Michael Rama: Yes, we expect the trajectory of the split between the service and the product to still be pretty consistent. What we’ve seen in 2023, as we move forward, our mix at the U.S. has been around 75% product and 25% service. And then kind of flip in Europe, we’re about 25% on the product side and about 75% on the own and operate side. So we still expect in 2024 to see that continue. But it gives us the flexibility, as we move forward, on having to be able to maximize on either side part of the business, either the hardware sales or the server side of it.
Brendan Jones: Yes, and the only modification, I’d say to that, Sameer, is we’re moving rather quickly through 2024 to expand our sales operations in Europe. So while we have a high presence of owner operator there, as Michael just outlined, there’s also an opportunity on sales that we’re restructuring all of our European offices to begin to take advantage of at a higher penetration rate.
Sameer Joshi: Understood. So then the gross margin outlook seems even more conservative than the top line outlook, because already in the fourth quarter you had near 30%, excluding extraordinary items, your product sales are projected to grow. That should increase overhead absorption. Your charging revenues are also expected to grow, which should add additional gross profit dollars. It seems that the outlook might be conservative. Am I reading it right?
Brendan Jones: Well, the only thing I would say is that for a full service EV infrastructure company today, and we have many contemporaries in the United States. We’ve seen their earnings results. We are the leading in margin today. Now, do we intend to rest on our laurels? Well, you’ve seen, we intend to get that to 33%, but it’s been our history since last year that when we give guidance, we’re making sure that we give it from a conservative and realistic perspective. So 33% is, we have a fundamental belief in looking at the numbers and the process and the improvements that we can achieve that target if there’s upsides, and we can truly measure that upside and clearly look through the rest of the organization on the finance and accounting side, that there’s going to be nothing that impacts that.
We may up that guidance as we go through the year, but I think 33% is the right target. And again, that’s still class leading. We’ve got one of our competitors that is showing a decrease next year, which is the complete opposite direction of where we’re going.
Sameer Joshi: Yes, no, I understood. Thanks for that. Just one last sort of bookkeeping question. Was the $45.5 million prepaid before December 31 or subsequent to December 31? I’m just not clear on that.
Brendan Jones: Michael?
Michael Rama: Yes, I’ll jump in on that. That $45.5 million represented, that was basically the SemaConnect acquisition note that we had out there. So we paid $12.5 of that during Q4 and the remainder in Q1 of 2024. So with the proceeds generated with the capital, we felt it was most prudent and effective to pay down that overhang, that obligation, and really decrease the expense burn on a go forward basis.
Sameer Joshi: Makes sense. Thanks for taking my questions, and good luck.
Brendan Jones: Thank you.
Operator: Thank you. Our final question is coming from Noel Parks with Tuohy Brothers. Your line is live.
Noel Parks: Hi. Good afternoon. I just had to get a couple. I wondered, could you talk a bit about multifamily? I think you also mentioned in discussing that briefly a little bit about hospitality, that sector as well. And I think with multifamily, it’s kind of that convergence between consumer adoption with sort of centralized charging. So just be interested to hear what you’re seeing in that market.
Brendan Jones: Yes. So the first thing is we’re seeing that segment grow next to fleet. We have that as the highest growing segment that we’re going after right now, and the industry data sort of backs that up. But it’s a little bit of two models or even three models coming together to service multifamily dwellings. In some multifamily dwellings, you have the single charger model, where you don’t need any network access. In other models, it’s a shared space model where we have to network the chargers and we have to create access credentials to them. And then another. And the third spot about multifamily is third-party garage based infrastructure, which is not associated with the multifamily dwelling, but is contracted out. And that requires, right now, full commercial chargers that are fully networked, but they are reserved for the people who consider that multifamily dwelling their home.
Now, what we’ve done over the last 18 months is make sure that we have a charger for each of those use cases, and we can provide that service. We always rent demand network because with network, we can build in energy management solutions. And with fully commercial charges, we can also build in energy management solutions. So you can better work with the facility to what you in the future to where you need to curtail use due to a rate card change or a mandate from the public utility, et cetera. But if it’s they don’t need a network charger, we have a solution for that. But we’re seeing that, again, predominantly where it is dedicated space, dedicated user, and the owners of the property, in terms of the garage, don’t want networking. They just want a charger there, and they’ll monitor and charge the customer a fee on their own.
So all three of those are what we are servicing today, and we see that service increasing in the future.
Noel Parks: Great. Thanks a lot for the details. And at Bowie, I wonder, can you sort of outline the maybe number of manufacturing lines you have there, maybe the present number and what the capacity is, or just some other way to quantify where you stand now and where the ultimate growth is in your footprint there?
