iRobot 2008 Annual Report Download - page 93

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The $29.4 million increase in revenue from our government and industrial division was driven by a
$25.4 million increase in government and industrial robots revenue due to a 101.9% increase in units shipped
in fiscal 2008 as compared to fiscal 2007. This was partially offset by a 30.2% decrease in associated net average
selling prices related to product mix primarily attributable to a shift of our military product line into lower priced
FasTac units as compared to MTRS (Man Transportable Robot System) units last year, and a $0.7 million decrease
in product life cycle revenue (spare parts and accessories).
Recurring contract development revenue generated under research and development contracts increased
$4.8 million in our government and industrial division. Contract revenue in fiscal year 2008 includes $1.7 million of
contract revenue from recently acquired Nekton. Our increased contract revenue was the result of our acquisition of
Nekton, incremental funding on existing contracts and new contract awards during fiscal 2008 offset by reduced
revenue on completed prior year contracts
Cost of Revenue
December 27,
2008 December 29,
2007 Dollar Change Percent Change
Fiscal Year Ended
(In thousands)
Total cost of revenue.............. $214,150 $166,494 $47,656 28.6%
As a percentage of total revenue ..... 69.6% 66.8%
Total cost of revenue increased to $214.2 million in fiscal 2008, compared to $166.5 million in fiscal 2007. The
increase is primarily due to higher costs associated with the 17.4% increase in the unit sales of our home care robots,
and the 101.9% increase in the unit sales of our military robots in fiscal 2008 as compared to fiscal 2007.
We incur research and development expenses under funded development arrangements with both governments
and industrial third parties, which in accordance with generally accepted accounting principles in the United States
of America, are classified as cost of revenue rather than research and development expense. For fiscal 2008, these
expenses amounted to $23.9 million compared to $18.8 million for the comparable period in 2007. The increase in
these expenses was primarily due to increased headcount in our contract research and development function to
82 employees at December 27, 2008 from 64 employees at December 29, 2007.
Gross Margin
December 27,
2008 December 29
2007 Dollar Change Percent Change
Fiscal Year Ended
(In thousands)
Total gross margin ................ $93,471 $82,587 $10,884 13.2%
As a percentage of total revenue ..... 30.4% 33.2%
Gross margin increased $10.9 million, or 13.2%, to $93.5 million (30.4% of revenue) in fiscal 2008, from
$82.6 million (33.2% of revenue) in fiscal 2007. The decrease in gross margin as a percentage of revenue fiscal 2008
compared tofiscal 2007 was the result of the home robots division gross margin decreasing3.6 percentage points, and
by the government and industrial division gross margin decreasing 1.8 percentage points. The 3.6 percentage point
decrease in the home robots division was driven primarily by a retail customer bankruptcy, provisions taken for excess
inventory and defective product returns, promotional incentives and channel mix. The government and industrial
division decrease was attributable to higher net warranty costs, provisions taken for excess inventory and product mix.
Research and Development
December 27,
2008 December 29,
2007 Dollar Change Percent Change
Fiscal Year Ended
(In thousands)
Total research and development...... $17,566 $17,082 $484 2.8%
As a percentage of total revenue ..... 5.7% 6.9%
45
Form 10-K