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01/11 03:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates strong financial performance, with a 20% revenue increase and a 45% rise in adjusted EPS, both exceeding guidance. The share repurchase plan is substantial, likely boosting shareholder confidence. Despite some uncertainties in the Q&A, such as tariff impacts and unclear guidance, the overall sentiment is positive due to robust growth, particularly in the CCS segment, and optimistic future guidance. The market is likely to react positively, with a potential 2% to 8% increase in stock price.
Revenue $2.65 billion, up 20% year-over-year, driven primarily by strong demand from hyperscaler customers in the CCS segment.
Adjusted EPS $1.20, an increase of $0.37 or 45% year-over-year, exceeding the high-end of guidance.
Adjusted Gross Margin 11.0%, up 110 basis points year-over-year, driven by higher volumes and a favorable mix.
Adjusted Operating Margin 7.1%, up 120 basis points year-over-year, driven by higher margin across both CCS and ATS segments.
Adjusted ROIC 31.5%, a 770 basis points improvement year-over-year, driven by higher operating profit and effective working capital management.
ATS Segment Revenue $807 million, up 5% year-over-year, primarily due to significant growth in the capital equipment business.
CCS Segment Revenue $1.84 billion, up 28% year-over-year, driven by strong growth for networking switches.
HPS Revenue Over $1 billion, up 99% year-over-year, driven by demand for 400G and ramping 800G networking switches.
Cash Deposits $472 million, down $40 million sequentially and down $248 million year-over-year.
Free Cash Flow $94 million, $26 million higher than the prior year period.
Gross Debt $887 million, with a net debt position of $584 million.
Gross Debt to Adjusted EBITDA Leverage Ratio 1.1 turns, up 0.1 turns sequentially, flat year-over-year.
Capital Expenditures $37 million, approximately 1.4% of revenue, compared to 1.8% in Q1 2024.
Inventory Balance $1.79 billion, a sequential increase of $28 million and a year-over-year decrease of $163 million.
New Program Awards: Recently awarded a new program with a leading optical OEM to build high-speed optical transceivers out of our Thailand site.
Networking Products: Strong momentum on 1.6T wins at this early stage in the cycle, with multiple new awards for 1.6T programs leveraging HPS solutions.
Revenue Growth in CCS Segment: CCS segment revenue was $1.84 billion, up 28%, driven by strong growth for networking switches.
Revenue Outlook for 2025: Raising revenue outlook for the year from $10.7 billion to $10.85 billion, reflecting year-over-year growth of 12%.
Adjusted Operating Margin: Adjusted operating margin of 7.1%, marking the highest performance in the company's history.
Free Cash Flow: Generated $94 million of free cash flow, $26 million higher than the prior year period.
Strategic Decision in A&D: Decision not to renew a dilutive margin program in A&D business to position for higher profitability.
Global Manufacturing Footprint: Global manufacturing footprint offers a distinct advantage, providing ample capacity in the U.S. and Mexico for future program adjustments.
Trade Policy Uncertainty: The macro environment has become increasingly dynamic due to trade policy uncertainty, with frequent policy adjustments impacting business decisions.
Tariffs and Trade Restrictions: The company's guidance assumes no material changes to tariffs or trade restrictions, which could significantly impact financial results.
Supply Chain Challenges: The company remains vigilant and prepared to adapt swiftly to policy changes affecting supply chain operations.
Customer Demand Fluctuations: There are anticipated fluctuations in customer demand, particularly in the enterprise end market due to a technology transition in an AI/ML compute program.
Economic Factors: The overall macro backdrop presents heightened uncertainty, which could affect the company's performance despite strong demand in certain segments.
Dependence on Key Customers: Three customers accounted for a significant portion of total revenue, indicating a risk related to dependence on a limited customer base.
Revenue Outlook for 2025: Celestica is raising its revenue outlook for the year from $10.7 billion to $10.85 billion, reflecting year-over-year growth of 12%.
Adjusted EPS Outlook for 2025: The non-GAAP adjusted EPS outlook is raised from $4.75 per share to $5 per share, reflecting strong revenue growth and improved profitability.
Free Cash Flow Outlook for 2025: The free cash flow outlook for the year continues to be $350 million.
CCS Segment Growth: CCS segment is anticipated to grow in the high-teens percentage range in 2025, driven by strong demand from hyperscaler customers.
New Program Awards: Celestica has secured multiple new awards for 1.6T programs leveraging HPS solutions, including a major OEM customer.
Q2 2025 Revenue Guidance: Projected revenue for Q2 2025 is between $2.575 billion and $2.725 billion, representing growth of 11% at the midpoint.
Q2 2025 Adjusted EPS Guidance: Adjusted EPS for Q2 2025 is anticipated to be between $1.17 and $1.27, representing a 36% increase at the midpoint.
Q2 2025 Operating Margin Guidance: Non-GAAP operating margin is expected to be 7.2%, an increase of 90 basis points over the prior year period.
ATS Segment Revenue Outlook: ATS segment revenue is anticipated to be approximately flat year-over-year.
CCS Segment Revenue Outlook: CCS segment revenue in the communications end market is projected to grow in the high-50s percentage range.
Share Repurchase Program: During the first quarter, Celestica repurchased $75 million of shares for cancellation under their normal course issuer bid. Following the end of the quarter, an additional $40 million of shares were repurchased, bringing the total repurchases under the NCIB to $115 million year-to-date. The company intends to continue being opportunistic on share buybacks for the remainder of 2025.
The earnings call presents strong financial metrics, optimistic guidance, and strategic growth in AI/ML and networking, which are positive indicators. The Q&A section highlights robust customer commitments and future growth opportunities, despite some management reticence on specifics. The raised annual revenue and EPS outlooks, along with increased free cash flow, support a positive sentiment. The positive impact of the shareholder return plan and strong financial health further contribute to the positive outlook. However, the lack of specific guidance on some future aspects tempers the overall rating to 'Positive' rather than 'Strong positive.'
The earnings call summary and Q&A indicate strong financial performance, with raised revenue and EPS guidance, and significant growth in key segments like CCS. The management's confidence in sustaining growth, despite some uncertainties, and the positive sentiment from analysts support a positive outlook. However, the lack of long-term guidance and uncertainties in material availability slightly temper expectations. Overall, the short-term outlook is positive, likely leading to a stock price increase of 2% to 8% over the next two weeks.
The earnings call indicates strong financial performance, with a 20% revenue increase and a 45% rise in adjusted EPS, both exceeding guidance. The share repurchase plan is substantial, likely boosting shareholder confidence. Despite some uncertainties in the Q&A, such as tariff impacts and unclear guidance, the overall sentiment is positive due to robust growth, particularly in the CCS segment, and optimistic future guidance. The market is likely to react positively, with a potential 2% to 8% increase in stock price.
The earnings call summary highlights strong financial performance with increased revenue, EPS, and margins, along with significant share repurchases. The Q&A reveals optimism about growth in communications, AI/ML space entry, and partnerships with hyperscalers. Despite some vague management responses, the overall sentiment is positive, supported by optimistic guidance and strategic wins, suggesting a likely stock price increase of 2% to 8%.
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