Robert Young

Robert Young asked for context on the third hyperscaler 1.6T win, specifically if it was an extension of 800G, tied to Tomahawk ASIC experience, or part of a rack integration. He also inquired about how operating margins are expected to evolve with 1.6T programs, and how margin structure might differ between full rack deployments and standalone programs.

Answer

CEO Rob Mionis explained that the third 1.6T win is an extension of an existing relationship where Celestica had predominant share on 400G and 800G with that hyperscaler, awarded based on design win and performance. CFO Mandeep Chawla stated that 1.6T programs are expected to be as profitable as past switching programs, with higher margins during ramp/development and offset by operating leverage in mass production. He noted a trend towards more HPS in the switching portfolio, leading to better pricing, and for full rack deployments, they look at it holistically, capturing value from switching, compute, integration, and testing.

Robert Young asked for context on the third hyperscaler 1.6T win (extension of 800G, tied to Tomahawk ASIC experience, part of rack integration), and how operating margins are expected to evolve for 1.6T programs, differentiating between full rack and standalone deployments.

Answer

Rob Mionis (President and CEO) explained that the third 1.6T win is an extension of existing 400G and 800G predominant share with that hyperscaler, starting with a design win and leading to mass production. Mandeep Chawla (CFO) stated that 1.6T programs are expected to be as profitable as past switching programs, with more money made during ramping/development and offset by operating leverage in mass production. He noted that more of the switching portfolio moving to HPS (High-Performance Solutions) typically leads to better pricing. For full rack deployments, Mandeep Chawla said they look at it holistically, ensuring the value from switching (most engineering) is captured in overall pricing, including compute, integration, and testing.

Robert Young inquired if the 40 basis points of operating margin expansion in the 2026 guidance seemed conservative given the scale jump, shift to higher-end networking, and software mix, asking about potential headwinds or if pricing is a strategic advantage. He also asked if the shorter refresh cycles in networking (1.6T-3.2T) make it harder for new entrants and how this relates to greenfield versus existing data center deployments.

Answer

Mandeep Chawla (CFO) explained that the 40 basis points improvement comes from maintaining margins in both CCS and ATS with 40% CCS growth, and that Celestica aims for further expansion. Jason Phillips (President of Connectivity and Cloud Solutions) highlighted technology leadership, customization, and advanced manufacturing as differentiators, noting competitors struggle with execution. Steve Dorwart (SVP and GM of Hyperscalers) added that differentiated value and reliability strengthen incumbency, reducing price competition. Jason Phillips and Steve Dorwart also stated that faster technology generations make it harder for new entrants, with Celestica's demonstrated strong performance in delivering solutions quickly (e.g., 1.6T in days vs. weeks for competitors) proving its advantage.

Robert Young questioned if the 40 basis points of operating margin expansion in 2026 guidance seemed conservative given the scale jump and shift to higher-end networking, asking about pricing as a strategic advantage or any headwinds. He also asked if shorter refresh cycles in networking (1.6T-3.2T) make it harder for new entrants and how this relates to greenfield vs. existing data center deployments.

Answer

Mandeep Chawla (CFO) explained that the 40 basis points expansion reflects maintaining margins in both CCS and ATS with 40% CCS growth, and that they are working on various levers for further expansion. Jason Phillips (President of Connectivity and Cloud Solutions) emphasized differentiation through technology leadership (first with 800G/1.6T), customization for optimization, and advanced manufacturing processes, which customers value. Steve Dorwart (SVP and GM of Hyperscalers) added that delivering differentiated value reliably strengthens incumbency, reducing the need to compete on price and allowing focus on strategic opportunities. Jason Phillips also noted that faster technology generations make it harder for new entrants to keep up, and Celestica's long-standing investments position them as a technology leader. Steve Dorwart highlighted Celestica's strong performance in delivering 1.6T solutions rapidly, proving their capability.

Robert Young asked for an update on 1.6T momentum and how the full-rack solution win is creating a halo effect for ODM opportunities. He also questioned if acquisitions are needed to scale the services component of these solutions.

Answer

President and CEO Rob Mionis confirmed they continue to win 1.6T variants and that the fully orchestrated rack win is opening new doors. He stated that expanding their services footprint is a major focus. CFO Mandeep Chawla added that while they have a partner network, they are looking at M&A targets for vertical integration in services, which would likely have a more material financial impact around 2026.

Robert Young asked for clarification on the guidance, which seems to imply a second-half deceleration despite several announced program ramps. He also inquired about the ATS segment's margin improvement and the timing of the A&D program roll-off.

Answer

CFO Mandeep Chawla clarified that the second half will see sequential revenue growth and described the guidance as a 'high confidence view' that is risk-adjusted for the uncertain environment. On ATS margins, he confirmed the dilutive A&D program roll-off occurred in April and is reflected in the Q2 and full-year outlook, and he sees further opportunity for margin expansion in ATS this year.

Robert Young asked about the new digital native win, specifically probing the relationship with custom silicon providers and the depth of Celestica's own IP contribution to the full RAC solution. He also inquired about the expected revenue cadence throughout 2025.

Answer

President and CEO Rob Mionis clarified that the win leverages long-standing silicon partners for networking and the customer's proprietary custom compute silicon. He stressed that it is a significant design win for a full RAC, utilizing Celestica's IP in switching, compute modules, and RAC orchestration. CFO Mandeep Chawla described the 2025 guidance as a 'high confidence view' with strong visibility through Q3, implying potential for upside as Q4 solidifies.

Robert Young from Canaccord Genuity sought details on the strategic win with Grok, asking why Celestica was chosen, if it was a direct go-to-market effort, and if it includes HPS revenue. He also asked for an update on the pace, win rate, and ASP difference for 800G programs.

Answer

Stephen Dorwart, SVP, stated the Grok win was a significant proof point for Celestica's AI/ML compute capabilities, secured through their own go-to-market efforts, though often endorsed by ecosystem partners. The initial engagement is for manufacturing, with plans for increased design participation in future generations. On 800G, Dorwart confirmed winning next-gen programs with existing 400G customers, with strong demand and customer pressure to accelerate. CFO Mandeep Chawla added that while individual 800G ASPs are higher, the portfolio average ASP increase is in the low to mid-single digits due to product mix.

Robert Young asked for a breakdown of the 30% government pipeline growth, distinguishing between U.S. federal and other regions, and how sovereignty trends are influencing this. He also inquired about headcount versus revenue growth, revenue per employee, and the inclusion of recent acquisitions in headcount figures, as well as the impact of outcome-based and fixed-price contracts on margins.

Answer

François Boulanger, CEO of CGI Inc., detailed government momentum in Canada (defense, cybersecurity), other global defense ministries (Germany, UK, NATO), and U.S. state/local government, with U.S. federal pipeline showing opportunities despite potential lumpiness. He confirmed Comarch and OBS are included in headcount, explaining that revenue per headcount continues to grow due to outcome-based managed services and AI. Mr. Boulanger clarified that outcome-based contracts can be fixed-price, and fixed-price projects allow for margin improvement through cost reduction.

Robert Young asked for details on the 30% increase in the government pipeline, differentiating between U.S. Federal and other regions, and the impact of sovereignty trends. He also inquired about revenue per employee growth given flat headcount, and the impact of outcome-based and fixed-price contracts on margins.

Answer

François Boulanger, CEO, highlighted global government momentum, including defense and cybersecurity in Canada and Europe, and U.S. state and local governments. He confirmed Comarch and OBS are in headcount, and revenue per headcount is growing due to AI in managed services. Mr. Boulanger stated that fixed-price and outcome-based contracts, replacing input-based models, will improve long-term margins as cost reductions directly benefit profitability.

Robert Young sought clarification on whether the 75/25 core vs. adjacent revenue split is a Q4 metric or a FY2026 expectation post-VoIP Supply. He also asked to reconcile the differing timelines for return to growth (Q2 vs. second half core platform) and requested a bridge for the FY2026 EBITDA margin guidance (17%-19%) from Q4's adjusted 20%, considering improved gross margins and stable OpEx. Additionally, he inquired if the 18% Q4 over Q3 growth in prem-based products was a direct result of competitors exiting the market and asked for the absolute dollar value of this growing business segment.

Answer

COO Jeremy Wubs confirmed the 75/25 split is for FY2026 and forward. CFO Larry Stock clarified that both core and adjacent categories are expected to begin growing from Q2 onwards. Larry Stock bridged the EBITDA margin guidance by noting that the 20% Q4 adjusted EBITDA included VoIP Supply, which had $1.1 million EBITDA and $4 million revenue, and that OpEx would be stable at $30 million per quarter, leading to the 17%-19% range. Jeremy Wubs and Charles Salameh confirmed that the 18% Q4 over Q3 growth in prem-based products (specifically Switchvox and phones) was a direct result of Sangoma's proactive strategy to capture market share from competitors like Avaya and Mitel who are disengaging from the prem business. Charles Salameh stated that while they don't report the exact dollar value, this segment is a 'major chunk' of the business, serving as a significant growth engine and a pathway for customers to transition to cloud solutions.

Robert Young sought clarification on Sangoma's new revenue classification, asking if the 75-25 core versus adjacent split applies to Q4 or fiscal 2026 post-VoIP Supply. He also asked to reconcile the differing statements on growth resumption (Q2 vs. second half) and to bridge the 2026 EBITDA margin guidance (17-19%) from Q4's adjusted 20%, considering improved gross margins and stable OpEx. Additionally, he inquired if the 18% Q4 over Q3 growth in channel efforts was a direct result of competitors disengaging and the scale of this business.

Answer

Charles Salameh, CEO, confirmed the 75-25 core versus adjacent split applies to fiscal 2026 and forward. He clarified that both core and adjacent categories are expected to begin sequential growth in Q2. For EBITDA margins, Charles Salameh, CEO, explained that the bridge from Q4's 20% to the 17-19% guidance for 2026 accounts for the divestiture of VoIP Supply, which contributed $1.1 million in EBITDA and $4 million in revenue, and the remaining $3 million in revenue from the 75% gross margin. Jeremy Wubs, COO, confirmed the 18% Q4 over Q3 growth in prem-based Switchvox product lines was a direct result of Sangoma's proactive strategy to target Avaya and Mitel customers, leveraging their market distress. Charles Salameh, CEO, added that this is a significant part of the business, creating a larger customer base for future cloud transitions, though an exact dollar value was not provided.

Robert Young sought clarification on Sangoma's new business categorization, asking if the 75-25 core versus adjacent split applies to Q4 or FY2026 post-VoIP Supply. He also asked to reconcile the 'second half return to growth in core platform' statement with 'return to growth in Q2.' Additionally, he requested a bridge for the FY2026 EBITDA margin guidance (17-19%) from Q4's adjusted 20%, considering gross margin improvements and stable OpEx, and inquired about the absolute dollar value and drivers of the 18% sequential growth in prem-UC products.

Answer

COO Jeremy Wubs clarified the 75-25 core/adjacent split is for FY2026 and forward. CFO Larry Stock and CEO Charles Salameh confirmed both core and adjacent categories are expected to grow sequentially starting in Q2. Stock bridged the EBITDA margin guidance by factoring in VoIP Supply's divestiture (OpEx and EBITDA contribution) and its impact on revenue. Wubs and Salameh explained the 18% sequential growth in prem-UC products was a direct result of Sangoma actively targeting and capturing market share from competitors like Avaya and Mitel who exited the prem business, noting its significant, albeit undisclosed, contribution to the portfolio and its role in transitioning customers to cloud.

Robert Young of Canaccord Genuity asked about channel dynamics, specifically if legacy competitor disengagement is shifting power in Sangoma's favor, and whether the speed of these exits creates a unique opportunity to migrate on-prem customers to the cloud. He also inquired about potential margin upside from this market shift.

Answer

CEO Charles Salameh confirmed the market shift is highly beneficial, with thousands of competitor resellers now seeking alternatives. He described it as a "double-edged opportunity" to capture on-prem customers and later migrate them to cloud solutions, leveraging Sangoma's improved customer satisfaction. Regarding margins, Salameh stated it is too early to consider price increases, as the current priority is to capture market share and build the customer base for long-term value rather than seek short-term profit gains.

Robert Young from Canaccord Genuity asked about channel dynamics, questioning if the disengagement of legacy players is shifting power to Sangoma's benefit. He also explored the strategy of capturing and migrating these on-prem customers to the cloud and asked if this market shift could lead to margin upside.

Answer

CEO Charles Salameh confirmed the market shift is highly beneficial, as thousands of resellers from legacy players are now seeking alternatives, creating a significant opportunity for Sangoma's revitalized on-premise offerings. He detailed the strategy to capture this base and migrate them to higher-value cloud solutions over time. He stated it's too early to leverage price for margin upside, as the current focus is on building the customer base.

Robert Young sought clarification on the revised guidance, asking why the significant revenue reduction didn't result in higher EBITDA margin guidance. He also asked about the timeline to reach 85% recurring revenue and 20% EBITDA margins, the balance between M&A and debt paydown, and whether Sangoma was seeing increased market interest similar to Cisco's recent report.

Answer

CFO Larry Stock and CEO Charles Salameh explained the current guidance still includes the non-core businesses, and the shift to higher-margin revenue takes time due to longer sales cycles. The 20% EBITDA margin target is a future goal post-divestitures and strategic realignment. Salameh confirmed they will simultaneously pay down debt and accelerate their M&A strategy, with active discussions underway. COO Jeremy Wubs noted that while they see increased uptake of AI features like transcription, boosting order size, they haven't seen a major jump in the volume of new orders akin to what Cisco reported for the large enterprise market.

Robert Young from Canaccord Genuity Inc. asked for confirmation on the number of 'Big Five' tech customers and details on the recent expansion win, particularly the decision to displace an internal system. He also sought clarity on the assumptions behind the raised guidance, including the status of large deals, FedRAMP, and net retention trends.

Answer

CEO Alessio Artuffo confirmed this was their second 'Big Five' tech customer, won due to the client's need for a scalable, highly integrable platform to replace an in-house system for a customer experience use case. CFO Brandon Farber stated the guidance increase reflects strong mid-market performance and FX tailwinds, while noting that large enterprise deals and FedRAMP remain upside. Farber also reiterated that net retention should improve in Q3 before a Q4 dip from the AWS contract loss.

Robert Young asked for clarification on the full-year guidance reduction, questioning if it was driven by an increase in churn. He also noted a seeming slowdown in large customer growth and asked if the enterprise pipeline was overrepresented in macro-sensitive industries like retail and manufacturing.

Answer

CFO Brandon Farber explained the guidance reduction reflects a more measured approach for the second half of the year due to macro impacts on new logo growth, not an increase in churn; retention assumptions remain unchanged. He noted some deal elongation in the enterprise segment but stated the pipeline remains healthy and well-diversified, consistent with historical industry representation.

Robert Young of Canaccord Genuity asked about the impact of new product releases on Docebo's competitive position and customer adoption, and requested an update on the FedRAMP initiative's progress and potential.

Answer

CEO Alessio Artuffo confirmed the new product modules had a meaningful impact and outlined a broader strategy to evolve Docebo into an AI-first learning platform. Interim CFO Brandon Farber provided a FedRAMP update, stating they expect to achieve Authority to Operate (ATO) status by the end of Q3, which will allow them to begin bidding on federal contracts and capitalize on the need to modernize government technology.

Robert Young of Canaccord Genuity sought context on the steady decline in quarterly new customer additions and asked if it was solely due to the upmarket shift. He also inquired about the presence of 'mega deals' in the current sales pipeline.

Answer

CFO Sukaran Mehta explained that new customer count is a less relevant metric as the company focuses on higher-value enterprise clients, where one large win can equal 10-20 SMB customers. He noted new logo ACV increased to $71k and the enterprise cohort grew 30% YoY. Mehta also confirmed the pipeline contains large, strategic 7-figure opportunities in both government and enterprise.

Robert Young of Canaccord Genuity Group Inc. inquired about the current status of Enthusiast Gaming's debt covenants, the maturity of its credit facilities, and potential actions in a worst-case scenario, such as asset sales. He also asked about the growth outlook for the subscription business, particularly The Sims Resource (TSR), and sought clarification on gross margin guidance for the remainder of 2025.

Answer

CFO Alex Macdonald stated the company is actively working with lenders to amend its credit facilities, extend the June 2025 maturity date, and revise covenants, expecting a resolution soon. Interim CEO Adrian Montgomery added that in a worst-case scenario, the company possesses numerous attractive and transactable assets. Regarding subscriptions, Mr. Macdonald detailed a successful shift to premium annual plans for TSR, which improves LTV and reduces churn, and highlighted the upcoming 'Dress to Impress' feature as a key differentiator for market share growth. He also clarified that gross margins are expected to stabilize around the mid-70% level reported in Q1 for the rest of the year.

Robert Young inquired about the current status of the company's debt covenants and near-term maturities, particularly the one in June 2025. He also asked about potential asset sales in a worst-case scenario, growth opportunities in the subscription business via The Sims Resource (TSR), and sought clarification on gross margin guidance for the remainder of the year.

Answer

CFO Alex Macdonald stated the company is working closely with lenders to amend facilities and extend the June 2025 maturity, expecting a resolution soon. Interim CEO Adrian Montgomery confirmed the company possesses highly attractive and transactable assets, receiving regular inbound interest. Regarding subscriptions, Alex Macdonald detailed a successful shift to premium annual packages for TSR, which now comprise over 50% of subscribers, and highlighted the upcoming 'Dress to Impress' feature as a key driver for market share and expansion. He also clarified that gross margins are expected to remain stable at the current Q1 level of around 74% for the rest of the year.

Robert Young of Canaccord Genuity inquired about the Q1 outlook, including top-line seasonality, the impact of discontinuing the NFL TNG program, and whether adjusted EBITDA could remain positive. He also asked about the expected gross margin cadence for 2025, future opportunities with the NFL, the rationale for ending the TNG contract, and the status of the CEO search.

Answer

CFO Alex Macdonald addressed the financial outlook, confirming normal Q1 seasonality but noting strong underlying CPM trends and significant cost savings from ending the NFL TNG program. He stated that while achieving positive adjusted EBITDA in Q1 is difficult due to seasonality, it is the goal for the remainder of the year, with gross margins expected to stabilize in the low 70% range. Interim CEO Adrian Montgomery explained the decision to end the NFL TNG contract was due to its rigid, high-cost structure, contrasting it with more flexible and profitable custom content models. Regarding the CEO search, he noted the board's focus has been on stabilizing the business and can now revisit leadership timelines.

Robert Young of Canaccord Genuity inquired about the pipeline for additional major sports league partnerships following the NFL and NHL deals. He also sought more detail on the timing of CPG-related direct sales and the potential margin impact of a rebound, and asked about the future growth opportunity within the subscription business.

Answer

Interim CEO Adrian Montgomery noted a pipeline exists, with some inbound interest from other leagues, but the immediate focus is on successfully launching the NHL partnership. CFO Felicia DellaFortuna elaborated that the CPG direct sales dip was due to client campaign timing, not a loss of business. Adrian Montgomery added that a rebound in direct sales would significantly impact the bottom-line EBITDA. Regarding subscriptions, he highlighted the use of first-party data and longer-term packages to drive intelligent user acquisition for properties like The Sims Resource and Fantasy Football Scout.

Robert Young asked about the penetration of Global Trade Intelligence (GTI) solutions within Descartes' customer base and whether the use case applies to all customers.

Answer

CEO Ed Ryan stated that he expects continued GTI growth from new and existing customers but clarified that the solution is primarily for mid-sized to large customers with complex international shipping needs. He noted that it is not a universal use case for all 26,000 customers, as smaller clients with simple supply chains can often manage tariffs themselves.

Robert Young of Canaccord Genuity asked for metrics or a general idea of the penetration of Global Trade Intelligence solutions within Descartes' existing customer base.

Answer

CEO Ed Ryan did not provide specific penetration metrics but explained that the need for trade intelligence solutions is primarily with mid-sized and larger customers. He noted that usage is driven by complexity; a company with many products shipping to many countries cannot manage tariffs effectively on their own and becomes a prime candidate for the solution, whereas smaller, less complex shippers may not need it.