Unidentified Analyst: Okay, that’s helpful. Are you seeing any indications that Tier 1 wireless and telecom companies will be increasing capital spending?
Rob Dawson: I think — so increasing in total is probably flat year-over-year. I think increasing in the areas of opportunity where we are much more relevant like densification in particular is really what we’re seeing. So I think, yes, we’re seeing that shift from the large macro site spend that usually is at the beginning of the cycle. There’ll usually be a pause, which has been, in this case, a little longer and a little steeper of a pause than what we might like. As it’s coming back, we’re seeing more of that spend dedicated to things like small cell and other more street level densification. So yes, we’re certainly seeing that both in conversation around what that CapEx looks like, but also in the kinds of products that are being ordered.
Unidentified Analyst: Okay. And my last question, to what extent will the $2.5 million reduction in operating expenses drop to the bottom line in 2024?
Rob Dawson: Yes, so during 2023, I would have told you, it was all going to drop through. I think we’ve had to offset some inflationary pressure on certain things, specifically things like insurance and some logistics costs. So we think probably 75% or 80% of it should fall through, but we are offsetting some things that have kind of shown up over the course of that year, which is why we’re very focused on not having it be a one-time effort. We’re driving additional opportunities to take out more cost in some of the same places we already hit, but also some new and additional kind of ongoing places as well to help us get as much of that falling through as possible.
Unidentified Analyst: Great. Thank you very much.
Rob Dawson: Thanks, Ethan.
Operator: Thank you. Your next question is coming from [Steve Cole from Mangrove] (ph). Your line is live.
Unidentified Analyst: Good afternoon, guys. Rob, a couple of quick questions. If you look at the backlog that we have now, can you provide a little bit of color on what the margin — the booked in margin is of that backlog? Forgetting about fixed cost absorption when it comes out.
Rob Dawson: Yes, I think it’s hard to be specific on that, because in many cases we don’t see the final margin until we’ve finished building some of those products and gotten them out the door. But I think the blend there, a lot of that’s been sitting there for a while too, Steve. So I think the blend in there is going to kind of be in line with our historical levels. As we add to that, we expect the margin profile of the things being added to be higher margin.
Unidentified Analyst: Okay. And just turning back, I saw Microlab, you provided a year number of $17 million and change. Can you maybe turn the clock back a little bit and tell us how is that acquisition performed from when you bought it to where we are today? And if I remember right, we have a reasonable project-oriented component that moves that number up and down, is that still the case and that’s why it flexes from that 20-ish level on to the high teen.
Unidentified Analyst: Yes, I think what you see is, when we bought it the trailing 12 months was a little under $17 million. We ran that up sort of immediately. There was some great things that they had in their pipeline and some new things we landed. That pushed that business up over the next three or four quarters to a higher level, north of $20 million annualized. Then you’re right with what you said around the project-based portion of that business. Large venues in particular, so stadiums and other large venues where there’s wireless deployments happening, is a pretty meaningful upside for that business. And that was caught up in the same reduced spend that kind of hit some of our other product areas in the last year. So, I think it’s performs, I’ll say, wildly, depending on the quarter.
Some are great and some are a little under our expectations. We expect that to get back — with carrier spend recovering, we expect some of that to benefit us on the Microlab side. And we have added some additional products there as well that are more focused on small cell deployments and some more enterprise-level deployments that are not so carrier-focused and carrier-backed from a spending perspective. So trying to diversify that product line a bit as well to address some sort of parallel markets at the same time.
Unidentified Analyst: And we don’t want to leave out Peter, but just a quick question on free cash flow. So when you’re looking at the forecast for this year, I would expect given the cost reductions and the margin shift, even on lower revenues, we should be free cash flow positive this fiscal year. Is that right?
