The ODP (ODP) - 2025 Q1 - Quarterly Results

Executive Summary & Financial Highlights This section provides an overview of The ODP Corporation's Q1 2025 financial performance, CEO commentary, and consolidated GAAP and adjusted results First Quarter 2025 Overview The ODP Corporation reported Q1 2025 revenue of $1.7 billion, a 9% decrease year-over-year, with a GAAP operating loss of $32 million and a net loss of $29 million. Adjusted EPS was $1.06, and adjusted free cash flow significantly increased to $45 million. The company also announced key supplier partnerships in the hospitality industry and new B2B customers Consolidated Financial Highlights (1Q25 vs 1Q24) | Consolidated (in millions, except per share amounts) | 1Q25 | 1Q24 | | :------------------------------------------ | :----- | :----- | | Sales | $1,699 | $1,869 | | Sales change from prior year period | (9)% | | | Operating income (loss) | $(32) | $41 | | Adjusted operating income | $54 | $66 | | Net income (loss) from continuing operations | $(29) | $31 | | Diluted earnings (loss) per share from continuing operations | $(0.97) | $0.83 | | Adjusted net income from continuing operations | $32 | $50 | | Adjusted earnings per share from continuing operations | $1.06 | $1.31 | | Adjusted EBITDA | $76 | $91 | | Operating Cash Flow from continuing operations | $57 | $44 | | Free Cash Flow | $36 | $13 | | Adjusted Free Cash Flow | $45 | $17 | - Total reported sales of $1.7 billion, down 9% versus the prior year period, largely related to lower sales in its Office Depot Division (46 fewer retail locations, reduced traffic) and ODP Business Solutions Division[5] - GAAP operating loss of $32 million and net loss from continuing operations of $29 million, or $(0.97) per diluted share, versus GAAP operating income of $41 million and net income of $31 million, or $0.83 per diluted share, in the prior year period[5] CEO Commentary CEO Gerry Smith highlighted positive momentum, sequential EBITDA improvement, and meaningful free cash flow growth. He noted significant new B2B contracts, progress in the hospitality industry, and strong third-party revenue growth for Veyer, expressing confidence in future sustained, profitable growth - Overall performance reflects positive momentum and improving trends, with EBITDA improving sequentially and free cash flow increasing meaningfully over last year[6] - Secured some of the most meaningful new B2B business contracts in company history, including an agreement with CoreTrust, with accelerating customer onboarding[6] - Making significant underlying progress on efforts to serve the hospitality industry, including forging key supplier relationships and engaging with potential new customers, expecting more meaningful results beginning in the second half of this year[6] - Veyer continued to deliver exceptional results, achieving over 85% revenue growth from third-party customers and adding significant new accounts[6] Consolidated GAAP Results Q1 2025 total reported sales decreased 9% to $1.7 billion, driven by lower sales in both consumer (Office Depot) and B2B divisions. The company reported a GAAP operating loss of $32 million and a net loss of $29 million, primarily due to $86 million in charges, including $48 million for restructuring and $28 million in asset impairments - Total reported sales for the first quarter of 2025 were $1.7 billion, a decrease of 9% compared with the same period last year, driven primarily by lower sales in both its consumer (Office Depot, 46 fewer stores, lower traffic) and business-to-business ("B2B") divisions[7] - The Company reported GAAP operating loss of $32 million in Q1 2025 (down from $41 million income in prior year), including $86 million of charges ($48 million in restructuring expenses for "Optimize for Growth" plan, $28 million in non-cash asset impairments of operating lease ROU assets)[8] - Net loss from continuing operations was $29 million, or $(0.97) per diluted share in Q1 2025, down compared to net income of $31 million, or $0.83 per diluted share in Q1 2024[8] Consolidated Adjusted (Non-GAAP) Results Adjusted operating income was $54 million, down from $66 million YoY, and adjusted EBITDA was $76 million, down from $91 million. Adjusted net income from continuing operations was $32 million ($1.06 per diluted share), compared to $50 million ($1.31 per diluted share) in the prior year. Operating cash flow increased to $57 million, and adjusted free cash flow rose significantly to $45 million, with total available liquidity of $653 million Selected Adjusted (Non-GAAP) Financial Measures (1Q25 vs 1Q24) | Metric | 1Q25 | 1Q24 | | :------------------------------------------ | :----- | :----- | | Adjusted operating income | $54 million | $66 million | | Adjusted EBITDA | $76 million | $91 million | | Adjusted net income from continuing operations | $32 million | $50 million | | Adjusted diluted earnings per share from continuing operations | $1.06 | $1.31 | - Operating cash flow from continuing operations of $57 million and adjusted free cash flow of $45 million, versus $44 million and $17 million, respectively, in the prior year period[9] - $653 million of total available liquidity including $185 million in cash and cash equivalents at quarter end[9] - Adjusted results for Q1 2025 exclude charges and credits totaling $86 million and associated tax impacts[11] Division Performance This section details the first quarter 2025 performance of ODP Business Solutions, Office Depot, and Veyer divisions, highlighting sales, operating income, and key operational drivers ODP Business Solutions Division The ODP Business Solutions Division reported sales of $852 million, an 8% decrease YoY, primarily due to macroeconomic conditions, lower demand, fewer customers, and severe weather. Adjacency categories constituted 44% of sales. The division secured new business, including CoreTrust, and made significant progress in establishing a presence in the hospitality industry through key supplier partnerships ODP Business Solutions Division Performance (1Q25 vs 1Q24) | Metric | 1Q25 | 1Q24 | | :------------------------ | :----- | :----- | | Sales (external) | $850 | $923 | | % change of total sales | (8)% | (8)% | | Division operating income | $21 | $31 | | % of total sales | 2% | 3% | - Sales were $852 million in Q1 2025, down 8% YoY, related primarily to weaker macroeconomic conditions, lower demand, fewer customers, and severe weather impacts (estimated 80 basis points of decline)[14] - Total adjacency category sales (cleaning, breakroom, furniture, technology, copy/print) were 44% of total ODP Business Solutions' sales[14] - Executed initiatives to convert a strong pipeline of new business, including initiating service for one of the largest contracts in Company history and winning key new business like the agreement with CoreTrust (a 3,500+ business member purchasing collective)[14] Office Depot Division The Office Depot Division reported sales of $838 million, an 11% decrease YoY, primarily due to 46 fewer retail locations and lower retail/online consumer traffic. However, targeted sales strategies led to an improvement over recent quarterly trends, with comparable store sales down 5% (an improvement from 10% in the prior year). Operating income was $45 million Office Depot Division Performance (1Q25 vs 1Q24) | Metric | 1Q25 | 1Q24 | | :--------------------------------- | :----- | :----- | | Sales (external) | $832 | $937 | | % change of total sales | (11)% | (14)% | | Division operating income | $45 | $50 | | % of total sales | 5% | 5% | | Change in comparable store sales | (5)% | (10)% | - Reported sales were $838 million in Q1 2025, down 11% compared to the prior year, reflecting an improvement over recent prior quarterly trends as targeted profitable sales strategies gained traction[13] - The Company closed 12 retail stores in the quarter and had 857 stores at quarter end, with sales down 5% on a comparable store basis, representing a meaningful improvement over the 10% decrease in the prior year period[13] - Operating income was $45 million in Q1 2025, compared to $50 million during the same period last year, driven primarily by the flow through impact from lower sales[21] Veyer Division Veyer, the supply chain division, generated $1.2 billion in reported sales, primarily supporting internal customers. Sales from third-party customers increased by 89% YoY to $17 million, with third-party EBITDA remaining flat at $3 million. The division continued to add new third-party accounts and executed warehousing and fulfillment services for a major e-commerce company Veyer Division Performance (