• Revenue: $2.5 billion, up 22% year-over-year.

• Adjusted EPS: $1.04, above guidance range.

• Non-IFRS Operating Margin: 6.7%, up 100 basis points.

• CCS Segment Revenue: $1.69 billion, up 42% year-over-year.

• ATS Segment Revenue: $814 million, down 5% year-over-year.

• Adjusted Gross Margin: 10.7%, up 90 basis points.

• Adjusted ROIC: 28.6%, an improvement of 7.1%.

• Inventory Balance: $1.83 billion, down $434 million year-over-year.

• Adjusted Free Cash Flow: $75 million for the quarter, $203 million year-to-date.

• Cash Balance: $399 million at the end of the quarter.

• Gross Debt: $746 million, net debt position of $347 million.

• Share Repurchase: 2.2 million shares repurchased for $100 million.

• Fourth Quarter Revenue Guidance: $2.425 billion to $2.575 billion.

• Fourth Quarter Adjusted EPS Guidance: $0.99 to $1.09.

• Full Year 2024 Revenue Outlook: $9.6 billion.

• Full Year 2024 Adjusted EPS Outlook: $3.85.

• Full Year 2024 Adjusted Free Cash Flow Outlook: $275 million.

• Warning! GuruFocus has detected 5 Warning Sign with CLS.

Release Date: October 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Celestica Inc (NYSE:CLS) achieved record quarterly results with revenues of $2.5 billion and adjusted EPS of $1.04, surpassing guidance.

• The Connectivity & Cloud Solutions (CCS) segment saw a 42% year-over-year revenue increase, driven by strong demand from hyperscale customers.

• The company reported a non-IFRS operating margin of 6.7%, marking a 100 basis point improvement.

• Celestica's Hardware Platform Solutions (HPS) business is expected to generate $2.8 billion in revenues, reflecting over 60% growth.

• The company anticipates continued strong demand for its networking switches, with 800G solutions gaining traction.

Negative Points

• The Advanced Technology Solutions (ATS) segment experienced a 5% year-over-year revenue decline due to softness in the industrial business.

• Celestica's enterprise end market is expected to see a low double-digit percentage revenue decrease due to a technology transition.

• The company faces potential pricing pressures in the server business due to strong North American competitors and ODMs.

• Inventory levels remain a concern, with cash cycle days increasing by 2 days sequentially.

• The ATS segment's growth is expected to be in the low single digits for 2025, below the company's long-term target.

Q & A Highlights

Q: Can you discuss the potential impact of Cisco's involvement in Meta's new data center networks on your market share? A: Stephen Dorwart, SVP of Global Accounts, explained that hyperscalers balance the best solutions for specific applications with product availability. Celestica continues to invest in R&D and work closely with key technology providers to ensure their platforms remain relevant. Despite the introduction of Cisco, Celestica has not seen a significant shift in hyperscaler behaviors, which aligns with their strategy and strengths.