My passion is building brands, and I've had the opportunity to build iconic brands in many diverse categories of consumer goods. While I pride myself on marketing and innovation, I have significant experience in R&D and have run Asia sourcing and global operations. I directed businesses successfully through the pandemic and recent global supply challenges, and I have operated across all environments and stages of performance, from turnaround and crisis management to stabilization and growth. Over my career, I have architected and led the strategy, the organization, and operating platform that ultimately drove sustainable and profitable growth. I joined iRobot because it is an iconic brand that has a strong relationship with consumers and retail and distribution partners. In fact, even in turnaround, iRobot continues to be the leader in several markets. We have a culture of innovation that is evident in our passionate and talented employees, and I know that we can innovate our way to growth and value creation. I see incredible opportunities for this company. For the past 25 years, I have worked in leadership roles with consumer companies, many of which were turnarounds. I find it rewarding to enable positive change while energizing teams to work together to leverage skill sets, adapt best practices, and implement strategic plans that provide the framework for consistent, profitable growth. When I worked on the Oral-B brand at Gillette, I inherited an empty pipeline and built an innovation engine that delivered dozens of new products in a five-year period. While at Playtex, I repositioned Banana Boat and Hawaiian Tropic, and they became the fastest-growing products at the company. And most recently at Qualitor, I built a talented U.S.-based R&D team that designed and developed a new product IP that was then sourced and manufactured in Asia, a similar model to what we are perfecting at iRobot. During the past three months, I have identified several inefficiencies within our business that I believe have hindered iRobot's ability to maximize the potential of our powerful technology, brand, and consumer appeal. We had a high cost product line that is now in the process of being refreshed in order to enhance our competitiveness and improve our profitability. At the same time, we had an organizational structure with too many layers that was built for a much larger company and that slowed decision-making. Additionally, the R&D model carried too much overhead in high-cost countries for too many non-core ideas. Our restructuring plan addresses all of these issues. Since I have joined, we have made several changes to our executive leadership team and reorganized the R&D to be better aligned with our vision of how to deliver new products. In fact, I am pleased to announce Jeff Engel has officially joined iRobot as President and Chief Operating Officer, reporting to me. Jeff has been with iRobot for seven months as our Chief Restructuring Officer and Advisor. He will be responsible for R&D, operations and supply chain and product management, and will continue his duties as CRO since our work in this area is not completed. Jeff's willingness to join iRobot at this time and his faith in our turnaround speaks volumes to the company's growth prospects. And he has been instrumental in helping us deliver against our restructuring targets. Our second quarter results demonstrate that our restructuring plan is on track and delivering the expected results. We have made tough but appropriate decisions to achieve our planned operating expense and headcount reduction targets. We have also reduced inefficient marketing spend and improved our product margins via our new contract manufacturing strategy. One driver of this was the launch of our margin accretive essentials product line, which is gaining traction in many markets and is now the unit leader in Japan. Furthermore, we have continued to reduce our finished goods inventory and narrowed our operating losses despite incurring one-time charges. We also lessened our use of operating cash. While we are making progress, we recognize that turnarounds take time. And in the near term, we will continue to operate in a dynamic operating environment. This is reflected in our revised 2024 outlook. Julie will discuss our Q3 and 2024 outlook shortly. As we navigate near-term headwinds, we remain confident in our ability to build on iRobot's legacy of innovation to advance our long-term growth initiatives. To that end, we have launched iRobot Elevate, which is a new strategy centered on improving our financial performance, increasing consumer focus to elevate our brand, bringing innovative products to market in an entirely new and more profitable way, continuing our operational and organization improvements, and developing and retaining our best talent. We are evaluating everything we do at iRobot to enhance our performance for the benefit of all stakeholders. Our restructuring is focused on cost savings and improving our gross margin and cash flow. Elevate is about growth. A big part of Elevate will be developing and commercializing new products. Last month, we announced our smartest and best cleaning robot yet, the Roomba Combo 10 Max. This two-in-one robot vacuum and mop takes independent cleaning to a new level with more intelligence and our first multifunction auto-wash dock. It is engineered to powerfully vacuum and mop multiple floor types, while the dock automatically refills and recharges the robot, washes and drives the mopping pad, empties debris, and self-cleans. The Roomba Combo 10 Max will be followed by another new product in Q4 2024, and then an entire revamp of our 2025 lineup, including an unprecedented number of new product launches across our good, better, and best price points. We are also announcing the creation of iRobot Labs, which will serve as the company's innovation center. iRobot Labs is a global initiative and will harness the strength of our internal product and software engineering talent and selected partners around the world. The team will focus on reducing our time to market and securing the technological leadership that our company is known for. Overall, we are embarking on an exciting journey to reclaim our position as the global innovation leader in consumer robots for the home and beyond. We're a consumer products company that is backed by technology and serves a purpose for consumers around the world. We operate in a sizeable global segment that has the potential for value expansion. This is demonstrated by the growth in multifunctional cleaning devices in our European market. As the category creator and innovator, we plan to lead and drive the global value expansion with new products. Our products enable our consumers to have more free time to enjoy their lives. We are working tirelessly to delight our consumers with every aspect of their Roomba experience. This includes opening the box, starting the robot for the first time, the initial cleaning experience, and using the app. Our plans include rebuilding our mobile app and delivering a new and improved user experience for our consumers. We have a lot of work in front of us to reduce unproductive costs and become a more agile business. We will continue to make the difficult but necessary decisions to ensure that we will reduce our operating and cash flow losses and have line of sight to achieve positive operating income and cash flow from operations over time. Our near-term goal is to stabilize the business, improve the balance sheet, and launch new products that set us on a path to revenue growth. I am confident in our turnaround plan, pleased with our early returns, and energized by our future potential. Turnarounds are challenging, take time, energy, and commitment. I have done it before and I plan to do it again. I look forward to sharing updates with you on future calls. With that, I'll turn the call over to Julie.