Celestica(US:CLS)2024-04-25 15:16Financial Data and Key Metrics Changes - First quarter revenue was $2.21 billion, up 20% year-over-year, exceeding guidance [4][55] - Adjusted EPS for the first quarter was $0.86, an increase of $0.39 compared to the prior year [43] - Non-IFRS operating margin improved to 6.2%, up 100 basis points year-over-year [4][55] - Adjusted free cash flow was $65 million, compared to $9 million in the prior year [20] Segment Performance Changes - ATS segment revenue was $768 million, down 3% year-over-year, driven by demand softness in the industrial business [5] - CCS segment revenue was $1.44 billion, up 38% year-over-year, with enterprise end market revenue increasing by 72% [6][44] - HPS revenue was $519 million, up 40% year-over-year, driven by stronger networking demand from hyperscaler customers [7] Market Data and Key Metrics Changes - The enterprise end market is expected to grow in the low 20% range year-over-year, driven by AI/ML compute demand [25] - Communications end market revenue is anticipated to increase in the mid-40% range year-over-year [25] - The overall demand environment remains healthy, particularly in the CCS segment, supported by hyperscaler customers [39][95] Company Strategy and Development Direction - The company is raising its full-year outlook for 2024, expecting revenue of $9.1 billion and adjusted EPS of $3.30, representing growth of 14% and 36% respectively [27] - The company continues to prioritize fundamentals, strategic roadmaps, and prudent decision-making to generate long-term shareholder value [11] - Investments are being made in capacity expansion to support growth in hyperscaler demand, including new facilities in Thailand and Malaysia [19][114] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver on financial targets despite some visibility challenges in the second half of the year [15][27] - The demand for AI/ML compute products remains strong, with expectations for continued growth in the CCS segment [33][35] - The company anticipates a return to year-over-year growth in the ATS segment by the fourth quarter of 2024 [29] Other Important Information - The company completed a tuck-in acquisition of NCS Global Services LLC for $36 million, enhancing its IT services capabilities [40] - Inventory balance was $1.96 billion, down $150 million sequentially, indicating effective working capital management [18] - The company plans to continue share repurchases opportunistically throughout 2024 [22] Q&A Session Summary Question: Full year guidance and visibility into the second half - Management noted that while hyperscaler demand remains healthy, visibility into the fourth quarter is uncertain due to demand dynamics [14][15] Question: Customer concentration and growth - The largest customer accounted for 34% of total revenues, with strong growth across multiple programs [45][36] Question: Competitive landscape and market share - Management acknowledged increased competition but emphasized strong relationships and multiple programs with hyperscalers [98][124] Question: Capacity utilization and expansion - The company is currently operating at high capacity utilization and is investing in additional capacity to meet future demand [113][127]