Q4 2021 Celestica Inc Earnings Call

Speaker 5: Good morning. My name is Julianne and I will be your conference operator.

Good morning, My name is Julian and I will be your conference operator today at this.

Speaker 5: At this time, I would like to welcome everyone to Celestica's fourth quarter 2021 earnings conference call.

I would like to welcome everyone to the West Coast fourth quarter 2021 earnings conference call.

Speaker 5: All lines have been placed on mute to prevent any background noise. After the speaker's presentation there will be a question and answer session.

All lines have been placed on mute to prevent any background noise. After the speaker's presentation there'll be a question and answer session. If.

Speaker 5: If you'd like to ask a question at this time, please press star followed by the number one on your telephone keypad.

If you'd like to ask a question at this time. Please press star followed by the number one on your telephone keypad.

Speaker 5: If you have any difficulties hearing the conference, please press star zero. Thank you. Craig Oberg, Vice President of Investor Relations and Corporate Development, you may begin your conference.

If you have any difficulties hearing the Kaufmann Please press star zero.

Craig Oberg, Vice President of Investor Relations and corporate development you may be.

And your conference.

Speaker 6: Good morning, and thank you for joining us on Sileska's fourth quarter 2021 earnings conference call. On the call today are Rob Mayones, President and Chief Executive Officer, and Mandeep Chawla, Chief Financial Officer.

Good morning, and thank you for joining us on Velasquez fourth quarter 2021 earnings conference call on the call today are Rob My honest, President and Chief Executive Officer.

<unk> Chawla Chief Financial Officer.

Speaker 6: As a reminder, during this call we will make forward-looking statements within the meetings of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian Security Center.

As a reminder, during this call we will make forward looking statements within the meetings of the U S. Private Securities Litigation Reform Act of 1995 and applicable Canadian Securities laws.

Speaker 6: Such forward-looking statements are based on management's current expectations, forecasts, and assumptions, which are subject to risks, uncertainties, and other factors that could cause actual outcomes and results to differ materially from conclusions, forecasts, or projections expressed in such statements.

Such forward looking statements are based on management's current expectations forecasts and assumptions, which are subject to risks uncertainties and other factors that could cause actual outcomes and results to differ materially from conclusions forecasts or projections expressed in such statements.

Speaker 6: for identification and discussion of such factors and assumptions, as well as further information concerning forward-looking statements.

For identification and discussion of such factors and assumptions as well as further information concerning forward looking statements.

Speaker 6: Please refer to yesterday's press release, including the cautionary note regarding forward-looking statements therein, our most recent annual report on Form 20-F, and other public filings, which can be accessed at scc.gov and CDAR.gov.

Please refer to yesterday's press release, including the cautionary note regarding forward looking statements during our most recent annual report on form 20-F.

And other public filings, which can be accessed at <unk> dot Gov, and SEDAR Dot com.

Speaker 6: We assume no obligation to update any forward-looking statement except as required by law.

We assume no obligation to update any forward looking statements, except as required by law.

Speaker 6: In addition, during this call, we will refer to various non-IFRS financial measures, including operating earnings, operating margin, adjusted gross margin, adjusted return on invested capital or adjusted ROIC, free cash flow, gross debt to non-IFRS trailing 12-month adjusted EBITDA leverage ratio, adjusted net earnings, adjusted EPS, adjusted SG&A, lifecycle solutions revenue, and adjusted effective tax rate.

In addition, during this call we will refer to various non <unk> financial measures, including operating earnings operating margin adjusted gross margin adjusted return on invested capital or adjusted ROIC.

Free cash flow gross debt to non <unk> trailing 12 month adjusted EBITDA leverage ratio.

Net earnings adjusted EPS, adjusted SG&A lifecycle solutions revenue and adjusted effective tax rate.

Speaker 6: Listeners should be cautioned that references to any of the foregoing measures during this call denote non-IFRS financial measures, whether or not specifically designated as such.

Listeners should be cautioned that references to any of the foregoing measures. During this call denote non <unk> financial measures, whether or not specifically designated as such these.

Speaker 6: These non-IFRS financial measures do not have any standardized meanings prescribed by IFRS and may not be comparable to similar measures presented by other public companies that use IFRS or who report under US GAAP and use non-GAAP financial measures to describe similar operating metrics.

These non <unk> financial measures do not have any standardized meaning prescribed by EIOPA Rs and may not be comparable to similar measures presented by other public companies that use <unk> or who report under U S. GAAP and use non-GAAP financial measures to describe similar operating metrics.

Speaker 6: We refer you to yesterday's press release and our Q4 2021 earnings presentation, which are available at celeskia.com under the investor relations tab. For more information about these and certain other non-IFRS financial measures, including a reconciliation of historical non-IFRS financial measures, to the most directly comparable IFRS financial measures from our financial statements, please visit the website.

We refer you to yesterday's press release, and our Q4 2021 earnings presentation, which are available at Philadelphia Dot Com under the Investor Relations tab for more information about these and certain other non <unk> financial measures, including a reconciliation of historical non <unk> financial measures to the most directly comparable.

<unk> financial measures from our financial statements.

Speaker 6: Unless otherwise specified, all references to dollars on this call are to U.S. dollars and per share information is based on diluted shares outstanding. Let me now turn to the next slide.

Unless otherwise specified all references to dollars on this call are to U S dollars and per share information is based on diluted shares outstanding.

Let me now turn the call over to Rob.

Speaker 7: Thank you, Craig. Good morning, everyone, and thank you for joining us on today's conference call. In the fourth quarter, Celstic achieved several important milestones, capping a challenging but successful year.

Thank you Craig good morning, everyone and thank you for joining us on today's conference call in the fourth quarter achieved several important milestones capping a challenging but successful year.

Speaker 7: A company closed the acquisition of PCI, our first acquisition in three years, which has been immediately accretive to our financial performance and accelerated our portfolio diversification efforts.

Our company closed the acquisition of PCI, our first acquisition in three years.

It has been immediately accretive to our financial performance.

Celebrated a portfolio diversification efforts.

Speaker 7: We achieved a return to top-line year-over-year revenue growth in the fourth quarter after successfully disengaging with Cisco.

<unk>, a return to topline year over year revenue growth in the fourth quarter after successfully disengaging with Cisco.

Speaker 7: And we recorded a highest non-IFRS operating margin ever for the second straight quarter in a row.

And we recorded our highest non <unk> operating margin ever for the second straight quarter in a row.

Speaker 7: In spite of a dynamic macro environment, Celestica continues to execute well on our key objectives while advancing our long-term strategy.

In spite of a dynamic macro environment, firstly continues to execute well.

On our key objectives.

Our long term strategy.

Speaker 7: Our fourth quarter revenue came in at $1.51 billion, slightly higher than the midpoint of our guidance.

Our fourth quarter revenue came in at 151 billion slightly higher than the midpoint of our guidance.

Speaker 7: While non-IFRS adjusted EPS of $0.44, our highest quarterly adjusted EPS in more than 20 years came in well above the high end of our guidance range.

Well non ifr rais adjusted EPS of <unk> 44 cents our.

Our highest quarterly adjusted EPS and more than 20 years came in well above the high end of our guidance range.

Speaker 7: a non-IFRS operating margin of 4.9%, with another high watermark for fluff.

Our non <unk> operating margin of four 9%.

So it's another high watermark for Celestica.

Speaker 7: This represented our eighth consecutive quarter of year-over-year operating margin improvement, and was higher than the guidance midpoint of four and a half percent.

This represented our eighth consecutive quarter of year over year operating margin improvement.

It was higher than the guidance midpoint of four 5%.

Speaker 7: With our solid progress on margin expansion over the last two years, we believe we are in a strong position to maintain our operating margin in our target range of 4 to 5% for 2022.

With our solid progress on margin expansion over the last two years. We believe we are in a strong position to maintain our operating margin in our target range of 4% to 5% for 2022.

Speaker 7: 2021 was a great year for our CCS segment, as our hardware platform solutions business, or HPS, achieved a record $1.15 billion in sales.

2021 was a great year for our Ccs segment as our hardware platform solutions business or HTS achieved a record 1.15 billion in sales.

Speaker 7: which represented growth of 34% compared to 2020, as we continue to gain share and grow faster in the market.

Which represented growth of 34% compared to 2020.

As we continue to gain share and grow faster than the market.

Speaker 7: Despite the challenges presented by the constrained global supply chain environment, demand from service providers in our HPS business is expected to remain a driver of growth in CCS for 2022.

Despite the challenges presented by the constrained global supply chain environment demand from service providers and our HTS business is expected to remain a driver of growth at Ccs for 2022.

Speaker 7: Our ETF segments saw strong revenue growth in 2021, led by our capital investment business, which achieved sales of approximately $750 million. We also experienced a return to growth in the fourth quarter of 2021 in our industrial business.

Our Ats segment saw strong revenue growth in 2021 led by our capital business, which achieved sales of approximately $750 million. We also experienced a return to growth in the fourth quarter of 2021, and our industrial business.

Speaker 7: Looking ahead to 2022, we expect revenue growth in ATS of 10% or more. Our outlook is supported by continued strength in our capital equipment business.

Looking ahead to 2022, we expect revenue growth in Acs of 10% or more our outlook is supported by continued strength in our capital equipment business.

Speaker 7: Incremental growth in our industrial business, further accelerated by the addition of PCI, and continuing commercial aerospace recovery, aided by new program ramps in defense.

Incremental growth in our industrial business further accelerated by the addition of PCI and continuing commercial aerospace recovery aided by new program ramps in defense.

Speaker 7: While 2022 is by no means anticipated to be without its share of challenges.

While 2022 is by no means anticipated to be without its share of challenges.

Speaker 7: We expect to build on the positive momentum we have established in 2021 and lead the company to another strong year of financial performance by executing on our strategic and operational objectives.

We expect to build on the positive momentum we have established in 2021 and lead the company to another strong year of financial performance by executing on our strategic and operational objectives.

Speaker 7: Before I offer some additional detail on our business outlook, I would like to turn the call over to Mandeep, who will provide you with additional color on our fourth quarter financial performance, as well as our guidance for the first quarter and our outlook for 2022. Mandeep, over to you. Thank you, Rob.

Before I offer some additional detail on our business outlook I would like to turn the call over to Mandy who will provide you with additional color on our fourth quarter financial performance as well as our guidance for the first quarter and our outlook for 2022.

Sandeep over to you.

Thank you, Rob and good morning, everyone.

Speaker 6: Fourth quarter 2021 revenue came in at $1.51 billion in line with the midpoint of our guidance.

Fourth quarter 2021 revenue came in at $1 five 1 billion in line with the midpoint of our guidance range.

New was up 9% year over year and up 3% sequentially.

Speaker 6: Our return to year-to-year growth was driven by double-digit organic revenue growth in our ATS segment, further accelerated by our acquisition of PCI.

Turning to year to year growth was driven by double digit organic revenue growth in our Ats segment further accelerated by our acquisition of PCI.

Speaker 6: We delivered non-IFRS operating margin of 4.9%, 40 basis points ahead of the midpoint of our non-IFRS adjusted EPS guidance range, driven by strong performance in both types.

We delivered non <unk> operating margin of four 9% 40 basis points ahead of the midpoint of our adjusted EPS guidance range driven by strong performance in both segments.

Speaker 6: non-IFRS operating margin was up 130 basis points year-over-year and up 70 basis points sequentially.

<unk> operating margin was up 130 basis points year over year, and up 70 basis points sequentially.

Speaker 6: Non-IFRS adjusted earnings per share were 44 cents above the high end of our guidance range of 35 to 41.

Non <unk> adjusted earnings per share were <unk> 44.

Above the high end of our guidance range of 35 to <unk> 41.

Speaker 6: This was up $0.18 a year and up $0.09 sequentially.

This was up 18% year over year and up nicely sequentially.

In late 2021, we experienced a brief outage that temporarily impacted our operations based on the nature of the incident did not have a material impact on our financial results in Q4 2021.

Operations are functioning at normal capacity and we do not expect any material impact to our Q1 2022 financial results from this brief outage.

Speaker 6: ATS revenue is up 23% year-over-year, in line with our expectations of a low 20% year-over-year increase. Sequentially, ATS revenues will be up 33% year-over-year.

Ats revenue was up 23% year over year in line with our expectation of a low 20 percentage year over year increase.

Sequentially Ats revenue was up 8%.

Speaker 6: The year-over-year revenue growth in ATS was driven by continuing strength in capital equipment, organic growth in our base industrial business, and two months of contribution from the PCI Acquisition.

The year over year revenue growth in ETF was driven by continuing strength in capital equipment organic growth in our base industrial business and two months of contribution from the PCI acquisition.

Speaker 6: We are pleased that ATS has achieved 10% or more of year-over-year revenue growth for the past three quarters.

We are pleased that Acs has achieved 10% or more of year over year revenue growth for the past three quarters.

Speaker 6: CCS segment revenue was up 1% to year-over-year and flat sequentially.

Ccs segment revenue was up 1% year over year and flat sequentially.

Speaker 6: Year over year, the Cisco disengagement offsets the 5% growth we experience from our non-Cisco portfolio, driven by strengths from service provider customers.

The year over year, the Cisco disengagement offset the 5% growth we experienced from our non physical portfolio driven by the transfer of service provider customers.

Speaker 6: Note, going forward, the disengagement from Cisco will no longer impact our comparison.

Going forward, the disengagement Francisco will no longer impact our comparative.

Speaker 6: Communications revenue increased by 1% year-over-year, in line with our expectation of a low single-digit percentage increase, and was up 4% sequentially.

Communications revenue increased by 1% year over year in line with our expectation of a low single digit percentage increase and was up 4% sequentially.

Speaker 6: Year over year, results were driven by growth in our HPS business, which was largely offset by the Cisco disengagement.

Year over year results were driven by growth in our <unk> business, which was largely offset by the Cisco disengagement.

Speaker 6: Enterprise revenue in the quarter was flat year-over-year, better than our expectation of a low single-digit percentage decrease. Sequentially, enterprise revenue

Enterprise revenue in the quarter was flat year over year better than our expectation of a low single digit percentage decrease sequentially enterprise revenue was down 7%.

Speaker 6: Our HPS business delivered revenue of $350 million in the fourth quarter, up 66% year-over-year, led by demand strength and new program ramps with service providers, supported by continuing data center growth.

Our hps business delivered revenue of $350 million in the fourth quarter up 66% year over year led by demand strength and new program ramps with service providers supported by continuing data center growth.

Turning to segment margins.

Speaker 6: ATS delivered a segment margin of 5.6 percent in the fourth quarter, up 170 basis points year-over-year, and up 130 basis points sequentially.

ACS delivered a segment margin of five 6% in the fourth quarter up 170 basis points year over year and up 130 basis points sequentially.

Speaker 6: we are pleased to have delivered on our goal of having our ATS segment margin enter our target margin range of 5% to 6% in Q4 2021. This also represented our eighth straight quarter of sequential margin expansion in our ATS segment.

Pleased to have delivered on our goal of having our Ats segment margin enter our target margin range of 5% to 6% in Q4 2021.

It's also represented our eighth straight quarter of sequential margin expansion in our Ats segment.

Speaker 6: CCS segment margin of 4.4%, the highest since 2015, was up 100 basis points year-over-year and up 30 basis points sequentially.

Ccs segment margin of four 4% the highest since 2015 was up 100 basis points year over year and up 30 basis points sequentially.

Speaker 6: with a year-over-year margin increase, driven by continuing strength in our HPS business.

The year over year margin increase was driven by continuing strength in our HPA business.

Moving on to some additional financial metrics.

Speaker 6: IFRS net earnings for the quarter were $31.9 million or $0.26 per share compared to net earnings of $20.1 million or $0.16 per share in Q4 2020 and net earnings of $35.2 million or $0.28 per share last quarter.

<unk> net earnings for the quarter were $31 9 million or <unk> 26 per share compared to net earnings of $20 1 million or <unk> 16 per share in Q4, 2020, and net earnings were $35 2 million or <unk> 28 per share last quarter.

Speaker 6: adjusted gross margin was 9.6%, up 120 basis points year-over-year, and up 80 basis points sequentially.

Adjusted gross margin was nine 6% up 120 basis points year over year, and up 80 basis points sequentially.

Speaker 6: The year-over-year improvement is driven by growth in our HPS business and our ATS segment as well as lower variables.

Year over year improvement was driven by growth in our HTS business and our Ats segment as well as lower variable spend.

Speaker 6: Non-IFRS operating earnings were $74.3 million, up $24.3 million year-over-year, and up $13.0 million sequentially.

<unk> operating earnings were $74 3 million up $24 $3 million year over year and up 30.

$14 1 million sequentially.

Speaker 6: Our non-IFRS Adjusted Effective Tax Rate for the fourth quarter was 16%, an improvement of 3% year-over-year and sequentially.

Our non <unk> adjusted effective tax rate for the fourth quarter was 16% an improvement of 3% year over year and sequentially.

Speaker 6: For the fourth quarter, non-IFRS adjusted net earnings were $55.2 million, compared to $33.3 million for the prior year period and $43.4 million in the last quarter.

For the fourth quarter non <unk> adjusted net earnings were $55 2 million compared to $33 3 million for the prior year period, and $43 $4 million in the last quarter.

Speaker 6: Fourth quarter non-IFRS adjusted ROIC of 16.6% was up 4.2% year-over-year and up 1.4% sequentially.

Fourth quarter non <unk> adjusted ROIC.

16, 6% was up four 2% year over year and up one 4% sequentially.

Moving on to working capital.

Speaker 6: Our inventory at the end of the quarter was $1.7 billion, up $606 million year-over-year, and up $291 million sequentially.

Our inventory at the end of the quarter was $1 7 billion.

$606 million year over year and up $291 million sequentially.

Speaker 6: We continue to maintain higher inventory levels to support growth across lifecycle solutions while also increasing strategic inventory purchases in light of the current supply chain environment.

Continue to maintained higher inventory levels to support growth across lifecycle solutions, while also increasing strategic inventory purchases in light of the current supply chain environment. The.

Speaker 6: The increase in inventory was also driven, in part, by the PCI acquisition.

The increase in inventory was also driven in part by the PCI acquisition.

Speaker 6: To offset the working capital impact of higher inventory, we continue to work with our customers to obtain higher cash deposits when appropriate.

To offset the working capital impact of higher inventory, we continue to work with our customers to obtain higher cash deposits when appropriate.

Speaker 6: Inventory turns in the fourth quarter were 3.5 turns, down from 4.4 turns in the prior year period, and down from 4.1 turns last quarter.

Inventory turns in the fourth quarter with three five turns down from four four turns in the prior year period and down from $4, one churn last quarter.

Speaker 6: Capital expenditures for the fourth quarter were $14.4 million, or approximately 1% of revenue. Capital expenditures for 2021 totaled $52 million.

Capital expenditures for the fourth quarter were $14 4 million or approximately 1% of revenue capital expenditures for 2021 totaled $52 million.

Speaker 6: Non-IFRS free cash flow was $36 million in the fourth quarter, compared to $19 million in the prior year period and $27 million last quarter. This is our 12th consecutive quarter of delivering positive non-IFRS free cash flow.

Non <unk> free cash flow was $36 million in the fourth quarter compared to $19 million in the prior year period and $27 million last quarter. This is our 12 consecutive quarter of delivering positive non <unk> free cash flow.

Speaker 6: Our free cash flow generation in 2021 was $115 million, delivering on our target of at least $100 million in annual non-IFRS free cash.

Our free cash flow generation in 2021 was $115 million Dilip.

Delivering on our target of at least $100 million in annual non <unk>.

Free cash flow.

Speaker 6: Cash cycle days were 75 in the fourth quarter, up two days year-over-year, and up three days sequentially.

Cash cycle days were 75% in the fourth quarter up two days year over year and up three days sequentially cash.

Speaker 6: Cash cycle days increased on a year-over-year basis, primarily due to higher inventory.

Cash cycle days increased on a year over year basis, primarily due to higher inventory.

Moving on to some additional key metrics our.

Speaker 6: Our cash balance at the end of the fourth quarter was $394 million, down $70 million year-over-year, and down $83 million sequentially.

Our cash balance at the end of the fourth quarter with $394 million.

Around $70 million year over year and down $83 million sequentially.

Speaker 6: Combined with availability under our recently expanded revolver, we continue to believe that our current liquidity of nearly $1 billion is sufficient to meet our anticipated business needs.

Combined with availability under our recently expanded revolver, we continue to believe that our current liquidity of nearly $1 billion.

Is sufficient to meet our anticipated business needs.

Speaker 6: Following the closing of the PCI acquisition in November , we ended the quarter with gross debt of $660 million, up $220 million from the previous quarter, leaving us with a net debt position of $266 million.

Following the closing of the PCI acquisition in November we ended the quarter with gross debt of $660 million up $220 million from the previous quarter, leaving us with a net debt position of $266 million.

Speaker 6: Our fourth quarter gross debt to non-IFRS trailing 12-month adjusted EBITDA leverage ratio was 2.0 times, up 0.6 turns sequentially, and up 0.4 turns from the same quarter last year.

Our fourth quarter gross debt to non <unk> trailing 12 month adjusted EBITDA leverage ratio was 2.0 title.

<unk> six turns sequentially and <unk> four turns from the same quarter last year.

Speaker 6: As December 31st, 2021, we were complying with all financial covenants under our credit agreement.

At December 31, 2021, we were compliant with all financial covenants under our credit agreements.

Speaker 6: We ended the quarter with 124.7 million shares of standing, a reduction of approximately 3% from the prior year period.

We ended the quarter with $124 7 million shares outstanding a reduction of approximately 3% from the prior year period.

Speaker 6: In early December , the TSX accepted our notice to launch a new normal course issuer bid, allowing us to purchase up to 10% of the public flow, or up to approximately 9 million shares through December of 2022.

In early December the <unk> accepted our notice to launch a new normal course, issuer bid, allowing us to purchase up to 10% of the public float or up to approximately 9 million shares through December of 2022.

Yeah.

Speaker 6: Now turning to our guidance for the first quarter of 2022. We are projecting first quarter revenue to be in the range of $1.4 billion to $1.55 billion. At the midpoint of this range, revenue would be up 19% year-over-year and down 2% sequentially.

Now turning to our guidance for the first quarter of 2022.

We are projecting first quarter revenue to be in the range of $1 4 billion to $1 55 billion.

At the midpoint of this range revenue would be up 19% year over year and down 2% sequentially.

Speaker 6: First quarter non-IFRS adjusted earnings per share are expected to range from 31 cents to 37 cents per share.

First quarter non <unk> adjusted earnings per share are expected to range from 31 to 37 cents per share.

Speaker 6: At the midpoint of our revenue and non-IFRS adjusted EPS guidance ranges, non-IFRS operating margin would be approximately 4.2%, an increase of 70 basis points over the same period last year, and a decrease of 70 basis points sequentially.

At the midpoint of our revenue and non <unk> adjusted EPS guidance ranges non <unk> operating margin would be approximately four 2% an increase of 70 basis points over the same period last year and a decrease of 70 basis points sequentially.

Speaker 6: Non-IFRS adjusted SG&E expense for the first quarter is expected to be in the range of $57 to $59 million.

Non <unk> adjusted SG&A expense for the first quarter is expected to be in the range of $57 million to $59 million.

Speaker 6: We anticipate our non-IFRS Adjusted Affected Tax Rate to be approximately 18%, excluding any impacts from taxable foreign exchange.

We anticipate our non <unk> adjusted effective tax rate to be approximately 18%, excluding any impacts from taxable foreign exchange.

Turning to our end market outlook for the first quarter of 2022.

Speaker 6: In our ATSN market, we anticipate revenue to be up in the low 20s percentage range year over year, driven by continued demand strength in capital equipment, a continuing recovery in A&D, as well as the first full quarter of contribution from PCI.

And our Ats end market, we anticipate revenue to be up in the low 20 percentage range year over year, driven by continued demand strength in capital equipment, a continuing recovery in A&D as well as the first full quarter of contribution from PCI.

Speaker 6: In CCS, we anticipate our communications and market revenue to be up in the high teens percentage range year-over-year, driven by strong demand from service provider customers supported by our HPS office.

In Ccs, we anticipate our communications end market revenue to be up in the high teens percentage range year over year, driven by strong demand from service provider customers supported by our HPE offerings.

Speaker 6: In our enterprise end market, we anticipate revenue to increase in the mid-teens percentage range year over year, supported by Sprint and Storage.

In our enterprise end market, we anticipate revenue to increase in the mid teens percentage range year over year supported by strength in storage demand.

Speaker 6: Finally, we would like to reiterate our outlook for 2022, which we discussed last quarter. We expect revenues to be at least $6.3 billion, with life cycle solutions growing at least 10% organically, and our non-IFRS operating margin between 4% and 5%.

Finally, we would like to reiterate our outlook for 2022, which we discussed last quarter, we expect revenue to be at least $6 3 billion with lifecycle solutions growing at least 10% organically and our non <unk> operating margin between 4% and 5%.

Speaker 6: I'll now turn the call back over to Rob for additional color on our end market and our overall business outlook.

I'll now turn the call back over to Rob for additional color on our end markets and our overall business outlook.

Speaker 7: Thank you, Mandeep. As we take stock of our performance for the past fiscal year, we are pleased with our financial performance and the progress we have made towards our long-term objective.

Thank you Mandy as we take stock of our performance for the past fiscal year. We are pleased with our financial performance and the progress we have made towards our long term objectives.

Speaker 7: A return to year-over-year revenue growth, record operating margin, and near-record adjusted EPS demonstrates that we have been effectively executing against our strategy, and our transformation is complete.

A return to year over year revenue growth record operating margin and near record adjusted EPS demonstrates that we have been effectively executing against our strategy and our transformation is complete.

Speaker 7: We are also pleased that our shareholders were rewarded in 2021 as our share price, which outperformed the primary Canadian and US indices, for first of all showing performance.

We are also pleased that our shareholders were rewarded in 2021, as our share price, which outperformed the primary Canadian and U S indices.

Our strong performance.

Speaker 7: However, we have no intention of resting on our laurels, and we are constantly striving for further improvement.

However, we have no intention of resting on our laurels and we are constantly striving for further improvement.

Speaker 7: Our focus is now squarely set on meeting our performance expectations for 2022.

Our focus is now squarely set on meeting our performance expectations for 2022.

Speaker 7: which includes solid top-line growth in combination with anticipated record non-IFRS operating margins for the year.

Which includes solid topline growth in combination with anticipated record non <unk> operating margins for the year.

Speaker 7: which, if achieved, will lead to the highest-ever annual non-IFRS-adjusted EPA.

Which if achieved will lead to the highest ever annual non <unk> adjusted EPS.

Speaker 7: Our efforts to diversify our commercial portfolio remain our centerpiece of a long-term strategy, and we are pleased with the progress we are making.

Our efforts to diversify our commercial portfolio remained a centerpiece of our long term strategy and we are pleased with the progress we are making.

Speaker 7: Our Lifecycle Solutions business saw another quarter of solid revenue growth up 36% year over year in the fourth quarter, recording nearly $1 billion in sales, and accounted for a record 65% of total revenue during the quarter.

Our lifecycle solutions business saw another quarter of solid revenue growth up 36% year over year in the fourth quarter recording nearly $1 billion in sales and accounted for a record 65% of total revenue during the quarter.

Speaker 7: for the full year 2021, lifecycle solutions accounted for 61% of total sales compared to just 39% in 2017. Looking forward to 2022.

For the full year 2021 lifecycle solutions accounted for 61% of total sales compared to just 39% in 2017 looks.

Looking forward to 2022.

Speaker 7: we reiterate our expectation for lifecycle solutions revenue growth of at least 10%.

We reiterate our expectation for lifecycle solutions revenue growth of at least 10%.

Speaker 7: As I mentioned in my opening remarks, the year ahead will not be without its share of challenges. The global supply chain environment continues to be the most challenging we have dealt with in recent memories.

As I mentioned in my opening remarks, the year ahead will not be without its share of challenges the global supply chain environment continues to be the most challenging we have dealt with in recent memory.

Speaker 7: And the new viral variants leading to further outbreaks of COVID-19 may further exacerbate the issue.

And the new viral variants, leading to further outbreaks of COVID-19 may further exacerbate positions.

Speaker 7: The fact that these hurdles have not stood in the way of us meeting our financial performance objectives is a testament to the resourcefulness, effort, and commitment of our entire global team.

The fact that these hurdles have not stood in the way of US meeting our financial performance objectives is a testament to the resourcefulness effort and commitment of our entire global team.

Speaker 7: However, we believe that the component shortages do gate our true growth potential as we believe the demand backdrop with our customers support materially higher revenues in the absence of these challenges.

However, we believe that the component shortages do gate, our true growth potential as we believe the demand backdrop with our customers support materially higher revenues and the absence of these challenges.

Speaker 7: Our first quarter and full year 2022 outlook have accounted for these macro conditions to the best of our ability, and we expect the supply chain environment will remain constrained for the medium term.

Our first quarter and full year 2022 outlook have accounted for these macro conditions to the best of our ability.

And we expect the supply chain environment will remain constrained for the medium term.

Speaker 7: Now turning to the outlet for our segments, in our ATS segment, we achieved two important goals in 2021.

Now turning to the outlook for our segments and our Ats segment, we achieved two important goals in 2021.

Speaker 7: First, we realize a long-term annual revenue growth target ending the year with 11% growth compared to 2020.

First we realized a long term annual revenue growth target ending the year with 11% growth compared to 2020.

Speaker 7: Second, we achieved our goal of reentering our ETF segment target margin range of 5% to 6% with a strong fourth quarter.

Second we achieved our goal of re entering our Ats segment target margin range of 5% to 6%.

With a strong fourth quarter.

Speaker 7: we continue to target a long-term annual revenue growth rate of 10% in our ATS segment. For 2022...

We continue to target a long term annual revenue growth rate of 10% in our Ats segment.

For 2022.

As a result of organic growth.

Speaker 7: On the addition of PCI, we expect ATS segment revenue of approximately $2.8 billion and segment margin of approximately 5.5%.

And the addition of PCI, we expect ACS segment revenue of approximately $2 8 billion.

And segment margin of approximately five 5%.

Speaker 7: If achieved, this would represent approximately 20% revenue growth compared to 2021, and approximately 100 bps of year-to-year segment margin expense.

If achieved this would represent approximately 20% revenue growth compared to 2021, and approximately 100 bps of year over year segment margin expansion.

Speaker 7: Our capital equipment business continues to exhibit exceptional strength.

Our capital equipment business continues to exhibit exceptional strengths.

Speaker 7: driven by market share gains, new winds, and a robust demand backdrop, which we expect to continue through all of 2022. Our outsized growth is supported by a global footprint, which we believe is tailor-made for success in this market, including our presence in South Korea, which we are leveraging to capitalize on significant semicap growth opportunities in that geography.

Driven by market share gains new wins, and a robust demand backdrop, which we expect to continue through all of 2022, our outsized growth is supported by a global footprint.

Which we believe is tailor made for success in this market, including our presence in South Korea, which we are leveraging to capitalize on significant from the cap growth opportunities in that geography.

Speaker 7: Our industrial business is expected to be a key contributor to ATS revenue growth in 2022.

Our industrial business is expected to be a key contributor to Ats revenue growth in 2022.

Speaker 7: Supported by both organic growth in our base industrial business, coupled with the addition of PCI, a number of new program ramps, as well as secular demand tailwinds in several areas, including EV charging, smart metering, factory automation, and telematics, are expected to drive year-to-year gains, which are expected to be accretive to our targeted long-term ATS revenue growth.

Supported by both organic growth in our base industrial business, coupled with the addition of PCI.

A number of new program ramps as well as secular demand tailwind in several areas, including EV charging smart metering.

From the automation and telematics are expected to drive year to year gains, which are expected to be accretive to our targeted long term ats revenue growth rate.

Speaker 7: Demand in our A&E business continues to stabilize, hosting modest year-to-year growth in the fourth quarter.

Demand in our A&D business continues to stabilize posting modest year to year growth in the fourth quarter.

Speaker 7: We expect commercial aerospace demand to experience a modest recovery in 2022 compared to the trough level seen in 2021 as commercial air traffic begins to normalize.

We expect commercial aerospace demand as we experienced a modest recovery in 2022.

Compared to the trough levels seen in 2021.

Commercial air traffic begins to normalize.

Speaker 7: While overall defense spending is expected to remain stable in 2022, Celestica has a number of new program ramps supported by a new facility in Maple Grove, Minnesota, which we opened in July of last year.

While overall defense spending is expected to remain stable in 2022.

<unk> has a number of new program ramps supported by our new facility in Maple Grove, Minnesota, which we opened in July of last year.

Speaker 7: In our health tech business, while we expect to see some softness in early 2022 due to the ramping down of certain COVID-19 related programs, we expect this demand to be replaced by new program ramps throughout the year in surgical, imaging, and patient monitoring equipment markets.

And our health Tech business, while we expect to see some softness in early 2022.

Due to ramping down of certain COVID-19 related programs. We expect this demand to be replaced by new program ramps throughout the year and surgical imaging and patient monitoring equipment markets.

Turning to Ccs.

Speaker 7: Our CCS segment recorded its highest CCS segment margin in the past five years.

Our Ccs segment recorded its highest Ccs segment margin in the past five years.

Speaker 7: with a strong demand from service providers expected to continue supporting HPS growth.

With a strong demand from service providers is expected to continue supporting EPS growth.

Speaker 7: We reiterate our view that CCS will maintain strong segment margin in 2020.

We reiterate our view that Ccs will maintain strong segment margin in 2022.

Speaker 7: The margin outlets for our hardware platform solutions business remain strong, supported by robust demand from our service provider customers.

The margin outlet for our hardware platform solutions business remains strong supported by robust demand from our service provider customers.

Speaker 7: We expect another year of strong growth in 2022, despite the challenges presented by the current supply chain environment.

We expect another year of strong growth in 2022.

The challenges presented by the current supply chain environment.

Speaker 7: We continue to anticipate HPS to deliver a strong growth compared to 2021.

We continue to anticipate Acs delivered strong growth compared to 2021.

Speaker 7: In the communications end market, we anticipate year-to-year growth to continue throughout 2022. Given by strong demand from service provider customers, particularly in our HPS business, though as mentioned, we believe that our growth prospects will remain tempered relative to their potential as a result of component constraints.

In the communications end market, we anticipate year to year growth to continue throughout 2022, driven by strong demand from service provider customers, particularly in our HTS business.

As mentioned, we believe that our growth prospects will remain tempered relative to their.

Potential as a result of component constraints.

Speaker 7: in our enterprise-end market, we anticipate that year-over-year declines in our enterprise business have largely stabilized.

In our enterprise end market.

We anticipate that year over year declines in our enterprise business have largely stabilized.

Speaker 7: We expect for annual revenue to be higher in 2022 compared to 2021.

We expect our annual revenue to be higher in 2022 compared to 2021.

Speaker 7: We continue to operate in an unprecedented environment. As we turn the page on another year, we enter 2022 with a sense of optimism and a confidence that our company is solidly positioned to deal with the challenges ahead and capitalize on the opportunities at hand.

We continue to operate in an unprecedented environment as we turn the page on another year, we enter 2022 with a sense of optimism and the confidence that our company is solidly positioned to deal with the challenges ahead and capitalize on the opportunities at hand.

Speaker 7: Our recent successes in the context of these challenges speak to our ability to execute on our plan and serve to validate our strategic vision.

Our recent successes in the context of these challenges speak to our ability to execute on our plan and serves to validate our strategic vision.

Speaker 7: I'd like to thank our entire global team and commend their efforts during 2021. With your dedication and focus, our company will push ahead once again in 2022 and continue to make that vision a reality.

I'd like to thank our entire global team and commend their efforts during 2021 review our dedication and focus our company will push ahead. Once again in 2022 and continue to make that vision a reality.

Speaker 7: And with that, I would now like to turn the call over to the operator for Q&A.

With that I would now like to turn the call over to the operator for Q&A.

Speaker 5: Thank you. As a reminder to ask a question, please press star followed by the number one on your telephone keypad.

Thank you as a reminder to ask a question. Please press star followed by the number one on your telephone keypad.

Speaker 5: Your first question comes from Thanos Moscapolis from BMO Capital Markets. Please go ahead, your line is open.

Got you.

Your first question comes from Dana's Master Polak from BMO capital markets. Please go ahead. Your line is open.

Speaker 8: Hi, good morning. On the supply chain, ClearLeave had a bigger impact on revenue in Q4 than in Q3. Can you provide some color in terms of how you're thinking about that impact heading into Q1 and through 2022? Are you assuming that it gets stable from here, a bit worse, or what's implicit in your assumption?

Hi, good morning.

On the supply chain.

We've had a bigger impact on revenue in Q4 than in Q3 can you provide some color in terms of how you're thinking about that impact heading into Q1.

Through 2022.

Are you assuming that.

Stable from Europe , a bit worse or what's implicit in your assumptions.

Speaker 7: Hi, good morning, Thanos. This is Rob. Yeah, as we go into Q1, we assume that the impact in Q1 is very similar to Q4.

Hi, Good morning, this is Rob.

Yes, as we go into Q1.

Assuming that the impact in Q1 is very similar to Q4.

Speaker 7: And as we look out for a full year 22, you know, we don't expect any meaningful improvements throughout the year if you just think about what's going on in the macro environment. There's strong OEM growth, the semi-cap capacity that is coming online will probably be late in the year. Inventories are low, lead times are up, pricing is up.

Now as we look out sort of full year 'twenty two.

We don't expect any meaningful improvements throughout the year. If you just think about what's going on in the macro environment.

OEM growth.

Semi cap capacity that is coming online we will probably be.

Late in the year inventories are low lead times of our pricing is up.

Speaker 7: So we've aligned ourselves and assumed that we're not going to see meaningful improvement in supply chain constraints throughout the year.

So we've.

We've aligned ourselves and assume that we're not going to see meaningful improvement in supply chain constraints throughout the year.

Speaker 7: You know, that being said, as you can see, we've been faring fairly well through the environment. It's driven by our strong processes, our strong people. And we're also working closely with our customers, on our customer side, just to add some more color. You know, we're being very transparent with them. And as such, they've opened up the horizons. And in many cases, they've increased cash deposits so we could secure our strategic inventory for that.

Thanks, Ed.

As you can see we've been carrying fairly well through the environment.

Driven by our strong processes are strong people and we're also working closely with our customers.

Our customer side just to add some more color.

We've been very transparent with them and as such they have opened up the horizons and in many cases.

We have increased cash deposits that we could secure strategic inventory for them.

Speaker 7: And on the process side, we've developed a series of new automated tools and in many cases, we actually understand our customers demand better than they do, which allows us to more clearly communicate with our suppliers and get the critical supply that we need.

And on the process side, we've developed a series of new automated tools and in many cases, we actually understand our customers' demand better than they do which allows us to more clearly communicate with a supplier you can get to a critical supply that we need.

Speaker 6: I was just going to add some numbers to what Rob had just mentioned. As you know, for Q1, we are continuing to have a little bit of a wider guidance range, plus or minus $75 million. So we have taken into account material constraints to the best of our ability for the first quarter.

Okay Dan.

Yes.

Sorry go ahead.

Sorry I.

I'm just going to add some numbers to what Robert just mentioned.

As you know for Q1, we are continuing to have a little bit of a wider guidance range plus or minus $75 million. So we have taken into account material constraints to the best of our ability for the first quarter and then when we talk about 2022.

Speaker 6: And then when we talk about 2022, as you know, we're targeting at least $6.3 billion in revenue. Our demand outlook is north of that. And so we've done to the best of our abilities. We've taken into account the supply environment when communicating the $6.3 billion.

We are targeting at least $6 3 billion in revenue our demand outlook is north of that.

And so we have done to the best of our ability to be taken into account the supply environment.

Communicating the $6 3 billion plus.

Speaker 8: Great. You don't disclose backlog, but I have to assume that your backlog is growing and the weighted average of your backlog is probably increasing, setting up your longer-term visibility. Is that fair?

Great.

Don't disclose backlog, but I have to say that.

Yet your backlog is growing and the weighted average of your backlog is probably increasing.

And longer term visibility is that fair.

Speaker 7: Yeah, that is fair. Our customers' backlog is increasing, and sometimes two to three-fold, and as such, our backlog is also increasing to the same extent.

Yes that is.

Our customers are back.

<unk>.

It is increasing.

Sometimes two to three fold and as such our backlog is also increasing to the same extent.

Speaker 8: And then finally, on cash cycle days, obviously, inventory is increasing and drop sending it to some extent with higher deposits. How do you think that dynamic kind of progresses over the coming months?

And then finally on net cash cycle days.

Obviously inventory is increasing and dropped setting it to some extent with higher deposits. How do you think that dynamic kind of progresses over the coming months.

Speaker 6: Yeah, so it's been a tough environment, as you know, this year, but we're pleased that we were able to generate over $100 million in cash in 2021. Despite it, inventory has been growing, but we've been doing that strategically. And then at the same time, working with customers on deposits.

Yes, so it's been a tough environment as you know this year and but we're pleased that we were able to generate over $100 million of cash in 2021. Despite it.

Inventory has been growing but we've been doing that strategically and then at the same time working with customers on deposits as we go into 2022, we expect again the environment is going to remain largely consistent inventory will be elevated for a period of time, but again supported by deposits.

Speaker 6: As we go into 2022, we expect, again, the environment is going to remain largely consistent. Inventory will be elevated for a period of time, but again, supported by deposits.

Speaker 6: We are still targeting strong free cash flow in 2022, but as that inventory unwinds, we should expect that some deposits will unwind as well. So, it doesn't all fall to the bottom line in terms of cash, but we've taken that into account in our in our projections.

Still targeting strong free cash flow in 2022, but as that inventory unwind, we should expect that some deposits will unwind as well.

So it doesn't all fall to the bottom line in terms of cash, but we've taken into account.

Our projections.

Great.

Speaker 5: Your next question comes from Robert Young from Canaccord. Please go ahead. Your line is open.

Your next question comes from Robert Young from Canaccord. Please go ahead. Your line is open.

Speaker 9: Hi, good morning. Just a question on the semi-cap outlook. Obviously, it's very strong for 2022, but I was curious, relative to last quarter, would you think that the outlook is better or worse?

Hi, good morning, just.

Question on the semi cap outlook. Thank you.

Very strong for 2022 layers curious relative to last quarter would you think that the outlook is better or worse. There has been a lot of capacity expansion announcements I'm trying to put that into context.

Speaker 9: know in the public domain versus what you might have known ahead of time from your customers? Is the environment better today than it was three months ago?

No in the public domain versus what you might have known ahead of time from your customers is this environment better today than it was three months ago.

Hi, Rob what do you mean.

Speaker 7: When you say the environment, you mean our Q4 performance relative to Q3 performance within our business or more broadly speaking? More broadly, I'm thinking about 2020.

Should the environment, you mean, our Q4 performance relative to Q3 performance within our business or more broadly speaking.

I'm thinking about 2022.

Speaker 7: Yeah, so 2022 is the external environment, what we're hearing from our customers, the market should be growing about 14-15% is what we're hearing. Internally here, we're allowing it to grow much faster than the market due to the fact that

Yes, so 2022.

We external environment, what we're hearing from our customers and markets should be growing about 14%, 15% is what we're hearing.

Internally here, we are aligned to grow much faster than the market due to the fact that.

Speaker 7: You know, we've been, frankly, just taking share and we have a number of new program ramps that are scheduled to happen during the course of the year in the areas of high-level assembly, machining, robotics, new customers in display, etc. But the external market that we're hearing from is about, you know, about a 15%, 14% increase year-over-year from a week of adequate.

We think frankly, just taking share and we have an equal number of new program ramps that are scheduled to happen during the course of the year.

Areas of hung.

Carnival assembled machining robotics new customers.

Display et cetera.

But the external market that we are hearing from us about.

About 15%, 14% increase year over year from a wafer fab equipment.

Speaker 9: And that does sound better. I think you said the market was 12% growth last quarter. So the market sounds like it's better than it was last quarter. Is that a fair statement?

Okay and that does sound better I think you said the market was 12% growth last quarter.

Market sounds like it's better than it was last quarter or is that a fair statement.

Yes, the outlook I'm talking kind of about the quarter.

Speaker 9: Yeah, the outlook is higher than it was last quarter, so the outlook is increasing. And it's also extending as well, what we're hearing from the market folks and our customers that expect this cycle, if you will, to certainly last throughout 22 and well into 23. And many are asking us for capacity plans through 24 as well to make sure that we're able to go with them. Okay. And then on the HPS growth...

Yes, the outlook is higher than it was last quarter. So the outlook is increasing and it is also expanding as well what we're hearing from the market.

And our customers.

Wed expect this cycle if you will.

I can certainly lost throughout 'twenty, two and well into 2000 today and many are asking us for.

Possibly clients through 'twenty, four as well to make sure that we're able to grow with them.

Okay, and then on the <unk> growth.

For 2022, 10% or greater I was just looking at the comps.

Speaker 9: expectation for Q1 of growth of high teens, and I would think of that normally as a slower quarter Q1, and so I'm trying to reconcile the 10% plus guide.

Exercise for Q1 growth of high teens.

Think of that normally is.

A slower quarter Q1, and so I'm trying to reconcile the 10% plus side with the high teens.

Speaker 9: and Q1 is visibility just lower as you go through the year or is Q1 just higher than it might be?

Expectation in Q1.

As visibility just lower as you go through the year or Q1, just higher than it might normally be.

Speaker 7: Within communications, the majority of the ramps that we're seeing in comms is coming from HPS and continued demand strength and new program ramps and networking, which is largely fueled by HPS. We're also seeing some demand strength in some existing programs as well, but the high teens is really a reflection of the HPS growth that we're seeing.

Okay.

Moving communication the majority of the ramps that we're seeing in comms is coming from.

Hbf and continued demand strength and new program ramps and networking, which is largely fueled by HP.

We're also seeing some demand strength in some existing programs as well, but the high teens is really a reflection of HTS growth that we're seeing.

Speaker 6: Yeah, and Rob, what I would just add is, going back to our 2022 commentary, we're expecting growth of 10% or more in life cycle solutions, which, of course, is inclusive of HPF and going back to the comment I shared with Dan of the demand outlook remains robust.

Yes, and Rob, but what I would just add.

It goes back to our 2022 commentary, we're expecting growth of 10% or more and lifecycle solutions, which of course this conclusively the hbf and going back to the comments I shared with Dan knows the demand outlook remains robust. What we're doing is we're also taking into account the materials environment. When we provide that color. So as we just look at Q1, which is right in front of us.

Speaker 10: what we're doing is we're also taking into account the materials environment when we provide that color. And so as we just look at Q1, which is right in front of us, we're feeling quite comfortable based on the supply environment, but of course we continue to be cautiously optimistic that you go beyond Q1.

We're feeling quite comfortable.

Based on the supply environment, but of course, we continue to be cautiously optimistic as you go beyond Q1.

Okay, Great and then I didn't see.

An update on the target margins for Ccs and Ats.

Five 5% for 2022% to 3% still relevant.

Yes.

6%.

General.

Speaker 6: What I would say is that, yes, we expect that the performance of CCS is going to continue coming out of 2021. And as you know, throughout 2021, they were above their target margin range. And so, we expect that to continue. On the ATS side, we're pleased that they entered back into their target margin range of 5% to 6%. And we expect strong performance at those levels.

What I would say is that.

Yes, we expect that the performance of <unk> is going to continue coming out of 2021 and as you know throughout 2021. They were above your target margin range and so we can we expect strength to continue on the Ats side. We're pleased that the entered back into their target margin range of 5% to 6%.

And we expect strong performance at <unk>.

Those levels or.

Speaker 6: possibly higher throughout the year. We gave a full year number of around five and a half percent.

Possibly higher throughout the year, we gave on a full year number of around five 5% what I would say in terms of target margin. So as you know we did increase the companys range, 4% to 5% for 2022.

Speaker 10: What I would say in terms of target margins, though, is, as you know, we did increase the company's range to 4% to 5% for 2022. We'll re-look at what the right target margin ranges are for the individual segments as we go through the year. Frankly, we want to operate in the range for a few quarters first. We also want to complete the integration of PCI. So right now, the higher margins from both segments is being reflected in the total company number, and we'll revisit what the right ranges are over the long term for the segments later.

We really look at what the right target margin ranges are for the individual segments. As we go through the year frankly, we want to operate in the range for a few quarters.

We also wanted to complete the integration of PCI, So right now.

The higher margins from both segments is being reflected in the total company number and we'll revisit what the right range of our over the long term for the segments later on.

Okay. Thanks for taking the questions.

Thanks Rocco.

Speaker 6: Your next question comes from Todd Copeland from CIBC. Please go ahead. Your line is open. Yes. Good morning everyone. I wanted to ask you about margins as well. I think street expectations for 2022.

Your next question comes from Todd Coupland from CIBC. Please go ahead. Your line is open.

Yes.

Everyone.

I wanted to ask you about margins as well I think street expectations for 2022.

Speaker 9: EPS is $1.45 to $1.50, and it's more or less implying the low end of your 4% to 5% target range, 4.1 or something like that.

The EPS is.

45 to $1 50, and it's more or less implying the low end of your 4% to 5% target range of $4, one or something like that.

Speaker 6: At the start of the year, is that the right place to be in that target range, or given you've increased the guidance range, should people start to move towards the middle of that range, given the momentum in your business? Just a little color around that would be helpful. Thank you.

At the start of the year is that the right place to be in that target range or given you've increased the guidance range.

Should people start to move towards the middle of that range given the momentum in your business.

A little color around that would be helpful. Thank you.

Speaker 6: Sure. Thanks for the question, Todd. Yeah, what I would say is that.

Sure.

Thanks for the question, yes, what I would say to that.

Speaker 6: We do know what the consensus numbers are. That's around $6.3 billion in revenue, $1.47 or so of EPS.

We do know what the consensus numbers are at around $6 $3 billion in revenue and $1 47, or so of EPS.

Speaker 6: And then the implied margins are in the 4.2, 4.3% range.

And then the implied margins are in the four to four 3% range. What I would say is is that that's at the low end of what we're targeting as you can see from our guidance for the first quarter at four 2%, which historically is our weakest quarter based on seasonality, we are targeting stronger margins at four 2% as we go through the remainder of the year.

Speaker 6: What I would say is that that's at the low end of what we're targeting. As you can see from our guidance for the first quarter at 4.2%, which historically is our weakest quarter based on seasonality, we are targeting stronger margins and 4.2% as we go through the remainder of the year.

Speaker 6: Also, from a revenue perspective, to reiterate my comments to others, we are targeting 6.3 billion or more as we go through the year. We're just tempering demand right now with some of the material constraints.

Also from a revenue perspective to reiterate my comments others that we're targeting.

$6 $3 billion or more.

As we go through the year, where we're just temporary demand right now with some of the material constraints.

Speaker 6: dynamics. So, all in all, we believe that consensus right now is reflecting the low end of what we are targeting. We are certainly targeting.

<unk>.

Dynamics. So all in all we believe that consensus right now is reflecting the low end of what we are targeting we are certainly targeting higher than that.

Speaker 6: Okay, and is the at this point in the year beyond seasonality is the biggest swing factor how supply chain plays out?

Okay.

At this point in the year beyond seasonality is the biggest swing factor how supply chain plays out.

Speaker 6: It is the biggest dynamic, I would say, that could flex our revenue. Again, the demand outlook remains robust. It's remained robust through 2021. we think we've done a nice job. Of managing through it, but the impact is anywhere between 30 to 50Million dollars a quarter of revenue that we could have done had we not had any supply constraints. So we think we've accounted for that in the 6.3Billion. we don't see it getting significantly worse. At the same time, based on what we're seeing right now, we also don't see it getting better in 2021.

The biggest dynamic I would say that could flex our revenue again the demand outlook remains robust. It has remained robust through 2021, we think we've done a nice job of.

Managing through it but the impact is anywhere between $30 million to $50 million a quarter of our revenue that we could've done had we not had any supply constraints.

So we think we've accounted for that in the $6 3 billion and we don't see it getting significantly worse than at the same time based on what we're seeing right now we also see it getting better in 2022.

Speaker 9: Great. And my second question relates to the PCI acquisition. Apologies if you disclosed this, but how much did it contribute to revenue and EPS in the fourth quarter?

Great.

And my second question relates to the PC PCI acquisition.

Apologies if you disclose this but how much does it contribute to revenue and EPS in the fourth quarter.

Speaker 10: We don't break it up specifically. I will this time because it was a partial quarter in the basis transaction closed on November the 1st. It gave us about 1% of our overall growth. So, ex-PCI, we would have been about 1% to 2% lower on a year-over-year basis. And as we're going into next year, as we've communicated, we're expecting an incremental amount of around $300 million or so on a year-over-year basis.

As we speak.

Specifically I will this time, because it was a partial quarter.

The business closed transaction closed on November the first.

Give us 1% of our overall growth so ex PCI, we would've been about 1% to 2% lower.

On a year over year basis, and as we're going into next year as we've communicated we're expecting an incremental amount of around $300 million or so on a year over year basis.

Okay.

Great. Thanks for the color I appreciate it.

Thanks, Doug.

Your next question comes from Paul steep from Scotia Capital. Please go ahead. Your line is open.

Speaker 11: Capitol, please go ahead. Your line is

Speaker 12: Maybe just to go back a little bit, either Rob or Mandy, can we talk about non-HPS CCS and just.

Good morning, ladies.

Maybe just to go back a little bit.

Robert Sandeep can you can we talk about non hps Ccs and just.

The cadence obviously debate.

Theres been grossing.

Programs.

Speaker 12: But I think my question is longer term, how should we think about recalibrating that portfolio?

But I think my question is longer term, how should we think about recalibrating that portfolio.

Speaker 12: went through a lengthy period of maybe

Went through a lengthy period of maybe removing.

<unk>.

Speaker 12: Revenues and client work that might be better placed all other places Where are we in that trending because it looks like you've replaced capacity and HPS is a percent of CCS I'll sort of tick down a little bit on a percentage basis of the mix this year How do I?

Revenues in <unk>.

Didn't work that might be better placed all other places where are we in that trending because it looks like you've replaced capacity in hps as a percent of Ccs will sort of tick down a little bit on a percentage basis of the mix this year.

I sort of reconcile.

Okay.

Speaker 6: Hey Paul, I'll start off, I'll let Rob finish. What I would say is that the non-HPS portfolio in CCS is still very good business.

Hey, Paul I'll start off I'll, let Rob finish what I would say is that.

The non <unk> portfolio and Ccs.

Speaker 6: It's about $2 billion of our overall revenue, gives us terrific utilization in some of our key factories, gives us the ability to have better buying power with our suppliers, getting better pricing across the entire network, and so it is a very attractive piece of business. The other thing, too, is that it is becoming stickier because of our HBS business, because when you can service a customer with both the traditional EMS offering as well as HBS offering, you become a more strategic supplier to that customer.

Still very good business.

It's about $2 billion of our overall revenue gives us terrific utilization in some of our key factories gives us the ability to have better buying power with our suppliers getting better pricing across the entire network.

So it is a very attractive piece of business. The other thing too is that becoming stickier.

<unk> of our <unk> business, because when you can service a customer with both the traditional E&S offering as well as hps offering you become a more strategic supplier to that customer and so as we look into next year.

Speaker 10: And so as we look into next year, if you look at the overall growth rates of markets, it's in the low single-digit rate. That's something that is not too far off of what we would expect of our non-HPS portfolio within CCS. But again, we're pleased with the portfolio that we do have. We've already made the tough decisions that we've had to make around portfolio shaping. And so the portfolio we have today, we think, is still very strategic for us.

If you look at the overall growth rates of markets.

In the low single digit rate, that's something that is not too far off of what we would expect of our non <unk> portfolio within Ccs.

But again.

We're pleased with the portfolio that we do have we have already made the tough decisions that we've had to make around portfolio shaping and so the portfolio. We have today, we think is right.

It is still very strategic for us.

And the only thing I would add Sarah.

Speaker 7: The only thing I would add would be that our non-HPS portfolio on the areas of comms and enterprise also enables us to actually gain more HPS content over time. So that allows us to kind of move up the rack and also follow-up solutions to our customers and also, you know, transition customers from EMS to HPS over a period of time. So it's an enabler.

The only thing I would add would be that on non hps portfolio on the areas of comes in.

Enterprise also enables us to actually gain more HBO content over time.

Allows us to kind of move up the rack and offer solutions to our customers and also.

Transition customers from EMF hbf's over a period of time, so from enabler as well.

Speaker 12: Maybe Robert can be the other one who wants to start and I'll sort of two-part this one.

Okay, maybe Robert Mindy by the one who wants to start and I'll sort of two part this one.

Speaker 12: But talk to us about what you're thinking about the global footprint in terms of where production is and maybe shifting factories around. You talked about opening the Minnesota facility last year.

Talk to us about what Youre thinking about the global footprint in terms of where production is and may be shifting factories around you talked about opening the Minnesota facility last year.

Speaker 12: But that's against the CapEx backdrop that's maybe been maybe.

But that's against the Capex backdrop, that's maybe been maybe more.

Speaker 12: I guess the second part of it for Mandeep is Mandeep, how should we think about CapEx this year and next? And then maybe the other one, I believe we've cleared most of the real estate opportunity, but I think there still are some owned facilities. What's the opportunity to maybe realize some real estate, unlock some value in real estate?

So I guess the second part of it from an deep is manned deep how should we think about capex. This year and next and then maybe the other one I believe we've cleared most of the real estate opportunity, but I think there still are some owned facilities, what's the opportunity to maybe realize some real estate unlock some value in real estate.

I'll make deploy that capital.

Speaker 7: Good questions. From a footprint perspective, there's been certainly an increased trend for regionalization and we've been capitalizing on that from a couple of different aspects. First, from a growth perspective as supply chains

Well good question.

Footprint perspective.

An increased trend.

For regionalization and we've been capitalizing on that from a couple of different aspects first from a growth perspective and supply chains.

Speaker 7: become more complex and also as our customers want to regionalize more. It's actually been increasing the amount of outsourcing that we've seen from the customer base. So we've been capitalizing that and growing specifically to support our new customers' regionalization efforts. And then secondly, you know, based on the footprint that

Come more complex.

And also as our customers want to regionalize more it's actually been increasingly amount of outsourcing.

We've seen from our customer base. So we have been.

Capitalize on that and growing.

The disappointing.

New customers Regionalization efforts and then secondly, based on the footprint that we have.

Speaker 7: many customers either to devest the supply chain or just to improve total landed costs. I've asked us to help support multi-node solutions.

Any customers either to derisk, the supply chain or just.

Improved total landed cost of foster helps support multimode solutions.

Speaker 7: So, we've been kind of supporting them doing that. So, that's been a heavy activity allow, I would say, over the last 18 months or so. It's still will be fairly active this year in terms of maybe repositioning some of our customers' products to better align them with where they need it to be. But I think, you know, we have the right footprint right now to support our customers.

So we've been kind of supporting them doing that so that's been <unk>.

Activity all outlets over the last eight.

18 months or so.

So we'll be fairly active this year in terms of maybe repositioning some of our.

Customers products to better align them with with.

With where they needed to be.

But I think we have the right footprint right now.

Our customers are we.

Speaker 7: We are looking at niche capacity expansions as our company continues to grow though. Thank you.

We're looking at niche capacity expansions.

Company continues to grow though an empty slots.

Speaker 6: Yeah, and Paul, I'll just continue on on the front. So we spent about 50Million dollars in 2021 around 1% of our revenue lower than we had originally set out to do. And that's just because some projects that we were anticipating to start at the back end of this year and push to the right along.

Yeah, and Paul I'll, just continue on the Capex front. So we spent about $50 million of Capex in 2021 around 1% of our revenue lower than we had originally set out to do and Thats just because some projects that we were anticipating to start at the back end of this year had pushed to the right along with display environment.

Speaker 6: As we look at the 2022, we are targeting closer to 1.5% of revenue. You can think about it from a modeling perspective as 90 to 100 billion dollars. That's in line with the guidance that we traditionally give, which is 1.5 to 2% of overall revenue.

As we look into 2022, we are targeting closer to one 5% of revenue.

Think about it from a modeling perspective is $90 million to $100 million.

That's in line with the guidance that we traditionally give which is one 5% to 2% of overall revenue.

Speaker 6: And we're pleased, though, that where we're spending that money is to support customer programs and new wins. So it's largely growth-oriented.

We're pleased though that.

We're spending that money is to support customer programs and new wins, so it's largely growth oriented.

Speaker 6: To your point about owned versus leased real estate, it is something that we look at from time to time, and being in 14 different countries, the dynamics are gonna be different in various locations. We don't feel right now that there's a compelling reason to take any of our assets at this point and necessarily do a sale-leaseback. The business cases don't make sense in various scenarios, but it is something that we constantly evaluate, and we know that that is a source of capital if we.

To your point about.

Owned versus leased real estate. It is something that we look at from time to time in being in 14 different countries. The dynamics is going to be different in various locations. We don't feel right now that is a compelling reason to take any of our assets at this point unnecessarily do a sale leaseback.

The business cases don't make sense in various scenarios.

But it is something that we constantly evaluate and we know that that is a source of capital.

If we wanted it to be.

Great last one and then I'll pass on.

Speaker 12: Last one and then I'll pass on. Just obviously close PCI and leverage is up, but it's going to quickly deliver at least.

Just obviously closed PCI and leverages up, but it's going to quickly de lever at least.

Okay.

Keith.

Yeah.

Speaker 10: Paul, I'm sorry, I think your phone broke out. Wasn't able to hear the question.

Paul Im sorry, I think your phone broke out.

Wasn't able to hear the question.

Okay.

Yeah.

Speaker 10: That was really a pretty hard factor.

Oh really.

Our earn factor.

<unk>.

Okay.

Okay.

Speaker 10: Oh, I'm sorry, I think the reception broke out. So the question did come through. Let me give you another chance at that. Otherwise, we can always put you back in the queue as well.

Paul I'm sorry.

The reception broker.

You didn't come through.

Let me give you another chance that that otherwise we can always put you back in the queue as well.

Hi.

Yeah.

Speaker 7: Sorry, guys. I'll pass the line. I've got a bathroom soak. Okay. Thanks, Paul. If you're using forest care equipment, it would be so much better, Paul. Yeah.

Sorry, guys.

Okay. Thanks.

So, let's take care equipment, it will be so much better call.

[laughter].

Speaker 13: Your next question comes from Rupalu Bhattacharya from Bank of America. Please go ahead. Your line is open.

Your next question comes from <unk> Bhattacharya from Bank of America. Please go ahead. Your line is open.

Hi, Thank you for taking my questions.

Speaker 14: Um, can you help us bridge the 70 basis points of margin decline between 4Q and

Can you help US bridge, the 70 basis points of margin decline between <unk> and <unk>.

Speaker 14: I mean, your CCS margins looks like have consistently been above the 2 to 3% long-term range for over two years now, I mean, for the last eight quarters. And on the ATS side, you're guiding, I guess, for sequential growth.

Ccs margins it looks like have consistently been above the 2% to 3% long term range for over two years now I mean for the last eight quarters and on the Ats side, you're guiding I guess for sequential growth in revenues. So I'm trying to figure out what are the factors that are driving that margin decline.

Speaker 14: So I'm trying to figure out what are some of the factors that are driving that margin decline. Can you help us break that into how much is mix, how much is FX, how much is volume related? And if you could just give us any guidance on how you're thinking about margins for both segments.

Can you help us break that into how much is mix how much is FX how much is volume related and if you could just give us any guidance on how you're thinking about margins for both segments in the first quarter.

Speaker 10: Sure. Good morning, Luclu. So, what the margin decline quarter to quarter is reflecting is some moderation within CCS. As you know, we don't give guidance ranges specifically at the end market level, but I can tell you that we are targeting above the guidance range or the target range in CCS up close above 3%. But the 4.4% that we saw in the fourth quarter was exceptionally strong, driven by strong mix and some strong recoveries as well.

Sure good.

Good morning, Mutlu. So what is what the margin decline quarter to quarter is reflecting some moderation within Ccs as you know we don't give guidance ranges specifically at the end market level, but I can tell you that we are targeting above the guidance range or the target range and Tcs are close about 3%.

But the four 4% that we saw in the fourth quarter was exceptionally strong.

Driven by.

Strong mix and some strong recoveries as well on the Ats side, we're targeting to be above the 5% again, the full year outlook for Ats is five 5% or thereabouts approximately.

Speaker 10: On the ATS side, we're targeting to be above the 5%. Again, the full year outlook for ATS is 5.5% to thereabouts, approximately, and we are expecting to be at 5% or more. We're working towards that in each of the quarters next year.

And we are expecting to be at 5% or more.

We're working towards that in each of the quarters next year.

Speaker 6: And then to answer your question, maybe a little more specifically on what's driving some of the moderation within CCS, that is the business where we traditionally see seasonality.

And then.

To answer your question, maybe a little more specifically on what's driving some of the moderation within Ccs that is the business, where we traditionally see seasonality.

Speaker 6: particularly with our enterprise customers. And so our goal would be to see margin strength in CCS going beyond the first quarter as well, but it's not unusual for CCS to have its quote-unquote weakest quarter in the first quarter.

Particularly with our enterprise customers.

So our goal would be to see margin strength in tcs going beyond the first quarter as well, but it is not unusual for Ccs to have it quote unquote weakest quarter.

<unk> in the first quarter.

Speaker 14: Okay, Mandy, thanks for the details on that. Maybe related to margins, I'm gonna ask a more theoretical question. As your capital equipment business grows, I mean, that should be accretive to your ATS segment margins. I think you reported 750 million of revenues in that business, capital equipment.

Okay, Randy Thanks for the details on that.

Maybe related to margins I'm going to ask a more theoretical question.

You know as your capital equipment business grows I mean that should be accretive to your Ats segment margins I think you reported $750 million of revenues in that business capital equipment business in fiscal 'twenty one.

Speaker 14: uh... i'm trying to estimate how much more you know margin expansion that business create so if they're like uh... a revenue level at which you read steady state uh... margins in the

Trying to estimate how much more margin expansion can that business creates so is there like a revenue level at which you reach steady state margins in that business.

Okay.

Speaker 10: We're already experiencing strong margins in the business right now. We've talked about this some previous calls where as we continue to grow that business, we would expect that it could perform above 6% operating margin. It's not there yet from a consistency perspective, but also going to what we talked about for 2022, we're expecting further growth in CCS. We do expect incremental margin accretion from capital equipment as we go through 2022.

So we're already experiencing strong margins in the business right now we've talked about this.

Some previous calls where as we continue to grow that business, we would expect that it could perform above 6% operating margin.

Not there yet from a consistency perspective, but also going to what we talked about for 2022, we're expecting further growth in seats. Yet. So we do expect incremental margin accretion from I'm, sorry capital equipment.

Incremental margin accretion from capital equipment as we go through 2022.

Speaker 10: That being said, we want to just make sure that we temper expectations because capital equipment demand will not continue forever. And we do expect that eventually it will moderate. We have been very disciplined on adding fixed costs to that business so that we are able to weather the next inevitable downturn. But the reason that we continue to be optimistic for the ATS business is because our very large segment in aerospace and defense is operating below expectations.

That being said, we wanted to just make sure that we temper expectations because capital equipment demand will not continue forever and we do expect that eventually it will moderate and we have been very disciplined on adding fixed costs of that business. So that we are able to weather. The next inevitable downturn, but the reason that we continue to be optimistic for the Acs business.

Is because our very large segment in aerospace and defense is operating below expectation and so we do expect that eventually when capital equipment moderates, our A&D business will hopefully be able to come right behind it and pick up any of that margin dilution. So we think we're set up for a good margin story over the next few years.

Speaker 10: And so we do expect that eventually when Capital Equipment moderates our A&D business, we'll hopefully be able to come right behind it and pick up any of that margin dilution. So we think we're set up for a good margin story over the next few years.

Speaker 10: But we just want to make sure that we balance our expectations around capital equipment.

But we just want to make sure that we balance our expectations around capital equipment.

Okay. Thanks for the details on that I appreciate that.

Speaker 14: And for the last question, Mandeep, can I ask you about your priorities for use of cash now that you have the new NCIB? How should we think about debt reduction versus share buybacks versus further NCIB?

For the last question Mandy can I ask you about your priorities for use of cash now that you have the new N CIB, how should we think about.

Debt reduction versus.

Share buybacks versus further M&A.

Speaker 10: Absolutely. So, it all starts with free cash flow generation. So, again, pleased with the cash generation that we have in the 2021 $115 million. We are targeting $100 million or more for 2022, albeit it is a challenging environment. We have a very healthy balance sheet. Our gross leverage ratio is at 2.0 times. It will reduce as we go through the year. And then also our liquidity remains very strong. With our refinance credit facility, it's close to a billion dollars.

Yeah, absolutely so.

It all starts with free cash flow generation. So again pleased with the cash generation that we had in the 2020 $115 million, we are targeting $100 billion or more for 2022, albeit it is a challenging environment, we have a very healthy balance sheet.

Our gross leverage ratio of about two points over time, it will reduce as we go through the year.

And then also our liquidity remains very strong with our refinanced credit facility close to $1 billion.

Speaker 10: up almost $100 million from where it was a quarter ago. So we feel like we have a lot of flexibility.

Up almost $400 million from where it was.

Order ago. So we feel like we have a lot of flexibility when it comes to share buybacks, we're going to continue to be opportunistic on those buybacks and what I mean by that is it.

Speaker 10: When it comes to share buybacks, we're going to continue to be opportunistic on those buybacks. And what I mean by that is, does the stock price reflect what we are actually doing from an operational execution perspective? Right now, we believe that consensus estimate does not fully reflect what we are.

Does the stock price reflect what we are actually doing from an operational execution perspective, right. Now we believe that consensus estimate does not fully reflect what we are aiming.

Speaker 10: aiming to do in 2022. And frankly, the multiple on the company is still trading at a discount relative to historical averages. And so when there is a weakness, we are comfortable going in and buying back shares because we think that's a good use of cash for shareholding.

They need to do in 2022.

And frankly, the multiple on the company is still trading at a discount relative to historical averages.

And so when there is weakness we are comfortable going in debt and buying back shares because we think that's a good use of cash for shareholders.

Speaker 10: That being said, we maintain flexibility to do M&A. Our long-term priorities don't change. You know, 50% back to shareholders, largely through SIPs, 50% of our cash generation being invested in the business.

That being said, we maintain flexibility to do M&A.

Our long term priorities don't change, 50% back to shareholders.

Largely three Ensco DS, 50% of our cast generation being invested in the business, but on the M&A side.

Speaker 10: But on the M&A side, as you know, we maintain a very, very tight filter and it needs to be EPS accretive in year one, ROI has to be above our cost of capital by year two or sooner. It has to be a strategic fit for the business. We have to be able to integrate it well. And so we'll continue to look at M&A transactions as we go through 2022. We have both the balance sheet and the management capacity to do a transaction should the right one come in front of us. But we're going to be very disciplined. And.

As you know, we maintain a very very tight filter.

And it needs to be EPS accretive in year one.

<unk> SV called above our cost of capital by year, two or sooner has to be strategic fit for the business, we have to be able to integrate it well.

And so we will continue to look at M&A transactions as we go through 2022, we have both the balance sheet and the management capacity to do a transaction should the what rate one coming in front of us, but we're going to be very disciplined and before we pull the trigger on anything.

Speaker 14: uh... thanks for all the details congrats on the quarter and the strong margin

Okay. Thanks for all the details congrats on the quarter and the strong margin performance.

Thanks, a lot with it.

Speaker 11: Next question comes from Jim Suba from Citigroup. Please go ahead, your line is open.

Next question comes from Jim Suva from Citigroup. Please go ahead. Your line is open.

Speaker 7: Thank you. I have two questions and I'll ask them at the same time so you can.

Thank you I have two questions and I'll ask them at the same time. So you can figure out which way you want to answer them, but one of them just mostly a clarification. When you mentioned about that you saw some recoveries in the quarter are theirs.

Speaker 7: figure out which way you want to answer them, but one of them is just mostly a clarification when you mentioned about that you saw some recoveries.

Speaker 7: in a quarter. There's lots of ways to define that. You know, some call it like recovery of COVID costs. Other may call it the recovery of utilization rates. Others may call it like recovery from bad debt accruals or lots of other things. Can you just help us what you meant, understand what you meant by recoveries?

There's lots of ways to define that some call. It like recovery of Covid costs. Other may call. It a recovery of utilization rates, others may call. It like recovery from bad debt accruals or lots of other things can you just help us understand what you meant by recoveries and then second question is am I right.

Speaker 7: And then the second question is, am I right that the Celestica we're looking at now, since it's post the Cisco disengagement, that this is the alignment and kind of the vehicle that we should look at going forward, or do you still have some things in your portfolio for?

Let's go we're looking at now since it's post the Cisco disengagement that that this is the alignment and kind of the vehicle that we should look at going forward or do you still have some things in your portfolio for repositioning that we should be mindful of I know you of course have to do the integration of PCI, but it seems like.

Speaker 15: repositioning that we should be mindful of. I know you, of course, have to do the integration of PCI, but it seems like we're probably close to the point of the true, clear vehicle that we should be looking at going forward. Thank you.

We'll probably close to the point the true clear.

Vehicle that we should be looking at going forward. Thank you.

Speaker 10: Hey, Jim, it's Mandy here. Nice to talk to you this morning. So to answer your 1st question, when we're talking about recovery, it was largely related to premiums that we were paying or free expenses that we were able to successfully recover from our customers during the quarter. And that did.

Yeah, Hey, Jim It's maybe Peter can talk to you. This morning. So to answer your first question. When we're talking about recoveries. It was largely related to premiums that we're paying or treat expenses that we were able to successfully recovered from our customers during the quarter and that did.

Speaker 10: I'll let Rob maybe add on to a starting of an answer for the second one.

Help us I'll, let Rob.

Maybe add on to the starting of an answer for the second one.

Speaker 10: which is, as we have said, our portfolio shaping actions are complete. We went through a multi-year transformation, the transformation is done.

As we have said our portfolio shaping actions are complete we went through a multiyear transformation. The transformation is done we're now in the growth phase and so what we're really pleased with is that we are now.

Speaker 10: We're now in the growth phase. And so what we're really pleased with is that we are now posting absolute growth numbers as we go into Q4, or as we finish Q4, and as we're going now into Q1, and all through 2022, we're looking to see absolute growth across the board.

Hosting absolute growth numbers.

As we go into Q4, as we finish Q4 and as we're growing and now into Q1 and all through 2022, we're looking for to see absolute growth across the company.

Of course, our strategic objectives are to continue to grow.

Our diversified set of businesses Hps and <unk>.

And again, we're targeting 10% or more growth in those businesses in 2022, and we think that as we continue to improve the mix from those very high reliability businesses. It just continues to strengthen the company, but I'll, let rob add on to that.

Speaker 7: I think you covered the majority of the points, Mandeep, but I would just say I'm really pleased, Jim, with the progress. You know, we've improved diversification. As a result of that, we've improved our margins and we've also improved our customer concentration. So we think we have a much more resilient portfolio and a portfolio that's much better aligned to take advantage of some of the secular tailwinds that we're seeing.

Okay.

The majority of the <unk> mandate.

I would just say I'm really pleased with the progress we've improved diversification.

As a result of that we've improved our margin and he.

It also improves our customer concentration so.

We think we have a much more resilient portfolio a portfolio that is much better aligned to take advantage of some of the secular tailwind that we're seeing.

Speaker 7: So I would mock the transformation as complete, but our work is not yet done because there's no result for us.

So I would I would mark the transformation is complete but our work is not yet done because there's always room for improvement.

Speaker 15: Thank you, and congratulations to you and your team for lots of effort and work, which is now manifesting itself, thank you.

Thank you and congratulations to you and your team for lots of effort and work, which is now manifesting itself. Thank you.

I appreciate that.

Speaker 11: Your last question comes from Paul Treber from RBC Capital Markets. Please go ahead, your line is open.

Your last question comes from Paul Treiber from RBC Capital markets. Please go ahead. Your line is open.

Speaker 6: Thanks very much and good morning. Could you speak to the labor environment? You mentioned supply chain constraints, but to what degree are you seeing any shortages in labor, if any, or absenteeism or also wage inflation? How do you think about the labor environment through 2022?

Oh, thanks, very much and good morning, just could you speak to the labor environment.

You mentioned supply chain constraints, but to what degree are you seeing any shortages in labor, if any or you know absenteeism or also wage inflation and how do you think about the labor environment through 2022.

Speaker 7: A good question, Paul. We've certainly seen pockets of.

Good question Paul.

We certainly are seeing pockets of Oh.

Speaker 7: of wage inflation, of higher absenteeism and difficulty in attracting talent. I would call it pockets largely in the Americas on the West Coast and also in the Northwest area.

So wage inflation.

Sharon.

Higher absenteeism and difficulty in attracting talent I would call it pockets largely in the Americas on the West coast.

And also in the northwest area.

Speaker 7: In terms of just picking it off, in terms of absenteeism given by COVID, we had a

In terms of just kicking it off in terms of absenteeism driven by Covid.

<unk>.

Speaker 7: You know, a rush of it, I think, earlier in January . But frankly, you know, given the new CDC guidelines, people are back at work and we've returned to normal level. So it's really for a very short, limited amount of time early in Q1.

Russia of it I think earlier in January but frankly.

Given the new CDC guidelines.

<unk> are back at work and we've returned to normal levels. So it's really for a very limited amount of time early in early in Q1.

Speaker 7: In terms of the inflationary environment, I do think that's alive and well, if you will. We've been taking that into account and working with our customers and repricing accordingly. And in terms of finding talent, we're doing our best to

Terms of the.

The inflationary environment.

I do think that's right.

Alive and well if you will we've been taking that into account and working with our customers and re pricing accordingly.

And in terms of finding talent.

We're doing our best to.

No.

Speaker 7: have partnerships with local universities and doing all the normal things to find the right talent to enable the strong demand that we have in some key sites. But I wouldn't say it's a broad global issue. We're just seeing certain pockets in certain geographies.

Our partnerships with local universities.

And doing all the normal things to find the right talent.

To enable this.

Strong demand that we have in some key sites, but I wouldn't say, it's a broad global issue, we're just seeing certain pockets in certain geographies Paul.

Speaker 6: And you mentioned being able to pass along wage inflation. Is there any explicit cost related to labor shortages or absenteeism that's constraining you that maybe you just refer to as supply chain constraints or is it immaterial at this point?

And you mentioned being able to pass along wage inflation is there any way.

They are cost related to the labor shortages or absenteeism.

Constraining you that maybe you just referred to supply chain constraints or is it immaterial at this point.

Speaker 7: You know, right now, the labor constraints are, um...

Right now the labor constraints.

Uh huh.

Speaker 7: probably just impeding our ability to get product out the door in a certain timeframe. But, you know, we have other tools in mind in terms of overtime or shift patterns or things like that to compensate for that. So I wouldn't view it as a major barrier in terms of fulfilling demand. I think right now the major barrier is really around material. If we have the material, we could typically get the product out the door.

Probably just impeding our ability to get product out the door in a certain timeframe.

But we have other tools in mind in terms of overtime or shift patterns and things like that to compensate for that.

I don't view it as a major barrier.

And in terms of fulfilling demand I'd say right now that the major barriers really around material. We have the material. We can typically get the product out the door.

Speaker 7: and we've been combating the labor shortage with, it's not, I wouldn't call it a top tier issue, I would call it a second tier issue.

And we've been combating the labor shortage.

It sounds I wouldn't call it a top tier ratio would call. It a second carrier issue right now.

Yeah.

Speaker 6: OK, and then last question, last question for me, the SG&A in the quarter was lower than what we anticipated. Could you speak to, you know, you know, I know you spoke to margins on a percentage basis, but how do we think about like SG&A dollars, you know, in Q4 and then also through 2022?

Okay and then last question last question for me.

SG&A in the quarter.

Lower than what we anticipated could you speak to why you know I know.

You spoke to margins on a percentage basis, but how do we think about like SG&A dollars in Q4, and then also through 2022.

Speaker 10: Yeah, hey Paul. So I'd say in Q4 we saw a little bit of a reduction in some variable spend items.

Yeah, Hey, Paul.

I'd say in Q4, we saw a little bit of a reduction it's a variable spend items.

Speaker 10: that turned out to be favorable for us. But as you go into 2022, largely we're looking to maintain our SG&A dollars and so to see leveraged benefits as the top line grows. That being said, there are two things I would call out that we'll add to the SG&A dollars. The first one, of course, is the PCI integration. PCI's SG&A is going to be somewhere around a million dollars.

It turned out to be favorable for us.

And as you go into 2022, largely we're looking to maintain our SG&A dollars and so to see leverage benefit the top line growth that being said there are two things I would call out that.

We will add to the SG&A dollars. The first one of course is the PCI.

Integration PCI SG&A is going to be somewhere around a million dollars a month.

Speaker 10: So look for about $12 million or so to be added going into 2020.

So look for other $12 million or sort of be added going into 2022.

Speaker 10: The second one is that we would anticipate that as we move toward the back end of the year, that travel is going to start picking up from a management team perspective. We're in 14 countries. We travel to those locations frequently. And so we will expect to see a little bit more SG&A spend in that area 2022 compared to 2021.

The second one is is that we would anticipate that as we move towards the back end of the year that traveled isn't picking up from.

Agent team perspective, we're in 14 countries, we travel to those locations frequently and so we will expect to see a little bit more SG&A spend in that area 2022, compared to 2021, but largely.

Speaker 10: but largely we are expecting as the top line grows that we will continue to see cost productivity and we are aiming to be very disciplined on our SG&A spend outside of those items to drive good levels of productivity to offset inflation. Thanks for taking my question.

We are expecting at the top line growth that we will continue to see cost productivity.

Amy can be very disciplined on our SG&A spend outside of those items to drive good levels of productivity to offset inflation.

Okay. Thanks for taking my questions and congratulations on the quarter.

Thanks, Paul Thank you.

Speaker 13: We have no further questions. I would like to turn the call back over to Rob Maiones for closing remarks.

We have no further questions I would like to turn the call back over to Rob <unk> for closing remarks.

Thank you Julien.

Speaker 7: I'm pleased with our performance in the fourth quarter and our full year 2021 results. We continue to execute well through a difficult supply chain environment, and we've completed our transformation and are now focused on continued growth and earnings expansion.

I am pleased with our performance in the fourth quarter and our full year 2021 results, we continue to execute well through a difficult supply chain environment and we've completed our transformation and are now focused on continued growth and earnings expansion as we head into 2022 with strong tailwind in <unk>.

Speaker 7: As we head into 2022 with strong tailwinds and continued conviction that we are on the right path, I'd like to thank our global team for a strong 21 and I'd also like to thank all of you for joining today's call. I look forward to updating you as you progress throughout the year.

<unk> conviction that we're on the right path I would like to thank our global team for a strong 21.

I also like to thank all of you for joining today's call and look forward to updating you as we progress throughout the year stay safe investor here.

Speaker 13: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Okay.

[music].

Yeah.

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Sure.

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Yes.

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Yes.

Speaker 1: The host has ended this call. Goodbye.

The House has ended this call goodbye.

Hi, My question, so it looks like.