Abinand Rangesh: You’re likely to see probably more like a jump and because there’s a whole slug of units that were put in around the same time and we’re working our way through the replacements of the engines as well as the exhaust heat exchangers. And especially with COVID and a lot of the supply chain disruptions that we had in the last couple of years, some of these things are a little behind as well in terms of where they need to be, in terms of the replacement cycle. So once we get through all of that, we should be in a position to see a margin increase.
Sameer Joshi: Okay. And then just broadly, you did mention backlog in Ag and education, municipal. Apart from the pipeline that you are currently addressing are you trying to get into other verticals or opportunistically looking for things that might emerge?
Abinand Rangesh: So I think, really, what we’re trying to do is to focus on certain key market segments. So one is definitely the process cooling and a number of different areas, because those are applications where the chiller runs year-round, and hence the savings are much higher for both the customer and our revenue as well as our service margins will also be very good in those kind of applications. And there are also applications where customers are going to use the hot water year-round. So it typically tends to be a pretty good area to be in. Beyond the cannabis industry, we haven’t done a whole lot in that space yet, but we’re hoping to be doing more in that, because a lot of the industrials do use hot water and there.
The other markets that we continue to just build on is the multifamily. We do still continue to see projects in New York and Boston and the high utility rate areas. We are continuing to talk to engineers work with engineers on that, even with headwinds in places like New York, there’s still a huge benefit from the financial standpoint. So we are seeing projects that continue to be there, just not as much as we would have done in a couple of years ago. The other areas that we are looking at is places where, again, there might be an air-cooled chiller replacement. We’re continuing to push for products into those where the customer has some kind of a dehumidification load or humidity control load. So those don’t have to be industrials, they could be an air conditioning type load, but they would be anywhere where they’re doing a humidity control type application.
So there are some new verticals we’re pushing into, but we’re being relatively measured about which ones we get into at any one time. Because a lot of it is going to come down to having the right firms that can design around our products, the right developers who can actually put those products in and those relationships take a while to build up. So we’re talking to quite a few of them, but we’re not expanding to all of the verticals that I just mentioned at the same time.
Sameer Joshi: Understood. Thanks Abinand for taking my questions. Good luck.
Abinand Rangesh: Thank you, Sameer.
Operator: Thank you. [Operator Instructions] Our next question is from the line of Alex Blanton with Clear Harbor Asset Management. Please proceed with your questions.
Alex Blanton: Hi, good morning.
Abinand Rangesh: Good morning, Alex. I’m wondering if you could talk about the service margins that you expect to recover by second quarter. If we annualize that improvement starting in the second quarter, would that alone produce a profit? It looks to me like it would, because if you go back, let’s say your service revenues expand to $13 million next year or on a 12-month basis and you raise the margin to 52% from 44%, that would add about $2 million on it. I’m really talking nine months, not a year, assuming nine months — if your nine months this year were to be $13 million and you earned 52%, it would add $2 million to the pre-tax line, and on an annual basis, $2.7 million, which on a net basis would be almost $0.10 a share. So that would bring you pretty much to breakeven it seems to me?
