Gene Nestro: Yes. We believe €“ Alex, we believe that the high-50s and we say 60% on the gross margin is where we will €“ even in some of those down €“ in the cyclical quarters that we have, we’ll still be able to maintain that. The variables are your sales expenses and things like that as it relates to commissions and things like that. So that kind of self-governance, I mean, I think you can look at steady R&D costs. We continue to steadily plug a lot of our investment into our R&D for redesign of current products and new products. So I think you can continue to see that. But the gross margin pull-through, we don’t see that dipping really below where we’re setting is at that bottom. The operational expenses move around a little bit.
We said that in Q3 when we announced Q3 that, that was €“ even when you go back to Q2, we said that was a high watermark wherever it was in Q2 of last year, and then we dipped down with some things in Q3. But we said, it stabilizes in that. I don’t have it in front of me, 16.5-ish or somewhere in that range, 16.5, 17. So some quarters will experience a little bit more and some less given how we’re pushing some expenses around. But in general, it will stay pretty steady, Alex.
Alexander Henderson: Similarly, if I look at the seasonal commentary, the year-over-year growth rates shouldn’t be seasonal generally. Guide that implies a couple of percent at the low-end and a little over 10% at the high-end, and then it accelerates over the course of the year to get to. I think it’s 15% at the low-end. So can you talk a little about what the mechanics are around that? Thanks.
Gene Nestro: Yes. We talk about this kind of mid to upper teens, 15% to 20% organic growth. We just have never experienced that type of growth year-over-year in Q1. It just doesn’t come. We talk about that type of organic growth on an annual basis. Q1 is always a difficult, I mean, you know the test and measurement space, where it just €“ people just don’t spend money in Q1 and we continue to see that. We even see it on the project-based side where people just don’t deploy in Q1. So it just ends up being a much smaller year-over-year organic growth, Q1 over Q1, and that goes back for several years. But on average, when we look at annual growth, we do stand €“ feel like, that 15% to 20% growth is good numbers.
Alexander Henderson: And just as a reminder, the first quarter, is that your period of your normal annual pay increases?
Gene Nestro: It is.
Alexander Henderson: It is. And how is your turnover and how attrition rates look and what kind of annual increase should we be thinking of modeling in for those expenses?
Gene Nestro: Yes. We expect to be adding people as we go through this year as we’re growing our business, especially internationally. I would say the best way to look at it is, if you take a look at this year, we were about €“ and I’ll just tell you how we look at it internally. We were a little bit above 62% full-year on the OpEx side. We think next year will probably be in the mid-50s, 55-ish, 56 somewhere in that range as a percent. And when you €“ and it should grow. So you should see Q1 to Q2 to Q3 to Q4 creep up a little bit as we’re adding people in there and certainly commissions. So when you step back and take a look at our OpEx, roughly close to 70% of our OpEx is headcount related, whether it’s bonus, salary, stock comp, et cetera.
And then 6% is amortization and 5% or 6% is commissioned. So on a higher sales, it’ll ramp up that way. So I hope that helps with your answer. We also track to make sure €“ especially now with everything that’s going on, we want to make sure we stay in line with our OpEx. So our sales per employee is something that we track and look at. And in 2021, it was 280,000 per employee. 2022, it was 315, and we think next year it should be in the mid-300s.
