10-KPeriod: FY2021

CELESTICA INC Annual Report, Year Ended Dec 31, 2021

Filed March 14, 2022For Securities:CLS

Summary

Celestica Inc.'s (CLS) 2021 10-K filing reveals a company navigating a dynamic market with a focus on strategic shifts. The company delivered a mixed financial performance, with revenue declining slightly year-over-year due to the disengagement from a major customer in the Connectivity & Cloud Solutions (CCS) segment. However, the Advanced Technology Solutions (ATS) segment demonstrated strong growth, driven by its HealthTech and Capital Equipment businesses, and the acquisition of PCI. Despite revenue headwinds in CCS, segment margins improved due to a more favorable product mix, notably the growth of the Hardware Platform Solutions (HPS) business. Celestica remains committed to expanding its higher-margin ATS segment and diversifying its customer base, aiming for profitable growth through organic initiatives and targeted acquisitions. The company continues to manage supply chain constraints, a significant factor impacting operations throughout 2021, and anticipates these pressures to persist into 2022.

Key Highlights

  • 1Total revenue for 2021 decreased by 2% to $5.63 billion compared to $5.75 billion in 2020.
  • 2ATS segment revenue increased by 11% to $2.32 billion in 2021, driven by HealthTech and Capital Equipment growth, and the PCI acquisition.
  • 3CCS segment revenue decreased by 9% to $3.32 billion in 2021, primarily due to the disengagement from Cisco programs.
  • 4Hardware Platform Solutions (HPS) within CCS saw significant growth, with revenue increasing by 34% to $1.15 billion, representing 20% of total 2021 revenue.
  • 5ATS segment margin improved to 4.5% in 2021 from 3.3% in 2020, with the fourth quarter reaching 5.6%.
  • 6CCS segment margin increased to 3.9% in 2021 from 3.5% in 2020, with Q4 2021 at 4.4%.
  • 7Celestica acquired PCI for $314.7 million in November 2021 to expand its capabilities in Asia.
  • 8The company incurred $10.5 million in restructuring charges in 2021, part of ongoing efforts to optimize its cost base.

Frequently Asked Questions

Celestica reported a slight decrease in total revenue for 2021 to $5.63 billion from $5.75 billion in 2020. The Advanced Technology Solutions (ATS) segment showed strong growth, while the Connectivity & Cloud Solutions (CCS) segment experienced a revenue decline, primarily due to strategic customer disengagements. However, segment margins improved across the board, driven by a shift towards higher-margin services like Hardware Platform Solutions (HPS).

Celestica completed the acquisition of PCI Private Limited for $314.7 million in November 2021. This acquisition expanded Celestica's capabilities and customer base, particularly in Asia, and contributed to the ATS segment's revenue growth and overall results.

Celestica faces several risks, including customer concentration (top 10 customers account for 66% of revenue), intense competition and pricing pressures in the EMS industry, supply chain constraints (exacerbated by COVID-19), dependence on customer success, rapidly evolving technologies, and geopolitical and economic uncertainties. The company also noted ongoing global supply chain constraints and workforce constraints as significant operational impacts.

Celestica's strategy focuses on increasing penetration in its end markets, diversifying its customer mix and product portfolios with an emphasis on higher value-added services like design and engineering, and pursuing disciplined acquisitions. The company aims to grow its ATS segment organically and strategically expand its offerings by continuing to invest in new technologies and capabilities.