Following iRobot’s Analyst Day, 3 themes stood out that confirm iRobot will remain one of the leading consumer robotic companies in the world for years to come. They include extremely low household penetration rates domestically and internationally, iRobot’s multi-million unit install base, and the company’s ability to scale the technology into many other consumer robotic categories.
We have barely scratched the surface. iRobot estimates only 10% of U.S. households own a robotic vacuum cleaner, and outside the U.S., penetration rates are estimated to be considerably lower (~2-3%). However, robotic vacuum sales have been growing at a 22% CAGR since 2012, and we anticipate 20%+ growth to continue in this category through 2020 as more households adopt this technology for the first time. We believe the biggest driver to growing adoption is increasing customer awareness through increased marketing spend. Despite Wall Street criticism around the company’s initiatives to increase marketing spend, we believe devoting extra resources to sales and marketing will drive incremental revenues and profit in the long term. As displayed in the chart below, iRobot believes the immediate addressable market is 2x their current install base, and looking out further, the company believes they have barely scratched the surface.
Source: iRobot 2018 Investor Day Presentation
Growing install base an undervalued robotics asset. The company highlighted their U.S. install base is over 13M units. We view this large and growing install base as a very underappreciated asset. As a Roomba is helping the consumer clean, it is also benefiting iRobot by gathering large data sets on how the robot interacts with the world. iRobot can then use the data to train their proprietary AI algorithms and improve their robots functionality. This is akin to a self-driving car testing on public roads. iRobot’s CEO, Colin Angle, said the biggest challenge any robot has to overcome is interrupting the world. By having access to millions of robots across the world, we believe the company will continue to build the highest performing robots on the market.
iRobot is much more than a vacuum company. iRobot’s mission is to drive robot adoption among the consumer. Today, that primarily consists of Roombas and Braavs, but we believe the company is capable of scaling this technology across many types of other domestic robot categories like lawn mowers, security systems, etc. Given the many years of robotics expertise, as well as the proprietary data iRobot has access too, we expect the company to begin to enter new robotic categories in the coming years. While iRobot’s Management team did not give too much information on the company’s new product launches in 2H18, they did hint that the company could soon be expanding outside of robotic vacuums and mops.
Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.