Joe Bergera: Yes. Well, specification happens at multiple levels. So, for example, we work with a lot of states to help them set the specifications for detection devices that are sold and deployed in their jurisdictions. And to the extent that we’re able to influence that, that can obviously be beneficial for Iteris. So, that’s one thing that happens. To the extent that we’re able in certain competitive procurements to influence the specifications of the request for proposals, the technical evaluation criteria, that’s obviously beneficial to us. And so, as appropriate, we’ll attempt to influence those specifications. But in this particular instance, we’re talking about something different. These are instances where several agencies submitted and received grants from the U.S. Department of Transportation for initiatives that are going to be funded through the IIJA funding.
And in those particular instances, the way that the grant proposals were written, the agency specified Iteris, technology, software or services. In some instances, that could be because they’re required to use us because the state has already stipulated that we must be – because we’ve managed to influence the state specifications, but in other instances, the states just felt that we were the appropriate technical solution for the project that was envisioned when they submitted the grant. But in any event, so either one of those mechanisms, we are the specified solutions and then they subsequently received that funding from the U.S. DOT when their grants were selected.
Mike Latimore: Okay, great. Makes sense.
Joe Bergera: Now just to be clear though, that does not mean necessarily that we represent 100% of all the activity that’s been funded. We’re now working with agencies to get clarification as to what our scope is going to be in those projects. But again, there’s some total of all that activity that was funded through those grants represents 94 million, which is almost 20% of all the – I think it’s like 16% to 17% of all of the [indiscernible] for all grants that were awarded in the most recent cycle.
Mike Latimore: Yeah. Should help keep the win rates high as well.
Joe Bergera: Absolutely. And we’re obviously super focused on that. And as I mentioned, we’re really excited that our competitive win rate, this is for our services business, I’m setting aside the hardware, was 82% in the fourth quarter.
Mike Latimore: Thank you.
Operator: The next question is from Tim Moore with EF Hutton. Please proceed.
Tim Moore: Thanks and congratulations on a strong sales growth for the year. It’s also nice to see the addition of Kerry’s expertise on supply chain, ops, and service based business models. It was good to talk to him last month at our conference. So, just starting off with my first question about services, I’m just wanting to reach more of an inflection point of incremental gross margin acceleration and step-up there? Specifically for your cloud-based solution, the direct licensing subscriptions or with process virtualization, do you estimate that you need about 10 million more in revenue from those combined businesses to really move the needle more to get the gross margin up significantly more?
Joe Bergera: Yes. Tim, I think you’re right. I do think that we’d reach a critical inflection point when we add an incremental 10 million in recurring revenue. So, you’re absolutely right. But I don’t want people to think that we’re not going to see any incremental improvement. I mean, we definitely will. We would expect to see, I mean, it may not be obvious when we report our enterprise results yet, but we do feel like we’re seeing some improvement every quarter and we would expect to continue to see that as we progress through fiscal 2024. And as Kerry mentioned, I mean, that is driving some of the expected gross margin and EBITDA margin improvement in the second half of the current fiscal year. It is absolutely coming from the growth in our services revenue lines.
