February 5, 2019 | 3:16 PM by Jay Kunstman | jkunstman@jaguaranalytics.com

Behind The Numbers – Control4 (CTRL)

Control4 is a provider of smart home and business solutions that allow consumers to integrate audio, video, lighting, temperature, security, communications, network management and other functionalities into a unified automation solution, customized to match their lifestyles and business needs.

Shares are getting punished today, down 17% as I type this, after reporting Q4 earnings after the bell yesterday:

-EPS of $0.44 vs $0.43 estimate – Beat
-Revenue of $72.5M vs $73.2M estimate – Miss
-Revenue increased 6% Y/Y
-Q1 EPS Guidance of $0.08 – $0.11 vs $0.21 estimate – Miss
-Q1 Revenue Guidance of $61M – $63M vs $64.1M estimate – Miss

-Company delivered five operating system releases with new and improved functionality to dealers and end customers, and now more than 137,000 sites of their 385,000 total registered installations are running Control4 software released in 2018.

-Company added over 58,600 new customer installations and an additional 71,000 Control4 operating system upgrades to prior installations throughout the world.


Macro Issues – Not surprising, the company would say that during the second half of 2018, their Y/Y revenue growth rate slowed. CEO Martin Plaehn would say, “We believe these headwinds are attributable to a combination of factors, including general economic conditions, related pressures facing our dealers and time impact relative to our product development cycles.”

Mr. Plaehn would add that the general economic conditions included the slowing of new housing in MDU projects in many metropolitan areas, geopolitical polarization intentions in the UK and EU, and within and between the U.S. and China and most recently, stock market volatility, all of which impact consumer confidence and homeowner decision-making regarding meaningful purchases involving design, installation and customization.

Also, as for their dealers, CE Pro recently released its annual survey of electronics installers. The publication noted that in 2018 integrated revenues grew on average 8% in 2018, which is down from 11% of growth in 2017 and the average number of new installation per dealer fell from 48 in 2017 to 45 in 2018. The CE Pro survey also reported challenges noted by dealers, including a slowdown in new home construction and ongoing trade labor shortages facing the industry.

Needham was out this morning downgrading shares to Hold from Buy noting that CTRL’s top-line guidance assumes a soft Q1 with a reacceleration in the second half as a number of initiatives take hold. However, Needham also thinks headwinds from the weak macro environment could make the embedded reacceleration challenging.


This morning, Roth Capital was out with a note defending the stock saying that the production builder focus and certified showroom initiative should both be decisively additive to 2H19 growth rates.

Production Builder Program – On the call, the company announced that it launched its production builder program in conjunction with the introduction of its newest controller product the CI1. They will enter 2019 with 32 production builders and over 20 in process applications prominently in North America who are or will be standardizing on Control4 as their smart home automation system for the houses they will build in 2019 and 2020.

Certified Showroom Program – In addition, the company also launched its certified showroom program starting in May with 140 high quality experiential showrooms and expanded that number to 199 as of today, and they have more than 30 additional children applications in process for expected certification in the first half of 2019.

NEEO – Finally, the company announced it had acquired Swiss-based NEEO for total consideration of $11M in cash. NEEO is the designer and creator of the NEEO universal handheld remote for entertainment and smart home automation. While the acquisition of NEEO will help accelerate the development of new and exciting products, the company’s guidance for 2019 does not assume incremental revenue from these products, but does include approximately $3.5M in incremental operating expenses associated primarily with the product development teams acquired in the transaction.

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