Corning Incorporated

Welcome to the Corning Incorporated Quarter 1, 2023 Earnings Call. To place yourself into the Q&A queue, please push star 1-1. It is my pleasure to introduce to you Ann Nicholson, Vice President of Investor Relations.

Thank you and good morning, everybody. Welcome to Corning's first quarter 2023 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 primary differences between GAAP and core EPS stem from restructuring charges and from non-cash mark-to-market adjustments associated with the company's currency hedging contracts and Japanese yen denominated debts. In total, these increased core earnings in Q1 by $97 million. As a reminder, the mark-to-market accounting has no impact on our cash flow. 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 slides 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. Last quarter, we told you that markets constituting about half of our sales were experiencing recession-level demand, that our first quarter sales would decline by greater than normal seasonality due to pandemic-related disruptions in China, that we would raise prices again to offset additional inflation and also begin to restore our productivity ratios to pre-pandemic levels. And as a result, our margins would increase one to two percentage points sequentially despite lower sales. And that is exactly how the first quarter played out. First quarter sales were $3.4 billion and EPS was 41 cents. Our actions to raise prices and restore productivity ratios began delivering notable results. Despite a 7% sequential sales decline, gross margin expanded 160 basis points sequentially to 35.2%. And operating margin expanded 150 basis points from the prior quarter to 15.5%. Although conditions remain weak in multiple markets, we expect our results to improve in the second quarter. We remain focused on profitability and cash flow, and we will continue to align our cost structure to demand. I wanted to provide some context on the dynamics we're experienced in our key markets. And then I'll discuss how we're continuing to build our long-term growth opportunities across our businesses. So let's dive in. In display technologies, sales declined 3% sequentially as both volume and glass price declined slightly. In March, panel maker utilization increased and we expect our volume in the second quarter to increase significantly from the first quarter. As conditions continue to improve, we're optimistic that panel maker utilization is beginning to move beyond correction levels and will return to more normal levels in the coming quarters. In optical communications, sales declined 6% sequentially. Our pricing actions partially offset a greater than normal seasonal volume decline in connectivity solutions, which is associated with the pacing of several large customer projects. Our pricing and productivity actions resulted in net income improving 22% sequentially despite the lower sales. Government commitments to connect the unconnected are contributing to robust cable and fiber demand and we continue to advance our leadership. Last month, we officially opened an optical cable manufacturing campus in North Carolina to help provide U.S. network operators with the cable they need to bring high-speed optical connectivity to underserved communities, particularly in rural America. Commerce Secretary Gina Raimondo said, quote, it is past time that every American be connected with affordable Internet no matter where they live. We could not do it without the folks at Corning. We wouldn't have the fiber, the innovation, or the cable, end quote. Finally, in environmental technologies, we saw increased adoption of gasoline particulate filters in the quarter, which helped drive a 9% sequential improvement in sales despite the languishing car market. Net income grew 19% in the segment based on our productivity actions and growing sales. To sum up the short term, We're seeing improvement in some of our markets, but a series of challenges continues to ripple across the global economy. Nevertheless, we expect to grow sequentially in the second quarter and to improve our key financial metrics. For the back half of the year, I'd be disappointed if we didn't grow from second quarter level. Longer term, we will continue to innovate and capture growth opportunities as they materialize. We're energized about Corning's future, and I'd like to review some of the reasons why. It all starts with our focused and cohesive portfolio. We maintain clear leadership in three core technologies and four proprietary manufacturing and engineering platforms that are vital to solving a broad range of significant challenges in shaping industries. We apply new combinations of our assets and capabilities to advance important secular trends in tandem with our customers. And by reapplying and repurposing our insights and assets across multiple opportunities and markets, we increase our profitability. In optical communications, we've been leading in the industry for more than 50 years. is the most fully evolved example of Corning's focused portfolio, using all three of our core technologies and four of our manufacturing and engineering platforms. And we will continue to apply these capabilities to help build a more connected world over the next 50 years. In display, by leveraging all three of our core technologies and evolving our fusion platform, we have achieved large-scale and broad capabilities that have advanced our leadership position. As our customers evolve, we're helping them create a world with richer, more lifelike, and ubiquitous displays. In mobile consumer electronics, we invented the carbon glass category and redefined it by integrating glass with ceramics and by combining fusion with vapor deposition. We continue to advance the state of the art with our leading cover materials, which have been deployed on more than 8 billion devices to date. And we've recently entered new product categories that provide opportunities for more of our content. For example, the camera lens covers on devices like the Samsung Galaxy S22 and S23 series. These advancements are excellent examples of our more corning approach. We're also innovating in emerging technologies like augmented reality and bendable devices, which we expect to contribute to long-term growth. In automotive, we're helping build a world where vehicles are increasingly green and where software and displays are enabling new vehicle experience. Our inventions are enabling industry leaders to meet stringent upcoming EU7 emissions regulations and achieve near zero emissions levels. And we're collaborating with LG Electronics, a global technology and vehicle component solutions innovator, to advance in-car connectivity. Overall, we're helping to solve more and more of our customers' challenges in design, connectivity, and autonomy. And at CES, we continue to generate strong industry excitement about how our technical glass and optics capabilities can expand the boundaries of what's possible. Finally, in life sciences, we're using Corning's core glass and optical physics technologies, along with our expertise in vapor deposition, precision forming, and extrusion, to help support the discovery and delivery of new medicine. including biological treatments that are personalized, effective, and safe. So as you can see, our investments in distinctive capabilities have placed us at the center of secular trans-touching many facets of daily life. And we believe we will continue to develop category-defining products to transform industries and enhance lives. I'm also excited by our growth opportunities in the renewable energy industry, where I believe we can make significant additional contributions to a sustainable US-based solar supply chain. We're proud to make the world just a little bit better wherever we can, and that extends to all of our stakeholders, especially in these uncertain times. We recently released our DE&I and reports which capture the great progress we've made and underscore our commitment to helping move the world forward. So, as I wrap up my remarks, here's what I'd like to leave you with today. Moving forward throughout 2023, we will continue to focus on operating each of our businesses well and adjusting to meet the needs of the moment including aligning our cost structure to the demand environment. At the same time, we're advancing growth initiatives and capabilities that will drive long-term success. We remain well-positioned to continue capturing some very rich sets of long-term opportunities that we've built across our market access platforms. I look forward to updating you on our progress Now, I'll turn the call over to Ed so he can get into the details of our financial priorities along with our results and outlook.