Tom Deitrich: Sure. I can jump in on that one and then perhaps, Joan, you want to add anything additional. The work that we’ve been doing over the last year plus on changing contracts for new agreements to provide a little bit more flexibility around pricing specifically and in the inflationary environment. That has gone well. I would say that vast majority of new bookings are in a place where you’ve got to a little bit better protection against inflation. That said, we still have a fair amount of overhang of bookings prior to that change in our operations more than a year ago. And that work has sometimes been with us and sometimes we haven’t been able to achieve a price increase. So I would say that in terms of backlog, it’s inflation protected.
We’re above 1/3 but probably less than half in terms of what the size of that is. But new projects as they continue to roll through and as deliveries happen, it rolls off that stuff where we do have a margin pitch and gets us into a better zipco from a margin perspective.
Ben Kallo: And just maybe lastly, just could you remind us of the cadence of especially outcomes. I think I saw the service revenue tick up more but just like other trajectory of how things get implemented with service before it hit something else and then the different margin profile.
Tom Deitrich: Sure. So a few steps on the outcomes side of things that I think are helpful. So roughly 75% of that revenue is recurring revenue. The majority of that is sort of staff or service-based revenue which has a meaningful higher margin which is why outcomes tends to run materially above the gross margin line compared to network or even devices. The timing of outcomes revenues, generally, let’s call it, 18 months after the network deployment in terms of timing, it changes a little bit project to project but that’s a good time of the year number to understand what the timing would be. And that revenue tends to come over a very long period of time. So I think 10-year SaaS or managed service agreements, so you get that revenue over a very long period of time.
Operator: Now our next question coming from the line of from Graham Price with Raymond James.
Pavel Molchanov: It’s Pavel Molchanov here. Same question I asked a few months ago in this kind of quasi recessionary environment, is there any improvement in terms of multiples from an M&A perspective as you look at private companies?
Tom Deitrich: I think that valuations are certainly coming down. There’s still a meaningful difference between I would say, hardware valuations and software valuations where software tends to be a bit higher. But indeed, valuations are coming down a bit. large-scale enterprise software valuations still tend to be pretty rich compared to the traditional valuation that you’ve seen but coming down a little.
Pavel Molchanov: Okay. Can you get an update also on demand response business. I mean it’s obviously one slice of outcomes but we get these extreme weather dynamics which I would imagine pushes up the appetite among ISOs for demand response.
Tom Deitrich: Indeed, the demand response world continues to move along pretty nicely. And honestly, what I’ve seen is not only using that capability from a traditional demand response, let’s shave the peak off and deal with a very high pressure kind of situation, using that capability much more as a normal course of practice to understand when to charge things like EVs and how rooftop solar much more effectively. So I think it’s moving from a demand response peak shaving kind of situation to much more of a localized control for distributed energy resource management is where the industry tends to be heading and a lot of the discussions we have with our customers accomplish both of those use cases.
Operator: And our next question coming from the line of Marin Malloy with Johnson Rice & Company.
