The ODP (ODP) Q2 2024 earnings summary

Executive summary

• Q2 2024 performance was below expectations, with sales declining 10% year-over-year due to macroeconomic headwinds, reduced spending, and onboarding challenges in ODP Business Solutions and Office Depot Divisions.

• Project Core restructuring is underway, targeting over $100 million in annualized cost savings, with most actions expected by end of 2024.

• The company entered a non-binding agreement to sell the Varis Division, expecting to retain a 20% stake post-sale; Varis is classified as discontinued operations.

• Share repurchases totaled $191 million year-to-date, with $141 million in Q2 and $168 million under new authorization.

• Updated full-year 2024 guidance reflects current market realities and ongoing macroeconomic challenges.

Financial highlights

• Q2 2024 revenue was $1.7–$1.72 billion, down about 10% year-over-year; gross profit was $342 million (19.9%–20% margin), down from $414 million (21.7%–22%).

• Adjusted operating income was $33 million, down from $67 million; adjusted EBITDA was $57 million, down from $95 million.

• Net loss in Q2 2024 was $73 million, compared to net income of $34 million in Q2 2023; adjusted net income was $20 million ($0.56 per diluted share), down from $48 million ($1.22 per share).

• Operating cash flow from continuing operations was $(1) million in Q2; adjusted free cash flow was $5 million.

• Total available liquidity at quarter-end was $831 million, with $190 million in cash and $641 million in available credit; total debt was $183 million.

Outlook and guidance

• Full-year 2024 sales expected to be at least $7 billion.

• Adjusted EBITDA guidance lowered to $310–$350 million; adjusted operating income to $200–$240 million; adjusted EPS to $4.25–$5.00; adjusted free cash flow expected to be approximately $200 million.

• Guidance reflects a challenging macro environment, slower sales pipeline conversion, and does not include material impact from potential new wins at Veyer or ODP Business Solutions.

• Project Core restructuring is expected to be completed in 2025, with the majority of actions by end of 2024; capital expenditures for 2024 are estimated up to $110 million.