CLS - Earnings call transcript Q3 2021

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Operator

Good day. And thank you for standing by. And welcome to the Celestica Q3 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. advised conference be being Please Instructions] that is today's recorded. [Operator to I Mr. conference would Instructions] hand now today, [Operator speaker like the your over to Oberg, Corporate Relations of Craig Development. Vice-President Investor and ahead. go Please

Craig Oberg

us morning. on conference Good you thank for call. Celestica's quarter XXXX And third earnings joining

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

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

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

IFRS any prescribed public and refer companies will These adjusted this be as to measures measures rate. XX-month adjusted non-IFRS tax designated any debt similar to do on that measures non-IFRS by not SG&A including specifically during other gross standardized have may financial foregoing IFRS, use EBITDA leverage who earnings, various by margin, effective to comparable not the non-IFRS or not presented call such. measures adjusted presentation, ratio, free adjusted flow, meanings and to gross should refer release In which you invested ROIC, financial our QX financial cash operating to and this earnings U.S. describe non-GAAP call, EPS, adjusted Relations that of XXXX be net whether and celestica.com the tab. at measures Listeners capital operating under denote under trailing report margin, press yesterday's cautioned addition, GAAP Investor during similar are we references adjusted non-IFRS use available measures return metrics. or earnings, financial to operating adjusted or adjusted We

information and including on measures more a non-IFRS call about comparable of and financial to otherwise diluted directly other per information non-IFRS specified, certain this measures measures all dollars shares most For to these from the financial references statements. is are historical reconciliation IFRS Unless based on U.S. to share dollars outstanding. our

to over Let me call turn now Rob. the

Rob Mionis

thank on on that resiliency Craig. you, business positive Celestica’s you And us our and morning results call. for the today’s quarter Good joining everyone. has momentum a Thank conference third built strong of reflect pervasive propelled ahead our build the achieving gain ground our push in challenges towards continue chain new performance progress, Despite supply we on objectives. recent to long industry, our term our impacting quarters. and

revenue guidance $X.XX at quarter of in in billion firmly third came Our range. center the our

range. guidance we quarter, Our strategic of our our non-IFRS $X.XX the results recently our above towards operating during high margin EPS And underscore have macro transformation our of the completed. initiatives the range. the guidance challenging of environment was midpoint Despite the adjusted in non-IFRS strong the third X.X% came end importance of adjusted of

quarterly to traded our history publicly a their our of Our seventh represented the target X.X%. highest year-to-year within straight third second marks quarter operating our quarter margin quarter This in operating margin margin and straight operating X.XX% improvement, company. range as

set out achieve the our quarter, HPS platform another to we two year-to-year, to driven Lifecycle ago. solutions portfolio our year double-digit that in by beginning grew business. a our business and the the segment, the our In Solutions up plus third of XX% solutions, quarter, We continue as are growth ATS growth at revenues hardware we of quarter XX% of in XX% lifecycle targeting represented consolidated fourth XX%. in or important year. diversify from objectives a

return a to re-enter since our our target with margin its line that growth segment First, range. second, disengagement top ATS will Cisco, we anticipate and

the place expect momentum next the quarter these take capabilities head for believe our presence a milestones anticipate into to to us of which position acquisition achieving markets. enhance growth finish as of key closing further we fourth portfolio PCI also XXXX. strong XXXX will bolster add with attractive solid will We and to we that and important our our month, during We

an who on I as a some over outlook, fourth quarter color business Before turn you. for to over provide performance guidance on I'd you additional our offer detail third as the to quarter. will Mandeep, our additional financial call to Mandeep, like the well

Mandeep Chawla

And morning Rob. Thank good everyone. you,

quarter Third and $X.XX X% X% of range. at at our decreased midpoint in billion the Revenue increased revenue XXXX guidance came sequentially. year-over-year

business, our basis. grew five and operating the of Our the non-IFRS both revenue our guidance was by up to percentage and compared in performance year-over-year double a share points line driven A&D In in $X.XX equipment were by segment We to X.X%, ATS year in of delivered operating sequential high partly our demand and range of up business, demand end within was including service sequentially margin declines solid $X.XX the our These offset a disengagement in increase Cisco in year both Non-IFRS basis performance This an basis certain business. non largely up sequentially. revenue X% certain a specifically from enterprise by $X.XX programs margin Cisco our our offset year-over-year year-over-year customers, by Year-over-year, digit capital softness expectations was EPS demand was in our recovery our segments. end X%. was HealthTech strong in sequentially. market. points XX% end decline strong year revenue partly was in business. adjusted X% year-over-year earnings enterprise revenues This up from up our low revenue $X.XX, of per highest in demand commercial ago. by the $X.XX up other ahead programs guidance marks of down years. and over increase, X% year-over-year our growth range HPS sequentially. Non-IFRS ATS The XX% market. of aerospace in grew and strong industrial was and with another and in XX XX driven quarter nearly in midpoint of provider volatility and on driven towards ATS CCS were continuing

by increased disengagement CCS of greater by driven decline a Our The year-over-year. in decrease. Cisco by revenue was Communications digit our demand single primarily volatility year-over-year declined other year-to-year expectation customers than percentage from X% XX% revenues of currently than and the in Cisco from X%. enterprise high better provider demand Sequentially, the low service percentage decrease. Sequentially, customers. down up revenue our expectation was program, strong was offset down revenue was than XX a year-over-year certain quarter X% communications Enterprise revenue XX%.

strength delivered $XXX ramps to by year-over-year, XX% new center demand and revenue of service business up with providers due led million, HPS Our program continued data growth.

margins, equipment, year-over-year expansion. of segment X.X% segment delivered quarter and to third sequential points margin in profitable margin segment above capital including the which up consecutive of more year-over-year than the sequentially. driven year-over-year basis ATS margin of sequentially. growth X%, CCS improvements, and margin by business. in XX ATS of segment margin to improvement by The HPS in was increase XX offset came and The our basis sixth year-over-year quarter XX points a softness This target up X.X% up points Turning X% driven growth our marks basis was range aerospace points basis defense. continued in XX in

of partly businesses and for by and up capital basis share up the net year-over-year and some year-over-year earnings million and QX, to XX by points IFRS share, Adjusted financial $XX.X improvement compensation margin million $XX.X up per X.X%, sequentially. per $X.XX XXXX or quarter per net in HPS earnings $X.XX of driven sequentially. year-over-year gross metrics. quarter. softness up earnings A&D. $X.X additional The were was share net on million growth to lower earnings $XX.X variable last $X.XX operating and our basis or or Moving million was in million, $X.X $XX.X were million points in XX Non-IFRS offset compared equipment

X% non-IFRS adjusted the rate effective improvement was third tax and XX%, of year-over-year an Our for quarter sequentially.

to were the and the year compared adjusted prior period, earnings third quarter. million For in second million, net quarter, for the non-IFRS million $XX.X $XX.X $XX.X

quarter XX.X% non-IFRS year-over-year and adjusted X.X% was of flat ROIC Third up sequentially.

Moving on to working capital.

from in X.X light expenditures continue for now quarter billion, the approximately the year capital growth in the inventory $X.XX XXth million the the million was cash turns of and the period, $XX $XX delivering of positive cash was million in third up X.X were $XX Inventory to were of in offset quarter the turns, higher period work last up our to million, flow and year-over-year million year Our X.X current X% This when of and compared in down support To million revenue. down on customers turns quarter non-IFRS Cash chain to were the and our cycle days day third our one primarily XX to to third quarter. total due supply XX year-over-year increased year-to-date days, inventory higher a in free cash sequentially, the impacts $XX support basis up $XXX days sequentially. $XXX year-over-year prior quarter up flow, billion. cycle business and to Cash inventory, freeing from turns of appropriate. third on increase prior Non-IFRS quarter last working we deposits at in Capital customers end quarter or with $XX days we quarter. our our is inventory. free continue environment. consecutive HPS as

Moving metrics. some key on to additional

with of end our our over cash $XXX $XXX $XX We quarter year-over-year unchanged gross the Combined was million. million the $XX quarter at under and of to the we of million continue to previous is revolver, liquidity quarter, of net our up sufficient with leaving the business a that ended third up million debt current us $XX $XXX believe balance cash Our meet with sequentially. position needs. million, from million anticipated availability

was same and turns EBITDA an flat Our debt gross X.X non-IFRS sequentially, quarter year. the last X.X third ratio improvement of XX-month trailing turns, to adjusted quarter leverage from

anticipated last the At PCI we add November, term following a debt of additional million balance closing to through financial agreement. sheet new in were our XXXX, XX As with of loan. the under September $XXX month, to all we compliant we covenants expect approximately credit acquisition announced our

shares total at million. $XX.X at for X.X reduction shares repurchased of period. from of year we commencing November in with cancellation a of quarter, $XX.X XXX.X have million the repurchased a X.X the prior shares ended program XXXX, Since the we of cost our a outstanding, of X% million We cost approximately approximately NCIB million quarter million. During a

returning with in business. shareholders pleased are to our cash of our We history investing also while

our reduce focus for strategy a capital debt. see said, term cancellation will to to opportunistically allocation a we long as the unchanged, That warranted. of PCI being our our also leverage remains what have While of result shares we when believe, repurchase as balance, our net given in acquisition modest be flexibility XXXX we

intend commence program quarter we necessary approvals a subjected November. in As new such, NCIB to fourth during NCIB program expires to after our existing the

for We that quarter fourth a Now partial of of guidance guidance QX turning the to results XXXX. assumes PCI. to our from like note financial our would quarter

basis range to the fourth the $X.XX and our and are We on year-over-year. At taxable to XX%, non-IFRS for will are Fourth up fourth XXXX. $XX adjusted any of growth range to EPS tax highest year. line ranges, sequentially, expected billion. top company. in would adjusted At with range, from be be basis SG&A first or sequentially, is margin the be history as up share effective a earnings be to the quarter million. approximately quarter million billion X% expected $X.XX of $X.XXX per since X.X%, our to basis We this be period represent points same ever settlements. exchange operating foreign last impacts publicly projecting expense XX quarter of excluding non-IFRS anticipate revenue margin revenue XX would adjusted guidance in traded non-IFRS midpoint over non-IFRS of range up a of Celestica's points to operating to and the approximately $XX per of unanticipated the revenue quarter adjusted midpoint share. an the increase our rate third quarter would our from $X.XXX X% Non-IFRS year-to-year be This This in tax

in driven the well expect strength in the of sustain In percentage demand be market from I'll low equipment, as our industrial up capital supported range Cisco's of CCS, provider anticipate service offering strong customers end digit our by market revenue we quarter lapsing market, end low in a comparatives. low outlook revenue XXXX. decrease the color year-over-year, enterprise our fourth overall the to our by year-over-year, for ATS outlook. business our our partial up as over single In financial demand quarter beginning momentum the percentage single on end digit In revenue PCI. be we revenue in of communications in and XXs the to HPS to continued range to now results from end and Rob we percentage by back from anticipate for our end market, to range turn call driven additional year-over-year. markets Turning

Rob Mionis

you, Thank Mandeep.

continue our to momentum and execute on objectives our We term on strategic quarter-after-quarter. long build

reshaping our restructuring margins are top moving we priorities now growth squarely and focused With us, on as strong the heavy behind and lifting forward. of maintaining

proactive the and to current its approach on necessary we demand challenges. supply teams environment. The the continue availability to to procurement not planning profitability and persistent pressure dedicated our in and by to The remains targets. allowed However, planning recognize secure is efforts has our us pervasive business global achieve revenue road component the and without ahead

of have ability we XXXX supply fiscal the outlook guidance dynamic, for and fourth best [ph]. to our XXXX the While our impact challenges accounted quarter and of chain these

However, its relative constrained we potential. believe growth remains to that

supports As demand higher that feel customer materially revenues. current we

to Mandeep in of history margins a top despite constraints As the return operating we X.X%, material traded mentioned, highest quarter fourth growth the Celestica's a company. in anticipate at publicly line as

XXXX between billion least solutions X%. growing or In addition, outlook with in more operating and of to I'd margins revenues, reaffirm and XX% like at lifecycle X% our $X.X

basis. we for segments. outlet for growth are In organic our target the track on achieve to ATS, our on revenue to XX% turning XXXX Now

Additionally, to during re-enter target X% our segment we to expect continue our ATS X% of fourth range margin to margin quarter. the

for quarter partial results results to the include Our expected a fourth of from segment are ATS quarter PCI.

business in equipment revenues tailwinds share experience compared equipment and capital strength, business greater in capital to of exceptional XXXX, exceed market would which remains on strong by our growth to robust than XX% With supported another million quarter Our continues XXXX. performance, gains. represent secular track to $XXX

are in that We runway not growth short nature, believe to strength continue the demand. continued in this for extended supporting dynamics providing an term

we XXXX. As for our growth expectations such, strong into reiterate

Our continues year-to-year to build another revenue momentum of quarter posted business and growth. industrial

metering. anticipate and energy ramps growth the expect We sequential program driven and such EV new charging, this generation quarter momentum and as continue to year-to-year fourth in by smart in areas

boosting also PCIs With end exposure will our our next acquisition industrial of markets. profile into and the outlook PCI anticipated our completion we of consolidate month, begin to further revenue margin revenues business, to and to new customers

existing solid expect well the our business in to growth We CCRs as achieve organic as portfolio XXXX. industrial

business signs second sequential the quarter. stabilization, growth A&D of Our for registering continues modest to show straight

and winds. expect program to into XXXX initial We supported into the momentum fourth quarter by new this continue

foot the to continue levels of expect opening of highly near investments enhance our we well into Maple commercial announced a designed the A&D and spite to business. in term have However, spaces. industrial defense Minnesota, in customers and outlook, to regulated we In depressed strong as In opening demand pre-pandemic state facility facility. square XXXX. been remain capabilities of the to in the art aerospace AbelConn markets, the relative soft support XXX,XXX the facility July, of we since make Bookings term as Electronics aerospace our Grove, long the to our energy

support to process HealthTech Additionally, certifications customers the regulatory necessary of the the is site in market. obtaining also the in

quarter. Our HealthTech business strong a very third registered

robust, short demand we moderate remains in While to the rates term. expect growth

As new COVID ramps. is demand by related program replaced

ramps. these expect new market continue to to by XXXX We HealthTech into fuelled grow our program

sixth a to turning of result our results, lower to business segment achieve margin growth improved and including disengagement straight revenues our HPS CCS, Cisco. with range, in our as above being our continues with its quarter year-to-year despite mix, segment excellent target Now CCS registering

to XXXX. Our track or our momentum HPS business into range we X% X% exceed well within comfortably XXXX, to CCS this on margins continue continues $X to maintain perform expect in billion target remains and revenue anticipated growth segment higher. in to With to

Looking to quarter start our basis Cisco segment growth ahead, year-to-year the to to in CCS on as top from lapse on fourth return realize period. we line our comparative expect a revenues a the also

Our driver with revenues hardware a service has provider more growth compared $XXX year-to-date from than representing million being our primary posted business XXXX platform consistent demand customers. of XX% solutions strength to

greater growth growth this to constraints. business proponent opportunity challenges to and market this versus XXXX more HPS for XXXX related in in Our outlook compared to Component spite has not XX% XXXX now achieved than revenue or the impressive remains withstanding positive. HPS year. our and anticipate very general of growth of achieve constraints expect We XX% final

their our invest center to support with for HPS integration to XXXX. market, base with supply relationship our foot first a consolidate prospects, largely growth our thereby will year-to-year provider In expected end since engineering The in in XXXX expanded market anticipate our end recently service Texas. completion the our resume that by fourth an strong but demand to for hyperscalers capacity, aiming addresses and HPS only of to for partners lifecycle U.S. QX absolute time in with not communications disengagement continue Cisco facility in its is basis solutions. communications customer’s additional We full in strengthening XXX,XXX Given quarter, Richardson, to establishing driven by rack remain desire excellence the bolsters growth footprint of are the square we capabilities, customers. on our base

our communications are end be In seeing we be impacted demand. remains strong likely continued largely mentioned, material are enterprise demand growth storage revenues to in of offset strong to as Despite by continue tempered as compute. by However our outlook expected constraints. is to the softness market,

enterprise the declines in quarter, are here persist stabilizing. in the We expect these fourth dynamics revenues to year-to-year

the an inflection important quarter, reached look fourth to has we our point. business As

goals. our to efforts would portfolio I on the want building to and operator entire return now transforming has dedicated to enable turn momentum. like team performance which and a the with drive to growth global shifted absolute to achieve focus our our our session. their our from our that, achieving to thank over Q&A Our reshaping to and begin us I And call for

Operator

Thank you. [Operator compile Instructions] the Please while stand roster. by we Q&A

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

Ruplu Bhattacharya

taking questions. you for thank Hi, my

looks your Mandeep for sequentially, revenues was XQ guess, up X%. guiding I XX% it up question and First inventory like

we whip? can XXXX? some fiscal in much cycle what how Mandeep much details how inventory flow raw free mix So should on and us of give about materials, you cash how cash that And was, conversion think

Mandeep Chawla

Ruplu. the Good for Thanks morning question.

inventory as a quite strong term view that few And up, XXXX. for order is our demand. to taking we're balance demand The we're right working different is we bring times and So with inventory the satisfy to managing in needed in you've mentioned, we've the are about on long a now talked sheet. how that's as customers

we are can mindful we right customers our working Now get though returns. of cash to very We're of when the maintaining level with deposits.

things From on is also we the you'll we're cash I deposits yet. a we're year-to-year to because the continue of because charges we're being And the perspective, to focus on as carrying get on quarter. early basis. to that a also going of through much is mindful get are a on will too customers million We're up focus right plans generated as is fulfil still year-to-date mark. of strong.\ year-over-year that our do $XXX $XXX right in XXXX can what the One deposits on we're cash to ROIC. for almost when But But a is what like materially the targeting quite the But it cash now million to with $XX And free free flow working our we not inventory to we our XXXX. on over able really notice we're demand we necessarily million that our able growing say fourth now almost basis. is look despite tell want the flow positive proud basis, working

Ruplu Bhattacharya

ask that. new a NCIB for Looks you're for Okay, to thanks like in on going XQ. details the

to You PCI is announced in fourth close supposed the which the quarter. acquisition,

priorities? further you remind us should pay down? acquisitions of or we versus think buybacks, capital the How debt your can about allocation this, priority versus of can Given help us you

Mandeep Chawla

Yes, absolutely.

over long a As shareholders have we've job know half free it strong strategy have record Ruplu, through of to that. track you very we we returning on of share maintained also good And flow. generating the nice long term buybacks cash our done term. And a of

you XX go years. even you five years, frankly over If back over

NCIB November, the existing the in under right program, it expire we have On program now. does that

repurchase So far X.X we million cancellation. shares for

entire are that used continue program a we looking it the was enough advantage in to opportunistic be go-forward the new in we On market on take certain up to So opportunities at a open of of to times. so buybacks. basis, can but not used, program, likely December, was share

to million to that the probably make TSX, Just under understanding for however million We for use up the we cancellation repurchase with your of under the shares. about that filing we X for intend X will can compensation. stock-based

of stock make buybacks what But still on there we willing go PCI are So cash we we're X to it But free through need debt go acquisition. you million and about to to will then maximum our be strong puts we that that of are our just to, have to the We a new now sheet said, generate down position, as in priority program. year. And go we in think as right a as and if opportunistic share that company strong the flexibility. doing, the number we the if reflective is one, strong we after willing pay we even us under into amount shares price this not to around is act the we That will can find the in think balance capacity additional XXXX and being purchases. gives a flow.

Ruplu Bhattacharya

thanks make for Rob. I And and if can that. just for more Okay, one

digits, guided side, communication XX% it year-on-year. had you was like actually down down On looks single high the

weaker anything did networking? you just like give you the than see can So any there there markets in stronger, Was some details what Was us other? or end on optical? the

Rob Mionis

also shortages good EMS to Ruplu the HPS, saw late driven strength we in quarter some time well. door. but not some get But that for little what cleared it initial Yes, third from our out by good networking, very as and down a the and in quarter, it was programs the in us was strength expectations in

Ruplu Bhattacharya

thanks Okay, Congrats the execution. all for details. on the

Rob Mionis

Ruplu. Thanks

Operator

question of the with Markets. line RBC Capital next Paul from your Treiber comes And

Paul Treiber

very Good Thanks morning. is growth, HPS I or there sequential much. to that least could in the QX to what's there Is in hoping seasonality was speak that in QX implied maybe from or trend quarter-over-quarter growth headwinds business you for guidance. deceleration any at to the the, component shortages, expected QX? that that

Rob Mionis

we growth also nice good on some moving happening also Yes, moving we're What's Paul. ramps some in and is just see strong into well. we And QX, HPS in very saw QX, some basis really comps. a growth. very tougher seeing in growth really And as We're compute still growth some QX sequential networking. in into seeing

Paul Treiber

was to regards into constraints, come million $XX supply quarter. and the looking you similar the to And in environment this shifting this last quarter at headwind gears

I think on the the challenging. get last more caller common said will that environment [ph]

that So quarter to allowed during what know potential greater the you what you that mitigate happened headwind? that

Rob Mionis

question. Thanks for the

You going supply chain a to we be know, environment I for that least of at end till we're mid XXXX. year, constrained heading into realize think and last the

put procedures, and now organization are force. new our adopting processes, our structure, tools things all started place, those our we in in So full

visibility we've And is good quarter but frankly, about think feel very volatile the good variables. managing ahead. ability I you And And far. managing to have our quarter, our the while chain do our processes. situation dynamic team, and our So we're good in thus been the tools a resilience very days. dynamic, supply through now, demonstrated environment. is with have new to we good we've I new what That's to some these every have processes we just and And into these roads very navigate at say, very right to

Paul Treiber

seeing freight like chain, in from point and whatnot, your And to challenges hearing you terms that goods still to just global think transit, the the we're seeing compared you've related that when products backlog downstream you in ranges in just, products view, of in delays about of your to a of of a terms and about on getting customers shipping supply but in you are ports customers, are lengthening seen? in historical it

Rob Mionis

certain. Yes, that is

us. seeing We hasn't are main been that, been different transportation. for of that using We've the certainly impact modes

done have of of and also job nice a regionalization supply localization the chain. very We

less across the if So us be mile based and certainly to on our helped through we ocean, you have product that turbulent going was where will, navigate final times. done, these able

Paul Treiber

Thanks my questions. taking for

Operator

And BMO your with Thanos Moschopoulos Capital comes from of question line the next Markets.

Thanos Moschopoulos

a speak I'd to Rob, demand given mean, morning. is visibility But to Hi, probably uncertainty be fair side. good can strong overall you demand this in your just imagine longer visibility? times, that I supply characterization? the there's obviously, exceptionally lead that have at point would

Rob Mionis

the extended with their our We've successful at along on. that and based lead cover in that doing been going material. working to I books Yes with least times, order mean, that's out customers on be would extend pretty Thanos, to

it, strong. mentality you we especially quite firm of Many will type or, purchase and those that in we're frankly, orders. build been try our subsequent So doing demand. we've our demand into visibility our we'll is could the environments, us if spaces in demand. what In take best hyperscale fulfill types giving to of of seeing get of majority either don't what their non-perishable quarter, -- to But is one the customers, we get quarter,

Thanos Moschopoulos

is expectation that there? will subdued flat perhaps in latter your for XXXX current in And current for much remain of it up panel, picking expectations thinking terms us of part, remind the the or what's

Rob Mionis

footprint, that site. because to little semi in gain I equipment that, on a location cap the able to be the and lot is, into the of based the with positive news going is of XXXX. Yes, subdued market share been think, market Korea of we've display actually capabilities our a But Korean

factories cap, product we've within U.S. the do Malaysia in leader share been market, we the We fantastic have than introduction new And that in So we've semi footprint. a and the we’re shares, Korea. market we again in have gaining growing broader and faster been

ramp business that while to we're in the able semicap display So down programs. we're happy Korea, new is

Thanos Moschopoulos

Great. I’ll you. on. pass it Thank

Rob Mionis

Thank you.

Operator

Instructions]. [Operator

comes question Suva next Jim Our with from line Citigroup of

Jim Suva

very your some know What the what's insights seeing digestion down inventory trends? quarter you on some year-over-year, much. of that report on or they you kind the Thank the I outlook that's comparisons if enterprise there? And there, or don't were give Could you're looks shed going like also? and it

Rob Mionis

Sure, Jim.

same saw in softness compute both that by ago. really storage, dynamic So softness is in enterprise we and from tough comps some some partially and seeing HDD. QX well, Flash But both strength year compute in and the QX, with driven in storage, in demand was the a in offset compute, softness into as

Jim Suva

Okay. so much. Thank you

Rob Mionis

welcome. You’re

Operator

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

Robert Young

good Hi, morning.

around our grow, some the you Do like and are curious, customers business? are see looking are in seeing, supply of of more challenges Celestica? they particularly your diversified closely they the sourcing with chain to at the some market of Just addressable the the challenges starting opportunities companies the side

Rob Mionis

another competitive to on the from renewal supplier existing chain the transfer or is a chain what – It's diversified hard, rate work constraints. supplier one on higher seeing with supply to the we're chain business. respect out bid, the to based on a supply supply given On challenges, go challenges frankly,

terms next So half we've ago. and probably year and that now of those we higher rates. ramp year amount And in to just an seeing ramps a we're of into are renewal year. outsourcing ago, trends. There's tremendous won also product We're a that seeing have ATS a starting new a increasing

a we're we digestion get were to a of period to looking through supply strong the going get now, able certified these So products once chains very XXXX. and flush, growth forward

Robert Young

HPS earlier if want question it's more XX% as is XXXX. around The the I XXXX HPS. related maybe consider growth a but the deceleration in said extension and the tougher then I seems growth, focused though Paul's on to comp, and it growth to think inventory ask, Okay, to you even especially

the I'm HPS growth So XXXX. trying against inventory in XX% this guide of and reconcile to growth

Rob Mionis

the Rob Yes, question. for thanks

said we XX% or think I more.

game, certainly the I think now. more where at are believe this from stage be will of we we it

very a The end dynamics quite We are pipeline. strong. have market full still

will you of strong. element each and compute, storage -- environment and We the of if and have the and leading positions, networking, remain rack, market the and

that's part. think conservative on I our probably a So estimate

Mandeep Chawla

I would that, add to just Rob.

a data digits profile if next aware, As excess of market we itself, you attractive a high just last it And into is we've shown the or you're we product what this data of HPS the as in so. at year, have growing the pretty go look and does market and doing. single center in lot growth centers, are has year year,

Robert Young

SG&A last step part one to that could. if modeling I assume is is The little guidance a I Okay, PCI. up. for question, big of related

we… should so And

Rob Mionis

related is then other of it how And do timing of part PCI. the variable the has to part of to yes, model just it with compensation. That our we

have quarter. expense larger fourth a in We the

on it's number bigger So it a big basis. like as looks not sequentially, while year-to-year a

Robert Young

in Okay, go contribution given to it down expect that QX up the so shouldn't the part should come should again we from PCI, comp… after

Rob Mionis

typically start first to second have the versus half. We the lower normalize. SG&A in will It the year of half

Robert Young

thanks. Okay,

Rob Mionis

Thank you.

Operator

with Coupland the comes line from CIBC. question Todd And of your next

Todd Coupland

I good Yes, could. a I questions morning. if had couple

contribution Firstly on PCI, in guess fourth EPS revenue I the quarter, or on the on margins? and is what implied

Rob Mionis

you operating the right the getting industrial the at now will go have the say won't about the assumed go-forward approximately then we fourth talking in PCI. will we $XX XX% business, profit And But a our million it into ATS. be we just number. ATS, know, problem. we've be that as in will actuals of part as overall Yes, included revenue so The I is $X.X be basis profitability, they and billion put a specifically profit then in in on so no quarter. guidance

Todd Coupland

granularity. appreciate Great the

Second growth is into extended of the much in that? that lead for additional supply your about chain $X.X times How XX% takes in $X.X you given in investment about revenue, and or billion? roughly XXXX. billion around think talk Can Thank you. inventory required to puts view XXXX if just get we question, to that

Rob Mionis

sure, don't $X.X start with we the So off why billion.

implies before a next So that ATS acquisition indicated grow expecting are $X lifecycle are our the is year, was as what And XX% We've to we XX% expecting it billion that grow growth or more. you to portfolio. on we know, and XX% essentially, it PCI HPS solutions announced number. was

from year. $X billion on numbers that. And XX% much you XXXX that put to add number pretty you our solutions, PCI to we if gets So next then lifecycle

a some already and to we dynamic as it's inventory because that build brought support the inventory the the some go is situation in-house year. go of now, terms In we've right of revenue of the growth through

to on inventory that. our course, be we And we've inventory. strategic an don't help expect working of go-forward So investing given to never, on make I have customers say is, we support investments, some If basis. in is material been additional were forecast. us But a we would though, would what amounts that already our with we

with mentioned beginning adjusted Frankly, carrying And cash in maintain to to look charges work internally, so of our deposits at then we help we'll for instances, And at as ROIC. on look offset other we call, order our on to inventory. customers basis. inventory a cash the in the them the I

Todd Coupland

of if sort the Great, And you right we Is through were XXXX. the is to unwinding sounds the like think given the that? wouldn't flow way of that. the thanks capital working of just think until that to for into view that, back likely then that the get about world, business it

Rob Mionis

I inventory elevated be will think as fair to XXXX. go assume that through it's we

understanding is ofcourse that elevated. also Now, AP

unwind, well. the one so other as will when to Right. And starts unwind

Todd Coupland

that much. on growth business, color appreciated. very equipment then any And last business, cap XXXX? the implied could question, Thanks cap that the the is in for if what would be around Any I semi rate

Rob Mionis

XXXX, the growth fact digits. Hi, bolstered passive for a going market gains. to is that I of programs way would guess feeling again, XX%. for the the And And on is we're we're double market implied say the in the about we're of are And rapid. those, at I that looking market lot by is XXXX, it our to share be able these that won go based lot a rate in

Todd Coupland

it. appreciate lot, a Thanks

Rob Mionis

Thanks.

Operator

next [Operator line Daniel Securities. the of TD comes Chan from with Instructions] question Your

Daniel Chan

on times. from think this after just the thanks you'd with over? Do sure up I'm continue lead taking helping like continues this it a Rob, of is my to this visibility Hi, you these are for planning game trend disruptions for questions. the like way. going your higher longer and follow to you having these higher visibility

Rob Mionis

question. Because we'll maintained we've and use the new yes. that we've we've the on, think, back forecast been be to forward, working I developed of customers that visibility our tools prior forward. Interesting like moving increased developed, will them world predict. SIOP tools rhythms to go this would to moving If of hard with help to that analytical but it's

this be I strong. visibility XXXX, stay So for at least will will of though, I'm uncertain think that

Daniel Chan

that Okay, to being as thanks you to And your seem supply. try has than competitive any the that. customers as lockdowns geographic have for by diverse your then, more maybe to be footprint displacements peers, and allowed you you of impacted less get some

Rob Mionis

the creative Malaysian also our navigating as in other power some our been them we've issues Yes, footprint and and, of and patterns shift through on China well, issue, ideas. and based

times. In serve picking turbulent customers to that, one and I that driver a to, wouldn't if has or allowing terms through just up resilient, our say to been us of the that another. remain share, will, relative way you It's

Mandeep Chawla

And, I'll to Dan, maybe that. just add

his in remarks, geographies, in prepared remarks, like the As we Rob investing mentioned are we have, in expansions U.S.

to our in lot ATS facility Texas a to rack also order over in customers, support a growth opened Minnesota HPS, new integration. service our and of in facility taking and have up We in

have that or are have think sites. to is now already sites, way tied customer about I to are those think expansions, awarding customers driven we so business new customers the those And are it to us either who where we because the

so are continue customers respond us to do. to be nimble to asking to And what we'll

Daniel Chan

Thank you.

Rob Mionis

customers our that very, It's next Operator, questions? It's strong quite and really excited good of up provide Mandeep. very any Texas. progression customers about and filling it's the site. more the there Richardson, lot value in our a and really point, We're logical is investment to interest from

Operator

sir, me, at and I'll Rob remarks. closing there audio back over Mionis to Mr. questions. further the are this call now Excuse time, hand for no

Rob Mionis

on out thank operations the than more excited efforts successfully very dynamic collapse with on pleased constrained and Cisco revenues our our on momentum the from by compared fourth our comparative increase environment, the continues progress yielding while to quarter all increase chain to And the forward to each that the safe. to are our year-over-year third to into fourth stock quarter quarter, as period is year. global the and like absolute margins track this I'm XX we're for a to we through the operating track of themselves are thank to look you. XX% the we're XXXX. on world and growth X% remaining today's track track transform In strong XXXX business the and react for Thank by vigilant we of as achieve our navigate supply adjusted our I'd on close while year. final midpoint call. in to to quarter guidance, Based year to is And basis points And environment. the our print as other EPS to you company performance move on to joining and team year-over-year results. keeping in updating XXXX. adapted throughout I we you have

Operator

your today's And for thank participation. This conference Thank you concludes you. call.

disconnect. now may You

Celestica (CLS) 26 Oct 212021 Q3 Earnings call transcript