Q4 2022 ODP Corp Earnings Call

Speaker 1: We on Listen Only mode for today's call, after which instructions will be given in order to ask a question. At the request of the ODP Corporation, today's call is being recorded. I would like to introduce Temporat, Vice President, Invest Relations and Treasurer. Mr. Perratt, you may now begin. Good morning, and thank you for joining us for the ODP Corporation's fourth-

Speaker 2: Good morning and welcome to the ODP Corporation's fourth quarter and full year 2022 earnings conference call.

Speaker 2: All lines will be on listen-only mode for today's call, after which instructions will be given in order to ask a question. At the request of the ODP Corporation, today's call is being recorded. I would like to introduce Tim Perott, Vice President, Investor Relations and Treasurer. Mr. Perott, you may now begin.

Speaker 2: to drive shareholder value.

Speaker 2: After Jerry's commentary, Anthony will then review the company's fourth quarter and full-year financial results, including highlights of our divisional performance.

Speaker 2: Following Anthony's comments, we will open up the line for your questions.

Speaker 3: Good morning and thank you for joining us for the ODP corporations's fourth quarter 2022 earnings conference call. This is Tim perat, and I'm here with Jerry Smith, our CEO , and Anthony sagleone, our Executive Vice President and Co. during today's call, Jerry will provide an update on the business.

Speaker 2: Before you begin, I would like to inform you that certain comments made on this call include Ford Looking Statements, which are subject to the safe harbor provisions of the Private Securities Lilligation Reform Act of 1995.

Speaker 2: These forward-looking statements reflect the company's current expectations concerning future events, and are subject to a number of risks and uncertainties that could cause actual results to differ materially.

Speaker 3: focusing much of his commentary on our accomplishments for 2022, including our operational performance and the progress we're making on all of our initiatives to drive shareholder value. After Jerry's commentary, Anthony will then review the company's fourth quarter and full year financial results, including highlights of our divisional performance.

Speaker 2: A detailed discussion of these risks and uncertainties are contained in the company's filings with the U.S. Security and Exchange Commission.

Speaker 2: Also during the call, we will use some non- GAAP financial measures as we describe business performance.

Speaker 3: Following Anthony's comments, we will open up the line for your questions. Before you begin, I would like to inform you that certain comments made on this call include forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. these forward-looking statements reflect the company's current expectations concerning.

Speaker 2: The SEC filings, as well as the earnings press release, presentation slides that accompany today's comments and reconcilations of non-GAT financial measures to the most directly comparable GAT financial measures are all available on our website at investor.vodpcorp.com.

Speaker 2: Today's call and slide presentation is being simulcast on our website and will be archived there for at least one year.

Speaker 2: I will now turn the call over to Jerry Smith. Jerry?

Speaker 2: Thank you, Tim, and good morning for everyone joining our call today.

Speaker 2: Thanks for joining us this morning and we hope that all of our stakeholders and their families continue to remain safe and healthy.

Speaker 3: non-GAAP financial measures as we describe business performance. The SEC filings, as well as the earnings press release, presentation slides that accompany today's comments, and reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investor.odpcorp.com

Speaker 2: I'm so excited to be here with you today to discuss our results and accomplishments for 2022 as well as our strong finish in the fourth quarter.

Speaker 2: Our performance reflects our team's continued operational and financial focus. It gets an increasingly challenging macroeconomic backdrop.

Speaker 2: As I begin, I like to recognize our entire team for many focused and driving these strong results while addressing all the strategic initiatives we face throughout the year.

Speaker 3: Today's call and slide presentation is being simulcast on our website and will be archived there for at least one year. I will now turn the call over to Jerry Smith. Jerry? Thank you, Tim, and good morning for everyone joining our call today.

Speaker 2: including the launch of our new four business unit structure.

Speaker 2: This required tremendous effort and I couldn't be more proud of all of our team members who go out every day and demonstrate what makes our company so remarkable.

Speaker 3: Thanks for joining us this morning, and we hope that all of our stakeholders and their families continue to remain safe and healthy. I'm so excited to be here today to discuss our results and accomplishments for 2022, as well as our strong finish in the fourth quarter. Our performance reflects our team's continued operational is.

Speaker 2: Our success this year is a true testament to all of our teams across our businesses as we continue to demonstrate operational excellence, which allows us to hit the commitments we made at our Investor Day meeting.

Speaker 2: It is no secret that throughout the year the entire market experience challenges related to the macroeconomic environment, burden with high inflation, supply change challenges, and the onset of slower GDP growth and consumer spend.

Speaker 2: As shown in slide 4.

Speaker 3: Including the launch of our new four business unit structure. This required tremendous effort and couldn't be more proud of all of our team members who go out every day and demonstrate what makes our company so remarkable. Our success this year is a true testament to all of our teams, across their businesses.

Speaker 2: inflation rose to a 40-year high, increasing the input cost in our business, impacting supply chain conditions by ocean freight constraints, and higher transportation costs.

Speaker 2: With diesel fuel prices up an average of roughly 50% versus last year.

Speaker 2: This was a challenge not only for ODP but for companies in almost all industries.

Speaker 3: as we continue to demonstrate operational excellence, which allows us to hit the commitments we made at our investor day meeting. It is no secret that throughout the year, the entire market experienced challenges related to the macroeconomic environment, burden with high inflation, supply chain challenges, and the onset of slower GDP growth and consumer spend.

Speaker 2: And many of these challenges we continue to face today. And expected face in the year ahead.

Speaker 2: While 2022 presented these challenges, I'm so proud of our team for once again rising up to address them head on.

Speaker 2: 2022 presented these challenges. I'm so proud of our team for once again rising up to to rest in head on. We utilize our supply chain operations.

Speaker 2: diverse routes to market, pricing flexibility, and balance sheet flexibility to help drive our low-cost business model and offset many other hurdles we faced.

Speaker 3: As shown on slide four, inflation rose to a 40-year high, increasing the input costs in our business, impacting supply chain conditions by ocean freight constraints, and higher transportation costs, with diesel fuel prices up an average of roughly 50% versus last year. This was a challenge not only for ODP, but for companies in almost all industries. And many of these challenges we continue to face today, and expect to face in the year ahead. While 2022 presented these challenges, I'm so proud of our team for once again, rising up to address them head on.

Speaker 2: Overall, we successfully navigate through a very complicated year, delivering full-year results consistent with our guidance, despite this difficult backdrop.

Speaker 2: A key component of our success is remaining true to the core tenants that drive our business.

Speaker 2: helping us reach our goals for the year and establishing our foundation for the future.

Speaker 2: and setting this up to execute upon our three horizon strategy, which I will discuss in more detail in a few minutes.

Speaker 2: Perhaps most important of our core tenants is our continued focus on our low-cost business model and operational excellence.

Speaker 3: We utilize our supply chain operations, diverse routes to market, pricing flexibility, and balance sheet flexibility to help drive our low-cost business model and offset many of the hurdles we face. Overall, we successfully navigated through a very complicated year, delivering folio results consistent with our guidance despite this difficult backdrop.

Speaker 2: Our low cost business model focus is one of the areas I'm most proud of and remains a cornerstone of our operating strategy. I learned this approach after 30 years in Tech Hardware, where managing unit cost was so important and every penny counted."

Speaker 2: After spending years driving operational excellence and a low cost mindset, we embedded this focus into this fabric at ODP, and that's helped us to simply lower our operating cost base, helping us to move from a highly fixed cost business to a more variable operating structure.

Speaker 3: A key component of our success is remaining true to the core tenets that drive our business, helping us reach our goals for the year and establishing our foundation for the future, and setting this up to execute upon our three horizon strategy, which I will discuss in more detail in a few minutes. Perhaps most important of our core tenets is our continued focus on our low-cost business model and operational excellence. Our low-cost business model focus is one of the areas I'm most proud of and remains a cornerstone of our operating strategy. I learned this approach after 30 years in tech hardware where managing unit cost was so important and every penny counted. After spending years driving operational excellence and a low-cost mindset, I learned that our mission has an enormous ppm of MLKDoes.

Speaker 2: And as I shared on investor day, over the past five years, we have eliminated over $500 million in operating costs, helping to thrive through challenging economic cycles and finding new and better ways to serve our customers.

Speaker 2: And we are not stopping there. We're continuing to look for more and better ways to officially operate our business, including use of automation, machine learning, and AI tools to help us lower the cost of serve and improve our customer service.

Speaker 2: In 2023, we will also continue to develop our analytic capabilities in VR. Leveraging investments we made in our proprietary technology, which is FlowPath, providing greater insight into the economic supply chain to further improve efficiency.

Speaker 3: We embedded this focus in this fabric ODP, and that's helped us to simply lower our operating cost base, helping us to move from a highly fixed cost business to a more variable operating structure and, as I share, to Investor Day. Over the past five years, we have eliminate over five hundred million dollars in operating costs, helping us thrive through challenging economic cycles and finding new and better ways to serve our customers.

Speaker 2: And we will also leverage the investment that we have made in our digital platform business, Varys, position this business for future growth and allow for even more efficient means in which to serve customers. And of course, we expect you continue to execute upon our $1 billion share repurchase program.

Speaker 3: And we are not stopping there. We're continuing to look for more and better ways to efficially operate our business, including use of automation, machine learning and AI tools to help us lower the cost to serve and improve our customer service. In 2023, we will also continue to develop our analytic capabilities in there, leveraging investments we made in our proprietary technology, which is flow path, providing greater insight into the economics of our supply chain to further improve efficiency.

Speaker 2: All these actions support a low cost business model focus and enhanced returns for shareholders.

Speaker 2: and we will continue to drive our Operational Excellence and Low Cost Model, which is part of our 5-seat culture and a competitive differentiator.

Speaker 2: And it's not just what we accomplished, it's also how we reached our goals as shown in slide 5.

Speaker 2: And it's not just what we accomplished, it's also how we reached our goals as shown in Slide 5. At the center of our approach is our winning 5C culture.

Speaker 2: The 5C stands for customer, commitment, creativity, change and carry.

Speaker 3: And we also leverage the investment that we have made in our digital plth for our business veris, positioning this business for feuture growth and allow for even more efficient means in which to serve customers. And, of course, we expect to continue to execute upon our $1 billion share repurchase program. All these actions support our low-cost business model focus and enhanced returns for shareholders, and we will continue to drive our operational excellence and low-cost model, which is part of our five C culture and a competitive differentiator. And it's not just what we accomplish, it's also how we reached our goals, as shown on Slide five

Speaker 2: These are not just words on paper, but rather our five-seat cultures are North Star and the engine of how we work in living our communities every day.

Speaker 2: I'm very proud of the culture we have created and the foundation it provides as we support our community, attract new talent, and continue to execute upon strategic priorities.

Speaker 2: I think a true testament to our 5C culture is the strong team we have built over the past few years, attracting the best and brightest talent across a broad range of industries, including technology, business commerce, supply chain, and finance.

Speaker 3: At the cent of our approach is our winning five C culture. The five C stand for customer commitment creativity, change and caring. These are not just words on paper, but rather a five C culture is our North Star and the engine of how we work in lim, in our communities every day. I'm very proud of the culture we have created and the foundation it provides as we support our community at trac new talent and continue to execute upon strategic priorities.

Speaker 2: I can't express enough gratitude to our team in living up to our 5C culture, serving customers, and supporting our communities.

Speaker 2: We've continued to set the highest standards for corporate responsibility, investing in and giving back to our communities throughout the year.

Speaker 2: For example, we double the impact of Elevate together, a signature initiative in the second year of operation, helping to reduce historic barriers of bringing racial equity to small business owners and entrepreneurs.

Speaker 3: I think a true testament to our 5C culture is the strong team we have built over the past few years, attracting the best and brightest talent across a broad range of industries, including technology, business commerce, supply chain, and finance. I can't express enough gratitude to our team in living up to our 5C culture, serving customers, and supporting our communities. We've continued to set the highest standards for corporate responsibility, investing in and giving back to our communities throughout the year. For example, we doubled the impact of Elevate together.

Speaker 2: Through our Start Proud initiative, we continued our strong support of teachers and students with our program, supporting low-income elementary schools across the nation, providing fully filled backpacks filled with supplies, gift cards, and awards for teachers.

Speaker 2: For the fifth straight year, we adopt the 35 of the most economic these-dress elementary schools across the US, providing 18,000 fully stocked backpacks, over $350,000 in office depot gift cards and teacher supplies. Nearly 1,000 of our associates assembled and distributed these resources.

Speaker 3: A signature initiative in a second year of operation, helping to reduce historic barriers of bring racial equity to small business owners and enttrumpneurs. Through our Star proud initiative, we continued our strong support of teachers and students with our program supporting low income elementary schools across the nation, providing fully filled backpacks, stillill supplies, gift cardarss and awards for teachers. For the fifth straight year, we adopt 35 of the most economical distress elementary schools across the? U,'s, providing 18 thousand fully stock pbackpacks, over $35 thousand in office peoplepo gift cars and teacher supplies.

Speaker 2: at school-based events. Our award-winning Depot Difference program continues to provide strong support of our national partnership with the Boys and Girls Clubs of America.

Speaker 2: And this year, our Depot Difference Team partnered with a newly established ODP Business Solutions team on working with school districts and relief agencies to provide support to the region devastated by Hurricane Ian.

Speaker 2: I am so proud to be the leader of a company with such a strong commitment to our communities, the environment and a culture that truly makes a difference.

Speaker 2: Now, before we get into the specifics of our major accomplishments in 2022, I'd like to spend a few moments discussing the way we're thinking about our business and driving long-term value through what I call our three horizon strategy. This is shown on slide six.

Speaker 3: Nearly 1,000 of our associates assembled and distributed these resources at school-based events. Our award-winning Depot Difference program continues to provide strong support of our national partnership with the Boys and Girls Clubs of America. And this year, our Depot Difference team partnered with a newly established ODP Business Solutions team on working with school districts and relief agencies to provide support to the region devastated by Hurricane Ian. I am so proud to be the leader of a company with such a strong commitment to our communities, the environment, and a culture that truly makes a difference. Now before we get into the specifics of our major accomplishments in 2022, I'd like to spend a few moments discussing the way we're thinking about our business.

Speaker 2: Over the past several years, we've been transforming our business to lower our costs.

Speaker 2: Position your assets with the right routes to market and innovate to create a more valuable company.

Speaker 2: The core tenets I mentioned earlier served as guideposts to establish the new ODP Corporation. Reposition your recognizing that power the assets in our control.

Speaker 2: And all that work and effort culminated in a real line for business infrastructure that we highlighted during our investor day meeting.

Speaker 2: Our new operating structure is creating opportunities for our businesses to create value as we execute upon this strategy.

Speaker 3: and driving long-term value through what I call our three horizon strategy. This is shown on slide six. Over the past several years, we've been transforming our business to lower our costs, position our assets with the right routes to market, and innovate to create a more valuable company. The core tenants I mentioned earlier served as guideposts to establish the new ODP Corporation, repositioning and recognizing the power of the assets in our control. And all that work and effort culminated in a realigned four business unit structure that we highlighted during our investor day meeting. Our new operating structure is creating opportunities for our businesses to create value as they execute upon this strategy. This strategy puts into perspective how we will drive our business units.

Speaker 2: This RADG puts into perspective how we will drive our business units in order to lock the underlying fundamentals of our business, build long-term sustainable growth, expand our multiple, and maximize shareholder value.

Speaker 2: And with our four business unit model, we are in an excellent position to drive our business and unleash greater value.

Speaker 2: Let me highlight this approach. Our first horizon focused on continued to drive off the steepest strong performance.

Speaker 2: Excellent cost for service and that promoter scores and most importantly, continue to drive strong EBITDA and cash conversion.

Speaker 2: Office Depot is a cast generation engine, and this horizon continues that focus, getting the most out of this engine.

Speaker 2: As we laid out an investor day, we will continue to optimize and nurture this business, adding new product absorbance aligned with customer needs while continuing to provide excellent service to its target as customers base, including small businesses, education, and home office customers.

Speaker 3: in order to lock the underlying fundamentals of our business, build long-term sustainable growth, expand our multiple, and maximize shareholder value. With our four business unit model, we are in an excellent position to drive our business and unleash greater value. Let me highlight this approach. Our first horizon focused on continuing to drive Office Depot's strong performance.

Speaker 2: And we measure our service with NPS, or Net Promoter Scores, and our team has delivered outstanding results.

Speaker 2: Next, our second rise in focus on continuing to drive ODP business solutions, our BDP distribution business, delivering growth, margin expansion, and cash flow.

Speaker 3: Excellent customer service and that Promoter Scores and, most importantly, continues to drive strong EBITDA and cash conversion. Office depo is a cash generation engine and this horizon continues that fol is getting the most out of this engine.

Speaker 2: This is a higher multiple B2B distribution business with a solid runway ahead for profitable growth.

Speaker 2: As you see in our release this morning, we are moving well along the path we set.

Speaker 3: As we laid out, an Investor Day. We will continue to optimize a nurture of this business at a new product assortments aligned with customer needs, while continue to provide excellent service to its targeted customers base, including small businesses, education and home office customersand we measure our service with NPS or net Promoter scores that our team has delivered outstanding resultsnext, our second Horizons focused on continuing to drive ODP business solutions, our BDP distribution business, delivering growth margin, expansion and cash flow. This is a higher multiple BDP distribution business with a solid runway ahead for profitable growth.

Speaker 2: Our business solutions team is executing upon this horizon, continues to gain traction with customers and driving possible growth.

Speaker 2: We will continue to execute its course strategy of expanding its customer base, expanding the products and services it offers to customers, and kids' units focus on margin expansion along with our long-term targets.

Speaker 2: We believe that as we execute our plan, the market will begin to recognize the value of this higher multiple business, and this will be reflected in ODP's overall value.

Speaker 2: Our third horizon is building value pursuing higher-long term growth opportunities through VAR, our supply chain and procurement business, and in VARIS, our innovative B2B digital platform business.

Speaker 3: As you see in our release this morning, we are removing well along the path we set. Our business solutions team is executing upon this horizon: continue to gain traction with customers and driving profitable growth. We will continue to execute its core strategy of expanding customer base. Expanding the products and services it offers to customers and kids units focus on margin expansion align with our long-term targets. We believe that as we execute our plan, the market will begin to recognize the value of this higher multiple business and this will be reflected in OP's overall value. Our third Horizons: building value in pursuing higher long-term growth.

Speaker 2: Both of these businesses represent significant long-term growth and multiple expansion opportunities for ODP.

Speaker 2: VAR is a world-class supply chain business with valuable assets and capabilities that include next-day service to nearly 99% of the U.S. ZIP codes, a large private fleet, over 9 million square feet of distribution center space, and through our global sourcing office, strong international procurement expertise.

Speaker 2: We set up Bear this year, moving in from a cost center focus to now a key business unit driving's own focus go to market strategy and serving customers.

Speaker 3: Opportunities to verar our supply chain of procurement business and inverious are innovated B to B digital platform business. Both these businesses represent significant long term growth and multiple expansion opportunities for ODP. ver is a Ro class supply chain business with valuable assets and capabilities that include next day' service to nearly 99% of the? U's hiip coodes, a large private fleet, over nine million score feet of distribution center space and, through our global sourcing office, strong international procurement expertise. We set up there are this year moving them from a cost center focus to know a key business unit, driving's own focus go to market strategy and serving customers. veris focus on continuing to provide excellent service and be a low cost provider. Support the success of its two internal customers, ODP business solutions and office de.

Speaker 2: Bear is focused on continuing to provide excellent service and be a low cost provider to support the success of its two internal customers, ODP business solutions and office people, while also using existing capacity to serve external third-party customers. Bear is already serving several third-party customers.

Speaker 2: including some of our vendor partners as well as way to reach long-term goals we set during investor day, which included generating at least $30 million in EBITDA for third-party customers utilizing existing capacity.

Speaker 2: And lastly, Veris is a key high growth component to this long-term horizon. Veris represents perhaps the largest addressable market opportunity for ODP to provide a modern, consumer-like digital B2B Procurement Platform experience.

Speaker 2: that can track Connect's procurement organizations with suppliers and vice versa. This is a high multiple growth opportunity with a very large target market and a scalable business model that also improves the efficiency in which we serve our customers.

Speaker 3: While also using existing capacity to serve external third party customers varis already serving several third party customers including some of our vendor partners as well as way to reach long term goals we set during Investor Day which included generating at least $3 million in EBITDA for third party customers utilizing existing capacity and lastly veris is a key high growth component to its long term horizon veris represents perhaps the largest addressable market opportunity for ODP through providing a modern consumer line digital B D B procurement platform experience that contractually connects procurement organizations with suppliers and Vice versathis is a high multiple growth opportunity with a very large.

Speaker 2: Over the last two years, we've made significant progress. We have built a world-class team led by Princess Wilson that has embarked on developing every finding the tech-stacking capabilities, and as we announce during our investor-day meeting, we launched a network more broadly this past November .

Speaker 2: It is still early days, however, we're adding new customers and suppliers to the platform and continuing to refine its capabilities.

Speaker 2: We're excited about the path that Veris is on and the multiple opportunities to pursue growth that it represents.

Speaker 2: And we accomplished all of this while maintaining capex investment levels within historical ranges.

Speaker 2: So overall, our three-heritance strategy will help us continue to drive our near-term cash flow engines while allowing us to continue to pursue both mid and long-term growth and higher multiple businesses, which we believe will create significant value for our shareholders.

Speaker 2: This is all anchored on our low-cost business model focus to EBITDA and EPS growth, while we are currently managing our balance sheet and deploying capital to the benefit of our shareholders and of course continuing to live our 5p culture.

Speaker 2: Lastly, we will continue to demonstrate our operational excellence, which is fundamental to our success.

Speaker 2: Now turning the highlights of our major accomplishments for 2022 as shown in Slide 7. First we drove solid operating performance for the year and delivered results consistent with our guidance.

Speaker 3: So overall, our three horizon strategy will help us continue to drive our near-term cash flow engines, while allowing us to continue to pursue both mid- and long-term growth and higher multiple businesses, which we believe will create significant value for our shareholders.

Speaker 2: We drove a strong results despite the industry-wide challenges mentioned earlier.

Speaker 2: Revenant was up year over year and our operational excellence and low-cost model approach combined with flexible pricing and distribution strategies helped the drive solid operating results and cash flow against the more challenging backdrop to the year.

Speaker 3: This is all anchored on our low-cost business level focus to EBITDA and EPS growth, while prudly managing our balance sheet and deploying capital to the benefit of our shareholders and, of course, continue to deliver our five C culture. Lastly, we will continue to demonstrate our operational excellence, which is fundamental to our successi'll. Turning to the highlights of our major accomplishments for 22, as shown on Slide seven first, we drove solid operating performance for the year and deliver results consistent with our guidance.

Speaker 2: Our year-on-year growth included the positive impact of the 53rd week being present this year.

Speaker 2: This adjustment happens every four or five years for companies who report on a 445 calendar.

Speaker 2: Anthony will provide more color on the impact toward 2022 results and comparisons for 2023 letter on in his remarks.

Speaker 2: Next, we addressed the strategic initiatives that were before us earlier in the year. And we completed the re-alignment to our operating structure that supports the launch of our re-align for business unit model.

Speaker 3: We drove these strong results despite the industry-wide challenges mentioned earlier. Revenue was up year-over-year in. Our operational excellence and low-cost model approach, combined with flexible pricing and distribution strategies, helped to drive solid operating results and cash flow against the more challenging backdrop to the year. Our year-on-year growth included the positive impact of the 53 RD week being present this year.

Speaker 2: This structure more fully reflects the power of our businesses and unlocks shareholder value. And we feel this is a catalyst for expand our multiple over time. As each business unit demonstrates our individual growth and earnings power, which we feel is not previously reflected in the combined ODP multiple. And as a component of our new structure.

Speaker 3: This adjustment happens every four or five years for companies who report on a 4- five calendar. Anthony will provide more color on the impact to our 2020 results and comparisons for 2023 later on in his remarks. Next, we address their strategic initiatives that were before us earlier in the year and we completed the realignment to our operating structure that supports the launch of our realign four business unit model. This structure more fully reflects the power of our businesses and unlocks shareholder value.

Speaker 2: We stood up there, our supply chain on the logistics business, and Varys, our B2B Digital Platform business.

Speaker 2: As I mentioned earlier, these new businesses represent attracted new long-term growth opportunities for ODP. And last, but certainly not least, we expanded our commitment to enhancing shareholder value by announcing our $1 billion Sherry Purchase Program.

Speaker 2: Let me spend a few moments on our activity under this effort.

Speaker 3: And we feel this is a catalyst for expand our multiple overtime, as each business unit demonstrates our individual growth and earnings power, which we feel was not previously reflected in the combined ODP multiple and as a component of our new structure, we stood up there: our supply chain logistics business and veris, our bdb digital platform business.

Speaker 2: As we announced during our investor day meeting, our Board of Directors approved a $1 billion share repurchase program. We are excited about what this means for our stakeholders and how this program is supported by our strong balance sheet and operational excellence plan as expected to generate significant cash flow over the next several years.

Speaker 2: We have been aggressively executing under this plan during the quarter. Repurchase significant amount of shares since we had lost it in early November . In addition to the shares we were purchased earlier in the year.

Speaker 3: As I mentioned earlier, these new businesses represent attractive new long-term growth opportunities for ODP. And, last but certainly not least, we expanded our commitment to enhancing shareholder value by announcing our $1 billion share repurchase program. Let me spend a few moments on our activity under this effort. As we announced during our Investor Day meeting, our Board of Directors approving a $1 billion share repurchase program, we are excited about what this means for our stakeholders and how this program is supported by our strong balance sheet and operational excellence plan, as expected to generate significant cash flow over the next several years.

Speaker 2: In total, for 2022, we have repurchased about 6.4 million shares for about $266 million with the majority purchased under the new authorization.

Speaker 2: We've also continued our repurchases into the new year.

Speaker 2: As they move throughout the balance of the year, we will continue to be disciplined in our approach to overall capital deployment as we consider evolving market conditions and opportunities within our business, but expect with support from our board to continue repurchasing throughout the year.

Speaker 3: We've been aggressively executing under this plan. During the quarter, we repurchased a significant numberber of shares since we launched it in early November , in addition to the shares we repurchased earlier in the yearin total for 2022, we have repurchased about six point four million shares for about $266 million, with a majority chased under the new authorization. We've also continue to repurchases into the new year as we moved throughout the balance of the year. We will continue to be disciplined in our approach to our overall capital deployment as we consider evolving market conditions and opportunities within our business.

Speaker 2: On slide 9, our overall performance in 2022 reflects the positive attributes of our team's commitment to operational excellence and the value of past investments we made in our infrastructure and the flexibility of our business model.

Speaker 2: As I mentioned, the industry backdrop and macroeconomic environment proved to be increasingly challenging throughout the year.

Speaker 2: Because of the investments we have previously made in our supply chain infrastructure, the flexibility of our distribution network and pricing scenarios, as well as our low-cost model approach, ODP has been able to navigate better than most companies through these challenges. We've addressed the challenging supply chain environment.

Speaker 3: But expect for support from our Board to continue repurchasing throughout the year on Slide nine our overall performance in 2022 reflects the positive attributes of our team's commitment to operational excellence and the value of past investments we made in our infrastructure and the flexibility of our business model.

Speaker 2: by leveraging our large presence in Asia for a global sourcing office.

Speaker 2: As well as investments we have made in our private fleet and the flexibility of our distribution network, which includes our long-term relationships with our distribution partners and suppliers.

Speaker 3: As I mentioned, the industry backdrop and macroeconomic environment proved to be increasingly challenging throughout the year. Because of investments we have previously made in our supply chain infrastructurethe flexibility of our distribution network and pricing scenarios, as well as our low-cost model approach, ODP has been able to navigate better than most companies through these challenges. We've addressed the challenging supply chain environment.

Speaker 2: We also utilize pricing flexibility to help mitigate some of the inflationary increases allowing the surpassed through certain price increases to help alleviate cost pressures.

Speaker 2: Our revenue results were driven by strong performance at ODP Business Solutions as more businesses returned to the office post-COVID.

Speaker 2: This is somewhat offset by lower revenue office depot related to both a reduction in the store footprint in lower e-commerce traffic as individual consumers have been less active compared to last year. It all, our value proposition, continue to resonate with customers and will combine with our low cost business model approach.

Speaker 3: By leveraging our large presence in Asia for global sourcing office, as well as investments we have made in our private fleets and the flexibility of our distribution network, which includes our long-term relationships, will have distribution partners and suppliers. We also utilize pricing flexibility to help mitigate some of the inflationary increases, allowing to pass-through certain price increases to help alleviate cost pressures. Our revenue results were driven by strong performance at ODP business solutions as more businesses return to the office post-COVID.

Speaker 2: We drove close to $300 million in adjusted to offer income in the year and solid EBITDA results. Now, turning to highlights of our divisional performance on slide 10, starting with ODP business solutions.

Speaker 2: ODP Business Solutions delivered strong results throughout 2022.

Speaker 2: Over the past several years, we've built a strong customer base with over 140,000 enterprise customers, including about 60% of the Fortune 100.

Speaker 3: This is somewhat offset by lower revenue office depo related to both a reduction in the store footprint and lower e-commerce traffic, as individual consumers have been less active compared to last year. In all, our value proposition continued to resonate with customers and wewere combined with our low-cost business model approach, we drove close to $3 million in adjusted opera income in the year and solid EBITDA resultsnow Turning to highlights of our diividual performance on Slide 10, starting with OTP business solutions. Otp business solution delivered strong results throughout 2022. over the past several years, we both a strong customer base with over 14 thousand enterprise customers.

Speaker 2: This business-exhibited strong growth is clearly on a path to spend its margins back to and beyond pre-COVID levels, a long-term KPI that we identify during our investor-day meeting.

Speaker 2: Revenue growth was strong in the year, up 11% as continued back to office trends continued to gain traction as we drove our market-based pricing model and maintained high revenue retention levels.

Speaker 2: Back to office trends have been a nice tailwind for the business, with external tracking reports now estimating that 50% of workers are back in the office.

Speaker 2: This has helped us offset some of the effects for the well-publicized corporate layoffs we've seen the news over the past year.

Speaker 3: Cling about 60% of the Fortune 100. this business exhibited strong growth, is clearly in a path to expand its margins back to and beyond precoovid levels, a long-term KPI that we identified during our Investor Day meeting. Revenue growth is strong the year, up 11% as continued back to office trends continue to gain traction as we drove our market-based pricing model and retain high revenue retention levels.

Speaker 2: Our adjacency categories continue to grow and comprise 44% of total ODP business solution sales.

Speaker 2: A standout among our adjacency categories is our JanSan and cleaning and break room category, which to date has grown to about $700 million per year in revenue, which if taken on an independent basis makes us one of the larger JanSan supply businesses in the U.S.

Speaker 2: We also drove margins higher and nearly doubled our operating income relative to last year, capturing higher top-line growth and utilizing our disciplined approach to operational excellence and continued focus on customer profitability reviews.

Speaker 3: Back to office. Trends have a nice tailwind for the business, with external tracking reports now estimate that 50% of workers are back in the office. This has helped us offset some of the effects from the well publicized corporate layoffs. We have seen the news over the past year. Our jacenc categories continue to grow and comprise 44% of total ODP business solutution sales.

Speaker 2: Moving forward, we are well in the path to reach our long-term goals, expanding margins and continuing to focus on maintaining our leadership position and the traditional business applied categories while growing in our adjacency categories, continuing our success in the federation and focusing on customer growth in the areas we have the right to win.

Speaker 3: A standout among our adjacency category is our jansan and cleaning, a breakkeroom category which to date has grown to about $7 million per year in revenue which, if taken on independent basis, makes us one of the larger jansan supply businesses in the? U's. We also drove margins higher and nearly doubled our operating income relative to last year, capturing higher top line growth and utilizing our disciplined approach to operational excellence and continued focus on customer profitability reduce.

Speaker 2: Next on slide 11, Office Depot continues to be a strong CAS generation engine for ODP.

Speaker 2: Again, drove solid margin performance and cash flow in the year. And there are team executed upon our low cost model approach and delivered a value proposition that continue to resonate with our customers.

Speaker 2: I'm extremely proud of our team for continuing to drive a positive shopping experience leading to continued strong net promoter scores above 70% among the best in any industry.

Speaker 3: Moving forward. We are well in the path to reach our long-term goals, expanding margins and continu focus on maintaining our leadership position and the traditional business appplies categories, while growing in our adjacency categories, continued our success in the Federation and focusing on customer growth in the area. As we have the right to win next on Slide 11, office depo continue to be a strong cash generation engine for OP again drove solid margin performance and cash flow in the year and, as our team executed upon our low-cost model approach and deliver a value proposition that continuue to resonate with our customers, I'm extremely proud of our team to our continuue to drive a positive shopping experience leading to continued strong net Promoter Scores above 70% among the best in any industry.

Speaker 2: Revenants were lower versus last year, partially driven by fewer stores and service as a result of plan store closures, as well as lower traffic trends and store, and online post-COVID was partially offset by stronger sales per shopper and stronger on-the-channel sales, apart by 20-minute pickup guarantee.

Speaker 2: From a product perspective, as some of the effects of COVID received during the year, we saw an increase in demand for traditional copy and print services, paper, school and break room supplies.

Speaker 2: This was offset by lower sales of cleaning and PPE products, supplies, and technology products, all categories and higher demand during the pandemic. As it relates to tech, Kevin and the team are keenly focused on the product assortment and sales flow through given some of the more acute challenges affecting technology categories overall.

Speaker 3: Revenues were lower versus last year, partially driven by fewer stores and service as a result of planned store closures, as well as lower traffic trends in store and online post-COVID, which were partially offset by stronger sales per shopper and stronger omn-channel sales, supplily by a 20 minute pickup guarantee.

Speaker 2: Moving forward, given the weaker macroeconomic environment, we will continue to monitor any changes in the consumer activity which we noted we can in the back half of last year.

Speaker 2: We also continue to optimize our store footprint and fine tune our product set to address the evolving needs of our customers.

Speaker 3: From a product perspective, as some of the effects of COVID receded during the year, we saw an increase in demand for traditional copy and print services, paper, school, and break room supplies. This was offset by lower sales of cleaning and PPE products, supplies, and technology products, all categories in higher demand during the pandemic. As it relates to tech, Kevin and the team are keenly focused on the product assortment and sales flow through given some of the more acute challenges affecting technology categories overall. Moving forward, given the weaker macroeconomic environment, we will continue to monitor any changes in the consumer activity, which we noted weakening in the back half of last year.

Speaker 2: On slide 12, we highlight VARE, a key growth engine for our future and a component of our third horizon.

Speaker 2: There is our world-class supply chain services and sourcing provider with core competencies and distribution, fulfillment, transportation, global sourcing, and purchasing, which also includes our global sourcing operations in Asia.

Speaker 2: As mentioned earlier, we've separated VAR into its own business and reporting unit moving forward. VAR is focused on delivering best-in-class service to ODP's internal customers at a low cost, while leveraging its existing capacity to provide services to third-party customers.

Speaker 3: We also continue to optimize our store footprint and fine tune our product set to address the evolving needs of our customers. On Slide 12, we highlight there a key growth engine for our future and a component of our third horizon. There is our world class supply chain services and sourcing provider with core competencies: and distribution to fulfillment transportation, global sourcing and purchasing, which also inclues our global sourcing operations in Asia. As mentioned earlier, we separated vari' own business and reporting unit. Moving forward there is focused on delivering best in class service to ODP's internal customers at a low cost, while leveraging its existing capacity.

We stood up there as its own business unit in the back half of last year as its own focused profit center to capture the full value of its unique assets and to help drive a new narrative for our shareholders in value in this business.

Bear is making progress not only serving our internal customers with efficient and low cost services, benefiting both internal and external customers, but also growing their influence with third-party customers and building the pipeline of future business.

While external revenue was steady for the year, internal revenue was lower related to less demand in our consumer business. That said, we believe that VARE has come out of the gate strong and is on the path that we set during our investor day meeting to reach at least $30 million in EBITDA from external sources by 2025.

Speaker 3: To provide services to third-party customers. We stood up there as his own business unit in the back half of last year, as his own focused profit center to capture the full value of its unique assets and to help drive a new narrative for our shareholders and value in this business. There is making progress, not only serving our internal customers with efficient and low-cost services, benefiting both internal and external customers, but also growing their influence with third-party customers and building the pipeline of feuture business.

There represents a great opportunity to generate organic EBITDA from our existing infrastructure and investments we are making to be more efficient and over time it will build upon its world-class capabilities to provide full three-pill services supply chain procurement services to third parties in the future.

Turning to slide 13, Varus continued to make solid progress throughout the quarter and the year. As we announced during our investor day meeting, it is still early days as we launched the platform during the fourth quarter and continued to refine its capabilities, work with our partners and add new customers and suppliers to the platform.

Speaker 3: While external revenue was steady for the year, internal revenue is lower, related to less demand in our consumer business. That said, we believe that ver has come out of the gate. Strong is on the path that we set during our Investor Day meeting to reach at least $3 million in EBITDA from external sources by 2025. there represents a great opportunity to generate organic EBITDA from our existing infrastructure and the investments we are making to be more efficient and over time, it will build upon its world-class capabilities to provide fourll three pill services, supply chain and procurement services to the third parties in the future.

We are running hard, attracting new customers, driving volume through the platform, adding new bookings, and converting revenue.

While VARIS did incur considerable expenses during the year as it prepared for launch,

As we mentioned during our investor day meeting, we expect that 2022 was a peak year of investments.

We're also continuing to evaluate future funding alternatives to help us accelerate our plans for growth and scale the business.

Speaker 3: Turning to Slide 13. verious continue to make solid progress throughout the quarter and the year, as we announced during our Investor Day meeting, and a still early days, as we launch the platform during the fourth quarter and continue to refinance capabilities, work with our partners and add new customers and suppliers to the platform. We are running hard, attracting new customers, driving balling through the platform, adding new bookings and converting revenue, while verious didn'tincur considerable expenses during the year as to prepared for launch. As we mentioned during our Investor Day meeting, we expect that 2022 was that peak care of investments. We RE also continue to valuate future funding alternatives. Help us accelerate our plans for growth and scale. The businesstwo thousand and 22 was a transformer view for OP. Our team ofaccall for so much, driving strong results.

2022 was a transformative year for ODP. Our team of compers so much, driving strong results, meeting our commitments, and establish our foundation for the future.

As we move forward in 2023, we remain cautiously optimistic about the year ahead as we continue to navigate the increasingly challenging macroeconomic environment and its effect across all industries. That said, we remain in a position of strength with a strong balance sheet, diverse routes to market.

A continued low cost business model mindset and our operational excellence we have demonstrated. We will continue to be disciplined, focusing on operational excellence and driving our low cost business model focus across all of our businesses. We will be relentlessly focused on cash generation.

and navigating through what we expect will be another challenging year for the macroeconomic environment.

Speaker 3: Meeting our commitments and establish our foundation for the future as we move forward in 2023. We remain cautiously optimistic about the year ahead as we continue to navigate the increasingly challenging macroeconomic environment and its effect across all industries. That said, we remain in a position of strength, with a strong balance sheet, diverse rster market and continued low-cost business model mindset and our operational excellence we have demonstrated. We will continue to be disciplined, focusing on operational excellence and driving our low-cost business model focus across all of our businesses.

We will focus on unleashing the power of our four business unit model and driving value and multiple expansion through our three horizon strategy. We will continue to drive our cash generation machine Office Depot and work to improve traffic trends and expand our adjacencies to capture new opportunities.

At ODP Business Solutions, we will focus on continuing to grow our top line and remain disciplined in expanding our margins along the path we set on the best or day. Vero focus on the continued to provide excellent service levels, remaining low cost provider for our internal customers. Vero focus on the continued to provide excellent service levels, remaining low cost provider for our internal customers.

Speaker 3: We will be relentlessly focus on cash generation and navigating through what we expect will be another challenging year for the macroeconomic environment. We will focus on leashing the power of our coor business unit model and driving value and multiple expansion through our three horizon strategy. We will continue to drive our cash generation machine off ICE cepo and work to improve traffic trends and expand our jacencies to capture new opportunities at OTP business solutions. We will focus on continue to grow our top line and remain disciplined and expanding our margins on in the path we set on Investor Day.

while pursuing new third-party business using existing capacity. And Barris is all about adding bookings, converting bookings to revenue, and working to drive scale on the platform. And finally, we will continue to live our 5C culture. With that, I'll turn the call over to Anthony Scaglione, our CFO . Thank you, Jerry, and good morning to everyone on the call today. I'm happy to be here today to discuss our financial results for the fourth quarter.

Speaker 3: verwill focus on to continue to provide excellent service levels, remain a low-cost provider for our internal customers while pursuing new third-party business using existing capacity and barris is all about adding bookings, converting bookings to revenue and working to drive scale on the platform. And finally, we will continue to liver our five C culture. With that, I'll turn the call over to Anthony sigleone, our CFO . Thank you Jerry, and good morning to everyone on the call today. I'm happy to be here today to discuss our financial results for the fourth quarter and full year 2020 -two.

of high inflation and supply chain constraints.

We're excited about our new 4BU structure we highlighted at investor day, and unleashing our full potential by more fully realizing the value of our assets and positioning ODP to pursue greater opportunities for long-term profitable growth.

Our accomplishments this year is a clear demonstration of the operational excellence and strong commitment from our world-class team. And a team that has continued to live up to our 5-seat culture.

Speaker 3: As I begin I'd like to say thank you to our entire team for remaining focus during what was a very complicated year as we realigned the business and wraps the market with the backdrop of an increasingly difficult macroeconomic environment the team did an incredible job staying focused on our customers while navigating through the effects of high inflation and supply chain constraints we're excited about our new four BU structure we highlighted at Investor Day and unleashing our full potential by more fully realizing the value of our assets and positioning ODP to pursue greater opportunities for long-term profitable growth our accomplishments this year is a clear demonstration of the operational excellence and.

As you heard from Jerry, the challenges related to the macroeconomic environment were numerous during the year.

Riding inflation caused mid-single digit increases to our average overall cost of goods sold, via our product baskets, along with other input costs to the business.

Supply chain operations remain constrained, with ocean freight container costs exhibiting significant volatility with spot prices up more than fivefold. Diesel fuel costs up 50% and labor continuing to be scarce and costly.

However, with the investments in our infrastructure that we have made over the past several years, along with our low-cost model and flexible pricing strategies, we've remained in a strong position to help mitigate some of these challenges.

We utilize our Private Fleet and Global Sourcing Office to help offset some of the broader supply chain challenges.

While we saw pressures building early, we closely managed inventory and used our flexible pricing discipline to help offset some of the effects of inflation.

We also carefully manage labor costs, utilizing short-term incentives to remain competitive while continuing to give us flexibility moving forward.

Our ability to execute and navigate this challenging environment is a testament to the investments we have made over the years and is a core strength in our foundation.

Speaker 3: With the investments in our infrastructure that we have made over the past several years, along with our low-cost model and flexible pricing strategies, we remain in a strong position to help mitigate some of these challenges. We utilize our private fleet and global sourcing office to help offset some of the broader supply chain challenges. While we saw pressures building early, we closely manage inventory and use our flexible pricing discipline to help offset some of the effects of inflation. We also carefully manage labor costs, utilizing short-term incentives to remain competitive while continuing to give us flexibility moving forward.

I would note that although some of the conditions from a supply chain standpoint have improved in the back half of the year, the environment continues to remain challenging, and while we see some signs that certain constraints are abating, we expect that these conditions will persist in the near term.

That said, we are in a strong position to continue to mitigate some of the challenges and manage accordingly.

As I cover our financial highlights for the quarter and year, I would like to point out that our yearly and quarterly results include the positive impact of the 53rd week in 2022.

As with many companies with a retail component, our reporting period is based on a 445 calendar, meaning our months are on a cycle of four and five week periods.

Speaker 3: Our ability to execute and navigate this challenging environment is a testament to the investments we have made over the years and as a core strength in our foundation. I would note that, although some of the condition from a supply chain standpoint have improved in the back half of the year, the environment continues to remain challenging and, while we see some signs that certain constraints are abating, we expect that these conditions will persist in in the near term. That said, we are in a strong position to continue to mitigate some of the challenges and manage accordingly. As I cover our financial highlights for the quarter and year, I D like to point out that our yearly and quarterly results include the positive impact of the fifty-threerdweek in 2020 -two.

Typically, this fits into a traditional 52-week year, but every four to five years, there's an extra week account for in the year, causing some distortions to year-over-year comparisons.

This past year in 2022, we had the positive impact of the 53rd week, which will reset the cadence and reporting calendar. While we did receive a benefit to revenue and operating income related to the extra week in the year, primarily in our Office Depot and ODP Business Solutions divisions, it is worth noting that we did begin the fiscal 2022 prior year on the 26th of December during a week with relatively lower demand.

Speaker 3: As with many companies with a retail component, our reporting period is based on a four 4- five calendar, meaning our months are on a cycle of four and five week periods. Typically this fits into a traditional 52 week the year, but every four to five years there is an extra week account for in the year, causing some distortions to year over-year comparisons. This past year, in 2022, we had the positive impact of the 50 threerd week, which will reset the cadence and reporting calendar. While we did receive a benefit to revenue and operating income related to the extra week in the year, primarily in our office Depot and ODP business solutions divisions, it is worth noting that we did begin the fiscal 2022 prior year onthe 2000 sixth of December , during a week with relatively lower demand. I will point out the impacts related to the 50 threerd week as I cover our financial results. Now, Turning to the highlights of our financial results as shown on Slide 16, consistent with previous quarters, we have provided our results on both a gap and adjusted basis, ING to the specifics of our results.

I will point out the impacts related to the 53rd week as I cover our financial results. Now turning to the highlights of our financial results as shown on slide 16. Consistent with previous quarters, we have provided our results on both a gap and adjusted basis. Turning to the specifics of our results, we generated total revenue of $2.1 billion in the fourth quarter.

up 3% versus Q4 of last year. This amount included the favorable impact related to the 53rd week of approximately $128 million. This was primarily driven by stronger sales and ODT business solutions, as return to office trends and business activity remain strong in the quarter.

Much of this was offset by lower sales in our consumer business, Office Depot, partly due to 58 fewer stores in service compared to last year, coupled with lower traffic, lower e-commerce sales and lower comparable sales for products previously in high demand last year in the later stages of the pandemic.

GAP operating income in the quarter was $55 million, up from $31 million last year. Operating income included a favorable impact related to the 53rd week of about $20 million.

Speaker 3: We generated total revenue of $2.1 million in the fourth quarter, up 3% versus Q4 of last year. This amount included the favorable impact related to the 50 threerd week ofapproxately $128 million. This was primarily driven by stronger sales in odt business solutions as returned to office trends and business activity remained strong in the quarter. Much of this was offset by lower sales in our consumer business office Depot, partly due to 50- eight fewer stores in service compared to last year, coupled with lower traffic, lower e-commerce sales and lower comparable sales for products previously in high demand last year in the later stages of the pandemic GAAP. Operating income in the quarter with 50- five million dollars up from $31 million last year. Operating income included a favorable impact related to the 50 threerd week of about $2 million. Also included an operating in income was a net three million dollars of charges, consisting of six million associated with noncash asset impairment.

Also included in operating income was a net $3 million of charges consisting of $6.9 associated with non-cash asset impairment, primarily related to the right of use assets associated with our store locations, $8.9 of other operating costs associated with realignment activities and restructuring costs.

Offset by the reversal of 11 million related to restructuring activities as we reviewed the remaining amount of our maximize B2B restructuring program Excluding these items are adjusted operating income for Q4 with $58 million up from $47 million last year Unallocated corporate expenses were $22 million a just to the EBITDA of $89 million for the quarter compared to $87 million in last year's fourth quarter

This includes adjusted depreciation and amortization expense of $31 million and $35 million in the fourth quarter of 2022 and 2021 respectively.

Speaker 3: Primarily related to the right of use assets associated with our store locations, eight million of other operating costs associated with realignment activities and restructuring costs offset by the reversal of 11 illion related to restructuring activities. As we have reviewed the remaining amount of our maximized B two B restructuring program, Excluding these items, are adjusted operating income for q,4 with fifty $8 million up from $37 million last yearar unallocated corporate expenses were twent Y two million dollars. Adjusted EBITDA: $89 million for the quarter, compared to $87 million in last year's fourth quarter. This includde adjusted depreciation and amortization expense of $31.000035 trillion in the fourth quarters of two thousand and Y two and two thousand and one.

I would also mention that overall depreciation has been slightly lower as a result of the reclassification of our headquarters building as an asset help for sale.

The fiscal 2022 cumulative amount of the reduction is approximately $1.5 million.

Excluding the aftertax impact from the items mentioned earlier, a adjusted net income for the fourth quarter was $49.85 per diluted chair compared to just a net income of $37.91 or $71 per diluted chair in the prior year period.

including the aftertax impact from the items mentioned earlier, adjusted net income for the fourth quarter was $40 million or 85 cents per diluted chair compared to just a net income of $37 million or 71 cents per diluted chair in the prior year period. Turning to cash flow.

Our team did a terrific job in driving cash flow in the quarter. Seeing some of the pressures in the first half, we took a keen eye on managing inventory levels and other working capital items, helping to deliver strong cash flow to close out the year. In the quarter, we generated operating cash flow of $158 million, which included about $20 million in restructuring and other spend. This compared to operating cash flow of $88 million last year. Capital expenditures in the quarter were $31 million compared to 20.

Speaker 3: We took a key eye in managing inventory levels and other working capital items, helping to deliver strong cash flow. To close out the year, in the quarter we generated operating cash flow $158 million, which include about $2 million in restructuring and other spend. This compared to operating cash flow of $88 million last year. Capital expenditures in the quarter were $31 million compared to $26 million in the prior year period. Reflected targeted growth investments in our digital transformation.

See you here.

I can't say enough about how proud I am of our team for driving cash flow over the past year. Given all the macroeconomic challenges we faced, which is a true testament of our operational focus.

Now turning to slide 17. I've highlighted some of the key performance measures for the full year 2022. We delivered impressive results against a much more demanding macroeconomic backdrop, meeting our guidance ranges for the year. Total company sales for the year totaled $8.5 billion flat with the prior year. This include the impact related to the 53rd week as I mentioned earlier.

Speaker 3: Distribution network and e-commerce capabilities, partially offset by lower CapEx in our retail division. Adjusting for cash charges of approximately $3 million associated with the company's restructuring and realignment plans, adjustinged free cash F in the quarter was $147 million, a significant increase from $8 million in the previous year.

Stronger sales generated in our B2B business as back-to-office trends increased throughout the year and business activity picked up helped to drive our performance.

This was offset by lower sales in our consumer business segment largely due to a smaller store footprint relative to last year, lower traffic as consumer activity was slightly weaker throughout the year, and lower e-commerce sales.

Speaker 3: I can't say enough about how proud I am of our team for driving cash flow over the past year, given all the macroeconomic challenges we faced, which is a true testament of our operational focus.

Speaker 3: Say enough about how proud I am of our team for driving cash flow over the past year, given all the macroeconomic challenges we faced, which is a true testament of our operational focus now turning to Slide seventeen.

As reflected on a full year gap basis, we recorded operating income of $2,43 million compared to operating income of $234 million last year.

Speaker 3: I've highlighted some of the key performance measures for the full year 2022. We delivered impressive results against the much more demanding macroeconomic backdrop, meeting our guidance ranges for the year. Total company sales for the year total $8.5 billion, flat with the prior yearer. This include the impact related to the 53 RD week, as I mentioned earlier. Stronger sales generated in our B two B business, as back-to office trends increased throughout the year and business activity picked up, helped to drive our performance. This was offset by lower ses in our consumer business segment, largely due to a smaller store footprint relative to last year. Lower traffic, as consumer activity was slightly weaker throughout the year, and lower e-commerce sales.

This result also included the favorable impact related to the 53rd week. Strong top-line results and our continued commitment to our low-cost model approach helped drive this result. It is also worth mentioning that this result included the impact from our peak year of both OPEX and CAPEX investment related to VAERS.

Full year adjusted operating income was $296 million compared to $305 million last year with adjusted EBITDA of $437 million. Solid results given the challenging business conditions.

Excluding the after tax impact from the items mentioned earlier, 2022 adjusted net income from continuing operations with $216 million, or $4.40 per share. Compared to $234 million, or $4.28 per share in the prior year period.

Speaker 3: As reflected on a full year GAAP basis, we recorded operating income of $243 million, compared to operating income of $234 million last year. This result also included a favorable impact related to the 50 RD week. Strong top line results, and our continued commitment to our low-post model approach helped drive this result. It is also worth mentioning that this result included the impact from our peak year of both OpEx and CapEx investment related to veris full year adjusted operating income of $296 million compared to $305 million last year.

Finally, regarding cash flow for the year, cash provided by operating activities of $237 million, which included $63 million in cash costs associated with our restructuring, separation activities and other costs. CapEx was $99 million in 2022, largely targeted at our digital transformation, B2B platform and e-commerce capabilities.

Speaker 3: With adjusted EBITDA: $437 million. Solid results given the challenging business conditions, excluding the after-tax impact from the items mentioned earlier. 2022 adjusted net income from continuing operations with $216 million, or $4 and 40 cents per share, compared to $234 million, or $4 and 28 cents per share in the prior year period.

In total, we generated just a free cash flow of $201 million in 2022.

Looking back at our cash loan comparing first half versus second half of 2022, it highlights just how much effort our team made to meet our target for the year. We delivered $147 million in adjusted free cash loan to the fourth quarter and over $300 million in the second half of 2022. A tremendous improvement over the first half of the year.

Speaker 3: Finally regarding cash flow for the year, cash provided by operating activities of $237 million, which included $63 million in cash costs associated with our restructuring, separation activities and other costs. Capex with 99.002022 million, largely targeted at our digital transformation, B two B platform and e-commerce capabilities.

where adjusted free cash flow usage was $100 million as we addressed higher supply chain costs and overall inflation. As we navigated the second half of the year, the strategies we implemented to manage inventory levels, balance pricing promotions, and drive cash conversion led to strong performance across all our key metrics.

Speaker 3: In total, we generated adjusted free cash flow oftwo hundred and $1 million in thousand and 22. looking back at our cash flow, comparing first half versus second half of two thousand and 22, it highlights just how much effort our team made to meet our target for the year. We delivered a hundred and $47 million an adjusted free cash flow in the fourth quarter and over $3 million in the second half of two thousand and 22- a tremendous improvement over the first half of the year.

Now I would like to cover our business unit performance starting with ODP business solutions on slide 18.

ODP Business Solutions continues to deliver improving results as the return to office trends gain further traction, generating revenue of just over $1 billion in Q4, up over 10% in the quarter relative to Q4 of last year.

This did include a benefit related to the 53rd week of about $58 million.

Speaker 3: where adjusted free cash flow usage was $100 million as we addressed higher supply chain costs and overall inflation. As we navigated the second half of the year, the strategies we implemented to manage inventory levels, balance price and promotions, and drive cash conversion led to strong performance across all our key metrics.

Our core contract business, our federation companies, and our grand and toy business in Canada all delivered strong year-over-year growth.

As a reminder, our federation companies are the regional tuck-in acquisitions we have been executing over the past few years, including this year, expanding our distribution reach and allowing us a more effective customer acquisition strategy in previously underserved markets.

Speaker 3: Now I would like to cover our business unit performance, starting with OTP business solutions. On Slide 18, OTP business solutions continued to deliver improving results as a return to office trends gained further traction, generating revenue of just over $1 billion in Q4, up over 10% in the quarter relative to Q4 of last year. This did include a benefit related to the 53 RD week of about $58 million.

From a product and services standpoint, we saw stronger demand across the board for core supplies, as well as for our adjacency categories including Jan Sand cleaning and break room, workspaces, and copy and print services.

Our adjacency product categories as a percentage of total revenue, a KPI for ODP Business Solutions, remained at 44%.

Speaker 3: Our core contract business, our federation companies, and our grand and toy business in Canada, all delivered strong year-over-year growth. As a reminder, our federation companies are the regional tuck-in acquisitions we have been executing over the past few years, including this year, expanding our distribution reach and allowing us a more effective customer acquisition strategy in previously underserved markets.

This percentage may toggle from quarter to quarter, but our long-term objective is to consistently grow this percentage and also absolute dollars as we expand our value proposition and while continuing to leverage our strength and core categories. For 2023.

We expect this percentage to be flat to slightly up as compared to fiscal 2022. And as you heard during our investor day meeting, ODP Business Solutions is on a path to drive its EBITDA margins back to pre-COVID levels and beyond. They made real great progress throughout the year and quarter generating operating income of $37 million in the quarter.

Speaker 3: From a product and services standpoint, we saw stronger demand across the Board for core supplies, as well as for our adjacency categories, including Jan, cleaning and breakroom work spaces and copy and print services. Our adjacency product categories: as a percentage of total revenue, a KPI for ODP business solutions remained at 44%. This percentage may toggle from quarter-to-quarter, but our long-term objective is to consistently grow this percentage, and also absolute dollars, as we expand our value proposition and while continuing to leverage our strength in core categories. For 2023, we expect this percentage to be flat to slightly up as compared to fiscal 2022 and as you heard during our Investor Day meeting.

more than double last year.

This represents a 180 basis point margin improvement as a percentage of sales.

This included a favorable benefit of about $5 million related to the 53rd week. Strong sales of core supplies and efficient operations and pricing disciplines help to mitigate inflationary pressures and position us to drive these strong results.

I would add that the work we started in early 2022, utilizing our data-driven approach and performing line-level reviews of customer contracts, has helped us identify margin opportunities in the business while continuing to meet customer demands in the most efficient way.

Speaker 3: ODP Business Solutions is on a path to drive its EBITDA margins back to pre-COVID levels and beyond. They made real great progress throughout the year and quarter, generating operating income of $37 million in the quarter, more than double last year. This represents a 180 basis points margin improvement as a percentage of sales.

Now turning to our consumer division results as shown on slide 19. Our Office Depot Consumer Division continued to provide excellent service and a strong value proposition to its home office, education, consumer, and small business customers.

Speaker 3: This included a favorable benefit of about $5 million related to the 53rd week. Strong sales of core supplies and efficient operations and pricing disciplines helped to mitigate inflationary pressures and positioned us to drive these strong results. I would add that the work we started in early 2022 utilizing our data-driven approach and performing line-level reviews of customer contracts has helped us identify margin opportunities in the business while continuing to meet customer demands in the most efficient way.

Reported revenues in a quarter were down 3% to $1.1 billion, driven partially by 58 fewer retail stores in service this year versus last year related to planned store closures as well as lower store traffic.

We did experience relatively sluggish consumer behavior in the second half of the year and it is an area we are closely monitoring to the start of 2023.

Additionally, we closed 29 stores in the quarter, ending the quarter with just under 1,000 stores in service. Sales results benefited by approximately $70 million from the 53rd week.

Speaker 3: Now turning to our Consumer Division results as shown on slide 19. Our Office Depot Consumer Division continued to provide excellent service and a strong value proposition to its home office, education, consumer, and small business customers. Reported revenues in a quarter were down 3% to $1.1 billion, driven partially by 58 fewer retail stores in service this year versus last year related to planned store closures, as well as lower store traffic. We did experience relatively sluggish consumer behavior in the second half of the year and it is an area we are closely monitoring to the start of 2023. Additionally, we closed 29 stores in the quarter, ending the quarter with just under 1,000 stores in service.

Lower sales for product categories previously in high demand during the window of the pandemic contributed to the lower year-over-year revenues.

A good example of this is cleaning products as well as certain tech. Partially offsetting lower demand and same store traffic in the quarter was higher conversion rates and average order volumes, leading to a strong increase in sales per shopper. We saw continued strong demand for our copy and print services as well as in-mail and shipping services.

offset by lower demand in core categories and cleaning. We are happy to report that our omni-channel presence on a SAMHSA basis continues to grow with strong BOPIS sales in the quarter. Supporting this success is our 20-minute pickup guarantee, which continues to drive strong customer satisfaction, with our retail net promoter scores above 70%. From an operating perspective, we continue to deliver solid operating margin performance in the quarter despite the low demand in the quarter.

Speaker 3: Sales results benefited by approximately $7 million from the 53 RD week. Lower sales for product categories previously in high demand during the window of the pandemic contributed to the lower year-over-year revenues. A good example of this is cleaning products, as well as certain tech. Partially offsetting lower demand and same-store traffic in the quarter was higher conversion rates and average order volumes, leading to a strong increase in sales per shopperwe saw continued strong demand for our copy and print services, as well as in-mail and shipping services.

Speaker 3: offset by lower demand in core categories and cleaning. We are happy to report that our omni-channel presence on a SAMHSA basis continues to grow with strong BOPIS sales in the quarter. Supporting this success is our 20-minute pickup guarantee, which continues to drive strong customer satisfaction, with our retail net promoter scores above 70%. From an operating perspective, we continue to deliver solid operating margin performance in the quarter despite the lower traffic and higher supply chain and inflationary costs. We generated operating income of $57 million in the quarter, compared to $59 million last year. Lower operating income compared to last year was primarily driven by lower sales and higher supply chain performance.

related to the impact of the 53rd week.

Finally, we are excited by the launch of our new Imagine Success campaign, which highlights how we are our destination for home office, education, consumer, and small business customers who can rely on us to meet their growing needs.

As we mentioned during our investor day meeting, our KPIs for Office Deep are focused on improving our same source sales comp and driving e-commerce sales. For 2023, we're focusing on delivering same source sales comps in the range of negative 2 to negative 3% on a comparative basis, which is a slight improvement over the fiscal 22 results. We also expect that our online penetration will continue to be a source of strength and will continue to be a source of growth.

as we execute on the full potential of our Omni Channel strategy.

Now turning to slide 20. As we mentioned earlier, we have separated VARE into its own business and its own reporting unit.

Their specializes in B2B and Consumer Business Service delivery with core competencies and distribution, fulfillment, transportation, global sourcing and procurement, which also includes our operations in Asia. As we outlined that investor day, their serves the internal needs of its primary customers, Office Depot, and ODP business solutions, as well as third parties through our procurement and supply chain business. Thank you.

Speaker 3: Range of negative two to negative 3% on a comparative basis, which is a slight improvement over the fiscal 20: two results. We also expect that our online penetration will continue to be a source of strength as we execute on the full potential of our omnichannel strategy. Now, Turning to Slide 20, as we mentioned earlier, we have separated there into its own business.

Our intercompany agreements between Vayr and the business units stipulate the cost and fees charged for procurement of goods and supply chain services. Vayr's stated mission statement is to be the lowest cost provider to Office Depot and ODP Business Solutions, which will drive the best enterprise results upon consolidation for all of ODP. Therefore, as we undertake actions to drive efficiencies, we will be able to provide the best services for all of our customers.

Speaker 3: and its own reporting unit. VARE specializes in B2B and consumer business service deliveries with core competencies in distribution, fulfillment, transportation, global sourcing and procurement, which also includes our operations in Asia.

including strategically optimizing working capital and distribution effectiveness, which may include alternate sourcing strategies, such as the use of virtual warehouse delivery to Office Depot and ODB Business Solutions and customers, the intercompany revenue and corresponding allocated profit to Vayr could fluctuate over time.

Speaker 3: As we outlined that Investor Day. They serves the internal needs of its primary customers'- office Depot and ODP business solutions, as well as third parties through our procurement and supply chain business. Our inter-company agreements between V and the business units stipulate the cost and fees chargeed for procurement of goods and supply chain services.

For example, we are pursuing new sourcing activities that should reduce the inflationary impact we have seen in certain categories.

As Vayr is successful in those endeavors benefiting the total ODP enterprise, which is our focus, the fees Vayr collects from the sourcing component of the intercompany transactions could be lower, resulting in lower allocated operating profit at Vayr. Therefore, as we proceed throughout this year and going forward, it will be helpful for us to provide investors with transparency as to the fluctuation in Vayr's operating results.

Speaker 3: They are stated mission statement is to be the lowest cost provider to office Depot and ODP business solutions which will drive the best enterprise results upon consolidation for all of odptherefore as we undertake actions to drive efficiencies including strategically optimizing working capital and distribution effectiveness which may include alternate sourcing strategies such as the use of virtual warehouse delivery to office Depot and ODP business solutions and customers the intercompany revenue and corresponding allocated profit to their.

as a result of these intercompany activities. Outside of intercompany transactions, Vayr is also pursuing third-party growth, leveraging our capacity and expertise in sourcing and logistics, and as we continue to look at opportunities to become more efficient with our internal customers.

Speaker 3: could fluctuate over time. For example, we are pursuing new sourcing activities that should reduce the inflationary impact we have seen in certain categories. As VARE is successful in those endeavors, benefiting the total ODP enterprise, which is our focus, the fees VARE collects from the sourcing component of the intercompany transactions could be lower, resulting in lower allocated operating profit at VARE. Therefore, as we proceed throughout this year and going forward, it will be helpful for us to provide investors with transparency as to the fluctuation in VARE's operating results.

And these benefits should accrue to attracting external customers as well. This is something we are very excited to grow going forward and is a key measure of the long-term commercial success for VAIR. This is one of the primary reasons we have positioned it as a standalone entity.

And as Jerry mentioned in the 3Horizon strategy, this is a great opportunity to generate organic EBITDA from our existing investments, and over time build upon its world-class capabilities to provide full 3PL services to third parties in the future.

Speaker 3: As a result of these intercompany activities. Outside of intercompany transactions, there is also pursuing third-party growth, leveraging our capacity and expertise and sourcing and logistics, and as we continue to look at opportunities to become more efficient with our internal customers, and these benefits should accrue to attracting external customers as well. This is something we are very excited to grow going forward and is a key measure of the long-term commercial success for veyor. This is one of the primary reasons we have positioned it as a stand-alone entity and, as Jerry mentioned, in the three horizon strategy.

Regarding its financial results for Q4, the Air drove sales of $1.5 billion, predominantly supporting the purchasing and supply chain operations of ODP Business Solutions and Office Depot that are eliminated upon consolidation. Included in this amount was $10 million in sales to external parties, more than double the previous year.

There, total operating income for Q4 was $4 million compared to $7 million last year, primarily due to the aforementioned intercompany transactions and how we fulfilled orders for our customers, along with lower B2C product volume.

Speaker 3: This is a great opportunity to generate organic EBITDA from our existing investments and, over time, built upon its world-class capabilities to provide full three PL services to third parties in the futureregarding its financial results for Q4, their drove sales of one point five billion, predominantly supporting the purchasing and supply chain operations of ODP, business solutions and office Depot that are eliminated upon consolidation. Included in this amount was one million in sales to external parties, more than double the previous year. Their total operating income for Q4 was four million dollars.

However, as a key metric that we identified during our investor day meeting, we are beginning to see solid traction in EBITDA generated from third-party customers. And while small, this is one of our key metrics going forward.

And we are making progress, showing a significant increase in EBITDA generated from third parties in 2022, including amounts generated through a contra expense benefit from providing supply chain services and backhaul to our vendors, thus lowering the overall cost of delivery. While we are encouraged by this progress, we will continue to work to ensure that the

We are even more excited about the year ahead, as our plans call for more than doubling of the amount of externally generated EBITDA in 2023, targeting approximately 10 million in EBITDA from third parties in the year ahead.

This progress places us ahead of the path we set during our Investor Day meeting, which had a goal of $30 million by 2025. Now turning briefly to Varis on slide 21. As you heard during our Investor Day meeting, Varis is our digitally native B2B procurement platform that is focused on transforming digital commerce between buying organizations and suppliers.

Speaker 3: Including amounts generated through a contraexpense. Benefit from providing supply chain services and backhaul to our vendors, thus lowering the overall cost of delivery.

Veris aims to provide a more modern and convenient experience, a consumer-like experience, connecting buyers and suppliers in a way that solves the pain points that exist today, saving money for our customers, and removing friction through a digital experience.

Speaker 3: While we are encouraged by this progress, we are even more excited about the year ahead, as our planans call for more than doubling of the amount of externally generated EBITDA in 2023, targeting approximately one million in EBITDA from third parties in the year aheadthis progress places us ahead of the path we set during our Investor Day meeting, which had a goal of three million by 2020. -five.

We recently launched the Verus platform at the end of last year, and we are continuing to add customers and suppliers to the network, with a goal of driving Gross Transaction Volume, or GTV, which is both merchandise and services through the network, the key KPI we identified at Investor Day.

Speaker 3: Now turning briefly to veris on Slide 21. as you heard during our Investor Day meeting, veris is our digitally native B two B procurement platform that is focused on transforming digital commerce between buying organizations and suppliersveris aims to provide a more modern and convenient experience, a consumer-like experience, connecting buyers and suppliers in a way that solve the pain points that exists today.

Keeping in mind that the platform launched late last year from a results perspective, Varys generated about 2 million in revenue in the quarter. Primarily subscriptions derived from existing customers that we acquired on the buyer quest platform.

As we previously announced, we expect that 2022 will be the peak year of investment for Veris as we prepared and launched the platform, and positioned this business to scale for the future.

Speaker 3: Saving money for our customers and removing friction through a digital experience. We recently launched the vious platform at the end of last year, and we are continuing to add customers and suppliers to the network with a goal of driving gross transaction volume, or GTV, which is both merchandise and services- through the network. The key KPI we identified at Investor Day.

Related to this effort, Verus' operating loss was $18 million in the quarter. It's still early days, but we are really excited about the progress we're making at Verus and the continuous improvement and positive experience we're bringing to the table for our customers.

As part of our plan for 2023, we will also begin to transfer some ODP Business Solution customers that are primarily direct-assist customers.

Speaker 3: Keeping in mind that the platform launched late last year. From a results perspective, veraris generated about two million in revenue in the quarter, primarily subscriptions derived from existing customers that we acquired on the byioquest platform. As we previously announced, we expect that 2022 will be the peak year of investment for verars, as we prepared and launched the platform and positioned this business to scale for the futurerelated to this effort, various' operating loss, with $18 million in the quarterit's still early days, but we are really excited about the progress we're making.

These direct assist customers are generally smaller customers, utilizing ODP business solutions platform independently with typically lower level of direct interaction from ODP sales force. Porting some of these customers over will create a dive for the total enterprise for a number of reasons. First.

This will allow us to provide our customers with a better and more modern e-commerce experience, improving satisfaction levels.

Next, given the ease of use and convenience of the platform, our customers will not only be able to continue to purchase ODP products, but will also have the opportunity to source other products they buy outside of ODP's assortment through the platform from other suppliers, growing both GTV and creating additional revenue opportunity for Verus and the collective enterprise.

Lastly, what we have seen in early adoption is that customers buying through the Verus platform have higher overall contract compliance, a key benefit for ODP Business Solutions and for both customers and suppliers on the Verus platform. So overall, this creates a great opportunity to improve customer experience, efficiency and contract compliance.

Speaker 3: For the total enterprise for a number of reasons. First, this will allow us to provide our customers with a better and more modern e commerce experience, improving satisfaction levels. Next, given the ease of use and convenience of the platform, our customers will not only be able to continue to purchase OD P products, but will also have the opportunity to source other products they buy outside of ODP's assortment.

while providing an opportunity to capture more sales through the platform from other products and services they buy outside of ODP Business Solutions. From an economic standpoint, ODP Business Solutions will continue to generate revenue as they have from sales of their products to these customers, however at a slightly lower margin as they will pay transaction fee to Veris as gross transaction volume flows through the platform.

Speaker 3: Through the platform from other suppliers, growing both GTV and creating additional revenue opportunity for verious and the collective enterprise. Lastly, what we have seen an early adoption is that customers buying through the various platform have higher overall contract compliance, a key benefit for ODP business solutions and for both customers and suppliers on the various platform.

just like any other vendor using a platform to transact their business. That said, we believe the benefits related to higher contract compliance, more efficient customer reach, lower sales commissions in certain cases, and the additional opportunity to capture overall GTV sales more than outweighs the incremental fees ODP Business Solutions will incur for using the platform.

Speaker 3: So overall, this creates a great opportunity to improve customer experience, efficiency and contract compliance, while providing an opportunity to capture more sales through the platform from other products and services they buy outside of ODP business solutions. From an economic standpoint, ODP business solutions will continue to generate revenue as they have from sales of their products in these customers, however at a slightly lower margin, as they will pay transaction feed of veris as gross transaction volume flows through the platform, just like any other vendor using a platform to transact their business.

We're excited about the progress and hope you can join us and members of the VARIS team as we show a demonstration of the VARIS platform tomorrow at the NASDAQ. Now briefly turning to our balance sheet on slide 22. We ended the quarter with total liquidity of approximately 1.3 billion dollars consisting of 403 million dollars in cash and cash equivalents and 856 million dollars in availability.

under our asset-based lending facility. Total debt at the end of the quarter was approximately $188 million. Next, as we announced in November , we put a new $1 billion share buyback plan in place and we have been aggressively buying back shares in the fourth quarter. In Q4 and under the new plan, we repurchase about 3.4 million shares for approximately $153 million. Adding this to our activity under our prior authorization, we retired about 6.4 million shares for approximately $1.4 million.

Speaker 3: That said, we believe the benefits related to higher contract compliance, more efficient customer reach, lower sales commissions in certain cases and the additional opportunity to capture overall GTV sales more than outweighing the incremental fees ODP business solutions will incur for using the platform.

Speaker 3: We're excited about the progress and I hope you can join us in, members of the vus team, as we show a demonstration of the vus platform tomorrow at the NASDAQ. Now briefly Turning to our balance sheet. On Slide 22, we enter the quarter with total liquidity of approximately $1.3 million, consisting of 403 million doars in cash and cash equivalents and $856 million in availability under our asset-based lending facility.

Speaker 3: Total debt at the end of the quarter was approximately $188 million. Next, as we announced in November , we put a new $1 million share buyback plan in place and we have been aggressively buying back shares. In the fourth quarter in Q4 and under the new plan we repurchased about three point four million shares for approximately $153 million.

and the ODP equity story.

We finished the year with a very strong balance sheet, allowing continued flexibility for our allocation of capital. Our priorities include repurchasing shares and driving our business for cash flow and selected avenues for growth, all with the goal of maximizing shareholder value. Before moving to 2023 guidance, we will be issuing our 10k later today, and I want to thank the entire finance team on that significant lift.

Speaker 3: Adding this to our activity under our prior authorization. We retired about six point four million shares for approximately $266 million. You'll notice a slightly higher number of shares repurchase in our upcoming 10 -k, which includes a final share settlement of our ASR program and Q2, in total for 2020 -two. We have returned nearly three million capital to investors through share buybacks.

In addition, to help support our analysts and investor community, we plan to release our historical GAAP financials under the 4BU structure in the upcoming weeks. We will be furnishing this information under an 8K.

Speaker 3: And I am pleased to announce we continue to be active repurchasing shares, as our liquidity supports our program and we see continuing value in the ODP equity story. We finish the year with a very strong balance sheet allowing continued flexibility for our allocation of capital. Our priorities include repurchasing shares and driving our business for cash flow and selected avenues for growth, all with the goal of maximizing shareholder value before moving to 2023 guidance. We will be issuing our 10 -k later today and I want to thank the entire finance team on that significant lift.

Now turning to our 2023 guidance as shown on slide 23. Considering the macroeconomic environment and industry conditions, our guidance for the year ahead is as follows. We are expecting to generate sales in the range of $8 to $8.4 billion, which includes the impact of closed stores, annualized and expected.

We're expecting to deliver adjusted EBITDA between $400 to $430 million and adjusted operating income between $270 to $300 million.

We are aiming to drive adjusted earnings per share between $4.50 to $5.10 per share. This range will include the effect of our activity under our share repurchase program. We plan to generate adjusted free cash flow between $200 to $230 million and CapEx between $100 and $120 million. A few comments about the assumptions in this guidance.

Speaker 3: In addition, to help support our analysts and Investor community, we plan to release our historical GAAP financials under the four B structure in the upcoming weeks. We will be furnishing this information under an 8? -k. Now turning to our 2023 guidance, as shown on Slide twenty-three.

Speaker 3: Considering the macroeconomic, environment and industry conditions, our guidance for the year ahead is that falls. We are expecting to generate sales in the range of eight to eight point four million dollars, which include the impact of closed stores, annualized and expected. We're expecting to deliver adjusted EBITDA between 400 to four and $3 million and adjusted operating income between 270 to $3 million. We are aiming to drive adjusted earnings per share between $4 and 50 to five doars- 10 cents per share. This range will include the effect of our activity under our share repurchase program.

First, as we stated earlier, we have been experiencing some weakness in consumer activity in the second half of last year, and our guidance assumes that this carries forward into 2023, but stays relatively stable throughout the year.

We expect that the current macroeconomic conditions stay relatively constant with the end of 2022. The guidance also assumes continued activity under our share buyback authorization, a similar pace of store closures at Office Depot, and a continued top line and margin improvement at ODP Business Solutions.

We are also assuming a stable supply and procurement environment at VARE and revenue growth and lower OPEX burden at VARIS.

As we stated during our investor meeting, we expect that 2022 was the peak year of investment for Verus as they prepared and launched the platform.

Our 2023 guidance assumes that revenues will begin to grow on the platform and we expect that CapEx investment for rares will be approximately in the range of $20-30 million and OpEx in the range of $50-69 million.

In summary, we've executed extremely well across our strategic initiatives and drove strong results in 2022. We have strategically realigned the business, have a capital return plan that balances investments with returns to shareholders, and an organization that is fully aligned and excited about the years ahead.

Speaker 3: 22 the guidance also assumes continued activity under our share buyback authorization, a similar pace of store closures at off Depot and a continued top line and margin improvement at ODP business solutions. We are also assuming a stable supply procurement environment at there and revenue growth and lower OpEx burden at veris. As we stated during our Investor meeting, we expect that two thousand and 22 was a peak.

And with that operator, I will turn it over for questions. As a reminder to ask a question, you will need to press star 1 1 on your telephone again that's star 1 1 on your telephone to ask questions. A great operator. Hi, this is Tim Tim.

with ODP. We actually have an analyst that could not join us today on the call. So he has submitted some virtual questions. So I'm going to go ahead and ask those virtual questions. So the first question, and this is from Michael Lasser at UBS. You provided strong guidance for 2023, which does assume a relatively stable macro.

Speaker 3: Drove strong results in 2022. We have strategically realigned a business, have a capital return plan that balances investments with return to shareholders, and an organization that is fully aligned and excited about the years ahead. And with that operator I will turn it over for questions. As a reminder, to ask a question you will need to press star 1- one on your telephone again that.

ODP business solutions in 2022, we see that continuing to 2023. I think that our low-cost model, our operational excellence, and our balance sheet strength is going to help as well. And I think if we hit our commitments we had last year in tough economic conditions, I think we can do the same thing as we move forward in 2023 as well. Anthony? Yeah, I would just add, I think if you look back to the prior great recession, 2008-2009, we have a much healthier...

Speaker 3: And this is from Michael lassert UBS.

Speaker 3: You provided strong guidance for 2023, which does assume a relatively stable macro environment. Just how sensitive is the business if say, the employment goes from three point a half to 5%? Just what is the sensit vthe overall? it'took a Anthony at some color as well. First of all, I think we have Traverse routs to market. That's the power of the four BU model.

stronger operating environment as well as the store network. So as we think about the impact, you know, obviously we're always going to look at that impact. We're going to manage the balance sheet accordingly, but I think we're going to show that we continue to be resilient.

Speaker 3: I think that's going to us. You saw this strength of OD P business solutions in 2022. We see that continuing to two million and 23. I think that our low-cost model, our operational excellence in our balance sheet strength is going to help as- and I think- we hit our commitments we had last year in tough e come in the tough economic conditions. I think we can do the same thing as we move forward intwothousand and 23 as well, think. I' just add, I think, if you look back to the prior great recession in 2008 2009, we have a much healthier and stronger operating environment, as well as the store network.

Great. Now, the next question is, if the macro environment gets significantly worse, how does this impact plans for the shared buyback? Well, first, I want to thank the Board for their commitment to the $1 billion buyback, and the Board is still committed to the $1 billion buyback through 2025.

We've got a really strong balance sheet. That really helps. We demonstrated our operational excellence.

in Q4 when we bought a lot of shares back in tough economic conditions and we'll continue to drive our operational excellence. I think it separates us. We've quarter over quarter demonstrated this excellence that really helps to generate cash.

Speaker 3: As we think about the impact. You know, obviously we're always going to look at that impact. We're going to manage the balance et accordingly. But I think we're going to show that where we continue to be resilient, great. Now the next question is: if the macro environment gets significantly worse, how does this impact plans for the share buyback? But first I want to thank the Board forfurther commitment to the $1 billion buyback. The Bo isstillcommitted to the $1 billion buyback through 2025. We've got think that we've got a really strong balance sheet. That really helps. We demonstrated our operational excellence.

huge cash flow in Q4 and we're going to focus on doing that again this year and have ability because we think returning capital to our shareholders is important. Obviously if conditions got really crazy or some type of even stronger we have the ability to throttle up and down but the reality is we are committed as a board and a company to return capital to our shareholders across that one billion dollar plan by the end of...

The next question is regarding guidance and that is just how much of the guidance in 23 is coming from Bayer and Veris? Let me take that one, Jerry. So as we outlined in our prepared remarks, we expect growth in both Bayer and Veris on a year-over-year basis. We expect growth in both Bayer and Veris on a year-over-year basis.

Speaker 3: Q4. We buy a lot of shares back in tough economic conditions and we'll continue to driver operational excellence. I think separates this. We order of quderter, we demonstrate this excellence. It really helps to generate cash, huge cash flow in Q4 and we're going to focus on doing that again this year. And that ability because we think returning capital to our shareholders is important. Obviously, if conditions got really crazy or some type of even stronger, we have the ability to throw on up and down. But the reality is we are committed as a Board and a company to return capital to shareholders across that one billion large plan by the end of thousand and twenty five.

Overall, for Vayr, outside of the commercial agreements, which is obviously the factored into the ODP Business Solutions and Office Depot results, we expect Vayr to contribute approximately $10 million in external, EBITDA, or roughly $0.10 on an adjusted basis. And just to remind investors that third-party business is really going to come.

through from an EBITDA standpoint by backhaul and our line haul, but there's growth that we have and we're trending higher than our 30 million dollar target that we set for 2025 which is off to a great start.

Speaker 3: Now the next question is regarding guidance and that is just how much of the guidance in 23 is coming from Bay and verus. Let me take that when, Jerry. So as we outlined in our prepared remarks you know, we expect pect growth in both Bay and bearth on a year over year basis overall. For Bay, outside of the commercial agreements which is obviously the factor into the OD P business solutions and office Depot results, we expect bar to contribute approximately one million in an external evda, or roughly 10 cents on an adjusted basis. And just the remind investors that third party business is really going to come.

With respect to Veris, we also provided guidance in the range of both OpEx and CapEx, and this is going to be lower on a year-over-year basis. So good progress on the Veris platform and more to come.

Great, super. The next question is regarding ODP business solutions. Great results in 2022. How much of this is from organic versus any acquisition? I'll take that one. First, none of it's inorganics. All that was organic. I also want to thank Dave and his team for almost doubling operating income across the entire team, all the routes to market as well. I think that's testimony to over here.

Speaker 3: Through from an EBITDA standpoint by back haul and our line, all but their growth that we have and we're trending higher than our $3 million target that we set for 2025, which is off to a great start with respective therear. We also provided guidance in a range, both OpEx and CapEx, and this is going to be lower on a year over year basis. The good progress on the var platform are more to come: great super. The next question is for regarding OD T business solutions: great results in 2022. how much of this is from organic versus any? I'll take. That was the first. None of its.

50% of people are back in the office. But we spent a lot of time, this is Operation Excellence again, we dug through account by account early last year. That had a huge result. Anthony and I and Dave were involved in that. And I think that set us up for a really strong 2022. And that momentum will continue in 23. But again, Dave, Tom, Steve, Brian , Chris, Kim, thank you for a great year in the whole team. It's really making a difference. I'm super optimistic in 23. Great. And the last question is regarding Office Depot. Just generally, it seems that traffic trends have been overall lower.

Speaker 3: In organics. All that was organic. I want to also want to thank Dave in the team for almost doubling operating income may across the entire team, all the routes to market as well, and I think that's testimony to over 50% of people are back in the office. But we spent a lot of time this- the operational license- again we done through account by account early last year. That had a huge result. Anthony I Dave were involved in thatand I think that' says up for a really strong 2022 and that momentum will continue in 23. but again Dave, Tom STE ban and Chris can Thank you for a great year in the whole team. It's really making a difference that I'm super optimistic.

Do you expect this to continue into 2023 and what is the outlook for store closure this year? Kevin, I'll start and then I'll let Anthony finish. From an overall perspective, as we said at Investor Day, we believe category expansion is a huge key to that and we're actually doing a lot of deep dives across all our categories right now. We want to bring in new categories into the business. Also, I want to highlight that, hey, we have a 20-minute guarantee out there from a BOPUS buy-in-line pickup and store that no one else has.

And so we think there's going to be a lot of advantage to Almond Channel. And Kevin's team has done a remarkable job at a, I'll think almost world class, or, you know, mid to high 70s from a, a low to mid 70s, excuse me, from a Net Promoter Score perspective. And that's going to make a difference over time. Customers are going to remember that experience. They're going to want to come back into our stores, across all those pieces, it's important. And they'll let you talk about the footprint. Yeah. You know, I echo Jerry's comments. You know, really, really proud of what the retail team.

Speaker 3: pointthree great. And the last question is regarding office Depot. Just generally seems that traffic trends have been overall lower. Do do've expect this to continue into 2023 and what is the outlook for store closure? I don't Sha.

Speaker 3: 'll start Anthony finish. From a overall perspective, as we said at Investor Day, we believe category expansions a huge key to that and we're actually doing a lot of into de timesves across all our categies. Now wewant to bring in categories of the business. Also want to highlight the Hey, we have a 20 minute guarantee out there from a us by line pickups the store that no one else that. So we think there's going to be a lot of advantished on the channel and Kevin steam is another remarkable job But I'll think almost world class know mid to high seventy's from aso lotad of mid 70- excuse me from a Promoter Score perspect, and that's going to make a difference. Time custom are going remember thatexperience. They're going to want to come back into our stores across all those pieces. Is's important. They taltalk about footprint.

and the omni-channel, I should say, has been able to accomplish over the last couple years. And with the product assortment, with our outlook, with a stronger network, we expect a slightly slower pace of store closures. Again, this is going to be dependent on a number of factors, but we expect a year-over-year slightly slower pace of store closures. Great, super. I think we're up against the hour, so I'll just ask Jerry any final comments. Thanks, Tim, for coordinating. Michael, thanks for the questions you submitted.

And for our investors, thank you. I'm super proud of our team for a tremendous 2022. We delivered to our commitment, which is part of our 5C culture. On investor day, we said we're going to hit our commitments. We delivered that. Our low-cost model contributed that. Our operational excellence contributed that. Our four business unit strategy. And very importantly, our share buyback is very important from a shareholder perspective.

Speaker 3: Yes echoed Jerry's comments. You know really, really proud of what the retail team and the omni channel ized today has been able to accomplish over the last couple of years and with the product assthortment, with our outlook, with a stronger network, we expecteda slightly slower pace of closures. Again, this is going to be dependent on a number of factors, but we expect a year over year slightly slower pace of closure. Cre super. I think we're up against the hour. So I'll just ask Jerry funal and thanks to according Michael, thanks for the questions you submbeen and for our investors, Thank you. I'm super proud of our am for the- a tremendous 2022. We delired to our commitment. We is part of our five C culture Investor Day. We said we're going to get our commitments. We deliver that. Our will look. Cal model contributed that. Our operational actually contributed that. Our four business unit strategy.

and really drive into the valley. Our number one focus is driving shareholder value. We think we're well positioned in 2023 to do that. And I do want to mention again that at Nasdaq tomorrow, we send an invitation out, but really I would encourage everyone to come attend our Verus investor day there. And you'll have Premise and Daniel and the team there to talk about Verus. I'll be there with Anthony as well. We're really excited to talk about the potential value creation of Verus for ODP shareholders in the future. Thank you again, everyone. We'll see a bunch of you tomorrow and look forward to.

We're talking again the next quarter. Operator, that's all we have. We can end the call. Thank you for your participation. This concludes today's call. You may now disconnect.

Speaker 3: And very importantly, our share buyback is is very important from a shareholder perspective and really driving the value. Our number one focuses driving shareholder value. We think we're well positioned 2023 to do that and I do want to mention again that at NASDAQ tomorrow we we's initation out but really encourage everyone to come and 10 our barris Investor Day there and you'll have pmise and Daniel and the team mayor to talk about ferris. I'll be there with Anthony as well. We're really excited to talk about the potential value creation of barris for ODP shareholders in the future. Thank you again everyone. We'll see a bunch of you tomorrow and look forward to talking again the next quarter.

Speaker 4: That's all we have we you for your participationthis con today's you may now this.

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