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A Recap of Control4's (CTRL) Last Two Quarters

Recs

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January 15, 2014 – Comments (0) | RELATED TICKERS: GOOGL , CTRL

Notes from 2Q2013 earnings call

*Link: http://investor.control4.com/releasedetail.cfm?ReleaseID=787915

*Sell and deliver solutions through an extensive worldwide network of over the 2,900 dealers and distributors; products are sold and installed in more than 80 countries;

*Revenue of $32.5 million for the quarter was 18% growth over same quarter last year, 22% sequentially, EPS $0.08 versus $0.06 same quarter last year;

*4Sight service is available to all Control4 customers at an MSRP of $100 per home per year. Although subscription revenue is not material today, adding Anywhere Access to 4Sight is a first step towards building more robust consumer services and associated recurring revenue;

*In China market moving to direct-to-consumer to more fully take advantage of market opportunity; working with Cisco to assess overall market opportunity in India as well as other international regions;

*Revenue attributable to sales through dealers located in the United States and Canada is North America core revenue; revenue throughout the rest of the world is international core revenue. Core revenue does not include project-based sales to hotels or multi-dwelling units, which is other revenue;

*In 2Q2013 the company sold 15,208 controllers which is down from the 18,463 sold during the same quarter last year. However it must be noted that this decline is directly attributed to the new controller (HC-1000) which takes the place of three older models. One new controller does the work of at least two older models;

*North America core revenue was 77%; international core 21% and other 2% for the quarter;

*Gross margin of 51% was up 3000bps over the same quarter last year thanks to pricing and online distribution platforms, release of an inventory reserve which helped COGS;

*OPEX of $13.9 million for the quarter was up from $12.3 million a year ago;

*Third quarter expectations are revenue of $32.5 to $34.5 million with EPS ranging between $0.05-$0.10; full year sales expected to be between $126 million and $130 million;

*Playing into the trends of family and home ownership in India and China, direct model makes more sense to control the relationship;

*Revenue and profit per controller is rising with the more powerful controller as well as the software bundled into the controller;

*4Sight w/ Anywhere Access attach rate at around 20% of installations in the very early innings of the product; 4Sight is a more compelling choice for multi-disciplined installations (lighting, HVAC, security, etc.);

Notes from 3Q2013 earnings call

*Link: http://investor.control4.com/releasedetail.cfm?ReleaseID=803283

*Revenue of $33.6 million for the quarter was 18% growth over same quarter last year, EPS $0.12 versus $0.07 last year;

*Fourth quarter expectations are revenue of $35 to $36.5 million with EPS ranging between $0.10-$0.15; full year sales expected to be between $126 million and $130 million;

*North American core saw 21% growth over a year ago, enhanced ecosystem partners adding Nest and Dish Networks as partners; international saw 11% growth; slower due to migration from two-tier to direct-to-consumer, this will pass in first half of 2014 but it weighed on the quarter; excluding China international saw 25% growth;

*Slow conditions in UK and Central Europe due to slow summer and sluggish economic conditions;

*New next-generation wired and wireless lighting going out, being well-received, reflects both traditional and emerging LED lighting;

*As of September 30, 2013 CTRL had 2,457 active dealers in NA versus  2,416 as of June 30;

*New training centers open in China and to open in India should boost awareness and sales in those markets;

*“Regarding, our expanding device ecosystem, Nest Labs announced in September that they selected Control4 to be their first partner for their new developer program in cloud-based API to bring in customers and dealers a level of integration with home automation previously not available.”

*For 3Q North America core was 75%, international 23% and other 2%;

*In 3Q the company sold 16,154 controllers versus the 15,208 the quarter before (sequentially);

*Gross margin 50.7% versus 47.9% a year ago thanks to pricing and software bundling;

*R&D expenses maintained at 17% of sales for both quarters;

*Balance sheet healthy with $82.5 million cash and equivalents versus negligible debt;

*Continue to see the business very underpenetrated internationally (Europe for one) which represents large opportunity for the international core; Middle East is a huge emerging opportunity;

*Breakdown of revenue is 40% controller and associated software and 60% peripheral products.

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