CLS - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Celestica Third Quarter 2020 Earnings Call. At this time, all participants lines are on mute. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to your speaker today, Craig Oberg, Vice President of Investor Relations and Corporate Development. ahead. go Please

Craig Oberg

thank Quarter and joining on us Good earnings you conference Third XXXX call. Celestica's afternoon for

On the call Executive today are Rob Mionis, Mandeep Chief Officer, President Chawla, Financial Officer. and and Chief

and make during are call, of reminder, based US Litigation applicable on XXXX risks, Securities Act results Private within Such forecasts Canadian and a differ in As cause assumptions, securities uncertainties, to and the expectations, subject could expressed we other will laws. current the forward-looking conclusions, management's actual this from are meanings outcomes to materially of and projections forecasts that factors which Reform statements or statements. such forward-looking statements

For forward-looking as release today's identification assumptions press and concerning statements of the refer as factors cautionary note on can to which therein further assume including and forward-looking and report law. regarding required well public annual forward-looking discussion sedar.com. be obligation such by accessed information Form statements, statements to XX-F other We sec.gov update any and please as no and filings, our except at

addition, comparable not measures measures, do most meanings or may to by the measures be to cash third who non-IFRS EBITDA will tab Investor ratio, other foregoing metrics. our of any similar capital public whether various adjusted operating adjusted non-GAAP free for standardized press companies any designated XXXX information measures earnings, measures about to These including adjusted on debt Listeners these gross are available adjusted under references refer other measures refer this use IFRS specified, of from operating adjusted call and the earnings presented IFRS and adjusted per shares rate. or this we Relations describe margin, financial including prescribed In that non-IFRS on the earnings, invested gross US our tax celestica.com EPS, call use directly comparable a this at denote adjusted SG&A ROIC, to release trailing margin, based which on measures We cautioned you to to similar is outstanding. otherwise operating and and call, to or information have are effective XX-month quarter today's certain presentation, non-IFRS be reconciliation and measures report to under flow, during to return adjusted dollars net dollars Unless should leverage measures share GAAP non-IFRS as and IFRS not not during by diluted non-IFRS specifically US more such. that all references historical non-IFRS statements.

call me now over Let the turn to Rob.

Rob Mionis

Good joining Thank performed margin quarter of you, call. growth. conference thank third Celestica well year-over-year revenue for morning the environment, and Despite quarter, Craig. delivering in and the sequential challenging operating another you and today's

and benefits the solid is results. results to see third portfolio transformation We are actions our strategy another quarter are continuing our yielding our of sign that

global Our today's challenges is navigating keeping our employees support safe. to while and customers, working tirelessly team our is successfully

supply remain continues improve. operations and stabilized our largely Our chain to

remain impacted demand experience COVID-XX. amount customers' markets by as continue a to we of our However, end fair volatility

to global any As in protocols well processes change, to We to new have continues to our and place situation we around circumstances manage adapt challenges. evolve of and the robust the continue address operations believe set prepared chain a we are and as COVID-XX COVID supply world.

JDM softness capital commercial see aerospace. continue the equipment in business, markets to in health significantly strength demand experiencing are and other in markets, most we and tech we While

on basis grew Our solid of performance. delivered year-over-year segment CCS to X% came target a in and margin range. our quarter segment above Revenue X% another

cost some demand driven offsetting CCS. tech strong In productivity in are sequential our leading of wins. within profitability. ATS our capital actions represents the improved in equipment weakness taken health growth and quarter The margin to is This quarter of in segment, sixth ATS businesses consecutive by expansion recent

to to are continue operating achieved actions to to return and in its % of quarter. margin we target that margin take the encouraged segment we third year-over-year by ATS operating X%, the expansion While the sequential

continue our demand quarter our we in first, margins environment over broader markets As a are execute results. cost on taken seeing details to and on we we to to our our recent our to actions and have strengthened you, productivity of turn and levels. third some for the return strategy our give testament drive Over strength will innovate, and to portfolio customers. deliver believe we markets, the several The actions the additional believe in we Mandeep will business Mandeep. target be provide pleased are years have will the Overall, ability but I is to results. improves, to end I to our we call you end seeing color transform positive the further diversification

Mandeep Chawla

Thank you, Rob. And morning, good everyone.

of quarter uncertainty As to did reminder, the provide a guidance COVID-XX. by XXXX for financial we created the due third not

the impacts inefficiencies experienced we During premiums being and to supply. a of continuity secure supply ensure quarter, of related paid unable including to result COVID-XX as

offset various However, were impacts recoveries. by these

anticipated revenue strong due mainly in third to JDM. $X.XX Our quarter demand came in at higher communications fueled than billion, by

and revenue sequentially. total Our X% increased year-over-year X%

sequential cents, year-over-year improved and XX business the The $X.XX initiatives sequentially. $X.XX productivity share $X.XX were Our mix up sequentially. year-over-year and and and $X.XX, was operating adjusted margin X.X%, share up year-over-year earnings and by per sequentially. XXX non-IFRS basis IFRS were $X.XX was in per up up up improvement driven our up points across Non-IFRS CCS. basis points earnings year-over-year $X.XX

of new by the compared strength well was aerospace from period, but of across strength commercial health as program was the down partly prior-year demand to by segment in by our COVID-XX and the Higher end decline ramps continued offset was and XX% X% in driven market. ATS revenue equipment, to sequential growth third consolidated several was due The up revenue tech year-over-year X% semi sequentially. industrial. revenue, Our driven primarily impact, to as capital demand was XX% in This ATS markets. specifically down quarter last year. related of compared

XX% segment, Within Communications strength XX% communications our end the last of X% was quarter Our quarter the the by in up JDM Sequentially, year-over-year market revenue by in in and revenue consolidated in across segment revenue third number from CCS year. of business. X% customers, CCS quarter up was represented communications strength driven including a demand of up was largely third up up year-over-year, JDM. driven our revenue, strong X% our X%, sequentially. our

consolidated quarter, strength provider in consistent was portfolio business up of to and was demand X% CCS our service softness. in end driven third Our XX% represented last the Enterprise year-over-year, as largely revenue down offset enterprise our partially planned by disengagements year. program. quarter Sequentially, in enterprise market revenue revenue of period due the same by the optimization with part X%

are number ramp revenue. customers. with the for our of million year-to-date company of of levels of We achieved XX% our the pleased Year-to-date, programs up JDM our total hyperscaler business approximately $XXX a prior-year and increasing support demand compared performance to continue XX% our approximately JDM in we revenue, new to as from accounted period approximately business and

flat represented in the quarter-over-quarter. the Our XX% XX% XX third and period from up customers year last same for quarter, revenue of top

revenue, For from of the XX% or third prior third total quarter customer more the we quarter, unchanged one contributing XXXX. quarter the and had of

Turning to segment margins.

capital basis in efforts productivity segment the improvements was businesses a up points, as well business, our within ATS our points transition above initiatives The range, resulting year-over-year improvement our by target plan. as of across driven execute below segment still our our cost our volume margin leverage up number X.X% basis due mix, including highest was X% margin JDM, by Sequentially, to points margin XXXX in came from margin up business sequential improvement year-over-year XX points XX ATS sequentially. year-over-year and as across as in we of XXX portfolio well margin and productivity equipment CCS ATS Although and cost and volumes. as X% reflects of ramps. segment higher in basis program XX new improved CCS margin shaping and the X.X% This target leverage by favorable up was range benefits of productivity. higher favorable to The strong the driven operating improvements since basis was growth driven represented from was mix. and successfully

other the $XX.X the SG&A sequentially. $X.XX some was primarily loss favorable was in Non-IFRS for SG&A Year-over-year sequentially, up across mix of $XX.X up largely volume million $X.X business. were quarter due $X.X due and year quarter productivity higher and net same of negative offset the variable or $X to gross points up improvements quarter operating earnings compensation, driven million share IFRS compensation. $XX mostly of million leverage, highlights up variable to million to were earnings quarter. dynamics. the improved or partly of to share million higher by million, compared a was X.X% by per net the last Moving $X.XX margin $X financial million Year-over-year, to up from our sequential points last for XXX year. sequentially. adjusted per basis exchange same were compared year to XX up and million, foreign Adjusted last basis $XX.X and

rate compared last XX% the was quarter for quarter. to third the tax XX% effective for and adjusted prior-year non-IFRS period Our XX%

our pleased in in are profit rate, of lower overall driven tax improvement levels We increasing with tax by the geographies.

quarter. for earnings to earnings, earnings $X.XX, up period were the third $X.XX million $XX.X quarter to sequentially. compared and expense. was lower Non-IFRS operating last per higher up year Sequentially, and For quarter, interest Non-IFRS to adjusted X.X% lower net year-over-year and up due last earnings taxes non-IFRS adjusted $X.XX the earnings. compared $XX.X up of to higher share were million was million prior-year $XX.X mainly of share the due adjusted same XX.X% ROIC of X.X% per adjusted

working Moving on to capital.

quarter revenue. the turns quarter down third were full-year our relative for the sequentially. was year-over-year or Cash less turns million in in to $X.X In in the turns to X.X, than business. we $XX million in investments last are XX $XXX of positive at with million cash year-over-year to Sequentially, million period, X was compared flow X.X Capital inventory the of non-IFRS largely billion, our approximately flat. days, the were $XX and days same free year. cash quarter the for generate driven billion third an Our increase more. period cash have sequentially. quarter, day $XXX down of targets $XX and free flat inventory Inventory XXXX flow. the were we generated $XXX of quarter up cycle or X% JDM million expenditures in Non-IFRS. X.X flow, was targeting fourth Year-to-date, by end line free prior-year the third

were the Our end deposits down $XXX at sequentially. of September million million, cash $XX

$XXX $XX was needs. continues year-over-year million, to up key strong cash have a the sheet, maintain over Celestica to of on our third Combined our other measures. revolver, at a million our balance balance believe remains to million with we quarter sufficient million end up $X undrawn, Moving and the which $XXX meet position current million. liquidity business $XXX of sequentially. liquidity we have solid We and

net the our gross improvement million, $XXX Our of position sequentially. debt was million $XX while was end million $XX debt September, at of an

improvement Our covenants result an adjusted end trailing improvement gross reduction agreement. all X.X free debt the At we financial to strong with turn credit of X.X and improved were generation, XXXX. ratio September, compliant turn of turns, our non-IFRS XX-month X.X cash profitability. was year-over-year leverage end of a is flow disciplined debt the of under the EBITDA improvement and The from sequentially

remain priorities unchanged. allocation capital Our

strong half incurred We to adjust third will return to In investing cost demand, over charges work we flow. free in A&D our $X in other towards of restructuring the of long our generating the half levels while the quarter, plan cash business. continue base business. shareholders, approximately to fluctuating million we to including to term, the And

our We charges be fourth transition original in will demand than complete quarter restructuring charges segments we time, undergoing to anticipate we restructuring our taken that Cisco million. will adjust our take across cost base of the full-year actions and, $XX pressure. at of estimate Year-to-date, million continue $XX as the less and restructuring have this

for fourth guidance quarter our to turning of Now XXXX. the

portfolio our sustained the weakness be from increase the from disengagement quarter adjusted the period sequentially. a revenue adjusted revenue be communications double-digit in result of billion on quarter tax of Fourth midpoint decrease in to would enterprise down guidance in year-over-year, revenue partly quarter, last adjusted Based approximately health to growth and $X.XX low anticipate fourth end XX% of increase to Cisco. fourth effective projecting year share our rate range per year-over-year, anticipate offset our expected $X.XX geographical down basis commercial in driven and this revenue low points range in our range, by year-over-year market in expense billion. back quarter X% the the taxable foreign priorities. $XX the million margin end XX weaker anticipate aerospace partly to equipment range be range our to update anticipate operating midpoint and between and an in low for any Returning to non-IFRS $XX adjusted quarter now double-digits of additional we and an market, of we tech expected fourth In we driven would impacts approximately of be the offset for be of due turn are year-over-year over call market, demand $X.XX. of in revenue X.X%, to to the by as profits capital are same decrease activity. We basis In end to a projected Rob planned to the COVID-XX, the mix million. our XX% be points and is single sequentially. non-IFRS down in the color XX At At end business. the our the our on approximately In earnings EPS by strength to ATS ranges, shaping market exchange. outlook to excluding $X.XX of over non-IFRS fourth digits XXXX. SG&A our for I'll revenue and market, Non-IFRS we JDM, remaining and by our

Rob Mionis

Thank you, Mandeep.

We XXXX performance despite from are resulting COVID-XX. with pleased year-to-date challenges our the

believe to continue for the us us have future. benefit portfolio these over the from we that made company made position the and We investments better We actions actions the stronger a productivity few and have taken shaping years. last and

and activities, continue operational Our mix portfolio-shaping execute as on including we to Cisco reflected our strong third quarter results our transition. performance

for COVID-XX to pleased are third the margin quarter on operating consecutive We improved have despite year-over-year a basis headwinds.

Now ATS. turning to

and equipment business our volume with capital adjacent in end quarter, demand posted wins a markets. strong in new another business by semi profitable Our increased of driven number equipment base

end XXXX year A&D, is the throughout is softness ago, are business as market materially demand and we we conditions Demand continue materially demand we our year demand a from experience in expect we XXXX leveling stable, demand our to down off In in enter up from remain a environment overall While defense while and seeing commercial depress persist XXXX. business. aerospace ago, in these to XXXX.

improve to continue of industrial, customer and will lower overall recovery at across this a quarter, of demand third appropriate our revenue. the In impacts experienced of We moderated drive the cost productivity profitability gradual the levels to we in the actions business base. of COVID-XX

projects team and in We on profitability on Within new on a well basis executed fight productivity supporting the cost our we improvement also year-over-year ramp tech, programs roadmap. health our an as COVID-XX. executing saw against very is

the demand we level anticipate COVID-XX. for first of XXXX. We fight demand improvements We of and elevated from end in half ramping see XXXX, for anticipate enter and the of products in diagnostic the products demand an essential as to elective to equipment strong XXXX continue surgery

actions. CCS. than Now growth strong declines I Overall, our more revenue CCS hyperscaler the quarter. from turning am The from of portfolio with segment shaping in performance pleased to our offset customers as third posted segment growth year-over-year revenue our the

are of deliver their the have a strategic growing In and that XX centers us service in two in result the years, wins CCS the increasing overall customers and support deployed which online years, supports continue the as last our made value-add as investments revenue and in our developing to few mentioned business, providers, to and services driven to growth by growth to see we business. JDM centers. diversification the over As we of demand technologies world's trend learn stability X CCS compounded upgrade throughout cloud higher requirements. further past, last home over due strong of largest data customers, to data Celestica enabled from is the providing our impressive while expand hyperscaler work by the

is progressing Cisco it the as planned. to disengagement, Turning

mostly complete the to Our completed end manufacturing the was the year. by transition the of third and anticipate largely be quarter, we in

progress on off business We value-add are We to have back we richer achieve our and are a customers. Cisco, secured new across pleased track with number programs. a with of with making solutions the of higher remain goals mix

look evidence back I I As our our year-to-date, on hold. see performance strategy is continue taking to that

at to pleased a am few while quarter despite third particular, and added margin time, solutions of set able shaping downturn the the last the we're the markets. markets. productivity difficult have portfolio aerospace operating positioned Our better in generate years, in I across In industrial actions us over deliver broad and commercial severe to the X.X% value

look we we strong, to our increased continue As expect fueled by be to JDM recent services. for and quarter, fourth to ahead wins the and demand products

some anticipate softness environment enterprise, we and demand by portfolio our soft actions. However, driven in a

we to value will the that ATS, we mix JDM strong and in as continue higher the growing margin our due portfolio. build moderate generation stronger, we products in in fourth a normalization market. anticipate in a we quarter, diverse of CCS and more sequentially support remain invest investment segment next While expect margin to In to business of incremental

weakness other aerospace, in continued offset ATS partially strength by commercial in expect We our markets.

to continue face During these remain impact confident in the unprecedented outlook. long-term uncertainty we COVID-XX. times, from surrounding potential we our But

of close matters. governance, I – corporate about like social ESG, we or business would and today, talk our to important area Before another environmental,

that the comes world and integral have right is everything foremost, employees customers For our we And Celestica responsibility us. by people are and company. what's with around and of first the last doing XX years, But do. these we areas three a to technology focus company. been a

have a our shifted signed have renewable workforce our gas sustainable pledge. portion XX% reducing by we sources, example, to Moreover, large to employees greenhouse date, XXXX. For emissions energy consumption the XX,XXX of in of our

want will establishing our aggressive set greenhouse targets our XX% gas scope action to ESG by thrive. forward especially global to backgrounds in by going the Their hard our across XXXX. and Celestica's and adapting dedication to to remain all look to to one at taking environment footprint continue and coming over diversity moment. I I goals, of times. begin reduce are for these difficult during emissions And would we comes you core of strategy now We the new commitment, to Amy resilience to to inclusion, scope appreciation the our and operations turn we and this ensure We With to when unprecedented to to may initiatives extend which to These my other quarters. global Q&A. employees it two Thank work an by their you. updating continue sustainability call over foster like forward. and the keys additional that, an team to continue are

Operator

[Operator Instructions].

Your Todd CIBC. first line of Coupland question from comes with the

Todd Coupland

I talk think wanted have business COVID-XX. past we to you get looks you like the about once what

about or pandemic. semi, get portfolio, if on like be growth think would the think least at is super the business drivers about is current to growth rate for helpful complete? excluding and you. color we Any normalized what the through Thank So, that Cisco we once a JDM once the portfolio disengagement that

Mandeep Chawla

here. XXXX. of been tremendous Mandy say, volatility, a There's would going I amount through

increases to of down stability starting off, quarter softness commercial as level fourth that starting significant to off. aerospace is to entering What in starting that The we've into are some other we're significantly. provider appear. in service the business level seeing is are are markets up the is Some are we demand the seen significantly, markets level side the there

XX% is us XXXX. to over that look we that for have that you we at the roadmaps we if should that think and confidence possibility always rate there into our so, XXXX, growth is point have target view give out ATS put continue that And this that a

business bit On all XXXX. to to continue bookings then, the revenue our from incremental XXXX, when performance those knew we was target to CCS do exit of a levels some And that series some we there's stabilizing a be as when they're looking we ex-Cisco, But coming. the Cisco, opportunities a maintain back. to going of the then And CCS But growth. also depressed at side, at little overhang going big into there's you at. markets the of we come we're of look markets but see drive that

Rob Mionis

basis, gains the to some I think going over business. ATS, would Industrial, is on the is strong well. quite drivers couple expect And be of business last is return tech doing us years. as moderating we capital to think, by very add – mentioned, a incremental this though, for year. from And the do growth. within little our Within That's growth being growth health though Mandy fueled equipment CCS, wins our even program even I – color. year-over-year would JDM we share a really had of we I bit course, the growth and demand

Operator

Your line next the Young Canaccord of question with Genuity. from comes Robert

Robert Young

that the understand the sure drivers I not behind QX. in moderation CCS I'm in margins

that think all in JDM. break in Is lumpiness normalization you you investments about what's maybe if Or talk you Maybe is can driver hyperscalers? I that there? could the impact? mix enterprise that, said

Mandeep Chawla

It's Mandy here.

in So, performance the frankly, CCS EBIT. just had, third quarter, X.X% generating outstanding

margin to business you the that target X%. know, is As X% for range

strong going don't expect from this performance will CCS, it it And quarter while point. expect to to we the fourth into X%, continue we at so, repeat

of mix say that of in went higher a lot it JDM. so, moderation, mix a we positive means some levels quarter. because And more right when get normal things bit of is And the had as reason little a level. had strong third Within back we well. We for to the JDM, with

were successful off for our those generating with bit. margin lot little we So, the start leveling it the billings start is. a of And was things, should also in service normalize customers. When profile the business margin you of profile stronger than normally a JDM then, to

Robert Young

related restructuring a to Why guess? more not in near be business meet Does that would the question that second demand? little term restructuring more – to target, the that given my is you're aerospace aerospace. see [indiscernible] Or lower is the expectation your I then, I is Cisco And suggest around disengagement that lower? to was the that than surprised restructuring

Mandeep Chawla

The were dollars $XX full we as million restructuring year, this anticipate of two high still the quarters as for first the not but spending year.

When we fourth defense where some look our is have ship final still be costs on as additional the So, aerospace most the Cisco and to activities the being most we where quarter. that the we downturn. there's targeted side, in take at in in and restructuring towards, you quarter. that product been incurred that those And in restructuring significant then, will fourth industrial to ATS in some segments. activity to are your the businesses completed, continue the cost have has the do are target to the point, actions that of need we And demand but

we'll So, do fourth that quarter expect continue in envelope. $XX that take the and to actions we within million stay

Rob Mionis

that anticipated the due I'll to in and able business than direct originally Cisco, Thailand. less a new strength restructuring Rob wins the within to was that, lot base the we're some add, to

a So, anticipate. lower was it than lot

Operator

Your next Bank Bhattacharya the from America. Ruplu with question of of line comes

Ruplu Bhattacharya

single then, into down one, meet X% segment? first drill expectations? just saying And you digit. communication optical or you're guide, Did one like the Cisco that, the can What For the looks from did it like see revenue networking strong year-on-year. Looks was low little your wireless? and you a up single bit digits up an the

incremental in in seeing you're that XQ? So, some is segment there weakness

Rob Mionis

somewhat strength communication The service with and really demand came provider transition, was ramps, was speaking, partially strength saw that networking Cisco it offset part in is program broadly exits And with our dynamics. from which segment. that With of again, business. XQ, we offset and the

really move some of both growth see and is in growth networking we still the we growth QX, existing also transitions, exit. very really the the program programs, i.e., in terms optical. into As very in strong dynamic in But offsetting Cisco strong networking,

Ruplu Bhattacharya

can to debt just us bit. you I now? Mandeep, You've priorities allocation wanted remind quite for ask, on capital your maybe a reduced

for think should year? on any think M&A? allocation more you'll focus So, we your just should we going on that next about how priorities Or buybacks share So, thoughts capital forward? the

Mandeep Chawla

long-term Our unchanged. priorities remain

to continue been And aggressive strong years, flow, so peers more we investing on I will know, than cash share into focus any you the business. space. We very and on as our last shareholders nine eight the our in the to returning the know, generating have over or buybacks, XX% frankly XX% of

far the have with year, are to so performance to able wonderful. So, position, seeing a we been cash get flow is neutral this and we that we've debt been pleased almost which net

build dry Our continues to whether continue be to this in apply focus to we at or additional dry generating debt will of more paying we powder, time that down on just up powder terms looking cash on make whenever our we're it investment to at compared continue an balance alternatives at sheet said, well. That be targets. focused looking decision, on M&A because we to being we as

buyback Right an in a we're We'll can ROI analysis at in, opportunistic a position we as and that time ensure from we are we to that moment So, flexibility towards we'll is a looking are it, as as M&A that an up the we'll accretion that based But perspective the And take go relative buyback program. or open time. to share we the reopen do EPS way we continue open where one at now buybacks. program. share such other. share right will it monitor when now, to on we view have to up again, things targets

then look market be the sometime in and terms the trades to So, sometime in whether of going the fourth M&A. just us in also it's how quarter at alternatives we'll XXXX, continue monitor to or

Ruplu Bhattacharya

the Congrats the on and on strong quarter margin improvement.

Operator

Your BMO Capital next question comes from Thanos line Moschopoulos Markets. with of

Thanos Moschopoulos

semi the on expand you can business. Rob,

as hear terms leveling that off more Maybe color bit demand seeing next in about a from front? talked enter in what your you into You customers year. you of

Rob Mionis

we cap Semi year, been strong. In been logic spending. has first strong has of strong. – and equipment particularly all been very the saw this spending Semicap has foundry half capital

As get logic of seeing as into we year, in we're spending back this the increase spending and some half memory continuing well. the foundry and is

across A rising DRAM. gains, spending XX% to we and portion see by business semicap ramps It's equipment. growing fact, capital in all business, XX% We've wins And, a not growth program look is forward to just the our gains large we're XX going very new really share new not new year, even new level. capital is we next growth also that memory we expanding we're other commencing of sea the to within. equipment approximately of right NAND nice driven actually just continuing, share being now. been job doing with As that but have of our our from of

going lot equipment. in on capital a So,

Thanos Moschopoulos

what's Is related a built for that fabs in flat the subdued? there? or to in seeing up pick being And note, are what need of that you to see do happening some new we Maybe panel?

Rob Mionis

still the should part happens. the complete. smartphones The And actions when into gets as that'll pushed Correct. view being that of into uptake A we a TVs year market hopefully and overall half business of gets industry uplift new the the year of COVID past. of form to take the obviously, also with well cloud XXXX. the generally think recovery. large a The last And are XG market we help drivers, Those make into thought it's factor have said, we we And be long placed lower being display – be year probably at this latter that this XXXX did the would next is first would projects That ramping of lot are volume. actions lot the start the efficient more depressed. right.

Operator

Paul Your with the from Steep Scotiabank. of comes line question next

Paul Steep

the cash But talk guess, looking? there. challenged bit Or as is the you're builds, just working wisely the spent a heads like try even a period out How working environment? or you've to thinking Mandeep, M&A of business. it on sounds Obviously, on is and it Rob your terms sort current I you little that capital in of priority about maybe business. to it's it the environment and can what grow pause is through still down way and environment

Mandeep Chawla

can add if Rob on and off start I'll to. like he'd

targets that which evaluating year, very looking online are nice certain of COVID of to strategies. is drop we're in lot beginning accelerate a every dramatic see. a understood targets for well M&A everyone, the being to saw our number said, we to frankly. starting off coming at a hit So, more just activity. It's seeing types are when M&A week, we transactions the that That We're was of

that want any make largely can trigger will fit. our us, for M&A sure want on bring it. it's business We paying target, to for that the the we When of it because look pulled But we're of we're not the have right we them, make We is to capabilities the so accelerate at looking an important. right sure also that course, price, that to strategies. price

us then, just able also provide can when want to to sure And ensure when business the want that we're go don't is We integrated targets. a at looking through again, be massive of integration needed. level the it We right that relatively lightly. to making scale

so, to are targets continue good there, some this same that imminent And out nothing but we apply point. There is at the filter.

Paul Steep

from sort It's CCS? capacity give a disengagements How you sort shifting and in then, hard of us sense us that the Cisco that one but we you've not replacing business? terms new far business plan in sort capacity to Cisco back. in reorienting for and you. of say the through follow-up. that some of – Thank project to quick of disengaging, you And outside obviously, of terms are, work just of would all been for of Can

Rob Mionis

We're Rob. pretty a on along couple is that process of different This for aspects. far

that by EMS base high JDM Cisco up. our we end wanted goal. replace when programs. fueled very had – higher, our significant business JDM That's We've We driven those new really that rich weren't portfolio, for service dollar. a by by to to by And all, a this the Cisco also at year. of together and transition, started to we bookings Again, a portfolio. place dollar We plan of intending we players programs First offering. we're in played plan our closing value put bookings and put Thailand, close wins the our both driven is provider

part Now, the think the time market of actually think to be you through to knothole, it it is will, latter if takes and revenue, within depending our will on But with XXXX, offering taking those Cisco XXXX which been uptake. pleased overall, transformation portfolio and and and CCS. the CCS portfolio operating. into for the we're has turn bookings we're we on I how level. very renewal very very We're mix to the strong the is invest JDM And in to next strong, continuing

Mandeep Chawla

impact back Only well. thing have I'd a maybe – XXXX's is moving Cisco in you're and of right revenue now then add is to pieces. disengagements numbers. done final programs that as a in well, year-and-a-half. The still we Paul, And CCS – there's We've going as lot

guide growing you it is has If at disengagements, on at When overall revenue been for CCS look the in flat outside business been of relatively up year-over-year the despite how you a double-digit the the happening. actually provided, just on have we disengagements implying is that based range. CCS basis, look that percentage the XXXX,

a growth we've areas of disengagements in coming. that generating to the lot drive talks the other offset it bookings been that to So, to are

beyond the pretty programs we're good growth some So, underlying disengaging from.

Operator

Capital comes Treiber RBC line next from Your Paul Markets. the question with

Paul Treiber

planning could long-term or speak roadmap the side that terms business. was and particularly Typically, pipeline with JDM programs hyperscalers, involved future? you product in sales that you out to I the hoping you with are integrated of of have the visibility or into the the on hyperscalers how maybe

Rob Mionis

have CCS specific We with roadmap all business have have could broadly hyperscalers, with JDM our But visibility good business, when numbers. to we them. visibility. technology our quarter good Most out and we a meetings it comes of speaking,

closely share to that we've customers our we their They worked ready Within such we're customize roadmap really we specific for solutions the our application. closely share when with And need JDM, to ready. requirements. for they be So, technology. us their align

when with respects, their So, in tightly them many requirements. interlinked it very to comes we're

Mandeep Chawla

you Paul, this. know I know

business are across Rob is customize selling benefits have a even it our not products We around One in we customers are well. shelf of off that as that consumption. turning the customers for as have buying also our with product, we but mentioned, we They're the in brand to solutions. and we not they're different compute closely necessarily well into their And where networking that very is using JDM of necessary. own sets it, the as work storage, provide solutions of number

sales that because more the us, take products diversity can And in customize or products we with some they can channel. that off-the-shelf terms us of have so, it they gives

Paul Treiber

or JDM And then, have to? XX% revenue growth aspirations how – a you any of how the couple out you total you and terms progressing over share or year-to-date see next revenue. when of we up could Do business is large look targets so, it's that percent total could of that long-term in maybe years XX% of get of

Mandeep Chawla

I'll off. start

profile the the been into results, helped as we see you performing From going As well is not tell providing you to a overall you year-to-date know, in bring business materially has of on we JDM up we're that, to rest similar growth and accretive XXXX the fourth But the company's up as quarter. business and CCS level of JDM is mentioned, has can perspective, as CCS a the what margin continue that guidance. well. a margins basis as

of earlier. into growth, XXXX, we targeting briefly that are mentioned look and As some we still level Rob

wins and then COVID. and accelerated place seeing had it's at is combination this some ramping, we're year because of since be in to the However, What a XXXX going we've again. of XX% XXXX that not demand levels

regular into a XXXX. and are steady JDM. starts But expecting we our start that in moderate state JDM ramps, strong we going As to acceleration in reaching as XXXX growth we'll expect still

Rob Mionis

in would together, business ATS our high our kind look the that our the in cycle add ATS our when look some broad engagement, businesses. – And you and terms look goal you it's you diversification of is, it's you high in consider moving forward. revenue. And of have and when we're looking grow is at continue And of already well that of value we're that you you them add, take and an nature XX% I or to that life our of similar take they're and of and invest when part engineering be efforts, business, is led at JDM diversification at our kind those revenue. also product value business JDM very extent, to And to revenue strategy company's we north business to of revenue there our

Operator

comes of Your next line Stifel. Kurt question Swartz from the with

Kurt Swartz

to and we I'm off on right quantify XXXX? expecting also Cisco expecting lingering Thank to of at the come can hoping see a just the the Cisco drill into Cisco of how at down wind sales of you're point, some ramps the CCS turn be see that down XX% offset Should new can cadence the to and I on year? this you the magnitude bit you. full if and maybe follow-up roughly And of this we guess, new you're able down. then, with helpful. if maybe be much to program contribution Or would wind related communication

Rob Mionis

I'll start that. off with

it to down In very terms complete quarter, the the contribution – should terms When little the of Cisco, revenue were the largely third quarter. be business. fourth of in wind manufacturing our comes activities in

or have in material low not completed say would The terms nature. majority or like in production I thing things very very remaining that but revenue in would this insignificant very, be the programs the recognized of or So, we volume is game. XXXX last the at that, of of stage any end-of-life

next going the mentioned into move some for take year, bookings convert it's to we those that into to earlier, As I time bookings revenue.

half XXXX we CCS portfolio side. latter renew on our So, as the perhaps the of

Kurt Swartz

I of of segment guess can completed and maybe sense recently the you or demand end market? any give at just looking back notable quarter maybe quarter, any of throughout volatility the linearity sort by

Rob Mionis

figure in linearity, the will believe, inside speaking, go and of of third I seen of just in in that, to most balance out go changes inside a the month But in one, that's dynamics. shipped generally modest quarter. whether or will the to it's COVID, out revenue that's some linearity we've two month Pre revenue quarter. terms COVID COVID, general in dynamics is the of XX% about will go month the post a the of quarter, hard In of revenue three our quarter. month due but a XX% demand

Kurt Swartz

really out? guess, I end no, material markets call So, the to swings or notable within

Rob Mionis

Nothing notable.

Operator

Instructions]. [Operator

of Citigroup. Suva with from Jim next Your comes question line

Jim Suva

been you've traction the JDM with I impressed getting. very am

or they're I So, if a cloud not. context around lot accurate bit I into how the as conscious a it, or – that ensure who the is moat the impressive doing so it. that protective could as themselves you we suppliers, give And very price switches? if maybe servers of do sounds growth your don't may speak profitability. be do but us similar JDM tied of about is seeing, know of color you don't the that or numbers you're if those Asia lot well a do little for efforts that's guess Thank more more storage it or like as or you. a here it's of hyperscalers especially And out little importantly, a statement It your companies. other an lot yet

Rob Mionis

the majority is of some And is center. of but to terms customers data actually as the the across JDM, revenue on they're going making going In to all well. enterprise technologies that of also the our we're the hyperscalers, products

lastly, a and that of plus very solutions, product probably it's offering that continuing at also networking strong biggest has we're engineering-centric, our them. would engineering amount heritage, we're offering So, solutions, offering think level to The capable difference, of say us. been working we're And We've for quality portion years the competitors' organization. solutions, product customized truly storage R&D. think, on is of we're been compute because forward. level is enterprise we're in speed our is, and and moving recipe some excited between I which to our capabilities working have that the now and continuing earlier, And providers customers customers make for pricing. ODM That silicon access up I to I very we're also sure to mentioned roadmaps we with developing working our early to to roadmaps fair and our I of as And support silicone have doing specifications. customers' our a leading-edge have invest to seven

Mandeep Chawla

of to believe to just some add the into We that Rob remarks on are barriers maybe to Jim, made. business. high entry that there do this

mentioned, a decade, investing business to the $XX better year. this been Rob million As every part of has for $XX we've million in

on You R&D see our line. that

don't have have the direct business very we of relationships sticky We the well that don't have we customers, of a reasons a number has doing channel. years. a sales with is One that brand, our compete back we don't been go

so, And high allows very trust a relationship. for that

thing that's been And in they've years off solution. ago our with footprint would have. doing us been that, looking continue the China. while say started We we of some number a that production of to customers, The of Asia benefiting other lot a I a we JDM is do for Southeast

one is lot And do which JDM manufacturing our a of our of in network. so, we strongest in Thailand, sites the

types as And across believe of use, that so, the broad a is as to set, are of products we're because the that entry high. the we are relatively well able barriers footprint we to which that producing,

Jim Suva

a great appreciated. was description That and very much

Operator

Rob This closing concludes remarks. our question-and-answer back session. to I will the for over Mionis call now turn

Rob Mionis

marked able to flow. cash improvement quarter I'm Amy. and by solid operating another free strong deliver you, margin Thank sequential we're pleased

perform face execute headwinds each pandemic, and we to other profitability you shaping in And we consecutive have And as keeping forward thank delivered to progress team and you And Celestica we in I'd navigate margin uncertainty proven to I'm the to updating our the continues successfully our like the businesses, global call. look improvement for commercial might Thank the actions. lie vigilant business that we seeing has I throughout that today's and ATS, ahead. believe continue team of amidst and ability portfolio improved that all our the year. aerospace CCS we remaining joining challenges of to sequential themselves pleased industrial. for with as a the this portfolio continued expansion while Our we're well sixth given quarter safe.

Operator

this today's On call. participating. you conference for Ladies behalf gentlemen, Celestica, and concludes of thank

You disconnect. now may

Celestica (CLS) 28 Oct 202020 Q3 Earnings call transcript