Control4 Reports Financial Results for Third Quarter 2013 North America Delivers 21% Year-Over-Year Revenue Growth Contributing to Strong Net Income SALT LAKE CITY, Oct. 31, 2013 (GLOBE NEWSWIRE) -- Control4 Corporation (Nasdaq:CTRL), a leading provider of automation and control solutions for the connected home, today announced financial results for its third quarter and the nine months ended September 30, 2013. Revenue for the third quarter of 2013 was $33.6 million, compared with $28.6 million for the third quarter of 2012, representing 18% year-over-year growth. Revenue for the nine months ended September 30, 2013 also grew 18% to $92.8 million, compared with $78.8 million for the nine months ended September 30, 2012. Net income for the third quarter of 2013 was $1.7 million, or $0.07 per diluted share, compared with net loss of $4.1 million, or $1.73 per diluted share, in the third quarter of 2012. Net income for the nine months ended September 30, 2013 was $1.2 million, or $0.06 per diluted share, compared with net loss of $6.3 million, or $2.69 per diluted share, for the nine months ended September 30, 2012. Control4 recorded non-GAAP net income of $2.9 million in the third quarter of 2013, or $0.12 per diluted share, compared with $1.3 million, or $0.07 per diluted share, in the third quarter of 2012. Non-GAAP net income for the nine months ended September 30, 2013 was $4.1 million, or $0.20 per diluted share, compared with a Non-GAAP net income of $547,000, or $0.03 per diluted share, for the nine months ended September 30, 2012. A reconciliation of GAAP to non-GAAP financial information is contained in the attached tables. "This quarter we continued to increase the penetration of our products across our global dealer network. We are very pleased with our business traction in North America, which delivered 21% year-over-year revenue growth," said Martin Plaehn, chief executive officer of Control4. "We launched new multi-room media distribution products to enhance our audio and video solutions and we continue to strengthen our 3^rd party device ecosystem to provide our customers and dealers with unparalleled integration within our home automation solutions." Commenting on the company's financial results, Dan Strong, chief financial officer of Control4, added, "Our financial performance speaks to our continued progress as a leading home automation provider and reflects our focus on innovation and revenue growth while gaining operating leverage, as evidenced by both our top line growth and bottom line performance." For the fourth quarter of 2013, the company expects revenue to be between $35.0 million and $36.5 million, and expects non-GAAP net income to be between $2.6 million and $3.7 million, or between $0.10 and $0.15 per diluted share. Non-GAAP Financial Measures Control4's stated results include certain non-GAAP financial measures, including non-GAAP adjusted gross margin, non-GAAP adjusted operating income, non-GAAP net income and non-GAAP net income per diluted share. Non-GAAP adjusted gross margin, non-GAAP adjusted operating income, and non-GAAP net income exclude non-cash expenses related to stock-based compensation as well as gains or losses on inventory purchase commitments. The company further excludes litigation settlement expenses from non-GAAP operating income 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 our business operations. Management also believes that it is useful to exclude gains or losses on inventory purchase commitments because it is income or expense that arose from our commitment to purchase energy-related products from a contract manufacturing partner that will not be used going forward due to the decision to discontinue our energy product line for utility customers. The Company has not recognized that type of income or expense in periods prior to 2012, and management believes that past and future periods are more comparable if that income or expense is excluded. Furthermore, the Company believes it is useful to exclude litigation settlement expense because of the variable and unpredictable nature of these expenses, which are not indicative of past or future operating performance. Management believes that past and future periods are more comparable if that expense is excluded. Control4 believes these adjustments provide useful comparative information to investors. Control4 considers these non-GAAP financial measures to be important because they provide useful measures of its operating performance and are used by its management for that purpose. In addition, investors often use measures such as these to evaluate the operating performance of a company. Non-GAAP results are presented for supplemental informational purposes only for understanding Control4's 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. Conference Call Control4 Corporation (Nasdaq:CTRL) will host an investor conference call and webcast the event beginning at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time) on October 31, 2013. To access the conference call, dial 480-629-9712 or 877-941-2068 (toll free) and enter passcode 4644548. The webcast and replay will be accessible on Control4's investor relations website at http://investor.control4.com/. A replay of the conference call will be available within two hours of the conclusion of the conference through November 11, 2013. To access the replay, please dial 303-590-3030 or 800-406-7325 and enter passcode 4644548. About Control4 Corporation (Nasdaq:CTRL): Control4 is a leading provider of automation and control systems for the connected home. Control4 unlocks the potential of connected devices, making entertainment systems easier to use, homes more comfortable and energy efficient, and families more secure. Control4 provides its consumers with the ability to integrate music, video, lighting, temperature, security, communications and other functionalities into a unified home automation solution that enhances their daily lives. At the center of the Control4 solution is an advanced software platform, which Control4 provides through its products that interface with a wide variety of connected devices developed both by Control4 and by many third parties. Control4's solution functions as the operating system of the home, making connected devices work together to control, automate and personalize the homes of its consumers. By delivering insightfully simple, personalized control solutions that enhance the lives of individuals and families, Control4 is the automation platform of choice for consumers, major consumer electronics companies, hotels and businesses around the world. To learn more, visit Control4 at www.control4.com. 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 financial outlook. All statements other than statements of historical fact contained in this press release are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. These forward-looking statements are made as of the date they were first issued and were based on 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, risks detailed in Control4's risk factors discussed in filings with the U.S. Securities and Exchange Commission ("SEC"), including but not limited to Control4's Registration Statement on FormS-1 declared effective by the SEC on August1, 2013, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, as well as other documents that may be filed by the Company from time to time with the SEC. In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: the ability of Control4 to remain competitive and maintain its position in the market; Control4's ability to increase market awareness of its solution and brand; the ability of dealers and distributors to sell Control4 solutions; quarterly and annual operating results may fluctuate more than expected; the ability of Control4 to develop new solutions and develop and expand its network of dealers and distributors; the ability of Control4 to realize the intended benefits of its strategic relationships; the compatibility of Control4 solutions with third-party products and applications; the ability of Control4 to adapt to technological changes; the market for Control4's solutions may develop more slowly than expected; the risk of losing key employees; increased demands on employees and costs associated with operating as a public company; general political or destabilizing events, including war, conflict, or acts of terrorism; and other risks and uncertainties. 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. The Company anticipates that subsequent events and developments will cause its views to change. Control4 undertakes no intention or 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. CONTROL4 CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, September 30, 2012 2013 (unaudited) Assets Current assets: Cash and cash equivalents $18,695 $82,485 Accounts receivable, net 13,078 15,941 Inventories 12,515 15,559 Prepaid expenses and other current assets 1,871 1,965 Total current assets 46,159 115,950 Property and equipment, net 2,666 3,640 Intangible assets, net 926 970 Other assets 887 1,130 Total assets $50,638 $121,690 Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit) Current liabilities: Accounts payable $14,435 $16,699 Accrued liabilities 6,571 5,548 Deferred revenue 542 637 Current portion of notes payable 1,321 1,191 Total current liabilities 22,869 24,075 Notes payable 1,838 2,127 Warrant liability 601 -- Other long-term liabilities 1,620 484 Total liabilities 26,928 26,686 Commitments and contingencies Redeemable convertible preferred stock, $0.0001 par value; 83,163,408 and no shares authorized; 15,293,960 and no shares issued and outstanding at December 31, 2012 and September 30, 2013 116,313 -- (unaudited), respectively; aggregate liquidation preference of $118,150 and $0 at December 31, 2012 and September 30, 2013 (unaudited), respectively Stockholders' equity (deficit): Preferred stock, $0.0001 par value, no and 25,000,000 shares authorized; no shares issued and -- -- outstanding at December 31, 2012 and September 30, 2013 (unaudited), respectively Common stock, $0.0001 par value; 127,836,592 and 500,000 000 shares authorized; 2,490,870 and 22,766,644 shares issued and outstanding at -- 2 December 31, 2012 and September 30, 2013 (unaudited), respectively Additional paid-in capital 12,988 199,354 Accumulated deficit (105,587) (104,354) Accumulated other comprehensive income (loss) (4) 2 Total stockholders' equity (deficit) (92,603) 95,004 Total liabilities, redeemable convertible preferred $50,638 $121,690 stock and stockholders' equity (deficit) CONTROL4 CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Three Months Nine Months Ended Ended September 30, September 30, 2012 2013 2012 2013 (unaudited) (unaudited) Revenue $28,605 $33,641 $78,847 $92,755 Cost of revenue 14,918 16,592 41,710 46,129 Cost of revenue – inventory purchase 1,840 -- 1,840 (180) commitment Gross margin 11,847 17,049 35,297 46,806 Operating expenses: Research and development 5,158 6,409 15,119 18,670 Sales and marketing 5,333 5,596 15,479 16,597 General and administrative 2,471 2,847 7,666 8,623 Litigation settlement 2,869 200 2,869 440 Total operating expenses 15,831 15,052 41,133 44,330 Income (loss) from operations (3,984) 1,997 (5,836) 2,476 Other income (expense): Interest income 2 4 11 8 Interest expense (65) (209) (209) (420) Other income (expense) (45) 42 (222) (699) Total other income (expense) (108) (163) (420) (1,111) Income (loss) before income taxes (4,092) 1,834 (6,256) 1,365 Income tax expense -- (103) -- (132) Net income (loss) $(4,092) $1,731 $(6,256) $1,233 Net income (loss) per common share: Basic $(1.73) $0.12 $(2.69) $0.19 Diluted $(1.73) $0.07 $(2.69) $0.06 Weighted‑average number of shares: Basic 2,363 14,389 2,324 6,511 Diluted 2,363 23,556 2,324 21,206 Stock-based compensation expense included in the consolidated statements of operations data: Cost of revenue $18 $15 $53 $46 Research and development 202 419 461 974 Sales and marketing 139 187 421 543 General and administrative 363 319 1,159 1,085 Total stock-based compensation $722 $940 $2,094 $2,648 expense CONTROL4 CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Nine Months Ended September 30, 2012 2013 (unaudited) Operating activities Net income (loss ) $(6,256) $1,233 Adjustments to reconcile net income (loss) to net cash (used in) provided by operatingactivities: Depreciation expense 1,254 1,609 Amortization of intangible assets 203 218 Provision for doubtful accounts 203 112 Loss (gain) on inventory purchase commitment 1,840 (180) Stock‑based compensation 2,094 2,648 Warrant liability expense 222 709 Changes in assets and liabilities: Accounts receivable (3,199) (2,978) Inventories (1,318) (2,947) Prepaid expenses and other current assets (495) (98) Other assets (783) (243) Accounts payable 3,964 2,150 Accrued liabilities 2,650 (838) Deferred revenue 46 95 Other long-term liabilities (450) (1,138) Net cash (used in) provided by operating activities (25) 352 Investing activities Purchases of property and equipment (1,656) (2,575) Business acquisition -- (88) Net cash used in investing activities (1,656) (2,663) Financing activities Proceeds from issuance of common stock, net of issuance -- 65,556 costs Proceeds from exercise of options for common stock 191 367 Proceeds from notes payable 1,376 1,145 Repayment of notes payable (708) (986) Net cash provided by financing activities 859 66,082 Effect of exchange rate changes on cash and cash (37) 19 equivalents Net increase (decrease) in cash and cash equivalents (859) 63,790 Cash and cash equivalents at beginning of period 18,468 18,695 Cash and cash equivalents at end of period $17,609 $82,485 Supplemental disclosure of cash flow information Cash paid for interest $208 $419 Cash paid for taxes -- 131 Supplemental schedule of non-cash investing and financing activities Options for common stock granted in connection with a -- 174 business acquisition Elimination of liability upon net exercise of warrants to -- 1,310 purchase preferred stock Conversion of redeemable convertible preferred stock to -- 116,313 common stock CONTROL4 CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (in thousands, except percentages and per share data) (unaudited) Three Months Nine Months Ended Ended September 30, September 30, 2012 2013 2012 2013 Reconciliation of Gross Margin on a GAAP Basis to Adjusted Gross Margin on a Non-GAAP Basis: Gross margin $11,847 $17,049 $35,297 $46,806 Stock-based compensation expense in 18 15 53 46 cost of revenue Cost of revenue - inventory purchase 1,840 -- 1,840 (180) commitment Adjusted gross margin $13,705 $17,064 $37,190 $46,672 Revenue $28,605 $33,641 $78,847 $92,755 Gross margin percentage 41.4% 50.7% 44.8% 50.5% Adjusted gross margin percentage 47.9% 50.7% 47.2% 50.3% Reconciliation of Operating Income (Loss) on a GAAP Basis to Adjusted Operating Income on a Non-GAAP Basis: Income (loss) from operations $(3,984) $1,997 $(5,836) $2,476 Stock-based compensation expense 722 940 2,094 2,648 Cost of revenue - inventory purchase 1,840 -- 1,840 (180) commitment Litigation settlement 2,869 200 2,869 440 Adjusted operating income from $1,447 $3,137 $967 $5,384 operations Revenue $28,605 $33,641 $78,847 $92,755 Operating margin percentage -13.9% 5.9% -7.4% 2.7% Adjusted operating margin percentage 5.1% 9.3% 1.2% 5.8% Reconciliation of Net Income (Loss) on a GAAP Basis to Adjusted Net Income on a Non-GAAP Basis: Net income (loss) $(4,092) $1,731 $(6,256) $1,233 Stock-based compensation expense 722 940 2,094 2,648 Cost of revenue - inventory purchase 1,840 -- 1,840 (180) commitment Litigation settlement 2,869 200 2,869 440 Adjusted net income $1,339 $2,871 $547 $4,141 Adjusted net income per common share: Basic $0.57 $0.20 $0.24 $0.64 Diluted $0.07 $0.12 $0.03 $0.20 Weighted‑average number of shares: Basic 2,363 14,389 2,324 6,511 Diluted 19,052 23,556 18,872 21,206 CONTACT: Investor Relations Mike Bishop The Blueshirt Group Tel: +1 415-217-4968 email@example.com Media Relations Brittany Rae Fraser ICR, Inc. Tel: +1 646-277-1231 firstname.lastname@example.org
Control4 Reports Financial Results for Third Quarter 2013
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