Celestica ((TSE:CLS)) has held its Q1 earnings call. Read on for the main highlights of the call.
Celestica’s recent earnings call paints a picture of a company experiencing a strong start to 2025, marked by record revenue and earnings per share (EPS). The call highlighted the robust performance of the company’s CCS segment and strategic demand planning as key drivers of this success. However, challenges were acknowledged in the enterprise segment due to technology transitions and in the ATS segment, partly due to macroeconomic uncertainties. Despite these hurdles, Celestica maintains a positive outlook for the remainder of the year.
Record Q1 Revenue and EPS
Celestica reported impressive financial results for the first quarter of 2025, achieving revenues of $2.65 billion and an adjusted EPS of $1.20. These figures not only exceeded the company’s guidance ranges but also set a new benchmark for the company.
Highest Adjusted Operating Margin
The company achieved an adjusted operating margin of 7.1%, the highest in its history. This milestone underscores Celestica’s operational efficiency and its ability to optimize its cost structure effectively.
Strong CCS Segment Performance
The CCS segment was a standout performer, with revenues climbing to $1.84 billion, a 28% increase. This growth was primarily driven by strong demand for networking switches, particularly from hyperscaler customers, highlighting the segment’s strategic importance.
Positive Annual Outlook Revision
In light of its strong start, Celestica has revised its annual revenue outlook upwards to $10.85 billion, with a non-GAAP adjusted EPS of $5. This reflects a 12% year-over-year growth, signaling confidence in sustained performance.
Robust Free Cash Flow
The company generated $94 million in free cash flow during the first quarter, surpassing the previous year’s period by $26 million. This robust cash flow provides Celestica with the flexibility to invest in growth opportunities.
Enterprise Revenue Decline
Despite overall strong performance, the enterprise end market experienced a 39% revenue decline year-over-year. This was attributed to a technology transition in an AI/ML compute program, highlighting a key area of concern.
ATS Segment Challenges
The ATS segment saw a modest revenue increase of 5%, with macroeconomic slowdowns impacting its outlook. This segment’s performance remains a focal point for future improvement.
Inventory and Cash Flow Challenges
Celestica faced challenges with inventory and cash flow, as inventory balances increased sequentially and cash deposits decreased by $40 million sequentially and $248 million year-over-year. These issues highlight areas for potential operational adjustments.
Forward-Looking Guidance
Looking ahead, Celestica provided robust guidance for the upcoming quarters. The company anticipates Q2 2025 revenues between $2.575 billion and $2.725 billion, with an adjusted EPS ranging from $1.17 to $1.27. For the full year, revenue expectations have been raised to $10.85 billion, with a non-GAAP adjusted EPS of $5. Celestica also expects a free cash flow of $350 million and projects an adjusted effective tax rate of 20% for Q2.
In conclusion, Celestica’s earnings call reflects a strong start to 2025, with record-breaking financial metrics and a positive outlook for the year. Key takeaways include the impressive performance of the CCS segment, a significant increase in operating margins, and a revised annual outlook. While challenges persist in certain segments, the company’s strategic planning and robust guidance suggest a promising trajectory for the remainder of the year.