Corning Incorporated (NYSE:GLW) Citi’s 2022 Global Technology Conference Call September 8, 2022 10:30 AM ET
Company Participants
Ed Schlesinger – Executive Vice President and Chief Financial Officer
Ann Nicholson – Investor Relations
Conference Call Participants
Asiya Merchant – Citi
Asiya Merchant
Alright. Good morning, everyone. We’re at the bottom of the hour, and it’s time for Corning. This is Citigroup’s Global Technology Conference. I am here – I am Asiya Merchant. I work with Jim Suva here at Citi’s researchers, tech hardware, telecom equipment, tech supply chain, just a few housekeeping items before we start no media or press is allowed. Disclosures are available at the check-in and on City Velocity. Company disclosures and Safe Harbors are of course available on their own website. And if there are any investors here who are subject to MiFID II, please ensure that the applicable research agreements are in place.
With that, I’d like to introduce Ed Schlesinger. He is the EVP and CFO at Corning. We also have Ann Nicholson in the audience who’s Corning’s IR. And I am going to kick it off with a few questions that I have. And of course, if you are – if you have any questions in the audience, please do raise your hand so we can bring the mic to you.
Question-and-Answer Session
Q – Asiya Merchant
So Ed, thank you for being here. I guess the most important question, I guess, all investors are talking about is, of course, the macro, no surprise here. And just thinking about how you guys guided for the third quarter, subsequently in July and in August, we have had other companies pre-announced or give earnings and things do definitely look weaker in certain pockets of the end markets that you participate in, primarily consumer end markets. So, maybe you could just talk to investors about where you were when you put out your guidance and how you guys think about the end markets now that couple of months have gone by.
Ed Schlesinger
Yes, sure. I think maybe I would start by saying relative to our guidance for the third quarter all of our businesses are essentially performing in line with what we saw with the exception of display. I will talk a little bit about display, the market and sort of what’s happening in there. So in display, we had talked a lot about panel maker utilization coming down through the year. We saw panel makers reduce utilization in June quite significantly a sharp decline. And then we expected that to continue through the third quarter. That was factored into our guidance. And what we are seeing is utilization being lower in August than we expected and that’s primarily driven by rolling energy adjustments being made in China, right. That’s the primary driver. So that’s really the big change in display, so that impacts the amount of glass that we expect in the quarter in the market and the amount of glass for us and that impacts where we see ourselves in the guidance range that we provided. We think the impact of that puts us towards the low end, towards the bottom of that range or maybe slightly below depending on how the quarter plays out, but for the most part all the other businesses performing in line. From a market perspective, actually, I will pause and see if you want to ask any other questions, I can come back to you.
Asiya Merchant
No, no, please continue.
Ed Schlesinger
I was just going to say from a market perspective, if I think about like mobile consumer electronics and autos, we weren’t expecting the market to necessarily be strong in the back half. I don’t think we are seeing anything different than that. So we continue to see much lower car production than historical norms and certainly lower than we would have expected at the beginning of the year. We were expecting maybe the back half to be a little stronger. I don’t know that I would say it’s going to be much different. And the number of cars produced, for example, will probably be more in line with 2021 versus seeing an uptick. In smartphones, we expect unit volume to be down for the year. And again, that’s not different than we would have expected, but not anything necessarily stronger than that.
Asiya Merchant
Okay. And then, of course, on the positive side, the optical segment of your market, which is a pretty significant driver of net income, continues to do really well. But there are concerns with some of this macro pressure affect your carrier spending and hyperscaler spending environment?
Ed Schlesinger
Yes. I mean I think stepping back, so optical has been very strong, really strong growth in the first half. It was the largest growth driver for us in the second quarter. And we think over a long period of time, 3 to 5-year period, there is a lot of tailwinds in this space and we would expect to see strong growth from us. We probably dollar-wise, it’s our biggest business. It will be our largest dollar growth driver for a period of time, but in this space, you definitely go through periods of lumpiness. You have builds coming to an end, builds starting up sometimes dynamics in an infrastructure environment impact what happens in any given quarter. So I don’t – I wouldn’t project out growth rates like we saw in the first half and that’s obviously not factored into how we see our year playing out anyway. So in any given period of time, you might see a lower growth or even a slowdown, but I think longer term, we feel really good about it. As you probably saw, we had a couple of announcements in optical. We announced this morning the opening of a fiber factory in Poland. We have been talking about adding capacity in this space for some time. So, that’s actually now up and running. That was a constraint for us and that will help us as we continue to supply into high demand environment. And you saw the announcement, the partnership with AT&T to start cable facility in Arizona and that will come online in 2024.
Asiya Merchant
Okay. Alright. Obviously, you have been through economic – Corning has been through economic downturns before, just before we jump into the segment stuff. Maybe if you just kind of take a step back and look at all your various end markets, all your various businesses that are doing well, some are a little bit going through some macro pressures. How do you think about how Corning is positioned to, let’s say, weather this macro downturn, whether that’s short lived, long lived, we just don’t know right now what how is Corning better positioned now versus if you dial it back to the prior downturn?
Ed Schlesinger
Yes, I think a few things. One, we are more balanced now. We have larger businesses versus say having one business driving a significant amount of revenue and profit and cash. I think that balance will certainly help us and we are seeing that actually play out because we have tailwinds in some of the markets like in Optical and Solar even when other markets are down. So we are still able to grow through that time period or certainly outperform the markets that we are serving. I think in addition to that, we are very focused on adding content in our markets. So if I take the smartphone market, it’s down this year. But if you even go back, let’s say, to 2015 or 6, 7-year time period, that market is relatively flat. We have doubled the size of our business. So I think we have – we are well positioned to be resilient even in a downturn, because we will add content into the markets we serve and some of our markets will perform better than other markets.
Asiya Merchant
Okay. And then obviously you’ve been talking about taking pricing actions to offset inflationary component pricing, logistics pricing and all that kind of stuff. And you have been negotiating with your customers on those contracts. And can you remind us like how far are you in those negotiations? Have you been able to offset it? Is there still work to be done? So we kind of get back to margins that you were in the past before you had to take them down due to the logistics and higher inflationary components?
Ed Schlesinger
Yes. I think I would actually start with the reason for raising price, the environment – the supply chain environment has been very volatile. We’ve seen the cost of input materials go up significantly. We have seen the cost of transportation go up significantly. And we have seen big spikes up and some normalization. So there is – it’s definitely a very volatile environment. We started seeing that in 2020 and into 2021. And in the back half of ‘21, we started taking action to raise prices. Our primary focus was to serve our customers and then we started raising prices and sharing the cost of higher input materials and higher freight with our customers. We are pretty far into that. We saw price increases in Q1 take hold and price increases in Q2 take hold. You saw that in our results. Our margins improved. We actually had price go up in totality for the company in those two quarters. That said, I think there is certainly more to be done, because I don’t think the environment has stabilized. So the sort of driving factor for why we need to raise price hasn’t really changed. And it’s been, again, volatile in the sense that where we are seeing input costs has changed over time. I mean we will certainly see higher energy costs, for example, in Europe than we have seen given the current dynamic there. So I think we will continue to look to raise price as a way to offset that cost. We are not caught up, if you will, right. So there is still more work to be done, but we have made significant progress to get caught up.
Asiya Merchant
Is the – are the negotiations with customers just tougher right now given the backdrop or is that just a display phenomenon? We can talk to display separately. But if I think about autos, Hemlock, optical, life sciences, just higher pricing, is that getting a lot more pushback from customers right now or more or less, they are kind of saying, yes, we get it. You have to pass on the higher cost of logistics and energy onwards?
Ed Schlesinger
Yes. I think for the most part, we have good long-term relationships with a lot of our customers and we treat them very well. And I think they understand the dynamic and it is not easy I am sure if people who had to actually raise the prices were here, they would say it’s not easy to do. But that said, I think it’s not necessarily changing in a negative way. I think customers understand the dynamic. And I think end consumer demand will ultimately determine how all of this plays out and whether raw material costs start coming down, demand starts coming down and then that might normalize it or if that continues and inflation continues, I think how much our customers have the ability to pass price along will also have an impact on how it all plays out.
Asiya Merchant
Okay, alright. Maybe we can – just a quick look at the audience, if there is any questions, please do raise your hand. Otherwise, I am going to be jumping into segments. We do have a question there.
Unidentified Analyst
Hey, so just on the display commentary you made early on, you mentioned lower end of guidance. I just want to clarify that’s the lower end of your display guidance specifically, are you making a comment that you would also come in at the lower end on a total company basis?
Ed Schlesinger
Yes, sorry. I was making a comment that I would come in on the lower end of – thanks for that question on the lower end of total company guidance on sales and earnings per share at the bottom of our sales and earnings per share guidance driven by lower volume in display.
Unidentified Analyst
It sounds like related comments or maybe like a supply or a market hiccup related issue, but I just want to clarify whether any of those display comments are any sort of a demand read or perhaps a lower pool from somebody else in the supply chain, just whether it’s demand or supply would be a good clarification?
Ed Schlesinger
Yes, I wasn’t – I am not 100% sure I understand your question.
Unidentified Analyst
So yes, you made comments about energy and how there was something – yes, that makes it sound like it’s a temporary hiccup more than it is a longer term perhaps later into the fall or winter issue, I just want to…
Ed Schlesinger
Yes. I don’t think the dynamic in display is a production-related issue. It’s more of panel makers taking down their utilization to levels that sort of put them in the right place with their customers with the set makers, that dynamic we have been expecting that to happen for quite some time. And it has been happening actually slowly through the year and then it really spiked in June. What I talked about in August was more around rolling blackouts, specifically in China, impacting panel makers, so taking utilization down even further. But stepping back and just ignoring that for a second, utilization rates are very low, the rates that we saw in 2009 like financial crisis level. So, I don’t think that level is sustainable, but I also don’t think it has anything to necessarily do with production capability. It’s more related to end market demand.
Asiya Merchant
Related to display, Ed, I mean, you guys have had – despite what’s going on in the end markets from a demand weakness on the consumer side, you guys have been able to hold pricing on the glass side relatively flat, which is surprising, I guess, to a lot of people when glass used to go down – glass prices used to go down quite significantly in the past. So I understand the competitive dynamics. But maybe you could just refresh us on why is that the case? And is there any risk that there is excess glass inventory at the panel makers?
Ed Schlesinger
Yes, I think there are generally three dynamics that impact glass pricing, and they have helped to stabilize pricing over the last couple of years and pricing has actually been up slightly in some of the quarters. First and foremost, the supply-demand is generally in balance. I mean think of it over a period of time versus, say, in a specific month or in a quarter, there isn’t a lot of excess glass capacity. Second panel make up glass makers need to take their production down. We need to take our production down to actually repair our tanks put new technology on. We can also use the time when we’re making or need to make less glass for panel makers to replenish our own inventory, which was relatively low throughout the pandemic time period. So that’s sort of the second dynamic is managing our capacity and our own inventory level. And I think lastly, just competitor profitability is very low. And in that environment, it’s tough to see prices continue to come down. So I would say those have – those dynamics have stabilized the pricing environment. And our view is even in this really low utilization time period, we’re seeing pricing being stable. We expect pricing to be consistent in the third quarter with the second quarter, and we still expect that to be the case regardless of further utilization reductions.
Asiya Merchant
And then the yen affects glass revenues on the display side. And so – but on the flip side, you guys are hedged on the positive side. So maybe you can just remind investors, the yen moves and the sharp depreciation you’ve seen in the yen, how does that affect you, but then you guys are positively hedged. And so net-net, on the cash flow side, it’s less of a drag than perhaps it is on the earnings side?
Ed Schlesinger
Yes. So we’ve had a hedging program in place going back about a decade. We’ve been pretty successful in the dynamic to think about is we’re long yen and we sell in yen, pricing in yen, and we’re short in other currencies like RMB, Taiwan dollar, Korean one, where we make product. So we have short exposures in those currencies, long exposures in yen. We think of that as kind of a basket of exposures, and we hedge that – our goal is to keep stability of our cash flows. That’s how our hedging program has worked, and we’ve had a lot of success, generated a significant amount of gains over time, over $2 billion or so of gains. When we think about the yen where it currently is, we’re hedged at ¥107 for 2022 and 2023, we have some hedges in place for 2024 and even 2025, and we have some yen debt that’s also priced in priced at about ¥107, which will mature in ‘24, ‘25, ‘26 and so on. So that also acts as a natural hedge. Our goal will be to continue to keep ourselves at ¥107. We will use opportunities to further hedge ‘24 and ‘25 as the yen becomes more volatile. And our customers who are yen based – their costs are also outside of Japan more and more because they are producing in China. So they are exposed to some extent as well to the yen, which is a dynamic that certainly impacts their profitability. Our competitors, I might have a competitors. Yes, sorry.
Asiya Merchant
Yes. Okay. Alright. Maybe shifting to the optical side of things, I mean, obviously, strong growth here. I think consensus in my model to, I should say, revenues will be kind of above the $5 billion range this year. Just how do you think about the momentum in this business and ability to sustain double digit growth? Because we do hear service providers spending kind of peaking out in 2022. So just as you kind of roll it forward, would you guys – would you think about the double-digit growth and the momentum in this business?
Ed Schlesinger
Yes. I think sort of as we spoke earlier, I think over the longer period of time, I think the dynamics play out really well for significant growth carriers are committed to continued fiber-to-the-home build-out, 5G build-out, hyperscalers are also committed to adding capacity. So I think you will see a significant amount of demand. It may wane over time in a given period and then pick back up, I think that is certainly possible. And I think the broadband initiative in the United States and in other Western countries will be – will add the opportunity to the opportunity to the market for Corning and for other optical communication companies because not all of that will be cannibalized, right? I think the 5G build-outs and some of the fiber-to-the-home stuff is separate from building out the rural broadband. And so that makes the market opportunity bigger.
Asiya Merchant
Okay. And then what’s driving higher margins for you guys in this segment? Is it volume, because obviously, leverage works in your favor? But are there specifically shift towards certain solutions under fiber expansion as well as the broadband initiative that drives the shift towards – mix shift towards higher-margin products?
Ed Schlesinger
Yes. I think there are three things in this business that will help to drive margins. First and foremost, as we bring capacity online, filling that capacity, having that capacity at a full rate helps on margin, get rid of any cost drag. Secondly, as you talked about, selling solutions is a much more lucrative opportunity for us than just selling say cable or something like that. We believe the value prop to selling solutions is great, and we’ve seen traction there. For example, less labor cost required to install our products. So the total cost is less for the customer than maybe another product set that someone else might sell even if the upfront cost isn’t. And I think that will help – selling more of that will certainly help our margins. And then lastly, raising price, so for sure, in optical communications, this is a place where we have been raising price. We saw a lot of inflation. We’re continuing to see inflation and now continuing to raise price will help us continue to improve our margins.
Asiya Merchant
Okay. And the competitive environment here in optical – are your competitors following suit? And do they – are they also raising prices? Or since you are like a sole provider at several of your carrier customers it’s less of an issue?
Ed Schlesinger
Yes. I won’t comment on what our competitors are doing, but I would say that we haven’t seen a problem necessarily raising price.
Asiya Merchant
Okay. Alright. Maybe we can shift to the specialty segment where you guys are driven by cover glass and smartphones. You guys are talking about cover glass across cameras and other things. Maybe you can just talk to how do you think about the content growth in smartphones dial it back a few years? Like you mentioned smartphone units have been stable. You’ve doubled that business. So really, what’s the content growth that you’ve experienced? And what’s the opportunity ahead, assuming smartphone is going to hang in here at this level that they are.
Ed Schlesinger
Yes. I think if you go back in time, adding more glass to the phone, huge content opportunity glass backs just different form factors. I think that’s added a significant amount of revenue for us. Obviously, other types of glass camera lenses has had an impact. That’s probably more in front of us than behind us. Another thing is composition, glass composition, so like, for example, ceramic shield, with Apple, higher price point. I think that has added more in the past. And certainly, there is opportunity for different glass compositions and form factors that could add value in the future. And I think in this space, there is also a different device opportunities, they are probably more longer-term, not something that I would worry about or count in 2022, 2023, 2024 time frame, but have AR, which is an opportunity you potentially have whatever happens with foldable phones or different form of smartphones, I think that potentially adds content into the space as well.
Asiya Merchant
And so the higher ASPs for Apple devices, is that just because you have a separate – you mentioned, I think, ceramic shield, which has a different composition. So is it just a function of the specific composition that works for Apple that you’re able to charge higher prices? Or is there something else that’s going on per unit basis?
Ed Schlesinger
I think to the extent we can continue to improve the glass that goes into a phone that allows us to extract more value. So it’s not – I don’t think it’s something I would – I use that as an example.
Asiya Merchant
Okay. And then just the margins in this segment, is there opportunity – again, aside from our leverage that works in your favor, are you bringing on incremental capacity or are you running pretty full already or what’s driving margins in this segment that would allow you to maybe continue to expand or in this particular segment?
Ed Schlesinger
Yes, we’re not necessarily adding capacity. I think it’s more about us just continuing to sell more content. I think that’s a big margin opportunity for us is us being able to sell more content into the higher value segment of the market.
Asiya Merchant
Okay. Alright. Shifting to autos, I mean you guys have laid out like a road map towards I think it’s $100 per car opportunity that exists there, both from the particulate filters as well as glass on the interior, the exterior, the sensors that go out there. So maybe you can just explain to us where you are in that road map how – what’s ahead, what’s already there. And of course, there is this auto market that you highlighted where the volumes are depressed right now because of component shortages as well as lockdowns and things like that. So how do you guys kind of see this auto market evolving relative to where you are right now, which is at depressed levels given just the sales numbers yes?
Ed Schlesinger
Yes. I think if I start with the market, our view is the market has to be bigger than it is today, roughly 72, 71 million cars were made for the last 3 years, clearly well below where we were pre-pandemic. I don’t know what the right number is, but I think the current level is too low to really meet the demand that we see as being out there. So I think you will see more cars being built. When and how exactly that happens, I’m not sure. I would say that when the auto market comes back, I think it bodes well for our environmental business. We have capacity, we’re able to supply into that. You’ll see some modest adoption of GPF in China and Europe as well because it’s not completely adopted, but I think that, that will help to some extent with growth. I wouldn’t expect there to be massive outpacing the market necessarily in this particular space for environmental. I think the other opportunity, which is really about adoption, which is less about the number of cars being built, although obviously more cars helps is in auto glass. And if I think about auto glass for us, we continue to win business primarily on the interior of cars, but we have an opportunity to win business on the exterior of cars as the way cars function is more complicated use of head-up displays, use of LIDAR, other specialized opportunity sensors. There is lots of glass that’s going to be required on the outside and the inside of cars. I think that is – and because it’s an adoption opportunity, we should start to see growth rates way in excess of whatever happens in the auto market over the next several years.
Asiya Merchant
And the indications from your customers about adoption of that auto glass, exterior, interior, where are we in those conversations? What are you hearing from your car customers?
Ed Schlesinger
Yes, for sure. I think for sure, auto manufacturers are adding more glass to their cars. That I think is for sure. We have won a significant amount of business. We have about $1 billion of business that we won. It starts to kind of come in over time as model years come out. And I think we are seeing more and more opportunities for future models. So, I think the market is there, more so maybe than it was a few years ago. And the question is just exactly how it plays out and how fast it ramps more than anything.
Asiya Merchant
Okay. And then on the gas particulate filters, obviously, that’s a beneficiary of regulations that are in Europe and China, nothing yet in the U.S.
Ed Schlesinger
Nothing yet in the U.S., there is talk about it in the mid to late-2020s. We are obviously working to try to make that happen sooner, but there is nothing specific about that yet.
Asiya Merchant
Okay. And the particulate filter opportunity gets you to, if I am not mistaken, $30 a car?
Ed Schlesinger
Yes. So, we – if you think about – we talk about $100 per car opportunity. That’s sort of how we think about it. Think of that as an average, right, you may have cars at well above $100 and you may have cars well below the environmental business, ceramic filters, gas particulate filters, maybe it’s a $15 to $30 opportunity. And then if you think of the glass opportunity, that is really the rest of it. Interior, maybe a $25, $30 opportunity exterior specialty glass, all the other things kind of fills out the rest and that’s sort of, I think the way to think about it. And there are cars out there today that have well in excess of $100. They are high-end vehicles, but that’s typically how the market sort of starts to bring innovations to bear, right. They come in the high-end and then they eventually work their way down…
Asiya Merchant
And is it a function of – like is it a demand pull, or is it – do the costs come down? I am just trying to understand like what would be the inflection where you would start to see a little bit more in the mainstream market?
Ed Schlesinger
Yes, I think it’s probably a combination. I don’t – I think cost for sure, always plays in, in the automotive market for sure, as scale improves, I think cost will help. But I think it’s more of the way people are using their cars, for example, with electric vehicles, having the ability to have a lighter weight car or for example, with head-up displays being able to take a windshield out of the car, if it’s broken and replace it, you really need a much more technical glass. You want to be able to prevent that from happening. You don’t want to have – every time you get a little rock chip in your window, you have got to go back to the dealer and have it replaced, right. So, I think those kinds of things, those dynamics with all the technology play well into more specialized glass areas.
Asiya Merchant
Okay. Alright. I am going to ask the audience if there is – if there are any questions before I continue. Okay. We can talk a little bit about maybe the Hemlock side of things, which has been a positive growth driver for you guys. Again, I don’t know how many investors in the audience are aware of what – what’s the drivers there and the fact that you have a lot of capacity that you could bring online, which would be a positive for you guys.
Ed Schlesinger
Yes. So, maybe a minute on Hemlock, Hemlock makes semi-grade polysilicon that feeds the semiconductor industry and solar grade polysilicon that feeds the solar industry. We were 40% owners through a series of transactions. We became the majority owner of Hemlock. That happened in late 2020. So, we now consolidate Hemlock. And in – the semiconductor space is a very strong business. When we consolidated it, we gave out some information about a $600 million business long-term take-or-pay contracts, growing with the semiconductor market, and we have seen that play out pretty well. And at some point in time, the market may become constrained on semiconductor grade polysilicon and you may see us talk about that or others talk about capacity in that space. CHIPS Act may make that an opportunity depending on what happens, whether there is really a semiconductor supply chain build-out in the United States. I think that bodes well for Hemlock if that turns out to be the case. On the solar side, Hemlock was in the business for a really long period of time and then exited the business as it really moved to China. And from a cost perspective, Hemlock really wasn’t able to compete with the Chinese competitors and really all of the panel making, solar panel making and module-making was really all in China, 90%-plus of the industry, close to 95% of the industry is in China. What’s happened is that polysilicon is constrained and the U.S. has so fair labor practice laws preventing Chinese polysilicon to come into the United States and it’s created a further constraint. Customer – so Hemlock had turned off their capacity, exited the industry. Customers have come back and asked Hemlock for solar grade polysilicon and Hemlock had some inventory. They were able to sell all of that inventory out in 2021 and they have since turned on production that they had mothballed. We could probably double the size of the production that they have turned on. They haven’t turned on all of their capacity. As you mentioned, there is upside opportunity.
And I think as most people have followed the Inflation Reduction Act has a lot of clean energy manufacturing incentives in there. And we are currently studying that and determining how that might play out and whether there is an opportunity for solar supply chain in the U.S. or it just helps Hemlock with turning on additional capacity. With respect to the capacity they have turned on, they have essentially sold that out. They have got multiyear take-or-pay contracts. Customers have given them some cash to afford to be able to turn on their capacity. So, I think it’s a great opportunity for us long-term. And that we may be talking about it more as we sort of study these infrastructure opportunities, the government incentive opportunities.
Asiya Merchant
Okay. Looking at free cash flows, you guys have, I think north of $1.7 billion of free cash flow generation. Last year was a good free cash flow generation year two. This one as well, investors always worry that there may be CapEx incremental CapEx that you will need to invest that’s going to crunch the free cash flow. Maybe you can just talk to us about what your free cash flow expectations are CapEx expectations? And then just the shareholder returns, right? I think share repurchases would dip down a little bit in your last reported quarter.
Ed Schlesinger
Yes. I mean on free cash flow and CapEx, we have said that will be similar to prior year in terms of what we expect for 2022. And I think in general, on capital, we are a capital-intense company. We need capital to grow. We look to prioritize how we spend money on capital. We seek to generate a 20% return on new capital. We call that billed capital. So, if we are putting in a new plant or a new capacity, our goal is to get the 20% return. We seek to de-risk that return by either getting money from others which helps to mitigate the risk of achieving that 20% return or having a take-or-pay contract or some other form of certainty around generating that return. We have been very successful within doing that. So, I think you will see us continue to spend on capital, but our goal is to sort of keep it at that level and not let it impact our ability to generate strong, consistent free cash flow. So, that’s kind of how we are thinking about it. And then with respect to shareholder returns, I mean we had a big transaction in 2021 with – we had Samsung converting their preferred shares from preferred to common. During that process, we repurchased about 4% of our outstanding shares. We pay for that over a 3-year period of time. So, we had a payment in 2021, a payment in 2020 and one more we have in 2023, and that consumes a little bit of our capacity for additional repurchases if you think about it. So, we were able to take all those shares offline, kind of on the front end and pay for them over time. And then we will continue to be opportunistic with respect to share buybacks, and we certainly value rewarding shareholders very much with respect to our dividend and buying back shares.
Asiya Merchant
Right. And just a little bit on operating leverage. I think I get this question, I understand the gross margin dynamics given your – you have factories that you need to fill in order to drive gross margins. What are some of the levers that you can pull on the OpEx line that could maybe give you some offsets to any margin pressures you see in a macro downturn?
Ed Schlesinger
Yes. I think our goal is to have operating leverage, so to grow our operating expenses slower than our sales to have some OpEx leverage. We are very committed to investing in technology. So, research and development is very important to us. We don’t look to cut it in difficult time periods. We are sort of – we feel compelled to continue to invest there. And we obviously manage our OpEx like everybody else during various growth opportunity times or downturns. I would also say that I think as we think about long-term, we expect to be able to grow. And in order to do that, we are going to need to grow OpEx to some extent to help us do that. So, I don’t think we can have a fixed level of OpEx as if we are able to grow.
Asiya Merchant
Okay. Lastly Ed, I get this question, what are some of your most pressing priorities? And just with it for investors, like why would you be buying and holding on to Corning shares?
Ed Schlesinger
I think the thing that’s playing out right now is a good reason to do that, right. Even during a rough economic time, markets for us that are down we are continuing to grow. So, I think we have resilience, and I think that’s a compelling reason to own us. I also think a lot of the opportunities we talked about from a longer term perspective, auto glass, solar, optical communications, I think there – and there are others that we didn’t talk about allow us to continue to grow and put plant seeds that have big opportunities into the future. So, I think we are performing well now. We are generating cash. We are powering through a very difficult economic time period, but we also have the ability to grow when that economic period cycles throw.
End of Q&A
Asiya Merchant
Okay. Alright. That wraps it up. Thank you, Ed. Thank you, Ann.
Ed Schlesinger
Thank you.
Asiya Merchant
And I hope the rest of your one-on-ones are packed and tight, like 401s, 301s. So, thank you everybody. That wraps up our call here today with Corning.
Ann Nicholson
Thank you.
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