CLS.TO - Earnings call transcript Q3 2022

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Operator

Good morning, ladies and gentlemen, and welcome to the Celestica Q3 2022 Earnings Conference Call. At this time, all lines are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded today, Tuesday, October 25, 2022. I would now like to turn the conference over to Craig Oberg. ahead. go Please

Craig Oberg

thank quarter and joining on us Good earnings you conference third XXXX call. Celestica’s morning, 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 U.S. 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 statement Annual public other update forward-looking as release and most We yesterday’s identification and assume assumptions, press Report and no concerning at statements law. of the filings, refer as which forward-looking factors as XX-F cautionary on note to to therein, sec.gov further including and recent be our regarding accessed well sedar.com. forward-looking discussion except such our obligation information required by statements, please Form can any

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

now call over me the turn Let to Rob.

Rob Mionis

on the conference billion Good majority you, combined strong our by Craig. our execution and high guidance of above the back thank today’s everyone, across solid Celestica of quarter, team. the end Thank range of revenue achieved for us In call. on the joining $X.XX with you our third of demand morning, businesses

than non-IFRS highest our in in macroeconomic this more highest operating resulted to of demand And on ever X.X%. EPS challenges was the XX adjusted our quarterly result ability of of Our years. in face deliver our margin continued non-IFRS $X.XX

revenue the continue At we of guidance and EPS billion reflect guidance ongoing are quarter a and an of through seeing the macroeconomic concentrated in $X.XX midpoint non-IFRS adjusted of strategic Celestica’s if revenue nearly represent year results year-over-year into challenges. increase increase our XX% achieved. strong of momentum strong is the $X.XX quarter, The high non-IFRS midpoint, a Because of achieved. Also, markets to by Our Celestica at would our new third would XX% we are long-term XX% full our fourth EPS marked navigate represent to of ranges. the value our of if an pleased the providing execution adjusted plan. raise performance foundation continued XXXX year-over-year with revenue guidance us

and the We portfolio. customer supported our opportunities continue strong many front to by execute diversified we on see bookings, in growth of us, by backlogs, enabled

outlook. On we opportunity are also this year full the a of taking a provide strong XXXX, back to XXXX

mark fiscal coming if $X.X revenues for which record our of would non-IFRS the least EPS achieved, year, to another to our at achieve for For we outlook $X.XX, billion. And high company. $X.XX expect adjusted is

increase margin operating are X.X%. basis we to XX by to non-IFRS to Additionally, pleased range our points company’s X.X% target

the for third outlook our like to I detailed I guidance fourth our on the turn over the of will quarter. further for as as provide color who to quarter our would a of Mandeep, financial in the businesses, each Before provide performance well overview call

Mandeep Chawla

everyone. morning, good and Rob, you, Thank

midpoint sequentially. end Celestica revenue $X.XX the operating XX both businesses. fueled time driven growth ATS businesses our of material our XX operating program continued the the margin up up in ATS total meaningfully non-IFRS guidance our Revenue higher high higher high-teen Equipment, up improved $X.XX share demand, basis supported XX% percentage increase. points for the exceeding and year-over-year non-IFRS by This of the achieved year-over-year in driven per revenue A&D above $X.XX, and achieved was X%. XX%. by third sequentially revenue was at non-IFRS billion, and of growth points Sequentially, by XX% the majority margin the XX% of has strong points $X.XX represents our up We up of ATS of than up basis segment basis XXXX solid first third ATS came profitability guidance in quarter than double-digit our our year-over-year Non-IFRS of revenues year-over-year well and high in XX% revenue the The end Third and and Capital across was adjusted was quarter, revenue X.X%, accounted strong new earnings by margin were range. was ATS CCS year-over-year operating Industrial The ranges year-over-year above our up in XX up sequentially. revenue expectations ramps availability. and about segment segment range, segment performance quarter. guidance segments.

revenue HPS higher delivered primarily segment of growth year-over-year our the CCS strong quarter segment strong market, CCS up driven sequentially. to another Our end our due XX% with was by revenue performance strengthen in Communications XX% business.

demand revenue expansion. Our of strong they third million growth data quarter, HPS XX% in business continue HPS strong growth, to service to providers, in center year-over-year. exhibit delivering continued as by up in $XXX was from invest driven the The very

HPS Communications sequentially. gain were share, and rates. was of market outpace XX% ahead us to was up anticipated XX% year-over-year that in pleased of company increase mid-teen underlying market our business total helping the are our growth expectations up quarter. revenue of continues revenues XX% percentage third We HPS revenues a

was mid-teens noted, business enterprise program close sequential by growth driven our and lower. expectations percentage quarter increased improved revenue year-over-year up by Enterprise XX% X% customer and to As material year-over-year, availability. revenue Sequentially, ramps. the demand the new driven was our HPS was in and

XX improved the margins. The a and driven across X.X% year-over-year and points quarter, margin segment points XX year-over-year ATS XX sequentially. was third segment by to up of basis as result profitability in basis the increase stronger Turning segment margin was up was demand of year-over-year mix margin volume ever business. The year-over-year points up was the improved increase up XXX driven by and segment segment highest CCS margin maturing X.X% leverage our points HPS basis and program reported sequentially. basis margin ramps. within CCS

or per X.X%, $XX volumes sequentially. per basis million, $X.XX Non-IFRS quarter year-over-year and XX and in quarter. by million improvement were was some $XX.X of million, $X.XX margin metrics, basis of due the Adjusted net $XX both in year-over-year to earnings IFRS year, to up and last or points, net operating earnings additional points operating were up financial share the the per $XX for on ATS The million same Moving $XX XX million, or net last benefit higher sequentially. was leverage earnings year-over-year compared up gross and CCS. $XX driven million, quarter down to share of $X.XX earnings share

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

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

adjusted over X up highest years X% non-IFRS in of was year-over-year X% and sequentially. the quarter up Third XX.X%, ROIC

During XX the our X for segment, XX% quarter across XX% the quarter second comprising customers which than greater the both quarter, of our breadth product that XX% in of our XX customers testament customer total XX% customers compared Both our to are in is aggregate the programs, top quarter accounted individually with and quarter second our revenue, and a compared of XXXX third to of individually for the XXXX. of of in or third had total of offering. in X revenue more of accounted We third revenues in XX% operate separate CCS and XXXX.

capital. working to on Moving

of the by driven was end and environment. recent the chain challenges quarter inventory in our Our sequentially, the have $XXX focus industry up million persistent been the balances Higher up quarters, year-over-year. at a inventory in $XXX million supply $X.X third within billion,

of customer us get have let’s the strong non-IFRS while ROIC. generating results advances mitigated So cash levels, demand, higher lead inventory longer are to strong at enabled by grow partially adjusted which rates, exceptional times and

since lower prior period, over quarter, inventory cycle As year Cash the third quarter the the third lowest days and the we expect were material environment balances time. of reduce during to days XXXX. the improves, XX X than

diligently Our and to of working balances, $XX with expenditures manage our capital approximately quarter our million, the closely work were or suppliers. customers team X% Capital continues to revenue. third working including for

investment to we the quarter. program adjusted cash having business, CapEx As quarter, of half to Mexico the growth $XX the our second Southeast in Solutions in capital Asia million expenditures Non-IFRS in million prior lower primarily including year. support our and call, expected increased of and was the we is be in $X to during our new last footprint compared of win. noted levels earnings the flow Lifecycle a expansions year of first The previous program $XX period, third in higher number million XXXX to investment capital after support half during free

million XX, $XX cash to XXXX. September as investments flow was million strategic $XX adjusted capital working in outlook our and fiscal of we be continues As non-IFRS year free make

additional some Moving metrics. on key to

the balance of $XXX end quarter and at million million $X year-over-year down sequentially. down third cash was $XXX the Our million,

million our capacity us provide ended million. of approximately leaving We combination with $XXX net anticipated of in liquidity which billion, $X borrowing quarter, us balance gross million sufficient $XXX million, to under business cash position the $XXX $X believe with debt is revolver, a of the previous we a from of quarter with with approximately needs. down debt Our meet

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

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

launch after our approvals, During December. the capital fourth program subject current program in within of to we capital quarter, NCIB remained expire Return necessary priority to early a a strategy. intend to set to shareholders our new allocation is

to to We our aim non-IFRS over the into XX% the XX% continue reinvest flow free shareholders adjusted long-term. return to cash business and of

discount trading we However, earnings focus operating believe the debt, We at repurchases our share net have is to considering with such, as in as active material our market. priority share price remaining previous while short-term NCIB. been and is reducing opportunistic performance, a currently our in our our strong noted recently under our when calls, on

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

per $X.XX range is are to ranges share expected XX of earnings earnings If be and is be achieved, basis $X.XXX quarter and which our an of rate expected in effective the per non-IFRS Fourth share. expected the midpoint sequentially. per be the the to and increase achieved, in to are operating flat the X% is is The approximately sequentially. prior If to year revenue adjusted up Our non-IFRS the quarter. $X.XXX margin midpoint midpoint be adjusted quarter period range would share this fourth SG&A $XX billion. revenue achieved, of billion $X.XX range quarter for adjusted would over be the year-over-year. tax XX% of XX% would for our to range represent non-IFRS year-over-year fourth the the $XX non-IFRS million. anticipate of be would in range non-IFRS of fourth guidance revenue If up million this points be non-IFRS up EPS to X.X%, adjusted approximately adjusted We to XX% expense of

outlook market in ATS year-over-year, revenues the be all market in driven new markets end up supported mid-XX% CCS in fourth in be from mid-XX% revenue new Enterprise we growth the our business our outlook. and customers service businesses. turn growth by low-XX% additional driven by strong our offering. on of Communications for to the in Rob to anticipate our turning end market, over In quarter and up our ramps ramps year-over-year, ATS double-digit supported demand back anticipate demand I’ll storage by In range in provide provider Now by our and call overall segment, anticipate range of to the XXXX. year-over-year range continued In we to strong end we end color the revenue end our in HPS compute. market, to our program

Rob Mionis

Mandeep. you, Thank

some to a on outlook, success the given I market provide Before step sustainability ongoing the I backdrop. our of move and end on current commentary to want back our take macroeconomic

our As X% in surpassed in the first non-IFRS operating for company’s margin history. time we quarter third the noted, our

we XXth As margin year-over-year of our non-IFRS quarter recorded operating consecutive improvement.

poised also record achieve mark are non-IFRS in EPS adjusted we surpass We and to if outlook achieve in XXXX. the a is that high provided XXXX, in new

a structural more is we us markets well entry, demand, evolve coming we our into by diversified, to important to higher key a immune and that with barriers business. Solutions from XX% more helped believe profitable we of business. what revenues changes have now are decisions resilient of the impacts diversified Lifecycle Celestica call strategic made While as in changes which company, have cyclical as to means our no some

and As we fixed benefits our a wins mix market cost strong gains. grow leverage program providing and structure continue additional from believe volume and support to end our share consumer due the and not new require in our we XXXX Moreover, significant broader already does Solutions, outgrow investments. we lean Lifecycle expect is we market is Therefore, to both minimal, exposure, to market to will margins. exposure markets

like estimates backlog. export impacts would China controls as quarter growth continues ATS driven strong the to our outlook the moderation by wafer The spending calling are equipment Now, significant short-term secular for X fourth a business market new and through market ramps Equipment segment, with the I turn fabrication We mitigated End the of for gains. in experienced program growth strength and existing share over businesses. exhibit anticipate are Starting will has past market our our continue our years. Capital XXXX. our by to to demand,

of and new we Our in on support wafer investments business, edge expect our focus to market of however, is remaining the leading anticipate the primarily as our focused broader on we quarter. share Based X on-shoring, pockets demand such the capacity to coming expectations fab equipment new order and in market, nanometers. where strong than outperform on wins fab gains, wafer to technologies market backlog, less equipment continue strong,

green trends. EV next robust expected market, and supported ramps Investment growth for program demand several in secular generation, demand be vehicle New charging in energy long-term storage the and sustain favorable supporting and business in Industrial are such demand electrical technologies in for projects growth continue by years. our to to the as

Industrial X business has year, organically of first into the Our growth and organic months expect XX% revenue double-digit these XXXX. in trends grown to we support the

continue by driven XXXX, in aircrafts aerospace Now program believe Market levels strengthen return for new continue pre-COVID estimates turning air to which should to new projected suggests to aerospace commercial further highlighted is commercial we see XXXX. business should demand by A&D, deliveries. wins. single-aisle and improvements near traffic now Commercial demand we in that to through support jet to

strengthen ramps and also as growth. governments its their medicine track, and our anticipated drive In particularly sequential to EU. expected is solid militaries, devices new growth the surgical revenue business to Defense business, HealthTech to in in project continue continue Our are year-over-year sports

We and wins COVID-related offset contribution in and imaging beginning for and new are next anticipate monitoring imaging are seeing also to equipment. than new diagnostic and and softening for devices, demand demand expected solid demand from monitoring anticipated more patient Strong year. in patient projects

segment. our Now to turning CCS

period. as supported business our investments in seeing recording the The customers, remarkable significant strong a CCS to growth billion months service they of year, Our our our HPS HPS in compared first scale remains X of from segment, from is we capacity, gains XX% of in capital results for that revenue the the data share the growth in prior year market are driver primary provider center the by our business their ODMs. coupled with $X.XX rate

have least though, into to comps subsequent quarter. each at rates become calls, we moderate growth XXXX, with expect in trend likely As noted near-term, it our this view tougher will for the prior is we continue as that is

in ramps strong New hyperscale with into significant continue to our coming from demand support that market customers has our what control. programs for factors and far Communications admirable the ahead. ramp finally, challenging and reflected We quarter, from outlook the XXXX. of the accomplished our will which XXXX, strong our HPS a And within in XXXX, results impact demand with for Celestica to economy Enterprise, by am remain demand end the of our despite potential year-over-year the existing in end strength on the demand of offering. outlook, in slowing a in continue incredibly we signs year. have I of healthy in demand demand broader remain growth had our typically we an this as our program storage year in managing as the portion cautious from more thus growth done a pleased pronounced also Enterprise Despite Across our growth a team end has environment, anticipate remain job year. new market wins. during double-digit is to anticipate strong is expected into compute supported through new is we ramps, for continued Enterprise Demand of end customers. This

We our on are like turn operator our plan and our confident to the for execution that, you. for consistent would With I value shareholders to over drive that strategic now focus the over long-term. the questions. will Thank call

Operator

sir. begin Please comes first question we session. from the Thank Your and now will BMO ahead. you, Moschopoulos question-and-answer gentlemen, Markets. [Operator go Instructions] Ladies of Thanos Capital

Thanos Moschopoulos

Hi, both relative availability. the said the prior look you to component better combination Rob, of your at a we and quarter of good if it upside stronger demand was expectations, morning.

upside you more it factors, Just of qualitatively, if chain the doing thought? those think than supply about demand weighting better relative we more was towards weighted towards X or

Rob Mionis

would Thanos. expectation. was chain the along supply lines improving, than say, more of original was clear-to-build it Hi, I constraints better our

So it our was in and you our if strong will. the really quarter, fill anticipated. not enabling better fulfill convert, backlog it us to but convert rates ability to our actually than moderate was Demand, demand, it

Thanos Moschopoulos

Okay.

far XXXX strong to currently guidance level Presumably, speak XXXX, is does over. in that introducing of even As visibility fiscal backlog you’re as that the the XXXX you for have?

Rob Mionis

Correct.

to of I little continue strong growth confident from in areas, a look we net-net, provide growth business. – Enterprise demand our into see coming we’re bit given see our that to to we do macroeconomic But, verticals. think, we good forward and as good, As light able We XXXX. backdrop, going XXXX, some feel many China in the

Thanos Moschopoulos

Great.

in see think how reduction flow you that so continue, Finally, of a some and as cash the presumably, you year? We did XXXX? CapEx should over cash a Mandeep, for next like drive generation you sounds inventories might about bit think

Mandeep Chawla

we want a cash always because year pleased say working that make do Yeah, we’re we’ve decided million, year. you’ve this capital, have investments Thanos. to in But our to generation $XX would of with highlighted. outlook for we more of as I number so had Good the far morning, this

do improved there XXXX, should through be capital. unwind material to working the some anticipate going the that clear-to-build go on of help us we that As we side is

to our we that next $XXX so, be over that’s year. think a goal million, for And continues safe floor and

Thanos Moschopoulos

and Thanks, of Congrats guys. luck. Great. best on the quarter,

Rob Mionis

Thanks, Thanos.

Operator

Your comes go from of question Rob ahead. Young Genuity. next Canaccord Please

Robert Young

morning. good Hi,

leading already to XX just about could about you there. progress? How by of that covered semi little months. a space, The safer. that a dig want a talk little probably to already deeper in ramps Maybe how on that give business visibility is if of just process little bit so a the visibility You talked curious your a cap the bit of in? locked much But visibility the the I’m there? much next little has highlight exposure level note in is of of sense Or are over is I

Rob Mionis

Sure, Rob.

and your XXXX, So a the comment in than wins for new step and in we we a on the on fantastic much to and also very share, Korea, of being our program north back XX%. track Malaysia that have America reason and a just about take be market, market integration of footprint to have growing North grow vertical faster some we growth. competitive that’s we’re large capabilities back expanding should that’s And

resolved. have first focusing relative an that market for reasons; said, should business. XXXX, and certainly we under is the to XX% well the really and And that a year. good broad fab year impact as is, seeing From wafer second will robust, those next could more from spending. started our have is is pressure of node, mechanical extend of of couple than to market less As our on growth ramp perspective, to lot using their the the the going A mix program so the fairly is aftermarket supporting vertical limited; this that from equipment less a perspective; new is to right we’re growth. and as we’ve exposure growth some memory XX% China all we much our the being pessimistic, this typically that the we to lastly, some programs up news our perform not is nanometers feel have capabilities. we On end mix. into integration second that, of than of more additional reason, to are better the decline high coming look into China is will is market XX% seen predicting memory reason a of if confident and capabilities now analysts headwinds, on X all to Demand portion exposure X% export in is controls top a That

should So, confident market, than be pretty feel we into go to to flat we the up – we net-net, and up that as perform will XXXX.

Robert Young

for is above guidance If said that back guidance does the that commercial the over that margin margin to I was contributor becoming and color. aerospace. comments, I XXXX order to update wondering year? the very it it’s give next in all Thanks And get would for X%, business require where think to you recovered margins. you Okay. impressive. past the just Or think in likely if anticipate on, just an where go a us maybe operating contribution from A&D is I to

Mandeep Chawla

morning, Rob. Good Yeah.

margin So and trajectory a is now that we the in guide right that company’s seeing we’re for company highest that’s highlighted and QX history. the margin of the our X.X% from things quarter, the pleased some this with perspective,

then that the Number year doing the what next If history. the that’s raising QX and we’re And mix. from of highest we’re for points there’s you is implies the the take midpoint driving guidance, things basis in benefits main Really, X.X%. that. X X.X% is by are now X.X% this it one company’s XX continuing range between year for

revenue the Lifecycle is which as Solutions Lifecycle for to continues company. Solutions two-thirds accretive of is the margin And to the grow. So revenue, profile company’s combined

perspective. from benefits see mix a will You

to starting are we is second volume the benefits of leverage. see The

to that our have functionally And – maintain in could we take While cuts been maybe transformation asked that over strategic we could structure everywhere the ago, investments a the number of and when the we we we were to we were maintain didn’t because that knew through we growing. decision factories, so. do going years made

top-line. is the as right as And nearly growing so SG&A our not fast now

specifically benefits there on your So we’re as well. seeing point volume A&D. To

the strong puts within right be back moderate, So but now, as and performing and into at going that ATS will see then we will CCS coming year, which X%. expect can markets probably takes mix well. is themselves. margins next CCS some incredibly happening benefits some are there’s you There still

not Equipment had sequentially. businesses, was improving a performing be with volume to back. seeing still couple is in margin But profile And it’s is opportunities pleased A&D we A&Ds well. pre-COVID. we’re Capital well, some But the it is the and profitability are still of in very performing So very demand bounce more HealthTech where

business, in coming growth know a then lastly, same seeing profitability. Industrial. our at is they significant a an those PCI and had, from full We’re of which peak not the quarter, that aren’t is excellent at as the for us, business levels fire yet you business part profitable programs thing is despite still, Industrial, either. from last top-line is But And operating the their

there’s if year. we go to you as within improve help ATS margins So tailwind some next still will into

Robert Young

the Right. And that’s beyond operating X.X% X.X% to margin…

Mandeep Chawla

No. We’ve into taken all that account.

as we year. So, end we of the well, Solutions moderation. pickup bit over as then, next CCS ATS year. go get And little grow help higher probably opportunity may going that range through an a to into again, moderate has next a to will any Lifecycle hopefully that us

Robert Young

expectation? anywhere. Just long-term is that that double-digit wasn’t little guidance to the No, I able reiterated to guidance, of the that pass Is line. right? find the EPS I’ll And midpoint you last below us, one, gave still

Mandeep Chawla

know, EPS year. the a highest EPS. EPS growth midpoint so back in company, The this what mean, QX you $X.XX. as with is the I of so that significant showing in we’re we guidance pleased I Yeah, for overall this, that XXXX, very The had increase we’re believe, as calls $X.XX

when the $X.XX the XX%. The year-over-year $X.XX XX%, up $X.XX basis, think year. and X% $X.XX at implies I on look implies that’s you next to Now

that to do some we growth higher, EPS then end the of visibility to But a so, medium- be given of range. still the going over have be higher years that are course, are, towards is a bit bit the lower. number believe right will that and We And some the working right obviously years today. XX% are to now, targeting we will XX% be the we long-term. There X%

Robert Young

on the quarter. Thanks. Okay. Congrats

Mandeep Chawla

You’re welcome.

Operator

of of Your Bank next from Ruplu Please America. go question comes ahead. Bhattacharya

Ruplu Bhattacharya

Thank taking results congrats question questions my first margins. and you strong My on for is on quarter. the in the

versus operating the X.X% you You’re end? midpoint the top to needs to CCS the to obviously, performing low you happen it’s end range been for get to much X.X%. What the above range. that said segment, guiding the specifically, margin And the to of versus XXXX long-term

margins fiscal XXXX? So that about we how should segment think in in

Mandeep Chawla

continues have. are X.X% there gives there at us be we of with opportunities. just at because do X%, on HPS. of margins higher continue we but Yeah, say, a billion. probably a to the same at side, turn go to least again, range, X.X% to so we backlog is would $X.X at going we said, already don’t probably to to PCI them I we that is the leverage come that end production opportunities grow be If from X%. we But continue we on this and full revenue, different to both that between as started that that to of above would talked comes in $X.X grow not then because business. billion, range. is posting strong won’t this revenue of posted posted. already to We PCI as to how historical of segment being expect out. the expect where on is segments back of just also in ramping by end And the what utilized additional be end because it’s a that’s And We tied the equipment is revenue have, that bit very we leverage, around we ever expect somewhere on a help year, margin to heavy maturity overall, the since the time, look was necessarily margins we some you it X% When higher see have programs the us CCS will at be rates, based of the margin. we again, volume But be which for so A&D, the little do will at just benefits get back is CCS don’t quarter cost the just the about to we highest quarter, the now But they’ve that XXXX, cost to We expect ATS of the mix specifically, next fixed which past to well. beginning expected back recovery, year. do as

So mature, those we significant our improved we as that continue profitability in business. Industrial amount specifically expect. of business programs are is ramping And there would to a

Ruplu Bhattacharya

contributing, of you all there. PCI the How or fiscal guiding the on XX% XXXX What about guidance. think you’re growth. expected growth? is XXXX fiscal the was from was I midpoint HPS And for from question My details year-on-year? revenue is it HPS the revenue Thanks said growth fiscal at X-month next Okay. think X% in up to should first year-on-year XXXX? we revenue in contribution the the contribution

that of revenue the from much how be HPS would growth? So

Mandeep Chawla

Yeah.

has year-to-date be third basis, don’t million growing. well. relative some PCI XX% specifically, we business the quarter, So, to now, On as this could additional year There the up $XXX Based going business anywhere seeing I on HPS, year-over-year from PCI from contribution is million that I to a around been trajectory been sustainable. synergies previous growth million maybe not Ruplu, business $XXX XX% but the to we up business for that year-over-year in specifically, business go public obviously, out $XXX right the was on to $XXX million We’ve fiscal is where break back bought revenue that XXXX. XXXX. outsized good business remarks mean, next of just when the of commercial is year

that down probably normalize, to year, As growth we market going to back go are we’re expecting rates maybe now into rates. next

in strong, very So expect we the will the be margin there continue moderation to profile to growth will But company. a within be be overall and to HPS. that continue do accretive

Ruplu Bhattacharya

can question, debt? XXXX, maybe for cash M&A cash for to versus specifically, And prioritize it. of as that do you at ask last you Got versus how allocation capital shareholders, look priorities you I if returning reducing on fiscal the for uses my

Mandeep Chawla

Yeah, so the strength strong number our is I one of mean, priority balance now the right generation. sheet. happy with were very we cash

times know, you liquidity $X leverage in billion overall overall. As X.X gross only

do sheet. So there is, we healthy have balance a

this we We’re wins quarter, in investing in because going are directly strong you CapEx areas to that continue like to the invest have. in we new program business saw CapEx,

when the our lines up less free of credit in interest flow bit bit net a tap and would our see that to you strong balance cash building is in well. So a the continue by a likely us go that continue reduces expense. cash immediate to to business, debt more as that pleased their little short-term quarter to we’re allows little reduce inter with But generation beyond I invest

We’re going to intention, and our until can have then just mentioned, have X, December to open the NCIB so open. we open program as one new we up a one, always

depression opportunistically on shares share will is the We buy severe price. there when

because way cash. with or price being either $X strategic the quarter. back use added we strategically. it’s said, with we price. we view share can million bought right we’ve capabilities now, shares can around an already, the actually to actually on It’s capacity, of I to a And where back continue to of business adding you M&A, accelerate they’re that to a when depressed isn’t bought a to last need right $X existing value shares which our it shareholders. synergies better good find already tell that the in a our to is M&A said, we of won’t probably customer return where As we long-term hesitate invest. us base, That roadmaps severely have And of October growing we million at example, give

funnel. have We robust a M&A

We’re very disciplined.

have healthy in front whether we M&A we next of sheet of pivot, buyback the trigger you cash in and when going look pull we believe at majority As that the the know, that the a we vast into that balance that with lot we But outlook or have, the do it’s we share on balance sheet targets, don’t the can year, the them. front.

Ruplu Bhattacharya

for Got on congrats the all quarter. again and the details, it. Thanks

Mandeep Chawla

Thank you.

Rob Mionis

Thank Ruplu. you,

Operator

Suva Your ahead. from go Citigroup. next comes question Jim of Please

Jim Suva

very current your in in outlook your growth margins. And you. trajectory Thank is impressive

you impact about capital we like kind growing But, curious of getting has far know to and working CapEx inventory inventory about about and went I’m Just kind do your the be maybe how little you forward is component CapEx it us mentioned, a But with help think, up, I as should thinking but can and chain supply the availability. business. better as bit? you sure of your inventory, going expectations

Mandeep Chawla

Good Jim. absolutely. morning, Yeah,

And had I clear-to-build primary the come being But target we of side, fourth you around gives year, digits, that into growing light, and the look CapEx the to be the But range X.X% half XX% of us an an X%. of to countries, year, we to CapEx opportunity back about, revenue But So, we’re would probably on we we’ll the right probably, and to very working meaning building we’re into investments talked as higher our material quarter, XXXX, not as first just we again now us I or of of at back as the improve and reason well. continue even the record being inventory with of seeing because the range. restrictions opportunity is It required about, as in guidance disciplined the as capital a on us we’re there that we’re start is said higher we more around close the when X% normal, inventory on is the did In past. investment. back to improve, inventory level X% have X% traditionally getting between it talked the for build think revenue then number constraints starting less the we inventory In quarter, year-over-year. new various end of in lifted the opportunity the to frankly would CapEx at of slightly make. X.X% In that to range, we before. materials a world has been that. seeing were wins, single be maybe are that revenue. reducing getting is the third X% providing quite good Overall, have is than to say that you the range have as a track XXXX, revenue. much that of continues higher next as in gives we level may But operate we

cash we XXXX, so on do provide And us in unwind which with capital should some good a expect flow. working free opportunity

Jim Suva

congratulations And to you you. and teams. Thank your

Mandeep Chawla

you. Thank

Rob Mionis

Jim. Thanks,

Operator

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

Paul Treiber

of obviously quite just I the and bit much morning. good outlook a your very thanks had questions than a couple XXXX, on which was expecting. stronger Hello, is Street for

And your the outlook? driving In conversely, lead in what that to words, macroeconomic in then a are Or guidance, know, what degree in to would terms occur? you your see maybe factoring – environment, you upside what slowdown you to is other the environment? to of if do downside would

Rob Mionis

more customers. bottoms have strategic we all all do our with up key annual importantly, a planning We our process pretty Yeah, operating when we but do plan, Paul. in-depth our and interlock Hey, our sites plan.

markets strength upside Perhaps the So, pretty as provided down data the outlook, our your wafer answer going that we it adoption is business aerospace should be in we’re outlook, as ramp would we little improve HPS those a quickly about would a And, anticipated. number that in in ramping than anticipated, questions as guidance the help through we fab faster products in directly. not growth little give much would us able recovery for ramps. a good we’re those more boost. or currently upside. higher our spending also Industrial be business more a also our to would feel cycle market give bit of equipment And it expansion us to that provide What continued some and to center

inverse we I everything a the of put that obviously, I pluses but XXXX. gets just able minuses, that But done have it numbers upon pretty we pressure, year balanced view in XXXX. said, downward be just hope And to improve On pressure. that to again, we’ve along, being downside and would mentioned, and would we say, the the as the like we provided, of taken the have the

Paul Treiber

questions. helpful. That’s of A couple follow-on

Is outlook does XXXX. strong side? a your looks like Does positive in Just that supply to in for for supply positive are terms XXXX it potential regards in Does mention slowdown it net chain consumer It XXXX, become the variable supply for you or as here. on a net chain? you didn’t chain? improving things of

Rob Mionis

And them a a have XXXX, shorter being long, I get are technologies lot certain certain semiconductors think instant, we’re the would specific point, the mention suppliers improve still gradual times now, It positive, for a less still node in – nothing and Yeah, Paul, all there I are things. clear-to-build certainly remain are frequent. and lead through probably our were out because capacity suppliers said, building but gotten that recovery. technologies that to assuming That will constrained, we gradual recovery, older shouldn’t Right our better, there. isn’t it’s a from are that that. need that de-commits on good the of suppliers

terms So, improvements. we’re get nothing as outlook XXXX. in monstrous assuming we all, But into major our in the of improvement gradual

Paul Treiber

on. Congrats I’ll the pass on and it the outlook. quarter you. Thank

Rob Mionis

you. Thank

Operator

ahead. Instructions] Chan Your from Securities. next Daniel of question Please go TD comes [Operator

Daniel Chan

guys. good morning, Hi,

So margins? performance? you helping ability mentioned is due that are impact costs customers? your the to given with those improving pass Or component to your on have component supplies it neutral your an Does suppliers

Rob Mionis

improve some supply the To components extent, of factories. improve efficiency our

increases. price in help of So margins the cycle it terms our of through does pricing

in to increases overwhelming customer. terms forward been pricing those the passing we’ve majority, For our on price of

and the rise we’ll contract So, with that. on tight

Daniel Chan

the much they we what ordered than Okay. near you that Thanks during for customers supply normalizing more that. is the in channel sector? there’ll retail excess what components extent in like working is supply through saw in backlog to risk the and there issues, that And future? inventory needed your a be And the

Mandeep Chawla

is where Yeah. a of from balance hoard we have start sheet. inventory, risk. believe that a customers we’ve lot have one something are deposits customers build always we on Overall, as of manageable. it you that going order is Good is always something is It’s would million to been morning, to out things know that almost $XXX product. the been the in our there. environment, I that say a wanting constrained to you that’s Anytime But Dan. building

their to so, is down that money to relative the confirm we – asked And customers build demand are putting inventory when real. being that’s forecast there often by they’re a to

vast know, is The of other the inventory have, about the of customer. specifically thing, the capital our and business, the liability we I know you that our this majority working

going forecast become doing pushed that relative liability. going also are and really over that forecast. is provide a to to customers materialize know order, a they doesn’t orders get to we back so, And or their if inventory But them, to it’s that

there’s So, now a rationality I’d that overall right marketplace. the in say

over We of be happening, buffering that we the material. that’s are of but going don’t expect it’s pockets to now maybe been mindful right

Rob Mionis

out fulfill today, would demand. whether decreasing Dan, either lower But growth been we’ve up, it’s demand haven’t customers I us things have to add, demand tempering tempering. a so or it material may also or a asking the – issue And backlog But to seen or growth date. our we push lower the and a been seen outlook been growth cancel it bit little be hasn’t reducing we’ve backlog converting customers

Daniel Chan

Great. Thank you.

Mandeep Chawla

Thanks, Dan.

Operator

are phone turn the to There I to remarks. lines. conference no questions on now further Mionis the closing would like back Rob for

Rob Mionis

you. Thank

diligently execute I’m solid outlook and in initial full macroeconomic feel And through that start supply macro environment. to and year as we by we to posting results. a the financial raise to our to able our in and the we We And year difficult chain confident we’re continue given current profile pleased for do to our another our provide raise demand pleased order year. continue backdrop. progress able the customers our to will continue so, strong quarter we’re XXXX. to projections throughout I’m and work outlook the to for also well

our to as for through all in ability progress the lay] I ahead. well economic year. are today’s that to you updating we confident potential any navigate we [my joining call Lastly, to throughout and cycles Thank you skilled and our at waters continue choppy look [ph] forward business managing feel to

Operator

concludes gentlemen, this all like this morning. participating. for for your to would thank call and conference you We Ladies

disconnect now your lines. may You

Celestica (CLS) 25 Oct 222022 Q3 Earnings call transcript