Celestica Announces Second Quarter 2023 Financial Results

Celestica Inc. (TSX: CLS) (NYSE: CLS), a leader in design, manufacturing, hardware platform and supply chain solutions for the world’s most innovative companies, announced financial results for the quarter ended June 30, 2023 (Q2 2023)^†.

“Celestica delivered another strong quarter, exceeding the high end of our guidance ranges on revenue and non-IFRS adjusted EPS, with our non-IFRS operating margin firmly above 5.0%,” said Rob Mionis, President and CEO, Celestica.

“Our business delivered solid results as our team continues to execute on our strategic plan and meet the evolving needs of our customers. Our diversified portfolio is driving revenue growth and margin expansion, despite softness in the Semi Capital Equipment market. We are pleased to raise our 2023 annual financial outlook, and expect our strong performance to continue into 2024 as all of our markets are poised for growth.”

Q2 2023 Highlights

• Key measures:

• Revenue: $1.94 billion, increased 13% compared to $1.72 billion for the second quarter of 2022 (Q2 2022).
• Non-IFRS operating margin*: 5.5%, compared to 4.8% for Q2 2022.
• ATS segment revenue: increased 24% compared to Q2 2022; ATS segment margin was 4.8%, compared to 4.5% for Q2 2022.
• CCS segment revenue: increased 5% compared to Q2 2022; CCS segment margin was 6.0%, compared to 5.0% for Q2 2022.
• Adjusted earnings per share (EPS) (non-IFRS)*: $0.55, compared to $0.44 for Q2 2022.
• Adjusted return on invested capital (adjusted ROIC) (non-IFRS)*: 20.0%, compared to 16.2% for Q2 2022.
• Adjusted free cash flow (non-IFRS)*: $66.8 million, compared to $43.3 million for Q2 2022.

• Most directly comparable IFRS financial measures to non-IFRS measures above:

• Earnings from operations as a percentage of revenue: 4.5%, compared to 3.7% for Q2 2022.
• EPS: $0.46, compared to $0.29 for Q2 2022.
• Return on invested capital (IFRS ROIC): 16.5%, compared to 12.3% for Q2 2022.
• Cash provided by operations: $130.2 million, compared to $86.9 million for Q2 2022.
• Repurchased 1.4 million subordinate voting shares (SVS) for cancellation for $15.0 million under our normal course issuer bid.

^{† Celestica has two operating and reportable segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS). Our ATS segment consists of our ATS end market and is comprised of our Aerospace and Defense (A&D), Industrial, HealthTech and Capital Equipment businesses. Our CCS segment consists of our Communications and Enterprise (servers and storage) end markets. Segment performance is evaluated based on segment revenue, segment income and segment margin (segment income as a percentage of segment revenue). See note 3 to our June 30, 2023 unaudited interim condensed consolidated financial statements (Q2 2023 Interim Financial Statements) for further detail.}

Third Quarter of 2023 (Q3 2023) Guidance^‡

For Q3 2023, we expect a negative $0.17 to $0.23 per share (pre-tax) aggregate impact on net earnings on an IFRS basis for employee stock-based compensation (SBC) expense, amortization of intangible assets (excluding computer software), and restructuring charges; and a non-IFRS adjusted effective tax rate* of approximately 19% (which does not account for foreign exchange impacts or unanticipated tax settlements).

2023 Outlook Raised^‡

Based on our strong performance in Q2 2023 and our current and expected levels of demand, our 2023 outlook currently consists of:

• revenue of at least $7.85 billion (our previous outlook was at least $7.6 billion);
• non-IFRS operating margin* of 5.5% (our previous outlook was between 5.0% to 5.5%);
• non-IFRS adjusted EPS* of $2.25 (our previous outlook was between $2.00 and $2.05); and
• non-IFRS adjusted free cash flow* of $125 million.

Achievement of our current 2023 revenue and non-IFRS adjusted EPS* outlook would represent an at least 8% revenue growth rate and an 18% non-IFRS adjusted EPS* growth rate from 2022.

2024 Outlook^‡

As we look forward to 2024, we expect revenue growth across each of our businesses, supported by anticipated strong secular tailwinds and new program wins. We believe that this growth, with continuing margin strength, will lead to non-IFRS adjusted EPS* growth of 10%, or more in 2024, relative to our 2023 outlook.

^{* See Schedule 1 for the definitions of, and recent modifications to, certain of these non-IFRS financial measures. We do not provide reconciliations for forward-looking non-IFRS financial measures, as we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various events that have not yet occurred, are out of our control and/or cannot be reasonably predicted, and that would impact the most directly comparable forward-looking IFRS financial measure. For these same reasons, we are unable to address the probable significance of the unavailable information. Forward-looking non-IFRS financial measures may vary materially from the corresponding IFRS financial measures.}

^{‡ Although we have incorporated the anticipated impact of supply chain constraints and demand softness in our Capital Equipment business into our financial guidance and outlook to the best of our ability, their adverse impact (in terms of duration and severity) cannot be estimated with certainly, and may be materially in excess of our expectations.}