Q3 2024 Celestica Inc Earnings Call

While we will make forward looking statements, including statements related to anticipated trends in and their anticipated impact on our industry, our segments and their businesses and statements related to the future performance of Celestica and our conversion to U S. GAAP.

While these forward looking statements represent our current judgment actual results could differ materially from a conclusion forecast or projection in the forward looking statements made today.

Certain material factors and assumptions are applied in drawing any such statement for identification and discussion of such factors and assumptions. Please refer to our public filings available on SEDAR, plus dossier, and SEC dot Gov as well as our virtual investor meeting and earnings presentation available at Celestica Dot com under the Investor Relations tab.

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

Adjusted free cash flow gross debt to non <unk> trailing 12 month, adjusted EBITDA leverage ratio adjusted earnings per share or adjusted EPS, adjusted SG&A expense and adjusted effective tax rate.

Additional information about material factors that could cause actual results to differ materially from a conclusion forecast or projection in the forward looking information as well as the risk factors that may impact future performance and results of Celestica and reconciliations of non <unk> financial measures to their most directly comparable <unk> measures are contained in.

Our public filings and on our virtual Investor meeting and earnings presentation available at Celestica Dot com under the Investor Relations tab.

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.

Unless otherwise specified all references to comparative figures are a year over year comparison.

Let me now turn the call over to Rob.

Rob: Thank you Craig and good evening, everyone and thank you for joining us on today's call.

Rob: In the third quarter, our strong momentum continued achieving revenues of $2 5 million.

Rob: And adjusted EPS of $1 four above the high end of our guidance ranges.

Rob: The outperformance was driven by continued strong demand in our <unk>.

Rob: <unk> business, coupled with strong non <unk> operating margin of six 7%.

Rob: Our Ccs segment revenues increased 42% year over year, driven by continued investment from our Hyperscale customers and data center infrastructure, including very strong demand for our networking switches within our hps portfolio.

Rob: The solid revenue growth and improvements contributed to healthy margin expansion as our Ccs segment margin of seven 6% was up by 140 basis points versus last year.

Rob: In our Ats segment revenues were 5% lower year over year, driven by continued softness in our industrial business, where the demand environment remains dynamic across a number of our submarkets, partly offsetting those declines.

Rob: Continued strength in our A&D and capital equipment businesses, which saw growth of 15% and 31% respectively in the third quarter.

Rob: Overall, we are pleased with our very strong performance. This year looking ahead, we feel we are well positioned to continue to capitalize on a number of high value opportunities across our portfolio and strengthen our competitive position in key end markets.

Speaker Change: I would now like to turn the call over to Mandy.

Speaker Change: He will provide a detailed review of our third quarter performance.

Speaker Change: Our guidance for the fourth quarter of 2024, and our outlook for the full year mandate over the year.

Mandy: Thank you Rob third quarter revenue came in at $2 five zero billion up 22% and above the high end of our guidance range. The growth was supported by strong demand from Hyperscale customers in our Ccs segment, partially offset by lower revenues in our Ats segment, driven by the anticipated softness in our industrial business.

Mandy: Third quarter non <unk> operating margin of six 7% was an improvement of 100 basis points, driven by improved mix and operating leverage from higher volumes in our Ccs segment.

Our third quarter adjusted earnings per share was $1, four which exceeded the high end of our guidance range and was 39% higher.

Mandy: This once again marked our highest quarterly results in company history.

Mandy: Our third quarter adjusted effective tax rate was 21%.

Mandy: Moving onto our segment performance Ats segment revenues for the third quarter were $814 million down 5% slightly more than our expectations of a low single digit decrease.

The decrease in Ats segment revenue was driven by lower demand in our industrial business. The decline was partially offset by solid growth in our aerospace and defense and capital equipment businesses.

Mandy: Segment revenue accounted for 33% of total revenue in the third quarter.

Mandy: Our third quarter Ccs segment revenue of $1 69 billion.

Mandy: It's up by 42% driven by very strong growth in both our enterprise and communications end market.

<unk> segment revenue accounted for 67% of total company revenues in the third quarter.

Mandy: Revenue in our enterprise end market was up by 38% above our expectation of a mid <unk> percentage increase driven by stronger than expected demand due to program dynamics in our storage business.

Mandy: Revenue in our communications end market grew by 45%, which was better than our expectation of a low 30 percentage increase.

Mandy: The growth in our communications end market was driven primarily by increased demand for our HPA networking switches.

Mandy: <unk> revenues grew by 54%, reaching $761 million in the third quarter, which accounted for 30% of total company revenue.

Mandy: The very strong growth on our HTS portfolio was driven by hyperscale or customer demand for our 400 G networking switches as well as ramping programs in 800 gig switches.

Mandy: Turning to segment margins.

Mandy: Ats segment margin in the third quarter was four 8% down 10 basis points, driven primarily by lower operating leverage in our industrial end market, partially offset by improvement in capital equipment and the A&D.

Mandy: Ccs segment margin during the quarter was seven 6% up 140 basis points, driven by greater operating leverage and improved mix.

Mandy: During the third quarter, we had two customers that accounted for more than 10% of total revenue, representing 25% and 12% of sales for the quarter respectively.

Mandy: We remain comfortable with the levels of customer concentration in our portfolio as we believe that we maintain appropriate levels of diversification across multiple programs with our largest customers.

Mandy: Moving on to some additional financial metrics.

Mandy: <unk> net earnings for the third quarter were $92 million or <unk> 77 per share up 10.

Mandy: Adjusted gross margin for the third quarter was 10, 7% up 90 basis points, driven by operating leverage and production efficiencies in our Ccs segment.

Mandy: Our third quarter adjusted ROIC was 28.

Mandy: Eight 6% an improvement of seven 1% driven by higher operating profitability and strong working capital management.

Moving on to working capital.

At the end of the third quarter, our inventory balance was $1 83 billion down $26 million sequentially and down $434 million year over year cash.

Mandy: Cash deposits were $521 million at the end of the quarter lower by $55 million sequentially and $354 million lower year over year.

Mandy: As expected we continue to return some of our cash deposits back to customers as gross inventory move lower.

Mandy: Cash cycle days during the third quarter were <unk> 66 up two days sequentially and six days lower than the prior year period.

Mandy: Moving onto our cash flow.

Mandy: Capital expenditures for the quarter were $46 million or.

Mandy: The only one 8% of revenue compared with one 3% in the third quarter of 2023.

Mandy: We expect our capital expenditures for 2024 to be approximately 175% of revenue in line with our previous outlook of between one five and 2%.

Mandy: In the third quarter, we generated $75 million of adjusted free cash flow compared to $34 million in the prior year period two.

Mandy: <unk> 2024 year to date, we have generated $203 million of adjusted free cash flow compared to $110 million during the first three quarters of 2023.

Mandy: Now moving on to some additional key metrics.

Mandy: At the end of the third quarter, our cash balance was $399 million.

A combination with our $750 million of borrowing capacity under our revolver. This provides us with approximately $1 $1 billion in total liquidity, which we believe is sufficient to meet our anticipated business needs.

Our gross debt at the end of the third quarter was $746 million.

Mandy: Leaving us with a net debt position of $347 million.

Mandy: Our gross debt to non <unk> trailing 12 month adjusted EBITDA leverage ratio was 1.0 turns.

Mandy: 0.1 turns both sequentially and compared to the prior year.

Mandy: As of September 30, we were compliant with all financial covenants under our credit agreement.

Mandy: During the third quarter, we repurchased approximately $2 2 million shares for cancellation under our normal course issuer bid at an average cost of approximately $44 per share for a total deployment of $100 million.

Mandy: This step up in purchases compared to recent quarters is reflective of our commitment to be active on an opportunistic basis. When we feel there is a dislocation in our share price relative to our financial performance and outlook.

Mandy: Year to date, we have purchased a total of approximately $2 9 million shares at a cost of $127 million under the program.

Mandy: Now turning to our guidance for the fourth quarter of 2024.

Mandy: Fourth quarter revenues are expected to be in the range of 242 5 billion to $2 $5 75 billion.

Mandy: Which if achieved would represent growth of 17% at the midpoint.

Mandy: Fourth quarter adjusted earnings per share are expected to be in the range of 99 to $1 <unk>, which if achieved would represent an improvement of 28 per share or <unk>, 37% at the midpoint.

At the midpoint of our revenue and adjusted EPS guidance ranges are achieved non <unk> operating margin would be six 7%, which would represent an increase of 70 basis points compared to the same period last year.

Mandy: Our adjusted SG&A expense for the fourth quarter is expected to be in the range of <unk> $78 million to $80 million.

Mandy: We anticipate our adjusted effective tax rate for the fourth quarter to be approximately 21%.

Mandy: Now turning to our end market outlook for the fourth quarter of 2024.

Mandy: In our Ats segment, we anticipate revenue to be flat year over year.

Mandy: Driven by continued growth in A&D and recovering demand in capital equipment offset by continued softness in our industrial business.

Mandy: In our Ccs segment, we anticipate revenue in our communications end market to be up in the high 50 percentage range driven by continued demand strength for our networking switches, including accelerating ramps and our 800 G program.

Mandy: In our enterprise end market, we expect revenues to decrease in the low double digit percentage range consistent with our commentary last quarter. We anticipate decline is driven by a technology transition and a large sole source AI ml can few program with the next generation program also sole sourced expected to ramp in the latter half of 2025.

Mandy: We expect these declines will be partly offset by growth in our storage business.

Mandy: Assuming the achievement of the midpoint of our fourth quarter guidance ranges, we now anticipate revenue of $9 6 billion and.

Mandy: And adjusted EPS of $3 85 for the full year 2024.

Mandy: These outlooks are achieved they would represent growth of 21% and 58% respectively.

Mandy: Our 2024, 9% non <unk> operating margin is now expected to be six 5%, which would represent a 90 basis point improvement.

Mandy: Finally, our adjusted free cash flow is now expected to be $275 million in full year up from our previous outlook of $250 million.

Mandy: I'd also like to take this opportunity to remind everyone of our upcoming transition from foreign private issuer to U S. Domestic issuer reporting status as our shareholder base is now comprised of a majority of U S based investors.

Mandy: Beginning January one 2025, our consolidated financial statements will be prepared in accordance with U S. GAAP and we will no longer report results under Ifr.

Mandy: Concurrent with the release of our Q4 and full year 2020 square financial results. We will include a reconciliation of the financial metrics provided as part of our guidance and outlook in <unk> and non aircraft with a comparable U S GAAP and non-GAAP adjusted financial metrics.

Mandy: At this time, we do not expect any material differences in our Q4 2020 for guidance and full year of 2024 outlook has been prepared under U S. GAAP.

Mandy: Finally, this change does not impact our status as a Canadian domiciled company.

Speaker Change: With that I would like to turn the call back over to Rob to begin our 2020 for virtual Investor meeting.

Rob: Thank you Mandy.

Rob: Sorry to have the opportunity to provide you with an update on the progress we have been making in the execution of our strategy and an overview of the opportunities we are pursuing in each of our markets.

Rob: Before we get started I will.

Rob: Like to briefly walk you through the agenda for the next portion of our call today.

Rob: First I'll provide a brief overview of our business, our operational footprint and discuss the key pillars of our Companys strategy.

Rob: Next Jason Phillips, President of connectivity and cloud solutions.

Jason Phillips: Provide an overview of our Ccs segment and discuss the evolving data center hardware landscape.

Jason Phillips: Following Jason Todd Cooper, President of advanced Technology solutions will discuss our diversified markets portfolio I'm, putting the macro outlook and long term strategic priorities across each of our end markets and finally, we will hand, the floor back to our CFO <unk> <unk>, who will discuss our 2025 financial outlook.

Jason Phillips: <unk> allocation priorities and our plans to continue to maximize returns for our shareholders.

Jason Phillips: Following this we.

Jason Phillips: We will open up the lines for Q&A, where Steve Gilbert SVP of our Hyperscale or in service provider business will also join us.

Now, let's begin with an overview of our business today.

Jason Phillips: So, let's forget as a global leader in electronic manufacturing services and supply chain solutions, serving the world's leading technology companies across a range of industries, which are critical to the advancement of our global economy.

Jason Phillips: We're much more than just a manufacturing partner, where our strategic collaborator offering leading edge products best in class engineering support and trusted operational execution across our global network that spans 16 countries and are supported by 27000 employees.

Jason Phillips: We enable our customers to bring innovative products and services to market with speed.

Jason Phillips: <unk> C and uncompromising quality.

Jason Phillips: The evolution in our business continues to be reflected in our financial performance.

Jason Phillips: Our consistently improving results in recent years.

Jason Phillips: I think driven by the successful execution of our strategy and the growing demand for our leading capabilities and product offerings.

Jason Phillips: <unk> of our full year outlook for 2024, which represent the strongest non <unk> operating margins and the highest adjusted earnings per share.

Jason Phillips: The company's history.

Today.

Jason Phillips: The constraints.

Jason Phillips: And far beyond traditional EMS, we believe that our differentiated value proposition.

Jason Phillips: As the best of both the EMS and ODM models.

Jason Phillips: Riding our scale and supply chain proficiency with advanced customization capabilities in both design and manufacturing.

Jason Phillips: We believe that as a north American based tier one EMS and ODM companies are offering stands out amongst our competitors in the marketplace and importantly, and offers US a number of distinct strategic advantages that allow us to better serve our customers and positions us as a choice partner are complex.

Jason Phillips: Hi reliability programs.

Jason Phillips: Our strategic plan is built on four key pillars, which are intended to leverage our core strengths and capitalize on market opportunities that align with our competencies, while delivering sustainable value to our shareholders. Firstly, we're committed to building a resilient growth oriented and diversified portfolio.

Jason Phillips: Designed to withstand cyclical fluctuations we've been discerning in choosing the markets that we compete in and we remained selective in our approach to entering new markets.

Our focus remains on opportunities that we believe are supported by strong secular tailwind offer attractive growth potential and provide structural benefits to our portfolio.

Jason Phillips: Secondly, we're committed to making the necessary investments to expand our capabilities and further enhance our offerings.

Jason Phillips: While we have made a great deal of progress in this regard over the years, we are not resting on our past achievements, we continue to build out our ODM offering with investments in next generation products based on multi year, roadmaps, while adding through and enhancing our EMS engineering and services capabilities.

Jason Phillips: Thirdly.

Jason Phillips: We remain dedicated to operational excellence across our global footprint.

Jason Phillips: The <unk> operating system is designed to help ensure consistency and operational execution.

Jason Phillips: To enable best in class performance, which is reflected by the numerous customer awards and high customer scorecard ratings that we receive each year.

Jason Phillips: Quality and execution are central to our ethos and integral to everything that we do.

Jason Phillips: Lastly.

Jason Phillips: Our objective is to maximize total shareholder returns we aim to achieve this by targeting long term adjusted EPS growth of 10% or more while maintaining a disciplined approach to capital allocation.

Speaker Change: Now I would like to hand, the call over to Jason to provide a closer look at our Ccs segment, Jason over to you.

Jason Phillips: Thank you, Rob and good evening, everyone I'm pleased to be here with you today to provide an update on some of the exciting projects. We're working on in our connectivity and cloud solutions business I.

Jason Phillips: I'd like to start with a look at where we are today.

Jason Phillips: 24 has been a year of tremendous growth for our business as we are on track to achieve $6 $4 billion in revenue, which would represent an impressive 39% increase.

Jason Phillips: Our growth has been driven by strong demand in all three of our core technologies server and storage in our enterprise end market and networking within our communications end market with each category expected to end the year up more than 25%.

Jason Phillips: We'll talk more about our portfolio and each of those technologies and just a few minutes.

Jason Phillips: From a customer perspective, hyperscale or as had been the primary growth driver in our business this year in.

Jason Phillips: In 2024, we are on track for $4 $8 billion in revenue with Hyperscale, which now accounts for nearly three quarters of our Ccs portfolio.

Jason Phillips: Looking at our Ccs segment by solution, we've seen in recent years strong and balanced growth across both our EMS and hps portfolios.

Jason Phillips: Our hps business continues to account for a rising share of our portfolio driven by strong demand in our market, leading Ethernet switch business.

Jason Phillips: Lastly, we are supporting our customers by continuing to make investments in our services capabilities, which we view as an increasingly important part of our end to end lifecycle solutions offering for the data center.

Jason Phillips: Adding to our core strengths in R&D and engineering, our services offering has grown to include it asset disposition.

Jason Phillips: Asset management, and carbon credit services, creating a powerful platform for growth with our customers by helping to strengthen our relationships and drive higher attach rates.

Jason Phillips: As we look at the major market trends influencing our business investments in artificial intelligence continue to be the driving force shaping the datacenter landscape.

Jason Phillips: It remains our belief that the current wave of investment in AI infrastructure as a multi year runway ahead of it.

Jason Phillips: Today, the lion's share of the investment in AI infrastructure is driven by the top five hyper scaler.

Jason Phillips: Our estimated to spend $133 billion. This year on data center hardware across storage networking and server technologies.

Jason Phillips: Estimates suggest that annual hyperscale or spend on data center hardware will grow by more than $50 billion through 2027 or 40% to $186 million.

Jason Phillips: Our latest forecasts based on discussions with our customers for 2025 are showing early support for these estimates.

Jason Phillips: Today, we serve our hyperscale customers across all three major hardware technology categories, and we are investing to stay at the leading edge of the technology curve. As we look ahead, we feel we are well positioned to continue to capture a growing share of the spend from these key players in the coming years.

Jason Phillips: As we've seen the hardware and infrastructure investments required to support the development of AI models are significant.

Jason Phillips: And while Hyperscale or are leading the AI investment cycle today, there is a growing wave of organizations, which the market is termed digital native companies, who are looking to harness the transformative potential of AI by ramping up their own infrastructure investments.

Jason Phillips: We believe that these emerging players in the rapidly expanding AI ecosystem present high margin growth opportunities of meaningful scale for solutions providers like Celestica.

Jason Phillips: Firstly, we are seeing opportunities with an emerging breed of specialized AI cloud providers, providing AI optimized infrastructure and services to support increasingly specific use cases, such as natural language processing machine vision and data analytics.

Jason Phillips: Others in this market are building high powered AI compute infrastructure at scale, helping customers to scale their AI workloads more efficiently and at a lower cost.

Jason Phillips: Next as large enterprise customers increasingly employ the use of AI models, we anticipate more spending on edge computing, bringing AI infrastructure closer to where data is created in order to reduce latency and enhanced data security.

Jason Phillips: Finally, we have seen a number of nations or sovereigns make commitments to invest in large scale data center projects as governments across the world are increasingly recognizing the strategic importance of domestic AI infrastructure.

Jason Phillips: These government led initiatives could be a meaningful contributor to growth and capex dollars within the AI data center ecosystem.

Jason Phillips: We believe celestica is well positioned to capitalize on these emerging opportunities.

Our expertise in designing and manufacturing advanced hardware solutions, coupled with our comprehensive services portfolio enables us to cater to the needs of this diverse set of customers.

Hardware platform solutions or HTS <unk> original design manufacturing offering where we innovate on product designs across all three major technologies in the datacenter server storage and networking are.

Jason Phillips: Our HTS business supports our customers on engagements ranging from joint design, the highly customized hardware to off the shelf White box solutions, which can be further enabled with open source software.

Jason Phillips: In 2024, we anticipate that <unk> will generate approximately $2 $8 billion in revenues, which would represent growth of more than 60%.

Jason Phillips: However, this journey has been.

Jason Phillips: Far from an overnight success.

Jason Phillips: We've spent more than 10 years building our platform, while innovating hundreds of patents and supporting 230 product launches.

Jason Phillips: This year, we will be investing nearly $80 million into R&D, and we expect that number to grow next year.

Jason Phillips: R&D is a core competency for celestica.

Jason Phillips: In addition to innovating with our own proprietary product designs. We also play an important role as an extension of our customers' R&D teams.

We believe that our capabilities and breadth of offerings in this area for a critical factor that differentiates us from both our North American EMS and ODM peers.

Jason Phillips: Our investments over the last decade, plus in this platform reflect our strong commitment to making ODM are central and enduring element of our business.

Jason Phillips: Our HTS portfolio is margin accretive to our Ccs segment and enables relationships that are more deeply entrenched with our customers and ecosystem partners compared to traditional E&S engagements.

Jason Phillips: In networking, our switch product support a range of customers and use cases from <unk> switches for Oems designed for the campus to 800, <unk> switches for hyperscale or used to facilitate AI workloads in the data center.

Jason Phillips: Today, the majority of our HTS portfolio is made up of networking switches, which are exclusively for Ethernet.

Jason Phillips: We were an early leader in 400 G and were early to market with our 800 gig solutions, which are being well received by our customers in preparation for the next upgrade cycle. We are already investing in designs for $1 16.

Jason Phillips: Our growing team of nearly 150 software engineers in Chennai continues to support customers with enablement of proprietary open source solutions for network operating systems, which we believe customers will continue to gravitate to overtime.

Jason Phillips: We also have the capability to offer a ready to use operating system production heartened by our engineering team or to integrate existing third party software and optimize performance for each.

Jason Phillips: And AI ml compute we're committing R&D to advance cooling system designs to support the increasing power demands of AI Silicon, which we'll talk more about in a few minutes.

And in storage, we have proprietary designs for high availability next generation controllers and expansion systems, which we are able to integrate with our offering as part of our rack solutions.

Jason Phillips: We feel that our distinctive ODM offering will continue to drive new wins and remain a key growth driver in our Ccs segment over the long term.

Jason Phillips: Next I'd like to do a deeper dive into our business and the market outlook across each of our technologies.

Jason Phillips: Domestic is communications business is a cornerstone of our portfolio.

Jason Phillips: Today Celestica as the world's largest ODM provider of Ethernet switches with $2 4 billion of our portfolio expected to come from HTS networking solutions in 2024.

Jason Phillips: Our portfolio is geared towards high bandwidth applications with the majority of our HTS networking revenues now coming from switches 400 G and higher.

Jason Phillips: Our focus on high bandwidth solutions is reflected in our leading market share in the 400 <unk> switch segment.

Jason Phillips: Third party data suggests that we have the market's largest install base as measured by deliveries of 400 gig ports over the past five years.

Jason Phillips: As leading datacenter operators begin their transition to <unk> 800, <unk>, we will be enabling all of our hyperscale customers, who use our 400 <unk> switches in this upgrade cycle.

Jason Phillips: We believe that being early to market with our 800 gig solutions as is poised to build on our existing leadership position as ramps accelerate.

Jason Phillips: The rapid expansion of cloud data centers, coupled with the increasing demand for more powerful computing to support AI applications is driving exceptional levels of investment and networking infrastructure.

Jason Phillips: Market forecast predict that the Ethernet switch market for bandwidth of 400, G and higher will grow at a remarkable 52% compound annual growth rate over the next three years.

Jason Phillips: It is critical to our success to continue to be a first mover and remain at the leading edge of each successive technology transition and we are making the necessary investments to do so.

Jason Phillips: To this end we're pleased to have an initial win with a large hyperscale customer for a one six terabytes switching program exemplifying our leadership and innovation.

Jason Phillips: We anticipate that this will be the first of many for the next generation switching technology and expect to see revenues from this program began ramping in mid 2026.

Jason Phillips: With each generation of upgrades to higher bandwidth the engineering challenges related to signal integrity power and thermal management involve a step function increase in complexity relative to previous generations, making a high performance product that is early to market that much more challenging to deliver.

Jason Phillips: This is a dynamic that we believe plays to <unk> strengths in R&D and we are confident we are up to the task to this end we are exploring brand new innovations, including advanced designs in the areas of cooling and signal integrity.

Jason Phillips: We feel that Celestica is proven capabilities and our commitment to continued innovation will allow us to remain a leader in this market through future upgrade cycles.

Speaker Change: So let's take a server business has had another strong year driven by AI ml compute which comprises the vast majority of our portfolio.

Speaker Change: With more than 20 years of experience supporting OEM customers and high performance servers.

Speaker Change: Thats, the engineering expertise and scale manufacturing capabilities to build compute platforms designed around the latest generation of AI silicon from various vendors.

Today, we are concentrated primarily on designs using custom ASIC silicon.

Speaker Change: Have a proven history supporting multiple generations of these platforms for one of the worlds leading hyperscale.

Speaker Change: We believe our engineering support is a key differentiator we.

Speaker Change: We specialize in highly customized designs with demanding complexity and technical requirements. Our expertise spans a wide range of areas critical with its hardware from power density and form factor optimization to specialized testing capabilities and fully integrated rack scale solutions.

Speaker Change: Thermal management is a critical area, where celestica has a strong history of proof points. We currently support programs utilizing both air cooling in single phase liquid cooling techniques. However, with the rapid advancements in AI silicon power usage and thermal output are increasing dramatically and as a result, the requirements for cooling.

Speaker Change: Solutions are fast evolving.

Speaker Change: <unk> is looking to position itself to be a leader with the next generation of cooling systems for HTS team has developed proof of concept designs for pump to face cooling systems, and we are exploring advanced techniques for improving heat transfer between high powered silicon and coal plates, which are applicable to both single and dual phase cooling systems.

Speaker Change: We are also actively developing prototypes for liquid emerging solutions.

Speaker Change: We will look to leverage these advanced capabilities to support our customers on successive generations of their AI ml server programs as well as to incorporate our thermal management systems in the future HTS designs for AI ml servers and full rack solutions.

Speaker Change: In 2020 for the AI server market is expected to reach approximately 100 billion.

Speaker Change: And this figure is projected to grow to over $250 billion by 2027.

Speaker Change: The top five hyperscale or account for nearly 70% of spending today driven by the substantial investments in the backend infrastructure required to train the latest generations of AI models.

Speaker Change: And while they are expected to continue to comprise the majority of the AI server market in the coming years, we anticipate that digital native companies will claim a larger share of spend over time.

Speaker Change: We are also seeing custom ASIC platforms play an increasingly important role in AI infrastructure, particularly for Hyperscale and specialized AI cloud providers.

Speaker Change: AI applications become increasingly specialized and models grew larger the benefits of custom silicon platforms become more pronounced offering potential advantages such as power efficiency optimize performance and cost effectiveness.

Speaker Change: We continue to be very optimistic on the potential for growth within the custom ASIC segment of the AI server market.

Speaker Change: <unk> is pursuing a multifaceted strategy to capture these growth opportunities and diversify our AI ml compute business.

Speaker Change: Firstly, we are actively pursuing programs with new server customers, including digital native companies for this and we are pleased to formally announced a strategic relationship with a growing AI player.

Speaker Change: Rock, we have developed an innovative new proprietary silicon platform the language processing unit, which specializes in accelerated inferencing, where.

Proud to be supporting block with the manufacturing of their AI ml servers, and full rack solutions with programs expected to begin ramping in early 2025.

Speaker Change: Our hyperscale customers also remain pivotal to our AI ml server growth plans, we've already secured the next generation of liquid cooled custom ASIC based server programs with our largest hyperscale customer that to ramp up in mid 2025 as well as additional programs that are expected to ramp in 2026 and.

Speaker Change: Beyond.

Speaker Change: We are also in discussions with a number of other hyperscale customers regarding potential engagements for both customer and merchant silicon platforms with expected start dates ranging from late 2025 to as far out as 2027.

Speaker Change: Finally, we are investing in our own HTS designed for full system rack scale solutions for AI ml compute.

Speaker Change: While we are initially collaborating with AMD, our platform will be capable of supporting both merchant silicon and custom Asics.

Speaker Change: We see a growing need within the marketplace for modular solutions that can be customized to accommodate a diverse range of AI silicon options.

Speaker Change: By leveraging our engineering expertise and cooling systems power management, and rapid integration and orchestration along with our existing HTS solutions for switching and storage. We believe that we will be able to create an attractive offering that can satisfy the needs of hyperscale AI cloud and enterprise customers alike.

Moving onto our storage portfolio.

With nearly 30 years of history in the storage market, we're able to leverage our expertise to deliver high performance storage products for the data center as well as enterprise.

Speaker Change: The demand for storage products as yet to experience a significant step up in the manner, which we have seen recently in the server and switching markets. However, with a surge in AI workloads, we believe the market for storage products will continue to trend towards high performance and high density storage technologies.

Speaker Change: Our storage business will continue to play an important role in the plans for both our EMS and OEM offerings as our engineering.

Speaker Change: Hearing expertise and proprietary designs can be seamlessly integrated into our rack scale solutions.

Speaker Change: To support our ability to capture this opportunity we can.

Speaker Change: Continue to invest in the development of next generation storage solutions with industry, leading density power efficiency and thermal management, leveraging the latest technology and high capacity drives and buses.

Speaker Change: To wrap up we continue to see investment in AI reshaping the hardware landscape over the coming years driving innovative changes in technology and impressive growth as a leading player in both EMS and OEM offerings across the data center. We believe this presents us with a tremendous opportunity to build on our <unk>.

Speaker Change: Recent successes and to grow along with it with.

Speaker Change: With that I'd like to turn it over to Todd Cooper to talk to you about our Ats segment.

Todd Cooper: Thank you, Jason and good evening to all of you joining us on the call as you can see on the screen. Our Ats segment is expected to deliver approximately $3 2 billion of revenue. This year as part of Celeste because overall strategy, we remain committed to growing our presence in diversified markets, which we believe offers a number of strategic advantages and synergies with the rest of <unk>.

Todd Cooper: Business. Among these are diversification exposure to markets with strong structural tailwind and a competitive environment that is limited by strict regulatory hurdles and capability requirements.

Todd Cooper: Despite facing demand headwinds in certain markets. This year, we have demonstrated resilience by achieving an anticipated 11% average annual revenue growth rate over the past three years. This speaks to the attractiveness and durability of our portfolio over the long term and.

Todd Cooper: In 2025, we expect to see our Ats segment revenues grow in the low single digits percentage range, we will discuss the end market dynamics driving this growth shortly.

Todd Cooper: Overall, our strategic priority for the Ats segment is to achieve greater scale in select markets in an effort to drive a more optimal mix within our portfolio attaining this balance will allow us to reach greater benefits of diversification reduce volatility and better weather cyclical market downturns.

Todd Cooper: We are optimistic about the growth roadmap that we've laid out for each of our Ats businesses and continue to have confidence in our ability to maintain our long term target revenue growth rate of 10% or more for the Acs portfolio.

Todd Cooper: So now, let's move on and discuss the outlook and growth opportunities in each of our end markets, starting with industrial and smart energy.

Todd Cooper: Our industrial and smart energy portfolio, which is expected to achieve $1 $3 billion in revenue. This year is broadly diversified across markets such as energy storage energy generation EV charging telematics factory automation and on vehicle.

The key value drivers in our industrial and smart energy portfolio include our strong manufacturing presence close to home, including our expanded manufacturing presence at our Monterrey, Mexico site as well as our expertise in new product introductions, which we have leveraged to support a number of early stage customers as well as larger more established companies working.

Todd Cooper: With new technologies.

Todd Cooper: After a year of soft demand driven by macro uncertainties and customer inventory burn down.

Todd Cooper: Are seeing signs of market stabilization.

Todd Cooper: We remain cautiously optimistic on returning to growth in 2025 with demand expected to strengthen in the back half of next year.

Todd Cooper: Over the long term, we continue to see many attractive opportunities supported by favorable trends in the sub markets. In fact industry forecast suggests that base demand in our smart energy markets, including EV charging energy storage and energy generation are expected to grow at an average of 13% annually through 2027.

Todd Cooper: Given by government spending on Green energy infrastructure and supported by Bill such as the inflation reduction at <unk>.

Todd Cooper: We are also seeing solid opportunities in battery energy storage systems.

Todd Cooper: <unk>, both utility scale and residential applications.

Todd Cooper: Let's move on to A&D today, our A&D business is comprised of approximately 60% commercial aerospace and 40% defense and is on track to reach approximately $900 million of revenue in 2024.

Todd Cooper: We serve major aircraft subsystem and component Oems as well as defense contractors from our sites in Malaysia, Europe and North America.

Todd Cooper: We view ourselves as the leading A&D supplier within the EMS industry supported by over two decades of developing our key capabilities and proof points with our customers.

Breaking it down by segment and commercial aerospace that general demand backdrop remains stable with growth in our base business expected to normalize after several strong years of being bolstered by recovery from the pandemic.

Todd Cooper: Looking at our commercial portfolio in 2025, we have made the decision not to renew expiring program that is breakeven and profitability at the same time. We have recently won a high margin licensing program with the same customer as a result in 2025, we expect A&P revenue to be approximately $100 million lower year over year.

Todd Cooper: <unk>, but with higher operating profit dollars and margins.

Todd Cooper: In defense, we are seeing strong traction with new opportunities driven by demand from European and Western governments, which are expected to drive robust growth.

Todd Cooper: We're also leveraging our engineering capabilities to pursue growth opportunities in emerging sub markets, including space.

Todd Cooper: Manned aerial vehicles and electric vertical takeoff and landing aircraft.

Todd Cooper: Let's next move to capital equipment.

After a challenging 2023 and capital equipment, we have seen demand begin to recover and we had revenues of approximately $700 million in 2024 up 16%.

Todd Cooper: Our capital equipment business supports the world's leading wafer fabrication equipment Oems through our network of sites in Malaysia, South Korea, and the U S.

Todd Cooper: We believe that our extensive capabilities and depth of experience position us as a leading EMS provider in this market.

Todd Cooper: This is evidenced by our strong share gains over the past several years, including our newest logo ASML holdings, with whom we have begun ramping critical lithography programs.

Todd Cooper: In 2025, we expect growth to be supported by these ramping programs in lithography as well as continued recovery in base market demand driven primarily by memory.

Todd Cooper: Further we continue to make investments in our footprint and capabilities to better service, our customers on leading edge technologies and memory logic lithography and AI devices.

Todd Cooper: We've added new clean room capacity over the last 12 months in all of our capital equipment sites globally as well as additional technical personnel to support demand for both domestic U S and Asia production.

Todd Cooper: We believe that our domestic capacity and strategic footprint within Asia will be critical differentiators in the years ahead as geopolitical considerations.

Todd Cooper: The increase in government restrictions on the semiconductor industry.

Todd Cooper: And the need for localization continued to intensify.

Todd Cooper: And finally, let's move to our health Tech business and our health Tech business, we anticipate revenues of approximately $300 million in 2024.

Todd Cooper: Today, we serve customers across a number of critical technologies, leveraging our high reliability manufacturing capabilities at FDA registered an ISO certified facilities looking ahead to 2025, our business is expected to see modest growth as we ramped new programs and shift our mix.

Todd Cooper: Towards finished devices, while continuing to expand our health Tech engineering services offerings.

Todd Cooper: Our long term growth plans in health Tech are primarily focused on the fast growing diabetes care imaging diagnostics and surgical instrument markets.

Todd Cooper: To support this growth we have made investments in our product level engineering capabilities, enabling us to support our customers' end to end from full box build the finished products the testing and regulatory certification we.

Todd Cooper: We also continue to invest in our advanced manufacturing competence, most recently, adding to our automation capabilities at our Galway Ireland site.

Speaker Change: With that I would now like to turn the floor back over to Mandy, who will discuss our financial outlook for 2025, and our capital allocation priorities.

Mandy: Thank you Todd.

Since completing our strategic transformation in 2020, plus has made significant progress on our path towards achieving the level of financial performance. We had in 2024, which as Rob mentioned is on track to be another record year.

Mandy: Look back at the past five years showcases our track record of consistent growth and improvements in profitability.

Mandy: Assuming the achievement of our 2020 outlook, we will have added nearly $4 billion in revenue over the last four years financing to a 14% CAGR since 2020.

Mandy: At $9 $6 billion in revenue, we are on track to close 2024 up 21% during the period, where the majority of our mes industry peers are seeing revenue decline.

Mandy: Profitability also continued to improve as our portfolio's mix has shifted towards higher margin ODM business and high complexity engagement in our Ccs segment.

Mandy: Our outlook for 2024, if achieved will have seen non <unk> operating margins rise by 300 basis points.

Mandy: And adjusted EPS, nearly four times higher compared to 2020.

Mandy: Our ability to efficiently manage our working capital during this period of strong growth Athena generate positive adjusted free cash flow in each quarter for over five years.

We believe our performance speaks to our disciplined financial strategy, the resilience of our portfolio across both of our segments and the strength of our team.

Mandy: Looking ahead at our early estimates for 2025.

Mandy: We anticipate revenue of $10 4 billion, which would represent growth of 8% compared to our 2020 for outlook.

Mandy: Our Ccs segment is expected to see growth in the low double digit percentage range, driven primarily by the ramping of the energy programs with Hyperscale and new wins in AI ml compute.

Mandy: In our Ats segment, we anticipate low single digit percentage growth as our industrial and capital equipment businesses are expected to experience a recovery in demand, partly offset by lower revenue in our A&D business due to a decision not to renew expiring program with an aim to improve overall profitability.

Mandy: <unk> operating margin is expected to come in at six 7%, which would be 20 basis points of margin expansion compared to our 2024 outlook driven by operating leverage and improved profitability in both segments.

Our outlook of adjusted EPS of $4 42 is 15% higher compared to our 2020, where outlook ahead of our long term target CAGR of 10% or more.

Mandy: Capital expenditures are expected to remain between one 5% and two point year a percent of revenue within our historical range.

Mandy: Finally, we are anticipating adjusted free cash flow of $325 million, which would represent.

Present growth of 18% over our 2020 for outlook.

Mandy: Our current outlook for 2025 represents our high confidence view based on current discussions with our customers. These.

Mandy: These conversations are active and ongoing and so we look forward to providing you with an update in January.

Mandy: Beyond 2025, we are encouraged by these discussions which are supported by significant new wins and third party forecast for growth in our underlying market.

Mandy: We currently expect the momentum we are seeing to continue into 2026 and the medium term.

Mandy: Moving on to our capital allocation priority.

Mandy: Our overall framework for capital allocation remains consistent over the long term, we aim to return 50% of our adjusted free cash flow to shareholders and reinvest 50% back into the business.

Mandy: Since the beginning of 2014, we have reduced our share of their planning by 36% in that time, we've returned close to $1 billion in capital to our shareholders through buybacks.

Mandy: We will continue to deploy capital towards buyback on an opportunistic basis.

In addition, we remain focused on opportunities to reinvest back into the business through R&D strategic investments in our manufacturing footprint and capability and M&A.

Mandy: With respect to M&A, we evaluate potential targets on a continuous basis.

Mandy: As always we continue to apply a strict filter to our evaluation process for any acquisition.

From a strategic perspective, we target acquisitions, which will allow us to enhance our capability and accelerate our scale in selected markets.

Mandy: Our financial hurdles required that our targets be adjusted EPS accretive in the first year and have a return on investment above our cost of capital by the second year or sooner.

Mandy: Given our conservative level of leverage and strong adjusted free cash flow generation, we have the financial capacity and the appetite to execute on accretive acquisition to the opportunity presents itself.

Mandy: Finally, I'd like to discuss our financial performance and our current valuation relative to our peers in recent period plus that has consistently delivered very strong financial performance that are diverging meaningfully from that of our peers in the EMS industry.

Mandy: On a trailing four quarter basis as of the end of the third quarter. We have delivered revenue growth of 18% compared to an average of a 12% decline for our E&S peer group. In addition, our non <unk> operating margin has expanded by 90 basis points and our adjusted EPS is up 60% over the same period.

Mandy: We believe our operating performance over the last 12 months has exceeded our peer group and our outlook through 2025 continues to be very strong. However, our 12 month forward price earnings multiple remains in line with or below the EMS peer group average.

Mandy: And our view, let's get consistent strong financial performance is not accurately reflected in our valuation and presents an opportunity for greater shareholder returns.

Speaker Change: With that I'd now like to turn the call back over to Rob for his closing remarks.

Rob: As we conclude our investor meeting I want to emphasize that our business has a great deal of momentum in our favour.

Rob: The past several years, we have accumulated a track record of delivering strong financial performance.

Consistent operational execution.

Rob: We've also proven our ability to evolve.

Rob: Organically built on leading ODM offering we will continue to execute on our strategic roadmap.

Rob: Which will position us to capitalize on the significant growth opportunities that lie ahead, and ultimately deliver value for our shareholders.

Rob: Thank you for your time and continued support.

Rob: That concludes our presentation today, and we are now ready to move into Q&A.

Rob: A reminder, joining mandate benign for Q&A will be Jason Philips, Todd Cooper, and Steve Goulart, Operator, I will now turn the call over to you.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your telephone keypad.

Speaker Change: Hey, a pump that Johanna has been raised and should you wish to cancel your request. Please press star followed by the two <unk>.

Speaker Change: Are you seeing your speaker phone please lift the handset before pressing any keys I would like to advice everyone wanted to have a limit of one question and one follow up. Your first question comes from the line of Daniel Chan from TD Cowen. Please go ahead.

Daniel Chan: Hi, good afternoon, congrats on the strong quarter and guidance a couple of questions on the communications side meta put out designs of its new data Center networks last week and that included some Cisco equipment and the new networks can you just talk about the potential wallet share dynamics with Cisco coming in as an additional supplier.

Speaker Change: Steve you want to take that.

Daniel Chan: Sure.

Steve: Thanks, Dan.

Steve: I think when you think about Hyperscale is and how they make the decision, but it tends to be a balance between what's the best solution for particular application and what does the product availability.

Steve: To meet those deployment objectives.

Steve: Which is why we continue to invest in R&D and work closely with key technology providers to ensure that our platforms are timely and relevant to our target customers in the target markets.

Steve: I believe as a result of the pandemic and the period of constraints that followed many of our customers realize the need to have a backup plan or a secondary source.

Steve: Seeing some of our customers qualify off the shelf or OEM solutions as a backup plan rather than creating another custom platform or solution.

Steve: But fundamentally receivables category of companies still believes that they can.

Steve: But optimize hardware can be a competitive differentiator for them.

Steve: Don't want to pay for what they need and only what they need and they want to be able to implement new innovations at their own speed.

Steve: Therefore, we haven't really seen a meaningful shift in any hyperscale or behaviors, which plays to our strategy and our strengths.

Jason Phillips: Hey, Dan This is Jason I would just I would just add to that as well in terms of how we compete.

Jason: We believe as a north American based ODM that has been delivering system and rack level solutions across all the core technologies in the data center.

Jason: That we are in an advantaged position and while we talk about our HTS portfolio and offering and equated to an ODM offering.

Jason: I would highlight that not all odm's value propositions and capabilities are equal when we look at what we're doing in the HTS space in particular, you've heard it from Stephen in our prepared remarks.

Jason: A lot of focus on customization for what I would say.

Jason: This customization for optimization.

Jason: Not just at a solution level of design level, but also at a supply chain level I mean, we're anticipating.

Jason: Geographic requirements are changing rapidly we have been accounting for that as we've been developing our engineering centers of excellence as well as our our manufacturing sites and accounting for that as well as customization of the model you heard Steve talk about our customers are looking to.

Jason: For specific offering and thats, what they want they don't necessarily want more than that that's another area of strength for us as well.

Speaker Change: That's very helpful. Thank you so much for all the color the other opportunity I wanted to dive into a little bit. It was on the backend networks that seems to be a large opportunity for Ethernet vendors like yourself. So good to see you guys are leading that charge and 400 G as well as it sounds like an 800 G.

Speaker Change: How are your discussions with customers going about the backend opportunity are you guys winning share there or are you seeing some share shifts between the different vendors.

Speaker Change: Steve you want to start with that one.

Speaker Change: Steve.

Steve: Apologies, yes, we see future solutions are really continuing the trend towards Ethernet for both scale up and scale out applications.

Steve: Leaving <unk>.

Steve: Innovation and speed and density are causing us and we see further improvements.

Steve: Improvements coming in this technology with things such as ultra Ethernet for the for the scale AI applications.

Steve: Overall, we see a significant increase in Ethernet connectivity and bandwidth to support many of the AI ml systems.

Steve: Clothing, those that are based around both merchant and.

Steve: In custom Asics are proprietary asics.

Steve: At the same time, we see just generally AI ml is generating a lot more data requiring a lot more networking required to move that data.

Steve: And further our Hyperscale is are adjusting their network architectures from centralized to more distributed architectures.

Steve: To optimize for latency or security or probably more importantly, lately the availability of power and so this is requiring more and more and differentiated connectivity solutions, which we are well positioned to support.

Steve: And we've consistently we anticipate seeing continued strong demand for these products going forward.

Speaker Change: And then I would just add as well in the spirit of the growing Ethernet networking opportunity.

Speaker Change: We've talked about pivoting and taking our roadmaps and pivoting from data center and to the campus and the edge and we've been rounding out our roadmaps to be applicable there and we're seeing a lot of I'd say traction and an uptake as we build out our capability not just our roadmaps, but also are our software.

Speaker Change: <unk> abilities are open source software and sonic areas like that that are also creating more opportunities on the networking side for us as well.

Speaker Change: Great. Thanks, I'll jump back in the queue.

Speaker Change: Thank you and your next question comes from the line of Robert Young from Canaccord Genuity. Please go ahead.

Speaker Change: Hi, good evening.

Would love to dig into this grok win why was Celesio chosen was it was a manufacturing.

Speaker Change: Partner in the silicon influential.

Speaker Change: Is there any hps revenue attached to this.

Speaker Change: And then you had called it a strategic relationship.

Speaker Change: Is there a single source or are there multiple vendors there.

Speaker Change: Couple of crammed into one.

Speaker Change: Steve you want to start with that one.

Steve: Sure sure. So we see the <unk> as I've mentioned earlier is a significant win for us in the end.

Steve: Another important proof point for us entering the AI ml compute space.

Steve: Certainly the industry, leading position that we've established on the networking side.

Steve: <unk> helped us to be credible in this space because of a lot of the underlying competencies and.

Steve: And the technologies that we developed in support of those programs are portable are transferable to.

Steve: This type of product.

Steve: The initial engagement includes manufacturing predominantly work today they have.

Our sources from providing some of the early preproduction prototype type.

Steve: Type systems.

Steve: Will enter with our current generation of product, but the plan is to.

Steve: An increased level of design participation or involvement going forward in future generations of our products, which will start nearly immediately so.

Steve: Very very happy to have that win in.

Steve: I think it will really help us build.

Steve: Competency and credibility for the future.

Speaker Change: What's the deal with their own go to market.

Speaker Change: Or was it done with a partner.

Speaker Change: I'm, sorry, I missed the first part of that.

Speaker Change: Oh, sorry, I was this done with your own go to market effort or where you brought to this relationship with maybe the silicon manufacturer like that.

Speaker Change: Good question Yeah. Good question. So it really was our own go to market and.

Speaker Change: We have a strategy a comprehensive strategy for us to participate in the increased level of AI ml compete spend across various market segmentation and.

Speaker Change: So this especially especially data center operator is one of the categories that we've selected and that we have aligned ourselves with in terms of our offerings.

Speaker Change: However, we have built very strong relationships with some of the key ecosystem.

Speaker Change: Technology providers, and oftentimes, we get endorsements or leads or.

Speaker Change: In some cases co marketing efforts that go on with these companies that ultimately resulted in the award decisions from these customers.

Speaker Change: Okay and then maybe second question just be around can you just give an update on the pace and the win rate of <unk> 800 gig programs are you still converting all of the 400 gig is it happening faster than you expected and is there any ASP difference that you can call out and then I'll pass the line.

Speaker Change: Yes, so certainly.

Speaker Change: Thinking about 800 gig is the continuation of the next generation of the 400 gig wins that we've had.

Speaker Change: Very happy with the outcome of several different.

Speaker Change: Sourcing initiatives with our customers that have resulted in us winning the 800 gig or next generation <unk>.

We have.

Speaker Change: Over half a dozen products that we're currently working on today many of those will lead to future iterations of those same products for specific applications or architectures and so we think it's a very significant.

Speaker Change: Positioned to be him here with 800 gig.

Speaker Change: With with other potential customers and.

And opportunities still in front of us.

Speaker Change: Most of those projects will all of those projects are very much on track.

Speaker Change: Have some pressure from customers to accelerate which is natural.

Speaker Change: And.

Speaker Change: And I think that we're continuing to see strong demand on those products.

Speaker Change: From an ASP perspective, certainly the silicon.

Speaker Change: Otherwise these designs.

Speaker Change: Design is going to be more expensive than our focus is really on value based pricing and not having pricing specifically tied to the value of a particular part of components, but from a revenue perspective, it will certainly improve the topline on the on a comparable volume.

Rob: Rob It's Matthew Pierce I'll just add on.

Speaker Change: Asps are going up, especially as you go from 400 G to 800 <unk> there is that uplift.

Speaker Change: The way to understand it as it impacts our business as we look at it on a on a portfolio basis.

Speaker Change: As you know we do also do.

Speaker Change: <unk> in the 100 G switches in 25 gig switches.

Speaker Change: And so from a portfolio perspective, when we look at the year over year change in ASP is between.

Speaker Change: Below 100 400 800.

Speaker Change: We're seeing probably around a low to mid single digit increase on the average ASD.

Speaker Change: And so of course, you can apply that to the switching business.

Speaker Change: It really comes down to the mix in the portfolio.

Speaker Change: Yes, Rob I would just just comment on the demand piece as well.

Speaker Change: Touched on the 408 energy transition and demand being strong.

Speaker Change:

Speaker Change: And some of our remarks today, you've heard the networking requirements. We expect when you're looking at data center rack today, 15% to 20% of it is going to comprise of networking. We expect in the next two to three years, but thats going to triple and so the AI infrastructure investment cycle and the workload is going to drive up the networking requirements.

Speaker Change: Firemen and with that we're just seeing very strong demand for 400 G remain in 2025 and beyond while we see some some very strong demand for 800 <unk>.

Picking up and in 2025 in terms of 800 G wins, another point to call out in particular.

Speaker Change: We've had I'd say outside of the Hyperscale and so we've had some enterprise customers.

Speaker Change: That have come back and we started having discussions on 800 gig and we had some competitors that were very aggressive with price to get to get to get in.

Speaker Change: Early on and performance has been a challenge and we're now circling back to those customers and having fruitful conversations, which I think represent another growth opportunity for us.

Speaker Change: Oh.

Speaker Change: Great to hear I'll pass the line.

Speaker Change: Yeah.

Speaker Change: Thank you and your next question comes from the line of Matt Sheerin from Stifel. Please go ahead.

Speaker Change: Yes, Thank you and thanks for all the information so far either.

Matt Sheerin: A question regarding the guidance for Ccs for next year low double digits, how should we think about growth in the communications segment versus enterprise, particularly with with the headwinds that you talked about with servers shall we expect enterprise to be down for the year.

Matt Sheerin: And which would imply communications up 20% plus so how should we think about that.

Speaker Change: Hi, Matt.

Matt Sheerin: Yeah, I think youre getting close to it.

Speaker Change: We continue to have a really strong outlook on enterprise overall on the server side in particular.

Speaker Change: As you know we are in the process right now of seeing a technology transition with our largest customer and so because of that timing delay.

Speaker Change: We will see some lower revenue in the first half of 2025 before it starts ramping again in the back half of 'twenty five and then we really do see that growth continuing because.

Speaker Change: We've already now been winning programs for new server.

Speaker Change: Programs, which are actually set to begin ramping in early 2026.

The overall growth trajectory for enterprise continues to be very strong.

Speaker Change: Because of that timing of that transition, which we've talked about for a couple of quarters now and we do expect enterprise to be down next year, and that's going to be more than offset though by very strong double digit growth to your point above 20%.

Speaker Change: In the communication side led by <unk>.

Speaker Change: Increasing levels of.

Speaker Change: Deliveries on 800 genes, which is primarily going into next year.

Speaker Change: Okay, Great and then just on the enterprise business.

Speaker Change: Clearly in communications that you have a moat right with it with that ODM strategy and your own design.

Speaker Change: But you can argue that within the <unk>.

Speaker Change: Enterprise server business.

Speaker Change: You've got at least two very strong north American competitors.

Speaker Change: All acquiring.

Speaker Change: Different technologies like like liquid cooling and power management and then you've got the Oems also.

Speaker Change: So it's spreading out in terms of.

Speaker Change: Our geographic diversification et cetera. So I guess the question is should we expect some some incremental pricing pressure in that business and and and.

Speaker Change: And what's your strategy around that and taking share versus being more disciplined.

Jason Phillips: Hi, Matt This is Jason maybe I'll start with.

Jason Phillips: What I would describe as our competitive differentiation and advantage in and the compute specifically AI ml and what I'd describe as proprietary compute.

Jason Phillips: First I'd start with we've been involved in highly complex custom AI ml systems and rack level solution now for for our.

Jason Phillips: Product program generations at scale, so that's a long time and I'd emphasize the keyword.

Jason Phillips: At scale it takes years to become confident in this area and then I would say it takes years on top of that to become proficient in that space. So well competitors will be looking to get in.

Jason Phillips: To do it at scale.

Jason Phillips: It's not easy it takes time.

Jason Phillips: And we've been making a tremendous amount of investments in that area. Both on the engineering as well as the manufacturing side.

Jason Phillips: To do that in terms of some of the announcements I mean, theres been a flurry of announcements around reference designs around partnerships.

Jason Phillips: Would say that.

Jason Phillips: That we were there at one point in time in our past, but we're well down the road in and beyond that innovating at a what I would describe as system level throughout the system and the rack level, we're working with our ecosystem partners to optimize performance at a system level ultimately to enable our customers. So instead of <unk>.

Jason Phillips: What an ecosystem partners has a certain spec of their solution or component can drive we're asking them.

Jason Phillips: We want you to solve for a system level Thats performing at this what can you do to get US there. So I think our innovation at a system in a rack level.

The amount of investment, we've been making and the time that we've been making it at.

Jason Phillips: <unk> is a competitive differentiator for us today, and moving forward and I would say that the.

Jason Phillips: The word is getting out in the industry, we've been fairly quiet about it we just stay focused on enabling our customers'.

Jason Phillips: But that growing.

Jason Phillips: The capability at scale.

Jason Phillips: <unk> is growing and then on the on the cooling side, we've talked about it in some of our prepared remarks.

Jason Phillips: We're well down the path there we've been working on a two phased POC for quite some time, we've got a lot of interest from customers. We're excited about where that can go at a system level, but also at a at a rack level and in leveraging our networking industry, leading networking position there as well.

Speaker Change: Okay, Great and then just on the pricing side or are you seeing more pricing pressure or expecting that.

Speaker Change: Dave you want to take that one.

Yeah. So I think it's a natural part of the process that our customers are looking for us to.

Dave: Drive competitive pricing as well as innovation, but really where we differentiate is on that innovation side.

Dave: We add a lot of value to our customers.

Dave: By getting involved very early in the product realization process.

All the way from design through NPI and launch into into product manufacturing in.

Dave: As you mentioned earlier, though or characterize those headwinds.

Dave: We really see this as normal technology transitions and some of it is the non linear nature of datacenter deployments.

Dave: And we're not really overly concerned as we've really recently secured the next generation of AI ml products from some of our existing customers as well as.

Dave: The introduction of some new customers such as rock and so further where we where we see our customers have made decisions to dual source and this is where we get some of the.

Dave: Direct competitive comparisons.

Dave: We typically enter those engagements as the lead partner engaging very early in the process as I mentioned.

Dave: And typically maintain.

Dave: 70, or near exclusivity for a period of time until the product is really stabilized and ourselves.

On the customer agree that has lower risk to bring on a second source. So we.

We continue to see the.

Dave: AI ml compute systems is another strong area of growth for us going forward.

Dave: Okay.

Speaker Change: I would just add add to that in terms of the year. The areas, where we are dual sourced on programs as Steve had mentioned I would say our performance.

Speaker Change: As allowed us to maintain the majority share there and we remain focused on.

Speaker Change: Staying at the top of our customer scorecards.

Speaker Change: Okay got it thanks a lot.

Speaker Change: Thank you and your next question comes from the line of Dennis Michelle <unk> from BMO capital markets. Please go ahead.

Speaker Change: Hi, good afternoon.

Starting off with a question for mandates, which is youre guiding for a six 7% margin in 2025, which is the same as you had.

Speaker Change: In Q3 as you are guiding for Q4.

Speaker Change: Any particular puts and takes to think about in terms of why you would be seeing some margin improvements with operating leverage next year.

Speaker Change: Okay.

Speaker Change: Yeah, Hey, Dennis good to hear from you.

Speaker Change: We're happy with the six 7% we had in the third quarter the highest in the company's history.

Speaker Change: Really nice to see.

Speaker Change: <unk> perform at the levels that they did.

Speaker Change: Can we expect Ccs to perform at that exact number every quarter from now till the end of 2025, maybe.

Speaker Change: But at the same time, we're taking into account that there are mix impacts along the way.

We are expecting margin improvement in overall Etfs.

Speaker Change: As we get some better operating leverage we talked about some of the portfolio.

Speaker Change: The actions that have been taken at a program level within A&D and so we do expect some improving level of.

Speaker Change: Our margin, but it's going to be more backend loaded overall, so we think right now the six 7% is something that we're highly confident in and we're really happy to see the flow to the bottom line to drive 15% EPS.

Speaker Change: Growth right now and again, we just want to kind of.

Speaker Change: I'd say reiterate two things one is it's our high confidence view.

Speaker Change: What we're giving right now for 2025 and in addition, it is October as well and so we do look forward as we get some firmer customer forecast over.

Speaker Change: Over the coming months to give an update in January.

Speaker Change: Great.

Speaker Change: And then a question probably for Jason which is.

Speaker Change: If I look at your mix within Ccs of of the non Hyperscale business.

Speaker Change: Currently OEM business it seems like that's.

Speaker Change: Relatively flat or will be down a little bit in 24 versus 23.

Anything to call out there or is that just reflective of your focus primarily the higher margin hyperscale earnings PFS opportunities or any call outs.

Speaker Change: Yes, that's a great great question Dennis.

Speaker Change: I'm actually I'm pleased with.

Speaker Change: One the growth of the overall business, but also the diversification inside the overall portfolio.

Speaker Change: We've seen some really strong diversification inside the hyperscale business.

Speaker Change: And then additionally, we've got our portfolio of solutions and services businesses, which we spent a lot of time investing in creating capability and.

Speaker Change: And building out the front ends and we're starting to see real fruit from those efforts now.

Speaker Change: So portfolio of solutions again is leveraging our HTS platforms as they are oftentimes enabled with open source software like Sonic.

Speaker Change: And in that business I am expecting that business to triple over the next three years and we've recently just secured a major win with a large retailer that you would know by name.

Speaker Change: As an example of one of the proof points and the success, we're having in that business and were establishing a number of channel partnerships. There. So I feel good about the growth prospects there and.

Speaker Change: And the extent of the value proposition that those customers leverage from US and then when we look at our services business with the recent acquisition of NCS Global we've really bolstered our our overall asset disposition capability.

Which is going to help us help our customers manage their assets throughout their product lifecycle. When you look at the amount of infrastructure.

That is being deployed now the upgrade cycles that are going to be happening and we're very well positioned to help service their services needs as well as their it asset disposition requirements and when I look over the next three years I expect our <unk> business to triple as well. So overall pleased with the progress.

I'm excited about what 2025 brings.

Speaker Change: Alright, I'll pass the line thanks.

Speaker Change: Thank you and your next question comes from the line of Steven Fox from Fox Advisors. Please proceed.

Steven Fox: Thanks, Good afternoon I.

Steven Fox: Two questions first off on the <unk>.

Steven Fox: Ats prospects.

Steven Fox: Topline prospects for getting back to 10% Rev.

Steven Fox: Revenue growth can you just sort of walk through the risks and opportunities there.

Steven Fox: This is the second year being below it understanding.

Steven Fox: Understanding of his track record of growth.

Like where.

Steven Fox: Where do you see the turn in that business to get back on that type of trajectory and then I had a follow up.

Steven Fox: Okay.

Steven Fox: Steven.

Steven Fox: Todd Cooper here good evening. Thanks, Thanks for the question.

Todd Cooper: I'd say from an Ats point of view, we are focused on on getting back to the 10% year over year growth.

Steven Fox: We have been impacted I think and I've run.

Steven Fox: A number of your reports and I think you covered it quite well, but in the in our industrial segment, which is the largest of the four ats segments.

Steven Fox: You've really been impacted over the over the last year by what I'll call a bubble of customer inventory that was really created coming out of COVID-19 and the extreme material constraints.

Steven Fox: That happened in 'twenty, one 'twenty two first half of 'twenty three.

Steven Fox: We left a lot of our customers with just a significant amount of inventory they had they had to burn through.

Steven Fox: That's been we've been partnering with our customers they've been working through that inventory over the last 12 months.

Steven Fox: We see the industrial market broadly beginning to stabilize.

Steven Fox: And with with a path to return to growth.

Steven Fox: Next year.

I say I say all of that again in context of our largest segment with with the one with the one caveat that EV Chargers, maybe to caveat EV Chargers and factory automation, which comprise our.

Part part of our industrial segment, we think they are still sitting on.

Steven Fox: Elevated levels of inventory really driven by the the high expectations for those businesses.

Steven Fox: The reality of their demand.

Steven Fox: See positive demand not negative, but we think in those two areas in industrial are likely to be the second half of next year before they returned to more to more normal.

Steven Fox: More normal demand.

Steven Fox: So I'd say, that's probably been the largest attractor capital equipment has been has been strong this year candidly stronger than we expected we were seeing another strong year.

Steven Fox: Year ahead in <unk>, and 'twenty, five and even 26 beyond that.

Steven Fox: If you look at the UBS report that came out in September.

Steven Fox: Most analysts still as many of our customers still projecting a trillion dollar semiconductor.

Steven Fox: Market buy.

Steven Fox: By 2030, which would imply $150 billion to $171 billion of semiconductor equipment.

Steven Fox: Versus the $96 million level, we're at we're at today.

Steven Fox:

Steven Fox: And then in health Tech are smallest bell and I'll pause after that and health Tech, which is our smallest segment.

Steven Fox: We've actually won a number a large finished product programs in diabetes in imaging and diagnostics because their finished products. They take two to three years.

Steven Fox: To ramp we're in the early stages of those ramps and I fully expect that our health Tech business will double based on again this already won and ramping business over the next three to four years.

Speaker Change: Great. Thanks, Todd that's really helpful. And then just as a follow up if I think about just stepping back big picture on the Ccs business.

Speaker Change: It seems like the Holy Grail is to be doing as much as you can on the rack that you showed on slide 11, and you've sort of alluded to different ways that youre going about sort of leveraging.

Speaker Change: Different component wins into more system wins et cetera can you can you sort of give us perspective on on that vision and the vision for services like how much does that sort of contribute to growth now versus what it could be and what kind of work you have to do to really where possible gain more share of wallet.

Speaker Change: At like Big customers.

Speaker Change: Hey, Stephen this is Jason yes. So.

Jason: I mean ultimately that is that is the goal is to enable our customers, which is with as many of the systems and the rack as possible.

Speaker Change: We made a very conscious decision.

Speaker Change: Back in 2009, when we started an HTS and ODM to focus at a system level and we had a very strong <unk>.

Speaker Change: George position, then we continue to today doing business with four of the top six and now taking what I would call our enterprise class storage solutions into the Hyperscale or market, which has got some exciting potential.

Speaker Change: And then we developed networking in this industry, leading networking position now focused very much on the high end of the data center.

Speaker Change: 400, <unk> was a big breakthrough we've now moved into 800 <unk> secured all the wins and 800, where we had 400 G engagements and we just announced a big one that six terabyte win.

Speaker Change: What I would say an exponential amount of interest.

Speaker Change: From 800 to one six that continues to grow and so we've got an industry, leading position there and the merchant side of silicon.

Speaker Change: And then AI ml compute where we've just announced in addition to having a what I'd call an industry leading customer ASIC.

Speaker Change: <unk> position.

Speaker Change: We are developing a modular HTS AI ml platform that we'll be able to support both merchant and custom silicon tight and we're very excited about the prospects there and we just recently announced a partnership with A&D, where we're going to prove that out on my $3 25.

Speaker Change: So you can see our progression from 2009 to where we are we've gone from we remain focused at innovating at a system level and enabling our customers with optimized solutions for their applications and for their software and that naturally progresses and translates in Iraq level solutions, where we're doing.

Speaker Change: I would say more rack level orchestration and it's different than just system integration its rack level orchestration.

Speaker Change: For our customers. So again, we're going to remain focused on enabling them.

Speaker Change: We've been making significant investments since 2009 were approaching half a billion dollars of R&D investment as we approach the end of 2024.

Speaker Change: All of that is culminating into a robust portfolio of system and rack level solutions.

Speaker Change: Great that's great perspective, thank you very much.

Speaker Change: Thank you and your next question comes from the line of Jesse <unk> from <unk>. Please go ahead.

Speaker Change: Hey, good evening, just coming back to the to.

Speaker Change: So the digital natives.

Speaker Change: There are a lot of the discussions that youre, having with this group or are they kind of like the <unk>, where it sounds like it's starting off as manufacturing and then the idea is eventually to move into design or are you having design discussions with some of these parties already.

Speaker Change: Steve why don't you take that one.

Steve: Yes, I think I think it's really both but in many cases.

Steve: When we look at these kinds of opportunities one of the key decision criteria when we're assessing the strategic fit.

Steve: These companies as a potential customer.

It was really about.

Steve: The opportunity to have more design involvement in.

Steve: And to have a broader offering or have them need the broader offering that we can provide so so it's not unusual to start the relationship on current generation product.

It helps kind of as a pipe cleaner it allows us to get familiar with each other and familiar with the products.

Steve: Some some real real time experience thats applicable into the next generation. So it's not uncommon to start off that way. However, we have others where.

They look at.

The portfolio of platform solutions, but we have they look at ways that they can potentially iterate and customized.

Steve: And in some cases use as is.

Steve: In their infrastructure and their racks and so that often leads to.

Steve: A fair amount of HTS participation right from the beginning.

Steve: Yeah.

Steve: That's helpful and and and if you could can you maybe just characterize the aggressiveness in terms of spending like are they ready to really you know open the wallet or are they still you know.

Steve: Trying to solidify their planning.

Steve: Yes, it's a hit.

Speaker Change: It varies I hate to give the depends answer, but it kind of depends on where they are alert and there.

Speaker Change: Development.

In some cases these are emerging companies.

They have.

Speaker Change:

Speaker Change: Some niche kinds of.

Speaker Change: The technologies in.

Speaker Change: And they have a market that's very interested in those kinds of solutions.

Speaker Change: <unk> so if it.

Speaker Change: It does it does vary a bit from from customer to customer but.

Speaker Change: So again part of our criteria and we look at the kinds of companies that we think we can really bring differentiated value to and that we want to align with.

Speaker Change: And Jesse I would just add to that.

Speaker Change: With these companies, there's a willingness to leverage.

Speaker Change: A broader portion of the value proposition that we can deliver.

Right away, sometimes it takes time to build up that relationship with customers, where they take more advantage of the value proposition that we can help enable them with.

Speaker Change: Stay with this customer class.

Speaker Change: A greater willingness right out of the gate to get to get scaling as quickly as possible and leverage.

Speaker Change: Many of the services that we offer.

Speaker Change: That makes a lot of sense, thanks for that I'll pass the line.

Speaker Change: Thank you and your next question comes from the line of Paul <unk> from RBC capital markets. Please go ahead.

Speaker Change: Alright, thanks, very much and.

Paul: Good afternoon.

Speaker Change: High level question on customer mix and diversification within Ccs.

Speaker Change: Think about the opportunity with digital natives.

Large tier one hyperscale ours are still will be a large portion of the market now how do you see.

Speaker Change: And your opportunity with other large tier one hyperscale or.

Speaker Change: And what's the strategy to drive in and capture more share with those.

Speaker Change: Hey, Paul maybe I'll start and then Steve can add some color.

Speaker Change: Color here.

Speaker Change: So we continue to do business with the top five hyperscale.

And I would say I am very pleased with the amount of diversification as I mentioned a bit earlier, that's taken place there outside of our largest customer we've seen tremendous growth with our other hyperscale or customers.

Speaker Change: And we've got I would say very promising discussions ongoing in terms of.

Speaker Change: Building upon that growth.

Speaker Change: So so strong diversification. Unfortunately, we cant provide too much color there in terms of the details, but but pleased with the progress we're making there.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: I would just add to that that I.

Speaker Change: I mentioned earlier, our comprehensive strategy to participate across many of these growing markets specifically are those being driven by AI and ml applications silicone.

Speaker Change: The Hyperscale is with cloud services and specialized clouds.

Speaker Change: The large enterprise.

Speaker Change: <unk> been working with Oems.

Speaker Change: Working through channels.

Speaker Change: The address some of the SMB opportunity. So so we have a strategy to go broad across this one when we think about the hyperscale is they tend to be.

Speaker Change: The drivers or the pioneers of new technologies and oftentimes those technologies have a long life. After the Hyperscale is have moved on to the next thing so.

Speaker Change: It's always part of our strategy to look at opportunities to leverage the investments that we've made.

Speaker Change: The scale that we've achieved in the relationships, we have with the ecosystem partners too.

Speaker Change: Have compelling solutions across that broad market.

Speaker Change: Thanks for that and then follow up question I know you've discussed pricing.

Speaker Change: Yeah.

Speaker Change: And looking at this market.

Speaker Change: Yeah.

Speaker Change: How our Hyperscale is at this point or are they taking price into into consideration is one of the top priorities yet do you expect that that would happen.

Speaker Change: At some point in the future, where they may be more price sensitive.

Speaker Change: Maybe what they have been in the last 12, 18 24 months or so.

Speaker Change: Hey.

Speaker Change: Yes.

Thanks for the question.

Speaker Change: Great.

Speaker Change: But as I mentioned before when we think about pricing in the Hyperscale is in their approach to pricing.

Speaker Change: Yes.

Speaker Change: There's always a component of pricing.

Speaker Change: Availability and performance and.

Speaker Change: Ease of doing business or the other criteria I think they usually assess their suppliers based on and oftentimes with leading edge new technologies, the performance and availability as a key driver.

Speaker Change: Follow closely by pricing and so.

Speaker Change: As we think about just the pricing piece of that as I mentioned before it's really about.

Speaker Change: Moving to a more value based pricing and finding more areas are opportunities for us to add value.

Speaker Change: The overall system, so theres a number of <unk>.

Speaker Change: Versus buy decisions that occur within something as complex as the rack.

Speaker Change: Theres Commie modules Theres next theirs.

Speaker Change: Other subsystems CPU modules on power and complex was those kinds of things and so we looked at the ways that we can add value across the entire rack or the entire system.

Speaker Change: And which contribute to stronger pricing.

Speaker Change: We also like to look at ways to gain control of key commodities, so sometimes our hyperscale customers like to have source control.

Speaker Change: Stay.

Speaker Change: Closely aligned to some of the key commodities, but.

Speaker Change: We're always finding ways to become more competitive there and with some commodities.

Speaker Change: When you think about it the only the only companies that buy more volume than Hyperscale is are companies that are aggregating the demand in several end users like ourselves and so we're always looking for ways and working diligently to find in terms of opportunities.

Speaker Change: To ensure that we're pricing remains competitive and our solutions are compelling.

Speaker Change: Thanks for taking the questions.

Speaker Change: Thank you and your next question comes from the line of Todd Cooper.

Speaker Change: The line is from CIBC. Please go ahead.

Hi, good evening, everyone. Thanks for taking my question.

Todd Cooper: I was wondering if you could bridge the gap you talk about.

Todd Cooper: Roughly 30% growth in Ccs end markets, yet when we look at Hyperscale or Capex for 2025, it's more or less low double digit growth and I'm just wondering.

Todd Cooper: Why is it that low end.

Todd Cooper: Are you basically implying in your views.

Todd Cooper: That growth rate is actually going to accelerate in 2025, some some commentary on the market would be appreciated. Thanks a lot.

Todd Cooper: Hey, Todd maybe Karen it's nice to talk to you, yes, sorry, sorry, if it wasn't clear, but let me just clarify.

Speaker Change: Our revenue outlook overall, so the $10 4 billion as 8% overall for the company again, its our high confidence to you.

Speaker Change: We're seeing right now low double digit growth in Ccs and we're seeing low single digit growth in Ats.

Speaker Change: I know you didn't ask it but this time around on the Ats side, good level of growth across the portfolio over to we're expecting everyone to grow.

Speaker Change: We are seeing the impact of that.

Speaker Change: Program decision that we've made in A&D offsetting some of the growth and then some of the growth that we're expecting in industrial is more backend loaded.

Speaker Change: On the Ccs side.

Speaker Change: As I talked about a little bit earlier on.

Speaker Change: The enterprise because of the program transitions, we do expect to see some level of decline next year, that's going to be more than offset on the communications side communications will be probably up.

Speaker Change: Above 20%.

Speaker Change: 20% to 25%.

Speaker Change: That's overall, we're really pleased with the growth to your point on the on the Hyperscale or Capex. It is one thing that we are watching.

Speaker Change: Consensus numbers are only one thing and then of course, taking market shares in other right now.

Speaker Change: Hyperscale or Capex in 2024 and can be very very strong as everyone knows.

Speaker Change: The consensus is somewhere in the 30 percentage range.

Right now for Hyperscale or Capex next year is in the low double digits.

Speaker Change: So.

Speaker Change: That's reflected in our outlook right now the one thing I will say when we talk about the high confidence, though is we have very good open forecast conversations with their customer, which go with our hyperscale customer, which go out about 12 months and so we have some pretty robust forecast right now for Q1, two and three.

Speaker Change: What we don't have is very robust forecast yet for fourth quarter and so that's one of the areas that we're really working on over the coming months to shore that up.

Speaker Change: So that's why when we come back in January.

But even in that regard.

Speaker Change: I guess my follow up on that is and again this is more of a market question.

Speaker Change: When you hear companies like Snowflake say, there isn't one fortune 500 company in production with Gen. AI applications, what do you think about that like it seems like.

Speaker Change: The market.

Speaker Change: Adoption still has a ways to go and there is going to be digestion period. So I guess from our perspective. It seems like some of that is baked into the hyperscale capex for next year, but just wondering at a corporate level, what you think about that as well. Thanks.

Speaker Change: Yes.

Speaker Change: Hey, Todd This is Jason I guess, one comment I would make on the Capex numbers, it's important to recognize it inside of those numbers include.

Everything that makes the data center work, including power property plant.

Speaker Change: Equipment all of that right. So that there's a lot that goes into that bucket and so when we look at.

Speaker Change: Our growth rates and where the Hyperscale is are deploying their capex I'd say, we feel we feel very good about about our level of growth.

Speaker Change: I don't know if there's anything you'd want to add to that.

Speaker Change: No I think I think we're all set.

Speaker Change: Unless there is follow on questions.

Speaker Change: No that's great I appreciate the color thanks a lot.

Speaker Change: I'll just add on.

Speaker Change: To reiterate we talked about 225 already its our high confidence view.

Speaker Change: We're really encouraged right now that we are already winning programs, which are set to ramp starting in 2026, we've won.

Speaker Change: New.

AI server programs with our largest customer which are not in our 2020 forecast what youre going to ramp in early 2026.

We continue to see.

Speaker Change: We will be seeing the impact of the $1 60 program.

Speaker Change: We believe that is the first in the industry.

Speaker Change: Which is going to be ramping in 2026, and we're having very active discussions with a number of hyperscale. There's on programs that could begin in 'twenty five that began in 2006 and even program that began in 2007 and so of course, we have to take this one year at a time, but the conversations with our customers at the program level.

Speaker Change: Very encouraging.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Thanks for the color Randy.

Speaker Change: Thank you there are no further questions at this time I will now hand, the call back to Mr. Robert <unk> for any closing remarks.

Robert <unk>: Thank you operator, and thank you all for joining US. This evening overall I'm pleased with the execution of our strategy and that it continues to yield results.

Robert <unk>: I'm also quite encouraged that our momentum is continuing into 2025 and beyond.

Robert <unk>: Frankly, the products that we have in development right now give us the confidence in our outlook and our future is certainly quite Brian we look forward to updating you in January and have a good evening.

Speaker Change: Thank you. This concludes today's call. Thank you for participating you may all disconnect.

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