iRobot Corp (IRBT) 2012 Q1 法說會逐字稿

Good day, everyone, and welcome to the iRobot first-quarter 2012 earnings financial results conference call.

This call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Elise Caffrey of iRobot Investor Relations.

Please go ahead.

Thank you and good morning.

Before I introduce the iRobot management team, I would like to note that statements made on today's call that are not based on historical information are forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such statements.

Additional information on these risks and uncertainties can be found in our public filings with the Securities and Exchange Commission.

iRobot undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information or circumstances.

During this conference call we will also disclose non-GAAP financial measures as defined by SEC Regulation G, including adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, amortization, merger and acquisition expenses, restructuring expenses, net intellectual property litigation expenses, and noncash stock compensation.

A reconciliation of GAAP and non-GAAP metrics can be found in the financial tables at the end of the first-quarter 2012 earnings press release issued last evening, which is available on our website.

On today's call, iRobot Chairman and CEO Colin Angle will provide a review of the Company's operations and achievements for the first quarter of 2012, as well as our business outlook for the rest of 2012.

And John Leahy, Chief Financial Officer, will review our financial results for the first quarter and provide our financial expectations for the full year 2012 and the second quarter ending June 30, 2012.

Then we will open the call for questions.

At this point, I will turn the call over to Colin Angle.

Good morning and thank you for joining us.

We kicked off the 2012 with a better-than-anticipated quarter.

The results and outlook for our home robot business are excellent, while the near-term visibility in our defense and security business continues to be limited.

Total Q1 revenue of $98 million was at the high end of our expectations for the quarter, while adjusted EBITDA of $6 million and EPS of $0.02 for the quarter both exceeded our expectations.

Strong growth in both our international and US markets fueled a 20% year-over-year increase in home robot revenue.

We are successfully expanding our distribution of new products and increasing our penetration in existing markets while establishing a presence in new markets.

Our steadily increasing home robot global reach is enabling us to weather continuing US budget issues impacting our defense and security business.

Based on our view of the rest of the year, we are reaffirming our financial expectation shared this past February to deliver full-year 2012 revenue of $455 million to $485 million, EPS between $0.75 and $0.95, and adjusted EBITDA of $56 million to $63 million.

Our outlook by business unit has changed, and due to significant growth in home robots, we now expect that business to comprise approximately 75% of total Company revenue for the year.

In the second quarter, we expect expanded product distribution and international demand to drive significant revenue growth in home robots.

We expect to receive US government contracts for the purchase of FirstLook and SUGV robots that will generate higher second-half revenue in our defense and security business, as we discussed earlier this year.

For the second quarter, we anticipate revenue of $102 million to $112 million, EPS between $0.05 and $0.13, and adjusted EBITDA of $7 million to $10 million.

Now, I would like to take you to some of the details of the first quarter and our expectations for the rest of 2012.

In home robots, very strong demand overseas, particularly in Japan, continue to fuel revenue growth.

In the first quarter, international home robot revenue increased 20% year over year, and we expect overseas demand to contribute significantly to revenue for the remainder of 2012.

I've said in the past that one in four vacuum cleaners sold in Spain is a robot.

Based on current data, that statistic is even more striking.

Quarterly data through February showed that one in three vacuum cleaners sold in Spain was a robot.

Beyond Spain, we see the same fast-developing adoption in such diverse markets as Italy, Taiwan, Denmark, Israel and Russia.

The robot vacuum cleaner category is going mainstream and growing far faster than the overall vacuum cleaning market.

The good news is that not only is the adoption rate accelerating, but our Roomba remains the market leader.

Last year, we began selling into Latin America, and that region is on track to grow considerably this year off a small base.

We have also begun selling limited product in China and expect material revenue contribution from that market next year, 2013.

In our domestic business, Q1 results grew an impressive 21% over the same quarter last year, largely due to increased sales to retail stores.

Our US retailers are reporting stronger sellthrough, and we expect strong double-digit full-year growth over 2011.

During the quarter, we expanded our distribution of the Roomba 700 into retailers domestically and further throughout Western European markets.

We also introduced the Scooba 230 into select European markets.

Both products have been very well received in all regions and together comprise approximately 40% of revenue in the quarter.

Expanding our distribution of both products throughout the rest of 2012 will continue to drive increased revenue.

In late April, we launched one of the largest domestic marketing campaigns in iRobot history.

This campaign will help build off a strong Q1 performance.

The multifaceted media blitz based on the concept of -- iRobot, do you?

-- includes an extensive integrated presence on television, online and print publications.

We are reaching out to our target customer, the modern professional, to a greater extent than ever before.

2000 television spots reaching more than 1.5 billion people will run on channels such as HGTV, DIY Network, Food Network and The Travel Channel.

In addition, more than 200 million online banner impressions will run on sites including Wired, Epicurious and the New Yorker.

And print ads will appear in a number of targeted magazines.

We initiated the campaign in Q2 to capture the markets for spring cleaning, Mother's Day and the wedding season.

And we will run it again in the fourth quarter around the holidays.

The objective is to increase awareness of iRobot and position our home robots as mainstream solutions to practical problems.

Over the past year, we have talked about the import of investing in brand and marketing to support our strategic growth plans.

We saw the positive impact of our investments on domestic results in 2011 and expect this program to drive even greater awareness in the US markets in 2012.

In Q2 we anticipate higher year-over-year revenue in the US supported by our new campaign, as well as significant growth in our international markets, driven by sales of the Roomba 700 and Scooba 230.

These positive developments have allowed us to increase our full-year revenue expectation for home robots.

Turning now to our defense and security business, the Q1 results are consistent with our expectation that 70% of the unit's revenue will be generated in the second half of the year.

We are well positioned with a broad product base and increased functionality enabled through technology to meet the evolving needs of global military and security forces.

The President requested $84 million to purchase more than 300 SUGVs in his proposed 2013 budget compared with just $25 million requested in the 2012 budget.

While multiple approvals are required for its passage, this demonstrates the recognized value of and support for our tactical ground robots by the military leadership in Washington.

Given leaner military budgets, there is an intense focus on doing more with less.

Unmanned ground vehicles enable efficient achievement of mission objectives with fewer troops.

We recently reported orders for more than 100 FirstLook robots and a Warrior robot, both new products introduced this year.

The FirstLook, weighing in at 5 pounds, is our smallest robot.

The robots are undergoing operational assessment in theatre, and we have received very positive feedback from the field about its capabilities.

We are excited about the advantage of this game-changing robot we will provide to our troops and expect additional orders for FirstLook in the second half of the year.

Exploring adjacent market opportunities for our defense and security robots has been an ongoing initiative at the Company.

Earlier this month we announced the first significant order for a commercial-use ground robot.

Progress Energy purchased a Warrior, our largest robot at 350 pounds, and several PackBot robots for use at the Robinson Nuclear Plant near Hartsville, South Carolina.

Following our success moving debris and transmitting information regarding radiation levels at Japan's Fukushima Daiichi nuclear reactor last year, we had numerous inquiries about using our robots at other nuclear facilities.

Robots mitigate risk by keeping personnel out of radioactive environments and serve as cost-effective ways to perform operations.

We are very excited about the potential in this market and continue to look at other industrial applications for our military robot systems.

We continue to experience funding delays that will impact Q2 revenue, and we have reflected that impact in our expectations.

We expect orders and funding to start flowing, but full-year results will be lower than we anticipated last quarter for military robots.

We continue to believe that the prospects in our defense and security robots are significant.

As the life-saving and operating efficiency attributes of our products and technology have been acknowledged by the soldiers and military leadership, expanded use of the robots has driven increasing demand.

The wars in Iraq and Afghanistan clearly accelerated adoption of robots to a point where unmanned systems have become part of the military doctrine and our products part of the future Army's standard equipment.

As we said in our last earnings call, limited visibility in our defense and security business presents near-term challenges, but we are working our way through them and expect to exit 2012 in a very good position.

In addition to our established businesses, I'm excited about the progress we're making and the opportunities that we see for Ava, our human interface robot.

Ava is a breakthrough mobile robotics platform developed to help robot designers, application developers and market innovation specialists expedite the pursuit of practical, affordable mobile robotic solutions.

New market opportunities exist for Ava in multiple industries, including healthcare, retail and security.

Finally, at the end of February, we announced a management and structural realignment of the Company for our next stage of evolution.

Three business units were formed focused on home robots, defense and security robots, and emerging technologies.

These business units report to Jeff Beck, formerly President of home robots, as Chief Operating Officer.

Our government and industrial division has been renamed defense and security to reflect our focus on those markets.

The three business units will advance iRobot's long-term growth strategies as a technology leader and remote presence in automated home maintenance solutions.

The use of iRobot platforms to technologies outside of the home and military markets has grown significantly, and a new structure allows us to build market-facing business units around new opportunities and energize rapid product development.

Jeff has made significant and meaningful contributions to iRobot, driving profitable growth strategies across the business, expanding new product distribution domestically and internationally and improving business processes.

Joe Dyer, formerly Chief Operating Officer, has been named Chief Strategy Officer, and he will lead strategic business development, mergers and acquisitions, research, and advanced technology development.

In summary, first-quarter results exceeded expectations, and we are on track to meet our expectations for the rest of the year.

I will now turn the call over to John to review our first-quarter results and Q2 expectations in more detail.

Thank you, Colin.

Revenue in the first quarter was $98 million compared with last year's record $106 million.

Earnings per share and EBITDA both exceeded expectations for the quarter.

Earnings per share for the quarter were $0.02 compared with $0.27, and EBITDA for Q1 was $6.1 million compared with $15.2 million last year.

Home robot shipments grew 12%, while revenue of $82 million increased 20% from a year ago.

International revenue increased 20% in the quarter to $60 million and comprised approximately 75% of home robot revenue.

Total domestic revenues were up 21% in Q1, one of our best performances in several years.

And we expect this double-digit growth to continue throughout 2012.

Importantly, sellthrough at our top five domestic retailers was up about 15% year over year, reflecting improved consumer sentiment and the impact of our marketing programs and new product introductions.

Defense and security revenue of $16 million decreased from a year ago, due to both lower contract and product revenue.

Gross margins in the division decreased significantly as a result of lower fixed-cost absorption.

Defense and security product revenue was $10 million in the first quarter compared with $29 million last year.

Product lifecycle revenue was $5 million or 48% of product revenue.

For the total Company, gross margin was 35% for the quarter compared with 41% last year, due to the negative impact of the defense and security business.

Home robot gross margins continue to be strong at 45%.

We expect gross margin to improve throughout the year, resulting in full-year 2012 gross margins of 40% to 41%.

Operating expenses were limited to a 3% increase over last year.

As a percentage of revenue, OpEx was 34% in Q1 compared with 30% last year, primarily due to lower revenue.

For the full year, we continue to expect operating expenses to be approximately 31% of revenue.

At the end of Q1 we had cash, including investments, totaling $182 million compared with $124 million last year.

And operating cash flow was $4 million.

In Q2 we expect revenue of $102 million to $112 million, a slight increase over last year, driven by very strong growth in home robots.

We expect EPS in the range of $0.05 to $0.13, and EBITDA of $7 million to $10 million.

Our full-year revenue expectations of $465 million to $485 million remain unchanged; however, we now expect home robot revenue to grow approximately 25%, to $345 million to $355 million, and comprise 75% of total Company revenue.

We anticipate defense and security revenue in the range of $120 million to $130 million for the full year, with about 70% coming in the second half.

Strong domestic sales growth, the expanded distribution of new products, and further penetration into long-term international markets will drive the home robot business.

Orders for FirstLook and SUGV robots from the US military, sales to foreign countries, and block software upgrades of defense and security robots and theater will support that business in the second half.

And now, back to Colin.

Our results in the first quarter exceeded our expectations, due to strong performance by our home robot business.

As we look at the rest of the year, we will diligently balance our investment in technology in the iRobot brand with our commitment to deliver profitable growth.

This year we are further deepening our presence in existing markets and expanding in new geographic markets enabled by our investments.

Beyond this year, we see tremendous growth opportunities for our home robots.

While the military climate is disappointing, the longer-term drivers remain intact for our defense and security business.

And we are well-positioned for those markets.

With that, we will take your questions.

(Operator Instructions) Ricchiuti, Needham & Co.

Question I had was -- first question is on the defense business.

Of the units that you shipped in the quarter it sounds like, clearly based on the average selling price, the bulk of these were FirstLook.

That is correct.

Numerically, absolutely.

And Colin, I guess that is just what I'm trying to get a sense of.

As we look at the year and the second half, what is the profile of that business going to look like in terms of FirstLook, SUGV and other?

And also, where do you see -- and this maybe a question for John -- but where do you see gross margins going in this business?

So, for the year, I think that FirstLook is going to play a very significant role, growing to be the largest single contributor.

I think if you look at the product sales, PackBot, SUGV and FirstLook are all roughly comparable contributors to the product sales.

And then you add in the PLR on top of it to round out the year.

But I think we've seen very, very nice strong growth in establishing FirstLook as another major revenue driver.

And at the PackBot and SUGV products are still contributing.

PackBot is hanging on, and SUGV is -- we've got the BCTM sales happening later in the year.

And I think that we still have not reached the levels of acquisition around SUGV that we anticipate.

So we will be looking for that to happen out in '13 and beyond.

And then, with respect to gross margins in this business, would you assume that they get back to the 30% type of level that you have seen in the past?

Yes, Jim, we think in the second half, gross margins will run in the traditional range of low- to mid-30s.

Certainly, margins were -- well they were negative in the first quarter because of the low revenue.

We think there will be improvement in Q2, not all the way back to where we traditionally are, but in the second half, as revenue ramps up as it did in 2011 in 2010.

We think margins will come back.

Okay, one follow-up.

Just switching gears on the consumer business; just given the changing profile of the business in terms of heavier mix of consumer and the stepped up efforts in advertising and marketing that you are expecting, how should we think about SG&A -- sales and marketing, I should say -- expense as a percent of revenues for the year?

It sounds like that is clearly going to creep up.

It will, Jim, and particularly in Q2 our operating expenses will grow versus Q1.

And that's obviously reflected in the guidance that we gave.

The bulk of the spend around the marketing program that Colin talked about in his remarks -- the bulk of the spend will occur in Q2 and then again in Q4 around the holidays.

So, you should look to see OpEx in sales and marketing grow from Q1 by somewhere around $5 million or $6 million.

The other elements of OpEx will hold relatively steady.

And Jim, let me jump in.

You do correctly say and point out that we are seeing a shift in the financial drivers of the business currently.

We view this as a massive de-risking of our year, with such (technical difficulty) on the military side, to see the home business responding so powerfully and at mix shift.

We are very happy about what is going on in the home.

And it makes the -- as we look forward, the idea that we will see strengthening military markets in the future as very nice upside to our growth plans.

Okay, thanks very much.

Barbara Coffey, Brigantine.

As you are looking at the government side, I noticed that the ASPs came down a lot.

And I assume that's because the FirstLook is a little less expensive.

But also, can you talk about how you expect the first call to the layered into the budget?

Because I don't -- I didn't know where it was, but I did see the SUGV allocations.

You're correct.

In the first quarter we sold 100 FirstLooks, and that definitely drove down ASPs.

ASPs for FirstLook are in the $25,000 range rather than, for PackBots and SUGVs, up closer to $100,000 per robot.

So that is an ASP Delta.

And where do you expect FirstLook to show up in the budget?

Right now, the demand for FirstLooks are through urgent need requests coming from theater.

You would not find them in a line item in a budget for 2012.

Okay, thank you.

Paul Coster, JPMorgan.

This is Mark Strouse on for Paul.

So, you are now expecting a higher mix of home robots for the year.

I mean, given the higher margin in that business, is it fair to say that you're more comfortable with the higher end of your earnings guidance range?

Or maybe what is the rationale for not nudging that up a bit?

I think that we're very comfortable with the range as given.

I think that until we have better visibility on what the military side of the business is going to perform, and we see our backlogs growing to support our expectations for government, you're not going to see us getting particularly aggressive about full-year guidance.

We think we have good numbers.

We think they represent the correct balance of conservatism and optimism.

But it is a frustrating lens we have to look through as we try to predict the buying behaviors.

Because on the one hand we get very, very strong messages around the need and demand for these robots.

And on the other hand, it seems like the delays and slowness around contracting and actually procuring these robots offsets that demand pull.

So, we think we have a good balance right now.

And we'll keep you guys posted as the year develops.

Certainly the tremendous performance on the home robots side is giving us a lot more comfort to weather this perfect storm of sequestration's specter of continued resolution and election-year politics all coming together at the same time.

So, that is where we are.

Okay, that's helpful.

Thanks.

And then do you mind just walking us through the intra-quarter trends on the home robots side?

Seems like some of the macro issues in Europe kind of peaked again towards the end of the quarter.

Did that have any impact on your business, especially given the news in Spain, or thus far into 2Q?

You know, we've been relatively unaffected.

Or, I guess, more accurately we should say that the powerful adoption drivers in the robot vacuum market have outweighed the negative impacts from the macros in Europe and Spain; so that we have been able to achieve -- throughout last year and the first quarter this year -- very, very strong results, despite disappointing macros.

I would love to see what would be possible if the macros turned around as well.

But it is a mix, and we haven't seen the slowdown.

We would have seen it last year.

Certainly the macro environment in Europe was very challenging then as well.

So we are weathering that with good aplomb.

And as I said earlier, Japan continues to be a very strong driver of our growth.

Okay, got it.

That's it for us.

Thank you very much.

Adam Fleck, Morningstar.

I want to follow up on the European situation.

You know, obviously, the demand still seems to be there.

But I know, Colin, you have previously discussed the importance of a marketing investments from your distributors in the region.

Can you talk a little bit about the level of support there?

Obviously, the economy is, of course, bad, as we have discussed.

But the dollar is stronger.

And I know that has been a headwind in the past.

You know, I think the dollar is stronger.

But it is still within the range that we predicted it would be that is built into our models with our distributors.

The distributors, I think, have seen the dramatic impact of what investing in the marketing around the robots can yield as far as returns go.

And so that works.

And we're seeing a continuation.

We're saying the continued investment in marketing from our distributors.

I think we've got good alignment between our target customer, our target customer demographic in Europe, and our distributors' ability to reach them, so that is very good alignment.

So it is business as usual.

We have a winning formula, proved out last year and continued into this year.

And we had economic headwinds last year.

We see them again this year.

Hopefully, we will see it improve a little bit throughout the year, but one can never predict.

So, our guidance is based around macro challenges like we saw in '11 in '12 in Europe, and levels of investment from our distributors on par with what we saw last year.

And they have expressed willingness and determination to do that, based on the efficacy of those programs last year.

Great, thanks for the color there.

And then, it is still early, of course, but on the home robots side again, can you share with us the contributions from Latin America during the quarter?

Latin America contribution -- it is growing off a small base.

We are seeing a multiple of sales from a year ago.

I think that it is -- there is a lot more room for improvement on the Latin America side.

I think we are doing better right now in Mexico than we are in Brazil, but it is contributing.

Are the -- is the winning formula you have in Europe -- do you find that that is working in Latin America as well?

I would say we think we have the right formula.

It is still -- I would not say that we've gotten too far out of first gear, as far as driving the types of dollars out of Latin America yet.

But, again, this is a process.

We're committed to it.

And we're seeing the needle move, as far as revenue goes.

We think we have the right model.

Okay, great.

That is it for me.

Thanks, guys.

Josephine Millward, Benchmark.

Hi, Colin.

Can you give us a breakdown of your product mix expectation for government robots this year?

I think previously you talked about roughly 400 SUGVs and maybe 2000 FirstLooks.

If you can help us in your -- giving us more color on your thinking with the updated guidance.

Sure.

On a unit perspective, PackBots are going to be around 100 units; SUGVs in the rough order of magnitude 150 units; FirstLook, 1500 units is what is contemplated by the guidance.

So, basically from a dollar perspective, 20% PackBot 30% SUGV; 30% FirstLook.

That gets us to the guidance figures that we gave.

If we're able to see upsides from those figures, that is upside to our guidance.

Okay, that sounds good.

Can you also talk about some of the new opportunities in the government and security division?

What is going on with the undersea vehicle market?

And we talk about security, are you referring to law-enforcement and critical infrastructure protection?

And what is your go-to-market strategy there?

Thank you.

So the CNO has been outspoken in his desire to drive the unmanned underwater space.

And what we have seen coming out of that is a lot more interest in underwater vehicles has not driven -- translated into product procurement dollars.

But we have a number of research and product development programs, a program called [RILS], which is developing an unmanned swimmer interdiction system for harbor security, and a high-speed countermeasure program that has seen its funding turn back on and proceeding toward product on the maritime space.

So again, these things have a lot of inertia behind them, but we do have some very exciting product development programs supported by government dollars, proceeding, I think, as a result.

And I would say that the intermediate term prospects for the underwater, unmanned space to be improving based on a growing recognition that this is an area that we must be investing in as a nation.

Okay.

Can you comment on law enforcement and critical infrastructure protection?

Is that an adjacent market that you are targeting, and whether you would see that contributing this year or next year?

The paramilitary markets are markets that we have always sort of supported on an inbound call side.

We are outbound marketing to these organizations have been relatively limited, as it is a very distributed marketplace.

With the growing maturity of our FirstLook product, we think that there are opportunities to go back with a product which is at a price point and capability that is a nice alignment in those areas.

And you will be hearing us talk more about our success and selling FirstLooks into those markets.

Although, at this moment in time, we are 100% focused on supporting the urgent needs for FirstLook in 2012.

So that opportunity is more of a '13 and beyond opportunity.

Because, basically, all of our engineering investment around FirstLook is maturing this product rapidly enough in order to meet the DoD customer needs.

But we think that as a lot of legs outside of the DoD on a go-forward basis.

As far as critical infrastructure, you heard us talk about our first sale of the Warrior platform to Progress Energy.

We think that is a nice adjacent marketplace, and we are -- we do have energy put against the selling of additional units into other customers, similar to Progress Energy.

And, again, we will keep you informed as that develops.

Thank you very much.

Jim Ricchiuti, Needham & Co.

Colin, in the past you have talked about the international markets.

And you have given us an idea of which countries represent the highest portion of your revenues.

Has that changed much?

Is Japan still one of the big three?

Is it the largest market right now?

Yes, Japan is one of the big three.

It is our largest single nation outside of the United States and growing very, very strongly.

Our distributors doing a great job, continues to invest very strongly in the iRobot brand and awareness programs, and a bright spot.

Although on the home side we have many bright spots.

And the other markets, has there been any change?

You've talk about France being one of the large ones -- well, clearly, Spain it sounds like?

Yes, Spain is in the top five.

Italy and France are strong.

Switzerland is strong.

Europe continues, across the board, to be a very good market for the robots.

And, hopefully, you took away from the call that our domestic market is -- been turned around, both in margin and growth rates.

And we're very excited that 2012 is going to be the year of North America re-joining the growth parade for robot vacuum cleaners.

And we are investing in it.

We are excited to make that part of our home robot story this year.

I would assume your competitors are seeing the same kinds of activity; at least, the pickup in the US market and the strength overseas.

Has there been much of a change in the competitive landscape, particularly as you allude to robot vacuum cleaners becoming more mainstream products now?

I think that what I would say is that the growth in the marketplace has allowed the legitimate competitors to start to have some economic success.

And so that the LG, Samsung, and then the two US companies Evolution and Neato, I think that they are becoming -- they are sharing in the growth of the robot vacuuming category, which is expected.

Again, their marketing efforts help break through the skepticism barriers that held us back for so long.

And so they add their marketing dollars to the growth of this category.

We view this as a good thing.

It is one of the reasons why we are seeing the mainstreaming of robot vacuuming.

It's now more relatively accepted as the better way of cleaning your floor.

So that is a good thing.

And it also means that we can see sections of stores beginning to devote themselves to robots.

We saw, I think, the first time ever Best Buy has got a robot section.

It's 75% iRobot, which is nice.

But we have a better store presence now than we've ever have in the past, driven by the mainstreaming of this category.

What do you think your market share is right now?

It really depends on the country, but we're clearly the leader in these categories.

And last question from me, just with respect to the 700 and the Scooba 230.

It looks like it is around 45% of the home robot business.

What percentage of your overall distribution channel do these products now address?

I'm not sure I'm understanding your question.

Well, have these products now gotten full distribution in the channel?

Or are they -- are you still moving -- I mean, to the 230, it looks like you are still moving that into the international markets.

(multiple speakers) When we do expect to have these products fully available?

Okay, I understand the question.

First off -- yes, in fact, our new products are driving about 40% of our home robot revenue this year, which we think is a great new and healthy statistic.

The products are absolutely not fully rolled out.

We are very methodical in how we bring our new products to market.

We would rather move deliberately from the specialty retail into the sort of big boxes specialty into mainstream and then finally into our discount retail channels.

And so that, even by the end of this year, we will see -- we will not see these new products fully rolled out through our product introduction strategy because it is a multiyear strategy.

But we will see mass-market distribution of these new products in probably all of our markets except Latin America, through the end of -- by the end of the year.

So not in every channel in every market, but in every market by the end of the year.

And these products still -- you would assume, continue to command higher gross margins and that should continue?

Absolutely, yes.

Okay, thank you.

Please go ahead with your closing remarks.

Thank you very much.

So, that concludes our first-quarter earnings call.

We appreciate your support and look forward to talking with you again in July to discuss our Q2 results.

That concludes the call.

Participants may now disconnect.