Summary of Celestica Q1 2026 Earnings Call

1Key Financial Results and Metrics

Revenue: $4.05 billion, up 53% year-over-year, exceeding guidance.

Adjusted Operating Margin: 8.0%, a 90 basis point increase.

Adjusted EPS: $2.16, up 80% year-over-year, surpassing guidance.

Adjusted Gross Margin: 11.3%, up 30 basis points.

Adjusted ROIC: Approximately 50%, an increase of over 18 percentage points year-over-year.

Free Cash Flow: $138 million generated in Q1.

Capital Expenditures: $230 million, with a full-year guidance of approximately $1 billion.

Net Debt: $341 million with a gross debt to adjusted EBITDA leverage ratio of 0.6 turns.

2Strategic Updates and Business Highlights

Segment Performance:

ATS Segment: Revenue of $806 million, flat year-over-year, driven by HealthTech growth but impacted by portfolio reshaping in A&D and capital equipment softness.

CCS Segment: Revenue of $3.24 billion, up 76%, driven by strong demand in communications (69% growth) and enterprise markets (101% growth).

Customer Demand: Strong demand from hyperscalers, with a robust backlog and opportunity pipeline.

New Programs: Secured collaborations with AMD for networking switches and a landmark program for a 1.6T co-packaged optics Ethernet switch.

Supply Chain Management: Improved visibility and long-term contracts with key suppliers to address component shortages.

3Forward Guidance and Outlook

Q2 2026 Guidance: Revenue projected between $4.15 billion and $4.45 billion, with adjusted EPS between $2.14 and $2.34.

2026 Annual Outlook: Revenue guidance raised from $17 billion to $19 billion, with adjusted EPS raised from $8.75 to $10.15.

2027 Outlook: Anticipated revenue growth significantly exceeding $6.5 billion, driven by strong demand in both CCS and ATS segments.

4Bad News, Challenges, or Points of Concern

Supply Chain Constraints: Increased component shortages, particularly in custom silicon and memory, impacting production timelines.

Market Dynamics: The supply environment remains dynamic, with extended lead times and potential risks to meeting demand.

Margin Pressures: While margins improved, there are headwinds from rising input costs, particularly for memory and silicon.

5Notable Q&A Insights

Market Share and Visibility: Management reported stable market share with strong visibility into future programs, despite some component supply issues.

CPO Ethernet Switch Program: Recognized as a significant win, expected to enhance margins due to its complexity and high value-add.

CapEx Outlook: Anticipated elevated CapEx beyond $1 billion in 2027 to support growth, with investments tied to strong business cases.

Customer Engagement: Enhanced long-term visibility and contractual agreements with customers, allowing for better planning and execution amid supply chain challenges. Overall, Celestica demonstrated strong financial performance in Q1 2026, driven by robust demand in its CCS segment and strategic program wins, while navigating supply chain challenges and maintaining a positive outlook for the remainder of the year and into 2027.