Control4 Sees ‘Finite’ Number of Qualified Home Automation Dealers, Annual Report Says

Control4 is looking to “enhance our dealer footprint,” and work with “larger and more sophisticated dealers” while expanding the mainstream consumer products its dealers offer, said the 10-K report it filed with the SEC Friday. Currently, none of the company’s 3,000-plus dealers accounts for more than 5 percent of Control4 revenue, it said. The top 100 dealers represented 22 percent of Control4 revenue in 2013, it said. There’s a “finite” number of dealers qualified to handle the technical requirements of a home automation system, Control4 said.

The company estimated it has automated more than 150,000 homes with 340,000 controllers, which are the brain of a connected home. The price of a Control4 system starts at about $1,000 for single-room multimedia automation, with an average integrated solution cost of $26,000, the company said. More than half of consumers have systems with one controller, with an average cost of $4,000, and a median cost of $2,500, including installation, it said.

In a breakdown of functionality within installed Control4 systems, Control4 said 100 percent of systems include video control, 57 percent have audio, 51 percent have lighting, 32 percent have communications, 31 percent have security and 23 percent have temperature control. More than 78 percent of consumers have integrated at least two of the functions in their homes, it said.

Control4 cited as a potential risk the “rapid technological change” inherent in the home automation and control industry. The company’s ability to attract new customers and increase revenue from existing customers will hinge on its ability to “anticipate changes in industry standards and to continue to enhance or introduce existing solutions on a timely basis to keep pace with technological developments,” it said. Control4 is “changing several aspects” of its operating system and may use Android open source technology in the future, it said, which could present challenges in compatibility, stability and time to market.

At the end of 2013, Control4 had control agreements with more than 150 manufacturers, and 49 of those had formally submitted devices for certification with the platform, the company said. Fifty-nine third-parties licensed Control4’s SDDP device auto-discovery technology by year end, to make it easier for dealers and consumers to add products to existing systems, and 22 companies began shipping products last year, it said. More than 800 products from 43 brands are selling through Control4’s online store, it said.

Control4 hardware products are primarily produced by contract manufacturers Sanmina and LiteOn in southern China, with additional manufacturing done by six contract manufacturers based in Asia, it said. The agreement with Sanmina expires in June 2017, after which it automatically renews for successive one-year terms unless either party terminates the agreement with 90 days’ notice, and the agreement with LiteOn expires in December 2014, after which it renews for successive one-year terms unless either party terminates the agreement with 180 days’ notice, Control4 said. The manufacturing partners ship hardware products to fulfillment centers in Salt Lake City and York, England.