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TRANSCRIPT
November 2017
FORWARD LOOKING STATEMENTS
This presentation contains “forward-looking” statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever
materialize or the assumptions prove incorrect, the Company’s results may differ materially from those expressed or implied by such forward-
looking statements. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to: any
statements about historical results that may suggest trends for the Company’s business and results of operations; any statements concerning the
Company’s plans, strategies or objectives; any statements of expectation or belief regarding future events; and any statements of assumptions
underlying any of the foregoing. These statements are based on estimates and information available to the Company at the time of this
presentation and are not guarantees of future performance.
As outlined more fully in the Company’s filings with the SEC on Forms 10-K and 10-Q, actual results could differ materially from the Company’s
current expectations as a result of many factors, including, but not limited to: quarterly fluctuations in the Company’s business and results of
operations; the Company’s ability to address market needs and sell its products and services successfully; the effects of competition; and market
factors and general economic conditions. The Company assumes no obligation for and does not intend to update these forward-looking
statements. Nothing contained herein is, or should be relied on as, a promise or representation as to the future performance of the Company. This
presentation includes certain non-GAAP financial measures.
Logos and trademarks referenced herein are the property of their respective owners.
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CONTROL4 INTRODUCTION
▪ Founded in 2003; IPO in 2013
▪ 100% focus on connected home
▪ 300,000+ home and business installations
▪ 10,900+ third-party products controlled
▪ 5,500+ independent dealers
▪ 97 countries served
▪ 630 employees
▪ Headquartered in Salt Lake City
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$93.4
$109.5
$128.5
$148.8
$163.2
$208.8
$151.4
$176.4
2011 2012 2013 2014 2015 2016 2016 2017
REVENUE TRENDS
$ IN MILLIONS
First 9 Months
INVESTMENT HIGHLIGHTS
Addressing Large,
Underpenetrated Market
Recognized Leader in Pro-Installed
Connected Home Solutions
Vast & Expanding Network
of Independent Dealers
Comprehensive, Open &
Scalable Platform & Ecosystem
Executing on Aggressive
New Product & Acquisition Cycle
Committed to Accelerated
Earnings Growth
14.1MUS HOUSEHOLDS
4
CONNECTED HOME MARKET SEGMENTS
INTEGRATION & PERSONALIZATION | PREMIUM EXPERIENCE
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DIY & DIFM MANAGED SERVICE PRO-INSTALLED
Key
Participants
Economic
Model
Pay Per Device,
Usually with Install
Upfront Device, Install
and Monthly Subscription
Upfront System
and Install
Typical Cost $100 – $500 / device $500 – $1,000 / year $1,000 – $50,000
Typical # of Devices 1 – 3 5 – 10 25 – 125
SIGNIFICANT MARKET OPPORTUNITY
✓ Homeowners
✓ Ages: 35 – 55
✓ Families with Children
✓ College-Educated
✓ Strong Income
SUBSTANTIAL AND UNDERPENETRATED MARKETPREMIUM CUSTOMER
14.1MUS Households
>$150k Income
<2.0%Estimated
Control4 USPenetration
International Opportunity is Even Larger
Source: U.S. Census Bureau, 2015 Current Population Survey.
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HOME AUTOMATION HOME NETWORKS A/V DISTRIBUTION
VIDEO DISTRIBUTION HVAC CONTROL ACCESS CONTROL
LIGHTING CONTROL AUDIO AMPLIFIERS INTERCOMS
CONTROL4: PRO-INSTALLED BRAND LEADER
#1 Home Automation Brand
Source: Rankings are based on CE Pro’s 2017 Brand Analysis survey of the industry’s top 100 custom electronics integrators who were asked to rank their top three vendors in each product category.
Brand Leadership Across Many Categories
61%
45%
42%
14%
10%
10%
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SOLUTIONS FOR EVERY LIFESTYLE
Single Room
$1,000
$5,000
Multi-Room
$5,000
$20,000
Whole Home
$20,000
$250,000
Flexibility to Scale Up and Scale Down
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PRODUCT PORTFOLIO
SMART
LIGHTING
SAFETY &
SECURITY
INTELLIGENT
NETWORKINGCONTROLLERS &
OPERATING SYSTEM
COMFORT &
CONVENIENCE
HOME
ENTERTAINMENT
USER
EXPERIENCE
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OPEN SOFTWARE PLATFORM AND ECOSYSTEM
▪ Interoperable with 10,900 third-party products
▪ Orchestrating ~12 million connected devices
▪ Average 40+ devices per home
▪ 250+ SDDP partners shipping 2,900+ models
SELECTED SDDP PARTNERS
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EXPANDING EXPERT DEALER NETWORK
✓ Local Presence
✓ Local Expertise
✓ Local Marketing
✓ Local Service
✓ Scalable Model
3,017 3,179 3,463
3,688
5,141 5,522
2012 2013 2014 2015 2016 Q3 2017
North America International
Note: 2016 and Q3 2017 dealer counts include active dealers that are authorized to sell only the Pakedge and Triad-branded line of products.
BENEFITS OF OUR DEALER CHANNELCERTIFIED DEALERS AT END OF PERIOD
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Recruit More
Dealers
GROWTH STRATEGY
Capture
Market Share
Expand Share
of Wallet
Increase Dealer
Efficiency
▪ North American Expansion
▪ Add International Direct Dealers
▪ New Dealers via Pakedge and Triad
▪ Lead-Gen and Marketing
▪ Software Innovation
▪ Training and Support
▪ Leaf, Pakedge and Triad
▪ EA Series
▪ International Lighting
▪ Customer Delight
▪ Expert Local Channel
▪ Open Platform
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EA-SERIES CONTROLLERS
▪ Entertainment & Automation (“EA”) Series
• EA-1: $500 US MSRP – single room
• EA-3: $1,000 US MSRP – multi-room
• EA-5: $2,000 US MSRP – whole-home
▪ Also includes Native Music Services
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High-Performance Automation with High-Resolution Audio
New September 2017
▪ Control4 OS 2.10
• Enhanced 4Sight Service
- When >> Then – Automation Personalization (CEDIA “Best of Show”)
- A/V Intercom Anywhere (to/from Mobile App)
• Added streaming from Spotify and iHeartRadio
PAKEDGE NETWORKING
▪ Acquired in January 2016
▪ Leader in networking solutions designed for audio, video, security and home automation
▪ 2,904 Control4 dealers have purchased Pakedgeproducts during 2017
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New September 2017
▪ Pakedge WR-1 with BakPak Lite (CEDIA “Best of Show”)- Integrated network router and wireless access point
- Built-in cloud-based network management
- 802.11ac Wave 2 Wi-Fi technology
- $300 MSRP
▪ Pakedge Certified Network Administrator (PCNA) Program- Online training program to ensure networking competency of dealers
- Includes Pakedge networking equipment – $2,000 MSRP
- Cost to dealers: $650 per technician (net of rebate)
High-Performance Networking for Reliable Connected-Home Experiences
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AMAZON ALEXA INTEGRATION
▪ Control4 with Amazon Echo, Dot, and FireTV
▪ Personalized Whole-Home Voice Control
▪ Lights, Customized Lighting Scenes, Thermostats
▪ End-User Installation from Alexa App
▪ Dealer definable Voice Scenes for Listen, Watch, Comfort, Convenience
▪ End-User Voice-Command Customization via customer.control4.com
▪ Secure 4Sight Control4-Cloud to AVS-Cloud Integration
▪ Marketing Programs and Kits for Control4 Dealers
New in 2017
▪ Now available in the UK and Germany
TRIAD AUDIO
▪ Acquired Feb 2017; Ordered by 1,645 Control4 Dealers To-Date
▪ Industry leader in high-performance audio
▪ Family-Rooms, Home Theaters, Whole-Home & Patio Audio
▪ Full range of high-performance products – Made-to-Order Custom Capabilities
▪ Acoustic Specialists – Product Engineering and Installation Design Services
▪ Released in 2017 – new outdoor landscape and in-ceiling speakers
New September 2017
▪ New high-resolution audio products- Triad AMS-24 and AMS-8 Audio Matrix Switches
- Triad 8-Zone Power Amplifier
- Triad One Streaming Amplifier
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High-Performance Audio for Connected-Home Entertainment Experiences
HOME THEATERMULTI-ROOM AUDIO SOUNDBARS OUTDOOR SPEAKERS
HIGHLIGHTSNON-GAAP FINANCIAL PERFORMANCE
Q3 2017 RECAP
▪ Record revenue at the high end of guidance
• Total y/y revenue growth of 16%
• Pro forma y/y revenue growth of 12% (1)
▪ Record non-GAAP net income exceeded the high end
of guidance by over $2M; increased 49% y/y
▪ Non-GAAP gross margins of 52.7%; up 18 bps y/y
▪ Ended Q3 with $71.9M of cash (including restricted);
no debt plus $30M unused line of credit; generated
$6.6M in cash flow from operations
▪ $14.1M in share repurchases since May 2015
$ In Millions, Except EPS
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Q3 2016 Q3 2017 Change
Revenue $55.2 $64.7 +17%
Gross Margin 52.5% 52.7% +18 bps
Operating Income $6.5 $9.5 +45%
Operating Margin 11.8% 14.6% +280 bps
Net Income $6.4 $9.6 +49%
Net Margin 11.6% 14.8% +313 bps
EPS $0.26 $0.35 +$0.09
(1) Pro forma revenue growth has been presented as if Triad was acquired on 6/30/16.
Note: See Appendix for a reconciliation of GAAP to non-GAAP figures.
COMMENTARY
STEADY REVENUE GROWTH
▪ 2016 Overall Revenue Grew 28%
• Growth of 15% pro forma (1)
▪ 2016 North America Core Grew 31%
• Growth of 17% pro forma (1)
▪ 2016 International Core Grew 12%
• Growth of 21% on a constant currency basis
▪ 2017 Guidance Implied Growth 17%
• Includes $10M of Triad revenue; 11% pro forma (1)
• Raised from prior guidance of $240.5M – $244.5M
$ IN MILLIONS
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17.3% 27.9%15.8% 9.7%
$128.5
$148.8$163.2
$208.8
2013 2014 2015 2016 2017
ANNUAL REVENUE & Y/Y GROWTH
$242.5 – $244.5
Guidance(1) 2016 and 2017 pro forma revenue growth has been presented as if Pakedge was acquired on 12/31/14 and Triad was acquired on 12/31/16.
16.6%
QUARTERLY REVENUE TRENDS
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$ IN MILLIONS
SECOND QUARTER
19.9% 0.7% 34.1% 16.7% 12.7% 21.8% 19.2% 15.4% 16.3% 11.3% 26.7% 17.3% 15.1% 4.2% 33.7% 10.7%
$31.9 $32.1
$43.0
$50.2
$36.7
$44.6
$53.2
$61.4
$39.1
$43.6
$55.2
$64.7
$41.2 $42.9
$57.4
$66.3 – $68.3
Q1 14 Q1 15 Q1 16 Q1 17 Q2 14 Q2 15 Q2 16 Q2 17 Q3 14 Q3 15 Q3 16 Q3 17 Q4 14 Q4 15 Q4 16 Q4 17
Guidance
FIRST QUARTER THIRD QUARTER FOURTH QUARTER
Top 10 5%
11 – 100 14%
101 – 500 30%
Other51%
BALANCED REVENUE MIX
Platform Products Drive 2x Attach Rate
to Solution Products
Top 100 Dealers Represent
Only 19% of Total Revenue
Solution Products
72%
2016 REVENUE BY CATEGORY2016 REVENUE BY DEALER
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Platform
Products
28%
CONSISTENT GROSS MARGINS
▪ Generally Consistent Across Products
▪ Software Value-Add Preserves Pricing
▪ Ops Team Manages Product Costs
▪ Higher Margins Through Direct Dealers
▪ Q3 2017 Non-GAAP Gross Margin of 52.7%
▪ Triad Gross Margin Range of 35% – 40%
COMMENTARYNON-GAAP GROSS MARGIN TRENDS
Note: See Appendix for a reconciliation of GAAP to non-GAAP figures.
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48.1%50.3% 51.7% 51.1% 52.2%
2012 2013 2014 2015 2016 Target
52% – 54%
Range
COMMENTARYANNUAL NON-GAAP NET INCOME
$ IN MILLIONS
RAPID EARNINGS GROWTH
▪ Made Investments in R&D and S&M in 2015
▪ Realized Returns on Those Investments in 2016
▪ 2016 Non-GAAP Net Income Grew 150% Y/Y
▪ Realizing Further Margin Expansion in 2017
▪ Q3 2017 Non-GAAP Net Income Reached $9.6M
– a 49% Increase Over Q2 2016
▪ Raised 2017 Guidance From $26.5M – $28.5M to
$30.2M – $31.2M Based on Strong YTD results
Note: See Appendix for a reconciliation of GAAP to non-GAAP figures.
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$8.7
$14.0
$8.3
$20.6
2013 2014 2015 2016 2017
$30.2 – $31.2
Guidance
POSITIVE
FREE CASH FLOW
DRIVING SHAREHOLDER VALUE
INCREASE
REVENUE
INCREASE
MARKET SHARE
ORGANIC
INITIATIVES
SHARE
BUYBACKS
STRATEGIC
ACQUISITIONS
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INVESTMENT HIGHLIGHTS
Addressing Large,
Underpenetrated Market
Recognized Leader in Pro-Installed
Connected Home Solutions
Vast & Expanding Network
of Independent Dealers
Comprehensive, Open &
Scalable Platform & Ecosystem
Executing on Aggressive
New Product & Acquisition Cycle
Committed to Accelerated
Earnings Growth
14.1MUS HOUSEHOLDS
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2013 2014 2015 2016 9M 2016 9M 2017Gross Margin Reconciliation
GAAP Gross Profit $64,657 $76,357 $81,534 $103,679 $74,132 $89,814
Stock-Based Compensation Expense 63 105 174 171 128 185
Amortization of Intangible Assets 319 491 1,392 3,052 2,266 2,367
Acquisition-Related Costs - - 294 2,162 2,173 165
Inventory Purchase Commitment (380) - - - - -
Non-GAAP Gross Profit $64,659 $76,953 $83,394 $109,064 $78,699 $92,531
Revenue $128,511 $148,800 $163,179 $208,802 $151,435 $176,386
GAAP Gross Margin 50.3% 51.3% 50.0% 49.7% 49.0% 50.9%
Non-GAAP Gross Margin 50.3% 51.7% 51.1% 52.2% 52.0% 52.5%
Net Income Reconciliation
GAAP Net Income (Loss) $3,503 $8,156 $(1,652) $12,954 $8,940 $9,921
Stock-Based Compensation Expense 3,760 5,341 7,034 8,370 5,933 9,191
Amortization of Intangible Assets 319 491 1,474 4,598 3,393 3,885
Acquisition-Related Costs - - 1,393 (5,911) (5,942) (1,969)
Inventory Purchase Commitment (380) - - - - -
Litigation Settlements 440 47 21 475 400 -
Convertible Preferred Stock Warrant 709 - - - - -
Executive Severance 340 - - 157 157 -
Non-GAAP Net Income $8,691 $14,035 $8,270 $20,643 $12,881 $21,028
GAAP TO NON-GAAP RECONCILIATION
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$ IN THOUSANDS