Jesse Pytlak

Jesse Pytlak asked about the breadth of customers Celestica is engaged with on its Optical programs and if these programs are commonly becoming bundled with switching programs.

Answer

Jason Phillips (President of Connectivity and Cloud Solutions) stated that Celestica has a few primary Optical customers with deep engagements and investments, noting a strong correlation between Optical and networking, particularly with CPO technology expected to ramp in 1.6T and more significantly in 3.2T. Steve Dorwart (SVP and GM of Hyperscalers) added that co-package optics will have a dual existence with pluggables, and current optical capabilities will be applicable to embedded or co-package optics in future switch designs.

Jesse Pytlak asked about the breadth of customers Celestica is engaged with on its Optical programs and whether these programs are commonly becoming bundled with switching programs.

Answer

Jason Phillips (President of Connectivity and Cloud Solutions) stated that Celestica has a few primary Optical customers with deep engagements and investments, noting a strong correlation between Optical and networking, especially with CPO technology deployments expected in 1.6T and more in 3.2T. Steve Dorwart (SVP and GM of Hyperscalers) added that optical capabilities developed today will be applicable to embedded or co-package optics in future switch designs.

Jesse Pytlak requested the mix of 400G versus 800G switches in the quarter and pricing trends for 400G. He also asked if the dynamic macro environment was changing the company's approach to M&A.

Answer

President and CEO Rob Mionis and CFO Mandeep Chawla explained that for the full year, 800G switches will likely comprise over 50% of the networking business, with 400G having a long tail. On M&A, Mandeep Chawla stated that while the company has a healthy balance sheet and is looking at targets, the current environment is challenging for deal-making, but they remain open to the right strategic deal.

Jesse Pytlak from Cormark Securities inquired about the nature of engagements with emerging "digital native" customers, asking if they typically start with manufacturing before moving to design, similar to the Grok win. He also asked to characterize the spending aggressiveness of this customer group.

Answer

Stephen Dorwart, SVP, explained that engagements with digital natives can be both, with some starting with manufacturing on a current product before adding design involvement, while others leverage Celestica's HPS platform solutions from the outset. He noted that a key criterion for partnership is the opportunity for broader design involvement. Regarding spending, Dorwart stated it varies depending on the company's development stage and market traction. An executive added that this customer class shows a greater willingness to leverage Celestica's full value proposition from the start to scale quickly.

Jesse Pytlak of Cormark Securities sought clarification on the Massachusetts wholesale dynamics, asking if the Q3 softening was gradual or a direct result of the vape ban. He also requested more details on the CBD For Life distribution agreements and expansion.

Answer

CFO Julius Kalcevich described the Massachusetts wholesale dip as a 'kneejerk reaction' in the last two weeks of September when orders were canceled post-ban. He also confirmed the CBD For Life expansion to 2,300 doors and new agreements providing access to 43,000 outlets, crediting the new team and critical logistics improvements from a new 3PL partnership and e-commerce platform.

Jesse Pytlak from Cormark Securities asked for more details on the CBD For Life business, specifically its geographic sales concentration and its supply chain structure, including whether it is involved in hemp cultivation or manufacturing.

Answer

CEO Hadley Ford clarified that CBD For Life's sales are concentrated in major cities like New York and LA to build brand awareness efficiently. He explained that the company outsources manufacturing to an FDA-approved cosmetics factory partner in New Jersey, allowing the team to focus on its core strength of brand building. CFO Julius Kalcevich added that current distribution is through wholesalers to specialty retailers and spas, with plans to target larger, well-known retailers in the near future.