Corning Incorporated

Welcome to the Corning Incorporated Third Quarter 2022 Earnings Call. To place yourself into the Q&A queue, please press star 11 on your telephone. It is my pleasure to introduce to you Ann Nicholson, Vice President of Investor Relations.

Thank you and good morning. Welcome to Corning's Q3 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 third quarter, the primary difference between GAAP and core EPS was from primarily non-cash charges associated with capacity optimization and non-cash mark-to-market adjustments associated with the company's currency hedging contracts. This increased core earnings in the third quarter by $234 million. To be clear, these charges and mark-to-market accounting have no impact on our cash flow. 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 slides are being shown live. 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. Today, we reported solid third quarter results that demonstrate strong execution. We continue to operate each of our businesses well, and our focus on leadership and distinctive capabilities allow us to capitalize on important secular trends and drive our more corning approach Sales were $3.7 billion, up slightly, versus a strong third quarter last year, and EPS was 51 cents. We were able to offset a sales decline in display technologies with growth in optical communications and solar. While we believe that display panel maker production bottomed in September, we would like to see additional positive evidence before guiding a significant recovery in glass demand. In total, we performed well despite the economic environment. Before we get into the details, I want to set some context on what we're facing across our markets. On our last call, we told you that end markets in multiple businesses were down. A smartphone sales in the second quarter declined 8% year over year. Panel maker utilization in June 2022 was at its lowest level since 2009. And yearly automotive production was 10 to 15 million vehicles below. its pre-COVID rate. Several of these dynamics continued or even intensified in the third quarter. A smartphone unit sales declined 14% year over year in the quarter, with tablet and notebook demand down 17%. Panel maker utilization decreased even further from its June level, with September being the lowest month of the quarter. And annual automotive production is still 10 to 15 million cars short due to continued component shortages. Nevertheless, we delivered results within our guidance range and expectations. We continue to benefit from infrastructure investments in broadband and clean energy. Two secular trends were strategically positioned to address. We delivered 16% year-over-year growth in optical communications, and we captured ongoing demand in the solar market, which contributed to 33% year-over-year growth in hemlock and emerging growth businesses. So let's take a deeper look at what we're seeing in some of our key markets, how we're responding, and why we're confident that our strategy continues to position us to deliver profitable multi-year growth. I'll start with display. In the third quarter, the glass market and our volume both decreased almost 25% sequentially, which significantly reduced our sales and profitability. In September, panel maker utilization reached the lowest level since the fourth quarter of 2008. More than a year ago, we said we expected a correction in the display industry during 2022. In the second quarter, panel makers began reducing production levels with accelerated reductions in June. In the third quarter, panel maker production reached an even lower level. And we believe that panel maker production reached the bottom in September. So now the question is, when will the glass market recover? Now, our answer is that we would like to see additional positive evidence before we guide a robust recovery in glass demand. We've maintained stable price and market position during this whole correction. Consequently, We expect our volume and profitability to increase sharply when panel maker utilization rebounds. And we expect to exit the correction with strengthened customer relationships and, importantly, a refreshed manufacturing fleet. As always, we will keep you informed as we progress. Overall, we feel very good about our execution in display. In mobile consumer electronics, customer product launches and strength in semiconductor drove sequential growth in specialty materials. But as I noted, smartphone and IT retail unit sales declined significantly in the quarter. We now expect smartphones to be down about 12% for the year. And we expect notebook and tablet demand to decline 15%. We expect the year-over-year decline in smartphones, notebooks, and tablets to be greater in the second half than in the first half. This will limit the growth we normally see in our second half sales relative to the first half. Now that said, we continue to outperform the market through our product leadership, our more corning approach, and our ongoing collaboration with industry leaders. Over the long term, our content strategy and mobile consumer electronics will help us grow. As we continue to develop and launch premium glasses, and optical treatments for existing and new form factors. Additionally, we're executing our more according approach in the semiconductor industry. In July, Senator Chuck Schumer and New York Governor Kathy Hochul joined us to announce government funding that supports an expansion of our advanced optics facilities, which make Equipment and materials vital to semiconductor manufacturing. Of course, semiconductors are fundamental to virtually all technology we interact with today. We've helped advance the industry for more than 50 years, and our expansion will keep us well positioned to support nearly every step of the chip manufacturing process and to respond to new customer needs, including products, for EUV technology. Let's turn to automotive. In environmental technologies, we delivered sales and profit growth despite the constraints on vehicle production, and we're outperforming the market for the year. We continue to adjust our operations to effectively navigate the variability in auto production, and we are prepared to meet demand when industry production increases to normal rates. We're also generating significant wins in our automotive glass solutions business. Polt is strong for our technical glass and optics innovations. During the quarter, CarUX, a leading car display company owned by Intelluxe, announced its use of our patented hold-form technology to help drive the future of auto interior displays. Corning continues to be well-positioned to further grow its automotive business as the industry offers more advanced, design-oriented cabins and enhanced driver assistance features. Let's move to optical communications. which was the largest contributor to third-quarter sales. The industry continues to experience a large multi-year wave of growth for passive optical networks, and we continue to increase our capacity to support this growth. In August, U.S. Secretary of Commerce Gina Raimondo joined AT&T CEO John Stankey and me to announce a new manufacturing facility in Arizona. You may recall Secretary Raimondo's leadership helped pass infrastructure legislation dedicated to the idea of Internet for All. Our new plant will boost optical cable capacity to meet record demand. In September, we opened a new optical fiber manufacturing plant in Poland to serve committed demand. And we're innovating to support every phase of broadband deployment as network access is increasingly viewed as a fundamental human right. In the quarter, we announced additions to our evolved connectivity portfolio, which helps operators streamline permitting, accelerate field installation, and optimize network testing. Optical sales have grown 22% for the first three quarters of the year, setting us up for another strong year of growth. However, we expect fourth quarter sales to be down sequentially due to the timing of customer projects. Turning to solar. The renewable energy industry is evolving rapidly and our ongoing growth continues to indicate that the market's behavior is more closely tied to a global imperative than the current economic trends. We re-energized our participation in the solar market by starting up idle capacity and securing customer commitments through new, long-term, take-or-pay contracts for solar-grade polysilicon. Third quarter sales grew significantly year over year, and we will benefit from the state of Michigan's infrastructure investment program, which will help us expand operations to meet increasing global demand for polysilicon. We believe that Corning's broader technical and manufacturing capabilities, our three and four, will prove to be highly relevant in helping advance the renewable energy industry. And we see excellent growth potential in solar. Now, as I conclude my remarks, here's what I'd like to leave you with today. We remain very well positioned to deliver profitable multi-year growth. And we'll continue to execute with discipline. We'll invest where we see strength and will pace to meet demand. Our cohesive and focused portfolio provides strategic resilience that is playing out well in this current environment. We've established a deep relevance to secular trends, along with the ability to drive more content into our markets over time. We've been leading in the automotive and life science markets for 100 years, display for 80 years, telecommunication for 50, and mobile consumer electronics since the inception of smart devices. The basis of our ongoing success is our distinctive set of capabilities and long track record of life-changing and even life-saving inventions. And that's what enables us to power through moments like the present while maintaining an attractive long-term growth trajectory. Now, let me turn the call over to Ed, who will share more details on our results, financial priorities, and outlook.