Corning Incorporated

welcome to the corning incorporated's quarter one 2021 earnings call to place yourself into the q a q please push star one it is my pleasure to introduce you to ann nicholson vice president of investor relations please go ahead thank you catherine and good morning everybody welcome to corning's first quarter 2022 earnings call with me today are wendell weeks chairman and chief executive officer

Ed Schlesinger, Executive Vice President and Chief Financial Officer, and Jeff Evenson, Executive Vice President and Chief Strategy Officer. I'd like to remind you that today's remarks contain forward-looking statements that fall within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks, uncertainties, and other factors that could cause actual results to differ materially. These factors are detailed in the company's financial reports. You should also note that we'll be discussing our consolidated results using core performance measures unless we specifically indicate our comments relate to GAAP data. Our core performance measures are non-GAAP measures used by management to analyze the business. For the first quarter, the largest differences between our GAAP and core results stem from non-cash mark-to-market gains associated with the company's currency hedging contracts and non-cash impairment charges. With respect to mark-to-market adjustments, GAAP accounting requires earnings translation hedge contracts and foreign debt settling in future periods to be marked to market and recorded at current value at the end of each quarter, even though those contracts will not be settled in the current quarter. For us, this increased GAAP earnings in the first quarter by $138 million. To be clear, this mark-to-market accounting has no impact on our cash flow. Our currency hedges protect us economically from foreign exchange rate fluctuations and provide higher certainty for our earnings and cash flow, our ability to invest for growth, and our future shareholder distributions. Our non-GAAP or core results provide additional transparency into operations by using a constant currency rate aligned with the economics of our underlying transactions. We're very pleased with our hedging program and the economic certainty it provides. We've received more than $1.9 billion in cash under our hedge contracts since their inception almost 10 years ago. A reconciliation of core results to the comparable gap value can be found in the investor relations section of our website at Corning.com. You may also access core results on our website with downloadable financials in the Interactive Analyst Center. Supporting flies are being shown live on our webcast. We encourage you to follow along. They're also available on our website for downloading. And now I'll turn the call over to Wendell.

Thank you, Anne, and good morning, everyone. We're off to an outstanding start in 2022. with strong first quarter sales and improved profitability. Sales grew 15% over the first quarter of 2021 to $3.7 billion. EPS increased 20% year over year to 54 cents. Free cash flow was $171 million. We saw broad-based strength across our businesses and we effectively navigated a complex geopolitical and external operating environment. Gross margin of 36.6% and operating margin of 17.6% both expanded sequentially and year over year. The improvements were primarily driven by benefits of pricing actions across all our businesses. Historically, prices are usually down in the first quarter. However, as I told you last quarter, we negotiated with customers to increase prices in our long-term contracts to share increased costs more appropriately. And therefore, this year, price in total was up both sequentially and year-over-year. We expect price to be up again in the second quarter. Specifically in display, we achieved a slight price increase in the first quarter. For the second quarter, we expect price to be up slightly sequentially, and glass supply and demand to remain tight. You'll hear more from Ed on the display market and our outlook. Now, let's take a closer look at how we performed in each of our market access platforms. In display, we continue to operate from a position of strength. we delivered 11% year-over-year sales in net income growth, driven by higher glass volume and slightly higher price. In optical communications, we grew sales 28% year-over-year to $1.2 billion, representing 32% of total sales. Optical communications is our largest market access platform by sales, and we expect significant growth to continue. Operators are expanding their networks. The pace of data center construction is accelerating, and fiber-rich wireless deployments are underway. We continue to be energized by the momentum that is building in this business, and we're well positioned to capture growth. In mobile consumer electronics, specialty materials outperformed the market with year-over-year sales growth of 9%, driven by significant demand for our premium cover materials and advanced optics products. In automotive, our environmental technology sales declined year-over-year due to customer production constraints. However, we continue to outperform the market. Sales were up in our automotive glass business, and I'll talk more about that in a minute. In life sciences, we grew year over year, advanced key innovations for cell and gene therapy, and expanded supply of glass vials and tubing. Based on the quarter and our expectation of continued strong demand, we are raising our sales expectations for the year to above $15 billion. Our results speak for themselves. We've been delivering consistent growth with more balanced contributions across the company. And you'll hear more about that from Ed in just a minute. So how do we do this? Our strong position stems from a complementary set of three core technologies, four proprietary manufacturing and engineering platforms, and five market access platforms. We're leaders in each. We capture growth opportunities by combining integrating and evolving these capabilities to help our customers drive their industries forward. And in so doing, we drive more Corning content into the products people are already buying. How we typically spend the majority of our time discussing the results within our five segments. However, important growth opportunities for our More Corning strategy also reside in the segment we have historically referred to as Other. To better reflect the significant contributions and potential of these initiatives, we've renamed it Hemlock and Emerging Growth Businesses. This segment grew 38% year-over-year in the first quarter. So today, I want to spend some time talking about what's going on and how it underscores our confidence that we will continue to deliver durable, multi-year profitable growth. Hemlock currently delivers most of the sales in this segment. Hemlock manufactures ultra pure polysilicon for the semiconductor and solar industries. As a reminder, Corning owns 80.5% of Hemlock as a result of Hemlock's purchase of DuPont's ownership in the company in 2020. Now this was a great transaction for Corning. We didn't put any money into the transaction and we gained an additional 40% interest and Hemlock's strong semiconductor business that also has the upside potential reflected in the solar market. Recently, we secured multi-year take or pay commitments for solar, and we expect demand to grow. Additionally, as the renewable energy industry evolves, we believe that Corning's technical, and manufacturing capabilities. Our three and four can provide significant benefits. We believe this business has excellent growth potential. The other two major contributors in this segment are automotive glass and pharmaceutical glass packaging. And we're making good progress on these two large opportunities. and both are prime examples of our focused and cohesive portfolio in action. So let's take a look at how we reapply and reuse our capabilities to drive ongoing value, starting with automotive glass. There's no denying it, the driving experience is rapidly evolving. Drivers want more connected and autonomous features. And the basis of competition is moving from the engine to the cabin. Automakers are responding to these trends. Car design is getting less analog and more digital. Fewer buttons and more large screens with touch capability. Nearly universally, the solution is more glass. And as automakers address the opportunities and the challenges they face, they're looking for glass to provide both form and function. To meet their needs, we've reapplied our existing capabilities, expertise, and experience in the automotive market. We started with the fusion jaw assets that provide pristine flat glass, in our display, and mobile consumer electronics market access platforms. And we took insight from Gorilla Glass to create better, more sustainable products that offer superior economics and help our customers advance the transformation of their industry. The pull for our technical glass products is strongest in auto interiors. We've answered with auto-grade Gorilla Glass. It provides our signature toughness and optics tailored for the automotive use case to bring the smartphone experience into the car. We've also developed and patented cold form technology. By removing heat from the glass shaping process, cold form improves yields, saves money, and ultimately delivers a better, more sustainable product at a lower cost than hot form glass. It enables dashboard and console displays that follow the natural curves of the car's interior. Protected by a single, thin piece of precision glass. Our customers can bend the glass to suit their design needs right at the end of their own display module assembly. Looking ahead, we continue to pursue multiple opportunities for our interior and exterior glass innovations. We've entered a new product category with our curved mirror solutions for head-up displays. And we're providing Gorilla Glass to Jeep's iconic Wrangler and Gladiator. We're also working on OLED lighting. And we're in the early stages of delivering glass solutions for the sensors that are critical for autonomous vehicles. What this all adds up to is an increasingly significant business created by applying our more Corning approach. Our automotive glass solutions business is helping us capture $100 per car opportunity. We've already been awarded over a billion dollars of multi-year business across multiple manufacturers and numerous car makes and models. And we're confident in our growth trajectory as we continue to build on this exciting opportunity. Now let's look at another key emerging growth business. We drew on our glass science capabilities to develop a pharmaceutical packaging solution with both exceptional strength and enhanced chemical stability relative to incumbent borosilicate vials. Borosilicate glass is inherently prone to issues such as delamination. Shifting to an aluminum silicate base eliminates this risk and optimizes vials for our ion exchange process. As with the auto example that I just shared, we applied our experience making tough, damage-resistant glass to the pharmaceutical vial market. And we drew on our deep relationships and years of experience in the life sciences market to deepen our understanding of customers' problems and collaborate very closely on our solution. We started with glass tubing and then applied our expertise in extrusion and precision forming to convert the glass into vials. And we leveraged our experience in vapor deposition to apply a coating that helps vials travel more quickly through the drug filling process. The result was Valor Glass. And I think it's fair to say that this is a product no one else in the world could have invented. Last fall, we expanded our portfolio by unpacking the Valor technology stack to launch a new product that helps address supply chain challenges. Our new Velocity vials use already approved packaging with a patented coating. Velocity is helping drug makers increase efficiency and throughput to drive faster manufacturing of vaccines and other medications to help meet significant global demand. Today, our solutions are clearly showing their strength. Our portfolio of vials and tubing has enabled the delivery of 5.5 billion doses of COVID-19 vaccines. And demand continues to be strong. In the first quarter, our vial production was up more than 150% versus 2021. And our tubing production increased. is expected to increase more than 25% this year as we ramp capacity. We also recently announced a new long-term supply and development agreement with West Pharmaceutical to enable advanced injectable drug packaging and delivery systems for the pharmaceutical industry. This partnership is designed to help speed the commercialization phase for biologic drug developers by avoiding costly time-intensive barriers so they can successfully bring important new drug discoveries to market faster. In total, we're helping to create a future for pharmaceutical manufacturing that offers higher quality, greater efficiency, and better sustainability. Stepping back, I think you can see why our customers value our capabilities. We provide unique solutions to move industries forward, all while making the world just a little bit better. Because of this, we're able to thrive in up and down markets. Combined with the measures we're taking to improve margins, we're confident in our ability to drive long-term profitable growth. Now, as I conclude my remarks, I'll leave you with a final thought. The confluence of the consequential events that we're experiencing today and the need to operate effectively to serve our stakeholders has required that we all embrace creative new ways of doing business. And at Corning, our values are evident in our actions. We outline much of our progress in our 2021 sustainability and DE&I reports, which published last month. And this quarter, We built on our success through actions including financial support for humanitarian efforts in the Ukraine and surrounding countries and continued progress on the greenhouse gas goals we announced at the end of last year. I'm excited about the year ahead and look forward to updating you on our progress. Now let me turn the call over to Ed, who will share more details on our results, financial priorities, and outlook.