8-K: Celestica Announces Strong Q4 and FY 2024 Results, Raises 2025 Outlook

Celestica reports Q4 2024 adjusted EPS above guidance, driven by strong revenue growth and operational leverage, and raises its 2025 annual outlook.

Summary

• Celestica announced its Q4 and full-year 2024 financial results, showcasing significant growth.
• Q4 2024 revenue reached $2.55 billion, a 19% increase compared to Q4 2023.
• GAAP earnings per share for Q4 2024 were $1.29, up from $0.77 in Q4 2023.
• Adjusted EPS for Q4 2024 was $1.11, also up from $0.77 in the prior year.
• For the full year 2024, revenue grew by 21% to $9.65 billion.
• Adjusted EPS for the full year increased by 58% to $3.88.
• The company repurchased 0.3 million common shares for $25.5 million in Q4 2024.
• Celestica is raising its 2025 annual outlook, now anticipating revenue of $10.7 billion (previously $10.4 billion) and adjusted EPS of $4.75 (previously $4.42).
• The company secured new AI program awards, including second and third 1.6T program wins.
• Q1 2025 guidance includes revenue between $2.475 billion and $2.625 billion, and adjusted EPS between $1.06 and $1.16.

Sentiment

Score: 9

Explanation: The document presents a highly positive outlook with strong financial results, raised guidance, and new customer wins. The management's comments are optimistic, and the company is well-positioned in a growing market.

Positives

• Strong revenue growth in both Q4 2024 and full-year 2024.
• Significant increase in adjusted EPS for both Q4 2024 and full-year 2024.
• Raised 2025 annual outlook for revenue and adjusted EPS.
• New customer program wins in the AI space.
• Strong performance in the CCS segment, particularly in Hardware Platform Solutions.
• GAAP earnings from operations as a % of revenue increased from 5.1% to 8.0% for Q4 2023 to Q4 2024.
• Adjusted operating margin increased from 6.0% to 6.8% for Q4 2023 to Q4 2024.

Negatives

• Adjusted SG&A for Q4 2024 came in just over the guidance range due to higher than anticipated variable spend.
• ATS segment revenue remained flat compared to Q4 2023.

Risks

• The document mentions risks related to customer and segment concentration.
• The document mentions risks related to reduction in customer revenue.
• The document mentions risks related to erosion in customer market competitiveness.
• The document mentions risks related to changing revenue mix and margins.
• The document mentions risks related to uncertain market, industry, political and economic conditions.
• The document mentions risks related to changes to policies or legislation.
• The document mentions risks related to operational challenges such as inventory management and materials and supply chain constraints.
• The document mentions risks related to the cyclical nature and/or volatility of certain of our businesses.
• The document mentions risks related to talent management and inefficient employee utilization.
• The document mentions risks related to the expansion or consolidation of our operations.
• The document mentions risks related to cash flow, revenue, and operating results, and tax and interest variability.
• The document mentions risks related to technology and IT disruption.
• The document mentions risks related to increasing legal, tax and regulatory complexity and uncertainty (including in relation to our or our customers' businesses).
• The document mentions risks related to integrating and achieving the anticipated benefits from acquisitions.
• The document mentions risks related to the potential adverse impacts of events outside of our control.

Future Outlook

Celestica anticipates revenue of $10.7 billion and non-GAAP adjusted EPS of $4.75 for 2025. The company expects positive momentum to continue into 2026, driven by strong demand in the CCS segment and new AI program awards.

Management Comments

• Rob Mionis, President and CEO, Celestica, stated that the company is pleased with its strong performance in the fourth quarter and solid finish to 2024.
• Rob Mionis noted that the fourth quarter revenue of $2.55 billion was up 19% year-over-year, and non-GAAP adjusted EPS of $1.11 was the highest quarterly EPS ever.
• Rob Mionis mentioned that Celestica achieved 21% revenue growth and 58% non-GAAP adjusted EPS growth year-over-year for the full year 2024.
• Rob Mionis stated that the company is pleased to raise its full-year outlook, reflecting strengthening demand in its CCS segment.
• Management believes the positive momentum they are experiencing will continue beyond this year, and into 2026.

Industry Context

Celestica's strong performance and raised outlook reflect the robust demand environment for data center hardware, particularly driven by AI applications. The company's success in securing new AI program awards positions it well to capitalize on this growing market. The document references 'Hyperscaler' customers which are the large cloud providers such as Amazon Web Services, Microsoft Azure, and Google Cloud Platform. Celestica's wins in this space are significant.

Comparison to Industry Standards

• Celestica operates in the EMS (Electronics Manufacturing Services) industry, competing with companies like Jabil, Flex, and Sanmina.
• Celestica's revenue growth of 21% for FY 2024 is strong compared to the industry average, which typically ranges from single-digit to low double-digit growth.
• The company's focus on high-growth areas like AI and data center hardware aligns with industry trends and positions it for continued success.
• Celestica's adjusted operating margin of 6.5% for FY 2024 is competitive within the EMS industry.
• The company's success in securing 1.6T program awards demonstrates its technological capabilities and its ability to win business from leading hyperscalers.

Stakeholder Impact

• Shareholders will benefit from the strong financial performance and increased profitability.
• Employees may see increased job security and potential for career advancement.
• Customers will benefit from Celestica's ability to deliver innovative solutions for their complex challenges.
• Suppliers may see increased demand for their products and services.
• Creditors will be reassured by Celestica's strong financial position and ability to meet its obligations.

Next Steps

• Management will host a conference call on January 30, 2025, to discuss the Q4 2024 results.
• The company will focus on ramping up production for new AI program awards in 2026.
• Celestica will continue to execute its strategy to capitalize on the growing demand for data center hardware.

Key Dates