Greg, I'll try to keep it—we'll try to keep it to 10 minutes or so. Is that right? And then just. Yeah, okay. Yeah, yeah. All right. Let's get going here. Welcome, everyone, to Sidoti March Small Cap Conference. Thanks for joining us today here for The ODP Corporation presentation. With us from the company, we have Max Hood and Adam Haggard, the company's Co-CFOs, and Tim Perrott, who heads up their IR operations. They're going to run through a quick presentation, then we'll get to as much Q&A as we can at the end. If you do have a question, feel free to enter it through the functionality in Zoom, and we'll get to as many of those as possible. With that, I will hand it off to Max, Adam, and Tim. Great. Thanks so much, Greg. Really appreciate it. Thanks for having us. What I thought we would do is just go ahead and cover off on just an update on the company. As I think most of you know, or maybe you don't know, a lot of developments that are happening at ODP Corporation. In fact, we've been on a significant evolution of our business over the last few years, really executing what we call our B2B pivot. When you step back and you look at the assets of the company, our supply chain, our procurement expertise, our B2B distribution, large B2B base, is really what we're leveraging into not only our traditional market segments and adjacency SKU segments, but also we're moving now, fortunately, this is really exciting for us, into an entire new industry sector, right, where these core competencies and core strengths really resonate. We're super excited about that. Everything that we're doing in our business today is working to accelerate that as fast as we can because we see such great opportunity. Maybe I'll just start with the company and the way we're organized today. We have three major business units: two in B2B and one, as a lot of people know, is for in B2C with Office Depot and OfficeMax retail stores. If you kind of look at what we have here underneath The ODP Corporation, you have our B2B distribution subsidiary that's called ODP Business Solutions. Again, it serves enterprise, medium, and small customers, a very large B2B customer base in excess of 120,000 customers today. We serve over 60% of the Fortune 100 companies, both private and public sector companies that we serve, both in our traditional market segments, kind of in office supplies and what we are known for in the past, but also adjacencies, which make up about half of our revenue in that segment today. Those are things like Jan-San, cleaning and break room, workspaces, furniture, tech, etc. We will talk about a little in just a minute what we are really super excited about is our opportunity to move into some new segments. When you look at that, we are looking to obviously expand margin, grow that business, and generate a lot of cash flow. Next, and this is really interesting for us, is we have actually taken our supply chain out from being a core center of our business a few years ago to its own subsidiary, its own P&L. It supports our two internal customers, both ODP Business Solutions and Office Depot. It has just incredible capabilities to serve other third-party customers. If you look at our supply chain, it is a nationwide supply chain. We have over 8 million sq ft of distribution center space. We have the capability to serve 98.5% next day throughout the United States. It is just a very large, very capable supply chain business that we are leveraging. It is really the backbone of our overall business, and it is why we are driving our distribution business and positioning ourselves to get into new market segments. Really excited about VEYER and what that is doing for us. We have our B2C business, which is Office Depot, which is our omnichannel retail business serving small business, education, home office customers. We have over 860 stores today, e-commerce presence, very high levels of customer care and service. I think one thing to note about our retail business is that the average store lease life today is less than three years, which means we do not have a lot of exposure on the retail side from a lease liability standpoint. The overwhelming majority of our stores are free cash flow positives. What you have seen over the last couple of years in terms of our plans is we have been optimizing that store footprint. It has been coming down somewhat, but we have been optimizing that and generating free cash flow as we go forward. These three business units, very synergistic, our B2B business is where you are going to see us focusing more and more of our time and our capital as we go forward. Just looking at the next slide here, I'll touch on this, but 2024 was obviously a challenging year just overall for the business, but significant developments and things that have been going on maybe beneath the surface that investors should be aware of. It is obviously leveraging our core competencies, right, in supply chain, procurement, distribution, or our B2B base, really leveraging those key differentiators to build better, I would say, pipeline and growth initiatives within our traditional market segments, and then position ourselves to move into higher growth market segments, which we'll get to in a minute. Obviously, a very solid balance sheet. Available liquidity is very strong for us. I would say after a pretty tough early part of 2024, as we're heading into the second half of last year, winning significant new business and really improving the pipeline of the company, which we expect as we go throughout the year, we'll begin to contribute to our overall traction in B2B. In fact, we won our largest B2B enterprise customer win in history, the $1.5 billion deal with a very large company that we are currently onboarding, as well as we have launched strategic warehousing fulfillment services for one of the largest e-commerce, maybe I'll call it a social media-driven e-commerce platform and their online sales. That is more in our VEYER specific business that's serving that third party. Very excited about that. Leveraging these core assets, and it's taken quite a while, but now we're moving into a large industry segment in the hospitality market, which for the first time in a long time, we're actually moving into a market that's growing in the 4%-6% range on an annual basis. It's quite large. It's $16 billion a year for the industry, just hospitality in general. We have recently partnered and signed an agreement with one of the largest hotel management companies in the space. We're positioning for future growth there where our core competencies really resonate. Lastly, we announced our Optimize for Growth plan, which is really designed to focus more and more of our corporate entity, our capital structure, our cash, and our investments into capitalizing on these opportunities in the B2B space while also reducing some of the exposure on the consumer and the retail side. On the hospitality market, I think I mentioned this. I will not spend a lot of time on it, but we did sign this monumental agreement with one of the leading hotel management companies. It is an interesting market because the qualifications to participate in that market are very high. Our core strengths fit the industry extremely well. There is a significant need for greater and more reliable service, and we feel like we are in a great position to serve that market. We are now one of a very few preferred suppliers and distributors in the hospitality space. It's interesting because it's a highly curated space where certain brands and certain brands that the hotel has about their own business has got to be delivered to those customers. It really reduces the opportunity for things like leakage that we see in our traditional market segment. We're super excited about that. It really doesn't end there. This is the beginning. If you look at all the adjacent market segments and same mechanism in terms of supply and distribution in other market segments and cruise lines and others, you can kind of run them out. It's a very large market segment that we can go and leverage our core strengths. We're super excited about the opportunity in the hospitality side. As I've mentioned, our Optimize for Growth plan, leveraging our core strengths, capturing growth in B2B, reducing our fixed costs, which is very key for us. Part of this is looking at our infrastructure that supports our consumer business. We're looking at ways that will optimize that, bring down our fixed cost structure as we continue to execute our overall plan. Maybe I'll just stop there for a minute and just see if Anthony and Max have anything to weigh in on. If not, we can go to Q&A. Good. Yeah. I'd like to go into Q&A for sure. Sure. All right. I'll kick it off. The movement to the hospitality market, very, very significant, but maybe there's a little bit of skepticism, I guess, potentially with the Street, or maybe it's waiting to see it in the numbers. Maybe you could just talk about the significance of that opportunity a little bit, and then maybe your expectations for how that might ramp up this year and when we might start to see it in your numbers. Yeah. Yeah, I think one key item to keep in mind is a lot of the hospitality industry and a lot of the major hotels in the U.S. were already ODP customers from an office supply perspective. We have the relationships, but it was a really big deal for us to step into providing hospitality supplies, things like linens, towels, sheets, soaps. It utilizes our same core competency of what we do today, but expands into a growing market, which is what we're really excited about. Yeah. To just piggyback onto Max's comment, Greg, to your question on how long will it take and when will we start to see this business really arrive in our results. We just signed this contract and went live about three weeks ago. Of course, it's going to take time. Like anything else, this customer that we signed has 19,000 individual properties throughout the U.S. We are going to need some time to obviously reach out to that customer base and start converting them on a go-forward basis. It is definitely a back half of the year story as we continue to ramp through. The selling motion needs to continue. We need to start to convert some of these customers from the suppliers that they were working with over to the ODP Business Solutions platform. We'll definitely get some real good momentum in the back half of the year and heading into 2026. Okay. I know maybe that was a little bit of the reason, this lack of visibility, I guess, in the near term around not giving guidance. What are your thoughts about updating the street on some guidance and maybe giving us some signposts, maybe in terms of how we should think about earnings and revenue growth for this year? Yeah. For now, we're trying to figure out the pacing of buying from these hotel groups. As we figure that out, we want to provide guidance. Our goal is mid-year. We revisit, and hopefully, we can share more at that time. It's really figuring out the pacing of the buying that we're. Yeah. Okay. We just turned the switch on about three weeks ago. It is we're just getting that ball rolling. We did comment that we expect to generate, obviously, more free cash flow this year than last year. Leverage should have an opportunity to also improve, even though it's already extremely low. Those two things go together. As we start to understand the cadence of how this new industry for us, these customers come on, it's a more measured, fortunately, delivery model, which we like. As we start getting more of that under our belt, we'll come back as soon as we can to give investors a bit more visibility in terms of both top line and even up. Okay. What does the pipeline look like? How much of a door opener has this large hospitality contract been for you? Should we expect to hear some updates in terms of maybe new contracts in the next couple of quarters? Yeah. It's a good question, Greg. I think that overall, what we're seeing is some inbound calls coming our way from other hospitality hotel groups that have caught wind that we have been awarded this business. We've gotten some calls that have said, "Hey, if you guys have passed the sniff test and the vetting from this group, we're on board." Everybody knows the procurement team that we've joined this partnership with. Because they're so well respected in the industry, we have other hospitality groups that are clearly engaging now with us just simply because they know that we have the ability to offer the services that are required and really take share inside this space. One thing too, which I think is interesting, just to add on to what Adam is saying, is if you look at, if you think about the vendor supplier side that we've been bringing to market with Hunter Amenities, Sobel Westex, I mean, these are very big players and suppliers in the industry that we're forging relationships with, obviously, to be the distribution partner to serve customers. You'll see those type of relationships that we're beginning to bring to bear as well, in addition to all the inbounds on the customer side that we're starting to see. All right. Great. Obviously, hospitality, a big deal. Could we maybe just talk about your competitive positioning and ability to maybe gain share in your traditional market segments? I know you mentioned that $1.5 billion deal, largest in history. I know last year there was maybe the competitiveness of the marketplace was a little tough, and that limited some of the growth in that area. Can you just talk about maybe the opportunities for growth in your more traditional part of your business? Yeah. One other big call out on top of the $1.5 billion is that we just signed into another contract with CoreTrust, which is a GPO out there in the market that is going to also bring us an incredible office supply business as well. It's going to be traditionally in the same vein as what we have been selling historically. Yeah, we are signing additional large contracts, way larger than what we've been accustomed to in the past. I mean, these are hefty. $150 million a year for the one over 10 years. That's a pretty sizable lift for us. That's transitioning over as we move throughout the year as well. It's CoreTrust, another nice win for us. We are making really big strides in signing large contracts. Those large contracts will help us come in and offset the deleverage that the business did see in 2024. That is a big strategic change for us, right, from 2024, is that we need fixed cost absorption. These two big contracts will definitely help us reverse course on the deleverage that we saw in 2024. Winning office supply business is here. We're doing it. It will be, once again, we're just winning them now. We've announced them. It will be back half of the year type activity. We will see some pickup there. We're not giving up on the core supply business. It's something that's near and dear to our hearts. We're continuously battling out there in the marketplace and taking back share, just as you're seeing here with these two massive wins that we just have under our belts. All right. Great. When we think about that volume leveraging back into the business, where can we get the margins on the B2B wholesale side of your business? Is 5% a good target? Do you think you could get higher than that? What is the potential for that business? That's where we're aiming, Greg. We're aiming at exactly that. That 5% mark is where we're planning for. Last year, in 2024, we were in the 3% range. We have a series of initiatives to claw that back and get back to 5%. Signing business in the 4%-5% range is the first step, right? We have some efficiencies that are working throughout the business as well to also help propel us back margin-wise. We've got a lot of irons in the fire when it comes to growing back to that 5% range. Gerry Smith is definitely been challenging the team to get back there sooner rather than later. Yeah. To Adam's point, the hospitality business that we've been talking about, that's around that 5% as well. That's accretive to our business getting back to that 5%. Okay. Great. Great. All right. Maybe we could pivot over to the retail side. You announced kind of a major restructuring on that side of the business this last quarter. Maybe you could just frame how the street should think about that business. I know you're limiting, cutting off growth investment there. Should we think of that more as an accelerated cash cow that you're going to manage the decline more tightly of, or as you take out fixed costs? Is that the objective, just to maximize cash flow, keep the operating margin at a plus level and let the business decline, or is there any goal to drive growth there? Yeah. You got it, Greg. Our retail business is a good business for us. I mean, it is a cash generator for us. That's how I would look at it. I wouldn't look at it as a growth business, but more of a cash generator. Optimize for Growth is a restructuring program that we announced. This program is really focused on our fixed cost profile of our company. As sales have declined last year, it has caused a deleveraging effect on us. We are really taking a close look at the fixed cost infrastructure of our business. That is not only store leases, but also our supply chain, so distribution centers, warehouses. This is a three to four-year plan that we are taking really a balanced and cash-focused approach on over the next three to four years. To answer your question, Greg, we're not going to throw cash away. If the stores are cash flow positive, they're performing well, then the stores will continue to operate and generate that cash flow for us. At the same time, it is a declining industry that we're in. Our expectation is long-term, we'll continue to see pressure there. The Optimize for Growth will allow us to exit stores and lease costs in that restructuring bucket. The way I would look at it is, like I said, as long as the stores are profitable, generating cash. If they're not, our approach will be to make it as organic as possible following the lease schedule. If a store is coming up on lease, we'll evaluate at that point rather than unnecessarily pay lease termination costs and things like that. Right. Okay. Yeah. Remember that the average lease life is less than three years, right? It gives us a lot of flexibility. In fact, I think that's a great point, Max, is the fact that when you look at the universe of companies that are either retail companies or have retail exposure, we have a tremendous amount of flexibility. From our standpoint, we're not sitting on long-term leases. They're very short-term leases. Look, as Max said, if the retail stores do better, generate a lot of cash, then there's all different types of trajectories to look at. I think part of the message is, too, we're not putting growth capital in there. It's not going to be capital-intensive for us. In fact, we can have flexibility to do a lot with that market without spending an incremental dollar, right? We're in a great position. You are having rationalized your footprint. I think there was a target. There was a level in the past you talked about getting to. Maybe it was like 800 stores or something in that range. Now, is there no defined kind of store count that you're managing towards? It's just whatever it can be profitable at, that's what we're going to do. Yeah. Yep. As long as it's to Max's comment, as long as you're profitable, we'll do our best to make sure that that store continues on in life. There is no predetermined number that is out there for us to go and aim at. It's all based off cash. This is a full cash generation conversation. The minute that there's not cash generation, we will be exiting from whatever boxes are out there. Okay. Declining top line. And then is there a margin for the segment as a whole, like an operating margin target you want to operate within, like a low single-digit number or mid-single digit? Or is there a target? Yeah. Mid-single digit 4%-6% is usually where we feel good about for that business. You can maintain that even as the top line comes down? Yes. I mean, I think that we had on one of our slides in the opening comments, 95+% of our stores are cash flow positive. They have been for a long time. We have been on this road of pruning stores out really for quite some time. We did announce in 2020 a Max B2B restructuring program, which started this motion of constantly pruning the stores off of the chain that are not making money or will not make money in the very near future. Because of that constant focus, it has allowed us to maintain an incredibly healthy overall store chain, which we anticipate will continue moving forward. That motion that we started in 2020 with that program also is the reason why we have under three years of average lease length inside of our network. It's allowed us to consciously be at this very objective for quite some time. We did take our foot off the gas on this front a little bit during the year 2021, 2022, just simply because the phenomenon of COVID pushed so much traffic into our stores and our online business that we slowed that overall program and took advantage of all the incremental cash flows that were being created from that change in buying behavior. Now that largely the world has gone back to normal, let's say, we are back really just restarting that program that we set off with in 2020. It's been a long evolution, but we've had a lot of practice at doing this. That practice has allowed us to maintain an incredibly healthy store chain. We anticipate that moving forward as well. All right. Great. Maybe we just finish off on cash flow. You mentioned your expectations for free cash flow to be higher year- over- year. Can you just talk about maybe what was negatively impacting your free cash flow in 2024 and why you see that improving next year or this year? Yeah. Yeah. We did briefly touch on it before, but I will expand a little bit here. I appreciate the question, Greg, because it's very important. When we were starting this hospitality journey last year, winning the hospitality business and getting into this new segment did not happen overnight, right? Throughout 2024, we had been engaging on this process for the better part of that year. Throughout that engagement and throughout the process of being vetted and trying our best to get into this new growing segment, we had put in a lot of investments behind this, right? It needed investment. It needed both working capital, and it needed CapEx investments throughout the organization. Those are things that we consciously, in connection with our board, had made a decision on. We had diverted capital to growing that business and getting a real nice return on what we know will be a good return on invested capital in the future. Those were two big investments that we consciously made during 2024. Our last big chunk of it, we did notify everybody that after the Q3 earnings and Q4, we would be taking our last big slog into that investment, which we did. Those investments are largely behind us now. What they did was they beefed up those investments, beefed up our VEYER capability to be able to distribute and satisfy all the customers that we anticipate will be new to our overall organization. That is all behind us. Working capital also was invested. We did spend some dollars to get ahead of tariffs. After we saw that the president had won the election, we knew that we were going to be headed down this path, or we thought for sure, and we were right. We bought ahead a little bit of that inventory profile as well just to get ourselves ahead of the game. Yeah, those were the big meaty pieces of working capital that we used last year. They were behind us. We anticipate reaping the benefits of that investment this year during 2025. Okay. You did mention tariffs. If you've built up your inventory a little bit ahead of that, will you be a beneficiary of tariffs as you kind of sell off that lower-cost inventory at higher prices? Is that a dynamic to watch out for? I mean, yeah, we've protected ourselves. The beauty of what we did was we will see a small slight benefit that's there. Nothing material in nature, we don't believe. What we wanted to do is create an insurance policy for us that allowed us to get a head start on the tariffs as they started to be introduced. One thing that we should call out inside this conversation when it comes to tariffs is that back when we had Trump in his first presidency, we were exposed for our direct import, our own private label direct import business. We had about 80% of that business was over in Asia at the time and through China. Since the first Trump administration, we did work as a team to make sure that we moved a lot of that product out of China into other parts of Asia, Vietnam especially. When we made that change, we brought what was 80% exposure to China down to about 30% today. We never put it back. It is not like the Biden administration came in and we, like some companies, just reverted back to where it was of old. We have heard that some companies have done that. We did not. We stayed true to what our strategy was in that space. We moved and we left everything out of China. We did limit our exposure this time around as well. All right. Great. We're over our time here. I'll just leave it off to you for some final thoughts, and then we could wrap it up. Sure. I mean, I think we covered it all. Last year was a challenging year, as we all know. The thing that gets us most excited is really the core strengths of our supply chain distribution, our B2B customer base really gives us so much flexibility in our traditional market segments and other market segments that we are now leveraging. We believe the future for us is extremely bright. Investors will see that as we put points on the board later in the year. All right. Great. Looking forward to that for sure. With that, we'll wrap it up. Thanks, everyone, for listening in. Thanks, ODP, for presenting. Thank you, Greg. Thank you so much, Greg. Thank you, everybody, for listening. Bye-bye.