(UDPATED) iRobot Beats 4th Quarter Earnings Estimates, Announces Aggressive 2010 Revenue Target

(Updated with link to conference call transcript and analysis). iRobot Corp. announced a stellar 4th Quarter with more than $100 million in revenue and 20 cents a share in earnings, enough to propel the company to a 13 cents a share earnings year -- a good deal better than the barely break even that the company had expected about six months ago in the teeth of the recession.

Impressively, the company ended the year with a $42 million backlog in military orders, up from $8 million last year, which should propel growth this year. The company set a very aggressive revenue target of $345-$360 million, essentially up 20 percent or so. That should be achievable with a modest consumer rebound, additional international expansion and the beginning of the ramp up for the SUGV military robots. The company is expecting 20-25 cents earnings, which is a tad lighter than analysts were projecting, but iRobot has historically been quite conservative with its targets. That still sets up a P/E of near 100, so the real value in iRobot is in future growth or in a possible sale/breakup of the company. (I'd note that EBITDA is significantly higher, but leaves out what is a substantial drag from stock-based compensation).

At any rate, the company's ability to post a better profit number in 2009 versus 2008 despite revenue falling slightly and essentially no new products shows how successful the company has been at cost control, and now appears poised to accelerate with the economy starting to rebound and military orders hitting new highs. One concern is that gross margin dipped a bit in the fourth quarter.

During the conference call, CEO Colin Angle dismissed competition in the home robots business, noting that Samsung and LG have yet to bring their robotic vacuums to the United States, and their robots cost significantly more than Roomba. He did not specifically name the Neato Robotics XV-11 laser-guided vac that appears to be their fiercest competition to date in the U.S., but dismissed others as "startups" and said he is confident that Roomba's advantages and continuous upgrades will continue growth. Angle also said that there is a trend toward buying more expensive Roomba models which is a good sign as well. The company is planning to expand this year into South America and eastern Europe, but is not incorporating much from that into their model. The company also noted that they already have orders in hand for the SUGV but have not announced them because the government asked them not to do so. This is a very good sign that the SUGV orders they are counting on to drive second half revenues will materialize. Like last year, it appears that the SUGV will be the absolute key driver for iRobot for the next couple of years (they project sales of 10,000 to 20,000 long-term with 8,000 from the Army alone) alongside incremental upgrades to Roomba, marketing and the like. There was no mention I heard of the company's new healthcare business, which I imagine we probably will see in stealth mode for the next year or two while they try to bring a robotic iRobot Medic to market.

Conference call transcript is available at Seeking Alpha.

Earnings announcement here.

I'll post details from the conference call later.

Tags: iRobot, robot

Budget Request Includes $3.2 billion for Brigade Combat Team modernization

Funding for iRobot's SUGV product, the cornerstone of growth for the military side of the business, is somewhere within a $3.2 billion budget request for the Army's Brigade Combat Team modernization program. The budget last year for the program, a descendant of the Future Combat Systems project, was $2.6 billion, so that appears to be a very healthy increase. While the program overall may be subject to trimming by Congress, I personally doubt the SUGV is in trouble. It is the one piece of equipment in that whole program that ALWAYS gets mentioned as a proven piece of technology that is already saving lives right now, and everything I've seen suggests soldiers want them in the field ASAP.

It's not clear yet how much of this will go to SUGV, which has been approved for low rate initial production. The bulk of that spending is still going into R&D for the overall project, which includes complex software that intends to connect the various new technologies being employed.

I haven't seen any detail yet besides the $3.2 billion figure in any story I've read. Other pieces of the defense budget that can affect iRobot include anti-IED portions of the budget, possibly the upcoming Afghanistan war supplemental and to a lesser extent DARPA. I'm sure this all will be discussed at the Feb. 18 earnings conference call.

Tags: iRobot, robot