Steve Frankel: And you’ve said for the last couple of quarters that you have seen some good progress in the North American sales force, waiting for that to happen elsewhere. Is that lack of progress with some of these other geographies, economic related? Or do you think there are processes that just haven’t been implemented the right way in these other–?
Marc DeBevoise: Yes, I think it’s a little bit of both, Steve. I think we did have some economic factors in 2023, but we also had operational changes we needed to make. I think we’ve now made those. We have hit this year, I would say the most correctly staffed that we have been since I got here, and correctly, might be the wrong word, but we feel like we have the right teams in place in the right places coming into this Q1 more so than we did coming into last year. And so I feel good about that change to the Hunter the Hunt Rivers farmer sort of model that we have. We have a great new CRO, great new CMO. They’re about 40 days in at this point. But I can already tell the energy and the focus is there. So, I’m excited about what we can do together. And I feel like we are sort of poised in each of the territories to make some real progress this year. As opposed to last year, I think we struggled in a couple of those territories over time.
Steve Frankel: Okay. Thank you. I’ll jump back into the queue.
Marc DeBevoise: Thanks.
Rob Noreck: Thanks, Steve. We’ll now take questions from Eric Martinuzzi at Lake Street Capital.
Eric Martinuzzi: Hey guys. I was curious to know the negative services gross margin in Q4, what’s the explanation for that?
Rob Noreck: That’s related to some of the timing of expenses for project delivery. We don’t expect that negative margin to continue going forward.
Eric Martinuzzi: Okay. And then as far as gross margins for 2024, do we expect anything substantially different than the year just ended?
Rob Noreck: No, I think they’ll be in line. I think the product and engineering team has taken great strides to control the cost there. You’ll see a portion of those costs increasing year-over-year related to depreciation and amortization. So, where we can control the costs we are. But overall, I think the gross margin will stay roughly in line with where we are.
Marc DeBevoise: And Rob, I think worth commenting on the D&A sort of peaking at a certain point.
Rob Noreck: Yes. And as we go into 2024, the depreciation and amortization from our historical capital investments will peak in 2024 and then start to run off as we finish capitalizing those projects as we get into 2025, 2026.
Eric Martinuzzi: Got you. The operating expenses, you mentioned a 5% reduction in the head count in Q1, but that it took place, I guess, kind of midstream. So, given that we had $29.4 million of OpEx in Q4, what’s the right way to think about Q1 and then 2024?
Rob Noreck: Yes, I think Q1 will be roughly in line with what we saw in the fourth quarter, just a little bit under. And then as you go into the second quarter, they will step up a little bit, as I mentioned, mainly due to the timing of merit. We have slid merit increases out to the second quarter. So, see the timing of that increase hit in the second quarter and operating expenses will tick-up a little bit there.
Eric Martinuzzi: Okay. And then, Marc, you made some substantial management changes, including the guys sitting next to you. Also our Chief Marketing Officer, Chief Revenue Officer, you’ve now got a Chief Operating Officer. What — do we — are we pursuing the same strategy with just kind of new players in place or are there potential shifts in strategy with the addition of these senior execs?
Marc DeBevoise: No, I think on the CRO and CMO front, we have two tremendous new people in who are jumping in both head end feed first. I’m excited about them joining. We picked the right people for the right spots for those two roles. We went without a CMO for over six months last year and obviously, the CRO, which I took that internal for about a quarter and a half. So, it’s great to have them on board, and I’m excited for what you’re going to see come out of those two. David Beck, who’s been here for almost as long as I have, it was really a promotion to COO and taking on some new responsibility centralizing effectively our data and revenue and marketing operations functions as well as the strategy function together to be a sort of a central source of truth for the company.
I think that’s a really strong model for us on how to operate going forward and really be data-driven. And then Rob, obviously, we talked about it a little bit, been here a long time, making a decision that this is the right moment to transition. We’ve done a really good job of working together to figure out how that was going to kind of play out over the course of this year. And I think we have a great plan in place. We’re obviously searching for a new at this moment, but are already into that process. I feel really good about how we’re going to make that transition here likely in the second quarter.
