Celestica Announces Third Quarter 2022 Financial Results

TORONTO — 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 September 30, 2022 (Q3 2022).

“Our exceptional performance during the third quarter was marked by our highest non-IFRS operating margin* in our history and our highest non-IFRS adjusted EPS* in more than 20 years,” said Rob Mionis, President and CEO, Celestica.

“We continue to execute on our strategy to drive profitable growth, and we are pleased with our solid financial results and the momentum that has been building. Year to date, our revenues are up 26%, and our non-IFRS adjusted EPS* is up 56%, compared to the prior year period. The strong performance in recent quarters continues to be driven by new project ramps in our ATS segment and strong demand with market share gains in our Hardware Platform Solutions business. Based on our strong momentum, we are raising our revenue and non-IFRS adjusted EPS* outlook for 2022, and expect revenue and non-IFRS adjusted EPS* growth in 2023.”

Q3 2022 Highlights

• Key measures:

  • Revenue: $1.92 billion, increased 31% compared to $1.47 billion for the third quarter of 2021 (Q3 2021).
  • Non-IFRS operating margin*: 5.1%, compared to 4.2% for Q3 2021.
  • ATS segment revenue: increased 30% compared to Q3 2021; ATS segment margin was 5.0%, compared to 4.3% for Q3 2021.
  • CCS segment revenue: increased 32% compared to Q3 2021; CCS segment margin was 5.2%, compared to 4.1% for Q3 2021.
  • Adjusted earnings per share (EPS) (non-IFRS)*: $0.52, compared to $0.35 for Q3 2021.
  • Adjusted return on invested capital (non-IFRS)*: 19.2%, compared to 15.2% for Q3 2021.
  • Adjusted free cash flow (non-IFRS)*: $7.4 million, compared to $27.1 million for Q3 2021.

• IFRS financial measures (directly comparable to non-IFRS measures above):

  • Earnings from operations as a percentage of revenue: 4.1%, compared to 3.5% for Q3 2021.
  • EPS: $0.37, compared to $0.28 for Q3 2021.
  • Return on invested capital (IFRS ROIC): 15.3%, compared to 12.8% for Q3 2021.
  • Cash provided by operations: $74.4 million, compared to $55.7 million for Q3 2021.

• Repurchased and cancelled 0.5 million subordinate voting shares (SVS) for $5.0 million under our normal course issuer bid (NCIB).

† 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 25 to our 2021 audited consolidated financial statements, included in our Annual Report on Form 20-F for the year ended December 31, 2021 (2021 20-F), available at www.sec.gov and www.sedar.com, for further detail.

Fourth Quarter of 2022 (Q4 2022) Guidance

Q4 2022 Guidance
Revenue (in billions) $1.875 to $2.025
Non-IFRS operating margin* 5.1% at the mid-point of our
revenue and non-IFRS adjusted
EPS guidance ranges
Adjusted SG&A (non-IFRS)* (in millions) $64 to $66
Adjusted EPS (non-IFRS)* $0.49 to $0.55

For Q4 2022, we expect a negative $0.15 to $0.21 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 21% (which does not account for foreign exchange impacts or unanticipated tax settlements).

2022 and 2023 Outlook

Based on our strong performance in the first nine months of 2022 and our Q4 2022 guidance, we have raised our 2022 revenue outlook to between $7.08 billion and $7.23 billion, and our non-IFRS adjusted EPS* outlook to between $1.83 and $1.89. Achievement of the mid-point of these ranges would represent 27% and 43% year- over-year growth for revenue and non-IFRS adjusted EPS*, respectively. Additionally, our 2022 non-IFRS adjusted free cash flow* outlook is $75 million, as we continue to make strategic investments to support our strong growth.

For 2023, our outlook consists of:

  • revenue of at least $7.5 billion;
  • non-IFRS operating margin* of between 4.5% and 5.5%; and
  • target non-IFRS adjusted EPS* of between $1.95 and $2.05.

Although we have incorporated the anticipated impact of supply chain constraints into the foregoing financial guidance and outlook to the best of our ability, their adverse impact (in terms of duration and severity) cannot be estimated with certainty, and may be materially in excess of our expectations.

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