Greg Brown: Our view on the full year and what’s informing our raise does not change from what we updated you on the Ukraine situation. Last year, we did talk about a hundred million. Jack referenced it about $100 million headwind. By the way that headwind still exists. It’s primarily in the second half of this year, which informs kind of the seasonality that’s implied in both Q2 and our full year guide. By the way, we remain in Gateway. I’m thrilled. We’re thrilled that the foreign aid bill got passed for $95 billion, and Malloy’s team remains actively engaged on multiple fronts. But our view in terms of the full year guide is unchanged from what we said last time.
Jamie Reynolds: And then just as a quick follow-up, has the thinking changed around what you expect from the command center piece of the business to contribute to growth this year?
Greg Brown: Still very enthusiastic about command center overall as a category. We still expect 10% growth for the full year. By the way, I might add that remember ESN in the way we record revenue was in the command center technology bucket. So Q1 would’ve grown handsome double digits normalized for U.K. Home Office. And quite frankly, when you look at the 10% guide implied for command center for the full year, it’s a number higher than that when you normalize for ESN as well. And you may want to mention just some of the other things going on.
Mahesh Saptharishi: We just actually finished our summit. This has been our largest summit, I think ever over 1300 customers attending. We launched our VESTA NEXT refreshed product both for cloud and for on-prem. Along with quite a few other new launches. Our responder, our mobile app. So it’s been traction, has been amazing. And we see greater than 60% of our Command Center customers now adopting a cloud connected product. And Rave and our other Command Center cloud products are doing exceptionally well beyond expectations.
Operator: The next question is from the line of Adam Tindle with Raymond James.
Adam Tindle : I just want to start maybe first for Jason. Great performance on margins in the product segment. Just wondering how much of the pricing benefit and supply chain cost is reflected in this versus how much is left in future quarters. I know Q1’s typically the low point for margins in that segment. I’m wondering if that’s still going to hold for 2024 and improve from there. And Greg, on just conceptually on the topic of margins, I know expanding margins is important to you. The drivers are very clear to us in fiscal ‘24, price, cost, et cetera, but it’s a little bit less obvious as we think about fiscal ‘25 and beyond. If you could help us maybe with conceptual levers to continue to drive margin expansion beyond this year? Or do you think we’re sort of at optimal margin and the focus might be more on growth, how to balance that equation.
Jason Winkler : Sure. So I’ll take the first one. We remain seeing the $60 million of lower broker costs, we call the PPV that we guided to 90 days ago. That’s a full year number. Q1 included some of that benefit. There’s more to go in getting to the total $60 million. We’re on path for that. We are seeing certainly the need to use far less and the supply improvements from our direct vendors are helping us get the parts we need at the price we need. That’s in part what informed our Q1 as well as our expectations for the year, complemented by the continued strong demand. So on plan in terms of the margin improvements related to lower supply chain costs, I would also point to what we talked about on the call is the continued benefit of customers adopting more feature-rich parts of the portfolio. That comes with a margin improvement for us as well.
Greg Brown : And in terms of margins, we — by the way, this year, we do expect gross margins to be up slightly, and we also now expect operating margins to be up about 75 basis points. As we think about it holistically and kind of on a pro forma basis, we think the levers of volume mix, which we’re enjoying now, some surgical price increases, primarily around services, where we have contracts that have appropriate cost of living mechanisms built into multiyear services contracts. And as they come due we will be disciplined in making sure we’re recovering appropriate cost increases that come and hit the firm. We look at the way we price new product as well and we continue to refresh the device portfolio and also fixed and mobile video.
And then OpEx. By the way, OpEx probably will be up about $100 million this year, year-on-year. Last quarter, we told you it was about $80 million. That $20 million increase, actually, I think it’s a good thing. We’re investing more in the business, indexing particularly around video. We’re likely to have some higher incentives around sales commissions, reflective of the higher revenue guide we’re giving you for the full year. And there’s some ancillary legal costs, which I actually consider investments in the business as we defend our position, both with the U.K. Home Office and continue to fight the good fight on Hytera and we’ll report hopefully more news between now and the end of the year on that front. And the other thing I’d tell you on the OpEx side, as you know, we acquired Silent Sentinel.
Given the balance sheet, the aperture is pretty wide but disciplined on acquisitions we may pursue and close. And if we do that, we do that because it’s financially accretive, it’s strategically important. It’s culturally compatible, and we can operate it or operationalize it and integrate it operationally, but also because we expect synergies on that front, too. We are built, I think, as a team, an executive team and as a company, that growing is not good enough. You’ve got to grow top line, you got to grow margins, you got to grow operating cash flow and you got to take share. That’s when you know the firm is cooking on all cylinders. And we always look at operating margins. We’re proud of them, but we know the there’s more work to be done.
And by the way, I didn’t even mention AI. I know a lot of companies tout it, but we’ll be disciplined in our use of that internally, the [Hayson] Jack have built it into a lot of our products in the analytics that Jason mentioned. I love what we’re doing on descriptive and generative AI as it relates to the ecosystem around public safety and physical security. But obviously, we’ll also use it in customer service internally in legal and contract management with co-pilot and engineering efficiencies. So, that really isn’t factored in at this point, and I’m not making any declaration or promises, but we’ll always be able to, I think, aspirationally drive toward operating margin improvement. And I think we have the assets where we can continue to do that.
