Good morning. And thank you for joining us on Celestica's third quarter 2021 earnings conference call.

On the call today are Rob Mionis, President and Chief Executive Officer; and Mandeep Chawla, Chief Financial Officer. As a reminder, during this call we will make forward-looking statements within the meanings of the U.S.

Private Securities Litigation Reform Act of 1995 and applicable Canadian Securities Laws. Such forward-looking statements are based on Management's current expectations, forecasts and assumptions, which are subject to risks, uncertainties and other factors that could cause actual outcomes and results to differ materially from conclusions, forecasts or projections expressed in such statement.

For identification and discussion of such factors and assumptions, as well as further information concerning forward-looking statements, please refer to yesterday's press release including the cautionary note regarding forward-looking statements therein, our most recent Annual Report on Form 20-F and other public filings, which can be accessed at sec.gov and sedar.com. We assume no obligation to update any forward-looking statement except as required by law.

In addition, during this call, we will refer to various non-IFRS financial measures including operating earnings, operating margin, adjusted gross margin, adjusted return on invested capital or adjusted ROIC, free cash flow, gross debt to non-IFRS trailing 12-month adjusted EBITDA leverage ratio, adjusted net earnings, adjusted EPS, adjusted SG&A and adjusted effective tax rate. Listeners should be cautioned that references to any of the foregoing measures during this call denote non-IFRS financial measures whether or not specifically designated as such.

These non-IFRS financial measures do not have any standardized meanings prescribed by IFRS and may not be comparable to similar measures presented by other public companies that use IFRS, or who report under U.S. GAAP and use non-GAAP financial measures to describe similar operating metrics.

We refer you to yesterday's press release and our Q2 2021 earnings presentation, which are available at celestica.com under the Investor Relations tab. For more information about these and certain other non-IFRS financial measures including a reconciliation of historical non-IFRS measures to the most directly comparable IFRS measures from our financial statements.

Unless otherwise specified, all references to dollars on this call are to U.S. dollars and per share information is based on diluted shares outstanding.

Let me now turn the call over to Rob.

Thank you, Craig. Good morning everyone.

And thank you for joining us on today’s conference call. Celestica’s strong third quarter results reflect a resiliency of our business and built on the positive momentum that has propelled our performance in recent quarters.

Despite the pervasive supply chain challenges impacting our industry, we continue to build on our progress, push ahead and gain new ground towards achieving our long term objectives. Our third quarter revenue came in at $1.47 billion firmly in the center of our guidance range.

Our non-IFRS adjusted EPS of $0.35 came in towards the high end of our guidance range. And our non-IFRS adjusted operating margin of 4.2% was above the midpoint of our guidance range.

Despite the challenging macro environment during the third quarter, our strong results underscore the importance of the strategic transformation initiatives we have recently completed. Our third quarter represented our seventh straight quarter of year-to-year operating margin improvement, and the second straight quarter within our target operating margin range 3.75% to 4.5%.

This marks our highest quarterly operating margin in their history as a publicly traded company. We continue to diversify our business as our lifecycle solutions portfolio grew 15% year-to-year, driven by another quarter of double-digit growth in our ATS segment, and 20%.

plus growth in a hardware platform solutions, or HPS business. Lifecycle Solutions represented 60% of our consolidated revenues in the third quarter, up from 50% a year ago.

In the fourth quarter, we are targeting to achieve two important objectives that we set out at the beginning of the year. First, a return to top line growth since our disengagement with Cisco, and second, we anticipate that our ATS segment will re-enter its target margin range.

We also anticipate the closing of our acquisition of PCI to take place next month, which we expect will further enhance our portfolio and add key capabilities to bolster our presence and attractive growth markets. We believe that achieving these important milestones during the fourth quarter will position us for a strong finish to 2021 with solid momentum as we head into 2022.

Before I offer some additional detail on our business outlook, I'd like to turn the call over to Mandeep, who will provide you an additional color on our third quarter financial performance as well as a guidance for the fourth quarter. Mandeep, over to you.

Thank you, Rob. And good morning everyone.

Third quarter 2021 revenue came in at $1.47 billion at the midpoint of our guidance range. Revenue decreased 5% year-over-year and increased 3% sequentially.

Our non Cisco revenues grew 6% year-over-year and grew 4% sequentially. We delivered non-IFRS operating margin of 4.2%, 20 basis points ahead of the midpoint of our guidance range driven by strong performance in both segments.

Non-IFRS operating margin was up 30 basis points on both the year-over-year and sequential basis. Non-IFRS adjusted earnings per share were $0.35 towards the high end of our guidance range of $0.30 to $0.36, and up $0.03 year-over-year and up $0.05 sequentially.

This marks our highest EPS in nearly five years. ATS revenue was up 12% compared to a year ago.

In line with our expectations of a low double digit percentage year-over-year increase, sequentially ATS revenue was up 5%. Year-over-year, revenue growth in ATS was driven by a continuing recovery in our industrial business, another quarter of strong demand in capital equipment and solid performance in our HealthTech business.

This was partly offset by softness in A&D specifically in our commercial aerospace business. CCS segment revenue was down 14% year-over-year and up 2% sequentially.

The year over year decline was largely driven by the Cisco disengagement and demand volatility within certain programs in our enterprise end market. These declines were partly offset by strong demand from service provider customers, including in our HPS business, and an increase in demand from certain other programs in our enterprise end market.

Our CCS revenues from customers other than Cisco increased by 2% year-over-year. Communications revenue declined 17% year-over-year greater than our expectation of a high single digit percentage decrease.

The year-to-year decline was primarily driven by the Cisco disengagement and demand volatility in certain program, currently offset by strong demand from service provider customers. Sequentially, communications revenue was down 4%.

Enterprise revenue in the quarter was down 7% year-over-year better than our expectation of a low 20 percentage decrease. Sequentially, enterprise revenue was up 16%.

Our HPS business delivered revenue of $300 million, up 22% year-over-year, led by demand strength and new program ramps with service providers due to continued data center growth. Turning to segment margins, ATS delivered a segment margin of 4.3% in the third quarter up 60 basis points year-over-year and 20 basis points sequentially.

This marks the sixth consecutive quarter of sequential ATS segment margin expansion. The year-over-year margin improvement was driven by profitable growth in capital equipment, which more than offset softness in aerospace and defense.

CCS segment margin of 4.1% came in above our target range of 2% to 3%, up 10 basis points year-over-year and up 40 basis points sequentially. The year-over-year margin increase was driven by improvements, including continued growth in our HPS business.

Moving on to some additional financial metrics. IFRS net earnings for the quarter were $35.2 million or $0.28 per share, compared to net earnings of $30.4 million or $0.24 per share in Q3, 2020 and net earnings of $26.3 million or $0.21 per share last quarter.

Adjusted gross margin was 8.8%, up 70 basis points year-over-year and up 40 basis points sequentially. The year-over-year improvement was driven by growth in our HPS and capital equipment businesses and lower variable compensation partly offset by softness in A&D.

Non-IFRS operating earnings were $61.3 million, up $1.2 million year-over-year and up $6.3 million sequentially. Our non-IFRS adjusted effective tax rate for the third quarter was 19%, an improvement of 1% year-over-year and sequentially.

For the third quarter, non-IFRS adjusted net earnings were $43.4 million, compared to $40.9 million for the prior year period, and $37.9 million in the second quarter. Third quarter non-IFRS adjusted ROIC of 15.2% was flat year-over-year and up 1.5% sequentially.

Moving on to working capital. Our inventory at the end of the quarter was $1.41 billion, up $201 million year-over-year and up $181 million sequentially, as we continue to support growth in our HPS business and increase inventory to support our customers in light of the current supply chain environment.

To offset the working capital impacts of higher inventory, we continue to work with our customers on cash deposits when appropriate. Inventory turns in the third quarter were 4.1 turns, down from 4.7 turns in the prior year period and down from 4.4 turns last quarter.

Capital expenditures for the third quarter were $16 million, or approximately 1% of revenue. Non-IFRS free cash flow was $27 million in the third quarter compared to $16 million in the prior year period, and $31 million last quarter.

This is now our 11th consecutive quarter of delivering positive non-IFRS free cash flow, freeing our year-to-date total to $79 billion. Cash cycle days in third quarter were 72 days, up 11 days year-over-year and up one day sequentially.

Cash cycle days increased on a year-over-year basis primarily due to higher inventory. Moving on to some additional key metrics.

Our cash balance at the end of the third quarter was $477 million, up $26 million year-over-year and up $10 million sequentially. Combined with availability under our revolver, we continue to believe that our current liquidity of over $900 million is sufficient to meet our anticipated business needs.

We ended the quarter with gross debt of $440 million unchanged from the previous quarter, leaving us with a net cash position of $37 million. Our third quarter gross debt to non-IFRS trailing 12-month adjusted EBITDA leverage ratio was 1.4 turns, flat sequentially, and an improvement of 0.2 turns from the same quarter last year.

As we announced last month, following the anticipated closing of the PCI acquisition in November, we expect to add approximately $220 million of additional debt to our balance sheet through a new term loan. At September 30 2021, we were compliant with all financial covenants under our credit agreement.

During the quarter, we repurchased approximately 2.1 million shares for cancellation at a cost of $17.2 million. Since commencing our NCIB program in November of 2020, we have repurchased a total of 4.4 million shares at a cost of $35.9 million.

We ended the quarter with 124.7 million shares outstanding, a reduction of approximately 3% from the prior year period. We are pleased with our history of returning cash to shareholders while also investing in our business.

While our long term capital allocation strategy remains unchanged, our focus in 2022 as a result of our acquisition of PCI will be to reduce our net debt. That being said, given what we see as a modest leverage balance, we believe, we also have the flexibility to opportunistically repurchase shares for cancellation when warranted.

As such, we intend to commence a new NCIB program during the fourth quarter subjected to necessary approvals after our existing NCIB program expires in November. Now turning to our guidance for the fourth quarter of 2021.

We would like to note that our Q4 guidance assumes a partial quarter of financial results from PCI. We are projecting fourth quarter revenue to be in the range of $1.425 billion to $1.575 billion.

At the midpoint of this range, revenue would be up 2% sequentially, and up 8% year-over-year. This will be our first quarter with top line growth on a year-to-year basis since the third quarter of 2020.

Fourth quarter non-IFRS adjusted earnings per share are expected to range from $0.35 to $0.41 per share. At the midpoint of our revenue and adjusted EPS guidance ranges, non-IFRS operating margin would be approximately 4.5%, an increase of 30 basis points sequentially, and up 90 basis points over the same period last year.

This would represent Celestica's highest ever non-IFRS operating margin in our history as a publicly traded company. Non-IFRS adjusted SG&A expense for the fourth quarter is expected to be in the range of $62 million to $64 million.

We anticipate our non-IFRS adjusted effective tax rate to be approximately 19%, excluding any impacts from taxable foreign exchange or unanticipated tax settlements. Turning to our end market outlook for the fourth quarter of 2021.

In our ATS end market, we expect revenue to be up in the low 20s percentage range year-over-year, driven by continued demand strength in capital equipment, sustain momentum in industrial as well as a partial quarter of financial results from PCI. In CCS, we anticipate our communications end market revenue to be up in the low single digit percentage range year-over-year, driven by strong demand from service provider customers supported by our HPS offering and the beginning of Cisco's revenue lapsing from our comparatives.

In our enterprise end market, we anticipate revenue to decrease in the low single digit percentage range year-over-year. I'll now turn the call back over to Rob for additional color on our end markets and overall business outlook.

Thank you, Mandeep. We continue to execute on our long term strategic objectives and build on our momentum quarter-after-quarter.

With the heavy lifting of reshaping and restructuring now behind us, we are squarely focused on growth and maintaining strong margins as our top priorities moving forward. However, we recognize the road ahead is not without its challenges.

The pressure on component availability remains persistent and pervasive in the current business environment. The dedicated efforts and proactive approach to demand planning by our global procurement and planning teams has allowed us to secure the necessary supply to continue to achieve our revenue and profitability targets.

While dynamic, we have accounted for the impact of these supply chain challenges and our fourth quarter 2021 guidance and fiscal 2022 outlook to the best of our ability [ph]. However, we believe that growth remains constrained relative to its potential.

As we feel that current customer demand supports materially higher revenues. As Mandeep mentioned, despite material constraints we anticipate a return to top line growth in the fourth quarter at operating margins of 4.5%, the highest in Celestica's history as a publicly traded company.

In addition, I'd like to reaffirm our 2022 outlook of at least $6.3 billion in revenues, with lifecycle solutions growing 10% or more and operating margins between 4% and 5%. Now turning to the outlet for our segments.

In ATS, we are on track to achieve our 10% revenue growth target for 2021 on organic basis. Additionally, we continue to expect our ATS segment margin to re-enter our target margin range of 5% to 6% during the fourth quarter.

Our ATS segment results for the fourth quarter are expected to include a partial quarter of results from PCI. Our capital equipment business continues to experience exceptional strength, supported by robust secular tailwinds and market share gains.

With another quarter of strong performance, our capital equipment business remains on track to exceed $700 million in revenues in 2021, which would represent greater than 30% growth compared to 2020. We continue to believe that the dynamics supporting this growth are not short term in nature, providing an extended runway for continued strength in demand.

As such, we reiterate our expectations for strong growth into 2022. Our industrial business continues to build momentum and posted another quarter of year-to-year revenue growth.

We expect this momentum to continue and anticipate year-to-year and sequential growth in the fourth quarter driven by new program ramps in such areas as EV charging, energy generation and smart metering. With the anticipated completion of our acquisition of PCI next month, we will also begin to consolidate PCIs revenues into our industrial business, further boosting our revenue outlook and margin profile to exposure to new customers and end markets.

We expect the CCRs portfolio as well as our existing industrial business to achieve solid organic growth in 2022. Our A&D business continues to show signs of stabilization, registering modest sequential growth for the second straight quarter.

We expect this initial momentum to continue into the fourth quarter and into 2022 supported by new program winds. However, we expect commercial aerospace demand to remain depressed relative to pre-pandemic levels into 2022.

In spite of the soft near term outlook, we continue to make long term investments to enhance our capabilities in our A&D business. In July, we announced the opening of our AbelConn Electronics facility in Maple Grove, Minnesota, a state of the art 110,000 square foot facility designed to support customers in the highly regulated aerospace and defense markets, as well as the industrial and energy spaces.

Bookings have been strong since the opening of the facility. Additionally, the site is also in the process of obtaining the necessary regulatory certifications to support customers in the HealthTech market.

Our HealthTech business registered a very strong third quarter. While demand remains robust, we expect growth rates to moderate in the short term.

As COVID related demand is replaced by new program ramps. We expect our HealthTech market to continue to grow into 2022 fuelled by these new program ramps.

Now turning to CCS, our CCS segment continues to achieve excellent results, registering its sixth straight quarter with segment margin above our target range, despite revenues being lower year-to-year as a result of improved mix, including growth in our HPS business and our disengagement with Cisco. Our HPS business continues to perform well and remains on track to exceed $1 billion in revenue in 2021.

With this growth momentum anticipated to continue into 2022, we expect to maintain CCS segment margins comfortably within our 2% to 3% target range or higher. Looking ahead, we also expect our CCS segment to realize a return to top line growth in the fourth quarter on a year-to-year basis as the revenues from Cisco start to lapse on our comparative period.

Our hardware platform solutions business has posted year-to-date revenues of more than $800 million representing 23% growth compared to 2020 with a primary driver being consistent demand strength from our service provider customers. Our HPS business has achieved this impressive growth in spite of the challenges related to proponent constraints.

Component constraints not withstanding our opportunity final and general market outlook remains very positive. We now expect HPS to achieve greater than 20% revenue growth for 2021 versus 2020 and anticipate growth of 10% or more in 2022 compared to this year.

Given its growth prospects, we continue to invest in HPS and recently expanded our footprint by establishing a center of excellence that will support HPS engineering in Richardson, Texas. The 750,000 square foot facility not only addresses our customer’s desire for additional U.S.

base capacity, but bolsters our rack integration capabilities, thereby strengthening our relationship with hyperscalers are aiming to consolidate their supply base to partners with full lifecycle solutions. In communications end market, demand is expected to remain strong for the fourth quarter, largely driven by service provider customers.

We anticipate year-to-year growth in our communications end market to resume on an absolute basis in Q4 2021 for the first time since the completion of our disengagement with Cisco in 2020. However as mentioned, our growth outlook remains tempered as communications revenues are likely to continue to be impacted by material constraints.

Despite strong demand. In our enterprise end market, the strong demand we are seeing in storage is expected to be largely offset by continued softness of compute.

We expect these dynamics to persist here in the fourth quarter, the year-to-year declines in enterprise revenues are stabilizing. As we look to the fourth quarter, our business has reached an important inflection point.

Our focus has shifted from reshaping and transforming our portfolio to achieving a return to absolute growth and building on our momentum. I want to thank our entire global team for their dedicated efforts which drive our performance and enable us to achieve our goals.

And with that, I would now like to turn the call over to the operator to begin our Q&A session.

Hi, thank you for taking my questions. First question for Mandeep I guess, it looks like inventory was up 15% sequentially, and your guiding 4Q revenues up 2%.

So can you give us some details Mandeep on what that mix of inventory was, how much raw materials, how much whip? And how should we think about cash conversion cycle and free cash flow in fiscal 2022?

Good morning Ruplu. Thanks for the question.

So inventory is up, as you've mentioned, and we are taking a long term view right now on how we're managing the balance sheet. The demand as we've talked about a few different times is quite strong for 2022.

And we're working with our customers to bring in the inventory that's needed in order to satisfy that demand. Now we are very mindful though of maintaining the right level of returns.

We're working with our customers when we can to get cash deposits. One of the things you'll notice is that our deposits are also up materially on a year-over-year basis.

And we're also working with our customers on carrying charges when we're not able to necessarily get the deposits because we continue to focus on ROIC. From a cash perspective, too early to tell what the 2022 is going to look like yet.

But what I will say is that despite the inventory growing almost $200 million on a year-to-year basis, we still generated almost $80 million of free cash flow on a year-to-date basis. We're proud we're targeting positive free cash flow in the fourth quarter.

But we're mindful that we do want to get over the $100 million mark. And we're working through right now our plans for 2022.

But right now our focus really is on being able to fulfil as much of the demand as we can because it is quite strong.\

Okay, thanks for the details on that. Looks like you're going to ask for a new NCIB in 4Q.

You announced the PCI acquisition, which is supposed to close in the fourth quarter. Given this, can you help us or can you remind us of your capital allocation priorities?

How should we think about the priority of further acquisitions versus buybacks, versus debt pay down?

Yes, absolutely. As you know Ruplu, we have a good track record of generating strong free cash flow.

And we also have maintained our long term strategy of returning half of it to shareholders through share buybacks over the long term. And we've done a very nice job on that.

If you go back over five years, you frankly even over 10 years. On the existing NCIB program, it does expire in November, under the program that we have right now.

So far we repurchase 4.4 million shares for cancellation. So not the entire program was used, but enough of it was used to take advantage of opportunities in the market at certain times.

On a go-forward basis, we are looking to open up a new program, likely in December, so that we can continue to be opportunistic on share buybacks. Just for your understanding under the under the filing that we intend to make with the TSX, we can repurchase for cancellation up to 9 million shares.

We however will probably use about 3 million of that for stock-based compensation. So you can think about it as a maximum amount of around 6 million shares under the new program.

That being said, our priority right now as we go into 2022 is number one, to generate strong free cash flow. And then to pay down debt as we go through the year.

We think that that puts the company in a in a strong position, our balance sheet will still be strong even after the PCI acquisition. But this just gives us additional flexibility.

But we will and we are willing to and we have the capacity to act on share buybacks if we need to, if we find that the stock price is not reflective of what we're doing, we are willing to go in there and make opportunistic purchases.

Okay, thanks for that. And if I can just make one more and for Rob.

On the communication side, you had guided down high single digits, looks like it actually was down 17% year-on-year. So can you just give us some details on the end markets like what did you see in optical?

Was there any or networking? Was there anything stronger, weaker than the other?

Yes, what we saw in the third quarter Ruplu was very good strength and networking, good strength in HPS, and also some EMS programs as well. But it was a little down from our initial expectations driven by some shortages that cleared late in the quarter, but not in time for us to get it out the door.

Okay, thanks for all the details. Congrats on the execution.

Thanks Ruplu.

Thanks very much. Good morning.

I was hoping that you could speak to the, the sequential quarter-over-quarter trend in HPS from Q3 to Q4 at least what's implied in guidance. Is there any seasonality there or is or component shortages, that maybe headwinds to that that business growth, the deceleration in growth expected for Q4?

Yes, we saw some very good growth in HPS in Q3, Paul. And moving into Q4, we still see some very strong growth.

What's really happening on a sequential basis is really just tougher comps. We're seeing some nice ramps and growth in networking.

And also moving into Q4 we're also seeing some growth in compute as well.

And shifting gears and looking at the supply environment in regards to the constraints, you come into this $30 million headwind this quarter was similar to last quarter. I think on the last caller common [ph] said that the environment will get more challenging.

So what you know what happened during the quarter that allowed you to mitigate that that potential greater headwind?

Thanks for the question. You know, mid last year, I think we realize that we're going to be heading into a supply chain and constrained environment for at least till the end of 2022.

So we started adopting our processes, our procedures, our organization structure, put new tools in place, and all those things are now in full force. So I have to say, right now, we have very good visibility into our supply chain with these new tools and processes.

And while the situation is very dynamic, I think we've demonstrated some very good resilience thus far. And frankly, we're very good at managing volatile variables.

That's what you have to do in these days. And we've just been managing to the dynamic environment.

And every quarter is a new quarter, but we feel good about our team, our processes and our ability to navigate through the roads ahead.

And just, still related on a supply chain, but when you think about it from a downstream point of view, just in terms of like global freight and getting the products to your customers in the backlog that we're hearing about in ports and whatnot, are you seeing challenges in terms of shipping products to your customers, are you seeing delays in lengthening of goods in transit, compared to historical ranges that you've seen?

Yes, that is certain. We are certainly seeing that, that hasn't been the main impact for us.

We've been using different modes of transportation. We also have done a very nice job of regionalization and localization of the supply chain.

So we have less product going across the ocean, if you will, based on where our final mile was done, and that certainly helped us be able to navigate through these turbulent times.

Thanks for taking my questions.

Hi, good morning. Rob, can you speak to just overall demand visibility?

I mean, obviously, there's uncertainty in the supply side. But given longer lead times, I'd have to imagine that your demand visibility is probably exceptionally strong at this point would that be a fair characterization?

Yes Thanos, that would be I mean, based on the extended lead times, that's going on. We've been working with our customers and pretty successful in doing that to extend their order books out to cover at least along with material.

So our demand visibility is quite strong. Many of our customers, especially in the hyperscale spaces or, if you could build it, we will take that type of mentality and giving us firm purchase orders.

In those types of environments, we've been doing our best to fulfill their demand. But frankly, what we don't get in one quarter, we'll try to get into subsequent quarter, -- either the majority of what we're seeing is non-perishable demand.

And remind us in terms of your current expectations for flat panel, is the expectation that it will remain subdued for much of 2022 perhaps picking up in the latter part, or what's current thinking there?

Yes, the display market is, I think, going to be a little subdued into 2022. But the positive news is that, because of our Korean footprint, we've been actually able to gain a lot of market share with semi cap equipment in Korea based on the location and the capabilities of that site.

So within semi cap, we’re the market share leader and that we've been gaining shares, we've been growing faster than the broader market, we have a fantastic footprint. We do new product introduction in the U.S.

And we have factories in Malaysia and again in Korea. So while the display business is down in Korea, we're happy that we're able to ramp new semicap programs.

Great. I’ll pass it on.

Thank you.

Thank you.

Thank you very much. Could you give shed some insights on the enterprise trends?

What you're seeing there, it looks like that they were down year-over-year, the report the quarter and your outlook also? And I don't know if that's comparisons or some inventory digestion or kind of what's going on there?

Sure, Jim. So in enterprise in Q3, we saw some demand softness in compute that was partially offset with strength in storage, seeing the same dynamic into Q4 as well, both in storage, both in Flash and HDD.

But some softness and compute, the softness and compute is really driven by tough comps from a year ago.

Okay. Thank you so much.

You’re welcome.

Hi, good morning. Just curious, some of the challenges around supply chain and some of the challenges your customers are seeing, are they are they looking more closely at our sourcing opportunities with companies like Celestica?

Do you see the the addressable market starting to grow, particularly in the diversified side of the business?

On the diversified – with respect to the supply chain challenges, what we're seeing is a higher renewal rate given the supply chain challenges on existing business. It's hard, frankly, to transfer work from one supplier to another supplier or go out on a competitive bid, based on the supply chain constraints.

So we're seeing higher renewal rates. We're also seeing in terms of increasing outsourcing trends.

There's a tremendous amount of new product ramps that we have an ATS that we've won probably a year ago, a year and a half ago. And those are just starting to ramp now and into next year.

So going through a digestion period of growth now, once we were able to get these products certified and get the supply chains flush, we're looking forward to a very strong 2022.

Okay, and then I want to ask, maybe extension to Paul's question earlier around the HPS growth, but more focused on 2022. The 10% growth in 2022 seems as though it's a deceleration even if you consider the tougher comp, and especially I think it said the inventory growth is related to HPS.

So I'm trying to reconcile the growth and inventory against this HPS guide of 10% growth in 2022.

Yes, Rob thanks for the question. I think we said 10% or more.

I think at this stage of the game, we certainly believe it will be more from where we are now. We have a very full pipeline.

The end market dynamics are still quite strong. We have leading positions, and each element of the -- of the rack, if you will and storage and compute, and networking, and the market environment remain strong.

So I think that's probably a conservative estimate on our part.

I would just add to that, Rob. As you're aware, a lot of HPS product does go into data centers, and the if you just look at the data center market itself, it has a pretty attractive growth profile next year, high single digits or so.

And we have as we've shown this year and last year, we are growing in in excess of what the market is doing.

Okay, one last little modeling question, if I could. The guidance for SG&A is a big step up.

I assume part of that is related to PCI. And so should we…

That yes, part of it is related to PCI. And then the other part of it has to just do with the timing of how we model our variable compensation.

We have a larger expense in the fourth quarter. So while it looks like a bigger number sequentially, it's not as big on a year-to-year basis.

Okay, so should we shouldn't expect that to go up again in Q1 given the part contribution from PCI, it should come down after the comp…

It will start to normalize. We typically have lower SG&A in the first half of the year versus the second half.

Okay, thanks.

Thank you.

Yes, good morning. I had a couple questions if I could.

Firstly on PCI, what is the implied contribution in the fourth quarter, I guess on on revenue and EPS or margins?

Yes, so no problem. The revenue right now we've assumed is $50 million in the $1.5 billion guidance number.

I will say that on a go-forward basis we won't be talking about the profitability, specifically a PCI. But we have put it in at approximately 10% ATS, so operating profit in the fourth quarter.

And then as you know, as we go into getting the actuals they will be part of our industrial business, and then the profit will just be included in overall ATS.

Great appreciate the granularity. Second question, if we think about that roughly 10% growth into 2022 or $6.3 billion in revenue, given extended lead times in your view of supply chain for 2022.

How much additional investment in inventory is required to get to that $6.3 billion? Can you just talk about the puts and takes around that?

Thank you.

So sure, why don't we start off with the $6.3 billion. So as you know, before the PCI acquisition was announced it was a $6 billion number.

And essentially, what it implies is 10% growth on our lifecycle solutions portfolio. We've indicated that we are expecting ATS to grow 10% next year, and that we are expecting HPS to grow 10% or more.

So if you put 10% on our lifecycle solutions, that pretty much gets you from 2021 numbers to $6 billion number next year. And then we add PCI to that.

In terms of the inventory build it's a dynamic situation right now, because some of the inventory that we've already brought in-house is to go and support some of the revenue growth as we go through the year. So we've never, of course, given an inventory forecast.

But what I would say is, is that we have already been investing in our inventory. And we don't expect material amounts on a go-forward basis.

If we were to make some additional strategic investments, though, we would be working with our customers to help support us on that. And so as I mentioned at the beginning of the call, we work with our customers on cash deposits to help offset our inventory.

Frankly, internally, we look at inventory on a cash adjusted basis. And then in other instances, we'll look to them for carrying charges in order to maintain the ROIC.

Great, thanks for that. And then just if we were to sort of think through the unwinding of that, given the view of the world, it sounds like you wouldn't get the working capital flow back into the business likely until 2023.

Is that is that the right way to think about that?

I think it's fair to assume that inventory will be elevated as we go through 2022. Now, ofcourse understanding that AP is also elevated.

And so when one starts to unwind, the other will unwind as well. Right.

And then the last question, if I could on the cap business, semi cap equipment business, what is the implied growth rate in that for 2022? Any any color around that would be appreciated.

Thanks very much.

Hi, I guess the implied growth rate for 2022, I would say is double digits. And again, the market for 2022, the way we're looking at it is about 12%.

And we're feeling that we're going to be able to go passive in the market based on market share gains. And a lot of those, a lot of that is bolstered by the fact that these programs are won in our rapid.

Thanks a lot, appreciate it.

Thanks.

Hi, thanks for taking my questions. Rob, just a follow up on the higher visibility game from the longer lead times.

Do you think this trend of having these higher visibility continues after these disruptions are over? I'm sure this is helping you with your planning and you'd like to like for it to continue going this way.

Interesting question. I would like to think, yes.

Because the tools that we've developed new SIOP rhythms that we've developed, the use of analytical tools that we've been working with our customers on, to help forecast them and moving forward, but it's hard to predict. If we'll go back to prior world of this increased visibility will be maintained moving forward.

So I'm uncertain of that will be at least for 2022, though, I think this visibility will stay strong.

Okay, thanks for that. And then, as your diverse geographic footprint and you being you seem to be less impacted by the lockdowns than maybe some of your peers, has that allowed you to have any competitive displacements as customers try to get more supply.

Yes, we've been navigating through the Malaysian issue, and also some of them power issues in China as well, based on our footprint and, and our shift patterns and other creative ideas. In terms of picking up share, relative to that, I wouldn't say that that has been a driver one way or another.

It's just allowing us to, to remain resilient, if you will, and serve our customers through the turbulent times.

And, Dan, maybe I'll just add to that. As Rob mentioned in his remarks, prepared remarks, we have, we are investing in expansions in geographies, like the U.S.

We have opened up a new facility in Minnesota to service a lot of our ATS customers, and also taking over facility in Texas in order to support our growth in HPS, and rack integration. And so I think the way to think about it is those are customer driven expansions, where we have either customers that are already tied to the sites, or customers who are now awarding new business to us because we have those sites.

And so we'll continue to be nimble to respond to what customers are asking us to do.

Thank you.

It's very, it's very good point, Mandeep. We're really quite excited about our investment in Richardson, Texas.

It's really the next logical progression and the value provide to our customers and a lot of strong interest from customers and filling up that site. Operator, is there any more questions?

Thank you. I'm pleased with our performance in the third quarter and momentum as we move into the final quarter of the year and close out 2021.

Based on the midpoint of our fourth quarter guidance, we're on track to print a very strong year. In the fourth quarter, the company is on track to achieve absolute year-over-year growth as the revenues from Cisco stock collapse on our comparative period and operating margins in 2021 are on track to increase by 50 basis points year-over-year to 4% while adjusted EPS is on track to increase by more than 25% compared to 2020.

And while the world continues to react to the supply chain constrained environment, we have successfully adapted our operations to navigate through this dynamic environment. And we're excited that our efforts to transform our business are yielding results.

I'd like to thank our global team for remaining vigilant and keeping themselves and each other safe. And thank you all for joining today's call.

I look forward to updating you as we progress throughout the year.