First Quarter Revenue of $1.9 Billion with GAAP
EPS of $0.40; Adjusted EPS of $1.05
GAAP Operating Income of $18 Million; Net
Income of $15 Million; Adjusted EBITDA of $82 Million
Accelerating Project Core to Maximize In-Year
Cost Savings with Future Annualized Run-Rate Cost Savings in Excess
of $100 Million
Driving Operational Excellence and Remaining
On-Track to Meet 2024 Guidance Despite Challenging Macroeconomic
and Business Environment Impacting Top-Line Results
Board of Directors Approved Held-For-Sale Plan
for Varis Business Unit
Company Repurchased Approximately $90 Million
of Shares Year to Date
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 first
quarter ended March 30, 2024.
Consolidated (in millions, except
per share amounts)
1Q24
1Q23
Selected GAAP and Non-GAAP
measures:
Sales
$1,871
$2,108
Sales change from prior year period
(11)%
Operating income
$18
$95
Adjusted operating income (1)
$51
$99
Net income from continuing operations
$15
$72
Diluted earnings per share from continuing
operations
$0.40
$1.71
Adjusted net income from continuing
operations (1)
$40
$75
Adjusted earnings per share from
continuing operations (fully diluted) (1)
$1.05
$1.78
Adjusted EBITDA (1)
$82
$131
Operating Cash Flow from continuing
operations
$38
$157
Free Cash Flow (2)
$3
$128
Adjusted Free Cash Flow (3)
$7
$133
First Quarter 2024
Summary(1)(2)(3)
- Total reported sales of $1.9 billion, down 11% 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 56 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 $18 million and net income from
continuing operations of $15 million, or $0.40 per diluted share,
versus $95 million and $72 million, respectively, or $1.71 per
diluted share, in the prior year
- Adjusted operating income of $51 million, compared to $99
million in the first quarter of 2023; adjusted EBITDA of $82
million, compared to $131 million in the first quarter of 2023
- Adjusted net income from continuing operations of $40 million,
or adjusted diluted earnings per share from continuing operations
of $1.05, versus $75 million or $1.78, respectively, in the prior
year period
- Operating cash flow from continuing operations of $38 million
and adjusted free cash flow of $7 million, versus $157 million and
$133 million, respectively, in the prior year period
- Repurchased 957 thousand shares at a cost of $50 million in the
first quarter of 2024; Repurchased a total of approximately $90
million of shares when including purchases in quarter and post
quarter through the current date
- $971 million of total available liquidity including $282
million in cash and cash equivalents at quarter end
“This quarter, we launched and are accelerating our Project Core
initiatives positioning us to offset the impact of an ongoing
challenging macroeconomic and business environment,” said Gerry
Smith, chief executive officer of The ODP Corporation. “Despite our
slower than expected start to the year, we remain confident in our
operational excellence approach and committed to achieving our
guidance for the full year 2024, as we utilize our strong
foundation and accelerate the broad execution of Project Core.”
“During the quarter, more cautious spending activity and ongoing
delays in the onboarding of new customers at ODP Business Solutions
impacted their performance, while reduced consumer activity
affected Office Depot’s revenue results. Despite this, we remain
encouraged by our ongoing success in winning new enterprise
customers through the flexibility of our service platform and
strength of our balance sheet. Additionally, Veyer demonstrated
continued momentum by attracting new third-party customers and
continuing to drive growth in external EBITDA. Furthermore, we
maintained our focus on capital allocation and increased the pace
of share repurchases, buying back approximately $90 million of our
stock since the beginning of the year. We expect to execute under
this plan at similar levels or higher as we move through the
balance of the year," added Smith.
“Given the slower than expected start to the year and our
continued commitment to our low-cost business model, we are
accelerating our plans for Project Core throughout the balance of
the year, generating higher in-year cost savings and future
annualized run-rate savings in excess of $100 million.
Additionally, we have arrived at the strategic decision to pursue a
sale of Varis, which our Board of Directors have approved.
Concurrently, we have reduced the operating cost of Varis to
further refine their focus, while continuing to support new and
existing customers. Through the acceleration of Project Core, the
additional cost efficiencies we are driving now and in the second
half of the year have positioned us to increase guidance for
adjusted EBITDA and adjusted EPS,” Smith continued.
“Despite the top-line challenges, we remain encouraged about the
future and we’re confident in our operational excellence approach
and position of strength. We will continue to focus on driving our
low-cost business model, leveraging our multiple routes to market,
and executing on our capital allocation plan,” Smith concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the first quarter of 2024 were $1.9
billion, a decrease of 11% compared with the same period last year.
This result was driven primarily by lower sales in its consumer
division, Office Depot, primarily due to 56 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 also down compared to last
year, largely driven by weaker economic activity and more cautious
spending among business customers, as well as continued challenges
related to the pace of onboarding new customers. Meanwhile, Veyer
provided strong logistics support for the ODP Business Solutions
and Office Depot Divisions and continued to capture additional
sales for its supply chain and procurement solutions among other
third-party customers.
The Company reported GAAP operating income of $18 million in the
first quarter of 2024, down compared to GAAP operating income of
$95 million in the prior year period. Operating results in the
first quarter of 2024 included $33 million of charges, primarily
related to $27 million in net merger and restructuring expenses and
$6 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 income from continuing
operations was $15 million, or $0.40 per diluted share in the first
quarter of 2024, down compared to net income from continuing
operations of $72 million, or $1.71 per diluted share in the first
quarter of 2023.
Adjusted (non-GAAP) Results(1)
Adjusted results for the first quarter of 2024 exclude charges
and credits totaling $33 million as described above and the
associated tax impacts.
- First quarter 2024 adjusted EBITDA was $82 million compared to
$131 million in the prior year period. This included depreciation
and amortization of $29 million and $30 million in the first
quarter of 2024 and 2023, respectively
- First quarter 2024 adjusted operating income was $51 million,
down compared to $99 million in the first quarter of 2023
- First quarter 2024 adjusted net income from continuing
operations was $40 million, or $1.05 per diluted share, compared to
$75 million, or $1.78 per diluted share, in the first quarter of
2023, a decrease of 41% 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 $3.8 billion.
- Reported sales were $0.9 billion in the first 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, and lower sales of technology
products and supplies
- 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 and new customer additions
- Operating income was $30 million in the first quarter of 2024,
down 23% compared to the same period last year on a reported basis.
As a percentage of sales, operating income margin was 3%, down 60
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 first quarter of 2024,
down 14% compared to the prior year on a reported basis. Lower
sales were partially driven by 56 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. Additionally, certain interruptions related to inclement
weather further impacted sales during the back-to-business season.
The Company closed 13 retail stores in the quarter and had 903
stores at quarter end. Sales were down 10% on a comparable store
basis
- 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 $50 million in the first quarter of 2024,
compared to operating income of $85 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 5%, down 240
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 first quarter of 2024, Veyer provided strong support for
its internal customers, ODP Business Solutions and Office Depot, as
well as its third-party customers, generating sales of $1.2
billion
- Operating income was $9 million in the first quarter of 2024,
compared to $15 million in the prior year period driven by the flow
through impact of lower sales to internal customers partially
offset by higher sales of services to external third-party
customers
- In the first quarter of 2024, sales and EBITDA generated from
third party customers increased 29% and 40% respectively, resulting
in sales of $9 million and EBITDA of $3 million
Varis Division
Tech-enabled B2B indirect procurement marketplace launched in
the fourth quarter of 2022, which provides buyers and suppliers a
seamless way to transact through the platform’s consumer-like
buying experience and advanced spend management tools.
- Continued work with customers, incorporating feedback and
adding new features and capabilities to the platform
- Generated revenues in the first quarter of 2024 of $2 million,
flat compared to the first quarter of 2023
- Operating loss was $14 million in the first quarter of 2024, an
improvement over the prior year, with further run-rate savings
after cost actions implemented since the beginning of the year
Share Repurchases
The Company continued to execute under its previously announced
$1 billion share repurchase authorization valid through March 31,
2027. During the first quarter of 2024, the Company repurchased 957
thousand shares at a cost of $50 million. Since the end of the
first quarter 2024, the Company repurchased additional shares for
approximately $40 million.
“Through our balanced capital allocation strategy, we are
investing in the future of our business while continuing to enhance
value for shareholders by accelerating the pace of share
repurchases under our buyback authorization,” stated Anthony
Scaglione, executive vice president and chief financial officer of
The ODP Corporation. “We have come out of the gate strong,
repurchasing approximately $90 million of our stock, and moving
forward, we expect to maintain or increase this pace of share
repurchases in the near term, while also enhancing our focus and
driving 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
authorization could be suspended or discontinued at any time as
determined by the Board of Directors.
Balance Sheet and Cash Flow
As of March 30, 2024, ODP had total available liquidity of
approximately $971 million, consisting of $282 million in cash and
cash equivalents and $689 million of available credit under the
Third Amended Credit Agreement. Total debt was $125 million.
For the first quarter of 2024, cash generated by operating
activities of continuing operations was $38 million, which included
$4 million in restructuring spend, compared to cash provided by
operating activities of continuing operations of $157 million in
the first quarter of the prior year, which included $5 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 first quarter of 2024 were $35
million versus $27 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 $7 million in the first quarter of
2024, compared to $133 million in the prior year period.
Accelerating Project Core and Maximizing In-Year and Run-Rate
Savings
As the Company previously announced, Project Core is a plan
designed to create further efficiencies in its business, focused on
driving enhanced operating results and increasing shareholder
returns through an expanded share repurchase program. This
broad-based plan includes cost improvement actions across the
entire enterprise, including all routes to market, Varis,
procurement, IT and shared services, encompassing the entirety of
ODP’s enterprise, optimizing its organizational structure to
support future growth of the business. As part of this effort, the
Company conducted a thorough review of strategic options for its
Varis business unit. As a result, its Board of Directors has
approved a plan to sell the Varis business, with activities
commencing immediately.
The Company is accelerating its efforts under Project Core,
working to maximize the in-year and full year run-rate savings
enhancing its future operating position. Considering the
acceleration of Project Core, the Company now expects to realize in
year savings of approximately $50 million, excluding Varis, and
annualized savings of over $100 million when fully implemented.
Restructuring and related charges associated with these actions,
excluding Varis, are now estimated to be in the range of $40
million to $50 million and are expected to be substantially
incurred throughout 2024. The Company expects to begin reducing
costs in the second quarter of 2024, with most of these actions
expected to be completed over the following 12 months.
“Aligned with our low-cost business model mindset, our decision
to accelerate Project Core will enable us to maximize in-year and
future run-rate cost savings,” said Smith.
2024 Guidance
“Despite our slow start to the year, we remain confident in our
operational excellence approach and enthusiastic about the
opportunities in our business to drive long-term value while
remaining focused on prudently deploying capital to the benefit of
shareholders,” said Smith. “As we continue to move forward into
2024, we remain cautious regarding the macroeconomic and business
environment, and we will remain focused on executing upon our
strategy through Project Core, meeting our near term commitments,
and positioning ODP for long-term success.”
“While macroeconomic and general business conditions posed
challenges in the quarter and we expect these conditions to persist
in the near term, our team’s continued focus on driving our
low-cost model, enhanced by our acceleration and focused nature of
Project Core, have positioned us to update our operational guidance
for 2024,” Scaglione added.
The Company is updating its full year guidance for 2024 as
follows:
Previous FY 2024
Guidance(1)
Updated FY 2024
Guidance(1)
Sales
Decline of 2% - 5%
Affirmed Lower End
Adjusted EBITDA(1)
$410 million - $430 million
Increased to $430 million - $450
million
Adjusted Operating Income(1)
$280 million - $300 million
Increased to $320 million - $340
million
Adjusted Earnings per Share (fully
diluted)(*)(1)
$5.60 - $5.80 per share
Increased to $6.30 - $6.60 per
share
Adjusted Free Cash Flow(1)(3)
Greater than $200 million
Affirmed
*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.
“Our revenue guidance assumes stabilization of macroeconomic and
business conditions, as well as continued store footprint
consolidation and improving overall omni-channel trends at Office
Depot. Additionally, our guidance assumes growth at ODP Business
Solutions in the second half of the year, and continued expansion
at Veyer. With the Board’s decision, going forward, Varis will be
classified as held for sale and we are moving to complete that
transaction in the very near term. Our adjusted EPS outlook assumes
higher interest expense associated with projected ABL borrowings
along with a more normalized tax rate for the balance of the year.
While our guidance assumes incremental improvement in the overall
macroeconomic environment throughout 2024, we remain cautious on
the state of the overall US economy, primarily workforce employment
and the consumer, as well as international trade policies and
agreements that could further impact the level of consumer and
business confidence,” Scaglione added.
The ODP Corporation will webcast a call with financial analysts
and investors on May 8, 2024, at 9:00 am Eastern Time, which will
be accessible to the media and the general public. To listen to the
conference call via webcast, please visit The ODP Corporation’s
Investor Relations website at investor.theodpcorp.com. A replay of
the webcast will be available approximately two hours following the
event.
(1)
As presented throughout this release,
adjusted results represent non-GAAP financial measures and exclude
charges or credits not indicative of core operations and the tax
effect of these items, which may include but not be limited to
merger integration, restructuring, acquisition costs, and asset
impairments. Reconciliations from GAAP to non-GAAP financial
measures can be found in this release as well as on the Company’s
Investor Relations website at investor.theodpcorp.com.
(2)
As used in this release, Free Cash Flow is
defined as cash flows from operating activities less capital
expenditures. Free Cash Flow is a non-GAAP financial measure and
reconciliations from GAAP financial measures can be found in this
release as well as on the Company’s Investor Relations website at
investor.theodpcorp.com.
(3)
As used in this release, Adjusted Free
Cash Flow is defined as Free Cash Flow excluding cash charges
associated with the Company’s Project Core Restructuring, and
related expenses Adjusted Free Cash Flow is a non-GAAP financial
measure and reconciliations from GAAP financial measures can be
found in this release as well as on the Company’s Investor
Relations website at investor.theodpcorp.com.
About The ODP Corporation
The ODP Corporation (NASDAQ:ODP) is a leading provider of
products, services, and technology solutions through an integrated
business-to-business (B2B) distribution platform and omni-channel
presence, which includes supply chain and distribution operations,
dedicated sales professionals, a B2B digital procurement solution,
online presence, and a network of Office Depot and OfficeMax retail
stores. Through its operating companies ODP Business Solutions,
LLC; Office Depot, LLC; Veyer, LLC; and Varis, Inc, The ODP
Corporation empowers every business, professional, and consumer to
achieve more every day. For more information, visit
theodpcorp.com.
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 a potential sale of Varis and benefits related to Project
Core; the risk that the Company may not be able to realize the
anticipated benefits of acquisitions due to unforeseen liabilities,
future capital expenditures, expenses, indebtedness and the
unanticipated loss of key customers or the inability to achieve
expected revenues, synergies, cost savings or financial
performance; the risk that the Company is unable to successfully
maintain a relevant omni-channel experience for its customers; the
risk that the Company is unable to execute the Maximize B2B
Restructuring Plan successfully or that such plan will not result
in the benefits anticipated; failure to effectively manage the
Company’s real estate portfolio; loss of business with government
entities, purchasing consortiums, and sole- or limited- source
distribution arrangements; failure to attract and retain qualified
personnel, including employees in stores, service centers,
distribution centers, field and corporate offices and executive
management, and the inability to keep supply of skills and
resources in balance with customer demand; failure to execute
effective advertising efforts and maintain the Company’s reputation
and brand at a high level; disruptions in computer systems,
including delivery of technology services; breach of information
technology systems affecting reputation, business partner and
customer relationships and operations and resulting in high costs
and lost revenue; unanticipated downturns in business relationships
with customers or terms with the suppliers, third-party vendors and
business partners; disruption of global sourcing activities,
evolving foreign trade policy (including tariffs imposed on certain
foreign made goods); exclusive Office Depot branded products are
subject to additional product, supply chain and legal risks;
product safety and quality concerns of manufacturers’ branded
products and services and Office Depot private branded products;
covenants in the credit facility; general disruption in the credit
markets; incurrence of significant impairment charges; retained
responsibility for liabilities of acquired companies; fluctuation
in quarterly operating results due to seasonality of the Company’s
business; changes in tax laws in jurisdictions where the Company
operates; increases in wage and benefit costs and changes in labor
regulations; changes in the regulatory environment, legal
compliance risks and violations of the U.S. Foreign Corrupt
Practices Act and other worldwide anti-bribery laws; volatility in
the Company’s common stock price; changes in or the elimination of
the payment of cash dividends on Company common stock;
macroeconomic conditions such as higher interest rates and future
declines in business or consumer spending; increases in fuel and
other commodity prices and the cost of material, energy and other
production costs, or unexpected costs that cannot be recouped in
product pricing; unexpected claims, charges, litigation, dispute
resolutions or settlement expenses; catastrophic events, including
the impact of weather events on the Company’s business; the
discouragement of lawsuits by shareholders against the Company and
its directors and officers as a result of the exclusive forum
selection of the Court of Chancery, the federal district court for
the District of Delaware or other Delaware state courts by the
Company as the sole and exclusive forum for such lawsuits; and the
impact of the COVID-19 pandemic on the Company’s business. The
foregoing list of factors is not exhaustive. Investors and
shareholders should carefully consider the foregoing factors and
the other risks and uncertainties described in the Company’s Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current
Reports on Form 8-K filed with the U.S. Securities and Exchange
Commission. The Company does not assume any obligation to update or
revise any forward-looking statements.
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share
amounts)
(Unaudited)
13 Weeks Ended
March 30,
April 1,
2024
2023
Sales
$
1,871
$
2,108
Cost of goods sold and occupancy costs
1,461
1,627
Gross profit
410
481
Selling, general and administrative
expenses
359
382
Asset impairments
6
4
Merger and restructuring expenses, net
27
—
Operating income
18
95
Other income (expense):
Interest income
3
2
Interest expense
(4
)
(5
)
Other income, net
—
2
Income from continuing operations before
income taxes
17
94
Income tax expense
2
22
Net income from continuing operations
15
72
Discontinued operations, net of tax
—
—
Net income
$
15
$
72
Basic earnings per share
Continuing operations
$
0.42
$
1.79
Discontinued operations
—
—
Net basic earnings per share
$
0.42
$
1.79
Diluted earnings per share
Continuing operations
$
0.40
$
1.71
Discontinued operations
—
—
Net diluted earnings per share
$
0.40
$
1.71
THE ODP CORPORATION
CONSOLIDATED BALANCE
SHEETS
(In millions, except shares
and par value)
March 30,
December 30,
2024
2023
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
282
$
392
Receivables, net
466
487
Inventories
733
765
Prepaid expenses and other current
assets
36
28
Current assets held for sale
7
6
Total current assets
1,524
1,678
Property and equipment, net
360
359
Operating lease right-of-use assets
978
983
Goodwill
403
403
Other intangible assets, net
44
45
Deferred income taxes
147
140
Other assets
279
278
Total assets
$
3,735
$
3,886
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
755
$
755
Accrued expenses and other current
liabilities
854
923
Income taxes payable
5
6
Short-term borrowings and current
maturities of long-term debt
10
9
Total current liabilities
1,624
1,693
Deferred income taxes and other long-term
liabilities
122
123
Pension and postretirement obligations,
net
14
15
Long-term debt, net of current
maturities
115
165
Operating lease liabilities, net of
current portion
791
789
Total liabilities
2,666
2,785
Contingencies
Stockholders’ equity:
Common stock — authorized 80,000,000
shares of $0.01 par value; issued shares — 66,958,689 at March 30,
2024 and 66,700,292 at December 30, 2023; outstanding shares —
36,260,932 at March 30, 2024 and 36,959,377 at December 30,
2023
1
1
Additional paid-in capital
2,758
2,752
Accumulated other comprehensive loss
(117
)
(114
)
Accumulated deficit
(297
)
(312
)
Treasury stock, at cost — 30,697,757
shares at March 30, 2024 and 29,740,915 shares at December 30,
2023
(1,276
)
(1,226
)
Total stockholders’ equity
1,069
1,101
Total liabilities and stockholders’
equity
$
3,735
$
3,886
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
13 Weeks Ended
March 30,
April 1,
2024
2023
Cash flows from operating
activities:
Net income
$
15
$
72
Income (loss) from discontinued
operations, net of tax
—
—
Net income from continuing operations
15
72
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
29
30
Amortization of debt discount and issuance
costs
—
1
Charges for losses on receivables and
inventories
9
5
Asset impairments
6
4
Gain on disposition of assets, net
—
(1
)
Compensation expense for share-based
payments
11
9
Deferred income taxes and deferred tax
asset valuation allowances
(8
)
17
Changes in working capital and other
operating activities
(24
)
20
Net cash provided by operating activities
of continuing operations
38
157
Net cash provided by (used in) operating
activities of discontinued operations
—
—
Net cash provided by operating
activities
38
157
Cash flows from investing
activities:
Capital expenditures
(35
)
(27
)
Businesses acquired, net of cash
acquired
—
(10
)
Proceeds from disposition of assets
1
1
Net cash used in investing activities of
continuing operations
(34
)
(36
)
Net cash provided by investing activities
of discontinued operations
—
5
Net cash used by investing activities
(34
)
(31
)
Cash flows from financing
activities:
Net payments on long and short-term
borrowings
(3
)
(5
)
Debt retirement
(128
)
(60
)
Debt issuance
75
100
Share purchases for taxes, net of proceeds
from employee share-based transactions
(6
)
(19
)
Repurchase of common stock for
treasury
(50
)
(201
)
Other financing activities
(1
)
—
Net cash used in financing activities of
continuing operations
(113
)
(185
)
Net cash provided by (used in) financing
activities of discontinued operations
—
—
Net cash used in financing activities
(113
)
(185
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(1
)
—
Net decrease in cash, cash equivalents and
restricted cash
(110
)
(59
)
Cash, cash equivalents and restricted cash
at beginning of period
395
404
Cash, cash equivalents and restricted cash
at end of period
$
285
$
345
Supplemental information on non-cash
investing and financing activities
Right-of-use assets obtained in exchange
for new operating lease liabilities
$
63
$
70
Right-of-use assets obtained in exchange
for new finance lease liabilities
6
—
Cash interest paid, net of amounts
capitalized and non-recourse debt
3
4
Cash taxes paid, net
1
—
THE ODP CORPORATION
BUSINESS UNIT
PERFORMANCE
(In millions)
(Unaudited)
ODP Business Solutions Division
1Q24
1Q23
Sales (external)
$923
$1,005
Sales (internal)
$3
$4
% change of total sales
(8)%
3%
Division operating income
$30
$39
% of total sales
3%
4%
Office Depot Division
1Q24
1Q23
Sales (external)
$937
$1,094
Sales (internal)
$7
$9
% change of total sales
(14)%
(8)%
Division operating income
$50
$85
% of total sales
5%
8%
Comparable store sales decrease
(10)%
(3)%
Veyer Division
1Q24
1Q23
Sales (external)
$9
$7
Sales (internal)
$1,235
$1,412
% change of total sales
(12)%
(7)%
Division operating income
$9
$15
% of total sales
1%
1%
Varis Division
1Q24
1Q23
Sales (external)
$2
$2
Sales (internal)
$0
$0
% change of total sales
0%
0%
Division operating loss
$(14)
$(17)
% of total sales
(700)%
(850)%
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)
Q1 2024
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
6
0.3
%
$
6
$
—
—
%
Merger and restructuring expenses, net
$
27
1.4
%
$
27
$
—
—
%
Operating income
$
18
1.0
%
$
(33
)
$
51
(4)
2.7
%
Income tax expense
$
2
0.1
%
$
(8
)
$
10
(5)
0.5
%
Net income from continuing operations
$
15
0.8
%
$
(25
)
$
40
(6)
2.1
%
Earnings per share from continuing
operations (fully diluted)
$
0.40
$
(0.65
)
$
1.05
(6)
Depreciation and amortization
$
29
1.5
%
$
—
$
29
1.5
%
Q1 2023
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
4
0.2
%
$
4
$
—
—
%
Merger and restructuring expenses, net
$
—
—
%
$
—
$
—
—
%
Operating income
$
95
4.5
%
$
(4
)
$
99
(4)
4.7
%
Income tax expense
$
22
1.0
%
$
(1
)
$
23
(5)
1.1
%
Net income from continuing operations
$
72
3.4
%
$
(3
)
$
75
(6)
3.6
%
Earnings per share from continuing
operations (fully diluted)
$
1.71
$
(0.07
)
$
1.78
(6)
Depreciation and amortization
$
30
1.4
%
$
—
$
30
1.4
%
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
13 Weeks Ended
March 30,
April 1,
Adjusted EBITDA:
2024
2023
Net income
$
15
$
72
Discontinued operations, net of tax
—
—
Net income from continuing operations
15
72
Income tax expense
2
22
Income from continuing operations before
income taxes
17
94
Add (subtract)
Interest income
(3
)
(2
)
Interest expense
4
5
Depreciation and amortization
29
30
Charges and credits, pretax (7)
33
4
Varis stock options expense
1
—
Adjusted EBITDA
$
82
$
131
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
March 30,
April 1,
Free cash flow
2024
2023
Net cash used in investing activities of
continuing operations
$
38
$
157
Capital expenditures
(35
)
(27
)
Change in restricted cash impacting
working capital
—
(1
)
Free cash flow
3
128
Adjustments for certain cash charges:
Maximize B2B Restructuring Plan
2
3
Previously planned separation of consumer
business and re-alignment
—
2
Project Core
2
—
Adjusted free cash flow
$
7
$
133
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)
Q1
Q1
2023
2024
Office Depot Division:
Stores opened
—
—
Stores closed
21
13
Total retail stores (U.S.)
959
903
Total square footage (in millions)
21.2
20.0
Average square footage per store (in
thousands)
22.1
22.1
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240508078790/en/
Tim Perrott Investor Relations 561-438-4629
Tim.Perrott@theodpcorp.com
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