iRobot 2008 Annual Report Download - page 85

develop next generation and new products, reducing the time, cost and risk of product development. Our significant
expertise in robot design and engineering, combined with our management team’s experience in military and
consumer markets, positions us to capitalize on the expected growth in the market for robots.
Over the past six years, we have sold more than 4 million of our home care robots. We have also sold more than
2,200 of our PackBot tactical military robots, most of which have been sold to the U.S. military and deployed on
missions in Afghanistan and Iraq.
Although we have successfully launched consumer and government and industrial 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 government and
industrial 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 programs. Product revenue is
derived from the sale of our various home cleaning robots and government and industrial 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 other 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 to the expanding installed base of our robots.
We currently derive a majority of our product revenue from the sale of our home cleaning robots and our
PackBot tactical military robots. For the fiscal years ended December 27, 2008 and December 29, 2007, product
revenues accounted for 91.4% and 91.3% of total revenue, respectively. For the fiscal years ended December 27,
2008 and December 29, 2007, our funded research and development contracts accounted for approximately 8.6%
and 8.7% 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.
For the fiscal years ended December 27, 2008 and December 29, 2007 approximately 56.0% and 59.3%,
respectively, of our home robot product revenue resulted from sales to 15 customers. For fiscal 2007 the customers
were comprised primarily of U.S. retailers, and for fiscal 2008, the customers were comprised of both U.S. retailers
and international distributors. Direct-to-consumer revenue generated through our on-line store accounted for 17.7%
of our home robot product revenue for the fiscal year ended December 27, 2008 compared to 23.4% in the fiscal
year ended December 29, 2007. In addition, 93.3% and 86.0% of military product revenue, and 89.8% and 72.4% of
funded research and development contract revenue, resulted from orders and contracts with the U.S. federal
government in the fiscal years ended December 27, 2008 and December 29, 2007, respectively.
For the fiscal years ended December 27, 2008 and December 29, 2007, sales to non-U.S. customers accounted
for 23.4% and 13.1% of total revenue, respectively.
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Form 10-K