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iRobot Corporation (NASDAQ:IRBT)

Q1 2013 Earnings Call

April 24, 2013 8:30 am ET

Executives

Elise Caffrey - IR

Colin Angle - Chairman & CEO

Alison Dean - CFO

Analysts

Jim Ricchiuti - Needham & Company

Brian Gesuale - Raymond James

Adam Fleck - Morningstar

Paul Coster - JP Morgan

Josephine Millward - Benchmark Company

Brian Ruttenbur - CRT Capital

Operator

Good day everyone and welcome to the iRobot First Quarter 2013 Financial Results Conference Call. This call is being recorded. At this time, for opening remarks and introduction, I would like to turn the call over to Elise Caffrey of iRobot Investor Relations. Please go ahead.

Elise Caffrey

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

These forward-looking statements are subject to risks and uncertainties and involve a number of factors that could cause the actual results to differ materially from those expressed or implied by such statements. Additional information on these risks and uncertainties can be found in our public filings with the Securities and Exchange Commission. iRobot undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information or circumstances.

During this conference call, we will also disclose non-GAAP financial measures as defined by SEC Regulation G, including adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, amortization, merger and acquisition expenses, restructuring expenses, net intellectual property litigation expenses and non-cash stock compensation. A reconciliation of GAAP and non-GAAP metrics can be found in the financial tables at the end of the first quarter 2013 earnings press release issued last evening, which is available on our website.

On today's call, iRobot Chairman & CEO Colin Angle will provide a review of the company's operations and achievements for the first quarter of 2013 as well as our business outlook for the rest of 2013; and Alison Dean, iRobot Chief Financial Officer, will review our financial results for the first quarter and provide our financial expectations for the full year 2013 and the second quarter ending June 29, 2013. Then we'll open the call for questions.

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

Colin Angle

Good morning and thank you for joining us. We kicked off 2013 with an outstanding quarter. The results and outlook for our Home Robot business are excellent. We are very excited to have begun shipping our RP-VITA telemedicine robot in Q1 and our Defense & Security business delivered solid results.

Based on our view of the rest of the year, we are increasing our full year financial performance. We now expect to deliver fiscal 2013 revenue of $485 million to $495 million, EPS of between $0.80 and $1.00, and EBITDA of $55 million to $61 million. The revenue increase is being driven by better than anticipated Home Robot demand in the United States.

The full year expectation for our D&S business remain unchanged. Improvements in gross margin, rapid integration of Evolution Robotics' manufacturing processes and product rollout, improved operating efficiency in D&S and tighter expense control will each contribute to increased profitability and enable us to deliver on our commitment to profitable growth.

Now, I'll take you through some of the details of the first quarter and our expectations for the rest of 2013. Total Q1 revenue of $106 million, EBITDA of $15 million, and EPS of $0.29 all exceeded our increased expectations.

In the first quarter, domestic revenue growth of 44% fueled a 14% year-over-year increase in Home Robot revenue. Lean inventory levels and strong Q4 sell through across all domestic retailers helped drive the Q1 growth.

Mint and expanded distribution of the Roomba 600 and 700 robots to retailers have all contributed to the increase in Home Robot revenue. Our U.S. retailers reported strong sell through again in Q1, and we expect better full year growth than we did in February when we first shared our outlook for fiscal 2013. We expect the domestic market to continue to be strong, as our U.S. advertising and media investment ramps in Q2.

In the second quarter last year we launched one of the largest domestic marketing campaigns in iRobot history. Last year's program contributed to domestic annual net growth of roughly 30%. The objective of these programs is to increase awareness of iRobot and position our home robots as mainstream solutions to practical problems. Over the past year we have talked about the importance of investing in brand and marketing to support our strategic growth plans. We saw the positive impact of our investments on domestic results in 2012, and expect this program to drive even greater awareness in the U.S. market in 2013.

Our strategy for this year's campaign is similar to that of last year's. We will be continuing our successful "iRobot Do You?" advertising on channels that reach our modern professional target audience, such as HGTV, Travel and DIY, where they ran last year and expanding to Bravo, CNBC, BBC America this year. In addition, we will be running an infomercial for Mint on Travel, Style, Lifetime Movie Network, DIY and BBC America, which were high performing sites for the product in 2012.

Overseas, demand in Japan was very strong and China's performance was consistent with our expectations. We did experience some softening in EMEA, due to macros, resulting in a relatively flat year-over-year international Q1. We are closely managing inventories in EMEA so we can ensure that there is not excess product in the channel.

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

Turning now to our Defense & Security business. Q1 results exceeded our expectations due to the timing of government product lifecycle revenue orders for PackBot and SUGV robots. Greater DoD Q1 demand for spares, service and training, to support the iRobot fleet of approximately 5,000 unmanned ground vehicles, resulted in higher quarterly revenue than we anticipated.

Last quarter the government disclosed a $14.4 million order for more than 600 FirstLook robots. This order was anticipated and included in our 2013 expectations. In addition, we received a $7 million international order at the beginning of the quarter, which we discussed on the last call. We now have more than 80% of the roughly $50 million in 2013 expectations in either booked orders or funded backlog and are highly confident in achieving the full year number, which will be down from last year.

Also important to note is that we expect non-DoD revenue to comprise more than 40% of 2013 D&S revenue compared with just 16% of 2012 revenue. This market diversification is important given the near term uncertainty created by competing budget priorities in Washington and changes in the Defense Department's mission requirements.

We began shipping the RP-VITA to InTouch in Q1 2013. To-date we have shipped roughly 2 dozen robots on which ITH has integrated their proprietary technology for telemedicine to facilitate its use in remote diagnosis and treatment. Half of these robots have been shipped by InTouch to both new and prior users of InTouch's products.

These are very early days but initial feedback has been positive. We expect to sell additional units this year, but our Remote Presence business unit is not expected to generate meaningful revenue in 2013. We are very excited about our progress in this segment and do expect the product to be a growth driver over the next couple of years.

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

Before turning the call over to Alison to review our first quarter results and Q2 expectations in more detail, I did want to comment on last week's marathon tragedy here in Boston. Shortly after the two explosions near the Boston Marathon finish line, we contacted the Massachusetts State Police to offer assistance and robots in addition to the ones they owned. On Friday, during the intensive manhunt, our robots were once again front and center, keeping law enforcement officials out of harm's way.

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

Alison Dean

Thanks Colin. Revenue in the first quarter was $106 million compared with $98 million last year. Revenue, earnings per share, and adjusted EBITDA all exceeded expectations.

Earnings per share for the quarter were $0.29, compared with $0.02 last year, and adjusted EBITDA for Q1 was $15.2 million, compared with $6.1 million last year. Q1 EPS this year includes an $0.08 benefit from 2012 and 2013 investment tax credits.

In Q1, Home Robot units grew 7% while revenue of $93 million increased 14% from a year ago. The mix of higher ASP Roomba 600 and 700 robots this year accounted for the difference in unit growth versus increased revenue. We expect year-over-year double-digit revenue growth to continue throughout 2013, driven by both product mix and unit volume. Based on current indications from our retailers and distributors, we anticipate revenue to be relatively level from Q2 through Q4.

Total domestic revenues were up 44% in Q1, following a 32% increase in Q4, and compared with 21% growth in Q1 last year, due to expanded distribution of Roomba 600 and 700 robots and the inclusion of Mint. Importantly, sell through, at our top five domestic retailers, was up 36% year-over-year reflecting consumer demand and the impact of our marketing program. International revenue was relatively flat for the quarter at $61 million and comprised approximately 66% of Home Robot revenue.

Defense & Security revenue of $11 million was higher in Q1 than anticipated, but down from a year ago, due to both lower contract and product revenue, as expected. Defense & Security product revenue was $8 million in the first quarter, $6 million of which was product lifecycle revenue.

As a result of the 2012 corporate realignment, in which we centralized our engineering and operations units, we reclassified certain income statements costs. This change does not impact earnings per share or adjusted EBITDA, but is intended to provide additional financial statement transparency. The change decreases cost of sales and increases operating expense by equal amounts. With our quarterly SEC 8-K submission, we have furnished four years of historical financial information, presenting income statement costs for those periods in a manner comparable to the reclassified 2013 presentation.

Based upon reclassified costs, Q1 gross margin was 43.8% compared with 38.4% last year, and OpEx was 35% of revenue compared with 38% last year. The year-over-year improvement in gross margin was driven primarily by favorability of Home Robot product mix, specifically expanded distribution of higher margin Roomba 600 and 700 robots this year compared with lower margin Roomba 500 robots in 2012. Tighter cost control and higher revenue in Q1 2013 resulted in improved operating expense as a percentage of revenue.

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

Turning to Q2, we expect revenue of $128 million to $133 million, driven by strong growth in Home Robots. We expect EPS in the range of $0.15 to $0.20 and adjusted EBITDA of $13 million to $16 million. Keep in mind that our seasonal investments in marketing, that Colin discussed, will be substantial in Q2 and Q4, as they were last year and that spend will impact EPS and adjusted EBITDA in those quarters.

Our full year revenue expectation of $485 million to $495 million assumes Home Robot revenue will grow approximately 22% to $435 million to $440 million and comprise roughly 90% of total company revenue. Our expectations for Defense & Security revenue remain unchanged at $45 million to $55 million for the full year.

Last quarter, we provided an estimated 2013 effective tax rate of 8% to 10% based on the impact of the 2012 and 2013 investment tax credits for R&D. Driven by our revised full year profit expectation, we now estimate a full year rate of approximately 20%. For Q2 through Q4, we are estimating a rate of roughly 25%.

In summary, for the full year, strong domestic sales growth, the expanded distribution of Mint and Braava, and further penetration into long-term international markets will drive the Home Robot business. Orders for FirstLook, sales to foreign countries, and PLR will generate expected revenue in our Defense & Security business.

I'll now turn the call back to Colin.

Colin Angle

Thank you. Our results in the first quarter exceeded our increased expectations due to strong performance by our Home Robot business. As we look at the rest of the year, we will diligently balance our investment in technology, and the iRobot brand, with our commitment to delivering profitable growth. This year we are further deepening our presence in existing markets, and expanding in new geographic markets, enabled by our investments. Beyond this year, we see tremendous growth opportunities for our home robots and are very excited about the potential for our Remote Presence robots. While the current military climate is disappointing, the longer term drivers remain intact for our Defense & Security business, and we are well-positioned for those markets.

With that, we'll take your questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And our first question comes from Jim Ricchiuti from Needham & Company. Please go ahead.

Jim Ricchiuti - Needham & Company

Question on the Home Robot business. Can you say what Mint contributed in the quarter?

Alison Dean

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

Jim Ricchiuti - Needham & Company

$2 million. Okay. Thanks Alison. It appears that the integration is ahead of schedule, I wonder if you could give us a little update on where you see the -- some of the supply chain efficiencies that you expect to realize?

Colin Angle

I think that we're, things are moving ahead of schedule, which means we're well on track of achieving our improvements in gross margin for the Mint product line this year as expected. We're also, as I mentioned in the call preparing to launch. We're going to have to train ourselves to use of term Braava instead of Mint, so there we're going through a name change. So we've a single name internationally. But we're on track to be launching Braava internationally as well.

Jim Ricchiuti - Needham & Company

Got it. And can you say what the decline was in the EMEA region in the Home Robot business in the quarter?

Alison Dean

Jim, it was lower than we expected. We really think it was just driven by the macros in the area that wasn't a particular highlight of our country. It was just a slower demand than we had anticipated in the first quarter.

Jim Ricchiuti - Needham & Company

And the one area, it appears Japan was strong. It looks like China is tracking the way you expected. What are you seeing in Latin America?

Alison Dean

In Lat, we've had a slow start planned for Q1 in terms of the full year. We're still trying to gain traction in that market and still facing some challenges. So its China is a little bit of ahead of Lat at this point in terms of our ability to gain traction there.

Jim Ricchiuti - Needham & Company

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

Alison Dean

It actually impacted gross margins in both segments of our business. So from a home perspective, we took direct fulfillment costs, out of sales and marketing and moved it into gross margin. And then on a D&S perspective we took some engineering costs that had previously been reported in gross margin and moved them down CapEx. So it was sort of an opposite change depending on which division you're looking at.

Operator

Thank you. And our next question comes from Brian Gesuale from Raymond James. Please go ahead.

Brian Gesuale - Raymond James

Yeah, good morning, very nice job on the quarter guys.

Colin Angle

Thank you.

Brian Gesuale - Raymond James

Wondering if you could give us a little detail on the sales progression this year for Mint or Braava. Is it going to be a little bit more of a congruent Q2, Q3, and Q4, as you launch in those respective quarters and then the holiday surge won't be quite as pronounced or how should we really look at that progression?

Colin Angle

You should expect a growing launch quarter-over-quarter. Certainly Q1 at $2 million is significantly forward than what we expect our quarterly run rate. But you'll see a ramp as distribution expands. We again don't subscribe to the stack 'em high and hope they fly type of philosophy. So we'll be providing our retailers with units that we're certain that we're able to move and then look at the demand and ramp up appropriately. So Q4 again Braava sales should be our largest quarter for sales. But you should see significant increase in sales Q2 over Q1, as we expand our distribution. That that will be the only significant step function in sales this year.

Brian Gesuale - Raymond James

And then just one last follow-up on the geographies here. On Japan, it sounds like it was really strong, are you starting to see any currency issues bind into that or is that really an issue for you guys? And then secondly, on Europe, it softens, you guys have blown through in terms of growth when Europe has been soft in the past. Is this a one quarter phenomena or is there something that you're expecting to be a little bit different this time around in Europe? Thanks.

Alison Dean

In terms of Japan, we haven't really been experiencing anything relative to currency issues. On EMEA, we were cautious going into the air about EMEA our results were a little less than we thought in Q1, and we think we're being conservatively cautious for the rest of the year relative to our expectations. So we want to, you know Mint should help drive some of the growth in EMEA, but we're going to be I think appropriately cautious about what to expect there this year.

Colin Angle

And I think that what we've seen in the past Brian is that the hyper growth of the product demand in EMEA sort of eclipsed the ability of the macros to slowdown sales. I think that well, we're far, far from being a mature product in EMEA. It is still sort of less new and our volumes are quite significant and so that we're had a little bit more exposure to macros than we've had in prior years.

So I think that the chilling effect of the macros will impact us. We still offset them somewhat by the inherent growth in the category and it's just the balance is slightly different than it's been in the prior years. And also to clarify our retailer agreements are protected from currency fluctuations within a band, and right now our currency, the exchange rates are within that band, so that we're -- we feel good about it.

Operator

Thank you. And our next question comes from Adam Fleck from Morningstar. Please go ahead.

Adam Fleck - Morningstar

I want to follow-up on the European situation, given the slowing there, you mentioned you're monitoring your inventories. Just curious the conversations you're having with your distributors as you launch the Braava product. Is the newness of that product what gives you confidence in the growth or is there any concern there you kind of looking at a lower inventory level any details there would be helpful?

Colin Angle

Sure, we believe and have for some time that the Mint product will succeed very well in EMEA and Asian markets based on it's -- the popularity of electrostatic cleaning in those markets. So this is something that demand for bringing this product to market was certainly key in our decisions last year to do the acquisition.

We are, as I mentioned previously, regardless of our enthusiasm having been burned in the past, taking a conservative approach to brining the products to market and predicting the results of doing so. So again Q2, we will have a significant new distribution access for the Braava, meaning that we're bringing Braava into our retailers or many of our retailers in EMEA. So that will be a step change. But we will be very closely controlling inventories to make sure that we can protect the product in the marketplace.

Adam Fleck - Morningstar

And then on the reclassification, looking through the 8-K there seems to be a new segment, the other category is this primarily the marine business and I think you bought that, right?

Alison Dean

That's a very small component of that bucket. The main driver of that bucket is our non-BCTM research revenue, as well as any revenue that we've from our RP-VITA. But the driver of that category at least in Q1 is our non-BCTM research revenue.

Adam Fleck - Morningstar

Okay. And the cost in that segment seems to have come down quite a bit. Is that because of the marine pullout of the office in North Carolina or may be any help there will be good too?

Alison Dean

Absolutely, so separate from our reclassification, because we're running our business differently in '13 than we did last year based on our reorganization and the creation of shared service centers, we needed to change our segment reporting. So going forward, we're going to have just three segments home, which pretty much has not changed, defense and then other, which we just described.

From a cost perspective the other thing going on here though is that we've centralized our supply chain and operations, organization, along with our engineering organization. And in our segment reporting all of our operation and supply chain costs are now being reflected in that other cost of sales category, whereas in previous years those costs were in home and in defense. So that category contains cost for sales for the research revenue I mentioned, but it also is being primarily driven by the operations expenses of the company being in that bucket now.

Adam Fleck - Morningstar

Okay. Great that's helpful. Thanks Alison. And then, finally, just a quick housekeeping question. Your accounts payable fell pretty sharply in the quarter, was that just a timing issue or would you call anything else out there?

Alison Dean

No, there's nothing to call out. It was really timing. We had some things that we had accrued for at the end of Q4 that were paid out, but it really was just a timing event in Q1.

Operator

Thank you. And our next question comes from Paul Coster from JP Morgan. Please go ahead.

Paul Coster - JP Morgan

Yeah, thanks for taking my question. Colin, it seems sort of seasonal investment in SG&A. But there's no seasonality it seems or lees seasonality at least in the revenue outlook for the remainder of the year. Can you just sort of explain that a little bit?

Colin Angle

Sure. Balancing the inventory levels at our retailers is something that we work hard at doing. Also, the seasonality associated with our European and Asian markets is quite different from more traditional seasonality in our domestic markets. Also in order to answer your question fully, I've to explain that in North America we're primarily responsible for our advertising spend. Outside of North America, our distributors are primarily responsible for their advertising spend. So the Q2 and Q4 increases in OpEx spend are to Back to School, Mother's Day, which is one of the two times during the year when advertising dollars are most effective for our business and the holiday season. So that explains why.

Similarly, in Europe and Asia our distributors are peaking at moments in time when they feel their advertising dollars are thus spent. But that does not appear on our OpEx line. So that gives -- that creates the lumpiness in the spend. And then, supporting the flatness of sales is that for the end of Q3 we see retailers often placing orders to support the Q4 demand supported by advertising. And similarly, in Q1, you see retailers restocking from the outflow of product in their stores in the holiday season, since our strategy is to not oversupply our retailers in Q4 of the year. So ideally retailers go into Q1 with a decrease inventory level. So Q1 is driven by that, Q2 is driven by the advertising, Q3 is driven by preparing for the Q4 rush, and Q4 is driven by the advertising. So each one is nicely lined up and results this year in relatively even revenue.

Paul Coster - JP Morgan

Okay. I mean related question, yeah we were pleasantly surprised by the start you had to this year. And it sounds like you may have been a little bit as well, and to an extent that's true, this is a surprise. Why was this a surprise? And do you think the sort of the magnitude of these surprises will diminish in time as you learn more about your end markets?

Colin Angle

You know I think that wasn't a surprise to us. Certainly it was our performance in North America was stronger than we would have hoped, predicting a 40% growth figures is not something that is normal course of business for iRobot. I think that it does speak to strong performance, and the efficacy of our national advertising campaigns, and the strengths of the product in this growing market segment.

So will it settle down overtime? I think that we look at our market, see the fact that where there's household penetration levels are still very, very low, and we would hope that we have many, many years of aggressive growth in front of us. Certainly, as we work at the balance of this year and next year, we constantly work to improve our ability to predict our markets, and I'd say that I'd hope that we would be closer to the mark on these upsides, but certainly the doors are blowing off as far as domestic revenue in home in Q1 of this quarter.

Operator

Thank you. And our next question comes from Josephine Millward from Benchmark Company. Please go ahead.

Josephine Millward - Benchmark Company

Colin, given this softness in Europe and the strength we're seeing in U.S. Home Robot sales, do you still think international Home Robot sales, can grow around 20% for the year, which was what, which was your assumption on the last call? By the way congratulations on the great quarter.

Colin Angle

Thank you. Absolutely, we feel like our estimates of I think that we're predicting 22% growth for the full year in Home Robots, is still a very good figure. We think that our market penetration in the EU remains small with plenty of headroom for additional growth.

Josephine Millward - Benchmark Company

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

Alison Dean

And our expectations are the same Josephine; around $22 million to $24 million is what we anticipate.

Josephine Millward - Benchmark Company

Sounds good. Can you give us an update on the DoD thinking and strategy for the SUGV? As you know the army didn't request any additional funding in the President's '14 budget request for unmanned ground vehicle. So what happens to the money from fiscal year '12 and '13 for SUGV, and do you think this program could be cancelled?

Colin Angle

So where we're right now is that there have been multiple unmanned ground vehicle platforms designed for similar missions. And the army has recognized this and requested a thorough review of requirements for unmanned systems that are SUGV class. So the review is ongoing and most likely a new competition around a new set of requirements will take place in the next few years, until the new requirement is approved and funded we expect the government to continue to support and use the field of SUGV systems they currently have but we are not currently modeling or expecting the SUGV dollars to continue to flow for development of that program. So I think that we didn't believe those numbers in the President's budget would materialize, we continue to believe that.

Josephine Millward - Benchmark Company

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

Colin Angle

You're getting ahead of the curve. I think that we believe strongly in the long-term potential for D&S, but are not commenting on our expectations for next year at this time.

Josephine Millward - Benchmark Company

Okay. That's good because I don't think the army knows yet.

Colin Angle

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

Josephine Millward - Benchmark Company

Right.

Colin Angle

Now, we do feel better than we have in a long time about the appropriateness of our current expectations for Defense. So we're very confident about the number that we've given out.

Josephine Millward - Benchmark Company

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

Alison Dean

On our last call, we said probably 30% would be the ongoing rate in a more normalized year. So I'd continue to use that at this point.

Operator

Thank you. And our next question comes from Brian Ruttenbur from CRT Capital. Please go ahead.

Brian Ruttenbur - CRT Capital

The only question I've had and it's been asked a couple of times, but I do not know if I got the answer. The domestic market is going to grow how much this year? I was a little confused on that answer. I heard a bunch of different numbers. Could you just tell me the Home Robot business domestically U.S. is going to grow how much?

Alison Dean

Our thinking is about 20%.

Colin Angle

Full year.

Brian Ruttenbur - CRT Capital

Okay. So everything is going to be 20%, international and domestic are going to grow the exact same?

Alison Dean

Yes, at this point that's our best view.

Brian Ruttenbur - CRT Capital

Okay. Great. And when do you see the drop-off happen in the U.S. market?

Alison Dean

Can you repeat the question, we couldn't hear you?

Brian Ruttenbur - CRT Capital

I'm sorry. When do you see that the growth is going to drop-off for the domestic market that was growing 40 plus percent? I was just even trying to figure out, is it going to be second quarter, is it going to be third quarter, when is the drop-off to slowdown in the U.S. market?

Colin Angle

Not something that we've agreed visibility in. I think that we're off to a great start. And well, we don't see the compelling reason beyond raising the guidance as we've done to predict full year increase in growth beyond that 20% we just gave you. It will be a bit of a wait and see and we'll give you more information on the next call as we see things develop.

Alison Dean

Well Brian, just to add, we're expecting that throughout 2013. We'll continue to have double-digit quarter-on-quarter home domestic growth each quarter. So each quarter is going to remain strong, may be not at the 40% level that we had in Q1, but each of those quarters should continue to have very strong year-over-year growth.

Brian Ruttenbur - CRT Capital

Okay. And then, last question. Did you do something special in terms of advertising in the first quarter? What caused the strength? I don't know if there was anything unique advertising discounts anything?

Colin Angle

No, it was driven by sell through. So very, very strong demand for our products, I think that we did in Q4 of last year effectively, clear out the shelves. And so that there might be a little bit of restocking associated with driving that figure, but primarily driven by actual sell through at the store front.

Operator

Thank you. And our next question comes from Jim Ricchiuti from Needham & Company. Please go ahead.

Jim Ricchiuti - Needham & Company

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

Colin Angle

You know, we're the dominant share domestically, and so there wasn't particularly a lot of share to gain. So that this is organic growth and the category is the primary driver here.

Jim Ricchiuti - Needham & Company

Okay. And then final question from me, I was just wondering on the healthcare market or RP-VITA. You, I guess, so through year-to-date you've shipped about 24 robots?

Colin Angle

Correct.

Jim Ricchiuti - Needham & Company

And what should we expect going out over the balance of the year. Was this the number that you shipped so far this year is that just the initial launch and we'll see that taper or is this kind of a rate that we could assume going through the next couple of quarters?

Colin Angle

I'd not assume that it is a steady state rate at this time. Certainly there was pent-up demand for the product, but also we're shipping at a purposefully low rate as this is a new technology going in and there is -- these robots, the installation process involve mapping the hospitals, so that the robot can autonomously navigate throughout that hospital. The installation process for that is I'd describe as an engineering process at this point and not a polished working like interface, so that we're doing these installs and with our partner into our shelves at a quick rate, we'll have a lots of learning, the customers love these robots. And this is, as I said, early days and we're excited by the results and the potential in this category. But we said sales in 2013 shouldn't be viewed as particularly material, we'll see the ramp up in rates and volumes in next year and beyond.

Operator

Thank you. And so our next question comes from Paul Coster from JP Morgan. Please go ahead.

Paul Coster - JP Morgan

Yes, thank you. On the international side, can you just talk a little bit about the mix shift in the ASP sort of the benefit from this 600, 700 series going into that channel and to what extent do you think that is the sort of principal driver or not of the 20% growth you see in international this year.

Colin Angle

I think, Paul, it's going to be a mix. We'll see increases in both units and ASPs in the U.S. As Alison said, it was definitely split so that those two drivers compounded the effect. But I'll point out that on a go forward basis as we launch the Braava into the EU it's going to be a little bit of apples and pears because the Braava is a lower ASP product. So the impact of the Braava launch all things being equal will be a reduction in ASP and acceleration of unit growth. So we're going to have to rebalance the way we interpret those two figures through the back half of this year.

Colin Angle

All right. That concludes our first quarter earnings call. We appreciate your support and look forward to talking with you again in July to discuss our Q2 results.

Operator

That concludes the call. Participants may now disconnect. Thank you.

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