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01/11 03:33
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Revenue $2.89 billion, up 21% year-over-year, driven primarily by strong demand in the communications end market from hyperscaler customers.
Adjusted Gross Margin 11.7%, up 110 basis points year-over-year, driven by higher volumes and improving mix in both segments.
Adjusted Operating Margin 7.4%, up 110 basis points year-over-year, driven by higher margin across both CCS and ATS segments.
Adjusted Earnings Per Share (EPS) $1.39, an increase of $0.49 or 54% year-over-year, exceeding the high end of guidance range.
Adjusted Return on Invested Capital (ROIC) 35.5%, compared to 26.6% a year ago, driven by higher operating profit and strong working capital management.
ATS Segment Revenue $819 million, up 7% year-over-year, driven by strong demand in capital equipment and industrial businesses.
CCS Segment Revenue $2.07 billion, up 28% year-over-year, driven by strong growth in the communications end market.
Communications End Market Revenue Increased by 75%, driven by strong demand and ramping programs in HPS networking business and strengthening demand in optical programs.
Enterprise End Market Revenue Decreased by 37%, due to an anticipated technology transition in an AI/ML compute program with a hyperscaler customer.
HPS Revenue $1.2 billion, up 82% year-over-year, driven by ramping of several 800G networking switch programs and strong hyperscaler demand for 400G switches.
ATS Segment Margin 5.3%, up 70 basis points year-over-year, driven by improved profitability in the A&D business.
CCS Segment Margin 8.3%, up 130 basis points year-over-year, driven by a higher mix of HPS revenues and strong productivity.
Inventory Balance $1.92 billion, a sequential increase of $130 million and a year-over-year increase of $74 million.
Cash Deposits $397 million, down $75 million sequentially and down $179 million year-over-year.
Cash Cycle Days 66 days.
Capital Expenditures $33 million or approximately 1.1% of revenue, compared to 1.5% in Q2 2024, due to stronger-than-expected revenue growth and timing of expenditures.
Free Cash Flow $120 million, $54 million higher than the prior year period.
Cash Balance $314 million, combined with $660 million of borrowing capacity under revolver, totaling approximately $1 billion in liquidity.
Gross Debt $823 million, with a net debt position of $509 million.
Gross Debt to Trailing 12-Month Adjusted EBITDA Leverage Ratio 0.9 turns, an improvement of 0.2 turns sequentially and 0.3 turns year-over-year.
800G networking switch programs: Ramping up multiple 800G networking switch programs, complementing strong hyperscaler demand for 400G switches.
AI/ML compute program: Anticipated ramping of next-generation AI/ML compute program with a large hyperscaler customer in Q3 2025.
Hyperscaler demand: Robust demand for networking products as hyperscalers invest in data center infrastructure.
Industrial business: Strength in industrial business expected to continue into the second half of 2025, supported by several ramping programs.
Adjusted operating margin: Achieved 7.4%, marking the highest performance in company history.
Free cash flow: Raised annual free cash flow outlook from $350 million to $400 million.
A&D business: Decision not to renew a margin-dilutive program, leading to improved profitability.
Capital allocation: Repurchased 600,000 shares for $40 million in Q2 2025, with $115 million spent year-to-date on share buybacks.
Tariffs and Trade Restrictions: The company assumes no material changes to tariffs or trade restrictions, but any changes could impact results as they cannot be reliably predicted.
Enterprise End Market Revenue Decline: Revenue in the enterprise end market decreased by 37% due to an anticipated technology transition in an AI/ML compute program with a hyperscaler customer.
Aerospace and Defense (A&D) Business Revenue Impact: The decision not to renew a margin-dilutive program in the A&D business is expected to result in lower year-over-year revenues for the remainder of the year.
Capital Equipment Business Demand Moderation: Second-half demand in the capital equipment business is expected to moderate after some demand was pulled into the first half of the year.
Inventory and Cash Deposits: Inventory increased by $130 million sequentially and $74 million year-over-year, while cash deposits decreased by $75 million sequentially and $179 million year-over-year, indicating potential working capital challenges.
Customer Concentration Risk: Two customers accounted for 31% and 13% of total revenue, respectively, indicating a high dependency on a few customers.
Q3 2025 Revenue: Projected to be between $2.875 billion and $3.125 billion, representing growth of 20% at the midpoint.
Q3 2025 Adjusted EPS: Anticipated to be between $1.37 and $1.53, representing an increase of $0.41 at the midpoint or 39%.
Q3 2025 Non-GAAP Operating Margin: Expected to be 7.4%, an increase of 60 basis points over the prior year period.
Q3 2025 Adjusted Effective Tax Rate: Expected to be approximately 19%.
2025 Annual Revenue Outlook: Increased from $10.85 billion to $11.55 billion, reflecting year-over-year growth of 20%.
2025 Annual Non-GAAP Adjusted EPS Outlook: Increased from $5 per share to $5.50 per share, representing year-over-year growth of 42%.
2025 Annual Free Cash Flow Outlook: Raised from $350 million to $400 million.
CCS Segment 2025 Growth: Anticipated growth of nearly 30% for the full year, driven by robust hyperscaler demand for networking products.
Enterprise End Market Outlook: Q3 will see the ramping of next-generation AI/ML compute program with a large hyperscaler customer, contributing to strengthening enterprise volumes in the second half of 2025 and into 2026.
ATS Segment 2025 Revenue Outlook: Revenues expected to remain approximately flat compared to 2024.
Industrial Business Outlook: Strength seen in Q2 is expected to continue into the second half of 2025, supported by several ramping programs.
A&D Business Outlook: Profitability improvements expected due to mix improvements, despite lower year-over-year revenues from a margin-dilutive program decision.
Capital Equipment Business Outlook: Second half revenue expected to be lower than the first half due to demand moderation, but full-year growth anticipated to align with market growth rates.
Share Repurchase: During the second quarter, Celestica repurchased approximately 600,000 shares for cancellation at a cost of $40 million under its normal course issuer bid (NCIB). This brings the total purchases under the NCIB to $115 million year-to-date. The company intends to remain opportunistic on share buybacks for the second half 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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