Shares of iRobot (NASDAQ:IRBT) were pummeled after the company released its second-quarter 2014 results last month. The robot maker fell short of revenue estimates, and missed earnings estimates by a hair if we exclude the benefit of a one-time tax valuation allowance. 

The market usually reacts to the headline numbers in earnings releases and, while these are important, they never tell the entire story. Much valuable color is shared during conference calls, which many investors don't tune into. So, we're going to cover five key things from iRobot's call that you should know.

iRobot's flagship product: the Roomba vacuuming bot. Source: iRobot.

Operating cash flow goal is still on track for 2014

CFO Alison Dean's response to an analyst's question:

Our view for the year hasn't changed, again with the skewing of our business over the year, as you said, we are in a [negative cash flow] position in the first half of the year, but we fully expect to make that up by the second half of the year and then achieve that high single-digit percent of revenue.

It's naturally good news that iRobot's negative operating cash flow through the first half of 2014 doesn't mean that the company is off track to hit its cash flow target of a high single-digit percentage of revenue. iRobot has long been conservative in all aspects of its guidance. So, it seems likely that Dean would hedge a bit on her response, and/or the company might even have notched down its operating cash flow expectation if it weren't quite positive that it would meet its 2014 target.

Of course, the proof will be in the pudding -- or the cash flow statement. We'll have to wait until early next year to see if the company's operating cash flow turns from negative to positive for the year and hits the target.

As to specifics, iRobot reported operating income of $17.7 million in the first half of 2014, whereas it had a negative operating cash flow of $7.8 million. In others words, its "books" showed an operating profit, whereas it lost money from a cash standpoint. A major culprit – though not the only one – was accrued compensation.

Ideally, we'd like the cash flow generated from operations to be greater than reported operating income. At the least, we'd like the two numbers to be in the same general ballpark. However, two quarters is a relatively short period, and cash flow will vary for numerous good reasons. That said, this divergence between operating income and cash generated from operations should be monitored going forward, as it could be cause for concern if it persists.

Company is confident the defense business is bottoming out

PacBot. Source: iRobot.

CEO Colin Angle replied, "[a]bsolutely, absolutely ... and we're building 2015 backlog," to an analyst who asked, "Is it fair to say that the confidence surrounding the fact that defense is bottoming out is stronger today than it was, say, a quarter ago?"

If this proves true -- and the solid backlog for the remainder of 2014 and into 2015 suggests that it likely will -- it will be good news for investors.The company's defense and security business has struggled for several years, primarily due to the U.S. government budget cuts during the past few years, as well as the government shutdown last year. This segment only accounts for a small -- and shrinking -- portion of iRobot's revenue. However, it continues to act as a drag on the company's overall results, both from revenue growth and profitability standpoints.  

Defense business has a solid recurring income stream

Angle in response to a question:

So, if we categorize this as recurring revenue and in 2014 just to give you a statistic, 60% of our [U.S. Department of Defense] revenue is related to servicing and upgrading the existing fleet. And so, while we build out our international and non-DOD business we've been able to continue to see good revenue and profit from servicing the installed base.

This solid recurring income stream means there's a floor (no pun intended, Roomba and Scooba) to how low the revenue in this segment could fall. More positively, if the defense business upticks in 2015, as expected, this income stream will increase in the future. 

ICU: the growth sweet spot for medical telepresence bots

Angle in response to a question:

[T]he real area of growth for RP-VITA is in treatment and involvement in the ICU ... where specialists are needed more frequently than that rate [referring to 10 times per month, which is average use for stroke diagnosis applications]. 

The company's telepresence robots are relatively new, and account for just a small portion of its overall business -- less than 5% last year; so, we'll have to see if the growth prospects pan out as the company hopes. Medical remote presence bots present a huge opportunity, and the company's early mover status in this space should continue to help it secure business.

iRobot's medical telepresence bots were first adopted for stroke diagnosis applications. And Angle noted that RP-VITA is "really shining," and the company's sales win rate is "astronomically high" for these applications. That's good news, of course, but the better news is that the company believes that nascent intensive care unit applications present an even bigger opportunity. That's because medical specialists need to monitor patients very frequently.

Considerable corporate interest in Ava 500 telepresence bot

Angle said: "[W]e have a very impressive pipeline of interested parties. We have a number of robots that are in trial."

Ava 500. Source: iRobot.

Ava 500 is a telepresence robot aimed at the enterprise market. In March, iRobot launched this product in North America and certain European markets through select certified Cisco resellers. These are very high-end robots -- costing in the neighborhood of $70,000 to buy; so, as the company expected, "all perspective customers to-date want to use the robot on a trial basis in their respective environments prior to purchasing the product." As to the trial periods, Angle noted that they're typically four-to-eight weeks.  

This commercial business is only expected to contribute about 3% to revenue in 2014. However, the company expects it to make a more meaningful contribution in 2015 and beyond.