iRobot has an increasing number of competitors within its market, and its current market share is relatively small, despite the company’s continual growth over the past several years. The company has put little effort into its marketing campaigns, and has also placed few resources to research and development. However, the recommended strategy for the company will be to use considerable capital in research and development, to create innovative robots designed for the retail industry. Major retail companies, such as Walmart, are beginning to invest in robots to facilitate a great number of tasks, both in physical retail locations, as well as manufacturing and distribution centers. With the commitment from companies such as these to continue integrating robotics into their operations, a new lucrative market is available for iRobot. If the company could develop a robot to facilitate the needs of these retail giants, iRobot could recognize massive profits, and also capitalize on relatively untouched market, quickly grabbing up the majority of the market share.
The suggested strategy is for iRobot to invest $70 million in 2019 in the R & D department, to design and produce a retail-specific robot within 6 months. The company currently has more than enough liquid assets to cover this investment without putting the company in financial stress. Once the robots are developed, iRobot will invest $25 million in a marketing campaign geared specifically for the retail industry, to gain the attention of retailers and supply chain companies worldwide. In 2019, iRobot will purchase 5,000 robots, with the goal of selling 2,500 in the first year. The average cost for such a robot will be around $15,500 per robot for production, while the average sales price that iRobot could charge to retailers is around $50,000 per robot.
For the first year, iRobot will incur and additional $172.5 million in the initial investment and production of the first run of 5,000 robots. However, the company will also recognize an additional $125 million in revenues from the 2,500 robots to be sold in 2019. This will result in a decrease in net income of around 44%, which still nets the company nearly $50 million in net income. Although the first year represents an impactful decrease in net income, the payoff comes with each following year for the next decade with similarly increasing results. In 2020, the company will incur and additional $210 million for the production of 10,000 robots, including continued R & D and marketing investments. However, with the company projected to sell 12,500 retail robots within the year, the company stands to recognize and additional $625 million from these robots alone. As for 2021, the company is set to reach maximum annual production capacity of 15,000 retail robots, which will cost the company around $322.5 million in overall costs. Sales revenues from the retail robots for 2021 could be recognized at $750 million, which represents exponential growth for the company.
As described above, the investment in the company’s R & D department and marketing campaign for creating and selling innovative retail robots represents an incredibly appealing strategy. Although the strategy represents a significant initial investment, the strategy could result in exponentially higher revenues and net income, which will allow the company to gain a significant competitive advantage, and yield massive returns on their investment for the next decade.
Reference
United States Securities & Exchange Commission. (2019). 2018 FORM SEC 10-K Annual Report: iRobot Corporation.
Appendix ?: Pro-Forma Income Statement (2019-2021)
(numbers in thousands)
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Appendix ?: Pro-Forma Balance Sheet (2019-2021)
![]()
Appendix ?: Pro-Forma Balance Sheet Continued (2019-2021)
![]()
Appendix ?: Pro-Forma Statement of Cash Flows (2019-2021)
(numbers in thousands)
![]()
12/31/202012/31/2021% Change12/31/202012/31/2021% Change
$170,718$175,1843%$526,842$987,18887%
170,181172,9752%187,215190,8742%
164,935166,8811%207,818257,18524%
25,18426,9887%28,88633,08715%
531,018542,0282%950,7611,468,33454%
58,11559,5432%60,87462,8743%
118,896118,8960%118,896118,8960%
24,27324,2730%24,27324,273
53,51556,7146%55,3840-100%
785,817801,4542%1,210,1881,674,37738%
148,632163,84510%168,742190,74513%
78,15182,2145%80,18785,3896%
226,783246,0598%248,929276,13411%
0000
19,87422,74520,78624,98320%
246,657268,8049%269,715301,11712%
2782780%2782780%
366,111359,601-2%767,4241,200,21156%
172,771172,7710%172,771172,7710%
539,160532,650-1%940,4731,373,26046%
785,817801,4542%1,210,1881,674,37738%
Without New Strategy
Balance Sheet
Assets
Cash and Equivalents
Total Assets
Liabilities
Accounts Payable
Accounts Receivable
Inventory
Other Current Assets
Total Current Assets
Property Plant & Equipment
Goodwill
Total Liabilities and Equity
Equity
Common Stock
Retained Earnings
Paid in Capital & Other
Total Equity
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Other Long-Term Liabilities
Total Liabilities
Intangibles
Other Long-Term Assets
Assets
Cash and Equivalents
Accounts Receivable
Inventory
Other Current Assets
Total Current Assets
With New Strategy
Balance Sheet
Liabilities
Accounts Payable
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Other Long-Term Liabilities
Property Plant & Equipment
Goodwill
Intangibles
Other Long-Term Assets
Total Assets
Paid in Capital & Other
Total Equity
Total Liabilities and Equity
Total Liabilities
Equity
Common Stock
Retained Earnings
12/31/201812/31/2019% Change12/31/201812/31/2019% Change
87,992 90,310 2.63%87,992 46,669 -46.96%
(26,367) (28,468) 7.97%(26,367) (18,749) -28.89%
(43,166) (41,642) 3.53%(43,166) (36,875) 14.57%
18,459 20,200 9.43%18,459 (8,955) -148.51%
12/31/201912/31/2020% Change12/31/201912/31/2020% Change
90,310 92,303 2.21%46,669 348,745 647.27%
(28,468) (29,858) 4.88%(18,749) (32,874) 75.34%
(41,642) (42,993) -3.24%(36,875) (45,187) -22.54%
20,200 19,452 -3.70%(8,955) 270,684 3122.71%
12/31/202012/31/2021% Change12/31/201912/31/2020% Change
92,303 94,218 2.07%348,745 622,978 78.63%
(29,858) (31,842) 6.64%(32,874) (38,480) 17.05%
(42,993) (43,180) -0.43%(45,187) (48,137) -6.53%
19,452 19,196 -1.32%270,684 536,361 98.15%
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Net Cash Flow
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Net Cash Flow
With New Strategy
Statement of Cash Flows
Cash Flows from Financing Activities
Net Cash Flow
With New Strategy
Statement of Cash Flows
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Net Cash Flow
With New Strategy
Statement of Cash Flows
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Without New Strategy
Statement of Cash Flows
Net Cash Flow
Without New Strategy
Without New Strategy
Statement of Cash Flows
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Statement of Cash Flows
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Net Cash Flow
12/31/201812/31/2019% Change12/31/201812/31/2019% Change
$1,092,584$1,184,9248.45%$1,092,584$1,309,92419.89%
537,156587,1569.31%537,156664,65623.74%
555,428597,7687.62%555,428645,26816.17%
446,806484,7548.49%446,806579,75429.76%
108,622113,0144.04%108,62265,514-39.69%
0000
108,622113,0144.04%108,62265,514-39.69%
20,63022,70410.05%20,63015,845-23.19%
0000
87,99290,3102.63%87,99249,669-43.55%
12/31/201912/31/2020% Change12/31/201912/31/2020% Change
$1,184,924$1,315,84511.05%$1,309,924$2,045,60956.16%
587,156600,8422.33%664,656892,76834.32%
597,768715,00319.61%645,2681,152,84178.66%
484,754598,71223.51%579,754723,96624.87%
113,014116,2912.90%65,514428,875554.63%
0000
113,014116,2912.90%65,514428,875554.63%
22,70423,9885.66%15,845102,930549.61%
0000
90,31092,3032.21%49,669325,945556.23%
12/31/202012/31/2021% Change12/31/202012/31/2021% Change
$1,315,845$1,472,15311.88%$2,045,609$3,102,45051.66%
600,842615,8422.50%892,7681,214,54536.04%
715,003856,31119.76%1,152,8411,887,90563.76%
598,712736,91923.08%723,966968,45733.77%
116,291119,3922.67%428,875919,448114.39%
0000
116,291119,3922.67%428,875919,448114.39%
23,98825,1744.94%102,930201,98496.23%
0000
92,30394,2182.07%325,945717,464120.12%
Operating Expenses
EBIT
Without New Strategy
Income Statement
Revenues
Cost of Goods Sold
Gross Profit
Interest Expense
EBT
Tax
Non-Recurring Events
Net Income
Net Income
Without New Strategy
Income Statement
Revenues
Cost of Goods Sold
Gross Profit
Operating Expenses
EBIT
Interest Expense
EBT
Tax
Non-Recurring Events
Net Income
Without New Strategy
Income Statement
Revenues
Cost of Goods Sold
Gross Profit
Operating Expenses
EBIT
Interest Expense
EBT
Tax
Non-Recurring Events
Net Income
With New Strategy
Income Statement
Revenues
Cost of Goods Sold
Gross Profit
Operating Expenses
EBIT
Interest Expense
EBT
Tax
Non-Recurring Events
Net Income
With New Strategy
Income Statement
Revenues
Cost of Goods Sold
Gross Profit
Operating Expenses
EBIT
Interest Expense
EBT
Tax
Non-Recurring Events
Net Income
With New Strategy
Income Statement
Revenues
Cost of Goods Sold
Gross Profit
Operating Expenses
EBIT
Interest Expense
EBT
Tax
Non-Recurring Events
12/31/201812/31/2019% Change1/31/201812/31/2019% Change
$161,978$164,8752%$161,978$211,64731%
162,166165,7442%162,166165,3842%
164,633159,551-3%164,633197,75120%
25,66026,6934%25,66026,6934%
514,437516,8630%514,437601,47517%
57,02657,0300%57,02657,0300%
118,896118,8960%118,896118,8960%
24,27324,2730%24,27324,2730%
52,32951,418-2%52,32951,418-2%
766,961768,4800%766,961853,09211%
136,742133,151-3%136,742140,1953%
77,01575,975-1%77,01578,1511%
213,757209,126-2%213,757218,3462%
0000
17,88217,8970%17,88218,2152%
231,639227,023-2%231,639236,5612%
2782780%2782780%
362,273368,4082%362,273443,48222%
172,771172,7710%172,771172,7710%
535,322541,4571%535,322616,53115%
766,961768,4800%766,961853,09211%
12/31/201912/31/2020% Change12/31/201912/31/2020% Change
$164,875$170,7184%$211,647$526,842149%
165,744170,1813%165,384187,21513%
159,551164,9353%197,751207,8185%
26,69325,184-6%26,69328,8868%
516,863531,0183%601,475950,76158%
57,03058,1152%57,03060,8747%
118,896118,8960%118,896118,8960%
24,27324,2730%24,27324,2730%
51,41853,5154%51,41855,3848%
768,480785,8172%853,0921,210,18842%
133,151148,63212%140,195168,74220%
75,97578,1513%78,15180,1873%
209,126226,7838%218,346248,92914%
000
17,89719,87411%18,21520,78614%
227,023246,6579%236,561269,71514%
2782780%2782780%
368,408366,111-1%443,482767,42473%
172,771172,7710%172,771172,7710%
541,457539,1600%616,531940,47353%
768,480785,8172%853,0921,210,18842%
Other Current Assets
Total Current Assets
Property Plant & Equipment
Goodwill
Intangibles
Accounts Receivable
Inventory
Balance Sheet
Assets
Cash and Equivalents
Accounts Receivable
Other Long-Term Assets
Total Assets
Liabilities
Accounts Payable
Other Current Assets
Total Current Assets
Property Plant & Equipment
Goodwill
Total Liabilities and Equity
Without New Strategy
Without New Strategy
Balance Sheet
Assets
Cash and Equivalents
Common Stock
Retained Earnings
Paid in Capital & Other
Total Equity
Total Current Liabilities
Long-Term Debt
Other Long-Term Liabilities
Total Liabilities
Equity
Other Current Liabilities
Inventory
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Other Long-Term Liabilities
Total Liabilities
Intangibles
Other Long-Term Assets
Total Assets
Liabilities
Accounts Payable
Total Liabilities and Equity
Equity
Common Stock
Retained Earnings
Paid in Capital & Other
Total Equity
With New Strategy
Balance Sheet
Assets
Cash and Equivalents
Accounts Receivable
Inventory
Other Current Assets
Total Current Assets
Liabilities
Accounts Payable
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Other Long-Term Liabilities
Property Plant & Equipment
Goodwill
Intangibles
Other Long-Term Assets
Total Assets
Paid in Capital & Other
Total Equity
Total Liabilities and Equity
With New Strategy
Balance Sheet
Total Liabilities
Equity
Common Stock
Retained Earnings
Property Plant & Equipment
Goodwill
Intangibles
Other Long-Term Assets
Total Assets
Assets
Cash and Equivalents
Accounts Receivable
Inventory
Other Current Assets
Total Current Assets
Total Liabilities
Equity
Common Stock
Retained Earnings
Liabilities
Accounts Payable
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Other Long-Term Liabilities
Paid in Capital & Other
Total Equity
Total Liabilities and Equity
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