Mr. Rob Mionis reports

CELESTICA ANNOUNCES SECOND QUARTER 2023 FINANCIAL RESULTS

Celestica Inc. has released financial results for the quarter ended June 30, 2023. (All amounts are in U.S. dollars. Per-share information is based on diluted shares outstanding unless otherwise noted.)

"Celestica delivered another strong quarter, exceeding the high end of our guidance ranges on revenue and non-[international financial reporting standard] adjusted [earnings per share*], with our non-IFRS operating margin* firmly above 5.0 per cent," said Rob Mionis, president and chief executive officer, Celestica.

"Our business delivered solid results as our team continues to execute on our strategic plan and meet the evolving needs of our customers. Our diversified portfolio is driving revenue growth and margin expansion despite softness in the semi-capital equipment market. We are pleased to raise our 2023 annual financial outlook, and expect our strong performance to continue into 2024 as all of our markets are poised for growth."

Second quarter 2023 highlights:

• Key measures:
  • Revenue: $1.94-billion, increased 13 per cent compared with $1.72-billion for the second quarter of 2022;
  • Non-IFRS operating margin*: 5.5 per cent, compared with 4.8 per cent for Q2 2022;
  • ATS segment revenue: increased 24 per cent compared with Q2 2022; ATS segment margin was 4.8 per cent, compared with 4.5 per cent for Q2 2022;
  • CCS segment revenue: increased 5 per cent compared with Q2 2022; CCS segment margin was 6.0 per cent, compared with 5.0 per cent for Q2 2022;
  • Adjusted earnings per share (non-IFRS)*: 55 cents, compared with 44 cents for Q2 2022;
  • Adjusted return on invested capital (non-IFRS)*: 20.0 per cent, compared with 16.2 per cent for Q2 2022;
  • Adjusted free cash flow (non-IFRS)*: $66.8-million, compared with $43.3-million for Q2 2022;
• Most directly comparable IFRS measures to non-IFRS measures above:
  • Earnings from operations as a percentage of revenue: 4.5 per cent, compared with 3.7 per cent for Q2 2022;
  • EPS: 46 cents, compared with 29 cents for Q2 2022;
  • Return on invested capital: 16.5 per cent, compared with 12.3 per cent for Q2 2022;
  • Cash provided by operations: $130.2-million, compared with $86.9-million for Q2 2022;
  • Repurchased 1.4 million subordinate voting shares for cancellation for $15.0-million under its normal course issuer bid.

Celestica has two operating and reportable segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS). Its ATS segment consists of its ATS end market and is composed of its aerospace and defence (A&D), industrial, healthtech, and capital equipment businesses. Its CCS segment consists of its 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 3 to its June 30, 2023, unaudited interim condensed consolidated financial statements for further detail.

* Non-international financial reporting standard measures (including ratios based on non-IFRS measures) do not have any standardized meaning prescribed by IFRS and therefore may not be comparable with similar financial measures presented by other public companies that report under IFRS or U.S. generally accepted accounting principle. See Schedule 1 for, among other items, non-IFRS measures included in this press release, their definitions, uses and a reconciliation of historical non-IFRS measures to the most directly comparable IFRS measures. Schedule 1 also includes a description of modifications to: (i) the IFRS measure on which the measure it refers to as IFRS ROIC is based (commencing in third quarter 2022); and (ii) the calculation of certain non-IFRS measures resulting from: (x) a recently applicable exclusion related to its total return swap (commencing in the first quarter of 2023); and (y) the addition of certain costs to other charges (commencing in Q2 2023), substantially all of which for Q2 2023 consisted of secondary offering costs (defined therein). Prior-period reconciliations and calculations with respect to non-IFRS ROIC reflect the current presentation. The most directly comparable IFRS measures to non-IFRS operating margin, non-IFRS adjusted EPS, non-IFRS adjusted ROIC and non-IFRS adjusted free cash flow are earnings from operations as a percentage of revenue, EPS, IFRS ROIC and cash provided by operations, respectively.

For third quarter 2023, it expects a negative 17-cent- to 23-cent-per-share (pretax) 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 19 per cent (which does not account for foreign exchange impacts or unanticipated tax settlements).

2023 outlook raised

Based on its strong performance in Q2 2023 and its current and expected levels of demand, its 2023 outlook currently consists of:

• Revenue of at least $7.85-billion (its previous outlook was at least $7.6-billion);
• Non-IFRS operating margin of 5.5 per cent (our previous outlook was between 5.0 per cent to 5.5 per cent);
• Non-IFRS adjusted EPS of $2.25 (its previous outlook was between $2 and $2.05);
• Non-IFRS adjusted free cash flow of $125-million.

Achievement of its current 2023 revenue and non-IFRS adjusted EPS* outlook would represent an at-least-8-per-cent revenue growth rate and an 18-per-cent non-IFRS adjusted EPS growth rate from 2022.

2024 outlook

As the company looks forward to 2024, it expects revenue growth across each of its businesses, supported by anticipated strong secular tailwinds and new program wins. It believes that this growth, with continuing margin strength, will lead to non-IFRS adjusted EPS growth of 10 per cent, or more in 2024, relative to its 2023 outlook.

Secondary offering

On June 5, 2023, the company and Onex Corp., its controlling shareholder, entered into an underwriting agreement with RBC Capital Markets LLC, relating to an underwritten secondary public offering by Onex of 12 million SVS, approximately 11.8 million of which were issued upon conversion of an equivalent number of its multiple voting shares, which closed on June 8, 2023. The underwriting agreement contains customary provisions for agreements of this type. The company did not sell any SVS in, and did not receive any proceeds from, the secondary offering. In connection with the secondary offering, it agreed to indemnify the underwriter and Onex against certain claims, including certain claims under applicable U.S. and Canadian securities laws. The company agreed to pay approximately $950,000 of the aggregate fees and expenses of the secondary offering. Onex remains its controlling shareholder.

Credit facility amendment

On June 14, 2023, it amended its credit facility to replace London interbank offered rate with the term secured overnight financing rate plus 0.1 per cent. Such amendment did not have a significant impact on its Q2 2023 interim financial statements.

Q2 2023 webcast

Management will host its Q2 2023 results conference call on July 27, 2023, at 8 a.m. Eastern Daylight Time. The webcast will be available at the Celestica website.

About Celestica Inc.

Celestica enables the world's best brands. Through its recognized customer-centric approach, it partners with leading companies in aerospace and defence, communications, enterprise, healthtech, industrial, and capital equipment to deliver solutions for their most complex challenges. As a leader in design, manufacturing, hardware platform and supply chain solutions, Celestica brings global expertise and insight at every stage of product development -- from the drawing board to full-scale production and aftermarket services. With talented teams across North America, Europe and Asia, it imagines, develops and delivers a better future with its customers.

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