Roomba Maker Needs to Suck Up More Chips
iRobot’s shares slide as supply constraints hurt growth and margins, but ambitious long-term targets remain
By Dan Gallagher
Wall Street Journal
Feb. 11, 2022 7:00 am ET
iRobot’s exposure to some of the most constrained chip categories caused its latest results to come up short, but the Roomba maker is making a big bet that conditions will improve. PHOTO: HANDOUT/REUTERS
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Among the inequities of the great chip shortage is that even companies in similar industries aren’t being affected to the same extent.
Within personal and home electronics, the latest earnings season has seen relatively strong reports from companies including Apple, Sonos and GoPro. All three managed to exceed Wall Street’s revenue expectations for the December quarter, and both Apple and Sonos noted that sales would have been even higher if not for shortages of necessary components. The shares of all three got a lift following their respective reports; Sonos shares rose 4% Thursday following its fiscal first-quarter results.
iRobot IRBT 3.22% wasn’t so fortunate. The maker of the Roomba line of automated vacuum cleaners said late Wednesday that fourth-quarter revenue fell 16% from a year earlier to $455.4 million. That was 3% below analysts’ forecasts for the quarter and the first time in a decade that the company’s revenue has fallen during the crucial holiday period. The company noted that more than $35 million worth of orders went unfulfilled due to shortages and shipping delays.
It projected full-year revenue for 2022 that was slightly ahead of forecasts, but that projection is heavily predicated on sales improving strongly later in the year. The company said it expects 65% of full-year revenue to come in the second half; the past five years have averaged 60% in that period.
The report took iRobot’s share price down 14% Thursday, closing out a rough year for the company during which sales rose only 9% after averaging 22% annual growth over the previous four years. Shortages and logistics weighed elsewhere too; iRobot’s gross margins for the year came in at 35%, dipping below the 45% line for the first time since 2012. By contrast, Sonos’s gross margins for calendar 2021 came in at 47.7%—2 percentage points higher than the previous year and on the high side of the company’s historical levels, according to data from S&P Global Market Intelligence.
Why the difference? One factor is that not all chips are equally hard to come by. The mechanical nature of even the most high-tech vacuum cleaners exposes iRobot to some of the same supply-chain issues facing industries such as autos. On his company’s call Thursday morning, iRobot Chief Executive Colin Angle specifically called out the same shortage of microcontrollers—a relatively low-cost chip typically made using older equipment—that has bedeviled car makers. Microcontrollers are the most constrained chip segment, with lead times in January nearly 33% longer than the chip industry’s average, according to Christopher Rolland of Susquehanna.
iRobot expects the situation to improve enough to deliver about 15% revenue growth this year—a 6-percentage-point acceleration from 2021. The company is also standing by the long-term target it gave in its December analyst meeting of hitting about $2.5 billion in annual revenue in 2024, which reflects a compounded annual growth rate of 16% to 18% over the next three years compared with an average of 13% over the past three. It is an ambitious goal, especially considering microcontrollers are expected to remain supply constrained through at least the rest of this year. iRobot will need to hoover up every chip it can find.
Write to Dan Gallagher at dan.gallagher@wsj.com
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Appeared in the February 12, 2022, print edition as 'Roomba’s Supply Chain Has Hit the Wall.'
Roomba Maker Needs to Suck Up More Chips - WSJ |
