The operator introduces Ann Nicholson, Vice President of Investor Relations, who begins the Corning Incorporated Quarter Two 2024 Earnings Call. Nicholson reminds listeners that the remarks may contain forward-looking statements and that the company will be discussing core performance measures. She also provides information on how to access these measures on the company's website. CEO Wendell Weeks then takes over and announces strong second quarter 2024 results.

The company has seen a return to year-over-year growth, exceeding their sales and EPS guidance. This is due to the strong adoption of their new optical connectivity products for generative AI. This application creates a second network within data centers to connect GPUs, resulting in about 10 times the number of fiber connections. The company has been working with key customers to design these optical links and has invented new products that reduce installation time and costs while increasing reliability. This has led to record sales in the enterprise portion of their optical business, which has grown over 40% year-over-year. Additionally, the increased adoption of Gen AI also leads to higher bandwidth requirements between data centers.

Corning has reached an agreement with Lumen Technologies to reserve 10% of their global fiber capacity for the next two years, which will facilitate the build of a new network. This is part of their Springboard plan, which aims to add over $3 billion in annualized sales within the next three years and deliver strong incremental profit and cash flow. The company has seen growth in the second quarter and expects to continue growing in the third quarter. They also continue to innovate new products to drive growth above market levels.

In this paragraph, the speaker discusses the company's capacity and capabilities to service $3 billion in the next three years. They mention their strong financial results and growth, as well as their plans to accelerate the return of cash to shareholders. The speaker also talks about their new product suite for GenAI and how it took years of dedicated work to reach this point. They expect to see more customer announcements and commercialized innovations in the coming quarters.

The speaker provides a chart to explain the incremental sales opportunity for the company's Springboard plan. They project a potential growth of $8 billion in annualized sales run rate by the end of 2028, with $5 billion by the end of 2026. The plan is not risk-adjusted and is based on assumptions such as market recovery, successful adoption of innovations, and operational milestones. The speaker also mentions a high confidence plan for the next three years, with probabilistic adjustments for potential outcomes in each market access platform.

The Springboard plan is a milestone-based plan that is expected to lead to strong growth for the company over the next three years. The company is currently ahead of its run rate and has seen strong sales in the first two quarters. The plan will continue to evolve and the company will update investors on significant milestones. The company's Board of Directors will also be involved in guiding the plan. An investor event is planned for September and a full Investor Day in early 2025.

The company plans to refresh its Board composition to align with their Springboard plan. The CEO, Wendell, highlighted the company's target of $8 billion in incremental sales by 2028 and $5 billion by 2026. The CTO, Ed, discussed the major growth drivers for the company, including the Gen AI opportunity in Optical Communications, expected growth in the enterprise business, and government efforts to bring high-speed internet to rural communities. In the display division, the company expects to capitalize on the trend of larger screens to add low to mid-single-digit volume growth.

The company is making adjustments to maintain appropriate returns in their display business and expects significant growth in their automotive glass business due to new regulations. They also plan to leverage the Inflation Reduction Act to support the development of a US solar supply chain. The company has a $5 billion growth opportunity, but has adjusted their projections to a $3 billion high confidence plan. They expect strong profit and cash flow as they capture this growth, and have seen improvements in gross margin and sales in the second quarter.

In the second quarter, the company saw a 20% increase in sales for the Optical Communications segment and a 16% increase for the Display Technologies segment. Net income also saw significant growth, with a 43% increase for Optical and a 28% increase for Display. The company plans to make currency-based price adjustments to maintain profitability in the display business and has hedges in place for the future. The expected profitability for the display business will be in line with the average of the last five years.

The sales and net income for Corning's Specialty Materials segment and Environmental Technologies segment saw increases and decreases respectively in the second quarter. The company expects the heavy-duty market weakness to continue in the third quarter. Sales for the Life Sciences segment also saw an increase, while sales for the Hemlock and Emerging Growth businesses decreased due to lower pricing. For the third quarter, the company expects sales to grow and EPS to increase three times the rate of sales. The company's sales are ahead of their Springboard plan and they anticipate strong free cash flow in the third quarter. Their capital allocation priorities remain the same.

The company prioritizes investing in organic growth opportunities, as they believe it creates the most value for shareholders in the long term. They have the technical capabilities and capacity to add over $3 billion in annual sales with minimal cash investment, and plan to maintain a strong balance sheet and continue returning excess cash to shareholders. The company is on track to deliver on their Springboard plan, and their second quarter results and third quarter guidance demonstrate the incremental profit and cash flow expected from capturing sales growth. The CEO looks forward to sharing more updates on the Springboard plan and creating value for shareholders.

The speaker discusses the visibility and strong growth potential for the Gen AI products in the optical side of the business. They have high visibility due to their customized systems for brand-new data centers, and word of mouth has been positive, resulting in new customers. The speaker also mentions that most of the variance has been upside variance, and the competitive moat for Corning in the optical enterprise market is stronger now compared to previous quarters.

Wendell Weeks discusses the competitive moats that the company is building, driven by their new-to-the-world fiber cable and connectivity system. This system will increase the optical performance and is protected by intellectual property. The company expects their competitive advantages to increase in this segment. They also mention the $8 billion Springboard opportunity by 2026, with the majority of the opportunity coming from the enterprise sector due to the changing computing landscape. The recent Lumen agreement is expected to contribute significantly to the company's revenue, with the 10% of their global fiber capacity being a good estimate for sizing.

The speaker discusses the potential revenue from the Lumen transaction and the impact it could have on the company's network connecting data centers. They mention the possibility of a dramatic increase in the need for fiber to connect these data centers due to a new GPU-based back-end network for Gen AI. The speaker is excited about the Lumen deal and sees it as a strong proof point for this segment of the network. They decline to speculate on similar agreements with other carriers, but believe that Lumen's adoption of their new technology will generate interest. Another question is asked about the scope of similar agreements with other carriers.

The speaker is responding to a question about the projected 25% CAGR for the enterprise business over the next few years. They address concerns about potential diversity in growth and explain how they have addressed this in their planning. They also mention that their near-term visibility is high and they feel comfortable with the 25% growth guidance given. The next question asks for further clarification on the consistency of this growth, to which the speaker responds that they have strong visibility and are confident in the guidance given.

During a Q&A session, Martin Yang asks about the 3Q guidance and whether or not there will be a price increase. Ed Schlesinger responds by stating that there is a range of potential outcomes for their guidance and they are currently in discussions with customers about a currency based price adjustment. The next question from Ruplu Bhattacharya asks about the trend of gross margins and what is driving their growth. Ed Schlesinger explains that their capacity and technical capabilities allow them to support higher sales without needing to add fixed costs, which will continue to drive gross margins and operating margins in the future.

The speaker is responding to a question about the display segment and discussing their expectations for panel maker utilization rates in the third quarter. They also mention implementing currency based price adjustments and the impact on their glass market share. There is also a question about the reset of the core yen rate, to which the speaker responds that they have hedges in place for 2025 and beyond and will come back to share their thoughts once the currency-based price adjustment with customers is complete. The intention is to hold their share as a result of their overall approach to the industry.

The speaker is discussing the profitability of the Optical business and how it compares to the Display business. They mention that sales and EPS growth have been strong, and they expect EPS growth to continue to outpace sales. The speaker also believes that margins in the Optical business are attractive, particularly in the data center and AI data center space. They are asked if they can significantly outperform past net income margins of 13%, to which they respond that they believe it is possible. The next question is about the 10% decline in carrier business and how it compares to the previous quarter and the expected trajectory for the next quarter.

The company's carrier business is showing positive growth, with sequential increases in orders and sales. While there is still a year-over-year decline due to inventory drawdown, the trend is expected to continue. The company is also seeing a shift towards higher-margin enterprise business, with a higher degree of adoption and sophistication in their offerings.

The speaker provides an update on the company's progress in negotiations with customers regarding currency-based pricing and mentions plans to provide a more detailed update in September. They also mention ongoing discussions about moving to US dollar-based pricing. On the topic of carriers, the speaker notes that inventory and deployment rates vary among customers and progress is expected in the third quarter.

Wendell Weeks responds to a question about the deployment rate of carriers and display profitability. He states that the rate is expected to continue closing quickly and that the company will price appropriately to reward shareholders. A question is then asked about the current Gen AI business and its compatibility with different hyperscaler architectures. Wendell explains that the current revenue is from fiber optic connections between switches.

The speaker addresses a question about the company's competitive differentiation in the optical business. They mention the Gen AI solution and reveal that it is a customized product from Corning. They also mention that they are currently working with multiple customers on customization.

The speaker discusses Corning's unique position in the fiber cable industry, where they provide their new fiber technology to other companies while also designing their own proprietary cables and connectors. Their advantage lies in their ability to shrink the diameter of the fiber without compromising optical performance, thanks to their proprietary design and manufacturing process. This allows them to maintain a competitive cost while providing superior performance. They also mention their focus on customization and expertise at each level of the value stream.

The company's goal is to generate most of its revenue from customized solutions and reduced installation time, while also satisfying customer needs. They are attending two conferences and hosting a facility visit in September, as well as scheduling management visits to investor offices. A replay of the call will be available on their website. The operator then ends the call.

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