Control4 (Nasdaq: CTRL), a leading provider of home automation, lighting control and multiroom A/V systems for the home-technology integrator channel, released positive results for its Q1 2016 ended March 31, with revenues way up and full-year guidance in line with consensus estimates.
Today, the first day of trading after the Q1 report, CTRL shares rose 11.2% to $7.93. At times during the day, CTRL shares reached $8.60, more than 20% higher than yesterday’s close.
Here are some highlights from the Q1 report and yesterday’s earnings call.
- Total revenue for the quarter was $43 million, resulting in year-over-year growth of 34%, beating estimates.
- The new networking products from the Feb. 24, 2016, acquisition of Pakedge contributed $3.2 million in revenue during the last two months of the quarter, meaning Control4’s organic growth was 24% compared to the first quarter of 2015.
- More than 370 Control4 dealers have purchased Pakedge products for the first time since the acquisition.
- Pakedge dealers who were not Control4 dealers before the acquisition – about 1200 of them – have been “cautiously neutral” in their purchases in the three months following the acquisition.
- CEO Martin Plaehn: “We intend to grow the Pakedge networking product business and expand its sales channel of networking specialty. We will encourage all appropriately qualified Pakedge and Control4 dealers to explore both product lines and we will be actively cross-training and cross-certifying dealers in accordance with our existing standards of technical proficiency and business practices.”
- In Q1, Control4 shipped more than 19,500 EA series controllers, which were launched on January 6. (4,500 legacy HD series controllers also were sold.)
- Year-over-year, total controller sales increased 73% in Q1 – from 13,900 in Q1 2015 to 24,100 in Q1 2016.
- Control4 says it has “expanded the market” both at the low end and high end with its EA1 ($500) and EA5 ($2,000) controllers. The middler is the EA3 ($1,000).
- In Q1, Control4 added 99 dealers in North America — the most added in a single quarter since Q3 2013.
- Control4 estimates Q2 2016 revenue at $49.3 to $51.3 million, meaning the first-half year-over-year growth should be 20% to 23%.
- First-half comparisons are more germane than Q1 comparisons because of unusual events in the first quarters of both years: 1) Q1 revenues for 2015 were suppressed from the late shipment of several key products, which were delayed until Q2. 2) Q2 revenues were especially high due to the shipment of the EA Series, a brand new line of high-performance controllers with expanded implications for the low and high end of the market.
- Control4 estimates non-GAAP net income for Q2 2016 at $3.8 to $4.8 million or $0.15 or $0.20 for fully diluted share. For full-year 2016, Control4 reiterates its annual guidance of $198 to $202 million in revenue and $16 to $18 million of non-GAAP net income or non-GAAP EPS of $0.67 to $0.76.
- The fact that Control4 added more dealers than ever in Q1, along with the rapid adoption of Pakedge products by Control4 dealers, gives investors “a lot of positive reasons to believe that the momentum that we're seeing in Q1 carry into future quarters,” says CFO Mark Novakovich.
So it seems this Control4 shorter Howie Man, who doesn’t quite get Control4 and the market it serves, was kind of off base in his March 30, 2016, report: Control4: Insurmountable Competitive Pressure Leads To Large Price Cuts And Business Impairment.
We have written about Control4 Corp. (NASDAQ:CTRL) (“CTRL” or the “Company”) twice before – both turned out to be quite timely and accurate calls. We believe current conditions present another, even more attractive opportunity to short the stock. Over the last two months, CTRL's stock has run-up nearly 50% despite significant negative developments including: 1) a 40% price cut to its controllers effective January 15th, 2) a questionable acquisition that consumed half its cash, and 3) a massive increase in Amazon's (NASDAQ:AMZN) commitment to the Echo product line in January with a stated intent of dominating the home automation market.
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