Good afternoon, my name is Mike and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Celestica Fourth Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the call over to Jim Fitzpatrick, Vice President of Communications and Investor Relations; you may begin your conference.

Thanks Mike. Good afternoon and thank you for joining us on Celestica's fourth quarter of 2015 earnings conference call. On the call today are Rob Mionis, President, and Chief Executive Officer and Darren Myers, Chief Financial Officer. This call will last approximately 45 minutes and Darren and Rob will provide some brief comments on the quarter and then we’ll open up the call for questions. During the Q&A, please limit yourself to one question and a brief follow-up. We'll be available after the conference call for additional follow-up. Also, please visit our website at celestica.com to view the supporting slides accompanying this webcast. As a reminder, during this call we make forward-looking statements related to our plans for future growth, trends in our industry, our financial and operational results and performance, and financial guidance that are based on management's current expectations, forecasts and assumptions that are subject to risks and uncertainties that could cause actual outcomes and results to differ materially. Please refer to our cautionary statements regarding forward-looking information in the Company's various public filings, including the cautionary note regarding forward-looking information in today's press release. We also refer you to the Company's various public filings, which contain and identify material factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements and which discuss material factors and assumptions on which such forward-looking statements are based. These filings include our Annual Report on Form 20-F filed with and subsequent reports on Form 6-K filed with or furnished to the Securities and Exchange Commission, and our Annual Information Form filed with the Canadian Securities Administrators, which can be accessed respectively at sec.gov and sedar.com. During this call, we will refer to certain non-IFRS financial measures, which include adjusted gross margin, adjusted SG&A, adjusted operating earnings or adjusted EBIAT, adjusted operating margin, adjusted net earnings, adjusted EPS, return on invested capital or ROIC, inventory turns, cash cycle days, free cash flow, adjusted tax rate and adjusted tax expense. These non-IFRS measures do not have any standardized meaning under IFRS and may not be comparable with other non-GAAP or non-IFRS financial measures presented by other public companies, including our major competitors. We also refer you to today's press release, which is available at celestica.com for more information about these and certain other non-IFRS measures, including a reconciliation of the historical non-IFRS measures to the corresponding IFRS measures where comparable IFRS measure exists. Unless otherwise specified, all references to dollars on this call are to US dollars. I'll now turn the call over to Darren Myers.

Thank you Jim and good afternoon everyone. Celestica delivered solid operating results in the fourth quarter with sequential and year-over-year revenue growth along with free cash flow and ROIC. Fourth-quarter revenue of $1.5 billion was above our guidance range driven primarily by strength in our storage and server markets and the ramp of our solar business. Let me start with a few highlights for the fourth quarter. Revenue in the quarter increased 8% sequentially and 6% compared to the fourth quarter of 2014. Revenue from our diversified markets represented 30% of revenue, increasing 6% sequentially and 18% year-over-year. Non-IFRS operating margin was 3.5%. Adjusted earnings of $0.27 per share was at the lower end of guidance range, driven by higher cost to ramp our solar business and higher than expected income tax expense. IFRS earnings were $12.1 million or $0.08 per share. We generated $76 million of free cash flow and we achieved return on invested capital of 21.4%. Before discussing the fourth quarter details, I’d like to highlight some of our financial results for the full year. In a difficult demand environment, our full-year 2015 revenue of $5.6 billion was relatively flat compared to 2014. We continue to improve over mix with growth in our storage and diversified markets offset by reductions in consumer, while server and communications were unchanged year-over-year. Full-year adjusted operating margin at 3.5% was flat compared to 2014, in part due to our investments in our aerospace and defense, and energy businesses. Adjusted earnings per share were $0.92, down $0.08 from 2014 due to higher year-over-year income tax expense. IFRS net earnings were $67 million or $0.42 per share compared with $108 million or $0.60 per share in 2014 due primarily to higher income tax expense and stock-based compensation. We generated free cash flow of…

Thank you, Darren and good afternoon to everyone on the call. And thank you for joining us today. First, I would like to thank the entire Celestica team for their dedication and effort in the fourth quarter and throughout 2015. As Darren highlighted, we delivered solid operating results in the fourth quarter with revenue of $1.5 billion that was above our guidance range, as well as strong free cash flow of $76 million. Operating margins of 3.5% were at the low-end of our guidance range, largely due to the increased costs associated with ramping our solar business in Asia. Let me take this opportunity to provide some additional context about our solar business. On our October earnings call, we highlighted that we are experiencing some delays in ramping our solar business in Thailand based on the installation of new next generation equipment, while also managing a strong demand environment. While the equipment is fully installed and our output increased throughout the quarter, we are still working to get the production to the optimum level of efficiency. Additionally, some of our suppliers have been facing challenges in ramping to meet our requirements. Both of these factors are leading to higher than expected costs in our solar business. Despite the increased costs, our solar business delivered strong sequential year-over-year growth. We are continuing to work aggressively to get our operations fully ramped. We expect to make significant improvement by the end of the second quarter. Despite the near-term challenges, I am the excited about the healthy demand we are seeing from a number of customers in this market. We continue to be confident about our ability to profitably grow our solar business. Moving back to company performance. For the full year 2015, Celestica delivered solid financial and operational results. We increased our…

Thanks a lot. Good afternoon, guys. I will just start off with the solar ramp comments that you guys have. Could you maybe talk about either in terms of what basis points of impact it had in December and you see in March or dollar impact that these ramps are having and for you to get to this breakeven target, I think you said by Q2 - or the headwinds to go away at least. Is it a factor of you just need more revenues there or you just need a more optimal supply team to get there?

Hi, Amit, it’s Darren. In terms of the quarter, there was good progress obviously in the revenue side and it's frankly been throw what we need to throw out to make sure we can execute and get the demand up. There's lot of demand for it, so we spent more money than we would like in order to fulfill that demand and I’d say overall it tossed about 30 basis points for the fourth quarter. Looking at the first quarter, we are not out of the woods yet in terms of the extra cost and the extra effort in order to get the right yields and the right throughput. So we do expect further cost put in the range of 20 basis points maybe in the first quarter and we are looking to improve from there as the year goes on.

Got it. And then I guess, Rob, a question for you. You talked about the strategic review you have looked and feel good about the portfolio, especially on the enterprise communication side. I'm wondering where lot of the customers you have, have their own sort of challenges, so is there a thought process or have you looked at the fact that maybe there should be a more deeper engagement with some of the hyper scale customers directly who might the bypassing your traditional customers right now to build their own networking storage gear and so on?

Hi, Amit. Within our the overall strategy I think we have a very well run business and our growth in terms of accelerating our strategy is really going to be focusing on accelerating our leadership position in some of our key markets. And we also believe we have some very robust solutions for our customers across all our markets. And to your point, I think the key is getting the right audience within senior leaders within our customer base to make sure that we are able to provide broad solutions versus point solutions. And we – by doing that across all our markets, especially the ones we have leaderships positions in, should increase our traction. Hopefully, I am not sure if I addressed you question. Does that answer your question?

I guess, I am wondering, do you go after a newer set of customers in that bucket versus the ones you already have partnerships with?

Within our diversified markets, part of our strategy is certainly to expand our logos and broaden our reach and that’s also true within our core EMS market and we are continuing to do that in terms of expanding our logos, if you will, and making good progress towards doing that.

Perfect. Thanks a lot and best of luck guys.

Thanks Amit.

The next question is from Andrew Huang with B. Riley.

Thanks for taking my question. Rob, I guess, since it’s your second quarter as CEO on the call, I was wondering if you could share your thoughts towards vertical integration and getting into product like sheet metal, plastics injection molding or other components?

Hi, Andrew. At this time, we think vertical integration certainly has a play in certain of our markets, but it's not a key focus area. We would certainly explore that where we think eliminate the margins stack would be beneficial and would give us supply chain flexibility, but from a broad brush basis I would say it's not a key focus area to get more vertically integrated.

Okay. And then I was wondering if you could maybe share your kind of initial thoughts on the full year with respect to maybe revenue growth or CapEx or margins or anything like that?

Darren lead that and I will chime in.

Andrew, from a full year perspective on revenue, we are not giving guidance across the board for the full year, but I will say starting the year at 4% year-over-year growth is obviously quite positive and we're pleased with that. The market continues to be quite dynamic out there, so giving projections outside of the first quarter is just not what we are going to do today, but needless to say we are targeting to grow the company this year. I think, think of modest growth for the year, but again we're not providing guidance. From a CapEx point of view, I think the 1% to 1.5% continues to be our target and for operating margin, our target for the company continues to be in the 3.5% to 4%. Those are the targets as we run our business, not saying that we're giving guidance in the operating margin for the year though.

Thanks very much.

The next question is from Jim Suva with Citi.

Hi, this is Tim Yang on behalf of Jim Suva. Thanks for taking my questions.

Hi, Tim.

Hi. I guess my question is on impairment charges in December quarter, is that associated with the [indiscernible] acquisition back in 2014?

No, it was not. It was part of our annual impairment related to some of the fixed assets we have for two higher cost geography sites that we have.

Got it. Okay, thanks. And then my next question is tax rate. It seems like the guidance for next quarter is 17% to 19%, it’s higher than the previous guidance, for December quarter it’s 14% to 16%. So what's the reason for that? Is it more region mix, sort of how should we think about tax rate in full year 2016?

Yeah. For the full year, the guidance is 17% to 19%. We have seen that creep up really as a function of the mix of where our profits are landing as well as just the tax rates in different geographies.

Got it. Okay, thanks.

The next question is from with Thanos Moschopoulos with BMO Capital Markets.

Hi, good afternoon. I was pleasantly surprised to see the improvement in the cash cycle given the increase in the diversified mix, because I would have expected those two variables to be negatively correlated. And so how sustainable are those improvements in the cash cycle which we think about as far as inventory turns and the various elements over the next quarters?

Thanos, the inventory certainly was helped by the additional upside that we had in revenue, a lot of in the - frankly in the last few weeks of the quarter. So we saw that strong growth in server and storage which really helped to improve the inventory turns for the quarter. I’d say it’s less driven on the diversified side and that really helped in terms of that inventory turn improvement. When we look at the first quarter with the lower revenue point, we have 2 point average on our turns. We do expect to start low and then work our way up as the year goes on and as we see some growth in the company.

Okay. And then can you provide us with an update on the semi business and how that's performing?

Yeah, on the semi business, as we reported last quarter, we were positive. We were pleased to report that we are both gross margin and EBIAT positive. As we looked into the fourth quarter of this year, demand was down a little bit and we were about breakeven for that business. As the year goes along and the good news about that by the way is we are able to lower our breakeven point from a revenue perspective. As the year goes on, we expect to continue to improve our cost position and hope to get better tailwinds, if you will, from the end markets, but the end markets will be what the end markets are and we will have to wait and see how that turns out.

Thanos, just to add that is one of the items that is really pulling down the margin a little bit in the first quarter. The fact that the performance, we are just not seeing the growth in that business right now.

And so the first quarter declines implies the decline year-over-year in that business?

Well, not in those improvement year-over-year, because of the work that Rob described and a lot of work that went on by team, but it's really staying flat towards the Q4 level, so just not generating the margin that we would like yet.

Got it. Thanks.

Thank you.

And the next question is from Matt Sheerin with Stifel.

Hi, Matt.

Yes, Thanks. Hi, guys, good afternoon. Question just on the diversified markets that is one key growth area for you. I know you’ve got a bunch of buckets there, industrial, and aero, defense, the solar business now. Could you help us understand the mix? What's the biggest component there, and as -- and I understand some of the margin headwinds with solar and semi-cap, but in theory, that should be a business that’s generating margins above, if not, well above the corporate average. So what's the timetable and am I right there and what's the timetable to get there?

Yes. Why don’t I take that on? So in terms of the business, really, the largest is the aerospace business and then secondly, we have a large industrial, which including the semiconductor from a size perspective. The base business, I’d say overall in diversified is a relatively flat environment. We’re seeing growth from the programs wins we've had and we’re seeing that in the area of aerospace and defense and we’re seeing that in the area of smart energy in particular and the solar ramp that we have, but the base business underneath everything has been relatively flat and semiconductor has been challenging over the last -- certainly over the last quarter, but the team has done a good job as I mentioned. From a margin point of view, you’re right that within our precision machining business, so there is two aspects to our semiconductor business. There is high-level assembly work we do in this precision machining. Precision machining, we would expect that higher margins and overall for the blend of the two of them, they would be slightly higher than the company averages, but not materially higher because the high-level assembly is a bit lower margin. So the short of all that is, those together should be north of our margins as a company.

I’m not just talking about the semi-cap, but that whole diversified area for you, with the value add there, it seems like that should be with the solar business and the aerospace business certainly should be higher?

Absolutely. And that's one of our key efforts is to get the margins higher as we ramp our programs and get some hopefully some growth in the market, but we can’t predict that right now.

Okay. Rob and you talked a little bit about the strategy and really basically sticking to the game plan, fine tuning things. Will M&A play a role there? Obviously, you've got a good cash position again here. Is that going to factor into the strategy at all?

Yeah. M&A -- in terms of any growth strategy, M&A is a key tool that we look to utilize. That being said, we’re going to be very purposeful and very focused on any M&A that we do to make sure it passes our stringent financial criteria and truly add shareholder value and adds capability to the company. But it is a tool in the toolbox that we’ll be looking to deploy.

Okay, thanks. Best of luck this year.

Thank you very much.

And the next question is from Paul Steep with Scotia Capital.

Thanks. Rob, just on that exact topic we were on, if we think about -- in the long term goals, you talked about key areas of investment, maybe, bucket them. On the organic side, the key areas of investment, do you need greater distribution, greater sales, greater capabilities, greater IP, where is that investment going based on Darren’s comments, it doesn't sound like it's more money per se or at least it’s within the cost envelope you have today. If you could give us that view and then I've got a quick follow-up?

Sure. On the organic side, we need to continue to invest in the front-end of our business with respect to sales and BD resources to get the topline moving. We also are continuing to invest in our JDM profile to help improve more value-added services to our customers. And lastly in our factories, and across our network, it's important that we stay current with technology and capital equipment. And the overall digital experience to keep our factories as productive as possible. So, a large portion of our organic money, we will spend and on the inorganic side, it will largely use the M&A tool to fill any potential capability gaps we think we need and in order to able to serve our customers and our end markets in a more efficient manner that also adds, we feel, to total shareholder return.

So just to follow on that, like, it ties to you or more to Darren, what do you view as your optimal capital structure and what's your willingness to add say meaningful leverage, several turns to leverage on debt to sort of further the goals you just talked about?

Hi, Paul. From a debt perspective, certainly, we are under levered still, I mean, we've got a turn of debt and as we've talked about in the past, we felt that was the best use of capital is to give back to shareholders. We continue to go under the philosophy we want to invest in the business, but we will also give back to shareholders and in the past, we had a proxy of 50-50, but it will really depend on what's in front of us. For the right opportunities, absolutely we’d be willing to put more debt on the balance sheet. I don't want to box us into an actual rate, but certainly a couple of turns is not an issue and we have a lot of financial leverage and ability to raise to 2+ in terms of debt, but really it’s about finding the right opportunities that we can bring value to and if we can't bring value to it, we will look to give back to shareholders.

Great. Thanks guys.

Thank you.

[Operator Instructions] The next question is from Robert Young with Canaccord Genuity.

Hi, good evening. I wanted to ask a question on margins. I think you said that the solar business is a 30 bps headwind in Q1 and that you’re hoping to see some additional cost come out of the semi business and maybe that will get better as we go through the year. So that 3.5% to 4% operating margin target seems as though it’s reasonably -- seems as though it's within reach in Q2, is that a good way to think about it?

Hi, Rob. I would say that, let's go back to the number we used to give at 1.4 billion. That's really the target, we’re at 3%, 3.5%. So, that hasn't changed. There is obviously levers and depending on how fast we get the throughputs up that we want in solar, but at 1.4, 3.5% is still a reasonable proxy.

Okay. Second question is on the, like you said in the dialog, two quarters now of year-over-year growth and you have to go back quite a way to see that previously. So, well, congratulations there, but also at the same time, you’re looking for I guess modest growth for the full year. So was there demand pulled in in the server and storage market into Q4 at the expense of Q1 and Q2 or something like that? Is there something, I’m just trying to reconcile that?

I think you’re hearing in my comment, just a function of the markets. The markets are quite dynamic still and so predicting growth for the year is not something we want to go do, but we’re starting strong with 4% growth, which is a positive obviously. To your question was there demand pull in, there was just strong demand with some programs that will make for a tougher repeat next year in Q4, but that doesn't change the full year though.

Okay. And last question for me. I think Rob you said, I think a couple of times, you mentioned some of the potential for aftermarket services and I think you said repair and overhaul inside of the aerospace line item and I don't think I've heard much about that in the past. So is there anything you could elaborate there or is it something that's always been a part of the mix, just not aware of it?

As part of our aerospace and defense capability, we are apart, what they call apart, 145, which means a license repair and overall overhaul facilities, so we have that capability. We probably don’t tout it as much as we should in the open marketplace, but that 145 license is very difficult to get and to certify for and it's really a license to hunt. That being said, we don't generate a lot of revenue from aftermarket services, but as our strategies mature and if we are able to get some more traction, it’s certainly a growth avenue for us.

And certainly given your background, it seems like an area you’d probably be interested in growing.

Yeah. We’re funded at a very attractive space and we think we’re pretty unique in that area from an EMS perspective to have a 145 license.

Okay, thanks a lot. I'll pass the line.

Thank you, Rob.

There are no further questions at this time. I'll turn the call back over to the presenters.

Thank you all for joining us on the call today and we look forward to the call next quarter.

Thank you.