The ODP (ODP) Q3 2024 earnings summary

Executive summary

• Third quarter 2024 revenue was $1.8 billion, down 11% year-over-year, with results impacted by weak macroeconomic conditions, lower retail and B2B demand, hurricanes, and industry-wide back-to-school softness.

• The company is accelerating its B2B pivot, securing a major new contract worth up to $1.5 billion over 10 years, and expanding into high-growth verticals such as hospitality and eCommerce supply chain services.

• Completed the sale of the Varis Division, retaining a 19.9% minority interest and reducing future capital commitments.

• Project Core restructuring and cost savings initiative is underway, targeting $100 million in annualized savings by 2025.

• Year-to-date, repurchased $295 million in shares, with $102 million in Q3 alone; pace of buybacks to be moderated in favor of B2B investments.

Financial highlights

• Q3 2024 sales were $1.8 billion, down from $2.01 billion in Q3 2023; adjusted operating income was $41 million (down from $112 million), and adjusted EBITDA was $62 million (down from $138 million).

• Adjusted net income from continuing operations was $24 million ($0.71 per diluted share), down from $85 million ($2.17 per share) last year.

• GAAP operating income was $102 million, including $70 million in legal matter monetization.

• Gross margin declined to 20% in Q3 2024 from 24% in Q3 2023, mainly due to lower product margin and higher supply chain/occupancy costs.

• Operating cash flow from continuing operations was $81 million, with adjusted free cash flow at $68 million, both down year-over-year.

Outlook and guidance

• 2024 revenue guidance maintained at approximately $7 billion; adjusted EBITDA outlook lowered to $260–$300 million, adjusted operating income to $160–$200 million, and adjusted EPS to $3.10–$3.80.

• Adjusted free cash flow guidance suspended due to near-term investment needs.

• Share repurchase pace expected to moderate for the remainder of the year.