iRobot Business & Financials Analysis

Addis | Dmitry | Eizaz | Joey | Onyema

13th March 2017

The content of this presentation is not for public sharing without the explicit permission of ASB.
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 1. Business Analysis
iRobot Background and Product Offerings

Defense/Military Home Robots/ Cleaning services

iRobot corporation was incorporated in 1990 and its headquarters is located in Bedford Massachusetts and is currently trading on the
NASDAQ stock market LLC. Other office locations include the United Kingdom, China, and Hong Kong.
iRobot is a leading global consumer robot company that designs, and builds robots for the smart home and until recently the military.
Some of the product offerings for smart home include the Roomba for vacuuming, the Braava for mopping, the Looj for gutter cleaning
and the Mirra for swimming pool cleaning. According to the Global industry classification standards, the smart home product offerings
would be classified under household durables household appliances.
iRobot sells its products through national retailers as well as online stores. Consumer base are local and international.
The defense and security arm of the business was fully divested in 2016, and revenue from that arm was recognized only in the first
quarter of 2016.
Total revenue in 2016 grew by 7.1% mostly from an increase in domestic sales in the United States.

1
 1. Business Analysis
iRobot Market Segmentations & Strategy Adopted

Competitive Positioning
Competitors include developers of robot floor cleaning products and developers of small unmanned ground
vehicles.
Established companies have developed or are developing robots that will compete directly with iRobot product
offering

Ventures Customer Segments Strategy

Mapping & Navigation
Human-Robot Interaction
Physical Solutions
The SMART Home - An
ecosystem of robots working
together
Home appliances Focuses on product
consumers differentiation rather than
Early adopters were tech- cost leadership.
savvies R&D in interconnected
Educators appliances via software
("programmable" robots) updates.
Non-profits (robots for Complete divestiture of
charity) defense robotics so as to
focus fully on consumer
robotics
 1. Business Analysis
Porters 5 Forces Analysis for iRobot
Smart home solution producers
No store loyalty
Highly competitive market
Medium-High Providers of traditional cleaning products and services
Developers of robot cleaning products There are only a few substitutes for smart home appliances
Threat of and the threat might appear low, however when you factor in
Developers of small unmanned ground vehicles Substitute other home appliances that are not "smart" the threat
becomes higher

Low-Medium High High

Rivalry
Cheap parts Bargaining
Among
Bargaining Many competitors + Chinese Producers
Easy to substitute Power of Existing
Power of Low product differentiation
Suppliers Customers
Competitors Though iRobot offers smart home
appliances, the products come at a high
Market Share of iRobot cost and consumers have a plethora of
High options to choose from
Threat of
New
Entrants

Easy to start
No capital expenses Established companies have
developed or are developing robots that will compete
directly with iRobot product offering (Annual Report 2016)
3
 2. Accounting Analysis
Critical Accounting Policies & Estimates
Revenue Recognition
From Q3 2015, Revenue allocated to the app and unspecified
software upgrades is deferred and recognized on straight-line basis
(over the expected period of provision of upgrades and the
estimated life of the robot).
Revenue mainly comes from product sales.
Revenue recognition = Sales of robot upon transfer of title and risk
of loss to customer, LESS estimated return.
Sales & Return Policy
Direct online sales to consumer: Limited rights of return provided.
Domestic and Canada Sales:
At time of sales, revenue is reduced for estimates of liabilities,
rights of return, rebates and price protection.
Estimates made based on T&C in the reseller agreements,
historical return experience, 7 various other assumptions.
International: International distributor agreements do not currently
allow for product returns and, as a result, no reserve for returns is
established for this group of customers.
Goodwill
Goodwill is recorded as the difference, if any, between the
aggregate consideration paid for an acquisition and the fair value of
the net tangible and intangible assets acquired.
Fixed Assets, and Purchased Intangible Assets
Periodically evaluate the recoverability of FA, including
purchased intangible assets whenever events and changes in
circumstances, such as reductions in demand or significant
economic slowdowns in the industry, indicate that the carrying
amount of an asset may not be fully recoverable.
When indicators of impairment are present, the carrying values
of the asset group are evaluated in relation to the future
undiscounted cash flows of the underlying business.
The net book value of the underlying asset is adjusted to fair
value if the sum of the expected discounted cash flows is less
than book value.
Fair values are based on estimates of market prices and
assumptions concerning the amount and timing of estimated
future cash flows and assumed discount rates, reflecting varying
degrees of perceived risk.
Inventory Valuation
Valued at lower cost of the actual cost of inventory or current
estimated market value.
Write down inventory for obsolescence or unmarketable
inventories based upon assumptions about future demand and
market conditions.
 3. Financial Statement Analysis
General Observations

Company always meets the expectations.

As of December 31, 2016, there was no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
In 2017, iRobot is expecting revenue of $770 to $785 million, which is year-over-year growth of 17% to 19%, EPS of
$1.35 to $1.65 and operating income of $57 to $70 million. These expectations include the anticipated financial impact
of their Japanese distributor acquisition, targeted to close at the beginning of Q2 2017. In November of 2016, the
company issued a press release, announcing signed definitive agreement, and stated that for 2017 it expected a
positive revenue impact of $20 to $25 million and a one-time negative impact to earnings per share of $0.25 - $0.35.
Company compensation is competitive and in line with a comparative peer group of companies with revenues within
a similar range and generally similar market capitalization. These peer companies operate in comparable industries
that focus on high-tech products as well as companies with highly-engineered products and complex technologies with
multiple industry applications. Compensation is based on an evaluation of achievement against financial and
operational metrics in accordance with the compensation and talent committee, resulting in fair payout-to-
performance ratios to executive officers and spending prudence.
 3. Financial Statement Analysis
Specific Observations
Share Price
Price drop from $61.24 on 08/02/17 to $53.32 on 09/02/17 after announcement of Q4 2016 results (EPS twice lower for 1st half a year):
Exited non-consumer businesses to focus solely on products for the home.
Quarterly earnings per share were $0.49, compared with $0.65 in the fourth quarter of 2016.
Fourth quarter 2016 earnings per share included a $0.03 benefit associated with a change in accounting treatment of an equity
investment.
Future one-time negative impact in Q2 2017 from acquisition of Japan distributor.
Goodwill
Goodwill of $7.7 million recorded in conjunction with the acquisition of Nekton in September 2008 is directly associated with the defense
and security business unit.
Leases
Off-Balance Sheet Arrangements: As of January 2, 2016, there was no off-balance sheet arrangements as defined in Item 303(a)(4) of
Regulation S-K.
Generally do not enter into binding purchase commitments.
Principal commitments consist of obligations under working
capital line of credit, leases for office space and minimum
contractual obligations for material. Other obligations
consist of software licensing arrangements. Table shown
describes commitments to settle contractual obligations in
cash as of January 2, 2016:
 3. Financial Statement Analysis
Liquidity, Profitability, Productivity & Leverage Ratios
Liquidity Ratio Profitability Ratio Productivity Ratio
Measures companys ability to pay debt Assesses business ability to generate Measures performance and efficiency of
obligations and its margin of safety. earnings compared to its expenses and production.
relevant costs.
Current ratio showed steady rate at an ROA shows an increasing trend, and Total assets turnover peaked in 2016
average of approximately 3.6 (highest almost doubled since 2012 (4.88%) as at 1.30. This shows that iRobot is able
in 2015 at 4.03). This indicates that the compared to 2016 (8.26%). This to generate 1.30 more sales by
company ability to cover its current indicates that the company is picking utilizing its total assets.
obligations is approximately three- up on its effectiveness of assets The fixed asset turnover is shows an
fold. utilization to generate income. increasing trend from 3.65 to 5.32 in
Debt-equity ratio showed an average The same trend observed for ROE. It 2012 and 2016 respectively. Evidently
of 21% for the 5 years observed, with shows that the iRobot is able to utilize it has been able to increase its
year 2016 being the highest at 23.4%. its equity holders investments into production efficiency in relation to
The company is showing a positive generating earnings. utilizing the fixed assets.
liquidity measurement, indicating Evidently its gross profit margin is Current asset turnover however
favorable cash flow positioning. showing the same increasing trend. fluctuates, but still showing a positive
efficiency in the utilization of current
Leverage Ratio assets to generate sales.
Measures the ability to meet financial obligations.
Note:
Leverage ratio of iRobot is recorded at NIL for all 1. Refer to Appendix 4 for list of key financial ratios.
assessed years, due to the absence of debts. 2. Ratios are calculated and analyzed based on 5-year reported financial statements.
 4. Prospective Analysis
Forecasting & Valuations
Stock Rating: Index Outperformer Stock Price Performance:
An evaluation of a stocks position from
an investment standpoint.

iRobot stocks were compared with a

list of 16 peer companies over the
year, resulting in the 5th top firm in the
industry. iRobot also outperformed
the Dow Jones index, S&P 500 as well
as NASDAQ over the past two years.
Stocks have shown an 80% rate of
return against the benchmark indices.
Our market research shows that the
industry is primed for growth and
strong returns are expected for the
rest of the year.

Earnings Per Share PE Ratio

Year EPS PE (iRobot)
Note:
2014 1.48 38.09 1. Based on Yahoo Finance analysis.
2015 1.47 2. Stock movement comparisons made against same peer companies used for iRobot
2016 1.25 management compensation, found in page 32 of the 2015 iRobot Financial Statements.
 4. Prospective Analysis
Forecasting & Valuations
Market Forecast
Analysis of potential future market
movement.
iRobot's recent decision to focus solely
on consumer electronics robotics, and
plans to invest aggressively in product
development and marketing, should
help the company be a primary
beneficiary of market growth.
According to iRobot management,
while only eight million households in
the U.S., or less than 10%, have
robotic vacuum cleaners, word-of-
mouth marketing is becoming material
enough for the company to make
significant inroads in 2017 on "the
next segment of immediately
addressable 25 million households."
Valuation Analysis
Evaluate the potential merits of an
investment and assesses stock value.
Our analysis shows that iRobot is Note:
currently undervalued and does not 1. Based on a 5-year pro forma forecast.
reflect economic reality. This is 2. Refer to appendix 6 for detailed pro forma.
observed through our pro forma
forecasts (a percentage of revenue) at
a growth rate of 8%, cost of revenue
of 52%, R&D costs of 12%, taxes of
32%, and depreciation of 2%.
The pro forma valuation forecasts until
the year 2021, and using net present
value free cash flow, shows that the
current value of stock at $56.48
should be priced at $75.16 instead.
 5. Competitor Analysis
Cognex Corporation
Background Stock Price Performance against iRobot:
Cognex Corporation is a manufacturer
of machine vision systems and sensors
used in automated manufacturing to
inspect, detect defects, verify, and
guide assembly robots. Both iRobot
and Cognex hold similar IP rights over
similar products, and create value by
constantly pushing the limits of the
industry.
iRobot named Cognex Corporation as
one of the 16 firms used as peer
evaluation; incidentally both founders
of iRobot and Cognex are MIT alumni,
and both companies are incorporated
in Massachusetts.
Note:
Earnings Per Share PE Ratio 1. Based on Yahoo Finance analysis.
Year EPS (iRobot) EPS (Cognex) PE (iRobot) PE (Cognex) 2. Stock movement comparisons made against same peer
2014 1.48 1.72 38.09 46.25 companies used for iRobot management compensation.
2015 1.47 1.67 3. Refer to Appendix 5 for list of key financial ratios.
4. Ratios are calculated and analyzed based on 5-year reported
2016 1.25 1.72 financial statements
 Conclusions
Decision made is to Hold
Decision is made based on the analysis below:
Based on Business Analysis - HOLD or SELL
Market share is declining, industry is competitive. Conflict between iRobot management and Red Mountain Capital in 2015-
2016. That time shareholders chose iRobot management proposal, but the situation adds risks.
Based on Accounting Analysis No potential problems found
Accounting policies practiced by iRobot are disclosed clearly in the annual report, and reflect the true and fair view of the
financial practices of the company. There is no potential problem found.
Based on Financial Statements Analysis - HOLD or BUY after Q2 2017 results announcement
Despite a slight decline and divestiture of D&S robots, the company was able to deliver promised EPS and revenue. Despite
slight decline in Q2 2017 because of acquisition of Japan distributor, company is expected to show growth in 2017 and high
EPS.
NPV of FCF shows that the company is currently undervalued (Appendix 6)
( current Market Price $57.33 vs. NPV FCF $75.15)
Ratios analysis shows positive trends for iRobot
Based on Prospective Analysis - BUY
EPS and PE ratios show exceptional returns outperforming the S&P 500 index as well as most rivals. Coupled with a focused
direction and untapped market potential, iRobot shares are likely to increase in value.
Based on Competitor Analysis - HOLD or BUY
Compared to selected competitor iRobot has lower P/E ratio.
APPENDIX

12
Financial Statements
Appendix 1: Income Statement
Period Ended 12/31/16 01/02/2016 12/27/14 12/28/13 12/29/12
Annual Income Statement
Update Update Update Reclassified Reclassified
02/19/17 02/19/17 02/19/17 02/18/17 02/18/17
In millions of USD
(except for per share items)
Net Sales 660.6 616.78 556.85 487.4 436.24
Revenue 660.6 616.78 556.85 487.4 436.24
Total Revenue 660.6 616.78 556.85 487.4 436.24
7% 11% 14% 12%
Cost of Revenue 341.29 327.85 298.79 266.25 241.9
Cost of Revenue, Total 341.29 327.85 298.79 266.25 241.9

Gross Profit 319.32 288.93 258.06 221.15 194.35

Selling / General / Administrative Expense 105.96 142.39 125.98 114.88 103.92

Labor & Related Expense 11.59 9.85 9.55 10.01 8.19
Advertising Expense 64.4 -- -- -- --
Selling / General / Administrative Expenses, Total 181.95 152.24 135.53 124.89 112.11
Research & Development 79.81 76.07 69.41 63.65 57.07

Total Operating Expense 603.05 556.16 503.73 454.78 411.07

Operating Income 57.56 60.62 53.12 32.62 25.17

Investment Income - Non-Operating 0.03 -- -- -- --

Interest / Investment Income, Non-Operating 0.03 -- -- -- --
Interest Income (Expense), Net-Non-Operating, Total 0.03 -- -- -- --
Other Non-Operating Income (Expense) 3.78 2.35 -0.71 -0.2 0.44
Other, Net 3.78 2.35 -0.71 -0.2 0.44

Net Income Before Taxes 61.36 62.97 52.41 32.42 25.61

Provision for Income Taxes 19.42 18.84 14.61 4.77 8.31

Net Income After Taxes 41.94 44.13 37.8 27.64 17.3

 Financial Statements
Appendix 2: Balance Sheet
Period Ended 12/31/16 01/02/2016 12/27/14 12/28/13 12/29/12 Period Ended 12/31/16 01/02/2016 12/27/14 12/28/13 12/29/12
Annual Balance Sheet Annual Balance Sheet
Update Update Update Reclassified Reclassified Update Update Update Reclassified Reclassified
02/19/17 02/18/17 02/18/17 02/18/17 02/18/17 02/19/17 02/18/17 02/18/17 02/18/17 02/18/17
In millions of USD In millions of USD
(except for per share items) (except for per share items)
Cash & Equivalents 214.52 179.92 185.96 165.4 126.77 Accounts Payable 67.28 61.66 60.26 41.34 42.52
Short Term Investments 39.93 33.12 36.17 21.95 12.43 Accrued Expenses 38.64 30.92 34.23 34.38 25.51
Cash and Short Term Investments 254.45 213.04 222.12 187.36 139.2 Notes Payable / Short Term Debt 0 0 0 0 0
Accounts Receivable - Trade, Gross 72.94 104.71 71.12 39.42 29.52 Customer Advances 5.66 4.05 4.55 5.19 6.26
Provision for Doubtful Accounts -0.03 -0.03 -0.07 -0.07 -0.11 Income Taxes Payable 1.06 -- -- -- --
Accounts Receivable - Trade, Net 73.05 105.13 73.67 40.2 30.61 Other Current liabilities, Total 6.72 4.05 4.55 5.19 6.26
Total Receivables, Net 73.05 105.13 73.67 40.2 30.61
Inventories - Finished Goods 45.86 52.6 38.4 37.59 28.06 Total Current Liabilities 112.64 96.63 99.04 80.92 74.28
Inventories - Work In Progress -- -- 0 0 0.06
Inventories - Raw Materials 4.72 9.08 9.46 8.52 8.85 Total Long Term Debt 0 0 0 0 0
Total Inventory 50.58 61.68 47.86 46.11 36.97 Total Debt 0 0 0 0 0
Deferred Income Tax - Current Asset -- 0 21.51 20.14 19.27 Other Long Term Liabilities 6.32 7.71 3.74 4.73 4.22
Other Current Assets 5.59 9.5 9.7 6.85 8.85 Other Liabilities, Total 6.32 7.71 3.74 4.73 4.22
Other Current Assets, Total 5.59 9.5 31.21 26.99 28.12
Total Liabilities 118.96 104.33 102.78 85.65 78.5
Total Current Assets 383.67 389.35 374.86 300.66 234.89
Redeemable Convertible Preferred Stock 0 0 0 0 0
Buildings - Gross 21.38 21.02 20.83 15.98 15.76 Redeemable Preferred Stock, Total 0 0 0 0 0
Machinery / Equipment - Gross 46.49 46.12 47.31 37.81 37.9 Common Stock 0.27 0.29 0.3 0.29 0.28
Other Property / Plant / Equipment - Gross 2.91 2.44 2.3 1.85 2.76 Common Stock, Total 0.27 0.29 0.3 0.29 0.28
Property / Plant / Equipment, Total - Gross 70.78 69.58 70.44 55.64 56.42 Additional Paid-In Capital 161.89 232.35 249.41 227.18 199.9
Accumulated Depreciation, Total -43.25 -42.73 -39.14 -31.98 -31.46 Retained Earnings (Accumulated Deficit) 226.95 185.01 140.88 103.08 75.44
Property / Plant / Equipment, Total - Net 27.53 26.85 31.3 23.66 24.95 Other Comprehensive Income -0.15 -0.24 -0.15 0.15 0.2
Goodwill, Net 41.04 48.75 48.75 48.75 48.95 Other Equity, Total -0.15 -0.24 -0.15 0.15 0.2
Intangibles - Gross 27 27 31.5 31.5 31.5
Accumulated Intangible Amortization -14.79 -11.34 -12.35 -8.83 -3.28 Total Equity 388.96 417.41 390.44 330.69 275.82
Intangibles, Net 12.21 15.66 19.15 22.67 28.22
LT Investment - Affiliate Companies 0 9.41 10.75 10.5 0
Long Term Investments 0 9.41 10.75 10.5 0 Total Liabilities & Shareholders' Equity 507.91 521.74 493.21 416.34 354.31
Defered Income Tax - Long Term Asset 30.59 31.72 8.41 10.1 8.79
Other Long Term Assets 12.88 0 0 0 8.5
Other Long Term Assets, Total 43.46 31.72 8.41 10.1 17.29

Total Fixed Assets 124.24 141.8 129.11 126.18 119.41

Total Assets 507.91 521.74 493.21 416.34 354.31

Financial Statements
Appendix 3: Statement of Cash Flows
Period Ended 12/31/16 01/02/2016 12/27/14 12/28/13 12/29/12
Annual Cash Flow Statement
Update Update Update Update Update
02/19/17 02/18/17 02/18/17 02/18/17 02/18/17
In millions of USD (except for per share items)
Net Income / Starting Line 41.94 44.13 37.8 27.64 17.3
Depreciation 13.61 15.09 13.05 12.17 11.67
Depreciation / Depletion 13.61 15.09 13.05 12.17 11.67
Deferred Taxes 3.56 -0.99 3.1 -0.77 -3.76
Unusual Items -0.86 -3.07 0.25 2.18 1.33
Equity in Net Earnings (Loss) -1.38 -- -- -- --
Other Non-Cash Items 13.11 12.87 10.78 11.05 9.63
Non-Cash Items 10.87 9.79 11.02 13.22 10.96
Accounts Receivable 25.68 -31.46 -33.47 -9.6 16.73
Inventories -0.98 -13.98 -2.39 -9.37 -0.81
Other Assets 3.19 0.2 -2.86 1.98 -2.89
Accounts Payable 6.5 3.79 16.25 -1.74 -8.68
Accrued Expenses 9.97 -3.25 0.32 9.01 -6.76
Other Liabilities 2.09 3.39 -2.23 -0.66 4.12
Changes in Working Capital 46.45 -41.32 -24.37 -10.37 1.7
Cash from Operating Activities 116.42 26.71 40.61 41.89 37.86
Purchase of Fixed Assets -10.82 -9.37 -13.77 -6.83 -6.77
Capital Expenditures -10.82 -9.37 -13.77 -6.83 -6.77
Acquisition of Business -- -- 0 0 -74.53
Sale of Business 23.52 -- -- -- --
Sale / Maturity of Investment 10.13 26.15 16.5 8.69 10
Purchase of Investments -16.55 -17.76 -31.22 -17.95 -5.09
Other Investing Cash Flow -2.09 -1.02 -0.25 -2 -6
Other Investing Cash Flow Items, Total 15.01 7.38 -14.97 -11.25 -75.62
Cash from Investing Activities 4.19 -2 -28.74 -18.08 -82.39
Other Financing Cash Flow 1.67 0.17 1.43 1.19 0.66
Financing Cash Flow Items 1.67 0.17 1.43 1.19 0.66
Repurchase / Retirement of Common -97.02 -37.39 -1.68 -- --
Common Stock, Net -97.02 -37.39 -1.68 -- --
Options Exercised 9.34 6.46 8.94 13.63 4.33
Issuance (Retirement) of Stock, Net -87.68 -30.93 7.27 13.63 4.33
Cash from Financing Activities -86.01 -30.76 8.69 14.82 4.99
Net Change in Cash 34.61 -6.04 20.55 38.63 -39.54
Net Cash - Beginning Balance 179.92 185.96 165.4 126.77 166.31
Net Cash - Ending Balance 214.52 179.92 185.96 165.4 126.77
Cash Taxes Paid 14.06 14.34 15.51 7.24 11.66
 Ratio Analysis
Appendix 4: Key Financial Ratios of iRobot

Period Ended 12/31/16 01/02/2016 12/27/14 12/28/13 12/29/12

Liquidity Ratios
Current Ratio [CA/CL] 3.41 4.03 3.78 3.72 3.16
Quick Ratio/Acid-Test Ratio [(CA-Inventories)/CL] 2.96 3.39 3.30 3.15 2.66
Asset Coverage Ratio [((Assets-Intangible Assets)-(CL-Short Term Debts))/Total
Debts] - - - - -
Debt-Equity Ratio [Total Liabilities/Total Assets] 23.42% 20.00% 20.84% 20.57% 22.16%

Profitability Ratios
ROA [Net Income/Total Assets] 8.26% 8.46% 7.66% 6.64% 4.88%
ROE [Net Income/SH Equity] 10.78% 10.57% 9.68% 8.36% 6.27%
Gross Profit Margin [(Revenue-COGS)/Revenue] 48.34% 46.84% 46.34% 45.37% 44.55%
Operating Ratio [Operating Expenses/Net Sales] 91.29% 90.17% 90.46% 93.31% 94.23%

Leverage Ratios
Leverage Ratio [Total Debt/Total Equity] - - - - -

Productivity Ratios
TAT [Net Sales/Total Assets] 1.30 1.18 1.13 1.17 1.23
Fixed Assets Turnover [Net Sales/Fixed Assets] 5.32 4.35 4.31 3.86 3.65
Current Assets Turnover [Net Sales/Current Assets] 1.72 1.58 1.49 1.62 1.86
Ratio Analysis
Appendix 5: Financial Ratios of Cognex Corp. (Competitor)
 Valuation Analysis
Appendix 6: Pro Forma
Assumptions Values
Growth Rate 8%
Cost of revenue f(revenue) 52%
R&D f(revenue) 12%
Taxes 32%
Depreciation as f(revenue) 2%

Actual Future Cash Flows

31-Dec-16 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21
Revenue $ 660,604 $ 710,226 $ 763,576 $ 820,933 $ 882,599 $ 948,897 $ 1,020,174
Cost of revenue(1) 341,289 366,925 394,488 424,120 455,979 490,230 527,054
Gross margin 319,315 343,301 369,088 396,813 426,620 458,666 493,120
less SG&A 181,953 195,621 210,315 226,113 243,098 261,359 280,991
less R&D 79,805 85,800 92,245 99,174 106,623 114,633 123,243
Oper Profit (EBIT) 57,557 61,880 66,529 71,526 76,899 82,675 88,886
Taxes 18,218 19,586 21,058 22,639 24,340 26,168 28,134
Return (NOPAT) = EBIAT 39,339 42,294 45,471 48,887 52,559 56,507 60,751
add depreciation 13,212 14,205 15,272 16,419 17,652 18,978 20,403
Less Capex 10.82 11.63 12.51 13.45 14.46 15.54 16.71
less WCR (61,569) (66,194) (71,166) (76,512) (82,259) (88,438) (95,081)
FCF 114,109 122,681 131,896 141,804 152,456 163,907 176,220
NPV FCF 2016-2021 454,252 Terminal value
NPV FCF 2022+ 1,593,582
NPV FCF 2,047,834
shares 27,246,211
share price 75.16
Operating expenses:
Research and development(1) 79,805 85,800 92,245 99,174 106,623 114,633 123,243
Selling and marketing(1) 115,125 123,773 133,070 143,066 153,813 165,366 177,788
General and administrative(1) 66,828 71,848 77,245 83,047 89,285 95,992 103,203
Total operating expenses 261,758 281,420 302,560 325,287 349,721 375,991 404,234
Operating income 57,557 61,880 66,529 71,526 76,899 82,675 88,886
Other income (expense), net 3,804 4,090 4,397 4,727 5,082 5,464 5,875
Income before income taxes 61,361 65,970 70,926 76,253 81,981 88,139 94,760
Income tax expense 19,422 20,881 22,449 24,136 25,949 27,898 29,993
Net income $ 41,939 $ 45,089 $ 48,476 $ 52,118 $ 56,033 $ 60,241 $ 64,767
Net income per share
Basic (Dollar per share) $ 1.51
Diluted (Dollars per share) $ 1.48
Number of weighted average common shares
used in calculations per share
Basic (In shares) 27,698
Diluted (In shares) 28,292