[10-Q] iRobot Corporation Quarterly Earnings Report
Filing Impact
Filing Sentiment
Form Type
10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________
FORM 10-Q
______________________________________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
FOR THE QUARTERLY PERIOD ENDED June 28, 2025
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 001-36414
______________________________________________
(Exact name of registrant as specified in its charter)
______________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices, including zip code)
(781 ) 430-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
______________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | ☒ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
The number of shares outstanding of the Registrant’s Common Stock as of July 25, 2025 was 31,367,897 .
iROBOT CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 28, 2025
INDEX
| Page | |||||
PART I: FINANCIAL INFORMATION | |||||
Item 1. Financial Statements (unaudited) | |||||
Consolidated Balance Sheets as of June 28, 2025 and December 28, 2024 | 3 | ||||
Consolidated Statements of Operations for the three and six months ended June 28, 2025 and June 29, 2024 | 4 | ||||
Consolidated Statements of Comprehensive Loss for the three and six months ended June 28, 2025 and June 29, 2024 | 5 | ||||
Consolidated Statements of Stockholders' Equity (Deficit) for the three and six months ended June 28, 2025 and June 29, 2024 | 6 | ||||
Consolidated Statements of Cash Flows for the six months ended June 28, 2025 and June 29, 2024 | 8 | ||||
Notes to Consolidated Financial Statements | 9 | ||||
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 24 | ||||
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 36 | ||||
Item 4. Controls and Procedures | 37 | ||||
PART II: OTHER INFORMATION | |||||
Item 1. Legal Proceedings | 37 | ||||
Item 1A. Risk Factors | 37 | ||||
Item 5. Other Information | 40 | ||||
Item 6. Exhibits | 41 | ||||
Signatures | 42 | ||||
2
iROBOT CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
| June 28, 2025 | December 28, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventory | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Deferred tax assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses | |||||||||||
| Deferred revenue and customer advances | |||||||||||
Term loan | |||||||||||
| Total current liabilities | |||||||||||
Term loan | |||||||||||
| Operating lease liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Total long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 12) | |||||||||||
Preferred stock, | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders' (deficit) equity | ( | ||||||||||
| Total liabilities and stockholders' (deficit) equity | $ | $ | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
3
iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Cost of product revenue | |||||||||||||||||||||||
| Restructuring and other | |||||||||||||||||||||||
Total cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling and marketing | |||||||||||||||||||||||
| General and administrative | ( | ||||||||||||||||||||||
| Restructuring and other | |||||||||||||||||||||||
| Amortization of acquired intangible assets | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense), net | ( | ( | ( | ||||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Income tax (benefit) expense | ( | ( | |||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Net loss per share: | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Number of shares used in per share calculations: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
4
iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Net foreign currency translation adjustments | ( | ( | |||||||||||||||||||||
| Net unrealized gains on cash flow hedges | |||||||||||||||||||||||
| Net losses (gains) on cash flow hedge reclassified into earnings | ( | ( | ( | ||||||||||||||||||||
| Change in fair value of term loan due to instrument-specific credit risk | ( | ( | ( | ||||||||||||||||||||
| Total comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
5
iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
(unaudited)
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) ("AOCI") | Total Stockholders' Deficit | |||||||||||||||||||||||||||||||||||||
| Shares | Value | ||||||||||||||||||||||||||||||||||||||||
| Balance at March 29, 2025 | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | ( | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||||||||||||||
| Stock withheld to cover tax withholdings requirements upon restricted stock vesting | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Issuance of warrants (Note 11) | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balance at June 28, 2025 | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) ("AOCI") | Total Stockholders' Equity (Deficit) | |||||||||||||||||||||||||||||||||||||
| Shares | Value | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 28, 2024 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | ( | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||||||||||||||
| Restructuring cost related to stock-based awards | |||||||||||||||||||||||||||||||||||||||||
| Stock withheld to cover tax withholdings requirements upon restricted stock vesting | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Issuance of warrants (Note 11) | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balance at June 28, 2025 | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
6
iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
(unaudited)
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss ("AOCI") | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Value | ||||||||||||||||||||||||||||||||||||||||
| Balance at March 30, 2024 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | ( | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||||||||||||||
| CEO transition costs related to stock-based awards | |||||||||||||||||||||||||||||||||||||||||
| Stock withheld to cover tax withholdings requirements upon restricted stock vesting | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance costs | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net loss | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balance at June 29, 2024 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) ("AOCI") | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Value | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 30, 2023 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | ( | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||||||||||||||
| CEO transition costs related to stock-based awards | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Stock withheld to cover tax withholdings requirements upon restricted stock vesting | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance costs | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balance at June 29, 2024 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
7
iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Six Months Ended | |||||||||||
| June 28, 2025 | June 29, 2024 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| (Gain) loss on equity investment | ( | ||||||||||
| Stock-based compensation | |||||||||||
| Provision for inventory excess and obsolescence | |||||||||||
| Change in fair value of term loan | |||||||||||
| Debt issuance costs expensed under fair value option | |||||||||||
| Deferred income taxes, net | ( | ||||||||||
| Other | ( | ||||||||||
| Changes in operating assets and liabilities — (use) source | |||||||||||
| Accounts receivable | ( | ||||||||||
| Inventory | ( | ||||||||||
| Other assets | |||||||||||
| Accounts payable | ( | ||||||||||
| Accrued expenses and other liabilities | ( | ( | |||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities: | |||||||||||
| Additions of property and equipment | ( | ||||||||||
| Purchase of investments | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Income tax withholding payment associated with restricted stock vesting | ( | ( | |||||||||
| Proceeds from issuance of common stock, net of issuance costs | |||||||||||
| Repayment of term loan | ( | ( | |||||||||
| Payment of debt issuance costs | — | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | |||||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash, at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash, at end of period | $ | $ | |||||||||
| Cash, cash equivalents and restricted cash, at end of period: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Restricted cash, non-current (included in other assets) | |||||||||||
| Cash, cash equivalents and restricted cash, at end of period | $ | $ | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
8
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Nature of the Business
iRobot Corporation ("iRobot" or the "Company") designs, builds and sells robots and home innovations that make life better. The Company's portfolio of home robots and smart home devices features proprietary technologies for the connected home and advanced concepts in cleaning, mapping and navigation. iRobot's durable and high-performing robots are designed using the close integration of software, electronics and hardware. The Company's revenue is primarily generated from product sales through a variety of distribution channels, including chain stores and other national retailers, through the Company's own website and app, dedicated e-commerce websites, the online arms of traditional retailers and through value-added distributors and resellers worldwide.
Termination of Merger Agreement
As previously disclosed, on August 4, 2022, the Company entered into an Agreement and Plan of Merger (the "Original Merger Agreement") with Amazon.com, Inc., a Delaware corporation ("Parent" or "Amazon"), and Martin Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Amazon ("Merger Sub"), providing for, among other things, the merger of Merger Sub with and into iRobot, with the Company surviving the merger as a wholly owned subsidiary of Parent (the "Merger", and, together with the other transactions contemplated by the Merger Agreement (as defined below), (the "Transactions"). On July 24, 2023, iRobot, Amazon and Merger Sub entered into an amendment to the Original Merger Agreement (the "Amendment", and the Original Merger Agreement, as amended and supplemented by the Amendment, the "Merger Agreement"). The Amendment adjusted the merger consideration to reflect the incurrence of the Term Loan (see Note 9, Debt, for additional information).
On January 28, 2024, the Company and Amazon mutually agreed to terminate the Merger Agreement and entered into a mutual termination agreement effective as of such date (the "Termination Agreement"). The termination of the Merger Agreement was approved by the Company's board of directors ("Board"). In accordance with the terms of the Termination Agreement, Amazon made a cash payment to the Company in the previously agreed amount of $94.0 million (the "Parent Termination Fee") on January 29, 2024. During the first quarter of fiscal 2024, as a result of the termination of the Merger Agreement and receipt of the Parent Termination Fee of $94.0 million from Amazon, the Company made a payment of $18.8 million for professional fees incurred in connection with the Transactions. In accordance with the terms of the Credit Agreement (as defined below), the Company applied $35.0 million to repay a portion of the Term Loan. The remaining $40.0 million of the Parent Termination Fee was set aside as restricted cash to be used for future repayments of the Term Loan subject to limited ability of the Company to utilize such amounts at the discretion of the lenders for the purchase of inventory. See Note 9, Debt, for additional information. The Parent Termination Fee received net of professional fees paid was $75.2 million and was recorded during the first quarter of fiscal 2024 as a benefit in general and administrative expenses on the consolidated statements of operations.
2. Summary of Significant Accounting Policies
Basis of Presentation and Foreign Currency Translation
The accompanying consolidated financial statements include those of iRobot and its subsidiaries, after elimination of all intercompany balances and transactions. iRobot has prepared the accompanying unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP").
In the opinion of management, all adjustments necessary to the unaudited interim consolidated financial statements have been made to state fairly the Company's financial position. Interim results are not necessarily indicative of results for the full fiscal year or any future periods. The information included in this Form 10-Q should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the fiscal year ended December 28, 2024, filed with the Securities and Exchange Commission on March 12, 2025.
The Company operates and reports using a 52-53 week fiscal year ending on the Saturday closest to December 31. Accordingly, the Company's fiscal quarters end on the Saturday that falls closest to the last day of the third month of each quarter.
Liquidity Risks and Uncertainties
As part of its quarterly assessment completed during the fourth quarter of fiscal 2024 in its Annual Report on Form 10-K, management concluded that there was substantial doubt about the Company's ability to continue as a going concern for a period of at least 12 months from the date of issuance of the consolidated financial statements.
On March 11, 2025, the Company entered into Amendment No. 1 to the Credit Agreement ("Amendment No. 1"). Pursuant to Amendment No. 1, the lenders waived, until May 6, 2025 (the "Initial Waiver Period"), the Company's obligation to
9
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
comply with the Company's covenant obligations to (1) provide a report and opinion of the auditor with respect to the Company's annual consolidated financial statements for fiscal year 2024 without a qualification regarding the Company's ability to continue as a going concern (the "Going Concern Covenant") and (2) maintain a minimum level of core assets (the "Minimum Core Assets Covenant" and, together with the Going Concern Covenant, the "Specified Covenants"). On April 30, 2025, the Company entered into Amendment No. 2 to the Credit Agreement which extended the Initial Waiver Period to June 6, 2025, and on June 5, 2025, the Company entered into Amendment No. 3 to the Credit Agreement which further extended the Initial Waiver Period to August 14, 2025. On August 6, 2025, the Company entered into Amendment No. 4 to the Credit Agreement, which further extended the Initial Waiver Period to September 19, 2025.
The iRobot Board of Directors initiated and continues its formal strategic review to evaluate a broad range of strategic alternatives, including, but not limited to, exploring a potential sale or strategic transaction and refinancing the Company's debt. The Company remains actively engaged in ongoing collaborative and constructive discussions with its primary lender while the Board continues its strategic review process. There can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions. Additional actions within the Company's control to maintain its liquidity and operations include optimizing its production volumes with contract manufacturers by reducing inventory supply forecast for cancellable purchase orders, further reducing discretionary spending in all areas of the business and realigning resources through ongoing attrition.
As of June 28, 2025, the fair value of the Term Loan was $203.2 million, which significantly exceeded the Company's available cash and cash equivalents and there continues to be substantial doubt about the Company's ability to continue as a going concern. Absent further waiver of the breach of the Specified Covenants by the lenders, the Company expects to be in default under the Credit Agreement on September 19, 2025 unless there is a favorable resolution from the strategic review. If the Company is in default under the Credit Agreement and the Company's lenders accelerate the repayment obligations with respect to the outstanding loans, the Company expects that it would be unable to repay its obligations under the Credit Agreement, may be forced to significantly curtail or cease operations and would likely seek bankruptcy protection. In such proceedings, it is unlikely that any proceeds would remain for distribution to stockholders and, as a result, stockholders would likely lose all of their investment in the Company. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Recently Issued Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that recently issued standards, which are not yet effective, will not have a material impact on the Company's consolidated financial statements upon adoption.
Use of Estimates
The preparation of these consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses. These estimates and judgments, include but are not limited to, revenue recognition, including variable consideration and other obligations such as sales incentives and product returns; impairment of goodwill and long-lived assets; valuation of non-marketable equity investments; valuation of debt; valuation of performance-based awards with market conditions; inventory excess and obsolescence; loss on purchase commitments; loss contingencies; and accounting for income taxes and related valuation allowances. The Company bases its estimates and assumptions on historical experience, market participant fair value considerations, projected future cash flows, current economic conditions, and various other factors that the Company believes are reasonable under the circumstances. Actual results and outcomes may differ from the Company's estimates and assumptions.
10
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with maturity of three months or less at the time of purchase to be cash and cash equivalents. The Company invests its excess cash primarily in money market funds. Accordingly, its cash and cash equivalents are subject to minimal market risk. At June 28, 2025 and December 28, 2024, cash and cash equivalents totaled $40.6 million and $134.3 million, respectively. These cash and cash equivalents are carried at cost, which approximates fair value.
Allowance for Credit Losses
The Company maintains an allowance for credit losses for accounts receivable using an expected loss model that requires the use of forward-looking information to calculate credit loss estimate. The expected loss methodology is developed through consideration of factors including, but not limited to, historical collection experience, current customer credit ratings, customer concentrations, current and future economic and market conditions and age of the receivable. The Company reviews and adjusts the allowance for credit losses on a quarterly basis. Accounts receivable balances are written off against the allowance when the Company determines that the balances are not recoverable. At June 28, 2025 and December 28, 2024, the Company had an allowance for credit losses of $3.0
Inventory
Inventory primarily consists of finished goods and, to a lesser extent, components, which are purchased from contract manufacturers. Inventory is stated at the lower of cost or net realizable value with cost being determined using the standard cost method, which approximates actual costs determined on the first-in, first-out basis. Inventory costs primarily consist of materials, inbound freight, import duties, tariffs and other handling fees. The Company writes down its inventory for estimated obsolescence or excess inventory based upon assumptions around market conditions and estimates of future demand including consideration of product life cycle status, product development plans and current sales levels. Inventory write-downs and losses on purchase commitments are recorded in cost of product revenue. Net realizable value is the estimated selling price less estimated costs of completion, disposal and transportation. Adjustments to reduce inventory to net realizable value are recognized in cost of product revenue and have not been significant for the periods presented.
Impairment of Goodwill and Long-Lived Assets
Goodwill is assessed for impairment at the reporting unit level annually during the fourth quarter of each fiscal year or more frequently if the Company believes indicators of impairment exist. During the three months ended June 28, 2025, the Company did not identify any triggering events. All goodwill is allocated to the Company's one reporting unit which had a negative carrying value as of June 28, 2025.
The Company periodically evaluates the recoverability of other long-lived assets whenever events and changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. There were no triggering events identified on the long-lived assets during the three months ended June 28, 2025.
Strategic Investments
The Company holds non-marketable equity securities as part of its strategic investments portfolio. The Company classifies the majority of these securities as equity securities without readily determinable fair values and measures these investments at cost, less any impairment, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. These investments are valued using significant unobservable inputs or data in an inactive market and the valuation requires the Company's judgment due to the absence of market prices and inherent lack of liquidity. The Company monitors non-marketable equity investments for impairment indicators, such as deterioration in the investee's financial condition and business forecasts and lower valuations in recent or proposed financings. The estimated fair value is based on quantitative and qualitative factors including, but not limited to, subsequent financing activities by the investee and projected discounted cash flows. The Company performs an assessment on a quarterly basis to assess whether triggering events for impairment exist and to identify any observable price changes. Changes in fair value of non-marketable equity investments are recorded in other income (expense), net on the consolidated statements of operations. At June 28, 2025 and December 28,
11
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
2024, the Company's equity securities without readily determinable fair values totaled $10.9 million and $11.1 million, respectively and are included in other assets on the consolidated balance sheets.
Warrants
The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC 480, "Distinguishing Liabilities from Equity," and ASC 815, "Derivatives and Hedging." Warrants classified as equity are recorded at fair value as of the date of issuance and no further adjustments to their valuation are made. Warrants classified as derivative liabilities that require separate accounting as liabilities are recorded at their fair value on the date of issuance and are revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense. See Note 11, Stockholders' Equity, for additional information.
Other Income (Expense), net
The following table provides information about other income (expense), net (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| Interest income | $ | $ | $ | $ | |||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Changes in fair value of Term Loan | ( | ( | ( | ||||||||||||||||||||
Debt issuance costs (1) | ( | ( | ( | ( | |||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||
Total other income (expense), net | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
(1)Includes the fair value of $5.2 million and $16.8 million on warrants issued during the three and six months ended June 28, 2025, respectively. See Note 11, Stockholders' Equity, for additional information.
Net Loss Per Share
Basic loss per share is calculated using the Company's weighted-average outstanding common shares. Diluted earnings per share is calculated using the Company's weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods, as the inclusion of all potential common share equivalents outstanding would have been antidilutive.
The following table presents the calculation of both basic and diluted net loss per share (in thousands, except per share amounts):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted-average shares outstanding | |||||||||||||||||||||||
| Basic and diluted loss per share | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
3. Revenue Recognition
The Company primarily derives its revenue from the sale of consumer robots and accessories. The Company sells products directly to consumers through online stores and indirectly through resellers and distributors. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenue is allocated to distinct performance obligations and is recognized net of allowances for returns and other credits and incentives. Revenue is recognized only to the extent that it is probable that a significant reversal of revenue will not occur and when collection is considered probable. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from revenue. Shipping and handling expenses are considered fulfillment activities and are expensed as incurred.
12
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Frequently, the Company's contracts with customers contain multiple promised goods or services. Such contracts may include any of the following, the consumer robot, downloadable app, cloud services, accessories on demand, potential future unspecified software upgrades and extended warranties. For these contracts, the Company accounts for the promises separately as individual performance obligations if they are distinct. Performance obligations are considered distinct if they are both capable of being distinct and distinct within the context of the contract. In determining whether performance obligations meet the criteria for being distinct, the Company considers a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract.
The Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices ("SSPs"). When available, the Company uses observable prices to determine SSPs. When observable prices are not available, SSPs are established that reflect the Company's best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. The Company's process for estimating SSPs without observable prices considers multiple factors that may vary depending upon the facts and circumstances related to each performance obligation including market data or the estimated cost of providing the products or services. The transaction price allocated to the robot is recognized as revenue at a point in time when control is transferred, generally as title and risk of loss pass, and when collection is considered probable. The transaction price allocated to services and support is deferred and recognized over their service periods. For contracts with a duration of greater than one year, the transaction price allocated to performance obligations that are unsatisfied as of June 28, 2025 and December 28, 2024 was $9.2 million and $12.2 million, respectively.
The Company's products generally carry a one-year or two-year limited warranty that promises customers that delivered products are as specified. The Company does not consider these assurance-type warranties as a separate performance obligation and therefore, the Company accounts for such warranties under ASC 460, "Guarantees." For contracts with the right to upgrade to a new product after a specified period of time, the Company accounts for this trade-in right as a guarantee obligation under ASC 460. The total transaction price is reduced by the full amount of the trade-in right's fair value and the remaining transaction price is allocated between the performance obligations within the contract.
The Company provides limited rights of returns for direct-to-consumer sales generated through its online stores and certain resellers and distributors. The Company records an allowance for product returns based on specific terms and conditions included in the customer agreements or based on historical experience and the Company's expectation of future returns. In addition, the Company may provide other credits or incentives which are accounted for as variable consideration when estimating the amount of revenue to recognize. Where appropriate, these estimates take into consideration relevant factors such as the Company's historical experience, current contractual requirements, specific known market events and forecasted inventory level in the channels. Overall, these reserves reflect the Company's best estimates, and the actual amounts of consideration ultimately received may differ from the Company's estimates. Returns and credits are estimated at the time of sale and updated at the end of each reporting period as additional information becomes available. As of June 28, 2025, the Company had reserves for product returns of $9.2 million and other credits and incentives of $30.3 million. As of December 28, 2024, the Company had reserves for product returns of $14.6 million and other credits and incentives of $64.3 million. The Company regularly evaluates the adequacy of its estimates for product returns and other credits and incentives. Future market conditions and product transitions may require the Company to take action to change such programs and related estimates. When the variables used to estimate these reserves change, or if actual results differ significantly from the estimates, the Company increases or reduces revenue to reflect the impact. During the three and six months ended June 28, 2025 and June 29, 2024, changes to these estimates related to performance obligations satisfied in prior periods were not material.
Disaggregation of Revenue
The following table provides information about disaggregated revenue by geographical region (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
| EMEA | |||||||||||||||||||||||
| Japan | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
13
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Contract Balances
The following table provides information about receivables and contract liabilities from contracts with customers (in thousands):
| June 28, 2025 | December 28, 2024 | ||||||||||
| Accounts receivable, net | $ | $ | |||||||||
| Contract liabilities | |||||||||||
The Company invoices customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include deferred revenue associated with services and extended warranty plans as well as prepayments received from customers in advance of the satisfaction of its performance obligations. During the three months ended June 28, 2025 and June 29, 2024, the Company recognized $4.8 million and $3.3 million, respectively, of the contract liability balance as revenue upon transfer of the products or services to customers. During the six months ended June 28, 2025 and June 29, 2024, the Company recognized $10.7 million and $6.1 million, respectively, of the contract liability balance as revenue upon transfer of the products or services to customers.
4. Restructuring and Other Charges
During the three months ended June 28, 2025 and June 29, 2024, the Company recorded restructuring and other charges of $1.0 million and $8.2 million, respectively, in the consolidated statements of operations. During the six months ended June 28, 2025 and June 29, 2024, the Company recorded restructuring and other charges of $8.9 million and $22.4 million, respectively, in the consolidated statements of operations.
The components of restructuring and other charges were as follows (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| Cash restructuring charges: | |||||||||||||||||||||||
| Severance and other personnel costs | $ | $ | $ | $ | |||||||||||||||||||
| Other restructuring costs | |||||||||||||||||||||||
| CEO transition costs | |||||||||||||||||||||||
| Total cash charges | |||||||||||||||||||||||
| Non-cash charges: | |||||||||||||||||||||||
| Asset write offs | ( | ||||||||||||||||||||||
| CEO transition costs related to stock-based awards | ( | ||||||||||||||||||||||
| Total non-cash charges | ( | ||||||||||||||||||||||
| Total restructuring and other charges | $ | $ | $ | $ | |||||||||||||||||||
On January 29, 2024, following the termination of the Merger Agreement, the Company announced an operational restructuring plan ("2024 Restructuring Plan") which included a reduction in headcount of approximately 440 employees. During the three months ended June 28, 2025 and June 29, 2024, the Company recorded restructuring costs of $0.6 million and $4.9 million, respectively. During the six months ended June 28, 2025 and June 29, 2024, the Company recorded restructuring costs of $2.7 million and $16.2 million, respectively. These charges consist primarily of employee termination benefits including severance, payroll taxes and other benefits. The Company does not expect any further material restructuring charges under the 2024 Restructuring Plan.
In addition, during the three months ended June 28, 2025 and June 29, 2024, the Company recorded other restructuring costs of $0.4 million and $1.2 million, respectively. During the six months ended June 28, 2025 and June 29, 2024, the Company recorded other restructuring costs of $6.2 million and $5.7 million, respectively. These charges consist of accelerated depreciation and write-offs on certain fixed assets, warehouse exit costs, write-offs on material liabilities at contract manufacturers due to discontinuation of programs, as well as other costs associated with rightsizing its global real estate footprint.
In conjunction with the termination of the Merger Agreement, Colin Angle, the Company's then-Chief Executive Officer, stepped down as an officer of the Company and from his position as chairman of the Board effective January 28, 2024. The Board appointed Glen D. Weinstein, the Company's then Executive Vice President and Chief Legal Officer, as Interim Chief
14
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Executive Officer while a search was conducted for a permanent CEO. On May 6, 2024, the Company appointed Gary S. Cohen as the Company's Chief Executive Officer. Gary S. Cohen succeeded Glen D. Weinstein as the principal executive officer of the Company. Glen D. Weinstein provided transition services as a Company employee during the transition period. CEO transition costs represent costs incurred for CEO search fees and charges associated with the transition-related agreements with Colin Angle and Glen D. Weinstein which include compensation during the transition period as well as adjustments for modification of stock-based awards.
The following table presents a roll-forward of cash restructuring-related liabilities associated with the 2024 Restructuring Plan, which is included within accounts payable and accrued expenses in the consolidated balance sheets (in thousands):
| Severance and other personnel costs | Other restructuring costs | CEO transition costs | Total | ||||||||||||||||||||
Balance as of December 28, 2024 | $ | $ | $ | $ | |||||||||||||||||||
| Charges | |||||||||||||||||||||||
| Cash payments | ( | ( | ( | ( | |||||||||||||||||||
Balance as June 28, 2025 | $ | $ | $ | $ | |||||||||||||||||||
The Company expects the majority of the people-related balance to be paid within fiscal 2025.
5. Leases
The Company's leasing arrangements primarily consist of operating leases for its facilities which include corporate, sales and marketing and research and development offices and equipment under various non-cancelable lease arrangements. The operating leases expire at various dates through 2030. The Company currently has two sublease agreements for space at its headquarters. In addition, as of July 22, 2025, the Company has amended the lease for its headquarters to provide the landlord with the right to take back space under certain circumstances. At June 28, 2025, the Company's weighted average discount rate was 4.39 %, while the weighted average remaining lease term was 4.69 years.
The components of lease expense were as follows (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Variable lease cost | |||||||||||||||||||||||
| Sublease income | ( | ( | ( | ( | |||||||||||||||||||
| Right-of-use asset impairment | |||||||||||||||||||||||
| Net lease cost | $ | $ | $ | $ | |||||||||||||||||||
Supplemental cash flow information related to leases was as follows (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||||||||
| Operating cash flows from operating leases | $ | $ | $ | $ | |||||||||||||||||||
Right-of-use assets obtained in exchange for operating lease liabilities (non-cash) | $ | $ | $ | $ | |||||||||||||||||||
| Right-of-use asset reductions related to operating lease modifications (non-cash) | $ | $ | ( | $ | $ | ( | |||||||||||||||||
15
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Maturities of operating lease liabilities and sublease payments were as follows as of June 28, 2025 (in thousands):
| Operating Lease Payments | Sublease Payments | Net | |||||||||||||||
| Remainder of 2025 | $ | $ | ( | $ | |||||||||||||
| 2026 | ( | ||||||||||||||||
| 2027 | ( | ||||||||||||||||
| 2028 | ( | ||||||||||||||||
| 2029 | ( | ||||||||||||||||
| Thereafter | ( | ||||||||||||||||
| Total minimum lease payments | $ | $ | ( | $ | |||||||||||||
| Less: imputed interest | |||||||||||||||||
| Present value of future minimum lease payments | $ | ||||||||||||||||
Less: current portion of operating lease liabilities (Note 8) | |||||||||||||||||
| Long-term lease liabilities | $ | ||||||||||||||||
6. Fair Value Measurements
Fair Value Measurements - Recurring Basis
The Company's financial assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):
Fair Value Measurements as of June 28, 2025 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| Assets: | |||||||||||||||||
| Money market funds | $ | $ | $ | ||||||||||||||
Restricted cash (Note 2) | |||||||||||||||||
| Restricted cash, non-current (Note 2) | |||||||||||||||||
| Total assets measured at fair value | $ | $ | $ | ||||||||||||||
| Liabilities: | |||||||||||||||||
Term loan (unpaid principal of $ | $ | $ | $ | ||||||||||||||
| Total liabilities measured at fair value | $ | $ | $ | ||||||||||||||
Fair Value Measurements as of December 28, 2024 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| Assets: | |||||||||||||||||
| Money market funds | $ | $ | $ | ||||||||||||||
| Restricted cash, current | |||||||||||||||||
| Restricted cash, non-current (Note 2) | |||||||||||||||||
Derivative instruments (Note 10) | |||||||||||||||||
| Total assets measured at fair value | $ | $ | $ | ||||||||||||||
| Liabilities: | |||||||||||||||||
Term loan (unpaid principal of $ | $ | $ | $ | ||||||||||||||
| Total liabilities measured at fair value | $ | $ | $ | ||||||||||||||
16
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The following table provides a summary of changes in fair value of our Level 3 instrument for the six months ended June 28, 2025 (in thousands):
Balance as of December 28, 2024 | $ | ||||
| Repayment | ( | ||||
| Change in fair value | |||||
Balance as of June 28, 2025 | $ | ||||
As discussed further in Note 9 to the consolidated financial statements, the Company elected to recognize the Term Loan under the fair value option. The fair value of the Term Loan as of June 28, 2025 has been determined based on a discounted cash flow model, which represents Level 3 measurements. Fair value estimates using probability-weighted scenarios which include assumptions that are highly subjective and require judgements regarding significant matters, such as the amount and timing of future cash flows, expected interest rate volatility and the discount rate. The use of different assumptions could have a material effect on the fair value estimates.
7. Goodwill and Other Intangible Assets
The following table summarizes the activity in the carrying amount of goodwill and intangible assets for the six months ended June 28, 2025 (in thousands):
| Goodwill | Intangible assets | ||||||||||
Balance as of December 28, 2024 | $ | $ | |||||||||
| Amortization | — | ( | |||||||||
| Effect of foreign currency translation | |||||||||||
Balance as of June 28, 2025 | $ | $ | |||||||||
8. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
| June 28, 2025 | December 28, 2024 | ||||||||||
| Accrued manufacturing and logistics cost | $ | $ | |||||||||
| Accrued returns and sales incentives | |||||||||||
| Accrued warranty | |||||||||||
| Accrued compensation and benefits | |||||||||||
| Current portion of operating lease liabilities | |||||||||||
Accrued taxes payable | |||||||||||
| Accrued interest | |||||||||||
Accrued restructuring and other | |||||||||||
| Accrued other | |||||||||||
| $ | $ | ||||||||||
9. Debt
Term Loan
On July 24, 2023, the Company entered into a Credit Agreement (the "Credit Agreement") by and among the Company, as borrower, each lender from time to time party thereto and TCG Senior Funding L.L.C., an affiliate of The Carlyle Group, as administrative agent and collateral agent, providing for a $200.0 million senior secured term loan credit facility (the "Term Loan"). Total proceeds from the Term Loan were $188.2 million, net of $11.8 million of debt issuance costs. The Term Loan had an original maturity date of July 24, 2026.
The Term Loan bears interest at a rate per annum equal to, at the Company's option, (i) a rate based on term SOFR plus a credit spread adjustment plus a 9.00 % spread or (ii) a rate based on the base rate plus a rate adjustment plus an 8.00 % spread. A portion of each spread equal to 2.5 % is paid in kind by capitalizing such option into principal of the Term Loan. In the event of repayment, prepayment or acceleration of all or any portion of the Term Loan, the Company is required to pay to the lenders an additional amount which represents a minimum guaranteed return on the Term Loan that ranges between 1.30x and 1.75x of the principal in accordance with the provisions within the Credit Agreement. The minimum guaranteed return range is based on the date on which it is paid. As of June 28, 2025, the minimum guaranteed return rate was 1.5x, and the minimum guaranteed
17
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
return rate increased to 1.7x on July 23, 2025. The Credit Agreement provides for mandatory prepayments of borrowings under certain circumstances, including non-ordinary course asset sales and incurrence of other indebtedness, subject to customary exceptions.
The Credit Agreement contains customary affirmative covenants, including financial statement reporting requirements and delivery of compliance certificates. The Credit Agreement also contains customary negative covenants that limit the Company's and its subsidiaries' ability to, among other things, grant or incur liens, incur additional indebtedness, make certain restricted investments or payments, including payment of dividends on its capital stock and payments on certain permitted indebtedness, enter into certain mergers and acquisitions or engage in certain asset sales, subject in each case to certain exceptions. In addition, the Credit Agreement contains a financial covenant that the Company will not permit its consolidated core assets (comprising cash, accounts receivable and inventory), measured on the last day of each fiscal month, to be less than $250.0 million which amount is subject to increase or decrease upon certain triggers related to the payment or non-payment of any termination fees under the Merger Agreement (or fees in lieu of such termination fees) and the occurrence or non-occurrence of the Merger.
During the first quarter of fiscal 2024, as a result of the termination of the Merger Agreement and receipt of the Parent Termination Fee of $94.0 million from Amazon on January 29, 2024, $35.0 million of such Parent Termination Fee was used immediately to repay a portion of the Term Loan, and $40.0 million of the Parent Termination Fee was set aside in a restricted account to be used for future repayments of the Term Loan subject to limited ability of the Company to utilize such amounts at the discretion of the lenders for the purchase of inventory in the third quarter of fiscal 2025. The $35.0 million repayment was applied to the principal, interest and the 1.4x minimum guaranteed return, reducing the principal balance of the loan to $176.1 million. With the termination of the Merger Agreement and the $35.0 million repayment, the applicable minimum guaranteed return ranges between 1.4x and 1.7x of the principal and the consolidated core assets financial covenant is reduced to $200.0 million. To access the $40.0 million of restricted cash for inventory purchases, on the day of such election, the Company must certify to its lenders that the Company has pro forma consolidated core assets of $275.0 million and no default or event of default under the Credit Agreement. During the third quarter of fiscal 2024, the Company elected to draw down $40.0 million of the restricted cash, which was repaid to the restricted account in March 2025.
On March 11, 2025, the Company entered into Amendment No. 1 to the Credit Agreement with TCG Senior Funding L.L.C., an affiliate of The Carlyle Group, as administrative agent and collateral agent (the "Agent") and the lenders party thereto (the "Lenders"). Pursuant to Amendment No. 1, the Lenders waived, until May 6, 2025 (the "Initial Waiver Period"), the Company's covenant obligations to (1) provide a report and opinion of the auditor with respect to the Company's annual consolidated financial statements for fiscal year 2024 without a qualification regarding the Company's ability to continue as a going concern (the "Going Concern Covenant") and (2) maintain a minimum level of core assets (the "Minimum Core Assets Covenant" and, together with the Going Concern Covenant, the "Specified Covenants"). On April 30, 2025, the Company entered into Amendment No. 2 to the Credit Agreement, which extended the Initial Waiver Period to June 6, 2025. In connection with Amendment No. 1, the Company returned to a controlled account for the benefit of the Agent and the Lenders the $40.0 million that it elected to withdraw from such controlled account during the third quarter of fiscal 2024 for the purchase of inventory, and the Agent deferred payment of the related $4.0 million use fee until the end of the Initial Waiver Period. Amendment No. 1 also required the Company to provide more frequent supplemental financial reporting to the Agent. Fees payable by the Company to the Lenders in connection with Amendment No. 1 include (1) $3.6 million (representing 2.0 % of the aggregate principal amount of term loans outstanding), which was paid in kind via an increase of the outstanding principal amount of the Term Loan and (2) issuing to the Lenders on the date of Amendment No. 1 warrants to purchase an aggregate of 1,840,503 shares of the Company's common stock (equal to six percent of its outstanding common stock as of March 10, 2025), with an exercise price of $0.01 per share. These warrants were accounted for at fair value of $11.6 million on the issuance date and recorded as debt issuance cost in other income (expense), net on the consolidated statement of operations.
On June 5, 2025, the Company entered into Amendment No. 3 to the Credit Agreement, which further extended the Initial Waiver Period to August 14, 2025. Fees payable by the Company to the Lenders in connection with Amendment No. 3 included (1) $4.0 million in cash held in the restricted cash account, which was entirely applied to reduce the outstanding principal amount of the Term Loan and (2) issuing to the Lenders on the date of Amendment No. 3 warrants to purchase an aggregate of 1,556,323 shares of the Company's common stock (equal to five percent of its outstanding common stock as of June 4, 2025), with an exercise price of $0.01 per share. These warrants were accounted for at fair value of $5.2 million on the issuance date and recorded as debt issuance cost in other income (expense), net on the consolidated statement of operations.
On August 6, 2025, the Company entered into Amendment No. 4 to the Credit Agreement, which further extended the Initial Waiver Period to September 19, 2025 (the "Extended Waiver Period"). No event of default will occur under the Credit Agreement as a result of failure to comply with the Specified Covenants during the Extended Waiver Period, provided that the Company is still obligated to comply with the Specified Covenants after the end of the Extended Waiver Period and if it does not, unless the Lenders further extend such waiver by the end of the Extended Waiver Period, an Event of Default will occur. See Note 2, Liquidity Risks and Uncertainties, for further information.
18
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Credit Agreement also contains customary events of default (subject to certain exceptions, thresholds and grace periods), such as the failure to pay obligations when due, breach of certain covenants, including the financial covenant, cross-default or cross-acceleration of certain indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain change of control events involving the Company. The occurrence of an event of default may result in the termination of the Credit Agreement and acceleration of repayment obligations with respect to any outstanding loans or letters of credit under the Term Loan.
The obligations under the Term Loan are guaranteed by the Company and certain of its subsidiaries located in the United States, United Kingdom, Japan, France and Spain. In addition, the obligations under the Term Loan are secured by a first priority lien on substantially all tangible and intangible property of the Company and the guarantors and pledges of the equity of certain subsidiaries, in each case subject to certain exceptions, limitations and exclusions from the collateral.
Upon initial issuance, the Company elected to account for the Term Loan under the fair value option. The primary reason for electing the fair value option is for simplification and cost-benefit considerations of accounting for the Term Loan at fair value in its entirety versus bifurcation of the embedded features. The fair value of the Term Loan was determined using a discounted cash flow model which represents Level 3 measurements. The significant assumptions used in the discounted cash flow model include the amount and timing of future cash flows, expected interest rate volatility and the discount rate.
Under the fair value election, debt issuance costs are expensed as incurred, and the debt liability is subsequently valued at fair market value, including paid in kind interest, during each reporting period until its settlement.
The Company's outstanding debt as of June 28, 2025 was as follows (in thousands):
| Classification | Term Loan | ||||||||||
Term Loan at fair value at December 28, 2024 | $ | ||||||||||
Repayment | ( | ||||||||||
Change in fair value of term loan due to instrument-specific credit risk | Other comprehensive loss | ||||||||||
| Remaining changes in fair value | Other expense | ||||||||||
Term Loan at fair value as of June 28, 2025 | $ | ||||||||||
During the three and six months ended June 28, 2025, the Company recorded $5.1 million and $10.1 million of interest expense, respectively, related to the quarterly cash interest. During the three and six months ended June 29, 2024, the Company recorded $5.4 million and $10.9 million of interest expense, respectively, related to the quarterly cash interest. These interest expenses were recorded in other income (expense), net on the consolidated statements of operations. As of June 28, 2025, $3.5 million of interest expense is unpaid and included in accrued expenses on the consolidated balance sheet. The interest expense was calculated using the rate based on term SOFR plus a credit spread adjustment plus a 9.00 % spread.
10. Derivative Instruments and Hedging Activities
The Company operates internationally and, in the normal course of business, is exposed to fluctuations in foreign currency exchange rates. The foreign currency exposures typically arise from transactions denominated in currencies other than the functional currency of the Company's operations, primarily the British Pound, Canadian Dollar, Euro and Japanese Yen. The Company historically entered into derivative instruments that were designated as cash flow hedges to reduce its exposure to foreign currency exchange risk in sales. The Company exited its last cash flow hedges during February 2024. At June 28, 2025 and December 28, 2024, the Company had no
The Company enters into economic hedges that were not designated as hedges from an accounting standpoint to reduce foreign currency exchange risks related to short term trade receivables and payables. These contracts typically had maturities of approximately one month . Historically, the Company has used forward contracts but also may use option contracts as an alternative. At June 28, 2025 the Company had no outstanding foreign currency economic hedges. At December 28, 2024, the Company had outstanding foreign currency economic hedges with a total notional value of $28.1 million.
The fair values of derivative instruments were as follows (in thousands):
| Fair Value | |||||||||||||||||
| Classification | June 28, 2025 | December 28, 2024 | |||||||||||||||
| Derivatives not designated as hedging instruments: | |||||||||||||||||
| Foreign currency forward contracts | Other current assets | $ | $ | ||||||||||||||
19
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(Losses) gains associated with derivative instruments not designated as hedging instruments were as follows (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| Classification | June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | |||||||||||||||||||||||||
| (Loss) gain recognized in income | Other income (expense), net | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||
The following tables reflect the effect of derivatives designated as cash flow hedging (in thousands):
| Gain recognized in OCI on Derivative (1) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | |||||||||||||||||||||||
| Foreign currency forward contracts | $ | $ | $ | $ | ||||||||||||||||||||||
(1)The amount represents the change in fair value of derivative contracts due to changes in spot rates.
| (Loss) gain recognized in earnings on cash flow hedging instruments | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | |||||||||||||||||||||||
| Revenue | Revenue | |||||||||||||||||||||||||
| Consolidated statements of operations in which the effects of cash flow hedging instruments are recorded | $ | $ | $ | $ | ||||||||||||||||||||||
| (Loss) gain on cash flow hedging relationships: | ||||||||||||||||||||||||||
| Foreign currency forward contracts: | ||||||||||||||||||||||||||
| Amount of (loss) gain reclassified from AOCI into earnings | $ | ( | $ | $ | $ | |||||||||||||||||||||
20
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
11. Stockholders' Equity
ATM Equity Offering
In February 2024, the Company entered into an ATM Equity Offering Sales Agreement (the "ATM Agreement") with BofA Securities, Inc. ("BofA") pursuant to which the Company may offer and sell, from time to time, at the Company's option, up to an aggregate of $100.0 million in shares of common stock through BofA, as sales agent, in an "at the market" offering. Under the ATM Agreement, shares will be offered and sold pursuant to an effective automatic shelf registration statement on Form S-3 filed with the Securities and Exchange Commission. BofA will receive a commission up to 3.00 % of the aggregate gross sales proceeds of any common stock sold through BofA under the ATM Agreement.
During the first quarter of fiscal 2025, the Company suspended any sales of its common stock pursuant to the ATM Agreement unless and until the Company files a new shelf registration statement on Form S-3 with the Securities and Exchange Commission. As of December 28, 2024, the Company had sold an aggregate of 1.9 million shares under the ATM Agreement, and received proceeds of $19.3 million, net of total issuance costs of $1.1 million incurred in connection with the ATM Agreement.
Warrants
On March 11, 2025, in connection with Amendment No. 1 to the Credit Agreement, the Company issued warrants to the Lenders to purchase an aggregate of 1,840,503 shares of the Company's common stock (equal to six percent of the Company's outstanding common stock as of March 10, 2025), with an exercise price of $0.01 per share and an expiration date of March 11, 2035. On June 5, 2025, in connection with Amendment No. 3 to the Credit Agreement, the Company issued warrants to the Lenders to purchase an aggregate of 1,556,323 shares of common stock (equal to five percent of the Company's outstanding common stock as of June 4, 2025), with an exercise price of $0.01 per share and an expiration date of June 5, 2035.
The Company evaluated the issued warrants and concluded that they meet the criteria to be classified within stockholders' equity. These issued warrants (1) are freestanding financial instruments that are legally detachable and separately exercisable from the common stock, (2) are immediately exercisable, (3) do not embody an obligation for the Company to repurchase its shares, (4) permit the holder to receive a fixed number of shares of common stock upon exercise, (5) are indexed to the Company's common stock and (6) meet the equity classification criteria. Accordingly, the warrants in connection with Amendment No. 1 and Amendment No. 3 are accounted for at fair value of $11.6 million and $5.2 million, respectively, on the issuance dates. There are no changes in fair value recognized after their issuance dates. The warrants were valued using the Company's closing stock price on the dates of issuance which is considered a Level 1 input within the fair value hierarchy.
12. Commitments and Contingencies
Legal Proceedings
From time to time and in the ordinary course of business, the Company is subject to various claims, charges and litigation. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, which could materially affect our financial condition or results of operations. For the following litigation matter, a liability is not probable or the amount cannot be reasonably estimated and therefore accruals have not been made.
On March 8, 2024, purported Company shareholder Dylan Das filed a putative class action in the U.S. District Court for the District of New Jersey against the Company and certain of its officers, captioned Dylan Das v. iRobot Corporation, et al., No. 2:24-cv-02138. The parties agreed to transfer the case to the U.S. District Court for the District of Massachusetts. An amended complaint was filed on July 19, 2024. The complaint alleges violations of Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder based on allegedly false and misleading statements and omissions concerning the likelihood of regulatory approval of the Merger and its impact on the Company's financial performance. The complaint seeks, among other things, unspecified compensatory damages, including interest, in connection with the Company's allegedly inflated stock price, attorneys' fees and costs, and unspecified equitable/injunctive relief. On September 3, 2024, the Company filed a motion to dismiss with the Court. On January 27, 2025, the Court granted the Company's motion to dismiss and therefore dismissed the amended complaint with prejudice. On February 24, 2025, the plaintiff in this matter appealed the Court's dismissal to the U.S. Court of Appeals for the First Circuit, and on April 21, 2025, the plaintiff filed its opening appeal brief with the U.S. Court of Appeals for the First Circuit. On June 3, 2025, the Company filed its response brief, and on July 3, 2025, the plaintiff filed its reply brief. Oral argument is scheduled for September 8, 2025.
On June 8, 2024, purported Company shareholder Anthony Wren filed a shareholder derivative complaint in the U.S. District Court for the District of Massachusetts against the Company, certain of its current and former members of the Board, and certain of its officers, captioned Anthony Wren, derivatively on behalf of iRobot Corp. v. iRobot Corporation, et al., No. 1:24-cv-11498. The parties filed a stipulation staying this action until final resolution on the Motion to Dismiss. On May 1, 2025, the U.S. District Court for the District of Massachusetts issued an order closing the case for administrative purposes without entry of judgment, and any party may move to reopen the case after the related appellate proceedings for the Motion to Dismiss have concluded. Given the uncertainty of litigation, the preliminary stage of the shareholder derivative action and the
21
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
legal standards that must be met for, among other things, success on the merits, the Company cannot estimate the reasonably possible loss or range of loss, if any, that may result from this action.
On July 7, 2025, purported Company shareholder Vinayak Savant filed a putative class action in the U.S. District Court for the Southern District of New York against the Company and certain of its current and former officers, captioned Vinayak Savant v. iRobot Corporation, et al., No. 1:25-cv-05563. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder based on allegedly false and misleading statements and omissions concerning the Company's financial performance and ability to operate on a standalone basis following the termination of the Merger in January 2024. The complaint seeks, among other things, unspecified compensatory damages, including interest, in connection with the Company's allegedly inflated stock price, attorneys' fees and costs, and unspecified other further relief. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss, if any, that may result from this action.
Commitments to Suppliers
The Company utilizes contract manufacturers to build its products and some of its accessories. These contract manufacturers manage the supply of components, capacity and resources to build products based on a forecasted production plan, which typically covers a rolling 12-month period. During the normal course of business, and in order to ensure adequate supply, the Company enters into purchase commitments with contract manufacturers and suppliers. In certain instances, these purchase commitments allow the Company the option to cancel, reschedule and/or adjust the supply requirements based on its business needs for a period of time before the order is due to be fulfilled. In some instances, these purchase commitments are not cancellable in the event of a change in demand or other circumstances, such as where the contract manufacturer and/or supplier has built products, semi-finished products or procured and/or ordered unique, iRobot-specific designs, and/or specific non-cancellable, non-returnable components based on the provided forecasts. If the Company cancels all or part of the orders, or materially reduces forecasted orders, in certain circumstances the Company may be liable to its contract manufacturers and/or suppliers for the cost of the excess components purchased by its contract manufacturers based on the forecasted production plan and the purchase terms of its component suppliers. The loss on purchase commitments is included in accrued manufacturing and logistics cost on the consolidated balance sheets (Note 8).
Guarantees and Indemnification Obligations
The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses incurred by the indemnified party, generally the Company’s customers, in connection with any patent, copyright, trade secret or other proprietary right infringement claim by any third party. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company had no liabilities recorded for these agreements as of June 28, 2025 and December 28, 2024, respectively.
Warranty
The Company provides warranties on most products and has established a reserve for warranty obligations based on estimated warranty costs. The reserve is included as part of accrued expenses (Note 8) in the accompanying consolidated balance sheets.
Activity related to the warranty accrual was as follows (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Provision | |||||||||||||||||||||||
| Warranty claims | ( | ( | ( | ( | |||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||
13. Income Taxes
The Company's interim provision for income taxes is determined using an estimate of the annual effective tax rate. The Company records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs. The Company also records the tax effects of certain discrete items, including tax effects of changes in a valuation allowance, during the interim period in which they occur.
22
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company has assessed, on a jurisdictional basis, the realization of its net deferred tax assets, including the ability to carry back net operating losses, the existence of taxable temporary differences, the availability of tax planning strategies and available sources of future taxable income. The Company has concluded that a valuation allowance on its U.S. and certain foreign jurisdictions net deferred tax assets continues to be appropriate. A valuation allowance is a non-cash charge, and does not limit the Company's ability to utilize its deferred tax assets, including its ability to utilize tax loss and credit carryforward amounts, against future taxable income. The amount of the deferred tax assets considered realizable, and the associated valuation allowance, could be adjusted in a future period if estimates of future taxable income change or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for future growth.
For the three months ended June 28, 2025 and June 29, 2024, the Company recorded an income tax benefit of $0.5 million and an income tax expense of $0.7 million, respectively. The Company's effective income tax rates were 2.2 % and (1.0 )% for the three months ended June 28, 2025 and June 29, 2024, respectively. The Company's effective income tax rate differed from the federal statutory tax rate of 21% primarily driven by the impact of the valuation allowance against the Company's U.S. and certain foreign net deferred tax assets, and by the release of an uncertain tax position reserve.
For the six months ended June 28, 2025 and June 29, 2024, the Company recorded an income tax benefit of $0.1 million and an income tax expense of $0.8 million, respectively. The Company's effective income tax rates were 0.1 % and (1.4 )% for the six months ended June 28, 2025 and June 29, 2024, respectively. The Company's effective income tax rate differed from the federal statutory tax rate of 21% primarily driven by the impact of the valuation allowance against the Company's U.S. and certain foreign net deferred tax assets, and by the release of an uncertain tax position reserve.
On July 4, 2025, new U.S tax legislation was signed into law (known as the "One Big Beautiful Bill Act" or "OBBBA") which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, but many are generally not effective until 2026. The Company is currently evaluating the impact of the new legislation but does not expect it to have a material impact on its results of operations.
14. Industry Segment, Geographic Information and Significant Customers
The Company's consumer robots are offered to consumers through a variety of distribution channels, including chain stores and other national retailers, through the Company's own website and app, dedicated e-commerce websites, the online arms of traditional retailers, and through value-added distributors and resellers worldwide.
The Company operates as one operating segment. The Company's chief operating decision maker ("CODM") is its chief executive officer, who reviews financial information presented on a consolidated basis to make key operating decisions and assess performance. The CODM evaluates operating performance and decides how to allocate resources based on consolidated net income (loss) that is reported on the consolidated statements of operations as well as non-GAAP gross profit and non-GAAP operating income (loss). The CODM manages business activities by considering budget-to-actual analysis and developing short-term and long-term operational plans. The CODM does not review assets in evaluating operating performance, and therefore, such information is not presented.
23
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The following table presents selected financial information with respect to the Company's single operating segment for the three and six months ended June 28, 2025 and June 29, 2024 (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Working marketing | |||||||||||||||||||||||
| Other selling and marketing | |||||||||||||||||||||||
| General and administrative | ( | ||||||||||||||||||||||
| Restructuring and other | |||||||||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||||||||
| Other (income) expense, net | ( | ||||||||||||||||||||||
| Income tax (benefit) expense | ( | ( | |||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Geographic Information
For the three months ended June 28, 2025 and June 29, 2024, sales to non-U.S. customers accounted for 55.8 % and 49.3 % of total revenue, respectively. For the six months ended June 28, 2025 and June 29, 2024, sales to non-U.S. customers accounted for 57.3 % and 51.6 % of total revenue, respectively.
The following table provides information about revenue by geographical region (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
| EMEA | |||||||||||||||||||||||
| Japan | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
Significant Customers
For the three months ended June 28, 2025 and June 29, 2024, the Company generated 24.9 % and 26.9 %, respectively, of total revenue from one of its retailers. For the six months ended June 28, 2025 and June 29, 2024, the Company generated 21.8 % and 23.6 %, respectively, of total revenue from one of its retailers.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information contained in this section has been derived from our consolidated financial statements and should be read together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and are subject to the "safe harbor" created by those sections. In particular, statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including, but not limited to, statements concerning our future results of operations and financial position, business strategy, plans and objectives of management for future operations; the anticipated impact of a default under our Credit Agreement and acceleration of our loan repayment obligations; new product sales, plans for product development and offerings, launches and manufacturing, ability to address consumer needs, the expansion of our addressable market, factors for differentiation of our products, our consumer robots, our competition, our strategy, our market position, market acceptance of our products, revenue recognition, our profits, growth of our revenues, composition of our revenues, our cost of revenues, units shipped, average selling prices, the impact of tariffs and our ability to reduce exposure to tariffs, operating expenses, selling and marketing expenses, general and administrative expenses, research and development expenses, and compensation costs, our credit and letter of credit facilities, seasonal factors, efforts to refine value proposition and related results, efforts to mitigate supply chain challenges, plans for the production of robots, strategic alliances, product integration
24
plans, liquidity and the impact of cost-control measures and cost savings related to such activities, our ability to continue as a going concern, the strategic review process initiated by our board of directors, and implementation of our operational restructuring plan constitute forward-looking statements and are made under these safe harbor provisions. Some of the forward-looking statements can be identified by the use of forward-looking terms such as "believes," "expects," "may," "will," "should," "could," "seek," "intends," "plans," "estimates," "anticipates," or other comparable terms and negative forms of such terms. Forward-looking statements involve inherent risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. We urge you to consider the risks and uncertainties discussed in greater detail under the heading "Risk Factors" in this Quarterly Report on Form 10-Q, in Part II, "Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the period ended March 29, 2025, and Part 1, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 28, 2024 in evaluating our forward-looking statements. We have no plans to update our forward-looking statements to reflect events or circumstances after the date of this report. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made.
Overview
iRobot is a leading global consumer robot company that designs and builds robots that empower people to do more. With over 30 years of artificial intelligence ("AI") and advanced robotics experience, we are focused on building thoughtful robots and developing intelligent home innovations that help make life better for millions of people around the world. iRobot's portfolio of home robots and smart home devices features proprietary technologies for the connected home and advanced concepts in cleaning, mapping and navigation. Leveraging this portfolio, we plan to add new capabilities and expand our offerings to help consumers make their homes easier to maintain, more efficient, more secure and healthier places to live.
Since our founding in 1990, we have developed the expertise necessary to design, build, sell and support durable, high-performance robots through the close integration of software, electronics and hardware. Following the introduction of the Roomba robotic vacuum cleaner in 2002, we have sold over 50 million consumer robots worldwide to become a global, market-leading consumer robotics innovator with a strong presence in a number of major geographic regions worldwide. In recent years, we have seen increased competition with new product offerings in the robotic floorcare segment and have conceded some market share. We believe our iRobot Elevate strategy introduced during fiscal 2024 will help facilitate the turnaround of our Company.
In 2024, iRobot began a journey of transformation designed to rebuild our Company both financially and strategically. We initiated, and largely completed, an operational restructuring plan designed to more closely align our cost structure with near-term revenue expectations with the goal of improved profitability. Leveraging a new asset-light model, we began to streamline our supply chain to set us up for speed and scale, while relying on our partners and contract manufacturers to provide non-core engineering functions. We launched iRobot Labs where all innovation and development of our IP will reside with the expectation of optimizing our research and development organization to focus on key innovations and critical consumer needs throughout the home and beyond. We have continued to innovate across several core technology areas including robotic vacuums, robotic mops, robotic lawn mowers, general robotic software including AI and vision-enabled technologies and mobile applications for robotic floor cleaners. We anticipate our extensive patent portfolio will enable us to accelerate the time to market, while also reducing the costs, time and other risks associated with product development. These capabilities are amplified by our proprietary robot, cloud and iRobot OS. iRobot OS provides consumers with greater control over where, when and how our robots work, simple integration with other smart home devices, thoughtful recommendations to further enhance the cleaning experience, and provide control to improve overall cleaning performance. We believe that our expertise in robot design, engineering, and smart home technologies along with our targeted focus on understanding and addressing consumer needs, positions us well to capitalize on a wider range of robotic and smart home categories over time.
In March 2025, we announced the largest new product launch in our history, which included a suite of new floor cleaning robots featuring elevated design, improved technology, advanced features and a new Roomba Home app. The Roomba 105 Vac Robot series features enhanced power-lifting suction while the Roomba 205 DustCompactor series introduces industry-leading innovation that stores debris. The Roomba Plus 405 Combo Robot + AutoWash Dock asserts intense suction, deep scrubbing and a maintenance-free dock, and Roomba Plus 505 Combo Robot + AutoWash Dock, featuring PerfectEdge technology to get deep into corners and a hands-free, multi-function dock that automatically empties debris, washes and heat-dries mop pads and self-cleans when finished. The majority of these new products were available to consumers in early April. In late April, we announced the Roomba Max 705 Vac Robot + AutoEmpty Dock. In July 2025, we introduced the Roomba Max 705 Combo Robot + AutoWash Dock which is our most advanced 2-in-1 vacuum and mop. It delivers a hands-free cleaning experience by pairing the all-new PowerSpin Roller Mop with PerfectEdge advanced mopping system with our AutoWash dock, while featuring advanced suction power and enhanced brushes. It is available for pre-sale in Europe, followed by North America and Japan later this year.
Since 2023, our revenue performance has been impacted by lower orders from retailers and distributors due in part to a decline in consumer sentiment and resultant spending. Our 2024 performance was also impacted by incremental promotional spending to stimulate sell-through during the holiday season prior to our 2025 new product launches. As expected, performance
25
during the first half of fiscal 2025 also included higher promotional activity and pricing adjustments as we worked to encourage sell-through of our legacy products, as well as delayed launch on certain product. Our total revenue for the six months ended June 28, 2025 was $229.1 million, a decline of $87.2 million, or 27.6%, from revenue of $316.4 million for the six months ended June 29, 2024. Geographically, domestic revenue declined by $55.4 million, or 36.1%, and international revenue declined by $31.9 million, or 19.5%. We are leveraging our brand and recently launched products with better design and more competitive features to improve our competitiveness in multiple price segments. During the first half of fiscal 2025, revenue associated with our newly launched suite of robots generated 49% of total revenue as we transition from our legacy products to the new products with limited availability in the channels during the first quarter of fiscal 2025.
The United States has recently announced changes to U.S. trade policy, including increasing tariffs on imports, in some cases significantly, and potentially renegotiating or terminating existing trade agreements. In February 2025, the U.S. government implemented an additional 10% tariff on goods being imported from China and, in response, the Chinese government implemented a 15% tariff on certain goods being imported into China from the United States. In April 2025, the U.S. government imposed broad new tariffs, including a baseline tariff of 10% on all imports, plus additional country-specific tariffs. In July 2025, Vietnam and the United States reached a provisional understanding to reduce impending U.S. tariffs on goods imported from Vietnam to 20% (from an earlier proposed 46%), while maintaining a higher 40% tariff rate on products deemed "trans-shipped" through Vietnam from third countries. The U.S. tariff policies are continuing to evolve. We cannot predict whether, and to what extent, there may be further changes to international trade agreements, including those with China and Vietnam, or whether, or to what extent, quotas, duties, additional tariffs, export controls or other restrictions will be changed or imposed by the United States or by other countries. In anticipation of tariff uncertainty with China, we have relocated production of our U.S. bound robots outside of China, mainly to Vietnam. Our accessories are sourced from manufacturers in China. We are working to relocate the manufacture of these accessories outside of China. We estimate that the imposition of these new and additional tariffs will cause an increase in tariff costs of approximately $27.0 million during 2025. The estimated tariff impact assumes tariff rates of 20% from Vietnam and 170% from China for U.S. bound imports of robots and accessories, respectively.
Amendments to Credit Agreement
On March 11, 2025, we entered into Amendment No. 1 ("Amendment No. 1") to our credit agreement (the "Credit Agreement") with TCG Senior Funding L.L.C., an affiliate of The Carlyle Group, as administrative agent and collateral agent (the "Agent") and the lenders party thereto (the "Lenders"). Pursuant to Amendment No. 1, the Lenders waived, until May 6, 2025 (the "Initial Waiver Period"), our covenant obligations to (1) provide a report and opinion of our auditor with respect to our annual consolidated financial statements for fiscal year 2024 without an exception regarding our ability to continue as a going concern (the "Going Concern Covenant") and (2) maintain a minimum level of core assets (the "Minimum Core Assets Covenant" and, together with the Going Concern Covenant, the "Specified Covenants"). On April 30, 2025, we entered into Amendment No. 2 to the Credit Agreement ("Amendment No. 2"), which extended the Initial Waiver Period to June 6, 2025. The consolidated financial statements for the fiscal year ended December 28, 2024 included in our Annual Report on Form 10-K included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern; therefore, we would have been in breach of the Going Concern Covenant and the Agent would be able to exercise all applicable remedies under the Credit Agreement but for Amendment No. 1 and Amendment No. 2 described above. In connection with Amendment No. 1, we returned to a controlled account for the benefit of the Agent and the Lenders the $40.0 million that we elected to withdraw from such controlled account during the third quarter of fiscal 2024 for the purchase of inventory, and the Agent deferred payment of the related $4.0 million use fee until the end of the Initial Waiver Period. Amendment No. 1 also requires us to provide more frequent supplemental financial reporting to the Agent. Fees payable by us to the Lenders in connection with Amendment No. 1 include (1) $3.6 million (representing 2.0% of the aggregate principal amount of term loans outstanding), which will be paid in kind via an increase of the outstanding principal amount of the Term Loan and (2) issuing to the Lenders on the date of Amendment No. 1 warrants to purchase an aggregate of 1,840,503 shares of our common stock (equal to six percent of our outstanding common stock as of March 10, 2025), with an exercise price of $0.01 per share. On June 5, 2025, we entered into Amendment No. 3 to the Credit Agreement ("Amendment No. 3"), which further extended the Initial Waiver Period to August 14, 2025. On August 6, 2025, we entered into Amendment No. 4 to the Credit Agreement, which further extended the Initial Waiver Period to September 19, 2025 (the "Extended Waiver Period"). No event of default will occur under the Credit Agreement as a result of failure to comply with the Specified Covenants during the Extended Waiver Period, provided that we are still obligated to comply with the Specified Covenants after the end of the Extended Waiver Period and if we do not, unless the Lenders further extend such waiver by the end of the Extended Waiver Period, an Event of Default will occur. See Note 2, Liquidity Risks and Uncertainties, for further information. Fees payable by us to the Lenders in connection with Amendment No. 3 include (1) $4.0 million in cash held in the restricted cash account, which was entirely applied to reduce the outstanding principal amount of the Term Loan and (2) issuing to the Lenders on the date of Amendment No. 3 warrants to purchase an aggregate of 1,556,323 shares of our common stock (equal to five percent of our outstanding common stock as of June 4, 2025), with an exercise price of $0.01 per share.
26
Termination of Merger Agreement
As previously disclosed, on August 4, 2022, we entered into the Original Merger Agreement with Amazon and Merger Sub providing for, among other things, the merger of Merger Sub with and into us, with us surviving the merger as a wholly owned subsidiary of Amazon. On July 24, 2023, iRobot, Amazon and Merger Sub entered into the Amendment. The Amendment adjusted the merger consideration to reflect the incurrence of the Term Loan (see Note 9 to our consolidated financial statements).
On January 28, 2024, we and Amazon mutually agreed to terminate the Merger Agreement and entered into a mutual termination agreement effective as of such date. The termination of the Merger Agreement was approved by our board of directors. In accordance with the terms of the Termination Agreement, Amazon made a cash payment to us in the previously agreed amount of $94.0 million on January 29, 2024. During the first quarter of fiscal 2024, as a result of the termination of the Merger Agreement and receipt of the Parent Termination Fee of $94.0 million from Amazon, we made a payment of $18.8 million for professional fees incurred in connection with the Transactions. In accordance with the terms of the Credit Agreement, we applied $35.0 million to repay a portion of the Term Loan. The remaining $40.0 million of the Parent Termination Fee was set aside as restricted cash to be used for future repayments of the Term Loan subject to our limited ability to utilize such amounts at the discretion of the lenders for the purchase of inventory. The Parent Termination Fee received net of professional fees paid was $75.2 million and was recorded during the first quarter of fiscal 2024 as a benefit in operating expense, which is classified in general and administrative expenses on the consolidated statements of operations.
Key Financial Metrics and Non-GAAP Financial Measures
In addition to the measures presented in our consolidated financial statements in accordance with GAAP, we use the following key metrics, including non-GAAP financial measures, to evaluate and analyze our core operating performance and trends, and to develop short-term and long-term operational plans. The most directly comparable financial measures to the following non-GAAP metrics calculated under U.S. GAAP are gross profit, gross margin, operating loss and operating margin. During the three months ended June 28, 2025 and June 29, 2024, we had gross profit of $38.3 million and $27.5 million, gross margin of 30.0% and 16.5%, operating loss of ($36.7) million and ($61.1) million and operating margin of (28.8)% and (36.7)%, respectively. During the six months ended June 28, 2025 and June 29, 2024, we had gross profit of $58.6 million and $63.6 million, gross margin of 25.6% and 20.1%, operating loss of ($82.5) million and ($49.2) million and operating margin of (36.0)% and (15.5)%, respectively. A summary of key metrics and certain non-GAAP measures for the three and six months ended June 28, 2025, as compared to the three and six months ended June 29, 2024, is as follows:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| (dollars in thousands, except average gross selling prices) | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Total Revenue | $ | 127,558 | $ | 166,361 | $ | 229,127 | $ | 316,375 | |||||||||||||||
| Non-GAAP Gross Profit | $ | 38,496 | $ | 27,736 | $ | 60,813 | $ | 64,666 | |||||||||||||||
| Non-GAAP Gross Margin | 30.2 | % | 16.7 | % | 26.5 | % | 20.4 | % | |||||||||||||||
| Non-GAAP Operating Loss | $ | (27,008) | $ | (48,203) | $ | (58,528) | $ | (88,153) | |||||||||||||||
| Non-GAAP Operating Margin | (21.2) | % | (29.0) | % | (25.5) | % | (27.9) | % | |||||||||||||||
| Total robot units shipped (in thousands) | 516 | 574 | 926 | 1,030 | |||||||||||||||||||
| Average gross selling prices for robot units | $ | 301 | $ | 330 | $ | 299 | $ | 337 | |||||||||||||||
Our non-GAAP financial measures reflect adjustments based on the following items. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results, provided below, should be carefully evaluated.
Amortization of acquired intangible assets: Amortization of acquired intangible assets consists of amortization of intangible assets including completed technology, customer relationships, and reacquired distribution rights acquired in connection with business combinations as well as any non-cash impairment charges associated with intangible assets in connection with our past acquisitions. Amortization charges for our acquisition-related intangible assets are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions.
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Net Merger, Acquisition and Divestiture (Income) Expense: Net merger, acquisition and divestiture (income) expense primarily consists of professional fees associated with mergers, acquisitions and the review of strategic alternatives, including, but not limited to, exploring a potential sale or strategic transaction. During the first quarter of fiscal 2024, the adjustment included the impact of the Termination Agreement and receipt of the Parent Termination Fee.
Stock-Based Compensation: Stock-based compensation is a non-cash charge relating to stock-based awards.
Restructuring and Other: Restructuring charges are related to one-time actions associated with realigning resources, enhancing operational productivity and efficiency, or improving our cost structure in support of our strategy. Such actions are not reflective of ongoing operations and include costs primarily associated with severance and related costs, costs associated with early termination of contracts, charges related to paused work unrelated to our core business, costs associated with the Chief Executive Officer transition and other non-recurring costs directly associated with resource realignments tied to strategic initiatives or changes in business conditions.
Gain/Loss on Strategic Investments: Gain/loss on strategic investments includes fair value adjustments, realized gains and losses on the sales of these investments and losses on the impairment of these investments.
Debt issuance costs: Debt issuance costs include various incremental fees paid to third parties and warrants issued in connection with the issuance or amendment of debt.
Income tax adjustments: Income tax adjustments include the tax effect of the non-GAAP adjustments, calculated using the appropriate statutory tax rate for each adjustment. We regularly assess the need to record valuation allowance based on the non-GAAP profitability and other factors. We also exclude certain tax items, including the impact from stock-based compensation windfalls/shortfalls, that are not reflective of income tax expense incurred as a result of current period earnings.
We exclude these items from our non-GAAP measures to facilitate an evaluation of our current operating performance and comparisons to our past operating performance. These items may vary significantly in magnitude or timing and do not necessarily reflect anticipated future operating activities. In addition, we believe that providing these non-GAAP measures affords investors a view of our operating results that may be more easily compared with our peer companies.
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The following table reconciles gross profit, operating loss, net loss and net loss per share on a GAAP and non-GAAP basis for the three and six months ended June 28, 2025 and June 29, 2024:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||||||||||
| GAAP Gross Profit | $ | 38,299 | $ | 27,466 | $ | 58,612 | $ | 63,567 | |||||||||||||||
| Stock-based compensation | 197 | 270 | 543 | 1,099 | |||||||||||||||||||
| Restructuring and other | — | — | 1,658 | — | |||||||||||||||||||
| Non-GAAP Gross Profit | $ | 38,496 | $ | 27,736 | $ | 60,813 | $ | 64,666 | |||||||||||||||
| GAAP Gross Margin | 30.0 | % | 16.5 | % | 25.6 | % | 20.1 | % | |||||||||||||||
| Non-GAAP Gross Margin | 30.2 | % | 16.7 | % | 26.5 | % | 20.4 | % | |||||||||||||||
| GAAP Operating Loss | $ | (36,716) | $ | (61,068) | $ | (82,466) | $ | (49,168) | |||||||||||||||
| Amortization of acquired intangible assets | 145 | 168 | 280 | 339 | |||||||||||||||||||
| Stock-based compensation | 3,763 | 4,510 | 9,076 | 12,458 | |||||||||||||||||||
| Net merger, acquisition and divestiture expense (income) | 4,768 | (43) | 5,718 | (74,159) | |||||||||||||||||||
| Restructuring and other | 1,032 | 8,230 | 8,864 | 22,377 | |||||||||||||||||||
| Non-GAAP Operating Loss | $ | (27,008) | $ | (48,203) | $ | (58,528) | $ | (88,153) | |||||||||||||||
| GAAP Operating Margin | (28.8) | % | (36.7) | % | (36.0) | % | (15.5) | % | |||||||||||||||
| Non-GAAP Operating Margin | (21.2) | % | (29.0) | % | (25.5) | % | (27.9) | % | |||||||||||||||
| GAAP Net Loss | $ | (22,808) | $ | (70,646) | $ | (110,081) | $ | (62,039) | |||||||||||||||
| Amortization of acquired intangible assets | 145 | 168 | 280 | 339 | |||||||||||||||||||
| Stock-based compensation | 3,763 | 4,510 | 9,076 | 12,458 | |||||||||||||||||||
| Net merger, acquisition and divestiture expense (income) | 4,768 | (43) | 5,718 | (74,159) | |||||||||||||||||||
| Restructuring and other | 1,032 | 8,230 | 8,864 | 22,377 | |||||||||||||||||||
| (Gain) loss on strategic investments | (394) | — | (394) | 375 | |||||||||||||||||||
| Debt issuance costs | 5,627 | 238 | 18,636 | 477 | |||||||||||||||||||
| Income tax effect | (1,100) | — | (1,017) | (409) | |||||||||||||||||||
| Non-GAAP Net Loss | $ | (8,967) | $ | (57,543) | $ | (68,918) | $ | (100,581) | |||||||||||||||
| GAAP Net Loss Per Diluted Share | $ | (0.68) | $ | (2.41) | $ | (3.41) | $ | (2.16) | |||||||||||||||
| Dilutive effect of non-GAAP adjustments | 0.41 | 0.45 | 1.27 | (1.34) | |||||||||||||||||||
| Non-GAAP Net Loss Per Diluted Share | $ | (0.27) | $ | (1.96) | $ | (2.14) | $ | (3.50) | |||||||||||||||
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Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates and assumptions are based on historical experience and various other factors that we believe are reasonable under the circumstances. Actual results and outcomes may differ from our estimates and assumptions.
The critical accounting policies affected most significantly by estimates and assumptions used in the preparation of our consolidated financial statements are described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, filed with the Securities and Exchange Commission on March 12, 2025. On an ongoing basis, we evaluate the critical accounting policies used to prepare our consolidated financial statements.
Overview of Results of Operations
The following table sets forth our results of operations as a percentage of revenue:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | ||||||||||||||||||||
| Revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Cost of product revenue | 70.0 | 83.5 | 73.7 | 79.9 | |||||||||||||||||||
| Restructuring and other | — | — | 0.7 | — | |||||||||||||||||||
| Total cost of revenue | 70.0 | 83.5 | 74.4 | 79.9 | |||||||||||||||||||
| Gross profit | 30.0 | 16.5 | 25.6 | 20.1 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 10.8 | 14.0 | 12.4 | 18.1 | |||||||||||||||||||
| Selling and marketing | 30.6 | 24.0 | 28.5 | 21.9 | |||||||||||||||||||
| General and administrative | 16.5 | 10.2 | 17.5 | (11.6) | |||||||||||||||||||
| Restructuring and other | 0.8 | 4.9 | 3.1 | 7.1 | |||||||||||||||||||
| Amortization of acquired intangible assets | 0.1 | 0.1 | 0.1 | 0.1 | |||||||||||||||||||
| Total operating expenses | 58.8 | 53.2 | 61.6 | 35.6 | |||||||||||||||||||
| Operating loss | (28.8) | (36.7) | (36.0) | (15.5) | |||||||||||||||||||
| Other income (expense), net | 10.5 | (5.3) | (12.1) | (3.8) | |||||||||||||||||||
| Loss before income taxes | (18.3) | (42.0) | (48.1) | (19.3) | |||||||||||||||||||
| Income tax (benefit) expense | (0.4) | 0.5 | (0.1) | 0.3 | |||||||||||||||||||
| Net loss | (17.9) | % | (42.5) | % | (48.0) | % | (19.6) | % | |||||||||||||||
Comparison of Three and Six Months Ended June 28, 2025 and June 29, 2024
Revenue
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 127,558 | $ | 166,361 | $ | (38,803) | (23.3) | % | $ | 229,127 | $ | 316,375 | $ | (87,248) | (27.6) | % | |||||||||||||||||||||||||||||||
Revenue for the three months ended June 28, 2025 decreased $38.8 million to $127.6 million, or 23.3%, from $166.4 million for the three months ended June 29, 2024. The decrease was primarily attributable to a $27.9 million, or 33.1%, decline in domestic revenue and a $10.9 million, or 13.3%, decline in international revenue, which reflected a decrease of 16.6% in EMEA, partially offset by an increase of 5.8% in Japan, in each case compared to the three months ended June 29, 2024. The decrease in revenue reflected a decrease of 10.1% in total robots shipped due to competition in the market and longer than expected delays in scaling production and sales of our new products, and a 8.8% decrease in gross average selling price for the three months ended June 28, 2025, compared to the three months ended June 29, 2024.
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Revenue for the six months ended June 28, 2025 decreased $87.2 million to $229.1 million, or 27.6%, from $316.4 million for the six months ended June 29, 2024. The decrease was primarily attributable to a $55.4 million, or 36.1%, decline in domestic revenue and a $31.9 million, or 19.5%, decline in international revenue, which reflected decreases of 22.1% in EMEA and 7.5% in Japan compared to the six months ended June 29, 2024. The decrease in revenue reflected a decrease of 10.1% in total robots shipped and a 11.3% decrease in gross average selling price for the six months ended June 28, 2025, compared to the six months ended June 29, 2024. The decrease in revenue was also impacted by additional promotional activity to stimulate sell-through of our legacy products before the full launch of our 2025 product lineup.
Cost of Product Revenue
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Cost of product revenue | $ | 89,259 | $ | 138,895 | $ | (49,636) | (35.7) | % | $ | 168,857 | $ | 252,808 | $ | (83,951) | (33.2) | % | |||||||||||||||||||||||||||||||
| As a percentage of revenue | 70.0 | % | 83.5 | % | 73.7 | % | 79.9 | % | |||||||||||||||||||||||||||||||||||||||
Cost of product revenue decreased to $89.3 million in the three months ended June 28, 2025, compared to $138.9 million in the three months ended June 29, 2024. The decrease was primarily driven by the 23.3% decrease in revenue, as well as adjustments recorded for obsolete or excess inventory and losses on purchase commitments during the three months ended June 29, 2024. In the second quarter of fiscal 2024, we finalized our 2025 product roadmap as part of our transition to a new contract manufacturing paradigm, evaluated our component inventory on-hand and non-cancelable purchase commitments with our contract manufacturers and suppliers, and recorded a charge totaling $18.4 million. This charge included a $10.3 million non-cash reserve for obsolete or excess component inventory and a $8.1 million charge for losses on non-cancelable purchase commitments.
Cost of product revenue decreased to $168.9 million in the six months ended June 28, 2025, compared to $252.8 million in the six months ended June 29, 2024. The decrease was primarily driven by the 27.6% decrease in revenue, as well as adjustments recorded for obsolete or excess inventory and losses on purchase commitments during the three months ended June 29, 2024. In the second quarter of fiscal 2024, we finalized our 2025 product roadmap as part of our transition to a new contract manufacturing paradigm, evaluated our component inventory on-hand and non-cancelable purchase commitments with our contract manufacturers and suppliers, and recorded a charge totaling $18.4 million. This charge included a $10.3 million non-cash reserve for obsolete or excess component inventory and a $8.1 million charge for losses on non-cancelable purchase commitments.
Gross Profit
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 38,299 | $ | 27,466 | $ | 10,833 | 39.4 | % | $ | 58,612 | $ | 63,567 | $ | (4,955) | (7.8) | % | |||||||||||||||||||||||||||||||
| Gross margin | 30.0 | % | 16.5 | % | 25.6 | % | 20.1 | % | |||||||||||||||||||||||||||||||||||||||
Gross margin increased to 30.0% in the three months ended June 28, 2025, compared to 16.5% in the three months ended June 29, 2024. Gross margin increased 13.5 percentage points primarily driven by the charges related to non-cash reserve for obsolete or excess component inventory and losses on non-cancellable purchase commitments recorded during the three months ended June 29, 2024 that did not recur during the three months ended June 28, 2025. The gross margin for the three months ended June 28, 2025 was also favorably impacted by sales of our new products with a better cost profile, partially offset by lower leverage on our fixed cost due to decreased revenue.
Gross margin increased to 25.6% in the six months ended June 28, 2025, compared to 20.1% in the six months ended June 29, 2024. Gross margin increased 5.5 percentage points primarily driven by the charges related to non-cash reserve for obsolete or excess component inventory and losses on non-cancellable purchase commitments recorded during the three months ended June 29, 2024 that did not recur during the three months ended June 28, 2025. The gross margin for the three months ended June 28, 2025 was also favorably impacted by sales of our new products with a better cost profile, partially offset by promotional activities to stimulate sell-through of our legacy products. Although we have taken a wide range of actions to drive gross margin improvement through a multitude of product cost optimization, manufacturing and supply chain initiatives that have been implemented over the past few quarters, our ability to deliver sustainable gross margin improvement will largely depend on our ability to drive revenue growth.
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Research and Development
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 13,766 | $ | 23,230 | $ | (9,464) | (40.7) | % | $ | 28,453 | $ | 57,108 | $ | (28,655) | (50.2) | % | |||||||||||||||||||||||||||||||
| As a percentage of revenue | 10.8 | % | 14.0 | % | 12.4 | % | 18.1 | % | |||||||||||||||||||||||||||||||||||||||
Research and development expenses decreased $9.5 million, or 40.7%, to $13.8 million (10.8% of revenue) in the three months ended June 28, 2025 from $23.2 million (14.0% of revenue) in the three months ended June 29, 2024. This decrease was primarily due to decreases of $6.9 million in people-related costs and $2.5 million in program-related costs during the three months ended June 28, 2025.
Research and development expenses decreased $28.7 million, or 50.2%, to $28.5 million (12.4% of revenue) in the six months ended June 28, 2025 from $57.1 million (18.1% of revenue) in the six months ended June 29, 2024. This decrease was primarily due to decreases of $22.2 million in people-related costs and $2.0 million in stock-based compensation associated with lower headcount resulting from the 2024 operational restructuring plan, as well as a decrease of $4.4 million in program-related costs during the six months ended June 28, 2025.
Selling and Marketing
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Selling and marketing | $ | 39,003 | $ | 39,980 | $ | (977) | (2.4) | % | $ | 65,054 | $ | 69,696 | $ | (4,642) | (6.7) | % | |||||||||||||||||||||||||||||||
| As a percentage of revenue | 30.6 | % | 24.0 | % | 28.5 | % | 21.9 | % | |||||||||||||||||||||||||||||||||||||||
Selling and marketing expenses decreased $1.0 million, or 2.4%, to $39.0 million (30.6% of revenue) in the three months ended June 28, 2025 from $40.0 million (24.0% of revenue) in the three months ended June 29, 2024. This decrease was primarily attributable to a $1.1 million decrease in people-related costs associated with the lower headcount resulting from the 2024 operational restructuring plan. Selling and marketing expenses as a percentage of revenue increased during the three months ended June 28, 2025 primarily due to the investment associated with the 2025 new product launches.
Selling and marketing expenses decreased $4.6 million, or 6.7%, to $65.1 million (28.5% of revenue) in the six months ended June 28, 2025 from $69.7 million (21.9% of revenue) in the six months ended June 29, 2024. This decrease was primarily attributable to a $4.4 million decrease in people-related costs associated with the lower headcount resulting from the 2024 operational restructuring plan. Selling and marketing expenses as a percentage of revenue increased during the six months ended June 28, 2025 primarily due to the investment associated with the 2025 new product launches.
General and Administrative
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 21,069 | $ | 16,926 | $ | 4,143 | 24.5 | % | $ | 40,085 | $ | (36,785) | $ | 76,870 | (209.0) | % | |||||||||||||||||||||||||||||||
| As a percentage of revenue | 16.5 | % | 10.2 | % | 17.5 | % | (11.6) | % | |||||||||||||||||||||||||||||||||||||||
General and administrative expenses increased $4.1 million, or 24.5%, to $21.1 million (16.5% of revenue) in the three months ended June 28, 2025, from $16.9 million (10.2% of revenue) in the three months ended June 29, 2024. This increase was primarily driven by an increase of $4.8 million of legal and professional fees associated with our strategic review process.
General and administrative expenses increased $76.9 million, or 209.0%, to $40.1 million (17.5% of revenue) in the six months ended June 28, 2025, from ($36.8) million ((11.6)% of revenue) in the six months ended June 29, 2024. This increase was primarily driven by receipt of the $94.0 million Parent Termination Fee, offset by a payment of $18.8 million for professional fees incurred in connection with the Transactions during the six months ended June 29, 2024. The increase was also driven by an increase of $4.7 million of legal and professional fees associated with our strategic review process, partially offset by a decrease of $2.5 million in people-related costs associated with lower headcount.
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Restructuring and Other
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | $ | — | $ | — | $ | — | — | % | $ | 1,658 | $ | — | $ | 1,658 | — | % | |||||||||||||||||||||||||||||||
| Operating expense | 1,032 | 8,230 | (7,198) | (87.5) | % | 7,206 | 22,377 | (15,171) | (67.8) | % | |||||||||||||||||||||||||||||||||||||
| Total restructuring and other | $ | 1,032 | $ | 8,230 | $ | (7,198) | (87.5) | % | $ | 8,864 | $ | 22,377 | $ | (13,513) | (60.4) | % | |||||||||||||||||||||||||||||||
| As a percentage of revenue | 0.8 | % | 4.9 | % | 3.1 | % | 7.1 | % | |||||||||||||||||||||||||||||||||||||||
Restructuring and other expenses decreased $7.2 million, or 87.5%, to $1.0 million in the three months ended June 28, 2025, from $8.2 million in the three months ended June 29, 2024. Restructuring and other expenses for the three months ended June 28, 2025 and June 29, 2024 relate to the 2024 operational restructuring plan which began in March 2024. During the three months ended June 28, 2025 and June 29, 2024, we recorded $0.6 million and $4.9 million, respectively, of severance-related costs as well as other restructuring costs of $0.4 million and $1.2 million, respectively, associated with exit activities. During the three months ended June 29, 2024, we also recorded $2.2 million associated with CEO transition costs.
Restructuring and other expenses decreased $13.5 million, or 60.4%, to $8.9 million in the six months ended June 28, 2025, from $22.4 million in the six months ended June 29, 2024. Restructuring and other expenses for the six months ended June 28, 2025 and June 29, 2024 relate to the 2024 operational restructuring plan which began in March 2024. During the six months ended June 28, 2025 and June 29, 2024, we recorded $2.7 million and $16.2 million, respectively, of severance-related costs as well as other restructuring costs of $6.2 million and $5.7 million, respectively, associated with exit activities. During the six months ended June 29, 2024, we also recorded $0.4 million associated with CEO transition costs.
Amortization of Acquired Intangible Assets
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Operating expense | $ | 145 | $ | 168 | $ | (23) | (13.7) | % | $ | 280 | $ | 339 | $ | (59) | (17.4) | % | |||||||||||||||||||||||||||||||
| As a percentage of revenue | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | |||||||||||||||||||||||||||||||||||||||
Amortization of acquired intangible assets relates to our customer relationships.
Other Income (Expense), Net
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 793 | $ | 2,623 | $ | (1,830) | (69.8) | % | $ | 1,888 | $ | 4,892 | $ | (3,004) | (61.4) | % | |||||||||||||||||||||||||||||||
| Interest expense | (5,099) | (5,398) | 299 | (5.5) | % | (10,130) | (10,936) | 806 | (7.4) | % | |||||||||||||||||||||||||||||||||||||
| Changes in fair value of Term Loan | 23,278 | (5,754) | 29,032 | (504.6) | % | (2,687) | (4,746) | 2,059 | (43.4) | % | |||||||||||||||||||||||||||||||||||||
| Debt issuance costs | (5,627) | (238) | (5,389) | 2,264.3 | % | (18,636) | (477) | (18,159) | 3,806.9 | % | |||||||||||||||||||||||||||||||||||||
| Other | 40 | (82) | 122 | (148.8) | % | 1,885 | (767) | 2,652 | (345.8) | % | |||||||||||||||||||||||||||||||||||||
Total other income (expense), net | $ | 13,385 | $ | (8,849) | $ | 22,234 | (251.3) | % | $ | (27,680) | $ | (12,034) | $ | (15,646) | 130.0 | % | |||||||||||||||||||||||||||||||
| As a percentage of revenue | 10.5 | % | (5.3) | % | (12.1) | % | (3.8) | % | |||||||||||||||||||||||||||||||||||||||
Other income (expense), net increased $22.2 million, or 251.3%, to $13.4 million in the three months ended June 28, 2025 from ($8.8) million in the three months ended June 29, 2024. This increase was primarily driven by the $29.0 million increase in the non-cash adjustment due to change in fair value of our Term Loan, offset by a $5.4 million increase related to the fair value of issued warrants.
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Other expense, net increased $15.6 million, or 130.0%, to $27.7 million in the six months ended June 28, 2025 from $12.0 million in the six months ended June 29, 2024. This increase was primarily driven by the $18.2 million increase related to the fair value of issued warrants.
Income Tax (Benefit) Expense
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | June 28, 2025 | June 29, 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Income tax (benefit) expense | $ | (523) | $ | 729 | $ | (1,252) | (171.7) | % | $ | (65) | $ | 837 | $ | (902) | (107.8) | % | |||||||||||||||||||||||||||||||
| Effective income tax rate | 2.2 | % | (1.0) | % | 0.1 | % | (1.4) | % | |||||||||||||||||||||||||||||||||||||||
We recorded income tax benefits of $0.5 million and $0.1 million for the three and six months ended June 28, 2025, respectively, and income tax expense of $0.7 million and $0.8 million for the three months ended June 29, 2024, respectively. The income tax benefit for the three and six months ended June 28, 2025 resulted in an effective income tax rate of 2.2% and 0.1%, respectively. The income tax expense for the three and six months ended June 29, 2024 resulted in an effective income tax rate of (1.0)% and (1.4)%, respectively. Our effective income tax rate differed from the federal statutory tax rate of 21% primarily driven by the impact of the valuation allowance against our U.S. and certain foreign net deferred tax assets, and by the release of an uncertain tax position reserve.
Liquidity and Capital Resources
At June 28, 2025, our cash and cash equivalents were $40.6 million, a decline from cash and cash equivalents of $69.9 million at March 29, 2025. At June 28, 2025, we also had $38.4 million in restricted cash, $36.0 million of which was set aside for future repayment of the Term Loan subject to our limited ability to utilize such amounts at the discretion of the Lenders for the purchase of inventory in the third quarter of fiscal 2025. On July 29, 2025, with the Lenders' consent, we drew down an additional $10.0 million of the $36.0 million remaining in the restricted cash account. The other $2.4 million is used for collateral for our credit card program and to secure outstanding letters of credit and is included in other assets on the consolidated balance sheets. Our working capital, which represents our total current assets less total current liabilities including the Term Loan, was ($211.8) million as of June 28, 2025, compared to $70.3 million as of December 28, 2024. Cash and cash equivalents held by our foreign subsidiaries totaled $10.1 million as of June 28, 2025. The undistributed earnings of our foreign subsidiaries remain permanently reinvested outside of the United States as of June 28, 2025.
We manufacture and distribute our products through contract manufacturers and third-party logistics providers. We believe this approach gives us the advantages of relatively low capital investment and significant flexibility in scheduling production and managing inventory levels. By leasing our office facilities, we also minimize the cash needed for expansion, and only invest periodically in leasehold improvements a portion of which is often reimbursed by the landlords of these facilities. Accordingly, our capital spending is generally limited to leasehold improvements, business applications software and computer and equipment. With the shift to the new contract manufacturing paradigm in 2024, we are spending significantly less on tooling and machinery than in previous periods.
Our strategy for delivering consumer products to our distributors and retail customers gives us the flexibility to provide container shipments directly from our contract manufacturers in Vietnam to our customers or, alternatively, allows our distributors and certain retail customers to take possession of product on a domestic basis. Accordingly, our inventory consists of goods shipped to our third-party logistics providers for the fulfillment of distributor, retail and direct-to-consumer sales. Our contract manufacturers are also responsible for purchasing and stocking components required for the production of our products, and they typically invoice us when the finished goods are shipped.
Cash used in operating activities
Net cash used in operating activities for the six months ended June 28, 2025 was $56.6 million, of which the principal components were our net loss of $110.1 million, offset by the non-cash charges of $37.0 million and cash inflow of $16.5 million from changes in working capital. The change in working capital was driven by net cash inflows of $59.4 million from accounts payable, partially offset by net cash outflows of $32.1 million from accrued expenses and other liabilities and $12.8 million from inventory. During the six months ended June 29, 2024, the net cash used in operating activities benefited from the one-time receipt of the Parent Termination Fee, net of professional fees paid of $75.2 million in first quarter of fiscal 2024, as a result of the termination of the Merger Agreement.
Cash used in investing activities
Net cash used in investing activities for the six months ended June 28, 2025 was $0.01 million and related to the purchase of investments.
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Cash used in financing activities
Net cash used in financing activities for the six months ended June 28, 2025 was $4.3 million and primarily related to the $4.0 million repayment to the Term Loan in connection with Amendment No. 3.
Debt
Term Loan
On July 24, 2023, we entered into the Credit Agreement by and among us, as borrower, each lender from time to time party thereto and TCG Senior Funding L.L.C., an affiliate of The Carlyle Group, as administrative agent and collateral agent, providing for a $200.0 million Term Loan. During fiscal 2023, we received total proceeds from the Term Loan of $188.2 million, net of $11.8 million of debt issuance costs. During the first quarter of fiscal 2024, as a result of the termination of the Merger Agreement and receipt of the Parent Termination Fee of $94.0 million from Amazon on January 29, 2024, $35.0 million of such Parent Termination Fee was used immediately to repay a portion of the Term Loan. The Term Loan matures on July 24, 2026 with additional terms more fully described in Note 9 to our consolidated financial statements.
Between March and August 2025, we entered into four amendments to our Credit Agreement pursuant to which the Lenders waived, for specified time periods, the Specified Covenants. As of the most recent amendment, effective August 6, 2025, the Lenders have waived the Specified Covenants until September 19, 2025. Additional terms of these amendments are more fully described in Note 9 to our consolidated financial statements.
Lines of Credit
As of June 28, 2025, we had letters of credit outstanding of $1.4 million with Bank of America, N.A. The letters of credit were collateralized with a cash deposit.
ATM Equity Offering
In February 2024, we entered into an ATM Equity Offering Sales Agreement (the "ATM Agreement") with BofA Securities, Inc. ("BofA") pursuant to which we may offer and sell, from time to time, at our option, up to an aggregate of $100.0 million in shares of common stock through BofA, as sales agent, in an "at the market" offering. Under the ATM Agreement, shares will be offered and sold pursuant to an effective automatic shelf registration statement on Form S-3 filed with the Securities and Exchange Commission. BofA will receive a commission up to 3.00% of the aggregate gross sales proceeds of any common stock sold through BofA under the ATM Agreement.
During the first quarter of fiscal 2025, we suspended any sales of our common stock pursuant to the ATM Agreement unless and until we file a new shelf registration statement on Form S-3 with the Securities and Exchange Commission. As of December 28, 2024, we have sold an aggregate of 1.9 million shares under the ATM Agreement, and received proceeds of $19.3 million, net of total issuance costs of $1.1 million incurred in connection with the ATM Agreement.
Liquidity Risks and Uncertainties
As part of our quarterly assessment completed during the fourth quarter of fiscal 2024 in our Annual Report on Form 10-K, management concluded that there was substantial doubt about our ability to continue as a going concern for a period of at least 12 months from the date of issuance of the consolidated financial statements.
On March 11, 2025, we entered into Amendment No. 1, pursuant to which the Lenders waived, during Initial Waiver Period, our obligation to comply with the Specified Covenants. On April 30, 2025, we entered into Amendment No. 2 to the Credit Agreement which extended the Initial Waiver Period to June 6, 2025, and on June 5, 2025, we entered into Amendment No. 3 to the Credit Agreement which further extended the Initial Waiver Period to August 14, 2025. On August 6, 2025, we entered into Amendment No. 4 to the Credit Agreement, which further extended the Initial Waiver Period to September 19, 2025.
Our Board of Directors initiated and continues its formal strategic review to evaluate a broad range of strategic alternatives, including, but not limited to, exploring a potential sale or strategic transaction and refinancing our debt. We remain actively engaged in ongoing collaborative and constructive discussions with our primary lender while the Board continues its strategic review process. There can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions. Additional actions within our control to maintain our liquidity and operations include optimizing our production volumes with contract manufacturers by reducing inventory supply forecast for cancellable purchase orders, further reducing discretionary spending in all areas of the business and realigning resources through ongoing attrition.
As of June 28, 2025, the fair value of the Term Loan was $203.2 million, which significantly exceeded our available cash and cash equivalents and there continues to be substantial doubt about our ability to continue as a going concern. Absent further waiver of the breach of the Specified Covenants by the Lenders, we expect to be in default under the Credit Agreement on September 19, 2025 unless there is a favorable resolution from the strategic review. If we are in default under the Credit Agreement and the Lenders accelerate the repayment obligations with respect to the outstanding loans, we expect that we would
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be unable to repay our obligations under the Credit Agreement, may be forced to significantly curtail or cease operations and would likely seek bankruptcy protection. In such proceedings, it is unlikely that any proceeds would remain for distribution to stockholders and, as a result, stockholders would likely lose all of their investment in us. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Contractual Obligations
The disclosure of our contractual obligations and commitments is set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contractual Obligations" in our Annual Report on Form 10-K for the year ended December 28, 2024. Our principal commitments generally consist of obligations under the Term Loan, leases for office space, inventory related purchase obligations, and minimum contractual obligations. Other obligations consist primarily of subscription services.
As of June 28, 2025, we had outstanding purchase orders aggregating approximately $173.1 million. The purchase orders are typically related to the purchase of inventory and marketing and media spend in the normal course of business. Included in these outstanding purchase orders is $124.5 million related to inventory purchases at our contract manufacturers, of which $51.8 million are not cancellable without penalty.
We utilize contract manufacturers to build our products and some of our accessories. These contract manufacturers manage the supply of components, capacity and resources to build products based on a forecasted production plan, which typically covers a rolling 12-month period. During the normal course of business, and in order to ensure adequate supply, we enter into purchase commitments with contract manufacturers and suppliers. In certain instances, these purchase commitments allow us the option to cancel, reschedule and/or adjust the supply requirements based on our business needs for a period of time before the order is due to be fulfilled. In some instances, these purchase commitments are not cancellable in the event of a change in demand or other circumstances, such as where the contract manufacturer and/or supplier has built products, semi-finished products or procured and/or ordered unique, iRobot-specific designs, and/or specific non-cancellable, non-returnable components based on the provided forecasts. If we cancel all or part of the orders, or materially reduce forecasted orders, in certain circumstances we may be liable to our contract manufacturers and/or suppliers for the cost of the excess components purchased by our contract manufacturers based on the forecasted production plan and the purchase terms of its component suppliers.
Recently Adopted Accounting Pronouncements
See Note 2 to our consolidated financial statements for a discussion of recently adopted accounting pronouncements.
Recently Issued Accounting Pronouncements
See Note 2 to our consolidated financial statements for a discussion of recently issued accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Exchange Rate Sensitivity
Our international revenue and expenses are denominated in multiple currencies, including British Pounds, Canadian Dollars, Chinese Renminbi, Euros and Japanese Yen. As such, we have exposure to changes in exchange rates associated with the revenue and operating expenses of our foreign operations. Any fluctuations in other currencies will have minimal direct impact on our international revenue.
In addition to international business conducted in foreign currencies, we have international revenue denominated in U.S. dollars. As the U.S. dollar strengthens or weakens against other currencies, our international distributors may be impacted, which could affect their profitability and our ability to maintain current pricing levels on our international consumer products.
We historically entered into derivative instruments that were designated as cash flow hedges to reduce our exposure to foreign currency exchange risk in sales. These contracts had a maturity of three years or less. We do not currently use foreign exchange contracts or derivatives that are designated as cash flow hedges to hedge any foreign currency exposures for accounting purposes.
We enter into economic hedges that are not designated as hedges from an accounting standpoint to reduce or eliminate the effects of foreign exchange rate changes typically related to short term trade receivables and payables. These contracts have maturities of approximately one month. At June 28, 2025 we had no outstanding economic hedges. At December 28, 2024, we had outstanding economic hedges with a total notional value of $28.1 million.
Based on transactions denominated in currencies other than the U.S. dollar as of June 28, 2025, a hypothetical change of 10% would have resulted in an impact on revenue of approximately $6 million and $10 million for the three and six months ended June 28, 2025, respectively.
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Item 4. Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective at a reasonable assurance level in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms; and (ii) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
From time to time and in the ordinary course of business, we are subject to various claims, charges and litigation. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, which could materially affect our financial condition or results of operations. See Note 12 to our consolidated financial statements for a description of certain of our legal proceedings.
Item 1A. Risk Factors
We operate in a rapidly changing environment that involves a number of risks that have materially affected and could in the future materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this report, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 28, 2024, and in our Quarterly Report on Form 10-Q for the period ended March 29, 2025, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not presently known to us, which we currently deem immaterial or which are similar to those faced by other companies in our industry or business in general, may also impair our business operations. There are no material changes to the Risk Factors described in our Annual Report on Form 10-K for the year ended December 28, 2024, other than as set forth below:
We cannot assure you that our ongoing review of strategic alternatives will result in any transaction being consummated, and speculation and uncertainty regarding the outcome of this review may adversely impact our business.
On March 12, 2025, we announced that our board of directors is conducting a review of strategic alternatives, including, but not limited to, exploring a potential sale or strategic transaction and refinancing our debt. This review process is ongoing, and there can be no assurance that it will result in any transaction or outcome. Whether the process will result in any transactions, our ability to complete any such transaction, and if our board of directors decides to pursue one or more transactions, will depend on numerous factors, some of which are beyond our control. Such factors include the interest of potential acquirers or strategic partners in a potential transaction, the value potential acquirers or strategic partners attribute to our business, regulatory approvals, market conditions, and industry trends. Potential strategic transactions that require stockholder approval may not be approved by our stockholders or, if required, a counterparty's stockholders. Furthermore, any strategic transaction into which we enter may be delayed or may ultimately not be consummated as a result of regulatory reviews (which may include domestic and foreign antitrust, CFIUS or other regulatory agency reviews) and determinations or other factors.
The price of our common stock decreased significantly following our public announcement of our 2024 financial results and the initiation of our review of strategic alternatives and may be further adversely affected if the strategic review process does not result in transactions or if one or more transactions are consummated on terms that investors view as unfavorable to us. Even if one or more transactions are completed, there can be no assurance that any such transactions will be successful or have a positive effect on stockholder value. Our board of directors may also determine that no transaction is in the best interest of our stockholders. Our financial results and operations could be adversely affected by the strategic process and by the uncertainty regarding its outcome.
The attention of management and our board of directors could be diverted from our core business operations as a result of this strategic review process. We have diverted capital and other resources to the process that otherwise could have been used in
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our business operations, and we expect to continue to do so until the process is completed. We could incur substantial expenses associated with identifying and evaluating potential strategic alternatives, including those related to employee retention payments, equity compensation, severance pay and legal, accounting and financial advisor fees. A considerable portion of these expenses may be incurred regardless of whether a transaction is completed. In addition, the process could lead us to lose or fail to attract, retain and motivate key employees, and to lose or fail to attract customers or business partners. Furthermore, it could expose us to litigation. The public announcement of a strategic alternative may also yield a negative impact on operating results if prospective or existing customers, vendors or partners are reluctant to commit to new or renewed contracts.
We do not intend to disclose developments or provide updates on the progress or status of the strategic process until our board of directors deems further disclosure is appropriate or necessary. Accordingly, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of our company could cause the price of our common stock to fluctuate significantly. If we are unable to mitigate these or other potential risks related to the uncertainty caused by our evaluation of strategic alternatives, it could disrupt our business and adversely impact operating results and financial condition.
The waiver of events of default under our senior secured term loan credit facility is time-limited; if this waiver is not extended at the end of the applicable period, we will be in default. Our senior secured term loan credit facility provides our lenders with a first-priority lien against substantially all of our assets, and contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our results of operations.
On March 11, 2025, we entered into Amendment No. 1 to our credit agreement (the "Credit Agreement" with TCG Senior Funding L.L.C., an affiliate of The Carlyle Group, as administrative agent and collateral agent (the "Agent") and the lenders party thereto (the "Lenders"). Pursuant to Amendment No. 1, the Lenders waived, until May 6, 2025 (the "Initial Waiver Period"), our covenant obligations to (1) provide a report and opinion of our auditor with respect to our annual consolidated financial statements for fiscal year 2024 without an exception regarding our ability to continue as a going concern (the "Going Concern Covenant") and (2) maintain a minimum level of core assets (the "Minimum Core Assets Covenant" and, together with the Going Concern Covenant, the "Specified Covenants"). On April 30, 2025, we entered into Amendment No. 2 to the Credit Agreement, which extended the Initial Waiver Period to June 6, 2025, and on June 5, 2025, we entered into Amendment No. 3 to the Credit Agreement, which further extended the Initial Waiver Period to August 14, 2025. On August 6. 2025, we entered into Amendment No. 4 to the Credit Agreement, which further extended the Initial Waiver Period to September 19, 2025 (the "Extended Waiver Period"). No event of default will occur under the Credit Agreement as a result of failure to comply with the Specified Covenants during the Extended Waiver Period; however, we are still obligated to comply with the Specified Covenants after the end of the Extended Waiver Period and if we do not, unless the Lenders further extend such waiver by the end of the Extended Waiver Period, an event of default will occur.
The auditor report on our consolidated financial statements for the fiscal year ended December 28, 2024 includes an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern; therefore, we would be in breach of the Going Concern Covenant and the Agent would be able to exercise all applicable remedies under the Credit Agreement but for the waiver of breach during the Extended Waiver Period as described above. The earliest we would be able to regain compliance with the Going Concern Covenant is upon the filing of our Annual Report on Form 10-K for the year ending January 3, 2026, which we do not anticipate will be filed until March 2026. As a result, we are dependent on continued waivers from the Lenders to avoid an event of default related to the Going Concern Covenant, which waivers are in the Lenders' sole discretion. We cannot assure you that the Lenders will provide any additional waiver of compliance with the Specified Covenants by the end of the Extended Waiver Period.
Any failure by us to comply with the covenants or payment requirements specified in the Credit Agreement (including the Specified Covenants after the Extended Waiver Period) would, result in an event of default under the Credit Agreement, which may result in the termination of the Credit Agreement and acceleration of repayment obligations with respect to any outstanding loans. In addition, the Lenders would have the right to proceed against the collateral in which we granted a security interest to them, which consists of substantially all our assets. As of June 28, 2025, the fair value of the Term Loan was $203.2 million and our cash and cash equivalents totaled $40.6 million. If we are in default under the Credit Agreement and the Lenders accelerate the repayment obligations with respect to the outstanding loans, we expect that we would be unable to repay our obligations under the Credit Agreement, may be forced to significantly curtail or cease operations and would likely seek bankruptcy protection. In such proceedings, it is unlikely that any proceeds would remain for distribution to stockholders and, as a result, stockholders would likely lose all of their investment in our company.
The Credit Agreement contains customary negative covenants that limit our and our subsidiaries' ability to, among other things, grant or incur liens, incur additional indebtedness, make certain restricted investments or payments, including payment of dividends on our capital stock and payments on certain permitted indebtedness, enter into certain mergers and acquisitions or engage in certain asset sales, subject in each case to certain exceptions. The Credit Agreement also includes certain restrictions on the use of a portion of the termination payment received by us from Amazon in early 2024, which the remaining amount thereof (after giving effect to certain periods for such amounts to be used for inventory in limited circumstances and upon
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satisfying certain conditions) will ultimately be required to be used to prepay a portion of the loan under the Credit Agreement. The terms of our outstanding debt may restrict our current and future operations and could adversely affect our ability to finance our future operations or capital needs or to execute business strategies in the manner desired. In addition, complying with the covenants may make it more difficult for us to successfully execute our business strategy, invest in our growth strategy, and compete against companies who are not subject to such restrictions.
Significant developments in U.S. trade policies have had, and we expect will continue to have, a material adverse effect on our business, financial condition and results of operations.
There is significant uncertainty about the future of trade relationships around the world, including potential changes to trade laws and regulations, trade policies, and tariffs. The United States has recently announced changes to U.S. trade policy, including increasing tariffs on imports, in some cases significantly, and potentially renegotiating or terminating existing trade agreements. For example, in February 2025, the U.S. government implemented an additional 10% tariff on goods being imported from China and, in response, the Chinese government implemented a 15% tariff on certain goods being imported into China from the United States. In April 2025, the U.S. government imposed broad new tariffs, including a baseline tariff of 10% on all imports, plus additional country-specific tariffs. In July 2025, Vietnam and the United States reached a provisional understanding to reduce impending U.S. tariffs on goods imported from Vietnam to 20% (from an earlier proposed 46%), while maintaining a higher 40% tariff rate on products deemed "trans-shipped" through Vietnam from third countries. We cannot predict whether, and to what extent, there may be further changes to international trade agreements, including those with China and Vietnam, or whether, or to what extent, quotas, duties, additional tariffs, export controls or other restrictions will be changed or imposed by the United States or by other countries. The imposition of these new or additional tariffs or other trade barriers may significantly raise the cost of our products. In such a case, there can be no assurance that we will be able to shift manufacturing and supply agreements to non-impacted countries, including the United States, to reduce the effects of the tariffs. As a result, we may suffer margin erosion or be required to raise our prices, which may make our products less competitive in certain markets where our competitors are unconstrained by such tariffs, and may result in the loss of customers, negatively impact our results of operations, or otherwise harm our business. We cannot predict future trade policy and regulations in the United States and other countries, the terms of any renegotiated trade agreements or treaties, or tariffs and their impact on our business. We continue to monitor the impact of these tariffs, as well as potential retaliatory tariffs imposed by other countries. These tariffs could have a material adverse impact on the global consumer products industry, supply chains worldwide, and other political and macroeconomic conditions. A trade war could have a significant adverse effect on world trade and the world economy. Uncertainty surrounding international trade policy and regulations as well as disputes and protectionist measures could also have an adverse effect on consumer confidence and spending.
Changes or proposed changes in U.S. or other countries' trade policies may result in restrictions and economic disincentives on international trade. Tariffs, economic sanctions and other changes in U.S. trade policy have in the past and could in the future trigger retaliatory actions by affected countries, and certain foreign governments have instituted or are considering imposing retaliatory measures on certain U.S. goods. These tariffs, and other governmental action relating to international trade agreements or policies, may directly or indirectly adversely impact demand for our products, our costs, customers, suppliers, distributors, resellers and/or the U.S. economy or certain sectors thereof and, as a result, may adversely impact our business, financial condition and results of operations. It remains unclear what the U.S. or foreign governments will or will not do with respect to tariffs, international trade agreements and policies on a short-term or long-term basis. We cannot predict future trade policy, whether exclusions will be continued or reinstated, or the terms of any new trade agreements or their impacts on our business. Further, any emerging protectionist or nationalist trends (whether regulatory- or consumer-driven) either in the United States or in other countries could affect the trade environment. The new tariff increases on imports to the United States, including from China and Vietnam, should they be sustained for an extended period of time, would have a significant adverse effect on our supply chain and financial and operating results. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could adversely impact our business, financial condition and results of operations.
In response to international trade policy, as well as other risks associated with concentrated manufacturing in China, in 2023 we relocated a meaningful portion of our supply chain from China to Vietnam. We plan on manufacturing only a limited number of accessories in China that are U.S. bound, and no robots. Over time, we anticipate relocating the manufacture of these remaining accessories outside of China. Such relocation activities increase costs and risks associated with establishing new manufacturing facilities, and any additional or increased tariffs, including tariffs imposed on imports from Vietnam, may nonetheless result in compression on our margin on products sold and pricing pressures on our products. Any additional or increased tariffs may in the future cause us to further increase prices to our customers which we believe has reduced, and in the future may reduce, demand for our products.
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Item 5. Other Information
(c) Insider Trading Arrangements
During the fiscal quarter ended June 28, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted terminated
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Item 6. Exhibits
EXHIBIT INDEX
| Exhibit Number | Description | |||||||
4.1 | Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed June 6, 2025). | |||||||
10.1 | Amendment No. 2 to Credit Agreement, dated as of April 30, 2025, by and among the Company, as borrower, each lender from time to time party thereto, and TCG Senior Funding L.L.C., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed May 6, 2025). | |||||||
10.2 | Amendment No. 3 to Credit Agreement, dated as of June 5, 2025, by and among the Company, as borrower, each lender from time to time party thereto, and TCG Senior Funding L.L.C., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed June 6, 2025). | |||||||
10.3 | Fourth Amendment to the iRobot Corporation 2018 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed May 20, 2025) | |||||||
10.4† * | 2025 Executive Sale Bonus Plan | |||||||
10.5† * | Form of 2025 Executive Sale Bonus Plan Award Letter | |||||||
10.6* | Tenth Amendment to Lease Agreement between the Registrant and Boston Properties Limited Partnership for premises located at 4-18 Crosby Drive, Bedford, Massachusetts, dated as of July 22, 2025 | |||||||
31.1* | Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 | |||||||
31.2* | Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 | |||||||
32.1** | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 104* | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*) | |||||||
__________________________
| * | Filed herewith | ||||
| ** | Furnished herewith | ||||
| † | Indicates a management contract or any compensatory plan, contract or arrangement. | ||||
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| iROBOT CORPORATION | ||||||||
Date: August 7, 2025 | By: | /s/ Karian Wong | ||||||
| Karian Wong | ||||||||
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||
42
Irobot
NASDAQ:IRBT
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Aug 7, 2025
[8-K] iRobot Corporation Reports Material Event
Jul 29, 2025
[SCHEDULE 13G/A] iRobot Corporation SEC Filing
Jul 17, 2025
[SCHEDULE 13G/A] iRobot Corporation SEC Filing
Jul 14, 2025
[Form 4] iRobot Corporation Insider Trading Activity
Jun 30, 2025
[Form 4] iRobot Corporation Insider Trading Activity
IRBT Stock Data
131.27M
29.86M
3.84%
54.24%
25.07%
Furnishings, Fixtures & Appliances
Household Appliances
United States
BEDFORD