Mark Donohue: Yes, we are. I think if we go into next year, there’s two real components; there’s pure subscription and there’s distribution. We’re moving away from the purchase model that we used to have where we actually ran some of the hardware sales through our books. We’re now really driving that distribution model just in the third quarter alone. In the first quarter we really drove it, we did about 30% of our business that way. So we’re on path to do the 50:50 going into next year. You’ll probably see somewhere in the 40% zone in the fourth quarter to kind of get to that 35% that we talked about in the back half of the year. We probably will see some quarters where it’s not 50:50. As we go through the year, I think we’re really thinking about an annual number of 50:50. It’s a little bit hard for us to tell exactly what’s going to happen from a quarter-to-quarter basis.
Mike Latimore: Yes, yes. Makes sense. All right, great. Congrats on a great quarter.
Peter George: Great. Thanks, Mike. Appreciate it.
Mike Latimore: Yes.
Operator: Next we’ll go to the line of Hugh Cunningham with TD Cowen. Please go ahead.
Hugh Cunningham: Thank you. Hey, guys, thanks for taking my questions. Congratulations on a strong quarter especially the unit growth there and on the CT transition and for the 2024 guidance. Couple of quick things. First thing is on the product revenue line. Can you remind me, Mark, what in there in addition to what portion of that is direct sales? And then, I think another piece of that is add-ons that you guys sell like the, I’m guessing the new product, the one you’re partnering with for the brandished weapons, that’s not going to be there because that’s coming from your partner, but what else is in that number? And then the second part of that question is on the product line. So first thing is what’s in there basically and then how fast do you expect it to come down?
Mark Donohue: So the product line, Hugh, it really is a combination of a few things. It’s really the piece parts that we sell, whether it’d be tablets or other parts of our business as well as the products that were sold through the old purchase model. We still have units that we sell from time to time including demos that you’ll see go through that line. So think about the things going through that line as demos, accessories and our direct product sales overall. The Extend is likely to have nothing to do with that line, it’s going to be a recurring revenue element in our business for the most part. I would say that we’re going to continue to see a reduction in that product revenue line. We had booked quite a few units in the Q2 timeframe and a lot of those shift in Q3. So I expect that to continue to decline into Q4 because we’re not booking as many in that area. We will see some next year, but I would say that the units for the entire year next year would be sub 200.
Hugh Cunningham: All right. And then Peter for you, two quick ones. One, you talked in the past about the sort of verticalization of the go-to-market and the teams you’re building. Can you talk about that? And then can you talk about the experience of your buyers? So when you go talking to a customer, who is the — what’s the experience of the person actually making the decision to purchase? What sort of due diligence do they do? Can you talk a little bit about that?
Peter George: Sure. So in terms of verticals, two years ago as you know in 2022, we verticalized our sales organization and focused on education, sports, health care, distribution warehouses and we continue to do that. In 2023, we regionalized so we created five discrete regions that are operating with sales people of about seven or eight in each of those regions that carry quota and they’re focused on the high risk verticals in their region. So those were really important organizational changes that are helping drive our growth in the company and we’re going to continue to stay focused on that. As it relates to the buyer experience, most of our customers have security experts on staff. These are retired police officers, people in the secret service, military.
They’re steeped in understanding security and oftentimes when they come and see our product, they do their own testing. So we give them the information that we have around what our systems can detect, but they do their own testing as well. And they are just absolutely phenomenal and it’s a trusted network of security professionals that all know each other and trust each other. On the school slot side, it’s slightly different. There’s not only CROs and superintendents, but there’s a whole set of reseller partners that are subject matter experts that help schools understand their security posture as well. So our sales in experiential sale and most of our customers, in fact almost all of them, have subject matter experts testing the product themselves.
Hugh Cunningham: Thanks guys, Appreciate it.
Mark Donohue: Thanks, Hugh.
Peter George: Thanks, Hugh.
Operator: [Operator Instructions] Our next question comes from the line of Chad Bennett. Please go ahead.
Chad Bennett: Great. Thanks for taking my questions. Nice job again on the quarter, guys. I guess a couple of questions. First, Mark, can you give us an update on Express 2.0, the new system and hardware, kind of how we’re progressing there on the cost savings there and timing wise of when we expect that to hit the market?
Mark Donohue: No problem. So Express 2.0, that’s really our cost-down effort on our Express flagship product. About 95% of the functionality we have in 1.0 will be the same in Express 2.0. We’ve added a few new things to it. But generally speaking, the whole purpose of 2.0 is to really to help with quality, to really think about how to service it in a more modular way and to really kind of take the learnings we had in 1.0 and kind of position them. It’s the same software stack so there’s no difference there. But in terms of the timing of it, I think, we’re expecting it to really kind of start to ship in earnest by the beginning — maybe the end of Q2, but definitely by the beginning of Q3. That’s the plan we’re on. The cost-down efforts, we still see that being in the 30% to 35% range and we’ve kind of locked that in at this point.
