Operational Excellence and Low-Cost Model
Drives Strong First Quarter Results
First Quarter Revenue of $2.1 Billion with GAAP
EPS of $1.71; Adjusted EPS of $1.78
GAAP Operating Income of $95 Million; Net
Income of $72 Million; Adjusted EBITDA of $131 Million
ODP Business Solutions Doubles Operating
Income
Repurchased $202 Million of Shares in the First
Quarter Supported by Strong Cash Flow and Balance Sheet
Management
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 April 1, 2023.
Consolidated (in millions, except
per share amounts)
1Q23
1Q22
Selected GAAP and Non-GAAP
measures:
Sales
$2,108
$2,178
Sales change from prior year period
(3)%
Operating income
$95
$76
Adjusted operating income (1)
$99
$88
Net income from continuing operations
$72
$55
Diluted earnings per share from continuing
operations
$1.71
$1.09
Adjusted net income from continuing
operations (1)
$75
$64
Adjusted earnings per share from
continuing operations (fully diluted) (1)
$1.78
$1.27
Adjusted EBITDA (1)
$131
$125
Operating Cash Flow from continuing
operations
$157
$30
Free Cash Flow (2)
$128
$9
Adjusted Free Cash Flow (3)
$133
$16
First Quarter 2023
Summary(1)(2)(3)
- Total reported sales of $2.1 billion, down 3% versus the prior
year, primarily due to lower sales in its Office Depot consumer
division, largely driven by 73 fewer retail locations in service
compared to the prior year, as well as lower traffic; partially
offset by stronger sales in its B2B distribution division, ODP
Business Solutions
- GAAP operating income of $95 million and net income from
continuing operations of $72 million, or $1.71 per diluted share,
versus $76 million and $55 million, or $1.09 per diluted share,
respectively in the prior year
- Adjusted operating income of $99 million, compared to $88
million in the first quarter of 2022; adjusted EBITDA of $131
million, compared to $125 million in the first quarter of 2022
- Adjusted net income from continuing operations of $75 million,
or adjusted diluted earnings per share from continuing operations
of $1.78, versus $64 million or $1.27, respectively in the prior
year
- Operating cash flow from continuing operations of $157 million
and adjusted free cash flow of $133 million, versus $30 million and
$16 million, respectively in the prior year
- $1.1 billion of total available liquidity including $343
million in cash and cash equivalents at quarter end
“We are off to a terrific start to the year as our ongoing
commitment to operational excellence and our capital allocation
plan both continue to drive strong earnings per share growth and
shareholder value," said Gerry Smith, chief executive officer of
The ODP Corporation. "Our low-cost business model again positioned
us to deliver strong operating results against an ongoing difficult
macroeconomic backdrop plagued with high inflation and sluggish
consumer activity. We improved most of our operational KPI's in the
quarter, while continuing to execute on our $1 billion share
repurchase authorization, buying back over $200 million of our
shares during the quarter."
"We're making solid progress along the path we set during our
investor day meeting, highlighted by driving organic growth at ODP
Business Solutions, our $4 billion annual revenue B2B distribution
business, and generating strong cash flow results in our consumer
business, Office Depot. Our supply chain services provider, Veyer,
made progress towards its 2023 goal of more than doubling its
EBITDA from third party services, and our recently launched digital
procurement business, Varis, continues to enhance its capabilities
and add customers to its platform," he added.
“Moving ahead, we remain cautiously optimistic as we continue to
navigate the challenging macroeconomic environment and its related
negative impact on consumer activity. We remain in a position of
strength, with a low-cost business model mindset, diverse routes to
market, and a strong balance sheet. As we move through the year and
monitor consumer activity, we will continue to prioritize capital
allocation while prudently managing our four-business unit model,
remaining focused on delivering strong shareholder returns,” Smith
concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the first quarter of 2023 were $2.1
billion, a decrease of 3% compared with the same period last year.
The Company’s ODP Business Solutions Division drove 3% top-line
revenue growth in the first quarter of 2023 as more businesses
returned to the office and as the division continued to execute
upon its growth strategy. This was offset by lower sales at its
Office Depot Division, primarily due to 73 fewer stores in service
compared to last year related to planned store closures, as well as
lower traffic. The Company drove strong sales across the majority
of major product categories in its ODP Business Solutions Division,
highlighted by strong sales of core supplies, furniture, and
technology products. Additionally, Veyer provided strong logistics
support for the ODP Business Solutions and Office Depot Divisions,
and began to capture additional demand for its supply chain and
procurement solutions among other third-party customers.
The Company reported operating income of $95 million in the
first quarter of 2023, up 25% compared to operating income of $76
million in the prior year period. Operating results in the first
quarter of 2023 included $4 million associated with non-cash asset
impairment charges 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 $72
million, or $1.71 per diluted share in the first quarter of 2023,
up from $55 million, or $1.09 per diluted share in the first
quarter of 2022.
Adjusted (non-GAAP) Results(1)
Adjusted results for the first quarter of 2023 exclude charges
and credits totaling $4 million as described above and the
associated tax impacts.
- First quarter of 2023 adjusted EBITDA was $131 million compared
to $125 million in the prior year period. This included
depreciation and amortization of $30 million and $34 million in the
first quarters of 2023 and 2022, respectively
- First quarter of 2023 adjusted operating income was $99 million
compared to $88 million in the first quarter of 2022
- First quarter of 2023 adjusted net income from continuing
operations was $75 million, or $1.78 per diluted share, compared to
$64 million, or $1.27 per diluted share, in the first quarter of
2022, an increase of 40% 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 in excess of $4 billion
- Reported sales were $1.0 billion in the first quarter of 2023,
up 3% compared to the same period last year, as flexible pricing
strategies and return to the office trends helped to drive strong
sales in core and adjacency products
- Drove strong sales across core supply categories, breakroom,
furniture, technology, and copy and print
- Total adjacency category sales, including cleaning and
breakroom, furniture, technology, and copy and print, were 44% of
total ODP Business Solutions’ sales
- Operating income was $39 million in the first quarter of 2023,
up 105% over the same period last year, related to the flow through
impact of higher sales and gross margins. As a percentage of sales,
operating income was 4%, or up approximately 200 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 $1.1 billion in the first quarter of 2023,
down 8% compared to the prior year period partially due to 73 fewer
retail outlets in service associated with planned store closures,
as well as lower demand relative to last year in certain product
categories and lower online sales. The Company closed 21 retail
stores in the quarter and had 959 stores at quarter end. Sales were
down approximately 3% on a comparable store basis
- Store traffic and demand relative to last year was negatively
impacted by the recovery from the pandemic as a greater percentage
of customers returned to the office
- Operating income was $85 million in the first quarter of 2023,
down 11% over the same period last year. As a percentage of sales,
operating income was 8%, flat as compared to the same period last
year. This result was primarily driven by lower sales and impacts
related to inflation
Veyer Division
- Veyer is a supply chain, distribution, procurement and global
sourcing operation, supporting Office Depot and ODP Business
Solutions, as well as other third-party customers. Assets and
capabilities of Veyer include approximately 9 million square feet
of infrastructure; ~100 facilities (distribution centers,
cross-docks, and direct import centers); approximately 600 private
fleet vehicles; and next-day delivery to 98.5% of US
population
- In the first quarter, Veyer provided strong support for its
internal customers, ODP Business Solutions and Office Depot, as
well as for its third-party customers, generating sales of $1.4
billion
- Operating income was $15 million in the first quarter of 2023,
up from $8 million in the prior year period due to higher product
initial gross margins and lower shrink
- In the quarter relative to last year, sales and EBITDA
generated from third party customers were up over 50% and nearly
100%, respectively, resulting in sales of approximately $7 million
and EBITDA of $2 million
Varis Division
- Varis is a 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
- Successfully launched the platform in the fourth quarter of
2022; Ramping first wave of customers and driving transaction
volume to Varis suppliers during the first quarter
- Varis generated revenues in the quarter of $2 million and an
operating loss of $17 million
Share Repurchases
The Company continued to execute under its previously announced
$1 billion share repurchase authorization, available through
year-end 2025. During the first quarter of 2023, the Company
repurchased approximately 4 million shares for $202 million. Since
the inception of the authorization beginning in November 2022, the
Company has repurchased approximately 7.6 million shares for $354
million.
The number of shares to be repurchased 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 current authorization could be
suspended or discontinued at any time as determined by the Board of
Directors.
Balance Sheet and Cash Flow
As of April 1, 2023, ODP had total available liquidity of
approximately $1.1 billion, consisting of $343 million in cash and
cash equivalents and $803 million of available credit under the
Third Amended Credit Agreement. Total debt was $222 million.
For the first quarter of 2023, cash provided by operating
activities of continuing operations was $157 million, which
included $5 million in restructuring and other spend, compared to
cash provided by operating activities of continuing operations of
$30 million in the first quarter of the prior year, which included
$7 million in restructuring and other spend. The year-over-year
change in operating cash flow largely related to stronger operating
results and timing of working capital items.
Capital expenditures in the first quarter of 2023 were $27
million versus $21 million in the prior year period, reflecting
continuing growth investments in the Company’s digital
transformation, distribution network, and eCommerce capabilities.
Operating cash flow from continuing operations was $157 million in
the first quarter of 2023 and Adjusted Free Cash Flow(3) was $133
million in the first quarter of 2023, a significant increase
compared to $16 million in the prior year period.
“We continue to be laser focused on managing our working capital
and driving cash flow,” said Anthony Scaglione, executive vice
president and chief financial officer of The ODP Corporation. “Our
cash generation in the quarter was a result of our overall stronger
operating performance and the timing of certain working capital
items. As we move throughout the balance of the year, we will
remain disciplined as we manage through the seasonal effects on
cash in our business and focused on navigating the continued
challenging macroeconomic environment and its potential impact on
consumer activity.”
2023 Expectations
“We're enthusiastic about the opportunities ahead to pursue
long-term profitable growth by driving our four business unit
model, executing along our three horizons strategy, expanding our
product offerings and remaining focused on prudently deploying
capital to maximize shareholder value,” said Smith. “By executing
our long-term strategy, we’re on a path to unlocking ODP's
potential and creating a compelling value proposition for all of
our stakeholders.”
The Company’s full year guidance for 2023 included in this
release includes non-GAAP measures, such as adjusted EBITDA,
Adjusted Operating Income, Adjusted Earnings per Share and Adjusted
Free Cash Flow. These measures exclude charges or credits not
indicative of core operations, which may include but not be limited
to merger integration expenses, restructuring charges,
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.
The Company’s full year guidance for 2023 remains as
follows:
FY 2023 Guidance
Sales
$8.0 - $8.4 billion
Adjusted EBITDA
$400 - $430 million
Adjusted Operating Income
$270 - $300 million
Adjusted Earnings per Share(*)
$4.50 - $5.10 per share
Adjusted Free Cash Flow(**)
$200 - $230 million
Capital Expenditures
$100 - $120 million
*Adjusted Earnings per Share (EPS)
guidance for 2023 excludes potential discrete (tax) items that may
affect quarter to quarter fluctuations and includes expected impact
from share repurchases
**Adjusted Free Cash Flow is defined as cash flows from operating
activities less capital expenditures excluding cash charges
associated with the Company’s Maximize B2B Restructuring and
expenses incurred in connection with our previously planned
separation of the consumer business and re-alignment
“Our guidance assumes stabilization in overall economic trends
throughout 2023. While we are encouraged by our strong start to the
year, we are prudently reaffirming current guidance as we remain
cautious on the state of the consumer and general macroeconomic
conditions,” said Scaglione.
The ODP Corporation will webcast a call with financial analysts
and investors on May 10, 2023, 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 Maximize B2B Restructuring, and
expenses incurred in connection with our previously planned
separation of the consumer business and re-alignment. 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 world-class 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
Office Depot, LLC; ODP Business Solutions, 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 its strategic shift to maintain all of
its businesses under common ownership; 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
April 1,
March 26,
2023
2022
Sales
$
2,108
$
2,178
Cost of goods sold and occupancy costs
1,627
1,694
Gross profit
481
484
Selling, general and administrative
expenses
382
396
Asset impairments
4
2
Merger, restructuring and other operating
expenses, net
—
10
Operating income
95
76
Other income (expense):
Interest income
2
1
Interest expense
(5
)
(5
)
Other income, net
2
2
Income from continuing operations before
income taxes
94
74
Income tax expense
22
19
Net income from continuing operations
72
55
Discontinued operations, net of tax
—
—
Net income
$
72
$
55
Basic earnings per share
Continuing operations
$
1.79
$
1.14
Discontinued operations
—
—
Net basic earnings per share
$
1.79
$
1.14
Diluted earnings per share
Continuing operations
$
1.71
$
1.09
Discontinued operations
—
—
Net diluted earnings per share
$
1.71
$
1.09
THE ODP CORPORATION
CONSOLIDATED BALANCE
SHEETS
(In millions, except shares
and par value)
April 1,
December 31,
2023
2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
343
$
403
Receivables, net
524
536
Inventories
793
828
Prepaid expenses and other current
assets
43
36
Current assets held for sale
110
107
Total current assets
1,813
1,910
Property and equipment, net
345
352
Operating lease right-of-use assets
885
874
Goodwill
467
464
Other intangible assets, net
44
46
Deferred income taxes
165
182
Other assets
322
321
Total assets
$
4,041
$
4,149
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
903
$
821
Accrued expenses and other current
liabilities
923
1,005
Income taxes payable
7
17
Short-term borrowings and current
maturities of long-term debt
12
16
Total current liabilities
1,845
1,859
Deferred income taxes and other long-term
liabilities
123
122
Pension and postretirement obligations,
net
16
16
Long-term debt, net of current
maturities
210
172
Operating lease liabilities
699
693
Total liabilities
2,893
2,862
Commitments and contingencies
Stockholders’ equity:
Common stock — authorized 80,000,000
shares of $0.01 par value; issued shares — 66,448,993 at April 1,
2023 and 65,636,015 at December 31, 2022; outstanding shares —
38,763,384 at April 1, 2023 and 42,213,046 at December 31, 2022
1
1
Additional paid-in capital
2,732
2,742
Accumulated other comprehensive loss
(75
)
(77
)
Accumulated deficit
(379
)
(451
)
Treasury stock, at cost — 27,685,609
shares at April 1, 2023 and 23,422,969 shares at December 31,
2022
(1,131
)
(928
)
Total stockholders’ equity
1,148
1,287
Total liabilities and stockholders’
equity
$
4,041
$
4,149
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
13 Weeks Ended
April 1,
March 26,
2023
2022
Cash flows from operating
activities:
Net income
$
72
$
55
Loss from discontinued operations, net of
tax
—
—
Net income from continuing operations
72
55
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
30
34
Amortization of debt discount and issuance
costs
1
—
Charges for losses on receivables and
inventories
5
6
Asset impairments
4
2
Gain on disposition of assets, net
(1
)
(3
)
Compensation expense for share-based
payments
9
9
Deferred income taxes and deferred tax
asset valuation allowances
17
10
Changes in working capital and other
operating activities
20
(83
)
Net cash provided by operating activities
of continuing operations
157
30
Net cash provided by operating activities
of discontinued operations
—
—
Net cash provided by operating
activities
157
30
Cash flows from investing
activities:
Capital expenditures
(27
)
(21
)
Businesses acquired, net of cash
acquired
(10
)
—
Proceeds from disposition of assets
1
6
Settlement of company-owned life insurance
policies
—
1
Net cash used in investing activities of
continuing operations
(36
)
(14
)
Net cash provided by investing activities
of discontinued operations
5
67
Net cash provided by (used in) investing
activities
(31
)
53
Cash flows from financing
activities:
Net payments on long and short-term
borrowings
(5
)
(6
)
Debt retirement
(60
)
(43
)
Debt issuance
100
—
Share purchases for taxes, net of proceeds
from employee share-based transactions
(19
)
(14
)
Repurchase of common stock for
treasury
(201
)
—
Other financing activities
—
(1
)
Net cash used in financing activities of
continuing operations
(185
)
(64
)
Net cash provided by (used in) financing
activities of discontinued operations
—
—
Net cash used in financing activities
(185
)
(64
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
—
1
Net decrease in cash, cash equivalents and
restricted cash
(59
)
20
Cash, cash equivalents and restricted cash
at beginning of period
404
537
Cash, cash equivalents and restricted cash
at end of period
$
345
$
557
Supplemental information on non-cash
investing and financing activities
Right-of-use assets obtained in exchange
for new operating lease liabilities
70
35
Promissory note receivable obtained from
disposition of discontinued operations
59
55
Earn-out receivable obtained from
disposition of discontinued operations
9
9
Cash interest paid, net of amounts
capitalized and non-recourse debt
4
—
Other current receivable obtained from
disposition of discontinued operations
—
30
THE ODP CORPORATION
BUSINESS UNIT
PERFORMANCE
(In millions)
(Unaudited)
ODP Business Solutions Division
1Q23
1Q22
Sales (external)
$1,005
$978
Sales (internal)
$4
$6
% change of total sales
3%
Division operating income
$39
$19
% of total sales
4%
2%
Office Depot Division
1Q23
1Q22
Sales (external)
$1,094
$1,194
Sales (internal)
$9
$7
% change of total sales
(8)%
Division operating income
$85
$96
% of total sales
8%
8%
Veyer Division
1Q23
1Q22
Sales (external)
$7
$4
Sales (internal)
$1,412
$1,529
% change of total sales
(7)%
Division operating income
$15
$8
% of total sales
1%
1%
Varis Division
1Q23
1Q22
Sales (external)
$2
$2
Sales (internal)
$0
$0
% change of total sales
0%
Division operating loss
$(17)
$(15)
% of total sales
(850)%
(750)%
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. 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
Restructuring, and the previously planned separation of the
consumer business and re-alignment.
(In millions, except per share amounts)
Q1 2023
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
4
0.2
%
$
4
$
—
—
%
Merger, restructuring and other operating
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
%
Q1 2022
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
2
0.1
%
$
2
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
10
0.5
%
$
10
$
—
—
%
Operating income
$
76
3.5
%
$
(12
)
$
88
(4)
4.0
%
Income tax expense (benefit)
$
19
0.9
%
$
(3
)
$
22
(5)
1.0
%
Net income from continuing operations
$
55
2.5
%
$
(9
)
$
64
(6)
2.9
%
Earnings per share from continuing
operations (fully diluted)
$
1.09
$
(0.18
)
$
1.27
(6)
Depreciation and amortization
$
34
1.6
%
$
—
$
34
1.6
%
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
13 Weeks Ended
April 1,
March 26,
Adjusted EBITDA:
2023
2022
Net income
$
72
$
55
Discontinued operations, net of tax
—
—
Net income from continuing operations
72
55
Income tax expense
22
19
Income from continuing operations before
income taxes
94
74
Add (subtract)
Interest income
(2
)
(1
)
Interest expense
5
5
Depreciation and amortization
30
34
Charges and credits, pretax (7)
4
12
Adjusted EBITDA
$
131
$
125
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, restructuring and other operating
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,
restructuring and other operating 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, restructuring and other operating
expenses, net, asset impairments (if any).
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
13 Weeks Ended
April 1,
March 26,
Free cash flow
2023
2022
Net cash provided by operating activities
of continuing operations
$
157
$
30
Capital expenditures
(27
)
(21
)
Change in restricted cash impacting
working capital
(1
)
—
Free cash flow
128
9
Adjustments for certain cash charges:
Maximize B2B Restructuring Plan
3
2
Previously planned separation of consumer
business and re-alignment
2
5
Adjusted free cash flow
$
133
$
16
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
2022
Office Depot Division:
Stores opened
—
—
Stores closed
21
6
Total retail stores (U.S.)
959
1,032
Total square footage (in millions)
21.2
22.7
Average square footage per store (in
thousands)
22.1
22.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230510005264/en/
Tim Perrott Investor Relations 561-438-4629
Tim.Perrott@theodpcorp.com
Danny Jovic Media Relations 561-438-1594
Danny.Jovic@officedepot.com
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