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美國
證券交易委員會
華盛頓特區20549
______________________________________________ 
表格 10-Q
 ______________________________________________
☒根據1934年證券交易法第13或15(d)節的季度報告
截至2022年1月31日的季度期2024年9月28日
或者
☐根據1934年證券交易法第13或15(d)節的轉型報告書
過渡期從             至           
佣金檔案號 001-36414
______________________________________________ 
irobot公司
(根據其章程規定的註冊人準確名稱)
 ______________________________________________
特拉華州77-0259335
（國家或其他管轄區的
公司成立或組織）		（IRS僱主
唯一識別號碼）
8 Crosby大道
Bedford, 萬事達 01730
（總部地址，包括郵政編碼）

(781) 430-3000
(註冊人電話號碼，包括區號)

在法案第12(b)條的規定下注冊的證券：
每一類的名稱交易標誌在其上註冊的交易所的名稱
普通股票，面值爲$0.01irobot納斯達克證券交易所 LLC
______________________________________________ 
請勾選以下內容。申報人是否（1）在過去12個月內（或申報人需要報告這些報告的時間較短的期間內）已提交證券交易法規定的第13或15（d）條要求提交的所有報告；以及（2）過去90天內已被要求提交此類報告。    Yes  x    否  o
請勾選以下內容。申報人是否已在過去12個月內（或申報人需要提交此類文件的時間較短的期間內）逐個以電子方式提交了根據規則405提交的互動數據文件。這章的交易中規定。    Yes  x    否  o
請勾選標記以說明註冊人是大型快速申報人、加速申報人、非加速申報人、較小的報告公司還是新興成長型公司。請查看《交易所法》第120億.2條中「大型快速申報人」、「加速申報人」、「較小的報告公司」和「新興成長型公司」的定義。
        
大型加速報告人☒加速文件申報人☐
非加速文件提交人☐更小的報告公司☐
新興成長公司☐
如果是新興成長型企業，請勾選複選標記，表明註冊者已選擇不使用延長過渡期來符合根據證券交易法第13(a)條規定提供的任何新財務會計準則。 o    
請勾選以下內容。申報人是否是外殼公司（根據證券交易法規則12b-2定義）。    是  ☐    沒有 x 
2024年10月25日，註冊公司普通股的流通股數量爲 30,558,808.
        


irobot公司
10-Q 表格
2024年9月28日結束的季度
指數
 
2




irobot公司
基本報表
（以千爲單位，每股金額除外）
(未經審計)
 
2024年9月28日2023年12月30日
資產
流動資產：
現金及現金等價物$99,447 $185,121 
受限現金41,082 — 
2,687,823 101,326 79,387 
庫存149,156 152,469 
其他資產32,774 48,513 
   總流動資產423,785 465,490 
資產和設備，淨值25,405 40,395 
經營租賃權使用資產15,137 19,642 
遞延所得稅資產9,093 8,512 
商譽175,928 175,105 
無形資產, 淨額3,635 5,044 
其他16,932 19,510 
總資產$669,915 $733,698 
負債和股東權益
流動負債:
應付賬款$195,133 $178,318 
應計費用88,384 97,999 
遞延收入和客戶預付款9,121 10,830 
   所有流動負債292,638 287,147 
期限貸款
186,713 201,501 
經營租賃負債22,892 27,609 
其他長期負債17,510 20,954 
總長期負債227,115 250,064 
總負債519,753 537,211 
100億股認可，分別於2024年5月3日和2024年2月2日擁有發行並流通的股份數量
優先股，5,000授權股數爲否未兌現
— — 
普通股，每股面值爲 $0.0001；0.01面值$100,000.01股已發行並流通；30,559 和 27,964 已發行和未流通股份
306 280 
額外實收資本326,394 290,755 
累積赤字(173,705)(105,295)
已實現其他綜合收益 (損失)(2,833)10,747 
股東權益總額150,162 196,487 
負債和股東權益總額$669,915 $733,698 
附註是合併財務報表的組成部分。
3


irobot公司
合併運營報表
（以千爲單位，每股金額除外）
(未經審計)
 
 三個月已結束九個月已結束
 2024年9月28日2023 年 9 月 30 日2024年9月28日2023 年 9 月 30 日
收入$193,435 $186,176 $509,811 $583,036 
收入成本：
產品收入成本131,058 137,888 383,865 443,932 
收購的無形資產的攤銷— 292 — 864 
總收入成本
131,058 138,180 383,865 444,796 
毛利潤62,377 47,996 125,946 138,240 
運營費用：
研究和開發19,630 37,336 76,739 116,576 
銷售和營銷29,270 41,558 98,966 139,630 
一般和行政3,232 28,270 (33,552)85,116 
重組和其他1,922 152 24,298 8,236 
收購的無形資產的攤銷1,066 174 1,405 529 
運營費用總額55,120 107,490 167,856 350,087 
營業收入（虧損）7,257 (59,494)(41,910)(211,847)
其他費用，淨額(12,548)(19,113)(24,583)(24,217)
所得稅前虧損(5,291)(78,607)(66,493)(236,064)
所得稅支出1,080 598 1,917 5,053 
淨虧損$(6,371)$(79,205)$(68,410)$(241,117)
每股淨虧損
基本$(0.21)$(2.86)$(2.34)$(8.73)
稀釋$(0.21)$(2.86)$(2.34)$(8.73)
每股計算中使用的股票數量：
基本30,348 27,738 29,276 27,608 
稀釋30,348 27,738 29,276 27,608 
附註是合併財務報表的組成部分。
4


irobot公司
綜合損益合併報表
(以千爲單位)
(未經審計)
 
 三個月結束九個月結束
 2024年9月28日2023年9月30日2024年9月28日2023年9月30日
淨損失$(6,371)$(79,205)$(68,410)$(241,117)
其他綜合損失，稅後淨額:
外幣財務報表折算差額9,773 (3,014)1,678 615 
現金流利益套期交易未實現收益— 5,105 3,213 7,077 
現金流套期交易的未實現收益重新分類爲收入(3,519)(5,568)(11,827)(14,249)
由於特定工具信用風險導致的定期貸款公允價值變動(5,523)881 (6,644)881 
總綜合虧損$(5,640)$(81,801)$(81,990)$(246,793)
附註是合併財務報表的組成部分。
5


irobot公司
股東權益合併報表
(以千爲單位)
(未經審計)
普通股額外的
實繳
資本		累計赤字累計其他全面收益虧損（「AOCI」）股東總數
股權
股份數值
2024年6月29日餘額30,077 $301 $319,673 $(167,334)$(3,564)$149,076 
受限制股票單位解除限制300 3 (3)— 
股票補償5,480 5,480 
與股權獎勵相關的首席執行官過渡成本(143)(143)
股票被扣減以滿足限制股解禁時的稅金要求(4)— (28)(28)
普通股股份發行淨額（扣除發行成本）186 2 1,415 1,417 
其他綜合收益731 731 
淨損失(6,371)(6,371)
2024年9月28日餘額30,559 $306 $326,394 $(173,705)$(2,833)$150,162 
普通股額外的
實繳
資本		累計赤字累積的
其他
綜合
收益（損失）（"AOCI"）		股東總數
股權
股份數值
截至2023年12月30日的餘額27,964 $280 $290,755 $(105,295)$10,747 $196,487 
受限制股票單位解除限制747 7 (7)— 
股票補償17,937 17,937 
與股票獎勵相關的首席執行官過渡成本(1,140)(1,140)
用於支付限制股解禁時的稅款要求的預扣股票(49)— (491)(491)
普通股股份發行淨額（扣除發行成本）1,897 19 19,340 19,359 
其他綜合損失(13,580)(13,580)
淨損失(68,410)(68,410)
2024年9月28日餘額30,559 $306 $326,394 $(173,705)$(2,833)$150,162 
6


irobot公司
股東權益合併報表
(以千爲單位)
(未經審計)
普通股額外的
實繳
資本		留存收益
收益		累積的
其他
綜合
收益（「AOCI」）		股東總數
股權
股份數值
2023年7月1日的餘額27,696 $277 $272,190 $37,503 $15,449 $325,419 
受限制股票單位解除限制172 2 (2)— 
股票補償9,375 9,375 
股票被扣留以支付限制性股票解禁時的稅款要求(3)— (105)(105)
其他綜合損失(2,596)(2,596)
淨損失(79,205)(79,205)
2023年9月30日結餘27,865 $279 $281,458 $(41,702)$12,853 $252,888 
普通股額外的
實繳
資本		留存收益
收益		累積的
其他
綜合
收入（"AOCI"）		股東權益總計
股份數值
2022年12月31日結存餘額27,423 $274 $257,498 $199,415 $18,529 $475,716 
按員工股票計劃發行普通股9 — 9 9 
受限制股票單位解除限制479 5 (5)— 
股票補償25,880 25,880 
股票被扣押以支付限制股份解禁時的稅款要求(46)— (1,924)(1,924)
其他綜合損失(5,676)(5,676)
淨損失(241,117)(241,117)
2023年9月30日結餘27,865 $279 $281,458 $(41,702)$12,853 $252,888 
附註是合併財務報表的組成部分。
7


irobot公司
綜合現金流量表
(以千爲單位)
(未經審計)
 九個月已結束
 2024年9月28日2023 年 9 月 30 日
來自經營活動的現金流：
淨虧損$(68,410)$(241,117)
爲使淨虧損與經營活動中使用的淨現金相一致而進行的調整：
折舊和攤銷16,912 21,367 
股權投資虧損375 3,910 
基於股票的薪酬17,937 25,880 
爲庫存過剩和過時編列經費11,800 1,740 
定期貸款公允價值的變化13,515 5,292 
根據公允價值期權支出的債務發行成本529 11,837 
遞延所得稅，淨額(651)4,115 
其他 (6,318)(8,618)
運營資產和負債的變化——（使用）來源
應收賬款(22,073)(7,943)
庫存(10,539)32,935 
其他資產15,598 12,544 
應付賬款16,674 28,904 
應計費用和其他負債(15,825)(4,483)
用於經營活動的淨現金(30,476)(113,637)
來自投資活動的現金流：
增加財產和設備(118)(3,132)
購買投資(56)(213)
用於投資活動的淨現金(174)(3,345)
來自融資活動的現金流：
員工股票計劃的收益— 9 
與限制性股票歸屬相關的所得稅預扣款(491)(1,924)
普通股發行收益，扣除發行成本19,359 — 
償還定期貸款(34,947)— 
定期貸款的收益— 200,000 
債務發行成本的支付(529)(11,837)
融資活動提供的（用於）淨現金(16,608)186,248 
匯率變動對現金、現金等價物和限制性現金的影響1,251 4,193 
現金、現金等價物和限制性現金淨增加（減少）(46,007)73,459 
期初現金、現金等價物和限制性現金187,887 117,949 
期末現金、現金等價物和限制性現金$141,880 $191,408 
期末現金、現金等價物和限制性現金：
現金和現金等價物$99,447 $189,649 
受限制的現金41,082 — 
限制性現金，非流動（包含在其他資產中）1,351 1,759 
期末現金、現金等價物和限制性現金$141,880 $191,408 
附註是合併財務報表的組成部分。
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irobot公司
基本報表附註
(未經審計)
1. 業務性質
愛戴機器人公司（「愛戴」或「公司」）設計、製造和銷售使生活更美好的機器人和家居創新產品。公司的家庭機器人和智能家居-腦機設備組合擁有專有技術，用於聯網家居和在清潔、映射和導航方面的高級概念。愛戴公司堅固且性能卓越的機器人是通過軟件、電子和硬件的密切集成設計的。公司的營業收入主要來自通過各種銷售渠道銷售產品，包括連鎖店和其他全國零售商，通過公司自己的網站和應用程序，專門的電子商務網站，傳統零售商的在線業務以及全球增值分銷商和經銷商。
終止合併協議
根據之前披露的信息，2022年8月4日，公司與亞馬遜公司(一家特拉華州公司，代號"母公司"或"亞馬遜")和Martin Merger Sub, Inc.(一家特拉華州公司，爲亞馬遜的間接全資子公司，代號"合併子公司")簽署了一份《併購協議和計劃書》("原始併購協議"), 其中規定了合併子公司與irobot進行合併，公司作爲母公司的全資子公司生存("合併", 以及併購協議規定的其他交易一起，稱爲"交易")。2023年7月24日，irobot、亞馬遜和合並子公司簽署了《原始併購協議的修正案》("修正案", 以及修正和補充的原始併購協議一起，稱爲"合併協議")。修正案調整了合併對價以反映發行的長期貸款(見註釋9， 債務。 ）。
2024年1月28日，公司與亞馬遜相互同意終止並簽署了一份有效的雙方終止協議（"終止協議"）。公司董事會批准了合併協議的終止。根據終止協議的條款，亞馬遜向公司支付了之前約定的金額爲$94.0百萬美元的"母公司終止費"。2024年1月29日，公司在2024財年第一季度由於終止合併協議並收到亞馬遜支付的94.0百萬美元"親自終止費"，支付了與交易相關的專業費用共計$18.8百萬。根據信貸協議（如下所定義），公司將$35.0百萬用於償還部分長期貸款。剩餘的$40.0百萬母公司終止費被保留爲限制性現金，用於未來償還部分長期貸款，但公司有限的權利可利用該金額購買庫存。有關詳細信息請參閱附註9， 債務，。扣除支付的專業費用後獲得的母公司終止費爲$75.22024財年第一季度已經記錄了一筆一百萬美元的支出，在聯合運營報表的一般管理費用中作爲收益。
2. 重要會計政策之摘要
報告的編制基礎和外幣貨幣翻譯
附屬的合併基本報表包括irobot及其子公司的報表，在清除所有公司間餘額和交易後。irobot已根據美國通用會計準則（"GAAP"）編制了這份附屬的未經審計的合併基本報表。此外，某些往年金額已重新分類以符合當前年度的呈現方式，包括在合併利潤表上對重組和其他成本進行單獨呈現。這些重新分類對報告的財務結果沒有實質影響。
管理層認爲，爲了公正陳述公司的財務狀況，基本報表的所有必要調整已經完成。中期結果並不一定代表整個財政年度或任何未來時期的結果。本表格10-Q中包含的信息應當與公司於2023年12月30日結束的財政年度提交給證券交易委員會的年度報告中包含的經審計的綜合基本報表及附註一起閱讀。
公司使用以距離12月31日最近的星期六結束的52-53周財政年度進行運營和報告。因此，公司的財政季度將在每個季度的第三個月最後一天最接近的星期六結束。
流動性
附帶的未經審計的合併基本報表已根據公司將繼續作爲持續經營的實體進行編制，這預示着業務的連續性、資產的實現以及債務在正常業務過程中的清算。
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irobot公司
合併基本報表附註 - (續)
在2024財年第三季度，公司的業績繼續受到零售商和經銷商訂單減少的影響，這主要是由於消費者情緒下降和市場價格競爭加劇。在截至2024年9月28日的九個月內，公司的營業收入下降 12.6，相比之下，與截至2023年9月30日的九個月相比，公司的營收下降了%41.9 ，公司在2024年9月28日結束的九個月中出現了30.5 百萬美元的經營虧損以及75.2百萬美元的經營現金流出，這得益於2024財年第一季度獲得的13.5百萬美元的親生母親終止費用減去專業費用的一次性收入，公司的經營虧損還包括2024財年第三季度與後來於十月收到現金的知識產權訴訟結算（"訴訟和解"）相關的一次性收益99.4 ，在2024年9月28日，公司的現金及現金等價物爲42.4 百萬美元，公司還有40.0自2024財年第四季度後，獲得了500萬美元的限制性現金。該現金將用於購買庫存，並根據貸款協議的條款在五個月內償還。然後在2025財年第三季度再次可用於購買庫存。
管理層已考慮並評估了自未經審計的合併基本報表發佈之日起的一年內作爲持續經營實體的能力。管理層的評估包括編制現金流預測，考慮到重組行動和維持債務契約合規性。 2024年1月29日，在終止合併協議後，公司宣佈一項運營重組計劃，以更緊密地調整其成本結構以符合近期營收預期，並推動盈利能力。 2024年的運營重組計劃設計如下:
•通過專注於價值設計和與公司現有和新的製造夥伴達成更有益的條件，實現毛利率的提高；
•通過暫停與公司核心地面清潔業務無關的工作，並將更多依賴代工廠商，以降低價值商品工程工作的研發支出；
•將銷售和營銷支出恢復到更加正常水平，與消費品市場的行業標準保持一致，通過將資源集中在更有限的地理區域上並整合營銷工作以提高效率；和
•進一步減少約全球員工總數的 350 名員工，約佔了 31%，相當於截至2023年12月30日公司全球員工總數的
在截至2024年9月28日的九個月中，該公司在實施其2024年運營重組計劃方面取得了重大進展。公司的總營業費用下降$93.5百萬，即 26.7%，不包括與母公司終止費用相關的一次性收益$75.2百萬和與訴訟和解相關的一次性收益$13.5百萬，相較於截至2023年9月30日的九個月。研發費用減少$39.8百萬，即 34.2%，而銷售和市場營銷費用減少$40.7百萬，即 29.1在截至2024年9月28日的九個月內，毛利率改善到 32.2截至2024財年第三季度，與 25.8相比，2023年第三季度爲%。除了減少員工人數外，公司在2022至2024財年之間簽署或修改了 三 份分租協議，用於出租總部的部分空間。irobot預計這些分租協議將在未來根據剩餘租期產生6.1百萬美元的分租現金支付。公司預計將通過在公司總部進一步進行分租和淘汰小型、業績不佳地區的辦公室，繼續調整其全球房地產業務版圖。公司繼續評估其成本結構，在2024年11月，作爲持續進行的重組計劃的一部分，公司宣佈了第二輪員工減少措施，總計約裁員105名。自2024年開始以來，包括這一新舉措在內，公司已將全球員工人數減少了約50%。
庫存已經消耗了大量現金，公司將繼續仔細管理其庫存水平，以確保運營資本的效率。庫存天數已經從 161 天，在2023財年第三季度提高到 104 天，在2024財年第三季度。公司計劃繼續管理其庫存，使其與當前的運行速率和業務的季節性相一致。
儘管管理層估計這些措施足以使其維持債務契約的遵從性，並使其流動性和業務在至少從這些財務報表發佈起的12個月內維持正常運作，但無法保證公司將符合債務契約的遵從性並從業務產生足夠的未來現金流量，可能的因素包括但不限於進一步的通貨膨脹、更高的利率、持續的衰退條件或因消費者情緒或競爭導致公司產品需求持續減少。如果公司無法成功增加產品的需求，或者如果宏觀經濟條件進一步限制消費者需求，公司可能會繼續經歷營業收入和盈利能力的不利影響。公司內部可採取的其他措施以保持其流動性和業務包括通過減少可取消採購訂單的預測庫存供應來優化與代工廠商的生產量，進一步在業務的所有領域減少自由支出，並通過持續的自然減員活動調整資源而不進行重新僱傭活動。此外，公司可能需要
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irobot公司
合併基本報表附註 - (續)
爲執行當前或未來的業務策略，公司可能需要額外融資，包括公共或私人股權或債務融資，而且可能無法獲得額外融資或獲得的條件對公司有利。
合併基本報表不包括任何調整，以反映對資產的恢復性和分類，或者可能由這些不確定性結果導致的負債的金額和分類的未來影響。
最近頒佈的會計準則
時不時，美國財務會計準則委員會發布新的會計聲明，公司在指定生效日期時予以採納。除非另有討論，公司認爲最近發佈的尚未生效的準則，在採納後不會對公司的合併基本報表產生重大影響。
使用估計
根據通用會計準則編制這些基本報表需要公司進行會計估計和假設，這些影響資產和負債、營業收入和費用的報告金額。這些估計和判斷包括但不限於營業收入確認，包括變量考慮因素和其他義務，比如銷售獎勵和產品退貨；商譽和無形資產減值；非上市股權投資估值；債務估值；庫存過剩和過時；採購承諾損失；損失準備；以及會計所得稅和相關減值準備。公司的估計和假設基於歷史經驗、市場參與者公允價值考量、預計未來現金流、當前經濟條件，以及公司認爲在特定情況下合理的各種其他因素。實際結果和結果可能會與公司的估計和假設不同。
現金、現金等價物和受限制的現金
公司認爲所有在購買時期限爲三個月或更短的高度流動性投資均被視爲現金及現金等價物。公司的受限制現金餘額截至2024年9月28日爲$42.4 百萬美元，其中有$41.1 百萬專爲未來償還面向公司有限權利的一筆期限貸款而保留。在截至2024年9月28日的三個月內，公司選擇動用了$40.0 百萬的受限現金，這筆款項隨後於2024財年第四季度收到，將用於購買庫存。詳見附註9， 債務，以獲取更多信息。其餘的1.4 百萬受限現金作爲公司信用卡計劃的抵押品，並用於擔保未結信用證，被納入資產負債表的其他資產。
信用減值準備
公司利用預期損失模型爲應收賬款維持信貸損失準備金，該模型需使用前瞻性信息來計算信貸損失估計。預期損失方法是通過考慮諸如歷史收款經驗、客戶當前信用評級、客戶集中度、當前和未來經濟和市場狀況以及應收賬款賬齡等因素來制定的。公司每季度審查和調整信貸損失準備金。當公司確定餘額無法收回時，應收賬款餘額將被沖銷至準備金。截至2024年9月28日和2023年12月30日，公司的信貸損失準備金爲$2.7股票回購活動以及因員工基於股票的補償目的而重新發行國庫股的情況如下：
庫存
存貨主要包括成品，以及在較小程度上由代工廠商購買的元件。存貨按成本或淨實現價值中的較低值計量，成本採用標準成本法確定，其近似於先進先出基礎上確定的實際成本。存貨成本主要包括材料、入境運費、進口稅和其他處理費用。公司根據關於市場條件和未來需求的估計，包括考慮產品生命週期狀態、產品開發計劃和當前銷售水平的假設，對存貨進行預計報廢或過量存貨的減值。存貨減值和採購承諾的損失計入營業成本。淨實現價值是估計銷售價格減去估計的完成成本、處置成本和運輸成本。將存貨減少至淨實際價值的調整計入營業成本，並在所提出的期間內並不顯著。
在2024財年第二季度，公司完成了其2025年產品路線圖，作爲向新合同製造範式過渡的一部分。因此，該公司評估了其手頭的零部件庫存和與代工廠商和供應商的不可取消採購承諾，並記錄了一筆總額爲$的費用。18.4在2024財年第二季度，產品營業收入成本中包含了一筆$的費用。這筆費用包括了$的無現金儲備用於陳舊或過剩零部件庫存，以及$用於不可取消採購承諾的損失。10.3在2024財年第二季度，產品營業收入成本中包含了一筆$的費用。這筆費用包括了$的無現金儲備用於陳舊或過剩零部件庫存，以及$用於不可取消採購承諾的損失。8.1在2024財年第二季度，產品營業收入成本中包含了一筆$的費用。這筆費用包括了$的無現金儲備用於陳舊或過剩零部件庫存，以及$用於不可取消採購承諾的損失。
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Strategic Investments
The Company holds non-marketable equity securities as part of its strategic investments portfolio. The Company classifies the majority of these securities as equity securities without readily determinable fair values and measures these investments at cost, less any impairment, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. These investments are valued using significant unobservable inputs or data in an inactive market and the valuation requires the Company's judgment due to the absence of market prices and inherent lack of liquidity. The Company monitors non-marketable equity investments for impairment indicators, such as deterioration in the investee's financial condition and business forecasts and lower valuations in recent or proposed financings. The estimated fair value is based on quantitative and qualitative factors including, but not limited to, subsequent financing activities by the investee and projected discounted cash flows. The Company performs an assessment on a quarterly basis to assess whether triggering events for impairment exist and to identify any observable price changes. Changes in fair value of non-marketable equity investments are recorded in other expense, net on the consolidated statements of operations. At September 28, 2024 and December 30, 2023, the Company's equity securities without readily determinable fair values totaled $11.1 million and $11.4 million, respectively, and are included in other assets on the consolidated balance sheets.
Net Loss Per Share
Basic loss per share is calculated using the Company's weighted-average outstanding common shares. Diluted loss per share is calculated using the Company's weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method.
The following table presents the calculation of both basic and diluted net loss per share (in thousands, except per share amounts): 
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023September 28, 2024September 30, 2023
Net loss$(6,371)$(79,205)$(68,410)$(241,117)
Weighted-average shares outstanding30,348 27,738 29,276 27,608 
Basic and diluted loss per share$(0.21)$(2.86)$(2.34)$(8.73)
Employee stock awards representing approximately 2.8 million and 0.8 million shares of Common Stock for the three months ended September 28, 2024 and September 30, 2023, respectively, and approximately 2.9 million and 0.9 million shares for the nine months ended September 28, 2024 and September 30, 2023, respectively, were excluded from the computation of diluted earnings per share as their effect would have been antidilutive.
3. Revenue Recognition
The Company primarily derives its revenue from the sale of consumer robots and accessories. The Company sells products directly to consumers through online stores and indirectly through resellers and distributors. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenue is allocated to distinct performance obligations and is recognized net of allowances for returns and other credits and incentives. Revenue is recognized only to the extent that it is probable that a significant reversal of revenue will not occur and when collection is considered probable. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from revenue. Shipping and handling expenses are considered fulfillment activities and are expensed as incurred.
Frequently, the Company's contracts with customers contain multiple promised goods or services. Such contracts may include any of the following, the consumer robot, downloadable app, cloud services, accessories on demand, potential future unspecified software upgrades and extended warranties. For these contracts, the Company accounts for the promises separately as individual performance obligations if they are distinct. Performance obligations are considered distinct if they are both capable of being distinct and distinct within the context of the contract. In determining whether performance obligations meet the criteria for being distinct, the Company considers a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract.
The Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices ("SSPs"). When available, the Company uses observable prices to determine SSPs. When observable prices are not available, SSPs are established that reflect the Company's best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. The Company's process for estimating SSPs without observable prices considers multiple factors that may vary depending upon the facts and circumstances related to each performance obligation including market data or the estimated cost of providing the products or services. The transaction price allocated to the robot is
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
recognized as revenue at a point in time when control is transferred, generally as title and risk of loss pass, and when collection is considered probable. The transaction price allocated to services and support is deferred and recognized over their service periods. For contracts with a duration of greater than one year, the transaction price allocated to performance obligations that are unsatisfied as of September 28, 2024 and December 30, 2023 was $13.6 million and $18.4 million, respectively.
The Company's products generally carry a one-year or two-year limited warranty that promises customers that delivered products are as specified. The Company does not consider these assurance-type warranties as a separate performance obligation and therefore, the Company accounts for such warranties under Accounting Standards Codification ("ASC") 460, "Guarantees." For contracts with the right to upgrade to a new product after a specified period of time, the Company accounts for this trade-in right as a guarantee obligation under ASC 460. The total transaction price is reduced by the full amount of the trade-in right's fair value and the remaining transaction price is allocated between the performance obligations within the contract.
The Company provides limited rights of returns for direct-to-consumer sales generated through its online stores and certain resellers and distributors. The Company records an allowance for product returns based on specific terms and conditions included in the customer agreements or based on historical experience and the Company's expectation of future returns. In addition, the Company may provide other credits or incentives which are accounted for as variable consideration when estimating the amount of revenue to recognize. Where appropriate, these estimates take into consideration relevant factors such as the Company's historical experience, current contractual requirements, specific known market events and forecasted inventory level in the channels. Overall, these reserves reflect the Company's best estimates, and the actual amounts of consideration ultimately received may differ from the Company's estimates. Returns and credits are estimated at the time of sale and updated at the end of each reporting period as additional information becomes available. As of September 28, 2024, the Company had reserves for product returns of $16.3 million and other credits and incentives of $58.3 million. As of December 30, 2023, the Company had reserves for product returns of $24.6 million and other credits and incentives of $95.3 million. The Company regularly evaluates the adequacy of its estimates for product returns and other credits and incentives. Future market conditions and product transitions may require the Company to take action to change such programs and related estimates. When the variables used to estimate these reserves change, or if actual results differ significantly from the estimates, the Company increases or reduces revenue to reflect the impact. During the three and nine months ended September 28, 2024 and September 30, 2023, changes to these estimates related to performance obligations satisfied in prior periods were not material.
Disaggregation of Revenue
The following table provides information about disaggregated revenue by geographical region (in thousands):
Three Months EndedNine Months Ended
September 28, 2024September 30, 2023September 28, 2024September 30, 2023
United States$105,137 $85,781 $258,398 $288,725 
EMEA45,902 51,861 130,884 149,421 
Japan27,718 34,713 83,254 110,186 
Other14,678 13,821 37,275 34,704 
Total revenue$193,435 $186,176 $509,811 $583,036 
Contract Balances
The following table provides information about receivables and contract liabilities from contracts with customers (in thousands):
September 28, 2024December 30, 2023
Accounts receivable, net$100,266 $77,112 
Contract liabilities14,635 18,702 
The Company invoices customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include deferred revenue associated with services and extended warranty plans as well as prepayments received from customers in advance of the satisfaction of its performance obligations. During the three months ended September 28, 2024 and September 30, 2023, the Company recognized $5.1 million and $4.5 million, respectively, of the contract liability balance as revenue upon transfer of the products or services to customers. During the nine months ended September 28, 2024 and September 30, 2023, the Company recognized $8.9 million and $11.3 million, respectively, of the contract liability balance as revenue upon transfer of the products or services to customers.
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
4. Restructuring and Other Charges
During the three months ended September 28, 2024 and September 30, 2023, the Company recorded restructuring and other charges of $1.9 million and $0.2 million, respectively, in the consolidated statements of operations. During the nine months ended September 28, 2024 and September 30, 2023, the Company recorded restructuring and other charges of $24.3 million and $8.2 million, respectively, in the consolidated statements of operations.
The components of restructuring and other charges were as follows (in thousands):
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023September 28, 2024September 30, 2023
Cash restructuring charges:
Severance and other personnel costs$998 $69 $17,198 $3,602 
Other restructuring costs454 83 3,439 4,634 
CEO transition costs534 — 2,053 — 
Total cash charges1,986 152 22,690 8,236 
Non-cash charges:
Asset write offs79 — 2,828 — 
CEO transition costs related to stock-based awards(143)— (1,220)— 
Total non-cash charges(64)— 1,608 — 
Total restructuring and other charges$1,922 $152 $24,298 $8,236 
On January 29, 2024, following the termination of the Merger Agreement, the Company announced an operational restructuring plan which includes a reduction in headcount. As of September 28, 2024, approximately 340 employees have been notified, with $1.0 million and $17.2 million of restructuring cost recorded during the three and nine months ended September 28, 2024, respectively. These charges consist primarily of employee termination benefits including severance, payroll taxes and other benefits.
In addition, the operational restructuring plan includes actions to pause work unrelated to the Company's core floorcare business and, as a result, during the nine months ended September 28, 2024, the Company recorded restructuring costs of $4.9 million. These charges typically consist of write-offs on certain fixed assets as well as material liabilities at contract manufacturers due to discontinuation of programs.
In conjunction with the termination of the Merger Agreement, Colin Angle, the Company's then-Chief Executive Officer, stepped down as an officer of the Company and from his position as chairman of the Board effective January 28, 2024. The Board appointed Glen D. Weinstein, the Company's then Executive Vice President and Chief Legal Officer, as Interim Chief Executive Officer while a search was conducted for a permanent CEO. On May 6, 2024, the Company appointed Gary S. Cohen as the Company's Chief Executive Officer. Gary S. Cohen succeeded Glen D. Weinstein as the principal executive officer of the Company. Glen D. Weinstein provided transition services as a Company employee during the transition period. CEO transition costs represent costs incurred for CEO search fees and charges associated with the transition-related agreements with Colin Angle and Glen D. Weinstein which include compensation during the transition period as well as adjustments for modification of stock-based awards.
The following table presents a roll-forward of cash restructuring-related liabilities, which is included within accounts payable and accrued expenses in the consolidated balance sheet (in thousands):
Severance and other personnel costsOther restructuring costsCEO transition costsTotal
Balance as of December 30, 2023
$— $— $— $— 
Charges17,198 3,439 2,053 22,690 
Cash payments(16,109)(1,284)(1,411)(18,804)
Balance as September 28, 2024
$1,089 $2,155 $642 $3,886 
The Company expects the people-related balance to be paid within the fourth quarter of 2024, and the remaining balance to be paid within fiscal 2025.
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
5. Leases
The Company's leasing arrangements primarily consist of operating leases for its facilities which include corporate, sales and marketing and research and development offices and equipment under various non-cancelable lease arrangements. The operating leases expire at various dates through 2030. The Company currently has three sublease agreements for space at its headquarters. At September 28, 2024, the Company's weighted average discount rate was 4.46%, while the weighted average remaining lease term was 5.37 years.
The components of lease expense were as follows (in thousands):
Three Months EndedNine Months Ended
September 28, 2024September 30, 2023September 28, 2024September 30, 2023
Operating lease cost$1,043 $1,359 $3,604 $4,827 
Variable lease cost716 646 2,669 2,374 
Sublease income(535)(495)(1,526)(819)
Right-of-use asset impairment167 — 1,034 3,048 
Net lease cost$1,391 $1,510 $5,781 $9,430 
Supplemental cash flow information related to leases was as follows (in thousands):
Three Months EndedNine Months Ended
September 28, 2024September 30, 2023September 28, 2024September 30, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$1,853 $1,815 $5,095 $6,092 
Right-of-use assets obtained in exchange for operating lease liabilities (non-cash)
$— $— $811 $683 
Right-of-use asset reductions related to operating lease modifications (non-cash)$— $— $(1,883)$— 
Maturities of operating lease liabilities and sublease payments were as follows as of September 28, 2024 (in thousands):
Operating Lease PaymentsSublease PaymentsNet
Remainder of 2024$976 $(343)$633 
20255,853 (1,003)4,850 
20265,907 (1,033)4,874 
20275,315 (1,064)4,251 
20285,474 (1,096)4,378 
Thereafter7,574 (1,513)6,061 
Total minimum lease payments$31,099 $(6,052)$25,047 
Less: imputed interest3,768 
Present value of future minimum lease payments$27,331 
Less: current portion of operating lease liabilities (Note 8)
4,439 
Long-term lease liabilities$22,892 

15
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
6. Fair Value Measurements
Fair Value Measurements - Recurring Basis
The Company's financial assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):
 
Fair Value Measurements as of
September 28, 2024
Level 1
Level 2
Level 3
Assets:
Money market funds$30,324 $— $— 
Restricted cash (Note 2)
41,082 — — 
Restricted cash, non-current (Note 2)1,351 — — 
Total assets measured at fair value$72,757 $— $— 
Liabilities:
Term loan (unpaid principal of $178,308) (Note 9)
$— $— $186,713 
Derivative instruments (Note 10)
— 82 — 
Total liabilities measured at fair value$— $82 $186,713 
 Fair Value Measurements as of
December 30, 2023
 Level 1
Level 2
Level 3
Assets:
Money market funds$117,652 $— $— 
Restricted cash, current1,000 — — 
Restricted cash, non-current (Note 2)1,766 — — 
Derivative instruments (Note 10)
— 3,999 — 
Total assets measured at fair value$120,418 $3,999 $— 
Liabilities:
Term loan (unpaid principal of $200,000 ) (Note 9)
$— $— $201,501 
Derivative instruments (Note 10)
— 7,643 — 
Total liabilities measured at fair value$— $7,643 $201,501 
The following table provides a summary of changes in fair value of our Level 3 instrument for the nine months ended September 28, 2024 (in thousands):
Balance as of December 30, 2023$201,501 
Repayment(34,947)
Change in fair value20,159 
Balance as of September 28, 2024
$186,713 
As discussed further in Note 9 to the consolidated financial statements, the Company elected to recognize the Term Loan under the fair value option. The fair value of the Term Loan as of September 28, 2024 has been determined based on a discounted cash flow model, which represents Level 3 measurements. Fair value was estimated using probability-weighted scenarios which include assumptions that are highly subjective and require judgment regarding significant matters, such as the amount and timing of future cash flows, expected interest rate volatility and the discount rate. The use of different assumptions could have a material effect on the fair value estimates.
Fair Value Measurements - Nonrecurring Basis
The Company measures the fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. During the second quarter of fiscal 2024, as a result of the execution of an amendment to one of its sublease agreements, the Company determined that indicators of impairment existed related to the long-lived assets associated with the subleased space. The right-of-use asset was measured and written down to fair value on a nonrecurring basis as a result of impairment. The fair value measurement was determined using a discounted
16
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
cash flow method with unobservable inputs and was classified within Level 3 of the fair value hierarchy. The Company recognized an impairment charge of $0.9 million related to the right-of-use asset and recorded it as a non-cash restructuring and other charge on its consolidated statement of operations in the second quarter of fiscal 2024. The fair value of the remaining right-of-use asset was $0.9 million.
7. Goodwill and Other Intangible Assets
The following table summarizes the activity in the carrying amount of goodwill and intangible assets for the nine months ended September 28, 2024 (in thousands):
GoodwillIntangible assets
Balance as of December 30, 2023$175,105 $5,044 
Amortization— (1,405)
Effect of foreign currency translation823 (4)
Balance as of September 28, 2024$175,928 $3,635 
8. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
September 28, 2024December 30, 2023
Accrued warranty$19,067 $24,625 
Accrued returns and sales incentives17,758 12,897 
Accrued compensation and benefits14,289 13,593 
Accrued manufacturing and logistics cost12,211 5,462 
Accrued taxes payable
4,721 8,927 
Current portion of operating lease liabilities4,439 5,216 
Accrued interest3,895 4,498 
Accrued restructuring and other
3,571 1,894 
Derivative liability82 7,276 
Accrued merger related liabilities— 4,721 
Accrued other8,351 8,890 
$88,384 $97,999 
9. Debt
Term Loan
On July 24, 2023, the Company entered into a Credit Agreement (the "Credit Agreement") by and among the Company, as borrower, each lender from time to time party thereto and TCG Senior Funding L.L.C., an affiliate of The Carlyle Group, as administrative agent and collateral agent, providing for a $200.0 million senior secured term loan credit facility (the "Term Loan"). Total proceeds from the Term Loan were $188.2 million, net of $11.8 million of debt issuance costs. The Term Loan matures on July 24, 2026.
The Term Loan bears interest at a rate per annum equal to, at the Company's option, (i) a rate based on term SOFR plus a credit spread adjustment plus a 9.00% spread or (ii) a rate based on the base rate plus a rate adjustment plus an 8.00% spread. A portion of each spread equal to 2.5% is paid in kind by capitalizing such option into principal of the Term Loan. In the event of repayment, prepayment or acceleration of all or any portion of the Term Loan, the Company is required to pay to the lenders an additional amount which represents a minimum guaranteed return on the Term Loan that ranges between 1.30x and 1.75x of the principal in accordance with the provisions within the Credit Agreement. The minimum guaranteed return range is based on the date on which it is paid. The Credit Agreement provides for mandatory prepayments of borrowings under certain circumstances, including non-ordinary course asset sales and incurrence of other indebtedness, subject to customary exceptions.
The Credit Agreement contains customary affirmative covenants, including financial statement reporting requirements and delivery of compliance certificates. The Credit Agreement also contains customary negative covenants that limit the Company's and its subsidiaries' ability to, among other things, grant or incur liens, incur additional indebtedness, make certain restricted investments or payments, including payment of dividends on its capital stock and payments on certain permitted indebtedness, enter into certain mergers and acquisitions or engage in certain asset sales, subject in each case to certain exceptions. In addition, the Credit Agreement contains a financial covenant that the Company will not permit its consolidated core assets (comprising cash, accounts receivable and inventory), measured on the last day of each fiscal month, to be less than
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
$250.0 million which amount is subject to increase or decrease upon certain triggers related to the payment or non-payment of any termination fees under the Amended Merger Agreement (or fees in lieu of such termination fees) and the occurrence or non-occurrence of the Merger.
During the first quarter of 2024, as a result of the termination of the Merger Agreement and receipt of the Parent Termination Fee of $94.0 million from Amazon on January 29, 2024, $35.0 million of such Parent Termination Fee was used immediately to repay a portion of the Term Loan, and $40.0 million of the Parent Termination Fee has been set aside in a restricted account to be used for future repayments of the Term Loan subject to limited rights of the Company to utilize such amounts for the purchase of inventory in the third quarters of fiscal 2024 and 2025. The $35.0 million repayment was applied to the principal, interest and the 1.4x minimum guaranteed return, reducing the principal balance of the loan to $176.1 million. With the termination of the Merger Agreement and the $35.0 million repayment, the applicable minimum guaranteed return ranges between 1.4x and 1.7x of the principal and the consolidated core assets financial covenant is reduced to $200.0 million. To access the $40.0 million of restricted cash for inventory purchases, on the day of such election, the Company must certify to its lenders that the Company has pro forma consolidated core assets of $275.0 million and no default or event of default under the Credit Agreement. During the three months ended September 28, 2024, the Company elected to draw down $40.0 million of the restricted cash, which was subsequently received in the fourth quarter of fiscal 2024. As of September 28, 2024, the Company was in compliance with the covenants under the Term Loan.
The Credit Agreement also contains customary events of default (subject to certain exceptions, thresholds and grace periods), such as the failure to pay obligations when due, breach of certain covenants, including the financial covenant, cross-default or cross-acceleration of certain indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain change of control events involving the Company. The occurrence of an event of default may result in the termination of the Credit Agreement and acceleration of repayment obligations with respect to any outstanding loans or letters of credit under the Term Loan.
The obligations under the Term Loan are guaranteed by the Company and certain of its subsidiaries located in the United States, United Kingdom, Japan, France and Spain. In addition, the obligations under the Term Loan are secured by a first priority lien on substantially all tangible and intangible property of the Company and the guarantors and pledges of the equity of certain subsidiaries, in each case subject to certain exceptions, limitations and exclusions from the collateral.
Upon issuance, the Company elected to account for the Term Loan under the fair value option. The primary reason for electing the fair value option is for simplification and cost-benefit considerations of accounting for the Term Loan at fair value in its entirety versus bifurcation of the embedded features. The fair value of the Term Loan was determined using a discounted cash flow model which represents Level 3 measurements. The significant assumptions used in the discounted cash flow model include the amount and timing of future cash flows, expected interest rate volatility and the discount rate.
Under the fair value election, debt issuance costs are expensed as incurred, and debt liability is subsequently valued at fair market value, including paid in kind interest, during each reporting period until its settlement.
The Company's outstanding debt as of September 28, 2024 was as follows (in thousands):
ClassificationSeptember 28, 2024
Term Loan at fair value at December 30, 2023
$201,501 
Repayment
(34,947)
Change in fair value of term loan due to instrument-specific credit risk
Other comprehensive income6,644 
Remaining changes in fair valueOther expense, net13,515 
Term Loan at fair value as of September 28, 2024
$186,713 
During the three and nine months ended September 28, 2024, the Company recorded $5.4 million and $16.2 million, respectively, of interest expense in other expense, net on the consolidated statements of operations related to the quarterly cash interest, $3.9 million of which is unpaid and included in accrued expenses on the consolidated balance sheet as of September 28, 2024.
10. Derivative Instruments and Hedging Activities
The Company historically entered into derivative instruments that were designated as cash flow hedges to reduce its exposure to foreign currency exchange risk in sales. These contracts had a maturity of three years or less. During the first quarters of 2024 and 2023, the Company terminated foreign currency forward contracts with a notional value of $102.9 million and $151.7 million, respectively, resulting in net cash proceeds of $2.7 million and a net cash payment of $2.5 million, respectively, which were recognized within cash used in operating activities in the consolidated statements of cash flows. Amounts previously recorded in AOCI were frozen at the time of termination, and will be recognized in earnings when the
18
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
original forecasted transaction occurs. At September 28, 2024, the Company had no outstanding cash flow hedges. As of December 30, 2023, the Company had outstanding cash flow hedges with a total notional value of $114.4 million.
The Company enters into economic hedges that are not designated as hedges from an accounting standpoint to reduce foreign currency exchange risks related to short term trade receivables and payables. These contracts typically have maturities of approximately one month. At September 28, 2024 and December 30, 2023, the Company had outstanding foreign currency economic hedges with a total notional value of $11.9 million and $252.0 million, respectively.
The fair values of derivative instruments were as follows (in thousands):
Fair Value
ClassificationSeptember 28, 2024December 30, 2023
Derivatives not designated as hedging instruments:
Foreign currency forward contractsOther current assets$— $2,929 
Foreign currency forward contractsAccrued expenses82 4,586 
Derivatives designated as cash flow hedges:
Foreign currency forward contractsOther current assets$— $1,070 
Foreign currency forward contractsAccrued expenses— 2,690 
Foreign currency forward contractsLong-term liabilities— 367 
(Losses) gains associated with derivative instruments not designated as hedging instruments were as follows (in thousands):
Three Months EndedNine Months Ended
ClassificationSeptember 28, 2024September 30, 2023September 28, 2024September 30, 2023
(Loss) gain recognized in incomeOther expense, net$(494)$2,151 $853 $3,418 
The following tables reflect the effect of derivatives designated as cash flow hedging (in thousands): 
Gain recognized in OCI on Derivative (1)
Three Months EndedNine Months Ended
September 28, 2024September 30, 2023September 28, 2024September 30, 2023
Foreign currency forward contracts$— $5,105 $3,213 $7,077 
(1)The amount represents the change in fair value of derivative contracts due to changes in spot rates.
Gain recognized in earnings on cash flow hedging instruments
Three Months EndedNine Months Ended
September 28, 2024September 30, 2023September 28, 2024September 30, 2023
RevenueRevenue
Consolidated statements of operations in which the effects of cash flow hedging instruments are recorded$193,435 $186,176 $509,811 $583,036 
Gain on cash flow hedging relationships:
Foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings$3,519 $5,568 $11,827 $14,249 
19
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
11. Stockholders' Equity
ATM Equity Offering
In February 2024, the Company entered into an ATM Equity Offering Sales Agreement (the "ATM Agreement") with BofA Securities, Inc. ("BofA") pursuant to which the Company may offer and sell, from time to time, at the Company's option, up to an aggregate of $100.0 million in shares of Common Stock through BofA, as sales agent, in an "at the market" offering. The shares will be offered and sold pursuant to an effective automatic shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission on February 27, 2024. BofA will receive a commission up to 3.00% of the aggregate gross sales proceeds of any Common Stock sold through BofA under the ATM Agreement.
During the three and nine months ended September 28, 2024, the Company sold an aggregate of 0.2 million and 1.9 million shares under the ATM Agreement, respectively, and received net proceeds of $1.4 million and $19.4 million, respectively. The issuance costs incurred in connection with the offering were $0.1 million and $1.1 million during the three and nine months ended September 28, 2024, respectively. As of September 28, 2024, $79.6 million remained available for further sale under the ATM Agreement.
12. Commitments and Contingencies
Legal Proceedings
From time to time and in the ordinary course of business, the Company is subject to various claims, charges and litigation. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, which could materially affect our financial condition or results of operations. For the following litigation matter, a liability is not probable or the amount cannot be reasonably estimated and therefore accruals have not been made.
On March 8, 2024, purported Company shareholder Dylan Das filed a putative class action in the U.S. District Court for the District of New Jersey against the Company and certain of its officers, captioned Dylan Das v. iRobot Corporation, et al., No. 2:24-cv-02138. The parties have agreed to transfer the case to the U.S. District Court for the District of Massachusetts. An amended complaint was filed on July 19, 2024. On September 3, 2024, the Company filed a motion to dismiss ("Motion to Dismiss"). The complaint alleges violations of Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended and Rule 10b-5 thereunder based on allegedly false and misleading statements and omissions concerning the likelihood of regulatory approval of the Merger and its impact on the Company's financial performance. The complaint seeks, among other things, unspecified compensatory damages, including interest, in connection with the Company's allegedly inflated stock price, attorneys' fees and costs, and unspecified equitable/injunctive relief. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss, if any, that may result from this action. On June 8, 2024, purported Company shareholder Anthony Wren filed a shareholder derivative complaint in the U.S. District Court for the District of Massachusetts against the Company, certain of its current and former members of the board of directors, and certain of its officers, captioned Anthony Wren, derivatively on behalf of iRobot Corp. v. iRobot Corporation, et al., No. 1:24-cv-11498. The parties filed a stipulation staying this action until final resolution on the Motion to Dismiss.
Commitments to Suppliers
The Company utilizes contract manufacturers to build its products and some of its accessories. These contract manufacturers manage the supply of components, capacity and resources to build products based on a forecasted production plan, which typically covers a rolling 12-month period. During the normal course of business, and in order to ensure adequate supply, the Company enters into purchase commitments with contract manufacturers and suppliers. In certain instances, these purchase commitments allow the Company the option to cancel, reschedule and/or adjust the supply requirements based on its business needs for a period of time before the order is due to be fulfilled. In some instances, these purchase commitments are not cancellable in the event of a change in demand or other circumstances, such as where the contract manufacturer and/or supplier has built products, semi-finished products or procured and/or ordered unique, iRobot-specific designs, and/or specific non-cancellable, non-returnable components based on the provided forecasts. If the Company cancels all or part of the orders, or materially reduces forecasted orders, in certain circumstances the Company may be liable to its contract manufacturers and/or suppliers for the cost of the excess components purchased by its contract manufacturers based on the forecasted production plan and the purchase terms of its component suppliers. During the second quarter of fiscal 2024, the Company finalized its 2025 product roadmap as part of its transition to a new contract manufacturing paradigm. As a result, the Company evaluated its component inventory on-hand and non-cancelable purchase commitments with its contract manufacturers and suppliers and recorded a charge totaling $18.4 million in cost of product revenue in the second quarter of fiscal 2024. This charge included a $10.3 million non-cash reserve for obsolete or excess component inventory and a $8.1 million charge for losses on non-cancellable purchase commitments. The loss on purchase commitments is included in accrued manufacturing and logistics cost on the consolidated balance sheets (Note 8).
20
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Guarantees and Indemnification Obligations
The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses incurred by the indemnified party, generally the Company’s customers, in connection with any patent, copyright, trade secret or other proprietary right infringement claim by any third party. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company had no liabilities recorded for these agreements as of September 28, 2024 and December 30, 2023, respectively.
Warranty
The Company provides warranties on most products and has established a reserve for warranty obligations based on estimated warranty costs. The reserve is included as part of accrued expenses (Note 8) in the accompanying consolidated balance sheets.    
Activity related to the warranty accrual was as follows (in thousands):
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023September 28, 2024September 30, 2023
Balance at beginning of period$19,765 $23,935 $24,625 $27,379 
Provision3,994 2,869 10,039 11,229 
Warranty claims(4,692)(4,484)(15,597)(16,288)
Balance at end of period$19,067 $22,320 $19,067 $22,320 
13. Income Taxes
The Company's interim provision for income taxes is determined using an estimate of the annual effective tax rate. The Company records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs. The Company also records the tax effects of certain discrete items, including tax effects of changes in a valuation allowance, during the interim period in which they occur.
The Company has assessed, on a jurisdictional basis, the realization of its net deferred tax assets, including the ability to carry back net operating losses, the existence of taxable temporary differences, the availability of tax planning strategies and available sources of future taxable income. The Company has concluded that a valuation allowance on its U.S. net deferred tax assets continues to be appropriate. In addition, valuation allowances were established in certain foreign jurisdictions during fiscal 2023 considering cumulative taxable losses in recent years and uncertainty with respect to future taxable income. A valuation allowance is a non-cash charge, and does not limit the Company’s ability to utilize its deferred tax assets, including its ability to utilize tax loss and credit carryforward amounts, against future taxable income. The amount of the deferred tax assets considered realizable, and the associated valuation allowance, could be adjusted in a future period if estimates of future taxable income change or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for future growth.
For the three months ended September 28, 2024 and September 30, 2023, the Company recorded an income tax expense of $1.1 million and $0.6 million, respectively. The Company's effective income tax rates were (20.4)% and (0.8)% for the three months ended September 28, 2024 and September 30, 2023, respectively. The Company's effective income tax rate differed from the federal statutory tax rate of 21% primarily driven by the impact of the valuation allowance against the Company's U.S. and certain foreign net deferred tax assets.
For the nine months ended September 28, 2024 and September 30, 2023, the Company recorded an income tax expense of $1.9 million and $5.1 million, respectively. The Company's effective income tax rates were (2.9)% and (2.1)% for the nine months ended September 28, 2024 and September 30, 2023, respectively. The Company's effective income tax rate differed from the federal statutory tax rate of 21% primarily driven by the impact of the valuation allowance against the Company's U.S. and certain foreign net deferred tax assets.
14. Industry Segment, Geographic Information and Significant Customers
The Company operates as one operating segment. The Company's consumer robots are offered to consumers through a variety of distribution channels, including chain stores and other national retailers, through the Company's own website and app, dedicated e-commerce websites, the online arms of traditional retailers, and through value-added distributors and resellers worldwide.
21
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Significant Customers
For the three months ended September 28, 2024 and September 30, 2023, the Company generated 32.6% and 22.4%, respectively, of total revenue from one of its retailers.
For the nine months ended September 28, 2024 and September 30, 2023, the Company generated 27.1% and 26.8%, respectively, of total revenue from one of its retailers.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information contained in this section has been derived from our consolidated financial statements and should be read together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and are subject to the "safe harbor" created by those sections. In particular, statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including, but not limited to, statements concerning our future results of operations and financial position, business strategy, plans and objectives of management for future operations, new product sales, plans for product development and offerings, launches and manufacturing, ability to address consumer needs, the expansion of our addressable market, factors for differentiation of our products, our consumer robots, our competition, our strategy, our market position, market acceptance of our products, revenue recognition, our profits, growth of our revenues, composition of our revenues, our cost of revenues, units shipped, average selling prices, the impact of promotional activity and tariffs, operating expenses, selling and marketing expenses, general and administrative expenses, research and development expenses, and compensation costs, our credit and letter of credit facilities, seasonal factors, efforts to refine value proposition and related results, efforts to mitigate supply chain challenges, plans for the production of robots, strategic alliances, product integration plans, liquidity and the impact of cost-control measures and cost savings related to such activities, and implementation of our operational restructuring plan constitute forward-looking statements and are made under these safe harbor provisions. Some of the forward-looking statements can be identified by the use of forward-looking terms such as "believes," "expects," "may," "will," "should," "could," "seek," "intends," "plans," "estimates," "anticipates," or other comparable terms and negative forms of such terms. Forward-looking statements involve inherent risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. We urge you to consider the risks and uncertainties discussed in greater detail under the heading "Risk Factors" in this Quarterly Report on Form 10-Q and in Part 1, "Item 1A. Risk Factors" in our Quarterly Reports on Form 10-Q for the periods ended March 30, 2024 and June 29, 2024 and Part 1, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 30, 2023 in evaluating our forward-looking statements. We have no plans to update our forward-looking statements to reflect events or circumstances after the date of this report. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made.
Overview
iRobot is a leading global consumer robot company that designs and builds robots that empower people to do more. With over 30 years of artificial intelligence ("AI") and advanced robotics experience, we are focused on building thoughtful robots and developing intelligent home innovations that help make life better for millions of people around the world. iRobot's portfolio of home robots and smart home devices features proprietary technologies for the connected home and advanced concepts in cleaning, mapping and navigation. Leveraging this portfolio, we plan to add new capabilities and expand our offerings to help consumers make their homes easier to maintain, more efficient, more secure and healthier places to live.
Since our founding in 1990, we have developed the expertise necessary to design, build, sell and support durable, high-performance and cost-effective robots through the close integration of software, electronics and hardware. Following the introduction of the Roomba robotic vacuum cleaner in 2002, we have sold over 50 million consumer robots worldwide to become a global, market-leading consumer robotics innovator with a strong presence in a number of major geographic regions worldwide. Our core technologies serve as reusable building blocks that we adapt and expand to create next-generation robotic platforms. We believe that this approach accelerates the time to market, while also reducing the costs, time and other risks associated with product development. These capabilities are amplified by iRobot OS. The software intelligence of iRobot OS powers our portfolio of connected robotic floorcare products, enabling an expanding range of new features and thoughtful digital experiences that improve overall cleaning performance, personalization and control. By leveraging our considerable expertise and ongoing investment in AI, home understanding and machine vision technologies, iRobot OS provides consumers with greater control over where, when and how our robots work, simple integration with other smart home devices, thoughtful recommendations to further enhance the cleaning experience, and the ability to share and transfer home knowledge across multiple iRobot robots. We believe that the capabilities within iRobot OS will help support our long-term vision of building out a larger ecosystem that encompasses a broader range of robots. We believe that our significant expertise in robot design, engineering, and smart home technologies and targeted focus on understanding and addressing consumer needs, positions us well to expand our total addressable market and capitalize on the anticipated growth in a wider range of robotic and smart home categories over time.
22


During the first quarter of fiscal 2024, we launched the Roomba Combo Essential robot which replaces Roomba 600 Series with an added mopping function, more suction power, longer battery life and intelligent iRobot OS automations. This robot makes the 2-in-1 cleaning experience more accessible to customers given the lower price point. The Roomba Combo Essential robot is available in North America and EMEA and became available in APAC beginning in the second quarter of fiscal 2024. In addition, the Roomba Vac Essential was launched in North America as the vacuum-only version. These are the first products to benefit from our new contract manufacturing paradigm, taking advantage of their mature supply chains, expertise in design-for-manufacturing, and flexibility in component selection. In July 2024, we introduced the Roomba Combo 10 Max Robot + AutoWash dock, an advanced robot vacuum and mop which brings independent cleaning to a new level. The robot is engineered to powerfully vacuum and mop multiple floor types while the dock automatically refills and recharges the robot, washes and dries the mopping pad, empties debris, and self-cleans. This robot is our first entry into the fast-growing market segment of multifunctional docks and is our first robot floor cleaner to be compliant with the Matter smart home protocol and compatible with the Apple Home ecosystem. The launch represents an important milestone in our product innovation roadmap and is central to our strategy for Europe, where we aim to capitalize on growth opportunities at the high end of the market. Shipping of the Roomba Combo 10 Max Robot began in August 2024 through our DTC channels and select distributors and retailers in the U.S., Japan and EMEA. It will be available in remaining international markets during the fourth quarter of 2024. During the third quarter of fiscal 2024, we launched the 2-in-1 Roomba Combo 2 Essential robot and Roomba Vac 2 Essential robot in North America and Japan, followed by the launch in EMEA during October 2024. These robots are the first in our affordable Essential series that automatically empty their dust bin into an AutoEmpty dock after cleaning. The robots also provide twice the cleaning power of the original Essential series, an enhanced bumper design to more seamlessly navigate, and the ability to recharge and resume during cleaning missions.
Our total revenue for the nine months ended September 28, 2024 was $509.8 million, a decline of $73.2 million, or 12.6%, from revenue of $583.0 million for the nine months ended September 30, 2023. Geographically, domestic revenue declined by $30.3 million, or 10.5%, and international revenue declined by $42.9 million, or 14.6%. Continuing from 2023, our revenue performance was impacted by lower orders from retailers and distributors largely resulting from a decline in consumer spending in the U.S. and Japan. The overall market conditions continue to be challenging with aggressive competition in EMEA and the U.S. We are leveraging our brand and innovative products to extend or reclaim our leadership positions in the mid and premium market segments as well as leveraging our new product launches that balance price point and cost profile to participate more fully in the entry market segment. Revenue from mid-tier robots (with an MSRP between $300 and $499) and premium robots (with an MSRP of $500 or more) represented 78% of total robot sales during the nine months ended September 28, 2024 versus 84% from the same period last year, reflecting the introduction of the Roomba Combo Essential, providing the iRobot 2-in-1 cleaning experience at a lower price point.
Entering the last quarter of 2024, we continue to focus on managing our cash and executing on our near-term robotic floorcare roadmaps. To achieve our goals for the year and set us up for success, we announced an operational restructuring plan that is designed to more closely align our cost structure with near-term revenue expectations and drive profitability. During the nine months ended September 28, 2024, we initiated an overall reduction of approximately 350 employees, which represents 31% of our global workforce as of December 30, 2023. During the nine months ended September 28, 2024, our operating expenses declined $93.5 million, or 26.7%, which excludes the one-time benefit of $75.2 million related to the Parent Termination Fee and the one-time benefit of $13.5 million related to an intellectual property litigation settlement ("Litigation Settlement"), compared to the nine months ended September 30, 2023. See Note 4 to our consolidated financial statements for additional details and charges related to the operational restructuring plan. During the third quarter of fiscal 2024, we continued to carefully manage our inventory to a level that better aligns with current revenue run rates and seasonality of the business.
Our operational restructuring plan has focused on cost savings and improving our gross margin and cash flow. During the second quarter of fiscal 2024, we launched "iRobot Elevate," which is a new strategy focused on growth. Elevate centers on 1) improving our financial performance, 2) increasing consumer focus to elevate our brand, 3) bringing innovative products to market in an entirely new and more profitable way, 4) continuing our operational and organization improvements, and 5) developing and retaining our best talent.
Termination of Merger Agreement
As previously disclosed, on August 4, 2022, we entered into an Agreement and Plan of Merger (the "Original Merger Agreement") with Amazon.com, Inc., a Delaware corporation ("Parent" or "Amazon"), and Martin Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Amazon ("Merger Sub"), providing for, among other things, the merger of Merger Sub with and into us, with us surviving the merger as a wholly owned subsidiary of Parent (the "Merger", and, together with the other transactions contemplated by the Merger Agreement (as defined below), the "Transactions"). On July 24, 2023, iRobot, Amazon and Merger Sub entered into an amendment to the Original Merger Agreement (the "Amendment", and the Original Merger Agreement, as amended and supplemented by the Amendment, the "Merger Agreement"). The Amendment adjusted the merger consideration to reflect the incurrence of the Term Loan (see Note 9 to our consolidated financial statements).
23


On January 28, 2024, we and Amazon mutually agreed to terminate the Merger Agreement and entered into a mutual termination agreement effective as of such date (the "Termination Agreement"). The termination of the Merger Agreement was approved by our Board of Directors. In accordance with the terms of the Termination Agreement, Amazon made a cash payment to us in the previously agreed amount of $94.0 million (the "Parent Termination Fee") on January 29, 2024. During the first quarter of fiscal 2024, as a result of the termination of the Merger Agreement and receipt of the Parent Termination Fee of $94.0 million from Amazon, we made a payment of $18.8 million for professional fees incurred in connection with the Transactions. In accordance with the terms of the Credit Agreement, we applied $35.0 million to repay a portion of the Term Loan. The remaining $40.0 million of the Parent Termination Fee was set aside as restricted cash to be used for future repayments of the Term Loan subject to limited rights of us to utilize such amounts for the purchase of inventory. The Parent Termination Fee received net of professional fees paid was $75.2 million and was recorded during the first quarter of fiscal 2024 as a benefit in Operating Expense, which is classified in general and administrative expenses on the consolidated statements of operations.
Key Financial Metrics and Non-GAAP Financial Measures
In addition to the measures presented in our consolidated financial statements in accordance with GAAP, we use the following key metrics, including non-GAAP financial measures, to evaluate and analyze our core operating performance and trends, and to develop short-term and long-term operational plans. The most directly comparable financial measures to the following non-GAAP metrics calculated under U.S. GAAP are gross profit, gross margin, operating income (loss) and operating margin. During the three months ended September 28, 2024 and September 30, 2023, we had gross profit of $62.4 million and $48.0 million, gross margin of 32.2% and 25.8%, operating income (loss) of $7.3 million and ($59.5) million and operating margin of 3.8% and (32.0)%, respectively. During the nine months ended September 28, 2024 and September 30, 2023, we had gross profit of $125.9 million and $138.2 million, gross margin of 24.7% and 23.7%, operating loss of ($41.9) million and ($211.8) million and operating margin of (8.2)% and (36.3)%, respectively. A summary of key metrics for the three and nine months ended September 28, 2024, as compared to the three and nine months ended September 30, 2023, is as follows:
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023September 28, 2024September 30, 2023
(dollars in thousands, except average gross selling prices)
(unaudited)
Total Revenue$193,435 $186,176 $509,811 $583,036 
Non-GAAP Gross Profit$62,764 $49,414 $127,432 $142,228 
Non-GAAP Gross Margin32.4 %26.5 %25.0 %24.4 %
Non-GAAP Operating Income (Loss)*$15,069 $(40,649)$(73,083)$(153,449)
Non-GAAP Operating Margin*
7.8 %(21.8)%(14.3)%(26.3)%
Total robot units shipped (in thousands)732 627 1,762 1,895 
Average gross selling prices for robot units$313 $331 $329 $354 
* Beginning in the fourth quarter of fiscal 2023, we updated our calculation of non-GAAP financial measures to no longer exclude "IP litigation expense, net." The metrics for each period are presented in accordance with this updated methodology; as a result, the third quarter and the nine months ended September 30, 2023 differ from those previously presented by the amount of IP litigation expense, net recorded in such period.
Our non-GAAP financial measures reflect adjustments based on the following items. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results, provided below, should be carefully evaluated.
Amortization of acquired intangible assets: Amortization of acquired intangible assets consists of amortization of intangible assets including completed technology, customer relationships, and reacquired distribution rights acquired in connection with business combinations as well as any non-cash impairment charges associated with intangible assets in connection with our past acquisitions. Amortization charges for our acquisition-related intangible assets are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions.
24


Net Merger, Acquisition and Divestiture (Income) Expense: Net merger, acquisition and divestiture (income) expense primarily consists of transaction fees, professional fees, and transition and integration costs directly associated with mergers, acquisitions and divestitures, including with respect to the Merger. It also includes business combination adjustments including adjustments after the measurement period has ended. During the first quarter of fiscal 2024, the adjustment included the impact of the Termination Agreement and receipt of the Parent Termination Fee.
Stock-Based Compensation: Stock-based compensation is a non-cash charge relating to stock-based awards.
Restructuring and Other: Restructuring charges are related to one-time actions associated with realigning resources, enhancing operational productivity and efficiency, or improving our cost structure in support of our strategy. Such actions are not reflective of ongoing operations and include costs primarily associated with severance and related costs, charges related to paused work unrelated to our core business, costs associated with the Chief Executive Officer transition and other non-recurring costs directly associated with resource realignments tied to strategic initiatives or changes in business conditions.
Gain/Loss on Strategic Investments: Gain/loss on strategic investments includes fair value adjustments, realized gains and losses on the sales of these investments and losses on the impairment of these investments.
Debt issuance costs: Debt issuance costs include various incremental fees and commissions paid to third parties in connection with the issuance of debt.
Income tax adjustments: Income tax adjustments include the tax effect of the non-GAAP adjustments, calculated using the appropriate statutory tax rate for each adjustment. We regularly assess the need to record valuation allowances based on the non-GAAP profitability and other factors. We also exclude certain tax items, including the impact from stock-based compensation windfalls/shortfalls, which are not reflective of income tax expense incurred as a result of current period earnings.
We exclude these items from our non-GAAP measures to facilitate an evaluation of our current operating performance and comparisons to our past operating performance. These items may vary significantly in magnitude or timing and do not necessarily reflect anticipated future operating activities. In addition, we believe that providing these non-GAAP measures affords investors a view of our operating results that may be more easily compared with our peer companies.

25


The following table reconciles gross profit, operating income (loss), net income (loss) and net income (loss) per share on a GAAP and non-GAAP basis for the three and nine months ended September 28, 2024 and September 30, 2023:
Three Months EndedNine Months Ended
September 28, 2024September 30, 2023September 28, 2024September 30, 2023
(in thousands, except per share amounts)
 GAAP Gross Profit$62,377 $47,996 $125,946 $138,240 
   Amortization of acquired intangible assets— 292 — 864 
   Stock-based compensation387 838 1,486 2,226 
   Net merger, acquisition and divestiture expense— 288 — 898 
 Non-GAAP Gross Profit$62,764 $49,414 $127,432 $142,228 
 GAAP Gross Margin32.2 %25.8 %24.7 %23.7 %
 Non-GAAP Gross Margin32.4 %26.5 %25.0 %24.4 %
 GAAP Operating Income (Loss)$7,257 $(59,494)$(41,910)$(211,847)
   Amortization of acquired intangible assets1,066 466 1,405 1,393 
   Stock-based compensation5,480 9,375 17,937 25,880 
   Net merger, acquisition and divestiture (income) expense(656)8,852 (74,813)22,889 
   Restructuring and other1,922 152 24,298 8,236 
 Non-GAAP Operating Income (Loss)*$15,069 $(40,649)$(73,083)$(153,449)
 GAAP Operating Margin3.8 %(32.0)%(8.2)%(36.3)%
 Non-GAAP Operating Margin*7.8 %(21.8)%(14.3)%(26.3)%
 GAAP Net Loss$(6,371)$(79,205)$(68,410)$(241,117)
   Amortization of acquired intangible assets1,066 466 1,405 1,393 
   Stock-based compensation5,480 9,375 17,937 25,880 
   Net merger, acquisition and divestiture (income) expense(656)8,852 (74,813)22,889 
   Restructuring and other1,922 152 24,298 8,236 
   Loss on strategic investments— 758 375 3,910 
   Debt issuance costs52 11,837 529 11,837 
   Income tax effect(447)(30,407)(856)3,585 
 Non-GAAP Net Income (Loss)*$1,046 $(78,172)$(99,535)$(163,387)
 GAAP Net Loss Per Diluted Share$(0.21)$(2.86)$(2.34)$(8.73)
   Dilutive effect of non-GAAP adjustments*0.24 0.04 (1.06)2.81 
 Non-GAAP Net Income (Loss) Per Diluted Share*$0.03 $(2.82)$(3.40)$(5.92)
* Beginning in the fourth quarter of fiscal 2023, we updated our calculation of non-GAAP financial measures to no longer exclude "IP litigation expense, net." The metrics for each period are presented in accordance with this updated methodology; as a result, the third quarter and the nine months ended September 30, 2023 differ from those previously presented by the amount of IP litigation expense, net recorded in such period.

26


Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates and assumptions are based on historical experience and various other factors that we believe are reasonable under the circumstances. Actual results and outcomes may differ from our estimates and assumptions.
The critical accounting policies affected most significantly by estimates and assumptions used in the preparation of our consolidated financial statements are described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 30, 2023, filed with the Securities and Exchange Commission on February 27, 2024. On an ongoing basis, we evaluate the critical accounting policies used to prepare our consolidated financial statements.
Overview of Results of Operations
The following table sets forth our results of operations as a percentage of revenue:
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023September 28, 2024September 30, 2023
Revenue100.0 %100.0 %100.0 %100.0 %
Cost of revenue:
Cost of product revenue67.8 74.0 75.3 76.2 
Amortization of acquired intangible assets— 0.2 — 0.1 
Total cost of revenue67.8 74.2 75.3 76.3 
Gross profit32.2 25.8 24.7 23.7 
Operating expenses:
Research and development10.1 20.1 15.1 20.0 
Selling and marketing15.0 22.3 19.3 23.9 
General and administrative1.7 15.2 (6.6)14.6 
Restructuring and other1.0 0.1 4.8 1.4 
Amortization of acquired intangible assets0.6 0.1 0.3 0.1 
Total operating expenses28.4 57.8 32.9 60.0 
Operating income (loss)3.8 (32.0)(8.2)(36.3)
Other expense, net(6.5)(10.2)(4.8)(4.2)
Loss before income taxes(2.7)(42.2)(13.0)(40.5)
Income tax expense0.6 0.3 0.4 0.9 
Net loss(3.3)%(42.5)%(13.4)%(41.4)%
Comparison of Three and Nine Months Ended September 28, 2024 and September 30, 2023
Revenue
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023Dollar
Change		Percent
Change		September 28, 2024September 30, 2023Dollar
Change		Percent
Change
 (Dollars in thousands)(Dollars in thousands)
Revenue$193,435 $186,176 $7,259 3.9 %$509,811 $583,036 $(73,225)(12.6)%
Revenue for the three months ended September 28, 2024 increased $7.3 million to $193.4 million, or 3.9%, from $186.2 million for the three months ended September 30, 2023. The increase was primarily attributable to a $19.4 million, or 22.6% increase in domestic revenue, partially offset by a $12.1 million, or 12.0% decrease in international revenue, which reflected decreases of 20.2% in Japan and 11.5% in EMEA compared to the three months ended September 30, 2023. The increase in domestic revenue during the third quarter of fiscal 2024 was primarily related to the timing of certain large orders. In contrast, the decrease in international revenue was driven by reduced demand due to declining consumer sentiment and continuing increased competition in the market, which required additional promotional activities and pricing adjustments. The increase in revenue also reflected an increase of 16.7% in total robots shipped, partially offset by a 5.4% decrease in gross average selling price for the three months ended September 28, 2024, compared to the three months ended September 30, 2023.
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Revenue for the nine months ended September 28, 2024 decreased $73.2 million to $509.8 million, or 12.6%, from $583.0 million for the nine months ended September 30, 2023. Geographically, in the nine months ended September 28, 2024, domestic revenue decreased $30.3 million, or 10.5%, and international revenue decreased $42.9 million, or 14.6%, which reflected decreases of 24.4% in Japan and 12.4% in EMEA. The decrease in revenue during the nine months ended September 28, 2024 was primarily driven by reduced demand due to declining consumer sentiment, continuing increased competition in the market, requiring additional promotional activities and pricing adjustments, as well as unfavorable exchange rate changes on Japanese Yen. Excluding the unfavorable foreign currency impact, Japan revenue decreased 17.5% over the same period in the prior year. The decrease in revenue also reflected a decrease of 7.0% in total robots shipped and a 7.1% decrease in gross average selling price for the nine months ended September 28, 2024, compared to the nine months ended September 30, 2023. The decrease in gross average selling price was primarily due to the launch of Roomba Combo Essential and Roomba Vac Essential robots, which are offered at a lower price point.
Cost of Product Revenue
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023Dollar
Change		Percent
Change		September 28, 2024September 30, 2023Dollar
Change		Percent
Change
 (Dollars in thousands)(Dollars in thousands)
Cost of product revenue$131,058$137,888$(6,830)(5.0)%$383,865$443,932$(60,067)(13.5)%
As a percentage of revenue67.8 %74.0 %75.3 %76.2 %
Cost of product revenue decreased to $131.1 million in the three months ended September 28, 2024, compared to $137.9 million in the three months ended September 30, 2023. The decrease was primarily driven by lower product costs from our new products with a better cost profile, as well as cost reductions on existing products during the year. The decrease was also driven by the reduced people-related costs as a result of our restructuring activities. The decrease was also attributable to lower charges related to excess material during the three months ended September 28, 2024.
Cost of product revenue decreased to $383.9 million in the nine months ended September 28, 2024, compared to $443.9 million in the nine ended September 30, 2023. The decrease was primarily driven by the 12.6% decrease in revenue, offset by adjustments for obsolete or excess inventory and losses on purchase commitments in the nine months ended September 28, 2024. During the second quarter of fiscal 2024, we finalized our 2025 product roadmap as part of our transition to a new contract manufacturing paradigm. As a result, we evaluated our component inventory on-hand and non-cancelable purchase commitments with our contract manufacturers and suppliers and recorded a charge totaling $18.4 million. This charge includes a $10.3 million non-cash reserve for obsolete or excess component inventory and a $8.1 million charge for losses on non-cancelable purchase commitments.
Gross Profit
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023Dollar
Change		Percent
Change		September 28, 2024September 30, 2023Dollar
Change		Percent
Change
 (Dollars in thousands)(Dollars in thousands)
Gross profit$62,377$47,996$14,381 30.0 %$125,946$138,240$(12,294)(8.9)%
Gross margin32.2 %25.8 %24.7 %23.7 %
Gross margin increased to 32.2% in the three months ended September 28, 2024, compared to 25.8% in the three months ended September 30, 2023. Gross margin increased 6.4 percentage points primarily driven by favorable impact from lower product costs which is driven by new products with a better cost profile, as well as cost reductions on existing products during the year. The decrease was also driven by reduced people-related costs as a result of the restructuring activities and improved leverage on our fixed costs due to increased revenue during the three months ended September 28, 2024. The increase in gross margin is partially offset by continued increases in promotional and pricing activities. Although we have taken a wide range of actions to drive gross margin improvement through a multitude of product cost optimization, manufacturing and supply chain initiatives that have been implemented over the past few quarters, our ability to deliver sustainable gross margin improvement will largely depend on our ability to drive revenue growth and seasonality of our business.
Gross margin increased to 24.7% in the nine months ended September 28, 2024, compared to 23.7% in the nine months ended September 30, 2023. Gross margin increased 1.0 percentage point primarily driven by favorable impact from product mix, lower product costs and reduced people-related costs as a result of the restructuring activities during the nine months ended September 28, 2024. The increase in gross margin is partially offset by continued increases in promotional and pricing activities, charges related to non-cash reserve for obsolete or excess component inventory and losses on non-cancelable purchase commitments during the nine months ended September 28, 2024. Although we have taken a wide range of actions to
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drive gross margin improvement through a multitude of product cost optimization, manufacturing and supply chain initiatives that have been implemented over the past few quarters, our ability to deliver sustainable gross margin improvement will largely depend on our ability to drive revenue growth and seasonality of our business.
Research and Development
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023Dollar
Change		Percent
Change		September 28, 2024September 30, 2023Dollar
Change		Percent
Change
 (Dollars in thousands)(Dollars in thousands)
Research and development$19,630 $37,336 $(17,706)(47.4)%$76,739 $116,576 $(39,837)(34.2)%
As a percentage of revenue10.1 %20.1 %15.1 %20.0 %
Research and development expenses decreased $17.7 million, or 47.4%, to $19.6 million (10.1% of revenue) in the three months ended September 28, 2024 from $37.3 million (20.1% of revenue) in the three months ended September 30, 2023. This decrease was primarily due to decreases of $12.0 million in people-related costs and $2.1 million in stock-based compensation associated with lower headcount resulting from the 2024 operational restructuring plan, as well as a decrease of $2.4 million in program-related costs during the three months ended September 28, 2024.
Research and development expenses decreased $39.8 million, or 34.2%, to $76.7 million (15.1% of revenue) in the nine months ended September 28, 2024 from $116.6 million (20.0% of revenue) in the nine months ended September 30, 2023. This decrease was primarily due to decreases of $25.9 million in people-related costs and $3.7 million in stock-based compensation associated with lower headcount resulting from the 2024 operational restructuring plan, as well as a decrease of $7.0 million in program-related costs during the nine months ended September 28, 2024.
Selling and Marketing
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023Dollar
Change		Percent
Change		September 28, 2024September 30, 2023Dollar
Change		Percent
Change
 (Dollars in thousands)(Dollars in thousands)
Selling and marketing$29,270 $41,558 $(12,288)(29.6)%$98,966 $139,630 $(40,664)(29.1)%
As a percentage of revenue15.0 %22.3 %19.3 %23.9 %
Selling and marketing expenses decreased $12.3 million, or 29.6%, to $29.3 million (15.0% of revenue) in the three months ended September 28, 2024 from $41.6 million (22.3% of revenue) in the three months ended September 30, 2023. This decrease was primarily attributable to scaled back working media and other demand-generation activities totaling approximately $6.8 million as well as a $2.9 million decrease in people-related costs associated with lower headcount.
Selling and marketing expenses decreased $40.7 million, or 29.1%, to $99.0 million (19.3% of revenue) in the nine months ended September 28, 2024 from $139.6 million (23.9% of revenue) in the nine months ended September 30, 2023. This decrease was primarily attributable to scaled back working media and other demand-generation activities totaling approximately $27.7 million as well as a $7.7 million decrease in people-related costs associated with lower headcount.
General and Administrative
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023Dollar
Change		Percent
Change		September 28, 2024September 30, 2023Dollar
Change		Percent
Change
 (Dollars in thousands)(Dollars in thousands)
General and administrative$3,232 $28,270 $(25,038)(88.6)%$(33,552)$85,116 $(118,668)(139.4)%
As a percentage of revenue1.7 %15.2 %(6.6)%14.6 %
General and administrative expenses decreased $25.0 million, or 88.6%, to $3.2 million (1.7% of revenue) in the three months ended September 28, 2024, from $28.3 million (15.2% of revenue) in the three months ended September 30, 2023. This decrease was primarily driven by a one-time benefit of $13.5 million related to the Litigation Settlement, a $7.3 million decrease in merger-related costs and decreases of $1.9 million in people-related costs and $0.9 million in stock-based compensation associated with lower headcount resulting from the 2024 operational restructuring plan during the three months ended September 28, 2024.
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General and administrative expenses decreased $118.7 million, or 139.4%, to ($33.6) million ((6.6)% of revenue) in the nine months ended September 28, 2024, from $85.1 million (14.6% of revenue) in the nine months ended September 30, 2023. This decrease was primarily driven by receipt of the $94.0 million Parent Termination Fee, offset by a payment of $18.8 million for professional fees incurred in connection with the Transactions, a one-time benefit of $13.5 million related to the Litigation Settlement, and decreases of $6.7 million in people-related costs and $2.6 million in stock-based compensation associated with lower headcount resulting from the 2024 operational restructuring plan during the nine months ended September 28, 2024.
Restructuring and Other
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023Dollar
Change		Percent
Change		September 28, 2024September 30, 2023Dollar
Change		Percent
Change
 (Dollars in thousands)(Dollars in thousands)
Restructuring and other$1,922 $152 $1,770 1,164.5 %$24,298 $8,236 $16,062 195.0 %
As a percentage of revenue1.0 %0.1 %4.8 %1.4 %
Restructuring and other expenses increased $1.8 million, or 1,164.5%, to $1.9 million in the three months ended September 28, 2024, from $0.2 million in the three months ended September 30, 2023. The increase was driven by the 2024 operational restructuring plan which began in March 2024 and includes $1.0 million of severance-related costs as well as other restructuring costs of $0.6 million associated with exit activities. In addition, we recorded CEO transition costs totaling $0.4 million, primarily related to cash compensation charges associated with the transition-related agreements with Colin Angle and Glen D. Weinstein. The $0.2 million of restructuring and other expenses during the three months ended September 30, 2023 was related to our previous restructuring plan initiated in February 2023.
Restructuring and other expenses increased $16.1 million, or 195.0%, to $24.3 million in the nine months ended September 28, 2024, from $8.2 million in the nine months ended September 30, 2023. The increase was driven by the 2024 operational restructuring plan which began in March 2024 and includes $17.2 million of severance-related costs as well as other restructuring costs of $6.3 million, $4.9 million of which was associated with the pausing of work unrelated to our core floorcare business. In addition, we recorded CEO transition costs totaling $0.8 million, $2.1 million of which relates to CEO search fees and cash compensation charges associated with the transition-related agreements with Colin Angle and Glen D. Weinstein, offset by modification adjustments of ($1.2) million related to their stock-based awards. The $8.2 million of restructuring and other expenses during the nine months ended September 30, 2023 was related to our previous restructuring plan initiated in February 2023.
Amortization of Acquired Intangible Assets
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023Dollar
Change		Percent
Change		September 28, 2024September 30, 2023Dollar
Change		Percent
Change
 (Dollars in thousands)(Dollars in thousands)
Cost of revenue$— $292 $(292)(100.0)%$— $864 $(864)(100.0)%
Operating expense1,066 174 892 512.6 %1,405 529 876 165.6 %
Total amortization expense$1,066 $466 $600 128.8 %$1,405 $1,393 $12 0.9 %
As a percentage of revenue0.6 %0.3 %0.3 %0.2 %
The increase in amortization of acquired intangible assets in the three and nine months ended September 28, 2024 as compared to the three and nine months ended September 30, 2023, was primarily related to accelerated amortization on acquired intangible assets in the third quarter of 2024, resulting in higher amortization expense during the three and nine months ended September 28, 2024.
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Other Expense, Net
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023Dollar
Change		Percent
Change		September 28, 2024September 30, 2023Dollar
Change		Percent
Change
 (Dollars in thousands)(Dollars in thousands)
Interest income$1,676 $2,090 $(414)(19.8)%$6,568 $3,523 $3,045 86.4 %
Interest expense(5,370)(4,709)(661)14.0 %(16,306)(6,786)(9,520)140.3 %
Changes in fair value of Term Loan(8,769)(5,292)(3,477)65.7 %(13,515)(5,292)(8,223)155.4 %
Debt issuance costs(52)(11,837)11,785 (99.6)%(529)(11,837)11,308 (95.5)%
Loss on strategic investments— (758)758 (100.0)%(375)(3,910)3,535 (90.4)%
Other(33)1,393 (1,426)(102.4)%(426)85 (511)(601.2)%
Total other expense, net
$(12,548)$(19,113)$6,565 (34.3)%$(24,583)$(24,217)$(366)1.5 %
As a percentage of revenue(6.5)%(10.2)%(4.8)%(4.2)%
Other expense, net decreased $6.6 million, or 34.3%, to $12.5 million in the three months ended September 28, 2024 from $19.1 million in the three months ended September 30, 2023. This decrease was primarily driven by a $11.8 million decrease in debt issuance costs associated with our Term Loan, offset by a $3.5 million increase in non-cash adjustment due to change in fair value of our Term Loan and a $0.7 million increase in cash interest expense in connection with the Term Loan during the three months ended September 28, 2024.
Other expense, net increased $0.4 million, or 1.5%, to $24.6 million in the nine months ended September 28, 2024 from $24.2 million in the nine months ended September 30, 2023. This change was primarily driven by a $9.5 million increase in cash interest expense in connection with our Term Loan, as well as a $8.2 million non-cash adjustment due to change in fair value of our Term Loan during the nine months ended September 28, 2024. This was offset by an $11.3 million decrease in debt issuance costs associated with our Term Loan, a $3.5 million decrease in the loss on strategic investments and a $3.0 million increase in interest income due to higher yields on our cash and restricted cash.
Income Tax Expense
 Three Months EndedNine Months Ended
 September 28, 2024September 30, 2023Dollar
Change		Percent
Change		September 28, 2024September 30, 2023Dollar
Change		Percent
Change
 (Dollars in thousands)(Dollars in thousands)
Income tax expense$1,080 $598 $482 80.6 %$1,917 $5,053 $(3,136)(62.1)%
Effective income tax rate(20.4)%(0.8)%(2.9)%(2.1)%
We recorded income tax expense of $1.1 million for the three months ended September 28, 2024 and $0.6 million for the three months ended September 30, 2023. The income tax expense for the three months ended September 28, 2024 resulted in an effective income tax rate of (20.4)%. The $0.6 million income tax expense for the three months ended September 30, 2023 resulted in an effective income tax rate of (0.8)%. Our effective income tax rate differed from the federal statutory tax rate of 21% primarily driven by the impact of the valuation allowance against our U.S. and certain foreign net deferred tax assets.
We recorded income tax expense of $1.9 million for the nine months ended September 28, 2024 and $5.1 million for the nine months ended September 30, 2023. The income tax expense for the nine months ended September 28, 2024 resulted in an effective income tax rate of (2.9)%. The $5.1 million income tax expense for the nine months ended September 30, 2023 resulted in an effective income tax rate of (2.1)%. Our effective income tax rate differed from the federal statutory tax rate of 21% primarily driven by the impact of the valuation allowance against our U.S. and certain foreign net deferred tax assets.
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Liquidity and Capital Resources
At September 28, 2024, our cash and cash equivalents were $99.4 million. We also had $42.4 million in restricted cash, $41.1 million of which is set aside for future repayment of the Term Loan subject to limited rights of us to utilize such amounts for the purchase of inventory in the third quarters of fiscal 2024 and 2025. During the three months ended September 28, 2024, we elected to draw down $40.0 million of the restricted cash, which was subsequently received in the fourth quarter of fiscal 2024. The remaining $1.4 million is used for collateral for our credit card program and to secure the outstanding letters of credit and was included in other assets. Our working capital, which represents our total current assets less total current liabilities, was $131.1 million as of September 28, 2024, compared to $178.3 million as of December 30, 2023. Cash and cash equivalents held by our foreign subsidiaries totaled $20.5 million as of September 28, 2024. The undistributed earnings of our foreign subsidiaries remain permanently reinvested outside of the United States as of September 28, 2024.
On January 28, 2024, we and Amazon mutually agreed to terminate the Merger Agreement and entered into a mutual termination agreement effective as of such date. In accordance with the terms of the Termination Agreement, Amazon made a cash payment to us in the previously agreed amount of $94.0 million on January 29, 2024. During the first quarter of 2024, as a result of the termination of the Merger Agreement and receipt of the Parent Termination Fee of $94.0 million from Amazon, we made a payment of $18.8 million for professional fees incurred in connection with the Transactions. In accordance with the terms of the Credit Agreement, we applied $35.0 million to repay a portion of the Term Loan. The remaining $40.0 million of the proceeds was set aside in a restricted account to be used for future repayments of the Term Loan subject to our limited rights to utilize such amounts for the purchase of inventory in the third quarters of fiscal 2024 and 2025.
We manufacture and distribute our products through contract manufacturers and third-party logistics providers. We believe this approach gives us the advantages of relatively low capital investment and significant flexibility in scheduling production and managing inventory levels. By leasing our office facilities, we also minimize the cash needed for expansion, and only invest periodically in leasehold improvements, a portion of which is often reimbursed by the landlords of these facilities. Accordingly, our capital spending is generally limited to leasehold improvements, business applications software and computer and equipment. With the shift to the new contract manufacturing paradigm in 2024, we are spending significantly less on tooling and machinery than in previous periods. During the nine months ended September 28, 2024 and September 30, 2023, we spent $0.1 million and $3.1 million, respectively, on capital expenditures.
Our strategy for delivering consumer products to our distributors and retail customers gives us the flexibility to provide container shipments directly from our contract manufacturers in Southern China, Malaysia and other areas of APAC to our customers or, alternatively, allows our distributors and certain retail customers to take possession of product on a domestic basis. Accordingly, our inventory consists of goods shipped to our third-party logistics providers for the fulfillment of distributor, retail and direct-to-consumer sales. Our contract manufacturers are also responsible for purchasing and stocking components required for the production of our products, and they typically invoice us when the finished goods are shipped.
Cash used in operating activities
Net cash used in operating activities for the nine months ended September 28, 2024 was $30.5 million, of which the principal components were our net loss of $68.4 million and the cash ouflow of $16.2 million from change in working capital, offset by non-cash charges of $54.1 million. The change in working capital was driven by net cash outflows of $22.1 million from accounts receivable, $15.8 million from accrued expenses and other liabilities, and $10.5 million from inventory, partially offset by net cash inflow of $16.7 million from accounts payable. During the nine months ended September 28, 2024, the net cash used in operating activities benefited from the one-time receipt of the Parent Termination Fee, net of professional fees paid of $75.2 million in first quarter of fiscal 2024, as a result of the termination of the Merger Agreement.
Cash used in investing activities
Net cash used in investing activities for the nine months ended September 28, 2024 was $0.2 million and related to the purchase of computers and software and the purchase of investments.
Cash used in financing activities
Net cash used in financing activities for the nine months ended September 28, 2024 was $16.6 million, primarily related to the $34.9 million repayment of the Term Loan as a result of the termination of the Merger Agreement. During the nine months ended September 28, 2024, we sold an aggregate of 1.9 million shares under the ATM Agreement and received net proceeds of $19.4 million.
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Debt
Term Loan
On July 24, 2023, we entered into a Credit Agreement (the "Credit Agreement") by and among us, as borrower, each lender from time to time party thereto and TCG Senior Funding L.L.C., an affiliate of The Carlyle Group, as administrative agent and collateral agent, providing for a $200.0 million senior secured term loan credit facility (the "Term Loan"). During fiscal 2023, we received total proceeds from the Term Loan of $188.2 million, net of $11.8 million of debt issuance costs. During the first quarter of 2024, as a result of the termination of the Merger Agreement and receipt of the Parent Termination Fee of $94.0 million from Amazon on January 29, 2024, $35.0 million of such Parent Termination Fee was used immediately to repay a portion of the Term Loan. The Term Loan matures on July 24, 2026 with additional terms more fully described in Note 9 to our consolidated financial statements.
Lines of Credit
As of September 28, 2024, we had letters of credit outstanding of $0.4 million with Bank of America, N.A. The letters of credit were collateralized with a cash deposit.
We have an unsecured guarantee line of credit with Mizuho, Bank Ltd., available to fund import tax payments up to an aggregate outstanding amount of 250.0 million Japanese Yen. As of September 28, 2024, we had no outstanding balance under the guarantee line of credit. 
ATM Equity Offering
In February 2024, we entered into an ATM Equity Offering Sales Agreement (the "ATM Agreement") with BofA Securities, Inc. ("BofA") pursuant to which we may offer and sell, from time to time, at our option, up to an aggregate of $100.0 million in shares of Common Stock through BofA, as sales agent, in an "at the market" offering. The shares will be offered and sold pursuant to an effective automatic shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission on February 27, 2024. BofA will receive a commission up to 3.00% of the aggregate gross sales proceeds of any Common Stock sold through BofA under the ATM Agreement.
During the three and nine months ended September 28, 2024, we sold an aggregate of 0.2 million and 1.9 million shares under the ATM Agreement, respectively, and received net proceeds of $1.4 million and $19.4 million, respectively. The issuance costs incurred in connection with the offering were $0.1 million and $1.1 million during the three and nine months ended September 28, 2024, respectively. As of September 28, 2024, $79.6 million remained available for further sale under the ATM Agreement.
Liquidity
The accompanying unaudited consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
In the third quarter of fiscal 2024, our performance continued to be impacted by lower orders from retailers and distributors largely resulting from a decline in consumer sentiment and increased pricing competition in the market. During the nine months ended September 28, 2024, our revenue declined 12.6%, compared to the nine months ended September 30, 2023. Our operating loss of $41.9 million and operating cash outflows of $30.5 million for the nine months ended September 28, 2024 benefited from the one-time receipt of the Parent Termination Fee net of professional fees paid of $75.2 million during the first quarter of fiscal 2024. Our operating loss also includes the one-time benefit of $13.5 million related to the Litigation Settlement during the third quarter of fiscal 2024 with cash received subsequently in October. At September 28, 2024, our cash and cash equivalents were $99.4 million. We also had $42.4 million in restricted cash. During the three months ended September 28, 2024, we elected to draw down $40.0 million of the restricted cash which was subsequently received in the fourth quarter of fiscal 2024. The cash will be used for the purchase of inventory and is required to be repaid within five months in accordance with the terms of the loan agreement. It will then be available again during the third quarter of 2025 for purchases of inventory.
We have considered and assessed our ability to continue as a going concern for the one year from the date that the unaudited consolidated financial statements are issued. Our assessment included the preparation of cash flow forecasts taking into account our restructuring actions and maintaining debt covenant compliance. On January 29, 2024, following the termination of the Merger Agreement, we announced an operational restructuring plan to more closely align our cost structure with near-term revenue expectations and drive profitability. The 2024 operational restructuring plan is structured to:
•achieve gross margin improvements through a focus on design-to-value and more beneficial terms with our existing and new manufacturing partners;
•lower research and development expenditure by pausing work unrelated to our core floorcare business and shifting to greater reliance on contract manufacturers as it relates to the lower-value commodity engineering work;
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•return selling and marketing expenditures to a more normalized level, consistent with industry standards in the consumer products market, by centralizing resources on more limited geographies and consolidating marketing efforts for efficiencies; and
•further reduce headcount by approximately 350 employees, which represents approximately 31% of our global workforce as of December 30, 2023.
During the nine months ended September 28, 2024, we made significant progress in implementing our 2024 operational restructuring plan. Our total operating expenses declined $93.5 million, or 26.7%, which excludes the one-time benefits of $75.2 million related to the Parent Termination Fee and $13.5 million related to the Litigation Settlement, compared to the nine months ended September 30, 2023. Research and development expenses decreased $39.8 million, or 34.2%, while selling and marketing expenses decreased $40.7 million, or 29.1%, during the nine months ended September 28, 2024. Gross margin improved to 32.2% during the third quarter of fiscal 2024, compared to 25.8% during the third quarter of 2023. In addition to the reduction of our headcount, we entered into or amended three sublease agreements between fiscal 2022 and 2024 to sublease portions of our headquarters. We expect these sublease agreements will generate $6.1 million in sublease cash payments in the future over the remaining lease terms. We expect to continue to right size our global real estate footprint through additional subleasing at our corporate headquarters and the elimination of offices in smaller, underperforming geographies. We continue to evaluate our cost structure, and in November 2024, as part of the ongoing restructuring plan, we announced an additional round of workforce reductions, totaling approximately 105 employees. Since the start of 2024 and including this new action, we have reduced our global workforce by approximately 50%.
Inventory has consumed a significant amount of cash and we continue to manage our inventory level carefully to ensure efficiency in our working capital. Days in inventory has improved from 161 days during the third quarter of fiscal 2023 to 104 days in the third quarter of fiscal 2024. We plan to continue to manage our inventory to a level that aligns with current run rates and seasonality of the business.
While we estimate such actions will be sufficient to allow us to maintain our debt covenant compliance, and our liquidity and our operations in the ordinary course for at least 12 months from the issuance of these financial statements, there can be no assurance we will meet our debt covenant compliance and generate sufficient future cash flows from operations due to potential factors, including, but not limited to, further inflation, higher interest rates, ongoing recessionary conditions or continued reduced demand for our products due to consumer sentiment or competition. If we are not successful in increasing demand for our products, or if macroeconomic conditions further constrain consumer demand, we may continue to experience adverse impacts to revenue and profitability. Additional actions within our control to maintain our liquidity and operations include optimizing our production volumes with contract manufacturers by reducing inventory supply forecast for cancellable purchase orders, further reducing discretionary spending in all areas of the business and realigning resources through ongoing attrition without rehiring activity. In addition, we may need additional financing, including public or private equity or debt financing, to execute on our current or future business strategy, and additional financing may not be available or on terms favorable to us.
The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.
Contractual Obligations
The disclosure of our contractual obligations and commitments is set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contractual Obligations" in our Annual Report on Form 10-K for the year ended December 30, 2023. Our principal commitments generally consist of obligations under the Term Loan, leases for office space, inventory related purchase obligations, and minimum contractual obligations. Other obligations consist primarily of subscription services. 
As of September 28, 2024, we had outstanding purchase orders aggregating approximately $104.6 million. The purchase orders are typically related to the purchase of inventory and marketing and media spend in the normal course of business. Included in these outstanding purchase orders is $41.2 million related to inventory purchases at our contract manufacturers, of which $22.7 million are not cancellable without penalty.
We utilize contract manufacturers to build our products and accessories. These contract manufacturers manage the supply of components, capacity and resources to build products based on a forecasted production plan, which typically covers a rolling 12-month period. During the normal course of business, and in order to ensure adequate supply, we enter into purchase commitments with contract manufacturers and suppliers. In certain instances, these purchase commitments allow us the option to cancel, reschedule and/or adjust the supply requirements based on our business needs for a period of time before the order is due to be fulfilled. In some instances, these purchase commitments are not cancellable in the event of a change in demand or other circumstance, such as where the contract manufacturer and/or supplier has built products, semi-finished products or procured and/or order unique, iRobot-specific designs, and/or specific non-cancellable, non-returnable components based on the provided forecasts. If we cancel all or part of the orders, or materially reduce forecasted orders, in certain circumstances we
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may be liable to our contract manufacturers for the cost of the excess components purchased by our contract manufacturers based on the forecasted production plan and the purchase terms of its component suppliers. As a result, we evaluated our component inventory on-hand and non-cancelable purchase commitments with our contract manufacturers and suppliers and recorded a charge totaling $18.4 million in cost of product revenue in the second quarter of fiscal 2024. This charge included a $10.3 million non-cash reserve for obsolete or excess component inventory and a $8.1 million charge for losses on non-cancellable purchase commitments. The loss on purchase commitments is included in accrued manufacturing and logistics cost on the consolidated balance sheets.
Recently Adopted Accounting Pronouncements
See Note 2 to our consolidated financial statements for a discussion of recently adopted accounting pronouncements.
Recently Issued Accounting Pronouncements
See Note 2 to our consolidated financial statements for a discussion of recently issued accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Exchange Rate Sensitivity
Our international revenue and expenses are denominated in multiple currencies, including British Pounds, Canadian Dollars, Chinese Renminbi, Euros and Japanese Yen. As such, we have exposure to adverse changes in exchange rates associated with the revenue and operating expenses of our foreign operations. Any fluctuations in other currencies will have minimal direct impact on our international revenue. Based on transactions denominated in currencies other than the U.S. dollar as of September 28, 2024, a hypothetical change of 10% would have resulted in an impact on revenue of approximately $5 million and $16 million for the three and nine months ended September 28, 2024, respectively.
In addition to international business conducted in foreign currencies, we have international revenue denominated in U.S. dollars. As the U.S. dollar strengthens or weakens against other currencies, our international distributors may be impacted, which could affect their profitability and our ability to maintain current pricing levels on our international consumer products.
We do not currently use foreign exchange contracts or derivatives that are designated as cash flow hedges to hedge any foreign currency exposures for accounting purposes. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy, such fluctuations could have a significant impact on our future results of operations.
We enter into economic hedges that are not designated as hedges from an accounting standpoint to reduce or eliminate the effects of foreign exchange rate changes typically related to short term trade receivables and payables. These contracts have maturities of one month or less. At September 28, 2024 and December 30, 2023, we had outstanding economic hedges with a total notional value of $11.9 million and $252.0 million, respectively.
Item 4. Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective at a reasonable assurance level in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms; and (ii) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information
Item 1. Legal Proceedings
From time to time and in the ordinary course of business, we are subject to various claims, charges and litigation. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, which could materially affect our financial condition or results of operations. See Note 12 to our consolidated financial statements for a description of certain of our legal proceedings.
Item 1A. Risk Factors
We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this report, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 30, 2023 and in our Quarterly Reports on Form 10-Q for the period ended March 30, 2024 and June 29, 2024, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not presently known to us, which we currently deem immaterial or which are similar to those faced by other companies in our industry or business in general, may also impair our business operations. There are no material changes to the Risk Factors described in our Annual Report on Form 10-K for the year ended December 30, 2023 or in our Quarterly Reports on Form 10-Q for the period ended March 30, 2024 and June 29, 2024, other than as set forth below:
We are transitioning primarily to a single contract manufacturer, and our reputation and results of operations would be harmed if the contract manufacturer fails to meet our requirements.
We depend on third-party contract manufacturers to produce our products. For fiscal 2023, we purchased 79% of our finished goods from one vendor. Starting in 2025, we will primarily depend on a single contract manufacturer, Shenzhen 3irobotix Co., Ltd. d/b/a Picea ("Picea"), located in China, to manufacture our products. Our agreement with Picea is scheduled to expire on August 17, 2025, but it can be extended if both parties agree in writing. Either party has the option to terminate the agreement for convenience with 180 days' advance written notice.
These manufacturers manage the supply chain for all of the raw materials and provide all facilities and labor required to manufacture our products. If Picea terminates its arrangement with us or fails to provide the required capacity and quality on a timely basis, there would be a disruption in manufacturing our products until replacement contract manufacturing services could be obtained or volume transferred to an alternative manufacturing partner, each of which is a costly and time-consuming process. We cannot assure you that we would be able to establish alternative manufacturing arrangements on acceptable terms or in a timely manner. Any significant interruption in manufacturing at Picea would reduce the supply of our products, which could cause a delay in fulfillment of our orders or breach of our agreements with distribution partners, which in turn would reduce our revenue. Any adverse change in Picea's financial or business conditions could disrupt our ability to supply our products.
Our reliance on these contract manufacturers involves certain risks, including the following:
•lack of direct control over production capacity and delivery schedules;
•lack of direct control over quality assurance, manufacturing yields and production costs;
•lack of enforceable contractual provisions over the production and costs of consumer products;
•risk of loss of inventory while in transit;
•risk of increased shipping costs as a result of rebel attacks on commercial ships.
Any interruption in the manufacture of our products would be likely to result in delays in shipment, lost sales and revenue and damage to our reputation in the market, all of which would harm our business and results of operations. In addition, because our purchase contracts with contract manufacturers are typically denominated in U.S. dollars, changes in currency exchange rates may impact our contract manufacturers who operate in local currency, which may cause our suppliers to seek price concessions on future orders.
We depend on the experience and expertise of our senior management team and key technical employees, and the loss of any key employee may impair our ability to operate effectively.
Our success depends upon the continued services of our senior management team and key technical employees. Each of our executive officers, key technical personnel and other employees could terminate his or her relationship with us at any time. The loss of any member of our senior management team or key technical employee might significantly delay or prevent the achievement of our business objectives, result in a loss of institutional know-how and could materially harm our business and customer relationships. In addition, because of the highly technical nature of our robots, the loss of any significant number of our existing engineering and project management personnel could have a material adverse effect on our business and operating results. Also, increased turnover, particularly on the senior management team, with insufficient development of leadership
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talent and succession plans, could diminish employee confidence and increase risks for retaining key employees. Our failure to successfully attract well-qualified employees, retain and motivate existing employees or integrate new members of our senior management team and key employees, could materially and adversely affect our operations and our ability to execute our strategy. Leadership transitions and management changes can be inherently difficult to manage and may cause uncertainty or a disruption to our business or may increase the likelihood of turnover in key employees and senior management. In addition, recently appointed members of senior management may view our business differently than prior members, and have made and may continue to make changes to our strategic focus, operations, business plans, existing personnel and their responsibilities. We may not be able to properly manage such shifts in focus, and any changes to our business may not ultimately prove successful. Further, changes in our senior management team may be disruptive to our business, and any failure to successfully transition and assimilate key new hires or promoted employees could adversely affect our business and results of operations.
By the end 2024, most of our senior management team will have turned over during the course of the year. In January 2024, Colin Angle stepped down as Chief Executive Officer and chairman of our board of directors and our board of directors appointed Glen Weinstein, our then Executive Vice President and Chief Legal Officer, as interim Chief Executive Officer. In May 2024, our board of directors appointed Gary S. Cohen as Chief Executive Officer, in June 2024, Faris Habbaba stepped down as our Chief Research and Development Officer and in August 2024, our board of directors appointed Jeff Engel as President and Chief Operating Officer. Effective December 2024, Russ Campanello will step down as Executive Vice President, Human Resources and Corporate Communications, and Jules Connelly will be appointed as Senior Vice President and Chief Human Resources Officer. Additionally, Julie Zeiler will step down as Executive Vice President and Chief Financial Officer, and Karian Wong will be appointed as Executive Vice President and Chief Financial Officer. These changes in our management team could cause retention and morale concerns among current employees, as well as operational risks. If this leadership transition is not successful, it could disrupt our business, affect our culture, cause employee retention concerns, be viewed negatively by our customers or investors, and affect our financial condition and operational results.
If we are unable to attract and retain additional skilled personnel, we may be unable to operate our business.
To execute our business stabilization plan and return to profitability, we must attract and retain additional, highly-qualified personnel. Competition for hiring these employees is intense, especially with regard to engineers with high levels of experience in designing, developing and integrating robots and engineers with expertise in artificial intelligence, machine learning, data science and cloud applications. Many of the companies with which we compete for hiring experienced employees have greater resources than we have. If we fail to attract new technical personnel or fail to retain and motivate our current employees, our business and future growth prospects could be severely harmed.
In addition, we have experienced increased employee turnover as a result of general market conditions, the impact of reductions in force executed in August 2022, February 2023 and the first half of 2024, and the termination of the proposed acquisition by Amazon. These factors may cause additional attrition and affect the morale of our current employees and might adversely affect our reputation among job seekers. Significant or prolonged turnover or revised hiring priorities may negatively affect our operations and culture, as well as our ability to successfully maintain our processes and procedures. New hires require significant training and, in most cases, take significant time before they achieve full productivity. New employees may not become as productive as we expect, and we may be unable to hire or retain significant numbers of qualified individuals. Moreover, we may be forced to adjust salaries or other compensation in order to retain key talent. Job seekers and existing personnel often consider the value of the equity awards they receive in connection with their employment. The recent decline in our stock price may impact the actual or perceived value of our equity awards for current employees or new hires, and we may need to grant additional or larger equity awards to offer attractive compensation packages to hire and retain employees. If our retention efforts are not successful or our team member turnover rate continues to increase in the future, our business, results of operations and financial condition could be materially and adversely affected.
Additionally, as we are operating our business with fewer employees, we face additional risks that we might not be able to execute on our strategic plans and product roadmap, which may have an adverse effect on our business, financial condition, and operating results.
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Cybersecurity risks could adversely affect our business and disrupt our operations.
The threats to network and data security are increasingly diverse and sophisticated. Despite our efforts and processes to prevent breaches, our devices, as well as our servers, computer systems, and those of third parties that we use in our operations are vulnerable to personnel misconduct, cybersecurity risks, including cyber attacks such as viruses and worms, phishing attacks, distributed denial-of-service attacks, ransomware, and similar disruptions from unauthorized tampering with our servers and computer systems or those of third parties that we use in our operations, which could lead to interruptions, delays, loss of critical data, and loss of consumer confidence. In addition, we may be the target of numerous attack vectors and methods, including email scams, social engineering, smishing, vishing, and identity spoofing, which attempt to acquire sensitive information or company assets. Despite our efforts to create security barriers to such threats, we may not be able to entirely mitigate these risks. These threats may be increased due to work-from-home policies implemented by us and our customers, suppliers and distributors. Any cyber attack that attempts to obtain our data and assets, disrupt our service, or otherwise access our systems, or those of third parties we use, if successful, could adversely affect our business, operating results, and financial condition, be expensive to remedy, and damage our reputation. Our cyber insurance may not protect against all of the costs and liabilities arising from a cyber attack.
Item 5. Other Information
(c) Insider Trading Arrangements
On August 26, 2024, Tonya Drake, EVP & General Counsel, entered into a trading plan pursuant to Rule 10b5-1 of the Exchange Act. Ms. Drake's Rule 10b5-1 trading plan provides for the sale from time to time of a maximum of 9,651 shares of our common stock pursuant to the terms of the plan. Ms. Drake's Rule 10b5-1 trading plan expires on August 1, 2026, or earlier if all transactions under the trading arrangement are completed. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c).
During the three months ended September 28, 2024, other than described in the statements above, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
In addition, in our Quarterly Report on Form 10-Q filed with the SEC on May 8, 2024, we inadvertently omitted disclosure regarding the entry into a Rule 10b5-1 trading plan by Julie Zeiler, EVP & Chief Financial Officer, on March 9, 2024. Ms. Zeiler's Rule 10b5-1 trading plan provides for the sale from time to time of a maximum of 24,629 shares of our common stock pursuant to the terms of the plan. Ms. Zeiler's Rule 10b5-1 trading plan expires on March 14, 2026, or earlier if all transactions under the trading arrangement are completed. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c).
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Item 6. Exhibits
 
EXHIBIT INDEX
Exhibit
Number		 Description
Employment Agreement, dated as of August 7, 2024, by and between the Company and Jeff Engel (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on August 7, 2024).
Form of Performance-Based Restricted Stock Unit Award Agreement, dated as of August 7, 2024, by and between the Company and Jeff Engel (incorporated by reference to Exhibit 99.1 to the Company's Form S-8 filed on August 7, 2024).
Form of Restricted Stock Unit Award Agreement, dated as of August 7, 2024, by and between the Company and Jeff Engel (incorporated by reference to Exhibit 99.2 to the Company's Form S-8 filed on August 7, 2024).
Original Design Manufacturer and Supply Agreement, by and between the Company and Shenzhen 3irobotix Co., Ltd
 Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
 Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
104*Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)
 __________________________
*Filed herewith
**Furnished herewith
†Indicates a management contract or any compensatory plan, contract or arrangement.
+
Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the SEC upon request.
#
Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because such information is both (i) not material and (ii) information that the Registrant treats as private or confidential.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
iROBOT CORPORATION
Date: November 6, 2024
By:/s/ Julie Zeiler
Julie Zeiler
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
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