CLS - Earnings call transcript Q1 2022

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Operator

Good morning. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to Celestica's Q1 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers ' remarks, there will be a question-and-answer session. you. Thank instructions] [Operator President your Relations conference. Vice you Corporate may begin of Oberg, and Investor Development, Craig

Craig Oberg

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

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

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

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

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

turn me now over to call Let Rob. the

Rob Mionis

Thank you, for today's thank everyone, joining on Good call. conference you us Craig. and morning,

the was quarter to another Furthermore, our non-IFRS represents continues our strong revenue non-IFRS guidance growth, execution X.X% to margin exhibit quarter EPS margin great and was QX the of first share. year-over-year Celestica XXXX non-IFRS objectives, we improvement. macro operating year exceeded growth of achieving testament HPS, a quarter ninth dynamic as consecutive our to the our guidance for mid-point Both strategy. margin our our And ranges. operating while CCS in operating our of came and our the execute XX% of segment, continue advancing ranges, our well long-term on above adjusted end key high of the a for strong Our the gain quarter or to journey. performance and first to very Platform of quarter the compared of Hardware Solutions, revenue market XXXX to a first spite multi-year In of start XXXX. environment, strong continues

growth all driver is a business in CCS remain for to of HPS XXXX. expected Our of

of Our to ATS segment quarter compared also year. had a solid last quarter, growth, revenue achieving first the XX% as

in our full Industrial A&D our by PCI. growth ATS in to including our see also results Equipment levels Capital businesses, of was driven in trough quarter success growth to Our pleased We're XXXX. primarily first returning business from our and from

environment executing full a we and year we believe chain environment, While the have billion, strong does we the the first not momentum established growth. of quarter challenging outlook XXXX we assumption strategic are operating operational XXXX. year-over-year XX% in another to year and that we objectives positive financial build in demand and on have by in chain achieved, Based this on will our the or worsen, achieve supply pleased If to would revenue more. robust materially supply are represent on year-to-date our raised $X.X performance

to of revenue we on In adjusted range higher the addition, as outlook, our between $X.XX. the and non-IFRS $X.XX result a EPS have full year tightened range

first our performance, detail some like financial turn details on and Over quarter as the will next Before Mandeep, to for well over additional with the I on on guidance outlook, additional Mandeep. as color outlook. business offer our quarter call you I'd who to to you, our provide XXXX our

Mandeep Chawla

you, everyone. Thank good and Rob, morning,

guidance midpoint of points double-digit of operating share guidance at basis adjusted in fueled performance our and XX Revenue segments. and the points in a ATS range of above of year-over-year revenue year-over-year sequentially. our up of expectations was year-over-year growth growth basis $X.XX sequential in The operating was strong Industrial $X.XX Capital ranges, business EPS points up down organic ATS XX% Non-IFRS base segments. Non-IFRS and were margin our by the the down basis $X.XX, percentage per First range. of PCI. our revenue was delivered up revenue up revenue and of high of a sequentially. $X.XX, up Equipment, earnings segment quarter above revenue above ATS to up from XX non-IFRS and increase. both of end XXXX adjusted up ahead low-XXs by margin year-over-year $X.XX and year-over-year driven was revenue year-over-year, our XX was XX%. Organically, guidance both growth in revenue in billion, strength XX% was end X.X%, total revenue and in our Sequentially, $X.XX full XX% quarter year-over-year. continued We by ATS sequentially, segment X% came driven high non-IFRS

ATS We year-over-year are achieved organic over pleased the of growth XX% each that has past quarters. for four revenue

down Our our HPS was by line deliver business. Year-over-year from continued CCS up our Communications with markets, growth, growth top to and segment driven led sequentially. by year-over-year XX% across strength revenue Enterprise X% and strong

HPS the quarter, approximately and year-over-year, with new program by quarter XX% demand delivered was led business. both expectation with growth than our by by driven flat. was across increase, strength of up continuing Our million XX% increase. increase HPS customers service high-teens Enterprise $XXX up of driven was The storage demand year-over-year, percentage revenue compute growth. in the business revenue XX% expectations supported a and of year-over-year, seasonality impact. center our revenue by less line than better a X% anticipated our growth ramps percentage revenue mid-teens Enterprise providers, year-over-year was down strong a sequentially. up in Communications in in was first Year-over-year Sequentially, and and data

our increase down margins. of higher improved segment The ATS XXX XX year-over-year in up points driven margin delivered from first operating sequentially. was segment the year-over-year margin basis X.X% leverage basis quarter, a by to and volumes Turning and points stronger The down segment points business. up XX volume margin related driven CCS was year-over-year basis HPS productivity. mix sequentially. basis increase margin of and XX was X.X% to points and higher year-over-year by

$XX were basis earnings sequentially. net and on quarter points inefficiencies share, $X year the of Moving some strong XX share, driven earnings $X.XX material or higher up of and to were to improvement share, a The per or million by metrics. IFRS financial volumes additional or Non-IFRS quarter productivity $XX leverage, compared million sequentially. million offset cost was $XX $XX $X.XX basis earnings per of year-over-year operating million was margin net per Adjusted last efforts, constraints. points $X.XX operating gross $XX by up partly million quarter. the X.X%, of same down from and year-over-year last for in earnings year-over-year result XX million, as and down net

rate was year-over-year sequentially. X% effective XX%, but higher lower non-IFRS for quarter tax the first Our X% adjusted

million, first adjusted earnings million the non-IFRS quarter, million net $XX $XX year-over-year up and were For down sequentially. $X

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

Moving on capital. to working

at inventory end the was million billion, million $XXX up $XXX Our of $X.XX up the year-over-year quarter sequentially. and

Non-IFRS by were Inventory This first business, environment. appropriate. we To X.X and compared flow was the inventory or Solutions revenue. X.X last X% maintain have last XXth across period quarter million Capital offset in from cash them to is supply million quarter non-IFRS constrained in $XX.X consecutive year higher free prior in higher decreased our Lifecycle continue increasing will higher light quarter and quarter, strategic of quarter, year-over-year and more impacts of of the free million obtain million basis, delivering six cash deposits first chain customer’s the $XX.X Cash purchases XX quarter. on the first the $X.X $XX.X to inventory day and our turns support while inventory sequentially. turns to the first the working in deposits our deposit up of higher positive to continue year cycle capital also to year-over-year inventory, were days. of for days times, one doubled We flow. higher A/P days with improvement more levels year-over-year days and than than growth when cash cash from days expenditures cycle was the cash down as work period offset were in the down an Cash higher X.X prior a quarter. from turns in

Moving on metrics. additional key some to

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

same all agreement. under quarter At we X.X and debt ratio adjusted March down X.X XX, year. with from times, trailing last XXXX, the credit gross leverage to Our first our sequentially of quarter compliant was non-IFRS XX-month covenants financial X.X were up turns EBITDA turns

at period. we shares cancellation, of XXX.X the outstanding, prior repurchased year for reduction million $X.X quarter the During We approximately million. the X% cost of approximately ended from a quarter, with shares a XXX,XXX

Our our long-term while of flow to cash over our capital shareholders, intend to strategy free the consistent. long term. allocation investing our We business non-IFRS remains return in XX% XX%

of as be while debt share XXXX net in focus our reduce to of our our repurchases. continuing be a result towards will acquisition However, to PCI opportunistic

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

to be of revenue $X.XXX billion revenue quarter If the up is billion. second range $X.XXX in the the We mid-point X% and sequentially. be range XX% projecting year-over-year are of to achieved, up would

basis points from of Non-IFRS any range the are taxable non-IFRS approximately to be X.X%, for unanticipated adjusted increase quarter exchange adjusted We range share. and midpoint points revenue per are impacts adjusted share operating expected XX the settlements. million. expense $X.XX and XX tax is would excluding SG&A or from guidance to second ranges to $X.XX be our XX%, quarter effective Second to tax an of per $XX expected margin in non-IFRS non-IFRS If $XX non-IFRS sequentially. our rate adjusted increase basis million achieved, year-over-year anticipate earnings foreign the an be of approximately to EPS of

acquisition to end end Enterprise year-over-year, In to outlook the customers, supported strength market from In market, end anticipate the Equipment Capital of business. be low-double-digit CCS, by the In service be [ph] market HealthTech [ph] end demand and Communications our range range to supported low-XXs demand by our market, revenue revenue we by anticipate up our our year-over-year, to second in year-over-year, percentage Turning range of percentage increase anticipate Industrial, in in ATS HPS the and revenue up servers. we strong driven for the PCI. XXXX. provider by including driven percentage we high-teens our quarter in

our we on strong based are $X.X XXXX revenue date least the mentioned, have Rob pleased chain supply billion to at current and to Finally, robust demand as outlook raised for environment. to execution, our

our outlook update XXXX year, evaluate We the should chain accordingly. will to will environment materially we the and throughout supply improve our outlook continue

now non-IFRS between anticipate margin adjusted for turn now color end outlook. between $X.XX X% X% I'll $X.XX full over on are our business non-IFRS market targeting to call the continue back of for and and Rob to overall EPS and year. additional and We the operating

Rob Mionis

the remain pillars markets. committed this vision us, continue of To we of to our ahead and Mandeep. strategy. undisputed high on Thank you, we focus value becoming to our With industry the leader are core our transformation will our objective, achieve long-term looking behind in

grow have we will we First, Lifecycle what where our continue competitive we or market call advantages, leaders to specific are Solutions business.

well executing total against in Solutions first XX% of quarter as revenue the our already end up the are business at quarter strategy, Lifecycle XXXX, represented first of We of the XXXX. XX% from this of our

growth Looking we the XXXX, forward strong expectation Solutions. for in to remainder reiterate of our Lifecycle

is of core for by solutions customers. our second strategy across further to to new the and to enhance pillar of expand value invest The continuing our capabilities chain growth our for set our capabilities develop to

our capabilities we are to be global our will as prudent to the And across investments and of Grove, to cornerstone have system make come. drive capabilities, the the recently our Solutions global will in to our across We organic facilities priority advance three network. And these finally, intend is excellence quarters and our top operating excellence of of and network. All our investments across significant Operational bolstering Richardson, in Texas, including our continue acquisition PCI. a to Lifecycle capabilities inorganic we made our continue investments well success Celestica the as business. in examples Maple Minnesota, of

revenues with support as constrained demand confident are chain the would absence the of we believe the for to year. higher growth continue customers significantly gate believe true future, component Although at we will environment challenges. in potential, remainder of we in these our remain our will supply the We the expect that least backdrop the our shortages

accounted guidance the best Our XXXX second these macro for of and quarter have full conditions outlook year to ability. our

the turning Now outlook segments. to for our

to we achieved new strong demand ATS from continue growth. as impressive Our segment and the growth quarter, in first benefit program

and this XXXX, would segment billion continue continued growth, $X.X For a represent to If revenue revenue ATS of approximately outlook segment growth XX% to segment and as X% our approximately XXXX. margin more, result achieved, ATS X%. expect of we or compared anticipated between is

Our business robust and its Capital runway that market demand strong, wins driven trajectory secular additional Wafer and share tailwinds. to growth. continue impressive continued these for we by believe new dynamics Equipment QX support in equipment continued gains, fabrication is XXXX,

a Our large business our Industrial expected to is this be to continue contributor to year. growth

We OEMs in leading well a the positioned energy are storage are market. strong presence with currently charger EV and six also building

beyond. to which begun throughout already continue in have this ramps We significant space, are anticipated and XXXX

The as Additionally, capabilities experiencing our begun we together aerospace. as demand has continues, expand yield acquisition commercial already we to deliver in market of work an in and cross-selling range to synergies PCI our recovery A&D of increase are to our customers. from the

opportunities with logos margin We expected attractive in profile. our a significant As even segment new our was in we the UAV is space believe A&D our its runway HealthTech for pandemic, growth Moreover, business to A&D stated recovery. are market very component continues given largest A&D. defense, calls, significant ATS as business further the an growth with growth is previous businesses believe prior wins and of to and drive in accretive the there that

Our markets, new a of and growth extensive array expertise in markets. end a existing across certifications site foundation provide for automation wide and future

Now turning CCS. to

Our CCS achieve XX% segment growing results, continues year-over-year. excellent to

to we Our remain HPS opportunity and end are driven driven proudly market, storage seeing the service the demand year, strong can second In very end In HPS. ever. compute is strong market expected market, year-to-year, Today, networking largely than I continue and and our our Moreover, in quarter. is business the by in we XX% are provider communications customers. in grew to stronger outlook Enterprise say demand positive by expected general Communications our remains customers. throughout funnel

markets company, profiles a operating advantage. growth we in where have We with strong more a diversified, and focused, are competitive yet

to and enabling commitment, over thank I turn win, to in to would we their like have of achieve employees for And We are the that for the continued to not Operator and without now Q&A. work long-term trajectory. continue a goals. employees. accomplished we the all built This our have perseverance strategy intended support with and to our place could our that, been us to call want ensure of progress hard I our

Operator

from Thank you [Operator Our go ahead. from Bhattacharya comes America. of Ruplu Bank first question Please Instructions]

Your line is open.

Ruplu Bhattacharya

a terms of taking the guidance questions. line there assumes the disruption Hi. headwind, to on Is and have as from the Ukraine? my quantify line on line? line Thank revised bottom on top year of you and from the issues, the chain assumed bottom terms what full top way for in as both the in war in supply you well What

Mandeep Chawla

answer, as it's Hi, changes that, and it tough Ruplu. sense a know, the It's Mandeep quarter-to-quarter. you to one dynamic here. in

with guidance we to QX, execute saw our environment. the beating because ended able supply you very we As were well up in range

the assumption the really, be For an QX, it into we date. going is assumption that quo. holding impact where back very environment the to are guidance the minimal provided half to we're on that Russia, on that has And is a consistent right to and relatively year. specific the supply your making had we've Ukraine it now for point so the status To forward of the company today,

And similar out and suppliers of we so are we're the exposed programs that customers know the have are half expecting consistent. know those assumptions because something what year which coming back we Ukraine, Ukraine our are to of ones the the of into going and

Ruplu Bhattacharya

And inventory should conversion for higher Got year? year, cash Okay. the ask, think know, flow you free revenue it given was about full the the I up growth it. Can how looks and sequentially. for cycle XX% now like assumptions we cash

Mandeep Chawla

Yeah.

this also are you XXX% year, up almost Deposits Deposits up. is are up inventory mentioned. So year-over-year. as

We an now really build. fund view is as So it to the asset. inventory of helping some right

able continuing is robust our through inventory to is going likely of We anticipate were this remain leading fulfill more to that XXXX. customers, to the cash free we the when us flow very demand Our We year. of billion ability were revenue through and million for targeting from year. to $XXX be or $X.X elevated inventory secure is which indicating

seeing QX and will we likely fulfill are QX. cash But we still flow to million raised for free that targeting be positive year. Now the ability outlook, demand that more we're than we've to revenue our our $XXX less through for

Ruplu Bhattacharya

some for in. What that Got margin of And higher just again one X% couple should long-term I we the CCS about of can drivers over next the it. was operating think X% are more segment how sneak than the quarters? if to The this? And range.

Mandeep Chawla

point simplistically, of as know, grew Most we Yeah. I have demand to first XX% would just quarter. The HPS, continues very HPS. adoption to products that the very to good There's of level in brought you year-over-year strong. profile a the be market.

continue Overall, would I is accretive that so XXXX. what And that company to also to will is through the margins. CCS accretive HPS margins. It's say

expect do And so a pie, larger part have margin the as continues to we we in benefits that HPS CCS. of be

Ruplu Bhattacharya

Great. on details, Thank the execution congrats the in and you for all strong quarter. the

Mandeep Chawla

Ruplu. lot, a Thanks

Rob Mionis

Thanks, Ruplu.

Operator

Our Thanos comes BMO go Please next question Markets. ahead. Moschopoulos from Capital from

open. Your line is

Thanos Moschopoulos

morning. Supply good chain QX. top of line a impact in had Hi, than less

does just guys improvement, terms or reflect the that that better of do able And in you that with so have Or more that sequential with actions take? component to mix availability? were mitigating does to

Rob Mionis

Thanos. Hi,

say dynamic seeing I well, relative quite managing still extended. been That similar in pretty things As environment We're said, chain at passives. is quarter. through being with to still and with times macro them pretty supply COVID, last in some much are quite we're the consistent navigating and supply through it's are Lead increase QX. chain constrained, we've overall would becoming adept constraints.

Mandeep Chawla

year. now, through right Thanos, that the that continue And will is our expectation

as dynamics the on semiconductors, for we But example, quarter. relatively the and relatively lead with the some part, say resistors were we As side. the Where they Rob an additional fourth is are most times Capacitors we'd first the mentioned, seeing is environment are lead as passives when consistent. right at extending. are that quarter consistent environment the in times within look now constrained

Thanos Moschopoulos

lockdowns? I in I incremental have from lockdowns mean, impacted there have the at you the know if there. impact Is China presence the how And business, a all? any

Rob Mionis

the to has date, To impact immaterial. operations been Yeah.

risks the is that dynamic attendance it suppliers, range XX% and watchful Our Thanos, guidance. on the sites. China eye logistics. It but relates we But keeping outbound we are sites a at any situation, believe in our in our are factored is of as the to a into especially our inbound

Thanos Moschopoulos

suggesting And is something year equipment that just on average semi months. then time finally, in lead the like the report XX now [ph]

consistent you're Just with what that's curious seeing? if

Rob Mionis

we It continue is. have out we And to us book customers are order our shorts post at is raw of record helping which and do growth backlogs I highs. would planning, material that impressive effective our also increased, as has say The visibility that business. into

Thanos Moschopoulos

Congrats pass great. I'll along. Thanks. Hey, on And quarter. the

Rob Mionis

Thanks, Thanos.

Operator

comes question Jim Please from ahead. next Suva Citigroup. go from Our

open. is line Your

Jim Suva

math I if Then believe looks is year acquisition about you. a it total? of If going you. just are Thank I follow-up? of, Can so, do the XX% up going organic or be kind versus it this in help this to organic your PCI versus of kind folded fully you correct. right, so ballpark I'll us year, probably that's to dissect my be kind Thank have like revenues

Mandeep Chawla

Yeah. morning, we When closed the million we range. was had $XXX PCI about the that in being indicated targeted acquisition Good Jim. revenue

if about the out probably And so $X,XXX that we X% growth. when say back of you million, that's

on organic an XX% the XX% to grows basis. closer So

Jim Suva

plan in Great. little past it's or know kind of trajectory so? bit And or that revenue PCI changed consistent? if still months is few I the a didn't

Mandeep Chawla

The talk is on how And performing. can for business moment, pleased business I case. PCI about No. revenue the if is the track a maybe with we're to very

targets have from do chain on. now. seeing working win our list In slightly to And the supply between going same PCI, the integration customer thing also it a is we're see up that group. booked Controls on a starting Celestica's benefits PCI an before them first we're also And material clear some very their Celestica it we and a facility. helping are joining other a synergy also we're but We've integrated, lot Celestica customer to of really exceeding fact, into expertise, of shorts. pleased that was side. perspective. across We're long it's synergistic demand right PCI We're with strong

Jim Suva

my then customer it model just-in-time of changing? you mentioned seems kind in you'd kind now I'm in is less. question And do nature, you a have inventory this maybe curious you like inventory. there's the more kind rather more Is be industry? inventory? And is, the Great. of more rather structural to Obviously, than where deposits just this last deposits of structural built-in think to whole permanent if going but not a is and of change,

Rob Mionis

off inventory say enables and start else. I'll I'll to in we anything gain or protect cash either share. with an than and enables in let to or carefully our Mandeep gain today's share. finish, been protect would asset with It and their Jim. our I us of us more environment is grow, protect to we've grow to sure customers help partnership growth that And make market them also deposits working get share,

think timing perspective time until and a be environment, a can it chain somewhat when it do we somewhat still then going to we dynamic product of That clear to caught of it's said, last-minute of from So it bit a ship stuck that. a being gets the supply comes we is some we're very win-win little and for shortages. able get when to

and So we're our to the strong last quarters. well at the over there's fairly still there, proven looking we're else everyone in it managing inefficiency by relative but it way growth as is several

Mandeep Chawla

that in from and, And months In we structural of or does they more giving as demand contractually, backing the up higher out. year. material on next XX something they're us levels structural if much visibility be And if some on that where that into are frankly, support our customers ultimately is a the point to through change hook maybe to customers us they providing. to go Jim, materialize we that want this is seeing outlook they bring could year inventory. even or are was not for the cases, are to profile it demand their they're the know that visibility what I

go far. traditionally out haven't order that windows We seen

And it chain be the new see that's so to supply whether interesting environment will as normalizes norm. a

Jim Suva

up, be just earnings? the logistic like last you, up more end question narrowed higher by you EPS didn't about would your like, the range shipping costs looks you took that what to, the word, costs revenue guidance higher Okay. Then you but and my is, it also adjust due the wouldn't and right then lower of end. guys Is the higher taking change why end

Mandeep Chawla

dynamic in just a right reflection we're it's of that No, the environment now.

So yield, point, we million to to of we the range to your to $XXX it that more, $X.XX. trying or took $X.XX billion, from say that extra $X.XX, we're $X.X to is tightened much revenue to an be an going probably $X.XX What and is minimum, above It'll know And we billion. revenue $X.X at over $X.XX. range? do additional we tied the how to is go there opportunity could to more

Jim Suva

and clarifications. Thank you the so much details all for

Mandeep Chawla

Jim. Thanks,

Operator

ahead. go Paul Our from Capital RBC Please next question Treiber comes Markets. from

line open. is Your

Paul Treiber

much demand seeing is strong now. that Thanks the right environment quite Obviously, morning. and good very you're

technology, purchase any macro could that there's Just that the hoping of have just a concerns sustainability lot you indication on the board. you customers of in even or mean, conservatism of suggest but forecast may would second signs year orders, the of pulling sign for anything the Have some extended demand. provide across I half reducing any the that you XXXX? seen or either beyond of

Rob Mionis

the markets Within That's with ATS, our strong of. business. and the the CCS at with same with Hey, to have something that. we of visibility, our wareful & Industrial, no record Aerospace But seen And HealthTech top our very of our backlogs, HPS same frankly, Paul. be within across minds Defense. see same we signs certainly that's business, specifically,

prior visibility, time very relative of we to firm with for POs earlier, have As Mandeep a good strong mentioned period really year.

to So we have softening seen date. no

Mandeep Chawla

so, add or Paul, had Investor what we portfolio our if from as we the the mix the a portfolio. ago confidence Day a is about was And really about maybe month during discussion company's would what just talked reminder the the in had I we - of by is driven

between in revenue which of and ATS is thirds Lifecycle from or Solutions, So let's built came call it you XX%, two our QX, today, HPS. know

has ATS On the we revenue Lifecycle view that the our XXXX. now that of of over believe grow place that Clearly, do the which into we term. there changed. also playing have long or share traction XX% will We long that amount And grow been And has we grow in that the market now, our the of or in believe term. with the more double side, at that 'XX confident HPS fundamentals able share right to going are XX% long-term that it's and digits. over right at it Solutions we ATS not more then at when out we've the take, look to feel and business continue can ability markets to

Paul Treiber

a the Thanks. deposits That's demand deposits all Jim's helpful. that on else say, the better follow-up visibility of A and is the or at cash bit amount you least larger of equal, structural cash stickier Would future to demand? question change. creating to perhaps

Mandeep Chawla

one in to my that turn we that we months, can I to that to and going funding deposits only equation outlook inventory out the be we, lever they an with when the may XX the kit and sure aren't bring a Because XX the secure XX months now. Yes. next deposits of made, there's to can what that work make in please is a thing to remarks customer the not us in to. XX we inventory, year Because to. asking giving want want that they square they I six a consume able bring to for from you because customer, to is us order to have But go it, are us a that go please

from in some we approach our receivable. ROIC accounts it's been payments of additional on driven the years, some the to same many as an We And also, which at pricing end And get the we're cases, early is day, in customers. commercial get company. is for cases,

in pricing. And that offsets we're in capital covered through ensure so through to want either than we is more working excess if inventory bringing other that or

Rob Mionis

fact that add, it's a to their would that a the And that. And is on profile. for really Paul, increased customers basis is have confidence in deposit I question, just up the year-over-year first to a testament demand proxy your our cash the back

Paul Treiber

Thank pass very line. the helpful. you. I'll That's

Operator

from question Todd next Our CIBC. Instructions] comes ahead. Please go from [Operator Coupland

Your open. line is

Todd Coupland

appropriate everyone. issues, America, terms have the whether keeps getting strategic your you what but you When that you just is demand Thanks. chain in not footprint out extended a see of does ask production make of from about on also morning, relief, that? North I pushed or supply kind environment, rethink Good geopolitical you should wanted perspective. more globally in to that more this have thoughts and

Rob Mionis

into in need and year-plus, supply present we take where make have The regionalization look working strategy we And the question. we've diversified with the chain, North we we and good have that of to over if now, see America, of capacity That a on resiliency you continue to several of footprint. will capacity profile our very we've at. comfortable Right across incremental capacity to our quarters. kind we some to Yeah, add need said, their improve plans at this last impressive a our as resiliency the looking for helping being been trend, think to customers contingency over shifting plans and network or create Asia. of where has chain. we investments customers supply their feel And seen help that here probably outside out. constantly and about we're Mexico very if And growth it been we Americas, been we're will,

Todd Coupland

have the that on Asia-Pac you does imagine footprint moment? that different that if downsized countries? making are you And how or continues, getting choices - can at trend Right. impact you the that in that Does

Rob Mionis

We and this No, probably capacity at see we terms see expansion, that also more in in in specifically, least the parts Asia. don't the of of see of the downsizing game we really stage cards. But Mexico the in growth other in contraction, to just don't the based see any on that at mid-term. cards, we near in

Mandeep Chawla

to Asia what satisfy Southeast strategy. footprint see be of who seeing node We're to because customers, be in Todd, is Asia. And the continue I in dual strong in we able we're desire of also Malaysia, to would a Southeast a and want have to demand. customers those Thailand our some dominant say that customers have

run want of out also America. North they similar So programs

for have now, seeing we're And of right we're customers. footprint But lot the strategic getting those the go towards a our we so Mexico. quite it's feedback is

Todd Coupland

sort advantage. to us on the cost of just update Right. And

and Mexico So over advantage environment? you Malaysia cost at would current see Thailand material the a in

Mandeep Chawla

extent, ocean. labor going is parts see and there perspective, would some also would yes, forth say what back from a To over I are differences. But the historically, we is, also what

and cheaper on actually situations, go in it's on or be is cost at that just cost do some customer's interesting landed total going, look you could of you even cost America. the in beyond where if North and it it ownership, labor par sometimes And depending product to so

Rob Mionis

our if are that regions, is and resiliency more the pay their for customers various than the creating to those more differences also our would difference chain. of differences a I in understand cost add supply willing there in between customers, name

Todd Coupland

And question recovery. has sense. Yeah. slow Aerospace been for me, then That last makes on just a

that you you're talked getting still having recovery You you fairly it's the Is are seems muted it or it being, about is expectations being better. about - Yet, that. like a that change conservative there? hinting for

Rob Mionis

little jet but And the in air on that think a commercial, North have segments, say expecting you is a been. versus back programs Europe, it's Aerospace I ramping commercial lagging bit half defense. quarter-to-quarter-to-quarter. in defense business In aerospace, will getting America, better [ph] right growth. first won of When I I recovery, has it's see we half North to relative half. we very go a second would be sequentially into It America some and now. we're stronger commercial think On the versus side, And dynamic that the steady new towards I think a steady China of we've is it's hot year. traffic recovering.

Mandeep Chawla

And then It A&D. won't what we're until we'd back probably recovery also say, sequential in though, improvement full to get that is with XXXX, we're pleased seeing though. the

have A&D. over in Equipment that we outer years the can Capital happen time may with moderate, offset that an as do we so believe And

Todd Coupland

Okay, great. Appreciate the color. Thanks a lot.

Mandeep Chawla

Thanks, Todd.

Operator

Our Genuity. go Please next question comes from Robert Young Canaccord ahead. from

up. Your line is

Robert Young

have If happen stage in is think Or still a line A&D of questioning to it's of on a second in the the to just you on what that margins? half, that where that X% I at drag in structure it would could might ATS? the implication X% kind continue margin recovery

Mandeep Chawla

to expect the its It's a we back towards we get drag end but of own hold it today, as the year.

very get downturn. So has in more revenue do see. we cost business need order purposely on this we right now, capabilities decided you to growth know, a margins would that A&D as during to heavy some And We that to structure. to fixed hold Rob, normally

expectations Our we some the is sequential that in we margin as for ATS total through year. will improvement see go

the seen, would we in X.X% you have first did As quarter.

we range, are still through targeting in improve that X% the year. we we as to to the and X% be We go can think

Robert Young

dynamic with my benefit then along supply And question a between is about that think, of you around I factor? a that? a difficulty higher or pricing in customers work that there vendors transferring last quarter more chain. second your seeing are Okay. comes is that renewal the rates And a comment made, because still Is difficult

Rob Mionis

or switching new a Yes, When establish if will, it's you thinks a supply to provider chain. you ponies, very both for Rob. customer hard still to supplier, It what factor. about if will questions, is a

some create is that's creating say a to it does relationships. extent, So wouldn't it And advantage, I stickier driver. but main pricing

Mandeep Chawla

stickiness lot to reason on would without. stickiness are be Lifecycle the barriers There And there entry. very that the high reflective supply is chain that environment. Rob, of of that a we Solutions. But focus frankly, It's

of a to years certain for in level You number to order lot a a of of need capabilities. get investment

which And revenue Solutions, environment, than that's traditional we so EMS. normalized Lifecycle thirds two even in stickier think of company, the is a

Robert Young

And last Okay. me. question for

is bit, still in a confidence conversations confident very on XXXX. be your the in you little in seems it Just cycle but to to that me seem my visibility the weakening semi cap

Just that it think If may outlook any durability there how semi would the curious, or the seeing there, Is last? is kind you from, you're the cap have give are benefiting be long XXXX? any of on any cycle that helpful? to and of signs you visibility confidence any it XXXX you color

Rob Mionis

the very We're in Equipment confident business. Capital Yeah.

our also also they're As our are driven assembly vertical our very with very I good. The our level growing mentioned us giving integration high backlogs that faster is capability, the we that diversified footprint, earlier, visibility the have. than We're customers high. market, by

little on next those mentioned. But in says flattening I we're bit growing Equipment, the going outlook we're our overall, 'XX. strong year going of entire very as bullish UBS be into to for So basically at based year least that well. on than and again, a industry, faster this is also reasons Capital market the forecast some a 'XX, our out

Mandeep Chawla

And plateau logic, of continues from fire we in into the into be year. as Rob, going equipment produce very Memory little foundry that's that terms were bit, slowing space. was be in last going in on demand. you wafer has XXXX, when a others may foundry equipment equipment to the you're equipment the hearing and remarks high but that know, started logic memory Both to semi fab and cycle

good still place but fundamentals year. may that we into XXXX, the has that's overall there's growth why moderate XXXX still so logic, in XXXX, this some characteristics. as remainder very for And And in good growth then foundry that go of

Robert Young

the could in that of market, something And helpful. that the That's healthier Equipment, display then Capital XXXX? other Great. still the side is become

Rob Mionis

to through that lot a all we plays over of regionalization now, given that having into region, support that semi Hynix, kind very the Maybe. And well we're cap, is growth. XX% Korea very you purchased about that will, folks of Samsung, play. strong in the Right if capital it of cap in we're a capabilities semi due have the growth in repurposing to

the the the display within area tremendous Equipment, market cap. we're growth have the while and the we have to in semi using that we is So Capital capacity support capabilities down,

Robert Young

Thanks for questions. taking Okay. the

Rob Mionis

Thanks, Rob.

Mandeep Chawla

Thanks, Rob.

Operator

to We back Mionis for have no to the I'd questions Rob call over like further turn in closing remarks. any queue.

Rob Mionis

to strong forward raise environment. yield results. to look start continues progress that to quarter. difficult to and I'm to you of a strategy joining execute I'm our for first XXXX, year a to updating continue in well off also as supply financial I'd all our throughout strong team we you. the We Thank today's And through pleased We're call. our chain the thank a outlook. pleased like And we're year. for you that thank able full we global execution

Operator

this participation. gentlemen, your Thank concludes you conference today's and Ladies for call.

Celestica (CLS) 28 Apr 222022 Q1 Earnings call transcript