Control4 Reports Financial Results for Q1 2019

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

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

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

Stock-based compensation included in the consolidated statement of
operations data (unaudited):

View source version on businesswire.com: https://www.businesswire.com/news/home/20190509005510/en/