Second Quarter Revenue of $1.7 Billion with
GAAP EPS of $(0.12); Adjusted EPS of $0.56
Progress on Project Core to Drive Future Cost
Savings and Implementing Growth Initiatives
Company Repurchased $191 Million of Shares Year
to Date
Company Provides Update on Varis Sale
Process
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 June 29, 2024.
Consolidated (in millions, except
per share amounts)
2Q24
2Q23
YTD24
YTD23
Selected GAAP and Non-GAAP
measures:
Sales
$1,717
$1,907
$3,586
$4,013
Sales change from prior year period
(10)%
(11)%
Operating income
$0.4
$60
$41
$172
Adjusted operating income (1)
$33
$67
$100
$183
Net income (loss) from continuing
operations
$(4)
$43
$27
$127
Diluted earnings (loss) per share from
continuing operations
$(0.12)
$1.09
$0.73
$3.11
Adjusted net income from continuing
operations (1)
$20
$48
$70
$135
Adjusted earnings per share from
continuing operations (fully diluted) (1)
$0.56
$1.22
$1.89
$3.30
Adjusted EBITDA (1)
$57
$95
$147
$239
Operating Cash Flow from continuing
operations
$(1)
$(8)
$43
$169
Free Cash Flow (2)
$(20)
$(25)
$(7)
$132
Adjusted Free Cash Flow (3)
$5
$(24)
$22
$138
Second Quarter 2024
Summary(1)(2)(3)
- Total reported sales of $1.7 billion, down 10% versus the prior
year on a reported basis. The decrease in reported sales is largely
related to lower sales in its Office Depot Division, primarily due
to 58 fewer retail locations in service compared to the previous
year and reduced transactions, as well as lower sales in its ODP
Business Solutions Division
- GAAP operating income of approximately $400 thousand and net
income (loss) from continuing operations of $(4) million, or
$(0.12) per diluted share, versus $60 million and $43 million,
respectively, or $1.09 per diluted share, in the prior year
period
- Adjusted operating income of $33 million, compared to $67
million in the second quarter of 2023; adjusted EBITDA of $57
million, compared to $95 million in the second quarter of 2023
- Adjusted net income from continuing operations of $20 million,
or adjusted diluted earnings per share from continuing operations
of $0.56, versus $48 million or $1.22, respectively, in the prior
year period
- Operating cash flow from continuing operations of $(1) million
and adjusted free cash flow of $5 million, versus $(8) million and
$(24) million, respectively, in the prior year period
- Repurchased nearly 2.4 million shares at a cost of $104 million
in the second quarter of 2024; Repurchased a total of approximately
$141 million of shares when including purchases made in the second
quarter and post quarter through the current date
- $831 million of total available liquidity including $190
million in cash and cash equivalents, of which $10 million is
presented in Current assets held for sale related to the Varis
Division, at quarter end
“We are executing Project Core while taking actions to improve
top-line trends in both our B2B and B2C businesses,” said Gerry
Smith, chief executive officer of The ODP Corporation. “Our
performance in the quarter was below our expectations, impacted by
more cautious business spending and weaker consumer activity, along
with new customer onboarding challenges impacting revenue traction
at ODP Business Solutions. Additionally, retail store traffic
trends, while improving sequentially, remained sluggish. Although
market challenges impacted Office Depot and ODP Business Solutions,
we continued to see progress in Veyer, as they executed across
their growth strategies, attracting new third-party customers and
improving their external EBITDA. Furthermore, we continued to buy
back our shares, returning over $100 million of our stock in the
quarter and over $190 million year to date,” he added.
“While we are pacing below our prior expectations for the year,
we are not standing still. We’re taking actions to improve our
top-line trajectory and we remain focused on capturing the
long-term opportunities derived by our strong value proposition,
solid balance sheet, and flexible foundation. In addition to our
efforts under Project Core, which we expect will create over $100
million in annual cost savings when fully implemented, we are
executing on initiatives to accelerate sales pipeline conversion,
drive additional avenues for growth with existing customers, and
leverage our deep customer relationships to solve more of their
procurement challenges. This is what we call the Power of 1 – the
ability to add value to our customers through offering one more
product or suite of products to help them succeed. For example, we
recently were awarded a sizeable order for standalone air
conditioning units for a government entity -- something not top of
mind when you think of ODP Business Solutions, but it showcases the
trust customers have in our capabilities to source, deliver, and
solution during a time of need – all through the Power of 1.
Additionally, we are set early for the upcoming back-to-school
season and well positioned with our Education 365 approach,
connecting customers within the education sector.”
“Although we are disappointed by our first half performance and
outlook for the remainder of the year, we are committed to driving
growth back into the business, remaining focused on converting the
numerous opportunities in our pipeline, strengthening our position
in the second half of the year and having impact in 2025 and
beyond. We have several prospects at both ODP Business Solutions
and Veyer that we expect to close in the second half that will
boost revenue growth velocity as we exit this year. With these
opportunities, coupled with our full realization of Project Core,
we expect to exit 2024 with a stronger profile,” he continued.
“Despite the near term top-line challenges, we remain committed
and encouraged about the future and confident in our operational
excellence approach. Our team remains focused on executing the
necessary steps to position us for long term growth and
profitability,” Smith concluded.
Consolidated Results
Reported (GAAP) Results Total
reported sales for the second quarter of 2024 were $1.7 billion, a
decrease of 10% compared with the same period last year, driven by
lower sales in both its consumer and business-to-business (B2B)
divisions. Lower sales in its consumer division, Office Depot, was
primarily due to 58 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 lower compared to last year, largely driven
by macroeconomic factors causing more cautious spending among
business customers, as well as continued challenges related to the
onboarding of new customers and fewer transactions. Meanwhile,
Veyer provided strong logistics support for the ODP Business
Solutions and Office Depot Divisions and continued to execute
across its growth strategy, delivering supply chain and procurement
solutions to new third-party customers and driving external
EBITDA.
The Company reported GAAP operating income of approximately $400
thousand in the second quarter of 2024, down compared to GAAP
operating income of $60 million in the prior year period. Operating
results in the second quarter of 2024 included $33 million of
charges, primarily related to $25 million in net merger and
restructuring expenses and $8 million non-cash asset impairment
primarily related to the operating lease right-of-use (ROU) assets
associated with the Company’s retail store locations. Net loss from
continuing operations was $4 million, or $(0.12) per diluted share
in the second quarter of 2024, down compared to net income from
continuing operations of $43 million, or $1.09 per diluted share in
the second quarter of 2023.
Adjusted (non-GAAP) Results(1)
Adjusted results for the second quarter of 2024 exclude charges and
credits totaling $33 million as described above and the associated
tax impacts.
- Second quarter 2024 adjusted EBITDA was $57 million compared to
$95 million in the prior year period. This included depreciation
and amortization of $24 million and $25 million in the second
quarter of 2024 and 2023, respectively
- Second quarter 2024 adjusted operating income was $33 million,
down compared to $67 million in the second quarter of 2023
- Second quarter 2024 adjusted net income from continuing
operations was $20 million, or $0.56 per diluted share, compared to
$48 million, or $1.22 per diluted share, in the second quarter of
2023, a decrease of 54% 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 $917 million in the second quarter of 2024,
down 8% compared to the same period last year. The decrease in
sales was related primarily to weaker macroeconomic conditions,
more cautious business spending, new customer onboarding
challenges, and lower sales conversion
- Total adjacency category sales, including cleaning and
breakroom, furniture, technology, and copy and print, were 43% of
total ODP Business Solutions’ sales
- Continued strong pipeline of potential new business and
implementing several initiatives to regain top-line traction
- Operating income was $29 million in the second quarter of 2024,
down 36% compared to the same period last year on a reported basis.
As a percentage of sales, operating income margin was 3%, down 140
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 eCommerce presence.
- Reported sales were $799 million in the second quarter of 2024,
down 12% compared to the prior year on a reported basis. Lower
sales were partially driven by 58 fewer retail outlets in service
associated with planned store closures, as well as lower demand
relative to last year in major product categories and lower online
sales. The Company closed 9 retail stores in the quarter and had
894 stores at quarter end. Sales were down 7% on a comparable store
basis
- Store and online traffic were lower year over year due to
macroeconomic factors causing sluggish consumer activity
- Operating income was $17 million in the second quarter of 2024,
compared to operating income of $35 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 2%, down 170
basis points 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 second quarter of 2024, Veyer provided 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 $5 million in the second quarter of 2024,
compared to $6 million in the prior year period driven by the flow
through impact of lower sales to internal customers partially
offset by the contribution related to services to external
third-party customers
- In the second quarter of 2024, sales generated from third-party
customers were in-line with the same period last year and EBITDA
generated from third-party customers increased by 17% year over
year, resulting in sales of $10 million and EBITDA of $4
million
Share Repurchases
The Company continued to execute under its previously announced
$1 billion share repurchase authorization valid through March 31,
2027. During the second quarter of 2024, the Company repurchased
nearly 2.4 million shares at a cost of $104 million. Since the end
of the second quarter of 2024, the Company repurchased additional
shares for $37 million.
“Our capital allocation strategy balances investing in the
future of our business while continuing to enhance value for
shareholders through share repurchases under our buyback
authorization,” stated Anthony Scaglione, executive vice president
and chief financial officer of The ODP Corporation. “We have
executed under this approach, investing in our business and
repurchasing over $190 million of our stock thus far in 2024.
Moving forward, we will continue to balance our capital allocation
strategy remaining mindful of market conditions and business
performance as we continue to drive our low-cost business model
through Project Core.”
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 share
repurchase authorization could be suspended or discontinued at any
time as determined by the Board of Directors.
Balance Sheet and Cash Flow
As of June 29, 2024, ODP had total available liquidity of
approximately $831 million, consisting of $190 million in cash and
cash equivalents, including $10 million that is presented in
Current assets held for sale related to the Varis Division, and
$641 million of available credit under the Fourth Amended Credit
Agreement. Total debt was $183 million.
For the second quarter of 2024, cash used in operating
activities of continuing operations was $1 million, which included
$25 million in restructuring spend, compared to cash used in
operating activities of continuing operations of $8 million in the
second quarter of the prior year, which included $1 million in
restructuring 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 second quarter of 2024 were $19
million versus $17 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 $5 million in the second quarter of
2024, compared to $(24) million in the prior year period.
Progress on Project Core
As the Company previously announced, Project Core is a plan
designed to create further efficiencies throughout its business,
focused on driving enhanced operating results and shareholder
value. This broad-based plan includes cost improvement actions
across the entire enterprise, optimizing its organizational
structure to support future growth of the business. The Company
continues to make significant progress under Project Core and is in
position to realize in-year savings of approximately $50 million
and annualized savings of over $100 million when fully implemented.
Restructuring and related charges associated with these actions are
now estimated to be in the range of $40 million to $50 million,
excluding those related to the Varis Division, and are expected to
be substantially incurred throughout 2024.
Varis Division Update
The Company has entered into a non-binding term sheet agreement
with a third-party for the sale of Varis. Under the proposed terms,
the Company would retain an approximately 20% current stake in the
entity. However, there can be no assurances regarding the ultimate
timing of this proposed transaction or that such transaction will
be completed.
“After a thorough process, we have arrived at a path forward for
Varis that aligns with our stated objectives of finalizing our
capital commitment to the business, while providing ODP with a
continued invested interest in the opportunities ahead. We expect
to announce further details of the proposed transaction upon close,
which we expect to be completed in the third quarter,” added
Smith.
2024 Guidance
“Our performance in the first half of the year was clearly below
expectations, placing us behind our goals for the year,” said
Smith. “The initiatives we are taking to improve our top-line
trajectory, along with our low-cost model, high touch service
approach, and strong value proposition, give us confidence in our
ability to improve our performance and position us for greater
stability and growth in the future. Considering our slow start to
the first half of the year, as well as the uncertain macroeconomic
environment and the potential variability of the timing of our
initiatives, we are updating our 2024 guidance as follows”:
Updated full-year guidance for 2024
Updated FY 2024
Guidance(1)
Sales
At least $7 billion
Adjusted EBITDA(1)
$310 million - $350 million
Adjusted Operating Income(1)
$200 million - $240 million
Adjusted Earnings per Share (fully
diluted)(*)(1)
$4.25 - $5.00 per share
Adjusted Free Cash Flow(1)(3)
Approximately $200 million
*Adjusted Earnings per Share (fully diluted) (EPS) guidance for
2024 excludes potential discrete (tax) items that may affect
quarter to quarter fluctuations and includes expected impact from
share repurchases
The Company’s full year guidance for 2024 includes non-GAAP
measures, such as Adjusted EBITDA, Adjusted Operating Income,
Adjusted Earnings per Share (fully diluted) 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.
“As a result of our first half performance, along with a
continuing challenging macro environment and lower than anticipated
sales pipeline conversion in ODP Business Solutions, we are
lowering our full year outlook. While first half results were below
our expectations, our team remains focused on executing upon
opportunities in our business to grow our top line, leveraging our
low-cost business model, strong balance sheet, and diverse routes
to market,” said Scaglione.
The ODP Corporation will webcast a call with financial analysts
and investors on August 7, 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, online presence, and a network of
Office Depot and OfficeMax retail stores. Through its operating
companies ODP Business Solutions, LLC; Office Depot, LLC; and
Veyer, LLC, 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. ©2023 Office Depot,
LLC. All rights reserved. Any other product or company names
mentioned herein are the trademarks of their respective owners.
FORWARD LOOKING STATEMENTS 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, 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 or 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 a potential sale of Varis on the terms proposed or
at all 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.
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share
amounts)
(Unaudited)
13 Weeks Ended
26 Weeks Ended
June 29,
July 1,
June 29,
July 1,
2024
2023
2024
2023
Sales
$
1,717
$
1,907
$
3,586
$
4,013
Cost of goods sold and occupancy costs
1,375
1,493
2,836
3,118
Gross profit
342
414
750
895
Selling, general and administrative
expenses
309
347
650
712
Asset impairments
8
6
14
10
Merger and restructuring expenses, net
25
1
45
1
Operating income
—
60
41
172
Other income (expense):
Interest income
2
2
5
4
Interest expense
(5
)
(5
)
(10
)
(10
)
Other income, net
(1
)
3
(1
)
5
Income (loss) from continuing operations
before income taxes
(4
)
60
35
171
Income tax expense
—
17
8
44
Net income (loss) from continuing
operations
(4
)
43
27
127
Discontinued operations, net of tax
(69
)
(9
)
(85
)
(20
)
Net income (loss)
$
(73
)
$
34
$
(58
)
$
107
Basic earnings (loss) per share
Continuing operations
$
(0.12
)
$
1.11
$
0.75
$
3.22
Discontinued operations
(1.93
)
(0.22
)
(2.34
)
(0.52
)
Net basic earnings (loss) per share
$
(2.05
)
$
0.89
$
(1.59
)
$
2.70
Diluted earnings (loss) per share
Continuing operations
$
(0.12
)
$
1.09
$
0.73
$
3.11
Discontinued operations
(1.93
)
(0.22
)
(2.28
)
(0.50
)
Net diluted earnings (loss) per share
$
(2.05
)
$
0.87
$
(1.55
)
$
2.61
THE ODP CORPORATION
CONSOLIDATED BALANCE
SHEETS
(In millions, except shares
and par value)
June 29,
December 30,
2024
2023
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
180
$
381
Receivables, net
465
485
Inventories
778
765
Prepaid expenses and other current
assets
38
28
Current assets held for sale
15
80
Total current assets
1,476
1,739
Property and equipment, net
301
297
Operating lease right-of-use assets
999
983
Goodwill
403
403
Other intangible assets, net
43
45
Deferred income taxes
158
142
Other assets
273
278
Total assets
$
3,653
$
3,887
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
779
$
755
Accrued expenses and other current
liabilities
840
915
Income taxes payable
5
6
Short-term borrowings and current
maturities of long-term debt
10
9
Current liabilities held for sale
8
12
Total current liabilities
1,642
1,697
Deferred income taxes and other long-term
liabilities
113
120
Pension and postretirement obligations,
net
13
15
Long-term debt, net of current
maturities
173
165
Operating lease liabilities, net of
current portion
819
789
Total liabilities
2,760
2,786
Contingencies
Stockholders’ equity:
Common stock — authorized 80,000,000
shares of $0.01 par value; issued shares — 67,382,080 at June 29,
2024 and 66,700,292 at December 30, 2023; outstanding shares —
34,321,389 at June 29, 2024 and 36,959,377 at December 30, 2023
1
1
Additional paid-in capital
2,759
2,752
Accumulated other comprehensive loss
(117
)
(114
)
Accumulated deficit
(370
)
(312
)
Treasury stock, at cost — 33,060,691
shares at June 29, 2024 and 29,740,915 shares at December 30,
2023
(1,380
)
(1,226
)
Total stockholders’ equity
893
1,101
Total liabilities and stockholders’
equity
$
3,653
$
3,887
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
26 Weeks Ended
June 29,
July 1,
2024
2023
Cash flows from operating
activities:
Net income (loss)
$
(58
)
$
107
Loss from discontinued operations, net of
tax
(85
)
(20
)
Net income from continuing operations
27
127
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
49
50
Amortization of debt discount and issuance
costs
1
1
Charges for losses on receivables and
inventories
12
10
Asset impairments
14
10
Gain on disposition of assets, net
(1
)
(1
)
Compensation expense for share-based
payments
20
14
Deferred income taxes and deferred tax
asset valuation allowances
(18
)
23
Changes in working capital and other
operating activities
(61
)
(65
)
Net cash provided by operating activities
of continuing operations
43
169
Net cash used in operating activities of
discontinued operations
(16
)
(20
)
Net cash provided by operating
activities
27
149
Cash flows from investing
activities:
Capital expenditures
(50
)
(36
)
Businesses acquired, net of cash
acquired
—
(10
)
Proceeds from disposition of assets
1
101
Settlement of company-owned life insurance
policies
1
1
Net cash provided by (used in) investing
activities of continuing operations
(48
)
56
Net cash used in investing activities of
discontinued operations
(5
)
(10
)
Net cash provided by (used in) investing
activities
(53
)
46
Cash flows from financing
activities:
Net payments on long and short-term
borrowings
(5
)
(9
)
Debt retirement
(240
)
(165
)
Debt issuance
246
165
Share purchases for taxes, net of proceeds
from employee share-based transactions
(15
)
(23
)
Repurchase of common stock for
treasury
(153
)
(231
)
Other financing activities
(7
)
—
Net cash used in financing activities of
continuing operations
(174
)
(263
)
Net cash provided by (used in) financing
activities of discontinued operations
—
—
Net cash used in financing activities
(174
)
(263
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(2
)
1
Net decrease in cash, cash equivalents and
restricted cash
(202
)
(67
)
Cash, cash equivalents and restricted cash
at beginning of period
395
404
Cash, cash equivalents and restricted cash
at end of period
$
193
$
337
Supplemental information on non-cash
investing and financing activities
Right-of-use assets obtained in exchange
for new operating lease liabilities
$
155
$
148
Right-of-use assets obtained in exchange
for new finance lease liabilities
8
3
Cash interest paid, net of amounts
capitalized and non-recourse debt
8
10
Cash taxes paid, net
11
19
THE ODP CORPORATION
BUSINESS UNIT
PERFORMANCE
(In millions)
(Unaudited)
ODP Business Solutions Division
2Q24
2Q23
YTD24
YTD23
Sales (external)
$915
$999
$1,838
$2,005
Sales (internal)
$2
$3
$5
$7
% change of total sales
(8)%
0%
(8)%
1%
Division operating income
$29
$45
$59
$84
% of total sales
3%
4%
3%
4%
Office Depot Division
2Q24
2Q23
YTD24
YTD23
Sales (external)
$792
$898
$1,729
$1,991
Sales (internal)
$7
$8
$15
$17
% change of total sales
(12)%
(13)%
(13)%
(10)%
Division operating income
$17
$35
$68
$120
% of total sales
2%
4%
4%
6%
Comparable store sales decrease
(7)%
(8)%
(8)%
(5)%
Veyer Division
2Q24
2Q23
YTD24
YTD23
Sales (external)
$10
$10
$19
$17
Sales (internal)
$1,167
$1,312
$2,401
$2,725
% change of total sales
(11)%
(7)%
(12)%
(7)%
Division operating income
$5
$6
$14
$21
% of total sales
0%
0%
1%
1%
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 and
changes in restricted cash. 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 and Project Core
Restructuring, and the previously planned separation of the
consumer business and re-alignment.
(In millions, except per share amounts)
Q2 2024
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
8
0.5
%
$
8
$
—
—
%
Merger and restructuring expenses, net
$
25
1.5
%
$
25
$
—
—
%
Operating income
$
—
—
%
$
(33
)
$
33
(4)
1.9
%
Income tax expense
$
—
—
%
$
(9
)
$
9
(5)
0.5
%
Net income (loss) from continuing
operations
$
(4
)
(0.2
)%
$
(24
)
$
20
(6)
1.2
%
Earnings (loss) per share from continuing
operations (fully diluted)
$
(0.12
)
$
(0.68
)
$
0.56
(6)
Depreciation and amortization
$
24
1.4
%
$
—
$
24
1.4
%
Q2 2023
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
6
0.3
%
$
6
$
—
—
%
Merger and restructuring expenses, net
$
1
0.1
%
$
1
$
—
—
%
Operating income
$
60
3.1
%
$
(7
)
$
67
(4)
3.5
%
Income tax expense
$
17
0.9
%
$
(2
)
$
19
(5)
1.0
%
Net income from continuing operations
$
43
2.3
%
$
(5
)
$
48
(6)
2.5
%
Earnings per share from continuing
operations (fully diluted)
$
1.09
$
(0.13
)
$
1.22
(6)
Depreciation and amortization
$
25
1.3
%
$
—
$
25
1.3
%
YTD 2024
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
14
0.4
%
$
14
$
—
—
%
Merger and restructuring expenses, net
$
45
1.3
%
$
45
$
—
—
%
Operating income
$
41
1.1
%
$
(59
)
$
100
(4)
2.8
%
Income tax expense
$
8
0.2
%
$
(15
)
$
23
(5)
0.6
%
Net income from continuing operations
$
27
0.8
%
$
(44
)
$
70
(6)
2.0
%
Earnings per share from continuing
operations (fully diluted)
$
0.73
$
(1.16
)
$
1.89
(6)
Depreciation and amortization
$
49
1.4
%
$
—
$
49
1.4
%
YTD 2023
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
10
0.2
%
$
10
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
1
0.0
%
$
1
$
—
—
%
Operating income
$
172
4.3
%
$
(11
)
$
183
(4)
4.6
%
Income tax expense
$
44
1.1
%
$
(3
)
$
47
(5)
1.2
%
Net income from continuing operations
$
127
3.2
%
$
(8
)
$
135
(6)
3.4
%
Earnings per share from continuing
operations (fully diluted)
$
3.11
$
(0.19
)
$
3.30
(6)
Depreciation and amortization
$
50
1.2
%
$
—
$
50
1.2
%
13 Weeks Ended
26 Weeks Ended
June 29,
July 1,
June 29,
July 1,
Adjusted
EBITDA:
2024
2023
2024
2023
Net income (loss)
$
(73
)
$
34
$
(58
)
$
107
Discontinued operations, net of tax
(69
)
(9
)
(85
)
(20
)
Net income (loss) from continuing
operations
(4
)
43
27
127
Income tax expense
—
17
8
44
Income (loss) from continuing operations
before income taxes
(4
)
60
35
171
Add (subtract)
Interest income
(2
)
(2
)
(5
)
(4
)
Interest expense
5
5
10
10
Depreciation and amortization
24
25
49
50
Charges and credits, pretax (7)
33
7
59
11
Adjusted EBITDA
$
57
$
95
$
147
$
239
Amounts may not foot due to rounding. The sum of the quarterly
amounts may not equal the reported amounts for the year due to
rounding.
(4)
Adjusted operating income for all periods
presented herein exclude merger and restructuring expenses, net,
and asset impairments (if any).
(5)
Adjusted income tax expense for all
periods presented herein exclude the tax effect of the charges or
credits not indicative of core operations as described in the
preceding notes.
(6)
Adjusted net income and adjusted earnings
per share (fully diluted) for all periods presented exclude merger
and restructuring expenses, net, asset impairments (if any), and
exclude the tax effect of the charges or credits not indicative of
core operations.
(7)
Charges and credits, pretax for all
periods presented include merger and restructuring expenses, net,
asset impairments (if any).
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
13 Weeks Ended
26 Weeks Ended
June 29,
July 1,
June 29,
July 1,
Free cash
flow
2024
2023
2024
2023
Net cash provided by (used in) operating
activities of continuing operations
$
(1
)
$
(8
)
$
43
$
169
Capital expenditures
(19
)
(17
)
(50
)
(36
)
Change in restricted cash impacting
working capital
—
—
—
(1
)
Free cash flow
(20
)
(25
)
(7
)
132
Adjustments for certain cash charges:
Maximize B2B Restructuring Plan
3
1
5
4
Previously planned separation of consumer
business and re-alignment
—
—
—
2
Project Core
22
—
24
—
Adjusted free cash flow
$
5
$
(24
)
$
22
$
138
Amounts may not foot due to rounding. The sum of the quarterly
amounts may not equal the reported amounts for the year due to
rounding.
THE ODP CORPORATION
Store Statistics
(Unaudited)
Q2
Q2
YTD
2023
2024
2024
Office Depot Division:
Stores opened
—
—
—
Stores closed
7
9
22
Total retail stores (U.S.)
952
894
—
Total square footage (in millions)
21.1
19.8
—
Average square footage per store (in
thousands)
22.1
22.1
—
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240807246692/en/
CONTACT: Tim Perrott Investor Relations 561-438-4629
Tim.Perrott@theodpcorp.com
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