So if you think about that correlation between the speed and the latency and then, in fact, the economics of the models, you can understand that there is a lot of value embedded in our products as it relates to what it creates in terms of functionality for our customers. And whether that’s at the chip processor level, whether that’s inside the data centers, with the cloud operators, whatever that is. There’s no doubt about it that we have to build also our capacity and that these are extremely high-precision products. They require intensity of testing. They require intensity of automation. Craig, I think, alluded to in his prepared remarks a little bit that we might see a couple of quarters of a little bit more CapEx, not just for this market, but for other markets as well.
But this is one of those areas where we’re really building up phenomenal capabilities. And I just have to take one last moment here and answer your question. Like everything that I’m talking about, it’s easy for me to say all these things. I can’t tell you how hard our team is working to execute on these words. I mean, again, these are complex products with complex production processes, complex systems, extremely high reliability, a lot at stake because of those underlying economics. And boy, I have rarely been as grateful as I am to those folks who are working 24/7 across Amphenol around the world to really ramp up in support of our customers that are implementing these AI data centers.
Operator: Thank you. Our next question is from Mark Delaney with Goldman Sachs. You may go ahead.
Mark Delaney: Yes, good afternoon. Thanks very much for taking my question. I’m hoping to better understand how Amphenol is thinking about capital allocation for the rest of the year, especially with the pending Carlisle Interconnect transaction. Is the M&A funnel still active? And with the new repurchase authorization you announced this morning, but also the potential cash usage for M&A, so just Carlisle, how active might the company be on buybacks this year?
Craig Lampo: Yes. Thanks a lot, Mark. Yes, I think in regards to our capital deployment, we’ve had a very consistent policy and practice over many years with regard to our capital deployment and over a whole host of years where we’ve done a significant amount of M&A and less M&A, and we continue to be kind of – it continues to be a balanced and flexible deployment strategy. In the current year with the CIT, I talked about how strong our balance sheet is, the 0.7 times net leverage, the strong free cash flow that we generate and continue to generate. And so I wouldn’t think even with CIT, I wouldn’t say that, that would have any impact ultimately on our capital deployment strategy. And we did just renew or have a new $2 billion three-year share repurchase program.
Certainly, that’s one of the legs and a return of capital to shareholders. Ultimately, over time, we want to return about 50% or roughly half of our free cash flow to our shareholders. And part of that is our dividend yield, which is roughly 1%, and we continue to target that over time as well as our share repurchase plan. So, I would say this new plan is just consistent with that and our dividend certainly policy is consistent with that. And ultimately, that M&A continues to be the focus that ultimately over time, we believe that, that will continue to drive strong returns. So if there was a time where we generated a significant closing of deals in this particular year, what we think about maybe dialing back share repurchases. But at the end of the day, just considering the significant free cash flow that we generate, we really haven’t had to do that and certainly wouldn’t expect this year just with CIT to have to have any adjustment to that.
Adam Norwitt: And Mark, relative to the M&A pipeline, I would just tell you that our pipeline remains strong. Yes, we completed last year, 10 acquisitions. Yes, we announced in January, our largest ever acquisition was CIT. But I can tell you, we have the appetite, the capacity and the ability and agility to continue to make acquisitions large and small. And I think we continue to demonstrate our ability to do more acquisitions, do bigger acquisitions. And the beauty of this industry and the beauty of this market is that, there’s just so many great opportunities to find companies with great people and great technology and a very complementary market position to Amphenol. We remain extremely disciplined in our acquisition program, and we will walk away for – if we get a bad feeling up until the last second before we wire money, but there’s no doubt about it that there’s great, great opportunities for us for the future.
And as Craig mentioned, like our financial condition is in really a fantastic position with 0.7 times leverage here at the end of the quarter. Our leverage will just be a touch above 1, following the acquisition of CIT. And so we have really the capacity, the capability and the appetite to continue.
Operator: Thank you. Our next question is from Steven Fox with Fox Advisors. You may go ahead.
Steven Fox: Hi, good afternoon. I was just wondering on the auto markets, the 17% growth you talked about. I know you highlighted communications. And I know you guys don’t like to count cars per se, but can you just sort of provide some color on the backdrop you’re selling into right now and into Q2? And what exactly would you call out as sort of leading products that you’re, especially doing well on right now? Thanks.
Adam Norwitt: Yes. Thanks very much, Steve. And you’re right. I don’t like counting cars necessarily. I mean, the market is what the market is. But look, we have taken advantage, I think, for a very long time, not of an overall growing auto market. I mean, if you look over, I don’t know, eight years or something, it’s still sort of a similar level of total worldwide auto production. But there’s no doubt that the content has expanded dramatically over these years. And I think we’ve taken a real advantage of that. So when we think about our opportunities, we talked a lot over the past years about electrified drivetrains, the high-voltage connectors, for example, sensors that go into that. But we’ve also talked about all the other applications.
And so when you think about communications, as I highlighted earlier, there’s just more and more communications technology being put into cars. And as a leader in RF technology for cars, as a leader in antennas for cars, as someone who participates really across that whole signal chain of communication that creates a great opportunity. There’s other areas like connectivity, passenger connectivity, engine control. By the way, there’s still the vast majority of cars that are built are using fuel-based engines or ICE vehicles and those require an enormous amount of different contents as well. Most of actually what we sell into cars is agnostic to the drivetrain. But it’s not agnostic to the increase in content in cars. As there’s more electronics, there’s going to be more opportunities for Amphenol.
Operator: Thank you. Our next question is from Samik Chatterjee with JPMorgan. You may go ahead.
Joe Cardoso: Hi. Thanks for the question. This is Joe Cardoso on for Samik. Can you just give us an update on where we stand on the inventory destocking headwinds in the industrial market and how you’re thinking about timing of when we see that normalizing? And then maybe as a quickie second, if I can. Can you just touch on the CapEx investments that you highlighted in your prepared remarks? How should we be thinking about magnitude and besides IT datacom that you mentioned, what are the other major buckets of investments there? Thank you.
