iRobot (IRBT) Q1 Earnings and Revenues Surpass Estimates

iRobot Corporation IRBT delivered better-than-expected results for the first quarter of 2020. Compared with the year-ago quarter, the results suffered from disruptions caused by the coronavirus outbreak.

The company reported a loss of 32 cents per share in the quarter, whereas the Zacks Consensus Estimate for loss per share was pegged at 55 cents. However, in the year-ago quarter, it reported earnings of 96 cents per share.

It is worth mentioning here that Section 301 tariff costs had adversely impacted earnings by 23 cents, higher than 12 cents in the year-ago quarter.

Revenue Details

In the quarter under review, the company’s revenues of $192.5 million exceeded its projection of $175-$185 million. Also, the metric surpassed the Zacks Consensus Estimate of $180 million by 7%.

However, the quarterly top line decreased 19% year over year as the pandemic adversely impacted sales activities and manufacturing supply chain.

Total product units of 721 shipped in the quarter decreased 17.7% year over year, while average selling prices fell 1.9%. Notably, revenues from vacuum products declined 23.1% year over year to $170 million. Units shipped were 625 thousand, down from 764 thousand in the year-ago quarter. Further, revenues from mopping products soared 35.3% to $23 million. Units shipped were 96 thousand, down from 112 thousand in the first quarter of 2019.

On a geographical basis, the company sourced 42.6% of revenues from domestic operations, the rest came from the international arena. Domestic revenues totaled $82 million, reflecting a 28.1% decrease from the year-ago quarter. International revenues declined 10.5% to $110.6 million. International operations suffered from a 14% fall in revenues in Japan and an 11% decline in EMEA.

Margin Profile

In the quarter under review, iRobot’s adjusted costs of revenues decreased 0.8% year over year to $113.8 million, representing 59.1% of revenues compared with 48.3% in the year-ago quarter. Adjusted gross profit in the quarter decreased 36% year over year to $78.8 million, while adjusted gross margin contracted 1090 basis points (bps) to 40.9%.

Research and development expenses were $36.8 million, up 4.2% year over year. This accounted for 19.1% of revenues compared with 14.8% in the year-ago quarter. Selling and marketing expenses decreased 5.8% to $36.6 million. As a percentage of revenues, it reflected 19% of the top line compared with 16.3% in the prior year. General and administrative expenses were $24.6 million, up 7.3% year over year. The figure mirrored 12.8% of the total revenue base compared with 9.6% in the year-earlier quarter.

In the quarter, the company recorded an adjusted operating loss of $14.4 million against operating income of $33.1 million in the year-ago quarter. Adjusted operating margin was (7.5%) versus 13.9% in the first quarter of 2020.

Tariff costs related to Section 301 amounted to $6.6 million in the quarter, increasing 87.9% from the year-ago quarter. The metric adversely impacted margins by 3.4% in the quarter.

Balance Sheet and Cash Flow

iRobot exited the first quarter with cash and cash equivalents of $248.8 million, increasing 3.9% from $239.4 million recorded at the end of the last reported quarter. Total long-term liabilities were $65.2 million, down sequentially from $66.2 million.

In the quarter, the company generated net cash of $40.7 million from its operating activities, reflecting a decline of 22.7% from the year-ago quarter. Capital used for purchasing property and equipment totaled $7.3 million compared with $6 million in the first quarter of 2019.

During the quarter, the company repurchased 0.7 million shares for $25 million consideration.

Outlook

In the present uncertain environment, iRobot is focused on handling costs (through workforce reduction, suspension of certain marketing actions for Terra and others), workers’ safety, fulfillment of customer demand and maintaining business strength.

It believes that revenue challenges will persist in the near term. Also, restructuring charges of $2 million will be recorded in the second quarter.

However, healthy demand for Roomba i7, Roomba s9 and Braava jet m6 products, healthy sales in retail stores, and spur in the e-commerce business will likely benefit. Also, it noted that the exclusion of Roomba products from tariffs imposed under section 301 — permission granted by the United States Trade Representative and effective Aug 7, 2020 — will help in effectively dealing with the prevailing macro headwinds.

iRobot Corporation Price, Consensus and EPS Surprise

 

iRobot Corporation Price, Consensus and EPS Surprise

iRobot Corporation price-consensus-eps-surprise-chart | iRobot Corporation Quote

Zacks Rank & Stocks to Consider

The company currently has a market capitalization of $1.6 billion and a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Industrial Products sector are Silgan Holdings Inc. SLGN, Superior Uniform Group, Inc. SGC and CECO Environmental Corp. CECE. While Silgan Holdings currently sports a Zacks Rank #1 (Strong Buy), both Superior Uniform and CECO Environmental carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 30 days, earnings estimates for Silgan Holdings improved for the current year, while have been unchanged for Superior Uniform and CECO Environmental. Further, earnings surprise for the last reported quarter was 16.33% for Silgan Holdings, 33.33% for Superior Uniform and 92.86% for CECO Environmental.

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Silgan Holdings Inc. (SLGN) : Free Stock Analysis Report
 
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