Financial Data and Key Metrics Changes - For Q2 FY 2026, total revenue was $96.3 million, down from $113.9 million in the same period of FY 2025, primarily due to reduced demand from a longstanding customer and the transition of an End-of-Life program [3][4] - The net loss for Q2 FY 2026 was $8.6 million or $0.79 per share, compared to a net loss of $4.9 million or $0.46 per share in Q2 FY 2025 [7] - Adjusted gross margin for Q2 FY 2026 was 7.9%, down from 6.8% in the same period of FY 2025, while operating margin was -10.7% compared to -1.0% [5][6] Business Line Data and Key Metrics Changes - The company initiated a wind down of manufacturing operations in China, which is expected to save approximately $1.2 million per quarter once completed [5] - The company is also reducing its workforce in Mexico, aiming for savings of approximately $1.5 million per quarter [5] - The consigned materials program is ramping up, with potential revenue growth of over $25 million annually, equivalent to a $100 million turnkey program [16] Market Data and Key Metrics Changes - Inventory decreased by $12.3 million or 12% year-over-year, while accounts receivable days sales outstanding (DSOs) improved to 77 days from 99 days a year ago [8] - The company continues to face uncertainties in the global economy and volatile trade policies, impacting customer demand [4][9] Company Strategy and Development Direction - The company is focusing on nearshoring and tariff mitigation strategies to reduce costs while maintaining operational flexibility [4] - Manufacturing operations are being shifted from China to Vietnam and the U.S. to better align with strategic initiatives and customer demand [12][15] - The company anticipates that by the end of FY 2026, approximately half of its manufacturing will occur in the U.S. and Vietnam [15] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are uncertainties in the global economy, new programs are gradually ramping up, and cost efficiencies from recent overhead reductions are taking hold [9][10] - The company is not providing forward-looking guidance for Q3 FY 2026 due to the uncertainty of new product ramps [10] - Management expressed confidence in the potential for profitable long-term growth despite current challenges [19] Other Important Information - The company has reduced its total debt year-over-year by approximately $13.4 million, reflecting its ability to generate cash from operations [8] - Capital expenditures for FY 2026 are expected to be around $8-$10 million, focusing on new production equipment and automation [9] Q&A Session Summary Question: Can you provide more details on the increased demand from existing customers? - Management indicated that the increased demand is primarily from two longstanding customers, with a significant revenue impact from product maturation and an End-of-Life program [23][24] Question: What is the size and timing of the new programs won? - The automotive program is expected to generate up to $5 million and will be manufactured in Mexico, while pest control and industrial equipment programs are expected to generate $2-$5 million and will be produced in the U.S. [25] Question: What are the tariff mitigation strategies being implemented? - The company is focusing on lower-cost production facilities in Vietnam and Mexico, leveraging the USMCA agreement to mitigate tariffs [26][28] Question: What is the outlook for gross margin and revenue growth? - Management expects to achieve breakeven by the end of the fiscal year, with anticipated revenue growth and margin expansion from the consigned program [40][41] Question: How is the restructuring in Mexico expected to impact future growth? - Management believes that recent efficiency improvements and automation investments will make the Mexico facility more competitive, with expectations for growth moving forward [44][45]

Core Viewpoint - Flex is set to announce its third quarter fiscal year 2026 financial results on February 4, 2026, before market opening, followed by a conference call to discuss the results [1]. Group 1: Financial Results Announcement - The financial results will be announced before the market opens on February 4, 2026 [1]. - A conference call to discuss the results will take place at 7:30 AM CT / 8:30 AM ET on the same day [1]. Group 2: Webcast Information - A live webcast of the presentation will be available on the Flex investor relations website [2]. - A replay of the webcast and supporting materials will be accessible on the investor relations website after the event [2]. Group 3: Company Overview - Flex is a manufacturing partner that assists leading brands in designing, building, and managing products aimed at improving the world [3]. - The company operates in 30 countries, providing advanced manufacturing and supply chain solutions, innovative products, and lifecycle services [3]. - In the AI era, Flex is focused on accelerating data center deployment by addressing power, heat, and scale challenges with advanced technology [3].

Core Insights - Celestica (CLS) has evolved from a lesser-known contract manufacturer to a significant player in the AI infrastructure sector, indicating a substantial transformation that the market may still be undervaluing [1] Company Overview - The company is positioned as a critical enabler of the AI infrastructure boom, suggesting strong growth potential in this emerging market [1] Investment Philosophy - The investment approach highlighted emphasizes growth prospects and the potential for high profitability within 1-2 years, aligning with the company's current trajectory [1]

Core Insights - Celestica (CLS) has evolved from a lesser-known contract manufacturer to a significant player in the AI infrastructure sector, indicating a substantial transformation that the market may still be undervaluing [1] Company Overview - The company is positioned as a critical enabler of the AI infrastructure boom, suggesting strong growth potential in this emerging market [1] Investment Perspective - The investment philosophy associated with Celestica emphasizes long-term discipline and consistent alpha generation, with a focus on companies that exhibit aggressive growth prospects [1]

Company Overview - Jabil Inc. (NYSE:JBL) is a contract manufacturer that has transformed from a low-multiple manufacturer to a company that assists clients in product design and manufacturing location decisions, which is increasingly important due to tariffs [1][2] - The company provides a range of services including manufacturing, design, and product management, serving various industries such as healthcare, automotive, and electronics [2] Financial Performance - Jabil reported a strong quarterly performance with better-than-expected guidance for the current quarter, indicating robust operational capabilities [2] - The company's share count has decreased by 43.6% since the end of 2015, reflecting a significant share buyback activity [1] Market Sentiment - Jim Cramer expressed bullish sentiment on Jabil, highlighting it as one of his favorite stocks within the contract manufacturing sector, which is currently experiencing a quiet bull market [2] - Despite an initial stock price increase of nearly 10% following the earnings report, Jabil's stock eventually retraced most of those gains due to a broader sector sell-off, although the stock has appreciated by 50% overall [1]

Summary of Conference Call Company Overview - The conference call features Fabrinet, a company involved in IT hardware and communications equipment, with a focus on optical and transceiver manufacturing. Key Industry Insights Telecom and Data Center Interconnect (DCI) - Fabrinet has recently separated DCI from its telecom reporting to provide clearer visibility on growth, driven primarily by the Datacom sector [4][14] - DCI products, particularly 400ZR and 800ZR, are experiencing strong growth, with five main customers contributing to this segment [4][5] - The demand for DCI is robust, with expectations for sustainable growth over the coming years [15][14] - Traditional telecom business is growing but at a more stable rate compared to the exponential growth seen in DCI [20][24] High-Performance Computing (HPC) - Fabrinet has initiated a new HPC category, primarily serving AWS, with a revenue of $15 million from qualification volumes [28][30] - The company aims to establish a cost-competitive solution in the HPC market, with potential for significant growth [31][30] - The HPC business is expected to ramp up, with plans for additional product offerings beyond PCBAs [100][105] Capacity Expansion - Fabrinet is constructing Building 10, which will add $2.5 billion in revenue capacity, with a current run rate of $4.5 billion [39][40] - The new facility will be flexible, allowing for quick repurposing based on customer needs [41][44] - The capital expenditure for Building 10 is approximately $130 million, funded from existing cash reserves [45][46] Datacom Demand - Demand for transceivers in the Datacom sector is described as insatiable, particularly with the rise of AI data centers [69][70] - Fabrinet is producing advanced transceivers (200G, 800G, and 1.6T) but faces component shortages that limit production capacity [71][73] - The company is exploring opportunities with various customers, including traditional companies and hyperscalers [78][79] Automotive Sector - Fabrinet's automotive business is stable, with growth in EV charging infrastructure and LiDAR technology [94][95] - The company has captured a significant share of the LiDAR market, positioning itself for future growth as the technology gains traction [95] Financial Performance and Strategy - Fabrinet aims for a gross margin range of 12.5%-13%, with low operating expenses around 1.6%-1.7% of revenue [93][94] - The company has a strong financial position with no debt and approximately $1 billion in cash, allowing for self-funded growth [45][46] - Fabrinet's growth strategy focuses on maintaining a compound annual growth rate of 16% over the past decade, with plans to continue this trend [130][130] Additional Considerations - The company emphasizes the importance of performance and customer satisfaction in securing additional business opportunities [106][107] - Fabrinet is committed to long-term planning, utilizing an eight-quarter rolling revenue forecast to guide its growth strategy [129][130] - The company is open to diversifying its product offerings beyond optical solutions, depending on customer demand [85][86]

Summary of Flex Limited Conference Call Company Overview - **Company**: Flex Limited - **Industry**: Contract Manufacturing - **Revenue**: Approximately $26 billion - **Business Units**: Six, with participation in five major end markets: - Consumer (Lifestyle and Consumer Devices) - Cloud Enterprise Communication (CEC) - Healthcare (particularly devices) - Automotive - Industrial - **Global Presence**: Operates in 30 countries with around 100 manufacturing sites and approximately 140,000 employees [8][9] Core Business Insights - **Data Center and AI Infrastructure**: - 25% of revenue comes from AI data center utility space, growing at 35% - Revenue from this segment projected to reach $6.5 billion in the current fiscal year [9][17] - Focus on compute integration, cooling, and power solutions [17][18] - **Competitive Landscape**: - Flex competes with companies like Delta in embedded power and Eaton, Schneider in electrical distribution - The cooling market is fragmented with many small players [21][22] - **Power Pods**: - Integrated solutions that include power modules, infrastructure, and cooling systems, designed to improve installation speed and reduce labor costs [23][24] Recent Acquisitions - **Crown Technical Systems**: - Acquired to enhance presence in the fragmented U.S. utility market and expand power pod capabilities [25][27] - **JetCool**: - Acquired to strengthen liquid cooling portfolio, focusing on high-density cooling solutions for data centers [30][32] Financial Performance and Growth - **Operating Margin**: - Increased from 3% to 6% over the past seven years, with expectations for continued expansion driven by mix shift and productivity enhancements [15][39] - **Growth Areas**: - Data centers and utilities are identified as key growth sectors, with ongoing investments expected to yield significant returns [40][41] Market Trends and Challenges - **Regionalization Strategy**: - Flex is adapting its footprint to align with growth areas, particularly in North America and Europe, while reducing presence in less profitable regions [36][37] - **Supply Chain and Capacity**: - Capacity constraints are a constant consideration, with ongoing evaluations to meet growing demand [28][29] - **AI Investments**: - Anticipated growth in data center capacity driven by AI investments, with projections for significant infrastructure development in the coming years [41][42] Other Business Lines - **Healthcare**: - Strong performance in medical devices, particularly continuous glucose monitors [33] - **Industrial**: - Mixed performance with growth in infrastructure and energy sectors, while residential renewables have declined [34] - **Automotive**: - Clarity in platform investments is expected to drive growth, with Flex being platform agnostic [34] - **Consumer**: - Flat growth anticipated, with limited focus on this segment [35] Conclusion - Flex Limited is positioned as a leading contract manufacturer with a strong focus on data center and utility solutions, leveraging its global footprint and recent acquisitions to drive growth and enhance operational efficiency. The company is well-prepared to capitalize on emerging trends in AI and infrastructure development while maintaining a disciplined approach to portfolio management and margin expansion [45]

Core Insights - Industry rumors indicate that Mana Products, a long-established beauty contract manufacturer, is exploring "strategic options" amid workforce furloughs and an uncertain future [1][2] Company Overview - Mana Products was founded by Nikos Mouyiaris approximately 50 years ago and was acquired by Traub Capital Partners in 2020 following Mouyiaris's death in 2019 [2] - The company had previously pursued a sale that did not materialize, leading to its current operational challenges [2] Financial Performance - When exploring deal options, Mana Products reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of around $20 million [3] Product Lines and Initiatives - Historically focused on makeup, Mana Products has expanded into skincare in recent years [4] - The company launched the "Artists at the Bench" initiative in 2022, featuring three makeup lines developed by Meredith Baraf, Marco Castro, and Rudy Miles [4] - Mana Products previously owned the Black Opal brand, which was sold in 2019 [4]

Core Insights - The Carillon Scout Mid Cap Fund's third-quarter 2025 investor letter highlights strong corporate earnings and AI infrastructure momentum as key drivers for the Russell Midcap Index's positive returns [1] - Celestica Inc. (NYSE:CLS) is emphasized as a significant holding, showcasing a remarkable 239.87% increase in share value over the past 52 weeks despite a recent one-month decline of 13.70% [2][3] Company Performance - Celestica Inc. reported Q3 2025 revenue of $3.19 billion, reflecting a 28% increase from Q3 2024 [4] - The company is recognized for its contract manufacturing capabilities, particularly in data center hardware and aerospace components, with strong demand for networking switches driving positive quarterly results [3] Market Position - Celestica Inc. is gaining market share in the networking industry through private label solutions, which offer lower total costs and flexible designs compared to branded vendors [3] - The company is expected to see rising earnings estimates as it secures new deals and benefits from existing hyperscaler programs ramping up faster than anticipated [3]

Core Insights - Celestica Inc. (NYSE:CLS) is recognized as a strong investment opportunity within the consumer cyclical sector, particularly due to its role in the AI ecosystem by providing essential infrastructure for data centers [1] Group 1: Analyst Ratings and Price Targets - Barclays maintained an Overweight rating on Celestica's shares and raised the price target to $359 from $357 [2] - Citi upgraded Celestica's stock to Buy from Hold, keeping its price target at $375, citing expectations of over 40% growth in hyperscaler capital expenditure in 2026 after a 75% increase in 2025 [2] Group 2: Financial Performance - Celestica reported third-quarter earnings on October 27th, achieving $3.19 billion in revenue and $1.58 in adjusted EPS, surpassing analyst expectations of $3.04 billion and $1.49 respectively [3] - Following the earnings announcement, Celestica's shares rose by as much as 10%, and management increased the full-year revenue guidance to $12.2 billion from $11.55 billion due to strong demand [3] Group 3: Demand Insights - During the third-quarter earnings call, management indicated strong visibility into customer demand, with forecasts extending 12 to 15 months ahead, particularly related to 2026 budgeting and spending commitments [4] - Management noted that certain customers have made commitments that provide assurance regarding the longevity and scale of their programs, enhancing visibility into future demand [4]