Ladies and gentlemen, thank you for joining us and welcome to the Celestica Q4 2025 Financial Results and Conference Call. After today's prepared remarks, we will host a question and answer session. If you'd like to ask a question, please raise your hand. If you have dialed in to today's call, please press star nine to raise your hand and star six to unmute when called upon. I will now hand the conference over to Matthew Pallotta, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on Celestica's Q4 2025 Financial Results Conference Call. On the call today, we have Rob Maiones, President and Chief Executive Officer, and Mandeep Chawla, Chief Financial Officer. Please note that during the course of this call, we will make forward-looking statements, including statements relating to the future performance of Celestica, our business outlook, guidance for the first quarter of 2026 our 2026 annual outlook and anticipated trends in our industry and their anticipated impact on our business these are based on management's current expectations forecasts and assumptions including that there are no material changes to tariffs or trade restrictions compared to what is in effect as of january 28th these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and their potential impact on our results cannot be reliably predicted at this time. For identification and discussion of the material assumptions, risks, and uncertainties, please refer to our public filings with the SEC and on CDAR+, as well as the Investor Relations section on our website. We undertake no obligation to update these forward-looking statements unless expressly required to do so by law. In addition, during this call, we will refer to various non-GAAP financial measures, We have included in our earnings release, found in the Investor Relations section of our website, a discussion of those non-GAAP financial measures and a reconciliation to the most comparable GAAP measures. Unless otherwise specified, all references to dollars on this call are to U.S. dollars, all per share information is based on diluted shares outstanding, and all references to comparative figures are a year-over-year comparison. Let me now turn the call over to Rob.

Thank you Matt and good morning everyone and thank you for joining us on today's call. We delivered very strong results in the fourth quarter, driven primarily by growth in our CCS segment across both our communications and enterprise end markets. This led to revenue and adjusted EPS both exceeding the high end of our guidance ranges. while adjusted operating margin of 7.7 percent once again marked the strongest performance in company history. I'd like to briefly review our performance for this past fiscal year. Overall, 2025 was another exceptional year for the company. For the full year, we achieved revenue of $12.4 billion and adjusted EPS of $6.05, representing growth of 28% and 56% year-over-year respectively. Our adjusted operating margin of 7.5% marked the second consecutive year of 100 basis points of improvement, driven by both in AI-related demand for data center technologies, strong operational execution, and improved operating leverage. we surpassed our annual outlook for each of our key financial metrics further building on our positive momentum generated over the last several years looking back our financial results reflect a consistent progression marked by sustained annual improvement across revenue adjusted operating margin and adjusted eps as we look ahead we anticipate the strong momentum to continue with revenue growth expected to accelerate in 2026. Furthermore, our optimism continues to strengthen regarding the significant pipeline of growth opportunities that lie ahead for our businesses, particularly in our CCS segment, which we believe will sustain this growth trajectory in 2027. Before I provide an update on an annual outlook for each of our businesses, I would like to hand the call over to Mandate to discuss our financial performance during the quarter and our guidance for the first quarter of 2026. Mandeep, over to you.

Thank you Rob and good morning everyone. In the fourth quarter revenue of 3.65 billion dollars was up 44 percent and above the high end of our guidance range driven by very strong demand in our CCS segment. Our non-GAAP operating margin was 7.7 percent up 90 basis points driven by strong margin improvement in both of our segments our adjusted earnings per share was $1.89 in the fourth quarter exceeding the high end of our guidance range and an increase of 78 cents or 70 moving on to some additional metrics adjusted gross margin was 11.3 percent up 30 basis points driven by higher volumes and stronger productivity our adjusted effective tax rate for the quarter was 19%. And lastly, as a result of strong profitability and disciplined working capital management, we achieved adjusted ROIC of 43%, up 14 percentage points versus the prior year. Moving on to our segment performance. Revenue in our ATS segment for the quarter was $795 million, 1% lower and in line with our guidance of a low single-digit percentage decline. The decline in revenue was driven by lower volumes in our capital equipment business and previously communicated portfolio reshaping in our AMD business, partly offset by stronger demand in our other end markets. Our ATS segment accounted for 22% of total company revenue in the fourth quarter. Revenue in our CCS segment was $2.86 billion, up 64%, driven by very solid growth in both our communications and enterprise and markets. The CCS segment accounted for 78% of total company revenue in the fourth quarter. Revenue in our communications and market increased by 79% above our guidance of a high 60s percentage growth, primarily driven by strong demand and ramping programs for 800G networking switches across our largest hyperscaler customers. Our enterprise end market revenue was higher by 33%, which was above our guidance of a low 20s percentage increase, driven by the acceleration in the ramping of a next-generation AIML compute program with a large hyperscaler customer. Our HPS business generated revenue of $1.4 billion in the fourth quarter, representing growth of 72% and accounted for 38% of total company revenue. The strong growth was driven by ramping volumes in 800G-switch programs with multiple hyperscaler customers. Moving on to segment margins. ATF segment margin in the quarter was 5.3%, up 70 basis points, primarily driven by improved profitability in our A&D business. CCS segment margin in the fourth quarter was 8.4%, an improvement of 50 basis points, driven by strong operating leverage. During the fourth quarter, we had three customers that each accounted for at least 10% of total revenue, representing 36%, 15%, and 12% of revenue, respectively. For the full year 2025, we also had three customers that accounted for at least 10% of revenues at 32%, 14%, and 12% of revenue, respectively. Moving on to working capital. At the end of the fourth quarter, our inventory balance was $2.19 billion, a sequential increase of $141 million and higher by $427 million compared to the prior year, as we support continuing revenue growth in our CCS segment. Cash cycle days during the fourth quarter were 61, an improvement of 8 days versus the prior year and was 4 days better sequentially. Turning to cash flows. In the fourth quarter, we generated $156 million of free cash flow, resulting in total annual adjusted free cash flow of $458 million in 2025, which was an increase of $152 million compared to the full year in 2024 and above our most recent annual outlook of $425 million. dollars. Our capital expenditures for the fourth quarter were $95 million, or 2.6% of revenue, bringing our total capital expenditures in 2025 to $201 million, or 1.6% of revenue. Since we last spoke at our Investor and Analyst Day in October, we have continued our discussions with key customers in our CCS segment in order to align on long-term capacity planning. As a result of these discussions, we are meaningfully increasing the scale and scope of our capital investment plans in 2026 and 2027 in order to build out the revenue enabling capacity required to support the strengthening demand we see ahead. We now anticipate that our capital expenditures for 2026 will be approximately $1 billion or 6% of our current annual revenue outlook. Unfortunately, we anticipate to be able to fully support this increase in capital expenditures through operating cash flow. The investments we are making in new capacity, which we expect will come online throughout 2026 and 2027, are a response to record bookings, accelerating growth in the scale of our existing engagements, and meaningfully improved long-term demand visibility with our hyperscaler customers. We view our investments in new capacity as highly strategic, aligning our global footprint with the multi-year capacity roadmaps of our key customers in support of their large-scale investments in data center infrastructure and AI capabilities. These investments will include a combination of capacity additions at our largest sites, new customer-driven investments in the United States, and upgrades to manufacturing capabilities, including investments in power. We are undertaking significant new investments in Texas in support of growing customer demand for US capabilities in the areas of R&D, manufacturing, and advanced assembly. At both our Richardson campus and use site in Fort Worth, we are adding a total of over 700,000 square feet of footprint with expanded power availability. This incremental capacity is expected to come online in 2027. Also, in order to facilitate greater engagement on R&D and design, we plan to establish a new HPS design center in Austin. Our CapEx plans also include large-scale investments in our manufacturing capacity and capabilities across the rest of our global network. In Thailand, we continue to add new capacity to support very strong demand from multiple customers. We are adding over 1 million square feet in a digital footprint with upgrades including expanded power availability, advanced liquid cooling manufacturing, and testing capabilities. We expect this new capacity to come online towards the end of 2026 and into 2027. Elsewhere in our network, we are upgrading and retooling sites to add new manufacturing lines in locations such as Mexico and Japan in support of customer demand for greater geographic diversification, allowing them the flexibility and optionality to de-risk their global supply chains within our network. We are also excited to announce our plans to establish a new HPS design center in Taiwan. Overall, we are very encouraged by the strong alignment and close collaboration on capacity planning we have with our customers, which underpins our confidence in making these investments. Turning to our balance sheet and capital allocation. At the end of the quarter, our cash balance was $596 million. Our gross debt was $724 million, resulting in a net debt position of $128 million. We had no draw outstanding on our revolver at the end of the quarter, leaving us with approximately $1.3 billion in available liquidity. Our gross debt to non-GAAP trailing 12-month adjusted EBITDA leverage ratio was 0.7 turns, an improvement of 0.1 turns sequentially and 0.3 turns versus the prior year period. As of December 31st, we were in compliance with all financial covenants under our credit agreement. During the fourth quarter, we received regulatory approval to launch our new normal course issuer bid which permits us to, at our discretion, purchase up to approximately 5% of our public flow until November 2, 2026. We will continue to be opportunistic towards share repurchases as our approach remains unchanged. During the quarter, we repurchase approximately 132,000 shares under our normal course at Shorebid for $36 million. For 2025, our repurchases totaled 1.36 million shares at a cost of $151 million or an average cost of approximately $111 per share. Now moving on to our guidance for the first quarter of 2026. First quarter revenue is projected to be between $3.85 and $4.15 billion, representing growth of 51% at the midpoint. Adjusted earnings per share are anticipated to be between $1.95 and $2.15, representing an increase of $0.85 at the midpoint, or 71% growth compared to the prior year. Assuming the achievement of the midpoint of our revenue and adjusted EPS guidance ranges, our non-GAAP operating margin for the first quarter is expected to be 7.8%, representing an increase of 70 basis points. We expect our adjusted effective tax rate for the first quarter to be approximately 21%. Finally, let's review our revenue outlook for each of our end markets. In our ATS segment, we anticipate revenue to be down in the low single-digit percentage range, as growth in our health tech and industrial businesses are being offset by market-related softness in our capital equipment business and portfolio reshaping in our A&B business. In our CCS segment, we anticipate revenue in our communications and market to grow in the low 60s percentage range, primarily driven by ongoing ramps in multiple 800G programs with our hyperscaler customers. In our enterprise end market, we expect a very strong group in the 100 high teens percentage range, supported by the progression and developing of a next-generation AIML hyperscaler compute program. With that, I will now turn the call back over to Rob for an update on our 2026 annual financial outlook and to provide additional color on the latest developments in our business.

Thank you, Mandeep. Given the strengthening demand forecast across our portfolio, we are raising our 2026 annual financial outlook. We are increasing our revenue outlook to $17 billion and raising our adjusted EPS outlook to $8.75, representing year-over-year growth of 37% and 45% respectively. This represents our high-confidence view for 2026, which we will continue to refine and update as the year progresses. We are also maintaining our free cash flow outlook of $500 million. This demonstrates the inherent cash-generating power of our business, allowing us to organically fund a significant increase in capital investments while continuing to generate cash to fund other investment opportunities. Since our Investor and Analyst Day this past October, the velocity and scale of awarded programs and growth opportunities for Celestica continues to expand. As Randeep discussed, we have responded by significantly increasing our capital investment plans in order to grow our global footprint in alignment with our customers' multi-year requirements. These investments are intended to provide us with the necessary scale to support the accelerated growth we anticipate in 2026 and which we believe will be sustained in 2027. In undertaking these investments, we have closely collaborated on demand planning with our largest customers, which has informed our decisions on the location, capabilities and scale of the new capacity we are developing. These investments are targeted to strategically support our customer base and their program specific requirements over the long term. On this note, we are proud of our decade-long partnership with Google and are excited to continue supporting the acceleration of leading AI data center architecture. Celestica remains closely aligned with Google on the development of complex data center hardware and systems. As a preferred manufacturing partner for Google's Tensor Processing unit, or TPU systems, Celestica is committed to making long-term investments in both capacity and capabilities, both in the United States and across our global footprint, which includes our planned investments to expand manufacturing capacity in 2026 and 2027. These investments are designed to support the scaling of production for current and future generations of google's custom silicon tpu systems as well as leading edge networking technologies based on our latest outlook we anticipate full-year revenue growth of approximately 50 percent in our ccs segment supported by strong demand and new program ramps across both end markets in communications demand from hyperscalers is driving strong volumes for our 800G programs, while 400G remains highly resilient. We continue to expect mass production for our first 1.60 switching programs to begin ramping in the latter part of the year. Over the past 90 days, we have continued to add to our pipeline of newly won business and networking, adding to an already robust view of demand into 2027. We are pleased to announce that we have secured the Design and Manufacturing Award for the 1.16 Networking Switch platform with a third hyperscaler customer. This HPS engagement is expected to ramp production beginning in 2027, with design work already underway. way. This new program award, along with strengthening demand forecasts from our largest customers and a significant funnel of opportunities, gives us confidence and optimism regarding the growth trajectory of our networking businesses. In our enterprise end market, demand signals remain solid. As anticipated, we saw a meaningful ramp in our next-generation AI ML compute program with a hyperscaler customer during the fourth quarter, and we continue to expect that volumes will accelerate into 2026. Looking towards 2027, we continue to anticipate strong demand from our hyperscaler and digital native customers driven by ramps and next-gen AI ML compute programs. Now moving on to our ATS segment. We are maintaining our outlook for revenues to remain approximately flat to up in the mid-single digits percentage range for the full year 2026, consistent with the targets we shared at our Investor and Analyst Day in October. We continue to expect growth in our industrial and health tech business, supported primarily by the ramping of new programs. we anticipate this growth will be at least partially moderated by lower volumes in our capital equipment business in the near term as we progress through 2026 we anticipate overall ats revenues to be higher in the second half of the year led by a recovery in capital equipment volumes as broader market growth tailwinds come into effect we also expect year-over-year growth to improve as we live out the impact from the strategic portfolio reshaping activities we undertook in A&D during the first half of 2025. Overall, we expect 2026 to be another year of transformational progress in the growth and evolution of our business. We are experiencing an unprecedented level of demand supported by the sustained large-scale multi-year investments from our largest data center customers we believe our company is uniquely positioned as a critical enabler of the ai ml revolution helping to solve the most difficult challenges in the data center from advanced liquid cooling solutions throughout the rack to the transition to next generation networking platforms it's our ability to deliver these complex system level solutions that allows us to win new mandates and solidify our leadership in the technologies of tomorrow today our team is intently focused on our operational execution as we scale our global footprint to meet this growing demand with that i will now turn the call back to the operator to begin the q a session thank you we will now begin the question and answer session please limit yourself to one question if you would like to ask a question, please raise your hand now.

If you have dialed into today's call, please press star nine to raise your hand and star six to unmute when you're called upon. Please stand by while we compile the Q&A roster. And your first question comes from the line of Rupalu Bhattacharya from Bank of America. Rupalu, your line is now open. You might have to unmute.

Sorry, can you hear me now? Hi, good morning. Thanks for taking my questions. So looks like you've taken up both the top line and the bottom line guide for fiscal 26. If we take the midpoint of the guidance literally, then there seems to be a slowdown coming in fiscal second half and also some loss of operating leverage. I mean, the revenue guidance is 51% year-on-year for fiscal 1Q, but the full year is 37%, so implying some slower growth in the remaining three quarters. Likewise, in EPS, it's 71% for the first quarter, but full year is 45%. So EPS is definitely growing faster than revenue, and there is leverage in the model, but it looks like some operating leverage declined in the remaining three quarters. So can you just clarify for us, is there something specific that's causing this slowdown, or should investors just chalk this up to conservatism in the guide? Okay, thanks for the details there. If I can ask a quick follow-up, I want to ask about risk management. So, you know, you obviously have a lot of opportunity in both your white box switching business and the custom ASIC server business. One thing you've mentioned is you're increasing capex to fund the growth. Can I ask if you're concerned about any potential funding for future AI-related projects? And is there any risk to programs materializing? And have you taken that into account? And also, you've kept free cash flow at $500 million, you know, given that CapEx is going up and you're probably going to need more working capital to support revenue growth. Can you just tell us, like, you know, is there a risk to the story here and what is giving you confidence to maintain the free cash flow guide? And again, congrats on the quarter. Thanks for taking my questions.

Thank you. Your next question comes from the line of Sameek Chatterjee with JP Morgan. Your line is now open.

I'll take my question. Maybe if I can start with the CapEx investment and the ramp here. I know you provided us an update of the investor day and you mentioned that activity really ramped with customers again since then and engagement did ramp. I'm trying to think like when we when you are sort of going ahead and doing those investments is should we think about this as something that drives revenue in 2027 itself or are these sort of programs as well as the RAM sort of more to address customer demand in 2028 2029 just trying to get a sense of what kind of program visibility customers are giving you already to drive this significant you know investment from you just trying to get a sense of that and follow up thank you yeah the capacity that and then maybe for the follow-up of the outlook that you're sharing for CCS to maintain these sort of strong growth rates into 2027 just wondering does that sort of incorporate the digital native customer and the ramp with that customer and any updates in terms of over the last sort of 90 days anything any updates in relation to the timing or sort of how you think about the magnitude of that in RAM in 2027. Thank you. Thanks for taking my questions.

Thank you. As a reminder please limit yourself to one question. Your next question comes from the line of Thanos Moschopoulos with BMO Capital Markets. Your line is now open.

Hi good morning. Can you speak to how we should think about the margin trajectory just given the mix shift dynamic where you've got some enterprise becoming a larger part the CCS mix. Would that imply that there might be some compression in CCS margins as the year progresses and into 27 or are there offsets to that? Thanks.

Networking is also very strong in 2026 and going into 2027 and 2026.

Thank you congrats on the strong quarter.

Thank you. Your next question comes to the line of Michael Ng with Goldman Sachs. Your line is now open.

Great. Thank you so much for the question. My question is just around the CapEx. You know, encouraging to hear about all the visibility your partners are giving you. I wanted to ask whether the capital intensity in the business has changed at all, or, you know, does the, you know, $1 billion CapEx, you know, support you know two to two and a half percent revenue over time kind of implying a path to forty to fifty billion dollars of revenue over time is that a fair way to think about it or has that the capital intensity in the business changed at all thank you good morning Michael I'm not going to help you back into that number thank you Mindy that's very clear thank you your

next question comes to the line of Carl Ackerman from BNP Paribas Carl your Your line is now open. Carl, your line is now open. You may have to unmute.

Yes, can you hear me okay? Sorry about that. So I know you have deep engagements on 400 gig and 800 gig switch programs, but could you speak to the opportunity you have to address multi-rack, scale-up XPU networks such as OptalSugar switches and co-package optics-based switches, perhaps in terms of the breadth of customer engagements? Thank you.

Thank you. Your next question comes from the line of Tim Long. with Barclays. Your line is now open.

Thank you. Hopefully you can hear me. I did want to just talk about, you know, a few comments on the call you guys made about new programs and new program wins. Could you talk a little bit about kind of, you know, you talked about some strong backlog and visibility and wins, as well as obviously the capacity expansions. You obviously got a lot of large switching and AIML and digital native rack. wins. Can you talk about, you know, the outlook for the next few years, what we should expect to see from newer programs where they could be centered with this more be around new switching customers or new applications or use cases from some of the existing customers? Anything you could give us on that would be helpful. Thank you.

Okay, thank you very much. Thank you. Your next question comes in line from David Vogt with UBS. your line is helping.

Thanks guys, can you hear me? So I have a question about sort of the scope of work and the economics of the digital native customer. Can you kind of update us on where we stand in terms of what that relationship looks like as we go into 26 and to 27? And then Mandeep, on the CapEx numbers, that billion dollars, can you help us parse through how much of that growth CapEx is tied to sort of the existing customer base and the expansion of programs and projects with your largest customers versus incremental customers like the DNC or any other incremental customers that you see in the pipeline for 26, 27.

Thank you. Your next question comes from the line of Paul Treiber with RBC Capital Markets. Your line is now open. Yeah, thanks and good morning.

Just a question, just in light of the new program win momentum that you're seeing, can you speak to how the returns, the expected returns in those programs compare compare against existing programs, and really, you know, what I'm going to add is also, are you seeing competition changing the returns on new programs versus what you saw in the past?

In terms of competitive intensity and, you know, I would say as time goes on, the programs that will.

Thank you for taking the question.

Thank you. Your next question comes to the line of Ruben Roy with Stiefel. Your line is now with him.

Thank you.

Thank you, Rob. Bob, maybe we could follow up where you left off there. And I had a question on the 1.6T win, the new win at a new hyperscaler. Are you seeing a shift towards HPS design-led solutions and away from cost plus? You've got the design center that you talked about in Austin. Just wondering if that's something that's happening as you move towards these more complex switching technologies and how you see that playing out from a margin perspective as you think about 20, 27, 28 timeframe.

Yes.

Great.

Thank you.

Thank you. Your next question comes to the line of Stephen Fox with Fox Advisors. Your line is now open.

Hi. Good morning. First of all, congratulations on reaching a point where people are complaining about 37% growth. I thought that was great. In terms of my question, there's been a bunch of confusion around with your largest customer, how the supply chain works on those AI ML compute programs and where you are sort of positioned versus, you know, there are other suppliers. Can you just sort of clarify, you know, how you're playing there, you know, what kind of competition you see? And then it looks like you're also expanding directly to support some more programs on that. So, anything on that would be helpful. Thank you. Great. Thank Thank you very much.

Thank you. Your next question comes to the line of John Hsiao with TD Cowan. Your line is now open.

Thanks for taking my question. So, within your guidance, how much do you bake in a price increase of key components or materials? At this point, are you still comfortable with the supply chain? Do you think this is going to be any source of potential margin compression given right now we're getting this inflationary environment in the supply chain? Thank you. Thank you, again.

Thank you. Your next question comes to the line of Todd Kooplin with CIBC. Your line is now open.

Good morning, everyone. I wanted to ask about the 1.6 programs in the second half of the year. And at this point, what are the range of outcomes and gating factors for those programs to start to wrap this year? Just talk about that a little bit. Thank you.

Thank you. Your next question comes from the line of Atif Malik from Citi. Your line is now open.

Thank you for taking my questions. We got a couple of questions from investors on this yesterday. In your press release, you called out Google or TPUs as a preferred manufacturing partner versus sole source. Is that a new disclosure? And just as a follow-up, if some of your hyperscalers were to adopt more TPUs, do they all go through you guys or are there other entities like Broadcom and others that can participate in the TPU RAC trade?

Thank you. And your final question comes from the line of Robert Young with Canaccord Genuity. Robert, your line is now open. Robert, your line is now open. You might have to unmute.

Hopefully you can hear me now. On the third hyperscaler 1.6 win, how was this one? Was it an extension of 800? Was it tied to your Tomahawk ASIC experience? And is it part of a rack integration with another outside vendor or is that being done by the hyperscaler? Just some context around that. And then if you could also talk about how you expect operating margins to evolve as you move into 1.6 terabytes programs and how that might differ between, I think you have two full rack and then two standalone if I understand the large programs. Now, how would the margin structure differ and evolve? And is there any context on between the full rack deployment and standalone?

It's integrated.

Yeah, thanks.

Thank you. There are no further questions at this time, so I will now turn to call back to Rob Mionis, CEO, for closing remarks.

Here at AI Roadmaps, in our deep partnership with industry leaders like Google and our expanding global footprint in Texas and Asia, reinforces our confidence on the growth trajectory.

This concludes today's call. Thank you all for attending. You may now disconnect.