IRobot Raises 2021 Guidance, but Warns of COVID-19 Impact Persisting

IRobot raised 2021 guidance from $1.67 billion to $1.71 billion Tuesday, but CEO Colin Angle cautioned on a Q1 earnings call that it's "still early in the year." The COVID-19 pandemic “continues to weigh heavily on the macroeconomic landscape and limit our visibility," he said.

IRobot is challenged by the semiconductor shortage, and some component suppliers recently notified iRobot of “potential volume limitations,” Angle said. The company is “grappling with rising costs for raw materials,” including resins that are up 50% in some situations, said Angle in Q&A; costs are higher in freight and transportation, too. Elevated costs are expected to extend through the next several months, reverting “over time” to “more normalized levels as market forces adjust.” The company recalibrated spending to meet financial targets, he said.

The company has long-term relationships with its contract manufacturers with strong partnerships to work through shortages, said Angle. The current market is “unusual” in that component suppliers de-committed components the company had expected, forcing it to do spot buys on the open market, which drove costs higher. The financial impact is baked into guidance, he said.

IRobot has been able to secure longer term commitments and take a slightly higher inventory position on some affected components, which will lead to a normalization of cost going forward. Those commitments gave the company the confidence to raise 2021 guidance and leave expectations for 2022 operating income “unchanged,” he said.

Uncertainty about availability of incremental product “hampers our ability to lean even further forward,” said Angle. “In a constrained or an unfavorable supply situation, companies are less able to meet growth demand because of lead times, componentry lead times, which have been substantially growing over the past few months,” he said. “Assuming that we can find the supply, we believe the demand is there.”

Commenting on the “huge shift” to e-commerce during the pandemic, Angle said trends continued in Q1, with 56% of revenue coming from digital sales vs. 40% in 2019. He believes brick-and-mortar sales could “come back a bit” but not to 2019 levels when the split was 60/40. The company is “pretty agnostic as to whether we’re selling online or retail,” he said, noting the improved gross margins from the direct-to-consumer business.

During Q1, iRobot upgraded its Genius Home Intelligence platform, including adding “estimated clean time” and “clean while I am away” features that use a smartphone’s location services to tell the robot to start cleaning once users leave the house. The Genius platform is helping drive sales of mid-tier and premium robots, said the company.

Q1 revenue grew 58% to $303.3 million on strong category momentum, a fast-growing D2C channel, “excellent retailer relationships” and healthy inventory positions, said Angle. D2C sales grew 146% and were 12% of revenue. The stock closed 7.5% lower Tuesday at $96.17.