We’re really just going through the final testing and points on the product there and we’re now building pilot systems and everything like that. So we think that’ll be a big push for us in the middle of next year. While I’m on that point, I think, that cost-down effort is more of a 2H situation. So I think as we talked about our 60% gross margins, we’ll see a greater benefit from that in the second half of the year.
Peter George: Chad, this is Peter. I just wanted to reiterate something that Mark said, which is when we make improvements in our software around efficacy and accuracy, the cloud infrastructure we have, the data analytics; all the improvements that we can bring to our customers are happening on our platform today and will happen on our future sensor platforms in the future. 2.0 is one of those and we’re going to get a cost-down benefit there. But the magic is really in the software and so all of our customers get the benefit of that no matter what sensor platform they’re on.
Chad Bennett: And then maybe just a follow-up. Just in light of kind of recent events and attention around the company, it doesn’t seem like there’s been any abatement in demand and demand actually seems to be almost accelerating to some extent for you guys. Can you just talk about just kind of the demand environment that you’re seeing out there? Obviously you’ve reiterated your upped guide for the year and gave us a great early look to ’24. But just considering some of the noise out there, can you just speak to the demand and awareness of the product today?
Peter George: Look, we haven’t seen any abatement in demand at all. And in fact when we did this results, we’ve seen an increase in our health care penetration. We grew health care by 50% year-on-year. We had a great quarter in sports. Education was about 40% of our business. So all the secular tailwinds that have been driving our company from our early days even before we went public continue in an unabated way. I mean to date there have been 597 mass shootings this year, which is two a day. There’s lots of gun violence and a lot of anxiety in society. And people want to be safe wherever they go not just in venues, but when they’re , gathering with other people in bowling alleys, in bars, in places where people gather; and technology can help now create safe zones that people can gather together and know that nobody has a weapon.
And we don’t see that changing anytime soon and we certainly don’t see any legislation on the horizon that will change that. So we’re working really, really hard as a company to make sure that we enhance our product, our detection capability and that we can get as many systems in places to keep people safe and that’s our primary mission and goal as a company.
Chad Bennett: Got it. Thanks so much. Nice job again.
Peter George: Thanks.
Brian Norris: Terrific Chad. Thank you very much. Operator, I think, we have time for one more question.
Operator: Okay. And we’ll go to the line of Brett Knoblauch with Cantor Fitzgerald. Please go ahead.
Brett Knoblauch: Hi, guys. Thanks for taking my question. I guess, on the deployment guidance for ’24 and ’25. Is there any chance that you guys deploy a fewer amount of units in ’24 than you do in ’23, or, I guess, expected to do in 2023?
Peter George: No. No, that’s not what we’re expecting to do. Look, we’re talking about 7,000 plus. We’re really talking in 1,000 unit increments. I could see us close to 7,500 plus.
Brett Knoblauch: Got it.
Brian Norris: First, we’re in the fall of 2023 talking about ’24. So we’re trying to give you our best view early on in the T-box here.
Brett Knoblauch: Understood. And then if I kind of look at ARR per unit deployed, it’s kind of increased sequentially now for three straight quarters. How should we expect that to trend over the coming quarters? Is there any reason to believe whether that would go down or gyrate or how should we think about that trend?
Mark Donohue: Look, I think we’re going to see — the distribution model this past quarter was about 30% of our business. I expect it to probably be close to 40% in the fourth quarter and reaching 50% by Q1 and probably holding steady there. So I think mathematically on an average basis, I think you will see our ARR number come down a little bit more and then stabilize as we go forward. That’s just part and parcel to the model of actually moving to that distribution cycle where there’s less ARR than we had in other models. Just remember too in the distribution model, we have a license revenue component that we didn’t have before and that gets recognized immediately and brings in cash to the company quicker than it had before.
Brett Knoblauch: And that’s not being included in ARR, correct?
Mark Donohue: And that’s not included in ARR. You really need to think about us going forward as being about an 80% ARR company and a 20% IP license company.
Brian Norris: It’s the expanded gross margins that we’re continuing to deliver, right?
Brett Knoblauch: And then if I could just ask 1. I know when you guys preannounced, you also disclosed the FTC was investigating. I don’t think you guys brought it up in the call, but just curious if you guys have any color on what they’re looking at or to provide any clarity on the situation?
Peter George: So we’re not at liberty to talk too much about that, but we are working with the FTC on their inquiry around questions around our marketing and we’re answering every question that they have. There is no question or challenge around our technology. We stand by that. It’s really about marketing claims and we’re very confident going forward that we’ll end up at a really good place. We can’t talk much about it. What we can say is it hasn’t had any impact at all on our business. Our customers aren’t talking about it. It’s not getting in the way of anything and we’re out serving our customers, living to the mission and keeping kids and people safe every day and that’s what we’re very, very focused on.
