ODP Corp (ODP)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue declined 10% year over year to $1.624B; GAAP EPS was $0.36 and adjusted EPS was $0.66, with adjusted EBITDA of $58M, reflecting weaker consumer and B2B demand and 47 fewer stores versus prior year .
• Management announced an “Optimize for Growth” plan focused on accelerating B2B distribution/3PL, reducing retail exposure, and targeting hospitality, healthcare and adjacent segments; expected costs of $185–$230M, ~$380M EBITDA uplift, and >$1.3B total value over the multi-year plan .
• A milestone contract with a leading hotel management company positions ODP to enter the $16B hospitality supply market, with exclusivities on certain products and joint go-to-market; management called it “the most important inflection point” in 15 years .
• Cash and liquidity remain solid ($166M cash; $644M total liquidity; $279M debt); capital allocation is shifting toward B2B growth over buybacks (Q4 repurchases: 1.4M shares/$43M) .

What Went Well and What Went Wrong

• What Went Well

  • Secured a landmark hospitality agreement, opening a $16B market and driving inbound interest across adjacencies (e.g., healthcare, cruise lines); “one of only a few preferred providers,” with joint sales and exclusivities .
  • Progress on large-scale enterprise wins: onboarding the largest enterprise contract in company history, potentially up to $1.5B over 10 years .
  • Veyer third‑party revenue rose 150% year over year to $20M in Q4, demonstrating traction in external logistics and fulfillment despite near‑term onboarding costs .

• What Went Wrong

  • Top-line pressure persisted: Q4 sales fell 10% year over year; adjusted EPS and EBITDA contracted versus Q4 2023 (EPS $0.66 vs $1.13; EBITDA $58M vs $83M) on macro headwinds and store closures .
  • Retail traffic and comps weakened (comps −8% in Q4), with 47 fewer stores year over year and lingering severe weather impacts; Office Depot operating margin fell to 4% from 5% .
  • Adjusted free cash flow was negative (−$57M) driven by working capital investments for new customers, hospitality ramp, and tariff mitigation; management expects benefits in 2025 .

Financial Results

YoY snapshot (Q4 2024 vs Q4 2023):

Segment breakdown

KPIs and balance sheet

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We made significant progress in our B2B pivot during the year… intensifying our focus on the growing potential within the B2B marketplace.” — Gerry Smith, CEO .
• “This agreement marks a pivotal step in our evolution beyond traditional office supplies… entering the $16 billion hospitality supply industry.” — Gerry Smith on hospitality .
• “Over the life of this restructuring plan, we expect… total cash costs $185M–$230M… uplift in EBITDA of $380M… approximately $1.3B in total value.” — Adam Haggard, Co‑CFO .
• “We plan to prioritize capital allocation toward our core business over share repurchases, focusing on high-return B2B growth opportunities.” — Adam Haggard .

Q&A Highlights

• Hospitality deal genesis and ramp: Existing relationship expanded to OS&E based on ODP’s supply chain reliability; includes exclusive products and joint selling; ramp will be both exclusive distribution and hunting-license with dedicated sales assets .
• Optimize for Growth cadence: Multi‑year (3–4 years), back‑end loaded savings; ~$30–$40M annual costs offset by savings near term; net‑neutral while increasing cash generation .
• B2B vs B2C trajectory: Expect hospitality, 3PL (Veyer) and core B2B growth to offset ongoing B2C optimization over time; timing not exact .
• Government exposure: Limited federal exposure currently .
• Free cash flow decline drivers: Working capital investments for new social‑commerce customer, hospitality ramp, and tariff mitigation; expected conversion to cash in 1H 2025 .
• Guidance stance: Directional commentary for 2025 (higher FCF, steady leverage), formal ranges to come as hospitality traction and new contracts pace becomes clearer .

Estimates Context

• Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at time of writing due to SPGI request limits; as a result, beat/miss analysis vs consensus cannot be provided and will be updated when accessible.

Key Takeaways for Investors

• ODP’s pivot is real: Hospitality entry and large enterprise wins expand TAM ($16B hospitality; $60B with adjacencies) and should structurally shift mix toward B2B distribution and 3PL .
• Near-term fundamentals are soft but stabilizing: Q4 sales −10% y/y with adjusted EPS/EBITDA down y/y; management expects B2B contract ramps to improve top line progressively .
• Multi‑year value plan: “Optimize for Growth” targets ~$380M EBITDA uplift and >$1.3B value while reducing retail exposure; watch execution milestones (store footprint optimization, lease reductions) .
• Veyer is a call option on third‑party logistics: Third‑party revenue scaling (Q4 +150% y/y) with onboarding costs depressing EBITDA near term; monitor margin improvement as volumes mature .
• Working capital investments are deliberate: Tariff mitigation and new customer onboarding weighed on adjusted FCF (−$57M in Q4), but management guides to higher FCF in 2025 .
• Capital allocation pivot: Expect reduced buybacks as cash is redirected to B2B growth initiatives; aligns with higher ROI focus .
• Risk monitor: Persistent macro weakness, retail traffic declines, and FX (CAD) headwinds; execution risk in hospitality ramp and restructuring cadence .

Appendix: Additional Q4-Period Press Releases

• Announced hospitality milestone agreement (Jan 27, 2025) .
• 10‑year $1.5B transformation enterprise contract (Nov 6, 2024) .
• Verizon retail services agreement (Dec 4, 2024) .