Celestica(US:CLS)2023-04-26 16:00Revenue and Financial Performance - IFRS revenue for Q1 2023 was $1,837.8 million, an increase from $1,566.9 million in Q1 2022[168] - Revenue increased from $1,566.9 million in Q1 2022 to $1,837.8 million in Q1 2023[72] - Celestica raised its 2023 revenue outlook to at least $7.6 billion, up from the previous outlook of at least $7.5 billion[4] - Q2 2023 revenue guidance is projected to be between $1.75 billion and $1.90 billion, with a 5.2% growth at the mid-point of the revenue and non-IFRS adjusted EPS guidance ranges[3] - The ATS segment revenue for Q1 2023 was $792.2 million, representing 43% of total revenue, while the CCS segment revenue was $1.0456 billion, representing 57% of total revenue[56] - ATS segment revenue increased by 14% compared to Q1 2022, with a segment margin of 4.4% (down from 5.0% in Q1 2022)[176] - CCS segment revenue increased by 20% compared to Q1 2022, with a segment margin of 5.8% (up from 3.9% in Q1 2022)[176] Profitability and Margins - Non-IFRS adjusted gross profit for Q1 2023 was $172.6 million, representing 9.4% of revenue, compared to $138.1 million (8.8%) in Q1 2022[168] - Non-IFRS operating earnings (adjusted EBIAT) for Q1 2023 were $95.4 million (5.2% of revenue), up from $69.3 million (4.4%) in Q1 2022[168] - Non-IFRS operating margin for Q1 2023 was 5.2%, with a mid-point guidance range of 5.0%[180] - The company tightened its 2023 non-IFRS operating margin guidance to between 5.0% and 5.5%, from the previous range of 4.5% to 5.5%[4] - CCS segment income increased from $34.2 million in Q1 2022 to $60.8 million in Q1 2023, with segment margin rising from 3.9% to 5.8%[207] Earnings and Cash Flow - Non-IFRS adjusted net earnings for Q1 2023 were $57.2 million, compared to $48.2 million in Q1 2022[168] - Non-IFRS adjusted free cash flow for Q1 2023 was $9.2 million, a significant improvement from $0.5 million in Q1 2022[168] - Adjusted free cash flow (non-IFRS) was $9.2 million, compared to $0.5 million in Q1 2022[176] - Net earnings for the period increased from $21.8 million in Q1 2022 to $24.7 million in Q1 2023[72] - Diluted earnings per share (EPS) for Q1 2023 was $0.20, up from $0.17 in Q1 2022[172] - Adjusted EPS (non-IFRS) for Q1 2023 was $0.47, compared to $0.39 in Q1 2022[176] - Celestica also tightened its 2023 non-IFRS adjusted EPS guidance to between $2.00 and $2.05, from the previous range of $1.95 to $2.05[4] Segment Performance - Communications end market revenue accounted for 36% of total revenue in Q1 2023, down from 38% in Q1 2022, while Enterprise end market revenue increased to 21% from 18% over the same period[56] - Two customers in the CCS segment individually represented 15% and 11% of total revenue in Q1 2023, compared to no individual customer representing 10% or more of total revenue in Q1 2022[232] Cash and Liquidity - Net cash provided by operating activities in Q1 2023 was $72.3 million, compared to $35.3 million in Q1 2022[46] - Cash provided by operations was $72.3 million, up from $35.3 million in Q1 2022[176] - Cash and cash equivalents decreased from $374.5 million in December 2022 to $318.7 million in March 2023[71] - Accounts receivable decreased from $1,393.5 million in December 2022 to $1,260.1 million in March 2023[71] - Inventories increased from $2,350.3 million in December 2022 to $2,403.3 million in March 2023[71] - Accounts receivable (A/R) sales program sold $282.6 million of A/R at March 31, 2023, up from $245.6 million at December 31, 2022[209] - The company entered into an A/R sales program agreement with a third-party bank, allowing the sale of up to $450.0 million in A/R, increased from the prior limit of $405.0 million[88] Debt and Financial Covenants - Total borrowings under the Credit Facility decreased from $627.2 million in December 2022 to $622.6 million in March 2023[65] - Initial Term Loan remained constant at $280.4 million, while Incremental Term Loan decreased from $346.8 million to $342.2 million over the same period[65] - Celestica was in compliance with all restrictive and financial covenants under the Credit Facility as of March 31, 2023 and December 31, 2022[64] - Outstanding balances under the Term Loans decreased from $660.4 million in December 2021 to $622.6 million in March 2023, with repayments totaling $37.8125 million over the period[213] Share Repurchases and Equity - The company repurchased $10.6 million worth of SVS for cancellation in Q1 2023, with an additional $5.0 million accrued for future repurchases[174] - Repurchased 0.8 million subordinate voting shares (SVS) for cancellation for $10.6 million under the normal course issuer bid[176] - The company repurchased up to 9.0 million SVS under the 2021 NCIB, with an accrued $7.5 for 0.7 million SVS repurchases under the December 2021 NCIB ASPP, which was reversed in Q1 2022[67] - Total equity decreased from $1,677.7 million in December 2022 to $1,655.5 million in March 2023[71] Restructuring and Provisions - The company recorded $4.3 million in cash restructuring charges in Q1 2023, primarily for employee termination costs, with a restructuring provision of $7.0 million as of March 31, 2023[220] Insurance and Tax Matters - The company recovered $31 million and $2 million of inventory losses through insurance proceeds in Q4 2022 and Q1 2023, respectively, following a fire at the Batam, Indonesia facility in June 2022[238] - The company paid approximately $7 million to Romanian tax authorities in Q3 2021 to advance a tax case to the appeals phase, disputing the assessment for additional income and value-added taxes[236] Accounting Standards and Compliance - The company adopted new accounting standards effective January 1, 2023, including amendments to IAS 8 and IAS 12, which had no material impact on consolidated financial statements[82][83] Return on Invested Capital (ROIC) - Non-IFRS adjusted ROIC for Q1 2023 was 17.9%, up from 13.9% in Q1 2022[168] - Adjusted return on invested capital (ROIC) (non-IFRS) was 17.9%, up from 13.9% in Q1 2022[176] - Annualized IFRS earnings from operations increased from $162.4 million in 2022 to $237.6 million in 2023, with IFRS ROIC rising from 8.1% to 11.2%[69] Swap Agreements and Financial Instruments - The company amended the swap agreement with one of the two counterparty banks under the Incremental Swaps, with a notional amount of $50.0 million, to mirror the LIBOR successor provisions under the Credit Facility[141] Comprehensive Income and Expenses - Total comprehensive income for Q1 2023 was $20.7 million, down from $32.5 million in Q1 2022[173] - Research and development expenses increased from $11.4 million in Q1 2022 to $12.1 million in Q1 2023[72] - Adjusted SG&A (non-IFRS) was $64.3 million, with a guidance range of $56 to $58 million[180] - Non-IFRS adjusted SG&A expenses for Q1 2023 were $64.3 million (3.5% of revenue), down from $56.7 million (3.6%) in Q1 2022[168]