Chuck Scheiwe: Yes. We do have a lot of operating leverage here that we can capitalize on because a lot of the bodies we would add are production-based, which is already in the COGS line forecast going forward. So, those bodies are already part of the cost of goods sold in terms of production. And we can definitely have a lot of leverage there to grow the business without adding a lot of OpEx.
Sameer Joshi: Right. So, cash flows and net margins are not only going to be improved as gross margin improve, but you will find this operating leverage as well and further improvement?
Chuck Scheiwe: Correct. It’s going to kick in from here on very well from what I am seeing.
Sameer Joshi: Alright. Thanks for taking my questions.
Ron Dutt: Yes. Thanks.
Operator: Our next question comes from the line of Craig Irwin with ROTH. Please proceed with your question.
Craig Irwin: Good evening gentlemen and congratulations on the nice growth and progress of your margin.
Ron Dutt: Thanks Craig.
Craig Irwin: So, Ron, can you maybe comment for us or give us some color on your competitiveness in the airport ground equipment market? And with the environmental commitments of the airlines, looking to reduce their carbon footprints and commit to these advanced technologies, how active do you expect that market to potentially be this year?
Ron Dutt: It’s certainly come back to life, in the pandemic, as you know, when the – particularly the top five airlines just really shutdown everything, battened down the hatches. And so for the past year, we have seen really a very strong revenue growth. I would say our largest customer, Delta Air Lines, is known as a technology leader in the sector. And our distributor that we have, Avrist [ph], is a very long-term seasoned supplier of batteries to the airlines. So, we have a great leverage, great enabler there with the airline. So, we see them, some other airlines, we brought on top five, including – and then also Air Canada. We have others piling the packs, and we see the growing interest. And I think part of it is, yes, it’s interesting.
I mean as I was referencing before, they are looking at lithium and going, well, with lead acid or diesel, we didn’t have telemetry. What are the real leverage points and benefits of this, and I think when you see somebody like Delta, who has brought this on and others with the very positive experiences they have and what they are getting out of it for cost management, emissions, I think it’s just my opinion, I think that’s going to continue to grow. Credibility is everything and the current players are giving credibility. We claim leadership, particularly in the U.S. on supplying GSE. And the market of course is not nearly as big as the material handling market in North America, but it’s very sizable. It represents a market where our core competencies can be exploited for them.
And we are seeing that. We are very excited about that and working with them because all their equipment, virtually all their equipment uses 80-volt battery packs. And what we are seeing is that having spent time with that has allowed the basis for continued expansion of products in GSE and also the adoption of 80-volt lithium batteries for the very heavy-duty forklifts. So, there is that tangential benefit to the GSE market you – the GSE market you mentioned, now you mentioned the competitiveness. There are other competitors out there. But I think we offered some of the reputation with some of these large customers and the airlines top five, as you know, are very large themselves and what we are finding it resonating with them is that we are somebody that can handle operations with many sites and meet their quality and service needs.
Does that help, answer that?
Craig Irwin: No, that’s just excellent. That’s really helpful. My next question is about tax certifications this year and spending on new product development. Can you maybe update us on any planned certification this year that we should look at in the financial model? How would you discuss the expenses for these packs? And R&D, do you have any specific new initiatives that will alter the trajectory from where you have been? I mean I know you guys have been really tight on the spending side, but you are smart about where you spend your money. So, if you could maybe just give us a little granularity.
Ron Dutt: Yes. The UL certification is one where historically or the past 7 years, 8 years, really requires money and time to go through that. And we will continue to incur that. The current heavy-duty models have UL. But as we add more models, we are working on a 96-volt model. We believe that all those models going into ground support equipment, at some point will likely require UL certification. And we use that – we view that UL certification really as a good thing, even though it’s time and money, used to be an aggravation, but it’s also a point of differentiation. It’s also a point of building confidence with our customers. And you take the airlines, if they have anything go wrong, any thermal event or something, they get extremely nervous, send their safety officers immediately to wherever they are going.
So, they are particularly excited as are other customers on that UL certification. So, we will continue that. The good news is that given our many years with UL, we are able to do all the testing here. We used to have to send it out to expensive third-party groups that took time and money, and we can do it now with the UL oversight either virtually or in person depending on the test that they think is important. So, that’s a – that’s been an important leverage point in mitigating that expense. The other thing is there is some testing there that we – honestly, we need to do anyway. I mean they are covering safety and ruggedness tests, which of course we will want to do as well. The other piece of certification, Craig, is getting the OEMs, whether they are forklifts, particularly, we are putting a battery in their forklift.
