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The ODP (ODP) - 2024 Q4 - Earnings Call Transcript
ODPThe ODP (ODP)2025-02-26 18:09
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Financial Data and Key Metrics Changes - Total revenue for Q4 2024 was 1.6billion,downapproximately101.6 billion, down approximately 10% compared to the same quarter last year, primarily due to lower sales in the retail business and reduced consumer traffic [44][50] - GAAP operating income for Q4 was 20 million, down from 52millionintheprioryear,withadjustedoperatingincomeat52 million in the prior year, with adjusted operating income at 32 million compared to 57million[45][50]−AdjustednetincomefromcontinuingoperationsforQ4was57 million [45][50] - Adjusted net income from continuing operations for Q4 was 20 million or 0.66perdilutedshare,downfrom0.66 per diluted share, down from 43 million or 1.13perdilutedshareintheprioryear[47][50]−Full−year2024totalcompanysaleswere1.13 per diluted share in the prior year [47][50] - Full-year 2024 total company sales were 7 billion, down from 7.8billionin2023,withadjustednetincomefromcontinuingoperationsat7.8 billion in 2023, with adjusted net income from continuing operations at 114 million or 3.30pershare,comparedto3.30 per share, compared to 263 million or 6.61pershareintheprioryear[49][51]BusinessLineDataandKeyMetricsChanges−ODPBusinessSolutionsrevenueforQ4was6.61 per share in the prior year [49][51] Business Line Data and Key Metrics Changes - ODP Business Solutions revenue for Q4 was 827 million, down 9% year-over-year, influenced by a weak macroeconomic environment and reduced enterprise spending [54] - Office Depot's revenue for Q4 was 784million,a13784 million, a 13% decline driven by fewer retail stores and lower consumer demand [58] - Veyor's third-party revenue increased by 150% year-over-year, reaching 20 million, while consolidated sales were 1.1billion[63]MarketDataandKeyMetricsChanges−Thehospitalityindustryrepresentsa1.1 billion [63] Market Data and Key Metrics Changes - The hospitality industry represents a 16 billion market, with ODP securing a key supplier agreement, marking a significant entry into this growing sector [16][28] - The overall addressable market opportunity, including healthcare and other sectors, is estimated to exceed 60billion[32]CompanyStrategyandDevelopmentDirection−ThecompanyisfocusingonaB2Bpivot,expandingbeyondtraditionalofficesuppliesintohighergrowthsegments,includinghospitalityandhealthcare[12][34]−An"optimizedforgrowth"restructuringplanhasbeenlaunchedtoacceleraterevenuegrowthinB2Bwhilereducingrelianceonretailoperations[34][36]−Thecompanyaimstoleverageitssupplychainanddistributioncapabilitiestocapturenewbusinessopportunitiesandenhancecustomerservice[13][29]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgedthechallengesfacedin2024duetomacroeconomicfactorsandcompetitivepressuresbutexpressedoptimismaboutfuturegrowthopportunities[10][38]−ThecompanyexpectstoseebenefitsfromitsB2Binitiativesandthehospitalitysector,withafocusonlong−termsustainablegrowth[41][78]OtherImportantInformation−Thecompanyendedthequarterwithtotalliquidityof60 billion [32] Company Strategy and Development Direction - The company is focusing on a B2B pivot, expanding beyond traditional office supplies into higher growth segments, including hospitality and healthcare [12][34] - An "optimized for growth" restructuring plan has been launched to accelerate revenue growth in B2B while reducing reliance on retail operations [34][36] - The company aims to leverage its supply chain and distribution capabilities to capture new business opportunities and enhance customer service [13][29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in 2024 due to macroeconomic factors and competitive pressures but expressed optimism about future growth opportunities [10][38] - The company expects to see benefits from its B2B initiatives and the hospitality sector, with a focus on long-term sustainable growth [41][78] Other Important Information - The company ended the quarter with total liquidity of 644 million and total debt of 279million,maintainingasolidbalancesheet[66]−CapitalexpendituresinQ4were279 million, maintaining a solid balance sheet [66] - Capital expenditures in Q4 were 25 million, flat with the prior year, primarily focused on growth investments [48] Q&A Session Summary Question: Can you discuss the genesis of the hospital deal? - The deal originated from an existing relationship, with the customer recognizing the need for a reliable supply chain, leading to ODP being selected as a preferred partner [81][82] Question: How should we think about the revenue ramp from this deal? - The revenue ramp will be a combination of exclusive products and a "hunting license" approach, with joint sales efforts expected to enhance growth [90] Question: What is the timeframe for the optimize for growth plan? - The plan is a multiyear initiative, expected to take three to four years to realize the projected EBITDA uplift [94] Question: Have you considered strategic alternatives for the retail business? - The company is always exploring ways to maximize shareholder value, including potential strategic alternatives for the retail segment [97] Question: What are your assumptions for growth in the B2B office suppliers market? - The B2B segment is expected to hold steady, with ongoing challenges in the office supply sector making market share difficult to gauge [106] Question: How much exposure does ODP have to the federal government? - ODP does not have significant exposure to federal business at this moment [112]