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Call sheet · Q2'24

Celestica (CLS)

Q2'24 earnings call · held July 25, 2024 · compared with the Q1'24 call · management-credibility review
6/12
Disclosure score
2 high, 5 medium, 1 low flags
Financial quality
Bottom line
The sleeper story everyone will miss: CLS just revealed their AI compute boom is hitting a wall with sole-sourced programs declining in H2 and new products not ramping until mid-2025, creating a 6-9 month revenue hole in their highest-margin business. Yes, the headline 23% growth and raised guidance look fantastic, but it's being driven by a single customer now at 32% of revenue while management admits 'visibility into the fourth quarter is a bit murky.' The binding constraint isn't demand, it's technology transition timing and customer concentration risk. Most revealing quote: 'single-sourced program will start plateauing and decreasing towards the back end of the year.' My view changes if they win meaningful AI compute programs beyond their mega-customer or if 800G ramp accelerates enough to fully offset the compute decline.

The 30-second version

  • The sleeper story: AI compute program transitions creating a Q4 hole that networking can't fully fill
  • The obvious win masks concentration risk: hyperscaler revenue hit $4.6B run rate but it's increasingly one customer
  • Inventory and deposits both dropping while revenue grows 23%, signaling either amazing efficiency or demand peaking

What changed this quarter

MetricQ1'24Q2'24Change
Revenue$2.21B (20% YoY)$2.39B (23% YoY)+$180M sequential, +3pp YoY acceleration
Adjusted EPS$0.86 (83% YoY)$0.91 (65% YoY)+$0.05 sequential but YoY growth decelerating
Non-IFRS Operating Margin6.2%6.3%+10 bps sequential expansion
CCS Segment Revenue$1.44B (38% YoY)$1.62B (51% YoY)+13pp YoY acceleration
CCS Segment Margin7.0%7.2%+20 bps sequential improvement
ATS Segment Revenue$768M (-3% YoY)$768M (-11% YoY)Flat sequential but deteriorating YoY
ATS Segment Margin4.7%4.6%-10 bps sequential compression
HPS Revenue$519M (40% YoY)$686M (94% YoY)+54pp YoY acceleration, now 29% of total revenue
Enterprise Revenue Growth72% YoY37% YoY-35pp deceleration despite AI compute strength
Communications Revenue Growth17% YoY64% YoY+47pp massive acceleration

Accountability tracked

8 new promises made5 narrative shifts flagged7 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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