Q3 2023 The ODP Corp Earnings Call

Speaker 1: Or.

Good morning, and welcome to the ODP Corporation third quarter 2023 earnings Conference call all lines will be on a 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.

Speaker 2: Good morning and welcome to the ODP Corporation's third quarter 2023 earnings conference call. All lines will be on a 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 Perot, Vice President, Investor Relations and Treasurer. Mr. Perot, you may begin.

I would like to introduce team Perrott, Vice President Investor Relations and Treasurer, Mr. Perrault, you may begin.

Good morning, and thank you for joining us for the ODP corporations third quarter 2023 earnings conference call.

Speaker 3: Good morning and thank you for joining us for the ODP Corporation's third quarter 2023 earnings conference call.

Speaker 3: This is Tim Perot, and I'm here with Joe Vasiluzzo, our Chairman of the Board, who has assumed the responsibilities of our CEO , Jerry Smith, who is on medical leave.

This is Tim Perrott, and I'm here with Joe that's a lose though our chairman of the board who has assumed the responsibilities of our CEO Gerry Smith, who is on medical leave also with US is Anthony Scaglione, our executive Vice President and CFO.

Speaker 3: Also with us is Anthony Scaglione, our Executive Vice President and CFO .

Speaker 3: During today's call, Joe will provide opening comments and highlights of our accomplishments for the third quarter of 2023.

During today's call Joe will provide opening comments and highlights of our accomplishments for the third quarter of 2023.

Speaker 3: After Joe's commentary, Anthony will then review the details of the company's third quarter results, including highlights of our divisional performance. Following Anthony's comments,

After Joe's commentary Anthony will then review the details of the company's third quarter results, including highlights of our divisional performance.

Following Anthonys comments, we will open up the line for questions.

Speaker 3: Before we begin, I need 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.

Before we begin I need 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.

Speaker 3: 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.

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

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

Speaker 3: During the call, we will use some non-GAAP financial measures as we describe business performance. The SEC filings

During the call we will use some non-GAAP financial measures as we describe business performance.

The SEC filings as well as the earnings release presentation slides that accompany today's comments and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are available on our website investor Dot the ODP Corp Dot com.

Speaker 3: Presentation slides that accompany today's comments and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are available on our website, investor.theodpcorp.com.

Speaker 3: Today's call and slide presentation is being simulcast on our website and will be archived there for at least one year.

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

Speaker 3: I will now turn the call over to Joe Vasiluso. Joe?

I will now turn the call over to Joe absolutely So Joe.

Speaker 3: Thank you, Tim. And good morning, everyone. I would like to welcome all our analysts and investors who have joined our call today. I'm Joe Vasaluzo, Chairman of the Board of the ODP Corporation.

Thank you, Tim and good morning, everyone.

I would like to welcome all our analysts and investors who have joined our call today.

I'm, Joe Vassa lose our chairman of the board of the ODP Corporation.

Speaker 4: As Tim mentioned, and as we announced back in September , I have assumed the authority and responsibilities for our CEO , Jerry Smith, until he returned from his medical leave.

As Tim mentioned and as we announced back in September.

I have assumed the authority and responsibilities for our CEO.

Gerry Smith.

Until he returned from his medical leave.

Jerry is continuing to recover at his home and.

Speaker 4: and we expect that Jerry will remain on leave for several more weeks. We all wish him well and we hope that he will be back soon.

And we expect that Jerry will remain on leave for several more weeks.

We all wish him well and a speedy recovery.

Speaker 4: Please note that we will not be providing additional comments on Jerry's health during the Q&A portion of our call. Before I highlight our...

We just know that we will not be providing additional comments on Jerry's health during the Q&A portion of our call.

Before I highlight our progress for the quarter.

Speaker 4: I want to provide a few observations after stepping into the role and being more actively involved in the day-to-day operations of ODP.

I want to provide a few observations after stepping into the role and being more actively involved in the day to day operations of ODP.

Speaker 4: First, I am extremely impressed with the capabilities and bench strength of our team.

First I am extremely impressed with the capabilities and bench strength of our team.

Speaker 4: not only at the leadership level, but throughout all levels of the organization and across our business unit.

Not only at the leadership level.

But throughout all levels of the organization and across our business units, we have assembled a tremendous team a team that is committed to driving operational excellence.

Speaker 4: we have assembled a tremendous team, a team that is committed to driving operational excellence.

Speaker 4: And the term operational excellence is not just a catchy phrase at ODP.

And the term operational excellence is not just a catchy phrase it ODP.

Speaker 4: It is a mindset and culture that permeates throughout our company and is embedded in the DNA of every employee.

It is a mindset and culture.

That permeates throughout our company.

And it's embedded in the DNA of every employee.

Speaker 4: In the weeks since I assumed Jerry's responsibilities, I have experienced firsthand our team's strong 5C culture and maniacal focus on driving a low-cost model.

And the week since I assume <unk> responsibilities.

I have experienced firsthand.

Our team's strong five C culture.

And I Echo focused on driving a low cost model.

Speaker 4: both of which serves us well as evidenced by our continuing strong operating income performance in the quarter and throughout the year.

Both of which serves us well as evidenced by our continued strong operating income performance in the quarter and throughout the year.

Speaker 4: Next, I would like to emphasize the value we are creating through our four business unit structure and our team's unwavering focus on executing upon our three horizon strategy.

Next I would like to emphasize the value we are creating through our four business unit structure and our team's unwavering focus on executing upon our three horizons strategy.

Speaker 4: You can find a visual representation of this on slide four of our presentation.

You can find a visual representation of this on slide four of our presentation.

Speaker 4: The introduction of our four business unit structure a year ago has fundamentally transformed our business.

The introduction of our four business unit structure a year ago.

Fundamentally transformed our business.

Speaker 4: positioning ODP to pursue new and exciting opportunities.

<unk>, Oh, DP to pursue new and exciting opportunities.

Speaker 4: This enhanced foundation aligns our go-to market strategies, improves our asset utilization, further leverages the benefits of scale, and provides our investors greater visibility into the value of the assets we control.

This enhanced foundation aligns to our go to market strategies improves our asset utilization further leverages the benefits of scale and provides our investors greater visibility into the value of the assets we control.

Speaker 4: Together with our capital allocation priorities, these elements empower us to pursue the long-term, full potential of ODP, driving value for all stakeholders.

Together with our capital allocation priorities. These elements empower us to pursue the long term full potential of ODP driving value for all stakeholders.

Speaker 4: A prime example of this can be witnessed in the remarkable transformation of our supply chain assets, which are now organized under VARE. Once-

A prime example of this can be witnessed in the remarkable transformation of our supply chain assets, which are now organized under there.

Once an internal cost center within ODP.

Speaker 4: There is now emerging into a thriving logistics and supply chain company, not only supporting our internal costs.

There is now emerging into a thriving logistics and supply chain company not only supporting our internal customers, but also serving some of the most renowned brands in the United States.

Speaker 4: but also serving some of the most renowned brands in the United States. In only its first year, Vayr has established a clear path ahead.

In only its first year.

<unk> has established a clear path ahead.

For profitable growth and value creation.

Speaker 4: And under our four business unit structure, our team is unlocking the value of ODP through executing upon what we call our three horizon strategy.

And under our four business unit structure, our team is unlocking the value of ODP through executing upon what we call our three horizons strategy.

Speaker 4: This strategy puts into perspective how we will drive our business units to unlock the underlying fundamentals, pursue long-term sustainable growth, and maximize the growth

This strategy puts into perspective, how we will drive our business units.

Unlock the underlying fundamentals.

Pursue long term sustainable growth.

Maximize shareholder value.

It consists of our first horizon.

Speaker 4: where we are driving strong EBITDA and cash conversion at Office Depot, leveraging their core competency of providing excellent customer experience as indicated by our industry leading net promoter scores and expanded product and service office.

Where we are driving strong EBITDA and cash conversion at office depot, leveraging their core competency of providing excellent customer experience as indicated by our industry, leading net promoter scores and expanded product and service offering.

Speaker 4: Our second horizon focuses on delivering long-term growth, margin expansion, and cash flow from ODP Business Solutions, our B2B distribution business.

Our second horizon focuses on delivering long term growth margin expansion.

Cash flow from ODP business solutions, our <unk> distribution business.

Speaker 4: ODP business solutions possesses tremendous scale and reach with a large and growing customer base and broad assortment of products and services.

ODP business solutions possesses tremendous scale and reach with a large and growing customer base and broad assortment of products and services.

Speaker 4: As you read in the press release this morning, while growth has been challenged in the near term, we continue to make

As you read in their press release. This morning, why growth has been challenged in the near term.

We continue to make solid progress.

Speaker 4: and are moving along well along the margin expansion path we sent.

And are moving along well along the margin expansion path we set.

And then our third horizon.

Speaker 4: We are building value and positioning ODP to pursue higher long-term opportunities to bear and bear it.

We are building value and positioning ODP to pursue higher long term opportunities to Bayer and various.

Speaker 4: So overall, our three horizon strategies enables us to drive short, medium, and longer term performance, which we believe will help us grow earnings, expand our multiple and create—

So overall, our three horizons strategy enables us to drive short medium and longer term performance, which we believe will help us grow earnings.

Expand our multiple.

And create significant value for our shareholders.

Before I turn it over to Anthony for a more detailed review of our results I would like to highlight a few of our accomplishments in the quarter.

Speaker 4: Before I turn it over to Anthony for a more detailed review of our results, I would like to highlight a few of our accomplishments in the quarter as shown on slide 5.

Shown on slide five.

Speaker 4: our team delivered another quarter of strong operating and earnings per share results, reflecting on our steadfast commitment to operational excellence and disciplined capital allocation, the two primary elements of our shareholder value creation formula.

Our team delivered another quarter of strong operating and earnings per share results, reflecting on our steadfast commitment to operational excellence and disciplined capital allocation.

Two primary elements of our shareholder value creation formula.

We expanded margins at the ODP business solutions added new product testing and category expansion at office Depot secured new third party customers that Bayer while remaining on track to more than doubling third party EBITDA this year and enhanced our platform and customer engagement.

Speaker 4: Added new product testing and category expansion at Office Depot. Secured new third-party customers at Vayr, while remaining on track to more than doubling third-party Ipatavish.

Speaker 4: and enhance our platform and customer engagement at Veris.

Various.

Speaker 4: Despite facing challenges related to a broader macro economy and a softer than anticipated back to school season, our low cost business model, combined with our team's exceptional execution, enabled us to deliver impressive performance, resulting in strong operating and earnings per share results.

Despite facing challenges related to a broader macro economy, and a softer than anticipated back to school season, our low cost business model combined with our team's exceptional execution enabled us to deliver impressive performance, resulting in strong operating and earnings per.

Share results.

Speaker 4: And finally, with our strong balance sheet and liquidity, we continue to execute on our shareholder focused capital allocation plan.

And finally with our strong balance sheet and liquidity, we continue to execute on our shareholder focused capital allocation plan repurchasing a significant number of shares during the quarter that when combined with our strong operating results.

Speaker 4: purchasing a significant number of shares during the quarter that when combined with our strong operating results contributed to a notable

Contributed to a notable year over year increase in adjusted earnings per share for the third quarter and once again revised upward EPS guidance for the full year.

Speaker 4: in adjusted earnings per share for the third quarter. And once again revised, upward EPS guidance for the full year.

In summary.

Speaker 4: as we approach the end of this year and set our sights on 2024.

As we approach the end of this year and set our sights on 2024.

Speaker 4: We will continue to be mindful of the macro environment and the potential headwinds to our business. Remaining disciplined.

We will continue to be mindful of the macro environment and the potential headwinds to our business remaining disciplined in our approach.

Speaker 4: And as I mentioned earlier, I am extremely impressed by the accomplishments of our team and our unwavering commitment to maintaining operational excellence as we progress forward.

And as I mentioned earlier I am extremely impressed by the accomplishments of our team and our unwavering commitment to maintaining operational excellence as we progress forward.

Speaker 4: With that, I will now turn it over to Anthony Scaglione for a more detailed review of our third quarter.

With that I will now turn it over to Anthony Scaglione for a more detailed review of our third quarter performance.

Speaker 3: Thank you, Joe, and warm welcome to all participants joining our call today. Part of discussing our third quarter performance, I would like to take a moment to express my gratitude to Joe and extend my well wishes to Jerry for a swift recovery.

Thank you, Joe and warm welcome to all participants joining our call today.

Hard to discussing our third quarter performance I would like to take a moment to express my gratitude to Joe and extend my well wishes to Jerry for a swift recovery.

Speaker 3: I echo Joe's comments and would like to recognize our entire team for their steadfast commitment and outstanding execution during this quarter. Our team's disciplined focus on driving our low-cost business model has enabled us to deliver impressive results in the quarter, despite a more challenging macroeconomic environment impacting our top line.

I Echo Joe's comments, and we'd like to recognize our entire team for their steadfast commitment and outstanding execution. During this quarter. Our teams disciplined focus on driving our low cost business model has enabled us to deliver impressive results in the quarter. Despite a more challenging macroeconomic environment impacting our topline.

Speaker 3: Turning to the highlights of our key accomplishments for the third quarter as shown on slide 7.

Turning to the highlights of our key accomplishments for the third quarter as shown on slide seven.

Speaker 3: First, on a Consolidate basis, we drove strong operating income performance in the third quarter, despite the generally weaker macroeconomic conditions.

First on a consolidated basis, we drove strong operating income performance in the third quarter. Despite the generally weaker macroeconomic conditions. While overall revenue was down largely due to a more cautious demand environment and fewer stores and service our low cost business model approach helped us drive adjusted operating income results that were.

Speaker 3: While overall revenue was down largely due to a more cautious demand environment and fewer stores and service, our low cost business model approach helped us drive adjusted operating income results that were consistent with last year.

Consistent with last year.

Speaker 3: And when combining this performance with our stock buyback, we drove a 27% increase in adjusted earnings per share versus last year, a meaningful accomplishment. And one that has positioned us to again increase our adjusted EPS outlook for the year. I cannot say enough about our team's continued focus and discipline in achieving these solid results in the quarter.

And when combining this performance with our stock buyback, we drove a 27% increase in adjusted earnings per share versus last year, a meaningful accomplishment and one that has positioned us to again increase our adjusted EPS outlook for the year.

I cannot say enough about our team's continued focus and discipline in achieving these solid results in the quarter.

Speaker 3: Next, we remain committed to our capital allocation plan by continuing to execute upon our $1 billion share repurchase authorization that our Board of Directors put in place a year ago.

Next we remain committed to our capital allocation plan by continuing to execute upon our $1 billion share repurchase authorization that our board of directors put in place a year ago. We.

Speaker 3: We continue to believe that buying backs are stock at these levels is one of the best investments we can make to create additional shareholder value.

We continue to believe that buying back our stock at these levels is one of the best investments, we can make to create additional shareholder value.

Speaker 3: During the quarter, we repurchased approximately $660,000 shares for $32 million. And over the past year, we have bought back $9 million shares for approximately $420 million. Putting this activity into context, since November of last year, we have bought back approximately 25% of the market value of the company.

During the quarter, we repurchased approximately 660000 shares for $32 million and over the past year, we have bought back 9 million shares for approximately $420 million.

Putting this activity into context since November of last year, we have bought back approximately 25% of the market value of the company.

Speaker 3: And lastly, we are making good progress across our four business units, driving increasing margins at ODP business solutions, external revenue and EBITDA growth at VAIR, expanding our assortment at office depot, and continuing to enhance our various plots.

And lastly, we are making good progress across our four business units driving increasing margins at ODP business solutions external revenue and EBITDA growth at Bayer expanding our assortment at office depot and continuing to enhance our various platform.

Speaker 3: Now turning to the specifics of our financial results as shown in slide 8.

Now turning to the specifics of our financial results as shown on slide eight.

Speaker 3: with previous quarters. We have provided our results on both a gap and a tyre be.

Consistent with previous quarters, we have provided our results on both a GAAP and adjusted basis.

Speaker 3: In the third quarter, we generated a total revenue of $2 billion down 8% year over year. At the weaker macroeconomic conditions resulted in some pullback in spending amongst businesses and consumers, along with fewer stores and stores year over year.

In the third quarter, we generated total revenue of 2 billion down 8% year over year as the weaker macroeconomic conditions resulted in some pullback in spending amongst businesses and consumers along with fewer stores in service year over year.

Speaker 3: Lower sales at Alpha Depot was a primary driver. Partially due to 71 fewer stores and service compared the last year, as well as a reduction in consumer traffic and lower than expected demand during the back of schools.

Lower sales at office depot was a primary driver partially due to 71 fewer stores in service compared to last year as well as a reduction in consumer traffic and lower than expected demand during the back to school season.

Speaker 3: Revenue at ODP business solutions was also slightly lower, primarily related to macroeconomic challenges, resulting in a more conservative spending from some of our enterprise customers, and the overall impact from market insurance.

Revenue at ODP business solutions was also slightly lower primarily related to macroeconomic challenges, resulting in a more conservative spending from some of our enterprise customers and the overall impact from market uncertainty.

Speaker 3: Fight the lower revenue in the quarter, gap operating income was $91 million, up over 8% to Q3 of last year.

Despite the lower revenue in the quarter GAAP operating income was $91 million up over 8% to Q3 of last year.

Speaker 3: Included in operating income was $4 million, with charges primarily associated with non-cash acid impairments, largely related to the right of use assets associated with our store.

Included in operating income was $4 million of charges, primarily associated with noncash asset impairments largely related to the right of use assets associated with our store locations.

Speaker 3: Adjusted operating income for Q3 with $95 million consistent with last year and included unallocated corporate expenses of $20 million.

Adjusted operating income for Q3 was $95 million consistent with last year and included unallocated corporate expenses of $20 million.

Speaker 3: Adjusted EBITDA was $125 million for the quarter, compared to $131 million in the same period last year. This includes depreciation and amortization expense of $28 million and $32 million in the third quarters of 2023 and 2022, respect—

Adjusted EBITDA was $125 million for the quarter compared to $131 million in the same period last year.

This includes depreciation and amortization expense of $28 million and $32 million in the third quarters of 2023 and 2022, respectively.

Speaker 3: excluding the after-tax impact from the items mentioned earlier, adjusted an income for the third quarter with $73 million or $1.88 per diluted chair, representing a 27% increase in adjusted EPS, driven by strong operating performance, and a continued execution under our share repurchase program.

Excluding the after tax impact from the items mentioned earlier adjusted net income for the third quarter was $73 million or $1 88 per diluted share representing a 27% increase in adjusted EPS driven by strong operating performance and the continued execution under our share repurchase program.

Speaker 3: Turning to cash generation, we drove strong cash flow results in the quarter. Operating cash flow in the quarter was $112 million compared to $163 million last year. Capital expenditures in the quarter were $25 million, flat compared to last year's third quarter. Targeting investments in our supply chain, digital transformation, and e-commerce capability.

Turning to cash generation, we drove strong cash flow results in the quarter operating cash flow in the quarter was $112 million compared to $163 million last year.

Capital expenditures in the quarter were $25 million flat compared to last year's third quarter targeting investments in our supply chain digital transformation and e-commerce capabilities.

Speaker 3: The Justice Freak cash flow in the quarter was $89 million compared to $169 million in the same period last year. On a year-to-day basis, we've generated $192 million in the Justice Freak cash flow versus $54 million year-to-date through the same period last year. The difference in the Justice Freak cash flow is primarily related to the timing of working capital, including the management and timing of ocean freight container costs, which was a challenge in the prior year.

Adjusted free cash flow in the quarter was $89 million compared to $160 million in the same period last year on a year to date basis, we've generated $192 million and adjusted free cash flow versus $54 million year to date through the same period last year.

The difference in adjusted free cash flow is primarily related to the timing of working capital, including the management and timing of Ocean freight container costs, which was a challenge in the prior year.

Speaker 3: I want to thank our entire team for remaining disciplined and focused on working capital and inventory management resulting in these strong year-to-date cash flow results.

I want to thank our entire team for remaining disciplined and focus on working capital and inventory management, resulting in the strong year to date cash flow results.

Speaker 3: Now I'd like to cover our business unit performance, starting with ODP Business Solutions on Slide 9.

Now I'd like to cover our business unit performance, starting with ODP business solutions on slide nine.

ODP business solutions, our large and diverse <unk> distribution business delivered strong operating results in the quarter, expanding its margins and generating a meaningful increase in operating income despite a softer topline.

Speaker 3: ODP business solutions are large and diverse B2B distribution business delivered strong operating results in the quarter, expanding its margins and generating a meaningful increase in operating income despite a softer toppling.

Speaker 3: Revenue was approximately $1 billion in the quarter, down 3% versus last year, driven primarily by macro factors, causing what we see as more cautious enterprise spending, as well as slower return to office trends.

Revenue was approximately $1 billion in the quarter down 3% versus last year, driven primarily by macro factors, causing what we see as more cautious enterprise spending as well as slower return to office trends.

Speaker 3: Notwithstanding the more restrained level of business bending, we are continuing to win new accounts and believe our revenue performance is outpacing other market participants, resulting in share gain.

Notwithstanding the more restrained level of business spending we are continuing to win new accounts and believe our revenue performance is outpacing other market participants, resulting in share gains.

Speaker 3: Additionally, we are working to onboard some of our more recent large enterprise wins that have taken longer to implement But we expect to have them up and running by year end or early next year

Additionally, we are working to onboard some of our more recent large enterprise wins that have taken longer to implement but we expect to have them up and running by year end or early next year.

Speaker 3: I would also like to note that our federation companies, our regional tuck-in M&A entities, continue to remain resilient. We've been successfully executing this strategy and growing this business, which now generates well over $600 million in revenue on an annual basis.

I would also like to note that our federation companies are regional tuck in M&A entities continue to remain resilient. We've been successfully executing this strategy in growing this business, which now generate well over $600 million in revenue on an annual basis.

Speaker 3: This market continues to be highly fragmented and our disciplined M&A approach gives us tremendous runway to keep growing our platform strategically over time.

This market continues to be highly fragmented and our disciplined M&A approach gives us tremendous runway to keep growing our platform strategically over time.

Speaker 3: Our adjacency category penetration remained at approximately 44% of the total division revenue.

Our adjacency category penetration remained at approximately 44% of the total division revenue.

Speaker 3: Adjacency categories include cleaning and break room products, as well as furniture, technology products, and copy and print services.

Jason C categories include cleaning and break room products as well as furniture technology products and copy and print services, while cleaning and break room categories grew over last year. This was more than offset by lower sales of technology products as well as other categories previously and higher demand during last year's supply chain constraints.

Speaker 3: While cleaning and break-room categories grew over last year, this was more than offset by lower sales of technology products, as well as other categories previously in higher demand during last year's supply chain crisis.

Speaker 3: As a notable KPI for ODP Business Solutions, our adjacency category penetration may fluctuate from quarter to quarter, but our long-term objective is to consistently grow these categories both on an absolute dollar and percentage basis as we expand our value proposition and continue to leverage our strength in core categories.

As a notable kpis for ODP business solutions, our adjacency category penetration may fluctuate from quarter to quarter, but our long term objective is to consistently grow these categories. Both on an absolute dollar and percentage basis, as we expand our value proposition and continue to leverage our strength in core categories.

Speaker 3: From an operating perspective, ODP business solutions continue to drive margins higher in the quarter, with operating margins reaching 6 percent, a 100 basis point improvement over last year, resulting in $56 million in operating income, a 17 percent increase over last year.

From an operating perspective, ODP business solutions continue to drive margins higher in the quarter with operating margins, reaching 6%, a 100 basis point improvement over last year, resulting in $56 million in operating income a 17% increase over last year.

Speaker 3: This margin improvement is a tremendous accomplishment given the macro challenges and places us on a strong path to generate growth with consistent margins, a goal we set out at Investor Day last year.

This margin improvement is a tremendous accomplishment given the macro challenges and places us on a strong path to generate growth with consistent margins a goal we set out at Investor day last year.

Competitively with our strong balance sheet and compelling offering our pipeline of new business remains at a historically high level, we're continuing to win nearly 100% of customer renewals, while adding net new business wins.

Speaker 3: Competitively with our strong balance sheet and compelling offering, our pipeline of new business remains at a historically high level. We're continuing to win nearly 100% of customer renewals while adding net new business wins.

Speaker 3: While we have witnessed the choppy few months and expect back to continue through the end of the year, we are confident that ODP Business Solutions Foundation remains strong. Our customer service and value proposition continues to be compelling, and we are competitively well positioned to continue to drive results in the future.

While we have witnessed a choppy few months and expect that to continue through the end of the year. We are confident that ODP business solutions Foundation remained strong our customer service and value proposition continues to be compelling and we are competitively well positioned to continue to drive results in the future.

Speaker 3: Now turning to our consumer division results at Office Depot as shown on slide 10.

Now turning to our consumer Division results at office depot as shown on slide 10.

Office depot, our Omnichannel consumer business, serving small businesses education and home office customers continues to provide exceptional service and compelling value proposition to its customers as demonstrated by our consistent NPS scores above 70% among the highest in any consumer business.

Speaker 3: Office Depot, our omni-channel consumer business serving small businesses, education and home office customers, continues to provide exceptional service and compelling value proposition to its customers as demonstrated by our consistent NPS scores above 70% among the highest in any consumer business.

Speaker 3: In the quarter, however, our top line continued to be challenged as a slowing economy and high inflation moderated the pace of consumer spending and impacted demand during the back to school.

In the quarter. However, our topline continued to be challenged as a slowing economy and high inflation moderated the pace of consumer spending and impacted demand during the back to school season.

Speaker 3: Reported revenue for the quarter stood at $1 billion at 12% decline. Same-store sales were down about 6% as lower retail sales and online traffic outweighed higher conversion. We also had 71 fewer retail stores in service versus last year related to planned store closures as well as lower traffic and transactions in both our retail and e-commerce.

Reported revenue for the quarter stood at $1 billion, a 12% decline same store sales were down about 6% as lower retail sales in online traffic outweighed higher conversion. We also had 71 fewer retail stores and service with versus last year related to planned store closures as well as lower traffic and transactions in both our retail and e-commerce channels.

Speaker 3: From a product perspective, stronger sales of copy and print were more than offset by lower sales of higher ticket items, including technology products and furniture.

From a product perspective stronger sales of copy and print were more than offset by lower sales of higher ticket items, including technology products and furniture, while conversion rates were stronger in the quarter. The reduced sales of higher ticket items impacted average order volumes and thus resulted in lower sales per shopper sale.

Speaker 3: While conversion rates were stronger in the quarter, the reduced sales of higher ticket items impacted average order volumes and thus resulted in lower sales per shopper.

Speaker 3: Sales and back to school categories are not materialized at the level we had anticipated. Largely related to the software economy and a lack of the second and third wave of return trips to the store, a behavior that we have not typically seen in the past.

Sales in back to school categories than not materialize at the level, we had anticipated largely related to the softer economy and a lack of the second and third wave of return trips to the store a behavior that we have not typically seen in the past.

Speaker 3: And we are not alone, as early data shows that overall demand in our relevant back-to-school categories was generally soft during the period, a little less so in our private brand products, an indicator of customers being more cautious with their spend.

And we are not alone as early data shows that overall demand in a relevant back to school categories was generally soft during the period, a little less so in our private brand products and indicator of customers being more cautious with their spend.

Speaker 3: With our relationships with school districts, teachers, and students, we have the right to win year round. As a result, we are launching our education 365 initiative in Q1 of next year and integrated year round approach involving both our B2B and our Omni Channel businesses. We are putting the pieces in place now, which will include the other things, boots on the ground, key incentives and marketing, and I look forward to sharing more next quarter.

With our relationships with school districts teachers and students we have the right to win year round. As a result, we are launching our education 365 initiative in Q1 of next year and integrated year round approach involving both our <unk> and our Omnichannel businesses, we're putting the pieces in place now which will include among other things.

Boots on the ground key incentives and marketing and I look forward to sharing more next quarter.

Speaker 3: From an operating perspective, margins were 7% flat with last year as a team work to offset some of the top line challenge.

From an operating perspective margins were 7% flat with last year as the team worked to offset some of the topline challenges.

Speaker 3: We remain disciplined with pricing as we work to maximize the profitability of every interaction.

We remain disciplined with pricing as we work to maximize the profitability of every interaction. We continue to see good results in copy and print a highly profitable part of our business up double digits. In Q3 that said operating income was $66 million in the quarter down compared to $83 million last year lower operating income compared to last year was mostly driven by.

Speaker 3: We continue to see good results in copy and print, a highly profitable part of our business, up double digits in Q3. That said, operating income was $66 million in the quarter, down compared to $83 million last year. Lower operating income compared to last year was mostly driven by the flow-through impact from lower sales volumes.

The flow through impact from lower sales volume.

Speaker 3: While we expect the macro environment to remain challenging as we close out the year, we continue to focus on our low-cost business model approach, working to optimize our organizational structure, updating our store labor model, and driving cost-saving initiatives.

While we expect the macro environment to remain challenging as we close out the year. We continue to focus on our low cost business model approach working to optimize our organizational structure updating our store labor model and driving cost savings initiatives from an E. Commerce perspective, our new leader is taking steps to realign our digital marketing effort designed to drive greater trap.

Speaker 3: From an e-commerce perspective, our new leader is taking steps to realign our digital marketing efforts designed to drive greater traffic and conversion.

<unk> and conversion.

Speaker 3: So overall, while it was a challenging quarter for our consumer business, we're focused on driving the components of our business that we can control and believe we are well positioned to continue to drive this cash engine going forward. Next up is values.

So overall, while it was a challenging quarter for our consumer business, we're focused on driving the components of our business that we can control and believe we are well positioned to continue to drive this cash engine going forward.

Next up is there is shown on slide 11.

Speaker 3: There is our world-class supply chain services and logistics provider with core competencies in distribution, fulfillment, transportation, and global sourcing and purchasing.

There is our world class supply chain services, and logistics provider with core competencies in distribution fulfillment transportation and global sourcing and purchasing.

Speaker 3: Their assets and capabilities include over 8 million square feet of infrastructure through a nationwide network of distribution centers, crosstalks, and other facilities throughout the United States, a global sourcing presence in Asia, a large private fleet of vehicles, and next day delivery to 98.5% of the U.S. population.

Their assets and capabilities include over 8 million square feet of infrastructure through a nationwide network of distribution centers cross docks and other facilities throughout the United States, a global sourcing presence in Asia, a large private fleet of vehicles and next day delivery to 98, 5% of the U S population.

Speaker 3: Bayer serves the needs of their primary internal customers, Office Depot, and ODP Business Solutions, as well as for other third parties through our procurement and supply chain expertise.

<unk> serves the needs of their primary internal customers office depot, and ODP business solutions as well as for other third parties through our procurement and supply chain expertise. We're very encouraged about the continuing progress out there in the quarter delivering efficient services to its internal customers, while gaining momentum with external third party customers.

Speaker 3: We're very encouraged about the continuing progress that they are in the quarter, delivering efficient services to its internal customers while gaining momentum with external third party costs.

Speaker 3: On a consolidated basis, they are drove sales of 1.3 billion, predominantly supporting the purchasing and supply chain operations of ODB business solutions and Office Depot, which are effectively eliminated upon consolidation. As a reminder, through our intercompany agreement, as they are drives greater efficiency for its internal customers, much of this benefit is captured through ODB business solutions and Office Depot, benefiting the entire enterprise, rather than being reflected only in VAERS results.

On a consolidated basis, they're drove sales of $1 3 billion predominantly supporting the purchasing and supply chain operations of ODP business solutions and office depot, which are effectively eliminated upon consolidation as a reminder, through our intercompany agreements as they are drives greater efficiency for its internal customers. Much of this benefit is captured through our ODP business <unk>.

<unk> and office depot benefiting the entire enterprise rather than being reflected only in bayer's results. Therefore by continuing to optimize its network and drive the low cost model there provides value to its internal customers and positions itself to deliver a strong value proposition for new third party customers.

Speaker 3: Therefore, by continuing to optimize its network and drive the low cost model, their provides value to its internal customers and positions itself to deliver strong value propositions for new third-party customers.

Speaker 3: The key area of focus to assess there that value creation is by looking at our progress with external third party cuts.

A key area of focus to assess their value creation is by looking at our progress with external third party customers.

Speaker 3: In the quarter, they're continued to add new external customer logos to its slate of business, providing service for some of the nation's most renowned brands.

In the quarter, there continued to add new external customer logos to its slate of business, providing service for some of the nation's most renowned brands.

Speaker 3: This continued to drive revenue and even a growth from third party customers. In fact, third party revenue was up in the quarter to $11 million dollars and increase of over 50%. There's profit from backhaul is up over 100% versus last year and over 50% year to date.

This continued to drive revenue and EBITDA growth from third party customers. In fact third party revenue was up in the quarter to $11 million an increase of over 50%. There is profit from backhaul is up over 100% versus last year and over 50% year to date.

Speaker 3: From a bottom line perspective, they are total operating income in Q3 with $10 million compared to $9 million last year, primarily due to the aforementioned inter-company transactions, mix, and third party activities.

From a bottomline perspective their total operating income in Q3 was $10 million compared to $9 million last year, primarily due to the aforementioned intercompany transactions mix and third party activity.

Speaker 3: And from an external customer perspective, we generate slightly more than $3 million of EBITDA from third-party customers, representing nearly a 120% increase over Q3 last year, positioning us well on our way to more than double EBITDA from third-party customers in 2023. It is becoming evident that various compelling value proposition is beginning to resonate with our expanded set of costs.

And from an external customer perspective, we generated slightly more than $3 million of EBITDA from third party customers, representing nearly a 120% increase over Q3 last year positioning us well on our way to more than double EBITDA from third party customers in 2023.

It is becoming evident that there is a compelling value proposition that is beginning to resonate with our expanded set of customers.

Speaker 3: There also continues to make progress on its modernization roadmap as they build out additional capabilities in the information systems that it uses to run its business.

There also continues to make progress on its monetization roadmap as they build out additional capabilities in the information systems that it uses to run its business. We're partnering in deploying a gartner magic quadrant level tech stack that positions us to more effectively manage our business improve service levels and provide the flexibility necessary to deliver services to external third party.

Speaker 3: We're partnering and deploying a Gartner Magic Quadrant Level Tech stack that positions us to more effectively manage our business, improve service levels, and provide the flexibility necessary to deliver services to external third parties.

Speaker 3: For example, our in-house developed flow path technology that we now call Vayr Kinetic provides critical cost intelligence to optimize our operations and service levels for our customers.

For example, our in house developed flow path technology that we now call. Their kinetic provides critical cost intelligence to optimize our operations and service levels for our customers.

Speaker 3: We've also begun to deploy our new warehouse management systems, supporting our operations, and automating tasks, improving our ability to provide services to third party cuts.

We've also begun to deploy our new warehouse management systems, supporting our operations and automating tasks, improving our ability to provide services to third party customers.

Speaker 3: We remain very excited about their progress and how this higher multiple business positions ODP to drive profitable growth in the future. Now turning to Varus as

We remain very excited about their progress and how those higher multiple business positions ODP to drive profitable growth in the future.

Now turning to various as shown on slide 12.

Speaker 3: Varys, our digitally native B2B procurement platform, launched less than a year ago, continues to enhance its platform with new features and is attracting and providing a seamless process for onboarding new customers.

<unk>, our digitally native BW procurement platform launched less than a year ago continues to enhance its platform with new features and is attracting and providing a seamless process for onboarding new customers.

Speaker 3: While there is revenue ramp has been floer than originally anticipated, we remain encouraged by the strong interest it continues to attract from both customers and suppliers.

While <unk> revenue ramp has been slower than originally anticipated we remain encouraged by the strong interest it continues to attract from both customers and suppliers.

Speaker 3: Recognizing that Verus is still in the very early stages of development, ramping customer activity takes time, which has led to lower sales momentum than we originally anticipated at the beginning of the year, but consistent with what we announced during our Q2 earnings.

Recognizing that <unk> is still in very early stages of development ramping customer activity takes time, which has led to lower sales momentum than we originally anticipated at the beginning of the year, but consistent with what we announced during our Q2 earnings.

During the quarter various generated approximately $2 million in revenue primarily derived from subscriptions from existing customers and an operating loss of $17 million flat with last year as the company continued to enhance its platform and onboard new customers there.

Speaker 3: During the quarter of the virus generated approximately 2 million in revenue, primarily derived from subscriptions from existing customers, and an operating loss of $17 million flat with last year, as the company continued to enhance its platform and onboard new customers. They included with these results was approximately 1 million of non-cash stock option expense, which is tied to criteria specific to virus.

With these results was approximately $1 million of noncash stock option expense, which is tied to criteria are specific to various <unk>.

Speaker 3: For the full year, we expect this figure to be approximately 3 million and will be excluded from our adjusted non-gapment.

For the full year, we expect this figure to be approximately $3 million and will be excluded from our adjusted non-GAAP metrics now.

Speaker 3: Now briefly turning to our balance sheet highlights as shown on slide 13.

Now briefly turning to our balance sheet highlights as shown on slide 13, we ended the quarter with total liquidity of $1 2 billion, consisting of $384 million in cash and cash equivalents, which includes cash held internationally of approximately $100 million and $771 million in availability under our asset based lending facility total debt at the.

Speaker 3: We ended the quarter with total liquidity of $1.2 billion consisting of $384 million in cash and cash equivalents, which includes cash held internationally of approximately $100 million and $771 million in availability under our asset-based lending facility. Total debt at the end of the quarter was approximately $173 million.

End of the quarter was approximately $173 million.

Speaker 3: As previously mentioned, we've continued to buy back shares under our 1 billion dollar share buyback authorization repurchasing about 660,000 shares for 32 million dollars. In total. We have repurchased 9M shares for approximately 420M dollars. Since the program began 1 year ago, moving forward, we will continue to be disciplined and focused on maintaining a strong balance sheet, allowing for ample flexibility to invest in our business and repurchase.

As previously mentioned, we've continued to buy back shares under our $1 billion share buyback authorization repurchasing about 660000 shares for $32 million in total we have repurchased 9 million shares for approximately $420 million. Since the program began one year ago moving forward, we will continue to be disciplined and focused on maintaining a <unk>.

Strong balance sheet, allowing for ample flexibility to invest in our business and repurchase shares.

Speaker 3: Now moving on to slide 14 that highlighted our updated guidance for 2020.

Now moving onto slide 14 that highlights our updated guidance for 2023.

Speaker 3: Our operating performance here today speaks to the resiliency of our team and the strength of our low-cost business model and strategic capital.

Our operating performance year to date speaks to the resiliency of our team and the strength of our low cost business model and strategic capital allocation.

Speaker 3: While the weaker macroeconomic conditions have impacted the level of business and consumer activity, creating top-line headwinds, our relentless focus on operational excellence has as well positioned to continue to drive operating results and initiatives across our four business units as we close out these.

While the weaker macroeconomic conditions have impacted the level of business and consumer activity, creating top line headwinds our relentless focus on operational excellence has us well positioned to continue to drive operating results and initiatives across our four business units as we close out the year.

Speaker 3: Considering our performance to date, along with current macroeconomic conditions and expectations for revenue trends, we updated our revenue guidance to confirm a target below our previous guidance range, moving from revenue expectations to a range of $7.8 to $7.9 billion, while reaffirming our guidance for adjusted EBITDA, adjusted free cash flow, and capital gains.

<unk> our performance to date, along with current macroeconomic conditions and expectations for revenue trends, we updated our revenue guidance to confirm a target below our previous guidance range moving from revenue expectations to a range of seven 8% to $7 $9 billion, while reaffirming our guidance for adjusted EBITDA.

Just the free cash flow and Capex.

Speaker 3: Also, given our strong operating performance today, we are increasing our guidance for adjusted operating income to a range of 280 million to $310 million up from the previous range of 270 to $300 million.

Also given our strong operating performance to date, we are increasing our guidance for adjusted operating income to a range of 280 million to $310 million up from the previous range of $270 million to $300 million.

Speaker 3: We are also increasing our guidance for adjusted earnings per share to arrange it between $5.30 to $5.60 up from our previous range of $5.30.

We are also increasing our guidance for adjusted earnings per share to a range of between $5 30 to $5 60 up from our previous range of $5 to $5 30.

Speaker 3: Our updated guidance assumes a consistent macroeconomic environment and reflects our year-to-date revenue.

Our updated guidance assumes that consistent macroeconomic environment and reflects our year to date revenue trends our increased adjusted EPS outlook assumes a lower full year effective tax rate driven by the execution of certain tax credits lower than anticipated interest expense associated with projected ABL borrowings and the impact from our.

Speaker 3: Our increased adjusted EPS outlook assumes a lower full year effective tax rate driven by the execution of certain tax credits, lower than anticipated interest expense associated with projected ABL barring, and the impact from our continued share by back activities.

<unk> share buyback activity.

Speaker 3: Looking forward, as we close out the year, we will remain disciplined, maintaining our focus on cash conversion, capital allocation, and EPS growth.

Looking forward as we close out the year, we will remain disciplined maintaining our focus on cash conversion capital allocation and EPS growth.

Speaker 3: So overall, despite the challenging macro conditions and softer top line, we remain in a solid operating position.

So overall, despite the challenging macro conditions and softer top line, we remain in a solid operating position driving our cash flow and with our continued focus on delivering capital returns to shareholders significant earnings per share growth I remain excited about our four business unit structure and what we can deliver over time with that.

Speaker 3: Driving our cash flow and with our continued focus on delivering capital returns to shareholders significant earnings per share growth.

Speaker 3: I remain excited about our four business unit structure and what we can deliver over time. With that operator, we will turn the call.

There, we will turn the call over for questions.

Speaker 2: Thank you. In a sorry monitor to our tele audience to ask a question, press star 11 and wait for your name to be at nouns. To withdraw the question, press star 11 again. One moment please.

Thank you and as a reminder to our audience to ask a question press Star one one and wait for your name to be at nouns to withdraw your question Press Star one again.

<unk> please.

Speaker 2: And our first question comes from the Rhine of Death Lake. Mr. Lake, please state your company name and proceed with your question.

And our first question comes from the line of Catholic Mr. Li Please state your company name and proceed with your question.

Speaker 5: Hi, it's Jeff Lick, the Fiorioli financial. Chairman Joe Gregg to have you on the call. I did a great job.

Hi, it's Jeff <unk>.

Financial Chairman, Joe Great to have you on the call we did a great job.

Speaker 5: So guys, I was wondering, just first off, if you could give some details on business solutions, you know, the revenue was down 3.8%, but operating it come up 17%. So I'm just curious if you could kind of elaborate where, you know, the growth in operating, you can come to come from where there was gross margin dollars or better expense management a little bit of...

So guys I was wondering just first off if you could give some details on business solutions revenue was down three 8%, but operating income up 17%. So I'm just curious if you could kind of elaborate where.

The growth in operating income came from weather was gross margin dollars or better expense management, a little bit of both.

Speaker 3: Hey Jeff, how you doing? This is Anthony. I'll start and have Chairman Joe provide any additional commentary. You know, overall a decent quarter, you know, slightly soft on the top line. And that's really could be ascribed primarily to what we saw as lower text sales in the channel. Something we've seen in the past few quarters and lower larger ticket items, specifically in the furniture, which were in higher demand.

Hey, Jeff how are you doing this is Anthony I'll start and have a.

Chairman, Joe provide any additional commentary.

Overall, a decent quarter slightly soft on the top line and Thats really good described primarily to what we saw as lower tech sales and the channel.

Something we've seen in the past few quarters and lower in larger ticket items, specifically in the furniture, which were in higher demand last year.

Speaker 3: last year. Uh, you know, I want to reiterate our pipeline continues to be very strong. Our new winds continue to be strong, although new wind conversion has taken a little bit longer than what we've liked to see.

I want to reiterate our pipeline continues to be very strong our new wins continue to be strong although new win conversion has taken a little bit longer than what we'd like to see and let me quantify that those are for large scale win multimillion dollar wins that we have secured but the conversion is taking a little bit longer from a retention standpoint.

Speaker 3: And let me qualify that those are for large scale wins, multi-million dollar wins that we have secured, but the conversion is taking a little bit longer. From a retention standpoint, we're still running, as we mentioned, close to 100%, and right now we're just seeing, broadly speaking, our customers being a bit more cautious.

We're still running as we mentioned close to a 100%.

Right now, we're just seeing broadly speaking our customers being a bit more cautious.

Speaker 3: than we would like. And then the last point I would just want to mention, and this is enterprise-wide, we are in a position of bouncing strength, something that I know many of our competitors can't say. And I think that leads to long-term stability from a customer basis and why I feel we're winning new business and seeing more opportunities today. So although that in summary, while top line was down, really strong performance by the time we get to the end of the day.

Then we would like and then the last point I would just want to mention and this is enterprise wide.

We are in a position of balance sheet strength, something that I know many of our competitors can't say and I think that leads to long term stability from a customer basis, and why I feel we're winning new business and seeing more opportunities today. So although that in summary, while top line was down really strong performance by the team.

Speaker 5: And then you just kind of a bigger picture follow up. So if I look at your guidance on the operating income line, I'm 280 to 310 for the year. You're at 247 through three quarters, which implies a range of 33.

And then just kind of a bigger picture follow up so if I look at your guidance on the operating income line of $2 80 to $3 10 for the year.

We're at 247003 quarters, which implies.

The range of 33.

Speaker 5: If that's even really possible to have that big of a range in the last quarter and maybe if you could just be unpacked some puts and tape.

If that's even really possible to have that big of a range in the last quarter and maybe if you could just maybe unpack some puts and takes.

Speaker 3: Yeah, great question. And obviously we're being cautious based on still the math for uncertainty. We have line of sight into opportunities within business solution retail tends to be a little bit more choppy as it relates to performance. So we're just being conservative in terms of ensuring that we have enough flexibility on both ends to hopefully outperform the midpoint. Hello, Jeff.

Yes.

Yes, great Great question, and obviously, we are being cautious based on still the macro uncertainty.

Have line of sight into opportunities within business solutions retail tends to be a bit more choppy as it relates to performance. So we're just being conservative in terms of ensuring that we have enough flexibility on both ends to hopefully outperform the midpoint.

Hello, Matt.

Sure.

Hi, Joe.

Go ahead.

No I just wanted to say Hello, Jeff and this is Joe vaginal lose though just to echo anthonys sentiment in terms of the macro challenges.

Speaker 4: No, I just wanted to say hello Jeff and this is Joe Vasoluzo just to echo Anthony's sentiments in terms of the macro challenges. Certainly corporate layoffs have had some impact as well as the slowness in return to office trends.

Certainly corporate layoffs have had some impact as well as the slowness in return to office trends.

Speaker 5: Just a real quick one, and I'll leave it. With respect to Vayr and Verus, I'm just curious, can Vayr be up sequentially in Q4 operating income, you know, from the 10 million you did in Q3, and then any update on Verus in terms of how that the cadence of that operating loss will play?

Just a real quick one.

EBIT.

With respect to Bayer various I'm just curious.

<unk> be up sequentially in Q4 operating income from.

From the 10 million you did in Q3, and then any update on the various in terms of how bad the cadence of that operating loss will play out.

Speaker 3: Yeah, I think for for VAIR, you know, we clearly put out a plan that we're going to more than double and we're on that plan and that continues to be the execution from that team. And it's been a really positive. I think you heard it the excitement last last quarter with Jerry around the progress that we've made in VAIR and we continue to see opportunities within that business unit, both from a top line and more importantly from a third party EBITDA creation standpoint. And in VAIR, it's no real meaningful update to what we said in Q2 in terms of a little bit softer than what we would like but we we provided that update as part of our Q2 so no further update other than they continue to make progress working with our customers and suppliers but no further update from a performance standpoint.

Yes, I think for their clear.

Clearly put out a plan that we're going to more than double and we're on that plan and that continues to be the execution from that team.

And it's been a really positive. Thank you heard at the excitement lastly last quarter with Gerry around the progress that we've made in there and we continue to see opportunities within that business unit, both from a top line and more importantly from a third party EBITDA creation standpoint, and then there is no real meaningful update to what we said in Q2 in terms of.

A little bit softer than we would like but we we provided that update as part of our Q2. So no further update other than they continue to make progress working with our customers and suppliers, but no further update from a performance standpoint.

Speaker 3: for the balance of the year. Well, great quarter, thanks very much. And I look forward to touching base later. Thanks, Jeff. Appreciate it.

For the balance of the year great.

Great quarter, Thanks, very much and I look forward to the world.

Touch base later.

Thanks, Jeff I appreciate it.

Thank you.

Speaker 2: Let's wait for our next question. It comes from the line of Michael Lasser. Mr. Lasser, please state your company name and proceed with your question.

Wait for our next question comes from the line of Michael Lasser. Mr. Lasser. Please state your company name and proceed with your question.

Speaker 6: Good morning. Thank you so much for taking my question. It's Michael Lasky from UBS. Anthony, how long can sales decline at this rate and ODP still generate flat to positive operating income moving forward?

Good morning. Thank you so much for taking my question, it's Michael Lasser from UBS.

Anthony how long Kinsale decline at this rate at all ODP still generally flat to positive.

Operating income moving forward.

Speaker 3: Well, I hope we don't decline at this rate forever, but you know, obviously the macro is something that we've been signaling from the beginning of the year. I think we've been very consistent and transparent that we see the choppiness there, but I think we also demonstrated that we can and have been focusing on the levers we can control and managing through that choppy environment by staying vigilant on costs.

Well I hope, we don't decline at this rate forever, but obviously the macros something that we've been signaling from the beginning of the year. So I think we've been very consistent and transparent that we see the choppiness there, but I think we also demonstrated that we can and have been focusing on the levers, we can control and managing through that choppy environment.

By staying vigilant on costs driving that cash conversion, ensuring that we have the value proposition.

Speaker 3: driving that cash conversion, ensuring that we have the value proposition.

Speaker 3: with customers and not chasing bad deals. And I think that's key at the end of the day in both our channels you know, we're being vigilant in terms of the cost drivers, we're being vigilant in terms of the pricing drivers and we're seeing some positive indicators, especially in our B2B business across ODP Business Solutions and VARE that are encouraging but we're still dealing with a relatively choppy macro and ensuring that we continue to stay focused on the cost levers that we have in front of us.

With customers and not chasing bad deals and I think thats key at the end of the days in both our channels.

Being vigilant in terms of the cost drivers are being vigilant in terms of the pricing drivers.

And we're seeing some positive indicators, especially in our <unk> business across the ODP business solutions and there that are encouraging, but we're still dealing with a relatively choppy choppy macro and ensuring that we continue to stay focused on the cost levers that we have in front of us.

Speaker 6: And it's probably asking the same question, this is slightly different way. If we assume in our models that ODP sales decline at a similar rate in 24 as the macro gets worse next year, what should is it best to expect the leverage on operating income or you'll have to invest some of the profits to stabilize or continue to maintain your market share?

It's probably asking the same question just a slightly different way if we assume in our models that our ODP sales decline at a similar rate in 'twenty four as the macro gets worse next year.

At best to expect deleverage on an operating income where youll have to invest.

Some of the profit.

Stabilized.

To maintain your market share.

Speaker 3: Yeah, I mean, we're not addressing long-term targets today, so I want to caution on 2024, but I think we've exhibited our ability to manage the cost side of the business.

Yes.

I mean, we're not addressing long term target today, so I want to caution on 2024, but I think we've exhibited our ability to manage the cost side of the business.

Speaker 3: Clearly, we have opportunities on the B2B side and broadly speaking with NODP business solutions that we're seeing as a positive given my early.

Clearly we have opportunities on the <unk> side and broadly speaking within ODP business solutions that we're seeing as a positive given my earlier remarks around our balance sheet strength to work with our customers more strategically our pipeline continues to be the best we've ever seen while the conversions are taking longer we're winning new business and I.

Speaker 3: Remarks around our balance sheet strength to work with our customers more strategically our pipeline continues to be the best we've ever seen While the conversions are taking longer, we're winning new business and I think that is the opportunity we have to offset some additional pressure on the retail side as we continue to comp negatively and continue to rationalize the portfolio from a store campus

That is the opportunity we have to offset some additional pressure on the retail side as we continue to comp negatively in continue to rationalize the portfolio from a store count perspective.

Hello, Michael This is Joe.

Speaker 7: Hello, Michael, this is Joe Bassett. Hey, Joe. Go ahead. I'm sorry, Mike.

Go ahead I'm sorry.

You guys know.

Speaker 4: Just wanted to introduce myself Michael to you. This is Joe Vassaluso again.

Just wanted to introduce myself Michael to you. This is Joe boxer loosens up again.

Just to Echo what Anthony has been saying with regard to ODP business solutions and it really goes beyond that.

Speaker 4: Just to echo what Anthony's been saying with regard to ODP business solutions and really goes beyond that. It's to doubt the all for our business units is our commitment and our my local focus on operational action.

Throughout the off all four of our business units is our commitment.

And my uncle focused on operational excellence, and our capital allocation plan and our low cost business model that permeates everything that we do and I think it's evidenced by the performance you see despite the topline softness that we've witnessed.

Speaker 4: and our Capital Allocation Plan and our Low Cost Business Model. That permeates everything that we do, and I think it's evidenced by the performance you see despite the top line softness that we've witnessed.

Speaker 6: Guy, thank you very much. My last question is, why is the progress on the top line at Barris slower than what you expect?

Got it thank you very much.

Last question.

Why is the progress on the topline it varies slower than what you expected.

Speaker 3: Yeah, we addressed that last quarter, Michael. We had some technical stack issues that we had to address that we completed early in Q3. So we're a couple of quarters behind where we would like to be from a various perspective. That being said, we are getting good feedback from customers across our retail, manufacturing, education market.

Yes, we addressed that last quarter Michael.

We had some technical stack issues that we had to address that we completed early in Q3. So we're a couple of quarters behind where we would like to be from <unk> perspective.

That being said.

We are getting good feedback from customers across our retail manufacturing education market that the one stop purchasing platform that viruses is resonating. It's just onboarding and ramping is taking a little bit longer than what we would've liked and what we expected at this time when we provided initial guidance.

Speaker 3: that the one-stop purchasing platform that Barris is resonating. It's just onboarding and ramping and taking a little bit longer than what we would have liked and what we expected at this time when we provided initial guidance.

Okay. Thank you very much and good luck.

Speaker 2: Thank you. One moment for our next question, please.

Thanks, Brian.

One moment for our next question please.

Speaker 2: And it comes from the line of Greg Burns. Mr. Burns, please state your company name and proceed with your question.

And it comes from the line of.

Greg Burns Mr. Burns. Please state your company name and proceed with your question.

Speaker 8: That's Greg Barnes from Sidoti and Company. Just to follow up on that last question around VARIS. Now that the stack is

It's Greg Burns from Sidoti <unk> company.

Just to follow up on that.

Question around Paris.

The stack is.

Speaker 8: I guess where you want it to be or completed. What are the major bottlenecks in terms of onboarding new customers? Is it just more sales resources or how do you see the growth there develop?

I guess, where you want it to be or completed what are the major bottlenecks in terms of onboarding, new customers, just more more sales resources or.

How do you see the growth there development.

Yes, I think it's more getting the customers on boarded and then the ramp.

Speaker 3: Yeah, I think it's more getting the customers onboarded and then the ramp and the conversion from potentially not having a system in place from a procurement or switching procurement system just takes a little bit of time. So as we now have the stack developed and we're going to continue to make progress with the tech stack to continue to add features, but the majority of...

The conversion from potentially not having a system in place from a procurement or switching procurement system, just takes a little bit of time.

As we now have the stack developed and we're going to continue.

Make progress with the tech stack to continue to add add features but the majority of what were the delays in the first half were rectified in Q3. So it's really about the customer conversion and then ultimately that customer conversion since it is a gross transaction volume.

Speaker 3: what were the delays in the first half, you know, were rectified in Q3. So it's really about the customer conversion and then ultimately that customer conversion, since it is a gross transaction volume.

Speaker 3: getting those customers to interact with the platform and ensuring that we see the GTV growth over the next couple of quarters going forward.

<unk> getting those customers to interact with the platform and ensuring that we see the GTD growth over the next couple of quarters going forward.

Okay.

<unk>.

Speaker 8: and then Profb Deepo, I know

And then <unk>.

Office depot.

I know.

Speaker 8: While back maybe your analysts say you'd put a target for getting to flat comp.

No.

Ill back maybe your analyst day, you had put out a target for getting to flat comps.

Speaker 8: on that side of the business. These still have line of sight on that, and maybe could you give us an update on some of the...

On that side of the business.

Do you still have line of sight on that and maybe could you give us an update on some of the.

The new.

Speaker 8: You know, growth initiatives have there around product, new product categories, maybe new service offerings to drive retail traffic.

Growth initiatives, you have there around product news.

Product categories, maybe new service offerings to drive.

To drive retail traffic to your stores.

Speaker 3: Yeah, sure. On the first one, again, we're not providing any updated long-term guidance, but we plan to address all those questions.

Yeah sure on the first one again, we're not providing any updated long term guidance, but we plan to address all of those.

Questions.

Speaker 3: as we guide for 2024. From a category expansion, as I mentioned last quarter, really just started the expansion of the categories and it's really early days. The feedback has been positive.

As we guide for 2024 from a category expansion as I mentioned last quarter really just started the expansion of the categories and it's really early days of feedback has been positive.

Speaker 3: We did a lot of agile test and learn and we saw progress both in the

We did a lot of agile test and learn and we saw progress both in the party and dorm collection that we launched this year, we just hired a new chief merchant and office depot someone from outside the industry really bringing in a new fresh perspective on both category.

Speaker 3: party and dorm collections that we launched this year. We just hired a new chief merchant in office depot, someone from outside the industry really bringing in a new fresh perspective on both category management and expansion. So it's early days and we see opportunities, you know, how we're going to drive the traffic both on our e-commerce and end store. It's going to be doing things differently and we have plans in place to address that in 2024.

Management and expansion.

Early days and we see opportunities.

We're going to drive the traffic both on our e-commerce and in store is going to be doing things differently and we have plans in place to address that in 2024 and beyond.

Okay.

Speaker 8: OK, and then for business solutions.

And then.

For business solutions.

Speaker 8: I guess obviously technology and maybe some other categories like Furnshire are being a little bit of a drag. Are we, where are those categories relative to?

I guess, obviously technology.

And maybe.

Maybe some other categories like furniture or being a little bit of a drag.

Alright.

Where are those categories relative to.

Pre pandemic like have we.

<unk>.

Reset the bar now where you can grow or is there more maybe potential downside to some of those other.

Speaker 8: Reset the bar now where you can grow or is there more, maybe potential downside to some of those other adjacent categories?

Adjacent categories.

Yes, let me, let me break that down a little further so when you look at pre pandemic, obviously the pandemic came in.

Speaker 3: Yeah, let me break that down a little further. So when you look at a pre-pandemic, obviously the pandemic came and...

Speaker 3: cleaning and break room, tack, work spaces, all went up as you can imagine companies redefining work from home so we saw the lift across all our bids.

Cleaning and break room Tac Workspaces all went up as you can imagine.

Companies reader.

Redefining work from home. So we saw a lift across all our business as we look at TAC I think tech is more of a this year specifically a cyclical impact. So I don't think we're alone here by any means in terms of what we saw softness in the tech is starting to see some opportunities open up recently, but I still think there's opportunities in 'twenty.

Speaker 3: As we look at tech, I think tech is more of this year, specifically a sicko-thal impact. So I don't think we're alone here by any means in terms of what we saw as softness in the tech. It's starting to see some opportunities open up recently, but I still think there's opportunities in 24 that will normalize. So tech, I would look at it as more of a...

For that will normalize so Tac I would look at it as more of our industry.

Speaker 3: industry, why not ODP business solutions, ODP, specific issue. For furniture, furniture, you know, there's large deals and we've had some, you know, great wins even this year. It was just a little bit softer in Q3 compared to prior year. And we saw, you know, heightened demand during the pandemic, but I think we're at more of a normal, we've been at a normalized level of furniture and workspaces this year. And then the last one, cleaning and break room, you know, clearly that had to spike in, during the COVID time period, but that's an area where we still see opportunities for growth and it's a growth and market as well. So those are...

Industry wide not ODP business solutions, our ODP specific issue for.

For furniture furniture, there is law.

Large deals and we've had some great wins, even this year with just a little bit softer in Q3 compared to prior year and we saw heightened demand during the pandemic, but I think we're at more of a normal and we've been at a normalized level of furniture and Workspaces in this year and then the last one cleaning and break room clearly that had the spike.

During the Covid time period, but that's an area, where we still see opportunities for growth and it's a growth end market as well. So those are why we're leaning into those adjacency categories, because we see ultimately those adjacency categories being growth drivers for the business.

Speaker 9: why we're leaning into those adjacency categories because we see ultimately those adjacency categories being growth drivers for the business.

Alright, thank you.

Thank you.

Thanks, Brian for our last question. Please.

He comes from the line of Joe Gomes Mr.

Speaker 2: Mr. Gomez, please state your company name and proceed with your question.

Mr. Gomes. Please state your company name and proceed with your question.

Congrats on the quarter, it's Joe Gomes with noble capital.

Speaker 5: and grads on the corner of St. Joe Gomes with Noble Capital.

Speaker 5: Hey, Jeff. So first question, and then you mentioned a couple of times about the slowness of onboarding some of the new clients there in business solutions. They're just wondering, do you give us a little more detail? Is that specific?

Hey, Joe.

So first question you mentioned a couple of times about the slowness.

Of Onboarding some of the new clients there on business solutions I was just wondering if you could give us a little more detail is that specific to.

Speaker 5: off of steep O is that due to your, excuse me, ODP or is that due to the client's just taking longer? This little more clarity there.

Office depot is that due to your or excuse me ODP or is that due to the clients just taking longer I'm, just a little more clarity there. Please.

Speaker 3: It's mostly client driven and again I want to qualify these are large scale wins, conversions from an incumbent take time and as you can imagine the incumbent does everything possible to hold on to this contract as long as they can something that we do if we lose a contract.

Well, it's mostly client driven and again I want to qualify. These are large scale wins conversion from an incumbent take time and as you can imagine that you'd come in does everything possible to hold onto that contract as long as they can something that we do if we lose a contract.

Speaker 3: So some of this is normal But where we expected some of these large wins this

So some of this is normal.

But where we would expect that some of these large wins.

Speaker 3: start in Q4 looks like they're going to start later in the quarter or early Q1, which is impacting some of ODP Business Solutions results for the balance of this year. But overall, like I mentioned, we continue to have extremely good opportunities ahead of us. Our pipeline continues to be extremely strong. We're winning.

In Q4, it looks like Theyre going to start later in the quarter early Q1, which is impacting some of ODP business solutions results for.

For the balance of this year, but overall like I mentioned, we continue to have extremely good opportunities ahead of us our pipeline continues to be extremely strong we're winning close to 100% of our renewals and I think it goes back to from an enterprise perspective, we are coming in with a balance sheet that is strong we can work with our customers around what.

Speaker 3: close to 100% of our renewals. And I think it goes back to, from an enterprise perspective, we are coming in with a balance sheet that's strong. We can work with our customers around what they want to achieve, both from a delivery perspective, a service perspective, a cost perspective, and I think that's going to afford.

They want to achieve both from a delivery perspective of service perspective, a cost perspective, and I think that's going to afford us opportunities as we think about 2024 and beyond.

Speaker 3: us opportunities as we think about 2024 and beyond.

Speaker 3: When we look at the competitive landscape, being the position that we are in and the position we've been able to manage from a bounce sheet standpoint, give a lot of credit to the team, but I think that's an area that we will be able to drive profitable growth over time.

When we look at the competitive landscape being the position that we are in the position we've been able to manage from a balance sheet standpoint.

Give a lot of credit to the team, but I think thats an area that we will be able to drive profitable growth over time.

Speaker 5: Okay, thanks for that. And on the retail stores, you mentioned some softness and consumer traffic.

Okay. Thanks for that.

On the retail stores you mentioned.

Some softness in consumer traffic.

Speaker 5: Are you guys doing anything different to try and help improve retail traffic, either at the stores or online? And similarly, you know, last quarter, you had started the college collections and party supplies just wondering, what to quarter in, how that was acceptable.

Are you guys doing anything different to try and help.

Improved retail traffic at the stores or online and similarly.

Last quarter, you had started the college collections and party supplies, just wondering one quarter and how.

That was accepted.

Yes.

Speaker 3: Yes, on the on the latter point, the college supplies early days, but we saw positivity is just very small. We wanted to test and learn versus doing a full blown from an inventory management and also from a staging perspective across our nine hundred.

<unk> point there.

<unk> supplies early days, but we saw positivity is just very small we wanted to test and learn versus doing a full blown from an inventory management and also from a staging perspective across our 900.

Speaker 3: plus stores. As you can imagine, we wanted to make sure that we're making the right incremental investments in those categories and they resonated well, but small from an overall contribution standpoint. As you think about the things we're doing to grow traffic, you know, one is TSA. We've launched that. That's well underway. We expect to be fully across. I think it's about a 500 stores.

The stores as you can imagine we wanted to make sure that we're making the right incremental investments in those categories and they resonated well, but small from an overall contribution standpoint.

You think about the things we're doing to grow traffic wanted TSA, we've launched that that's well underway, we expect to be fully across I think it's about 500 stores sometime middle of next year, that's going to be a traffic driver. We're looking at other areas within the travel I'll use that more broadly speaking travel area.

Speaker 3: Sometime middle of next year, that's gonna be a traffic driver. We're looking at other areas within the travel. I'll use that more broadly speaking travel area that can drive traffic.

That can drive traffic as it relates to not going to the store just particularly for office supplies are for the categories. We carry.

And then from an ecommerce perspective, if you visit our site Youll see were constantly looking at ways to drive traffic looking at ways to market to our customer base to try to drive that traffic and that's been probably the biggest challenges. This year candidly has been the e-commerce.

Speaker 5: you'll see, you know, we're constantly looking at ways to drive traffic, looking at ways to market to our customer base to try to drive that traffic. And that's been probably the biggest challenges this year, candidly, has been the e-commerce versus the actual in-store, in-stores down, but e-commerce has been a bigger challenge. But we have a new leader in place and we are doing everything we can to drive momentum in that business. Okay, great. And one last one from me on there.

Versus the actual in store in stores down, but E. Commerce has been a bigger challenge, but we have a new leader in place and we are doing everything we can to drive momentum in that business.

Speaker 3: to drive momentum in that place.

Okay, Great and one last one for me on there.

Speaker 5: Okay, great, and one last one for me, I'm there.

Yeah.

Speaker 5: What kind of growth, you know, customers sequentially did you see in that business?

What kind of growth.

Customers sequentially.

Did you see in there.

That business.

Speaker 3: We don't break out the customer accounts, but I can say what we've seen is the continued momentum and what they've been able to deliver. You know, it's a relatively new business model. It's just getting the word out. You see the excitement on LinkedIn and the areas that we're doing, you know, some specific what I would say low-cost business model marketing that's driving attention. And we're getting our fair share of looks. You know, it's a tough market, as you can imagine, the 3PL logistics market. Being a new player in that market, just being recognized from a capability standpoint. But if we have an opportunity and we're expecting sometime in Q1 to do a VEYR day, similar to the VEYRS day, where we can share a lot more about not only what we're doing with existing customers, but how we're developing the platform further to drive additional growth over the next couple of years. And it's, as you know, it's a very large market.

We don't break out the customer counts, but I can say the what we've seen is the continued momentum and what they've been able to deliver it's a relatively new business model.

It's just getting the word out you see the excitement on Linkedin and areas that we're doing some specific what I would say low cost business model marketing, that's driving attention and we're getting our fair share of looks.

Tough market as you can imagine the <unk> logistics market.

Being a new player in that market, just being recognized from a capability standpoint, but if we have an opportunity and were expecting sometime in Q1 to do a day or day similar to those areas, where we can share a lot more about not only what we're doing with existing customers, but how we are developing the platform further to drive additional growth over the next.

Couple of years and as.

As you know, it's a very large market and our ability to drive opportunities with the infrastructure and the assets that chairman Joe mentioned in his prepared remarks, it's clearly an area that's.

Speaker 3: and our ability to drive opportunities with the infrastructure and the assets that Chairman Joe mentioned in his prepared remarks. It's clearly an area that's driving a lot of excitement within the company and also with our customers. Great.

<unk> a lot of excitement within the company and also with our customers.

Great. Thanks for that update thank you.

Thanks, Joe Yeah.

Speaker 2: And this concludes the Q&A session for today. I will now turn the call back over to the ODP Corporation's Chairman of the Board, Joe Basaluzo for closing remarks.

And this concludes the Q&A session for today I will now turn the call back over to the ODP Corporation as chairman of the Board Joe Boxer loser for his closing remarks.

Speaker 4: Thank you and thank you again for joining our call today.

Thank you and thank you again for joining our call today.

Speaker 9: We certainly appreciate your interest in the ODP Corporation and look forward to speaking with you again next quarter. Thank you for your participation.

We certainly appreciate your interest in the ODP Corporation.

And look forward to speaking with you again next quarter.

Thank you for your participation.

In today's call you may now disconnect.

Yeah.

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Speaker 10: No.

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Speaker 10: St.

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Speaker 10: And.