The paragraph introduces the Corning Incorporated fourth quarter 2024 earnings call, hosted by Ann Nicholson, the Vice President of Investor Relations. She is joined by Wendell Weeks, the Chairman and CEO, and Ed Schlesinger, the Executive Vice President and CFO. Ann notes that the remarks will include forward-looking statements with potential risks and uncertainties. The discussion will focus on the company's core performance measures, which are non-GAAP metrics, and explains the differences between GAAP and core results. She mentions that the financial reports detailing these can be found on Corning's website, and invites listeners to follow along with supporting slides on the webcast. The call is then handed over to Wendell Weeks for further discussion of the results.

The company reported an outstanding quarter with an 18% year-over-year sales increase, reaching a record $3.9 billion, and a 46% rise in EPS to $0.57. Operating margin expanded by 220 basis points to 18.5%, and return on invested capital grew by 390 basis points to 12.7%. They generated $1.25 billion in free cash flow for 2024, a 42% increase. These results reflect a successful first year of their Springboard plan, which aims for $8 billion in annualized sales by 2028. By 2026, they target a $5 billion non-risk-adjusted opportunity, with adjustments for market dynamics and potential downcycles. Their high-confidence plan aims to add over $3 billion in sales and achieve a 20% operating margin by 2026. In the first year, they added $2.4 billion to the sales run rate and improved operating margins.

The company reported strong financial growth in 2024, with a 46% increase in EPS to $0.57 and a 390-basis-point rise in ROIC to 12.7%, alongside generating $1.25 billion in free cash flow, a 42% increase. Their Springboard plan, focused on strategic milestones in Display and Optical Communications, drove this success. In Display, they maintained stable net income by raising glass prices despite a weaker yen, targeting $900-$950 million in net income with a 25% margin. In Optical Communications, revenue grew as demand for new GenAI products surged, with Enterprise sales growing 93% year-over-year in Q4, reaching a record $2 billion annually. This growth reflects opportunities in AI-enabled data centers, supported by innovations for network connectivity, including a deployment agreement with Lumen Technologies for their new GenAI fiber and cable system.

The company has begun shipping new data center interconnect products, which contributed to $1.4 billion in Optical sales in the fourth quarter, marking a 51% increase year-over-year. They anticipate continued demand growth in Optical through 2025 and beyond. The company is outperforming its Springboard plan and plans to upgrade it during their March Investor event. They aim to add $8 billion in annualized sales by 2028 and $5 billion by 2026, maintaining these non-risk-adjusted targets. While acknowledging that not all plans will be perfectly timed, they emphasize the strength of their diversified portfolio and have presented a high-confidence plan to increase sales by more than $3 billion annually by the end of 2026.

The paragraph discusses the company's progress in the first year of its three-year high-confidence plan, highlighting strong performance and positive momentum driven by its GenAI products and display pricing. In the fourth quarter, the company added $2.4 billion to its annualized sales run rate and grew profitability at a faster rate than sales. Looking ahead, the company plans to upgrade its $3 billion plan at a March Investor event and expects to continue benefiting from cyclical and secular trends to drive growth through 2026. Ed Schlesinger notes that the company has both the capacity and financial systems in place to achieve sales growth, demonstrated by an 18% year-over-year increase in sales and a 46% rise in EPS during the fourth quarter.

The company reported strong financial performance, with operating margins expanding to 18.5% and improved EPS and sales targets. In the first quarter, they anticipate sales to increase by 10% and EPS by 30%. For the full year, sales grew by 7% to $14.5 billion, and EPS increased by 15%. Optical Communications segment sales rose 51% in the fourth quarter, contributing to a 16% annual growth to $4.66 billion. The Enterprise business also saw significant growth, with fourth-quarter sales up 93% and full-year growth of 49% to $2 billion, driven by new GenAI products. Net income in the Optical Communications segment increased substantially. The company expects continued growth in 2025, led by their unique capabilities and projected increases in Carrier deployments.

The paragraph discusses the company's financial performance across different segments. In Connectivity, there's growing demand for their products, and they've begun shipping new data center interconnect products to Lumen. Display Technologies saw a 12% year-over-year sales increase in the fourth quarter, with net income rising significantly due to increased panel maker activity and government stimulus in China. They implemented price hikes to maintain profitability amid currency fluctuations and expect strong performance in 2025. Specialty Materials experienced a 9% sales increase in the fourth quarter and an 8% increase for the year, driven by their More Corning content strategy and strong demand for premium glass. In Environmental Technologies, fourth-quarter sales dropped 7% year-over-year due to weaker light-duty and heavy-duty markets in Europe, with overall annual sales down 6% due to global market challenges.

The paragraph reports on financial performance and future expectations. In the fourth quarter, net income decreased year-over-year mainly due to lower volume, but Life Sciences saw modest growth in both sales and net income. Sales in Hemlock and Emerging Growth Businesses grew, and the company expresses confidence in continuing progress into 2025 with projected Q1 sales and core EPS growth. The company has hedged yen exposure and set a core yen rate to JPY120 for better financial accuracy. Expected net income for the Display division in 2025 is between $900 million and $950 million, maintaining a 25% margin. They plan to allocate capital efficiently to boost sales by $3 billion annually by the end of 2026, aiming for increased profits and cash flow.

The paragraph highlights the company's successful execution of its Springboard plan in its first year, noting a 42% increase in free cash flow to $1.25 billion in 2024. The company aims to invest in organic growth opportunities, maintain a strong balance sheet, and return excess cash to shareholders. It reports significant sales and EPS growth in Q4 2024 compared to Q4 2023 and has set targets for continued growth, including a 20% operating margin by 2026. The paragraph concludes with a preview of an upcoming March Investor event where the company will provide updates on its Springboard plan.

In the paragraph, during a Q&A session, Joe Cardoso from JPMorgan asks Wendell Weeks about Corning's potential upgrade to their risk-adjusted financial plan versus their non-risk-adjusted plan for their 2026 targets. Wendell confirms that they anticipate a possible adjustment between the $8 billion long-term target and their risk-adjusted figures, suggesting a positive shift towards higher probable outcomes. He mentions the company will provide further details and milestones in March, indicating overall confidence in reaching their goals despite potential risks.

In the paragraph, Wendell Weeks discusses the progress and future milestones for various business areas of Corning. He highlights that while there have been challenges, such as inventory issues with carriers, signs of recovery are appearing as carrier purchases align with deployment rates. Weeks also emphasizes milestones in sectors like solar, mobile consumer electronics, and automotive. He suggests that the focus is on reaching these milestones rather than viewing them purely as risks. Joe Cardoso confirms that this explanation is helpful, and the conversation is followed by the next question from another participant.

An unidentified analyst inquires about anticipated increases in carrier deployments for 2025 and asks if this expectation excludes Lumen. They also ask for insights on projected 10% year-on-year sales growth, particularly in the Enterprise and Display markets. Ed Schlesinger responds, explaining that while Lumen shipments have started and will ramp up throughout the year, carrier deployment growth is expected to be broader but not concentrated in the early part of 2025. Schlesinger indicates that the Enterprise segment is expected to remain strong, particularly in the first quarter. Regarding the Display market, there was growth in glass due to screen size in 2024, with panel makers performing well in the fourth quarter. The full-year net income guide suggests possible variations in sales, with a stronger first half potentially leading to a weaker second half in Display.

The paragraph discusses the financial performance and future expectations for a company's Optical segment and cash flow margins. Analyst Asiya Merchant inquires about net income margins in the Optical segment, which have improved compared to the previous quarter, and the factors driving growth in Enterprise over Carrier. Ed Schlesinger explains that Optical sales have increased significantly, particularly in Enterprise, and are expected to continue growing, which has impacted margins in the fourth quarter. However, margins are anticipated to improve going into 2025. Regarding cash flow, the company does not foresee needing additional capacity, which aligns with their capital guide.

The paragraph discusses Corning's financial outlook and the impact of DeepSeek's innovations on the industry. Corning reports a positive increase in free cash flow and anticipates further improvement, despite building working capital due to sales growth. Ann Nicholson opens the floor for questions, and Wamsi Mohan from Bank of America asks about the impact of DeepSeek on AI development and Corning's business. Wendell Weeks, from Corning, states that their revenue target remains unaffected by DeepSeek's announcements. He explains that DeepSeek has been a topic of interest in the technical community due to their cost-reducing training innovations, combining current industry practices with new techniques, but expects more details to emerge over time.

The paragraph discusses the need for significant improvements in training and inference costs to make generative AI a sustainable business model and effective productivity driver. It emphasizes the importance of innovation in enhancing computational and communication capabilities to improve AI models. Wamsi Mohan acknowledges this point and asks Ed Schlesinger about the stability of the JPY120 core rate and future capital expenditure (CapEx) plans for 2025. Ed Schlesinger explains that the CapEx guidance aligns with maintaining current capacity levels, with spending slightly below depreciation to avoid adding material capacity, focusing instead on necessary technological innovations.

In the paragraph, several topics are discussed during a conference call. Initially, Wendell Weeks addressed questions about the BEAD program potentially being reworked to include more satellite involvement. He explained that their plans had already accounted for how the BEAD program might be used and they did not expect it to contribute to significant revenue until 2026. After evaluating the prospects for fiber optics versus satellite solutions, they made some strategic adjustments but nothing that altered their main strategy. Subsequently, John Roberts inquired about the surge in minority interest income from Hemlock, asking if Hemlock's sales would be detailed in the March quarter. Ed Schlesinger responded to this question, though his response is not included in the paragraph.

The paragraph discusses the company's joint ventures, specifically Hemlock, and their impact on minority interest due to strong fourth-quarter performance from semiconductor polysilicon contracts. It notes plans to update segment reporting, including separating the automotive glass business and solar/Hemlock segments, with more details to follow after filing the 10-K. A question from Matt Niknam of Deutsche Bank addresses potential impacts of new U.S. tariffs on demand and ordering activity, and queries about dividend growth amidst increasing free cash flow and share buybacks. Ed Schlesinger responds, affirming good cash flow and continued share buybacks without a specific target, while noting the company's commitment to a healthy dividend.

The paragraph discusses Corning's approach to potential tariff impacts and their current financial strategy. They aim to reduce their payout ratio before considering increasing dividends. Corning manufactures close to customers, limiting tariff impacts, and is capable of adjusting supply chains and prices if necessary. They emphasize their commitment to U.S. manufacturing, particularly in fiber, cable, environmental, life sciences, solar, and mobile electronics. They acknowledge uncertainties around tariffs and prefer to await confirmed changes before reacting. Wendell Weeks adds that while direct sales aren't heavily impacted, there may be changes in customer behavior.

The paragraph is part of an earnings call where different speakers, including Meta Marshall from Morgan Stanley, are discussing the performance and expectations in various business areas. One speaker mentions seeing stronger panel maker utilization in the display business and emphasizes careful modeling and humility in approaching broader questions. When Meta Marshall asks about Lumen orders and the impact of an upgrade in Samsung's S25 phone on Specialty Materials, Wendell Weeks responds that the order pattern is as expected, with delays due to the newness of the product rather than lack of demand. He also expresses excitement about the Samsung upgrade, aligning with Corning's strategy and innovation goals.

The paragraph captures a conversation during an investor call where Tim Long from Barclays asks about the Optical Communications business, specifically its enterprise segment’s shift towards data centers and its cyclical nature. Ed Schlesinger responds, explaining that the enterprise business is projected to grow by 50% from 2023 to 2024, largely driven by the GenAI data center sector. He acknowledges the historical cyclicality of the business but expresses confidence in near-term visibility, particularly through 2025. However, he cautions that periods of slower growth may still occur despite strong orders.

The paragraph involves a conversation between Wendell Weeks and Tim Long about capital cycles in the Carrier and Enterprise spaces. Weeks notes that Carrier behavior is not currently a major factor in their results, attributing the results more to the recovery of orders aligning with deployments. He mentions an upcoming update in March regarding hyperscale data center buildouts and capacity reservations, which will help explain why they plan to upgrade their risk-adjusted plan. The discussion then shifts to James Cannon (standing in for Josh Spector) asking about the BEAD program, specifically whether any orders have started coming in following final approvals from three states. Weeks acknowledges the early stages of the process and refers to previous discussions about approaching the future with caution and humility.

The paragraph involves a discussion among company executives about the impact of government programs like BEAD, emphasizing skepticism due to slow progress and minimal data affecting projections up to 2026. George Notter from Jefferies congratulates the company on strong results and inquires about the favorable JPY120 yen rate. He asks whether achieving this rate involved significant hedging costs or if such costs were historically low. Ed Schlesinger responds that the company used various tools to maintain low costs while securing the JPY120 rate. Notter also requests a year-on-year comparison of Q1 guidance, factoring in the JPY120 rate, to allow for clear analysis.

The paragraph discusses the company's approach to managing the weaker yen environment. They have been hedging the yen with other currencies, generating significant gains of over $2.5 billion. Despite changes in the yen's value from JPY107 to JPY120, they expect to maintain the same level of profitability due to price increases. They will not alter their yen strategy for Q1 2024 and anticipate similar profitability for Q1 2025. Additionally, they plan to attend the Susquehanna 14th Annual Tech Conference on February 28th, host an investor event in New York City on March 18th, and arrange management visits to investor offices. A web replay of the call will be available later in the morning.

The paragraph thanks participants for their involvement and informs them that they can now disconnect.

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