BOCA RATON, Fla.–(BUSINESS WIRE)–Dec. 14, 2023– The ODP Corporation (NASDAQ:ODP), a leading provider of products, services and technology solutions to businesses and consumers, today announced that it received a score of 100 on the Human Rights Campaign Foundation’s 2023-2024 Corporate Equality Index (CEI), the nation’s foremost benchmarking survey and report measuring corporate policies and practices related to LGBTQ+ workplace equality. The ODP Corporation joins the ranks of 545 major U.S. businesses that also earned top marks this year.
“The ODP Corporation is proud to be recognized as a top-scoring company 12 years in a row,” said Zoë Maloney, executive vice president and chief human resources officer for The ODP Corporation. “We are committed to fostering an inclusive workplace where our associates feel safe, respected, and valued for who they are. Embracing diverse perspectives allows us to connect more deeply with our customers and communities and unlocks the full potential of our team to innovate for continued progress.”
“For well over two decades, businesses have played an important role in furthering LGBTQ+ equality by centering employee needs and voices when it comes to workplace inclusion. While there is much more work to be done, year-over-year growth in CEI participation is evidence of a business community that recognizes the responsibility and value in upholding equity and inclusion,” said RaShawn “Shawnie” Hawkins, Human Rights Campaign senior director of workplace equality. “Our goal at the Human Rights Campaign Foundation is to work in a spirit of partnership with companies, providing educational resources and leading benchmarking, and collaborating on ways for businesses to support the LGBTQ+ community at a time when we face unprecedented legislative attacks, heightened anti-LGBTQ+ rhetoric and physical violence. The CEI is an ever-evolving tool – a blueprint that companies can use to show up more effectively in supporting their LGBTQ+ employees and their families.”
The results of the 2023-2024 CEI showcase how U.S.-based companies are promoting LGBTQ+ friendly workplace policies in the U.S. and abroad. The first year of the CEI included 319 participants, and the 2023-2024 CEI now includes 1,384 participants; further demonstrating the tremendous trajectory of the CEI, a record-breaking 1,340 businesses have non-discrimination protections specific to gender identity, up from just 17 in 2002. These critical non-discrimination protections cover 21 million employees in the U.S. and around the globe. The ODP Corporation’s efforts in satisfying all the CEI’s criteria earned a score of 100 and the designation as recipient of the Equality 100 Award: Leader in LGBTQ+ Workplace Inclusion.
The CEI rates employers providing these crucial protections to over 20 million U.S. workers and an additional 18 million outside of the U.S. Companies rated in the CEI include Fortune magazine’s 500 largest publicly traded businesses, American Lawyer magazine’s top 200 revenue-grossing law firms (AmLaw 200), and hundreds of publicly and privately held mid- to large-sized businesses.
The CEI rates companies on detailed criteria falling under four central pillars:
Non-discrimination policies across business entities;
Equitable benefits for LGBTQ+ workers and their families;
About the Human Rights Campaign Foundation The Human Rights Campaign Foundation is the educational arm of the Human Rights Campaign (HRC), America’s largest civil rights organization working to achieve equality for lesbian, gay, bisexual, transgender and queer (LGBTQ+) people. Through its programs, the HRC Foundation seeks to make transformational change in the everyday lives of LGBTQ+ people, shedding light on inequity and deepening the public’s understanding of LGBTQ+ issues, with a clear focus on advancing transgender and racial justice. Its work has transformed the landscape for more than 15 million workers, 11 million students, 1 million clients in the adoption and foster care system and so much more. The HRC Foundation provides direct consultation and technical assistance to institutions and communities, driving the advancement of inclusive policies and practices; it builds the capacity of future leaders and allies through fellowship and training programs; and, with the firm belief that we are stronger working together, it forges partnerships with advocates in the U.S. and around the globe to increase our impact and shape the future of our work.
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 omnichannel presence, which includes world-class 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 Office Depot, LLC; ODP Business Solutions, 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.
ODP and ODP Business Solutions are trademarks of ODP Business Solutions, LLC. Office Depot is a trademark of The Office Club, LLC. OfficeMax is a trademark of OMX, Inc. Veyer is a trademark of Veyer, LLC. Varis is a trademark of Varis, Inc. Any other product or company names mentioned herein are the trademarks of their respective owners.
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.
NobleCon19. The ODP Corporation CFO Anthony Scaglione presented at NobleCon19. Highlights included are the optimization of Office Depot, growth drivers in Varis and Veyer, and returning value to shareholders. A rebroadcast is available at https://www.channelchek.com/videos/the-odp-corporation-noblecon19-replay.
Office Depot. The Company discussed the optimization of its store footprint from a current store count of roughly 930 stores to 800-900 stores by 2025. These stores, which the optimization should reduce costs, in our view, mixed with the eCommerce website, provide ODP with strong free cash flow generation to be deployed in its faster growing segments, Varis and Veyer.
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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.
BOCA RATON, Fla.–(BUSINESS WIRE)–Nov. 29, 2023– The ODP Corporation (“ODP,” or the “Company”) (NASDAQ:ODP), a leading provider of business services, products and digital workplace technology solutions to businesses and consumers, announced today that D. Anthony Scaglione, executive vice president and chief financial officer, and Tim Perrott, vice president of investor relations and treasurer, will present at the Noble Capital Markets’ Nineteenth Annual Emerging Growth Equity Conference on December 4th, 2023 at approximately 3:00 pm (ET).
A replay of the presentation will be available the following day on the Company’s investor relations website, 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 world-class 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 Office Depot, LLC; ODP Business Solutions, 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.
Validated science-based targets emphasize The ODP Corporation’s commitment to environmental sustainability
BOCA RATON, Fla.–(BUSINESS WIRE)–Nov. 16, 2023– The ODP Corporation is proud to announce that it has successfully earned validation from the Science Based Targets initiative (SBTi) of its science-based targets for scope 1, scope 2, and scope 3 greenhouse gas (GHG) emissions. This significant milestone demonstrates The ODP Corporation’s commitment to environmental sustainability and aligns with its ongoing efforts to combat the effects of climate change.
The science-based targets reflect The ODP Corporation’s goals for reducing GHG emissions, including a commitment to reduce absolute scope 1 and 2 GHG emissions 46.2% by 2030 from a 2019 base year. The Company further commits to reduce scope 3 GHG emissions from downstream transportation and distribution and use of sold products 55% per USD value added by 2030 from a 2019 base year.
As part of its dedication to driving sustainability throughout its supply chain, The ODP Corporation also commits that 75% of its suppliers by spend covering purchased goods and services will have science-based targets by 2027. This collaborative effort will contribute to reducing emissions and fostering an environmentally responsible business ecosystem.
“We are incredibly proud to have our science-based targets validated, as it underscores our commitment to make meaningful changes in our environmental impact,” said Shannon Hunter, vice president of sustainability at The ODP Corporation. “By setting these targets, we are sending a clear message to all of our stakeholders—including our employees, customers, and partners—that we are dedicated to environmental sustainability and actively reducing our carbon footprint.”
Achieving validation of our science-based targets is a testament to The ODP Corporation’s ongoing sustainability journey. The ODP Corporation remains committed to continuously improving its environmental practices and embracing innovative solutions. This announcement marks a pivotal step forward in the company’s sustainability efforts and reinforces its position as a responsible corporate citizen.
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 omnichannel presence, which includes world-class 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 Office Depot, LLC; ODP Business Solutions, 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.
ODP and ODP Business Solutions are trademarks of ODP Business Solutions, LLC. Office Depot is a trademark of The Office Club, LLC. OfficeMax is a trademark of OMX, Inc. Veyer is a trademark of Veyer, LLC. Varis is a trademark of Varis, Inc. Any other product or company names mentioned herein are the trademarks of their respective owners.
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.
3Q23 Results. Revenue came in at $2.009 billion, down from $2.172 billion in 3Q22, driven by store closures, lower comparable sales, and a challenging economic environment. Adjusted net income was flat at $73 million, while adjusted EPS rose to $1.88 from $1.48 as a result of the reduction in outstanding shares. Adjusted EBITDA was $125 million, compared to $131 million last year.
Strategy Is Working. ODP delivered solid operating results in spite of the challenging economic environment, with strong adjusted EPS and adjusted free cash flow. Adjusted FCF in the quarter was $89 million. The Company’s low cost operating model continues to deliver.
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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.
Low-Cost Business Model and Disciplined Capital Allocation Drive Solid Operating Performance and Strong EPS Growth
Third Quarter Revenue of $2 Billion with GAAP EPS of $1.79; Adjusted EPS of $1.88
GAAP Operating Income of $91 Million; GAAP Net Income of $70 Million; Adjusted EBITDA of $125 Million
Repurchased $32 Million of Shares in the Third Quarter of 2023
Updates Full-Year 2023 Guidance
BOCA RATON, Fla.–(BUSINESS WIRE)–Nov. 8, 2023– 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 third quarter ended September 30, 2023.
Consolidated (in millions, except per share amounts)
3Q23
3Q22
YTD23
YTD22
Selected GAAP and Non-GAAP measures:
Sales
$2,009
$2,172
$6,025
$6,385
Sales change from prior year period
(8)%
(6)%
Operating income
$91
$84
$232
$188
Adjusted operating income (1)
$95
$95
$247
$238
Net income from continuing operations
$70
$67
$176
$142
Diluted earnings per share from continuing operations
$1.79
$1.36
$4.38
$2.84
Adjusted net income from continuing operations (1)
$73
$73
$187
$177
Adjusted earnings per share from continuing operations (fully diluted) (1)
$1.88
$1.48
$4.66
$3.54
Adjusted EBITDA (1)
$125
$131
$342
$347
Operating Cash Flow from continuing operations
$112
$163
$261
$79
Free Cash Flow (2)
$86
$138
$183
$11
Adjusted Free Cash Flow (3)
$89
$160
$192
$54
Third Quarter 2023 Summary(1)(2)(3)
Total reported sales of $2.0 billion, down 8% versus the prior year, primarily due to lower sales in its Office Depot consumer division, largely driven by 71 fewer retail locations in service compared to the prior year, as well as lower retail and online consumer traffic and transactions
GAAP operating income of $91 million and net income from continuing operations of $70 million, or $1.79 per diluted share, versus $84 million and $67 million, respectively, or $1.36 per diluted share, in the prior year
Adjusted operating income of $95 million, flat compared to the third quarter of 2022; adjusted EBITDA of $125 million, compared to $131 million in the third quarter of 2022
Adjusted net income from continuing operations of $73 million, or adjusted diluted earnings per share from continuing operations of $1.88, versus $73 million or $1.48, respectively, in the prior year
Operating cash flow from continuing operations of $112 million and adjusted free cash flow of $89 million, versus $163 million and $160 million, respectively, in the prior year
Repurchased 659 thousand shares at a cost of $32 million in the third quarter of 2023
$1.2 billion of total available liquidity including $384 million in cash and cash equivalents at quarter end
“I am extremely impressed seeing the day-to-day commitment and exceptional execution from our team as I fulfill Chief Executive Officer Gerry Smith’s responsibilities while he is on medical leave,” said Joseph Vassalluzzo, ODP’s chairman of the board. “In the quarter, our team delivered strong operating income and earnings per share results against a challenging economic backdrop, reflecting our unwavering commitment to operational excellence and to our low-cost business model approach.
“We continue to make progress across our four business units as we execute our three horizons strategy. This included expanding margins at ODP Business Solutions, new product testing and category expansion at Office Depot, securing new third-party customers at Veyer while remaining on track to more than double third-party EBITDA this year, and enhancing our platform and customer engagement at Varis.
“Our shareholder value creation formula, which integrates operational excellence with a shareholder-focused capital allocation plan, including the repurchase of approximately $32 million of shares during the quarter, contributed to a meaningful year-over-year increase in adjusted earnings per share for the third quarter and revised upward EPS guidance for the full year,” Vassalluzzo added.
“As we look ahead, we anticipate the macroeconomic environment to remain challenging throughout the remainder of the year. However, we are confident in our position of strength and will continue to focus on driving value for shareholders through our low-cost business model, leveraging our multiple routes to market, and continuing with our disciplined capital allocation,” Vassalluzzo concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the third quarter of 2023 were $2 billion, a decrease of 8% compared with the same period last year. This was driven primarily by lower sales in its consumer division, Office Depot, primarily due to 71 fewer stores in service compared to last year related to planned store closures, as well as lower retail and online consumer traffic. Sales at ODP Business Solutions Division were down slightly compared to last year, largely driven by slower return to office trends and lower sales of technology products. Meanwhile, Veyer provided strong logistics support for the ODP Business Solutions and Office Depot Divisions, and continued to capture additional demand for its supply chain and procurement solutions among other third-party customers.
The Company reported operating income of $91 million in the third quarter of 2023, up 8% compared to operating income of $84 million in the prior year period. Operating results in the third quarter of 2023 included $4 million of charges. These charges consisted primarily of $3 million associated with non-cash asset impairments largely related to the operating lease right-of-use (ROU) assets associated with the Company’s retail store locations. Net income from continuing operations was $70 million, or $1.79 per diluted share in the third quarter of 2023, up from $67 million, or $1.36 per diluted share in the third quarter of 2022.
Adjusted (non-GAAP) Results(1)
Adjusted results for the third quarter of 2023 exclude charges and credits totaling $4 million as described above and the associated tax impacts.
Third quarter of 2023 adjusted EBITDA was $125 million compared to $131 million in the prior year period. This included depreciation and amortization of $28 million and $32 million in the third quarters of 2023 and 2022, respectively
Third quarter of 2023 adjusted operating income was $95 million, flat compared to the third quarter of 2022
Third quarter of 2023 adjusted net income from continuing operations was $73 million, or $1.88 per diluted share, compared to $73 million, or $1.48 per diluted share, in the third quarter of 2022, an increase of 27% 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 in excess of $4 billion
Reported sales were $1.0 billion in the third quarter of 2023, down approximately 3% compared to the same period last year primarily related to lower sales of technology products and weaker macroeconomic conditions
Stronger sales in cleaning and breakroom supplies were more than offset by lower sales of technology and core supplies
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 $56 million in the third quarter of 2023, up 17% over the same period last year, related primarily to higher gross margins. As a percentage of sales, operating income margin was 6%, up 90 basis points compared to the same period 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 $1.0 billion in the third quarter of 2023, down 12% compared to the prior year period partially due to 71 fewer retail outlets in service associated with planned store closures, as well as lower demand relative to last year in certain product categories, softer back-to-school seasonal demand, and lower online sales. The Company closed 14 retail stores in the quarter and had 938 stores at quarter end. Sales were down approximately 6% on a comparable store basis
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 $66 million in the third quarter of 2023, compared to operating income of $83 million during the same period last year, driven primarily by the flow through impact from lower sales. As a percentage of sales, operating income was 7%, flat compared to the same period last year.
Veyer Division
Veyer is a supply chain, distribution, procurement and global sourcing operation with over 35 years of experience and proven leadership, 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 nationwide 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 third quarter of 2023, Veyer provided strong support for its internal customers, ODP Business Solutions and Office Depot, as well as for its third-party customers, generating sales of $1.3 billion
Operating income was $10 million in the third quarter of 2023, up from $9 million in the prior year period related to the favorable impacts of higher sales to external third parties and lower product costing
In the quarter relative to last year, sales and EBITDA generated from third party customers was up 57% and 119% respectively, resulting in sales of approximately $11 million and EBITDA of $3 million in the quarter
Varis Division
Varis is a 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
Successfully launched the platform in the fourth quarter of 2022; adding and on-boarding new customers, incorporating feedback, and adding new features and capabilities to the platform
Varis generated revenues in the third quarter of 2023 of $2 million, flat compared to the third quarter of 2022
Operating loss was $17 million, flat compared to the third quarter of 2022, as the division continued to enhance its platform and onboard new customers
Share Repurchases
The Company continued to execute under its previously announced $1 billion share repurchase authorization, available through year-end 2025. During the third quarter of 2023, the Company repurchased 659 thousand shares at a cost of $32 million. Since the inception of the authorization beginning in November 2022, the Company has repurchased 9 million shares for approximately $420 million.
The number of shares to be repurchased 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 current authorization could be suspended or discontinued at any time as determined by the Board of Directors.
Balance Sheet and Cash Flow
As of September 30, 2023, ODP had total available liquidity of approximately $1.2 billion, consisting of $384 million in cash and cash equivalents and $771 million of available credit under the Third Amended Credit Agreement. Total debt was $173 million.
For the third quarter of 2023, cash generated by operating activities of continuing operations was $112 million, which included $3 million in restructuring and other spend, compared to cash provided by operating activities of continuing operations of $163 million in the third quarter of the prior year, which included $22 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 third quarter of 2023 and 2022 were $25 million, reflecting continued growth investments in the Company’s digital transformation, distribution network, and eCommerce capabilities. Adjusted Free Cash Flow(3) was $89 million in the third quarter of 2023, compared to $160 million in the prior year period.
“I would like to recognize our entire team for their commitment and dedication in managing inventory and working capital, which has resulted in another quarter of strong cash flow generation,” said Anthony Scaglione, executive vice president and chief financial officer of The ODP Corporation. “As we work to close out the year, we maintain our disciplined approach, focusing on managing costs, maximizing cash flow, and executing our capital allocation plan,” Scaglione added.
Updated 2023 Expectations
“Our team’s unwavering commitment to delivering value is evident in our compelling customer proposition, strong free cash flow generation, and strategic capital allocation for the benefit of our shareholders,” highlighted Vassalluzzo. “While we acknowledge the influence of the challenging macroeconomic environment on consumer and business activity, we remain steadfast in our dedication to driving long-term value within our business through effective execution of our three horizons strategy.”
The Company’s full year guidance for 2023 included in this release 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 merger integration expenses, restructuring charges, 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 without unreasonable effort.
The Company is updating its full year guidance for 2023 as follows:
Previous 2023 Guidance
Updated 2023 Guidance
Sales
Approximately $8 billion
Revised to $7.8 – $7.9 billion
Adjusted EBITDA
$400 – $430 million
Affirmed
Adjusted Operating Income
$270 – $300 million
Revised to $280 – $310 million
Adjusted Earnings per Share(*)
$5.00 – $5.30 per share
Revised to $5.30 – $5.60 per share
Adjusted Free Cash Flow(**)
$200 – $230 million
Affirmed
Capital Expenditures
$100 – $120 million
Affirmed
*Adjusted Earnings per Share (EPS) guidance for 2023 includes tax benefits related to R&D and employee-related tax credits and includes expected impact from share repurchases
**Adjusted Free Cash Flow is defined as cash flows from operating activities less capital expenditures excluding cash charges associated with the Company’s Maximize B2B Restructuring and expenses incurred in connection with our previously planned separation of the consumer business and re-alignment
“Our year-to-date performance speaks to the resilience of our team and the strength of our low-cost business model and capital allocation approach,” said Scaglione. “While the weaker macroeconomic conditions have impacted the level of consumer and business activity creating top-line headwinds, our continued focus on operational excellence has us well positioned to continue driving strong operating results as we close out the year. Our updated guidance assumes a consistent overall macroeconomic environment and reflects our year-to-date revenue trends, while increasing our outlook for adjusted operating income and adjusted EPS.
Our increased adjusted EPS outlook also assumes a lower full-year effective tax rate driven by the execution of certain tax credits, lower than anticipated interest expense associated with projected intra-quarter ABL borrowings, and the impact from our continued share buyback activity,” Scaglione added.
The ODP Corporation will webcast a call with financial analysts and investors on November 8, 2023, 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 Maximize B2B Restructuring, and expenses incurred in connection with our previously planned separation of the consumer business and re-alignment. 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 its strategic shift to maintain all of its businesses under common ownership; 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.
BOCA RATON, Fla.–(BUSINESS WIRE)–Oct. 25, 2023– The ODP Corporation (NASDAQ:ODP) (“ODP,” or the “Company”), a leading provider of business services, products and digital workplace technology solutions to businesses and consumers, will announce third quarter 2023 financial results before the market open on Wednesday, November 8th, 2023. The ODP Corporation will webcast a call with financial analysts and investors that day 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. A copy of the earnings press release, supplemental financial disclosures and presentation will also be available on the website.
About The ODP Corporation
The ODP Corporation (NASDAQ:ODP) is a leading provider of products and services through an integrated business-to-business (B2B) distribution platform and omnichannel presence, which includes world-class 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 Office Depot, LLC; ODP Business Solutions, 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.
ODP and ODP Business Solutions are trademarks of ODP Business Solutions, LLC. Office Depot is a trademark of The Office Club, LLC. OfficeMax is a trademark of OMX, Inc. Veyer is a trademark of Veyer, LLC. Varis is a trademark of Varis Inc. Grand&Toy is a trademark of Grand & Toy, LLC in Canada. Any other product or company names mentioned herein are the trademarks of their respective owners.
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.
Medical Leave. Yesterday, The ODP Corporation announced that Gerry P. Smith, the Chief Executive Officer of the Company, began a temporary medical leave of absence to undergo a medical procedure that requires several weeks of recovery. Effective immediately, the Board of Directors of the Company appointed Joseph S. Vassalluzzo, the Company’s non-executive Chair of the Board, to assume Mr. Smith’s authority and responsibilities until Mr. Smith returns from his medical leave.
Mr. Vassalluzzo Background. Mr. Vassalluzzo has served as the independent non-executive Chairman of the Board since February 2017 and has served as a member of the Board since August 2013. Mr. Vassalluzzo has extensive industry experience. He was employed by Staples, Inc. from 1989 until 2005 and his duties included worldwide responsibility for all of Staples’ real estate activities, including the development and management of all retail stores; distribution; office and warehouse centers; international operations; engineering, construction and design activities; facilities management; M&A activities; and the Legal Department function. Mr. Vassalluzzo also served as Staples’ vice chairman from 1999 to 2005.
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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.
BOCA RATON, Fla.–(BUSINESS WIRE)–Sep. 12, 2023– The ODP Corporation (“ODP,” or the “Company”) (NASDAQ:ODP), a leading provider of business services, products and digital workplace technology solutions to businesses and consumers, announced today that its executive vice president and chief financial officer, D. Anthony Scaglione, and vice president of investor relations and treasurer, Tim Perrott, will participate in the B. Riley Securities Consumer Conference on September 14th, 2023.
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 world-class 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 Office Depot, LLC; ODP Business Solutions, 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.
The “Imagine Success” Podcast Will Help Listeners Gain Insights and Inspiration from Conversations with Industry Leaders and Small Business Owners
BOCA RATON, Fla.–(BUSINESS WIRE)–Sep. 12, 2023– Office Depot, a leading omnichannel retailer dedicated to helping its small business, home office, and education clients live more productive and organized lives through innovative products and services, today announced the launch of a new podcast series called “Imagine Success,” available now at officedepot.com/podcast and on major podcast platforms including Spotify and Apple Podcasts. The series will include thought-provoking conversations to inspire entrepreneurs and help guide them through the various stages of a business’s life cycle, from taking the leap to building a brand to identifying sources of funding, scaling for growth, conquering challenges and more.
Hosted by Kevin Moffitt, executive vice president of The ODP Corporation and president of Office Depot, the podcast series features real-world strategies and stories from industry leaders and small business owners alike. Through these stories, guests will educate and inspire others to achieve their own version of success.
“At Office Depot, we’re always striving to find new, innovative ways to enable success for small business owners,” said Moffitt. “We hope listeners of the podcast will find practical insights, valuable takeaways and actionable tips from each episode that will empower them to pursue their passions and achieve their business goals.”
As the proud son of small business owners who’ve opened four different businesses since the mid-1970s, Moffitt kicks off the podcast’s debut episode in conversation with his parents, Bertha and Victor Moffitt. The first episode of the Imagine Success podcast explores putting a business idea into motion and also features interviews with Brit Morin and Justine Pon. Morin is a venture capitalist, serial entrepreneur and founder and CEO of Brit + Co, a modern lifestyle and education company, plus Selfmade, an educational platform that Office Depot has been a proud sponsor of since 2020, that helps female founders start and grow their own businesses. Pon is the founder of The Ponnery, an arts and crafts product company that celebrates Asian American food and culture.
Visit officedepot.com/podcast to listen to the podcast and discover innovative products and helpful services designed to support small business owners.
About Office Depot
Office Depot, LLC, an operating company of The ODP Corporation, is a leading specialty retailer providing innovative products and services delivered through a fully integrated omnichannel platform of Office Depot and OfficeMax retail stores and an award-winning online presence, OfficeDepot.com, to support the productivity and organization of its small business, home office and education clients. Office Depot is committed to enabling its clients’ success, strengthening local communities and providing equal opportunities for all. For more information, visit officedepot.com, download the Office Depot app on your iPhone or Android and follow @officedepot on Facebook, Twitter, Instagram and TikTok.
Office Depot is a trademark of The Office Club, LLC. OfficeMax is a trademark of OMX, Inc. ODP and ODP Business Solutions are trademarks of ODP Business Solutions, LLC. Veyer is a trademark of Veyer, LLC. Varis is a trademark of Varis, Inc. Any other product or company names mentioned herein are the trademarks of their respective owners.
Company Teams Up with Customers To Support More Than 900 Title I Public Schools
BOCA RATON, Fla.–(BUSINESS WIRE)–Aug. 30, 2023– Office Depot today announced that nearly $1.7 million was raised leveraging its retail footprint to help more than 900 Title I public schools get brand new school supplies, classroom furniture, tech and more, just in time for the new school year.
The company partnered with Round It Up America® to enable every Office Depot and OfficeMax store to raise funds to support a Title I public elementary, middle or high school in the store’s local community. As result of this program, nearly $1.7 million was raised from April through June of this year. Stores will continue to support the same local schools through December to help them restock and refresh the supplies they need, well after the start of the new school year.
Some local beneficiary schools will have the chance to participate in free VIP school shopping events to pick up furniture, supplies and more, to help create more comfortable and productive learning environments for students. Others will create wish lists detailing the items they need most, which will then be delivered to them at the school or available for pick up at their local Office Depot or OfficeMax store.
“We’re proud to host this education donation drive in our Office Depot and OfficeMax stores to help connect teachers and staff at Title I schools with the additional resources they need,” said Kevin Moffitt, executive vice president of The ODP Corporation and president of Office Depot. “Thanks to our customers’ generous support of this program, extra supplies, new classroom furniture, tech and more will be directed to hundreds of schools to help encourage a successful new school year.”
The program is an integral part of Office Depot’s Imagine Success™ platform, created to help teachers, parents, students, home office workers and small business owners alike fuel their passions, power their potential and achieve their goals.
Start Proud!® Program
The company also helps to support education through The ODP Corporation’s Start Proud!® program, and recently announced that over $2.5 million worth of school supplies and equipment would be provided to students and teachers at Title I public elementary schools across the country.
Give Back to Schools Program
And students, parents and teachers who shop online at officedepot.com or in Office Depot and OfficeMax stores can help to support the local school of their choice with any qualifying purchase. Shoppers can simply provide the name or Give Back To Schools ID number of their desired school at checkout (in store or online) and their designated school will receive 5% back in credits for free supplies, through the Give Back to Schools program.
Office Depot, LLC, an operating company of The ODP Corporation, is a leading specialty retailer providing innovative products and services delivered through a fully integrated omnichannel platform of Office Depot and OfficeMax retail stores and an award-winning online presence, OfficeDepot.com, to support the productivity and organization of its small business, home office and education clients. Office Depot is committed to enabling its clients’ success, strengthening local communities and providing equal opportunities for all. For more information, visit officedepot.com, download the Office Depot app on your iPhone or Android and follow @officedepot on Facebook, Twitter, Instagram and TikTok.
Office Depot is a trademark of The Office Club, LLC. OfficeMax is a trademark of OMX, Inc. ODP and ODP Business Solutions are trademarks of ODP Business Solutions, LLC. Veyer is a trademark of Veyer, LLC. Varis is a trademark of Varis, Inc. Any other product or company names mentioned herein are the trademarks of their respective owners.
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.
Initiation. We are initiating research coverage of The ODP Corporation with an Outperform rating and a $65 price target. Not your father’s Office Depot, ODP’s four business unit, low cost operating model will highlight each unit’s strength and value, in our view, while an aggressive share repurchase program returns excess capital to shareholders.
Two Established Cash Flowing Businesses. ODP Business Solutions, a leader in the B2B distribution business, and Office Depot, a leading omnichannel retailer of office supplies, form the foundation, with both businesses generating strong cash flows, with Business Solutions set up for long-term growth.
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.
Operational Excellence and Disciplined Capital Allocation Drive Solid Operating Performance and Strong EPS Growth
Second Quarter Revenue of $1.9 Billion with GAAP EPS of $0.87; Adjusted EPS of $0.99
GAAP Operating Income of $46 Million; GAAP Net Income of $34 Million; Adjusted EBITDA of $86 Million
Repurchased $31 Million of Shares in the Second Quarter of 2023
Updates Full-Year 2023 Guidance
BOCA RATON, Fla.–(BUSINESS WIRE)–Aug. 9, 2023– 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 second quarter ended July 1, 2023.
Consolidated (in millions, except per share amounts)
2Q23
2Q22
YTD23
YTD22
Selected GAAP and Non-GAAP measures:
Sales
$1,908
$2,034
$4,016
$4,212
Sales change from prior year period
(6)%
(5)%
Operating income
$46
$28
$141
$104
Adjusted operating income (1)
$53
$54
$152
$143
Net income from continuing operations
$34
$20
$107
$75
Diluted earnings per share from continuing operations
$0.87
$0.39
$2.61
$1.49
Adjusted net income from continuing operations (1)
$39
$39
$114
$104
Adjusted earnings per share from continuing operations (fully diluted)(1)
$0.99
$0.79
$2.80
$2.06
Adjusted EBITDA (1)
$86
$91
$217
$216
Operating Cash Flow from continuing operations
$(8)
$(114)
$149
$(84)
Free Cash Flow(2)
$(31)
$(135)
$97
$(127)
Adjusted Free Cash Flow (3)
$(30)
$(121)
$103
$(106)
Second Quarter 2023 Summary(1)(2)(3)
Total reported sales of $1.9 billion, down 6% versus the prior year, primarily due to lower sales in its Office Depot consumer division, largely driven by 68 fewer retail locations in service compared to the prior year, as well as lower retail and online consumer traffic and transactions
GAAP operating income of $46 million and net income from continuing operations of $34 million, or $0.87 per diluted share, versus $28 million and $20 million, or $0.39 per diluted share, respectively in the prior year
Adjusted operating income of $53 million, compared to $54 million in the second quarter of 2022; adjusted EBITDA of $86 million, compared to $91 million in the second quarter of 2022
Adjusted net income from continuing operations of $39 million, or adjusted diluted earnings per share from continuing operations of $0.99, versus $39 million or $0.79, respectively in the prior year
Operating cash flow from continuing operations of ($8 million) and adjusted free cash flow of ($30 million), versus $(114 million) and $(121 million), respectively in the prior year
Repurchased 724 thousand shares for $31 million in the second quarter of 2023
$1.1 billion of total available liquidity including $335 million in cash and cash equivalents at quarter end
“Our continued focus on operational excellence and disciplined capital allocation drove solid operating results and a strong increase in earnings per share,” said Gerry Smith, chief executive officer of The ODP Corporation. “ODP Business Solutions led the way, expanding its margin profile and driving an impressive year-over-year increase in operating income. Veyer added new third-party business, remaining on-track to more than double external EBITDA in 2023, and Varis continues to onboard customers and incorporate feedback and new features onto its platform. While the weaker macroeconomic environment and somewhat sluggish consumer activity created top-line headwinds in our consumer business during the quarter, Office Depot continued to provide a superior customer experience and we are encouraged by our expanded assortment, which positions us well for the upcoming back-to-school selling season.”
“Combining our solid operating performance with our continued disciplined capital allocation, which included repurchasing about $31 million of our shares in the quarter, we drove an impressive 25% year-over-year increase in adjusted earnings per share in the second quarter,” Smith continued.
“Our low-cost business model, multiple routes to market, and strong balance sheet have us well positioned to continue navigating the ongoing challenging macroeconomic conditions. Moving ahead, we will continue to drive operational excellence across our four business units and prioritize capital allocation, remaining squarely focused on driving value for our shareholders,” Smith concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the second quarter of 2023 were $1.9 billion, a decrease of 6% compared with the same period last year. This was driven primarily by lower sales in its consumer division, Office Depot, primarily due to 68 fewer stores in service compared to last year related to planned store closures, as well as lower retail and online consumer traffic. Sales at ODP Business Solutions Division were flat year over year, as increases in sales for paper and certain adjacency categories, and flexible pricing strategies, were largely offset by lower sales in product categories including ink, toner, office supplies and personal protective equipment. Additionally, Veyer provided strong logistics support for the ODP Business Solutions and Office Depot Divisions, and began to capture additional demand for its supply chain and procurement solutions among other third-party customers.
The Company reported operating income of $46 million in the second quarter of 2023, up 64% compared to operating income of $28 million in the prior year period. Operating results in the second quarter of 2023 included $7 million of charges. These charges consisted primarily of $6 million associated with non-cash asset impairments largely related to the operating lease right-of-use (ROU) assets associated with the Company’s retail store locations. Net income from continuing operations was $34 million, or $0.87 per diluted share in the second quarter of 2023, up from $20 million, or $0.39 per diluted share in the second quarter of 2022.
Adjusted (non-GAAP) Results(1)
Adjusted results for the second quarter of 2023 exclude charges and credits totaling $7 million as described above and the associated tax impacts.
Second quarter of 2023 adjusted EBITDA was $86 million compared to $91 million in the prior year period. This included depreciation and amortization of $29 million and $34 million in the second quarters of 2023 and 2022, respectively
Second quarter of 2023 adjusted operating income was $53 million compared to $54 million in the second quarter of 2022
Second quarter of 2023 adjusted net income from continuing operations was $39 million, or $0.99 per diluted share, compared to $39 million, or $0.79 per diluted share, in the second quarter of 2022, an increase of 25% 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 in excess of $4 billion
Reported sales were $1.0 billion in the second quarter of 2023, flat compared to the same period last year, as return to the office trends and flexible pricing strategies were offset by higher levels of unemployment and other macroeconomic factors
Drove strong sales in paper and adjacency categories, including furniture, cleaning and breakroom supplies, and copy and print services
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 signed renewed business in excess of $100 million in customer agreements
Operating income was $45 million in the second quarter of 2023, up 25% over the same period last year, related primarily to higher gross margins. As a percentage of sales, operating income margin was 4.5%, up 100 basis points compared to the same period 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 second quarter of 2023, down 13% compared to the prior year period partially due to 68 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 7 retail stores in the quarter and had 952 stores at quarter end. Sales were down approximately 8% on a comparable store basis
Store traffic and demand relative to last year was negatively impacted by the recovery from the pandemic as a greater percentage of customers returned to the office, as well as weaker macroeconomic activity and higher unemployment
Operating income was $35 million in the second quarter of 2023, compared to operating income of $49 million during the same period last year. As a percentage of sales, operating income was 4%, or down approximately 90 basis points compared to the same period last year. This result was primarily driven by the flow through impact from lower sales and impacts related to inflation
Veyer Division
Veyer is a supply chain, distribution, procurement and global sourcing operation, supporting Office Depot and ODP Business Solutions, as well as other third-party customers. Assets and capabilities of Veyer include approximately 9 million square feet of infrastructure; ~100 facilities (distribution centers, cross-docks, and direct import centers); a large private fleet of vehicles; and next-day delivery to 98.5% of US population
In the second quarter of 2023, Veyer provided strong support for its internal customers, ODP Business Solutions and Office Depot, as well as for its third-party customers, generating sales of $1.3 billion
Operating income was $6 million in the second quarter of 2023, down from $8 million in the prior year period related to lower sales in Office Depot
In the quarter relative to last year, sales and EBITDA generated from third party customers was up nearly 62% and over 141%, respectively, resulting in sales of approximately $10 million and EBITDA of $3 million in the quarter
Varis Division
Varis is a 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
Successfully launched the platform in the fourth quarter of 2022; onboarding new customers, incorporating feedback, and adding new features to the platform
Varis generated revenues in the quarter of $2 million, an increase of $1 million compared to the second quarter of 2022
Operating loss was $14 million, compared to an operating loss of $16 million in the second quarter of 2022, primarily driven by lower employee related costs and as the division continued to invest in its business and worked to onboard customers
Share Repurchases
The Company continued to execute under its previously announced $1 billion share repurchase authorization, available through year-end 2025. During the second quarter of 2023, the Company repurchased 724 thousand shares for $31 million. Since the inception of the authorization beginning in November 2022, the Company has repurchased approximately 8.3 million shares for $387 million.
The number of shares to be repurchased 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 current authorization could be suspended or discontinued at any time as determined by the Board of Directors.
Balance Sheet and Cash Flow
As of July 1, 2023, ODP had total available liquidity of approximately $1.1 billion, consisting of $335 million in cash and cash equivalents and $811 million of available credit under the Third Amended Credit Agreement. Total debt was $181 million.
For the second quarter of 2023, cash used by operating activities of continuing operations was $8 million, which included $1 million in restructuring and other spend, compared to cash used by operating activities of continuing operations of $114 million in the second quarter of the prior year, which included $14 million in restructuring and other spend. The year-over-year improvement in operating cash flow largely related to stronger operating results, prudent inventory management, and timing of certain working capital items.
Capital expenditures in the second quarter of 2023 were $23 million versus $21 million in the prior year period, reflecting continuing growth investments in the Company’s digital transformation, distribution network, and eCommerce capabilities. Adjusted Free Cash outflow(3) was $30 million in the second quarter of 2023, a significant improvement compared to $121 million outflow in the prior year period.
“I would like to thank our entire team for their continued efforts on carefully managing inventory and other working capital items, which resulted in significantly stronger year-over-year cash flow in the quarter,” said Anthony Scaglione, executive vice president and chief financial officer of The ODP Corporation. “As we move into the second half of the year, we will maintain our disciplined approach and focus on managing operating costs, maximizing cash flow in our business, and optimizing our capital allocation plan,” Scaglione added.
Updated 2023 Expectations
“We remain cautiously optimistic about the second half of the year and are excited about the opportunity to continue driving operational excellence and delivering strong value for our shareholders,” said Smith. “While we recognize that the challenging macroeconomic environment is causing somewhat sluggish consumer activity and market disruptions, we’re enthusiastic about our strong position and are focused on driving the assets we control to deliver long-term profitable growth. Through executing along our three horizons strategy, driving our four business unit model, and remaining focused on prudently deploying capital to maximize shareholder value, we’re on a path to unlocking ODP’s potential, creating a compelling value proposition for all of our stakeholders.”
The Company’s full year guidance for 2023 included in this release 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 merger integration expenses, restructuring charges, 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 without unreasonable effort.
The Company is updating its full year guidance for 2023 as follows:
Previous 2023 Guidance
Updated 2023 Guidance
Sales
$8.0 – $8.4 billion
Revised to approximately $8 billion
Adjusted EBITDA
$400 – $430 million
Affirmed
Adjusted Operating Income
$270 – $300 million
Affirmed
Adjusted Earnings per Share(*)
$4.50 – $5.10 per share
Revised to $5.00 – $5.30 per share
Adjusted Free Cash Flow(**)
$200 – $230 million
Affirmed
Capital Expenditures
$100 – $120 million
Affirmed
*Adjusted Earnings per Share (EPS) guidance for 2023 excludes potential discrete (tax) items that may affect quarter to quarter fluctuations and includes expected impact from share repurchases
**Adjusted Free Cash Flow is defined as cash flows from operating activities less capital expenditures excluding cash charges associated with the Company’s Maximize B2B Restructuring and expenses incurred in connection with our previously planned separation of the consumer business and re-alignment
“We delivered solid performance in the first half of the year and remain in a strong capital position with our low-cost business model mindset,” said Scaglione. “While we’re cautious on the state of the consumer and general macroeconomic conditions, our continued focus on operational excellence has us well positioned to continue driving solid results for the balance of the year. Our updated guidance assumes stabilization in overall economic trends in the second half of 2023 and reflects our expectations for revenue trends given first half performance, confirming the low end of our previous full-year revenue guidance range, while reaffirming all other operating metrics and increasing our earnings per share guidance given our strong performance to date, lower than expected interest and tax expense, and continued share buyback activity,” Scaglione added.
The ODP Corporation will webcast a call with financial analysts and investors on August 9, 2023, 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 Maximize B2B Restructuring, and expenses incurred in connection with our previously planned separation of the consumer business and re-alignment. 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 world-class 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 Office Depot, LLC; ODP Business Solutions, 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 its strategic shift to maintain all of its businesses under common ownership; 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.
THE ODP CORPORATION GAAP to Non-GAAP Reconciliations (Unaudited)
We report our results in accordance with accounting principles generally accepted in the United States (“GAAP”). We also review certain financial measures excluding impacts of transactions that are not related to our core operations (“non-GAAP”). Management believes that the presentation of these non-GAAP financial measures enhances the ability of its investors to analyze trends in its business and provides a means to compare periods that may be affected by various items that might obscure trends or developments in its business. Management uses both GAAP and non-GAAP measures to assist in making business decisions and assessing overall performance. Non-GAAP measures help to evaluate programs and activities that are intended to attract and satisfy customers, separate from expenses and credits directly associated with Merger, restructuring, and certain similar items. Certain non-GAAP measures are also used for short and long-term incentive programs.
Our measurement of these non-GAAP financial measures may be different from similarly titled financial measures used by others and therefore may not be comparable. These non-GAAP financial measures should not be considered superior to the GAAP measures, but only to clarify some information and assist the reader. We have included reconciliations of this information to the most comparable GAAP measures in the tables included within this material.
Free cash flow is a non-GAAP measure, which we define as cash flows from operating activities less capital expenditures. We believe that free cash flow is an important indicator that provides additional perspective on our ability to generate cash to fund our strategy and expand our distribution network. Adjusted free cash flow is also a non-GAAP measure, which we define as free cash flow excluding cash charges associated with the Company’s Maximize B2B Restructuring, and the previously planned separation of the consumer business and re-alignment.
