iRobot Corp (IRBT) 2013 Q1 法說會逐字稿

Good day, everyone, and welcome to the iRobot first-quarter 2013 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'd 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 provisions 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 non-cash stock compensation.

A reconciliation of GAAP and non-GAAP metrics can be found in the financial tables at the end of the first-quarter 2013 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 2013, as well as our business outlook for the rest of 2013, and Alison Dean, iRobot Chief Financial Officer, will review our financial results for the first quarter and provide our financial expectations for the full-year 2013 and the second quarter ending June 29, 2013.

Then we'll open the call for questions.

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

Good morning, and thank you for joining us.

We kicked off 2013 with an outstanding quarter.

The results and outlook for our home robot business are excellent.

We're very excited to have begun shipping our RP-VITA telemedicine robot in Q1, and our defense and security business delivered solid results.

Based on our view of the rest of the year, we are increasing our full-year financial performance.

We now expect to deliver fiscal 2013 revenue of $485 million to $495 million, EPS of between $0.80 and $1.00, and EBITDA of $55 million to $61 million.

The revenue increase is being driven by better than anticipated home robot demand in the United States.

The full-year expectations for our D&S business remain unchanged.

Improvements in gross margin, rapid integration of evolution robotics manufacturing processes and product rollout, improved operating efficiency in D&S, and tighter expense control will each contribute to increased profitability and enable us to deliver on our commitments to profitable growth.

Now I'll take you through some of the details of the first quarter and our expectations for the rest of 2013.

Total Q1 revenue of $106 million, EBITDA of $15 million, and EPS of $0.29 all exceeded our increased expectations.

In the first quarter, domestic revenue growth of 44% fueled a 14% year-over-year increase in home robot revenue.

Lean inventory levels and strong Q4 sellthrough across all domestic retailers helped drive the Q1 growth.

Mint and expanded distribution of the Roomba 600 and 700 robots to retailers have all contributed to the increase in home robot revenue.

Our US retailers reported strong sellthrough again in Q1, and we expect better full-year growth than we did in February when we first shared our outlook for fiscal 2013.

We expect the domestic markets to continue to be strong as our US advertising and media investment ramps in Q2.

In the second quarter last year, we launched one of the largest domestic marketing campaigns in iRobot history.

Last year's program contributed to domestic annual net growth of roughly 30%.

The objective of these programs 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 importance of investing in brand and marketing to support our strategic growth plans.

We saw the positive impact of our investments on domestic results in 2012 and expect this program to drive even greater awareness in the US market in 2013.

Our strategy for this year's campaign is similar to that of last year's.

We will be continuing our successful "iRobot.

Do you?" advertising on channels that reach our modern, professional target audience, such as HGTV, Travel, and DIY, where they ran last year, and expanding to Bravo, CNBC, BBC America this year.

In addition, we will be running an infomercial for Mint on Travel, Style, Lifetime Movie Network, DIY, and BBC America, which were high-performing sites for the product in 2012.

Overseas, demand in Japan was very strong, and China's performance was consistent with our expectations.

We did experience some softening in EMEA due to macros, resulting in a relatively flat year-over-year international Q1.

We are closely managing inventories in EMEA so we can ensure that there is no excess product in the channel.

In Q2, we expect the European launch of Brava, our iRobot-branded version of the Mint robot, coupled with continued Roomba sales into China, to drive overseas growth in home robot, while domestic revenue will be driven by further penetration of our core products.

Turning now to our defense and security business, Q1 results exceeded our expectations due to the timing of government product lifecycle revenue orders for PackBot and SUGV robots.

Greater DoD Q1 demand for spares, service, and training to support the iRobot fleet of approximately 5,000 unmanned ground vehicles resulted in higher quarterly revenue than we anticipated.

Last quarter, the government disclosed a $14.4 million order for more than 600 FirstLook robots.

This order was anticipated and included in our 2013 expectations.

In addition, we received a $7 million international order at the beginning of the quarter, which we discussed on the last call.

We now have more than 80% of the roughly $50 million in 2013 expectations in either booked orders or funded backlog, and are highly confident in achieving the full-year number, which will be down from last year.

Also, important to note that we expect non-DoD revenue to comprise more than 40% of 2013 D&S revenue, compared with just 16% of 2012 revenue.

This market diversification is important, given the near-term uncertainty created by competing budget priorities in Washington and changes in the Defense Department's mission requirements.

We began shipping the RP-VITA to InTouch in Q1 2013.

To date, we have shipped roughly two dozen robots on which ITH has integrated their proprietary technology for telemedicine to facilitate its use in remote diagnosis and treatment.

Half of these robots have been shipped by InTouch to both new and prior users of InTouch's products.

These are very early days, but initial feedback has been quite positive.

We expect to sell additional units this year, but our remote presence business unit is not expected to generate meaningful revenue in 2013.

We are very excited about our progress in this segment and do expect the product to be a growth driver over the next couple of years.

In summary, first-quarter results exceeded expectations and some of the drivers are expected to result in favorability for the year, so we are increasing our full-year expectations.

Before turning the call over to Alison to review our first-quarter results and Q2 expectations in more detail, I did want to comment on last week's marathon tragedy here in Boston.

Shortly after the two explosions near the Boston Marathon finish line, we contacted Mass State Police to offer assistance in robots in addition to the ones they owned.

On Friday, during the intense manhunt, our robots were once again front and center, keeping law enforcement officials out of harm's way.

The Company's response to the Boston Marathon bombings continues a long tradition of iRobot's responsiveness in time of crisis and speaks to our values and commitment as an organization.

Alison?

Thanks, Colin.

Revenue in the first quarter was $106 million, compared with $98 million last year.

Revenue, earnings per share, and adjusted EBITDA all exceeded expectations.

Earnings per share for the quarter were $0.29, compared with $0.02 last year, and adjusted EBITDA for Q1 was $15.2 million, compared with $6.1 million last year.

Q1 EPS this year includes an $0.08 benefit from 2012 and 2013 investment tax credits.

In Q1, home robot units grew 7%, while revenue of $93 million increased 14% from a year ago.

The mix of higher ASP Roomba 600 and 700 robots this year accounted for the difference in unit growth versus increased revenue.

We expect year-over-year double-digit revenue growth to continue throughout 2013, driven by both product mix and unit volume.

Based on current indications from our retailers and distributors, we anticipate revenue to be relatively level from Q2 through Q4.

Total domestic revenues were up 44% in Q1, following a 32% increase in Q4 and compared with 21% growth in Q1 last year, due to expanded distribution of Roomba 600 and 700 robots and to the inclusion of Mint.

Importantly, sellthrough at our top five domestic retailers was up 36% year over year, reflecting consumer demand and the impact of our marketing programs.

International revenue was relatively flat for the quarter at $61 million and comprised approximately 66% of home robot revenue.

Defense and security revenue of $11 million was higher in Q1 than anticipated, but down from a year ago due to both lower contract and product revenue, as expected.

Defense and security product revenue was $8 million in the first quarter, $6 million of which was product lifecycle revenue.

As a result of the 2012 corporate realignment in which we centralized our engineering and operations units, we reclassified certain income statement costs.

This change does not impact earnings per share or adjusted EBITDA, but is intended to provide additional financial statement transparency.

The change decreases cost of sales and increases operating expense by equal amounts.

With our quarterly SEC 8-K submission, we have furnished four years of historical financial information, presenting income statement costs for those periods in a manner comparable to the reclassified 2013 presentation.

Based upon reclassified costs, Q1 gross margin was 43.8%, compared with 38.4% last year, and OpEx was 35% of revenue, compared with 38% last year.

The year-over-year improvement in gross margin was driven primarily by favorability of home robot product mix, specifically expanded distribution of higher-margin Roomba 600 and 700 robots this year, compared with lower-margin Roomba 500 robots in 2012.

Tighter cost control and higher revenue in Q1 2013 resulted in improved operating expense as a percentage of revenue.

At the end of Q1, we had cash, including investments, totaling $138 million, compared with $182 million last year, and operating cash flow was roughly breakeven.

Turning to Q2, we expect revenue of $128 million to $133 million, driven by strong growth in home robots.

We expect EPS in the range of $0.15 to $0.20 and adjusted EBITDA of $13 million to $16 million.

Keep in mind that our seasonal investments in marketing that Colin discussed will be substantial in Q2 and Q4, as they were last year, and that spend will impact EPS and adjusted EBITDA in those quarters.

Our full-year revenue expectation of $485 million to $495 million assumes home robot revenue will grow approximately 22% to $435 million to $440 million and comprise roughly 90% of total Company revenue.

Our expectations for Defense & Security revenue remain unchanged at $45 million to $55 million for the full year.

Last quarter, we provided an estimated 2013 effective tax rate of 8% to 10%, based on the impact of the 2012 and 2013 investment tax credits for R&D.

Driven by a revised full-year profit expectation, we now estimate of full-year rate of approximately 20%.

For Q2 through Q4, we are estimating a rate of roughly 25%.

In summary, for the full year strong domestic sales growth, the expanded distribution of Mint and Brava, and further penetration into long-term international markets will drive the home robot business.

Orders for FirstLook, sales to foreign countries, and PLR will generate expected revenue in our Defense & Security business.

I'll now turn the call back to Colin.

Thank you.

Our results in the first quarter exceeded our increased 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 and the iRobot brand with our commitment to delivering profitable growth.

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

Beyond this year, we see tremendous growth opportunities for our home robots and are very excited about the potential for our remote presence robots.

While the current 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).

Jim Ricchiuti, Needham & Company.

A question on the home robot business.

Can you say what Mint contributed in the quarter?

In terms of our revenue level, Jim, it was about $2 million.

$2 million, okay.

Thanks, Alison.

And it appears that the integration is ahead of schedule.

I wonder if you could give us a little update on where you see some of the supply-chain efficiencies that you expect to realize.

I think that we are -- things are moving ahead of schedule, which means we are well on track of achieving our improvements in gross margin for the Mint project -- for the Mint product line this year, as expected.

We're also, as we mentioned on the call, preparing to launch.

We're going to have to train ourselves to use the term Brava instead of Mint, so we're going through a name change so we have a single name internationally.

But we are on track to be launching Brava internationally as well.

Got it.

Colin, can you say what the decline was in the EMEA region in the home robot business in the quarter?

Jim, it was lower than we expected.

We really think it was just driven by the macros in the area.

There wasn't a particular highlight of a country; it was just slower demand than we had anticipated in the first quarter.

And the one area -- it appears Japan was strong.

It looks like China is tracking the way you expected.

What are you seeing in Latin America?

In Lat, we had a slow start planned for Q1 in terms of the full year.

We are still trying to gain traction in that market and still facing some challenges.

So it -- China is a little bit ahead of Lat at this point in terms of our ability to gain traction there.

Got it.

And last question, Alison, the reclassification of expenses, that mostly impacted gross margins in the D&S business?

It actually impacted gross margins in both segments of our business.

So from a home perspective, we took direct fulfillment costs out of sales and marketing and moved it into gross margin.

And then on a D&S perspective, we took some engineering costs that had previously been reported in gross margin and moved them down to OpEx.

So it was sort of an opposite change, depending on which division you were looking at.

Got it.

Thank you.

Brian Gesuale, Raymond James.

Yes, good morning.

Real nice job on the quarter, guys.

Thank you.

Wondering if you could give us a little detail on the sales progression this year for Mint or Brava.

Is it going to be a little bit more of a congruent Q2, Q3, and Q4 as you launch in those respective quarters, and then the holiday surge won't be quite as pronounced?

Or how should we really look at that progression?

You should expect a growing launch quarter over quarter.

Certainly, Q1 at $2 million is significantly lower than what we expect our quarterly run rate.

But you'll see a ramp as distribution expands.

We, again, don't subscribe to the stack it high and hope they fly type of philosophy.

So we will be providing our retailers with units that we are certain they will be able to move in and then look at the demand and ramp up appropriately.

So Q4, again, Brava sales should be our largest quarter for sales, but you should see significant increase in sales Q1 -- Q2 over Q1 as we expand our distribution.

That will be the only significant step function in sales this year.

Okay, terrific.

And then, just one last follow-up on the geographies here.

On Japan, it sounds like it was really strong.

Are you starting to see any currency issues bite into that or is that really an issue for you guys?

And then, secondly on Europe, it softened.

You guys have blown through in terms of growth when Europe has been soft in the past.

Is this a one-quarter phenomena or is there something that you are expecting to be a little bit different this time around in Europe?

Thanks.

In terms of Japan, we haven't really been experiencing anything relative to currency issues.

On EMEA, you know, we were cautious going into the year about EMEA.

Our results were a little less than we thought in Q1 and we think we're being conservatively cautious for the rest of the year, relative to our expectations.

So we want to -- Mint should help drive some of the growth in EMEA, but we are going to be, I think, appropriately cautious about what to expect there this year.

And I think that what we have seen in the past, Brian, is that the hypergrowth of the product demand in EMEA sort of eclipsed the ability of the macros to slow down sales.

I think that while we are far, far from being a mature product in EMEA, it is still sort of less new and our volumes are quite significant, and so that we've had a little bit more exposure to macros than we have had in prior years.

So I think that the chilling effect of the macros will impact us.

We still offset them somewhat by the inherent growth in the category.

It's just the balance is slightly different than it's been in prior years.

Also to clarify, our retailer agreements are protected from currency fluctuations within a band, and right now our currency -- the exchange rates are within that band so that we feel good about it.

Great.

Thanks.

That's very helpful, guys.

Adam Fleck, Morningstar.

I wanted to follow up on the European situation, given the slowing there.

You mentioned you're monitoring your inventories.

Just curious the conversations you're having with your distributors as you launch the Brava product.

Is the newness of that product what gives you confidence in the growth or is there any concern there?

Are you kind of looking at a lower inventory level?

Any details there would be helpful.

Sure.

We believe and have for some time that the Mint product will succeed very well in EMEA and Asian markets based on its -- the popularity of electrostatic cloth cleaning in those markets.

So this is something that demand for bringing this product to market was certainly key in our decisions last year to do the acquisition.

We are, as I mentioned previously, regardless of our enthusiasm, having been burned in the past, taking a conservative approach to bringing the market -- bringing the products to market and predicting the results of doing so.

So again, Q2, we will have a significant new distribution access for the Brava, meaning that we're bringing Brava into our retailers -- or many of our retailers in EMEA.

So that will be a step change.

But we will be very closely controlling inventories to make sure that we can protect the product in the marketplace.

Okay, great, thanks.

And then, on the reclassification -- looking through the 8-K there seems to be a new segment, the other category.

Is this primarily the marine business?

Am I thinking about that right?

That's a very small component of that bucket.

The main driver of that bucket is our non-BCTM research revenue, as well as any revenue that we have from our PBU.

But the driver of that category, at least in Q1, is our non-BCTM research revenue.

Okay, and the costs in that segment seem to have come down quite a bit.

Is that because of the marine pullout of the office in North Carolina or -- maybe any help there would be good, too.

Absolutely.

So separate from our reclassification, because we are running our business differently in 2013 than we did last year, based on our reorganization and the creation of shared service centers, we needed to change our segment reporting.

So going forward, we're going to have the three segments -- home, which pretty much hasn't changed; defense; and then other, which we just described.

From a cost perspective, the other thing going on here, though, is that we have centralized our supply chain and operations organization, along with our engineering organization.

And in our segment reporting, all of our operations and supply-chain costs are now being reflected in that other cost of sales category, whereas in previous years those costs were in home and in defense.

So that category contains cost of sales for the research revenue I mentioned, but it also is being primarily driven by the operations expenses of the Company being in that bucket now.

Okay, that's great.

That's helpful.

Thanks, Alison.

And then, finally, just a quick housekeeping question.

Your Accounts Payable fell pretty sharply in the quarter.

Was that just a timing issue or would you call anything else out there?

No, there's nothing to call out.

It was really timing.

We had some things we had accrued for at the end of Q4 that were paid out, but it really was just a timing event in Q1.

Okay, great.

That's it for me.

Thanks.

Paul Coster, JPMorgan.

Yes, thanks for taking my question.

Colin, you talked of seasonal investment in SG&A.

But there's no seasonality, it seems, or less seasonality at least in the revenue outlook for the remainder of the year.

Can you just sort of explain that a little bit?

Sure.

The -- balancing the inventory levels at our retailers is something that we work hard at doing.

Also, the seasonality associated with our European and Asian markets is quite different from more traditional seasonality in our domestic markets.

Also, in order to answer your question fully, I have to explain that in North America, we are primarily responsible for our advertising spend.

Outside of North America, our distributors are primarily responsible for their advertising spend.

So the Q2 and Q4 increases in OpEx spend are tied to back to school, Mother's Day, which is one of the two times during the year when advertising dollars are most effective for our business, and the holiday season.

So that explains why, similarly in Europe and Asia, our distributors are peaking at moments in time when they feel their advertising dollars are best spent.

But that does not appear on our OpEx line.

So that creates the lumpiness in the spend.

And then, supporting the flatness of the sales is that in -- toward the end of Q3, we see retailers often placing orders to support the Q4 demand, supported by advertising, and similarly in Q1 you see retailers restocking from the outflow of product in their stores in the holiday season, since our strategy is to not oversupply our retailers in Q4 of a year.

So ideally, retailers go into Q1 with a decreased inventory level.

So Q1 is driven by that, Q2 is driven by the advertising, Q3 is driven by preparing for the Q4 rush, and Q4 is driven by the advertising.

So each one is nicely lined up and results this year in relatively even revenue.

Okay.

Related question is, we were very pleasantly surprised by the start you had to this year, and it sounds like you may have been a little bit as well.

To the extent that is true, that it's a surprise, why was it a surprise?

And do you think the magnitude of these surprises will diminish in time as you learn more about your end markets?

You know, I think that -- was it a surprise to us?

Certainly it was -- our performance in North America was stronger than we would've hoped.

Predicting a 40% growth figure is not something that is normal course of business for iRobot.

I think that it does speak to a strong performance and the efficacy of our national advertising campaigns and the strength of the product in this growing market segment.

So, will it settle down over time?

You know, I think that we look at our markets, see the fact that there is -- household penetration levels are still very, very low, and we would hope that we have many, many years of aggressive growth in front of us.

Certainly as we look at the balance of this year and next year, we constantly work to improve our ability to predict our markets, and I would say that I would hope that we would be closer to the mark on these upsides.

But certainly, the doors were blown off as far as domestic revenue in home in Q1 of this quarter.

Okay, thank you very much.

You bet.

Josephine Millward, The Benchmark Company.

Colin, given the softness in Europe and the strength we're seeing in US home robot sales, do you still think international home robot sales can grow around 20% for the year, which was what -- which was your assumption on the last call?

By the way, congratulations on a great quarter.

Thank you.

Absolutely.

We feel like our estimates of -- I think that we are -- predicting 22% growth for the full year in home robots is still a very good figure.

We think that our market penetration in the EU remains small, with plenty of headroom for additional growth.

Okay.

Can you -- are you still assuming around $25 million for Mint for the year or has that number gone up?

Our expectations are the same, Josephine.

$22 million to $24 million is what we anticipate.

Sounds good.

Can you give us an update on the DoD's thinking and strategy for the SUGV?

As you know, the Army did not request any additional funding in the President's 2014 budget request for unmanned ground vehicles.

So what happens to the money from fiscal year 2012 and 2013 for SUGV?

And do you think this program could be canceled?

So where we are now right is that there have been multiple unmanned ground vehicle platforms designed for similar missions, and the Army has recognized this and requested a thorough review of requirements for unmanned systems that are SUGV class.

So the review is ongoing, and most likely a new competition around a new set of requirements will take place in the next few years.

Until the new requirement is approved and funded, we expect the government to continue to support and use the fielded SUGV systems they currently have.

But we are not currently modeling or expecting the SUGV dollars to continue to flow for development of that program.

So I think that, as I said, we didn't believe those numbers in the President's budget would materialize.

We continue to believe that.

Do you think -- so should we think about defense stabilizing next year or could it go down further?

You're getting ahead of the curve.

I think that we believe strongly in the long-term potential for D&S, but are not commenting on expectations for next year at this time.

But (multiple speakers)

Okay, that's fair because I don't think the Army knows yet.

As soon as you find out, you can let us know.

Right.

We do feel better than we have in a long time about the appropriateness of our current expectations for defense.

So we're very confident about the number we have given out.

In terms of tax rate for next year, maybe this is a question for Alison, should we use 35%?

On our last call, we said probably 30% would be the ongoing rate in a more normalized year.

So I would continue to use that at this point.

Great.

Thank you very much.

You're welcome.

You bet.

Brian Ruttenbur, CRT Capital.

Great.

Thank you very much.

The only question I have had and it's been asked a couple of times, but I don't know if I got the answer.

The domestic market is going to grow how much this year?

I was a little confused on that answer.

I heard a bunch of different numbers.

If you could just tell me the home robot business domestically, US, is going to grow how much?

We're thinking it's about 20%.

Full year.

(Multiple speakers) so everything is going to be 20%?

International and domestic are going to grow the exact same?

At this point, that's our best view.

Okay, great.

And when do you see the drop-off happen on the US market?

Can you repeat the question?

We couldn't hear you.

I'm sorry.

When do you see that the growth is going to drop off some for the domestic market, because it was growing 40%-plus?

I was just even trying to figure out, is it going to be second quarter?

Is it going to be third quarter?

When is the drop-off, the slowdown, in the US market?

Not something that we have a great visibility in.

I think that we are off to a great start and we don't see the compelling reason beyond raising the guidance, as we've done, to predict full-year increase in growth beyond that 20% we just gave you.

It will be a bit of a wait and see, and we'll give you more information on the next call as we see things develop.

But Brian, just to add, we are expecting that throughout 2013 we will continue to have double-digit quarter-on-quarter home domestic growth each quarter.

So each quarter is going to remain strong, maybe not at the 40% level that we had in Q1, but each of those quarters should continue to have very strong year-over-year growth.

Okay, and then last question.

Did you do something special in terms of advertising in the first quarter?

What caused the strength?

I didn't know if there was anything unique?

Advertising, discounts, anything?

No, it was driven by sellthrough, so very, very strong demand for our products.

I think that we did in Q4 of last year effectively clear out the shelves, and so that there might be a little bit of restocking associated driving that figure, but primarily driven by actual sellthrough at the storefront.

Great.

Thank you very much.

Jim Ricchiuti, Needham & Company.

Colin, do you think you gained share in the domestic market in Q1 or is this just a function of the category growth?

You know, we're the dominant share domestically, and so there wasn't particularly a lot of share to gain.

So this is organic growth in the category is the primary driver here.

Okay, okay.

And then, final question for me.

I was just wondering on the healthcare market, RP-VITA.

You, I guess -- so through year to date, you've shipped about 24 robots?

Correct.

And what should we expect, going out over the balance of the year?

Was this -- the number that you shipped so far this year, is that just the initial launch and we'll see that taper, or is this kind of a rate that we could assume going through the next couple of quarters.

I would not assume that it is a steady-state rate at this time.

Certainly there was pent-up demand for the product, but also we're shipping at a purposefully low rate as this is a new technology going in.

And there's -- these robots, the installation process involves mapping the hospital so that the robot can autonomously navigate throughout that hospital.

The installation process for that is, I would describe, as an engineering process at this point and not a polished workman-like interface of it.

We're doing these installs with our partner InTouch Health at a quick rate.

We have lots of learning.

The customers love these robots, and this is, as I said, early days.

We're excited by the results and the potential in this category.

But we said sales in 2013 should be viewed as particularly material.

We'll see the ramp up in rates and volumes next year and beyond.

Okay, thanks a lot.

You bet.

Paul Coster, JPMorgan.

Yes, thank you.

On the international side, can you just talk a little bit about the mix shift and the ASP sort of benefit from the 600, 700 series going into that channel?

And to what extent do you think that is the sort of principal driver or not of the 20% growth you see in international this year?

I think it's -- Paul, it's going to be a mix.

We'll see increases in both units and ASPs in the US.

As Alison said, it was definitely split so that those two drivers compounded the effect.

But I will point out that on a go-forward basis, as we launch the Brava into the EU, it's going to be a little bit apples and pears because the Brava is a lower ASP product.

So the impact of the Brava launch, all things being equal, will be a reduction in ASP and an acceleration of unit growth.

So we're going to have to rebalance the way we interpret those two figures through the back half of this year.

All right, 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.

Thank you.