Jeff Cote: Yes. So there’s been — with the supply chain challenges, the normal order patterns of our customers over the last several years have been a little bit hard to read but they do appear to be normalizing a little bit. For the second quarter, we are about 93%, which is pretty consistent with where we historically are on a bookings level or order intake level against the revenue guide that we provided. But I would say that and we’ve always said that order patterns would normalize as our customers gain more confidence that when they place an order, we’re going to deliver it, it’s not going to be challenged with raw material availability. And clearly, that is happening and we’re seeing more stabilization. It does bring in the broader question regarding inventory levels as well because you may remember that we ended last year with a belief that we still had $40 million of inventory in the channel on the automotive market.
I’d tell you that’s becoming a lot harder to sort of estimate what’s happening in terms of the channels. I suspect that that’s an element of what’s impacting our outgrowth in the current quarter because we did not call out any inventory contraction in the channel. But it’s getting to the point where it’s smaller numbers, and we’re going to focus on overall growth in the business. Thanks for the question, Mark.
Operator: The next question comes from Luke Junk from Baird. Please go ahead.
Luke Junk: Just wondering regarding the margin drivers on Slide 8 and the 21% target for the business, should we view those as being in rank order? And within that, I’m just hoping you could put a finer point on what is in your control or how much you can lean into certain drivers versus just what the market is giving you. And on the piece that’s within your control, has your thinking changed at all, it still seems pretty volume dependent. Am I reading that right?
Paul Vasington: It is still very volume dependent. I think we’re doing a really good job on the pricing side. We’re driving better productivity in the business. You can see that in the margin improvement, the way we laid out the chart, the headwinds are around the investments we’re making for growth in our future. The acquisitions are not at the Sensata level margins. And so as we’re growing that’s having an impact on the margin rate and that’s been consistently laid out for everyone to see and then currency. And we also divested a business last year that was at the height of its revenue and profit given the semiconductor cycle, and that business wasn’t strategically aligned with where we’re going directionally. And so we’ve divested that business, and it’s going to have a dilutive impact year-over-year in the first half.
And then in the second half, there will be apples-to-apples. And yes, volume is going to be — is a great contributor to our margin expansion, just given the structure of our business and the ability to drive operating leverage off that volume as markets continue to start to improve hopefully in the next 12 to 18 months.
Jeff Cote: And Luke, I just want to also emphasize that although we haven’t provided guidance, we believe that the quality of this business is such that getting to 21% over time is very achievable with those investments. And we saw some good uplift in margin profile first quarter to first quarter on 2% higher revenue in the first quarter of this year, 60 basis points improvement and we’re guiding to 40 basis points improvement on flat revenue. And so that’s a result of doing it the hard way, right, managing the profile to get to better margins, not getting lift margin associated with volume on a flat market, but it will take more time to get back to that 21%, but there’s management conviction to do that over time. And we’ll continue to keep you updated and work hard to get there.
Operator: The next question comes from Joe Giordano from TD Cowen. Please go ahead.
Joe Giordano: Yes. So just curious on the auto growth that you’re using for 2Q at 4%. Like last I saw third-party estimates were like double digits. So I’m just curious like what the gap is there. And then if you could just touch on, and maybe you’re not seeing it quite yet but any potential behavioral changes that like maybe like even as you get down to the dealership level, given like the banking tightening in regional banks and smaller banks.
Jeff Cote: Yes. So you’re absolutely right. IHS would have the second quarter at about 21.5 million units. That would suggest a 13% growth year-over-year. We’re calling it at about 20 million, 20.2 million, so only about a 6% growth. It’s broad-based. So we’re calling Europe 500,000 units off. We’re calling North America, another 300,000 off what IHS estimates are. And so it’s based really on what we’re seeing from order pattern is what we hear from our customers. And it could prove to be wrong, right? In the first quarter, it turned out to be a little bit better than we had called it, and the revenue came through. But based upon what we’re seeing, we’re calling it a little bit more conservative versus the IHS estimate. In terms of the macro, our view, we’re still quite positive in terms of the overall automotive market, the age of the fleet is growing, although the vehicle inventory is improving and the lead times are shortening.
There still seems to be very strong raw demand for vehicles. It is surprising with rising interest rates, that there’s a desire to continue to do this. We would expect over time that there may be other moves on the part of the OEM customers to help alleviate some of that challenge, but we’re not seeing that yet in terms of incentives and other financing mechanisms. So there are many levers still available to build the demand for vehicles. So I think although we’re cautious about the market, we’re quite optimistic regarding the next several years in terms of automotive growth given where we are relative to historical reference points.
Operator: The next question comes from Shreyas Patil from Wolfe Research. Please go ahead.
Shreyas Patil: I just wanted to maybe come back to the automotive guidance for end markets. So obviously, with the 93% fill rate, there would seem to be a pretty high visibility for most of the quarter as it relates to what you’re expecting for orders. So is the gap between what you’re expecting for the end market versus IHS. Is that a case of you believe IHS as being too optimistic? Or is there some element of OEM sourcing, particularly some of those higher market share sensors from other vendors or from existing inventory. And then you mentioned the content differential between Chinese locals and multinationals for Sensata. I was hoping you can maybe give us a little more context around that.
