David Heinzmann: Thanks.
Trisha Tuntland: Thanks David for your question. Appreciate it.
Operator: Our next question will come from the line of David Williams with Benchmark. Please go ahead.
Trisha Tuntland: Good morning, David.
David Williams: Good morning. And congrats on navigating the difficult environment here. So just a couple of quick things. And — I’m sorry.
Trisha Tuntland: Yes, we can hear you.
David Williams: Okay. Good. And not to proverbial dead horse here, but on the inventory level I’m kind of curious if you are seeing or maybe a change in rationale from your customers in terms of the levels that they carry. And if we’re burning inventory back down to maybe an elevated level that they’re carrying now versus what would be a normalized level? And just kind of how you think about that at those levels
David Heinzmann: Yes. I think it’s a great question. It’s a question we ask ourselves. And we talk with customers often and when we talk with our distribution partners and what they’re seeing with the end customers. I think it’s our assertion right now that in customers probably carry a bit elevated inventories compared to they were pre-pandemic. Now, they’re not going to carry at the level they’ve been operating in the last few months, so there’s going to be some bleed down of that that’s certainly impacting our business. But our current assertion is, they’ll still keep a bit elevated because of the volatility we’ve experienced, which is — it’s been many different aspects that have impacted. It certainly got kicked off by COVID, but many other aspects, whether it’s fires and semiconductor fabs in Japan or freezes in Texas and things like that.
It’s not a lot of volatility. And so I think our belief is that there will be slightly elevated inventories that our end customers carry for the foreseeable future.
David Williams: Okay. Very helpful. Thank you. And then maybe secondly when you touched on China just a bit earlier, it sounds like you’re seeing some indications of a recovery effort the Chinese New Year. Just maybe curious about that geography, how you’re thinking about demand trends there? And is that an area that could be potentially maybe a little stronger than what you were thinking now as that economy recovers?
David Heinzmann: Yes. I would say it’s a bit early to kind of — to take much of a position on that yet. Certainly, at our own factories and our own suppliers and even kind of our core customers we’re dealing with. The rebound and returning employees after the Lunar New Year has been pretty positive and has had kind of surprisingly robust. In some ways, there was nervousness about that. So we’re seeing that as a positive sign. I think certainly on our teams, our teams in China have been phenomenal in dealing with the situation of early in 2022, having zero COVID policies to — in the back half — back end of the year where very high percentages of employees who had COVID and dealt with those disruptions. Our teams managed through that really effectively with the strength of our teams in China and has kind of recovered relatively quickly.
So I guess I would say how does that impact potential demand in China in the back half of the year? What I would say is, I’m hopeful — we’re hopeful that, that might pretend that there could be an improvement in demand in the Chinese market as the year goes on. But I think it’s kind of early to call that for sure. .
David Williams: Thank you so much.
Trisha Tuntland: Appreciate your questions, David. We will take our next caller please.
Operator: Your next question will come from the line of David Silver with CL King & Associates. Please go ahead.
Trisha Tuntland: Good morning, David.
David Silver: Good morning. Yes, thank you. So a few questions, and I’ll copy my predecessors reference to maybe risking beating a dead horse. But there was a question about decrementals, and I believe it was related more to the Electronics segment. But when I looked across all of your segments, change in revenue versus change in operating income, 3Q to 4Q. I mean there was kind of a pretty high decremental in each of those segments. So I was just wondering if you could take a step back and maybe described some buckets where, I don’t know, mix issues or the lower volumes in Transportation. But overall, I mean, what do you think were the key elements in kind of a 70% or so decremental kind of company-wide 3Q to 4Q? Thank you.
Meenal Sethna: Sure, David. So stepping back on to some of the questions we’ve got, but if I aggregate it all, versus where we were a quarter ago. We definitely saw some additional and accelerated destocking in some areas. Dave has been talking about the channel destocking we saw, definitely accelerated as we got through the quarter going into Q1. And I talked about earlier the fact that with Electronics being our strongest margin segment, the decrementals on that also tend to be higher than the company average. So that’s one. We’ve also talked about the fact that we saw continued destocking in auto and new destocking as we got into the end of the quarter with Carling customers because of the strong backlog and we were able to meet all of the customer demand.
That also had an incremental reduction as well. And so when we talk about this element of destocking, what does it mean, it’s a combination of the fact that sales come down, we’re producing less. And in some cases, the environment changed rapidly within this past 90 days or so. So you’ve got sales dropping and you’ve got what we call stranded production cost. As you’re reacting, you’re trying to react very quickly, but you’re watching this all happen real time. So with all that additional production cost. I would say the last piece also on our Industrial segment, and we had the same thing happened last year. The team really tried to pull in shipments out of China before the Chinese New Year. Good thing, given everything that has been going on.
And so we incurred some extra logistics costs in that period then get washed out with additional sales in the next quarter. So it’s really the combination of those, I’d say that’s the 80:20 to the whole mix.
David Silver: Great. Thank you. Next question would be about the comment, I guess, regarding design wins for off-board charging. And my recollection is you’ve discussed that opportunity in terms of Tier 1, Tier 2, Tier 3, where the lower two tiers kind of a single-digit dollar opportunity per unit, but the highest tier is triple-digit dollars more per unit. So I was just wondering if you could characterize the overall quality of your design wins in terms of the percentage that might be in that highest — highest dollar opportunity tier. And then secondly, any idea or any sense of a timeline or when a design win in that area kind of converts into production shipments and revenue? Thank you.
