ODP - Earnings call transcript Q3 2017

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Operator

Good morning, and welcome to the Office Depot's Third Quarter 2017 Earnings Conference Call. [Operator Instructions] At the request of Office Depot, today's call is being recorded. I would like to introduce Richard Leland, Vice President, Investor Relations and Treasurer. Mr. Leland, you may now begin.

Richard Leland

you us. thank and morning, for joining Good This Smith, our our Leland, and Executive with Gerry I'm here CEO; President CFO. is and Rich Vice and Steve Hare, and summarize On Gerry business. the provide an third today's update will quarter call, the on results the then results financial review and Steve quarterly will outlook.

open Following we'll then closing for line comments some discussion, the your Steve's and have up questions.

provisions to and and forward-looking concerning is company's of the comments made the with results events call include statements, Before and Reform are XXXX. differ certain safe contained Private uncertainties Act we the a current could filings on and These reflect Exchange U.S. are future the that factors harbor number to of discussion begin, factors Securities Litigation forward-looking Commission. inform you uncertainties subject I to detailed materially. the to which need expectations subject in of this company's actual cause A Securities that these of statements

some Office highlights We've your presentation Smith. being call posted convenience. that short measures website accompany strategic also measures new today's CEO, investor.officedepot.com. turn year. for as most reconciliations use release, a the our GAAP to Today's the that the slides at website simulcast least we'll well website are comparable call, the on available measures at non-GAAP presentation all and on direction, of slide non-GAAP and financial earnings to as I'll directly describe the as X business is encourage comments our The filings financial to view our you During Gerry there press will over SEC performance. on financial we call be and and at archived video it I now Depot's our

Gerry Smith

October successfully very Rich, and we us day hard for on I Late a amount for little the CompuCom, exciting this at a when everyone first call. everyone make tremendous the you, from is yesterday to Office the the afternoon, over X X. just good we of a their It completed acquisition Depot. effort work announced here deal thank month Thank team. to happen. by Today of on took to morning want

Slide marks it excited for direction, to but the sales on the share in first, Depot details with let's billion, for beginning I'm Office transform as financial major quarter third future. XXXX. company of decrease Beginning we're X; the were the the quarter also the Importantly, of X% results. to strategic recap new third a of milestone a very from $X.X you quarter total our

were sales down X%. adjusted closures, store Excluding

Hurricane States, quarter the sales Maria, a impact in retail include customers the Rico disrupted negative in where Southeastern of Third which our of United contract and concentration Harvey, operations are located. heavy Irma and Puerto

to share will liquidity as Rico flexibility CompuCom with continue position maintain $XXX Although with markets facility ABL is business, an cash operating full of year. some which be have financial Operating more extent, prior for the $X.XX generated continuing credit future. the with certain to with operations such share operations per Puerto that earnings guidance. several normal to free Adjusted share. a compared of from after and per our continuing Even per million diluted prior year million of earnings quarter compared to per $XXX compared a year-to-year cash $X.XX was And $X.XX continuing the us adjusted a the still $XXX updated from Adjusted provides acquisition, outlook income solid adjusted in substantial year. in I'm in was making with line $XXX undrawn also our pleased investments very on basis, a $X.XX strengthen year-to-date our several we in the XXXX. for and in including compared per quarter earnings share to with $X.XX $XXX in $XXX operating flow, months. million, was share was operations diluted in million third per share operations million the impacted basis income resumed line income to to on third million diluted share, we've from the

putting office way to to is to way the changed This I function pivot a as believe, pad why Turning technology you strategic technology know is a product, categories, company. I the we're thought I increasingly the Office primarily about small, at organization. a future. into and of of transform medium want writing work. the the a is such presentation Slide our company I a product-based making to office-supply information our is has in toner, that I ink X; moving paper, important I printed The evolution traditional Because that dramatically a information all digital past, a as including it's look identify technology capture customers. can and We or an strengths on have the traditional the to wider to talk world. services-driven company we that supply as our as communicate business range arrived in said assets businesses believe for holistic pressure When several enterprise of a provide of company Depot, transaction fundamental this at took well a a our from to solutions and

capabilities our and next-day chain chain our me ZIP with products on ability the technology next-day As that of you we a X,XXX to for in having and value. I customers. can and of ways drive global background that's ability a new the bring was core to on in States and deliver a in saw about the to local basis. basis. codes them bottom ZIP of This how Starting points supply slide; drives important, approximately sourcing leverage what services our these additional believe supply supply the United think company customers again, in know, asset codes stores platform appreciate to the first distribution the provides I'll and to omni-channel that on utilize and And repeat robust chain, is business, this as attributes market I XX% products has XX% to a perspective very outside I helped

focused bring products The to bringing was company saw platform the and about enterprise-level and our the online problems, our copy assets we force relationships value strong integrated the pricing leverage but the are taking core for sales access more change services. what and that furniture, dissimilar to selection assortment in products is advantage of and offer this customers to a our top to Honestly, of a and Customers do millions When businesses is and become category of presence to mile. customers. that you're can of is history do extensive a strengths increasingly figure access through of our enhance also value But trying that second presence, not vendor sharp included that our need. stores. as This started the office-supply how we are offerings online-only local really it on provide. what omni-channel our has design at company, They're need expansion fundamental the the by differentiator This and person-to-person service remains to asset of what well that out. break-room and last customers, company to businesses important and businesses also need. as & we and a cleaning on as one-to-one a ability way into a services we convenience think we the to our print is the the mind, particularly, looking I many

major initiatives growth key several the service first of pivot, underway of capabilities have We acquisition with key this as portfolio. to in our step adding the CompuCom being part

Our need. research the most and services tech market shows large is that SMB critical customer a

providing BizBox. this customers. provide all earlier platform tech subscription-based of services omni-channel to the additional and will details initiatives a take with important just also in as BizBox to we We on also to offer a launched advantage business services an door for connect in services This products few opens us our is platform part believe play a why importantly, but I'll additional award-winning called growth these that customers. CompuCom way high-quality, minutes, of week,

In as you involve to addition, although moving want are often remind I services products a we more company, services-driven well. towards that

natural is So a there connection.

strategy this Our and we value our way team come to shareholders together see and customers as create benefits new of both a has in around the long-term.

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our number to future. of a this journey, multiyear While clear on to build continuing will for opportunities, we be execute near-term while significant a path have pivot a

Let strategy. through three me walk pillars you primary the the of

tech major transforming now opportunities already we step strategic that acquisition CompuCom here but was the portfolio. The growth clearly to as have developing about the omni-channel First, into we platform. go-to-market our and have detail substantial about award-winning go they opportunity. I acquisition brought begin of services more we very specific this in our leverage this We into believe talked will past has few have business. excited teams a our the their across month, the capabilities nationwide strategies just are minutes, been over and

core traditional Second, the the to ways the challenge future we about at thinking looking business. disrupt our into out and are market of ways

thinking fresh produce how saying, example of As tap is have being can about excellent assets an impressive into assets this bring BizBox to This thinking and and really disruptive. I've we results. these week's launch been compelling of

about approach one one I password a a in we in and organizations are small find really be number a can of the they can necessary that new another fee. solve this This out As monthly more convenient start the starting and business talking where business. provides orders, way, small- their and market. services services a We business to to later hear to potential we know to needed provide will way core with services to grow In wide platform but tools excited one unique I've competition. this platform I in ourselves difficult small the BizBox, hope of differentiate bit from access that detail, frequently website our and business. really been entrepreneurs because as start with business discuss problem to to new new that with one-stop grow businesses medium-sized the don't their the and is

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enhancing drive we little are the to supply as CompuCom performance generate additional this and and acquisition into I how point, this improvements We forward. going deeper our plan business chain capital cost also dive to At capabilities working maximize want and value to the of opportunities both a well. to

acquisition, For high the who highlights of seen solutions. Slide our those and you business we've have is Beginning may the national services, announcing they noticed very IT investor CompuCom CompuCom on some of do; X. of with quality, presentation managed not products of a what provider the

X,XXX to a IT capabilities and call hardware fact, have In being by for the rating IT Group IT support Top Magic years center largest as life leading and for the leader Tier Quadrant centers Everest over IT X companies, North in employee services a procure, services, desk, key Since we and and Gartner is XXX customer the highest systems, technician currently firms is They workforce a and is to offer industry-wide on services data an factor. the businesses field base including an security of satisfaction relatively this of manage X believe of remote They XX the a really knowledge the a about the in data install nationwide the retailers X ranked software broad top real world-class around Fortune having received as intimate have multiple financial monitoring cloud In provider, trust is over this in-house a top network require in of environment North services technicians on-site help they've including buyer professionals. including XXXX. have sticky XX and top of technicians, base, have America, customer's data centers, cycle differentiating recognition of asset. XX They range rising, receiving with your and offering. where and you technology certified a America. end-to-end an

relationship is for own. devices, unique generated would been large Internet desktops nearly and our average a over are XX years. some including laptops capabilities smartphones, us that revenues result, million users our of impossible support million to approximately CompuCom's a and X tablets, repeat impressive Clearly, As notes. for portion customer customers, and has create and X CompuCom end over have on They

a on our However, minimal we and expanding as to of upfront our across Tech-Zone from tech through desk comes sales omni-channel as with immediate acquisition believe this cost, a professionals their into and the country. tap X, support set support that capabilities plan in repair country to within millions for believe across Providing opportunity services-rich provide can capacity scale stores become leverage our technology opportunity. of a excess will you to growth retail technicians. that take that capabilities services will has we utilize world-class We compelling IT the Office of customers. and the X,XXX business platforms of a growth exists them broad platform customer-rich play Slide with across see stores CompuCom's business with capital and access a we combining services power and ability digital true CompuCom clear our unlock network Fundamentally, SMB a our and customers. across reach our customer nationwide, Depot to within the stores, platform powerful

that within shows customers are X,XXX Our X there research approximately of million our three nearly SMB miles stores.

world-class only the service created has capabilities advantage market, marketplace. true to provider able we Office is at business IT service Buy mile Depot be the will to Best that to deliver SMB customers, offer a technology the While to providing believe consumer aimed offering services technology last a nationwide underserved

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customer broader across business. overlap the professionals to basis. We're Our analysis We suite Depot is now in as structure that place a meaningful to combined they CompuCom driving has customer existing focused shown base. believe Office very provide services little services across cross-selling will between able this and immediate of opportunities on products customer incentive the specifically sales our are our revenue putting offer and X,XXX also

a cost significant the provides Lastly, have will to entity purchasing lower combined scale that benefit power increased customers. and

that that SMB initiatives actually with and CompuCom billion Depot be going entire can customer CompuCom to services market deliver be $XX that will managed market. in innovation unique large enterprise further and to will to businesses The enable purchasing While made focused believe benefits combination forward. base services has customers, continue highly world-class solution Together, a core the across we'll automation providing the we successful. Office on this positioned efficiency a we capture scale and share on a IT from focus opportunity see also fragmented CompuCom leveraged

have hard month to as Slide briefly been the business. initial X; go-to-market strategies over I combined the the earlier, mentioned teams work developing past for Turning at

are on the both initiatives the to very going of Now and there's Office implementing overlap the focused acquisition channels. and these opportunities, immediately go-to-market initiatives at across Depot customer all has begin teams of between we're cross-selling bases, little begin we'll sales each many CompuCom training been these that companies completed, Since immediately.

that We In marketplace on the will local taking essential Office emphasis marketing and share online the increase about managed leader and by small building offerings believe award-winning today. represent credentials. our XX% and supported providers from in-store that services, with will be addition, of this market materials in in promotional components out of as Depot we're that a be the service awareness position

Janet to and partnerships incentive Program, a expect a these we revenue commercial channel, enterprise, company, on that utilize structure in new the drive Street and sales was lead services channels. have successfully indirect for and channel efforts market came share. Channel recently from capture exciting and variable brought a Lastly, to government for us and other to she introduce growth where Schijns drove the in us. Janet is This customer and the revenue Chief their and new Verizon, to Feet Executive

at to on from specific building XX; Turning offerings targeted bundles Tech-Zone SMB started service CompuCom. to develop Slide also market, successful the the we've

offerings focused subscriptions on size, on need will manage packages. customer and be Our and tiered based budget and

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note tracker subscribers. You'll core our Centriq we're discounts that products with certain also office packages as as our on asset for well including

nationwide of an In products being omni-channel enterprise-level and a that broader relationship is addition, the offer strategy. platform, develop in to services component market first are company the customer our and believe unique services the of an combination way to key important also to we IT across

experience a XX; it how will of represents our in every While organization, our to to Slide incorporate retail into permeate the we provided desk plan itself be a rendering we services-driven aspect a services platform critical. of Tech-Zone needs On how stores.

in the that building integrated the scheduling the line. get is service into need support need the so new also appointment more store. waiting desk note they system when and flow can friendly it also an customers of that customer You'll without We're they

the Tech-Zone of test additional in to plan aggressively the The completed to and XXXX the markets. finalizing we coming Austin, into have rollout our Orlando markets in strategy, expand expect Tampa end teams We but are desks year. XXXX service by approximately XX

for pivot exactly service-driven business Slide makes and small a demonstrates BizBox, our second utilizes to to to company. more us want meaningful shift strengths customers, our platform about our and Turning Earlier new for and XX; into leaders, and we minute week, capabilities. startups our I our a unveiled core gears partner CompuCom, initiative business talk like service this a to

earlier, their together a bandwidth services together. is out to in of piece set BizBox have and small services care can and and integrated and manage concept. to of are day. borne that of don't necessary and simple Business listening mentioned looking built of be customer's business vendors I diverse platform for evaluate fundamental owners order As need their necessary it start start Most managing to overwhelming. the take to and every a take owners don't our time-consuming businesses a business. Starting to multiple the access work and on aren't single for convenient a is care was

services, you design, as XX; such accounting, and core As Slide digital see platform, BizBox hosting on can marketing, support. and includes our Centriq asset CRM payroll website offering social the management and and HRM finance

that entry by utilize the to provided also additional BizBox. services can for available point believe a businesses on technical CompuCom services create support We great

through platform We on It a is based across and have more subscription, strategy of purposely future models built even available far, company. the to services to strong revenue received BizBox small It which help recurring monthly their is so each to customers positive we've group seamlessly in digital feedback. can a to the is platform access initially succeed the direct new to a with concept navigate business. so we've This is customer an customers aligned Pros be tested integrated in build extremely value. our and help to online added with that service flexible be create really

we the a presence. in-store be we additional omni-channel to Depot ahead, Office our including portfolio BizBox and can the as fit services of add to Looking into offering ways core part explore platform, think BizBox an

services-driven Finally, abandoning as are company, we more not although I mentioned are on focused earlier, our to pivoting a core. we

and demand can leading the customer of new our business Slide drive expand generation, On product be service number complementary have improved and underway increase our product across believe execution see associated sales. a to we offerings, innovate and broaden across fact, our relationships initiatives In services XX; that improve can you we and overall the the business.

addition, across supply capabilities new regional office models, several operations. In break-room United and States acquisitions order in janitorial also supply markets existing that plans access select in the company These improve its cleaning the presence we category. companies selling recently to increase geographic our to leverage and add in and in chain products purchasing within variable customers scale small the acquired to

Steve? core Lastly, Chief are and and who making CFO, both will business for customer the in improve Officer; growth the We product supply CEO, right to to derive sustainable our Depot broader all model Office since the investments conclusion, believe demand Steve this strategic new Schijns number turn derive hires marketing, have believe as transformation support that the experiences right our channels. Depot our innovation over the strategic Merchant direction new company. and Slide bring the order services, joining disrupt to as Chief the organization, third strengthen and we service Hare, on of I including to then we our can can more overnight, as don't is now Janet a relationships strategy, right Chief to in generation certainly Officer. go-to-market with details In and talent future happen expect bring I quarter Jerri X financial call sales customer ultimately capabilities, deeper to XX; can made revenue provide Marketing Collectively, transform, team on By I but and results. position pillars critical future. creates such product our as Bleisch experience across have and as generation, chain, and a key offerings, for making merchandising DeVard and investments expanding which we David in and in of Office executive Services operations. innovation, the proven our Officer; they experience building and as to a path our demand shown Legal

Stephen Hare

third to results. Gerry, everyone. and happy to you today quarter good morning, here our with be I'm discuss you, Thank

As quarter noted calls. this and will XXXX performance primarily talk closed I same key financials keep Also will XX; focus not comments operations highlighted and the in on the sales fourth we beginning my I for on year-to-date have in done Slide measures third as will I some from performance previous have in our continuing period. the mind the the this Total about transaction as included with be include acquisition, quarter week X% do that last quarter CompuCom compared year. period the declined results. our company to

Excluding the the prior The retail and closures currency impact lower period U.S. declined in losses our retail sales and to stores. from planned compared store adjusted to traffic year in translation, decline due Business foreign prior our year. Solutions primarily XX-month Division in X% prior the customer was

Gerry three negatively also disrupted major Puerto mentioned, Rico in operations by third and in impacted the that were Southeastern sales the United U.S. quarter States, hurricanes Virgin our As Islands. the

year. quarter $XXX the in prior decreased income to to $XXX Third million compared million operating

operating integration, quarter, the and restructuring to merger acquisition-related the of $XX transition expenses the incurred related company executive million During OfficeMax activities, expenses.

Excluding these impact review impacts from and our adjusted $XX initiatives synergies. in more These by compared administrative OfficeMax that our and reduction nature. period. prior integration of continued a rate store third offset was are negative by chain sales operating general lower and in XXXX expenses, comprehensive selling, partially business fixed driven the was expenses, supply by exceeded driven of were million, decrease primarily of our which the million $XXX deleverage The special year income the to decrease in the quarter negative items,

million, For year-to-date versus income $X XXXX, of the same $XXX adjusted a operating decrease was period XXXX. in million

increase to our adjusted as XXXX. We by compared margin X.X% operating continue a to basis improve to evidenced year-to-date point XX

quarter X% the from special compared was per million adjusted a share On after-tax million per per impact share continuing improvement year-over-year a mentioned $XX to $X.XX year. to operations million $X.XX million or continuing share income in earnings the was million operations compared $XXX items is or prior adjusted per of share. the income $XXX in adjusted $XX or or the earlier, $X.XX Excluding prior net year. year-to-date net This share third from $X.XX basis, $XX in from per

Slide sales the X% quarter in decline value. order traffic comp and to was Turning declined to driven comparable the Retail compared store mainly year. sales Division the lower in average by The XX; prior

stores. Division, third a XXX strongest as in hurricane our store as in Total retail XX% year, including quarter the soft which back-to-school shopping period prior season typically the affected the year, our the The but XX-month Retail impact decreased disruption, quarter for we this versus sales is prior experienced from planned well the closures approximately period.

Retail other technology performance at in product primarily sales product and items. toner Looking our decreased our most across of categories, ink, by category.

XXXX review of cleaning The Division display $XX margin reported company's store these However, realized administrative increased category year period. negative and the and was and than gross this year-over-year decline sales customers year the category efforts lower in program in momentum. million to of our make to break-room store selling, flow-through comprehensive impact Retail compared general the expand the double-digits operating from products income in and to them rate, the compared gain as more other the our prior period in more in reposition of primarily initiatives. to to accessible and to driven a from quarter third the million prior lower business This $XXX expenses which lower closure offset sales by continue

translation. stores. X,XXX During XXX brings ended which closures XX the phase we BSD. Division, foreign from a quarter, count Solutions benefit quarter in year of our total under of second Slide performance with XXXX Business currency billion, stores were Sales a prior $X.X retail the points closed the optimization a four of stores of plan of Division. the includes quarter third Retail our to about the total decrease the the third the and in XX shows from or period, of basis X% This

are compared sales second Although declined, basis driven we wins fulfilled. were experience primarily Division, decline the by points which the programs, competitive quarter recorded sales of The omni-channel channel, sales sequential customer to of and prior realized. continued new year customer losses a our XXXX the the versus in Retail approximately year-over-year orders as where are from did our in pressures these improvement impact was XXX contract

deliveries In the during addition, the disrupted impacted by hurricanes were quarter, three sales customers. which our to

category, the and million to the income with This cleaning prior business Looking continue operating sales Alternatively, million general and our savings lower BSD product in from we $XX to division quarter flow-through technology performance offset the third furniture at our lower year expenses categories administrative and supplies impact and a and lower expanding reported year growth negative year-over-year and the growing compared prior The period. in year achieved the rate, focus than sales cost decreased $XX of adjacencies. as prior remaining compared margin efficiencies. our XXXX by break-room gross BSD selling, decline versus driven flat. & and on positive of copy more which from by primarily in to sales was print

reflected quarter lending and quarter. at balance to of XXXX of debt XX; the $X.X the the on million, was and and financing, related Turning to flow excluding equivalents cash $XXX end fourth highlights CompuCom the asset-based in $XXX the which with our will operations of under million sheet quarter total with million $X liquidity ended $XXX and continuing billion, Total the be nonrecourse in of available debt Slide third consisting billion cash we cash in the notes facility. timber associated

Capital generation integration. XXXX, merger The cash and continuing restructuring of in $X free outflows of flow related third of the quarter the operating million operating continuing operations the flow third million which of were expenditures. to million activities cost. activities merger $XX OfficeMax brings the million XXXX. OfficeMax $XXX operations million quarter, included expenditures integration quarter for of $XXX $XXX We For third of cash was the quarter by activities in XXXX in in year-to-date strong to continuing consisting provided generated $XX flow This from less $XX provided million. operations third million approximately free in cash by million, our cash continuing in operations, $XX million cash $XXX of of of capital

of a the $X.XX the million we million of of available of XX company of of initiative, share. stock in average about under our of $XXX common the weighted As shareholder million approximately have for quarter, million. for remained the shares for $XXX repurchased with total outstanding share part shares authorization. cost third million year, per began end May approximately quarter total repurchased common the price during of repurchase its current program return a stock $XX At a repurchase Since the last cost million buyback X $XX

cash In for a paid record $XX dividend share addition, a quarterly of of was September total million. the XX approximately per to to $X.XXX shareholders on

acquisition million of our also to for of approved $XXX The XX. payment quarterly transaction announced Board paid million. approximately that to we this December completed We five-year has funded CompuCom's was senior the $XX repay cash loan, on a secured XX approximately term CompuCom a to shareholders shares of yesterday, all with of Late on million Directors the new be common debt. and seller of of stock to morning Proceeds dividend $XXX the used issuance approximately million were hand.

returns low debt opportunities. to future provides key and liquidity the continue our positive repayments, cash outlines of our outlook. Slide and balance shareholders flow capital position for growth believe maintain significant to flexibility strong components XXXX XX We leverage other and free

in comparable traffic lower hurricanes. a major lower planned will to in during market, than on basis. disruption and be XXXX store this year's pressures company XX-week our from in competitive We three result believe primarily is continue retain the total XXXX to closures, store back-to-school addition season ongoing This the a sales decline the of

customer a new wins contract sequential losses, as the implement do the from expect BSD we in anniversary However, of initiatives. prior basis customer business in rate XX-week strategic we and decline another comparable fourth quarter grow year sales improvement on

tax third recall also our year direction. adjusted XXXX the higher rate benefit $XXX million and a operating out point supply effective cost of non-cash continued due XXXX, chain valuation the benefit approximately $XX during reduced the October million. quarter you planned related full tax company to strategic million tax income for investments of GAAP connection between to income results X% result, consolidation guidance the reporting company that a with and new U.S. as the our from of hurricane we realized I in its on want the a be for tax third This allowance, to updated and quarter. our to vendors announcement X, As in of warehouses, company's $XXX may impacts and

in tax line $XXX estimate effective Capital previous non-GAAP third a available to continuing of expense depreciation are $XXX cash expenditures tax we annual to approximately as such approximately million. effective accounting an remain carry rates strong moving of still at between from reduction other operating just financial expect We company's operations. excludes a XXXX periods, The considerably approximately million GAAP XXXX. and our the which treatment be operations our XX%. credits. to million free forwards on of cash quarter tax XX% free outlook utilize Although cash Considering we in consolidated After in from includes acquisition be CompuCom, cash flow expected rate and statements and adjustments, we forward. very are are rate, of performance, continuing evaluating generate loss closed and valuation anticipate from more than in flow continue to approximately segments $XXX the we now implications amortization purchase tax estimated are the $XXX the that million XXXX, reportable we to

of addition, support we guidance provide to Due be over are investments strategic estimates will services-driven years. these although a for necessary to time, developing our call. not direction model earnings to will In business quarter new required the guidance providing uncertainties, this transition XXXX along we preliminary the fourth with and the we at coming

continue traffic driven to Division, an flow-through store impacted to XXXX ongoing associated closures, do primarily our lower pressures with be additional by expect we store and Retail However, planned by to impact sales profitability. trends, competitive

Gerry? for I'll call comments. his over closing to Now turn Gerry back the

Gerry Smith

with additional little than acquisition the strategic direction. today know we've I usual new a and details run CompuCom Steve. all longer our Thanks, in

the turn the I'll over questions. can and your call we to now So take operator back

Operator

Dan [Operator Instructions] comes Binder. Your question first from

Daniel Binder

a Dan with few questions. had I Binder Jefferies. It's

in First on is synergies, line of if I'm a underlying obviously, can in but is. top realized CompuCom. going just some been some According little was trying to us you around of I the pressure. second I bit CompuCom what have in relative little about on then that of business. cumulatively, these And curious the acquisition And like terms question you tell deliver of was just of that bit the sales. us existing size, terms the you've I slide presentation, looks there's, that tell give structure why what wondering color the dealers sales if us around the to under the to business. can a understand margin announced. was

Gerry Smith

the second dealer cannot I that is synergies especially Gerry. say for the space to encouraged competitive market give Yes, and a SMB leveraging and the footprint start structure. reasons, the go think is size margin that from and and very we this specifics back, we on we're I'm in Dan, consolidation right is there capabilities. So and question space then from will perspective, the all Depot right? Office for and going area an opportunity

competitions. significant it's I think a can we great think if sticky office through, can sell a we we get the step they we supplies But other leave other And think relative from you to Dan well. encouraged say from who always have a in sell you perspective, services, pull whole a Relative leader. to enterprise us sell as CompuCom as services So it's I'll market, Stone, declined strengthening an team we're can because into, forward. evaluate CompuCom, we extremely to the it's market can and our of our piece, a products and on see CompuCom it's IT a I has strategy to really continuing going automation. market, core him you think -- will

CompuCom to AI, done an over are than trajectory rich. etcetera, who service well. from think great growing have by and award-winning on great that done have of a the actually -- a one But reach. actually they certifications, As They've he's business There's we etcetera, job people CEO, since capabilities etcetera. they X,XXX no slowdown that has secular the recognized faster slide, they We automation, and is trends taken was has we nationwide. and because they've of automation, job the think services else thing, technicians the have other important services Gartner as are and very most

and teams services think very has there's XX% the team equal is going we're multiple market got bar that customer they're developing is there We've the and rich, two to is stores, X for we're if up, overlapping team cross-selling, And There Steve's only optimistic Dan's ready through we that customers, teams to So we rich the is for X think huge to there sell channel CompuCom is X. example. we're that through cross-selling services. lined We together, and we've put more. opportunities. the the plus really go, routes Dan

that with capabilities. like distribution reach and going in about through consolidation, optimistic is scale, tech and we'll through a all We're bullish Office through if go space. it's That's the a to go companies, serviced, in as Fortune markets get Dan's to -- having can awesome try go we're technicians involved for immediately service innovation, X,XXX that And great lastly, one fragmented size, you're want those serviced number we of market. to to very, place over see well XXX that's advantage the stores, customers so that innovation in XX and traveling the time, position fragmented grow and versus that also through product versus having on And crazy you're growth that and through customers points importantly, headquarters. and road, or very go one to having product Depot in corporate can been a you large if get on to and to very an road before space -- your this back get and scales, was an you're

is return of very we understand way So margins. we grow business we in moving And it a forward. can sticky substantial with challenges, descendible revenue the think this high

Daniel Binder

you you from But annualized sales into the just announced. revenues, that a the a understand that just don't understand can perspective, we get to can, dealers follow-up on helpful. want Yes, the I names. modeling be If just if would I

Gerry Smith

and listening as Alley are obviously probably for to But know competitors our competitive that. on Rich reasons, off-line well. You talk -- we

acquired. to So want any specifics, go with we teams we're we the excited to but don't have

going excited going that with and part and evaluate forward. people capabilities. we're of be continue experience team and to are We There a their now we're glad world-class to to is Steve's

Operator

McShane. Kate Your comes from next question

Kate McShane

services to change? your of tech tech ramp as percentage to now regards a your of customers offering With offering product how right Citi. of And have sales? from as your increase product a more selling offer you product McShane as you're that do Kate And this that will you the result CompuCom, with the up? will technology composition

Gerry Smith

Yes.

power like overnight yes, yes well, Obviously, into tech, myself doubles years to do detail. -- some But buying my tech, I is So I'll I'm and for dating yes. say, one don't is of XX-plus that go our publicly. let sides. here. number me But background both

a all as there's Gannfors well. Schijns, I Janet businesses. backgrounds lot and mean, So between Dan are both tech John Stone of cost synergy

huge increase use will a products I move have with going your we're our a our think from sell say, us the space for stack tech to tech stack. competitions distribution I'll obviously, level have old lot. of We're or now pressure going we a tech Street we'll to are up more tech ability going to perspective. And, I'll and much you'll to bring say, II whole partners we who sell. have sell to So selling people in. other And channels to Fighter in position people the forward. a to position And opportunity on different it's in negotiations put

think who know I I mean. you

Kate McShane

you from And be something Does precludes would buying CompuCom retail Okay, in interested pursuing? of if other office great. the consolidation product I ask can second still And just you'd anything then of a unrelated else? question. be acquisition

Gerry Smith

mechanically strategically. if it I'll Then about let talk talk he Steve I'll would.

execute We our ability explore all will options to continue to an strategy. look and from to

flexibility, flexibility And comment And acquisition job on the we And so Stephen mechanics. strategy the our the do have -- of growing Rich I'll did have let tremendous continue service-driven we a did a and on Steve platform. to this. to our

Stephen Hare

but in new that highlighted restrictive Gerry this usual have there, Kate, could sufficient sure the reinvest offering flexibility related make in sure has we strategic have direction covenants today. Yes, high-yield made our we to there that we to we

Gerry Smith

in concise that came services base, not important I expand really presentation, base. important. time, period the and hope product clear have that chronic that's revenue it's just want our that a I to base. clear that and the out and we a emphasize loud my think we over of we to strategy And but

customer great If you you into lock people give relationship, experience. a a

going in our Score supplies associates services or relationship. products, our type the it's sticky tech with people transaction. products, And next then of have as then products different that office to Promoter We well. relationship a are That core that year we want pull to Net pay and

bid. You're not an -- of online competing on a on basis daily

that monthly strategy relationship, have wise. that them important that and that giving utility, Kate. You station, a you're Thank service It's you, super experience. and customer

Operator

from Matt comes Fassler. question next Your

Chandni Luthra

This is Chandni want about Luthra on behalf Matt. business. of to Gerry, the BizBox I briefly talk

wondering the if So you you we core the looking are of under new how please? this, these Depot? of could on were umbrella to Office at many anything Were website, services the offering previously discuss margin And business? BizBox the profile

Gerry Smith

from that a is with a excited. be you. member can't -- people and business we margin this personally is This with honest small we're gives to well business, it of reasons. family territory. we starting one CTO yet run not the consolidated help Valley. haven't out a a medium -- company perspective, competitive talk and Silicon there for from profile, I experienced services customers, but other And concept to some to is talked company. There and had obviously, a Dell platform as we But new kept with talking a in business former their Well,

tech, best relationships just excited have with I are and am all new And beginning. say very powerful. I'll we're that can just the had response NDA. supplies can we can those infinite new the brewer, We products that, beta but get to I'll days obviously, it's more league world, basis CompuCom, best best want we in sell spend you give technology technology, best -- to wheel being in much from the to some the launch there. opportunity. You the show best XX continue too do sell very perspective. chef, but center, about with office have best the sell users. talk the launched business just that's to something onto we're think relationships think not that day a on to the specifics, the services can hardware We we shop, versus We care we the there. mechanics a more we exciting potential under run to restaurant And an With time and -- we partners, beta than worrying expand try always the not a ago, services, winemaker just that

you differently a as some the platform of challenges believe marketplace the penetration out at as league haven't work back is is omni-channel the And differentiating employees our the yesterday the medium And $XX as I retail in new And, businesses envelope we country. a blogs subscribers very go on we for number small and forward. exciting and it think we've this used the strategy going it not that about as -- back modeling Obviously, focused it per SMB before. the really gets as me, the of to So line companies going because revenue business. partner verify explaining across you per forward. of has beta go live information, a math, is get the SMB if account, we business, we team One going you you to consumers, we team, us those to biggest at it the data drive services the read a platform get to models, and just as and We could it's online trying that's off-line. States but Steve month the services talked per that BXB not points at out of company, well. great new have a that distribution want revenue we're product-driven in strategy, our for And than we're reach the that, -- have small a have a doesn't medium that's double and ability the the great we real a levers that point. -- customers and business strategy model provider, Rich, XX our we're a you point XX% know for because to staff, we're a you had -- to And that to, that data because X,XXX talked just because talking we We'll But across exciting that's currently the about and base United differentiate look in problems, huge better. do stores, across that we and mean, Alley think it's a In company days. and as entry-level. had a just larger is if of to this the customer team the scaling we we be last find have future, average that. with and pretty this month, tremendously have obviously, I as because has encouraged X,XXX starts this supply top huge within beauty feedback important, we enterprise, that's public team, We as our mean running well. sellers, the because think service of here

Chandni Luthra

Very bit Was bit margin? What Steve, just of little the helpful. you could If, or us if I little up base a else? particular business? a more it color on mix something gross And division were follow could give drivers? the weakness? on it Was the

Stephen Hare

really not mix. was it Yes,

supply went on the around It of basis not store the work deleverage cost were into chain, vendors running into costs, our closures some You decline. that that. primary offset should played the that we played had Retail the obviously, and the of and of just division. activities think And the and a and then really the cases, higher, some supply gross But some some temporary BSD Division are through across the because chain consolidation the of both able some driver. I integration sales sales also fixed. But be deleverage in to margin was the as we more

of lost result in And little so we QX ground a a that. as

we forward. to try I to said, put into to pressure I normal back going I get seeing forward, think we we're some think programs our the I going address can place think and improvement trends As

Operator

Sindler. Your next question comes Adam from

Adam Sindler

very So overlap you core beginning the about of between customer talked and at CompuCom. little the the business the presentation,

let's need a be, to model. So, a And today, is, point? piece result key at overlap a result would sell to say will this I on guess, months, sort obviously, solution-based to out what that say, to from as cross-selling XX on solution If a product? done? from what we look good Maybe an get look A, from an point? great your that at organizational overlap of would outsell you we're a much sitting historically perspective, and then here of perspective customer customers a And core provider what would to train perspective? you that happen organizational spend to that How need like train just customer

Gerry Smith

quit that. that the Well, is of focus focus as grow to we descendible getting both model for -- a targets, I said descaling the exhibit, specifics give company not time the many, and obviously, many period sticky a services products. a grow give to a organization need times and and it a to of to grow sells but going that's I'm over We're out services-based an time number not revenue our one company business again. But and as loud is can't I

specifically overlap, into he leader. and as of. great -- an conversations, have be new before. that and relationship honest, Dan outstanding on the We smile the leadership, surprised were Steve just it when and why honest, of us with to made cross-selling And lack first to and piece, it's again, the one be together we and well On to the I is worked a by reasons started both talk

not does across we're need into confident sell if in. and XXX sell you you're we're Sellers can sales so in, sell When -- expertise a selling, that products seller, great can the services. say, can you -- Fortune let's can solutions, that you cross-sell Dan. have a We easily we products, team. go you If good can we account sell category. you that they're I'm a

opportunity our and the overlay Of call to their sales team an us going as help we're the close close whole and compensate course, bring to identification. going but grow in We're we're that sellers compensate we for going business. the sales specialist in deal, capabilities to to

and to businesses, indirect this while are our XX out and people smaller, those stores sellers see for building in of potentially leveraging on something those been correct don't Janet's in across want selling capability with to Dan's going not as a of us resell my points because a we my up done people it's already United are before. let's number, forget The company with bundle building but they of channel, this, medium a print other these base. still channels, channels, in selling in the in our pivot, associates and distribution with by variable is less And business all And that that in target as who it's capabilities I to getting States to are so going well. & extremely small to and lot enterprise means excited. important get are to as and go piece are What medium XX% cost seller the is to catching and our have by selling than background bar that's store even margin-wise. bar businesses really in, CompuCom, this and and our not sell paid, employees, background BizBox, the again focus that hasn't our it's But is, that more industry sellers indirect have well X,XXX compensate employees services this And emphasize that. we value-added exposure copy there's us today selling X,XXX think

also to not that you, We're platform services a a growth, vision equity my me, retailer. it's my shareholder BXB, well. business than and company this different a X% the or We're today services a different a is margin vision as of structure, business services. more different tech that X% with -- is excuse another to the is of retailer. business is XX% of as value well. a revenue and It into X% a stream, respective sustainable honest be from pivot So has as

current Depot services. is So the XX%, XX% already of Office

to correct drive aggressively that is goal Our overtime.

as day. as product traditional valuation fighting so model not or business every the well. BXB two And and three analyst, challenge in because road is, services, transaction And down core completely our the is years our we're day-to-day the vision should different it's a be

We that, with them are a to whether once locking But monthly in card XX of a have great relationships with them to on basis, we we're give contract credit give that a and products. them customer type manage going them give service larger to services, X customer or give a content, experience customer. relationship

Operator

Michael Your next comes question from Lasser.

Michael Lasser

business segment, to looked the you at organic -- from quarter, Lasser the from Michael if accelerate? second did UBS. It's Steve, To growth the growth services did third

Stephen Hare

bit a Michael, sorry, a little say little you missed that bit louder, could that. I'm of I've

Michael Lasser

Solutions from Business you impact But the from the organic accelerated In want to growth don't the Sure. can quarter? you us acquisitions. quantify to second if tell segment, third the

Stephen Hare

The did forward, The will anticipate improvement the But part impact on to of from QX. acquisitions an third second in that quarter going we not was really have that BSDs. quarter be Yes. organic. trend

Michael Lasser

the and Staples sequential you're contract the losses, you And removed far associated less because that drove organic are distractions fewer from now What improvement? improvement disruption acquisition? from with the seeing

Stephen Hare

mean, Yes, spot I on. you're

We've to very And is that take previous X the in the on about, the I was we've working sideline during process, a that can what higher pipeline that on to of announcement. account. than realizing time X. that's rebuilt depending complexity pipeline sometimes of months, see the been Staples' XX-month to takes to And the towards that X starting Staples' impact that. [indiscernible] a think now period of we've being and revenue you're and it extended talked level As of successfully really go sort to process, pipeline it the

organic successful pace also the able us think recently. of activity, normal improvement and back is to being So I wins standpoint just get from to our being a very

Gerry Smith

about improving. is in talked earnings, we previous When that pipeline conversion our

Michael Lasser

of the market Gerry, for CompuCom are share And that the Is is my result such experienced serves question last Got years CompuCom. over it. on few follow-up growing, that which is losses? the turn the business, just business? turning your how Or core in trying it And on is actually how decline? serving -- are as plan do market CompuCom declines that around you around you is the to it the

Gerry Smith

Michael. question, great Yes,

which the there. and that We that into of serve, services didn't the faster SMB Let and is actually you This very element the is The critical overall success and in me acquisition $XX enterprise, than have space reach before the space. that customer area. have. the enterprise had of careful. market space grew be very We market some growing. started that participated test IT moved piece the billion and is The CompuCom is declining just we reach

are with in down think X,XXX certification the X,XXX replicate. our really and have capabilities the that's I sellers and go three. certifications on enterprise. channel going tech certifications don't in selling. X,XXX in in have customers in to MCVs piece, are X.X that I space, one that to BizBox stores, technicians something this XXX,XXX in the bring, back one SMB since foreign no opportunity We well. Dan going debt any is This They bar our X,XXX real In already amplifier, don't else declining. that's down equals grow world-class have mean, think we're retail for we're across testing across the the one a market continue plus. certified and experience, are to and for excited walk partners technicians, and we're that that going as that I space growth away not. that They CompuCom solidify them, will to customers do those entering We're the really the isn't success certification, He invest to market, that someone years want we're so was about emphasize, to want to enterprise, those critical the But faster space of we us, is in innovate. is real We're grew be into going to segment with to critical can cross-selling, And believe he But retailer, able over going walls that the but else to market. a time. with IT up plus

proven right and services prove was you with Janet, move off and and creating right the the the that. over I I've company. well. it in as to team great the go team that is going go Jerri, X- show-me the built X-year extensive guys. And next This state got this Now acquisition demand right understand here generations a or got and we for period expertise I've selling, time very to David, that marketing, the background and we're

as the CompuCom the piece. as we'll team coming And separate that treated a is focused of little on together value going And sure team But that, of do how business gate. whole core the bit ingrowing services foreshadowing. so it's the entity the make to putting -- out growing a we're

an comment, forward that's Slide XX, you when that any have the into you'll to what on services business. to walk yes, you posting opportunity. saw don't is and seen services-led very or see, ancient everyone drive near into I services-led front the future, on we on Depot that And we future the comment and only to meant the you that's make and excited So by meant And Analyst sure -- when the as Day be in experience. led experience. in we're disruption, today, the paper, door, we're be but cross-selling at it currently a center super have The walk Tech-Zone, to that the I by store that look being across want by the Tech-Zone built, to BizBox XX [indiscernible] we can move going look Office BizBox, an store

Operator

I any remarks. the to today. concludes That the closing over Smith Q&A now will session turn back for call for Gerry

Gerry Smith

Alley, Analyst to on and updating you going joining we're morning. to the we're call company -- a for profitable in for and Rich Day progress, team as I we on think said more launch a early you us quarterly thank I and growth call to can't a anyone successful BizBox the completion and we're have excited to acquisitions, to We detail. tell, obviously, of of are will path up, growth the future. being come in And and before, pretty the forward we're we well our as an look I pivot revenue back this as CompuCom think XXXX. in that's sustainable fired conference services-driven want

we're we're to much. you you of Depot. host you We're to to you and services-led through the have walk going the We strategy. team are Office to my show going future going Thank going And show very entire experience.

Operator

concludes Thank you for This your participation. call. the

You may disconnect. now

The ODP Corporation (ODP) 10 Nov 172017 Q3 Earnings call transcript