Major iRobot News...

Sorry I've been AWOL this week (anybody out there with a newborn will understand).

I will have updates today on new Roombas, upcoming PackBot contracts, and more.

-Thorn.

iRobot Gets $22 Million in xBot/PackBot Orders

This appears to be a touch light relative to what I was expecting, but orders is orders, as they say. It provided a nice lift to the stock yesterday. I had hoped that the Army would show a little more urgency on the xBot, but perhaps they are waiting for SUGV?

Here is the press release:

May 22, 2008 01:05 PM Eastern Daylight Time
iRobot Receives Orders Totaling $22 Million
BEDFORD, Mass.--(BUSINESS WIRE)--iRobot Corp. (Nasdaq: IRBT) today announced it received orders under two separate contracts from the U.S. Army Program Executive Office for Simulation, Training, and Instrumentation (PEO STRI), that manages these contracts on behalf of the Robotic Systems Joint Project Office at Warren, Mich and Huntsville, Ala.
PEO STRI placed a $16 million order, the third under the xBot contract, to put more than 200 robots and spare parts into the hands of infantry by October 31, 2008. Orders to date now total $27 million under this $286 million Indefinite-Delivery/Indefinite-Quantity (IDIQ) contract.
iRobot also received a delivery order totaling $6.3 million under the PEO STRI contract for a combination of iRobot® PackBot® 510 with EOD kit robots, the iRobot PackBot with ICx Fido Explosives Detection Kits, as well as spare parts and equipment. Total orders under this $64 million IDIQ contract equal $52 million, and iRobot expects to complete delivery by the end of September 30, 2008.
“Each day, the military is using our robots to perform missions that leverage the benefits of robots in theater,” said Joe Dyer, president of iRobot Government and Industrial Robots. “Continued investment by the U.S. Army further validates these advantages, especially the ability to complete critical missions at safe standoff distances.”
The robots ordered under both contracts will help warfighters address critical mission needs, including reconnaissance, building clearance, chemical sensing, investigation of suspicious objects and identification of roadside bombs, as well as other IEDs.
iRobot has delivered more than 1,500 PackBot robots, which make a difference everyday by conducting dangerous missions that keep warfighters out of harm's way.

Tags: iRobot, robot

Metal Storm Demonstrates iRobot Warrior with Firestorm

Metal Storm, an armament company teaming with iRobot on creating robot terminators, announced it has been showing off an iRobot Warrior mounted with its "Firestorm" technology at this link.

On the list of potential uses for Firestorm technology is one that seems a bit odd: "Crowd Control"!

Huh? At closer look, however, Metal Storm says that in addition to high explosive charges (that would disperse a crowd pretty quick), the system can handle a "range of less lethal munitions." I would hope so!

It does kind of remind me though of the Droid Army descending on Naboo to pacify it. Lasers, anyone?

A photo gallery of the armed Warrior is available here.

Tags: iRobot

iRobot to hold investor/analyst day May 28

Here is the press release:
iRobot to Host Analyst and Investor Day at New Corporate Headquarters
Thursday May 22, 8:30 am ET

BEDFORD, Mass.--(BUSINESS WIRE)--iRobot Corp. (NASDAQ: IRBT - News) today announced that it will host an Analyst and Investor Day on Wednesday, May 28, 2008 in Bedford, MA, from 9 a.m. to 12 p.m. EDT. The day's agenda includes presentations by Colin Angle, iRobot’s chief executive officer, Helen Greiner, iRobot’s chairman, Geoff Clear senior vice president and chief financial officer and other senior executives. A live webcast of the event will be available on the Investor Relations section of the company's web site.

Note that the annual shareholders meeting is May 29.

Tags: iRobot

iRobot Conference Call Transcript/JP Morgan Conference Transcript

iRobot's first quarter conference call is available in this very handy transcript form by regular contributor Jonas at this link.

Also, here is the full transcript of the JPMorgan Q&A session with CEO Colin Angle.

The only thing new for me that came out of that was a little more color out of the disappearing of Sandra Lawrence as Home Robots chief. Colin said she was good at marketing, which helped with all the new robot rollouts, but now that they've got those behind them, they need an operations-oriented chief. (We've already noted not to expect any new robots this year, and the big challenge for iRobot will continue to be expanding distribution while coming up with the "Next Big Thing" a year or two hence on the robot side...)

Tags: iRobot

Turmoil at iRobot: Sandra Lawrence OUT as Home Robots President!

I certainly didn't see this coming!
Sandra Lawrence will no longer be the president of iRobot Home Robots, effective May 16th, after a little more than a year with the company. According to iRobot she is leaving "to pursue other interests," which is pablum. There has to be a MAJOR backstory here. Lawrence was touted as someone who could bring consumer sensibility (she had been a Gillette exec) to an engineering-heavy firm, and now she's gone after a year with no obvious or clear impact on the company, and not even a single sentence of praise from the company for anything that she did. ODD!!!

During her tenure, the company released the Roomba 500 Series which had been under development long before she arrived, ditto with the Looj, delayed the ConnectR robot, and launched a television advertising campaign that was criticized by some as offensive for portraying children as pigs and a husband as a donkey (others found it funny). Sales grew significantly, but it's not clear how much of that was Lawrence's doing or part of pieces that were already in the works. I guess we should have guessed something was up when she was not on the most recent conference call.

iRobot named Jon Elordi as the interim chief:

The company has named Jon Elordi as interim general manager of the Home Robots division, a position he will hold for the duration of the company’s search for a new president. During this time, Elordi will report to iRobot chief executive officer Colin Angle who will assist through the transition. The change will be effective as of May 16th. Mr. Elordi has worked at iRobot for three years as vice president of international sales and marketing. He is responsible for the strategic direction, partnerships, sales and marketing, and operations of the overseas business. Recently Elordi spearheaded the creation of a direct channel for international business, and established warehousing and protocols that enable iRobot to sell and ship directly to customers in the United Kingdom and Germany.
“Jon brings to the position a proven record of leadership and accomplishment in the consumer market space and a deep understanding of our business,” Angle said. “These management changes will not impact the financial expectations we discussed on May 1st 2008.”
Prior to joining iRobot Elordi was the senior vice president and general manager of international business for the Holmes Group. He has also held executive positions with Helen of Troy and Hallmark Greeting Cards. Elordi has a bachelor’s degree from Mercer University, and a master’s degree in Business from Florida Institute of Technology. Elordi served as a Lieutenant in the United Sates Navy between 1984 and 1990, where he was a surface warfare officer on board the USS William V. Pratt.

iRobot of course recently changed the helm at CFO, of course, replacing Geoff Clear, who professed a desire to work at another startup. (Clear said that change was long planned, but of course there is no such mention in this very puzzling announcement.)

Tags: iRobot

Next Bit of News Likely To Be Good

iRobot faces a retailing headwind in the United States this year (even though its consumer sales are UP!), which has crimped its results and stock price to bargain basement levels. But the next few big pieces of news are likely to be good, even very good, indeed.

1) "Large" xBot/PackBot with FasTac orders are expected shortly, according to iRobot CEO Colin Angle. These should generate another round of publicity for the company and perhaps more interest from the big papers and television networks, because of the new robot's status of the first robot for the basic infantry.

2) SUGV Go-No Go decision in September. I'm betting a lot that there will be a "GO" decision on the SUGV Early, which could lead to lots of new orders flowing into 2009 and dramatically boost the company's fortunes. Why?
* The Army is under tremendous pressure to show short-term results from FCS, given the billions and years that have been invested. The SUGV Early is one of the most tangible, easy-to-understand force multipliers to emerge from the program. It's also relatively cheap compared to robotic tanks, etc., and does not require the massive FCS software package to be deployed immediately. Every review from soldiers is that they want the SUGV and they want it NOW.

3) Europe! Foreign sales were up 5X in the first quarter year over year. That's 500% folks! Readers of this blog know that I've been harping on the need for more international sales for the better part of two years, and iRobot apparently is starting to figure out the game. (Not that anybody noticed; everybody was freaked out over LNT's looming bankruptcy filing and lowered profit and revenue expectations.) With the cheap dollar, and the advent of DIRECT sales in Europe, consumer weakness in the United States should be at least partially offset by galloping sales overseas, where there are vast, untapped markets of technologically savvy folks with smaller-than-U.S. homes and apartments who are perfect customers for Roomba, Scooba, et al. There is also plenty of room for dramatic improvements in Asia as well, which already has a pro-robot culture.

4) Higher average prices. The new Roomba 500 Series is commanding a premium of $50-$100 over the older series at retail, even though it probably doesn't cost that much more to produce. I'm convinced the older Roomba 400 Series is being kept around simply to crowd out bargain basement competitors from emerging at a lower price point. Eventually, I imagine that the Roomba 500s will move slightly lower in price at the lower end (i.e., the Roomba 510 has been spotted below $199 a few times as promotional items, though it lacks key features such as a home base and upgradeability for scheduling, etc.).

Tags: iRobot

The trouble with Auction Rate Securities

I have to admit, I had never heard of "Auction Rate Securities" until iRobot had to take a $2.1 million write-down to its balance sheet in its first-quarter report, with potentially an even larger haircut to come.

The New York Times has a good article on how the ARS market has completely failed in the past quarter, with what should be rock-solid investments backed by governments failing and being discounted as much as 25 percent.

iRobot has effectively $14-$16 million tied up in this mess, a significant portion of its overall liquidity. It's not THAT significant, given that the company has an untapped $50 million line of credit and zero debt, but troubling nonetheless.

Tags: iRobot, auction rate securities

StrategyPage posts on SUGV

Another fine article on iRobot's new SUGV, already shipping, at Strategy Page.
(Thx, Micro)

Here's a clip:

SUGV can also perform outpost and listening post work. These are two dangerous jobs the infantry are glad to hand off to a robot. Outposts are, as the name implies, one or two troops dug in a hundred meters or so from the main position, to give early warning of an enemy attack. A listening post is similar, but the friendly troops are often much deeper into enemy territory. The SUGV battery enables it to just sit in one place, listening and watching, for eight hour or more. After that, you send out another SUGV with a fresh battery, and have the other one come back for a recharge. No risk of troops getting shot at while doing the same things, and the troops really appreciate that. Other dangerous jobs for the SUGV are placing explosives by a door (to blow it open for the troops), or placing a smoke grenade where it will prevent the enemy from seeing the troops move.

The SUGV along with the xBot has the potential to drive exponential growth for iRobot's military robotics business. A key go/no-go decision is expected in September. I'm placing my bets on "go," of course. This one contract has the potential to be worth the entire value of iRobot's current stock price. Once you are the established vendor for a key piece of military hardware, you can end up with near-endless upgrade cycles, spare parts sales, scale advantages, etc.

Tags: iRobot, SUGV

IRBT's Brutal Day

IRBT took it on the chin today after lowering its earnings guidance, replacing its CFO, disclosing potentially impaired financial investments, taking a $1.8 million hit from Linens 'N Things, and disappointing analysts who had banked on iRobot lowballing its earnings for the year, vs. downgrading.

I think the sell-off is vastly overblown. The company is now selling for near parity with annual sales, and is getting closer and closer to being a takeover target at these prices, given the hundreds of millions of military contracts it has in hand and the substantial brand value it has generated on the consumer side. The new CFO is a red herring issue. And despite a consumer recession (which is not exactly news, folks), Roomba sales were still through the roof compared to a year ago. If it weren't for the hit from LNT, sales and profits for the full year would barely budge.

And, most importantly on the plus side, the company is FINALLY starting to realize the tremendous opportunities available for its products overseas, particularly with the plummeting dollar, growing sales 500% year over year even BEFORE opening up its new DIRECT sales channels in Europe next month in Great Britain and Germany, which will result in improved margins, lower prices and more sales. There is a vast untapped market of time-sapped professionals across the globe with dirty homes that need cleaning. I was particularly encouraged to hear on the conference call that Japan has now emerged as the top foreign market, beating out South Korea. Japan is a perfect market for iRobot, but for whatever reason the company had heretofore failed to make much of a dent there. There is no reason why the company can't make the overseas business into half of consumer robot sales within a couple of years. The company also reported new sales of its PackBot line in places like Australia, but my guess is that the U.S. military will continue to provide about 90 percent of its military funding. Of note, the company said it expects large orders for the xBot/PackBot FasTac robot shortly, although that is a lower margin product than its PackBot 510 robot. Demand for PackBots and production of PackBots continues to soar, although margins are a bit under pressure as cheaper variants are likely to get more traction. Analysts on the call seemed to be disappointed that there wasn't more talk of upside surprises from sales of the iRobot Warrior (one has been sold for mine clearing), or potentially the SUGV early, which faces a crucial September go/no-go decision from the Army. (iRobot Chairwoman Helen Greiner said the SUGV is going excellently so far, but a decision on sales would likely mean production largely in 2009). iRobot CEO Colin Angle seemed a bit flummoxed and surprised by the hostile tone of the analyst questions, and defensively said that the military side of the business is just where they want it to be.
At any rate, at least for another year, the iRobot story will still be one of future promise, and revenue growth, and not of profits here and now. The company has several problems that it must address, including the impairment of some of its financial investments that are not selling at face value (the company took a $2 million charge but anticipates recouping that in the future because the investments are backed by the government). The company also has to keep its eye on the consumer ball, and ride herd on shaky retailers like Linens 'N Things (Sharper Image, another iRobot customer, already went into bankruptcy, but that didn't cost iRobot directly because they had only received product on a cash basis). There are no guarantees that other iRobot retailers will not experience financial difficulty, although LNT and Sharper are probably in a class all their own. There is also at least a small chance that LNT will be able to avoid bankruptcy and start paying off its vendors like iRobot, but I wouldn't count on it. (Yet another reason for iRobot to open its own branded stores!)

Remember, at any rate, the name of the game is buy low and sell high. We're getting low.

Tags: iRobot, robot

iRobot Warns on Full Year Guidance

iRobot issued new financial guidance after the market close yesterday that reflected the financial problems of retailer Linens 'N Things, which apparently owes iRobot $1.8 million and is reported to be near a bankruptcy filing (I warned of this a few weeks back), as well as a weaker retailing environment. iRobot still expects to make money for the full year, but dropped its expectations to $5-7 million from $8-$10 million. That means another year without anything close to a meaningful P/E ratio, but the positive would seem to be that the company is still forecasting significant growth despite a near-recessionary environment.
The company has forecast new revenue guidance of $295 million to $305 million, down from $300 million to $310 million.

Here is the press release:

iRobot Reports First Quarter 2008 Results
Wednesday April 30, 4:30 pm ET
Revenue Up 45 Percent; Cautious About Retail Sector Second Half of 2008

BEDFORD, Mass.--(BUSINESS WIRE)--iRobot Corp. (NASDAQ:IRBT - News) today announced its financial results for the fiscal quarter ended March 29, 2008.

“In Q1, we delivered our 15th consecutive quarter of year-over-year revenue growth,” said Colin Angle, chief executive officer of iRobot. “We continue to see strong demand for our products in both divisions. Home Robot revenue was up 55 percent with significant increases in international home robot revenue from Q1 2007. Government & Industrial revenue grew 35 percent in the first quarter from the first quarter a year ago. That said, we faced some macro economic challenges during the quarter that impacted our bottom line and changed our outlook for the rest of 2008,” he added.

“Over the past two months, the overall retail environment has deteriorated. Due to the financial condition of one of our key customers, Linens ‘n Things, we did not recognize revenue for $1.8 million of shipments made to them in Q1. As compared to first quarter 2007, this accounted for a 2.3 percentage point decline in gross margin and a $0.05 decrease in earnings per share.

“The financial expectations we shared on February 20th assumed a unit growth rate that we thought was reasonable in a recession, and we have seen sell through performance that meets or exceeds that model. In the current U.S. economic climate, however, we anticipate that it will be difficult for our retail partners to buy as aggressively as they have in the past to fill their shelves with product in the back half of the year. Therefore, we are reiterating our expectations for first half 2008 financial performance and modifying our expectations for full year 2008 financial performance.”

Current expectations for first half and full year 2008 financial performance are as follows:

Current Guidance

First Half

Full Year
Revenue $ 109M - $112M $ 295M - $305M
Pre-Tax Net Income (Loss) ($17M - $19M) $ 5M - $7M
Earnings Per Share (Loss Per Share)
($0.42 - $0.45) $ 0.12 - $0.17


February 20, 2008 Guidance

Revenue $ 109M - $112M $ 300M - $310M
Pre-Tax Net Income (Loss) ($17M - $19M) $ 8M - $10M
Earnings Per Share (Loss Per Share)
($0.42 - $0.45) $ 0.18 - $0.23

Financial Highlights:

* Revenues for the first quarter of 2008 grew to $57.3 million, compared with $39.5 million in the first quarter of 2007.
* Gross profit for the first quarter of 2008 increased to $15.4 million (26.8 percent of sales), compared with $11.1 million (28.2 percent of sales) in the first quarter of 2007.
* Net loss in the first quarter of 2008 was $4.0 million compared with a net loss in the first quarter of 2007 of $5.5 million.

Business Highlights:

* iRobot announced the company reached a funding agreement with the U.S. Army’s Lead Systems Integrator (LSI) of Boeing and Science Applications International Corporation team on the previously determined direction of SUGV acceleration on January 17, 2008 under the Future Combat Systems (FCS) Program. This contract has grown from $23 million in 2003 to its current level of approximately $63 million.
* iRobot announced an expansion of the iRobot Verro™ Pool Cleaning Robot line. Three robots are available for the 2008 pool season, including two new models, the Verro 100 Pool Cleaning Robot at $399 and the Verro 500 Pool Cleaning Robot at $999.
* iRobot announced it received an award under the Defense Advanced Research Projects Agency's (DARPA) LANdroids program to develop a new portable communications relay robot that is small, inexpensive, intelligent and robust. The goal of the DARPA LANdroids program is to develop technologies to enable the warfighter operating in dense urban environments to rapidly deploy and maintain a vital communications infrastructure.

Tags: iRobot, robot