While iRobot Corp’s third quarter posted a profit increase of 53% over the same time last year, its overall 2016 expenses are rising nearly on par with its profits, according to an analysis of its latest financial statement.

The robotics company is known best for its artificial intelligence vacuum cleaner, the Roomba, but it also produces mop, pool and gutter cleaning robots.

Though the company’s third quarter report shows the company cleaning up with a 53 per cent increase in profits and only a 5 per cent increase in expenses for that quarter, the overall nine month trend is not so impressive.


Source: iRobot


Source: iRobot
This difference is visually obvious in the TradingView chart below. iRobot’s net income, also known as profits, dropped considerably in its second quarter, while its expenses kept rising steadily. A longer analysis of profits and income on TradingView shows that iRobot’s income and expenses follow one another fairly closely.

iRobot stocks, income and expenses by BronwynBeairsto on TradingView.com
Source: TradingView

University of Ottawa business professor James Bowen says that it is impossible to tell from the company’s financial statements and press releases exactly where the company’s jump in both profits and expenses are coming from, but he has a few guesses.

The start-up and technology expert looks to increased marketing costs, new facilities for new products, or increased personnel as being likely culprits for increased expenses.
However, this sort of spending often means the company is growing in some way according to Bowen. “It indicates they’ve undertaken an initiative to scale up” he says, “but it’s difficult to tell what that initiative is.”

In a press release, the company said that the third quarter exceeded company expectations. In a conference call with reporters in October, Chief Financial Officer, Allison Dean said, “We delivered third quarter results well ahead of our expectations, due to timing of orders and operating expenses. As we have consistently said, predicting the exact Q3/Q4 timing of orders for the holiday season is very difficult and this year we saw orders pulled in by our new China distributor in the third quarter.”

Indeed, according to the previously mentioned report, the company sold 197,000 more units in its 2016 third quarter as compared to 2015, likely an early Christmas order. This could account for some of the rapid rise in profits between the second and third quarters, as seen in the TradingView chart.

In the same report, the company points to a couple of other places where money was shuffled around.
Announced in February and finalized in April, iRobot sold all of its defense and security holdings for $24.5 million. This meant decreases in personnel and sales and marketing expenses, but this was offset by increasing personnel in other areas, especially software engineering, according to its 2016 third quarter statement


Source: iRobot

According to its third quarter financial statement, in 2015, iRobot launched its first “connected robot”. Networked robots means that software upgrades will be necessary. This will make the relationship between company and consumer longer as customers will be returning to iRobot for upgraded software as their device ages. This is a future expected cost that the company is working into its expenses now. It also means that more software engineers are being employed to develop the software upgrades for current robots, and presumably software for future robots.

In a press release and the afore mentioned conference call, the company said it has increased its 2016 fourth quarter predictions, suggesting that its net profits would be between $10 and $13 million dollars for the quarter, between $38 and $41 million for the year.

iRobot’s fourth quarter report will be released on Feb. 8.

Feature image source: Wikimedia commons