iRobot, the leader in home robotics, reported impressive Mar-18 results, reiterated full-year revenue guidance, and modestly increased full-year EPS expectations. Heading into the quarter, we were optimistic demand was tracking ahead of expectations due to strong pricing trends throughout the quarter (see note here), but we were encouraged to hear Management’s commentary around continued strength despite investor fears of increased competition. iRobot reported Mar-18 quarter revenues of $217M, which is up 29% year/year and exceeded Street expectations by ~$3M. Demand in the quarter was driven by Roomba, with units and revenues increasing, 22% and 33% respectively. Following the strong quarter, we believe the transition to home automation is moving quickly, and see iRobot as a key player for years to come.
Home automation becoming mainstream theme. Largely due to increased consumer awareness, the domestic robot market has been one of the fastest growing robotic categories over the last several years and iRobot has taken full advantage. This marks the 5th quarter iRobot experienced 20%+ year/year revenue growth, and the company is on pace to see 20%+ growth for the second consecutive year. iRobot has invested a lot in sales and marketing initiatives, which has driven consumer awareness for the whole industry and benefited the company’s P&L materially. With only ~10% U.S. households and ~2 – 3% international homes owning a robotic vacuum cleaner, the domestic robot market and iRobot has more room to run.
iRobot’s premium robot niche tough to beat. Although a portion of rising ASPs was due to the company’s recent acquisition, we also believe it has to do with strong demand for iRobot’s higher-end Roomba products. The 900 Roomba series has been one of the company’s best selling products since being released, and the company has established itself as the clear leader in this category. While increased competition from traditional brands and new Chinese companies remains a risk and key topic, most of these companies are releasing lower-end products and have yet to threaten iRobot’s higher-end dominance. Given iRobot’s 20+ years of robotic expertise, and strong brand recognition we see it as challenging for these new brands to bring a superior high-end product to market. However, if a company does release a competitive high-end product, we view this market as growing fast enough where more than one company can flourish.
What to think of Amazon? Amazon was the latest to make some noise in the consumer robotic space when multiple reports had indicated the company is working on bringing a home robot to market. However, note this report was not confirmed by Amazon and many questions are still to be answered if they will be a direct competitor to iRobot. Until more information is released, we do not see it has a real threat today. However, assuming they want to release a vacuum or wet floor product, most will view this announcement as a negative. That said, iRobot finds it as a positive because it brings further validation and market awareness to the space. Also it should not be assumed Amazon will come in and dominate this market. Because, as multiple Fortune 500 companies have already found, making a fully functional robot is much harder than it seems.
Model Revisions. Given the company reiterated full-year revenue and operating income guidance, we have left our model mostly unchanged. See model here and here.
Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.