Xcel Brands, Inc. 1333 Broadway 10th Floor New York, NY 10018 United States https:/Sector(s): Consumer Cyclical Industry: Apparel Manufacturing Full Time Employees: 84 Key Executives Name Title Pay Exercised Year Born Mr. Robert W. D’Loren Chairman, Pres & CEO 1.27M N/A 1958 Mr. James F. Haran CFO, Principal Financial & Accou
Michael Kupinski, Director of Research, Equity Research Analyst, Digital, Media & Technology , Noble Capital Markets, Inc.
Jacob Mutchler, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Provides preliminary Q4 estimates. The company provided Q4 revenue and adj. EBITDA preliminary estimates that are slightly below our expectations. The preliminary revenue estimate was $2.13 million versus our estimate of $2.80 million. In addition, the adj. EBITDA preliminary estimate of a loss of $1.07 million was somewhat higher than our loss estimate of $451,000.
Preliminary full year results. Total company revenue for 2023 is expected to be $17.7 million and EBITDA of $5.1 million. The preliminary results are slightly below our $18.5 million and loss of $5.4 million, respectively.
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*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
QuantaSing is a leading online service provider in China dedicated to improving people’s quality of life and well-being by providing lifelong personal learning and development opportunities. The Company is the largest service provider in China’s online adult learning market and China’s adult personal interest learning market in terms of revenue, according to a report by Frost & Sullivan based on data from 2022. By leveraging its proprietary tools and technology, QuantaSing offers easy-to-understand, affordable, and accessible online courses to adult learners under a variety of brands, including QiNiu, JiangZhen and QianChi, empowering users to pursue personal development. Leveraging its extensive experience in individual online learning services, the Company has also expanded its services to corporate clients including, among others, marketing services and enterprise talent management services.
Michael Kupinski, Director of Research, Equity Research Analyst, Digital, Media & Technology , Noble Capital Markets, Inc.
Patrick McCann, CFA, Research Analyst, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Strong results. The company reported strong fiscal Q2 revenue and adj. EBITDA for the period ended December 31. Revenue of RMB980.5 million and adj. EBITDA of RMB 98.6 million outperformed our estimates of RMB 930.0 million and RMB 83.0 million, respectively.
User growth. Total registered users grew roughly 45% to 112.4 million users, up from 77.8 million users at the end of the prior year period. Total paying learner grew to 0.4 million, up 24% from the prior year period.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
LOS ANGELES, March 07, 2024 (GLOBE NEWSWIRE) — FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT Brands” or the “Company”) today reported fiscal fourth quarter and full fiscal year 2023 financial results for the fiscal year ended December 31, 2023.
“With the acquisition of Smokey Bones early in the fourth quarter, we have grown the FAT Brands portfolio to 18 iconic restaurant brands with annualized system wide sales of $2.5 billion,” said Andy Wiederhorn, Chairman of FAT Brands. “We opened 125 restaurants in 2023, including 29 in the fourth quarter. We are seeing strong franchisee interest in development opportunities, having signed more than 225 development agreements in 2023, bringing our total pipeline to 1,100 units. This represents the potential for over 50% EBITDA growth over the next several years.”
Ken Kuick, Co-Chief Executive Officer of FAT Brands, commented, “While franchise interest remains high across all of our brands, we continue to be focused on the expansion of Twin Peaks. This year we opened 14 new lodges and ended the year with 109 lodges, a 33% increase since acquiring the brand in 2021. Our growth pipeline includes 113 lodges and Smokey Bones’ healthy real estate portfolio provides us with the opportunity to convert locations into Twin Peaks lodges, with the potential to significantly accelerate the growth of the brand.”
Rob Rosen, Co-Chief Executive Officer of FAT Brands, concluded, “We believe there are significant opportunities on the horizon for FAT Brands. Our seasoned leadership and strong brand management platform allow us to efficiently integrate new brands while maintaining a healthy and evolving pipeline for organic growth. These strengths position us for continued growth in the future, which will help deleverage our balance sheet.”
Fiscal Fourth Quarter 2023 Highlights
Total revenue improved 52.8% to $158.6 million compared to $103.8 million in the fourth quarter of 2022
System-wide sales growth of 16.5% in the fiscal fourth quarter of 2023 compared to the prior year fiscal quarter
System-wide same-store sales declined 0.6% in the fiscal fourth quarter of 2023 compared to the prior fiscal year
29 new store openings during the fiscal fourth quarter of 2023
Loss from operations of $3.1 million compared to $32.6 million in the fiscal fourth quarter of 2022
Net loss of $26.2 million, or $1.68 per diluted share, compared to $70.8 million, or $4.39 per diluted share, in the fiscal fourth quarter of 2022
Adjusted EBITDA(1) of $27.0 million compared to $19.6 million in the fiscal fourth quarter of 2022
Adjusted net loss(1) of $17.3 million, or $1.15 per diluted share, compared to $43.0 million, or $2.70 per diluted share, in the fiscal fourth quarter of 2022
Fiscal Year 2023 Highlights
Total revenue increased 18.0% to $480.5 million compared to $407.2 million in fiscal 2022
System-wide sales growth of 6.9% compared to fiscal 2022
System-wide same-store sales growth of 0.8% in fiscal 2023 compared to fiscal 2022
125 new store openings during fiscal 2023
Income from operations of $22.3 million compared to loss from operations of $17.9 million in the fiscal quarter of 2022
Net loss of $90.1 million, or $5.85 per diluted share, compared to $126.2 million, or $8.06 per diluted share, in fiscal 2022
Adjusted EBITDA(1) of $91.2 million compared to $88.8 million in fiscal 2022
Adjusted net loss(1) of $56.5 million, or $3.83 per diluted share, compared to $80.9 million, or $5.32 per diluted share, in fiscal 2022
(1) EBITDA, adjusted EBITDA and adjusted net loss are non-GAAP measures defined below, under “Non-GAAP Measures”. Reconciliation of GAAP net loss to EBITDA, adjusted EBITDA and adjusted net loss are included in the accompanying financial tables.
Summary of Fourth Quarter 2023 Financial Results
Total revenue increased $54.8 million, or 52.8%, in the fiscal fourth quarter of 2023, to $158.6 million compared to $103.8 million in the same fiscal period of 2022, driven by a 10.4% increase in royalties, an 80.5% increase in company-owned restaurant revenues driven by new restaurant openings and the acquisition of Smokey Bones during the fourth quarter of 2023 and a 10.0% increase in revenues from our manufacturing facility.
Costs and expenses consist of general and administrative expense, cost of restaurant and factory revenues, depreciation and amortization, refranchising net losses and advertising fees. Costs and expenses increased $25.4 million, or 18.6%, in the fiscal fourth quarter of 2023 to $161.8 million compared to $136.4 million in the same fiscal period in the prior fiscal year.
General and administrative expense decreased $8.8 million, or 22.6%, in the fiscal fourth quarter of 2023 compared to the same fiscal period in the prior fiscal year, primarily due to a $16.6 million non-cash reserve on claimed Employee Retention Credits recorded during the fourth quarter of 2022 and the recognition of $3.4 million related to Employee Retention Credits during the fiscal fourth quarter of 2023, partially offset by the acquisition of Smokey Bones in the fourth quarter of 2023 and higher professional fees related to certain litigation matters.
Cost of restaurant and factory revenues was related to the operations of the company-owned restaurant locations and our dough factory and increased $43.4 million, or 70.3%, in the fiscal fourth quarter of 2023 to $105.1 million, compared to the prior year quarter, primarily due to the acquisition of Smokey Bones in the fourth quarter of 2023.
Depreciation and amortization increased $3.0 million, or 42.9% in the fiscal fourth quarter of 2023 compared to the same fiscal period in the prior fiscal year, primarily due to the acquisition of Smokey Bones in the fourth quarter of 2023 and depreciation of new property and equipment at company-owned restaurant locations.
Refranchising losses in the fiscal fourth quarter of 2023 and 2022 were $2.1 million and $3.1 million, respectively, and were comprised of restaurant costs and expenses, net of food sales.
Advertising expenses increased $2.2 million in the fiscal fourth quarter of 2023 compared to the prior fiscal year period. These expenses vary in relation to advertising revenues.
Total other expense, net for the fiscal fourth quarters of 2023 and 2022 was $31.9 million and $24.2 million, respectively, primarily comprised of net interest expense of $33.3 million and $25.6 million, respectively.
Adjusted net loss was $17.3 million, or $1.15 per diluted share, in the fiscal fourth quarter of 2023 compared to $43.0 million, or $2.70 per diluted share, in the fiscal fourth quarter of 2022.
Key Financial Definitions
New store openings – The number of new store openings reflects the number of stores opened during a particular reporting period. The total number of new stores per reporting period and the timing of stores openings has, and will continue to have, an impact on our results.
Same-store sales growth – Same-store sales growth reflects the change in year-over-year sales for the comparable store base, which we define as the number of stores open and in the FAT Brands system for at least one full fiscal year. For stores that were temporarily closed, sales in the current and prior period are adjusted accordingly. Given our focused marketing efforts and public excitement surrounding each opening, new stores often experience an initial start-up period with considerably higher than average sales volumes, which subsequently decrease to stabilized levels after three to six months. Additionally, when we acquire a brand, it may take several months to integrate fully each location of said brand into the FAT Brands platform. Thus, we do not include stores in the comparable base until they have been open and in the FAT Brands system for at least one full fiscal year.
System-wide sales growth – System wide sales growth reflects the percentage change in sales in any given fiscal period compared to the prior fiscal period for all stores in that brand only when the brand is owned by FAT Brands. Because of acquisitions, new store openings and store closures, the stores open throughout both fiscal periods being compared may be different from period to period.
Conference Call and Webcast
FAT Brands will host a conference call and webcast to discuss its fiscal fourth quarter 2023 financial results today at 5:00 PM ET. Hosting the conference call and webcast will be Andy Wiederhorn, Chairman of the Board, and Ken Kuick, Co-Chief Executive Officer and Chief Financial Officer.
The conference call can be accessed live over the phone by dialing 1-844-826-3035 from the U.S. or 1-412-317-5195 internationally. A replay will be available after the call until Thursday, March 28, 2024, and can be accessed by dialing 1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The passcode is 10186678. The webcast will be available at www.fatbrands.com under the “Investors” section and will be archived on the site shortly after the call has concluded.
About FAT (Fresh. Authentic. Tasty.) Brands
FAT Brands (NASDAQ: FAT) is a leading global franchising company that strategically acquires, markets, and develops fast casual, quick-service, casual dining, and polished casual dining concepts around the world. The Company currently owns 18 restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, Smokey Bones, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses and franchises and owns approximately 2,300 units worldwide. For more information, please visit www.fatbrands.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the future financial and operating results of the Company, estimates of future EBITDA, the timing and performance of new store openings, future reductions in cost of capital and leverage ratio, our ability to conduct future accretive acquisitions and our pipeline of new store locations. Forward-looking statements generally use words such as “expect,” “foresee,” “anticipate,” “believe,” “project,” “should,” “estimate,” “will,” “plans,” “forecast,” and similar expressions, and reflect our expectations concerning the future. Forward-looking statements are subject to significant business, economic and competitive risks, uncertainties and contingencies, many of which are difficult to predict and beyond our control, which could cause our actual results to differ materially from the results expressed or implied in such forward-looking statements. We refer you to the documents that we file from time to time with the Securities and Exchange Commission, such as our reports on Form 10-K, Form 10-Q and Form 8-K, for a discussion of these and other risks and uncertainties that could cause our actual results to differ materially from our current expectations and from the forward-looking statements contained in this press release. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this press release.
Non-GAAP Measures (Unaudited)
This press release includes the non-GAAP financial measures of EBITDA, adjusted EBITDA and adjusted net loss.
EBITDA is defined as earnings before interest, taxes, and depreciation and amortization. We use the term EBITDA, as opposed to income from operations, as it is widely used by analysts, investors, and other interested parties to evaluate companies in our industry. We believe that EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance. EBITDA is not a measure of our financial performance or liquidity that is determined in accordance with generally accepted accounting principles (“GAAP”), and should not be considered as an alternative to net loss as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance measure derived in accordance with GAAP.
Adjusted EBITDA is defined as EBITDA (as defined above), excluding expenses related to acquisitions, refranchising losses, impairment charges, and certain non-recurring or non-cash items that the Company does not believe directly reflect its core operations and may not be indicative of the Company’s recurring business operations.
Adjusted net loss is a supplemental measure of financial performance that is not required by or presented in accordance with GAAP. Adjusted net loss is defined as net loss plus the impact of adjustments and the tax effects of such adjustments. Adjusted net loss is presented because we believe it helps convey supplemental information to investors regarding our performance, excluding the impact of special items that affect the comparability of results in past quarters to expected results in future quarters. Adjusted net loss as presented may not be comparable to other similarly titled measures of other companies, and our presentation of adjusted net loss should not be construed as an inference that our future results will be unaffected by excluded or unusual items. Our management uses this non-GAAP financial measure to analyze changes in our underlying business from quarter to quarter based on comparable financial results.
Reconciliations of net loss presented in accordance with GAAP to EBITDA, adjusted EBITDA and adjusted net loss are set forth in the tables below.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Impact of UAW Strike on 4Q. Fourth quarter results were negatively impacted by a work stoppage at a customer facility due to the UAW strike. Management estimated the strike reduced revenue by about $12 million and had a $0.05/sh negative impact on EPS. We expect that eventually the revenue will come back, it is just a question of timing.
New Wins. CVG recorded in excess of $150 million of new wins in 2023 on a fully ramped basis, continuing the Company’s strong track record of success. The wins continue to be focused within the Electrical Systems segment and support the product ramp-up at the new plants in Mexico and Morocco, which are focused on meeting the demand growth in electrical systems. CVG is currently expanding its Morocco footprint with an additional new plant under construction.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
LOS ANGELES, March 04, 2024 (GLOBE NEWSWIRE) — FAT(Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT Brands” or the “Company”), a leading global franchising company and parent company of iconic brands including Round Table Pizza, Fatburger, Johnny Rockets, Twin Peaks, Fazoli’s and 13 other restaurant concepts, today announced that the Company will host a conference call to review its fourth quarter and fiscal year 2023 financial results on Thursday, March 7, 2024 at 5:00 PM ET. A press release with fourth quarter and fiscal year 2023 financial results will be issued prior to the conference call that day.
The conference call can be accessed live over the phone by dialing 1-844-826-3035 from the U.S. or 1-412-317-5195 internationally. A replay will be available after the call until Thursday, March 28, 2024, and can be accessed by dialing 1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The passcode is 10186678. Hosting the call will be Andy Wiederhorn, Chairman, and Ken Kuick, Co-Chief Executive Officer and Chief Financial Officer.
The conference call will also be webcast live from the corporate website at www.fatbrands.com, under the “Investors” section. A replay of the webcast will be available through the corporate website shortly after the call has concluded.
About FAT (Fresh. Authentic. Tasty.) Brands
FAT Brands (NASDAQ: FAT) is a leading global franchising company that strategically acquires, markets, and develops fast casual, quick-service, casual dining, and polished casual dining concepts around the world. The Company currently owns 18 restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, Great American Cookies, Smokey Bones, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses, and franchises and owns over 2,300 units worldwide. For more information on FAT Brands, please visit www.fatbrands.com.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
4Q23 Results. Driven by a number of factors, including a strike at a customer plant, revenue was down 5.0% y-o-y to $223.1 million. We had estimated $230 million. Adjusted EBITDA came in at $10.3 million, down $2.9 million y-o-y and below our $13 million forecast. Impacted by a favorable tax benefit, 4Q23 GAAP net income was $23.3 million, or $0.70/sh, compared to GAAP net loss of $32 million, or a loss of $0.98/sh. Adjusted 4Q23 net income was $2.9 million, or $0.09/sh, compared to $1.4 million, or $0.04/sh last year. We had forecast net income of $4.4 million, or $0.13/sh.
Segments. Electrical Systems remained the star performer with revenue increasing 19.4% to $56.2 million and adjusted operating income up 25% to $6.7 million. Vehicle Solutions revenue down 10.1% to $128.4 million, with adjusted operating income down 3.9% to $4 million. Aftermarket revenue of $31.4 million was off 8.1%, while adjusted operating income declined 6.4% to $3.4 million. Industrial Automation revenue of $7.1 million declined 35%, while adjusted operating income was $0.3 million.
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This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Office Depot, Inc., together with its subsidiaries, supplies a range of office products and services. It offers merchandise, such as general office supplies, computer supplies, business machines and related supplies, and office furniture through its chain of office supply stores under the Office Depot, Foray, Ativa, Break Escapes, Worklife, and Christopher Lowell brand names. The company also provides graphic design, printing, reproduction, mailing, shipping, and other services through design, print, and ship centers. It has operations throughout North America, Europe, Asia, and Central America. The company also sells its products and services through direct mail catalogs, contract sales force, Internet sites, and retail stores, through a mix of company-owned operations, joint ventures, licensing and franchise agreements, alliances, and other arrangements. As of December 31, 2008, Office Depot operated 1,267 North American retail division office supply stores and 162 international division retail stores, as well as participated under licensing and merchandise arrangements in 98 stores. The company was founded in 1986 and is based in Boca Raton, Florida.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
4Q Results. Total sales were $1.8 billion, down 14% from last year or 9% excluding the 53rd week in 2022 that wasn’t repeated in 2023, driven by store closures, and a continued challenging economic environment. We had revenue of $1.85 billion. Adjusted net income was $35 million, or $0.92 per diluted share, compared to $40 million, or $0.85 per diluted share, in the fourth quarter of 2022. Adjusted EBITDA was $73 million compared to $89 million in the prior year.
Cost Savings Initiative. Project Core is the new plan to create more efficiencies in ODP’s low cost model, in which management expects the plan to realize annualized savings of $50-$60 million when fully implemented. Management expects the plan to take effect in Q2 of 2024. We are optimistic that management can fully implement the strategy into its model, with cost savings already being an important factor in management’s operating philosophy.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Low-Cost Business Model and Disciplined Capital Allocation Drive Solid Operating Performance and Strong Adjusted EPS Growth in 2023
Repurchased 6 Million Shares for $298 Million in Full Year 2023
Announces “Project Core”: Enterprise-Wide Program Focused on Streamlining Operations and Enhancing Focus on Core Business
Approves New $1 Billion Share Repurchase Authorization
Provides 2024 Guidance
BOCA RATON, Fla.–(BUSINESS WIRE)–Feb. 28, 2024– The ODP Corporation (“ODP,” or the “Company”) (NASDAQ:ODP), a leading provider of products, services, and technology solutions to businesses and consumers, today announced results for the fourth quarter and full year ended December 30, 2023.
Consolidated (in millions, except per share amounts)
4Q23
4Q22
FY23
FY22
Selected GAAP and Non-GAAP measures:
Sales
$1,806
$2,106
$7,831
$8,491
Sales change from prior year period
(14)%
(8)%
Operating income (loss)
$(31)
$55
$201
$243
Adjusted operating income (1)
$43
$58
$290
$296
Net income (loss) from continuing operations
$(37)
$36
$139
$178
Diluted earnings (loss) per share from continuing operations
$(0.99)
$0.76
$3.50
$3.61
Adjusted net income from continuing operations (1)
$35
$40
$223
$216
Adjusted earnings per share from continuing operations (fully diluted) (1)
$0.92
$0.85
$5.60
$4.40
Adjusted EBITDA (1)
$73
$89
$417
$437
Operating Cash Flow from continuing operations
$70
$158
$331
$237
Free Cash Flow (2)
$41
$127
$224
$138
Adjusted Free Cash Flow (3)
$43
$147
$235
$201
Fourth Quarter 2023 Summary(1)(2)(3)
Total reported sales of $1.8 billion, down 14% versus the prior year on a reported basis, or down 9% when eliminating the $128 million favorable impact related to the 53rd week included in the fourth quarter of 2022. The decrease in reported sales is largely related to lower sales in its Office Depot consumer division, primarily due to 64 fewer retail locations in service compared to the previous year, as well as reduced retail and online consumer traffic and transactions
GAAP operating loss includes non-cash asset impairment charges of $68 million related to goodwill at Varis, which led to a GAAP operating loss of $31 million and net loss from continuing operations of $37 million, or $(0.99) per diluted share. This result compares to GAAP operating income of $55 million and net income from continuing operations of $36 million, or $0.76 per diluted share, in the prior year. GAAP operating income results in the prior year period included the favorable impact related to the 53rd week of $20 million
Adjusted operating income of $43 million, compared to $58 million in the fourth quarter of 2022; adjusted EBITDA of $73 million, compared to $89 million in the fourth quarter of 2022
Adjusted net income from continuing operations of $35 million, or adjusted diluted earnings per share from continuing operations of $0.92, versus $40 million or $0.85, respectively, in the prior year period
Operating cash flow from continuing operations of $70 million and adjusted free cash flow of $43 million, versus $158 million and $147 million, respectively, in the prior year period
Repurchased 672 thousand shares at a cost of $32 million in the fourth quarter of 2023
$1.1 billion of total available liquidity including $392 million in cash and cash equivalents at quarter end
Full Year 2023 Summary
Total reported sales of $7.8 billion, versus $8.5 billion in the prior year. Consolidated sales results in the prior year included the favorable impact related to the 53rd week in 2022 of $128 million
GAAP operating income of $201 million and net income from continuing operations of $139 million, or $3.50 per diluted share, versus $243 million and net income from continuing operations of $178 million, or $3.61 per diluted share, respectively, in the prior year. Operating income results in the prior year include the favorable impact related to the 53rd week in 2022 of $20 million
Adjusted operating income of $290 million, compared to $296 million in 2022; adjusted EBITDA of $417 million, compared to $437 million in 2022
Adjusted net income from continuing operations of $223 million, or adjusted diluted earnings per share from continuing operations of $5.60, versus $216 million or $4.40, respectively, in the prior year
Operating cash flow from continuing operations of $331 million and adjusted free cash flow of $235 million, versus $237 million and $201 million, respectively in the prior year
Repurchased 6 million shares for $298 million in 2023
“In the first year of operating under our new structure, we delivered strong adjusted EBITDA and adjusted earnings per share results throughout an ongoing challenging macroeconomic environment, underscoring our commitment to our low-cost business model and capital allocation strategy,” said Gerry Smith, chief executive officer of The ODP Corporation. “We expanded margins at ODP Business Solutions, drove strong external EBITDA growth at Veyer, expanded our product and service offerings at Office Depot, and began our strategic review of Varis in late Q4. In addition, our operational excellence helped drive free cash flow above our forecasted guidance, supporting our return to shareholders of nearly $300 million through our share repurchase program during 2023.”
“As we continue to evolve and consistent with our low-cost model approach, we are announcing today “Project Core” — a comprehensive initiative aimed at streamlining operations, sharpening our focus on our core business, and increasing shareholder returns through an expanded new $1 billion share repurchase program,” Smith continued. “We expect this broad-based plan to generate annualized savings in the range of $50 million to $60 million when fully implemented, achieved through cost efficiency measures across the entire enterprise including all routes to market, including Varis, as well as corporate support functions, leading to further optimization of our organization and supporting future profitable growth. During this effort, we are working to complete a strategic review of Varis and we expect to provide a full update of that review by our first quarter earnings call in early May 2024,” Smith added.
“We’re excited about the future and confident in our position of strength, as we focus on continuing to drive our low-cost business model, leveraging our multiple routes to market, and remaining disciplined with our capital allocation plan,” Smith concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the fourth quarter of 2023 were $1.8 billion, a decrease of 14% compared with the same period last year, or down 9% when eliminating the $128 million favorable impact related to the 53rd week included in the fourth quarter of 2022. This result was driven primarily by lower sales in its consumer division, Office Depot, primarily due to 64 fewer stores in service compared to last year related to planned store closures, as well as lower retail and online consumer traffic and transactions. Sales at ODP Business Solutions Division were down slightly compared to last year when eliminating the favorable impact to sales from the 53rd week included in the fourth quarter of last year, largely driven by weaker economic activity and lower sales of personal protective equipment (PPE) and technology products. Meanwhile, Veyer provided strong logistics support for the ODP Business Solutions and Office Depot Divisions and continued to capture additional sales for its supply chain and procurement solutions among other third-party customers.
The Company reported a GAAP operating loss of $31 million in the fourth quarter of 2023, down compared to GAAP operating income of $55 million in the prior year period. Operating results in the fourth quarter of 2023 included $74 million of charges, primarily related to a $68 million non-cash impairment of goodwill in its Varis business unit. Net loss from continuing operations was $37 million, or $(0.99) per diluted share in the fourth quarter of 2023, down compared to net income from continuing operations of $36 million, or $0.76 per diluted share in the fourth quarter of 2022.
Adjusted (non-GAAP) Results(1)
Adjusted results for the fourth quarter of 2023 exclude charges and credits totaling $74 million as described above and the associated tax impacts.
Fourth quarter of 2023 adjusted EBITDA was $73 million compared to $89 million in the prior year period. This included depreciation and amortization of $28 million and $31 million in the fourth quarters of 2023 and 2022, respectively
Fourth quarter of 2023 adjusted operating income was $43 million, down compared to $58 million in the fourth quarter of 2022
Fourth quarter of 2023 adjusted net income from continuing operations was $35 million, or $0.92 per diluted share, compared to $40 million, or $0.85 per diluted share, in the fourth quarter of 2022, an increase of 8% on a per share basis
Division Results
ODP Business Solutions Division
Leading B2B distribution solutions provider serving small, medium and enterprise level companies with an annual trailing-twelve-month revenue of nearly $4 billion.
Reported sales were $0.9 billion in the fourth quarter of 2023, down 10% compared to the same period last year, or down 4% when eliminating the $58 million favorable impact to sales related to the 53rd week included in the fourth quarter of 2022. The decrease in sales was related primarily to weaker macroeconomic conditions and lower sales of PPE and technology products
Total adjacency category sales, including cleaning and breakroom, furniture, technology, and copy and print, were 44% of total ODP Business Solutions’ sales
Continued strong pipeline and net new business customer additions
Operating income was $34 million in the fourth quarter of 2023, down 8% compared to the same period last year on a reported basis. When eliminating the $5 million favorable impact to operating income related to the 53rd week included in the fourth quarter of 2022, operating income was up approximately 6% over last year. As a percentage of sales, operating income margin was 4%, flat compared to last year
Office Depot Division
Leading provider of retail consumer and small business products and services distributed via Office Depot and OfficeMax retail locations and an award-winning eCommerce presence.
Reported sales were $0.9 billion in the fourth quarter of 2023, down 18% compared to the prior year on a reported basis, or down 13% when eliminating the favorable impact of $70 million in sales related to the 53rd week included in same period last year. Lower sales were partially driven by 64 fewer retail outlets in service associated with planned store closures, as well as lower demand relative to last year in certain product categories and lower online sales. The Company closed 22 retail stores in the quarter and had 916 stores at quarter end. Sales were down approximately 5% on a comparable store basis when eliminating the favorable impact of the 53rd week included in the prior year period
Stronger sales of copy and print services were more than offset by lower sales in supplies, technology, and other categories
Store and online traffic were lower year over year due to a greater percentage of customers having returned to the office post pandemic, as well as weaker macroeconomic activity
Operating income was $43 million in the fourth quarter of 2023, compared to operating income of $57 million during the same period last year, driven primarily by the flow through impact from lower sales. Operating income results in the prior year period included a $15 million favorable impact related to the 53rd week in in 2022. As a percentage of sales, operating income was 5%, flat compared to the same period last year
Veyer Division
Nationwide supply chain, distribution, procurement and global sourcing operation supporting Office Depot and ODP Business Solutions, as well as third-party customers. Veyer’s assets and capabilities include 8 million square feet of infrastructure through a network of distribution centers, cross-docks, and other facilities throughout the United States; a global sourcing presence in Asia; a large private fleet of vehicles; and next-day delivery to 98.5% of US population.
In the fourth quarter of 2023, Veyer provided strong support for its internal customers, ODP Business Solutions and Office Depot, as well as its third-party customers, generating sales of $1.2 billion
Operating income was $3 million in the fourth quarter of 2023, compared to $4 million in the prior year period driven by the flow through impact of lower sales to internal customers partially offset by higher sales of services to external third-party customers
For the full year 2023, sales and EBITDA generated from third party customers increased 25% and 120% respectively, resulting in sales of $35 million and EBITDA of $11 million
Varis Division
Tech-enabled B2B indirect procurement marketplace launched in the fourth quarter of 2022, which provides buyers and suppliers a seamless way to transact through the platform’s consumer-like buying experience and advanced spend management tools.
Continued work with new customers, incorporating feedback and adding new features and capabilities to the platform
Generated revenues in the fourth quarter of 2023 of $2 million, flat compared to the fourth quarter of 2022
Operating loss was $15 million in the fourth quarter of 2023, an improvement over the prior year
Share Repurchases in 2023
Throughout the year, the Company continued to execute under its previously announced $1 billion share repurchase authorization valid through year-end 2025. During the fourth quarter of 2023, the Company repurchased 672 thousand shares at a cost of $32 million, resulting in a total of 6 million shares for $298 million for the full year 2023. Since the inception of the authorization beginning in November 2022, the Company has repurchased 10 million shares for approximately $451 million.
“We’re encouraged by the opportunities within our business to generate value and enhance shareholder returns,” stated Anthony Scaglione, executive vice president and chief financial officer of The ODP Corporation. “Since the beginning of our previous authorization, we have repurchased 10 million shares, retiring over 20% of our outstanding shares since November 2022. Moving forward, we are thrilled to expand this initiative through Project Core, establishing a new $1 billion share buyback authorization valid over the next three years, creating additional value for shareholders while enhancing our core focus and driving our low-cost business model.”
Balance Sheet and Cash Flow
As of December 30, 2023, ODP had total available liquidity of approximately $1.1 billion, consisting of $392 million in cash and cash equivalents and $696 million of available credit under the Third Amended Credit Agreement. Total debt was $174 million. Subsequent to the end of the quarter, in January 2024, the Company retired $53 million of outstanding FILO Term Loan Facility loans, funded through available liquidity.
For the fourth quarter of 2023, cash generated by operating activities of continuing operations was $70 million, which included $2 million in restructuring and other spend, compared to cash provided by operating activities of continuing operations of $158 million in the fourth quarter of the prior year, which included $20 million in restructuring and other spend. The year-over-year change in operating cash flow is largely related to the timing of certain working capital items.
Capital expenditures in the fourth quarter of 2023 were $29 million versus $31 million in the prior year period, reflecting continued growth investments in the Company’s digital transformation, distribution network, and eCommerce capabilities. Adjusted Free Cash Flow(3) was $43 million in the fourth quarter of 2023, compared to $147 million in the prior year period.
“Our team’s strong commitment and dedication in managing inventory and working capital has resulted in strong cash flow generation,” said Scaglione. “As we move into the new year, we will maintain our disciplined approach, focusing on managing costs, maximizing cash flow, and executing our capital allocation plan,” he added.
Project Core and New $1 Billion Share Repurchase Authorization
Upon a year-end review across all of its business units and consistent with its low-cost business model approach, the Company announced “Project Core”, a plan designed to create further efficiencies in its business, focused on driving enhanced operating results and increasing shareholder returns through an expanded share repurchase program. This broad-based plan includes cost improvement actions across the entire enterprise, including all routes to market, Varis, procurement, IT and shared services, encompassing the entirety of ODP’s enterprise, optimizing its organizational structure to support future growth of the business. During this effort, the Company continues to review strategic options for it’s Varis business unit and expects to conclude this review and provide a full update by its first quarter earnings announcement call in early May 2024.
In connection with Project Core, the Company expects to realize annualized savings in the range of $50 million to $60 million when fully implemented. Restructuring and related charges associated with these actions are estimated to be in the range of $20 million to $30 million and are expected to be substantially incurred throughout 2024. The Company expects to begin reducing costs exiting the first quarter of 2024, with most of these actions expected to be completed over the following 12 months.
“Project Core aligns with our low-cost model mindset and builds upon our continued focus of driving strong operating results while enhancing value for shareholders through our new share repurchase authorization,” said Smith. “We’re taking what we’ve learned during our first year of operating under our new structure, and through Project Core, we’re driving further operational efficiencies in our business, enabling us to more effectively serve customers and pursue new avenues of long-term growth.”
As a component of Project Core, the Company announced that its Board of Directors has approved a new $1 billion, 3-year, share repurchase authorization, replacing its prior authorization that was valid through 2025, which had approximately $530 million available at the end of February 2024, after the Company repurchased approximately $470 million since November 2022.
“Our new $1 billion share repurchase authorization highlights our management team and Board of Director’s continued focus on enhancing value for shareholders. Our disciplined capital plan, combined with our continued focus on driving operational excellence enhanced through Project Core, create a compelling value proposition for all of our stakeholders,” said Smith.
The number of shares to be repurchased under the authorization in the future and the timing of such transactions will depend on a variety of factors, including market conditions, regulatory requirements, and other corporate considerations. The new authorization could be suspended or discontinued at any time as determined by the Board of Directors.
2024 Guidance
“We’re enthusiastic about the numerous opportunities in our business to drive long term value and we remain focused on prudently deploying capital to the benefit of shareholders,” said Smith. “As we move forward into 2024, we remain cautiously optimistic regarding the macroeconomic environment, and we will remain focused on executing upon our three horizons strategy and continuing our commitment to our low-cost model approach through Project Core.”
“While macroeconomic conditions posed challenges throughout the year and we expect these conditions to persist in the near term, our team’s continued focus on driving our low-cost model, enhanced by Project Core, have positioned us to issue the following guidance for 2024,” Scaglione added.
The Company’s full year guidance for 2024 is as follows:
FY 2024 Guidance(1)
Sales
Decline of 2% – 5%
Adjusted EBITDA
$410 million – $430 million
Adjusted Operating Income(1)
$280 million – $300 million
Adjusted Earnings per Share(1)
$5.60 – $5.80 per share
Adjusted Free Cash Flow (3)(*)
Greater than $200 million
*Adjusted Free Cash Flow is defined as cash flows from operating activities less capital expenditures excluding cash charges associated with the Company’s Project Core Restructuring and related expenses
The Company’s full year guidance for 2024 includes non-GAAP measures, such as Adjusted EBITDA, Adjusted Operating Income, Adjusted Earnings per Share and Adjusted Free Cash Flow. These measures exclude charges or credits not indicative of core operations, which may include but not be limited to restructuring charges, capital expenditures, acquisition-related costs, executive transition costs, asset impairments and other significant items that currently cannot be predicted without unreasonable efforts. The exact amount of these charges or credits are not currently determinable but may be significant. Accordingly, the Company is unable to provide equivalent GAAP measures or reconciliations from GAAP to non-GAAP for these financial measures.
“Our revenue guidance assumes continued store footprint consolidation and improving trends in our eCommerce channel at Office Depot, organic and inorganic growth at ODP Business Solutions, continued expansion at Veyer and progress at Varis. Our adjusted EPS outlook assumes higher interest expense associated with projected intra-quarter ABL borrowings, and the impact from a higher level of share buyback activity associated with Project Core. While our guidance assumes incremental improvement in the overall macroeconomic environment throughout 2024, we remain cautious on the state of the overall US economy, primarily workforce employment and the consumer, as well as international trade policies and agreements that could further impact the level of consumer and business activity,” Scaglione added.
The ODP Corporation will webcast a call with financial analysts and investors on February 28, 2024, at 9:00 am Eastern Time, which will be accessible to the media and the general public. To listen to the conference call via webcast, please visit The ODP Corporation’s Investor Relations website at investor.theodpcorp.com. A replay of the webcast will be available approximately two hours following the event.
(1)
As presented throughout this release, adjusted results represent non-GAAP financial measures and exclude charges or credits not indicative of core operations and the tax effect of these items, which may include but not be limited to merger integration, restructuring, acquisition costs, and asset impairments. Reconciliations from GAAP to non-GAAP financial measures can be found in this release as well as on the Company’s Investor Relations website at investor.theodpcorp.com.
(2)
As used in this release, Free Cash Flow is defined as cash flows from operating activities less capital expenditures. Free Cash Flow is a non-GAAP financial measure and reconciliations from GAAP financial measures can be found in this release as well as on the Company’s Investor Relations website at investor.theodpcorp.com.
(3)
As used in this release, Adjusted Free Cash Flow is defined as Free Cash Flow excluding cash charges associated with the Company’s Project Core Restructuring, and related expenses Adjusted Free Cash Flow is a non-GAAP financial measure and reconciliations from GAAP financial measures can be found in this release as well as on the Company’s Investor Relations website at investor.theodpcorp.com.
About The ODP Corporation
The ODP Corporation (NASDAQ:ODP) is a leading provider of products, services, and technology solutions through an integrated business-to-business (B2B) distribution platform and omni-channel presence, which includes supply chain and distribution operations, dedicated sales professionals, a B2B digital procurement solution, online presence, and a network of Office Depot and OfficeMax retail stores. Through its operating companies ODP Business Solutions, LLC; Office Depot, LLC; Veyer, LLC; and Varis, Inc, The ODP Corporation empowers every business, professional, and consumer to achieve more every day. For more information, visit theodpcorp.com.
This communication may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements or disclosures may discuss goals, intentions and expectations as to future trends, plans, events, results of operations, cash flow or financial condition, the potential impacts on our business due to the unknown severity and duration of the COVID-19 pandemic, or state other information relating to, among other things, the Company, based on current beliefs and assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “expectations”, “outlook,” “intend,” “may,” “possible,” “potential,” “predict,” “project,” “propose” or other similar words, phrases or expressions, or other variations of such words. These forward-looking statements are subject to various risks and uncertainties, many of which are outside of the Company’s control. There can be no assurances that the Company will realize these expectations or that these beliefs will prove correct, and therefore investors and stakeholders should not place undue reliance on such statements.
Factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things, highly competitive office products market and failure to differentiate the Company from other office supply resellers or respond to decline in general office supplies sales or to shifting consumer demands; competitive pressures on the Company’s sales and pricing; the risk that the Company is unable to transform the business into a service-driven, B2B platform that such a strategy will not result in the benefits anticipated; the risk that the Company will not be able to achieve the expected benefits of its strategic plans, including the strategic review of Varis and benefits related to Project Core; the risk that the Company may not be able to realize the anticipated benefits of acquisitions due to unforeseen liabilities, future capital expenditures, expenses, indebtedness and the unanticipated loss of key customers or the inability to achieve expected revenues, synergies, cost savings or financial performance; the risk that the Company is unable to successfully maintain a relevant omni-channel experience for its customers; the risk that the Company is unable to execute the Maximize B2B Restructuring Plan successfully or that such plan will not result in the benefits anticipated; failure to effectively manage the Company’s real estate portfolio; loss of business with government entities, purchasing consortiums, and sole- or limited- source distribution arrangements; failure to attract and retain qualified personnel, including employees in stores, service centers, distribution centers, field and corporate offices and executive management, and the inability to keep supply of skills and resources in balance with customer demand; failure to execute effective advertising efforts and maintain the Company’s reputation and brand at a high level; disruptions in computer systems, including delivery of technology services; breach of information technology systems affecting reputation, business partner and customer relationships and operations and resulting in high costs and lost revenue; unanticipated downturns in business relationships with customers or terms with the suppliers, third-party vendors and business partners; disruption of global sourcing activities, evolving foreign trade policy (including tariffs imposed on certain foreign made goods); exclusive Office Depot branded products are subject to additional product, supply chain and legal risks; product safety and quality concerns of manufacturers’ branded products and services and Office Depot private branded products; covenants in the credit facility; general disruption in the credit markets; incurrence of significant impairment charges; retained responsibility for liabilities of acquired companies; fluctuation in quarterly operating results due to seasonality of the Company’s business; changes in tax laws in jurisdictions where the Company operates; increases in wage and benefit costs and changes in labor regulations; changes in the regulatory environment, legal compliance risks and violations of the U.S. Foreign Corrupt Practices Act and other worldwide anti-bribery laws; volatility in the Company’s common stock price; changes in or the elimination of the payment of cash dividends on Company common stock; macroeconomic conditions such as higher interest rates and future declines in business or consumer spending; increases in fuel and other commodity prices and the cost of material, energy and other production costs, or unexpected costs that cannot be recouped in product pricing; unexpected claims, charges, litigation, dispute resolutions or settlement expenses; catastrophic events, including the impact of weather events on the Company’s business; the discouragement of lawsuits by shareholders against the Company and its directors and officers as a result of the exclusive forum selection of the Court of Chancery, the federal district court for the District of Delaware or other Delaware state courts by the Company as the sole and exclusive forum for such lawsuits; and the impact of the COVID-19 pandemic on the Company’s business. The foregoing list of factors is not exhaustive. Investors and shareholders should carefully consider the foregoing factors and the other risks and uncertainties described in the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the U.S. Securities and Exchange Commission. The Company does not assume any obligation to update or revise any forward-looking statements.
ACCO Brands Corporation is one of the world’s largest designers, marketers and manufacturers of branded academic, consumer and business products. Our widely recognized brands include AT-A-GLANCE®, Esselte®, Five Star®, GBC®, Kensington®, Leitz®, Mead®, PowerA®, Quartet®, Rapid®, Rexel®, Swingline®, Tilibra®, and many others. Our products are sold in more than 100 countries around the world. More information about ACCO Brands, the Home of Great Brands Built by Great People, can be found at www.accobrands.com.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Setting the Table. ACCO management had laid out a number of key priorities at the beginning of 2023 to set the Company on a path of sustainable, profitable growth. The key elements of the program were achieved. Gross margin improved 428 basis points y-o-y, restructuring efforts are right-sizing SG&A and the facility footprint, inventory was reduced by $68 million, and strong FCF enabled debt to be reduced by $88 million.
But Top Line Challenges Remain. Comparable revenue fell 6.5% y-o-y. Weak computer and gaming accessory sales, lower than expected “return-to-office” trends, and tight inventory management by customers all impacted the top line. We expect a number of these challenges to reverse course in 2024, although the pace will be measured and likely benefit 2H24.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Upgrade to Outperform. We are upgrading our rating on Lifeway shares to Outperform from Market Perform with a $14 price target. Since peaking on November 14th at an intra-day high of $17.33, LWAY shares have drifted lower, closing Friday at $10.51, modestly above the lowest closing price since mid-November of $9.38.
A Look Back. LWAY shares have been on a roller coaster ride since mid-August 2023, driven by a combination of improving operational performance, including a number of record quarters, and takeover speculation, in our view. The shares ran up from $6.50 in mid-August to $12.40 by mid-September, back below $10 by the end of September, back above $12 by mid-November, plunging to $9.38 on November 13th before hitting a 52-week high of $17.33 ten days later. Since the 52-week high, the shares have drifted lower. Notably, during the run up, ADV often exceeded 100,000 shares per day, compared to less than 20,000 prior to the run up. More recently, ADV has settled in the 20,000-40,000 range.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Reported net sales of $1.833 billion, with gross margin expanding 420 basis points
Operating income of $45 million; adjusted operating income grew 17% to $205 million
Loss per share of $(0.23); adjusted EPS of $1.09, above the Company’s outlook
Net operating cash flow improved $51 million, generated adjusted free cash flow of $118 million
Reduced total debt by $88 million with a consolidated net leverage ratio of 3.4x at year-end
LAKE ZURICH, Ill.–(BUSINESS WIRE)– ACCO Brands Corporation (NYSE: ACCO) today reported financial results for the fourth quarter and fiscal year ended December 31, 2023.
“I am pleased to report that our fourth quarter financial performance, including our reported net sales and adjusted EPS and free cash flow, was better than expected. During the year, we successfully executed against our 2023 priorities and implemented our previously announced restructuring plans, which enabled us to significantly expand our gross margin, deliver strong free cash flow, and reduce our consolidated net leverage ratio to 3.4x at the end of 2023. We believe our achievement of these results against a challenging demand environment is a testament to the solid execution of our team and our geographically diverse portfolio of leading brands. The restoration of our gross margins and improved cash flows enables us to make investments that position the Company for long-term growth,” stated ACCO Brands’ President and Chief Executive Officer, Tom Tedford.
Fourth Quarter Results
Net sales declined 2.2 percent to $488.6 million from $499.4 million in 2022. Comparable sales fell 4.6 percent, as favorable foreign exchange increased sales by $12.2 million, or 2.4 percent. Both reported and comparable sales declines reflect softer demand due to a weaker macroeconomic environment, which has also led to lower global demand for our technology accessories. These factors more than offset growth in our International segment, driven by the recovery of back-to-school sales in Latin America.
Operating loss was $52.8 million versus operating income of $35.6 million in 2022, primarily due to a non-cash goodwill impairment charge of $89.5 million related to the North America segment. In 2023, we recognized restructuring charges of $20.9 million, compared to $7.3 million in the prior-year period, with the increase related to our continuing footprint rationalization and cost reduction programs. Adjusted operating income increased 30.6 percent to $68.3 million from $52.3 million in the prior-year period. This increase reflects recovery of gross margin from the effect of cumulative global price increases and cost reduction actions, as well as moderating input costs. This was partially offset by higher SG&A expense, primarily due to an increase in incentive compensation compared to the prior year.
The Company reported a net loss of $59.4 million, or $(0.62) per share, compared with prior-year net income of $18.8 million, or $0.20 per share. The net loss is primarily due to the non-cash goodwill impairment charge of $89.5 million, with no associated tax benefit, as well as the higher restructuring charges noted above. In addition, there was a favorable change in discrete tax items of $21.8 million, largely related to recent tax legislation in both Brazil and the United States. Adjusted net income was $37.5 million, or $0.39 per share, compared with $30.5 million, or $0.32 per share in 2022. The increase in adjusted net income was due to the items noted above in adjusted operating income, partially offset by higher interest and non-operating pension expenses.
Full Year Results
Net sales decreased 5.9 percent to $1.83 billion from $1.95 billion in 2022. Favorable foreign exchange increased sales by $11.3 million, or 0.6 percent. Comparable sales decreased 6.5 percent. Both reported and comparable sales declines reflect the challenging macroeconomic environment, especially in North America and EMEA, and lower than anticipated return to office trends, as well as tight inventory management by our customers in North America. Sales of technology accessories were most negatively impacted. This more than offset the benefit of cumulative price increases across all segments, and volume growth in Latin America.
Operating income was $44.7 million compared to $34.8 million in 2022. The increase in operating income is primarily due to a lower non-cash goodwill impairment charge of $89.5 million versus the $98.7 million recorded in 2022. In 2023, we recorded restructuring charges of $27.2 million compared to $9.6 million in 2022, with the increase related to our continuing footprint rationalization and cost reduction programs. 2022 includes a benefit related to the change in value of the PowerA contingent earnout of $9.0 million, which did not repeat in 2023. Adjusted operating income increased to $204.8 million from $175.8 million in 2022. Both reported and adjusted operating income increases reflect the benefit of cumulative global price increases and cost reduction initiatives, partially offset by negative fixed cost leverage and higher SG&A expense, primarily due to increased incentive compensation.
Net loss was $21.8 million, or $(0.23) per share, compared with a net loss of $13.2 million, or $(0.14) per share, in 2022. The net losses were primarily related to the items noted above in operating income. In 2023, there was a significant increase in discrete tax benefits largely related to recent tax legislation in both Brazil and the United States, partially offset by reduced operating tax gains. Adjusted net income was $105.6 million compared with $101.0 million in 2022, and adjusted earnings per share were $1.09 per share compared with $1.04 per share in 2022. The increase in adjusted net income was due to the items noted above in adjusted operating income, partially offset by higher interest and non-operating pension expenses.
Capital Allocation and Dividend
For the full year, the Company significantly improved its operating cash flow to $128.7 million versus $77.6 million in the prior year, driven primarily by improved profits and working capital. Adjusted free cash flow in 2023 improved by $40.0 million to $117.5 million versus $77.5 million in 2022. Adjusted free cash flow in 2022 excludes the contingent earnout payment. The Company’s consolidated leverage ratio as of December 31, 2023 was 3.4x.
On February 16, 2024, ACCO Brands announced that its board of directors declared a regular quarterly cash dividend of $0.075 per share. The dividend will be paid on March 27, 2024 to stockholders of record at the close of business on March 15, 2024.
Restructuring and Cost Savings Program
On January 30, 2024, the Company announced a multi-year restructuring and cost savings program, with anticipated annualized pre-tax cost savings of at least $60 million. The program incorporates initiatives to simplify and delayer the Company’s operating structure and reduce costs through headcount reductions, supply chain optimization, global footprint rationalization, and better leveraging the Company’s sourcing capabilities. As a result of these actions, the Company will improve its speed of execution and bring key leaders closer to customers.
In connection with the program, the Company recognized pre-tax restructuring charges of $20.9 million in the fourth quarter of 2023, related to costs associated with the headcount reductions, as well as the closing of its Sidney, NY manufacturing facility. This was the fourth facility closure announced in 2023.
New Operating Segments
As previously announced, the Company will be implementing a new operating model, consolidating its three reportable segments into two reportable segments. The Americas reporting segment will include the U.S., Canada, Brazil, Mexico and Chile and the International reporting segment will include EMEA, Australia, New Zealand, and Asia. The Company will report on this basis for the fiscal year commencing January 1, 2024.
Business Segment Results
ACCO Brands North America – For the full year, North America net sales of $887.2 million decreased 11.1 percent from $998.0 million in 2022, and comparable sales declined 10.7 percent. Fourth quarter segment net sales of $199.0 million and comparable sales of $199.1 million both decreased 11.8 percent versus the prior year. Both full-year and fourth quarter reported and comparable sales decreases reflect softer demand due to a weaker macroeconomic environment, lower than anticipated return to office trends and retailers maintaining lower inventory levels, which resulted in lower demand for technology accessories and office products. This more than offset the benefit of cumulative pricing actions.
In North America, full year operating loss was $5.9 million versus an operating loss of $4.9 million in 2022. In 2023, we recorded a $89.5 million non-cash goodwill impairment charge compared to the $98.7 million recorded in the prior year. In 2023, restructuring charges were $16.7 million, an increase from the $5.3 million in 2022, largely related to our cost reduction and productivity programs. Adjusted operating income was $122.4 million, up from $121.5 million in the prior year, as benefits of the cumulative effect of pricing and cost actions, were largely offset by lower volume and negative fixed cost leverage.
ACCO Brands EMEA – Full year net sales in the EMEA segment of $547.2 million decreased 5.7 percent from $580.3 million in 2022. Favorable foreign exchange increased sales by 1.0 percent. Comparable sales declined 6.7 percent. Fourth quarter segment net sales of $159.1 million increased 2.0 percent versus the prior year’s net sales of $156.0 million. Favorable foreign exchange increased sales by 4.6 percent for the quarter. Comparable sales of $152.0 million decreased 2.6 percent versus the prior-year period as volume declines moderated sequentially in the quarter. Both full year and fourth quarter comparable sales declines reflect reduced demand, especially for technology accessories, due to a weaker macroeconomic environment. This more than offset the benefit of cumulative pricing actions.
The EMEA segment posted full-year operating income of $38.7 million compared with operating income of $21.7 million in 2022. In 2023, we recorded restructuring charges of $8.9 million versus $3.4 million in 2022, with the increase related to our ongoing footprint rationalization and cost reduction programs. Adjusted operating income was $62.5 million, up from $37.0 million in 2022. The increases in both reported operating income and adjusted operating income reflect recovery of gross margins from price increases and cost savings actions, more than offsetting negative fixed cost leverage and higher incentive compensation.
ACCO Brands International – International segment net sales of $398.4 million for the full year increased 7.9 percent from $369.3 million in 2022. Favorable foreign exchange increased sales by 2.6 percent. Comparable sales were $388.7 million, up 5.3 percent versus the prior year. Fourth quarter segment net sales of $130.5 million increased 10.9 percent versus the prior year’s net sales of $117.7 million. Favorable foreign exchange increased sales by 4.4 percent for the quarter. Comparable sales were $125.3 million an increase of 6.5 percent versus the year-ago period. Both full year and fourth quarter reported and comparable sales increases reflect stronger pricing and volume growth in Latin America, more than offsetting the impact of weaker economic conditions in Australia and Asia and overall lower demand for technology accessories.
Operating income for the full year was $60.7 million, an increase from $50.5 million in 2022. Adjusted operating income of $68.1 million increased from $58.3 million in the prior year. The increase in both operating and adjusted operating income were primarily due to the cumulative benefit of pricing and cost actions, somewhat offset by higher go-to-market spending, people costs and incentive compensation.
2024 Outlook
“We are taking actions to reposition the company for long-term, sustainable, profitable growth. In January, we announced a multi-year restructuring and cost savings program, to reset our cost structure. The program is expected to deliver at least $60 million in annual cost savings once fully implemented and will better leverage our global platform and leading brands. We continue to focus on our margin profile by exiting low margin business and better leveraging our sourcing and supply chain infrastructure. These actions will enable us to accelerate investments in new product development, innovation, and other growth initiatives, while increasing our profitability and cash flow, leading to improved shareholder value,” concluded Mr. Tedford.
For the full year, we expect reported sales to be down in the range of 2.0% to 5.0%. The Company’s sales outlook reflects the uncertain demand environment for its categories. Full year adjusted EPS is expected to be within a range of $1.07 to $1.11. The Company expects 2024 free cash flow to grow to at least $120 million and to end the year with a consolidated leverage ratio of approximately 3.0x to 3.2x.
In the first quarter, we expect reported sales to be down in the range of 6.5% to 8.0% and adjusted EPS within a range of $0.01 to $0.04. Seasonally, sales can shift between first and second quarter due to the timing of back-to-school shipments in North America.
Webcast
At 8:30 a.m. ET on February 23, 2024, ACCO Brands Corporation will host a conference call to discuss the Company’s fourth quarter and full year 2023 results. The call will be broadcast live via webcast. The webcast can be accessed through the Investor Relations section of www.accobrands.com . The webcast will be in listen-only mode and will be available for replay following the event.
About ACCO Brands Corporation
ACCO Brands, the Home of Great Brands Built by Great People, designs, manufactures and markets consumer and end-user products that help people work, learn, and play. Our widely recognized brands include AT-A-GLANCE®, Five Star®, Kensington®, Leitz®, Mead®, PowerA®, Swingline®, Tilibra® and many others. More information about ACCO Brands Corporation (NYSE: ACCO) can be found at www.accobrands.com .
Non-GAAP Financial Measures
In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this earnings release to aid investors in understanding the Company’s performance. Each non-GAAP financial measure is defined and reconciled to its most directly comparable GAAP financial measure in the “About Non-GAAP Financial Measures” section of this earnings release.
Forward-Looking Statements
Statements contained herein, other than statements of historical fact, particularly those anticipating future financial performance, business prospects, growth, strategies, business operations and similar matters, results of operations, liquidity and financial condition, and those relating to cost reductions and anticipated pre-tax savings and restructuring costs are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to us at the time such statements are made. These statements, which are generally identifiable by the use of the words “will,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “forecast,” “project,” “plan,” and similar expressions, are subject to certain risks and uncertainties, are made as of the date hereof, and we undertake no duty or obligation to update them. Forward-looking statements are subject to the occurrence of events outside the Company’s control and actual results and the timing of events may differ materially from those suggested or implied by such forward-looking statements due to numerous factors that involve substantial known and unknown risks and uncertainties. Investors and others are cautioned not to place undue reliance on forward-looking statements when deciding whether to buy, sell or hold the Company’s securities.
Our outlook is based on certain assumptions, which we believe to be reasonable under the circumstances. These include, without limitation, assumptions regarding the impact of inflation and global geopolitical and economic uncertainties and fluctuations in foreign currency exchange rates; and the other factors described below.
Among the factors that could cause our actual results to differ materially from our forward-looking statements are: our ability to successfully execute our restructuring and cost savings plans and realize the anticipated benefits of these plans and our other ongoing productivity initiatives; our ability to obtain additional price increases and realize longer-term cost reductions; the ongoing impact of the COVID-19 pandemic; a relatively limited number of large customers account for a significant percentage of our sales; issues that influence customer and consumer discretionary spending during periods of economic uncertainty or weakness; risks associated with foreign currency exchange rate fluctuations; challenges related to the highly competitive business environment in which we operate; our ability to develop and market innovative products that meet consumer demands and to expand into new and adjacent product categories that are experiencing higher growth rates; our ability to successfully expand our business in emerging markets and the exposure to greater financial, operational, regulatory, compliance and other risks in such markets; the continued decline in the use of certain of our products; risks associated with seasonality; the sufficiency of investment returns on pension assets, risks related to actuarial assumptions, changes in government regulations and changes in the unfunded liabilities of a multi-employer pension plan; any impairment of our intangible assets; our ability to secure, protect and maintain our intellectual property rights, and our ability to license rights from major gaming console makers and video game publishers to support our gaming accessories business; continued disruptions in the global supply chain; risks associated with inflation and other changes in the cost or availability of raw materials, transportation, labor, and other necessary supplies and services and the cost of finished goods; risks associated with outsourcing production of certain of our products, information technology systems and other administrative functions; the failure, inadequacy or interruption of our information technology systems or its supporting infrastructure; risks associated with a cybersecurity incident or information security breach, including that related to a disclosure of personally identifiable information; our ability to grow profitably through acquisitions; our ability to successfully integrate acquisitions and achieve the financial and other results anticipated at the time of acquisition, including planned synergies; risks associated with our indebtedness, including limitations imposed by restrictive covenants, our debt service obligations, and our ability to comply with financial ratios and tests; a change in or discontinuance of our stock repurchase program or the payment of dividends; product liability claims, recalls or regulatory actions; the impact of litigation or other legal proceedings; our failure to comply with applicable laws, rules and regulations and self-regulatory requirements, the costs of compliance and the impact of changes in such laws; our ability to attract and retain qualified personnel; the volatility of our stock price; risks associated with circumstances outside our control, including those caused by public health crises, such as the occurrence of contagious diseases, severe weather events, war, terrorism and other geopolitical incidents; and other risks and uncertainties described in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, and in other reports we file with the Securities and Exchange Commission.
ACCO Brands Corporation is one of the world’s largest designers, marketers and manufacturers of branded academic, consumer and business products. Our widely recognized brands include AT-A-GLANCE®, Esselte®, Five Star®, GBC®, Kensington®, Leitz®, Mead®, PowerA®, Quartet®, Rapid®, Rexel®, Swingline®, Tilibra®, and many others. Our products are sold in more than 100 countries around the world. More information about ACCO Brands, the Home of Great Brands Built by Great People, can be found at www.accobrands.com.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
A Mixed Fiscal Year. A weaker macroenvironment globally, mixed with softer technology demand, lower than anticipated return to office trends and, in some quarters, a stronger U.S. dollar led to a decline in net sales from the prior year. However, increases in the Company’s gross and operating margin is attributable to management’s cumulative global price increases and cost reduction initiatives. With the recent announcement of a multi-year restructuring and cost savings program, we expect these increases to continue over the next year.
Results. Net sales for the fourth quarter were $488.6 million compared to $499.4 million last year and above our estimate of $475 million. Comparable sales decreased 4.6%. Net loss for ACCO was $59.4 million, or $0.62/sh, compared to net income of $18.8 million, or $0.20/sh, last year. An $89.5 million impairment charge and an increase in restructuring charges were the primary drivers of the 4Q23 loss. Adjusted net income was $37.5 million, or $0.39 per share, compared with $30.5 million, or $0.32, in 2022.
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This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
FAT Brands (NASDAQ: FAT) is a leading global franchising company that strategically acquires, markets, and develops fast casual, quick-service, casual dining, and polished casual dining concepts around the world. The Company currently owns 17 restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses, and franchises and owns over 2,300 units worldwide. For more information on FAT Brands, please visit www.fatbrands.com.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Wells Notice. In an 8-K filed yesterday, FAT Brands reported that the Company, Chairman Andrew Wiederhorn, and one current and one former officer of the Company each received a Wells Notice from the staff of the SEC. The notice is related to the previously disclosed SEC investigation of the Company. The Company continues to cooperate with the SEC and maintains its actions were appropriate, and intends to pursue the Wells Notice process, including submitting a formal response to the SEC.
What Is a Wells Notice? According to the Cornell Law School Legal Information Institute, “A ‘Wells Notice’ is a letter sent by a securities regulator to a prospective respondent, notifying him of the substance of charges that the regulator intends to bring against the respondent, and affording the respondent with the opportunity to submit a written statement to the ultimate decision maker.”
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
