Colin Angle - Chairman, CEO and Co-Founder John Leahy - CFO Elise Caffrey - Investor Relations

James Ricchiuti - Needham & Company Barbara Coffey - Kaufman Brothers Paul Coster - JPMorgan Charlie Anderson - Dougherty & Company

Thank you and good morning. Before I introduce the iRobot management team, I would like to note that statements made on today’s call that are not based on historical information are forward-looking statements made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

This conference call may contain expressed or implied forward-looking statements relating to the company’s financial results and operation, demand for the company’s products and services and business conditions. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in the forward-looking statements.

In particular, the risks and uncertainties include those contained in our public filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

During this conference call, we will also discuss various non-GAAP financial measures as defined by SEC Regulation-G including adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, amortization and non-cash stock compensation expense. A reconciliation between net loss, the GAAP measure most directly comparable to adjusted EBITDA and adjusted EBITDA loss is provided in the financial tables at the end of the Q1 2009 earnings press release issued last evening available on our website www.irobot.com.

A live audio broadcast of this conference call is available on the Investor Relations page of our website and an archived version of the broadcast will be available on the same web page shortly. In addition, a replay of this conference call will be available through April 30, 2009 and can be accessed by dialing 719-457-0820, access code 5918741.

Please note that beginning with our second quarter 2009 earnings call in July, we will post a copy of the earnings call script on our website when we issue the quarterly earnings release, the evening before the call. On today’s call, iRobot Chairman and CEO Colin Angle will provide a review of the company’s operations and achievements for the first quarter of 2009 and our outlook for the business for the rest of the year and John Leahy, the Chief Financial Officer will review our financial results for the first quarter of 2009.

Then we will open the call for questions. At this point, I will turn the call over to Colin Angle.

Good morning and thank you for joining us. Last evening we reported first quarter results that demonstrate the underlying strength of our business, despite tough economic conditions.

Revenue of $57 million was roughly even with last year and primarily driven by strong international demand in our Home Robot business. Loss per share of $0.07 compared favorably with our expectations of $0.12 to $0.18 loss per share and last year’s loss per share of $0.16.

It reflects our efforts to manage controllable expenses and improve profitability. Adjusted EBITDA loss was $300,000 in Q1, a $4 million improvement over last year’s results and significantly stronger than our quarterly guidance.

This achievement demonstrates our commitment to improved profitability in the first half when we have historically reported losses. Given our strong performance in the first quarter we are reaffirming our full year expectations despite uncertain economic environment.

For 2009, we expect revenue to be in the range of $290 million to $310 million, earnings per share of between breakeven and $0.04, and adjusted EBITDA between $14 million and $17 million. The actions we took in the second half of last year in response to a deepening recession strengthened the company’s financial position coming into 2009.

We ended the first quarter with nearly $55 million in cash compared with $41 million at year end as a result of aggressive working capital management. We now have generated $34 million operating cash flow over the past two quarters and improved our cash position by $28 million.

Turning now to highlights from the first quarter, in March we filled a key position in our Home Robot division. Jeff Beck, who brings more than 20 years of high technology leadership, joined us as President and General Manager.

Most recently he served as Senior Vice President and General Manager of the aerospace and defense division of AMETEK, Inc. Jeff's experience as a General Manager and his success in growing businesses has provided him the tools to successfully lead our Home Robots division, and we are excited to welcome him to the team.

Jon Elordi, who has served as Interim General Manager will resume full time responsibility for high growth Home Robot International business. Our international business continues to demonstrate the strength we anticipated going into the year.

Many of our existing customers are expanding into new stores because of the success they have had with the Roomba 500. In addition, we are participating in an affinity program in Europe with a new customer, which is proving to be very successful.

We are wary of overseas economies particularly in Western Europe, but demand at this point seems to be outpacing the negative recessionary impact. Home Robot revenue in the first quarter was $33 million compared with $30 million in 2008.

International revenue grew 69% in the first quarter to $18 million and comprised more than 50% of Home Robot revenue this year compared with 35% last year. At this point, our expectations in home robots have not changed since we shared our expectations in February.

We continue to expect growth in international to partially offset recession driven weakness in our domestic, retail and direct channels. We feel good about the Home Robot business.

We've made tremendous progress in the international markets and see continued opportunities overseas. The domestic market will recover with the economy and still has very low penetration.

We are continuing to make strategic investments in home robots consistent with our long-term plan to develop new Home Robot products. And we have found an accomplished leader for the division.

In the Government and Industrial division, we generated $24 million in Q1 revenue, primarily as a result of delivering PackBot FastTac robots, as compared with $27 million a year ago. Based on the backlog going into the quarter the decrease is consistent with our expectations and does not negatively impact our G&I outlook for the year.

The recent announcements from Defense Secretary Gates regarding the strategic reshaping of the department of defense spending, to fund development of technologies and products, that address the challenges on the irregular warfare, appear at the present to be positive for iRobot. With the respect for the future combat system's program Gates reaffirmed that he plans to retain and accelerate the initial increment of the program to spinout the technology enhancements to all combat brigades.

Our small unmanned ground vehicle, the SUGV is part of this initial increment of the program. The budget details surrounding the army’s procurement of the SUGVs are still forthcoming.

However the Secretary of Defense clearly communicated that spinout one of FCS will be both accelerated and expanded. That means that SUGVs will be procured for all combat brigades rather than just for FCS battalions.

We expect the increased revenue from the shift to be material beginning in 2010 and extend for the next three to five years. Also funding for robots will transfer into the core budget from programs currently funded by supplemental bills.

In addition, we expect international sales opportunity to begin in 2010 and extend well beyond the initial DoD buy. To-date, we've had positive field and test result, as well as user poll on our robots.

Restructuring the program has the potential to free funds to accelerate SUGV further. There is some risk however the contracts in our funding will be delayed while the defense department sorts out its new direction.

When we spoke to you last quarter, we anticipated the FCS SUGV production decision in orders in late 2009. At this point, we are uncertain about that timing.

Based on the conversations with our customers however, we expect to receive additional 2009 orders for SUG variant such as the $17 million contract for the mini EOD that the iRobot Boeing team won in February as well as more orders for the PackBot 510 than we had originally anticipated for 2009. The military shift and focus from Iraq to Afghanistan positively impacts our expectations of sale to the military.

As the rock terrain and lack of urban transport requires a lighter more mobile robot. Both Iraq and Afghanistan employ our robots in detecting and diffusing roadside bombs or providing situation awareness for the troops in urban settings or clearing caves.

iRobot provide a low cost solution for the current state of a regular warfare. In addition to supplying robots to the US government, we are gaining traction in international markets.

In the first quarter, international revenue increased to $2.8 million or 17% of G&I product revenue, compared with 800,000 or 4% last year. We delivered robots to seven countries outside of the United States and expect the rest of the year to continue to be strong internationally as we pursue additional orders in Europe, Asia and Latin America.

Iraqi government sales are a particular focus for us as the US troop levels ramped down and the Iraqi needs to ramp up to take-over from these departing U.S forces. In March, we participated in a National Defense Industrial Association’s Ground Robotics Capability Conference.

This is one of the most important industry conferences for us, as it is focused on unmanned ground vehicles and is attended by general officers, war fighters and all major players in the industry. We demonstrated the Warrior, SUGV, FasTac and PackBot 510 to a broad range of customers and identified a range of new opportunities.

Probably the most important information at the conference was the army’s thinking about autonomous systems. The army articulated a desire for more autonomy in a robot, which marks a significant change in those thinking.

Generals and war fighters spoke passionately about having increased autonomy. iRobot’s sophisticated Aware operating system, which enables the development of increased autonomy, differentiates our robots and provides a barrier of entry for low-end companies and competitors.

New autonomous requirements for robots identified by the military include automated route clearance, convoy operations, persistent surveillance and formational [arrangement]. iRobot has big platforms and leading technology that will be useful in addressing these new requirements.

The customers increased focus on autonomy is a positive development for the industry as a whole and for iRobot in particular, as it supports our long-term strategy to develop and produce increasingly autonomous robotic systems. We also experienced a bit of local excitement here in Massachusetts during the quarter, when the states bomb squad equipped with the PackBot’s FastTac responded successfully, removed and destroyed suspicious packages in two local towns.

The events received widespread media coverage and the company had significant exposure as a result. Robots already play a central role in the military but they have recently taken center-stage alongside state and local police.

The have great utility in hostage situations, chemical and biological hazards and even domestic disputes. They can be used by responders, where they need to understand the risks of the situation without being physically present.

I’m very encouraged by the results for the quarter but expect that the rest of 2009 will be challenging due to the current state of the economy and uncertainties around the timing of actions from Secretary Gates’ proposed DoD budget. We’ll continue to tightly manage the business and drive EBITDA and operating cash-flow.

I’ll now turn the call over to John to review our first quarter financial results.

Thanks, Colin. First quarter revenue of $57 million was about even with last year, despite challenges in both divisions.

Higher International Home Robot sales offset lower domestic sales. Our revenues in G&I were generated by sales of PackBot FasTac's.

Loss per share for the quarter was $0.07 compared with a loss of $0.16 per share in 2008. Adjusted EBITDA loss for Q1 was $300,000 compared with an adjusted EBITDA loss of $4.4 million a year ago.

Revenue EPS and EBITDA all exceeded our Q1 expectations. As a reminder, Linens n' Things bankruptcy last year adversely impacted revenue by $1.8 million and EPS by $0.05 in the first quarter a year ago.

In the Home Robot division, shipments of 183,000 units generated $33 million in revenue compared to 169,000 units and $30 million in revenue a year ago. International revenue increased 69% in the quarter year-over-year and comprised more than 50% of Home Robot revenue.

Domestic revenue including direct, declined 22% year-over-year. In the G&I division, total revenue declined 11% to $24 million in the quarter, largely due to order timing.

Revenue was driven by fulfillment of several orders for the PackBot FasTac. Contract revenue increased 9% in the quarter due to funding for warrior development in various PackBot sensor programs.

G&I product revenue was $17 million in the first quarter, compared to $20 million a year ago due to the timing of orders from the government. Product life-cycle revenue was $4 million or 26% of G&I product revenue compared with 16% of product revenue in Q1 last year.

For the total company, gross margin for the first quarter was 28.5% up from 26.8% last year. Home Robot gross margin increased 4.2 percentage points in Q1, largely due to the impact of Linens n' Things last year, while G&I gross margin decreased 1.8 points, mostly due to lower overhead absorption and decreased revenue.

Operating expenses improved $2.5 million year-over-year in Q1. Expenses totaled 34.6% of revenue, down from 38.8% last year.

The overall reduction in operating expenses was driven by a reduction in selling and marketing as we aggressively managed our expenses. We generated $14.3 million of operating cash flow for the quarter compared with breakeven in Q1 last year.

The improvement this year is a result of our focus on inventory management and strong receivables collection. We’ve now generated $34 million in operating cash flow over the past two quarters.

At the end of the first quarter, we had cash and investments totaling $55 million compared with $41 million at the end of December. Over the past two quarters, we have improved our cash position by $28 million and our cash balance is at its highest level in almost two years.

We expect our cash balance to decrease at the end of the second and third quarters as we build inventory for the holiday season before growing again in Q4. Day sales outstanding were 42 days, up from 38 at the end of the fourth quarter and 39 last year.

At the end of the quarter, inventory was $31 million, down from $35 million at the end of the fourth quarter and down from $46 million, a year ago. To summarize, we exceeded expectations in a difficult environment and continued to strengthen the company's financial position.

The remainder of the year promises to be challenging but we will continue to aggressively manage the key drivers of valuation; EBITDA, working capital and operating cash flow. Now I’d like to turn the call back to Colin.

Thank you, John. We had a very good first quarter at both the top and bottom line and outperformed expectations.

However, there is uncertainty moving forward. In summary we generated more than $14 million in operating cash flow to end the first quarter with nearly $55 million in cash and reported a $4 million improvement in adjusted EBITDA year-over-year.

Our International Home Robot business continues to offset the recession driven domestic decline. We believe that defense Secretary Gates’ statement regarding the strategic reshaping of the DoD spending is very positive for iRobot, but the details and timing are uncertain.

Net, net we need to continue to manage the business aggressively, but are well positioned for strong operating performance in the future. Before we take your questions I’d like to provide you with our financial expectations for the second quarter.

We are expecting revenues to be in the range of $57 million to $62 million. For Q2, we expect a loss per share of $0.10 to $0.14 and we expected adjusted EBITDA loss for Q2 to be between $1 million and $4 million.

We are reaffirming our full-year expectations. For 2009, we anticipate revenues to be in the range of $290 million to $310 million, earnings per share to be between breakeven and $0.04, and adjusted EBITDA to be between $14 million and $17 million.

With that we’ll open the call to your questions. Thank you.

I wonder with respect to the full year guidance you have given for revenues. Has the mix of that business changed at all?

It appears that the Home Robot business at least internationally remains very strong and looks like there is some moving parts to the G&I business. So, I’m just wondering as you look out at the balance of the year, how you see the mix of business?

I think you have got that right. The Home Robot side of revenue is consistent with our prior expectations, and on the government industrial side we are seeing some push out of the FCS, SUGV revenue replaced by stronger PackBot 510 revenue.

So, there are moving parts, but we like the math.

John, how would you characterize your visibility for the G&I business this year, how is it versus say, three months ago?

It continues to improve, we are at 42% of the year. As we like to say sort of in the bag where we either have signed contracts, have services already rendered and or existing backlog under contract.

So, that’s a figure that we have talked about before and that has improved over the last year and then we have more revenue coming that is in less certain buckets. So, we feel good about it.

Okay, and if I can make follow-up, is there any color you can provide on the strength of the international business, specifically the countries where you're seeing very strong demand for the product.

Well on the Home Robot side, the strongest areas right now are in Europe and as we mentioned that, while we understand that the economies in the rest of the world and particularly Europe are weakening, we are operating off a smaller base and we see expansion of demand for the product outpacing the recessionary impact. So, certainly we'll be doing better were the economy stronger.

About 80% of our international sales are currently coming from Europe.

Okay. Thank you.

Good morning. Can you speak a bit about the consumer side of what you're seeing from the direct of your own website sales versus what sort of the profile of the companies you're selling through.

Are these, more the Bed Bath & Beyond's or is it shifting at all to a different profile?

The profile we're seeing is roughly consistent. We haven’t seen the recessionary impact drive a fundamental change in customer buying behavior.

We're basically domestically down all over by similar percentages. So, I don't think people are being forced or driven to the web or driven to retail.

It's just a “consistent across the board” impact.

Are you seeing greater traction with the lower priced home robots or is that consistent as well?

We're seeing some impact on that front, but on the web, the higher price units have always been our strong sellers. So I think that we may see some stratification where people are either going low-end or high-end on the web and at the center.

Our price points are suffering a bit, but it's subtle.

Thank you.

Yes thank you, Colin, the international sales were obviously excellent. Can you just talk a little bit about the pricing of international products relative to domestic products and also sell-in to the channel versus sell-through and how that will evolve as the year progresses?

Sure. We manage to keep our pricing strategy for international consistent with what we did last year.

We did not do all our transactions denominated in dollars, so the strength of the dollar has put some pressure on our international distributors, but it's been consistent. As far as sell-in versus sell-through, the international distributors have been doing some channel expansion based on the strength of sales, but as we look at it, the vast majority of the improvement we've seen year-over-year is coming from improvements in the sell-through.

You know we are not opening up substantial percentages of new stores, so that which could artificially increase sales. So we feel good about that.

Do you have any sense of the demographics of use in Europe, is it young people sort of well-to-do-people, how is it working out there. Are you getting any feedback?

Something that we do look at not something that we're going to share on this call, but it is not something that is surprising or radically different from what we're seeing domestically. So the strength of our market is in the age ranges between 25 and 50, it skews slightly female, maybe 60-40, that type of skew, but it’s quite consistent with domestic.

Okay, on the G&I front, you’ve obviously got a number of sort of newish kind of products. You got R-Gator and Warrior and may head a project that you’re doing and you brought the underwater business.

Can you just talk a little bit about all of the above and whether there is any sort of significant revenue opportunities associated with them in the next say, next year.

We’ve talked a bit about the emergence of SUGV and we’ve got the back half is going to be materially driven by these SUGV variants although not the FCS version of the SUGV. So that program is on track and ramping very nicely.

The back half of the year is also going to be impacted by the beginning of sales of the Warrior robot although it’s not going to be tremendously material in 2009, but we’re going to start to see the revenue build on the Warrior side. Our maritime systems group is selling Seagliders.

This is our long-range high endurance robot. We’ve closed contracts this week for three of these robots with a University in UK.

We have a strong backlog of perspective customers on that front. So, those are starting to move and they carry a good price point.

So that’s going to contribute. The other products that you referenced, the Ranger Robot is going to be associated with some contract revenue in the back half, but not product revenue in the back half of the year.

So, certainly it is true that the numbers of revenue generating military robots is expanding strongly in the back half and we’ll see that momentum continuing into 2010.

Okay, last question. Any update on the roadmap for home robots?

If you are asking for new product announcements, you are going to be once again disappointed. We are not announcing anything on this call.

So we continue to invest in new product development, and I’ll let you guys know as-soon-as it’s ready and fit for launch and that will be around the same time you’re reading about it in the newspapers.

Alright, thanks Colin.

Great, this is actually Charlie for Jeff. How are you guys today?

We are good.

Good, just question on international. You guys obviously saw a really strong Q1 on consumer.

When you look at the guidance, it’s a little bit more tame, I mean not carrying that through. So I just wonder if you see any sort of a slowdown there, and do you feel like that can be consistent throughout the year on the international?

Really, what you are seeing in our guidance is the fact that we continue to be in a recessionary time. We have this potential, very positive news coming out of the DoD with uncertain timing and I think it would be foolhardy to say that we were bullish and optimistic with these types of risk factors out there.

So certainly the first quarter was positive, but there is a lot to follow through and get done in this year, so I think that we're comfortable with the guidance that we've provided and are willing to stand behind that.

Next question is about the SUGV variance. Obviously you guys got the mini-EOD order.

What are some of the other variants you are anticipating there and then also on the mini-EOD itself, were you guys recognizing any revenue from that in the quarter and is that completely sort of a 2009 event, that contract?

So the mini-EOD contract, a very small amount of revenue was recognized in the second quarter, the bulk of that extends through the balance of the year. As far as other revenue we do have a non-FCS variant, that we are marketing and believe will be driving some real revenue in the back half.

So it is officially in our product line and in our bag of things to deliver to customers.

Is that in that bag category, the SUGV variants, the 42%?

No that is not in the 42%. 42%, we are very conservative on that number.

That is things that are actually under contract or already shipped. That’s in the other bag to be nailed down.

The international portion of the G&I business seems to be growing nicely and I wonder if you have a target in mind as to what you would like to see that represent over the long-term as a percent of G&I?

Jim, in Q1 for G&I, international was about 17%. For the rest of this year we're probably looking in the range of about 15% of product revenue being international for G&I.

But as Colin mentioned in his remarks, it’s an area of growing focus for us, we put more resource behind selling overseas. So we expect overtime that we would have percentage of revenue of 20% or greater coming internationally for the G&I business.

All right, well, thank you very much. That concludes our first quarter earnings call.

We very much appreciate your support and look forward to talking with you again following our second quarter.

Thanks again and good bye.