UPDATED: iRobot Corp. (NASDAQ:IRBT) reported boffo results in its fiscal second quarter, with revenue at the high range of estimates -- $34.6 million -- and a far smaller loss than anticipated, at 8 cents instead of 20 cents (and even higher company guidance). The company raised the low end of the full-year revenue guidance, and now expects $182 million to $192 million.
Based on these much-better-than-expected results, there was no fundamental reason for the $25 to $16 slide. We may retrace those steps higher as a result, which would be a nice 50 percent plus gain. Shorts should be nervous, if they aren't covering as we speak (I see IRBT is now at $18+ after hours).
The company also talked during the conference call about additional PackBot orders and plans to double its production capacity, better-than-expected sales of the new Scooba 5800, and two new military robots that are getting ready for production -- the R-Gator ATV and the "Neo" robot. Read on!
Conference call highlights:
* Gross profit continues to impress at 34 percent, up 10 percentage points from last year. Full-year gross margins still expected to hit 36-37 percent. Home robot gross margins are significantly higher than military robots, which is why they expand in the second half of the year.
* Company expects to ramp up R&D and marketing even faster, soaking up most of earnings for the year, so it can continue to gear up for faster growth.
* The company experienced "strong Roomba AND Scooba sell-through" -- iRobot CEO Colin Angle.
* The launch of the new $299 Scooba 5800 exceeded goals when introduced by HSN in June, and margins are similar to the higher-powered $399 list Scooba 5900.
* Low Scooba prices on the 5900 as retailers transition to the 5800 are "temporary" and "expected," Angle said. (Scooba 5900 can be purchased for as cheap as $249 or $299 with lifetime warranty). Understatement of the day, from Greiner: "We've been discovering with the Scooba, the market is somewhat price sensitive." Angle expects most Scoobas sold in the second half will be Scooba 5800 (as we predicted), and the company will make up in volume what it lost in average selling price (ASP).
* Expanded direct-sales 176 percent, including sales direct through EBay and through its enhanced online store.
* Overall home robots revenue up 51 percent versus 2005, $16.7 million vs. $11.1 million. Units at 107,000, up from 83,000 a year ago, and accessory sales continue to bulge. (Note: I estimate Scooba shipments at less than 20,000 vs. 50,000 in first quarter, as Roomba sales were said to grow from last year).
* Roomba returns and warranty claims continue to come in better than expected, increasing margins. Roomba returns are significantly less than the 13 percent they were a year or so ago but they strongly hinted are above 10 percent without saying it. (They said Scooba is too new to know if returns/warranty claims are high or not, said it was similar to their early experience with Roomba).
* Non-U.S. sales nearly doubled, and now represent 11 percent of company revenue.
* Better home robot inventory management and order fulfillment means that the company will be able to adopt closer to a "just-in-time" type delivery system to its customers in the second half, which might tend to shift sales closer to Christmas.
* 1st Half PackBot sales up 16 percent in units delivered, from 135 to 156, 85 in second quarter. Spares and service are generating a greater percentage of revenue. The company announced 70 new orders so far in the third quarter, including new orders from Germany, the U.K., and the U.S. Government. Other countries that have bought PackBots include Singapore, France, Israel, UAE.
* The military backlog fell, but Angle cautioned that this is typical of government contracts, which tend to come in chunks. (The IDIQ contracts do not count as backlog until the actual orders come in).
* The development of the FCS PackBot SUGV 30-pound infantry soldier robot is on schedule and has met requirements. Chairwoman Helen Greiner noted that the "largest market opportunity" is to have a standard-issue infantry support robot, which would involve "thousands" of units. (Note: The SUGV is expected to be deployed around 2010 and iRobot has a $56 million Future Combat Systems research contract to develop it.)
* Greiner emphasized strategic modular architecture with developers signed for both the Roomba platform and for PackBot. Three companies have been signed to deliver enhancements for Roomba, but Helen Greiner refused to say what features might be forthcoming. It's "possible" that a new Roomba feature might come later in the year.
The most exciting new PackBot accessory, Greiner said, is a new explosive sniffer that will allow PackBot to detect roadside bombs and IEDs so that it can then destroy them. She also noted the announcement that PackBot will be used to help develop a modular Chemical Biological Radiological Nuclear detection device. Support of Roomba hackers was also mentioned, with Greiner noting the benefit of worldwide press coverage of such feats as Roomba Frogger.
* PackBot enhancements are in the works, including doubling its strength, boosting its speed, upgrading its communications capability and bolstering redoing the user interface. The company is in the process of DOUBLING its PackBot manufacturing capability.
* Greiner talked up the accelerated development of the "Neo" robot, a.k.a. "NeoMover," a 200-pound PackBot-like robot that can lift 150 pounds and run a 4-minute mile. Neo is "on track for production in 2007," she said. !!
* The company has delivered a $250,000 R-Gator robotic ATV in the third quarter, which is now undergoing testing. The company is on track for small-volume production by the end of the year, with higher volumes in 2007 and 2008. !!
* The company has higher gross margins in home robots, particularly in the second half of the year.
* The company does not expect to significantly expand retail channels in 2006, and has made a strategic decision to date not to sell to Wal-Mart, which would affect the company's relationship with other retailers. (Note: Sam's Clubs do carry iRobot products from time to time.)
* Settlement with the U.K. providing 30 PackBots will yield a $2.4 million pretax profit in 2nd Half, but the money will be plowed into R&D, not flow to the bottom line. (As we predicted)
* No one retailer sells more than 10 percent of their home robots, although one is close to 10 percent. (Amazon?)
* Won't say what home robot R&D is being spent on for competitive reasons (Duh!).
Greiner also praised the addition of retired Army materiel acquisitions chief Paul J. Kern to the board of directors.
* Higher interest rates aided iRobot's results because of it's $75 million cash hoard and zero debt. Net interest contributed $950,000.
* Inventory essentially unchanged at $16.8 million, averaging 7.2 turns.
* Insider sales. Greiner and Angle plan to sell up to 10 percent of their holdings over the next year, beginning in August. No real comfort one way or another on VC firms and others holding on, or not.
* No real discussion or questions on the fall in IRBT stock price.
Here is the company press release:
iRobot Reports Record Second Quarter 2006 Revenue
Revenue Grows 69 Percent over First Half 2005
- Revenues for the second quarter of 2006 grew 33.5 percent to $34.6 million, compared with $25.9 million for the same quarter one year ago.
- Gross profit for the second quarter grew 86.6 percent to $11.8 million (34.1 percent of sales), compared with $6.3 million (24.4 percent of sales) in the second quarter of 2005. This growth in gross profit as a percentage of sales represents an improvement of 9.7 percentage points in Q2 of fiscal 2006 when compared to Q2 of fiscal 2005.
- Net loss in the second quarter of 2006 was $1.8 million, or $0.08 per share, compared with a net loss in the second quarter of 2005 of $3.1 million, or $0.30 per share.
iRobot improved its financial guidance for 2006 by increasing the lower end of the revenue and pre-tax income range.
“The current trends in our business give us confidence that our revenues and pre-tax earnings results are likely to exceed the low end of our previous guidance,” said Geoff Clear, chief financial officer, iRobot. Therefore, for full year fiscal 2006, our new revenue guidance is $182 million to $192 million and our pre-tax income guidance is breakeven to a pre-tax profit of two percent of revenues.
iRobot will host a conference call today at 5:30 p.m. (ET) to discuss its financial results for the second fiscal quarter ended July 1, 2006, business outlook and outlook for future financial performance. An archived audio broadcast of the conference call is available at http://investors.irobot.com/events.cfm. A replay of the telephone conference call will be available through Aug. 14, and can be accessed by dialing (719) 457-0820, access code 2708044.
Tags: iRobot, IRBT, robotics, robot, robots, Roomba, Scooba, PackBot, military, stocks, investing, Helen Greiner, Colin Angle, R-Gator, NeoMover, SUGV, FCS, Future Combat System, Pentagon
1 comments:
I wonder if one of irobot's partnerships is with Evolution Robotics? A year ago, Evolution claimed to be able to provide hardware and software packages for vacuums with vision capabilities that could be priced in the $500 range, see http://www.evolution.com/news/icra_innovation_award.pdf. Ever since I saw that, I knew that Evolution must be heavily lobbying irobot for business.
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