iRobot Corporation (NASDAQ:IRBT) kept the earnings streak alive in the first quarter of 2019, wherein earnings beat estimates by 41.2%. However, sales lagged estimates by 5.8%.
The company’s adjusted earnings were 96 cents per share in the reported quarter, surpassing the Zacks Consensus Estimate of 68 cents. However, the quarterly results decreased 7.7% over the year-ago quarter’s figure of $1.04 due to higher costs of revenues and operating expenses. However, tax benefits recorded in the quarter were a relief.
Solid Product Demand Drives Revenues
In the quarter under review, the company’s net sales were $237.7 million, increasing 9.5% from the year-ago quarter’s figure. The quarterly results benefitted from solid product demand, especially of Roomba i7/i7+. Total product units shipped in the quarter increased 7.5% year over year while average selling prices grew 3.9%.
However, the top line lagged the Zacks Consensus Estimate of $252.3 million.
As noted, the company’s revenues from vacuum products grew 10% year over year to $221 million. Units shipped were 764 thousand, up from 712 thousand in the year-ago quarter. Further, revenues from mopping products increased 6.3% to $17 million. Units shipped were 112 thousand, up from 103 thousand in the first quarter of 2018.
On a geographical basis, the company sourced roughly 48% of revenues from domestic operations, the rest came from the international arena. Domestic sales totaled $114 million, reflecting an increase of 6.7% year over year and International sales grew 12.1% to $123.6 million. International operations benefited from the launch of Roomba i7/i7+ in China, Japan and EMEA.
Margins Fall Year Over Year
In the quarter under review, iRobot’s costs of revenues increased 16.6% year over year to $118.1 million. It represented 49.7% of net revenues compared with 46.7% in the year-ago quarter. Adjusted gross profit in the quarter increased 1.7% year over year to $123 million while adjusted gross margin decreased 395 basis points (bps) to 51.8%.
Research and development expenses were $35.3 million, up 7.1% year over year. It represented 14.8% of net sales versus 15.2% in the year-ago quarter. Selling and marketing expenses of $38.8 million reflect a year-over-year increase of 24%. As a percentage of net sales, it represented 16.3% versus 14.4% in the year-ago quarter. General and administrative expenses were $22.9 million, down 11.3% year over year. It represented 9.6% of net sales versus 11.9% in the year-ago quarter.
Adjusted operating income in the quarter under review decreased 14.8% year over year to $33.1 million. Adjusted operating margin, however, declined 400 bps to 13.9% in the reported quarter.
Balance Sheet and Cash Flow
Exiting the first quarter, iRobot had cash and cash equivalents of $173.1 million, roughly 32.8% above $130.4 million recorded at the end of the last reported quarter. Total long-term liabilities were $71.7 million, significantly above $17.9 million in the previous quarter.
In the first quarter, the company generated net cash of $52.7 million from operating activities, increasing 76.9% from the year-ago period’s level. Capital used for purchasing property and equipment totaled $6 million versus $8.7 million in the year-ago quarter.
Outlook
In the quarters ahead, iRobot anticipates gaining from diversified product portfolio, innovation investments and growing global presence. Also, it believes that efforts to expand manufacturing capabilities outside China will be boon.
For 2019, the company maintained revenues projection at $1.28-$1.31 billion, reflecting growth of 17-20% from the previous year’s reported figure. Also, operating income is pegged at $108-$118 million. Earnings projection has been increased from $3.00-$3.25 to $3.15-$3.40, accounting for a 15-cents tax benefit recorded in the first quarter.
In addition, the company anticipates that sales growth will be in high teens in the second quarter, mainly driven by solid demand for Roomba i7/i7+ and likely benefits from the two new product launches in the second quarter.
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