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Control4 Sees Connected-Product Growth Boosting Its Sales Potential

New York – Control4 executives went to an investors’ conference here to deliver an optimistic forecast of their company’s potential in the growing home-automation business, thanks in large part to the growing number of home products that connect to wireless networks.

Chairman/CEO Martin Plaehn cited a “huge opportunity before us” because the company’s two controllers, priced at a suggested $750 and $1,500, “sit at the center to organize those devices.”

Control4 also forecast continued growth because the company is “already seeing penetration” into households with incomes of just below $100,000, expanding the market to such people as young adults professionals buying their first condo, Plaehn said.

Thirteen percent of the 150,000 U.S. homes with C4 systems have incomes of less than $100,000, he said. Forty-five percent of C4 households in the U.S. have incomes of $100,000-$250,000, and 42 percent have incomes of more than $250,000.

C4 household penetrations stands at only 0.1 percent in the U.S, Plaehn added, presenting huge growth potential.

Plaehn didn’t see a threat from Google’s entry into home automation via its Nest acquisition or from Apple’s rumored entry into the home-automation space. Their entry “validates a large opportunity,” he said. “Our business will get much bigger before we see a slowdown.”

For the year ending December, the company posted a 17.4 percent revenue gain to $128.5 million and swung to a net profit of $3.5 million compared to a prior-year net loss of $3.72 million. The company went public in August 2013.

For the first quarter ending March, the company posted a 19 percent revenue gain to $31.9 million, and its net loss of $539,000 shrank from a year-ago net loss of $1.47 million.

The company expects 2014 revenues to rise by 16 percent to 20 percent in 2014 to anywhere between $149 million to $154 million. That compares to $57.1 million in 2008.

During their presentation, executives also revealed details about the company’s product margins, dealer base, average install prices, and other business metrics.

About 37 percent of revenues come from sales of controllers and 63 percent from sales of such solutions as in-wall dimmers, smart door locks, HVAC controls, multiroom-A/V systems, and security cameras. The company’s controllers connect to other-brand solutions as well.

As for product margins, “We sell [controllers] at 40 points off MSRP,” said Plaehn. Their margins are about the same as those on such solutions such as $125 in-wall dimmers and $400 smart door locks.

Control4 sells these products through 2,500 North American dealers. The total dealer base in 88 countries comes to 3,100. They include a mix of A/V installers, security dealers and lighting installers.

The top 10 dealers worldwide generate 6 percent of the company’s revenues, and the top 100 deliver 22 percent.

Because of the housing-market crash in the previous decade, Control4 now gets about 70 percent of revenues from retrofit and remodeling installs versus 20 percent in 2008 and 2009.

Despite the rise of home-automation products targeted to do-it-yourselfers, Plaehn sees continued opportunity for the installer channel. He cited a “short list of products capable of self-installation,” including high-end door locks that can take a DIYer one to two days to install, including multiple trips to the hardware store. Baby cams could be self-installed, but most consumers will shy away from installing exterior-mounted security cameras, he said.

Small installations averaging $4,200, including installation charges, account for 52 percent of Control4 installations, with medium-size installs with an average price of $10,600 accounting for 33 percent of installs. Large installs averaging $25,000 account for 15 percent on installs.

 In other comments, Plaehn said about 80 third-party companies have added Control4’s Simple Device Discovery Protocol (SDDP) to more than 300 home products. SDDP streamlines installation by enabling Control4 controllers to automatically discover the products and their IP addresses and add them to a home-automation system.