CLS.TO - Earnings call transcript Q3 2024

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Celestica Q3 2024 Earnings Call and Virtual Investor Meeting Conference Call. [Operator Instructions].

This call is being recorded on Wednesday, October 23, 2024. I would now like to turn the conference over to Mr. of and President Relations. Vice Oberg, Corporate Investor Development Craig Please go ahead.

Craig Oberg

Meeting. thank and Call us Investor you on evening, and Celestica's Virtual Conference joining Earnings for Good XXXX Third XXXX Quarter

President On our Solutions and Chief the Advanced Officer; President Solutions Technology & Phillips, segment. our Jason are Cooper, segment; call Rob and Financial Chief Officer; Todd Mandeep today Executive Chawla, Connectivity Cloud of Mionis, President of

Service of Provider our of Joining us our will Stephen Hyperscalers Dorwart, Q&A and on call SVP business. be portion the

Today's quarter of call open a will investor with our call. year review of results, our virtual our financial portion we will begin outlook up full third the guidance and the our Afterwards, quarter for for lines by fourth for followed meeting. Q&A our the

of our during their conference businesses and forward-looking GAAP. anticipated that will make related course to conversion industry, including and and trends Celestica related in the note U.S. our we segments the statements, on performance call, statements of to to and their our statements impact this anticipated Please

these current today. results from differ materially statements or judgment, conclusion, the statements our forecast While could the made projection actual in represent forward-looking forward-looking

any material are Certain assumptions in statement. applied and drawing factors such

obligation and assumptions, under the filings Investor For identification discussion as update presentation at to celestica.com refer virtual forward-looking earnings to available do no of these expressly such required at investor to Relations our our and We public sedarplus.ca as please factors statements available well so. sec.gov and meeting unless undertake and tab.

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

as their to investor directly actual in filings could are and risk material and forward-looking in and Investor information about information contained reconciliations our under virtual that earnings or our well projection presentation materially as IFRS celestica.com measures results most factors may performance tab. of impact comparable meeting the conclusion, Relations measures future non-IFRS of a differ forecast results public and available cause factors at the to financial that Additional from Celestica on

Unless otherwise on specified, Unless this are on diluted information dollars outstanding. based and all U.S. per a call references otherwise to dollars references to specified, year-over-year is to figures comparison. all are shares comparative share

over now turn Rob. to Let the me call

Robert Mionis

with joining coupled on you, business, was end the high good driven margin of in non-IFRS $X.X guidance us Thank and Craig, and $X.XX of In momentum by ranges. CCS The demand achieving our continued, of today's third adjusted quarter, call. evening, X.X%. our our billion the you for strong strong above operating of thank everyone, EPS continued and outperformance revenues strong

our segment solid and switches a investment very customers our portfolio. X.X% up segment by CCS improvements HPS margin was XXX on year-over-year The increased networking our data including as within our margins hyperscale points Our revenues from healthy CCS infrastructure, versus demand for revenue XX% driven strong last to by expansion contributed year. growth center basis continued of

continued demand the Partly which offsetting by revenues A&D saw growth capital segment, submarkets. in and declines our strength third of and dynamic equipment respectively, driven industrial ATS quarter. in XX% X% our of lower environment number continued where business, year-over-year in businesses, a softness were XX%, our our across the those In was a remains

performance with our pleased year. this are strong we Overall,

end competitive portfolio in and strengthen we position of Looking positioned across key feel markets. well are on ahead, to continue high-value opportunities to number we capitalize a our our

of XXXX our to like turn performance, year. guidance of will outlook fourth our you. the our provide who Mandeep a now detailed and third review quarter for quarter to the would I Mandeep, to for full call over the

Mandeep Chawla

Rob. you, Thank

of high our ATS revenue the CCS in offset range. $X.XX by and lower in segment, in our partially XX% was industrial strong driven in came quarter revenues up anticipated above billion, at Third The segment by guidance our from customers business. by the growth demand our end hyperscaler supported softness

higher operating an segment. quarter of our mix non-IFRS Third operating margin of XXX points, leverage CCS improved was and driven X.X% basis improvement by in from volumes

was Our $X.XX was marked highest in high $X.XX, history. company once which the again range guidance third our adjusted exceeded earnings of our quarterly higher. per share results quarter end This and

Our third quarter adjusted tax effective XX%. rate was

$XXX single-digit segment decrease. of revenue our solid were million, on business. third XX% in for our The down in revenues ATS offset ATS more the decline our Moving our was slightly ATS by decrease in driven lower equipment segment segment and Aerospace X%, quarter for than expectations industrial quarter. to was the by performance. Defense third and low a partially segment in accounted growth revenues of The capital businesses. demand total revenue

to $X.XX segment accounted Revenue the revenue by in Our enterprise XX%, was of enterprise our of up growth company total revenue billion market segment CCS driven third markets. XX% our third in strong end end quarter than by grew very was a storage quarter. better communications business. communications a both which for and CCS low increase in revenues our of by demand expectations XXs in percentage our XX%, our market of XX%, program end was percentage above dynamics up in driven by by Revenue increase. mid-XXs expectation due stronger-than-expected our

communications switches very for HPS demand The as end switches. The for third primarily which HPS hyperscaler for ramping demand XXXG by our XX%, driven million our XX% was networking customer our of total reaching in as driven in by switches. networking programs XXXG our revenue. market the grew well increased HPS by $XXX in revenues accounted in was strong growth growth quarter, portfolio company

and the driven X.X%, in by XXX CCS operating end by basis Turning equipment XX was in primarily operating capital A&D. basis by quarter improved third margin driven the offset improvement leverage points, to in mix. segment during market, greater margin leverage and X.X%, our was up margins. segment points, ATS lower segment down industrial partially quarter

of total of than with representing XX% in concentration third customer revenue, levels customers and as that quarter, across multiple the the the of largest comfortable diversification of our we for customers. During that respectively. appropriate maintain had with we XX% sales loans remain we quarter, portfolio accounted for We X believe XX% more programs our

the some share, by Moving on third was basis in margin million the CCS or quarter operating Adjusted additional up production XX net were third gross up points, to $X.XX our efficiencies financial segment. earnings $XX for IFRS driven metrics. for and XX.X%, per leverage quarter $X.XX.

X.X%, quarter profitability management. operating was adjusted third driven improvement and working capital higher strong ROIC Our XX.X%, by of an

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

continue XX, days we period. the gross sequentially some during cash to quarter X up and expected, the customers to third As return X deposits as lower. Cash were year back prior days our than of days cycle inventories move lower

XXXX. the expenditures X.X% X.X% flow. the million Moving quarter with on of revenue or of quarter to $XX were in compared cash approximately third for Capital our

we expect between adjusted with have in $XXX outlook X%. our $XX previous X.XX% in free compared the prior of capital cash free line quarters XXXX our $XXX in million year be to generated generated period. of third $XX revenues year-to-date, of the million and to In XXXX compared million flow million first adjusted We XXXX. cash during we X flow to of expenditures quarter, X.X% approximately for the

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

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

to Our gross XX-month adjusted year. both to non-IFRS the EBITDA turns X.X debt prior turns, leverage was ratio X.X and compared down sequentially trailing

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

deployment is outlook. course Year-to-date, for $XXX and active purchase compared at basis of opportunistic we be an our bid performance a million of when cancellation commitment This total under have normal shares is approximately a on in at dislocation third per share the of average issuer financial to there total purchased repurchased X.X a step-up approximately $XXX cost in feel under reflective an to we quarter, million program. a as approximately to our relative million our the of X.X of price cost quarters $XX recent share for During we million. shares

XX% Fourth $X.XXX expected to revenues for turning to Now guidance quarter Fourth to to share to represent per achieved, billion range the growth XX% in would at quarter $X.XX of of which, $X.XX if share fourth be of the midpoint. $X.XX $X.XXX be at achieved, XXXX. expected the the are of midpoint. in which, adjusted earnings represent the per range would our quarter if billion or of an improvement are

achieved, compared adjusted increase of of would be an period ranges operating guidance are If would non-IFRS the midpoint points which revenue year. our represent basis margin and same X.X% last EPS to XX the

the quarter to range fourth tax $XX rate expense adjusted be in million our the XX%. fourth to million. is We for approximately anticipate SG&A quarter be of adjusted Our for $XX expected the effective to

in business. year-over-year by networking our XXXG ATS softness XXXX. communications driven segment, the end accelerating up ramps be our anticipate continued by continued revenue we Now growth percentage in including capital market In programs. A&D the recovering driven outlook be fourth our demand market In turning strength anticipate and for our in to demand to high in XXs to for we by our offset Industrial our flat range equipment, revenue switches, end continued in of our in CCS quarter segment,

decline XXXX. half also by percentage technology AI/ML In we the with in quarter, last compute the with program a in large driven program sole-source the expect to in transition double-digit sole-sourced low latter decrease our our expected the Consistent range. is revenues anticipated next-generation market, of enterprise commentary ramp end to a

expect storage be growth in by declines partly offset We will business. our these

changes, anticipate If XX%, year are and fourth now of represent midpoint they $X.X Assuming the quarter achievement and XX% the of EPS adjusted respectively. the would we of growth revenue XXXX. of full achieved, $X.XX of billion outlooks our for guidance these

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

for flow our cash expected is $XXX $XXX free million. from year, adjusted our previous outlook million to full of now be the Finally, up

and full U.S.-based Concurrent IFRS. under Beginning with investors. in U.S. will like consolidated financial transition status comparable to financial opportunity and foreign adjusted XXXX metrics now from the material our issuer been comprised year everyone a QX At we shareholder upcoming financial any remind non-GAAP outlook do to XXXX GAAP of in of is prepared not to in majority IFRS reconciliation expect GAAP, statements of full GAAP. release we report private prepared reporting will the under with I'd accordance of include our our U.S. results, this guidance time, we U.S. and our provided this financial a for results longer metrics. QX our X, base and U.S. had be issuer our year it domestic and January also part quarter take XXXX and as XXXX, of no will outlook guidance the non-IFRS as of differences

change does a as company. our not status this Canadian Finally, impact domiciled

the With begin to Meeting. XXXX like back call Rob our turn that, to Investor I to Virtual would over

Robert Mionis

of been Mandeep. making you with of in on of an update have overview strategy the we provide to each in you, our pursuing to We're opportunities have are our markets. execution progress the the excited an the opportunity we Thank and

get of next portion call for we through agenda today. our like I'd the started, Before briefly walk you the to

overview our brief pillars and footprint operational our I First, our a of provide key of discuss business, strategy. the will company's

IT Connectivity Jason data and of segment Phillips, evolving and landscape. CCS will President an and Solutions, discuss provide hardware Next, of our the overview Cloud center

continue markets. Todd long-term Cooper, will finally, Technology shareholders. priorities and of back the discuss our Investment macro XXXX our diversified including outlook, of our portfolio, to plans our Chawla, Mandeep outlook maximize to capital President the hand our for returns to we strategic our And Jason, floor allocation financial will who priorities end Following CFO, discuss Solutions, each will and market across our

Dorwart, Steve business, we this, Hyperscaler where and Service also of Provider will the Q&A, us. our Following open up for lines will join SVP

range and our and a companies that trusted Celestica quality. and speed, serving an of with the employees. with manufacturing of global products a world's efficiency begin offering bring customers engineering to than advancement global today. support manufacturing our much XX to critical partner. spans across let's services the leader solutions, leading which business market and leading-edge network We're a enable are of electronic Now XX,XXX is a to products, strategic in supply just innovative chain supported technology by operational global countries best-in-class We're a economy. execution services industries are collaborator across more our We and overview uncompromising

evolution continues to reflected The our in business be performance. our in financial

years design supply traditional ODM Today, and combining in both our achievement of EMS results with the for been have leverages differentiated share EMS. proficiency driven capabilities strongest history. Celestica year capabilities beyond by full per and our The We highest manufacturing. for the believe and our the growing and of demand margins of value strategy successful Our chain extends the that sale consistently both customization company's earnings in outlook proposition our recent and advanced operating the XXXX non-IFRS offerings. the improving execution product strength would the and represent far adjusted our leading in best models,

a stands marketplace. We us ODM positions as partner high of us importantly, EMS as programs. offering competitors distinct customers better and our advantages out our offers our X us it North serve believe And reliability choice to Tier that a complex, for in amongst allow American-based a strategic and company, that the number

are strategic our opportunities while market sustainable intended on plan is align which on X that Our to built with and strengths leverage core competencies pillars our our key capitalize shareholders. value to delivering

our we a designed been to cyclical remain Firstly, markets diversified entering we we're withstand committed to compete resilient, We've in selective new in, in and building approach markets. choosing to the and growth-oriented that discerning fluctuations. portfolio

focus benefits on believe provide offer are attractive secular structural that growth strong tailwinds, potential portfolio. Our opportunities we by our remains and supported to

enhance and the to further capabilities Secondly, we're committed offerings. making to necessary our investments our expand

have deal not great of are made achievements. resting this we our While past on regard years, progress in we the a over

capabilities. road ODM while our products to out with adding build maps enhancing engineering services to in continue multiyear our investments EMS based and next-generation We offering on and

best-in-class across our The numerous high ethos dedicated year. Celestica ratings that awards system execution remain enable operating in integral we each excellence which reflected consistency is is we execution performance, to operational help that Quality are customer our the Thirdly, scorecard designed and we to customer receive operational to global central by everything and to footprint. do. and ensure and to

disciplined long-term capital while more aim EPS to Lastly, returns. growth achieve is our XX% approach objective to this to shareholder allocation. by targeting of maximize total We or adjusted maintaining a

Jason, to like Now hand over I to provide call look Jason you. at Phillips to to closer the would a our over CCS segment.

Jason Phillips

pleased to Thank in I'm are we working you, projects with I'd to evening, at Rob, our you Connectivity the of good Solutions look here start update be and are we to and Cloud an today. with provide some business. exciting like where everyone. today a on on

which track of year business would revenue, $X.X our a growth are to we been represent has impressive billion in increase. XX% XXXX tremendous for on as an achieve

core technologies, expected market, X portfolio strong end and networking has our each of within We'll the end more to just our market XX%. in been up server our year all than with in our demand enterprise more each minutes. few technologies by in communications talk category about a of and growth in those driven end Our storage

hyperscalers, CCS which From revenue $X.X are for the now customer portfolio. hyperscalers year. of driver for In billion primary in track nearly a with our perspective, business we X/X on been XXXX, in growth this accounts our have

we've Looking at balanced our across recent HPS our and years, and CCS EMS seen both portfolios. strong segment growth by solution, in

Ethernet strong of our a for to business. HPS driven Our our business by demand in rising portfolio, market-leading account Switch continues share

and disposition, services rates. continuing an solutions to our important our platform increasingly our and engineering, attach drive and cycle relationships R&D in of which growth asset offering capabilities, life grown creating has our investments by center. supporting carbon for data we strengthen to asset a our our end-to-end make IT as powerful helping core in higher credit customers are the to to include part services, view services Adding IT by offering we with Lastly, for our management customers strengths

continue influencing our our artificial ahead wave multiyear that be center investment remains of As in we the current the a at data landscape. intelligence belief trends investments business, force of driving It shaping in AI infrastructure runway market major the look has to it. the

infrastructure are top annual of lion's the Estimates to the server center on than billion these by with this leading we data million. and hyperscaler serve customers $XX that at technology share investment to XXXX categories, X The XXXX year Today, hyperscaler X networking the by spend showing curve. forecast all storage, driven to who discussions investing latest edge in our technology based more is and Today, are across on our center for technologies. estimated hardware $XXX early XX% stay the through the major AI for data billion grow will of $XXX across we or customers support estimates. hardware hyperscalers spend hardware are suggest on

growing well key to As spend players ahead, years. share feel of we coming these we positioned to continue capture the are the a from look in

infrastructure the rapidly harness who the solutions opportunities we've growth As meaningful high-margin wave the AI present players native the and And companies ecosystem investments providers is development to infrastructure a transformative leading organizations of models AI support are are believe AI cycle of while AI emerging of termed which required own there looking the investments. of Celestica. that by like these hardware for hyperscalers today, has digital are expanding potential market up the ramping scale to We growing investment seen, their significant. in

cases, services and a and to data processing, in Firstly, building providing AI opportunities at at as AI of support optimized lower AI and infrastructure compute Others breed increasingly specialized scale, an are market to with analytics. scale their are helping emerging high-powered more language vision customers seeing use this specific natural infrastructure workloads AI such we machine providers, cloud cost. efficiently

the models, enterprise is latency security. AI to reduce AI order in we anticipate computing, more spending infrastructure created to data closer edge of large as enhanced bringing use data employ where and increasingly Next, customers on

emerging the Finally, we increasingly data have large-scale across world of sovereigns, seen to domestic make a government-led well governments invest nations be dollars number contributor importance the as to AI the a in ecosystem. Celestica recognizing center infrastructure. are projects in on of capitalize or AI meaningful commitments these initiatives strategic within CapEx believe positioned These to data center could We growth is opportunities.

in services the hardware advanced with manufacturing Our designing cater of and coupled us to enables solutions, diverse expertise of our comprehensive set customers. to portfolio, this needs

Platform all Hardware across is where center, Solutions, server, the on or innovate original HPS, X design in we and Celestica's offering major networking. technologies designs product manufacturing data storage

Our engagements box off-the-shelf on solutions, highly software. to our source joint customized be hardware open to which design HPS customers can enabled business supports white with further from ranging

generate will we $X.X XXXX, would that of HPS In approximately than XX%. in more billion which anticipate represent revenues growth

journey However, of next our year, investing nearly grow while this R&D, to been we spent years $XX This platform from We've be success. hundreds supporting far expect has patents innovating will and we building number product launches. more XXX an than and overnight XX that million into year.

Celestica. is core competency a R&D for

important ODM designs, EMS a peers. differentiates with and of role own addition us customers' we critical breadth factor this North teams. to are of offerings proprietary both play our in In our an and innovating as capabilities our R&D American that our from area that extension believe product We an also

making the commitment investments Our reflect business. enduring to and in this our plus of last element our decade platform a over central ODM strong

partners our is ecosystem relationships CCS EMS deeply more portfolio are accretive entrenched segment our HPS to Our to and that margin compared traditional engagements. with and customers enables

next cases, HPS XG switches to for In is center. of use our networking, Ethernet. in made which from are solutions, AI range we switch OEMs We XXXG are designs Today, facilitate XXXG, an received preparation XXXG early a were switches the being we of data in to the products with customers in and by switches our our which the the used for cycle are for for hyperscalers in well of up leader upgrade and early for for campus are market X.XG. investing customers our networking designed already to support workloads exclusively majority portfolio

solutions engineers which to of team AI we enablement continues software over of nearly to gravitate source open Our support XXX in believe gen with growing systems, network continue for proprietary time. customers customers operating to will

to We engineering operating ready-to-use our capability offer hardened third-party system, also the a each. integrate team, existing production optimize and by or software for have to performance

ODM In a as which expansion next-generation AI/ML which demands system for to R&D the a about advance are integrate talk will our to silicon, our to designs few controllers systems, compute, minutes. designs CCS remain we driver we we'll support solutions. And our growth to more wins power our and have long of drive storage, with increasing availability, feel we continue key committing in and offering in AI cooling are high segment offering able new We in term. over part RAC of distinctive the that proprietary

outlook networking across is from like our to I'd XXXX. the Ethernet business a HPS portfolio cornerstone $X.X is business world's expected largest market in Today, Next, of of our and solutions into deeper technologies. Celestica's our communications provider ODM with billion Celestica dive of come switches do a of each the our portfolio. to

networking our applications XXXG bandwidth from high towards geared higher. is now portfolio and HPS with switches of the revenues majority Our coming

leading solutions in Our focus segment. XXXG on reflected the market share high switch in is bandwidth our

past have years. of Third-party the market's installed X we ports data by suggests that XXXG largest deliveries over measured the base as

build We As XXXG our operators as who leading customers on separate cycle. XXXG, that leadership our XXXG to use early to with transition our enabling being position their accelerate. as ramps all our data is poised in believe of switches center existing be will begin solutions to we market hyperscaler the

It for forecasts grow support exceptional and of do applications networking centers the our rate growth necessary next increasing computing compound levels Market at coupled continue transition, driving AI will making mover demand investment is critical expansion to switch a of of are we to and more so. be powerful and higher market with technology bandwidth at edge to remain the XX% Ethernet to data investments a over cloud to infrastructure. the rapid success The years. each annual for that first leading of predict is XXXG successive X remarkable in the the

large end, customer switching X.X this from be anticipate this first exemplifying we're to innovation. initial for next a To of for an hyperscaler terabyte leadership program and that a technology pleased will in many in expect see with revenues our mid-XXXX. to have the win win and the We generation switching this program begin ramping

and generation market we With increase and we of the our a that signal we and up brand-new that that us management function the challenges Celestica's each in feel Celestica step of power upgrade cooling continued innovations, challenging upgrades remain areas is relative task. higher future early in allow We engineering the to generations, capabilities to integrity, believe to high-performance dynamic and complexity R&D, this commitment we are plays integrity. This to has is involve confident more deliver. advanced to thermal related a to bandwidths, are leader strength in a designs are to to to a through To that product signal previous including will market much in making this proven end, exploring cycles. innovation

designed and which compute capabilities AI high-performance servers, compute, With than build engineering year, more of driven from our of and had possess the Celestica's portfolio. scale platforms majority another to vendors. by around the various OEM the experience we strong has vast server customers manufacturing XX silicon expertise supporting latest of generation AI/ML business comprises years

are we silicon. primarily using custom ASIC designs Today, concentrated on

of engineering is specialize highly designs have proven supporting We with We requirements. leading complexity these customized technical demanding world's for hyperscalers. key of history our a differentiator. believe generations a multiple support the and in one We platforms

range power spans to form and solutions. testing expertise wide capabilities this density hardware with a integrated factor Our of and scale critical optimization areas, RAC fully specialized from

area where air that Celestica has cooling a single-phase Thermal proof support a both liquid management and cooling programs strong techniques. utilizing is currently points of history critical

are power AI in silicon, the cooling advancement And and rapid are the thermal as output with usage evolving. requirements solutions a dramatically. However, for increasing result, fast

to position be looking next leader systems. generation with cooling a the is of Celestica to itself

and developed proof-of-concept team are pump to HPS transfer systems, for improving phase cooling heat exploring Our silicon plates and cooling are and dual high-powered applicable has systems. face we which designs advanced both between to techniques cold for single

liquid We are for also actively immersion solutions. developing prototypes

these our thermal server customers to to AI/ML We on of our as well and programs AI/ML generations successive management to will their full RAC HPS the support servers in look incorporate designs systems leverage advanced as for capabilities solutions. future

years, server billion grow to In figure the XXXX. $XXX we latest a in time. today, over top spend this market share the native the driven companies expected to over to projected billion reach by digital to that models. XXXX, train coming substantial of market approximately the they AI required the continue infrastructure larger is generations and while AI will the spending of XX% hyperscalers by $XXX nearly is for in of back-end of anticipate majority AI to claim server The And their X investments are expected to comprise account

hyperscalers We ASIC an for and platforms providers. play cloud role infrastructure, are AI specialized particularly important increasingly in also AI custom seeing

applications efficiency, offering specialized pronounced, the potential grow platforms such increasingly cost AI advantages larger, of benefits and optimized become As become models effectiveness. custom more performance as silicon power and

We optimistic is the growth Celestica within our growth ASIC be multifaceted server a opportunities compute these diversify potential capture the business. of to market. for AI AI/ML pursuing and continue very segment on custom the to strategy

an supporting of server expected with have end, a proud Grok strategic are full to developed language be We're specializes the relationship with platform, processing in unit, innovative proprietary solutions to their accelerated pleased RAC To native digital customers, we silicon XXXX. growing new and begin formally new to the AI/ML ramping which this inferencing. servers in early companies. manufacturing with actively programs programs Grok, with Firstly, we pursuing including announce who a are AI player,

as expect additional hyperscaler also hyperscaler already our liquid largest customer XXXX ramp with programs to pivotal and Our server up ASIC-based of ramp are that secured customers in AI/ML growth expected custom programs beyond. generation in cooled mid-XXXX well to to server next our remain as plans. We've the

We number silicon with XXXX for and ASIC out also engagements hyperscaler customers XXXX. in other regarding merchant as far from start a are dates with custom to late expected of ranging platforms potential discussions both as

scale we for for HPS compute. full own system investing our Finally, RAC AI/ML in are solutions designs

While AMD, both silicon our initially platform custom merchant capable collaborating will supporting with and of are be ASICs. we

growing expertise By with our we options. switching can the integration solutions satisfy diverse AI management a customers and engineering silicon offering cloud believe customized be marketplace that enterprise an and existing be leveraging that in hyperscale, power of modular along and accommodate HPS will for a of alike. that see able orchestration, RAC We needs our the need for can and to range cooling create to within attractive storage, AI we systems, solutions

on markets. manner as the in expertise our to storage in step-up products significant years demand portfolio. our as high-performance market, seen XX and experience which Moving nearly yet storage in a to of well leverage the we deliver With the server for storage center storage we're the The have has products to to history data recently able for enterprise. switching

high-density products towards workloads, surge storage continue will for the with technologies. trend to the high-performance AI storage we in market and believe However,

and of scale To continue play business seamlessly and EMS development proprietary to high-capacity power technology to thermal Our in into solutions. our be expertise our in as with support we our plans and the ODM latest opportunity, in important next-generation the integrated invest for the our an management, leveraging drives can storage both to solutions role density, buses. offerings will industry-leading this efficiency storage designs capture and ability RAC engineering continue

years, see to changes in IT landscape continue the impressive driving we up, innovative investment technology coming growth. wrap over in AI the and hardware reshaping To

the leading presents this believe to a in ODM across center, to with player and tremendous build we grow both As opportunity offerings our data EMS it. on us successes with a recent along and

that, to our Todd to like it talk to to I'd ATS over segment. With about turn you Cooper

Todd Cooper

us you, joining Thank of on all good the and evening Jason, you to call.

this the segment approximately on As to you expected ATS our can revenue billion $X.X deliver of see screen, year. is

number structural of our strategic environment hurdles with is diversified are Celestica's markets believe we to by markets competitive regulatory committed requirements. advantages diversification, we the and of part strong of synergies As Among presence and capability limited and which these a overall remain our growing a in with to tailwinds, business. that offers strict exposure strategy, rest

an X year, resilience have our grow portfolio markets revenue to facing by our ATS growth ATS to low rate we of the average headwinds over segment range. certain revenues in achieving digits in XXXX, over see the XX% we speaks past the anticipated expect term. In and attractiveness single durability Despite long annual demand percentage the demonstrated This this years.

growth this driving dynamics market end the discuss shortly. will We

weather in allow greater strategic the better and this Overall, is balance of greater scale volatility to reduce will our reap effort to segment optimal us for a in our select an within to portfolio. Obtaining downturns. achieve cyclical markets priority diversification, market mix more ATS drive benefits

of the target We businesses, map are have for ATS optimistic maintain about the ATS ability in our continue XX% that laid more revenue rate road we of to our growth for have and long-term growth out or each to portfolio. confidence our

move with smart and our and let's starting Industrial each assess the of opportunities growth now energy. outlook in end and So markets, on

storage, energy smart generation, as this on portfolio, year and diversified in which across energy is billion expected industrial factory EV such energy vehicle. charging automation telematics, to Our $X.X achieve markets and is broadly revenue

our close in companies technologies. manufacturing smart number of well support The our key manufacturing our to value early-stage new include product drivers working as new strong as a expanded introductions, to including more home, as in with which presence as well presence Mexico site portfolio we leveraged and established energy Monterrey, at our industrial expertise have customers larger, our

we on of demand remain market After to macro stabilization. returning signs cautiously to We in with burn strengthen XXXX seeing and by soft year. are customer down, demand optimistic year of growth driven in of uncertainties half the inventory back next a expected

term, the long many we by the to Over opportunities favorable supported submarkets. trends attractive see in continue

infrastructure grow In the at Act. energy demand of by average government and energy energy XX% including and fact, green forecast by storage an on as driven suggests bills such base industry our annually generation XXXX, expected to that charging, smart energy through markets, in are spending Inflation supported EV Reduction

and We both are battery supporting energy opportunities seeing utility storage applications. residential solid systems, also in scale

sites view as our We and A&D supplier with America. points leading approximately OEMs defense X commercial in and approximately major North customers. reach the Malaysia, and component A&D. contractors the A&D within from on aerospace of track comprised our and subsystem our capabilities of key to and revenue Today, is over move is business as Europe on defense as supported by $XXX to ourselves XX% well We Let's EMS proof aircraft, XXXX. serve XX% million in developing industry, decades our of

to after backdrop with it general base Breaking the demand In by commercial stable in growth from recovery of bolstered the years our expected business segment. strong normalize by several down aerospace, being pandemic. remains

profitability. decision our at to the have with an not expiring a commercial high-margin program time, made is this XXXX, the and renew that At we have portfolio customer. same Looking licensing same won breakeven program recently we in

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traction from are with which we new opportunities expected and robust are demand drive Western strong to Defense, European In seeing driven growth. by governments,

are our opportunities and space, We pursue vertical vehicles landing aerial also leveraging growth to submarkets, takeoff including unmanned aircraft. emerging in capabilities engineering electric and

up next we revenues a to we challenging have recover After move in XXXX have million equipment, approximately equipment. demand begin to capital $XXX and capital of XXXX, XX%. seen Let's in

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to HealthTech expected Looking ahead to new devices is programs continuing offerings. XXXX, our growth mix engineering as and our see business modest finished while to expand our shift we ramp towards

diagnostics markets. the long-term surgical plans primarily in imaging, instrument are and diabetes growth Our fast-growing on focused HealthTech care,

this to engineering end support made products and box product testing growth, support our to from end finished build we in our customers To investments enabling have certification. full level capabilities, us regulatory to to

adding We to capabilities competence, site. advanced also Galway, Ireland our continue in manufacturing our invest to most recently, automation our at

outlook allocation over who financial for discuss would priorities. Mandeep our will I XXXX that, our back now to With like turn the and capital floor to

Mandeep Chawla

we improvements in XXXX, I achieving another back consistent financial as has made progress in and Thank towards our growth years, of XXXX, be have is on X year. of significant track path past to you, level our our profitability. the the Rob in performance mentioned, transformation Todd. record look showcases If on Since completing which, strategic at record Celestica track

we to revenue added amounting $X since achievement the will At last billion industry the XX% XXXX. period the X our Assuming billion over of our of during decline. nearly XX%, are seeing close a track revenue, the majority years, have to in we in peers $X.X are where CAGR up on revenue XXXX EMS XXXX outlook,

shifted CCS portfolio's complexity ODM business improve has segment. to our and continues Profitability in our engagements high mix higher-margin towards also as

Our will achieved, points EPS adjusted if XXX basis outlook XXXX, higher rise XXXX. have nearly compared margins seen Xx and to non-IFRS operating for by

flow working strength quarter believe Our our has positive and financial our the manage for resilience the our across ability growth of to during team. of this speaks our of our disciplined capital to free period generate portfolio seen cash performance efficiently X segments strategy, us years. of each our over We both adjusted strong in

billion, Looking ahead at compared X% outlook. which would XXXX. We growth XXXX early estimates revenue represent of of our for anticipate to our $XX.X

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$XXX we growth XXXX over Finally, our of represent which of adjusted free XX% outlook. million, flow would are cash anticipating

with on confidence based for and conversations Our active current are ongoing. XXXX outlook high our view represents current discussions our These customers.

an we providing with January. update look And you to forward so in

encouraged new these supported are we third-party for and by in underlying significant wins XXXX, growth which market. our by Beyond are forecasts discussions,

to we As and medium such, term. we seeing currently momentum continue XXXX the into expect are the

priorities. Moving to allocation our on capital

Our overall consistent. allocation framework remains for capital

capital to of billion to XX%. the by share ] we beginning shareholders Over return that aim [ XX% flow In $X we through to time, back reinvest shareholders cash long Since returned XXXX, into our of gaining adjusted and free the reduced term, in of XX% we buybacks. the our to our close have business.

deploy We will capital an towards basis. on continue buybacks opportunistic to

manufacturing In our investments remain focused we on the opportunities M&A. capability business addition, footprint through in R&D, back strategic reinvest and to into and

M&A, to basis. on targets a potential With we continuous respect evaluate

us always, As process for a markets. evaluation our which filter accelerate we to in a any acquisition. continue we our target will From enhance to selected our and scale capabilities apply strategic strict acquisitions, allow perspective, to

capital cost in financial investment by have year adjusted Our our hurdles EPS the first a or of the return that above on second be accretive require year sooner. our and targets

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current performance and in is Finally, our financial consistently to strong delivered I'd like peers diverged that our Celestica the In EMS relative our from peers. financial very that valuation our to performance of recent industry. meaningfully periods, EMS discuss has

EMS for revenue trailing our a of average to of basis, as the have a we group. growth quarter, On XX% of the end decline delivered peer XX% of compared X-quarter third an

points In EPS up has period. adjusted same addition, our non-IFRS XX% our expanded operating over and is basis the XX margin by

months continues over believe operating group, exceeded our XX peer very performance the and to outlook XXXX be strong. through last our We has our

earnings valuation, price multiple remains Celestica's our the in forward EMS strong reflected and below performance for In shareholder not or consistent XX-month our greater financial our group opportunity an However, peer line accurately is in view, with presents average. returns.

remarks. closing the With back turn to that, for Rob I'd call to his like now over

Robert Mionis

our deal in that our favor. momentum business a As great to meeting, I conclude investor our we of want emphasize has

to a We've Over ODM built leading the execution. having past and several organically proven we track performance our operational accumulated years, evolve consistent of offering. financial strong ability record also a delivering have

continue execute ultimately the our map, to on our to growth us will for ahead strategic shareholders. position road on significant which capitalize deliver opportunities that will lie We and value

now into Thank for and and time our Q&A. to today, support. That ready are concludes presentation you your we continued move

joining I Steve for Q&A Jason Phillips, Todd As and and be Cooper, a Dorwart. will Mandeep reminder,

Operator, the call over I will you. now turn to

Operator

Instructions]. [Operator

the question Cowen. comes first Chan of from Daniel TD Your from line

Daniel Chan

last of in Meta coming share the designs in week, out just supplier? the new dynamics potential with Cisco some as data that equipment couple networks. the of A communications put networks you additional about Can its questions new wallet talk center and Cisco on an included side.

Robert Mionis

want to you do take that? Steve,

Stephen Dorwart

best meet providers, to balancing for which Sure. to a think a you what about decision, the and hyperscalers timely And target the the our customers application. markets. with think our particular Thanks, in when platforms how objectives solution key technology to those availability be work Dan. make the that is to and it product what's they relevant And deployment we I tends to closely target invest continue is ensure why are R&D and in

backup They shelf follow, of or to customers of still the solutions the a for But the a some rather optimized another need, our competitive our We've they of and that many still and need what result believe be can category -- this hardware pay can believes than differentiator that pandemic and they off want them. for they constraints fundamentally, secondary that OEM they for to only what backup able platform I our or companies in see strengths. solution. implement at plan really our to any to customers as a have meaningful want need a shift behaviors, the plays period we seen own creating new to as be realize source. innovations hyperscaler that of haven't their which plan we speed. custom strategy and Therefore, qualify seen of a

Jason Phillips

Jason. is This Dan. just would well. Hi, that add I to as

not terms as technologies has system our that delivering talk data the in of a the how across are compete, believe And in all position. all ODM been while In RAC-level center, we we're core would advantaged an we and American-based and North solutions that we portfolio I highlight value propositions offering, and to ODM an ODM's equal. offering about equated and HPS capabilities that

there's remarks, focus geographic the at engineering in at a look for we've a Steve and excellence been would model. well We've optimization, we're as for accounting HPS a customization this not a in of I rapidly. that chain supply our anticipating developing as sites accounting customization and as are changing centers requirements as well that the mean, been also of but our as manufacturing prepared level. for we level, you just of say what solution doing in we're customization particular, for design space, level, When at it from heard I what on our lot

as they You a strength They heard That's Steve -- want what us than talk don't necessarily of to another want. for about our more for looking area that. and specific customers offering, well. that's are

Daniel Chan

That's very helpful.

large into a to wanted networks. vendors like on back-end That little be The the seems yourselves. bit to dive opportunity I was a other Ethernet opportunity for

as XXXG. are discussions you vendors? well your see leading are How in guys share guys seeing as are share charge different you the customers it about XXXG Are to opportunity? back-end good there? that with going like in between So winning you Or sounds shifts the some

Robert Mionis

start want do to you one? Steve, that with

Stephen Dorwart

based solutions continuing as Apologies. technology innovations scale-up really applications. Ethernet the to the scale the trend Leading AI scale-out Overall, proprietary improvements causing our Yes, custom this, we see and for are with coming future speed merchant AI/ML things around including of in and towards in and ASICs. many increase connectivity systems, a see ASICs, we significant both and for both further this that are see bandwidth such Ethernet we density and applications. those and Ethernet ultra support

lot we data. centralized time, further, optimize generally see for move lot or AI/ML are architectures from that required adjusting more to latency more networking generating the data, same a just to a of hyperscalers availability requiring security the At importantly, to their more distributed is power. probably network more And architectures or lately,

going more And seeing is to And these anticipate so differentiated we support. more connectivity we're well products forward. requiring and this positioned and continued demand for which solutions, strong

Robert Mionis

rounding growing data from Yes. our be as our pivoting build We've center us in and out we open edge, opportunities maps, we've of, also like opportunity. about as source to pivoting our lot the of our And into just maps Ethernet a maps taking out creating the networking side our on there. the uptake the also then, software spirit software for as sonic would the applicable in road road campus areas well that, road seeing talked and but that been add we're well. and not and and traction networking say, capabilities, our And just more are I'd capability, I

Operator

the from Robert comes of from question Canaccord next line Genuity. your And Young

Robert Young

partner Would are win. there chosen? strategic and it HPS was multiple a in Grok attached a it this called revenue Is to vendors source? into Was there a Why crammed Is -- love one. to Couple Celestica relationship. Or the into influential? silicon any dig there? you this manufacturing this single

Robert Mionis

Steve, want one? to do that you start with

Stephen Dorwart

sure. Sure,

point for credible be to AI/ML us a us helped we has we've are compute Certainly, space. the of develop in as technologies significant support programs those point a industry-leading So is proof lot as important the the to we the of in product. us or this established another portable networking on mentioned the Grok of position win that underlying entering and side space and for transferable this see competencies type earlier, that

engagement initial today, they have The where, early been of the that's includes prototype preproduction systems. some a providing source predominantly manufacturing

to which We increased in plan that will of is level of with enter generations product, participation an the or start current immediately. nearly going but have generation future the of design involvement forward products,

win, have the us that and help future. to credibility I So and very for competency it build will think really happy

Robert Young

built But a done your Or go-to-market? was with it with partner? it own was

Stephen Dorwart

missed I part that. the sorry, I'm of first

Robert Young

Was relationship or Sorry. your you were go-to-market own with the like done things maybe that? this silicon this to manufacturer brought or with effort

Stephen Dorwart

question. Good Yes, good question.

segmentations. market for it various And increased a of was So level our comprehensive the us participate to we go-to-market. in compute have really across own AI/ML a strategy, spend strategy

is operator specialty that have we center categories one this data of the of offerings. our we've aligned that so terms And in and ourselves with selected

built with in these the in efforts oftentimes, However, strong we we leads some And that very have that of or, go technology with providers. these some or relationships customers. ecosystem ultimately cases, get co-marketing on result companies decisions endorsements award from key

Robert Young

the there Is out? faster can difference maybe gig? it can be And expected? pass win And I'll the XXX rate call you XXX still then on and all you the pace line. any around, update the just would Then happening ASP of an of programs? gig Are second than question just give Okay. the is you converting that you

Stephen Dorwart

Yes.

our about continuation we've outcome that have next wins initiatives of several the the in XXX So generation us gig XXX winning very We're different customers next-generation XXX-gig happy certainly, of sourcing for that thinking had. products. resulted is the with the of with gig

today. of currently half iterations a or specific Many We those products future applications lead same have those we're dozen to over of that products for on will working architectures.

opportunities a think customers front XXX us. here position in significant still be to And and very with gig with it's of so in potential other we

all much on of of But very those are those track. most projects well, projects,

improve We I those a going component. expensive. which on pressure have see that more strong on it value-based underlies focus volume. or an revenue customers natural. value perspective, specifically to and demand from silicon But will perspective, accelerate, think some really these on not part And is particular products. comparable to our the is the having And certainly, designs that to we're continuing the of pricing pricing to top ASP certainly tied line be from is From a a

Mandeep Chawla

XXXG, Rob, to there it's Mandeep up, as from uplift. you ASPs here, going add to so especially are on. that just go is XXXG

I at to understand think it it the portfolio as business impacts way look we our it a basis. is on

XG you do As do also and we switches. XXXG switches know, XXG and

so And XXX, around low the from average on seeing perspective, we portfolio the when XXX, we're change at a a between XXX, mid-single-digit to increase below year-over-year ASP. in look ASPs probably

that apply the in it switching portfolio. the down the you'd course, of really business. so to comes But And mix to

Robert Mionis

comment would well. on I Rob, And the demand just piece as

and You today, being remarks transition of heard the demand touched the you've networking some to XXXG In requirements. our XXXG on strong.

years, comprise X X rack but that's networking, it's you center going to to triple. a when we in XX% XX% today, expect data We at look to expect the of of next to going

infrastructure very XXXX. up strong going requirements. for XXXG while see remain for some XXXX picking strong investment And workload networking is seeing just so we that, And demand in to the with demand beyond, XXXG AI up very the drive in cycle the and and we're

price in call and for represent conversations, on had very to terms and I'd been challenge, another of to started In with XXXG come enterprise aggressive growth out, which have get in circling discussions particular, outside and some I has think We customers having now we've we've back of that a another say, we've those having opportunity were hyperscalers, had fruitful the that competitors early we're back -- and had XXXG customers to again. on some performance point wins, us.

Operator

the from comes from question Matt Stifel. line next Sheerin your of And

Matthew Sheerin

we that How year far. regarding versus with information communications for we think Thanks year, the Should CCS particularly for with double and headwinds plus. you a segment should expect up guidance so enterprise communications next to growth be question about which about have XX% enterprise, for all I digits. servers? would the imply the the low for down in talked the

that? about think we should how So

Mandeep Chawla

Matt, to think Mandeep it's close you're Yes, it. here. getting I

a on We customer. you as continue enterprise but in we our with are strong in a largest now overall know, side, to have service technology on of transition really process outlook particular, the right seeing

in are will first 'XX. been because lower early we ramping back for again which some revenue actually the of half we server before it ramping already that we've new winning do XXXX programs, of now that begin And continuing timing so programs because in see delay, And XXXX. in see of growth starts then the set half really to

switches couple strong. because So very strong of double-digit going by that's increasing that XX% led primarily transition, of going next of quarters next of we've which on be communications to point, timing year. And to that for the to into be overall deliveries growth, side, the do continues enterprise now, to talked offset, above XXXG very more expect we than But trajectory growth in for enterprise a levels down by your be though, about year.

Matthew Sheerin

very on also then like and strategy spreading least got ODM own communications, And Great. American management. moat, North the And liquid diversification, with cooling terms that server the you've you a cetera. got competitors X acquiring have your the strong their of design. in enterprise But and in et at power can then Clearly, geographic Enterprise business. right, ODMs all and and out Okay. different technologies just that you business, argue you've within

business? disciplined? the that guess around and more strategy question should pressure is, that we And being what's taking versus incremental I pricing share expect some your in So

Jason Phillips

AI/ML describe in And maybe and differentiation what I Jason. specifically our is advantage Matt, with proprietary start this I compute. described the as I'll competitive what compute, and as would

First, we've I'd X start in generations with, scale. at been complex for AI/ML solutions product program highly RAC-level involved custom and now systems

takes So space. that's proficient years then say the become a It to on in that long I'd And scale. of at confident time keyword and this top area. takes it years become identasize that to in

side looking it at time. do not And of as It a to we've engineering So do been amount scale, the easy. on that. get be while that manufacturing well in as both to competitors investments it's takes area, to will making tremendous the in

of some that terms that, In system of there a level. would time the innovating I partnerships. of would the announcements our past, I around but what point around say describe in we announcements, reference I there's down road were flurry at been mean, a as and designs, well one in at beyond we're

the and enable a system the at ecosystem we're performance optimize ultimately partners to So working level, at system to with RAC our our customers. level,

component So you we're ecosystem drive, a you can of certain an solution says for performing level do instead or there? of get want spec What that's system this. what asking them at us can taking a partner we their to solve to

-- And would just is fairly our industry, scale, and it. the innovation the our stayed system and of at on for enabling quiet been today we've So the that We the we've RAC focused a customers differentiator that growing. competitive it time I forward. level moving think investment a we've making amount in been getting a and is capability us growing making and say, been word the say at but out about I is I'd at that

lot And I POC our X-phase We've networking where prepared remarks, working a level, mean, of interest about been excited of level system a on talked that a there. RAC well. We're at as go for quite about but then the a well from some side, got cooling customers. networking path position on pump we're industry-leading and We've in down some also at it we've -- can our time. leveraging the there

Matthew Sheerin

Great. that? are just seeing or you on pricing pricing more expecting side, Okay. And the pressure

Robert Mionis

that want Steve, do you to take one?

Stephen Dorwart

Yes.

But involved a and in of early the the us of process customers as add pricing are where our NPI competitive our is it's So on getting for from We differentiate natural looking to to I product manufacturing. realization really that all a drive well side. process, think through innovation design part by innovation. as we way lot customers value product launch into very the that

data these we're overly recently deployments. introduction some our characterize really as of transitions new And as normal nature mentioned And customers AI/ML earlier as Grok. of some the it we've this of customers nonlinear well secured concerned from the see products technology and existing is next center really as or as such as of headwinds, you generation not the some of we

And this dual early those source, we direct engaging some to typically the see as the is have of further, enter process, engagements we very and customers competitive where as comparisons, get so the where our lead partner decisions we made I mentioned. in

agree a exclusivity And ourselves lower second risk and product source. or until the customer that for it's on bring near stabilized a typically has and to time the really maintain exclusivity of period

strong the systems of us see to area growth continue for we forward. AI/ML So another compute going as

Robert Mionis

that. just And add I would to

In the we has remain where us and our Steve are areas would share of terms mentioned, at on the majority allowed programs, performance say of dual-sourced as there I focused customer to maintain we had top on the scorecards. our staying

Operator

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

Thanos Moschopoulos

guiding you margin terms Starting the about why as guiding for XXXX, in takes some off leverage wouldn't you're QX. for to same X.X% as a with is is year? QX and of in be for you improvements you're and question a seeing which next particular Mandeep, think puts which operating margin with in had Any

Mandeep Chawla

at to we're CCS perform the expect Yes, that had into we in mix taking history. in to the quarter. happy at Thanos, at Look, Can along the the the third there see Really way. hear now CCS are end quarter levels with they that account highest you. number nice every XXXX? Maybe. It's the the the we to exact from X.X% But perform impacts from until did. we're company's that good time, same of

margin in within portfolio actions some the about We operating A&D. We some leverage. that we of as program improvement are better low ATS get expecting on overall talked taken been have a

And level be it's do going overall. more of some back-end we expect loaded but so margin, to improving

confidence in just want X to really see we're what view, happy it's I'd to think it's in. XX% now is -- we of X.X% highly And say, October confident right we're well. flow to that the our giving reiterate drive to XXXX. high right EPS again, line we're growth So as we And bottom kind is One the for something right now. And now, things. the addition,

get we customer January. And an coming forward some the do we give to months so firmer forecasts look as in over update

Thanos Moschopoulos

a HPS be look then higher-margin like I seems relatively reflective within OEM which your predominantly business, And the CCS versus to just that's the hyperscale or of it the Great. out? is, will flat a of opportunities question that if or out non-hyperscaler call guess, anything mix little 'XX. focus bit from Anything business, down Is probably in your to at there? or 'XX really Jason, for I call

Jason Phillips

capability services solutions we in which got we've lot investing building our we're out real great Yes, see portfolio fruit a from inside front of some the spent now. I'm also business, inside it's business. seen and pleased We've the the efforts diversification to but Thanos. and and diversification growth then end, really one, businesses, overall question, hyperscaler strong with, of creating overall a the the time those additionally, starting portfolio. And the

solutions, again, Sonic. they leveraging enabled HPS portfolio like platforms So are, source is with oftentimes our as software open

And a the that as major of win with know of that points number you we're that there. a I'm the retailer one success just secured years. large And would triple and channel recently we've proof example of we're X a business, partnerships next the by to expecting that an on establishing business name And in over that business. having

So proposition us. those from and I the customers extent leverage prospects value of the about feel good growth that there the

asset going when our life then look customers next being the services help with their assets deployed product of are really I when recent expect look the bolstered amount well. we Global, cycles their we're to I positioned X cycle. is needs to of upgrade their acquisition our well at services going happening, manage help NCS us requirements. at be business, overall infrastructure to help that the disposition very over capability, triple as ITAD disposition asset that business to years, as And our well their our which you now, When look service IT we've as throughout And IT is the

So progress about overall, pleased and with excited brings. the XXXX what

Operator

Your of Advisors. question line from Steven the from Fox comes Fox next

Steven Fox

had X I questions.

had see on sort And of getting through line get the that for This the below being type growth. business year revenue walk prospects, the and of you opportunities risks top it, follow-up. understanding Like of back second off, the in First -- to growth. ATS churn prospects then XX% track just record does trajectory. back that where to the you is on Can I a there?

Todd Cooper

view, Cooper Okay. focused are on point an Steven, XX% we Todd here. I'd getting to of back ATS the year-over-year say from growth.

that the months. last And to to happened customers been the of in been return They've with half of significant a burn to our We We the well. I've But XX of really which reports, 'XX, beginning market they a largest 'XX, impacted, of customer through COVID it and we've see with segments, -- material X the our think, partnering I have number industrial and and a we've 'XX, by really left what call, customers. created of I read impacted year I'll constraints over been that the in quite that extreme you think segment, covered a your was over a year. stabilize. path next broadly our the last bubble inventory that's had coming just working inventory been industrial at is lot to inventory through first amount with growth of been ATS

of largest maybe EV that that, comprise our again, industrial of part one EV elevated reality of demand. still but see -- of we be of really segment, not inventory caveat of the the all those to industrial say will think chargers We which next I half before driven sitting year on areas X more context businesses for segment. their levels -- in think high with our caveats, likely versus in the factory expectations return demand. negative, second the demand chargers and those by two We they automation, of our they're positive normal

stronger the candidly We're ahead that. been than strong 'XX year Capital equipment even year, strong in beyond another that's seeing So we detractor. been expected. and probably this I'd has say largest 'XX

that UBS semiconductor billion of by today. we're XXXX, analysts and $XX most the If still, our at out $XXX at September billion with which versus $X market to you many report would semiconductor of in customers, imply the still look billion level trillion projecting $XXX came equipment

and years number Because HealthTech, years. In in won expect We're this smallest, the those imaging and pause large actually then which in and business our diabetes HealthTech X ramping next to and products, to of HealthTech, that. finished business again, take X based they won will fully a smallest our they're already programs I double I'll the X ramp. ramps, our early segment, in X And finished diagnostics. product we've after stages to that and of over on, is

Steven Fox

you And And is on on sort the more to kind That's services? sort wins then a where about just what Slide work to Great. big to perspective do for seems us ways helpful. wins, like be? customers? at growth Grail different vision leveraging does of of what If sort really really, of Like the it as big much as Holy system component cetera. have follow-up. share Can versus going XX. as doing to and on vision into I a that think now picture you possible, about could And you do showed gain to alluded can much give be that contribute how stepping you're just you that the sort wallet business, of back, CCS et different RAC the on it more of like you've of that

Jason Phillips

Steven, Thanks, is Yes. this Jason.

in and we enable is of focus with rack is goal which the customers, then. the in very level a ODM We made ultimately, to our a as in conscious back when is we to very mean, position HPS the and had a storage started that possible. as decision XXXX system I So strong many at systems

the market, today to doing some solutions We the of continue hyperscaler call top which with exciting got X business has I'd into taking X and our now what potential. storage enterprise-class

now to announced And XXXG of a I where now interest XXX grow. center. from high then say, networking very the amount X.X just engagements, in that continues networking we an on would with, we exponential of We've wins developed was XXXG terabit and moved into what to win XXXG, big all in the breakthrough. we X.X secured much this focused industry-leading XXX position had big end our the data

position there merchant so the And an on of we've silicon. side got industry-leading

then industry-leading AI/ML what custom I compute having just we've position. And to call announced, where an addition ASIC in AI/ML

HPS there. prove will we're modular a able out platform and the that about merchant we're types, be to recently XXX. announced MI a to support silicon very just on and partnership AI/ML developing going where excited AMD, We custom are We both prospects with that

a are. just and for say, So with where translates software you progresses system customers to and focused we where and I'd their solutions for more our at remain naturally solutions can at for customers. see enabling optimized our than innovating progression orchestration level system different We from XXXX their doing, into RAC-level it's that RAC-level and orchestration It's and RAC-level integration. we're our applications

of So R&D again, solutions. we're and robust We've all approach culminating RAC-level going investments And focused XXXX, as approaching end of we're been significant into investment of a enabling is since remain XXXX. $X.X them. portfolio to the that on making we billion system

Operator

the of question next line Pytlak your And from Cormark. Jesse comes from

Jesse Pytlak

discussions kind already? the to some off the design? the with Just of Are idea and win having a move starting you're coming of that are it these natives. Grok to designed having group, are back like where sounds the Or of you lot is manufacturing they parties then digital into this discussions eventually with like

Robert Mionis

Steve, take that you why one? don't

Stephen Dorwart

Sure. Yes.

when a cases, and opportunity really of opportunities, the involvement need that think to broader offering we them offering I customer these a both. assessing really broader of the have provide. strategic it's of many is fit when kinds about criteria the key companies to the we In potential as can or more have have one decision at look these we're design

get us the that's unusual and So to applicable start as a the products generation pipe cleaner. on with it's familiar other next and each generation. of relationship It some into not current experience with It real-time product. to familiar allows helps kind

out to it's start uncommon way. So that not

that and at look is others the they However, in They solutions some ways or we as and their customize iterate potentially portfolio have. in use racks. their can they infrastructure platform where in at look cases, we have of that

to often leads amount that HPS participation so the right fair from And a of beginning.

Jesse Pytlak

if you in you just trying really maybe open they are like of characterize And they helpful. to ready still solidify could, are spending? That's to planning? their Like the wallet? their can aggressiveness terms Or

Stephen Dorwart

emerging I Yes, they answer, kind some those cases, that's kinds it give hate varies. very the where of companies, of niche on solutions development. offerings. depends are interested have in but these some technologies they In kinds to have in it their and market depends of and are a

we that And and does bit criteria, it it's bring vary that really customer differentiated kinds but customer, to value we a we want think companies of of to part look and our from at again so the align to we can with.

Todd Cooper

with And deliver we willingness Jesse, leverage of away. that, there's to the that to add a these proposition I a just broader value right would companies, can portion

greater class, we with out time get of the help takes where up of that say can scaling services as customer the of there's right that more many advantage them that take relationship as value this gate and enable with. it Sometimes, the build customers offer. we quickly leverage a possible to I'd to willingness with proposition they

Operator

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

Paul Treiber

high-level question a and customer within on diversification CCS. Just mix

you other Tier hyperscalers But You large the share did still what's with speak be opportunity large with large And probably about those? natives. see do are more the will portion and opportunity with a in digital X Tier and of How hyperscalers? market. the to capture strategy the drive your X

Robert Mionis

color start I'll can maybe and here. then Paul, some add Steve

to hyperscaler would our growth say, continue bit ongoing I'd customers. I we've pleased with And we terms of tremendous our got, of in I'm do that promising upon the very Outside And we've top amount largest So business say, hyperscalers. diversification, growth. place very with earlier, that's discussions building customer, taken of other with X there. seen mentioned a I as the

there provide So we're of color pleased strong much the too in but progress can't Unfortunately, diversification. making with we the terms details, there.

Stephen Dorwart

to AI ML participate markets, applications. just comprehensive mentioned these being add many by that to across that, growing those and strategy a specifically I of I earlier would driven

OEMs and working some enterprise So the SMB the even channels services, address with of from with through specialized cloud to large working clouds, and opportunities. the hyperscalers the

to So a have go strategy we broad process.

be after life to tend on they hyperscalers, a oftentimes, next those the have pioneers of the about think technologies moved we new long or technologies. have And the When drivers the to thing. the hyperscalers

investments to have achieved to that relationships part we've So made, that of the the we it's to the broad that and strategy we've always ecosystem opportunities, have compelling that look with scale market. the at leverage partners solutions the across

Paul Treiber

of in market, discussed consideration where future And you sensitive one expect And been how pricing. maybe XX into the then I that, a as taking follow-up they point are top may more hyperscalers in or some you've that Do priorities question. yet? mean, looking the at would so? XX, Are become this happen than price XX, they what price last at point? the this they have at months

Robert Mionis

Steve?

Stephen Dorwart

question. for that Thanks Yes.

mentioned think, of availability pricing new think component always we to pricing I pricing. the closely technologies, think that and on. driver, doing oftentimes, leading-edge they a there's ease -- or performance I criteria, a kind before, approach hyperscalers assess is their of and that and as about performance based when pricing and the business by I followed their key And and with suppliers usually availability of

areas to us moving to system. And more add value so or about it's and that, of finding for a pricing as value-based into as piece about the overall more opportunities we pricing before, just really the mentioned I think

RAC. fan a something that number There's and CPU of power there's combi modules, So as things. complexes, complex of occur make-versus-buy those other kinds decisions within and there's as modules subsystems, mix. There's the

system, contributes pricing. add which so we ways across at to the entire look that entire RAC And we can or the value stronger the

like also at commodities. gain to to ways of control look We key

aligned commodities, buy demand companies So of aggregating that that hyperscalers are about to key like companies it, the the our like control some stay And you than customers and hyperscale users to several there. But source think finding have sometimes volume some when more end to become only we're closely the always commodities. ourselves. with ways are more competitive of

working these kinds to so opportunities ways find competitive, are And that compelling. remains looking pricing and for and we're diligently our of always solutions to our ensure

Operator

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

Thomas Ingham

gap. could you the bridge if wondering was I

basically wondering, yet CCS would more less we hyperscaler look You XX% double-digit it that, growth. actually market views commentary is or on talked you XXXX, that are to roughly the in at in low in And going Some CapEx just accelerate end is And about rate growth why implying for markets, when I'm be low? your XXXX? it's appreciated. that growth

Mandeep Chawla

it overall. It's me clarify Mandeep clear, outlook nice wasn't Yes, to you. here. Todd. our but talk revenue just to if let sorry

around X% confidence now growth across the seeing in in ask growth is ATS view. to billion on growth it, right it's company. we're So for side, level low $XX.X I double-digit ATS. didn't portfolio. the And expecting good Again, is overall grow. We're of but know this high single-digit low CCS. you our the the seeing We're everyone

offsetting that that seeing some the industrial of And growth impact that the of made We then program decision expecting we've loaded. are more is A&D growth. we're back-end in the of some in

the because on program XX% the side. than next talked will to decline of do communications see we side, a That's be some be to above little expect transitions, CCS as Communications more I bit XX%. probably the up offset on, XX%, level On going of enterprise, earlier the year. to

pleased with growth. the So overall, we're really

then, it To is right share everyone that now, going knows. strong to Consensus your hyperscaler the only numbers CapEx, But one taking are in thing of point XXXX hyperscaler another. and thing CapEx course, market is we one are on as very, is be watching. very -- is

hyperscaler Consensus the year next right in I in double the percentage low now digits. range. mid-XX think consensus somewhere is CapEx for is

our in now. reflected that's right so outlook And

confidence, XX about which forecast will which The one months. thing hyperscaler with I go our out go the very is our high customers talk we though, open we say when about -- with customers, good have conversations

and right fourth forecast have robust we now is X for very forecast have yet X. so for the some robust don't we And pretty QX, What quarter.

coming that shore really one the that's to so over areas And we're of months up. that the working on

in So when we hoping come give January, regard. an back we can we're in update that's why that

Thomas Ingham

on and go, Gen follow-up isn't this market adoption a there AI question. ways that? Like still about We say you that companies a production is to be period. more and Snowflake one seems my market do of is, company in the hear applications. has like again, digestion XXX to going guess, think there's I it with What like Fortune

guess into seems baked from like hyperscaler for So the it perspective, of year. some our I that is CapEx next

you as a about Just corporate wondering level, at that think what well.

Jason Phillips

one all Todd, that, everything of numbers power, data So the lot work, important right? comment this yes, -- CapEx that equipment, would on that that is It's those including that to include numbers. Jason. make I recognize the inside goes guess, plant, of a center I bucket. property, that makes there's into

And and deploying feel where our say don't our look there's growth I to so very about good rates of hyperscalers want you'd if add growth. when to know level at their the that. CapEx, I'd we anything we are Steve,

Stephen Dorwart

No, well I unless questions. said it's there's think follow-on

Mandeep Chawla

reiterate. really We've with set that programs, in AI Todd, XXXX which XXXX to add are now ramp high customer, We it's forecast, are starting our I'll not in on in we our won our are which talked XXXX. largest new winning already, about just early confidence We're to view. going server ramp programs already are encouraged XXXX. to right which

we see with is be the hyperscalers programs in to began having discussions that X.XT be active continue that very could of even which We will of 'XX 'XX, on believe to begin that's programs ramping a going industry, in we're number that impact and in in the 'XX. in first We the begin XXXX. seeing program. the And

And the at But level take year encouraging. time. with program our X are very the a this at customers so conversations have of to course, we

Operator

this are any Rob for time. now There questions the closing will call to at hand Mionis Mr. I back remarks. further no

Robert Mionis

Thank we I'm to you you, that us evening. operator, products execution and the us certainly have a outlook We and bright. evening. look in our results. with and of January, is it encouraged also our beyond. into forward now is the our right continuing good updating the and quite future pleased confidence I'm that in strategy to give our have Frankly, XXXX for in and all joining momentum you development thank Overall, yield this quite continues that

Operator

And call. this for you. Thank you Thank concludes today's participating.

You disconnect. may all

Celestica (CLS) 23 Oct 242024 Q3 Earnings call transcript