IRBT
#Yes.
Well, I think that 11/11 and 12/12 are major events, sales events, in China.
We do, in fact, have some visibility already in how 11/11 is going to go based on preorders.
And so that as we ---+ we are giving ourselves the confidence to raise guidance, as we've done, we were able to look to that ---+ those indications in China that those events were going to be successful for us.
It is our operating procedure to, as we roll out our marketing programs in new markets, test, analyze and optimize the programs.
And so that, we are running programs in Japan.
We are running programs in China now.
We are running programs in the US.
And based on the results, we are able to go and add more energy to them as we've done in the US.
We ---+ 25% growth in the US this quarter was particularly satisfying.
What we're seeing happening in China as we've doubled down on the marketing programs that early in the year and late last year we were starting to get more information on.
In China, we have some data.
As I mentioned, we get the pre-sale data from 11/11.
We've gone through a distributor go-to-market strategy change in China and so that while the inventory levels we're working to optimize the expectations of our new distributor architecture, we felt we wanted to highlight just how effective the sell-through resulted insofar that up by 70%.
So we've got confidence in Q4 in what we have guided to as far as if there are additional upside.
I think that we are very comfortable with the guidance ranges that we have given at this time, given all of those factors that I just described.
It's growing very rapidly, and we think, in the next few years, it is ---+ the overall robot vacuum cleaning market is going to be larger than North America.
And so our strategy and our willingness to invest in China is around the thesis that we should be the leading player in that market, and the success of the wet floor care launch in China is an important part of that strategy because the natural daily cleaning routine of the Chinese consumer is mopping, not vacuuming.
And so the coming out and investing in driving the Braava and Braava jet category is a way of running around the existing vacuuming market and establishing our brand around this mopping category while bringing in the premium, high featured Roombas into that market and saying, as you grow to appreciate vacuuming, this is the best product.
So we think that our strategy in China has great potential to drive the market share targets that we internally hold.
It all has to do with the inventory levels and trying to operate as a leaner operation, coupled with the changes in distribution.
I know that's a little confusing.
It's why we talked about explicitly how we are doing in Japan and what the sell-through in China was.
So, as the Company continues to evolve, we're trying to keep our distributors at fewer days in inventory, which obviously has some impact on us in the moment, but long-term gives us much more ability to execute on different programs and work on SKU transitions and that sort of thing.
So, it's an improvement in the overall organization, but should not be confused at all with any change in the momentum and rate of appetite for our products.
Sure.
That is correct.
The will 980 and the 960 differ in pack-out slightly, but also the 960 does not have the Carpet Boost feature whether the robot will significantly up the power of the vacuum when it goes onto carpet.
So, the added expense of the bigger motor and battery capacity required for Carpet Boost we held back and, as a result of that, COGs savings was able to significantly move down that entry level price point into mapping and navigation.
So, again, a very important part of our overall strategy to drive connectivity, mapping, and navigation deep into our product line, and we're trying to do that as aggressively as we can.
And that's the true reason behind the 960.
So, that will be at some point next year.
We haven't announced the exact date.
As soon as we work through the technical challenges of operating a device with very, very rich connectivity and sophistication in China, we'll be eagerly prepared to roll out.
Thank you very much.
What do you mean by the connected features.
The percentage that do connect.
An extremely high percentage of purchasers that buy the 900 series are in fact connecting.
We've gone to great lengths to make it easy.
And while the robot will work if you just unpack it and turn it on, we do encourage you to ---+ and prompt the customer to go and connect it.
And so I won't disclose the exact percentage, but it is the vast, vast majority of Roomba 900 users.
The biggest impact thus far in connectivity is an extremely significant increase in the number of people who schedule their robots.
And that's one of the metrics that we track because we are trying to encourage people to change their behavior in how they vacuum from explicitly thinking of doing it multiple times a week to setting it and just appreciating the fact that this is done for them.
And the higher the percentage that schedule and reschedule the Roomba, we know that the product promise is being delivered.
And on the earlier models where we asked the consumer to schedule it on robot, despite our best efforts to make that as good an interface as possible, we were disappointed by the percentage of people who actually were doing it.
And the app, in my mind, there's here folks at iRobot that might disagree with me, but, in my mind, that's the biggest single benefit of the app thus far is reducing the friction for scheduling.
We haven't disclosed that directly.
I can tell you that, internationally, Japan is still our biggest market.
And as we progress through this year, China is closing that gap, and we do think, in the not too distant future, China will certainly overtake Japan.
You know, as normal, <UNK>, we won't talk about 2017 and 2018 until our February call, but certainly we are very pleased with the momentum we've already shown in 2016 relative to setting up for those targets.
Thanks, <UNK>.
Well, <UNK>, you hit the main driver of what will be our average ASP in the consumer business, and that will be the mix of the Braava category, both Braava jet and Braava itself.
We're trying to grow that portion of the business as a bigger and bigger percent.
And as that happens, it will definitely be a drag on ASPs.
On the other hand, we are continuing to drive up the range in the Roomba category and, as you stated, particularly so far this year, the mix of 900 and 800 continues to be a very large portion of the Roomba.
So that's a counterbalance to the negative of Braava.
Certainly, in Q3, with our sell-in of Braava jet, that did have a ---+ it weighted more so to the overall ASP in Q3, but we'll have to see.
Time will tell, but certainly as we push Braava as a category, both Braava and Braava jet, that will have a downward pressure on overall ASPs.
I think, <UNK>, as our product revenue drivers diversify into vacuuming and homes, the blended ASP, as a calculated metric, becomes much less valuable because it is absolutely our strategy to go and build the wet floor care market as a great adjacency to the vacuuming market, and the price points of those two products categories are going to be very different.
Sure.
So, we don't expect to do any more share repurchases for the remainder of 2016.
We are due to discuss with the board our plans for 2017.
At this point, I think it would be reasonable for you to expect, at a minimum, a program focused on offsetting dilution of newly issued equity.
So, the launch of the 960 was not done with the same type of energy and fanfare that the 980 was.
And so it wasn't an explicit launch event.
It was an expanding of the product line to create availability of connected mapping technology deeper into our line.
It's rapidly become a very successful SKU, as we had hoped it would, and is serving the purpose that it was designed for, which is to ---+ it probably it cannibalizes some 800 series product, which it was designed to cannibalize, replacing those sales with products that are connected, that are mapping, which is our longer-term strategy to maximize the installed base of connected products in the home.
You know, it's built into the cost of the robots.
I think that, as you think about iRobot going forward, you know, we've spoken in the past few years about the ---+ how we were going to drive improved profitability over time.
We talked about OpEx leverage and suggested there were less opportunities than product margin.
We feel like our software strategy and the value that we are creating in the marketplace with the software creates some potential margin opportunities, and so that we are starting to back off from that prior statement that there wasn't a lot of gross margin opportunity.
So we are starting to see a little bit.
So there's some foreshadowing, but certainly it's the paying off of the investments that we are making in software, creating consumer appreciated features that we can impact price with.
<UNK>, they have ---+ they are expecting a large Q4 just like we always did when we were managing that business.
They have a lot they have to accomplish in the fourth quarter in order to hit the numbers in that earnout, so we really won't know until the quarter is complete.
Sure.
We take a very pragmatic view of intellectual property.
We think that it is a huge asset of the Company and we will use it to aggressively defend our market position as we see competitors in the marketplace that have ---+ are actually having financial impact.
I think that, yes, we have seen new entrants into the market.
We also have seen our market share hold up extremely well in all of the markets globally, but you should expect us to look with ---+ look very significantly at anyone that may be starting to gain momentum because we view our IP portfolio as extremely powerful and we have ---+ there are many competitive products in the market, which at least, in our mind, are in clear violation of our IP.
Sure.
We have no explicit agreements with any of our vendors requiring us to be the exclusive distributor of robots.
So, let me be clear.
So, if we are in fact the exclusive robot vacuuming in a particular chain, it's because that chain looked at the relative demand for robot vacuum cleaners across brands and realized that the demand just wasn't there to justify carrying other vacuum cleaners.
And we view that as a beautiful thing and a nod to the effectiveness of the products we create and the marketing programs we put behind them.
So, we do have a very powerful brand and amazing, amazing products, and that's perhaps the ultimate compliment.
We expect to see in retailers over time the robot vacuuming, the robot mopping segments of those stores to grow because the future of vacuuming is robots; the future of mopping is robots.
And there is no future where this doesn't continue to grow and grow.
And so I think that we've had some experiences in retail where competitive products have come in, and that helps us because we actually create within the store the robot cleaning section of the store, and that helps us a lot.
So, it's an interesting place, but it's not by design.
It's more of a merit-based phenomenon.
Yes.
So, the ---+ relative to the first question, the 50% I still hold by.
I will give one bit of color ---+ is that that statistic was a US statistic.
So I think, in the US, that continues to hold.
As we think about Asia and in particular China, I would not be surprised if the wet floor care category exceeds the vacuuming category in only a few years just because of the fact that the daily cleaning habits in China are so much oriented around the hard floor wet cleaning methodology.
So, I think that, as wet floor care becomes larger for us, it demands a little more granularity by region so that the 50% vacuuming is relative to North America.
On this emerging recurring revenue opportunity with the Braava jet, we are seeing very good attachment rates for pads to robots.
And we've gone a little bit deeper.
And when you buy a Braava jet, there's an attachment rates of pads you buy with the Braava jet which we view as healthy.
And now we are seeing that we analyze the number of pads sold divided by the installed base of the robots.
And at this point, we are seeing the daily sales of pads growing faster than the rate of sales of Braava jets.
So that's suggesting that people are coming back to the store and buying more pads, as we would hope they would, which suggests people are actively using the robots and buying into the model of use the pads and then go buy more.
The impact of this recurring revenue model is going to take some time to build.
It's all based on the installed base.
And in China, we may see a phenomenon where reusable pads are a reasonably high percentage of the sales, and so that, in Japan and North America where consumables is well-established in the cleaning industry as desirable, in China it lags a little bit so that the revenue from the wet cleaning products in China, the recurring revenue, may be lower on an installed basis than they are in Japan and North America.
So, there's a lot of moving parts.
Sorry for the complicated answer but it's an evolving situation.
And in 2017, it will be more material than it was in 2016 and 2018, and we'll probably start talking about it pretty explicitly because it will get exciting.
You know.
it really is about having a product line that speaks to the growing acceptance that robot vacuuming is how we will be vacuuming our floors in the future.
The upright vacuum cleaner is, at this point, obsolete.
People are going to have a robot to clean their floors and a high-powered hand vac to clean couches and stairs.
And that's the future.
And so the ---+ with that broadening of appeal, we feel like the midrange, which has sort of been underperforming for us, is a real growth opportunity, and so that the 960 again, we pushed the connectivity down, as I said, but we also bolstered that middle price point domain.
It is still, if you look at sales thus far for 2016, and remember the 960 is only newly out, we truly are barbelled at the higher end of the range.
And then at 600 series, which has been fantastic and been lighter in the center of the category, we think that this move with Costco and the 960 will at least bring additional respectability and opportunity to the middle.
So, it is, at this point, not driven by competition.
Our market share remains even more favorable than we would have dared hope, so we are enjoying that and hope that it will stay that way for a long period to come.
So, thank you very much for the questions.
That concludes our third-quarter 2016 earnings call.
We appreciate your support and look forward to talking with you again in February to discuss our Q4 and full-year results.
