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Summary of Significant Accounting Policies | 9 Months Ended
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Sep. 27, 2025
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation and Foreign Currency Translation 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 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 28, 2024, filed with the Securities and Exchange Commission on March 12, 2025. 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. Liquidity Risks and Uncertainties As part of its quarterly assessment completed during the fourth quarter of fiscal 2024 in its Annual Report on Form 10-K, management concluded that there was substantial doubt about the Company's ability to continue as a going concern for a period of at least 12 months from the date of issuance of the consolidated financial statements. On March 11, 2025, the Company entered into Amendment No. 1 to the Credit Agreement ("Amendment No. 1"). Pursuant to Amendment No. 1, the Lenders (as defined below) waived, until May 6, 2025 (the "Initial Waiver Period"), the Company's obligation to comply with the Company's covenant obligations to (1) provide a report and opinion of the auditor with respect to the Company's annual consolidated financial statements for fiscal year 2024 without a qualification regarding the Company's ability to continue as a going concern (the "Going Concern Covenant") and (2) maintain a minimum level of core assets (the "Minimum Core Assets Covenant" and, together with the Going Concern Covenant, the "Specified Covenants"). On April 30, 2025, the Company entered into Amendment No. 2 to the Credit Agreement which extended the Initial Waiver Period to June 6, 2025; on June 5, 2025, the Company entered into Amendment No. 3 to the Credit Agreement which further extended the Initial Waiver Period to August 14, 2025; on August 6, 2025, the Company entered into Amendment No. 4 to the Credit Agreement, which further extended the Initial Waiver Period to September 19, 2025; on September 12, 2025, the Company entered into Amendment No. 5 to the Credit Agreement, which further extended the Initial Waiver Period to October 24, 2025; and on October 22, 2025, the Company entered into Amendment No. 6 to the Credit Agreement, which further extended the Initial Waiver Period to December 1, 2025 (the "Extended Waiver Period"). On March 12, 2025, the iRobot Board of Directors initiated a review of strategic alternatives, including, but not limited to, exploring a potential sale or strategic transaction and refinancing the Company's debt. In late October, the counterparty to a potential sale transaction withdrew from the process following a lengthy period of exclusive negotiations. The Company is continuing the review process, and is currently seeking to engage alternative counterparties to a potential sale or other strategic transaction. However, it is unlikely that the review of strategic alternatives or the efforts to engage with alternative counterparties will result in any transaction being consummated outside of a bankruptcy process. In addition, during the Company's most recent negotiations in a potential sale transaction, the potential counterparty offered a price per share to acquire the Company that was significantly lower than the trading price of the Company's stock over recent months. As of September 27, 2025, the fair value of the Term Loan was $205.3 million, which significantly exceeded the Company's available cash and cash equivalents and there continues to be substantial doubt about the Company's ability to continue as a going concern. The Company's cash and cash equivalents balance declined from $40.6 million as of June 28, 2025, to $24.8 million as of September 27, 2025, despite the draw down of $31.0 million from the restricted cash account during this period. The remaining $5.0 million from the restricted cash account was fully drawn on September 30, 2025, and the Company has no sources upon which it can draw for additional capital. In addition, absent further waiver of the breach of the Specified Covenants by the lenders, the Company expects to be in default under the Credit Agreement on December 1, 2025. If the Company is in default under the Credit Agreement and the Company's lenders accelerate the repayment obligations with respect to the outstanding loans, the Company expects that it would be unable to repay its obligations under the Credit Agreement. The Company is currently in discussions with the Lenders to provide the additional capital it requires to fund its ongoing business operations, including for payment of significant amounts owed to the Company's primary contract manufacturer. There can be no assurance that the Lenders will agree to provide this necessary funding. If the Company is unable to obtain new capital in the near term from the Lenders or otherwise, it may be forced to significantly curtail or cease operations and would likely seek bankruptcy protection. In such bankruptcy proceedings, it is unlikely that any proceeds would remain for distribution to stockholders and, as a result, stockholders would likely receive no recovery and will lose all of their investment in the Company. In addition, unsecured creditors of the Company would likely receive little to no recovery in such bankruptcy proceedings. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board 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. Use of Estimates The preparation of these consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses. These estimates and judgments, include but are not limited to, revenue recognition, including variable consideration and other obligations such as sales incentives and product returns; impairment of goodwill and long-lived assets; valuation of non-marketable equity investments; valuation of debt; valuation of performance-based awards with market conditions; inventory excess and obsolescence; loss on purchase commitments; loss contingencies; and accounting for income taxes and related valuation allowances. The Company bases its estimates and assumptions on historical experience, market participant fair value considerations, projected future cash flows, current economic conditions, and various other factors that the Company believes are reasonable under the circumstances. Actual results and outcomes may differ from the Company's estimates and assumptions. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments with maturity of three months or less at the time of purchase to be cash and cash equivalents. The Company invests its excess cash primarily in money market funds. Accordingly, its cash and cash equivalents are subject to minimal market risk. At September 27, 2025 and December 28, 2024, cash and cash equivalents totaled $24.8 million and $134.3 million, respectively. These cash and cash equivalents are carried at cost, which approximates fair value. The Company's restricted cash balance totaled $7.0 million as of September 27, 2025, $5.0 million of which remained as part of the restricted cash associated with the Term Loan. During the third quarter of fiscal 2024, the Company elected to draw down $40.0 million of the restricted cash which was repaid to the restricted account in March 2025. During the second quarter of fiscal 2025, in connection with Amendment No. 3, the Company made a $4.0 million principal repayment to the Term Loan from the restricted cash account. During the third quarter of fiscal 2025, with the Lenders' consent, the Company drew down $31.0 million from the restricted cash account. Subsequently, on September 30, 2025, the Company drew down the remaining $5.0 million from the restricted cash account. See Note 9, Debt, for additional information. The other $2.0 million of restricted cash is used as collateral for the Company's credit card program and to secure the outstanding letters of credit and is included in other assets on the consolidated balance sheets. Allowance for Credit Losses The Company maintains an allowance for credit losses for accounts receivable using an expected loss model that requires the use of forward-looking information to calculate credit loss estimate. The expected loss methodology is developed through consideration of factors including, but not limited to, historical collection experience, current customer credit ratings, customer concentrations, current and future economic and market conditions and age of the receivable. The Company reviews and adjusts the allowance for credit losses on a quarterly basis. Accounts receivable balances are written off against the allowance when the Company determines that the balances are not recoverable. At September 27, 2025 and December 28, 2024, the Company had an allowance for credit losses of $3.8 million and $3.0 million, respectively. Inventory Inventory primarily consists of finished goods and, to a lesser extent, components, which are purchased from contract manufacturers. Inventory is stated at the lower of cost or net realizable value with cost being determined using the standard cost method, which approximates actual costs determined on the first-in, first-out basis. Inventory costs primarily consist of materials, inbound freight, import duties, tariffs and other handling fees. The Company writes down its inventory for estimated obsolescence or excess inventory based upon assumptions around market conditions and estimates of future demand including consideration of product life cycle status, product development plans and current sales levels. Inventory write-downs and losses on purchase commitments are recorded in cost of product revenue. Net realizable value is the estimated selling price less estimated costs of completion, disposal and transportation. Adjustments to reduce inventory to net realizable value are recognized in cost of product revenue and have not been significant for the periods presented. Impairment of Goodwill and Long-Lived Assets Goodwill is assessed for impairment at the reporting unit level annually during the fourth quarter of each fiscal year or more frequently if the Company believes indicators of impairment exist. During the three months ended September 27, 2025, the Company did not identify any triggering events. All goodwill is allocated to the Company's one reporting unit which had a negative carrying value as of September 27, 2025. The Company periodically evaluates the recoverability of other long-lived assets whenever events and changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. There were no triggering events identified on the long-lived assets during the three months ended September 27, 2025. On October 27, 2025, the Company provided an update on its strategic review process and disclosed that the counterparty to a potential sale transaction withdrew from the process following a lengthy period of exclusive negotiations. As a result, the Company's stock price decreased approximately 30% in the subsequent trading session. The Company considers this subsequent event as a triggering event in the fourth quarter of fiscal 2025 and will perform an impairment assessment of goodwill and other long-lived assets in connection with its preparation of financial statements for the fourth quarter of fiscal 2025. Strategic Investments 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 in orderly transactions for identical or similar investments of the same issuer. These investments are valued using significant unobservable inputs or data in an inactive market and the valuation requires the Company's judgment due to the absence of market prices and inherent lack of liquidity. The Company monitors non-marketable equity investments for impairment indicators, such as deterioration in the investee's financial condition and business forecasts and lower valuations in recent or proposed financings. The estimated fair value is based on quantitative and qualitative factors including, but not limited to, subsequent financing activities by the investee and projected discounted cash flows. The Company performs an assessment on a quarterly basis to assess whether triggering events for impairment exist and to identify any observable price changes. During the three and nine months ended September 27, 2025, the Company recorded impairment charges of $2.0 million related to investments in non-marketable equity securities. Changes in fair value of non-marketable equity investments are recorded in other expense, net on the consolidated statements of operations. At September 27, 2025 and December 28, 2024, the Company's equity securities without readily determinable fair values totaled $9.0 million and $11.1 million, respectively and are included in other assets on the consolidated balance sheets. Warrants The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC 480, "Distinguishing Liabilities from Equity," and ASC 815, "Derivatives and Hedging." Warrants classified as equity are recorded at fair value as of the date of issuance and no further adjustments to their valuation are made. Warrants classified as derivative liabilities that require separate accounting as liabilities are recorded at their fair value on the date of issuance and are revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense. See Note 11, Stockholders' Equity, for additional information. Other Expense, net The following table provides information about other expense, net (in thousands):
| Three Months Ended |  | Nine Months Ended
| September 27, 2025 |  | September 28, 2024 |  | September 27, 2025 |  | September 28, 2024
Interest income | $ | 503 |  |  | $ | 1,676 |  |  | $ | 2,391 |  |  | $ | 6,568 |
Interest expense | (1,648) |  |  | (5,370) |  |  | (11,778) |  |  | (16,306) |
Changes in fair value of Term Loan | 3,766 |  |  | (8,769) |  |  | 1,079 |  |  | (13,515) |
Debt issuance costs (1) | (944) |  |  | (52) |  |  | (19,580) |  |  | (529) |
Loss on strategic investments | (1,960) |  |  | — |  |  | (1,566) |  |  | (375) |
Other | (428) |  |  | (33) |  |  | 1,063 |  |  | (426) |
Total other expense, net | $ | (711) |  |  | $ | (12,548) |  |  | $ | (28,391) |  |  | $ | (24,583) |
(1)Includes the fair value of zero and $16.8 million on warrants issued during the three and nine months ended September 27, 2025, respectively. See Note 11, Stockholders' Equity, for additional information. Net Loss Per Share Basic loss per share is calculated using the Company's weighted-average outstanding common shares. Diluted earnings 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. Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods, as the inclusion of all potential common share equivalents outstanding would have been antidilutive. The following table presents the calculation of both basic and diluted net loss per share (in thousands, except per share amounts):
| Three Months Ended |  | Nine Months Ended
| September 27, 2025 |  | September 28, 2024 |  | September 27, 2025 |  | September 28, 2024
Net loss | $ | (21,526) |  |  | $ | (6,371) |  |  | $ | (131,607) |  |  | $ | (68,410) |
Weighted-average shares outstanding | 34,866 |  |  | 30,348 |  |  | 33,128 |  |  | 29,276 |
Basic and diluted loss per share | $ | (0.62) |  |  | $ | (0.21) |  |  | $ | (3.97) |  |  | $ | (2.34) |
Employee stock awards and warrants together representing approximately 2.6 million and 2.8 million weighted average shares of common stock for the three months ended September 27, 2025 and September 28, 2024, respectively, and approximately 2.4 million and 2.9 million weighted average shares of common stock for the nine months ended September 27, 2025 and September 28, 2024, respectively, were excluded from the computation of diluted earnings per share as their effect would have been antidilutive.

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