CLS.TO - Earnings call transcript Q4 2024

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Operator

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

Craig Oberg

you Call. us thank XXXX Celestica's and Conference Earnings morning, for on joining QX Good

guidance not for IFRS IFRS call we Financial restated QX from have was having the our standards these be Officer; that under On reported that on today, previously reporting previously. financial assessment an and Chief President has note as U.S. did comparisons, Mandeep Executive results, and on including figures. impact Chawla, issued will of to our basis to our and impact all a the been Please transitioned due Chief on not the U.S. communicated, Officer. Listeners material historical note have XXXX should that of Rob now a transition Mionis, basis, GAAP GAAP

note current course during statements based to this the will which we forecasts performance expectations, the and on relating call, are make of Celestica, forward-looking future management's that Please of assumptions.

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

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

to and available For update of to as factors forward-looking discussion of performance as so please these to Investor undertake assumptions law. as do Celestica, well required factors at by statements Relations filings sec.gov and our that and impact our obligation as future and public risk refer may unless We no identification well such results sedarplus.ca expressly website.

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

annual GAAP our to QX to in outlook, on our included XXXX found to XXXX measures. we most earnings predicted exclude from a non-GAAP the our measures reliably comparable reconciliation dependent the basis routine Relations release operating future to able of include not does financial website, With measure measures not part be reconciliation management respect directly the are non-GAAP on and not are as and a comparable release on forward-looking are most a of our by measures events have earnings GAAP calculate activities. non-GAAP that of GAAP comparable Investor to our items We forward-looking that

in We occurrence, are predicting uncertainty reconciliation such provide unable to be in the which recognized. the periods impact may unreasonable a inherent the effort the to difficulty without adjustments financial the due and and

information of share occurrence, GAAP and our per from a diluted XXXX shares based are XXXX could amount The all specified, references year-over-year U.S. dollars. and results. references to dollars impact non-GAAP otherwise any figures timing and are on of outstanding GAAP call all this to Unless comparative QX All on to the items significantly comparison. excluded calculate is to

the Let now me over turn Rob. to call

Robert Mionis

the at EPS Thank guidance the billion We you, thank end exceeding us with performance everyone, range you in call. the joining range. our of morning, and on our today's of guidance of quarter revenue high of and and delivered $X.XX, high for adjusted fourth Craig, end good strong $X.XX

quarter the solid EPS we of guidance and year-over-year continue our of and strong revenue the growth expectations fourth operating CCS see robust was the XX% X.X% in hyperscaler to ATS anticipated our driven segment margin exceeded segment, as revenues demand in of demand Our from adjusted This midpoint adjusted dynamics. reflecting by market met ranges. delivered customers. result which

our which we our by achieved XXXX outstanding Celestica positive for equipment While which we build growth. was business, capital the strength year-over-year we a of XX% to an markets, continue on our see in in nearly moderation Overall, year encouraged momentum. industrial in demand continue are to

the full $X.XX, basis improvement respectively, in we with of growth and achieved in XX%, point adjusted a of For along billion revenues and margin. representing year, XX% XXX our EPS $X.XX operating adjusted

We progress achieved have are years. the company's several past and pleased we performance over the with significant the

our execution by along exceptional to platforms, are our the to we with the performance, optimistic in continuing our continue The growth strong entire of of momentum about the this and AI be team come. engines years

on you on the fourth provide quarter some financial you I each and call performance our to who would during the hand to guidance over quarter Mandeep, over with of provide of our XXXX. of to Before you. color first like further additional details the I businesses, Mandeep, the our for outlook will

Mandeep Chawla

good XX% performance hyperscaler customers up HPS CCS guidance strong was basis of Thank products demand was points, networking our segment, driven the Adjusted significant for margin in quarter morning, by and within primarily you, volumes gross by our Fourth XX.X%, business. quarter revenue and high XX up favorable at and mix. for end the range. This fueled was everyone. Rob, our from $X.XX billion of higher

operating basis X.X%, non-GAAP increase of points, margin quarter to HPS better segment driven was higher our revenues. mix XX in volumes higher due Fourth by and an CCS

quarter Our guidance an range end $X.XX, of and per was adjusted our increase earnings share $X.XX. of fourth high exceeding the

at profitability Our a of management. And to working XXX attributed adjusted and points the for operating XX%. effective quarter higher capital effective ROIC tax finally, significant our rate quarter was basis fourth XX.X%, adjusted was improvement

segment line the was revenues quarter lower million, our industrial strength and $XXX segment result a in ATS guidance. continuing by capital performance business performance quarter. our totaled to and with on this in our revenue Defense. and of Moving equipment flat The offset approximately for Aerospace in

total of accounted segment revenue. ATS Our XX% for

line lower our programs. technology This storage reached by $X.XX CCS CCS program in total the transition compute Revenue guidance XX%, The for accounted revenue company revenue in of our partially growth end market. enterprise anticipated favorable an was Our customers. due with by dynamics one quarter. segment end strong market demand in communications XX% in the billion, certain offset in very our to in hyperscaler of AI/ML to our due was up XX% with segment

end XX%, attributed for demand XX%, communications a by an growth our XXth increase products. of as HPS exceptional switches reaching total guidance This growth representing quarter, demand of networking our high hyperscaler increased XXXG stronger by ramping in networking well customer was market the as fourth in programs for percentage our to our was saw driven HPS This XX% of $XXX revenue switches. company increase. exceeding Revenue million for primarily revenue. XXXG

XX margins. industrial to margin Now our in primarily business. focus operating higher quarter end the leverage of to offset by due our HPS mix in segment shifting down reduced points, points by revenues. X.X%, operating increased and segment segment our was CCS leverage partly basis fourth basis market, in driven margins reached the of for capital a margin an quarter improvement equipment expanding XXX X.X%, ATS

for year, for that we and quarter over During total revenue. of full had customers the each two XX% the accounted

of win of are to respectively, full During customers XX%, of a levels XX% us year, customers engagements two beyond. the number to current ramp for of provides We with the which across fourth them, respectively. and the and XX% and same through programs accounted expected with currently new quarter, comfort our concentration. sales, different while XX% these they represented continue and for customer This each XXXX diversification support

decrease on our sequential balance to the $XX $XXX moving fourth billion, inventory a $X.XX At was a of end quarter, of million. working million Now the capital. year-over-year decrease of and

overall in able support declined. cycle $X to down as million Cash customers the levels we gross XX. We as inventory million quarter, while down $XXX still growth return days $XXX some million significant with inventories demand. were fourth end Cash sequentially reduction our being to were the deposits at and are year-over-year. of in customer the quarter continue the pleased deposits to during

year Turning approximately the of compared expenditures our fourth capital quarter XXXX quarter X.X% of revenue, in in the for to to line Net our X.X% $XX expenditures million with attention outlook. for were Capital cash or of revenue flow. XXXX. X.X% full were

million In $XX of the generated $XX prior year cash quarter, flow, fourth than our free period. higher million we

above outlook most For recent the free year $XXX full of $XXX of generated we flow, our cash annual million. XXXX, million

making balance and support necessary cash with to business. and to the And the allocation. pleased are the sheet moving our growth to consistent investments strong ability to We generate free flow in our growing capital on while continue

our approximately Combined $XXX this sufficient our of of balance with to us million projected borrowing under meet the At quarter, our $X.X revolver, billion million. believe cash with needs. is total which in end the was provides $XXX capacity we business fourth liquidity,

$XXX of Our debt debt was gross at the of fourth million, the quarter net resulting a $XXX million. end in position

down EBITDA ratio leverage non-GAAP gross turns, year-over-year. X.X and turns was debt Our both X.X sequentially XX-month trailing adjusted to

compliance As credit covenants in December all XX, with were under our of agreement. financial we

in our total This XXXX issuer of shares a repurchased the for cancellation reduction brings shares under total share $XXX outstanding. our X.X% quarter, repurchases for we of During resulting our bid million, XXX,XXX million. of $XX.X a in fourth to normal course approximately

we'll XXXX to generate We continue to expect and an on maintain in solid our cash to approach repurchase basis. free opportunistic shares flow

let's Revenue our for of $X.XXX anticipated per an or billion earnings signifying representing billion, growth and the at the be first projected midpoint. quarter turn XX% XX% XXXX. share per $X.XX Now of and is of to Adjusted $X.XX, share increase guidance to between $X.XX $X.XXX midpoint. to are be the at between

points EPS of would midpoint non-GAAP year-over-year. an increase of be achievement our operating our the the X.X%, ranges, margin basis adjusted XX Assuming and revenue guidance of

quarter to for be We expect our approximately adjusted XX%. rate effective first tax the

offset our we outlook market the first softness our segment, end in by defense to in of our demand segment, to XXs in our Finally, project programs. flat we including in communications aerospace the ramps and switches, strength let's low to quarter XXXG In our demand are in as and being fueled In market range, percentage ATS for revenue strength networking our equipment approximately turn for accelerating other be our CCS revenue XXXX. anticipate businesses ongoing by end markets. end grow capital

single the color to to we decrease expect enterprise With some annual percentage temporary outlook mid-XXs technology transition a revenue, source due call a on over updated additional our volumes to market, and back a decline XXXX like businesses. to Rob a our end program. compute In provide for from that, in in turn discuss financial resulting I'd AI/ML in our

Robert Mionis

Thank you, Mandeep.

view to our of We fourth the represent to provide visibility the forecast reflecting our full This year customers outlook, will the and market targets confidence X high confidence strengthening by continue quarters is strengthening growing into raise segment. dynamics from assess XXXX, as supported updates our our accordingly year in pleased These increased and are demand first and current we progresses. quarter. through CCS

XX% growth X.X%. We margin now of This an reflecting previous on EPS our of translates outlook $XX.X billion, operating of based of XX%. non-GAAP representing $X.XX, outlook $XX.X of to adjusted a a billion, growth anticipate revenues from increase non-GAAP

growth in to raising strong are robust earnings cash we outlook while free customer to our demand. Finally, meet demonstrating for million, $XXX conversion invest to continuing flow

would I on some provide color Next, businesses like for our year. the additional to you

segment, In of growth our year end our communications double-digit CCS we low anticipating expect to to as enterprise the half In XXXG transition programs end throughout October. growth market, the in XXXX. in In mid a double-digit large an continue outlook resulting are our customer. revenue the we continue communicated strength with program anticipate new market, softer we to from now a technology first hyperscalers with in AI/ML our ramp. compute hyperscaler year, of Impact

year, supported we However, ramp-up RAC AI/ML of [ program second half the programs sole-sourced further with in Grok compute ramping of to next-generation driven and communicated AI/ML the our revenues previously the by anticipate compute the ]. accelerate by of

Moving segment. on to ATS our

days, macro is the in is the revenues supported customer capital period renew being has the healthy, and new for solid XXXX segment expect and inventory of business. stabilizing over remains following not ATS on back a approximately growth the margin customer customer we base portfolio continued flat environment our the demand in on ramps new within is recover new year. our business for primarily softer XX anticipate forecasts, to of program A&D growth our in offset continued factors dilutive decision demand demand as to our by A&D, of and outlook equipment, to The outlook program demand industrial a program XXXX ramps. volumes and to back improve the Based by digestion. due Our wins. In half past In we

moment future about raised Before AI the to RX to moving recent has the on, on take discussions surrounding language which a I would large comment model of concerns model, development. DeepSeek's like

the we being on has technology DeepSeek's still to business this are over a positive analyzed, While years. neutral new impact disclosures few believe Celestica's next

compute Our AI/ML remains are custom business our Today, compute optimized performance efficiency and targeted custom primarily and leverage solutions designs. well chips cases. for ASIC power positioned. use These

XXXX and existing of models. large strategically language customers' remain and our through needs ramping advancements confident wins general programs are that new We aligned XXXX in with regardless purpose our

We accelerate. further our for lower continuing driven revenue. strengthen Additionally, AI demand are which a increased fuel networking opportunities believe the solutions. represents of by We networking leading see of adoption business, latency costs upside our low sale could majority significant our for that hyper high which a as networking networking position bandwidth, provider potentially will training infrastructure, to

We high-performance adoption. actually better highlights for efficiency, rather hardware, believe potential accelerate hindering which development even investment AI this cost in than could the

we As several we're demand of growth. we long-term reinforce optimism customer look that ahead, particular, center about tied our data continued AI-driven sustained indicators to excited investments. signals positive see In strong for

beyond. XX to and and we secured particular, new will with excited engage both in last begin two and to expect new In the of XX months a over to existing the discussions major continue in announce ramp through are on extend programs We customers quarter. XXXX to that we number next wins

networking the customer, customer on our will ramping in liquid footprint. XXXX. an we awarded represents RAC, inflection bandwidth from second center This the program design front, which applications This with cooling production includes large our within X.XT system-level technology. an been in will program data and award which another reduced a First, with a begin have supporting AI-optimized advanced leverage towards our available fully HPS switching program of point networking in networking hyperscaler increase cooling

a are also with in of digital a commercialization new announce Next, native who company, HPS AI the applications. to is we win leading significant a thrilled pioneer

servers. to full RAC, solution AI custom a customer's ASIC them around system accelerator. is with leverage investments deliver in will and developed The which collaborating AI/ML the be program optimized R&D will an We proprietary built our expertise

connectivity. X.XT solution our In bandwidth our designs, third and will switch switching RAC-level program marking cooling as high addition, well this as award next-generation include and

capabilities to begin demand XXXX, in us achieve level for enable Production our believe a the we expected will customer to and of These is our further this ramping today. a this wins to infrastructure decade-long our and design provider similar more part These platform. position program could wins AI of solidify latter of are building largest customers commitment showcase our hyperscaler leading full scale our from that also system at AI to those testament than edge leading within HPS a to as solutions. capabilities

solutions. team deliver to design, R&D, skilled of IP XXX and enable with engineers engineering Our along investments nearly our us in cutting-edge comprehensive

are see CCS strong We in portfolio, ahead. broad-based very a our and and has multiyear pleased momentum hardware the believe across that demand we to strength current for data runway center

her wish would member our thank highly in during XX of valued best and would of personal to I from Laurette has announced conclude, resignation her I her Before Directors Board future the Chair Laurette effective to XX endeavors. like for note her like Board reasons. of current has a Koellner, Committee, the we the tender for January for Audit efforts that her and been also past the years, our very her

as The thank global the begin also a execution of out for to next Audit and their would our incredibly our now to would with the successful we like I over Q&A exceptional Board yet tireless XXXX And as closed call like has Chair work the year. to appointed the turn Committee. Luis to session. operator that, I another in team truly Muller,

Operator

And Instructions]. is your will George Thank session. from now from Barclays. Wang question-answer first you. the we [Operator Ladies gentlemen, begin and question

Dong Wang

quarter, the guide. the Congrats on

ones. quick two Just

thoughts for And XXXX, Firstly, kind as you upgrade XXXG we have kind cannibalize you growth on this or XXXG strong that's just should of look the well. any cycle, programs going with to across coexist on continuously have as [ lower lower speeds X.XT. on similarly, talk thoughts to And one whether year? ] the into of continue XXXG at pull-through on speeds any the can about to three

relationships. Just of about kind those help us think

Robert Mionis

George, this is Rob.

So for coexisting XXXG time. XXXG we quite see and some

is XXX%. a also into out ramping But bit. in see As as XXXG again, XXX% And It to the XXXG. long XXXG we be we tail obviously well. quite we're years, we go get for XXXX, into up as up a growing XXXX will

be XXXG, use will on price cases technology. that different for type points there of the come As down

of for So long again, see period coexisting these time. we technologies a

Dong Wang

Okay. Great.

you the quickly peak I'm down native versus of if just curious customer talked run large also rate about Tier the you in your in can customer company of as of it's your terms secondly largest kind talk I in digital [ the and hyperscalers jewel revenue Rob Everybody kind remarkable, guys at can Just a guys road. win assets squeeze guys but but Mandeep, base you be just have maybe diversified -- ] about differentiation. Grok quarter, the you HPS know and X can crown potentially another of large-scale past networking. as last

But incumbents, maybe guys maybe tariff positioned design taking power management, modular are so continue of perspective cooling the and some ODMs. can to design, in kind of a share needs cooling also or terms server i.e., potentially of of of server you sustain differentiation of forward, maybe HPS from kind liquid of concerned, some but kind Can the the Asia of with of unpack you is more and guys the versus kind Taiwanese well more versus onshoring, ODMs? Chinese are a kind whether the going you this a the of kind power the

Robert Mionis

a Yes. win Thanks, to the I'll native a little alluded the digital background provide George. in on that we you bit of script.

major manufacturing fully it win, and services design includes orchestrated and is the for design, this a a the So RAC.

and all also over to And were scale artificial liquid have customer, name not expertise capability able particular a and written they and and extensive it. with to partner cool manufacture design is optimized intelligence. this this RAC looking strategic for Now and system for

to in had installation countries we proprietary they capabilities. This and maintenance. supply knowledge, chain them includes we a we It significant multiple property, resilient U.S.A. means had networking switch across select And rigorous X.XT And and which services we're multiple includes had because also technical manufacturing be also award beginning across have the also we compute. process. strong providing this cycles significant intellectual again, conducted They geographies. and capabilities And solution us a that we'll of supporting learning, component, decided design had ultimately, a we

this think OEMs. the that experience win have So a decade-plus in led I us against have fact to we the space

Operator

Young Robert from Thank you. Canaccord Genuity. is from

Robert Young

for new I the developing? On Broadcom around win how ASIC. relationship been just the custom is the relationship RAC you is relationship market about bullish that custom the with talk who's curious, with ASIC, if that a was integrated a with Is very Broadcom? Broadcom, influenced And by this on

Robert Mionis

this you the native hyperscaler Rob, Rob. about is Yes. talking the Are digital win, win?

Robert Young

digital the Native, native.

Robert Mionis

Yes.

networking And the is which custom switches. specifics too fully using silicon, long-standing there, providers into and compute our customer's integrated RAC. the silicon can't side, encapsulating be the side, providers go on compute the custom designing using be high-bandwidth side, of and silicon this a into we the our custom So on our will with compute have many that cooling will liquid this been majority for relationship

Robert Young

IP win then you on a go talked detail and you already in in the in just in it storage. content Okay. Do RAC Celestica's And is ODM the Like in is how contribution just little to solution. deep is switch, the this bit is? this servers, about HPS more

just its expecting IP. from Celestica to you You is that through Maybe make the own go contribution highlighted cooling.

Robert Mionis

actually us. for Yes. an Thanks, entire RAC. very design is Rob. It This significant is a project

it's the liquid just we're it integration as RAC full not the the doing, itself, backplanes, switching, includes RAC and actually we're orchestration. the includes you and compute RAC includes, mentioned cooling, cable doing before, module So RAC the

over significant the a leveraging that is XX-plus amount our this of developed IP past years. So we've

Robert Young

that be develop this? IP you'll presume further I able to And around

Robert Mionis

similar successfully another point, yet for think to industry. is Rob, that execute this with going this proof will the lead to just we point And full Yes. that this customers we across growth when and customer RAC system, further with that to other us be

Robert Young

me the one last year. for guidance the And just Okay. is on for

the in cadence at look bit second little as through year, despite just growth a the you weaker the all looks in half. of back ramps is half the though it If

pass know this can year that And give give through better of But I so you the and I'm model on at cadence -- QX don't revenue maybe then of curious if the you the line. sense I'll point. us guidance a to

Mandeep Chawla

at I to quarter, high view. want the confidence numbers from those this $XX.X $X.XX. the on to million be And notice We're first That's we $XX.X which to the revenue what But able in pleased is are our million. XX% outlook EPS growth said XX% reiterate call, higher. what to you'll raise growth. is to is then

the growing guided is revenue we've and XX%. midpoint at XX% above So EPS growth

in And right view so front know we're what we taking is us to QX of QX. on a solid now

now locked very the discussions. with we frankly, very fourth go have continue it. the We good through improving. fully visibility not But visibility yet we're as the the But confident quarter, positive largest quarter We're It's through is coming in down. will having months. solidify And and third our things to customers. these

to do So our view. be of confidence this would, high that we the as through go looking than is year. better course, We

Operator

question from Moschopoulos next Thanos is Our Markets. Capital BMO from

Thanos Moschopoulos

respect the the new on perspective? your that QX that? customer in to will a be as Congrats you customer Or expected? would transition from be just of proceeding bottom sequential is terms large outlook with wins. to And to the program clarify, transition enterprise, the With on expect what

Mandeep Chawla

we are to expected moving things sole-source life. them year-over-year program down of Thanos, as yes, Enterprise is be. the going is end as towards

we to as quarter, in a a of get that will ago is track we new we the We little end while go year. through the return program first for a third ramping reduction and would bit the of see of to expect won XXXX. year-over-year growth we half to the The as on have

is really working improvement go [ through largest that will XXXX. with custom Rob seeing the we as then as ramp ramping win the And sequential to that announced QX, with already in just Grok been things we're as new see on track. that and a nice those another our to we from then win ], customer with with before that completely speaking about, is go So this be program server well, reminder, year. out customer program will yet we that it's that has And win strengthen QX in and

good make the continuing So to are side. on we progress some server

Thanos Moschopoulos

that any the strength on is custom the just pipeline server of seeing terms And note, color you're for in RAC of incremental there provide can you additional and opportunities?

Robert Mionis

Sure, Thanos. is the a strong opportunities. we additional of pipeline the There tend play And proprietary tend side focus and Again, compute of that's is. our we on also very where server side, to on HPS to things. play

So high I would content. say And we healthy. the quite pipeline have design a is

Operator

from next from UBS. Your question is David Vogt

David Vogt

couple, got if well. I've a as you will,

clarify, So that that Rob large speeds? is won customer? faster the program or customer Mandeep, Or on just as with you customer. we a X.X new terabyte they existing a hyperscaler Can migrate an second that is to

my digital And opportunity second an from on give to and/or an question And you customer. lines, expand compute? along I'll the of other there the the network to optimized is native relationship those RAC parts networking

from this geographies. opportunity to I Is initial get complete fair but think think to of say technological multiple a to customer of sort that sort InfiniBand-based I heard to how just has of Rob better road and it's customer, been it historically of map. an obviously, an say is across this understanding a kind Celestica deploy about the across, trying solution, more ethernet technology

Robert Mionis

both with XXXG so yes, yes, customer, on they are customer hyperscaler XXXG customer. switches. an this and support David, We the existing currently

cool And RAC. liquid their really for X.XT is networking of of our it's next-generation family natural a this So extension relationship.

again entire this just So RAC. switch, the not is a but

Absolutely. solutions multi-node the customer? hyperscaler, our to share and we U.S. we're native And for also with opportunities Again, asked the for them system. of Asia. will on as this see solution final terms wallet be a with Based And grow the this -- and doing we Southeast the for and digital on be you hyperscaler both what we're this in see customer the with the we our what expand will opportunity doing also well. integrator of

InfiniBand have we're own to and them is the that and this center customized native for building. RAC. they're very custom specific I supporting designed digital data center would wouldn't to ethernet, they're And fully unique they the going for with their say, an respect I needs customer, say a with the data customer

Operator

Your from next from Fox Fox Steven Advisors. is question

Steven Fox

of wondering some and if couple which I diversifying on of And doing quarters of that from cloud large level, it landmark now questions RAC maybe with a up selling the I -- these you you've is follow more you've away wins guys orchestration. X,XXX-foot integration was could your are had the couple from to. been guys you're last complex

So aspects, changing the should XX we XX complexity And customer follow-up. months how I and towards the trends. on have more RAC, two say, like to from about months those diversity or business then a think next over, the XX to those

Robert Mionis

step manufacturers in in a keeping contract you they say, turn If to EMS. back time, at it high level, back the day, as

wins, in the company product a in these actually clearly section. way CCS OEM ODM we're category think under new be business we're with our well in I to our the

think OEM CCS ODM So that's going. are ourselves business distance into I proof these just to is land. from I think points further where And our

Steven Fox

integration? little liquid just then technology at at own manufacturing the level your be with I'm RAC as understand I to well front. want wins. And and plates about And -- that board these you a sure on design just opposed of cold yourself I would make cooling Are as as the the helpful. to talking how level? just That's leveraging on we much

Robert Mionis

able that manufacturing that it. fully and about we're applying orchestrating we're have to a talking And integrated and the partners at our also integrating deliver do we're and system. ecosystem processes level we make chip both RAC at and at level sure it Yes, scale to

Mandeep Chawla

that have we we a strong, able in well. customers experience strong gets we one the this the at the of being that things and and Steven, area that to cooling lot from liquid of scale I'll demonstrated know-how that's to to produce table is to just and really capabilities able the as have add a lot and our area -- challenge have solutions been in hearing of we're to bring

Operator

from Roy Ruben Stifel. question is next from Your

Ruben Roy

questions customer. the CapEx Mandeep, forward, wondering to following either sales on with have please? cycle, to Are to both? levels your the going mean some extensive capacity any of programs for was make the about up I does I you kind guess, development What or support just you thinking new of of changes around Would or these it new CapEx?

Mandeep Chawla

Yes.

Stifel. strong in first nice that have to So from we're We've less at spend have welcome, been over we've maintain growing a you Really CapEx double answer been our your row. able And very the comfortable we than at at take all, to digits with of XX%. have. Ruben. question, capacity years we X to Matt now If

of as the gives majority a spend on reminder, maintenance. Just lot where XX a dollars. want that basis CapEx. we of us CapEx light we only that on to And We of have growth those discretion about points is the

now the that's right us. in front have of to execute capacity We we need of all the demand

will areas targeting expand some to be like CapEx continuing in the of XXXX We we in that have growth to Thailand.

shown when support have in a in can Southeast we needed trip. year our on in our under We customer that bring campuses existing to capacity Asia, demand

very I either. is see this to way at for the saying in what previous about we've the XXXX that point the don't different year of been a think to CapEx be years in to to X% need so And revenue. And X.X% is in similar outer really

Ruben Roy

if about the that. a us opportunity to about Thank get you've out of guess thinking that more that cheaper you that to thinking to detail give can how But us you're getting that get good be the for what have if I and on term, thought, does mean opportunity about just more could comments around think great. edge, just early assessment how the networking It of how be little any, you thinking of we about some I Mandeep. thanks for we we're any thing. up Is that networking maybe do a AI you're what But about? about would big detail the sounds the point clusters And a to. could you're scale you guess used where sort scale if given like the then, networking, longer DeepSeek. comment given your Rob,

Robert Mionis

welcome. for of is are And all demand; of pundits the large crucial. of scaling the for Again, well. agnostic is the as views for all our models remains today. to in some AI accessibility networking this Yes, saying, being data drive training that really are for the middle will Ruben. as industry used Thanks, really language systems, transporting inferencing. And It's networking that is type AI crucial increased

as drive If vehicle is you so will used need still autonomous Even the switching. it bandwidth critical becomes for it's require like or high trading control, Again, across offers analytics, or of cluster think DeepSeek and distributed about again, real-time to DeepSeek think switching you you'll high-frequency minimal high servers, distributed computing. solution real-time the might fraud need if detection that. latency for if applications networking, bandwidth

view positive in to actually we is a So very our development of actually in portfolio. terms This networking drive business. growth our networking

Operator

[Operator Instructions]. Capital is from Treiber And next your Markets. RBC question Paul from

Paul Treiber

you are terms comment question of your with components? the individual shifting procuring or native pipeline, versus solutions the the broadly maybe procuring trend RAC on customers end-to-end Just in towards more win And past speaking, to just a full a seeing a digital in customer.

Robert Mionis

class digital customers. this with mean native full want really Paul, case, solution. I customers of a the Certainly

this solution, As doing with fairly is it service we're I a mentioned service, actually with not our RAC solution. sizable full the particular only customer,

proof market of think share a customers. class will to this that new this So with give win we expand us further point our

And we providing this point. hyperscalers again, what X.XT workloads, the we're depend an this to a within it With switch hyperscalers, RAC. respect the was we RAC has required does the design. networking this itself. and an the with AI And likely that mentioned latest for -- on dedicated specifically switching And for directly customer script incorporates in and had efficiency, track hyperscaler record, win be with X.XT inflection the on all it's liquid will it is, most designed the optimized that improves cooling optimized AI/ML of

terms where very think of market RAC So we're again, full going, this solutions, is think is the in well and we positioned. we

Paul Treiber

your interesting out how HPS, ability the of the compare look factor an then at from the shift contract OEM look couple do you Like the that you When importance to to in made contracts of with to having pipeline along and and to mix comment or that, contract that? you wins. at from you product as differentiation HPS manufacturing these in much you the is and about of your business win your how And EMS look next years?

Robert Mionis

and investing been design past over network for our design R&D increasingly in expanding and We've capability XX-plus years.

think I in, chime are Mandeep we the will over...

Mandeep Chawla

$XX up million million and are we we're in XXXX comfortable to going to as $XXX be year, spending spending well. this

Robert Mionis

and our in invest to anticipate migrate that that design on capabilities I to growth, continue towards journey we mentioned. And based

Mandeep Chawla

know Paul. I know you Yes. this,

They XXX over are engineers. ways. in customers with design multiple have engaging We

are type So directly. our logo of needs that customers' our Rob have Celestica that customers OEM it that products offerings have have and Celestica been as meet tested on our about, talked we

engineers And we But same they're in who then on along the customers what work have for. the customizing solution we with to can a way. collaboration in to that, looking addition work

our fall side. we on umbrella, while the under us a also wins they because level And so engineers have win of EMS content, to our the design some HPS of help do heavy our use

And our which so investment it's be we again differentiator were again, X is We're expertise that about high. Xx years on and Xx you why, if is ago, the now R&D. that going back into like in million find 'XX, going very a key we that, $XX to that spending think return and spending engineering is

Paul Treiber

if I And lastly, more. can in one squeeze

facility as requests but your more the onshoring, Thailand, the also you thinking mentioned expansion about are change for And expanding administration, customers you U.S. in in going forward? about production in U.S. Thailand and talk you are are and enthusiasm Just how with tariffs for the getting -- U.S.?

Robert Mionis

are customers have as mode. past, network. our in our done inside we But wait-and-see we've a in now, resilience Right the

one actually business in the capacity tariffs now, capacity, up we Right of shift, power our in want come means feel in area for CCS just to physical causing secured U.S. serve anticipation to area. as ample years not the means and but another our ample So them we customer power. in for can end we We've capacity have growing businesses.

So what keeping wait-and-see But are kind customers nimble. a direction, we're of if keeping I mood new our day eyes in because open now, you is we're mean. a every right and know

Mandeep Chawla

just then the a And complex do facilities. United on customers. we Coast of the of years large as West now of do We the the and a facility, semiconductor supporting the we a And a reminder, States. hyperscaler Texas our in And aerospace manufacturing we've very specifically Texas do very been Midwest. Richardson, which lot U.S., have in is defense work doubling for couple in revenue to

again, the more earlier, within as mentioned XXXX. doubling in than again the CapEx envelope I revenue We be would all And we will that expect.

Operator

you. Thank

Your next Todd question Coupland from is from CIBC.

Thomas Ingham

to Yes. specifically about ask on side. business, the I wanted communications the margin

guide, think us peers networking you of to if market into in we So relative double your that the bridge your the implies by be business will majority your end of digits. are nicely margins help the about could year. And in the it networking

lot So are? why us be higher shouldn't margins through your Just that spread. than a they talk

Robert Mionis

Todd.

selling OEMs We the our course, that So it well. our a small, side of It do -- in lot side hyperscaler also for a as there. amount includes HPS growth things, lot of are of into manufacture revenue, business is, EMS communications of gear but sometimes networking things. business revenue selling the of medium communications sometimes into of leading includes business has what there's our substantial a

So think basis. you to blended on need about communications a

Mandeep Chawla

would that. characterize is CCS I record quarter, our and the though, margins X.X% accretive in overall, margins HPS that, to business is look, way fourth had operating The the

as our revenue, of provides is types so expansion. to portfolio switches. The And an continuing HPS we it HPS margin majority of opportunity today for continue grow

we to thinking would following example, to same ZIP the of margin -- But so our about numbers. HPS comparison, some about apples-to-apples we're be It that to will expect you're up code. expansion. those not we're and pretty communication an how more ODMs. see the also way does would think an And ODM the best And much as lift relative an business perform if

Thomas Ingham

That's great. go wanted to well. to back then And I as just DeepSeek

silicon, takeaway an your incremental of at drive at this the driver? it's point is silicon So custom merchant demand to expense that that's going and

Robert Mionis

Yes.

we're market. silicon where the In place that focusing really where And terms specialized AI silicon view is that's Custom from. that's the growing actually our of come that's the we And majority is the the will play. custom growth that, applications. of on feel demand, we around

Operator

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

Robert Mionis

further bright. gives we quarter, you, this XXXX. products is in forward forward long-term We next and we're was and combined wonderful you into And joining also have confidence a our and you morning. our outlook building on to positive get as recent that have quite wins in development for certainly looking The XXXX solid thank a this on us Thank momentum with look us year operator. our again, us, for we future updating day.

Operator

all Thank and for Thank you. has gentlemen, Ladies the ended. conference joining. now you

disconnect You lines. may all your

Celestica (CLS) 30 Jan 252024 Q4 Earnings call transcript