Andrew Kaplowitz: Got it. And that’s helpful. And then you mentioned backlog of $12 billion. Obviously, it continues to go up. I think you talked about greater than $11 billion last quarter. So is this just more addendums to sort of existing contracts that you have? Or do you continue to win work with new customers? Obviously, we know, eventually, revenue will begin to eat into that backlog, given it’s so big. But how are you thinking about backlog at this point? Should it begin to go down now as revenue ramps up? Or still more new awards to be had?
Tom Ernst: Yes. Thanks for the question, Andrew. So you’re right, backlog did increase net of the revenue out in the quarter by about $900 million in the quarter. So that really reflects a couple of things. It reflects the new UNFI relationship that we announced on last quarter’s earnings call that was signed during this quarter. It also reflects an additional existing customer, new deployment we started in the quarter. And then finally, it reflects cost-adjusted pricing for the existing backlog in the quarter that we expect that you’ll see once a year when we start each calendar year. So a little bit different average cost per system in the backlog, how you should think about the backlog? Our strategy hasn’t shifted. We’re thrilled with the $12 billion backlog.
Our goal is really not to drive backlog growth so much, but really to drive our customers to being ragingly happy and having €“ and the scale against the opportunity we have. We’re looking to add new customers more by the one or two per year rather than add to the backlog as our primary strategy here in the near-term, given that we do have such a strong demand for our systems that we can control as the backlog as we want them.
Andrew Kaplowitz: Appreciate the color.
Tom Ernst: Thank you.
Operator: Thank you. Our next question comes from the line of Mark Delaney of Goldman Sachs. Your line is open.
Mark Delaney: Yes. Good afternoon, thank you very much for taking the questions. Rick, I think your decision to retake the CEO role on, as I understood it, was to streamline the touch points that your customers have and hopefully create some more efficiencies in that sort of relationships. Could you elaborate if that’s materializing as you expected?
Rick Cohen: Yes. It’s €“ I mean I’ve been the CEO for most of the time, except for really a short period of time. The interaction €“ so yes, it’s playing out the way I thought. Customers want to talk to me. They have been talking to me for a long time. I’m really the Chief Product Development Officer. And so when I just talk to customers, one of the things they are asking is, because of my deep distribution background, is they think some of the products that they are thinking about are viable. And so it just makes the logical, the sales cycle, the proof-of-concept piece of selling these big pieces of equipment and then the follow-through logical. So it’s playing out pretty much exactly the way I thought it would.
Mark Delaney: That’s very helpful. Thanks. And then my second question was around how to think about the cadence of systems going forward. And maybe help us better understand what’s contemplated in the guidance, perhaps in terms of number of new installations that may be started and if you think you’ll move any other systems into full completion this coming quarter baked into guidance. Thanks.
Tom Ernst: Yes. Thanks for the question, Mark. So we do anticipate adding more systems each quarter. It’s a little bit less predictable on a given quarterly basis exactly how many we will add. But you should expect that as you look forward over coming quarters, we continue to add systems and potentially in growing numbers as we look forward. Those systems that get added in the quarter don’t add as much revenue as the systems that have already been on the books for a couple or a few quarters. I think you know that our value that we deliver and thus the revenue that we carry from those systems is recognized and reported on a percentage completion basis, but it’s not linear. The revenue actually has a bit of a concentration to the middle part of the middle of the second half part of the contract when we’re doing the meat of the installation and testing of the system.
So those early systems do benefit quarterly revenue production, but not as strong as the systems that are well into the meat of installation.
Mark Delaney: Thank you.
Operator: Thank you. Our next question comes from the line of Nicole DeBlase. Your line is open.
Nicole DeBlase: Yes. Thanks. Good afternoon. Maybe just on the outsourcing initiative. It sounds like from the opening remarks that you guys have made really good progress on that. So if we were to talk about it in baseball terms, I guess, what inning are you in with all of your projects on outsourcing?
Rick Cohen: Yes. So in baseball terms, I would say, we have €“ I would say we’re probably in the fifth, sixth inning on outsourcing. We will €“ we €“ the partners are doing a good job, and €“ but we haven’t finished the process yet. So I think we’re bringing on some new €“ we haven’t announced them yet. We’ve announced some of it internally. We’re bringing on some new, very experienced manufacturing partners to help us work the outsourcing part of the business. So we feel really good about it, where the game plan is probably gone a little bit better than we thought, which is a nice thing to say. And no showstoppers. The world out there of our particular partners is interested in warehouse automation and in making EVs. And we right now have a lot of interest because of our big backlog and warehouse automation.
So we are very happy with the attention we’re getting from suppliers, quite frankly, all over the world. So that was not the case a year ago. So I guess, fifth inning, sixth inning, maybe even seventh inning. We’re pretty happy with where we are.
Nicole DeBlase: Got it. Thanks, Rick. That’s helpful. And then one more question for you guys is just €“ I know you talked about OpEx cresting. Is that also the case for the subcomponent of R&D.? Is that also expected to crest, just trying to think about all of the innovation initiatives that you guys also have underway?
