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
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.
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, 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
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share
amounts)
(Unaudited)
13 Weeks Ended
39 Weeks Ended
September 30,
September 24,
September 30,
September 24,
2023
2022
2023
2022
Sales
$
2,009
$
2,172
$
6,025
$
6,385
Cost of goods sold and occupancy costs
1,535
1,686
4,655
4,983
Gross profit
474
486
1,370
1,402
Selling, general and administrative
expenses
379
391
1,123
1,164
Asset impairments
3
3
13
8
Merger, restructuring and other operating
expenses, net
1
8
2
42
Operating income
91
84
232
188
Other income (expense):
Interest income
3
1
7
3
Interest expense
(5
)
(1
)
(15
)
(10
)
Other income, net
3
5
8
9
Income from continuing operations before
income taxes
92
89
232
190
Income tax expense
22
22
56
48
Net income from continuing operations
70
67
176
142
Discontinued operations, net of tax
—
—
—
7
Net income
$
70
$
67
$
176
$
149
Basic earnings (loss) per share
Continuing operations
$
1.83
$
1.39
$
4.52
$
2.92
Discontinued operations
—
(0.01
)
—
0.14
Net basic earnings (loss) per share
$
1.83
$
1.38
$
4.52
$
3.06
Diluted earnings (loss) per share
Continuing operations
$
1.79
$
1.36
$
4.38
$
2.84
Discontinued operations
—
(0.01
)
—
0.13
Net diluted earnings (loss) per share
$
1.79
$
1.35
$
4.38
$
2.97
THE ODP CORPORATION
CONSOLIDATED BALANCE
SHEETS
(In millions, except shares
and par value)
September 30,
December 31,
2023
2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
384
$
403
Receivables, net
542
536
Inventories
782
828
Prepaid expenses and other current
assets
37
36
Current assets held for sale
9
107
Total current assets
1,754
1,910
Property and equipment, net
352
352
Operating lease right-of-use assets
951
874
Goodwill
468
464
Other intangible assets, net
42
46
Deferred income taxes
141
182
Other assets
272
321
Total assets
$
3,980
$
4,149
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
818
$
821
Accrued expenses and other current
liabilities
930
1,005
Income taxes payable
3
17
Short-term borrowings and current
maturities of long-term debt
9
16
Total current liabilities
1,760
1,859
Deferred income taxes and other long-term
liabilities
118
122
Pension and postretirement obligations,
net
16
16
Long-term debt, net of current
maturities
164
172
Operating lease liabilities
767
693
Total liabilities
2,825
2,862
Commitments and contingencies
Stockholders’ equity:
Common stock — authorized 80,000,000
shares of $0.01 par value; issued shares — 66,695,068 at September
30, 2023 and 65,636,015 at December 31, 2022; outstanding shares —
37,626,086 at September 30, 2023 and 42,213,046 at December 31,
2022
1
1
Additional paid-in capital
2,744
2,742
Accumulated other comprehensive loss
(121
)
(77
)
Accumulated deficit
(275
)
(451
)
Treasury stock, at cost — 29,068,982
shares at September 30, 2023 and 23,422,969 shares at December 31,
2022
(1,194
)
(928
)
Total stockholders’ equity
1,155
1,287
Total liabilities and stockholders’
equity
$
3,980
$
4,149
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
39 Weeks Ended
September 30,
September 24,
2023
2022
Cash flows from operating
activities:
Net income
$
176
$
149
Income from discontinued operations, net
of tax
—
7
Net income from continuing operations
176
142
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
87
100
Amortization of debt discount and issuance
costs
1
—
Charges for losses on receivables and
inventories
16
15
Asset impairments
13
8
Gain on disposition of assets, net
(3
)
(4
)
Compensation expense for share-based
payments
28
31
Deferred income taxes and deferred tax
asset valuation allowances
39
33
Changes in working capital and other
operating activities
(96
)
(246
)
Net cash provided by operating activities
of continuing operations
261
79
Net cash provided by (used in) operating
activities of discontinued operations
—
—
Net cash provided by operating
activities
261
79
Cash flows from investing
activities:
Capital expenditures
(76
)
(68
)
Businesses acquired, net of cash
acquired
(9
)
—
Proceeds from disposition of assets
105
6
Settlement of company-owned life insurance
policies
3
3
Net cash provided by (used in) investing
activities of continuing operations
23
(59
)
Net cash provided by investing activities
of discontinued operations
5
74
Net cash provided by investing
activities
28
15
Cash flows from financing
activities:
Net payments on long and short-term
borrowings
(12
)
(16
)
Debt retirement
(204
)
(43
)
Debt issuance
200
—
Share purchases for taxes, net of proceeds
from employee share-based transactions
(26
)
(19
)
Repurchase of common stock for
treasury
(264
)
(69
)
Other financing activities
—
(4
)
Net cash used in financing activities of
continuing operations
(306
)
(151
)
Net cash provided by (used in) financing
activities of discontinued operations
—
—
Net cash used in financing activities
(306
)
(151
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
—
(6
)
Net decrease in cash, cash equivalents and
restricted cash
(17
)
(63
)
Cash, cash equivalents and restricted cash
at beginning of period
404
537
Cash, cash equivalents and restricted cash
at end of period
$
387
$
474
Supplemental information on non-cash
investing and financing activities
Right-of-use assets obtained in exchange
for new operating lease liabilities
$
275
$
171
Promissory note receivable obtained from
disposition of discontinued operations
59
55
Cash taxes paid, net
27
—
Earn-out receivable obtained from
disposition of discontinued operations
9
9
Cash interest paid, net of amounts
capitalized and non-recourse debt
5
—
Right-of-use assets obtained in exchange
for new finance lease liabilities
4
2
Other current receivable obtained from
disposition of discontinued operations
—
30
Transfer from additional paid-in capital
to treasury stock for final settlement of the accelerated share
repurchase agreement
—
29
THE ODP CORPORATION
BUSINESS UNIT
PERFORMANCE
(In millions)
(Unaudited)
ODP Business Solutions Division
3Q23
3Q22
YTD23
YTD22
Sales (external)
$996
$1,030
$3,001
$3,004
Sales (internal)
$4
$5
$11
$15
% change of total sales
(3)%
9%
(0)%
11%
Division operating income
$56
$48
$140
$103
% of total sales
6%
5%
5%
3%
Office Depot Division
3Q23
3Q22
YTD23
YTD22
Sales (external)
$1,000
$1,133
$2,991
$3,358
Sales (internal)
$10
$10
$27
$25
% change of total sales
(12)%
(8)%
(11)%
(9)%
Division operating income
$66
$83
$186
$228
% of total sales
7%
7%
6%
7%
Comparable store sales decrease
(6)%
N/A
(5)%
N/A
Veyer Division
3Q23
3Q22
YTD23
YTD22
Sales (external)
$11
$7
$28
$18
Sales (internal)
$1,320
$1,477
$4,044
$4,415
% change of total sales
(10)%
(3)%
(8)%
(2)%
Division operating income
$10
$9
$31
$25
% of total sales
1%
1%
1%
1%
Varis Division
3Q23
3Q22
YTD23
YTD22
Sales (external)
$2
$2
$5
$5
Sales (internal)
$0
$0
$0
$0
% change of total sales
0%
0%
0%
67%
Division operating loss
$(17)
$(17)
$(48)
$(48)
% of total sales
(850)%
(850)%
(960)%
(960)%
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 Restructuring, and the
previously planned separation of the consumer business and
re-alignment.
(In millions, except per share
amounts)
Q3 2023
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
3
0.1
%
$
3
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
1
0.0
%
$
1
$
—
—
%
Operating income
$
91
4.5
%
$
(4
)
$
95
(4)
4.7
%
Income tax expense
$
22
1.1
%
$
(1
)
$
23
(5)
1.1
%
Net income from continuing operations
$
70
3.5
%
$
(3
)
$
73
(6)
3.6
%
Earnings per share from continuing
operations (fully diluted)
$
1.79
$
(0.09
)
$
1.88
(6)
Depreciation and amortization
$
28
1.4
%
$
—
$
28
1.4
%
Q3 2022
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
3
0.1
%
$
3
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
8
0.4
%
$
8
$
—
—
%
Operating income
$
84
3.9
%
$
(11
)
$
95
(4)
4.4
%
Income tax expense
$
22
1.0
%
$
(5
)
$
27
(5)
1.2
%
Net income from continuing operations
$
67
3.1
%
$
(6
)
$
73
(6)
3.4
%
Earnings per share from continuing
operations (fully diluted)
$
1.36
$
(0.12
)
$
1.48
(6)
Depreciation and amortization
$
32
1.5
%
$
—
$
32
1.5
%
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
YTD 2023
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
13
0.2
%
$
13
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
2
0.0
%
$
2
$
—
—
%
Operating income
$
232
3.9
%
$
(15
)
$
247
(4)
4.1
%
Income tax expense
$
56
0.9
%
$
(4
)
$
60
(5)
1.0
%
Net income from continuing operations
$
176
2.9
%
$
(11
)
$
187
(6)
3.1
%
Earnings per share from continuing
operations (fully diluted)
$
4.38
$
(0.28
)
$
4.66
(6)
Depreciation and amortization
$
87
1.4
%
$
—
$
87
1.4
%
YTD 2022
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
8
0.1
%
$
8
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
42
0.7
%
$
42
$
—
—
%
Operating income
$
188
2.9
%
$
(50
)
$
238
(4)
3.7
%
Income tax expense
$
48
0.8
%
$
(15
)
$
63
(5)
1.0
%
Net income from continuing operations
$
142
2.2
%
$
(35
)
$
177
(6)
2.8
%
Earnings per share from continuing
operations (fully diluted)
$
2.84
$
(0.70
)
$
3.54
(6)
Depreciation and amortization
$
100
1.6
%
$
—
$
100
1.6
%
13 Weeks Ended
39 Weeks Ended
September 30,
September 24,
September 30,
September 24,
Adjusted EBITDA:
2023
2022
2023
2022
Net income
$
70
$
67
$
176
$
149
Discontinued operations, net of tax
—
—
—
7
Net income from continuing operations
70
67
176
142
Income tax expense
22
22
56
48
Income from continuing operations before
income taxes
92
89
232
190
Add (subtract)
Interest income
(3
)
(1
)
(7
)
(3
)
Interest expense
5
1
15
10
Depreciation and amortization
28
32
87
100
Charges and credits, pretax (7)
4
11
15
50
Adjusted EBITDA
$
125
$
131
$
342
$
347
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, restructuring and other operating 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, restructuring
and other operating 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, restructuring and other operating expenses, net, asset
impairments (if any).
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
13 Weeks Ended
39 Weeks Ended
September 30,
September 24,
September 30,
September 24,
Free cash flow
2023
2022
2023
2022
Net cash provided by operating activities
of continuing operations
$
112
$
163
$
261
$
79
Capital expenditures
(25
)
(25
)
(76
)
(68
)
Change in restricted cash impacting
working capital
(1
)
—
(2
)
—
Free cash flow
86
138
183
11
Adjustments for certain cash charges:
Maximize B2B Restructuring Plan
3
2
7
5
Previously planned separation of consumer
business and re-alignment
—
20
2
38
Adjusted free cash flow
$
89
$
160
$
192
$
54
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)
Q3
YTD
Q3
2023
2023
2022
Office Depot Division:
Stores opened
—
—
—
Stores closed
14
42
11
Total retail stores (U.S.)
938
—
1,009
Total square footage (in millions)
20.8
—
22.2
Average square footage per store (in
thousands)
22.2
—
22.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231108274081/en/
Tim Perrott Investor Relations 561-438-4629
Tim.Perrott@theodpcorp.com
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