Is iRobot making Money?

Those who fear the robots are coming for our jobs will wonder if the iRobot Corporation (NASDAQ: IRBT) makes money?

iRobot manufactures the Roomba Robot Vacuums and Braava Robot Mops that have become social media stars. A group of researchers from MIT’s Artificial Intelligence Lab started iRobot in 1990 to develop and market consumer robots.

iRobot’s cleaning automatons have become iconic products. Other iRobot products include the Mirra swimming pool cleaning robot discontinued in 2014, the Create hobby robot, and the Terra, robot lawn mower.

In addition to manufacturing cleaning robots, iRobot manufactures bomb disposal robots for police and the military. iRobot also makes heavy duty robots for use in emergency situations such has the Fukushima Daiichi nuclear reactors in Japan. However, iRobot left the military robotics business in 2016.

Is iRobot a Good Stock?

Mr. Market likes iRobot (NASDAQ: IRBT). In 2020, its share price grew from $48.63 on 2 January 2020 to $87.98 on 8 July 2020. However, iRobot’s shares fell to $72.44 on 27 July 2020 and rose to $73.60 on 30 July 2020.

iRobot claims to have sold over 30 million home robots worldwide.  Moreover Barron’s claims iRobots sales are exploding because of coronavirus. To explain, homeowners who are afraid of catching coronavirus from cleaners are ordering Roombas and Braavas.

In general, people want their homes clean to prevent the spread of COVID-19. However, many of those people are too lazy or too busy to clean so they order an iRobot product.

Unfortunately, I cannot find hard sales numbers for iRobot. On the other hand, Statista estimates iRobot had 82% of the US market for robot vacuums in 2019. Statista also estimates iRobot controlled 52% of the global market for cleaning robots in 2018.

Thus, I cannot consider iRobot a good stock because sales data is scarce. Moreover, iRobot pays no dividend which makes it a poor choice for ordinary people.

Does iRobot Make Money?

iRobot’s revenues have grown during the coronavirus pandemic. For instance, iRobot reported quarterly revenues of $192.53 million on 31 March 2020 that grew to $279.88 million on 30 June 2020.

Additionally, iRobot’s quarterly gross profit rose from $77.95 million on 31 March 2020 to $178.01 million on 30 June 2020. Moreover, iRobot reported a quarterly operating loss of -$20.23 million on 31 March 2020 that grew to a $70.28 million quarterly operating income of $70.28 million on 30 June 2020.

Impressively, iRobot’s revenues grew at a rate of 7.58% in the quarter ending on 30 June 2020. iRobot’s revenue growth rate fell by -18.99% in the quarter ending on 31 March 2020.

Finally, iRobot reported an -$18.14 million quarterly common net loss on 31 March 2020. That loss rose to $58.62 million on 30 September 2020.

How Much Cash is iRobot Generating?

Conversely, iRobot (NASDAQ: IRBT) is burning cash with its operations. For instance, iRobot reported a negative quarterly operating cash flow of -$12.58 million on 30 June 2020.

That operating cash flow fell from $40.73 million on 31 March 2020. Furthermore, iRobot reported an ending cash flow of $248.77 million on 31 March 2020. That ending cash flow fell to -$18.03 million on 30 June 2020.

Consequently, iRobot had $242.29 million in cash and short-term investments on 30 June 2020. iRobot’s cash and short-term investments fell from $263.53 million on 31 March 2020. However, iRobot had $156.78 million in cash and short-term investments on 30 June 2019.

iRobot’s business can generate cash but I’m not sure it cannot generate enough cash to support its operations. Hence, I’m not sure iRobot could survive as a standalone company.

What Value Does iRobot Have?

iRobot has some value in the form of $920.77 million in total assets on 30 June 2020. iRobot’s total assets grew from $820.03 million on 31 March 2020.

Plus iRobot had a $2.02 billion market capitalization on 29 July 2020. Thus, Mr. Market thinks iRobot has more value than I think it has.

Personally, I think iRobot is not making enough money from robot cleaners to be a good stock. However, there is one potential product at iRobot that I think could generate enormous amounts of income.

The Potential Value at iRobot

That product is the Root robot for coding. To explain Root is a coding robot. Currently, iRobot is marketing Root as a toy or a teaching aid.

However, if Root works iRobot could sell it to individuals or companies that need code written. For example, an inventor could use Root to write code for her new gadget. Plus companies could save money by replacing human software engineers and coders with Root.

I cannot tell if Root is smart or powerful enough to write code commercially. However, if it is Root could make money for iRobot. In addition, Root could be the first in a series of iRobot digital robots.

I cannot tell if Root is smart or powerful enough to write code commercially. However, if it is, Root could make money for iRobot. In addition, Root could be the first in a series of iRobot digital robots.

Beyond Root, iRobot could adapt the technology they use on the Roomba and Braava robots for other purposes. For instance, iRobot could develop a floor-waxing robot, or a commercial cleaning robot.

Other devices include stocking robots for use in retail stores. Notably, Amazon’s (NASDAQ: AMZN) Kiva robots look similar to Roomba. To explain, the Kiva is a robot platform that moves shelves full of merchandise around Amazon fulfillment centers. Pitchbook claims Amazon paid $775 million for Kiva’s manufacturer Kiva Systems (now Amazon Robotics).

iRobot could build its own version of Kiva based on the Roomba platform. Another huge market could be lawn mowing robots. For example, iRobot could build a larger commercial version of the Terra.

A Strange Opportunity for iRobot

Oddly, anti-immigration sentiment and closed borders could help borders. To explain, coronavirus closures and anti-immigrant sentiments could keep the huge numbers of illegal immigrants who clean homes and commercial buildings out of America.

The supply of those immigrants could dwindle soon because the US has closed its Mexican borders to limit the spread of coronavirus. Moreover, they have closed the US-Canada border for the same reason.

Americans and Canadians will still want those homes and buildings clean but they don’t want to clean themselves. Hence, more of those Americans will order iRobot products.

A Better Robot Stock than iRobot

I think there is a better robotics stock than iRobot (NASDAQ: IRBT) out there. That stock is NVIDIA (NASDAQ: NVDA). NVIDIA manufactures the chips and processors robots run on.

In contrast to iRobot NVIDA had $16.354 billion in cash and short-term investments on 30 April 2020. That cash grew from $10.897 billion on 31 January 2020. Moreover, NVIDIA reported a quarterly gross profit of $2.004 billion and a quarterly ending cash flow of $15.494 billion on 30 April 2020.

NVIDIA paid a 16₵ dividend on 4 June 2020.  Finally, NVIDIA had a $257.45 billion market capitalization on 29 July 2020. Mr. Market paid $424.56 for NVIDIA shares on 30 July 2020.

In the final analysis, I do not think iRobot is the stock to make money from robots. However, NVIDIA could be that stock.