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iRobot Idea Proposal (IRBT)

iRobot Idea Proposal (IRBT)
 

Will iRobot’s successful run continue?

Report Available: June 7, 2017

 

Blueshift’s initial research showed IRBT on a tear with a great first quarter in the U.S. and internationally. The company believes it is on the verge of explosive growth, pointing to the success of its Roomba vacuum cleaner, the introduction of its Braava wet floor care products, and the increasing focus on connectivity within its devices. But IRBT also faces growing competition, including from Samsung which had a nice showing at CES while introducing its new robot vacuum cleaner which also boasts connectivity and voice controls through AMZN’s Alexa.

 

Observations

  1. IRBT’s Q1 beat earnings and revenue expectations, with consumer revenue up 32% year to year. U.S. revenue grew 34% while international revenue climbed 29%. U.S. revenue is expected to grow 18% to 20% for the year, China and Japan are projected to each grow 30%, with EMEA climbing in the mid-teens. Gross margin increased to 52% while operating expenses dropped to 39% of revenue, though it is set to increase to 50% of revenue in Q2 to promote Mothers’ Day and Fathers’ Day, per usual. The company also completed the purchase of its Japanese distributor. As a result of its strong first quarter, IRBT increased its full year forecast.
  2. IRBT believes the robotic vacuum cleaner segment is at an inflection point, at the explosion stage on the maturity curve. The entry level Roomba was the highest selling vacuum cleaner in the U.S. in 2016 based on total retail dollars spent. The premium Roomba 900 was particularly popular and led to the high revenue growth in Q1.
  3. Braava saw revenue double in the quarter compared to the prior year. Braava now makes up 10% of company revenue with high expectations for continued growth. It also introduces a consumables line with the Braava washable wet mopping pads. The company is selling 2.5 boxes of pads per Braava robot. The Braava does particularly well in China and Japan where hard floors are more prevalent.
  4. Instead of introducing a new product category this year, IRBT is focused on connectivity in its existing products. It has updated its app to show users a coverage map of the cleaned area from its robots. The company said 200,000 connected Roomba 900 users were uploading 75,000 maps per day. IRBT is bringing connectivity to lower-priced vacuums in Q2. Consumers will also be able to activate their Roombas through AMZN’s Alexa devices.
  5. Given its success, IRBT faces increasing competition, including from the likes of Dyson, Samsung and Neato. Roomba takes three of the top four spots on a recent customer review list, with Dyson at 6, Neato at 7 and 10, and Samsung at 9. Roomba took on Dyson head-to-head and came out victorious as the Dyson faulted 12 times and did not clean the designated area as well, while the Roomba did not fault once and had better coverage and superior performance. Samsung introduced its latest robot vacuum at CES where it won an innovation award. This model improves its cleaning ability compared to earlier versions and can be controlled by an app or respond to voice commands through AMZN’s Alexa. With this rise in competition, IRBT has sued Hoover, Black & Decker, and others over patent infringements.

 

How sustainable is IRBT’s stellar sales performance? How much of an effect will rising competition have on IRBT? Does IRBT simply have a better mousetrap or is it just better at branding its product? How important is the first mover advantage for IRBT? What is the uptake on the Braava mops? How is the consumables business doing for the Braava? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Supply chain, Retail store personnel, Competitors, and Industry specialists.

 

Companies: iRobot Corp. (IRBT)

 

Research Begins: May 22, 2017