iRobot Corporation (NASDAQ:IRBT) announced stronger-than-expected fourth-quarter results on Wednesday after market close that showed accelerating growth of the robotic vacuum market. The company also detailed promising progress for its floor-mopping robots, as well as plans to launch new products in the coming quarters.  

However, iRobot also provided mixed guidance for the year ahead -- at least relative to the market's expectations -- leaving shares tumbling in after-hours trading. Let's take a closer look, then, at what iRobot accomplished over the past few months and what we can expect from the home robotics specialist as we look forward.

iRobot Roomba 980 rounding a corner on a hardwood floor

Image source: iRobot.

iRobot results: The raw numbers


Q4 2017

Q4 2016

Year-Over-Year Growth


$326.9 million

$212.5 million


Net income

$4.6 million

$13.7 million


Earnings per share




Data source: iRobot Corporation. 

What happened with iRobot this quarter?

  • GAAP earnings this quarter included a negative $0.41-per-share impact from recent U.S. tax reform law, as well as a $0.03-per-share tax benefit relating to new accounting standards for stock-based compensation. Adjusted for those items, iRobot's earnings were roughly in line with expectations.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 49.4% year over year to $42.7 million.
  • Consumer revenue grew 47% year over year in the U.S., 34% in Japan, and more than doubled in the EMEA region.
  • iRobot launched its first-ever Braava national television program in the U.S., helping domestic sales of the mopping robot family climb 65% for the full year.
  • In December, it announced a patent dispute agreement with Black & Decker under which Black & Decker agreed to exit the robotic vacuum market "for a period of time" after selling through its remaining inventory. This marked iRobot's second such win in its recent effort to enforce its patent portfolio.
  • Thanks to the recent acquisitions of major distributors in Japan and Europe, iRobot now directly controls more than 75% of its global revenue.

What management had to say

iRobot chairman and CEO Colin Angle stated:

The opportunity ahead of us is tremendous. Global household penetration of robotic vacuum cleaners remains extremely low, in the single digits. Strong economic conditions worldwide are fueling overall global growth and positive consumer sentiment. We have demonstrated that in regions where we have run marketing programs to educate prospective customers about Roomba, we have increased our market share, and our recent distributor acquisitions enable us to extend our strategic marketing programs to Japan and Europe.

Angle elaborated that iRobot believes it can drive incremental growth with its Braava line through campaigns targeted at millions of current Roomba customers -- though that's not the only reason it's excited for the future. During the subsequent conference call, he further teased that iRobot plans to introduce "several new products" in the second half of 2018.

"As with all our new products," Angle added, "I will not provide any additional details about the products or the timing of their launch other than to say that we expect 2018 revenue contribution of roughly 20% to 25%, and further strengthening our [robotic vacuum cleaner] leadership."

Looking forward

For full fiscal year 2018, iRobot expects revenue to increase by roughly 19% to 22%, or to a range of $1.05 to $1.08 billion. It also forecasts 2018 operating income of $86 million to $96 million, with full-year earnings per share of $2.10 to $2.35.

By comparison -- and though we don't usually pay close attention to Wall Street's near-term demands -- average estimates predicted lower 2018 revenue of $1.02 billion but higher earnings of $2.70 per share.

Finally, iRobot offered a glimpse at its longer-term financial targets, calling for revenue to increase at an annual rate of roughly 20% between 2018 and 2020. Trending toward the bottom line, iRobot is aiming for gross margin to be in the 50% to 51% range, with operating margin increasing to 10%.

In the end, there's no denying that this was a strong quarter from iRobot. And the company not only followed with an encouraging top-line outlook that indicates iRobot should be able to sustain healthy growth for the next several years, but also teased of new products coming down the pipe that should deliver strong incremental growth and solidify its industry leadership.

But iRobot's underwhelming earnings outlook also shows that this growth may come at a cost, flaring persistent concerns that worthy competitors will continue seeking to usurp that leadership position.

Of course, iRobot has made a habit of underpromising and overdelivering in each of its past several quarters. So there's a chance that this guidance could be on the conservative side. But with shares up more than 30% over the past year leading up to this report, it's no surprise to see iRobot stock pulling back right now. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.