iRobot 2009 Annual Report Download - page 83

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Form 10-K
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.
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 to fiscal 2007 was the result of the home robots division gross margin decreasing 3.6 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%
Research and development expenses increased by $0.5 million, or 2.8%, to $17.6 million (5.7% of revenue) in
fiscal 2008, from $17.1 million (6.9% of revenue) for fiscal 2007. The increase in research and development
expenses is primarily due to an increase in compensation and employee related costs, increased occupancy costs
associated with our move to our new facility and the write off of in-process research and development costs relating
to the Nekton acquisition, offset by a decrease in consultant expense.
In addition to our internal research and development activities discussed above, we incur research and
development expenses under funded development arrangements with both governments and industrial third parties.
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