The ODP Corporation Announces First Quarter 2023 Results
Operational Excellence and Low-Cost Model Drives Strong First Quarter Results
First Quarter Revenue of
GAAP Operating Income of
ODP Business Solutions Doubles Operating Income
Repurchased
Consolidated (in millions, except per share amounts) |
1Q23 |
1Q22 |
Selected GAAP and Non-GAAP measures: |
|
|
Sales |
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Sales change from prior year period |
(3)% |
|
Operating income |
|
|
Adjusted operating income (1) |
|
|
Net income from continuing operations |
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|
Diluted earnings per share from continuing operations |
|
|
Adjusted net income from continuing operations (1) |
|
|
Adjusted earnings per share from continuing operations
|
|
|
Adjusted EBITDA (1) |
|
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Operating Cash Flow from continuing operations |
|
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Free Cash Flow (2) |
|
|
Adjusted Free Cash Flow (3) |
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First Quarter 2023 Summary(1)(2)(3)
-
Total reported sales of
$2.1 billion 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 $72 million $1.71 $76 million $55 million $1.09 -
Adjusted operating income of
$99 million $88 million $131 million $125 million -
Adjusted net income from continuing operations of
$75 million $1.78 $64 million $1.27 -
Operating cash flow from continuing operations of
$157 million $133 million $30 million $16 million -
$1.1 billion $343 million
“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
"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
“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
The Company reported operating income of
Adjusted (non-GAAP) Results(1)
Adjusted results for the first quarter of 2023 exclude charges and credits totaling
-
First quarter of 2023 adjusted EBITDA was
$131 million $125 million $30 million $34 million -
First quarter of 2023 adjusted operating income was
$99 million $88 million -
First quarter of 2023 adjusted net income from continuing operations was
$75 million $1.78 $64 million $1.27 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 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 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 was4% , 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 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 approximately3% 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 11% over the same period last year. As a percentage of sales, operating income was8% , 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 $8 million -
In the quarter relative to last year, sales and EBITDA generated from third party customers were up over
50% and nearly100% , respectively, resulting in sales of approximately$7 million $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 $17 million
Share Repurchases
The Company continued to execute under its previously announced
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
For the first quarter of 2023, cash provided by operating activities of continuing operations was
Capital expenditures in the first quarter of 2023 were
“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 |
|
Adjusted EBITDA |
|
Adjusted Operating Income |
|
Adjusted Earnings per Share(*) |
|
Adjusted Free Cash Flow(**) |
|
Capital Expenditures |
|
*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
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
THE ODP CORPORATION |
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CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||
(In millions, except per share amounts) |
||||||||
(Unaudited) |
||||||||
|
|
13 Weeks Ended |
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|||||
|
|
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 |
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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 |
|
|
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 |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(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) |
|
|
Sales (internal) |
|
|
% change of total sales |
|
|
Division operating income |
|
|
% of total sales |
|
|
Office Depot Division |
1Q23 |
1Q22 |
Sales (external) |
|
|
Sales (internal) |
|
|
% change of total sales |
(8)% |
|
Division operating income |
|
|
% of total sales |
|
|
Veyer Division |
1Q23 |
1Q22 |
Sales (external) |
|
|
Sales (internal) |
|
|
% change of total sales |
(7)% |
|
Division operating income |
|
|
% of total sales |
|
|
Varis Division |
1Q23 |
1Q22 |
Sales (external) |
|
|
Sales (internal) |
|
|
% change of total sales |
|
|
Division operating loss |
|
|
% 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
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
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
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
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
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 ( |
|
|
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
Source: The ODP Corporation
