Corning Incorporated

Welcome to the Corning Incorporated Quarter 4 2024 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. Welcome to Corning's Fourth 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 fourth quarter, the differences between GAAP and core primarily reflected non-cash mark-to-market adjustments associated with the company's translated earnings contracts and Japanese yen denominated debt, as well as constant currency adjustments and other non-cash charges. 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. Today we announced fourth quarter and full year 2024 results. We had another outstanding quarter. We grew sales 18% year over year to a record $3.9 billion and grew EPS 46% to 57 cents. We expanded operating margin by 220 basis points to 18.5%. We also expanded return on invested capital 390 basis points to 12.7%. Additionally, for the full year, we generated strong free cash flow, delivering $1.25 billion for 2024, up 42%. Overall, these results capped off a terrific first year of Springboard. So I want to review our performance in the context of our Springboard plan. As we've laid out for you, we're pursuing growth across the company of $8 billion in annualized sales run rate by the end of 2028, driven by the convergence of upward cyclical and secular trends in our markets. And we've taken this internal non-risk adjusted plan and created a high confidence plan for investors. First, we focused on a three year time period, which reflects a $5 billion non-risk adjusted opportunity by the end of 2026. Second, we probabilistically adjusted for different potential outcomes. including market dynamics, timing of secular trends, successful adoption of our innovations, as well as volume, pricing, and market share across all of our businesses, and the potential that some of our markets may go through down cycles. And this is how we formulated our high-confidence springboard plan to add more than $3 billion in annualized sales. and to achieve operating margin of 20% by the end of 2026. How it's important to remember, we purposely drew the $3 billion springboard plan as a wedge. We weren't trying to guide every quarter for the next 12 quarters. So as you can see, we're off to a great start. our quarter four sales were $3.9 billion. So in year one of the plan, we added $2.4 billion to our annualized sales run rate from our springboard base. And on that strong sales growth, we demonstrated the powerful incrementals that are embedded in our plan. Year over year, In the fourth quarter, we expanded operating margin by 220 basis points to 18.5%. We grew EPS 46% to 57 cents. We expanded ROIC 390 basis points to 12.7%. And we closed out a strong year of free cash flow generation, delivering $1.25 billion in 2024, up 42%. So what's driving our outperformance versus our high confidence plan? When we introduced Springboard, we told you that it was a milestone-based plan. In 2024, we hit key strategic milestones in display and optical. In display, our Springboard plan is centered on maintaining stable U.S. dollar net income. To achieve this in a weaker yen environment, we raise glass prices in the second half of 2024 to deliver consistent profitability in the segment. We expect to deliver net income of $900 to $950 million this year and to deliver net income margin of 25%, consistent with the last five years. Overall, we're providing a strong base in display for our springboard growth. In optical communications, our springboard plan is about revenue growth as upwards cyclical and secular trends converge to drive demand for our unique capabilities. We introduced new GenAI products in June of 2024. And we said we expected to grow our enterprise business at a 25% compound annual growth rate through 2027. Demand for our new gen AI products grew each quarter and sales in the enterprise portion of our optical business grew 93% year over year in the fourth quarter. And for the full year, Enterprise grew to a record $2 billion, up 49% year-over-year. That growth reflects the GenAI 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 between the cities. As part of an agreement with Lumen Technologies, which reserves 10% of our global fiber capacity for 2025 and 2026, we launched the first outside plant deployment of Corning's new GenAI fiber and cable system that enables Lumen to fit anywhere from two to four times the amount of fiber into their existing conduit. And just this month, we started shipping. And Lumen has begun deploying our new data center interconnect products. Overall, strong customer response to our new products drove sales of $1.4 billion in optical in the fourth quarter, reflecting 51% year-over-year growth. And we expect continued growing demand in optical in 2025 and beyond. So I've highlighted just two of the key milestones that are contributing to the outperformance of our springboard plan in year one. We're pursuing a rich opportunity set that extends across our portfolio, including solar, automotive, and mobile consumer electronics. And the progress we've made increases the probability that our sales will be above our high confidence sales run rate by the end of 2026. As a result, we are planning to upgrade our $3 billion springboard plan at our March investor event. So let's take a moment to help you understand how we're thinking about it. First, I've already shared with you that our businesses are collectively pursuing a non-risk adjusted plan to add $8 billion in annualized sales run rate by the end of 2028 and $5 billion by the end of 2026. Now we've just completed our strategy planning cycle and we remain comfortable that those targets are appropriate. So we're not changing our non-risk adjusted plan at this time. Of course, our internal plans won't be exactly right on everything, including timing, because that's just not how the future works. But the benefit of our balanced portfolio is that we know many of our exciting opportunities will come to fruition. We translated our non-risk adjusted plan into a high confidence investable thesis for you by accounting for multiple potential outcomes. And we provided you our high confidence plan to add more than $3 billion in annualized sales by the end of 2026. So where do we stand today? Even though we're only one year into the three-year high confidence plan, Our progress against key milestones increases the potential for positive outcomes and therefore our likelihood of success. For example, the tremendous response to our Gen AI products puts us on the positive side of that distribution. Our display pricing also puts us on the positive side. And you're seeing that positive momentum in our numbers. So as I just shared with you, as a result of our progress across our portfolio, we will upgrade our $3 billion high confidence plan at our March investor event. Before I turn things over to Ed, here's what I'd like to leave you with today. Quarter four was an outstanding quarter that capped off a terrific first year of our springboard plan. We added $2.4 billion to our annualized sales run rate in quarter four. And as we grow sales, we're growing profitability at a significantly faster rate. 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've got many more milestones ahead, and I look forward to sharing more detail with you on the strong progress we're making when we get together in March. With that, I'll turn it over to Ed.