Q120 Fourth Quarter & Full Year 2024 Financial Results v Safe Harbor Statement The Private Securities Litigation Reform Act of 1995, as amended, (the "Act"), provides protection from liability in private lawsuits for "forward-looking" statements made by public companies under certain circumstances, provided that the public company discloses with specificity the risk factors that may impact its future results. The Company wants to take advantage of the "safe harbor" provisions of the Act. Certain statements ...

Core Viewpoint - ODP Corp. reported quarterly earnings of $0.66 per share, missing the Zacks Consensus Estimate of $0.80 per share, and showing a decline from $0.92 per share a year ago, indicating a significant earnings surprise of -17.50% [1][2] Financial Performance - The company posted revenues of $1.62 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.92%, but down from $1.81 billion year-over-year [2] - Over the last four quarters, ODP Corp. has not surpassed consensus EPS estimates and has topped consensus revenue estimates only once [2] Stock Performance - ODP Corp. shares have declined approximately 15.6% since the beginning of the year, contrasting with the S&P 500's gain of 1.3% [3] - The current Zacks Rank for ODP Corp. is 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.27 on revenues of $1.67 billion, and for the current fiscal year, it is $4.36 on revenues of $6.75 billion [7] - The trend of earnings estimate revisions is mixed, which could change following the recent earnings report [6] Industry Context - The Retail - Miscellaneous industry, to which ODP Corp. belongs, is currently in the top 12% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Performance - Total reported sales for Q4 2024 were $1.6 billion, a decrease of 10% compared to Q4 2023, primarily due to lower sales in the Office Depot Division and ODP Business Solutions Division[4] - GAAP operating income for Q4 2024 was $20 million, down from $52 million in the prior year, with net income from continuing operations of $11 million, or $0.36 per diluted share, compared to $39 million, or $1.02 per diluted share, in Q4 2023[10] - Adjusted operating income for Q4 2024 was $32 million, down from $57 million in Q4 2023, with adjusted EBITDA of $58 million compared to $83 million in the prior year[4] - Total reported sales for FY 2024 were $7.0 billion, down from $7.8 billion in FY 2023, with GAAP operating income of $163 million compared to $330 million in the prior year[19] - Adjusted net income from continuing operations for FY 2024 was $114 million, or adjusted diluted earnings per share of $3.30, down from $263 million, or $6.61 per diluted share, in FY 2023[19] - ODP Corporation reported Q4 2024 sales of $1.624 billion, a decrease of 9.9% from $1.803 billion in Q4 2023[34] - Gross profit for Q4 2024 was $331 million, down 16% from $394 million in Q4 2023, resulting in a gross margin of 20.4%[34] - ODP's net income from continuing operations for Q4 2024 was $11 million, compared to $39 million in Q4 2023, reflecting a decline of 71.8%[34] - The company reported a net loss of $3 million for the full year 2024, compared to a net income of $139 million in 2023[34] - Basic earnings per share from continuing operations for Q4 2024 was $0.36, down from $1.06 in Q4 2023[34] - Net income from continuing operations fell from $247 million in 2023 to $106 million in 2024, a decrease of 57.1%[38] - The company reported a total operating income of $20 million in Q4 2024, down from $52 million in Q4 2023, representing a decline of 61.5%[45] - Earnings per share from continuing operations (fully diluted) decreased to $3.08 in Q4 2024 from $6.22 in Q4 2023[46] - The adjusted EBITDA for the 52 weeks ended December 28, 2024, was $268 million, down from $459 million in the previous year[50] - Free cash flow for Q4 2024 was $9 million, a decrease from $46 million in Q4 2023, while adjusted free cash flow was negative at $(57) million[50] Cash Flow and Liquidity - Operating cash flow from continuing operations for FY 2024 was $159 million, down from $360 million in FY 2023, with adjusted free cash flow of $33 million compared to $288 million in the prior year[19] - The company has total available liquidity of approximately $644 million, consisting of $166 million in cash and cash equivalents and $478 million of available credit[19] - Cash and cash equivalents at the end of the period dropped from $395 million in 2023 to $171 million in 2024, a decrease of 56.7%[38] - Free cash flow for the year was significantly impacted, with net cash provided by operating activities decreasing from $331 million in 2023 to $130 million in 2024[38] Restructuring and Strategic Initiatives - The company expects to incur costs between $185 million and $230 million related to its "Optimize for Growth" restructuring plan, which is anticipated to generate approximately $380 million in EBITDA improvement[25] - The restructuring plan aims to reduce retail exposure and associated liabilities while targeting high-growth opportunities in the B2B marketplace[23] - Total value generated from the restructuring plan is projected to exceed $1.3 billion over its multi-year life[25] - ODP plans to prioritize capital allocation toward core business growth opportunities in the B2B market over share repurchases in 2025[18] - The company plans to suspend growth investments in its consumer and retail business while focusing on B2B sector growth[24] Shareholder Actions - The company repurchased 1.4 million shares at a cost of $43 million in Q4 2024, and a total of 8 million shares for $300 million in FY 2024[17] Divisional Performance - Sales for the ODP Business Solutions Division decreased by 8% year-over-year, from $3,904 million in FY23 to $3,578 million in FY24[40] - The Office Depot Division reported a 14% decline in external sales, from $3,884 million in FY23 to $3,358 million in FY24[40] Asset and Liability Management - Total assets decreased from $3,887 million in 2023 to $3,529 million in 2024, a decline of 9.2%[36] - The total current liabilities decreased from $1,697 million in 2023 to $1,543 million in 2024, a reduction of 9.1%[36] - The company’s long-term debt increased from $165 million in 2023 to $270 million in 2024, an increase of 63.6%[36] - The total stockholders' equity decreased from $1,101 million in 2023 to $807 million in 2024, a decline of 26.6%[36] Store Operations - The company closed 22 stores in Q4 2023 and 16 stores in Q4 2024, resulting in a total of 869 retail stores in the U.S. by the end of 2024[53] - Total square footage of retail stores decreased to 19.2 million square feet in 2024 from 20.3 million square feet in 2023[53] Other Financial Metrics - The company incurred $33 million in asset impairments in Q4 2024, compared to $17 million in Q4 2023[46] - Merger and restructuring expenses were $47 million in Q4 2024, up from $4 million in Q4 2023[46] - The income tax expense for Q4 2024 was $40 million, consistent with the 0.6% margin reported in Q4 2023[46] - The company reported a legal matter monetization charge of $(70) million in Q4 2024, which impacted overall financial performance[46]

Group 1 - ODP Corp. closed at $18.11, showing a +0.22% change, outperforming the S&P 500's daily loss of 1.71% [1] - The stock has lost 19.69% over the past month, while the Retail-Wholesale sector gained 4% and the S&P 500 gained 2.2% [1] Group 2 - ODP Corp. is set to release its earnings report on February 26, 2025, with an expected EPS of $0.80, reflecting a 13.04% decrease from the same quarter last year [2] - Revenue is forecasted at $1.59 billion, down 11.77% from the prior-year quarter [2] Group 3 - Recent changes in analyst estimates indicate a favorable outlook on ODP Corp.'s business health and profitability [3] - The Zacks Rank system, which incorporates estimate changes, has a proven track record of stock performance [4][5] Group 4 - ODP Corp. has a Zacks Rank of 3 (Hold) and a Forward P/E ratio of 4.15, indicating a discount compared to the industry's average Forward P/E of 15.58 [5] - The company has a PEG ratio of 0.3, significantly lower than the Retail - Miscellaneous industry's average PEG ratio of 2.17 [6] Group 5 - The Retail - Miscellaneous industry, part of the Retail-Wholesale sector, ranks in the top 12% of all industries according to the Zacks Industry Rank [6] - The top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

Group 1 - ODP Corp. closed at $20.12, reflecting a -1.32% change from the previous day, underperforming the S&P 500's gain of 0.03% [1] - Over the last month, ODP Corp.'s shares decreased by 13.93%, contrasting with the Retail-Wholesale sector's gain of 9.07% and the S&P 500's gain of 4.19% [1] Group 2 - The upcoming EPS for ODP Corp. is projected at $0.80, indicating a 13.04% decline compared to the same quarter last year [2] - Revenue is estimated to be $1.59 billion, reflecting an 11.77% decrease compared to the same quarter last year [2] Group 3 - Recent changes to analyst estimates for ODP Corp. suggest a favorable outlook on the company's business health and profitability [3] - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), currently ranks ODP Corp. at 3 (Hold) [5] Group 4 - ODP Corp. is trading at a Forward P/E ratio of 4.68, significantly lower than the industry average of 15.96, indicating a potential discount [6] - The company has a PEG ratio of 0.33, compared to the Retail - Miscellaneous industry's average PEG ratio of 1.57 [7] Group 5 - The Retail - Miscellaneous industry, which includes ODP Corp., has a Zacks Industry Rank of 30, placing it in the top 12% of over 250 industries [7][8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

The latest trading session saw ODP Corp. (ODP) ending at $23.39, denoting a -0.64% adjustment from its last day's close. This move lagged the S&P 500's daily gain of 0.53%. Meanwhile, the Dow experienced a rise of 0.38%, and the technology-dominated Nasdaq saw an increase of 0.25%.Prior to today's trading, shares of the office supply retailer had gained 3.52% over the past month. This has lagged the Retail-Wholesale sector's gain of 5.57% and outpaced the S&P 500's gain of 1.24% in that time.Analysts and in ...

Group 1 - ODP Corp. ended the latest trading session at $22.50, reflecting a -1.62% change from the previous close, underperforming the S&P 500's 0.53% gain [1] - Over the past month, ODP Corp. shares have decreased by 4.95%, contrasting with the Retail-Wholesale sector's gain of 2.71% and the S&P 500's gain of 2.69% [1] Group 2 - ODP Corp. is expected to report an EPS of $0.80, indicating a 13.04% decline from the same quarter last year, with a forecasted quarterly revenue of $1.59 billion, down 11.77% year-over-year [2] - Recent modifications to analyst estimates for ODP Corp. reflect changing short-term business dynamics, with positive revisions suggesting a favorable outlook on the company's health and profitability [3] Group 3 - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), indicates ODP Corp. is currently rated 3 (Hold), with the Zacks Consensus EPS estimate remaining unchanged over the past month [5] - ODP Corp. has a Forward P/E ratio of 5.25, which is below the industry average Forward P/E of 12.43, suggesting a valuation discount [5] Group 4 - ODP Corp. has a PEG ratio of 0.38, compared to the Retail - Miscellaneous industry's average PEG ratio of 1.39, indicating a lower valuation relative to expected earnings growth [6] - The Retail - Miscellaneous industry, part of the Retail-Wholesale sector, holds a Zacks Industry Rank of 37, placing it in the top 15% of over 250 industries [6]

Company Performance - ODP Corp. closed at $22.35, unchanged from the previous session, underperforming the S&P 500 which gained 0.16% [1] - Over the past month, ODP shares have declined by 21%, significantly worse than the Retail-Wholesale sector's loss of 4.61% and the S&P 500's loss of 2.7% [1] Financial Expectations - Analysts expect ODP Corp. to report earnings of $0.80 per share, reflecting a year-over-year decline of 13.04% [2] - Revenue is anticipated to be $1.59 billion, indicating an 11.77% drop compared to the same quarter last year [2] Analyst Projections - Recent shifts in analyst projections for ODP Corp. should be monitored as they reflect short-term business trends [3] - Positive estimate revisions are seen as a sign of optimism regarding the company's business outlook [3] Valuation Metrics - ODP Corp. has a Forward P/E ratio of 5.13, which is below the industry average of 11.65, indicating it is trading at a discount [6] - The company has a PEG ratio of 0.37, compared to the industry average of 1.18, suggesting favorable valuation relative to expected earnings growth [6] Industry Context - The Retail - Miscellaneous industry, part of the Retail-Wholesale sector, has a Zacks Industry Rank of 142, placing it in the bottom 44% of over 250 industries [7] - The Zacks Industry Rank indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

Group 1 - ODP Corp. closed at $22.12, with a daily increase of +0.55%, underperforming the S&P 500 which gained 1.26% [1] - Over the past month, ODP Corp. shares have decreased by 15.42%, significantly trailing the Retail-Wholesale sector's loss of 1.93% and the S&P 500's loss of 2.82% [1] Group 2 - ODP Corp. is expected to report an EPS of $0.80, reflecting a decline of 13.04% from the same quarter last year, with projected revenue of $1.59 billion, down 11.77% year-over-year [2] - Recent analyst estimates for ODP Corp. have remained stagnant, indicating a Zacks Rank of 5 (Strong Sell) [5] Group 3 - ODP Corp. has a Forward P/E ratio of 5.05, which is below the industry average of 12.03, suggesting a valuation discount [5] - The company has a PEG ratio of 0.36, compared to the industry average of 1.85, indicating lower expected earnings growth relative to its peers [6] Group 4 - The Retail - Miscellaneous industry, which includes ODP Corp., has a Zacks Industry Rank of 204, placing it in the bottom 19% of over 250 industries [6] - The Zacks Rank system indicates that the top 50% of rated industries outperform the bottom half by a factor of 2 to 1 [7]

Financial Data and Key Metrics Changes - The company generated total revenue of $1.8 billion in Q3 2024, down about 11% compared to the same quarter last year, primarily due to lower sales in Office Depot and ODP Business Solutions [20][21] - GAAP operating income was $102 million, compared to $108 million in the prior year, with adjusted operating income dropping to $41 million from $112 million [21][22] - Adjusted EBITDA was $62 million, down from $138 million in the previous year [22] - Adjusted net income from continuing operations was $24 million or $0.71 per diluted share, compared to $85 million or $2.17 per diluted share in the prior year [22] Business Line Data and Key Metrics Changes - ODP Business Solutions revenue was $916 million, down about 8% year-over-year, impacted by macroeconomic conditions and corporate layoffs [24][25] - Office Depot's revenue stood at $861 million, a 15% decline, driven by fewer stores and lower traffic during a competitive back-to-school season [27][28] - Veyer reported third-party revenue of over $14 million, a 30% increase year-over-year, while managing lower volumes from internal customers [30] Market Data and Key Metrics Changes - The overall retail industry saw a 5% decline in back-to-school demand compared to last year, affecting both B2C and B2B channels [8][9] - The company faced significant disruptions due to hurricanes, impacting customer activity and operations in major service areas [7][8] Company Strategy and Development Direction - The company is focusing on a strategic pivot to B2B, leveraging its supply chain and customer base to capture growth in adjacent high-value industry sectors, including hospitality [11][12] - A significant new B2B contract worth up to $1.5 billion over ten years was announced, marking a pivotal moment for the company [12][15] - The company is streamlining operations by selling its Varis Division, which simplifies its structure and reduces future capital commitments [15][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that Q3 performance was below expectations due to challenging macroeconomic conditions and competitive pressures [6][19] - There is optimism about stabilizing trends and new business wins, with a focus on capturing growth opportunities in the B2B space [19][39] - The company is amending its 2024 guidance, maintaining revenue expectations at approximately $7 billion but lowering adjusted EBITDA and operating income outlooks [35][36] Other Important Information - The company has a strong liquidity position with total liquidity of $728 million, consisting of cash and available credit [32] - Capital allocation strategy is shifting towards investing in core B2B resources, with a substantial reduction in share repurchases expected [17][33] Q&A Session Summary Question: Market share trends in Business Solutions and retail - Management believes they are holding their own in market share, citing a significant new B2B contract as evidence of stability despite challenges from hurricanes [42][43] Question: Why should the market not extrapolate recent performance into next year? - Management emphasized the trajectory change due to new contracts and ongoing stabilization in the market, which should not be overlooked [46][47] Question: Insights on new industry segments targeted - Management highlighted leveraging core strengths to penetrate growing markets like hospitality, with existing customer relationships aiding in this transition [52][53] Question: Impact of hurricanes on performance - Management noted the hurricanes had a substantial impact, but quantifying the exact effect is challenging due to the complexity of disruptions [61][62] Question: Free cash flow guidance visibility - Management indicated positive cash generation is expected in Q4, but uncertainty remains due to working capital shifts and investments [68][69]