Wendell Weeks : Thank you, Tim. On the 5G piece, I think that the more of the challenged at our customers in Telco based is that 5G you move from a technology in 4G, which a wireless is very wireless, right to 5G which therefore takes wireless and starts to make it more wireline? And therefore taking a good amount of infrastructure to put in place. Now interestingly, what they’ve taken advantage of is, if they’re going to do that, you see them combining their networks from wireline and wireless into one. And that allows them some significant cost savings and offers many different potential revenue opportunities for a given deployment at network. Now, so in a way, you are seeing their cost productivity improve, their ability to serve improve.
There is the challenge of how much revenue – incremental revenue to 5G at this stage has generated. And that is something they have wrestled with. What we see reflected in our thoughts for the year is rounded to as we muted deployment outlook. But that we will still see the pickup because what’s pushing us below sort of long-term deployment rates of fiber is then this eating through of the inventory largely purchased during the pandemic and dealing with that step up. And then, but it does incorporate a lower deployment outlook. So that’s what we’ve sought to do for that, Tim. Does that address your question on that piece?
Tim Long : Yes, yes. And then just on the datacenters popping up in other places impact?
Wendell Weeks : The answer to your question is yes. It is a interesting opportunity and it is coming back to – its enhancing capability we have that others don’t which is, this ability for us to actually respond globally across a really big geographic footprint not only in the US but across the globe, because of this search for energy is more than just finding the exact right communities here. And so, yes, it does offer a significant opportunity for us for both innovation, as well as volume. But it’s too early to factor that in, because they haven’t found all the energy sources yet that will be required and they’re still dealing with the infrastructure ramifications there in.
Tim Long : Okay. Great. Thank you.
Ann Nicholson : Thanks, Tim. The next question.
Operator: Our next question comes from the line of Asiya Merchant with Citi. Your line is now open.
Asiya Merchant : Oh great and apology if this question has been answered, but I did notice inventory was a little higher this quarter and OpEx tracked a little bit higher, as well. Just if you can provide some clarity on that. Thank you.
Ed Schlesinger: Sure. Thanks, Asiya. On inventory, just think of it as we had a very low volume quarter. In general, our volume will go up through the year. So we still view inventory as an opportunity to take it down from the level we are at and we think that’ll be a catalyst for cash flow in 2024. With respect to OpEx, I’m going to answer your question, but I’m going to reframe it a little bit, as well. So sequentially our OpEx was up. The simplest way to think about it is that our variable compensation in ‘23 was lower than normal, because we didn’t perform to target in 2023. So we just didn’t pay out at target were set where we’ve reset our targets. We expect to perform in 2024. So our variable compensation is at a normal level.
But what I think is important to take away on OpEx is we are committed to keep our OpEx relatively flat to where it is. They don’t move around in any given quarter. It’s I think we were about $700 million in the first quarter. It could be in the 7 to 725 range, but if we’re able to do that over time, it creates another leverage point for us as our sales grow and that’s why we talk about powerful incrementals, gross margin expands and operating margin expands, as well or profitability expands more than sales. So I feel good about OpEx overall.
Ann Nicholson : Thanks, Asiya.
Asiya Merchant : Great. And thanks.
Ann Nicholson : Go ahead, Asiya.
Asiya Merchant : Well, I was going to ask, I know there was commentary on yen earlier, but investors have been asking when Corning would feel comfortable sharing sort of the new yen hedges. And perhaps this question’s already been answered, but I did joined late so apologize – apologies if this is a repetitive question. But any color on this, yes.
Ed Schlesinger: Yeah, no apologies necessary, Asiya. Yes, what I shared earlier was the most important thing is to think about the return we generate in this business. Our goal is to generate an appropriate return. You could think of that as what we will deliver in 2024 or what we delivered in 2023. And we are going to use Yen hedging and raising price in combination to generate that economics or those economics to generate that return. And so, we have made progress on our hedges. We’ve made some nice progress and we’ll be opportunistic throughout the year and we’ll look to hedge at attractive rates. We’re not sort of discussing the details and I think it’s too early to think about how to frame up core rates for 2025. So we’ll keep you posted on that. But just think of it as the overall profitability level or cash generation level in the display business.
Asiya Merchant : Thank you.
Ann Nicholson : The next question.
Operator: Our next question comes from the line of Joshua Spector with UBS. Your line is now open.
Unidentified Analyst: Hey guys. Congrats on a solid quarter. This is James [Indiscernible] on for Josh. I just wanted to poke on the powerful incremental that you described, we are talking about the $3 billion sales opportunity. I mean, if I look back at kind of last couple of quarters, your gross margin has held in pretty steady despite sales declining. I think there’s some noise with display pricing coming through. Can you just give me some color as to how we should think about the cadence of gross margins as we go through the rest of the year?
Wendell Weeks : Yeah, thanks for the question. I think the way to think about it is, if you go back to Q2 of – I’m sorry, Q4 of 2022 that was our low point. We’ve expanded our gross margin 300 basis points while our sales have come down almost $400 million. We’ve done that by improving our productivity ratios, running our factories better and by raising price. So we’re actually at a very nice baseline of 37% and I’d remind you that 37% is closer to 39%, when you think about the old math before we absorb inflation and raised price right? So we’re starting from a very nice base. And we have the capacity in place to support a lot higher sales, which is not normally the way we would grow. So as sales comes back, we would expect our gross margin to march up along with those sales nicely each quarter.
