iRobot 2005 Annual Report Download - page 41

Over the past four years, we have sold more than 1.5 million of our home floor care robots. We have also
sold to the U.S. military more than 300 of our PackBot tactical military robots, most of which have been
deployed on missions in Afghanistan and Iraq.
Although we have successfully launched consumer and military products, our continued success depends
upon our ability to respond to a number of future challenges. We believe the most significant of these
challenges include increasing competition in the markets for both our consumer and military products, our
ability to obtain U.S. federal government funding for research and development programs, and our ability to
successfully develop and introduce products and product enhancements.
Initial Public Offering
On November 15, 2005, we completed our initial public offering of 4,945,000 shares of common stock at
$24.00 per share, comprised of 3,260,870 primary shares and 1,684,130 shares offered by selling stockholders,
which includes the exercise of the over-allotment option by the underwriters of the offering. In connection
with the offering, all of the outstanding shares of our preferred stock were converted into an equal number of
shares of common stock. The sale of the 3,260,870 shares of common stock in connection with our initial
public offering resulted in net proceeds to us of approximately $70.4 million after deducting underwriters'
discounts and offering-related expenses. A summary of the terms of the offering can be found in our
Registration Statement No. 333-126907 on Form S-1, as amended, as filed with the Securities and Exchange
Commission.
Revenue
We currently derive revenue from product sales and research and development services. Product revenue
is derived from the sale of our various home floor care and PackBot robots and related accessories. Research
and development revenue is derived from the execution of contracts awarded by the U.S. federal government,
other governments and a small number of industrial partners. In the future, we expect to derive increasing
revenue from product maintenance and support services due to a focused effort to market these services and
the wider distribution of our robots.
We currently derive a majority of our product revenue from the sale of our home floor care robots and our
PackBot tactical military robots. For the fiscal years ended December 31, 2005 and 2004, product revenues
accounted for 87.7% and 86.4% of total revenue, respectively. For the fiscal years ended December 31, 2005
and 2004, our funded research and development contracts accounted for approximately 12.2% and 13.0% of
our total revenue, respectively. We expect to continue to perform funded research and development work with
the intent of leveraging the technology developed to advance our new product development efforts. In the
future, however, we expect that revenue from funded research and development contracts could grow modestly
on an absolute dollar basis and represent a decreasing percentage of our total revenue due to the anticipated
growth in consumer and military product revenue.
We have historically derived royalty revenue from the licensing of technology to a third party. Due to the
discontinuation of sales of the third-party products incorporating our technology, we do not expect to generate
significant royalty revenue in the future from our existing products.
For the fiscal years ended December 31, 2005 and 2004 approximately 78.6% and 82.2%, respectively, of
our consumer product revenue resulted from sales to 15 customers, primarily U.S. retailers. In addition, 87.5%
and 86.3% of military product revenue, and 71.6% and 78.1% of funded research and development contract
revenue, resulted from orders and contracts with the U.S. federal government in the fiscal years ended
December 31, 2005 and 2004, respectively.
For the fiscal years ended December 31, 2005 and 2004, sales to non-U.S. customers accounted for 9.9%
and 7.4% of total revenue, respectively.
Our revenue from product sales is generated through sales to our retail distribution channels, our
distributor network and to certain U.S. and foreign governments. In 2002, when our Roomba robot was first
commercially introduced and throughout 2003, we recognized revenue from our U.S. consumer product sales
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