The ODP (ODP) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Performance Overview Consolidated Financial Results Total sales declined 8% to $1.6 billion due to lower divisional sales, though operating income improved significantly Q2 2025 Consolidated Financial Highlights (GAAP & Non-GAAP) | Consolidated (in millions, except per share amounts) | 2Q25 | 2Q24 | | :--- | :--- | :--- | | Sales | $1,586 | $1,717 | | Sales change from prior year period | (8)% | - | | Operating income (loss) | $9 | $0.4 | | Adjusted operating income | $25 | $33 | | Net income (loss) from continuing operations | $0 | $(4) | | Diluted earnings (loss) per share | $0.00 | $(0.12) | | Adjusted net income from continuing operations | $15 | $20 | | Adjusted earnings per share | $0.51 | $0.56 | | Adjusted EBITDA | $47 | $57 | | Operating Cash Flow from continuing operations | $16 | $(1) | | Adjusted Free Cash Flow | $13 | $5 | - The 8% decrease in reported sales was largely driven by lower sales in the Office Depot Division, resulting from 60 fewer retail locations and reduced consumer traffic, as well as lower sales in the ODP Business Solutions Division[4][6] - GAAP operating income was $9 million, a significant increase from $0.4 million in the prior year, with Q2 2025 results including $16 million in charges related to the "Optimize for Growth" plan[4][5][7] - The company ended the quarter with $658 million of total available liquidity, comprising $177 million in cash and cash equivalents[8] Divisional Performance The ODP Business Solutions and Office Depot divisions saw sales declines, while the Veyer division's third-party logistics revenue grew significantly ODP Business Solutions Division The B2B division's sales decreased by 6% to $859 million, but revenue trends improved sequentially due to new customer acquisitions ODP Business Solutions Q2 Performance | Metric | 2Q25 | 2Q24 | | :--- | :--- | :--- | | Sales (external) | $859M | $915M | | % Change of Total Sales | (6)% | (8)% | | Division Operating Income | $18M | $29M | - Revenue trends improved by about 200 basis points, driven by success in onboarding new customers and growth in hospitality categories[12] - The division made significant progress on growth initiatives, including onboarding approximately one thousand new hotel properties as customers[12] Office Depot Division The consumer division's sales declined 10% to $716 million, primarily due to operating 60 fewer stores, though comparable store sales trends improved Office Depot Division Q2 Performance | Metric | 2Q25 | 2Q24 | | :--- | :--- | :--- | | Sales (external) | $716M | $792M | | % Change of Total Sales | (10)% | (12)% | | Division Operating Income | $12M | $17M | | Change in Comparable Store Sales | (5)% | (7)% | - The sales decline was primarily impacted by 60 fewer retail locations and reduced online sales, with the company closing 23 stores in Q2 to end with 834 retail locations[12] Veyer Division The Veyer supply chain division's sales to third-party customers grew 90% year-over-year, indicating successful expansion of its logistics services Veyer Division Q2 Performance | Metric | 2Q25 | 2Q24 | | :--- | :--- | :--- | | Sales (external) | $19M | $10M | | Sales (internal) | $1,049M | $1,167M | | Division Operating Income | $10M | $5M | - Sales generated from third-party customers increased by 90% to $19 million, and EBITDA from these customers was $5 million, a 32% increase[20] Balance Sheet and Cash Flow The company maintained a solid financial position with $658 million in liquidity, while operating cash flow and adjusted free cash flow improved significantly - As of June 28, 2025, ODP had total available liquidity of $658 million, consisting of $177 million in cash and cash equivalents and $481 million of available credit, with total debt at $245 million[14] Q2 Cash Flow Comparison (in millions) | Metric | 2Q25 | 2Q24 | | :--- | :--- | :--- | | Cash from Operating Activities | $16 | $(1) | | Capital Expenditures | $(12) | $(19) | | Adjusted Free Cash Flow | $13 | $5 | - Stronger cash generation has enabled the company to pay down approximately $35 million in debt year-to-date, strengthening the balance sheet[17] Strategic Initiatives and Outlook Strategic Initiatives ODP is pursuing B2B expansion into the hospitality sector and implementing its "Optimize for Growth" restructuring plan to reduce costs Hospitality Industry Expansion The company is expanding into the hospitality market by onboarding new hotel properties and pursuing partnerships with major hospitality organizations - ODP Business Solutions has a strategic partnership with a major hotel management organization to be a preferred provider for OS&E to its over 15,000 members[18] - During Q2, the company onboarded approximately one thousand new properties under its current agreement and saw solid early demand for its OS&E product offering[19][21] - The company is actively engaged in discussions with several additional major hospitality organizations to become a primary supplier[22][23] "Optimize for Growth" Plan The multi-year restructuring plan incurred $12 million in Q2 expenses and aims to reduce fixed costs and accelerate B2B growth - The plan aims to reduce fixed-cost infrastructure while leveraging core strengths to accelerate growth in B2B market segments like hospitality and healthcare[24] - In Q2 2025, the company recognized $12 million of restructuring expense related to the closure of 23 retail stores, three distribution facilities, and one satellite location[25] - Over its multi-year life, the plan is expected to cost $185 million to $230 million and generate approximately $380 million in EBITDA improvement and over $1.3 billion in total value[25] 2025 Outlook The company expects to generate over $115 million in adjusted free cash flow for 2025, driven by B2B top-line improvements and strong consumer cash generation - The company provided additional guidance for 2025, expecting to generate over $115 million in adjusted free cash flow for the full year[1][28] - Key drivers for the second half of the year include top-line trend improvement at ODP Business Solutions and continued robust results and cash generation from the Office Depot business[28] - The outlook assumes stable macroeconomic conditions and the company believes it is well-positioned to manage potential impacts from the evolving tariff landscape[27] Financial Statements and Reconciliations Consolidated Statements of Operations The unaudited statement of operations shows Q2 2025 sales of $1.586 billion and net income from continuing operations of $0 Consolidated Statements of Operations (Q2 2025 vs Q2 2024, in millions) | Line Item | 13 Weeks Ended June 28, 2025 | 13 Weeks Ended June 29, 2024 | | :--- | :--- | :--- | | Sales | $1,586 | $1,717 | | Gross profit | $310 | $342 | | Operating income (loss) | $9 | $0 | | Net income (loss) from continuing operations | $0 | $(4) | | Net income (loss) | $0 | $(73) | Consolidated Balance Sheets The balance sheet as of June 28, 2025, shows total assets of $3.401 billion and total stockholders' equity of $796 million Consolidated Balance Sheet Highlights (in millions) | Account | June 28, 2025 | December 28, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $177 | $166 | | Inventories | $745 | $770 | | Total assets | $3,401 | $3,529 | | Total current liabilities | $1,524 | $1,543 | | Long-term debt, net | $237 | $270 | | Total liabilities | $2,605 | $2,722 | | Total stockholders' equity | $796 | $807 | Consolidated Statements of Cash Flows For the 26 weeks ended June 28, 2025, net cash from operating activities improved significantly to $73 million from $27 million in the prior year Consolidated Cash Flow Highlights (YTD, in millions) | Cash Flow Activity | 26 Weeks Ended June 28, 2025 | 26 Weeks Ended June 29, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $73 | $27 | | Net cash used in investing activities | $(19) | $(53) | | Net cash used in financing activities | $(45) | $(174) | | Net increase (decrease) in cash | $11 | $(202) | GAAP to Non-GAAP Reconciliations This section details reconciliations for non-GAAP measures, adjusting GAAP operating income of $9 million to an Adjusted Operating Income of $25 million for Q2 2025 Q2 2025 GAAP to Non-GAAP Reconciliation (in millions) | Metric | Reported (GAAP) | Charges & Credits | Adjusted (Non-GAAP) | | :--- | :--- | :--- | :--- | | Operating income | $9 | $(16) | $25 | | Net income from continuing operations | $0 | $(16) | $15 | | Earnings per share | $0.00 | $(0.51) | $0.51 | Q2 2025 Free Cash Flow Reconciliation (in millions) | Metric | Amount | | :--- | :--- | | Net cash from operating activities | $16 | | Capital expenditures | $(12) | | Free cash flow | $4 | | Adjustments for certain cash charges | $9 | | Adjusted free cash flow | $13 | Store Statistics The company closed 23 Office Depot stores in Q2 2025, bringing the total U.S. retail store count to 834 Office Depot Division Store Count | Metric | Q2 2025 | | :--- | :--- | | Stores closed | 23 | | Total retail stores (U.S.) | 834 |