Quick Summary

iRobot (IRBT) makes automated, robotic consumer home cleaning products. Currently, the company sells 3 device categories. The Roomba is its line of robotic vacuum cleaners, by far the company's biggest and most important product at 90% of sales. Roomba has both low-end and higher-end models that add features like more power, scheduling by app, and automatic recharge and resume. The Braava line are automated floor mopping devices, accounting for 10% of sales. Lastly are education-focused "coding robots", the Root and Create 2, acquired from the acquisition of Root in 2019, but not a significant contributor to revenue as of yet.

Does The Company Have Recurring And/Or Rising Revenues?

SOMEWHAT. iRobot's products are hardware devices that are one-off purchases, so the revenue model is not a recurring one. Sales are rising, though, with a 3-year compound annual growth rate of over 22%. Consumer acceptance of automated vacuum cleaners has been increasing, but they make up less than 25% of the $11 billion global vacuum cleaner market - there is still plenty of growth potential for Roomba. There would also seem to be a large potential market for other robotic applications. iRobot historically has dabbled in other markets, including pool cleaner robots, gutter cleaning robots, and military robots, but recently has focused solely on floor cleaning applications. The anticipated Terra robotic lawnmower was recently put on hold indefinitely, further questioning the company's commitment (or ability) to broaden their markets.

Does The Company Have Durable Competitive Advantages?

SOMEWHAT. We think iRobot's primary moat is in its CONSUMER BRAND advantage. Roomba is synonymous with robotic vacuums in the U.S. (~85% market share) and Europe (70%), and holds over 65% market share worldwide (not including China) - over 4 times the size of its nearest competitor. Additionally, it dominates the premium end of the robotic vacuum segment, with over 60% of revenue coming from products priced over $500, and growth in that segment exceeding 80% year-over-year in 2020. These statistics are indicative of both "automatic purchase" and pricing power of the Roomba brand over the competition. That said, there is no dearth of competition in this space. Competing products from Shark, Neato, Electrolux, and others - particularly on the low price end - will continue to challenge iRobot's pricing and dominance going forward.

GreenDot Rating: 

iRobot is still a YELLOW (somewhat attractive) business. The brand moat continues to shine in the firm's ability to sell higher-priced products, while still maintaining dominant market share in what is becoming an increasingly competitive space. There is growth potential, too, as robotic vacuums take share over hand-operated ones. However, there are a few concerns. There is no recurring revenue here, and the company's history of building out new robotic applications has been poor to say the least. We believe iRobot's management is making plans for recurring revenue, but it has to solve both problems to really generate huge returns for investors going forward.