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Why Is iRobot (IRBT) Down 12% Since Last Earnings Report?

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A month has gone by since the last earnings report for iRobot (IRBT). Shares have lost about 12% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is iRobot due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

iRobot Records Q1 Loss, Misses Revenue Estimates

iRobot reported disappointing first-quarter 2022 results. The company’s adjusted loss in the reported quarter was 66 cents per share, narrower than the Zacks Consensus Estimate of a loss of $1.38. Also, the quarterly loss compares unfavorably with earnings of 41 cents per share recorded in the year-ago quarter.

Revenue Details

The company generated revenues of $292 million in the reported quarter, lagging the Zacks Consensus Estimate of $302 million by 3.5%. On a year-over-year basis, revenues decreased 3.7% as the revenue increase in the United States and Japan was offset by a decline in EMEA.

Sales derived from premium and mid-tier robots accounted for 86% of the company’s total robot revenues, higher than 84% in the year-ago quarter.

Sales generated from the e-commerce platform (representing 62% of the reported quarter’s revenues) increased 6% year over year. The e-commerce platform includes online sources of retailers, IRBT’s app and website and e-commerce websites. Direct sales to consumers were up 17% year over year to $41 million and represented 14% of the quarter’s revenues.

Total product units of 974 thousand shipped in the quarter reflected a year-over-year decrease of 10.5%, while average selling prices grew 4.4%. For vacuum products, revenues of $259 million reflected a decline of 4.1% from the year-ago quarter. Units shipped were 865 thousand, down 10.9% from the year-ago quarter. Revenues from mopping products remained relatively stable at $33 million. Units shipped were 109 thousand, down from 117 thousand recorded in the year-ago quarter.

On a regional basis, the company sourced 52.5% of revenues from domestic operations and the rest came from the international arena. Domestic revenues totaled $153.2 million, reflecting a 33.4% increase from the year-ago quarter. International revenues declined 26.4% to $138.8 million.

Margin Profile

In the quarter under review, iRobot’s non-GAAP cost of revenues increased 2.3% to $184.5 million, representing 63.2% of revenues compared with 59.4% in the year-ago quarter. Non-GAAP gross profit was $100.6 million, down 18.6% year over year, while the adjusted gross margin decreased 620 basis points to 34.5%.

Research and development expenses were $42.5 million, up 1.4% year over year. This accounted for 14.6% of revenues compared with 13.8% in the year-ago quarter. Selling and marketing expenses increased 19.8% to $61.1 million. As a percentage of revenues, it was 20.9% for the reported quarter compared with 16.8% in the prior-year period. General and administrative expenses were $26.7 million, up 14.1%. The figure mirrored 9.1% of the total revenue base compared with 7.7% in the year-earlier quarter.

In the first quarter, the company recorded an adjusted operating loss of $18.5 million against operating earnings of $15 million in the year-ago period. Adjusted operating margin was (6.3%) versus 4.9% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting first-quarter 2021, iRobot had cash and cash equivalents of $112.1 million, decreasing 44.3% from $201.5 million recorded at the end of the last reported quarter. Total long-term liabilities were $65.7 million, down 8.7% sequentially.

In the first three months of 2022, the company used net cash of $102.3 million for operating activities against a net cash flow of $28.7 million in the previous-year period. Capital used for purchasing property and equipment totaled $3.1 million, decreasing 72.6%.

Outlook

For 2022, the company anticipates benefiting from solid product offerings and customer base, innovation capabilities, expansion plans and operational initiatives. Supply-chain issues are predicted to adversely impact IRBT’s performance in the first half of the year.

It predicts revenues within $1.64-$1.74 billion, suggesting year-over-year growth of 4.5-10.8%. IRBT anticipates non-GAAP earnings to be $1.50-$2.10 per share.

Non-GAAP gross profit is expected to be $583-$635 million and non-GAAP operating income is predicted to be $45-$61 million.

For the second quarter, the company predicts revenues to be $290-$318 million. Operating loss is projected to be $39-$53 million, while net loss per share is expected to be $1.41-$1.90.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -478.35% due to these changes.

VGM Scores

At this time, iRobot has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, iRobot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

iRobot belongs to the Zacks Industrial Automation and Robotics industry. Another stock from the same industry, Rockwell Automation (ROK), has gained 2.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Rockwell Automation reported revenues of $1.81 billion in the last reported quarter, representing a year-over-year change of +1.8%. EPS of $1.66 for the same period compares with $2.41 a year ago.

For the current quarter, Rockwell Automation is expected to post earnings of $2.36 per share, indicating a change of +2.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -13.4% over the last 30 days.

Rockwell Automation has a Zacks Rank #5 (Strong Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.


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