iRobot Corp
Investors remained focused on iRobot's plan B, if any, as per Needham analyst James Ricchuiti. The analyst had a Hold rating on iRobot stock.
Since the companies announced the deal in August 2022, IRBT's business has deteriorated for various reasons, including the post-pandemic hangover that followed a burst of home goods and consumer electronic spending, increased competition, and supply chain woes.
Through the first nine months of 2023, sales dropped 29% to $583 million, while IRBT's adjusted operating loss totaled $(153) million.
The analyst noted that if the deal breaks due to regulatory concerns issues, IRBT will likely receive $94 million, which will soften the blow and temporarily shore up the company's balance sheet.
However, it will not alter the difficult position in which IRBT finds itself; even after several rounds of expense reduction, the company's cost structure still needs to reflect the structural long-term changes in the business.
Although the company's fourth quarter results will likely show sequential improvement, the analyst noted it was nevertheless a tough holiday season for Roomba sales.
His most recent estimate for the fourth quarter of fiscal 2023 assumes sales of $225 million and an adjusted loss of $(67.5) million, bringing the full-year 2023 adjusted loss to $(230.8) million.
Even if the top line is more robust, Ricchuiti does not expect a meaningful upside on the bottom line.
He does not see a path to break even in 2024 without significant reductions in the company's operating expenses and an improvement in demand.
GAAP R&D and Sales and Marketing amounted to 20% and 24% of nine-month sales, respectively, with high levels of R&D in particular well above levels one would typically associate with a struggling consumer products company.
Price Action: IRBT shares are trading lower by 0.12% at $17.24 on the last check Monday.
