Operator: Thank you. Our next question or comment comes from the line of Anthony Stoss from Craig-Hallum. Mr. Stoss, your line is now open.
Anthony Stoss: Congrats as well. A lot of my questions have been asked. But maybe if I could just hone in a little bit more on the backlog, Ron. Was it up sequentially from last quarter? And can you share with us maybe the bulk of where that might be or how it splits amongst the three divisions? And then follow-up would be if you are seeing any kind of weakness, either geographically or within any of the three business segments?
Ron Konezny: Yes, it’s a really good question. It’s something we look at very carefully. It remains at historically elevated levels. We are struggling to get all of the parts to meet our customer needs. Although as we said earlier, we are seeing some easing there, which clearly last quarter drove our outperformance. That backlog is mainly in the next four quarters. It does spill into €˜24. We have been really watching Europe, in particular, with the war in Ukraine, with inflation, rising energy costs. We have been really pleased that Europe has held up. That was the area we €“ I think have been most concerned about. But with these rising input costs, if anything, really accelerate the urgency on digital transformation, to save on labor, to save on truck rolls. And that ROI is really compelling even in times that could appear dire. So we are pleased with better performance than we expected, especially out of the European theater.
Anthony Stoss: Thanks, guys.
Operator: Thank you. Our next question or comment comes from the line of Scott Searle from ROTH. Mr. Searle, your line is now open.
Scott Searle: Thanks for taking my questions. Nice job on the quarter guys. Hey, maybe just to quickly jump in. Ron, it sounds like you are continuing to be supply constrained, but things are improving, you guys have guided conservatively. I am wondering if you could give us some color in terms of what visibility do you have to the current level of guidance, particularly at the lower end of the range? I would imagine at this point, it’s probably pretty good. And then I had a couple of follow ups.
Ron Konezny: Yes. Thanks, Scott. Good morning. Yes, as I mentioned, demand has not been an issue for us. So it’s really our line of sight on key components and we are making some assumptions that our partners will deliver to our contract manufacturers. And we are taking what I think is a reasonable approach as to how people perform in the past and will they perform? We are not trying to be too aggressive that we are assuming too many enhanced improvements in their ability to deliver those components. Our manufacturers are healthy and ready to turn that into finished goods. So we think we have got a reasonable approach. Given the information we have, we still see some sticking points, there is some components, especially those that are used by automotive industry that we are in contention with to get our allocation. But we think we have got a sort of reasonable level of assumptions we put into that.
Scott Searle: Got it. And if I could, on the product front, you had good results, this quarter up sequentially, gross margins look good. I am wondering if you could provide a little bit more color in terms of how things are progressing from September to December in the outlook from a gateway perspective, from an Opengear perspective being the two elements of that business there, what you are seeing on that front, how that pipeline is shaping up and maybe some color in terms of the end markets?
Ron Konezny: Yes, I think we have seen €“ again really rewarding to see every one of our offerings grow year-over-year and contribute to the company’s success. One of the things that we are excited about is 5G is starting to gain a little bit more momentum than it has in the past, and in particular, for the retail segments. So we are excited to see that 5G start to kick in and that affects of course our cellular router and gateway business, but also businesses like Opengear to a lesser extent.
Scott Searle: Great. And lastly, if I could on the IoT solutions front, revenues were a little bit flattish there, ARR grew, but it hadn’t grown at a particularly accelerating pace. I am wondering if there is anything to be read into that how is that pipeline and book of business starting to shape up? Thanks so much.
Ron Konezny: Yes, it’s a good question. We are targeting growth that’s in excess of a revenue growth for ARR. And we do feel confident we have got the pipeline, we’ve got the opportunities that there is, if you will, a real deliberate approach to make sure that ROI is there, especially with larger rollouts that really start to move the needle. So you see our book of business on if you will kind of your small medium-sized opportunities continues to progress. But the larger opportunities I think are gaining a little bit more scrutiny, but we do expect those to really help push that ARR growth further as we go throughout the fiscal year.
Scott Searle: And maybe Ron, just to quickly follow-up, as you start to look at the gateway business and managing some of that transition to more of a Ventus model. Should we be expecting an acceleration on the ARR front, particularly in and around Ventus as we look into the back half of the calendar year? Thanks.
Ron Konezny: Yes, it’s a very good question. It’s one of the key growth synergies we had between Ventus and Digi and cellular routers in particular. Those teams are working closely together. So for example, at the NRF Trade Show held recently in New York City, those teams were really in the same exhibit area, working with those customers to make sure we are providing the best solution.
Scott Searle: Great. Thank you.
Operator: Thank you. Our next question or comment comes from the line of Derek Soderberg from Cantor Fitzgerald. Mr. Soderberg, your line is now open.
Derek Soderberg: Hey guys. Yes. Thanks for taking my questions and my congrats as well on the results. Ron, I was curious if you can talk about sort of which areas of the business you think you can drive subscriptions? My understanding is that some hardware products, maybe it’s embedded solutions, wouldn’t make sense for subscription agreement? Should you take sort of a Cradlepoint business model? What portion of your product portfolio, do you think you can successfully drive subscriptions? I mean is it half the business? Is it limited to routers and gateways? How should we think about, what portion of the product portfolio you think you can go to sort of 100% attach rate?
Ron Konezny: We feel strongly that with the exception of our OEM embedded solution that we can really push our business and our offering towards the solution offering. Embedded will not be 100%, those companies are typically working with us at the engineering level. We are a part of their IoT solution, but not necessarily all of it. That doesn’t mean, we can improve our ARR in that business, but it’s not going to be 100% like we would expect out of our businesses. Of course, in solutions that are already there, but even our box businesses like infrastructure management, cellular and Opengear, where we think we are going to have really compelling offerings.
