Celestica Announces First Quarter 2024 Financial Results

Q1 2024 revenue and non-IFRS adjusted EPS* above the high end of guidance ranges;
2024 full-year outlook raised

(All amounts in U.S. dollars. Per share information based on diluted shares outstanding unless otherwise noted.)

TORONTO,(GLOBE NEWSWIRE) — Celestica Inc. (TSX: CLS) (NYSE: CLS), a leader in design, manufacturing, hardware platform and supply chain solutions for the world’s most innovative companies, today announced financial results for the quarter ended March 31, 2024 (Q1 2024)^†.

“We are pleased with our strong start to the year, delivering revenue growth of 20% in Q1 2024 compared to the prior-year period, and continued non-IFRS operating margin* expansion. Our solid performance was reflected in revenue and non-IFRS adjusted EPS* each in excess of the high end of our guidance ranges,” said Rob Mionis, President and CEO, Celestica. “We continue to see healthy demand across a number of our major customers, which provides us with the confidence to raise our full year 2024 outlook. We continue to stay focused on solid execution for our customers, and delivering on our strategic priorities and financial targets.”

Q1 2024 Highlights

• Key measures:
  • Revenue: $2.21 billion, increased 20% compared to $1.84 billion for the first quarter of 2023 (Q1 2023).
  • Non-IFRS operating margin*: 6.2%, compared to 5.2% for Q1 2023.
  • ATS segment revenue decreased 3% compared to Q1 2023; ATS segment margin was 4.7% compared to 4.4% for Q1 2023.
  • CCS segment revenue increased 38% compared to Q1 2023; CCS segment margin was 7.0% compared to 5.8% for Q1 2023.
  • Adjusted earnings per share (EPS) (non-IFRS)*: $0.86, compared to $0.47 for Q1 2023.
  • Adjusted return on invested capital (adjusted ROIC) (non-IFRS)*: 24.8%, compared to 17.9% for Q1 2023.
  • Adjusted free cash flow (non-IFRS)*: $65.2 million, compared to $9.2 million for Q1 2023.

• Most directly comparable IFRS financial measures to non-IFRS measures above:
  • Earnings from operations as a percentage of revenue: 6.0% compared to 3.2% for Q1 2023.
  • EPS: $0.85 compared to $0.20 for Q1 2023.
  • Return on invested capital (IFRS ROIC): 23.8% compared to 11.2% for Q1 2023.
  • Cash provided by operations: $131.1 million compared to $72.3 million for Q1 2023.
• Repurchased 0.5 million subordinate voting shares (SVS) for cancellation for $16.5 million.

† 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 March 31, 2024 unaudited interim condensed consolidated financial statements (Q1 2024 Interim Financial Statements) for further detail.
* Non-International Financial Reporting Standards (IFRS) financial measures (including ratios based on non-IFRS financial measures) do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar financial measures presented by other public companies that report under IFRS or U.S. generally accepted accounting principles (GAAP). See “Non-IFRS Supplementary Information” below for information on our rationale for the use of non-IFRS financial measures. See Schedule 1 for, among other items, non-IFRS financial measures included in this press release, their definitions, uses, and a reconciliation of historical non-IFRS financial measures to the most directly comparable IFRS financial measures. The most directly comparable IFRS financial measures to non-IFRS operating margin, non-IFRS adjusted EPS, non-IFRS adjusted ROIC and non-IFRS adjusted free cash flow are earnings from operations as a percentage of revenue, EPS, IFRS ROIC, and cash provided by operations, respectively.

Second Quarter of 2024 (Q2 2024) Guidance^‡

For Q2 2024, 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.

For Q2 2024, we also expect a non-IFRS adjusted effective tax rate* of approximately 20%, without accounting for foreign exchange impacts or unanticipated tax settlements. This rate does assume that our income will be subject to Pillar Two global minimum tax as currently proposed, as legislation that has been introduced in Canada may become applicable before the end of Q2 2024 with possible retroactive impact to January 1, 2024^‡. If this legislation is not substantively enacted in Q2 2024, we expect our Q2 2024 non-IFRS adjusted EPS* guidance range to shift upwards by approximately $0.05, and our non-IFRS adjusted effective tax rate* for the quarter to be approximately 15%. Our Q2 2024 guidance also assumes consummation in May 2024 of our anticipated acquisition of NCS Global Services LLC (described below).

2024 Annual Outlook Update^‡

Building on our strong performance in Q1 2024, we are updating our 2024 outlook to the following:

• revenue of $9.1 billion (our previous outlook was $8.5 billion, or more);
• non-IFRS operating margin* of 6.1% (our previous outlook was between 5.5% to 6.0%);
• non-IFRS adjusted EPS* of $3.30 (our previous outlook was $2.70 or more); and
• non-IFRS adjusted free cash flow* of $250 million (our previous outlook was $200 million, or more).

Our 2024 annual outlook assumes that our income will be subject to Pillar Two global minimum tax as currently proposed, as legislation that has been introduced in Canada is expected to be enacted during 2024 and apply retroactively to January 1, 2024^‡. Our 2024 annual outlook also assumes consummation in May 2024 of our anticipated acquisition of NCS Global Services LLC (described below).

For the second through fourth quarters of 2024, we expect a non-IFRS adjusted effective tax rate* of approximately 20%^‡ (which does not account for foreign exchange impacts or unanticipated tax settlements).

* See Schedule 1 for the definitions 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.

^‡ The timing of global minimum tax legislation effectiveness and its impact on our tax expense cannot currently be estimated with certainty, and may differ materially from our expectations.