Cory Carpenter: Hey, good afternoon. I wanted to ask on the recent software product launches. Hoping you could expand a bit on the early reception you’re seeing, and then, maybe more specifically what you’re building into the guide around adoption and monetization as we progress through the year? Thank you.
John Heyman: Well, we kicked off the launch, Cory, with Summit, where we invited some of our top Control4 customers, when I say some, 100s. And we spent two to three days with them. This of course was after a pilot period beta, if you will, with tens of them. And it’s also on top of the experience we’ve had with 100s of Parasol partners and over 100,000 Foresight subscribers. And, I think the announcement was quite notable in the industry. I think it met with great press coverage, maybe with the exception of one columnist. And, inside our Summit, the response was fantastic. I couldn’t literally not have been more pleased and I’m an optimist. And, when we did a survey afterwards, the sentiment on those who attended the reception was staggering.
And, while we had, the subscription offering for the software was mandatory, the Assist, the support offering where dealers may or may not pride themselves on the level of service they provide the end customer. It was amazing to me, like people really see that as a way to provide their end customer with more service and they can’t do it themselves. They just don’t have the manpower to staff seven days a week, 24 hours a day. And so, we were quite pleased with that. The sales sentiment, so we had the top couple of 100 Control4 partners, but there’s over 3,000 Control4 partners who weren’t at the event. The sentiment from our sales force post event has been exceptionally strong. There’s always nitpickers out there, in terms of social media and so forth, but we continue to educate them and what’s been really interesting is watching other dealers educate, the nitpickers, if you will.
So, we have strong conviction. We’re starting to see it in the numbers by the way, like even though it’s not required today, it’s not required till the end of April, we’re giving the market some time to absorb this and teach their salespeople about it, etcetera. Literally the first week after the Summit, we started seeing subscribers come online. The pace of the subscribers coming online is increasing. It won’t really turn upwards in my mind until it becomes mandatory. What we have done in terms of our own guidance to The Street, is we’ve been conservative. We are only launching this inside the U.S. It’s not being launched outside the U.S. right now. We are inside our models. We are assuming that with the launch, we’ll have around these are round numbers, 15,000 to 20,000 subscribers for our Connect offering by the end of the year.
So, that will start to really ramp in May. We’ll be able to talk to you more about that after the second quarter. We’re modeling the Assist and Assist Premium. Those are the two levels of support to have a much lower attach rate for them, less than 10% of the subscribers. I think, I’m expecting to see some upside there. By early next year, so that’s how this will ramp this year. So, kind of our exit run rate, we’re anticipating to be in the high-teens to 20,000 subscribers. That translates, by the way, when you add it all up to, recognized revenue, because there’s a difference between booked revenue versus recognized revenue because they don’t start paying until the systems installed. And so this year, we expect to have a fairly small amount of recognized revenue, roughly $2 million but that increases quite significantly next year into the tens of millions as the installed base grows and we make this available outside the United States.
So, to sum it all up, I would say high-teens to about 20,000 subscribers this year. Think about that growing 50,000 plus subscribers a year. The mandatory offering of $250 a year should be applied to those numbers. The integrator share of percentage of that roughly 40% of the Connect fee and 30% of the Assist fee since we do more work with, we’ve mend the phones there. Those offerings cost $900 the service offerings are either $900 or $3,000 depending on which service offering you elect. Those are all well tested price points in the market at this point now. And so, that’s how we build the model. And so, if you’ll let me for a second, none of those numbers sound big when I start with $2 million this year. By the way, we do about $13 million right now with Foresight and Parasol, so that would be $15 million total.
But, if you let yourself think out five years and you’ll think about the history of our installed base and you apply very like less than 10% penetration of our service offerings assist and you multiply every single one of our installs by $250 for Connect, then you end up with somewhere around 270,000 subscribers in five years. And that drives roughly $95 million of revenue when you apply our mix. That’s all highly profitable recurring revenue. And, that does not include us creating an offering for the 500,000 or so installed base of existing Control4 customers that we would want to put on top of that 270,000. This is why we’ve invested well over $10 million over the past couple of years building this. This is why we’ve been spending time with the Foresight subscription product, the Parasol service product.
We think it can transform the P&L of our Company, but we also think it can transform the P&L of every integrator out there who is trying to develop recurring revenues. I’ll stop there.
Cory Carpenter: Great. Thank you. That was super comprehensive. Appreciate it.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Stephen Volkmann with Jefferies. Your line is now open.
Stephen Volkmann: Great. Thanks, guys. John, that was very comprehensive and you mentioned strong margins on these recurring revenues. Is it reasonable to think of those as just kind of normal SaaS type margins like 80% or something? Or would there be some other cost in there we should just keep in mind?
