ODP Corp (ODP)·Q2 2025 Earnings Summary

Executive Summary

• Adjusted EPS of $0.51 beat S&P Global consensus $0.36, while revenue of $1.586B was modestly below consensus $1.591B; GAAP EPS was breakeven and adjusted EBITDA was $47M . EPS beat vs consensus; revenue slight miss; EBITDA generally inline to above (see Estimates Context table)*.
• Management raised FY25 adjusted free cash flow outlook on the call to “exceed $150M,” above the press release’s “over $115M,” creating a positive catalyst tied to cash generation and balance sheet strengthening .
• Traction in hospitality (≈1,000 properties onboarded), improved B2B revenue trends (~200 bps better YoY/seq), and better retail comps (-5% vs -7% LY) underpin momentum heading into H2 .
• Retail footprint optimization (23 closures; 834 stores) and fixed-cost deleveraging remained headwinds; macro softness weighed on enterprise demand .

What Went Well and What Went Wrong

What Went Well

• Improved trends across segments: B2B revenue trends improved by ~200 bps YoY and sequentially; retail comps improved to -5% from -7% LY . “Sales trends improved month over month throughout the quarter” .
• Hospitality expansion momentum: ~1,000 properties onboarded; OS&E demand showing robust month-over-month growth; adjacency categories reached 45% of B2B sales . CEO: “We are very encouraged by the early momentum we are seeing as we enter the hospitality market segment” .
• Cash generation and balance sheet: Adjusted FCF $13M (+160% YoY), total liquidity $658M, cash $177M; CFO: “helped us pay down approximately $35M in debt so far this year” .

What Went Wrong

• Top-line decline: Sales down 8% YoY to $1.586B, driven by fewer retail locations and softer enterprise demand; Office Depot -10% YoY, Business Solutions -6% YoY .
• Fixed-cost deleveraging pressured margins: Business Solutions operating income fell to $18M (2% margin) from $29M (3% margin); margin pressure cited from lower revenues and fixed costs .
• Ongoing retail traffic headwinds and footprint reduction: 23 store closures in Q2; lower store/online traffic; 834 stores at quarter-end .

Financial Results

Segment breakdown (sales and operating income):

Key performance indicators:

Q2 2025 actual vs S&P Global consensus:

Values with asterisks retrieved from S&P Global. EBITDA definitions differ (company-reported adjusted vs SPGI methodology); see Non-GAAP reconciliation .

Guidance Changes

Directional outlook reiterated: improved H2 top-line at Business Solutions, continued robust retail performance, tariff impact assumed minimal with diversified sourcing .

Earnings Call Themes & Trends

Management Commentary

• CEO: “Sales trends improved month over month throughout the quarter, improving our position as we head into the second half of the year.”
• CEO: “We are very encouraged by the early momentum we are seeing as we enter the hospitality market segment… We believe the progress we are making will be reflected in our future results.”
• Co-CFO: “Our team’s focus on operational discipline and cash conversion helped us generate $13 million in adjusted free cash flow for the quarter—a 160% increase over last year… helped us pay down approximately $35 million in debt so far this year.”
• CEO (call): “We are ahead of expectations on cash generation and now expect adjusted free cash flow to exceed $150,000,000 for the year.”

Q&A Highlights

• Free cash flow outlook raised: Management now expects FY25 adjusted FCF to exceed $150M, emphasizing daily inventory/cash focus and strong July performance .
• Tariff mitigation: ~57% of inventory is MAP-priced or exempt; pricing was stable in Q2; early buys improved cost base .
• Path back to top-line growth: Hospitality and large B2B contracts (e.g., CoreTrust) are second-half drivers; ~1,000 properties onboarded; pipeline conversion underway .
• Margin dynamics: Business Solutions margin pressure from fixed-cost deleveraging; Optimize for Growth actions (facility closures) aim to improve profitability .
• Restructuring cash charges: Roughly ~$5M per quarter expected .

Estimates Context

• Q2 2025: Adjusted EPS $0.51 beat consensus $0.36; revenue $1.586B slightly missed consensus $1.592B; EBITDA modestly above consensus when using company-adjusted definition (see table above) *.
• Forward consensus (S&P Global): EPS Q3–Q4 2025/Q1–Q2 2026 mean estimates $0.80/$0.54/$0.99/$0.45; revenue $1.669B/$1.551B/$1.631B/$1.544B; EBITDA $63.0M/$51.4M/$69.1M/$45.7M*.
• Target price consensus ~$30.33*; recommendation text not available in dataset*. Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

• Cash is the story: Raised FY25 adjusted FCF to >$150M on the call versus >$115M in the release; balance sheet liquidity of $658M and net debt reduction (~$35M YTD) support deleveraging and optionality .
• Hospitality is the growth vector: Early traction (~1,000 properties) and adjacency lift (45% of B2B sales) point to H2 revenue improvement and mix benefits; OMNIA agreement post-quarter adds channel reach .
• Retail stabilization: Comps improved to -5% with disciplined promotions; footprint rationalization continues (834 stores), aiding margin profile over time .
• Near-term headwinds: Enterprise demand remains soft and fixed-cost deleveraging pressures B2B margins; execution on Optimize for Growth (store/DC closures) is critical to margin recovery .
• Estimates likely to adjust: Expect upward revisions to FY25 FCF and potentially EBITDA assumptions given call guidance and H2 momentum; revenue estimates may remain conservative given macro *.
• Trading implications: EPS beat and FCF raise are positive; slight revenue miss and ongoing footprint reductions may temper enthusiasm—watch H2 onboarding pace (CoreTrust/hospitality) and back-to-school sell-through .

Values with asterisks retrieved from S&P Global.