Control4 Corporation (NASDAQ: CTRL), a leading global provider
of smart-home and networking solutions, today announced financial
results for its first quarter ended March 31, 2019.
Revenue for the first quarter of 2019 was $60.4 million,
compared to revenue of $59.1 million for the first quarter of 2018,
representing quarterly year-over-year growth of 2.2%.
Net Loss for the first quarter of 2019 was $2.0 million, or
$0.07 per diluted share, compared to Net Income in the first
quarter of 2018 of $1.0 million, or $0.04 per diluted share.
Non-GAAP Net Income for the first quarter of 2019 was $3.6
million, or $0.13 per diluted share, compared to Non-GAAP Net
Income in the first quarter of 2018 of $5.8 million, or $0.21 per
diluted share. A reconciliation of GAAP to non-GAAP financial
information is contained in the attached tables.
During the first quarter of 2019, the Company used approximately
$11.1 million in cash related to the acquisition of
Switzerland-based NEEO. In addition, the Company repurchased
139,782 shares of Control4 stock for approximately $2.5 million,
paid $1.8 million for taxes related to the net share settlement of
restricted stock units in lieu of issuing an additional 103,094
shares, and used approximately $1.2 million in cash for capital
expenditures. These uses of capital combined with cash flow from
operations resulted in a decrease in unrestricted cash and net
investments to $72.0 million as of March 31, 2019, compared to
$93.3 million as of December 31, 2018.
Cancellation of Q1 Earnings Call
In light of today’s announcement regarding the pending
transaction with SnapAV, the Company will not host its previously
announced conference call to discuss its first quarter 2019
financial results. Additionally, given the pending transaction, the
Company is not updating its outlook for the balance of 2019.
Information about today’s announcement regarding the transaction
can be found on our website at
https://investor.control4.com/press-releases.
Additional Financial and Operational Metrics
Revenue ($ mm)
1Q 2019 4Q 2018
1Q 2018 North America Core Revenue1 46.2 54.4 45.7
International Core Revenue 14.1 17.5 12.8 Other Revenue2 0.1
0.6 0.6 Total Revenue 60.4
72.5 59.1
1 We refer to revenue from sales of our products through our
dealers, distributors and retailers as our Core Revenue, exclusive
of revenue from hospitality projects, such as installations in
hotels
2 Primarily consists of Hospitality Revenue
1Q 2019
4Q 2018 1Q 2018 Dealer
Adds3 North America 94 87 83 International4 183
50 52 Total Dealer Adds 277 137 135
Active Dealers3, 5 North America 3,305 3,264 3,108
International 1,290 1,238 1,195 Total
Active Dealers 4,595 4,502 4,303
Total
Dealers3 North America 3,463 3,402 3,215 International
1,637 1,479 1,358 Total Dealers 5,100
4,881 4,573
Controller Shipments 23,517
31,010 23,413
3 These dealer figures only include dealers authorized to sell
and install the full Control4 line of products and exclude
approximately 870 active dealers that are currently authorized to
sell only the Pakedge and or Triad brand of products.
4The dealer adds figure for 1Q 2019 include 133 dealers that
were acquired as part of the direct-to-dealer transitions in
Ireland, New Zealand, and Switzerland.
5 We define an active, authorized dealer (“active dealer”) as
one that has placed an order with us in the trailing 12-month
period.
About Control4 Corporation:
Control4 [NASDAQ: CTRL] is a leading global provider of
automation and networking systems for homes and businesses,
offering personalized control of lighting, music, video, comfort,
security, communications, and more into a unified smart home system
that enhances the daily lives of its consumers. Control4 unlocks
the potential of connected devices, making networks more robust,
entertainment systems easier to use, homes more comfortable and
energy efficient, and provides families more peace of mind. Today,
every home and business needs automation horsepower and a
high-performance network to manage the increasing number of
connected devices. The Control4 platform interoperates with more
than 13,500 third-party consumer electronics products, ensuring an
ever-expanding ecosystem of devices will work together. Control4 is
now available in approximately 100 countries. Leveraging a
professional channel that includes over 5,900 custom integrators,
retailers, and distributors authorized to sell Control4 products,
Pakedge branded networking solutions and Triad branded speakers.
Control4 is delivering intelligent solutions for consumers, major
consumer electronics companies, hotels, and businesses around the
world.
Additional Information about the Proposed Merger Transaction
and Where to Find It
This press release may be deemed to be solicitation material in
respect of the proposed merger transaction involving Control4. In
connection with the proposed merger transaction, Control4 will file
relevant materials with the U.S. Securities and Exchange Commission
(the “SEC”), including a proxy statement on Schedule 14A
(the “Proxy Statement”). This press release is not a
substitute for the Proxy Statement or for any other document that
Control4 may file with the SEC and or send to Control4’s
stockholders in connection with the proposed merger transaction.
BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS
OF CONTROL4 ARE URGED TO READ THE PROXY STATEMENT AND OTHER
DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT CONTROL4, THE PROPOSED MERGER TRANSACTION AND
RELATED MATTERS. Investors and security holders will be able to
obtain free copies of the Proxy Statement and other documents filed
by Control4 with the SEC through the website maintained by the SEC
at http://www.sec.gov. Copies of the documents filed by Control4
with the SEC will also be available free of charge on Control4’s
website at www.control4.com, or by contacting Control4’s Investor
Relations contact at the Blueshirt Group, LLC at (415) 217-2632.
Control4 and its directors and certain of its executive officers
may be considered participants in the solicitation of proxies from
Control4’s stockholders with respect to the proposed merger
transaction under the rules of the SEC. Information about the
directors and executive officers of Control4 is set forth in its
Annual Report on Form 10-K for the year ended December 31, 2018,
which was filed with the SEC on February 11, 2019, its proxy
statement for its 2019 annual meeting of stockholders, which was
filed with the SEC on March 20, 2019 and in subsequent documents
filed with the SEC. Additional information regarding the persons
who may be deemed participants in the proxy solicitations and a
description of their direct and indirect interests, by security
holdings or otherwise, will also be included in the Proxy Statement
and other relevant materials to be filed with the SEC when they
become available. You may obtain free copies of this document as
described above.
Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, including but not limited
to, statements regarding Control4’s business and financial outlook.
All statements other than statements of historical fact contained
in this press release are forward-looking statements. These
forward-looking statements are made as of the date they were first
issued, and were based on the then-current expectations, estimates,
forecasts, and projections, as well as the beliefs and assumptions
of management. Forward-looking statements are subject to a number
of risks and uncertainties, many of which involve factors or
circumstances that are beyond Control4’s control. Control4’s actual
results could differ materially from those stated or implied in
forward-looking statements due to a number of factors, including
but not limited to: (i) risks associated with Control4’s ability to
obtain the stockholder approval required to consummate the proposed
merger transaction and the timing of the closing of the proposed
merger transaction, including the risks that a condition to closing
would not be satisfied within the expected timeframe or at all or
that the closing of the proposed merger transaction will not occur;
(ii) the outcome of any legal proceedings that may be instituted
against the parties and others related to the merger agreement;
(iii) unanticipated difficulties or expenditures relating to the
proposed merger transaction, the response of business partners and
competitors to the announcement of the proposed merger transaction,
and/or potential difficulties in employee retention as a result of
the announcement and pendency of the proposed merger transaction;
and (iv) those, risks detailed in Control4’s most recent Annual
Report on Form 10-K, and subsequent filings with the SEC in
connection with the proposed transaction, as well as other reports
and documents that may be filed by Control4 from time to time with
the SEC. Past performance is not necessarily indicative of future
results. The forward-looking statements included in this press
release represent Control4’s views as of the date of this press
release. Control4 anticipates that subsequent events and
developments may cause its views to change. Control4 has no
intention and undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise. These forward-looking statements
should not be relied upon as representing Control4’s views as of
any date subsequent to the date of this press release.
Non-GAAP Financial Measures
Control4’s stated results include certain non-GAAP financial
measures, including non-GAAP gross margin, non-GAAP gross margin
percentage, non-GAAP income (loss) from operations, non-GAAP
operating income percentage, non-GAAP net income (loss), and
non-GAAP net income (loss) per diluted share. Non-GAAP gross margin
excludes non-cash expenses related to stock-based compensation,
amortization of intangible assets, and acquisition-related costs.
We further exclude expenses related to executive severance and
litigation settlements from non-GAAP income from operations and
non-GAAP net income.
Management believes that it is useful to exclude stock-based
compensation expense because the amount of such expense in any
specific period may not directly correlate to the underlying
performance of the business operations.
The company has recently completed acquisitions that resulted in
operating expenses that would not have otherwise been incurred.
Management has provided supplementary non-GAAP financial measures,
which exclude acquisition-related expense items, to allow more
accurate comparisons of the financial results to historical
operations, forward-looking guidance and the financial results of
less acquisitive peer companies. Management considers these types
of costs and adjustments, to a great extent, to be unpredictable
and dependent on a significant number of factors that are outside
of the company’s control. Furthermore, the company does not
consider these acquisition-related costs and adjustments to be
related to the organic continuing operations of the acquired
businesses and are generally not relevant to assessing or
estimating the long-term performance of the acquired assets. In
addition, the size, complexity and/or volume of past acquisitions,
which often drives the magnitude of acquisition-related costs, may
not be indicative of the size, complexity and/or volume of future
acquisitions. By excluding acquisition-related costs and
adjustments from the non-GAAP measures, management is better able
to evaluate the ability to utilize its existing assets and estimate
the long-term value that acquired assets will generate. The company
believes that providing a supplemental non-GAAP measure which
excludes these items allows management and investors to consider
the ongoing operations of the business both with, and without, such
expenses.
These acquisition-related costs are included in the following
categories: (i) professional service fees, recorded in operating
expenses, which include third-party costs related to transactions,
and legal and other professional service fees associated with
diligence, entity formation and corporate structuring, disputes and
regulatory matters related to transactions; (ii) transition and
integration costs, recorded in operating expenses, which include
retention payments, transitional employee costs, earn-out payments
treated as compensation expense, as well as the costs of
integration-related services provided by third parties; and (iii)
acquisition-related adjustments which include adjustments to
acquisition-related items such as being required to record acquired
inventory at its fair value, resulting in a step-up in the
inventory value, and having to reverse part of our valuation
allowance in order to offset the deferred tax liability that was
recorded based on differences between the book and tax basis of
assets acquired and liabilities assumed. The step-up in inventory
is recorded through cost of goods sold when the inventory is sold,
resulting in a negative impact to our gross margin. Although these
expenses are not recurring with respect to past acquisitions, the
company will generally incur these expenses in connection with any
future acquisitions.
The company excludes the amortization of acquired intangible
assets from non-GAAP measures. These amounts are inconsistent in
amount and frequency and are significantly impacted by the timing
and size of acquisitions. Providing a supplemental measure which
excludes these charges allows management and investors to evaluate
results “as-if” the acquired intangible assets had been developed
internally rather than acquired. Although the company excludes
amortization of acquired intangible assets from non-GAAP measures,
management believes that it is important for investors to
understand that such intangible assets contribute to revenue
generation. Amortization of intangible assets that relate to past
acquisitions will recur in future periods until such intangible
assets have been fully amortized. Future acquisitions may result in
the amortization of additional intangible assets.
Furthermore, we believe it is useful to exclude expenses related
to litigation settlements and executive severance because of the
variable and unpredictable nature of these expenses which are not
indicative of past or future operating performance. We believe that
past and future periods are more comparable if we exclude those
expenses.
Management believes these adjustments provide useful comparative
information to investors. Non-GAAP results are presented for
supplemental informational purposes only for understanding the
operating results. The non-GAAP results should not be considered a
substitute for financial information presented in accordance with
generally accepted accounting principles and may be different from
non-GAAP measures used by other companies. The non-GAAP financial
measures may not provide information that is directly comparable to
that provided by other companies in the industry, as other
companies in the industry may calculate non-GAAP financial results
differently, particularly related to non-recurring, unusual items.
Management urges investors to review the reconciliation of non-GAAP
financial measures to the comparable GAAP financial measures
included below, and not to rely on any single financial measure to
evaluate the business.
Source: Control4
CONTROL4 CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except share
data)
March 31, December 31, 2019 2018
(unaudited) Assets Current assets: Cash and cash
equivalents $ 19,828 $ 40,395 Restricted cash 264 259 Short-term
investments 48,789 52,794 Accounts receivable, net 30,316 33,016
Inventories 45,867 42,684 Prepaid expenses and other current assets
9,633 6,100 Total current assets 154,697 175,248
Property and equipment, net 9,540 9,663 Operating lease
right-of-use assets 10,567 — Long-term investments 3,201 —
Intangible assets, net 25,389 20,651 Goodwill 31,403 21,530 Other
assets 22,560 25,456 Total assets $ 257,357 $ 252,548
Liabilities and stockholders’ equity Current liabilities:
Accounts payable $ 23,083 $ 26,213 Accrued liabilities 7,151 9,142
Current portion of deferred revenue 5,588 5,507 Current operating
lease liability 3,924 — Total current liabilities
39,746 40,862 Long-term operating lease liability 7,924 — Other
long-term liabilities 5,838 5,339 Total liabilities
53,508 46,201 Commitments and contingencies — —
Stockholders’ equity: Common stock, $0.0001 par value; 500,000,000
shares authorized; 26,655,506 and 26,516,912 shares issued and
outstanding at March 31, 2019 and December 31, 2018, respectively 3
3 Additional paid-in capital 234,999 235,529 Accumulated deficit
(30,355) (28,385) Accumulated other comprehensive loss (798)
(800) Total stockholders’ equity 203,849
206,347 Total liabilities and stockholders’ equity $ 257,357 $
252,548
CONTROL4 CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share
data)
Three Months Ended March 31,
2019 2018 (unaudited) Revenue $ 60,425 $
59,149 Cost of revenue 31,142 28,410 Gross margin
29,283 30,739 Operating expenses: Research and
development 11,817 10,940 Sales and marketing 13,342 12,535 General
and administrative 7,117 6,293 Total operating
expenses 32,276 29,768 Income (loss) from operations
(2,993) 971 Other income (expense), net: Interest,
net 344 236 Other income (expense), net (87) (357)
Total other income (expense), net 257 (121) Income
(loss) before income taxes (2,736) 850 Income tax benefit
(766) (116) Net income (loss) $ (1,970) $ 966 Net income
(loss) per common share: Basic $ (0.07) $ 0.04 Diluted $ (0.07) $
0.04 Weighted-average number of shares: Basic 26,563 25,904 Diluted
26,563 27,526
Stock-based compensation included in the consolidated
statement of operations data (unaudited):
Three Months Ended March
31, 2019 2018 Cost of revenue $ 78 $ 68 Research
and development 1,287 1,084 Sales and marketing 870 959 General and
administrative 1,294 1,224 Total stock-based
compensation expense $ 3,529 $ 3,335
CONTROL4 CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
Three Months Ended March 31,
2019 2018 (unaudited) Operating
activities Net income (loss) $ (1,970) $ 966 Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities: Depreciation expense 1,109 969 Amortization
of intangible assets 1,620 1,446 Loss on disposal of fixed assets —
14 Provision for doubtful accounts 8 71 Investment discount and
premium amortization, net (169) (83) Stock-based compensation 3,529
3,335 Changes in assets and liabilities: Accounts receivable, net
2,064 3,235 Inventories (1,741) (2,003) Prepaid expenses and other
current assets (3,034) (916) Other assets 1,784 194 Accounts
payable (3,887) (3,923) Accrued liabilities (3,395) (3,083)
Deferred revenue 25 163 Other long-term liabilities (650)
84 Net cash provided by (used in) operating activities
(4,707) 469
Investing activities Purchases of
available-for-sale investments (27,171) (19,501) Proceeds from
sales of available-for-sale investments 1,800 1,000 Proceeds from
maturities of available-for-sale investments 26,399 18,200
Purchases of property and equipment (1,171) (892) Business
acquisitions, net of cash acquired (11,695) — Net
cash used in investing activities (11,838) (1,193)
Financing activities Proceeds from exercise of options for
common stock 310 2,089 Payments for withholding taxes related to
net share settlement of equity awards (1,847) (3,614) Repurchase of
common stock (2,522) (7,448) Payment of debt issuance costs
— (113) Net cash used in financing activities (4,059)
(9,086) Effect of exchange rate changes on cash and cash
equivalents 42 48 Net change in cash and cash
equivalents (20,562) (9,762) Unrestricted and restricted cash and
cash equivalents at beginning of period 40,654 30,034
Unrestricted and restricted cash and cash equivalents at end of
period $ 20,092 $ 20,272
Supplemental disclosure of cash flow
information Cash paid for interest $ 81 $ 25 Cash paid for
taxes 184 167
Supplemental schedule of non-cash investing and
financing activities Settlement of accounts receivable and
other assets in business combinations 4,250 — Business acquisitions
holdback liability 1,310 — Purchases of property and equipment
financed by accounts payable 61 207 Net unrealized gains (losses)
on available-for-sale investments 55 (64)
CONTROL4 CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
(unaudited)
Three Months Ended March
31, 2019 2018 (in thousands, except
percentages and per share data) Reconciliation of Gross
Margin to Non-GAAP Gross Margin: Gross margin $ 29,283 $ 30,739
Stock-based compensation expense in cost of revenue 78 68
Amortization of intangible assets in cost of revenue 864
921 Non-GAAP gross margin $ 30,225 $ 31,728 Revenue $ 60,425
$ 59,149 Gross margin percentage 48.5 % 52.0 % Non-GAAP gross
margin percentage 50.0 % 53.6 %
Reconciliation of Income
(Loss) from Operations to Non-GAAP Income (Loss) from
Operations: Income (loss) from operations $ (2,993) $ 971
Stock-based compensation expense 3,529 3,335 Amortization of
intangible assets 1,620 1,446 Acquisition-related costs 459
16 Non-GAAP income (loss) from operations $ 2,615 $ 5,768
Revenue $ 60,425 $ 59,149 Operating margin percentage (5.0) % 1.6 %
Non-GAAP operating margin percentage 4.3 % 9.8 %
Reconciliation of Net Income (Loss) to Non-GAAP Net Income:
Net income (loss) $ (1,970) $ 966 Stock-based compensation expense
3,529 3,335 Amortization of intangible assets 1,620 1,446
Acquisition-related costs 459 16 Non-GAAP net income
(loss) $ 3,638 $ 5,763 Non-GAAP net income (loss) per common share:
Basic $ 0.14 $ 0.22 Diluted $ 0.13 $ 0.21 Weighted-average number
of shares: Basic 26,563 25,904 Diluted 27,133 27,526
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version on businesswire.com: https://www.businesswire.com/news/home/20190509005510/en/
Investor RelationsLauren SloaneThe Blueshirt GroupTel: +1
415-217-2632lauren@blueshirtgroup.com
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