Q2 2025 The ODP Corp Earnings Call
Good morning and welcome to the ODP corporation's. Second quarter 2025 earnings conference. Call Alliance will be on the listen, only mode for today's call after. Which instructions will be given to ask a question at the request of the ODP Corporation, today's call is being recorded.
I would like to introduce temporary. Vice president, investor relations and Treasurer Mr. Peratt, you may now begin?
Good morning and thank you for joining us for the ODP corporation's. Second quarter 2025 earnings conference call.
This is Tim peratt and I'm here with Jerry Smith, our CEO.
Also, joining us on the call today, are Max hood and Adam Haggard. Our Co CFOs
during today's call, Jerry will provide an update on the business focusing, much of his commentary on our results and accomplishments for the second quarter of 2025,
Including the progress, we were making on our strategy and our expansion into higher growth industry, sectors.
After Jerry's, commentary. Max will then review the company's results for the quarter, including highlights of our divisional performance.
Followed by Adam who will highlight our balance sheet and Outlook.
Following our comments, we will then open up the line for your questions.
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.
These 4 looking statements, reflect the company's current expectations concerning future events and our subject to a number of risks and uncertainties that could cause actual results to differ materially.
Detailed discussion of these risks and uncertainties are contained in the company's filings with the US Securities and Exchange Commission.
During the call, we will use some non-gaap Financial measures as we describe business performance.
The SEC filings as well as the earnings press release.
ite at
today's call and slide presentation is being SEMO cast on our website and will be archived there for at least 1 year. I'll now turn the call over to Jerry Smith Jerry
Thank you, Tim, and good morning, everyone.
I'd like to start by thanking everyone for joining our call today to review, our results and accomplishments for the second quarter of 2025.
As always, we appreciate your continued interest and support as we execute our strategy and position ODP for long-term growth.
This morning, I'll provide an overview of our improved performance in the quarter and highlight. The progress, we are making on our overall strategy.
As I cover our performance, I want to focus on a few key takeaways that I think reflect our progress and provide context for our results.
These key points are shown on slide 4 of the presentation.
To start our results. This quarter clearly demonstrates that we're executing our strategy and making meaningful progress, our strategy centers on leveraging our supply chain and distribution strengths
To accelerate growth in our B2B business.
Reinforcing our traditional business while expanding into higher growth areas like hospitality and adjacent markets.
At the same time, we remain focused on maximizing value, in cash flow from our retail segment.
Our optimized for growth plan, underpins this strategy directing assets and capital toward higher returned, B2B opportunities.
While reducing fixed costs in our business.
Second, our progress is quarter is driving meaningful improvements, and momentum across the business surpassing. The average external Expectations by most measures
We've improved year-over-year Trends in our B2B business.
And in our consumer business, we're driving significantly stronger results.
And most importantly, our improved performance is leading to significantly higher adjusted free, cash flow.
Positioning us to further strengthen our balance sheet and liquidity position.
And lastly, looking ahead. We expect these positive Trends to continue in the second half of the Year driven by additional Topline Improvement or bdb distribution business and sustained strength in our retail channels,
Let me expand on these points and provide more detail on our performance for the quarter, starting with the slide 5 of the presentation.
Our improved performances quarter underscores the positive momentum, we're building across our business as we remain focused on operational, excellence and discipline execution of our strategy.
We delivered stronger, Revenue trends.
Trends that improved month-to-month throughout the quarter resulting in solid adjusted ibida and robust growth and adjusted free cash flow. Both exceeding expectations.
On an adjusted basis. We delivered 47 million in eida and generated 13 million in free cash flow for the second quarter.
This strong cash generation is especially notable, as we typically see cash outflows in Q2 due to inventory buildup ahead of the back-to-school season.
These impressive results were driven by improved performance in both our B2B and consumer segments.
In our bdb distribution segment, we grow stronger, Revenue traction with comparable, Revenue Trends, improving by approximately 200 basis points, both sequentially and year-over-year.
by a continued progress in onboarding new business wins and stronger demand from new customers, despite the ongoing softness, in general, Enterprise spending
We're particularly excited about our progress with core. Trust is a group purchasing collective with over 3,500 enterprise members, which we announced last quarter.
On boarding is progressing. Well and we expect this along with other recent wins to further benefit our performance, in the second half of the year.
Additionally, although still small our early stage expansion into the hospitality segment is gaining momentum and beginning to contribute to our results.
I'll provide more details on this shortly.
Turning to our retail segment Office Depot, our team continued to deliver strong results, driving improved topline trends both year-over-year and sequentially.
This performance fueled by targeted sales initiatives, and operational excellence under our optimized. For growth plan is translating into strong results and increase free cash flow.
While plans store closures, impacted total sales comparable store sales Trends improved by 200 basis points versus last year.
Discontinued 2025 are comparable sales showed even greater Improvement on an Apples to Apples basis.
This performance represents a significant turnaround from last year.
Our team's execution is creating meaningful value in our consumer business with higher average order volumes increased loyalty program enrollments and improved performance in key categories, like paper.
Although it's still early in the back to school season, our strong performance has continued through July giving stronger confidence in our momentum, for the remainder of the year.
In our supply chain business. There we achieved, 90% year-over-year Revenue growth from third-party customers, and we're expanding our new business pipeline.
Operationally. They're generated a 32% increase in ebida from third-party customers underscoring. The strength of our supply chain capabilities and growing in Market presence
There remains a key asset supporting our Global operations, navigating the evolving tariff environment, and enabling effective Inventory management. Particularly, as we expand it into the hospitality segment,
We're also making progress in optimizing their supply chain assets, working to improve fixed costs and operational efficiency through our optimized for growth plan.
I'll share more details on these initiatives shortly.
Finally, from a cash management perspective, our team continued to execute effectively optimizing business operations and inventory to maximize cash flow.
Cash conversion remains strong. Resulting in 13 million. Adjusted free cash flow for the quarter more than double the amount generated in the same period last year.
This is particularly impressive given that we typically see a use of cash in most second quarter results. Given the inventory buildup in advance of the back to school season and the third quarter. As we move forward, we are intensifying our focus on inventory management, which we expect will drive further, improvements in working capital in future quarters.
I want to thank the team for their dedication and discipline approach to cash management.
Now, I'd like to provide an update on our progress in the hospitality markets, this is shown on slide 6.
We are making significant progress in our entry into the hospitality industry.
About six months ago, we announced a major strategic partnership with one of the world's largest hotel management organizations that has become a preferred provider for operating supplies and equipment.
Which includes essential items, like towels, and linens and amenities like, soaps and shampoos and many other products.
This agreement marked a major Milestone positioning ODP to enter the 16 billion. Hospitality segment a growing Market that demands High service capabilities and aligns perfectly with our core strengths and supply chain and distribution.
This partnership covers, approximately 15,000 members, with hotels, and related assets, which serve as a strong foundation for future growth and hospitality and adjacent markets.
Over the past several months, we've established Key Supply agreements with leading industry suppliers, such as Sobel, westex and Hunter amenities ensuring access to premium Hospitality products.
While inventory build and sourcing took longer than anticipated, we made substantial progress and have improved our position to meet the expected growing demand in the future.
We’ve also recently strengthened our team by adding experienced sales professionals to drive future growth in this segment.
The new Talent we've added during the quarter brings many years of proven expertise in building successful supply of businesses. Within the hospitality industry, our team is energized and ready to hit the ground running and we're excited about the value. They will bring as we execute our plans.
Also this quarter, we've broadened the launch of our OS, product offering directly engaging with the potential Hospitality customers and we've onboarded about 1,000, new hotel properties under our current partnership.
While building momentum takes the time, we are encouraged by the strong early response and growing demand that we're beginning to see in the market.
While still small, we have seen robust month over month growth. And importantly, our expanded offering is driving increased interest in our traditional Office Products. Among Hospitality customers, both existing and new
Initial data indicates a meaningful increase in demand for our traditional products among existing Hotel customers.
Following the expansion of our offering to include OS Hotel products.
These early results demonstrate that our broader product assortment is beginning to have a positive impact on overall sales.
We're encouraged by early results and the positive industry Dynamics.
We expect to sign agreements with 1 or 2 more major hotel management companies this year.
overall we are very encouraged by our progress and believe Hospitality will become a more meaningful, contributor to our sales beginning, the second half of the year
And finally, I want to highlight the progress. We're making with our optimized for growth of restructuring plan. This is shown on slide 7.
As a reminder, this initiative is focused on streamlining our fixed cost infrastructure to improve our margin profile while leveraging our core strengths to accelerate growth in our B2B market segments.
This includes our expansion into new Enterprise verticals such as Hospitality as well as in healthcare and other adjacent sectors in the future.
We continue to make meaningful progress this quarter.
Further optimizing. Both our retail store, operations and supply chain infrastructure to better serve customers and drive greater efficiency.
Under the plan. We closed about 2 dozen retail stores and 3 distribution facilities in Q2.
While there's more work ahead, we are on Pace and we're confident that these efforts will lead to a more efficient operating model and drive margin Improvement in the future.
Before I turn it over to Max, I want to thank our team for their dedication, to our Core Business and commitment to operational excellence.
We are making solid progress on our strategy, delivering stronger year-over-year. Revenue Trends while driving strong increases in adjusted free, cash flow.
Based on our performance so far, we expect to maintain this momentum into the second half of the Year assuming a relatively stable, tariff, environment and no major changes in the broader economy or Enterprise Market regarding the Tariff in environment. While we are not immune. We believe we are. Well, positioned to adjust. And we have taken proactive, measures to position ourselves effectively to help mitigate potential impacts, as the situation continues to evolve.
Supporting our Outlook as we enter the second half of the year. We anticipate driving additional top land Improvement at ODP Business Solutions while maintaining strong results in our retail Channel.
We are ahead of expectations on cash generation and now expected adjusted free cash flow to exceed million dollars for the year further. Strengthening our balance sheet and liquidity.
We remain focused on executing our strategy, driving our core initiatives and delivering value for our shareholders with that. I will turn over to Max for a review of our financial results.
Thank you, Jerry and good morning to everyone on the call. I'm Max Hood Co CFO.
I would like to cover our results for the second quarter on slide 9, please note that our results as presented are for continuing operations.
We generated total revenue of 1.6 billion dollars for the quarter and 8% decrease compared to the second quarter of last year. However, this result represents an improvement in year-over-year trends
The decline in overall sales was primarily driven by 60 fewer stores in operation reduced consumer traffic and lower Enterprise sales despite the positive momentum in recent performance.
Gap. Operating income in the quarter was 9 million compared to 400,000 in the prior year period.
Our Gap results in the quarter included, 16 million dollars of charges, primarily related to 13 million of restructuring expenses. Largely associated with our optimized for growth plan.
through this plan, we closed 23 retail, store locations,
Three distribution facilities and one satellite location.
The balance of million dollars was associated with non-cash asset impairments of operating lease rate of use assets. Associated with a retail store locations and supply chain facilities,
excluding these charges adjusted operating income. For the second quarter was 25 million compared to 33 million in last year's, second quarter,
Unallocated corporate expenses were 15 million in Q2.
Adjusted ibida was 47 million in the quarter compared to 57 million in last year's. Second quarter,
This includes depreciation and amortization expense of 24 million in the second quarter of 2025 and 2024.
Excluding the after tax impact from the items mentioned earlier, adjusted net income from continuing operations for the second quarter was 15 million or 51 cents per diluted share.
Compared to 20 million or 56 cents per diluted share in the prior year period.
now, turning to our improved cash flow generation in the quarter,
This compared to cash used in operating activities of continuing operations of $1 million, including 25 million in restructuring spend. In the same period last year.
The year-over-year increase in operating cash flow. Reflects our strengthening business model and disciplined, working Capital Management. As we successfully converted inventory investments into cash as we indicated last quarter,
This led to strong cash conversion in the quarter.
Capital expenditures were 12 million in the second quarter of 2025 versus 19 million in the prior year period. And we continue to prioritize Capital Investments towards B2B growth opportunities supporting our supply chain operations, distribution, Network, and digital capabilities.
Adjusted free cash flow in the quarter was 13 million. A significant increase as compared to adjusted free cash flow of 5 million dollars generated in the same period last year.
This result is especially noteworthy given that we typically experience cash. Outflows in the second quarter due to inventory. Build ahead of the back to school season.
Now, turning to a consumer Business Office Depot as shown on, slide 10.
Office Depot delivered, another quarter of improving results with year-over-year. Topline Trends improving in the quarter as targeted profitable sales strategies continued to gain traction,
Reported sales were 716 million in the quarter down, 10% compared to the prior year.
This result represented an improvement in the year-over-year trend. We reported in the same period last year.
Overall sales were impacted primarily by 60 fewer retail locations and service associated with planned store closures as well as lowered traffic and online sales. Partially offset by higher average, order volumes and the positive impact of targeted sales promotions
In total, we closed 23 retail stores in the quarter and had 834 stores at quarter end.
On a comparable store basis.
Our targeted sales initiatives continue to drive meaningful Improvement and comparable store sale metrics.
On a same store basis sales were down 5% year-over-year, representing a approximately, a 200 basis. Point improvement in our same store comp over last year's second quarter.
From an operational standpoint operating income for the quarter was 12 million.
On a percentage of Revenue basis. This result was flat with last year.
as we move forward, we're continuing to execute on our profitable sales initiatives, in our retail business balancing, our pricing and promotion strategy with demand elasticity
We continue to make progress. And as Jerry mentioned, we carried that momentum into the month of July and are closely monitoring our progress as we head into the highly competitive back to school season.
We're also continuing to execute our optimized for growth plan focused on efficiency gains across the organization and help us lower fixed costs.
Now, turning to ODP Business Solutions has shown on slide 11.
As Jerry mentioned, we're pleased to report improved Topline Trends this quarter.
Reported Revenue was 859 million in Q2, down 6% year-over-year but representing more than a 200 basis, point improvement over recent trends.
While Enterprise spending remains generally soft, our results benefited from stronger, sales traction with new accounts and continued progress in onboarding recent business wins.
Additionally, all those Bill Early sales in our Hospitality categories grew month over month throughout the quarter and began contributing to our overall performance.
With our expanded offering including os&e products, we are also seeing a meaningful increase in sales of traditional product categories. Among existing Hospitality customers.
Overall sales to hospitality customers Rose by a low double digit percentage.
Our pipeline of new business continues to grow, and we are making progress in converting the recent large new customer wins, which represent over $500 million in annual spend when at full run rate.
Looking ahead, we remain focused on converting, these new customers.
Strengthening relationships with existing clients and driving growth in Hospitality to help offset softer, Enterprise spending and support continued Improvement in the second half of the year.
Additionally, adjacency product categories. Accounted for 45% of total revenue. This quarter up from 43% in Q2 of last year a key performance indicator for our business
On the operating front, lower revenues and related fixed cost to. You leveraging resulted in operating income of $18, million in the quarter compared to 29 million in the prior year period.
Reducing fixed costs within our supply chain operations remains a top priority as we work to drive future margin improvements.
We are encouraged by our improving position for the future as we execute our strategy and expand into new market segments.
We expect to continue driving sequential improvements in the second half of the year with greater contribution from the hospitality sector.
Now turning to our results in our supply chain business there, as shown on slide 12.
There is reported Topline performance reflected lower sales from its internal customers ODP, Business Solutions, and Office Depot.
Partially offset by Revenue growth from third-party customers.
Overall, the year-over-year sales trends improved versus the prior year on a total segment basis.
They are delivered sales of 1.1 billion in the quarter. Primarily derived from supporting the purchasing and supply chain operations of ODP, Business Solutions, and Office Depot, which are eliminated upon consolidation.
They are continued to make progress in executing its strategy to serve third-party customers. Adding new logos to its customer lists and driving a strong increase in external Revenue.
Being mindful that some of their third-party profitability is accounted for as a contra expense instead of flowing through Revenue.
For Q2, they are delivered third-party revenue of 19 million up 90% over last year.
Their drove third-party EBITDA of $5 million, which represents a 32% increase compared to the prior year period.
Now, I'll turn it over to Adam to cover our balance sheet, highlights and Outlook.
Thank you, Max.
And it's great to be here with everyone. This morning, I'm Adam hagard Co CFO
Turning the slide 14, our balance sheet and liquidity position continue to improve in the quarter supported by our strong cash generation.
Adjusted free cash flow was $13 million in the quarter, a substantial increase compared to last year.
The changes. We are making to our business model. Have resulted in our stronger cash generation year to date and have helped us pay down approximately 35 million in debt. So far this year further strengthening our balance sheet
In total we've generated 58 million in adjusted free cash flow, a more than 160% increase, compared to the first half of last year.
As we move forward, we're also sharpening our focus on Inventory management opportunities, which we expect will enhance future cash generation.
We believe this strategy positions us to maximize cash flow further improves our balance sheet and provides a pathway for long-term. Sustainable growth and value creation.
Our balance sheet at quarter-end included total liquidity of $658 million, consisting of $177 million in cash, cash equivalents, and $481 million in available credit under the fourth amended credit agreement.
Total debt was 245 million.
Moving on to Capital, allocation.
We continue to execute our Capital allocation strategy, primarily investing in our court to drive the future of our business.
We invested 12 million in capex in the quarter versus 19 million in the prior year, period, targeted in our supply chain operations distribution, business, and digital capabilities to set ourselves apart in the industry.
As we move forward, we expect to prioritize our Capital allocation towards investment in. Our core B2B resources positioning us to capture the growth opportunities we discussed earlier.
We Believe investing in our B2B business and expanding into new markets, segments will drive the highest Roi and create long-term value for shareholders.
Now, turning to our outlook for 2025 as shown on slide 15.
As we look to the second half of the year directionally, we are expecting the following Dynamics and outlook for our business.
First, we expect to drive, Topline improvements in the second half of the year, at ODP Business Solutions, as we continue to make progress on customer conversion and drive, stronger sales, and hospitality.
Next, we expect to continue driving strong performance in our retail Channel and the second half of the year.
Helping us support continued, strong cash generation.
Heading into the second half of the year.
Lastly we now expect to generate over 115 million in adjusted. Free cash flow for the full year 2025 as we execute our strategy and continue to focus on working Capital Management.
Our Outlook considers a relatively stable, macroeconomic environment and minimal additional impact from the evolving tariff environment.
As we stated earlier, while we are not immune from the potential impacts related to the changing tariff structures. We believe we are well positioned with a diverse sourcing structure and flexible operating structure to help limit potential impacts to our business.
With that, I will turn the call back over to Jerry.
Thank you, Adam, before we open the call for questions, I want to once again, thank our team for the dedication to operational excellence.
And their commitment to building a stronger foundation for profitable growth and long-term value creation for all our stakeholders.
To reiterate, we are making excellent progress on our strategy. Driving improved performance in both our B2B and consumer businesses expanding to high growth industries, increasing cash flow, and further strengthening our balance sheet. We are encouraged by our momentum, and we expect to deliver continuing improvements in the second half of the year.
Our expansion into higher growth market segments like, hospitality is already showing early positive results and we anticipate gaining additional Traction in this area contributing more meaningful to our performance in the second half of the 2025.
Additionally, our improving performance is leading to Stronger, adjusted free cash flow results. Which further reinforces our foundation
for sustainable growth in 2026 and Beyond.
With that operator, we're ready to take your questions.
Thank you to ask a question. Please press star 1, 1 on your telephone, and wait for your name to be announced.
To withdraw your question. Please press star 1 1, again please, stand by while we compile the Q&A roster.
Our first question comes from the line of Michael Lasser with UBS your line is now open.
Morning, thank you so much for taking my question to Jerry during your time here at Corp, you've been aggressive in pursuing strategic alternatives to try and maximize the value to shareholders of the week.
As you stand today, are there Alternatives that you're exploring given uh where your stock price stands, and what you see for the future or is the focus more. So on simply executing the game plan to uh continue to perform as uh you anticipate which is maybe the way that you expect to
Maximize shareholder value. Thank you.
Well Matt, good morning Michael, great to hear from you. Um, our our my job in the board's job is always maximize shareholder value. That's our primary focus as a board and as a CEO, I will say that I I can't comment on any activities or it's not our policy to talk about in any rumors or speculation. And so you know that's my answer to that piece and I'm super proud of the team of. We're executing our strategy, we have a daily operations focused across all our businesses and we're driving a tremendous results and I think our cash results and our EPA results demonstrate that. And so I mean again my job is to maximize shareholder value. I'm going to go out and do that. Our team is executing very, very well.
Got you. Thank you very much for that. Uh, 1 follow up is on the expectation. That ODP Corp, can generate $150 million of free cash flow this year? There are some signs that the labor market is weakening. So what do you assume from a macroeconomic standpoint, particularly the labor market within this expectation? And if we do start to see the unemployment rate rise, how would that impact your expectation for free cash flow generation this year?
You know, we're and we're seeing, honestly, we saw strength in the business in July, especially on the consumer side. And, you know, the, the last, you know, the last 3 or 4 days have been super strong as well. So, I mean, you know, barring why, why we put the comment in, barring any, you know, changes in the environment, you know. But, you know, we we think we're performing well in this, you know, current economic environment. And we're performing well from a tariff mitigation perspective and you know, super pleased with the momentum. We've seen in the last 45 days from the hospitality perspective as well. Yeah, for example, yesterday was our biggest rate ever in the hospitality business. So not you know I I want a lot more and so does dates and travel the president of our B2B business. And we we literally have a daily call every day with our Hospitality sales leaders. And so we do that on the Kevin. Does it with me on the b2c side and we're doing it on the B2B side but I want our investors to hear. We're focused on operational excellence for folks.
Focus on daily execution, and hey, and we have a 100 Day plans. We have our top 10 priorities. We're executing an extremely well, you know, and we're ready exactly in the environment that's thrown at us but, you know, hey, the 115 million plus is important. It shows the strength of our balance sheet and it shows the ability from a liquidity position to get even stronger. And over time as we continue to build that, we we will continue to look for growth opportunities AC with with that cash in the future.
Okay, 2. Last questions. One is on the tariff fees. What percentage of your assortment, roughly speaking, is being subject to a tariff? And in response, how much are you anticipating?
Uh, taking price up to maintain your margin.
Yes, so let me take the, let me, let me give you the structural at the top and let Madame Max and Adam jump in with the details, from the Tariff perspective. So we started daily care forums when it first came out.
Our our procurement and and Merchants teams have done an incredible job, Eric man. AJ and a number of people recognition, you know, Andrew across the across the board. We, we've done a great job of mitigating that a lot of our tariffs actually hit in areas, Michael where you have a, a map pricing which is minimum average pricing, whether the vendor sets the price. And so what the vendors have done across Tech and ink and toner, a number of areas that they've already risen had price increases and that, so, the whole Market floats up now obviously, there could be softening in demand. We haven't seen a lot of that yet and so, you know, a big priority, big percentage of our terrorists were there. And what we'll all this lab will flow through an appropriately where we see tariffs and other areas but Adam you want to jump in first and then Max. Yeah. So um, hey Michael, it's Adam, uh, 1 thing that that should be clear when it comes to the the Tariff environment for us is that we were very focused on bringing an in.
Inventory early on, uh, and this this tariff, uh, environment. If we go all the way back to, when we were buying ahead for, uh, Port strike, which feels like it was 10 years ago now. But uh, last year at the end of the year, we were, we were starting to get ahead for Port strike. We were starting to get ahead for tariffs. We had a really good inventory position, a good cost base that we were really happy about coming into.
What allowed us to do with that cost base, was be competitive on pricing. So, 1 thing that should be very clear, is that? There were no real M, uh, uh, uh,
Pricing impacts to Q2.
Um, we had a stable pricing environment and so all the trends in our business are organic trends for us. They are not pricing related. So that's that, that should be something that everybody takes away from this call.
And then uh, to just put a finer point on what Jerry just alluded to is that about 57% of our inventory is either map or map priced or exempt.
In the Tariff environment. So, we have a lot of flexibility in this space moving forward, and we feel really comfortable, um, as long as the macro, doesn't turn sideways on a switch.
Uh, is is the plan at this point?
In my last question, I apologize for uh taking so much time. But my last question is, for those who want to invest in ODP, Corp, stock, 1 of the key questions is at what point does the positive, the positive development of all the PowerPoint actions that you've been taking such as
the adjacent categories, all those that you've, um,
How can potentially?
Michael, you broke up a bit in the beginning but I I I'm going to try to hit it at a high level let the guys jump in as well. You know, I I believe we're tremendously undervalued today if you look at our balance sheet position, our cash position, our you know, our liquidity position that the potential we have in hospitality. And and the pitch, what we're what, we're the execution of our B Toc teams and we're, you know,
We are a from a market cap perspective, a a, at a, a, a 2, and a half types of multiple, which is a, in my mind, a liquidation multiple, which isn't fair at all, you know, we, we have some with potential, the cap, the cash position, the moment we have we should be in my opinion, a much stronger, multiple going forward. And I think with the potential of hospitality as a growth segment in the future and the tax position we have in the balance sheet. I, I think we're personally, I think we're a strong buying Michael and I think, and I as a CEO, my job is to maximize shareholder value, and we're going to go keep executing and to go up and go do that. But I mean, you know, we we have a strong balance sheet position, we have a strong cash position. We just took guidance up on cash at 1:15 plus and so and we have a segment, we've entered into we're starting to see a lot of traction on. That is a a growing Market segment, what the timing of that hard to predict, but you know that now is the best time there's ever a, from a, a value perspective because I
I had to compete in this business.
Guys, good luck.
Yeah, thank you. Go ahead.
Michael, its Max. Just wanted to add add to that. Um, you know, just a reminder we expect to see our retail business um, you know, continue to decline based on
The industry while. However that's very stabilized and Performing better than we think it is right now. Um, our focus is on Jerry mentioned growing industry in Hospitality. Um, we've converted over a thousand properties in just the 1 contract, um, that we began with. So we're making really good progress. Just want to reiterate that. It's a, it's a second half.
Story where we really expect to see some momentum. So I would keep watching, um, and focusing on the performance this year and the second half.
Okay, thank you very much. Good luck.
Our next question comes from the line of Greg burns with sedoti. Your line is now open.
Good morning. Um,
You've given us a lot of detail on the momentum in the hospitality space. Um, but I just wanted to get maybe a little bit more color on where you're at with those larger new deals you've signed in the more traditional office categories on the B2B side. Um,
How how are those uh, progressing in terms of their, their onboarding? The pace of onboarding are they where you, uh, thought they would be. And you know, what kind of momentum are you seeing from those deals? Uh, in the second quarter? And as we moved into move into the third quarter,
Yeah. I mean obviously I can't get into a lot of detail because some of that's competitive information. But I will say we're an active active conversations in our, you know, confident that we will have contracts in place this year with a with additional parties that are significant to our overall growth plan.
Okay. I I was more asking about the ones you've already announced and signed just where where you are in terms of um the pace of onboarding. Um any any momentum the momentum you're seeing in those? Yeah, yeah.
For the, for the ones we have, we're, we're optimistic with the momentum. I mean signing in a thousand properties and, you know, we are out Senator and her team's out, and they're, they're knocking on doors and they're, they're, they're take, they're, they're getting wins. And again, we're, we're looking at this every single day. And so, the goal is to, you know, how do you double that thousand to 2 thousand? How do you go to 2,000 to 4,000? How do you get to 14,000 and all of the, so we're pleased with the momentum of of the other 2 signings we've had. And those, are we mentioned core trust and that's been a very strong relationship for us. And that is growing as, as well as the other when we left in November is we're, we're on boarding people on on, on an ongoing basis on
All all 3 fronts.
Had me thinking. Okay great. Yeah.
Talking about. And we see early signs right now in Q2 that it's starting and so that gives us hope and and and and what the the back half of the year is going to look like from the top line and bottom line perspective.
Okay, great. Um,
the more on the margins on the, uh,
The solutions business we're down a little bit sequentially. Is that just some of the, the newer business coming in at a lower margin and needs to to gain a little bit more scale? What was driving that sequential?
The client and operating margin this quarter.
Max and Adam.
Yeah. Hey Greg. Um, yeah, it's Max. So related to the margins, you know. Overall, you know, just to be clear on the on the product margin itself. We've held strong. Um, so we've seen consistent product margin been able to keep that High. Um, overall margins. Um, you know, we're still we we're still continuing to see well. Um, we made good progress.
in our sales, um,
Trajectory going to a negative 6 decline in ODP, Business Solutions. Um,
We still have a deleveraging impact and an impact of our fixed costs on our profit margin. So this comes back to optimize for growth, which we launched last quarter. We're making excellent progress. We have some details in the release, but essentially closed a variety of facilities to tighten up our supply chain, and that's going to drive very direct profitability.
Profitability improvement in the business solutions.
Okay. Um thanks for that and then um, just lastly in the in the what what are they going to be the cash charges this year um for restructuring and and uh you know, the um project core and optimized for growth.
Cash charges should be roughly around, uh, probably about 5 million dollars a quarter.
Okay, great. Thank you.
Thank you. Our next question comes from the line of Joe Gomez with Noble Capital. Your line is now open.
Good morning. Thanks for taking my questions.
So I wanted to start out real big.
Morning. I just wanted to start out real big picture, uh, you know, on on the, on the Business Solution side, you know, making some good progress there, the 200 basis point Improvement in sales trends,
What though do you did you sit here today? Do you think needs to happen or it occur?
For that segment, to get back to positive.
Revenue trends.
I I think it is discontinued the executional focus. We have its you know we we are we are 100% blanketing Hospitality that that that's that that's a growth Market. How do I get? How, how does David his team in the who's the B2B of our, our B of our business? You know, drive from a thousand properties to 2,000 properties to 3,000 properties to 4,000 properties. We're going to go do that and we're deploying sales teams we did. I want to mention that we run a very experienced leader to run our inside sales team that had you know 15 plus years experience in the hospitality provider and did a great job there and is a a a wealth of information and experience. I think he's going to do a fantastic job for us. I mean Joe Brothers running our our team for us and are all other sales leaders are. Again, we have a daily Hospitality call. Dave runs I participated on it, Adam and Max are on as well. And so, we are laser focused on driving operational excellence to go off and drive this business. That, that that's where we're going to get the
Growth from and from core trust and from the other the large deal we had in November and any other deals that we'll continue to look for going forward. So it's about operational focused. And and I think the we've tripled down on that and I think we've done that all year and and that's showing in the results of a q1 and Q2. Hey, Joe, it's Adam. Can I can I pull on that thread for a second as well? 1 1 Thing.
To note is that our change in trend in the ODP business.
Really coming from.
Some of these other contracts started, just alluded to.
And I'll just have 1 quick point to that, too. What we're noticing, um, as an extra benefit here is that in our traditional space that our sales are growing there, as we explore Hospitality as well. Um, I mentioned earlier, uh, low double digit growth in our traditional space. So, these are things like Pantry, um, cleaning. So all sort of traditional spaces increasing as a result of our expansion in the hospital. So a great way to say it would be, they're they're viewing us as a, a total, a total solution provider. Not not just an office Product Company more, but now now we can 1 truck can do you know, cleaning and break room? We can do snacks, you can do Hospitality products, you can do a traditional Office Products. You can do Furniture, I can do Tech and so and we've done deals in some of these places. In all those categories, I think it's a really important strategic point you made Max that you know, hey in in in these pieces, we're seeing in these customers, we're seeing growth that cross the whole across our whole portfolio.
Great. And then then 1 other 1 for me,
So again, you know, you're seeing some improvement over at Office Depot on the retail side. Um, but you know,
Guesses out there for back to school. Could be down. Anywhere from the mid to high single digits.
um,
if that would occur, you know, these these they can still see improve same store sales trends at at
Depot or um, you know, are you the way you're looking at it? You're not seeing those types of declines that are being forecasted out there.
You'll take that first. I want to I think Kevin off and his team. They've done an incredible job in q1 and Q2 they had an incredible July that that this week has been strong as well and it's really a merchandising strategy shift of offering value across the number of product categories. It's a daily execution by our store teams, Carlos, Chris and Billy doing an incredible job of and we're we're operationally looking at every day scorecard and it but I I think that you know, you know, we're early in the flight weeks you know this week is a big flight week and we've had really strong performance, you know, to, you know, Sunday, you know, you know Monday to and Tuesday and so it you know that's a good indicator that we can continue the strength. I can't predict what's going to happen is you know the next you know you know in the next 3 and a half 4 weeks. But yeah, we think we're incredibly positioned with the, you know, merchandise and execution of our merchandising teams, the performance of our store teams and the way we've scorecard it or manage it every single.
Single day at every single store, every single District, every single region. And and and we're doing the same thing with our our key product categories, and it's working. And so I, I, I have to applaud that team because they are they have built tremendous momentum and I, I know I was on the call today at 8:30 before this call, and another great day. So, thank you, team for doing that. And we're going to try to continue to the every day. But I hope that all our call listeners are hearing.
Strategies for working operational excellence are in place, day by day. The focus is working, and I have strong hopes for the B2C team this quarter.
Okay, anything else then?
I think I think you summed it up. Well, the only thing I would add to that is that you know, coming in to this first beginning of the flight week since Jerry was alluding to we were seeing nice momentum and usually that's a good sign to for things to come. We don't know exactly how things will pan out, of course. Uh, throughout the remainder of the quarter, but it it early signs, uh, good July early signs to to to the first couple flight weeks that are here. So we we're encouraged by what we're seeing early on here in the beginning of back to school.
Great. Thanks for that guys. I'll hop back to you.
Thank you so much. Thank you; that concludes the Q&A session for today. I will now turn the call back over to the ODP Corporation CEO, Gerry Smith, for any closing remarks.
Yeah, I just want to thank everyone for joining the call today. I want to just reiterate that really proud of this team. I want to thank my leadership, team my senior leadership team, all the employees of the, of the company, and our partners as well, we're demonstrating strong strategy. Execution, we're demonstrating an operational. Excellence, we have very focused, prioritized plans, and how we run the business every single day, you know. And I think that's really had great results in q1 and Q2 very pleased with the cash. You know, forecast increase across the business. A lot of us have faith. And we're, we're turning into that every day as our process business as well. And look forward to being, you know, you know
Further, thank you for joining the call today and we look forward to continued to drive it and maximize your older value.
While others will keep praying for the success. Thank you very much.