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MarketScreener Homepage  >  Equities  >  Nasdaq  >  The ODP Corporation    ODP

THE ODP CORPORATION

(ODP)
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Office Depot : The ODP Corporation Third Quarter 2020 Results Reference Slides

11/05/2020 | 01:42pm EST

Third Quarter

Q1202020 Financial Results

Office Depot® is a trademark of The Office Club, Inc. OfficeMax® is avtrademark of OMX, Inc. ©2020 Office Depot, LLC. All rights reserved.

Safe Harbor Statement

2

The Private Securities Litigation Reform Act of 1995, as amended, (the "Act") provides protection from liability in private lawsuits for "forward-looking" statements made by public companies under certain circumstances, provided that the public company discloses with specificity the risk factors that may impact its future results. The Company wants to take advantage of the "safe harbor" provisions of the Act. Certain statements made during this presentation are forward-looking statements under the Act. Except for historical financial and business performance information, statements made during this presentation should be considered forward-looking as referred to in the Act. Much of the information that looks towards future performance of the Company is based on various factors and important assumptions about future events that may or may not actually come true, including the impacts on our business due to the unknown severity and duration of the COVID-19 outbreak. As a result, operations and financial results in the future could differ materially and substantially from those discussed in the forward-looking statements made during this presentation. Certain risks and uncertainties are detailed from time to time in the Company's filings with the United States Securities and Exchange Commission ("SEC").

You are strongly urged to review all such filings for a more detailed discussion of such risks and uncertainties. The Company's SEC filings are available at no charge at www.sec.gov and at the Company's website at investor.theodpcorp.com.

During portions of today's presentation, the Company may refer to results which are non-GAAP financial measures. A reconciliation of GAAP to non- GAAP financial measures is available on the Company's website at investor.theodpcorp.com. These measures exclude charges or credits not indicative of core operations and the tax effects of these items, which may include but not be limited to merger integration, restructuring, acquisition costs, asset impairments and executive transition costs. The exact amount of these charges or credits are not currently determinable but may be significant. Accordingly, the Company is unable to provide GAAP measures or equivalent reconciliations from GAAP to non-GAAP for these financial measures.

Gerry Smith

Chief Executive Officer

Third Quarter 2020 Highlights

4

Maintained Safety Measures for Associates & Customers

Balanced Ecosystem and Low-Cost Model Drove Stronger Performance

  • Balanced ecosystem and channel diversity meeting needs of customers in all environments
  • Value proposition resonating with customers in work/learn-from-home environment
  • Broader offering of products and services addressing customer needs
  • Low-costbusiness model driving efficiencies

Delivered Improved Operating Performance

  • Improved sequential revenue performance - up 18% sequentially
  • Operating performance near prior year pre-COVID levels
  • Strong adjusted Free Cash Flow - $312 million
  • Maintained strong balance sheet; $1.7B in total available liquidity

Significant Progress on B2B Pivot

  • "Maximize B2B" long term restructuring plan
    • Reduces retail lease liabilities; improves cost structure; generates cash; provides flexibility
  • Building upon B2B ecosystem and supply chain capabilities

Confident in our future - Reinstating share buy-back plan

Positioned to Address Evolving Needs of Customers 5

Evolving Customer Needs

o

Working from home

o

Essential wellness needs

o

Learning from home

o Reliability and "need it now"

o

Staying connected

o

Costs management

  1. Home office products, services and support

Global Sourcing

& Supply Chain

Expansive & Unique

Distribution Network

Multiple

Routes to Market

Enterprise Contract;

eCommerce; Retail

ECOSYSTEM

Broad

Products & Services

Expanding Portfolio of

Products & Services; Tech & Support

Go-to-Market

Engine

~1300 Sales Professionals;

Over 6000 Tech & Field Support

Ecosystem & Low-Cost Model Improving Trends

6

Ecosystem and diverse routes-to-market served businesses and consumers' evolving needs

  • eCommercesales up double digit versus prior year
  • Retailcontinued strong demand from businesses and consumers with increasing average order volumes
  • Omnisales up 32% year-over-year; BOPIS nearly doubled; Same-day delivery up
  • Channel balance partially offset lower demand in Contract channel due to COVID impact

Serving customers in all environments with broader offering of products/solutions

  • Home Office, Technology & Workspacesstrong increases in demand
  • Cleaning & Breakroom; PPEcontinued solid demand
  • Adjacency categories 47% of total BSD revenues

Supply chain reliably serving customers

  • Reliably serving customers in high demand environment
  • Private fleet and diverse 3PL relationships

Low-cost model drives cost efficiencies

  • BAP and Maximize B2B programs driving lower costs

Business Units Highlights for 3Q20

7

Business Solutions Division (BSD)

  1. COVID environment negatively impacted Contract Channel, but improved sequential trends
  1. Ecosystem providing balance - eCommerce strong demand and "work/learn from anywhere" up o Strong net new customer wins; Robust pipeline
    o Mix shift in channel and product set
    o Positioned to capture growth as business environment recovers

Retail Division

  1. Critical access for businesses and consumers
  1. Strong operating performance despite back-to-school shift o Cost efficiencies and improved operating model
    o "Start Proud" Program and community support

CompuCom

o COVID continues to impact performance

o Slower project work and lower product sales o Stable annuity services business

o Evaluating options to drive future value and growth

ODP: Strong Position to Drive Future Growth

8

Strong Balance Sheet

Leverage Broad B2B Ecosystem

$1.7B Available

$743M

Global Sourcing & Supply Chain

Liquidity

in Cash

Key customer and vendor relationships

Balance distribution & strong go-to-market engine

Positioned to drive future growth

$1B Available

ABL Credit Facility

Under ABL

Extended to 2025

Execute Maximize B2B Plan

Drive Low-Cost Business Model

Reduce retail lease liabilities

Low-cost business model "wins"

Reduce cost & move to variable cost driven model

Variable cost model

Generates resources to fuel B2B pivot and growth

BAP and Maximize B2B programs

Anthony Scaglione

Executive Vice President & Chief Financial Officer

Third Quarter 2020 Summary

Third Quarter

($ in millions, except per share amounts)

2020

2019

Sales

$2,539

$2,782

Operating Income

$102

$108

Adjusted Operating Income (1)

$138

$137

Net Income

$57

$60

Diluted Earnings Per Share (2)

$1.04

$1.09

Adjusted Earnings per share (diluted)(1)(2)

$1.80

$1.53

Adjusted EBITDA (1)

$186

$191

Operating Cash Flow

$309

$212

Free Cash Flow (3)

$295

$180

Adjusted Free Cash Flow (4)

$312

$209

10

COVID-19 pandemic and fewer stores impacted revenue and operating results

Balanced channels to market and work/learn from home and essential products demand partially offset COVID impacts

Low-cost model approach drove SG&A improvements helping to drive YOY improvements in adjusted operating income.

3Q20 adjusted operating income(1) of $138 million versus $137 million in 3Q19

  • Adjusted EBITDA(1) of $186 million, versus $191 million in 3Q19

Prudent cash management: 3Q20 Adjusted Free Cash Flow(4) of $312 million versus $209 million in 3Q19

  1. Non-GAAPfinancial measure. A reconciliation of GAAP to non-GAAP financial measures can be found at investor.theodpcorp.com.
  2. After obtaining shareholder approval on May 11, 2020, the Company's Board of Directors determined to set a reverse stock split ratio of 1-for-10 for a reverse stock split of the Company's outstanding shares of common stock, and a reduction in the number of authorized shares of the
    Company's common stock by a corresponding ratio. The reverse stock split was effective on June 30, 2020. All share and per share amounts in this presentation have been retroactively adjusted for the prior period presented to give effect to this reverse stock split.
  3. As used in this presentation, Free Cash Flow is defined as cash flow from operating activities less capital expenditures. Free cash flow is a non-GAAP financial measure. A reconciliation of GAAP to non-GAAP financial measures can be found at investor.theodpcorp.com.
  4. As used in this presentation, Adjusted Free Cash Flow excludes cash charges associated with the Company's Business Acceleration Program of $4 million and its Maximize B2B Restructuring Plan of $13 million in the third quarter of 2020, and cash charges associated with the Company's
    Business Acceleration Program of $29 million in the third quarter of 2019. Adjusted Free Cash Flow is a non-GAAP financial measure. A reconciliation of GAAP to non-GAAP financial measures can be found at investor.theodpcorp.com."

Business Solutions Division - 3Q20

11

Sales

Operating Income

($ millions)

($ millions)

$1,197

$1,350

$71

$45

3Q20

3Q19

3Q20

3Q19

  • 3Q20 reported sales decreased 11% versus 3Q19
    • Largely due to COVID-19 disruptions to businesses and schools negatively impacting sales in Contract channel
    • Compared to 2Q20, reported sales performance improved 17%
  • eCommerce channel and Adjacency categories demand partially offset impact to Contract channel
    • eCommerce sales demand up 20% year-over-year
    • Strong sales of home office related products including technology, peripherals, and workspaces; Strong sales of cleaning/breakroom & PPE
    • Adjacency categories account for 47% of total BSD revenue
  • 3Q20 operating income of $45 million versus $71 million in prior year
    • Lower sales and product mix due to COVID-19 pandemic partially offset by a reduction in SG&A achieved through cost efficiency programs

Retail Division - 3Q20

Sales

($ millions)

$1,147$1,177

3Q203Q19

  • 3Q20 reported sales declined 3% versus 3Q19

12

Operating Income

($ millions)

$119

$84

3Q203Q19

    • Planned store closures and fewer transactions drove revenue decline (73 fewer retail outlets year-over-year)
    • Back to school selling season impacted by COVID, shifting sales into 4Q20 and 1Q21
    • Demand for work/learn from home products and cleaning supplies partially offset declines in supply categories
    • Strong increase in Buy On-LinePick-up In Store (BOPIS), up 82%
  • Product sales flat with last year; service revenue down 22%
    • Increased demand for work & learn from home; Service revenue negatively impacted by COVID
  • 3Q20 operating income of $119 million, up 42% versus $84 million in 3Q19
    • 320 bps margin improvement as a percentage of sales
    • Lower SG&A costs, improvement in distribution/inventory management costs, and lower operating lease costs

CompuCom Division - 3Q20

13

Sales

Operating Income

($ millions)

($ millions)

$197$252

$3$3

3Q20

3Q19

3Q20

3Q19

  • 3Q20 reported sales impacted by COVID-19
    • Down 22% versus last year
    • Lower product sales and project-relatedcustomer-imposed delays; lower service volume
    • Stability in annuity service sales
  • 3Q20 operating income of $3 million, flat with 3Q19
    • Cost efficiencies related to Business Acceleration Program improved operating margin versus 3Q19
  • Performing end-to-end business review
  • Evaluating options to drive future value

Balance Sheet / Cash Flow Highlights*

14

Total available liquidity of approximately $1.7 billion at end of 3Q20

Strong Available Liquidity

$1.0 billion available credit under asset-based lending facility

- Paid down $300 million of ABL facility

$743 million in cash and cash equivalents

Operating cash flow of $309 million in 3Q20 and included cash outflows related to:

Operating Cash Flow

$17 million in restructuring costs, primarily associated with the BAP

$4 million in acquisition and integration-related costs

Capital expenditures of $14 million in 3Q20

Capital Expenditures & Other

Lower investment in retail operations; continued investments in B2B platform,

distribution network, eCommerce

Adjusted Free Cash Flow*

Adjusted Free Cash Flow of $312 million in 3Q20 vs. $209 million in prior year period

  • Free Cash Flow is a non-GAAP financial measure and is defined as cash flows from operating activities less capital expenditures. Adjusted Free Cash Flow is a non-GAAP financial measure that excludes cash charges associated with the Company's Business Acceleration Program of $4 million and its Maximize B2B Restructuring Plan of $13 million in the third quarter of 2020, and cash charges associated with the Company's Business Acceleration Program of $29 million in the third quarter of 2019. A reconciliation of GAAP to non-GAAP financial measures can be found at investor.theodpcorp.com.

Q&A

Disclaimer

ODP Corporation published this content on 05 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 November 2020 18:41:02 UTC


© Publicnow 2020
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Financials (USD)
Sales 2020 9 722 M - -
Net income 2020 -293 M - -
Net cash 2020 412 M - -
P/E ratio 2020 -8,08x
Yield 2020 0,27%
Capitalization 2 446 M 2 446 M -
EV / Sales 2020 0,21x
EV / Sales 2021 0,22x
Nbr of Employees 40 000
Free-Float 82,7%
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Consensus
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Mean consensus OUTPERFORM
Number of Analysts 3
Average target price 41,00 $
Last Close Price 46,44 $
Spread / Highest target 29,2%
Spread / Average Target -11,7%
Spread / Lowest Target -50,5%
EPS Revisions
Managers and Directors
NameTitle
Gerry P. Smith Chief Executive Officer & Executive Director
Joseph S. Vassalluzzo Non-Executive Chairman
Diego Anthony Scaglione Chief Financial Officer & Executive Vice President
Todd Hale Chief Information Officer & Executive VP
Terry Leeper Chief Technology Officer & Executive VP
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