ODP Corp (ODP)·Q3 2025 Earnings Summary

Executive Summary

• Adjusted EPS beat and revenue slight miss: Q3 2025 adjusted diluted EPS was $1.14 vs Wall Street consensus of ~$0.80; revenue was $1.625B vs consensus ~$1.669B. GAAP diluted EPS was $0.72. The EPS beat was driven by disciplined cost control and restructuring/integration credits, while top-line softness persisted in both B2B and retail . Values retrieved from S&P Global.*
• Sequential cash strength: Operating cash flow rose to $90M and adjusted free cash flow to $89M despite lower sales; total liquidity was $730M (cash $182M; available credit $548M), and total debt declined to $148M .
• Mixed segment trends: Office Depot retail comps improved (-7% vs -10% LY), with operating income rising to $31M; ODP Business Solutions revenue declines moderated (-6%) but margins compressed; Veyer grew third‑party revenue 64% YoY to $23M and EBITDA to $7M .
• Corporate action dominates near-term narrative: ODP will not hold an earnings call or provide forward guidance due to the pending Atlas Holdings merger, expected to close by year‑end 2025, which is a key stock catalyst alongside the EPS beat and strong FCF .

What Went Well and What Went Wrong

What Went Well

• Strong adjusted earnings and cash generation: Adjusted EPS rose to $1.14 and adjusted free cash flow to $89M, with operating cash flow at $90M, reflecting operational discipline and working capital management .
• Retail margin and comps improved: Office Depot operating income increased to $31M (4% of sales, +140 bps YoY); comparable store sales declined 7% vs 10% last year as targeted promotions drove higher average order volumes .
• Veyer third‑party traction: Third‑party revenue reached $23M (+64% YoY) and EBITDA was $7M, supporting diversification beyond internal customers .

What Went Wrong

• Top-line pressure persisted: Consolidated sales fell 9% YoY to $1.625B, largely due to store closures (63 fewer) and softer enterprise demand; ODP Business Solutions sales declined 6% YoY .
• Reported margins compressed YoY versus legal monetization in prior year: GAAP operating income fell to $34M from $102M, with prior-year benefiting from $70M legal matter monetization; adjusted operating income was modestly lower ($38M vs $41M) .
• No guidance and no call: In light of the pending merger, management did not provide forward-looking guidance or host a Q3 call, limiting near-term visibility into trajectory and estimate updates .

Financial Results

Segment breakdown (sales are external unless noted; $USD Millions):

KPIs:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Adjusted operating income of $38 million… Adjusted EBITDA of $62 million in both the third quarter of 2025 and 2024.” Non-GAAP results exclude merger/restructuring, asset impairments, and prior-year legal monetization .
• On retail: “Operating income was $31 million… As a percentage of sales, operating income was 4%, increase of 140 basis points from the same period last year” .
• On Veyer: “Sales generated from third-party customers increased by 64%… resulting in sales of $23 million. EBITDA generated from third-party customers was $7 million” .
• Transaction update: “Entered into a definitive agreement to be acquired… expected to be completed by the end of 2025… will not hold an earnings conference call or provide forward-looking guidance” .

Q&A Highlights

Note: No Q3 call; highlights from Q2 Q&A.

• Free cash flow outlook raised: “Now expect adjusted free cash flow to exceed $150,000,000 for the year” (CEO) .
• Tariff exposure and pricing: “About 57% of our inventory is either MAP priced or exempt… no real pricing impacts to Q2” (Co‑CFO) .
• Hospitality onboarding momentum: Targeting expansion from ~1,000 properties; daily execution cadence to scale .
• Retail back-to-school cadence: Strong early flight weeks; merchandising strategy shift to value; daily store scorecards .
• Restructuring cash charges: “Roughly around… about $5,000,000 a quarter” (Co‑CFO) .

Estimates Context

Values retrieved from S&P Global.*

Implications: A sizable EPS beat vs consensus alongside strong cash generation should prompt upward estimate revisions on EPS/FCF, while muted revenue relative to consensus reinforces top-line caution. The absence of formal guidance and the pending merger may constrain near-term sell-side updates .

Key Takeaways for Investors

• EPS outperformance with robust FCF despite sales declines indicates effective cost discipline and working capital execution; near-term EPS/FCF estimates likely reset higher . Values retrieved from S&P Global.*
• Retail is a relative bright spot: improving comps and margin expansion (+140 bps YoY), providing cash support while store count rationalization continues .
• B2B trajectory is stabilizing: declines moderated (-6% YoY) with improving trend, but margin leverage still pressured—watch onboarding pace and hospitality mix for 2H and 2026 .
• Veyer externalization is gaining traction: third‑party revenue and EBITDA growth diversify earnings and support margin resilience .
• Balance sheet flexibility: $730M liquidity and lower debt ($148M) provide downside protection and optionality for investment during the merger transition .
• Corporate catalyst dominates: Atlas Holdings merger expected by year‑end 2025; lack of guidance/call shifts focus to deal closure and regulatory/shareholder approvals .
• Trading lens: EPS beat/FCF strength vs muted revenue and no guidance creates a bifurcated setup; deal closure is the principal near-term stock driver, with operational improvement supporting downside protection . Values retrieved from S&P Global.*