Control4 Corporation (CTRL:BUY) The company announced better than expected second quarter results with revenues increasing 13%

7-SEP-18 – Control4 Corporation (CTRL:BUY) The company announced better than expected second quarter results with revenues increasing 13% to $69.2 million and EPS up 35% YOY. CTRL also raised its full year FY18 revenue and EPS guidance. We maintain our BUY rating and increase our target price to $37.00 per share.

Q2:18 Highlights

  • Q2:18 revenues were $69.2 million, up 13% from Q2:17, largely attributable to revenue growth in both the North America (+11% YOY) and international (+18% YOY) segments on account of new dealer additions as well as growth from existing dealers.
  • CTRL delivered non-GAAP gross margin of 53.9%, compared to 53.6% in Q1:18 and 52.6% in Q2:17.
  • The North American dealer network grew ~6% to 3,280 dealers in Q2:18. While the number of international dealers grew ~10% to 1,410.
  • The CA-1 Automation controller saw significant sales traction in Q2:18 and management expects its demand to remain robust for the remainder of the year.
  • For the full year of 2018, CTRL expects revenue to be between $273 million and $276 million, and non-GAAP net income to be between $38 million to $40 million.
  • We marginally adjust our estimates based on the results and management commentary. We maintain our BUY rating and increase our target price to $37.00, with an implied capital appreciation potential of 14%.

PRIMARY RISKS

  • Projected sales and earnings are dependent on economic growth in the Company’s target markets. Unexpected political or economic shocks could interrupt consumer spending in these regions.
  • The market is highly fragmented and competitive with presence of large established multinational corporations which have larger resources than CTRL.