Paul Treiber

Paul Treiber inquired about how the expected returns on new program wins compare against existing programs, and specifically if competition is changing the returns on new programs compared to the past.

Answer

CFO Mandeep Chawla explained that Celestica takes a holistic, global view on investments, ensuring strong profitability and customer support, with a focus on ROIC and disciplined investment. CEO Rob Mionis added that new programs are increasingly complex, and some business lost to pricing competition in 2025 returned in 2026 due to competitors' inability to execute at scale, highlighting Celestica's competitive moat in engineering and production at scale.

Paul Treiber asked how the expected returns on new program wins compare against existing programs, and if competition is changing the returns on new programs versus the past.

Answer

Mandeep Chawla (CFO) stated that Celestica takes a holistic, global view on investments, focusing on strong profitability and disciplined investment to ensure business cases hold, aiming to expand ROIC and margins while growing revenue. Rob Mionis (President and CEO) added that new programs are increasingly complex, and some business lost on pricing in 2025 returned in 2026 due to competitors' inability to execute. He highlighted Celestica's engineering and scale as a powerful competitive moat.

Paul Treiber asked about the long-term visibility from customers, specifically if it's reflected in program wins, explicit volume commitments, or contract nature. He also inquired about the degree to which Celestica is proactively shaping its portfolio, disengaging from less strategic programs, and any metrics on win rates or success in rebidding next-generation contracts for strategic programs.

Answer

Steve Dorwart (SVP and GM of Hyperscalers) stated that they have comfort in continued program awards, including follow-on next-generation programs, providing longer-term visibility. Rob Mionis (President and CEO) gave an example of winning follow-on compute programs for next-generation silicon ramping into 2027 and noted R&D efforts on 3.2T for future adoption. Jason Phillips (President of Connectivity and Cloud Solutions) added that deep conversations on capacity and power planning extend well beyond 2026-2027. Todd Cooper (President of Advanced Technology Solutions) explained that ATS is continuously reviewing its portfolio, doubling down on larger Tier 1 customers, and exiting margin-dilutive or non-strategic smaller customers to strengthen the portfolio and improve margins. Jason Phillips confirmed CCS is in a strong strategic spot, with only one smaller, non-material customer where they are no longer strategically aligned.

Paul Treiber asked about the long-term visibility from customers, specifically if it's reflected in program wins with explicit volume commitments or other contract types. He also inquired about the degree to which Celestica is proactively shaping its portfolio, disengaging from less strategic programs, and metrics like win rates or success on rebidding next-generation contracts for strategic programs.

Answer

Steve Dorwart (SVP and GM of Hyperscalers) confirmed comfort in long-term visibility due to consistent program awards and follow-on next-generation programs. Rob Mionis (President and CEO) and Mandeep Chawla (CFO) gave examples of winning follow-on programs for compute into 2027 and working on 3.2T for 2028. Jason Phillips (President of Connectivity and Cloud Solutions) added that deep conversations on capacity planning extend well beyond 2027. Todd Cooper (President of Advanced Technology Solutions) explained that ATS is continuously reviewing its portfolio, doubling down on Tier 1 customers, and exiting margin-dilutive, non-strategic smaller customers to improve margins and growth. Jason Phillips added that CCS is in a great strategic spot with hyperscalers and enterprise, with only one minor non-strategic customer disengagement.

Paul Treiber inquired about the new program pipeline, specifically the opportunity to expand wallet share with existing hyperscalers and penetrate new ones and digital natives. He also asked about the role of pricing in current customer discussions.

Answer

President and CEO Rob Mionis explained the focus is on increasing share of wallet with existing hyperscalers and targeting digital natives, citing a recent win for a full orchestrated AI rack as a key proof point. He stated that while pricing is always a factor, certainty of supply and technology leadership are currently the primary drivers. CFO Mandeep Chawla added that their global footprint provides a total cost of ownership advantage.

Paul Treiber questioned the price elasticity of demand, asking if customers provided feedback on challenges at higher tariff levels and how elasticity varies across segments. He also asked if the new business pipeline has changed recently.

Answer

President and CEO Rob Mionis responded that customers did not waver on their CapEx plans or demand outlook during the brief period of higher tariffs, and OEM customers are prepared to pass on costs via surcharges. He also stated the pipeline has seen no major changes, only minor, non-material delays in decision-making. CFO Mandeep Chawla added that any customer re-evaluation is concentrated in the industrial segment.

Paul Treiber asked about the trend of customers procuring full end-to-end RAC solutions, the role of HPS and R&D in securing these deals, and whether there is growing demand for U.S.-based production driven by onshoring trends.

Answer

President and CEO Rob Mionis confirmed a clear trend towards full RAC solutions, particularly with digital native customers. He and CFO Mandeep Chawla emphasized that rising R&D investment (nearing $100M) and a large design team are critical differentiators. Regarding onshoring, Mionis noted customers are in a 'wait-and-see mode,' but Celestica is prepared with ample, power-secured capacity in the U.S.

Paul Treiber from RBC Capital Markets asked about Celestica's strategy to capture more share with other large Tier 1 hyperscalers beyond its primary one. He also questioned if hyperscalers are becoming more price-sensitive than they have been in the recent past.

Answer

An executive stated that Celestica does business with the top five hyperscalers and has seen tremendous growth and diversification outside its largest customer. SVP Stephen Dorwart added that the strategy is to leverage technology pioneered with hyperscalers into broader markets. On pricing, Dorwart explained that while price is a factor, performance and availability are key drivers for new technology. He emphasized a move to value-based pricing and adding value across the entire system to remain competitive, rather than competing on component cost alone.

Paul Treiber asked about the potential ROI and cost savings for automakers using BlackBerry's vehicle software platform, as well as the economic split between QNX and Vector. He also inquired about the size of BlackBerry's Secure Communications business with the Canadian federal government and the strategy to expand further given new investment initiatives.

Answer

CFO Tim Foote explained that the vehicle software platform, a pull from OEMs, offers significant cost savings by offloading software integration, allowing OEMs to focus on application layer differentiation. He noted BlackBerry would be the billing entity, with a significant portion of revenue attributed to them, and Vector's portion passed through cost of sales. CEO John Giamatteo highlighted strong momentum with the Canadian government, a comprehensive UEM relationship, and productive discussions to expand Secusmart and AtHoc, especially with increased defense spending.

Paul Treiber asked about the potential ROI and cost savings for automakers using BlackBerry's vehicle software platform, as well as the economic split between QNX and its partner Vector. He also sought an update on the size of BlackBerry's SecuSUITE business with the Canadian government and the strategy for further expansion, particularly given new investment initiatives.

Answer

CFO Tim Foote explained that the vehicle software platform, a response to OEM demand, offers significant cost savings by offloading software integration, allowing OEMs to focus on application layer differentiation. QNX will be the billing entity, capturing a significant portion of the revenue. CEO John Giamatteo highlighted strong momentum with the Canadian government, leveraging existing UEM relationships and pursuing expansion for SecuSUITE and AtHoc, especially with increased defense spending and 'Buy Canada' initiatives.

Paul Michael Treiber inquired about the back-end loaded QNX revenue outlook for the year, seeking clarification on whether it's driven by licensed sales, professional services, or a ramp in royalties. He also asked for an update on the automotive market, specifically if new platform development programs by OEMs are back on track after earlier uncertainties.

Answer

CFO Tim Foote stated that the back-end loaded QNX revenue pattern is typical, primarily driven by the timing of development seat licenses and program starts, with royalties also showing sequential growth. He noted that while programs are coming online, they have shifted to the right, and challenges remain despite decreased uncertainty. CEO John Giamatteo added that increased global light vehicle production and stable OEM guidance indicate market stabilization.

Paul Treiber asked about the back-end loaded nature of QNX's annual revenue outlook, seeking clarification on whether this pattern is driven by one-time licenses, professional services, or a ramp-up in royalties. He also inquired about the current feedback from automotive OEMs regarding the prioritization and timing of new platform development and large programs.

Answer

CFO Tim Foote explained that QNX's revenue pattern has historically been back-end loaded, with Q1 being the lowest and Q4 the highest, primarily due to the timing of design work, program starts, and development seat licenses. He noted a gradual increase in royalties as programs come online. Regarding the auto market, Tim Foote stated that while programs are coming online, they have generally 'shifted to the right,' and challenges like tariff uncertainty and software development complexity persist, though there's more certainty than at the beginning of the year. CEO John Giamatteo added that increased S&P global light vehicle production and OEMs maintaining guidance suggest stabilization after a 'pause button' in Q1.

Paul Michael Treiber from RBC Capital Markets asked about the back-end loaded outlook for QNX revenue, seeking clarification on whether the anticipated pickup in the second half of the year is driven by one-time licenses/professional services or a ramp in royalties. He also inquired about the current status of large automotive OEM programs, specifically if they are back on track after earlier uncertainties or if delays persist.

Answer

CFO Tim Foote explained that QNX's back-end loaded revenue pattern is typical, with Q1 being the lowest and Q4 the highest, primarily driven by the timing of development seat licenses and design work, alongside growing royalties. He clarified that while automotive programs are starting to come online, they are still "shifted to the right" due to ongoing tariff headwinds and software development complexities, though there is more certainty than previously. CEO John Giamatteo added that increased S&P global light vehicle production and stable OEM guidance suggest a stabilization and an "unpressing of the pause button."

Paul Treiber inquired about potential churn from the U.S. Federal government following procurement changes and asked if the growing SDP 8.0 pipeline for automotive is additive to the existing QNX pipeline or represents a transition from older versions.

Answer

CEO John Giamatteo stated they saw no material impact from U.S. government budget shifts, as mission-critical communications were not prioritized for cuts, which helped stabilize ARR and DBNRR. CFO Tim Foote added that while they encourage migration to the higher-ASP SDP 8.0 platform, it's still in the early innings given the long life cycles in the automotive market.

Paul Treiber inquired about the impact of automotive tariffs on OEM production plans and whether BlackBerry has observed any changes in new vehicle introductions. He also asked for the size of the U.S. Federal business as a percentage of Secure Communications and if there have been any indications of seat reductions from government agencies.

Answer

CEO John Giamatteo stated that BlackBerry has not seen any material impact or received significant warnings from customers about supply chain problems due to tariffs, noting over 50% of QNX revenue is from outside the U.S. Regarding the U.S. Federal business, he confirmed it represents about 20-25% of Secure Communications revenue and has not seen any material impact, as the mission-critical nature of BlackBerry's products makes them less likely to be cut.

Paul Treiber requested an update on the operational status of the business separation, inquired about structural profitability differences between the IoT and Cyber divisions, and asked about the primary drivers of the Cyber segment's revenue beat.

Answer

CEO John Giamatteo stated that significant progress has been made on the separation, with the focus now on balancing further separation with avoiding dissynergies and new costs. CFO Tim Foote deferred the question on divisional profitability to the upcoming Investor Day. Giamatteo attributed the Cyber beat to broad-based strength across license, service, and hardware, including a Secusmart device refresh cycle and durable performance from UEM and AtHoc.

Paul Treiber from RBC Capital Markets inquired about the plan to achieve the remaining $25 million in cost reductions to meet the $150 million target. He also asked if the separation of IT systems is the primary bottleneck for the full separation of the business units.

Answer

CEO John Giamatteo expressed confidence in reaching the full cost-saving target, stating the next steps involve untangling complex, shared IT systems like Salesforce and NetSuite to create right-sized solutions for each division. He clarified that while IT separation is a key project, the business units are already operating with separate leadership and increased agility, which represents the most significant benefit realized to date.

Paul Treiber inquired about the potential impact, positive or negative, of recent U.S. Department of Transportation changes to trucking regulations on Descartes' domestic trucking business. He also asked about the company's capital allocation strategy, specifically the balance and priority between share repurchases (via NCIB) and acquisitions, considering current market valuations.

Answer

CEO Ed Ryan stated that new government regulations typically create demand for software solutions that help customers comply and operate more efficiently. Regarding capital allocation, he prioritized acquisitions, seeing numerous opportunities to integrate businesses onto Descartes' network, especially with AI. He noted the Normal Course Issuer Bid (NCIB) is a strategic option for opportunistic share repurchases if Descartes' valuation is deemed unfairly low, but acquisitions remain the primary focus.

Paul Treiber questioned if lower professional services and license revenue indicated a customer pause, asked about the slight dip in organic growth, and inquired how Global Trade Intelligence (GTI) acts as a 'door opener'.

Answer

CEO Ed Ryan clarified that the focus is on recurring services revenue, not licenses, and that the slight organic growth fluctuation was not a concern. He confirmed that GTI is a significant 'door opener' for new business, second only to the core network, as rising tariff complexity drives demand and creates opportunities to cross-sell other solutions.

Paul Treiber of RBC Capital Markets questioned if lighter professional services and license revenue indicated a customer pause, asked about the organic service revenue growth rate, and inquired how Global Trade Intelligence wins lead to broader sales discussions.

Answer

CEO Ed Ryan clarified that the company's focus is on recurring services revenue, not professional services or licenses, and that sales were strong. He stated that 6% organic services growth was a 'fine number' and the primary goal remains 10-15% adjusted EBITDA growth. He explained that while the Global Logistics Network is the main entry point for customers, Global Trade Intelligence is a key secondary way to win business and then cross-sell the broader portfolio of solutions.

Sought clarification on whether the 9% organic growth figure included hardware revenue, if the Q3 baseline revenue includes the expected $2.5 million in hardware sales, and the deal structure for the remaining 5% of the ASD acquisition.

Answer

The 9% organic growth is for the total business. The Q3 baseline includes a portion of the expected hardware sales for which orders are already confirmed. The payment for the remaining 5% of ASD is not a premium but was part of the original deal structure due to seller preferences for a deferred payment.

Paul Treiber from RBC Capital Markets sought clarification on whether the 9% organic growth figure included hardware revenue, if the Q3 baseline accounts for expected hardware sales, and the structure of the remaining 5% ASD acquisition.

Answer

CFO Allan Brett confirmed the 9% organic growth is for the total business. He explained the Q3 baseline includes a portion of the anticipated $2.5 million in hardware sales for which orders are already in hand. He also clarified the remaining 5% ASD purchase is not at a premium and aligns with the original deal structure.

Paul Treiber sought clarification on several financial points, including whether the 9% organic growth figure was for the total business, if the Q3 baseline revenue included the anticipated $2.5 million in hardware sales, and the deal structure for the remaining 5% purchase of the ASD acquisition.

Answer

CFO Allan Brett confirmed the 9% organic growth applies to the total business. He clarified that the Q3 baseline includes a portion of the hardware sales for which orders are confirmed, but not the full estimate. Regarding the ASD acquisition, he stated the final 5% purchase is part of the original deal structure and does not involve a premium.

Inquired about the timing of ocean volume recovery translating to domestic trucking, whether this is reflected in the baseline, and if recent M&A activity has paused the hunt for more acquisitions.

Answer

The company clarified that the translation of ocean to domestic volumes is a timing issue and is not yet reflected in the baseline, which is a point-in-time metric. They also confirmed that the internal teams have the capacity for more M&A and are actively looking at a favorable pipeline of opportunities.

Paul Treiber sought clarification on whether the lag between rising ocean volumes and domestic trucking volumes was a matter of timing. He also asked if the two recent large acquisitions have consumed the company's internal capacity for further M&A.

Answer

CEO Ed Ryan clarified that his comments were about timing; the company has recently seen ocean volumes pick up and expects this to translate into increased domestic volumes in the coming months, as it has historically. He stated this potential uplift is not yet reflected in the baseline revenue. Regarding M&A, Ryan asserted that the internal teams are not consumed and that the company has the capacity to pursue more deals, noting a favorable environment with many opportunities at reasonable prices.

Asked about the nature of organic growth drivers (structural vs. short-term), how stronger growth might change the business model, and the company's preference for acquiring profitable versus unprofitable businesses.

Answer

The company views the growth drivers as structural and long-term, driven by a global realization of the importance of supply chain technology. They will continue to prudently increase investments but not fundamentally change the business model. For acquisitions, they remain disciplined in seeking profitable, growing, recurring-revenue businesses and are not interested in 'fixer-uppers'.

Paul Treiber from RBC Capital Markets asked about the fundamental drivers behind the strong pipeline growth and its sustainability, and also inquired about potential headwinds or one-time items affecting the fiscal 2026 free cash flow growth guidance.

Answer

CEO Mark J. Barrenechea and President Todd Cione attributed the pipeline surge to the first full quarter of the TitaniumX platform in the market and strong sales execution in quantifying its value for customers. Regarding free cash flow, Barrenechea and CFO Chadwick Westlake clarified that the 17-20% growth outlook is based on clean execution with no expected one-time headwinds in FY26, noting a prior year's one-time tax payment may have skewed comparisons.

Paul Treiber questioned the rationale behind the significant magnitude of the announced headcount reductions, asking why the company chose a large move now instead of a slower transition, and inquired about the philosophy of introducing EPS guidance.

Answer

CEO Mark Barrenechea explained that after more than a year of progress, the company can clearly see productivity gains from AI, comparing it to the step-function efficiency improvement that ERP systems once delivered. CFO Chadwick Westlake added that guiding on EPS is valuable because it is a consistent, bottom-line metric that demonstrates the company's profitability and the effectiveness of its capital deployment, for which he feels OpenText is not getting full credit.

Paul Treiber from RBC Capital Markets asked about the drivers behind the expected acceleration in cloud bookings in the second half and requested metrics on productivity gains from internal AI initiatives.

Answer

President of Worldwide Sales, Todd Cione, attributed the strong outlook to a solid Q3 pipeline and the largest-ever Q4 cloud pipeline, supported by conversion programs and the upcoming Titanium X release. CEO and CTO Mark Barrenechea added that while specific metrics on AI productivity are not yet available, internal tools like 'Athena' for developers and 'Ollie.AI' for sales are expected to drive significant efficiency gains.

Paul Treiber sought to confirm if the fiscal 2027 revenue aspiration is based purely on organic growth and asked how management compensation will be adjusted to align with the new emphasis on return-focused metrics.

Answer

CEO and CTO Mark J. Barrenechea stated unequivocally that the fiscal 2027 plan is 'manifestly organic growth' and fully within the company's control. On compensation, he revealed that the upcoming proxy circular will detail four advancements, including the board setting higher performance bars for leadership on both growth and margin for annual incentives, with long-term compensation tied to stock performance relative to the NASDAQ.

Paul Treiber questioned CGI's competitive positioning in AI, asking if it strengthens its position, and inquired about the economic impact of AI, specifically whether clients are reinvesting productivity gains.

Answer

President and CEO François Boulanger asserted that the need for deep expertise to implement AI correctly strengthens CGI's competitive position and creates new opportunities. He explained that clients are indeed seeing productivity gains and are often reinvesting those savings. For example, cost reductions on the 'run' side of the business are being reallocated to accelerate digital transformation projects.

Paul Treiber asked where Shopify is seeing the most operational impact from its internal use of AI and questioned the magnitude of the productivity gains achieved so far.

Answer

President Harley Finkelstein explained that Shopify is a major net beneficiary of AI, using it both for merchant-facing products (Sidekick, Media Editor) and internally. He highlighted internal productivity gains in developer effectiveness and in the support organization, where AI handles lower-quality conversations, allowing human support to focus on high-quality interactions with merchants.