Good morning. My name is Jonathan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Celestica Inc. First Quarter Results Conference Call. [Operator Instructions] Thank you. Mr. Manny Panesar, Director of Investor Relations. You may begin your conference.

Thank you, Jonathan. Good morning, and thank you for joining us on Celestica's first quarter of 2014 earnings conference call. On the call today are Craig Muhlhauser, President and Chief Executive Officer; and Darren Myers, Chief Financial Officer. This conference call will last approximately 45 minutes. Darren and Craig will provide some brief comments on the quarter, and then we will open the call for Q&A. During the Q&A session, please limit yourself to 1 question and a brief follow-up as we have our Annual General Meeting immediately following this conference call. We will be available after our Annual General Meeting for additional follow-up. Copies of the supporting slides accompanying this webcast can be viewed at www.celestica.com. As a reminder, during this call, we make forward-looking statements related to our future growth, trends in our industry, our intentions concerning the return of cash to our shareholders, our financial and operational results and performance, and financial guidance that are based on current expectations, forecasts and assumptions that involves risks and uncertainties that could cause actual outcomes and results to differ materially. We also refer you to our cautionary statements regarding forward-looking information in the company's various public filings, including the Safe Harbor statement in today's press release. We refer you to the company's various public filings, which contain and identify material factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements and which discuss material factors and assumptions on which such forward-looking statements are based. These filings include our annual report on Form 20-F and subsequent reports on Form-6K, filed with the Securities and Exchange Commission and our annual information form filed with the Canadian Securities Administrators, which can be accessed at, respectively, at sec.gov and sedar.com. During this call, we will refer to certain non-IFRS financial measures, which include adjusted gross margin, adjusted SG&A, operating margin or adjusted EBIAT, adjusted net earnings, adjusted EPS, return on invested capital or ROIC, inventory turns; cash cycle days and free cash flow. These non-IFRS measures do not have any standardized meaning under IFRS and may not be comparable with other non-GAAP or non-IFRS financial measures presented by other companies, including our major competitors. We refer you to our press release, which is available at celestica.com, for more information about these and certain other non-IFRS measures, including a reconciliation of the historical non-IFRS measures to the corresponding IFRS measures where a comparable IFRS measure exists. Unless otherwise specified, all reference to dollars in this call are to U.S. dollars. I will now turn the call over to Darren Myers.

Thank you, Manny, and good morning, everyone. Celestica delivered first quarter revenue within our guidance range, while adjusted earnings per share came in above the guidance range as a result of an income tax benefit recorded in the quarter. First quarter revenue of $1.312 billion was at the lower end of our guidance range of $1.3 billion to $1.4 billion, primarily impacted by demand softness in our Communications business and the delayed program in our Diversified end markets. First quarter revenue decreased 4% compared with the first quarter of 2013 and declined approximately 9% compared with the fourth quarter of 2013. Some highlights for the first quarter include: We delivered IFRS net earnings of $37.3 million or $0.20 per share. Non-IFRS adjusted earnings per share of $0.26 was above our guidance range of $0.17 to $0.23 per share. Included in our adjusted earnings is a $0.06 per share net income tax benefit that was recognized in the first quarter. Non-IFRS operating margin of 3.1% improved 60 basis points compared with the first quarter of 2013. Free cash flow was negative $16 million driven by variable compensation payments in the first quarter. And we delivered 16.1% return on invested capital. Looking at revenue from an end market perspective. Our diversified end markets comprised 28% of our total revenue for the quarter, up from 24% in the first quarter of 2013. First quarter revenue from our Diversified end markets was impacted by the push out of a program into the second quarter. Diversified revenue grew 10% compared with the first quarter of 2013 with strong growth in our semiconductor, industrial and aerospace and defense sectors, partially offset by declines in solar. Revenue from our Diversified end markets declined 5% sequentially, largely driven by the previously mentioned delayed program. All revenue performance in…

Thank you, Darren. Good morning to everyone on the call, and thank you for joining us today. Celestica's first quarter revenue was impacted by seasonality, demand softness primarily in our Communications end markets, and deferral and delivery of a diversified program. We delivered first quarter profitability in line to our forecast, despite increased volatility in mix changes and customer demand forecasts late in the quarter, which negatively impacted our inventory and free cash flow. As Darren mentioned earlier, we're expecting sequential revenue growth of 9% at the midpoint of our second quarter guidance, expected growth in 4 of our 5 end markets. We're also projecting sequential and year-over-year operating margin improvements. We're encouraged by the momentum we're building for 2014. And based on the current outlook, we expect to make continued improvement in our financial performance throughout the year. Now, let me provide some additional perspective and insight on the outlook for our end markets. We continue to achieve double digit year-over-year growth in our Diversified end markets. While first quarter diversified revenue was impacted by the delay of a program into the second quarter, revenue from the remainder of the Diversified end markets came in generally as expected with strong year-over-year growth in our semiconductor, industrial and aerospace and defense end markets. For the second quarter, we're expecting Diversified to grow sequentially in the low double-digit percentages driven by solar and aerospace and defense. Relative to the second quarter of 2013, we're expecting Diversified growth in the low double-digit percentages with growth across all end markets except solar. Revenue from our semiconductor business is expected to be relatively flat in the second quarter compared with the first quarter. However, we are expecting a stronger second half as end market demand improves and as we ramp new programs. Semiconductor continues…

[Operator Instructions] And your first question comes from the line of Thanos Moschopoulos with BMO Capital Markets.

Craig, looking at the forecast and the commentary you're getting from your customers, would you say that demand environment is any less volatile than it was a quarter ago? And how is your visibility shaping up for the second half of the year at this point?

I'd say that the demand volatility is probably, is going to continue. I think the message is though that, in general, the first quarter, I think, was a low point for us. And we're seeing strength across a wide range of customers, and our visibility would be -- at 3 months, I would say 90 days would be the visibility that we would have. Although we did experience in March some relatively short cycle demand changes in the March time period as we mentioned in Darren's portion of the materials today. So a volatile environment. We've got a capability to meet those requirements and the flexibility to deliver against that. We're encouraged by the demand forecast that we're seeing. And certainly, our second quarter outlook at 9% growth over the first quarter is very encouraging.

And just lastly, regarding the quarter end changes in demand and volatility, did that affect any one specific segment, or was that across multiple segments?

It was generally across the Communications segment.

Your next question comes from the line of Jim Suva with Citigroup.

You guys have made a lot of effort into the Diversification market, which is very admirable. Recently, you talked about some delay there. Is that due to, I guess, like design delays, the customer not being ready, the market not being ready? And now that we're pretty much through April, most of the month, has it already started to ramp, or is it being delayed permanently because they want to make adjustments to it? Or can you just help us talk -- better understand these delays?

Well, in terms of the delay we mentioned for the first quarter, it was largely related to our solar business. And frankly, it was just a delay in the delivery of a specific project and program for 1 specific customer. So it's customer specific. It was a program delay. It will ship in the second quarter. No issues there, so that was programmatic. In general, the other business continued to perform. There's really 3 factors: end market demand, it's the success of the programs that we're on; it's the success of the program -- customers that we're serving; and it's the time to revenue for the ramps. So it's a balance of all those 4 things, but diversified continues to perform at double-digit improvements in growth year-over-year. And we are encouraged by the outlook for a range of those subsegments that we've got.

Great. And then for modeling purposes for my follow-up, any -- help us on the tax rate outlook? This quarter, it moved around quite a bit. I assume it was like some NOLs you're able to pull in or some credit recovery. What happened there? Can it happen multiple quarters in a row, or is it kind of a one quarter thing? And what should we expect for tax rate going forward?

Jim, it's Darren here. In terms of the quarter, the tax recovery was related to Malaysian tax incentives where we were able to negotiate favorable terms. We're investing heavily in Malaysia, as Craig has mentioned and we've mentioned on previous calls with our semiconductor business. So we had some favorable incentives there. Going forward, the tax rate, we're so comfortable at the annual rate of 10% to 12%, but this was more of a one-time nature, a one-time event.

Your next question comes from the line of Naser Iqbal with Salman Partners.

Just my first question, just on the Communications segment. Could you talk maybe that when we look at your largest customers in that space and they're talking about an intelligent networking and a smarter, intelligent -- do you think there's any cyclical or structural growth in terms of replacement cycle or smarter, intelligent products being higher priced products that's driving this segment?

Well, clearly, the demand for bandwidth continues to grow, so networking equipment is at the centerpiece of that along with storage and servers. Enterprise and telecommunications applications grow. The hyperscale data centers are having an impact. I think we're in the higher end of that segment in the more complex areas of the business. And as well as the optical space where a lot of the bandwidth will become optical. So the answer is it will always be very price competitive. I think one of the key differentiators will be the ability to meet short-cycle shipments as these build-outs occur very quickly, as customers attempt to put new services on their Internet service platforms and scale quickly to meet new consumer demand or create new consumer opportunities. So we're bullish on the outlook for communications. It'll be the centerpiece of big data and a lot of what's happening in the IT space. And we think we're well positioned with the market leaders.

Okay, that's great. And then just trying to understand the -- I know it's beating a dead horse. But on this diversified delay in the program, I mean is it that we -- that the quarter would have been in line with the midpoint of your prior guidance if it wasn't for this shift? I mean is it -- is this all it is, that it was a timing shift from 1 quarter to the next?

Well, it was a timing shift. I mean the answer is, short answer is no. The program involved would not have been the difference between meeting the midpoint of our guidance and where we ended up. Roughly, it was about $14 million of an impact to the revenue for the quarter. And the rest was really due to the late March sort of cancellations or changes in the forecast and the mix of products.

In the Communications segment?

Yes, right. Yes.

Your next question comes from the line of Todd Coupland with CIBC.

Just so I understand the comms point. So you're basically saying you saw some contracts get canceled at the end of the quarter, but they're coming back into Q2, which is causing the sequential uptick?

No, I mean we didn't see -- I mean there was changes in the forecast demand for the quarter. That was just -- we're seeing some increases in our finished goods hubs. And customers did not pull to the extent that they forecast they would pull, so that was the impact.

I see. Okay.

So that was...

And Todd, we would expect those finished goods to ship out in the second quarter and really drive an improvement in the inventory as a result.

And just one quick follow-up. On the diversified side, we've seen a little bit better performance out of a few of the larger semiconductor companies. Are you seeing that flow through in terms of demand in that segment of Diversified yet?

We're seeing increases in both our market share and then the outlook for new program ramps as we go into the second half of the year, so I think that's -- the short answer is yes.

Okay, and is that a material driver in Diversified growth this year?

Yes, I mentioned it's about 6% of the total company now. And the growth rates for some of the customers that we've attracted is very encouraging, so we expect that to continue through the second half and be a major contributor to our Diversified growth in 2014.

[Operator Instructions] Your next question comes from the line of Robert Young with Canaccord Genuity.

I was wondering if you can talk about the 9% quarter over growth and the outlook. That's a bit better than the seasonal growth in Q2 in the past. I was wondering if you could maybe frame them. I mean the annual growth outlook you've -- in the past, you had 6% to 8% and then 3% to 5% and then below that. I was wondering if you could frame the annual growth relative to that. It seems like if we extrapolate 9% going forward, it could be strong growth for the year?

Well, we don't like to get too far ahead of the headlights here, but 9% is encouraging. The visibility, as I mentioned previously, is about 90 days and the volatility is very high. But the fundamentals, the foundation of the mix of business, the strength that we're seeing in our Diversified business, the Storage business, improved demand in the Server business, we are building a solid platform from which to grow. Outlooking exactly the growth rates for the full year at this point, I think, would be premature.

Rob, I would just add to Craig's comments there. Just on the 9%, relative to some historical trends, certainly with the solar program push and just the softer Q1, that's helping the 9% as well.

Okay, and then second question is on the semiconductor component. It's 6% of total revenue. Is there any way to put a frame around what you think that can grow to eventually? Are there big deals out there to be won in 2014, or is it going to be a slow grind from here?

Well, there are certainly significant opportunities for Celestica as we build our capacity and resource to ramp the business. I think it's consistent performance in building with the market leaders, which we have emerging and established positions today. So I don't think it's, it is a long marathon of execution, execution. But the opportunity is there to build a very solid business, and that's our objective.

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

Okay. Well, I'd like to thank everybody for joining the call today. I appreciate your interest and support of Celestica, and we look forward to talking with you again in July. Thank you very much.

And ladies and gentlemen, this concludes today's conference call. You may now disconnect.