Celestica(CLS) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides Celestica Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for Q2 and 1H 2025 Item 1. Financial Statements This section presents Celestica Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, comprehensive income, changes in equity, and cash flows, along with detailed notes on accounting policies, segment reporting, acquisitions, and financial instruments Condensed Consolidated Balance Sheets Presents Celestica's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Assets | | | | Total current assets | 4,771.0 | 4,512.2 | | Total assets | 6,241.1 | 5,988.2 | | Liabilities & Equity | | | | Total current liabilities | 3,320.8 | 3,021.4 | | Total liabilities | 4,483.2 | 4,092.2 | | Total equity | 1,757.9 | 1,896.0 | | Total liabilities and equity | 6,241.1 | 5,988.2 | - Total assets increased by $252.9 million from December 31, 2024, to June 30, 2025, primarily driven by increases in accounts receivable and inventories[10] - Total equity decreased by $138.1 million from December 31, 2024, to June 30, 2025[10] Condensed Consolidated Statements of Operations Details Celestica's revenue, gross profit, earnings from operations, and net earnings for Q2 and 1H 2025 and 2024 | Metric | Three months ended June 30, 2025 (Millions USD) | Three months ended June 30, 2024 (Millions USD) | Six months ended June 30, 2025 (Millions USD) | Six months ended June 30, 2024 (Millions USD) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Revenue | 2,893.4 | 2,391.9 | 5,542.0 | 4,600.8 | | Gross profit | 371.0 | 253.8 | 644.9 | 475.9 | | Earnings from operations | 272.5 | 132.9 | 401.3 | 258.7 | | Net earnings | 211.0 | 95.0 | 297.2 | 186.8 | | Basic EPS | 1.83 | 0.80 | 2.57 | 1.57 | | Diluted EPS | 1.82 | 0.80 | 2.55 | 1.57 | - Revenue increased 21% for Q2 2025 YoY and 20% for 1H 2025 YoY[12] - Net earnings more than doubled in Q2 2025 YoY, increasing by 122%, and grew by 59% for 1H 2025 YoY[12] Consolidated Statements of Comprehensive Income Outlines Celestica's net earnings and other comprehensive income components for Q2 and 1H 2025 and 2024 | Metric | Three months ended June 30, 2025 (Millions USD) | Three months ended June 30, 2024 (Millions USD) | Six months ended June 30, 2025 (Millions USD) | Six months ended June 30, 2024 (Millions USD) | | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net earnings | 211.0 | 95.0 | 297.2 | 186.8 | | Total other comprehensive income (loss), net of tax | 14.8 | (7.9) | 16.7 | (11.7) | | Total comprehensive income | 225.8 | 87.1 | 313.9 | 175.1 | - Total comprehensive income significantly increased, from $87.1 million in Q2 2024 to $225.8 million in Q2 2025, driven by higher net earnings and positive other comprehensive income[14] Condensed Consolidated Statements of Changes in Equity Shows changes in Celestica's equity, including capital stock, treasury stock, and accumulated deficit, from January 1 to June 30, 2025 | Metric | Balance – January 1, 2025 (Millions USD) | Balance – June 30, 2025 (Millions USD) | | :-------------------------------- | :--------------------------------------- | :------------------------------------- | | Capital stock | 1,632.8 | 1,621.5 | | Treasury stock | (92.9) | (202.2) | | Additional paid-in capital | 797.5 | 466.1 | | Accumulated deficit | (423.8) | (126.6) | | Accumulated other comprehensive income (loss) | (17.6) | (0.9) | | Total equity | 1,896.0 | 1,757.9 | - Total equity decreased from $1,896.0 million at January 1, 2025, to $1,757.9 million at June 30, 2025, primarily due to significant share repurchases for cancellation ($116.9 million) and for SBC plans ($221.6 million), partially offset by net earnings ($297.2 million)[16][17] Condensed Consolidated Statements of Cash Flows Details Celestica's cash flows from operating, investing, and financing activities for Q2 and 1H 2025 and 2024 | Metric | Three months ended June 30, 2025 (Millions USD) | Three months ended June 30, 2024 (Millions USD) | Six months ended June 30, 2025 (Millions USD) | Six months ended June 30, 2024 (Millions USD) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by operating activities | 152.4 | 99.6 | 282.7 | 207.7 | | Net cash used in investing activities | (35.0) | (70.1) | (71.7) | (110.5) | | Net cash provided by (used in) financing activities | (106.6) | 96.4 | (320.5) | (33.6) | | Net increase (decrease) in cash and cash equivalents | 10.8 | 125.9 | (109.5) | 63.6 | | Cash and cash equivalents, end of period | 313.8 | 434.0 | 313.8 | 434.0 | - Net cash provided by operating activities increased by $52.8 million in Q2 2025 YoY and $75.0 million in 1H 2025 YoY[25] - Net cash used in financing activities significantly increased to $320.5 million in 1H 2025, compared to $33.6 million in 1H 2024, primarily due to higher share repurchases and SBC cash settlements[25] Notes to Condensed Consolidated Financial Statements Provides detailed explanations of Celestica's accounting policies, segment reporting, acquisitions, and financial instruments 1. REPORTING ENTITY Describes Celestica Inc.'s incorporation, stock listings, and its two reportable business segments - Celestica Inc. is incorporated in Ontario, Canada, with common shares listed on the TSX and NYSE[26] - The company operates in two reportable segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS)[26] 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES Outlines the accounting principles used for interim financial statements and the impact of management's judgments and estimates - Interim financial statements are prepared in accordance with GAAP for interim reporting, condensing or omitting certain annual disclosures[27] - Management makes significant judgments, estimates, and assumptions, which are reviewed ongoingly, and actual results may differ materially[29][30] - The company is evaluating the impact of recently issued accounting pronouncements, including ASU 2024-03 on expense disaggregation, effective for annual periods after December 15, 2026[37][38] 3. SEGMENT AND CUSTOMER REPORTING Presents revenue and segment margin data for Celestica's Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS) segments | Segment | Q2 2025 Revenue (Millions USD) | Q2 2024 Revenue (Millions USD) | 1H 2025 Revenue (Millions USD) | 1H 2024 Revenue (Millions USD) | | :---------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | ATS | 819.1 | 767.7 | 1,626.3 | 1,535.6 | | CCS Communications | 1,641.2 | 935.2 | 3,068.9 | 1,699.4 | | CCS Enterprise | 433.1 | 689.0 | 846.8 | 1,365.8 | | Total CCS | 2,074.3 | 1,624.2 | 3,915.7 | 3,065.2 | | Total Revenue | 2,893.4 | 2,391.9 | 5,542.0 | 4,600.8 | | Segment | Q2 2025 Segment Margin | Q2 2024 Segment Margin | 1H 2025 Segment Margin | 1H 2024 Segment Margin | | :---------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | ATS | 5.3 % | 4.6 % | 5.2 % | 4.4 % | | CCS | 8.3 % | 7.0 % | 8.1 % | 7.0 % | - Two customers (both in CCS) accounted for 31% and 13% of total revenue in Q2 2025, highlighting customer concentration[44] 4. ACQUISITION Details the acquisition of NCS Global Services LLC, including purchase price, funding, and goodwill allocation - On April 26, 2024, Celestica acquired NCS Global Services LLC, an IT infrastructure and asset management business, for $39.6 million, funded by its credit facility[47] - The acquisition included a potential earn-out of up to $20 million, valued at $6.6 million at acquisition date, and resulted in $19.4 million of non-tax deductible goodwill allocated to the CCS segment[47][49] 5. ACCOUNTS RECEIVABLE (A/R), NET Provides a breakdown of accounts receivable, net, allowance for credit losses, and contract assets | Metric | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | | :-------------------------- | :----------------------------- | :------------------------------- | | Accounts receivable, net | 2,287.8 | 2,069.0 | | Allowance for credit losses | 22.8 | 10.1 | | Contract assets | 293.4 | 237.9 | - The allowance for credit losses increased from $10.1 million at December 31, 2024, to $22.8 million at June 30, 2025[50] 6. INVENTORIES Details inventory components, write-downs, and customer cash deposits for inventory risk | Component | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | | :---------------- | :----------------------------- | :------------------------------- | | Raw materials | 1,492.5 | 1,521.1 | | Work in progress | 132.7 | 106.6 | | Finished goods | 292.9 | 132.9 | | Total Inventories | 1,918.1 | 1,760.6 | - Inventory write-downs recorded in cost of sales increased significantly to $12.8 million in Q2 2025 (from $1.3 million in Q2 2024) and $29.3 million in 1H 2025 (from $18.2 million in 1H 2024)[54] - Cash deposits from customers for inventory risk decreased from $511.6 million at December 31, 2024, to $396.6 million at June 30, 2025[55] 7. LEASES Presents lease expense components and right-of-use assets and lease obligations | Lease Expense Component | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Finance lease expense (amortization) | 2.0 | 1.9 | 4.1 | 3.7 | | Finance lease expense (interest) | 0.8 | 0.9 | 1.6 | 1.8 | | Operating lease expense | 10.3 | 10.0 | 20.6 | 19.7 | | Short-term and variable lease expense | 0.7 | 0.5 | 1.1 | 0.9 | | Total Lease Expense | 13.8 | 13.3 | 27.4 | 26.1 | | ROU Assets / Lease Obligations | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total ROU assets | 174.9 | 180.8 | | Total lease obligations | 196.6 | 196.8 | 8. CREDIT FACILITIES Describes the company's credit facility, including Term A and B Loans, Revolving Credit Facility, and compliance with covenants - The company's Credit Facility, amended in June 2024, includes a $250.0 million Term A Loan, a $500.0 million Term B Loan, and a $750.0 million Revolving Credit Facility[58] | Borrowings | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Revolver | 90.0 | — | | Term A Loan | 237.5 | 243.7 | | Term B Loan | 495.0 | 497.5 | | Total Credit Facility Borrowings | 822.5 | 741.2 | | Finance lease obligations | 58.5 | 61.7 | | Total Credit Facility and finance lease obligations | 875.2 | 796.7 | - Celestica was in compliance with all restrictive and financial covenants under the Credit Facility as of June 30, 2025[62] 9. CAPITAL STOCK Details common shares outstanding, repurchase activities, and the 2025 Long Term Incentive Plan | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------------------- | :----------------------- | :--------------------------- | | Common Shares outstanding | 115.0 | 116.1 | | Common Shares repurchased for cancellation (1H) | 1.2 | 0.7 (1H 2024) | | Cost of repurchases for cancellation (1H) | $115.0 | $26.5 (1H 2024) | | Common Shares repurchased for SBC plans (1H) | 1.7 | 2.8 (1H 2024) | | Cost of repurchases for SBC plans (1H) | $221.6 | $101.6 (1H 2024) | - The 2024 NCIB allows for repurchase of up to approximately 8.6 million shares, with 7.1 million remaining available at June 30, 2025[68] - The 2025 Long Term Incentive Plan (2025 LTIP) was approved, allowing for grants of up to 6.9 million Common Shares for equity awards[70] 10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX Breaks down components of accumulated other comprehensive income (loss), including foreign currency translation and derivative gains/losses | Component | June 30, 2025 (Millions USD) | June 30, 2024 (Millions USD) | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Foreign currency translation account | (30.5) | (33.5) | | Unrealized net gain (loss) on currency forward cash flow hedges | 12.1 | (9.9) | | Unrealized net gain (loss) on interest rate swap cash flow hedges | (2.3) | 4.6 | | Pension and non-pension post-employment benefit account | 19.8 | 26.9 | | Accumulated other comprehensive loss (AOCI), net of tax | (0.9) | (11.9) | - AOCI improved from a loss of $11.9 million in June 2024 to a loss of $0.9 million in June 2025, primarily due to a shift from unrealized losses to gains on currency forward derivative hedges[75] 11. RESTRUCTURING AND OTHER CHARGES, NET OF RECOVERIES Summarizes restructuring charges, transition costs, acquisition costs, and other charges for the reported periods | Charge Type | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Restructuring charges | 12.8 | 5.6 | 15.0 | 10.7 | | Transition Costs | 1.1 | 4.8 | 1.1 | 4.8 | | Acquisition costs | 0.3 | 1.1 | 0.9 | 2.1 | | Other charges (recoveries) | 0.3 | — | 1.4 | (1.3) | | Total | 14.5 | 11.5 | 18.4 | 16.3 | - Restructuring charges in Q2 2025 more than doubled YoY, primarily due to employee terminations to adjust the cost base[76][77] - Transition Costs in Q2 2025 and 1H 2025 were $0.4 million, related to subleasing the Purchaser Lease, a significant decrease from $4.8 million in prior year periods[80] 12. MISCELLANEOUS EXPENSE Details components of miscellaneous expense, primarily related to derivative losses and net periodic benefit costs | Component | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net periodic benefit cost (non-service) | 0.4 | 0.3 | 0.5 | 0.6 | | Loss recognized on derivatives (interest rate swaps) | 1.3 | 2.5 | 2.6 | 5.2 | | Loss recognized on derivatives (foreign exchange forwards) | — | 1.6 | — | 5.2 | | Total Miscellaneous Expense | 1.7 | 4.4 | 3.1 | 11.0 | - Miscellaneous expense decreased significantly in Q2 2025 and 1H 2025 compared to prior year periods, primarily due to lower losses recognized on derivative instruments[82] 13. PENSION AND NON-PENSION POST-EMPLOYMENT BENEFIT PLANS Outlines the components of net periodic benefit cost for pension and non-pension post-employment benefit plans | Component of Net Periodic Benefit Cost | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :--------------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Service cost | 1.3 | 2.0 | 2.6 | 4.0 | | Interest cost | 3.4 | 3.1 | 6.6 | 6.2 | | Expected return on plan assets | (2.5) | (2.3) | (5.0) | (4.6) | | Amortization of net gain | (0.5) | (0.5) | (1.1) | (1.0) | | Total Net Periodic Benefit Cost | 1.7 | 2.3 | 3.1 | 4.6 | - The non-service cost components of net periodic benefit cost are included in miscellaneous expense, while service costs are recorded in cost of sales and SG&A[83] 14. INCOME TAXES Discusses income tax expense, the impact of global minimum tax, and tax uncertainties in various jurisdictions | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income tax expense | 46.3 | 18.5 | 73.8 | 31.9 | | GMT impact | 7.1 | 12.2 | 13.9 | 16.2 | | DTA Recognition (U.S.) | — | (7.5) | — | (7.5) | | Tax uncertainties (Asian subsidiaries) | 3.0 (expense) | — | 3.0 (expense) | (5.6) (reversal) | - Income tax expense increased significantly in Q2 2025 and 1H 2025, partly due to Pillar Two global minimum tax legislation (GMT) and tax uncertainties in Asian subsidiaries[87] - The company benefits from tax incentives in Thailand and Laos, with some exemptions expiring by 2028-2029, which could increase future tax expense[177] 15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Explains Celestica's use of financial instruments to manage currency, equity price, and interest rate risks - Celestica uses foreign currency forward contracts and swaps to hedge currency risk from operational costs and future cash flows[90] - A Total Return Swap (TRS) Agreement is used to manage cash flow and equity price risk related to SBC plans, with a re-struck price of $91.58 per share on March 14, 2025, resulting in a $98.6 million cash receipt[91][92] - Interest rate swaps are in place to hedge against variable interest rates on Term Loans, covering $370.0 million notional amount at June 30, 2025, leaving $452.5 million of borrowings unhedged[95][96] 16. EARNINGS PER SHARE Presents basic and diluted weighted average shares and earnings per share for the reported periods | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | 1H 2025 (Millions) | 1H 2024 (Millions) | | :-------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Basic weighted average shares | 115.1 | 118.8 | 115.5 | 118.9 | | Diluted weighted average shares | 115.9 | 119.4 | 116.4 | 119.3 | - Basic EPS increased from $0.80 in Q2 2024 to $1.83 in Q2 2025, and diluted EPS increased from $0.80 to $1.82, reflecting higher net earnings and a lower weighted-average share count[12] 17. CONTINGENCIES Addresses ongoing litigation, investigations, and tax proceedings, including management's assessment of their financial impact - The company is subject to litigation, investigations, and tax proceedings, including a $7 million Romanian tax assessment (2014-2018) and a $12 million Thailand VAT assessment (2019)[106][107] - Management believes adequate provisions have been recorded, and the ultimate resolution of pending matters will not have a material adverse impact on financial performance, though outcomes are not assured[105][108] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Celestica's financial condition and results of operations for Q2 2025 and 1H 2025, highlighting strong revenue and earnings growth driven by the CCS segment, particularly HPS networking business. It also discusses critical accounting estimates, liquidity, capital resources, and non-GAAP financial measures Overview Provides a general introduction to Celestica's business, segments, and external factors impacting its operations - Celestica provides supply chain solutions globally across two segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS)[114] - External factors like geopolitical tensions, trade conflicts, tariffs, and supply chain disruptions continue to pose risks[117] - The company is investing in capacity and capability expansions in Thailand, Malaysia, and Richardson, U.S., to support growth in AI/machine learning (ML) programs[119][122] Recent Developments Highlights key financial and operational developments, including segment revenue growth and share repurchase activities - ATS segment revenue increased 7% in Q2 2025 YoY, driven by Capital Equipment and Industrial businesses, with margin improving to 5.3%[124] - CCS segment revenue increased 28% in Q2 2025 YoY, with Communications up 75% due to HPS networking, while Enterprise decreased 37% due to an AI/ML compute program transition. CCS margin rose to 8.3%[125][126] - The company repurchased 0.6 million Common Shares for $40.0 million in Q2 2025 under its NCIB, with 7.1 million shares remaining available[127] Summary of Q2 2025 and Year-to-Date Period Presents a concise overview of Celestica's financial performance and key operational metrics for Q2 and 1H 2025 | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Revenue | 2,893.4 | 2,391.9 | 5,542.0 | 4,600.8 | | Gross profit | 371.0 | 253.8 | 644.9 | 475.9 | | Net earnings | 211.0 | 95.0 | 297.2 | 186.8 | | Diluted EPS | 1.82 | 0.80 | 2.55 | 1.57 | | Metric | Q2 2025 | Q2 2024 | 1H 2025 | 1H 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | | ATS revenue (% of total) | 28% | 32% | 29% | 33% | | CCS revenue (% of total) | 72% | 68% | 71% | 67% | | ATS segment margin | 5.3% | 4.6% | 5.2% | 4.4% | | CCS segment margin | 8.3% | 7.0% | 8.1% | 7.0% | | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | | :---------------- | :------ | :------ | :------ | :------ | :------ | :------ | | Days in A/R | 70 | 72 | 73 | 71 | 71 | 75 | | Days in inventory | 67 | 68 | 73 | 75 | 81 | 93 | | Days in A/P | (54) | (51) | (55) | (56) | (59) | (62) | | Cash cycle days | 66 | 69 | 69 | 66 | 64 | 68 | | Inventory turns | 5.4x | 5.4x | 5.0x | 4.9x | 4.5x | 3.9x | Critical Accounting Estimates Discusses management's significant judgments and estimation uncertainties in preparing financial statements - Management's critical accounting estimates involve significant judgment and estimation uncertainty, including revenue recognition timing, impairment assessments, fair value measurements, and purchase price allocations for acquisitions[137][141] - No significant revisions to critical accounting estimates or assumptions were made in Q2 2025, and no material impairments or adjustments were identified[140][142] Operating Results Analyzes Celestica's financial performance across various income statement components and segments Revenue Details revenue performance by segment and end market, highlighting growth drivers and customer concentration | Segment | Q2 2025 Revenue (Millions USD) | Q2 2024 Revenue (Millions USD) | 1H 2025 Revenue (Millions USD) | 1H 2024 Revenue (Millions USD) | | :---------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | ATS | 819.1 | 767.7 | 1,626.3 | 1,535.6 | | CCS Communications | 1,641.2 | 935.2 | 3,068.9 | 1,699.4 | | CCS Enterprise | 433.1 | 689.0 | 846.8 | 1,365.8 | | Total Revenue | 2,893.4 | 2,391.9 | 5,542.0 | 4,600.8 | - ATS segment revenue increased 7% in Q2 2025 and 6% in 1H 2025, driven by Capital Equipment and Industrial businesses[146] - CCS segment revenue increased 28% in Q2 2025 and 1H 2025. Communications end market revenue surged 75% in Q2 2025 and 81% in 1H 2025 due to HPS networking[147] - Enterprise end market revenue decreased 37% in Q2 2025 and 38% in 1H 2025 due to an anticipated technology transition in an AI/ML compute program[147] - Top 10 customers represented 78% of total revenue in Q2 2025 and 1H 2025, with two CCS customers individually accounting for 31% and 13% in Q2 2025[148] Gross profit Examines gross profit and margin trends, including the impact of revenue growth and fair value adjustments | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :---------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Gross profit | 371.0 | 253.8 | 644.9 | 475.9 | | Gross margin | 12.8 % | 10.6 % | 11.6 % | 10.3 % | - Gross profit increased 46% in Q2 2025 and 36% in 1H 2025, driven by strong revenue growth. Gross margin improved due to higher volumes and a more favorable mix[150] - Gross profit and margin in Q2 2025 and 1H 2025 benefited from $33.5 million and $13.2 million, respectively, of higher favorable fair value adjustments related to the total return swap agreement (TRS FVAs)[151] SG&A Analyzes selling, general, and administrative expenses, including the effects of fair value adjustments and foreign exchange | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :---------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | SG&A | 38.9 | 79.3 | 151.4 | 144.1 | | SG&A (% of revenue) | 1.3 % | 3.3 % | 2.7 % | 3.1 % | - SG&A decreased by $40.4 million in Q2 2025 YoY, primarily due to $48.2 million favorable TRS FVA changes, partially offset by higher foreign exchange losses[153] - SG&A increased by $7.3 million in 1H 2025 YoY, driven by higher expected credit losses, compensation, and foreign exchange losses, partially offset by $17.9 million favorable TRS FVA changes[154] Segment income and margin Presents segment income and margin for ATS and CCS, highlighting profitability drivers | Segment | Q2 2025 Income (Millions USD) | Q2 2025 Margin | Q2 2024 Income (Millions USD) | Q2 2024 Margin | | :---------------- | :---------------------------- | :------------- | :---------------------------- | :------------- | | ATS | 43.5 | 5.3 % | 35.1 | 4.6 % | | CCS | 171.2 | 8.3 % | 114.5 | 7.0 % | | Total | 214.7 | | 149.6 | | - ATS segment income increased 24% in Q2 2025 and 26% in 1H 2025, with margin improving to 5.3% and 5.2% respectively, driven by improved profitability in the A&D business[156] - CCS segment income increased 50% in Q2 2025 and 49% in 1H 2025, with margin improving to 8.3% and 8.1% respectively, driven by a higher mix of HPS revenue and strong productivity[157] SBC expense and TRS FVAs Discusses share-based compensation expense and the impact of Total Return Swap fair value adjustments on earnings | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Total employee SBC expense | 15.2 | 11.9 | 41.2 | 34.6 | | Total TRS FVAs: gains | (97.4) | (15.7) | (78.3) | (47.2) | | Combined effect | (82.2) | (3.8) | (37.1) | (12.6) | | Director SBC expense in SG&A | 0.5 | 0.6 | 1.1 | 1.2 | - Employee SBC expense increased in Q2 2025 and 1H 2025. TRS FVAs showed significant gains, leading to a combined positive impact on earnings, primarily due to fluctuations in the Common Share price[161] Restructuring and other charges, net of recoveries Details charges related to restructuring, transition costs, acquisition costs, and other items | Charge Type | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Restructuring charges | 12.8 | 5.6 | 15.0 | 10.7 | | Transition Costs | 1.1 | 4.8 | 1.1 | 4.8 | | Acquisition costs | 0.3 | 1.1 | 0.9 | 2.1 | | Other charges (recoveries) | 0.3 | — | 1.4 | (1.3) | | Total | 14.5 | 11.5 | 18.4 | 16.3 | - Restructuring charges increased in Q2 2025 and 1H 2025, mainly from employee terminations. Transition Costs decreased significantly due to sublease agreements for the Purchaser Lease[164][166] - Other charges in 2025 relate to the transition as a U.S. domestic filer, while 2024 included legal recoveries[167] Finance Costs Analyzes finance costs, primarily interest expense under the credit facility | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Finance Costs | 13.5 | 15.0 | 27.2 | 29.0 | | Interest expense under credit facility | 11.2 | 12.1 | 24.3 | 24.0 | - Finance Costs decreased in Q2 2025 and 1H 2025, primarily due to lower interest expense under the credit facility and the absence of debt issuance costs incurred in 2024[168] Miscellaneous Expense (Income) Discusses miscellaneous expense, mainly driven by derivative losses and foreign currency fluctuations | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Miscellaneous Expense | 1.7 | 4.4 | 3.1 | 11.0 | - Miscellaneous Expense decreased in Q2 2025 and 1H 2025, mainly due to lower losses from foreign currency forward exchange contracts and interest rate swaps[170] Income taxes Examines income tax expense, the impact of global minimum tax, and tax incentives | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income tax expense | 46.3 | 18.5 | 73.8 | 31.9 | | GMT impact | 7.1 | 12.2 | 13.9 | 16.2 | | DTA Recognition (U.S.) | — | (7.5) | — | (7.5) | | Tax uncertainties (Asian subsidiaries) | 3.0 (expense) | — | 3.0 (expense) | (5.6) (reversal) | - Income tax expense increased due to higher earnings before tax, GMT legislation, and tax uncertainties in Asian subsidiaries, partially offset by DTA recognition in 2024[171][172][174] - The company faces potential increases in tax expense from expiring tax incentives in Thailand and Laos, and ongoing tax audits in various jurisdictions[176][177][178] Net earnings Summarizes the drivers of net earnings growth for the reported periods | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :---------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net earnings | 211.0 | 95.0 | 297.2 | 186.8 | - Net earnings increased by $116.0 million in Q2 2025 and $110.4 million in 1H 2025, primarily driven by higher gross profit and lower SG&A, partially offset by increased income tax and R&D expenses[182] Liquidity and Capital Resources Assesses Celestica's ability to meet its financial obligations and fund operations through cash, credit, and other resources Liquidity Reviews cash and cash equivalents, credit facility borrowings, and cash flow activities | Metric | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | 313.8 | 423.3 | | Borrowings under credit facility | 822.5 | 741.2 | | Cash Flow Activity | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net cash provided by operating activities | 152.4 | 99.6 | 282.7 | 207.7 | | Net cash used in investing activities | (35.0) | (70.1) | (71.7) | (110.5) | | Net cash provided by (used in) financing activities | (106.6) | 96.4 | (320.5) | (33.6) | - Net cash from operating activities increased in 1H 2025 due to higher net earnings, despite working capital requirements driven by increases in A/R and inventory[185] Non-GAAP free cash flow Presents and reconciles non-GAAP free cash flow, highlighting its components and trends | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | GAAP cash provided by operations | 152.4 | 99.6 | 282.7 | 207.7 | | Purchase of property, plant and equipment, net of sales proceeds | (32.5) | (34.0) | (69.2) | (74.4) | | Non-GAAP free cash flow | 119.9 | 65.6 | 213.5 | 133.3 | - Non-GAAP free cash flow increased by $80.2 million in 1H 2025 compared to 1H 2024, primarily due to higher cash generated from operations[188] Cash used in investing activities Details cash outflows for investing activities, primarily capital expenditures and acquisitions | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net cash used in investing activities | (35.0) | (70.1) | (71.7) | (110.5) | | Capital expenditures | (32.5) | (36.9) | (69.2) | (77.3) | - Capital expenditures in 1H 2025 were $69.2 million, primarily for enhancing manufacturing capabilities and supporting new customer programs, mostly within the CCS segment[189] - The NCS acquisition in April 2024 contributed to investing activities in the prior year[190] Cash provided by and used in financing activities Summarizes cash flows from financing activities, including share repurchases and TRS settlements | Financing Activity | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | 1H 2025 (Millions USD) | 1H 2024 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net cash provided by (used in) financing activities | (106.6) | 96.4 | (320.5) | (33.6) | | Repurchase of capital stock for cancellation | (40.0) | (10.0) | (117.7) | (26.5) | | Purchase of treasury stock for SBC plans | — | — | (221.6) | (101.6) | | Proceeds from TRS settlement | — | — | 98.6 | 32.3 | | SBC cash settlement | — | — | (156.0) | (69.0) | - Net cash used in financing activities significantly increased in 1H 2025 due to higher share repurchases for cancellation ($117.7 million) and for SBC plans ($221.6 million), and increased SBC cash settlements ($156.0 million)[25] - The company received $98.6 million from a TRS re-strike transaction in 1H 2025 and $32.3 million from a partial TRS settlement in 1H 2024[196] Cash requirements Discusses anticipated cash needs for working capital, capital spending, and debt repayments - Working capital requirements fluctuate due to business factors like new programs, inventory levels, and payment timing, managed through cash on hand, the Revolver, A/R sales, and SFPs[198] - Current and projected liquidity sources are expected to be sufficient for anticipated needs for the next twelve months and beyond, including working capital, capital spending, and debt repayments[199] Financing Arrangements Describes the company's credit facility, interest expense, and compliance with covenants - Annual interest expense and fees under the Credit Facility are approximately $48 million, expected to be funded by cash on hand[201] - Outstanding indebtedness and mandatory prepayment provisions may limit future acquisitions, capital flexibility, and increase vulnerability to economic conditions[203] - The company expects to remain in compliance with Credit Facility covenants, which include restrictive and financial covenants[204] TRS Explains the Total Return Swap Agreement's role in managing equity price risk and its financial impact - The TRS Agreement manages cash flow and equity price risk for SBC plans. A re-strike on March 14, 2025, at $91.58 per share, resulted in a $98.6 million cash receipt[206][207] - Future payments under the TRS Agreement are uncertain due to variable interest payments and Common Share price fluctuations, but are expected to be funded from cash on hand[208] Repatriations Details expected cash repatriations from foreign subsidiaries and associated withholding taxes - The company expects to repatriate approximately $115 million of cash from foreign subsidiaries, incurring about $14 million in anticipated withholding taxes[209] Capital Expenditures Provides estimates for capital spending and funding sources for 2025 - Capital spending for 2025 is estimated at 1.5% to 2.0% of revenue, funded by cash on hand and financing arrangements[210] Common Share Repurchases and SBC settlements Discusses the funding mechanisms for common share repurchases and share-based compensation settlements - Common Share repurchases and SBC cash settlements are funded by cash on hand, Revolver borrowings, or a combination[210] Lease Obligations Summarizes total finance and operating lease obligations and their funding - Total finance and operating lease obligations were $196.6 million at June 30, 2025, expected to be funded by cash on hand and financing arrangements[211] Litigation and contingencies (including indemnities) Addresses legal and tax proceedings, and routine indemnifications, and their potential financial impact - The company is involved in litigation and tax proceedings, including Romanian and Thailand tax matters, with management believing adequate provisions are in place[211] - Routine indemnifications are provided, with maximum potential liability not reasonably estimable, but historically not resulting in significant payments[212] Capital Resources Outlines available capital resources, including cash, credit facilities, and accounts receivable sales programs - Capital resources include cash from operations, the Revolver ($648.9 million available at June 30, 2025), uncommitted bank overdraft facilities ($198.5 million available), and A/R sales programs[213][216][223][224] - The Credit Facility has an accordion feature allowing for increased Term Loans and/or Revolver commitments by $200.0 million plus additional amounts based on leverage ratio[217] - Interest rate risk on $452.5 million of Credit Facility borrowings was unhedged at June 30, 2025[220] Outstanding Share Data Provides a snapshot of outstanding common shares, stock options, RSUs, PSUs, and DSUs as of July 23, 2025 | Metric | As of July 23, 2025 | | :-------------------------------- | :------------------ | | Common Shares outstanding | 115,032,686 | | Outstanding stock options | 38,629 | | Outstanding RSUs | 1,418,747 | | Outstanding PSUs (100% target vesting) | 2,187,431 | | Outstanding DSUs | 441,529 | Unaudited Quarterly Financial Highlights Compares actual Q2 2025 financial results against guidance, highlighting key performance metrics | Metric | Q2 2025 Actual | Q2 2025 Guidance | | :-------------------------------- | :------------- | :--------------- | | Revenue (in billions) | $2.89 | $2.575 to $2.725 | | GAAP earnings from operations as a % of revenue | 9.4% | N/A | | GAAP EPS | $1.82 | N/A | | Adjusted operating margin (non-GAAP) | 7.4% | 7.2% (mid-point) | | Adjusted EPS (non-GAAP) | $1.39 | $1.17 to $1.27 | - Q2 2025 revenue exceeded guidance due to higher customer demand, especially in Communications[229] - Non-GAAP adjusted operating margin and adjusted EPS surpassed guidance, driven by stronger operating leverage in both segments[228] - GAAP EPS for Q2 2025 included a $0.33 per share charge for SBC, amortization, and restructuring, and a $0.84 per share positive impact from TRS FVAs[230] Non-GAAP Financial Measures Explains the use of non-GAAP financial measures and provides a reconciliation to GAAP results - Management uses non-GAAP measures to assess operating performance, provide normalized comparisons, and enhance understanding of core operations, excluding items like employee SBC expense, TRS FVAs, and restructuring charges[231][233][234][237] | Non-GAAP Metric | Q2 2025 | Q2 2024 | 1H 2025 | 1H 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Adjusted gross profit (% of revenue) | 11.7 % | 10.6 % | 11.4 % | 10.2 % | | Adjusted SG&A (% of revenue) | 3.0 % | 3.4 % | 3.1 % | 3.3 % | | Adjusted operating earnings (EBIAT) (% of revenue) | 7.4 % | 6.3 % | 7.3 % | 6.1 % | | Adjusted net earnings (% of revenue) | 5.6 % | 4.5 % | 5.4 % | 4.5 % | | Adjusted EPS | $1.39 | $0.90 | $2.59 | $1.73 | | Free cash flow | $119.9 | $65.6 | $213.5 | $133.3 | | Adjusted ROIC % | 35.5 % | 26.6 % | 33.3 % | 25.1 % | | Adjusted effective tax rate | 20 % | 20 % | 20 % | 18 % | Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk This section details Celestica's exposure to market risks, including currency, equity price, and interest rate risks, and how these are managed through financial instruments like foreign currency forward contracts, total return swaps, and interest rate swaps - Currency Risk: Managed through foreign currency forward contracts and swaps, with a net unrealized gain of $13.7 million at June 30, 2025 (vs. $18.5 million net unrealized loss at Dec 31, 2024)[251] - Equity Price Risk: Managed by a Total Return Swap (TRS) Agreement, which had an unrealized gain of $79.1 million at June 30, 2025. A one-dollar decrease in Common Share price would decrease TRS value by $1.3 million[252] - Interest Rate Risk: Partially hedged on Term Loans using interest rate swaps, which had a net unrealized gain of $0.2 million at June 30, 2025. A one-percentage point increase in interest rates would increase annual interest expense by $4.5 million (hedged) or $8.2 million (unhedged)[253] Item 4. Controls and Procedures Management, under the supervision of the principal executive and financial officers, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they are effective. No material changes in internal control over financial reporting were identified during Q2 2025 - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[255] - No material changes in internal control over financial reporting occurred during Q2 2025[257] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section refers to the legal proceedings detailed in Note 17 of the Q2 2025 Interim Financial Statements and the 'Operating Results — Income Taxes' section of Item 2, which include ongoing Romanian income and value-added tax matters and a Thailand value-added tax matter - Legal proceedings include ongoing Romanian income and value-added tax matters and a Thailand value-added tax matter, as detailed in Note 17 and Item 2[259] Item 1A. Risk Factors This section updates previously disclosed risk factors, emphasizing potential material adverse effects from U.S. policies, legislation, and export controls, particularly concerning China, and the risks associated with business or operations transfers - U.S. policies, legislation, and export controls (especially regarding China) could materially impact business, results, and financial condition due to tariffs and restrictions[261] - Uncertainty regarding the scope and duration of trade actions and their impact on demand and operations remains material[262] - Transfers of business or operations may increase costs and disrupt customer service due to facility downtime, underutilization, and relocation expenses[263][265] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities. It details the company's repurchase activity for equity securities during Q2 2025, specifically 0.6 million Common Shares for cancellation under the 2024 NCIB in April 2025 - No unregistered sales of equity securities occurred[266] | Period | Total Number of Common Shares Purchased (in millions) | Average Price Paid per Common Share | | :---------------- | :------------------------------------ | :---------------------------------- | | April 1 — 30, 2025 | 0.6 | $70.48 | | May 1 — 31, 2025 | — | $— | | June 1 — 30, 2025 | — | $— | | Total | 0.6 | $70.48 | - As of April 30, 2025, 7.1 million Common Shares remained available for repurchase under the 2024 NCIB[267] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reported period - No defaults upon senior securities occurred[268] Item 5. Other Information This section confirms that none of the company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the fiscal quarter ended June 30, 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during Q2 2025[269] Item 6. Exhibits This section lists the exhibits filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q, including organizational documents, executive compensation plans, and certifications - The report includes various exhibits such as organizational documents, executive compensation plans (e.g., 2025 Executive Compensation Deferral Plan, 2025 Long Term Incentive Plan), and certifications (e.g., Section 302 and 906 certifications)[272] SIGNATURES Confirms the official signing of the report by the President and CEO, and Chief Financial Officer - The report is signed by Robert A. Mionis, President and Chief Executive Officer, and Mandeep Chawla, Chief Financial Officer, on July 28, 2025[277]