Gary Prestopino: A couple of questions. With the introduction of the inbound subrogation, the debt automatically attached to entities that were using the outbound subrogation or is that sold a la carte, inbound and outbound sold a la carte?
Githesh Ramamurthy: Gary, the short answer is yes, it can be adopted individually. So we have customers that have chosen to adopt both inbound and outbound at the same time. We have customers that started out — starting out with outbound. And so it can work in any way. And that’s generally how all our solutions work. You can adopt any components because it works seamlessly with all the other components.
Gary Prestopino: Are you finding that the ones that we’re using outbound are rapidly adopting inbound, too, to have that end-to-end solution?
Githesh Ramamurthy: It’s actually more the other way around. We are seeing much more interest in inbound because of the complexity and then many of those customers are choosing to also saying, hey, once we get this rolled out, we want to move to your outbound solutions. Some are actually starting with both.
Gary Prestopino: And then just one question on this Cloud IX, where you’re talking about taking events and decisions across the network to improve claims processing. Does that — would that also be applicable to if there was a dispute that who was at fault at an accident? Can this product help with that since you’ve got a whole data set of various accidents that show who is at fault, if fault was determined?
Githesh Ramamurthy: Yes. Those are things that we’ll probably come up with because what you’re fundamentally talking about is liability determination. So when you think about liability determination, there are a number of factors that actually come in. For example, we have intersection data, we have weather data, when someone is taking a left turn who had the right of way when a certain accident took place. We also have some pieces that can do accident reconstruction. So these are all capabilities that we can introduce and the power of the IX Cloud is to put all of these pieces together in a seamless, easy to absorb manner so that at an individual claim level, you can get optimum performance.
Operator: Our next question will be coming from Samad Samana of Jefferies.
Jeremy Sahler: This is Jeremy on for Samad. A lot of my questions have already been asked. Maybe one more quick one on emerging products. So in order to achieve that 3 to 4 points of growth in the longer term, I guess, what percent of the client base do you see is likely having to adopt these products? I guess, what’s the penetration that you need there and what’s that terminal penetration?
Brian Herb: Yes. Good question. Yes. I mean we look at it as a deployment of the solutions across the existing base. So when we think about kind of where we are with the ecosystem and all the participants of the ecosystem, many of them have the established solutions. So we just see them stepping up the penetration across the emerging. So we’re not kind of calling out a percent of our existing clients to convert it. It’s more that if they step into the adoption that it will ramp up over time.
Jeremy Sahler: Got you. That’s helpful. And then maybe a quick one. You mentioned you began rolling out the new top 20 APD insurance client that you announced last year. I guess, can you maybe remind us what does the rollout like this look like? And when do you expect the full revenue contribution from this insurer?
Brian Herb: Yes, absolutely. It will start to fully contribute in the second half of the year. It will start to play into the Q2 numbers, but not fully rolled out. So it will partially come into Q2 and then fully roll out in the second half.
Githesh Ramamurthy: We just started.
Operator: The next question is coming from Kirk Materne.
Unidentified Analyst: This is [indiscernible] on for Kirk. The auto insurance has been up recently based on inflation. With that in mind, how are companies thinking about IT spend in your industry?
Githesh Ramamurthy: In fact, I was just talking to a customer in my office just today. And what they are looking for is any solutions that can give them rapid ROI. So people are very open to more solutions. They’re not looking at this as should I increase my IT spend or should I decrease my IT spend. What people are saying is solutions that I can deploy easily that give me ROI. I am ready to put that in place. And the last 2 years have shown that people need to be competitive.
Operator: The next question will be coming from Chris Moore of CJS Securities.
Christopher Moore: But obviously, given the conversation you started with on the investment you’re making at IX Cloud and across the board, R&D was higher than normal, close to, I don’t know, 22% this quarter. almost $50 million. Just trying to understand if this is kind of the new normal level moving forward? Or kind of how we should think about that at this stage?
Githesh Ramamurthy: That might include stock.
Brian Herb: Yes, it does, Chris. So it’s Brian. Yes, you have to look at it kind of in the — excluding the stock comp. So that will be the biggest driver. If you exclude stock comp, there — it does continue to grow, but it’s pretty moderate. We talked about in the past that we had meaningful step-up in capacity that’s built into the system, and we feel like that capacity is what we need to drive innovation going forward. And so we’re comfortable that R&D will continue to grow, but grow at a reasonable pace and continue to drive leverage across the business. And we’re very comfortable on the margin progression that we’re talking about for the full year, and we’re comfortable about the margin progression to our target of getting to the mid-40s over time.
Operator: Our next question will be coming from Gabriela Borges of Goldman Sachs.
Gabriela Borges: I wanted to ask the new levers of question in a couple of different ways. The first part is around the success that you’re having in the repair shop community, remind us how to think about penetration there and what the limiting factor is into the number of new levers that you can get in any given year within that ecosystem, given there is a little bit of network effect in ?
Brian Herb: Yes. Gabriela. So the way we look at the shop network is about 40,000 repair shops that are kind of the marketplace. Today, we have 29,500. We’ve been adding, if you look back over the past several years, about 1,000 net new logos a year, and we continue to see that pacing and very comfortable with that pacing for the year and in the near term. So really good momentum, continuing to see strength in new logo adoption at the shops.
