Celestica, Inc. Q4 FY2024 earnings call

• Delivered strong Q4 performance with revenues of $2.55 billion at the high-end of guidance and adjusted EPS of $1.11, exceeding guidance. • CCS segment drove growth with 30% year-over-year increase due to Hyperscaler demand for networking products. • ATS segment revenues met expectations with lower industrial revenues offset by strength in capital equipment and aerospace/defense. • Adjusted gross margin 11.0%, up 50 basis points; adjusted operating margin 6.8%, up 80 basis points. • Adjusted ROIC 29.1%, a significant improvement. • Repurchased $25.5 million of shares in Q4, total $152 million in 2024. • Secured major new customer wins, including a 1.6T switching program and a solution for a digital native company.

ATS segment revenue totaled $806 million, approximately flat and in line with guidance, accounting for 32% of total revenue. CCS segment revenue reached $1.74 billion, up 30%, accounting for 68% of total company revenue. HPS revenue increased by 65%, reaching $807 million in the fourth quarter, representing 32% of total company revenue.

• Q1 2025 revenue projected between $2.475 billion and $2.625 billion, adjusted EPS between $1.06 and $1.16. • 2025 annual outlook: revenue $10.7 billion, adjusted EPS $4.75, free cash flow $350 million. • CCS segment expected mid-double-digit revenue growth in 2025, enterprise end market to recover in second-half.

Q: George Lyon asked about 400G pull-through and 1.6T program cannibalization.

A: Rob Mionis said 400G and 800G will coexist, with 400G having a long tail as price points drop.

Q: Robert Young inquired about relationship with Broadcom and Celestica's IP contribution.

A: Rob Mionis stated it uses longstanding custom silicon providers, and the win involves significant Celestica IP in the entire rack solution.

Q: Thanos Moschopoulos asked about enterprise program transition and pipeline strength.

A: Mandeep Chawla said enterprise is down as sole source program ends, new program ramps in Q3; Rob Mionis noted strong server pipeline.

Q: David Vogt asked about 1.6T program customer and digital native technology roadmap.

A: Rob Mionis said it's an existing hyperscaler customer, and digital native has custom data center needs.

Q: Steven Fox asked about business change towards full rack solutions and liquid cooling.

A: Rob Mionis said moving to OEM land, and Mandeep Chawla noted liquid cooling capabilities.

Q: Ruben Roy asked about CapEx for new programs and DeepSeek impact.

A: Mandeep Chawla said comfortable with capacity, CapEx 1.5%-2% of revenue; Rob Mionis said increased AI accessibility drives networking demand.

Q: Paul Treiber asked about full rack solutions and U.S. facility expansion.

A: Rob Mionis said customers wait-and-see, Mandeep Chawla noted U.S. facilities supporting growth.

Q: Todd Coupland asked about communications margins and DeepSeek impact.

A: Mandeep Chawla said CCS had 7.9% operating margin, Rob Mionis said custom silicon demand drives growth.