Celestica(US:CLS)2025-10-27 20:25Financial Performance - ATS segment revenue for Q3 2025 decreased by 4% to $3,194.0 million compared to Q3 2024, primarily due to the discontinuation of a margin dilutive program [130]. - CCS segment revenue for Q3 2025 increased by 43% to $2,426.0 million compared to Q3 2024, with Communications end market revenue rising by 82% driven by data center networking demand [131]. - Hardware Platform Solutions (HPS) revenue was approximately $1.4 billion in Q3 2025, accounting for 44% of total revenues and increasing by 79% compared to Q3 2024 [131]. - Net earnings for Q3 2025 were $267.8 million, a 199% increase compared to $89.5 million in Q3 2024 [136]. - Diluted earnings per share for Q3 2025 were $2.31, up 208% from $0.75 in Q3 2024 [136]. - Revenue for Q3 2025 was $3.19 billion, a 28% increase compared to Q3 2024, and year-to-date revenue reached $8.74 billion, up 23% from the previous year [150]. - Gross profit for Q3 2025 was $416.1 million, a 60% increase from Q3 2024, with a gross margin of 13.0%, up from 10.4% [155]. - ATS segment income increased by $2.7 million (7%) in Q3 2025, with a segment margin of 5.5%, up from 4.9% in Q3 2024 [160]. - CCS segment income rose by $70.7 million (55%) in Q3 2025, with a segment margin of 8.3%, compared to 7.6% in Q3 2024 [161]. - Net earnings for Q3 2025 were $267.8 million, an increase of $178.3 million compared to Q3 2024, driven by a $155.5 million increase in gross profit [182]. - For YTD 2025, net earnings reached $565.0 million, up $288.7 million from YTD 2024, primarily due to a $324.5 million increase in gross profit [182]. - Free cash flow for Q3 2025 was $88.9 million, an increase from $76.8 million in Q3 2024 [251]. - Adjusted net earnings for Q3 2025 were $183.1 million, or 5.7% of revenue, compared to $123.8 million, or 5.0% of revenue, in Q3 2024 [251]. Operational Highlights - The company operates a global network of sites and centers of excellence to meet specific market and customer product lifecycle requirements [121]. - The company continues to monitor geopolitical tensions and their potential impact on supply chains and operational costs [123]. - The company is focused on advancing AI technologies and cloud computing to support high levels of capital expenditure investments from leading customers [118]. - The top 10 customers accounted for 80% of total revenue in Q3 2025, up from 74% in Q3 2024 [153]. - Days in accounts receivable improved to 68 days in Q3 2025 from 71 days in Q3 2024, indicating better cash management performance [137]. Financial Position - Cash and cash equivalents as of September 30, 2025, were $305.9 million, down from $423.3 million as of December 31, 2024 [137]. - Total assets increased to $6,606.7 million as of September 30, 2025, compared to $5,988.2 million as of December 31, 2024 [137]. - Borrowings under the credit facility as of September 30, 2025, were $728.1 million, compared to $741.2 million as of December 31, 2024 [183]. - The company had $739.2 million available under the Revolver for future borrowings as of September 30, 2025 [216]. - The company recorded Miscellaneous Expense of $1.3 million for Q3 2025, down from $2.8 million in Q3 2024 [170]. Market Conditions - Celestica's revenue is expected to be influenced by current market conditions, customer-specific factors, and potential restructuring actions [116]. - Increased political tensions and changes in trade policies may adversely affect demand for Celestica's services and overall financial condition [124]. - Tariffs imposed by the U.S. government are expected to be recovered from customers, but any unrecovered costs could negatively impact financial results [125]. - The company anticipates growth in manufacturing outsourcing and aims to diversify its customer base while developing new capabilities [117]. Capital Expenditures and Investments - Capital expenditures for YTD 2025 were $106.5 million, down from $123.3 million in YTD 2024, focused on enhancing manufacturing capabilities [188]. - Capital spending for 2025 is estimated to be approximately 1.5% of revenue, at the lower end of the previous estimate of 1.5% to 2.0% [210]. - The company completed the acquisition of NCS for a purchase price of $39.6 million in April 2024 [189]. Tax and Interest Expenses - The company incurred a net income tax expense of $43.1 million for Q3 2025 on earnings before tax of $310.9 million, compared to $34.5 million on earnings before tax of $124.0 million for Q3 2024 [171]. - GAAP tax expense for Q3 2025 was $43.1 million, compared to $34.5 million in Q3 2024, reflecting an increase of 25% [252]. - A one-percentage point increase in relevant interest rates would increase annual interest expense by $3.6 million, including the impact of interest rate swap agreements [258]. - Interest paid under the Credit Facility in YTD 2025 was $33.4 million, slightly decreased from $34.0 million in YTD 2024 [201].