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Why Is iRobot (IRBT) Down 8.5% Since Last Earnings Report?

It has been about a month since the last earnings report for iRobot (IRBT). Shares have lost about 8.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is iRobot due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

iRobot Incurs Narrower-Than-Expected Net Loss in Q1

iRobot reported first-quarter 2024 adjusted loss of $1.53 per share, narrower than the Zacks Consensus Estimate of a loss of $2.03. The reported figure compares favorably with the year-ago quarter’s net loss of $1.67.

Revenue Details

iRobot generated revenues of $150 million in the reported quarter, beating the Zacks Consensus Estimate of $139 million. On a year-over-year basis, revenues decreased 6.4% due to lower sales across all product categories.

Sales derived from premium and mid-tier robots accounted for 81% of IRBT’s total robot revenues, lower than 88% in the year-ago quarter.

Total product units of 456 thousand were shipped in the quarter under review, reflecting a year-over-year increase of 4.6%, while average selling prices decreased 13.9%.

For solo and other products, revenues of $94 million reflected a decline of 30.4% year over year. Units shipped were 267 thousand, down 28.4% year over year.

Revenues from 2-in-1 products increased 124% year over year to $56 million. Units shipped were 189 thousand, up from 63 thousand recorded in the year-ago quarter.

On a regional basis, iRobot sourced 45.9% of revenues from domestic operations and the rest came from the international arena. Domestic revenues totaled $68.9 million, reflecting a 4.3% fall on a year-over-year basis. International revenues decreased 8.2% year over year to $81.1 million.

Margin Profile

Cost of revenues decreased 7.8% year over year to $113.9 million. Adjusted gross profit was $36.9 million, down 2.6% year over year, while the adjusted gross margin expanded 90 basis points to 24.6%.

Research and development expenses were $33.9 million, down 17.9% year over year. Selling and marketing expenses plunged 30.1% on a year-over-year basis to $29.7 million.

IRBT recorded adjusted operating loss of $40 million compared with $62.3 million in the year-ago period. The adjusted operating margin was (26.6%) compared with (38.9%) in the year-ago quarter.

Balance Sheet and Cash Flow

While exiting first-quarter 2024, iRobot had cash and cash equivalents of $118.4 million compared with $185.1 million recorded at the end of fourth-quarter 2023. Total long-term liabilities were $214.7 million compared with $250.1 million at fourth-quarter 2023-end.

In the first three months of 2024, it generated net cash of $1.44 billion form operating activities against net cash of $94.5 million used in the prior-year period. Capital used for purchasing property and equipment plunged 91.9% on a year-over-year basis to $118 million.

Second-Quarter & Full-Year 2024 Outlook

For second-quarter 2024, the company expects net sales in the range of $167-$172 million. The figure indicates a decrease from $237 million reported in the year-ago quarter.

Adjusted gross margin is estimated in the band of 24-25%. Management projects adjusted loss per share in the band of $1.74-$1.81. The metric was higher than the adjusted loss of $1.42 in the year-earlier quarter.

For 2024, management forecasts net sales in the range of $815-$860 million. The figure implies a fall from $891 million reported in 2023.

Adjusted gross margin is envisioned in the band of 31-33%. Management projects adjusted loss per share in the band of $2.71–$3.13. The metric was lower than the adjusted loss of $7.73 in 2023.

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How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, iRobot has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise iRobot has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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