The operator introduces Ann Nicholson, Vice President of Investor Relations, for the Corning Incorporated Quarter One 2024 Earnings Call. Ann Nicholson reminds listeners that the remarks will contain forward-looking statements and that the company will be discussing core performance measures. She also provides a reconciliation of core results to GAAP results and directs listeners to the company's website for more information. Wendell Weeks then introduces the first quarter 2024 results, with sales of $3.3 billion and EPS of $0.38.

The company's year-over-year gross margin and free cash flow have improved, and they expect the first quarter to be the lowest of the year. They have plans to add $3 billion in annualized sales within the next three years and are confident in their ability to generate profits and shareholder value. They have outlined a framework for stronger returns and expect to see growth in each of their markets. Their confidence in this framework has only increased in the past three months.

The company expects Optical and Display to be the main drivers of improvement in the near term. They anticipate an increase in sales as carrier inventory levels return to normal and customer deployments increase. In Display, they expect higher utilization rates and growth in retail demand. For the full year, they expect mid-single-digit growth in glass volume at retail. They also expect to add more than $3 billion in annualized sales within the next three years.

Corning is optimistic about their market opportunities due to their leadership positions and collaboration with customers. They expect their sales in Optical Communications to increase by 40% as the industry rebounds and funding approvals for network builds are expected to begin later this year. The demand for Generative AI also creates opportunities for Corning, as customers are building a new fiber-rich network to connect GPUs. Corning's pre-connectorized structured cabling solutions offer installation time advantages and their latest high-density innovations are expected to be adopted by customers building large GPU clusters.

Corning has introduced new products to meet the high-density requirements of AI datacenters, including RocketRibbon cable with Flow Ribbon technology and Contour Optical Fiber. This has given them a unique competitive advantage and they have seen significant customer wins. In the automotive industry, the new US EPA standards for multi-pollutant emissions will increase Corning's environmental technology content opportunity by two to three times per US ICE vehicle. They are also pursuing additional opportunities in the automotive industry with their Automotive Glass Solutions. In Mobile Consumer Electronics, Corning aims to outpace the market by increasing the content they provide for each device. Their sales have consistently outpaced the market in the past decade and they expect this trend to continue.

Corning has been able to increase the value per device by improving cover materials and adding more content. They expect growth in the Display segment due to the increase in television screen sizes and their technology leadership. They are also expanding into new product platforms such as Automotive Glass Solutions and pharmaceutical packaging. Despite a decrease in sales, they have been able to improve gross margin through productivity and pricing initiatives, establishing a stronger profitability and cash flow base to support future sales growth.

In the first quarter, the company saw signs of improving market conditions and expects to see higher sales and strong incremental profit in the second quarter. They have also put processes in place to generate operating leverage as they grow sales. The company's Chief Strategy Officer will be retiring at the end of May after 13 years of leadership. Sales were $3.26 billion and EPS was $0.38, meeting the high end of their guidance. Their efforts to increase price and improve productivity have been successful.

In the first quarter, the company saw a decrease in sales but an increase in gross margin and free cash flow compared to the previous year. They expect to continue growing in the second quarter. In the Optical Communications segment, sales were down due to lower demand from carriers, but there are signs of improvement. In Display Technologies, sales were up compared to the previous year, but panel makers reduced their utilization levels in response to a softer retail season.

The increase in net income in the first quarter was due to higher volume and pricing actions taken in the second half of 2023. The company's decision to reduce production in line with lower volume in the fourth and first quarters had a negative impact on net income, but profitability is expected to be higher in the second quarter. The company anticipates higher panel maker utilization and increased glass volume and prices in the second quarter, and overall expects favorable pricing for the full year. The company has actively hedged its foreign currency exposure and has received over $2.5 billion in cash from its hedge contracts since their inception. The company's most significant hedge contracts are for the Japanese yen, which will support their Yen core rate of 107 through the end of 2024.

The company's goal for its display business beyond 2024 is to maintain a good return through currency hedges and price increases. They are actively working to improve their hedge coverage for future years and have already partially hedged for 2025. They plan to raise glass prices in yen to share the benefits of the weak yen rate with their customers. Sales for Specialty Materials and Environmental Technologies have increased, driven by strong demand and new innovations. Net income has also increased due to higher volume and improved operating performance.

Sales in the first quarter for Life Sciences were down 8% due to inventory drawdowns by customers in North America and Europe, but net income increased by 44% due to improved productivity. Sales for Hemlock and emerging growth businesses were down 19% due to lower pricing and completion of volume commitments for COVID-related products. The company expects sales to grow in the second quarter and anticipates strong incremental profit and cash flow. They also have a strong balance sheet and plan to prioritize investing in organic growth opportunities.

Corning's current average debt maturity is 23 years with only $1 billion in debt coming due over the next five years. They have no significant debt due in any given year and are committed to providing returns to shareholders as their cash flow increases. The company has grown its dividend by 40% since 2019 and their dividend yield is top quartile in the S&P 500. They will also be opportunistic with share repurchases. The company is focused on building a solid foundation for long-term growth and will share more updates in the coming months. The next question is about the datacenter opportunity for Corning and when the incremental orders and revenue will flow in. Wendell Weeks, CEO of Corning, explains that they have a large business in the Enterprise sector and will see robust revenue growth in the back half of the year. The revenue will come from front-end network connections, such as rack-to-rack connections in optical and datacenter.

The demand for more Corning innovation has increased due to the need for higher density and bandwidth in GPU racks. This has led to the development of new products and technologies, such as the B100, which can handle higher bandwidth requirements. Corning is continuously working on new innovations to meet the growing demand for higher density and bandwidth in GPU installations.

The speaker thanks Ed for his answer and asks him about the potential impact of the yen rate and pricing changes on display business in 2025. Ed responds by stating that they are committed to generating a good return and will continue to hedge and raise prices to offset any potential impact. He also mentions that it is too early to discuss core rate and that the best way to think about the display business is based on the economics they will deliver in 2024. He assures that they will keep investors updated on their progress.

Meta Marshall from Morgan Stanley asks about the company's potential for growth and investments over the next few years. She also asks about the timing of BEAD and its impact on the Optical business. CEO Wendell Weeks responds by stating that they are conservative in their outlook of BEAD's effectiveness and anticipate slower spending than the industry overall. He also mentions that the company has capacity for more than $3 billion in sales. CFO Ed Schlesinger adds that they see potential for sales beyond $3 billion and are considering various sources for this growth.

The company is confident in supporting a number above $3 billion for potential opportunities, but does not see a need for significant capital. They may need to spend some money for building out their auto glass business, but not for melting capacity. Their goal is to generate a significant amount of cash flow from existing capacity. They are still trying to understand the impact of newly announced subsidy programs in China on their retail TV market and glass volume.

The speaker asks a question about the display market and its volatility, mentioning that the current cycle may be different due to the shift in manufacturing location. The response explains that the market is now more mature and easier to predict, and that the behavior of set makers and panel makers has also changed.

The speaker discusses changes in the panel market, with panel makers seeking to optimize prices and reduce utilization to match orders. They believe this may lead to a more stable industry in the long term. In terms of the Optical Comms business, they mention inventory normalization and potential weakness due to challenges with 5G for telcos.

In response to a question about the impact of 5G's lack of success on their business, Wendell Weeks discusses the challenges faced by their customers in the Telco industry and the potential cost savings and revenue opportunities that come with combining wireless and wireline networks. He also mentions that their deployment outlook for fiber has been muted due to lower deployment rates, but they still expect a pickup. Additionally, he addresses the potential impact of datacenters popping up in new areas on their Enterprise business.

The speaker, Wendell Weeks, confirms that the company has an interesting opportunity to enhance its capabilities globally due to the search for energy. However, it is too early to factor in this opportunity as the required energy sources have not been found yet. Another caller, Asiya Merchant, asks about the increase in inventory and OpEx. The speaker, Ed Schlesinger, explains that the inventory is expected to go down as volume increases, and the OpEx increase is due to normal variable compensation after underperforming in the previous year. The company is committed to keeping OpEx relatively flat.

The company's sales in the first quarter were around $700 million and they expect it to increase as they continue to grow. They are focused on increasing profitability and will use Yen hedging and raising prices to achieve this goal. They have made progress on their hedges and will continue to look for opportunities. They are not discussing specific details or framing up core rates for 2025 yet. They want to generate an appropriate return for their business and will keep investors updated on their progress.

The speaker, James, asks about the company's gross margin and how it will be affected by the $3 billion sales opportunity. Wendell Weeks explains that their gross margin has remained steady despite a decline in sales due to improved productivity and price increases. He believes that as sales increase, the gross margin will also increase each quarter. The company's target operating margin is 40%, and they believe they can reach this as the $3 billion sales opportunity is realized.

Wendell Weeks, the CEO of Corning, discusses the company's recent financial performance and its goal of reaching a 40% margin. He explains that they have already absorbed inflation and raised prices, which has brought their margin percentage down to 38%. However, he is confident that they can reach the 40% level again as they continue to increase sales. An analyst asks about the Specialty Materials business, and Ed Schlesinger, the CFO, responds that they expect growth to come from adding more Corning content to the market rather than overall market growth. They do not anticipate significant growth from this in the near term, but it will be a catalyst for future growth. Another analyst asks for more details on the business, and Schlesinger explains that it performed as expected in Q1 and will continue to grow as they add more content to the market. They do not expect significant market growth in the near term, but future growth will come from their innovations in the market.

George Notter asks about the appropriate level of profitability and the cost of the hedging program. Wendell Weeks explains that the appropriate level of profitability includes the cost of hedging and that the hedging program is minimal and balanced for shareholders. The Annual Meeting of Shareholders will be held on May 2nd.

The company will be attending the JP Morgan Technology Conference on May 21st and hosting management visits to investor offices in select cities. A web replay of the call will be available on their website. The call has ended and participants can now disconnect.

This summary was generated with AI and may contain some inaccuracies.