Control4

Prospectus Summary

PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information that may be important to you. You should read this entire prospectus and should consider, among other things, the matters set forth under "Risk Factors," "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes thereto appearing elsewhere in this prospectus before making your investment decision.

Overview

Control4 is a leading provider of automation and control solutions for the connected home. We unlock the potential of connected devices, making entertainment systems easier to use, homes more comfortable and energy efficient, and families more secure. We provide our consumers with the ability to integrate music, video, lighting, temperature, security, communications and other functionalities into a unified home automation solution that enhances our consumers' daily lives. More than 75% of our consumers have integrated two or more of these functionalities with our solution. At the center of our solution is our advanced software platform, which we provide through our products that interface with a wide variety of connected devices that are developed both by us and by third parties.

Our solution functions as the operating system of the home, making connected devices work together to control, automate and personalize the homes of our consumers. For example, our solution can be configured so that:

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A half hour before you wake up in the morning, the thermostat adjusts to heat up the house, the lights slowly become brighter and the shades gradually open;


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As you leave for work, one push of a button locks the doors, arms the security system, turns off all the lights, powers down all non-essential devices and adjusts the temperature settings to the "away" mode;


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When you return home in the evening, the push of a button opens your garage door, unlocks the door and adjusts the thermostat to your preferred temperature;


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When you are ready to watch a movie, instead of having to use several remotes, a single interface—be it a touch screen, smartphone, tablet or simple remote—provides you with easy control of your entire entertainment system. As the movie starts, the window blinds close, the lights dim and the temperature adjusts to keep your family comfortable; and


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When it is time for bed, the press of a "goodnight" button closes the blinds, turns off the lights, locks the doors, arms the security system and turns off all televisions and game consoles.

At the center of the Control4 product line is the Control4 Home Operating System, which we refer to as the C4 OS. We embed our C4 OS in a range of products, including controller appliances, interfaces and connected devices that interact with various music, video, lighting, temperature, security, communications and other devices. We offer our 4Sight subscription service, which allows consumers to control and monitor their homes remotely from their smartphone, tablet or laptop, and allows our dealers to perform remote diagnostic services. For example, 4Sight allows a consumer to remotely unlock the front door to let in a repairman, to turn on the air conditioning on the way home, and to monitor the home security cameras from a smartphone. In addition, our 4Store application marketplace offers a range of third-party applications for use with our products. We derive virtually all of our revenue from the sale of products that contain our proprietary software, and a smaller portion from software licensing and annual service subscriptions.

We were founded in 2003 to deliver a home automation solution to the mainstream market by enabling consumers to unify their connected devices into a personalized system at an accessible and affordable entry point. Based on our analysis, through March 31, 2013, we estimate that we have automated more than 120,000 homes representing cumulative sales of more than 275,000 of our controller appliances, the brain of the connected home. We sell and deliver our solutions through an extensive worldwide dealer and distributor network and have solutions installed in 81 countries. Our top 100 dealers represented 24% of our total revenue in 2012.

We generated revenue of $74.9 million, $93.4 million and $109.5 million in 2010, 2011 and 2012, respectively, and $26.6 million for the three months ended March 31, 2013. We had a net loss of $16.3 million, $3.9 million and $3.7 million in 2010, 2011 and 2012, respectively, and $1.5 million for the three months ended March 31, 2013.

Our Industry

Market Opportunity

Consumers are becoming more reliant on network-aware devices in their everyday lives, contributing to the creation of a large opportunity in the mainstream home automation market. Growth in smart devices, such as smartphones and tablets, and the ubiquity of wireless networks have combined to create the "connected consumer." These consumers are seeking a connected home with expanded capabilities in the form of networks, connected devices and smart systems.

Historically, the home automation market was primarily comprised of luxury systems that were so expensive that only wealthy consumers could afford the programming and installation costs. As consumer awareness of home automation grows and expectations for interoperable and more affordable solutions increase, the mainstream segment of the home automation market is expected to expand rapidly. According to ABI Research, the mainstream segment of the home automation market was estimated to be a $571 million market in 2012 and a $2.6 billion market by 2017, representing a CAGR of 35%, as consumers look for centralized solutions to provide personalized control and automation of their homes.

Consumer Requirements

For mainstream consumers to embrace a home automation solution, we believe that the solution must have the following attributes:

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Easy to Use. Accustomed to easy-to-use smartphones, consumers want a simple, unified, yet powerful and innovative interface for the unique set of devices and systems they have in their homes;


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Interoperable. Consumers are looking for a single solution with the ability to manage their network of current and future devices, regardless of manufacturer, technology or communication protocol;


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Personalized and Flexible. Consumers want to be able to easily personalize the behavior of the devices in their homes to reflect their own lifestyles and preferences—now and into the future—providing flexibility as their needs and lifestyles change;


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Affordable and Future-Proof. Consumers want a home automation solution that delivers rich functionality at an affordable price point and that adapts to changing needs over time without significant cost or disruption; and


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Accessible Service and Support. Consumers are looking for solutions that are supported by local trained specialists who can provide both responsive initial consultation and installation, as well as ongoing service and support.

Limitations of Traditional Approaches

The home automation market has traditionally been comprised of:

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Luxury Installations. Generally found in the highest end segment of the market, these systems and installations are typically complex, lengthy, inflexible and expensive;


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Managed Services. Generally provided by a cable, telephone or security provider, these services come as a non-personalized, one-size-fits-all service with narrow capabilities and recurring monthly charges; and


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Point Products. Generally supplied by companies focused on a discrete function within the home, these products typically lack interoperability with other devices.

Our Solution

The Control4 solution, built around our advanced software platform, sits at the center of the fast-growing mainstream segment of the home automation market. Our solution functions as the operating system of the home, integrating music, video, lighting, temperature, security, communications and other devices into a unified automation solution that enhances our consumers' daily lives. Our solution provides the consumer with the following key benefits:

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Easy to Use. Our solution is designed to be simple and intuitive. For example, our easy-to-use interfaces can be as advanced as a smartphone, tablet, in-wall touch panel, television or multi-function remote control, or as simple as a single button or switch;


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Broad Device Interoperability. Our open and flexible solution provides consumers with access to a broad universe of over 6,400 discrete third-party devices. With our solution, consumers can connect and automate the devices they already own—as well as the devices they purchase in the future—and have the confidence that all of those devices will interoperate as seamlessly as if they were made by the same manufacturer;


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Advanced Personalization. Our adaptable solution enables consumers to personalize the features and functionality of their Control4 system. Our modular design also enables the smooth integration of new third-party products to meet the evolving needs of our consumers as their lifestyles change;


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Attractive Entry Point. According to ABI Research, the typical luxury home automation installation can cost $60,000 or more for whole-home systems. With our solution, consumers can start with a single-room multi-media automation experience for about $1,000 and scale to an integrated solution with an average cost of $26,000;


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Professional Installation and Support Through Our Global Dealer Network. We have built a global network of over 2,800 active direct dealers and distributors to help consumers develop and install their customized home automation experiences with the Control4 solution; and


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Remote Access and Specialized Apps. We have developed complementary services and applications offerings to provide consumers more access, control and enhanced functionality over their automated homes.

Our Growth Strategy

Our goal is to be the leading global provider of mainstream home automation solutions and the operating system of choice for the home. The following are key elements of our growth strategy:

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Enhance Our Software Platform and Products. We intend to continue to invest in our software platform to develop new products, features and capabilities that deliver exceptional performance and value to our consumers;


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Strengthen and Expand Our Global Dealer Network. We plan to continue to expand, train, support and optimize our global certified dealer network to ensure that we have sufficient geographic coverage across both existing and new markets;


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Increase Penetration of Our North America Core Market. We intend to continue to focus sales and marketing resources to increase penetration of the residential market in North America;


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Expand Our Focus on Adjacent Markets. We plan to continue making investments to capitalize on opportunities outside the residential market, including in the light commercial, multi-dwelling unit and hospitality markets, and internationally;


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Enhance Our Solution with Services and Apps. We intend to continue to enhance our 4Sight subscription services and to support third-party apps via our 4Store application marketplace to deliver more functionality and value to our consumers;


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Pursue Technology Licensing Opportunities. We plan to expand our licensing activities to leverage third-party distribution channels, grow our partner relationships, and simplify the home automation experience for dealers and consumers; and


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Pursue Strategic Acquisitions. We intend to identify, acquire and integrate strategic technologies, assets and businesses that we believe will enhance the overall strength of our business.

Risks Related to Our Business

Our business is subject to numerous risks and uncertainties, including those highlighted in "Risk Factors" immediately following this prospectus summary. These risks include, but are not limited to, the following:

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We have incurred operating losses in the past, may incur operating losses in the future, and may not achieve or maintain profitability;


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The markets in which we participate are highly competitive and many companies, including large technology companies, broadband and security service providers and other managed service providers, are actively targeting the home automation market. Our failure to differentiate ourselves and compete successfully with these companies would make it difficult for us to add and retain consumers, and would reduce or impede the growth of our business;


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Consumers may choose to adopt point products that provide control of a discrete home function rather than adopting our unified home automation solution. If we are unable to increase market awareness of the benefits of our unified solution, our revenue may not continue to grow, or it may decline;


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Many of the competitors in our market, including providers of luxury integrated solutions with long operating histories, established markets, broad user bases and proven consumer acceptance, may be successful in expanding into the mainstream home automation market, which may harm our growth and future prospects;

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Since we rely on third-party dealers and distributors to sell and install our solutions, we do not have a direct sales pipeline, which makes it difficult for us to accurately forecast future sales and correctly predict manufacturing requirements;


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Our quarterly results of operations have fluctuated and may continue to fluctuate. As a result, we may fail to meet or exceed the expectations of investors or securities analysts, which could cause our stock price to decline; and


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If we are unable to develop new solutions, sell our solutions into new markets or further penetrate our existing markets, our revenue may not grow as expected.

Corporate Information

We were incorporated in Delaware in 2003. Our principal executive offices are located at 11734 South Election Road, Suite 200, Salt Lake City, Utah 84020, and our telephone number is (801) 523-3100. Our principal website address is www.control4.com. Information contained on our website does not constitute a part of, and is not incorporated by reference into, this prospectus.

Control4, the Control4 logo, 4Sight, 4Store and Control4 MyHome are registered trademarks or trademarks of Control4 Corporation in the United States and, in certain cases, in other countries. This prospectus contains additional trade names, trademarks and service marks of other companies. We do not intend our use or display of these companies' trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earliest to occur of: the last day of the fiscal year in which we have more than $1.0 billion in annual revenue; the date we qualify as a "large accelerated filer," with at least $700 million of equity securities held by non-affiliates; the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; or the last day of the fiscal year ending after the fifth anniversary of our initial public offering.

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