Corning Incorporated

Good day and thank you for standing by. Welcome to the Corning Incorporated Quarter 3 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. It is my pleasure to introduce you to Ann Nicholson, Vice President of Investor Relations. Please go ahead.

Thank you, Dilem, and good morning, everybody. Welcome to Corning's third quarter 2024 earnings call. With me today are Wendell Weeks, Chairman and Chief Executive Officer, and Ed Schlesinger, Executive Vice President and Chief Financial 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 difference between GAAP and core EPS primarily reflected non-cash mark-to-market adjustments associated with the company's translated earnings contracts and Japanese yen-denominated debt, constant currency adjustments, and non-cash asset write-offs and charges. As a reminder, the mark-to-market accounting has no impact on our cash flow. A reconciliation of core results to the comparable GAAP 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, and we encourage you to follow along. Now, I'll turn the call over to Wendell.

Thank you, Anne. And good morning, everyone. Today, we announced strong third quarter 2024 results. Year over year, sales grew 8% to $3.73 billion. and EPS grew 20% to 54 cents. Our quarter three outperformance was led by optical communications where continued strong adoption of our new optical connectivity products for generative AI drove 55% year-over-year growth in the enterprise portion of the segment. Our momentum continues as we close out the year. In the fourth quarter, we expect year-over-year sales growth to accelerate and EPS to continue growing faster than sales. And Ed will elaborate more on that in a moment. Overall, our results and outlook show we're making strong progress on our springboard plan to add more than $3 billion in annualized sales with powerful incremental profit and cash flow, and to achieve an operating margin of 20% by the end of 2026. So before Ed and I get into the details, let me just briefly recap the primary elements of Springboard. First, this chart reflects our internal non-risk adjusted springboard plan. This is what our business operators are focused on delivering. There's a lot to take away from this slide. We have a significant sales opportunity. We're looking at potential growth of $8 billion in annualized sales run rate by the end of 2028, with $5 billion by the end of 2026. Now remember, this is our internal plan. When we say it's not risk adjusted, what we mean is the projections are based on a number of assumptions, including markets recovering to historical trend lines with continued growth thereafter. Successful adoption of new innovations across a number of markets and platforms and successful execution of all our operational milestones for productivity and for price. But what we wanted to do was take our $8 billion opportunity and translate it into a high-confidence plan for our shareholders. To do that, first, we focused on a three-year time period. We probabilistically adjusted for different potential outcomes in each of our market access platforms, including market dynamics, timing of secular trends, successful adoption of our innovations, as well as volume, pricing, and market share across all our businesses, as well as the potential that some of our markets may go through down cycles. In this, is how we come to the high confidence springboard plan to add more than $3 billion in annualized sales and achieve operating margin of 20% by the end of 2026. It's also important to know that we purposely drew this as a wedge. We weren't trying to guide every quarter for the next 12 quarters. It obviously will not be a straight line. but we're also not dealing with a hockey stick. When we built the plan, we expected to see strong growth this year. And that's exactly what you're seeing in our results. So I'd like to take a moment to share two important observations about our performance. First, we're significantly improving our return profile. In the third quarter, we again drove sales growth while demonstrating our ability to deliver the powerful incrementals embedded in Springboard. In the third quarter, sales grew 8% year over year. EPS grew more than twice as fast as sales. Operating margin expanded 160 basis points year over year to 18.3%. and gross margin expanded 220 basis points to 39.2%. We also generated strong free cash flow of $553 million. And we continued buying back shares in the third quarter. Second, we're reaching key strategic milestones that underscore the significant progress we've made against our high confidence plan. Let me just briefly summarize the recent milestones in display and in optical. In display, our springboard plan is centered on maintaining stable US dollar net income. To achieve this, we are raising glass prices. Our price actions, in combination with the hedges we have in place through 2026, will deliver consistent profitability in the segment. We expect to deliver net income of $900 to $950 million next year and to deliver net income margin of 25%, consistent with the last five years. Simply put, our price increases offset the weaker yen in our hedges and we expect to maintain the same profitability. Most importantly, we will continue to be the low-cost technology and market leader in display. Overall, we're providing a strong base in display for our springboard growth. In optical communications, our springboard plan is about revenue growth. as cyclical and secular trends converge to drive demand for our unique capabilities. When we introduced our Gen AI products in June, we said we expected to grow our enterprise business at a 25% compound annual growth rate over the next four years. Looking back to the second quarter, Strong demand for our new Gen AI products drove outperformance, and our enterprise business grew by 42% year over year. As I noted, outperformance continues. Enterprise grew by 55% in the third quarter versus last year. That growth reflects the Gen AI opportunity inside the data center. we've also introduced a set of innovations to help our customers build a new network to interconnect AI-enabled data centers. As part of an agreement with Lumen Technologies, which reserves 10% of our global fiber capacity for each of the next two years, we recently launched the first outside plant deployment of Corning's new GenAI fiber and cable system that enables Lumens to fit anywhere from two to four times the amount of fiber into their existing conduit. This is an exciting new space, and we expect to capture other large opportunities. Optical is also marking important developments with other important carrier customers, Verizon and AT&T. At their broadband strategy event last week, Verizon highlighted their partnership with Corning and said we're delivering technologies that make it easier for them to reach their deployment goals. They plan to significantly expand their fiber footprint from 25 million fiber passings to more than 30 million fiber passings by 2028. We also just announced a multi-year purchase agreement with AT&T. to provide next-generation fiber cable and connectivity solutions to support the expansion of AT&T's fiber network and help bring high-speed internet to more Americans. The agreement, valued at more than $1 billion, builds on a decades-long collaboration between our companies. AT&T is expanding its network to bring world-class fiber to more people and places across the country. By using Corning's newest pre-connectorized solutions, AT&T can accelerate its network expansion and enhance network performance while minimizing deployment cost. They'll leverage our latest additions to our portfolio of connectivity solutions, which are fully compliant with the Build America, Buy America provisions of the Broadband Equity, Access, and Deployment Program. The program, known as BEAD, is part of the government's efforts to bring high speed internet to rural communities. Stepping back. As you can see, we're three quarters into our three year springboard plan and we're making significant progress. Our third quarter results demonstrate the sales growth and the powerful incremental profit in cash flow we expect to deliver as we improve our return profile and march steadily toward our 20% operating margin target by the end of 2026. And we're marking significant milestones along our springboard journey. And we have plenty of milestones ahead. In optical communications, we expect carriers to return to buying at deployment rates and for their deployment rates to increase and drive growth in 2025. And we expect the bead program to gather momentum starting in the second half of 2025. We have a triple digit automotive glass business today, and we expect sales in that business to almost triple by 2026. We expect recently announced US EPA regulations to force gas particulate filter adoption and drive hundreds of millions of dollars of growth for us in the US alone with sales starting in 2026. Finally, we plan to launch a new solar market access platform. Overall, we positioned our businesses to benefit from a convergence of cyclical and secular trends to drive growth across the company through 2026 and beyond. We'll continue to update you as we hit significant milestones. Now, let me turn it over to Ed for some more detail and perspective on the quarter as well as springboard.