CLS.TO - Earnings call transcript Q1 2024

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Operator

Good morning, ladies and gentlemen, and welcome to the Celestica First Quarter 2024 Earnings Call. [Operator Instructions] And this call is being recorded on Thursday, April 25, 2024. I would now like to turn the conference over to Craig Oberg, Vice President of Investor Relations and Corporate Development. Please go ahead.

Craig Oberg

Good morning, and thank you for joining us on Celestica's First Quarter 2024 Earnings Conference Call.

On the call today are Rob Mionis, President and Chief Executive Officer; and Mandeep Chawla, Chief Financial Officer. Please note that during the course of this conference call, we will make statements relating to the future performance of Celestica that contain forward-looking information.

represent a judgment, in conclusion, statements today. statements differ results the forward-looking made from materially forecast these our actual current could forward-looking While or projection such assumptions in Certain are factors and drawing material any statement. applied We undertake forward-looking expressly to required update so law. statements by unless do obligation no to these

debt will cash this or or non-IFRS adjusted non-IFRS return earnings to earnings. invested to capital financial flow, adjusted measures, EBITDA addition, during adjusted tax SG&A operating refer margin, and margin, In including rate ROIC, adjusted expense, gross free adjusted adjusted gross call, we adjusted non-IFRS ratio, XX-month various non-IFRS operating adjusted trailing effective EPS, on adjusted leverage share per

conclusion, contained material and information the factors comparable well risk such information IFRS financial Celestica in that as their about as are from on measures in press forward-looking of reconciliation U.S. directly distributed to of references that otherwise dollars and all non-IFRS was sec.gov are release call share found performance that public diluted in Additional yesterday sedarplus.ca results well specified, a as outstanding. financial dollars future or to may forecast and on impact as may factors actual projection cause our results website. could differ and shares measures our be to on Unless is filings materially to per information this which our at based most

the call now turn Rob. Let to me over

Robert Mionis

billion EPS at quarter, exceeding achieving high call. our thank very first with started of end year for both Thank $X.XX off a ranges. and you, joining us everyone, Craig, We $X.XX, while on came today's morning, guidance you the good adjusted and strong of in our revenue the

was EPS ranges. non-IFRS X.X%, our and the revenue was adjusted of guidance which operating above midpoint margin Our

across in ongoing solid dynamic in Our was demand our during in supported by kick by year-to-year the CCS across segment the and as business of ATS ATS our quarter. continued down from other flow operating primarily customers. industrial point million year off margins slightly by adjusted both resulted strength revenues driven performance basis improvement drove the This growth a $XX our sequential markets businesses. our by revenues non-IFRS and strong CCS resulted strength segment, segment, cash and X% customers our demand anticipated, of in year-over-year. In and free year-to-year end enterprise in The were from partially communications margin to driven solid hyperscale XXX offset softness our growth

see And year-to-year the solid revenue year appear outlook tough remains stabilized, business, and revenues growth are in forecasts have coming our accelerate quarters will signaling quarters. the that capital A&D business the year-to-year double-digit continues equipment growth to to customer for positive. Our after and several in

regarding an pleased to We tuck-in acquisition. update share are also recent our

and EPS our hurdles, start financial This our allowing our the of we including expanding with our across LLC, by our assets. very strongly U.S.-based and to agreement to the of road pleased our acquisition enhance business in adjusted geographic us Following infrastructure life meets being and service accelerates definitive the our cycle to services to offerings accretive entire IT our within NCS acquisition capabilities quarter, aligned are is for signed XXXX. Overall, map strategic footprint a we customers' year. a and CCS management strategic million. the This to acquire $XX map our segment close Global road IT Services asset

you. of details will first and guidance XXXX. a market to are Mandeep, tailwinds the our on across the We second our performance the financial quarter to number by our quarter our now our would strong over to and execution, further the provide solid turn encouraged portfolio. I businesses positive for in who by of like over Mandeep, performance financial call

Mandeep Chawla

good and Rob, morning, you, Thank everyone.

our segment. came quarter year-over-year. XX% ATS by partially the decline in The growth $X.XX at was anticipated increase above our in by modest in end supported segment, First our stronger-than-expected range of revenue up and CCS high billion, offset guidance an

non-IFRS of favorable of the driven improvement XXX margin X.X% quarter year-over-year, margin an our expansion and X.X%. production non-IFRS marked as margin points operating first and efficiencies. result segments a basis that quarterly in profitability exceeded The was first Our improved by operating was time of both mix

which Our the adjusted first was our guidance quarter for of the share end exceeded $X.XX, earnings per high range.

driven the favorable to compared more by and $X.XX up rate. operating was effective EPS period, non-IFRS higher primarily prior adjusted a Our year adjusted earnings tax

minimum rate global tax expectation assuming would was first March XX%, in adjusted XX. tax enacted by Our be that Canada effective quarter

Given effective approximately $X.XX the of to adjusted in per legislation leading benefit came rate at has not our tax a yet favorably share. been XX%, enacted,

ATS business. Moving industrial million, continued first in segment softness of The were $XXX partially single-digit the in was performance. with our revenue by quarter our percentage offset business. demand on to year-over-year, by growth X% which ATS was These in our in driven low segment our solid A&D decline down decrease. revenue a was year-to-year declines in line year-over-year expectations

business our period. to segment revenue accounted ATS a prior modest year-to-year stabilize XX% for the quarter. on in registering saw total first capital year addition, equipment In the of basis, revenue compared revenues growth

of billion our market. by driven products communications XX Revenue exceeding up high $X.XX was our strength the first AI/ML both accounted of higher market our for growth in of period, of support AI/ML communications in end revenue communications hyperscaler compared Our by XX% products increased segment return customers, for by in networking revenue than in driven program expectation new year-over-year end low quarter. Revenue prior was market the infrastructure. by was primarily market in first total XX% from demand a better XX% XX% revenues was driven in was quarter, segment Growth customers. which to year quarter by was total demand prior the demand to was increase. the strong quarter. quarter, up in for CCS ramps. CCS The driven XX% the percentage in continued hyperscaler quarter in our single-digit percentage million compute end from growth enterprise increase. A our our for the HPS first by hyperscaler revenue in quarter, and of including end networking our company $XXX the customers, company year-over-year higher a was stronger year to from HPS growth predominantly revenues and expectation XX% enterprise of accounted compared

mix up was points XXX year-over-year prior strong CCS Turning the drove first margin volume leverage, which period, segment the to as X.X%, the to mix. segment improved during margins. ATS productivity. result a compared basis points in by basis X.X%, segment year favorable driven up margin quarter was quarter XX and of

one During than had representing sales the quarter, revenues, for that we more XX% quarter. of first accounted total customer XX% the for of

solid our with continue a comfortable we programs, customer portfolio. support with execution We across this this remain to our current levels and with strong in number of of demand concentration

additional from prior year-over-year Moving $XXX production XX share was higher the gross $X.XX share IFRS to earnings due net period. year $XX margin quarter on mix more for million or financial some for million in or volumes. per $X.XX to up and basis resulting first favorable points XX.X%, metrics. the efficiencies quarter per Adjusted the were compared to first

year driven was XX.X%, Our prior effective the an capital profitability and the management. higher improvement compared by first for quarter working adjusted quarter, of to X.X% ROIC

period. million down year of was million $XXX first Cash $X.XX on quarter, the our the to were million first the inventory down Moving $XXX to million balance the At compared billion, $XX the $XXX prior and at end million working deposits down year-over-year. lower sequentially end sequentially capital. and of quarter, $XXX by

Cash Our days decreased, period. X days ramping cycle the on cash deposits as first were deliveries of as during prior XX result a lower the X quarter, sequentially down projects. of expected, higher than days a number year and

for to continue for X.X% flat of Consistent discussion quarter, the million flows. expenditures Capital to expect our X.XX% revenues. revenue, prior X.XX% capital quarter year XXXX the be were $XX our or last and cash of we with Moving compared to between period. with expenditures on approximately

of track Kulim first to programs floor facility space hyperscaler Malaysia. than with site our our our feet which on phase of the square square add first we expansion addition phase remain half XXX,XXX of Thailand the in the XXXX, XX,XXX of foot complete the to support commenced facility expansion We at expansion, manufacturing new During facility X our our at to quarter, Thailand first and the customers. second will by more operations

$XX to cash generated flow. compared Turning first million in million We the in $X adjusted year prior period. our to quarter free the

business to combination we with provides some additional $XXX believe meet quarter, us our $XXX metrics. Moving million, million approximately our the capacity approximately is $XXX in our on this with the under our in of liquidity anticipated borrowing balance end cash of to which first needs. revolver, million, key sufficient was At

us leaving the was Our of end debt million. with net of quarter at million, $XXX position the $XXX a first gross debt

adjusted to turns X.X X.X down last EBITDA quarter leverage ratio XX-month down compared same the first non-IFRS and period Our to debt gross turn was turns, year. sequentially trailing X.X

As agreement. March financial we were our compliant XXXX, of credit covenants all under with XX,

issuer During shares under cost the of XXXX. an to shares at continue purchased on course to quarter, first bid intend XXX,XXX in normal million. we opportunistic for our a approximately $XX cancellation We basis repurchase

quarter of Now of in range $X.XXX prior turning the achieved, of period. billion, billion of represent range midpoint the to XXXX. be second compared the growth guidance which, Revenues are this quarter $X.XXX for the if second year in is the to would our to XX% to expected

EPS would XX expected to the would same are XX% which over revenue X.X%, guidance margin XXXX. At quarter be which to per range at midpoint non-IFRS the of would of be or period of share in to quarter are increase adjusted $X.XX, $X.XX the represent earnings Second our year. per adjusted represent achieved, improvement and an basis operating the the second points an share of $X.XX ranges last midpoint, of compared

subject Our excluding adjusted tax $XX be or settlement. foreign quarter, last effective to to to adjusted our the quarter, income the minimum SG&A of million be tax tax. unanticipated million. guidance any approach global Consistent expected We expense that be taxable for anticipate quarter our second our assumes in range impact approximately exchange is rate will XX% our for $XX with from to the second

market the our quarter softness to business, we by communications be by products networking by In in year-over-year, for turning from down to mid-XX single-digit in equipment. and the percentage partly customers. range segment, We driven our industrial market anticipate XXXX. be demand demand end percentage our end year-over-year, revenue in offset of the second to our up ATS anticipate Now outlook HPS range strengthening for high in revenues hyperscaler driven A&D growth in capital

business. hyperscaler range to in over discuss Finally, end by expect percentage up the end turn the compute be the anticipated in market, XXs back programs now Rob driven our in our from to low year-over-year, markets each of demand and outlook AI/ML overall growth the we customers. I'll enterprise our to revenue call for

Robert Mionis

Mandeep. you, Thank

for like outlook the our update to outlook financial our end discussing would XXXX. markets, provide Before annual I for an to

We on quarter be which are revenue of number the a pleased to in of based and raising adjusted of seeing to now are positive our represent growth solid $X.XX, and we full and the first XX%, outlook across year expect XX% XXXX. XXXX billion our momentum a respectively, We businesses. EPS would $X.X of in our performance compared

a expected Our is improvement now be X.X%, represent XXXX. point XX basis to non-IFRS compared margin approximately to operating which would

Finally, cash for to adjusted flow million we are year. raising full our the free $XXX outlook

of in on a compared resume the segment. Within we with to to our businesses. the year. ATS for moving back the XXXX Now to XXXX anticipate first of half continue and our for growth half outlook Beginning in year-to-year to the decline ATS,

secular As ATS believe in robust business term smart be favorable continue by including coming XXXX. In will we XXXX the to help years. vehicle EV the the over and expecting long charging, flat automation energy, sustainable compared in now and industrial will year a in our key our our to for drive full trends result, to we approximately that growth segment submarkets, business, factory economy supported in and industrial revenues on be are

business demand large near experience amidst the in term, part industrial by submarkets, a a in across as to EV in an works for However, charging, our electric backlog through softness vehicles. the driven the continues inventory industry of slowdown number

our do we and return quarter. In the to continues revenues commercial for aerospace show the progresses solid in demand However, improvement A&D to improve traffic year XXXX with year-to-year fourth sequential recovery growth. expect business, expected to growth drive throughout by to air a as the

strength commercial demand our XXXX. aerospace to throughout broad-based expect persist portfolio We in

increased equipment supported the outlook a and wafer an market. growth by newly investments for XXXX. Market in anticipate portfolio, continue the and manufacturers demand of primarily year, quarter. The grow in suggests in supported seeing in the the now memory support Within third-party demand won ramping this demand support in defense base such year. We sectors currently are our by We fab AI recovery revenues to for portfolio applications for these business, ramping new silicon year-to-year market within stronger first trends calling healthy processes programs our outlook business used forecast XXXX, latest order equipment the our in early a forecasts our content anticipate for will other and and also continued chip in momentum with improved in recovery capital sequentially Generative by that into growth XXXX will of are as affirming our stabilizing of products we return are to next into programs. In to both signs automotive. that capital

for our end strong of segment in XXXX. for range revenue communications accounted number to the XXXX, hypescalers outlook by segment. on our to continues growth strength CCS in we Now segment, our segment. very enterprise support solid are mid-XXs customers expectation in raising our demand we supported the CCS and markets. In our The turning grow our percentage for in from our expect CCS both growth hyperscaler that to and XXXX, to revenues, strong CCS demand Based XX%

for cycle. and As applications this our growth learning the the in investment XXXX underpinning demand November Day, driver machine primary Investor that recent we AI have quarters, remains and in discussed new

to continue demand likely durable this is its We strength to support that secular offering for CCS XXXX. scene nature our in is into and believe continued

necessary to continuing our engineering expansion of the in position for investments, critical products a to such, maintain capacity and as order As we data in provider the capabilities services and leading center. are make including

Now remains demand our markets. The end end moving very on enterprise to our outlook for markets healthy.

compute capacity growing we investment As in the anticipate we AI/ML and ramps. AI/ML by in the deployments by continue compute increasing supported to from demand quarters, new program benefit coming enterprise strong to hyperscalers, remain

growth the to by Our communications business, mirrors ramping the demand supported from and communications anticipate demand hyperscale quarters. strong demand our HPS start this end expect programs. Within throughout market end coming new momentum We market. networking year, saw HPS the and accelerate of of sustained the that a to stronger-than-anticipated we our in for largely customers XXXX, products

by hyperscalers throughout supported increased in for from outlook double-digit Our sustained inventory of growth period a calls digestion XXXX. XXXX, deployment after networking of infrastructure

throughout feel the year for for our portfolio another to In year new XXXG including wins, is addition, program XXXX. and our into XXXX. We platforms positioned strong in expected are that ramp well very

regardless our to continue the strategic within our maps, prudent play prioritize the road to and execution confident in over long-term dynamics value the now all We We fundamentals, and for adherence to underlying making, our generating deliver solid turn like our the remain decision of of our you. markets. to questions. I at continue ability Thank businesses, shareholders. With call that, would operator for to and on financial targets the

Operator

first [Operator Robert Canaccord Your the from of Instructions] question Genuity. line comes Young of

Robert Young

quarter. Congrats on the

guide implies in out a deceleration had to QX second and the take simply line year QX was would there. the I of top half. full first in question The related just guide. the It the It

just factor? is specific out visibility or to the And -- Or any there call there into if that's something half? other so second curious

Robert Mionis

remains markets So healthy demand remain comes visibility, you and hyperscaler touched really multiple on signals to healthy, demand it but it. and down across

So some hyperscaler to exceed dynamics X beyond about is play. outlook. demand at a supply. customers provide months, XX-month But Demand continues generally there

by then And extent, availability secondarily, resource improves variability to plans or there So in orders technology accelerate. as customers' some customer deployment transitions. material some driven is constraints

the full of few first hence, the year the bit So should half relative outlook. next flattish -- our first up months. But murky, visibility is -- a quarter into fourth view firm a in to

Mandeep Chawla

Mandeep here. Rob, Yes.

growth. reflects a strong year-over-year XX% the year-over-year half Rob Just to point, set is bit what half was to your second mentioning, a the the on first but than little of double-digit X,XXX lower And build still numbers.

seeing being to thing back demand I healthy. not and going important we the areas CCS the think year. particular, but of of the in mindful our is the half in are had what for remains environment, concern, whether QX of and away material thought came look, to that was We're take going stronger as seeing availability we than such say, be to implications the back it customers in

are And discussions so continuing. those

Robert Young

Okay. That's very helpful.

would on concentration. Second customer be question for me

you quarter, little out bit. a would last help suggested networking think that I that recovery maybe

growth, was with HPS up. go so actually to concentration And the returning I surprised to see

that is plus that so there line. the that networking And AI first at -- then any at largest is other pass Or dynamic customer? And I'll play?

Mandeep Chawla

Yes.

same into continuing just we largest is about we is number At it Rob, very saw it, comms with which customer. do had hit a which quarter, a the quarter. of last programs this it's and our we biggest large programs, happening what And the You of on with level underscores growth second customer. time, talked in XX% XX-plus

with And so large as we on an strength not demand customer, but compute well. only side we're side now seeing seeing on the are also that switching acceleration the

so our able And that is to we're support them in areas. happy multiple portfolio

Robert Mionis

of I'll growth beyond healthy the remains across very as a same add our number customers those top enterprise. customer comms along well platforms, hypescaler And that,

Robert Young

And as or HPS broader you Maybe Is customers? have give many is across just I a by driven of switch. that that Is growth, the how customers that XXX-gig how than of large there a sense a broad us just customer. there, larger it number follow-on assume, is? business spread

Robert Mionis

a across customers. and year number year. also ramping XXX next is gig gig XXX Yes, into this of We're switches

is a in also on important of as additional [indiscernible] will it's to just well. ramps. content networking. amount year, HPS out to on, point HPS come not limited modules also that XXXG fair compute switch Next customers On HPS, There's

Operator

question And Chan TD the Daniel line next comes from Cowen. of your of

Daniel Chan

question. communications the on up top to just Maybe

financials? program? words, between the profile of price mix difference margin XXXG affect how and other the XXXG, In what the more is and XXXG the get you As that does

Mandeep Chawla

question. Dan, the thanks for

you little as from They're changed ASPs, XXXG XXXG. bit the not twice necessarily a as much. of So to go course,

units it's so of conversation how cetera. shipped, And really being a are many et

also it revenue, we really were be look deployments higher we know, you products, work overbuild, I on up-level happen. To the as at around expect products only of in think communications demand as XXXG slow -- customers just program down meantime XXXG overall year-over-year question asking, inventory if not and is well. growth because that the with you're to but us XXXG the development an announcing as the we're taking to revenue XXXG

we're now. next that That into going actually the side. to right more for one to nice XXXG than on it's naturally year. XXXG slowing so see shipping would down one start products both expect And filled We for

Daniel Chan

That's helpful. customers When the you the higher than data -- of traditional could at AI for data done sense your do center? center you you talk is and cloud mix your that to get the an center what products within a look was be data architecture,

Robert Mionis

one that data providing them. But the to hard is, have a solutions into what I And need that an go currently our That's we're discern. know do customers all we AI center.

firing we're all cylinders. hence, So on

modules. HPS EMS have provide modules. We We content across across compute high-value compute

content And you as And on network on and switches. [ we ] also and have also, advanced XXX devices. We know, we're GXXX to well. traditional HPS in have as development generation future solutions HPS both storage

are full taking customers solutions. really our our So of advantage

Mandeep Chawla

solutions towards we're product the are amount and you're certain seeing that showing in that are well works not are and as reason that the Dan, deployments, some really hyperscalers. of that fit HPS equal, challenging know, of all growth demand out is the lean for because you there those really created requirements hyperscalers that more The us. complex hyperscalers

which shift what complex implies we is as towards see. centers, to data of this see AI want more type we product, a it more so And

Daniel Chan

hyperscale one the experience in chipsets? growth if this the Have on in custom that your helpful. The quarter. so, ramp for given your decelerate enterprise with AI year? you successful compute remainder base just servers like? of And run Maybe what to rate does look more using enterprise. new is is customer expected Or Great. AI diversifying been in That's squeezing the next the

Robert Mionis

finish and will off Mandeep it. start I'll Yes,

XXs. the main well. we're very seeing up really second also demand The The declining, significantly ago. that We're well. a up enterprise dynamic from is is healthy, as comps of in but second in What significantly demand from compute quarter quarter mentioned, really seeing as tough in is the we terms driver storage also, year as have steady is and comms happy we're CCS up

Mandeep Chawla

quarter, And more I what would to go customers deployment say now that from signals comms Yes. the we're we enterprise side especially demand sequential of it increase line as revenue be a top the continue up-level as number aggregate. Dan, did basis. to on continue we're to what's our strong that product talk healthy. one and enterprise side. hyperscalers with is do in hyperscalers, revenues, the to see is think the I But a to We on as look about server another. CapEx second total They're we of of But seeing important at growth then type to continuing. growth and with shifting we overall, continuing serve to

Operator

Your Sheerin line of question of from next Stifel. Matt comes the

Matthew Sheerin

-- for saw was of where the just the me, inventory sheet, down down, inventory that you're gross growing One, couple A cash yet were balance your deposits inventory down net questions also significantly. please. and Mandeep, on was I

that given the of you're your you terms inventory So And hyperscale a talk not business, shift consignment are COGS? could in there? through on passing you the growth dynamics going the in seeing about

Mandeep Chawla

Thanks question, for the Matt.

to you're hitting So cash to that we the we seeing on $XXX you that some unwind we flow under million, conversion for anticipating. we're we monitor inventory side any try able every free over comfortable generated, know, continue not years and as X to as yes, that number to on as our have. And free overall save the free the flow are how of positive it, quarter, but cash cash with million. performance, ratios strong working We covers the $XX we we're year want capital more, healthy flow happy raise were conversion the to happy is, the with

help to passives times we well do they seeing were of working semis us fund with now build, come we the are saying also can year, times generate unwind. but as coming we're allowing And really as is go are on our inventory do necessarily very deposits under differences. focused they And and as improving. of point it's of Our inventory on that the still that turns. up perspective, expected And function inventory take continuing your turns and a consigned, be step terms non-consigned some are free go to in. we're long back. the come weeks, a as lead always into some lead now, in a that we return a in as as again to because which happy we in flow. To of really customers dollar our to were really as from to may unwinding where The customers don't cash model collaborative extended, positive are how with then deposits times XX are on terms any of think Lead nothing going turns know through

Matthew Sheerin

relationship? share, with on also, And large from that. customer question wanted your ask landscape. in you to one the you that that Obviously, in American There competition about on what some your but hyperscale to particularly whether expect gaining peers, does for your do is North you market we're edge the concern seeing more that EMS to competitive Thank the other Okay. obviously, you're OEMs Could a Asia. I dynamic suppliers? And and competitive bring talk your from customer.

Robert Mionis

also a on the in some second the time, the single EMS at a is programs over being our add In ways. Also, And a from respects, of given sourcing In at new. we're switching to so is qualification ecosystem different where are second is typically bit HPS second because products goes performance usually typically primary assuming is our little and for to the add a data help benefactor and of time costs incumbent, prohibitive. And of onset. And again, What a versus we initial are to is is sourced some center also dynamic within a source source source of play. a competitive to the HPS the peers. as both are equation, happens the enabling other process being EMS dynamic introduce there's which equation, of brought is EMS typically products, to competitive high-value HPS into brought products products. sourced our we're customers. bring that over this to products new there's stringent our the I lot of competition, awarded next-generation next-generation able that's are Matt, would source it the transitioning a technology program, programs cases, nothing think because the the single life strong edge offerings, play. currently our this on to second AI/ML it the matures, value

Mandeep Chawla

maybe knows support, the growing well. there's going a be to to materially point, continues good that, the the Matt, CapEx we this all that just year. to know, pie is, is of -- one year is expectation that's on going growth as bigger. to add which we Everyone going get as next The all who spend level into across top hyperscalers,

revenue it -- And look products. on the pie less is content. redeploy the or continues HBS grow. The allows complex way to products, continuing positive that as also so second happening the more us to what hyperscalers is our And with the more bigger, to is to at engineering when complex whether sourcing to get complex the Rob products capacity it just are heavy mentioned, be

as on out And not surprised expected. us. been It's has dynamics really the say so there any competitive that landscape, playing would I has

Matthew Sheerin

Okay. Great.

you've you Is of big still the AI/ML in with being -- sort your talked with about that, are programs. that of terms exclusive line in case Just customer? still the

Robert Mionis

it's would I a on basis. program-by-program so. say wouldn't I say No,

mentioned, I those Some the as And were exclusive, through life product time programs life over through were dynamics, some not. cycle. programs might early change product the

Operator

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

Thanos Moschopoulos

quarter, look of growth a If provide has been been largest would Could more to subdued. at we you're your programs how that on other year-over-year to rate Is that the a hyperscalers? growth capacity? outside fair Or bit the the in perhaps your do be you CCS some [indiscernible] customer, just prioritizing function with could exposed any you've have comps helpful. color of

Robert Mionis

finish. I'll also have I'll capacity, we and say way. But we're of that it sites, off, a and start do forward, it's our function would capacity at Mandeep stays ample not building let to forward make sure I investing

hyperscalers. mentioned factory expansion different Thailand the investment we came plans. online the expansion currently capacity patterns cycles go to script, has of and They have additional It plans of coming Kulim As capacity are with half second in the 'XX, buying of schedule. different just in and and ahead I online, that's all really we our have

So it's and able kind kind biorhythms to be we'll support happy to them. each of of of their

are next some Some heavier year. year, this might be heavier

Mandeep Chawla

just to build on that, And Thanos.

the So in to first customer. going is spreading quarter our QX, we that that seeing growth of What the the we're we're you're into off comms by saw the largest in with in seeing being the that growth that is rest customers. hyperscale is started the encouraged comms now

are made customers, terms And at year, X very across we're quarter, valid, so not full point a at the number you it looking while we as is just of seeing in X. when the growth the you of look first or

Thanos Moschopoulos

improve this year? you've the Is expand talk think there we to to year should helpful. expect then fact industrial, to offsetting not XXXX. about should and any margins got early And mix. Any in and be about? why we That's HPS in growing that reason as But got it's into weakness might think next constraints for next And we sustainable capital respect the year. the to margins, you've equipment which with too about maybe Okay. later

Mandeep Chawla

are X.X% way I'll can Yes, And together. our outlook history. From achieved, in and needed. be it, because highest the now in we're off X.X% year-over-year is mix with if overall We're will company's the history. hyperscaler of in first quarter, add margins providing involved up that and the Clearly, the happy company. margins the highest that the on level is when to the start coming a the Rob complexity accretive perspective, of is that

close to ATS. as CCS think, to grow revenues, to continue hyperscaler or opportunity, little a year, bit. The we really margins I talk as so minus And you for about looking are we maintain next plus

is the below capital to on the quarter. be year X% right your a industrial, margins of those we ATS which profitable, demand is for a But basis. get more. help business leverage strong at back, first outlook full returns comes the did the but our And as ATS. will point, as to contributes is They as benefits. So way, equipment, expand X.X% which by now to Both in demand margin

so And some 'XX. going think have we that we into opportunities

Operator

comes line question of the of next Cormark from Securities. Jesse Pytlak Your

Jesse Pytlak

increase really you you guidance is context XXXX just you the bigger? about in said, being out Or XXXX is forward? When like it for getting laid Day, of at is and the pipe the maybe increased -- the pulled some the Investor November demand think the numbers for XXXX that's there

Mandeep Chawla

QX. -- see, me, excuse call. Jesse, guidance the see your that providing to came continue coverage. pleased And above it across pull-ins all, because at happening, you are say our QX to the not signals really demand wouldn't question, as high to first probably in in of be healthy Cormark be in welcome accurate of To answer we the To end some hyperscalers.

And as quarter. some went that fulfilling we through in dropped that of the was demand

is talked customer rolling had not of quarters we're have seeing XX-month out few patterns. that to a As don't level, we it's forecast, shifts a have may visibility at the But because higher the been that about, in clear getting how demand backfilled. Rob not revenue

at deployments that, that data for Q&A, positive double-digit as XXXX April the we're to be see now continuing our XXXX. But strong of to half point, in pretty then back to continue what into what close the was growth signals or XXXX. imply is already we're rates. your outlook would demand going to beginning ahead The so yes, in the year, we talked this of of growth And about center

X we'll right to better give But for a wait seem we're tide is XXXX. so just overall for like signals feeling that outlook feeling really to now, the from months be XXXX. The demand And not it's rising.

Jesse Pytlak

more can bit then in things just of the hyperscalers cloud traditional of And in helpful. That's seeing kind you space? you're a comment what little the Okay. networking beyond on side the

Robert Mionis

and actually of XXXG cloud terms to XXX, most Yes, XXX the networking of our switches. providers is business going in

recovering side, year. industry as burns back some of half On softness that the do inventory. are continued the seeing we to We excess of in OEM see the the some

Mandeep Chawla

Yes.

we macroeconomic capital does not hyperscalers, those the are from know, of be gone businesses. continue type As to be OEM that the side And you believe just deployments don't small permanently there But also medium conditions. have the is market. business exposed, but that, the of going hyperscaler been demand but to impacted [indiscernible]

Operator

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

Paul Treiber

What's that customer other of try strategy visibility successful and of to with couple success the X.X your replicate last hyperscale to very been years degree customers? You've largest over years. your or

Robert Mionis

with number ramping. either with replicating strong new we have a Well, actually the I say with currently are those We've I hyperscalers. are mean or positions development in of success would won other very majority customers. the in that programs hyperscalers we that of

solely reliant that So one on we're customer. not we're not

very levels just to across our mode time, platforms hyperscaler across driving customer some have and will hyperscalers so We those other those the of healthy heavy be happens Over a a and come that within are hyperscalers. investment investment number #X might actually happens It number investment down, concentration numbers. levels increase. portfolios but of a right those now of

So is portfolio actually hyperscaler very our very, healthy. overall

Paul Treiber

what That's XX% to the the quarter? sense helpful give past getting customer just at specific being you're The a is a customer to this earlier us your see with outlook that we're on you comments why -- it comfortable you concentration. concentration, is for comfortable of Could hear. with

Robert Mionis

across past just performance, crossing multiple of a even single strong technologies and engineering a high-value over programs engagements with as decade multiple well. or Yes, its across not on relationships but continued because not decade program a on EMS, it's

breadth relationship this the We and performance. solutions providing we're of take we're sticky granted. customer. these by So for a never high mutual happy won very back respect with things that But it's

Paul Treiber

just on And mentioned expansion? mean capacity customers in it speak with additional then capacity are equation. capacity for co-investments you've side that what have I you then the can opportunities you and of to compares historically utilization just seeing capacity, And lastly, your do averaged? you how to your the you

Robert Mionis

Yes.

or within highly you're manage very capacity in carefully what So where our sites fulfilled utilization sites demand seeing and sites, is on our our extremely capacity. AI results, our sites the are high is business that's and utilized profitable of highly we Asia in majority leveraged our

We to those should for times. utilization expansions any time investments think the decided in think next high additional for some a those have that take and for us We capacity invest underway don't rates. of the additional should we we clip of time. care us period need of We are any co-investments foresee take keep of and care at this

Mandeep Chawla

on that. had have when In Day, revenue billion that to was out we now Investor we we gave the range add a to that November, we to Paul, just billion. The at fulfill to stated that we $X.X that. our And outlook going provided had $XX time footprint believe XXXX. to

So order with we new don't country factory that demand brand-new keep greenfield outlook. need a a in to in up to

grow one it's may about that -- still elevated, of things be bit levels, our so that while revenue. to CapEx or being with And line pleased is to little while historical the believe we're less we able able a we're more in

Operator

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

Thomas Ingham

reaccelerating the think you looking might seeing wanted I And in the year. terms and you when that us that that any of second What indication to are compute. QX factors specifically line? for decelerate give about into half on of We're ask happen? into

Robert Mionis

I'll Yes, start.

up So in up Compute that compute of year-over-year not least decelerating. call the year-over-year. XXX% basis. percentage range was I would the the -- QX year QX over is in half a in first XX in on at

is speaking, As that year, we go our year. and demand at of material volume the least of constrained. some driven broadly into little by outlook remains bit a the exit the But is of compute we murkiness second -- half as

to this point again, visibility output, increase give we available, us the but have as that might demand that this So is becomes in and our time. availability at exceeds supply material an opportunity

Mandeep Chawla

I XXXG Yes. talked that the the when Todd, as we in And for to of last to maybe demand is middle hyperscalers add cycle about to we to started of that is year just start compute migrating it would accelerate to say really XXXG believed switches well. over switches, to start AI as was networking, that which with type to but and going it moving going was

out and capital, level where we're And a keep what quite overall, high. compute fixed right on that are now is deploy so say demand is think becoming other a portfolio, QX that we're we're into side. seeing to mind to come and is out going have away that of of choose that. Customers we comp now going larger is QX. of in we Because a to capital. of going the communications But more starting ahead because because of a that. the part they that towards seeing the that see to Not they shift have dynamic our are coming you healthy more And comps

Thomas Ingham

have could the flow with processors, debate And of just wondering custom that's And silicon that you've on versus merchant you follow if this their if coming I that. obviously, yet into up bridge Within custom would that compute, that, guess help to up come. your I'm have might business. thought understanding. started gap all could I just to silicon. on I hyperscalers had are own And

Robert Mionis

merchant of custom benefactor we towards and silicon the tilted silicon, Todd, been heavily switch. Yes, that we versus definitely have are

comes as silicon see And the to are custom in silicon. also continuing custom forward. from to the our provide to types able we'll feel that these press, you get As to of confident these we hyperscalers be announcements invest new to them the moving in access solutions customers market, and

advantage So that I think continuing and trend taking we're it. is of

Operator

no so Mionis you Thank remarks. time, I this for like would closing questions further are call Rob now our And much. turn at to there back the presenters. to speaker,

Robert Mionis

also we another all increase confidence updating our for you continued markets. I next market I'm position and posted products execution to strong XXXG forward Overall, encouraged and today's and us the in look our solid especially pleased for very pleased strong thank outlook and with with growing our quarter, some is XXXX. we to call, you. new you I'm momentum like strong joining strong that by very Thank giving quarter.

Operator

This concludes Thank you, participation, Have call. ladies disconnect. today's and presenters, you, good and conference you thank may you and day. for your now gentlemen. Thank a

Celestica (CLS) 25 Apr 242024 Q1 Earnings call transcript