Wamsi Mohan: Yes. Yes, it does, Wendell. Maybe just to step back for a second, if I could. Like do you feel that the macro environment relative to 90 days ago for your end markets is getting better or worse?
Wendell Weeks: I think that the integration of the macro environment into our customers’ business plans, continues at different rates in different industries. So I think by and large, people are speaking less robustly than they were 90 days ago, changed our point of view much. Well at the center probably not so much, in our operating units profit will be more. I think the really interesting question is isn’t so much when does sort of realization of what’s the broad economic outlook sets in all the different industries is when does the reverse happen? Like when do we start to see those more robust signals that shows really would be online. And I just haven’t seen those yet. That’s what I’m looking for. And as soon as we see them, we’ll tell you, Wamsi.
Edward Schlesinger: Yes. Well, you had asked about display second quarter, what we’ve incorporated in our second quarter guide versus the prior year. So just a couple of thoughts. One, remember last year, the way display played out is the first half was really strong. We started to see panel makers drop their utilization at the end of the second quarter, right. So Q3 and Q4, they ran at much lower rates, Q1 and Q2, they ran at much higher rates, right. And if you think about the way we typically do our guide, we always have a range of outcomes, right. So if I think about the second quarter this year for display, we think we’ll run — so now I’m going to go back to sequential for a second. We think panel makers will run sequentially higher in the second quarter than they did in the first quarter. And so it’s possible they get to the same place as they did last year, that’s certainly in the range of outcomes. I don’t know that that’s necessarily the most likely outcome.
Operator: Our next question comes from the line of Joshua Spector with UBS.
Unidentified Analyst: This is James Cannon on for Josh. I just wanted to touch on some of the dynamics with display pricing. As you talked about some supportive dynamics, but if I think about what played out in the first quarter, it seemed like you had demand trending sort of in line with weak January, improving in March. And I was just wondering if you could give some color on what happened with pricing that you had guided to being flat and came in down and how that plays into what we should expect for the second quarter?
Edward Schlesinger: Yes. I think, James, price was slightly down in the quarter, and I think the way we think about favorable pricing in any given quarter can be slightly up, it could be flat, it could be slightly down. So I think it’s generally in line with the way we were thinking about it.
Operator: Our next question comes from the line of Asiya Merchant with Citi.
Asiya Merchant: I just kind of talk — looking into your free cash flow guidance. I know you guys have kind of talked about CapEx being slightly lower than ’22 levels at $1.6 billion and strong sequential improvement in free cash flow. Should we expect free cash flow given that earnings should improve from here on? Can we expect free cash flow to be higher than what you guys had in ’22? Is that reasonable just given CapEx coming lower and hopefully operating on the earnings level as well doing better than ’22?
Edward Schlesinger: Yes. Asiya, I’m going to build a little bit on the way Wendell described the way we’re thinking about sales and what could happen in the second quarter and the second half, right? I think there’s certainly in a high-end case, yes, cash flow should follow our growth through the year. And if we grow at the higher end of the second quarter, and we continue to grow from there, yes, there’s certainly a case to be made that, that would happen. I think we’re taking a little bit more moderate view of what might happen. So getting capital slightly down and free cash flow improving as sales improves and just our normal cycling of cash flow is stronger in the second quarter and in the second half.
Asiya Merchant: Correct. I think you guided last time to seen significant working capital improvement that should buoy free cash flow generation year. So I guess I was just kind of circling back to those comments. And then any update on stock repurchases? Are you expecting to resume that at a level that was maybe consistent with if we dial it back a couple of years?
Edward Schlesinger: No update on stock repurchases. We’ll just continue to remain opportunistic there. And maybe I’ll make one other comment on your cash flow statement. As I think about inventory, we talked about a lot of the dynamics that have driven it up through 2022 with respect to a very challenging supply chain environment and inflation. And our goal is to continue to drive it down. And I think in Q1, it stayed relatively flat, down a little bit. But remember, sales were really low. So we actually feel really good about that.
Operator: Our next question comes from the line of Samik Chatterjee with JPMorgan.
Samik Chatterjee: Ed, if I can just follow up on your comment about growth specialty materials in the second half. When I go back and look at it historically, it’s been a wide range of as low as 5%, I think, last year to as high as 45%. So just trying to sort of get a better color there in terms of what should we think about in terms of content growth with some of your customers into the second half? What’s that magnitude? And what also sort from a macro perspective, are you expecting to sort of from the first half versus second half variance there, just to be able to rightsize sort of what that magnitude looks like? And Wendel, one for you, in terms of have you been able to digest Biden’s recent plans about pushing electric vehicle adoption to 50% by 2030, how does that impact overall sort of growth outlook for environmental?
Edward Schlesinger: Yes, I think you’re certainly hitting on one of the areas that gives us a range of outcomes in the way we’re thinking about the back half that is in specialty. Obviously, smartphone and PC IT demand remains relatively weak. I think it’s possible that above the low end of the range, you articulated the sequential growth first — second half over first half, but I don’t know that I would say it’s going to be at the high end of that range. We’re not planning on growth levels at those levels.
Samik Chatterjee: Wendell, any thoughts on the electrification plans from the current comment?
Wendell Weeks: And by that, I assume you mean sort of the recent administration announcement from the EPA on what along with some of the industrial policy that goes with it. But at that EPA regulation that they just released a comment. And in that, the piece of it that we’re most excited about is that they’ve now adopted the way to measure and the approach that the Europeans have, Chinese have, which will mean gas particulate filters will be required on all ICE vehicles in the U.S. So that adds tremendously to our content at 2 to 3x to our content level for U.S. vehicles and U.S. markets had a small market. So what this enables us to do to sort of keep our overall content that’s in our environmental piece of our business, our mission control piece of our business sort of more Corning plays out as the number of ICE vehicles shrink.
So we are quite excited by that. Our core long-term answer to the EV, is that’s where we have focused on the bulk of our glass and optics and autonomy efforts at, at this point in time, really our highest value-add vehicles — our electric vehicles that has the most content on us, despite not using our emissions control because that tends to be where we’re the most successful on both our interiors and our exteriors and now our autonomy products. Did I get to your question?
Operator: Our next question comes from the line of Meta Marshall with Morgan Stanley.
Meta Marshall: Maybe a question on the gross margin improvement that you saw in Q1 over Q4, clearly on down volumes. Just how much more feel is there some of these activities to improve gross margin throughout the year, maybe kind of with or without volume improvement. I guess I’m just trying to see how some of the pricing actions or efficiency actions kind of fully reflected in what we see in Q1? Or just how much of that can carry throughout the year and improve margins even if we don’t see kind of meaningful improvements in volumes?
Edward Schlesinger: Yes. So first — thanks for the question. And maybe I’ll just sort of reiterate how we described our margin improvement and what sort of played out in Q1 and then I’ll get to sort of what happens from here. So yes, we increased price that’s definitely a big driver of why margins went up. We’re also looking to improve our productivity ratios back to the Wave brand prior to the pandemic. We’ve made progress there that takes cost out, and we’re certainly taking fixed cost out as well. So those drove our margins up sequentially on lower sales, which is very unnatural. I think there is definitely an opportunity for us to continue to do that. We do expect sales to go up in the second quarter, but we do expect profitability to go up as well from there. So I think there’s more room to run from where we are now. We’re going to continue to work on it. It’s clearly a priority for us.
Meta Marshall: Great. And just as the opening of the North Carolina facility kind of impact optical profitability in the near term? Or can you guys still get efficiencies — or does that plan even add more efficiencies that can help margins there?
Wendell Weeks: As always, as we fire these plants up, get a little bit of a drag as we fill them, but we’ve been able, because of the way as we prioritize protecting our people and our customers pre-pandemic. We ran at very high staffing levels pretty high inventory levels. . So we’ve been able with our improvements in those things to more than offset sort of the drag we’ve seen from opening up some of our new capacity, but various good question. Yes, we do always get a drag before we get these things all the way filled up and all of our technology connectivity.
Operator: Our next question comes from the line of George Notter with Jefferies.
