iRobot 2014 Annual Report Download - page 98

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25
Our total revenue for 2014 was $556.8 million, which represents a 14% increase from 2013 revenue of $487.4 million.
This increase in revenue was largely attributable to a $79.6 million increase in revenue in our home robots business as a direct
result of growth in both domestic and international markets, which was primarily driven by expanded distribution of our
Roomba 800 series robot worldwide, growth in China and the replacement of the Roomba 500 series robot with the higher-
priced Roomba 600 series in club stores. The increase in home robots revenue was partially offset by a decrease in revenue of
$4.5 million in our defense and security business related to continued budget reductions within the U.S. government in 2014.
We began selling our remote presence robots into the healthcare market and the enterprise market in 2013 and 2014,
respectively. However, these sales did not generate meaningful revenue in 2014 or 2013. Our home robots revenue represented
91% of our total 2014 revenue compared to 88% in 2013. We anticipate that our revenue for the next few years will be
primarily driven by our rapidly growing home technology business and that our home robots revenue will comprise
approximately 90% of our total revenue in the near term.
Our total revenue for 2013 was $487.4 million, which represents a 12% increase from 2012 revenue of $436.2 million.
This increase in revenue was largely attributable to a $71.0 million increase in revenue in our home robots business as a direct
result of growth in both domestic and international markets. The increase in home robots revenue was partially offset by a
decrease in revenue of $20.9 million in our defense and security business related to reductions in new unmanned ground
vehicle robots, associated with ongoing budget reductions within the U.S. government. Our home robots revenue represented
88% of our total 2013 revenue compared to 82% in 2012.
Revenue
We currently derive revenue from product sales, government research and development contracts, and commercial
research and development contracts. Product revenue is derived from the sale of our various home cleaning robots, defense and
security robots and remote presence 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 to a lesser extent,
our PackBot, FirstLook, SUGV and Kobra defense and security robots, and product life cycle revenue related to these robots.
For the fiscal years ended December 27, 2014, December 28, 2013 and December 29, 2012, product revenues accounted for
99.2%, 98.0% and 95.9% of total revenue, respectively. For the fiscal years ended December 27, 2014, December 28, 2013 and
December 29, 2012, our funded research and development contracts accounted for approximately 0.8%, 2.0% and 4.1% of our
total revenue, respectively.
For the fiscal years ended December 27, 2014, December 28, 2013 and December 29, 2012, approximately 75.7%, 75.3%
and 75.4%, respectively, of our home robot product revenue resulted from sales to 15 customers, which were comprised of both
domestic retailers and international distributors. Direct-to-consumer revenue generated through our domestic and international
on-line stores accounted for 6.1%, 5.9% and 6.3% of our home robot product revenue for the fiscal years ended December 27,
2014, December 28, 2013 and December 29, 2012, respectively. We typically sell our recently launched products direct on-
line, and then subsequently offer these products through other channels of distribution.
For the fiscal years ended December 27, 2014, December 28, 2013 and December 29, 2012, sales to non-U.S. customers
accounted for 60.9%, 59.5% and 57.3% 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. We recognize revenue from sales of robots under the terms of the customer agreement
upon transfer of title and risk of loss to the customer, net of estimated returns, provided that collection is determined to be
reasonably assured and no significant obligations remain. During 2014, we recorded a net benefit to revenue and income
before income taxes of $4.3 million and $5.7 million, respectively, related to adjustments to our product returns reserves,
compared to a net benefit to both revenue and income before income taxes of $7.9 million and $11.0 million related to
adjustments to our product returns reserves during fiscal 2013 and 2012, respectively. The net adjustments recorded in 2014
and 2013 resulted from lower product returns experience as compared to estimates used to establish reserves in prior periods,
and the favorable adjustments in 2012 were directly attributable to contractual modifications limiting our defective returns
liability with certain customers, as well as overall lower defective returns experience.
Revenue from our defense and security robots business are occasionally influenced by the September 30 fiscal year-end
of the U.S. federal government. In addition, our revenue can be affected by the timing of the release of new products and the
size and timing of contract awards from defense and other government agencies. Historically, revenue from consumer product
sales has been significantly seasonal, with a majority of our consumer product revenue generated in the second half of the year
(in advance of the holiday season). While the growth of our international consumer business, which is less seasonal than our
domestic consumer business, has decreased this seasonality in recent years, a significant portion of our revenue was recorded in
the second half of 2014 and we expect this trend to continue into 2015.