Good day and welcome to the Sensata Technologies Q3 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Joshua Young, Vice President, Investor Relations. Please go ahead.

Thank you very much, Carrie, and good morning, everybody. I’d like to welcome you to Sensata’s third quarter 2017 earnings conference call. Joining me on today’s call are Martha Sullivan, Sensata’s President and CEO; and Paul Vasington, Sensata’s Chief Financial Officer. In addition to the earnings release we issued earlier today, we will be referencing a slide presentation on today’s conference call. The PDF of this presentation can be downloaded from Sensata’s Investor Relations website. We will also post a replay of today’s webcast shortly after the conclusion of today’s call. Before we begin, I’d like to reference Sensata’s Safe Harbor statement on slide number 2. During the course of this conference call, we will make forward-looking statements regarding future events or the financial performance of the company that involve risks and uncertainties. The Company’s actual results may differ materially from the projections described in such statements. Factors that might cause such differences include but are not limited to, those discussed in our Forms 10-Q and 10-K, as well as other subsequent SEC filings. On slide number 3, we show Sensata’s GAAP results for the third quarter of 2017. We encourage you to review our GAAP financial statements in addition to today’s presentation. Most of the subsequent information that we will discuss during today’s call will be related to non-GAAP financial measures. Reconciliations of our GAAP to our non-GAAP financial measures are included in our earnings release and in our webcast presentation. Additionally the company provides details of its segment performance on Slide 10 and 11, which are the primary measures management uses to evaluate the business. Martha will begin today’s call with an overall business summary. Paul will then cover our financials for the third quarter of 2017 and provide guidance for the full year and fourth quarter of 2017. We will then take your questions after our prepared remarks. Now, I’d like to turn the call over to Sensata’s President and CEO, Martha Sullivan.

Thank you, Joshua, and thank you all for joining us this morning. I am pleased that Sensata once again reported strong results in the third quarter of 2017. Strength in China combined with momentum in our HVOR and industrial businesses continue to drive our top line performance, while M&A cost synergies and lower integration costs are delivering strong margin expansion and earnings growth. I will begin on Slide 4. We reported revenues of $819 million representing organic revenue growth of 3.6% in the third quarter of 2017, exceeding the high end of our guidance. Both of our segments generated solid results in Q3 as Performance Sensing posted 3.1% organic revenue growth and Sensing Solutions reported 5.2% organic revenue growth. The key drivers of our overall revenue growth continue to be China, particularly in our automotive business as well as our HVOR and industrial businesses. We expanded our adjusted EBIT margins by 90 basis points compared to the third quarter of 2016. This has continued a trend of strong year-over-year margin expansion throughout 2017. We delivered another quarter of double-digit adjusted earnings growth, posting growth of 10% in the third quarter of 2017. This performance was a result of improvements and the profitability of our acquired businesses and lower integration cost. The earnings power in our business model due to M&A cost synergies should continue to drive attractive earnings growth in the fourth quarter and into next year. Many of you may have seen that, on September 29, we announced our intention to redomicile the company to the UK. This announcement was another key highlight of the quarter. Should the re-domicile be approved, we believe that this move will provide Sensata with a number of benefits including greater flexibility for our capital deployment initiatives, while maintaining our attractive tax position. Sensata…

Thank you, Martha. Key highlights for the third quarter, as shown on Slide 9, include revenue of $819 million in the quarter, an increase of 3.7% in the third quarter of 2016. Of this growth changes in foreign exchange rates were a slight tailwind on revenue growth. Organic revenue growth, which excludes the impact of foreign exchange rates was 3.6% in the quarter. Adjusted EBIT grew by 7.5% and adjusted EBIT margins increased by 90 basis points compared to the third quarter of 2016. On inorganic basis, adjusted EBIT grew by 7.1% in the quarter. Adjusted net income was $138.8 million or 16.9% of revenue. A margin increase of 90 basis points compared to the third quarter of 2016. Adjusted net income grew 9.2% organically far outpacing our organic revenue growth of 3.6%. Adjusted EPS was $0.81 in the quarter, a $0.07 increase from the prior quarter. Of this increase $0.01 reflects tailwinds from foreign exchange rates. Excluding the impact of foreign exchange rates, adjusted EPS grew 8.1% organically, primarily due to higher volumes and growing acquisition synergies. Now I’d like to comment on our two business segments. I will start with Performance Sensing on Slide 10. Our Performance Sensing business reported revenues of $603.9 million for the third quarter of 2017, an increase of 3.3% compared to the third quarter of 2016, which includes the tailwind of 0.2% from changes in foreign exchange rates. As Martha mentioned earlier, this performance was driven by exceptionally strong results in our HVOR business, which rose nearly 20% organically and a strong performance of our automotive business in China. Our European automotive business grew organically just over 1% during the quarter, which helped offset a weak North American auto market. Performance Sensing profit was $162.7 million, or 26.9% of revenue. Excluding the effects…

Thank you. Carrie, please assemble the Q&A roster.

We will now begin the question-and-answer session. [Operator Instructions] The first question will come from Samik Chatterjee of JP Morgan. Please go ahead.

Hi, good morning. The first question I had was you had really strong growth rates in both the HVOR and in Sensing Solutions this quarter. How should I really think about the sustainability of that growth going forward? What are you sort of expecting in terms of growth in those two end markets in 4Q, for example? And if you can sort of also add color about what the content growth was in HVOR versus what was the industry growth in your estimate in this quarter.

If you look at the HVOR market, we believe the market actually moved about 5%, and we moved way beyond that, about 20%. We would expect to have strong content growth on an ongoing basis in our Heavy Vehicle and off-road business. I would say that this quarter was particularly strong. If you think about the way our content growth plays out, it’s usually designed and associated with new models and new controls that go into cabs. It’s not terribly linear. But over this past year, we’ve seen high single-digit content growth, and we think that, that continues to be achievable. On the area of the strongest growth within our Sensing Solutions has been in our industrial solutions business, our industrial sensing business. That represents about 7.5% of overall Sensata’s revenue, and that’s growing similarly from a content perspective as HVOR. The balance of what makes up Sensing Solutions is moving with market. We’re gaining share in China, for example, and would expect to continue to sustain that performance as well. So those are some of the puts and takes. It will be important to understand how end markets are moving. I think that’s a call that we’ll want to make as we end this year and look at our backlog into 2018. And that will be part of our outlook for the overall organic growth.

Got it, got it. Great. And that leads me to my second question in terms of the industrial sensing business, which you mentioned is 7.5% of revenue but is reporting double-digit growth. I just wanted to better understand. Is it sort of the market overall for industrial sensing is growing at that pace? Or is it more that Sensata’s gaining share because there are only a few suppliers that can – that have access to this technology at this point?

So it’s a combination. We’re seeing some end-markets that are growing, but it’s primarily content drive. It’s very diversified set of applications. And as our customers look to make use of more efficient solutions, information now that they want to put in into an analytics layer, we are seeing nice pull-through on that business.

Great, thank you. Thanks for taking our questions.

The next question will come from Wamsi Mohan of Bank of America Merrill Lynch. Please go ahead.

Yes, thank you. Martha, given your decision here to potentially re-domicile to the UK, can you comment on a couple of items here? One, how concerned are you about the uncertainty associated with Brexit and cross-border agreements and talent and things like that? And second, when you say more balanced capital deployment, does it mean that we’ll start to see a more meaningful uptick in share repurchases in 2018, given the more favorable setup there? And I have a follow-up for Paul.

So I think the first thing to note is that this requires shareholder approval and approval by the High Court in the UK. And so we really need to get through that overall process. The other thing I would share with you is this is a project that required a lot of analysis and many, many, many, many, many months of work to ensure that we looked at all of the risks associated. And one of those we looked at was Brexit. Our point of view is when you look at the puts and takes on that, it’s primarily related to the trading of goods and services, and you don’t see risks associated with tax jurisdictions and being domiciled in the UK. So I would say that’s the major way to think about our position in the UK. We think it’s really important to have balance and optionality in the way that we allocate capital, and the way we think about that is we look at the returns that can come from interesting things that are in our M&A pipeline, and we compare those against the returns that we can provide shareholders through cash returns, and that’s a balanced perspective that we have – intend to take us we go forward. It sounds like you had a question.

Okay. Thanks, Martha. Yes, my question for Paul is the free cash flow performance, year-on-year, has been somewhat weaker despite these improvements in adjusted EBIT margin. Then – and you called out inventory earlier in your prepared remarks, has that inventory build been higher than what you thought last quarter? And if yes, what drove that higher level? Was it like better demand? And how much do you think the cash conversion cycle could change in 2018? Thank you.

So Wamsi, so this year, underlying the cash, we have a significant amount of restructuring spend that we have a fund, charge that we took in prior year, those payments are due in terms of severance and things of that nature. Inventory is higher. But we think it’s very prudent to have that level of inventory to ensure that we’re going to serve our customers exceptionally well as we transition manufacturing from the sites that are – we’re shutting down, to the new sites which are receiving those new production lines. So we think it’s a very smart thing to do. It’s a timing issue. We’ll get the benefit of the cash flow next year as we convert that inventory into revenue.

The next question comes from Amit Daryanani of RBC Capital. Please go ahead.

Thanks a lot. Good morning, guys. I guess, maybe to start off with Martha, China has been a nice source of strength for you guys across, I think, both Performance Sensing and Sensing Solutions buckets. Could you just talk about the sustainability of the strength you’re seeing in China in those two markets, especially in China auto production, as the compares, I think, is rather difficult entering 2018 for you guys

Sure. So recognize China is now about 14% of our overall revenues, and that’s fairly split between auto and our business – our industrial-based businesses. The end market there has been, I would say, not as strong as past years, a little stronger than we expected here in the second half of the year. So that growth is, particularly on the auto side, is coming from content growth. When we look at what makes that up, and we look at the great success we’ve had this year in overall design wins, much of that occurring in China, we do expect to be able to extend that content performance as we go forward.

Fair enough. And then, I guess, Paul, could you just remind us how much restructuring or integration charges that are still ahead for you guys as we think about calendar 2018? How much of that should we model in going forward, I guess?

There’s probably another $5 million to $10 million to fund over the next 12 months. You can see we’ve already funded $20 million, and that’s in this year’s cash flow. So it starts to go down over time.

Got it. Okay, thanks a lot and congrats on the quarter guys.

Thank you.

The next question comes from Shawn Harrison of Longbow Research. Please go ahead.

Hi, good morning. Just if I may touch on North America a bit briefly. Within the guidance, is there any expected, I guess, I don’t know if inventory replenishment or whatever the hurricanes may have impacted, both positively and negatively, into the fourth quarter guidance? Or do you expect, I guess, North America to weaken any further into the end of the year?

At this point, when we’re calling the quarter, we’re really looking at our overall backlog, and that’s the primary thing that informs our guide. And so you can parse that out and look at how that pertains in overall production rates, and there are some give and takes. There’s probably some production that’s related to inventory that came out. But quite frankly, that’s not the information that we use to guide the forward-looking quarter.

Okay. And so within that, nothing related to hurricanes either?

I couldn’t say. So what we’re based on is the pull rates and the demand that our customer is providing us. And I’m – so you’d really have to look at the OEMs’ comments on that to understand how much of that is hurricane-based or how much of that is overall demand based.

Okay. And a follow-up for Paul, if I may. Euros rallied a bit over the past 90 days, over the past six months. How should we think about, just standing right now, the benefit, potentially, to sales next year and kind of EPS as well knowing that you have a number of hedges that should roll off and provide maybe a little bit of a tailwind?

So for next year we do see a tailwind on the top line, probably in the range of 1% or so in terms of top line. I would say, in the bottom line, which is more important [indiscernible] a lot different currencies that are moving against each other. We think it’s probably a $0.07 to $0.10 benefit next year. We still have to finish our hedging program out for the year, wait till we move around, obviously, in the fourth quarter. So we’ll be able to provide a better view when we give formal guidance for 2018, but it is definitely looking favorable in the $0.07 to $0.10 range for next year.

[Operator Instructions] The next question comes from Christopher Glynn of Oppenheimer. Please go ahead.

Thank you. Good morning. I have a question on Sensing Solutions and some of the legacy controls and protection. Wondering if you’re seeing any new dynamics working to the long-term growth outlook, just like around broad electronics content of GDP. Any new breadth of uptake for the products you’re identifying?

That business is remarkable in its ability to find new applications. And as you know, Chris, it’s – those applications are quite niche-y. But we have been able to achieve design-in into that legacy side of the business and also to gain share. Again, a lot of focus in China on that growth. As I mentioned, about half of our content and our growth in China is outside of auto. And the Sensing Solutions, that portion of the business you’re referring to, is definitely a piece of that. So it’s probably less growthful than other components of our business, but we think that we’ll be able to sustain slightly above GDP growth as we look ahead.

Okay. And just a question on the margins for Performance Sensing. I think that usually progress upward a little bit in the third quarter versus the second quarter, not so in this instance. Just curious if there’s any thought around that.

When we look at the P&L, you’ll see R&D costs increased sequentially. And most of that R&D is in the Performance Sensing segment, and most of that spend was to support the accelerating NBO pipeline that we’re seeing.

The next question comes from Craig Hettenbach of Morgan Stanley. Please go ahead.

Yes, thank you. Martha, I had a follow-up question on CST, your comments around kind of reinvestment in that business. Can you give any context in terms of time line? In other words, in the last 6 months to 12 months if you are increasing investments, when that would – when you would see revenue contribution from those efforts?

Yes. Craig, I think, the point we’re trying to make here is we’re seeing revenue increase now. So if you look at the growth in Sensing Solutions and recognizing that most of the CST portfolio went into Sensing Solutions, it’s definitely a driver of the growth of the overall business, and that’s coming a little bit sooner than we would have expected. So already seeing the benefits of the investment we did to reinvigorate the growth.

Got it. And then as my follow-up, your comments around capital allocation in terms of flexibility. Any thoughts as the balance sheet leverage has come down in terms of your approach to M&A versus buybacks?

I think, again, the way we think about that, we’ve been able to deliver very high returns with very accretive M&A, and that will continue to be an important part of our capital allocation. We have also in the past returned cash to shareholders in the form of buybacks. So when we think about that going forward, we want to be able to continuously compare those two options against each other and make sure that we are selecting what will deliver the best returns for our shareholders. As a result, I would expect to see more balance in our capital allocation.

The next question comes from Joe Giordano of Cowen. Please go ahead.

Hi guys, thanks for taking my questions here. I just want to dive maybe a little bit more on the wins you mentioned in brake systems and gas filtration systems. Are you predominantly displacing people on those? Or are these new systems that have like never been on certain platforms before?

Almost always, the way we gain share is to get into applications early on and grow with them as they grow. So that allows us to outpace the end market, and both of these are great examples of doing just exactly that.

Are you – on the brake side, I know there’s been talk about like putting sensors on the actual pads. Are you guys involved in stuff there? Or is this more on like the larger systems? I know that’s something that, as you get more into EVs, some of the manufacturers there are kind of thinking about.

Yes. Look, we’re always very sensitive to talk about very new sort of emerging applications and new technologies that we’re bringing into that kind of an application, so I will probably leave it to the OEMs to discuss what they’re doing there. But we’re highly engaged in that application and many other subsystems on the vehicles that have to become much more efficient to help to extend the range of things like plug-in electric vehicles and full electric vehicles, quite engaged on that front. And also systems that need to have more diagnostics as we get into higher levels of autonomous vehicles. So a lot of work underway in that area.

And maybe last, just for Paul. I think you guys currently – you do not pay cash tax in the U.S. and don’t have the expectation of doing so anytime soon. Does anything with your move potentially to the UK or anything you’ve heard out of the federal government here in terms of heating up on tax reform, does that change your outlook there at all?

No, no. The move to the UK doesn’t affect our cash taxes. The UK entity that’s moving is the parent company. All the operations remain in the jurisdictions that they are today. So it doesn’t have an effect on our taxable income base. And you’re right, we won’t be a tax payer in the U.S. for a significant period of time.

The next question comes from Brian Johnson of Barclays. Please go ahead.

Yes, good morning. Could you maybe talk us through on an incremental margin or margin basis whether we can talk about the CPV and margin differences between light vehicle and HVOR? With HVOR having a strong result, automotive flat, is it fair to assume the margin expansion came from HVOR? And how should we think about the incrementals within the segment?

So no huge differences on the profitability across those two business. Most of our margin expansion is coming from the fact that we are improving the profitability of our acquired businesses. And primarily, that focuses on the Schrader acquisition and the CST acquired portfolio. So with the integration spend that we’ve had and the optimization of our supply chain, we are getting – we are delivering on the plans that we’ve put in place when we acquired these businesses to bring them to Sensata’s margin.

Okay. And second of all, can you – is the higher R&D that you mentioned to design wins, is that expected to continue through the close of the year and into next year? And how should we think about it for next year?

Certainly, it will continue to be higher for the remainder of the year.

Okay, thank you.

The next question comes from William Stein of SunTrust. Please go ahead.

Great. Thanks for taking my questions. Revenue is clearly outperforming. EPS isn’t entirely, in particular, for the out quarter guidance. Does that relate to the R&D comment that you’ve made a couple times, Paul? Or is there something else? I think, relative to our model, the gross margins appeared to perhaps be a little bit lighter despite great results overall. That was one concern we had, and we’d love to hear you explain it.

So this quarter, I mentioned that we did spend some money to continue to optimize our manufacturing operations in both Performance Sensing and Sensing Solutions, and that will drive efficiencies in the future. For the fourth quarter, the big increase, I would say, relative to what you would expect is the higher R&D spend to support this accelerating NBO pipeline that we have to fund to launch those products in the future. FX was also a little bit of a headwind this quarter in the third quarter as it relates to our cash flow hedging. So it was about a 15 basis points, 20 basis point headwind.

To gross margin.

To gross margin. You can see the offset down below in other income and expense. I think gross margin was a headwind.

That’s helpful. Maybe one other, if I can. Paul, I think, at least a couple of times you’ve talked about your expectation for growth in 2018, while you’re not clearly guiding it now, to exceed the growth that you’re seeing in 2017. And perhaps the R&D that you’re doing now is a sign that you’re supporting that and you still expect that. But any comment around that and the margin trajectory for next year would also be really helpful. Thank you.

So the design work that we do today typically results in revenue over the next three years to eight years so that what we’re doing today won’t have a big impact on 2018 per se, and there is maybe a little bit, but most of that’s longer term. So I think it’s the right investment at the right time, given the acceleration of the NBO pipeline.

Yes. So we’re on a strong cadence, an improved cadence of organic growth, and you’re seeing that play out in 2017. Frankly, stronger than we had called it coming into the year when we had also said at that point in time we expected 2018 to be stronger than 2017. So we’re feeling good about a continued cadence of strong organic revenue growth.

Thank you.

The next question will come from Mark Delaney of Goldman Sachs. Please go ahead.

Yes. Good morning and thanks very much for taking the questions. First question I wanted to follow-up on the trends that Sensata is seeing in electric vehicles. I think the company said over the summer that average content on a pure electric vehicle is in the mid-$20 range per car versus something in the mid-$30 range on a traditional combustion engine. But also, that Sensata has been working to close that gap. Could you just update us on where you stand with those efforts and on an organic basis? And is that something that Sensata would look to address inorganically?

So we’re making great progress in terms of adding content to all manner of electrified vehicles. In the near term, we’re seeing nice take rates on braking systems that regenerate energy, for example. Those are relevant on both hybrid, plug-in electric and full electric vehicles. One of the things that we’re seeing is quite a range in the content that’s available on electric vehicles as some of the more sophisticated manufacturers are moving into their gen 2 and gen 3 versions of a full electric vehicle, and we’re seeing our content opportunity come up significantly as that happens. So quite engaged in that. We’re at the point now where if you try to use an average number on a pure electric vehicle for Sensata, so meaning, no plug-in, pure electric vehicle, there is such a range based on the model and where it’s built in the world that the overall average is not all that meaningful. So it can be well above the content we see on a typical gas engine vehicle or below, depending a lot on who the OEM is, where in the world that product is being made and whether or not it’s a gen 1, gen 2 type of vehicle.

That’s helpful, Martha. And a follow-up question also just longer-term trend. I think Sensata said earlier in the year that its expectation for diesel penetration rates in Europe was that it would go from about 48% earlier in calendar 2017 to, I think, it was 43% was the forecast by 2022. Is there any change in the company’s expectation for diesel penetration rates?

We’re watching that one really closely. And as a reminder, what we keep our eye on is overall production of diesel engines in Europe, some of those being exported outside of Europe. In this past quarter, for example, we saw 1% decline in the diesel engine production in Europe, so that was a headwind for us. And so as we look ahead, we’re being very mindful of what can change that and is it changing, and we’ll continue to share that perspective with you as you go forward. Some of the puts and takes on that, I think, as everybody knows, the take rates, the sell rate in Europe is coming down. Interestingly, we’re seeing stronger demand for things like light commercial vehicle diesel content in emerging market, and that’s a bit of an offset to the European headwind.

The next question comes from Jim Suva of Citi. Please go ahead.

Thanks very much. I have one question for Martha and one question for Paul. Martha, can you talk a little bit about inventory levels, whether it be at the distributors or the channel? Specifically, more in your HVOR and your industrial segment, is it below average? In line with average? Above average? Just any thoughts on inventory in the channel. And then the question for Paul is, Paul, if I heard correctly, given your hedging, it sounds like about a 1% top line benefit for next year and $0.07 to $0.10 of earnings benefit next year. Can you confirm if I got those right? And then also, just explain the methodology you guys use for hedging. Is it like a three-year hedge [indiscernible] and you keep putting them on as they roll off? Or has anything changed, just so we can think about, long term, your hedging programs? Thank you.

Sure, Jim. So as it relates to inventory in those end markets, it’s, I would say, overall in line, maybe slightly lower in portions of our Heavy Vehicle and off-road business. So we don’t get a ton of visibility to dealer inventory there, but it is a channel check that we do. So slightly lower in that part of the business, in line with the other areas of our industrial business. And keep in mind, Sensata does not have a lot of revenue that runs through distribution. So we’ll be more aligned with overall demand than other firms as a result of our overall channel strategy.

And Jim, as it relates to foreign exchange, it is an early view, but I did say 1% higher revenue next year due to more favorable foreign exchange rates and then $0.07 to $0.10 of incremental EPS due to favorable foreign exchange rates. Our hedging program is to hedge, on a rolling basis, over a 18-month to 24-month period, and we layer those hedges in over time. And so we – doing that, we try to create reduction in earnings volatility over time due to movements in exchange rates.

Great. Thanks so much for the details. That’s greatly appreciated.

You’re welcome.

Thanks.

The next question will come from Rich Kwas of Wells Fargo Securities. Please go ahead.

Good morning. This is Deepa Raghavan for Rich Kwas. Your HVOR organic growth, pretty strong, obviously, as questions are asked about it, too. In the past, I thought you mentioned it was a richer mix. Just curious, should we expect that reduced 2018 conversion rates, assuming it’s a richer mix? Or has something changed within your HVOR products? Or anything that we should be thinking about as offsets to what you would have thought was a richer mix in the past?

Yes, we always – I think nine times out of 10, folks assume it’s a richer mix. Our overall margins are really strong across the business. And when you look at the way we manage our overall operations, it’s a part of how we drive the business. So this is not a change from prior. We have strong profitability, both in our automotive business and our Heavy Vehicle and off-road business.

Great. You did call out 1% diesel – lower diesel or diesel decline in Europe production – in Europe diesel production. Curious, if you would be able to quantify how much that possibly clipped your automotive revenue growth? I don’t know if you can qualify it. But if you can, that will be helpful. And wondering if you saw – if there’s any evidence that you’ve seen that the headwinds actually accelerate. You did give us your outlooks going forward, but are you seeing that accelerate? You pointed out sales being lower, production needs to catch up at some point in time. So just curious if you’ve seen that accelerates.

No. Just a couple of data points. On an annualized basis, about 1% decline is about $5 million in revenue for Sensata. So 1% decline in diesel, $5 million in revenue on an annualized basis, if that’s helpful. I think another data point is if you look back, let’s say, five years, we’ve seen about a 10% overall reduction in that mix on diesel. So it’s been a cadence downward. Some acceleration on that, if we look in 2017, but not beyond what our expectation has been. And so the other thing to think about is, with a 1% decline today equals $5 million in revenue, that gets smaller as we move forward for two reasons. Some of those diesel engine vehicles are actually moving to a hybrid vehicle. And when that happens, we’re getting to a point where the difference is quite small. And at the same time, our gas engine content in Europe is coming up. And that’s been on a cadence improvement in 2017, it will improve even further in 2018 and into 2019. So in the time period where we think we’re going to see the most deceleration of diesel, we’re getting to a point where the gap between our content on a diesel engine versus a gas engine versus a hybridized vehicle is becoming negligible.

And that’s all the time allotted for today’s call. I would now like to turn the conference back over to Joshua Young, Vice President of Investor Relations, for any closing remarks.

I’d like to thank everybody for joining us this morning. We appreciate your continued interest in Sensata, and we look forward to hosting many of you at our upcoming Investor/Analyst Day in New York City on December 12. If you’d like to attend this event, details about the event and registration are posted on our Investor Relations website. Thank you, and good day.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines. Have a great day.