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 September 28, 2019

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

______________________________________________ 

iROBOT CORPORATION

(Exact name of registrant as specified in its charter)

 ______________________________________________

Delaware	77-0259335
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

8 Crosby Drive

Bedford, MA 01730

(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
Common Stock, $0.01 par value	IRBT	The Nasdaq Stock Market LLC

______________________________________________ 

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	☒	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 October 26, 2019 was 28,270,544.

iROBOT CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 28, 2019

INDEX

	Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of September 28, 2019 and December 29, 2018	3
Consolidated Statements of Income for the three and nine months ended September 28, 2019 and September 29, 2018	4
Consolidated Statements of Comprehensive Income for the three and nine months ended September 28, 2019 and September 29, 2018	5
Consolidated Statements of Stockholders' Equity for the three and nine months ended September 28, 2019 and September 29, 2018	6
Consolidated Statements of Cash Flows for the nine months ended September 28, 2019 and September 29, 2018	8
Notes to Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures about Market Risk	25
Item 4. Controls and Procedures	26
PART II: OTHER INFORMATION
Item 1. Legal Proceedings	26
Item 1A. Risk Factors	26
Item 5. Other Information	28
Item 6. Exhibits	29
Signatures	30

2

iROBOT CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)

	September 28, 2019		December 29, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	70,542	$	130,373
Short term investments	20,530		31,605
Accounts receivable, net	169,562		162,166
Inventory	248,303		164,633
Other current assets	39,112		25,660
Total current assets	548,049		514,437
Property and equipment, net	75,019		57,026
Operating lease right-of-use assets	48,948		—
Deferred tax assets	37,177		36,979
Goodwill	117,537		118,896
Intangible assets, net	14,931		24,273
Other assets	32,003		15,350
Total assets	$	873,664	$	766,961
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	108,331	$	136,742
Accrued expenses	70,586		71,259
Deferred revenue and customer advances	4,902		5,756
Total current liabilities	183,819		213,757
Operating lease liabilities	56,341		—
Deferred tax liabilities	1,560		4,005
Other long-term liabilities	9,059		13,877
Total long-term liabilities	66,960		17,882
Total liabilities	250,779		231,639
Commitments and contingencies (Note 11)
Preferred stock, 5,000 shares authorized and none outstanding	—		—
Common stock, $0.01 par value, 100,000 shares authorized; 28,245 and 27,788 shares issued and outstanding, respectively	282		278
Additional paid-in capital	189,268		172,771
Retained earnings	432,280		367,021
Accumulated other comprehensive income (loss)	1,055		(4,748		)
Total stockholders’ equity	622,885		535,322
Total liabilities and stockholders’ equity	$	873,664	$	766,961

The accompanying notes are an integral part of the consolidated financial statements.

3

iROBOT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Revenue	$	289,399	$	264,534	$	787,232	$	707,919
Cost of revenue:
Cost of product revenue	149,463		124,754		403,392		324,967
Amortization of acquired intangible assets	3,095		4,574		9,283		14,035
Total cost of revenue	152,558		129,328		412,675		339,002
Gross profit	136,841		135,206		374,557		368,917
Operating expenses:
Research and development	33,401		35,309		104,320		103,178
Selling and marketing	42,257		39,030		137,502		116,269
General and administrative	18,372		23,329		61,871		72,630
Amortization of acquired intangible assets	256		263		796		805
Total operating expenses	94,286		97,931		304,489		292,882
Operating income	42,555		37,275		70,068		76,035
Other income, net	900		337		3,713		2,363
Income before income taxes	43,455		37,612		73,781		78,398
Income tax expense	7,923		5,683		8,522		15,597
Net income	$	35,532	$	31,929	$	65,259	$	62,801
Net income per share:
Basic	$	1.26	$	1.16	$	2.33	$	2.27
Diluted	$	1.24	$	1.12	$	2.27	$	2.19
Number of shares used in per share calculations:
Basic	28,154		27,493		28,029		27,692
Diluted	28,650		28,506		28,759		28,629

The accompanying notes are an integral part of the consolidated financial statements.

4

iROBOT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Net income	$	35,532		$	31,929		$	65,259		$	62,801
Other comprehensive income (loss):
Net foreign currency translation adjustments	(4,902		)	1,826			(5,578		)	(3,960		)
Net unrealized gains (losses) on cash flow hedges, net of tax	8,175			272			11,437			40
Net (gains) losses on cash flow hedge reclassified into earnings, net of tax	(138		)	(412		)	(300		)	9
Net unrealized gains (losses) on marketable securities, net of tax	36			(28		)	244			(113		)
Total comprehensive income	$	38,703		$	33,587		$	71,062		$	58,777

The accompanying notes are an integral part of the consolidated financial statements.

5

iROBOT CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)

	Three Months Ended
	Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss) ("AOCI")			Stockholders’ Equity
	Shares	Value
Balance at June 29, 2019	28,123	$	281	$	184,663		$	396,748	$	(2,116	)	$	579,576
Issuance of common stock under employee stock plans	9	—		301								301
Vesting of restricted stock units	113	1		(1		)						—
Stock-based compensation				4,284								4,284
Other comprehensive income									3,171			3,171
Directors' deferred compensation				21								21
Net income							35,532					35,532
Balance at September 28, 2019	28,245	$	282	$	189,268		$	432,280	$	1,055		$	622,885

	Nine Months Ended
	Common Stock					Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss) ("AOCI")			Stockholders’ Equity
	Shares		Value
Balance at December 29, 2018	27,788		$	278		$	172,771		$	367,021	$	(4,748	)	$	535,322
Issuance of common stock under employee stock plans	125		1			4,980								4,981
Vesting of restricted stock units	391		4			(4		)						—
Stock-based compensation						18,742								18,742
Stock withheld to cover tax withholdings requirements upon restricted stock vesting	(59	)	(1		)	(7,276		)						(7,277		)
Other comprehensive income											5,803			5,803
Directors' deferred compensation						55								55
Net income									65,259					65,259
Balance at September 28, 2019	28,245		$	282		$	189,268		$	432,280	$	1,055		$	622,885

The accompanying notes are an integral part of the consolidated financial statements.

6

iROBOT CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)

	Three Months Ended
	Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss) ("AOCI")			Stockholders’ Equity
	Shares	Value
Balance at June 30, 2018	27,402	$	274	$	151,556		$	309,901	$	(3,690	)	$	458,041
Issuance of common stock under employee stock plans	149	2		5,340								5,342
Vesting of restricted stock units	120	1		(1		)						—
Stock-based compensation				6,592								6,592
Other comprehensive income									1,658			1,658
Directors' deferred compensation				16								16
Net income							31,929					31,929
Balance at September 29, 2018	27,671	$	277	$	163,503		$	341,830	$	(2,032	)	$	503,578

	Nine Months Ended
	Common Stock					Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss) ("AOCI")			Stockholders’ Equity
	Shares		Value
Balance at December 30, 2017	27,945		$	279		$	190,067		$	277,989	$	1,992		$	470,327
Issuance of common stock under employee stock plans	216		3			7,945								7,948
Vesting of restricted stock units	360		4			(4		)						—
Stock-based compensation						18,969								18,969
Stock withheld to cover tax withholdings requirements upon restricted stock vesting	(51	)	(1		)	(3,531		)						(3,532		)
Other comprehensive income											(4,024		)	(4,024		)
Directors' deferred compensation						49								49
Share repurchases	(799	)	(8		)	(49,992		)						(50,000		)
Cumulative effect of a change in accounting principle related to adoption of ASC 606									1,040					1,040
Net income									62,801					62,801
Balance at September 29, 2018	27,671		$	277		$	163,503		$	341,830	$	(2,032	)	$	503,578

The accompanying notes are an integral part of the consolidated financial statements.

7

iROBOT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended
	September 28, 2019			September 29, 2018
Cash flows from operating activities:
Net income	$	65,259		$	62,801
Adjustments to reconcile net income to net cash (used in) provided by operating activities, net of the effects of acquisition:
Depreciation and amortization	27,744			27,000
Stock-based compensation	18,742			18,969
Deferred income taxes, net	(5,873		)	(4,296		)
Other	4,687			1,032
Changes in operating assets and liabilities — (use) source
Accounts receivable	(10,948		)	31,930
Inventory	(83,863		)	(54,619		)
Other current assets	(8,155		)	(18,418		)
Accounts payable	(27,256		)	(10,512		)
Accrued expenses and other liabilities	(11,916		)	(13,594		)
Net cash (used in) provided by operating activities	(31,579		)	40,293
Cash flows from investing activities:
Additions of property and equipment	(27,080		)	(25,284		)
Change in other assets	(5,336		)	(2,263		)
Proceeds from sale of equity investment	—			856
Cash paid for business acquisition, net of cash acquired	(2,817		)	—
Purchases of investments	—			(6,438		)
Sales and maturities of investments	9,380			10,500
Net cash used in investing activities	(25,853		)	(22,629		)
Cash flows from financing activities:
Proceeds from employee stock plans	4,981			7,948
Income tax withholding payment associated with restricted stock vesting	(7,277		)	(3,532		)
Stock repurchases	—			(50,000		)
Net cash used in financing activities	(2,296		)	(45,584		)
Effect of exchange rate changes on cash and cash equivalents	(103		)	(593		)
Net decrease in cash and cash equivalents	(59,831		)	(28,513		)
Cash and cash equivalents, at beginning of period	130,373			128,635
Cash and cash equivalents, at end of period	$	70,542		$	100,122

The accompanying notes are an integral part of the consolidated financial statements.

8

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Description of Business

iRobot Corporation ("iRobot" or the "Company") designs and builds robots that empower people to do more. The Company develops robotic technology and applies it to produce and market consumer robots. The Company’s revenue is primarily generated from product sales through distributor and retail sales channels, as well as its on-line stores.

2. Summary of Significant Accounting Policies

Basis of Presentation

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 addition, certain prior year amounts have been reclassified to conform to the current year presentation.

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 29, 2018, filed with the Securities and Exchange Commission on February 14, 2019.

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.

Use of Estimates

The preparation of these financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses. These estimates and judgments include, but are not limited to, revenue recognition, including performance obligations, variable consideration and other obligations such as product returns and incentives; warranty costs; valuation of goodwill and acquired intangible assets; valuation of financial instruments; evaluating loss contingencies; accounting for stock-based compensation including performance-based assessments; and accounting for income taxes and related valuation allowances. The Company bases these estimates and judgments on historical experience, market participant fair value considerations, projected future cash flows and various other factors that the Company believes are reasonable under the circumstances. Actual results may differ from the Company’s estimates.

Other Assets

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. At September 28, 2019 and December 29, 2018, other assets consisted primarily of equity securities without readily determinable fair values and an equity method investment totaling $22.4 million and $15.1 million, respectively. On October 17, 2019, the Company disposed of one of these non-marketable equity securities, resulting in a gain of approximately $8.0 million which will be recorded as other income during the fourth quarter of fiscal 2019.

Net Income Per Share

Basic income per share is calculated using the Company's weighted-average outstanding common shares. Diluted income

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.

9

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table presents the calculation of both basic and diluted net income per share (in thousands, except per share amounts): 

	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Net income	$	35,532	$	31,929	$	65,259	$	62,801
Basic weighted-average common shares outstanding	28,154		27,493		28,029		27,692
Dilutive effect of employee stock awards	496		1,013		730		937
Diluted weighted-average common shares outstanding	28,650		28,506		28,759		28,629
Basic income per share	$	1.26	$	1.16	$	2.33	$	2.27
Diluted income per share	$	1.24	$	1.12	$	2.27	$	2.19

Employee stock awards representing approximately 0.4 million and 0.0 million shares of common stock for the three months ended September 28, 2019 and September 29, 2018, respectively, and approximately 0.1 million shares of common stock for the nine months ended September 28, 2019 and September 29, 2018, were excluded from the computation of diluted earnings per share as their effect would have been antidilutive.

Recently Adopted Accounting Standards

In June 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-07, "Compensation - Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (Topic 718)." The amendments in ASU No. 2018-07 expand the scope of Topic 718 to include share-based payments issued to nonemployees for goods or services. The amendments in this ASU are effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods, with early adoption permitted. The Company adopted this standard effective December 30, 2018 which did not have a material impact on the Company's consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02 "Leases." This ASU and subsequently issued amendments require lessees to recognize the assets and liabilities on their balance sheet for the rights and obligations created by most leases and continue to recognize expenses on their income statements over the lease term. The standard also requires disclosures designed to give financial statement users information on the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements," which provides an alternative transition method that entities can elect when adopting the new standard. Under this alternative transition method, a company is permitted to use its effective date as the date of initial application without restating comparative period financial statements. The Company adopted the standard effective December 30, 2018 using the alternative transition method which resulted in the recognition of operating lease right-of-use assets and operating lease liabilities of approximately $52.8 million and $67.3 million, respectively. The Company's consolidated financial statements as of and for the three and nine months ended September 28, 2019 are presented under the new standard, while the comparative quarter presented is not adjusted and continues to be reported in accordance with the historical accounting policy. See Note 4, "Leases," for the required disclosures related to the impact of adopting this standard and a discussion of the Company's updated policies related to lease accounting.

Recently Issued Accounting Standards

In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software." The new standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The amendments to this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company intends to adopt the ASU using the prospective method effective December 29, 2019, and does not expect the new standard will have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement." The amendment modifies disclosure requirements related to fair value measurement. The amendments to this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. The Company does not believe this amendment will have a material impact on its consolidated financial statements.

10

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments," as clarified in ASU No. 2019-04 and ASU No. 2019-05. The guidance amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments. This may result in the earlier recognition of allowances for losses. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company intends to adopt the ASU effective December 29, 2019. The Company does not believe the new standard will have a material impact on its consolidated financial statements.

From time to time, new accounting pronouncements are issued by FASB 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.

3. Revenue Recognition

The Company primarily derives its revenue from product sales. The Company sells products directly to consumers through on-line stores and indirectly through resellers and distributors. Revenue is recognized upon transfer of control of promised products or services to customers, generally as title and risk of loss passes, in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. 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.

The Company’s product portfolio includes various consumer robots, many of which are Wi-Fi connected. The consumer robots are generally highly dependent on, and interrelated with, the embedded software and cannot function without the software. As such, the consumer robots are accounted for as a single performance obligation, and the revenue is recognized at a point in time when the control is transferred to distributors, resellers or directly to end customers through on-line stores. For consumer robots with Wi-Fi capability ("connected robots"), each sale represents an arrangement with multiple promises consisting of the robot, an app, cloud services and potential future unspecified software upgrades. The Company has determined that the app, cloud services and potential future unspecified software upgrades represent one promised service to the customer to enhance the functionality and interaction with the robot (referred to collectively as "Cloud Services"). For certain connected robots, the Company has concluded that, on a quantitative and qualitative basis, the Cloud Services do not constitute a material performance obligation and, as such, these services are not considered a separate performance obligation that requires allocation of transaction price.

During the third quarter of 2018, the Company launched Roomba i7 and i7+ which brought a new level of intelligence and automation to robotic vacuum cleaners with the ability to learn, map and adapt to a home's floor plan. The Company has concluded that beginning with this launch, the Cloud Services related to these new products are a material performance obligation. For contracts that contain multiple performance obligations, the transaction price is allocated to each performance obligation based on a relative standalone selling price ("SSP"). The SSP reflects the Company's best estimate of what the selling prices of performance obligations would be if they were sold regularly on a standalone basis. Revenue allocated to the robots is recognized at a point in time when control is transferred. Revenue allocated to the Cloud Services is deferred and recognized on a straight-line basis over the estimated period the software upgrades and services are expected to be provided. For contracts with a duration of greater than one year, the transaction price allocated to performance obligations that are unsatisfied as of September 28, 2019 is not material. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

The Company’s products generally carry a one-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."

Significant Judgments

The Company provides limited rights of returns for direct-to-consumer sales generated through its on-line stores and certain resellers and distributors. In addition, the Company may provide other credits or incentives, including price protection, 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 trends and forecasted customer buying and payment patterns. 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 contract inception and updated at the end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. As of September 28, 2019, the Company has reserves for product returns of $41.7 million and other credits and incentives of $78.6 million. As of December 29, 2018, the Company had reserves for product returns of $53.9 million and other credits and incentives of $97.7 million. Revenue recognized during the three and nine months

11

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

ended September 28, 2019 and September 29, 2018 related to performance obligations satisfied in a prior period was not material.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by geographical region (in thousands):

	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
United States	$	117,929	$	127,240	$	356,466	$	345,628
EMEA	93,688		73,831		251,150		213,541
Other	77,782		63,463		179,616		148,750
Total revenue	$	289,399	$	264,534	$	787,232	$	707,919

Contract Balances

The following table provides information about receivables and contract liabilities from contracts with customers (in thousands):

	September 28, 2019		December 29, 2018
Accounts receivable, net	$	169,562	$	162,166
Contract liabilities	6,412		5,756

The Company invoices customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities primarily relate to prepayments received from customers in advance of product shipments. The change in the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. During the three months ended September 28, 2019 and September 29, 2018, the Company recognized $1.7 million and $2.2 million, respectively, of the contract liability balance as revenue upon transfer of the products to customers. During the nine months ended September 28, 2019 and September 29, 2018, the Company recognized $5.8 million and $6.7 million, respectively, of the contract liability balance as revenue upon transfer of the products to customers. The Company does not assess whether a prepayment received represents a significant financing component as the period between when the payment is received and the transfer of the products to the customer is generally one year or less.

4. Leases

The Company's leasing arrangements primarily consist of operating leases for its facilities which include corporate, sales and research and development offices. For leases with terms greater than 12 months, the Company records the related right-of-use asset and lease obligation at the present value of lease payments over the term. The Company's leases typically include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. The Company does not separate lease and nonlease components of contracts and excludes all variable lease payments from the measurement of right-of-use assets and lease liabilities. The Company's variable lease payments generally include usage based nonlease components. The Company's lease agreements do not contain any residual value guarantees or restrictive covenants. Leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense is recognized on a straight-line basis over the lease term.

The Company's existing leases do not provide a readily determinable implicit rate. Therefore, the Company estimates its incremental borrowing rate to discount the lease payments based on information available at December 30, 2018 (date of initial application) or the lease commencement date for existing leases upon adoption or new leases post adoption, respectively. At September 28, 2019, the Company's weighted average discount rate was 3.61%, while the weighted average remaining lease term was 9.40 years.

12

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The components of lease expense were as follows (in thousands):

	Three Months Ended		Nine Months Ended
	September 28, 2019
Operating lease cost	$	2,250	$	6,539
Variable lease cost	828		2,965
Total lease cost	$	3,078	$	9,504

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended		Nine Months Ended
	September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,566	$	7,447
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	460	$	53,227

Maturities of operating lease liabilities were as follows as of September 28, 2019 (in thousands):

	Operating leases
Remainder of 2019	$	1,774
2020	8,798
2021	8,232
2022	7,560
2023	7,109
Thereafter	41,128
Total minimum lease payments	$	74,601
Less: imputed interest	11,953
Present value of future minimum lease payments	$	62,648
Less: current portion of operating lease liabilities (Note 7)	6,307
Long-term lease liabilities	$	56,341

Financial Statement Impact of Adopting ASC 842

The Company adopted ASC 842 effective December 30, 2018 using the alternative transition method. Under this alternative transition method, a company is permitted to use its effective date as the date of initial application without restating comparative period financial statements. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company elected the practical expedient to use hindsight in determining lease term. The adoption of the new standard resulted in the recognition of right-of-use assets and lease liabilities of approximately $52.8 million and $67.3 million, respectively. The standard did not materially impact the Company's consolidated income or cash flows.

13

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

5. Inventory

Inventory consists of the following (in thousands):

	September 28, 2019		December 29, 2018
Raw materials	$	2,801	$	2,992
Finished goods	245,502		161,641
	$	248,303	$	164,633

6. Goodwill and Other Intangible Assets

The following table summarizes the activity in the carrying amount of goodwill for the nine months ended September 28, 2019 (in thousands):

Balance as of December 29, 2018	$	118,896
Acquisition	2,050
Effect of foreign currency translation	(3,409		)
Balance as of September 28, 2019	$	117,537

Intangible assets consisted of the following (in thousands):

	September 28, 2019						December 29, 2018
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Completed technology	$	28,100	$	24,320	$	3,780	$	26,900	$	21,607	$	5,293
Tradename	100		100		—		100		100		—
Customer relationships	10,989		2,049		8,940		11,291		1,365		9,926
Reacquired distribution rights	31,239		29,112		2,127		32,499		23,598		8,901
Non-competition agreements	251		167		84		263		110		153
Total	$	70,679	$	55,748	$	14,931	$	71,053	$	46,780	$	24,273

Amortization expense related to acquired intangible assets was $3.4 million and $4.8 million for the three months ended September 28, 2019 and September 29, 2018, respectively. Amortization expense related to acquired intangible assets was $10.1 million and $14.8 million for the nine months ended September 28, 2019 and September 29, 2018, respectively.

The estimated future amortization expense related to current intangible assets in each of the five succeeding fiscal years is expected to be as follows (in thousands):

	Cost of Revenue		Operating Expenses		Total
Remainder of 2019	$	2,411	$	231	$	2,642
2020	1,140		990		2,130
2021	1,140		774		1,914
2022	915		774		1,689
2023	240		774		1,014
Thereafter	61		5,481		5,542
Total	$	5,907	$	9,024	$	14,931

14

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

7. Accrued Expenses

Accrued expenses consisted of the following at (in thousands):

	September 28, 2019		December 29, 2018
Accrued other compensation	$	14,625	$	10,518
Accrued warranty	12,372		11,964
Accrued direct fulfillment costs	13,000		5,372
Accrued bonus	9,050		21,226
Current portion of operating lease liabilities	6,307		—
Accrued sales and other indirect taxes payable	3,073		11,397
Accrued federal and state income taxes	3,146		1,936
Accrued accounting fees	1,985		2,052
Accrued other	7,028		6,794
	$	70,586	$	71,259

8. Derivative Instruments

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 uses derivative instruments that are designated in cash flow hedge relationships to reduce or eliminate the effects of foreign exchange rate changes on sales. These contracts typically have maturities of thirty-seven months or less. At September 28, 2019 and December 29, 2018, the Company had outstanding cash flow hedges with a total notional value of $387.8 million and $366.7 million, respectively.

The Company also enters 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 typically have maturities of ten months or less. At September 28, 2019 and December 29, 2018, the Company had outstanding economic hedges with a total notional value of $75.9 million and $56.0 million, respectively.

The fair values of derivative instruments are as follows (in thousands):

		Fair Value
	Classification	September 28, 2019		December 29, 2018
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Other current assets	$	1,342	$	551
Foreign currency forward contracts	Accrued expenses	727		—
Derivatives designated as cash flow hedges:
Foreign currency forward contracts	Other current assets	$	4,580	$	53
Foreign currency forward contracts	Other assets	9,574		172
Foreign currency forward contracts	Accrued expenses	355		335
Foreign currency forward contracts	Long-term liabilities	363		795

Gains (losses) associated with derivative instruments not designated as hedging instruments are as follows (in thousands):

		Three Months Ended				Nine Months Ended
	Classification	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Gain (loss) recognized in income	Other income, net	$	852	$	435	$	200	$	973

15

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following tables reflect the effect of derivatives designated as cash flow hedging (in thousands): 

	Gain (loss) recognized in OCI on Derivative (1)
	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Foreign currency forward contracts	$	10,905	$	362	$	15,254	$	(198	)

(1) The amount represents the change in fair value of derivative contracts due to changes in spot rates.

	Gain (loss) recognized in earnings on cash flow hedging instruments
	Three Months Ended
	September 28, 2019				September 29, 2018
	Revenue		Cost of revenue		Revenue		Cost of revenue
Consolidated statements of income in which the effects of cash flow hedging instruments are recorded	$	289,399	$	152,558	$	264,534	$	129,328
Gain (loss) on cash flow hedging relationships:
Foreign currency forward contracts:
Amount of gain (loss) reclassified from AOCI into earnings	$	185	$	—	$	549	$	—

	Gain (loss) recognized in earnings on cash flow hedging instruments
	Nine Months Ended
	September 28, 2019				September 29, 2018
	Revenue		Cost of revenue		Revenue		Cost of revenue
Consolidated statements of income in which the effects of cash flow hedging instruments are recorded	$	787,232	$	412,675	$	707,919	$	339,002
Gain (loss) on cash flow hedging relationships:
Foreign currency forward contracts:
Amount of gain (loss) reclassified from AOCI into earnings	$	400	$	—	$	270	$	(386	)

9. Fair Value Measurements

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 September 28, 2019
	Level 1		Level 2 (1)		Level 3 (2)
Assets:
Corporate and government bonds, $20,516 at cost (3)	$	—	$	20,530	$	—
Derivative instruments (Note 8)	—		15,496		—
Total assets measured at fair value	$	—	$	36,026	$	—
Liabilities:
Derivative instruments (Note 8)	$	—	$	1,445	$	—
Total liabilities measured at fair value	$	—	$	1,445	$	—

16

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

	Fair Value Measurements as of December 29, 2018
	Level 1		Level 2 (1)		Level 3 (2)
Assets:
Money market funds	$	3,730	$	—	$	—
Corporate and government bonds, $30,035 at cost	—		29,605		—
Convertible note	—		—		2,000
Derivative instruments (Note 8)	—		776		—
Total assets measured at fair value	$	3,730	$	30,381	$	2,000
Liabilities:
Derivative instruments (Note 8)	$	—	$	1,130	$	—
Total liabilities measured at fair value	$	—	$	1,130	$	—

(1) Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

(2) Level 3 fair value estimates are based on inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing and discounted cash flow models. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.

(3) As of September 28, 2019, the Company’s investments had maturity dates ranging from October 2019 to March 2021.

The following table provides a summary of changes in fair value of our Level 3 investment for the nine months ended September 28, 2019 (in thousands):

Balance as of December 29, 2018	$	2,000
Conversion of convertible note	(2,000		)
Balance as of September 28, 2019	$	—

10. Stockholders' Equity

Share Repurchase Activity

On February 27, 2018, the Company's board of directors approved a stock repurchase program authorizing up to $50.0 million in share repurchases. This share repurchase program commenced on March 28, 2018 with an expiration date of December 28, 2018. As of June 30, 2018, the Company completed the repurchase program and repurchased 798,794 shares of common stock totaling $50.0 million.

11. 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.

On October 24, 2019, purported Company shareholder Miramar Firefighters’ Pension Fund 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 directors and officers, captioned Miramar Firefighters’ Pension Fund v. iRobot Corporation, et al., No. 1:19-cv-09837.  The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder based on allegedly false and misleading statements and omissions concerning the Company’s acquisitions of Sales on Demand Corporation and Robopolis SAS and the Company’s subsequent 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.

17

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Outstanding Purchase Orders

At September 28, 2019, the Company had outstanding purchase orders of approximately $135.2 million. These purchase orders, the majority of which are with contract manufacturers for the purchase of inventory in the normal course of business, are for manufacturing and non-manufacturing related goods and services, and are generally cancelable without penalty.

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 has no liabilities recorded for these agreements as of September 28, 2019 and December 29, 2018, 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 7) in the accompanying consolidated balance sheets.    

Activity related to the warranty accrual was as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Balance at beginning of period	$	11,970		$	11,233		$	11,964		$	11,264
Provision	3,484			2,682			8,817			7,310
Warranty usage	(3,082		)	(2,485		)	(8,409		)	(7,144		)
Balance at end of period	$	12,372		$	11,430		$	12,372		$	11,430

12. Income Taxes

The Company’s effective income tax rate for the three months ended September 28, 2019 and September 29, 2018, was 18.2% and 15.1%, respectively. The increase in the effective income tax rate was primarily due to lower tax benefits recognized related to excess stock-based compensation.

The Company's effective income tax rate of 18.2% for the three months ended September 28, 2019 differed from the federal statutory tax rate of 21% primarily due to the recognition of higher tax benefits related to federal and state income tax credits.

The Company’s effective income tax rate for the nine months ended September 28, 2019 and September 29, 2018, was 11.6% and 19.9%, respectively. The decrease in the effective income tax rate was primarily due to increased tax benefits related to excess stock-based compensation and a decrease in foreign taxes related to a discrete charge for estimated taxes associated with a restructuring of the EMEA business in the nine months ended September 29, 2018.

The Company's effective income tax rate of 11.6% for the nine months ended September 28, 2019 differed from the federal statutory tax rate of 21% primarily due to the recognition of tax benefits related to excess stock-based compensation.

13. Industry Segment, Geographic Information and Significant Customers

The Company operates as one operating segment. The Company's consumer robots products are offered to consumers around the world through distributor and retail sales channels, as well as its on-line stores.

Significant Customers

For the three months ended September 28, 2019 and September 29, 2018, the Company generated 29.6% and 24.8% of total revenue, respectively, from one of its retailers (Amazon).

For the nine months ended September 28, 2019 and September 29, 2018, the Company generated 25.0% and 20.4% of total revenue, respectively, from one of its retailers (Amazon).

18

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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 and Exchange Act of 1934, as amended, or 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 new product sales, the timing of product launches, product development and offerings, our consumer robots, our competition, our strategy, our market position, the impact of tariffs, market acceptance of our products, seasonal factors, revenue recognition, our profits, growth of our revenues, composition of our revenues, our cost of revenues, units shipped, average selling prices, operating expenses, selling and marketing expenses, general and administrative expenses, research and development expenses, compensation costs, our projected income tax rate, our credit and letter of credit facilities, our valuations of investments, valuation and composition of our stock-based awards, and liquidity, 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. 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 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 consumer robot company that designs and builds robots that empower people to do more both inside and outside of the home. Our consumer robots help people find smarter ways to clean and accomplish more in their daily lives. Our portfolio of solutions features proprietary technologies for the connected home and advanced concepts in cleaning, mapping and navigation, human-robot interaction and physical solutions. Leveraging this portfolio, our engineers are building an ecosystem of robots to empower the smart home. For more than 25 years, we have been a pioneer in the robotics and consumer products industries. We sell our robots through a variety of distribution channels, including chain stores and other national retailers, through our on-line store, and through value-added distributors and resellers worldwide.

As of September 28, 2019, we had 1,132 full-time employees. We have developed expertise in the disciplines necessary to build durable, high-performance and cost-effective robots through the close integration of software, electronics and hardware. Our core technologies serve as reusable building blocks that we adapt and expand to enhance existing products, develop next-generation versions of our products and design and launch new products, reducing the time, cost and risk associated with product development. Our significant expertise in consumer needs, robot design, engineering and smart home technologies and trends positions us to capitalize on the growth we expect in the market for robot-based consumer products.

Our continued success depends upon our ability to respond to a number of challenges in the consumer robots market. We believe the most significant of these include increasing competition and our ability to successfully develop and introduce products and product enhancements into both new and existing markets. Furthermore, we believe that our efforts to cost-optimize our products and diversify our contract manufacturing and broader supply chain will continue to play an important role in maintaining competitive product pricing, reducing supply-chain risk and limiting China-related tariff exposure, among other factors that impact our results of operations.

In the third quarter of 2018, we introduced the Roomba i7 and i7+ in the U.S., which are robot vacuums that remember a home's floor plan and clean specific rooms by name. Using Imprint™ Smart Mapping, the Roomba i7+ learns the home's floor plan, giving customers total control over which rooms to clean and when. When the Roomba i7+ robot vacuum is finished cleaning, it empties its own dust bin into the Clean Base™, which holds 30 bins of dirt. In the third quarter of 2018, the Company also introduced the Roomba e5, a highly-featured product at a more accessible price, to our lineup in the U.S. In the fourth quarter of 2018, we introduced the Roomba e5 in markets outside of the U.S. in advance of the holiday season.

During the first quarter of 2019, we launched Roomba i7 and i7+ in EMEA, Japan and China. During the second quarter of 2019, we successfully launched two new cleaning robots in the U.S., the Roomba s9 and s9+, which, along with the features of the Roomba i7 and i7+, are robot vacuums that can clean deep into corners and along edges, and the Braava jet m6 robot mop, which can tackle multiple rooms and large spaces with advanced navigation and mapping capabilities. Together, these two robots can use Imprint Link Technology to talk to each other, automatically vacuuming and then mopping without additional action by the user. During the third quarter of 2019, the s9 and s9+ were launched in EMEA, while the m6 was launched in both EMEA and Japan. We anticipate that the s9, s9+ and m6 will launch in all other target markets in early 2020.

19

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses. These estimates and judgments include, but are not limited to, revenue recognition including performance obligations, variable consideration and other obligations such as product returns and incentives; warranty costs, valuation of goodwill and acquired intangible assets; evaluating loss contingencies; accounting for stock-based compensation including performance-based assessments; and accounting for income taxes and related valuation allowances. We base these estimates and judgments on historical experience, market participant fair value considerations, projected future cash flows and various other factors that we believe are reasonable under the circumstances. Actual results may differ from our estimates. Additional information about these critical accounting policies may be found in the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" section included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2018.

Effective December 30, 2018, we adopted the new leasing standard under ASC 842 using the alternative transition method. The adoption of the new standard resulted in a material increase in the assets and liabilities, while the impact on the Company's results of operations and cash flows was not material for the three and nine months ended September 28, 2019. We have updated our accounting policy as it relates to lease accounting. Refer to Note 4 of the 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				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue:
Cost of product revenue	51.6		47.2		51.2		45.9
Amortization of acquired intangible assets	1.1		1.7		1.2		2.0
Total cost of revenue	52.7		48.9		52.4		47.9
Gross profit	47.3		51.1		47.6		52.1
Operating expenses:
Research and development	11.5		13.3		13.2		14.6
Selling and marketing	14.6		14.8		17.5		16.4
General and administrative	6.4		8.8		7.9		10.3
Amortization of acquired intangible assets	0.1		0.1		0.1		0.1
Total operating expenses	32.6		37.0		38.7		41.4
Operating income	14.7		14.1		8.9		10.7
Other income, net	0.3		0.1		0.5		0.4
Income before income taxes	15.0		14.2		9.4		11.1
Income tax expense	2.7		2.1		1.1		2.2
Net income	12.3	%	12.1	%	8.3	%	8.9	%

20

Comparison of Three and Nine Months Ended September 28, 2019 and September 29, 2018

Revenue

	Three Months Ended								Nine Months Ended
	September 28, 2019		September 29, 2018		Dollar Change		Percent Change		September 28, 2019		September 29, 2018		Dollar Change		Percent Change
			(In thousands)								(In thousands)
Revenue	$	289,399	$	264,534	$	24,865	9.4	%	$	787,232	$	707,919	$	79,313	11.2	%

Revenue for the three months ended September 28, 2019 increased to $289.4 million, or 9.4%, compared to $264.5 million for the three months ended September 29, 2018. The $24.9 million increase in revenue for the three months ended September 28, 2019 was primarily driven by an increase in the average gross selling price of 10.5% for the three months ended September 28, 2019 as compared to the three months ended September 29, 2018. The increase in average gross selling price was primarily driven by the launch of our new products during the second half of fiscal 2018 and the first three quarters of fiscal 2019. Total robots shipped in the three months ended September 28, 2019 increased 4.0% to approximately 1.1 million units, compared to the three months ended September 29, 2018. In the three months ended September 28, 2019, domestic revenue decreased $9.3 million, or 7.3%, and international revenue increased $34.2 million, or 24.9%, as compared to the three months ended September 29, 2018.

Revenue for the nine months ended September 28, 2019 increased to $787.2 million, or 11.2%, compared to $707.9 million for the nine months ended September 29, 2018. The $79.3 million increase in revenue for the nine months ended September 28, 2019 was primarily driven by an increase in the average gross selling price of 5.9% for the nine months ended September 28, 2019 as compared to the nine months ended September 29, 2018. The increase in average gross selling price was primarily driven by the launch of our new products during the second half of fiscal 2018 and the first three quarters of fiscal 2019. Total robots shipped in the nine months ended September 28, 2019 increased 7.9% to approximately 3.1 million units, compared to approximately 2.9 million units in the nine months ended September 29, 2018. In the nine months ended September 28, 2019, domestic revenue increased $10.8 million, or 3.1%, and international revenue increased $68.5 million, or 18.9%, as compared to the nine months ended September 29, 2018.

Cost of Product Revenue

	Three Months Ended										Nine Months Ended
	September 28, 2019			September 29, 2018			Dollar Change		Percent Change		September 28, 2019			September 29, 2018			Dollar Change		Percent Change
	(In thousands)										(In thousands)
Cost of product revenue	$	149,463		$	124,754		$	24,709	19.8	%	$	403,392		$	324,967		$	78,425	24.1	%
As a percentage of revenue	51.6		%	47.2		%					51.2		%	45.9		%

Cost of product revenue increased to $149.5 million in the three months ended September 28, 2019, compared to $124.8 million in the three months ended September 29, 2018. The $24.7 million increase in cost of product revenue is primarily due to the increase in revenue and higher tariffs on our Roomba products imported into the United States from China. Effective September 24, 2018, tariffs were set at 10%, and effective May 10, 2019, tariffs further increased to 25%.

Cost of product revenue increased to $403.4 million in the nine months ended September 28, 2019, compared to $325.0 million in the nine months ended September 29, 2018. The $78.4 million increase in cost of product revenue is primarily due to the increase in revenue and higher tariffs on our Roomba products imported into the United States from China. Effective September 24, 2018, tariffs were set at 10%, and effective May 10, 2019, tariffs further increased to 25%.

Gross Profit

	Three Months Ended										Nine Months Ended
	September 28, 2019			September 29, 2018			Dollar Change		Percent Change		September 28, 2019			September 29, 2018			Dollar Change		Percent Change
	(In thousands)										(In thousands)
Gross profit	$	136,841		$	135,206		$	1,635	1.2	%	$	374,557		$	368,917		$	5,640	1.5	%
Gross margin	47.3		%	51.1		%					47.6		%	52.1		%

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Gross margin decreased to 47.3% in the three months ended September 28, 2019 compared to 51.1% in the three months ended September 29, 2018. The decrease in gross margin is primarily related to increased promotional activity as well as the increased tariffs on our Roomba products imported to the United States from China.

Gross margin decreased to 47.6% in the nine months ended September 28, 2019 compared to 52.1% in the nine months ended September 29, 2018. The decrease in gross margin is primarily related to increased promotional activity as well as the increased tariffs on our Roomba products imported to the United States from China.

Research and Development

	Three Months Ended											Nine Months Ended
	September 28, 2019			September 29, 2018			Dollar Change			Percent Change		September 28, 2019			September 29, 2018			Dollar Change		Percent Change
	(In thousands)											(In thousands)
Research and development	$	33,401		$	35,309		$	(1,908	)	(5.4	)%	$	104,320		$	103,178		$	1,142	1.1	%
As a percentage of revenue	11.5		%	13.3		%						13.2		%	14.6		%

Research and development expenses decreased $1.9 million, or 5.4%, to $33.4 million (11.5% of revenue) in the three months ended September 28, 2019 from $35.3 million (13.3% of revenue) in the three months ended September 29, 2018. This decrease is primarily due to lower program-related costs of $3.3 million, partially offset by an increase in people-related costs of $1.5 million resulting from increased headcount.

Research and development expenses increased $1.1 million, or 1.1%, to $104.3 million (13.2% of revenue) in the nine months ended September 28, 2019 from $103.2 million (14.6% of revenue) in the nine months ended September 29, 2018. This increase is primarily due to an increase in people-related costs of $7.4 million resulting from increased headcount, partially offset by lower program-related costs of $6.3 million during the nine months ended September 28, 2019.

Selling and Marketing

	Three Months Ended										Nine Months Ended
	September 28, 2019			September 29, 2018			Dollar Change		Percent Change		September 28, 2019			September 29, 2018			Dollar Change		Percent Change
	(In thousands)										(In thousands)
Selling and marketing	$	42,257		$	39,030		$	3,227	8.3	%	$	137,502		$	116,269		$	21,233	18.3	%
As a percentage of revenue	14.6		%	14.8		%					17.5		%	16.4		%

Selling and marketing expenses increased $3.2 million, or 8.3%, to $42.3 million (14.6% of revenue) in the three months ended September 28, 2019 from $39.0 million (14.8% of revenue) in the three months ended September 29, 2018. This increase was primarily attributable to an increase in marketing investments totaling $2.2 million to support our new product launches in EMEA and Japan and certain promotional and advertising campaigns in the United States and abroad as well as higher people-related costs of $0.9 million.

Selling and marketing expenses increased $21.2 million, or 18.3%, to $137.5 million (17.5% of revenue) in the nine months ended September 28, 2019 from $116.3 million (16.4% of revenue) in the nine months ended September 29, 2018. This increase was primarily attributable to an increase in marketing investments totaling $16.0 million to support our new product launches and certain promotional and advertising campaigns in all regions as well as higher people-related costs of $4.0 million.

General and Administrative

	Three Months Ended											Nine Months Ended
	September 28, 2019			September 29, 2018			Dollar Change			Percent Change		September 28, 2019			September 29, 2018			Dollar Change			Percent Change
	(In thousands)											(In thousands)
General and administrative	$	18,372		$	23,329		$	(4,957	)	(21.2	)%	$	61,871		$	72,630		$	(10,759	)	(14.8	)%
As a percentage of revenue	6.4		%	8.8		%						7.9		%	10.3		%

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General and administrative expenses decreased $5.0 million, or 21.2%, to $18.4 million (6.4% of revenue) in the three months ended September 28, 2019 from $23.3 million (8.8% of revenue) in the three months ended September 29, 2018 primarily attributable to lower stock-based and other incentive compensation costs.

General and administrative expenses decreased $10.8 million, or 14.8%, to $61.9 million (7.9% of revenue) in the nine months ended September 28, 2019 from $72.6 million (10.3% of revenue) in the nine months ended September 29, 2018 primarily attributable to lower short-term and long-term incentive compensation costs of $5.0 million and a decrease in legal costs of $4.9 million after favorable determination of a previously-disclosed intellectual property litigation suit in the fourth quarter of 2018.

Amortization of Acquired Intangible Assets

	Three Months Ended											Nine Months Ended
	September 28, 2019			September 29, 2018			Dollar Change			Percent Change		September 28, 2019			September 29, 2018			Dollar Change			Percent Change
	(In thousands)											(In thousands)
Cost of revenue	$	3,095		$	4,574		$	(1,479	)	(32.3	)%	$	9,283		$	14,035		$	(4,752	)	(33.9	)%
Operating expense	256			263			(7		)	(2.7	)%	796			805			(9		)	(1.1	)%
Total amortization expense	$	3,351		$	4,837		$	(1,486	)	(30.7	)%	$	10,079		$	14,840		$	(4,761	)	(32.1	)%
As a percentage of revenue	1.2		%	1.8		%						1.3		%	2.1		%

The decrease in amortization of acquired intangible assets in the three and nine months ended September 28, 2019 as compared to the three and nine months ended September 29, 2018, was primarily related to the reacquired distribution rights intangible asset, which is being amortized on an accelerated basis.

Other Income, Net

	Three Months Ended										Nine Months Ended
	September 28, 2019			September 29, 2018			Dollar Change		Percent Change		September 28, 2019			September 29, 2018			Dollar Change		Percent Change
	(In thousands)										(In thousands)
Other income, net	$	900		$	337		$	563	167.1	%	$	3,713		$	2,363		$	1,350	57.1	%
As a percentage of revenue	0.3		%	0.1		%					0.5		%	0.4		%

Other income, net, amounted to $0.9 million and $0.3 million for the three months ended September 28, 2019 and September 29, 2018, respectively. Other income, net, amounted to $3.7 million and $2.4 million for the nine months ended September 28, 2019 and September 29, 2018, respectively. Other income, net includes interest income, interest expense, foreign currency gains (losses) as well as gains (losses) from strategic investments.

Income Tax Expense

	Three Months Ended										Nine Months Ended
	September 28, 2019			September 29, 2018			Dollar Change		Percent Change		September 28, 2019			September 29, 2018			Dollar Change			Percent Change
	(In thousands)										(In thousands)
Income tax expense	$	7,923		$	5,683		$	2,240	39.4	%	$	8,522		$	15,597		$	(7,075	)	(45.4	)%
Effective income tax rate	18.2		%	15.1		%					11.6		%	19.9		%

We recorded an income tax expense of $7.9 million and $5.7 million for the three months ended September 28, 2019 and September 29, 2018, respectively. The $7.9 million income tax expense for the three months ended September 28, 2019 resulted in an effective income tax rate of 18.2%. The $5.7 million income tax expense for the three months ended September 29, 2018 resulted in an effective income tax rate of 15.1%. The increase in the effective income tax rate was primarily due to lower tax benefits recognized related to excess stock-based compensation.

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Our effective income tax rate of 18.2% for the three months ended September 28, 2019 differed from the federal statutory tax rate of 21% primarily due to the recognition of higher tax benefits related to federal and state income tax credits.

We recorded an income tax expense of $8.5 million and $15.6 million for the nine months ended September 28, 2019 and September 29, 2018, respectively. The $8.5 million income tax expense for the nine months ended September 28, 2019 resulted in an effective income tax rate of 11.6%. The $15.6 million income tax expense for the nine months ended September 29, 2018 resulted in an effective income tax rate of 19.9%. The decrease in the effective income tax rate was primarily due to increased tax benefits related to excess stock-based compensation and a decrease in foreign taxes related to a discrete charge for estimated taxes associated with a restructuring of the EMEA business recorded in the nine months ended September 29, 2018.

Our effective income tax rate of 11.6% for the nine months ended September 28, 2019 differed from the federal statutory tax rate of 21% primarily due to the recognition of tax benefits related to excess stock-based compensation.

Liquidity and Capital Resources

At September 28, 2019, our principal sources of liquidity were cash and cash equivalents totaling $70.5 million and short-term investments of $20.5 million. Our working capital, which represents our total current assets less total current liabilities, was $364.2 million as of September 28, 2019, compared to $271.1 million as of September 29, 2018.

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. Accordingly, our capital spending is generally limited to leasehold improvements, computers, office furniture, product-specific production tooling, internal use software and test equipment. In the nine months ended September 28, 2019 and September 29, 2018, we spent $27.1 million and $25.3 million, respectively, on capital expenditures.

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 Southern China to our customers and, alternatively, allows our distributors and certain retail customers to take possession of product on a domestic basis. Accordingly, our consumer product 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 nine months ended September 28, 2019 was $31.6 million, of which the principal components were our net income of $65.3 million, non-cash charges of $45.3 million and changes in working capital. The change in working capital mainly includes increases in accounts receivable, inventory and other current assets of $10.9 million, $83.9 million and $8.2 million, respectively, partially offset by a decrease in accounts payable and accrued expenses of $39.2 million.

Cash used in investing activities

Net cash used in investing activities for the nine months ended September 28, 2019 was $25.9 million. During the nine months ended September 28, 2019, we invested $27.1 million in the purchase of property and equipment, including machinery and tooling for new products. In addition, we made strategic investments of $5.3 million and paid $2.8 million for a business acquisition, while proceeds from the sales and maturities of marketable securities amounted to $9.4 million.

Cash used in financing activities

Net cash used in financing activities for the nine months ended September 28, 2019 was $2.3 million. During the nine months ended September 28, 2019, we received $5.0 million from employee stock plans and paid $7.3 million upon vesting of restricted stock where 59,260 shares were retained by us to cover employee tax withholdings.

Working Capital Facilities

Credit Facility

In June 2018, we entered into a new agreement with Bank of America, N.A., increasing the amount of our unsecured revolving line of credit from $75.0 million to $150.0 million and extending the term of the credit facility to June 2023. As of September 28, 2019, we had no outstanding borrowings under our revolving credit facility. The revolving line of credit is available to fund working capital and other corporate purposes. The interest on loans under our credit facility accrues, at our election, at either (1) LIBOR plus a margin, currently equal to 1.0%, based on our ratio of indebtedness to Adjusted EBITDA (the "Eurodollar Rate"), or (2) the lender’s base rate. The lender’s base rate is equal to the highest of (1) the federal funds rate

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plus 0.5%, (2) the lender’s prime rate and (3) the Eurodollar Rate plus 1.0%. In the event that LIBOR is discontinued as expected in 2021, we expect the interest rates for our debt following such event will be based on either alternate base rates or agreed upon replacement rates. While we do not expect a LIBOR discontinuation would affect our ability to borrow or maintain already outstanding borrowings, it could result in higher interest rates.

The credit facility contains customary terms and conditions for credit facilities of this type, including restrictions on our ability to incur or guarantee additional indebtedness, create liens, enter into transactions with affiliates, make loans or investments, sell assets, pay dividends or make distributions on, or repurchase, our stock, and consolidate or merge with other entities. In addition, we are required to meet certain financial covenants customary with this type of agreement, including maintaining a maximum ratio of indebtedness to Adjusted EBITDA and a minimum specified interest coverage ratio.

The credit facility contains customary events of default, including for payment defaults, breaches of representations, breaches of affirmative or negative covenants, cross defaults to other material indebtedness, bankruptcy and failure to discharge certain judgments. If a default occurs and is not cured within any applicable cure period or is not waived, our obligations under the credit facility may be accelerated.

As of September 28, 2019, we were in compliance with all covenants under the revolving credit facility.

Working Capital and Capital Expenditure Needs

We currently have no material cash commitments, except for normal recurring trade payables, expense accruals, capital expenditures and operating leases, all of which we anticipate funding through working capital, funds provided by operating activities and our existing revolving line of credit. We believe our outsourced approach to manufacturing provides us with flexibility in both managing inventory levels and financing our inventory. We believe our existing cash and cash equivalents, short-term investments, cash provided by operating activities, and funds available through our revolving line of credit will be sufficient to meet our working capital and capital expenditure needs over at least the next twelve months. In the event our revenue plan does not meet our expectations, we may eliminate or curtail expenditures to mitigate the impact on our working capital. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our marketing and sales activities, the timing and extent of spending to support product development efforts, the timing of introductions of new products and enhancements to existing products, the acquisition of new capabilities or technologies, and the continuing market acceptance of our products and services. Moreover, to the extent existing cash and cash equivalents, short-term investments, cash from operations, and cash from short-term borrowing are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. As part of our business strategy, we may consider additional acquisitions of companies, technologies and products, which could also require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us or at all.

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 29, 2018. Our principal commitments generally consist of obligations under our credit facility, leases for office space and minimum purchase commitments for services such as cloud support and other non-cancelable contractual obligations for subscription software services. There have been no material changes in our contractual obligations and commitments since December 29, 2018.

Off-Balance Sheet Arrangements

As of September 28, 2019, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Recently Adopted Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements.

Recently Issued Accounting Pronouncements

See Note 2 to the 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 adverse 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.

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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 regularly monitor the forecast of non-U.S. dollar revenue and expenses and the level of non-U.S. dollar monetary asset and liability balances to determine if any actions, including possibly entering into foreign currency contracts should be taken to minimize the impact of fluctuating exchange rates on our results of operations. Periodically, we enter into forward exchange contracts to hedge against foreign currency fluctuations. These contracts may or may not be designated as cash flow hedges for accounting purposes. We use cash flow hedges primarily to reduce the effects of foreign exchange rate changes on sales primarily in Japanese Yen and Euros. At September 28, 2019 and December 29, 2018, we had outstanding cash flow hedges with a total notional value of $387.8 million and $366.7 million, respectively.

We also 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 ten months or less. At September 28, 2019 and December 29, 2018, we had outstanding economic hedges with a total notional value of $75.9 million and $56.0 million, respectively.

At September 28, 2019, assuming all other variables are constant, if the U.S. Dollar weakened or strengthened by 10%, the fair market value of our foreign currency contracts would increase or decrease by approximately $46.4 million.

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.

On October 24, 2019, purported Company shareholder Miramar Firefighters’ Pension Fund 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 directors and officers, captioned Miramar Firefighters’ Pension Fund v. iRobot Corporation, et al., No. 1:19-cv-09837.  The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder based on allegedly false and misleading statements and omissions concerning the Company’s acquisitions of Sales on Demand Corporation and Robopolis SAS and the Company’s subsequent 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.

Item 1A. Risk Factors

We operate in a rapidly changing environment that involves a number of risks that could 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 29, 2018, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not presently known to us, which we

26

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 29, 2018, other than updates to the Risk Factor set forth below:

Significant developments from the recent and potential changes 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.

The U.S. government has indicated its intent to alter its approach to international trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements and treaties with foreign countries. Effective September 24, 2018, the U.S. government implemented a 10% tariff on certain goods imported from China, which include the majority of those imported by the Company. These tariffs were increased to 25% on May 10, 2019 and were slated to further increase to 30% in October 2019 until a last-minute interim deal was reached between the United States and China. In addition, the U.S. government has indicated a desire to implement tariffs on the remainder of the goods the Company imports from China, with tariffs on the Company’s mopping products set to increase to 15% on December 15, 2019.  These tariffs, and other governmental action relating to international trade agreements or policies, have adversely impacted demand for our products, our costs, customers, suppliers, distributors, resellers and/or the U.S. economy or certain sectors thereof and, as a result, have adversely impacted, and we expect will continue to adversely impact, our business, financial condition and results of operations. The already-implemented, and any additional or increased, tariffs have caused and 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. The increased tariffs are a contributing cause for lowering our margin on products sold, and we expect a reduced margin going forward due to continuing tariffs. 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 or the terms of any renegotiated trade agreements and their impacts on our business. 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 further adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could further adversely impact our business, financial condition and results of operations.

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Item 5. Other Information

Our policy governing transactions in our securities by our directors, officers, and employees permits our officers, directors, funds affiliated with our directors, and certain other persons to enter into trading plans complying with Rule 10b5-l under the Exchange Act. We have been advised that certain of our officers and directors (including Colin Angle, Chief Executive Officer, Russell Campanello, EVP, Human Resources and Corporate Communications, Timothy Saeger, EVP & Chief R&D Officer, Glen Weinstein, EVP & Chief Legal Officer, as well as Mohamad Ali, Deborah Ellinger, Andrew Miller and Michelle Stacy, each a director of the Company) have entered into trading plans (each a "Plan" and collectively, the "Plans") covering periods after the date of this quarterly report on Form 10-Q in accordance with Rule 10b5-1 and our policy governing transactions in our securities. Generally, under these trading plans, the individual relinquishes control over the transactions once the trading plan is put into place. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company.

We anticipate that, as permitted by Rule 10b5-l and our policy governing transactions in our securities, some or all of our officers, directors and employees may establish trading plans in the future. We intend to disclose the names of our executive officers and directors who establish a trading plan in compliance with Rule 10b5-1 and the requirements of our policy governing transactions in our securities in our future quarterly reports on Form 10-Q and annual reports on Form 10-K filed with the Securities and Exchange Commission. We undertake no obligation to update or revise the information provided herein.

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Item 6. Exhibits

EXHIBIT INDEX

Exhibit Number	Description
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

29

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: October 31, 2019	By:	/s/ Alison Dean
		Alison Dean
		Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

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EX-31.1

Exhibit 31.1

Certifications

I, Colin M. Angle, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of iRobot Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 31, 2019	/s/ COLIN M. ANGLE
	Colin M. Angle Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certifications

I, Alison Dean, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of iRobot Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 31, 2019	/s/ ALISON DEAN
	Alison Dean Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of iRobot Corporation (the "Company") for the period ended September 28, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Colin M. Angle, the Chief Executive Officer of the Company and Alison Dean, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to our knowledge, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification is being provided pursuant to 18 U.S.C. 1350 and is not to be deemed a part of the Report, nor is it to be deemed to be "filed" for any purpose whatsoever.

Date: October 31, 2019	/s/ COLIN M. ANGLE
	Colin M. Angle Chairman of the Board and Chief Executive Officer
Date: October 31, 2019	/s/ ALISON DEAN
	Alison Dean Chief Financial Officer

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Stockholders Equity (Notes)

9 Months Ended

Sep. 28, 2019

Equity [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Stockholders' Equity

Share Repurchase Activity

On February 27, 2018, the Company's board of directors approved a stock repurchase program authorizing up to $50.0 million in share repurchases. This share repurchase program commenced on March 28, 2018 with an expiration date of December 28, 2018. As of June 30, 2018, the Company completed the repurchase program and repurchased 798,794 shares of common stock totaling $50.0 million.

XML

Description of Business

9 Months Ended

Sep. 28, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business

Description of Business

iRobot Corporation ("iRobot" or the "Company") designs and builds robots that empower people to do more. The Company develops robotic technology and applies it to produce and market consumer robots. The Company’s revenue is primarily generated from product sales through distributor and retail sales channels, as well as its on-line stores.

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Goodwill, Other Intangible Assets and Other Assets

9 Months Ended

Sep. 28, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Other Intangible Assets and Other Assets

Goodwill and Other Intangible Assets

The following table summarizes the activity in the carrying amount of goodwill for the nine months ended September 28, 2019 (in thousands):

Balance as of December 29, 2018	$	118,896
Acquisition	2,050
Effect of foreign currency translation	(3,409		)
Balance as of September 28, 2019	$	117,537

Intangible assets consisted of the following (in thousands):

	September 28, 2019						December 29, 2018
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Completed technology	$	28,100	$	24,320	$	3,780	$	26,900	$	21,607	$	5,293
Tradename	100		100		—		100		100		—
Customer relationships	10,989		2,049		8,940		11,291		1,365		9,926
Reacquired distribution rights	31,239		29,112		2,127		32,499		23,598		8,901
Non-competition agreements	251		167		84		263		110		153
Total	$	70,679	$	55,748	$	14,931	$	71,053	$	46,780	$	24,273

Amortization expense related to acquired intangible assets was $3.4 million and $4.8 million for the three months ended September 28, 2019 and September 29, 2018, respectively. Amortization expense related to acquired intangible assets was $10.1 million and $14.8 million for the nine months ended September 28, 2019 and September 29, 2018, respectively.

The estimated future amortization expense related to current intangible assets in each of the five succeeding fiscal years is expected to be as follows (in thousands):

	Cost of Revenue		Operating Expenses		Total
Remainder of 2019	$	2,411	$	231	$	2,642
2020	1,140		990		2,130
2021	1,140		774		1,914
2022	915		774		1,689
2023	240		774		1,014
Thereafter	61		5,481		5,542
Total	$	5,907	$	9,024	$	14,931

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Consolidated Statements of Income Statement - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018
Revenue	$ 289,399	$ 264,534	$ 787,232	$ 707,919
Cost of product revenue	149,463	124,754	403,392	324,967
Amortization of acquired intangible assets	3,095	4,574	9,283	14,035
Total cost of revenue	152,558	129,328	412,675	339,002
Gross profit	136,841	135,206	374,557	368,917
Research and development	33,401	35,309	104,320	103,178
Selling and marketing	42,257	39,030	137,502	116,269
General and administrative	18,372	23,329	61,871	72,630
Amortization of acquired intangible assets	256	263	796	805
Total operating expenses	94,286	97,931	304,489	292,882
Operating income	42,555	37,275	70,068	76,035
Other income, net	900	337	3,713	2,363
Income before income taxes	43,455	37,612	73,781	78,398
Income tax expense	7,923	5,683	8,522	15,597
Net income	$ 35,532	$ 31,929	$ 65,259	$ 62,801
Basic	$ 1.26	$ 1.16	$ 2.33	$ 2.27
Diluted	$ 1.24	$ 1.12	$ 2.27	$ 2.19
Basic	28,154	27,493	28,029	27,692
Diluted	28,650	28,506	28,759	28,629

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Derivative Instruments Schedule of Derivative Instruments (Tables)

9 Months Ended

Sep. 28, 2019

Derivative [Line Items]

Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The following tables reflect the effect of derivatives designated as cash flow hedging (in thousands): 

	Gain (loss) recognized in OCI on Derivative (1)
	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Foreign currency forward contracts	$	10,905	$	362	$	15,254	$	(198	)

(1)

The amount represents the change in fair value of derivative contracts due to changes in spot rates.

Schedule of Derivative Instruments [Table Text Block]

The fair values of derivative instruments are as follows (in thousands):

		Fair Value
	Classification	September 28, 2019		December 29, 2018
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Other current assets	$	1,342	$	551
Foreign currency forward contracts	Accrued expenses	727		—
Derivatives designated as cash flow hedges:
Foreign currency forward contracts	Other current assets	$	4,580	$	53
Foreign currency forward contracts	Other assets	9,574		172
Foreign currency forward contracts	Accrued expenses	355		335
Foreign currency forward contracts	Long-term liabilities	363		795

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Summary of Significant Accounting Policies Other Assets (Details) - USD ($) $ in Millions	Sep. 28, 2019	Dec. 29, 2018
Equity and cost method investments [Abstract]
Equity Securities without Readily Determinable Fair Value, Amount	$ 22.4	$ 15.1

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Leases Lease Cost (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 28, 2019 USD ($)	Sep. 28, 2019 USD ($)
Leases [Abstract]
Operating Lease, Weighted Average Discount Rate, Percent	3.61%	3.61%
Operating Lease, Cost	$ 2,250	$ 6,539
Variable Lease, Cost	828	2,965
Lease, Cost	$ 3,078	$ 9,504
Operating Lease, Weighted Average Remaining Lease Term	9 years 4 months 24 days	9 years 4 months 24 days

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Industry Segment, Geographic Information and Significant Customers - Segment Information about Revenue, Cost of Revenue, Gross Margin and Income before Income Taxes (Detail) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019 USD ($)	Sep. 29, 2018 USD ($)	Sep. 28, 2019 USD ($) segment	Sep. 29, 2018 USD ($)
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Number of Reportable Segments | segment			1
Total cost of revenue	$ 152,558	$ 129,328	$ 412,675	$ 339,002
Gross profit	136,841	135,206	374,557	368,917
Research and development	33,401	35,309	104,320	103,178
Selling and marketing	42,257	39,030	137,502	116,269
General and administrative	18,372	23,329	61,871	72,630
Other income, net	$ 900	$ 337	$ 3,713	$ 2,363

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Stockholders Equity (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 29, 2018	Dec. 29, 2018	Feb. 27, 2018
Equity [Abstract]
Stock Repurchase Program, Authorized Amount			$ 50,000,000.0
Stock Repurchased and Retired During Period, Shares	799,000	798,794
Stock Repurchased and Retired During Period, Value	$ 50,000,000	$ 50,000,000.0

XML

Leases Maturity of Operating Lease LIability (Details) - USD ($) $ in Thousands	Sep. 28, 2019	Dec. 30, 2018	Dec. 29, 2018
Leases [Abstract]
Lessee, Operating Lease, Liability, Payments, Remainder of Fiscal Year	$ 1,774
Lessee, Operating Lease, Liability, Payments, Due Year Two	8,798
Lessee, Operating Lease, Liability, Payments, Due Year Three	8,232
Lessee, Operating Lease, Liability, Payments, Due Year Four	7,560
Lessee, Operating Lease, Liability, Payments, Due Year Five	7,109
Lessee, Operating Lease, Liability, Payments, Due after Year Five	41,128
Lessee, Operating Lease, Liability, Payments, Due	74,601
Lessee, Operating Lease, Liability, Undiscounted Excess Amount	11,953
Operating Lease, Liability	62,648	$ 67,300
Operating Lease, Liability, Current	6,307		$ 0
Operating Lease, Liability, Noncurrent	$ 56,341		$ 0

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Goodwill, Other Intangible Assets and Other Assets - Other Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018	Dec. 29, 2018
Finite-Lived Intangible Assets [Line Items]
Document Period End Date			Sep. 28, 2019
Finite-Lived Intangible Assets, Gross	$ 70,679		$ 70,679		$ 71,053
Intangible assets accumulated amortization	55,748		55,748		46,780
Intangible Assets, Net	14,931		14,931		24,273
Amortization of Acquired Intangible Assets	3,400	$ 4,800	10,100	$ 14,800
Completed technology
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	28,100		28,100		26,900
Intangible assets accumulated amortization	24,320		24,320		21,607
Intangible Assets, Net	3,780		3,780		5,293
Trade Names
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	100		100		100
Intangible assets accumulated amortization	100		100		100
Intangible Assets, Net	0		0		0
Customer-Related Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	10,989		10,989		11,291
Intangible assets accumulated amortization	2,049		2,049		1,365
Intangible Assets, Net	8,940		8,940		9,926
Distribution Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	31,239		31,239		32,499
Intangible assets accumulated amortization	29,112		29,112		23,598
Intangible Assets, Net	2,127		2,127		8,901
Noncompete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	251		251		263
Intangible assets accumulated amortization	167		167		110
Intangible Assets, Net	$ 84		$ 84		$ 153

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Derivative Instruments Schedule of Derivative Instruments (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018	Dec. 29, 2018
Derivative [Line Items]
Document Period End Date				Sep. 28, 2019
Revenue		$ 289,399	$ 264,534	$ 787,232	$ 707,919
Total cost of revenue		152,558	129,328	412,675	339,002
Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative, Notional Amount		387,800		387,800		$ 366,700
Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative, Notional Amount		75,900		75,900		56,000
Accrued Liabilities [Member] | Foreign Exchange Forward [Member]
Derivative [Line Items]
Other Derivatives Not Designated as Hedging Instruments at Fair Value, Net		727		727		0
Cash Flow Hedging [Member] | Foreign Exchange Forward [Member]
Derivative [Line Items]
Derivative Instruments, Gain Recognized in Other Comprehensive Income (Loss), Effective Portion	[1]	10,905	362	15,254	(198)
Other Nonoperating Income (Expense) [Member]
Derivative [Line Items]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net		852	435	200	973
Cost of revenue | Cash Flow Hedging [Member] | Foreign Exchange Forward [Member]
Derivative [Line Items]
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net		0	0	0	(386)
Sales Revenue, Net [Member] | Cash Flow Hedging [Member] | Foreign Exchange Forward [Member]
Derivative [Line Items]
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net		185	$ 549	400	$ 270
Not Designated as Hedging Instrument [Member] | Other Current Assets [Member] | Foreign Exchange Forward [Member]
Derivative [Line Items]
Derivative Asset		1,342		1,342		551
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member] | Accrued Liabilities [Member] | Foreign Exchange Forward [Member]
Derivative [Line Items]
Derivative Liability		355		355		335
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member] | Other Noncurrent Liabilities [Member] | Foreign Exchange Forward [Member]
Derivative [Line Items]
Derivative Liability		363		363		795
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member] | Other Current Assets [Member] | Foreign Exchange Forward [Member]
Derivative [Line Items]
Derivative Asset		4,580		4,580		53
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member] | Other Noncurrent Assets [Member] | Foreign Exchange Forward [Member]
Derivative [Line Items]
Derivative Asset		$ 9,574		$ 9,574		$ 172

[1] (1) The amount represents the change in fair value of derivative contracts due to changes in spot rates.

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Derivative Instruments (Tables)

9 Months Ended

Sep. 28, 2019

Derivative Instruments, Gain (Loss) [Line Items]

Derivative Instruments, Gain (Loss) [Table Text Block]

Gains (losses) associated with derivative instruments not designated as hedging instruments are as follows (in thousands):

		Three Months Ended				Nine Months Ended
	Classification	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Gain (loss) recognized in income	Other income, net	$	852	$	435	$	200	$	973

The following tables reflect the effect of derivatives designated as cash flow hedging (in thousands): 

	Gain (loss) recognized in OCI on Derivative (1)
	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Foreign currency forward contracts	$	10,905	$	362	$	15,254	$	(198	)

(1) The amount represents the change in fair value of derivative contracts due to changes in spot rates.

	Gain (loss) recognized in earnings on cash flow hedging instruments
	Three Months Ended
	September 28, 2019				September 29, 2018
	Revenue		Cost of revenue		Revenue		Cost of revenue
Consolidated statements of income in which the effects of cash flow hedging instruments are recorded	$	289,399	$	152,558	$	264,534	$	129,328
Gain (loss) on cash flow hedging relationships:
Foreign currency forward contracts:
Amount of gain (loss) reclassified from AOCI into earnings	$	185	$	—	$	549	$	—

	Gain (loss) recognized in earnings on cash flow hedging instruments
	Nine Months Ended
	September 28, 2019				September 29, 2018
	Revenue		Cost of revenue		Revenue		Cost of revenue
Consolidated statements of income in which the effects of cash flow hedging instruments are recorded	$	787,232	$	412,675	$	707,919	$	339,002
Gain (loss) on cash flow hedging relationships:
Foreign currency forward contracts:
Amount of gain (loss) reclassified from AOCI into earnings	$	400	$	—	$	270	$	(386	)

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Leases (Tables)

9 Months Ended

Sep. 28, 2019

Operating Lease Cost [Abstract]

Lease, Cost [Table Text Block]

The components of lease expense were as follows (in thousands):

	Three Months Ended		Nine Months Ended
	September 28, 2019
Operating lease cost	$	2,250	$	6,539
Variable lease cost	828		2,965
Total lease cost	$	3,078	$	9,504

ScheduleOfLeasesSupplementalCashFlow [Table Text Block]

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended		Nine Months Ended
	September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,566	$	7,447
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	460	$	53,227

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

Maturities of operating lease liabilities were as follows as of September 28, 2019 (in thousands):

	Operating leases
Remainder of 2019	$	1,774
2020	8,798
2021	8,232
2022	7,560
2023	7,109
Thereafter	41,128
Total minimum lease payments	$	74,601
Less: imputed interest	11,953
Present value of future minimum lease payments	$	62,648
Less: current portion of operating lease liabilities (Note 7)	6,307
Long-term lease liabilities	$	56,341

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Subsequent Event (Notes)	9 Months Ended
	Sep. 28, 2019
Subsequent Events [Abstract]
Subsequent Events [Text Block]	On October 17, 2019, the Company disposed of one of these non-marketable equity securities, resulting in a gain of approximately $8.0 million which will be recorded as other income during the fourth quarter of fiscal 2019.

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Derivative Instruments (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018
Derivative Instruments, Gain (Loss) [Line Items]
Document Period End Date				Sep. 28, 2019
Revenue		$ 289,399	$ 264,534	$ 787,232	$ 707,919
Total cost of revenue		152,558	129,328	412,675	339,002
Foreign Exchange Forward [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, before Tax	[1]	10,905	362	15,254	(198)
Foreign Exchange Forward [Member] | Sales Revenue, Net [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net		185	549	400	270
Foreign Exchange Forward [Member] | Cost of revenue | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net		$ 0	$ 0	$ 0	$ (386)

[1] (1) The amount represents the change in fair value of derivative contracts due to changes in spot rates.

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Leases Financial Statement Impact of Adopting ASC 842 (Details) - USD ($) $ in Thousands	Sep. 28, 2019	Dec. 30, 2018	Dec. 29, 2018
Leases [Abstract]
Operating lease right-of-use asset	$ 48,948	$ 52,800	$ 0
Operating Lease, Liability	$ 62,648	$ 67,300

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Goodwill, Other Intangible Assets and Other Assets Schedule of goodwill (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 28, 2019	Dec. 29, 2018
Goodwill [Line Items]
Goodwill	$ 117,537	$ 118,896
Goodwill, Acquired During Period	2,050
Goodwill, Foreign Currency Translation Gain (Loss)	$ (3,409)

XML

Revenue Recognition Contract Balances (Tables)

9 Months Ended

Sep. 28, 2019

Revenue Recognition and Deferred Revenue [Abstract]

Contract with Customer, Asset and Liability [Table Text Block]

Contract Balances

The following table provides information about receivables and contract liabilities from contracts with customers (in thousands):

	September 28, 2019		December 29, 2018
Accounts receivable, net	$	169,562	$	162,166
Contract liabilities	6,412		5,756

The Company invoices customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities primarily relate to prepayments received from customers in advance of product shipments. The change in the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. During the three months ended September 28, 2019 and September 29, 2018, the Company recognized $1.7 million and $2.2 million, respectively, of the contract liability balance as revenue upon transfer of the products to customers. During the nine months ended September 28, 2019 and September 29, 2018, the Company recognized $5.8 million and $6.7 million, respectively, of the contract liability balance as revenue upon transfer of the products to customers. The Company does not assess whether a prepayment received represents a significant financing component as the period between when the payment is received and the transfer of the products to the customer is generally one year or less.

XML

Industry Segment, Geographic Information and Significant Customers

9 Months Ended

Sep. 28, 2019

Segment Reporting [Abstract]

Industry Segment, Geographic Information and Significant Customers

Industry Segment, Geographic Information and Significant Customers

The Company operates as one operating segment. The Company's consumer robots products are offered to consumers around the world through distributor and retail sales channels, as well as its on-line stores.

Significant Customers

For the three months ended September 28, 2019 and September 29, 2018, the Company generated 29.6% and 24.8% of total revenue, respectively, from one of its retailers (Amazon).

For the nine months ended September 28, 2019 and September 29, 2018, the Company generated 25.0% and 20.4% of total revenue, respectively, from one of its retailers (Amazon).

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Accrued Expenses (Tables)

9 Months Ended

Sep. 28, 2019

Accrued Liabilities, Current [Abstract]

Components of Accrued Expenses

	September 28, 2019		December 29, 2018
Accrued other compensation	$	14,625	$	10,518
Accrued warranty	12,372		11,964
Accrued direct fulfillment costs	13,000		5,372
Accrued bonus	9,050		21,226
Current portion of operating lease liabilities	6,307		—
Accrued sales and other indirect taxes payable	3,073		11,397
Accrued federal and state income taxes	3,146		1,936
Accrued accounting fees	1,985		2,052
Accrued other	7,028		6,794
	$	70,586	$	71,259

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018
Net income	$ 35,532	$ 31,929	$ 65,259	$ 62,801
Other comprehensive income (loss):
Net foreign currency translation adjustments	(4,902)	1,826	(5,578)	(3,960)
Net unrealized gains (losses) on cash flow hedges, net of tax	8,175	272	11,437	40
Net (gains) losses on cash flow hedge reclassified into earnings, net of tax	(138)	(412)	(300)	9
Net unrealized gains (losses) on marketable securities, net of tax	36	(28)	244	(113)
Total comprehensive income	$ 38,703	$ 33,587	$ 71,062	$ 58,777

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 28, 2019	Oct. 26, 2019
Entity Information [Line Items]
Document Type	10-Q
Document Period End Date	Sep. 28, 2019
Document Quarterly Report	true
Document Transition Report	false
Entity Central Index Key	0001159167
Entity File Number	001-36414
Entity Registrant Name	iROBOT CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	77-0259335
Amendment Flag	false
Entity Address, Address Line One	8 Crosby Drive
Entity Address, City or Town	Bedford
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01730
City Area Code	781
Local Phone Number	430-3000
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	IRBT
Security Exchange Name	NASDAQ
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-28
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		28,270,544

XML

Fair Value Measurements (Notes)

9 Months Ended

Sep. 28, 2019

Fair Value Footnote [Abstract]

Fair Value Disclosures [Text Block]

Fair Value Measurements

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 September 28, 2019
	Level 1		Level 2 (1)		Level 3 (2)
Assets:
Corporate and government bonds, $20,516 at cost (3)	$	—	$	20,530	$	—
Derivative instruments (Note 8)	—		15,496		—
Total assets measured at fair value	$	—	$	36,026	$	—
Liabilities:
Derivative instruments (Note 8)	$	—	$	1,445	$	—
Total liabilities measured at fair value	$	—	$	1,445	$	—

	Fair Value Measurements as of December 29, 2018
	Level 1		Level 2 (1)		Level 3 (2)
Assets:
Money market funds	$	3,730	$	—	$	—
Corporate and government bonds, $30,035 at cost	—		29,605		—
Convertible note	—		—		2,000
Derivative instruments (Note 8)	—		776		—
Total assets measured at fair value	$	3,730	$	30,381	$	2,000
Liabilities:
Derivative instruments (Note 8)	$	—	$	1,130	$	—
Total liabilities measured at fair value	$	—	$	1,130	$	—

(1) Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

(2) Level 3 fair value estimates are based on inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing and discounted cash flow models. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.

(3) As of September 28, 2019, the Company’s investments had maturity dates ranging from October 2019 to March 2021.

The following table provides a summary of changes in fair value of our Level 3 investment for the nine months ended September 28, 2019 (in thousands):

Balance as of December 29, 2018	$	2,000
Conversion of convertible note	(2,000		)
Balance as of September 28, 2019	$	—

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 28, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

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 addition, certain prior year amounts have been reclassified to conform to the current year presentation.

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 29, 2018, filed with the Securities and Exchange Commission on February 14, 2019.

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.

Use of Estimates

The preparation of these financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses. These estimates and judgments include, but are not limited to, revenue recognition, including performance obligations, variable consideration and other obligations such as product returns and incentives; warranty costs; valuation of goodwill and acquired intangible assets; valuation of financial instruments; evaluating loss contingencies; accounting for stock-based compensation including performance-based assessments; and accounting for income taxes and related valuation allowances. The Company bases these estimates and judgments on historical experience, market participant fair value considerations, projected future cash flows and various other factors that the Company believes are reasonable under the circumstances. Actual results may differ from the Company’s estimates.

Other Assets

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. At September 28, 2019 and December 29, 2018, other assets consisted primarily of equity securities without readily determinable fair values and an equity method investment totaling $22.4 million and $15.1 million, respectively. On October 17, 2019, the Company disposed of one of these non-marketable equity securities, resulting in a gain of approximately $8.0 million which will be recorded as other income during the fourth quarter of fiscal 2019.

Net Income Per Share

Basic income per share is calculated using the Company's weighted-average outstanding common shares. Diluted income

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.

The following table presents the calculation of both basic and diluted net income per share (in thousands, except per share amounts): 

	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Net income	$	35,532	$	31,929	$	65,259	$	62,801
Basic weighted-average common shares outstanding	28,154		27,493		28,029		27,692
Dilutive effect of employee stock awards	496		1,013		730		937
Diluted weighted-average common shares outstanding	28,650		28,506		28,759		28,629
Basic income per share	$	1.26	$	1.16	$	2.33	$	2.27
Diluted income per share	$	1.24	$	1.12	$	2.27	$	2.19

Employee stock awards representing approximately 0.4 million and 0.0 million shares of common stock for the three months ended September 28, 2019 and September 29, 2018, respectively, and approximately 0.1 million shares of common stock for the nine months ended September 28, 2019 and September 29, 2018, were excluded from the computation of diluted earnings per share as their effect would have been antidilutive.

Recently Adopted Accounting Standards

In June 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-07, "Compensation - Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (Topic 718)." The amendments in ASU No. 2018-07 expand the scope of Topic 718 to include share-based payments issued to nonemployees for goods or services. The amendments in this ASU are effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods, with early adoption permitted. The Company adopted this standard effective December 30, 2018 which did not have a material impact on the Company's consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02 "Leases." This ASU and subsequently issued amendments require lessees to recognize the assets and liabilities on their balance sheet for the rights and obligations created by most leases and continue to recognize expenses on their income statements over the lease term. The standard also requires disclosures designed to give financial statement users information on the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements," which provides an alternative transition method that entities can elect when adopting the new standard. Under this alternative transition method, a company is permitted to use its effective date as the date of initial application without restating comparative period financial statements. The Company adopted the standard effective December 30, 2018 using the alternative transition method which resulted in the recognition of operating lease right-of-use assets and operating lease liabilities of approximately $52.8 million and $67.3 million, respectively. The Company's consolidated financial statements as of and for the three and nine months ended September 28, 2019 are presented under the new standard, while the comparative quarter presented is not adjusted and continues to be reported in accordance with the historical accounting policy. See Note 4, "Leases," for the required disclosures related to the impact of adopting this standard and a discussion of the Company's updated policies related to lease accounting.

Recently Issued Accounting Standards

In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software." The new standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The amendments to this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company intends to adopt the ASU using the prospective method effective December 29, 2019, and does not expect the new standard will have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement." The amendment modifies disclosure requirements related to fair value measurement. The amendments to this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. The Company does not believe this amendment will have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments," as clarified in ASU No. 2019-04 and ASU No. 2019-05. The guidance amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments. This may result in the earlier recognition of allowances for losses. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company intends to adopt the ASU effective December 29, 2019. The Company does not believe the new standard will have a material impact on its consolidated financial statements.

From time to time, new accounting pronouncements are issued by FASB 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.

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Inventory

9 Months Ended

Sep. 28, 2019

Inventory Disclosure [Abstract]

Inventory

Inventory

Inventory consists of the following (in thousands):

	September 28, 2019		December 29, 2018
Raw materials	$	2,801	$	2,992
Finished goods	245,502		161,641
	$	248,303	$	164,633

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Leases Supplemental Cash Flow (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 28, 2019	Sep. 28, 2019
Leases [Abstract]
Document Period End Date		Sep. 28, 2019
Operating Lease, Payments	$ 2,566	$ 7,447
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability	$ 460	$ 53,227

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 28, 2019

Commitments and Contingencies Disclosure [Abstract]

Activity Related to the Warranty Accrual

Activity related to the warranty accrual was as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Balance at beginning of period	$	11,970		$	11,233		$	11,964		$	11,264
Provision	3,484			2,682			8,817			7,310
Warranty usage	(3,082		)	(2,485		)	(8,409		)	(7,144		)
Balance at end of period	$	12,372		$	11,430		$	12,372		$	11,430

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Revenue Recognition Significant Judgments (Details) - USD ($) $ in Millions	Sep. 28, 2019	Dec. 29, 2018
Revenue Recognition and Deferred Revenue [Abstract]
Refund liability, product returns	$ 41.7	$ 53.9
Refund liability, other credits and incentives	$ 78.6	$ 97.7

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Income Taxes (Details)	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018
Income Tax Disclosure [Abstract]
Effective Income Tax Rate Reconciliation, Percent	18.20%	15.10%	11.60%	19.90%

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Fair Value Measurements Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands		9 Months Ended
		Sep. 28, 2019		Dec. 29, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		$ 0		$ 2,000
Available-for-sale Securities, Amortized Cost Basis	[1]	20,516		30,035
conversion of debt		(2,000)
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure				3,730
Available-for-sale Securities		0	[1]	0
Convertible Debt, Fair Value Disclosures				0
Derivative Asset		0		0
Assets, Fair Value Disclosure		0		3,730
Derivative Liability		0		0
Financial and Nonfinancial Liabilities, Fair Value Disclosure		0		0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	[2]			0
Available-for-sale Securities	[2]	20,530	[1]	29,605
Convertible Debt, Fair Value Disclosures	[2]			0
Derivative Asset		15,496		776	[2]
Assets, Fair Value Disclosure	[2]	36,026		30,381
Derivative Liability	[2]	1,445		1,130
Financial and Nonfinancial Liabilities, Fair Value Disclosure	[2]	1,445		1,130
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	[3]			0
Available-for-sale Securities	[3]	0	[1]	0
Convertible Debt, Fair Value Disclosures	[3]			2,000
Derivative Asset	[3]	0		0
Assets, Fair Value Disclosure	[3]	0		2,000
Derivative Liability		0		0	[3]
Financial and Nonfinancial Liabilities, Fair Value Disclosure		$ 0		$ 0	[3]

[1] As of September 28, 2019, the Company’s investments had maturity dates ranging from October 2019 to March 2021.

[2] Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

[3] Level 3 fair value estimates are based on inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing and discounted cash flow models. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.

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Goodwill, Other Intangible Assets and Other Assets - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018	Dec. 29, 2018
Business Acquisition [Line Items]
Goodwill	$ 117,537		$ 117,537		$ 118,896
Amortization of Acquired Intangible Assets	$ 3,400	$ 4,800	$ 10,100	$ 14,800

XML

Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 28, 2019	Dec. 29, 2018
Accrued Liabilities, Current [Abstract]
Accrued Professional Fees, Current	$ 1,985	$ 2,052
Accounts Payable, Current [Abstract]
Accrued Employee Benefits	14,625	10,518
Accrued warranty	12,372	11,964
Accrued bonus	9,050	21,226
Operating Lease, Liability, Current	6,307	0
Accrued direct fulfillment costs	13,000	5,372
Accrued sales and other taxes payable	3,073	11,397
Accrued federal and state income taxes	3,146	1,936
Accrued other	7,028	6,794
Accrued expenses	$ 70,586	$ 71,259

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Inventory (Tables)

9 Months Ended

Sep. 28, 2019

Inventory Disclosure [Abstract]

Components of Inventory

Inventory

Inventory consists of the following (in thousands):

	September 28, 2019		December 29, 2018
Raw materials	$	2,801	$	2,992
Finished goods	245,502		161,641
	$	248,303	$	164,633

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 28, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

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 addition, certain prior year amounts have been reclassified to conform to the current year presentation.

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 29, 2018, filed with the Securities and Exchange Commission on February 14, 2019.

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.

Use of Estimates

Use of Estimates

The preparation of these financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses. These estimates and judgments include, but are not limited to, revenue recognition, including performance obligations, variable consideration and other obligations such as product returns and incentives; warranty costs; valuation of goodwill and acquired intangible assets; valuation of financial instruments; evaluating loss contingencies; accounting for stock-based compensation including performance-based assessments; and accounting for income taxes and related valuation allowances. The Company bases these estimates and judgments on historical experience, market participant fair value considerations, projected future cash flows and various other factors that the Company believes are reasonable under the circumstances. Actual results may differ from the Company’s estimates.

Investment, Policy [Policy Text Block]

Other Assets

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. At September 28, 2019 and December 29, 2018, other assets consisted primarily of equity securities without readily determinable fair values and an equity method investment totaling $22.4 million and $15.1 million, respectively.

Net Income Per Share

Net Income Per Share

Basic income per share is calculated using the Company's weighted-average outstanding common shares. Diluted income

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.

The following table presents the calculation of both basic and diluted net income per share (in thousands, except per share amounts): 

	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Net income	$	35,532	$	31,929	$	65,259	$	62,801
Basic weighted-average common shares outstanding	28,154		27,493		28,029		27,692
Dilutive effect of employee stock awards	496		1,013		730		937
Diluted weighted-average common shares outstanding	28,650		28,506		28,759		28,629
Basic income per share	$	1.26	$	1.16	$	2.33	$	2.27
Diluted income per share	$	1.24	$	1.12	$	2.27	$	2.19

Employee stock awards representing approximately 0.4 million and 0.0 million shares of common stock for the three months ended September 28, 2019 and September 29, 2018, respectively, and approximately 0.1 million shares of common stock for the nine months ended September 28, 2019 and September 29, 2018, were excluded from the computation of diluted earnings per share as their effect would have been antidilutive.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

In June 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-07, "Compensation - Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (Topic 718)." The amendments in ASU No. 2018-07 expand the scope of Topic 718 to include share-based payments issued to nonemployees for goods or services. The amendments in this ASU are effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods, with early adoption permitted. The Company adopted this standard effective December 30, 2018 which did not have a material impact on the Company's consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02 "Leases." This ASU and subsequently issued amendments require lessees to recognize the assets and liabilities on their balance sheet for the rights and obligations created by most leases and continue to recognize expenses on their income statements over the lease term. The standard also requires disclosures designed to give financial statement users information on the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements," which provides an alternative transition method that entities can elect when adopting the new standard. Under this alternative transition method, a company is permitted to use its effective date as the date of initial application without restating comparative period financial statements. The Company adopted the standard effective December 30, 2018 using the alternative transition method which resulted in the recognition of operating lease right-of-use assets and operating lease liabilities of approximately $52.8 million and $67.3 million, respectively. The Company's consolidated financial statements as of and for the three and nine months ended September 28, 2019 are presented under the new standard, while the comparative quarter presented is not adjusted and continues to be reported in accordance with the historical accounting policy. See Note 4, "Leases," for the required disclosures related to the impact of adopting this standard and a discussion of the Company's updated policies related to lease accounting.

Recently Issued Accounting Standards

In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software." The new standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The amendments to this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company intends to adopt the ASU using the prospective method effective December 29, 2019, and does not expect the new standard will have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement." The amendment modifies disclosure requirements related to fair value measurement. The amendments to this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. The Company does not believe this amendment will have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments," as clarified in ASU No. 2019-04 and ASU No. 2019-05. The guidance amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments. This may result in the earlier recognition of allowances for losses. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company intends to adopt the ASU effective December 29, 2019. The Company does not believe the new standard will have a material impact on its consolidated financial statements.

From time to time, new accounting pronouncements are issued by FASB 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.

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Summary of Significant Accounting Policies - Basic and Diluted Net Income Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018
Schedule Of Computation Of Basic And Diluted Earnings Per Common Share [Line Items]
Document Period End Date			Sep. 28, 2019
Net income	$ 35,532	$ 31,929	$ 65,259	$ 62,801
Weighted-average shares outstanding	28,154	27,493	28,029	27,692
Dilutive effect of employee stock options and restricted shares	496	1,013	730	937
Diluted weighted-average shares outstanding	28,650	28,506	28,759	28,629
Basic income per share	$ 1.26	$ 1.16	$ 2.33	$ 2.27
Diluted income per share	$ 1.24	$ 1.12	$ 2.27	$ 2.19
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	400	0	100

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Revenue Recognition Contract Balances (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018	Dec. 29, 2018
Revenue Recognition and Deferred Revenue [Abstract]
Accounts Receivable, Net, Current	$ 169,562		$ 169,562		$ 162,166
Contract with Customer, Liability, Revenue Recognized	1,700	$ 2,200	5,800	$ 6,700
Contract with Customer, Liability	$ 6,412		$ 6,412		$ 5,756

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018
Cash flows from operating activities:
Net income	$ 65,259	$ 62,801
Adjustments to reconcile net income to net cash (used in) provided by operating activities, net of the effects of acquisition:
Depreciation and amortization	27,744	27,000
Stock-based compensation	18,742	18,969
Deferred income taxes, net	(5,873)	(4,296)
Other	4,687	1,032
Changes in operating assets and liabilities — (use) source
Accounts receivable	(10,948)	31,930
Inventory	(83,863)	(54,619)
Other current assets	(8,155)	(18,418)
Accounts payable	(27,256)	(10,512)
Accrued expenses and other liabilities	(11,916)	(13,594)
Net cash (used in) provided by operating activities	(31,579)	40,293
Cash flows from investing activities:
Additions of property and equipment	(27,080)	(25,284)
Change in other assets	(5,336)	(2,263)
Proceeds from sale of equity investment	0	856
Cash paid for business acquisition, net of cash acquired	2,817	0
Purchases of investments	0	(6,438)
Sales and maturities of investments	9,380	10,500
Net cash used in investing activities	(25,853)	(22,629)
Cash flows from financing activities:
Proceeds from employee stock plans	4,981	7,948
Income tax withholding payment associated with restricted stock vesting	(7,277)	(3,532)
Stock repurchases	0	50,000
Net cash used in financing activities	(2,296)	(45,584)
Effect of exchange rate changes on cash and cash equivalents	(103)	(593)
Net decrease in cash and cash equivalents	(59,831)	(28,513)
Cash and cash equivalents, at beginning of period	130,373	128,635
Cash and cash equivalents, at end of period	$ 70,542	$ 100,122

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Commitments and Contingencies

9 Months Ended

Sep. 28, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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.

On October 24, 2019, purported Company shareholder Miramar Firefighters’ Pension Fund 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 directors and officers, captioned Miramar Firefighters’ Pension Fund v. iRobot Corporation, et al., No. 1:19-cv-09837.  The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder based on allegedly false and misleading statements and omissions concerning the Company’s acquisitions of Sales on Demand Corporation and Robopolis SAS and the Company’s subsequent 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.

Outstanding Purchase Orders

At September 28, 2019, the Company had outstanding purchase orders of approximately $135.2 million. These purchase orders, the majority of which are with contract manufacturers for the purchase of inventory in the normal course of business, are for manufacturing and non-manufacturing related goods and services, and are generally cancelable without penalty.

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 has no liabilities recorded for these agreements as of September 28, 2019 and December 29, 2018, 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 7) in the accompanying consolidated balance sheets.    

Activity related to the warranty accrual was as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Balance at beginning of period	$	11,970		$	11,233		$	11,964		$	11,264
Provision	3,484			2,682			8,817			7,310
Warranty usage	(3,082		)	(2,485		)	(8,409		)	(7,144		)
Balance at end of period	$	12,372		$	11,430		$	12,372		$	11,430

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Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 28, 2019	Dec. 29, 2018
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares outstanding
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	28,245,000	27,788,000
Common stock, shares outstanding	28,245,000	27,788,000

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Accrued Expenses

9 Months Ended

Sep. 28, 2019

Accrued Liabilities, Current [Abstract]

Accrued Expenses

Accrued Expenses

Accrued expenses consisted of the following at (in thousands):

	September 28, 2019		December 29, 2018
Accrued other compensation	$	14,625	$	10,518
Accrued warranty	12,372		11,964
Accrued direct fulfillment costs	13,000		5,372
Accrued bonus	9,050		21,226
Current portion of operating lease liabilities	6,307		—
Accrued sales and other indirect taxes payable	3,073		11,397
Accrued federal and state income taxes	3,146		1,936
Accrued accounting fees	1,985		2,052
Accrued other	7,028		6,794
	$	70,586	$	71,259

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Revenue Recognition (Notes)

9 Months Ended

Sep. 28, 2019

Revenue Recognition and Deferred Revenue [Abstract]

Revenue from Contract with Customer [Text Block]

Revenue Recognition

The Company primarily derives its revenue from product sales. The Company sells products directly to consumers through on-line stores and indirectly through resellers and distributors. Revenue is recognized upon transfer of control of promised products or services to customers, generally as title and risk of loss passes, in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. 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.

The Company’s product portfolio includes various consumer robots, many of which are Wi-Fi connected. The consumer robots are generally highly dependent on, and interrelated with, the embedded software and cannot function without the software. As such, the consumer robots are accounted for as a single performance obligation, and the revenue is recognized at a point in time when the control is transferred to distributors, resellers or directly to end customers through on-line stores. For consumer robots with Wi-Fi capability ("connected robots"), each sale represents an arrangement with multiple promises consisting of the robot, an app, cloud services and potential future unspecified software upgrades. The Company has determined that the app, cloud services and potential future unspecified software upgrades represent one promised service to the customer to enhance the functionality and interaction with the robot (referred to collectively as "Cloud Services"). For certain connected robots, the Company has concluded that, on a quantitative and qualitative basis, the Cloud Services do not constitute a material performance obligation and, as such, these services are not considered a separate performance obligation that requires allocation of transaction price.

During the third quarter of 2018, the Company launched Roomba i7 and i7+ which brought a new level of intelligence and automation to robotic vacuum cleaners with the ability to learn, map and adapt to a home's floor plan. The Company has concluded that beginning with this launch, the Cloud Services related to these new products are a material performance obligation. For contracts that contain multiple performance obligations, the transaction price is allocated to each performance obligation based on a relative standalone selling price ("SSP"). The SSP reflects the Company's best estimate of what the selling prices of performance obligations would be if they were sold regularly on a standalone basis. Revenue allocated to the robots is recognized at a point in time when control is transferred. Revenue allocated to the Cloud Services is deferred and recognized on a straight-line basis over the estimated period the software upgrades and services are expected to be provided. For contracts with a duration of greater than one year, the transaction price allocated to performance obligations that are unsatisfied as of September 28, 2019 is not material. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

The Company’s products generally carry a one-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."

Significant Judgments

The Company provides limited rights of returns for direct-to-consumer sales generated through its on-line stores and certain resellers and distributors. In addition, the Company may provide other credits or incentives, including price protection, 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 trends and forecasted customer buying and payment patterns. 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 contract inception and updated at the end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. As of September 28, 2019, the Company has reserves for product returns of $41.7 million and other credits and incentives of $78.6 million. As of December 29, 2018, the Company had reserves for product returns of $53.9 million and other credits and incentives of $97.7 million. Revenue recognized during the three and nine months

ended September 28, 2019 and September 29, 2018 related to performance obligations satisfied in a prior period was not material.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by geographical region (in thousands):

	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
United States	$	117,929	$	127,240	$	356,466	$	345,628
EMEA	93,688		73,831		251,150		213,541
Other	77,782		63,463		179,616		148,750
Total revenue	$	289,399	$	264,534	$	787,232	$	707,919

Contract Balances

The following table provides information about receivables and contract liabilities from contracts with customers (in thousands):

	September 28, 2019		December 29, 2018
Accounts receivable, net	$	169,562	$	162,166
Contract liabilities	6,412		5,756

The Company invoices customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities primarily relate to prepayments received from customers in advance of product shipments. The change in the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. During the three months ended September 28, 2019 and September 29, 2018, the Company recognized $1.7 million and $2.2 million, respectively, of the contract liability balance as revenue upon transfer of the products to customers. During the nine months ended September 28, 2019 and September 29, 2018, the Company recognized $5.8 million and $6.7 million, respectively, of the contract liability balance as revenue upon transfer of the products to customers. The Company does not assess whether a prepayment received represents a significant financing component as the period between when the payment is received and the transfer of the products to the customer is generally one year or less.

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Industry Segment, Geographic Information and Significant Customers - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018
Revenues from External Customers and Long-Lived Assets [Line Items]
Document Period End Date			Sep. 28, 2019
Sales Revenue, Net [Member] | Amazon [Member] | Customer Concentration Risk [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Concentration Risk, Percentage	29.60%	24.80%	25.00%	20.40%

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Commitments and Contingencies - Additional Information (Detail) $ in Millions	Sep. 28, 2019 USD ($)
Outstanding POs [Abstract]
Contractual Obligation	$ 135.2

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Industry Segment, Geographic Information and Significant Customers (Tables)	9 Months Ended
	Sep. 28, 2019
Segment Reporting [Abstract]
Segment Information about Revenue, Cost of Revenue, Gross Margin and Income before Income Taxes	The Company operates as one operating segment.

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Revenue Recognition Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 289,399	$ 264,534	$ 787,232	$ 707,919
UNITED STATES
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	117,929	127,240	356,466	345,628
EMEA [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	93,688	73,831	251,150	213,541
All Other Regions [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 77,782	$ 63,463	$ 179,616	$ 148,750

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Derivative Instruments (Notes)

9 Months Ended

Sep. 28, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Derivative Instruments

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 uses derivative instruments that are designated in cash flow hedge relationships to reduce or eliminate the effects of foreign exchange rate changes on sales. These contracts typically have maturities of thirty-seven months or less. At September 28, 2019 and December 29, 2018, the Company had outstanding cash flow hedges with a total notional value of $387.8 million and $366.7 million, respectively.

The Company also enters 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 typically have maturities of ten months or less. At September 28, 2019 and December 29, 2018, the Company had outstanding economic hedges with a total notional value of $75.9 million and $56.0 million, respectively.

The fair values of derivative instruments are as follows (in thousands):

		Fair Value
	Classification	September 28, 2019		December 29, 2018
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Other current assets	$	1,342	$	551
Foreign currency forward contracts	Accrued expenses	727		—
Derivatives designated as cash flow hedges:
Foreign currency forward contracts	Other current assets	$	4,580	$	53
Foreign currency forward contracts	Other assets	9,574		172
Foreign currency forward contracts	Accrued expenses	355		335
Foreign currency forward contracts	Long-term liabilities	363		795

Gains (losses) associated with derivative instruments not designated as hedging instruments are as follows (in thousands):

		Three Months Ended				Nine Months Ended
	Classification	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Gain (loss) recognized in income	Other income, net	$	852	$	435	$	200	$	973

The following tables reflect the effect of derivatives designated as cash flow hedging (in thousands): 

	Gain (loss) recognized in OCI on Derivative (1)
	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Foreign currency forward contracts	$	10,905	$	362	$	15,254	$	(198	)

(1) The amount represents the change in fair value of derivative contracts due to changes in spot rates.

	Gain (loss) recognized in earnings on cash flow hedging instruments
	Three Months Ended
	September 28, 2019				September 29, 2018
	Revenue		Cost of revenue		Revenue		Cost of revenue
Consolidated statements of income in which the effects of cash flow hedging instruments are recorded	$	289,399	$	152,558	$	264,534	$	129,328
Gain (loss) on cash flow hedging relationships:
Foreign currency forward contracts:
Amount of gain (loss) reclassified from AOCI into earnings	$	185	$	—	$	549	$	—

	Gain (loss) recognized in earnings on cash flow hedging instruments
	Nine Months Ended
	September 28, 2019				September 29, 2018
	Revenue		Cost of revenue		Revenue		Cost of revenue
Consolidated statements of income in which the effects of cash flow hedging instruments are recorded	$	787,232	$	412,675	$	707,919	$	339,002
Gain (loss) on cash flow hedging relationships:
Foreign currency forward contracts:
Amount of gain (loss) reclassified from AOCI into earnings	$	400	$	—	$	270	$	(386	)

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Leases (Notes)

9 Months Ended

Sep. 28, 2019

Leases [Abstract]

Lessee, Operating Leases [Text Block]

Leases

The Company's leasing arrangements primarily consist of operating leases for its facilities which include corporate, sales and research and development offices. For leases with terms greater than 12 months, the Company records the related right-of-use asset and lease obligation at the present value of lease payments over the term. The Company's leases typically include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. The Company does not separate lease and nonlease components of contracts and excludes all variable lease payments from the measurement of right-of-use assets and lease liabilities. The Company's variable lease payments generally include usage based nonlease components. The Company's lease agreements do not contain any residual value guarantees or restrictive covenants. Leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense is recognized on a straight-line basis over the lease term.

The Company's existing leases do not provide a readily determinable implicit rate. Therefore, the Company estimates its incremental borrowing rate to discount the lease payments based on information available at December 30, 2018 (date of initial application) or the lease commencement date for existing leases upon adoption or new leases post adoption, respectively. At September 28, 2019, the Company's weighted average discount rate was 3.61%, while the weighted average remaining lease term was 9.40 years.

The components of lease expense were as follows (in thousands):

	Three Months Ended		Nine Months Ended
	September 28, 2019
Operating lease cost	$	2,250	$	6,539
Variable lease cost	828		2,965
Total lease cost	$	3,078	$	9,504

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended		Nine Months Ended
	September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,566	$	7,447
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	460	$	53,227

Maturities of operating lease liabilities were as follows as of September 28, 2019 (in thousands):

	Operating leases
Remainder of 2019	$	1,774
2020	8,798
2021	8,232
2022	7,560
2023	7,109
Thereafter	41,128
Total minimum lease payments	$	74,601
Less: imputed interest	11,953
Present value of future minimum lease payments	$	62,648
Less: current portion of operating lease liabilities (Note 7)	6,307
Long-term lease liabilities	$	56,341

Financial Statement Impact of Adopting ASC 842

The Company adopted ASC 842 effective December 30, 2018 using the alternative transition method. Under this alternative transition method, a company is permitted to use its effective date as the date of initial application without restating comparative period financial statements. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company elected the practical expedient to use hindsight in determining lease term. The adoption of the new standard resulted in the recognition of right-of-use assets and lease liabilities of approximately $52.8 million and $67.3 million, respectively. The standard did not materially impact the Company's consolidated income or cash flows.

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Consolidated Statement of Shareholders' Equity Statement - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]
Beginning Balance, Shares		27,945,000
Beginning balance	$ 470,327	$ 279	$ 190,067	$ 277,989	$ 1,992
Issuance of common stock under employee stock plans (in shares)		216,000
Stock Issued During Period, Value, Stock Options Exercised	7,948	$ 3	7,945
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures (in shares)		360,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	0	$ 4	(4)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	18,969		18,969
Shares Paid for Tax Withholding for Share Based Compensation (in shares)		(51,000)
Stock Withheld to Cover Tax Withholding Requirements Upon Vesting to Restricted Stock Units Amount	(3,532)	$ (1)	(3,531)
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	(4,024)				(4,024)
Adjustments to Additional Paid in Capital Directors Deferred Compensation	49		49
Net income	$ 62,801			62,801
Stock Repurchased and Retired During Period, Shares	(799,000)
Stock Repurchased and Retired During Period, Value	$ (50,000)	$ (8)	(49,992)
Stock Repurchased and Retired During Period, Shares	(798,794)
Stock Repurchased and Retired During Period, Value	$ (50,000)
Beginning Balance, Shares		27,402,000
Beginning balance	458,041	$ 274	151,556	309,901	(3,690)
Issuance of common stock under employee stock plans (in shares)		149,000
Stock Issued During Period, Value, Stock Options Exercised	5,342	$ 2	5,340
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures (in shares)		120,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	0	$ 1	(1)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	6,592		6,592
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	1,658				1,658
Adjustments to Additional Paid in Capital Directors Deferred Compensation	16		16
Net income	31,929			31,929
Beginning Balance, Shares		27,671,000
Beginning balance	503,578	$ 277	163,503	341,830	(2,032)
Cumulative Effect of New Accounting Principle in Period of Adoption	$ 1,040			1,040
Beginning Balance, Shares	27,788,000	27,788,000
Beginning balance	$ 535,322	$ 278	172,771	367,021	(4,748)
Issuance of common stock under employee stock plans (in shares)		125,000
Stock Issued During Period, Value, Stock Options Exercised	4,981	$ 1	4,980
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures (in shares)		391,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	0	$ 4	(4)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	18,742		18,742
Shares Paid for Tax Withholding for Share Based Compensation (in shares)		(59,000)
Stock Withheld to Cover Tax Withholding Requirements Upon Vesting to Restricted Stock Units Amount	(7,277)	$ (1)	(7,276)
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	5,803				5,803
Adjustments to Additional Paid in Capital Directors Deferred Compensation	55		55
Net income	65,259			65,259
Beginning Balance, Shares		28,123,000
Beginning balance	579,576	$ 281	184,663	396,748	(2,116)
Issuance of common stock under employee stock plans (in shares)		9,000
Stock Issued During Period, Value, Stock Options Exercised	301	$ 0	301
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures (in shares)		113,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	0	$ 1	(1)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	4,284		4,284
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	3,171				3,171
Adjustments to Additional Paid in Capital Directors Deferred Compensation	21		21
Net income	$ 35,532			35,532
Beginning Balance, Shares	28,245,000	28,245,000
Beginning balance	$ 622,885	$ 282	$ 189,268	$ 432,280	$ 1,055

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Income Taxes (Notes)

9 Months Ended

Sep. 28, 2019

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

The Company’s effective income tax rate for the three months ended September 28, 2019 and September 29, 2018, was 18.2% and 15.1%, respectively. The increase in the effective income tax rate was primarily due to lower tax benefits recognized related to excess stock-based compensation.

The Company's effective income tax rate of 18.2% for the three months ended September 28, 2019 differed from the federal statutory tax rate of 21% primarily due to the recognition of higher tax benefits related to federal and state income tax credits.

The Company’s effective income tax rate for the nine months ended September 28, 2019 and September 29, 2018, was 11.6% and 19.9%, respectively. The decrease in the effective income tax rate was primarily due to increased tax benefits related to excess stock-based compensation and a decrease in foreign taxes related to a discrete charge for estimated taxes associated with a restructuring of the EMEA business in the nine months ended September 29, 2018.

The Company's effective income tax rate of 11.6% for the nine months ended September 28, 2019 differed from the federal statutory tax rate of 21% primarily due to the recognition of tax benefits related to excess stock-based compensation.

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Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 28, 2019	Dec. 29, 2018
Current assets:
Cash and cash equivalents	$ 70,542	$ 130,373
Short term investments	20,530	31,605
Accounts receivable, net	169,562	162,166
Inventory	248,303	164,633
Other current assets	39,112	25,660
Total current assets	548,049	514,437
Property and equipment, net	75,019	57,026
Operating lease right-of-use assets	48,948	0
Deferred tax assets	37,177	36,979
Goodwill	117,537	118,896
Intangible assets, net	14,931	24,273
Other assets	32,003	15,350
Total assets	873,664	766,961
Current liabilities:
Accounts payable	108,331	136,742
Accrued expenses	70,586	71,259
Deferred revenue and customer advances	4,902	5,756
Total current liabilities	183,819	213,757
Operating lease liabilities	56,341	0
Deferred tax liabilities	1,560	4,005
Other long-term liabilities	9,059	13,877
Total long-term liabilities	66,960	17,882
Total liabilities	250,779	231,639
Commitments and contingencies (Note 11)
Preferred stock, 5,000 shares authorized and none outstanding	0	0
Common stock, $0.01 par value, 100,000 shares authorized; 28,245 and 27,788 shares issued and outstanding, respectively	282	278
Additional paid-in capital	189,268	172,771
Retained earnings	432,280	367,021
Accumulated other comprehensive income (loss)	1,055	(4,748)
Total stockholders’ equity	622,885	535,322
Total liabilities and stockholders’ equity	$ 873,664	$ 766,961

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Subsequent Event (Details) $ in Millions	Oct. 17, 2019 USD ($)
Subsequent Event [Line Items]
Gain (Loss) on Sale of Equity Investments	$ 8.0

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Commitments and Contingencies - Activity Related to Warranty Accrual (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018
Movement in Standard Product Warranty Accrual [Roll Forward]
Balance at beginning of period	$ 11,970	$ 11,233	$ 11,964	$ 11,264
Provision	3,484	2,682	8,817	7,310
Warranty usage	(3,082)	(2,485)	(8,409)	(7,144)
Balance at end of period	$ 12,372	$ 11,430	$ 12,372	$ 11,430

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Inventory (Details) - USD ($) $ in Thousands	Sep. 28, 2019	Dec. 29, 2018
Inventory Disclosure [Abstract]
Inventory, Raw Materials, Net of Reserves	$ 2,801	$ 2,992
Inventory, Finished Goods, Net of Reserves	245,502	161,641
Inventory	$ 248,303	$ 164,633

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Goodwill, Other Intangible Assets and Other Assets Finite-lived intangible assets, schedule of future amortization (Details) $ in Thousands	Sep. 28, 2019 USD ($)
Finite-lived intangible assets, schedule of amortization expense [Line Items]
Remainder of 2018	$ 2,642
2019	2,130
2020	1,914
2021	1,689
2022	1,014
Thereafter	5,542
Total	14,931
Cost of revenue
Finite-lived intangible assets, schedule of amortization expense [Line Items]
Remainder of 2018	2,411
2019	1,140
2020	1,140
2021	915
2022	240
Thereafter	61
Total	5,907
Operating Expense [Member]
Finite-lived intangible assets, schedule of amortization expense [Line Items]
Remainder of 2018	231
2019	990
2020	774
2021	774
2022	774
Thereafter	5,481
Total	$ 9,024

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Goodwill, Other Intangible Assets and Other Assets (Tables)

9 Months Ended

Sep. 28, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill [Table Text Block]

The following table summarizes the activity in the carrying amount of goodwill for the nine months ended September 28, 2019 (in thousands):

Balance as of December 29, 2018	$	118,896
Acquisition	2,050
Effect of foreign currency translation	(3,409		)
Balance as of September 28, 2019	$	117,537

Other Intangible Assets

Intangible assets consisted of the following (in thousands):

	September 28, 2019						December 29, 2018
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Completed technology	$	28,100	$	24,320	$	3,780	$	26,900	$	21,607	$	5,293
Tradename	100		100		—		100		100		—
Customer relationships	10,989		2,049		8,940		11,291		1,365		9,926
Reacquired distribution rights	31,239		29,112		2,127		32,499		23,598		8,901
Non-competition agreements	251		167		84		263		110		153
Total	$	70,679	$	55,748	$	14,931	$	71,053	$	46,780	$	24,273

Estimated Future Amortization Expense Related to Current Intangible Assets

The estimated future amortization expense related to current intangible assets in each of the five succeeding fiscal years is expected to be as follows (in thousands):

	Cost of Revenue		Operating Expenses		Total
Remainder of 2019	$	2,411	$	231	$	2,642
2020	1,140		990		2,130
2021	1,140		774		1,914
2022	915		774		1,689
2023	240		774		1,014
Thereafter	61		5,481		5,542
Total	$	5,907	$	9,024	$	14,931

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Revenue Recognition Disaggregation of Revenue (Tables)

9 Months Ended

Sep. 28, 2019

Revenue Recognition and Deferred Revenue [Abstract]

Disaggregation of Revenue [Table Text Block]

Disaggregation of Revenue

The following table provides information about disaggregated revenue by geographical region (in thousands):

	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
United States	$	117,929	$	127,240	$	356,466	$	345,628
EMEA	93,688		73,831		251,150		213,541
Other	77,782		63,463		179,616		148,750
Total revenue	$	289,399	$	264,534	$	787,232	$	707,919